Assignment for Transpo 2G/2I/2L

I. GENERAL CONCEPTS

a. Contract of Transportation in general b. Perfection c. Common Carriers 1. Statutory Definition (Art. 1732, Rep. Act 386) 2. Distinction from Private Carriers 3. Distinction from towage, arrastre and stevedoring services 4. Tests in determining whether one is a common carrier 5. Parties to a Contract of Carriaged. Registered Owner Rule and the Kabit System

Assigned Cases: a. Baliwag Transit Corporation v. Court of Appeals 169 SCRA 849 b. British Airways Inc. v. Court of Appeals 218 SCRA 699 c. Dangwa Transportation Co., Inc. v. Court of Appeals 202 SCRA 574 d. Light Rail Transit Authority v. Navidad 397 SCRA 75 e. De Guzman v. Court of Appeals 168 SCRA 612 f. Spouses Cruz v. Sun Holidays Inc. G.R. No. 186312 g. Asia Lighterage and Shipping Inc. v. Court of Appeals 409 SCRA 340 h. First Philippine Industrial Corp. v. Court of Appeals 300 SCRA 661 i. Planters Products Inc. v. Court of Appeals 226 SCRA 476 j. Fabre. v. Court of Appeals 259 SCRA 426 k. Bascos v. Court of Appeals 221 SCRA 318 l. FGU Insurance Corp. v. Sarmiento Trucking Corp. 386 SCRA 312 m. Crisostomo v. Court of Appeals G.R. No. 138334 n. Cargolift Shipping, Inc. v. L. Acuario Marketing Corp. 493 SCRA 157 o. Erezo v. Jepte G.R. No. L-9605 p. Santos v. Sibug 104 SCRA 520 q. Lita Enterprises, Inc. v. Court of Appeals G.R. No. L-64693 r. PCI Leasing and Finance Inc. v. Court of Appeals 557 SCRA 141 s. Lim v. Court of Appeals G.R. No. 125817 t. Teja Marketing U. IAC 148 SCRA 347

G.R. No. 80447 January 31, 1989

BALIWAG TRANSIT, INC., petitioner, vs. HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and GEORGE L. CAILIPAN, respondents.

Sta. Maria & Associates for petitioner.

Punzalan and Associates Law Office for respondents.

MELENCIO-HERRERA, J.:

On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was filed by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son George, of legal age, against petitioner Baliwag Transit (Baliwag, for brevity). The Complaint alleged that George, who was a paying passenger on a Baliwag bus on 17 December 1984, suffered multiple serious physical injuries when he was thrown off said bus driven in a careless and negligent manner by Leonardo Cruz, the authorized bus driver, along Barangay Patubig, Marilao, Bulacan. As a result, he was confined in the hospital for treatment, incurring medical expenses, which were borne by his parents, the respondent Spouses, in the sum of about P200,000.00 plus other incidental expenses of about P10,000.00.

On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries sustained by George was solely attributable to his own voluntary act in that, without warning and provocation, he suddenly stood up from his seat and headed for the door of the bus as if in a daze, opened it and jumped off while said bus was in motion, in spite of the protestations by the driver and without the knowledge of the conductor.

Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its third-party liability insurance in the amount of P50,000.00. In its Answer, Fortune Insurance claimed limited liability, the coverage being subject to a Schedule of Indemnities forming part of the insurance policy.

On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag each filed Motions to Dismiss on the ground that George, in consideration of the sum of P8,020.50 had executed a "Release of Claims" dated 16 May 1985. These Motions were denied by the Trial Court in an Order dated 13 January 1986 as they were filed beyond the time for pleading and after the Answer were already filed.

On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by the Trial Court. The Amended Answer incorporated the

affirmative defense in the Motion to Dismiss to the effect that on 16 May 1985, George bad been paid all his claims for damages arising from the incident subject matter of the complaint when he executed the following "Release of Claims":

For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND TWENTY and 50/100 PESOS ONLY (P8,020.50), the receipt of which is hereby acknowledged, I/we, being of lawful age, do hereby release, acquit and forever discharge Fortune Insurance and/or Baliwag transit, Inc. his/her heirs, executors and assigns, from any and all liability now accrued or hereafter to accrue on account of any and all claims or causes of action which I/we now or may here after have for personal injuries, damage to property, loss of services, medical expenses, losses or damages of any and every kind or nature whatsoever, now known or what may hereafter develop by me/us sustained or received on or about 17th day of December, 1984 through Reckless Imprudence Resulting to Physical Injuries, and I/we hereby declare that I/we fully understand the terms of this settlement and voluntarily accept said sum for the purpose of making a full and final compromise adjustment and settlement of the injuries and damages, expenses and inconvenience above mentioned. (Rollo, p. 11)

During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release of Claims" signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed engineer.

By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified that be is the father of George, who at the time of the incident was a student, living with his parents and totally dependent on them for their support; that the expenses for his hospitalization were shouldered by his parents; and that they had not signed the "Release of Claims."

In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed the Complaint and Third-party Complaint, ruling that since

the contract of carriage is between Baliwag and George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute the Release of Claims despite the fact that he is still a student and dependent on his parents for support. Consequently, the execution by George of the Release of Claims discharges Baliwag and Fortune Insurance.

Aggrieved, the Spouses appealed to respondent Court of Appeals.

On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside

the appealed Order and holding that the "Release of Claims" cannot operate as a valid ground for the dismissal of the case because it does not have the conformity of all the parties, particularly George's parents, who have a substantial interest in the case as they stand to be prejudiced by the judgment because they spent a sizeable amount for the medical bills of their son; that the Release of Claims was secured by Fortune Insurance for the consideration of P8,020.50 as the full and final settlement of its liability under the insurance policy and not for the purpose of releasing Baliwag from its liability as a carrier in this suit for breach of contract. The Appellate Court also ordered the remand of the case to the lower Court for trial on the merits and for George to return the amount of P8,020.50 to Fortune Insurance.

Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court judgment.

The issue brought to the fore is the legal effect of the Release of Claims executed by George during the pendency of this case.

We hold that since the suit is one for breach of contract of carriage, the Release of Claims executed by him, as the injured party, discharging Fortune Insurance and Baliwag from any and all liability is valid. He was then of legal age, a graduating student of Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus, he could sue and be sued even without the assistance of his parents.

Significantly, the contract of carriage was actually between George, as the paying passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound to carry its passengers safely as far as human care and foresight could provide, and is liable for injuries to them through the negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George had the right to be safely brought to his destination and Baliwag had the correlative obligation to do so. Since a contract may be violated only by the parties thereto, as against each other, in an action upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14, 1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right while a real party-in-interest-defendant is one who has a correlative legal obligation whose act or omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988). In the absence of any contract of carriage between Baliwag and George's parents, the latter are not real parties-in-interest in an action for breach of that contract.

The general rule of the common law is that every action must be brought in the name of the party whose legal right has been invaded or infringed. 15 Enc. P1. & Pr. p. 484. "For the immediate wrong and damage the person injured is the only one who can maintain the action." Id. p. 578. The person who sustains an injury is the person to bring an action for the injury against the wrongdoer." Dicey parties to Actions, 347. (Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).

There is no question regarding the genuineness and due execution of the Release of Claims. It is a duly notarized public document. It clearly stipulates that the consideration of P8,020.50 received by George was "to release and forever discharge Fortune Insurance and/or Baliwag from any and all liabilities now accrued or to accrue on account of any and all claims or causes of action ... for personal injuries, damage to property, loss of services, medical expenses, losses or damages of any and every kind or nature whatsoever, sustained by him on 17 December 1984 thru Reckless Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent Appellate Court that the "Release of Claims" was intended only as the full and final settlement of a third-party liability for bodily injury claim and not for the purpose of releasing Baliwag from its liability, if any, in a breach of a contract of carriage, has to be rejected for being contrary to the very terms thereof. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code). The phraseology "any and all claims or causes of action" is broad enough to include all damages that may accrue to the injured party arising from the unfortunate accident.

The Release of Claims had the effect of a compromise agreement since it was entered into for the purpose of making a full and final compromise adjustment and settlement of the cause of action involved. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced (Article 2028, Civil Code). The Release of Claims executed by the injured party himself wrote finish to this litigation.

WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is SET ASIDE, the Decision of the Regional Trial Court of Bulacan, Branch 20, is REINSTATED, and the Complaint and Third-Party Complaint are hereby ordered DISMISSED. No costs.

SO ORDERED.

G.R. No. 92288 February 9, 1993

BRITISH AIRWAYS, INC., petitioner, vs. THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND GENERAL SERVICES, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.

Monina P. Lee for private respondent.

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of Appeals 1 affirming the decision of the trial court 2 in ordering petitioner British Airways, Inc. to pay private respondent First International Trading and General Services actual damages, moral damages, corrective or exemplary damages, attorney's fees and the costs as well as the Resolution dated February 15, 1990 3 denying petitioner's Motion for Reconsideration in the appealed decision.

It appears on record that on February 15, 1981, private respondent First International Trading and General Services Co., a duly licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal. 4

During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways, Inc. airfare tickets for 93 contract workers with specific instruction to transport said workers to Jeddah on or before March 30, 1981.

As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private respondent was immediately informed by petitioner that its principal had forwarded 93 prepaid tickets. Thereafter, private respondent instructed its travel agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but the latter failed to fly said workers, thereby compelling private respondent to borrow money in the amount of P304,416.00 in order to purchase airline tickets from the other airlines as evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had

recruited who must leave immediately since the visas of said workers are valid only for 45 days and the Bureau of Employment Services mandates that contract workers must be sent to the job site within a period of 30 days.

Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had received a prepaid ticket advice from its Jeddah branch for the transportation of 27 contract workers. Immediatety, private respondent instructed its travel agent to book the 27 contract workers with the petitioner but the latter was only able to book and confirm 16 seats on its June 9, 1981 flight. However, on the date of the scheduled flight only 9 workers were able to board said flight while the remaining 7 workers were rebooked to June 30, 1981 which bookings were again cancelled by the petitioner without any prior notice to either private respondent or the workers. Thereafter, the 7 workers were rebooked to the July 4,1981 flight of petitioner with 6 more workers booked for said flight. Unfortunately, the confirmed bookings of the 13 workers were again cancelled and rebooked to July 7, 1981.

On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when the receipt of the tax payments was submitted, the latter informed private respondent that it can only confirm the seats of the 12 workers on its July 7, 1981 flight. However, the confirmed seats of said workers were again cancelled without any prior notice either to the private respondent or said workers. The 12 workers were finally able to leave for Jeddah after private respondent had bought tickets from the other airlines.

As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the damages it had incurred by the latter's repeated failure to transport its contract workers despite confirmed bookings and payment of the corresponding travel taxes.

On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to pay the amount of P350,000.00 representing damages and unrealized profit or income which was denied by the petitioner.

On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the remaining recruited workers due to the delay in transporting the workers to Jeddah. 5

On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653.

On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message from Jeddah on March 20, 1981 advising that the principal of private respondent had prepaid the airfares of 100 persons to transport private respondent's contract workers from Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space and limited time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice consequently not even one of the alleged 93 contract workers were booked in any of its flights.

On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private respondent to Jeddah but the travel agent of the private respondent booked only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9 contract workers boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C"). 6

Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981 flight but said travel agent cancelled the booking of 2 passengers while the other 3 passengers did not show up on said flight.

Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to the previous 5 contract workers who were not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight which was accepted by petitioner subject to reconfirmation.

However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the bookings of private respondent's 12 contract workers. In the morning of July 7, 1981, the computer system of the petitioner was reinstalled and immediately petitioner tried to reinstate the bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines but both airlines replied that no seat was available on that date and had to place the 12 workers on the wait list. Said information was duly relayed to the private respondent and the 12 workers before the scheduled flight.

After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which reads as follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00;

3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or exemplary damages;

4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; and

5. To pay the costs. 7

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied its Motion for Reconsideration on February 28, 1986.

On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the dispositive portion of which reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant. 8

On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.

Hence, this petition.

It is the contention of petitioner that private respondent has no cause of action against it there being no perfected contract of carriage existing between them as no ticket was ever issued to private respondent's contract workers and, therefore, the obligation of the petitioner to transport said contract workers did not arise. Furthermore, private respondent's failure to attach any ticket in the complaint further proved that it was never a party to the alleged transaction.

Petitioner's contention is untenable.

Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission of one party in violation of the legal right or rights of the other. 9 Petitioner's repeated failures to transport private

respondent's workers in its flight despite confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part. In resolving petitioner's theory that private respondent has no cause of action in the instant case, the appellate court correctly held that:

In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of the same, namely: (a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected by mere consent (See Article 1356, Civil Code of the Philippines), and (b) the contract "of carriage" or "of common carriage" itself which should be considered as a real contract for not until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.)

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

There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from Manila to Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of the appellee's contract workers advising the appellant that it must transport the contract workers on or before the end of March, 1981 and the other batch in June, 1981.

Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of the appellee, and the appellant had accepted such payment. The existence of this payment was never objected to nor questioned by the appellant in the lower court. Thus, the cause or consideration which is the fare paid for the passengers exists in this case.

The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is the transport of the passengers from the place of departure to the place of destination as stated in the telex.

Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing reciprocal obligations on both parties.

In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its willingness for its contract workers to leave for their place of destination.

On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the contract workers on their flight despite confirmation and bookings made by appellee's travelling agent.

xxx xxx xxx

Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period of compliance therewith, and with emphasis that it could only be used if the passengers fly on BA. Under the circumstances, the appellant should have refused acceptance of the PTA from appellee's principal or to at least inform appellee that it could not accommodate the contract workers.

xxx xxx xxx

While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the appellee's contract workers who were recruited for ROLACO Engineering and the said contract workers were the intended passengers in the aircraft of the appellant, the said contract "to carry" also involved the appellee for as recruiter he had to see to it that the contract workers should be transported to ROLACO Engineering in Jeddah thru the appellant's transportation. For that matter, the involvement of the appellee in the said contract "to carry" was well demonstrated when the appellant upon receiving the PTA immediately advised the appellee thereof. 10

Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to private respondent since all expenses had already been subsequently reimbursed by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00 representing actual damages refers to private respondent's second cause of action involving the expenses incurred by the latter which were not reimbursed by ROLACO Engineering. However, in the Complaint 11 filed by private respondent, it was alleged that private respondent

suffered actual damages in the amount of P308,016.00 representing the money it borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages private respondent seeks to recover are the airline tickets and travel taxes it spent for its workers which were already reimbursed by its principal and not for any other expenses it had incurred in the process of recruiting said contract workers. Inasmuch as all expenses including the processing fees incurred by private respondent had already been paid for by the latter's principal on a staggered basis as admitted in open court by its managing director, Mrs. Bienvenida Brusellas. 12 We do not find anymore justification in the appellate court's decision in granting actual damages to private respondent.

Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its contract workers when petitioner failed to transport said workers, the reimbursements made by its principal to private respondent failed to support the latter's claim that it suffered actual damages as a result of petitioner's failure to transport said workers. It is undisputed that private respondent had consistently admitted that its principal had reimbursed all its expenses.

Article 2199 of the Civil Code provides that:

Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. 13

However, private respondent is entitled to an award of moral and exemplary damages for the injury suffered as a result of petitioner's failure to transport the former's workers because of the latter's patent bad faith in the performance of its obligation. As correctly pointed out by the appellate court:

As evidence had proved, there was complete failure on the part of the appellant to transport the 93 contract workers of the appellee on or before March 30, 1981 despite receipt of the payment for their airfares, and acceptance of the same by the appellant, with specific instructions from the appellee's principal to transport the contract workers on or before March 30, 1981. No previous notice was ever registered by the appellant that it could not comply with the same. And then followed the detestable act of appellant in unilaterally cancelling, booking and rebooking unreasonably the flight of appellee's contract workers in June to July, 1981 without prior notice. And all of these actuations of the appellant indeed constitute malice and evident bad faith which had caused damage and besmirched the reputation and business image of the appellee. 14

As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for said damages was ever made by the petitioner immediately after their alleged occurrence therefore said counterclaims were mere afterthoughts when private respondent filed the present case.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be deleted from said decision.

SO ORDERED.

G.R. No. 95582 October 7, 1991

DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners, vs. COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by Inocencia Cudiamat, respondents.

Francisco S. Reyes Law Office for petitioners.

Antonio C. de Guzman for private respondents.

