G.R. No.

125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas,
respondents.

MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional
Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed
petitioners' complaint for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as
amended, to contract, install and operate oil pipelines. The original pipeline concession
was granted in 1967
1
and renewed by the Energy Regulatory Board in 1992.
2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on its gross
receipts for the fiscal year 1993 pursuant to the Local Government Code
3
. The
respondent City Treasurer assessed a business tax on the petitioner amounting to
P956,076.04 payable in four installments based on the gross receipts for products
pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order
not to hamper its operations, petitioner paid the tax under protest in the amount of
P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is
engaged in the business of transporting petroleum products from the
Batangas refineries, via pipeline, to Sucat and JTF Pandacan
Terminals. As such, our Company is exempt from paying tax on gross
receipts under Section 133 of the Local Government Code of 1991 . . .
.
Moreover, Transportation contractors are not included in the
enumeration of contractors under Section 131, Paragraph (h) of the
Local Government Code. Therefore, the authority to impose tax "on
contractors and other independent contractors" under Section 143,
Paragraph (e) of the Local Government Code does not include the
power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The
said section limits the imposition of fees and charges on business to
such amounts as may be commensurate to the cost of regulation,
inspection, and licensing. Hence, assuming arguendo that FPIC is
liable for the license fee, the imposition thereof based on gross
receipts is violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not commensurate to the
cost of regulation, inspection and licensing. The fee is already a
revenue raising measure, and not a mere regulatory imposition.
4

On March 8, 1994, the respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government Code.
5

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint
6
for tax refund with prayer for writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer.
In its complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the
business tax on its gross receipts violates Section 133 of the Local Government Code;
(2) the authority of cities to impose and collect a tax on the gross receipts of "contractors
and independent contractors" under Sec. 141 (e) and 151 does not include the authority
to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the
term "contractors" excludes transportation contractors; and, (3) the City Treasurer
illegally and erroneously imposed and collected the said tax, thus meriting the immediate
refund of the tax paid.
7

Traversing the complaint, the respondents argued that petitioner cannot be exempt from
taxes under Section 133 (j) of the Local Government Code as said exemption applies
only to "transportation contractors and persons engaged in the transportation by hire
and common carriers by air, land and water." Respondents assert that pipelines are not
included in the term "common carrier" which refers solely to ordinary carriers such as
trucks, trains, ships and the like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or manner by which a product is
delivered to its destination.
8

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling
in this wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear.
It is a rule that tax exemptions are to be strictly construed against the
taxpayer, taxes being the lifeblood of the government. Exemption may
therefore be granted only by clear and unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline concession under
Republic Act 387. (Exhibit A) whose concession was lately renewed
by the Energy Regulatory Board (Exhibit B). Yet neither said law nor
the deed of concession grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise holders
under Sec. 137 of the Local Tax Code. Such being the situation
obtained in this case (exemption being unclear and equivocal) resort
to distinctions or other considerations may be of help:
1. That the exemption granted
under Sec. 133 (j) encompasses
only common carriers so as not to
overburden the riding public or
commuters with taxes. Plaintiff is
not a common carrier, but a
special carrier extending its
services and facilities to a single
specific or "special customer"
under a "special contract."
2. The Local Tax Code of 1992
was basically enacted to give
more and effective local
autonomy to local governments
than the previous enactments, to
make them economically and
financially viable to serve the
people and discharge their
functions with a concomitant
obligation to accept certain
devolution of powers, . . . So,
consistent with this policy even
franchise grantees are taxed
(Sec. 137) and contractors are
also taxed under Sec. 143 (e) and
151 of the Code.
9

Petitioner assailed the aforesaid decision before this Court via a petition for review. On
February 27, 1995, we referred the case to the respondent Court of Appeals for
consideration and adjudication.
10
On November 29, 1995, the respondent court
rendered a decision
11
affirming the trial court's dismissal of petitioner's complaint.
Petitioner's motion for reconsideration was denied on July 18, 1996.
12

Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996.
13
Petitioner moved for a reconsideration which was granted by this
Court in a Resolution
14
of January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the
petitioner is not a common carrier or a transportation contractor, and (2) the exemption
sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public
as engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm
or association engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the
business of carrying goods for
others as a public employment,
and must hold himself out as
ready to engage in the
transportation of goods for person
generally as a business and not
as a casual occupation;
2. He must undertake to carry
goods of the kind to which his
business is confined;
3. He must undertake to carry by
the method by which his business
is conducted and over his
established roads; and
4. The transportation must be for
hire.
15

Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all
persons indifferently, that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation. The fact that petitioner has a limited
clientele does not exclude it from the definition of a common carrier. In De Guzman vs.
Court of Appeals
16
we ruled that:
The above article (Art. 1732, Civil Code) makes no
distinction between one whose principal business
activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 .
. . avoids making any distinction between a person
or enterprise offering transportation service on a
regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between
a carrier offering its services to the "general public,"
i.e., the general community or population, and one
who offers services or solicits business only from a
narrow segment of the general population. We think
that Article 1877 deliberately refrained from making
such distinctions.
So understood, the concept of "common carrier"
under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the
law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:
every person that now or
hereafter may own, operate.
manage, or control in the
Philippines, for hire or
compensation, with general or
limited clientele, whether
permanent, occasional or
accidental, and done for general
business purposes, any common
carrier, railroad, street railway,
traction railway, subway motor
vehicle, either for freight or
passenger, or both, with or
without fixed route and whatever
may be its classification, freight or
carrier service of any class,
express service, steamboat, or
steamship line, pontines, ferries
and water craft, engaged in the
transportation of passengers or
freight or both, shipyard, marine
repair shop, wharf or dock, ice
plant, ice-refrigeration plant,
canal, irrigation system gas,
electric light heat and power,
water supply and power
petroleum, sewerage system, wire
or wireless communications
systems, wire or wireless
broadcasting stations and other
similar public services. (Emphasis
Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of
the Local Government Code refers only to common carriers transporting goods and
passengers through moving vehicles or vessels either by land, sea or water, is
erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil
Code makes no distinction as to the means of transporting, as long as it is by land, water
or air. It does not provide that the transportation of the passengers or goods should be
by motor vehicle. In fact, in the United States, oil pipe line operators are considered
common carriers.
17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier.
A pipe line shall have the preferential right to
utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize
the remaining transportation capacity pro rata for
the transportation of such other petroleum as may
be offered by others for transport, and to charge
without discrimination such rates as may have been
approved by the Secretary of Agriculture and
Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of
Article 7 thereof provides:
that everything relating to the exploration for and
exploitation of petroleum . . . and everything relating
to the manufacture, refining, storage, or
transportation by special methods of petroleum, is
hereby declared to be a public utility. (Emphasis
Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In
BIR Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire
that is engaged only in transporting petroleum
products, it is considered a common carrier under
Republic Act No. 387 . . . . Such being the case, it is
not subject to withholding tax prescribed by
Revenue Regulations No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier"
and, therefore, exempt from the business tax as provided for in Section 133 (j), of the
Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing
Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the
following:
xxx xxx xxx
(j) Taxes on the
gross receipts
of
transportation
contractors and
persons
engaged in the
transportation
of passengers
or freight by
hire and
common
carriers by air,
land or water,
except as
provided in this
Code.
The deliberations conducted in the House of Representatives on the Local Government
Code of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95,
line
1. It states: "SEC. 121 [now Sec. 131]. Common
Limitations on the Taxing Powers of Local
Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the
business of transportation. This appears to be one
of those being deemed to be exempted from the
taxing powers of the local government units. May
we know the reason why the transportation
business is being excluded from the taxing powers
of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an
exception contained in Section 121 (now Sec. 131),
line 16, paragraph 5. It states that local government
units may not impose taxes on the business of
transportation, except as otherwise provided in this
code.
Now, Mr. Speaker, if the Gentleman would care to
go to page 98 of Book II, one can see there that
provinces have the power to impose a tax on
business enjoying a franchise at the rate of not
more than one-half of 1 percent of the gross annual
receipts. So, transportation contractors who are
enjoying a franchise would be subject to tax by the
province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker,
is the imposition of taxes by local government units
on the carrier business. Local government units may
impose taxes on top of what is already being
imposed by the National Internal Revenue Code
which is the so-called "common carriers tax." We do
not want a duplication of this tax, so we just
provided for an exception under Section 125 [now
Sec. 137] that a province may impose this tax at a
specific rate.
MR. AQUINO (A.). Thank you for that clarification,
Mr. Speaker. . . .
18

It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code.
19
To tax petitioner again on
its gross receipts in its transportation of petroleum business would defeat the purpose of
the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court
of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET
ASIDE.
SO ORDERED.











