Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
2.G.R. No. 80447 January 31, 1989
BALIWAG TRANSIT, INC., petitioner,
vs.
HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA
LOPEZ and GEORGE L. CAILIPAN, respondents.
Sta. Maria & Associates for petitioner.
Punzalan and Associates Law Office for respondents.
THE ISSUE ON WHAT CONSTITUTES A PASSENGER
MELENCIO-HERRERA, J.:
FACTS:
On 10 April 1985 a Complaint for damages arising from breach of contract of carriage
was filed by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez,
and their son George, of legal age, against petitioner Baliwag Transit (Baliwag, for
brevity). The Complaint alleged that George, who was a paying passenger on a Baliwag
bus on 17 December 1984, suffered multiple serious physical injuries when he was
thrown off said bus driven in a careless and negligent manner by Leonardo Cruz, the
authorized bus driver, along Barangay Patubig, Marilao, Bulacan. As a result, he was
confined in the hospital for treatment, incurring medical expenses, which were borne
by his parents, the respondent Spouses, in the sum of about P200,000.00 plus other
incidental expenses of about P10,000.00.
April 26 1985 - Answer by petitioner - the cause of the injuries sustained by George
was solely attributable to his own voluntary act in that, without warning and provocation,
he suddenly stood up from his seat and headed for the door of the bus as if in a daze,
opened it and jumped off while said bus was in motion, in spite of the protestations by
the driver and without the knowledge of the conductor.
Baliwag filed a thirs party complaint to the Fortune insurance company, but such claims
limited imdenification only. On 5 February 1986 Baliwag filed a Motion to Admit
Amended Answer, which was granted by the Trial Court. The Amended Answer
incorporated the affirmative defense in the Motion to Dismiss to the effect that on 16
May 1985, George bad been paid all his claims for damages arising from the incident
subject matter of the complaint when he executed the following "Release of Claims":
During the preliminary hearing on the aforementioned affirmative defense, Baliwag
waived the presentation of testimonial evidence and instead offered as its Exhibit "1"
the "Release of Claims" signed by George and witnessed by his brother Benjamin L.
Cailipan, a licensed engineer.
Respondent Sotero Cailipan, Jr. testified that be is the father of George, who at the
time of the incident was a student, living with his parents and totally dependent on them
for their support; that the expenses for his hospitalization were shouldered by his
parents; and that they had not signed the "Release of Claims."
RTC granted Baliwag’s petition on 29 August 1986, 1 dismissing the Complaint and
Third-party Complaint, ruling that since the contract of carriage is between Baliwag and
George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute
the Release of Claims despite the fact that he is still a student and dependent on his
parents for support. Consequently, the execution by George of the Release of Claims
discharges Baliwag and Fortune Insurance.
Spouses appealed to Court of Appeals.
On 22 October 1987, CA set aside the order and rendered a new decision, saying:
the "Release of Claims" cannot operate as a valid ground for the dismissal of the case
because it does not have the conformity of all the parties, particularly George's parents,
who have a substantial interest in the case as they stand to be prejudiced by the
judgment because they spent a sizeable amount for the medical bills of their son; that
the Release of Claims was secured by Fortune Insurance for the consideration of
P8,020.50 as the full and final settlement of its liability under the insurance policy and
not for the purpose of releasing Baliwag from its liability as a carrier in this suit for
breach of contract.
The Appellate Court also ordered the remand of the case to the lower Court for trial on
the merits and for George to return the amount of P8,020.50 to Fortune Insurance.
Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court
judgment.
The issue brought to the fore is the legal effect of the Release of Claims executed by
George during the pendency of this case.
We hold that since the suit is one for breach of contract of carriage, the Release of
Claims executed by him, as the injured party, discharging Fortune Insurance and
Baliwag from any and all liability is valid.
He was then of legal age, a graduating student of Agricultural Engineering, and had the
capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code).
Thus, he could sue and be sued even without the assistance of his parents.
ISSUE:
EMPHASIS:TRANSPORTATION ISSUE
Whether there exist a contract of carriage between the petitioner and the parent’s of
the respondent:
DECISION:
Significantly, the contract of carriage was actually between George, as the paying
passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound
to carry its passengers safely as far as human care and foresight could provide, and is
liable for injuries to them through the negligence or wilful acts of its employees (Articles
1755 and 1759, Civil Code). Thus, George had the right to be safely brought to his
destination and Baliwag had the correlative obligation to do so. Since a contract may
be violated only by the parties thereto, as against each other, in an action upon that
contract, the real parties in interest, either as plaintiff or as defendant, must be parties
to said contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-
40234, December 14, 1987, 156 SCRA 368). A real party-in-interest -plaintiff is one
who has a legal right while a real party-in-interest-defendant is one who has a
correlative legal obligation whose act or omission violates the legal right of the former
(Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988).
In the absence of any contract of carriage between Baliwag and George's parents, the
latter are not real parties-in-interest in an action for breach of that contract.
The general rule of the common law is that every action must be brought in the name
of the party whose legal right has been invaded or infringed. 15 Enc. P1. & Pr. p. 484.
"For the immediate wrong and damage the person injured is the only one who can
maintain the action." Id. p. 578. The person who sustains an injury is the person to bring
an action for the injury against the wrongdoer." Dicey parties to Actions, 347. (Cited in
Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).
There is no question regarding the genuineness and due execution of the Release of
Claims. It is a duly notarized public document. It clearly stipulates that the consideration
of P8,020.50 received by George was "to release and forever discharge Fortune
Insurance and/or Baliwag from any and all liabilities now accrued or to accrue on
account of any and all claims or causes of action ... for personal injuries, damage to
property, loss of services, medical expenses, losses or damages of any and every kind
or nature whatsoever, sustained by him on 17 December 1984 thru Reckless
Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent
Appellate Court that the "Release of Claims" was intended only as the full and final
settlement of a third-party liability for bodily injury claim and not for the purpose of
releasing Baliwag from its liability, if any, in a breach of a contract of carriage, has to
be rejected for being contrary to the very terms thereof. If the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control (Article 1370, Civil Code). The phraseology "any
and all claims or causes of action" is broad enough to include all damages that may
accrue to the injured party arising from the unfortunate accident.
The Release of Claims had the effect of a compromise agreement since it was entered
into for the purpose of making a full and final compromise adjustment and settlement
of the cause of action involved. A compromise is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to one already
commenced (Article 2028, Civil Code). The Release of Claims executed by the injured
party himself wrote finish to this litigation.
WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is
SET ASIDE, the Decision of the Regional Trial Court of Bulacan, Branch 20, is
REINSTATED, and the Complaint and Third-Party Complaint are hereby ordered
DISMISSED. No costs.
SO ORDERED.
Paras, Padilla, Sarmiento and Regalado, JJ., concur.
2.
[G.R. No. 111127. July 26, 1996]
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
* full stop only after a series of impacts. The bus came to rest off the road. A
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.:
ISSUE ON EXTRAORDINARY DILIGENCE
FACTS:
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
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 filed a criminal complaint on Nov. 3, 1984 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,
TRIAL COURT’s DECISION:
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.
COURT OF APPEALS:
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]
ISSUE:
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. By then it was too late for him to avoid falling off the road.
[3]
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 that the vehicles passing on that portion of the road
[4]
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. They had hired him only after a two-week apprenticeship.They had
[7]
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. To the contrary, the award of P500,000.00 for
[11]
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.
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, on facts similar to those in this case, this Court held the bus
[14]
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
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, Batangas Laguna Tayabas Bus Co.v. Intermediate
[16]
Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals,
[17]
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, thus:
[19]
Nor should it make any difference that the liability of petitioner [bus owner]
springs from contract while that of respondents [owner and driver of other
vehicle] arises from quasi-delict. As early as 1913, we already ruled in
Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due
to the negligence of the driver of the bus on which he was riding and of the
driver of another vehicle, the drivers as well as the owners of the two vehicles
are jointly and severally liable for damages. Some members of the Court,
though, are of the view that under the circumstances they are liable on quasi-
delict.
[20]
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals this[21]
Court exonerated the jeepney driver from liability to the injured passengers
and their families while holding the owners of the jeepney jointly and severally
liable, but that is because that case was expressly tried and decided
exclusively on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and
[12]
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 so long as private
[23]
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
[15]
driver were jointly and severally liable because their separate and distinct acts
concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
MODIFICATION as to the award of damages. Petitioners are ORDERED to
PAY jointly and severally the private respondent Amyline Antonio the following
amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of
plaintiff Amyline Antonio;
[18]
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.
3. [G.R. No. 122494. October 8, 1998]
EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF
APPEALS and HERNANDEZ TRADING CO. INC., respondents.
DECISION
MARTINEZ, J.:
FACTS:
Private respondent imported three crates of bus spare parts marked as
MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier,
Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation
based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan
to Manila on board ADELFAEVERETTE, a vessel owned by petitioners
principal, Everett Orient Lines. The said crates were covered by Bill of Lading
No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked
MARCO C/No. 14 was missing.This was confirmed and admitted by petitioner
in its letter of January 13, 1992 addressed to private respondent, which
thereafter made a formal claim upon petitioner for the value of the lost cargo
amounting to One Million Five Hundred Fifty Two Thousand Five Hundred
(Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated
November 14, 1991. However, petitioner offered to pay only One Hundred
Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause
18 of the covering bill of lading which limits the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a suit for
collection docketed as Civil Case No. C-15532, against petitioner before the
Regional Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no
testimonial evidence to offer and agreed instead to file their respective
memoranda.
On July 16, 1993, the trial court rendered judgment in favor of private
[2]
respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or
its peso equivalent representing the actual value of the lost cargo and the
material and packaging cost; (c) 10% of the total amount as an award for and
as contingent attorneys fees; and (d) to pay the cost of the suit. The trial court
ruled:
Considering defendants categorical admission of loss and its failure
to overcome the presumption of negligence and fault, the Court
conclusively finds defendant liable to the plaintiff. The next point of
inquiry the Court wants to resolve is the extent of the liability of the
defendant. As stated earlier, plaintiff contends that defendant should
be held liable for the whole value for the loss of the goods in the
amount of Y1,552,500.00 because the terms appearing at the back
of the bill of lading was so written in fine prints and that the same was
not signed by plaintiff or shipper thus, they are not bound by the
clause stated in paragraph 18 of the bill of lading. On the other hand,
defendant merely admitted that it lost the shipment but shall be liable
only up to the amount of Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New
Civil Code -
Art. 1750. A contract fixing the sum that may be
recovered by the owner or shipper for the loss,
destruction or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has
been fairly and freely agreed upon.
It is required, however, that the contract must be reasonable and just
under the circumstances and has been fairly and freely agreed upon.
The requirements provided in Art. 1750 of the New Civil Code must
be complied with before a common carrier can claim a limitation of
its pecuniary liability in case of loss, destruction or deterioration of
the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of
said article have not been met. The fact that those conditions are
printed at the back of the bill of lading in letters so small that they are
hard to read would not warrant the presumption that the plaintiff or
its supplier was aware of these conditions such that he had fairly and
freely agreed to these conditions. It can not be said that the plaintiff
had actually entered into a contract with the defendant, embodying
the conditions as printed at the back of the bill of lading that was
issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorneys fees but
affirmed the trial courts findings with the additional observation that private
respondent can not be bound by the terms and conditions of the bill of lading
because it was not privy to the contract of carriage. It said:
As to the amount of liability, no evidence appears on record to show
that the appellee (Hernandez Trading Co.) consented to the terms of
the Bill of Lading. The shipper named in the Bill of Lading is Maruman
Trading Co., Ltd. whom the appellant (Everett Steamship Corp.)
contracted with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co.,
Ltd. accepted the terms of the bill of lading when it delivered the
cargo to the appellant, still it does not necessarily follow that appellee
 Hernandez Trading Company as consignee is bound thereby
considering that the latter was never privy to the shipping contract.
xxxxxxxxx
Never having entered into a contract with the appellant, appellee
should therefore not be bound by any of the terms and conditions in
the bill of lading.
Hence, it follows that the appellee may recover the full value of the
shipment lost, the basis of which is not the breach of contract as
appellee was never a privy to the any contract with the appellant, but
is based on Article 1735 of the New Civil Code, there being no
evidence to prove satisfactorily that the appellant has overcome the
presumption of negligence provided for in the law
. liable for any loss of possible profits or any consequential loss.
Petitioner now comes to us arguing that the Court of Appeals erred
ISSUES:
(1) in ruling that the consent of the consignee to the terms and
conditions of the bill of lading is necessary to make such stipulations
binding upon it; (2) in holding that the carriers limited package liability
as stipulated in the bill of lading does not apply in the instant case; and
(3) in allowing private respondent to fully recover the full alleged value
of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carriers liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner declares
a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of
the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is limited
to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in
a number of cases. Thus, in Sea Land Service, Inc. vs Intermediate
[3]
Appellate Court , we ruled:
[4]
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea
Act did not exist, the validity and binding effect of the liability limitation clause
in the bill of lading here are nevertheless fully sustainable on the basis alone
of the cited Civil Code Provisions. That said stipulation is just and reasonable
is arguable from the fact that it echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in the bill of
lading. To hold otherwise would amount to questioning the justness and
fairness of the law itself, and this the private respondent does not pretend to
do. But over and above that consideration, the just and reasonable character
of such stipulation is implicit in it giving the shipper or owner the option of
avoiding accrual of liability limitation by the simple and surely far from onerous
expedient of declaring the nature and value of the shipment in the bill of lading..
Pursuant to the afore-quoted provisions of law, it is required that the stipulation
limiting the common carriers liability for loss must be reasonable and just under
the circumstances, and has been freely and fairly agreed upon.
The bill of lading subject of the present controversy specifically provides,
among others:
18. All claims for which the carrier may be liable shall be adjusted
and settled on the basis of the shippers net invoice cost plus freight
and insurance premiums, if paid, and in no event shall the carrier be
The carrier shall not be liable for any loss of or any damage to or in
any connection with, goods in an amount exceeding One Hundred
Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent
in any other currency per package or customary freight unit
(whichever is least) unless the value of the goods higher than this
amount is declared in writing by the shipper before receipt of the
goods by the carrier and inserted in the Bill of Lading and extra freight
is paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of
lading, the carrier made it clear that its liability would only be up to One
Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman
Trading, had the option to declare a higher valuation if the value of its
cargo was higher than the limited liability of the carrier. Considering that
the shipper did not declare a higher valuation, it had itself to blame for
not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and
freely agreed to the limited liability clause in the bill of lading because the said
conditions were printed in small letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals that the jurisprudence on the
[5]
matter reveals the consistent holding of the court that contracts of adhesion
are not invalid per se and that it has on numerous occasions upheld the binding
effect thereof. Also, in Philippine American General Insurance Co., Inc. vs.
Sweet Lines , Inc. this Court , speaking through the learned Justice Florenz
[6]
D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts
of adhesion wherein one party imposes a ready-made form of
contract on the other x x x are contracts not entirely prohibited. The
one who adheres to the contract is in reality free to reject it entirely;
if he adheres he gives his consent. In the present case, not even an
allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full
comprehension of the provisions of a contract of carriage devolves
 not on the carrier but on the owner, shipper, or consignee as the case
may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals that stipulations in
[7]
contracts of adhesion are valid and binding.
While it may be true that petitioner had not signed the plane ticket x
x, he is nevertheless bound by the provisions thereof. Such
provisions have been held to be a part of the contract of carriage,
and valid and binding upon the passenger regardless of the latters
lack of knowledge or assent to the regulation.It is what is known as
a contract of adhesion, in regards which it has been said that
contracts of adhesion wherein one party imposes a ready-made form
of contract on the other, as the plane ticket in the case at bar, are
contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives
his consent. x x x , a contract limiting liability upon an agreed
valuation does not offend against the policy of the law forbidding one
from contracting against his own negligence. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with
contracts of adhesion in that the said contracts must be carefully scrutinized
in order to shield the unwary (or weaker party) from deceptive schemes
contained in ready-made covenants, such as the bill of lading in question.
[8]
The stringent requirement which the courts are enjoined to observe is in
recognition of Article 24 of the Civil Code which mandates that (i)n all
contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts
must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been extensively engaged in
the trading business. It can not be said to be ignorant of the business
transactions it entered into involving the shipment of its goods to its customers.
The shipper could not have known, or should know the stipulations in the bill
of lading and there it should have declared a higher valuation of the goods
shipped. Moreover, Maruman Trading has not been heard to complain that it
has been deceived or rushed into agreeing to ship the cargo in petitioners
vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as
consignee, who is not a signatory to the bill of lading is bound by the
stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra),
we held that even if the consignee was not a signatory to the contract of
carriage between the shipper and the carrier, the consignee can still be bound
by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a
consignee in a bill of lading to recover from the carrier or shipper for
loss of, or damage to goods being transported under said bill,
although that document may have been- as in practice it
oftentimes is-drawn up only by the consignor and the carrier
without the intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent
here, to recover for loss of a shipment consigned to him under
a bill of lading drawn up only by and between the shipper and
the carrier, springs from either a relation of agency that may
exist between him and the shipper or consignor, or his status
as stranger in whose favor some stipulation is made in said
contract, and who becomes a party thereto when he demands
fulfillment of that stipulation, in this case the delivery of the
goods or cargo shipped. In neither capacity can he assert
personally, in bar to any provision of the bill of lading, the
alleged circumstance that fair and free agreement to such
provision was vitiated by its being in such fine print as to be
hardly readable. Parenthetically, it may be observed that in one
comparatively recent case (Phoenix Assurance Company vs.
Macondray & Co., Inc., 64 SCRA 15) where this Court found that a
similar package limitation clause was printed in the smallest
type on the back of the bill of lading, it nonetheless ruled that
the consignee was bound thereby on the strength of authority
holding that such provisions on liability limitation are as much
a part of a bill of lading as though physically in it and as though
placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity
and enforceability of freely-agreed-upon stipulations in a contract of
carriage or bill of lading limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and inserts
it into said contract or bill. This proposition, moreover, rests upon
an almost uniform weight of authority. (Underscoring supplied)
When private respondent formally claimed reimbursement for the missing
goods from petitioner and subsequently filed a case against the latter based
on the very same bill of lading, it (private respondent) accepted the provisions
of the contract and thereby made itself a party thereto, or at least has come to
court to enforce it. Thus, private respondent cannot now reject or disregard
[9]
the carriers limited liability stipulation in the bill of lading. In other words, private
respondent is bound by the whole stipulations in the bill of lading and must
respect the same.
Private respondent, however, insists that the carrier should be liable for the full
value of the lost cargo in the amount of Y1,552,500.00, considering that the
shipper, Maruman Trading, had "fully declared the shipment x x x, the contents
of each crate, the dimensions, weight and value of the contents," as shown [10]
in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the
contents, quantity and value of "the shipment which consisted of three pre-
packed crates described in Bill of Lading No. NGO-53MN merely as 3 CASES
SPARE PARTS. [11]
The bill of lading in question confirms petitioners contention. To defeat the
- versus - LEONARDO-DE CASTRO, **

