LTFRB and DOTR vs Hon. Valenzuela.

The DOTC, through DO 2015-11, created two (2) new classifications for public transport
conveyance, 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."[7Under 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]

DBDOYC 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, and
accredited Angkas drivers and allowed them to offer their transport services to the public
despite the absence of CPCs.[
the LTFRB issued a press release which says that Angkas cannot legally operate
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
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 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]
Hence this petition
Whether or not DBDOYC is a common carrier.
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]

For its part, DBDOYC claims reprieve from Art 1731 of the NCC, claiming that it and its
accredited drivers 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." 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.

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.

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:

(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 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:
A writ of preliminary injunction is an order granted at any stage of an action or proceeding prior
to 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
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, of a final judgment in the case.

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.

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.

G.R. No. 157917               August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL
RAILWAYS, and the COURT OF APPEALS Respondents.
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of
Batangas, respondents.

MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals
dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the
Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which
dismissed petitioners' complaint for a business tax refund imposed by the City of
Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as
amended, to contract, install and operate oil pipelines. The original pipeline
concession was granted in 19671 and renewed by the Energy Regulatory Board in
1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office
of the Mayor of Batangas City. However, before the mayor's permit could be
issued, the respondent City Treasurer required petitioner to pay a local tax based
on its gross receipts for the fiscal year 1993 pursuant to the Local Government
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.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent
City Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is
engaged in the business of transporting petroleum products from
the Batangas refineries, via pipeline, to Sucat and JTF Pandacan
Terminals. As such, our Company is exempt from paying tax on
gross receipts under Section 133 of the Local Government Code of
1991 . . . .
Moreover, Transportation contractors are not included in the
enumeration of contractors under Section 131, Paragraph (h) of the
Local Government Code. Therefore, the authority to impose tax "on
contractors and other independent contractors" under Section 143,
Paragraph (e) of the Local Government Code does not include the
power to levy on transportation contractors.
 The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The
said section limits the imposition of fees and charges on business to
such amounts as may be commensurate to the cost of regulation,
inspection, and licensing. Hence, assuming arguendo that FPIC is
liable for the license fee, the imposition thereof based on gross
receipts is violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not commensurate to the
cost of regulation, inspection and licensing. The fee is already a
revenue raising measure, and not a mere regulatory imposition.4
On March 8, 1994, the respondent City Treasurer denied the protest contending
that petitioner cannot be considered engaged in transportation business, thus it
cannot claim exemption under Section 133 (j) of the Local Government Code.5
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint6 for tax refund with prayer for writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in her capacity as City
Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition
and collection of the business tax on its gross receipts violates Section 133 of the
Local Government Code; (2) the authority of cities to impose and collect a tax on
the gross receipts of "contractors and independent contractors" under Sec. 141
(e) and 151 does not include the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131 (h), the term "contractors" excludes
transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax
paid.7
Traversing the complaint, the respondents argued that petitioner cannot be
exempt from taxes under Section 133 (j) of the Local Government Code as said
exemption applies only to "transportation contractors and persons engaged in
the transportation by hire and common carriers by air, land and water."
Respondents assert that pipelines are not included in the term "common carrier"
which refers solely to ordinary carriers such as trucks, trains, ships and the like.
Respondents further posit that the term "common carrier" under the said code
pertains to the mode or manner by which a product is delivered to its
destination.8
On October 3, 1994, the trial court rendered a decision dismissing the complaint,
ruling in this wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear.
It is a rule that tax exemptions are to be strictly construed against
the taxpayer, taxes being the lifeblood of the government. Exemption
may therefore be granted only by clear and unequivocal provisions
of law.
Plaintiff claims that it is a grantee of a pipeline concession under
Republic Act 387. (Exhibit A) whose concession was lately renewed
 by the Energy Regulatory Board (Exhibit B). Yet neither said law nor
the deed of concession grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise
holders under Sec. 137 of the Local Tax Code. Such being the
situation obtained in this case (exemption being unclear and
equivocal) resort to distinctions or other considerations may be of
help:
1. That the exemption granted under Sec.
133 (j) encompasses only common carriers
so as not to overburden the riding public or
commuters with taxes. Plaintiff is not a
common carrier, but a special carrier
extending its services and facilities to a
single specific or "special customer" under
a "special contract."
2. The Local Tax Code of 1992 was basically
enacted to give more and effective local
autonomy to local governments than the
previous enactments, to make them
economically and financially viable to serve
the people and discharge their functions
with a concomitant obligation to accept
certain devolution of powers, . . . So,
consistent with this policy even franchise
grantees are taxed (Sec. 137) and
contractors are also taxed under Sec. 143
(e) and 151 of the Code.9
Petitioner assailed the aforesaid decision before this Court via a petition for
review. On February 27, 1995, we referred the case to the respondent Court of
Appeals for consideration and adjudication. 10 On November 29, 1995, the
respondent court rendered a decision 11 affirming the trial court's dismissal of
petitioner's complaint. Petitioner's motion for reconsideration was denied on July
18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution
dated November 11, 1996. 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.
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
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:
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
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 Re venue 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. 186312               June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011 against
Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages
arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on
September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas
from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort
(Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was
by virtue of a tour package-contract with respondent that included transportation to and from the
Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account
of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave
the Resort in the afternoon of September 10, 2000, but was advised to stay for another night
because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners’ 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.
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.
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
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.
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 amount of ₱10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected, alleging
that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III
to sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric,
Geophysical and Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.6
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 exercised the utmost diligence in ensuring the safety of its passengers; contrary
to petitioners’ allegation, there was no storm on September 11, 2000 as the Coast Guard in fact
cleared the voyage; and M/B Coco Beach III was not filled to capacity and had sufficient life
jackets for its passengers. By way of Counterclaim, respondent alleged that it is entitled to an
award for attorney’s fees and litigation expenses amounting to not less than ₱300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires
four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is
clearance from the Coast Guard, (3) there is clearance from the captain and (4) there is clearance
from the 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, causing the boat to capsize.10
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 Appeals17 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.
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.
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
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 $90035 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 living
Capacity 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
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 Appeals40 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, shall be 12% per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance of credit. (emphasis
supplied).
Since the amounts payable by respondent have been determined with certainty only in the
present petition, the interest due shall be computed upon the finality of this decision at the rate of
12% per annum until satisfaction, in accordance with paragraph number 3 of the immediately
cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET
ASIDE. Judgment is rendered in favor of petitioners ordering 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 earning capacity; (3) ₱100,000 as moral damages; (4) ₱100,000 as
exemplary damages; (5) 10% of the total amount adjudged against respondent as attorneys fees;
and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per annum
computed from the finality of this decision until full payment.
SO ORDERED.
CASE DIGEST: Spouses Perena vs. Zarate
G.R. No. 157917 : August 29, 2012
SPOUSES TEODORO and NANETTE PERENA, Petitioners, v. SPOUSES NICOLAS and TERESITA L. ZARATE,
PHILIPPINE NATIONAL RAILWAYS, and the COURT OF APPEALS, Respondents.