REGALADO, J.:p

On May 13, 1985, private respondents filed a complaint 1 for damages against

petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged that on said date, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, first brought his other passengers and cargo to their respective destinations before banging said victim to the Lepanto Hospital where he expired.

On the other hand, petitioners alleged 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, it was 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.

On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal portion:

IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was negligent, which negligence was the proximate cause of his death. Nonetheless,

defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount defendants initially offered said heirs for the amicable settlement of the case. No costs.

SO ORDERED. 2

Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the

decision of the lower court, and ordered petitioners to pay private respondents:

1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim Pedrito Cudiamat;

2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;

3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and compensatory damages;

4. The costs of this suit. 4

Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990,5 hence this petition with the central issue herein being

whether respondent court erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the damages claimed.

It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court are contrary to those of the trial court, in which case a reexamination of the facts and evidence may be undertaken. 6

In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim is guilty of negligence. Perforce, we have had to conduct an evaluation of the evidence in this case for the prope calibration of their conflicting factual findings and legal conclusions.

The lower court, in declaring that the victim was negligent, made the following findings:

This Court is satisfied that Pedrito Cudiamat 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. But defendants can also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard to believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under such circumstances, equity demands that there must be something given to the heirs of the victim to assuage their feelings. This, also considering that initially, defendant common carrier had made overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's heirs. 7

However, respondent court, in arriving at a different opinion, declares that:

From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop when the victim Pedrito Cudiamat 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 Cudiamat 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 Cudiamat 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). 8

After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination as follows:

Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?

A The way going to the mines but it is not being pass(ed) by the bus.

Q And the incident happened before bunkhouse 56, is that not correct?

A It happened between 54 and 53 bunkhouses. 9

The bus conductor, Martin Anglog, also declared:

Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual incident that occurred?

A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54.

Q What happened when you delivered this passenger at this particular place in Lepanto?

A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an umbrella about a split second and I signalled again the driver, so the driver stopped and we

went down and we saw Pedrito Cudiamat asking for help because he was lying down.

Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down — from the bus how far was he?

A It is about two to three meters.

Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?

A At the back, sir. 10 (Emphasis supplied.)

The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim boarded the same is correct. 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. Under such circumstances, it cannot be said that the deceased was guilty of negligence.

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, does not merit consideration. 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. 11

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. 12

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 aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow motion" at the point where the victim had boarded and was on its platform. 13

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. 14 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. 15

Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the safety of the passengers transported by the according to all the circumstances of each case. 16 A common carrier is bound to carry the passengers safely as far as human care and foresight can

provide, using the utmost diligence very cautious persons, with a due regard for all the circumstances. 17

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. 18

Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator, despite

the serious condition of the victim. The vacuous reason given by petitioners that it was the wife of the deceased who caused the delay was tersely and correctly confuted by respondent court:

... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose husband is at the verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to help her distressed and helpless husband. 19

Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the companion of the victim who informed his family thereof. 20 In fact, it was only after the refrigerator was unloaded that one of the

passengers thought of sending somebody to the house of the victim, as shown by the testimony of Virginia Abalos again, to wit:

Q Why, what happened to your refrigerator at that particular time?

A I asked them to bring it down because that is the nearest place to our house and when I went down and asked somebody to bring down the refrigerator, I also asked somebody to call the family of Mr. Cudiamat.

COURT:

Q Why did you ask somebody to call the family of Mr. Cudiamat?

A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.

Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?

A No sir. 21

With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the actual damages based on the gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income and minus living and other incidental expenses. 22

We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the deceased was 48 years old, in good health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on computation based on the net earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23

WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are hereby AFFIRMED in all other respects.

SO ORDERED.

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY,respondents.

D E C I S I O N

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al., which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor Navidad.

On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a token (representing payment of the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight.No evidence, however, was adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection and supervision of its security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it adjudged:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against

the defendants Prudent Security and Junelito Escartin ordering the latter to pay

jointly and severally the plaintiffs the following:

a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of

P50,000.00;

b) Moral damages of P50,000.00;

c) Attorneys fees of P20,000;

d) Costs of suit.

The complaint against defendants LRTA and Rodolfo Roman are dismissed for

lack of merit.

The compulsory counterclaim of LRTA and Roman are likewise dismissed.[1]

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally liable thusly:

WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the

appellants from any liability for the death of Nicanor Navidad, Jr. Instead,

appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held

liable for his death and are hereby directed to pay jointly and severally to the

plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorneys fees.[2]

The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a contract of carriage theretofore had already existed when the victim entered the place where passengers were supposed to be after paying the fare and getting the corresponding token therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon the victim and the evidence merely established the fact of death of Navidad by reason of his having been hit by the train owned and managed by the LRTA and operated at the time by Roman. The appellate court faulted petitioners for their failure to present expert evidence to establish the fact that the application of emergency brakes could not have stopped the train.

The appellate court denied petitioners motion for reconsideration in its resolution of 10 October 2000.

In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:

I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY

DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING

THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR

NAVIDAD, JR.

III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING

THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA.[3]

Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by holding them liable on the basis of a sweeping conclusion that the presumption of negligence on

the part of a common carrier was not overcome. Petitioners would insist that Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an act of a stranger that could not have been foreseen or prevented. The LRTA would add that the appellate courts conclusion on the existence of an employer-employee relationship between Roman and LRTA lacked basis because Roman himself had testified being an employee of Metro Transit and not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created from the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights and protection under a contractual relation, and that the appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.

Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the safety of passengers.[4]The Civil Code, governing the liability of a common carrier for death of or injury to its passengers, provides:

Article 1755. A common carrier is bound to carry the passengers safely as far as

human care and foresight can provide, using the utmost diligence of very cautious

persons, with a due regard for all the circumstances.

Article 1756. In case of death of or injuries to passengers, common carriers are

presumed to have been at fault or to have acted negligently, unless they prove that

they observed extraordinary diligence as prescribed in articles 1733 and 1755.

Article 1759. Common carriers are liable for the death of or injuries to passengers

through the negligence or willful acts of the formers employees, although such

employees may have acted beyond the scope of their authority or in violation of

the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised

all the diligence of a good father of a family in the selection and supervision of

their employees.

Article 1763. A common carrier is responsible for injuries suffered by a passenger

on account of the willful acts or negligence of other passengers or of strangers, if

the common carriers employees through the exercise of the diligence of a good

father of a family could have prevented or stopped the act or omission.

The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all circumstances.[5] Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage.[6] The statutory provisions render a common carrier liable for death of or injury to passengers (a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other passengers or of strangers if the common carriers employees through the exercise of due diligence could have prevented or stopped the act or omission.[7] In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and[8] by simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force majeure.[9] In the absence of satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault,[10] an exception from the general rule that negligence must be proved.[11]

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

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 2176[12] and related provisions, in conjunction with Article 2180,[13] of the Civil Code. The premise, however, for the employers liability is negligence or fault on the part of the employee. Once such fault is established, the employer can then be made liable on the basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and supervision of its employees. The liability is primary and can only be negated by showing due diligence in the selection and supervision of the employee, a factual

matter that has not been shown. Absent such a showing, one might ask further, how then must the liability of the common carrier, on the one hand, and an independent contractor, on the other hand, be described?It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194[14] of the Civil Code can well apply.[15] In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract.[16] Stated differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.[17]

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

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

The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.[18] It is an established rule that nominal damages cannot co-exist with compensatory damages.[19]

WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No costs.

SO ORDERED.

G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and

attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private

respondent to be a common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight "as a casual occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

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

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberaom making such distinctions.

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

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

It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent'sprincipal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character-of the goods or defects in the packing or-in the containers; and (5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case — the hijacking of the carrier's truck — does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence required private respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or its employees;

(6) that the common carrier's liability for acts committed by thieves, or of robbers who donot act with grave or irresistible threat, violence or force, is dispensed with or diminished; and

(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account of the defective condition of the car vehicle, ship, airplane or other equipment used in the contract of carriage. (Emphasis supplied)

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

In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First Instance of

Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms.

The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of the undelivered merchandise which was lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

SPOUSES DANTE CRUZ and

LEONORA CRUZ,

Petitioners,

- versus -

SUN HOLIDAYS, INC.,

Respondent.

G.R. No. 186312

Present:

CARPIO MORALES, J.,

Chairperson,

BRION,

BERSAMIN,

ABAD,* and

VILLARAMA, JR., JJ.

Promulgated:

June 29, 2010

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

D E C I S I O N

CARPIO MORALES, J.:

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25,

2001[1]

against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of

Pasig City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who

perished with his wife on September 11, 2000 on board the boat M/B Coco Beach III that

capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had

stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11,

2000 was by virtue of a tour package-contract with respondent that included transportation

to and from the Resort and the point of departure in Batangas.

Miguel C. Matute (Matute),[2]

a scuba diving instructor and one of the survivors, gave his

account of the incident that led to the filing of the complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to

leave the Resort in the afternoon of September 10, 2000, but was advised to stay for

another night because of strong winds and heavy rains.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including

petitioners son and his wife trekked to the other side of the Coco Beach mountain that was

sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them

to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera

and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to

side and the captain to step forward to the front, leaving the wheel to one of the crew

members.

The waves got more unwieldy. After getting hit by two big waves which came one

after the other, M/B Coco Beach III capsized putting all passengers underwater.

The passengers, who had put on their life jackets, struggled to get out of the boat. Upon

seeing the captain, Matute and the other passengers who reached the surface asked him

what they could do to save the people who were still trapped under the boat. The captain

replied Iligtas niyo na lang ang sarili niyo (Just save yourselves).

Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto

Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22

persons, consisting of 18 passengers and four crew members, who were brought

to Pisa Island. Eight passengers, including petitioners son and his wife, died during the

incident.

At the time of Ruelitos death, he was 28 years old and employed as a contractual worker

for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly

salary of $900.[3]

Petitioners, by letter of October 26, 2000,[4]

demanded indemnification from respondent for

the death of their son in the amount of at least P4,000,000.

Replying, respondent, by letter dated November 7, 2000,[5]

denied any responsibility for the

incident which it considered to be a fortuitous event. It nevertheless offered, as an act of

commiseration, the amount of P10,000 to petitioners upon their signing of a waiver.

As petitioners declined respondents offer, they filed the Complaint, as earlier reflected,

alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B

Coco Beach III to sail notwithstanding storm warning bulletins issued by the Philippine

Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as early

as 5:00 a.m. of September 11, 2000.[6]

In its Answer,[7]

respondent denied being a common carrier, alleging that its boats are not

available to the general public as they only ferry Resort guests and crew

members. Nonetheless, it claimed that it exercised the utmost diligence in ensuring the

safety of its passengers; contrary to petitioners allegation, there was no storm on September

11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not

filled to capacity and had sufficient life jackets for its passengers. By way of Counterclaim,

respondent alleged that it is entitled to an award for attorneys fees and litigation expenses

amounting to not less than P300,000.

Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily

requires four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is

calm, (2) there is clearance from the Coast Guard, (3) there is clearance from the captain

and (4) there is clearance from the Resorts assistant manager.[8]

He added that M/B Coco

Beach III met all four conditions on September 11, 2000,[9]

but asubasco or squall,

characterized by strong winds and big waves, suddenly occurred, causing the boat to

capsize.[10]

By Decision of February 16, 2005,[11]

Branch 267 of the Pasig RTC dismissed petitioners

Complaint and respondents Counterclaim.

Petitioners Motion for Reconsideration having been denied by Order dated September 2,

2005,[12]

they appealed to the Court of Appeals.

By Decision of August 19, 2008,[13]

the appellate court denied petitioners appeal,

holding, among other things, that the trial court correctly ruled that respondent is a private

carrier which is only required to observe ordinary diligence; that respondent in fact

observed extraordinary diligence in transporting its guests on board M/B Coco Beach III;

and that the proximate cause of the incident was a squall, a fortuitous event.

Petitioners Motion for Reconsideration having been denied by Resolution dated January

16, 2009,[14]

they filed the present Petition for Review.[15]

Petitioners maintain the position they took before the trial court, adding that

respondent is a common carrier since by its tour package, the transporting of its guests is an

integral part of its resort business.They inform that another division of the appellate court

in fact held respondent liable for damages to the other survivors of the incident.

Upon the other hand, respondent contends that petitioners failed to present evidence to

prove that it is a common carrier; that the Resorts ferry services for guests cannot be

considered as ancillary to its business as no income is derived therefrom; that it exercised

extraordinary diligence as shown by the conditions it had imposed before allowing M/B

Coco Beach III to sail; that the incident was caused by a fortuitous event without any

contributory negligence on its part; and that the other case wherein the appellate court held

it liable for damages involved different plaintiffs, issues and evidence.[16]

The petition is impressed with merit.

Petitioners correctly rely on De Guzman v. Court of Appeals[17]

in characterizing

respondent as a common carrier.

The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons,

corporations, firms or associations engaged in the

business of carrying or transporting passengers or

goods or both, by land, water, or air for compensation,

offering their services to the public.

The above article makes no distinction between one whose principal

business activity is the carrying of persons or goods or both, and one

who does such carrying only as an ancillary activity (in local idiom, as

a sideline). Article 1732 also carefully avoids making any

distinction between a person or enterprise offering transportation service

on a regular or scheduled basis and one offering such service on

an occasional, episodic or unscheduled basis. Neither does Article

1732 distinguish between a carrier offering its services to the general

public, i.e., the general community or population, and one who offers

services or solicits business only from anarrow segment of the general

population. We think that Article 1733 deliberately refrained from

making such distinctions.

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

seen to coincide neatly with the notion of public service, under the Public

Service Act (Commonwealth Act No. 1416, as amended) which at least

partially supplements the law on common carriers set forth in the Civil

Code. Under Section 13, paragraph (b) of the Public Service Act, public

service includes:

. . . every person that now or hereafter may own,

operate, manage, or control in the Philippines, for hire

or compensation, with general or limited clientele,

whether permanent, occasional or accidental, and done

for general business purposes, any common carrier,

railroad, street railway, traction railway, subway motor

vehicle, either for freight or passenger, or both, with or

without fixed route and whatever may be its

classification, freight or carrier service of any class,

express service, steamboat, or steamship line, pontines,

ferries and water craft, engaged in the transportation of

passengers or freight or both, shipyard, marine repair

shop, wharf or dock, ice plant, ice-refrigeration plant,

canal, irrigation system, gas, electric light, heat and

power, water supply and power petroleum, sewerage

system, wire or wireless communications systems, wire

or wireless broadcasting stations and other similar

public services . . .[18] (emphasis and underscoring

supplied.)

Indeed, respondent is a common carrier. Its ferry services are so intertwined with

its main business as to be properly considered ancillary thereto. The constancy of

respondents ferry services in its resort operations is underscored by its having its

own Coco Beach boats. And the tour packages it offers, which include the ferry services,

may be availed of by anyone who can afford to pay the same. These services are thus

available to the public.

That respondent does not charge a separate fee or fare for its ferry services is of

no moment. It would be imprudent to suppose that it provides said services at a loss. The

Court is aware of the practice of beach resort operators offering tour packages to factor the

transportation fee in arriving at the tour package price. That guests who opt not to avail of

respondents ferry services pay the same amount is likewise inconsequential. These guests

may only be deemed to have overpaid.

As De Guzman instructs, Article 1732 of the Civil Code defining common carriers has

deliberately refrained from making distinctions on whether the carrying of persons or

goods is the carriers principal business, whether it is offered on a regular basis, or whether

it is offered to the general public. The intent of the law is thus to not consider such

distinctions. Otherwise, there is no telling how many other distinctions may be concocted

by unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid

the legal obligations and liabilities of common carriers.

Under the Civil Code, common carriers, from the nature of their business and for reasons

of public policy, are bound to observe extraordinary diligence for the safety of the

passengers transported by them, according to all the circumstances of each case.[19]

They

are bound to carry the passengers safely as far as human care and foresight can provide,

using the utmost diligence of very cautious persons, with due regard for all the

circumstances.[20]

When a passenger dies or is injured in the discharge of a contract of carriage, it is

presumed that the common carrier is at fault or negligent. In fact, there is even no need for

the court to make an express finding of fault or negligence on the part of the common

carrier. This statutory presumption may only be overcome by evidence that the carrier

exercised extraordinary diligence.[21]

Respondent nevertheless harps on its strict compliance with the earlier mentioned

conditions of voyage before it allowed M/B Coco Beach III to sail on September 11,

2000. Respondents position does not impress.

The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical

cyclone warnings for shipping on September 10 and 11, 2000 advising of tropical

depressions in Northern Luzon which would also affect the province of Mindoro.[22]

By the

testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be

expected under such weather condition.[23]

A very cautious person exercising the utmost diligence would thus not brave such stormy

weather and put other peoples 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.

