Transportation Law Full Cases

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 80447 January 31, 1989
BALIWAG TRANSIT, INC., petitioner,
vs.
HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and
GEORGE L. CAILIPAN, respondents.
Sta. Maria & Associates for petitioner.
Punzalan and Associates Law Office for respondents.
MELENCIO-HERRERA, J.:
On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was filed by
private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son George,
of legal age, against petitioner Baliwag Transit (Baliwag, for brevity). The Complaint alleged that
George, who was a paying passenger on a Baliwag bus on 17 December 1984, suffered multiple
serious physical injuries when he was thrown off said bus driven in a careless and negligent
manner by Leonardo Cruz, the authorized bus driver, along Barangay Patubig, Marilao, Bulacan.
As a result, he was confined in the hospital for treatment, incurring medical expenses, which were
borne by his parents, the respondent Spouses, in the sum of about P200,000.00 plus other
incidental expenses of about P10,000.00.
On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries sustained
by George was solely attributable to his own voluntary act in that, without warning and
provocation, he suddenly stood up from his seat and headed for the door of the bus as if in a
daze, opened it and jumped off while said bus was in motion, in spite of the protestations by the
driver and without the knowledge of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on
its third-party liability insurance in the amount of P50,000.00. In its Answer, Fortune Insurance
claimed limited liability, the coverage being subject to a Schedule of Indemnities forming part of
the insurance policy.
On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag
each filed Motions to Dismiss on the ground that George, in consideration of the sum of P8,020.50
had executed a "Release of Claims" dated 16 May 1985. These Motions were denied by the Trial
Court in an Order dated 13 January 1986 as they were filed beyond the time for pleading and after
the Answer were already filed.
On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by the
Trial Court. The Amended Answer incorporated the affirmative defense in the Motion to Dismiss to
the effect that on 16 May 1985, George bad been paid all his claims for damages arising from the
incident subject matter of the complaint when he executed the following "Release of Claims":
For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND
TWENTY and 50/100 PESOS ONLY (P8,020.50), the receipt of which is hereby
acknowledged, I/we, being of lawful age, do hereby release, acquit and forever
discharge Fortune Insurance and/or Baliwag transit, Inc. his/her heirs, executors and
assigns, from any and all liability now accrued or hereafter to accrue on account of
any and all claims or causes of action which I/we now or may here after have for
Transpo Cases (P. 1-2 of the Syllabus) 1
personal injuries, damage to property, loss of services, medical expenses, losses or
damages of any and every kind or nature whatsoever, now known or what may
hereafter develop by me/us sustained or received on or about 17th day of
December, 1984 through Reckless Imprudence Resulting to Physical Injuries, and
I/we hereby declare that I/we fully understand the terms of this settlement and
voluntarily accept said sum for the purpose of making a full and final compromise
adjustment and settlement of the injuries and damages, expenses and
inconvenience above mentioned. (Rollo, p. 11)
During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the
presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release of Claims"
signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed engineer.
By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified
that be is the father of George, who at the time of the incident was a student, living with his
parents and totally dependent on them for their support; that the expenses for his hospitalization
were shouldered by his parents; and that they had not signed the "Release of Claims."
In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed
the Complaint and Third-party Complaint, ruling that since the contract of carriage is between
Baliwag and George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute
the Release of Claims despite the fact that he is still a student and dependent on his parents for
support. Consequently, the execution by George of the Release of Claims discharges Baliwag and
Fortune Insurance.
Aggrieved, the Spouses appealed to respondent Court of Appeals.
On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed Order
and holding that the "Release of Claims" cannot operate as a valid ground for the dismissal of the
case because it does not have the conformity of all the parties, particularly George's parents, who
have a substantial interest in the case as they stand to be prejudiced by the judgment because
they spent a sizeable amount for the medical bills of their son; that the Release of Claims was
secured by Fortune Insurance for the consideration of P8,020.50 as the full and final settlement of
its liability under the insurance policy and not for the purpose of releasing Baliwag from its liability
as a carrier in this suit for breach of contract. The Appellate Court also ordered the remand of the
case to the lower Court for trial on the merits and for George to return the amount of P8,020.50 to
Fortune Insurance.
Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court judgment.
The issue brought to the fore is the legal effect of the Release of Claims executed by George
during the pendency of this case.
We hold that since the suit is one for breach of contract of carriage, the Release of Claims
executed by him, as the injured party, discharging Fortune Insurance and Baliwag from any and
all liability is valid. He was then of legal age, a graduating student of Agricultural Engineering, and
had the capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus,
he could sue and be sued even without the assistance of his parents.
Significantly, the contract of carriage was actually between George, as the paying passenger, and
Baliwag, as the common carrier. As such carrier, Baliwag was bound to carry its passengers
safely as far as human care and foresight could provide, and is liable for injuries to them through
the negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George
had the right to be safely brought to his destination and Baliwag had the correlative obligation to
do so. Since a contract may be violated only by the parties thereto, as against each other, in an
action upon that contract, the real parties in interest, either as plaintiff or as defendant, must be

parties to said contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234,
December 14, 1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right
while a real party-in-interest-defendant is one who has a correlative legal obligation whose act or
omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28,
1988). In the absence of any contract of carriage between Baliwag and George's parents, the
latter are not real parties-in-interest in an action for breach of that contract.
The general rule of the common law is that every action must be brought in the
name of the party whose legal right has been invaded or infringed. 15 Enc. P1. & Pr.
p. 484. "For the immediate wrong and damage the person injured is the only one
who can maintain the action." Id. p. 578. The person who sustains an injury is the
person to bring an action for the injury against the wrongdoer." Dicey parties to
Actions, 347. (Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).
There is no question regarding the genuineness and due execution of the Release of Claims. It is
a duly notarized public document. It clearly stipulates that the consideration of P8,020.50 received
by George was "to release and forever discharge Fortune Insurance and/or Baliwag from any and
all liabilities now accrued or to accrue on account of any and all claims or causes of action ... for
personal injuries, damage to property, loss of services, medical expenses, losses or damages of
any and every kind or nature whatsoever, sustained by him on 17 December 1984 thru Reckless
Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent Appellate
Court that the "Release of Claims" was intended only as the full and final settlement of a third-
party liability for bodily injury claim and not for the purpose of releasing Baliwag from its liability, if
any, in a breach of a contract of carriage, has to be rejected for being contrary to the very terms
thereof. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code).
The phraseology "any and all claims or causes of action" is broad enough to include all damages
that may accrue to the injured party arising from the unfortunate accident.
The Release of Claims had the effect of a compromise agreement since it was entered into for the
purpose of making a full and final compromise adjustment and settlement of the cause of action
involved. A compromise is a contract whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already commenced (Article 2028, Civil Code). The Release
of Claims executed by the injured party himself wrote finish to this litigation.
WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is SET
ASIDE, the Decision of the Regional Trial Court of Bulacan, Branch 20, is REINSTATED, and the
Complaint and Third-Party Complaint are hereby ordered DISMISSED. No costs.
SO ORDERED.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 92288 February 9, 1993

BRITISH AIRWAYS, INC., petitioner,
vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING
AND GENERAL SERVICES, respondents.
Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.
Monina P. Lee for private respondent.
NOCON, J.:
This is a petition for review on certiorari to annul and set aside the decision dated November 15,
1989 of the Court of Appeals1 affirming the decision of the trial court 2 in ordering petitioner British
Airways, Inc. to pay private respondent First International Trading and General Services actual
damages, moral damages, corrective or exemplary damages, attorney's fees and the costs as well
as the Resolution dated February 15, 1990 3 denying petitioner's Motion for Reconsideration in the
appealed decision.
It appears on record that on February 15, 1981, private respondent First International Trading and
General Services Co., a duly licensed domestic recruitment and placement agency, received a
telex message from its principal ROLACO Engineering and Contracting Services in Jeddah, Saudi
Arabia to recruit Filipino contract workers in behalf of said principal. 4
During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British
Airways, Inc. airfare tickets for 93 contract workers with specific instruction to transport said
workers to Jeddah on or before March 30, 1981.
As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93
workers, private respondent was immediately informed by petitioner that its principal had
forwarded 93 prepaid tickets. Thereafter, private respondent instructed its travel agent, ADB
Travel and Tours. Inc., to book the 93 workers with petitioner but the latter failed to fly said
workers, thereby compelling private respondent to borrow money in the amount of P304,416.00 in
order to purchase airline tickets from the other airlines as evidenced by the cash vouchers
(Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave immediately
since the visas of said workers are valid only for 45 days and the Bureau of Employment Services
mandates that contract workers must be sent to the job site within a period of 30 days.
Sometime in the first week of June, 1981, private respondent was again informed by the petitioner
that it had received a prepaid ticket advice from its Jeddah branch for the transportation of 27
contract workers. Immediatety, private respondent instructed its travel agent to book the 27
contract workers with the petitioner but the latter was only able to book and confirm 16 seats on its
June 9, 1981 flight. However, on the date of the scheduled flight only 9 workers were able to
board said flight while the remaining 7 workers were rebooked to June 30, 1981 which bookings
were again cancelled by the petitioner without any prior notice to either private respondent or the
workers. Thereafter, the 7 workers were rebooked to the July 4,1981 flight of petitioner with 6
more workers booked for said flight. Unfortunately, the confirmed bookings of the 13 workers were
again cancelled and rebooked to July 7, 1981.
On July 6, 1981, private respondent paid the travel tax of the said workers as required by the
petitioner but when the receipt of the tax payments was submitted, the latter informed private
respondent that it can only confirm the seats of the 12 workers on its July 7, 1981 flight. However,
the confirmed seats of said workers were again cancelled without any prior notice either to the
private respondent or said workers. The 12 workers were finally able to leave for Jeddah after
private respondent had bought tickets from the other airlines.
As a result of these incidents, private respondent sent a letter to petitioner demanding
compensation for the damages it had incurred by the latter's repeated failure to transport its
contract workers despite confirmed bookings and payment of the corresponding travel taxes.
On July 23, 1981, the counsel of private respondent sent another letter to the petitioner
demanding the latter to pay the amount of P350,000.00 representing damages and unrealized
profit or income which was denied by the petitioner.
On August 8, 1981, private respondent received a telex message from its principal cancelling the
hiring of the remaining recruited workers due to the delay in transporting the workers to Jeddah. 5
On January 27, 1982, private respondent filed a complaint for damages against petitioner with the
Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653.
On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex
message from Jeddah on March 20, 1981 advising that the principal of private respondent had
prepaid the airfares of 100 persons to transport private respondent's contract workers from Manila
to Jeddah on or before March 30, 1981. However, due to the unavailability of space and limited
time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice consequently not
even one of the alleged 93 contract workers were booked in any of its flights.
On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract
workers of private respondent to Jeddah but the travel agent of the private respondent booked
only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9 contract workers
boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine
Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C"). 6
Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's
July 4, 1981 flight but said travel agent cancelled the booking of 2 passengers while the other 3
passengers did not show up on said flight.
Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers
in addition to the previous 5 contract workers who were not able to board the July 4, 1981 flight
with the petitioner's July 7, 1981 flight which was accepted by petitioner subject to reconfirmation.
However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's
failure to get a reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the
bookings of private respondent's 12 contract workers. In the morning of July 7, 1981, the computer
system of the petitioner was reinstalled and immediately petitioner tried to reinstate the bookings
of the 12 workers with either Gulf Air or Saudi Arabia Airlines but both airlines replied that no seat
was available on that date and had to place the 12 workers on the wait list. Said information was
duly relayed to the private respondent and the 12 workers before the scheduled flight.
After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive
portion of which reads as follows:
WHEREFORE, in view of all the foregoing, this Court renders judgment:
1. Ordering the defendant to pay the plaintiff actual damages in the sum of
P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of
P20,000.00;
3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or
exemplary damages;
4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as
attorney's fees; and
5. To pay the costs.7
On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial
court denied its Motion for Reconsideration on February 28, 1986.
On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the
dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against
the appellant.8
On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.
Hence, this petition.
It is the contention of petitioner that private respondent has no cause of action against it there
being no perfected contract of carriage existing between them as no ticket was ever issued to
private respondent's contract workers and, therefore, the obligation of the petitioner to transport
said contract workers did not arise. Furthermore, private respondent's failure to attach any ticket in
the complaint further proved that it was never a party to the alleged transaction.
Petitioner's contention is untenable.
Private respondent had a valid cause of action for damages against petitioner. A cause of action is
an act or omission of one party in violation of the legal right or rights of the other. 9 Petitioner's
repeated failures to transport private respondent's workers in its flight despite confirmed booking
of said workers clearly constitutes breach of contract and bad faith on its part. In resolving
petitioner's theory that private respondent has no cause of action in the instant case, the appellate
court correctly held that:
In dealing with the contract of common carriage of passengers for purpose of
accuracy, there are two (2) aspects of the same, namely: (a) the contract "to carry
(at some future time)," which contract is consensual and is necessarily perfected by
mere consent (See Article 1356, Civil Code of the Philippines), and (b) the contract
"of carriage" or "of common carriage" itself which should be considered as a real
contract for not until the carrier is actually used can the carrier be said to have
already assumed the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p.
429, Eleventh Ed.)
In the instant case, the contract "to carry" is the one involved which is consensual
and is perfected by the mere consent of the parties.
There is no dispute as to the appellee's consent to the said contract "to carry" its
contract workers from Manila to Jeddah. The appellant's consent thereto, on the
other hand, was manifested by its acceptance of the PTA or prepaid ticket advice
that ROLACO Engineering has prepaid the airfares of the appellee's contract
workers advising the appellant that it must transport the contract workers on or
before the end of March, 1981 and the other batch in June, 1981.
Even if a PTA is merely an advice from the sponsors that an airline is authorized to
issue a ticket and thus no ticket was yet issued, the fact remains that the passage

had already been paid for by the principal of the appellee, and the appellant had
accepted such payment. The existence of this payment was never objected to nor
questioned by the appellant in the lower court. Thus, the cause or consideration
which is the fare paid for the passengers exists in this case.
The third essential requisite of a contract is an object certain. In this contract "to
carry", such an object is the transport of the passengers from the place of departure
to the place of destination as stated in the telex.
Accordingly, there could be no more pretensions as to the existence of an oral
contract of carriage imposing reciprocal obligations on both parties.
In the case of appellee, it has fully complied with the obligation, namely, the payment
of the fare and its willingness for its contract workers to leave for their place of
destination.
On the other hand, the facts clearly show that appellant was remiss in its obligation
to transport the contract workers on their flight despite confirmation and bookings
made by appellee's travelling agent.
xxx xxx xxx
Besides, appellant knew very well that time was of the essence as the prepaid ticket
advice had specified the period of compliance therewith, and with emphasis that it
could only be used if the passengers fly on BA. Under the circumstances, the
appellant should have refused acceptance of the PTA from appellee's principal or to
at least inform appellee that it could not accommodate the contract workers.
xxx xxx xxx
While there is no dispute that ROLACO Engineering advanced the payment for the
airfares of the appellee's contract workers who were recruited for ROLACO
Engineering and the said contract workers were the intended passengers in the
aircraft of the appellant, the said contract "to carry" also involved the appellee for as
recruiter he had to see to it that the contract workers should be transported to
ROLACO Engineering in Jeddah thru the appellant's transportation. For that matter,
the involvement of the appellee in the said contract "to carry" was well demonstrated
when
the appellant upon receiving the PTA immediately advised the appellee thereof. 10
Petitioner also contends that the appellate court erred in awarding actual damages in the amount
of P308,016.00 to private respondent since all expenses had already been subsequently
reimbursed by the latter's principal.
In awarding actual damages to private respondent, the appellate court held that the amount of
P308,016.00 representing actual damages refers to private respondent's second cause of action
involving the expenses incurred by the latter which were not reimbursed by ROLACO Engineering.
However, in the Complaint 11 filed by private respondent, it was alleged that private respondent
suffered actual damages in the amount of P308,016.00 representing the money it borrowed from
friends and financiers which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel
tax of the 12 workers. It is clear therefore that the actual damages private respondent seeks to
recover are the airline tickets and travel taxes it spent for its workers which were already
reimbursed by its principal and not for any other expenses it had incurred in the process of
recruiting said contract workers. Inasmuch as all expenses including the processing fees incurred
by private respondent had already been paid for by the latter's principal on a staggered basis as
admitted in open court by its managing director, Mrs. Bienvenida Brusellas. 12 We do not find

anymore justification in the appellate court's decision in granting actual damages to private
respondent.
Thus, while it may be true that private respondent was compelled to borrow money for the airfare
tickets of its contract workers when petitioner failed to transport said workers, the reimbursements
made by its principal to private respondent failed to support the latter's claim that it suffered actual
damages as a result of petitioner's failure to transport said workers. It is undisputed that private
respondent had consistently admitted that its principal had reimbursed all its expenses.
Article 2199 of the Civil Code provides that:
Except as provided by law or by stipulations, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved.
Such compensation is referred to as actual or compensatory damages.
Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved,
and proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or
guesswork as to the fact and amount of damages, but must depend upon competent proof that
they have suffered and on evidence of the actual amount thereof. 13
However, private respondent is entitled to an award of moral and exemplary damages for the
injury suffered as a result of petitioner's failure to transport the former's workers because of the
latter's patent bad faith in the performance of its obligation. As correctly pointed out by the
appellate court:
As evidence had proved, there was complete failure on the part of the appellant to
transport the 93 contract workers of the appellee on or before March 30, 1981
despite receipt of the payment for their airfares, and acceptance of the same by the
appellant, with specific instructions from the appellee's principal to transport the
contract workers on or before March 30, 1981. No previous notice was ever
registered by the appellant that it could not comply with the same. And then followed
the detestable act of appellant in unilaterally cancelling, booking and rebooking
unreasonably the flight of appellee's contract workers in June to July, 1981 without
prior notice. And all of these actuations of the appellant indeed constitute malice and
evident bad faith which had caused damage and besmirched the reputation and
business image of the appellee. 14
As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record
shows that no claim for said damages was ever made by the petitioner immediately after their
alleged occurrence therefore said counterclaims were mere afterthoughts when private
respondent filed the present case.
WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the
award of actual damages be deleted from said decision.
SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 114061 August 3, 1994

KOREAN AIRLINES CO., LTD., petitioner,
vs.
COURT OF APPEALS and JUANITO C. LAPUZ, respondents.
G.R. No. 113842 August 3, 1994
JUANITO C. LAPUZ, petitioner,
vs.
COURT OF APPEALS and KOREAN AIRLINES CO., LTD., respondents.
M.A. Aguinaldo and Associates for Korean Airlines Co., Ltd.
Camacho and Associates for Juanito Lapuz.
CRUZ, J.:
Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in
Jeddah, Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services,
Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was
"wait-listed," which meant that he could only be accommodated if any of the confirmed
passengers failed to show up at the airport before departure. When two of such passengers did
not appear, Lapuz and another person by the name of Perico were given the two unclaimed seats.
According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the
check-in counter of KAL. He passed through the customs and immigration sections for routine
check-up and was cleared for departure as Passenger No. 157 of KAL Flight No. KE 903.
Together with the other passengers, he rode in the shuttle bus and proceeded to the ramp of the
KAL aircraft for boarding. However, when he was at the third or fourth rung of the stairs, a KAL
officer pointed to him and shouted "Down! Down!" He was thus barred from taking the flight. When
he later asked for another booking, his ticket was canceled by KAL. Consequently, he was unable
to report for his work in Saudi Arabia within the stipulated 2-week period and so lost his
employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc.
coordinated with KAL for the departure of 30 contract workers, of whom only 21 were confirmed
and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph, after being informed
that there was a possibility of having one or two seats becoming available, gave priority to Perico,
who was one of the supervisors of the hiring company in Saudi Arabia. The other seat was won
through lottery by Lapuz. However, only one seat became available and so, pursuant to the earlier
agreement that Perico was to be given priority, he alone was allowed to board.
After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for damages,
disposing as follows:
WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered
sentencing the defendant Korean Air Lines to pay plaintiff Juanito C. Lapuz the
following:

