G.R. No.
L-65510 March 9, 1987 In this particular transaction a chattel mortgage (Exhibit 1) was constituted as
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.
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.
Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortez, JJ., concur.
Alampay, J., took no part.

Footnotes
* Penned by Justice Carolina C. Griño-Aquino; concurred in by Justices Nestor
B. Alampay and Reynato S. Puno.
SECOND DIVISION
[G.R. No. 125817. January 16, 2002]
ABELARDO LIM and ESMADITO GUNNABAN, petitioners, vs. COURT OF
APPEALS and DONATO H. GONZALES, respondents.
DECISION
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.
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 Vallartas name, it was Vallarta
and not private respondent who was the real party in interest.i For his part,
petitioner Gunnaban averred that the accident was a fortuitous event which
was beyond his control.ii
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.iii
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.iv On the other
hand, petitioners insisted that they could have the vehicle repaired for
P20,000.00.v
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.vi
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 the
kabit system could not sue without joining the registered owner of the vehicle
as his principal, equity demanded that the present case be made an
exception.vii 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 only P30,000.00, an award of
P236,000.00 is inconceivably large and would amount to unjust enrichment.viii
Petitioners' attempt to illustrate that an affirmance of the appealed decision
could be supportive of the pernicious kabit 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.ix Although the parties to such an agreement are not
outrightly penalized by law, the kabit system is invariably recognized as being
contrary to public policy and therefore void and inexistent under Art. 1409 of
the Civil Code.
In the early case of Dizon v. Octaviox 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 baneful kabit
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.xi
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.xii
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 to
damnum emergens or actual loss but extends to lucrum cessans or the
amount of profit lost.xiii
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).xiv
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.xv
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.
Costs against petitioners.
SO ORDERED.
G.R. No. L-9907 June 30, 1958
LOURDES J. LARA, ET AL., plaintiffs-appellants,
vs.
BRIGIDO R. VALENCIA, defendant-appellant.
Castillo, Cervantes, Occeña, Lozano, Montana, Cunanan, Sison and Castillo
and Eligio G. Lagman for defendant-appellant.
Donato C. Endriga and Emigdio Dakanay for plaintiffs-appellants.
BAUTISTA ANGELO, J.:
This is an action for damages brought by plaintiffs against defendant in the
Court of First Instance of Davao for the death of one Demetrio Lara, Sr.
allegedly caused by the negligent act of defendant. Defendant denied the
charge of negligence and set up certain affirmative defenses and a
counterclaim.
The court after hearing rendered judgment ordering defendant to pay the
plaintiffs the following amount: (a) P10,000 as moral damages; (b) P3,000 as
exemplary damages; and (c) P1,000 as attorney's fees, in addition to the costs
of action. Both parties appealed to this Court because the damages claimed
in the complaint exceed the sum of P50,000.
In their appeal, plaintiffs claim that the court a quo erred in disregarding their
claim of P41,400 as actual or compensatory damages and in awarding as
attorneys' fees only the sum of P1,000 instead of P3,000 as agreed upon
between plaintiffs and their counsel. Defendant, on the other hand, disputes
the finding of the court a quo that the oath of Demetrio Lara, Sr. was due to
the negligence of defendant and the portion of the judgment which orders
dependant to pay to plaintiffs moral and exemplary damages as well as
attorneys' fees, said defendant contending that the court should have
declared that the death of Lara was due to unavoidable accident.
The deceased was an inspector of the Bureau of Forestry stationed in Davao
with an annual salary of P1,800. The defendant is engaged in the business of
exporting logs from his lumber concession in Cotabato. Lara went to said
concession upon instructions of his chief to classify the logs of defendant
which were about to be loaded on a ship anchored in the port of Parang. The
work Lara of lasted for six days during which he contracted malaria fever. In
the morning of January 9, 1954, Lara who then in a hurry to return to Davao
asked defendant if he could take him in his pick-up as there was then no other
means of transportation, to which defendant agreed, and in that same
morning the pick-up left Parang bound for Davao taking along six passengers,
including Lara.
The pick-up has a front seat where the driver and two passengers can be
accommodated and the back has a steel flooring enclosed with a steel walling
of 16 to 17 inches tall on the sides and with a 19 inches tall walling at the
back. Before leaving Parang, the sitting arrangement was as follows:
defendant was at the wheel and seated with him in the front seat were Mrs.
Valencia and Nicanor Quinain; on the back of the pick-up were two
improvised benches placed on each side, and seated on the right bench were
Ricardo Alojipan and Antonio Lagahit, and on the left one Bernardo and
Pastor Geronimo. A person by the name of Leoning was seated on a box
located on the left side while in the middle Lara sat on a bag. Before leaving
Parang, defendant invited Lara to sit with him on the front seat but Lara
declined. It was their understanding that upon reaching barrio Samoay,
Cotabato, the passengers were to alight and take a bus bound for Davao, but
when they arrived at that place, only Bernardo alighted and the other
passengers requested defendant to allow them to ride with him up to Davao
because there was then no available bus that they could take in going to that
place. Defendant again accommodated the passengers.
When they continued their trip, the sitting arrangement of the passengers
remained the same, Lara being seated on a bag in the middle with his arms
on a suitcase and his head cove red by a jacket. Upon reaching Km. 96, barrio
Catidtuan, Lara accidentally fell from the pick-up and as a result he suffered
serious injuries. Valencia stopped the pick-up to see what happened to Lara.
He sought the help of the residents of that place and applied water to Lara
but to no avail. They brought Lara to the nearest place where they could find
a doctor and not having found any they took him to St. Joseph's Clinic of
Kidapawan. But when Lara arrived he was already dead. From there they
proceeded to Davao City and immediately notified the local authorities. An
investigation was made regarding the circumstances surrounding the death
of Lara but no criminal action was taken against defendant.
It should be noted that the deceased went to the lumber concession of
defendant in Parang, Cotabato upon instructions of his chief in order to
classify the logs of defendant which were then ready to be exported and to
be loaded on a ship anchored in the port of Parang. It took Lara six days to do
his work during which he contracted malaria fever and for that reason he
evinced a desire to return immediately to Davao. At that time, there was no
available bus that could take him back to Davao and so he requested the
defendant if he could take him in his own pick-up. Defendant agreed and,
together with Lara, other passengers tagged along, most of them were
employees of the Government. Defendant merely accommodated them and
did not charge them any fee for the service. It was also their understanding
that upon reaching barrio Samoay, the passengers would alight and transfer
to a bus that regularly makes the trip to Davao but unfortunately there was
none available at the time and so the same passengers, including Lara, again
requested the defendant to drive them to Davao. Defendant again
accommodated them and upon reaching Km. 96, Lara accidentally fell
suffering fatal injuries.
It therefore appears that the deceased, as well his companions who rode in
the pick-up of defendant, were merely accommodation passengers who paid
nothing for the service and so they can be considered as invited guests within
the meaning of the law. As accommodation passengers or invited guests,
defendant as owner and driver of the pick-up owes to them merely the duty
to exercise reasonable care so that they may be transported safely to their
destination. Thus, "The rule is established by the weight of authority that the
owner or operator of an automobile owes the duty to an invited guest to
exercise reasonable care in its operation, and not unreasonably to expose him
to danger and injury by increasing the hazard of travel. This rule, as frequently
stated by the courts, is that an owner of an automobile owes a guest the duty
to exercise ordinary or reasonable care to avoid injuring him. Since one riding
in an automobile is no less a guest because he asked for the privilege of doing
so, the same obligation of care is imposed upon the driver as in the case of
one expressly invited to ride" (5 Am. Jur., 626-627). Defendant, therefore, is
only required to observe ordinary care, and is not in duty bound to exercise
extraordinary diligence as required of a common carrier by our law (Articles
1755 and 1756, new Civil Code).
The question that now arises is: Is there enough evidence to show that
defendant failed to observe ordinary care or diligence in transporting the
deceased from Parang to Davao on the date in question?
The trial court answered the question in the affirmative but in so doing it took
into account only the following facts:
No debe perderse de vista el hecho, que los negocios de exportacion de
trozos del demandado tiene un volumen de P1,200. Lara era empleado de la
Oficina de Montes, asalariado por el gobierno, no pagado por el demandado
para classificar los trozos exportados; debido a los trabajos de classificacion
que duro 6 dias, en su ultimo dia Lara no durmio toda la noche, al dia
siguiente, Lara fue atacado de malaria, tenia inflamada la cara y cuerpo, sufria
dolores de cabeza con erupciones en la cara y cuerpo; que en la manana, del
dia 2 de enero de 1954, fecha en que Lara salio de Davao para Parang, en
aeroplano para clasificar los trozos del demandado, el automobil de este
condujo a aquel al aerodromo de Davao.
xxx xxx xxx
El viaje de Cotabato a Davao no es menos de 8 horas, su carretera esta en
malas condiciones, desnivelada, con piedras salientes y baches, que hacen del
vehiculo no estable en su marcha. Lara estaba enfermo de cierta gravedad,
tenia el cuerpo y cara inflamados, atacado de malaria, con dolores de cabeza
y con erupciones en la cara y cuerpo.
A la vista de estos hechos, el demandado debia de saber que era sumamente
peligroso llevar 5 pasajeros en la parte trasera del pick-up; particularmente,
para la salud de Lara; el permitirlo, el demandado no ha tomado las
precausiones, para evitar un posible accidente fatal. La negative de Lara de
ocupar el asiento delantero del pick-up no constituye a juicio del Juzgado una
defensa, pues el demendado conociendo el estado delicado de salud de Lara,
no debio de haber permitido que aquel regrese a Davao en su pick-up; si
querria prestar a aquel un favor, debio de haver provisto a Lara de un
automobil para su regrese a Davao, ya que el demendado es un millionario;
si no podia prestar a aquel este favor, debio de haver dejado a Lara en Samuay
para coger aquel un camion de pasajero de Cotabato a Davao.
Even if we admit as true the facts found by the trial court, still we find that
the same are not sufficient to show that defendant has failed to take the
precaution necessary to conduct his passengers safely to their place of
destination for there is nothing there to indicate that defendant has acted
with negligence or without taking the precaution that an ordinary prudent
man would have taken under similar circumstances. It should be noted that
Lara went to the lumber concession of defendant in answer to a call of duty
which he was bound to perform because of the requirement of his office and
he contracted the malaria fever in the course of the performance of that duty.
It should also be noted that defendant was not in duty bound to take the
deceased in his own pick-up to Davao because from Parang to Cotabato there
was a line of transportation that regularly makes trips for the public, and if
defendant agreed to take the deceased in his own car, it was only to
accommodate him considering his feverish condition and his request that he
be so accommodated. It should also be noted that the passengers who rode
in the pick-up of defendant took their respective seats therein at their own
choice and not upon indication of defendant with the particularity that
defendant invited the deceased to sit with him in the front seat but which
invitation the deceased declined. The reason for this can only be attributed
to his desire to be at the back so that he could sit on a bag and travel in a
reclining position because such was more convenient for him due to his
feverish condition. All the circumstances therefore clearly indicate that
defendant had done what a reasonable prudent man would have done under
the circumstances.
