1# SPOUSES CRUZ vs. SUN HOLIDAYS, INC.

,
G.R. No. 186312
June 29, 2010

FACTS:
Spouses Dante and Leonora Cruz sued Coco Beach Island Resort after the death of their
son and his wife while aboard the now capsized M/B Coco Beach III. It was presented in
evidence that on September 11, 2000, the resort continued to ferry passengers from Puerto
Galera to Batangas, despite warnings from PAGASA that there’s a possibility of squalls due
to a weather phenomena in Luzon. The petitioners’ son took the boat trip that day. The boat
sunk and led to his, his wife’s, and two other passenger’s demise.

The petitioners posit that the respondent resort is a common carrier and insists that they are
liable to pay damages for not exercising extraordinary diligence. Also, they argued that the
transportation engaged in by the respondent is so intimately connected with their operation
of a resort as they offer it regularly to their patrons.

The respondent, on the other hand, retorted that it is not a common carrier, reasoning that it
does not ferry passengers publicly and it does not receive compensation for transporting
resort goers to and from Mindoro to Batangas. It added that even as it was not a common
carrier, it exercised due diligence as it has its own strict standards before letting a boat
venture into the sea. Lastly, it contended that the capsizing of the boat was due to a
fortuitous event.

The RTC and the CA decided that the resort is not a common carrier. The appellate court
resolved that the respondent is a private carrier, which is only required to observe ordinary
diligence in transporting passengers. It also ruled that the incident was due to a fortuitous
event.

ISSUE:
1. Whether or not the respondent is a common carrier.
2. Whether or not the respondent needs to observe extraordinary diligence.

RULINGS:
[1] Yes, the respondent resort is 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.”

As De Guzman vs Court of Appeals 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.
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.

[2] Yes, being a common carrier, the respondent needs to observe extraordinary
diligence in transporting passengers. 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.

Common carriers 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. So, when a passenger dies in the discharge of a contract of
carriage, it is presumed that the common carrier is at fault or negligent. Only evidence can
rebut the presumption.

However, 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, where
squalls are to be expected. For a fact, the squalls were expected, thus, the failure of the
respondent to prevent its boat from voyaging is contributory negligence that tears down its
defense of a fortuitous event and debunks the claim that it exercised extraordinary diligence.

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 so.

#2 A.F. Sanchez Brokerage Inc. vs CA

G.R. No. 147079, December 21, 2004

DOCTRINES
1) 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.
2) Definition of Extraordinary Diligence
3) If the improper packing is known to the carrier or his employees or is apparent upon
ordinary observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the resulting damage.

FACTS
Wyeth-Pharma GMBH shipped oral contraceptives for delivery to Manila in favor of the
consignee, Wyeth-Suaco Laboratories, Inc.

Details of the Shipment

86,800 Blisters Femenal tablets- 124 cartons -------placed in a LD3 Container
42,000 Blisters Trinordiol tablets- 20 cartons--------also placed in same LD3 Container
14,000 Blisters Nordiol tablets-place in two pallets containing 30 cartons each

Said shipment was insured by FGU Insurance which issued Marine Risk Note No. 4995.
Upon Arrival at NAIA, it was delivered to the warehouse of Phil. SKylanders Inc. (PSI) .For
the release of said cargoes, Wyeth-Suaco engaged the services of Sanchez Brokerage.

Sanchez Brokerage- 2 representatives paid storage fee which they received a receipt and
another representative which ACKNOWLEDGED that he received cargoes of three pieces in
GOOD CONDITION. The release of the cargoes were witnessed by Ruben Alonso and Tony
Akas, employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo
surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of FGU
Insurance.

Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in
Antipolo City for quality control check. A representative of Wyeth-Suaco, acknowledged the
delivery of the cargoes by affixing his signature on the delivery receipt. Upon inspection,
however, he, together with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons
containing Femenal and Nordiol tablets were in bad order. Said discovery was properly
documented.

The Elite Surveyors later issued Certificate No. CS-0731-1538/9223 whereon it was
indicated that prior to the loading of the cargoes to the broker’s trucks at the NAIA, they were
inspected and found to be in "apparent good condition." Also noted was that at the time of
delivery to the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could
account for the wetting of the 44 cartons of Femenal and Nordiol tablets. The Hizon
Laboratories Inc. issued a Destruction Report then Wyeth-Suaco issued a Notice of
Materials Rejection.

Wyeth-Suaco later demanded from Sanchez Brokerage the payment of P191,384.25

representing the value of its loss arising from the damaged tablets. As the Sanchez
Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against FGU
Insurance which paid Wyeth-Suaco the amount of P181,431.49 in settlement of its claim
under Marine Risk Note Number 4995. Wyeth-Suaco thus issued Subrogation Receipt in
favor of FGU Insurance.
On demand by FGU Insurance for payment, Sanchez Brokerage, by letter, disclaimed
liability for the damaged goods, positing that the damage was due to improper and
insufficient export packaging; that when the sealed containers were opened outside the PSI
warehouse, it was discovered that some of the loose cartons were wet, prompting its
(Sanchez Brokerage’s) representative Morales to inform the Import-Export Assistant of
Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but that the latter advised
to still deliver them to Hizon Laboratories where an adjuster would assess the damage.

FGU filed a complaint with RTC but was dismissed holding that the Survey Report prepared
by the Elite Surveyors is bereft of any evidentiary support and a mere product of pure
guesswork.

The appellate court reversed the decision of the trial court, it holding that the Sanchez
Brokerage engaged not only in the business of customs brokerage but also in the
transportation and delivery of the cargo of its clients, hence, a common carrier within the
context of Article 1732 of the New Civil Code.

Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in
good order and condition but were in a damaged state when delivered to Wyeth-Suaco, the
appellate court held that Sanchez Brokerage is presumed negligent and upon it rested the
burden of proving that it exercised extraordinary negligence not only in instances when
negligence is directly proven but also in those cases when the cause of the damage is not
known or unknown.

ISSUE
Whether or not Sanchez Brokerage can be considered as a common carrier

HELD
YES. 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.

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to
the public.

The 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. Anacleto F. Sanchez, Jr., the Manager and
Principal Broker of Sanchez Brokerage, himself testified that the services the firm offers
include the delivery of goods to the warehouse of the consignee or importer.
In this light, petitioner as a common carrier is mandated to observe, under Article 1733 of the
Civil Code, extraordinary diligence in the vigilance over the goods it transports according to
all the 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.

The concept of "extra-ordinary diligence" was explained in Compania Maritima v. Court of

Appeals:

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
sale, 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 characteristics of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as their nature requires."

In an attempt to free itself from responsibility for the damage to the goods, petitioner posits
that they were damaged due to the fault or negligence of the shipper for failing to properly
pack them and to the inherent characteristics of the goods ; and that it should not be faulted
for following the instructions of Calicdan of Wyeth-Suaco to proceed with the delivery despite
information conveyed to the latter that some of the cartons, on examination outside the PSI
warehouse, were found to be wet.

While paragraph No. 4 of Article 1734 of the Civil Code exempts a common carrier from
liability if the loss or damage is due to the character of the goods or defects in the packing or
in the containers, the rule is that if the improper packing is known to the carrier or his
employees or is apparent upon ordinary observation, but he nevertheless accepts the same
without protest or exception notwithstanding such condition, he is not relieved of liability for
the resulting damage.

If the claim of petitioner that some of the cartons were already damaged upon delivery to it
were true, then it should naturally have received the cargo under protest or with reservations
duly noted on the receipt issued by PSI. But it made no such protest or reservation.

Moreover, as observed by the appellate court, if indeed petitioner’s employees only

examined the cargoes outside the PSI warehouse and found some to be wet, they would
certainly have gone back to PSI, showed to the warehouseman the damage, and demanded
then and there for Bad Order documents or a certification confirming the damage. Or,
petitioner would have presented, as witness, the employees of the PSI from whom Morales
and Domingo took delivery of the cargo to prove that, indeed, part of the cargoes was
already damaged when the container was allegedly opened outside the warehouse.

Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day.
Instead, it asserts that some of the cargoes were already wet on delivery by PSI outside the
PSI warehouse but such notwithstanding Calicdan directed Morales to proceed with the
delivery to Hizon Laboratories, Inc

While Calicdan testified that he received the purported telephone call of Morales on July 29,
1992, he failed to specifically declare what time he received the call. As to whether the call
was made at the PSI warehouse when the shipment was stripped from the airport
containers, or when the cargoes were already in transit to Antipolo, it is not determinable.
Aside from that phone call, petitioner admitted that it had no documentary evidence to prove
that at the time it received the cargoes, a part of it was wet, damaged or in bad condition.
The 4-page weather data furnished by PAGASA on request of Sanchez Brokerage hardly
impresses, no witness having identified it and interpreted the technical terms thereof.

The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral
contraceptives were damaged by rainwater while in transit to Antipolo City is more likely
then. Sanchez himself testified that in the past, there was a similar instance when the
shipment of Wyeth-Suaco was also found to be wet by rain.

Since petitioner received all the cargoes in good order and condition at the time they were
turned over by the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a
portion thereof was found to be in bad order, it was incumbent on petitioner to prove that it
exercised extraordinary diligence in the carriage of the goods. It did not, however. Hence, its
presumed negligence under Article 1735 of the Civil Code remains unrebutted.

WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
#3 CRISOSTOMO vs. CA
G.R. No. 138334 | August 25, 2003

FACTS:
In 1991, Estela L. Crisostomo contracted the services of Caravan Travel and Tours
International, Inc. (Caravan) to arrange and facilitate her booking, ticketing and
accommodation in her Europe tour costing 74,322.70. Pursuant to said contract, Menor
(ticketing manager and niece of the petitioner) went to her aunt’s residence to deliver
Crisostomo’s travel documents and plane tickets. Crisostomo, paid in full for the package
tour. Menor then told her to be at NAIA on Saturday for her flight on board British Airways.

Without checking her travel documents, Crisostomo went to NAIA to take the flight from
Manila to Hongkong. To her dismay, she discovered that the flight she was supposed to take
had already departed the previous day. She thus called up Menor to complain.
Subsequently, Menor prevailed upon Crisostomo to take another tour – the “British
Pageant”. For this tour package, petitioner was asked anew to pay US$785.00 or
P20,881.00. She paid partially.

Upon Crisostomo’s return from Europe, she demanded from Caravan the reimbursement of
P61,421.70, Despite several demands, Caravan refused to reimburse the amount,
contending that the same was non- refundable.
Crisostomo was thus constrained to file a complaint for breach of contract of carriage and
damages in RTC Makati, which was granted. CA likewise found both parties to be at fault.
However, the appellate court held that petitioner is more negligent than respondent because
as a lawyer and well-traveled person, she should have known better than to simply rely on
what was told to her.

In the present petition, petitioner contends that respondent did not observe the standard of
care required of a common carrier when it informed her wrongly of the flight schedule. She
could not be deemed more negligent than respondent since the latter is required by law to
exercise extraordinary diligence in the fulfillment of its obligation.

ISSUE: Whether Caravan is a common carrier — NO

RULING:
By definition, a contract of carriage or transportation is one whereby a certain person or
association of persons obligate themselves to transport persons, things, or news from one
place to another for a fixed price. Such person or association of persons are regarded as
carriers and are classified as private or special carriers and common or public carriers. A
common carrier is defined under Article 1732 of the Civil Code as persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their services to the public.

It is obvious from the above definition that respondent is not an entity engaged in the
business of transporting either passengers or goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake to transport petitioner from one place to
another since its covenant with its customers is simply to make travel arrangements in their
behalf. Respondent’s services as a travel agency include procuring tickets and facilitating
travel permits or visas as well as booking customers for tours.

While petitioner concededly bought her plane ticket through the efforts of respondent
company, this does not mean that the latter ipso facto is a common carrier. At most,
respondent acted merely as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondent’s obligation to petitioner in this regard
was simply to see to it that petitioner was properly booked with the airline for the appointed
date and time. Her transport to the place of destination, meanwhile, pertained directly to the
airline.

The object of petitioner’s contractual relation with respondent is the latter’s service of
arranging and facilitating petitioner’s booking, ticketing and accommodation in the package
tour. In contrast, the object of a contract of carriage is the transportation of passengers or
goods. It is in this sense that the contract between the parties in this case was an ordinary
one for services and not one of carriage. Petitioner’s submission is premised on a wrong
assumption.