G.R. No. 111127 July 26, 1996
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP,
INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V.
QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO,
RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE,
EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O.
LOPES, JULIUS CAESAR, GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C.
CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA
TORRES, MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE
MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO,
CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER,
respondents.

MENDOZA, J .:p
This is a petition for review on certiorari of the decision of the Court of Appeals
1
in CA-
GR No. 28245, dated September 30, 1992, which affirmed with modification the decision
of the Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and
severally to pay damages to private respondent Amyline Antonio, and its resolution
which denied petitioners' motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for school
children which they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom
they hired in 1981, after trying him out for two weeks, His job was to take school children
to and from the St. Scholastica's College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc.
(WWCF) arranged with petitioners for the transportation of 33 members of its Young
Adults Ministry from Manila to La Union and back in consideration of which private
respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the
afternoon. However, as several members of the party were late, the bus did not leave
the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00 o'clock in the
evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the
bridge at Carmen was under repair, sot hat petitioner Cabil, who was unfamiliar with the
area (it being his first trip to La Union), was forced to take a detour through the town of
Baay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp
curve on the highway, running on a south to east direction, which he described as
"siete." The road was slippery because it was raining, causing the bus, which was
running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus
hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus
Escano, then turned over and landed on its left side, coming to a full stop only after a
series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell
on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on
the floor of the bus and pinned down by a wooden seat which came down by a wooden
seat which came off after being unscrewed. It took three persons to safely remove her
from this portion. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said
he was not familiar with the area and he could not have seen the curve despite the care
he took in driving the bus, because it was dark and there was no sign on the road. He
said that he saw the curve when he was already within 15 to 30 meters of it. He
allegedly slowed down to 30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the
basis of their finding they filed a criminal complaint against the driver, Porfirio Cabil. The
case was later filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus
Escano P1,500.00 for the damage to the latter's fence. On the basis of Escano's affidavit
of desistance the case against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati,
Metro Manila. As a result of the accident, she is now suffering from paraplegia and is
permanently paralyzed from the waist down. During the trial she described the
operations she underwent and adduced evidence regarding the cost of her treatment
and therapy. Immediately after the accident, she was taken to the Nazareth Hospital in
Baay, Lingayen. As this hospital was not adequately equipped, she was transferred to
the Sto. Nio Hospital, also in the town of Ba-ay, where she was given sedatives. An x-
ray was taken and the damage to her spine was determined to be too severe to be
treated there. She was therefore brought to Manila, first to the Philippine General
Hospital and later to the Makati Medical Center where she underwent an operation to
correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel to a
long distance trip and that the driver was properly screened and tested before being
admitted for employment. Indeed, all the evidence presented have shown the negligent
act of the defendants which ultimately resulted to the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline
Antonio were the only ones who adduced evidence in support of their claim for
damages, the Court is therefore not in a position to award damages to the other
plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment against
defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles
2176 and 2180 of the Civil Code of the Philippines and said defendants are ordered to
pay jointly and severally to the plaintiffs the following amount:
1) P93,657.11 as compensatory and actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity
of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorney's fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline
Antonio but dismissed it with respect to the other plaintiffs on the ground that they failed
to prove their respective claims. The Court of Appeals modified the award of damages
as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorney's fees; and
6) Costs of suit.
The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to
exercise due care and precaution in the operation of his vehicle considering the time and
the place of the accident. The Court of Appeals held that the Fabres were themselves
presumptively negligent. Hence, this petition. Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE
NEGLIGENT.
II. WHETHER OF NOT PETITIONERS WERE
LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
III WHETHER OR NOT DAMAGES CAN BE
AWARDED AND IN THE POSITIVE, UP TO WHAT
EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the
amount of P600,000.00. It is insisted that, on the assumption that petitioners are liable
an award of P600,000.00 is unconscionable and highly speculative. Amyline Antonio
testified that she was a casual employee of a company called "Suaco," earning
P1,650.00 a month, and a dealer of Avon products, earning an average of P1,000.00
monthly. Petitioners contend that as casual employees do not have security of tenure,
the award of P600,000.00, considering Amyline Antonio's earnings, is without factual
basis as there is no assurance that she would be regularly earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on the
theory that petitioners are liable for breach of contract of carriage or culpa contractual or
on the theory of quasi delict or culpa aquiliana as both the Regional Trial Court and the
Court of Appeals held, for although the relation of passenger and carrier is "contractual
both in origin and nature," nevertheless "the act that breaks the contract may be also a
tort."
2
In either case, the question is whether the bus driver, petitioner Porfirio Cabil, was
negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who
owned the bus, failed to exercise the diligence of a good father of the family in the
selection and supervision of their employee is fully supported by the evidence on record.
These factual findings of the two courts we regard as final and conclusive, supported as
they are by the evidence. Indeed, it was admitted by Cabil that on the night in question,
it was raining, and as a consequence, the road was slippery, and it was dark. He
averred these facts to justify his failure to see that there lay a sharp curve ahead.
However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour
and only slowed down when he noticed the curve some 15 to 30 meters ahead.
3
By
then it was too late for him to avoid falling off the road. Given the conditions of the road
and considering that the trip was Cabil's first one outside of Manila, Cabil should have
driven his vehicle at a moderate speed. There is testimony
4
that the vehicles passing on
that portion of the road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that it
was dark, that he drove his bus at 50 kilometers an hour when even on a good day the
normal speed was only 20 kilometers an hour, and that he was unfamiliar with the
terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by
private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the
presumption that his employers, the Fabres, were themselves negligent in the selection
and supervisions of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant
possessed a professional driver's license. The employer should also examine the
applicant for his qualifications, experience and record of service.
5
Due diligence in
supervision, on the other hand, requires the formulation of rules and regulations for the
guidance of employees and issuance of proper instructions as well as actual
implementation and monitoring of consistent compliance with the rules.
6

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently
did not consider the fact that Cabil had been driving for school children only, from their
homes to the St. Scholastica's College in Metro Manila.
7
They had hired him only after a
two-week apprenticeship. They had hired him only after a two-week apprenticeship.
They had tested him for certain matters, such as whether he could remember the names
of the children he would be taking to school, which were irrelevant to his qualification to
drive on a long distance travel, especially considering that the trip to La Union was his
first. The existence of hiring procedures and supervisory policies cannot be casually
invoked to overturn the presumption of negligence on the part of an employer.
8

Petitioners argue that they are not liable because (1) an earlier departure (made
impossible by the congregation's delayed meeting) could have a averted the mishap and
(2) under the contract, the WWCF was directly responsible for the conduct of the trip.
Neither of these contentions hold water. The hour of departure had not been fixed. Even
if it had been, the delay did not bear directly on the cause of the accident. With respect
to the second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place
to which he wishes to be conveyed, but exercises no other control over the conduct of
the driver, is not responsible for acts of negligence of the latter or prevented from
recovering for injuries suffered from a collision between the automobile and a train,
caused by the negligence or the automobile driver.
9