Respondents insistence that the incident was caused by a fortuitous event does not

impress either.

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected

occurrence, or the failure of the debtors to comply with their obligations, must have been

independent of human will; (b) the event that constituted the caso fortuito must have been

impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have

been such as to render it impossible for the debtors to fulfill their obligation in a normal

manner; and (d) the obligor must have been free from any participation in the aggravation

of the resulting injury to the creditor.[24]

To fully free a common carrier from any liability, the fortuitous event must have been

the proximate and only cause of the loss. And it should have exercised due diligence to

prevent or minimize the loss before, during and after the occurrence of the fortuitous

event.[25]

Respondent cites the squall that occurred during the voyage as the fortuitous event that

overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls

was expected under the weather condition of September 11, 2000. Moreover, evidence

shows that M/B Coco Beach III suffered engine trouble before it capsized and sank.[26]

The

incident was, therefore, not completely free from human intervention.

The Court need not belabor how respondents evidence likewise fails to demonstrate that it

exercised due diligence to prevent or minimize the loss before, during and after the

occurrence of the squall.

Article 1764[27]

vis--vis Article 2206[28]

of the Civil Code holds the common

carrier in breach of its contract of carriage that results in the death of a passenger liable to

pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity and

(3) moral damages.

Petitioners are entitled to indemnity for the death of Ruelito which is fixed

at P50,000.[29]

As for damages representing unearned income, the formula for its computation is:

Net Earning Capacity = life expectancy x (gross annual income -

reasonable and necessary living

expenses).

Life expectancy is determined in accordance with the formula:

2 / 3 x [80 age of deceased at the time of death][30]

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x

[80 age at death]) adopted in the American Expectancy Table of Mortality or the Actuarial

of Combined Experience Table of Mortality.[31]

The second factor is computed by multiplying the life expectancy by the net

earnings of the deceased, i.e., the total earnings less expenses necessary in the creation of

such earnings or income and less living and other incidental expenses.[32]

The loss is not

equivalent to the entire earnings of the deceased, but only such portion as he would have

used to support his dependents or heirs. Hence, to be deducted from his gross earnings are

the necessary expenses supposed to be used by the deceased for his own needs.[33]

In computing the third factor necessary living expense, Smith Bell Dodwell

Shipping Agency Corp. v. Borja[34]

teaches that when, as in this case, there is no showing

that the living expenses constituted the smaller percentage of the gross income, the living

expenses are fixed at half of the gross income.

Applying the above guidelines, the Court determines Ruelito's life expectancy as

follows:

Life expectancy = 2/3 x [80 - age of deceased at the time of death]

2/3 x [80 - 28]

2/3 x [52]

Life expectancy = 35

Documentary evidence shows that Ruelito was earning a basic monthly salary of

$900[35]

which, when converted to Philippine peso applying the annual average exchange

rate of $1 = P44 in 2000,[36]

amounts to P39,600. Ruelitos net earning capacity is thus

computed as follows:

Net Earning Capacity = life expectancy x (gross annual income -

reasonable and necessary living expenses).

= 35 x (P475,200 - P237,600)

= 35 x (P237,600)

Net Earning Capacity = P8,316,000

Respecting the award of moral damages, since respondent common carriers

breach of contract of carriage resulted in the death of petitioners son, following Article

1764 vis--vis Article 2206 of the Civil Code, petitioners are entitled to moral damages.

Since respondent failed to prove that it exercised the extraordinary diligence

required of common carriers, it is presumed to have acted recklessly, thus warranting the

award too of exemplary damages, which are granted in contractual obligations if the

defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.[37]

Under the circumstances, it is reasonable to award petitioners the amount

of P100,000 as moral damages and P100,000 as exemplary damages.[38]

Pursuant to Article 2208[39]

of the Civil Code, attorney's fees may also be awarded

where exemplary damages are awarded. The Court finds that 10% of the total amount

adjudged against respondent is reasonable for the purpose.

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals[40]

teaches that when an

obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-

delicts is breached, the contravenor can be held liable for payment of interest in the concept

of actual and compensatory damages, subject to the following rules, to wit

1. When the obligation is breached, and it consists in the

payment of a sum of money, i.e., a loan or forbearance of money, the

interest due should be that which may have been stipulated in writing.

Furthermore, the interest due shall itself earn legal interest from the time

it is judicially demanded. In the absence of stipulation, the rate of interest

shall be 12% per annum to be computed from default, i.e., from judicial

or extrajudicial demand under and subject to the provisions of Article

1169 of the Civil Code.

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

money, is breached, an interest on the amount of damages awarded may

be imposed at the discretion of the court at the rate of 6% per annum. No

interest, however, shall be adjudged on unliquidated claims or damages

except when or until the demand can be established with reasonable

certainty. Accordingly, where the demand is established with reasonable

certainty, the interest shall begin to run from the time the claim is made

judicially or extrajudicially (Art. 1169, Civil Code) but when such

certainty cannot be so reasonably established at the time the demand is

made, the interest shall begin to run only from the date the judgment of

the court is made (at which time the quantification of damages may be

deemed to have been reasonably ascertained). The actual base for the

computation of legal interest shall, in any case, be on the amount finally

adjudged.

3. When the judgment of the court awarding a sum of money

becomes final and executory, the rate of legal interest, whether the case

falls under paragraph 1 or paragraph 2, above, shall be 12% per annum

from such finality until its satisfaction, this interim period being deemed

to be by then an equivalent to a forbearance of credit. (emphasis

supplied).

Since the amounts payable by respondent have been determined with certainty only in the

present petition, the interest due shall be computed upon the finality of this decision at the

rate of 12% per annum until satisfaction, in accordance with paragraph number 3 of the

immediately cited guideline in Easter Shipping Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19,

2008 is REVERSED and SET ASIDE. Judgment is rendered in favor of petitioners

ordering respondent to pay petitioners the following: (1)P50,000 as indemnity for the death

of Ruelito Cruz; (2) P8,316,000 as indemnity for Ruelitos loss of earning capacity;

(3) P100,000 as moral damages; (4) P100,000 as exemplary damages; (5) 10% of the total

amount adjudged against respondent as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per

annum computed from the finality of this decision until full payment.

SO ORDERED.

ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.

D E C I S I O N

PUNO, J.:

On appeal is the Court of Appeals May 11, 2000 Decision [1] in CA-G.R. CV No. 49195 and February 21, 2001 Resolution[2] affirming with modification the April 6, 1994 Decision[3] of the Regional Trial Court of Manila which found petitioner liable to pay private respondent the amount of indemnity and attorney's fees.

First, the facts.

On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192.35[4] was shipped by Marubeni American Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.[5] The shipment was insured by the private respondent Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.[6]

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.

On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by Lighterage Receipt No. 0364 [7] for delivery to consignee. The cargo did not reach its destination.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other barges which arrived ahead of it while weathering out the storm that night. A few days after, the barge developed a list because of a hole it sustained after hitting an unseen protuberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990.[8] It likewise secured the services of Gaspar Salvaging Corporation which refloated the barge.[9] The hole was then patched with clay and cement.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current.To avoid the

complete sinking of the barge, a portion of the goods was transferred to three other barges.[10]

The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining cargo. [11] A second Marine Protest was filed on September 7, 1990.[12]

On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and loaded on the three other barges.[13] The total proceeds from the sale of the salvaged cargo was P201,379.75.[14]

On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and another letter dated September 18, 1990 to the private respondent for the value of the lost cargo.

On January 30, 1991, the private respondent indemnified the consignee in the amount of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to no avail.

On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the amount of indemnity, attorney's fees and cost of suit.[16] Petitioner filed its answer with counterclaim.[17]

The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its Decision states:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant

Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance

Co., Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on July

3, 1991 until fully satisfied plus 10% of the amount awarded as and for attorney's

fees. Defendant's counterclaim is hereby DISMISSED. With costs against defendant.[18]

Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate court affirmed the decision of the trial court with modification. The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the

sense that the salvage value of P201,379.75 shall be deducted from the amount

of P4,104,654.22. Costs against appellant.

SO ORDERED.

Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate court in a Resolution promulgated on February 21, 2001.

Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate court, viz:[19]

(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.

(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED.

(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE CONSIGNEES CARGO.

The issues to be resolved are:

(1) Whether the petitioner is a common carrier; and,

(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its care and custody of the consignees cargo.

On the first issue, we rule that petitioner is a common carrier.

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the general public.[20]

We disagree.

In De Guzman vs. Court of Appeals,[21] we held that the definition of common carriers in Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. We also did not distinguish between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to the general public, and one who offers services or solicits business only from a narrow segment of the general population.

In the case at bar, the principal business of the petitioner is that of lighterage and drayage[22] and it offers its barges to the public for carrying or transporting

goods by water for compensation. Petitioner is clearly a common carrier. In De Guzman, supra,[23] we considered private respondent Ernesto Cendaa to be a common carrier even if his principal occupation was not the carriage of goods for others, but that of buying used bottles and scrap metal in Pangasinan and selling these items in Manila.

We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.

To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals.[24] The test to determine a common carrier is whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted.[25] In the case at bar, the petitioner admitted that it is engaged in the business of shipping and lighterage, [26] offering its barges to the public, despite its limited clientele for carrying or transporting goods by water for compensation.[27]

On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise extraordinary diligence in its care and custody of the consignees goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. [28] They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated.[29] To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach:

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the

goods, unless the same is due to any of the following causes only:

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

calamity;

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

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

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

containers;

(5) Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize the loss. [30] The evidence show that, even before the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states:

CROSS-EXAMINATION BY ATTY. DONN LEE:[31]

x x x x x x x x x

q - Can you tell us what else transpired after that incident?

a - After the first accident, through the initiative of the barge owners, they tried to pull out the barge from the place of the accident, and bring it to the anchor terminal for safety, then after deciding if the vessel is stabilized, they tried to pull it to the consignees warehouse, now while on route another accident occurred, now this time the barge totally hitting something in the course.

q - You said there was another accident, can you tell the court the nature of the second accident?

a - The sinking, sir.

q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?

a - Mostly it was related to the first accident because there was already a whole (sic) on the bottom part of the barge.

x x x x x x x x x

This is not all. Petitioner still headed to the consignees wharf despite knowledge of an incoming typhoon. During the time that the barge was heading towards the consignee's wharf on September 5, 1990, typhoon Loleng has already entered the Philippine area of responsibility.[32] A part of the testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:

DIRECT-EXAMINATION BY ATTY. LEE:[33]

x x x x x x x x x

q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie where she was instead of towing it?

a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the consignee) as I have said was in a hurry for their goods to be delivered at their Wharf since they needed badly the wheat that was loaded in PSTSI-3.It was needed badly by the consignee.

q - And this is the reason why you towed the Barge as you did?

a - Yes, sir.

x x x x x x x x x

CROSS-EXAMINATION BY ATTY. IGNACIO:[34]

x x x x x x x x x

q - And then from ISLOFF Terminal you proceeded to the premises of the

GMC? Am I correct?

a - The next day, in the morning, we hired for additional two (2) tugboats as I

have stated.

q - Despite of the threats of an incoming typhoon as you testified a while ago?

a - It is already in an inner portion of Pasig River. The typhoon would be

coming and it would be dangerous if we are in the vicinity of Manila

Bay.

q - But the fact is, the typhoon was incoming? Yes or no?

a - Yes.

q - And yet as a standard operating procedure of your Company, you have to

secure a sort of Certification to determine the weather condition, am I

correct?

a - Yes, sir.

q - So, more or less, you had the knowledge of the incoming typhoon, right?

a - Yes, sir.

q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon

if you are already inside the vicinity or inside Pasig entrance, it is a safe

place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short of due diligence required from a common carrier. More importantly, the officers/employees themselves of petitioner admitted that when the towing bits of the vessel broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a human factor, i.e., negligence had intervened.

IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF

APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and

ADORACION C. ARELLANO, in her official capacity as City Treasurer of

Batangas, respondents.

D E C I S I O N

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated

November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of

Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a

business tax refund imposed by the City of Batangas.

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to

contract, install and operate oil pipelines. The original pipeline concession was granted in 1967[1] and

renewed by the Energy Regulatory Board in 1992.[2]

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor

of Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer

required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to

the Local Government Code.[3] The respondent City Treasurer assessed a business tax on the

petitioner amounting to P956,076.04 payable in four installments based on the gross receipts for

products pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not

to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the

first quarter of 1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City

Treasurer, the pertinent portion of which reads:

"Please note that our Company (FPIC) is a pipeline operator with a government concession

granted under the Petroleum Act. It is engaged in the business of transporting petroleum

products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan

Terminals. As such, our Company is exempt from paying tax on gross receipts under

Section 133 of the Local Government Code of 1991 x x x x

"Moreover, Transportation contractors are not included in the enumeration of contractors

under Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority

to impose tax 'on contractors and other independent contractors' under Section 143,

Paragraph (e) of the Local Government Code does not include the power to levy on

transportation contractors.

"The imposition and assessment cannot be categorized as a mere fee authorized under

Section 147 of the Local Government Code. The said section limits the imposition of fees

and charges on business to such amounts as may be commensurate to the cost of

regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the

license fee, the imposition thereof based on gross receipts is violative of the aforecited

provision. The amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to

the cost of regulation, inspection and licensing. The fee is already a revenue raising

measure, and not a mere regulatory imposition."[4]

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner

cannot be considered engaged in transportation business, thus it cannot claim exemption under

Section 133 (j) of the Local Government Code.[5]

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a

complaint[6] for tax refund with prayer for a writ of preliminary injunction against respondents City of

Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner

alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts

violates Section 133 of the Local Government Code; (2) the authority of cities to impose and collect a

tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151

does not include the authority to collect such taxes on transportation contractors for, as defined under

Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer

illegally and erroneously imposed and collected the said tax, thus meriting the immediate refund of

the tax paid.[7]

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes

under Section 133 (j) of the Local Government Code as said exemption applies only to

"transportation contractors and persons engaged in the transportation by hire and common carriers by

air, land and water." Respondents assert that pipelines are not included in the term "common carrier"

which refers solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further

posit that the term "common carrier" under the said code pertains to the mode or manner by which a

product is delivered to its destination.[8]

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this

wise:

"xxx Plaintiff is either a contractor or other independent contractor.

xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax

exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the

government. Exemption may therefore be granted only by clear and unequivocal provisions

of law.

"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387,

(Exhibit A) whose concession was lately renewed by the Energy Regulatory Board

(Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption upon

the plaintiff.

"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of

the Local Tax Code. Such being the situation obtained in this case (exemption being

unclear and equivocal) resort to distinctions or other considerations may be of help:

1. That the exemption granted under Sec. 133 (j) encompasses

only common carriers so as not to overburden the riding public

or commuters with taxes. Plaintiff is not a common carrier, but a

special carrier extending its services and facilities to a single

specific or "special customer" under a "special contract."

2. The Local Tax Code of 1992 was basically enacted to give more and

effective local autonomy to local governments than the previous

enactments, to make them economically and financially viable

to serve the people and discharge their functions with a

concomitant obligation to accept certain devolution of powers, x

x x So, consistent with this policy even franchise grantees are

taxed (Sec. 137) and contractors are also taxed under Sec. 143

(e) and 151 of the Code."[9]

Petitioner assailed the aforesaid decision before this Court via a petition for review. On

February 27, 1995, we referred the case to the respondent Court of Appeals for consideration and

adjudication.[10] On November 29, 1995, the respondent court rendered a decision[11] affirming the trial

court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July

18, 1996.[12]

Hence, this petition. At first, the petition was denied due course in a Resolution dated

November 11, 1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a

Resolution[14] of January 20, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is

not a common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is

not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as

engaged in the business of transporting persons or property from place to place, for compensation,

offering his services to the public generally.

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.[15]

Based on the above definitions and requirements, there is no doubt that petitioner is a common

carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for

hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons

who choose to employ its services, and transports the goods by land and for compensation. The fact

that petitioner has a limited clientele does not exclude it from the definition of a common

carrier. In De Guzman vs. Court of Appeals[16] we ruled that:

"The above article (Art. 1732, Civil Code) makes no distinction between one whose

principal business activity is the carrying of persons or goods or both, and one who does

such carrying only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x

x avoids making any distinction between a person or enterprise offering

transportation service on a regular or scheduled basis and one offering such service on

an occasional, episodic or unscheduled basis.Neither does Article 1732 distinguish

between a carrier offering its services to the 'general public,' i.e., the general

community or population, and one who offers services or solicits business only from a

narrow segment of the general population. We think that Article 1877 deliberately

refrained from making such distinctions.