WHEREFORE, the instant petition is DENIED for lack of merit.

#4 Case Title: De Guzman vs. Court of Appeals
G.R No. L- 47822 December 22, 1988
Feliciano, J:

Doctrine: Under Article 1745 (6) above, a common carrier is held responsible — and will not
be allowed to divest or to diminish such responsibility — even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are reached where the goods
are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or
force.
Facts:
Nature: This is a petition for review in the decision of the Court of Appeal.

Factual antecedents:
1. Respondent Ernesto Cendaña, a junk dealer, was engaged in buying up used bottles
and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap
material, respondents would bring such material to Manila for resale. He utilized two
(2) six-wheeler trucks which he owned for hauling the material to Manila.
2. On the return trip to Pangasinan, the respondent would load his vehicles with cargo
which various merchants wanted delivered to differing establishments in Pangasinan.
For that service, respondents charged freight rates which were commonly lower than
regular commercial rates.
3. Sometime in November 1970, petitioner Pedro de Guzman, a merchant and
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty
filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970.
4. Only 150 boxes of Liberty filled milk were delivered to the petitioner. The other 600
boxes never reached petitioner, since the truck which carried these boxes was
hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac.
Case Proceedings
5. On 6 January 1971, petitioner commenced action against the private respondent in
the Court of First Instance of Pangasinan, demanding payment of P22,150.00, the
claimed value of the lost merchandise, plus damages and attorney's fees.
6. Petitioner argued that private respondent, being a common carrier, and having failed
to exercise the extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods
7. In his Answer, the private respondent denied that he was a common carrier and
argued that he could not be held responsible for the value of the lost goods, such
loss having been due to force majeure.
8. On 10 December 1975, the trial court rendered a Decision' finding private respondent
to be a common carrier.
9. The Court of Appeals reversed the judgment of the trial court and held that
respondent had been engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier.

Issues:
 1. W/not the private respondent was a common carrier - YES
2. W/not the hijacking if respondent’s truck was force majeure-NO
3. W/not the respondent was not liable for value of undelivered cargo -NO

Ruling:
#1 issue:

The Supreme Court held that the private respondent is a common carrier. "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":

". . . 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
classi􏰏cation, 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, ..”

In the given case, the private respondent is properly characterized as a common

carrier even though he merely "back-hauled" goods for other merchants from Manila to
Pangasinan, although such backhauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent's principal occupation
was not the carriage of goods for others.
The Court of Appeals referred to the fact that the private respondent held no
certificate of public convenience, and concluded he was not a common carrier. This is
palpable error. A certificate of public convenience is not a requisite for the incurring of
liability under the Civil Code provisions governing common carriers. That liability arises the
moment a person or firm acts as a common carrier, without regard to whether or not such
carrier has also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public convenience or other
franchise.

#2 and 3 Issue:
Under Article 1745 (6) above, a common carrier is held responsible — and will not be
allowed to divest or to diminish such responsibility — even for acts of strangers like thieves
or robbers, except where such thieves or robbers in fact acted "with grave or irresistible
threat, violence or force." We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by a private
respondent which carried the petitioner's cargo. The record shows that an information for
robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case
No. 198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando
Mesina, Oscar Oria and one John Doe. The decision of the trial court shows that the accused
acted with grave, if not irresistible, threat, violence or force.

WHEREFORE, the Petition for Review on Certiorari is hereby DENIED and the Decision of the
Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
5. FIRST PHILIPPINE INDUSTRIAL CORPORATION VS COURT OF APPEALS

G.R. No. 125948, December 29, 1998;

FACTS:

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 the petitioner to pay a local tax pursuant to the Local Government Code.

The Petitioner contends that the Company (FPIC) as a pipeline operator with a
government concession granted under the Petroleum Act 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 9h) of the Local Government Code.
Therefore, the authority to impose tax ‘on contractors and other independent
contractors’ under Section 143, Paragraph 9e) of the Local Government Code does
not include the power to levy on transportation contractors.

The Respondents contends that Petitioner cannot be considered engaged in

transportation business, thus it cannot claim exemption under Section 133 (j) of the
Local Government Code. Pipelines are not included in the term “common carrier”
which refers solely to ordinary carriers such as trucks, trains, ships and the like. The
term “common carrier” under the said code pertains to the mode or manner by which
a product is delivered to its destination.

ISSUE:

Whether or not Pipelines are included in the term of common carrier.

HELD:

YES. Article 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.
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.
#6 Erezo v. Jepte
G.R. No. L-9605; September 30, 1957
LABRADOR, J.:

FACTS:

Defendant-appellant is the registered owner of a six by six truck. While the same was being
driven by Rodolfo Espino, it collided with a taxicab. As the truck went off the street, it hit
Ernesto Erezo and another, and the former suffered injuries, as a result of which he died.
The driver was prosecuted for homicide through reckless negligence. As the amount of the
judgment could not be enforced against him (driver), plaintiff brought this action against the
registered owner of the truck, the defendant-appellant.

The defendant does not deny at the time of the fatal accident the cargo truck was registered
in his name. He however claims that the vehicle belonged to the Port Brokerage, of which he
was the broker at the time of the accident. The trucks of the corporation were registered in
his name as a convenient arrangement so as to enable the corporation to pay the
registration fee with his backpay as a pre-war government employee.

Defendant further claims that at the time of the accident, the relation of employer and
employee between the driver and defendant-appellant was not established, it having been
proved at the trial that the owner of the truck was the Port Brokerage, of which defendant-
appellant was merely a broker.

ISSUE:

1. Is defendant-appellant liable for the accident although the vehicle already belongs to
Port Brokerage?

2. Should defendant not be allowed to prove the truth, that he had sold it to another and
thus shift the responsibility for the injury to the real and actual owner?

RULING:

1. Yes. The registered owner of a certificate of public convenience is liable to the public
for the injuries or damages suffered by passengers or third persons caused by the
operation of said vehicle, even though the same had been transferred to a third person.
Defendant-appellant should be held liable to plaintiff-appellee for the injuries occasioned
to the latter because of the negligence of the driver even if the defendant-appellant was
no longer the owner of the vehicle at the time of the damage because he had previously
sold it to another.

2. No. The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no
vehicle may be used or operated upon any public highway unless the same is properly
registered. It has been stated that the system of licensing and the requirement that each
machine must carry a registration number, conspicuously displayed, is one of the
precautions taken to reduce the danger of injury to pedestrians and other travelers from
the careless management of automobiles, and to furnish a means of ascertaining the
identity of persons violating the laws and ordinances, regulating the speed and operation
of machines upon the highways. Registration is required not to make said registration the
operative act by which ownership in vehicles is transferred.

Were a registered owner allowed to evade responsibility by proving who the supposed
transferee or owner is, it would be easy for him, by collusion with others or otherwise, to
escape said responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or injury done. A
victim of recklessness on the public highways is usually without means to discover or
identify the person actually causing the injury or damage. He has no means other than by
recourse to the registration in the Motor Vehicles Office to determine who is the owner.
The protection that the law aims to extend to him would become illusory were the
registered owner given the opportunity to escape liability by disproving his ownership.

A registered owner who has already sold or transferred a vehicle has the recourse to a
third-party complaint, in the same action brought against him to recover for the damage
or injury done, against the vendee or transferee of the vehicle. The inconvenience of the
suit is no justification for relieving him of liability; said inconvenience is the price he pays
for failure to comply with the registration that the law demands and requires.
#7 Lim vs CA and Donito Gonzales
G.R. No. 125817
January 16, 2002

DOCTRINE: The thrust of the law in enjoining the kabit system is not so much as to penalize
the parties but to identify the person upon whom responsibility may be fixed in case of an
accident with the end view of protecting the riding public. The policy therefore loses its force
if the public at large is not deceived, much less involved.

FACTS:
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger
jeepney from Gomercino Vallarta, holder of a certificate of public convenience for the
operation of public utility vehicles plying the Monumento-Bulacan route. While private
respondent Gonzales continued offering the jeepney for public transport services he did not
have the registration of the vehicle transferred in his name nor did he secure for himself a
certificate of public convenience for its operation. Thus Vallarta remained on record as its
registered owner and operator.

On 22 July 1990, while the jeepney was running northbound along the North Diversion Road
somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler-truck owned by petitioner
Abelardo Lim and driven by his co-petitioner Esmadito Gunnaban. Gunnaban owned
responsibility for the accident.

Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the
heirs of the deceased passenger, and had the Ferroza automobile, one of the vehicles
Gunnaban collided with, restored to good condition. He also negotiated with private
respondent and offered to have the passenger jeepney repaired at his shop. Private
respondent however did not accept the offer so Lim offered him ₱20,000.00, the assessment
of the damage as estimated by his chief mechanic. Again, petitioner Lim's proposition was
rejected; instead, private respondent demanded a brand-new jeep or the amount of
₱236,000.00. Lim increased his bid to ₱40,000.00 but private respondent was unyielding.
Under the circumstances, negotiations had to be abandoned; hence, the filing of the
complaint for damages by private respondent against petitioners.

Petitioner's Arguments:
● Lim denied liability by contending that he exercised due diligence in the selection and
supervision of his employees
● He further asserted that as the jeepney was registered in Vallarta’s name, it was
Vallarta and not private respondent who was the real party in interest. To recognize
an operator under the kabit system as the real party in interest and to countenance
his claim for damages is utterly subversive of public policy.
● For his part, petitioner Gunnaban averred that the accident was a fortuitous event
which was beyond his control.

RTC: ruled in favor of private respondent

● In support of its decision, the trial court ratiocinated that as vendee and current owner
of the passenger jeepney private respondent stood for all intents and purposes as
the real party in interest. Even Vallarta himself supported private respondent's
 assertion of interest over the jeepney for, when he was called to testify, he
dispossessed himself of any claim or pretension on the property.
● Gunnaban was found by the trial court to have caused the accident since he
panicked in the face of an emergency. On the other hand, petitioner Lim's liability for
Gunnaban's negligence was premised on his want of diligence in supervising his
employees. It was admitted during trial that Gunnaban doubled as mechanic of the ill-
fated truck despite the fact that he was neither tutored nor trained to handle such
task
CA: affirmed the decision of the RTC
● In upholding the decision of the court a quo the appeals court concluded that while
an operator under the kabit system could not sue without joining the registered owner
of the vehicle as his principal, equity demanded that the present case be made an
exception.

ISSUE: Whether or not private respondent is the real party in interest in the suit, despite the
fact that he is not the registered owner under the certificate of public convenience.

RULING: YES. The kabit system is an arrangement whereby a person who has been
granted a certificate of public convenience allows other persons who own motor vehicles to
operate them under his license, sometimes for a fee or percentage of the earnings. Although
the parties to such an agreement are not outrightly penalized by law, the kabit system is
invariably recognized as being contrary to public policy and therefore void and inexistent
under Art. 1409 of the Civil Code.

The Court explained that the thrust of the law in enjoining the kabit system is not so much as
to penalize the parties but to identify the person upon whom responsibility may be fixed in
case of an accident with the end view of protecting the riding public. The policy therefore
loses its force if the public at large is not deceived, much less involved.

In the present case it is at once apparent that the evil sought to be prevented in enjoining the
kabit system does not exist. First, neither of the parties to the pernicious kabit system is
being held liable for damages. Second, the case arose from the negligence of another
vehicle in using the public road to whom no representation, or misrepresentation, as regards
the ownership and operation of the passenger jeepney was made and to whom no such
representation, or misrepresentation, was necessary. Thus it cannot be said that private
respondent Gonzales and the registered owner of the jeepney were in estoppel for leading
the public to believe that the jeepney belonged to the registered owner. Third, the riding
public was not bothered nor inconvenienced at the very least by the illegal arrangement. On
the contrary, it was private respondent himself who had been wronged and was seeking
compensation for the damage done to him. Certainly, it would be the height of inequity to
deny him his right.

