Sps.

Dante Cruz and Leonora Cruz vs. Sun Holidays, Inc.

D E C I S I O N


CARPIO MORALES, J.:

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25,
2001[1] against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC)
of Pasig City for damages arising from the death of their son Ruelito C. Cruz
(Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B
Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental
Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned
and operated by respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to
11, 2000 was by virtue of a tour package-contract with respondent that included
transportation to and from the Resort and the point of departure in Batangas.

Miguel C. Matute (Matute),[2] a scuba diving instructor and one of the survivors,
gave his account of the incident that led to the filing of the complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000. He was originally
scheduled to leave the Resort in the afternoon of September 10, 2000, but was
advised to stay for another night because of strong winds and heavy rains.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests
including petitioners son and his wife trekked to the other side of the Coco Beach
mountain that was sheltered from the wind where they boarded M/B Coco Beach III,
which was to ferry them to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto
Galera and into the open seas, the rain and wind got stronger, causing the boat to tilt
from side to side and the captain to step forward to the front, leaving the wheel to
one of the crew members.

The waves got more unwieldy. After getting hit by two big waves which came one
after the other, M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat.
Upon seeing the captain, Matute and the other passengers who reached the surface
asked him what they could do to save the people who were still trapped under the
boat. The captain replied Iligtas niyo na lang ang sarili niyo (Just save yourselves).

Help came after about 45 minutes when two boats owned by Asia Divers in Sabang,
Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on those two
boats were 22 persons, consisting of 18 passengers and four crew members, who

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

At the time of Ruelitos death, he was 28 years old and employed as a contractual
worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a
basic monthly salary of $900.[3]
Petitioners, by letter of October 26, 2000,[4] demanded indemnification from
respondent for the death of their son in the amount of at least P4,000,000.

Replying, respondent, by letter dated November 7, 2000,[5] denied any
responsibility for the incident which it considered to be a fortuitous event. It
nevertheless offered, as an act of commiseration, the amount of P10,000 to
petitioners upon their signing of a waiver.

As petitioners declined respondents offer, they filed the Complaint, as earlier
reflected, alleging that respondent, as a common carrier, was guilty of negligence in
allowing M/B Coco Beach III to sail notwithstanding storm warning bulletins issued
by the Philippine Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.[6]

In its Answer,[7] respondent denied being a common carrier, alleging that its boats
are not available to the general public as they only ferry Resort guests and crew
members. Nonetheless, it claimed that it exercised the utmost diligence in ensuring
the safety of its passengers; contrary to petitioners allegation, there was no storm
on September 11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco
Beach III was not filled to capacity and had sufficient life jackets for its passengers.
By way of Counterclaim, respondent alleged that it is entitled to an award for
attorneys fees and litigation expenses amounting to not less than P300,000.

Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily
requires four conditions to be met before a boat is allowed to sail, to wit: (1) the sea
is calm, (2) there is clearance from the Coast Guard, (3) there is clearance from the
captain and (4) there is clearance from the Resorts assistant manager.[8] He added
that M/B Coco Beach III met all four conditions on September 11, 2000,[9] but a
subasco or squall, characterized by strong winds and big waves, suddenly occurred,
causing the boat to capsize.[10]
By Decision of February 16, 2005,[11] Branch 267 of the Pasig RTC dismissed
petitioners Complaint and respondents Counterclaim.

Petitioners Motion for Reconsideration having been denied by Order dated
September 2, 2005,[12] they appealed to the Court of Appeals.

By Decision of August 19, 2008,[13] the appellate court denied petitioners appeal,
holding, among other things, that the trial court correctly ruled that respondent is a
private carrier which is only required to observe ordinary diligence; that
respondent in fact observed extraordinary diligence in transporting its guests on

board M/B Coco Beach III; and that the proximate cause of the incident was a squall,
a fortuitous event.

Petitioners Motion for Reconsideration having been denied by Resolution dated
January 16, 2009,[14] they filed the present Petition for Review.[15]

Petitioners maintain the position they took before the trial court, adding that
respondent is a common carrier since by its tour package, the transporting of its
guests is an integral part of its resort business. They inform that another division of
the appellate court in fact held respondent liable for damages to the other survivors
of the incident.

Upon the other hand, respondent contends that petitioners failed to present
evidence to prove that it is a common carrier; that the Resorts ferry services for
guests cannot be considered as ancillary to its business as no income is derived
therefrom; that it exercised extraordinary diligence as shown by the conditions it
had imposed before allowing M/B Coco Beach III to sail; that the incident was
caused by a fortuitous event without any contributory negligence on its part; and
that the other case wherein the appellate court held it liable for damages involved
different plaintiffs, issues and evidence.[16]

The petition is impressed with merit.

Petitioners correctly rely on De Guzman v. Court of Appeals[17] in characterizing
respondent as a common carrier.

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

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

So understood, the concept of common carrier under Article 1732 may be seen to
coincide neatly with the notion of public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the

law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, public service includes:

. . . every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other
similar public services . . .[18] (emphasis and underscoring supplied.)


Indeed, respondent is a common carrier. Its ferry services are so intertwined with
its main business as to be properly considered ancillary thereto. The constancy of
respondents ferry services in its resort operations is underscored by its having its
own Coco Beach boats. And the tour packages it offers, which include the ferry
services, may be availed of by anyone who can afford to pay the same. These
services are thus available to the public.

That respondent does not charge a separate fee or fare for its ferry services is of no
moment. It would be imprudent to suppose that it provides said services at a loss.
The Court is aware of the practice of beach resort operators offering tour packages
to factor the transportation fee in arriving at the tour package price. That guests
who opt not to avail of respondents ferry services pay the same amount is likewise
inconsequential. These guests may only be deemed to have overpaid.

As De Guzman instructs, Article 1732 of the Civil Code defining common carriers has
deliberately refrained from making distinctions on whether the carrying of persons
or goods is the carriers principal business, whether it is offered on a regular basis,
or whether it is offered to the general public. The intent of the law is thus to not
consider such distinctions. Otherwise, there is no telling how many other
distinctions may be concocted by unscrupulous businessmen engaged in the
carrying of persons or goods in order to avoid the legal obligations and liabilities of
common carriers.

Under the Civil Code, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence for the safety
of the passengers transported by them, according to all the circumstances of each
case.[19] They are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances.[20]



When a passenger dies or is injured in the discharge of a contract of carriage, it is
presumed that the common carrier is at fault or negligent. In fact, there is even no
need for the court to make an express finding of fault or negligence on the part of
the common carrier. This statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence.[21]

Respondent nevertheless harps on its strict compliance with the earlier mentioned
conditions of voyage before it allowed M/B Coco Beach III to sail on September 11,
2000. Respondents position does not impress.

The evidence shows that PAGASA issued 24-hour public weather forecasts and
tropical cyclone warnings for shipping on September 10 and 11, 2000 advising of
tropical depressions in Northern Luzon which would also affect the province of
Mindoro.[22] By the testimony of Dr. Frisco Nilo, supervising weather specialist of
PAGASA, squalls are to be expected under such weather condition.[23]

A very cautious person exercising the utmost diligence would thus not brave such
stormy weather and put other peoples lives at risk. The extraordinary diligence
required of common carriers demands that they take care of the goods or lives
entrusted to their hands as if they were their own. This respondent failed to do.



Respondents insistence that the incident was caused by a fortuitous event does not
impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to foresee or, if foreseeable,
impossible to avoid; (c) the occurrence must have been such as to render it
impossible for the debtors to fulfill their obligation in a normal manner; and (d) the
obligor must have been free from any participation in the aggravation of the
resulting injury to the creditor.[24]

To fully free a common carrier from any liability, the fortuitous event must have
been the proximate and only cause of the loss. And it should have exercised due
diligence to prevent or minimize the loss before, during and after the occurrence of
the fortuitous event.[25]

Respondent cites the squall that occurred during the voyage as the fortuitous event
that overturned M/B Coco Beach III. As reflected above, however, the occurrence of
squalls was expected under the weather condition of September 11, 2000.
Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it

capsized and sank.[26] The incident was, therefore, not completely free from human
intervention.

The Court need not belabor how respondents evidence likewise fails to demonstrate
that it exercised due diligence to prevent or minimize the loss before, during and
after the occurrence of the squall.




Article 1764[27] vis--vis Article 2206[28] of the Civil Code holds the common
carrier in breach of its contract of carriage that results in the death of a passenger
liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning
capacity and (3) moral damages.

Petitioners are entitled to indemnity for the death of Ruelito which is fixed at
P50,000.[29]

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

Net Earning Capacity = life expectancy x (gross annual income - reasonable and
necessary living expenses).

Life expectancy is determined in accordance with the formula:

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


The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80
age at death]) adopted in the American Expectancy Table of Mortality or the
Actuarial of Combined Experience Table of Mortality.[31]
The second factor is computed by multiplying the life expectancy by the net
earnings of the deceased, i.e., the total earnings less expenses necessary in the
creation of such earnings or income and less living and other incidental
expenses.[32] The loss is not equivalent to the entire earnings of the deceased, but
only such portion as he would have used to support his dependents or heirs. Hence,
to be deducted from his gross earnings are the necessary expenses supposed to be
used by the deceased for his own needs.[33]

In computing the third factor necessary living expense, Smith Bell Dodwell Shipping
Agency Corp. v. Borja[34] teaches that when, as in this case, there is no showing that
the living expenses constituted the smaller percentage of the gross income, the
living expenses are fixed at half of the gross income.

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


Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35

Documentary evidence shows that Ruelito was earning a basic monthly salary of
$900[35] which, when converted to Philippine peso applying the annual average
exchange rate of $1 = P44 in 2000,[36] amounts to P39,600. Ruelitos net earning
capacity is thus computed as follows:

Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).

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

Net Earning Capacity = P8,316,000


Respecting the award of moral damages, since respondent common carriers breach
of contract of carriage resulted in the death of petitioners son, following Article
1764 vis--vis Article 2206 of the Civil Code, petitioners are entitled to moral
damages.

Since respondent failed to prove that it exercised the extraordinary diligence
required of common carriers, it is presumed to have acted recklessly, thus
warranting the award too of exemplary damages, which are granted in contractual
obligations if the defendant acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.[37]

Under the circumstances, it is reasonable to award petitioners the amount of
P100,000 as moral damages and P100,000 as exemplary damages.[38]


Pursuant to Article 2208[39] of the Civil Code, attorney's fees may also be awarded
where exemplary damages are awarded. The Court finds that 10% of the total
amount adjudged against respondent is reasonable for the purpose.

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals[40] teaches that when an
obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for payment of interest
in the concept of actual and compensatory damages, subject to the following rules,
to wit

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,
an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be
so reasonably established at the time the demand is made, the interest shall begin to
run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit. (emphasis supplied).



Since the amounts payable by respondent have been determined with certainty only
in the present petition, the interest due shall be computed upon the finality of this
decision at the rate of 12% per annum until satisfaction, in accordance with
paragraph number 3 of the immediately cited guideline in Easter Shipping Lines,
Inc.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and
SET ASIDE. Judgment is rendered in favor of petitioners ordering respondent to pay
petitioners the following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2)
P8,316,000 as indemnity for Ruelitos loss of earning capacity; (3) P100,000 as moral
damages; (4) P100,000 as exemplary damages; (5) 10% of the total amount
adjudged against respondent as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12%
per annum computed from the finality of this decision until full payment.

SO ORDERED.

A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT OF APPEALS and
FGU INSURANCE CORPORATION, respondents.
D E C I S I O N
CARPIO MORALES, J.:

Before this Court on a petition for Certiorari is the appellate courts Decision[1] of
August 10, 2000 reversing and setting aside the judgment of Branch 133, Regional
Trial Court of Makati City, in Civil Case No. 93-76B which dismissed the complaint of
respondent FGU Insurance Corporation (FGU Insurance) against petitioner A.F.
Sanchez Brokerage, Inc. (Sanchez Brokerage).

On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal
Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of 86,800
Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters
Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco
Laboratories, Inc.[2] The Femenal tablets were placed in 124 cartons and the
Nordiol tablets were placed in 20 cartons which were packed together in one (1)
LD3 aluminum container, while the Trinordial tablets were packed in two pallets,
each of which contained 30 cartons.[3]

Wyeth-Suaco insured the shipment against all risks with FGU Insurance which
issued Marine Risk Note No. 4995 pursuant to Marine Open Policy No. 138.[4]

Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International
Airport (NAIA),[5] it was discharged without exception[6] and delivered to the
warehouse of the Philippine Skylanders, Inc. (PSI) located also at the NAIA for
safekeeping.[7]

In order to secure the release of the cargoes from the PSI and the Bureau of
Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage which had been
its licensed broker since 1984.[8] As its customs broker, Sanchez Brokerage
calculates and pays the customs duties, taxes and storage fees for the cargo and
thereafter delivers it to Wyeth-Suaco.[9]

On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez
Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for which, Official
Receipt No. 016992,[10] was issued. On the receipt, another representative of
Sanchez Brokerage, M. Sison,[11] acknowledged that he received the cargoes
consisting of three pieces in good condition.[12]

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the
cargoes[13] which were thereupon stripped from the aluminum containers[14] and
loaded inside two transport vehicles hired by Sanchez Brokerage.[15]

Among those who witnessed the release of the cargoes from the PSI warehouse
were Ruben Alonso and Tony Akas,[16] employees of Elite Adjusters and Surveyors

Inc. (Elite Surveyors), a marine and cargo surveyor and insurance claim adjusters
firm engaged by Wyeth-Suaco on behalf of FGU Insurance.

Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon
Laboratories Inc. in Antipolo City for quality control check.[17] The delivery receipt,
bearing No. 07037 dated July 29, 1992, indicated that the delivery consisted of one
container with 144 cartons of Femenal and Nordiol and 1 pallet containing
Trinordiol.[18]

On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the
delivery of the cargoes by affixing his signature on the delivery receipt.[19] Upon
inspection, however, he, together with Ruben Alonzo of Elite Surveyors, discovered
that 44 cartons containing Femenal and Nordiol tablets were in bad order.[20] He
thus placed a note above his signature on the delivery receipt stating that 44 cartons
of oral contraceptives were in bad order. The remaining 160 cartons of oral
contraceptives were accepted as complete and in good order.

Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey
report[21] dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3
cartons of Nordiol tablets were wetted (sic).[22]

The Elite Surveyors later issued Certificate No. CS-0731-1538/92[23] attached to
which was an Annexed Schedule whereon it was indicated that prior to the loading
of the cargoes to the brokers trucks at the NAIA, they were inspected and found to
be in apparent good condition.[24] Also noted was that at the time of delivery to the
warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could account
for the wetting of the 44 cartons of Femenal and Nordiol tablets.[25]

On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report[26]
confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700 blister packs of
Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily damaged
with water and emitted foul smell.

On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection[27] of 38
cartons of Femenal and 3 cartons of Nordiol on the ground that they were delivered
to Hizon Laboratories with heavy water damaged (sic) causing the cartons to sagged
(sic) emitting a foul order and easily attracted flies.[28]

Wyeth-Suaco later demanded, by letter[29] of August 25, 1992, from Sanchez
Brokerage the payment of P191,384.25 representing the value of its loss arising
from the damaged tablets.

As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an
insurance claim against FGU Insurance which paid Wyeth-Suaco the amount of
P181,431.49 in settlement of its claim under Marine Risk Note Number 4995.

Wyeth-Suaco thus issued Subrogation Receipt[30] in favor of FGU Insurance.

On demand by FGU Insurance for payment of the amount of P181,431.49 it paid
Wyeth-Suaco, Sanchez Brokerage, by letter[31] of January 7, 1993, disclaimed
liability for the damaged goods, positing that the damage was due to improper and
insufficient export packaging; that when the sealed containers were opened outside
the PSI warehouse, it was discovered that some of the loose cartons were wet,[32]
prompting its (Sanchez Brokerages) representative Morales to inform the Import-
Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes
but that the latter advised to still deliver them to Hizon Laboratories where an
adjuster would assess the damage.[33]

Hence, the filing by FGU Insurance of a complaint for damages before the Regional
Trial Court of Makati City against the Sanchez Brokerage.