So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide

neatly with the notion of 'public service,' under the Public Service Act (Commonwealth Act

No. 1416, as amended) which at least partially supplements the law on common carriers set

forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, 'public

service' includes:

'every person that now or hereafter may own, operate, manage, or control in the

Philippines, for hire or compensation, with general or limited clientele, whether permanent,

occasional or accidental, and done for general business purposes, any common carrier,

railroad, street railway, traction railway, subway motor vehicle, either for freight or

passenger, or both, with or without fixed route and whatever may be its classification,

freight or carrier service of any class, express service, steamboat, or steamship line,

pontines, ferries and water craft, engaged in the transportation of passengers or freight or

both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,

irrigation system gas, electric light heat and power, water supply and power petroleum,

sewerage system, wire or wireless communications systems, wire or wireless broadcasting

stations and other similar public services.' "(Underscoring Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the

Local Government Code refers only to common carriers transporting goods and passengers through

moving vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code

makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not

provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the

United States, oil pipe line operators are considered common carriers.[17]

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a

"common carrier." Thus, Article 86 thereof provides that:

"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the

preferential right to utilize installations for the transportation of petroleum owned by him,

but is obligated to utilize the remaining transportation capacity pro rata for the

transportation of such other petroleum as may be offered by others for transport, and to

charge without discrimination such rates as may have been approved by the Secretary of

Agriculture and Natural Resources."

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of

Article 7 thereof provides:

"that everything relating to the exploration for and exploitation of petroleum x x and

everything relating to the manufacture, refining, storage, or transportation by special

methods of petroleum, is hereby declared to be a public utility." (Underscoring Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR

Ruling No. 069-83, it declared:

"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting

petroleum products, it is considered a common carrier under Republic Act No. 387 x x

x. Such being the case, it is not subject to withholding tax prescribed by Revenue

Regulations No. 13-78, as amended."

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,

therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government

Code, to wit:

"Section 133. Common Limitations on the Taxing Powers of Local Government Units. -

Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,

municipalities, and barangays shall not extend to the levy of the following :

x x x x x x x x x

(j) Taxes on the gross receipts of transportation contractors and persons engaged

in the transportation of passengers or freight by hire and common carriers

by air, land or water, except as provided in this Code."

The deliberations conducted in the House of Representatives on the Local Government Code of

1991 are illuminating:

"MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec.

131]. Common Limitations on the Taxing Powers of Local Government Units." x x x

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to

be one of those being deemed to be exempted from the taxing powers of the local

government units. May we know the reason why the transportation business is being

excluded from the taxing powers of the local government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec.

131), line 16, paragraph 5. It states that local government units may not impose taxes on

the business of transportation, except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see

there that provinces have the power to impose a tax on business enjoying a franchise at the

rate of not more than one-half of 1 percent of the gross annual receipts. So, transportation

contractors who are enjoying a franchise would be subject to tax by the province. That is

the exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is the imposition of taxes by local

government units on the carrier business. Local government units may impose taxes on

top of what is already being imposed by the National Internal Revenue Code which is the

so-called "common carriers tax." We do not want a duplication of this tax, so we just

provided for an exception under Section 125 [now Sec. 137] that a province may impose

this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]

It is clear that the legislative intent in excluding from the taxing power of the local government

unit the imposition of business tax against common carriers is to prevent a duplication of the so-

called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings

under the National Internal Revenue Code.[19] To tax petitioner again on its gross receipts in its

transportation of petroleum business would defeat the purpose of the Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of

Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE. SO

ORDERED.

G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA,respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter 2 was entered into between

Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all

presumably inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-party which reads:

16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo Bureau inspector or substitute appointed by charterers for his account certifying the

vessel's readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's expense and the vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime commences. (emphasis supplied)

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 (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. 5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into 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-partly (which provided for an F.I.O.S. clause). 6 The hatches remained open throughout the duration of the discharge. 7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the cargo. 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. 8 The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th).10 A private marine and cargo surveyor,

Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed 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 dated 18 July 1974 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. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for payment because, according to them, what they received was just a request for shortlanded certificate and not a formal claim, and that this "request" was denied by them because they "had nothing to do with the discharge of the shipment." 14Hence, on 18 July 1975, 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 defendant carrier for the value of the goods lost or damaged when it ruled thus: 15

. . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and to delivery by it of less than what it received. After that, the burden of proving that the loss or damage was due to any of the causes which exempt him from liability is shipted to the carrier, common or private he may be. Even if the provisions of the charter-party aforequoted are deemed valid, and the defendants considered private carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo. This they failed to do. By this omission, coupled with their failure to destroy the presumption of negligence against them, the defendants are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled 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. Accordingly, the Civil Code

provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. Thus —

. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce sufficient evidence to prove the negligence of the defendant carrier as alleged in its complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove his exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action, i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was under the impression that it did not have to establish defendant's negligence. Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligation . . . 18 (emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner for loss or damage to goods cause by want of due deligence on its part or that of its manager to make the vessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil Code applies only to common carriers and not to private carriers. 19 Petitioner further argues that since the possession and control of the

vessel remain with the shipowner, absent any stipulation to the contrary, such shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the appellate court in not applying the presumption of negligence against respondent carrier, and instead shifting the onus probandi on the shipper to show want of due deligence on the part of the carrier, when he was not even at hand to witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that he had exercised that degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it fitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; 20 a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 The definition extends to carriers either by land, air or

water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. 24

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. 25 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. 26 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.

It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. 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. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, 29 does not find

application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 —

As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her,

the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collusion occur; and the same difficulty in discovering the truth as to what has taken place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima faciepresumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship's boom. 32

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. 34

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. This was confirmed by respondent appellate court thus —

. . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligations. Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly show absence of negligence by the defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed and nobody could open the same except in the presence of the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would have to be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).

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. 35 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. 36

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. 37 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. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process.

The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was just an approximation or

estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee's warehouse.

Indeed, we agree 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.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.

Costs against petitioner.

SO ORDERED.

MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO

CABIL, petitioners, vs. COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.

D E C I S I O N

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals[1] in CA-GR No. 28245, dated September 30, 1992, which affirmed with modification the decision of the Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to private respondent Amyline Antonio, and its resolution which denied petitioners motion for reconsideration for lack of merit.

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus principally in connection with a bus service for school children which they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks. His job was to take school children to and from the St. Scholasticas College in Malate, Manila.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in consideration of which private respondent paid petitioners the amount of P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the afternoon. However, as several members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue

and EDSA until 8:00 oclock in the evening. Petitioner Porfirio Cabil drove the minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction, which he described as siete. The road was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her from this position. She was in great pain and could not move.

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar with the area and he could not have seen the curve despite the care he took in driving the bus, because it was dark and there was no sign on the road. He said that he saw the curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too late.

The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latters fence. On the basis of Escanos affidavit of desistance the case against petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a result of the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist down.During the trial she described the operations she underwent and adduced evidence regarding the cost of her treatment and therapy. Immediately after the accident, she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not adequately equipped,

she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray was taken and the damage to her spine was determined to be too severe to be treated there. She was therefore brought to Manila, first to the Philippine General Hospital and later to the Makati Medical Center where she underwent an operation to correct the dislocation of her spine.

In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for

travel to a long distance trip and that the driver was properly screened and tested

before being admitted for employment. Indeed, all the evidence presented have

shown the negligent act of the defendants which ultimately resulted to the accident

subject of this case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms.

Amyline Antonio were the only ones who adduced evidence in support of their

claim for damages, the Court is therefore not in a position to award damages to the

other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against

defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to

articles 2176 and 2180 of the Civil Code of the Philippines and said defendants are

ordered to pay jointly and severally to the plaintiffs the following amount:

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages; and

5) 25% of the recoverable amount as attorneys fees;

6) Costs of suit.

SO ORDERED.

The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it with respect to the other

plaintiffs on the ground that they failed to prove their respective claims. The Court of Appeals modified the award of damages as follows:

1) P93,657.11 as actual damages;

2) P600,000.00 as compensatory damages;

3) P50,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) P10,000.00 as attorneys fees; and

6) Costs of suit.

The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to exercise due care and precaution in the operation of his vehicle considering the time and the place of the accident. The Court of Appeals held that the Fabres were themselves presumptively negligent. Hence, this petition. Petitioners raise the following issues:

I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY PRIVATE RESPONDENTS.

III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is insisted that, on the assumption that petitioners are liable, an award of P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a casual employee of a company called Suaco, earning P1,650.00 a month, and a dealer of Avon products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees do not have security of tenure, the award of P600,000.00, considering Amyline Antonios earnings, is without factual basis as there is no assurance that she would be regularly earning these amounts.

With the exception of the award of damages, the petition is devoid of merit.

First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held, for although the relation of passenger and carrier is contractual both in

origin and nature, nevertheless the act that breaks the contract may be also a tort.[2] In either case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent.

The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on record. These factual findings of the two courts we regard as final and conclusive, supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a consequence, the road was slippery, and it was dark. He averred these facts to justify his failure to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30 meters ahead.[3] By then it was too late for him to avoid falling off the road. Given the conditions of the road and considering that the trip was Cabils first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony[4] that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed.

Considering the foregoing the fact that it was raining and the road was slippery, that it was dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the selection and supervision of their employee.

Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional drivers license. The employer should also examine the applicant for his qualifications, experience and record of service.[5] Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules.[6]

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had been driving for

school children only, from their homes to the St. Scholasticas College in Metro Manila.[7] They had hired him only after a two-week apprenticeship. They had tested him for certain matters, such as whether he could remember the names of the children he would be taking to school, which were irrelevant to his qualification to drive on a long distance travel, especially considering that the trip to La Union was his first. The existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the presumption of negligence on the part of an employer.[8]

Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the congregations delayed meeting) could have averted the mishap and (2) under the contract, the WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold water. The hour of departure had not been fixed. Even if it had been, the delay did not bear directly on the cause of the accident. With respect to the second contention, it was held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to the

place to which he wishes to be conveyed, but exercises no other control over the

conduct of the driver, is not responsible for acts of negligence of the latter or

prevented from recovering for injuries suffered from a collision between the

automobile and a train, caused by the negligence either of the locomotive engineer

or the automobile driver.[9]

As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. As this Court has held:[10]

Art. 1732. Common carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or both, by

land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the general public, i.e., the general

community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions.

As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides:

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

This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees.

The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify finding them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of Appeals erred in increasing the amount of compensatory damages because private respondents did not question this award as inadequate.[11] To the contrary, the award of P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable considering the contingent nature of her income as a casual employee of a company and as distributor of beauty products and the fact that the possibility that she might be able to work again has not been foreclosed. In fact she testified that one of her previous employers had expressed willingness to employ her again.

With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not sufficiently indicate the factual and legal basis for them, we find that they are nevertheless supported by evidence in the records of this case. Viewed as an action for quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabils gross

negligence amounted to bad faith.[12] Amyline Antonios testimony, as well as the testimonies of her father and co-passengers, fully establish the physical suffering and mental anguish she endured as a result of the injuries caused by petitioners negligence.

The award of exemplary damages and attorneys fees was also properly made. However, for the same reason that it was error for the appellate court to increase the award of compensatory damages, we hold that it was also error for it to increase the award of moral damages and reduce the award of attorneys fees, inasmuch as private respondents, in whose favor the awards were made, have not appealed.[13]

As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on that of breach of contract. The question is whether, as the two courts below held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of Appeals,[14] on facts similar to those in this case, this Court held the bus company and the driver jointly and severally liable for damages for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of Appeals[15] a driver found negligent in failing to stop the bus in order to let off passengers when a fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus and suffered injuries, was held also jointly and severally liable with the bus company to the injured passengers.

The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court,[17] and Metro Manila Transit Corporation v. Court of Appeals,[18] the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the latters heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals,[19] thus:

Nor should it make any difference that the liability of petitioner [bus owner]

springs from contract while that of respondents [owner and driver of other vehicle]

arises from quasi-delict. As early as 1913, we already ruled in Gutierrez vs.

Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence

of the driver of the bus on which he was riding and of the driver of another vehicle,

the drivers as well as the owners of the two vehicles are jointly and severally liable

for damages. Some members of the Court, though, are of the view that under the

circumstances they are liable on quasi-delict.[20]

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] this Court exonerated the jeepney driver from liability to the injured passengers and their families while holding the owners of the jeepney jointly and severally liable, but that is because that case was expressly tried and decided exclusively on the theory of culpa contractual. As this Court there explained:

The trial court was therefore right in finding that Manalo [the driver] and spouses

Mangune and Carreon [the jeepney owners] were negligent. However, its ruling

that spouses Mangune and Carreon are jointly and severally liable with Manalo is

erroneous. The driver cannot be held jointly and severally liable with the carrier in

case of breach of the contract of carriage. The rationale behind this is readily

discernible. Firstly, the contract of carriage is between the carrier and the

passenger, and in the event of contractual liability, the carrier is exclusively

responsible therefore to the passenger, even if such breach be due to the negligence

of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81,

April 29, 1966, 16 SCRA 742) . . .[22]

As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out their claim against the carrier and the driver exclusively on one theory, much less on that of breach of contract alone. After all, it was permitted for them to allege alternative causes of action and join as many parties as may be liable on such causes of action[23] so long as private respondent and her co-plaintiffs do not recover twice for the same injury. What is clear from the cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus justifying the holding that the carrier and the driver were jointly and severally liable because their separate and distinct acts concurred to produce the same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to the award of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline Antonio the following amounts:

1) P93,657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) 25% of the recoverable amount as attorneys fees; and

6) costs of suit.

SO ORDERED.

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

ESTRELLITA M. BASCOS, petitioners, vs. COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.

Modesto S. Bascos for petitioner.

Pelaez, Adriano & Gregorio for private respondent.

SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. — 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." . . . The holding of the Court in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held thus: "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 distinguished between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions."

2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE. — Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article

1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption . . . The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. — In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . . (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme Court also held that: "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 of irresistible threat, violence of 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."

4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, 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.

5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner presented no other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it.

6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES. — While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the contents of the petition.

Affidavits are not considered the best evidence if the affiants are available as witnesses.

7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. — Granting that the said evidence were 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.

D E C I S I O N

CAMPOS, JR., J p:

This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:

"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in toto. Costs against appellant." 1

The facts, as gathered by this Court, are as follows:

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract 2 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 400 sacks of soya bean meal worth P156,404.00 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 in accordance with the contract which stated that:

"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or damages to the cargo during transport at market value, . . ." 3

Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ of Preliminary Attachment was supported by an affidavit 5 which contained the following allegations:

"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of preliminary attachment may lawfully issue, namely:

"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;"

5. That there is no sufficient security for the claim sought to be enforced by the present action;

6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"

The trial court granted the writ of preliminary attachment on February 17, 1987.

In her answer, 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 in the amount of P11,000.00 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, exculpated petitioner from any liability to CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay the former:

1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual damages with legal interest

of 12% per cent per annum to be counted from December 4, 1986 until fully paid;

2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and

3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is DENIED for being moot and academic.

SO ORDERED." 6

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.

Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:

"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.

II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.

III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7

The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the hijacking referred to a force majeure?

The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that she did business under the name A.M.

Bascos Trucking and that said admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The respondent Court also adopted in toto the trial court's decision that petitioner was a common carrier, Moreover, both courts appreciated the following pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was placed in petitioner's care.

In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in this petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in his testimony his statement that the contract was a lease contract. 10 She also stated that: she was not catering to the general public. Thus, in her answer to the amended complaint, she said that she does business under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to the general public but to a few customers only in view of the fact that it is only a small business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier.

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." 12 In this case, 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. 13

But petitioner argues that there was only a contract of lease because they offer their services only to a select group of people and because the private respondents, plaintiffs in the lower court, did not object to the presentation of

affidavits by petitioner where the transaction was referred to as a lease contract.

Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it held thus:

"The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions."

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 were 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. 15 Furthermore, petitioner presented no other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it. 16

Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force majeure.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. 17 Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. 19 In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.

In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which provides:

"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy;

xxx xxx xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or force, is dispensed with or diminished;"

In the same case, 21 the Supreme Court also held that:

"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."

