SECOND DIVISION

G.R. No. 242860, March 11, 2019

THE LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD

(LTFRB) AND THE DEPARTMENT OF TRANSPORTATION (DOTR), PETITIONERS,
v. HON. CARLOS A. VALENZUELA, IN HIS CAPACITY AS PRESIDING JUDGE OF
THE REGIONAL TRIAL COURT OF MANDALUYONG CITY, BRANCH 213 AND
DBDOYC, INC., RESPONDENTS.

DECISION

PERLAS-BERNABE, J.:

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

The Facts

On May 8, 2015, the Department of Transportation and Communications (DOTC), the

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

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

partnership, sole proprietor, or other form, that provides pre-arranged
transportation services for compensation using an online-enabled application
or platform technology to connect passengers with drivers using their
personal vehicles."7 Although DO 2015-11 made mention of TNVS, the term was not
clearly defined until June 19, 2017, when the DOTr issued DO 2017-11 8 which set the
rules and procedures on the issuance of franchises for public transport routes and
services,9 including TNCs and TNVS. Under DO 2017-11, TNVS is defined as "a [PUV]
accredited with a [TNC], which is granted authority or franchise by the LTFRB
to run a public transport service."10 DO 2017-11 further provided in Item 2.2
thereof that "[m]otorcycles x x x are likewise not allowed as public transport
conveyance."11

Consequently, the LTFRB issued various memorandum circulars 12 to govern the
issuance of the necessary CPC for a TNVS and the accreditation of a TNC. In its
issuances, the LTFRB declared that a TNC is treated as a transport provider.13 whose
accountability commences from the acceptance by its TNVS while online. 14 On the other
hand, the accountability of the TNVS, as a common carrier, attaches from the time the
TNVS is online and offers its services to the riding public. 15

Meanwhile, on May 26, 2016, DBDOYC registered its business with the Securities and
Exchange Commission (SEC), and subsequently, in December 2016, launched
"Angkas," an online and on-demand motorcycle-hailing mobile application
(Angkas or Angkas app) that pairs drivers of motorcycles with potential passengers
without, however, obtaining the mandatory certificate of TNC accreditation from the
LTFRB. In this regard, DBDOYC accredited Angkas drivers and allowed them to offer
their transport services to the public despite the absence of CPCs. 16

Cognizant of the foregoing, the LTFRB issued a press release on January 27, 2017
informing the riding public that DBDOYC, which is considered as a TNC, cannot legally
operate.17 Despite such warning, however, DBDOYC continued to operate and offer its
services to the riding public sans any effort to obtain a certificate of TNC accreditation. 18

In response, DBDOYC, on July 4, 2018, filed a Petition for Declaratory Relief with
Application for Temporary Restraining Order/Writ of Preliminary Injunction 19 against
petitioners before the RTC alleging that:

(a) it is not a public transportation provider since Angkas app is a mere tool that

connects the passenger and the motorcycle driver; (b) Angkas and its drivers are not
engaged in the delivery of a public service; (c) alternatively, should it be determined
that it is performing a public service that requires the issuance of a certificate of
accreditation and/or CPC, then DO 2017-11 should be declared invalid because it
violates Section 7 of Republic Act No. (RA) 4136 or the "Land and Transportation Traffic
Code,"20 which does not prohibit motorcycles from being used as a PUV; and (d) neither
the LTFRB nor the DOTr has jurisdiction to regulate motorcycles for hire. 21

The RTC Proceedings and The Assailed Order

In an Order22 dated July 13, 2018, the RTC issued a Temporary Restraining Order (TRO)
finding DBDOYC's business not subject to any regulation nor prohibited under existing
law. It added that since the use of DBDOYC's internet-based mobile application is not
contrary to law, morals, good customs, public order, or public policy, 23 a clear and
unmistakable right has been established in favor of DBDOYC such that if petitioners
prohibit the operation of Angkas, the same would cause irreparable injury to the
company.24

Proceedings were thereafter conducted relative to the application for a writ of

preliminary injunction. Eventually, through the Assailed Order, 25 the RTC issued the said
writ to enjoin petitioners and anyone acting on their behalf: (a) from interfering,
whether directly or indirectly, with DBDOYC's operations; (b) from
apprehending Angkas bikers who are in lawful pursuit of their trade or occupation based
on Angkas mobile application; and (c) from performing any act/acts that will impede,
obstruct, frustrate, or defeat DBDOYC's pursuit of its lawful business or trade as owner
and operator of Angkas.26
In so ruling, the RTC found that DBDOYC has a clear and unmistakable right "to
conduct its business based on its constitutional right to liberty," which includes "the
right of an individual to x x x earn his livelihood by any lawful calling; [and] to pursue
any [vocation] and essentially to do and perform anything unless otherwise prohibited
by law."27 In this light, the RTC concluded that DBDOYC has a right to enter into an
independent contract with its Angkas riders as an application provider, further
reiterating that DBDOYC's business is not yet subject to any regulation nor prohibited
by any existing law, and that the Angkas biker's offer of transportation services to a
potential passenger is a purely private arrangement using DBDOYC's
application.28 Thus, should petitioners prohibit DBDOYC from operating Angkas, an
irreparable injury will result, thereby entitling it to the issuance of the injunctive relief
prayed for.29

Aggrieved, petitioners are now before the Court ascribing grave abuse of discretion on
the part of the RTC in issuing the writ of preliminary injunction through the Assailed
Order. Notably, in the present petition, petitioners sought the issuance of a TRO to
enjoin the RTC from enforcing its injunctive writ, which the Court granted in a
Resolution30 dated December 5, 2018.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the RTC committed grave
abuse of discretion amounting to lack or in excess of jurisdiction in issuing a writ of
preliminary injunction in favor of DBDOYC and against petitioners.

The Court's Ruling

Preliminarily, despite the absence of the required prior motion for reconsideration, 31 the
Court finds it proper to give due course to the petition in view of the public interest
involved, and further, the urgent necessity of resolving this case so as not to prejudice
the interests of the government.32

The petition is meritorious.

Case law states that "grave abuse of discretion arises when a lower court or tribunal
patently violates the Constitution, the law or existing jurisprudence." 33 According to its
classic formulation:
By grave abuse of discretion is meant capricious and whimsical exercise of judgment as
is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be
grave abuse of discretion as when the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so patent and so gross
as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law. 34
In ruling on whether or not the RTC gravely abused its discretion in this case, the Court
turns to the basic principles governing the issuance of preliminary injunctive writs.

The first and foremost requisite in the issuance of a writ of preliminary injunction is
the existence of a clear legal right. The rationale therefor hews with the nature of
these writs being mere provisional reliefs. In Department of Public Works and Highways
v. City Advertising Ventures Corporation,35 the Court explained that a writ of
preliminary injunction is issued to:
[P]revent threatened or continuous irremediable injury to some of the parties before
their claims can be thoroughly studied and adjudicated. Its sole aim is to preserve the
status quo until the merits of the case can be heard fully[.] Thus, it will be issued
only upon a showing of a clear and unmistakable right that is
violated. Moreover, an urgent necessity for its issuance must be shown by the
applicant.36 (Emphasis and underscoring supplied)
In Spouses Nisce v. Equitable PCI Bank, Inc.,37 the Court held that "[t]he plaintiff
praying for a writ of preliminary injunction must x x x establish[, inter alia,] that he or
she has a present and unmistakable right to be protected; x x x [t]hus, where the
plaintiffs right is doubtful or disputed, a preliminary injunction is not proper.
The possibility of irreparable damage without proof of an actual existing right is not a
ground for a preliminary injunction."38

In this case, the RTC premised its issuance of the assailed injunctive writ on DBDOYC's
purported clear and unmistakable legal right "to conduct its business based on its
constitutional right to liberty."39 Prescinding therefrom, the RTC concludes that DBDOYC
has "the right to enter into an independent contract with its Angkas bikers as an
[application] provider [without] initially requiring it to secure [a CPC]." 40

As in all fundamental rights, the State has a legitimate interest in regulating these
rights when their exercise clearly affects the public. To recount, "[p]olice power is the
inherent power of the State to regulate or to restrain the use of liberty and property for
public welfare."41 Accordingly, the State "may interfere with personal liberty, property,
lawful businesses and occupations to promote the general welfare [as long as] the
interference [is] reasonable and not arbitrary." 42