The trial court, by Decision[34] of July 29, 1996, dismissed the complaint, holding
that the Survey Report prepared by the Elite Surveyors is bereft of any evidentiary
support and a mere product of pure guesswork.[35]

On appeal, the appellate court reversed the decision of the trial court, it holding that
the Sanchez Brokerage engaged not only in the business of customs brokerage but
also in the transportation and delivery of the cargo of its clients, hence, a common
carrier within the context of Article 1732 of the New Civil Code.[36]

Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to
petitioner in good order and condition but were in a damaged state when delivered
to Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed
negligent and upon it rested the burden of proving that it exercised extraordinary
negligence not only in instances when negligence is directly proven but also in those
cases when the cause of the damage is not known or unknown.[37]

The appellate court thus disposed:

IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED.
The Decision of the Court a quo is REVERSED. Another Decision is hereby rendered
in favor of the Appellant and against the Appellee as follows:

1. The Appellee is hereby ordered to pay the Appellant the principal amount of
P181, 431.49, with interest thereupon at the rate of 6% per annum, from the date of
the Decision of the Court, until the said amount is paid in full;

2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00
as and by way of attorneys fees; and

3. The counterclaims of the Appellee are DISMISSED.[38]

Sanchez Brokerages Motion for Reconsideration having been denied by the

appellate courts Resolution of December 8, 2000 which was received by petitioner
on January 5, 2001, it comes to this Court on petition for certiorari filed on March 6,
2001.

In the main, petitioner asserts that the appellate court committed grave and
reversible error tantamount to abuse of discretion when it found petitioner a
common carrier within the context of Article 1732 of the New Civil Code.

Respondent FGU Insurance avers in its Comment that the proper course of action
which petitioner should have taken was to file a petition for review on certiorari
since the sole office of a writ of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion amounting to lack or excess of
jurisdiction and does not include correction of the appellate courts evaluation of the
evidence and factual findings thereon.

On the merits, respondent FGU Insurance contends that petitioner, as a common
carrier, failed to overcome the presumption of negligence, it being documented that
petitioner withdrew from the warehouse of PSI the subject shipment entirely in
good order and condition.[39]

The petition fails.

Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in
any case, i.e., regardless of the nature of the action or proceedings involved, may be
appealed to this Court by filing a petition for review, which would be but a
continuation of the appellate process over the original case.[40]

The Resolution of the Court of Appeals dated December 8, 2000 denying the motion
for reconsideration of its Decision of August 10, 2000 was received by petitioner on
January 5, 2001. Since petitioner failed to appeal within 15 days or on or before
January 20, 2001, the appellate courts decision had become final and executory. The
filing by petitioner of a petition for certiorari on March 6, 2001 cannot serve as a
substitute for the lost remedy of appeal.

In another vein, the rule is well settled that in a petition for certiorari, the petitioner
must prove not merely reversible error but also grave abuse of discretion
amounting to lack or excess of jurisdiction.

Petitioner alleges that the appellate court erred in reversing and setting aside the
decision of the trial court based on its finding that petitioner is liable for the damage
to the cargo as a common carrier. What petitioner is ascribing is an error of
judgment, not of jurisdiction, which is properly the subject of an ordinary appeal.

Where the issue or question involves or affects the wisdom or legal soundness of the
decision not the jurisdiction of the court to render said decision the same is beyond

the province of a petition for certiorari.[41] The supervisory jurisdiction of this

Court to issue a cert writ cannot be exercised in order to review the judgment of
lower courts as to its intrinsic correctness, either upon the law or the facts of the
case.[42]

Procedural technicalities aside, the petition still fails.

The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit:

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.

Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage,
himself testified that the services the firm offers include the delivery of goods to the
warehouse of the consignee or importer.

ATTY. FLORES:

Q: What are the functions of these license brokers, license customs broker?

WITNESS:

As customs broker, we calculate the taxes that has to be paid in cargos, and those
upon approval of the importer, we prepare the entry together for processing and
claims from customs and finally deliver the goods to the warehouse of the
importer.[43]

Article 1732 does not distinguish between one whose principal business activity is
the carrying of goods and one who does such carrying only as an ancillary
activity.[44] The contention, therefore, of petitioner that it is not a common carrier
but a customs broker whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

In this light, petitioner as a common carrier is mandated to observe, under Article
1733[45] of the Civil Code, extraordinary diligence in the vigilance over the goods it
transports according to all the circumstances of each case. In the event that the
goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary diligence.[46]

The concept of extra-ordinary diligence was explained in Compania Maritima v.
Court of Appeals:[47]

The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the greatest skill and
foresight and to use all reasonable means to ascertain the nature and characteristics
of goods tendered for shipment, and to exercise due care in the handling and
stowage, including such methods as their nature requires.[48]

In the case at bar, it was established that petitioner received the cargoes from the
PSI warehouse in NAIA in good order and condition;[49] and that upon delivery by
petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad
order, as noted in the Delivery Receipt[50] issued by petitioner, and as indicated in
the Survey Report of Elite Surveyors[51] and the Destruction Report of Hizon
Laboratories, Inc.[52]

In an attempt to free itself from responsibility for the damage to the goods,
petitioner posits that they were damaged due to the fault or negligence of the
shipper for failing to properly pack them and to the inherent characteristics of the
goods[53]; and that it should not be faulted for following the instructions of
Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed
to the latter that some of the cartons, on examination outside the PSI warehouse,
were found to be wet.[54]

While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a common
carrier from liability if the loss or damage is due to the character of the goods or
defects in the packing or in the containers, the rule is that if the improper packing is
known to the carrier or his employees or is apparent upon ordinary observation,
but he nevertheless accepts the same without protest or exception notwithstanding
such condition, he is not relieved of liability for the resulting damage.[56]

If the claim of petitioner that some of the cartons were already damaged upon
delivery to it were true, then it should naturally have received the cargo under
protest or with reservations duly noted on the receipt issued by PSI. But it made no
such protest or reservation.[57]

Moreover, as observed by the appellate court, if indeed petitioners employees only
examined the cargoes outside the PSI warehouse and found some to be wet, they
would certainly have gone back to PSI, showed to the warehouseman the damage,
and demanded then and there for Bad Order documents or a certification
confirming the damage.[58] Or, petitioner would have presented, as witness, the
employees of the PSI from whom Morales and Domingo took delivery of the cargo to
prove that, indeed, part of the cargoes was already damaged when the container
was allegedly opened outside the warehouse.[59]

Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell
that day. Instead, it asserts that some of the cargoes were already wet on delivery by

PSI outside the PSI warehouse but such notwithstanding Calicdan directed Morales
to proceed with the delivery to Hizon Laboratories, Inc.

While Calicdan testified that he received the purported telephone call of Morales on
July 29, 1992, he failed to specifically declare what time he received the call. As to
whether the call was made at the PSI warehouse when the shipment was stripped
from the airport containers, or when the cargoes were already in transit to Antipolo,
it is not determinable. Aside from that phone call, petitioner admitted that it had no
documentary evidence to prove that at the time it received the cargoes, a part of it
was wet, damaged or in bad condition.[60]

The 4-page weather data furnished by PAGASA[61] on request of Sanchez
Brokerage hardly impresses, no witness having identified it and interpreted the
technical terms thereof.

The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral
contraceptives were damaged by rainwater while in transit to Antipolo City is more
likely then. Sanchez himself testified that in the past, there was a similar instance
when the shipment of Wyeth-Suaco was also found to be wet by rain.

ATTY. FLORES:

Q: Was there any instance that a shipment of this nature, oral contraceptives, that
arrived at the NAIA were damaged and claimed by the Wyeth-Suaco without any
question?

WITNESS:

A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-
Suaco did not claim anything against us.

ATTY. FLORES:

Q: HOW IS IT?

WITNESS:

A: We experienced, there was a time that we experienced that there was a cartoon
(sic) wetted (sic) up to the bottom are wet specially during rainy season.[62]

Since petitioner received all the cargoes in good order and condition at the time they
were turned over by the PSI warehouseman, and upon their delivery to Hizon
Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent
on petitioner to prove that it exercised extraordinary diligence in the carriage of the
goods. It did not, however. Hence, its presumed negligence under Article 1735 of the
Civil Code remains unrebutted.


WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby
AFFIRMED.

Costs against petitioner.

SO ORDERED.

FIRST DIVISION
[G.R. No. 138334. August 25, 2003]

ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS and CARAVAN
TRAVEL & TOURS INTERNATIONAL, INC., respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent
Caravan Travel and Tours International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed Jewels of Europe. The package tour
included the countries of England, Holland, Germany, Austria, Liechstenstein,
Switzerland and France at a total cost of P74,322.70. Petitioner was given a 5%
discount on the amount, which included airfare, and the booking fee was also
waived because petitioners niece, Meriam Menor, was respondent companys
ticketing manager.

Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in
turn, gave Menor the full payment for the package tour. Menor then told her to be at
the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her
flight on board British Airways.

Without checking her travel documents, petitioner went to NAIA on Saturday, June
15, 1991, to take the flight for the first leg of her journey from Manila to Hongkong.
To petitioners dismay, she discovered that the flight she was supposed to take had
already departed the previous day. She learned that her plane ticket was for the
flight scheduled on June 14, 1991. She thus called up Menor to complain.

Subsequently, Menor prevailed upon petitioner to take another tour the British
Pageant which included England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as
partial payment and commenced the trip in July 1991.

Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she
paid for Jewels of Europe and the amount she owed respondent for the British
Pageant tour. Despite several demands, respondent company refused to reimburse
the amount, contending that the same was non-refundable.[1] Petitioner was thus
constrained to file a complaint against respondent for breach of contract of carriage
and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch 59
of the Regional Trial Court of Makati City.

In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was
due to respondents fault since it did not clearly indicate the departure date on the

plane ticket. Respondent was also negligent in informing her of the wrong flight
schedule through its employee Menor. She insisted that the British Pageant was
merely a substitute for the Jewels of Europe tour, such that the cost of the former
should be properly set-off against the sum paid for the latter.

For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco
insisted that petitioner was informed of the correct departure date, which was
clearly and legibly printed on the plane ticket. The travel documents were given to
petitioner two days ahead of the scheduled trip. Petitioner had only herself to blame
for missing the flight, as she did not bother to read or confirm her flight schedule as
printed on the ticket.

Respondent explained that it can no longer reimburse the amount paid for Jewels of
Europe, considering that the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner
did not join the tour. Lotus European tour organizer, Insight International Tours
Ltd., determines the cost of a package tour based on a minimum number of
projected participants. For this reason, it is accepted industry practice to disallow
refund for individuals who failed to take a booked tour.[3]

Lastly, respondent maintained that the British Pageant was not a substitute for the
package tour that petitioner missed. This tour was independently procured by
petitioner after realizing that she made a mistake in missing her flight for Jewels of
Europe. Petitioner was allowed to make a partial payment of only US$300.00 for the
second tour because her niece was then an employee of the travel agency.
Consequently, respondent prayed that petitioner be ordered to pay the balance of
P12,901.00 for the British Pageant package tour.

After due proceedings, the trial court rendered a decision,[4] the dispositive part of
which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the defendant to return and/or refund to the plaintiff the amount of
Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per
annum starting January 16, 1992, the date when the complaint was filed;

2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees;

3. Dismissing the defendants counterclaim, for lack of merit; and

4. With costs against the defendant.

SO ORDERED.[5]

The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioners testimony. However, petitioner should
have verified the exact date and time of departure by looking at her ticket and
should have simply not relied on Menors verbal representation. The trial court thus
declared that petitioner was guilty of contributory negligence and accordingly,
deducted 10% from the amount being claimed as refund.

Respondent appealed to the Court of Appeals, which likewise found both parties to
be at fault. However, the appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so, she is not entitled
to any form of damages. Petitioner also forfeited her right to the Jewels of Europe
tour and must therefore pay respondent the balance of the price for the British
Pageant tour. The dispositive portion of the judgment appealed from reads as
follows:

WHEREFORE, premises considered, the decision of the Regional Trial Court dated
October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to pay to the defendant-appellant the
amount of P12,901.00, representing the balance of the price of the British Pageant
Package Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per
annum, to be computed from the time the counterclaim was filed until the finality of
this decision. After this decision becomes final and executory, the rate of TWELVE
PERCENT (12%) interest per annum shall be additionally imposed on the total
obligation until payment thereof is satisfied. The award of attorneys fees is
DELETED. Costs against the plaintiff-appellee.

SO ORDERED.[6]

Upon denial of her motion for reconsideration,[7] petitioner filed the instant
petition under Rule 45 on the following grounds:

I

It is respectfully submitted that the Honorable Court of Appeals committed a
reversible error in reversing and setting aside the decision of the trial court by
ruling that the petitioner is not entitled to a refund of the cost of unavailed Jewels of
Europe tour she being equally, if not more, negligent than the private respondent,
for in the contract of carriage the common carrier is obliged to observe utmost care
and extra-ordinary diligence which is higher in degree than the ordinary diligence
required of the passenger. Thus, even if the petitioner and private respondent were
both negligent, the petitioner cannot be considered to be equally, or worse, more
guilty than the private respondent. At best, petitioners negligence is only

contributory while the private respondent [is guilty] of gross negligence making the
principle of pari delicto inapplicable in the case;

II

The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe
tour was not indivisible and the amount paid therefor refundable;

III

The Honorable Court erred in not granting to the petitioner the consequential
damages due her as a result of breach of contract of carriage.[8]

Petitioner contends that respondent did not observe the standard of care required
of a common carrier when it informed her wrongly of the flight schedule. She could
not be deemed more negligent than respondent since the latter is required by law to
exercise extraordinary diligence in the fulfillment of its obligation. If she were
negligent at all, the same is merely contributory and not the proximate cause of the
damage she suffered. Her loss could only be attributed to respondent as it was the
direct consequence of its employees gross negligence.

Petitioners contention has no merit.

By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price.[9] Such person or association of
persons are regarded as carriers and are classified as private or special carriers and
common or public carriers.[10] A common carrier is defined under Article 1732 of
the Civil Code as persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water or
air, for compensation, offering their services to the public.

It is obvious from the above definition that respondent is not an entity engaged in
the business of transporting either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers is simply to make
travel arrangements in their behalf. Respondents services as a travel agency include
procuring tickets and facilitating travel permits or visas as well as booking
customers for tours.

While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondents obligation
to petitioner in this regard was simply to see to it that petitioner was properly

booked with the airline for the appointed date and time. Her transport to the place
of destination, meanwhile, pertained directly to the airline.

The object of petitioners contractual relation with respondent is the latters service
of arranging and facilitating petitioners booking, ticketing and accommodation in
the package tour. In contrast, the object of a contract of carriage is the
transportation of passengers or goods. It is in this sense that the contract between
the parties in this case was an ordinary one for services and not one of carriage.
Petitioners submission is premised on a wrong assumption.

The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in a
contract of carriage is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious persons and with
due regard for all the circumstances.[11] As earlier stated, however, respondent is
not a common carrier but a travel agency. It is thus not bound under the law to
observe extraordinary diligence in the performance of its obligation, as petitioner
claims.

Since the contract between the parties is an ordinary one for services, the standard
of care required of respondent is that of a good father of a family under Article 1173
of the Civil Code.[12] This connotes reasonable care consistent with that which an
ordinarily prudent person would have observed when confronted with a similar
situation. The test to determine whether negligence attended the performance of an
obligation is: did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence.[13]

In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged negligent act since respondent
did not call Menor to the witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3 (e)[14] of the Rules of Court that
evidence willfully suppressed would be adverse if produced and thus considered
petitioners uncontradicted testimony to be sufficient proof of her claim.