In light of the foregoing, it is evident that private respondent has the right to proceed against
petitioners for the damage caused on his passenger jeepney as well as on his business. Any
effort then to frustrate his claim of damages by the ingenuity with which petitioners framed
the issue should be discouraged, if not repelled.
LITA ENTERPRISES, INC. v SECOND CIVIL CASES DIVISION, INTERMEDIATE
APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA,
G.R. No. L-64693 | April 27, 1984

DOCTRINE: Although not outrightly penalized as a criminal offense, the "kabit

system" is invariably recognized as being contrary to public policy and, therefore,
void and inexistent under Article 1409 of the Civil Code, It is a fundamental principle
that the court will not aid either party to enforce an illegal contract, but will leave
them both where it finds them.

FACTS:
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia,
herein private respondents, purchased in installment from the Delta Motor Sales
Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they
had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprises,
Inc., through its representative, Manuel Concordia, for the use of the latter's
certificate of public convenience in consideration of an initial payment of P1,000.00
and a monthly rental of P200.00 per taxicab unit. The aforesaid cars were thus
registered in the name of petitioner Lita Enterprises, Inc.; possession, however,
remained with the spouses Ocampo who operated and maintained the same under
the name Acme Taxi, petitioner's trade name.
About a year later, one of said taxicabs driven by their employee, Emeterio
Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the
head injuries sustained therefrom. A criminal case was eventually filed against the
driver Emeterio Martin, while a civil case for damages was instituted by Rosita
Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., whereby
it was adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for
attorney's fees. Pursuant to the decision, a writ of execution was issued and one of
the vehicles of respondent spouses was levied upon and sold at public auction for to
one the highest bidder. Another car was likewise levied upon and sold at public
auction.
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register
his taxicabs in his name by requesting the manager of petitioner Lita Enterprises,
Inc. to turn over the registration papers to him, but the latter allegedly refused.
Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila
for reconveyance of motor vehicles with damages. The court ordered defendant Lita
Enterprises to transfer the registration certificate of the three Toyota cars not levied
upon by executing a deed of conveyance in favor of the plaintiff. Plaintiff was,
however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate
of convenience. On appeal by the petitioner, the Intermediate Appellate Court
modified the decision by including as part of its dispositive portion that in the event
the condition of the three Toyota rears will no longer serve the purpose of the deed
of conveyance because of their deterioration, or because they are no longer
serviceable, or because they are no longer available, then Lita Enterprises, Inc. is
ordered to pay the plaintiffs their fair market value as of July 22, 1975.

ISSUE: Whether or not the parties are in pari delicto.

HELD:
 YES. Under American jurisdiction, the doctrine is stated thus: "The proposition
is universal that no action arises, in equity or at law, from an illegal contract; no suit
can be maintained for its specific performance, or to recover the property agreed to
be sold or delivered, or damages for its property agreed to be sold or delivered, or
damages for its violation. The rule has sometimes been laid down as though it was
equally universal, that where the parties are in pari delicto, no affirmative relief of any
kind will be given to one against the other." Moreover, Article 1412 states that:
ART. 1412. if the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed;
(1) when the fault is on the part of both contracting parties, neither may recover what
he has given by virtue of the contract, or demand the performance of the other's
undertaking.
The "kabit system" is invariably recognized as being contrary to public policy and,
therefore, void and inexistent under Article 1409 of the Civil Code. It is a fundamental
principle that the court will not aid either party to enforce an illegal contract, but will
leave them both where it finds them.
In the case at bar, the parties herein operated under an arrangement, commonly
known as the "kabit system", whereby a person who has been granted a certificate
of convenience allows another person who owns motors vehicles to operate under
such franchise for a fee. A certificate of public convenience is a special privilege
conferred by the government. Abuse of this privilege by the grantees thereof cannot
be countenanced. Upon this premise, it was flagrant error on the part of both the trial
and appellate courts to have accorded the parties relief from their predicament.
Article 1412 of the Civil Code denies them such aid.

SO ORDERED.

#9 Teja Marketing vs. Intermediate Appellate Court

G.R. No. L-65510
March 9, 1987

DOCTRINE:
- "Kabit system" is whereby a person who has been granted a certificate of public
convenience allows another person who owns motor vehicles to operate under such
franchise for a fee.
- It is not penalized as a criminal offense, however, it is invariably recognized as being
contrary to public policy and, therefore, void and inexistent under Article 1409 of the
Civil Code. It is a fundamental principle that the court will not aid either party to
enforce an illegal contract, but will leave both where it finds then. (in pari delicto)
FACTS:
On May 9, 1974, the defendant, Pedro Nale, bought from the plaintiff, Teja Marketing
a motorcycle with complete accessories and sidecar for P 8,000.00. Nale gave a down
payment of P 1,700.00 with a promise that he would pay the balance within 60 days.
However, he failed to comply with his promise and so the period of paying the balance was
extended to one year in monthly installments until January 1976 when he stopped paying.
Teja Mktg. made demands but Nale failed again, and due to this, the Teja Mktg. consulted a
lawyer and filed an action for damages.
There was a chattel mortgage that was used as a security to make it appear that the
motorcycle sold to Nale was first mortgaged to the Teja Mktg. by Angel Jaucian though the
Teja Mktg. and Angel Jaucian are one and the same. It was made to appear that way as
Nale had no franchise of his own and he attached the unit to Teja Mktg’s MCH Line. The
agreement of the parties was for the Teja Mktg. to undertake the yearly registration of the
motorcycle with the Land Transportation Commission. However, it failed to register the
motorcycle on that year on the ground that the Nale failed to comply with some
requirements.
Teja Mktg. also explained that though the ownership of the motorcycle was already
transferred to Nale, the vehicle was still mortgaged with Nale’s consent to the Rural Bank of
Camaligan for the reason that all motorcycle purchased from Teja Mktg. on credit was
rediscounted with the bank.
Pedro Nale did not dispute the sale and the outstanding balance. According to him,
he was persuaded to buy the motorcycle because of the condition that it would be registered
every year with the LTC. However, Teja Mktg. failed to register both the chattel mortgage
and the motorcycle with the LTC notwithstanding the fact that the defendant gave him
money for mortgage fee and registration fee and had the motorcycle insured. According to
him, the failure of Teja Mktg. to comply with his obligation to register the motorcycle has led
him to suffer damages when he failed to claim any insurance indemnity.
Additionally, he also denied the claim that he was hiding from Teja Mktg. the
motorcycle resulting in its not being registered. According to him, the motorcycle was being
used for transporting passengers and it kept on travelling from one place to another. The
motor vehicle sold to him was mortgaged by the plaintiff with the Rural Bank of Camaligan
without his consent and knowledge and the defendant was not even given a copy of the
mortgage deed. Next, he claims that it is not true that the motorcycle was mortgaged
because of re-discounting, for rediscounting is only true with Rural Banks and the Central
Bank. He blames Teja Mktg. for not registering the motorcycle with the LTC and for not
giving him the registration papers in spite of demands made.
The lower court found that Nale purchased the motorcycle in question, particularly for
the purpose of engaging and using the same in the transportation business and for this
purpose said trimobile unit was attached to Teja Mktg’s transportation line who had the
franchise, so much so that in the registration certificate, it appears to be the owner of the
unit. Furthermore, it appears to have been agreed, further between the plaintiff and the
defendant, that plaintiff would undertake the yearly registration of the unit in question with
the LTC. Thus, for the registration of the unit for the year 1976, per agreement, the
defendant gave to the plaintiff the amount of P82.00 for its registration, as well as the
insurance coverage of the unit.
The petitioner in this, Teja Marketing and/or Angel Jaucian, filed an action for "Sum
of Money with Damages" against private respondent Pedro N. Nale in the City Court of Naga
City. The City Court rendered judgment in favor of petitioner. On appeal to the CFI of
Camarines Sur, the decision was affirmed in toto. The private respondent filed for a petition
for review with the same court. The IAC ruled that since “kabit system” was without the
approval of the Board of Transportation and was an illegal transaction, the parties are in pari
delicto, and neither of them may bring an action against each other to enforce their illegal
contract. Thus, the petition to the Supreme Court.

ISSUE:
Whether or not the arrangement (kabit system) between the parties cannot be
considered a legal contract, thus, applying in pari delicto.

RULING:
Yes. The arrangement between the parties cannot be considered a legal contract.
This arrangement is commonly known as the "kabit system" whereby a person who has
been granted a certificate of public convenience allows another person who owns motor
vehicles to operate under such franchise for a fee. A certificate of public convenience is a
special privilege conferred by the government. Abuse of this privilege by the grantees
thereof cannot be countenanced. The "kabit system" has been Identified as one of the root
causes of the prevalence of graft and corruption in the government transportation offices.
Although not outrightly penalized as a criminal offense, the kabit system is invariably
recognized as being contrary to public policy and, therefore, void and inexistent under Article
1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to
enforce an illegal contract, but will leave both where it finds then. Upon this premise it would
be an error to accord the parties relief from their predicament. Article 1412 of the Civil Code
denies them such aid: “Art. 1412. If the act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules shall be observed: 1. When the
fault is on the part of both contracting parties, neither may recover that he has given by
virtue of the contract, or demand, the performance of the other's undertaking.”

WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of
the Intermediate Appellate Court is AFFIRMED.
#10 Nostradamus Villanueva vs. Domingo

G.R. No. 144274 | Corona, J. | September 20, 2004

Registered Owner Rule

DOCTRINE:

The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefore can be fixed on a definite individual, the registered owner.

FACTS:

Respondent Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer

Car model 1980 bearing plate No. NDW 781 '91 with co-respondent Leandro Luis R.
Domingo as authorized driver. Petitioner Nostradamus Villanueva was then the registered
"owner" of a green Mitsubishi Lancer bearing Plate No. PHK 201 '91.

Following a green traffic light, respondent’s silver Lancer car (NDW 781 '91) then
driven by co-respondent was cruising along the middle lane of South Superhighway at
moderate speed from north to south. Suddenly, a green Mitsubishi Lancer (PHK 201 '91)
driven by Renato Dela Cruz Ocfemia darted directly into the path of NDW 781 '91 thereby
hitting and bumping its left front portion. As a result of the impact, NDW 781 '91 hit 2 parked
vehicles at the roadside, the second hitting another parked car in front of it. Ocfemia was
driving with expired license and positive for alcoholic breath. Hence, Manila Assistant City
Prosecutor Oscar A. Pascua recommended the filing of information for reckless imprudence
resulting to damage to property and physical injuries. The original complaint was amended
twice: first, impleading Auto Palace Car Exchange as commercial agent and/or buyer-seller
and second, impleading Albert Jaucian as principal defendant doing business under the
name and style of Auto Palace Car Exchange. Petitioner Nostradamus Villanueva claimed
that he was no longer the owner of the car at the time of the mishap because it was
swapped with a Pajero owned by Albert Jaucian/Auto Palace Car Exchange. On the other
hand, Auto Palace Car Exchange represented by Albert Jaucian claimed that he was not the
registered owner of the car. Moreover, it could not be held subsidiary liable as employer of
Ocfemia because the latter was off-duty as utility employee at the time of the incident.
Neither was Ocfemia performing a duty related to his employment.

After trial, the trial court found petitioner liable and ordered him to pay respondent
actual, moral and exemplary damages plus appearance and attorney's fees. The CA upheld
the trial court's decision but deleted the award for appearance and attorney's fees because
the justification for the grant was not stated in the body of the decision.

ISSUE:

Whether or not the registered owner of a motor vehicle may be held liable for damages
arising from a vehicular accident involving his motor vehicle while being operated by the
employee of its buyer without the latter's consent and knowledge – YES

HELD:

The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no
vehicle may be used or operated upon any public highway unless the same is
property registered. It has been stated that the system of licensing and the requirement
that each machine must carry a registration number, conspicuously displayed, is one of the
precautions taken to reduce the danger of injury to pedestrians and other travelers from the
careless management of automobiles. The main aim of motor vehicle registration is to
identify the owner so that if any accident happens, or that any damage or injury is
caused by the vehicle on the public highways, responsibility therefore can be fixed on
a definite individual, the registered owner.

With the above policy in mind, the question that defendant-appellant poses is: should
not the registered owner be allowed at the trial to prove who the actual and real owner is,
and in accordance with such proof escape or evade responsibility by and lay the same on
the person actually owning the vehicle? We hold with the trial court that the law does not
allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of
the responsibility that the law fixes and places upon him as an incident or consequence of
registration. Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to
one who possesses no property with which to respond financially for the damage or injury
done.