There is every reason to believe that the unfortunate happening was only due
to an unforeseen accident accused by the fact that at the time the deceased
was half asleep and must have fallen from the pick-up when it ran into some
stones causing it to jerk considering that the road was then bumpy, rough and
full of stones.
The finding of the trial court that the pick-up was running at more than 40
kilometers per hour is not supported by the evidence. This is a mere surmise
made by the trial court considering the time the pick-up left barrio Samoay
and the time the accident occured in relation to the distance covered by the
pick-up. And even if this is correct, still we say that such speed is not
unreasonable considering that they were traveling on a national road and the
traffic then was not heavy. We may rather attribute the incident to lack of
care on the part of the deceased considering that the pick-up was open and
he was then in a crouching position. Indeed, the law provides that "A
passenger must observe the diligence of a good father of a family to avoid
injury to himself" (Article 1761, new Civil Code), which means that if the injury
to the passenger has been proximately caused by his own negligence, the
carrier cannot be held liable.
All things considered, we are persuaded to conclude that the accident
occurred not due to the negligence of defendant but to circumstances
beyond his control and so he should be exempt from liability.
Wherefore, the decision appealed from is reversed, without pronouncement
as to costs.
Paras, C. J., Bengzon, Reyes, A., Concepcion, Reyes, J. B. L., Endencia and Felix,
JJ., concur.
G.R. No. 162267 July 4, 2008
PCI LEASING AND FINANCE, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC., respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, seeking a reversal of the Decision1 of the Court of Appeals
(CA) dated December 12, 2003 affirming with modification the Decision of the
Regional Trial Court (RTC) of Makati City which ordered petitioner and Renato
Gonzaga (Gonzaga) to pay, jointly and severally, respondent the amount of
P244,500.00 plus interest; and the CA Resolution2 dated February 18, 2004
denying petitioner's Motion for Reconsideration.
The facts, as found by the CA, are undisputed:
On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate
Number PHD-206 owned by United Coconut Planters Bank was traversing the
Laurel Highway, Barangay Balintawak, Lipa City. The car was insured with
plantiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac
with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped
by an 18-wheeler Fuso Tanker Truck with Plate No. PJE-737 and Trailer Plate
No. NVM-133, owned by defendants-appellants PCI Leasing & Finance, Inc.
allegedly leased to and operated by defendant-appellant Superior Gas &
Equitable Co., Inc. (SUGECO) and driven by its employee, defendant appellant
Renato Gonzaga.
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an
explosion of the rear part of the car. The driver and passenger suffered
physical injuries. However, the driver defendant-appellant Gonzaga
continued on its [sic] way to its [sic] destination and did not bother to bring
his victims to the hospital.
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00
representing the insurance coverage of the damaged car.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated
demands were made by plaintiff-appellee for the payment of the aforesaid
amounts. However, no payment was made. Thus, plaintiff-appellee filed the
instant case on March 13, 1991.3
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could
not be held liable for the collision, since the driver of the truck, Gonzaga, was
not its employee, but that of its co-defendant Superior Gas & Equitable Co.,
Inc. (SUGECO).4 In fact, it was SUGECO, and not petitioner, that was the
actual operator of the truck, pursuant to a Contract of Lease signed by
petitioner and SUGECO.5 Petitioner, however, admitted that it was the owner
of the truck in question.6
After trial, the RTC rendered its Decision dated April 15, 1999,7 the dispositive
portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff UCPB General Insurance [respondent], ordering the defendants PCI
Leasing and Finance, Inc., [petitioner] and Renato Gonzaga, to pay jointly and
severally the former the following amounts: the principal amount of
P244,500.00 with 12% interest as of the filing of this complaint until the same
is paid; P50,000.00 as attorney's fees; and P20,000.00 as costs of suit.
SO ORDERED.8
Aggrieved by the decision of the trial court, petitioner appealed to the CA.
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision,
with certain modifications, as follows:
WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED
with modification that the award of attorney's fees is hereby deleted and the
rate of interest shall be six percent (6%) per annum computed from the time
of the filing of the complaint in the trial court until the finality of the
judgment. If the adjudged principal and the interest remain unpaid
thereafter, the interest rate shall be twelve percent (12%) per annum
computed from the time the judgment becomes final and executory until it is
fully satisfied.
SO ORDERED.9
Petitioner filed a Motion for Reconsideration which the CA denied in its
Resolution dated February 18, 2004.
Hence, herein Petition for Review.
The issues raised by petitioner are purely legal:
Whether petitioner, as registered owner of a motor vehicle that figured in a
quasi-delict may be held liable, jointly and severally, with the driver thereof,
for the damages caused to third parties.
Whether petitioner, as a financing company, is absolved from liability by the
enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of
1998.
Anent the first issue, the CA found petitioner liable for the damage caused by
the collision since under the Public Service Act, if the property covered by a
franchise is transferred or leased to another without obtaining the requisite
approval, the transfer is not binding on the Public Service Commission and, in
contemplation of law, the grantee continues to be responsible under the
franchise in relation to the operation of the vehicle, such as damage or injury
to third parties due to collisions.10
Petitioner claims that the CA's reliance on the Public Service Act is misplaced,
since the said law applies only to cases involving common carriers, or those
which have franchises to operate as public utilities. In contrast, the case
before this Court involves a private commercial vehicle for business use,
which is not offered for service to the general public.11
Petitioner's contention has partial merit, as indeed, the vehicles involved in
the case at bar are not common carriers, which makes the Public Service Act
inapplicable.
However, the registered owner of the vehicle driven by a negligent driver may
still be held liable under applicable jurisprudence involving laws on
compulsory motor vehicle registration and the liabilities of employers for
quasi-delicts under the Civil Code.
The principle of holding the registered owner of a vehicle liable for quasi-
delicts resulting from its use is well-established in jurisprudence. Erezo v.
Jepte,12 with Justice Labrador as ponente, wisely explained the reason
behind this principle, thus:
Registration is required not to make said registration the operative act by
which ownership in vehicles is transferred, as in land registration cases,
because the administrative proceeding of registration does not bear any
essential relation to the contract of sale between the parties (Chinchilla vs.
Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of
the vehicle upon any public highway (section 5 [a], Act No. 3992, as
amended.) The main aim of motor vehicle registration is to identify the owner
so that if any accident happens, or that any damage or injury is caused by the
vehicle on the public highways, responsibility therefor can be fixed on a
definite individual, the registered owner. Instances are numerous where
vehicles running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor
vehicle registration is primarily ordained, in the interest of the determination
of persons responsible for damages or injuries caused on public highways.
"'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 would 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 the registered owner be allowed at the trial to prove who the
actual and real owner is, and in accordance with such proof escape or evade
responsibility and lay the same on the person actually owning the vehicle?
We hold with the trial court that the law does not allow him to do so; the law,
with its aim and policy in mind, does not relieve him directly of the
responsibility that the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner allowed to evade
responsibility by proving who the supposed transferee or owner is, it would
be easy for him, by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or
injury done. 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 not 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.
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.13
The case is still good law and has been consistently cited in subsequent
cases.14 Thus, there is no good reason to depart from its tenets.
For damage or injuries arising out of negligence in the operation of a motor
vehicle, the registered owner may be held civilly liable with the negligent
driver either 1) subsidiarily, if the aggrieved party seeks relief based on a
delict or crime under Articles 100 and 103 of the Revised Penal Code; or 2)
solidarily, if the complainant seeks relief based on a quasi-delict under
Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff
whether to waive completely the filing of the civil action, or institute it with
the criminal action, or file it separately or independently of a criminal
action;15 his only limitation is that he cannot recover damages twice for the
same act or omission of the defendant.16
In case a separate civil action is filed, the long-standing principle is that the
registered owner of a motor vehicle is primarily and directly responsible for
the consequences of its operation, including the negligence of the driver, with
respect to the public and all third persons.17 In contemplation of law, the
registered owner of a motor vehicle is the employer of its driver, with the
actual operator and employer, such as a lessee, being considered as merely
the owner's agent.18 This being the case, even if a sale has been executed
before a tortious incident, the sale, if unregistered, has no effect as to the
right of the public and third persons to recover from the registered owner.19
The public has the right to conclusively presume that the registered owner is
the real owner, and may sue accordingly.20
In the case now before the Court, there is not even a sale of the vehicle
involved, but a mere lease, which remained unregistered up to the time of
the occurrence of the quasi-delict that gave rise to the case. Since a lease,
unlike a sale, does not even involve a transfer of title or ownership, but the
mere use or enjoyment of property, there is more reason, therefore, in this
instance to uphold the policy behind the law, which is to protect the unwitting
public and provide it with a definite person to make accountable for losses or
injuries suffered in vehicular accidents.21 This is and has always been the
rationale behind compulsory motor vehicle registration under the Land
Transportation and Traffic Code and similar laws, which, as early as Erezo, has
been guiding the courts in their disposition of cases involving motor vehicular
incidents. It is also important to emphasize that such principles apply to all
vehicles in general, not just those offered for public service or utility.22
The Court recognizes that the business of financing companies has a
legitimate and commendable purpose.23 In earlier cases, it considered a
financial lease or financing lease a legal contract,24 though subject to the
restrictions of the so-called Recto Law or Articles 1484 and 1485 of the Civil
Code.25 In previous cases, the Court adopted the statutory definition of a
financial lease or financing lease, as:
[A] mode of extending credit through a non-cancelable lease contract under
which the lessor purchases or acquires, at the instance of the lessee,
machinery, equipment, motor vehicles, appliances, business and office
machines, and other movable or immovable property in consideration of the
periodic payment by the lessee of a fixed amount of money sufficient to
amortize at least seventy (70%) of the purchase price or acquisition cost,
including any incidental expenses and a margin of profit over an obligatory
period of not less than two (2) years during which the lessee has the right to
hold and use the leased property, x x x but with no obligation or option on his
part to purchase the leased property from the owner-lessor at the end of the
lease contract. 26
Petitioner presented a lengthy discussion of the purported trend in other
jurisdictions, which apparently tends to favor absolving financing companies
from liability for the consequences of quasi-delictual acts or omissions
involving financially leased property.27 The petition adds that these
developments have been legislated in our jurisdiction in Republic Act (R.A.)
No. 8556,28 which provides:
Section 12. Liability of lessors. - Financing companies shall not be liable for
loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment,
machinery or other property leased to a third person or entity except when
the motor vehicle, aircraft, vessel, equipment or other property is operated
by the financing company, its employees or agents at the time of the loss,
damage or injury.1avvphi1
Petitioner's argument that the enactment of R.A. No. 8556, especially its
addition of the new Sec. 12 to the old law, is deemed to have absolved
petitioner from liability, fails to convince the Court.