On the other hand, respondent has consistently denied that Menor was negligent
and maintains that petitioners assertion is belied by the evidence on record. The
date and time of departure was legibly written on the plane ticket and the travel
papers were delivered two days in advance precisely so that petitioner could
prepare for the trip. It performed all its obligations to enable petitioner to join the
tour and exercised due diligence in its dealings with the latter.

We agree with respondent.

Respondents failure to present Menor as witness to rebut petitioners testimony

could not give rise to an inference unfavorable to the former. Menor was already
working in France at the time of the filing of the complaint,[15] thereby making it
physically impossible for respondent to present her as a witness. Then too, even if it
were possible for respondent to secure Menors testimony, the presumption under
Rule 131, Section 3(e) would still not apply. The opportunity and possibility for
obtaining Menors testimony belonged to both parties, considering that Menor was
not just respondents employee, but also petitioners niece. It was thus error for the
lower court to invoke the presumption that respondent willfully suppressed
evidence under Rule 131, Section 3(e). Said presumption would logically be
inoperative if the evidence is not intentionally omitted but is simply unavailable, or
when the same could have been obtained by both parties.[16]

In sum, we do not agree with the finding of the lower court that Menors negligence
concurred with the negligence of petitioner and resultantly caused damage to the
latter. Menors negligence was not sufficiently proved, considering that the only
evidence presented on this score was petitioners uncorroborated narration of the
events. It is well-settled that the party alleging a fact has the burden of proving it
and a mere allegation cannot take the place of evidence.[17] If the plaintiff, upon
whom rests the burden of proving his cause of action, fails to show in a satisfactory
manner facts upon which he bases his claim, the defendant is under no obligation to
prove his exception or defense.[18]

Contrary to petitioners claim, the evidence on record shows that respondent
exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket[19] issued to petitioner clearly
reflected the departure date and time, contrary to petitioners contention. The travel
documents, consisting of the tour itinerary, vouchers and instructions, were
likewise delivered to petitioner two days prior to the trip. Respondent also properly
booked petitioner for the tour, prepared the necessary documents and procured the
plane tickets. It arranged petitioners hotel accommodation as well as food, land
transfers and sightseeing excursions, in accordance with its avowed undertaking.

Therefore, it is clear that respondent performed its prestation under the contract as
well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have
been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care of
her concerns. This undoubtedly would require that she at least read the documents
in order to assure herself of the important details regarding the trip.

The negligence of the obligor in the performance of the obligation renders him liable
for damages for the resulting loss suffered by the obligee. Fault or negligence of the
obligor consists in his failure to exercise due care and prudence in the performance
of the obligation as the nature of the obligation so demands.[20] There is no fixed

standard of diligence applicable to each and every contractual obligation and each
case must be determined upon its particular facts. The degree of diligence required
depends on the circumstances of the specific obligation and whether one has been
negligent is a question of fact that is to be determined after taking into account the
particulars of each case.[21]

The lower court declared that respondents employee was negligent. This factual
finding, however, is not supported by the evidence on record. While factual findings
below are generally conclusive upon this court, the rule is subject to certain
exceptions, as when the trial court overlooked, misunderstood, or misapplied some
facts or circumstances of weight and substance which will affect the result of the
case.[22]

In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own damage.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the
Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is
ordered to pay respondent the amount of P12,901.00 representing the balance of
the price of the British Pageant Package Tour, with legal interest thereon at the rate
of 6% per annum, to be computed from the time the counterclaim was filed until the
finality of this Decision. After this Decision becomes final and executory, the rate of
12% per annum shall be imposed until the obligation is fully settled, this interim
period being deemed to be by then an equivalent to a forbearance of credit.[23]

SO ORDERED.

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. 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. L-30115

September 28, 1973

FE PEREZ, plaintiff-appellant,
vs.
JOSEFINA GUTIERREZ, defendant third-party plaintiff-appellee, PANFILO ALAJAR,
third-party defendant-appellee.

Julian C. Gonzales, Jr. for plaintiff-appellant.

Gerardo E. Angeles for defendant-third-party plaintiff-appellee.

Apostadera, Palabrica and Muyco for third-party defendant-appellee.



CASTRO, J.:

This appeal from the decision dated June 9, 1967 of the Court of First Instance of
Davao in its civil case 3163 poses objections to the manner the trial court
adjudicated the claim for damages filed by the plaintiff-appellant Fe Perez against
the defendant-third-party plaintiff-appellee Josefina Gutierrez.

The complaint (later amended) filed on October 29, 1959 by Fe Perez with the Court
of First Instance of Davao against Josefina Gutierrez, for breach of contract of
carriage, alleges that on September 6, 1959 while she, together with nine co-
teachers, was a passenger of an AC jeepney registered under the name of the
defendant Gutierrez, the said vehicle, due to the reckless negligence of its driver
Leopoldo Cordero, met with an accident, resulting in injuries to herself which
required her hospitalization. In her answer, Josefina Gutierrez averred that if the
claim of Fe Perez is at all justified, responsibility therefor should devolve on one
Panfilo Alajar, the actual owner, by purchase, of the said passenger jeepney when
the accident occurred and against whom she has filed a third-party complaint.

The deed of sale attached to the third-party complaint recites, inter alia,

That it is mutually agreed by the herein vendor and vendee that the TITLE to the
aforementioned vehicle shall remain with the VENDOR, pending approval of the
herein SALE by the Public Service Commission, said motor vehicle being registered
as a public utility auto-calesa under "AC" denomination; ...

That the vendee herein, by these presents, do [sic] hereby binds himself and do [sic]
hereby assume, [sic] responsibility for all actions, claims, demands, and rights of
action, and whatever kind and nature, that may hereafter develop as a consequence
of or in the course of operation of the aforementioned vehicle; ...

In his answer to the third-party complaint, Panfilo Alajar disclaimed responsibility

for the accident, alleging that (a) the mentioned deed of sale is null and void because
it has not been registered with the Public Service Commission despite repeated
demands on the 3rd-party complainant to do so; (b) the said passenger jeepney
remained in the control of the 3rd-party complainant who, together with her
lawyer-husband, had been collecting rentals from him for the use of the said vehicle;
and (c) by express agreement, title to the said vehicle remained with the 3rd-party
complainant pending approval of the sale by the Public Service Commission.

The defendant Leopoldo Cordero was declared in default and did not appeal.

On June 9, 1967, after trial on the merits, the court a quo rendered its decision, in
the main finding Leopoldo Cordero guilty of reckless imprudence, and finding that
Panfilo Alajar owned and operated the auto calesa in question and, in fact, after the
accident, even assumed responsibility for the payment of the hospital bills due to
the Brokenshire Memorial Hospital for treatment of the injuries suffered by Fe
Perez. Based on these findings as well as the proof of the damages suffered by Fe
Perez, the court adjudged as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering third-
party defendant Panfilo Alajar to pay plaintiff the amount of P1,552.20 hospital
expenses; P2,000.00, actual damages; P5,000.00 moral damages; P500.00 incidental
expenses; and P2,000.00 attorney's fees.

Ordering likewise Panfilo Alajar to pay defendant third-party plaintiff Josefina
Gutierrez P500.00 moral damages; and P1,000.00 attorney's fees, and to pay the
costs of the proceedings on both cases.

The present appeal questions the correctness of the dispositive portion of the
decision a quo which adjudged Panfilo Alajar, instead of Josefina Gutierrez, as the
party liable to her for the payment of the damages adjudicated in her favor.
Specifically, Fe Perez argues that the registered owner of a motor vehicle should be
the one held liable for damages resulting from breach of contract of carriage by a
common carrier.

We find the appeal meritorious and in accord with settled law on the matter.

In Peralta vs. Mangusang 1 this Court, in approbation of a similar argument, said:

The law (Sec. 20 [g], Public Service Act) really requires the approval of the Public
Service Commission in order that a franchise, or any privileges pertaining thereto,
may be sold or leased without infringing the certificate issued to the grantee. The
reason is obvious. Since a franchise is personal in nature any transfer or lease
thereof should be submitted for approval of the Public Service Commission, so that
the latter may take proper safeguards to protect the interest of the public. It follows
that if the property covered by the franchise is transferred or leased to another

without obtaining the requisite approval, the transfer is not binding on the Public
Service Commission and, in contemplation of law, the grantee continues to be
responsible under the franchise in relation to the Commission and to the public for
the consequences incident to the operation of the vehicle, one of them being the
collision under consideration. (Montoya v. Ignacio, 50 O.G. No. 1. 108; Vda. de
Medina, et al. v. Cresencia, et al., 52 O.G. No. 10, 4604; Erezo v. Jepte, et al., G.R. No. L-
9605, Sept. 30, 1957; Tamayo v. Aquino, 56 O.G. No. 36,5617).

In the earlier case of Erezo vs. Jepte, 2 which is cited in the foregoing opinion, this
Court held that the doctrine making the registered owner of a common carrier
answerable to the public for negligence injuries to its passengers or third persons,
even though the vehicle had already been transferred to another, is based upon the
principle

... that in dealing with vehicles registered under the Public Service Law, the public
has the right to assume or presume that the registered owner is the actual owner
thereof, for it would be difficult for the public to enforce the actions that they may
have for injuries caused to them by the vehicles being negligently operated if the
public should be required to prove who the actual owner is. How would the public
or third persons know against whom to enforce their rights in case of subsequent
transfers of the vehicles? We do not imply by this doctrine, however, that the
registered owner may not recover whatever amount he had paid by virtue of his
liability to third persons from the person to whom he had actually sold, assigned or
conveyed the vehicle.

In Tamayo vs. Aquino, 3 also cited in Mangusang, supra, this Court, reiterating what
was stated en passant in Jepte, supra, described the nature of the liability of the
actual transferee of a vehicle the negligent operation of which gives rise to injuries
to its passengers:

The question that is posed, therefore, is how should the holder of the certificate of
public convenience Tamayo participate with his transferee operator Rayos, in the
damages recoverable by the heirs of the deceased passenger, if their liability is not
that of joint tortfeasors in accordance with Article 2194 of the Civil Code. The
following considerations must be borne in mind in determining this question. As
Tamayo is the registered owner of the truck, his responsibility to the public or to
any passenger riding in the vehicle or truck must be direct, for the reasons given in
our decision in the case of Erezo vs. Jepte, supra, as quoted above. But as the
transferee, who operated the vehicle when the passenger died, is the one directly
responsible for the accident and death, he should in turn be made responsible to the
registered owner for what the latter may have been adjudged to pay. In operating
the truck without transfer thereof having been approved by the Public Service
Commission, the transferee acted merely as agent of the registered owner and
should be responsible to him (the registered owner), for any damages that he may
cause the latter by his negligence."

Upon the foregoing, it is quite clear that the court below erred in holding Panfilo
Alajar, rather than Josefina Gutierrez, as the one directly liable to Fe Perez for the
latter's injuries and the corresponding damages incurred. This Court notes
moreover, that the court below inexplicably failed to hold the driver (Leopoldo
Cordero), whom it found guilty of reckless imprudence, jointly and solidarily liable
with Josefina Gutierrez to Fe Perez in accordance with the provisions of article 2184
in relation to article 2180 of the new Civil Code. 4

ACCORDINGLY, the judgment below is hereby modified in the sense that Josefina
Gutierrez and Leopoldo Cordero are hereby adjudged directly and jointly and
solidarily liable to Fe Perez for the sums adjudicated in the judgment below in her
(Fe Perez') favor, while Panfilo Alajar is, in turn, hereby held answerable to Josefina
Gutierrez for such amount as the latter may pay to Fe Perez in satisfaction of the
judgment appealed from. Costs against both the defendant-third party plaintiff-
appellee Josefina Gutierrez and the third party defendant-appellee Panfilo Alajar.

G.R. No. 125817 January 16, 2002

ABELARDO LIM and ESMADITO GUNNABAN, petitioners,
vs.
COURT OF APPEALS and DONATO H. GONZALES, respondents.

BELLOSILLO, J.:

When a passenger jeepney covered by a certificate of public convenience is sold to
another who continues to operate it under the same certificate of public
convenience under the so-called kabit system, and in the course thereof the vehicle
meets an accident through the fault of another vehicle, may the new owner sue for
damages against the erring vehicle? Otherwise stated, does the new owner have any
legal personality to bring the action, or is he the real party in interest in the suit,
despite the fact that he is not the registered owner under the certificate of public
convenience?

Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu
passenger jeepney from Gomercino Vallarta, holder of a certificate of public
convenience for the operation of public utility vehicles plying the Monumento-
Bulacan route. While private respondent Gonzales continued offering the jeepney
for public transport services he did not have the registration of the vehicle
transferred in his name nor did he secure for himself a certificate of public
convenience for its operation. Thus Vallarta remained on record as its registered
owner and operator.1wphi1.nt

On 22 July 1990, while the jeepney was running northbound along the North
Diversion Road somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler-
truck owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadito
Gunnaban. Gunnaban owned responsibility for the accident, explaining that while he
was traveling towards Manila the truck suddenly lost its brakes. To avoid colliding
with another vehicle, he swerved to the left until he reached the center island.
However, as the center island eventually came to an end, he veered farther to the
left until he smashed into a Ferroza automobile, and later, into private respondent's
passenger jeepney driven by one Virgilio Gonzales. The impact caused severe
damage to both the Ferroza and the passenger jeepney and left one (1) passenger
dead and many others wounded.

Petitioner Lim shouldered the costs for hospitalization of the wounded,
compensated the heirs of the deceased passenger, and had the Ferroza restored to
good condition. He also negotiated with private respondent and offered to have the
passenger jeepney repaired at his shop. Private respondent however did not accept
the offer so Lim offered him P20,000.00, the assessment of the damage as estimated
by his chief mechanic. Again, petitioner Lim's proposition was rejected; instead,
private respondent demanded a brand-new jeep or the amount of P236,000.00. Lim
increased his bid to P40,000.00 but private respondent was unyielding. Under the

circumstances, negotiations had to be abandoned; hence, the filing of the complaint

for damages by private respondent against petitioners.

In his answer Lim denied liability by contending that he exercised due diligence in
the selection and supervision of his employees. He further asserted that as the
jeepney was registered in Vallartas name, it was Vallarta and not private
respondent who was the real party in interest.1 For his part, petitioner Gunnaban
averred that the accident was a fortuitous event which was beyond his control.2

Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and
decay. Private respondent explained that although he wanted to take his jeepney
home he had no capability, financial or otherwise, to tow the damaged vehicle.3

The main point of contention between the parties related to the amount of damages
due private respondent. Private respondent Gonzales averred that per estimate
made by an automobile repair shop he would have to spend P236,000.00 to restore
his jeepney to its original condition.4 On the other hand, petitioners insisted that
they could have the vehicle repaired for P20,000.00.5

On 1 October 1993 the trial court upheld private respondent's claim and awarded
him P236,000.00 with legal interest from 22 July 1990 as compensatory damages
and P30,000.00 as attorney's fees. In support of its decision, the trial court
ratiocinated that as vendee and current owner of the passenger jeepney private
respondent stood for all intents and purposes as the real party in interest. Even
Vallarta himself supported private respondent's assertion of interest over the
jeepney for, when he was called to testify, he dispossessed himself of any claim or
pretension on the property. Gunnaban was found by the trial court to have caused
the accident since he panicked in the face of an emergency which was rather
palpable from his act of directing his vehicle to a perilous streak down the fast lane
of the superhighway then across the island and ultimately to the opposite lane
where it collided with the jeepney.

On the other hand, petitioner Lim's liability for Gunnaban's negligence was
premised on his want of diligence in supervising his employees. It was admitted
during trial that Gunnaban doubled as mechanic of the ill-fated truck despite the fact
that he was neither tutored nor trained to handle such task.6

Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996,
affirmed the decision of the trial court. In upholding the decision of the court a quo
the appeals court concluded that while an operator under the kabit system could not
sue without joining the registered owner of the vehicle as his principal, equity
demanded that the present case be made an exception.7 Hence this petition.

