On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the
pertinent portion of which reads:
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.
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 1967 1 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 Code3. 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.
TRANSPO Batch 1
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 complaint 6 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:
Page 1 of 41
 . . . 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. 13 Petitioner 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.
TRANSPO Batch 1
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
4. The transportation must be for hire. 15
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  16 we 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
Page 2 of 41
 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)
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:
TRANSPO Batch 1
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:
x x x           x x x          x x x
(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
Page 3 of 41
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. 111127 July 26, 1996
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE
ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA,
ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA,
YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN,
FRANCIS NORMAN O. LOPES, JULIUS CAESAR, GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA
C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES,
MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA,
TRANSPO Batch 1
MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T.
RADOC and BERNADETTE FERRER, respondents.
MENDOZA, J.:p
This is a petition for review on certiorari of the decision of the Court of Appeals1 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. Scholastica's 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 o'clock 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 o'clock 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, sot hat 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 Baay 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 down by a wooden seat which came off after
being unscrewed. It took three persons to safely remove her from this portion. 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.
Page 4 of 41
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 latter's fence. On the basis of Escano's 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 Baay, Lingayen. As this hospital was not adequately equipped, she was
transferred to the Sto. Niño 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 attorney's fees;
6) Costs of suit.
TRANSPO Batch 1
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;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorney's fees; and
6) Costs of suit.
The Court of Appeals sustained the trial court's 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 OF 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 Antonio's 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
Page 5 of 41
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
Cabil's 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 supervisions of their
employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a
professional driver's 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 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.
Scholastica's College in Metro Manila. 7 They had hired him only after a two-week apprenticeship.
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
congregation's delayed meeting) could have a 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 or the automobile driver. 9
TRANSPO Batch 1
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 found 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 exercise 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 willful acts of the former's employees although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
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 findings 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
Page 6 of 41
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 Cabil's gross negligence
amounted to bad faith.12 Amyline Antonio's testimony, as well as the testimonies of her father and
copassengers, 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 attorney's 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
attorney's 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.
severally liable with 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 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 coplaintiffs 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
coplaintiffs 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 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;
3) P20,000.00 as moral damages;

The same rule of liability was applied in situations where the negligence of the driver of the bus on 4) P20,000.00 as exemplary damages;
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. Buño, 16 Batangas Laguna Tayabas Bus
Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court of 5) 25% of the recoverable amount as attorney's fees; and
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 6) costs of suit.
allocation of liability was explained in Viluan v. Court of Appeals, 19 thus:
SO ORDERED.
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

TRANSPO Batch 1 Page 7 of 41


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.
TRANSPO Batch 1
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:
Page 8 of 41
 ... 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:
TRANSPO Batch 1
(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;
Page 9 of 41
 (6) that the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; 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.
G.R. No. 157917               August 29, 2012

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 SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
beyond private respondent's control. vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the
COURT OF APPEALS Respondents.
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.
DECISION

SO ORDERED.
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

TRANSPO Batch 1 Page 10 of 41

death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if At the pre-trial, the parties stipulated on the facts and issues, viz:
the deceased passenger may only be an unemployed high school student at the time of the accident.
A. FACTS:
The Case
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
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
(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe
with modification the decision rendered on December 3, 1999 by the Regional Trial Court (RTC),
transportation carriage of the former spouses' son from their residence in Parañaque to his
Branch 260, in Parañaque City that had decreed them jointly and severally liable with Philippine
school at the Don Bosco Technical Institute in Makati City;
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). (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
Antecedents
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,
The Pereñas were engaged in the business of transporting students from their respective residences within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;
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
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision
at a time, two of whom would be seated in the front beside the driver, and the others in the rear, with
was a railroad crossing used by motorists for crossing the railroad tracks;
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.
(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;

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 (9) PNR received the demand letter of the spouses Zarate;
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 (10) PNR refused to acknowledge any liability for the vehicular/train collision;
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 (11) The eventual closure of the railroad crossing alleged by PNR was an internal
collision was imminent. The passenger bus successfully crossed the railroad tracks, but the van driven arrangement between the former and its project contractor; and
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 (12) The site of the vehicular/train collision was within the vicinity or less than 100 meters
body and severed his head, instantaneously killing him. Alano fled the scene on board the train, and from the Magallanes station of PNR.
did not wait for the police investigator to arrive.
B. ISSUES
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.

TRANSPO Batch 1 Page 11 of 41

 (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
TRANSPO Batch 1
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-
Page 12 of 41
 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.
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.

The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the III. The lower court erred in not reducing further the amount of damages awarded, assuming
absence of sufficient basis for such an award. petitioners are liable at all.

On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but Ruling
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
The petition has no merit.

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of
1.
Parañaque City is AFFIRMED with the modification that the award of Actual Damages is reduced to ₱
Were the Pereñas and PNR jointly
59,502.76; Moral Damages is reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is
and severally liable for damages?
Deleted.

The Zarates brought this action for recovery of damages against both the Pereñas and the PNR,
SO ORDERED.
basing their claim against the Pereñas on breach of contract of carriage and against the PNR on quasi-
delict.
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
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
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:– We concur with the CA.

2/3 x (80 - age at the time of death) = life expectancy 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
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy
with the train; that they even had their own son travel to and from school on a daily basis; and that
from age of 21 (the age when he would have graduated from college and started working for his own
Teodoro Pereña himself sometimes accompanied Alfaro in transporting the passengers to and from
livelihood) instead of 15 years (his age when he died). Considering that the nature of his work and his
school. The RTC gave scant consideration to such defense by regarding such defense as inappropriate
salary at the time of Aaron’s death were unknown, it used the prevailing minimum wage of ₱
in an action for breach of contract of carriage.
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

TRANSPO Batch 1 Page 13 of 41

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,9 primarily 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,15 viz:
"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:
TRANSPO Batch 1
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.
Page 14 of 41
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.28 He 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
TRANSPO Batch 1
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
Page 15 of 41
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.
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.

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.
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
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino
render effective the desired example for the public good. As a common carrier, the Pereñas needed to
was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be
be vigorously reminded to observe their duty to exercise extraordinary diligence to prevent a similarly
some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician, or a lawyer).
senseless accident from happening again. Only by an award of exemplary damages in that amount
Instead, the computation of Aaron’s earning capacity was premised on him being a lowly minimum
would suffice to instill in them and others similarly situated like them the ever-present need for
wage earner despite his being then enrolled at a prestigious high school like Don Bosco in Makati, a
greater and constant vigilance in the conduct of a business imbued with public interest.
fact that would have likely ensured his success in his later years in life and at work.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on

And, secondly, the fact that Aaron was then without a history of earnings should not be taken against
November 13, 2002; and ORDER the petitioners to pay the costs of suit.
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 SO ORDERED.
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

TRANSPO Batch 1 Page 16 of 41

 Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into
the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the
captain to step forward to the front, leaving the wheel to one of the crew members.

The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B
Coco Beach III capsized putting all passengers underwater.

The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the
captain, Matute and the other passengers who reached the surface asked him what they could do to
save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang
sarili niyo" (Just save yourselves).

Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera
passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting
of 18 passengers and four crew members, who were brought to Pisa Island. Eight passengers,
including petitioners’ son and his wife, died during the incident.
G.R. No. 186312               June 29, 2010
At the time of Ruelito’s death, he was 28 years old and employed as a contractual worker for Mitsui
Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900. 3
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent. Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the death
of their son in the amount of at least ₱4,000,000.
DECISION
Replying, respondent, by letter dated November 7, 2000, 5 denied any responsibility for the incident
which it considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the
CARPIO MORALES, J.:
amount of ₱10,000 to petitioners upon their signing of a waiver.

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 1 against Sun
As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected, alleging that
Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from
respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail
the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on
notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and
board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000. 6
Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by
respondent.
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available to
the general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that it
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by
exercised the utmost diligence in ensuring the safety of its passengers; contrary to petitioners’
virtue of a tour package-contract with respondent that included transportation to and from the Resort
allegation, there was no storm on September 11, 2000 as the Coast Guard in fact cleared the voyage;
and the point of departure in Batangas.
and M/B Coco Beach III was not filled to capacity and had sufficient life jackets for its passengers. By
way of Counterclaim, respondent alleged that it is entitled to an award for attorney’s fees and
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of litigation expenses amounting to not less than ₱300,000.
the incident that led to the filing of the complaint as follows:
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance
Resort in the afternoon of September 10, 2000, but was advised to stay for another night because of from the Coast Guard, (3) there is clearance from the captain and (4) there is clearance from the
strong winds and heavy rains. Resort’s assistant manager.8 He added that M/B Coco Beach III met all four conditions on September
11, 2000,9 but a subasco or squall, characterized by strong winds and big waves, suddenly occurred,
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners’ causing the boat to capsize.10
son and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the
wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas.

TRANSPO Batch 1 Page 17 of 41

By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners’ Complaint and
respondent’s Counterclaim.
Petitioners’ Motion for Reconsideration having been denied by Order dated September 2, 2005, 12 they
appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners’ appeal, holding, among other
things, that the trial court correctly ruled that respondent is a private carrier which is only required to
observe ordinary diligence; that respondent in fact observed extraordinary diligence in transporting its
guests on board M/B Coco Beach III; and that the proximate cause of the incident was a squall, a
fortuitous event.
Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16,
2009,14 they filed the present Petition for Review. 15
Petitioners maintain the position they took before the trial court, adding that respondent is a common
carrier since by its tour package, the transporting of its guests is an integral part of its resort
business. They inform that another division of the appellate court in fact held respondent liable for
damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it
is a common carrier; that the Resort’s ferry services for guests cannot be considered as ancillary to its
business as no income is derived therefrom; that it exercised extraordinary diligence as shown by the
conditions it had imposed before allowing M/B Coco Beach III to sail; that the incident was caused by
a fortuitous event without any contributory negligence on its part; and that the other case wherein
the appellate court held it liable for damages involved different plaintiffs, issues and evidence. 16
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals 17 in characterizing respondent 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 deliberately refrained from making such distinctions.
TRANSPO Batch 1
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 . . .18 (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business
as to be properly considered ancillary thereto. The constancy of respondent’s ferry services in its
resort operations is underscored by its having its own Coco Beach boats. And the tour packages it
offers, which include the ferry services, may be availed of by anyone who can afford to pay the same.
These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It
would be imprudent to suppose that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor the transportation fee in arriving at
the tour package price. That guests who opt not to avail of respondent’s ferry services pay the same
amount is likewise inconsequential. These guests may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately
refrained from making distinctions on whether the carrying of persons or goods is the carrier’s
principal business, whether it is offered on a regular basis, or whether it is offered to the general
public. The intent of the law is thus to not consider such distinctions. Otherwise, there is no telling
how many other distinctions may be concocted by unscrupulous businessmen engaged in the carrying
of persons or goods in order to avoid the legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence for the safety of the passengers transported by
them, according to all the circumstances of each case.19 They are bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the
common carrier is at fault or negligent. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary diligence. 21
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of
voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondent’s position
does not impress.
Page 18 of 41
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone
warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in Northern
Luzon which would also affect the province of Mindoro.22 By the testimony of Dr. Frisco Nilo,
supervising weather specialist of PAGASA, squalls are to be expected under such weather condition. 23
A very cautious person exercising the utmost diligence would thus not brave such stormy weather and
put other people’s lives at risk. The extraordinary diligence required of common carriers demands that
they take care of the goods or lives entrusted to their hands as if they were their own. This
respondent failed to do.
Respondent’s insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence,
or the failure of the debtors to comply with their obligations, must have been independent of human
will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible
for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free
from any participation in the aggravation of the resulting injury to the creditor. 24
To fully free a common carrier from any liability, the fortuitous event must have been the proximate
and only cause of the loss. And it should have exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the fortuitous event. 25
Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned
M/B Coco Beach III. As reflected above, however, the occurrence of squalls was expected under the
weather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III
suffered engine trouble before it capsized and sank. 26 The incident was, therefore, not completely free
from human intervention.
The Court need not belabor how respondent’s evidence likewise fails to demonstrate that it exercised
due diligence to prevent or minimize the loss before, during and after the occurrence of the squall.
Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common carrier in breach of its
contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity
for death, (2) indemnity for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at ₱50,000. 29
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living
expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 — age of deceased at the time of death]30
TRANSPO Batch 1
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age at death])
adopted in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table
of Mortality.31
The second factor is computed by multiplying the life expectancy by the net earnings of the deceased,
i.e., the total earnings less expenses necessary in the creation of such earnings or income and less
living and other incidental expenses.32 The loss is not equivalent to the entire earnings of the
deceased, but only such portion as he would have used to support his dependents or heirs. Hence, to
be deducted from his gross earnings are the necessary expenses supposed to be used by the
deceased for his own needs.33
In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping Agency Corp.
v. Borja34 teaches that when, as in this case, there is no showing that the living expenses constituted
the smaller percentage of the gross income, the living expenses are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $900 35 which, when
converted to Philippine peso applying the annual average exchange rate of $1 = ₱44 in
2000,36 amounts to ₱39,600. Ruelito’s net earning capacity is thus computed as follows:
Net Earning = life expectancy x (gross annual income - reasonable and necessary
Capacity living expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)
Net Earning
= ₱8,316,000
Capacity
Respecting the award of moral damages, since respondent common carrier’s breach of contract of
carriage resulted in the death of petitioners’ son, following Article 1764 vis-à-vis Article 2206 of the
Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence required of common
carriers, it is presumed to have acted recklessly, thus warranting the award too of exemplary
damages, which are granted in contractual obligations if the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.37
Under the circumstances, it is reasonable to award petitioners the amount of ₱100,000 as moral
damages and ₱100,000 as exemplary damages.381avvphi1
Page 19 of 41
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where exemplary
damages are awarded. The Court finds that 10% of the total amount adjudged against respondent is
reasonable for the purpose.

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals 40 teaches that when an obligation, regardless
of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor
can be held liable for payment of interest in the concept of actual and compensatory damages,
subject to the following rules, to wit —

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the demand
is made, the interest shall begin to run only from the date the judgment of the court is made
(at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, G.R. No. 200289               November 25, 2013
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit. (emphasis supplied).
WESTWIND SHIPPING CORPORATION, Petitioner,
vs.
Since the amounts payable by respondent have been determined with certainty only in the present UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.
petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per
annum until satisfaction, in accordance with paragraph number 3 of the immediately cited guideline in
x-----------------------x
Easter Shipping Lines, Inc.

G.R. No. 200314

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

The total amount adjudged against respondent shall earn interest at the rate of 12% per annum DECISION
computed from the finality of this decision until full payment.
PERALTA, J.:
SO ORDERED.