carriers limited liability, the aforecited Clause 18 of the bill of lading requires
that the shipper should have declared in writing a higher valuation of its
goods before receipt thereof by the carrier and insert the said declaration in
the bill of lading, with the extra freight paid. These requirements in the bill of BRION,
lading were never complied with by the shipper, hence, the liability of the
carrier under the limited liability clause stands. The commercial Invoice No.
MTM-941 does not in itself sufficiently and convincingly show that petitioner DEL CASTILLO, and
has knowledge of the value of the cargo as contended by private respondent.
No other evidence was proffered by private respondent to support is
contention. Thus, we are convinced that petitioner should be liable for the full
ABAD, JJ.
value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One
Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of
lading. SHIN YANG BROKERAGE
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in
C.A.-G.R. CV No. 42803 is hereby REVERSED and SET ASIDE.
SO ORDERED. CORPORATION, Promulgated:
Regalado, (Acting Chief Justice), Melo, Puno, and Mendoza, JJ., concur.

Respondent. December 18, 2009

x-------------------------------------------------------
SECOND DIVISION ------------x
4.

MOF COMPANY, INC., G.R. No. 172822 DECISION

Petitioner, DEL CASTILLO, J.:

The necessity of proving lies with the person who sues.

Present:
The refusal of the consignee named in the bill of lading to pay the freightage
on the claim that it is not privy to the contract of affreightment propelled the
shipper to sue for collection of money, stressing that its sole evidence, the bill
of lading, suffices to prove that the consignee is bound to pay. Petitioner now
comes to us by way of Petition for Review on Certiorari under Rule 45 praying
[1]

CARPIO, J., Chairperson,

* for the reversal of the Court of Appeals' (CA) judgment that dismissed its action
for sum of money for insufficiency of evidence.