It is petitioners' contention that the Court of Appeals erred in sustaining the
decision of the trial court despite their opposition to the well-established doctrine
that an operator of a vehicle continues to be its operator as long as he remains the

operator of record. According to petitioners, to recognize an operator under the

kabit system as the real party in interest and to countenance his claim for damages
is utterly subversive of public policy. Petitioners further contend that inasmuch as
the passenger jeepney was purchased by private respondent for only P30,000.00, an
award of P236,000.00 is inconceivably large and would amount to unjust
enrichment.8

Petitioners' attempt to illustrate that an affirmance of the appealed decision could
be supportive of the pernicious kabit system does not persuade. Their labored
efforts to demonstrate how the questioned rulings of the courts a quo are
diametrically opposed to the policy of the law requiring operators of public utility
vehicles to secure a certificate of public convenience for their operation is quite
unavailing.

The kabit system is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to
operate them under his license, sometimes for a fee or percentage of the earnings.9
Although the parties to such an agreement are not outrightly penalized by law, the
kabit system is invariably recognized as being contrary to public policy and
therefore void and inexistent under Art. 1409 of the Civil Code.

In the early case of Dizon v. Octavio10 the Court explained that one of the primary
factors considered in the granting of a certificate of public convenience for the
business of public transportation is the financial capacity of the holder of the license,
so that liabilities arising from accidents may be duly compensated. The kabit system
renders illusory such purpose and, worse, may still be availed of by the grantee to
escape civil liability caused by a negligent use of a vehicle owned by another and
operated under his license. If a registered owner is allowed to escape liability by
proving who the supposed owner of the vehicle is, it would be easy for him to
transfer the subject vehicle to another who possesses no property with which to
respond financially for the damage done. Thus, for the safety of passengers and the
public who may have been wronged and deceived through the baneful kabit system,
the registered owner of the vehicle is not allowed to prove that another person has
become the owner so that he may be thereby relieved of responsibility. Subsequent
cases affirm such basic doctrine.11

It would seem then that the thrust of the law in enjoining the kabit system is not so
much as to penalize the parties but to identify the person upon whom responsibility
may be fixed in case of an accident with the end view of protecting the riding public.
The policy therefore loses its force if the public at large is not deceived, much less
involved.

In the present case it is at once apparent that the evil sought to be prevented in
enjoining the kabit system does not exist. First, neither of the parties to the
pernicious kabit system is being held liable for damages. Second, the case arose
from the negligence of another vehicle in using the public road to whom no

representation, or misrepresentation, as regards the ownership and operation of the

passenger jeepney was made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said that private respondent
Gonzales and the registered owner of the jeepney were in estoppel for leading the
public to believe that the jeepney belonged to the registered owner. Third, the riding
public was not bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent himself who had been
wronged and was seeking compensation for the damage done to him. Certainly, it
would be the height of inequity to deny him his right.

In light of the foregoing, it is evident that private respondent has the right to
proceed against petitioners for the damage caused on his passenger jeepney as well
as on his business. Any effort then to frustrate his claim of damages by the ingenuity
with which petitioners framed the issue should be discouraged, if not repelled.

In awarding damages for tortuous injury, it becomes the sole design of the courts to
provide for adequate compensation by putting the plaintiff in the same financial
position he was in prior to the tort. It is a fundamental principle in the law on
damages that a defendant cannot be held liable in damages for more than the actual
loss which he has inflicted and that a plaintiff is entitled to no more than the just and
adequate compensation for the injury suffered. His recovery is, in the absence of
circumstances giving rise to an allowance of punitive damages, limited to a fair
compensation for the harm done. The law will not put him in a position better than
where he should be in had not the wrong happened.12

In the present case, petitioners insist that as the passenger jeepney was purchased
in 1982 for only P30,000.00 to award damages considerably greater than this
amount would be improper and unjustified. Petitioners are at best reminded that
indemnification for damages comprehends not only the value of the loss suffered
but also that of the profits which the obligee failed to obtain. In other words,
indemnification for damages is not limited to damnum emergens or actual loss but
extends to lucrum cessans or the amount of profit lost.13

Had private respondent's jeepney not met an accident it could reasonably be
expected that it would have continued earning from the business in which it was
engaged. Private respondent avers that he derives an average income of P300.00
per day from his passenger jeepney and this earning was included in the award of
damages made by the trial court and upheld by the appeals court. The award
therefore of P236,000.00 as compensatory damages is not beyond reason nor
speculative as it is based on a reasonable estimate of the total damage suffered by
private respondent, i.e. damage wrought upon his jeepney and the income lost from
his transportation business. Petitioners for their part did not offer any substantive
evidence to refute the estimate made by the courts a quo.

However, we are constrained to depart from the conclusion of the lower courts that
upon the award of compensatory damages legal interest should be imposed

beginning 22 July 1990, i.e. the date of the accident. Upon the provisions of Art. 2213
of the Civil Code, interest "cannot be recovered upon unliquidated claims or
damages, except when the demand can be established with reasonable certainty." It
is axiomatic that if the suit were for damages, unliquidated and not known until
definitely ascertained, assessed and determined by the courts after proof, interest at
the rate of six percent (6%) per annum should be from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to be
reasonably ascertained).14

In this case, the matter was not a liquidated obligation as the assessment of the
damage on the vehicle was heavily debated upon by the parties with private
respondent's demand for P236,000.00 being refuted by petitioners who argue that
they could have the vehicle repaired easily for P20,000.00. In fine, the amount due
private respondent was not a liquidated account that was already demandable and
payable.

One last word. We have observed that private respondent left his passenger jeepney
by the roadside at the mercy of the elements. Article 2203 of the Civil Code exhorts
parties suffering from loss or injury to exercise the diligence of a good father of a
family to minimize the damages resulting from the act or omission in question. One
who is injured then by the wrongful or negligent act of another should exercise
reasonable care and diligence to minimize the resulting damage. Anyway, he can
recover from the wrongdoer money lost in reasonable efforts to preserve the
property injured and for injuries incurred in attempting to prevent damage to it.15

However we sadly note that in the present case petitioners failed to offer in
evidence the estimated amount of the damage caused by private respondent's
unconcern towards the damaged vehicle. It is the burden of petitioners to show
satisfactorily not only that the injured party could have mitigated his damages but
also the amount thereof; failing in this regard, the amount of damages awarded
cannot be proportionately reduced.

WHEREFORE, the questioned Decision awarding private respondent Donato
Gonzales P236,000.00 with legal interest from 22 July 1990 as compensatory
damages and P30,000.00 as attorney's fees is MODIFIED. Interest at the rate of six
percent (6%) per annum shall be computed from the time the judgment of the lower
court is made until the finality of this Decision. If the adjudged principal and interest
remain unpaid thereafter, the interest shall be twelve percent (12%) per annum
computed from the time judgment becomes final and executory until it is fully
satisfied.1wphi1.nt

Costs against petitioners.

SO ORDERED.

G.R. No. L-64693

April 27, 1984

LITA ENTERPRISES, INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M.
OCAMPO and FRANCISCA P. GARCIA, respondents.

Manuel A. Concordia for petitioner.

Nicasio Ocampo for himself and on behalf of his correspondents.



ESCOLIN, J.:+.wph!1

"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the
tune-honored maxim that must be applied to the parties in the case at bar. Having
entered into an illegal contract, neither can seek relief from the courts, and each
must bear the consequences of his acts.

The factual background of this case is undisputed.

Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein
private respondents, purchased in installment from the Delta Motor Sales
Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they
had no franchise to operate taxicabs, they contracted with petitioner Lita
Enterprises, Inc., through its representative, Manuel Concordia, for the use of the
latter's certificate of public convenience in consideration of an initial payment of
P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id
agreement, the aforesaid cars were registered in the name of petitioner Lita
Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who
operated and maintained the same under the name Acme Taxi, petitioner's trade
name.

About a year later, on March 18, 1967, one of said taxicabs driven by their employee,
Emeterio Martin, collided with a motorcycle whose driver, one Florante Galvez, died
from the head injuries sustained therefrom. A criminal case was eventually filed
against the driver Emeterio Martin, while a civil case for damages was instituted by
Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as
registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court
of First Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for
damages in the amount of P25,000.00 and P7,000.00 for attorney's fees.

This decision having become final, a writ of execution was issued. One of the
vehicles of respondent spouses with Engine No. 2R-914472 was levied upon and
sold at public auction for 12,150.00 to one Sonnie Cortez, the highest bidder.

Another car with Engine No. 2R-915036 was likewise levied upon and sold at public
auction for P8,000.00 to a certain Mr. Lopez.

Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his
taxicabs in his name. He requested the manager of petitioner Lita Enterprises, Inc. to
turn over the registration papers to him, but the latter allegedly refused. Hence, he
and his wife filed a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de
Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of
motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First
Instance of Manila. Trial on the merits ensued and on July 22, 1975, the said court
rendered a decision, the dispositive portion of which reads: t.hqw

WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff of
Manila are concerned.

Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of
the three Toyota cars not levied upon with Engine Nos. 2R-230026, 2R-688740 and
2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in favor of the
plaintiff.

Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for
the certificate of convenience from March 1973 up to May 1973 at the rate of P200 a
month per unit for the three cars. (Annex A, Record on Appeal, p. 102-103, Rollo)

Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the
same was denied by the court a quo on October 27, 1975. (p. 121, Ibid.)

On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate
Appellate Court modified the decision by including as part of its dispositive portion
another paragraph, to wit: t.hqw

In the event the condition of the three Toyota rears will no longer serve the purpose
of the deed of conveyance because of their deterioration, or because they are no
longer serviceable, or because they are no longer available, then Lita Enterprises,
Inc. is ordered to pay the plaintiffs their fair market value as of July 22, 1975. (Annex
"D", p. 167, Rollo.)

Its first and second motions for reconsideration having been denied, petitioner
came to Us, praying that: t.hqw

1.
...

2.
... after legal proceedings, decision be rendered or resolution be issued,
reversing, annulling or amending the decision of public respondent so that:

(a)
the additional paragraph added by the public respondent to the DECISION of
the lower court (CFI) be deleted;

(b) that private respondents be declared liable to petitioner for whatever
amount the latter has paid or was declared liable (in Civil Case No. 72067) of the
Court of First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the
victim Florante Galvez, who died as a result ot the gross negligence of private
respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)

Unquestionably, the parties herein operated under an arrangement, comonly known
as the "kabit system", whereby a person who has been granted a certificate of
convenience allows another person who owns motors vehicles to operate under
such franchise for a fee. A certificate of public convenience is a special privilege
conferred by the government . Abuse of this privilege by the grantees thereof cannot
be countenanced. The "kabit system" has been Identified as one of the root causes of
the prevalence of graft and corruption in the government transportation offices. In
the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be
too severely condemned. It constitutes an imposition upon the goo faith of the
government.

Although not outrightly penalized as a criminal offense, the "kabit system" is
invariably recognized as being contrary to public policy and, therefore, void and
inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the
court will not aid either party to enforce an illegal contract, but will leave them both
where it finds them. Upon this premise, it was flagrant error on the part of both the
trial and appellate courts to have accorded the parties relief from their predicament.
Article 1412 of the Civil Code denies them such aid. It provides:t.hqw

ART. 1412. if the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed;

(1) when the fault, is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
other's undertaking.

The defect of inexistence of a contract is permanent and incurable, and cannot be
cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2
"the mere lapse of time cannot give efficacy to contracts that are null void."

The principle of in pari delicto is well known not only in this jurisdiction but also in
the United States where common law prevails. Under American jurisdiction, the
doctrine is stated thus: "The proposition is universal that no action arises, in equity
or at law, from an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered, or damages
for its property agreed to be sold or delivered, or damages for its violation. The rule
has sometimes been laid down as though it was equally universal, that where the

parties are in pari delicto, no affirmative relief of any kind will be given to one
against the other." 3 Although certain exceptions to the rule are provided by law, We
see no cogent reason why the full force of the rule should not be applied in the
instant case.

WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo
and Francisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of
the Court of First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio
Ocampo and Francisca P. Garica, Plaintiffs-Appellees, versus Lita Enterprises, Inc.,
Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisions
rendered therein are hereby annuleled and set aside. No costs.

SO ORDERED.1wph1.t

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.

[G.R. No. 144274. September 20, 2004]

NOSTRADAMUS VILLANUEVA petitioner, vs. PRISCILLA R. DOMINGO and LEANDRO
LUIS R. DOMINGO, respondents.
D E C I S I O N
CORONA, J.:

This is a petition to review the decision[1] of the Court of Appeals in CA-G.R. CV No.
52203 affirming in turn the decision of the trial court finding petitioner liable to
respondent for damages. The dispositive portion read:

WHEREFORE, the appealed decision is hereby AFFIRMED except the award of
attorneys fees including appearance fees which is DELETED.

SO ORDERED.[2]

The facts of the case, as summarized by the Court of Appeals, are as follows:

[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi
Lancer Car model 1980 bearing plate No. NDW 781 91 with [co-respondent]
Leandro Luis R. Domingo as authorized driver. [Petitioner] Nostradamus Villanueva
was then the registered owner of a green Mitsubishi Lancer bearing Plate No. PHK
201 91.

On 22 October 1991 at about 9:45 in the evening, following a green traffic light,
[respondent] Priscilla Domingos silver Lancer car with Plate No. NDW 781 91 then
driven by [co-respondent] Leandro Luis R. Domingo was cruising along the middle
lane of South Superhighway at moderate speed from north to south. Suddenly, a
green Mitsubishi Lancer with plate No. PHK 201 91 driven by Renato Dela Cruz
Ocfemia darted from Vito Cruz Street towards the South Superhighway directly into
the path of NDW 781 91 thereby hitting and bumping its left front portion. As a
result of the impact, NDW 781 91 hit two (2) parked vehicles at the roadside, the
second hitting another parked car in front of it.

Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido,
Renato dela Cruz Ocfemia was driving with expired license and positive for alcoholic
breath. Hence, Manila Assistant City Prosecutor Oscar A. Pascua recommended the
filing of information for reckless imprudence resulting to (sic) damage to property
and physical injuries.

The original complaint was amended twice: first, impleading Auto Palace Car
Exchange as commercial agent and/or buyer-seller and second, impleading Albert
Jaucian as principal defendant doing business under the name and style of Auto
Palace Car Exchange.

Except for Ocfemia, all the defendants filed separate answers to the complaint.
[Petitioner] Nostradamus Villanueva claimed that he was no longer the owner of the
car at the time of the mishap because it was swapped with a Pajero owned by Albert
Jaucian/Auto Palace Car Exchange. For her part, Linda Gonzales declared that her
presence at the scene of the accident was upon the request of the actual owner of
the Mitsubishi Lancer (PHK 201 91) [Albert Jaucian] for whom she had been
working as agent/seller. On the other hand, Auto Palace Car Exchange represented
by Albert Jaucian claimed that he was not the registered owner of the car. Moreover,
it could not be held subsidiary liable as employer of Ocfemia because the latter was
off-duty as utility employee at the time of the incident. Neither was Ocfemia
performing a duty related to his employment.[3]

After trial, the trial court found petitioner liable and ordered him to pay respondent
actual, moral and exemplary damages plus appearance and attorneys fees:

WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering Nostradamus
Villanueva to pay the amount of P99,580 as actual damages, P25,000.00 as moral
damages, P25,000.00 as exemplary damages and attorneys fees in the amount of
P10,000.00 plus appearance fees of P500.00 per hearing with legal interest counted
from the date of judgment. In conformity with the law on equity and in accordance
with the ruling in First Malayan Lending and Finance Corporation vs. Court of
Appeals (supra), Albert Jaucian is hereby ordered to indemnify Nostradamus
Villanueva for whatever amount the latter is hereby ordered to pay under the
judgment.