These developments, indeed, point to a seeming emancipation of financing
companies from the obligation to compensate claimants for losses suffered
from the operation of vehicles covered by their lease. Such, however, are not
applicable to petitioner and do not exonerate it from liability in the present
case.
The new law, R.A. No. 8556, notwithstanding developments in foreign
jurisdictions, do not supersede or repeal the law on compulsory motor vehicle
registration. No part of the law expressly repeals Section 5(a) and (e) of R.A.
No. 4136, as amended, otherwise known as the Land Transportation and
Traffic Code, to wit:
Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and
trailer of any type used or operated on or upon any highway of the Philippines
must be registered with the Bureau of Land Transportation (now the Land
Transportation Office, per Executive Order No. 125, January 30, 1987, and
Executive Order No. 125-A, April 13, 1987) for the current year in accordance
with the provisions of this Act.
xxxx
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other
encumbrances of motor vehicles, in order to be valid against third parties
must be recorded in the Bureau (now the Land Transportation Office).
Voluntary transactions or voluntary encumbrances shall likewise be properly
recorded on the face of all outstanding copies of the certificates of
registration of the vehicle concerned.
Cancellation or foreclosure of such mortgages, attachments, and other
encumbrances shall likewise be recorded, and in the absence of such
cancellation, no certificate of registration shall be issued without the
corresponding notation of mortgage, attachment and/or other
encumbrances.
x x x x (Emphasis supplied)
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by
implication is frowned upon, unless there is clear showing that the later
statute is so irreconcilably inconsistent and repugnant to the existing law that
they cannot be reconciled and made to stand together.29 There is nothing in
R.A. No. 4136 that is inconsistent and incapable of reconciliation.
Thus, the rule remains the same: a sale, lease, or financial lease, for that
matter, that is not registered with the Land Transportation Office, still does
not bind third persons who are aggrieved in tortious incidents, for the latter
need only to rely on the public registration of a motor vehicle as conclusive
evidence of ownership.30 A lease such as the one involved in the instant case
is an encumbrance in contemplation of law, which needs to be registered in
order for it to bind third parties.31 Under this policy, the evil sought to be
avoided is the exacerbation of the suffering of victims of tragic vehicular
accidents in not being able to identify a guilty party. A contrary ruling will not
serve the ends of justice. The failure to register a lease, sale, transfer or
encumbrance, should not benefit the parties responsible, to the prejudice of
innocent victims.
The non-registration of the lease contract between petitioner and its lessee
precludes the former from enjoying the benefits under Section 12 of R.A. No.
8556.
This ruling may appear too severe and unpalatable to leasing and financing
companies, but the Court believes that petitioner and other companies so
situated are not entirely left without recourse. They may resort to third-party
complaints against their lessees or whoever are the actual operators of their
vehicles. In the case at bar, there is, in fact, a provision in the lease contract
between petitioner and SUGECO to the effect that the latter shall indemnify
and hold the former free and harmless from any "liabilities, damages, suits,
claims or judgments" arising from the latter's use of the motor vehicle.32
Whether petitioner would act against SUGECO based on this provision is its
own option.
The burden of registration of the lease contract is minuscule compared to the
chaos that may result if registered owners or operators of vehicles are freed
from such responsibility. Petitioner pays the price for its failure to obey the
law on compulsory registration of motor vehicles for registration is a pre-
requisite for any person to even enjoy the privilege of putting a vehicle on
public roads.
WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003
and Resolution dated February 18, 2004 of the Court of Appeals are
AFFIRMED.
Costs against petitioner.

SO ORDERED.
Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, Reyes, JJ., concur.
G.R. No. 158793 June 8, 2006
JAMES MIRASOL, RICHARD SANTIAGO, and LUZON MOTORCYCLISTS
FEDERATION, INC., Petitioners,
vs.
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and TOLL REGULATORY
BOARD, Respondents.
DECISION
CARPIO, J.:
This petition for review on certiorari1 seeks to reverse the Decision dated 10
March 2003 of the Regional Trial Court, Branch 147, Makati City (RTC) in Civil
Case No. 01-034, as well as the RTC’s Order dated 16 June 2003 which denied
petitioners’ Motion for Reconsideration. Petitioners assert that Department
of Public Works and Highways’ (DPWH) Department Order No. 74 (DO 74),
Department Order No. 215 (DO 215), and the Revised Rules and Regulations
on Limited Access Facilities of the Toll Regulatory Board (TRB) violate Republic
Act No. 2000 (RA 2000) or the Limited Access Highway Act. Petitioners also
seek to declare Department Order No. 123 (DO 123) and Administrative
Order No. 1 (AO 1)2 unconstitutional.
Antecedent Facts
The facts are not in dispute. As summarized by the Solicitor General, the facts
are as follows:
1. On January 10, 2001, petitioners filed before the trial court a Petition for
Declaratory Judgment with Application for Temporary Restraining Order and
Injunction docketed as Civil Case No. 01-034. The petition sought the
declaration of nullity of the following administrative issuances for being
inconsistent with the provisions of Republic Act 2000, entitled "Limited
Access Highway Act" enacted in 1957:
a. DPWH Administrative Order No. 1, Series of 1968;
b. DPWH Department Order No. 74, Series of 1993;
c. Art. II, Sec. 3(a) of the Revised Rules on Limited Access Facilities
promulgated in 199[8] by the DPWH thru the Toll Regulatory Board (TRB).
2. Previously, pursuant to its mandate under R.A. 2000, DPWH issued on June
25, 1998 Department Order (DO) No. 215 declaring the Manila-Cavite
(Coastal Road) Toll Expressway as limited access facilities.
3. Accordingly, petitioners filed an Amended Petition on February 8, 2001
wherein petitioners sought the declaration of nullity of the aforesaid
administrative issuances. Moreover, petitioners prayed for the issuance of a
temporary restraining order and/or preliminary injunction to prevent the
enforcement of the total ban on motorcycles along the entire breadth of
North and South Luzon Expressways and the Manila-Cavite (Coastal Road)
Toll Expressway under DO 215.
4. On June 28, 2001, the trial court, thru then Presiding Judge Teofilo Guadiz,
after due hearing, issued an order granting petitioners’ application for
preliminary injunction. On July 16, 2001, a writ of preliminary injunction was
issued by the trial court, conditioned upon petitioners’ filing of cash bond in
the amount of P100,000.00, which petitioners subsequently complied with.
5. On July 18, 2001, the DPWH acting thru the TRB, issued Department Order
No. 123 allowing motorcycles with engine displacement of 400 cubic
centimeters inside limited access facilities (toll ways).
6. Upon the assumption of Honorable Presiding Judge Ma. Cristina Cornejo,
both the petitioners and respondents were required to file their respective
Memoranda. Petitioners likewise filed [their] Supplemental Memorandum.
Thereafter, the case was deemed submitted for decision.
7. Consequently, on March 10, 2003, the trial court issued the assailed
decision dismissing the petition but declaring invalid DO 123. Petitioners
moved for a reconsideration of the dismissal of their petition; but it was
denied by the trial court in its Order dated June 16, 2003.3
Hence, this petition.
The RTC’s Ruling
The dispositive portion of the RTC’s Decision dated 10 March 2003 reads:
WHEREFORE, [t]he Petition is denied/dismissed insofar as petitioners seek to
declare null and void ab initio DPWH Department Order No. 74, Series of
1993, Administrative Order No. 1, and Art. II, Sec. 3(a) of the Revised Rules on
Limited Access Facilities promulgated by the DPWH thru the TRB, the
presumed validity thereof not having been overcome; but the petition is
granted insofar as DPWH Department Order No. 123 is concerned, declaring
the same to be invalid for being violative of the equal protection clause of the
Constitution.
SO ORDERED.4
The Issues
Petitioners seek a reversal and raise the following issues for resolution:
1. WHETHER THE RTC’S DECISION IS ALREADY BARRED BY RES JUDICATA;
2. WHETHER DO 74, DO 215 AND THE TRB REGULATIONS CONTRAVENE RA
2000; AND
3. WHETHER AO 1 AND DO 123 ARE UNCONSTITUTIONAL.5
The Ruling of the Court
The petition is partly meritorious.
Whether the RTC’s Decision Dismissing Petitioners’ Case is Barred by Res
Judicata
Petitioners rely on the RTC’s Order dated 28 June 2001, which granted their
prayer for a writ of preliminary injunction. Since respondents did not appeal
from that Order, petitioners argue that the Order became "a final judgment"
on the issues. Petitioners conclude that the RTC erred when it subsequently
dismissed their petition in its Decision dated 10 March 2003.
Petitioners are mistaken. As the RTC correctly stated, the Order dated 28 June
2001 was not an adjudication on the merits of the case that would trigger res
judicata. A preliminary injunction does not serve as a final determination of
the issues. It is a provisional remedy, which merely serves to preserve the
status quo until the court could hear the merits of the case.6 Thus, Section 9
of Rule 58 of the 1997 Rules of Civil Procedure requires the issuance of a final
injunction to confirm the preliminary injunction should the court during trial
determine that the acts complained of deserve to be permanently enjoined.
A preliminary injunction is a mere adjunct, an ancillary remedy which exists
only as an incident of the main proceeding.7
Validity of DO 74, DO 215 and the TRB Regulations
Petitioners claim that DO 74,8 DO 215,9 and the TRB’s Rules and Regulations
issued under them violate the provisions of RA 2000. They contend that the
two issuances unduly expanded the power of the DPWH in Section 4 of RA
2000 to regulate toll ways. Petitioners assert that the DPWH’s regulatory
authority is limited to acts like redesigning curbings or central dividing
sections. They claim that the DPWH is only allowed to re-design the physical
structure of toll ways, and not to determine "who or what can be qualified as
toll way users."10
Section 4 of RA 200011 reads:
SEC. 4. Design of limited access facility. — The Department of Public Works
and Communications is authorized to so design any limited access facility and
to so regulate, restrict, or prohibit access as to best serve the traffic for which
such facility is intended; and its determination of such design shall be final. In
this connection, it is authorized to divide and separate any limited access
facility into separate roadways by the construction of raised curbings, central
dividing sections, or other physical separations, or by designating such
separate roadways by signs, markers, stripes, and the proper lane for such
traffic by appropriate signs, markers, stripes and other devices. No person,
shall have any right of ingress or egress to, from or across limited access
facilities to or from abutting lands, except at such designated points at which
access may be permitted, upon such terms and conditions as may be specified
from time to time. (Emphasis supplied)
On 19 February 1968, Secretary Antonio V. Raquiza of the Department of
Public Works and Communications issued AO 1, which, among others,
prohibited motorcycles on limited access highways. The pertinent provisions
of AO 1 read:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary [of] Public Works and
Communications under Section 3 of R.A. 2000, otherwise known as the
Limited Access Highway Act, the following rules and regulations governing
limited access highways are hereby promulgated for the guidance of all
concerned:
xxxx
Section 3 – On limited access highways, it is unlawful for any person or group
of persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not
motorized);
x x x x12 (Emphasis supplied)
On 5 April 1993, Acting Secretary Edmundo V. Mir of the Department of Public
Works and Highways issued DO 74:
SUBJECT: Declaration of the North Luzon Expressway from Balintawak to
Tabang and the South Luzon Expressway from Nichols to Alabang as Limited
Access Facilities
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is
defined as "a highway or street especially designed for through traffic, and
over, from, or to which owners or occupants of abutting land or other persons
have no right or easement or only a limited right or easement of access, light,
air or view by reason of the fact that their proper[t]y abuts upon such limited
access facility or for any other reason. Such highways or streets may be
parkways, from which trucks, buses, and other commerical [sic] vehicles shall
be excluded; or they may be free ways open to use by all customary forms of
street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and
Communications (now Department of Public Works and Highways) "to plan,
designate, establish, regulate, vacate, alter, improve, maintain, and provide
limited access facilities for public use wherever it is of the opinion that traffic
conditions, present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public
Works and Highways hereby designates and declares the Balintawak to
Tabang Sections of the North Luzon Expressway, and the Nichols to Alabang
Sections of the South Luzon Expressways, to be LIMITED ACCESS
HIGHWAYS/FACILITIES subject to such rules and regulations that may be
imposed by the DPWH thru the Toll Regulatory Board (TRB).