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

Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local idiom, as
"a sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained
from making such distinctions.
As common carriers, the Fabres were found to exercise "extraordinary
diligence" for the safe transportation of the passengers to their
destination. This duty of care is not excused by proof that they
exercise the diligence of a good father of the family in the selection
and supervision of their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the former's employees
although such employees may have acted beyond the scope of their
authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that
they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of
the appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict,
fully justify findings them guilty of breach of contract of carriage under Arts. 1733, 1755
and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we
think the Court of Appeals erred in increasing the amount of compensatory damages
because private respondents did not question this award as inadequate.
11
To the
contrary, the award of P500,000.00 for compensatory damages which the Regional Trial
Court made is reasonable considering the contingent nature of her income as a casual
employee of a company and as distributor of beauty products and the fact that the
possibility that she might be able to work again has not been foreclosed. In fact she
testified that one of her previous employers had expressed willingness to employ her
again.
With respect to the other awards, while the decisions of the trial court and the Court of
Appeals do not sufficiently indicate the factual and legal basis for them, we find that they
are nevertheless supported by evidence in the records of this case. Viewed as an action
for quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for
the payment of moral damages in cases of quasi delict. On the theory that petitioners
are liable for breach of contract of carriage, the award of moral damages is authorized
by Art. 1764, in relation to Art. 2220, since Cabil's gross negligence amounted to bad
faith.
12
Amyline Antonio's testimony, as well as the testimonies of her father and
copassengers, fully establish the physical suffering and mental anguish she endured as
a result of the injuries caused by petitioners' negligence.
The award of exemplary damages and attorney's fees was also properly made.
However, for the same reason that it was error for the appellate court to increase the
award of compensatory damages, we hold that it was also error for it to increase the
award of moral damages and reduce the award of attorney's fees, inasmuch as private
respondents, in whose favor the awards were made, have not appealed.
13

As above stated, the decision of the Court of Appeals can be sustained either on the
theory of quasi delict or on that of breach of contract. The question is whether, as the
two courts below held, petitioners, who are the owners and driver of the bus, may be
made to respond jointly and severally to private respondent. We hold that they may be.
In Dangwa Trans. Co. Inc. v. Court of Appeals,
14
on facts similar to those in this case,
this Court held the bus company and the driver jointly and severally liable for damages
for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals
15
a driver found negligent in failing to stop the bus in order to let off passengers
when a fellow passenger ran amuck, as a result of which the passengers jumped out of
the speeding bus and suffered injuries, was held also jointly and severally liable with the
bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of
the bus on which plaintiff was riding concurred with the negligence of a third party who
was the driver of another vehicle, thus causing an accident. In Anuran v. Buo,
16

Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court,
1
7 and Metro
Manila Transit Corporation v. Court of Appeals,
18
the bus company, its driver, the
operator of the other vehicle and the driver of the vehicle were jointly and severally held
liable to the injured passenger or the latters' heirs. The basis of this allocation of liability
was explained in Viluan v. Court of Appeals,
19
thus:
Nor should it make any difference that the liability of petitioner [bus
owner] springs from contract while that of respondents [owner and
driver of other vehicle] arises from quasi-delict. As early as 1913, we
already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of
injury to a passenger due to the negligence of the driver of the bus on
which he was riding and of the driver of another vehicle, the drivers as
well as the owners of the two vehicles are jointly and severally liable
for damages. Some members of the Court, though, are of the view
that under the circumstances they are liable on quasi-delict.
20

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals
21
this Court
exonerated the jeepney driver from liability to the injured passengers and their families
while holding the owners of the jeepney jointly and severally liable, but that is because
that case was expressly tried and decided exclusively on the theory of culpa contractual.
As this Court there explained:
The trial court was therefore right in finding that Manalo (the driver) and spouses
Mangune and Carreon (the jeepney owners) were negligent. However, its ruling that
spouses Mangune and Carreon are jointly and severally liable with Manalo is erroneous.
The driver cannot be held jointly and severally liable with carrier in case of breach of the
contract of carriage. The rationale behind this is readily discernible. Firstly, the contract
of carriage is between the carrier is exclusively responsible therefore to the passenger,
even if such breach be due to the negligence of his driver (see Viluan v. The Court of
Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742).
22

As in the case of BLTB, private respondents in this case and her coplaintiffs did not
stake out their claim against the carrier and the driver exclusively on one theory, much
less on that of breach of contract alone. After all, it was permitted for them to allege
alternative causes of action and join as many parties as may be liable on such causes of
action
23
so long as private respondent and her coplaintiffs do not recover twice for the
same injury. What is clear from the cases is the intent of the plaintiff there to recover
from both the carrier and the driver, thus, justifying the holding that the carrier and the
driver were jointly and severally liable because their separate and distinct acts concurred
to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION
as to award of damages. Petitioners are ORDERED to PAY jointly and severally the
private respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorney's fees; and
6) costs of suit.
SO ORDERED.




















G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.

FELICIANO, J .:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles
and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap
material, respondent would bring such material to Manila for resale. He utilized two (2)
six-wheeler trucks which he owned for hauling the material to Manila. On the return trip
to Pangasinan, respondent would load his vehicles with cargo which various merchants
wanted delivered to differing establishments in Pangasinan. For that service, respondent
charged freight rates which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized
dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted
with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of
General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4
December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent
himself, while 600 cartons were placed on board the other truck which was driven by
Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes
never reached petitioner, since the truck which carried these boxes was hijacked
somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took
with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the
Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed
value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that
private respondent, being a common carrier, and having failed to exercise the
extraordinary diligence required of him by the law, should be held liable for the value of
the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that
he could not be held responsible for the value of the lost goods, such loss having been
due to force majeure.
On 10 December 1975, the trial court rendered a Decision
1
finding private respondent
to be a common carrier and holding him liable for the value of the undelivered goods (P
22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking
services to the public; in not exempting him from liability on the ground of force majeure;
and in ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent
had been engaged in transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier.
Petitioner came to this Court by way of a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered
cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may,
under the facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. ... (Emphasis
supplied)
It appears to the Court that private respondent is properly characterized as a common
carrier even though he merely "back-hauled" goods for other merchants from Manila to
Pangasinan, although such back-hauling was done on a periodic or occasional rather
than regular or scheduled manner, and even though private respondent's principal
occupation was not the carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that fee frequently fell
below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of
public convenience, and concluded he was not a common carrier. This is palpable error.
A certificate of public convenience is not a requisite for the incurring of liability under the
Civil Code provisions governing common carriers. That liability arises the moment a
person or firm acts as a common carrier, without regard to whether or not such carrier
has also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public convenience or
other franchise. To exempt private respondent from the liabilities of a common carrier
because he has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent precisely for
failing to comply with applicable statutory requirements. The business of a common
carrier impinges directly and intimately upon the safety and well being and property of
those members of the general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and protection of
those who utilize their services and the law cannot allow a common carrier to render
such duties and liabilities merely facultative by simply failing to obtain the necessary
permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy"
2
are
held to a very high degree of care and diligence ("extraordinary diligence") in the
carriage of goods as well as of passengers. The specific import of extraordinary
diligence in the care of goods transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the
Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the
loss, destruction or deterioration of the goods which they carry, "unless the same is due
to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other
natural disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of the
goods;
(4) The character-of the goods or defects in the
packing or-in the containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or
deterioration which exempt the common carrier for responsibility therefor, is a closed list.
Causes falling outside the foregoing list, even if they appear to constitute a species of
force majeure fall within the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of
the preceding article, if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific
cause alleged in the instant case the hijacking of the carrier's truck does not fall
within any of the five (5) categories of exempting causes listed in Article 1734. It would
follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the
provisions of Article 1735, in other words, that the private respondent as common carrier
is presumed to have been at fault or to have acted negligently. This presumption,
however, may be overthrown by proof of extraordinary diligence on the part of private
respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the
care of petitioner's goods. Petitioner argues that in the circumstances of this case,
private respondent should have hired a security guard presumably to ride with the truck
carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in the
instant case, the standard of extraordinary diligence required private respondent to
retain a security guard to ride with the truck and to engage brigands in a firelight at the
risk of his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty
of extraordinary diligence in the vigilance over the goods carried in the specific context
of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under
Article 1733, given additional specification not only by Articles 1734 and 1735 but also
by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible
for the acts or omissions of his or its employees;
(6) that the common carrier's liability for acts
committed by thieves, or of robbers who do not act
with grave or irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not responsible for
the loss, destruction or deterioration of goods on
account of the defective condition of the car vehicle,
ship, airplane or other equipment used in the
contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will not be
allowed to divest or to diminish such responsibility even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat,
violence or force."
In the instant case, armed men held up the second truck owned by private respondent
which carried petitioner's cargo. The record shows that an information for robbery in
band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No.
198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando
Mesina, Oscar Oria and one John Doe." There, the accused were charged with willfully
and unlawfully taking and carrying away with them the second truck, driven by Manuel
Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at
petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the
accused acted with grave, if not irresistible, threat, violence or force.
3
Three (3) of the
five (5) hold-uppers were armed with firearms. The robbers not only took away the truck
and its cargo but also kidnapped the driver and his helper, detaining them for several
days and later releasing them in another province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City. The Court of First Instance convicted
all the accused of robbery, though not of robbery in band.
4