TRANSPO Batch 1 Page 20 of 41

These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of the 1997
Rules of Civil Procedure, September 13, 2011 Decision 1 and January 19, 2012 Resolution2 of the Court
of Appeals (CA) in CA-G.R. CV No. 86752, which reversed and set aside the January 27, 2006
Decision3 of the Manila City Regional Trial Court Branch (RTC) 30. The facts, as established by the
records, are as follows:
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation (SMC). The
shipment, covered by Bill of Lading No. KBMA-1074,4 was loaded and received clean on board M/V
Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind Shipping Corporation
(Westwind).
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for US
Dollars: One Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven Centavos
(US$184,798.97), which, at the time, was equivalent to Philippine Pesos: Six Million Two Hundred
Nine Thousand Two Hundred Forty-Five and Twenty-Eight Centavos (₱6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the custody of
the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services, Inc. 5 During the
unloading operation, however, six containers/skids worth Philippine Pesos: One Hundred Seventeen
Thousand Ninety-Three and Twelve Centavos (₱117,093.12) sustained dents and punctures from the
forklift used by the stevedores of Ocean Terminal Services, Inc. (OTSI) in centering and shuttling the
containers/skids. As a consequence, the local ship agent of the vessel, Baliwag Shipping Agency, Inc.,
issued two Bad Order Cargo Receipt dated September 1, 1993.
On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC,
withdrew from ATI the 197 containers/skids, including the six in damaged condition, and delivered the
same at SMC’s warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was
discovered upon discharge that additional nine containers/skids valued at Philippine Pesos: One
Hundred Seventy-Five Thousand Six Hundred Thirty-Nine and Sixty-Eight Centavos (₱175,639.68)
were also damaged due to the forklift operations; thus, making the total number of 15
containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI, and OFII to
recover the amount corresponding to the damaged 15 containers/skids. When UCPB paid the total
sum of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven Hundred Thirty-Two and Eighty
Centavos (₱292,732.80), SMC signed the subrogation receipt. Thereafter, in the exercise of its right
of subrogation, UCPB instituted on August 30, 1994 a complaint for damages against Westwind, ATI,
and OFII.6
After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind, ATI, and OFII. It
ruled that the right, if any, against ATI already prescribed based on the stipulation in the 16 Cargo
Gate Passes issued, as well as the doctrine laid down in International Container Terminal Services,
Inc. v. Prudential Guarantee & Assurance Co. Inc.7 that a claim for reimbursement for damaged goods
must be filed within 15 days from the date of consignee’s knowledge. With respect to Westwind, even
if the action against it is not yet barred by prescription, conformably with Section 3 (6) of the
Carriage of Goods by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court of Appeals,
et al.8 and Belgian Overseas Chartering and Shipping N.V. v. Phil. First Insurance Co., Inc., 9 the court
a quo still opined that Westwind is not liable, since the discharging of the cargoes were done by ATI
personnel using forklifts and that there was no allegation that it (Westwind) had a hand in the
TRANSPO Batch 1
conduct of the stevedoring operations. Finally, the trial court likewise absolved OFII from any liability,
reasoning that it never undertook the operation of the forklifts which caused the dents and punctures,
and that it merely facilitated the release and delivery of the shipment as the customs broker and
representative of SMC.
On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its September 13, 2011
Decision directed:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision dated
January 27, 2006 rendered by the court a quo is REVERSED AND SET ASIDE. Appellee Westwind
Shipping Corporation is hereby ordered to pay to the appellant UCPB General Insurance Co., Inc., the
amount of One Hundred Seventeen Thousand and Ninety-Three Pesos and Twelve Centavos
(Php117,093.12), while Orient Freight International, Inc. is hereby ordered to pay to UCPB the sum of
One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine Pesos and Sixty-Eight Centavos
(Php175,639.68). Both sums shall bear interest at the rate of six (6%) percent per annum, from the
filing of the complaint on August 30, 1994 until the judgment becomes final and executory.
Thereafter, an interest rate of twelve (12%) percent per annum shall be imposed from the time this
decision becomes final and executory until full payment of said amounts.
SO ORDERED.10
While the CA sustained the RTC judgment that the claim against ATI already prescribed, it rendered a
contrary view as regards the liability of Westwind and OFII. For the appellate court, Westwind, not
ATI, is responsible for the six damaged containers/skids at the time of its unloading. In its rationale,
which substantially followed Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc., 11 it
concluded that the common carrier, not the arrastre operator, is responsible during the unloading of
the cargoes from the vessel and that it is not relieved from liability and is still bound to exercise
extraordinary diligence at the time in order to see to it that the cargoes under its possession remain
in good order and condition. The CA also considered that OFII is liable for the additional nine
damaged containers/skids, agreeing with UCPB’s contention that OFII is a common carrier bound to
observe extraordinary diligence and is presumed to be at fault or have acted negligently for such
damage. Noting the testimony of OFII’s own witness that the delivery of the shipment to the
consignee is part of OFII’s job as a cargo forwarder, the appellate court ruled that Article 1732 of the
New Civil Code (NCC) does not distinguish between one whose principal business activity is the
carrying of persons or goods or both and one who does so as an ancillary activity. The appellate court
further ruled that OFII cannot excuse itself from liability by insisting that JBL undertook the delivery
of the cargoes to SMC’s warehouse. It opined that the delivery receipts signed by the inspector of
SMC showed that the containers/skids were received from OFII, not JBL. At the most, the CA said,
JBL was engaged by OFII to supply the trucks necessary to deliver the shipment, under its
supervision, to SMC.
Only Westwind and OFII filed their respective motions for reconsideration, which the CA denied;
hence, they elevated the case before Us via petitions docketed as G.R. Nos. 200289 and 200314,
respectively.
Westwind argues that it no longer had actual or constructive custody of the containers/skids at the
time they were damaged by ATI’s forklift operator during the unloading operations. In accordance
with the stipulation of the bill of lading, which allegedly conforms to Article 1736 of the NCC, it
contends that its responsibility already ceased from the moment the cargoes were delivered to ATI,
which is reckoned from the moment the goods were taken into the latter’s custody. Westwind adds
Page 21 of 41
that ATI, which is a completely independent entity that had the right to receive the goods as exclusive
operator of stevedoring and arrastre functions in South Harbor, Manila, had full control over its
employees and stevedores as well as the manner and procedure of the discharging operations.
As for OFII, it maintains that it is not a common carrier, but only a customs broker whose
participation is limited to facilitating withdrawal of the shipment in the custody of ATI by overseeing
and documenting the turnover and counterchecking if the quantity of the shipments were in tally with
the shipping documents at hand, but without participating in the physical withdrawal and loading of
the shipments into the delivery trucks of JBL. Assuming that it is a common carrier, OFII insists that
there is no need to rely on the presumption of the law – that, as a common carrier, it is presumed to
have been at fault or have acted negligently in case of damaged goods – considering the undisputed
fact that the damages to the containers/skids were caused by the forklift blades, and that there is no
evidence presented to show that OFII and Westwind were the owners/operators of the forklifts. It
asserts that the loading to the trucks were made by way of forklifts owned and operated by ATI and
the unloading from the trucks at the SMC warehouse was done by way of forklifts owned and
operated by SMC employees. Lastly, OFII avers that neither the undertaking to deliver nor the
acknowledgment by the consignee of the fact of delivery makes a person or entity a common carrier,
since delivery alone is not the controlling factor in order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc. 12 applies, as it settled
the query on which between a common carrier and an arrastre operator should be responsible for
damage or loss incurred by the shipment during its unloading. We elucidated at length:
Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them. Subject to
certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible
for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the
common carrier lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or constructively, by
the carrier to the consignee, or to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for
the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port
of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading,
unless agreed otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the Court interpreted the
ship captain’s liability as ultimately that of the shipowner by regarding the captain as the
representative of the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the
carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such
goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities
set forth in the Act. Section 3 (2) thereof then states that among the carriers’ responsibilities are to
properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
xxxx
TRANSPO Batch 1
On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on
the wharf or between the establishment of the consignee or shipper and the ship's tackle. Being the
custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of
the goods and to turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees
should observe the standards and measures necessary to prevent losses and damage to shipments
under its custody.
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the relationship and
responsibility of an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin to that of a depositor
and warehouseman. The relationship between the consignee and the common carrier is similar to that
of the consignee and the arrastre operator. Since it is the duty of the ARRASTRE to take good care of
the goods that are in its custody and to deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore
charged with and obligated to deliver the goods in good condition to the consignee. (Emphasis
supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals
with the clarification that the arrastre operator and the carrier are not always and necessarily
solidarily liable as the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator and a
carrier may not be held solidarily liable at all times. But the precise question is which entity had
custody of the shipment during its unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA states that among the carriers’ responsibilities are to
properly and carefully load, care for and discharge the goods carried. The bill of lading covering the
subject shipment likewise stipulates that the carrier’s liability for loss or damage to the goods ceases
after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain liable for
the cargo from the time it is turned over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled that like the
duty of seaworthiness, the duty of care of the cargo is non-delegable, and the carrier is accordingly
responsible for the acts of the master, the crew, the stevedore, and his other agents. It has also been
held that it is ordinarily the duty of the master of a vessel to unload the cargo and place it in
readiness for delivery to the consignee, and there is an implied obligation that this shall be
accomplished with sound machinery, competent hands, and in such manner that no unnecessary
injury shall be done thereto. And the fact that a consignee is required to furnish persons to assist in
unloading a shipment may not relieve the carrier of its duty as to such unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under
the custody of the carrier x x x.13
Page 22 of 41
In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines),
Inc.14 and Asian Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court echoed the doctrine that
cargoes, while being unloaded, generally remain under the custody of the carrier. We cannot agree
with Westwind’s disputation that "the carrier in Wallem clearly exercised supervision during the
discharge of the shipment and that is why it was faulted and held liable for the damage incurred by
the shipment during such time." What Westwind failed to realize is that the extraordinary
responsibility of the common carrier lasts until the time the goods are actually or constructively
delivered by the carrier to the consignee or to the person who has a right to receive them. There is
actual delivery in contracts for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is given him to remove the
goods.16 In this case, since the discharging of the containers/skids, which were covered by only one
bill of lading, had not yet been completed at the time the damage occurred, there is no reason to
imply that there was already delivery, actual or constructive, of the cargoes to ATI. Indeed, the
earlier case of Delsan Transport Lines, Inc. v. American Home Assurance Corp. 17 serves as a useful
guide, thus:
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because
the same had already been actually and legally delivered to Caltex at the time it entered the shore
tank holds no water. It had been settled that the subject cargo was still in the custody of Delsan
because the discharging thereof has not yet been finished when the backflow occurred. Since the
discharging of the cargo into the depot has not yet been completed at the time of the spillage when
the backflow occurred, there is no reason to imply that there was actual delivery of the cargo to the
consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank of
Caltex on shore, there was legally, at that moment, a complete delivery thereof to Caltex. To be sure,
the extraordinary responsibility of common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by, the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to a person who has the right
to receive them. The discharging of oil products to Caltex Bulk Depot has not yet been finished,
Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the
responsibility to guard and preserve the goods, a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case. The mere proof of
delivery of goods in good order to the carrier, and their arrival in the place of destination in bad order,
make out a prima facie case against the carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss
was due to accident or some other circumstances inconsistent with its liability. 18
The contention of OFII is likewise untenable. A customs broker has been regarded as a common
carrier because transportation of goods is an integral part of its business. 19 In Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc.,20 the Court already reiterated: It is settled that
under a given set of facts, a customs broker may be regarded as a common carrier.1âwphi1 Thus,
this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals held:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier,
as defined under Article 1732 of the Civil Code, to wit, 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.
TRANSPO Batch 1
xxxx
Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required by law is bereft of merit.
It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of goods
is an integral part of a customs broker, the customs broker is also a common carrier. For to declare
otherwise "would be to deprive those with whom [it] contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel
of petitioner’s business."21
That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric
Panganiban Cueto, that part of the services it offers to clients is cargo forwarding, which includes the
delivery of the shipment to the consignee.22 Thus, for undertaking the transport of cargoes from ATI
to SMC’s warehouse in Calamba, Laguna, OFII is considered a common carrier. As long as a person or
corporation holds itself to the public for the purpose of transporting goods as a business, it is already
considered a common carrier regardless of whether it owns the vehicle to be used or has to actually
hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil
Code,23 extraordinary diligence in the vigilance over the goods 24 it transports according to the peculiar
circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted negligently unless it proves that it observed
extraordinary diligence.25 In the case at bar it was established that except for the six containers/skids
already damaged OFII received the cargoes from ATI in good order and condition; and that upon its
delivery to SMC additional nine containers/skids were found to be in bad order as noted in the
Delivery Receipts issued by OFII and as indicated in the Report of Cares Marine Cargo Surveyors.
Instead of merely excusing itself from liability by putting the blame to ATI and SMC it is incumbent
upon OFII to prove that it actively took care of the goods by exercising extraordinary diligence in the
carriage thereof. It failed to do so. Hence its presumed negligence under Article 1735 of the Civil
Code remains unrebutted.
WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and
200314 respectively are DENIED. The September 13 2011 Decision and January 19 2012 Resolution
of the Court of Appeals in CA-G.R. CV No. 86752 which reversed and set aside the January 27 2006
Decision of the Manila City Regional Trial Court Branch 30 are AFFIRMED.
SO ORDERED.
Page 23 of 41
 tree.13 Sanico claimed that he paid for all the hospital and medical expenses of Colipano, 14 and that
Colipano eventually freely and voluntarily executed an Affidavit of Desistance and Release of Claim. 15

After trial, the RTC found that Sanico and Castro breached the contract of carriage between them and
Colipano but only awarded actual and compensatory damages in favor of Colipano. The dispositive
portion of the RTC Decision states:
WHEREFORE, premises considered, this Court finds the defendants LIABLE for breach of contract of
carriage and are solidarily liable to pay plaintiff:

1. Actual damages in the amount of P2,098.80; and

2. Compensatory damages for loss of income in the amount of P360,000.00.

No costs.
G.R. No. 209969, September 27, 2017
SO ORDERED.16
Only Sanico and Castro appealed to the CA, which affirmed with modification the RTC Decision. The
JOSE SANICO AND VICENTE CASTRO, Petitioners, v. WERHERLINA P. COLIPANO, Respondent. dispositive portion of the CA Decision states:
IN LIGHT OF ALL THE FOREGOING, the instant appeal is PARTIALLY GRANTED. The Decision dated
DECISION October 27, 2006 of the Regional Trial Court, Branch 25, Danao City, in Civil Case No. DNA-418, is
AFFIRMED with MODIFICATION in that the award for compensatory damages for loss of income in
paragraph 2 of the dispositive portion of the RTC's decision, is reduced to P200,000.00.
CAGUIOA, J.:
SO ORDERED.17
Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court filed by Without moving for the reconsideration of the CA Decision, Sanico and Castro filed this petition before
petitioners Jose Sanico (Sanico) and Vicente Castro (Castro), assailing the Decision 2 dated September the Court assailing the CA Decision.
30, 2013 of the Court of Appeals (CA) in CA-G.R. CEB-CV No. 01889. The CA affirmed with Issues
modification the Decision3 dated October 27, 2006 of the Regional Trial Court, Branch 25, Danao City
(RTC) which found Sanico and Castro liable for breach of' contract of carriage and awarded actual and a. Whether the CA erred in finding that Sanico and Castro breached the contract of carriage
compensatory damages for loss of income in favor of respondent Werherlina P. Colipano (Colipano). with Colipano;
The CA reduced the compensatory damages that the RTC awarded.
b. Whether the Affidavit of Desistance and Release of Claim is binding on Colipano; and
Antecedents
c. Whether the CA erred in the amount of damages awarded.
Colipano filed a complaint on January 7, 1997 for breach of contract of carriage and damages against
Sanico and Castro.4 In her complaint, Colipano claimed that at 4:00 P.M. more or less of December
25, 1993, Christmas Day, she and her daughter were; paying passengers in the jeepney operated The Court's Ruling
by Sanico, which was driven by Castro.5 Colipano claimed she was made to sit on an empty beer case
at the edge of the rear entrance/exit of the jeepney with her sleeping child on her lap. 6 And, at an The Court partly grants the petition.
uphill incline in the road to Natimao-an, Carmen, Cebu, the jeepney slid backwards because it did not
have the power to reach the top.7 Colipano pushed both her feet against the step board to prevent Only Sanico breached the contract of carriage.
herself and her child from being thrown out of the exit, but because the step board was wet, her left
foot slipped and got crushed between the step board and a coconut tree which the jeepney bumped, Here, it is beyond dispute that Colipano was injured while she was a passenger in the jeepney owned
causing the jeepney to stop its backward movement. 8 Colipano's leg was badly injured and was and operated by Sanico that was being driven by Castro. Both the CA and RTC found Sanico and
eventually amputated.9 Colipano prayed for actual damages, loss of income, moral damages, Castro jointly and severally liable. This, however, is erroneous because only Sanico was the party to
exemplary damages, and attorney's fees.10 the contract of carriage with Colipano.