In view thereof, the National Capital Region (NCR) of this Department is
hereby ordered, after consultation with the TRB and in coordination with the
Philippine National Police (PNP), to close all illegal openings along the said
Limited Access Highways/Facilities. In this connection, the NCR is instructed
to organize its own enforcement and security group for the purpose of
assuring the continued closure of the right-of-way fences and the
implementation of the rules and regulations that may be imposed by the
DPWH thru the TRB.
This Order shall take effect immediately.13
On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar issued DO 215:
SUBJECT: Declaration of the R-1 Expressway, from Seaside drive to Zapote, C-
5 Link Expressway, from Zapote to Noveleta, of the Manila Cavite Toll
Expressway as Limited Access Facility.
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is
defined as "a highway or street especially designed for through traffic, and
over, from, or to which owners or occupants of abutting land or other persons
have no right or easement or only a limited right or easement of access, light,
air or view by reason of the fact that their property abuts upon such limited
access facility or for any other reason. Such highways or streets may be
parkways, from which trucks, buses, and other commercial vehicles shall be
excluded; or they may be free ways open to use by all customary forms of
street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and
Communications (now Department of Public Works and Highways) "to plan,
designate, establish, regulate, vacate, alter, improve, maintain, and provide
limited access facilities for public use wherever it is of the opinion that traffic
conditions, present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public
Works and Highways hereby designates and declares the R-1 Expressway, C-
5 Link Expressway and the R-1 Extension Expressway Sections of the Manila
Cavite Toll Expressway to be LIMITED ACCESS HIGHWAYS/FACILITIES subject
to such rules and regulations that may be imposed by the DPWH thru the Toll
Regulatory Board (TRB).
In view thereof, the National Capital Region (NCR) of this Department is
hereby ordered, after consultation with the TRB and in coordination with the
Philippine National Police (PNP), to close all illegal openings along the said
Limited Access Highways/Facilities. In this connection, the NCR is instructed
to organize its own enforcement and security group for the purpose of
assuring the continued closure of the right-of-way fences and the
implementation of the rules and regulations that may be imposed by the
DPWH thru the TRB.
This Order shall take effect immediately.14
The RTC held that Section 4 of RA 2000 expressly authorized the DPWH to
design limited access facilities and to regulate, restrict, or prohibit access as
to serve the traffic for which such facilities are intended. According to the
RTC, such authority to regulate, restrict, or prohibit logically includes the
determination of who and what can and cannot be permitted entry or access
into the limited access facilities. Thus, the RTC concluded that AO 1, DO 74,
and the Revised Rules and Regulations on Limited Access Facilities, which ban
motorcycles’ entry or access to the limited access facilities, are not
inconsistent with RA 2000.
RA 2000, otherwise known as the Limited Access Highway Act, was approved
on 22 June 1957. Section 4 of RA 2000 provides that "[t]he Department of
Public Works and Communications is authorized to so design any limited
access facility and to so regulate, restrict, or prohibit access as to best serve
the traffic for which such facility is intended." The RTC construed this
authorization to regulate, restrict, or prohibit access to limited access
facilities to apply to the Department of Public Works and Highways (DPWH).
The RTC’s ruling is based on a wrong premise. The RTC assumed that the
DPWH derived its authority from its predecessor, the Department of Public
Works and Communications, which is expressly authorized to regulate,
restrict, or prohibit access to limited access facilities under Section 4 of RA
2000. However, such assumption fails to consider the evolution of the
Department of Public Works and Communications.
Under Act No. 2711, otherwise known as the Revised Administrative Code,
approved on 10 March 1917, there were only seven executive departments,
namely: the Department of the Interior, the Department of Finance, the
Department of Justice, the Department of Agriculture and Commerce, the
Department of Public Works and Communications, the Department of Public
Instruction, and the Department of Labor.15 On 20 June 1964, Republic Act
No. 413616 created the Land Transportation Commission under the
Department of Public Works and Communications. Later, the Department of
Public Works and Communications was restructured into the Department of
Public Works, Transportation and Communications.
On 16 May 1974, Presidential Decree No. 458 (PD 458) separated the Bureau
of Public Highways from the Department of Public Works, Transportation and
Communications and created it as a department to be known as Department
of Public Highways. Under Section 3 of PD 458, the Department of Public
Highways is "responsible for developing and implementing programs on the
construction and maintenance of roads, bridges and airport runways."
With the amendment of the 1973 Philippine Constitution in 1976, resulting in
the shift in the form of government, national agencies were renamed from
Departments to Ministries. Thus, the Department of Public Works,
Transportation and Communications became the Ministry of Public Works,
Transportation and Communications.
On 23 July 1979, then President Ferdinand E. Marcos issued Executive Order
No. 546 (EO 546), creating a Ministry of Public Works and a Ministry of
Transportation and Communications.17 Under Section 1 of EO 546, the
Ministry of Public Works assumed the public works functions of the Ministry
of Public Works, Transportation and Communications. The functions of the
Ministry of Public Works were the "construction, maintenance and repair of
port works, harbor facilities, lighthouses, navigational aids, shore protection
works, airport buildings and associated facilities, public buildings and school
buildings, monuments and other related structures, as well as undertaking
harbor and river dredging works, reclamation of foreshore and swampland
areas, water supply, and flood control and drainage works."18
On the other hand, the Ministry of Transportation and Communications
became the "primary policy, planning, programming, coordinating,
implementing, regulating and administrative entity of the executive branch
of the government in the promotion, development, and regulation of a
dependable and coordinated network of transportation and communication
systems."19 The functions of the Ministry of Transportation and
Communications were:
a. Coordinate and supervise all activities of the Ministry relative to
transportation and communications;
b. Formulate and recommend national policies and guidelines for the
preparation and implementation of an integrated and comprehensive
transportation and communications system at the national, regional and local
levels;
c. Establish and administer comprehensive and integrated programs for
transportation and communication, and for this purpose, may call on any
agency, corporation, or organization, whether government or private, whose
development programs include transportation and communications as an
integral part to participate and assist in the preparation and implementation
of such programs;
d. Regulate, whenever necessary, activities relative to transportation and
communications and prescribe and collect fees in the exercise of such power;
e. Assess, review and provide direction to transportation and
communications research and development programs of the government in
coordination with other institutions concerned; and
f. Perform such other functions as may be necessary to carry into effect the
provisions of this Executive Order.20 (Emphasis supplied)
On 27 July 1981, then President Marcos issued Executive Order No. 710 (EO
710), which merged the Ministry of Public Works and the Ministry of Public
Highways for "greater simplicity and economy in operations."21 The
restructured agency became known as the Ministry of Public Works and
Highways. Under Section 1 of EO 710 the functions of the Ministry of Public
Works and the Ministry of Public Highways22 were transferred to the
Ministry of Public Works and Highways.
Upon the ratification of the 1987 Constitution in February 1987, the former
Ministry of Public Works and Highways became the Department of Public
Works and Highways (DPWH) and the former Ministry of Transportation and
Communications became the Department of Transportation and
Communications (DOTC).
DPWH issued DO 74 and DO 215 declaring certain expressways as limited
access facilities on 5 April 1993 and 25 June 1998, respectively. Later, the TRB,
under the DPWH, issued the Revised Rules and Regulations on Limited Access
Facilities. However, on 23 July 1979, long before these department orders
and regulations were issued, the Ministry of Public Works, Transportation and
Communications was divided into two agencies – the Ministry of Public Works
and the Ministry of Transportation and Communications – by virtue of EO
546. The question is, which of these two agencies is now authorized to
regulate, restrict, or prohibit access to limited access facilities?23
Under Section 1 of EO 546, the Ministry of Public Works (now DPWH)
assumed the public works functions of the Ministry of Public Works,
Transportation and Communications. On the other hand, among the
functions of the Ministry of Transportation and Communications (now
Department of Transportation and Communications [DOTC]) were to (1)
formulate and recommend national policies and guidelines for the
preparation and implementation of an integrated and comprehensive
transportation and communications systems at the national, regional, and
local levels; and (2) regulate, whenever necessary, activities relative to
transportation and communications and prescribe and collect fees in the
exercise of such power. Clearly, under EO 546, it is the DOTC, not the DPWH,
which has authority to regulate, restrict, or prohibit access to limited access
facilities.
Even under Executive Order No. 125 (EO 125)24 and Executive Order No. 125-
A (EO 125-A),25 which further reorganized the DOTC, the authority to
administer and enforce all laws, rules and regulations relative to
transportation is clearly with the DOTC.26
Thus, DO 74 and DO 215 are void because the DPWH has no authority to
declare certain expressways as limited access facilities. Under the law, it is
the DOTC which is authorized to administer and enforce all laws, rules and
regulations in the field of transportation and to regulate related activities.
Since the DPWH has no authority to regulate activities relative to
transportation, the TRB27 cannot derive its power from the DPWH to issue
regulations governing limited access facilities. The DPWH cannot delegate a
power or function which it does not possess in the first place. Since DO 74
and DO 215 are void, it follows that the rules implementing them are likewise
void.
Whether AO 1 and DO 123 are Unconstitutional
DPWH Secretary Simeon A. Datumanong issued DO 123 on 18 July 2001. DO
123 reads in part:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary of Public Works and Highways
under Section 3 of R.A. 2000, otherwise known as the Limited Access Highway
Act, the following revised rules and regulations governing limited access
highways are hereby promulgated for the guidance of all concerned:
1. Administrative Order No. 1 dated February 19, 1968, issued by the
Secretary of the then Department of Public Works and Communications, is
hereby amended by deleting the word "motorcycles" mentioned in Section
3(h) thereof. Therefore, motorcycles are hereby allowed to operate inside the
toll roads and limited access highways, subject to the following:
a. Motorcycles shall have an engine displacement of at least 400 cubic
centimeters (cc) provided that:
x x x x28 (Emphasis supplied)
The RTC’s Decision dated 10 March 2003 declared DO 123 unconstitutional
on the ground that it violates the equal protection clause by allowing only
motorcycles with at least 400 cubic centimeters engine displacement to use
the toll ways. The RTC reasoned that the creation of a distinction within the
class of motorcycles was not based on real differences.