In these circumstances, we hold that the occurrence of the loss must reasonably be
regarded as quite beyond the control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common carriers are not made
absolute insurers against all risks of travel and of transport of goods, and are not held
liable for acts or events which cannot be foreseen or are inevitable, provided that they
shall have complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise which
was lost because of an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the
Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.


























G.R. No. 150403 January 25, 2007
CEBU SALVAGE CORPORATION, Petitioner,
vs.
PHILIPPINE HOME ASSURANCE CORPORATION, Respondent.
D E C I S I O N
CORONA, J .:
May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not
own?
This is the issue presented for the Courts resolution in this petition for review on certiorari
1

assailing the March 16, 2001 decision
2
and September 17, 2001 resolution
3
of the Court of
Appeals (CA) in CA-G.R. CV No. 40473 which in turn affirmed the December 27, 1989
decision
4
of the Regional Trial Court (RTC), Branch 145, Makati, Metro Manila.
5

The pertinent facts follow.
On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina
Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter
6
wherein
petitioner was to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu Santo
7

at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to
consignee Ferrochrome Phils., Inc.
8

Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100 metric tons
of silica quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day.
9

The shipment never reached its destination, however, because the M/T Espiritu Santo sank in the
afternoon of December 24, 1984 off the beach of Opol, Misamis Oriental, resulting in the total
loss of the cargo.
10

MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home
Assurance Corporation.
11
Respondent paid the claim in the amount of P211,500 and was
subrogated to the rights of MCCII.
12
Thereafter, it filed a case in the RTC
13
against petitioner for
reimbursement of the amount it paid MCCII.
After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to pay
respondent P211,500 plus legal interest, attorneys fees equivalent to 25% of the award and costs
of suit.
On appeal, the CA affirmed the decision of the 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.
SO ORDERED.

































G.R. No. 145804 February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,
vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT
SECURITY AGENCY, respondents.
D E C I S I O N
VITUG, J .:
The case before the Court is an appeal from the decision and resolution of the Court of Appeals,
promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720,
entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.,"
which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266,
Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail
Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of
Nicanor Navidad.
On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then
drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the
fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the
security guard assigned to the area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to
indicate how the fight started or who, between the two, delivered the first blow or how Navidad
later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was
killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with
her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA,
the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband.
LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and
Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in
the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting
evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was
negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it
adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the
plaintiffs the following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorneys fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.
"The compulsory counterclaim of LRTA and Roman are likewise dismissed."
1

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated
its now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad
and, instead, holding the LRTA and Roman jointly and severally liable thusly:
"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from
any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the
Light Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay
jointly and severally to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees."
2

The appellate court ratiocinated that while the deceased might not have then as yet boarded the
train, a contract of carriage theretofore had already existed when the victim entered the place
where passengers were supposed to be after paying the fare and getting the corresponding token
therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the
security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted
fist blows upon the victim and the evidence merely established the fact of death of Navidad by
reason of his having been hit by the train owned and managed by the LRTA and operated at the
time by Roman. The appellate court faulted petitioners for their failure to present expert evidence
to establish the fact that the application of emergency brakes could not have stopped the train.
The appellate court denied petitioners motion for reconsideration in its resolution of 10 October
2000.
In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE
FINDINGS OF FACTS BY THE TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT
PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT
RODOLFO ROMAN IS AN EMPLOYEE OF LRTA."
3

Petitioners would contend that the appellate court ignored the evidence and the factual findings of
the trial court by holding them liable on the basis of a sweeping conclusion that the presumption
of negligence on the part of a common carrier was not overcome. Petitioners would insist that
Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an act of a
stranger that could not have been foreseen or prevented. The LRTA would add that the appellate
courts conclusion on the existence of an employer-employee relationship between Roman and
LRTA lacked basis because Roman himself had testified being an employee of Metro Transit and
not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a contract of carriage
was deemed created from the moment Navidad paid the fare at the LRT station and entered the
premises of the latter, entitling Navidad to all the rights and protection under a contractual
relation, and that the appellate court had correctly held LRTA and Roman liable for the death of
Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for
reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the
safety of passengers.
4
The Civil Code, governing the liability of a common carrier for death of or
injury to its passengers, provides:
"Article 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for
all the circumstances.
"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755."
"Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the formers employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
"This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees."
"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of
the willful acts or negligence of other passengers or of strangers, if the common carriers
employees through the exercise of the diligence of a good father of a family could have prevented
or stopped the act or omission."
The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances.
5
Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage.
6
The statutory provisions render a common carrier liable for death of or
injury to passengers (a) through the negligence or wilful acts of its employees or b) on account of
wilful acts or negligence of other passengers or of strangers if the common carriers employees
through the exercise of due diligence could have prevented or stopped the act or omission.
7
In
case of such death or injury, a carrier is presumed to have been at fault or been negligent, and
8
by
simple proof of injury, the passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that
the injury is due to an unforeseen event or to force majeure.
9
In the absence of satisfactory
explanation by the carrier on how the accident occurred, which petitioners, according to the
appellate court, have failed to show, the presumption would be that it has been at fault,
10
an
exception from the general rule that negligence must be proved.
11

The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high diligence
required of the common carrier. In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the common carrier is not
relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 2176
12
and related provisions, in conjunction with Article 2180,
13
of the
Civil Code. The premise, however, for the employers liability is negligence or fault on the part
of the employee. Once such fault is established, the employer can then be made liable on the
basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris
families in the selection and supervision of its employees. The liability is primary and can only be
negated by showing due diligence in the selection and supervision of the employee, a factual
matter that has not been shown. Absent such a showing, one might ask further, how then must the
liability of the common carrier, on the one hand, and an independent contractor, on the other
hand, be described? It would be solidary. A contractual obligation can be breached by tort and
when the same act or omission causes the injury, one resulting in culpa contractual and the other
in culpa aquiliana, Article 2194
14
of the Civil Code can well apply.
15
In fine, a liability for tort
may arise even under a contract, where tort is that which breaches the contract.
16
Stated
differently, when an act which constitutes a breach of contract would have itself constituted the
source of a quasi-delictual liability had no contract existed between the parties, the contract can
be said to have been breached by tort, thereby allowing the rules on tort to apply.
17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that "there is
nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of
its employee, Escartin, has not been duly proven x x x." This finding of the appellate court is not
without substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the contractual
tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman;
thus, Roman can be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him.
18
It is an established rule that nominal damages cannot co-exist with
compensatory damages.
19

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













































G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y
MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY,
FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE
CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late
Pedrito Cudiamat represented by Inocencia Cudiamat, respondents.
Francisco S. Reyes Law Office for petitioners.
Antonio C. de Guzman for private respondents.