The above policy and application of the law may appear quite harsh and would seem
to conflict with truth and justice. We do not think it is so. A registered owner who has
already sold or transferred a vehicle has the recourse to a third-party complaint, in
the same action brought against him to recover for the damage or injury done,
against the vendee or transferee of the vehicle. The inconvenience of the suit is no
justification for relieving him of liability; said inconvenience is the price he pays for failure to
comply with the registration that the law demands and requires.

WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the Court
of Appeals is AFFIRMED.

SO ORDERED.
#11 Spouses Hernandez et al vs. Spouses Dolor et al,

GR No. 160286, July 30, 2004

Doctrine: Solidary Liability of Employer-employee relationship exists in a “boundary system” of

jeepney operation albeit disguised as a lease agreement in relation to Art 2180 of the civil code.

Facts: On December 19, 1986 Lorenzo Menard “Boyet” Dolor Jr. was driving an owner-type
jeepney along the road at Brgy. Anilao East, Mabini, Batangas, when his vehicle collided with
passenger jeepney driven by petitioner Juan Gonzales and owned by his co-petitioner Francisco
Hernandez.

Boyet Dolor and his passenger Oscar Valmocina died, and other passengers suffered physical
injuries.

Respondents commenced an action for damages alleging that jeepney driver Juan Gonzales was
guilty of negligence and lack of care and that Hernandez spouses were guilty of negligence in the
selection and supervision of their employees.

Respondents Hernandez contend that Gonzales was not their driver-employee as Gonzales only
“leased” the passenger jeepney on a daily basis, and that even if an employer-employee
relationship is found to exist between them, they cannot be held liable as employers since they
exercised due care in the selection and supervision of their employee.

Trial Court rendered decision in favor of Spouses Dolor awarding damages to them and held
that Spouses Hernandez are solidarily liable with jeepney driver Gonzales.

Petitioners appealed the decision to the CA but such judgment was affirmed hence this petition
for certiorari.

Issue: Whether or not the CA erred when it held that the Spouses Hernandez to be solidarily
liable with jeepney driver Gonzales, although they were not in the jeepney when the accident
occurred.

Held: No. Spouses Hernandez are solidarily liable with jeepney driver Gonzales.

Petitioners contention: that their absence inside the vehicle at time of collision
militates against holding them solidarily liable invoking Art 2184 of the Civil Code, which
provides:

ARTICLE 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver,
if the former, who was in the vehicle, could have, by the use of the due diligence,
prevented the misfortune. It is disputably presumed that a driver was negligent, if he
had been found guilty of reckless driving or violating traffic regulations at least twice
within the next preceding two months.

If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.

Article 2180 provides:

ARTICLE 2180. The obligation imposed by article 2176 is demandable not only for
one's own acts or omissions, but also for those of persons for whom one is responsible.
 Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.

The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage. (long provision – see codal)

On the other hand, Article 2176 provides –

Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.

While the above provisions of law do not expressly provide for solidary liability, the same can
be inferred from the wordings of the first paragraph of Article 2180 which states that the
obligation imposed by article 2176 is demandable not only for one's own acts or omissions , but
also for those of persons for whom one is responsible.

Moreover, Article 2180 should be read with Article 2194 of the same Code, which
categorically states that the responsibility of two or more persons who are liable for quasi-
delict is solidary. In other words, the liability of joint tortfeasors is solidary. Verily, under
Article 2180 of the Civil Code, an employer may be held solidarily liable for the negligent
act of his employee

They argue that Julian Gonzales pays them a daily rental of P150.00 for the use of the jeepney. In
essence, petitioners are practicing the "boundary system" of jeepney operation albeit disguised
as a lease agreement between them for the use of the jeepney.

We hold that an employer-employee relationship exists between the Hernandez spouses

and Julian Gonzales.

Indeed to exempt from liability the owner of a public vehicle who operates it under the
"boundary system" on the ground that he is a mere lessor would be not only to abet flagrant
violations of the Public Service Law, but also to place the riding public at the mercy of reckless
and irresponsible drivers — reckless because the measure of their earnings depends largely
upon the number of trips they make and, hence, the speed at which they drive; and
irresponsible because most if not all of them are in no position to pay the damages they might
cause.

WHEREFORE, the petition is DENIED. The assailed decision of the Court of Appeals is
AFFIRMED with the MODIFICATION that the grant of attorney's fees is DELETED for lack of
basis.
FEB Leasing and Finance Corporation (now BPI Leasing Corp.) vs. Sps. Sergio P. Baylon
and Maritess Villena Baylon, et al.,
G.R. No. 181398 | June 29, 2011 | Carpio, J.

DOCTRINE: With respect to the public and third persons, the registered owner of a motor
vehicle is directly and primarily responsible for the consequences of its operation regardless of
who the actual vehicle owner might be. Well-settled is the rule that the registered owner of the
vehicle is liable for quasi-delicts resulting from its use. Thus, even if the vehicle has already been
sold, leased, or transferred to another person at the time the vehicle figured in an accident, the
registered vehicle owner would still be liable for damages caused by the accident.

FACTS:
An Isuzu oil tanker running along Del Monte Avenue, Quezon City and bearing plate
number TDY 712 hit Loretta Baylon, daughter of respondent spouses Baylon. At the time of the
accident, the oil tanker was registered in the name of petitioner FEB Leasing and Finance
Corporation. The oil tanker was leased to BG Hauler and was being driven by the latter’s driver,
M. Estilloso. The oil tanker was insured by FGU Insurance.
Upon Loretta’s death, spouses Baylon filed with the RTC a Complaint for Damages
against petitioner, BG Hauler, the driver, and FGU Insurance. Petitioner FEB claimed that their
lease contract with BG Hauler specifically provides that BG Hauler shall be liable for any loss,
damage, or injury the leased oil tanker may cause even if petitioner is the registered owner of
the said oil tanker.
RTC found FEB Leasing, BG Hauler, and driver jointly and severally liable, with the
insurer’s obligation already been fulfilled upon payment of P450,000. CA affirmed RTC’s
decision.

ISSUE: Whether or not the registered owner (FEB Leasing) of a financially leased vehicle
remains liable for loss, damage, or injury caused by the vehicle notwithstanding an exemption
provision in the financial lease contract.

RULING:
Yes. Under Section 5 of Republic Act No. 4136, as amended, all motor vehicles used or
operated on or upon any highway of the Philippines must be registered with the Bureau of Land
Transportation (now Land Transportation Office) for the current year. Furthermore, any
encumbrances of motor vehicles must be recorded with the Land Transportation Office in order
to be valid against third parties.
In accordance with the law on compulsory motor vehicle registration, this Court has
consistently ruled that, with respect to the public and third persons, the registered owner of a
motor vehicle is directly and primarily responsible for the consequences of its operation
regardless of who the actual vehicle owner might be. Well-settled is the rule that the registered
owner of the vehicle is liable for quasi-delicts resulting from its use. Thus, even if the vehicle has
already been sold, leased, or transferred to another person at the time the vehicle figured in an
accident, the registered vehicle owner would still be liable for damages caused by the accident.
The sale, transfer or lease of the vehicle, which is not registered with the Land Transportation
Office, will not bind third persons aggrieved in an accident involving the vehicle.
The policy behind the rule is to enable the victim to find redress by the expedient
recourse of identifying the registered vehicle owner in the records of the LTO. The registered
owner can be reimbursed by the actual owner, lessee or transferee who is known to him. Unlike
the registered owner, the innocent victim is not privy to the lease, sale, transfer or encumbrance
of the vehicle. Hence, the victim should not be prejudiced by the failure to register such
transaction or encumbrance.
In this case, petitioner admits that it is the registered owner of the oil tanker that figured
in an accident causing the death of Loretta. As the registered owner, it cannot escape liability for
the loss arising out of negligence in the operation of the oil tanker. Its liability remains even if at
the time of the accident, the oil tanker was leased to BG Hauler and was being driven by the
latter’s driver, and despite a provision in the lease contract exonerating the registered owner
from liability
13. Sps. Perena vs. Sps. Zarate
G.R. No. 157917. August 29, 2012
Bersamin, J.
DOCTRINE: The true test for a common carrier is not the quantity or extent of the business
actually transacted, or the number and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in by the carrier that he has held
out to the general public as his business or occupation. According to Article 1759 of the Civil
Code, their liability as a common carrier did not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employee. The
Pereñas were liable for the death of Aaron despite the fact that their driver might have acted
beyond the scope of his authority or even in violation of the orders of the common carrier.

FACTS:

The Pereñas were engaged in the business of transporting students from their respective
residences in Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. They
employed Clemente Alfaro (Alfaro) as driver of the van used for such business. The Zarates
contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996 the
van picked Aaron up around 6:00 a.m. from the Zarates' residence. Aaron took his place on
the left side of the van near the rear door. The van, with its air-conditioning unit turned on
and the stereo playing loudly, ultimately carried all the 14 student riders on their way to Don
Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and that they
were already running late because of the heavy vehicular traffic on the South Superhighway,
Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path
underneath the Magallanes Interchange that was then commonly used by Makati-bound
vehicles as a short cut into Makati. At the time, the narrow path was marked by piles of
construction materials and parked passenger jeepneys, and the railroad crossing in the
narrow path had no railroad warning signs, or watchmen, or other responsible persons
manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing
open to traversing motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302
(train), operated by Jhonny Alano (Alano), was fast approaching. Alfaro drove the van across
the railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was
blocked because he overtook the passenger bus on its left side. The train blew its horn to
warn motorists of its approach. Alano applied the emergency brakes only when he saw that
a collision was imminent, about 50 meters away from the passenger bus and the van. The
passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not.
The train hit the rear end of the van, and the impact threw nine of the 12 students in the rear,
including Aaron, out of the van. Aaron landed in the path of the train, which dragged his
body and severed his head, instantaneously killing him. Alano fled the scene on board the
train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this action
for damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their
respective answers, with cross-claims against each other, but Alfaro could not be served
with summons.

The RTC ruled in favor of the Zarates, concluding that the Perenas operated as common
carriers and are thus expected to observe extraordinary diligence. The CA affirmed the
decision.

ISSUE:

Whether or not the petitioner is a common carrier. - YES

RULING:

The operator of a school bus service is a common carrier in the eyes of the law. He is bound
to observe extraordinary diligence in the conduct of his business. He is presumed to be
negligent when death occurs to a passenger. His liability may include indemnity for loss of
earning capacity even if the deceased passenger may only be an unemployed high school
student at the time of the accident.

A carrier is a person or corporation who undertakes to transport or convey goods or persons

from one place to another, gratuitously or for hire. The carrier is classified either as a
private/special carrier or as a common/public carrier. A private carrier is one who, without
making the activity a vocation, or without holding himself or itself out to the public as ready to
act for all who may desire his or its services, undertakes, by special agreement in a
particular instance only, to transport goods or persons from one place to another either
gratuitously or for hire. The diligence required of a private carrier is only ordinary, that is, the
diligence of a good father of the family. In contrast, a common carrier is a person,
corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering such services
to the public. Contracts of common carriage are governed by the provisions on common
carriers of the Civil Code, the Public Service Act, and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is
presumed to be at fault or to have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers.

The true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in by the carrier that he has
held out to the general public as his business or occupation. If the undertaking is a
single transaction, not a part of the general business or occupation engaged in, as
advertised and held out to the general public, the individual or the entity rendering such
service is a private, not a common, carrier. The question must be determined by the
character of the business actually carried on by the carrier, not by any secret intention or
mental reservation it may entertain or assert when charged with the duties and obligations
that the law imposes.

Applying these considerations to the case before us, there is no question that the Pereñas
as the operators of a school bus service were: (a) engaged in transporting passengers
generally as a business, not just as a casual occupation; (b) undertaking to carry passengers
over established roads by the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a limited clientèle, the Pereñas
operated as a common carrier because they held themselves out as a ready
transportation indiscriminately to the students of a particular school living within or
near where they operated the service and for a fee.