BERSAMIN, J.:

FACTS:

Spouses Teodoro and Nanette Peres (Peres) were engaged in the business of transporting students from
their respective residences in Paraque City to Don Bosco in Pasong Tamo, Makati City, and back. They
employed Clemente Alfaro (Alfaro) as driver of the van. Spouses Nicolas and Teresita Zarate (Zarates)
contracted the Peres to transport their son Aaron to and from 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. The railroad crossing in the narrow path had no railroad warning signs, or watchmen, or
other responsible persons manning the crossing. In fact, the bamboo barandilla was up, leaving the
railroad crossing open to traversing motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), was in
the vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad
crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus.
His view of the oncoming train was blocked because he overtook the passenger bus on its left side. The
train blew its horn to warn motorists of its approach. The passenger bus successfully crossed the
railroad tracks, but the van driven by Alfaro did not. The impact threw nine of the 12 students in the
rear, including Aaron, out of the van. Aaron landed in the path of the train, which dragged his body and
severed his head, instantaneously killing him.

Thus, the Zarates sued the Peres for breach of contract of carriage and the PNR for quasi-delict. The RTC
ruled in favor of the Zarates. On appeal, the CA affirmed the findings of the RTC.

ISSUE: Whether or not the Peres are liable for breach of contract of carriage?

HELD: The petition has no merit.

CIVIL LAW: common carrier; extraordinary diligence

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. Contracts of common carriage are governed by the provisions on common carriers
of the Civil Code, the Public Service Act, 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. 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.

Applying these considerations to the case before us, there is no question that the Peres 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
clientele, the Peres operated as a common carrier because they held themselves out to the general
public 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.

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.

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. The Peres 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. DENIED.