We need not pass upon the constitutionality of the classification of
motorcycles under DO 123. As previously discussed, the DPWH has no
authority to regulate limited access highways since EO 546 has devolved this
function to the DOTC. Thus, DO 123 is void for want of authority of the DPWH
to promulgate it.
On the other hand, the assailed portion of AO 1 states:
Section 3. On limited access highways, it is unlawful for any person or group
of persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not
motorized);
xxxx
Petitioners assail the DPWH’s failure to provide "scientific" and "objective"
data on the danger of having motorcycles plying our highways. They attack
this exercise of police power as baseless and unwarranted. Petitioners
belabor the fact that there are studies that provide proof that motorcycles
are safe modes of transport. They also claim that AO 1 introduces an
unreasonable classification by singling-out motorcycles from other motorized
modes of transport. Finally, petitioners argue that AO 1 violates their right to
travel.
Petitioners’ arguments do not convince us.
We emphasize that the Secretary of the Department of Public Works and
Communications issued AO 1 on 19 February 1968.
Section 3 of RA 200029 authorized the issuance of the guidelines. In contrast,
DPWH issued DO 74, DO 215 and DO 123 after EO 546 devolved to the DOTC
the authority to regulate limited access highways.
We now discuss the constitutionality of AO 1. Administrative issuances have
the force and effect of law.30 They benefit from the same presumption of
validity and constitutionality enjoyed by statutes.31 These two precepts place
a heavy burden upon any party assailing governmental regulations. The
burden of proving unconstitutionality rests on such party.32 The burden
becomes heavier when the police power is at issue.
The use of public highways by motor vehicles is subject to regulation as an
exercise of the police power of the state.33 The police power is far-reaching
in scope and is the "most essential, insistent and illimitable" of all government
powers.34 The tendency is to extend rather than to restrict the use of police
power. The sole standard in measuring its exercise is reasonableness.35 What
is "reasonable" is not subject to exact definition or scientific formulation. No
all-embracing test of reasonableness exists,36 for its determination rests
upon human judgment applied to the facts and circumstances of each
particular case.37
We find that AO 1 does not impose unreasonable restrictions. It merely
outlines several precautionary measures, to which toll way users must
adhere. These rules were designed to ensure public safety and the
uninhibited flow of traffic within limited access facilities. They cover several
subjects, from what lanes should be used by a certain vehicle, to maximum
vehicle height. The prohibition of certain types of vehicles is but one of these.
None of these rules violates reason. The purpose of these rules and the logic
behind them are quite evident. A toll way is not an ordinary road. The special
purpose for which a toll way is constructed necessitates the imposition of
guidelines in the manner of its use and operation. Inevitably, such rules will
restrict certain rights. But the mere fact that certain rights are restricted does
not invalidate the rules.
Consider Section 3(g) of AO 1, which prohibits the conduct of rallies inside toll
ways.38 The regulation affects the right to peaceably assemble. The exercise
of police power involves restriction, restriction being implicit in the power
itself. Thus, the test of constitutionality of a police power measure is limited
to an inquiry on whether the restriction imposed on constitutional rights is
reasonable, and not whether it imposes a restriction on those rights.
None of the rules outlined in AO 1 strikes us as arbitrary and capricious. The
DPWH, through the Solicitor General, maintains that the toll ways were not
designed to accommodate motorcycles and that their presence in the toll
ways will compromise safety and traffic considerations. The DPWH points out
that the same study the petitioners rely on cites that the inability of other
drivers to detect motorcycles is the predominant cause of accidents.39
Arguably, prohibiting the use of motorcycles in toll ways may not be the
"best" measure to ensure the safety and comfort of those who ply the toll
ways.
However, the means by which the government chooses to act is not judged
in terms of what is "best," rather, on simply whether the act is reasonable.
The validity of a police power measure does not depend upon the absolute
assurance that the purpose desired can in fact be probably fully
accomplished, or upon the certainty that it will best serve the purpose
intended.40 Reason, not scientific exactitude, is the measure of the validity
of the governmental regulation. Arguments based on what is "best" are
arguments reserved for the Legislature’s discussion. Judicial intervention in
such matters will only be warranted if the assailed regulation is patently
whimsical. We do not find the situation in this case to be so.
Neither do we find AO 1 oppressive. Petitioners are not being deprived of
their right to use the limited access facility. They are merely being required,
just like the rest of the public, to adhere to the rules on how to use the facility.
AO 1 does not infringe upon petitioners’ right to travel but merely bars
motorcycles, bicycles, tricycles, pedicabs, and any non-
motorized vehicles as the mode of traveling along limited access highways.41
Several cheap, accessible and practical alternative modes of transport are
open to petitioners. There is nothing oppressive in being required to take a
bus or drive a car instead of one’s scooter, bicycle, calesa, or motorcycle upon
using a toll way.
Petitioners’ reliance on the studies they gathered is misplaced. Police power
does not rely upon the existence of definitive studies to support its use.
Indeed, no requirement exists that the exercise of police power must first be
conclusively justified by research. The yardstick has always been simply
whether the government’s act is reasonable and not oppressive.42 The use
of "reason" in this sense is simply meant to guard against arbitrary and
capricious government action. Scientific certainty and conclusiveness, though
desirable, may not be demanded in every situation. Otherwise, no
government will be able to act in situations demanding the exercise of its
residual powers because it will be tied up conducting studies.
A police power measure may be assailed upon proof that it unduly violates
constitutional limitations like due process and equal protection of the law.43
Petitioners’ attempt to seek redress from the motorcycle ban under the aegis
of equal protection must fail. Petitioners’ contention that AO 1 unreasonably
singles out motorcycles is specious. To begin with, classification by itself is not
prohibited.44
A classification can only be assailed if it is deemed invidious, that is, it is not
based on real or substantial differences. As explained by Chief Justice
Fernando in Bautista v. Juinio:45
x x x To assure that the general welfare be promoted, which is the end of law,
a regulatory measure may cut into the rights to liberty and property. Those
adversely affected may under such circumstances invoked the equal
protection clause only if they can show that the governmental act assailed,
far from being inspired by the attainment of the common weal was prompted
by the spirit of hostility, or at the very least, discrimination that finds no
support in reason. It suffices then that the laws operate equally and uniformly
on all persons under similar circumstances or that all persons must be treated
in the same manner, the conditions not being different, both in the privileges
conferred and the liabilities imposed. Favoritism and undue preference
cannot be allowed. For the principle is that equal protection and security shall
be given to every person under circumstances, which if not identical is
analogous. If law be looked upon in terms of burden or charges, those that
fall within a class should be treated in the same fashion, whatever restrictions
cast on some in the group equally binding the rest.
We find that it is neither warranted nor reasonable for petitioners to say that
the only justifiable classification among modes of transport is the motorized
against the non-motorized. Not all motorized vehicles are created equal. A
16-wheeler truck is substantially different from other light vehicles. The first
may be denied access to some roads where the latter are free to drive. Old
vehicles may be reasonably differentiated from newer models.46 We find
that real and substantial differences exist between a motorcycle and other
forms of transport sufficient to justify its classification among those
prohibited from plying the toll ways. Amongst all types of motorized
transport, it is obvious, even to a child, that a motorcycle is quite different
from a car, a bus or a truck. The most obvious and troubling difference would
be that a two-wheeled vehicle is less stable and more easily overturned than registered with that office entitle them to use all kinds of roads in the country.
a four-wheeled vehicle. Again, petitioners are mistaken. There exists no absolute right to drive. On
the contrary, this privilege, is heavily regulated. Only a qualified group is
A classification based on practical convenience and common knowledge is allowed to drive motor vehicles: those who pass the tests administered by
not unconstitutional simply because it may lack purely theoretical or scientific the LTO. A driver’s license issued by the LTO merely allows one to drive a
uniformity. Moreover, we take note that the Philippines is home to a host of particular mode of transport. It is not a license to drive or operate any form
unique motorized modes of transport ranging from modified hand-carts of transportation on any type of road. Vehicle registration in the LTO on the
(kuliglig) to bicycle "sidecars" outfitted with a motor. To follow petitioners’ other hand merely signifies the roadworthiness of a vehicle. This does not
argument to its logical conclusion would open up toll ways to all these preclude the government from prescribing which roads are accessible to
contraptions. Both safety and traffic considerations militate against any ruling certain vehicles.
that would bring about such a nightmare.
WHEREFORE, we PARTLY GRANT the petition. We MODIFY the Decision dated
Petitioners complain that the prohibition on the use of motorcycles in toll 10 March 2003 of the Regional Trial Court, Branch 147, Makati City and its
ways unduly deprive them of their right to travel. Order dated 16 June 2003 in Civil Case No. 01-034. We declare VOID
We are not persuaded. Department Order Nos. 74, 215, and 123 of the Department of Public Works
and Highways, and the Revised Rules and Regulations on Limited Access
A toll way is not an ordinary road. As a facility designed to promote the fastest Facilities of the Toll Regulatory Board. We declare VALID Administrative Order
access to certain destinations, its use, operation, and maintenance require No. 1 of the Department of Public Works and Communications.
close regulation. Public interest and safety require the imposition of certain
restrictions on toll ways that do not apply to ordinary roads. As a special kind SO ORDERED.
of road, it is but reasonable that not all forms of transport could use it.
The right to travel does not mean the right to choose any vehicle in traversing
a toll way. The right to travel refers to the right to move from one place to
another. Petitioners can traverse the toll way any time they choose using
private or public four-wheeled vehicles. Petitioners are not denied the right
to move from Point A to Point B along the toll way. Petitioners are free to
access the toll way, much as the rest of the public can. The mode by which
petitioners wish to travel pertains to the manner of using the toll way, a
subject that can be validly limited by regulation.
Petitioners themselves admit that alternative routes are available to them.
Their complaint is that these routes are not the safest and most convenient.
Even if their claim is true, it hardly qualifies as an undue curtailment of their
freedom of movement and travel. The right to travel does not entitle a person
to the best form of transport or to the most convenient route to his
destination. The obstructions found in normal streets, which petitioners
complain of (i.e., potholes, manholes, construction barriers, etc.), are not
suffered by them alone.
Finally, petitioners assert that their possession of a driver’s license from the
Land Transportation Office (LTO) and the fact that their vehicles are
G.R. No. L-24219 June 13, 1968
PHILIPPINE AIR LINES, INC., petitioner,
vs.
CIVIL AERONAUTICS BOARD, and FILIPINAS ORIENT AIRWAYS, INC.,
respondents.