The Perenas’ defense of having observed the diligence of a good father of a family in the
selection and supervision of their driver was not legally sufficient. The Pereñas, acting as a
common carrier, were already presumed to be negligent at the time of the accident because
death had occurred to their passenger. According to Article 1759 of the Civil Code, their
liability as a common carrier did not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their
employee. The Pereñas were liable for the death of Aaron despite the fact that their
driver might have acted beyond the scope of his authority or even in violation of the
orders of the common carrier. Records showed their driver's actual negligence, despite
fully aware of the risks, by crossing the railroad tracks at a point at which the PNR did not
permit motorists going into the Makati area to cross. Compounding his lack of care was that
loud music was playing inside the air-conditioned van at the time of the accident. The
loudness most probably reduced his ability to hear the warning horns of the oncoming train.
Also, he sought to overtake a passenger bus on the left side as both vehicles traversed the
railroad tracks. In so doing, he lost his view of the train that was then coming from the
opposite side of the passenger bus.

WHEREFORE, the Court AFFIRMS the decision the decision of the CA and ORDER the
petitioners to pay the costs of suit.
14. BALIWAG TRANSIT, INC., petitioner,
vs.
HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ
and GEORGE L. CAILIPAN, respondents.
G.R. No. 80447 January 31, 1989
MELENCIO-HERRERA, J.:

FACTS:
On 10 April 1985 a Complaint for damages arising from breach of contract of carriage
was filed by private respondents, the Spouses and their son George, of legal age, against
petitioner Baliwag Transit (Baliwag, for brevity).
The Complaint alleged that George, who was a paying passenger on a Baliwag bus
on 17 December 1984, suffered multiple serious physical injuries when he was thrown off
said bus driven in a careless and negligent manner by Leonardo Cruz, the authorized bus
driver, along Barangay Patubig, Marilao, Bulacan. As a result, he was confined in the
hospital for treatment, incurring medical expenses, which were borne by his parents, the
respondent Spouses, in the sum of about P200,000.00 plus other incidental expenses of
about P10,000.00.
An answer was filed by petitioner alleging that the cause of the injuries sustained by
George was due to his own voluntary act in that, without warning a, he suddenly stood up
from his seat and headed for the door of the bus as if in a daze, opened it and jumped off
while said bus was in motion, in spite of the protestations by the driver and without the
knowledge of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety
Company, Inc., on its third-party liability insurance in the amount of P50,000.00. In its
Answer, Fortune Insurance claimed limited liability, the coverage being subject to a
Schedule of Indemnities forming part of the insurance policy. On 14 November 1985 and 18
November 1985, respectively, Fortune Insurance and Baliwag each filed Motions to Dismiss
on the ground that George had executed a "Release of Claims" dated 16 May 1985. These
Motions were denied by the Trial Court in an Order dated 13 January 1986 as they were filed
beyond the time for pleading and after the Answer were already filed.
On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was
granted by the Trial Court. The Amended Answer incorporated the affirmative defense in the
Motion to Dismiss to the effect that on 16 May 1985, George had been paid all his claims for
damages arising from the incident subject matter of the complaint when he executed the
Release of Claims. In the said claim, George acknowledged the receipt of P8,020.50 and by
accepting, Fortune Insurance and/or Baliwag transit, Inc. his/her heirs, executors, and
assigns, be acquitted and discharged from any and all liability accrued or to accrue for
personal injuries, damage to property, loss of services, medical expenses, losses or
damages of any and every kind or nature whatsoever, sustained by him on 17 December
1984 thru Reckless Imprudence Resulting to Physical Injuries.
During the preliminary hearing on the aforementioned affirmative defense, Baliwag
waived the presentation of testimonial evidence and instead offered as its Exhibit "1" the
"Release of Claims" signed by George and witnessed by his brother Benjamin L. Cailipan, a
licensed engineer.
To oppose the petitioner’s defense, respondent Sotero Cailipan, Jr. testified that be is
the father of George, who at the time of the incident was a student, living with his parents
and totally dependent on them for their support; that the expenses for his hospitalization
were shouldered by his parents; and that they had not signed the "Release of Claims."
Regional Trial Court of Bulacan, Branch 20, 1 dismissed the Complaint and Third-
party Complaint, ruling that since the contract of carriage is between Baliwag and George L.
Cailipan, the latter, who is of legal age, had the exclusive right to execute the Release of
Claims despite the fact that he is still a student and dependent on his parents for support.
Consequently, the execution by George of the Release of Claims discharges Baliwag and
Fortune Insurance.
Aggrieved, the Spouses appealed to respondent Court of Appeals.
Appellate Court set aside the ruling of the RTC holding that the "Release of Claims" cannot
operate as a valid ground for the dismissal of the case because it does not have the
conformity of all the parties, particularly George's parents, who have a substantial interest in
the case as they stand to be prejudiced by the judgment because they spent a sizeable
amount for the medical bills of their son; that the Release of Claims was secured by Fortune
Insurance for the consideration of P8,020.50 as the full and final settlement of its liability
under the insurance policy and not for the purpose of releasing Baliwag from its liability as a
carrier in this suit for breach of contract. The Appellate Court also ordered the remand of the
case to the lower Court for trial on the merits and for George to return the amount of
P8,020.50 to Fortune Insurance.
Hence, this Petition for Review on certiorari.

ISSUE/S:
1. Whether or not the “Release of Claims” is valid as to discharge Baliwag from its liability
from its breach of the contract of carriage. – YES

2. Whether or not the parents of George be the real parties-in-interest in an action for breach
of the contract of carriage. - NO

RULING:
1. The Supreme Court held that since the suit is one for breach of contract of carriage,
the Release of Claims executed by him, as the injured party, discharging Fortune Insurance
and Baliwag from any and all liability is valid. He was then of legal age, a graduating student
of Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in
relation to Article 402, Civil Code). Thus, he could sue and be sued even without the
assistance of his parents.
There is no question regarding the genuineness and due execution of the Release of
Claims. It is a duly notarized public document. Consequently, the ruling of respondent
Appellate Court that the "Release of Claims" was intended only as the full and final
settlement of a third-party liability for bodily injury claim and not for the purpose of releasing
Baliwag from its liability, if any, in a breach of a contract of carriage, has to be rejected for
being contrary to the very terms thereof. If the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall
control (Article 1370, Civil Code). The phraseology "any and all claims or causes of action" is
broad enough to include all damages that may accrue to the injured party arising from the
unfortunate accident.
The Release of Claims had the effect of a compromise agreement since it was
entered into for the purpose of making a full and final compromise adjustment and
settlement of the cause of action involved. A compromise is a contract whereby the parties,
by making reciprocal concessions, avoid a litigation or put an end to one already
commenced (Article 2028, Civil Code). The Release of Claims executed by the injured party
himself wrote finish to this litigation.

2. Significantly, the contract of carriage was actually between George, as the paying
passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound to
carry its passengers safely as far as human care and foresight could provide, and is liable
for injuries to them through the negligence or wilful acts of its employees (Articles 1755 and
1759, Civil Code). Thus, George had the right to be safely brought to his destination and
Baliwag had the correlative obligation to do so. Since a contract may be violated only by the
parties thereto, as against each other, in an action upon that contract, the real parties in
interest, either as plaintiff or as defendant, must be parties to said contract. A real party-in-
interest -plaintiff is one who has a legal right while a real party-in-interest-defendant is one
who has a correlative legal obligation whose act or omission violates the legal right of the
former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988). In the absence of any contract
of carriage between Baliwag and George's parents, the latter are not real parties-in-interest
in an action for breach of that contract.
WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals
is SET ASIDE, the Decision of the Regional Trial Court of Bulacan, Branch 20, is
REINSTATED, and the Complaint and Third-Party Complaint are hereby ordered
DISMISSED. No costs.
#15 British Airways Inc. v. Court of Appeals

G.R. No. 92288

February 9, 1993

Facts:
First International Trading and General Services Co., a duly licensed domestic
recruitment and placement agency, received a telex message from its principal
ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia to recruit
Filipino contract workers on behalf of said principal.

March 1981: British Airways informed First International that they received advice from
its Jeddah branch to transport 93 workers. First International instructed ADB Travel and
Tours. Inc to bool 93 tickets with British Airways. However, the 93 workers were not able
to fly, hence they were booked to a different airline.

June 1981: British Airways once again informed First International that they received
advice from its Jeddah branch to transport 27 workers. First International informed its
travel agent to book the 27 contract workers but was only able to confirm 16 seats on
June 9. On the scheduled flight only 9 workers were able to board said flight while the
remaining 7 workers were rebooked for June 30 which was again cancelled. They were
once again rebooked for July 4 with additional 6 workers and the flight was cancelled
again and was rebooked on July 7.

On July 6 when First International paid the travel tax for 13 workers, British Airways
informed them that they can only confirm 12 seats on the July 7 flight. However, the
flight was again cancelled and was able to fly when First International purchased tickets
from different airline.

July 1981: First International wrote to British Airways demanding compensation

amounting to P 350,000.00 due to the damage it caused for several instances of flight
cancellations.

August 1981: First International received a telex message from ROLACO cancelling the
hiring of the remaining recruited workers due to the delay in transporting the workers to
Jeddah.

January 1982: First International filed a complaint for damages against petitioner with
the Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653.

Counter claims were filed by British Airways regarding the cancellation of their
scheduled flight.
RTC ruled ordering the defendant to pay the plaintiff actual (P308,016.00), moral
(P20,000.00), corrective or exemplary (P10,000.00) damages and attorney’s fee (30% of
its total claim). CA affirmed the decision of the RTC.

Issue:
Whether or Not the British Airways is liable?

Held:
YES. British Airways repeated failures to transport First International’s workers in its
flight despite confirmed booking of said workers clearly constitutes breach of contract
and bad faith on its part. In resolving petitioner's theory that private respondent has no
cause of action in the instant case, the appellate court correctly held that:
In dealing with the contract of common carriage of passengers for purpose of
accuracy, there are two (2) aspects of the same, namely: (a) the contract "to
carry (at some future time)," which contract is consensual and is necessarily
perfected by mere consent (See Article 1356, Civil Code of the Philippines), and
(b) the contract "of carriage" or "of common carriage" itself which should be
considered as a real contract for not until the carrier is actually used can the
carrier be said to have already assumed the obligation of a carrier. (Paras, Civil
Code Annotated, Vol. V, p. 429, Eleventh Ed.)

In the instant case, the contract "to carry" is the one involved which is consensual
and is perfected by the mere consent of the parties.

First International has fully complied with the obligation, namely, the payment of the fare
and its willingness for its contract workers to leave for their place of destination.

On the other hand, British Airways was remiss in its obligation to transport the contract
workers on their flight despite confirmation and bookings made by First International’s
travelling agent. British Airways should have refused acceptance of the PTA from First
International’s principal or at least informed by First International that it could not
accommodate the contract workers.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION

that the award of actual damages be deleted from said decision.

Dangwa Transportation vs. Court of Appeals

G.R. No. 95582
1991 October 7
Doctrine:
It has been repeatedly held that in an action based on a contract of carriage, the
court need not make an express finding of fault or negligence on the part of the carrier in
order to hold it responsible to pay the damages sought by the passenger. By contract of
carriage, the carrier assumes the express obligation to transport the passenger to his
destination safely and observe extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the passenger is right away
attributable to the fault or negligence of the carrier. This is an exception to the general
rule that negligence must be proved, and it is therefore incumbent upon the carrier to
prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and
1755 of the Civil Code.

Facts:
Petitioner Theodore Lardizabal was driving a passenger bus belonging to
petitioner corporation when it ran over its passenger, Pedrito Cudiamat. However,
instead of bringing Pedrito immediately to the nearest hospital, the said driver first
brought his other passengers and cargo to their respective destinations before bringing
said victim to the Lepanto Hospital where he expired. The heirs of Pedro Cudiamat then
filed a complaint for damages against petitioners to which the petitioners replied that
they had observed and continued to observe the extraordinary diligence required in the
operation of the transportation company and the supervision of the employees, even as
they add that they are not absolute insurers of the safety of the public at large. Further,
they alleged that it was the victim's own carelessness and negligence which gave rise to
the subject incident, hence they prayed for the dismissal of the complaint plus an award
of damages in their favor by way of a counterclaim.

RTC RULING: RTC ruled that Pedrito Cudiamat’s negligence was the proximate
cause of his death. RTC stated that Pedrito was negligent in trying to board a moving
vehicle, especially with one of his hands holding an umbrella. And, without having given
the driver or the conductor any indication that he wishes to board the bus.

