De Guzman vs.
CA (GR L-47822, 22 December 1988)
Third Division, Feliciano (J): 4 concur
Facts: Ernesto Cendanñ a, a junk dealer, was engaged in buying
up used bottles and scrap metal in Pangasinan. Upon
gathering sufficient quantities of such scrap material,
Cendanñ a would bring such material to Manila for resale. He
utilized 2 six-wheeler trucks which he owned for hauling the
material to Manila. On the return trip to Pangasinan, Cendanñ a
would load his vehicles with cargo which various merchants
wanted delivered to differing establishments in Pangasinan.
For that service, Cendanñ a charged freight rates which were
commonly lower than regular commercial rates. Sometime in
November 1970, Pedro de Guzman, a merchant and
authorized dealer of General Milk Company (Philippines), Inc.
in Urdaneta, Pangasinan, contracted with Cendanñ a for the
hauling of 750 cartons of Liberty filled milk from a
warehouse of General Milk in Makati, Rizal, to de Guzman’s
establishment in Urdaneta on or before 4 December 1970.
Accordingly, on 1 December 1970, Cendanñ a loaded in Makati
the merchandise on to his trucks: 150 cartons were loaded on
a truck driven by Cendanñ a himself; while 600 cartons were
placed on board the other truck which was driven by Manuel
Estrada, Cendanñ a ‘s driver and employee. Only 150 boxes of
Liberty filled milk were delivered to de Guzman. The other
600 boxes never reached de Guzman, 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, de Guzman commenced action against
Cendanñ a in the CFI of Pangasinan, demanding payment of
P22,150.00, the claimed value of the lost merchandise, plus
damages and attorney’s fees. De Guzman argued that
Cendanñ a, 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, Cendanñ a 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 Cendanñ a to be a common carrier and
holding him liable for the value of the undelivered goods
(P22,150.00) as well as for P4,000.00 as damages and
P2,000.00 as attorney’s fees.
On appeal before the Court of Appeals, Cendanñ a 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 Cendanñ a 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. De Guzman came to the
Supreme Court by way of a Petition for Review.
The Supreme Court denied the Petition for Review on
Certiorari; and affirmed the Decision of the Court of Appeals
dated 3 August 1977; without pronouncement as to costs.
1. Common carriers defined; Article 1732 NCC
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.”
2. Article 1732 NCC makes no distinctions
Article 1732 of the Civil Code makes no distinction
between one whose principal business activity is the
carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in
local idiom, as “a sideline”). Article 1732 also
carefully avoids making any distinction between a
person or enterprise offering transportation service
on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between
a carrier offering its services to the “general public,”
i.e., the general community or population, and one
who offers services or solicits business only from a
narrow segment of the general population. Article
1733 deliberately refrained from making such
distinctions.
3. Concept of “common carrier” coincides neatly with
the notion of “public service” 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
1416, as amended) which at least partially
supplements the law on common carriers set forth in
the Civil Code.
4. Public Service; Section 13, paragraph (b) of the
Public Service Act
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. “
5. Cendanñ a a common carrier Cendanñ a is properly
characterized as a common carrier even though he
merely “back-hauled” goods for other merchants
from Manila to Pangasinan, although such
backhauling was done on a periodic or occasional
rather than regular or scheduled manner, and even
though Cendanñ a’s principal occupation was not the
carriage of goods for others. There is no dispute that
Cendanñ a charged his customers a fee for hauling
their goods; that fee frequently fell below
commercial freight rates is not relevant.
6. Certificate of public convenience not requisite for
incurring of liability as common carrier 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. Herein, to
exempt Cendanñ a 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.
7. Business of common carrier imbued with public
interest 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.
8. Extraordinary diligence required of common carriers
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
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.
9. Article 1734 NCC 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.”
10. Enumeration in Article 1734 NCC exclusive; Article
1735 NCC
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 that “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.”
11. Hold uppers of second truck armed Herein, armed
men held up the second truck owned by Cendanñ a
which carried de Guzman’s cargo. The record shows
that an information for robbery in band was filed in
the CFI of Tarlac, Branch 2, in Criminal Case 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 de
Guzman’s store in Urdaneta, Pangasinan. The
decision of the trial court shows that the accused
acted with grave, if not irresistible, threat, violence
or force. 3 of the 5 holduppers were armed with
firearms. The robbers not only took away the truck
and its cargo but also kidnapped the driver and his
helper, detaining them for several days and later
releasing them in another province (in Zambales).
The hijacked truck was subsequently found by the
police in Quezon City. The CFI convicted all the
accused of robbery, though not of robbery in band.
12. Specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in
the specific context of hijacking or armed robbery;
Armed robbery herein is fortuitous event 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 (5) that the
common carrier shall not be responsible for the acts
or omissions of his or its employees; (6) that the
common carrier’s liability for acts committed by
thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed
with or diminished; and (7) that the common carrier
shall not responsible for the loss, destruction or
deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage.” Under
Article 1745 (6), 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.” 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
these circumstances, 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.
13. Common carriers not absolute insurers against all
risks of travel and of transport of goods
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.
First Philippine Industrial Corp. vs. Court of Appeals
300 SCRA 661, 1998
Facts: Petitioner is a grantee of a pipeline concession under
R.A. No. 387, as amended, a contract, install and operate oil
pipelines. The original pipeline concession was granted in
1967 and renewed by the Energy Regulatory Board in 1992.
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 Treasure
assessed a business tax on the petitioner amounting to
P956,076.04 payable in four installments based on the gross
receipts for products pumped at GPS-1 for the fiscal year
1993 which amounted to P181,681,151.00. in order not to
hamper its operations, petitioner paid the tax under protest
in the amount of P239, 019.01 for the first quarter of 1993.
On June 15, 1994, petitioner filed with the RTC of Batangas
City a complaint for tax refund with prayer for writ of
preliminary injunction against respondents City of Batangas
and Adoracion Arellano in her capacity as City Treasurer. In
its complaint, petitioner alleged, inter alia, that: (1) the
imposition and collection of the business tax on its gross
receipts violates Sec. 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
contactors; and (3) the City Treasurer illegally and
erroneously imposed and collected the said tax, thus meriting
the immediate refund of the tax paid.
Traversing the complaint, the respondents argued that
petitioner cannot be exempt from taxes under Sec. 133 (J) of
the Local Government Code as said exemption applied 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 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.
Issue: Whether or not the petitioner is a common carrier so
that in the affirmative, he is not liable to pay the carriers tax
under the Local Government Code of 1991?
Held: Petitioner is a common carrier.
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 carrying of goods for others as a
public employment, and must hold himself out as ready to
engage in the transportation of goods or persons 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.