Crispin D. Baizas, Edgardo Diaz de Rivera and Cenon S. Cervantes, Jr. for
petitioner.
Office of the Solicitor General for respondent Civil Aeronautics Board.
Honorio Poblador and Ramon A. Pedrosa for respondent Filipinas Orient
Airways, Inc.
CONCEPCION, C.J.:
Original petition for certiorari, to set aside and annul a resolution of the Civil
Aeronautics Board — hereinafter referred to as CAB — granting respondent
Filipinas Orient Airways Inc. — hereinafter referred to as Fairways —
"provisional authority to operate scheduled and non-scheduled domestic air
services with the use of DC-3 aircrafts", subject to specified conditions.
Pursuant to Republic Act No. 4147, granting thereto "a franchise to establish,
operate and maintain transport services for the carriage of passengers, mail,
industrial flights and cargo by air in and between any and all points and places
throughout the Philippines and other countries", on September 16, 1964,
Fairways filed with CAB the corresponding application for a "certificate of
public convenience and necessity", which was Docketed as economic
proceedings (EP) No. 625, and was objected to by herein petitioner, Philippine
Air Lines, Inc., hereinafter referred to as PAL. Subsequently, a CAB hearing
officer began to receive evidence on said application. After several hearings
before said officer, or on December 14, 1964, Fairways filed an "urgent
petition for provisional authority to operate" under a detailed "program of
implementation" attached to said petition, and for the approval of its bond
therefor, as well as the provisional approval of its "tariff regulations and the
conditions of carriage to be printed at the back of the passenger tickets."
Despite PAL's opposition thereto, in a resolution issued on January 5, 1965,
CAB granted said urgent petition of Fairways. The pertinent part of said
resolution provides:
Filipinas Orient Airways, Inc., (FAIRWAYS) having presented to the Board
evidence showing prima facie its fitness, willingness and ability to operate the
services applied for and the public need for more air transportation service,
and to encourage and develop commercial air transportation, RESOLVED, to
grant, as the Board hereby grants, the said Filipinas Orient Airways, Inc.,
provisional authority to operate scheduled and non-scheduled domestic air
services with the use of DC-3 aircraft, subject to the following conditions;
1. The term of the provisional authority herein granted shall be until such
time as the main application for a certificate of public convenience and
necessity is finally decided or for such period as the Board may at any time
determine;
xxx xxx xxx
A reconsideration of this resolution having been denied, PAL filed the present
civil action alleging that, in issuing said resolution, CAB had acted illegally and
in excess of its jurisdiction or with grave abuse of discretion, because:
(1) CAB is not empowered to grant any provisional authority to operate, prior
to the submission for decision of the main application for a certificate of
public convenience and necessity;
(2) CAB had no evidence before it that could have justified the granting of the
provisional authority complained of;
(3) PAL was denied due process when CAB granted said authority before the
presentation of its evidence on Fairway's main application; and
(4) In granting said provisional authority, the CAB had prejudged the merits
of said application.
The first ground is devoid of merit. Section 10-C(1) of Republic Act No. 776,
reading:
(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny,
amend, revise, alter, modify, cancel suspend or revoke, in whole or in part,
upon petitioner complaint, or upon its own initiative, any temporary
operating permit or Certificate of Public Convenience and Necessity;
Provided, however, That in the case of foreign air carriers, the permit shall be
issued with the approval of the President of the Republic of the Philippines....
explicitly authorizes CAB to issue a "temporary operating permit," and
nothing contained, either in said section, or in Chapter IV of Republic Act No.
776, negates the power to issue said "permit", before the completion of the
applicant's evidence and that of the oppositor thereto on the main petition.
Indeed, the CAB's authority to grant a temporary permit "upon its own
initiative," strongly suggests the power to exercise said authority, even before
the presentation of said evidence has begun.
Moreover, we perceive no cogent reason to depart, in connection with the
commercial air transport service, from the policy of our public service law,
which sanctions the issuance of temporary or provisional permits or
certificates of public convenience and necessity, before the submission of a
case for decision on the merits.1 The overriding considerations in both
instances are the same, namely, that the service be required by public
convenience and necessity, and, that the applicant is fit, as well as willing and
able to render such service properly, in conformity with law and the pertinent
rules, regulations and requirements.2
As regards PAL's second contention, we have no more than PAL's assertion
and conclusion regarding the absence of substantial evidence in support of
the finding, in the order complained of, to the effect that Fairways' evidence
had established " prima facie its fitness, willingness and ability to operate the
services applied for and the public need for more transportation service ...".
Apart from PAL's assertion being contradicted by the tenor of said order,
there is the legal presumption that official duty has been duly performed.
has not satisfactorily shown that the aforementioned findings of the CAB are
lacking in the necessary evidentiary support.
Needless to say, the case of Ang Tibay vs. C.I.R.5 on which petitioner relies, is
not in point. Said case refers to the conditions essential to a valid decision on
the merits, from the viewpoint of due process, whereas, in the case at bar,
we are concerned with an interlocutory order prior to the rendition of said
decision. In fact, interlocutory orders may sometimes be issued ex parte,
particularly, in administrative proceedings, without previous notice and
hearing, consistently with due process.6 Again, the constitutional provision
to the effect that "no decision shall be rendered by any court of record
without expressing therein clearly and distinctly the facts and the law on
which it is based",7 applies, not to such interlocutory orders, but to the
determination of the case on the merits.8
Lastly, the provisional nature of the permit granted to Fairways refutes the
assertion that it prejudges the merits of Fairways' application and PAL's
opposition thereto. As stated in the questioned order, CAB's findings therein
made reflect its view merely on the prima facie effect of the evidence so far
introduced and do not connote a pronouncement or an advanced expression
of opinion on the merits of the case.
WHEREFORE, the petition herein should be, as it is hereby, dismissed, and the
writ prayed for, denied, with costs against petitioner Philippine Air Lines, Inc.
It is so ordered.

Such presumption is particularly strong as regards administrative agencies,

like the CAB, vested with powers said to be quasi-judicial in nature, in
connection with the enforcement of laws affecting particular fields of activity,
the proper regulation and/or promotion of which requires a technical or
special training, aside from a good knowledge and grasp of the overall
conditions, relevant to said field, obtaining in the nation.3 The consequent
policy and practice underlying our Administrative Law is that courts of justice
should respect the findings of fact of said administrative agencies, unless
there is absolutely no evidence in support thereof or such evidence is clearly,
manifestly and patently insubstantial.4 This, in turn, is but a recognition of
the necessity of permitting the executive department to adjust law
enforcement to changing conditions, without being unduly hampered by the
rigidity and the delays often attending ordinary court proceedings or the
enactment of new or amendatory legislations. In the case at bar, petitioner
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's principal occupation was not the carriage
of goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common
carrier. This is palpable error. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions governing
common carriers. That liability arises the moment a person or firm acts as a
common carrier, without regard to whether or not such carrier has also
complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured the necessary
certificate of public convenience, would be offensive to sound public policy;
that would be to reward private respondent precisely for failing to comply
with applicable statutory requirements. The business of a common carrier
impinges directly and intimately upon the safety and well being and property
of those members of the general community who happen to deal with such
carrier. The law imposes duties and liabilities upon common carriers for the
safety and protection of those who utilize their services and the law cannot
allow a common carrier to render such duties and liabilities merely facultative
by simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public
policy" 2 are held to a very high degree of care and diligence ("extraordinary
diligence") in the carriage of goods as well as of passengers. The specific
import of extraordinary diligence in the care of goods transported by a
common carrier is, according to Article 1733, "further expressed in Articles
1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the goods which they
carry, "unless the same is due to any of the following causes only:
(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 do not act with grave or irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss, destruction or
deterioration of goods on account of the defective condition of the car
vehicle, ship, airplane or other equipment used in the contract of carriage.
(Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and will
not be allowed to divest or to diminish such responsibility — even for acts of
strangers like thieves or robbers, except where such thieves or robbers in fact
acted "with grave or irresistible threat, violence or force." We believe and so
hold that the limits of the duty of extraordinary diligence in the vigilance over
the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner's cargo. The record shows that an
information for robbery in band was filed in the Court of First Instance of
Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines
v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one
John Doe." There, the accused were charged with willfully and unlawfully
taking and carrying away with them the second truck, driven by Manuel
Estrada and loaded with the 600 cartons of Liberty filled milk destined for
delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial
court shows that the accused acted with grave, if not irresistible, threat,
violence or force.3 Three (3) of the five (5) hold-uppers were armed with
firearms. The robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several days and later
releasing them in another province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must
reasonably be regarded as quite beyond the control of the common carrier
and properly regarded as a fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against all risks of travel and
of transport of goods, and are not held liable for acts or events which cannot
be foreseen or are inevitable, provided that they shall have complied with the
rigorous standard of extraordinary diligence.
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.
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.
DECISION
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. 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-party1 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 Charter2 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 holds4 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." 14 Hence, 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 facie presumption 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.
SECOND DIVISION
[G.R. No. 111127. July 26, 1996]
MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO CABIL, petitioners, vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP,
INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V.
QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO,
RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE,
EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O.
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.
DECISION
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 1) P93,657.11 as actual damages;
Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due
2) P500,000.00 as the reasonable amount of loss of earning capacity of
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 plaintiff Amyline Antonio;
are jointly and severally liable for damages. Some members of the Court, 3) P20,000.00 as moral damages;
though, are of the view that under the circumstances they are liable on quasi-
delict.[20] 4) P20,000.00 as exemplary damages;

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] this 5) 25% of the recoverable amount as attorneys fees; and
Court exonerated the jeepney driver from liability to the injured passengers 6) costs of suit.
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 SO ORDERED.
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:
SECOND DIVISION
[G.R. No. 125948. December 29, 1998]
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF
APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of
Batangas, respondents.
DECISION
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 Section 125 [now Sec. 137] that a province may impose this tax at a specific
extend to the levy of the following : rate.
xxxxxxxxx MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]
(j) Taxes on the gross receipts of transportation contractors and persons It is clear that the legislative intent in excluding from the taxing power of the
engaged in the transportation of passengers or freight by hire and common local government unit the imposition of business tax against common carriers
carriers by air, land or water, except as provided in this Code." is to prevent a duplication of the so-called "common carrier's tax."
The deliberations conducted in the House of Representatives on the Local Petitioner is already paying three (3%) percent common carrier's tax on its
Government Code of 1991 are illuminating: gross sales/earnings under the National Internal Revenue Code.[19] To tax
petitioner again on its gross receipts in its transportation of petroleum
"MR. AQUINO (A). Thank you, Mr. Speaker. business would defeat the purpose of the Local Government Code.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 WHEREFORE, the petition is hereby GRANTED. The decision of the
[now Sec. 131]. Common Limitations on the Taxing Powers of Local respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No.
Government Units." x x x 36801 is REVERSED and SET ASIDE.