1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED
SIXTY (P272,160.00) PESOS as actual/compensatory damages, with legal interest
thereon from the date of the filing of the complaint until fully paid.
2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for
attorney's fees; and
3. The costs of suit.
The case is hereby dismissed with respect to defendant Pan Pacific Overseas
Recruiting Services, Inc.
The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are
likewise dismissed.
On appeal, this decision was modified by the Court of Appeals 2 as follows:
WHEREFORE, in view of all the foregoing, the appealed judgment is hereby
AFFIRMED with the following modifications: the amount of actual damages
and compensatory damages is reduced to P60,000.00 and defendant-
appellant is hereby ordered to pay plaintiff-appellant the sum of One Hundred
Thousand Pesos (P100,000.00) by way of moral and exemplary damages, at
6% interest per annum from the date of the filing of the Complaint until fully
paid.
KAL and Lapuz filed their respective motions for reconsideration, which were both denied for lack
of merit. Hence, the present petitions for review which have been consolidated because of the
identity of the parties and the similarity of the issues.
In G. R. No. 114061, KAL assails the decision of the appellate court on the following grounds:
1. That the Court of Appeals erred in concluding that petitioner committed a
breach of contract of carriage notwithstanding lack of proper, competent and
sufficient evidence of the existence of such contract.
2. That the Court of Appeals erred in not according the proper evidentiary
weight to some evidence presented and the fact that private respondent did
not have any boarding pass to prove that he was allowed to board and to
prove that his airline ticket was confirmed.
3. That the Court of Appeals erred in concluding that the standby passenger
status of private respondent Lapuz was changed to a confirmed status when
his name was entered into the passenger manifest.
4. That the Court of Appeals abused its discretion in awarding moral and
exemplary damages in the amount of P100,000.00 in favor of private
respondent notwithstanding its lack of basis and private respondent did not
state such amount in his complaint nor had private respondent proven the
said damages.
5. That the Court of Appeals erred in dismissing the counterclaims.
6. That the Court of Appeals erred in dismissing the counterclaim of petitioner
against Pan Pacific.
7. That the Court of Appeals erred in ruling that the 6% per annum legal
interest on the judgment shall be computed from the filing of the complaint.
In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals
insofar as it modifies the award of damages; b) actual and compensatory damages in the sum
equivalent to 5 years' loss of earnings based on the petitioner's monthly salary of 1,600 Saudi rials
at the current conversion rate plus the cost of baggage and personal belongings worth P2,000 and
the service fee of P3,000 paid to the recruiting agency, all with legal interest from the filing of the
complaint until fully paid; c) moral damages of not less than P1 million and exemplary damages of
not less than P500,000.00, both with interest at 6% per annum from the filing of the complaint; and
d) attorney's fees in the sum equivalent to 30% of the award of damages.
It is evident that the issues raised in these petitions relate mainly to the correctness of the factual
findings of the Court of Appeals and the award of damages. The Court has consistently affirmed
that the findings of fact of the Court of Appeals and the other lower courts are as a rule binding
upon it, subject to certain exceptions. As nothing in the record indicates any of such exceptions,
the factual conclusions of the appellate court must be affirmed.
The status of Lapuz as standby passenger was changed to that of a confirmed passenger when
his name was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance
through immigration and customs clearly shows that he had indeed been confirmed as a
passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between
them when it failed to bring Lapuz to his destination.
This Court has held that a contract to transport passengers is different in kind and degree from
any other contractual relation. 3 The business of the carrier is mainly with the traveling public. It
invites people to avail themselves of the comforts and advantages it offers. The contract of air
carriage generates a relation attended with a public duty. Passengers have the right to be treated
by the carrier's employees with kindness, respect, courtesy and due consideration. They are
entitled to be protected against personal misconduct, injurious language, indignities and abuses
from such employees. 4 So it is that any discourteous conduct on the part of these employees
toward a passenger gives the latter an action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of courteously informing Lapuz
of his being a "wait-listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing
at him, thus causing him embarrassment and public humiliation.
KAL argues that "the evidence of confirmation of a chance passenger status is not through the
entry of the name of a chance passenger in the passenger manifest nor the clearance from the
Commission on Immigration and Deportation, because they are merely means of facilitating the
boarding of a chance passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the departure counter,
passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of
KAL's aircraft. In fact, his baggage had already been loaded in KAL's aircraft, to be flown with him
to Jeddah. The contract of carriage between him and KAL had already been perfected when he
was summarily and insolently prevented from boarding the aircraft.
KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary
damages is also not tenable.
The Court of Appeals granted moral and exemplary damages because:
The findings of the court a quo that the defendant-appellant has committed
breach of contract of carriage in bad faith and in wanton, disregard of plaintiff-
appellant's rights as passenger laid the basis and justification of an award for
moral damages.
xxxx
In the instant case, we find that defendant-appellant Korean Air Lines acted in
a wanton, fraudulent, reckless, oppressive or malevolent manner when it
"bumped off" plaintiff-appellant on November 8, 1980, and in addition treated
him rudely and arrogantly as a "patay gutom na contract worker fighting
Korean Air Lines," which clearly shows malice and bad faith, thus entitling
plaintiff-appellant to moral damages.
xxxx
Considering that the plaintiff-appellant's entitlement to moral damages has
been fully established by oral and documentary evidence, exemplary
damages may be awarded. In fact, exemplary damages may be awarded,
even though not so expressly pleaded in the complaint (Kapoe vs. Masa, 134
SCRA 231). By the same token, to provide an example for the public good, an
award of exemplary damages is also proper (Armovit vs. Court of
Appeals, supra).
On the other hand, Lapuz's claim that the award of P100,000.00 as moral and exemplary
damages is inadequate is not acceptable either. His prayer for moral damages of not less than P1
million and exemplary damages of not less than P500,000.00 is overblown.
The well-entrenched principle is that moral damages depend upon the discretion of the court
based on the circumstances of each case. 5 This discretion is limited by the principle that the
"amount awarded should not be palpably and scandalously excessive" as to indicate that it was
the result of prejudice or corruption on the part of the trial court. 6 Damages are not intended to
enrich the complainant at the expense of the defendant. They are awarded only to alleviate the
moral suffering that the injured party had undergone by reason of the defendant's culpable
action. 7 There is no hard-and-fast rule in the determination of what would be a fair amount of
moral damages since each case must be governed by its own peculiar facts.
A review of the record of this case shows that the injury suffered by Lapuz is not so serious or
extensive as to warrant an award of P1.5 million. The assessment of P100,000 as moral and
exemplary damages in his favor is, in our view, reasonable and realistic.
Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of
actual damages because it had not been assigned as an error by KAL. Not so. The rule is that
only errors specifically assigned and properly argued in the brief will be considered except errors
affecting jurisdiction over the subject matter and plain as well as clerical errors. 8 But this is not
without qualification for, as the Court held in Vda. de Javellana vs. Court of Appeals: 9
. . . [T]he Court is clothed with ample authority to review matters, even if they
are not assigned as errors in their appeal, if it finds that their consideration is
necessary in arriving at a just decision of the case.
A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise:
Issues, though not specifically raised in the pleading in the appellate court,
may, in the interest of justice, be properly considered by said court in deciding
a case, if they are questions raised in the trial court and are matters of record
having some bearing on the issue submitted which the parties failed to raise
or the lower court ignored.
The Court of Appeals was therefore justified in decreasing the award of actual damages even if
the issue was not assigned as an error by KAL. Consideration of this question was necessary for
the just and complete resolution of the present case. Furthermore, there was enough evidence to
warrant the reduction of the original award, as the challenged decision correctly observed:
A perusal of the plaintiff-appellant's contract of employment shows that the
effectivity of the contract is for only one year, renewable every year for five
years. Although plaintiff-appellant intends to renew his contract, such renewal
will still be subject to his foreign employer. Plaintiff-appellant had not yet
started working with his foreign employer, hence, there can be no basis as to
whether his contract will be renewed by his foreign employer or not. Thus, the
damages representing the loss of earnings of plaintiff-appellant in the renewal
of the contract of employment is at most speculative. Damages may not be
awarded on the basis of speculation or conjecture (Gachalian vs. Delim, 203
SCRA 126). Hence, defendant-appellant's liability is limited to the one year
contract only. Plaintiff-appellant is, therefore, entitled only to his lost earnings
for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount
of actual damages, representing lost earnings for five years prayed for in the
Complaint.
Plaintiff-appellant's contention that in computing his lost earnings, the current
rate of the Saudi Rial to the Philippine Peso at the time of payment should be
used, is untenable, considering that in his Complaint, plaintiff-appellant has
quantified in Philippine Peso his lost earnings for five years.
We disagree with the respondent court, however, on the date when the legal interest should
commence to run. The rule is that the legal interest of six percent (6%) on the amounts adjudged
in favor of Lapuz should resume from the time of the rendition of the trial court's decision instead
of November 28, 1980, the date of the filing of the complaint.
On this matter, the Court has held:
If suit were for payment of a definite sum of money, the contention might be
tenable. However, if it is for damages, unliquidated and not known until
definitely ascertained, assessed and determined by the courts after proof,
interest should be from the date of the decision. 11
xxxx
The obligation to pay interest on a sum filed in a judgment exists from the
date of the sentence, when so declared; for until the net amount of the
debtor's liability has been determined, he cannot he considered delinquent in
the fulfillment of his obligation to pay the debt with interest thereon. 12
Finally, we find that the respondent court did not err in sustaining the trial court's dismissal of
KAL's counterclaim against Pan Pacific Overseas Recruiting Services Inc., whose responsibility
ended with the confirmation by KAL of Lapuz as its passenger in its Flight No. 903.
This is still another case of the maltreatment of our overseas contract workers, this time by the
airline supposed to bring the passenger to his foreign assignment. Our OCW's sacrifice much in
seeking employment abroad, where they are deprived of the company of their loved ones, the
direct protection of our laws, and the comfort of our own native culture and way of life. This Court
shall exert every effort to vindicate their rights when they are abused and shall accord them the
commensurate reparation of their injuries consistent with their dignity and worth as members of
the working class.
WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal
interest on the damages awarded to private respondent should commence from the date of the
decision of the trial court on November 14, 1990. The parties shall bear their own costs.
SO ORDERED.

Sps. Fabre v CA,
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals [1] in CA-GR No.
28245, dated September 30, 1992, which affirmed with modification the decision of the Regional
Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to
private respondent Amyline Antonio, and its resolution which denied petitioners motion for
reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for school children which
they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after
trying him out for two weeks. His job was to take school children to and from the St. Scholasticas
College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc.
(WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults
Ministry from Manila to La Union and back in consideration of which private respondent paid
petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the
afternoon. However, as several members of the party were late, the bus did not leave the Tropical
Hut at the corner of Ortigas Avenue and EDSA until 8:00 oclock in the evening. Petitioner Porfirio
Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his
first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen,
Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway,
running on a south to east direction, which he described as siete. The road was slippery because
it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid
to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and
rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a
full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it
had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor
of the bus and pinned down by a wooden seat which came off after being unscrewed. It took three
persons to safely remove her from this position. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he
was not familiar with the area and he could not have seen the curve despite the care he took in
driving the bus, because it was dark and there was no sign on the road. He said that he saw the
curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30
kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the basis
of their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later
filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for

the damage to the latters fence. On the basis of Escanos affidavit of desistance the case against
petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial she described the operations she underwent and
adduced evidence regarding the cost of her treatment and therapy. Immediately after the accident,
she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not adequately
equipped, she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay, where she was
given sedatives. An x-ray was taken and the damage to her spine was determined to be too
severe to be treated there. She was therefore brought to Manila, first to the Philippine General
Hospital and later to the Makati Medical Center where she underwent an operation to correct the
dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel to a long
distance trip and that the driver was properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the negligent act of the defendants
which ultimately resulted to the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio
were the only ones who adduced evidence in support of their claim for damages, the Court is
therefore not in a position to award damages to the other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr.
& Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the
Civil Code of the Philippines and said defendants are ordered to pay jointly and severally to the
plaintiffs the following amount:
1) P93,657.11 as compensatory and actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio
but dismissed it with respect to the other plaintiffs on the ground that they failed to prove their
respective claims. The Court of Appeals modified the award of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorneys fees; and
6) Costs of suit.
The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to exercise
due care and precaution in the operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were themselves presumptively
negligent. Hence, this petition. Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED
BY PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO
WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable, an award of
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a
casual employee of a company called Suaco, earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees
do not have security of tenure, the award of P600,000.00, considering Amyline Antonios earnings,
is without factual basis as there is no assurance that she would be regularly earning these
amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on the theory
that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory
of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held,
for although the relation of passenger and carrier is contractual both in origin and nature,
nevertheless the act that breaks the contract may be also a tort. [2] In either case, the question is
whether the bus driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned
the bus, failed to exercise the diligence of a good father of the family in the selection and
supervision of their employee is fully supported by the evidence on record. These factual findings
of the two courts we regard as final and conclusive, supported as they are by the
evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a
consequence, the road was slippery, and it was dark. He averred these facts to justify his failure to
see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the
speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30
meters ahead.[3] By then it was too late for him to avoid falling off the road. Given the conditions of
the road and considering that the trip was Cabils first one outside of Manila, Cabil should have
driven his vehicle at a moderate speed. There is testimony[4] that the vehicles passing on that
portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per
hour, Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that it was
dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed
was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly
negligent and should be held liable for the injuries suffered by private respondent Amyline
Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and supervision of their
employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed
a professional drivers license. The employer should also examine the applicant for his
qualifications, experience and record of service. [5] Due diligence in supervision, on the other hand,
requires the formulation of rules and regulations for the guidance of employees and the issuance
of proper instructions as well as actual implementation and monitoring of consistent compliance
with the rules.[6]
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did
not consider the fact that Cabil had been driving for school children only, from their homes to the
St. Scholasticas College in Metro Manila. [7] They had hired him only after a two-week
apprenticeship. They had tested him for certain matters, such as whether he could remember the
names of the children he would be taking to school, which were irrelevant to his qualification to
drive on a long distance travel, especially considering that the trip to La Union was his first.The
existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the
presumption of negligence on the part of an employer. [8]
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by
the congregations delayed meeting) could have averted the mishap and (2) under the contract,
the WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold
water. The hour of departure had not been fixed. Even if it had been, the delay did not bear
directly on the cause of the accident. With respect to the second contention, it was held in an early
case that:
[A] person who hires a public automobile and gives the driver directions as to the place to which
he wishes to be conveyed, but exercises no other control over the conduct of the driver, is not
responsible for acts of negligence of the latter or prevented from recovering for injuries suffered
from a collision between the automobile and a train, caused by the negligence either of the
locomotive engineer or the automobile driver. [9]
As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres,
did not have to be engaged in the business of public transportation for the provisions of the Civil
Code on common carriers to apply to them. As this Court has held:[10]
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity
(in local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the general public, i.e., the general community
or population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained from making such distinctions.
As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof that
they exercised the diligence of a good father of the family in the selection and supervision of their
employee. As Art. 1759 of the Code provides:

Common carriers are liable for the death of or injuries to passengers through the negligence
or wilful acts of the formers employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of the
appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify
finding them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil
Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think
the Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate. [11] To the contrary, the award of
P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able to work again
has not been foreclosed. In fact she testified that one of her previous employers had expressed
willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the Court of
Appeals do not sufficiently indicate the factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this case. Viewed as an action for quasi
delict,this case falls squarely within the purview of Art. 2219(2) providing for the payment of moral
damages in cases of quasi delict. On the theory that petitioners are liable for breach of contract of
carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since
Cabils gross negligence amounted to bad faith. [12] Amyline Antonios testimony, as well as the
testimonies of her father and co-passengers, fully establish the physical suffering and mental
anguish she endured as a result of the injuries caused by petitioners negligence.
The award of exemplary damages and attorneys fees was also properly made. However, for
the same reason that it was error for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award of moral damages and reduce
the award of attorneys fees, inasmuch as private respondents, in whose favor the awards were
made, have not appealed.[13]
As above stated, the decision of the Court of Appeals can be sustained either on the theory
of quasi delict or on that of breach of contract.The question is whether, as the two courts below
held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and
severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals,[14] on facts similar to those in this case, this Court held the bus company and the driver
jointly and severally liable for damages for injuries suffered by a passenger. Again, in Bachelor
Express, Inc. v. Court of Appeals [15] a driver found negligent in failing to stop the bus in order to let
off passengers when a fellow passenger ran amuck, as a result of which the passengers jumped
out of the speeding bus and suffered injuries, was held also jointly and severally liable with the
bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of the
bus on which plaintiff was riding concurred with the negligence of a third party who was the driver
of another vehicle, thus causing an accident. In Anuran v. Buo,[16] Batangas Laguna Tayabas Bus
Co. v. Intermediate Appellate Court,[17] and Metro Manila Transit Corporation v. Court of Appeals,
[18]
the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were

jointly and severally held liable to the injured passenger or the latters heirs. The basis of this
allocation of liability was explained in Viluan v. Court of Appeals,[19] thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs from contract
while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as
1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a
passenger due to the negligence of the driver of the bus on which he was riding and of the driver
of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally
liable for damages. Some members of the Court, though, are of the view that under the
circumstances they are liable on quasi-delict.[20]
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals [21] this Court exonerated
the jeepney driver from liability to the injured passengers and their families while holding the
owners of the jeepney jointly and severally liable, but that is because that case was expressly tried
and decided exclusively on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune and
Carreon [the jeepney owners] were negligent. However, its ruling that spouses Mangune and
Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held jointly
and severally liable with the carrier in case of breach of the contract of carriage. The rationale
behind this is readily discernible. Firstly, the contract of carriage is between the carrier and the
passenger, and in the event of contractual liability, the carrier is exclusively responsible therefore
to the passenger, even if such breach be due to the negligence of his driver (see Viluan v. The
Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742) . . . [22]
As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out
their claim against the carrier and the driver exclusively on one theory, much less on that of
breach of contract alone. After all, it was permitted for them to allege alternative causes of action
and join as many parties as may be liable on such causes of action [23] so long as private
respondent and her co-plaintiffs do not recover twice for the same injury. What is clear from the
cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus
justifying the holding that the carrier and the driver were jointly and severally liable because their
separate and distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to
the award of damages. Petitioners are ORDERED to PAY jointly and severally the private
respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent
would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load
his vehicles with cargo which various merchants wanted delivered to differing establishments in
Pangasinan. For that service, respondent charged freight rates which were commonly lower than
regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for
the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal,
to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1
December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were
loaded on a truck driven by respondent himself, while 600 cartons were placed on board the other
truck which was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never
reached petitioner, since the truck which carried these boxes was hijacked somewhere along the
MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his
helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First
Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being
a common carrier, and having failed to exercise the extraordinary diligence required of him by the
law, should be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that he could
not be held responsible for the value of the lost goods, such loss having been due to force
majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as
well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking services to the
public; in not exempting him from liability on the ground of force majeure; and in ordering him to
pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been
engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came
to this Court by way of a Petition for Review assigning as errors the following conclusions of the
Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the
facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity
(in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberaom making such
distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even
though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although
such back-hauling was done on a periodic or occasional rather than regular or scheduled manner,
and even though private respondent's principal occupation was not the carriage of goods for

others. There is no dispute that private respondent charged his customers a fee for hauling their
goods; that fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of
public convenience is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of
the applicable regulatory statute and implementing regulations and has been granted a certificate
of public convenience or other franchise. To exempt private respondent from the liabilities of a
common carrier because he has not secured the necessary certificate of public convenience,
would be offensive to sound public policy; that would be to reward private respondent precisely for
failing to comply with applicable statutory requirements. The business of a common carrier
impinges directly and intimately upon the safety and well being and property of those members of
the general community who happen to deal with such carrier. The law imposes duties and
liabilities upon common carriers for the safety and protection of those who utilize their services
and the law cannot allow a common carrier to render such duties and liabilities merely facultative
by simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a
very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well
as of passengers. The specific import of extraordinary diligence in the care of goods transported
by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and
1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which
exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force majeure fall within the scope of
Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as required in Article 1733. (Emphasis
supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged
in the instant case — the hijacking of the carrier's truck — does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking
of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that
the private respondent as common carrier is presumed to have been at fault or to have acted

negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on
the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security guard to ride with the truck
and to engage brigands in a firelight at the risk of his own life and the lives of the driver and his
helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or
armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or
of robbers who donot act with grave or irresistible threat, violence or
force, is dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment used in
the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to
divest or to diminish such responsibility — even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat,
violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in
the vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The record shows that an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled " People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John
Doe." There, the accused were charged with willfully and unlawfully taking and carrying away with
them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled
milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial
court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 Three
(3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away the truck
and its cargo but also kidnapped the driver and his helper, detaining them for several days and
later releasing them in another province (in Zambales). The hijacked truck was subsequently
found by the police in Quezon City. The Court of First Instance convicted all the accused of
robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is
necessary to recall that even common carriers are not made absolute insurers against all risks of
travel and of transport of goods, and are not held liable for acts or events which cannot be
foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendana is not liable for the value of the undelivered merchandise which was lost because of an
event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the
Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas,
respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial
Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in
19671 and renewed by the Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on its gross receipts
for the fiscal year 1993 pursuant to the Local Government Code 3. The respondent City
Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in
four installments based on the gross receipts for products pumped at GPS-1 for the fiscal
year 1993 which amounted to P181,681,151.00. In order not to hamper its operations,
petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of
1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to
Sucat and JTF Pandacan Terminals. As such, our Company is exempt from
paying tax on gross receipts under Section 133 of the Local Government Code
of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration of
contractors under Section 131, Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax "on contractors and other independent
contractors" under Section 143, Paragraph (e) of the Local Government Code
does not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said section
limits the imposition of fees and charges on business to such amounts as may
be commensurate to the cost of regulation, inspection, and licensing. Hence,
assuming arguendo that FPIC is liable for the license fee, the imposition
thereof based on gross receipts is violative of the aforecited provision. The
amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the
cost of regulation, inspection and licensing. The fee is already a revenue
raising measure, and not a mere regulatory imposition. 4
On March 8, 1994, the respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government Code. 5
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint6 for tax refund with prayer for writ of preliminary injunction against respondents
City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on
its gross receipts violates Section 133 of the Local Government Code; (2) the authority of
cities to impose and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes
on transportation contractors for, as defined under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax paid. 7
Traversing the complaint, the respondents argued that petitioner cannot be exempt from
taxes under Section 133 (j) of the Local Government Code as said exemption applies only
to "transportation contractors and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents assert that pipelines are not
included in the term "common carrier" which refers solely to ordinary carriers such as
trucks, trains, ships and the like. Respondents further posit that the term "common carrier"
under the said code pertains to the mode or manner by which a product is delivered to its
destination.8
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in
this wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear. It is a
rule that tax exemptions are to be strictly construed against the taxpayer,
taxes being the lifeblood of the government. Exemption may therefore be
granted only by clear and unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline concession under Republic Act
387. (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession
grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the Local Tax Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1. That the exemption granted under Sec. 133 (j)
encompasses only common carriers so as not to
overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a special
carrier extending its services and facilities to a single

specific or "special customer" under a "special
contract."
2. The Local Tax Code of 1992 was basically enacted
to give more and effective local autonomy to local
governments than the previous enactments, to make
them economically and financially viable to serve the
people and discharge their functions with a
concomitant obligation to accept certain devolution
of powers, . . . So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and
contractors are also taxed under Sec. 143 (e) and 151
of the Code.9
Petitioner assailed the aforesaid decision before this Court via a petition for review. On
February 27, 1995, we referred the case to the respondent Court of Appeals for
consideration and adjudication. 10 On November 29, 1995, the respondent court rendered a
decision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion
for reconsideration was denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996. 13Petitioner moved for a reconsideration which was granted by this
Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the
petitioner is not a common carrier or a transportation contractor, and (2) the exemption
sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying
goods for others as a public employment, and must
hold himself out as ready to engage in the
transportation of goods for person generally as a
business and not as a casual occupation;
2. He must undertake to carry goods of the kind to
which his business is confined;
3. He must undertake to carry by the method by
which his business is conducted and over his
established roads; and
15
4. The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the
goods by land and for compensation. The fact that petitioner has a limited clientele does
not exclude it from the definition of a common carrier. In De Guzman vs. Court of
Appeals 16we ruled that:
The above article (Art. 1732, Civil Code) makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only
as an ancillary activity (in local idiom, as a "sideline"). Article
1732 . . . avoids making any distinction between a person or
enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population,
and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article
1877 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article
1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on
common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "public service" includes:
every person that now or hereafter may own, operate.
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele,
whether permanent, occasional or accidental, and
done for general business purposes, any common
carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal,
irrigation system gas, electric light heat and power,
water supply andpower petroleum, sewerage system,
wire or wireless communications systems, wire or
wireless broadcasting stations and other similar
public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of
the Local Government Code refers only to common carriers transporting goods and
passengers through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air.
It does not provide that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are considered common
carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. — A pipe line
shall have the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obligated to
utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by
others for transport, and to charge without discrimination such
rates as may have been approved by the Secretary of Agriculture
and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of
Article 7 thereof provides:
that everything relating to the exploration for and exploitation of
petroleum . . . and everything relating to the manufacture,
refining, storage, or transportation by special methods of
petroleum, is hereby declared to be a public utility. (Emphasis
Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In
BIR Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged
only in transporting petroleum products, it is considered a
common carrier under Republic Act No. 387 . . . . Such being the
case, it is not subject to withholding tax prescribed by Revenue
Regulations No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier"
and, therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units. — Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxx xxx xxx
(j) Taxes on the gross receipts of
transportation contractors and persons
engaged in the transportation of
passengers or freight by hire and
common carriers by air, land or water,
except as provided in this Code.
The deliberations conducted in the House of Representatives on the Local Government
Code of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the
Taxing Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of
transportation. This appears to be one of those being deemed to
be exempted from the taxing powers of the local government
units. May we know the reason why the transportation business is
being excluded from the taxing powers of the local government
units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in
Section 121 (now Sec. 131), line 16, paragraph 5. It states that
local government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of
Book II, one can see there that provinces have the power to
impose a tax on business enjoying a franchise at the rate of not
more than one-half of 1 percent of the gross annual receipts. So,
transportation contractors who are enjoying a franchise would be
subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the
imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top of
what is already being imposed by the National Internal Revenue
Code which is the so-called "common carriers tax." We do not
want a duplication of this tax, so we just provided for an
exception under Section 125 [now Sec. 137] that a province may
impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr.
Speaker. . . . 18
It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code. 19 To tax petitioner again on its
gross receipts in its transportation of petroleum business would defeat the purpose of the
Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.