Factual Antecedents
On October 25, 2001, Halla Trading Co., a company based in Korea, shipped
to Manilasecondhand cars and other articles on board the vessel Hanjin Busan
0238W. The bill of lading covering the shipment, i.e., Bill of Lading No.
HJSCPUSI14168303, which was prepared by the carrier Hanjin Shipping Co.,
[2]
Ltd. (Hanjin), named respondent Shin Yang Brokerage Corp. (Shin Yang) as
the consignee and indicated that payment was on a Freight Collect basis, i.e.,
that the consignee/receiver of the goods would be the one to pay for the freight
and other charges in the total amount of P57,646.00. [3]
The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner
MOF Company, Inc. (MOF), Hanjins exclusive general agent in the
Philippines, repeatedly demanded the payment of ocean freight,
documentation fee and terminal handling charges from Shin Yang. The latter,
however, failed and refused to pay contending that it did not cause the
importation of the goods, that it is only the Consolidator of the said shipment,
that the ultimate consignee did not endorse in its favor the original bill of lading
and that the bill of lading was prepared without its consent.
Thus, on March 19, 2003, MOF filed a case for sum of money before the
Metropolitan Trial Court ofPasay City (MeTC Pasay) which was docketed as
Civil Case No. 206-03 and raffled to Branch 48.MOF alleged that Shin Yang,
a regular client, caused the importation and shipment of the goods and
assured it that ocean freight and other charges would be paid upon arrival of
the goods in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly
breached its obligation to pay. MOF argued that Shin Yang, as the named
consignee in the bill of lading, entered itself as a party to the contract and
bound itself to the Freight Collect arrangement. MOF thus prayed for the
payment of P57,646.00 representing ocean freight, documentation fee and
terminal handling charges as well as damages and attorneys fees.
Claiming that it is merely a consolidator/forwarder and that Bill of Lading No.
HJSCPUSI14168303 was not endorsed to it by the ultimate consignee, Shin
Yang denied any involvement in shipping the goods or in promising to shoulder
the freightage. It asserted that it never authorized Halla Trading Co. to ship the
articles or to have its name included in the bill of lading. Shin Yang also alleged
that MOF failed to present supporting documents to prove that it was Shin
Yang that caused the importation or the one that assured payment of the
shipping charges upon arrival of the goods in Manila.
Ruling of the Metropolitan Trial Court
On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision [4]
in favor of MOF. It ruled that Shin Yang cannot disclaim being a party to the
contract of affreightment because:
x x x it would appear that defendant has business transactions with plaintiff.
This is evident from defendants letters dated 09 May 2002 and 13 May 2002
(Exhibits 1 and 2, defendants Position Paper) where it requested for the
release of refund of container deposits x x x. [In] the mind of the Court, by
analogy, a written contract need not be necessary; a mutual understanding
[would suffice]. Further, plaintiff would have not included the name of the
defendant in the bill of lading, had there been no prior agreement to that effect.
In sum, plaintiff has sufficiently proved its cause of action against the
defendant and the latter is obliged to honor its agreement with plaintiff despite
the absence of a written contract. [5]
The dispositive portion of the MeTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff and against the defendant, ordering the latter to pay plaintiff as follows:
1. P57,646.00 plus legal interest from the date of demand until fully paid,
2. P10,000.00 as and for attorneys fees and
3. the cost of suit.
SO ORDERED. [6]
Ruling of the Regional Trial Court
The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto the
Decision of the MeTC.It held that:
MOF and Shin Yang entered into a contract of affreightment which Blacks Law
Dictionary defined as a contract with the ship owner to hire his ship or part of
it, for the carriage of goods and generally take the form either of a charter party
or a bill of lading.
The bill of lading contain[s] the information embodied in the contract.
Article 652 of the Code of Commerce provides that the charter party must be
in writing; however, Article 653 says: If the cargo should be received without
charter party having been signed, the contract shall be understood as
executed in accordance with what appears in the bill of lading, the sole
evidence of title with regard to the cargo for determining the rights and
obligations of the ship agent, of the captain and of the charterer. Thus, the
Supreme Court opined in the Market Developers, Inc. (MADE) vs. Honorable
Intermediate Appellate Court and Gaudioso Uy, G.R. No. 74978, September
8, 1989, this kind of contract may be oral. In another case, Compania Maritima
vs. Insurance Company of North America, 12 SCRA 213 the contract of
affreightment by telephone was recognized where the oral agreement was
later confirmed by a formal booking.
xxxx
Defendant is liable to pay the sum of P57,646.00, with interest until fully paid,
attorneys fees of P10,000.00 [and] cost of suit.
Considering all the foregoing, this Court affirms in toto the decision of the Court
a quo.
SO ORDERED. [7]
Ruling of the Court of Appeals
Seeing the matter in a different light, the CA dismissed MOFs complaint and
refused to award any form of damages or attorneys fees. It opined that MOF
failed to substantiate its claim that Shin Yang had a hand in the importation of
the articles to the Philippines or that it gave its consent to be a consignee of
the subject goods. In its March 22, 2006 Decision, the CA said:
[8]
This Court is persuaded [that except] for the Bill of Lading, respondent has not
presented any other evidence to bolster its claim that petitioner has entered
[into] an agreement of affreightment with respondent, be it verbal or written. It
is noted that the Bill of Lading was prepared by Hanjin Shipping, not the
petitioner. Hanjin is the principal while respondent is the formers agent. (p. 43,
rollo)
The conclusion of the court a quo, which was upheld by the RTC Pasay City,
Branch 108 xxx is purely speculative and conjectural. A court cannot rely on
speculations, conjectures or guesswork, but must depend upon competent
proof and on the basis of the best evidence obtainable under the
circumstances.Litigation cannot be properly resolved by suppositions,
deductions or even presumptions, with no basis in evidence, for the truth must
have to be determined by the hard rules of admissibility and proof (Lagon vs.
Hooven Comalco Industries, Inc. 349 SCRA 363).
While it is true that a bill of lading serves two (2) functions: first, it is a receipt
for the goods shipped; second, it is a contract by which three parties, namely,
the shipper, the carrier and the consignee who undertake specific
responsibilities and assume stipulated obligations (Belgian Overseas
Chartering and Shipping N.V. vs. Phil. First Insurance Co., Inc., 383 SCRA
23), x x x if the same is not accepted, it is as if one party does not accept the
contract. Said the Supreme Court:
A bill of lading delivered and accepted constitutes the contract of carriage[,]
even though not signed, because the acceptance of a paper containing the
terms of a proposed contract generally constitutes an acceptance of the
contract and of all its terms and conditions of which the acceptor has actual or
constructive notice (Keng Hua Paper Products Co., Inc. vs. CA, 286 SCRA
257).
In the present case, petitioner did not only [refuse to] accept the bill of lading,
but it likewise disown[ed] the shipment x x x. [Neither did it] authorize Halla
Trading Company or anyone to ship or export the same on its behalf.
It is settled that a contract is upheld as long as there is proof of consent, subject
matter and cause (Sta. Clara Homeowners Association vs. Gaston, 374 SCRA
396). In the case at bar, there is not even any iota of evidence to show that
petitioner had given its consent.
He who alleges a fact has the burden of proving it and a mere allegation is not
evidence (Luxuria Homes Inc. vs. CA, 302 SCRA 315).
The 40-footer van contains goods of substantial value. It is highly improbable
for petitioner not to pay the charges, which is very minimal compared with the
value of the goods, in order that it could work on the release thereof.
For failure to substantiate its claim by preponderance of evidence, respondent
has not established its case against petitioner. [9]
Petitioners filed a motion for reconsideration but it was denied in a Resolution [10]
dated May 25, 2006.Hence, this petition for review on certiorari.
Petitioners Arguments
In assailing the CAs Decision, MOF argues that the factual findings of both the
MeTC and RTC are entitled to great weight and respect and should have
bound the CA. It stresses that the appellate court has no justifiable reason to
disturb the lower courts judgments because their conclusions are well-
supported by the evidence on record.
MOF further argues that the CA erred in labeling the findings of the lower
courts as purely speculative and conjectural. According to MOF, the bill of
lading, which expressly stated Shin Yang as the consignee, is the best
evidence of the latters actual participation in the transportation of the goods.
Such document, validly entered, stands as the law among the shipper, carrier
and the consignee, who are all bound by the terms stated therein. Besides, a
carriers valid claim after it fulfilled its obligation cannot just be rejected by the
named consignee upon a simple denial that it ever consented to be a party in
a contract of affreightment, or that it ever participated in the preparation of the
bill of lading. As against Shin Yangs bare denials, the bill of lading is the
sufficient preponderance of evidence required to prove MOFs claim. MOF
maintains that Shin Yang was the one that supplied all the details in the bill of
lading and acquiesced to be named consignee of the shipment on a Freight
Collect basis.
Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot
avoid its obligation to pay, because it never objected to being named as the
consignee in the bill of lading and that it only protested when the shipment
arrived in the Philippines, presumably due to a botched transaction between it
and Halla Trading Co. Furthermore, Shin Yangs letters asking for the refund
of container deposits highlight the fact that it was aware of the shipment and
that it undertook preparations for the intended release of the shipment.
Respondents Arguments
Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove
that it consented to take part in the contract of affreightment. Shin Yang argues
that MOF miserably failed to present any evidence to prove that it was the one
that made preparations for the subject shipment, or that it is an actual shipping
practice that forwarders/consolidators as consignees are the ones that provide
carriers details and information on the bills of lading.
Shin Yang contends that a bill of lading is essentially a contract between the
shipper and the carrier and ordinarily, the shipper is the one liable for the
freight charges. A consignee, on the other hand, is initially a stranger to the bill
of lading and can be liable only when the bill of lading specifies that the
charges are to be paid by the consignee. This liability arises from either a) the
contract of agency between the shipper/consignor and the consignee; or b)
the consignees availment of the stipulation pour autrui drawn up by and
between the shipper/ consignor and carrier upon the consignees demand that
the goods be delivered to it. Shin Yang contends that the fact that its name
was mentioned as the consignee of the cargoes did not make it automatically
liable for the freightage because it never benefited from the shipment. It never
claimed or accepted the goods, it was not the shippers agent, it was not aware
of its designation as consignee and the original bill of lading was never
endorsed to it.
Issue
The issue for resolution is whether a consignee, who is not a signatory to the
bill of lading, is bound by the stipulations thereof. Corollarily, whether
respondent who was not an agent of the shipper and who did not make any
demand for the fulfillment of the stipulations of the bill of lading drawn in its
favor is liable to pay the corresponding freight and handling charges.
Our Ruling
Since the CA and the trial courts arrived at different conclusions, we are
constrained to depart from the general rule that only errors of law may be
raised in a Petition for Review on Certiorari under Rule 45 of the Rules of Court
and will review the evidence presented. [11]
The bill of lading is oftentimes drawn up by the shipper/consignor and the
carrier without the intervention of the consignee. However, the latter can be
bound by the stipulations of the bill of lading when a) there is a relation of
agency between the shipper or consignor and the consignee or b) when the
consignee demands fulfillment of the stipulation of the bill of lading which was
drawn up in its favor.[12]
In Keng Hua Paper Products Co., Inc. v. Court of Appeals, we held that once
[13]
the bill of lading is received by the consignee who does not object to any terms
or stipulations contained therein, it constitutes as an acceptance of the
contract and of all of its terms and conditions, of which the acceptor has actual
or constructive notice.
In Mendoza v. Philippine Air Lines, Inc., the consignee sued the carrier for
[14]
damages but nevertheless claimed that he was never a party to the contract
of transportation and was a complete stranger thereto. In debunking
Mendozas contention, we held that:
x x x First, he insists that the articles of the Code of Commerce should be
applied; that he invokes the provisions of said Code governing the obligations
of a common carrier to make prompt delivery of goods given to it under a
contract of transportation. Later, as already said, he says that he was never a
party to the contract of transportation and was a complete stranger to it, and
that he is now suing on a tort or a violation of his rights as a stranger (culpa
aquiliana). If he does not invoke the contract of carriage entered into with the
defendant company, then he would hardly have any leg to stand on. His right
to prompt delivery of the can of film at the Pili Air Port stems and is derived
from the contract of carriage under which contract, the PAL undertook to carry
the can of film safely and to deliver it to him promptly. Take away or ignore that
contract and the obligation to carry and to deliver and right to prompt delivery
disappear. Common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery,
unless such common carriers previously assume the obligation. Said rights
and obligations are created by a specific contract entered into by the parties.
In the present case, the findings of the trial court which as already stated,
are accepted by the parties and which we must accept are to the effect
that the LVN Pictures Inc. and Jose Mendoza on one side, and the
defendant company on the other, entered into a contract of
transportation (p. 29, Rec. on Appeal). One interpretation of said finding
is that the LVN Pictures Inc. through previous agreement with Mendoza
acted as the latter's agent. When he negotiated with the LVN Pictures Inc.
to rent the film 'Himala ng Birhen' and show it during the Naga town
fiesta, he most probably authorized and enjoined the Picture Company
to ship the film for him on the PAL on September 17th. Another
interpretation is that even if the LVN Pictures Inc. as consignor of its own
initiative, and acting independently of Mendoza for the time being, made
Mendoza a consignee. [Mendoza made himself a party to the contract of
transportaion when he appeared at the Pili Air Port armed with the copy
of the Air Way Bill (Exh. 1) demanding the delivery of the shipment to
him.] The very citation made by appellant in his memorandum supports this
view. Speaking of the possibility of a conflict between the order of the shipper
on the one hand and the order of the consignee on the other, as when the
shipper orders the shipping company to return or retain the goods shipped
while the consignee demands their delivery, Malagarriga in his book Codigo
de Comercio Comentado, Vol. 1, p. 400, citing a decision of the Argentina
Court of Appeals on commercial matters, cited by Tolentino in Vol. II of his
book entitled 'Commentaries and Jurisprudence on the Commercial Laws of
the Philippines' p. 209, says that the right of the shipper to countermand
the shipment terminates when the consignee or legitimate holder of the
bill of lading appears with such bill of lading before the carrier and makes
himself a party to the contract. Prior to that time he is a stranger to the
contract.
Still another view of this phase of the case is that contemplated in Art.
1257, paragraph 2, of the old Civil Code (now Art. 1311, second
paragraph) which reads thus:
Should the contract contain any stipulation in favor of a third person, he
may demand its fulfillment provided he has given notice of his
acceptance to the person bound before the stipulation has been
revoked.'
Here, the contract of carriage between the LVN Pictures Inc. and the
defendant carrier contains the stipulations of delivery to Mendoza as
consignee. His demand for the delivery of the can of film to him at the
Pili Air Port may be regarded as a notice of his acceptance of the
stipulation of the delivery in his favor contained in the contract of
carriage and delivery. In this case he also made himself a party to the
contract, or at least has come to court to enforce it. His cause of action
must necessarily be founded on its breach. (Emphasis Ours)
[15]
In sum, a consignee, although not a signatory to the contract of carriage
between the shipper and the carrier, becomes a party to the contract by reason
of either a) the relationship of agency between the consignee and the shipper/
consignor; b) the unequivocal acceptance of the bill of lading delivered to the
consignee, with full knowledge of its contents or c) availment of the stipulation
pour autrui, i.e., when the consignee, a third person, demands before the
carrier the fulfillment of the stipulation made by the consignor/shipper in the
consignees favor, specifically the delivery of the goods/cargoes shipped. [16]
In the instant case, Shin Yang consistently denied in all of its pleadings that it
authorized Halla Trading, Co. to ship the goods on its behalf; or that it got hold
of the bill of lading covering the shipment or that it demanded the release of
the cargo. Basic is the rule in evidence that the burden of proof lies upon him
who asserts it, not upon him who denies, since, by the nature of things, he who
denies a fact cannot produce any proof of it. Thus, MOF has the burden to
[17]
controvert all these denials, it being insistent that Shin Yang asserted itself as
the consignee and the one that caused the shipment of the goods to the
Philippines.
In civil cases, the party having the burden of proof must establish his case by
preponderance of evidence, which means evidence which is of greater
[18]
weight, or more convincing than that which is offered in opposition to it. Here,
[19]
MOF failed to meet the required quantum of proof. Other than presenting the
bill of lading, which, at most, proves that the carrier acknowledged receipt of
the subject cargo from the shipper and that the consignee named is to shoulder
the freightage, MOF has not adduced any other credible evidence to
strengthen its cause of action. It did not even present any witness in support
of its allegation that it was Shin Yang which furnished all the details indicated
in the bill of lading and that Shin Yang consented to shoulder the shipment
costs. There is also nothing in the records which would indicate that Shin Yang
was an agent of Halla Trading Co. or that it exercised any act that would bind
it as a named consignee. Thus, the CA correctly dismissed the suit for failure
of petitioner to establish its cause against respondent.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of
Appeals dated March 22, 2006 dismissing petitioners complaint and the
Resolution dated May 25, 2006 denying the motion for reconsideration are
AFFIRMED.
SO ORDERED.