G.R. No. 161745 September 30, 2005

LEA MER INDUSTRIES, INC., Petitioners,
vs.
MALAYAN INSURANCE CO., INC.,* Respondent.
DECISION
PANGANIBAN, J.:
ommon carriers are bound to observe extraordinary diligence in their vigilance over the goods
entrusted to them, as required by the nature of their business and for reasons of public policy.
Consequently, the law presumes that common carriers are at fault or negligent for any loss or
damage to the goods that they transport. In the present case, the evidence submitted by petitioner
to overcome this presumption was sorely insufficient.
The Case
1
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the October 9,
2002 Decision2 and the December 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR
CV No. 66028. The challenged Decision disposed as follows:
"WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional
Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 is hereby REVERSED and SET
ASIDE. [Petitioner] is ordered to pay the [herein respondent] the value of the lost cargo in the
amount of ₱565,000.00. Costs against the [herein petitioner]."4
The assailed Resolution denied reconsideration.
 The Facts
Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the
shipment of 900 metric tons of silica sand valued at ₱565,000.5 Consigned to Vulcan
Industrial and Mining Corporation, the cargo was to be transported from Palawan to Manila.
On October 25, 1991, the silica sand was placed on board Judy VII, a barge leased by Lea
Mer.6 During the voyage, the vessel sank, resulting in the loss of the cargo.7
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.8 To recover
the amount paid and in the exercise of its right of subrogation, Malayan demanded
reimbursement from Lea Mer, which refused to comply. Consequently, Malayan instituted a
Complaint with the Regional Trial Court (RTC) of Manila on September 4, 1992, for the
collection of ₱565,000 representing the amount that respondent had paid Vulcan.9
On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of the
loss was a fortuitous event.10 The RTC noted that the vessel had sunk because of the bad weather
condition brought about by Typhoon Trining. The court ruled that petitioner had no advance
knowledge of the incoming typhoon, and that the vessel had been cleared by the Philippine Coast
Guard to travel from Palawan to Manila.11
Ruling of the Court of Appeals
Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for
Manila. Thus, the loss of the cargo was occasioned by petitioner’s fault, not by a fortuitous
event.12
Hence, this recourse.13
The Issues
Petitioner states the issues in this wise:
"A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been
presented as a witness of the said report during the trial of this case before the lower court can be
admitted in evidence to prove the alleged facts cited in the said report.
"B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding
of fact of the Regional Trial Court which clearly and unequivocally held that the loss of the
cargo subject of this case was caused by fortuitous event for which herein petitioner could not be
held liable.
"C. Whether or not the respondent, Court of Appeals, had committed serious error and grave
abuse of discretion in disregarding the testimony of the witness from the MARINA, Engr.
Jacinto Lazo y Villegal, to the effect that the vessel ‘Judy VII’ was seaworthy at the time of
incident and further in disregarding the testimony of the PAG-ASA weather specialist, Ms. Rosa
Barba y Saliente, to the effect that typhoon ‘Trining’ did not hit Metro Manila or Palawan."14
In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo,
and (2) whether the survey report of Jesus Cortez is admissible in evidence.
The Court’s Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo
Question of Fact
The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous
event. This issue involves primarily a question of fact, notwithstanding petitioner’s claim that it
pertains only to a question of law. As a general rule, questions of fact may not be raised in a
petition for review.15 The present case serves as an exception to this rule, because the factual
findings of the appellate and the trial courts vary.16 This Court meticulously reviewed the
records, but found no reason to reverse the CA.
Rule on Common Carriers
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 -- when this service
is offered to the public for compensation.17 Petitioner is clearly a common carrier, because it
offers to the public its business of transporting goods through its vessels.18
Thus, the Court corrects the trial court’s finding that petitioner became a private carrier when
Vulcan chartered it.19 Charter parties are classified as contracts of demise (or bareboat) and
affreightment, which are distinguished as follows:
"Under the demise or bareboat charter of the vessel, the charterer will generally be considered as
owner for the voyage or service stipulated. The charterer mans the vessel with his own people
and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused
by negligence. To create a demise, the owner of a vessel must completely and exclusively
relinquish possession, command and navigation thereof to the charterer; anything short of such a
complete transfer is a contract of affreightment (time or voyage charter party) or not a charter
party at all."20
The distinction is significant, because a demise or bareboat charter indicates a business
undertaking that is private in character. 21 Consequently, the rights and obligations of the parties
to a contract of private carriage are governed principally by their stipulations, not by the law on
common carriers.22
The Contract in the present case was one of affreightment, as shown by the fact that it was
petitioner’s crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII.23
Necessarily, petitioner was a common carrier, and the pertinent law governs the present
factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their vigilance over the goods
and the safety of the passengers they transport, as required by the nature of their business and for
reasons of public policy.24 Extraordinary diligence requires rendering service with the greatest
skill and foresight to avoid damage and destruction to the goods entrusted for carriage and
delivery.25
Common carriers are presumed to have been at fault or to have acted negligently for loss or
damage to the goods that they have transported.26 This presumption can be rebutted only by
proof that they observed extraordinary diligence, or that the loss or damage was occasioned by
any of the following causes:27
"(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
"(2) Act of the public enemy in war, whether international or civil;
"(3) Act or omission of the shipper or owner of the goods;
"(4) The character of the goods or defects in the packing or in the containers;
"(5) Order or act of competent public authority."28
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that "no person shall be responsible for a fortuitous
event which could not be foreseen, or which, though foreseen, was inevitable." Thus, if the loss
or damage was due to such an event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a "fortuitous event" as follows: (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.29
To excuse the common carrier fully of any liability, the fortuitous event must have been the
proximate and only cause of the loss.30 Moreover, it should have exercised due diligence to
prevent or minimize the loss before, during and after the occurrence of the fortuitous event.31
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the present case. As the common
carrier, petitioner bore the burden of proving that it had exercised extraordinary diligence to
avoid the loss, or that the loss had been occasioned by a fortuitous event -- an exempting
circumstance.
It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that
the loss of the cargo was due to the bad weather condition brought about by Typhoon Trining.32
Evidence was presented to show that petitioner had not been informed of the incoming typhoon,
and that the Philippine Coast Guard had given it clearance to begin the voyage.33 On October 25,
1991, the date on which the voyage commenced and the barge sank, Typhoon Trining was
allegedly far from Palawan, where the storm warning was only "Signal No. 1."34
The evidence presented by petitioner in support of its defense of fortuitous event was sorely
insufficient. As required by the pertinent law, it was not enough for the common carrier to show
that there was an unforeseen or unexpected occurrence. It had to show that it was free from any
fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize or prevent the loss
before, during or after the alleged fortuitous event.35 Its witness, Joey A. Draper, testified that he
could no longer remember whether anything had been done to minimize loss when water started
entering the barge.36 This fact was confirmed during his cross-examination, as shown by the
following brief exchange:
"Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other precautionary measure[s] exercised
by you and the crew of Judy VII so as to prevent the los[s] or sinking of barge Judy VII?
xxxxxxxxx
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action taken by the officers and crew of tugboat
Ayalit and barge Judy VII x x x to prevent the sinking of barge Judy VII?
xxxxxxxxx
Court:
Mr. witness, did the captain of that tugboat give any instruction on how to save the barge Judy
VII?
Joey Draper:
I can no longer remember sir, because that happened [a] long time ago."37
Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a
preponderance of evidence that the barge was not seaworthy when it sailed for Manila.38
Respondent was able to prove that, in the hull of the barge, there were holes that might have
caused or aggravated the sinking.39 Because the presumption of negligence or fault applied to
petitioner, it was incumbent upon it to show that there were no holes; or, if there were, that they
did not aggravate the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A. Luna,
testified that the barge was in "tip-top" or excellent condition,40 but that he had not personally
inspected it when it left Palawan.41
The submission of the Philippine Coast Guard’s Certificate of Inspection of Judy VII, dated
July 31, 1991, did not conclusively prove that the barge was seaworthy.42 The regularity of
the issuance of the Certificate is disputably presumed.43 It could be contradicted by competent
evidence, which respondent offered. Moreover, this evidence did not necessarily take into
account the actual condition of
the vessel at the time of the commencement of the voyage.44
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report45 prepared by Jesus Cortez, the cargo surveyor, should
not have been admitted in evidence. The Court partly agrees. Because he did not testify during
the trial,46 then the Report that he had prepared was hearsay and therefore inadmissible for the
purpose of proving the truth of its contents.
The Survey Report Not the Sole Evidence
The facts reveal that Cortez’s Survey Report was used in the testimonies of respondent’s
witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the
vice-president of Toplis and Harding Company.47 Soriano testified that the Survey Report had
been used in preparing the final Adjustment Report conducted by their company.48 The final
Report showed that the barge was not seaworthy because of the existence of the holes. Manlapig
testified that he had prepared that Report after taking into account the findings of the surveyor, as
well as the pictures and the sketches of the place where the sinking occurred.49 Evidently, the
existence of the holes was proved by the testimonies of the witnesses, not merely by Cortez’
Survey Report.
Rule on Independently
Relevant Statement
That witnesses must be examined and presented during the trial,50 and that their testimonies must
be confined to personal knowledge is required by the rules on evidence, from which we quote:
"Section 36. Testimony generally confined to personal knowledge; hearsay excluded. –A witness
can testify only to those facts which he knows of his personal knowledge; that is, which are
derived from his own perception, except as otherwise provided in these rules."51
On this basis, the trial court correctly refused to admit Jesus Cortez’s Affidavit, which
respondent had offered as evidence.52 Well-settled is the rule that, unless the affiant is presented
as a witness, an affidavit is considered hearsay.53
An exception to the foregoing rule is that on "independently relevant statements." A report made
by a person is admissible if it is intended to prove the tenor, not the truth, of the statements.54
Independent of the truth or the falsity of the statement given in the report, the fact that it has been
made is relevant. Here, the hearsay rule does not apply.55
In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part
of the testimonies of respondent’s witnesses. The referral to Cortez’s Report was in relation to
Manlapig’s final Adjustment Report. Evidently, it was the existence of the Survey Report that
was testified to. The admissibility of that Report as part of the testimonies of the witnesses was
correctly ruled upon by the trial court.
At any rate, even without the Survey Report, petitioner has already failed to overcome the
presumption of fault that applies to common carriers.
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are
AFFIRMED. Costs against petitioner.
SO ORDERED.

SULPICIO LINES, INC., Petitioner, v. NAPOLEON SESANTE, NOW SUBSTITUTED BY

MARIBEL ATILANO, KRISTEN MARIE, CHRISTIAN IONE, KENNETH KERRN
AND KARISNA KATE, ALL SURNAMED SESANTE, Respondent.
DECISION
BERSAMIN, J.:
Moral damages are meant to enable the injured party to obtain the means, diversions or
amusements in order to alleviate the moral suffering. Exemplary damages are designed to permit
the courts to reshape behavior that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behavior.