To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have concluded that these affidavits were not enough to overcome the presumption. Petitioner's affidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of objection on the part of private respondent, the respondent Court had discretion in assigning weight to such evidence. We are bound by the conclusion of the appellate court. In a petition for review on certiorari, We are not to determine the probative value of evidence but to resolve questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took place. Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness

as could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses. 25 The subsequent filing of the information for carnapping and robbery against the accused named in said affidavits did not necessarily mean that the contents of the affidavits were true because they were yet to be determined in the trial of the criminal cases.

The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

Having affirmed the findings of the respondent Court on the substantial issues involved, We find 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.

SO ORDERED.

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

FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.

D E C I S I O N

VITUG, J.:

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

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

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

The trial court, in its order of 30 April 1996,[1] granted the motion to dismiss, explaining thusly:

Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party

must prove his own affirmative allegation, xxx.

In the instant case, plaintiff did not present any single evidence that would prove

that defendant is a common carrier.

x x x x x x x x x

Accordingly, the application of the law on common carriers is not warranted and

the presumption of fault or negligence on the part of a common carrier in case of

loss, damage or deterioration of goods during transport under 1735 of the Civil

Code is not availing.

Thus, the laws governing the contract between the owner of the cargo to whom the

plaintiff was subrogated and the owner of the vehicle which transports the cargo

are the laws on obligation and contract of the Civil Code as well as the law on

quasi delicts.

Under the law on obligation and contract, negligence or fault is not presumed. The

law on quasi delict provides for some presumption of negligence but only upon the

attendance of some circumstances. Thus, Article 2185 provides:

Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving

a motor vehicle has been negligent if at the time of the mishap, he was violating

any traffic regulation.

Evidence for the plaintiff shows no proof that defendant was violating any traffic

regulation. Hence, the presumption of negligence is not obtaining.

Considering that plaintiff failed to adduce evidence that defendant is a common

carrier and defendants driver was the one negligent, defendant cannot be made

liable for the damages of the subject cargoes.[2]

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

The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court, in its decision of 10 June 1999,

[4] discoursed, among

other things, that -

"x x x in order for the presumption of negligence provided for under the law

governing common carrier (Article 1735, Civil Code) to arise, the appellant must

first prove that the appellee is a common carrier. Should the appellant fail to prove

that the appellee is a common carrier, the presumption would not arise;

consequently, the appellant would have to prove that the carrier was negligent.

"x x x x x x x x x

"Because it is the appellant who insists that the appellees can still be considered as

a common carrier, despite its `limited clientele, (assuming it was really a common

carrier), it follows that it (appellant) has the burden of proving the same. It

(plaintiff-appellant) `must establish his case by a preponderance of evidence,

which means that the evidence as a whole adduced by one side is superior to that

of the other. (Summa Insurance Corporation vs. Court of Appeals, 243 SCRA

175).This, unfortunately, the appellant failed to do -- hence, the dismissal of the

plaintiffs complaint by the trial court is justified.

"x x x x x x x x x

"Based on the foregoing disquisitions and considering the circumstances that the

appellee trucking corporation has been `its exclusive contractor, hauler since 1970,

defendant has no choice but to comply with the directive of its principal, the

inevitable conclusion is that the appellee is a private carrier.

"x x x x x x x x x

"x x x the lower court correctly ruled that 'the application of the law on common

carriers is not warranted and the presumption of fault or negligence on the part of a

common carrier in case of loss, damage or deterioration of good[s] during transport

under [article] 1735 of the Civil Code is not availing.' x x x.

"Finally, We advert to the long established rule that conclusions and findings of

fact of a trial court are entitled to great weight on appeal and should not be

disturbed unless for strong and valid reasons."[5]

Petitioner's motion for reconsideration was likewise denied; [6] hence, the instant petition,[7] raising the following issues:

I

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON

CARRIER AS DEFINED UNDER THE LAW AND EXISTING

JURISPRUDENCE.

II

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A

PRIVATE CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT

WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE

SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY

AND POSSESSION.

III

WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN

THE INSTANT CASE.

On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual or entity, cannot be considered a common carrier. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their services to the public,[8] whether to the public in general or to a limited clientele in particular, but never on an exclusive basis.[9] The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt to avail themselves of its transportation service for a fee.[10] Given accepted standards, GPS scarcely falls within the term common carrier.

The above conclusion nothwithstanding, GPS cannot escape from liability.

In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief.[11] The law, recognizing the obligatory force of contracts,[12] will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof.[13] A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promisee that may include his expectation interest, which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his reliance interest, which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a

position as he would have been in had the contract not been made; or his restitution interest, which is his interest in having restored to him any benefit that he has conferred on the other party.[14] Indeed, agreements can accomplish little, either for their makers or for society, unless they are made the basis for action.[15] The effect of every infraction is to create a new duty, that is, to make recompense to the one who has been injured by the failure of another to observe his contractual obligation[16] unless he can show extenuating circumstances, like proof of his exercise of due diligence (normally that of the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing liability.

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

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

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

by the evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the plaintiff.[21] Thus, it is not applicable when an unexplained accident may be attributable to one of several causes, for some of which the defendant could not be responsible.[22]

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

If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the right to present evidence.[24] Thus, respondent corporation may no longer offer proof to establish that it has exercised due care in transporting the cargoes of the assured so as to still warrant a remand of the case to the trial court.

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

SO ORDERED.

[G.R. No. 138334. August 25, 2003]

ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of Europe. The package tour included the countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare, and the booking fee was also waived because petitioners niece, Meriam Menor, was respondent companys ticketing manager.

Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for the package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her flight on board British Airways.

Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the flight for the first leg of her journey from Manila to Hongkong. To petitioners dismay, she discovered that the flight she was supposed to take had already departed the previous day. She learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called up Menor to complain.

Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant which included England, Scotland and Wales in its itinerary. For this tour package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as partial payment and commenced the trip in July 1991.

Upon petitioners return from Europe, she demanded from respondent the reimbursement of P61,421.70, representing the difference between the sum she paid for Jewels of Europe and the amount she owed respondent for the British Pageant tour. Despite several demands, respondent company refused to reimburse the amount, contending that the same was non-refundable.[1] Petitioner was thus constrained to file a complaint against respondent for breach of contract

of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court of Makati City.

In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was due to respondents fault since it did not clearly indicate the departure date on the plane ticket. Respondent was also negligent in informing her of the wrong flight schedule through its employee Menor. She insisted that the British Pageant was merely a substitute for the Jewels of Europe tour, such that the cost of the former should be properly set-off against the sum paid for the latter.

For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco insisted that petitioner was informed of the correct departure date, which was clearly and legibly printed on the plane ticket. The travel documents were given to petitioner two days ahead of the scheduled trip. Petitioner had only herself to blame for missing the flight, as she did not bother to read or confirm her flight schedule as printed on the ticket.

Respondent explained that it can no longer reimburse the amount paid for Jewels of Europe, considering that the same had already been remitted to its principal in Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner did not join the tour. Lotus European tour organizer, Insight International Tours Ltd., determines the cost of a package tour based on a minimum number of projected participants. For this reason, it is accepted industry practice to disallow refund for individuals who failed to take a booked tour.[3]

Lastly, respondent maintained that the British Pageant was not a substitute for the package tour that petitioner missed. This tour was independently procured by petitioner after realizing that she made a mistake in missing her flight for Jewels of Europe. Petitioner was allowed to make a partial payment of only US$300.00 for the second tour because her niece was then an employee of the travel agency. Consequently, respondent prayed that petitioner be ordered to pay the balance of P12,901.00 for the British Pageant package tour.

After due proceedings, the trial court rendered a decision, [4] the dispositive part of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the defendant to return and/or refund to the plaintiff the amount of

Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three

Centavos (P53,989.43) with legal interest thereon at the rate of twelve

percent (12%) per annum starting January 16, 1992, the date when the

complaint was filed;

2. Ordering the defendant to pay the plaintiff the amount of Five Thousand

(P5,000.00) Pesos as and for reasonable attorneys fees;

3. Dismissing the defendants counterclaim, for lack of merit; and

4. With costs against the defendant.

SO ORDERED.[5]

The trial court held that respondent was negligent in erroneously advising petitioner of her departure date through its employee, Menor, who was not presented as witness to rebut petitioners testimony. However, petitioner should have verified the exact date and time of departure by looking at her ticket and should have simply not relied on Menors verbal representation. The trial court thus declared that petitioner was guilty of contributory negligence and accordingly, deducted 10% from the amount being claimed as refund.

Respondent appealed to the Court of Appeals, which 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. This being so, she is not entitled to any form of damages. Petitioner also forfeited her right to the Jewels of Europe tour and must therefore pay respondent the balance of the price for the British Pageant tour. The dispositive portion of the judgment appealed from reads as follows:

WHEREFORE, premises considered, the decision of the Regional Trial Court dated

October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby

ENTERED requiring the plaintiff-appellee to pay to the defendant-appellant the amount of

P12,901.00, representing the balance of the price of the British Pageant Package Tour, the

same to earn legal interest at the rate of SIX PERCENT (6%) per annum, to be computed

from the time the counterclaim was filed until the finality of this decision. After this

decision becomes final and executory, the rate of TWELVE PERCENT (12%) interest per

annum shall be additionally imposed on the total obligation until payment thereof is

satisfied. The award of attorneys fees is DELETED. Costs against the plaintiff-appellee.

SO ORDERED.[6]

Upon denial of her motion for reconsideration, [7] petitioner filed the instant petition under Rule 45 on the following grounds:

I

It is respectfully submitted that the Honorable Court of Appeals committed a reversible

error in reversing and setting aside the decision of the trial court by ruling that the

petitioner is not entitled to a refund of the cost of unavailed Jewels of Europe tour she

being equally, if not more, negligent than the private respondent, for in the contract of

carriage the common carrier is obliged to observe utmost care and extra-ordinary diligence

which is higher in degree than the ordinary diligence required of the passenger. Thus, even

if the petitioner and private respondent were both negligent, the petitioner cannot be

considered to be equally, or worse, more guilty than the private respondent. At best,

petitioners negligence is only contributory while the private respondent [is guilty] of gross

negligence making the principle of pari delicto inapplicable in the case;

II

The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour was

not indivisible and the amount paid therefor refundable;

III

The Honorable Court erred in not granting to the petitioner the consequential damages due

her as a result of breach of contract of carriage. [8]

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. If she were negligent at all, the same is merely contributory and not the proximate cause of the damage she suffered. Her loss could only be attributed to respondent as it was the direct consequence of its employees gross negligence.

Petitioners contention has no merit.

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.[9]Such person or association of persons are regarded as carriers and are classified as private or special carriers and common or public carriers.[10] 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. Respondents 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. Respondents 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 petitioners contractual relation with respondent is the latters service of arranging and facilitating petitioners 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. Petitioners submission is premised on a wrong assumption.

The nature of the contractual relation between petitioner and respondent is determinative of the degree of care required in the performance of the latters obligation under the contract. For reasons of public policy, a common carrier in a contract of carriage is bound by law to carry passengers as far as human care and foresight can provide using the utmost diligence of very cautious persons and with due regard for all the circumstances.[11] As earlier stated, however, respondent is not a common carrier but a travel agency. It is thus not bound under the law to observe extraordinary diligence in the performance of its obligation, as petitioner claims.

Since the contract between the parties is an ordinary one for services, the standard of care required of respondent is that of a good father of a family under Article 1173 of the Civil Code.[12] This connotes reasonable care consistent with that which an ordinarily prudent person would have observed when confronted with a similar situation. The test to determine whether negligence attended the performance of an obligation is: did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence.[13]

In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of the wrong day of departure. Petitioners testimony was accepted as indubitable evidence of Menors alleged negligent act since respondent did not call Menor to the witness stand to refute the allegation. The lower court applied the presumption under Rule 131, Section 3 (e)[14] of the Rules of Court that evidence willfully suppressed would be adverse if produced and thus considered petitioners uncontradicted testimony to be sufficient proof of her claim.

On the other hand, respondent has consistently denied that Menor was negligent and maintains that petitioners assertion is belied by the evidence on

record. The date and time of departure was legibly written on the plane ticket and the travel papers were delivered two days in advance precisely so that petitioner could prepare for the trip. It performed all its obligations to enable petitioner to join the tour and exercised due diligence in its dealings with the latter.

We agree with respondent.

Respondents failure to present Menor as witness to rebut petitioners testimony could not give rise to an inference unfavorable to the former. Menor was already working in France at the time of the filing of the complaint,[15] thereby making it physically impossible for respondent to present her as a witness. Then too, even if it were possible for respondent to secure Menors testimony, the presumption under Rule 131, Section 3(e) would still not apply. The opportunity and possibility for obtaining Menors testimony belonged to both parties, considering that Menor was not just respondents employee, but also petitioners niece. It was thus error for the lower court to invoke the presumption that respondent willfully suppressed evidence under Rule 131, Section 3(e). Said presumption would logically be inoperative if the evidence is not intentionally omitted but is simply unavailable, or when the same could have been obtained by both parties.[16]

In sum, we do not agree with the finding of the lower court that Menors negligence concurred with the negligence of petitioner and resultantly caused damage to the latter. Menors negligence was not sufficiently proved, considering that the only evidence presented on this score was petitioners uncorroborated narration of the events. It is well-settled that the party alleging a fact has the burden of proving it and a mere allegation cannot take the place of evidence. [17] If the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner facts upon which he bases his claim, the defendant is under no obligation to prove his exception or defense.[18]

Contrary to petitioners claim, the evidence on record shows that respondent exercised due diligence in performing its obligations under the contract and followed standard procedure in rendering its services to petitioner. As correctly observed by the lower court, the plane ticket[19] issued to petitioner clearly reflected the departure date and time, contrary to petitioners contention. The travel documents, consisting of the tour itinerary, vouchers and instructions, were likewise delivered to petitioner two days prior to the trip. Respondent also properly booked petitioner for the tour, prepared the necessary documents and procured the plane tickets. It arranged petitioners hotel accommodation as well as food, land transfers and sightseeing excursions, in accordance with its avowed undertaking.

Therefore, it is clear that respondent performed its prestation under the contract as well as everything else that was essential to book petitioner for the tour. Had petitioner exercised due diligence in the conduct of her affairs, there would have been no reason for her to miss the flight. Needless to say, after the travel papers were delivered to petitioner, it became incumbent upon her to take

ordinary care of her concerns. This undoubtedly would require that she at least read the documents in order to assure herself of the important details regarding the trip.

The negligence of the obligor in the performance of the obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care and prudence in the performance of the obligation as the nature of the obligation so demands.[20] There is no fixed standard of diligence applicable to each and every contractual obligation and each case must be determined upon its particular facts. The degree of diligence required depends on the circumstances of the specific obligation and whether one has been negligent is a question of fact that is to be determined after taking into account the particulars of each case.[21]

The lower court declared that respondents employee was negligent. This factual finding, however, is not supported by the evidence on record. While factual findings below are generally conclusive upon this court, the rule is subject to certain exceptions, as when the trial court overlooked, misunderstood, or misapplied some facts or circumstances of weight and substance which will affect the result of the case.[22]

In the case at bar, the evidence on record shows that respondent company performed its duty diligently and did not commit any contractual breach. Hence, petitioner cannot recover and must bear her own damage.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay respondent the amount of P12,901.00 representing the balance of the price of the British Pageant Package Tour, with legal interest thereon at the rate of 6% per annum, to be computed from the time the counterclaim was filed until the finality of this Decision. After this Decision becomes final and executory, the rate of 12% per annum shall be imposed until the obligation is fully settled, this interim period being deemed to be by then an equivalent to a forbearance of credit.[23]

SO ORDERED.

CARGOLIFT SHIPPING, INC. G.R. No. 146426

Petitioner,

Present:

Panganiban, C.J. (Chairperson),

- versus - Ynares-Santiago,

Austria-Martinez,

Callejo, Sr., and

Chico-Nazario, JJ.

L. ACUARIO MARKETING CORP. and SKYLAND BROKERAGE, INC., Respondents. Promulgated: June 27, 2006

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

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari of the July 6, 2000 Decision[1]

of the Court of

Appeals in CA-G.R. CV No. 55664, which affirmed the judgment[2]

of the Regional Trial

Court of Caloocan City, Branch 121, in Civil Case No. C-16120 in so far as it found

petitioner Cargolift Shipping, Inc. (Cargolift) liable, as third-party defendant, for actual

damages in the sum of P97,021.20, as well as the November 28, 2000

Resolution[3]

denying the motion for reconsideration.