MR. AQUINO (A.). Thank you Mr. Speaker. SO ORDERED.
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
Synopsis/Syllabi
FIRST DIVISION
[G.R. No. 131621. September 28, 1999]
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE
MANILA INSURANCE CO., INC., respondents.
DECISION
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition
for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
seeks to reverse and set aside the following: (a) the 30 January 1997
decision[1] of the Court of Appeals in CA-G.R. CV No. 36401, which affirmed
the decision of 4 October 1991[2] of the Regional Trial Court of Manila,
Branch 16, in Civil Case No. 85-29110, ordering LOADSTAR to pay private
respondent Manila Insurance Co. (hereafter MIC) the amount of P6,067,178,
with legal interest from the filing of the complaint until fully paid, P8,000 as
attorneys fees, and the costs of the suit; and (b) its resolution of 19 November
1997,[3] denying LOADSTARs motion for reconsideration of said decision.
The facts are undisputed.
On 19 November 1984, LOADSTAR received on board its M/V Cherokee
(hereafter, the vessel) the following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and others; and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with
MIC against various risks including TOTAL LOSS BY TOTAL LOSS OF THE
VESSEL. The vessel, in turn, was insured by Prudential Guarantee &
Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its
way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along
with its cargo, sank off Limasawa Island. As a result of the total loss of its
shipment, the consignee made a claim with LOADSTAR which, however,
ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full
settlement of its claim, and the latter executed a subrogation receipt
therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI,
alleging that the sinking of the vessel was due to the fault and negligence of
LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the
insurance proceeds from the loss of the vessel directly to MIC, said amount
to be deducted from MICs claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shippers goods
and claimed that the sinking of its vessel was due to force majeure. PGAI, on
the other hand, averred that MIC had no cause of action against it, LOADSTAR
being the party insured. In any event, PGAI was later dropped as a party
defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC,
prompting LOADSTAR to elevate the matter to the Court of Appeals, which,
however, agreed with the trial court and affirmed its decision in toto.
In dismissing LOADSTARs appeal, the appellate court made the following
observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that
there was a single shipper on that fateful voyage. The court noted that the
charter of the vessel was limited to the ship, but LOADSTAR retained control
over its crew.[4]
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which
should be applied in determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the day of
the voyage. If it had been seaworthy, it could have withstood the natural and
inevitable action of the sea on 20 November 1984, when the condition of the
sea was moderate. The vessel sank, not because of force majeure, but
because it was not seaworthy. LOADSTARS allegation that the sinking was
probably due to the convergence of the winds, as stated by a PAGASA expert,
was not duly proven at the trial. The limited liability rule, therefore, is not
applicable considering that, in this case, there was an actual finding of
negligence on the part of the carrier.[5]
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not
apply because said provisions bind only the shipper/consignee and the
carrier. When MIC paid the shipper for the goods insured, it was subrogated
to the latters rights as against the carrier, LOADSTAR.[6]
5) There was a clear breach of the contract of carriage when the shippers
goods never reached their destination. LOADSTARs defense of diligence of a
good father of a family in the training and selection of its crew is unavailing
because this is not a proper or complete defense in culpa contractual.
6) Art. 361 (of the Code of Commerce) has been judicially construed to mean
that when goods are delivered on board a ship in good order and condition,
and the shipowner delivers them to the shipper in bad order and condition,
it then devolves upon the shipowner to both allege and prove that the goods
were damaged by reason of some fact which legally exempts him from
liability. Transportation of the merchandise at the risk and venture of the
shipper means that the latter bears the risk of loss or deterioration of his
goods arising from fortuitous events, force majeure, or the inherent nature
and defects of the goods, but not those caused by the presumed negligence
or fault of the carrier, unless otherwise proved.[7]
The errors assigned by LOADSTAR boil down to a determination of the
following issues:
(1) Is the M/V Cherokee a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?
Regarding the first issue, LOADSTAR submits that the vessel was a private
carrier because it was not issued a certificate of public convenience, it did not
have a regular trip or schedule nor a fixed route, and there was only one
shipper, one consignee for a special cargo.
In refutation, MIC argues that the issue as to the classification of the M/V
Cherokee was not timely raised below; hence, it is barred by estoppel. While
it is true that the vessel had on board only the cargo of wood products for
delivery to one consignee, it was also carrying passengers as part of its regular
business. Moreover, the bills of lading in this case made no mention of any
charter party but only a statement that the vessel was a general cargo carrier.
Neither was there any special arrangement between LOADSTAR and the
shipper regarding the shipment of the cargo. The singular fact that the vessel
was carrying a particular type of cargo for one shipper is not sufficient to
convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it
cannot be presumed to have been negligent, and the burden of proving
otherwise devolved upon MIC.[8]
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful
voyage on 19 November 1984, the vessel was allegedly dry docked at Keppel
Philippines Shipyard and was duly inspected by the maritime safety engineers
of the Philippine Coast Guard, who certified that the ship was fit to undertake
a voyage. Its crew at the time was experienced, licensed and unquestionably
competent. With all these precautions, there could be no other conclusion
except that LOADSTAR exercised the diligence of a good father of a family in
ensuring the vessels seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo,
such loss being due to force majeure. It points out that when the vessel left
Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine until
the next day when the vessel sank due to strong waves. MICs witness,
Gracelia Tapel, fully established the existence of two typhoons, WELFRING
and YOLING, inside the Philippine area of responsibility. In fact, on 20
November 1984, signal no. 1 was declared over Eastern Visayas, which
includes Limasawa Island. Tapel also testified that the convergence of winds
brought about by these two typhoons strengthened wind velocity in the area,
naturally producing strong waves and winds, in turn, causing the vessel to list
and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement
limiting its liability, such as what transpired in this case, is valid. Since the
cargo was being shipped at owners risk, LOADSTAR was not liable for any loss
or damage to the same. Therefore, the Court of Appeals erred in holding that
the provisions of the bills of lading apply only to the shipper and the carrier,
and not to the insurer of the goods, which conclusion runs counter to the
Supreme Courts ruling in the case of St. Paul Fire & Marine Insurance Co. v.
Macondray & Co., Inc.,[9] and National Union Fire Insurance Company of
Pittsburg v. Stolt-Nielsen Phils., Inc.[10]
Finally, LOADSTAR avers that MICs claim had already prescribed, the case
having been instituted beyond the period stated in the bills of lading for
instituting the same suits based upon claims arising from shortage, damage,
or non-delivery of shipment shall be instituted within sixty days from the
accrual of the right of action. The vessel sank on 20 November 1984; yet, the
case for recovery was filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding
that the loss of the cargo was due to force majeure, because the same
concurred with LOADSTARs fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below;
hence, the same must be deemed waived.
Thirdly, the limited liability theory is not applicable in the case at bar because
LOADSTAR was at fault or negligent, and because it failed to maintain a
seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a
typhoon is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier.
It is not necessary that the carrier be issued a certificate of public
convenience, and this public character is not altered by the fact that the
carriage of the goods in question was periodic, occasional, episodic or
unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc.,[11] where this Court held
that a common carrier transporting special cargo or chartering the vessel to
a special person becomes a private carrier that is not subject to the provisions
of the Civil Code. Any stipulation in the charter party absolving the owner
from liability for loss due to the negligence of its agent is void only if the strict
policy governing common carriers is upheld. Such policy has no force where
the public at large is not involved, as in the case of a ship totally chartered for
the use of a single party. LOADSTAR also cited Valenzuela Hardwood and
Industrial Supply, Inc. v. Court of Appeals[12] and National Steel Corp. v. Court
of Appeals,[13] both of which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for
simple reason that the factual settings are different. The records do not
disclose that the M/V Cherokee, on the date in question, undertook to carry
a special cargo or was chartered to a special person only. There was no
charter party. The bills of lading failed to show any special arrangement, but
only a general provision to the effect that the M/V Cherokee was a general
cargo carrier.[14] Further, the bare fact that the vessel was carrying a
particular type of cargo for one shipper, which appears to be purely
coincidental, is not reason enough to convert the vessel from a common to a
private carrier, especially where, as in this case, it was shown that the vessel
was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the
definition of a common carrier under Article 1732 of the Civil Code. In the
case of De Guzman v. Court of Appeals,[15] the Court juxtaposed the
statutory definition of common carriers with the peculiar circumstances of
that case, viz.:
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air for compensation, offering their
services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as a sideline. Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither
does Article 1732 distinguish between a carrier offering its services to the
general public, i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberately refrained from making
such distinctions.
xxx
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 backhauling was done
on a periodic or occasional rather than regular or scheduled manner, and
even though private respondents principal occupation was not the carriage
of goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that 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.
Moving on to the second assigned error, we find that the M/V Cherokee was
not seaworthy when it embarked on its voyage on 19 November 1984. The
vessel was not even sufficiently manned at the time. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with
a sufficient number of competent officers and crew. The failure of a common
carrier to maintain in seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code.[16]
Neither do we agree with LOADSTARs argument that the limited liability
theory should be applied in this case. The doctrine of limited liability does not
apply where there was negligence on the part of the vessel owner or
agent.[17] LOADSTAR was at fault or negligent in not maintaining a seaworthy
vessel and in having allowed its vessel to sail despite knowledge of an
approaching typhoon. In any event, it did not sink because of any storm that
may be deemed as force majeure, inasmuch as the wind condition in the area
where it sank was determined to be moderate. Since it was remiss in the
performance of its duties, LOADSTAR cannot hide behind the limited liability
doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for
the loss of the goods, in utter disregard of this Courts pronouncements in St.
Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc.,[18] and National Union
Fire Insurance v. Stolt-Nielsen Phils., Inc.[19] It was ruled in these two cases
that after paying the claim of the insured for damages under the insurance
policy, the insurer is subrogated merely to the rights of the assured, that is, it
can recover only the amount that may, in turn, be recovered by the latter.
Since the right of the assured in case of loss or damage to the goods is limited
or restricted by the provisions in the bills of lading, a suit by the insurer as
subrogee is necessarily subject to the same limitations and restrictions. We
do not agree. In the first place, the cases relied on by LOADSTAR involved a
limitation on the carriers liability to an amount fixed in the bill of lading which
the parties may enter into, provided that the same was freely and fairly
agreed upon (Articles 1749-1750). On the other hand, the stipulation in the
case at bar effectively reduces the common carriers liability for the loss or
destruction of the goods to a degree less than extraordinary (Articles 1744
and 1745), that is, the carrier is not liable for any loss or damage to shipments
made at owners risk. Such stipulation is obviously null and void for being
contrary to public policy.[20] It has been said:
Three kinds of stipulations have often been made in a bill of lading. The first
is one exempting the carrier from any and all liability for loss or damage
occasioned by its own negligence. The second is one providing for an
unqualified limitation of such liability to an agreed valuation. And the third is
one limiting the liability of the carrier to an agreed valuation unless the
shipper declares a higher value and pays a higher rate of freight. According to
an almost uniform weight of authority, the first and second kinds of
stipulations are invalid as being contrary to public policy, but the third is valid
and enforceable.[21]
Since the stipulation in question is null and void, it follows that when MIC paid
the shipper, it was subrogated to all the rights which the latter has against
the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred
by prescription. MICs cause of action had not yet prescribed at the time it was
concerned. Inasmuch as neither the Civil Code nor the Code of Commerce
states a specific prescriptive period on the matter, the Carriage of Goods by
Sea Act (COGSA) which provides for a one-year period of limitation on claims
for loss of, or damage to, cargoes sustained during transit may be applied
suppletorily to the case at bar. This one-year prescriptive period also applies
to the insurer of the good.[22] In this case, the period for filing the action for
recovery has not yet elapsed. Moreover, a stipulation reducing the one-year
period is null and void;[23] it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30
January 1997 of the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED.