G.R. No. 147246. August 19, 2003]
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and
PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.
DECISION
PUNO, J.:
On appeal is the Court of Appeals May 11, 2000 Decision [1] in CA-G.R. CV No. 49195 and
February 21, 2001 Resolution [2] affirming with modification the April 6, 1994 Decision [3] of the
Regional Trial Court of Manila which found petitioner liable to pay private respondent the amount
of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.35[4] was shipped by Marubeni American Corporation of Portland, Oregon on board
the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation
in Manila, evidenced by Bill of Lading No. PTD/Man-4. [5] The shipment was insured by the private
respondent Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75
under Marine Cargo Risk Note RN 11859/90.[6]
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the
custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the
consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III,
evidenced by Lighterage Receipt No. 0364 [7] for delivery to consignee. The cargo did not reach its
destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a
warning of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to
Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied
down to other barges which arrived ahead of it while weathering out the storm that night. A few
days after, the barge developed a list because of a hole it sustained after hitting an unseen
protuberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990. [8] It
likewise secured the services of Gaspar Salvaging Corporation which refloated the barge. [9] The
hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the
consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again
ran aground due to strong current. To avoid the complete sinking of the barge, a portion of the
goods was transferred to three other barges. [10]
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely,
resulting in the total loss of the remaining cargo. [11] A second Marine Protest was filed on
September 7, 1990.[12]

On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved
and loaded on the three other barges. [13]The total proceeds from the sale of the salvaged cargo
was P201,379.75.[14]
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and
another letter dated September 18, 1990 to the private respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the amount
of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said amount from the
petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of
the amount of indemnity, attorney's fees and cost of suit. [16] Petitioner filed its answer with
counterclaim.[17]
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its
Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia
Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc. the
sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991 until fully
satisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's counterclaim is
hereby DISMISSED. With costs against defendant.[18]
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The
appellate court affirmed the decision of the trial court with modification. The dispositive portion of
its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense
that the salvage value of P201,379.75 shall be deducted from the amount of P4,104,654.22. Costs
against appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied by the
appellate court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the
appellate court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.
SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER
COURT A QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE
APPLICABLE TO COMMON CARRIERS, THE LOSS OF THE CARGO IS,
THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE
(5) CASES ENUMERATED.
SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER
FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE
AND CUSTODY OF THE CONSIGNEES CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence
in its care and custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no
fixed and publicly known route, maintains no terminals, and issues no tickets. It points out that it is
not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it
consents. In short, it does not hold out its services to the general public. [20]
We disagree.
In De Guzman vs. Court of Appeals,[21] we held that the definition of common carriers in
Article 1732 of the Civil Code makes no distinction between one whose principal business activity
is the carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity. We also did not distinguish between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Further, we ruled that Article 1732 does not distinguish between a carrier
offering its services to the general public, and one who offers services or solicits business only
from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and
drayage[22] and it offers its barges to the public for carrying or transporting goods by water for
compensation. Petitioner is clearly a common carrier. In De Guzman, supra,[23] we considered
private respondent Ernesto Cendaa to be a common carrier even if his principal occupation was
not the carriage of goods for others, but that of buying used bottles and scrap metal in Pangasinan
and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on
an irregular rather than scheduled manner, and with an only limited clientele. A common carrier
need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue
tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.[24] The test to determine a common carrier is whether the given undertaking is a part of
the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted. [25] In the case at bar, the
petitioner admitted that it is engaged in the business of shipping and lighterage, [26] offering its
barges to the public, despite its limited clientele for carrying or transporting goods by water for
compensation.[27]
On the second issue, we uphold the findings of the lower courts that petitioner failed to
exercise extraordinary diligence in its care and custody of the consignees goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.[28] They are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. [29] To overcome the presumption of negligence in the
case of loss, destruction or deterioration of the goods, the common carrier must prove that it

exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the
Civil Code enumerates the instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total
loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held
liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has exercised due diligence before,
during and after the occurrence of the typhoon to prevent or minimize the loss. [30] The evidence
show that, even before the towing bits of the barge broke, it had already previously sustained
damage when it hit a sunken object while docked at the Engineering Island. It even suffered a
hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged vessel was
refloated but its hole was patched with only clay and cement. The patch work was merely a
provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to
proceed with the voyage, it recklessly exposed the cargo to further damage. A portion of the
cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE:[31]
xxxxxxxxx
q - Can you tell us what else transpired after that incident?
a - After the first accident, through the initiative of the barge owners, they tried to pull out
the barge from the place of the accident, and bring it to the anchor terminal for safety,
then after deciding if the vessel is stabilized, they tried to pull it to the consignees
warehouse, now while on route another accident occurred, now this time the barge
totally hitting something in the course.
q - You said there was another accident, can you tell the court the nature of the second
accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?
a - Mostly it was related to the first accident because there was already a whole (sic) on
the bottom part of the barge.
xxxxxxxxx
This is not all. Petitioner still headed to the consignees wharf despite knowledge of an
incoming typhoon. During the time that the barge was heading towards the consignee's wharf on
September 5, 1990, typhoon Loleng has already entered the Philippine area of responsibility. [32] A
part of the testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:[33]
xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie
where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the
consignee) as I have said was in a hurry for their goods to be delivered at their Wharf
since they needed badly the wheat that was loaded in PSTSI-3. It was needed badly
by the consignee.
q - And this is the reason why you towed the Barge as you did?
a - Yes, sir.
xxxxxxxxx
CROSS-EXAMINATION BY ATTY. IGNACIO:[34]
xxxxxxxxx
q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I
correct?
a - The next day, in the morning, we hired for additional two (2) tugboats as I have stated.
q - Despite of the threats of an incoming typhoon as you testified a while ago?
a - It is already in an inner portion of Pasig River. The typhoon would be coming and it
would be dangerous if we are in the vicinity of Manila Bay.
q - But the fact is, the typhoon was incoming? Yes or no?
a - Yes.
q - And yet as a standard operating procedure of your Company, you have to secure a
sort of Certification to determine the weather condition, am I correct?
a - Yes, sir.
q - So, more or less, you had the knowledge of the incoming typhoon, right?
a - Yes, sir.
q - And yet you proceeded to the premises of the GMC?
a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are
already inside the vicinity or inside Pasig entrance, it is a safe place to tow
upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to
escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon head-
on falls short of due diligence required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted that when the towing bits of the vessel broke
that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it was no
longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of the
cargo; a human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R.
CV No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.

FIRST DIVISION
[G.R. No. 145804. February 6, 2003]
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE
NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision and resolution of the Court of
Appeals, promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No.
60720, entitled Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et.
al., which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266,
Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail
Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of
Nicanor Navidad.
On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station after purchasing a token (representing payment of the
fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the
security guard assigned to the area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to
indicate how the fight started or who, between the two, delivered the first blow or how Navidad
later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was
killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with
her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA,
the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her
husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against
Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due
diligence in the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead of
presenting evidence, filed a demurrer contending that Navidad had failed to prove that Escartin
was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it
adjudged:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs
the following:
a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
b) Moral damages of P50,000.00;
c) Attorneys fees of P20,000;
d) Costs of suit.
The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.
The compulsory counterclaim of LRTA and Roman are likewise dismissed. [1]
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court
promulgated its now assailed decision exonerating Prudent from any liability for the death of
Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally liable thusly:
WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from
any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light
Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly
and severally to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees.[2]
The appellate court ratiocinated that while the deceased might not have then as yet boarded
the train, a contract of carriage theretofore had already existed when the victim entered the place
where passengers were supposed to be after paying the fare and getting the corresponding token
therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the
security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted
fist blows upon the victim and the evidence merely established the fact of death of Navidad by
reason of his having been hit by the train owned and managed by the LRTA and operated at the
time by Roman.The appellate court faulted petitioners for their failure to present expert evidence
to establish the fact that the application of emergency brakes could not have stopped the train.
The appellate court denied petitioners motion for reconsideration in its resolution of 10
October 2000.
In their present recourse, petitioners recite alleged errors on the part of the appellate
court; viz:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE
FINDINGS OF FACTS BY THE TRIAL COURT
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS
ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO
ROMAN IS AN EMPLOYEE OF LRTA.[3]
Petitioners would contend that the appellate court ignored the evidence and the factual
findings of the trial court by holding them liable on the basis of a sweeping conclusion that the
presumption of negligence on the part of a common carrier was not overcome. Petitioners would
insist that Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an act
of a stranger that could not have been foreseen or prevented. The LRTA would add that the
appellate courts conclusion on the existence of an employer-employee relationship between
Roman and LRTA lacked basis because Roman himself had testified being an employee of Metro
Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a contract of
carriage was deemed created from the moment Navidad paid the fare at the LRT station and
entered the premises of the latter, entitling Navidad to all the rights and protection under a
contractual relation, and that the appellate court had correctly held LRTA and Roman liable for the
death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and
for reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring
the safety of passengers.[4] The Civil Code, governing the liability of a common carrier for death of
or injury to its passengers, provides:
Article 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for
all the circumstances.
Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the formers employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of
the willful acts or negligence of other passengers or of strangers, if the common carriers
employees through the exercise of the diligence of a good father of a family could have prevented
or stopped the act or omission.
The law requires common carriers to carry passengers safely using the utmost diligence of
very cautious persons with due regard for all circumstances. [5] Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so long
as the passengers are within its premises and where they ought to be in pursuance to the contract
of carriage.[6] The statutory provisions render a common carrier liable for death of or injury to
passengers (a) through the negligence or wilful acts of its employees or b) on account of
wilful acts or negligence of other passengers or of strangers if the common carriers
employees through the exercise of due diligence could have prevented or stopped the act
or omission.[7] In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and[8] by simple proof of injury, the passenger is relieved of the duty to still establish the
fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to
prove that the injury is due to an unforeseen event or to force majeure. [9] In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners, according
to the appellate court, have failed to show, the presumption would be that it has been at fault,
[10]
an exception from the general rule that negligence must be proved. [11]
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high diligence
required of the common carrier. In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the common carrier is not
relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 2176[12] and related provisions, in conjunction with Article 2180, [13] of the Civil
Code. The premise, however, for the employers liability is negligence or fault on the part of the
employee. Once such fault is established, the employer can then be made liable on the basis of
the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the
selection and supervision of its employees. The liability is primary and can only be negated by
showing due diligence in the selection and supervision of the employee, a factual matter that has
not been shown. Absent such a showing, one might ask further, how then must the liability of the
common carrier, on the one hand, and an independent contractor, on the other hand, be
described? It would be solidary. A contractual obligation can be breached by tort and when the
same act or omission causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194[14] of the Civil Code can well apply. [15] In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the contract. [16] Stated differently, when
an act which constitutes a breach of contract would have itself constituted the source of a quasi-
delictual liability had no contract existed between the parties, the contract can be said to have
been breached by tort, thereby allowing the rules on tort to apply. [17]
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that there is nothing
to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its
employee, Escartin, has not been duly proven x x x. This finding of the appellate court is not
without substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the contractual
tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman;
thus, Roman can be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal damages
are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him.[18] It is an established rule that nominal damages cannot co-exist with
compensatory damages.[19]
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with
MODIFICATION but only in that (a) the award of nominal damages is DELETED and (b) petitioner
Rodolfo Roman is absolved from liability. No costs.
SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 157917 August 29, 2012
1
SPOUSES TEODORO and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and
the COURT OF APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to
observe extraordinary diligence in the conduct of his business. He is presumed to be negligent
when death occurs to a passenger. His liability may include indemnity for loss of earning capacity
even if the deceased passenger may only be an unemployed high school student at the time of
the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the
adverse decision promulgated on November 13, 2002, by which the Court of Appeals (CA)
affirmed with modification the decision rendered on December 3, 1999 by the Regional Trial Court
(RTC), Branch 260, in Parañaque City that had decreed them jointly and severally liable with
Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate
(Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students from their respective
residences in Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the
capacity to transport 14 students at a time, two of whom would be seated in the front beside the
driver, and the others in the rear, with six students on either side. They employed Clemente Alfaro
(Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On
August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the
Zarates’ residence. Aaron took his place on the left side of the van near the rear door. The van,
with its air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14
student riders on their way to Don Bosco. Considering that the students were due at Don Bosco
by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the
South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the
narrow path underneath the Magallanes Interchange that was then commonly used by Makati-
bound vehicles as a short cut into Makati. At the time, the narrow path was marked by piles of
construction materials and parked passenger jeepneys, and the railroad crossing in the narrow
path had no railroad warning signs, or watchmen, or other responsible persons manning the
crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing
motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train),
operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling
northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked
because he overtook the passenger bus on its left side. The train blew its horn to warn motorists
of its approach. When the train was about 50 meters away from the passenger bus and the van,
Alano applied the ordinary brakes of the train. He applied the emergency brakes only when he
saw that a collision was imminent. The passenger bus successfully crossed the railroad tracks,
but the van driven by Alfaro did not. The train hit the rear end of the van, and the impact threw
nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path of the
train, which dragged his body and severed his head, instantaneously killing him. Alano fled the
scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for
damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their
respective answers, with cross-claims against each other, but Alfaro could not be served with
summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe
transportation carriage of the former spouses' son from their residence in Parañaque to his
school at the Don Bosco Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the implementation thereof,
Aaron, the minor son of spouses Zarate died in connection with a vehicular/train collision
which occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses
Pereña, then driven and operated by the latter's employee/authorized driver Clemente
Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of August 22, 1996,
within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision
was a railroad crossing used by motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no appropriate and
safety warning signs and railings at the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound public utility and private
vehicles used on a daily basis the site of the collision as an alternative route and short-cut
to Makati;
(7) The train driver or operator left the scene of the incident on board the commuter train
involved without waiting for the police investigator;
(8) The site commonly used for railroad crossing by motorists was not in fact intended by
the railroad operator for railroad crossing at the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters
from the Magallanes station of PNR.
B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable
for negligence constituting the proximate cause of the vehicular collision, which resulted in
the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro
are liable for any negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad
system is liable for negligence in failing to provide adequate safety warning signs and
railings in the area commonly used by motorists for railroad crossings, constituting the
proximate cause of the vehicular collision which resulted in the death of the plaintiff
spouses' son;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of
carriage with plaintiff-spouses in failing to provide adequate and safe transportation for the
latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary
damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the
diligence of employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron
John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train
involved in the accident, in allowing or tolerating the motoring public to cross, and its failure
to install safety devices or equipment at the site of the accident for the protection of the
public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for
any and whatever amount the latter may be held answerable or which they may be ordered
to pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts
claimed by the latter in their Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and
exemplary damages and attorney's fees.2
The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe
transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a
good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had
been issued a driver’s license and had not been involved in any vehicular accident prior to the
collision; that their own son had taken the van daily; and that Teodoro Pereña had sometimes
accompanied Alfaro in the van’s trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the reckless
crossing of the van whose driver had not first stopped, looked and listened; and that the narrow
path traversed by the van had not been intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision, 3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering them to jointly and severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration, 4 reiterating that the
cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the
death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on
the established circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit: 5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and severally liable
together with defendant-appellants spouses Teodorico and Nanette Pereña and defendant-
appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and
damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses
despite overwhelming documentary evidence on record, supporting the case of defendants-
appellants Philippine National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral
and exemplary damages and attorney’s fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine
National Railways and in not holding the latter and its train driver primarily responsible for the
incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the
absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but
limited the moral damages to  2,500,000.00; and deleted the attorney’s fees because the RTC
did not state the factual and legal bases, to wit: 6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch
260 of Parañaque City is AFFIRMED with the modification that the award of Actual Damages is
reduced to  59,502.76; Moral Damages is reduced to  2,500,000.00; and the award for
Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling
in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company, 7 wherein the Court
gave the heirs of Cariaga a sum representing the loss of the deceased’s earning capacity despite

Cariaga being only a medical student at the time of the fatal incident. Applying the formula
adopted in the American Expectancy Table of Mortality:–
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life
expectancy from age of 21 (the age when he would have graduated from college and started
working for his own livelihood) instead of 15 years (his age when he died). Considering that the
nature of his work and his salary at the time of Aaron’s death were unknown, it used the prevailing
minimum wage of  280.00/day to compute Aaron’s gross annual salary to be  110,716.65,
inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s life expectancy of
39.3 years, his gross income would aggregate to  4,351,164.30, from which his estimated
expenses in the sum of  2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net
income. Due to Aaron’s computed net income turning out to be higher than the amount claimed by
the Zarates, only  2,109,071.00, the amount expressly prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration. 8
Issues
In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and
severally liable to pay damages with Philippine National Railways and dismissing their cross-claim
against the latter.
II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning
capacity of a minor who was only a high school student at the time of his death in the absence of
sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereñas and the PNR,
basing their claim against the Pereñas on breach of contract of carriage and against the PNR on
quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a
driver’s license and that he had not been involved in any vehicular accident prior to the fatal
collision with the train; that they even had their own son travel to and from school on a daily basis;
and that Teodoro Pereña himself sometimes accompanied Alfaro in transporting the passengers
to and from school. The RTC gave scant consideration to such defense by regarding such
defense as inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas
operated as a common carrier; and that their standard of care was extraordinary diligence, not the
ordinary diligence of a good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a
private carrier,9primarily because he only caters to some specific or privileged individuals, and his
operation is neither open to the indefinite public nor for public use, the exact nature of the
operation of a school bus service has not been finally settled. This is the occasion to lay the
matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons from
one place to another, gratuitously or for hire. The carrier is classified either as a private/special
carrier or as a common/public carrier. 10 A private carrier is one who, without making the activity a
vocation, or without holding himself or itself out to the public as ready to act for all who may desire
his or its services, undertakes, by special agreement in a particular instance only, to transport
goods or persons from one place to another either gratuitously or for hire. 11 The provisions on
ordinary contracts of the Civil Code govern the contract of private carriage.The diligence required
of a private carrier is only ordinary, that is, the diligence of a good father of the family. In contrast,
a common carrier is a person, corporation, firm or association engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for compensation, offering
such services to the public. 12 Contracts of common carriage are governed by the provisions on
common carriers of the Civil Code, the Public Service Act, 13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is presumed
to be at fault or to have acted negligently in case of the loss of the effects of passengers, or the
death or injuries to passengers.14
In relation to common carriers, the Court defined public use in the following terms in United States
v. Tan Piaco,15viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining whether a use is public, we
must look not only to the character of the business to be done, but also to the proposed mode of
doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is
not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There
must be, in general, a right which the law compels the owner to give to the general public. It is not
enough that the general prosperity of the public is promoted. Public use is not synonymous with
public interest. The true criterion by which to judge the character of the use is whether the public
may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided
any distinction between a person or an enterprise offering transportation on a regular or an
isolated basis; and has not distinguished a carrier offering his services to the general public, that
is, the general community or population, from one offering his services only to a narrow segment
of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code
coincides neatly with the notion of public service under the Public Service Act, which supplements
the law on common carriers found in the Civil Code. Public service, according to Section 13,
paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines,
for hire or compensation, with general or limited clientèle, whether permanent or occasional, and
done for the general business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless broadcasting stations and other similar
public services. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court has
considered as common carriers pipeline operators, 18 custom brokers and warehousemen, 19 and
barge operators20 even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the activity,
but whether the undertaking is a part of the activity engaged in by the carrier that he has held out
to the general public as his business or occupation. If the undertaking is a single transaction, not a
part of the general business or occupation engaged in, as advertised and held out to the general
public, the individual or the entity rendering such service is a private, not a common, carrier. The
question must be determined by the character of the business actually carried on by the carrier,
not by any secret intention or mental reservation it may entertain or assert when charged with the
duties and obligations that the law imposes.21
Applying these considerations to the case before us, there is no question that the Pereñas as the
operators of a school bus service were: (a) engaged in transporting passengers generally as a
business, not just as a casual occupation; (b) undertaking to carry passengers over established
roads by the method by which the business was conducted; and (c) transporting students for a
fee. Despite catering to a limited clientèle, the Pereñas operated as a common carrier because
they held themselves out as a ready transportation indiscriminately to the students of a particular
school living within or near where they operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the passengers is defined
by law. Given the nature of the business and for reasons of public policy, the common carrier is
bound "to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case." 22 Article 1755
of the Civil Code specifies that the common carrier should "carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances." To successfully fend off liability in an action upon the death
or injury to a passenger, the common carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was at fault or acted negligently would
stand.23 No device, whether by stipulation, posting of notices, statements on tickets, or otherwise,
may dispense with or lessen the responsibility of the common carrier as defined under Article
1755 of the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense or reason by which the
Court might now reverse the CA’s findings on their liability. On the contrary, an examination of the
records shows that the evidence fully supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be
negligent at the time of the accident because death had occurred to their passenger. 25 The
presumption of negligence, being a presumption of law, laid the burden of evidence on their
shoulders to establish that they had not been negligent. 26 It was the law no less that required them
to prove their observance of extraordinary diligence in seeing to the safe and secure carriage of
the passengers to their destination. Until they did so in a credible manner, they stood to be held
legally responsible for the death of Aaron and thus to be held liable for all the natural
consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their negligence by
credible evidence. Their defense of having observed the diligence of a good father of a family in
the selection and supervision of their driver was not legally sufficient. According to Article 1759 of
the Civil Code, their liability as a common carrier did not cease upon proof that they exercised all
the diligence of a good father of a family in the selection and supervision of their employee. This
was the reason why the RTC treated this defense of the Pereñas as inappropriate in this action for
breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted
beyond the scope of his authority or even in violation of the orders of the common carrier. 27 In this
connection, the records showed their driver’s actual negligence. There was a showing, to begin
with, that their driver traversed the railroad tracks at a point at which the PNR did not permit
motorists going into the Makati area to cross the railroad tracks. Although that point had been
used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into
taking that route. On the other hand, with his familiarity with that shortcut, their driver was fully
aware of the risks to his passengers but he still disregarded the risks. Compounding his lack of
care was that loud music was playing inside the air-conditioned van at the time of the accident.
The loudness most probably reduced his ability to hear the warning horns of the oncoming train to
allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he sought to
overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so
doing, he lost his view of the train that was then coming from the opposite side of the passenger
bus, leading him to miscalculate his chances of beating the bus in their race, and of getting clear
of the train. As a result, the bus avoided a collision with the train but the van got slammed at its
rear, causing the fatality. Lastly, he did not slow down or go to a full stop before traversing the
railroad tracks despite knowing that his slackening of speed and going to a full stop were in
observance of the right of way at railroad tracks as defined by the traffic laws and regulations. 28He
thereby violated a specific traffic regulation on right of way, by virtue of which he was immediately
presumed to be negligent.29
The omissions of care on the part of the van driver constituted negligence, 30 which, according to
Layugan v. Intermediate Appellate Court, 31 is "the omission to do something which a reasonable
man, guided by those considerations which ordinarily regulate the conduct of human affairs, would
do, or the doing of something which a prudent and reasonable man would not do, 32 or as Judge
Cooley defines it, ‘(t)he failure to observe for the protection of the interests of another person, that
degree of care, precaution, and vigilance which the circumstances justly demand, whereby such
other person suffers injury.’" 33
The test by which to determine the existence of negligence in a particular case has been aptly
stated in the leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he is guilty
of negligence. The law here in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet paterfamilias of the Roman law. The existence of negligence in
a given case is not determined by reference to the personal judgment of the actor in the situation
before him. The law considers what would be reckless, blameworthy, or negligent in the man of
ordinary intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of
course be always determined in the light of human experience and in view of the facts involved in
the particular case. Abstract speculation cannot here be of much value but this much can be
profitably said: Reasonable men govern their conduct by the circumstances which are before them
or known to them. They are not, and are not supposed to be, omniscient of the future. Hence they
can be expected to take care only when there is something before them to suggest or warn of
danger. Could a prudent man, in the case under consideration, foresee harm as a result of the
course actually pursued? If so, it was the duty of the actor to take precautions to guard against
that harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born of this
prevision, is always necessary before negligence can be held to exist. Stated in these terms, the
proper criterion for determining the existence of negligence in a given case is this: Conduct is said
to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an
effect harmful to another was sufficiently probable to warrant his foregoing the conduct or
guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when
he traversed the railroad tracks at a point not allowed for a motorist’s crossing despite being fully
aware of the grave harm to be thereby caused to his passengers; and when he disregarded the
foresight of harm to his passengers by overtaking the bus on the left side as to leave himself blind
to the approach of the oncoming train that he knew was on the opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court, 35 where the
Court held the PNR solely liable for the damages caused to a passenger bus and its passengers
when its train hit the rear end of the bus that was then traversing the railroad crossing. But the
circumstances of that case and this one share no similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of contributory negligence was adduced against the
owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary
diligence by preponderant evidence. Also, the records are replete with the showing of negligence
on the part of both the Pereñas and the PNR. Another distinction is that the passenger bus in
Philippine National Railways v. Intermediate Appellate Court was traversing the dedicated railroad
crossing when it was hit by the train, but the Pereñas’ school van traversed the railroad tracks at a
point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally"
liable for damages arising from the death of Aaron. They had been impleaded in the same
complaint as defendants against whom the Zarates had the right to relief, whether jointly,
severally, or in the alternative, in respect to or arising out of the accident, and questions of fact
and of law were common as to the Zarates. 36 Although the basis of the right to relief of the Zarates
(i.e., breach of contract of carriage) against the Pereñas was distinct from the basis of the Zarates’
right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless
could be held jointly and severally liable by virtue of their respective negligence combining to
cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of negligence
despite the school van of the Pereñas traversing the railroad tracks at a point not dedicated by the
PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure the
safety of others through the placing of crossbars, signal lights, warning signs, and other
permanent safety barriers to prevent vehicles or pedestrians from crossing there. The RTC
observed that the fact that a crossing guard had been assigned to man that point from 7 a.m. to 5
p.m. was a good indicium that the PNR was aware of the risks to others as well as the need to
control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint
tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC
on the liability, the CA modified the amount. Both lower courts took into consideration that Aaron,
while only a high school student, had been enrolled in one of the reputable schools in the
Philippines and that he had been a normal and able-bodied child prior to his death. The basis for
the computation of Aaron’s earning capacity was not what he would have become or what he
would have wanted to be if not for his untimely death, but the minimum wage in effect at the time
of his death. Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned

from his age of 15 years at the time of his death, but on 21 years, his age when he would have
graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully
warranted.
Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1âwphi1 They cited People v. Teehankee, Jr., 37 where the Court deleted the indemnity
for victim Jussi Leino’s loss of earning capacity as a pilot for being speculative due to his having
graduated from high school at the International School in Manila only two years before the
shooting, and was at the time of the shooting only enrolled in the first semester at the Manila Aero
Club to pursue his ambition to become a professional pilot. That meant, according to the Court,
that he was for all intents and purposes only a high school graduate.
We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi
Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron
would be some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician,
or a lawyer). Instead, the computation of Aaron’s earning capacity was premised on him being a
lowly minimum wage earner despite his being then enrolled at a prestigious high school like Don
Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at
work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken
against his parents and in favor of the defendants whose negligence not only cost Aaron his life
and his right to work and earn money, but also deprived his parents of their right to his presence
and his services as well. Our law itself states that the loss of the earning capacity of the deceased
shall be the liability of the guilty party in favor of the heirs of the deceased, and shall in every case
be assessed and awarded by the court "unless the deceased on account of permanent physical
disability not caused by the defendant, had no earning capacity at the time of his
death."38 Accordingly, we emphatically hold in favor of the indemnification for Aaron’s loss of
earning capacity despite him having been unemployed, because compensation of this nature is
awarded not for loss of time or earnings but for loss of the deceased’s power or ability to earn
money.39
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company, 40 fourth-year medical student Edgardo
Carriaga’s earning capacity, although he survived the accident but his injuries rendered him
permanently incapacitated, was computed to be that of the physician that he dreamed to become.
The Court considered his scholastic record sufficient to justify the assumption that he could have
finished the medical course and would have passed the medical board examinations in due time,
and that he could have possibly earned a modest income as a medical practitioner. Also, in
People v. Sanchez,41 the Court opined that murder and rape victim Eileen Sarmienta and murder
victim Allan Gomez could have easily landed good-paying jobs had they graduated in due time,
and that their jobs would probably pay them high monthly salaries from  10,000.00 to  15,000.00
upon their graduation. Their earning capacities were computed at rates higher than the minimum
wage at the time of their deaths due to their being already senior agriculture students of the
University of the Philippines in Los Baños, the country’s leading educational institution in
agriculture.
3.
Were the amounts of damages excessive?

The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates
in the respective amounts of  2,500,000.00 and  1,000,000.00 on the ground that such amounts
were excessive.
The plea is unwarranted.
The moral damages of  2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates’ deep
mental anguish over their son’s unexpected and violent death, and their moral shock over the
senseless accident. That amount would not be too much, considering that it would help the
Zarates obtain the means, diversions or amusements that would alleviate their suffering for the
loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice,
given the passage of a long time from when their mental anguish was inflicted on them on August
22, 1996.
Anent the  1,000,000.00 allowed as exemplary damages, we should not reduce the amount if
only to render effective the desired example for the public good. As a common carrier, the
Pereñas needed to be vigorously reminded to observe their duty to exercise extraordinary
diligence to prevent a similarly senseless accident from happening again. Only by an award of
exemplary damages in that amount would suffice to instill in them and others similarly situated like
them the ever-present need for greater and constant vigilance in the conduct of a business
imbued with public interest.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated
on November 13, 2002; and ORDER the petitioners to pay the costs of suit.
SO ORDERED.

THIRD DIVISION
[G.R. No. 112287. December 12, 1997]
NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF APPEALS AND VLASONS
SHIPPING, INC., respondents.
[G.R. No. 112350. December 12, 1997]
VLASONS SHIPPING, INC., petitioner, vs. COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the seaworthiness of a private carrier, its
owners responsibility for damage to the cargo and its liability for demurrage and attorneys
fees. The Court also reiterates the well-known rule that findings of facts of trial courts, when
affirmed by the Court of Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel Corporation (NSC) and
Vlasons Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of
Appeals. [1] The Court of Appeals modified the decision of the Regional Trial Court of Pasig, Metro
Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff
dismissing the complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on
the counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at
the legal rate on both amounts from April 7, 1976 until the same shall have been fully
paid;
2. Attorneys fees and expenses of litigation in the sum of P100,000.00; and
3. Cost of suit.
SO ORDERED. [2]
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is modified by reducing the
award for demurrage to P44,000.00 and deleting the award for attorneys fees and expenses of
litigation. Except as thus modified, the decision is AFFIRMED. There is no pronouncement as to
costs.
SO ORDERED. [3]

The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport
cargo or shipment for the general public. Its services are available only to specific persons who
enter into a special contract of charter party with its owner. It is undisputed that the ship is a
private carrier. And it is in this capacity that its owner, Vlasons Shipping, Inc., entered into a
contract of affreightment or contract of voyage charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant
Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit B;
also Exhibit 1) whereby NSC hired VSIs vessel, the MV VLASONS I to make one (1) voyage to
load steel products at Iligan City and discharge them at North Harbor, Manila, under the following
terms and conditions, viz:
1. x x x x x x.
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters
option.
3. x x x x x x
4. Freight/Payment: P30.00 /metric ton, FIOST basis. Payment upon presentation of Bill of Lading
within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive
hours, Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. x x x x x x
9. Cargo Insurance: Charterers and/or Shippers must insure the cargoes. Shipowners not
responsible for losses/damages except on proven willful negligence of the officers of the vessel.
10. Other terms:(a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized
Charter Party Agreement shall form part of this Contract.
xxxxxxxxx
The terms F.I.O.S.T. which is used in the shipping business is a standard provision in the
NANYOZAI Charter Party which stands for Freight In and Out including Stevedoring and Trading,
which means that the handling, loading and unloading of the cargoes are the responsibility of the
Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, Charterers to load, stow
and discharge the cargo free of risk and expenses to owners. x x x(Underscoring supplied).
Under paragraph 10 thereof, it is provided that (o)wners shall, before and at the beginning of the
voyage, exercise due diligence to make the vessel seaworthy and properly manned, equipped and
supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and
safe for its reception, carriage and preservation. Owners shall not be liable for loss of or damage
of the cargo arising or resulting from: unseaworthiness unless caused by want of due diligence on
the part of the owners to make the vessel seaworthy, and to secure that the vessel is properly
manned, equipped and supplied and to make the holds and all other parts of the vessel in which
cargo is carried, fit and safe for its reception, carriage and preservation; xxx; perils, dangers and
accidents of the sea or other navigable waters; xxx; wastage in bulk or weight or any other loss or
damage arising from inherent defect, quality or vice of the cargo; insufficiency of packing; xxx;

latent defects not discoverable by due diligence; any other cause arising without the actual fault or
privity of Owners or without the fault of the agents or servants of owners.
Paragraph 12 of said NANYOZAI Charter Party also provides that (o)wners shall not be
responsible for split, chafing and/or any damage unless caused by the negligence or default of the
master and crew.
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV
VLASONS I loaded at plaintiffs pier at Iligan City, the NSCs shipment of 1,677 skids of tinplates
and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about
2,481.19 metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of
the ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel[,] acknowledged receipt of
the cargo on board and signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit D) on
August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The
following day, August 13, 1974, when the vessels three (3) hatches containing the shipment were
opened by plaintiffs agents, nearly all the skids of tinplates and hot rolled sheets were allegedly
found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the
Charterer. Unloading was completed only on August 24, 1974 after incurring a delay of eleven
(11) days due to the heavy rain which interrupted the unloading operations. (Exhibit E)
(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the
shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated
March 17, 1975 (Exhibit G), MASCO made a report of its ocular inspection conducted on the
cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St.,
Sta. Mesa, Manila where the cargo was taken and stored. MASCO reported that it found wetting
and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin
hatch covers were noted torn at various extents; that container/metal casings of the skids were
rusting all over. MASCO ventured the opinion that rusting of the tinplates was caused by contact
with SEA WATER sustained while still on board the vessel as a consequence of the heavy
weather and rough seas encountered while en route to destination (Exhibit F). It was also reported
that MASCOs surveyors drew at random samples of bad order packing materials of the tinplates
and delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the
M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit I) which in part, states, The analysis
of bad order samples of packing materials xxx shows that wetting was caused by contact with
SEA WATER.
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the
defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the
amount of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said
claim but defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on
April 21, 1976 which was docketed as Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount
of P941,145.18 as a result of the act, neglect and default of the master and crew in the
management of the vessel as well as the want of due diligence on the part of the defendant to
make the vessel seaworthy and to make the holds and all other parts of the vessel in which the
cargo was carried, fit and safe for its reception, carriage and preservation -- all in violation of
defendants undertaking under their Contract of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming that the MV
VLASONS I was seaworthy in all respects for the carriage of plaintiffs cargo; that said vessel was
not a common carrier inasmuch as she was under voyage charter contract with the plaintiff as
charterer under the charter party; that in the course of the voyage from Iligan City to Manila, the
MV VLASONS I encountered very rough seas, strong winds and adverse weather condition,
causing strong winds and big waves to continuously pound against the vessel and seawater to
overflow on its deck and hatch covers; that under the Contract of Voyage Charter Hire, defendant
shall not be responsible for losses/damages except on proven willful negligence of the officers of
the vessel, that the officers of said MV VLASONS I exercised due diligence and proper
seamanship and were not willfully negligent; that furthermore the Voyage Charter Party provides
that loading and discharging of the cargo was on FIOST terms which means that the vessel was
free of risk and expense in connection with the loading and discharging of the cargo; that the
damage, if any, was due to the inherent defect, quality or vice of the cargo or to the insufficient
packing thereof or to latent defect of the cargo not discoverable by due diligence or to any other
cause arising without the actual fault or privity of defendant and without the fault of the agents or
servants of defendant; consequently, defendant is not liable; that the stevedores of plaintiff who
discharged the cargo in Manila were negligent and did not exercise due care in the discharge of
the cargo; and that the cargo was exposed to rain and seawater spray while on the pier or in
transit from the pier to plaintiffs warehouse after discharge from the vessel; and that plaintiffs
claim was highly speculative and grossly exaggerated and that the small stain marks or sweat
marks on the edges of the tinplates were magnified and considered total loss of the cargo. Finally,
defendant claimed that it had complied with all its duties and obligations under the Voyage Charter
Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged the following
counterclaim:
(a) That despite the full and proper performance by defendant of its obligations under the Voyage
Charter Hire Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00
despite demands made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum
of P8,000.00 per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila
waiting for plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay
defendant demurrage in the total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay
defendant attorneys fees and all expenses of litigation in the amount of not less than P100,000.00.
(8) From the evidence presented by both parties, the trial court came out with the following
findings which were set forth in its decision:
(a) The MV VLASONS I is a vessel of Philippine registry engaged in the tramping service and is
available for hire only under special contracts of charter party as in this particular case.
(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. 1), the
MV VLASONS I was covered by the required seaworthiness certificates including the Certification
of Classification issued by an international classification society, the NIPPON KAIJI KYOKAI (Exh.
4); Coastwise License from the Board of Transportation (Exh. 5); International Loadline Certificate
from the Philippine Coast Guard (Exh. 6); Cargo Ship Safety Equipment Certificate also from the
Philippine Coast Guard (Exh. 7); Ship Radio Station License (Exh. 8); Certificate of Inspection by
the Philippine Coast Guard (Exh. 12); and Certificate of Approval for Conversion issued by the
Bureau of Customs (Exh. 9). That being a vessel engaged in both overseas and coastwise trade,
the MV VLASONS I has a higher degree of seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage
Charter Hire, the MV VLASONS I underwent drydocking in Cebu and was thoroughly inspected by
the Philippine Coast Guard. In fact, subject voyage was the vessels first voyage after the
drydocking. The evidence shows that the MV VLASONS I was seaworthy and properly manned,
equipped and supplied when it undertook the voyage. It had all the required certificates of
seaworthiness.
(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings
were covered by hatchboards which were in turn covered by two or double tarpaulins. The hatch
covers were water tight. Furthermore, under the hatchboards were steel beams to give support.
(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by
evidence. The provisions of the Civil Code on common carriers pursuant to which there exists a
presumption of negligence in case of loss or damage to the cargo are not applicable. As to the
damage to the tinplates which was allegedly due to the wetting and rusting thereof, there is
unrebutted testimony of witness Vicente Angliongto that tinplates sweat by themselves when
packed even without being in contract (sic) with water from outside especially when the weather is
bad or raining. The rust caused by sweat or moisture on the tinplates may be considered as a loss
or damage but then, defendant cannot be held liable for it pursuant to Article 1734 of the Civil
Case which exempts the carrier from responsibility for loss or damage arising from the character
of the goods x x x. All the 1,769 skids of the tinplates could not have been damaged by water as
claimed by plaintiff. It was shown as claimed by plaintiff that the tinplates themselves were
wrapped in kraft paper lining and corrugated cardboards could not be affected by water from
outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not
closing the hatch openings of the MV VLASONS I when rains occurred during the discharging of
the cargo thus allowing rainwater to enter the hatches. It was proven that the stevedores merely
set up temporary tents to cover the hatch openings in case of rain so that it would be easy for
them to resume work when the rains stopped by just removing the tent or canvas. Because of this
improper covering of the hatches by the stevedores during the discharging and unloading
operations which were interrupted by rains, rainwater drifted into the cargo through the hatch
openings. Pursuant to paragraph 5 of the NANYOSAI [sic] Charter Party which was expressly
made part of the Contract of Voyage Charter Hire, the loading, stowing and discharging of the
cargo is the sole responsibility of the plaintiff charterer and defendant carrier has no liability for
whatever damage may occur or maybe [sic] caused to the cargo in the process.
(g) It was also established that the vessel encountered rough seas and bad weather while en
route from Iligan City to Manila causing sea water to splash on the ships deck on account of which
the master of the vessel (Mr. Antonio C. Dumlao) filed a Marine Protest on August 13, 1974 (Exh.
15) which can be invoked by defendant as a force majeure that would exempt the defendant from
liability.
(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter
Hire contract that it was to insure the cargo because it did not. Had plaintiff complied with the
requirement, then it could have recovered its loss or damage from the insurer. Plaintiff also
violated the charter party contract when it loaded not only steel products, i.e. steel bars, angular
bars and the like but also tinplates and hot rolled sheets which are high grade cargo commanding
a higher freight. Thus plaintiff was able to ship high grade cargo at a lower freight rate.
(I) As regards defendants counterclaim, the contract of voyage charter hire under paragraph 4
thereof, fixed the freight at P30.00 per metric ton payable to defendant carrier upon presentation
of the bill of lading within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00
despite demands.The evidence also showed that the plaintiff was required and bound under
paragraph 7 of the same Voyage Charter Hire contract to pay demurrage of P8,000.00 per day of
delay in the unloading of the cargoes. The delay amounted to eleven (11) days thereby making
plaintiff liable to pay defendant for demurrage in the amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I

The trial court erred in finding that the MV VLASONS I was seaworthy, properly manned,
equipped and supplied, and that there is no proof of willful negligence of the vessels officers.
II
The trial court erred in finding that the rusting of NSCs tinplates was due to the inherent nature or
character of the goods and not due to contact with seawater.
III
The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of
NSCs shipment.
IV
The trial court erred in exempting VSI from liability on the ground of force majeure.
V
The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and attorneys fees, to VSI. [4]
As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the
demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and
expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a
Resolution[5]dated October 20, 1993, the appellate court denied both motions. Undaunted, NSC
and VSI filed their respective petitions for review before this Court. On motion of VSI, the Court
ordered on February 14, 1994 the consolidation of these petitions. [6]
The Issues
In its petition[7] and memorandum,[8] NSC raises the following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading
delays caused by weather interruption;
2. Whether or not the alleged seaworthiness certificates (Exhibits 3, 4, 5, 6, 7, 8, 9, 11 and
12) were admissible in evidence and constituted evidence of the vessels seaworthiness
at the beginning of the voyages; and
3. Whether or not a charterers failure to insure its cargo exempts the shipowner from
liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;

2. Whether or not vessels officers and crew were negligent in handling and caring for
NSCs cargo;
3. Whether or not NSCs cargo of tinplates did sweat during the voyage and, hence, rusted
on their own; and
(4) Whether or not NSCs stevedores were negligent and caused the wetting[/]rusting of
NSCs tinplates.
[9]
In its separate petition, VSI submits for the consideration of this Court the following alleged
errors of the CA:
A. The respondent Court of Appeals committed an error of law in reducing the award of
demurrage from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award
of P100,000 for attorneys fees and expenses of litigation.
[10]
Amplifying the foregoing, VSI raises the following issues in its memorandum:
I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant
to which there exist[s] a presumption of negligence against the common carrier in case of loss or
damage to the cargo are applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the
Nanyozai Charter, are valid and binding on both contracting parties.
The foregoing issues raised by the parties will be discussed under the following headings:
1. Questions of Fact
2. Effect of NSCs Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorneys Fees.
The Courts Ruling
The Court affirms the assailed Decision of the Court of Appeals, except in respect of the
demurrage.
Preliminary Matter: Common Carrier or Private Carrier?
At the outset, it is essential to establish whether VSI contracted with NSC as a common
carrier or as a private carrier. The resolution of this preliminary question determines the law,
standard of diligence and burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public. It has been held that the
true test of a common carrier is the carriage of passengers or goods, provided it has space,
for all who opt to avail themselves of its transportation service for a fee. [11] A carrier which does
not qualify under the above test is deemed a private carrier. Generally, private carriage is

undertaken by special agreement and the carrier does not hold himself out to carry goods for the
general public. The most typical, although not the only form of private carriage, is the charter
party, a maritime contract by which the charterer, a party other than the shipowner, obtains the
use and service of all or some part of a ship for a period of time or a voyage or voyages. [12]
In the instant case, it is undisputed that VSI did not offer its services to the general public. As
found by the Regional Trial Court, it carried passengers or goods only for those it chose under a
special contract of charter party. [13] As correctly concluded by the Court of Appeals, the MV
Vlasons I was not a common but a private carrier. [14] Consequently, the rights and obligations of
VSI and NSC, including their respective liability for damage to the cargo, are determined primarily
by stipulations in their contract of private carriage or charter party. [15] Recently, in Valenzuela
Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping
Corporation, [16] the Court ruled:
x x x in a contract of private carriage, the parties may freely stipulate their duties and obligations
which perforce would be binding on them. Unlike in a contract involving a common carrier, private
carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on
common carriers protecting the general public cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the public policy embodied therein is not
contravened by stipulations in a charter party that lessen or remove the protection given by law in
contracts involving common carriers.[17]
Extent of VSIs Responsibility and Liability Over NSCs Cargo
It is clear from the parties Contract of Voyage Charter Hire, dated July 17, 1974, that VSI shall
not be responsible for losses except on proven willful negligence of the officers of the vessel. The
NANYOZAI Charter Party, which was incorporated in the parties contract of transportation, further
provided that the shipowner shall not be liable for loss of or damage to the cargo arising or
resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make
the vessel seaworthy or to ensure that the same was properly manned, equipped and supplied,
and to make the holds and all other parts of the vessel in which cargo [was] carried, fit and safe
for its reception, carriage and preservation. [18] The NANYOZAI Charter Party also provided that
[o]wners shall not be responsible for split, chafing and/or any damage unless caused by the
negligence or default of the master or crew. [19]
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its
shipment was caused by VSIs willful negligence or failure to exercise due diligence in making MV
Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo.Ineluctably, the burden
of proof was placed on NSC by the parties agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary
has not been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the transportation, due to
fortuitous event, force majeure, or the nature and inherent defect of the things, shall be for the
account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the
preceding article if proofs against him show that they occurred on account of his negligence or his
omission to take the precautions usually adopted by careful persons, unless the shipper
committed fraud in the bill of lading, making him to believe that the goods were of a class or
quality different from what they really were.
Because the MV Vlasons I was a private carrier, the shipowners obligations are governed by
the foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general
rule, places the prima facie presumption of negligence on a common carrier. It is a hornbook
doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to
prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or
damaged while in the carriers custody does not put the burden of proof on the carrier.
Since x x x a private carrier is not an insurer but undertakes only to exercise due care in the
protection of the goods committed to its care, the burden of proving negligence or a breach of that
duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carriers possession
does not cast on it the burden of proving proper care and diligence on its part or that the loss
occurred from an excepted cause in the contract or bill of lading. However, in discharging the
burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences by which the
law aids the bailor in an action against a bailee, and since the carrier is in a better position to know
the cause of the loss and that it was not one involving its liability, the law requires that it come
forward with the information available to it, and its failure to do so warrants an inference or
presumption of its liability. However, such inferences and presumptions, while they may affect the
burden of coming forward with evidence, do not alter the burden of proof which remains on
plaintiff, and, where the carrier comes forward with evidence explaining the loss or damage, the
burden of going forward with the evidence is again on plaintiff.
Where the action is based on the shipowners warranty of seaworthiness, the burden of proving a
breach thereof and that such breach was the proximate cause of the damage rests on plaintiff,
and proof that the goods were lost or damaged while in the carriers possession does not cast on it
the burden of proving seaworthiness. x x x Where the contract of carriage exempts the carrier
from liability for unseaworthiness not discoverable by due diligence, the carrier has the preliminary
burden of proving the exercise of due diligence to make the vessel seaworthy. [20]
In the instant case, the Court of Appeals correctly found that NSC has not taken the correct
position in relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11),
after citing Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-
appellants [NSCs] interpretation of Clause 12 is not even correct), it argues that a careful
examination of the evidence will show that VSI miserably failed to comply with any of these
obligations as if defendant-appellee [VSI] had the burden of proof. [21]
First Issue: Questions of Fact
Based on the foregoing, the determination of the following factual questions is manifestly
relevant: (1) whether VSI exercised due diligence in making MV Vlasons I seaworthy for the
intended purpose under the charter party; (2) whether the damage to the cargo should be
attributed to the willful negligence of the officers and crew of the vessel or of the stevedores hired