5. G.R. No. 92288 February 9, 1993
BRITISH AIRWAYS, INC., petitioner,
vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST
INTERNATIONAL TRADING AND GENERAL SERVICES, respondents.
Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.
Monina P. Lee for private respondent.
NOCON, J.:
This is a petition for review on certiorari to annul and set aside the decision
dated November 15, 1989 of the Court of Appeals affirming the decision of
1
the trial court in ordering petitioner British Airways, Inc. to pay private
2
respondent First International Trading and General Services actual damages,
moral damages, corrective or exemplary damages, attorney's fees and the
costs as well as the Resolution dated February 15, 1990 denying petitioner's
3
Motion for Reconsideration in the appealed decision.
It appears on record that on February 15, 1981, private respondent First
International Trading and General Services Co., a duly licensed domestic
recruitment and placement agency, received a telex message from its principal
ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia to
recruit Filipino contract workers in behalf of said principal. 4
During the early part of March 1981, said principal paid to the Jeddah branch
of petitioner British Airways, Inc. airfare tickets for 93 contract workers with
specific instruction to transport said workers to Jeddah on or before March 30,
1981.
As soon as petitioner received a prepaid ticket advice from its Jeddah branch
to transport the 93 workers, private respondent was immediately informed by
petitioner that its principal had forwarded 93 prepaid tickets. Thereafter, private
respondent instructed its travel agent, ADB Travel and Tours. Inc., to book the
93 workers with petitioner but the latter failed to fly said workers, thereby
compelling private respondent to borrow money in the amount of P304,416.00
in order to purchase airline tickets from the other airlines as evidenced by the
cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had
recruited who must leave immediately since the visas of said workers are valid
only for 45 days and the Bureau of Employment Services mandates that
contract workers must be sent to the job site within a period of 30 days.
Sometime in the first week of June, 1981, private respondent was again
informed by the petitioner that it had received a prepaid ticket advice from its
Jeddah branch for the transportation of 27 contract workers. Immediatety,
private respondent instructed its travel agent to book the 27 contract workers
with the petitioner but the latter was only able to book and confirm 16 seats on
its June 9, 1981 flight. However, on the date of the scheduled flight only 9
workers were able to board said flight while the remaining 7 workers were
rebooked to June 30, 1981 which bookings were again cancelled by the
petitioner without any prior notice to either private respondent or the workers.
Thereafter, the 7 workers were rebooked to the July 4,1981 flight of petitioner
with 6 more workers booked for said flight. Unfortunately, the confirmed
bookings of the 13 workers were again cancelled and rebooked to July 7, 1981.
On July 6, 1981, private respondent paid the travel tax of the said workers as
required by the petitioner but when the receipt of the tax payments was
submitted, the latter informed private respondent that it can only confirm the
seats of the 12 workers on its July 7, 1981 flight. However, the confirmed seats
of said workers were again cancelled without any prior notice either to the
private respondent or said workers. The 12 workers were finally able to leave
for Jeddah after private respondent had bought tickets from the other airlines.
As a result of these incidents, private respondent sent a letter to petitioner
demanding compensation for the damages it had incurred by the latter's
repeated failure to transport its contract workers despite confirmed bookings
and payment of the corresponding travel taxes.
On July 23, 1981, the counsel of private respondent sent another letter to the
petitioner demanding the latter to pay the amount of P350,000.00 representing
damages and unrealized profit or income which was denied by the petitioner.
On August 8, 1981, private respondent received a telex message from its
principal cancelling the hiring of the remaining recruited workers due to the
delay in transporting the workers to Jeddah. 5
On January 27, 1982, private respondent filed a complaint for damages
against petitioner with the Regional Trial Court of Manila, Branch 1 in Civil
Case No. 82-4653.
On the other hand, petitioner, alleged in its Answer with counterclaims that it
received a telex message from Jeddah on March 20, 1981 advising that the
principal of private respondent had prepaid the airfares of 100 persons to
transport private respondent's contract workers from Manila to Jeddah on or
before March 30, 1981. However, due to the unavailability of space and limited
time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice
consequently not even one of the alleged 93 contract workers were booked in
any of its flights.
On June 5, 1981, petitioner received another prepaid ticket advice to transport
16 contract workers of private respondent to Jeddah but the travel agent of the
private respondent booked only 10 contract workers for petitioner's June 9,
1981 flight. However, only 9 contract workers boarded the scheduled flight with
1 passenger not showing up as evidenced by the Philippine Airlines'
passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C"). 6
Thereafter, private respondent's travel agent booked seats for 5 contract
workers on petitioner's July 4, 1981 flight but said travel agent cancelled the
booking of 2 passengers while the other 3 passengers did not show up on said
flight.
Sometime in July 1981, the travel agent of the private respondent booked 7
more contract workers in addition to the previous 5 contract workers who were
not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight
which was accepted by petitioner subject to reconfirmation.
However on July 6, 1981, petitioner's computer system broke down which
resulted to petitioner's failure to get a reconfirmation from Saudi Arabia Airlines
causing the automatic cancellation of the bookings of private respondent's 12
contract workers. In the morning of July 7, 1981, the computer system of the
petitioner was reinstalled and immediately petitioner tried to reinstate the
bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines but
both airlines replied that no seat was available on that date and had to place
the 12 workers on the wait list. Said information was duly relayed to the private
respondent and the 12 workers before the scheduled flight.
After due trial on or on August 27, 1985, the trial court rendered its decision,
the dispositive portion of which reads as follows:
WHEREFORE, in view of all the foregoing, this Court renders judgment:
1. Ordering the defendant to pay the plaintiff actual damages in the sum
of P308,016.00;
2. Ordering defendant to pay moral damages to the plaintiff in the amount
of P20,000.00;
3. Ordering the defendant to pay the plaintiff P10,000.00 by way of
corrective or exemplary damages;
4. Ordering the defendant to pay the plaintiff 30% of its total claim for and
as attorney's fees; and
5. To pay the costs.7
On March 13, 1986, petitioner appealed said decision to respondent appellate
court after the trial court denied its Motion for Reconsideration on February 28,
1986.
On November 15, 1989, respondent appellate court affirmed the decision of
the trial court, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with costs
against the appellant. 8
On December 9, 1989, petitioner filed a Motion for Reconsideration which was
also denied.
Hence, this petition.
It is the contention of petitioner that private respondent has no cause of action
against it there being no perfected contract of carriage existing between them
as no ticket was ever issued to private respondent's contract workers and,
therefore, the obligation of the petitioner to transport said contract workers did
not arise. Furthermore, private respondent's failure to attach any ticket in the
complaint further proved that it was never a party to the alleged transaction.
Petitioner's contention is untenable.
Private respondent had a valid cause of action for damages against petitioner.
A cause of action is an act or omission of one party in violation of the legal
right or rights of the other. Petitioner's repeated failures to transport private
9
respondent's workers in its flight despite confirmed booking of said workers
clearly constitutes breach of contract and bad faith on its part. In resolving
petitioner's theory that private respondent has no cause of action in the instant
case, the appellate court correctly held that:
In dealing with the contract of common carriage of passengers for purpose of
accuracy, there are two (2) aspects of the same, namely: (a) the contract "to
carry (at some future time)," which contract is consensual and is necessarily
perfected by mere consent (See Article 1356, Civil Code of the Philippines),
and (b) the contract "of carriage" or "of common carriage" itself which should
be considered as a real contract for not until the carrier is actually used can
the carrier be said to have already assumed the obligation of a carrier. (Paras,
Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.)
In the instant case, the contract "to carry" is the one involved which is
consensual and is perfected by the mere consent of the parties.
There is no dispute as to the appellee's consent to the said contract "to carry"
its contract workers from Manila to Jeddah. The appellant's consent thereto,
on the other hand, was manifested by its acceptance of the PTA or prepaid
ticket advice that ROLACO Engineering has prepaid the airfares of the
appellee's contract workers advising the appellant that it must transport the
contract workers on or before the end of March, 1981 and the other batch in
June, 1981.
Even if a PTA is merely an advice from the sponsors that an airline is
authorized to issue a ticket and thus no ticket was yet issued, the fact remains
that the passage had already been paid for by the principal of the appellee,
and the appellant had accepted such payment. The existence of this payment
was never objected to nor questioned by the appellant in the lower court. Thus,
the cause or consideration which is the fare paid for the passengers exists in
this case.
The third essential requisite of a contract is an object certain. In this contract
"to carry", such an object is the transport of the passengers from the place of
departure to the place of destination as stated in the telex.
Accordingly, there could be no more pretensions as to the existence of an oral
contract of carriage imposing reciprocal obligations on both parties.
In the case of appellee, it has fully complied with the obligation, namely, the
payment of the fare and its willingness for its contract workers to leave for their
place of destination.
On the other hand, the facts clearly show that appellant was remiss in its
obligation to transport the contract workers on their flight despite confirmation
and bookings made by appellee's travelling agent.
xxx xxx xxx
Besides, appellant knew very well that time was of the essence as the prepaid
ticket advice had specified the period of compliance therewith, and with
emphasis that it could only be used if the passengers fly on BA. Under the
circumstances, the appellant should have refused acceptance of the PTA from
appellee's principal or to at least inform appellee that it could not accommodate
the contract workers.
xxx xxx xxx
While there is no dispute that ROLACO Engineering advanced the payment
for the airfares of the appellee's contract workers who were recruited for
ROLACO Engineering and the said contract workers were the intended
passengers in the aircraft of the appellant, the said contract "to carry" also
involved the appellee for as recruiter he had to see to it that the contract
workers should be transported to ROLACO Engineering in Jeddah thru the
appellant's transportation. For that matter, the involvement of the appellee in
the said contract "to carry" was well demonstrated when
the appellant upon receiving the PTA immediately advised the appellee
thereof.10
Petitioner also contends that the appellate court erred in awarding actual
damages in the amount of P308,016.00 to private respondent since all
expenses had already been subsequently reimbursed by the latter's principal.
In awarding actual damages to private respondent, the appellate court held
that the amount of P308,016.00 representing actual damages refers to private
respondent's second cause of action involving the expenses incurred by the
latter which were not reimbursed by ROLACO Engineering. However, in the
Complaint filed by private respondent, it was alleged that private respondent
11
suffered actual damages in the amount of P308,016.00 representing the
money it borrowed from friends and financiers which is P304,416.00 for the 93
airline tickets and P3,600.00 for the travel tax of the 12 workers. It is clear
therefore that the actual damages private respondent seeks to recover are the
airline tickets and travel taxes it spent for its workers which were already
reimbursed by its principal and not for any other expenses it had incurred in
the process of recruiting said contract workers. Inasmuch as all expenses
including the processing fees incurred by private respondent had already been
paid for by the latter's principal on a staggered basis as admitted in open court
by its managing director, Mrs. Bienvenida Brusellas. We do not find anymore
12
justification in the appellate court's decision in granting actual damages to
private respondent.
Thus, while it may be true that private respondent was compelled to borrow
money for the airfare tickets of its contract workers when petitioner failed to
transport said workers, the reimbursements made by its principal to private
respondent failed to support the latter's claim that it suffered actual damages
as a result of petitioner's failure to transport said workers. It is undisputed that
private respondent had consistently admitted that its principal had reimbursed
all its expenses.
Article 2199 of the Civil Code provides that:
Except as provided by law or by stipulations, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory
damages.
Furthermore, actual or compensatory damages cannot be presumed, but must
be duly proved, and proved with reasonable degree of certainty. A court cannot
rely on speculation, conjecture or guesswork as to the fact and amount of
damages, but must depend upon competent proof that they have suffered and
on evidence of the actual amount thereof. 13
However, private respondent is entitled to an award of moral and exemplary
damages for the injury suffered as a result of petitioner's failure to transport
the former's workers because of the latter's patent bad faith in the performance
of its obligation. As correctly pointed out by the appellate court:
As evidence had proved, there was complete failure on the part of the
appellant to transport the 93 contract workers of the appellee on or before
March 30, 1981 despite receipt of the payment for their airfares, and
acceptance of the same by the appellant, with specific instructions from the
appellee's principal to transport the contract workers on or before March 30,
1981. No previous notice was ever registered by the appellant that it could not
comply with the same. And then followed the detestable act of appellant in
unilaterally cancelling, booking and rebooking unreasonably the flight of
appellee's contract workers in June to July, 1981 without prior notice. And all
of these actuations of the appellant indeed constitute malice and evident bad
faith which had caused damage and besmirched the reputation and business
image of the appellee. 14
As to the alleged damages suffered by the petitioner as stated in its
counterclaims, the record shows that no claim for said damages was ever
made by the petitioner immediately after their alleged occurrence therefore
said counterclaims were mere afterthoughts when private respondent filed the
present case.
WHEREFORE, the assailed decision is hereby AFFIRMED with the
MODIFICATION that the award of actual damages be deleted from said
decision.
SO ORDERED.
6. G.R. No. L-18965 October 30, 1964
COMPAÑIA MARITIMA, petitioner,
vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
Rafael Dinglasan for petitioner.
Ozaeta Gibbs & Ozaeta for respondent.
BAUTISTA ANGELO, J.:
Sometime in October, 1952, Macleod and Company of the Philippines
contracted by telephone the services of the Compañia Maritima, a shipping
corporation, for the shipment of 2,645 bales of hemp from the former's Sasa
private pier at Davao City to Manila and for their subsequent transhipment to
Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral
contract was later on confirmed by a formal and written booking issued by
Macleod's branch office in Sasa and handcarried to Compañia Maritima's
branch office in Davao in compliance with which the latter sent to Macleod's
private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was
completed on October 29, 1952. These two lighters were manned each by a
patron and an assistant patron. The patrons of both barges issued the
corresponding carrier's receipts and that issued by the patron of Barge No.
1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from
MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment
at Manila onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and
moored at the government's marginal wharf in the same place to await the
arrival of the S.S. Bowline Knot belonging to Compañia Maritima on which the
hemp was to be loaded. During the night of October 29, 1952, or at the early
hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of
1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly
notified the carrier's main office in Manila and its branch in Davao advising it
of its liability. The damaged hemp was brought to Odell Plantation in Madaum,
Davao, for cleaning, washing, reconditioning, and redrying. During the period
from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell
to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of
the original cargo of 1,162 bales weighing 2,324 piculs which had a total value
of 116,835.00. After reclassification, the value of the reconditioned hemp was
reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last
amount the sum of P8,863.30 representing Macleod's expenses in checking,
grading, rebating, and other fees for washing, cleaning and redrying in the
amount of P19.610.00, the total loss adds up to P60,421.02.
All abaca shipments of Macleod, including the 1,162 bales loaded on the
carrier's LCT No. 1025, were insured with the Insurance Company of North
America against all losses and damages. In due time, Macleod filed a claim
for the loss it suffered as above stated with said insurance company, and after
the same had been processed, the sum of P64,018.55 was paid, which was
noted down in a document which aside from being a receipt of the amount
paid, was a subrogation agreement between Macleod and the insurance
company wherein the former assigned to the latter its rights over the insured
and damaged cargo. Having failed to recover from the carrier the sum of
P60,421.02, which is the only amount supported by receipts, the insurance
company instituted the present action on October 28, 1953. After trial, the court
a quo rendered judgment ordering the carrier to pay the insurance company
the sum of P60,421.02, with legal interest thereon from the date of the filing of
the complaint until fully paid, and the costs. This judgment was affirmed by the
Court of Appeals on December 14, 1960. Hence, this petition for review.
The issues posed before us are: (1) Was there a contract of carriage between
the carrier and the shipper even if the loss occurred when the hemp was
loaded on a barge owned by the carrier which was loaded free of charge and
was not actually loaded on the S.S. Bowline Knot which would carry the hemp
to Manila and no bill of lading was issued therefore?; (2) Was the damage
caused to the cargo or the sinking of the barge where it was loaded due to a
fortuitous event, storm or natural disaster that would exempt the carrier from
liability?; (3) Can respondent insurance company sue the carrier under its
insurance contract as assignee of Macleod in spite of the fact that the liability
of the carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court
of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the
carrier of the correctness and sufficiency of the shipper's statement of
accounts contrary to the burden of proof rule?; and (5) Can the insurance
company maintain this suit without proof of its personality to do so?
1. This issue should be answered in the affirmative. As found by the
Court of Appeals, Macleod and Company contracted by telephone the services
of petitioner to ship the hemp in question from the former's private pier at Sasa,
Davao City, to Manila, to be subsequently transhipped to Boston,
Massachusetts, U.S.A., which oral contract was later confirmed by a formal
and written booking issued by the shipper's branch office, Davao City, in virtue
of which the carrier sent two of its lighters to undertake the service. It also
appears that the patrons of said lighters were employees of the carrier with
due authority to undertake the transportation and to sign the documents that
may be necessary therefor so much so that the patron of LCT No. 1025 signed
the receipt covering the cargo of hemp loaded therein as follows: .
Received in behalf of S.S. Bowline Knot in good order and condition from
MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment
at Manila onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to take the hemp from
Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline Knot
does not in any way impair the contract of carriage already entered into
between the carrier and the shipper, for that preparatory step is but part and
parcel of said contract of carriage. The lighters were merely employed as the
first step of the voyage, but once that step was taken and the hemp delivered
to the carrier's employees, the rights and obligations of the parties attached
thereby subjecting them to the principles and usages of the maritime law. In
other words, here we have a complete contract of carriage the consummation
of which has already begun: the shipper delivering the cargo to the carrier, and
the latter taking possession thereof by placing it on a lighter manned by its
authorized employees, under which Macleod became entitled to the privilege
secured to him by law for its safe transportation and delivery, and the carrier
to the full payment of its freight upon completion of the voyage.
The receipt of goods by the carrier has been said to lie at the foundation of the
contract to carry and deliver, and if actually no goods are received there can
be no such contract. The liability and responsibility of the carrier under a
contract for the carriage of goods commence on their actual delivery to, or
receipt by, the carrier or an authorized agent. ... and delivery to a lighter in
charge of a vessel for shipment on the vessel, where it is the custom to deliver
in that way, is a good delivery and binds the vessel receiving the freight, the
liability commencing at the time of delivery to the lighter. ... and, similarly,