SO ORDERED.[4]

The CA upheld the trial courts decision but deleted the award for appearance and
attorneys fees because the justification for the grant was not stated in the body of
the decision. Thus, this petition for review which raises a singular issue:

MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR
DAMAGES ARISING FROM A VEHICULAR ACCIDENT INVOLVING HIS MOTOR
VEHICLE WHILE BEING OPERATED BY THE EMPLOYEE OF ITS BUYER WITHOUT
THE LATTERS CONSENT AND KNOWLEDGE?[5]

Yes.

We have consistently ruled that the registered owner of any vehicle is directly and
primarily responsible to the public and third persons while it is being operated.[6]
The rationale behind such doctrine was explained way back in 1957 in Erezo vs.
Jepte[7]:

The principle upon which this doctrine is based is that in dealing with vehicles
registered under the Public Service Law, the public has the right to assume or
presume that the registered owner is the actual owner thereof, for it would be

difficult for the public to enforce the actions that they may have for injuries caused
to them by the vehicles being negligently operated if the public should be required
to prove who the actual owner is. How would the public or third persons know
against whom to enforce their rights in case of subsequent transfers of the vehicles?
We do not imply by his doctrine, however, that the registered owner may not
recover whatever amount he had paid by virtue of his liability to third persons from
the person to whom he had actually sold, assigned or conveyed the vehicle.

Under the same principle the registered owner of any vehicle, even if not used for a
public service, should primarily be responsible to the public or to third persons for
injuries caused the latter while the vehicle is being driven on the highways or
streets. The members of the Court are in agreement that the defendant-appellant
should be held liable to plaintiff-appellee for the injuries occasioned to the latter
because of the negligence of the driver, even if the defendant-appellant was no
longer the owner of the vehicle at the time of the damage because he had previously
sold it to another. What is the legal basis for his (defendant-appellants) liability?

There is a presumption that the owner of the guilty vehicle is the defendant-
appellant as he is the registered owner in the Motor Vehicles Office. Should he not
be allowed to prove the truth, that he had sold it to another and thus shift the
responsibility for the injury to the real and actual owner? The defendant holds the
affirmative of this proposition; the trial court held the negative.

The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle
may be used or operated upon any public highway unless the same is property
registered. It has been stated that the system of licensing and the requirement that
each machine must carry a registration number, conspicuously displayed, is one of
the precautions taken to reduce the danger of injury to pedestrians and other
travelers from the careless management of automobiles. And to furnish a means of
ascertaining the identity of persons violating the laws and ordinances, regulating
the speed and operation of machines upon the highways (2 R.C.L. 1176). Not only
are vehicles to be registered and that no motor vehicles are to be used or operated
without being properly registered for the current year, but that dealers in motor
vehicles shall furnish thee Motor Vehicles Office a report showing the name and
address of each purchaser of motor vehicle during the previous month and the
manufacturers serial number and motor number. (Section 5(c), Act No. 3992, as
amended.)

Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the
administrative proceeding of registration does not bear any essential relation to the
contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil.
888), but to permit the use and operation of the vehicle upon any public highway
(section 5 [a], Act No. 3992, as amended). The main aim of motor vehicle
registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility

therefore can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused accidents or injuries
to pedestrians or other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways:

One of the principal purposes of motor vehicles legislation is identification of the
vehicle and of the operator, in case of accident; and another is that the knowledge
that means of detection are always available may act as a deterrent from lax
observance of the law and of the rules of conservative and safe operation. Whatever
purpose there may be in these statutes, it is subordinate at the last to the primary
purpose of rendering it certain that the violator of the law or of the rules of safety
shall not escape because of lack of means to discover him. The purpose of the statute
is thwarted, and the displayed number becomes a share and delusion, if courts
would entertain such defenses as that put forward by appellee in this case. No
responsible person or corporation could be held liable for the most outrageous acts
of negligence, if they should be allowed to pace a middleman between them and the
public, and escape liability by the manner in which they recompense servants. (King
vs. Brenham Automobile Co., Inc. 145 S.W. 278, 279.)

With the above policy in mind, the question that defendant-appellant poses is:
should not the registered owner be allowed at the trial to prove who the actual and
real owner is, and in accordance with such proof escape or evade responsibility by
and lay the same on the person actually owning the vehicle? We hold with the trial
court that the law does not allow him to do so; the law, with its aim and policy in
mind, does not relieve him directly of the responsibility that the law fixes and places
upon him as an incident or consequence of registration. Were a registered owner
allowed to evade responsibility by proving who the supposed transferee or owner
is, it would be easy for him, by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or injury
done. A victim of recklessness on the public highways is usually without means to
discover or identify the person actually causing the injury or damage. He has no
means other than by a recourse to the registration in the Motor Vehicles Office to
determine who is the owner. The protection that the law aims to extend to him
would become illusory were the registered owner given the opportunity to escape
liability by disproving his ownership. If the policy of the law is to be enforced and
carried out, the registered owner should not be allowed to prove the contrary to the
prejudice of the person injured, that is, to prove that a third person or another has
become the owner, so that he may thereby be relieved of the responsibility to the
injured person.

The above policy and application of the law may appear quite harsh and would seem
to conflict with truth and justice. We do not think it is so. A registered owner who

has already sold or transferred a vehicle has the recourse to a third-party complaint,
in the same action brought against him to recover for the damage or injury done,
against the vendee or transferee of the vehicle. The inconvenience of the suit is no
justification for relieving him of liability; said inconvenience is the price he pays for
failure to comply with the registration that the law demands and requires.

In synthesis, we hold that the registered owner, the defendant-appellant herein, is
primarily responsible for the damage caused to the vehicle of the plaintiff-appellee,
but he (defendant-appellant) has a right to be indemnified by the real or actual
owner of the amount that he may be required to pay as damage for the injury caused
to the plaintiff-appellant.[8]

Petitioner insists that he is not liable for damages since the driver of the vehicle at
the time of the accident was not an authorized driver of the new (actual) owner of
the vehicle. He claims that the ruling in First Malayan Leasing and Finance
Corporation vs. CA[9] implies that to hold the registered owner liable for damages,
the driver of the vehicle must have been authorized, allowed and permitted by its
actual owner to operate and drive it. Thus, if the vehicle is driven without the
knowledge and consent of the actual owner, then the registered owner cannot be
held liable for damages.

He further argues that this was the underlying theory behind Duavit vs. CA[10]
wherein the court absolved the registered owner from liability after finding that the
vehicle was virtually stolen from the owners garage by a person who was neither
authorized nor employed by the owner. Petitioner concludes that the ruling in
Duavit and not the one in First Malayan should be applicable to him.

Petitioners argument lacks merit. Whether the driver is authorized or not by the
actual owner is irrelevant to 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. To require the
driver of the vehicle to be authorized by the actual owner before the registered
owner can be held accountable is to defeat the very purpose why motor vehicle
legislations are enacted in the first place.

Furthermore, there is nothing in First Malayan which even remotely suggests that
the driver must be authorized before the registered owner can be held accountable.
In First Malayan, the registered owner, First Malayan Corporation, was held liable
for damages arising from the accident even if the vehicle involved was already
owned by another party:

This Court has consistently ruled that regardless of who the actual owner is of a
motor vehicle might be, the registered owner is the operator of the same with
respect to the public and third persons, and as such, directly and primarily
responsible for the consequences of its operation. In contemplation of law, the
owner/operator of record is the employer of the driver, the actual operator and

employer being considered merely as his agent (MYC-Agro-Industrial Corporation

vs. Vda. de Caldo, 132 SCRA 10, citing Vargas vs. Langcay, 6 SCRA 174; Tamayo vs.
Aquino, 105 Phil. 949).

We believe that it is immaterial whether or not the driver was actually employed by
the operator of record. It is even not necessary to prove who the actual owner of the
vehicle and the employer of the driver is. Granting that, in this case, the father of the
driver is the actual owner and that he is the actual employer, following the well-
settled principle that the operator of record continues to be the operator of the
vehicle in contemplation of law, as regards the public and third person, and as such
is responsible for the consequences incident to its operation, we must hold and
consider such owner-operator of record as the employer, in contemplation of law, of
the driver. And, to give effect to this policy of law as enunciated in the above cited
decisions of this Court, we must now extend the same and consider the actual
operator and employer as the agent of the operator of record.[11]

Contrary to petitioners position, the First Malayan ruling is applicable to him since
the case involves the same set of facts the registered owner had previously sold
the vehicle to someone else and was being driven by an employee of the new
(actual) owner. Duavit is inapplicable since the vehicle there was not transferred to
another; the registered and the actual owner was one and the same person. Besides,
in Duavit, the defense of the registered owner, Gilberto Duavit, was that the vehicle
was practically stolen from his garage by Oscar Sabiano, as affirmed by the latter:

Defendant Sabiano, in his testimony, categorically admitted that he took the jeep
from the garage of defendant Duavit without the consent and authority of the latter.
He testified further that Duavit even filed charges against him for the theft of the
jeep but which Duavit did not push through as his (Sabianos) parents apologized to
Duavit on his behalf.[12]

As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioners
case since the circumstance of unauthorized use was not present. He in fact
voluntarily delivered his car to Albert Jaucian as part of the downpayment for a
vehicle he purchased from Jaucian. Thus, he could not claim that the vehicle was
stolen from him since he voluntarily ceded possession thereof to Jaucian. It was the
latter, as the new (actual) owner, who could have raised the defense of theft to
prove that he was not liable for the acts of his employee Ocfemia. Thus, there is no
reason to apply the Duavit ruling to this case.

The ruling in First Malayan has been reiterated in BA Finance Corporation vs.
CA[13] and more recently in Aguilar, Sr. vs. Commercial Savings Bank.[14] In BA
Finance, we held the registered owner liable even if, at the time of the accident, the
vehicle was leased by another party and was driven by the lessees employee. In
Aguilar, the registered owner-bank answered for damages for the accident even if
the vehicle was being driven by the Vice-President of the Bank in his private

capacity and not as an officer of the Bank, as claimed by the Bank. We find no reason
to deviate from these decisions.

The main purpose of vehicle registration is the easy identification of the owner who
can be held responsible for any accident, damage or injury caused by the vehicle.
Easy identification prevents inconvenience and prejudice to a third party injured by
one who is unknown or unidentified. To allow a registered owner to escape liability
by claiming that the driver was not authorized by the new (actual) owner results in
the public detriment the law seeks to avoid.

Finally, the issue of whether or not the driver of the vehicle during the accident was
authorized is not at all relevant to determining the liability of the registered owner.
This must be so if we are to comply with the rationale and principle behind the
registration requirement under the motor vehicle law.

WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the
Court of Appeals is AFFIRMED.

SO ORDERED.

[G.R. No. 160286. July 30, 2004]

SPOUSES FRANCISCO M. HERNANDEZ and ANICETA ABEL-HERNANDEZ and JUAN
GONZALES, petitioners, vs. SPOUSES LORENZO DOLOR and MARGARITA DOLOR,
FRED PANOPIO, JOSEPH SANDOVAL, RENE CASTILLO, SPOUSES FRANCISCO
VALMOCINA and VIRGINIA VALMOCINA, SPOUSES VICTOR PANOPIO and MARTINA
PANOPIO, and HON. COURT OF APPEALS, respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the Rules of Court seeking the reversal
of the decision[1] of the Court of Appeals, dated April 29, 2003, in CA-G.R. CV No.
60357, which affirmed with modification the amount of damages awarded in the
November 24, 1997 decision[2] of the Regional Trial Court of Batangas City, Branch
IV.

The undisputed facts are as follows:

At about 3:00 p.m. of December 19, 1986, Lorenzo Menard Boyet Dolor, Jr. was
driving an owner-type jeepney with plate no. DEB 804 owned by her mother,
Margarita, towards Anilao, Batangas. As he was traversing the road at Barangay
Anilao East, Mabini, Batangas, his vehicle collided with a passenger jeepney bearing
plate no. DEG 648, driven by petitioner Juan Gonzales and owned by his co-
petitioner Francisco Hernandez, which was travelling towards Batangas City.

Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the collision.
Fred Panopio, Rene Castillo and Joseph Sandoval, who were also on board the
owner-type jeep, which was totally wrecked, suffered physical injuries. The collision
also damaged the passenger jeepney of Francisco Hernandez and caused physical
injuries to its passengers, namely, Virgie Cadavida, Fiscal Artemio Reyes and
Francisca Corona.[3]

Consequently, respondents commenced an action[4] for damages against
petitioners before the Regional Trial Court of Batangas City, alleging that driver Juan
Gonzales was guilty of negligence and lack of care and that the Hernandez spouses
were guilty of negligence in the selection and supervision of their employees.[5]

Petitioners countered that the proximate cause of the death and injuries sustained
by the passengers of both vehicles was the recklessness of Boyet Dolor, the driver of
the owner-type jeepney, who was driving in a zigzagging manner under the
influence of alcohol. Petitioners also alleged that Gonzales was not the driver-
employee of the Hernandez spouses as the former only leased the passenger
jeepney on a daily basis. The Hernandez spouses further claimed that even if an
employer-employee relationship is found to exist between them, they cannot be
held liable because as employers they exercised due care in the selection and
supervision of their employee.


During the trial of the case, it was established that the drivers of the two vehicles
were duly licensed to drive and that the road where the collision occurred was
asphalted and in fairly good condition.[6] The owner-type jeep was travelling uphill
while the passenger jeepney was going downhill. It was further established that the
owner-type jeep was moderately moving and had just passed a road bend when its
passengers, private respondents Joseph Sandoval and Rene Castillo, saw the
passenger jeepney at a distance of three meters away. The passenger jeepney was
traveling fast when it bumped the owner type jeep.[7] Moreover, the evidence
presented by respondents before the trial court showed that petitioner Juan
Gonzales obtained his professional drivers license only on September 24, 1986, or
three months before the accident. Prior to this, he was holder of a student drivers
permit issued on April 10, 1986.[8]

On November 24, 1997, the trial court rendered a decision in favor of respondents,
the dispositive portion of which states:

Premises duly considered and the plaintiffs having satisfactorily convincingly and
credibly presented evidence clearly satisfying the requirements of preponderance of
evidence to sustain the complaint, this Court hereby declares judgment in favor of
the plaintiffs and against the defendants. Defendants-spouses Francisco Hernandez
and Aniceta Abel Hernandez and Juan Gonzales are therefore directed to pay jointly
and severally, the following:

1) To spouses Lorenzo Dolor and Margarita Dolor:

a) P50,000.00 for the death of their son, Lorenzo Menard Boyet Dolor, Jr.;
b) P142,000.00 as actual and necessary funeral expenses;
c) P50,000.00 reasonable value of the totally wrecked owner-type jeep with plate
no. DEB 804 Phil 85;
d) P20,000.00 as moral damages;
e) P20,000.00 as reasonable litigation expenses and attorneys fees.

2) To spouses Francisco Valmocina and Virginia Valmocina:

a) P50,000.00 for the death of their son, Oscar Balmocina (sic);
b) P20,000.00 as moral damages;
c) P18,400.00 for funeral expenses;
d) P10,000.00 for litigation expenses and attorneys fees.
3) To spouses Victor Panopio and Martina Panopio:

a) P10,450.00 for the cost of the artificial leg and crutches being used by their son
Fred Panopio;
b) P25,000.00 for hospitalization and medical expenses they incurred for the
treatment of their son, Fred Panopio.

4) To Fred Panopio:

a) P25,000.00 for the loss of his right leg;
b) P10,000.00 as moral damages.
5) To Joseph Sandoval:

a) P4,000.00 for medical treatment.

The defendants are further directed to pay the costs of this proceedings.

SO ORDERED.[9]

Petitioners appealed[10] the decision to the Court of Appeals, which affirmed the
same with modifications as to the amount of damages, actual expenses and
attorneys fees awarded to the private respondents. The decretal portion of the
decision of the Court of Appeals reads:

WHEREFORE, the foregoing premises considered, the appealed decision is
AFFIRMED. However, the award for damages, actual expenses and attorneys fees
shall be MODIFIED as follows:

1) To spouses Lorenzo Dolor and Margarita Dolor:

a) P50,000.00 civil indemnity for their son Lorenzo Menard Dolor, Jr.;
b) P58,703.00 as actual and necessary funeral expenses;
c) P25,000,00 as temperate damages;
d) P100,000.00 as moral damages;
e) P20,000.00 as reasonable litigation expenses and attorneys fees.