CA RULING: CA reversed the RTC ruling. CA ruled that it is evident from

appellee’s own witness testimony that the subject bus was at full stop when the victim
boarded the same as it was precisely on this instance where a certain Miss Abenoja
alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim
did indicate his intention to board the bus as can be seen from the testimony of the said
witness when he declared that Pedrito was no longer walking and made a sign to board
the bus when the latter was still at a distance from him. It was at the instance when
Pedrito was closing his umbrella at the platform of the bus when the latter made a
sudden jerk movement (as) the driver commenced to accelerate the bus. Evidently, the
incident took place due to the gross negligence of the appellee-driver in prematurely
stepping on the accelerator and in not waiting for the passenger to first secure his seat
especially so when we take into account that the platform of the bus was at the time
slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe
their duty and obligation as common carrier to the end that they should observe extra-
ordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them according to the circumstances of each case (Article 1733, New
Civil Code).

Hence, this petition.

Issue:
Whether or not the driver and the conductor of the subject passenger bus are
guilty of negligence.

Ruling:
Yes, the driver and the conductor of the subject passenger bus are guilty of
negligence. The Supreme Court found no reason to disturb the above holding of the
Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners'
own witnesses which conclude that the bus was at full stop when the victim boarded the
same. They further confirm the conclusion that the victim fell from the platform of the
bus when it suddenly accelerated forward and was run over by the rear right tires of the
vehicle, as shown by the physical evidence on where he was thereafter found in relation
to the bus when it stopped.

In addition to that, the contention of petitioners that the driver and the conductor
had no knowledge that the victim would ride on the bus, since the latter had supposedly
not manifested his intention to board the same, is not meritorious. When the bus is not in
motion, there is no necessity for a person who wants to ride the same to signal his
intention to board. A public utility bus, once it stops, is in effect making a continuous offer
to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the
bus stops, to do no act that would have the effect of increasing the peril to a passenger
while he was attempting to board the same. The premature acceleration of the bus in
this case was a breach of such duty.

It is the duty of common carriers of passengers, including common carriers by

railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of
time in order to afford passengers an opportunity to board and enter, and they are liable
for injuries suffered by boarding passengers resulting from the sudden starting up or
jerking of their conveyances while they are doing so.

Further, even assuming that the bus was moving, the act of the victim in boarding
the same cannot be considered negligent under the circumstances. As clearly explained
in the testimony of the witness for petitioners, the bus had "just started" and "was still in
slow motion" at the point where the victim had boarded and was on its platform.

It is not negligence per se, or as a matter of law, for one attempt to board a train
or streetcar which is moving slowly. An ordinarily prudent person would have made the
attempt board the moving conveyance under the same or similar circumstances. The
fact that passengers board and alight from slowly moving vehicle is a matter of common
experience both the driver and conductor in this case could not have been unaware of
such an ordinary practice.

The victim herein, by stepping and standing on the platform of the bus, is already
considered a passenger and is entitled all the rights and protection pertaining to such a
contractual relation. Hence, it has been held that the duty which the carrier passengers
owes to its patrons extends to persons boarding cars as well as to those alighting
therefrom.

Common carriers, from the nature of their business and reasons of public policy,
are bound to observe extraordinary diligence for the safety of the passengers
transported according to all the circumstances of each case. A common carrier is bound
to carry the passengers safely as far as human care and foresight can provide, using the
utmost diligence of every cautious person, with a due regard for all the circumstances.

It has also been repeatedly held that in an action based on a contract of carriage,
the court need not make an express finding of fault or negligence on the part of the
carrier in order to hold it responsible to pay the damages sought by the passenger. By
contract of carriage, the carrier assumes the express obligation to transport the
passenger to his destination safely and observe extraordinary diligence with a
due regard for all the circumstances, and any injury that might be suffered by the
passenger is right away attributable to the fault or negligence of the carrier. This is
an exception to the general rule that negligence must be proved, and it is therefore
incumbent upon the carrier to prove that it has exercised extraordinary diligence as
prescribed in Articles 1733 and 1755 of the Civil Code.

WHEREFORE, subject to the above modifications, the challenged judgment and

resolution of respondent Court of Appeals are hereby AFFIRMED in all other respects
#17 LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN vs. MARJORIE NAVIDAD,
Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY

G.R. No. 145804 February 6, 2003

FACTS:

On October 14, 1993, about half an hour past 7p.m., Nicanor Navidad, then drunk,
entered the EDSA LRT station after purchasing a "token" (representing payment of the fare).
While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the
security guard assigned to the area approached Navidad. An altercation between them
ensued that led to a fist fight, with no evidence to indicate how the fight started nor who
attacked first. As a result, Navidad fell on the LRT tracks and an LRT train, operated by
Rodolfo Roman, came in and struck Navidad, killing him instantaneously.

The widow of Nicanor, respondent Marjorie Navidad, along with her children, filed a
complaint for damages against Escartin, Roman, and the Light Rail Transit Authority (LRTA),
the Metro Transit Organization, Inc. (Metro Transit), and Prudent Security (security
agency/employer of Escartin) for the death of her husband. The RTC ruled in favor of
Navidad and against Prudent and Escartin ordering them to pay damages and
indemnification for Navidad’s death. Prudent appealed to the CA which reversed the RTC's
decision, thereby exonerating Prudent from any liability for the death of Navidad.

Instead, the CA held that it is the LRTA and Roman who are solidarily liable for Navidad’s
death. The CA ruled that while the deceased might not have then as yet boarded the train, a
contract of carriage theretofore had already existed when the victim entered the place where
passengers were supposed to be after paying the fare and getting the corresponding token
therefor. In exempting Prudent from liability, the court stressed that there was nothing to link
the security agency to the death of Navidad. It said that Navidad failed to show that Escartin
inflicted fist blows upon the victim and the evidence merely established the fact of death of
Navidad by reason of his having been hit by the train owned and managed by the LRTA and
operated at the time by Roman. The CA faulted LRTA and Roman for their failure to present
expert evidence to establish the fact that the application of emergency brakes could not have
stopped the train. Morever, the CA ruled that the presumption of negligence on the part of a
common carrier was not overcome.
Hence, petitioners LRTA and Roman filed the instant petition assailing CA’s decision,
insisting that Escartin’s assault upon Navidad, which caused the latter to fall on the tracks,
was an act of a stranger that could not have been foreseen or prevented. Respondent
Navidad contended that a contract of carriage was deemed created from the moment
Navidad paid the fare at the LRT station and entered the premises of the latter, entitling
Navidad to all the rights and protection under a contractual relation, and that the CA had
correctly held LRTA and Roman liable for the death of Navidad in failing to exercise
extraordinary diligence imposed upon a common carrier.

ISSUE:

(1) Whether or not the LRTA, as a common carrier, exercised the extraordinary diligence
required by law and therefore exempt from any liability for Navidad’s death.

(2) Whether or not Prudent is liable.

HELD:

(1) NO. Law and jurisprudence dictate that a common carrier, both from the nature of its
business and for reasons of public policy, is burdened with the duty of exercising utmost
diligence in ensuring the safety of passengers. (See Articles 1755, 1756, 1759, and 1763
NCC).

The law requires common carriers to carry passengers safely using the utmost diligence of
very cautious persons with due regard for all circumstances. Such duty of a common carrier
to provide safety to its passengers so obligates it not only during the course of the trip but for
so long as the passengers are within its premises and where they ought to be in pursuance
to the contract of carriage. The statutory provisions render a common carrier liable for death
of or injury to passengers (a) through the negligence or wilful acts of its employees or b) on
account of wilful acts or negligence of other passengers or of strangers if the common
carrier’s employees through the exercise of due diligence could have prevented or stopped
the act or omission. In case of such death or injury, a carrier is presumed to have been at
fault or been negligent, and by simple proof of injury, the passenger is relieved of the duty to
still establish the fault or negligence of the carrier or of its employees and the burden shifts
upon the carrier to prove that the injury is due to an unforeseen event or to force majeure. In
the absence of satisfactory explanation by the carrier on how the accident occurred, which
petitioners, according to the appellate court, have failed to show, the presumption would be
that it has been at fault, an exception from the general rule that negligence must be proved.

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify
the victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the
safety of passengers, a carrier may choose to hire its own employees or avail itself of the
services of an outsider or an independent firm to undertake the task. In either case, the
common carrier is not relieved of its responsibilities under the contract of carriage.

(2) NO. If at all, that liability of Prudent could only be for tort under the provisions of Article
2176 and related provisions, in conjunction with Article 2180, of the Civil Code. The premise,
however, for the employer’s liability is negligence or fault on the part of the employee. Once
such fault is established, the employer can then be made liable on the basis of the
presumption juris tantum that the employer failed to exercise diligentissimi patris families in
the selection and supervision of its employees. The liability is primary and can only be
negated by showing due diligence in the selection and supervision of the employee, a factual
matter that has not been shown.

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that "there is
nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the
negligence of its employee, Escartin, has not been duly proven x x x." This finding of the
appellate court is not without substantial justification in our own review of the records of the
case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad is not itself a juridical relation between the
latter and Roman; thus, Roman can be made liable only for his own fault or negligence.

# 18. Asia Lighterage and Shipping, Inc. vs. Court of Appeals

G.R. No. 147246 | Puno J. | August 19, 2003

Determination of Common Carrier

DOCTRINE: “The test to determine a common carrier is “whether the given undertaking is
a part of the business engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business transacted.”

FACTS:
On June 13, 1990, a bulk of Better Western White wheat was shipped for delivery of
consignee, General Milling Corporation in Manila. Upon arrival, the cargo was transferred to
the custody of the petitioner Asia Lighterage and Shipping, which was contracted by the
consignee, as carrier to deliver the cargo to consignee’s warehouse at Bo. Ugong, Pasig
City however, it does not reach its destination. It appears that the barge carrying the cargo
was broke and the wheat completely cannot be recover.
On September 14, 1990, consignee sent a claim letter to the petitioner, and another
letter to the private respondent for the value of the lost cargo. Thereafter the subrogee, it
sought recovery of said amount from the petitioner, but to no avail. On July 3, 1991, the
private respondent filed a complaint against the petitioner for recovery of the amount of
indemnity, attorney’s fees and cost of suit.
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier.
The appellate court affirmed the decision of the trial court with modification. Petitioner’s
motion for reconsideration but was denied

ISSUE:
(1) Is petitioner a common carrier?
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary
diligence in its care and custody of the consignee’s cargo

HELD:
(1) YES. The court ruled that petitioner is a common carrier on the basis of Article 1732 of
the Civil code which defines common carries as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public. In
the case at bar, the principal business of the petitioner is that of lighterage and drayage
and it offers its barges to the public for carrying or transporting goods by water for
compensation.

We therefore hold that petitioner is a common carrier whether its carrying of goods is
done on an irregular rather than scheduled manner, and with an only limited clientele. A
common carrier need not have fixed and publicly known routes. Neither does it have to
maintain terminals or issue tickets.
 Petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals. The test to determine a common carrier is “whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business transacted.

(2) We uphold the findings of the lower courts that petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee’s goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over
the goods transported by them. They are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated.

There are, however, exceptions to this rule. Article 1734 of the Civil Code
enumerates the instances when the presumption of negligence does not attach:

Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

To overcome the presumption of negligence in the case of loss, destruction or

deterioration of the goods, the common carrier must prove that it exercised extraordinary
diligence.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-
G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 arc
hereby AFFIRMED.
#19 PLANTERS PRODUCTS, INC. vs. COURT OF APPEALS, SORIAMONT STEAMSHIP
AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA

G.R. No. 10153, September 15, 1993

FACTS:

Planters Products, Inc. (PPI) purchased from Mitsubishi International Corporation

(MITSUBISHI) of New York Urea fertilizer which the latter shipped in bulk aboard the cargo
vessel M/V “Sun Plum” owned by private respondent Kyosei Kisen Kabishuki Kaisha (KKKK)
from Kenai, Alaska, USA to Poro Point, San Fernando, La Union, Philippines, as evidenced
by a Bill of Lading signed by the master of the vessel and issued on the date of departure.
Prior to its voyage, a time charter-party on the vessel M/V “Sun Plum” pursuant to the
Uniform General Chapter was entered into between Mitsubishi as shipper/charterer and
KKKK as shipowner, in Tokyo, Japan.