G.R. No. 157917 August 29, 2012
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
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 Paranñ aque 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 Perenñ as were engaged in the business of transporting
students from their respective residences in Paranñ aque City
to Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Perenñ as 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 Perenñ as 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.
At about the time the van was to traverse the railroad
crossing, PNR Commuter 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 Perenñ as, PNR and Alano. The Perenñ as 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
Perenñ a for the adequate and safe transportation
carriage of the former spouses' son from their
residence in Paranñ aque 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 Perenñ a, 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 Perenñ a
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 Perenñ a 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 Perenñ a 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
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 Perenñ as and the PNR, basing their claim
against the Perenñ as on breach of contract of carriage and
against the PNR on quasi-delict.
The RTC found the Perenñ as and the PNR negligent. The CA
affirmed the findings.
We concur with the CA.
To start with, the Perenñ as’ 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 Perenñ a 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 Perenñ as 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,9primarily because he only caters to some 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.10 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.11 The provisions on
ordinary contracts of the Civil Code 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.12 Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public
Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to
have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers. 14
In relation to common carriers, the Court defined public use
in the following terms in United States v. Tan Piaco,15viz:
"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,16 the Court noted that
Article 1732 of the 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 clienteè le, whether
permanent or occasional, and done for the 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,
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,18 custom brokers and
warehousemen, and barge operators20 even if they had
19
limited clienteè le.
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 Perenñ as 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
clienteè le, the Perenñ as 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."22 Article 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. 23 No device, whether
by stipulation, 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 Perenñ as 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 Perenñ as, acting as a common carrier,
were already presumed to be negligent at the time of the
accident because death had occurred to their passenger. 25 The
presumption of negligence, being a presumption of law, laid
the burden of evidence on their shoulders to establish that
they had not been negligent. 26 It was the law no less that
required them to 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 Perenñ as 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
Perenñ as as inappropriate in this action for breach of contract
of carriage.
The Perenñ as 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.27 In this connection, the records showed their 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. 28He thereby violated a
specific traffic regulation on right 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,31 is "the omission 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, 32 or as Judge
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,34 thuswise:
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 Perenñ as’
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 Perenñ as cite Phil. National Railways v.
Intermediate Appellate Court,35 where the Court held the PNR
solely liable for the damages caused to 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 Perenñ as 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 Perenñ as’ school van traversed the
railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Perenñ as
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.36 Although the basis of the right to relief of the
Zarates (i.e., breach of contract of carriage) against the
Perenñ as 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 Perenñ as 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 Perenñ as 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 Perenñ as 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 Perenñ as’ 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."38 Accordingly, we emphatically hold in favor of
the indemnification for Aaron’s loss of earning capacity
despite him having been unemployed, because compensation
of this 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, 40 fourth-year 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, 41 the 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 Banñ os, the country’s leading educational
institution in agriculture.
3.
Were the amounts of damages excessive?
The Perenñ as 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
Perenñ as 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.
SO ORDERED.
PHILTRANCO SERVICE ENTERPRISES, INC.,
Petitioner,
-versus-
FELIX PARAS AND INLAND TRAILWAYS, INC., AND HON.
COURT OF APPEALS,
Respondents.
BERSAMIN, J.:
In an action for breach of contract of carriage
commenced by a passenger against his common carrier, the
plaintiff can recover damages from a third-party defendant
brought into the suit by the common carrier upon a claim
based on tort or quasi-delict. The liability of the third-party
defendant is independent from the liability of the common
carrier to the passenger.
Philtranco Service Enterprises, Inc. (Philtranco)
appeals the affirmance with modifications by the Court of
Appeals (CA) of the decision of the Regional Trial Court (RTC)
awarding moral, actual and temperate damages, as well as
attorneys fees and costs of suit, to respondent Felix Paras
(Paras), and temperate damages to respondent Inland
Trailways, Inc. (Inland), respectively the plaintiff and the
defendant/third-party plaintiff in this action for breach of
contract of carriage, upon a finding that the negligence of the
petitioner and its driver had caused the serious physical
injuries Paras sustained and the material damage Inlands bus
suffered in a vehicular accident.
Antecedents
The antecedent facts, as summarized by the CA, are
as follows:
Plaintiff-appellant [respondent]
Felix Paras (Paras for brevity), who hails
from Cainta, Rizal is engaged in the buy and
sell of fish products. Sometime on 08
February 1987, on his way home
to Manila from Bicol Region, he boarded a
bus with Body No. 101 and Plate No. EVE
508, owned and operated by Inland
Trailways, Inc. (Inland for brevity) and
driven by its driver Calvin Coner (Coner for
brevity).
At approximately 3:50 oclock in the
morning of 09 February 1987, while the said
bus was travelling along Maharlika Highway,
Tiaong, Quezon, it was bumped at the rear
by another bus with Plate No. EVB 259,
owned and operated by Philtranco Service
Enterprises, Inc. (Philtranco for brevity). As
a result of the strong and violent impact, the
Inland bus was pushed forward and
smashed into a cargo truck parked along the
outer right portion of the highway and the
shoulder thereof. Consequently, the said
accident bought considerable damage to the
vehicles involved and caused physical
injuries to the passengers and crew of the
two buses, including the death of Coner who
was the driver of the Inland Bus at the time
of the incident.
Paras was not spared from the
pernicious effects of the accident. After an
emergency treatment at the San
Pablo Medical Center, San Pablo City, Laguna,
Paras was taken
the NationalOrthopedic Hospital. At the
latter hospital, he was found and diagnosed
by Dr. Antonio Tanchuling, Jr. to be affected
with the following injuries:
contusion/hematoma; b) dislocation of hip
upon fracture of the fibula on the right leg;
c) fractured small bone on the right leg; and
d) close fracture on the tibial plateau of the
left leg. (Exh. A, p. 157, record)
complaint, Inland, sought for exoneration of
its liabilities to Paras, asserting that the
latters cause of action should be directed
against Philtranco considering that the
accident was caused by Miralles lack of care,
negligence and reckless imprudence. (pp. 50
to 56, records).
After trial, the RTC (Branch 71) in Antipolo, Rizal
rendered its judgment on July 18, 1997,[1] viz:
WHEREFORE, third-party defendant
Philtranco and Apolinar Miralles are hereby
ordered to pay plaintiff jointly and severally,
the following amounts:
1.P54,000.00 as actual damages;
to
2.P50,000.00 as moral damages;
3.P20,000.00 as attorneys fees and
a) costs.
SO ORDERED.
All the parties appealed to the CA on different
grounds.