In their answer, Sanico and Castro admitted that Colipano's leg was crushed and amputated but Since the cause of action is based on a breach of a contract of carriage, the liability of Sanico is direct
claimed that it! was Colipano's fault that her leg was crushed. 11 They admitted that the jeepney slid as the contract is between him and Colipano. Castro, being merely the driver of Sanico's jeepney,
backwards because the jeepney lost power.12 The conductor then instructed everyone not to panic but cannot be made liable as he is not a party to the contract of carriage.
Colipano tried to disembark and her foot got caught in between the step board and the coconut

TRANSPO Batch 1 Page 24 of 41

In Soberano v. Manila Railroad Co.,18 the Court ruled that a complaint for breach of a contract of
carriage is dismissible as against the employee who was driving the bus because the parties to the
contract of carriage are only the passenger, the bus owner, and the operator, viz.:
The complaint against Caccam was therefore properly dismissed. He was not a party to the contract;
he was a mere employee of the BAL. The parties to that contract are Juana Soberano, the passenger,
and the MRR and its subsidiary, the BAL, the bus owner and operator, respectively; and consequent
to the inability of the defendant companies to carry Juana Soberano and her baggage arid personal
effects securely and safely to her destination as imposed by law (art. 1733, in relation to arts. 1736
and 1755, N.C.C.), their liability to her becomes direct and immediate.19
Since Castro was not a party to the contract of carriage, Colipano had no cause of action against him
and the pomplaint against him should be dismissed. Although he was driving the jeepney, he was a
mere employee of Sanico, who was the operator and owner of the jeepney. The obligation to carry
Colipano safely to her destination was with Sanico. In fact, the elements of a contract of carriage
existeid between Colipano and Sanico: consent, as shown when Castro, as employee of Sanico,
accepted Colipano as a passenger when he allowed Colipano to board the jeepney, and as to
Colipano, when she boarded the jeepney; cause or consideration, when Colipano, for her part, paid
her fare; and, object, the transportation of Colipano from the place of departure to the place of
destination.20
Having established that the contract of carriage was only between Sanico and Colipano and that
therefore Colipano had no cause of action against Castro, the Court next determines whether Sanico
breached his obligations to Colipano under the contract.
Sanico is liable as operator and owner of a common carrier.
Specific to a contract of carriage, ithe Civil Code requires common carriers to observe extraordinary
diligence in safely transporting their passengers. Article 1733 of the Civil Code states:
ART. 1733. Common carriers, fijpm the nature of their business and for reasons of public policy, are
bbund 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.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734,
1735 and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is
further set forth in Articles 1755 and 1756.
This extraordinary diligence, following Article 1755 of the Civil Code, means that common carriers
have the obligation to carry passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard for all the circumstances.
In case of death of or injury to their passengers, Article 1756 of the Civil Code provides that common
carriers are presumed to have been at fault or negligent, and this presumption can be overcome only
by proof of the extraordinary diligence exercised to ensure the safety of the passengers.21
Being an operator and owner of a common carrier, Sanico was required to observe extraordinary
diligence in safely transporting Colipano. When Colipano's leg was injured while she was a passenger
in Sanico's jeepney, the presumption of fault or negligence on Sanico's part arose and he had the
burden to prove that he exercised the extraordinary diligence required of him. He failed to do this.
In Calalas v. Court of Appeals,22 the Court found that allowing the respondent in that case to be
seated in an extension seat, which was a wooden stool at the rear of the jeepney, "placed [the
respondent] in a peril greater than that to which the other passengers were exposed."23 The Court
further ruled that the petitioner in Calalas was not only "unable to overcome the presumption of
negligence imposed on him for the injury sustained by [the respondent], but also, the evidence shows
he was actually negligent in transporting passengers."24
TRANSPO Batch 1
Calalas squarely applies here. Sanico failed to rebut the presumption of fault or negligence under the
Civil Code. More than this, the evidence indubitably established Sanico's negligence when Castro
made Colipano sit on an empty beer case at the edge of the rear entrance/exit of the jeepney with
her sleeping child on her lap, which put her and her child in greater peril than the other passengers.
As the CA correctly held:
For the driver, Vicente Castro, to allow a seat extension made of an empty case of beer clearly
indicates lack of prudence. Permitting Werherlina to occupy an improvised seat in the rear portion of
the jeepney, with a child on her lap to boot, exposed her and her child in a peril greater than that to
which the other passengers were exposed. The use of an improvised seat extension is undeniable, in
view of the testimony of plaintiffs witness, which is consistent with Werherlina's testimonial assertion.
Werherlina and her witness's testimony were accorded belief by the RTC. Factual findings of the trial
court are entitled to great weight on appeal and should not be disturbed except for strong and valid
reasons, because the trial court ip in a better position to examine the demeanor of the witnesses
while testifying.25
The CA also correctly held that the!defense of engine failure, instead of exonerating Sanico, only
aggravated his already precarious position.26 The engine failure "hinted lack of regular check and
maintenance to ensure that the engine is at its best, considering that the jeepney regularly passes
through a mountainous area."27 This failure to ensure that the jeepney can safely transport
passengers through its route which required navigation through a mountainous area is proof of fault
on Sanico's part. In the face of such evidence, there is no question as to Sanico's fault or negligence.
Further, common carriers may also be liable for damages when they contravene the tenor of their
obligations. Article 1170 of the Civil Code states:
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages.
In Magat v. Medialdea,28 the Court ruled: "The phrase 'in any manner contravene the tenor' of the
obligation includes any illicit act or omission which impairs the strict and faithful fulfillment of the
obligation and every kind of defective performance."29 There is no question here that making Colipano
sit on the empty beer case was a clear showing of how Sanico contravened the tenor of his obligation
to safely transport Colipano from the place of departure to the place of destination as far as human
care and foresight can provide, using the utmost diligence of very cautious persons, and with due
regard for all the circumstances.
Sanico's attempt to evade liability by arguing that he exercised extraordinary diligence when he
hired; Castro, who was allegedly an experienced and time-tested driver, whom he had even
accompanied on a test-drive and in whom he was personally convinced of the driving skills,30 are not
enough to exonerate him from liability - because the liability of common carriers does not cease upon
p!roof that they exercised all the diligence of a good father of a family irii the selection. and
supervision of their employees. This is the express mandate of Article 1759 of the Civil Code:
ART. 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
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 only defenses available to common carriers are (1) proof that they observed extraordinary
diligence as prescribed in Article 1756,31 and (2) following Article 1174 of the Civil Code, proof that
the injury or death was brought about by an event which "could not be foreseen, or which, though
foreseen, were inevitable," or a fortuitous event.
The Court finds that neither of these defenses obtain. Thus, Sanico is liable for damages to Colipano
because of the injury that Colipano suffered as a passenger of Sanico's jeepney.
Page 25 of 41

The Affidavit of Desistance and Release of Claim is void.
Sanico cannot be exonerated from liability under the Affidavit of Desistance and Release of Claim32and
his payment of the hospital and medical bills of Colipano amounting to P44,900.00.33
The RTC ruled that "the Affidavit of Desistance and Release of Claim is not binding on plaintiff
[Colipano] in the absence of proof that the contents thereof were sufficiently translated and explained
to her."34 The CA affirmed the findings of the RTC and ruled that the document was not binding on
Colipano, as follows:
Finally, We sustain the RTC's finding that the affidavit of desistance and release of claim, offered by
defendants-appellants, are not binding on Werherlina, quoting with approval its reflection on the
matter, saying:
xxx this Court finds that the Affidavit of Desistance and Release of Claim is not binding on plaintiff in
the absence of proof that the contents thereof were sufficiently explained to her. It is clear from the
plaintiffs circumstances that she is not able to understand English, more so stipulations stated in the
said Affidavit and Release. It is understandable that in her pressing need, the plaintiff may have been
easily convinced to sign the document with the promise that she will be compensated for her
injuries.35
The Court finds no reason to depart from these findings of the CA and the RTC.
For there to be a valid waiver, the following requisites are essential:
(1) that the person making the waiver possesses the right, (2) that he has the capacity and power to
dispose of the right, (3) that the waiver must be clear and unequivocal although it may be made
expressly or impliedly, and (4) that the waiver is not contrary to law, public policy, public order,
morals, good customs or prejudicial to a third person with a right recognized by law.36
While the first two requirements can be said to exist in this case, the third and fourth requirements
are, however, lacking.
For the waiver to be clear and unequivocal, the person waiving the right should understand what she
is waiving and the effect of such waiver. Both the CA and RTC made the factual deitermination that
Colipano was not able to understand English and that there was no proof that the documents and
their contents and effects were explained to her. These findings of the RTC, affirmed by the CA, are
entitled to great weight and respect.37 As this Court held in Philippine National Railways Corp. v.
Vizcara38:
It is a well-established rule that factual fill dings by the CA are conclusive on the parties and are not
reviewable byj this Court. They are entitled to great weight and respect, even finality, especially
when, as in this case, the CA affirmed the factual findings arrived at by the trial court.39
Although there are exceptions to this rule,40 the exceptions are absent here.
Colipano could not have clearly and unequivocally waived her right to claim damages when she had
no understanding of the right she was waiving and the extent of that right. Worse, she was made to
sign a document written in a language she did not understand.
The fourth requirement for a valid waiver is also lacking as the waiver, based on the attendant facts,
can only be construed as contrary to public policy. The doctrine in Gatchalian v. Delim,41 which the
CA correctly cited,42 is applicable here:
Finally, because what is involved here is the liability of a common carrier for injuries sustained by
passengers in respect of whose safety a common carrier must exercise extraordinary diligence, we
must construe any such purported waiver most strictly against the common carrier. For a waiver to
be valid and effective, it must not be contrary to law, morals, public policy or good customs. To
uphold a supposed waiver of any right to claim damages by an injured passenger, under
circumstances like those exhibited in this case, would be to dilute and weaken the standard of
TRANSPO Batch 1
extraordinary diligence exacted by the law from common carriers and hence to render that standard
unenforceable. We believe such a purported waiver is offensive to public policy.43
"[P]ublic policy refers to the aims of the state to promote the social and general well-being of the
inhabitants."44 The Civil Code requires extraordinary diligence from common carriers because the
nature of their business requires the public to put their safety and lives in the hands of these common
carriers. The State imposes this extraordinary diligence to promote the well-being of the public who
avail themselves of the services of common carriers. Thus, in instances of injury or death, a waiver of
the right to claim damages is strictly construed against the common carrier so as not to dilute or
weaken the public policy behind the required standard of extraordinary diligence.
It was for this reason that in Gatchalian, the waiver was considered offensive to public policy because
it was shown that the passenger was still in the hospital and was dizzy when she signed the
document. It was also shown that when she saw the other passengers signing the document, she
signed it without reading it. .
Similar to Gatchalian, Colipano testified that she did not understand the document she signed.45 She
also did not understand the nature and extent of her waiver as the content of the document was not
explained to her.46 The waiver is therefore void because it is contrary to public policy.47
The Court reiterates that waivers executed under similar circumstances are indeed contrary to public
policy and are void.48 To uphold waivers taken from injured passengers who have no knowledge of
their entitlement under the law and the extent of liability of common carriers would indeed dilute the
extraordinary diligence required from common carriers, and contravene a public policy reflected in the
Civil Code.
Amount of compensatory damages granted is incorrect.
On the amount of damages, the RiTC awarded P2,098.80 as actual damages and P360,000.00 as
compensatoiy damages for loss of income, as follows:
[T]his Court can only award actual damages in the amount that is duly supported by receipts, that is,
P2,098.80 mid not P7,277.80 as prayed for by plaintiff as there is no basis for the amount prayed for.
However, considering that plaintiff has suffered the loss of one leg which has caused her to be limited
in her movement thus resulting in loss of livelihood, she is entitled to compensatory damages for lost
income at the rate of P12,000.00/year for thirty years in the amount of P360,000.00.49
The CA, on the other hand, modified the award of the RTC by reducing the compensatory damages
from P360,000.00 to P200,000.00, thus:
By virtue of their negligence, defendants-appellants are liable to pay Werheiiina compensatory
damages for loss of earning capacity. In arriving at the proper amount, the Supremip Court has
consistently used the following formula:
Net Earning Capacity
=
Life Expectancy x [Gross Annual Income - Living Expenses (50% of gross annual income)]
 
  where life expectancy
=
2/3 (80 - the age of the deceased).
Based on the stated formula, the damages due to Werherlina for loss of earning capacity is:
Net Earning Capacity
=
[2/3 x (80-30)] x (P12,000.00 x (50%)
 