by NSC; and (3) whether the rusting of the tinplates was caused by its own sweat or by contact
with seawater.
These questions of fact were threshed out and decided by the trial court, which had the
firsthand opportunity to hear the parties conflicting claims and to carefully weigh their respective
evidence. The findings of the trial court were subsequently affirmed by the Court of
Appeals.Where the factual findings of both the trial court and the Court of Appeals coincide, the
same are binding on this Court. [22] We stress that, subject to some exceptional instances, [23] only
questions of law -- not questions of fact -- may be raised before this Court in a petition for review
under Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find no reason
to disturb the lower courts factual findings, as indeed NSC has not successfully proven the
application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy
and fit for the carriage of NSCs cargo of steel and tinplates. This is shown by the fact that it was
drydocked and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its
voyage to Manila under the contract of voyage charter hire. [24] The vessels voyage from Iligan to
Manila was the vessels first voyage after drydocking. The Philippine Coast Guard Station in Cebu
cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo
vessel. [25] The Court of Appeals itself sustained the conclusion of the trial court that MV Vlasons
I was seaworthy. We find no reason to modify or reverse this finding of both the trial and the
appellate courts.
Who Were Negligent: Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused
by the negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy
and fit for the carriage of tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn
tarpaulin or canvas to cover the hatches through which the cargo was loaded into the cargo hold
of the ship. It faults the Court of Appeals for failing to consider such claim as an uncontroverted
fact [26] and denies that MV Vlasons I was equipped with new canvas covers in tandem with the old
ones as indicated in the Marine Protest xxx. [27] We disagree.
The records sufficiently support VSIs contention that the ship used the old tarpaulin, only in
addition to the new one used primarily to make the ships hatches watertight. The foregoing are
clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the
deposition of the ships boatswain, Jose Pascua. The salient portions of said marine protest read:
x x x That the M/V VLASONS I departed Iligan City or or about 0730 hours of August 8, 1974,
loaded with approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel
Corporation; that before departure, the vessel was rigged, fully equipped and cleared by the
authorities; that on or about August 9, 1974, while in the vicinity of the western part of Negros and
Panay, we encountered very rough seas and strong winds and Manila office was advised by
telegram of the adverse weather conditions encountered; that in the morning of August 10, 1974,
the weather condition changed to worse and strong winds and big waves continued pounding the

vessel at her port side causing sea water to overflow on deck andhatch (sic) covers and which
caused the first layer of the canvass covering to give way while the new canvass covering still
holding on;
That the weather condition improved when we reached Dumali Point protected by Mindoro; that
we re-secured the canvass covering back to position; that in the afternoon of August 10, 1974,
while entering Maricaban Passage, we were again exposed to moderate seas and heavy rains;
that while approaching Fortune Island, we encountered again rough seas, strong winds and big
waves which caused the same canvass to give way and leaving the new canvass holding on;
xxx xxx xxx [28]
And the relevant portions of Jose Pascuas deposition are as follows:
Q: What is the purpose of the canvas cover?
A: So that the cargo would not be soaked with water.
A: And will you describe how the canvas cover was secured on the hatch opening?
WITNESS
A: It was placed flat on top of the hatch cover, with a little canvas flowing over the sides
and we place[d] a flat bar over the canvas on the side of the hatches and then we
place[d] a stopper so that the canvas could not be removed.
ATTY DEL ROSARIO
Q: And will you tell us the size of the hatch opening? The length and the width of the
hatch opening.
A: Forty-five feet by thirty-five feet, sir.
xxxxxxxxx
Q: How was the canvas supported in the middle of the hatch opening?
A: There is a hatch board.
ATTY DEL ROSARIO
Q: What is the hatch board made of?
A: It is made of wood, with a handle.
Q: And aside from the hatch board, is there any other material there to cover the hatch?
A: There is a beam supporting the hatch board.
Q: What is this beam made of?
A: It is made of steel, sir.
Q: Is the beam that was placed in the hatch opening covering the whole hatch opening?
A: No, sir.
Q: How many hatch beams were there placed across the opening?
A: There are five beams in one hatch opening.
ATTY DEL ROSARIO

Q: And on top of the beams you said there is a hatch board. How many pieces of wood
are put on top?
A: Plenty, sir, because there are several pieces on top of the hatch beam.
Q: And is there a space between the hatch boards?
A: There is none, sir.
Q: They are tight together?
A: Yes, sir.
Q: How tight?
A: Very tight, sir.
Q: Now, on top of the hatch boards, according to you, is the canvas cover. How many
canvas covers?
A: Two, sir. [29]
That due diligence was exercised by the officers and the crew of the MV Vlasons I was further
demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not
give way and the ships hatches and cargo holds remained waterproof. As aptly stated by the
Court of Appeals, xxx we find no reason not to sustain the conclusion of the lower court based on
overwhelming evidence, that the MV VLASONS I was seaworthy when it undertook the voyage on
August 8, 1974 carrying on board thereof plaintiff-appellants shipment of 1,677 skids of tinplates
and 92 packages of hot rolled sheets or a total of 1,769 packages from NSCs pier in Iligan City
arriving safely at North Harbor, Port Area, Manila, on August 12, 1974; xxx. [30]
Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and
the crew of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC
who were negligent in unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches when strong rains
occasioned by a passing typhoon disrupted the unloading of the cargo. This tent-like covering,
however, was clearly inadequate for keeping rain and seawater away from the hatches of the
ship. Vicente Angliongto, an officer of VSI, testified thus:
ATTY ZAMORA:
Q: Now, during your testimony on November 5, 1979, you stated on August 14 you went
on board the vessel upon notice from the National Steel Corporation in order to
conduct the inspection of the cargo. During the course of the investigation, did you
chance to see the discharging operation?
WITNESS:
A: Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged
on the pier but majority of the tinplates were inside the hall, all the hatches were
opened.
Q: In connection with these cargoes which were unloaded, where is the place.
A: At the Pier.
Q: What was used to protect the same from weather?
ATTY LOPEZ:

We object, your Honor, this question was already asked. This particular matter . . . the
transcript of stenographic notes shows the same was covered in the direct
examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the
testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q: What was used in order to protect the cargo from the weather?
A: A base of canvas was used as cover on top of the tin plates, and tents were built at the
opening of the hatches.
Q: You also stated that the hatches were already opened and that there were tents
constructed at the opening of the hatches to protect the cargo from the rain. Now, will
you describe [to] the Court the tents constructed.
A: The tents are just a base of canvas which look like a tent of an Indian camp raise[d]
high at the middle with the whole side separated down to the hatch, the size of the
hatch and it is soaks [sic] at the middle because of those weather and this can be
used only to temporarily protect the cargo from getting wet by rains.
Q: Now, is this procedure adopted by the stevedores of covering tents proper?
A: No, sir, at the time they were discharging the cargo, there was a typhoon passing by
and the hatch tent was not good enough to hold all of it to prevent the water soaking
through the canvas and enter the cargo.
Q: In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter
and soak into the canvas and tinplates.
A: Yes, sir, the second time I went there, I saw it.
Q: As owner of the vessel, did you not advise the National Steel Corporation [of] the
procedure adopted by its stevedores in discharging the cargo particularly in this tent
covering of the hatches?
A: Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the
stevedores did not mind at all, so, I called the attention of the representative of the
National Steel but nothing was done, just the same. Finally, I wrote a letter to them. [31]
NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain
immediately about the stevedores negligence on the first day of unloading, pointing out that he
wrote his letter to petitioner only seven days later. [32] The Court is not persuaded.Angliongtos
candid answer in his aforequoted testimony satisfactorily explained the delay. Seven days lapsed
because he first called the attention of the stevedores, then the NSCs representative, about the
negligent and defective procedure adopted in unloading the cargo. This series of actions
constitutes a reasonable response in accord with common sense and ordinary human
experience. Vicente Angliongto could not be blamed for calling the stevedores attention first and
then the NSCs representative on location before formally informing NSC of the negligence he had
observed, because he was not responsible for the stevedores or the unloading operations. In fact,

he was merely expressing concern for NSC which was ultimately responsible for the stevedores it
had hired and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts findings and conclusions on
this point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores
hired by NSC were negligent in the unloading of NSCs shipment. We do not think so. Such
negligence according to the trial court is evident in the stevedores hired by [NSC], not closing the
hatch of MV VLASONS I when rains occurred during the discharging of the cargo thus allowing
rain water and seawater spray to enter the hatches and to drift to and fall on the cargo. It was
proven that the stevedores merely set up temporary tents or canvas to cover the hatch openings
when it rained during the unloading operations so that it would be easier for them to resume work
after the rains stopped by just removing said tents or canvass. It has also been shown that on
August 20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the manner
the stevedores hired by [NSC] were discharging the cargo on rainy days and the improper closing
of the hatches which allowed continuous heavy rain water to leak through and drip to the tinplates
covers and [Vicente Angliongto] also suggesting that due to four (4) days continuos rains with
strong winds that the hatches be totally closed down and covered with canvas and the hatch tents
lowered. (Exh 13). This letter was received by [NSC] on 22 August 1974 while discharging
operations were still going on (Exhibit 13-A). [33]
The fact that NSC actually accepted and proceeded to remove the cargo from the ship during
unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may
be noted that the NSC may seek indemnification, subject to the laws on prescription, from the
stevedoring company at fault in the discharge operations. A stevedore company engaged in
discharging cargo xxx has the duty to load the cargo xxx in a prudent manner, and it is liable for
injury to, or loss of, cargo caused by its negligence xxx and where the officers and members and
crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores
xxx the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of
the stevedores xxx [34] as in the instant case.
Do Tinplates Sweat?
The trial court relied on the testimony of Vicente Angliongto in finding that xxx tinplates sweat
by themselves when packed even without being in contact with water from outside especially
when the weather is bad or raining xxx. [35] The Court of Appeals affirmed the trial courts finding.
A discussion of this issue appears inconsequential and unnecessary. As previously discussed,
the damage to the tinplates was occasioned not by airborne moisture but by contact with rain and
seawater which the stevedores negligently allowed to seep in during the unloading.
Second Issue: Effect of NSCs Failure to Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is
totally separate and distinct from the contractual or statutory responsibility that may be incurred by
VSI for damage to the cargo caused by the willful negligence of the officers and the crew of MV
Vlasons I. Clearly, therefore, NSCs failure to insure the cargo will not affect its right, as owner and
real party in interest, to file an action against VSI for damages caused by the latters willful

negligence. We do not find anything in the charter party that would make the liability of VSI for
damage to the cargo contingent on or affected in any manner by NSCs obtaining an insurance
over the cargo.
Third Issue: Admissibility of Certificates Proving Seaworthiness
NSCs contention that MV Vlasons I was not seaworthy is anchored on the alleged
inadmissibility of the certificates of seaworthiness offered in evidence by VSI. The said certificates
include the following:
1. Certificate of Inspection of the Philippine Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
[36]
5. Certificate of Approval for Conversion issued by the Bureau of Customs.
NSC argues that the certificates are hearsay for not having been presented in accordance
with the Rules of Court. It points out that Exhibits 3, 4 and 11 allegedly are not written records or
acts of public officers; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not evidenced by official
publications or certified true copies as required by Sections 25 and 26, Rule 132, of the Rules of
Court. [37]
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and
12 are inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are
certificates issued by private parties, but they have not been proven by one who saw the writing
executed, or by evidence of the genuineness of the handwriting of the maker, or by a subscribing
witness. Exhibits 5, 6, 7, 8, 9, and 12 are photocopies, but their admission under the best
evidence rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay
rule per Section 44 of Rule 130 of the Rules of Court, which provides that (e)ntries in official
records made in the performance of a duty by a public officer of the Philippines, or by a person in
the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein
stated. [38] Exhibit 11 is an original certificate of the Philippine Coast Guard in Cebu issued by
Lieutenant Junior Grade Noli C. Flores to the effect that the vessel VLASONS I was drydocked x x
x and PCG Inspectors were sent on board for inspection x x x. After completion of drydocking and
duly inspected by PCG Inspectors, the vessel VLASONS I, a cargo vessel, is in seaworthy
condition, meets all requirements, fitted and equipped for trading as a cargo vessel was cleared
by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974. (sic) NSCs claim,
therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that that NSC has the burden of proving that MV Vlasons
I was not seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not
have the obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly
failed to discharge its duty of proving the willful negligence of VSI in making the ship seaworthy
resulting in damage to its cargo.Assailing the genuineness of the certificate of seaworthiness is
not sufficient proof that the vessel was not seaworthy.

Fourth Issue: Demurrage and Attorneys Fees
The contract of voyage charter hire provides inter alia:

xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters
option.
xxx xxx xxx
6. Loading/Discharging Rate : 750 tons per WWDSHINC.
[39]
7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day.
The Court defined demurrage in its strict sense as the compensation provided for in the
contract of affreightment for the detention of the vessel beyond the laytime or that period of time
agreed on for loading and unloading of cargo. [40] It is given to compensate the shipowner for the
nonuse of the vessel. On the other hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party. x x x If laytime is expressed in
running days, this means days when the ship would be run continuously, and holidays are not
excepted. A qualification of weather permitting excepts only those days when bad weather
reasonably prevents the work contemplated. [41]
In this case, the contract of voyage charter hire provided for a four-day laytime; it also
qualified laytime as WWDSHINC or weather working days Sundays and holidays included. [42] The
running of laytime was thus made subject to the weather, and would cease to run in the event
unfavorable weather interfered with the unloading of cargo. [43] Consequently, NSC may not be
held liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled by
unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the
parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed
respectively that NSC incurred eleven days of delay in unloading the cargo. The trial court arrived
at this erroneous finding by subtracting from the twelve days, specifically August 13, 1974 to
August 24, 1974, the only day of unloading unhampered by unfavorable weather or rain which
was August 22, 1974. Based on our previous discussion, such finding is a reversible error. As
mentioned, the respondent appellate court also erred in ruling that NSC was liable to VSI for
demurrage, even if it reduced the amount by half.
Attorneys Fees
VSI assigns as error of law the Court of Appeals deletion of the award of attorneys fees. We
disagree. While VSI was compelled to litigate to protect its rights, such fact by itself will not justify
an award of attorneys fees under Article 2208 of the Civil Code when x x x no sufficient showing of
bad faith would be reflected in a partys persistence in a case other than an erroneous conviction
of the righteousness of his cause x x x. [44] Moreover, attorneys fees may not be awarded to a
party for the reason alone that the judgment rendered was favorable to the latter, as this is
tantamount to imposing a premium on ones right to litigate or seek judicial redress of legitimate
grievances. [45]
Epilogue

At bottom, this appeal really hinges on a factual issue: when, how and who caused the
damage to the cargo? Ranged against NSC are two formidable truths. First, both lower courts
found that such damage was brought about during the unloading process when rain and seawater
seeped through the cargo due to the fault or negligence of the stevedores employed by it. Basic is
the rule that factual findings of the trial court, when affirmed by the Court of Appeals, are binding
on the Supreme Court. Although there are settled exceptions, NSC has not satisfactorily shown
that this case is one of them. Second, the agreement between the parties -- the Contract of
Voyage Charter Hire -- placed the burden of proof for such loss or damage upon the shipper, not
upon the shipowner. Such stipulation, while disadvantageous to NSC, is valid because the parties
entered into a contract of private charter, not one of common carriage. Basic too is the doctrine
that courts cannot relieve a party from the effects of a private contract freely entered into, on the
ground that it is allegedly one-sided or unfair to the plaintiff. The charter party is a normal
commercial contract and its stipulations are agreed upon in consideration of many factors, not the
least of which is the transport price which is determined not only by the actual costs but also by
the risks and burdens assumed by the shipper in regard to possible loss or damage to the
cargo. In recognition of such factors, the parties even stipulated that the shipper should insure the
cargo to protect itself from the risks it undertook under the charter party. That NSC failed or
neglected to protect itself with such insurance should not adversely affect VSI, which had nothing
to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby
DENIED. The questioned Decision of the Court of Appeals is AFFIRMED with the
MODIFICATION that the demurrage awarded to VSI is deleted. No pronouncement as to costs.
SO ORDERED.

Supreme Court
Manila
SECOND DIVISION
FILCAR TRANSPORT SERVICES, G.R. No. 174156

Petitioner,
Present:
CARPIO, J., Chairperson,

BRION,
- versus - PEREZ,
SERENO, and
REYES, JJ.
Promulgated:
JOSE A. ESPINAS,
Respondent. June 20, 2012
x------------------------------------------------------------------------------------x
DECISION
BRION, J.:
We resolve the present petition for review on certiorari[1] filed by petitioner Filcar Transport
Services (Filcar), challenging the decision[2] and the resolution[3] of the Court of Appeals (CA) in
CA-G.R. SP No. 86603.
The facts of the case, gathered from the records, are briefly summarized below.
On November 22, 1998, at around 6:30 p.m., respondent Jose A. Espinas was driving his car
along Leon Guinto Street in Manila. Upon reaching the intersection of Leon Guinto and President
Quirino Streets, Espinas stopped his car. When the signal light turned green, he proceeded to
cross the intersection. He was already in the middle of the intersection when another car,
traversing President Quirino Street and going to Roxas Boulevard, suddenly hit and bumped his
car. As a result of the impact, Espinas car turned clockwise. The other car escaped from the
scene of the incident, but Espinas was able to get its plate number.

After verifying with the Land Transportation Office, Espinas learned that the owner of the other
car, with plate number UCF-545, is Filcar.
Espinas sent several letters to Filcar and to its President and General Manager Carmen Flor,
demanding payment for the damages sustained by his car. On May 31, 2001, Espinas filed a
complaint for damages against Filcar and Carmen Flor before the Metropolitan Trial Court (MeTC)
of Manila, and the case was raffled to Branch 13. In the complaint, Espinas demanded that Filcar
and Carmen Flor pay the amount of P97,910.00, representing actual damages sustained by his
car.
Filcar argued that while it is the registered owner of the car that hit and bumped Espinas
car, the car was assigned to its Corporate Secretary Atty. Candido Flor, the husband of Carmen
Flor. Filcar further stated that when the incident happened, the car was being driven by Atty. Flors
personal driver, Timoteo Floresca.
Atty. Flor, for his part, alleged that when the incident occurred, he was attending a birthday
celebration at a nearby hotel, and it was only later that night when he noticed a small dent on and
the cracked signal light of the car. On seeing the dent and the crack, Atty. Flor allegedly asked
Floresca what happened, and the driver replied that it was a result of a hit and run while the car
was parked in front of Bogota on Pedro Gil Avenue, Manila.
Filcar denied any liability to Espinas and claimed that the incident was not due to its fault or
negligence since Floresca was not its employee but that of Atty. Flor. Filcar and Carmen Flor both
said that they always exercised the due diligence required of a good father of a family in leasing or
assigning their vehicles to third parties.
The MeTC Decision
The MeTC, in its decision dated January 20, 2004, [4] ruled in favor of Espinas, and ordered Filcar
and Carmen Flor, jointly and severally, to pay Espinas P97,910.00 as actual damages,
representing the cost of repair, with interest at 6% per annum from the date the complaint was
filed; P50,000.00 as moral damages; P20,000.00 as exemplary damages; and P20,000.00 as
attorneys fees. The MeTC ruled that Filcar, as the registered owner of the vehicle, is primarily
responsible for damages resulting from the vehicles operation.
The RTC Decision
The Regional Trial Court (RTC) of Manila, Branch 20, in the exercise of its appellate jurisdiction,
affirmed the MeTC decision.[5]The RTC ruled that Filcar failed to prove that Floresca was not its
employee as no proof was adduced that Floresca was personally hired by Atty. Flor. The RTC
agreed with the MeTC that the registered owner of a vehicle is directly and primarily liable for the
damages sustained by third persons as a consequence of the negligent or careless operation of a
vehicle registered in its name. The RTC added that the victim of recklessness on the public
highways is without means to discover or identify the person actually causing the injury or
damage. Thus, the only recourse is to determine the owner, through the vehicles registration, and
to hold him responsible for the damages.
The CA Decision
On appeal, the CA partly granted the petition in CA-G.R. SP No. 86603; it modified the RTC
decision by ruling that Carmen Flor, President and General Manager of Filcar, is not personally
liable to Espinas. The appellate court pointed out that, subject to recognized exceptions, the
liability of a corporation is not the liability of its corporate officers because a corporate entity
subject to well-recognized exceptions has a separate and distinct personality from its officers and
shareholders. Since the circumstances in the case at bar do not fall under the exceptions
recognized by law, the CA concluded that the liability for damages cannot attach to Carmen Flor.
The CA, however, affirmed the liability of Filcar to pay Espinas damages. According to the
CA, even assuming that there had been no employer-employee relationship between Filcar and
the driver of the vehicle, Floresca, the former can be held liable under the registered owner rule.
The CA relied on the rule that the registered owner of a vehicle is directly and primarily
responsible to the public and to third persons while the vehicle is being operated. Citing Erezo, et
al. v. Jepte,[6] the CA said that the rationale behind the rule is to avoid circumstances where
vehicles running on public highways cause accidents or injuries to pedestrians or other vehicles
without positive identification of the owner or drivers, or with very scant means of identification.
In Erezo, the Court said that the main aim of motor vehicle registration is to identify the owner, so
that if a vehicle causes damage or injury to pedestrians or other vehicles, responsibility can be
traced to a definite individual and that individual is the registered owner of the vehicle. [7]
The CA did not accept Filcars argument that it cannot be held liable for damages because
the driver of the vehicle was not its employee. In so ruling, the CA cited the case of Villanueva v.
Domingo[8] where the Court said that the question of whether the driver was authorized by the
actual owner is irrelevant in determining the primary and direct responsibility of the registered
owner of a vehicle for accidents, injuries and deaths caused by the operation of his vehicle.
Filcar filed a motion for reconsideration which the CA denied in its Resolution dated July 6,
2006.
Hence, the present petition.
The Issue
Simply stated, the issue for the consideration of this Court is: whether Filcar, as registered
owner of the motor vehicle which figured in an accident, may be held liable for the damages
caused to Espinas.
Our Ruling
The petition is without merit.
Filcar, as registered owner, is deemed the employer of

the driver, Floresca, and is thus vicariously liable under
Article 2176 in relation with Article 2180 of the Civil Code
It is undisputed that Filcar is the registered owner of the motor vehicle which hit and caused
damage to Espinas car; and it is on the basis of this fact that we hold Filcar primarily and directly
liable to Espinas for damages.
As a general rule, one is only responsible for his own act or omission. [9] Thus, a person will
generally be held liable only for the torts committed by himself and not by another. This general
rule is laid down in Article 2176 of the Civil Code, which provides to wit:
Article 2176. Whoever by act or omission causes damage to another, there

being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.
Based on the above-cited article, the obligation to indemnify another for damage caused by ones
act or omission is imposed upon the tortfeasor himself, i.e., the person who committed the
negligent act or omission. The law, however, provides for exceptions when it makes certain
persons liable for the act or omission of another.
One exception is an employer who is made vicariously liable for the tort committed by his
employee. Article 2180 of the Civil Code states:

Article 2180. The obligation imposed by Article 2176 is demandable not only
for ones own acts or omissions, but also for those of persons for whom one is
responsible.
xxxx
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
xxxx
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father of a
family to prevent damage.
Under Article 2176, in relation with Article 2180, of the Civil Code, an action predicated on
an employees act or omission may be instituted against the employer who is held liable for the
negligent act or omission committed by his employee.
Although the employer is not the actual tortfeasor, the law makes him vicariously liable on
the basis of the civil law principle of pater familias for failure to exercise due care and vigilance
over the acts of ones subordinates to prevent damage to another. [10] In the last paragraph of
Article 2180 of the Civil Code, the employer may invoke the defense that he observed all the
diligence of a good father of a family to prevent damage.
As its core defense, Filcar contends that Article 2176, in relation with Article 2180, of the
Civil Code is inapplicable because it presupposes the existence of an employer-employee
relationship. According to Filcar, it cannot be held liable under the subject provisions because the
driver of its vehicle at the time of the accident, Floresca, is not its employee but that of its
Corporate Secretary, Atty. Flor.
We cannot agree. It is well settled that in case of motor vehicle mishaps, the registered
owner of the motor vehicle is considered as the employer of the tortfeasor-driver, and is
made primarily liable for the tort committed by the latter under Article 2176, in relation with Article
2180, of the Civil Code.
In Equitable Leasing Corporation v. Suyom,[11] we ruled that in so far as third persons are
concerned, the registered owner of the motor vehicle is the employer of the negligent
driver, and the actual employer is considered merely as an agent of such owner.