On 04 March 1987 and 15 April

1987, Paras underwent two (2) operations On his part, Paras ascribed the following errors to
affecting the fractured portions of his body. the RTC, to wit:
(Exhs. A-2 and A-3, pp. 159 and 160
respectively, record)
1. THE TRIAL COURT ERRED IN HOLDING
THAT ONLY THIRD-PARTY DEFENDANT-
Unable to obtain sufficient financial
APPELLANT PHILTRANCO IS LIABLE FOR
assistance from Inland for the costs of his
THE DAMAGES SUFFERED BY APPELLANT
operations, hospitalization, doctors fees and
PARAS.
other miscellaneous expenses, on 31 July
1989, Paras filed a complaint for damages
II. THE TRIAL COURT ERRED IN NOT
based on breach of contract of
HOLDING APPELLANT INLAND TRAILWAYS
carriage against Inland.
INC. TO BE JOINTLY AND SEVERALLY
LIABLE FOR THE DAMAGES SUFFERED BY
In its answer, defendant Inland
PARAS.
denied responsibility, by alleging, among
others, that its driver Coner had observed an
III. THE TRIAL COURT ERRED IN NOT
utmost and extraordinary care and diligence
AWARDING UNEARNED INCOME AS
to ensure the safety of its passengers. In
ADDITIONAL ACTUAL DAMAGES SUFFERED
support of its disclaimer of responsibility,
BY APPELLANT PARAS AS HIS PHYSICAL
Inland invoked the Police Investigation
DISABILITY IS PERMANENT IN NATURE.
Report which established the fact that the
Philtranco bus driver of [sic] Apolinar
IV. THE TRIAL COURT ERRED IN NOT
Miralles was the one which violently
AWARDING EXEMPLARY DAMAGES IN
bumped the rear portion of the Inland bus,
FAVOR OF APPELLANT PARAS.
and therefore, the direct and proximate
cause of Paras injuries.
On the other hand, Inland assigned the following
On 02 March 1990, upon leave of
errors to the RTC, namely:
court, Inland filed a third-party complaint
against Philtranco and Apolinar Miralles
(Third Party defendants). In this third-party
 THE TRIAL COURT ERRED WHEN IT FAILED
TO AWARD DAMAGES UNTO THE THIRD
PARTY PLAINTIFF NOTWITHSTANDING
CLEAR FINDING THAT:
It is clear from the evidence that
the plaintiff sustained injuries
because of the reckless,
negligence, and lack of
precaution of third party
defendant Apolinar Miralles, an
employee of Philtranco.
AND, COMPLETELY DISREGARDED THE
UNCONTROVERTED ORAL AND
DOCUMENTARY EVIDENCES ESTABLISHING
THE EXTENT AND DEGREE OF DAMAGES
SUSTAINED BY THE THIRD PARTY
PLAINTIFF.
Lastly, Philtranco stated that the RTC erred
thuswise:
I defendant-appellants
THE COURT A QUO MISERABLY ERRED IN
AWARDING ACTUAL DAMAGES GREATER
THAN WHAT WAS ALLEGED IN THE
COMPLAINT ITSELF, AND EVEN MUCH
MORE GREATER THAN WHAT WERE
PROVED DURING THE TRIAL, HENCE,
PERPETUATING UNJUST ENRICHMENT.
II
THE COURT A QUO SERIOUSLY ERRED IN
AWARDING MORAL DAMAGES TO A CAUSE
OF ACTION OF CULPA-CONTRACTUAL EVEN
WITHOUT ANY EVIDENCE OF GROSS BAD
FAITH; HENCE, CONTRARY TO THE
ESTABLISHED DOCTRINE IN THE CASES OF
PHIL. RABBIT BUS LINES VS. ESGUERRA;
SOBERANO VS. BENGUET AUTO LINE AND
FLORES VS. MIRANDA.
III
THE COURT A QUO MISERABLY ERRED IN
HOLDING THAT MIRALLES WAS THE ONE
AT FAULT MERELY ON THE STRENGHT OF
THE TESTIMONY OF THE POLICE
INVESTIGATOR WHICH IS IN TURN BASED
ON THE STATEMENTS OF ALLEGED
WITNESSES WHO WERE NEVER
PRESENTED ON THE WITNESS STAND.
IV
THE COURT A QUO COMMITTED A
GRIEVOUS ERROR IN DISREGARDING THE
TESTIMONY OF APPELLANTS WITNESSES
WHO TESTIFIED AS TO THE DEFENSE OF
EXERCISE OF DUE DILIGENCE IN THE
SELECTION AND SUPERVISION OF
EMPLOYEES PURSUANT TO ART. 2180, LAST
PARAGRAPH, NEW CIVIL CODE.
On September 25, 2002, the CA promulgated its
decision,[2] disposing:
WHEREFORE, in consideration of
the foregoing premises, the assailed decision
dated 18 July 19(9)7 is perforce affirmed
with the following modifications:
1. Third party defendants-
appellants Philtranco and Apolinar Miralles
are ordered to pay plaintiff-appellant Felix
Paras jointly and severally the following
amounts:
a) P1,397.95 as actual damages;
b) P50,000.00 as temperate damages;
c) P50,000.00 as moral damages; and
d) P20,000.00 as attorneys fees and costs of suit.
2. On the third party plaintiff-
appellant Inlands claims, the third party
Philtranco and
Apolinar Miralles are hereby ordered to pay
the former (Inland) jointly and severally the
amount of P250,000.00 as and by way of
temperate damages.
SO ORDERED.
The CA agreed with the RTCs finding that no trace of
negligence at the time of the accident was attributable to
Inlands driver, rendering Inland not guilty of breach of
contract of carriage; that faulty brakes had caused
Philtrancos bus to forcefully bump Inlands bus from behind,
making it hit the rear portion of a parked cargo truck; that the
impact had resulted in considerable material damage to the
three vehicles; and that Paras and others had sustained
various physical injuries.
Accordingly, the CA: (a) sustained the award of moral
damages of P50,000.00 in favor of Paras pursuant to Article
2219 of the Civil Code based on quasi-delict committed by
Philtranco and its driver; (b) reduced the actual damages to
be paid by Philtranco to Paras from P54,000.00 to P1,397.95
because only the latter amount had been duly supported by
receipts; (c) granted temperate damages of P50,000.00 (in
lieu of actual damages in view of the absence of competent
proof of actual damages for his hospitalization and
therapy) to be paid by Philtranco to Paras; and (d) awarded
temperate damages of P250,000.00 under the same premise
to be paid by Philtranco to Inland for the material damage
caused to Inlands bus.