 
=
Page 26 of 41
(2/3 x 50) x P6,000.00 amputation, the Court deems it just and equitable to award interest from the date of the RTC
  decision. Since the award of damages was given by the RTC in its Decision dated October 27, 2006,
    the interest on the amount awarded shall be deemed to run beginning October 27, 2006.
=
33.33 x P6,000.00   As to the rate of interest, in Eastern Shipping Lines, Inc. v. Court of Appeals,60 the Court ruled that
    "[w]hen an obligation, not constituting a loan or forbearance of money, is breached, an interest on
= the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
P200,000.00 annum."61 Further, upon finality of the judgment awarding a sum of money, the rate of interest shall
The award of the sum of P200,000.00 as compensatory damages for loss of earning capacity is in be 12% per annum from such finality until satisfaction because the interim period is considered a
order, notwithstanding the objections of defendants-appellants with respect to lack of evidence on forbearance of credit.62 Subsequently, in Nacar v. Gallery Frames,63 the rate of legal interest for loans
Werherlina's age and annual income.50 or forbearance of any money, goods or credits and the rate allowed in judgments was lowered from
Sanico argues that Colipano failed to present documentary evidence to support her age and her 12% to 6%. Thus, the applicable rate of interest to the award of damages to Colipano is 6%.
income, so that her testimony is self-serving and that there was no basis for the award of
compensatory damages in her favor.51 Sanico is gravely mistaken. WHEREFORE, premises considered, the petition for review is hereby PARTLY GRANTED. As
to petitioner Vicente Castro, the Decision of the Court of Appeals dated September 30,
The Court has held in Heirs of Pedro Clemeña y Zurbano v. Heirs of Irene B. Bien52 that testimonial 2013 is  REVERSED  and  SET ASIDE and the complaint against him is dismissed for lack of
evidence cannot be objected to on the ground of being self-serving, thus: cause of action. As to petitioner Jose Sanico, the Decision of the Court of Appeals is
"Self-serving evidence" is not to be taken literally to mean any evidence that serves its proponent's hereby  AFFIRMED with MODIFICATIONS, Petitioner Jose Sanico is liable and ordered to
interest. The term, if used with any legal sense, refers only to acts or declarations made by a party in pay respondent Werherlina Colipano the following amounts:Actual damages in the amount
his own interest at some place and time out of court, and it does not include testimony that he gives of P2,098.80;
as a witness in court. Evidence of this sort is excluded on the same ground as any hearsay evidence,
that is, lack of opportunity for cross-examination by the adverse party and on the consideration that Compensatory damages for loss of income in the amount of P212,000.00;
its admission would open the door to fraud and fabrication. In contrast, a party's testimony in court is
sworn and subject to cross-examination by the other party, and therefore, not susceptible to an Interest on the total amount of the damages awarded in 1 and 2 at the rate of 6% per
objection on the ground that it is self-serving.53 annum reckoned from October 27, 2006 until finality of this Decision. The total amount of
Colipano was subjected to cross-examination and both the RTC and CA believed her testimony on her the foregoing shall, in turn, earn interest at the rate of 6% per annum from finality of this
age and annual income. In fact, as these are questions of facts, these findings of the RTC and CA are Decision until full payment thereof.
likewise binding on the Court.54
SO ORDERED.
Further, although as a general rule, documentary evidence is required to prove loss of earning
capacity, Colipano's testimony on her annual earnings of P12,000.00 is an allowed exception. There
are two exceptions to the general rule and Colipano's testimonial evidence falls under the second
exception, viz.:
By way of exception, damages for loss of earning capacity may be awarded despite the absence of
documentary evidence when (1) the deceased is self-employed earning less than the minimum wage
under current labor laws, and judicial notice may be taken of the fact that in the deceased's line of
work no documentary evidence is available; or (2) the deceased is employed as a daily wage worker
earning less than the minimum wage under current labor laws.55
The CA applied the correct formula for computing the loss of Colipano's earning capacity:
Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses (50% of gross
annual income)], where life expectancy = 2/3 (80-the age of the deceased).56
However, the CA erred when it used Colipano's age at the time she testified as basis for computing
the loss of earning capacity.57 The loss of earning capacity commenced when Colipano's leg was
crushed on December 25, 1993. Given that Colipano was 30 years old when she testified on October
14, 1997, she was roughly 27 years old on December 25, 1993 when the injury was sustained.
Following the foregoing formula, the net earning capacity of Colipano is P212,000.00.58

Sanico is liable to pay interest.

Interest is a form of actual or compensatory damages as it belongs to Chapter 259 of Title XVIII on
Damages  of the Civil Code. Under Article 2210 of the Civil Code, "[i]nterest may, in the discretion of
the court, be allowed upon damages awarded for breach of contract." Here, given the gravity of the
breach of the contract of carriage causing the serious injury to the leg of Colipano that resulted in its

TRANSPO Batch 1 Page 27 of 41


G.R. No. 194121, July 11, 2016
TORRES-MADRID BROKERAGE, INC., Petitioner, v. FEB MITSUI MARINE INSURANCE CO.,
INC. AND BENJAMIN P. MANALASTAS, DOING BUSINESS UNDER THE NAME OF BMT
TRUCKING SERVICES, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari challenging the Court of Appeals' (CA) October 14,
2010 decision in CA-G.R. CV No. 91829. 1chanrobleslaw
The CA affirmed the Regional Trial Court's (RTC) decision in Civil Case No. 01-1596, and found
petitioner Torres-Madrid Brokerage, Inc. (TMBI) and respondent Benjamin P. Manalastas jointly and
solidarily liable to respondent FEB Mitsui Marine Insurance Co., Inc. (Mitsui) for damages from the
loss of transported cargo.
Antecedents
On October 7, 2000, a shipment of various electronic goods from Thailand and Malaysia arrived at the
Port of Manila for Sony Philippines, Inc. (Sony). Previous to the arrival, Sony had engaged the
services of TMBI to facilitate, process, withdraw, and deliver the shipment from the port to its
warehouse in Binan, Laguna.2chanrobleslaw
TMBI - who did not own any delivery trucks - subcontracted the services of Benjamin Manalastas'
company, BMT Trucking Services (BMT), to transport the shipment from the port to the Binan
warehouse.3 Incidentally, TMBI notified Sony who had no objections to the
arrangement.4chanrobleslaw
Four BMT trucks picked up the shipment from the port at about 11:00 a.m. of October 7, 2000.
However, BMT could not immediately undertake the delivery because of the truck ban and because
the following day was a Sunday. Thus, BMT scheduled the delivery on October 9, 2000.
In the early morning of October 9, 2000, the four trucks left BMT's garage for Laguna. 5 However, only
three trucks arrived at Sony's Binan warehouse.
At around 12:00 noon, the truck driven by Rufo Reynaldo Lapesura (NSF-391) was found abandoned
along the Diversion Road in Filinvest, Alabang, Muntinlupa City. 6 Both the driver and the shipment
were missing.
TRANSPO Batch 1
Later that evening, BMT's Operations Manager Melchor Manalastas informed Victor Torres, TMBI's
General Manager, of the development.7 They went to Muntinlupa together to inspect the truck and to
report the matter to the police.8chanrobleslaw
Victor Torres also filed a complaint with the National Bureau of Investigation (NBI) against Lapesura
for "hijacking." 9 The complaint resulted in a recommendation by the NBI to the Manila City
Prosecutor's Office to prosecute Lapesura for qualified theft. 10chanrobleslaw
TMBI notified Sony of the loss through a letter dated October 10, 2000, 11 It also sent BMT a letter
dated March 29, 2001, demanding payment for the lost shipment. BMT refused to pay, insisting that
the goods were "hijacked."
In the meantime, Sony filed an insurance claim with the Mitsui, the insurer of the goods. After
evaluating the merits of the claim, Mitsui paid Sony PHP7,293,386.23 corresponding to the value of
the lost goods.12chanrobleslaw
After being subrogated to Sony's rights, Mitsui sent TMBI a demand letter dated August 30, 2001 for
payment of the lost goods. TMBI refused to pay Mitsui's claim. As a result, Mitsui filed a complaint
against TMBI on November 6, 2001,
TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a third-party defendant.
TMBI alleged that BMT's driver, Lapesura, was responsible for the theft/hijacking of the lost cargo and
claimed BMT's negligence as the proximate cause of the loss. TMBI prayed that in the event it is held
liable to Mitsui for the loss, it should be reimbursed by BMT,
At the trial, it was revealed that BMT and TMBI have been doing business with each other since the
early 80's. It also came out that there had been a previous hijacking incident involving Sony's cargo
in 1997, but neither Sony nor its insurer filed a complaint against BMT or TMBI. 13chanrobleslaw
On August 5, 2008, the RTC found TMBI and Benjamin Manalastas jointly and solidarity liable to pay
Mitsui PHP 7,293,386.23 as actual damages, attorney's fees equivalent to 25% of the amount
claimed, and the costs of the suit.14 The RTC held that TMBI and Manalastas were common carriers
and had acted negligently.
Both TMBI and BMT appealed the RTC's verdict.
TMBI denied that it was a common carrier required to exercise extraordinary diligence. It maintains
that it exercised the diligence of a good father of a family and should be absolved of liability because
the truck was "hijacked" and this was a fortuitous event.
BMT claimed that it had exercised extraordinary diligence over the lost shipment, and argued as well
that the loss resulted from a fortuitous event.
On October 14, 2010, the CA affirmed the RTC's decision but reduced the award of attorney's fees to
PHP 200,000.
The CA held: (1) that "hijacking" is not necessarily a fortuitous event because the term refers to the
general stealing of cargo during transit;15 (2) that TMBI is a common carrier engaged in the business
of transporting goods for the general public for a fee; 16 (3) even if the "hijacking" were a fortuitous
event, TMBI's failure to observe extraordinary diligence in overseeing the cargo and adopting security
measures rendered it liable for the loss; 17 and (4) even if TMBI had not been negligent in the
handling, transport and the delivery of the shipment, TMBI still breached its contractual obligation to
Sony when it failed to deliver the shipment.18chanrobleslaw
Page 28 of 41

TMBI disagreed with the CA's ruling and filed the present petition on December 3, 2010.
The Arguments
TMBI's Petition
TMBI insists that the hijacking of the truck was a fortuitous event. It contests the CA's finding that
neither force nor intimidation was used in the taking of the cargo. Considering Lapesura was never
found, the Court should not discount the possibility that he was a victim rather than a
perpetrator.19chanrobleslaw
TMBI denies being a common carrier because it does not own a single truck to transport its shipment
and it does not offer transport services to the public for compensation. 20 It emphasizes that Sony
knew TMBI did not have its own vehicles and would subcontract the delivery to a third-party.
Further, TMBI now insists that the service it offered was limited to the processing of paperwork
attendant to the entry of Sony's goods. It denies that delivery of the shipment was a part of its
obligation.21chanrobleslaw
TMBI solely blames BMT as it had full control and custody of the cargo when it was lost. 22 BMT, as a
common carrier, is presumed negligent and should be responsible for the loss.
BhtT's Comment
BMT insists that it observed the required standard of care.23 Like the petitioner, BMT maintains that
the hijacking was a fortuitous event - a force majeure - that exonerates it from liability.24 It points out
that Lapesura has never been seen again and his fate remains a mystery. BMT likewise argues that
the loss of the cargo necessarily showed that the taking was with the use of force or
intimidation.25cralawredchanrobleslaw
If there was any attendant negligence, BMT points the finger on TMBI who failed to send a
representative to accompany the shipment.26 BMT further blamed TMBI for the latter's failure to adopt
security measures to protect Sony's cargo.27chanrobleslaw
Mitsui's Comment
Mitsui counters that neither TMBI nor BMT alleged or proved during the trial that the taking of the
cargo was accompanied with grave or irresistible threat, violence, or force. 28 Hence, the incident
cannot be considered "force majeure" and TMBI remains liable for breach of contract.
Mitsui emphasizes that TMBI's theory - that force or intimidation must have been used because
Lapesura was never found - was only raised for the first time before this Court. 29 It also discredits the
theory as a mere conjecture for lack of supporting evidence.
Mitsui adopts the CA's reasons to conclude that TMBI is a common carrier. It also points out Victor
Torres' admission during the trial that TMBI's brokerage service includes the eventual delivery of the
cargo to the consignee.30chanrobleslaw
Mitsui invokes as well the legal presumption of negligence against TMBI, pointing out that TMBI
simply entrusted the cargo to BMT without adopting any security measures despite: (1) a previous
hijacking incident, when TMBI lost Sony's cargo; and (2) TMBI's knowledge that the cargo was worth
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more than 10 million pesos.31chanrobleslaw
Mitsui affirms that TMBI breached the contract of carriage through its negligent handling of the cargo,
resulting in its loss.
The Court's Ruling
A brokerage may be considered a  common
carrier if it also undertakes to  deliver the
goods for its customers
Common carriers are persons, corporations, firms or associations engaged in the business of
transporting passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public.32 By the nature of their business and for reasons of public policy, they are
bound to observe extraordinary diligence in the vigilance over the goods and in the safety of their
passengers.33chanrobleslaw
In A.F. Sanchez Brokerage Inc. v. Court of Appeals,34we held that a customs broker - whose principal
business is the preparation of the correct customs declaration and the proper shipping documents - is
still considered a common carrier if it also undertakes to deliver the goods for its customers. The law
does not distinguish between one whose principal business activity is the carrying of goods and one
who undertakes this task only as an ancillary activity.35 This ruling has been reiterated in Schmitz
Transport & Brokerage Corp. v. Transport Venture, Inc.,36 Loadmasters Customs Services, Inc. v.
Glodel Brokerage Corporation,37 and Wesrwind Shipping Corporation v. UCPB General Insurance Co.,
Inc.38chanrobleslaw
Despite TMBI's present denials, we find that the delivery of the goods is an integral, albeit ancillary,
part of its brokerage services. TMBI admitted that it was contracted to facilitate, process, and clear
the shipments from the customs authorities, withdraw them from the pier, then transport and deliver
them to Sony's warehouse in Laguna.39chanrobleslaw
Further, TMBI's General Manager Victor Torres described the nature of its services as follows:
chanRoblesvirtualLawlibrary
ATTY. VIRTUDAZO: Could you please tell the court what is the nature of the business of [TMBI]?
Witness MR. Victor Torres of Torres Madrid: We are engaged in customs brokerage business. We
acquire the release documents from the Bureau of Customs and eventually deliver the cargoes to
the consignee's warehouse and we are engaged in that kind of business, sir. 40
That TMBI does not own trucks and has to subcontract the delivery of its clients' goods, is immaterial.
As long as an entity holds itself to the public for the transport of goods as a business, it is considered
a common carrier regardless of whether it owns the vehicle used or has to actually hire
one.41chanrobleslaw
Lastly, TMBI's customs brokerage services - including the transport/delivery of the cargo - are
available to anyone willing to pay its fees. Given these circumstances, we find it undeniable that TMBI
is a common carrier.
Consequently, TMBI should be held responsible for the loss, destruction, or deterioration of the goods
it transports unless it results from:
Page 29 of 41