The Case

This appeal seeks to undo and reverse the adverse decision promulgated on June 27, 2005,1
whereby the Court of Appeals (CA) affirmed with modification the judgment of the Regional
Trial Court (RTC), Branch 91, in Quezon City holding the petitioner liable to pay temperate and
moral damages due to breach of contract of carriage.2 chanrobleslaw

Antecedents

On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a passenger
vessel owned and operated by the petitioner, sank near Fortune Island in Batangas. Of the
388 recorded passengers, 150 were lost.3 Napoleon Sesante, then a member of the Philippine
National Police (PNP) and a lawyer, was one of the passengers who survived the sinking. He
sued the petitioner for breach of contract and damages.4 chanrobleslaw

Sesante alleged in his complaint that the M/V Princess of the Orient left the Port of Manila while
Metro Manila was experiencing stormy weather; that at around 11:00 p.m., he had noticed the
vessel listing starboard, so he had gone to the uppermost deck where he witnessed the strong
winds and big waves pounding the vessel; that at the same time, he had seen how the passengers
had been panicking, crying for help and frantically scrambling for life jackets in the absence of
the vessel's officers and crew; that sensing danger, he had called a certain Vency Ceballos
through his cellphone to request him to inform the proper authorities of the situation; that
thereafter, big waves had rocked the vessel, tossing him to the floor where he was pinned by a
long steel bar; that he had freed himself only after another wave had hit the vessel;5 that he had
managed to stay afloat after the vessel had sunk, and had been carried by the waves to the
coastline of Cavite and Batangas until he had been rescued; that he had suffered tremendous
hunger, thirst, pain, fear, shock, serious anxiety and mental anguish; that he had sustained
injuries,6 and had lost money, jewelry, important documents, police uniforms and the .45 caliber
pistol issued to him by the PNP; and that because it had committed bad faith in allowing the
vessel to sail despite the storm signal, the petitioner should pay him actual and moral damages of
P500,000.00 and P1,000,000.00, respectively.7 chanrobleslaw

In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient due
to its having been cleared to sail from the Port of Manila by the proper authorities; that the
sinking had been due to force majeure; that it had not been negligent; and that its officers and
crew had also not been negligent because they had made preparations to abandon the vessel
because they had launched life rafts and had provided the passengers assistance in that regard.8 chanrobleslaw

Decision of the RTC

On October 12, 2001, the RTC rendered its judgment in favor of the respondent,9 holding as
follows:ChanRoblesVirtualawlibrary

WHEREFORE, judgment is hereby rendered in favor of plaintiff Napoleon Sesante and

against defendant Sulpicio Lines, Inc., ordering said defendant to pay plaintiff:
1. Temperate damages in the amount of P400,000.00;

2. Moral damages in the amount of One Million Pesos (P1,000,000.00);

3. Costs of suit.
SO ORDERED.10 chanroblesvirtuallawlibrary

The RTC observed that the petitioner, being negligent, was liable to Sesante pursuant to Articles
1739 and 1759 of the Civil Code; that the petitioner had not established its due diligence in the
selection and supervision of the vessel crew; that the ship officers had failed to inspect the
stowage of cargoes despite being aware of the storm signal; that the officers and crew of the
vessel had not immediately sent a distress signal to the Philippine Coast Guard; that the ship
captain had not called for then "abandon ship" protocol; and that based on the report of the
Board of Marine Inquiry (BMI), the erroneous maneuvering of the vessel by the captain
during the extreme weather condition had been the immediate and proximate cause of the
sinking.

The petitioner sought reconsideration, but the RTC only partly granted its motion by reducing
the temperate damages from P500,000.00 to P300,000.00.11 chanrobleslaw
Dissatisfied, the petitioner appealed.12 It was pending the appeal in the CA when Sesante passed
away. He was substituted by his heirs.13 chanrobleslaw

Judgment of the CA

On June 27, 2005, the CA promulgated its assailed decision. It lowered the temperate damages to
P120,000.00, which approximated the cost of Sesante's lost personal belongings; and held that
despite the seaworthiness of the vessel, the petitioner remained civilly liable because its
officers and crew had been negligent in performing their duties.14 chanrobleslaw

Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the motion.15 chanrobleslaw

Hence, this appeal.

Issues

The petitioner attributes the following errors to the CA, to wit: ChanRoblesVirtualawlibrary

THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF MORAL

DAMAGES, AS THE INSTANT CASE IS FOR ALLEGED PERSONAL INJURIES
PREDICATED ON BREACH OF CONTRACT OF CARRIAGE, AND THERE BEING NO
PROOF OF BAD FAITH ON THE PART OF SULPICIO

II

THE ASSAILED DECISION ERRED IN SUSTAINING THE AMOUNT OF MORAL

DAMAGES AWARDED, THE SAME BEING UNREASONABLE, EXCESSIVE AND
UNCONSCIONABLE, AND TRANSLATES TO UNJUST ENRICHMENT AGAINST
SULPICIO

III

THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF TEMPERATE

DAMAGES AS THE SAME CANNOT SUBSTITUTE FOR A FAILED CLAIM FOR
ACTUAL DAMAGES, THERE BEING NO COMPETENT PROOF TO WARRANT SAID
AWARD

IV

THE AWARD OF TEMPERATE DAMAGES IS UNTENABLE AS THE REQUISITE

NOTICE UNDER THE LAW WAS NOT GIVEN TO SULPICIO IN ORDER TO HOLD IT
LIABLE FOR THE ALLEGED LOSS OF SESANTE'S PERSONAL BELONGINGS

THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF RESPONDENT

SESANTE IN THE INSTANT CASE, THE SAME BEING A PERSONAL ACTION WHICH
DOES NOT SURVIVE

VI

THE ASSAILED DECISION ERRED IN APPLYING ARTICLE 1759 OF THE NEW CIVIL
CODE AGAINST SULPICIO SANS A CLEAR-CUT FINDING OF SULPICIO'S BAD FAITH
IN THE INCIDENT16 chanroblesvirtuallawlibrary

In other words, to be resolved are the following, namely: (1) Is the complaint for breach of
contract and damages a personal action that does not survive the death of the plaintiff?; (2) Is the
petitioner liable for damages under Article 1759 of the Civil Code?; and (3) Is there sufficient
basis for awarding moral and temperate damages?

Ruling of the Court

The appeal lacks merit.

An action for breach of contract of carriage survives the death of the plaintiff

The petitioner urges that Sesante's complaint for damages was purely personal and cannot be
transferred to his heirs upon his death. Hence, the complaint should be dismissed because the
death of the plaintiff abates a personal action.

The petitioner's urging is unwarranted.

Section 16, Rule 3 of the Rules of Court lays down the proper procedure in the event of the death
of a litigant, viz.:
ChanRoblesVirtualawlibrary

Section 16. Death of party; duty of counsel. - Whenever a party to a pending action dies, and
the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court
within thirty (30) days after such death of the fact thereof, and to give the name and address of
his legal representative or representatives. Failure of counsel to comply with his duty shall be a
ground for disciplinary action.