REGALADO, J .:p
On May 13, 1985, private respondents filed a complaint 1 for damages against
petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which
occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it
was alleged that on said date, while petitioner Theodore M. Lardizabal was driving a
passenger bus belonging to petitioner corporation in a reckless and imprudent manner
and without due regard to traffic rules and regulations and safety to persons and
property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing
Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without
regard to the welfare of the victim, first brought his other passengers and cargo to their
respective destinations before banging said victim to the Lepanto Hospital where he
expired.
On the other hand, petitioners alleged that they had observed and continued to observe
the extraordinary diligence required in the operation of the transportation company and
the supervision of the employees, even as they add that they are not absolute insurers
of the safety of the public at large. Further, it was alleged that it was the victim's own
carelessness and negligence which gave rise to the subject incident, hence they prayed
for the dismissal of the complaint plus an award of damages in their favor by way of a
counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners,
with this decretal portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced
that Pedrito Cudiamat was negligent, which negligence was the
proximate cause of his death. Nonetheless, defendants in equity, are
hereby ordered to pay the heirs of Pedrito Cudiamat the sum of
P10,000.00 which approximates the amount defendants initially
offered said heirs for the amicable settlement of the case. No costs.
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a
decision 3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the
decision of the lower court, and ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of
indemnity for death of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral
damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00)
Pesos as actual and compensatory damages;
4. The costs of this suit. 4
Petitioners' motion for reconsideration was denied by the Court of Appeals in its
resolution dated October 4, 1990, 5 hence this petition with the central issue herein
being whether respondent court erred in reversing the decision of the trial court and in
finding petitioners negligent and liable for the damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are
final and may not be reviewed by this Court on appeal. However, this is subject to
settled exceptions, one of which is when the findings of the appellate court are contrary
to those of the trial court, in which case a reexamination of the facts and evidence may
be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to
who between the petitioners an the victim is guilty of negligence. Perforce, we have had
to conduct an evaluation of the evidence in this case for the prope calibration of their
conflicting factual findings and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to
board a moving vehicle, especially with one of his hands holding an
umbrella. And, without having given the driver or the conductor any
indication that he wishes to board the bus. But defendants can also be
found wanting of the necessary diligence. In this connection, it is safe
to assume that when the deceased Cudiamat attempted to board
defendants' bus, the vehicle's door was open instead of being closed.
This should be so, for it is hard to believe that one would even attempt
to board a vehicle (i)n motion if the door of said vehicle is closed. Here
lies the defendant's lack of diligence. Under such circumstances,
equity demands that there must be something given to the heirs of the
victim to assuage their feelings. This, also considering that initially,
defendant common carrier had made overtures to amicably settle the
case. It did offer a certain monetary consideration to the victim's heirs.
7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano
Safarita, it is evident that the subject bus was at full stop when the
victim Pedrito Cudiamat boarded the same as it was precisely on this
instance where a certain Miss Abenoja alighted from the bus.
Moreover, contrary to the assertion of the appellees, the victim did
indicate his intention to board the bus as can be seen from the
testimony of the said witness when he declared that Pedrito Cudiamat
was no longer walking and made a sign to board the bus when the
latter was still at a distance from him. It was at the instance when
Pedrito Cudiamat was closing his umbrella at the platform of the bus
when the latter made a sudden jerk movement (as) the driver
commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the
appellee-driver in prematurely stepping on the accelerator and in not
waiting for the passenger to first secure his seat especially so when
we take into account that the platform of the bus was at the time
slippery and wet because of a drizzle. The defendants-appellees
utterly failed to observe their duty and obligation as common carrier to
the end that they should observe extra-ordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them according to the circumstances of each case
(Article 1733, New Civil Code). 8
After a careful review of the evidence on record, we find no reason to disturb the above
holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of
petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination
as follows:
Q It is not a fact Madam witness, that at bunkhouse
54, that is before the place of the incident, there is a
crossing?
A The way going to the mines but it is not being
pass(ed) by the bus.
Q And the incident happened before bunkhouse 56,
is that not correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985,
will you please inform this Honorable Court if there
was anv unusual incident that occurred?
A When we delivered a baggage at Marivic because
a person alighted there between Bunkhouse 53 and
54.
Q What happened when you delivered this
passenger at this particular place in Lepanto?
A When we reached the place, a passenger alighted
and I signalled my driver. When we stopped we
went out because I saw an umbrella about a split
second and I signalled again the driver, so the driver
stopped and we went down and we saw Pedrito
Cudiamat asking for help because he was lying
down.
Q How far away was this certain person, Pedrito
Cudiamat, when you saw him lying down from
the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about
three meters from the bus, was it at the front or at
the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one
of the passengers alighted were both between Bunkhouses 53 and 54, hence the finding
of the Court of Appeals that the bus was at full stop when the victim boarded the same is
correct. They further confirm the conclusion that the victim fell from the platform of the
bus when it suddenly accelerated forward and was run over by the rear right tires of the
vehicle, as shown by the physical evidence on where he was thereafter found in relation
to the bus when it stopped. Under such circumstances, it cannot be said that the
deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that
the victim would ride on the bus, since the latter had supposedly not manifested his
intention to board the same, does not merit consideration. When the bus is not in motion
there is no necessity for a person who wants to ride the same to signal his intention to
board. A public utility bus, once it stops, is in effect making a continuous offer to bus
riders. Hence, it becomes the duty of the driver and the conductor, every time the bus
stops, to do no act that would have the effect of increasing the peril to a passenger while
he was attempting to board the same. The premature acceleration of the bus in this case
was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers by railroad
train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in
order to afford passengers an opportunity to board and enter, and they are liable for
injuries suffered by boarding passengers resulting from the sudden starting up or jerking
of their conveyances while they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the
same cannot be considered negligent under the circumstances. As clearly explained in
the testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just
started" and "was still in slow motion" at the point where the victim had boarded and was
on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or
streetcar which is moving slowly. 14 An ordinarily prudent person would have made the
attempt board the moving conveyance under the same or similar circumstances. The
fact that passengers board and alight from slowly moving vehicle is a matter of common
experience both the driver and conductor in this case could not have been unaware of
such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already
considered a passenger and is entitled all the rights and protection pertaining to such a
contractual relation. Hence, it has been held that the duty which the carrier passengers
owes to its patrons extends to persons boarding cars as well as to those alighting
therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are
bound to observe extraordina diligence for the safety of the passengers transported by
the according to all the circumstances of each case. 16 A common carrier is bound to
carry the passengers safely as far as human care and foresight can provide, using the
utmost diligence very cautious persons, with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the
court need not make an express finding of fault or negligence on the part of the carrier in