Philtranco moved for reconsideration, [3] but the CA
denied its motion for reconsideration on January 21, 2004.[4]
Issues
 been the negligent, reckless and imprudent manner
Hence, this appeal, in which the petitioner submits defendant Apolinar Miralles drove and operated his driven
that the CA committed grave abuse of discretion amounting unit, the Philtranco Bus with Plate No. 259, owned and
to lack of jurisdiction in awarding moral damages to Paras operated by third-party defendant Philtranco Service
despite the fact that the complaint had been anchored on Enterprises, Inc.[10] The apparent objective of Inland was not
breach of contract of carriage; and that the CA committed a to merely subrogate the third-party defendants for itself, as
reversible error in substituting its own judgment by motu Philtranco appears to suggest, [11] but, rather, to obtain a
proprio awarding temperate damages of P250,000.00 to different relief whereby the third-party defendants would be
Inland and P50,000.00 to Paras despite the clear fact that held directly, fully and solely liable to Paras and Inland for
temperate damages were not raised on appeal by Paras and whatever damages each had suffered from the negligence
Inland. committed by Philtranco and its driver. In other words,
Philtranco and its driver were charged here as joint
Ruling tortfeasors who would be jointly and severally be liable to
Paras and Inland.
The appeal lacks merit.
Impleading Philtranco and its driver through the third-party
The Court does not disturb the unanimous findings by the CA
complaint filed on March 2, 1990 was correct. The device of
and the RTC on the negligence of Philtranco and its driver
the third-party action, also known as impleader, was in
being the direct cause of the physical injuries of Paras and the
accord with Section 12, Rule 6 of the Revised Rules of Court,
material damage of Inland.
the rule then applicable, viz:
Nonetheless, we feel bound to pass upon the
Section 12. Third-party complaint. A
disparate results the CA and the RTC reached on the liabilities
third-party complaint is a claim that a
of Philtranco and its driver.
defending party may, with leave of court, file
against a person not a party to the action,
1.
called the third-party defendant, for
Paras can recover moral damages
contribution, indemnity, subrogation or any
in this suit based on quasi-delict
other relief, in respect of his opponents
Philtranco contends that Paras could not recover
claim.[12]
moral damages because his suit was based on breach of
contract of carriage, pursuant to which moral damages could
be recovered only if he had died, or if the common carrier had
Explaining the application of Section 12, Rule
been guilty of fraud or bad faith. It argues that Paras had
6, supra, the Court said in Balbastro v. Court of Appeals,[13] to
suffered only physical injuries; that he had not adduced
wit:
evidence of fraud or bad faith on the part of the common
carrier; and that, consequently, Paras could not recover moral
Section 12 of Rule 6 of the Revised
damages directly from it (Philtranco), considering that it was
Rules of Court authorizes a defendant to
only being subrogated for Inland.
bring into a lawsuit any person not a party
to the action . . . for contribution, indemnity,
The Court cannot uphold the petitioners contention.
subrogation or any other relief in respect of
As a general rule, indeed, moral damages are not
his opponent's claim. From its explicit
recoverable in an action predicated on a breach of contract.
language it does not compel the defendant
This is because such action is not included in Article 2219 of
to bring the third-parties into the litigation,
the Civil Code[5] as one of the actions in which moral damages
rather it simply permits the inclusion of
may be recovered. By way of exception, moral damages are
anyone who meets the standard set forth in
recoverable in an action predicated on a breach of contract:
the rule. The secondary or derivative
(a) where the mishap results in the death of a passenger, as
liability of the third-party is central whether
provided in Article 1764,[6] in relation to Article 2206, (3),
the basis is indemnity, subrogation,
[7]
of the Civil Code; and (b) where the common carrier has
contribution, express or implied warranty or
been guilty of fraud or bad faith, [8] as provided in Article
some other theory. The impleader of new
2220[9] of the Civil Code.
parties under this rule is proper only
Although this action does not fall under either of the
when a right to relief exists under the
exceptions, the award of moral damages to Paras was
applicable substantive law. This rule is
nonetheless proper and valid. There is no question
merely a procedural mechanism, and
that Inland filed its third-party complaint against Philtranco
cannot be utilized unless there is some
and its driver in order to establish in this action that they,
substantive basis under applicable law.
instead of Inland, should be directly liable to Paras for the
physical injuries he had sustained because of their negligence.
Apart from the requirement that
To be precise, Philtranco and its driver were brought into the
the third-party complainant should
action on the theory of liability that the proximate cause of
assert a derivative or secondary claim for
the collision between Inlands bus and Philtrancos bus had
relief from the third-party defendant
 there are other limitations on said partys
ability to implead. The rule requires that
the third-party defendant is not a party
to the action for otherwise the proper
procedure for asserting a claim against
one who is already a party to the suit is
by means of counterclaim or cross-claim
under sections 6 and 7 of Rule 6. In
addition to the aforecited requirement,
the claim against the third-party
defendant must be based upon plaintiff's
claim against the original defendant
(third-party claimant). The crucial
characteristic of a claim under section 12
of Rule 6, is that the original defendant is
attempting to transfer to the third-party
defendant the liability asserted against
him by the original plaintiff.
Accordingly, the requisites for a third-party action
are, firstly, that the party to be impleaded must not yet be a
party to the action; secondly, that the claim against the third-
party defendant must belong to the original
defendant; thirdly, the claim of the original defendant against
the third-party defendant must be based upon the plaintiffs
claim against the original defendant; and, fourthly, the
defendant is attempting to transfer to the third-party
defendant the liability asserted against him by the original
plaintiff.[14]
As the foregoing indicates, the claim that the third-
party complaint asserts against the third-party defendant
must be predicated on substantive law. Here, the substantive
law on which the right of Inland to seek such other relief
through its third-party complaint rested were Article 2176
and Article 2180 of the Civil Code, which read:
Article 2176. Whoever by act or
omission causes damage to another, there
being fault or negligence, is obliged to pay
for the damage done. Such fault or
negligence, if there is no pre-existing
contractual relation between the parties, is
called a quasi-delict and is governed by the
provisions of this chapter. (1902a)
Article 2180. The obligation
imposed by article 2176 is demandable not
only for ones own acts or omissions, but also
for those of persons for whom one is
responsible.
xxx
Employers shall be liable for the damages
caused by their employees and household
helpers acting within the scope of their
assigned tasks, even though the former are
not engaged in any business or industry.
xxx
The responsibility treated of in this article
shall cease when the persons herein
mentioned prove that they observed all the
diligence of a good father of a family to
prevent damage. (1903a)
Paras cause of action against Inland (breach of contract of
carriage) did not need to be the same as the cause of action of
Inland against Philtranco and its driver (tort or quasi-delict)
in the impleader. It is settled that a defendant in a contract
action may join as third-party defendants those who may be
liable to him in tort for the plaintiffs claim against him, or
even directly to the plaintiff. [15] Indeed, Prof. Wright, et al.,
commenting on the provision of the Federal Rules of
Procedure of the United States from which Section 12, supra,
was derived, observed so, to wit:[16]
The third-party claim need not be
based on the same theory as the main claim.