where there is a contract to carry goods from one port to another, and they
cannot be loaded directly on the vessel and lighters are sent by the vessel to
bring the goods to it, the lighters are for the time its substitutes, so that the bill
of landing is applicable to the goods as soon as they are placed on the lighters.
(80 C.J.S., p. 901, emphasis supplied)
... The test as to whether the relation of shipper and carrier had been
established is, Had the control and possession of the cotton been completely
surrendered by the shipper to the railroad company? Whenever the control
and possession of goods passes to the carrier and nothing remains to be done
by the shipper, then it can be said with certainty that the relation of shipper and
carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W.
419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark.
100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365,
185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et al.,
200 S.W. 148).
The claim that there can be no contract of affreightment because the hemp
was not actually loaded on the ship that was to take it from Davao City to
Manila is of no moment, for, as already stated, the delivery of the hemp to the
carrier's lighter is in line with the contract. In fact, the receipt signed by the
patron of the lighter that carried the hemp stated that he was receiving the
cargo "in behalf of S.S. Bowline Knot in good order and condition." On the
other hand, the authorities are to the effect that a bill of lading is not
indispensable for the creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage. — As to the issuance of
a bill of lading, although article 350 of the Code of Commerce provides that
"the shipper as well as the carrier of merchandise or goods may mutua-lly
demand that a bill of lading is not indispensable. As regards the form of the
contract of carriage it can be said that provided that there is a meeting of the
minds and from such meeting arise rights and obligations, there should be no
limitations as to form." The bill of lading is not essential to the contract,
although it may become obligatory by reason of the regulations of railroad
companies, or as a condition imposed in the contract by the agreement of the
parties themselves. The bill of lading is juridically a documentary proof of the
stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-
315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code does not
demand, as necessary requisite in the contract of transportation, the delivery
of the bill of lading to the shipper, but gives right to both the carrier and the
shipper to mutually demand of each other the delivery of said bill. (Sp. Sup.
Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II,
Revised Edition, pp. 12-13)
The liability of the carrier as common carrier begins with the actual delivery of
the goods for transportation, and not merely with the formal execution of a
receipt or bill of lading; the issuance of a bill of lading is not necessary to
complete delivery and acceptance. Even where it is provided by statute that
liability commences with the issuance of the bill of lading, actual delivery and
acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the cargo in
question shielding itself behind the claim of force majeure or storm which
occurred on the night of October 29, 1952. But the evidence fails to bear this
out.
Rather, it shows that the mishap that caused the damage or loss was due, not
to force majeure, but to lack of adequate precautions or measures taken by
the carrier to prevent the loss as may be inferred from the following findings of
the Court of Appeals:
Aside from the fact that, as admitted by appellant's own witness, the ill-fated
barge had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which
admitted sea water in the same manner as rain entered "thru tank man-holes",
according to the patron of LCT No. 1023 (exh. JJJ-4) — conclusively showing
that the barge was not seaworthy — it should be noted that on the night of the
nautical accident there was no storm, flood, or other natural disaster or
calamity. Certainly, winds of 11 miles per hour, although stronger than the
average 4.6 miles per hour then prevailing in Davao on October 29, 1952 (exh.
5), cannot be classified as storm. For according to Beaufort's wind scale, a
storm has wind velocities of from 64 to 75 miles per hour; and by Philippine
Weather Bureau standards winds should have a velocity of from 55 to 74 miles
per hour in order to be classified as storm (Northern Assurance Co., Ltd. vs.
Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12,
1959).
The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc.,
marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-
tight conditions of various buoyancy compartments' (exh. JJJ); and this report
finds confirmation on the above-mentioned admission of two witnesses for
appellant concerning the cracks of the lighter's bottom and the entrance of the
rain water 'thru manholes'." We are not prepared to dispute this finding of the
Court of Appeals.
3. There can also be no doubt that the insurance company can recover
from the carrier as assignee of the owner of the cargo for the insurance amount
it paid to the latter under the insurance contract. And this is so because since
the cargo that was damaged was insured with respondent company and the
latter paid the amount represented by the loss, it is but fair that it be given the
right to recover from the party responsible for the loss. The instant case,
therefore, is not one between the insured and the insurer, but one between the
shipper and the carrier, because the insurance company merely stepped into
the shoes of the shipper. And since the shipper has a direct cause of action
against the carrier on account of the damage of the cargo, no valid reason is
seen why such action cannot be asserted or availed of by the insurance
company as a subrogee of the shipper. Nor can the carrier set up as a defense
any defect in the insurance policy not only because it is not a privy to it but
also because it cannot avoid its liability to the shipper under the contract of
carriage which binds it to pay any loss that may be caused to the cargo
involved therein. Thus, we find fitting the following comments of the Court of
Appeals:
It was not imperative and necessary for the trial court to pass upon the
question of whether or not the disputed abaca cargo was covered by Marine
Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a
party nor privy to this insurance contract, and therefore cannot avail itself of
any defect in the policy which may constitute a valid reason for appellee, as
the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever
defect the policy contained, if any, is deemed to have been waived by the
subsequent payment of Macleod's claim by appellee. Besides, appellant is
herein sued in its capacity as a common carrier, and appellee is suing as the
assignee of the shipper pursuant to exhibit MM. Since, as above
demonstrated, appellant is liable to Macleod and Company of the Philippines
for the los or damage to the 1,162 bales of hemp after these were received in
good order and condition by the patron of appellant's LCT No. 1025, it
necessarily follows that appellant is likewise liable to appellee who, as
assignee of Macleod, merely stepped into the shoes of and substi-tuted the
latter in demanding from appellant the payment for the loss and damage
aforecited.
4. It should be recalled in connection with this issue that during the trial
of this case the carrier asked the lower court to order the production of the
books of accounts of the Odell Plantation containing the charges it made for
the loss of the damaged hemp for verification of its accountants, but later it
desisted therefrom on the claim that it finds their production no longer
necessary. This desistance notwithstanding, the shipper however pre-sented
other documents to prove the damage it suffered in connection with the cargo
and on the strength thereof the court a quo ordered the carrier to pay the sum
of P60,421.02. And after the Court of Appeals affirmed this award upon the
theory that the desistance of the carrier from producing the books of accounts
of Odell Plantation implies an admission of the correctness of the statements
of accounts contained therein, petitioner now contends that the Court of
Appeals erred in basing the affirmance of the award on such erroneous
interpretation.
There is reason to believe that the act of petitioner in waiving its right to have
the books of accounts of Odell Plantation presented in court is tantamount to
an admission that the statements contained therein are correct and their
verification not necessary because its main defense here, as well as below,
was that it is not liable for the loss because there was no contract of carriage
between it and the shipper and the loss caused, if any, was due to a fortuitous
event. Hence, under the carrier's theory, the correctness of the account
representing the loss was not so material as would necessitate the
presentation of the books in question. At any rate, even if the books of
accounts were not produced, the correctness of the accounts cannot now be
disputed for the same is supported by the original documents on which the
entries in said books were based which were presented by the shipper as part
of its evidence. And according to the Court of Appeals, these documents alone
sufficiently establish the award of P60,412.02 made in favor of respondent.
5. Finally, with regard to the question concerning the personality of the
insurance company to maintain this action, we find the same of no importance,
for the attorney himself of the carrier admitted in open court that it is a foreign
corporation doing business in the Philippines with a personality to file the
present action.
WHEREFORE, the decision appealed from is affirmed, with costs against
petitioner.
7. G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Office for respondents.
SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila an1
action against the petitioner for damages based on culpa contractual. The
antecedent facts, as found by the respondent Court, are undisputed:
2
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro
B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port
of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts,
Amended Record on Appeal, p. 38). Pursuant to that agreement, Mauro B.
Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of
water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio
Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of
the lighter, for loading which was actually begun on the same date by the crew
of the lighter under the captain's supervision. When about half of the scrap iron
was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula
of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio
Tumambing. The latter resisted the shakedown and after a heated argument
between them, Mayor Jose Advincula drew his gun and fired at Gelacio
Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-
7).<äre||anº•1àw> The gunshot was not fatal but Tumambing had to be taken
to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13;
September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December
4, 1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered
captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16,
1972, pp. 8-9) where the lighter was docked (t.s.n., September 28, 1972, p.
31). The rest was brought to the compound of NASSCO (Record on Appeal,
pp. 20-22). Later on Acting Mayor Rub issued a receipt stating that the
Municipality of Mariveles had taken custody of the scrap iron (Stipulation of
Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision,
the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside
and a new one entered ordering defendant-appellee Mauro Ganzon to pay
plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual
damages, the sum of P5,000.00 as exemplary damages, and the amount of
P2,000.00 as attorney's fees. Costs against defendant-appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the
Court of Appeals are:
I Hence, the petitioner is presumed to have been at fault or to have acted
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY
OF BREACH OF THE CONTRACT OF TRANSPORTATION AND IN
IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME
THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO
BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER
FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE SCRAP INTO THE
SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT
OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE
SCRAP WAS DUE TO A FORTUITOUS EVENT AND THE PETITIONER IS
THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE
THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had
not been unconditionally placed under his custody and control to make him
liable. However, he completely agrees with the respondent Court's finding that
on December 1, 1956, the private respondent delivered the scraps to Captain
Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his
employees, actually received the scraps is freely admitted. Significantly, there
is not the slightest allegation or showing of any condition, qualification, or
restriction accompanying the delivery by the private respondent-shipper of the
scraps, or the receipt of the same by the petitioner. On the contrary, soon after
the scraps were delivered to, and received by the petitioner-common carrier,
loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the
possession and control of the common carrier, and upon their receipt by the
carrier for transportation, the contract of carriage was deemed perfected.
Consequently, the petitioner-carrier's extraordinary responsibility for the loss,
destruction or deterioration of the goods commenced. Pursuant to Art. 1736,
such extraordinary responsibility would cease only upon the delivery, actual or
constructive, by the carrier to the consignee, or to the person who has a right
to receive them. The fact that part of the shipment had not been loaded on
5
board the lighter did not impair the said contract of transportation as the goods
remained in the custody and control of the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of
the following causes enumerated in Article 1734 of the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.
negligently. By reason of this presumption, the court is not even required to
6
make an express finding of fault or negligence before it could hold the
petitioner answerable for the breach of the contract of carriage. Still, the
petitioner could have been exempted from any liability had he been able to
prove that he observed extraordinary diligence in the vigilance over the goods
in his custody, according to all the circumstances of the case, or that the loss
was due to an unforeseen event or to force majeure. As it was, there was
hardly any attempt on the part of the petitioner to prove that he exercised such
extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains
that he is exempt from any liability because the loss of the scraps was due
mainly to the intervention of the municipal officials of Mariveles which
constitutes a caso fortuito as defined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the
petitioner's defense was that the loss of the scraps was due to an "order or act
of competent public authority," and this contention was correctly passed upon
by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from
responsibility on the ground that he was ordered by competent public authority
to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had
the power to issue the disputed order, or that it was lawful, or that it was issued
under legal process of authority. The appellee failed to establish this. Indeed,
no authority or power of the acting mayor to issue such an order was given in
evidence. Neither has it been shown that the cargo of scrap iron belonged to
the Municipality of Mariveles. What we have in the record is the stipulation of
the parties that the cargo of scrap iron was accilmillated by the appellant
through separate purchases here and there from private individuals (Record
on Appeal, pp. 38-39). The fact remains that the order given by the acting
mayor to dump the scrap iron into the sea was part of the pressure applied by
Mayor Jose Advincula to shakedown the appellant for P5,000.00. The order of
the acting mayor did not constitute valid authority for appellee Mauro Ganzon
and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of
theory on appeal we cannot, however, allow. In any case, the intervention of
the municipal officials was not In any case, of a character that would render
impossible the fulfillment by the carrier of its obligation. The petitioner was not
duty bound to obey the illegal order to dump into the sea the scrap iron.
Moreover, there is absence of sufficient proof that the issuance of the same
order was attended with such force or intimidation as to completely overpower
the will of the petitioner's employees. The mere difficulty in the fullfilment of the
obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or
at the NASSCO compound, so that after the dispute with the local officials
concerned was settled, the scraps could then be delivered in accordance with
the contract of carriage.
There is no incompatibility between the Civil Code provisions on common
carriers and Articles 361 and 362 of the Code of Commerce which were the
8 9
basis for this Court's ruling in Government of the Philippine Islands vs.
Ynchausti & Co.10 and which the petitioner invokes in tills petition. For Art.
1735 of the Civil Code, conversely stated, means that the shipper will suffer
the losses and deterioration arising from the causes enumerated in Art. 1734;
and in these instances, the burden of proving that damages were caused by
the fault or negligence of the carrier rests upon him. However, the carrier must
first establish that the loss or deterioration was occasioned by one of the
excepted causes or was due to an unforeseen event or to force majeure. Be
that as it may, insofar as Art. 362 appears to require of the carrier only ordinary
diligence, the same is .deemed to have been modified by Art. 1733 of the Civil
Code.
Finding the award of actual and exemplary damages to be proper, the same
will not be disturbed by us. Besides, these were not sufficiently controverted
by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of
Appeals is hereby AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.
Yap, C.J., Paras and Padilla, JJ., concur.
Separate Opinions
MELENCIO-HERRERA, J., dissenting:
I am constrained to dissent.
It is my view that petitioner can not be held liable in damages for the loss and
destruction of the scrap iron. The loss of said cargo was due to an excepted
cause an 'order or act of competent public authority" (Article 1734[5], Civil
Code).
The loading of the scrap iron on the lighter had to be suspended because of
Municipal Mayor Jose Advincula's intervention, who was a "competent public
authority." Petitioner had no control over the situation as, in fact, Tumambing
himself, the owner of the cargo, was impotent to stop the "act' of said official
and even suffered a gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor Basilio Rub,
accompanied by three policemen, who ordered the dumping of the scrap iron
into the sea right where the lighter was docked in three feet of water. Again,
could the captain of the lighter and his crew have defied said order?
Through the "order" or "act" of "competent public authority," therefore, the
performance of a contractual obligation was rendered impossible. The scrap
iron that was dumped into the sea was "destroyed" while the rest of the cargo
was "seized." The seizure is evidenced by the receipt issues by Acting Mayor
Rub stating that the Municipality of Mariveles had taken custody of the scrap
iron. Apparently, therefore, the seizure and destruction of the goods was done
under legal process or authority so that petitioner should be freed from
responsibility.
Art. 1743. If through order of public authority the goods are seized or
destroyed, the common carrier is not responsible, provided said public
authority had power to issue the order.
Separate Opinions
MELENCIO-HERRERA, J., dissenting:
I am constrained to dissent.
It is my view that petitioner can not be held liable in damages for the loss and
destruction of the scrap iron. The loss of said cargo was due to an excepted
cause an 'order or act of competent public authority" (Article 1734[5], Civil
Code).
The loading of the scrap iron on the lighter had to be suspended because of
Municipal Mayor Jose Advincula's intervention, who was a "competent public
authority." Petitioner had no control over the situation as, in fact, Tumambing
himself, the owner of the cargo, was impotent to stop the "act' of said official
and even suffered a gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor Basilio Rub,
accompanied by three policemen, who ordered the dumping of the scrap iron
into the sea right where the lighter was docked in three feet of water. Again,
could the captain of the lighter and his crew have defied said order?
Through the "order" or "act" of "competent public authority," therefore, the
performance of a contractual obligation was rendered impossible. The scrap
iron that was dumped into the sea was "destroyed" while the rest of the cargo
was "seized." The seizure is evidenced by the receipt issues by Acting Mayor
Rub stating that the Municipality of Mariveles had taken custody of the scrap
iron. Apparently, therefore, the seizure and destruction of the goods was done
under legal process or authority so that petitioner should be freed from
responsibility.
Art. 1743. If through order of public authority the goods are seized or
destroyed, the common carrier is not responsible, provided said public
authority had power to issue the order.
8. G.R. No. 145804 February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,
vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT
SECURITY AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision and resolution of the
Court of Appeals, promulgated on 27 April 2000 and 10 October 2000,
respectively, in CA-G.R. CV No. 60720, entitled "Marjorie Navidad and Heirs
of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.," which has modified
the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig
City, exonerating Prudent Security Agency (Prudent) from liability and finding
Light Rail Transit Authority (LRTA) and Rodolfo Roman liable for damages on
account of the death of Nicanor Navidad.
On 14 October 1993, about half an hour past seven o’clock in the evening,
Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing
a "token" (representing payment of the fare). While Navidad was standing on
the platform near the LRT tracks, Junelito Escartin, the security guard
liability for the death of Nicanor Navidad and, instead, holding the LRTA and
Roman jointly and severally liable thusly:
"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating
the appellants from any liability for the death of Nicanor Navidad, Jr. Instead,
appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held
liable for his death and are hereby directed to pay jointly and severally to the
plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorney’s fees." 2

assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a fist fight. No
evidence, however, was adduced to indicate how the fight started or who,
between the two, delivered the first blow or how Navidad later fell on the LRT
tracks. At the exact moment that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving
train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie
Navidad, along with her children, filed a complaint for damages against
Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization,
Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and
Roman filed a counterclaim against Navidad and a cross-claim against
Escartin and Prudent. Prudent, in its answer, denied liability and averred that
it had exercised due diligence in the selection and supervision of its security
guards.
The LRTA and Roman presented their evidence while Prudent and Escartin,
instead of presenting evidence, filed a demurrer contending that Navidad had
failed to prove that Escartin was negligent in his assigned task. On 11 August
1998, the trial court rendered its decision; it adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendants Prudent Security and Junelito Escartin ordering the
latter to pay jointly and severally the plaintiffs the following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
"b) Moral damages of P50,000.00;
The appellate court ratiocinated that while the deceased might not have then
as yet boarded the train, a contract of carriage theretofore had already existed
when the victim entered the place where passengers were supposed to be
after paying the fare and getting the corresponding token therefor. In
exempting Prudent from liability, the court stressed that there was nothing to
link the security agency to the death of Navidad. It said that Navidad failed to
show that Escartin inflicted fist blows upon the victim and the evidence merely
established the fact of death of Navidad by reason of his having been hit by
the train owned and managed by the LRTA and operated at the time by
Roman. The appellate court faulted petitioners for their failure to present expert
evidence to establish the fact that the application of emergency brakes could
not have stopped the train.
The appellate court denied petitioners’ motion for reconsideration in its
resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors on the part of the
appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY
DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR
NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA." 3