order to hold it responsible to pay the damages sought by the passenger. By contract of
carriage, the carrier assumes the express obligation to transport the passenger to his
destination safely and observe extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the passenger is right away
attributable to the fault or negligence of the carrier. This is an exception to the general
rule that negligence must be proved, and it is therefore incumbent upon the carrier to
prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and
1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the
gravely injured victim immediately to the hospital for medical treatment is a patent and
incontrovertible proof of their negligence. It defies understanding and can even be
stigmatized as callous indifference. The evidence shows that after the accident the bus
could have forthwith turned at Bunk 56 and thence to the hospital, but its driver instead
opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a
refrigerator, despite the serious condition of the victim. The vacuous reason given by
petitioners that it was the wife of the deceased who caused the delay was tersely and
correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact
that they had to wait for about twenty minutes for Inocencia Cudiamat
to get dressed deserves scant consideration. It is rather scandalous
and deplorable for a wife whose husband is at the verge of dying to
have the luxury of dressing herself up for about twenty minutes before
attending to help her distressed and helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk
70 was to inform the victim's family of the mishap, since it was not said bus driver nor
the conductor but the companion of the victim who informed his family thereof. 20 In
fact, it was only after the refrigerator was unloaded that one of the passengers thought
of sending somebody to the house of the victim, as shown by the testimony of Virginia
Abalos again, to wit:
Q Why, what happened to your refrigerator at that
particular time?
A I asked them to bring it down because that is the
nearest place to our house and when I went down
and asked somebody to bring down the refrigerator,
I also asked somebody to call the family of Mr.
Cudiamat.
COURT:
Q Why did you ask somebody to call the family of
Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask
somebody to call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of
Mr. Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however, committed by
respondent Court of Appeals in computing the actual damages based on the gross
income of the victim. The rule is that the amount recoverable by the heirs of a victim of a
tort is not the loss of the entire earnings, but rather the loss of that portion of the
earnings which the beneficiary would have received. In other words, only net earnings,
not gross earnings, are to be considered, that is, the total of the earnings less expenses
necessary in the creation of such earnings or income and minus living and other
incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may
fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating
the actual or compensatory damages, respondent court found that the deceased was 48
years old, in good health with a remaining productive life expectancy of 12 years, and
then earning P24,000.00 a year. Using the gross annual income as the basis, and
multiplying the same by 12 years, it accordingly awarded P288,000. Applying the
aforestated rule on computation based on the net earnings, said award must be, as it
hereby is, rectified and reduced to P216,000.00. However, in accordance with prevailing
jurisprudence, the death indemnity is hereby increased to P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged judgment and
resolution of respondent Court of Appeals are hereby AFFIRMED in all other respects.
SO ORDERED.
G.R. No. 174156 June 20, 2012
FILCAR TRANSPORT SERVICES, Petitioner,
vs.
JOSE A. ESPINAS, Respondent.
D E C I S I O N
BRION, J .:
We resolve the present petition for review on certiorari
1
filed by petitioner Filcar Transport
Services (Filcar), challenging the decision
2
and the resolution
3
of the Court of Appeals (CA) in
CA-G.R. SP No. 86603.
The facts of the case, gathered from the records, are briefly summarized below.
On November 22, 1998, at around 6:30 p.m., respondent Jose A. Espinas was driving his car
along Leon Guinto Street in Manila. Upon reaching the intersection of Leon Guinto and President
Quirino Streets, Espinas stopped his car. When the signal light turned green, he proceeded to
cross the intersection. He was already in the middle of the intersection when another car,
traversing President Quirino Street and going to Roxas Boulevard, suddenly hit and bumped his
car. As a result of the impact, Espinas car turned clockwise. The other car escaped from the
scene of the incident, but Espinas was able to get its plate number.
After verifying with the Land Transportation Office, Espinas learned that the owner of the other
car, with plate number UCF-545, is Filcar.
Espinas sent several letters to Filcar and to its President and General Manager Carmen Flor,
demanding payment for the damages sustained by his car. On May 31, 2001, Espinas filed a
complaint for damages against Filcar and Carmen Flor before the Metropolitan Trial Court
(MeTC) of Manila, and the case was raffled to Branch 13. In the complaint, Espinas demanded
that Filcar and Carmen Flor pay the amount of P97,910.00, representing actual damages
sustained by his car.
Filcar argued that while it is the registered owner of the car that hit and bumped Espinas car, the
car was assigned to its Corporate Secretary Atty. Candido Flor, the husband of Carmen Flor.
Filcar further stated that when the incident happened, the car was being driven by Atty. Flors
personal driver, Timoteo Floresca.
Atty. Flor, for his part, alleged that when the incident occurred, he was attending a birthday
celebration at a nearby hotel, and it was only later that night when he noticed a small dent on and
the cracked signal light of the car. On seeing the dent and the crack, Atty. Flor allegedly asked
Floresca what happened, and the driver replied that it was a result of a "hit and run" while the car
was parked in front of Bogota on Pedro Gil Avenue, Manila.
Filcar denied any liability to Espinas and claimed that the incident was not due to its fault or
negligence since Floresca was not its employee but that of Atty. Flor. Filcar and Carmen Flor
both said that they always exercised the due diligence required of a good father of a family in
leasing or assigning their vehicles to third parties.
The MeTC Decision
The MeTC, in its decision dated January 20, 2004,
4
ruled in favor of Espinas, and ordered Filcar
and Carmen Flor, jointly and severally, to pay Espinas P97,910.00 as actual damages,
representing the cost of repair, with interest at 6% per annum from the date the complaint was
filed; P50,000.00 as moral damages; P20,000.00 as exemplary damages; and P20,000.00 as
attorneys fees. The MeTC ruled that Filcar, as the registered owner of the vehicle, is primarily
responsible for damages resulting from the vehicles operation.
The RTC Decision
The Regional Trial Court (RTC) of Manila, Branch 20, in the exercise of its appellate
jurisdiction, affirmed the MeTC decision.
5
The RTC ruled that Filcar failed to prove that Floresca
was not its employee as no proof was adduced that Floresca was personally hired by Atty. Flor.
The RTC agreed with the MeTC that the registered owner of a vehicle is directly and primarily
liable for the damages sustained by third persons as a consequence of the negligent or careless
operation of a vehicle registered in its name. The RTC added that the victim of recklessness on
the public highways is without means to discover or identify the person actually causing the
injury or damage. Thus, the only recourse is to determine the owner, through the vehicles
registration, and to hold him responsible for the damages.
The CA Decision
On appeal, the CA partly granted the petition in CA-G.R. SP No. 86603; it modified the RTC
decision by ruling that Carmen Flor, President and General Manager of Filcar, is not personally
liable to Espinas. The appellate court pointed out that, subject to recognized exceptions, the
liability of a corporation is not the liability of its corporate officers because a corporate entity
subject to well-recognized exceptions has a separate and distinct personality from its officers
and shareholders. Since the circumstances in the case at bar do not fall under the exceptions
recognized by law, the CA concluded that the liability for damages cannot attach to Carmen Flor.
The CA, however, affirmed the liability of Filcar to pay Espinas damages. According to the CA,
even assuming that there had been no employer-employee relationship between Filcar and the
driver of the vehicle, Floresca, the former can be held liable under the registered owner rule.
The CA relied on the rule that the registered owner of a vehicle is directly and primarily
responsible to the public and to third persons while the vehicle is being operated. Citing Erezo, et
al. v. Jepte,
6
the CA said that the rationale behind the rule is to avoid circumstances where
vehicles running on public highways cause accidents or injuries to pedestrians or other vehicles
without positive identification of the owner or drivers, or with very scant means of identification.
In Erezo, the Court said that the main aim of motor vehicle registration is to identify the owner,
so that if a vehicle causes damage or injury to pedestrians or other vehicles, responsibility can be
traced to a definite individual and that individual is the registered owner of the vehicle.
7