The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a guardian
ad litem for the minor heirs.

xxxx
Substitution by the heirs is not a matter of jurisdiction, but a requirement of due process.17 It
protects the right of due process belonging to any party, that in the event of death the deceased
litigant continues to be protected and properly represented in the suit through the duly appointed
legal representative of his estate.18 chanrobleslaw

The application of the rule on substitution depends on whether or not the action survives the
death of the litigant. Section 1, Rule 87 of the Rules of Court enumerates the following actions
that survive the death of a party, namely: (1) recovery of real or personal property, or an interest
from the estate; (2) enforcement of liens on the estate; and (3) recovery of damages for an injury
to person or property. On the one hand, Section 5, Rule 86 of the Rules of Court lists the actions
abated by death as including: (1) claims for funeral expenses and those for the last sickness of
the decedent; (2) judgments for money; and (3) all claims for money against the deceased,
arising from contract, express or implied.

A contract of carriage generates a relation attended with public duty, neglect or malfeasance of
the carrier's employees and gives ground for an action for damages.19 Sesante's claim against the
petitioner involved his personal injury caused by the breach of the contract of carriage. Pursuant
to the aforecited rules, the complaint survived his death, and could be continued by his heirs
following the rule on substitution.

II

The petitioner is liable for breach of contract of carriage

The petitioner submits that an action for damages based on breach of contract of carriage under
Article 1759 of the Civil Code should be read in conjunction with Article 2201 of the same code;
that although Article 1759 only provides for a presumption of negligence, it does not envision
automatic liability; and that it was not guilty of bad faith considering that the sinking of M/V
Princess of the Orient had been due to a fortuitous event, an exempting circumstance under
Article 1174 of the Civil Code.

The submission has no substance.

Article 1759 of the Civil Code does not establish a presumption of negligence because it
explicitly makes the common carrier liable in the event of death or injury to passengers due to
the negligence or fault of the common carrier's employees. It reads: ChanRoblesVirtualawlibrary

Article 1759. Common carriers are liable for the death 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 liability of common carriers under Article 1759 is demanded by the duty of extraordinary
diligence required of common carriers in safely carrying their passengers.20 chanrobleslaw

On the other hand, Article 1756 of the Civil Code lays down the presumption of negligence
against the common carrier in the event of death or injury of its passenger, viz.: ChanRoblesVirtualawlibrary

Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in Articles 1733 and 1755.
Clearly, the trial court is not required to make an express finding of the common carrier's fault or
negligence.21 Even the mere proof of injury relieves the passengers from establishing the fault or
negligence of the carrier or its employees.22 The presumption of negligence applies so long as
there is evidence showing that: (a) a contract exists between the passenger and the common
carrier; and (b) the injury or death took place during the existence of such contract.23 In such
event, the burden shifts to the common carrier to prove its observance of extraordinary diligence,
and that an unforeseen event or force majeure had caused the injury.24 chanrobleslaw

Sesante sustained injuries due to the buffeting by the waves and consequent sinking of M/V
Princess of the Orient where he was a passenger. To exculpate itself from liability, the common
carrier vouched for the seaworthiness of M/V Princess of the Orient, and referred to the BMI
report to the effect that the severe weather condition - a force majeure - had brought about the
sinking of the vessel.

The petitioner was directly liable to Sesante and his heirs.

A common carrier may be relieved of any liability arising from a fortuitous event pursuant to
Article 117425 of the Civil Code. But while it may free a common carrier from liability, the
cralawred

provision still requires exclusion of human agency from the cause of injury or loss.26 Else stated,
for a common carrier to be absolved from liability in case of force majeure, it is not enough that
the accident was caused by a fortuitous event. The common carrier must still prove that it did not
contribute to the occurrence of the incident due to its own or its employees' negligence.27 We
explained in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc.,28 as
follows:ChanRoblesVirtualawlibrary

In order to be considered a fortuitous event, however, (1) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtor to comply with his obligation, must be
independent of human will; (2) it must be impossible to foresee the event which constitute the
caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence must be
such as to render it impossible for the debtor to fulfill his obligation in any manner; and (4) the
obligor must be free from any participation in the aggravation of the injury resulting to the
creditor.
[T]he principle embodied in the act of God doctrine strictly requires that the act must be
occasioned solely by the violence of nature. Human intervention is to be excluded from
creating or entering into the cause of the mischief. When the effect is found to be in part
the result of the participation of man, whether due to his active intervention or neglect or
failure to act, the whole occurrence is then humanized and removed from the rules
applicable to the acts of God.29 (bold underscoring supplied for emphasis)
The petitioner has attributed the sinking of the vessel to the storm notwithstanding its position on
the seaworthiness of M/V Princess of the Orient. Yet, the findings of the BMI directly
contradicted the petitioner's attribution, as follows:
ChanRoblesVirtualawlibrary

7. The Immediate and the Proximate Cause of the Sinking

The Captain's erroneous maneuvers of the M/V Princess of the Orient minutes before she
sunk [sic] had caused the accident. It should be noted that during the first two hours when the
ship left North Harbor, she was navigating smoothly towards Limbones Point. During the same
period, the ship was only subjected to the normal weather stress prevailing at the time. She was
then inside Manila Bar. The waves were observed to be relatively small to endanger the safety of
the ship. It was only when the MV Princess of the Orient had cleared Limbones Pt. while
navigating towards the direction of the Fortune Island when this agonizing misfortune struck the
ship.

Initially, a list of three degrees was observed. The listing of the ship to her portside had
continuously increased. It was at this point that the captain had misjudged the situation. While
the ship continuously listed to her portside and was battered by big waves, strong southwesterly
winds, prudent judgement [sic] would dictate that the Captain should have considerably reduced
the ship's speed. He could have immediately ordered the Chief Engineer to slacken down the
speed. Meanwhile, the winds and waves continuously hit the ship on her starboard side. The
waves were at least seven to eight meters in height and the wind velocity was a[t] 25 knots.
The MV Princess of the Orient being a close-type ship (seven decks, wide and high
superstructure) was vulnerable and exposed to the howling winds and ravaging seas. Because of
the excessive movement, the solid and liquid cargo below the decks must have shifted its weight
to port, which could have contributed to the tilted position of the ship.

Minutes later, the Captain finally ordered to reduce the speed of the ship to 14 knots. At the same
time, he ordered to put ballast water to the starboard-heeling tank to arrest the continuous listing
of the ship. This was an exercise in futility because the ship was already listing between 15 to 20
degrees to her portside. The ship had almost reached the maximum angle of her loll. At this
stage, she was about to lose her stability.