Here, it is petitioners' position that  DBDOYC is a transportation provider  and its

accredited drivers are common carriers engaged in rendering public service which
is subject to their regulation.43 The regulatory measures against DBDOYC, as mentioned
above, pertain to DOs 2015-11 and 2017-11, which have created new classifications of
transportation services, namely TNC and TNVS, in light of modern innovations. These
issuances may be traced to Commonwealth Act No. 146,44 otherwise known as the
"Public Service Act," as amended.45 Under Section 13 (b) thereof, a "public service" is
defined as follows:
(b) The term "public service" includes every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad, street railway,
traction railway, sub-way motor vehicle, either for freight or passenger, or both
with or without fixed route and whatever may be its classification, freight or
carrier service of any class, express service, steamboat or steamship line, pontines,
ferries, and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine railway, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas electric light, heat and power, water supply and
power, petroleum, sewerage system, wire or wireless communications system, wire or
wireless broadcasting stations and other similar public services; Provided, however,
That a person engaged in agriculture, not otherwise a public service, who owns a motor
vehicle and uses it personally and/or enters into a special contract whereby said motor
vehicle is offered for hire or compensation to a third party or third [parties] engaged in
agriculture, not itself or themselves a public service, for operation by the latter for a
limited time and for a specific purpose directly connected with the cultivation of his or
their farm, the transportation, processing, and marketing of agricultural products of
such third party or third parties shall not be considered as operating a public service for
the purposes of this Act. (Emphases and underscoring supplied).
Section 15 of the same law requires that, except for certain exemptions, no public
service shall operate in the Philippines without possessing a CPC. 46 In turn, the then
DOTC (which had supervision and control over the LTFRB that had assumed certain
powers of the old Public Service Commission47 ) issued DO 97-1097 providing for the
standard classifications of all PUVs before they can be issued a CPC. This department
order was later amended by the above-stated DOs 2015-11 and 2017-11 and
thereafter, the LTFRB issued various memorandum circulars governing the rules for
TNC and TNVS accreditation, which rules DBDOYC purportedly failed to comply.

As stated in the Public Service Act, the term "public service" covers any person who
owns, operates, manages, or controls in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier.48 The Civil Code defines "common
earners" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air for compensation, offering their services to
the public. (Emphases supplied)
For its part, DBDOYC claims reprieve from the above-stated regulatory measures,
claiming that it and its accredited drivers are not common carriers or transportation
providers.49 It argues that "[its] technology [only] allows a biker willing to give a ride
and a passenger willing to pay the set price to meet and contract with each other.
Under this set-up, an Angkas biker does not offer his/her service to an indefinite
public."50Since the application "merely pairs an Angkas biker with a potential passenger
under a fare scheme which [DBDOYC] fixes for both, [DBDOYC] may not compel
an Angkas driver to pick up a potential passenger even after the latter confirms a
booking because as between the biker and the passenger, there is but a purely private
contractual arrangement."51

However, it seems that DBDOYC's proffered operations is not enough to extricate its
business from the definition of common carriers, which, as mentioned, fall under the
scope of the term "public service." As the DBDOYC itself describes, Angkas is a mobile
application which seeks to "pair an available and willing Angkasbiker with a potential
passenger, who requested for a motorcycle ride, relying on geo-location
technology."52Accordingly, it appears that it is practically functioning as a booking
agent, or at the very least, acts as a third-party liaison for its accredited bikers.
Irrespective of the application's limited market scope, i.e., Angkas users, it remains
that, on the one hand, these bikers offer transportation services to wiling public
consumers, and on the other hand, these services may be readily accessed by anyone
who chooses to download the Angkas app.

In De Guzman v. Court of Appeals,53 the Court discussed the relation between Article
1732 of the Civil Code and Section 13 (b) of the Public Service Act, explaining that
Article 1732 of the Civil Code does not distinguish between a carrier who offers its
services to the general public and one who offers services or solicits business only from
a narrow segment of the general population:
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public," i.e.,
the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that
Article [1732] deliberately refrained from making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be

seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. x x x. 54 (Emphases
and underscoring supplied)
In this relation, DBDOYC posits that its accredited bikers are private carriers as they do
not hold out their services generally to the public because they cannot just be hailed on
the street as they only contract via the Angkas online front. However, the Court is hard-
pressed to rule - at least at this point, and for the purpose of determining the validity of
the writ of preliminary injunction - that these bikers are only private carriers who may
publicly ply their trade without any regulation. As the Court observes, the genius behind
the Angkas app is that it removes the inconvenience of having to physically hail for
public transportation by creating a virtual system wherein practically the same activity
may now be done at the tip of one's fingers. As it is the trend of modern technology,
previously cumbersome mundane activities, such as paying bills, ordering food, or
reserving accommodations, can now be accomplished through a variety of online
platforms. By DBDOYC's own description, 55 it seems to be that Angkas app is one of
such platforms. As such, the fact that its drivers are not physically hailed on the street
does not automatically render Angkas-accredited drivers as private carriers.

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.

Carpio, Senior Associate Justice, (Chairperson), Caguioa, J. Reyes, Jr., and Lazaro-

Javier, JJ., concur.

Endnotes:

1
 With Very Urgent Prayer for the Issuance of a Temporary Restraining Order and/or
Writ of Preliminary Injunction; rollo, pp. 3-57.

2
 Id. at 219-225.

3
 Entitled "FURTHER AMENDING DEPARTMENT ORDER NO. 97-1097 TO PROMOTE
MOBILITY" (see rollo, pp. 226-231).

4
 Entitled "PROVIDING STANDARD CLASSIFICATION FOR ALL PUBLIC TRANSPORT
CONVEYANCES," issued on September 29, 1997.

5
 See Section 15 of Commonwealth Act No. 146, entitled "AN ACT TO REORGANIZE THE
PUBLIC SERVICE COMMISSION, PRESCRIBE ITS POWERS AND DUTIES, DEFINE AND
REGULATE PUBLIC SERVICES, PROVIDE AND FIX THE RATES AND QUOTA OF
EXPENSES TO BE PAID BY THE SAME, AND FOR OTHER PURPOSES," otherwise known
as the "PUBLIC SERVICE ACT" (November 7, 1936).

6
 See rollo, pp. 229-230.

7
 Id. at 229; emphasis supplied.

8
 Entitled "OMNIBUS GUIDELINES ON THE PLANNING AND IDENTIFICATION OF PUBLIC
ROAD TRANSPORTATION SERVICES AND FRANCHISE ISSUANCE" (see rollo, pp. 232-
249).
9
Rollo, p. 232.

10
 See Item 1.34 of DO 2017-11 (rollo, p. 233); emphasis supplied.

11
 Item 2.2 of DO 2017-11 reads in full:

2.2 Hierarchy and Classification of Public Transportation Modes

As a matter of policy, the modes of transportation shall follow the hierarchy of roads.
Thus, higher capacity transportation modes shall have priority in terms of CPC
allocation and transit right of way in trunk lines or main thoroughfares over lower
capacity modes. Taxis, TNVS, tourist transport services, and shuttle services are
excluded as they are considered door-to-door services and do not have specific routes.
Thus, as a general rule, assigning higher capacity modes to routes currently traversed
by lower capacity modes in the Local Public Transport Route Plan may be allowed, but
not otherwise.

The operation of tricycles shall be in accordance with Joint Memorandum Circular No. 1,
series of 2008 of the DILG and the DOTC, which states that tricycle operation should
only be confined along city or municipal roads, not along national roads and is limited
only to routes not traversed by higher modes of public transport. Motorcycles and
other farm implements such as the kuliglig are likewise not allowed as public
transport conveyance. Further basis of the provision of this mode should also be the
LPTRP [(Local Public Transport Route Plan; No. 1.15)]. (Emphasis and underscoring
supplied)
12
 These include: LTFRB Memorandum Circular No. 2015-015-A or the "RULES AND
REGULATIONS TO GOVERN THE ACCREDITATION OF TRANSPORTATION NETWORK
COMPANIES," issued on October 23, 2017 (see rollo, pp. 250-253); LTFRB
Memorandum Circular No. 2015-016-A or the "TERMS AND CONDITIONS OF A
CERTIFICATE OF TRANSPORTATION NETWORK COMPANY ACCREDITATION," issued on
October 23, 2017 (see rollo, pp. 254-257); LTFRB Memorandum Circular No. 2015-017
or the "IMPLEMENTING GUIDELINES ON THE ACCEPTANCE OF APPLICATIONS FOR A
CERTIFICATE OF PUBLIC CONVENIENCE TO OPERATE A TRANSPORTATION NETWORK
VEHICLE SERVICE," issued on May 28, 2015 (see rollo, pp. 258-260); and LTFRB
Memorandum Circular No. 2015-018-A or the "TERMS AND CONDITIONS OF A
CERTIFICATE OF PUBLIC CONVENIENCE TO OPERATE A TRANSPORTATION NETWORK
VEHICLE SERVICE," issued on October 23, 2017 (see rollo, pp. 261-263).