The antecedent facts of the case are as follows:

Sometime in March 1993, respondent L. Acuario Marketing Corp., (Acuario) and

respondent Skyland Brokerage, Inc., (Skyland) entered into a time charter

agreement[4]

whereby Acuario leased to Skyland its L. Acuario II barge for use by the latter

in transporting electrical posts from Manila to Limay, Bataan. At the same time, Skyland

also entered into a separate contract[5]

with petitioner Cargolift, for the latters tugboats to

tow the aforesaid barge.

In accordance with the foregoing contracts, petitioners tugboat M/T Beejay left

the Manila South Harbor on April 1, 1993 with Acuarios barge in tow. It reached

the port of Limay, Bataan on April 3, 1993, whereupon M/T Beejay disengaged and once

again set sail for Manila. Petitioners other tugboat, the M/T Count, remained in Bataan to

secure the barge for unloading.

Off-loading operations went underway until April 7, 1993, when operations were

interrupted for the next two days to give way to the observance of the lenten season. The

unloading of the cargo was concluded on April 12, 1993, by which time M/T Beejay had

gone back to Bataan for the return trip. The M/T Beejay and the barge returned to

the port of Manila on April 13, 1993.

On the same day, the barge was brought to Acuarios shipyard where it was

allegedly discovered by Acuarios dry-docking officer, Guillermo Nacu, Jr., that the barge

was listing due to a leak in its hull.According to Nacu, he was informed by the skipper of

the tugboat that the damage was sustained in Bataan. To confirm the same, Nacu ordered

an underwater survey of the barge and prepared a damage report dated April 14, 1993. No

representative of Skyland was present during the inspection although it was furnished with

a copy of the said report.

The barge was consequently dry-docked for repairs at the Western Shipyard from

April 16 to April 26, 1993. Acuario spent the total sum of P97,021.20 for the repairs.[6]

Pursuant to its contract with Skyland which provided that (a)ny damage or loss on

the barge due to the fault or negligence of charterers shall be the responsibility of the

(c)harterer or his representative,[7]

Acuario wrote Skyland seeking reimbursement of its

repair costs, failing which, it filed a complaint for damages against Skyland before the

Regional Trial Court of Caloocan City, where the case was docketed as Civil Case No. C-

16120 and raffled to Branch 121.

Skyland, in turn, filed a third-party complaint[8]

against petitioner alleging that it was

responsible for the damage sustained by the barge.

According to Acuario and its witnesses, the weather in Bataan shifted drastically

at dawn of April 7, 1993 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. Fortunately, no part of the cargo was lost even if only half of it had been unloaded at

that time.[9]

On the other hand, petitioner and Skyland denied that the barge had been damaged. One of

its witnesses, Salvador D. Ocampo, claimed that he was involved in all aspects of the

operation and that no accident of any sort was brought to his knowledge. He alleged that

the barge patron and tug master made no mention of any maritime casualty during the

clearing of the vessels at the Philippine Ports Authority in Limay, Bataan. The barge was in

good condition and was not damaged when it was turned over to Acuario on April 13,

1993.[10]

In due course, the trial court promulgated its decision dated June 10, 1996, the dispositive

part of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as

follows:

1. Ordering the defendant Skyland Brokerage to pay to

the plaintiff L. Acuario Marketing

Corporation the cost of repairs of the barge L.

Acuario II in the amount of P97,021.20 and to

seek reimbursement from the third-party

defendant Cargolift Shipping;

2. Ordering the defendant to pay attorneys fees in the

amount of P24,255.30 and to seek

reimbursement thereof from the third-party

defendant; and

3. Ordering the defendant to pay the costs of suit

subject to reimbursement from the third-party

defendant.

SO ORDERED.[11]

The trial court gave credence to the testimonies of Acuarios witnesses that the

barge sustained damage while it was being chartered by Skyland. It held that the positive

testimonies of Acuarios witnesses, coupled with documentary evidence detailing the nature

and extent of the damage as well as the repairs done on the barge, should prevail over the

bare denials of Skyland and petitioner. It also noted that two of the latters three witnesses

were not in Limay, Bataan when the incident happened.

The trial court further held that Skyland was liable under its time charter

agreement with Acuario pursuant to Article 1159 of the Civil Code which states that

contracts have the force of law between the contracting parties. Skyland must bear the

consequences of the tugboats incapacity to respond to the barges request for assistance

because Acuario had no control in the selection of the tugboats used by Skyland. But since

the ultimate fault lies with petitioner, justice demands that the latter reimburse Skyland for

whatever it may be adjudged to pay Acuario.[12]

Both Skyland and petitioner elevated the matter to the Court of Appeals which,

on July 6, 2000, rendered the assailed Decision affirming the trial court, but deleting the

award of attorneys fees. Upon denial of its motion for reconsideration,[13]

petitioner brought

the instant petition raising the following issues:

I

WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING

THE FINDING OF THE TRIAL COURT THAT L. ACUARIO II

SUSTAINED DAMAGE AND THAT IT WAS SUSTAINED DURING

ITS CHARTER TO RESPONDENT SKYLAND.

II

ASSUMING THAT L. ACUARIO II SUFFERED DAMAGE,

WHETHER THE COURT OF APPEALS ERRED IN UPHOLDING

THE TRIAL COURT DECISION HOLDING PETITIONER LIABLE

THEREFOR.[14]

The petition lacks merit.

On the first assigned error, petitioner is asking this Court to resolve factual issues that have

already been settled by the courts below. The question of whether the barge had been

damaged during its charter to Skyland is a factual matter, the determination of which may

not be generally disturbed on appeal. Questions of fact are not reviewable by this Court

except under certain exceptional circumstances.[15]

No such exceptional circumstance exists

in the case at bar.

On the contrary, the factual conclusions reached by the courts below are consistent with the

evidence on record. Acuarios witnesses testified that strong winds and waves caused the

barge to bump into the walls of the pier where it was berthed for unloading. Petitioners

tugboat failed to tow it farther away due to engine breakdown, thus causing the barge to

sustain a hole in its hull. These testimonies were duly supported and corroborated by

documentary evidence detailing the damage and repairs done on the barge.[16]

On the other hand, petitioner and Skylands denial that there was inclement weather in the

early hours of April 7, 1993 and that the barge sustained no damage on this occasion were

not supported by evidence to overcome the positive allegations of Acuarios witnesses who

were present at the place and time of the incident. The categorical declaration of Acuarios

witnesses regarding the events which led to the damage on the barge shifted the burden of

evidence on petitioner and Skyland. They could have easily disproved Acuarios claims by

presenting competent proof that there was no weather disturbance on that day or, by

presenting the testimony of individuals who have personal knowledge of the events which

transpired.

Moreover, the inability of petitioners and Skylands witnesses to unequivocally declare that

it was still the M/T Count that secured the barge during the resumption of off-loading

operations casts suspicion on their credibility. As aptly observed by the trial court, such

hesitation on the part of its witnesses is indicative of uncertainty, if not a propensity to

withhold information that could be unfavorable to their cause.[17]

To our mind, therefore,

the trial court rightly concluded that petitioners M/T Count indeed encountered mechanical

trouble, as asserted by Acuario. The fact that petitioner did not categorically deny the

allegation of mechanical trouble only serves to strengthen the trial courts conclusion.

Petitioners assertion that it is contrary to human experience for the barge to have made the

return trip to Manila if it sustained the alleged damage deserves short shrift. The trial court

found that the damage on the barge was not too extensive as to render it incapable of

staying afloat and being used in operation. Neither was it impossible for the barges cargo to

remain intact and undamaged during the weather disturbance. Apart from the fact that the

cargo which consisted of wooden electric poles are, by nature, not easily damaged by

adverse weather,[18]

part of it had already been unloaded when the unfortunate incident

occurred.

Consequently, we find no cogent reason to disturb the lower courts finding that

the barge sustained a hole in its hull when petitioners tugboat failed to tow it to a safer

distance as the weather changed in the port of Limay. This Court is bound by the factual

determinations of the appellate court especially when these are supported by substantial

evidence and merely affirm those of the trial court,[19]

as in this case. There is no showing

here that the inferences made by the Court of Appeals were manifestly mistaken, or that the

appealed judgment was based on a misapprehension of facts, or that the appellate court

overlooked certain relevant, undisputed facts which, if properly considered, would justify a

different conclusion.[20]

Thus, a reversal of the factual findings in this case is unwarranted.

As for the second assigned error, petitioner asserts that it could not be held liable for the

damage sustained by Acuarios barge because the latter sought to recover upon its contract

with Skyland, to which petitioner was not a party. Since it had no contractual relation with

Acuario, only Skyland should be held liable under the contract. Besides, Skyland

contractually assumed the risk that the tugboat might encounter engine trouble when it

acknowledged in its contract with petitioner that the latters vessels were in good order and

in seaworthy condition. At any rate, it was neither negligent in the performance of its

obligation nor the proximate cause of the damage.

We do not agree.

It was not Acuario that seeks to hold petitioner liable for the damage to the barge, as the

former in fact sued only Skyland pursuant to their charter agreement. It was Skyland that

impleaded petitioner as third-party defendant considering that Skyland was being held

accountable for the damage attributable to petitioner. In other words, petitioner was not

sued under Skylands charter agreement with Acuario, but pursuant to its separate

undertaking with Skyland. Strictly speaking, therefore, petitioner is not being held liable

under any charter agreement with Acuario.

Consequently, it is not correct for petitioner to assert that Acuario could not recover

damages from it due to lack of privity of contract between them. It is not Acuario that is

seeking damages from petitioner but Skyland, with whom it undoubtedly had a juridical

tie. While Acuario could hold Skyland liable under its charter agreement, Skyland in turn

could enforce liability on petitioner based on the latters obligation to Skyland. In other

words, petitioner is being held liable by Skyland and not by Acuario.

Thus, in the performance of its contractual obligation to Skyland, petitioner was required to

observe the due diligence of a good father of the family. This much was held in the old but

still relevant case of Baer Senior & Co.s Successors v. La Compania Maritima[21]

where

the Court explained that 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. Fault or negligence of the obligor consists in his failure to exercise

due care and prudence in the performance of the obligation as the nature of the obligation

so demands.[22]

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 Acuarios

barge was wholly dependent upon petitioners tugboat for propulsion. The barge was not

equipped with any engine and needed a tugboat for maneuvering.[23]

Needless to say, if petitioner only subjected the M/T Count to a more rigid check-up or

inspection, the engine malfunction could have been discovered or avoided. The M/T Count

was exclusively controlled by petitioner and the latter had the duty to see to it that the

tugboat was in good running condition. There is simply no basis for petitioners assertion

that Skyland contractually assumed the risk of any engine trouble that the tugboat may

encounter. Skyland merely procured petitioners towing service but in no way assumed any

such risk.

That petitioners 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. It is too late in the day for petitioner to insist that the proximate

cause of the damage was the barge patrons negligence in not objecting to the position of

the barge by the stone wall. Aside from the fact that the position of the barge is quite

understandable since off-loading operations were then still underway,[24]

the alleged

negligence of the barge patron is a matter that is also being raised for the first time before

this Court.

Thus, the damage to the barge could have been avoided had it not been for the tugboats

inability to tow it away from the stone wall. Considering that a barge has no power of its

own and is totally defenseless against the ravages of the sea, it was incumbent upon

petitioner to see to it that it could secure the barge by providing a seaworthy

tugboat. Petitioners failure to do so did not only increase the risk that might have been

reasonably anticipated during the shipside operation but was the proximate cause of the

damage.[25]

Hence, as correctly found by the courts below, it should ultimately be held

liable therefor.

WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of

Appeals in CA-G.R. CV No. 55664 dated July 6, 2000 and the Resolution dated November

28, 2000, finding petitioner Cargolift Shipping, Inc. liable, as third-party defendant, for

actual damages in the sum of P97,021.20, are AFFIRMED.

SO ORDERED.

G.R. No. L-9605 September 30, 1957

GAUDIOSO EREZO, ET AL., plaintiff-appellee, vs. AGUEDO JEPTE, defendant-appellant.

Gesolgon, Matti and Custodio for appellees. Aguedo Y. Jepte in his own behalf.

LABRADOR, J.:

Appeal from a judgment of the Court of First Instance of Manila ordering defendant to pay plaintiff Gaudioso Erezo P3,000 on the death of Ernesto Erezo, son of plaintiff Gaudioso Erezo.

Defendant-appellant is the registered owner of a six by six truck bearing plate No. TC-1253. On August, 9, 1949, while the same was being driven by Rodolfo Espino y Garcia, it collided with a taxicab at the intersection of San Andres and Dakota Streets, Manila. 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 in criminal case No. 10663 of the Court of First Instance of Manila. The accused pleaded guilty and was sentenced to suffer imprisonment and to pay the heirs of Ernesto Erezo the sum of P3,000. As the amount of the judgment could not be enforced against him, plaintiff brought this action against the registered owner of the truck, the defendant-appellant. The circumstances material to the case are stated by the court in its decision.

The defendant does not deny at the time of the fatal accident the cargo truck driven by Rodolfo Espino y Garcia 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. He explained, and his explanation was corroborated by Policarpio Franco, the manager of the corporation, that 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. Franco, however, admitted that the arrangement was not known to the Motor Vehicle Office.

The trial court held that as the defendant-appellant represented himself to be the owner of the truck and the Motor Vehicle Office, relying on his representation, registered the vehicles in his name, the Government and all

persons affected by the representation had the right to rely on his declaration of ownership and registration. It, therefore, held that the defendant-appellant is liable because he cannot be permitted to repudiate his own declaration. (Section 68 [a], Rule 123, and Art. 1431, New Civil Code.).

Against the judgment, the defendant has prosecuted this appeal claiming 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. We find no merit or justice in the above contention. In previous decisions, We already have held that 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. (Montoya vs. Ignacio, 94 Phil., 182, 50 Off. Gaz., 108; Roque vs. Malibay Transit Inc.,1 G. R. No. L- 8561, November 18,1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.)The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who the actual owner is. How would the public or third persons know against whom to enforce their rights in case of subsequent transfers of the vehicles? We do not imply by this doctrine, however, that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle.

Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. The members of the Court are in agreement that the 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. What is the legal basis for his (defendant-appellant's) liability?.

There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered owner in the Motor Vehicle Office. Should he 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? The defendant holds the affirmative of this proposition; the trial court held the negative.

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 (2 R. C. L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered for the current year, but that dealers in motor vehicles shall furnish the Motor Vehicles Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer's serial number and motor number. (Section 5 [c], Act. No. 3992, as amended.).

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 vehicles 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 those circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries caused on public highways.

One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and another is that the knowledge that means of detection are always available may act as a deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary

purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of means to discover him." The purpose of the statute is thwarted, and the displayed number becomes a "snare and delusion," if courts will entertain such defenses as that put forward by appellee in this case. No responsible person or corporation could be held liable for the most outrageous acts of negligence, if they should be allowed to place a "middleman" between them and the public, and escape liability by the manner in which they recompense their servants. (King vs. Brenham Automobile Co., 145 S. W. 278,279.)

With the above policy in mind, the question that defendant-appellant poses is: should not be registered owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with the trial court that the laws does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other than by a 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. If the policy of the law is to be enforced and carried out, the registered owner should be allowed to prove the contrary to the prejudice of the person injured that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured person.1âwphïl.nêt

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

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.1âwphïl.nêt

Bengzon, Paras, C.J., Bautista Angelo, Concepcion, Reyes, J. B. L., and Felix, JJ., concur. Montemayor, J., concurs in the result.

G.R. No. L-26815 May 26, 19810

ADOLFO L. SANTOS, petitioner, vs. ABRAHAM SIBUG and COURT OF APPEALS, respondents.

MELENCIO-HERRERA, J.:1äwph ï1.ñët

The controversy in this case will be resolved on the basis of the following facts and expositions. Prior to April 26, 1963 (the ACCIDENT DATE), Vicente U. Vidad (VIDAD, for short) was a duly authorized passenger jeepney operator. Also prior to the ACCIDENT DATE, petitioner Adolfo L. Santos (SANTOS, for short) 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 be operated under the latter's certificate of public convenience. ln other words, SANTOS became what is known in ordinary parlance as akabit operator. For the protection of SANTOS, VIDAD executed a re-transfer document to the former, which was to be a private document presumably to be registered if and where it was decided that the passenger jeep of SANTOS was to be withdrawn from the kabit arrangement.