2) To Spouses Francisco Valmocina and Virginia Valmocina:

a) P50,000.00 civil indemnity for the death of their son, Oscar Valmocina;
b) P100,000.00 as moral damages;
c) P10,000.00 as temperate damages;
d) P10,000.00 as reasonable litigation expenses and attorneys fees.
3) To Spouses Victor Panopio and Martina Panopio:

a) P10,352.59 as actual hospitalization and medical expenses;
b) P5,000.00 as temperate damages.

4) To Fred Panopio:

a) P50,000.00 as moral damages.

5) To Joseph Sandoval:

a) P3,000.00 as temperate damages.

SO ORDERED.[11]

Hence the present petition raising the following issues:

1. Whether the Court of Appeals was correct when it pronounced the Hernandez
spouses as solidarily liable with Juan Gonzales, although it is of record that they
were not in the passenger jeepney driven by latter when the accident occurred;

2. Whether the Court of Appeals was correct in awarding temperate damages to
private respondents namely the Spouses Dolor, Spouses Valmocina and Spouses
Panopio and to Joseph Sandoval, although the grant of temperate damages is not
provided for in decision of the court a quo;

3. Whether the Court of Appeals was correct in increasing the award of moral
damages to respondents, Spouses Dolor, Spouses Valmocina and Fred Panopio;

4. Whether the Court of Appeals was correct in affirming the grant of attorneys fees
to Spouses Dolor and to Spouses Valmocina although the lower court did not specify
the fact and the law on which it is based.

Petitioners contend that the absence of the Hernandez spouses inside the passenger
jeepney at the time of the collision militates against holding them solidarily liable
with their co-petitioner, Juan Gonzales, invoking Article 2184 of the Civil Code,
which provides:

ARTICLE 2184. In motor vehicle mishaps, the owner is solidarily liable with his
driver, if the former, who was in the vehicle, could have, by the use of the due
diligence, prevented the misfortune. It is disputably presumed that a driver was
negligent, if he had been found guilty of reckless driving or violating traffic
regulations at least twice within the next preceding two months.

If the owner was not in the motor vehicle, the provisions of article 2180 are
applicable.

The Hernandez spouses argues that since they were not inside the jeepney at the
time of the collision, the provisions of Article 2180 of the Civil Code, which does not
provide for solidary liability between employers and employees, should be applied.

We are not persuaded.

Article 2180 provides:

ARTICLE 2180. The obligation imposed by article 2176 is demandable not only for
one's own acts or omissions, but also for those of persons for whom one is
responsible.

The father and, in case of his death or incapacity, the mother, are responsible for the
damages caused by the minor children who live in their company.

Guardians are liable for damages caused by the minors or incapacitated persons
who are under their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches in
which the latter are employed or on the occasion of their functions.

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.

The State is responsible in like manner when it acts through a special agent; but not
when the damage has been caused by the official to whom the task done properly
pertains, in which case what is provided in article 2176 shall be applicable.

Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they remain
in their custody.

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. (Underscoring supplied)

On the other hand, Article 2176 provides

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.

While the above provisions of law do not expressly provide for solidary liability, the
same can be inferred from the wordings of the first paragraph of Article 2180 which
states that the obligation imposed by article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.

Moreover, Article 2180 should be read with Article 2194 of the same Code, which
categorically states that the responsibility of two or more persons who are liable for
quasi-delict is solidary. In other words, the liability of joint tortfeasors is

solidary.[12] Verily, under Article 2180 of the Civil Code, an employer may be held
solidarily liable for the negligent act of his employee.[13]

The solidary liability of employers with their employees for quasi-delicts having
been established, the next question is whether Julian Gonzales is an employee of the
Hernandez spouses. An affirmative answer will put to rest any issue on the solidary
liability of the Hernandez spouses for the acts of Julian Gonzales. The Hernandez
spouses maintained that Julian Gonzales is not their employee since their
relationship relative to the use of the jeepney is that of a lessor and a lessee. They
argue that Julian Gonzales pays them a daily rental of P150.00 for the use of the
jeepney.[14] In essence, petitioners are practicing the boundary system of jeepney
operation albeit disguised as a lease agreement between them for the use of the
jeepney.

We hold that an employer-employee relationship exists between the Hernandez
spouses and Julian Gonzales.

Indeed to exempt from liability the owner of a public vehicle who operates it under
the boundary system on the ground that he is a mere lessor would be not only to
abet flagrant violations of the Public Service Law, but also to place the riding public
at the mercy of reckless and irresponsible drivers reckless because the measure of
their earnings depends largely upon the number of trips they make and, hence, the
speed at which they drive; and irresponsible because most if not all of them are in
no position to pay the damages they might cause.[15]

Anent the award of temperate damages to the private respondents, we hold that the
appellate court committed no reversible error in awarding the same to the
respondents.

Temperate or moderate damages are damages which are more than nominal but
less than compensatory which may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case,
be proved with certainty.[16] Temperate damages are awarded for those cases
where, from the nature of the case, definite proof of pecuniary loss cannot be
offered, although the court is convinced that there has been such loss. A judge
should be empowered to calculate moderate damages in such cases, rather than the
plaintiff should suffer, without redress, from the defendants wrongful act.[17] The
assessment of temperate damages is left to the sound discretion of the court
provided that such an award is reasonable under the circumstances.[18]

We have gone through the records of this case and we find that, indeed, respondents
suffered losses which cannot be quantified in monetary terms. These losses came in
the form of the damage sustained by the owner type jeep of the Dolor spouses; the
internment and burial of Oscar Valmocina; the hospitalization of Joseph Sandoval on
account of the injuries he sustained from the collision and the artificial leg and
crutches that respondent Fred Panopio had to use because of the amputation of his

right leg. Further, we find that the amount of temperate damages awarded to the
respondents were reasonable under the circumstances.

As to the amount of moral damages which was awarded to respondents, a review of
the records of this case shows that there exists no cogent reason to overturn the
action of the appellate court on this aspect.

Under Article 2206, the spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental anguish for the
death of the deceased. The reason for the grant of moral damages has been
explained, thus:

. . . the award of moral damages is aimed at a restoration, within the limits possible,
of the spiritual status quo ante; and therefore, it must be proportionate to the
suffering inflicted. The intensity of the pain experienced by the relatives of the
victim is proportionate to the intensity of affection for him and bears no relation
whatsoever with the wealth or means of the offender.[19]

Moral damages are emphatically not intended to enrich a plaintiff at the expense of
the defendant. They are awarded to allow the former to obtain means, diversion or
amusements that will serve to alleviate the moral suffering he has undergone due to
the defendants culpable action and must, perforce, be proportional to the suffering
inflicted.[20]

Truly, the pain of the sudden loss of ones offspring, especially of a son who was in
the prime of his youth, and who holds so much promise waiting to be fulfilled is
indeed a wellspring of intense pain which no parent should be made to suffer. While
it is true that there can be no exact or uniform rule for measuring the value of a
human life and the measure of damages cannot be arrived at by a precise
mathematical calculation,[21] we hold that the Court of Appeals award of moral
damages of P100,000.00 each to the Spouses Dolor and Spouses Valmocina for the
death of their respective sons, Boyet Dolor and Oscar Valmocina, is in full accord
with prevailing jurisprudence.[22]

With respect to the award of attorneys fees to respondents, no sufficient basis was
established for the grant thereof.

It is well settled that attorneys fees should not be awarded in the absence of
stipulation except under the instances enumerated in Article 2208 of the Civil Code.
As we have held in Rizal Surety and Insurance Company v. Court of Appeals:[23]

Article 2208 of the Civil Code allows attorneys fees to be awarded by a court when
its claimant is compelled to litigate with third persons or to incur expenses to
protect his interest by reason of an unjustified act or omission of the party from
whom it is sought. While judicial discretion is here extant, an award thereof
demands, nevertheless, a factual, legal or equitable justification. The matter cannot

and should not be left to speculation and conjecture (Mirasol vs. De la Cruz, 84 SCRA
337; Stronghold Insurance Company, Inc. vs. Court of Appeals, 173 SCRA 619).

In the case at bench, the records do not show enough basis for sustaining the award
for attorneys fees and to adjudge its payment by petitioner. x x x.

Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of Appeals
that:

In Abrogar v. Intermediate Appellate Court [G.R. No. 67970, January 15, 1988, 157
SCRA 57], the Court had occasion to state that [t]he reason for the award of
attorneys fees must be stated in the text of the courts decision, otherwise, if it is
stated only in the dispositive portion of the decision, the same must be disallowed
on appeal. x x x.[24]

WHEREFORE, the petition is DENIED. The assailed decision of the Court of Appeals
is AFFIRMED with the MODIFICATION that the grant of attorneys fees is DELETED
for lack of basis.

Costs against petitioners.

SO ORDERED.

FEB LEASING AND FINANCE G.R. No. 181398

CORPORATION (now BPI

LEASING CORPORATION) , Present:

Petitioner,

CARPIO, J., Chairperson,

LEONARDO-DE CASTRO,*

BRION,

- versus - PEREZ, and

SERENO, JJ.

SPOUSES SERGIO P. BAYLON

and MARITESS VILLENA-BAYLON,

BG HAULER, INC., and Promulgated:

MANUEL Y. ESTILLOSO,

Respondents. June 29, 2011

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





D E C I S I O N





CARPIO, J.:

The Case



This is a petition for review on certiorari1 of the 9 October 2007 Decision2 and the
18 January 2008 Resolution3 of the Court of Appeals in CA-G.R. CV No. 81446. The 9
October 2007 Decision affirmed the 30 October 2003 Decision4 of the Regional Trial
Court (Branch 35) of Gapan City in Civil Case No. 2334 ordering petitioner to pay
respondents damages. The 18 January 2008 Resolution denied petitioners motion
for reconsideration.



The Facts



On 2 September 2000, an Isuzu oil tanker running along Del Monte Avenue in
Quezon City and bearing plate number TDY 712 hit Loretta V. Baylon (Loretta),
daughter of respondent spouses Sergio P. Baylon and Maritess Villena-Baylon
(spouses Baylon). At the time of the accident, the oil tanker was registered5 in the
name of petitioner FEB Leasing and Finance Corporation6 (petitioner). The oil
tanker was leased7 to BG Hauler, Inc. (BG Hauler) and was being driven by the
latters driver, Manuel Y. Estilloso. The oil tanker was insured8 by FGU Insurance
Corp. (FGU Insurance).



The accident took place at around 2:00 p.m. as the oil tanker was coming from
Balintawak and heading towards Manila. Upon reaching the intersection of
Bonifacio Street and Del Monte Avenue, the oil tanker turned left. While the driver of
the oil tanker was executing a left turn side by side with another vehicle towards Del
Monte Avenue, the oil tanker hit Loretta who was then crossing Del Monte Avenue
coming from Mayon Street. Due to the strong impact, Loretta was violently thrown
away about three to five meters from the point of impact. She fell to the ground
unconscious. She was brought for treatment to the Chinese General Hospital where
she remained in a coma until her death two days after.9



The spouses Baylon filed with the RTC (Branch 35) of Gapan City a Complaint10 for
damages against petitioner, BG Hauler, the driver, and FGU Insurance. Petitioner
filed its answer with compulsory counterclaim while FGU Insurance filed its answer
with counterclaim. On the other hand, BG Hauler filed its answer with compulsory
counterclaim and cross-claim against FGU Insurance.



Petitioner claimed that the spouses Baylon had no cause of action against it because
under its lease contract with BG Hauler, petitioner was not liable for any loss,
damage, or injury that the leased oil tanker might cause. Petitioner claimed that no
employer-employee relationship existed between petitioner and the driver.



BG Hauler alleged that neither do the spouses Baylon have a cause of action against
it since the oil tanker was not registered in its name. BG Hauler contended that the
victim was guilty of contributory negligence in crossing the street. BG Hauler
claimed that even if its driver was at fault, BG Hauler exercised the diligence of a
good father of a family in the selection and supervision of its driver. BG Hauler also
contended that FGU Insurance is obliged to assume all liabilities arising from the use
of the insured oil tanker.



For its part, FGU Insurance averred that the victim was guilty of contributory
negligence. FGU Insurance concluded that the spouses Baylon could not expect to be
paid the full amount of their claims. FGU Insurance pointed out that the insurance
policy covering the oil tanker limited any claim to a maximum of P400,000.00.



During trial, FGU Insurance moved that (1) it be allowed to deposit in court the
amount of P450,000.00 in the joint names of the spouses Baylon, petitioner, and BG
Hauler and (2) it be released from further participating in the proceedings. After the
RTC granted the motion, FGU Insurance deposited in the Branch Clerk of Court a
check in the names of the spouses Baylon, petitioner, and BG Hauler. The RTC then
released FGU Insurance from its contractual obligations under the insurance policy.



The Ruling of the RTC



After weighing the evidence submitted by the parties, the RTC found that the death
of Loretta was due to the negligent act of the driver. The RTC held that BG Hauler, as
the employer, was solidarily liable with the driver. The RTC further held that
petitioner, as the registered owner of the oil tanker, was also solidarily liable.

The RTC found that since FGU Insurance already paid the amount of P450,000.00 to
the spouses Baylon, BG Hauler, and petitioner, the insurers obligation has been
satisfactorily fulfilled. The RTC thus dismissed the cross-claim of BG Hauler against
FGU Insurance. The decretal part of the RTCs decision reads:



Wherefore, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against defendants FEB Leasing (now BPI Leasing), BG Hauler, and
Manuel Estilloso, to wit:



1. Ordering the defendants, jointly and severally, to pay plaintiffs the following:

a. the amount of P62,000.00 representing actual expenses incurred by the plaintiffs;

b. the amount of P50,000.00 as moral damages;

c. the amount of P2,400,000.00 for loss of earning capacity of the deceased victim,
Loretta V. Baylon;

d. the sum of P50,000.00 for death indemnity;

e. the sum of P50,000.00 for and as attorneys fees; and

f. with costs against the defendants.



2. Ordering the dismissal of defendants counter-claim for lack of merit and the cross
claim of defendant BG Hauler against defendant FGU Insurance.



SO ORDERED.11

Petitioner, BG Hauler, and the driver appealed the RTC Decision to the Court of
Appeals. Petitioner claimed that as financial lessor, it is exempt from liability
resulting from any loss, damage, or injury the oil tanker may cause while being
operated by BG Hauler as financial lessee.



On the other hand, BG Hauler and the driver alleged that no sufficient evidence
existed proving the driver to be at fault. They claimed that the RTC erred in finding

BG Hauler negligent despite the fact that it had exercised the diligence of a good
father of a family in the selection and supervision of its driver and in the
maintenance of its vehicles. They contended that petitioner, as the registered owner
of the oil tanker, should be solely liable for Lorettas death.



The Ruling of the Court of Appeals



The Court of Appeals held that petitioner, BG Hauler, and the driver are solidarily
liable for damages arising from Lorettas death. Petitioners liability arose from the
fact that it was the registered owner of the oil tanker while BG Haulers liability
emanated from a provision in the lease contract providing that the lessee shall be
liable in case of any loss, damage, or injury the leased oil tanker may cause.



Thus, the Court of Appeals affirmed the RTC Decision but with the modification that
the award of attorneys fees be deleted for being speculative. The dispositive part of
the appellate courts Decision reads:



WHEREFORE, in the light of the foregoing, the instant appeal is DENIED.
Consequently, the assailed Decision of the lower court is AFFIRMED with the
MODIFICATION that the award of attorneys fees is DELETED.