13
 See LTFRB Memorandum Circular No. 2015-015-A (see rollo, p. 250).

14
 See LTFRB Memorandum Circular No. 2015-016-A (see rollo, p. 254).

15
 See LTFRB Memorandum Circular No. 2015-018-A (see rollo, p. 261).

16
 See rollo, pp. 13-14 and 604.

17
 See id. at 14.

18
 Id.

19
 Dated June 26, 2018. Id. at 86-123.
20
 Pertinent portions of Section 7 of RA 4136, entitled "AN ACT TO COMPILE THE LAWS
RELATIVE TO LAND TRANSPORTATION AND TRAFFIC RULES, TO CREATE A LAND
TRANSPORTATION COMMISSION AND FOR OTHER PURPOSES" (June 20, 1964), read:
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.

xxxx

For the purpose of this section, a vehicle habitually used to carry freight not belonging
to the registered owner thereof, or passengers not related by consanguinity or affinity
within the fourth civil degree to such owner, shall be conclusively presumed to be "for
hire."

xxxx
21
 See rollo, pp. 97-120.

22
 Id. at 299-305.

23
 See id. at 303.

24
 Id at 304.

25
 Referring to the Order dated August 20, 2018; id. at 219-225.

26
 Id. at 224.

27
 Id. at 223.

28
 See id.

29
 See id. at 224.

30
 Id. at 502-503. See also TRO dated December 5, 2018; id. at 502-506.

31
 See Malay ang Manggagawa ng Stayfast Phils., Inc. v. National Labor Relations
Commission, 716 Phil. 500, 514 (2013).

32
 See id. at 514-515.

33
The Office of the Ombudsman v. Valencerina, 739 Phil. 11, 24 (2014).

34
Department of Public Works and Highways v. City Advertising Ventures Corporation,
799 Phil. 47, 62 (2016).
35
 Id.

36
 Id.

37
 545 Phil. 138 (2007).

38
 Id. at 160-161.

39
Rollo, p. 223.

40
 Id.

41
Manila Memorial Park, Inc. v. Secretary of the Department of Social Welfare and
Development, 722 Phil. 538, 575 (2013).

42
 Id. at 575-576.

43
Rollo, p. 31.

44
 Entitled "AN ACT TO REORGANIZE THE PUBLIC SERVICE COMMISSION, PRESCRIBE
ITS POWERS AND DUTIES, DEFINE AND REGULATE PUBLIC SERVICES, PROVIDE AND
FIX THE RATES AND QUOTA OF EXPENSES TO BE PAID BY THE SAME, AND FOR OTHER
PURPOSES" (November 7, 1936).

45
 As Amended by RA 2677, entitled "AN ACT TO AMEND SECTIONS TWO, THREE,
FOUR, TEN, THIRTEEN, AND AND FOURTEEN OF COMMONWEALTH ACT NUMBERED ONE
HUNDRED FORTY-SIX, AS AMEN OTHERWISE KNOWN AS THE PUBLIC SERVICE ACT,
AND FOR OTHER PURPOSES" (June 18, 1960).

46
 Section 15 of CA 146 (as amended by Commonwealth Act No. 454, entitled "AN ACT
TO AMEND VARIOUS SECTIONS OF COMMONWEALTH ACT NUMBERED ONE HUNDRED
AND FORTY-SIX, KNOWN AS THE PUBLIC SERVICE ACT" [June 8, 1939]) pertinently
reads:
Section 15. With the exception of those enumerated in the preceding section, no public
service shall operate in the Philippines without possessing a valid and
subsisting certificate from the Public Service Commission, known as
"certificate of public convenience," or "certificate of convenience and public
necessity," as the case may be, to the effect that the operation of said service and the
authorization to do business will promote the public interests in a proper and suitable
manner.

x x x x (Emphasis supplied)
47
 See Executive Order No. 202, entitled "CREATING THE LAND TRANSPORTATION
FRANCHISING AND REGULATORY BOARD" (June 19, 1987).

48
 See Section 1 of RA 1270, entitled "AN ACT TO AMEND SECTION THIRTEEN OF
COMMONWEALTH ACT NUMBERED ONE HUNDRED AND FORTY-SIX, OTHERWISE
KNOWN AS THE PUBLIC SERVICE ACT, AS AMENDED BY COMMONWEALTH ACT
NUMBERED FOUR HUNDRED AND FIFTY-FOUR" (June 14, 1955), Amending Section 13
of Commonwealth Act No. 146. See also Section 1 of RA 2677.
49
 See Comment dated December 17, 2018; rollo, p. 635.

50
 Id. at 100; underscoring supplied.

51
 Id. at 100-101; underscoring supplied.

52
 Id. at 99.

53
 250 Phil. 613 (1988).

54
 Id. at 618-619.

55
 See rollo, pp. 91 and 604.

56
 Id. at 642.

57
De Guzman v. Court of Appeals, supra note 53, at 618.

58
 "It is elementary that rules and regulations issued by administrative bodies to
interpret the law which they are entrusted to enforce, have the force of law, and are
entitled to great respect. Administrative issuances partake of the nature of a statute
and have in their favor a presumption of legality. As such, courts cannot ignore
administrative issuances especially when, as in this case, its validity was not put in
issue. Unless an administrative order is declared invalid, courts have no option but to
apply the same." (Landbank of the Philippines v. Celada, 515 Phil. 467, 479 [2006]).

59
 623 Phil. 596 (2009). 

60
 Id. at 600-601.

61
Bank of the Philippine Islands v. Hontanosas, Jr., 737 Phil. 38, 59-60 (2014); citations
omitted.

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
1967  and renewed by the Energy Regulatory Board in 1992. 
1 2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent
City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal
year 1993 pursuant to the Local Government Code . The respondent City Treasurer assessed
3

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
complaint  for tax refund with prayer for writ of preliminary injunction against respondents
6

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.   On November 29, 1995, the respondent court rendered a
10

decision   affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion
11

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.  Petitioner moved for a reconsideration which was granted by this Court
13

in a Resolution   of January 22, 1997. Thus, the petition was reinstated.
14

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  we 16

ruled that:

The above article (Art. 1732, Civil Code) makes no distinction

between one whose principal business activity is the carrying of
 persons or goods or both, and one who does such carrying only
as an ancillary activity (in local idiom, as a "sideline"). Article
1732 . . . avoids making any distinction between a person or
enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population,
and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article
1877 deliberately refrained from making such distinctions.

So understood, the concept of "common carrier" under Article

1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service"
includes:

every person that now or hereafter may own,

operate. manage, or control in the Philippines, for
hire or compensation, with general or limited
clientele, whether permanent, occasional or
accidental, and done for general business
purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any
class, express service, steamboat, or steamship
line, pontines, ferries and water craft, engaged in
the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock,
ice plant, ice-refrigeration plant, canal, irrigation
system gas, electric light heat and power, water
supply andpower petroleum, sewerage system,
wire or wireless communications systems, wire or
wireless broadcasting stations and other similar
public services. (Emphasis Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air. It
does not provide that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:
 Art. 86. Pipe line concessionaire as common carrier. — A pipe
line shall have the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obligated to
utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by
others for transport, and to charge without discrimination such
rates as may have been approved by the Secretary of
Agriculture and Natural Resources.

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of
Article 7 thereof provides:

that everything relating to the exploration for and exploitation of

petroleum . . . and everything relating to the manufacture,
refining, storage, or transportation by special methods of
petroleum, is hereby declared to be a public utility. (Emphasis
Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:

. . . since [petitioner] is a pipeline concessionaire that is

engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387 . . . .
Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:

Sec. 133. Common Limitations on the Taxing Powers of Local

Government Units. — Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:

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 Revenue Code.   To tax petitioner again on its
19

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.

Bellosillo, Puno and Mendoza, JJ., concur. 

Footnotes

1 Rollo, pp. 90-94.

2 Decision of the Energy Regulatory Board in ERB Case No. 92-94, renewing
the Pipeline Concession of petitioner First Philippine Industrial Corporation,
formerly known as Meralco Securities Industrial Corporation. (Rollo, pp. 95-
100).

3 Sec. 143. Tax on Business. The municipality may impose taxes on the

following business:

xxx xxx xxx

(e) On contractors and other independent contractors, in accordance with the

following schedule:

With gross receipts for the preceding Amount of Tax Per Annum

calendar year in the amount of

......