Despite this critical situation, the Captain executed several starboard maneuvers. Steering the
course of the Princess to starboard had greatly added to her tilting. In the open seas, with a fast
speed of 14 knots, advance maneuvers such as this would tend to bring the body of the ship in
the opposite side. In navigational terms, this movement is described as the centripetal force. This
force is produced by the water acting on the side of the ship away from the center of the turn.
The force is considered to act at the center of lateral resistance which, in this case, is the centroid
of the underwater area of the ship's side away from the center of the turn. In the case of the
Princess, when the Captain maneuvered her to starboard, her body shifted its weight to port.
Being already inclined to an angle of 15 degrees, coupled with the instantaneous movement of
the ship, the cargoes below deck could have completely shifted its position and weight towards
portside. By this time, the ship being ravaged simultaneously by ravaging waves and howling
winds on her starboard side, finally lost her grip.30chanroblesvirtuallawlibrary

Even assuming the seaworthiness of the MA/ Princess of the Orient, the petitioner could not
escape liability considering that, as borne out by the aforequoted findings of the BMI, the
immediate and proximate cause of the sinking of the vessel had been the gross negligence of
its captain in maneuvering the vessel.

The Court also notes that Metro Manila was experiencing Storm Signal No. 1 during the time of
the sinking.31 The BMI observed that a vessel like the M/V Princess of the Orient, which had a
volume of 13.734 gross tons, should have been capable of withstanding a Storm Signal No. 1
considering that the responding fishing boats of less than 500 gross tons had been able to weather
through the same waves and winds to go to the succor of the sinking vessel and had actually
rescued several of the latter's distressed passengers.32 chanrobleslaw
 III

The award of moral damages and temperate damages is proper

The petitioner argues that moral damages could be meted against a common carrier only in the
following instances, to wit: (1) in the situations enumerated by Article 2201 of the Civil Code;
(2) in cases of the death of a passenger; or (3)where there was bad faith on the part of the
common carrier. It contends that none of these instances obtained herein; hence, the award
should be deleted.

We agree with the petitioner that moral damages may be recovered in an action upon breach of
contract of carriage only when: (a) death of a passenger results, or (b) it is proved that the carrier
was guilty of fraud and bad faith, even if death does not result.33 However, moral damages may
be awarded if the contractual breach is found to be wanton and deliberately injurious, or if the
one responsible acted fraudulently or with malice or bad faith.34 chanrobleslaw

The CA enumerated the negligent acts committed by the officers and crew of M/V Princess of
the Orient, viz.: ChanRoblesVirtualawlibrary

x x x. [W]hile this Court yields to the findings of the said investigation report, yet it should be
observed that what was complied with by Sulpicio Lines were only the basic and minimal safety
standards which would qualify the vessel as seaworthy. In the same report however it also
revealed that the immediate and proximate cause of the sinking of the M/V Princess of the Orient
was brought by the following: erroneous maneuvering command of Captain Esrum
Mahilum and due to the weather condition prevailing at the time of the tragedy. There is no
doubt that under the circumstances the crew of the vessel were negligent in manning it. In fact
this was clearly established by the investigation of the Board of Marine Inquiry where it was
found that:ChanRoblesVirtualawlibrary

The Chief Mate, when interviewed under oath, had attested that he was not able to make stability
calculation of the ship vis-a-vis her cargo. He did not even know the metacentric height (GM) of
the ship whether it be positive or negative.

As cargo officer of the ship, he failed to prepare a detailed report of the ship's cargo stowage
plan.
He likewise failed to conduct the soundings (measurement) of the ballast tanks before the ship
departed from port. He readily presumed that the ship was full of ballast since the ship was fully
ballasted when she left Cebu for Manila on 16 September 1998 and had never discharge[d] its
contents since that time.

Being the officer-in-charge for emergency situation (sic) like this, he failed to execute and
supervise the actual abandonship (sic) procedure. There was no announcement at the public
address system of abandonship (sic), no orderly distribution of life jackets and no orderly
launching of life rafts. The witnesses have confirmed this finding on their sworn statements.

There was miscalculation in judgment on the part of the Captain when he erroneously navigated
the ship at her last crucial moment. x x x
To aggravate his case, the Captain, having full command and responsibility of the MV Princess
of the Orient, had failed to ensure the proper execution of the actual abandoning of the ship.

The deck and engine officers (Second Mate, Third Mate, Chief Engineers, Second
Engineer, Third Engineer and Fourth Engineer), being in charge of their respective
abandonship (sic) post, failed to supervise the crew and passengers in the proper execution of
abandonship (sic) procedure.

The Radio Officer (spark) failed to send the SOS message in the internationally accepted
communication network (VHF Channel 16). Instead, he used the Single Side Band (SSB) radio
in informing the company about the emergency situation. x x x x35 chanroblesvirtuallawlibrary

The aforestated negligent acts of the officers and crew of M/V Princess of the Orient could not
be ignored in view of the extraordinary duty of the common carrier to ensure the safety of the
passengers. The totality of the negligence by the officers and crew of M/V Princess of the Orient,
coupled with the seeming indifference of the petitioner to render assistance to Sesante,36
warranted the award of moral damages.

While there is no hard-and-fast rule in determining what is a fair and reasonable amount of moral
damages, the discretion to make the determination is lodged in the trial court with the limitation
that the amount should not be palpably and scandalously excessive. The trial court then bears in
mind that moral damages are not intended to impose a penalty on the wrongdoer, or to enrich the
plaintiff at the expense of the defendant.37 The amount of the moral damages must always
reasonably approximate the extent of injury and be proportional to the wrong committed.38 chanrobleslaw

The Court recognizes the mental anguish, agony and pain suffered by Sesante who fought to
survive in the midst of the raging waves of the sea while facing the immediate prospect of losing
his life. His claim for moral and economic vindication is a bitter remnant of that most infamous
tragedy that left hundreds of families broken in its wake. The anguish and moral sufferings he
sustained after surviving the tragedy would always include the memory of facing the prospect of
his death from drowning, or dehydration, or being preyed upon by sharks. Based on the
established circumstances, his survival could only have been a miracle wrought by God's grace,
by which he was guided in his desperate swim for the safety of the shore. But even with the glory
of survival, he still had to grapple with not just the memory of having come face to face with
almost certain death, but also with having to answer to the instinctive guilt for the rest of his days
of being chosen to live among the many who perished in the tragedy.39 chanrobleslaw

While the anguish, anxiety, pain and stress experienced by Sesante during and after the sinking
cannot be quantified, the moral damages to be awarded should at least approximate the
reparation of all the consequences of the petitioner's negligence. With moral damages being
meant to enable the injured party to obtain the means, diversions or amusements in order to
alleviate his moral and physical sufferings,40 the Court is called upon to ensure that proper
recompense be allowed to him, through his heirs. For this purpose, the amount of P1,000,000.00,
as granted by the RTC and affirmed by the CA, is maintained.