On the ACCIDENT DATE, private respondent Abraham Sibug (SIBUG for short) was bumped by a passenger jeepney operated by VIDAD and driven by Severe Gragas. As a result thereof, SIBUG filed a complaint for damages against VIDAD and Gragas with the Court of First Instance of Manila, Branch XVII, then presided by Hon. Arsenic Solidum. That Civil Case will hereinafter be referred to as the BRANCH XVII CASE.

On December 5, 1963, a judgment was rendered by Branch XVII, sentencing VIDAD and Gragas, jointly and severally, to pay SIBUG the sums of P506.20 as actual damages; P3,000.00 as moral damages; P500.00 as attorney's fees, and costs. 1

On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, with Plate No. PUJ-343-64, registered in the name of VIDAD, and scheduled the public auction sale thereof on May 8,1964.

On April 11, 1964, SANTOS presented a third-party claim with the Sheriff alleging actual ownership of the motor vehicle levied upon, and stating that

registration thereof in the name of VIDAD was merely to enable SANTOS to make use of VIDAD'S Certificate of Public Convenience. After the third-party complaint was filed, SIBUG submitted to the Sheriff a bond issued by the Philippine Surety Insurance Company (THE BONDING COMPANY, for short), To save the Sheriff from liability if he were to proceed with the sale and if SANTOS' third-party claim should be ultimately upheld.

On April 22, 1964, that is, before the scheduled sale of May 8, 1964, SANTOS instituted an action for Damages and injunction with a prayer for Preliminary Mandatory Injunction against SIBUG; VIDAD; and the Sheriff in Civil Case No. 56842 of Branch X, of the same Court of First Instance of Manila (hereinafter referred to as the BRANCH X CASE). The complaint was later amended to include the BONDING COMPANY as a party defendant although its bond had not become effective. ln the Complaint, SANTOS alleged essentially that he was the actual owner of the motor vehicle subject of levy: that a fictitious Deed of Sale of said motor vehicle was executed by him in VIDAD'S favor for purposes of operating said vehicle as a passenger jeepney under the latter's franchise; that SANTOS did not receive any payment from VIDAD in consideration of said sale; that to protect SANTOS' proprietary interest over the vehicle in question, VIDAD in turn had executed a Deed of Sale in favor of SANTOS on June 27, 1962; that SANTOS was not a party in the BRANCH XVII CASE and was not in any manner liable to the registered owner VIDAD and the driver Gragas; that SANTOS derived a daily income of P30.00 from the operation of said motor vehicle as a passenger jeepney and stood to suffer irreparable damage will possession of said motor vehicle were not restored to him. SANTOS then prayed that 1,) pending trial, a Writ of Preliminary Mandatory injunction be issued ex-parte commanding the Sheriff of Manila to restore the motor vehicle to him and that the Sheriff be enjoined from proceeding with its sale; 2) that, after trial, the Deed of Sale in favor of VIDAD be declared absolutely fictitious and, therefore, null and void, and adjudging SANTOS to be the absolute owner of the vehicle in questioned and 3) that damages be awarded to SANTOS as proven during the trial plus attorney's fees in the amount of P450.00 and costs. 2

No public sale was conducted on May 8, 1964. On May 11, 1964, Branch X issued a Restraining Order enjoining the Sheriff from conducting the public auction sale of the motor vehicle levied upon. 3 The Restraining Order was

issued wrongfully. Under the provisions of Section 17, Rule 39, the action taken by the Sheriff cannot be restrained by another Court or by another Branch of the same Court. The Sheriff has the right to continue with the public sale on his own responsibility, or he can desist from conducting the public sale unless the attaching creditor files a bond securing him against the third-party-claim. But the decision to proceed or not with the public sale lies with him. As said in Uy Piaoco vs.

Osmeña 9 Phil. 299, 307, "the powers of the Sheriff involve both discretional power and personal liability." The mentioned discretional power and personal liability have been further elucidated in Planes and Verdon vs. Madrigal & Co., et al., 94 Phil. 754, where it was held. 1äw phï1.ñët

The duty of the sheriff in connection with the execution and satisfaction of judgment of the court is governed by Rule 39 of the Rules of Court. Section 15 thereof provides for the procedure to be. followed where the property levied on execution 'is claimed by a by person. lf the third-party claim is sufficient, the sheriff, upon receiving it, is not bound to proceed with the levy of the property, unless he is given by the judgment creditor an indemnity bond against the claim (Mangaoang vs. Provincial Sheriff, 91 Phil., 368). Of course, the sheriff may proceed with the levy even without the Indemnity bond, but in such case he will answer for any damages with his own personal funds (Waits vs. Peterson, et al., S Phil. 419 Alzua et al. vs. Johnson, 21 Phil., 308; Consults No. 341 de los abogados de Smith, Bell & Co., 48 Phil., 565). And the rule also provides that nothing therein contained shall prevent a third person from vindicating his claim to the property by any proper action (Sec. 15 of Rule 39.).

It appears from the above that if the attaching creditor should furnish an adequate bond. the Sheriff has to proceed with the public auction. When such bond is not filed, then the Sheriff shall decide whether to proceed. or to desist from proceeding, with the public auction. lf he decides to proceed, he will incur personal liability in favor of the successful third-party claimant.

On October 14, 1965, Branch X affirmed SANTOS' ownership of the jeepney in question based on the evidence adduced, and decreed: 1äw phï1.ñët

WHEREFORE, judgment is hereby rendered, enjoining the defendants from proceeding with the sale of the vehicle in question ordering its return to the plaintiff and furthermore sentencing the defendant Abraham Sibug to pay the plaintiff the sum of P15.00 a day from April 10, 1964 until the vehicle is returned to him, and P500.00 as attorney's fee's as well as the costs. 4

This was subsequently amended on December 5, 1965, upon motion for reconsideration filed by SANTOS, to include the BONDING COMPANY as jointly slid severally liable with SIBUG. 5

1äwphï1.ñët

... provided that the liability of the Philippine Surety & insurance Co., Inc. shall in no case exceed P6,500.00. Abraham Sibug is furthermore condemned to pay the Philippine Surety & Insurance Co., Inc. the same sums it is ordered to pay under this decision.

The jugdment in the BRANCH X CASE appears to be quite legally unpalatable For instance, since the undertaking furnished to the Sheriff by the BONDING COMPANY did not become effective for the reason that the jeep was not sold, the public sale thereof having been restrained, there was no reason for promulgating judgment against the BONDING COMPANY. lt has also been noted that the Complaint against VIDAD was dismissed.

Most important of all, the judgment against SIBUG was inequitable. ln asserting his rights of ownership to the vehicle in question, SANTOS candidly admitted his participation in the illegal and pernicious practice in the transportation business known as the kabit system. Sec.. 20 (g) of the Public Service Act, then the applicable law, specifically provided: 1äw phï1.ñët

... it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the Commission previously had – ... (g) to sell, alienate, mortgage, encumber or lease its property, franchise, certificates, privileges, or rights, or any part thereof.

In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the registered owner and operator of record at the time of the accident. lt is true that VIDAD had executed a re-sale to SANTOS, but the document was not registered. Although SANTOS, as the kabit was the true owner as against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is directly and primarily responsible and liable for the damages caused to SIBUG, the injured party, as a consequence of the negligent or careless operation of the vehicle. 6 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 7 even if the vehicle involved in the accident had been sold to another where such sale had not been approved by the then Public Service Commission. 8 For the same basic reason, as the vehicle here in question was registered in VIDAD'S name, the levy on

execution against said vehicle should be enforced so that the judgment 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.

As indicated in the Erezo case, supra, SANTOS' remedy. as the real owner of the vehicle, is to go against VIDAD, the actual operator who was responsible for the accident, for the recovery of whatever damages SANTOS may suffer by reason of the execution. In fact, if SANTOS, as the kabit had been impleaded as a party defendant in the BRANCH XVII CASE, he should be held jointly and severally liable with VIDAD and the driver for damages suffered by SIBUG, 9 as well as for exemplary damages. 10

From the judgment in the BRANCH X CASE SIBUG appealed. Meanwhile, SANTOS moved for immidiately execution. SIBUG opposed it on the ground that Branch X had no jurisdiction over the BRANCH XVII CASE, and that Branch X had no power to interfere by injunction with the judgment of Branch XVII a Court of concurrent or coordinate jurisdiction. 11

On November 13, 1965, Branch X released an order authorizing immediate execution on the theory that the BRANCH X CASE is "principally an action for the issuance of a writ of prohibition to forbid the Sheriff from selling at public auction property not belonging to the judgment creditor (sic) and there being no attempt in this case to interfere with the Judgment or decree of another court of concurrent jurisdiction." 12

Without waiting for the resolution of his Motion for Reconsideration, SIBUG sought relief from respondent Appellate Court in a Petition for certiorari with Preliminary injunction. On November 18, 1965, respondent Court of Appeals enjoined the enforcement of the Branch X Decision and the Order of execution issued by said Branch. 13On September 28, 1966, respondent Count of Appeals

rendered the herein challenged Decision nullifying the judgment renderred in the Branch X Case and permanently restraining V from taking cognizance of the BRANCH X CASE SANTOS. It ruled that: 1äw phï1.ñët

... the respondent Court Branch X, indeed, encroached and interfered with the judgment of Branch XVII when it issued a restraining order and finally a decision permanently enjoining the other court from excuting the decision rendered in Civil Case No. 54335. This to our mind constitutes an interference

with the powers and authority of the other court having co-equal and coordinate jurisdiction. To rule otherwise, would indubitably lead to confusion which might hamper or hinder the proper administration of justice. ... 14

Respondent Court further held that SANTOS may not be permitted to prove his ownership over a particular vehicle being levied upon but registered in another's name in a separated action, observing that: 1äw phï1.ñët

As the vehicle in question was registered in the name of Vicente U. Vidad, the government or any person affected by the representation that said vehicle is registered under the name of a particular person had the right to rely on his declaration of ownership and registration: and the registered owner or any other person for that matter cannot be permitted to repudiate said declaration with the objective of proving that said registered vehicle is owned by another person and not by the registered owner (sec. 68, (a), Rule 123, and art. 1431, New Civil Code)

xxx xxx xxx

Were we to allow a third person to prove that he is the real owner of a particular vehicle and not the registered owner it would in effect be tantamount to sanctioning the attempt of the registered owner of the particular vehicle in evading responsibility for it cannot be dispelled that the door would be opened to collusion between a person and a registered owner for the latter to escape said responsibility to the public or to any person. ...

SANTOS now seeks a review of respondent Court's Decision contending that: 1äw phï1.ñët

1) The respondent Court of Appeals erred in holding that Branch X of the Court of First Instance of Manila has no jurisdiction to restrain by Writ of Injunction the auction sale of petitioner's motor vehicle to satisfy the judgment indebtedness of another person:

2) The respondent Court of Appeals erred in holding that petitioner as owner of a motor vehicle that was levied upon

pursuant to a Writ of Execution issued by Branch XVII of the Court of i stance of Manila in Civil Case No. 54335 cannot be allowed to prove in a separate suit filed in Branch X of the same court (Civil Case No. 56842) that he is the true owner of the said motor vehicle and not its registered owner;

3) The respondent Court of Appeals erred in declaring null and void the decision of the Court of First Instance of Manila (Branch X ) in Civil Case No. 56482.

We gave due course to the Petition for Review on certiorari on December 14, 1966 and considered the case submitted for decision on July 20, 1967.

One of the issues ventilated for resolution is the general question of jurisdiction of a Court of First Instance to issue, at the instance of a third-party claimant, an Injunction restraining the execution sale of a passenger jeepney levied upon by a judgment creditor in another Court of First Instance. The corollary issue is whether or not the third-party claimant has a right to vindicate his claim to the vehicle levied upon through a separate action.

Since this case was submitted for decision in July, 1967, this Court, in Arabay, lnc. vs. Hon. Serafin Salvador, 15speaking through Mr. Justice Ramon Aquino,

succinctly held: 1äwphï1.ñët

It is noteworthy that, generally, the rule, that no court has authority to interfere by injunction with the judgments or decrees of a concurrent or coordinate jurisdiction having equal power to grant the injunctive relief, is applied in cases, where no third-party claimant is involved, in order to prevent one court from nullifying the judgment or process of another court of the same rank or category, a power which devolves upon the proper appellate court.

xxx xxx xxx

When the sheriff, acting beyond the bounds of his authority, seizes a stranger's property, the writ of injunction, which is issued to stop the auction sale of that property, is not an interference with the writ of execution issued by another court because the writ of execution was improperly implemented by the sheriff. Under that writ, he could attach the property of the judgment debtor. He is not authorized to levy upon the property

of the third-party claimant (Polaris Marketing Corporation vs. Plan, L-40666, January 22, 1976, 69 SCRA 93, 97; Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94, 102).

An earlier case, Abiera vs. Hon. Court of Appeals, et al., 16 explained the doctrine more extensively: 1äwphï1.ñët

Courts; Jurisdiction Courts without power to interfere by injunction with judgments or decrees of a court of concurrent jurisdiction. – No court has power to interfere by injunction with the judgments or decrees of a court of concurrent or coordinate jurisdiction having equal power to grant the relief sought by injunction.

Same, Same; Same; When applicable. – For this doctrine to apply, the injunction issued by one court must interfere with the judgment or decree issued by another court of equal or coordinate jurisdiction and the relief sought by such injunction must be one which could be granted by the court which rendered the judgment or issued the decree.

Same, Same Same; Exception Judgment rendered by another court in favor of a third person who claims property levied upon on execution. – Under section 17 of Rule 39 a third person who claims property levied upon on execution may vindicate such claim by action. A judgment rendered in his favor - declaring him to be the owner of the property - would not constitute interference with the powers or processes of the court which rendered the judgment to enforce which the execution was levied. lf that be so - and it is so because the property, being that of a stranger, is not subject to levy - then an interlocutory order, such as injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be considered as such interference either.

Execution; Where property levied on claimed by third person; "Action" in section l7, Rule 39 of the Rules of Court, interpreted – The right of a person who claims to be the owner of property levied upon on execution to file a third-party claim with the sheriff is not exclusive, and he may file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any damages that may be

suffered by the third party claimant. By "action", as stated in the Rule, what is meant is a separate and independent action.

Applied to the case at bar, it mill have to be held that, contrary to the rationale in the Decision of respondent Court, it was appropriate, as a matter of procedure, for SANTOS, as an ordinary third-party claimant, to vindicate his claim of ownership in a separate action under Section 17 of Rule 39. And the judgment rendered in his favor by Branch X, declaring him to be the owner of the property, did not as a basic proposition, constitute interference with the powers or processes of Branch XVII which rendered the judgment, to enforce which the was levied upon. And this is so because property belonging to a stranger is not ordinarily subject to levy. While it is true that the vehicle in question was in custodia legis, and should not be interfered with without the permission of the proper Court, the property must be one in which the defendant has proprietary interest. Where the Sheriff seizes a stranger's property, the rule does not apply and interference with his custody is not interference with another Court's Order of attachment. 17

However, as a matter of substance and on the merits, the ultimate conclusion of respondent Court 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 upon by the Sheriff pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact, registered in the name of VIDAD, one of the judgment debtors. And what is more, the aspect of public service, with its effects on the riding public, is involved. Whatever legal technicalities may be invoked, we find the judgment of respondent Court of Appeals to be in consonance with justice.

WHEREFORE, as prayed for by private respondent Abraham Sibug, the petition for review on certiorari filed by Adolfo L. Santos is dismissed with costs against the petitioner.

SO ORDERED.

G.R. No. L-64693 April 27, 1984

LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA, respondents.

Manuel A. Concordia for petitioner.

Nicasio Ocampo for himself and on behalf of his correspondents.

ESCOLIN, J.:ñé+.£ªwph!1

"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts.

The factual background of this case is undisputed.

Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated and maintained the same under the name Acme Taxi, petitioner's trade name.

About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First Instance of Manila,

petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for attorney's fees.

This decision having become final, a writ of execution was issued. One of the vehicles of respondent spouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon and sold at public auction for P8,000.00 to a certain Mr. Lopez.

Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of Manila. Trial on the merits ensued and on July 22, 1975, the said court rendered a decision, the dispositive portion of which reads: têñ.£îhqwâ£

WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff of Manila are concerned.

Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota cars not levied upon with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in favor of the plaintiff.

Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate of convenience from March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars. (Annex A, Record on Appeal, p. 102-103, Rollo)

Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by the court a quo on October 27, 1975. (p. 121, Ibid.)