For example, there are cases in which the
third-party claim is based on an express
indemnity contract and the original
complaint is framed in terms of negligence.
Similarly, there need not be any legal
relationship between the third-party
defendant and any of the other parties to the
action. Impleader also is proper even though
the third partys liability is contingent, and
technically does not come into existence
until the original defendants liability has
been established. In addition, the words is or
may be liable in Rule 14(a) make it clear that
impleader is proper even though the third-
party defendants liability is not
automatically established once the third-
party plaintiffs liability to the original
plaintiff has been determined.
Nor was it a pre-requisite for attachment of the
liability to Philtranco and its driver that Inland be first
declared and found liable to Paras for the breach of its
contract of carriage with him. [17] As the Court has cogently
discoursed in Samala v. Judge Victor:[18]
Appellants argue that since
plaintiffs filed a complaint for damages
against the defendants on a breach of
contract of carriage, they cannot recover
from the third-party defendants on a cause
of action based on quasi-delict. The third
party defendants, they allege, are never
parties liable with respect to plaintiff s claim
although they are with respect to the
defendants for indemnification, subrogation,
contribution or other reliefs. Consequently,
they are not directly liable to the plaintiffs.
Their liability commences only when the
defendants are adjudged liable and not
when they are absolved from liability as in
the case at bar.
Quite apparent from these
arguments is the misconception entertained
by appellants with respect to the nature and
office of a third party complaint.
Section 16, Rule 6 of the Revised
Rules of Court defines a third party
complaint as a claim that a defending party
may, with leave of court, file against a person
not a party to the action, called the third-
party defendant, for contribution,
indemnification, subrogation, or any other
relief, in respect of his opponents claim. In
the case of Viluan vs. Court of Appeals, et
al., 16 SCRA 742 [1966], this Court had
occasion to elucidate on the subjects
covered by this Rule, thus:
... As explained in the
Atlantic Coast Line R. Co.
vs. U.S. Fidelity & Guaranty
Co., 52 F. Supp. 177 (1943:)
From the sources of
Rule 14 and the decisions
herein cited, it is clear that
this rule, like the admiralty
rule, covers two distinct
subjects, the addition of
parties defendant to the
main cause of action, and
the bringing in of a third
party for a defendants
remedy over. xxx
If the third party
complaint alleges facts
showing a third partys
direct liability to plaintiff
on the claim set out in
plaintiffs petition, then
third party shall make his
defenses as provided in
Rule 12 and his
counterclaims against
plaintiff as provided in
Rule 13. In the case of
alleged direct liability, no
amendment (to the
complaint) is necessary
or required. The subject-
matter of the claim is
contained in plaintiff's
complaint, the ground of
third partys liability on
that claim is alleged in
third party complaint,
and third partys defense
to set up in his answer to
plaintiff's complaint. At
that point and without
amendment, the plaintiff
and third party are at
issue as to their rights
respecting the claim.
The provision in the
rule that, The third-party
defendant may assert any
defense which the third-
party plaintiff may assert to
the plaintiffs claim, applies
to the other subject,
namely, the alleged liability
of third party defendant.
The next sentence in the
rule, The third-party
defendant is bound by the
adjudication of the third
party plaintiffs liability to
the plaintiff, as well as of
his own to the plaintiff or to
the third-party plaintiff
applies to both subjects. If
third party is brought in as
liable only to defendant and
judgment is rendered
adjudicating plaintiff's
right to recover against
defendant and defendants
rights to recover against
third party, he is bound by
both adjudications.That
part of the sentence refers
to the second subject. If
third party is brought in as
liable to plaintiff, then third
party is bound by the
adjudication as between
him and plaintiff. That
refers to the first subject. If
third party is brought in as
liable to plaintiff and also
over to defendant, then
third party is bound by
both adjudications. xxx
Under this Rule, a person not a
party to an action may be impleaded by the
defendant either (a) on an allegation of
liability to the latter; (b) on the ground of
direct liability to the plaintiff-; or, (c) both
(a) and (b). The situation in (a) is covered by
the phrase for contribution, indemnity or
subrogation; while (b) and (c) are subsumed
under the catch all or any other relief, in
respect of his opponents claim.
The case at bar is one in which
the third party defendants are brought
into the action as directly liable to the
plaintiffs upon the allegation that the
primary and immediate cause as shown
by the police investigation of said
 vehicular collision between (sic) the
above-mentioned three vehicles was the
recklessness and negligence and lack of
imprudence (sic) of the third-party
defendant Virgilio (should be Leonardo)
Esguerra y Ledesma then driver of the
passenger bus. The effects are that
plaintiff and third party are at issue as to
their rights respecting the claim and the
third party is bound by the adjudication
as between him and plaintiff. It is not
indispensable in the premises that the
defendant be first adjudged liable to
plaintiff before the third-party defendant
may be held liable to the plaintiff, as
precisely, the theory of defendant is that
it is the third party defendant, and not he,
who is directly liable to plaintiff. The
situation contemplated by appellants
would properly pertain to situation (a)
above wherein the third party defendant
is being sued for contribution, indemnity
or subrogation, or simply stated, for a
defendant's remedy over.[19]
It is worth adding that allowing the recovery of
damages by Paras based on quasi-delict, despite his
complaint being upon contractual breach, served the judicial
policy of avoiding multiplicity of suits and circuity of actions
by disposing of the entire subject matter in a single litigation.
[20]
2.
Award of temperate damages was in
order
Philtranco assails the award of temperate damages by the CA
considering that, firstly, Paras and Inland had not raised the
matter in the trial court and in their respective
appeals; secondly, the CA could not substitute the temperate
damages granted to Paras if Paras could not properly
establish his actual damages despite evidence of his actual
expenses being easily available to him; and, thirdly, the CA
gravely abused its discretion in granting motu proprio the
temperate damages of P250,000.00 to Inland although Inland
had not claimed temperate damages in its pleading or during
trial and even on appeal.
The Court cannot side with Philtranco.