Four folds of her holds were all presumably inspected by the charterer’s
representative before loading the fertilizer aboard the vessel. After the Urea fertilizer was
loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel
hatches were closed with heavy iron lids, covered with three layers of tarpaulin then tied with
steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage.
Upon arrival of the vessel at her port call, the steel pontoon hatches were opened with the
use of the vessel’s boom. Petitioner unloaded the cargo from the holds in its steelbodied
dump trucks which were parked alongside the berth, using metal scoops attached to the
ship, pursuant to the terms and conditions of the charter-party. The hatches were remained
open throughout the duration of the discharge. The port area was windy, certain portions of
the route to the warehouse were sandy and the weather was variable, raining occasionally
while the discharge was in progress. It took eleven (11) days for PPI to unload the cargo.
PPI hired a cargo surveyor, Cargo Superintendents Company, Inc. (CSCI) to determine the
“outturn” of the cargo shipped who found out that there was a shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated
with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo
prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and
about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and
dirt.

PPI filed an action for damages with the Court of First Instance of Manila. The
defendant carrier argued that the strict public policy governing common carriers does not
apply to them because they have become private carriers by reason of the provisions of the
charter-party. The court a quo however sustained the claim of the plaintiff against the carrier.
The CA reversed the lower court’s decision and absolved the carrier from liability for the
value of the cargo that was lost or damaged on the ground that the cargo vessel M/V "Sun
Plum" owned by private respondent KKKK was a private carrier and not a common carrier by
reason of the time charterer-party.

ISSUE:

Whether or not a common carrier becomes a private carrier by reason of a

charter-party.

HELD:
 NO. . When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its
officers and compliment were under the employ of the shipowner and therefore continued to
be under its direct supervision and control. Hardly then can we charge the charterer, a
stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer
did not have any control of the means in doing so. This is evident in the present case
considering that the steering of the ship, the manning of the decks, the determination of the
course of the voyage and other technical incidents of maritime navigation were all consigned
to the officers and crew who were screened, chosen and hired by the shipowner.

Article 1733 of the New Civil Code mandates that common carriers, by reason of the
nature of their business, should observe extraordinary diligence in the vigilance over the
goods they carry. In the case of private carriers, however, the exercise of ordinary diligence
in the carriage of goods will suffice. Moreover, in the case of loss, destruction or
deterioration of the goods, common carriers are presumed to have been at fault or to have
acted negligently, and the burden of proving otherwise rests on them. On the contrary, no
such presumption applies to private carriers, for whosoever alleges damage to or
deterioration of the goods carried has the onus of proving that the cause was the negligence
of the carrier.

The period during which private respondent was to observe the degree of diligence
required of it as a public carrier began from the time the cargo was unconditionally placed in
its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper,
up to and until the vessel reached its destination and its hull was reexamined by the
consignee, but prior to unloading. This is clear from the limitation clause agreed upon by the
parties in the Addendum to the standard "GENCON" time charter-party which provided for
an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to
be done by the charterer, free from all risk and expense to the carrier. Moreover, a
shipowner is liable for damage to the cargo resulting from improper stowage only when the
stowing is done by stevedores employed by him, and therefore under his control and
supervision, not when the same is done by the consignee or stevedores under the employ of
the latter. Verily, the presumption of negligence on the part of the respondent carrier has
been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by
the carrier in the care of the cargo.

Article 1734 of the New Civil Code provides that common carriers are not responsible
for the loss, destruction or deterioration of the goods if caused by the charterer of the goods
or defects in the packaging or in the containers. The Code of Commerce also provides that
all losses and deterioration which the goods may suffer during the transportation by reason
of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the
account and risk of the shipper, and that proof of these accidents is incumbent upon the
carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the
preceding causes if it is proved, as against him, that they arose through his negligence or by
reason of his having failed to take the precautions which usage has established among
careful persons.

The Court agrees with respondent carrier that bulk shipment of highly soluble goods
like fertilizer carries with it the risk of loss or damage. More so, with a variable weather
condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or
the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the
inherent character of the goods which makes it highly vulnerable to deterioration; as well as
the inadequacy of its packaging which further contributed to the loss. On the other hand, no
proof was adduced by the petitioner showing that the carrier was remise in the exercise of
due diligence in order to minimize the loss or damage to the goods it carried.
#20 Fabre. v. Court of Appeals,
G.R. No. 111127
July 26, 1996

DOCTRINE:

Article 1732 (provision on common carriers) 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. Article 1732 deliberately refrained from making such
distinctions.

FACTS:

Petitioners Engracio Fabre, Jr. and his wife were owners of a Mazda minibus principally
used in connection with a bus service for school children which they operated in Manila.
In 1981, they hired Porfirio J. Cabil as a driver whose job is to take school children to
and from St. Scholastica’s College in Malate, Manila.

On November 2, 1984, private respondent World Christian Fellowship, Inc. arranged

with the petitioners for the transportation of 33 members of its Young Adults Ministry
from Manila to Caba, La Union and back in consideration of which private respondent
paid petitioners the amount of P3,000.00. The group was scheduled to leave at 5PM but
the bus did not leave Tropical Hut at Ortigas corner EDSA until 8PM because of the late
members.

On the way to La Union, Cabil was forced to take a detour through Ba-ay, Lingayen,
Pangasinan because the bridge in the usual route (Carmen, Pangasinan) was under
repair. At 11:30pm, Cabil came upon a sharp curve on the highway. Theroad was
slippery because it was raining, causing the bus, which was running at the speed of
50kph to skid to the left road shoulder, hitting the traffic brace and sign along the road
and the fence of Jesus Escano, then turned over and landed on its left side. Several
passengers were injured, including respondent Amyline Antonio was thrown on the floor
of the bus and pinned down by a wooden seat which came off after being unscrewed.

In its decision, RTC Makati rendered judgment against petitioners Mr. & Mrs. Fabre, Jr.
and driver Cabil pursuant to articles 2176 and 2180 of the Civil Code of the Philippines
and ordered them to pay damages. On appeal, the Court of Appeals sustained the trial
court's finding that petitioner Cabil failed to exercise due care and precaution in the
operation of his vehicle considering the time and the place of the accident. The Court of
Appeals held that the Fabres were themselves presumptively negligent.
Petitioners, before the SC, argued that they are not liable because (1) an earlier
departure (made impossible by the congregation's delayed meeting) could have averted
the mishap and (2) under the contract, the WWCF was directly responsible for the
conduct of the trip.

Issue:

(1) Whether the petitioners were common carriers

(2) Whether or not petitioners were liable for the injuries suffered by the private
respondents.

Held:

1. Yes. This case involves a contract of carriage.

Art. 1732 provides that “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. Article 1732 deliberately refrained from making such distinctions.

Petitioners, the Fabres, did not have to be engaged in the business of public
transportation for the provisions of the Civil Code on common carriers to apply to them.

2. Yes. it is unnecessary to determine whether this case is to be decided on the theory

that petitioners are liable for breach of contract of carriage or culpa contractual or on the
theory of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of
Appeals held, for although the relation of passenger and carrier is "contractual both in
origin and nature," nevertheless "the act that breaks the contract may be also a tort.

The fact that it was raining and the road was slippery, that it was dark, that he drove his
bus at 50 kilometers an hour when even on a good day the normal speed was only 20
kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly
negligent and should be held liable for the injuries suffered by private respondent
Amyline Antonio. Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave
rise to the presumption that his employers, the Fabres, were themselves negligent in the
selection and supervision of their employee.

Due diligence in selection of employees is not satisfied by finding that the applicant
possessed a professional driver's license. The employer should also examine the
applicant for his qualifications, experience and record of service. Due diligence in
supervision, on the other hand, requires the formulation of rules and regulations for the
guidance of employees and the issuance of proper instructions as well as actual
implementation and monitoring of consistent compliance with the rules.

The Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider
the fact that Cabil had been driving for school children only, from their homes to the St.
Scholastica's College in Metro Manila. They had tested him for certain matters, such as
whether he could remember the names of the children he would be taking to school,
which were irrelevant to his qualification to drive on a long distance travel, especially
considering that the trip to La Union was his first.

On the other hand, Art. 1759 of the Code provides:

“Common carriers are liable for the death of or injuries to passengers through the
negligence or wilful acts of the former's employees, although such employees may have
acted beyond the scope of their authority or in violation of the orders of the common
carriers.”

As common carriers, the Fabres were bound to exercise "extraordinary diligence" for the
safe transportation of the passengers to their destination. This duty of care is not
excused by proof that they exercised the diligence of a good father of the family in the
selection and supervision of their employee. The same circumstances detailed above,
supporting the finding of the trial court and of the appellate court that petitioners are
liable under Arts. 2176 and 2180 for quasi delict, fully justify finding them guilty of breach
of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code

# 21 Bascos v Court of Appeals

G.R. No. 101089, April 7, 1993

FACTS

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short)

entered into a hauling contract with Jibfair Shipping Agency Corporation whereby the
former bound itself to haul the latter’s 2,000 m/tons of soya bean meal from Magallanes
Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna.
To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with
Estrellita Bascos (petitioner) to transport and to deliver sacks of soya bean meal from
the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner
failed to deliver the said cargo.

As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of
the lost goods. Cipriano demanded reimbursement from the petitioner but the latter
refused to pay. Eventually, Cipriano filed a complaint for a sum of money and damages
with writ of preliminary attachment for breach of a contract of carriage. Petitioner
interposed the following defenses: that there was no contract of carriage since
CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna;
that CIPTRADE was liable to petitioner for loading the cargo; that the truck carrying the
cargo was hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988;
that the hijacking was immediately reported to CIPTRADE and that petitioner and the
police exerted all efforts to locate the hijacked properties; that after preliminary
investigation, an information for robbery and carnapping were filed against Jose
Opriano, et al; and that hijacking, being a force majeure, exculpate petitioner from any
liability to CIPTRADE.

The trial court on its decision favors the plaintiff, and the CA affirms to the decision.
Hence, this case.

ISSUE
Whether or not Bascos (herein petitioner) a common carrier

RULING
YES. Article 1732 of the Civil Code defines a common carrier as “(a) person, corporation
or 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 to determine a common carrier is “whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business transacted.”
Further, the supreme court explained on its ruling that the petitioner herself has made
the admission that she was in the trucking business, offering her trucks to those with
cargo to move. Judicial admissions are conclusive and no evidence is required to prove
the same.

Regarding the affidavits presented by petitioner to the court, both the trial and appellate
courts have dismissed them as self-serving and petitioner contests the conclusion. We
are bound by the appellate court’s factual conclusions. Yet, granting that the said
evidence was not self-serving, the same were not sufficient to prove that the contract
was one of lease. It must be understood that a contract is what the law defines it to be
and not what it is called by the contracting parties. Furthermore, the petitioner presented
no other proof of the existence of the contract of lease. He who alleges a fact has the
burden of proving it.

Having affirmed the findings of the respondent Court on the substantial issues involved,
the Supreme Court finds no reason to disturb the conclusion that the motion to
lift/dissolve the writ of preliminary attachment has been rendered moot and academic by
the decision on the merits.

In the light of the foregoing analysis, it is Our opinion that the petitioner’s claim cannot be
sustained. The petition is DISMISSED and the decision of the Court of Appeals is
hereby AFFIRMED.
#23 FGU Insurance Corp. v. Sarmiento Trucking Corp.
G.R. No. 141910 | August 6, 2002

Vitug, J.

DOCTRINE:

A trucking company which is an exclusive contractor and hauler of another

company, rendering or offering its services to no other individual or entity, cannot be
considered a common carrier.

FACTS:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on thirty (30)

units of Condura S.D. white refrigerators aboard one of its Isuzu trucks, driven by
Lambert Eroles, from the plant site of Concepcion Industries, Inc., in Alabang, Metro
Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing
the road along McArthur highway in Tarlac, it collided with an unidentified truck, causing
it to fall into a deep canal, resulting in damage to the cargoes.

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, 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
Regional Trial Court. 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. GPS filed a motion to dismiss the complaint on the ground that petitioner
failed to prove that it was a common carrier.