P2, 000,000.00 or more at a rate not exceeding fifty

percent (50%) of one percent (1%)

4 Letter Protest dated January 20, 1994, Rollo, pp. 110-111.

5 Letter of respondent City Treasurer, Rollo, p. 112.

6 Complaint, Annex "C", Rollo, pp. 51-56.

7 Rollo, pp. 51-57.

8 Answer, Annex "J", Rollo, pp. 122-127.

9 RTC Decision, Rollo, pp. 58-62.

10 Rollo, p. 84.

11 CA-G.R. SP No. 36801; Penned by Justice Jose C. De la Rama and

concurred in by Justice Jaime M. Lantin and Justice Eduardo G.
Montenegro; Rollo, pp. 33-47.

12 Rollo, p. 49.
13 Resolution dated November 11, 1996 excerpts of which are hereunder
quoted:

"The petition is unmeritorious

"As correctly ruled by respondent appellate court, petitioner is not a common

carrier as it is not offering its services to the public.

"Art. 1732 of the Civil Code defines Common Carriers as: persons,
corporations, 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.

"We sustain the view that petitioner is a special carrier. Based on the facts on
hand, it appears that petitioner is not offering its services to the public.

"We agree with the findings of the appellate court that the claim for exemption
from taxation must be strictly construed against the taxpayer. The present
understanding of the concept of "common carries" does not include carriers of
petroleum using pipelines. It is highly unconventional to say that the business
of transporting petroleum through pipelines involves "common carrier"
business. The Local Government Code intended to give exemptions from local
taxation to common carriers transporting goods and passengers through
moving vehicles or vessels and not through pipelines. The term common
carrier under Section 133 (j) of the Local Government Code must be given its
simple and ordinary or generally accepted meaning which definitely not
include operators of pipelines."

14 G.R. No. 125948 (First Philippine Industrial Corporation vs. Court of

Appeals, et. al.) — Considering the grounds of the motion for reconsideration,
dated December 23, 1996, filed by counsel for petitioner, of the resolution of
November 11, 1996 which denied the petition for review on certiorari, the Court
Resolved:

(a) to GRANT the motion for reconsideration and to REINSTATE the petition;
and

(b) to require respondent to COMMENT on the petition, within ten (10) days
from notice.

15 Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5.

16 168 SCRA 617-618 [1988].

17 Giffin v. Pipe Lines, 172 Pa. 580, 33 Alt. 578; Producer Transp. Co. v.
Railroad Commission, 241 US 228, 64 L ed 239, 40 S Ct 131.

18 Journal and Record of the House of Representatives, Fourth Regular

Session, Volume 2, pp. 87-89, September 6, 1990; Emphasis Ours.

19 Annex "D" of Petition, Rollo, pp. 101-109.

 FIRST DIVISION

[G.R. No. 141910. August 6, 2002.]

FGU INSURANCE CORPORATION, Petitioner, v. G.P. SARMIENTO TRUCKING

CORPORATION and LAMBERT M. EROLES, Respondents.

DECISION

VITUG, J.:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty
(30) units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by
Lambert Eroles, from the plant site of Concepcion Industries, Inc., along South
Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan
City. While the truck was traversing the north diversion road along McArthur highway in
Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to
fall into a deep canal, resulting in damage to the cargoes. chanrob1es virtua1 1aw 1ibrary

FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion

Industries, Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in
turn, being the subrogee of the rights and interests of Concepcion Industries, Inc.,
sought reimbursement of the amount it had paid to the latter from GPS. Since the
trucking company failed to heed the claim, FGU filed a complaint for damages and
breach of contract of carriage against GPS and its driver Lambert Eroles with the a
Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted
that GPS was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and
it was not so engaged in business as a common carrier. Respondents further claimed
that the cause of damage was purely accidental.

The issues having thus been joined, FGU presented its evidence, establishing the extent
of damage to the cargoes and the amount it had paid to the assured. GPS, instead of
submitting its evidence, filed with leave of court a motion to dismiss the complaint by
way of demurrer to evidence on the ground that petitioner had failed to prove that it
was a common carrier. chanrob1es virtua1 1aw 1ibrary

The trial court, in its order of 30 April 1996, 1 granted the motion to dismiss, explaining
thusly: jgc:chanrobles.com.ph

"Under Section 1 of Rule 131 of the Rules of Court, it is provided that ‘Each party must
prove his own affirmative allegation, . . .’

"In the instant case, plaintiff did not present any single evidence that would prove that
defendant is a common carrier.

"x       x       x

"Accordingly, the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss,
damage or deterioration of goods during transport under 1735 of the Civil Code is not
availing.

"Thus, the laws governing the contract between the owner of the cargo to whom the
plaintiff was subrogated and the owner of the vehicle which transports the cargo are
the laws on obligation and contract of the Civil Code as well as the law on quasi delicts.

"Under the law on obligation and contract, negligence or fault is not presumed. The law
on quasi delict provides for some presumption of negligence but only upon the
attendance of some circumstances. Thus, Article 2185 provides: chanrob1es virtual 1aw library

‘Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a
motor vehicle has been negligent if at the time of the mishap, he was violating any
traffic regulation.’

"Evidence for the plaintiff shows no proof that defendant was violating any traffic
regulation. Hence, the presumption of negligence is not obtaining.

"Considering that plaintiff failed to adduce evidence that defendant is a common carrier
and defendant’s driver was the one negligent, defendant cannot be made liable for the
damages of the subject cargoes." 2 

The subsequent motion for reconsideration having been denied, 3 plaintiff interposed an
appeal to the Court of Appeals, contending that the trial court had erred (a) in holding
that the appellee corporation was not a common carrier defined under the law and
existing jurisprudence; and (b) in dismissing the complaint on a demurrer to evidence.
virtua1 1aw 1ibrary
chanrob1es

The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The
appellate court, in its decision of 10 June 1999, 4 discoursed, among other things, that
—

". . . in order for the presumption of negligence provided for under the law governing
common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that
the appellee is a common carrier. Should the appellant fail to prove that the appellee is
a common carrier, the presumption would not arise; consequently, the appellant would
have to prove that the carrier was negligent.

"x       x       x

"Because it is the appellant who insists that the appellees can still be considered as a
common carrier, despite its limited clientele, (assuming it was really a common carrier),
it follows that it (appellant) has the burden of proving the same. It (plaintiff-appellant)
‘must establish his case by a preponderance of evidence, which means that the
evidence as a whole adduced by one side is superior to that of the other.’ (Summa
Insurance Corporation v. Court of Appeals, 243 SCRA 175). This, unfortunately, the
appellant failed to do — hence, the dismissal of the plaintiffs complaint by the trial court
is justified.

"x       x       x
"Based on the foregoing disquisitions and considering the circumstances that the
appellee trucking corporation has been ‘its exclusive contractor, hauler since 1970,
defendant has no choice but to comply with the directive of its principal,’ the inevitable
conclusion is that the appellee is a private carrier. chanrob1es virtua1 1aw 1ibrary

"x       x       x

". . . the lower court correctly ruled that ‘the application of the law on common carriers
is not warranted and the presumption of fault or negligence on the part of a common
carrier in case of loss, damage or deterioration of good[s] during transport under
[article] 1735 of the Civil Code is not availing.’ . . .

"Finally, We advert to the long established rule that conclusions and findings of fact of a
trial court are entitled to great weight on appeal and should not be disturbed unless for
strong and valid reasons." 5 

Petitioner’s motion for reconsideration was likewise denied; 6 hence, the instant
petition, 7 raising the following issues: chanrob1es virtual 1aw library

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS

DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE.

II

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE

CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS
PROTECTIVE CUSTODY AND POSSESSION.

III

WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT

CASE.

On the first issue, the Court finds the conclusion of the trial court and the Court of
Appeals to be amply justified. GPS, being an exclusive contractor and hauler of
Concepcion Industries, Inc., rendering or offering its services to no other individual or
entity, cannot be considered a common carrier. 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 hire or compensation, offering
their services to the public, 8 whether to the public in general or to a limited clientele in
particular, but never on an exclusive basis. 9 The true test of a common carrier is the
carriage of passengers or goods, providing space for those who opt to avail themselves
of its transportation service for a fee. 10 Given accepted standards, GPS scarcely falls
within the term "common carrier." cralaw virtua1aw library
The above conclusion notwithstanding, GPS cannot escape from liability.