IT IS SO ORDERED.12



Dissatisfied, petitioner and BG Hauler, joined by the driver, filed two separate
motions for reconsideration. In its 18 January 2008 Resolution, the Court of Appeals
denied both motions for lack of merit.



Unconvinced, petitioner alone filed with this Court the present petition for review
on certiorari impleading the spouses Baylon, BG Hauler, and the driver as
respondents.13


The Issue


The sole issue submitted for resolution is whether the registered owner of a
financially leased vehicle remains liable for loss, damage, or injury caused by the
vehicle notwithstanding an exemption provision in the financial lease contract.



The Courts Ruling


Petitioner contends that the lease contract between BG Hauler and petitioner
specifically provides that BG Hauler shall be liable for any loss, damage, or injury the
leased oil tanker may cause even if petitioner is the registered owner of the said oil
tanker. Petitioner claims that the Court of Appeals erred in holding petitioner
solidarily liable with BG Hauler despite having found the latter liable under the lease
contract.



For their part, the spouses Baylon counter that the lease contract between
petitioner and BG Hauler cannot bind third parties like them. The spouses Baylon
maintain that the existence of the lease contract does not relieve petitioner of direct
responsibility as the registered owner of the oil tanker that caused the death of their
daughter.

On the other hand, BG Hauler and the driver argue that at the time petitioner and BG
Hauler entered into the lease contract, Republic Act No. 598014 was still in effect.
They point out that the amendatory law, Republic Act No. 8556,15 which exempts
from liability in case of any loss, damage, or injury to third persons the registered
owners of vehicles financially leased to another, was not yet enacted at that time.



In point is the 2008 case of PCI Leasing and Finance, Inc. v. UCPB General Insurance
Co., Inc.16 There, we held liable PCI Leasing and Finance, Inc., the registered owner
of an 18-wheeler Fuso Tanker Truck leased to Superior Gas & Equitable Co., Inc.
(SUGECO) and being driven by the latters driver, for damages arising from a
collision. This despite an express provision in the lease contract to the effect that the
lessee, SUGECO, shall indemnify and hold the registered owner free from any
liabilities, damages, suits, claims, or judgments arising from SUGECOs use of the
leased motor vehicle.

In the instant case, Section 5.1 of the lease contract between petitioner and BG
Hauler provides:

Sec. 5.1. It is the principle of this Lease that while the title or ownership of the
EQUIPMENT, with all the rights consequent thereof, are retained by the LESSOR, the
risk of loss or damage of the EQUIPMENT from whatever source arising, as well as
any liability resulting from the ownership, operation and/or possession thereof,
over and above those actually compensated by insurance, are hereby transferred to
and assumed by the LESSEE hereunder which shall continue in full force and
effect.17 (Emphasis supplied)





If it so wishes, petitioner may proceed against BG Hauler to seek enforcement of the
latters contractual obligation under Section 5.1 of the lease contract. In the present
case, petitioner did not file a cross-claim against BG Hauler. Hence, this Court cannot
require BG Hauler to reimburse petitioner for the latters liability to the spouses
Baylon. However, as the registered owner of the oil tanker, petitioner may not
escape its liability to third persons.


Under Section 5 of Republic Act No. 4136,18 as amended, all motor vehicles used or
operated on or upon any highway of the Philippines must be registered with the
Bureau of Land Transportation (now Land Transportation Office) for the current
year.19 Furthermore, any encumbrances of motor vehicles must be recorded with
the Land Transportation Office in order to be valid against third parties.20



In accordance with the law on compulsory motor vehicle registration, this Court has
consistently ruled that, with respect to the public and third persons, the registered
owner of a motor vehicle is directly and primarily responsible for the consequences
of its operation regardless of who the actual vehicle owner might be.21 Well-settled
is the rule that the registered owner of the vehicle is liable for quasi-delicts resulting
from its use. Thus, even if the vehicle has already been sold, leased, or transferred to
another person at the time the vehicle figured in an accident, the registered vehicle
owner would still be liable for damages caused by the accident. The sale, transfer or
lease of the vehicle, which is not registered with the Land Transportation Office, will
not bind third persons aggrieved in an accident involving the vehicle. The
compulsory motor vehicle registration underscores the importance of registering
the vehicle in the name of the actual owner.

The policy behind the rule is to enable the victim to find redress by the expedient
recourse of identifying the registered vehicle owner in the records of the Land
Transportation Office. The registered owner can be reimbursed by the actual owner,
lessee or transferee who is known to him. Unlike the registered owner, the innocent
victim is not privy to the lease, sale, transfer or encumbrance of the vehicle. Hence,
the victim should not be prejudiced by the failure to register such transaction or
encumbrance. As the Court held in PCI Leasing:



The burden of registration of the lease contract is minuscule compared to the chaos
that may result if registered owners or operators of vehicles are freed from such
responsibility. Petitioner pays the price for its failure to obey the law on compulsory
registration of motor vehicles for registration is a pre-requisite for any person to
even enjoy the privilege of putting a vehicle on public roads.22





In the landmark case of Erezo v. Jepte,23 the Court succinctly laid down the public
policy behind the rule, thus:


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.



x x x



Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with others
or, or otherwise, to escape said responsibility and transfer the same to an indefinite
person, or to one who possesses no property with which to respond financially for
the damage or injury done. A victim of recklessness on the public highways is

usually without means to discover or identify the person actually causing the injury
or damage. He has no means other than by a recourse to the registration in the
Motor Vehicles Office to determine who is the owner. The protection that the law
aims to extend to him would become illusory were the registered owner given the
opportunity to escape liability by disproving his ownership. If the policy of the law is
to be enforced and carried out, the registered owner should not be allowed to prove
the contrary to the prejudice of the person injured, that is to prove that a third
person or another has become the owner, so that he may be thereby be relieved of
the responsibility to the injured person.24





In this case, petitioner admits that it is the registered owner of the oil tanker that
figured in an accident causing the death of Loretta. As the registered owner, it
cannot escape liability for the loss arising out of negligence in the operation of the
oil tanker. Its liability remains even if at the time of the accident, the oil tanker was
leased to BG Hauler and was being driven by the latters driver, and despite a
provision in the lease contract exonerating the registered owner from liability.





As a final point, we agree with the Court of Appeals that the award of attorneys fees
by the RTC must be deleted for lack of basis. The RTC failed to justify the award of
P50,000 attorneys fees to respondent spouses Baylon. The award of attorneys fees
must have some factual, legal and equitable bases and cannot be left to speculations
and conjectures.25 Consistent with prevailing jurisprudence,26 attorneys fees as
part of damages are awarded only in the instances enumerated in Article 2208 of
the Civil Code.27 Thus, the award of attorneys fees is the exception rather than the
rule. Attorneys fees are not awarded every time a party prevails in a suit because of
the policy that no premium should be placed on the right to litigate.28



WHEREFORE, we DENY the petition. We AFFIRM the 9 October 2007 Decision and
the 18 January 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 81446
affirming with modification the 30 October 2003 Decision of the Regional Trial
Court (Branch 35) of Gapan City in Civil Case No. 2334 ordering petitioner FEB
Leasing and Finance Corporation, BG Hauler, Inc., and driver Manuel Y. Estilloso to
solidarily pay respondent spouses Sergio P. Baylon and Maritess Villena-Baylon the
following amounts:


a. P62,000.00 representing actual expenses incurred by the plaintiffs;

b. P50,000.00 as moral damages;

c. P2,400,000.00 for loss of earning capacity of the deceased victim, Loretta V.
Baylon; and

d. P50,000.00 for death indemnity.



Costs against petitioner.

SO ORDERED.

G.R. No. 157917 August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS,
and the COURT OF APPEALS Respondents.

D E C I S I O N

BERSAMIN, J.:

The operator of a. school bus service is a common carrier in the eyes of the law. He
is bound to observe extraordinary diligence in the conduct of his business. He is
presumed to be negligent when death occurs to a passenger. His liability may
include indemnity for loss of earning capacity even if the deceased passenger may
only be an unemployed high school student at the time of the accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias)
appeal the adverse decision promulgated on November 13, 2002, by which the
Court of Appeals (CA) affirmed with modification the decision rendered on
December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Paraaque City
that had decreed them jointly and severally liable with Philippine National Railways
(PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the
death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).

Antecedents

The Pereas were engaged in the business of transporting students from their
respective residences in Paraaque City to Don Bosco in Pasong Tamo, Makati City,
and back. In their business, the Pereas used a KIA Ceres Van (van) with Plate No.
PYA 896, which had the capacity to transport 14 students at a time, two of whom
would be seated in the front beside the driver, and the others in the rear, with six
students on either side. They employed Clemente Alfaro (Alfaro) as driver of the
van.

In June 1996, the Zarates contracted the Pereas to transport Aaron to and from
Don Bosco. On August 22, 1996, as on previous school days, the van picked Aaron up
around 6:00 a.m. from the Zarates residence. Aaron took his place on the left side of
the van near the rear door. The van, with its air-conditioning unit turned on and the
stereo playing loudly, ultimately carried all the 14 student riders on their way to
Don Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and
that they were already running late because of the heavy vehicular traffic on the
South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by

traversing the narrow path underneath the Magallanes Interchange that was then
commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the
narrow path was marked by piles of construction materials and parked passenger
jeepneys, and the railroad crossing in the narrow path had no railroad warning
signs, or watchmen, or other responsible persons manning the crossing. In fact, the
bamboo barandilla was up, leaving the railroad crossing open to traversing
motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No.
302 (train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes
Interchange travelling northbound. As the train neared the railroad crossing, Alfaro
drove the van eastward across the railroad tracks, closely tailing a large passenger
bus. His view of the oncoming train was blocked because he overtook the passenger
bus on its left side. The train blew its horn to warn motorists of its approach. When
the train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes only
when he saw that a collision was imminent. The passenger bus successfully crossed
the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of
the van, and the impact threw nine of the 12 students in the rear, including Aaron,
out of the van. Aaron landed in the path of the train, which dragged his body and
severed his head, instantaneously killing him. Alano fled the scene on board the
train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this
action for damages against Alfaro, the Pereas, PNR and Alano. The Pereas and
PNR filed their respective answers, with cross-claims against each other, but Alfaro
could not be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

(1)) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2)) Spouses Zarate engaged the services of spouses Perea for the adequate and
safe transportation carriage of the former spouses' son from their residence in
Paraaque to his school at the Don Bosco Technical Institute in Makati City;

(3)) During the effectivity of the contract of carriage and in the implementation
thereof, Aaron, the minor son of spouses Zarate died in connection with a
vehicular/train collision which occurred while Aaron was riding the contracted
carrier Kia Ceres van of spouses Perea, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided with the train of
PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes
Interchange in Makati City, Metro Manila, Philippines;

(4)) At the time of the vehicular/train collision, the subject site of the
vehicular/train collision was a railroad crossing used by motorists for crossing the
railroad tracks;

(5)) During the said time of the vehicular/train collision, there were no appropriate
and safety warning signs and railings at the site commonly used for railroad
crossing;

(6)) At the material time, countless number of Makati bound public utility and
private vehicles used on a daily basis the site of the collision as an alternative route
and short-cut to Makati;

(7)) The train driver or operator left the scene of the incident on board the
commuter train involved without waiting for the police investigator;

(8)) The site commonly used for railroad crossing by motorists was not in fact
intended by the railroad operator for railroad crossing at the time of the vehicular
collision;

(9)) PNR received the demand letter of the spouses Zarate;

(10)0) PNR refused to acknowledge any liability for the vehicular/train collision;

(11)) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and

(12)) The site of the vehicular/train collision was within the vicinity or less than
100 meters from the Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his
functions, liable for negligence constituting the proximate cause of the vehicular
collision, which resulted in the death of plaintiff spouses' son;

(2) Whether or not the defendant spouses Perea being the employer of defendant
Alfaro are liable for any negligence which may be attributed to defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of the
railroad system is liable for negligence in failing to provide adequate safety warning
signs and railings in the area commonly used by motorists for railroad crossings,
constituting the proximate cause of the vehicular collision which resulted in the
death of the plaintiff spouses' son;

(4) Whether or not defendant spouses Perea are liable for breach of the contract of
carriage with plaintiff-spouses in failing to provide adequate and safe transportation
for the latter's son;

(5) Whether or not defendants spouses are liable for actual, moral damages,
exemplary damages, and attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Perea observed the
diligence of employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental death of
Aaron John Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the commuter
train involved in the accident, in allowing or tolerating the motoring public to cross,
and its failure to install safety devices or equipment at the site of the accident for the
protection of the public;

(9) Whether or not defendant PNR should be made to reimburse defendant spouses
for any and whatever amount the latter may be held answerable or which they may
be ordered to pay in favor of plaintiffs by reason of the action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the
amounts claimed by the latter in their Complaint by reason of its gross negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral
and exemplary damages and attorney's fees.2

The Zarates claim against the Pereas was upon breach of the contract of carriage
for the safe transport of Aaron; but that against PNR was based on quasi-delict
under Article 2176, Civil Code.

In their defense, the Pereas adduced evidence to show that they had exercised the
diligence of a good father of the family in the selection and supervision of Alfaro, by
making sure that Alfaro had been issued a drivers license and had not been
involved in any vehicular accident prior to the collision; that their own son had
taken the van daily; and that Teodoro Perea had sometimes accompanied Alfaro in
the vans trips transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been
the reckless crossing of the van whose driver had not first stopped, looked and
listened; and that the narrow path traversed by the van had not been intended to be
a railroad crossing for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision,3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff and against the defendants ordering them to jointly and severally pay the
plaintiffs as follows:

(1) (for) the death of Aaron- Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

(4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorneys fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

On June 29, 2000, the RTC denied the Pereas motion for reconsideration,4
reiterating that the cooperative gross negligence of the Pereas and PNR had caused
the collision that led to the death of Aaron; and that the damages awarded to the
Zarates were not excessive, but based on the established circumstances.

The CAs Ruling

Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and
severally liable together with defendant-appellants spouses Teodorico and Nanette
Perea and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the
death of Aaron Zarate and damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees
witnesses despite overwhelming documentary evidence on record, supporting the
case of defendants-appellants Philippine National Railways.

The Pereas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for
actual, moral and exemplary damages and attorneys fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereas against
the Philippine National Railways and in not holding the latter and its train driver
primarily responsible for the incident.

The trial court erred in awarding excessive damages and attorneys fees.

The trial court erred in awarding damages in the form of deceaseds loss of earning
capacity in the absence of sufficient basis for such an award.

On November 13, 2002, the CA promulgated its decision, affirming the findings of
the RTC, but limited the moral damages to P 2,500,000.00; and deleted the
attorneys fees because the RTC did not state the factual and legal bases, to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial
Court, Branch 260 of Paraaque City is AFFIRMED with the modification that the
award of Actual Damages is reduced to P 59,502.76; Moral Damages is reduced to P
2,500,000.00; and the award for Attorneys Fees is Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aarons earning capacity, taking cognizance
of the ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad
Company,7 wherein the Court gave the heirs of Cariaga a sum representing the loss
of the deceaseds earning capacity despite Cariaga being only a medical student at
the time of the fatal incident. Applying the formula adopted in the American
Expectancy Table of Mortality:

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his
life expectancy from age of 21 (the age when he would have graduated from college
and started working for his own livelihood) instead of 15 years (his age when he
died). Considering that the nature of his work and his salary at the time of Aarons
death were unknown, it used the prevailing minimum wage of P 280.00/day to
compute Aarons gross annual salary to be P 110,716.65, inclusive of the thirteenth
month pay. Multiplying this annual salary by Aarons life expectancy of 39.3 years,
his gross income would aggregate to P 4,351,164.30, from which his estimated
expenses in the sum of P 2,189,664.30 was deducted to finally arrive at P
2,161,500.00 as net income. Due to Aarons computed net income turning out to be
higher than the amount claimed by the Zarates, only P 2,109,071.00, the amount
expressly prayed for by them, was granted.