chanRoblesvirtualLawlibrary
(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 of 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. 42chanroblesvirtuallawlibrary
For all other cases - such as theft or robbery - a common carrier is presumed to have been at fault
or to have acted negligently, unless it can prove that it observed extraordinary
diligence.43chanrobleslaw
Simply put, the theft or the robbery of the goods is not considered a fortuitous event or a force
majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting loss: (1) if it
proves that it exercised extraordinary diligence in transporting and safekeeping the goods;44 or (2) if
it stipulated with the shipper/owner of the goods to limit its liability for the loss, destruction, or
deterioration of the goods to a degree less than extraordinary diligence. 45chanrobleslaw
However, a stipulation diminishing or dispensing with the common carrier's liability for acts committed
by thieves or robbers who do not act with grave or irresistible threat, violence, or force is void under
Article 1745 of the Civil Code for being contrary to public policy. 46Jurisprudence, too, has
expanded Article 1734's five exemptions. De Guzman v. Court of Appeals47 interpreted Article 1745 to
mean that a robbery attended by "grave or irresistible threat, violence or force" is a fortuitous event
that absolves the common carrier from liability.
In the present case, the shipper, Sony, engaged the services of TMBI, a common carrier, to facilitate
the release of its shipment and deliver the goods to its warehouse. In turn, TMBI subcontracted a
portion of its obligation - the delivery of the cargo - to another common carrier, BMT.
Despite the subcontract, TMBI remained responsible for the cargo. Under Article 1736, a common
carrier's extraordinary responsibility over the shipper's goods lasts from the time these goods are
unconditionally placed in the possession of, and received by, the carrier for transportation, until they
are delivered, actually or constructively, by the carrier to the consignee. 48chanrobleslaw
That the cargo disappeared during transit while under the custody of BMT - TMBI's subcontractor - did
not diminish nor terminate TMBFs responsibility over the cargo. Article 1735 of the Civil Code
presumes that it was at fault.
Instead of showing that it had acted with extraordinary diligence, TMBI simply argued that it was not
a common carrier bound to observe extraordinary diligence. Its failure to successfully establish this
premise carries with it the presumption of fault or negligence, thus rendering it liable to Sony/Mitsui
for breach of contract.
Specifically, TMBI's current theory - that the hijacking was attended by force or intimidation - is
untenable.
First, TMBI alleged in its Third Party Complaint against BMT that Lapesura was responsible for
hijacking the shipment.49 Further, Victor Torres filed a criminal complaint against Lapesura with the
NBI.50 These actions constitute direct and binding admissions that Lapesura stole the cargo. Justice
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and fair play dictate that TMBI should not be allowed to change its legal theory on appeal.
Second, neither TMBI nor BMT succeeded in substantiating this theory through evidence. Thus, the
theory remained an unsupported allegation no better than speculations and conjectures. The CA
therefore correctly disregarded the defense of force majeure.
TMBI and BMT are not solidarity liable
to Mitsui 
We disagree with the lower courts" ruling that TMBI and BMT are solidarity liable to Mitsui for the loss
as joint tortfeasors. The ruling was based on Article 2194 of the Civil Code:
chanRoblesvirtualLawlibrary
Art. 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary.
Notably, TMBI's liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) but from its
breach of contract (culpa contractual). The tie that binds TMBI with Mitsui is contractual, albeit one
that passed on to Mitsui as a result of TMBI's contract of carriage with Sony to which Mitsui had been
subrogated as an insurer who had paid Sony's insurance claim. The legal reality that results from this
contractual tie precludes the application of quasi-delict based Article 2194.
A third party may recover from a
common carrier for quasi-delict
but must prove actual n  egligence
We likewise disagree with the finding that BMT is directly liable to Sony/Mitsui for the loss of the
cargo. While it is undisputed that the cargo was lost under the actual custody of BMT (whose
employee is the primary suspect in the hijacking or robbery of the shipment), no direct contractual
relationship existed between Sony/Mitsui and BMT. If at all, Sony/Mitsui's cause of action against BMT
could only arise from quasi-delict, as a third party suffering damage from the action of another due to
the latter's fault or negligence, pursuant to Article 2176 of the Civil Code. 51chanrobleslaw
We have repeatedly distinguished between an action for breach of contract {culpa contractual) and
an action for quasi-delict (culpa aquiliana).
In culpa contractual, the plaintiff only needs to establish the existence of the contract and the
obligor's failure to perform his obligation. It is not necessary for the plaintiff to prove or even allege
that the obligor's non- compliance was due to fault or negligence because Article 1735 already
presumes that the common carrier is negligent. The common carrier can only free itself from liability
by proving that it observed extraordinary diligence. It cannot discharge this liability by shifting the
blame on its agents or servants.52chanrobleslaw
On the other hand, the plaintiff in culpa aquiliana must clearly establish the defendant's fault or
negligence because this is the very basis of the action. 53 Moreover, if the injury to the plaintiff
resulted from the act or omission of the defendant's employee or servant, the defendant may absolve
himself by proving that he observed the diligence of a good father of a family to prevent the
damage,54chanrobleslaw
In the present case, Mitsui's action is solely premised on TMBl's breach of contract. Mitsui did not
even sue BMT, much less prove any negligence on its part. If BMT has entered the picture at all, it 'is
because TMBI sued it for reimbursement for the liability that TMBI might incur from its contract of
carriage with Sony/Mitsui. Accordingly, there is no basis to directly hold BMT liable to Mitsui for quasi-
delict.
Page 30 of 41
BMT is liable to TMBI for breach
of their  contract of carriage

We do not hereby say that TMBI must absorb the loss. By subcontracting the cargo delivery to BMT,
TMBI entered into its own contract of carriage with a fellow common carrier.

The cargo was lost after its transfer to BMT's custody based on its contract of carriage with TMBI.
Following Article 1735, BMT is presumed to be at fault. Since BMT failed to prove that it
observed extraordinary diligence in the performance of its obligation to TMBI, it is liable to TMBI for
breach of their contract of carriage.

In these lights, TMBI is liable to Sony (subrogated by Mitsui) for breaching the contract of carriage. In
turn, TMBI is entitled to reimbursement from BMT due to the latter's own breach of its contract of
carriage with TMBI. The proverbial buck stops with BMT who may either: (a) absorb the loss, or (b)
proceed after its missing driver, the suspected culprit, pursuant to Article 2181, 55chanrobleslaw
G.R. No. 242860, March 11, 2019
WHEREFORE, the Court hereby ORDERS petitioner Torres- Madrid Brokerage, Inc. to pay the
respondent FEB Mitsui Marine Insurance Co., Inc. the following: THE LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD (LTFRB) AND THE
DEPARTMENT OF TRANSPORTATION (DOTR), PETITIONERS, v. HON. CARLOS A.
chanRoblesvirtualLawlibrary VALENZUELA, IN HIS CAPACITY AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF
MANDALUYONG CITY, BRANCH 213 AND DBDOYC, INC., RESPONDENTS.
a. Actual damages in the amount of PHP 7,293,386.23 plus legal interest from the time the
complaint was filed until it is fully paid; DECISION

b. Attorney's fees in the amount of PHP 200,000.00; and cralawlawlibrary PERLAS-BERNABE, J.:

c. Costs of suit.
Assailed in this petition for certiorari1 is the Order2 dated August 20, 2018 (Assailed Order) rendered
by public respondent Judge Carlos A. Valenzuela of the Regional Trial Court of Mandaluyong City,
Branch 213 (RTC) in R-MND-18-01453-SC which directed the issuance of a writ of preliminary
Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE Torres-Madrid Brokerage, injunction in favor of private respondent DBDOYC, Inc. (DBDOYC) essentially enjoining petitioners the
Inc. of the above-mentioned amounts. Land Transportation Franchising and Regulatory Board (LTFRB) and the Department of Transportation
(DOTr; collectively, petitioners) from regulating DBDOYC's business operations conducted through
SO ORDERED the Angkas mobile application.

The Facts

On May 8, 2015, the Department of Transportation and Communications (DOTC), the predecessor of
DOTr, issued Department Order No. (DO) 2015-11,3 amending DO 97-1097,4 which set the standard
classifications for public transport conveyances to be used as basis for the issuance of a Certificate of
Public Convenience (CPC)5 for public utility vehicles (PUVs). In recognition of technological innovations
which allowed for the proliferation of new ways of delivering and offering public transportation, the
DOTC, through DO 2015-11, created two (2) new classifications, namely, Transportation Network
Companies (TNC) and Transportation Network Vehicle Service (TNVS).6

Under DO 2015-11, a TNC is defined as an "organization whether a corporation, partnership,

sole proprietor, or other form, that provides pre-arranged transportation services for
compensation using an online-enabled application or platform technology to connect
passengers with drivers using their personal vehicles."7 Although DO 2015-11 made mention of
TNVS, the term was not clearly defined until June 19, 2017, when the DOTr issued DO 2017-
118 which set the rules and procedures on the issuance of franchises for public transport routes and