"c) Attorney’s fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and Rodolfo Roman are dismissed
for lack of merit.
"The compulsory counterclaim of LRTA and Roman are likewise dismissed."
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate
court promulgated its now assailed decision exonerating Prudent from any
Petitioners would contend that the appellate court ignored the evidence and
the factual findings of the trial court by holding them liable on the basis of a
sweeping conclusion that the presumption of negligence on the part of a
common carrier was not overcome. Petitioners would insist that Escartin’s
1
assault upon Navidad, which caused the latter to fall on the tracks, was an act
of a stranger that could not have been foreseen or prevented. The LRTA would
add that the appellate court’s conclusion on the existence of an employer-
employee relationship between Roman and LRTA lacked basis because
Roman himself had testified being an employee of Metro Transit and not of the
LRTA.
Respondents, supporting the decision of the appellate court, contended that a
contract of carriage was deemed created from the moment Navidad paid the
fare at the LRT station and entered the premises of the latter, entitling Navidad
to all the rights and protection under a contractual relation, and that the
appellate court had correctly held LRTA and Roman liable for the death of
Navidad in failing to exercise extraordinary diligence imposed upon a common
carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of
its business and for reasons of public policy, is burdened with the duty of
exercising utmost diligence in ensuring the safety of passengers. The Civil
4
Code, governing the liability of a common carrier for death of or injury to its
passengers, provides:
"Article 1755. A common carrier is bound to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances.
"Article 1756. In case of death of or injuries to passengers, common carriers
are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as prescribed in articles 1733
and 1755."
"Article 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former’s employees,
although such employees may have acted beyond the scope of their authority
or in violation of the orders of the common carriers.
"This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees."
"Article 1763. A common carrier is responsible for injuries suffered by a
passenger on account of the willful acts or negligence of other passengers or
of strangers, if the common carrier’s employees through the exercise of the
diligence of a good father of a family could have prevented or stopped the act
or omission."
The law requires common carriers to carry passengers safely using the utmost
diligence of very cautious persons with due regard for all circumstances. Such
5
duty of a common carrier to provide safety to its passengers so obligates it not
only during the course of the trip but for so long as the passengers are within
its premises and where they ought to be in pursuance to the contract of
carriage. The statutory provisions render a common carrier liable for death of
6
or injury to passengers (a) through the negligence or wilful acts of its
employees or b) on account of wilful acts or negligence of other passengers
or of strangers if the common carrier’s employees through the exercise of due
diligence could have prevented or stopped the act or omission. In case of such
7
death or injury, a carrier is presumed to have been at fault or been negligent,
and by simple proof of injury, the passenger is relieved of the duty to still
8
establish the fault or negligence of the carrier or of its employees and the
burden shifts upon the carrier to prove that the injury is due to an unforeseen
event or to force majeure. In the absence of satisfactory explanation by the
9
carrier on how the accident occurred, which petitioners, according to the
appellate court, have failed to show, the presumption would be that it has been
at fault, an exception from the general rule that negligence must be proved.
10 11
The foundation of LRTA’s liability is the contract of carriage and its obligation
to indemnify the victim arises from the breach of that contract by reason of its
failure to exercise the high diligence required of the common carrier. In the
discharge of its commitment to ensure the safety of passengers, a carrier may
choose to hire its own employees or avail itself of the services of an outsider
or an independent firm to undertake the task. In either case, the common
carrier is not relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for
tort under the provisions of Article 2176 and related provisions, in conjunction
12
with Article 2180, of the Civil Code. The premise, however, for the employer’s
13
liability is negligence or fault on the part of the employee. Once such fault is
established, the employer can then be made liable on the basis of the
presumption juris tantum that the employer failed to exercise diligentissimi
patris families in the selection and supervision of its employees. The liability is
primary and can only be negated by showing due diligence in the selection
and supervision of the employee, a factual matter that has not been shown.
Absent such a showing, one might ask further, how then must the liability of
the common carrier, on the one hand, and an independent contractor, on the
other hand, be described? It would be solidary. A contractual obligation can be
breached by tort and when the same act or omission causes the injury, one
resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of
14
the Civil Code can well apply. In fine, a liability for tort may arise even under
15
a contract, where tort is that which breaches the contract. Stated differently,
16
when an act which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no contract existed
between the parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply. 17
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the
late Nicanor Navidad, this Court is concluded by the factual finding of the Court
of Appeals that "there is nothing to link (Prudent) to the death of Nicanor
(Navidad), for the reason that the negligence of its employee, Escartin, has
not been duly proven x x x." This finding of the appellate court is not without
substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is
guilty of any culpable act or omission, he must also be absolved from liability.
Needless to say, the contractual tie between the LRT and Navidad is not itself
a juridical relation between the latter and Roman; thus, Roman can be made
liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable.
Nominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him. It is an established rule that nominal damages cannot co-
18
exist with compensatory damages. 19
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with
MODIFICATION but only in that (a) the award of nominal damages is
DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No
costs.
SO ORDERED.
11. 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 finding private
1
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" are held to a very high degree of care and diligence ("extraordinary
2
diligence") in the carriage of goods as well as of passengers. The specific
import of extraordinary diligence in the care of goods transported by a common
carrier is, according to Article 1733, "further expressed in Articles 1734,1735
and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible
for the loss, destruction or deterioration of the goods which they carry, "unless
the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or
deterioration which exempt the common carrier for responsibility therefor, is a
closed list. Causes falling outside the foregoing list, even if they appear to
constitute a species of force majeure fall within the scope of Article 1735, which
provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article
1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the
specific cause alleged in the instant case — the hijacking of the carrier's truck
— does not fall within any of the five (5) categories of exempting causes listed
in Article 1734. It would follow, therefore, that the hijacking of the carrier's
vehicle must be dealt with under the provisions of Article 1735, in other words,
that the private respondent as common carrier is presumed to have been at
fault or to have acted negligently. This presumption, however, may be
overthrown by proof of extraordinary diligence on the part of private
respondent.
Petitioner insists that private respondent had not observed extraordinary
diligence in the care of petitioner's goods. Petitioner argues that in the
circumstances of this case, private respondent should have hired a security
guard presumably to ride with the truck carrying the 600 cartons of Liberty filled
milk. We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security guard
to ride with the truck and to engage brigands in a firelight at the risk of his own
life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of
the duty of extraordinary diligence in the vigilance over the goods carried in
the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods
is, under Article 1733, given additional specification not only by Articles 1734
and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides
in relevant part:
Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of
robbers who donot act with grave or irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss, destruction
or deterioration of goods on account of the defective condition of the car
vehicle, ship, airplane or other equipment used in the contract of carriage.
(Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and will
not be allowed to divest or to diminish such responsibility — even for acts of
strangers like thieves or robbers, except where such thieves or robbers in fact
acted "with grave or irresistible threat, violence or force." We believe and so
hold that the limits of the duty of extraordinary diligence in the vigilance over
the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner's cargo. The record shows that an
information for robbery in band was filed in the Court of First Instance of Tarlac,
Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe
Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John
Doe." There, the accused were charged with willfully and unlawfully taking and
carrying away with them the second truck, driven by Manuel Estrada and
loaded with the 600 cartons of Liberty filled milk destined for delivery at
petitioner's store in Urdaneta, Pangasinan. The decision of the trial court
shows that the accused acted with grave, if not irresistible, threat, violence or
force. Three (3) of the five (5) hold-uppers were armed with firearms. The
3
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.
9.
[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 and renewed by the Energy Regulatory
[1]
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. The respondent City Treasurer assessed a
[3]
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 for tax refund with prayer for a writ of preliminary injunction
[6]
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. On November 29, 1995, the
[10]
respondent court rendered a decision affirming the trial court's dismissal of
[11]
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. Petitioner moved for a reconsideration which was
[13]
granted by this Court in a Resolution of January 20, 1997. Thus, the petition
[14]
was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1)
the petitioner is not a common carrier or a transportation contractor, and (2)
the exemption sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to
the public as engaged in the business of transporting persons or property from
place to place, for compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a casual
occupation;
2. He must undertake to carry goods of the kind to which his business is
confined;
3. He must undertake to carry by the method by which his business is
conducted and over his established roads; and
4. The transportation must be for hire. [15]
Based on the above definitions and requirements, there is no doubt that
petitioner is a common carrier. It is engaged in the business of transporting or
carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude
it from the definition of a common carrier. In De Guzman vs. Court of Appeals [16]
we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one
whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom, as
a 'sideline'). Article 1732 x x x avoids making any distinction between a
person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the 'general public,' i.e., the
general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think
that Article 1877 deliberately refrained from making such distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be
seen to coincide neatly with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public Service Act, 'public service'
includes:
'every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system gas, electric light heat and power, water supply and
power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public
services.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in
Section 133 (j) of the Local Government Code refers only to common carriers
transporting goods and passengers through moving vehicles or vessels either
by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the
Civil Code makes no distinction as to the means of transporting, as long as it
is by land, water or air. It does not provide that the transportation of the
passengers or goods should be by motor vehicle. In fact, in the United States,
oil pipe line operators are considered common carriers. [17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
considered a "common carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall
have the preferential right to utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize the remaining transportation
capacity pro rata for the transportation of such other petroleum as may be
offered by others for transport, and to charge without discrimination such rates
as may have been approved by the Secretary of Agriculture and Natural
Resources."
Republic Act 387 also regards petroleum operation as a public utility. Pertinent
portion of Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum x
x and everything relating to the manufacture, refining, storage, or
transportation by special methods of petroleum, is hereby declared to be
a public utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common
carrier." In BIR Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 x x x. Such being the case, it is not subject to withholding
tax prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common
carrier" and, therefore, exempt from the business tax as provided for in Section
133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local Government
Units. - Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not extend to the levy of
the following :
xxxxxxxxx
(j) Taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code."
The deliberations conducted in the House of Representatives on the Local
Government Code of 1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121
[now Sec. 131]. Common Limitations on the Taxing Powers of Local
Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation.
This appears to be one of those being deemed to be exempted from the taxing
powers of the local government units. May we know the reason why the
transportation business is being excluded from the taxing powers of the
local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121
(now Sec. 131), line 16, paragraph 5. It states that local government units may
not impose taxes on the business of transportation, except as otherwise
provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II,
one can see there that provinces have the power to impose a tax on business
enjoying a franchise at the rate of not more than one-half of 1 percent of the
gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of
taxes by local government units on the carrier business. Local
government units may impose taxes on top of what is already being imposed
by the National Internal Revenue Code which is the so-called "common
carriers tax." We do not want a duplication of this tax, so we just provided
for an exception under Section 125 [now Sec. 137] that a province may
impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x [18]
It is clear that the legislative intent in excluding from the taxing power of the
local government unit the imposition of business tax against common carriers
is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its
gross sales/earnings under the National Internal Revenue Code. To tax [19]
petitioner again on its gross receipts in its transportation of petroleum business
would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the
respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No.
36801 is REVERSED and SET ASIDE.
SO ORDERED.
10. G.R. No. 157917 August 29, 2012
SPOUSES TEODORO and NANETTE PERENA, Petitioners,
1 At about the time the van was to traverse the railroad crossing, PNR Commuter
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL
RAILWAYS, and the COURT OF APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the
law. He is bound to observe extraordinary diligence in the conduct of his
business. He is presumed to be negligent when death occurs to a passenger.
His liability may include indemnity for loss of earning capacity even if the
deceased passenger may only be an unemployed high school student at the
time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia
(Perefias) appeal the adverse decision promulgated on November 13, 2002,
by which the Court of Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch
260, in Parañaque City that had decreed them jointly and severally liable with
Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas
and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron
John L. Zarate (Aaron), then a high school student of Don Bosco Technical
Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students from their
respective residences in Parañaque City to Don Bosco in Pasong Tamo,
Makati City, and back. In their business, the Pereñas used a KIA Ceres Van
(van) with Plate No. PYA 896, which had the capacity to transport 14 students
at a time, two of whom would be seated in the front beside the driver, and the
others in the rear, with six students on either side. They employed Clemente
Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and
from Don Bosco. On August 22, 1996, as on previous school days, the van
picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his
place on the left side of the van near the rear door. The van, with its air-
conditioning unit turned on and the stereo playing loudly, ultimately carried all
the 14 student riders on their way to Don Bosco. Considering that the students
were due at Don Bosco by 7:15 a.m., and that they were already running late
because of the heavy vehicular traffic on the South Superhighway, Alfaro took
the van to an alternate route at about 6:45 a.m. by traversing the narrow path
underneath the Magallanes Interchange that was then commonly used by
Makati-bound vehicles as a short cut into Makati. At the time, the narrow path
was marked by piles of construction materials and parked passenger
jeepneys, and the railroad crossing in the narrow path had no railroad warning
signs, or watchmen, or other responsible persons manning the crossing. In
fact, the bamboo barandilla was up, leaving the railroad crossing open to
traversing motorists.
No. 302 (train), operated by Jhonny Alano (Alano), was in the vicinity of the
Magallanes Interchange travelling northbound. As the train neared the railroad
crossing, Alfaro drove the van eastward across the railroad tracks, closely
tailing a large passenger bus. His view of the oncoming train was blocked
because he overtook the passenger bus on its left side. The train blew its horn
to warn motorists of its approach. When the train was about 50 meters away
from the passenger bus and the van, Alano applied the ordinary brakes of the
train. He applied the emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the railroad tracks, but the
van driven by Alfaro did not. The train hit the rear end of the van, and the
impact threw nine of the 12 students in the rear, including Aaron, out of the
van. Aaron landed in the path of the train, which dragged his body and severed
his head, instantaneously killing him. Alano fled the scene on board the train,
and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates
commenced this action for damages against Alfaro, the Pereñas, PNR and
Alano. The Pereñas and PNR filed their respective answers, with cross-claims
against each other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Pereña for the adequate
and safe transportation carriage of the former spouses' son from their
residence in Parañaque to his school at the Don Bosco Technical Institute in
Makati City;
(3) During the effectivity of the contract of carriage and in the implementation
thereof, Aaron, the minor son of spouses Zarate died in connection with a
vehicular/train collision which occurred while Aaron was riding the contracted
carrier Kia Ceres van of spouses Pereña, then driven and operated by the
latter's employee/authorized driver Clemente Alfaro, which van collided with
the train of PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of
the Magallanes Interchange in Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the
vehicular/train collision was a railroad crossing used by motorists for crossing
the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no
appropriate and safety warning signs and railings at the site commonly used
for railroad crossing;
(6) At the material time, countless number of Makati bound public utility and
private vehicles used on a daily basis the site of the collision as an alternative
route and short-cut to Makati;
(7) The train driver or operator left the scene of the incident on board the
commuter train involved without waiting for the police investigator;
(8) The site commonly used for railroad crossing by motorists was not in fact
intended by the railroad operator for railroad crossing at the time of the
vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an
internal arrangement between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than
100 meters from the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his
functions, liable for negligence constituting the proximate cause of the
vehicular collision, which resulted in the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the employer of
defendant Alfaro are liable for any negligence which may be attributed to
defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator
of the railroad system is liable for negligence in failing to provide adequate
safety warning signs and railings in the area commonly used by motorists for
railroad crossings, constituting the proximate cause of the vehicular collision
which resulted in the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable for breach of the
contract of carriage with plaintiff-spouses in failing to provide adequate and
safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages,
exemplary damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Pereña
observed the diligence of employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death
of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the
commuter train involved in the accident, in allowing or tolerating the motoring
public to cross, and its failure to install safety devices or equipment at the site
of the accident for the protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant
spouses for any and whatever amount the latter may be held answerable or
which they may be ordered to pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on
the amounts claimed by the latter in their Complaint by reason of its gross
negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual,
moral and exemplary damages and attorney's fees. 2
The Zarates’ claim against the Pereñas was upon breach of the contract of
carriage for the safe transport of Aaron; but that against PNR was based on
quasi-delict under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show that they had
exercised the diligence of a good father of the family in the selection and
supervision of Alfaro, by making sure that Alfaro had been issued a driver’s
license and had not been involved in any vehicular accident prior to the
collision; that their own son had taken the van daily; and that Teodoro Pereña
had sometimes accompanied Alfaro in the van’s trips transporting the students
to school.
For its part, PNR tended to show that the proximate cause of the collision had
been the reckless crossing of the van whose driver had not first stopped,
looked and listened; and that the narrow path traversed by the van had not
been intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision, disposing:
3
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the plaintiff and against the defendants ordering them to jointly and severally
pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,
reiterating that the cooperative gross negligence of the Pereñas and PNR had
caused the collision that led to the death of Aaron; and that the damages
awarded to the Zarates were not excessive, but based on the established
circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit: 5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and
severally liable together with defendant-appellants spouses Teodorico and
Nanette Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-
appellees for the death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees
witnesses despite overwhelming documentary evidence on record, supporting
the case of defendants-appellants Philippine National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable
for actual, moral and exemplary damages and attorney’s fees with the other
defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas
against the Philippine National Railways and in not holding the latter and its
train driver primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of
earning capacity in the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings
of the RTC, but limited the moral damages to ₱ 2,500,000.00; and deleted the
attorney’s fees because the RTC did not state the factual and legal bases, to
wit:
6
WHEREFORE, premises considered, the assailed Decision of the Regional
Trial Court, Branch 260 of Parañaque City is AFFIRMED with the modification
that the award of Actual Damages is reduced to ₱ 59,502.76; Moral Damages
is reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking
cognizance of the ruling in Cariaga v. Laguna Tayabas Bus Company and
Manila Railroad Company, wherein the Court gave the heirs of Cariaga a sum
7
representing the loss of the deceased’s earning capacity despite Cariaga
being only a medical student at the time of the fatal incident. Applying the
formula adopted in the American Expectancy Table of Mortality:–
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon
reckoning his life expectancy from age of 21 (the age when he would have
graduated from college and started working for his own livelihood) instead of
15 years (his age when he died). Considering that the nature of his work and
4
his salary at the time of Aaron’s death were unknown, it used the prevailing
minimum wage of ₱ 280.00/day to compute Aaron’s gross annual salary to be
₱ 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual
salary by Aaron’s life expectancy of 39.3 years, his gross income would
aggregate to ₱ 4,351,164.30, from which his estimated expenses in the sum
of ₱ 2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net
income. Due to Aaron’s computed net income turning out to be higher than the
amount claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly
prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration. 8
Issues
In this appeal, the Pereñas list the following as the errors committed by the
CA, to wit:
I. The lower court erred when it upheld the trial court’s decision holding the
petitioners jointly and severally liable to pay damages with Philippine National
Railways and dismissing their cross-claim against the latter.
II. The lower court erred in affirming the trial court’s decision awarding
damages for loss of earning capacity of a minor who was only a high school
student at the time of his death in the absence of sufficient basis for such an
award.
III. The lower court erred in not reducing further the amount of damages
awarded, assuming petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the
Pereñas and the PNR, basing their claim against the Pereñas on breach of
contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the
findings.
We concur with the CA.
To start with, the Pereñas’ defense was that they exercised the diligence of a
good father of the family in the selection and supervision of Alfaro, the van
driver, by seeing to it that Alfaro had a driver’s license and that he had not
been involved in any vehicular accident prior to the fatal collision with the train;
that they even had their own son travel to and from school on a daily basis;
and that Teodoro Pereña himself sometimes accompanied Alfaro in
transporting the passengers to and from school. The RTC gave scant
consideration to such defense by regarding such defense as inappropriate in
an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts
that the Pereñas operated as a common carrier; and that their standard of care
was extraordinary diligence, not the ordinary diligence of a good father of a
family.
Although in this jurisdiction the operator of a school bus service has been
usually regarded as a private carrier, primarily because he only caters to some
9
specific or privileged individuals, and his operation is neither open to the
indefinite public nor for public use, the exact nature of the operation of a school
bus service has not been finally settled. This is the occasion to lay the matter
to rest.
A carrier is a person or corporation who undertakes to transport or convey
goods or persons from one place to another, gratuitously or for hire. The carrier
is classified either as a private/special carrier or as a common/public carrier.
A private carrier is one who, without making the activity a vocation, or without
holding himself or itself out to the public as ready to act for all who may desire
his or its services, undertakes, by special agreement in a particular instance
only, to transport goods or persons from one place to another either
gratuitously or for hire. The provisions on ordinary contracts of the Civil Code
11
govern the contract of private carriage.The diligence required of a private
carrier is only ordinary, that is, the diligence of a good father of the family. In
contrast, a common carrier is a person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering such services to the
public. Contracts of common carriage are governed by the provisions on
12
common carriers of the Civil Code, the Public Service Act, and other special
13
laws relating to transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to have acted
negligently in case of the loss of the effects of passengers, or the death or
injuries to passengers. 14
In relation to common carriers, the Court defined public use in the following
terms in United States v. Tan Piaco, viz:15
"Public use" is the same as "use by the public". The essential feature of the
public use is not confined to privileged individuals, but is open to the indefinite
public. It is this indefinite or unrestricted quality that gives it its public character.
In determining whether a use is public, we must look not only to the character
of the business to be done, but also to the proposed mode of doing it. If the
use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of
the public utility commission. There must be, in general, a right which the law
compels the owner to give to the general public. It is not enough that the
general prosperity of the public is promoted. Public use is not synonymous
with public interest. The true criterion by which to judge the character of the
use is whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals, the Court noted that Article 1732 of the
16
Civil Code avoided any distinction between a person or an enterprise offering
transportation on a regular or an isolated basis; and has not distinguished a
carrier offering his services to the general public, that is, the general
community or population, from one offering his services only to a narrow
segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the
Civil Code coincides neatly with the notion of public service under the Public
Service Act, which supplements the law on common carriers found in the Civil
Code. Public service, according to Section 13, paragraph (b) of the Public
Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientèle,
whether permanent or occasional, and done for the general business
purposes, any common carrier, railroad, street railway, traction railway,
10
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, 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. x x x.17
Given the breadth of the aforequoted characterization of a common carrier,
the Court has considered as common carriers pipeline operators, custom 18
brokers and warehousemen, and barge operators even if they had limited
19 20
clientèle.
As all the foregoing indicate, the true test for a common carrier is not the
quantity or extent of the business actually transacted, or the number and
character of the conveyances used in the activity, but whether the undertaking
is a part of the activity engaged in by the carrier that he has held out to the
general public as his business or occupation. If the undertaking is a single
transaction, not a part of the general business or occupation engaged in, as
advertised and held out to the general public, the individual or the entity
rendering such service is a private, not a common, carrier. The question must
be determined by the character of the business actually carried on by the
carrier, not by any secret intention or mental reservation it may entertain or
assert when charged with the duties and obligations that the law imposes. 21
Applying these considerations to the case before us, there is no question that
the Pereñas as the operators of a school bus service were: (a) engaged in
transporting passengers generally as a business, not just as a casual
occupation; (b) undertaking to carry passengers over established roads by the
method by which the business was conducted; and (c) transporting students
for a fee. Despite catering to a limited clientèle, the Pereñas operated as a
common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near where
they operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the
passengers is defined by law. Given the nature of the business and for reasons
of public policy, the common carrier is bound "to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case." Article
22
1755 of the Civil Code specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all the
circumstances." To successfully fend off liability in an action upon the death or
injury to a passenger, the common carrier must prove his or its observance of
that extraordinary diligence; otherwise, the legal presumption that he or it was
at fault or acted negligently would stand. No device, whether by stipulation,
23
posting of notices, statements on tickets, or otherwise, may dispense with or
lessen the responsibility of the common carrier as defined under Article 1755
of the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense or
reason by which the Court might now reverse the CA’s findings on their liability.
On the contrary, an examination of the records shows that the evidence fully
supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already
presumed to be negligent at the time of the accident because death had
occurred to their passenger. The presumption of negligence, being a
25
presumption of law, laid the burden of evidence on their shoulders to establish
that they had not been negligent. It was the law no less that required them to
26
prove their observance of extraordinary diligence in seeing to the safe and
secure carriage of the passengers to their destination. Until they did so in a
credible manner, they stood to be held legally responsible for the death of
Aaron and thus to be held liable for all the natural consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their
negligence by credible evidence. Their defense of having observed the
diligence of a good father of a family in the selection and supervision of their
driver was not legally sufficient. According to Article 1759 of the Civil Code,
their liability as a common carrier did not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of
their employee. This was the reason why the RTC treated this defense of the
Pereñas as inappropriate in this action for breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver
might have acted beyond the scope of his authority or even in violation of the
orders of the common carrier. In this connection, the records showed their
27
driver’s actual negligence. There was a showing, to begin with, that their driver
traversed the railroad tracks at a point at which the PNR did not permit
motorists going into the Makati area to cross the railroad tracks. Although that
point had been used by motorists as a shortcut into the Makati area, that fact
alone did not excuse their driver into taking that route. On the other hand, with
his familiarity with that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding his lack of care
was that loud music was playing inside the air-conditioned van at the time of
the accident. The loudness most probably reduced his ability to hear the
warning horns of the oncoming train to allow him to correctly appreciate the
lurking dangers on the railroad tracks. Also, he sought to overtake a passenger
bus on the left side as both vehicles traversed the railroad tracks. In so doing,
he lost his view of the train that was then coming from the opposite side of the
passenger bus, leading him to miscalculate his chances of beating the bus in
their race, and of getting clear of the train. As a result, the bus avoided a
collision with the train but the van got slammed at its rear, causing the fatality.
Lastly, he did not slow down or go to a full stop before traversing the railroad
tracks despite knowing that his slackening of speed and going to a full stop
were in observance of the right of way at railroad tracks as defined by the traffic
laws and regulations. He thereby violated a specific traffic regulation on right
28
of way, by virtue of which he was immediately presumed to be negligent. 29
The omissions of care on the part of the van driver constituted negligence, 30
which, according to Layugan v. Intermediate Appellate Court, is "the omission
31
to do something which a reasonable man, guided by those considerations
which ordinarily regulate the conduct of human affairs, would do, or the doing
of something which a prudent and reasonable man would not do, or as Judge 32
Cooley defines it, ‘(t)he failure to observe for the protection of the interests of
another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury.’" 33
The test by which to determine the existence of negligence in a particular case
has been aptly stated in the leading case of Picart v. Smith, thuswise:
34
The test by which to determine the existence of negligence in a particular case
may be stated as follows: 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. The
law here in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the
personal judgment of the actor in the situation before him. The law considers
what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a
given situation must of course be always determined in the light of human
experience and in view of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much can be profitably said:
Reasonable men govern their conduct by the circumstances which are before
them or known to them. They are not, and are not supposed to be, omniscient
of the future. Hence they can be expected to take care only when there is
something before them to suggest or warn of danger. Could a prudent man, in
the case under consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take precautions to guard against
that harm. Reasonable foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary before negligence can
be held to exist. Stated in these terms, the proper criterion for determining the
existence of negligence in a given case is this: Conduct is said to be negligent
when a prudent man in the position of the tortfeasor would have foreseen that
an effect harmful to another was sufficiently probable to warrant his foregoing
the conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was
entirely negligent when he traversed the railroad tracks at a point not allowed
for a motorist’s crossing despite being fully aware of the grave harm to be
thereby caused to his passengers; and when he disregarded the foresight of
harm to his passengers by overtaking the bus on the left side as to leave
himself blind to the approach of the oncoming train that he knew was on the
opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate
Court, where the Court held the PNR solely liable for the damages caused to
35
a passenger bus and its passengers when its train hit the rear end of the bus
that was then traversing the railroad crossing. But the circumstances of that
case and this one share no similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of contributory negligence was
adduced against the owner of the bus. Instead, it was the owner of the bus
who proved the exercise of extraordinary diligence by preponderant evidence.
Also, the records are replete with the showing of negligence on the part of both
the Pereñas and the PNR. Another distinction is that the passenger bus in
Philippine National Railways v. Intermediate Appellate Court was traversing
the dedicated railroad crossing when it was hit by the train, but the Pereñas’
school van traversed the railroad tracks at a point not intended for that
purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR
"jointly and severally" liable for damages arising from the death of Aaron. They
had been impleaded in the same complaint as defendants against whom the
Zarates had the right to relief, whether jointly, severally, or in the alternative,
in respect to or arising out of the accident, and questions of fact and of law
were common as to the Zarates. Although the basis of the right to relief of the
36
Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct
from the basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict
under Article 2176, Civil Code), they nonetheless could be held jointly and
severally liable by virtue of their respective negligence combining to cause the
death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of
negligence despite the school van of the Pereñas traversing the railroad tracks
at a point not dedicated by the PNR as a railroad crossing for pedestrians and
motorists, because the PNR did not ensure the safety of others through the
placing of crossbars, signal lights, warning signs, and other permanent safety
barriers to prevent vehicles or pedestrians from crossing there. The RTC
observed that the fact that a crossing guard had been assigned to man that
point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of
the risks to others as well as the need to control the vehicular and other traffic
there. Verily, the Pereñas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although
agreeing with the RTC on the liability, the CA modified the amount. Both lower
courts took into consideration that Aaron, while only a high school student, had
been enrolled in one of the reputable schools in the Philippines and that he
had been a normal and able-bodied child prior to his death. The basis for the
computation of Aaron’s earning capacity was not what he would have become
or what he would have wanted to be if not for his untimely death, but the
minimum wage in effect at the time of his death. Moreover, the RTC’s
computation of Aaron’s life expectancy rate was not reckoned from his age of
15 years at the time of his death, but on 21 years, his age when he would have
graduated from college.
We find the considerations taken into account by the lower courts to be
reasonable and fully warranted.
Yet, the Pereñas submit that the indemnity for loss of earning capacity was
speculative and unfounded.1âwphi1 They cited People v. Teehankee, Jr., 37
where the Court deleted the indemnity for victim Jussi Leino’s loss of earning
capacity as a pilot for being speculative due to his having graduated from high
school at the International School in Manila only two years before the shooting,
and was at the time of the shooting only enrolled in the first semester at the
Manila Aero Club to pursue his ambition to become a professional pilot. That
meant, according to the Court, that he was for all intents and purposes only a
high school graduate.
We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation
there of Jussi Leino was not akin to that of Aaron here. The CA and the RTC
were not speculating that Aaron would be some highly-paid professional, like
a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the
computation of Aaron’s earning capacity was premised on him being a lowly
minimum wage earner despite his being then enrolled at a prestigious high
school like Don Bosco in Makati, a fact that would have likely ensured his
success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings
should not be taken against his parents and in favor of the defendants whose
negligence not only cost Aaron his life and his right to work and earn money,
but also deprived his parents of their right to his presence and his services as
well. Our law itself states that the loss of the earning capacity of the deceased
shall be the liability of the guilty party in favor of the heirs of the deceased, and
shall in every case be assessed and awarded by the court "unless the
deceased on account of permanent physical disability not caused by the
defendant, had no earning capacity at the time of his death." Accordingly, we
38
emphatically hold in favor of the indemnification for Aaron’s loss of earning
capacity despite him having been unemployed, because compensation of this SO ORDERED.
nature is awarded not for loss of time or earnings but for loss of the deceased’s
power or ability to earn money. 39