In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the
failure of its compliance justify, prima facie, a corresponding right of relief. 11 The law,
recognizing the obligatory force of contracts, 12 will not permit a party to be set free
from liability for any kind of misperformance of the contractual undertaking or a
contravention of the tenor thereof. 13 A breach upon the contract confers upon the
injured party a valid cause for recovering that which may have been lost or suffered.
The remedy serves to preserve the interests of the promisee that may include his
"expectation interest," which is his interest in having the benefit of his bargain by being
put in as good a position as he would have been in had the contract been performed, or
his "reliance interest," which is his interest in being reimbursed for loss caused by
reliance on the contract by being put in as good a position as he would have been in
had the contract not been made; or his "restitution interest," which is his interest in
having restored to him any benefit that he has conferred on the other party. 14 Indeed,
agreements can accomplish little, either for their makers or for society, unless they are
made the basis for action. 15 The effect of every infraction is to create a new duty, that
is, to make recompense to the one who has been injured by the failure of another to
observe his contractual obligation 16 unless he can show extenuating circumstances,
like proof of his exercise of due diligence (normally that of the diligence of a good
father of a family or, exceptionally by stipulation or by law such as in the case of
common carriers, that of extraordinary diligence) or of the attendance of fortuitous
event, to excuse him from his ensuing liability.cralaw : red

Respondent trucking corporation recognizes the existence of a contract of carriage

between it and petitioner’s assured, and admits that the cargoes it has assumed to
deliver have been lost or damaged while in its custody. In such a situation, a default
on, or failure of compliance with, the obligation — in this case, the delivery of the goods
in its custody to the place of destination — gives rise to a presumption of lack of care
and corresponding liability on the part of the contractual obligor the burden being on
him to establish otherwise. GPS has failed to do so.

Respondent driver, on the other hand, without concrete proof of his negligence or fault,
may not himself be ordered to pay petitioner. The driver, not being a party to the
contract of carriage between petitioner’s principal and defendant, may not be held liable
under the agreement. A contract can only bind the parties who have entered into it or
their successors who have assumed their personality or their juridical position. 17
Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract
can neither favor nor prejudice a third person. Petitioner’s civil action against the driver
can only be based on culpa aquiliana, which, unlike culpa contractual, would require the
claimant for damages to prove negligence or fault on the part of the defendant. 18 

A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a
defendant liable where the thing which caused the injury complained of is shown to be
under the latter’s management and the accident is such that, in the ordinary course of
things, cannot be expected to happen if those who have its management or control use
proper care. It affords reasonable evidence, in the absence of explanation by the
defendant, that the accident arose from want of care. 19 It is not a rule of substantive
law and, as such, it does not create an independent ground of liability. Instead, it is
regarded as a mode of proof, or a mere procedural convenience since it furnishes a
substitute for, and relieves the plaintiff of, the burden of producing specific proof of
negligence. The maxim simply places on the defendant the burden of going forward
with the proof. 20 Resort to the doctrine, however, may be allowed only when (a) the
event is of a kind which does not ordinarily occur in the absence of negligence; (b)
other responsible causes, including the conduct of the plaintiff and third persons, are
sufficiently eliminated by the evidence; and (c) the indicated negligence is within the
scope of the defendant’s duty to the plaintiff. 21 Thus, it is not applicable when an
unexplained accident may be attributable to one of several causes, for some of which
the defendant could not be responsible. 22 chanrob1es virtua1 1aw 1ibrary

Res ipsa loquitur generally finds relevance whether or not a contractual relationship
exists between the plaintiff and the defendant, for the inference of negligence arises
from the circumstances and nature of the occurrence and not from the nature of the
relation of the parties. 23 Nevertheless, the requirement that responsible causes other
than those due to defendant’s conduct must first be eliminated, for the doctrine to
apply, should be understood as being confined only to cases of pure (non-contractual)
tort since obviously the presumption of negligence in culpa contractual, as previously so
pointed out, immediately attaches by a failure of the covenant or its tenor. In the case
of the truck driver, whose liability in a civil action is predicated on culpa acquiliana,
while he admittedly can be said to have been in control and management of the vehicle
which figured in the accident, it is not equally shown, however, that the accident could
have been exclusively due to his negligence, a matter that can allow, forthwith, res ipsa
loquitur work against him.

If a demurrer to evidence is granted but on appeal the order of dismissal is reversed,

the movant shall be deemed to have waived the right to present evidence. 24 Thus,
respondent corporation may no longer offer proof to establish that it has exercised due
care in transporting the cargoes of the assured so as to still warrant a remand of the
case to the trial court.
chanrob1es virtua1 1aw library

WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of
Makati City, and the decision, dated 10 June 1999, of the Court of Appeals, are
AFFIRMED only insofar as respondent Lambert M. Eroles is concerned, but said assailed
order of the trial court and decision of the appellate court are REVERSED as regards
G.P. Sarmiento Trucking Corporation which, instead, is hereby ordered to pay FGU
Insurance Corporation the value of the damaged and lost cargoes in the amount of
P204,450.00. No costs.

SO ORDERED.

Davide, Jr., C.J., Kapunan, Ynares-Santiago and Austria-Martinez, JJ., concur.

Endnotes:

1. Rollo, p. 14.
2. Rollo, pp. 14-15.

3. Rollo, p. 17

4. Rollo, p. 20.

5. Rollo, pp. 24-28.

6. Rollo, p. 32.

7. Rollo, p. 3.

8. Article 1732, Civil Code.

9. Sec. 13[b], Public Service Act as amended; see also Guzman v. Court of Appeals,
G.R. L-47822, 22 December 1988.

10. National Steel Corporation v. Court of Appeals, 283 SCRA 45.

11. Calalas v. Court of Appeals, 332 SCRA 356; Sabena Belgian World Airlines v. Court
of Appeals, 255 SCRA 38.

12. See Articles 1159, 1308, 1315, 1356, Civil Code.

13. Anson on Contracts, 1939, p. 424; 17A Am Jur 2d, p. 728 citing Parks v. Parks, 187
P2d 145.

14. Restatement, Second, Contracts, §344.

15. Fuller and Purdue, The Reliance Interest in Contract Damages, 46 Yale L.J.61
(1936).

16. Richardson on Contracts, 1951, p. 309.

17. Article 1311, Civil Code.

18. Calalas v. Court of Appeals, supra; See Article 2176, Civil Code.

19. Africa v. Caltex (Phils.) Inc., 16 SCRA 448; Layugan v. Intermediate Appellate
Court, 167 SCRA 376.

20. Ramos v. Court of Appeals, 321 SCRA 600.

21. Sangco, Torts and Damages V.1, 1993, p. 29, citing 58 Am Jur 2d, pp. 56-58. See
Ramos v. Court of Appeals, supra.

22. Words and Phrases Vol. 37, p. 483.

23. 57B Am Jur 2d, p. 496.

24. Section 1, Rule 35, Rules of Court; Section 1, Rule 33, 1997 Rules of Civil
Procedure.

G.R. No. 200289               November 25, 2013

WESTWIND SHIPPING CORPORATION, Petitioner, 

vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.

x-----------------------x

G.R. No. 200314

ORIENT FREIGHT INTERNATIONAL INC., Petitioner, 

vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.

DECISION

PERALTA, J.:

These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of the 1997
Rules of Civil Procedure, September 13, 2011 Decision  and January 19, 2012 Resolution  of the
1 2

Court of Appeals (CA) in CA-G.R. CV No. 86752, which reversed and set aside the January 27,
2006 Decision  of the Manila City Regional Trial Court Branch (RTC) 30. The facts, as established by
3

the records, are as follows:

On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation (SMC). The
shipment, covered by Bill of Lading No. KBMA-1074,  was loaded and received clean on board M/V
4

Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind Shipping Corporation
(Westwind).

SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for US
Dollars: One Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven
Centavos (US$184,798.97), which, at the time, was equivalent to Philippine Pesos: Six Million Two
Hundred Nine Thousand Two Hundred Forty-Five and Twenty-Eight Centavos (₱6,209,245.28).

The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the custody
of the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services, Inc.  During the
5

unloading operation, however, six containers/skids worth Philippine Pesos: One Hundred Seventeen
Thousand Ninety-Three and Twelve Centavos (₱117,093.12) sustained dents and punctures from
the forklift used by the stevedores of Ocean Terminal Services, Inc. (OTSI) in centering and shuttling
the containers/skids. As a consequence, the local ship agent of the vessel, Baliwag Shipping
Agency, Inc., issued two Bad Order Cargo Receipt dated September 1, 1993.

On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC,
withdrew from ATI the 197 containers/skids, including the six in damaged condition, and delivered
the same at SMC’s warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was
discovered upon discharge that additional nine containers/skids valued at Philippine Pesos: One
Hundred Seventy-Five Thousand Six Hundred Thirty-Nine and Sixty-Eight Centavos (₱175,639.68)
were also damaged due to the forklift operations; thus, making the total number of 15
containers/skids in bad order.

Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI, and OFII
to recover the amount corresponding to the damaged 15 containers/skids. When UCPB paid the
total sum of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven Hundred Thirty-Two and
Eighty Centavos (₱292,732.80), SMC signed the subrogation receipt. Thereafter, in the exercise of
its right of subrogation, UCPB instituted on August 30, 1994 a complaint for damages against
Westwind, ATI, and OFII. 6

After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind, ATI, and OFII.
It ruled that the right, if any, against ATI already prescribed based on the stipulation in the 16 Cargo
Gate Passes issued, as well as the doctrine laid down in International Container Terminal Services,
Inc. v. Prudential Guarantee & Assurance Co. Inc.  that a claim for reimbursement for damaged
7

goods must be filed within 15 days from the date of consignee’s knowledge. With respect to
Westwind, even if the action against it is not yet barred by prescription, conformably with Section 3
(6) of the Carriage of Goods by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court
of Appeals, et al.  and Belgian Overseas Chartering and Shipping N.V. v. Phil. First Insurance Co.,
8

Inc.,  the court a quo still opined that Westwind is not liable, since the discharging of the cargoes
9

were done by ATI personnel using forklifts and that there was no allegation that it (Westwind) had a
hand in the conduct of the stevedoring operations. Finally, the trial court likewise absolved OFII from
any liability, reasoning that it never undertook the operation of the forklifts which caused the dents
and punctures, and that it merely facilitated the release and delivery of the shipment as the customs
broker and representative of SMC.

On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its September 13,
2011 Decision directed:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision dated
January 27, 2006 rendered by the court a quo is REVERSED AND SET ASIDE. Appellee Westwind
Shipping Corporation is hereby ordered to pay to the appellant UCPB General Insurance Co., Inc.,
the amount of One Hundred Seventeen Thousand and Ninety-Three Pesos and Twelve Centavos
(Php117,093.12), while Orient Freight International, Inc. is hereby ordered to pay to UCPB the sum
of One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine Pesos and Sixty-Eight Centavos
(Php175,639.68). Both sums shall bear interest at the rate of six (6%) percent per annum, from the
filing of the complaint on August 30, 1994 until the judgment becomes final and executory.
Thereafter, an interest rate of twelve (12%) percent per annum shall be imposed from the time this
decision becomes final and executory until full payment of said amounts.

SO ORDERED. 10

While the CA sustained the RTC judgment that the claim against ATI already prescribed, it rendered
a contrary view as regards the liability of Westwind and OFII. For the appellate court, Westwind, not
ATI, is responsible for the six damaged containers/skids at the time of its unloading. In its rationale,
which substantially followed Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.,  it
11

concluded that the common carrier, not the arrastre operator, is responsible during the unloading of
the cargoes from the vessel and that it is not relieved from liability and is still bound to exercise
extraordinary diligence at the time in order to see to it that the cargoes under its possession remain
in good order and condition. The CA also considered that OFII is liable for the additional nine
damaged containers/skids, agreeing with UCPB’s contention that OFII is a common carrier bound to
observe extraordinary diligence and is presumed to be at fault or have acted negligently for such
damage. Noting the testimony of OFII’s own witness that the delivery of the shipment to the
consignee is part of OFII’s job as a cargo forwarder, the appellate court ruled that Article 1732 of the
New Civil Code (NCC) does not distinguish between one whose principal business activity is the
carrying of persons or goods or both and one who does so as an ancillary activity. The appellate
court further ruled that OFII cannot excuse itself from liability by insisting that JBL undertook the
delivery of the cargoes to SMC’s warehouse. It opined that the delivery receipts signed by the
inspector of SMC showed that the containers/skids were received from OFII, not JBL. At the most,
the CA said, JBL was engaged by OFII to supply the trucks necessary to deliver the shipment, under
its supervision, to SMC.

Only Westwind and OFII filed their respective motions for reconsideration, which the CA denied;
hence, they elevated the case before Us via petitions docketed as G.R. Nos. 200289 and 200314,
respectively.

Westwind argues that it no longer had actual or constructive custody of the containers/skids at the
time they were damaged by ATI’s forklift operator during the unloading operations. In accordance
with the stipulation of the bill of lading, which allegedly conforms to Article 1736 of the NCC, it
contends that its responsibility already ceased from the moment the cargoes were delivered to ATI,
which is reckoned from the moment the goods were taken into the latter’s custody. Westwind adds
that ATI, which is a completely independent entity that had the right to receive the goods as
exclusive operator of stevedoring and arrastre functions in South Harbor, Manila, had full control
over its employees and stevedores as well as the manner and procedure of the discharging
operations.

As for OFII, it maintains that it is not a common carrier, but only a customs broker whose
participation is limited to facilitating withdrawal of the shipment in the custody of ATI by overseeing
and documenting the turnover and counterchecking if the quantity of the shipments were in tally with
the shipping documents at hand, but without participating in the physical withdrawal and loading of
the shipments into the delivery trucks of JBL. Assuming that it is a common carrier, OFII insists that
there is no need to rely on the presumption of the law – that, as a common carrier, it is presumed to
have been at fault or have acted negligently in case of damaged goods – considering the undisputed
fact that the damages to the containers/skids were caused by the forklift blades, and that there is no
evidence presented to show that OFII and Westwind were the owners/operators of the forklifts. It
asserts that the loading to the trucks were made by way of forklifts owned and operated by ATI and
the unloading from the trucks at the SMC warehouse was done by way of forklifts owned and
operated by SMC employees. Lastly, OFII avers that neither the undertaking to deliver nor the
acknowledgment by the consignee of the fact of delivery makes a person or entity a common carrier,
since delivery alone is not the controlling factor in order to be considered as such.

Both petitions lack merit.

The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.  applies, as it settled
12

the query on which between a common carrier and an arrastre operator should be responsible for
damage or loss incurred by the shipment during its unloading. We elucidated at length:

Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them. Subject to
certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in the possession of,
and received by the carrier for transportation until the same are delivered, actually or constructively,
by the carrier to the consignee, or to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for
the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port
of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading,
unless agreed otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the Court interpreted
the ship captain’s liability as ultimately that of the shipowner by regarding the captain as the
representative of the shipowner.

Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the
carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such
goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities
set forth in the Act. Section 3 (2) thereof then states that among the carriers’ responsibilities are to
properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

xxxx

On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on
the wharf or between the establishment of the consignee or shipper and the ship's tackle. Being the
custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of
the goods and to turn them over to the party entitled to their possession.

Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees
should observe the standards and measures necessary to prevent losses and damage to shipments
under its custody.

In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the relationship
and responsibility of an arrastre operator to a consignee of a cargo, to quote:

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor
and warehouseman. The relationship between the consignee and the common carrier is similar to
that of the consignee and the arrastre operator. Since it is the duty of the ARRASTRE to take good
care of the goods that are in its custody and to deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are
therefore charged with and obligated to deliver the goods in good condition to the consignee.
(Emphasis supplied) (Citations omitted)

The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of
Appeals with the clarification that the arrastre operator and the carrier are not always and
necessarily solidarily liable as the facts of a case may vary the rule.

Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator and a
carrier may not be held solidarily liable at all times. But the precise question is which entity had
custody of the shipment during its unloading from the vessel?

The aforementioned Section 3 (2) of the COGSA states that among the carriers’ responsibilities are
to properly and carefully load, care for and discharge the goods carried. The bill of lading covering
the subject shipment likewise stipulates that the carrier’s liability for loss or damage to the goods
ceases after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain
liable for the cargo from the time it is turned over to him until its delivery at the port of unloading.