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services,9 including TNCs and TNVS. Under DO 2017-11, TNVS is defined as "a [PUV] accredited
with a [TNC], which is granted authority or franchise by the LTFRB to run a public transport
service."10 DO 2017-11 further provided in Item 2.2 thereof that "[m]otorcycles x x x are
likewise not allowed as public transport conveyance."11
Consequently, the LTFRB issued various memorandum circulars 12 to govern the issuance of the
necessary CPC for a TNVS and the accreditation of a TNC. In its issuances, the LTFRB declared that
a TNC is treated as a transport provider.13 whose accountability commences from the acceptance by
its TNVS while online.14 On the other hand, the accountability of the TNVS, as a common carrier,
attaches from the time the TNVS is online and offers its services to the riding public. 15
Meanwhile, on May 26, 2016, DBDOYC registered its business with the Securities and Exchange
Commission (SEC), and subsequently, in December 2016, launched "Angkas," an online and on-
demand motorcycle-hailing mobile application (Angkas or Angkas app) that pairs drivers of
motorcycles with potential passengers without, however, obtaining the mandatory certificate of TNC
accreditation from the LTFRB. In this regard, DBDOYC accredited Angkas drivers and allowed them to
offer their transport services to the public despite the absence of CPCs. 16
Cognizant of the foregoing, the LTFRB issued a press release on January 27, 2017 informing the
riding public that DBDOYC, which is considered as a TNC, cannot legally operate. 17 Despite such
warning, however, DBDOYC continued to operate and offer its services to the riding public sans any
effort to obtain a certificate of TNC accreditation.18
In response, DBDOYC, on July 4, 2018, filed a Petition for Declaratory Relief with Application for
Temporary Restraining Order/Writ of Preliminary Injunction 19 against petitioners before the RTC
alleging that:
(a) it is not a public transportation provider since Angkas app is a mere tool that connects the
passenger and the motorcycle driver; (b) Angkas and its drivers are not engaged in the delivery of a
public service; (c) alternatively, should it be determined that it is performing a public service that
requires the issuance of a certificate of accreditation and/or CPC, then DO 2017-11 should be
declared invalid because it violates Section 7 of Republic Act No. (RA) 4136 or the "Land and
Transportation Traffic Code,"20 which does not prohibit motorcycles from being used as a PUV; and (d)
neither the LTFRB nor the DOTr has jurisdiction to regulate motorcycles for hire. 21
The RTC Proceedings and The Assailed Order
In an Order22 dated July 13, 2018, the RTC issued a Temporary Restraining Order (TRO) finding
DBDOYC's business not subject to any regulation nor prohibited under existing law. It added that
since the use of DBDOYC's internet-based mobile application is not contrary to law, morals, good
customs, public order, or public policy,23 a clear and unmistakable right has been established in favor
of DBDOYC such that if petitioners prohibit the operation of Angkas, the same would cause irreparable
injury to the company.24
Proceedings were thereafter conducted relative to the application for a writ of preliminary injunction.
Eventually, through the Assailed Order,25 the RTC issued the said writ to enjoin petitioners and
anyone acting on their behalf: (a) from interfering, whether directly or indirectly, with DBDOYC's
operations; (b) from apprehending Angkas bikers who are in lawful pursuit of their trade or
occupation based on Angkas mobile application; and (c) from performing any act/acts that will
impede, obstruct, frustrate, or defeat DBDOYC's pursuit of its lawful business or trade as owner and
operator of Angkas.26
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In so ruling, the RTC found that DBDOYC has a clear and unmistakable right "to conduct its business
based on its constitutional right to liberty," which includes "the right of an individual to x x x earn his
livelihood by any lawful calling; [and] to pursue any [vocation] and essentially to do and perform
anything unless otherwise prohibited by law." 27 In this light, the RTC concluded that DBDOYC has a
right to enter into an independent contract with its Angkas riders as an application provider, further
reiterating that DBDOYC's business is not yet subject to any regulation nor prohibited by any existing
law, and that the Angkas biker's offer of transportation services to a potential passenger is a purely
private arrangement using DBDOYC's application.28 Thus, should petitioners prohibit DBDOYC from
operating Angkas, an irreparable injury will result, thereby entitling it to the issuance of the injunctive
relief prayed for.29
Aggrieved, petitioners are now before the Court ascribing grave abuse of discretion on the part of the
RTC in issuing the writ of preliminary injunction through the Assailed Order. Notably, in the present
petition, petitioners sought the issuance of a TRO to enjoin the RTC from enforcing its injunctive writ,
which the Court granted in a Resolution30 dated December 5, 2018.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the RTC committed grave abuse of
discretion amounting to lack or in excess of jurisdiction in issuing a writ of preliminary injunction in
favor of DBDOYC and against petitioners.
The Court's Ruling
Preliminarily, despite the absence of the required prior motion for reconsideration, 31 the Court finds it
proper to give due course to the petition in view of the public interest involved, and further, the
urgent necessity of resolving this case so as not to prejudice the interests of the government. 32
The petition is meritorious.
Case law states that "grave abuse of discretion arises when a lower court or tribunal patently violates
the Constitution, the law or existing jurisprudence." 33 According to its classic formulation:
By grave abuse of discretion is meant capricious and whimsical exercise of judgment as is equivalent
to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion as
when the power is exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation of law. 34
In ruling on whether or not the RTC gravely abused its discretion in this case, the Court turns to the
basic principles governing the issuance of preliminary injunctive writs.
The first and foremost requisite in the issuance of a writ of preliminary injunction is the existence of
a clear legal right. The rationale therefor hews with the nature of these writs being mere provisional
reliefs. In Department of Public Works and Highways v. City Advertising Ventures Corporation,35 the
Court explained that a writ of preliminary injunction is issued to:
[P]revent threatened or continuous irremediable injury to some of the parties before their claims can
be thoroughly studied and adjudicated. Its sole aim is to preserve the status quo until the merits of
the case can be heard fully[.] Thus, it will be issued only upon a showing of a clear and
unmistakable right that is violated. Moreover, an urgent necessity for its issuance must be shown
by the applicant.36 (Emphasis and underscoring supplied)
In Spouses Nisce v. Equitable PCI Bank, Inc.,37 the Court held that "[t]he plaintiff praying for a writ of
preliminary injunction must x x x establish[, inter alia,] that he or she has a present and
unmistakable right to be protected; x x x [t]hus, where the plaintiffs right is doubtful or
Page 32 of 41
disputed, a preliminary injunction is not proper. The possibility of irreparable damage without
proof of an actual existing right is not a ground for a preliminary injunction." 38
In this case, the RTC premised its issuance of the assailed injunctive writ on DBDOYC's purported
clear and unmistakable legal right "to conduct its business based on its constitutional right to
liberty."39 Prescinding therefrom, the RTC concludes that DBDOYC has "the right to enter into an
independent contract with its Angkas bikers as an [application] provider [without] initially requiring it
to secure [a CPC]."40
As in all fundamental rights, the State has a legitimate interest in regulating these rights when their
exercise clearly affects the public. To recount, "[p]olice power is the inherent power of the State to
regulate or to restrain the use of liberty and property for public welfare." 41 Accordingly, the State
"may interfere with personal liberty, property, lawful businesses and occupations to promote the
general welfare [as long as] the interference [is] reasonable and not arbitrary." 42
Here, it is petitioners' position that DBDOYC is a transportation provider and its accredited
drivers are common carriers engaged in rendering public service which is subject to their
regulation.43 The regulatory measures against DBDOYC, as mentioned above, pertain to DOs 2015-11
and 2017-11, which have created new classifications of transportation services, namely TNC and
TNVS, in light of modern innovations. These issuances may be traced to Commonwealth Act No.
146,44 otherwise known as the "Public Service Act," as amended. 45 Under Section 13 (b) thereof, a
"public service" is defined as follows:
(b) The term "public service" includes every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, sub-way 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 railway, 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 system, wire or wireless broadcasting stations and other
similar public services; Provided, however, That a person engaged in agriculture, not otherwise a
public service, who owns a motor vehicle and uses it personally and/or enters into a special contract
whereby said motor vehicle is offered for hire or compensation to a third party or third [parties]
engaged in agriculture, not itself or themselves a public service, for operation by the latter for a
limited time and for a specific purpose directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products of such third party or third parties
shall not be considered as operating a public service for the purposes of this Act. (Emphases and
underscoring supplied).
Section 15 of the same law requires that, except for certain exemptions, no public service shall
operate in the Philippines without possessing a CPC.46 In turn, the then DOTC (which had supervision
and control over the LTFRB that had assumed certain powers of the old Public Service Commission 47 )
issued DO 97-1097 providing for the standard classifications of all PUVs before they can be issued a
CPC. This department order was later amended by the above-stated DOs 2015-11 and 2017-11 and
thereafter, the LTFRB issued various memorandum circulars governing the rules for TNC and TNVS
accreditation, which rules DBDOYC purportedly failed to comply.
As stated in the Public Service Act, the term "public service" covers any person who owns, operates,
manages, or controls 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.48 The Civil Code defines "common earners" in the following terms:
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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. (Emphases supplied)
For its part, DBDOYC claims reprieve from the above-stated regulatory measures, claiming that it and
its accredited drivers are not common carriers or transportation providers. 49 It argues that "[its]
technology [only] allows a biker willing to give a ride and a passenger willing to pay the set price to
meet and contract with each other. Under this set-up, an Angkas biker does not offer his/her service
to an indefinite public."50 Since the application "merely pairs an Angkas biker with a potential
passenger under a fare scheme which [DBDOYC] fixes for both, [DBDOYC] may not compel
an Angkas driver to pick up a potential passenger even after the latter confirms a booking because as
between the biker and the passenger, there is but a purely private contractual arrangement."51
However, it seems that DBDOYC's proffered operations is not enough to extricate its business from
the definition of common carriers, which, as mentioned, fall under the scope of the term "public
service." As the DBDOYC itself describes, Angkas is a mobile application which seeks to "pair an
available and willing Angkas biker with a potential passenger, who requested for a motorcycle ride,
relying on geo-location technology."52 Accordingly, it appears that it is practically functioning as a
booking agent, or at the very least, acts as a third-party liaison for its accredited bikers. Irrespective
of the application's limited market scope, i.e., Angkas users, it remains that, on the one hand, these
bikers offer transportation services to wiling public consumers, and on the other hand, these services
may be readily accessed by anyone who chooses to download the Angkas app.
In De Guzman v. Court of Appeals,53 the Court discussed the relation between Article 1732 of the Civil
Code and Section 13 (b) of the Public Service Act, explaining that Article 1732 of the Civil Code does
not distinguish between a carrier who offers its services to the general public and one who offers
services or solicits business only from a narrow segment of the general population:
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.
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. x x x.54 (Emphases and underscoring supplied)
In this relation, DBDOYC posits that its accredited bikers are private carriers as they do not hold out
their services generally to the public because they cannot just be hailed on the street as they only
contract via the Angkas online front. However, the Court is hard-pressed to rule - at least at this
point, and for the purpose of determining the validity of the writ of preliminary injunction - that these
bikers are only private carriers who may publicly ply their trade without any regulation. As the Court
observes, the genius behind the Angkas app is that it removes the inconvenience of having to
physically hail for public transportation by creating a virtual system wherein practically the same
activity may now be done at the tip of one's fingers. As it is the trend of modern technology,
previously cumbersome mundane activities, such as paying bills, ordering food, or reserving
accommodations, can now be accomplished through a variety of online platforms. By DBDOYC's own
description,55 it seems to be that Angkas app is one of such platforms. As such, the fact that its
drivers are not physically hailed on the street does not automatically render Angkas-accredited drivers
as private carriers.
Page 33 of 41

While DBDOYC further claims that another distinguishing factor of its business is that "[its] drivers
may refuse at any time any legitimate demand for service by simply not going online or not logging in
to the online platform,"56 still when they do so log-in, they make their services publicly available. In
other words, when they put themselves online, their services are bound for indiscriminate public
consumption. Again, as also-mentioned above, Article 1732 defining a common carrier "[c]arefully
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."57 This doctrinal statement seems to be the apt response to DBDOYC's assertion.
The writ is provisional because it constitutes a temporary measure availed of during the pendency of
the action and it is ancillary because it is a mere incident in and is dependent upon the result of the
main action.60
Under this limited scope, it is thus beyond the power of the Court to determine the ultimate rights
and obligations of the parties, else it unduly prejudges the main case for declaratory relief which is
still pending before the court a quo. While the Court acknowledges the contemporary relevance of the
topic at hand, it remains self-aware of this case's procedural and jurisdictional parameters.
Accordingly, the definitive resolution of the issue of regulating ride-booking or ride-sharing
applications must await the proper case therefor.

Moreover, based on the way the app works, it appears that there is really no contractual
discretion between the Angkas bikers and would-be passengers because the app automatically
pairs them up based on algorithmic procedures. Whether or not the parties once paired with each
other have the choice to freely accept, reject, or modify the terms of their engagement based solely
on their discretion is a matter which appears to have not yet been traversed in the proceedings
below. Verily, the absence of any true choice on these material contractual points apparently
contradicts the postulation that the Angkas app merely facilitates a purely private arrangement
between the biker and his passenger.
At any rate, even if it is assumed that Angkas-accredited bikers are not treated as common carriers
and hence, would not make DBDOYC fall under the "public service" definition, it does not necessarily
mean that the business of holding out private motorcycles for hire is a legitimate commercial venture.
Section 7 of RA 4136 states that:
Section 7. Registration Classification. - Every motor vehicle shall be registered under one of the
following described classifications:
As a final word, "[e]very court should remember that an injunction should not be granted lightly or
precipitately because it is a limitation upon the freedom of the defendant's action. It should be
granted only when the court is fully satisfied that the law permits it and the emergency demands it,
for no power exists whose exercise is more delicate, which requires greater caution and deliberation,
or is more dangerous in a doubtful case, than the issuance of an injunction." 61
WHEREFORE, the petition is GRANTED. The Order dated August 20, 2018 issued by the Regional
Trial Court of Mandaluyong City, Branch 213 (RTC) directing the issuance of a writ of preliminary
injunction in R-MND-18-01453-SC is ANNULLED and SET ASIDE. The RTC is hereby ORDERED to
conduct further proceedings, and thereafter, resolve R-MND-18-01453-SC with utmost dispatch.
SO ORDERED.

(a) private passenger automobiles; (b) private trucks; and (c) private motorcycles, scooters, or
motor wheel attachments. Motor vehicles registered under these classifications shall not be used for
hire under any circumstances and shall not be used to solicit, accept, or be used to
transport passengers or freight for pay.

x x x x (Emphases and underscoring supplied)

That being said, the Court therefore concludes that no clear and unmistakable right exists in
DBDOYC's favor; hence, the RTC gravely abused its discretion in issuing the assailed injunctive writ.
In the final analysis, the business of holding one's self out as a transportation service provider,
whether done through online platforms or not, appears to be one which is imbued with public interest
and thus, deserves appropriate regulations. With the safety of the public further in mind, and given
that, at any rate, the above-said administrative issuances are presumed to be valid until and unless
they are set aside,58 the nullification of the assailed injunctive writ on the ground of grave abuse of
discretion is in order.

Lest it be misunderstood, the pronounced grave abuse of discretion of the RTC exists only with
respect to its issuance of the assailed injunctive writ. It is fundamental that preliminary injunction [ G.R. NO. 217311, July 15, 2020 ]
proceedings are separate and distinct from the main case. In Buyco v. Baraquia,59 the Court discussed
the ancillary and provisional nature of these writs: ALESON SHIPPING LINES, PETITIONER, VS. CGU INTERNATIONAL INS. PLC. AND CANDADO
A writ of preliminary injunction is an order granted at any stage of an action or proceeding prior to
SHIPPING LINES, INC., RESPONDENTS.
the judgment or final order, requiring a party or a court, agency or a person to refrain from a
particular act or acts. It is merely a provisional remedy, adjunct to the main case subject to the
latter's outcome. It is not a cause of action in itself. Being an ancillary or auxiliary remedy, it is DECISION
available during the pendency of the action which may be resorted to by a litigant to preserve and
protect certain rights and interests therein pending rendition, and for purposes of the ultimate effects, LEONEN, J.:
of a final judgment in the case.

TRANSPO Batch 1 Page 34 of 41

This resolves a petition for review assailing the Decision and Resolution of the Court of Appeals in CA-
G.R. CV. No. 95628, which held Aleson Shipping Lines, Inc. (Aleson Shipping) liable for the damages
resulting from a vessel collision.
In 2002, Candano Shipping Lines, Inc. (Candano Shipping) signed a time charter agreement with Apo
Cement Corporation (Apo Cement) over the former's vessel, M/V Romeo. The agreement was
executed for the delivery of Apo Cement's cargo consisting of cement from Cebu to Albay.1
M/V Romeo was loaded with 31,250 bags of cement, equivalent to 1,250 metric tons. The cargo was
insured with CGU International Insurance (CGU Insurance).2
On July 14, 2002, at around 12 midnight, M/V Romeo was on its way out of the pier in Apo channel
when it collided with M/V Aleson Carrier 5 (M/V Aleson), which was owned by Aleson Shipping.3 M/V
Aleson's front hull hit the side of M/V Romeo.4 As a result, a gaping hole in the mid-section of M/V
Romeo caused it to instantly sink, taking with it the bags of cement worth P3,427,500.5
Apo Cement demanded payment from Candano Shipping and Aleson Shipping, but to no avail; hence,
it made an insurance claim with CGU Insurance, which was granted.6
relied on the message relayed to him by a crew that M/V Aleson must "standby for proceeding to
port."15
Further, while Captain Cabeltes initially claimed that he did not know any vessel present at the pier,
he later admitted that he knew M/V Romeo was loading cargo at that time. Moreover, when M/V
Aleson was in stop position, he neither contacted nor used its horn to signal the M/V Romeo. He
likewise admitted that there was still around 200 meters of space on the right side of the vessel
where he can maneuver to avoid the mishap, but he did not do so, fearing that M/V Aleson will run
aground.16
Maria Tessie Jadulco Flores (Flores), operations manager of Candano Shipping, claimed that M/V
Aleson was at fault in the collision. She averred that under the rule of the Apo channel, the vessel
going out of the wharf has the right of way, and vessels which are about to enter must wait until the
wharf is cleared. Hence, M/V Aleson should have waited until M/V Romeo exited the pier.17
Flores added that due to the incident, M/V Romeo's master of the vessel died instantly. While 14
members of the crew survived, two (2) remained missing. She further narrated that M/V Romeo was
no longer retrieved due to the depth of the sea, while M/V Aleson remained afloat.18

In its Decision,19 the Regional Trial Court found Aleson Shipping solely liable for the collision. Thus:
CGU Insurance then filed a case against Candano Shipping and Aleson Shipping before the Regional
Trial Court, claiming actual damages and attorney's fees.7
WHEREFORE, in view of the foregoing considerations, this Court hereby FINDS in favor of the
plaintiff against the defendant ALESON, hence it hereby ORDERS defendant ALESON, to pay plaintiff
Aleson Shipping denied liability and asserted that only Candano Shipping should be held liable
the sum of Philippine Pesos: THREE MILLION THREE HUNDRED SIXTY EIGHT THOUSAND SEVEN
because the latter's vessel, M/V Romeo, was at fault in the collision.8 On the other hand, its officers
HUNDRED FIFTY (P3,368,750.00) with interest at 6% percent per annum from date hereof until the
and crew at M/V Aleson have exercised diligence and care to avoid the incident.9
finality of this decision and 12% per annum from finality of this decision until fully paid and attorney's
fee of P50,000.00 plus cost of suit.
Meanwhile, Candano Shipping maintained that M/V Romeo was seaworthy and that it exercised
extraordinary diligence in the care and custody of the cargo, and in the operation of the vessel. It
The complaint against Candano is hereby DISMISSED in accordance with the provision of Article 826
blamed Aleson Shipping for the incident, claiming that Aleson Shipping was careless in command of
of the Code of Commerce. It states: "If a vessel would collide with another, through the fault,
M/V Aleson Carrier 5.10
negligence, or lack of skill of the captain, sailing mate, or any other member of the complement, the
owner of the vessel at fault shall indemnify the losses and damages suffered after expert appraisal.
Further, Candano Shipping argued that the complaint should be dismissed, because CGU Insurance
failed to observe the arbitration clause under the time charter.11
Finally, the counterclaims filed by defendant Aleson against defendant Candano are
hereby DISMISSED for insufficiency of evidence.
CGU   Insurance's   surveyor   and   investigator,   Teodoro   R.   Lopez (Lopez), testified that based
on his interviews with the Chief Engineer of M/V Romeo and the stevedores and supervisor of the
SO ORDERED.20 (Emphasis in the original)
port, M/V Aleson hit and caused an opening at the mid-section of M/V Romeo.12