In that case, a tractor registered in the name of Equitable Leasing Corporation (Equitable)
figured in an accident, killing and seriously injuring several persons. As part of its defense,
Equitable claimed that the tractor was initially leased to Mr. Edwin Lim under a Lease Agreement,
which agreement has been overtaken by a Deed of Sale entered into by Equitable and Ecatine
Corporation (Ecatine). Equitable argued that it cannot be held liable for damages because the
tractor had already been sold to Ecatine at the time of the accident and the negligent driver was
not its employee but of Ecatine.
In upholding the liability of Equitable, as registered owner of the tractor, this Court said that
regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as
the public and third persons are concerned; consequently, it is directly and primarily responsible
for the consequences of its operation. [12] The Court further stated that [i]n contemplation of law,
the owner/operator of record is the employer of the driver, the actual operator and
employer being considered as merely its agent.[13] Thus, Equitable, as the registered owner of
the tractor, was considered under the law on quasi delict to be the employer of the driver, Raul
Tutor; Ecatine, Tutors actual employer, was deemed merely as an agent of Equitable.
Thus, it is clear that for the purpose of holding the registered owner of the motor vehicle
primarily and directly liable for damages under Article 2176, in relation with Article 2180, of the
Civil Code, the existence of an employer-employee relationship, as it is understood in labor
relations law, is not required. It is sufficient to establish that Filcar is the registered owner of the
motor vehicle causing damage in order that it may be held vicariously liable under Article 2180 of
the Civil Code.
Rationale for holding the registered owner vicariously

liable
The rationale for the rule that a registered owner is vicariously liable for damages caused
by the operation of his motor vehicle is explained by the principle behind motor vehicle
registration, which has been discussed by this Court in Erezo, and cited by the CA in its decision:
The main aim of motor vehicle registration is to identify the owner so that if
any accident happens, or that any damage or injury is caused by the vehicle
on the public highways, responsibility therefor can be fixed on a definite
individual, the registered owner. Instances are numerous where vehicles running
on public highways caused accidents or injuries to pedestrians or other vehicles
without positive identification of the owner or drivers, or with very scant means of
identification. It is to forestall these circumstances, so inconvenient or prejudicial to
the public, that the motor vehicle registration is primarily ordained, in the interest of

the determination of persons responsible for damages or injuries caused on public
highways. [emphasis ours]
Thus, whether there is an employer-employee relationship between the registered owner

and the driver is irrelevant in determining the liability of the registered owner who the law
holds primarily and directly responsible for any accident, injury or death caused by the operation
of the vehicle in the streets and highways.
As explained by this Court in Erezo, the general public policy involved in motor vehicle
registration is the protection of innocent third persons who may have no means of identifying
public road malefactors and, therefore, would find it difficult if not impossible to seek redress for
damages they may sustain in accidents resulting in deaths, injuries and other damages; by fixing
the person held primarily and directly liable for the damages sustained by victims of road mishaps,
the law ensures that relief will always be available to them.
To identify the person primarily and directly responsible for the damages would also
prevent a situation where a registered owner of a motor vehicle can easily escape liability by
passing on the blame to another who may have no means to answer for the damages caused,
thereby defeating the claims of victims of road accidents. We take note that some motor vehicles
running on our roads are driven not by their registered owners, but by employed drivers who, in
most instances, do not have the financial means to pay for the damages caused in case of
accidents.
These same principles apply by analogy to the case at bar. Filcar should not be permitted
to evade its liability for damages by conveniently passing on the blame to another party; in this
case, its Corporate Secretary, Atty. Flor and his alleged driver, Floresca. Following our reasoning
in Equitable, the agreement between Filcar and Atty. Flor to assign the motor vehicle to the latter
does not bind Espinas who was not a party to and has no knowledge of the agreement, and
whose only recourse is to the motor vehicle registration.
Neither can Filcar use the defenses available under Article 2180 of the Civil Code - that the
employee acts beyond the scope of his assigned task or that it exercised the due diligence of a
good father of a family to prevent damage - because the motor vehicle registration law, to a
certain extent, modified Article 2180 of the Civil Code by making these defenses unavailable to
the registered owner of the motor vehicle. Thus, for as long as Filcar is the registered owner of the
car involved in the vehicular accident, it could not escape primary liability for the damages caused
to Espinas.

The public interest involved in this case must not be underestimated. Road safety is one of
the most common problems that must be addressed in this country. We are not unaware of news
of road accidents involving reckless drivers victimizing our citizens. Just recently, such pervasive
recklessness among most drivers took the life of a professor of our state university. [14] What is
most disturbing is that our existing laws do not seem to deter these road malefactors from
committing acts of recklessness.
We understand that the solution to the problem does not stop with legislation. An effective
administration and enforcement of the laws must be ensured to reinforce discipline among drivers
and to remind owners of motor vehicles to exercise due diligence and vigilance over the acts of
their drivers to prevent damage to others.
Thus, whether the driver of the motor vehicle, Floresca, is an employee of Filcar is irrelevant in
arriving at the conclusion that Filcar is primarily and directly liable for the damages sustained by
Espinas. While Republic Act No. 4136 or the Land Transportation and Traffic Code does not
contain any provision on the liability of registered owners in case of motor vehicle mishaps, Article
2176, in relation with Article 2180, of the Civil Code imposes an obligation upon Filcar, as
registered owner, to answer for the damages caused to Espinas car. This interpretation is
consistent with the strong public policy of maintaining road safety, thereby reinforcing the aim of
the State to promote the responsible operation of motor vehicles by its citizens.
This does not mean, however, that Filcar is left without any recourse against the actual employer
of the driver and the driver himself. Under the civil law principle of unjust enrichment, the
registered owner of the motor vehicle has a right to be indemnified by the actual employer of the
driver of the amount that he may be required to pay as damages for the injury caused to another.
The set-up may be inconvenient for the registered owner of the motor vehicle, but the
inconvenience cannot outweigh the more important public policy being advanced by the law in this
case which is the protection of innocent persons who may be victims of reckless drivers and
irresponsible motor vehicle owners.
WHEREFORE, the petition is DENIED. The decision dated February 16, 2006 and the resolution
dated July 6, 2006 of the Court of Appeals are AFFIRMED. Costs against petitioner Filcar
Transport Services.
SO ORDERED.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 82318 May 18, 1989
GILBERTO M. DUAVIT, petitioner,
vs.
THE HON. COURT OF APPEALS, Acting through the Third Division, as Public Respondent,
and ANTONIO SARMIENTO, SR. & VIRGILIO CATUAR respondents.
Rodolfo d. Dela Cruz for petitioner.
Bito, Lozada, Ortega & Castillo for respondents.
GUTIERREZ, JR., J.:

This petition raises the sole issue of whether or not the owner of a private vehicle which figured in
an accident can be held liable under Article 2180 of the Civil Code when the said vehicle was
neither driven by an employee of the owner nor taken with the consent of the latter.
The facts are summarized in the contested decision, as follows:
From the evidence adduced by the plaintiffs, consisting of the testimonies of
witnesses Virgilio Catuar, Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and Norberto
Bernarte it appears that on July 28, 1971 plaintiffs Antonio Sarmiento, Sr. and
Virgilio Catuar were aboard a jeep with plate number 77-99-F-I Manila, 1971, owned
by plaintiff, Ruperto Catuar was driving the said jeep on Ortigas Avenue, San Juan,
Rizal; that plaintiff's jeep, at the time, was running moderately at 20 to 35 kilometers
per hour and while approaching Roosevelt Avenue, Virgilio Catuar slowed down;
that suddenly, another jeep with plate number 99-97-F-J Manila 1971 driven by
defendant Oscar Sabiniano hit and bumped plaintiff's jeep on the portion near the
left rear wheel, and as a result of the impact plaintiff's jeep fell on its right and
skidded by about 30 yards; that as a result plaintiffs jeep was damaged, particularly
the windshield, the differential, the part near the left rear wheel and the top cover of
the jeep; that plaintiff Virgilio Catuar was thrown to the middle of the road; his wrist
was broken and he sustained contusions on the head; that likewise plaintiff Antonio
Sarmiento, Sr. was trapped inside the fallen jeep, and one of his legs was fractured.
Evidence also shows that the plaintiff Virgilio Catuar spent a total of P2,464.00 for
repairs of the jeep, as shown by the receipts of payment of labor and spare parts
(Exhs. H to H-7 Plaintiffs likewise tried to prove that plaintiff Virgilio Catuar,
immediately after the accident was taken to Immaculate Concepcion Hospital, and
then was transferred to the National Orthopedic Hospital; that while plaintiff Catuar
was not confined in the hospital, his wrist was in a plaster cast for a period of one
month, and the contusions on his head were under treatment for about two (2)
weeks; that for hospitalization, medicine and allied expenses, plaintiff Catuar spent
P5,000.00.
Evidence also shows that as a result of the incident, plaintiff Antonio Sarmiento, Sr.
sustained injuries on his leg; that at first, he was taken to the National Orthopedic
Hospital (Exh. K but later he was confined at the Makati Medical Center from July
29, to August 29, 1971 and then from September 15 to 25, 1971; that his leg was in
a plaster cast for a period of eight (8) months; and that for hospitalization and
medical attendance, plaintiff Antonio Sarmiento, Sr. spent no less than P13,785.25
as evidenced by receipts in his possession. (Exhs. N to N-1).
Proofs were adduced also to show that plaintiff Antonio sarmiento Sr. is employed
as Assistant Accountant of the Canlubang Sugar Estate with a salary of P1,200.00 a
month; that as sideline he also works as accountant of United Haulers Inc. with a
salary of P500.00 a month; and that as a result of this incident, plaintiff Sarmiento
was unable to perform his normal work for a period of at least 8 months. On the
other hand, evidence shows that the other plaintiff Virgilio Catuar is a Chief Clerk in
Canlubang Sugar Estate with a salary of P500.00 a month, and as a result of the
incident, he was incapacitated to work for a period of one (1) month.
The plaintiffs have filed this case both against Oscar Sabiniano as driver, and
against Gualberto Duavit as owner of the jeep.
Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate No.
99-07-F-J Manila, 1971), denied that the other defendant (Oscar Sabiniano) was his
employee. Duavit claimed that he has not been an employer of defendant Oscar
Sabiniano at any time up to the present.
On the other hand documentary and testimonial evidence show that defendant
Oscar Sabiniano was an employee of the Board of Liquidators from November 14,
1966 up to January 4, 1973 (Annex A of Answer).
Defendant Sabiniano, in his testimony, categorically admitted that he took the jeep
from the garage of defendant Duavit without the consent or authority of the latter
(TSN, September 7, 1978, p. 8). He testified further, that Duavit even filed charges
against him for theft of the jeep, but which Duavit did not push through as his
(Sabiniano's) parents apologized to Duavit on his behalf.
Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself
from liability, makes it appear that he was taking all necessary precaution while
driving and the accident occurred due to the negligence of Virgilio Catuar. Sabiniano
claims that it was plaintiffs vehicle which hit and bumped their jeep. (Reno, pp. 21-
23)
The trial court found Oscar Sabiniano negligent in driving the vehicle but found no employer-
employee relationship between him and the petitioner because the latter was then a government
employee and he took the vehicle without the authority and consent of the owner. The petitioner
was, thus, absolved from liability under Article 2180 of the Civil Code.
The private respondents appealed the case.
On January 7, 1988, the Court of Appeals rendered the questioned decision holding the petitioner
jointly and severally liable with Sabiniano. The appellate court in part ruled:
We cannot go along with appellee's argument. It will be seen that in Vargas v.
Langcay, supra, it was held that it is immaterial whether or not the driver was
actually employed by the operator of record or registered owner, and it is even not
necessary to prove who the actual owner of the vehicle and who the employer of the
driver is. When the Supreme Court ruled, thus: 'We must hold and consider such
owner-operator of record (registered owner) as the employer in contemplation of
law, of the driver,' it cannot be construed other than that the registered owner is the
employer of the driver in contemplation of law. It is a conclusive presumption of fact
and law, and is not subject to rebuttal of proof to the contrary. Otherwise, as stated
in the decision, we quote:

The purpose of the principles evolved by the decisions in these matters will be
defeated and thwarted if we entertain the argument of petitioner that she is not liable
because the actual owner and employer was established by the evidence. . . .
Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to prove that the
driver Sabiniano was not his employee at the time of the vehicular accident.
The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to the
effect that the burden of proving the non-existence of an employer-employee
relationship is upon the defendant and this he must do by a satisfactory
preponderance of evidence, has to defer to the doctrines evolved by the Supreme
Court in cases of damages arising from vehicular mishaps involving registered motor
vehicle. (See Tugade v. Court of Appeals, 85 SCRA 226, 230). (Rollo, pp. 26-27)
The appellate court also denied the petitioner's motion for reconsideration. Hence, this petition.
The petitioner contends that the respondent appellate court committed grave abuse of discretion
in holding him jointly and severally liable with Sabiniano in spite of the absence of an employer-
employee relationship between them and despite the fact that the petitioner's jeep was taken out
of his garage and was driven by Sabiniano without his consent.
As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for an accident
involving the said vehicle if the same was driven without his consent or knowledge and by a
person not employed by him. Thus, in Duquillo v. Bayot (67 Phil. 131-133-134) [1939] we said:
Under the facts established, the defendant cannot be held liable for anything. At the
time of the accident, James McGurk was driving the truck, and he was not an
employee of the defendant, nor did he have anything to do with the latter's business;
neither the defendant nor Father Ayson, who was in charge of her business,
consented to have any of her trucks driven on the day of the accident, as it was a
holy day, and much less by a chauffeur who was not in charge of driving it; the use
of the defendant's truck in the circumstances indicated was done without her
consent or knowledge; it may, therefore, be said, that there was not the remotest
contractual relation between the deceased Pio Duquillo and the defendant. It
necessarily follows from all this that articles 1101 and following of the Civil Code,
cited by the appellant, have no application in this case, and, therefore, the errors
attributed to the inferior court are without basis.
The Court upholds the above ruling as still relevant and better applicable to present day
circumstances.
The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103 [1957]
and Vargas v. Langcay (6 SCRA 174 [1962]) cannot be sustained. In the Erezo case, Jepte, the
registered owner of the truck which collided with a taxicab, and which resulted in the killing of
Erezo, claimed that at the time of the accident, the truck belonged to the Port Brokerage in an
arrangement with the corporation but the same was not known to the Motor Vehicles Office. This
Court sustained the trial court's ruling that since Jepte represented himself to be the owner of the
truck and the Motor Vehicles Office, relying on his representation, registered the vehicle in his
name, the Government and all persons affected by the representation had the right to rely on his
declaration of ownership and registration. Thus, even if Jepte were not the owner of the truck at
the time of the accident, he was still held liable for the death of Erezo significantly, the driver of the
truck was fully authorized to drive it.
Likewise, in the Vargas case, just before the accident occurred Vargas had sold her jeepney to a
third person, so that at the time of the accident she was no longer the owner of the jeepney. This
court, nevertheless, affirmed Vargas' liability since she failed to surrender to the Motor Vehicles

Office the corresponding AC plates in violation of the Revised Motor Vehicle Law and
Commonwealth Act No. 146. We further ruled that the operator of record continues to be the
operator of the vehicle in contemplation of law, as regards the public and third persons, and as
such is responsible for the consequences incident to its operator. The vehicle involved was a
public utility jeepney for hire. In such cases, the law does not only require the surrender of the AC
plates but orders the vendor operator to stop the operation of the jeepney as a form of public
transportation until the matter is reported to the authorities.
As can be seen, the circumstances of the above cases are entirely different from those in the
present case. Herein petitioner does not deny ownership of the vehicle involved in tire mishap but
completely denies having employed the driver Sabiniano or even having authorized the latter to
drive his jeep. The jeep was virtually stolen from the petitioner's garage. To hold, therefore, the
petitioner liable for the accident caused by the negligence of Sabiniano who was neither his driver
nor employee would be absurd as it would be like holding liable the owner of a stolen vehicle for
an accident caused by the person who stole such vehicle. In this regard, we cannot ignore the
many cases of vehicles forcibly taken from their owners at gunpoint or stolen from garages and
parking areas and the instances of service station attendants or mechanics of auto repair shops
using, without the owner's consent, vehicles entrusted to them for servicing or repair.
We cannot blindly apply absolute rules based on precedents whose facts do not jibe four square
with pending cases. Every case must be determined on its own peculiar factual circumstances.
Where, as in this case, the records of the petition fail to indicate the slightest indicia of an
employer-employee relationship between the owner and the erring driver or any consent given by
the owner for the vehicle's use, we cannot hold the owner liable.
We, therefore, find that the respondent appellate court committed reversible error in holding the
petitioner jointly and severally liable with Sabiniano to the private respondent.
WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are
hereby ANNULLED and SET ASIDE. The decision of the then Court of First Instance (now
Regional Trial Court) of Laguna, 8th Judicial District, Branch 6, dated July 30, 1981 is
REINSTATED.
SO ORDERED.
Supreme Court
Manila
THIRD DIVISION
PCI LEASING AND FINANCE, INC., G.R. No. 162267

Petitioner, Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
UCPB GENERAL INSURANCE CO., INC.,
Respondent. Promulgated:
July 4, 2008
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking a
reversal of the Decision[1] of the Court of Appeals (CA) dated December 12, 2003 affirming with modification
the Decision of the Regional Trial Court (RTC) of Makati City which ordered petitioner
and Renato Gonzaga (Gonzaga) to pay, jointly and severally, respondent the amount of P244,500.00 plus
interest; and the CA Resolution[2] dated February 18, 2004 denying petitioner's Motion for Reconsideration.
The facts, as found by the CA, are undisputed:
On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate Number PHD-
206 owned by United Coconut Planters Bank was traversing the Laurel
Highway, Barangay Balintawak, Lipa City. The car was insured with plantiff-
appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac
with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by an 18-
wheeler Fuso Tanker Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133, owned
by defendants-appellants PCI Leasing & Finance, Inc. allegedly leased to and operated by
defendant-appellant Superior Gas & Equitable Co., Inc. (SUGECO) and driven by its
employee, defendant appellant Renato Gonzaga.
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of
the rear part of the car. The driver and passenger suffered physical injuries. However, the
driver defendant-appellant Gonzaga continued on its [sic] way to its [sic] destination and did
not bother to bring his victims to the hospital.
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing the
insurance coverage of the damaged car.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands
were made by plaintiff-appellee for the payment of the aforesaid amounts. However, no
payment was made. Thus, plaintiff-appellee filed the instant case on March 13, 1991.[3]
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held liable for the
collision, since the driver of the truck, Gonzaga, was not its employee, but that of its co-defendant Superior
Gas & Equitable Co., Inc. (SUGECO). [4] In fact, it was SUGECO, and not petitioner, that was the actual
operator of the truck, pursuant to a Contract of Lease signed by petitioner and SUGECO. [5] Petitioner,
however, admitted that it was the owner of the truck in question.[6]
After trial, the RTC rendered its Decision dated April 15, 1999,[7] the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff UCPB