In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled that like
the duty of seaworthiness, the duty of care of the cargo is non-delegable, and the carrier is
accordingly responsible for the acts of the master, the crew, the stevedore, and his other agents. It
has also been held that it is ordinarily the duty of the master of a vessel to unload the cargo and
place it in readiness for delivery to the consignee, and there is an implied obligation that this shall be
accomplished with sound machinery, competent hands, and in such manner that no unnecessary
injury shall be done thereto. And the fact that a consignee is required to furnish persons to assist in
unloading a shipment may not relieve the carrier of its duty as to such unloading.

xxxx

It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under
the custody of the carrier x x x.
13

In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines),
Inc.  and Asian Terminals, Inc. v. Philam Insurance Co., Inc.,  the Court echoed the doctrine that
14 15

cargoes, while being unloaded, generally remain under the custody of the carrier. We cannot agree
with Westwind’s disputation that "the carrier in Wallem clearly exercised supervision during the
discharge of the shipment and that is why it was faulted and held liable for the damage incurred by
the shipment during such time." What Westwind failed to realize is that the extraordinary
responsibility of the common carrier lasts until the time the goods are actually or constructively
delivered by the carrier to the consignee or to the person who has a right to receive them. There is
actual delivery in contracts for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is given him to remove the
goods.  In this case, since the discharging of the containers/skids, which were covered by only one
16

bill of lading, had not yet been completed at the time the damage occurred, there is no reason to
imply that there was already delivery, actual or constructive, of the cargoes to ATI. Indeed, the
earlier case of Delsan Transport Lines, Inc. v. American Home Assurance Corp.  serves as a useful
17

guide, thus:

Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because
the same had already been actually and legally delivered to Caltex at the time it entered the shore
tank holds no water. It had been settled that the subject cargo was still in the custody of Delsan
because the discharging thereof has not yet been finished when the backflow occurred. Since the
discharging of the cargo into the depot has not yet been completed at the time of the spillage when
the backflow occurred, there is no reason to imply that there was actual delivery of the cargo to the
consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank of
Caltex on shore, there was legally, at that moment, a complete delivery thereof to Caltex. To be
sure, the extraordinary responsibility of common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by, the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the consignee, or to a person who
has the right to receive them. The discharging of oil products to Caltex Bulk Depot has not yet been
finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the
responsibility to guard and preserve the goods, a duty incident to its having the goods transported.

To recapitulate, common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case. The mere proof of
delivery of goods in good order to the carrier, and their arrival in the place of destination in bad
order, make out a prima facie case against the carrier, so that if no explanation is given as to how
the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove
that the loss was due to accident or some other circumstances inconsistent with its liability. 18
The contention of OFII is likewise untenable. A customs broker has been regarded as a common
carrier because transportation of goods is an integral part of its business.  In Schmitz Transport &
19

Brokerage Corporation v. Transport Venture, Inc.,  the Court already reiterated: It is settled that
20

under a given set of facts, a customs broker may be regarded as a common carrier.  Thus, this
1âwphi1

Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals held:

The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier,
as defined under Article 1732 of the Civil Code, to wit, Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their services to the public.

xxxx

Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required by law is bereft of merit.
It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of goods
is an integral part of a customs broker, the customs broker is also a common carrier. For to declare
otherwise "would be to deprive those with whom [it] contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel
of petitioner’s business." 21

That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric
Panganiban Cueto, that part of the services it offers to clients is cargo forwarding, which includes the
delivery of the shipment to the consignee.  Thus, for undertaking the transport of cargoes from ATI
22

to SMC’s warehouse in Calamba, Laguna, OFII is considered a common carrier. As long as a

person or corporation holds itself to the public for the purpose of transporting goods as a business, it
is already considered a common carrier regardless of whether it owns the vehicle to be used or has
to actually hire one.

As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil
Code,  extraordinary diligence in the vigilance over the goods  it transports according to the peculiar
23 24

circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted negligently unless it proves that it observed
extraordinary diligence.  In the case at bar it was established that except for the six containers/skids
25

already damaged OFII received the cargoes from ATI in good order and condition; and that upon its
delivery to SMC additional nine containers/skids were found to be in bad order as noted in the
Delivery Receipts issued by OFII and as indicated in the Report of Cares Marine Cargo Surveyors.
Instead of merely excusing itself from liability by putting the blame to ATI and SMC it is incumbent
upon OFII to prove that it actively took care of the goods by exercising extraordinary diligence in the
carriage thereof. It failed to do so. Hence its presumed negligence under Article 1735 of the Civil
Code remains unrebutted.

WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and
200314 respectively are DENIED. The September 13 2011 Decision and January 19 2012
Resolution of the Court of Appeals in CA-G.R. CV No. 86752 which reversed and set aside the
January 27 2006 Decision of the Manila City Regional Trial Court Branch 30 are AFFIRMED.

SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

LUCAS P. BERSAMIN* ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson s Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

* Designated as Acting Member in lieu of Associate Justice Marvic Mario Victor F. Leonen,
per Special Order No. 1605 dated November 20, 2013.

 Penned by Associate Justice Elihu A. Ybañez, with Associate Justices Estela M. Perlas-
1

Bernabe (now Supreme Court Associate Justice) and Remedios Salazar-Fernando,

concurring; rollo (G.R. 200289), pp. 7-29, (G.R. 200314), pp. 25-47.

2
 Rollo, (G.R. 200289), pp. 31-33; rollo (G.R. 200314), pp. 49-51.

3
 Id. at 79-88, id. at 59-68.

4
 Rollo, (G.R. 200289), p. 63.
5
 Records, p. 343.

6
 Id. at 1-8; rollo (G.R. 200289), pp. 59-62.

7
 377 Phil. 1082 (1999).

8
 96 Phil. 264 (1954).

9
 432 Phil. 567 (2002).

10
 Rollo (G.R. 200289), pp. 27-28, rollo (G.R. 200314), pp. 45-46. (Emphasis in the original)

11
 G.R. No. 165647, March 26, 2009, 582 SCRA 457.

12
 Id.

 Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc., supra note 11, at 466-
13

472. (Emphasis supplied)

14
 G.R. No. 168151, September 4, 2009, 598 SCRA 304.

15
 G.R. Nos. 181163, 181262 and 181319, July 24, 2013.

 Samar Mining Company, Inc. v. Nordeutscher Lloyd and C.F. Sharp & Company, Inc., 217
16

Phil. 497, 506 (1984), citing 11Words and Phrases 676, citing Yazoo & MVR Company v.
Altman, 187 SW 656, 657.

17
 530 Phil. 332 (2006).

18
 Delsan Transport Lines, Inc. v. American Home Assurance Corp., supra, at 340-341.

 Loadmasters Customs Services, Inc. v. Glodel Brokerage Corporation, G.R. No. 179446,
19

January 10, 2011, 639 SCRA 69, 80.

20
 496 Phil. 437 (2005).

21
 Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., supra, at 450-551.

22
 TSN, February 1, 1999, p. 11.

 Art. 1733. Common carriers, from the nature of their business and for reasons of public
23

policy, are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the circumstances of each
case. x x x x

 In Compania Maritima v. Court of Appeals (G.R. No. L-31379, August 29, 1958, 164 SCRA
24

685, 692), the meaning of "extraordinary diligence in the vigilance over goods" was
explained, thus: The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery.
 It requires common carriers to render service with the greatest skill and foresight and "to use
all reasonable means to ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage, including such methods as
their nature requires."

 Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding
25

article if the goods are lost destroyed or deteriorated common carriers are presumed to have
been at fault or to have acted negligently unless they prove that they observed extraordinary
diligence as required on Article 1733.

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. 8 chanrobleslaw

Victor Torres also filed a complaint with the National Bureau of

Investigation (NBI)  against Lapesura for "hijacking." 9 The complaint resulted in a
recommendation by the NBI to the Manila City Prosecutor's Office to prosecute
Lapesura for qualified theft.10chanrobleslaw

TMBI notified Sony of the loss through a letter dated October 10, 2000, 11 It also sent
BMT a letter dated March 29, 2001, demanding payment for the lost shipment. BMT
refused to pay, insisting that the goods were "hijacked."

In the meantime, Sony filed an insurance claim with the Mitsui, the insurer of the
goods. After evaluating the merits of the claim, Mitsui paid
Sony PHP7,293,386.23 corresponding to the value of the lost goods.12 chanrobleslaw

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. 18 chanrobleslaw

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 cralawredchanrobleslaw

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.30chanrobleslaw

Mitsui invokes as well the legal presumption of negligence against TMBI, pointing out
that TMBI simply entrusted the cargo to BMT without adopting any security measures
despite: (1) a previous hijacking incident, when TMBI lost Sony's cargo; and (2) TMBI's
knowledge that the cargo was worth 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.38chanrobleslaw

Despite TMBI's present denials, we find that the delivery of the goods is an integral,
albeit ancillary, part of its brokerage services. TMBI admitted that it was contracted to
facilitate, process, and clear the shipments from the customs authorities, withdraw
them from the pier, then transport and deliver them to Sony's warehouse in Laguna. 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.41chanrobleslaw

Lastly, TMBI's customs brokerage services - including the transport/delivery of the

cargo - are available to anyone willing to pay its fees. Given these circumstances, we
find it undeniable that TMBI is a common carrier.