The trial court ruled that under Article 1733 of the New Civil Code, Aleson Shipping and Candano
Lopez found that the port authority instructed M/V Aleson to wait until M/V Romeo has cleared the
Shipping are bound to observe extraordinary diligence as common carriers. If there was loss,
last buoy, but M/V Aleson still proceeded to enter the pier. In an interview with the captain of Apo
destruction, or deterioration of the goods it carries, common carriers are presumed responsible,
Cement's tug boat, Lopez likewise learned that the Captain of M/V Romeo asked the Captain of M/V
unless they can prove that they observed extraordinary diligence.21 Aleson Shipping failed to
Aleson to slow down, but the latter did not heed instructions.13
overcome this presumption. On the other hand, Candano Shipping appeared to have observed the
diligence required.22
Captain Ramil Fermin Cabeltes (Captain Cabeltes) of M/V Aleson testified for Aleson Shipping. He
narrated that the sea was calm during the incident and acknowledged that the Apo channel cannot
The trial court admitted in evidence the testimonies of Flores and Lopez which were treated as part of
accommodate two (2) vessels at a time.14 When M/V Aleson was about to enter the pier, he admitted
res gestae, being startling statements made immediately by persons who were near and at the place
that he failed to verify from the radio operator whether it can proceed to enter the pier. He merely

TRANSPO Batch 1 Page 35 of 41

of the incident.23 Moreover, it relied on the testimony of Captain Cabeltes, who admitted several
lapses in his duty as the captain of M/V Aleson.24
Based on the evidence, the impact of the collision was strong, as M/V Aleson created a gaping hole on
the side of M/V Romeo, causing the vessel to instantly sink after five (5) minutes. The trial court
noted that Captain Cabletes of M/V Aleson failed to wait until M/V Romeo has exited from the wharf,
and merely assumed that it can enter the port when he knew for a fact that there was a vessel
loading at that time. Moreover, Captain Cabletes of M/V Aleson admitted that the collision could have
been avoided if only he maneuvered the vessel; but he chose not to, fearing that M/V Aleson may be
aground.25
In its Appeal, Aleson Shipping maintained that it was not at fault in the collision. It claimed that
Captain Cabeltes exerted all efforts to avoid the collision, and that the trial court twisted his testimony
to make Aleson Shipping liable.26
Further, it claimed that M/V Aleson dropped its anchor at some 3,200 meters from the pier while
waiting for their turn to approach the loading berth. Captain Cabeltes could not see the loading bay
from its position and, thus, relied on the instructions of the port operators, who relayed that it can
already proceed to the loading bay.27It then went towards the pier at a slow speed of two (2) knots,
while M/V Romeo was navigating at full speed.28
Aleson Shipping claimed that this version of the story is more believable, as it coincides with Lopez's
testimony which confirmed that the collision site was three (3) kilometers away from the pier's last
buoy. Thus, the trial court erred in its observation that M/V Aleson failed to wait until M/V Romeo has
exited the last buoy.29
Moreover, Aleson Shipping claimed that it was M/V Romeo that failed to maneuver the vessel to avoid
the collision.30 The trial court faulted Aleson Shipping for its failure to blow its horn, but there was no
need to signal M/V Romeo, since both ships have communicated with each other and have explicitly
agreed to do a port-to-port passing to avoid a collision. Further, sending a sound signal would only do
more harm than good, since the master's instructions to the crew will not be heard over the horn's
sound.31
Aleson Shipping argued that the testimony of Captain Cabeltes must be given credence because of all
the witnesses, only he has first-hand knowledge of what transpired before, during, and after the
collision. On the other hand, Candano Shipping failed to present any of the surviving crew of M/V
Romeo.32
Further, Aleson Shipping asserted that the trial court erred in relying on hearsay testimony and in
applying the res gestae rule.33 Candano Shipping's witness, Flores, was incompetent to testify on
matters regarding the collision.34 She admitted to having no personal knowledge of the incident, and
even though she was not presented as an expert witness, the trial court allowed her to inject her
opinion as to who is at fault between the two (2) vessels.35
Similarly, Aleson Shipping claimed that the trial court erred in considering the testimony of Lopez as
part of res gestae because, as the inspector, he only had secondary information and none of the
sources of these information were present at the site of the incident.36
The Court of Appeals affirmed the decision of the lower court.37 Thus:
TRANSPO Batch 1
IN VIEW OF ALL THESE, the Appeal is DENIED. The Decision of the lower court is AFFIRMED.
SO ORDERED.38 (Emphasis in the original)
The appellate court further held that it found no strong and cogent reason to depart from the
conclusions and findings of the trial court.39 It ruled that the evidence defeats Aleson Shipping's
arguments. As the records bare, the collision was due to the fault of M/V Aleson's Captain. Despite
being informed that M/V Romeo was loading at the pier, M/V Aleson still proceeded to enter. Captain
Cabeltes likewise failed to blow its horn to alert M/V Romeo.40
Considering Captain Cabeltes' testimony, the Court of Appeals found that there is sufficient evidence
to ascribe fault to Aleson Shipping. Hence, Aleson Shipping's argument assailing the testimony of
Flores is irrelevant.41
Aleson Shipping moved for the reconsideration of the decision, but it was denied.42
In this Petition, petitioner argues that the lower courts erred in applying the law on common carriers
in determining its liability, considering that it has no contract of carriage with respondent CGU
Insurance or Apo Cement.43
It explains that in claiming subrogation rights, respondent CGU Insurance can only have as much
rights and causes of action as Apo Cement, which springs from the contract of insurance. Thus, it
cannot be sued based on contract, because it is a complete stranger to the time charter between
respondent Candano Shipping and Apo Cement, as well as to the contract of insurance between
respondents.44
Thus, petitioner claims that respondent CGU Insurance's action against it is based on maritime tort
governed by the Code of Commerce.45 It follows that there can be no presumption of negligence
against petitioner. It is not a common carrier under a contract of carriage which must exercise
extraordinary diligence. Moreover, the doctrine of last clear chance will not then be applicable in this
case, because under Article 827 of the Code of Commerce, if both vessels may be blamed, both shall
be jointly responsible for the damages.46
Necessarily, the trial court erred in applying laws and jurisprudence on common carriers, because the
cause of action in this case is based on maritime tort and not on the breach of contract of carriage.47
Petitioner further claims that respondent Candano Shipping was solely at fault for the collision which
was due to the error and negligence of its officers and crew. On the other hand, petitioner asserts
that it exercised ordinary diligence—the degree of diligence demanded from it under the Code of
Commerce.48
When it saw M/V Romeo, M/V Aleson immediately requested for a port-to-port passing to avoid
collision which the former granted.49 Still, M/V Romeo did not change course. In its last attempt to
avoid the collision, Captain Cabeltes ordered to stop M/V Aleson's engine, but to no avail.50
For the sake of argument that it was negligent, petitioner avers that it should be made solidarily liable
with respondent Candano Shipping under Article 827 of the Code of Commerced.51
Page 36 of 41
Further, petitioner questions the application of the res gestae rule to admit the testimonies of
respondents' witnesses.52
In particular, witness Floras, who admitted to having no personal lcnowledge on the incident, was
allowed to inject her own opinion as to who between the two (2) vessels was at fault. Petitioner
claims this is against Rule 130, Section 48 of the Rules of Court, which provides that the opinion of a
witness is inadmissible unless presented as an expert witness.53
Moreover, Captain Cabletes admitted that M/V Aleson had sufficient time to maneuver the vessel to
avoid the collision. He testified that from the time he knew the radio message, it had more or less 20
to 30 minutes to reach the pier.65 Even when Captain Cabletes saw that M/V Romeo did not alter its
course, he did not attempt to call the latter nor to blow the vessel's horn to warn M/V
Romeo.66 Petitioner points out that this is against the Collision Regulations, which states that when
maneuvering is authorized or required, sound blasts are required to signal their course of action to
the other vessel.67

Lastly, petitioner argues that Captain Cabletes had the last clear chance to avoid the collision. He
Moreover, it alleges that Lopez's testimony was mere hearsay. As respondents' surveyor, the
divulged during his testimony that he had more or less 200 meters to maneuver the vessel, but chose
information he proffered were obtained from the witnesses to the incident. Thus, these testimonies do
not to, fearing that M/V Aleson would run aground.68
not qualify as part of res gestae.54

In a separate Comment, respondent Candano Shipping points out that the petition raises purely
Lastly, petitioner maintains that Captain Cabeltes' testimony cannot be rejected for being self-serving,
questions of fact. While petitioner questions the applicable law, what petitioner actually seeks is the
considering that respondents were given the opportunity to cross-examine the witness in court.55
reversal of the factual findings of the trial court.69

In its Comment, respondent CGU Insurance avers that the petition must be denied because it raises
Respondent Candano Shipping asserts that the decision and findings of the trial court should not be
only questions of facts, which are not within the ambit of a Rule 45 petition. Further, findings of facts
disturbed, because it is based on evidence and is in accordance with the law. Petitioner argues that
in this case must be deemed final and conclusive since the findings of the trial court are affirmed by
respondents' evidence must be rejected for being hearsay, but in reality, it only rejects the finding of
the appellate court.56
liability which is based on the testimony of its own witness.70

Further, petitioner's claim that Captain Cabletes' testimony was misconstrued by the trial court is
Lastly, respondent Candano Shipping argues that it is immaterial whether the lower courts erred in
baseless.57 As shown by the evidence, it was M/V Aleson that hit M/V Romeo. Petitioner claims that
applying the presumption of negligence against common carriers, because it is clear from the
M/V Romeo failed to maneuver the vessel to avoid the collision. But, as the lower courts found, the
evidence on record that only petitioner is at fault for the collision.71
front hull of M/V Aleson rammed and hit the portside section of M/V Romeo.58

The case raises the following issues for resolution:

Respondent also claims that it is not true that the collision could have been avoided if there was a
port-to-port passing, considering that the Apo channel cannot accommodate two (2) vessels at a
time.59 First, whether or not the petition may raise questions of fact;

Further, it alleges that Captain Cabletes gave an inconsistent testimony. The trial judge, who had
witnessed and observed the demeanor of Captain Cabletes, concluded that his testimony was not
quite straightforward.60
For instance, Captain Cabletes claimed that it was his first time in the Apo channel when the incident
happened, but later retracted this statement and said that he has navigated the port at least eight (8)
times.61 Further, he testified that he did not know any vessels around the area at that time, but
contradicted himself by saying that he knew M/V Romeo was about to exit the channel. Lastly, he
agreed during trial that a bigger vessel like M/V Romeo is harder to maneuver than a small vessel like
M/V Aleson, which does not have any cargo, but again, retracted this statement later on.62
Apart from these inconsistent statements, it claimed that Captain Cabletes made several admissions
demonstrating his and his crew's negligence. Primarily, he admitted that the radio message allegedly
stating that M/V Aleson can proceed to the channel was only relayed to him by his crew, and that he
did not verify this information with the channel operator.63 His testimony further shows that the
instruction from the operator is to "stand by," which, in maritime parlance, merely meant to start the
engine, and not to the actual moving of the vessel.64
Second, whether or not the testimonies of respondents' witnesses are inadmissible for being hearsay;
and
Third, whether or not there is cause of action against the petitioner. Subsumed under this are the
following issues: (1) whether or not the lower courts erred in applying the civil law provisions on
common carriers; and (2) whether or not the petitioner exercised the degree of diligence required.
I
As a rule, only questions of law may be raised in a Rule 45 petition. This Court is not a trier of facts,
and it will not delve into factual questions already settled by the lower courts.72 While this rule
admits exceptions, the party must demonstrate and prove that the petition falls under the
exceptions.73
Here, the petition's resolution necessarily requires a re-evaluation of the lower courts' factual
findings. To resolve petitioner's liability, this Court is being asked to assess and weigh the evidence.
Failing to allege and demonstrate that this petition is an exception to the rule, We are bound to affirm
the lower courts' factual findings.