General Insurance [respondent], ordering the defendants PCI Leasing and Finance, Inc.,
[petitioner] and Renato Gonzaga, to pay jointly and severally the former the following
amounts: the principal amount of P244,500.00 with 12% interest as of the filing of this
complaint until the same is paid; P50,000.00 as attorney's fees; and P20,000.00 as costs of
suit.
SO ORDERED.[8]
Aggrieved by the decision of the trial court, petitioner appealed to the CA.
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision, with certain modifications, as
follows:
WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED with
modification that the award of attorney's fees is hereby deleted and the rate of interest shall
be six percent (6%) per annum computed from the time of the filing of the complaint in the
trial court until the finality of the judgment. If the adjudged principal and the interest remain
unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from
the time the judgment becomes final and executory until it is fully satisfied.
SO ORDERED.[9]
Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated February 18, 2004.
Hence, herein Petition for Review.
The issues raised by petitioner are purely legal:
Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-

delict may be held liable, jointly and severally, with the driver thereof, for the damages
caused to third parties.
Whether petitioner, as a financing company, is absolved from liability by the

enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.
Anent the first issue, the CA found petitioner liable for the damage caused by the collision since under the
Public Service Act, if the property covered by a franchise is transferred or leased to another without
obtaining the requisite approval, the transfer is not binding on the Public Service Commission and, in
contemplation of law, the grantee continues to be responsible under the franchise in relation to the operation
of the vehicle, such as damage or injury to third parties due to collisions.[10]
Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the said law applies
only to cases involving common carriers, or those which have franchises to operate as public utilities. In
contrast, the case before this Court involves a private commercial vehicle for business use, which is not
offered for service to the general public.[11]
Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar are not common
carriers, which makes the Public Service Act inapplicable.
However, the registered owner of the vehicle driven by a negligent driver may still be held liable
under applicable jurisprudence involving laws on compulsory motor vehicle registration and the liabilities of
employers for quasi-delicts under the Civil Code.
The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is well-
established in jurisprudence. Erezo v. Jepte,[12] with Justice Labrador as ponente, wisely explained the
reason behind this principle, thus:
Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the administrative
proceeding of registration does not bear any essential relation to the contract of sale between
the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and
operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, as amended.)
The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual, the registered owner. Instances
are numerous where vehicles running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the owner or drivers, or with
very scant means of identification. It is to forestall these circumstances, so inconvenient or
prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest
of the determination of persons responsible for damages or injuries caused on public
highways.
One of the principal purposes of motor vehicles legislation is identification of

the vehicle and of the operator, in case of accident; and another is that the
knowledge that means of detection are always available may act as a
deterrent from lax observance of the law and of the rules of conservative and
safe operation. Whatever purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of rendering it certain that the
violator of the law or of the rules of safety shall not escape because of lack of
means to discover him. The purpose of the statute is thwarted, and the
displayed number becomes a snare and delusion, if courts would entertain
such defenses as that put forward by appellee in this case. No responsible
person or corporation could be held liable for the most outrageous acts of
negligence, if they should be allowed to place a middleman between them
and the public, and escape liability by the manner in which they recompense
their servants. (King vs. Brenham Automobile Co., 145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is: should
not the registered owner be allowed at the trial to prove who the actual and real owner is, and
in accordance with such proof escape or evade responsibility and lay the same on the
person actually owning the vehicle? We hold with the trial court that the law does not allow
him to do so; the law, with its aim and policy in mind, does not relieve him directly of the

responsibility that the law fixes and places upon him as an incident or consequence of
registration. Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to
one who possesses no property with which to respond financially for the damage or injury
done. A victim of recklessness on the public highways is usually without means to discover
or identify the person actually causing the injury or damage. He has no means other than
by a recourseto the registration in the Motor Vehicles Office to determine who is the owner.
The protection that the law aims to extend to him would become illusory were the registered
owner given the opportunity to escape liability by disproving his ownership. If the policy of the
law is to be enforced and carried out, the registered owner should not be allowed to prove the
contrary to the prejudice of the person injured, that is, to prove that a third person or another
has become the owner, so that he may thereby be relieved of the responsibility to the injured
person.
The above policy and application of the law may appear quite harsh and would seem
to conflict with truth and justice. We do not think it is so. A registered owner who has already
sold or transferred a vehicle has the recourse to a third-party complaint, in the same action
brought against him to recover for the damage or injury done, against the vendee or
transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of
liability; said inconvenience is the price he pays for failure to comply with the registration that
the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is
primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he
(defendant-appellant) has a right to be indemnified by the real or actual owner of the amount
that he may be required to pay as damage for the injury caused to the plaintiff-appellant.[13]
The case is still good law and has been consistently cited in subsequent cases. [14] Thus, there is no good
reason to depart from its tenets.
For damage or injuries arising out of negligence in the operation of a motor vehicle, the registered owner
may be held civilly liable with the negligent driver either 1) subsidiarily, if the aggrieved party seeks relief
based on a delict or crime under Articles 100 and 103 of the Revised Penal Code; or 2) solidarily, if the
complainant seeks relief based on a quasi-delict under Articles 2176 and 2180 of the Civil Code. It is the
option of the plaintiff whether to waive completely the filing of the civil action, or institute it with the criminal
action, or file it separately or independently of a criminal action;[15] his only limitation is that he cannot recover
damages twice for the same act or omission of the defendant.[16]
In case a separate civil action is filed, the long-standing principle is that the registered owner of a motor
vehicle is primarily and directly responsible for the consequences of its operation, including the negligence of
the driver, with respect to the public and all third persons.[17] In contemplation of law, the registered owner of
a motor vehicle is the employer of its driver, with the actual operator and employer, such as a lessee, being
considered as merely the owner's agent.[18] This being the case, even if a sale has been executed before
a tortious incident, the sale, if unregistered, has no effect as to the right of the public and third persons to

recover from the registered owner.[19] The public has the right to conclusively presume that the registered
owner is the real owner, and may sue accordingly.[20]
In the case now before the Court, there is not even a sale of the vehicle involved, but a mere lease, which
remained unregistered up to the time of the occurrence of the quasi-delict that gave rise to the case. Since
a lease, unlike a sale, does not even involve a transfer of title or ownership, but the mere use or enjoyment
of property, there is more reason, therefore, in this instance to uphold the policy behind the law, which is to
protect the unwitting public and provide it with a definite person to make accountable for losses or injuries
suffered in vehicular accidents.[21] This is and has always been the rationale behind compulsory motor
vehicle registration under the Land Transportation and Traffic Code and similar laws, which, as early
as Erezo, has been guiding the courts in their disposition of cases involving motor vehicular incidents. It is
also important to emphasize that such principles apply to all vehicles in general, not just those offered for
public service or utility.[22]
The Court recognizes that the business of financing companies has a legitimate and commendable
purpose.[23] In earlier cases, it considered a financial lease or financing lease a legal contract, [24] though
subject to the restrictions of the so-called Recto Law or Articles 1484 and 1485 of the Civil Code.[25] In
previous cases, the Court adopted the statutory definition of a financial lease or financing lease, as:
[A] mode of extending credit through a non-cancelable lease contract under which
the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, motor
vehicles, appliances, business and office machines, and other movable or immovable
property in consideration of the periodic payment by the lessee of a fixed amount of money
sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost,
including any incidental expenses and a margin of profit over an obligatory period of not less
than two (2) years during which the lessee has the right to hold and use the leased property,
x x xbut with no obligation or option on his part to purchase the leased property from the
owner-lessor at the end of the lease contract. [26]
Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which apparently tends
to favor absolving financing companies from liability for the consequences of quasi-delictual acts or
omissions involving financially leased property.[27] The petition adds that these developments have been
legislated in our jurisdiction in Republic Act (R.A.) No. 8556,[28] which provides:
Section 12. Liability of lessors. Financing companies shall not be liable for loss, damage or
injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property
leased to a third person or entity except when the motor vehicle, aircraft, vessel, equipment
or other property is operated by the financing company, its employees or agents at the time
of the loss, damage or injury.
Petitioners argument that the enactment of R.A. No. 8556, especially its addition of the new Sec. 12 to the
old law, is deemed to have absolved petitioner from liability, fails to convince the Court.

These developments, indeed, point to a seeming emancipation of financing companies from the
obligation to compensate claimants for losses suffered from the operation of vehicles covered by their
lease. Such, however, are not applicable to petitioner and do not exonerate it from liability in the present
case.
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not supersede or
repeal the law on compulsory motor vehicle registration. No part of the law expressly repeals Section 5(a)
and (e) of R.A. No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code, to
wit:
Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and
trailer of any type used or operated on or upon any highway of the Philippines must be
registered with the Bureau of Land Transportation (now the Land Transportation Office, per
Executive Order No. 125, January 30, 1987, and Executive Order No. 125-A, April 13, 1987)
for the current year in accordance with the provisions of this Act.
xxxx
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other

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

encumbrances shall likewise be recorded, and in the absence of such cancellation, no
certificate of registration shall be issued without the corresponding notation of mortgage,
attachment and/or other encumbrances.
x x x x (Emphasis supplied)
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is frowned upon, unless
there is clear showing that the later statute is so irreconcilably inconsistent and repugnant to the existing law
that they cannot be reconciled and made to stand together.[29] There is nothing in R.A. No. 4136 that is
inconsistent and incapable of reconciliation.
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not registered with
the Land Transportation Office, still does not bind third persons who are aggrieved in tortious incidents, for
the latter need only to rely on the public registration of a motor vehicle as conclusive evidence of ownership.
[30]
A lease such as the one involved in the instant case is an encumbrance in contemplation of law, which
needs to be registered in order for it to bind third parties.[31] Under this policy, the evil sought to be avoided is
the exacerbation of the suffering of victims of tragic vehicular accidents in not being able to identify a guilty

party. A contrary ruling will not serve the ends of justice. The failure to register a lease, sale, transfer or
encumbrance, should not benefit the parties responsible, to the prejudice of innocent victims.
The non-registration of the lease contract between petitioner and its lessee precludes the former from
enjoying the benefits under Section 12 of R.A. No. 8556.
This ruling may appear too severe and unpalatable to leasing and financing companies, but the Court
believes that petitioner and other companies so situated are not entirely left without recourse. They may
resort to third-party complaints against their lessees or whoever are the actual operators of their vehicles. In
the case at bar, there is, in fact, a provision in the lease contract between petitioner and SUGECO to the
effect that the latter shall indemnify and hold the former free and harmless from any liabilities, damages,
suits, claims or judgments arising from the latter's use of the motor vehicle.[32] Whether petitioner would act
against SUGECO based on this provision is its own option.
The burden of registration of the lease contract is minuscule compared to the chaos that may result if
registered owners or operators of vehicles are freed from such responsibility. Petitioner pays the price for its
failure to obey the law on compulsory registration of motor vehicles for registration is a pre-requisite for any
person to even enjoy the privilege of putting a vehicle on public roads.
WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and Resolution
dated February 18, 2004 of the Court of Appeals are AFFIRMED.
Costs against petitioner.
SO ORDERED.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-65510 March 9, 1987
TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents.
Cirilo A. Diaz, Jr. for petitioner.
Henry V. Briguera for private respondent.
PARAS, J.:
"'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim
that must be applied to the parties in the case at bar. Having entered into an illegal contract,
neither can seek relief from the courts, and each must bear the consequences of his acts." (Lita
Enterprises vs. IAC, 129 SCRA 81.)
The factual background of this case is undisputed. The same is narrated by the respondent court
in its now assailed decision, as follows:
On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete
accessories and a sidecar in the total consideration of P8,000.00 as shown by
Invoice No. 144 (Exh. "A"). Out of the total purchase price the defendant gave a
downpayment of P1,700.00 with a promise that he would pay plaintiff the balance
within sixty days. The defendant, however, failed to comply with his promise and so
upon his own request, the period of paying the balance was extended to one year in
monthly installments until January 1976 when he stopped paying anymore. The
plaintiff made demands but just the same the defendant failed to comply with the
same thus forcing the plaintiff to consult a lawyer and file this action for his damage
in the amount of P546.21 for attorney's fees and P100.00 for expenses of litigation.
The plaintiff also claims that as of February 20, 1978, the total account of the
defendant was already P2,731.06 as shown in a statement of account (Exhibit. "B").
This amount includes not only the balance of P1,700.00 but an additional 12%
interest per annum on the said balance from January 26, 1976 to February 27, 1978;
a 2% service charge; and P 546.21 representing attorney's fees.
In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a
security for the payment of the balance of the purchase price. It has been the
practice of financing firms that whenever there is a balance of the purchase price the
registration papers of the motor vehicle subject of the sale are not given to the
buyer. The records of the LTC show that the motorcycle sold to the defendant was
first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing
and Angel Jaucian are one and the same, because it was made to appear that way
only as the defendant had no franchise of his own and he attached the unit to the
plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff to
undertake the yearly registration of the motorcycle with the Land Transportation
Commission. Pursuant to this agreement the defendant on February 22, 1976 gave
the plaintiff P90.00, the P8.00 would be for the mortgage fee and the P82.00 for the
registration fee of the motorcycle. The plaintiff, however failed to register the

motorcycle on that year on the ground that the defendant failed to comply with some
requirements such as the payment of the insurance premiums and the bringing of
the motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was
hiding the motorcycle from him. Lastly, the plaintiff explained also that though the
ownership of the motorcycle was already transferred to the defendant the vehicle
was still mortgaged with the consent of the defendant to the Rural Bank of
Camaligan for the reason that all motorcycle purchased from the plaintiff on credit
was rediscounted with the bank.
On his part the defendant did not dispute the sale and the outstanding balance of
P1,700. 00 still payable to the plaintiff. The defendant was persuaded to buy from
the plaintiff the motorcycle with the side car because of the condition that the plaintiff
would be the one to register every year the motorcycle with the Land Transportation
Commission. In 1976, however, the plaintfff failed to register both the chattel
mortgage and the motorcycle with the LTC notwithstanding the fact that the
defendant gave him P90.00 for mortgage fee and registration fee and had the
motorcycle insured with La Perla Compana de Seguros (Exhibit "6") as shown also
by the Certificate of cover (Exhibit "3"). Because of this failure of the plaintiff to
comply with his obligation to register the motorcycle the defendant suffered
damages when he failed to claim any insurance indemnity which would amount to no
less than P15,000.00 for the more than two times that the motorcycle figured in
accidents aside from the loss of the daily income of P15.00 as boundary fee
beginning October 1976 when the motorcycle was impounded by the LTC for not
being registered.
The defendant disputed the claim of the plaintiff that he was hiding from the plaintiff
the motorcycle resulting in its not being registered. The truth being that the
motorcycle was being used for transporting passengers and it kept on travelling from
one place to another. The motor vehicle sold to him was mortgaged by the plaintiff
with the Rural Bank of Camaligan without his consent and knowledge and the
defendant was not even given a copy of the mortgage deed. The defendant claims
that it is not true that the motorcycle was mortgaged because of re-discounting for
rediscounting is only true with Rural Banks and the Central Bank. The defendant
puts the blame on the plaintiff for not registering the motorcycle with the LTC and for
not giving him the registration papers inspite of demands made. Finally, the
evidence of the defendant shows that because of the filing of this case he was
forced to retain the services of a lawyer for a fee on not less than P1,000.00.
xxx xxx xxx
... it also appears and the Court so finds that defendant purchased the motorcycle in
question, particularly for the purpose of engaging and using the same in the
transportation business and for this purpose said trimobile unit was attached to the
plaintiffs transportation line who had the franchise, so much so that in the
registration certificate, the plaintiff appears to be the owner of the unit. Furthermore,
it appears to have been agreed, further between the plaintiff and the defendant, that
plaintiff would undertake the yearly registration of the unit in question with the LTC.
Thus, for the registration of the unit for the year 1976, per agreement, the defendant
gave to the plaintiff the amount of P82.00 for its registration, as well as the insurance
coverage of the unit.
Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with
Damages" against private respondent Pedro N. Nale in the City Court of Naga City. The City Court
rendered judgment in favor of petitioner, the dispositive portion of which reads:
WHEREFORE, decision is hereby rendered dismissing the counterclaim and
ordering the defendant to pay plaintiff the sum of P1,700.00 representing the unpaid
balance of the purchase price with legal rate of interest from the date of the filing of
the complaint until the same is fully paid; to pay plaintiff the sum of P546.21 as
attorney's fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and to
pay the costs.
SO ORDERED.
On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in
toto. Private respondent filed a petition for review with the Intermediate Appellate Court and on
July 18, 1983 the said Court promulgated its decision, the pertinent portion of which reads —
However, as the purchase of the motorcycle for operation as a trimobile under the
franchise of the private respondent Jaucian, pursuant to what is commonly known as
the "kabit system", without the prior approval of the Board of Transportation
(formerly the Public Service Commission) was an illegal transaction involving the
fictitious registration of the motor vehicle in the name of the private respondent so
that he may traffic with the privileges of his franchise, or certificate of public
convenience, to operate a tricycle service, the parties being in pari delicto, neither of
them may bring an action against the other to enforce their illegal contract [Art. 1412
(a), Civil Code].
xxx xxx xxx
WHEREFORE, the decision under review is hereby set aside. The complaint of
respondent Teja Marketing and/or Angel Jaucian, as well as the counterclaim of
petitioner Pedro Nale in Civil Case No. 1153 of the Court of First Instance of
Camarines Sur (formerly Civil Case No. 5856 of the City Court of Naga City) are
dismissed. No pronouncement as to costs.
SO ORDERED.
The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel
Jaucian presenting a lone assignment of error — whether or not respondent court erred in
applying the doctrine of "pari delicto."
We find the petition devoid of merit.
Unquestionably, the parties herein operated under an arrangement, commonly known as the
"kabit system" whereby a person who has been granted a certificate of public convenience allows
another person who owns motor vehicles to operate under such franchise for a fee. A certificate of
public convenience is a special privilege conferred by the government. Abuse of this privilege by
the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of
the root causes of the prevalence of graft and corruption in the government transportation offices.
Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized
as being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil
Code. It is a fundamental principle that the court will not aid either party to enforce an illegal
contract, but will leave both where it finds then. Upon this premise it would be error to accord the
parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It
provides:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:

1. When the fault is on the part of both contracting parties, neither may recover that
he has given by virtue of the contract, or demand, the performance of the other's
undertaking.
The defect of in existence of a contract is permanent and cannot be cured by ratification or by
prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.
WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the
Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs.
SO ORDERED.

SUPREME COURT
Manila
EN BANC
G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M.
OCAMPO and FRANCISCA P. GARCIA, respondents.
Manuel A. Concordia for petitioner.
Nicasio Ocampo for himself and on behalf of his correspondents.
ESCOLIN, J.:ñé+.£ªwph!1
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored
maxim that must be applied to the parties in the case at bar. Having entered into an illegal
contract, neither can seek relief from the courts, and each must bear the consequences of his
acts.
The factual background of this case is undisputed.
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private
respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota
Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs,
they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia,
for the use of the latter's certificate of public convenience in consideration of an initial payment of
P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id agreement, the
aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc, Possession,
however, remained with tile spouses Ocampo who operated and maintained the same under the
name Acme Taxi, petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio
Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries
sustained therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while
a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim,
against Lita Enterprises, Inc., as registered owner of the taxicab in the latter case, Civil Case No.
72067 of the Court of First Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable
for damages in the amount of P25,000.00 and P7,000.00 for attorney's fees.
This decision having become final, a writ of execution was issued. One of the vehicles of
respondent spouses with Engine No. 2R-914472 was levied upon and sold at public auction for
12,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was
likewise levied upon and sold at public auction for P8,000.00 to a certain Mr. Lopez.
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his
name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration
papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against
Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the
Sheriff of Manila for reconveyance of motor vehicles with damages, docketed as Civil Case No.
90988 of the Court of First Instance of Manila. Trial on the merits ensued and on July 22, 1975,
the said court rendered a decision, the dispositive portion of which reads: têñ.£îhqwâ£

WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff of
Manila are concerned.
Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of
the three Toyota cars not levied upon with Engine Nos. 2R-230026, 2R-688740 and
2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in favor of the
plaintiff.
Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for
the certificate of convenience from March 1973 up to May 1973 at the rate of P200 a
month per unit for the three cars. (Annex A, Record on Appeal, p. 102-103, Rollo)
Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was
denied by the court a quo on October 27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court
modified the decision by including as part of its dispositive portion another paragraph, to wit: têñ.
£îhqwâ£
In the event the condition of the three Toyota rears will no longer serve the purpose
of the deed of conveyance because of their deterioration, or because they are no
longer serviceable, or because they are no longer available, then Lita Enterprises,
Inc. is ordered to pay the plaintiffs their fair market value as of July 22, 1975. (Annex
"D", p. 167, Rollo.)
Its first and second motions for reconsideration having been denied, petitioner came to Us,
praying that: têñ.£îhqwâ£
1. ...
2. ... after legal proceedings, decision be rendered or resolution be issued,
reversing, annulling or amending the decision of public respondent so that:
(a) the additional paragraph added by the public respondent to the DECISION of the
lower court (CFI) be deleted;
(b) that private respondents be declared liable to petitioner for whatever amount the
latter has paid or was declared liable (in Civil Case No. 72067) of the Court of First
Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim Florante
Galvez, who died as a result ot the gross negligence of private respondents' driver
while driving one private respondents' taxicabs. (p. 39, Rollo.)
Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit
system", whereby a person who has been granted a certificate of convenience allows another
person who owns motors vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government . Abuse of this privilege by the
grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the
root causes of the prevalence of graft and corruption in the government transportation offices. In
the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too severely
condemned. It constitutes an imposition upon the goo faith of the government.
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized
as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil
Code, It is a fundamental principle that the court will not aid either party to enforce an illegal
contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on
the part of both the trial and appellate courts to have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It provides:têñ.£îhqwâ£

ART. 1412. if the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed;
(1) when the fault, is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
other's undertaking.
The defect of inexistence of a contract is permanent and incurable, and cannot be cured by
ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time
cannot give efficacy to contracts that are null void."
The principle of in pari delicto is well known not only in this jurisdiction but also in the United
States where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The
proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit
can be maintained for its specific performance, or to recover the property agreed to be sold or
delivered, or damages for its property agreed to be sold or delivered, or damages for its violation.
The rule has sometimes been laid down as though it was equally universal, that where the parties
are in pari delicto, no affirmative relief of any kind will be given to one against the
other." 3 Although certain exceptions to the rule are provided by law, We see no cogent reason
why the full force of the rule should not be applied in the instant case.
WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and
Francisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of
First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P.
Garica, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-Appellant," of the
Intermediate Appellate Court, as well as the decisions rendered therein are hereby annuleled and
set aside. No costs.
SO ORDERED.1äwphï1.ñët