The CA did not accept Filcars argument that it cannot be held liable for damages because the
driver of the vehicle was not its employee. In so ruling, the CA cited the case of Villanueva v.
Domingo
8
where the Court said that the question of whether the driver was authorized by the
actual owner is irrelevant in determining the primary and direct responsibility of the registered
owner of a vehicle for accidents, injuries and deaths caused by the operation of his vehicle.
Filcar filed a motion for reconsideration which the CA denied in its Resolution dated July 6,
2006.
Hence, the present petition.
The Issue
Simply stated, the issue for the consideration of this Court is: whether Filcar, as registered owner
of the motor vehicle which figured in an accident, may be held liable for the damages caused to
Espinas.
Our Ruling
The petition is without merit.
Filcar, as registered owner, is deemed the employer of the driver, Floresca, and is thus vicariously
liable under Article 2176 in relation with Article 2180 of the Civil Code
It is undisputed that Filcar is the registered owner of the motor vehicle which hit and caused
damage to Espinas car; and it is on the basis of this fact that we hold Filcar primarily and
directly liable to Espinas for damages.
As a general rule, one is only responsible for his own act or omission.
9
Thus, a person will
generally be held liable only for the torts committed by himself and not by another. This general
rule is laid down in Article 2176 of the Civil Code, which provides to wit:
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.
Based on the above-cited article, the obligation to indemnify another for damage caused by ones
act or omission is imposed upon the tortfeasor himself, i.e., the person who committed the
negligent act or omission. The law, however, provides for exceptions when it makes certain
persons liable for the act or omission of another.
One exception is an employer who is made vicariously liable for the tort committed by his
employee. Article 2180 of the Civil Code states:
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.
x x x x
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.
x x x x
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.
Under Article 2176, in relation with Article 2180, of the Civil Code, an action predicated on an
employees act or omission may be instituted against the employer who is held liable for the
negligent act or omission committed by his employee.
Although the employer is not the actual tortfeasor, the law makes him vicariously liable on the
basis of the civil law principle of pater familias for failure to exercise due care and vigilance over
the acts of ones subordinates to prevent damage to another.
10
In the last paragraph of Article
2180 of the Civil Code, the employer may invoke the defense that he observed all the diligence of
a good father of a family to prevent damage.
As its core defense, Filcar contends that Article 2176, in relation with Article 2180, of the Civil
Code is inapplicable because it presupposes the existence of an employer-employee relationship.
According to Filcar, it cannot be held liable under the subject provisions because the driver of its
vehicle at the time of the accident, Floresca, is not its employee but that of its Corporate
Secretary, Atty. Flor.
We cannot agree. It is well settled that in case of motor vehicle mishaps, the registered owner of
the motor vehicle is considered as the employer of the tortfeasor-driver, and is made primarily
liable for the tort committed by the latter under Article 2176, in relation with Article 2180, of the
Civil Code.
In Equitable Leasing Corporation v. Suyom,
11
we ruled that in so far as third persons are
concerned, the registered owner of the motor vehicle is the employer of the negligent driver, and
the actual employer is considered merely as an agent of such owner.
In that case, a tractor registered in the name of Equitable Leasing Corporation (Equitable) figured
in an accident, killing and seriously injuring several persons. As part of its defense, Equitable
claimed that the tractor was initially leased to Mr. Edwin Lim under a Lease Agreement, which
agreement has been overtaken by a Deed of Sale entered into by Equitable and Ecatine
Corporation (Ecatine). Equitable argued that it cannot be held liable for damages because the
tractor had already been sold to Ecatine at the time of the accident and the negligent driver was
not its employee but of Ecatine.
In upholding the liability of Equitable, as registered owner of the tractor, this Court said that
"regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar
as the public and third persons are concerned; consequently, it is directly and primarily
responsible for the consequences of its operation."
12
The Court further stated that "[i]n
contemplation of law, the owner/operator of record is the employer of the driver, the actual
operator and employer being considered as merely its agent."
13
Thus, Equitable, as the registered
owner of the tractor, was considered under the law on quasi delict to be the employer of the
driver, Raul Tutor; Ecatine, Tutors actual employer, was deemed merely as an agent of
Equitable.
Thus, it is clear that for the purpose of holding the registered owner of the motor vehicle
primarily and directly liable for damages under Article 2176, in relation with Article 2180, of the
Civil Code, the existence of an employer-employee relationship, as it is understood in labor
relations law, is not required. It is sufficient to establish that Filcar is the registered owner of the
motor vehicle causing damage in order that it may be held vicariously liable under Article 2180
of the Civil Code.
Rationale for holding the registered owner vicariously liable
The rationale for the rule that a registered owner is vicariously liable for damages caused by the
operation of his motor vehicle is explained by the principle behind motor vehicle registration,
which has been discussed by this Court in Erezo, and cited by the CA in its decision:
The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused accidents or injuries to pedestrians
or other vehicles without positive identification of the owner or drivers, or with very scant means
of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the interest of the determination of
persons responsible for damages or injuries caused on public highways. [emphasis ours]
Thus, whether there is an employer-employee relationship between the registered owner and the
driver is irrelevant in determining the liability of the registered owner who the law holds
primarily and directly responsible for any accident, injury or death caused by the operation of the
vehicle in the streets and highways.
As explained by this Court in Erezo, the general public policy involved in motor vehicle
registration is the protection of innocent third persons who may have no means of identifying
public road malefactors and, therefore, would find it difficult if not impossible to seek redress
for damages they may sustain in accidents resulting in deaths, injuries and other damages; by
fixing the person held primarily and directly liable for the damages sustained by victims of road
mishaps, the law ensures that relief will always be available to them.
To identify the person primarily and directly responsible for the damages would also prevent a
situation where a registered owner of a motor vehicle can easily escape liability by passing on the
blame to another who may have no means to answer for the damages caused, thereby defeating
the claims of victims of road accidents. We take note that some motor vehicles running on our
roads are driven not by their registered owners, but by employed drivers who, in most instances,
do not have the financial means to pay for the damages caused in case of accidents.
These same principles apply by analogy to the case at bar. Filcar should not be permitted to evade
its liability for damages by conveniently passing on the blame to another party; in this case, its
Corporate Secretary, Atty. Flor and his alleged driver, Floresca. Following our reasoning in
Equitable, the agreement between Filcar and Atty. Flor to assign the motor vehicle to the latter
does not bind Espinas who was not a party to and has no knowledge of the agreement, and whose
only recourse is to the motor vehicle registration.
Neither can Filcar use the defenses available under Article 2180 of the Civil Code - that the
employee acts beyond the scope of his assigned task or that it exercised the due diligence of a
good father of a family to prevent damage - because the motor vehicle registration law, to a
certain extent, modified Article 2180 of the Civil Code by making these defenses unavailable to
the registered owner of the motor vehicle.1awp++i1 Thus, for as long as Filcar is the registered
owner of the car involved in the vehicular accident, it could not escape primary liability for the
damages caused to Espinas.
The public interest involved in this case must not be underestimated. Road safety is one of the
most common problems that must be addressed in this country. We are not unaware of news of
road accidents involving reckless drivers victimizing our citizens. Just recently, such pervasive
recklessness among most drivers took the life of a professor of our state university.
14
What is
most disturbing is that our existing laws do not seem to deter these road malefactors from
committing acts of recklessness.
We understand that the solution to the problem does not stop with legislation. An effective
administration and enforcement of the laws must be ensured to reinforce discipline among drivers
and to remind owners of motor vehicles to exercise due diligence and vigilance over the acts of
their drivers to prevent damage to others.
Thus, whether the driver of the motor vehicle, Floresca, is an employee of Filcar is irrelevant in
arriving at the conclusion that Filcar is primarily and directly liable for the damages sustained by
Espinas. While Republic Act No. 4136 or the Land Transportation and Traffic Code does not
contain any provision on the liability of registered owners in case of motor vehicle mishaps,
Article 2176, in relation with Article 2180, of the Civil Code imposes an obligation upon Filcar,
as registered owner, to answer for the damages caused to Espinas car. This interpretation is
consistent with the strong public policy of maintaining road safety, thereby reinforcing the aim of
the State to promote the responsible operation of motor vehicles by its citizens.
This does not mean, however, that Filcar is left without any recourse against the actual employer
of the driver and the driver himself. Under the civil law principle of unjust enrichment, the
registered owner of the motor vehicle has a right to be indemnified by the actual employer of the
driver of the amount that he may be required to pay as damages for the injury caused to another.
The set-up may be inconvenient for the registered owner of the motor vehicle, but the
inconvenience cannot outweigh the more important public policy being advanced by the law in
this case which is the protection of innocent persons who may be victims of reckless drivers and
irresponsible motor vehicle owners.
WHEREFORE, the petition is DENIED. The decision dated February 16, 2006 and the resolution
dated July 6, 2006 of the Court of Appeals are AFFIRMED. Costs against petitioner Filcar
Transport Services.
SO ORDERED.