The petitioner contends that its liability for the loss of Sesante's personal belongings should
conform with Article 1754, in relation to Articles 1998, 2000 to 2003 of the Civil Code, which
provide:ChanRoblesVirtualawlibrary

Article 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's baggage
which is not in his personal custody or in that of his employees. As to other baggage, the
rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall
be applicable.

xxxx

Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as
necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided
that notice was given to them, or to their employees, of the effects brought by the guests and that,
on the part of the latter, they take the precautions which said hotel-keepers or their substitutes
advised relative to the care and vigilance of their effects.

xxxx

Article 2000. The responsibility referred to in the two preceding articles shall include the loss of,
or injury to the personal property of the guests caused by the servants or employees of the
keepers of hotels or inns as well as by strangers; but not that which may proceed from any force
majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotel
or inn shall be considered in determining the degree of care required of him.

Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure,
unless it is done with the use of arms or through an irresistible force.

Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the
guest, his family, servants or visitors, or if the loss arises from the character of the things brought
into the hotel.

Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the
effect that he is not liable for the articles brought by the guest. Any stipulation to the contrary
between the hotel-keeper and the guest whereby the responsibility of the former as set forth in
Articles 1998 to 2001 is suppressed or diminished shall be void.
The petitioner denies liability because Sesante's belongings had remained in his custody all
throughout the voyage until the sinking, and he had not notified the petitioner or its employees
about such belongings. Hence, absent such notice, liability did not attach to the petitioner.

Is notification required before the common carrier becomes liable for lost belongings that
remained in the custody of the passenger?

We answer in the negative.

The rule that the common carrier is always responsible for the passenger's baggage during the
voyage needs to be emphasized. Article 1754 of the Civil Code does not exempt the common
carrier from liability in case of loss, but only highlights the degree of care required of it
depending on who has the custody of the belongings. Hence, the law requires the common
carrier to observe the same diligence as the hotel keepers in case the baggage remains with the
passenger; otherwise, extraordinary diligence must be exercised.41 Furthermore, the liability
of the common carrier attaches even if the loss or damage to the belongings resulted from the
acts of the common carrier's employees, the only exception being where such loss or damages is
due to force majeure.42chanrobleslaw

In YHT Realty Corporation v. Court of Appeals,43 we declared the actual delivery of the goods to
the innkeepers or their employees as unnecessary before liability could attach to the hotelkeepers
in the event of loss of personal belongings of their guests considering that the personal effects
were inside the hotel or inn because the hotelkeeper shall remain accountable.44 Accordingly,
actual notification was not necessary to render the petitioner as the common carrier liable for the
lost personal belongings of Sesante. By allowing him to board the vessel with his belongings
without any protest, the petitioner became sufficiently notified of such belongings. So long as the
belongings were brought inside the premises of the vessel, the petitioner was thereby effectively
notified and consequently duty-bound to observe the required diligence in ensuring the safety of
the belongings during the voyage. Applying Article 2000 of the Civil Code, the petitioner
assumed the liability for loss of the belongings caused by the negligence of its officers or crew.
In view of our finding that the negligence of the officers and crew of the petitioner was the
immediate and proximate cause of the sinking of the M/V Princess of the Orient, its liability for
Sesante's lost personal belongings was beyond question.

The petitioner claims that temperate damages were erroneously awarded because Sesante had not
proved pecuniary loss; and that the CA merely relied on his self-serving testimony.

The award of temperate damages was proper.

Temperate damages may be recovered when some pecuniary loss has been suffered but the
amount cannot, from the nature of the case, be proven with certainty.45 Article 222446 of the Civil
Code expressly authorizes the courts to award temperate damages despite the lack of certain
proof of actual damages.47 chanrobleslaw

Indubitably, Sesante suffered some pecuniary loss from the sinking of the vessel, but the value of
the loss could not be established with certainty. The CA, which can try facts and appreciate
evidence, pegged the value of the lost belongings as itemized in the police report at P120,000.00.
The valuation approximated the costs of the lost belongings. In that context, the valuation of
P120,000.00 is correct, but to be regarded as temperate damages.

In fine, the petitioner, as a common carrier, was required to observe extraordinary diligence in
ensuring the safety of its passengers and their personal belongings. It being found herein short of
the required diligence rendered it liable for the resulting injuries and damages sustained by
Sesante as one of its passengers.

Should the petitioner be further held liable for exemplary damages?

In contracts and quasi-contracts, the Court has the discretion to award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.48 Indeed,
exemplary damages cannot be recovered as a matter of right, and it is left to the court to decide
whether or not to award them.49 In consideration of these legal premises for the exercise of the
judicial discretion to grant or deny exemplary damages in contracts and quasi-contracts against a
defendant who acted in a wanton, fraudulent,' reckless, oppressive, or malevolent manner, the
Court hereby awards exemplary damages to Sesante.

First of all, exemplary damages did not have to be specifically pleaded or proved, because the
courts had the discretion to award them for as long as the evidence so warranted. In Marchan v.
Mendoza,50 the Court has relevantly discoursed: ChanRoblesVirtualawlibrary

x x x. It is argued that this Court is without jurisdiction to adjudicate this exemplary

damages since there was no allegation nor prayer, nor proof, nor counterclaim of error for
the same by the appellees. It is to be observed however, that in the complaint, plaintiffs
"prayed for such other and further relief as this Court may deem just and equitable."
Now, since the body of the complaint sought to recover damages against the defendant-
carrier wherein plaintiffs prayed for indemnification for the damages they suffered as a
result of the negligence of said Silverio Marchan who is appellant's employee; and since
exemplary damages is intimately connected with general damages, plaintiffs may not be
expected to single out by express term the kind of damages they are trying to recover
against the defendant's carrier. Suffice it to state that when plaintiffs prayed in their
complaint for such other relief and remedies that may be availed of under the premises, in
effect, therefore, the court is called upon to exercise and use its discretion whether the
imposition of punitive or exemplary damages even though not expressly prayed or pleaded
in the plaintiffs' complaint.

x x x It further appears that the amount of exemplary damages need not be proved,
because its determination depends upon the amount of compensatory damages that may be
awarded to the claimant. If the amount of exemplary damages need not be proved, it need
not also be alleged, and the reason is obvious because it is merely incidental or dependent
upon what the court may award as compensatory damages. Unless and until this premise is
determined and established, what may be claimed as exemplary damages would amount to
a mere surmise or speculation. It follows as a necessary consequence that the amount of
exemplary damages need not be pleaded in the complaint because the same cannot be
predetermined. One can merely ask that it be determined by the court if in the use of its
discretion the same is warranted by the evidence, and this is just what appellee has done.
(Bold underscoring supplied for emphasis)
And, secondly, exemplary damages are designed by our civil law to "permit the courts to reshape
behavior that is socially deleterious in its consequence by creating negative incentives or
deterrents against such behavior."51 The nature and purpose for this kind of damages have been
well-stated in People v. Dalisay,52 to wit:
ChanRoblesVirtualawlibrary