Actual damages, to be recoverable, must not only be capable
of proof, but must actually be proved with a reasonable
degree of certainty. The reason is that the court cannot simply
rely on speculation, conjecture or guesswork in determining
the fact and amount of damages, but there must be
competent proof of the actual amount of loss, credence can be
given only to claims which are duly supported by receipts.[21]
The receipts formally submitted and offered by Paras
were limited to the costs of medicines purchased on various
times in the period from February 1987 to July 1989
(Exhibits E to E-35, inclusive) totaling only P1,397.95.[22] The
receipts by no means included hospital and medical
expenses, or the costs of at least two surgeries as well as
rehabilitative therapy. Consequently, the CA fixed actual
damages only at that small sum of P1,397.95. On its part,
Inland offered no definite proof on the repairs done on its
vehicle, or the extent of the material damage except the
testimony of its witness, Emerlinda Maravilla, to the effect
that the bus had been damaged beyond economic repair.
[23]
The CA rejected Inlands showing of unrealized income
worth P3,945,858.50 for 30 months (based on
alleged average weekly income of P239,143.02 multiplied by
its guaranteed revenue amounting to 55% thereof, then
spread over a period of 30 months, the equivalent to the
remaining 40% of the vehicles un-depreciated or net book
value), finding such showing arbitrary, uncertain and
speculative.[24] As a result, the CA allowed no compensation to
Inland for unrealized income.
Nonetheless, the CA was convinced that Paras should
not suffer from the lack of definite proof of his actual
expenses for the surgeries and rehabilitative therapy; and
that Inland should not be deprived of recourse to recover its
loss of the economic value of its damaged vehicle. As the
records indicated, Paras was first rushed for emergency
treatment to the San Pablo Medical Center in San Pablo City,
Laguna, and was later brought to the National Orthopedic
Hospital in Quezon City where he was diagnosed to have
suffered a dislocated hip, fracture of the fibula on the right
leg, fracture of the small bone of the right leg, and closed
fracture on the tibial plateau of the left leg. He underwent
surgeries on March 4, 1987 and April 15, 1987 to repair the
fractures.[25] Thus, the CA awarded to him temperate damages
of P50,000.00 in the absence of definite proof of his actual
expenses towards that end. As to Inland, Maravillas testimony
of the bus having been damaged beyond economic repair
showed a definitely substantial pecuniary loss, for which the
CA fixed temperate damages of P250,000.00. We cannot
disturb the CAs determination, for we are in no position
today to judge its reasonableness on account of the lapse of a
long time from when the accident occurred.[26]
In awarding temperate damages in lieu of actual
damages, the CA did not err, because Paras and Inland were
definitely shown to have sustained substantial pecuniary
losses. It would really be a travesty of justice were the CA
now to be held bereft of the discretion to calculate moderate
or temperate damages, and thereby leave Paras and Inland
without redress from the wrongful act of Philtranco and its
driver.[27] We are satisfied that the CA exerted effort and
practiced great care to ensure that the causal link between
the physical injuries of Paras and the material loss of Inland,
on the one hand, and the negligence of Philtranco and its
driver, on the other hand, existed in fact. It also rejected
arbitrary or speculative proof of loss. Clearly, the costs of
Paras surgeries and consequential rehabilitation, as well as
the fact that repairing Inlands vehicle would no longer be
economical justly warranted the CA to calculate temperate
damages of P50,000.00 and P250,000.00 respectively for
Paras and Inland.
There is no question that Article 2224 of the Civil
Code expressly authorizes the courts to award temperate
damages despite the lack of certain proof of actual damages,
to wit:
Article 2224. Temperate or
moderate damages, which are more than
nominal but less than compensatory
damages, may be recovered when the court
finds that some pecuniary loss has been
suffered but its amount cannot, from the
nature of the case, be proved with certainty.
The rationale for Article 2224 has been stated in Premiere
Development Bank v. Court of Appeals[28] in the following
manner:
Even if not recoverable as
compensatory damages, Panacor may still be
awarded damages in the concept of
temperate or moderate damages. When the
court finds that some pecuniary loss has
been suffered but the amount cannot, from
the nature of the case, be proved with
certainty, temperate damages may be
recovered. Temperate damages may be
allowed in cases where from the nature of
the case, definite proof of pecuniary loss
cannot be adduced, although the court is
convinced that the aggrieved party suffered
some pecuniary loss.
The Code Commission, in explaining
the concept of temperate damages under
Article 2224, makes the following comment:
In some States of
the American Union,
temperate damages are
allowed. There are cases
where from the nature of
the case, definite proof of
pecuniary loss cannot be
offered, although the court
is convinced that there has
been such loss. For
instance, injury to ones
commercial credit or to the
goodwill of a business firm
is often hard to show with
certainty in terms of
money. Should damages be
denied for that reason? The
judge should be
empowered to calculate
moderate damages in such
cases, rather than that the
plaintiff should suffer,
without redress from the
defendants wrongful act.
3.
Paras loss of earning capacity
must be compensated
In the body of its decision, the CA concluded that
considering that Paras had a minimum monthly income
of P8,000.00 as a trader he was entitled to recover
compensation for unearned income during the 3-month
period of his hospital confinement and the 6-month period of
his recovery and rehabilitation; and aggregated his unearned
income for those periods to P72,000.00.[29] Yet, the CA
omitted the unearned income from the dispositive portion.
The omission should be rectified, for there was
credible proof of Paras loss of income during his disability.
According to Article 2205, (1), of the Civil Code, damages may
be recovered for loss or impairment of earning capacity in
cases of temporary or permanent personal injury. Indeed,
indemnification for damages comprehends not only the loss
suffered (actual damages or damnum emergens) but also the
claimants lost profits (compensatory damages or lucrum
cessans).[30] Even so, the formula that has gained acceptance
over time has limited recovery to net earning capacity; hence,
the entire amount of P72,000.00 is not allowable. The
premise is obviously that net earning capacity is the persons
capacity to acquire money, less the necessary expense for his
own living.[31] To simplify the determination, therefore, the
net earning capacity of Paras during the 9-month period of
his confinement, surgeries and consequential therapy is
pegged at only half of his unearned monthly gross income
of P8,000.00 as a trader, or a total of P36,000.00 for the 9-
month period, the other half being treated as the necessary
expense for his own living in that period.
It is relevant to clarify that awarding the temperate
damages (for the substantial pecuniary losses corresponding
to Parass surgeries and rehabilitation and for the
irreparability of Inlands damaged bus) and the actual
damages to compensate lost earnings and costs of medicines
give rise to no incompatibility. These damages cover distinct
pecuniary losses suffered by Paras and Inland, [32] and do not
infringe the statutory prohibition against recovering damages
twice for the same act or omission.[33]
4.