G.R. No. L-65510 March 9, 1987
TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE,
respondents.
Cirilo A. Diaz, Jr. for petitioner.
Henry V. Briguera for private respondent.

PARAS, J .:
"'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-
honored maxim that must be applied to the parties in the case at bar. Having entered
into an illegal contract, neither can seek relief from the courts, and each must bear the
consequences of his acts." (Lita Enterprises vs. IAC, 129 SCRA 81.)
The factual background of this case is undisputed. The same is narrated by the
respondent court in its now assailed decision, as follows:
On May 9, 1975, the defendant bought from the plaintiff a motorcycle
with complete accessories and a sidecar in the total consideration of
P8,000.00 as shown by Invoice No. 144 (Exh. "A"). Out of the total
purchase price the defendant gave a downpayment of P1,700.00 with
a promise that he would pay plaintiff the balance within sixty days. The
defendant, however, failed to comply with his promise and so upon his
own request, the period of paying the balance was extended to one
year in monthly installments until January 1976 when he stopped
paying anymore. The plaintiff made demands but just the same the
defendant failed to comply with the same thus forcing the plaintiff to
consult a lawyer and file this action for his damage in the amount of
P546.21 for attorney's fees and P100.00 for expenses of litigation.
The plaintiff also claims that as of February 20, 1978, the total account
of the defendant was already P2,731.06 as shown in a statement of
account (Exhibit. "B"). This amount includes not only the balance of
P1,700.00 but an additional 12% interest per annum on the said
balance from January 26, 1976 to February 27, 1978; a 2% service
charge; and P 546.21 representing attorney's fees.
In this particular transaction a chattel mortgage (Exhibit 1) was
constituted as a security for the payment of the balance of the
purchase price. It has been the practice of financing firms that
whenever there is a balance of the purchase price the registration
papers of the motor vehicle subject of the sale are not given to the
buyer. The records of the LTC show that the motorcycle sold to the
defendant was first mortgaged to the Teja Marketing by Angel Jaucian
though the Teja Marketing and Angel Jaucian are one and the same,
because it was made to appear that way only as the defendant had no
franchise of his own and he attached the unit to the plaintiff's MCH
Line. The agreement also of the parties here was for the plaintiff to
undertake the yearly registration of the motorcycle with the Land
Transportation Commission. Pursuant to this agreement the defendant
on February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for
the mortgage fee and the P82.00 for the registration fee of the
motorcycle. The plaintiff, however failed to register the motorcycle on
that year on the ground that the defendant failed to comply with some
requirements such as the payment of the insurance premiums and the
bringing of the motorcycle to the LTC for stenciling, the plaintiff saying
that the defendant was hiding the motorcycle from him. Lastly, the
plaintiff explained also that though the ownership of the motorcycle
was already transferred to the defendant the vehicle was still
mortgaged with the consent of the defendant to the Rural Bank of
Camaligan for the reason that all motorcycle purchased from the
plaintiff on credit was rediscounted with the bank.
On his part the defendant did not dispute the sale and the outstanding
balance of P1,700. 00 still payable to the plaintiff. The defendant was
persuaded to buy from the plaintiff the motorcycle with the side car
because of the condition that the plaintiff would be the one to register
every year the motorcycle with the Land Transportation Commission.
In 1976, however, the plaintfff failed to register both the chattel
mortgage and the motorcycle with the LTC notwithstanding the fact
that the defendant gave him P90.00 for mortgage fee and registration
fee and had the motorcycle insured with La Perla Compana de
Seguros (Exhibit "6") as shown also by the Certificate of cover (Exhibit
"3"). Because of this failure of the plaintiff to comply with his obligation
to register the motorcycle the defendant suffered damages when he
failed to claim any insurance indemnity which would amount to no less
than P15,000.00 for the more than two times that the motorcycle
figured in accidents aside from the loss of the daily income of P15.00
as boundary fee beginning October 1976 when the motorcycle was
impounded by the LTC for not being registered.
The defendant disputed the claim of the plaintiff that he was hiding
from the plaintiff the motorcycle resulting in its not being registered.
The truth being that the motorcycle was being used for transporting
passengers and it kept on travelling from one place to another. The
motor vehicle sold to him was mortgaged by the plaintiff with the Rural
Bank of Camaligan without his consent and knowledge and the
defendant was not even given a copy of the mortgage deed. The
defendant claims that it is not true that the motorcycle was mortgaged
because of re-discounting for rediscounting is only true with Rural
Banks and the Central Bank. The defendant puts the blame on the
plaintiff for not registering the motorcycle with the LTC and for not
giving him the registration papers inspite of demands made. Finally,
the evidence of the defendant shows that because of the filing of this
case he was forced to retain the services of a lawyer for a fee on not
less than P1,000.00.
xxx xxx xxx
... it also appears and the Court so finds that defendant purchased the
motorcycle in question, particularly for the purpose of engaging and
using the same in the transportation business and for this purpose
said trimobile unit was attached to the plaintiffs transportation line who
had the franchise, so much so that in the registration certificate, the
plaintiff appears to be the owner of the unit. Furthermore, it appears to
have been agreed, further between the plaintiff and the defendant,
that plaintiff would undertake the yearly registration of the unit in
question with the LTC. Thus, for the registration of the unit for the year
1976, per agreement, the defendant gave to the plaintiff the amount of
P82.00 for its registration, as well as the insurance coverage of the
unit.
Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of
Money with Damages" against private respondent Pedro N. Nale in the City Court of
Naga City. The City Court rendered judgment in favor of petitioner, the dispositive
portion of which reads:
WHEREFORE, decision is hereby rendered dismissing the
counterclaim and ordering the defendant to pay plaintiff the sum of
P1,700.00 representing the unpaid balance of the purchase price with
legal rate of interest from the date of the filing of the complaint until the
same is fully paid; to pay plaintiff the sum of P546.21 as attorney's
fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and
to pay the costs.
SO ORDERED.
On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in
toto. Private respondent filed a petition for review with the Intermediate Appellate Court
and on July 18, 1983 the said Court promulgated its decision, the pertinent portion of
which reads
However, as the purchase of the motorcycle for operation as a
trimobile under the franchise of the private respondent Jaucian,
pursuant to what is commonly known as the "kabit system", without
the prior approval of the Board of Transportation (formerly the Public
Service Commission) was an illegal transaction involving the fictitious
registration of the motor vehicle in the name of the private respondent
so that he may traffic with the privileges of his franchise, or certificate
of public convenience, to operate a tricycle service, the parties being
in pari delicto, neither of them may bring an action against the other to
enforce their illegal contract [Art. 1412 (a), Civil Code].
xxx xxx xxx
WHEREFORE, the decision under review is hereby set aside. The
complaint of respondent Teja Marketing and/or Angel Jaucian, as well
as the counterclaim of petitioner Pedro Nale in Civil Case No. 1153 of
the Court of First Instance of Camarines Sur (formerly Civil Case No.
5856 of the City Court of Naga City) are dismissed. No
pronouncement as to costs.
SO ORDERED.
The decision is now before Us on a petition for review, petitioner Teja Marketing and/or
Angel Jaucian presenting a lone assignment of error whether or not respondent court
erred in applying the doctrine of "pari delicto."
We find the petition devoid of merit.
Unquestionably, the parties herein operated under an arrangement, commonly known as
the "kabit system" whereby a person who has been granted a certificate of public
convenience allows another person who owns motor vehicles to operate under such
franchise for a fee. A certificate of public convenience is a special privilege conferred by
the government. Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the
prevalence of graft and corruption in the government transportation offices.
Although not outrightly penalized as a criminal offense, the kabit system is invariably
recognized as being contrary to public policy and, therefore, void and in existent under
Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid
either party to enforce an illegal contract, but will leave both where it finds then. Upon
this premise it would be error to accord the parties relief from their predicament. Article
1412 of the Civil Code denies them such aid. It provides:
Art. 1412. If the act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules shall be
observed:
1. When the fault is on the part of both contracting parties, neither may
recover that he has given by virtue of the contract, or demand, the
performance of the other's undertaking.
The defect of in existence of a contract is permanent and cannot be cured by ratification
or by prescription. The mere lapse of time cannot give efficacy to contracts that are null
and void.
WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision
of the Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs.
SO ORDERED.