TRANSPO Batch 1 Page 37 of 41

In any case, even if this Court proceeds to resolve the petition, it must still be denied.
II
Generally, a witness can only give a testimony with respect to matters of which he or she has
personal knowledge.74 Testimonies which are hearsay are inadmissible as evidence. The rules,
however, allow for certain exceptions. One of which is when the evidence is part of res gestae.15 Rule
130, Section 42 states:
SECTION 42. Part of res gestae. — Statements made by a person while a starting occurrence is taking
place or immediately prior or subsequent thereto with respect to the circumstances thereof, may be
given in evidence as part of res gestae. So, also, statements accompanying an equivocal act material
to the issue, and giving it a legal significance, may be received as part of the res gestae.76
Res gestae refers to "those circumstances which are the undesigned incidents of a particular litigated
act and which are admissible when illustrative of such act."77 It contemplates statements that were
"voluntarily and spontaneously made so nearly contemporaneous as to be in the presence of the
transaction which they illustrate and explain, and were made under such circumstances as necessarily
to exclude the idea of design or deliberation[.]"78
There are two (2) acts which form part of the res gestae: (1) in spontaneous exclamations where
the res gestae is the startling occurrence; and (2) in verbal acts where res gestae is the statement
accompanying the equivocal act.79
To be admissible under the first class of res gestae, the following elements must be present: (1) that
the principal act, the res gestae, be a startling occurrence; (2) that the statements were made before
the declarant had time to contrive or devise; (3) that the statements made must concern the
occurrence in question and its immediately attending circumstances.80
Under the second class of res gestae, the following requisites must be present: 1) the principal act to
be characterized must be equivocal; (2) the equivocal act must be material to the issue; (3) the
statement must accompany the equivocal act; and (4) the statements give a legal significance to the
equivocal act.81
In general, the test is whether or not an act, declaration, or exclamation is "so intimately interwoven
or connected with the principal fact or event that it characterizes as to be regarded as a part of the
transaction itself, and also whether it clearly negatives any premeditation or purpose to manufacture
testimony."82
The element of spontaneity is critical because the admissibility of res gestae is premised on human
experience. The rule presumes that an utterance made, immediately following a strong and stressful
stimulus, is an honest and uncontrolled reaction. In People v. Cudal,83 this Court explained:
The spontaneity of the utterance and its logical connection with the principal event, coupled with the
fact that the utterance was made while the declarant was still "strong" and subject to the stimulus of
the nervous excitement of the principal event, are deemed to preclude contrivance, deliberation,
design or fabrication, and to give to the utterance an inherent guaranty of trustworthiness. The
admissibility of such exclamation is based on experience that, under certain external circumstances of
TRANSPO Batch 1
physical or mental shock, a stress of nervous excitement may be produced in a spectator which stills
the reflective faculties and removes their control, so that the utterance which then occurs is a
spontaneous and sincere response to the actual sensations and perceptions already produced by the
external shock. Since this utterance is made under the immediate and uncontrolled domination of the
senses, rather than reason and reflection, and during the brief period when consideration of self-
interest could not have been fully brought to bear, the utterance may be taken as expressing the real
belief of the speaker as to the facts just observed by him.84 (Citations omitted)
However, there is no fixed rule in determining the time interval within which the statement must be
made for it to be deemed spontaneous. The factual parameters of each case will require a different
resolution.85 Nevertheless, the following factors may guide courts in determining whether there is
spontaneity in the declarant's statements, to wit: (1) the time that lapsed between the occurrence of
the act or transaction and the making of the statement; (2) the place where the statement was
made; (3) the condition of the declarant when he made the statement; (4) the presence or absence
of intervening events between the occurrence and the statement relative thereto; and (5) the nature
and circumstances of the statement itself.86
Here, petitioner assails the admissibility of witnesses Lopez and Flores' testimony, because they did
not have personal knowledge of what immediately transpired before, during, and after the collision of
the vessels.87 It claims that this is an erroneous application of the res gestae rule. We disagree.
Res gestae is one of the exceptions to the hearsay rule. It contemplates testimonial evidence on
matters not personally witnessed by the witness, but is relayed to him or her by a declarant.
Here, it appears that petitioner misconstrued the rule in assailing the application of res gestae merely
on the basis that the testimonies are hearsay.
The testimonies of the witnesses satisfy the requirements of the rule, in that: (1) the collision of the
vessels and sinking of M/V Romeo is a startling occurrence; (2) the statements made are with respect
to the collision; and (3) the statements of the declarants were made immediately after the incident.
As testified to by Lopez and Flores, when the collision happened in midnight of July 14, 2002, they
immediately went to the pier the following day, which was a few hours after the incident. The people
they interviewed witnessed the incident. In particular, Lopez was able to interview M/V Romeo's Chief
Engineer, along with the stevedores and the port's supervisors,88 while Flores's testimony was based
on the narration of M/V Romeo's chief mate.89
These declarants witnessed a collision and a sinking of a vessel which almost claimed their lives. The
spontaneity of their statements with respect to the incident satisfies the rule on res gestae, making
these testimonies admissible even if the declarants were not presented in the witness stand.
In any case, even if this Court disregards the testimonies of Flores and Lopez, the remaining evidence
still supports a finding of petitioners' liability.
III
A vessel, functioning as a common carrier, may be held liable for damages under Article 1759 of the
Civil Code. It states:
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ARTICLE 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or wilful acts of the former's employees, although such employees may have acted beyond
the scope of their authority or in violation of the orders of the common carriers.
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.90
Further, a vessel is "bound to observe extraordinary diligence in the vigilance over the goods" it
transports.91 Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp.92 explains:
Common carriers, from the nature of their business and on public policy considerations, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them. Subject to
certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible
for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the
common carrier lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or constructively, by
the carrier to the consignee, or to the person who has a right to receive them.
In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt and
symbol of the goods covered by it. If it has no notation of any defect or damage in the goods, it is
considered as a "clean bill of lading." A clean bill of lading constitutes prima facie evidence of the
receipt by the carrier of the goods as therein described.93 (Citations omitted)
The high degree of diligence exacted by the law creates a presumption against common carriers when
goods are lost, destroyed or deteriorated.  To overcome this presumption, common carriers must
prove that they exercised extraordinary diligence in the handling and transportation of the goods.94
In Regional Container Lines of Singapore v. The Netherlands Insurance Co. (Philippines),95 this Court
summarized the rules on the liability of a common carrier:
(1)    Common earners are bound to observe extraordinary diligence over the goods they
transport, according to all the circumstances of each case;
(2)    In the event of loss, destruction, or deterioration of the insured goods, common
carriers are responsible, unless they can prove that such loss, destruction, or deterioration
was brought about by, among others, "flood, storm, earthquake, lightning, or other natural
disaster or calamity"; and
(3)    In all other cases not specified under Article 1734 of the Civil Code, common carriers
are presumed to have been at fault or to have acted negligently,  unless they observed  loaded on the latter's vessel SS Dona Nati were lost after the vessel was rammed by M/V Yasushima
extraordinary diligence.96  (Citation omitted)
In cases where cargos are lost, destroyed, or deteriorated, an action based on the contract of carriage
may be filed against the shipowner of the vessel based on Civil Code provisions on common earner.
I solidarily liable for the damages. In disregarding the Civil Code provisions on common carrier, this
TRANSPO Batch 1
For instance, in Eastern Shipping Lines, Inc., this Court held a shipowner liable because as a common
carrier, the shipowner failed to observe extraordinary diligence in the transportation of goods required
under Article 1734. It held that based on the bills of lading issued, the shipowner received the cargo
in good condition, and their arrival in bad order at their destination constitutes a presumption that the
carrier was negligent.97
Similarly, in cases of damages resulting from maritime collision, the Civil Code provisions on common
carrier are applicable if the cause of action is based on contract of carriage.
In Maritime Co. of the Philippines v. Court of Appeals?98 an insurer-subrogee filed an action for
damages against the shipowner based on a bill of lading. In this case, Acme Electrical and National
Development Company and Maritime Company (the Company) executed a bill of lading for the
transport of 800 packages of PVC compound loaded on the latter's vessel, SS Doña Nati. While in
transit, the goods were damaged after SS Dona Nati was rammed by M/V Yasushima Maru. Rizal
Surety, the insurer of the packages, paid the value of the lost goods and filed an action for damages
against the Company.
The trial court dismissed the complaint and held that the case should have been filed against the
owner of M/V Yasushima Maru, who was at fault in the collision. It ruled that under the Code of
Commerce, the vessel at fault should be made responsible for the damage to the cargo; hence, Rizal
Surety has no cause of action against the Company.99
Ultimately, this ruling was reversed. This Court held that Rizal Surety has a cause of action against
the Company based on their contract. Further, this Court ruled that as the subrogee, Rizal Surety has
a cause of action against the Company based on the contract of carriage as evidenced by the bill of
lading. Since there are specific provisions in the Civil Code regulating the liability of a common carrier,
it follows that the Code of Commerce, which only applies supplementarily, need not be applied. Thus,
Rizal Surety's rights are to be determined by the Civil Code and not the Code of Commerce. This
Court then ruled that under Article 1734 of the Civil Code, the Company is a common carrier bound to
exercise extraordinary diligence in the transport of the cargo. Failing to do so, it was held responsible
for the loss of goods.100
However, if the cause of action is based on maritime tort, the provisions of the Code of Commerce are
applicable. An action based on quasi-delict resulting from maritime collision is not specifically
regulated by the Civil Code, but by the Code of Commerce.101 Thus, if the cause of action is based
on quasi-delict and not on contract, the rules provided by the Code of Commerce applies.
This was clarified in National Development Company v. Court of Appeals and Development Insurance
& Surety Corporation.102 In this case, Development Insurance filed an action for damages against
National Development Company and Maritime Company (the Company). Similarly, the insured cargo
Maru. The trial and appellate courts ruled in favor of the Development Insurance. The lower courts
held the Company liable under Article 827 of the Code of Commerce and    A concluded that both
vessels are at fault.
This Court affirmed the ruling and held that the provisions of the Code of Commerce on collision
applies. Specifically, under Article 827, if the collision is imputable to both vessels, the vessels are
Court held that the Code of Commerce must be applied because maritime "collision falls among
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matters not specifically regulated by the Civil Code[.]"103 It appears, however, that the cause of
action in this case was based on tort and not contract. This Court held:
Moreover, the Couil held that both the owner and agent (Naviero) should be declared jointly and
severally liable, since the obligation which is the subject of the action had its origin in a tortious act
and did not arise from contract. Consequently, the agent, even though he may not be the owner of
the vessel, is liable to the shippers and owners of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however, to his rights against the owner of the ship, to
the extent of the value of the vessel, its equipment, and the freight.104 (Citations omitted)
Taking into consideration the ruling of this Court in these cases, the applicable law in resolving
complaints for damages would depend on the complainant's cause of action. If the action is based on
contract of carriage, the Civil Code provisions on common carrier are applicable. On the other hand, if
the cause of action is based on tort, the provisions of the Code of Commerce on vessel collision would
govern.
Here, the cause of action of respondent CGU Insurance against petitioner is not based on the time
charter but on tort. Petitioner is not a common carrier with respect to any of the parties.
Accordingly, the applicable provisions are found in Articles 826 and 827 of the Code of Commerce,
which state:
ARTICLE 826. If a vessel should collide with another through the fault, negligence, or lack of skill of
the captain, sailing mate, or any other member of the complement, the owner of the vessel at fault
shall indemnify the losses and damages suffered, after an expert appraisal.
ARTICLE 827. If both vessels may be blamed for the collision, each one shall be liable for his own
damages, and both shall be jointly responsible for the losses and damages suffered by their cargoes.
To be cleared of liability under these provisions, a vessel must show that it exercised ordinary
diligence.105 This level of diligence is the diligence which "an ordinary prudent man would exercise
with regard to his own property."106
Applying this standard to petitioner, this Court finds that it failed to observe the diligence by the law.
Based on the testimony of its own witness, M/V Aleson was recklessly operated. Captain Cabeltes
admitted that M/V Romeo was still in the pier when M/V Aleson was about t
o enter the Apo channel. Despite knowledge of this information, Captain Cabeltes failed to act with
caution. He himself declared that he was informed by the pier operator to standby and to not enter
the wharf yet, but it still proceeded.107
He later recanted this statement and claimed that a message was relayed to him saying that he may
enter the wharf already. Nevertheless, he confessed that he did not verify the veracity of the
message.
TRANSPO Batch 1
In his testimony:
Atty. Abesames:
Q. Were you the one who personally received that radio message?
Witness:
A. Iyong duty officer.
Q. Did you verify if that message was correct?
A. Sinabi niya sa akin na, Sir, (umawag iyong Apo, papasok na tayo.
Q. So you had a radio officer?
A. Iyong in-charge na duly sa bridge. Everytime may duty ako sa bridge. Iyong ma-duty diyan, pay
may tawag iyong Apo Cement na papasok, sabihin mo sa akin. Gisingin mo ako ako dahil matulog
ako. Paggising sa akin, Sir, (umawag, Sir, papasok na raw tayo. Ganoon.
Q. So you did not go, take the radio personally to confirm whether that radio advice was correct or
not?
A. Everytime ganoon man kami, Hang trip na kami do on medyo mat a gal lang na byahe, every time
ganoon sila tumatawag tapos hindi ko na kino-conjirm.108 (Emphasis supplied)
This   nonchalant  attitude  towards  his   duty   demonstrates   Captain Cabeltes'  lack of caution in
commanding M/V Aleson.    Due diligence demands that Captain Cabeltes ensures that every decision
he made is deliberate and calculated to guarantee the safety of M/V Aleson and nearby vessels. As
the captain, he is required under the law "[t]o be on deck at the time of sighting land and to take
command on entering and leaving ports[.]"109 Instead, Captain Cabeltes slept in and waited for his
crew to confirm whether they can proceed to enter. Thus, it is highly imprudent that Captain Cabeltes
piloted the vessel to the pier without personally verifying if M/V Romeo had already exited.
Moreover, even if Captain Cabeltes admittedly had the chance to avoid the collision, he chose not to
maneuver M/V Aleson, because he was worried that the vessel would run aground.110 This is despite
his acknowledgment that M/V Aleson was easier to maneuver than M/V Romeo because the latter was
a bigger vessel and was fully loaded at that time.111 His testimony reveals:
Q.   So, most probably when you saw for the first time that there was an outgoing vessel when you
were already going towards Apo wharf, more or less, you concluded that it was the M/V "Romeo"?
A.    Opo, Sir.
Q.    And you knew it was fully loaded. It... just came from loading?
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A.    Opo, Sir. Petitioner failed to show that the trial and appellate courts overlooked or misconstrued significant
evidence that would alter the resolution of the case. To reiterate, findings of the trial court, especially
when affirmed by the Court of Appeals, deserve great respect and are binding upon this Court. In this
Q.    It was a lot bigger than your vessel?
case, a review of the evidence and law fails to compel this Court to disregard the factual findings of
the lower courts.
A.    Yes, Sir.
WHEREFORE, premises considered, the petition for review is hereby DENIED. The Decision and
Q.    And as a master mariner or as the captain of the vessel or as a seafarer, you would understand Resolution of the Court of Appeals in CA-G.R. CV. No. 95628 is AFFIRMED.
and you would agree with me that a fully loaded big vessel is much harder to maneuver than a small
vessel that does not carry anything?
SO ORDERED.

A.    Tama po.

Q.   Because at that time you saw it for the first time and when you made that request for a port to
port passing, you knew already that given the things you see the courses of your vessel, you will
meet each other?

A.    Yes, Sir.

Q. That early, you knew of the danger of collision, correct? A. Yes, Sir, dahil head on kami,
nakaganito ang mga barko namin eh.112 (emphasis supplied)

He likewise acknowledged that he failed to send sound signals to M/V Romeo in violation of the rules
of navigation.113

Further, Captain Cabeltes' claim that M/V Aleson was navigating slowly is contradicted by evidence.
The strong impact of the collision is evidenced by the gaping hole created by the front hull of M/V
Aleson, which has caused M/V Romeo to instantly sink within five (5) minutes. Further, the impact
and location of the collision readily confirms that M/V Aleson was not navigating slowly as Captain
Cabeltes claims.114

Petitioner's contention that Captain Cabeltes's testimony was twisted and misinterpreted by the lower
courts fails to convince. It is a settled rule that the lower court's appreciation of the witnesses'
testimony deserves the highest respect because it "is best equipped to make the assessment of the
witnesses' credibility and demeanor on the witness stand[.]"115 Absent any showing of clear
misappreciation, the trial court's findings are generally not disturbed by this Court. In any case,
petitioner did not address how Captain Cabeltes's testimony was misappreciated when his clear
statements on record support the finding of the lower courts.

Considering the evidence and the relevant law, this Court finds no cogent reason to depart from the
ruling of the lower courts.1âшphi1 With respect to respondent Candano Shipping, this Court affirms
the findings of the lower courts which held that respondent Candano Shipping exercised the required
diligence as a common carrier. As established in the trial court, M/V Romeo was, in all respects,
seaworthy and with full complement of officers and crew.116 The testimony likewise confirmed that
M/V Romeo called and requested M/V Aleson to slow down, because it had the right of way. On the
other hand, petitioner must be held liable for the damages caused by its vessel, M/V Aleson. Despite
petitioner's contention, this Court is not convinced that Captain Cabeltes exercised ordinary diligence
in commanding M/V Aleson.

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