On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified the decision by including as part of its dispositive portion another paragraph, to wit: têñ.£îhqwâ£

In the event the condition of the three Toyota rears will no longer serve the purpose of the deed of conveyance because of their deterioration, or because they are no longer serviceable, or because they are no longer available, then Lita Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of July 22, 1975. (Annex "D", p. 167, Rollo.)

Its first and second motions for reconsideration having been denied, petitioner came to Us, praying that: têñ.£îhqwâ£

1. ...

2. ... after legal proceedings, decision be rendered or resolution be issued, reversing, annulling or amending the decision of public respondent so that:

(a) the additional paragraph added by the public respondent to the DECISION of the lower court (CFI) be deleted;

(b) that private respondents be declared liable to petitioner for whatever amount the latter has paid or was declared liable (in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim Florante Galvez, who died as a result ot the gross negligence of private respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)

Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system", whereby a person who has been granted a certificate of convenience allows another person who owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too severely condemned. It constitutes an

imposition upon the goo faith of the government.

Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will

leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides:têñ.£îhqw â£

ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed;

(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking.

The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to contracts that are null

void."

The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or damages for its property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other." 3 Although certain exceptions to the

rule are provided by law, We see no cogent reason why the full force of the rule should not be applied in the instant case.

WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisions rendered therein are hereby annuleled and set aside. No costs. SO ORDERED.1äwphï1.ñët

G.R. No. 125817 January 16, 2002

ABELARDO LIM and ESMADITO GUNNABAN, petitioners, vs. COURT OF APPEALS and DONATO H. GONZALES, respondents.

BELLOSILLO, J.:

When a passenger jeepney covered by a certificate of public convenience is sold to another who continues to operate it under the same certificate of public convenience under the so-called kabit system, and in the course thereof the vehicle meets an accident through the fault of another vehicle, may the new owner sue for damages against the erring vehicle? Otherwise stated, does the new owner have any legal personality to bring the action, or is he the real party in interest in the suit, despite the fact that he is not the registered owner under the certificate of public convenience?

Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney from Gomercino Vallarta, holder of a certificate of public convenience for the operation of public utility vehicles plying the Monumento-Bulacan route. While private respondent Gonzales continued offering the jeepney for public transport services he did not have the registration of the vehicle transferred in his name nor did he secure for himself a certificate of public convenience for its operation. Thus Vallarta remained on record as its registered owner and operator.1âw phi1.nêt

On 22 July 1990, while the jeepney was running northbound along the North Diversion Road somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler-truck owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadito Gunnaban. Gunnaban owned responsibility for the accident, explaining that while he was traveling towards Manila the truck suddenly lost its brakes. To avoid colliding with another vehicle, he swerved to the left until he reached the center island. However, as the center island eventually came to an end, he veered farther to the left until he smashed into a Ferroza automobile, and later, into private respondent's passenger jeepney driven by one Virgilio Gonzales. The impact caused severe damage to both the Ferroza and the passenger jeepney and left one (1) passenger dead and many others wounded.

Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of the deceased passenger, and had the Ferroza restored to good condition. He also negotiated with private respondent and

offered to have the passenger jeepney repaired at his shop. Private respondent however did not accept the offer so Lim offered him P20,000.00, 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 P236,000.00. Lim increased his bid to P40,000.00 but private respondent was unyielding. Under the circumstances, negotiations had to be abandoned; hence, the filing of the complaint for damages by private respondent against petitioners.

In his answer Lim denied liability by contending that he exercised due diligence in the selection and supervision of his employees. He further asserted that as the jeepney was registered in Vallarta’s name, it was Vallarta and not private respondent who was the real party in interest.1 For his part, petitioner Gunnaban averred that the accident was a fortuitous event which was beyond his control.2

Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and decay. Private respondent explained that although he wanted to take his jeepney home he had no capability, financial or otherwise, to tow the damaged vehicle.3

The main point of contention between the parties related to the amount of damages due private respondent. Private respondent Gonzales averred that per estimate made by an automobile repair shop he would have to spend P236,000.00 to restore his jeepney to its original condition.4 On the other hand, petitioners insisted that they could have the vehicle repaired for P20,000.00.5

On 1 October 1993 the trial court upheld private respondent's claim and awarded him P236,000.00 with legal interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney's fees. In support of its decision, the trial court ratiocinated that as vendee and current owner of the passenger jeepney private respondent stood for all intents and purposes as the real party in interest. Even Vallarta himself supported private respondent's assertion of interest over the jeepney for, when he was called to testify, he dispossessed himself of any claim or pretension on the property. Gunnaban was found by the trial court to have caused the accident since he panicked in the face of an emergency which was rather palpable from his act of directing his vehicle to a perilous streak down the fast lane of the superhighway then across the island and ultimately to the opposite lane where it collided with the jeepney.

On the other hand, petitioner Lim's liability for Gunnaban's negligence was premised on his want of diligence in supervising his employees. It was admitted during trial that Gunnaban doubled as mechanic of the ill-fated truck despite the fact that he was neither tutored nor trained to handle such task.6

Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the decision of the trial court. In upholding the decision of the court a quo the appeals court concluded that while an operator under thekabit system could not sue without joining the registered owner of the vehicle as his principal, equity demanded that the present case be made an exception.7 Hence this petition.

It is petitioners' contention that the Court of Appeals erred in sustaining the decision of the trial court despite their opposition to the well-established doctrine that an operator of a vehicle continues to be its operator as long as he remains the operator of record. According to petitioners, to recognize an operator under the kabit system as the real party in interest and to countenance his claim for damages is utterly subversive of public policy. Petitioners further contend that inasmuch as the passenger jeepney was purchased by private respondent for onlyP30,000.00, an award of P236,000.00 is inconceivably large and would amount to unjust enrichment.8

Petitioners' attempt to illustrate that an affirmance of the appealed decision could be supportive of the perniciouskabit system does not persuade. Their labored efforts to demonstrate how the questioned rulings of the courts a quo are diametrically opposed to the policy of the law requiring operators of public utility vehicles to secure a certificate of public convenience for their operation is quite unavailing.

The kabit system is an arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings.9 Although the parties to such an agreement are not outrightly penalized by law, thekabit system is invariably recognized as being contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code.

In the early case of Dizon v. Octavio10 the Court explained that one of the primary factors considered in the granting of a certificate of public convenience for the business of public transportation is the financial capacity of the holder of the license, so that liabilities arising from accidents may be duly compensated. The kabit system renders illusory such purpose and, worse,

may still be availed of by the grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated under his license. If a registered owner is allowed to escape liability by proving who the supposed owner of the vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no property with which to respond financially for the damage done. Thus, for the safety of passengers and the public who may have been wronged and deceived through the banefulkabit system, the registered owner of the vehicle is not allowed to prove that another person has become the owner so that he may be thereby relieved of responsibility. Subsequent cases affirm such basic doctrine.11

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

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

In light of the foregoing, it is evident that private respondent has the right to proceed against petitioners for the damage caused on his passenger jeepney as well as on his business. Any effort then to frustrate his claim of damages by the ingenuity with which petitioners framed the issue should be discouraged, if not repelled.

In awarding damages for tortuous injury, it becomes the sole design of the courts to provide for adequate compensation by putting the plaintiff in the same financial position he was in prior to the tort. It is a fundamental principle in the law on damages that a defendant cannot be held liable in damages for

more than the actual loss which he has inflicted and that a plaintiff is entitled to no more than the just and adequate compensation for the injury suffered. His recovery is, in the absence of circumstances giving rise to an allowance of punitive damages, limited to a fair compensation for the harm done. The law will not put him in a position better than where he should be in had not the wrong happened.12

In the present case, petitioners insist that as the passenger jeepney was purchased in 1982 for only P30,000.00 to award damages considerably greater than this amount would be improper and unjustified. Petitioners are at best reminded that indemnification for damages comprehends not only the value of the loss suffered but also that of the profits which the obligee failed to obtain. In other words, indemnification for damages is not limited todamnum emergens or actual loss but extends to lucrum cessans or the amount of profit lost.13

Had private respondent's jeepney not met an accident it could reasonably be expected that it would have continued earning from the business in which it was engaged. Private respondent avers that he derives an average income of P300.00 per day from his passenger jeepney and this earning was included in the award of damages made by the trial court and upheld by the appeals court. The award therefore of P236,000.00 as compensatory damages is not beyond reason nor speculative as it is based on a reasonable estimate of the total damage suffered by private respondent, i.e. damage wrought upon his jeepney and the income lost from his transportation business. Petitioners for their part did not offer any substantive evidence to refute the estimate made by the courts a quo.

However, we are constrained to depart from the conclusion of the lower courts that upon the award of compensatory damages legal interest should be imposed beginning 22 July 1990, i.e. the date of the accident. Upon the provisions of Art. 2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty." It is axiomatic that if the suit were for damages, unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof, interest at the rate of six percent (6%) per annum should be from the date the judgment of the court is made (at which time the quantification of damages may be deemed to be reasonably ascertained).14

In this case, the matter was not a liquidated obligation as the assessment of the damage on the vehicle was heavily debated upon by the parties with

private respondent's demand for P236,000.00 being refuted by petitioners who argue that they could have the vehicle repaired easily for P20,000.00. In fine, the amount due private respondent was not a liquidated account that was already demandable and payable.

One last word. We have observed that private respondent left his passenger jeepney by the roadside at the mercy of the elements. Article 2203 of the Civil Code exhorts parties suffering from loss or injury to exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. One who is injured then by the wrongful or negligent act of another should exercise reasonable care and diligence to minimize the resulting damage. Anyway, he can recover from the wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries incurred in attempting to prevent damage to it.15

However we sadly note that in the present case petitioners failed to offer in evidence the estimated amount of the damage caused by private respondent's unconcern towards the damaged vehicle. It is the burden of petitioners to show satisfactorily not only that the injured party could have mitigated his damages but also the amount thereof; failing in this regard, the amount of damages awarded cannot be proportionately reduced.

WHEREFORE, the questioned Decision awarding private respondent Donato Gonzales P236,000.00 with legal interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney's fees is MODIFIED. Interest at the rate of six percent (6%) per annum shall be computed from the time the judgment of the lower court is made until the finality of this Decision. If the adjudged principal and interest remain unpaid thereafter, the interest shall be twelve percent (12%) per annum computed from the time judgment becomes final and executory until it is fully satisfied.1âwphi 1.nêt

Costs against petitioners.

SO ORDERED.

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

TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner, vs. HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N.

NALE, respondents.

Cirilo A. Diaz, Jr. for petitioner.

Henry V. Briguera for private respondent.

PARAS, J.:

"'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129 SCRA 81.)

The factual background of this case is undisputed. The same is narrated by the respondent court in its now assailed decision, as follows:

On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a sidecar in the total consideration of P8,000.00 as shown by Invoice No. 144 (Exh. "A"). Out of the total purchase price the defendant gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. The defendant, however, failed to comply with his promise and so upon his own request, the period of paying the balance was extended to one year in monthly installments until January 1976 when he stopped paying anymore. The plaintiff made demands but just the same the defendant failed to comply with the same thus forcing the plaintiff to consult a lawyer and file this action for his damage in the amount of P546.21 for attorney's fees and P100.00 for expenses of litigation. The plaintiff also claims that as of February 20, 1978, the total account of the defendant was already P2,731.06 as shown in a statement of account (Exhibit. "B"). This amount includes not only the balance of P1,700.00 but an additional 12% interest per annum on the said balance

from January 26, 1976 to February 27, 1978; a 2% service charge; and P 546.21 representing attorney's fees.

In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a security for the payment of the balance of the purchase price. It has been the practice of financing firms that whenever there is a balance of the purchase price the registration papers of the motor vehicle subject of the sale are not given to the buyer. The records of the LTC show that the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the defendant had no franchise of his own and he attached the unit to the plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation Commission. Pursuant to this agreement the defendant on February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for the mortgage fee and the P82.00 for the registration fee of the motorcycle. The plaintiff, however failed to register the motorcycle on that year on the ground that the defendant failed to comply with some requirements such as the payment of the insurance premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was hiding the motorcycle from him. Lastly, the plaintiff explained also that though the ownership of the motorcycle was already transferred to the defendant the vehicle was still mortgaged with the consent of the defendant to the Rural Bank of Camaligan for the reason that all motorcycle purchased from the plaintiff on credit was rediscounted with the bank.

On his part the defendant did not dispute the sale and the outstanding balance of P1,700. 00 still payable to the plaintiff. The defendant was persuaded to buy from the plaintiff the motorcycle with the side car because of the condition that the plaintiff would be the one to register every year the motorcycle with the Land Transportation Commission. In 1976, however, the plaintfff failed to register both the chattel mortgage and the motorcycle with the LTC notwithstanding the fact that the defendant gave him P90.00 for mortgage fee and registration fee and had the motorcycle insured with La Perla Compana de Seguros (Exhibit "6") as shown also by the Certificate of cover

(Exhibit "3"). Because of this failure of the plaintiff to comply with his obligation to register the motorcycle the defendant suffered damages when he failed to claim any insurance indemnity which would amount to no less than P15,000.00 for the more than two times that the motorcycle figured in accidents aside from the loss of the daily income of P15.00 as boundary fee beginning October 1976 when the motorcycle was impounded by the LTC for not being registered.

The defendant disputed the claim of the plaintiff that he was hiding from the plaintiff the motorcycle resulting in its not being registered. The truth being that the motorcycle was being used for transporting passengers and it kept on travelling from one place to another. The motor vehicle sold to him was mortgaged by the plaintiff with the Rural Bank of Camaligan without his consent and knowledge and the defendant was not even given a copy of the mortgage deed. The defendant claims that it is not true that the motorcycle was mortgaged because of re-discounting for rediscounting is only true with Rural Banks and the Central Bank. The defendant puts the blame on the plaintiff for not registering the motorcycle with the LTC and for not giving him the registration papers inspite of demands made. Finally, the evidence of the defendant shows that because of the filing of this case he was forced to retain the services of a lawyer for a fee on not less than P1,000.00.

xxx xxx xxx

... it also appears and the Court so finds that defendant purchased the motorcycle in question, particularly for the purpose of engaging and using the same in the transportation business and for this purpose said trimobile unit was attached to the plaintiffs transportation line who had the franchise, so much so that in the registration certificate, the plaintiff appears to be the owner of the unit. Furthermore, it appears to have been agreed, further between the plaintiff and the defendant, that plaintiff would undertake the yearly registration of the unit in question with the LTC. Thus, for the registration of the unit for the year 1976, per agreement, the defendant gave to the plaintiff the amount of P82.00 for its registration, as well as the insurance coverage of the unit.

Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with Damages" against private respondent Pedro N. Nale in the City Court of Naga City. The City Court rendered judgment in favor of petitioner, the dispositive portion of which reads:

WHEREFORE, decision is hereby rendered dismissing the counterclaim and ordering the defendant to pay plaintiff the sum of P1,700.00 representing the unpaid balance of the purchase price with legal rate of interest from the date of the filing of the complaint until the same is fully paid; to pay plaintiff the sum of P546.21 as attorney's fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and to pay the costs.

SO ORDERED.

On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private respondent filed a petition for review with the Intermediate Appellate Court and on July 18, 1983 the said Court promulgated its decision, the pertinent portion of which reads —

However, as the purchase of the motorcycle for operation as a trimobile under the franchise of the private respondent Jaucian, pursuant to what is commonly known as the "kabit system", without the prior approval of the Board of Transportation (formerly the Public Service Commission) was an illegal transaction involving the fictitious registration of the motor vehicle in the name of the private respondent so that he may traffic with the privileges of his franchise, or certificate of public convenience, to operate a tricycle service, the parties being in pari delicto, neither of them may bring an action against the other to enforce their illegal contract [Art. 1412 (a), Civil Code].

xxx xxx xxx

WHEREFORE, the decision under review is hereby set aside. The complaint of respondent Teja Marketing and/or Angel Jaucian, as well as the counterclaim of petitioner Pedro Nale in Civil Case No. 1153 of the Court of First Instance of Camarines Sur (formerly Civil Case No. 5856 of the City Court of Naga City) are dismissed. No pronouncement as to costs.

SO ORDERED.

The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel Jaucian presenting a lone assignment of error — whether or not respondent court erred in applying the doctrine of "pari delicto."

We find the petition devoid of merit.

Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system" whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices.

Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds then. Upon this premise it would be error to accord the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides:

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:

1. When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of the contract, or demand, the performance of the other's undertaking.

The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.

WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs.

SO ORDERED.