The trial court granted the motion to dismiss, explaining that plaintiff did not
present any single evidence that would prove that defendant is a common carrier. 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, Art. 2185 provides:

‘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.’
 Plaintiff showed no proof that defendant was violating any traffic regulation.
Hence, the presumption of negligence is not obtaining.

The motion for reconsideration was denied. Plaintiff appealed to the CA,
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.

The CA rejected the appeal of petitioner and ruled in favor of GPS. The court
discoursed 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. Since the appellant failed to do so, the
dismissal of the plaintiffs complaint is justified.

ISSUE:

1. Whether or not respondent G.P. Sarmiento Trucking Corporation may be

considered as a common carrier
2. Whether or not 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

HELD:

1. No, respondent GPS is not 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, whether to the public in
general or to a limited clientele in particular, but never on an exclusive basis. 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.

Given accepted standards, GPS scarcely falls within the term “common carrier.”
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.

2. Yes, GPS may be presumed to have been negligent when the goods were
damaged while in its protective custody.

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. The law 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. A breach upon the
contract confers upon the injured party a valid cause for recovering that which may have
been lost or suffered.

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.

WHEREFORE, the order of the Regional Trial Court of Makati City, and the
decision 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.

Note: 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.
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.

Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.

G.R. No. 146426
June 27, 2006, YNARES-SANTIAGO, J.
Contract of Towage

DOCTRINE:

A tug and its owners must observe ordinary diligence in the performance of its obligation
under a contract of towage; While adverse weather has always been a real threat to
maritime commerce, the least that the tug owner could do is to ensure that its tugboats
would be able to secure the barge at all times during the engagement.

FACTS:

L. Acuario Marketing Corp. (“Acuario”) [respondent] and Skyland Brokerage, Inc.

(“Skyland”) [respondent] entered into a time charter agreement whereby Acuario leased
to Skyland its L. Acuario II barge for use by the latter in transporting electrical posts. At
the same time, Skyland also entered into a separate contract with Cargolift [petitioner],
for the latter’s tugboats to tow the aforesaid barge.

Petitioner’s tug-boat M/T Beejay left the Manila South Harbor with Acuario’s
barge in tow on April 1, 1993. By April 13, 1993, M/T Beejay and the barge returned to
the port of Manila. On the same day it was returned, Guillermo Nacu, Jr. (Acuario’s dry-
docking officer) discovered that the barge was listing due to a leak in its hull. The barge
was consequently dry-docked for repairs at the Western Shipyard. Acuario spent the
total sum of P97,021.20 for the repairs.

Pursuant to its contract with Skyland, Acuario wrote Skyland seeking

reimbursement of its repair costs, failing which, it filed a complaint for damages against
Skyland before the Regional Trial Court.

Respondent contended that the weather in Bataan shifted drastically at dawn

during a certain day while the barge was docked at the Limay port eight meters away
from the stone wall. Due to strong winds and large waves, the barge repeatedly hit its
hull on the wall, thus prompting the barge patron to alert the tugboat captain of the M/T
Count to tow the barge farther out to sea. However, the tugboat failed to pull the barge to
a safer distance due to engine malfunction, thereby causing the barge to sustain a hole
in its hull. On the other hand, petitioner and Skyland denied that the barge had been
damaged. The trial court ruled in favor of respondent. Since the ultimate fault lies with
petitioner, justice demands that the latter reimburse Skyland for whatever it may be
adjudged to pay Acuario.

Both Skyland and petitioner elevated the matter to the Court of Appeals, which
affirmed the decision of trial court and denied the motion for consideration of petitioner.
As such, petitioner brought the instant petition for review on certiorari of decision and
resolution of CA.

ISSUE:

Whether or not Cargolift is not liable for the damages sustained by L. ACUARIO II
since the latter sought to recover upon its contract with Skyland, to which
petitioner was not a party – NO, petitioner is still liable.

HELD:

The petitioner remains liable. Petitioner was not sued under Skyland’s charter
agreement with Acuario, but pursuant to its separate undertaking with Skyland. It is not
Acuario that is seeking damages from petitioner but Skyland, with whom it undoubtedly
had a juridical tie.

In the performance of its contractual obligation to Skyland, petitioner was

required to observe the due diligence of a good father of the family. In jurisprudence, a
tug and its owners must observe ordinary diligence in the performance of its
obligation under a contract of towage. The negligence of the obligor in the
performance of the obligation renders him liable for damages for the resulting loss
suffered by the obligee.

In the case at bar, the exercise of ordinary prudence by petitioner means

ensuring that its tugboat is free of mechanical problems. While adverse weather has
always been a real threat to maritime commerce, the least that petitioner could
have done was to ensure that the M/T Count or any of its other tugboats would be
able to secure the barge at all times during the engagement. This is especially true
when considered with the fact that Acuario’s barge was wholly dependent upon
petitioner’s tugboat for propulsion. The barge was not equipped with any engine and
needed a tugboat for maneuvering.

Petitioner’s negligence was the proximate cause of the damage to the barge
cannot be doubted. Had its tugboat been serviceable, the barge could have been moved
away from the stone wall with facility. Hence, petitioner is liable.

WHEREFORE, the petition is DENIED for lack of merit

#36 Santos vs. Sibug

GR No. L-26815
Facts: Prior to the accident which took place on April 26, 1963, Vicente Vidad was
an authorized jeepney passenger operator. Also, petitioner Adolfo Santos was the
owner of a passenger jeep, but he had no certificate of public convenience for the
operation of the vehicle as a public passenger jeep. Santos then transferred his jeep
to the name of Vidad so that it could operate under the latter’s certificate of public
convenience. Santos became known as a “kabit” operator. On the date of the
accident, private respondent Sibug was bumped by a passenger jeepney operated
by Vidad and driven by Gragas. Sibug then filed a complaint for damages against
Vidad and Gragas. A judgement was rendered by (BRANCH XVII) in favor of Sibug
sentencing Vidad and Gragas to pay for damages. On April 10, 1964, the sheriff of
manila levied on a motor vehicle, registered under the name of Vidad and scheduled
the public auction sale. Santos, however, presented in (BRANCH X) a third-party
claim that with the sheriff alleging actual ownership of the motor vehicle levied upon,
stating that registration under the name of Vidad was only for the use of the
Certificate of Public Convenience of Vidad. After the third-party complaint was filed,
Sibug submitted to the sheriff a bond, issued by the Philippine Surety Insurance
Company, to save the sheriff from liability if he were to proceed with the sale and if
Santos’ third-party claim should be upheld. Before the scheduled sale, Santos
instituted an action for damages against Sibug, Vidad, and the sheriff in the same
court of instance. In the complaint he alleged that he was the actual owner of the
motor vehicle subject of levy; that a fictitious deed of sale was executed by him in
Vidad’s favor for the purpose of operating said vehicle was executed by him in
Vidad’s favor for purposes of operating said vehicle as a passenger jeepney under
the latter’s franchise; and that he would suffer irreparable damage if possession of
the vehicle were not restored to him. The Court of First Instance (BRANCH X)
rendered a judgement in favor of Santos, ordering the sheriff to return the vehicle to
Santos and to bar the auction.

Issue: whether or not the third-party claimant has a right to vindicate his claim to the
vehicle levied upon separate action.

Ruling: Yes. As a matter of procedure, santos as an ordinary third-party claimant, it

was appropriate to vindicate his claim of ownership in a separate action under Sec
17 of Rule 39 of the Rules of Court. However, as a matter of substance and merits,
the decision of the respondent court should be upheld nullifying the decision of
(BRANCH X) permanently enjoining the auction sale should be upheld. Legally
speaking, it was not a “stranger’s property” that was levied pursuant to the decision
of Branch XVII. The vehicle was in fact registered in the name of Vidad, one of the
judgement debtors. This ruling is based on the principle that the operator of record is
considered the operator of the vehicle in contemplation of law as regards the public
and third persons even if the vehicle has been sold to another where such sale has
not been approved by the Public Service Commission. For the same basic reason
that the vehicle here in question was registered in Vidad’s name. the levy on
execution against the said vehicle should be enforced so that the judgement in the
(BRANCH XVII) case may be satisfied, notwithstanding the fact that the secret
ownership of the vehicle belonged to another. Santos, as the “kabit” should not be
allowed to defeat the levy on his vehicle and to avoid his responsibilities as a “kabit”
owner for he had led the public to believe that the vehicle belonged to Vidad. This is
one way of curbing the pernicious “kabit” system that facilitates the commission of
fraud against the travelling public.
Petition dismissed.

#37. PCI LEASING AND FINANCE, INC., v. UCPB GENERAL INSURANCE CO.,
INC.

G.R. No. 162267

(July 4, 2008)

FACTS:

A Mitsubishi Lancer car owned by UCPB, insured with UCPB General

Insurance Co., was traversing the Laurel Highway, Barangay Balintawak, LipaCity. It
was driven by Flaviano Isaac with Conrado Geronimo (Asst. Manager of said bank),
was hit and bumped by an 18-wheeler Fuso Tanker Truck, owned by defendants-
appellants PCI Leasing & Finance, Inc. allegedly leased to and operated by
defendant-appellant Superior Gas & Equitable Co., Inc. (SUGECO) and driven by its
employee, defendant appellant Renato Gonzaga. The impact caused heavy damage
to the Mitsubishi Lancer car resulting in an explosion of the rear part of the car. The
driver and passenger suffered physical injuries. However, the driver defendant-
appellant Gonzaga continued on its way to its destination and did not bother to bring
his victims to the hospital.

As the 18-wheeler truck is registered under the name of PCI Leasing,

repeated demands were made by plaintiff-appellee for the payment of the aforesaid
amounts. However, no payment was made. PCI Leasing and Finance, Inc.,
(petitioner) interposed the defense that it could not be held liable for the collision,
since the driver, Gonzaga, was not its employee, but that of its co-defendant
SUGECO. In fact, it was SUGECO, that was the actual operator of the truck,
pursuant to a Contract of Lease signed by petitioner and SUGECO. Petitioner,
however, admitted that it was the owner of the truck in question. RTC rendered
judgment in favour of UCPB General Insurance and ordered PCI Leasing and
Gonzaga, to pay jointly and severally the former. CA affirmed with the lower court’s
decision.

ISSUES:

1) Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-

delict may be held liable, jointly and severally, with the driver thereof, for the
damages caused to third parties.

2) Whether petitioner, as a financing company, is absolved from liability by the

enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.

RULING:

1) YES. The principle of holding the registered owner of a vehicle liable for quasi-
delicts resulting from its use is well-established in jurisprudence. As explained in the
case of Erezo v. Jepte, thus:
Registration is required not to make said registration the operative act
by which ownership in vehicles is transferred, as in land registration
cases, because the administrative proceeding of registration does not
 bear any essential relation to the contract of sale between the parties
(Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the
use and operation of the vehicle upon any public highway (section 5
[a], Act No. 3992, as amended.) The main aim of motor vehicle
registration is to identify the owner so that if any accident happens, or
that any damage or injury is caused by the vehicle on the public
highways, responsibility therefore can be fixed on a definite individual,
the registered owner. Instances are numerous where vehicles running
on public highways caused accidents or injuries to pedestrians or other
vehicles without positive identification of the owner or drivers, or with
very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the
motor vehicle registration is primarily ordained, in the interest of the
determination of persons responsible for damages or injuries caused
on public highways.

2) NO. The new law, R.A. No. 8556, notwithstanding developments in foreign
jurisdictions, do not supersede or repeal the law on compulsory motor vehicle
registration. No part of the law expressly repeals Section 5(a) and (e) of R.A. No.
4136, as amended, otherwise known as the Land Transportation and Traffic Code.
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that
is not registered with the Land Transportation Office, still does not bind third persons
who are aggrieved in tortious incidents, for the latter need only to rely on the public
registration of a motor vehicle as conclusive evidence of ownership. A lease such as
the one involved in the instant case is an encumbrance in contemplation of law,
which needs to be registered in order for it to bind third parties. Under this policy,
the evil sought to be avoided is the exacerbation of the suffering of victims of tragic
vehicular accidents in not being able to identify a guilty party. A contrary ruling will
not serve the ends of justice. The failure to register a lease, sale, transfer or
encumbrance, should not benefit the parties responsible, to the prejudice of innocent
victims.