SECOND DIVISION
G.R. No. 125817 January 16, 2002
ABELARDO LIM and ESMADITO GUNNABAN, petitioners,
vs.
COURT OF APPEALS and DONATO H. GONZALES, respondents.
BELLOSILLO, J.:
When a passenger jeepney covered by a certificate of public convenience is sold to another who
continues to operate it under the same certificate of public convenience under the so-
called kabit system, and in the course thereof the vehicle meets an accident through the fault of
another vehicle, may the new owner sue for damages against the erring vehicle? Otherwise
stated, does the new owner have any legal personality to bring the action, or is he the real party in
interest in the suit, despite the fact that he is not the registered owner under the certificate of
public convenience?
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney
from Gomercino Vallarta, holder of a certificate of public convenience for the operation of public
utility vehicles plying the Monumento-Bulacan route. While private respondent Gonzales
continued offering the jeepney for public transport services he did not have the registration of the
vehicle transferred in his name nor did he secure for himself a certificate of public convenience for
its operation. Thus Vallarta remained on record as its registered owner and operator.1âwphi1.nêt
On 22 July 1990, while the jeepney was running northbound along the North Diversion Road
somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler-truck owned by petitioner
Abelardo Lim and driven by his co-petitioner Esmadito Gunnaban. Gunnaban owned responsibility
for the accident, explaining that while he was traveling towards Manila the truck suddenly lost its
brakes. To avoid colliding with another vehicle, he swerved to the left until he reached the center
island. However, as the center island eventually came to an end, he veered farther to the left until
he smashed into a Ferroza automobile, and later, into private respondent's passenger jeepney
driven by one Virgilio Gonzales. The impact caused severe damage to both the Ferroza and the
passenger jeepney and left one (1) passenger dead and many others wounded.
Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of
the deceased passenger, and had the Ferroza restored to good condition. He also negotiated with
private respondent and offered to have the passenger jeepney repaired at his shop. Private
respondent however did not accept the offer so Lim offered him 20,000.00, the assessment of the
damage as estimated by his chief mechanic. Again, petitioner Lim's proposition was rejected;
instead, private respondent demanded a brand-new jeep or the amount of 236,000.00. Lim
increased his bid to 40,000.00 but private respondent was unyielding. Under the circumstances,
negotiations had to be abandoned; hence, the filing of the complaint for damages by private
respondent against petitioners.
In his answer Lim denied liability by contending that he exercised due diligence in the selection
and supervision of his employees. He further asserted that as the jeepney was registered in
Vallarta’s name, it was Vallarta and not private respondent who was the real party in interest. 1 For
his part, petitioner Gunnaban averred that the accident was a fortuitous event which was beyond
his control.2
Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and decay.
Private respondent explained that although he wanted to take his jeepney home he had no
capability, financial or otherwise, to tow the damaged vehicle. 3
The main point of contention between the parties related to the amount of damages due private
respondent. Private respondent Gonzales averred that per estimate made by an automobile repair
shop he would have to spend 236,000.00 to restore his jeepney to its original condition. 4 On the
other hand, petitioners insisted that they could have the vehicle repaired for 20,000.00. 5
On 1 October 1993 the trial court upheld private respondent's claim and awarded him 236,000.00
with legal interest from 22 July 1990 as compensatory damages and 30,000.00 as attorney's
fees. In support of its decision, the trial court ratiocinated that as vendee and current owner of the
passenger jeepney private respondent stood for all intents and purposes as the real party in
interest. Even Vallarta himself supported private respondent's assertion of interest over the
jeepney for, when he was called to testify, he dispossessed himself of any claim or pretension on
the property. Gunnaban was found by the trial court to have caused the accident since he
panicked in the face of an emergency which was rather palpable from his act of directing his
vehicle to a perilous streak down the fast lane of the superhighway then across the island and
ultimately to the opposite lane where it collided with the jeepney.
On the other hand, petitioner Lim's liability for Gunnaban's negligence was premised on his want
of diligence in supervising his employees. It was admitted during trial that Gunnaban doubled as
mechanic of the ill-fated truck despite the fact that he was neither tutored nor trained to handle
such task.6
Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the
decision of the trial court. In upholding the decision of the court a quo the appeals court concluded
that while an operator under the kabit system could not sue without joining the registered owner of
the vehicle as his principal, equity demanded that the present case be made an exception. 7 Hence
this petition.
It is petitioners' contention that the Court of Appeals erred in sustaining the decision of the trial
court despite their opposition to the well-established doctrine that an operator of a vehicle
continues to be its operator as long as he remains the operator of record. According to petitioners,
to recognize an operator under the kabit system as the real party in interest and to countenance
his claim for damages is utterly subversive of public policy. Petitioners further contend that
inasmuch as the passenger jeepney was purchased by private respondent for only 30,000.00, an
award of 236,000.00 is inconceivably large and would amount to unjust enrichment. 8
Petitioners' attempt to illustrate that an affirmance of the appealed decision could be supportive of
the pernicious kabit system does not persuade. Their labored efforts to demonstrate how the
questioned rulings of the courts a quoare diametrically opposed to the policy of the law requiring
operators of public utility vehicles to secure a certificate of public convenience for their operation is
quite unavailing.
The kabit system is an arrangement whereby a person who has been granted a certificate of
public convenience allows other persons who own motor vehicles to operate them under his
license, sometimes for a fee or percentage of the earnings. 9 Although the parties to such an
agreement are not outrightly penalized by law, the kabit system is invariably recognized as being
contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio10 the Court explained that one of the primary factors
considered in the granting of a certificate of public convenience for the business of public
transportation is the financial capacity of the holder of the license, so that liabilities arising from
accidents may be duly compensated. The kabit system renders illusory such purpose and, worse,
may still be availed of by the grantee to escape civil liability caused by a negligent use of a vehicle
owned by another and operated under his license. If a registered owner is allowed to escape
liability by proving who the supposed owner of the vehicle is, it would be easy for him to transfer
the subject vehicle to another who possesses no property with which to respond financially for the
damage done. Thus, for the safety of passengers and the public who may have been wronged
and deceived through the baneful kabit system, the registered owner of the vehicle is not allowed
to prove that another person has become the owner so that he may be thereby relieved of
responsibility. Subsequent cases affirm such basic doctrine. 11
It would seem then that the thrust of the law in enjoining the kabit system is not so much as to
penalize the parties but to identify the person upon whom responsibility may be fixed in case of an
accident with the end view of protecting the riding public. The policy therefore loses its force if the
public at large is not deceived, much less involved.
In the present case it is at once apparent that the evil sought to be prevented in enjoining
the kabit system does not exist. First, neither of the parties to the pernicious kabit system is being
held liable for damages. Second, the case arose from the negligence of another vehicle in using
the public road to whom no representation, or misrepresentation, as regards the ownership and
operation of the passenger jeepney was made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said that private respondent Gonzales and
the registered owner of the jeepney were in estoppel for leading the public to believe that the
jeepney belonged to the registered owner. Third, the riding public was not bothered nor
inconvenienced at the very least by the illegal arrangement. On the contrary, it was private
respondent himself who had been wronged and was seeking compensation for the damage done
to him. Certainly, it would be the height of inequity to deny him his right.
In light of the foregoing, it is evident that private respondent has the right to proceed against
petitioners for the damage caused on his passenger jeepney as well as on his business. Any effort
then to frustrate his claim of damages by the ingenuity with which petitioners framed the issue
should be discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the sole design of the courts to provide for
adequate compensation by putting the plaintiff in the same financial position he was in prior to the
tort. It is a fundamental principle in the law on damages that a defendant cannot be held liable in
damages for more than the actual loss which he has inflicted and that a plaintiff is entitled to no
more than the just and adequate compensation for the injury suffered. His recovery is, in the
absence of circumstances giving rise to an allowance of punitive damages, limited to a fair
compensation for the harm done. The law will not put him in a position better than where he
should be in had not the wrong happened.12
In the present case, petitioners insist that as the passenger jeepney was purchased in 1982 for
only 30,000.00 to award damages considerably greater than this amount would be improper and
unjustified. Petitioners are at best reminded that indemnification for damages comprehends not
only the value of the loss suffered but also that of the profits which the obligee failed to obtain. In
other words, indemnification for damages is not limited to damnum emergens or actual loss but
extends to lucrum cessans or the amount of profit lost.13
Had private respondent's jeepney not met an accident it could reasonably be expected that it
would have continued earning from the business in which it was engaged. Private respondent
avers that he derives an average income of 300.00 per day from his passenger jeepney and this
earning was included in the award of damages made by the trial court and upheld by the appeals
court. The award therefore of 236,000.00 as compensatory damages is not beyond reason nor
speculative as it is based on a reasonable estimate of the total damage suffered by private
respondent, i.e. damage wrought upon his jeepney and the income lost from his transportation
business. Petitioners for their part did not offer any substantive evidence to refute the estimate
made by the courts a quo.
However, we are constrained to depart from the conclusion of the lower courts that upon the
award of compensatory damages legal interest should be imposed beginning 22 July
1990, i.e. the date of the accident. Upon the provisions of Art. 2213 of the Civil Code, interest
"cannot be recovered upon unliquidated claims or damages, except when the demand can be
established with reasonable certainty." It is axiomatic that if the suit were for damages,
unliquidated and not known until definitely ascertained, assessed and determined by the courts
after proof, interest at the rate of six percent (6%) per annum should be from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to be
reasonably ascertained).14
In this case, the matter was not a liquidated obligation as the assessment of the damage on the
vehicle was heavily debated upon by the parties with private respondent's demand for
236,000.00 being refuted by petitioners who argue that they could have the vehicle repaired
easily for 20,000.00. In fine, the amount due private respondent was not a liquidated account that
was already demandable and payable.
One last word. We have observed that private respondent left his passenger jeepney by the
roadside at the mercy of the elements. Article 2203 of the Civil Code exhorts parties suffering from
loss or injury to exercise the diligence of a good father of a family to minimize the damages
resulting from the act or omission in question. One who is injured then by the wrongful or negligent
act of another should exercise reasonable care and diligence to minimize the resulting damage.
Anyway, he can recover from the wrongdoer money lost in reasonable efforts to preserve the
property injured and for injuries incurred in attempting to prevent damage to it. 15
However we sadly note that in the present case petitioners failed to offer in evidence the
estimated amount of the damage caused by private respondent's unconcern towards the
damaged vehicle. It is the burden of petitioners to show satisfactorily not only that the injured party
could have mitigated his damages but also the amount thereof; failing in this regard, the amount of
damages awarded cannot be proportionately reduced.
WHEREFORE, the questioned Decision awarding private respondent Donato Gonzales
236,000.00 with legal interest from 22 July 1990 as compensatory damages and 30,000.00 as
attorney's fees is MODIFIED. Interest at the rate of six percent (6%) per annum shall be computed
from the time the judgment of the lower court is made until the finality of this Decision. If the
adjudged principal and interest remain unpaid thereafter, the interest shall be twelve percent
(12%) per annum computed from the time judgment becomes final and executory until it is fully
satisfied.1âwphi1.nêt
Costs against petitioners.
SO ORDERED.

[G.R. No. 160286. July 30, 2004]
SPOUSES FRANCISCO M. HERNANDEZ and ANICETA ABEL-HERNANDEZ and JUAN

GONZALES, petitioners, vs. SPOUSES LORENZO DOLOR and MARGARITA DOLOR,
FRED PANOPIO, JOSEPH SANDOVAL, RENE CASTILLO, SPOUSES FRANCISCO
VALMOCINA and VIRGINIA VALMOCINA, SPOUSES VICTOR PANOPIO and MARTINA
PANOPIO, and HON. COURT OF APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the
decision[1] of the Court of Appeals, dated April 29, 2003, in CA-G.R. CV No. 60357, which affirmed
with modification the amount of damages awarded in the November 24, 1997 decision [2]of the
Regional Trial Court of Batangas City, Branch IV.
The undisputed facts are as follows:
At about 3:00 p.m. of December 19, 1986, Lorenzo Menard Boyet Dolor, Jr. was driving an
owner-type jeepney with plate no. DEB 804 owned by her mother, Margarita, towards Anilao,
Batangas. As he was traversing the road at Barangay Anilao East, Mabini, Batangas, his vehicle
collided with a passenger jeepney bearing plate no. DEG 648, driven by petitioner Juan Gonzales
and owned by his co-petitioner Francisco Hernandez, which was travelling towards Batangas City.
Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the collision. Fred
Panopio, Rene Castillo and Joseph Sandoval, who were also on board the owner-type jeep, which
was totally wrecked, suffered physical injuries. The collision also damaged the passenger jeepney
of Francisco Hernandez and caused physical injuries to its passengers, namely, Virgie Cadavida,
Fiscal Artemio Reyes and Francisca Corona. [3]
Consequently, respondents commenced an action [4] for damages against petitioners before
the Regional Trial Court of Batangas City, alleging that driver Juan Gonzales was guilty of
negligence and lack of care and that the Hernandez spouses were guilty of negligence in the
selection and supervision of their employees. [5]
Petitioners countered that the proximate cause of the death and injuries sustained by the
passengers of both vehicles was the recklessness of Boyet Dolor, the driver of the owner-type
jeepney, who was driving in a zigzagging manner under the influence of alcohol.Petitioners also
alleged that Gonzales was not the driver-employee of the Hernandez spouses as the former only
leased the passenger jeepney on a daily basis. The Hernandez spouses further claimed that even
if an employer-employee relationship is found to exist between them, they cannot be held liable
because as employers they exercised due care in the selection and supervision of their employee.
During the trial of the case, it was established that the drivers of the two vehicles were duly
licensed to drive and that the road where the collision occurred was asphalted and in fairly good
condition.[6] The owner-type jeep was travelling uphill while the passenger jeepney was going
downhill. It was further established that the owner-type jeep was moderately moving and had just
passed a road bend when its passengers, private respondents Joseph Sandoval and Rene
Castillo, saw the passenger jeepney at a distance of three meters away. The passenger jeepney
was traveling fast when it bumped the owner type jeep. [7] Moreover, the evidence presented by
respondents before the trial court showed that petitioner Juan Gonzales obtained his professional
drivers license only on September 24, 1986, or three months before the accident. Prior to this, he
was holder of a student drivers permit issued on April 10, 1986. [8]
On November 24, 1997, the trial court rendered a decision in favor of respondents, the
dispositive portion of which states:
Premises duly considered and the plaintiffs having satisfactorily convincingly and credibly
presented evidence clearly satisfying the requirements of preponderance of evidence to sustain
the complaint, this Court hereby declares judgment in favor of the plaintiffs and against the
defendants. Defendants-spouses Francisco Hernandez and Aniceta Abel Hernandez and Juan
Gonzales are therefore directed to pay jointly and severally, the following:
1) To spouses Lorenzo Dolor and Margarita Dolor:
a) P50,000.00 for the death of their son, Lorenzo Menard Boyet Dolor, Jr.;
b) P142,000.00 as actual and necessary funeral expenses;
c) P50,000.00 reasonable value of the totally wrecked owner-type jeep with plate
no. DEB 804 Phil 85;
d) P20,000.00 as moral damages;
e) P20,000.00 as reasonable litigation expenses and attorneys fees.
2) To spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 for the death of their son, Oscar Balmocina (sic);
b) P20,000.00 as moral damages;
c) P18,400.00 for funeral expenses;
d) P10,000.00 for litigation expenses and attorneys fees.
3) To spouses Victor Panopio and Martina Panopio:
a) P10,450.00 for the cost of the artificial leg and crutches being used by their son Fred Panopio;
b) P25,000.00 for hospitalization and medical expenses they incurred for the treatment of their
son, Fred Panopio.
4) To Fred Panopio:
a) P25,000.00 for the loss of his right leg;
b) P10,000.00 as moral damages.
5) To Joseph Sandoval:
a) P4,000.00 for medical treatment.
The defendants are further directed to pay the costs of this proceedings.
SO ORDERED.[9]
Petitioners appealed[10] the decision to the Court of Appeals, which affirmed the same with
modifications as to the amount of damages, actual expenses and attorneys fees awarded to the
private respondents. The decretal portion of the decision of the Court of Appeals reads:
WHEREFORE, the foregoing premises considered, the appealed decision
is AFFIRMED. However, the award for damages, actual expenses and attorneys fees shall be
MODIFIED as follows:
1) To spouses Lorenzo Dolor and Margarita Dolor:
a) P50,000.00 civil indemnity for their son Lorenzo Menard Dolor, Jr.;
b) P58,703.00 as actual and necessary funeral expenses;
c) P25,000,00 as temperate damages;
d) P100,000.00 as moral damages;
e) P20,000.00 as reasonable litigation expenses and attorneys fees.
2) To Spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 civil indemnity for the death of their son, Oscar Valmocina;
b) P100,000.00 as moral damages;
c) P10,000.00 as temperate damages;
d) P10,000.00 as reasonable litigation expenses and attorneys fees.
3) To Spouses Victor Panopio and Martina Panopio:
a) P10,352.59 as actual hospitalization and medical expenses;
b) P5,000.00 as temperate damages.
4) To Fred Panopio:
a) P50,000.00 as moral damages.
5) To Joseph Sandoval:
a) P3,000.00 as temperate damages.
SO ORDERED.[11]
Hence the present petition raising the following issues:
1. Whether the Court of Appeals was correct when it pronounced the Hernandez spouses as
solidarily liable with Juan Gonzales, although it is of record that they were not in the passenger
jeepney driven by latter when the accident occurred;
2. Whether the Court of Appeals was correct in awarding temperate damages to private
respondents namely the Spouses Dolor, Spouses Valmocina and Spouses Panopio and to
Joseph Sandoval, although the grant of temperate damages is not provided for in decision of the
court a quo;
3. Whether the Court of Appeals was correct in increasing the award of moral damages to
respondents, Spouses Dolor, Spouses Valmocina and Fred Panopio;
4. Whether the Court of Appeals was correct in affirming the grant of attorneys fees to Spouses
Dolor and to Spouses Valmocina although the lower court did not specify the fact and the law on
which it is based.
Petitioners contend that the absence of the Hernandez spouses inside the passenger jeepney
at the time of the collision militates against holding them solidarily liable with their co-petitioner,
Juan Gonzales, invoking Article 2184 of the Civil Code, which provides:
ARTICLE 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the
former, who was in the vehicle, could have, by the use of the due diligence, prevented the
misfortune. It is disputably presumed that a driver was negligent, if he had been found guilty of
reckless driving or violating traffic regulations at least twice within the next preceding two months.
If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.
The Hernandez spouses argues that since they were not inside the jeepney at the time of the
collision, the provisions of Article 2180 of the Civil Code, which does not provide for solidary
liability between employers and employees, should be applied.
We are not persuaded.
Article 2180 provides:

ARTICLE 2180. The obligation imposed by article 2176 is demandable not only for one's own acts
or omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who are under
their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on
the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent; but not when the
damage has been caused by the official to whom the task done properly pertains, in which case
what is provided in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused
by their pupils and students or apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage. (Underscoring
supplied)
On the other hand, Article 2176 provides
Whoever by act or omission causes damage to another, there being fault or negligence, is obliged
to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this
Chapter.
While the above provisions of law do not expressly provide for solidary liability, the same can
be inferred from the wordings of the first paragraph of Article 2180 which states that the obligation
imposed by article 2176 is demandable not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
Moreover, Article 2180 should be read with Article 2194 of the same Code, which categorically
states that the responsibility of two or more persons who are liable for quasi-delict is solidary. In
other words, the liability of joint tortfeasors is solidary. [12] Verily, under Article 2180 of the Civil
Code, an employer may be held solidarily liable for the negligent act of his employee. [13]
The solidary liability of employers with their employees for quasi-delicts having been
established, the next question is whether Julian Gonzales is an employee of the Hernandez
spouses. An affirmative answer will put to rest any issue on the solidary liability of the Hernandez
spouses for the acts of Julian Gonzales. The Hernandez spouses maintained that Julian Gonzales
is not their employee since their relationship relative to the use of the jeepney is that of a lessor
and a lessee. They argue that Julian Gonzales pays them a daily rental of P150.00 for the use of
the jeepney. [14] In essence, petitioners are practicing the boundary system of jeepney operation
albeit disguised as a lease agreement between them for the use of the jeepney.
We hold that an employer-employee relationship exists between the Hernandez spouses and
Julian Gonzales.

Indeed to exempt from liability the owner of a public vehicle who operates it under the
boundary system on the ground that he is a mere lessor would be not only to abet flagrant
violations of the Public Service Law, but also to place the riding public at the mercy of reckless
and irresponsible drivers reckless because the measure of their earnings depends largely upon
the number of trips they make and, hence, the speed at which they drive; and irresponsible
because most if not all of them are in no position to pay the damages they might cause. [15]
Anent the award of temperate damages to the private respondents, we hold that the appellate
court committed no reversible error in awarding the same to the respondents.
Temperate or moderate damages are damages which are more than nominal but less than
compensatory which may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty. [16]Temperate
damages are awarded for those cases where, from the nature of the case, definite proof of
pecuniary loss cannot be offered, although the court is convinced that there has been such loss. A
judge should be empowered to calculate moderate damages in such cases, rather than the
plaintiff should suffer, without redress, from the defendants wrongful act. [17] The assessment of
temperate damages is left to the sound discretion of the court provided that such an award is
reasonable under the circumstances.[18]
We have gone through the records of this case and we find that, indeed, respondents suffered
losses which cannot be quantified in monetary terms. These losses came in the form of the
damage sustained by the owner type jeep of the Dolor spouses; the internment and burial of
Oscar Valmocina; the hospitalization of Joseph Sandoval on account of the injuries he sustained
from the collision and the artificial leg and crutches that respondent Fred Panopio had to use
because of the amputation of his right leg. Further, we find that the amount of temperate damages
awarded to the respondents were reasonable under the circumstances.
As to the amount of moral damages which was awarded to respondents, a review of the
records of this case shows that there exists no cogent reason to overturn the action of the
appellate court on this aspect.
Under Article 2206, the spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish for the death of the deceased. The
reason for the grant of moral damages has been explained, thus:
. . . the award of moral damages is aimed at a restoration, within the limits possible, of the spiritual
status quo ante; and therefore, it must be proportionate to the suffering inflicted. The intensity of
the pain experienced by the relatives of the victim is proportionate to the intensity of affection for
him and bears no relation whatsoever with the wealth or means of the offender. [19]
Moral damages are emphatically not intended to enrich a plaintiff at the expense of the
defendant. They are awarded to allow the former to obtain means, diversion or amusements that
will serve to alleviate the moral suffering he has undergone due to the defendants culpable action
and must, perforce, be proportional to the suffering inflicted. [20]
Truly, the pain of the sudden loss of ones offspring, especially of a son who was in the prime
of his youth, and who holds so much promise waiting to be fulfilled is indeed a wellspring of
intense pain which no parent should be made to suffer. While it is true that there can be no exact
or uniform rule for measuring the value of a human life and the measure of damages cannot be
arrived at by a precise mathematical calculation, [21] we hold that the Court of Appeals award of
moral damages of P100,000.00 each to the Spouses Dolor and Spouses Valmocina for the death
of their respective sons, Boyet Dolor and Oscar Valmocina, is in full accord with prevailing
jurisprudence.[22]

With respect to the award of attorneys fees to respondents, no sufficient basis was
established for the grant thereof.
It is well settled that attorneys fees should not be awarded in the absence of stipulation except
under the instances enumerated in Article 2208 of the Civil Code. As we have held in Rizal Surety
and Insurance Company v. Court of Appeals:[23]
Article 2208 of the Civil Code allows attorneys fees to be awarded by a court when its claimant is
compelled to litigate with third persons or to incur expenses to protect his interest by reason of an
unjustified act or omission of the party from whom it is sought. While judicial discretion is here
extant, an award thereof demands, nevertheless, a factual, legal or equitable justification. The
matter cannot and should not be left to speculation and conjecture (Mirasol vs. De la Cruz, 84
SCRA 337; Stronghold Insurance Company, Inc. vs. Court of Appeals, 173 SCRA 619).
In the case at bench, the records do not show enough basis for sustaining the award for attorneys
fees and to adjudge its payment by petitioner. x x x.
Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of Appeals that:
In Abrogar v. Intermediate Appellate Court [G.R. No. 67970, January 15, 1988, 157 SCRA 57], the
Court had occasion to state that [t]he reason for the award of attorneys fees must be stated in the
text of the courts decision, otherwise, if it is stated only in the dispositive portion of the decision,
the same must be disallowed on appeal. x x x. [24]
WHEREFORE, the petition is DENIED. The assailed decision of the Court of Appeals is
AFFIRMED with the MODIFICATION that the grant of attorneys fees is DELETED for lack of
basis.
Costs against petitioners.
SO ORDERED.


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Republic of the Philippines

Transpo Cases (P. 1-2 of the Syllabus) 2

Transpo Cases (P. 1-2 of the Syllabus) 3

G.R. No. 92288 February 9, 1993

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G.R. No. 114061 August 3, 1994

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G.R. No. 125948 December 29, 1998

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[G.R. No. 145804. February 6, 2003]

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[G.R. No. 112350. December 12, 1997]

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1. Whether or not the vessel was seaworthy and cargo-worthy;

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The Courts Ruling

Preliminary Matter: Common Carrier or Private Carrier?

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Extent of VSIs Responsibility and Liability Over NSCs Cargo

First Issue: Questions of Fact

Transpo Cases (P. 1-2 of the Syllabus) 59

Was MV Vlasons I Seaworthy?

Who Were Negligent: Seamen or Stevedores?

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Transpo Cases (P. 1-2 of the Syllabus) 61

Transpo Cases (P. 1-2 of the Syllabus) 62

Transpo Cases (P. 1-2 of the Syllabus) 63

Second Issue: Effect of NSCs Failure to Insure the Cargo

Transpo Cases (P. 1-2 of the Syllabus) 64

Third Issue: Admissibility of Certificates Proving Seaworthiness

Transpo Cases (P. 1-2 of the Syllabus) 65

The contract of voyage charter hire provides inter alia:

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FILCAR TRANSPORT SERVICES, G.R. No. 174156

CARPIO, J., Chairperson,

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