Consequently, TMBI should be held responsible for the loss, destruction, or

deterioration of the goods it transports unless it results from:
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.45 chanrobleslaw

However, a stipulation diminishing or dispensing with the common carrier's liability for
acts committed by thieves or robbers who do not act with grave or irresistible threat,
violence, or force is void under Article 1745 of the Civil Code for being contrary to
public policy. 46Jurisprudence, too, has expanded Article 1734's five exemptions. De
Guzman v. Court of  Appeals47 interpreted Article 1745 to mean that a robbery attended
by "grave or irresistible threat, violence or force" is a fortuitous event that absolves the
common carrier from liability.

In the present case, the shipper, Sony, engaged the services of TMBI, a common
carrier, to facilitate the release of its shipment and deliver the goods to its warehouse.
In turn, TMBI subcontracted a portion of its obligation - the delivery of the cargo - to
another common carrier, BMT.

Despite the subcontract, TMBI remained responsible for the cargo. Under Article 1736,
a common carrier's extraordinary responsibility over the shipper's goods lasts from the
time these goods are unconditionally placed in the possession of, and received by, the
carrier for transportation, until they are delivered, actually or constructively, by
the carrier to the consignee. 48 chanrobleslaw

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.52chanrobleslaw

On the other hand, the plaintiff in culpa aquiliana  must clearly establish the defendant's
fault or negligence because this is the very basis of the action. 53 Moreover, if the injury
to the plaintiff resulted from the act or omission of the defendant's employee or
servant, the defendant may absolve himself by proving that he observed the diligence
of a good father of a family to prevent the damage, 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

Carpio, (Chairperson), Del Castillo, and Leonen, JJ., concur.

Mendoza, J.,  on official leave.

Endnotes:

1
 Penned by Associate Justice Remedios Salazar-Fernando and concurred in by
Associate Justices Celia C. Librea-Leagogo and Michael P. Elbinias.

2
 Rollo, pp. 44, 85, and 91.

3
 Id. at 43, 44.

4
 Id. at 13.

5
 Id. at 50.

6
 Id. at 44.

7
 Id. at 47, 50.

8
 Id. at 48, 50

9
 Id. at 48, 50, 97.

10
 Id. at 98.
11
 Id. at 48.

12
 Id. at 46. 

13
 Id. at 48. 

14
 Id. at 43. Id. at 53. 

16
 Id. at 54.

17
 Id at 55. 

18
 id. at 57. 

19
 Id. at 24. 

20
 Id. at 26. 

21
 Id. at 33. 

22
 Id. at 36. 

23
 Id. at 143. 

24
 Id. 

25
cralawred  Id. at 145.  

26
 Id. at 146. 

27
 Id. at 147. 

28
 Id. at 73.  

29
 Id. at 74.  

30
 Id. at 77. 

31
 Id. at 75.

32
 CIVIL CODE, Art. 1732.

33
 Id., Art. 1733.

34
 488 Phil. 430, 441 (2004).

35
  De Guzman  v. Court of Appeals,  250 Phil. 613,618 (1988).

36
 496 Phil. 437, 450 (2005).
37
 654 Phil. 67 (2011).

38
 G.R. No. 200289, 25 November 2013, 710 SCRA 544, 558-559.

39
 See TMBI's Answer to the Complaint at Rollo, p. 91 in relation to p. 85.

40
 TSN dated October 17, 2005, p. 9; rollo. p. 77.

41
  Weatwind Shipping Corporation v. UCPB General Insurance Co., Inc., supra  note 38,
at 559.

42
 CIVIL CODE, Art. 1734. 

43
 Id., Art. 1735. 

44
 Id. 

45
 Id., Art. 1744. 

46
 Id., Art. 1745.  

47
  Supra  note 35.

48
 Art. 1737, Civil Code.

49
  Rollo, pp. 109-110.

50
 Id. at 48, 50, 97.

51
  Loadmasters Custom Services, Inc. v. Glodel Brokerage Corp., 654 Phil. 67, 79
(2011). 

52
  Cangco  v. Manila Railroad Co., 38 Phil. 768, 777 (1918). 

53
 Id. at 776, citing MANRESA,  vol. 8, p. 71 [1907 ed., p. 76].

54
 Art 2180, CIVIL CODE.

THIRD DIVISION

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 causeof 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. Borja34teaches 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

Capacity  necessary living expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)

Net Earning
= ₱8,316,000
Capacity 
Respecting the award of moral damages, since respondent common carrier’s breach of contract of
carriage resulted in the death of petitioners’ son, following Article 1764 vis-à-vis Article 2206 of the
Civil Code, petitioners are entitled to moral damages.

Since respondent failed to prove that it exercised the extraordinary diligence required of common
carriers, it is presumed to have acted recklessly, thus warranting the award too of exemplary
damages, which are granted in contractual obligations if the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.37

Under the circumstances, it is reasonable to award petitioners the amount of ₱100,000 as moral
damages and ₱100,000 as exemplary damages.38 1avvphi1

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.

CONCHITA CARPIO MORALES

Associate Justice
Chairperson

WE CONCUR:

ARTURO D. BRION LUCAS P. BERSAMIN

Associate Justice Associate Justice

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.

RENATO C. CORONA
Chief Justice

Footnotes

* Additional member per Special Order No. 843 dated May 17, 2010.

1
 Records, pp. 2-6.

2
 TSN of September 12, 2002, pp. 2-22.

3
 Vide TSN of May 2, 2002, pp. 5-7; records, p. 4.

4
 Records, pp. 19-20.

5
 Id. at 21-22.

6
 Vide Complaint, supra note 1.
7
 Records, pp. 28-35.

8
 Vide TSN of February 4, 2003, pp. 6-7.

9
 Id. at 8.

10
 TSN of March 4, 2003, pp. 5-6.

11
 Records, pp. 488-496.

12
 Id. at 581-585.

 Penned by Associate Justice Normandie B. Pizarro, with the concurrence of Associate

13

Justices Edgardo P. Cruz and Fernanda Lampas Peralta; CA rollo, pp. 135-147.

14
 Id. at 190-191.

15
 Rollo, pp. 18-31.

16
 Vide Comment, id. at 60-81.

17
 G.R. No. L-47822, December 22, 1988,168 SCRA 612.

18
 Id. at 617-618.

19
 Civil Code, Art. 1733.

20
 Id., Art. 1755.

21
 Diaz v. Court of Appeals, G.R. No. 149749, July 25, 2006, 496 SCRA 468, 472.

22
 Vide records, pp. 268-276.

23
 Vide TSN of December 13, 2001, pp. 3-19.

 Lea Mer Industries, Inc. v. Malayan Insurance Co., Inc., G.R. No. 161745, September 30,
24

2005, 471 SCRA 698, 707-708.

25
 Ibid.

26
 Records, pp. 279-280.

 Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance
27

with Title XVIII of this Book concerning Damages. Article 2206 shall also apply to the death
of a passenger caused by the breach of contract by a common carrier.

28
 Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there may have been mitigating circumstances. In
addition:
 (1) The defendant shall be liable for the loss of the earning capacity of the deceased,
and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every
case be assessed and awarded by the court, unless the deceased on account of
permanent physical disability not caused by the defendant, had no earning capacity
at the time of his death;

(2) If the deceased was obliged to give support according to the provisions of article
291, the recipient who is not an heir called to the decedent's inheritance by the law of
testate or intestate succession, may demand support from the person causing the
death, for a period not exceeding five years, the exact duration to be fixed by the
court;

(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.

29
 Tiu v. Arriesgado, G.R. No. 138060, September 1, 2004, 437 SCRA 426, 451-452.

 Candano Shipping Lines, Inc. v. Sugata-on, G.R. No. 163212, March 13, 2007, 578 SCRA
30

221, 235.

 Lambert v. Heirs of Ray Castillon, G.R. No. 160709, February 23, 2005, 452 SCRA 285,
31

294.

32
 Ibid.

33
 Magbanua v. Tabusares, Jr., G.R. No. 152134, June 4, 2004, 431 SCRA 99, 104.

34
 G.R. No. 143008, June 10, 2002, 383 SCRA 341, 351.

35
 Vide records, pp. 258-259.

 For reference, vide Bangko Sentral ng Pilipinas Treasury Department Reference

36

Exchange Rate Bulletins at www.bsp.gov.ph/dbank_reports/ExchangeRates.

37
 Vide Yobido v. Court of Appeals, 346 Phil. 1, 13 (1997).

 Vide Victory Liner, Inc. v. Gammad, G.R. No. 159636, November 25, 2004, 444 SCRA
38

355, 370.

39
 Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

40
 G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95–97.