This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga

v. Laguna Tayabas Bus Company and Manila Railroad Company, fourth-year
40

medical student Edgardo Carriaga’s earning capacity, although he survived

the accident but his injuries rendered him permanently incapacitated, was
computed to be that of the physician that he dreamed to become. The Court
considered his scholastic record sufficient to justify the assumption that he
could have finished the medical course and would have passed the medical
board examinations in due time, and that he could have possibly earned a
modest income as a medical practitioner. Also, in People v. Sanchez, the 41

Court opined that murder and rape victim Eileen Sarmienta and murder victim
Allan Gomez could have easily landed good-paying jobs had they graduated
in due time, and that their jobs would probably pay them high monthly salaries
from ₱ 10,000.00 to ₱ 15,000.00 upon their graduation. Their earning
capacities were computed at rates higher than the minimum wage at the time
of their deaths due to their being already senior agriculture students of the
University of the Philippines in Los Baños, the country’s leading educational
institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereñas plead for the reduction of the moral and exemplary damages
awarded to the Zarates in the respective amounts of ₱ 2,500,000.00 and ₱
1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of ₱ 2,500,000.00 were really just and reasonable under
the established circumstances of this case because they were intended by the
law to assuage the Zarates’ deep mental anguish over their son’s unexpected
and violent death, and their moral shock over the senseless accident. That
amount would not be too much, considering that it would help the Zarates
obtain the means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the amount as
excessive might prove to be an injustice, given the passage of a long time from
when their mental anguish was inflicted on them on August 22, 1996.
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not
reduce the amount if only to render effective the desired example for the public
good. As a common carrier, the Pereñas needed to be vigorously reminded to
observe their duty to exercise extraordinary diligence to prevent a similarly
senseless accident from happening again. Only by an award of exemplary
damages in that amount would suffice to instill in them and others similarly
situated like them the ever-present need for greater and constant vigilance in
the conduct of a business imbued with public interest.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the
decision promulgated on November 13, 2002; and ORDER the petitioners to
pay the costs of suit.