Also known as 'punitive' or 'vindictive' damages, exemplary or corrective damages are

intended to serve as a deterrent to serious wrong doings, and as a vindication of undue
sufferings and wanton invasion of the rights of an injured or a punishment for those guilty
of outrageous conduct. These terms are generally, but not always, used interchangeably. In
common law, there is preference in the use of exemplary damages when the award is to account
for injury to feelings and for the sense of indignity and humiliation suffered by a person as a
result of an injury that has been maliciously and wantonly inflicted, the theory being that there
should be compensation for the hurt caused by the highly reprehensible conduct of the defendant
- associated with such circumstances as willfulness, wantonness, malice, gross negligence or
recklessness, oppression, insult or fraud or gross fraud - that intensifies the injury. The terms
punitive or vindictive damages are often used to refer to those species of damages that may be
awarded against a person to punish him for his outrageous conduct. In either case, these
damages are intended in good measure to deter the wrongdoer and others like him from
similar conduct in the future. (Bold underscoring supplied for emphasis)
The BMI found that the "erroneous maneuvers" during the ill-fated voyage by the captain of the
petitioner's vessel had caused the sinking. After the vessel had cleared Limbones Point while
navigating towards the direction of Fortune Island, the captain already noticed the listing of the
vessel by three degrees to the portside of the vessel, but, according to the BMI, he did not
exercise prudence as required by the situation in which his vessel was suffering the battering on
the starboard side by big waves of seven to eight meters high and strong southwesterly winds of
25 knots. The BMI pointed out that he should have considerably reduced the speed of the vessel
based on his experience about the vessel - a close-type ship of seven decks, and of a wide and
high superstructure - being vulnerable if exposed to strong winds and high waves. He ought to
have also known that maintaining a high speed under such circumstances would have shifted the
solid and liquid cargo of the vessel to port, worsening the tilted position of the vessel. It was only
after a few minutes thereafter that he finally ordered the speed to go down to 14 knots, and to put
ballast water to the starboard-heeling tank to arrest the continuous listing at portside. By then, his
moves became an exercise in futility because, according to the BMI, the vessel was already
listing to her portside between 15 to 20 degrees, which was almost the maximum angle of the
vessel's loll. It then became inevitable for the vessel to lose her stability.

The BMI concluded that the captain had executed several starboard maneuvers despite the
critical situation of the vessel, and that the maneuvers had greatly added to the tilting of the
vessel. It observed:ChanRoblesVirtualawlibrary

x x x In the open seas, with a fast speed of 14 knots, advance maneuvers such as this would
tend to bring the body of the ship in the opposite side. In navigational terms, this
movement is described as the centripetal force. This force is produced by the water acting
on the side of the ship away from the center of the turn. The force is considered to act at
the center of lateral resistance which, in this case, is the centroid of the underwater area of
the ship's side away from the center of the turn. In the case of the Princess, when the
Captain maneuvered her to starboard, her body shifted its weight to port. Being already
inclined to an angle of 15 degrees, coupled with the instantaneous movement of the ship,
the cargoes below deck could have completely shifted its position and weight towards
portside. By this time, the ship being ravaged simultaneously by ravaging waves and
howling winds on her starboard side, finally lost her grip.53 chanroblesvirtuallawlibrary

Clearly, the petitioner and its agents on the scene acted wantonly and recklessly. Wanton and
reckless are virtually synonymous in meaning as respects liability for conduct towards
others.54Wanton means characterized by extreme recklessness and utter disregard for the rights of
others; or marked by or manifesting arrogant recklessness of justice or of rights or feelings of
others.55 Conduct is reckless when it is an extreme departure from ordinary care, in a situation in
which a high degree of danger is apparent. It must be more than any mere mistake resulting from
inexperience, excitement, or confusion, and more than mere thoughtlessness or inadvertence, or
simple inattention.56 chanrobleslaw

The actuations of the petitioner and its agents during the incident attending the unfortunate
sinking of the M/V Princess of the Orient were far below the standard of care and circumspection
that the law on common carriers demanded. Accordingly, we hereby fix the sum of
P1,000,000.00 in order to serve fully the objective of exemplarity among those engaged in the
business of transporting passengers and cargo by sea. The amount would not be excessive, but
proper. As the Court put it in Pereña v. Zarate:57
Anent the P1,000,000.00 allowed as exemplary damages, we should not reduce the amount if
only to render effective the desired example for the public good. As a common carrier, the
Perenas needed to be vigorously reminded to observe their duty to exercise extraordinary
diligence to prevent a similarly senseless accident from happening again. Only by an award of
exemplary damages in that amount would suffice to instill in them and others similarly situated
like them the ever-present need for greater and constant vigilance in the conduct of a business
imbued with public interest.58 (Bold underscoring supplied for emphasis)
WHEREFORE, the Court AFFIRMS the decision promulgated on June 27, 2005 with the
MODIFICATIONS that: (a) the amount of moral damages is fixed at P1,000,000.00; (b) the
amount of P1,000,000.00 is granted as exemplary damages; and (c) the sum of P120,000.00 is
allowed as temperate damages, all to be paid to the heirs of the late Napoleon Sesante. In
addition, all the amounts hereby awarded shall earn interest of 6% per annum from the finality of
this decision until fully paid. Costs of suit to be paid by the petitioner.

SO ORDERED. chanRoblesvirtualLawlibrary

SECOND DIVISION
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. 1 chanrobleslaw

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.2 chanrobleslaw
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.4 chanrobleslaw

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.

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.10 chanrobleslaw

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.13 chanrobleslaw
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

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.19 chanrobleslaw

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.21 chanrobleslaw

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.25 cralawredchanroblesl aw

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.27 chanrobleslaw

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.30 chanrobleslaw

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 more than 10 million pesos.31 chanrobleslaw

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.38 chanrobleslaw

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.39 chanrobleslaw

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.41 chanrobleslaw

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:
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.42 chanroblesvirtuallawlibrary

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.43 chanrobleslaw

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.
46
Jurisprudence, 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 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.51 chanrobleslaw

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.52 chanrobleslaw

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,54 chanrobleslaw
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.

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
2181,55 chanrobleslaw

WHEREFORE, the Court hereby ORDERS petitioner Torres- Madrid Brokerage, Inc. to pay
the respondent FEB Mitsui Marine Insurance Co., Inc. the following:
chanRoblesvirtualLawlibrary

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;

b. Attorney's fees in the amount of PHP 200,000.00; and cralawlawlibrary

c. Costs of suit.

Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE Torres-Madrid

Brokerage, Inc. of the above-mentioned amounts.

SO ORDERED