Increase in award of attorneys fees
Although it is a sound policy not to set a premium on the
right to litigate,[34] we consider the grant to Paras and Inland
of reasonable attorneys fees warranted. Their entitlement to
attorneys fees was by virtue of their having been compelled
to litigate or to incur expenses to protect their interests, [35] as
well as by virtue of the Court now further deeming attorneys
fees to be just and equitable.[36]
In view of the lapse of a long time in the prosecution of the
claim,[37] the Court considers it reasonable and proper to
grant attorneys fees to each of Paras and Inland equivalent to
10% of the total amounts hereby awarded to them, in lieu of
only P20,000.00 for that purpose granted to Paras. CEBU SALVAGE CORPORATION

5. Vs
Legal interest on the amounts awarded
PHILIPPINE
HOME
Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,
ASSURANCE
[38]
legal interest at the rate of 6% per annum accrues on the
CORPORATION,
amounts adjudged reckoned from July 18, 1997, the date
when the RTC rendered its judgment; and legal interest at the
DECISION
rate of 12% per annum shall be imposed from the finality of
the judgment until its full satisfaction, the interim period
CORONA, J.:
being regarded as the equivalent of a forbearance of credit.

May a carrier be held liable for the loss of cargo resulting

WHEREFORE, the Court AFFIRMS WITH
from the sinking of a ship it does not own?
MODIFICATION the decision of the Court of Appeals
promulgated on September 25, 2002, by
This is the issue presented for the Courts resolution in this
ordering PHILTRANCO SERVICE ENTERPRISES,
petition for review on certiorari [1] assailing the March 16,
INC. and APOLINAR MIRALLES to pay, jointly and severally,
2001 decision[2] and September 17, 2001 resolution [3] of the
as follows:
Court of Appeals (CA) in CA-G.R. CV No. 40473 which in turn
affirmed the December 27, 1989 decision[4] of the Regional
1. To Felix Paras:
Trial Court (RTC), Branch 145, Makati, MetroManila.[5]
The pertinent facts follow.
(a) P1,397.95, as reimbursement for the
costs of medicines purchased between
On November 12, 1984, petitioner Cebu Salvage
February 1987 and July 1989;
Corporation (as carrier) and Maria Cristina Chemicals
Industries, Inc. [MCCII] (as charterer) entered into a voyage
(b) P50,000.00 as temperate damages;
charter[6] wherein petitioner was to load 800 to 1,100 metric
tons of silica quartz on board the
(c) P50,000.00 as moral damages;
M/T Espiritu Santo[7] at Ayungon, Negros Occidental for
transport to and discharge at Tagoloan, Misamis Oriental to
(d) P36,000.00 for lost earnings;
consignee Ferrochrome Phils., Inc.[8]
(e) 10% of the total of items (a) to (d) hereof
Pursuant to the contract, on December 23, 1984,
as attorneys fees; and
petitioner received and loaded 1,100 metric tons of silica
quartz on board the M/T Espiritu Santo which
(f) Interest of 6% per annum from July 18,
left Ayungon for Tagoloan the next day.[9] The shipment never
1997 on the total of items (a) to (d)
reached its destination, however, because the
hereof until finality of this decision, and
M/T Espiritu Santo sank in the afternoon of December 24,
12% per annum thereafter until full
1984 off the beach of Opol, Misamis Oriental, resulting in the
payment.
total loss of the cargo.[10]
2. To Inland Trailways, Inc.:
MCCII filed a claim for the loss of the shipment with its
insurer, respondent Philippine Home Assurance Corporation.
(a) P250,000.00 as temperate damages; [11]
Respondent paid the claim in the amount of P211,500and
was subrogated to the rights of MCCII. [12] Thereafter, it filed a
(b) 10% of item (a) hereof; and
case in the RTC[13] against petitioner for reimbursement of the
amount it paid MCCII.
(c) Interest of 6% per annum on item (a)
hereof from July 18, 1997 until finality
After trial, the RTC rendered judgment in favor of
of this decision, and 12% per
respondent. It ordered petitioner to pay
annum thereafter until full payment.
respondent P211,500 plus legal interest, attorneys fees
equivalent to 25% of the award and costs of suit.
3. The petitioner shall pay the costs of suit.
On appeal, the CA affirmed the decision of the
SO ORDERED
RTC. Hence, this petition.
 Petitioner and MCCII entered into a voyage charter,
also known as a contract of affreightment wherein the ship
was leased for a single voyage for the conveyance of goods, in
consideration of the payment of freight. [14] Under a voyage
charter, the shipowner retains the possession, command and
navigation of the ship, the charterer or freighter merely
having use of the space in the vessel in return for his payment
of freight.[15] An owner who retains possession of the ship
remains liable as carrier and must answer for loss or non-
delivery of the goods received for transportation.[16]
Petitioner argues that the CA erred when it affirmed
the RTC finding that the voyage charter it entered into with
MCCII was a contract of carriage. [17] It insists that the
agreement was merely a contract of hire wherein MCCII hired
the vessel from its owner, ALS Timber Enterprises (ALS).
[18]
Not being the owner of the M/T Espiritu Santo, petitioner
did not have control and supervision over the vessel, its
master and crew.[19] Thus, it could not be held liable for the
loss of the shipment caused by the sinking of a ship it did not
own.
We disagree.
Based on the agreement signed by the parties and
the testimony of petitioners operations manager, it is clear
that it was a contract of carriage petitioner signed with
MCCII.It actively negotiated and solicited MCCIIs account,
offered its services to ship the silica quartz and proposed to
utilize the M/T Espiritu Santo in lieu of the M/T Seebees or
the M/T Shirley (as previously agreed upon in the voyage
charter) since these vessels had broken down. [20]
There is no dispute that petitioner was a common
carrier. At the time of the loss of the cargo, it was engaged in
the business of carrying and transporting goods by water, for
compensation, and offered its services to the public.[21]
From the nature of their business and for reasons of
public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport
according to the circumstances of each case. [22] In the event of
loss of the goods, common carriers are responsible, unless
they can prove that this was brought about by the causes
specified in Article 1734 of the Civil Code. [23] In all other
cases, common carriers are presumed to be at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence.[24]
Petitioner was the one which contracted with MCCII
for the transport of the cargo. It had control over what vessel
it would use. All throughout its dealings with MCCII, it
represented itself as a common carrier. The fact that it did not
own the vessel it decided to use to consummate the contract
of carriage did not negate its character and duties as a
common carrier. The MCCII (respondents subrogor) could
not be reasonably expected to inquire about the ownership of
the vessels which petitioner carrier offered to utilize. As a
practical matter, it is very difficult and often impossible for
the general public to enforce its rights of action under a
contract of carriage if it should be required to know who the
actual owner of the vessel is. [25] In fact, in this case, the voyage
charter itself denominated petitioner as the owner/operator
of the vessel.[26]
Petitioner next contends that if there was a contract
of carriage, then it was between MCCII and ALS as evidenced
by the bill of lading ALS issued.[27]
Again, we disagree.