On April 4, 2003, the CA denied the Pereas motion for reconsideration.8


Issues

In this appeal, the Pereas list the following as the errors committed by the CA, to
wit:

I. The lower court erred when it upheld the trial courts decision holding the
petitioners jointly and severally liable to pay damages with Philippine National
Railways and dismissing their cross-claim against the latter.

II. The lower court erred in affirming the trial courts decision awarding damages for
loss of earning capacity of a minor who was only a high school student at the time of
his death in the absence of sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded,
assuming petitioners are liable at all.

Ruling

The petition has no merit.

1.
Were the Pereas and PNR jointly
and severally liable for damages?

The Zarates brought this action for recovery of damages against both the Pereas
and the PNR, basing their claim against the Pereas on breach of contract of carriage
and against the PNR on quasi-delict.

The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereas defense was that they exercised the diligence of a good
father of the family in the selection and supervision of Alfaro, the van driver, by
seeing to it that Alfaro had a drivers license and that he had not been involved in
any vehicular accident prior to the fatal collision with the train; that they even had
their own son travel to and from school on a daily basis; and that Teodoro Perea
himself sometimes accompanied Alfaro in transporting the passengers to and from
school. The RTC gave scant consideration to such defense by regarding such defense
as inappropriate in an action for breach of contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that
the Pereas operated as a common carrier; and that their standard of care was
extraordinary diligence, not the ordinary diligence of a good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually
regarded as a private carrier,9 primarily because he only caters to some specific or
privileged individuals, and his operation is neither open to the indefinite public nor
for public use, the exact nature of the operation of a school bus service has not been
finally settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or
persons from one place to another, gratuitously or for hire. The carrier is classified
either as a private/special carrier or as a common/public carrier.10 A private
carrier is one who, without making the activity a vocation, or without holding
himself or itself out to the public as ready to act for all who may desire his or its
services, undertakes, by special agreement in a particular instance only, to transport
goods or persons from one place to another either gratuitously or for hire.11 The
provisions on ordinary contracts of the Civil Code govern the contract of private
carriage.The diligence required of a private carrier is only ordinary, that is, the
diligence of a good father of the family. In contrast, a common carrier is a person,
corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering such
services to the public.12 Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act,13 and other
special laws relating to transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to have acted negligently
in case of the loss of the effects of passengers, or the death or injuries to
passengers.14

In relation to common carriers, the Court defined public use in the following terms
in United States v. Tan Piaco,15 viz:

"Public use" is the same as "use by the public". The essential feature of the public
use is not confined to privileged individuals, but is open to the indefinite public. It is
this indefinite or unrestricted quality that gives it its public character. In
determining whether a use is public, we must look not only to the character of the
business to be done, but also to the proposed mode of doing it. If the use is merely
optional with the owners, or the public benefit is merely incidental, it is not a public
use, authorizing the exercise of the jurisdiction of the public utility commission.
There must be, in general, a right which the law compels the owner to give to the
general public. It is not enough that the general prosperity of the public is promoted.
Public use is not synonymous with public interest. The true criterion by which to
judge the character of the use is whether the public may enjoy it by right or only by
permission.

In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil
Code avoided any distinction between a person or an enterprise offering
transportation on a regular or an isolated basis; and has not distinguished a carrier
offering his services to the general public, that is, the general community or

population, from one offering his services only to a narrow segment of the general
population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil
Code coincides neatly with the notion of public service under the Public Service Act,
which supplements the law on common carriers found in the Civil Code. Public
service, according to Section 13, paragraph (b) of the Public Service Act, includes:

x x x every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientle, whether
permanent or occasional, and done for the general business purposes, any common
carrier, railroad, street railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications systems, wire or
wireless broadcasting stations and other similar public services. x x x.17

Given the breadth of the aforequoted characterization of a common carrier, the
Court has considered as common carriers pipeline operators,18 custom brokers and
warehousemen,19 and barge operators20 even if they had limited clientle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or
extent of the business actually transacted, or the number and character of the
conveyances used in the activity, but whether the undertaking is a part of the
activity engaged in by the carrier that he has held out to the general public as his
business or occupation. If the undertaking is a single transaction, not a part of the
general business or occupation engaged in, as advertised and held out to the general
public, the individual or the entity rendering such service is a private, not a
common, carrier. The question must be determined by the character of the business
actually carried on by the carrier, not by any secret intention or mental reservation
it may entertain or assert when charged with the duties and obligations that the law
imposes.21

Applying these considerations to the case before us, there is no question that the
Pereas as the operators of a school bus service were: (a) engaged in transporting
passengers generally as a business, not just as a casual occupation; (b) undertaking
to carry passengers over established roads by the method by which the business
was conducted; and (c) transporting students for a fee. Despite catering to a limited
clientle, the Pereas operated as a common carrier because they held themselves
out as a ready transportation indiscriminately to the students of a particular school
living within or near where they operated the service and for a fee.

The common carriers standard of care and vigilance as to the safety of the
passengers is defined by law. Given the nature of the business and for reasons of
public policy, the common carrier is bound "to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case."22 Article 1755 of the Civil
Code specifies that the common carrier should "carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances." To successfully fend off
liability in an action upon the death or injury to a passenger, the common carrier
must prove his or its observance of that extraordinary diligence; otherwise, the legal
presumption that he or it was at fault or acted negligently would stand.23 No device,
whether by stipulation, posting of notices, statements on tickets, or otherwise, may
dispense with or lessen the responsibility of the common carrier as defined under
Article 1755 of the Civil Code. 24

And, secondly, the Pereas have not presented any compelling defense or reason by
which the Court might now reverse the CAs findings on their liability. On the
contrary, an examination of the records shows that the evidence fully supported the
findings of the CA.

As earlier stated, the Pereas, acting as a common carrier, were already presumed
to be negligent at the time of the accident because death had occurred to their
passenger.25 The presumption of negligence, being a presumption of law, laid the
burden of evidence on their shoulders to establish that they had not been
negligent.26 It was the law no less that required them to prove their observance of
extraordinary diligence in seeing to the safe and secure carriage of the passengers to
their destination. Until they did so in a credible manner, they stood to be held legally
responsible for the death of Aaron and thus to be held liable for all the natural
consequences of such death.

There is no question that the Pereas did not overturn the presumption of their
negligence by credible evidence. Their defense of having observed the diligence of a
good father of a family in the selection and supervision of their driver was not
legally sufficient. According to Article 1759 of the Civil Code, their liability as a
common carrier did not cease upon proof that they exercised all the diligence of a
good father of a family in the selection and supervision of their employee. This was
the reason why the RTC treated this defense of the Pereas as inappropriate in this
action for breach of contract of carriage.

The Pereas were liable for the death of Aaron despite the fact that their driver
might have acted beyond the scope of his authority or even in violation of the orders
of the common carrier.27 In this connection, the records showed their drivers
actual negligence. There was a showing, to begin with, that their driver traversed
the railroad tracks at a point at which the PNR did not permit motorists going into
the Makati area to cross the railroad tracks. Although that point had been used by
motorists as a shortcut into the Makati area, that fact alone did not excuse their

driver into taking that route. On the other hand, with his familiarity with that
shortcut, their driver was fully aware of the risks to his passengers but he still
disregarded the risks. Compounding his lack of care was that loud music was
playing inside the air-conditioned van at the time of the accident. The loudness most
probably reduced his ability to hear the warning horns of the oncoming train to
allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he
sought to overtake a passenger bus on the left side as both vehicles traversed the
railroad tracks. In so doing, he lost his view of the train that was then coming from
the opposite side of the passenger bus, leading him to miscalculate his chances of
beating the bus in their race, and of getting clear of the train. As a result, the bus
avoided a collision with the train but the van got slammed at its rear, causing the
fatality. Lastly, he did not slow down or go to a full stop before traversing the
railroad tracks despite knowing that his slackening of speed and going to a full stop
were in observance of the right of way at railroad tracks as defined by the traffic
laws and regulations.28 He thereby violated a specific traffic regulation on right of
way, by virtue of which he was immediately presumed to be negligent.29

The omissions of care on the part of the van driver constituted negligence,30 which,
according to Layugan v. Intermediate Appellate Court,31 is "the omission to do
something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do,32 or as Judge Cooley
defines it, (t)he failure to observe for the protection of the interests of another
person, that degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury."33

The test by which to determine the existence of negligence in a particular case has
been aptly stated in the leading case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may
be stated as follows: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence. The law here in effect
adopts the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of negligence in a given case
is not determined by reference to the personal judgment of the actor in the situation
before him. The law considers what would be reckless, blameworthy, or negligent in
the man of ordinary intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given
situation must of course be always determined in the light of human experience and
in view of the facts involved in the particular case. Abstract speculation cannot here
be of much value but this much can be profitably said: Reasonable men govern their
conduct by the circumstances which are before them or known to them. They are
not, and are not supposed to be, omniscient of the future. Hence they can be
expected to take care only when there is something before them to suggest or warn

of danger. Could a prudent man, in the case under consideration, foresee harm as a
result of the course actually pursued? If so, it was the duty of the actor to take
precautions to guard against that harm. Reasonable foresight of harm, followed by
the ignoring of the suggestion born of this prevision, is always necessary before
negligence can be held to exist. Stated in these terms, the proper criterion for
determining the existence of negligence in a given case is this: Conduct is said to be
negligent when a prudent man in the position of the tortfeasor would have foreseen
that an effect harmful to another was sufficiently probable to warrant his foregoing
the conduct or guarding against its consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely
negligent when he traversed the railroad tracks at a point not allowed for a
motorists crossing despite being fully aware of the grave harm to be thereby caused
to his passengers; and when he disregarded the foresight of harm to his passengers
by overtaking the bus on the left side as to leave himself blind to the approach of the
oncoming train that he knew was on the opposite side of the bus.

Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate
Court,35 where the Court held the PNR solely liable for the damages caused to a
passenger bus and its passengers when its train hit the rear end of the bus that was
then traversing the railroad crossing. But the circumstances of that case and this one
share no similarities. In Philippine National Railways v. Intermediate Appellate
Court, no evidence of contributory negligence was adduced against the owner of the
bus. Instead, it was the owner of the bus who proved the exercise of extraordinary
diligence by preponderant evidence. Also, the records are replete with the showing
of negligence on the part of both the Pereas and the PNR. Another distinction is
that the passenger bus in Philippine National Railways v. Intermediate Appellate
Court was traversing the dedicated railroad crossing when it was hit by the train,
but the Pereas school van traversed the railroad tracks at a point not intended for
that purpose.

At any rate, the lower courts correctly held both the Pereas and the PNR "jointly
and severally" liable for damages arising from the death of Aaron. They had been
impleaded in the same complaint as defendants against whom the Zarates had the
right to relief, whether jointly, severally, or in the alternative, in respect to or arising
out of the accident, and questions of fact and of law were common as to the
Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of
contract of carriage) against the Pereas was distinct from the basis of the Zarates
right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they
nonetheless could be held jointly and severally liable by virtue of their respective
negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly
found the PNR also guilty of negligence despite the school van of the Pereas
traversing the railroad tracks at a point not dedicated by the PNR as a railroad
crossing for pedestrians and motorists, because the PNR did not ensure the safety of
others through the placing of crossbars, signal lights, warning signs, and other
permanent safety barriers to prevent vehicles or pedestrians from crossing there.

The RTC observed that the fact that a crossing guard had been assigned to man that
point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks
to others as well as the need to control the vehicular and other traffic there. Verily,
the Pereas and the PNR were joint tortfeasors.

2.
Was the indemnity for loss of
Aarons earning capacity proper?

The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing
with the RTC on the liability, the CA modified the amount. Both lower courts took
into consideration that Aaron, while only a high school student, had been enrolled in
one of the reputable schools in the Philippines and that he had been a normal and
able-bodied child prior to his death. The basis for the computation of Aarons
earning capacity was not what he would have become or what he would have
wanted to be if not for his untimely death, but the minimum wage in effect at the
time of his death. Moreover, the RTCs computation of Aarons life expectancy rate
was not reckoned from his age of 15 years at the time of his death, but on 21 years,
his age when he would have graduated from college.

We find the considerations taken into account by the lower courts to be reasonable
and fully warranted.

Yet, the Pereas submit that the indemnity for loss of earning capacity was
speculative and unfounded.1wphi1 They cited People v. Teehankee, Jr.,37 where
the Court deleted the indemnity for victim Jussi Leinos loss of earning capacity as a
pilot for being speculative due to his having graduated from high school at the
International School in Manila only two years before the shooting, and was at the
time of the shooting only enrolled in the first semester at the Manila Aero Club to
pursue his ambition to become a professional pilot. That meant, according to the
Court, that he was for all intents and purposes only a high school graduate.

We reject the Pereas submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there
of Jussi Leino was not akin to that of Aaron here. The CA and the RTC were not
speculating that Aaron would be some highly-paid professional, like a pilot (or, for
that matter, an engineer, a physician, or a lawyer). Instead, the computation of
Aarons earning capacity was premised on him being a lowly minimum wage earner
despite his being then enrolled at a prestigious high school like Don Bosco in Makati,
a fact that would have likely ensured his success in his later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not
be taken against his parents and in favor of the defendants whose negligence not
only cost Aaron his life and his right to work and earn money, but also deprived his
parents of their right to his presence and his services as well. Our law itself states

that the loss of the earning capacity of the deceased shall be the liability of the guilty
party in favor of the heirs of the deceased, and shall in every case be assessed and
awarded by the court "unless the deceased on account of permanent physical
disability not caused by the defendant, had no earning capacity at the time of his
death."38 Accordingly, we emphatically hold in favor of the indemnification for
Aarons loss of earning capacity despite him having been unemployed, because
compensation of this nature is awarded not for loss of time or earnings but for loss
of the deceaseds power or ability to earn money.39

This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v.
Laguna Tayabas Bus Company and Manila Railroad Company,40 fourth-year
medical student Edgardo Carriagas earning capacity, although he survived the
accident but his injuries rendered him permanently incapacitated, was computed to
be that of the physician that he dreamed to become. The Court considered his
scholastic record sufficient to justify the assumption that he could have finished the
medical course and would have passed the medical board examinations in due time,
and that he could have possibly earned a modest income as a medical practitioner.
Also, in People v. Sanchez,41 the Court opined that murder and rape victim Eileen
Sarmienta and murder victim Allan Gomez could have easily landed good-paying
jobs had they graduated in due time, and that their jobs would probably pay them
high monthly salaries from P 10,000.00 to P 15,000.00 upon their graduation. Their
earning capacities were computed at rates higher than the minimum wage at the
time of their deaths due to their being already senior agriculture students of the
University of the Philippines in Los Baos, the countrys leading educational
institution in agriculture.

3.
Were the amounts of damages excessive?

The Pereas plead for the reduction of the moral and exemplary damages awarded
to the Zarates in the respective amounts of P 2,500,000.00 and P 1,000,000.00 on
the ground that such amounts were excessive.

The plea is unwarranted.

The moral damages of P 2,500,000.00 were really just and reasonable under the
established circumstances of this case because they were intended by the law to
assuage the Zarates deep mental anguish over their sons unexpected and violent
death, and their moral shock over the senseless accident. That amount would not be
too much, considering that it would help the Zarates obtain the means, diversions or
amusements that would alleviate their suffering for the loss of their child. At any
rate, reducing the amount as excessive might prove to be an injustice, given the
passage of a long time from when their mental anguish was inflicted on them on
August 22, 1996.

Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the
amount if only to render effective the desired example for the public good. As a
common carrier, the Pereas needed to be vigorously reminded to observe their
duty to exercise extraordinary diligence to prevent a similarly senseless accident
from happening again. Only by an award of exemplary damages in that amount
would suffice to instill in them and others similarly situated like them the ever-
present need for greater and constant vigilance in the conduct of a business imbued
with public interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision
promulgated on November 13, 2002; and ORDER the petitioners to pay the costs of
suit.

SO ORDERED.