Costs against petitioner.
SO ORDERED.
FIRST DIVISION
[G.R. No. 138334. August 25, 2003]
ESTELA L. CRISOSTOMO, petitioner, vs. the Court of Appeals and CARAVAN
TRAVEL & TOURS INTERNATIONAL, INC., respondents.
DECISION
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.
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January
25, 20011 against Sun Holidays, Inc. (respondent) with the Regional Trial
Court (RTC) of Pasig City for damages arising from the death of their son
Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000
on board the boat M/B Coco Beach III that capsized en route to Batangas from
Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach
Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September
9 to 11, 2000 was by virtue of a tour package-contract with respondent that
included transportation to and from the Resort and the point of departure in
Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the
survivors, gave his account of the incident that led to the filing of the
complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally
scheduled to leave the Resort in the afternoon of September 10, 2000, but
was advised to stay for another night because of strong winds and heavy
rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort
guests including petitioners’ son and his wife trekked to the other side of the
Coco Beach mountain that was sheltered from the wind where they boarded
M/B Coco Beach III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from
Puerto Galera and into the open seas, the rain and wind got stronger, causing
the boat to tilt from side to side and the captain to step forward to the front,
leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came
one after the other, M/B Coco Beach III capsized putting all passengers
underwater.
The passengers, who had put on their life jackets, struggled to get out of the
boat. Upon seeing the captain, Matute and the other passengers who
reached the surface asked him what they could do to save the people who
were still trapped under the boat. The captain replied "Iligtas niyo na lang ang
sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in
Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded
on those two boats were 22 persons, consisting of 18 passengers and four
crew members, who were brought to Pisa Island. Eight passengers, including
petitioners’ son and his wife, died during the incident.
At the time of Ruelito’s death, he was 28 years old and employed as a
contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi
Arabia, with a basic monthly salary of $900.3
Petitioners, by letter of October 26, 2000,4 demanded indemnification from
respondent for the death of their son in the amount of at least ₱4,000,000.
Replying, respondent, by letter dated November 7, 2000,5 denied any
responsibility for the incident which it considered to be a fortuitous event. It
nevertheless offered, as an act of commiseration, the amount of ₱10,000 to
petitioners upon their signing of a waiver.
As petitioners declined respondent’s offer, they filed the Complaint, as earlier
reflected, alleging that respondent, as a common carrier, was guilty of
negligence in allowing M/B Coco Beach III to sail notwithstanding storm
warning bulletins issued by the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.6
In its Answer,7 respondent denied being a common carrier, alleging that its
boats are not available to the general public as they only ferry Resort guests
and crew members. Nonetheless, it claimed that it exercised the utmost
diligence in ensuring the safety of its passengers; contrary to petitioners’
allegation, there was no storm on September 11, 2000 as the Coast Guard in
fact cleared the voyage; and M/B Coco Beach III was not filled to capacity and
had sufficient life jackets for its passengers. By way of Counterclaim,
respondent alleged that it is entitled to an award for attorney’s fees and
litigation expenses amounting to not less than ₱300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort
customarily requires four conditions to be met before a boat is allowed to
sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3)
there is clearance from the captain and (4) there is clearance from the
Resort’s assistant manager.8 He added that M/B Coco Beach III met all four
conditions on September 11, 2000,9 but a subasco or squall, characterized by
strong winds and big waves, suddenly occurred, causing the boat to
capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed
petitioners’ Complaint and respondent’s Counterclaim.
Petitioners’ Motion for Reconsideration having been denied by Order dated
September 2, 2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners’
appeal, holding, among other things, that the trial court correctly ruled that
respondent is a private carrier which is only required to observe ordinary
diligence; that respondent in fact observed extraordinary diligence in
transporting its guests on board M/B Coco Beach III; and that the proximate
cause of the incident was a squall, a fortuitous event.
Petitioners’ Motion for Reconsideration having been denied by Resolution
dated January 16, 2009,14 they filed the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding that
respondent is a common carrier since by its tour package, the transporting of
its guests is an integral part of its resort business. They inform that another
division of the appellate court in fact held respondent liable for damages to
the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present
evidence to prove that it is a common carrier; that the Resort’s ferry services
for guests cannot be considered as ancillary to its business as no income is
derived therefrom; that it exercised extraordinary diligence as shown by the
conditions it had imposed before allowing M/B Coco Beach III to sail; that the
incident was caused by a fortuitous event without any contributory
negligence on its part; and that the other case wherein the appellate court
held it liable for damages involved different plaintiffs, issues and evidence.16
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals17 in
characterizing respondent as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air for compensation, offering their
services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as "a sideline"). Article
1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services
to the "general public," i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberately refrained from
making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
. . . every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight
or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and
other similar public services . . .18 (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined
with its main business as to be properly considered ancillary thereto. The
constancy of respondent’s ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the tour packages
it offers, which include the ferry services, may be availed of by anyone who
can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services
is of no moment. It would be imprudent to suppose that it provides said
services at a loss. The Court is aware of the practice of beach resort operators
offering tour packages to factor the transportation fee in arriving at the tour
package price. That guests who opt not to avail of respondent’s ferry services
pay the same amount is likewise inconsequential. These guests may only be
deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common
carriers" has deliberately refrained from making distinctions on whether the
carrying of persons or goods is the carrier’s principal business, whether it is
offered on a regular basis, or whether it is offered to the general public. The
intent of the law is thus to not consider such distinctions. Otherwise, there is
no telling how many other distinctions may be concocted by unscrupulous
businessmen engaged in the carrying of persons or goods in order to avoid
the legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligence for
the safety of the passengers transported by them, according to all the
circumstances of each case.19 They are bound to carry the passengers safely
as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all the circumstances.20
When a passenger dies or is injured in the discharge of a contract of carriage,
it is presumed that the common carrier is at fault or negligent. In fact, there
is even no need for the court to make an express finding of fault or negligence
on the part of the common carrier. This statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary diligence.21
Respondent nevertheless harps on its strict compliance with the earlier
mentioned conditions of voyage before it allowed M/B Coco Beach III to sail
on September 11, 2000. Respondent’s position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts
and tropical cyclone warnings for shipping on September 10 and 11, 2000
advising of tropical depressions in Northern Luzon which would also affect
the province of Mindoro.22 By the testimony of Dr. Frisco Nilo, supervising
weather specialist of PAGASA, squalls are to be expected under such weather
condition.23
A very cautious person exercising the utmost diligence would thus not brave
such stormy weather and put other people’s lives at risk. The extraordinary
diligence required of common carriers demands that they take care of the
goods or lives entrusted to their hands as if they were their own. This
respondent failed to do.
Respondent’s insistence that the incident was caused by a fortuitous event
does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have been such as
to render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in
the aggravation of the resulting injury to the creditor.24
To fully free a common carrier from any liability, the fortuitous event must
have been the proximate and only cause of the loss. And it should have
exercised due diligence to prevent or minimize the loss before, during and
after the occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the voyage as the fortuitous
event that overturned M/B Coco Beach III. As reflected above, however, the
occurrence of squalls was expected under the weather condition of
September 11, 2000. Moreover, evidence shows that M/B Coco Beach III
suffered engine trouble before it capsized and sank.26 The incident was,
therefore, not completely free from human intervention.
The Court need not belabor how respondent’s evidence likewise fails to
demonstrate that it exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the squall.
Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common
carrier in breach of its contract of carriage that results in the death of a
passenger liable to pay the following: (1) indemnity for death, (2) indemnity
for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at
₱50,000.29
As for damages representing unearned income, the formula for its
computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable
and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 — age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the formula (2/3
x [80 — age at death]) adopted in the American Expectancy Table of Mortality
or the Actuarial of Combined Experience Table of Mortality.31
The second factor is computed by multiplying the life expectancy by the net
earnings of the deceased, i.e., the total earnings less expenses necessary in
the creation of such earnings or income and less living and other incidental
expenses.32 The loss is not equivalent to the entire earnings of the deceased,
but only such portion as he would have used to support his dependents or
heirs. Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own needs.33
In computing the third factor – necessary living expense, Smith Bell Dodwell
Shipping Agency Corp. v. Borja34 teaches that when, as in this case, there is
no showing that the living expenses constituted the smaller percentage of the
gross income, the living expenses are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy
as follows:
Life expectancy =
2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy =
35
Documentary evidence shows that Ruelito was earning a basic monthly salary
of $90035 which, when converted to Philippine peso applying the annual
average exchange rate of $1 = ₱44 in 2000,36 amounts to ₱39,600. Ruelito’s
net earning capacity is thus computed as follows:
Net Earning Capacity
= life expectancy x (gross annual income - reasonable and necessary living
expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)
Net Earning Capacity
= ₱8,316,000
Respecting the award of moral damages, since respondent common carrier’s
breach of contract of carriage resulted in the death of petitioners’ son,
following Article 1764 vis-à-vis Article 2206 of the Civil Code, petitioners are
entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence
required of common carriers, it is presumed to have acted recklessly, thus
warranting the award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.37
Under the circumstances, it is reasonable to award petitioners the amount of
₱100,000 as moral damages and ₱100,000 as exemplary
damages.381avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be
awarded where exemplary damages are awarded. The Court finds that 10%
of the total amount adjudged against respondent is reasonable for the
purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when respondent to pay petitioners the following: (1) ₱50,000 as indemnity for the
an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, death of Ruelito Cruz; (2) ₱8,316,000 as indemnity for Ruelito’s loss of earning
delicts or quasi-delicts is breached, the contravenor can be held liable for capacity; (3) ₱100,000 as moral damages; (4) ₱100,000 as exemplary
payment of interest in the concept of actual and compensatory damages, damages; (5) 10% of the total amount adjudged against respondent as
subject to the following rules, to wit — attorneys fees; and (6) the costs of suit.
1. When the obligation is breached, and it consists in the payment of a sum The total amount adjudged against respondent shall earn interest at the rate
of money, i.e., a loan or forbearance of money, the interest due should be of 12% per annum computed from the finality of this decision until full
that which may have been stipulated in writing. Furthermore, the interest payment.
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 SO ORDERED.
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