The bill of lading was merely a receipt issued by ALS
to evidence the fact that the goods had been received for
transportation. It was not signed by MCCII, as in fact it was
simply signed by the supercargo of ALS. [28] This is consistent
with the fact that MCCII did not contract directly with ALS.
While it is true that a bill of lading may serve as the contract
of carriage between the parties, [29] it cannot prevail over the
express provision of the voyage charter that MCCII and
petitioner executed:
[I]n cases where a Bill of Lading has been
issued by a carrier covering goods shipped
aboard a vessel under a charter party, and
the charterer is also the holder of the bill of
lading, the bill of lading operates as the
receipt for the goods, and as document of
title passing the property of the goods, but
not as varying the contract between
the charterer and the shipowner. The Bill of
Lading becomes, therefore, only a receipt
and not the contract of carriage in a charter
of the entire vessel, for the contract is the
Charter Party, and is the law between the
parties who are bound by its terms and
condition provided that these are not
contrary to law, morals, good customs,
public order and public policy. [30]
Finally, petitioner asserts that MCCII should be held
liable for its own loss since the voyage charter stipulated that
cargo insurance was for the charterers account.[31] This
deserves scant consideration. This simply meant that
the charterer would take care of having the goods insured. It
could not exculpate the carrier from liability for the breach of
its contract of carriage. The law, in fact, prohibits it and
condemns it as unjust and contrary to public policy. [32]
To summarize, a contract of carriage of goods was
shown to exist; the cargo was loaded on board the vessel; loss
or non-delivery of the cargo was proven; and petitioner failed
to prove that it exercised extraordinary diligence to prevent
such loss or that it was due to some casualty
or force majeure. The voyage charter here being a contract
of affreightment, the carrier was answerable for the loss of
the goods received for transportation.[33]
The idea proposed by petitioner is not only
preposterous, it is also dangerous. It says that a carrier that
enters into a contract of carriage is not liable to
the charterer or shipper if it does not own the vessel it
chooses to use. MCCII never dealt with ALS and yet petitioner
insists that MCCII should sue ALS for reimbursement for its
loss. Certainly, to permit a common carrier to escape its
responsibility for the goods it agreed to transport (by the
expedient of alleging non-ownership of the vessel it
employed) would radically derogate from the carrier's duty of
extraordinary diligence. It would also open the door to
collusion between the carrier and the supposed owner and to
the possible shifting of liability from the carrier to one
without any financial capability to answer for the resulting
damages.[34]
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
G.R. No. 166250 July 26, 2010
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.),
INC., Petitioner,
vs.
COURT OF APPEALS and PIONEER INSURANCE AND
SURETY CORPORATION, Respondents.
Facts: On August 31, 1992, the shipper Sylvex Purchasing
Corporation delivered to UTI a shipment of 27 drums of
various raw materials for pharmaceutical manufacturing,
consisting of: "1) 3 drums (of) extracts, flavoring liquid,
flammable liquid x x x banana flavoring; 2) 2 drums (of)
flammable liquids x x x turpentine oil; 2 pallets. STC: 40 bags
dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex
Extract." UTI issued Bill of Lading No. C320/C15991-
2, covering the aforesaid shipment. The subject shipment was
insured with private respondent Pioneer Insurance and
Surety Corporation in favor of Unilab against all risks in the
amount of P1,779,664.77 under and by virtue of Marine Risk
Note Number MC RM UL 0627 92 and Open Cargo Policy No.
HO-022-RIU.
On the same day that the bill of lading was issued,
the shipment was loaded in a sealed 1x40 container van, with
no. APLU-982012, boarded on APL’s vessel M/V "Pres.
Jackson," Voyage 42, and transshipped to APL’s M/V "Pres.
Taft" for delivery to petitioner in favor of the consignee
United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the
port of Manila. On October 6, 1992, petitioner received the
said shipment in its warehouse after it stamped the Permit to
Deliver Imported Goods procured by the Champs Customs
Brokerage. Three days thereafter, or on October 9, 1992,
Oceanica Cargo Marine Surveyors Corporation (OCMSC)
conducted a stripping survey of the shipment located in
petitioner’s warehouse.
Consequently, Unilab’s quality control representative
rejected one paper bag containing dried yeast and one steel
drum containing Vitamin B Complex as unfit for the intended
purpose. On November 7, 1992, Unilab filed a formal
claim for the damage against private respondent and UTI. On
November 20, 1992, UTI denied liability on the basis of the
gate pass issued by Jardine that the goods were in complete
and good condition; while private respondent paid the
claimed amount on March 23, 1993. By virtue of the Loss and
Subrogation Receipt issued by Unilab in favor of private
respondent, the latter filed a complaint for Damages against
APL, UTI and petitioner with the RTC of Makati.
Issue: Whether or not petitioner is a common carrier.
Held: Admittedly, petitioner is a freight forwarder. The term
"freight forwarder" refers to a firm holding itself out to the
general public (other than as a pipeline, rail, motor, or water
carrier) to provide transportation of property for
compensation and, in the ordinary course of its business, (1)
to assemble and consolidate, or to provide for assembling and
consolidating, shipments, and to perform or provide for
break-bulk and distribution operations of the shipments; (2)
to assume responsibility for the transportation of goods from
the place of receipt to the place of destination; and (3) to use
for any part of the transportation a carrier subject to the
federal law pertaining to common carriers.
A freight forwarder’s liability is limited to damages
arising from its own negligence, including negligence in
choosing the carrier; however, where the forwarder contracts
to deliver goods to their destination instead of merely
arranging for their transportation, it becomes liable as a
common carrier for loss or damage to goods. A freight
forwarder assumes the responsibility of a carrier, which
actually executes the transport, even though the forwarder
does not carry the merchandise itself.
Undoubtedly, UTI is liable as a common carrier.
Common carriers, as a general rule, are presumed to have
been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they
prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for
any loss or damage, therefore, they have the burden of
proving that they observed such diligence. Mere proof of
delivery of the goods in good order to a common carrier and
of their arrival in bad order at their destination constitutes a
prima facie case of fault or negligence against the carrier. If
no adequate explanation is given as to how the deterioration,
loss, or destruction of the goods happened, the transporter
shall be held responsible.