G.R. No.

111127 July 26, 1996

MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO
CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD
CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN
RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR.,
ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS
CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA,
YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN,
ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS
NORMAN O. LOPES, JULIUS CAESAR, GARCIA, ROSARIO
MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL,
ROSARIO MARA-MARA, TERESITA REGALA, MELINDA
TORRES, MARELLA MIJARES, JOSEFA CABATINGAN,
MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE
JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS
RANARIO, ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.

MENDOZA, J.:p
This is a petition for review on certiorari of the decision of the
Court of Appeals 1 in CA-GR No. 28245, dated September 30,
1992, which affirmed with modification the decision of the
Regional Trial Court of Makati, Branch 58, ordering petitioners
jointly and severally to pay damages to private respondent
Amyline Antonio, and its resolution which denied petitioners'
motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a
1982 model Mazda minibus. They used the bus principally in
connection with a bus service for school children which they
operated in Manila. The couple had a driver, Porfirio J. Cabil,
whom they hired in 1981, after trying him out for two weeks,
His job was to take school children to and from the St.
Scholastica's College in Malate, Manila.
On November 2, 1984 private respondent Word for the World
Christian Fellowship Inc. (WWCF) arranged with petitioners for
the transportation of 33 members of its Young Adults Ministry
from Manila to La Union and back in consideration of which
private respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at
5:00 o'clock in the afternoon. However, as several members of
the party were late, the bus did not leave the Tropical Hut at
the corner of Ortigas Avenue and EDSA until 8:00 o'clock in
the evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen,
Pangasinan. However, the bridge at Carmen was under repair,
sot hat petitioner Cabil, who was unfamiliar with the area (it
being his first trip to La Union), was forced to take a detour
through the town of Baay in Lingayen, Pangasinan. At 11:30
that night, petitioner Cabil came upon a sharp curve on the
highway, running on a south to east direction, which he
described as "siete." The road was slippery because it was
raining, causing the bus, which was running at the speed of
50 kilometers per hour, to skid to the left road shoulder. The
bus hit the left traffic steel brace and sign along the road and
rammed the fence of one Jesus Escano, then turned over and
landed on its left side, coming to a full stop only after a series

of impacts. The bus came to rest off the road. A coconut tree
which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline
Antonio was thrown on the floor of the bus and pinned down
by a wooden seat which came down by a wooden seat which
came off after being unscrewed. It took three persons to
safely remove her from this portion. She was in great pain and
could not move.
The driver, petitioner Cabil, claimed he did not see the curve
until it was too late. He said he was not familiar with the area
and he could not have seen the curve despite the care he
took in driving the bus, because it was dark and there was no
sign on the road. He said that he saw the curve when he was
already within 15 to 30 meters of it. He allegedly slowed down
to 30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day,
November 3, 1984. On the basis of their finding they filed a
criminal complaint against the driver, Porfirio Cabil. The case
was later filed with the Lingayen Regional Trial Court.
Petitioners Fabre paid Jesus Escano P1,500.00 for the damage
to the latter's fence. On the basis of Escano's affidavit of
desistance the case against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case
in the RTC of Makati, Metro Manila. As a result of the accident,
she is now suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial she described
the operations she underwent and adduced evidence
regarding the cost of her treatment and therapy. Immediately
after the accident, she was taken to the Nazareth Hospital in
Baay, Lingayen. As this hospital was not adequately equipped,
she was transferred to the Sto. Nio Hospital, also in the town
of Ba-ay, where she was given sedatives. An x-ray was taken
and the damage to her spine was determined to be too severe
to be treated there. She was therefore brought to Manila, first
to the Philippine General Hospital and later to the Makati
Medical Center where she underwent an operation to correct
the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was
properly checked for travel to a long distance trip and that the
driver was properly screened and tested before being
admitted for employment. Indeed, all the evidence presented
have shown the negligent act of the defendants which
ultimately resulted to the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian
Fellowship, Inc. and Ms. Amyline Antonio were the only ones
who adduced evidence in support of their claim for damages,
the Court is therefore not in a position to award damages to
the other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders
judgment against defendants Mr. & Mrs. Engracio Fabre, Jr.
and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of
the Civil Code of the Philippines and said defendants are
ordered to pay jointly and severally to the plaintiffs the
following amount:

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of
earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorney's fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court
with respect to Amyline Antonio but dismissed it with respect
to the other plaintiffs on the ground that they failed to prove
their respective claims. The Court of Appeals modified the
award of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorney's fees; and
6) Costs of suit.
The Court of Appeals sustained the trial court's finding that
petitioner Cabil failed to exercise due care and precaution in
the operation of his vehicle considering the time and the place
of the accident. The Court of Appeals held that the Fabres
were themselves presumptively negligent. Hence, this
petition. Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE
INJURIES SUFFERED BY PRIVATE RESPONDENTS.
III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN
THE POSITIVE, UP TO WHAT EXTENT.
Petitioners challenge the propriety of the award of
compensatory damages in the amount of P600,000.00. It is
insisted that, on the assumption that petitioners are liable an
award of P600,000.00 is unconscionable and highly
speculative. Amyline Antonio testified that she was a casual
employee of a company called "Suaco," earning P1,650.00 a
month, and a dealer of Avon products, earning an average of
P1,000.00 monthly. Petitioners contend that as casual
employees do not have security of tenure, the award of
P600,000.00, considering Amyline Antonio's earnings, is
without factual basis as there is no assurance that she would
be regularly earning these amounts.
With the exception of the award of damages, the petition is
devoid of merit.

First, it is unnecessary for our purpose to determine whether

to decide this case on the theory that petitioners are liable for
breach of contract of carriage or culpa contractual or on the
theory of quasi delict or culpa aquiliana as both the Regional
Trial Court and the Court of Appeals held, for although the
relation of passenger and carrier is "contractual both in origin
and nature," nevertheless "the act that breaks the contract
may be also a tort." 2 In either case, the question is whether
the bus driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his
employer, the Fabres, who owned the bus, failed to exercise
the diligence of a good father of the family in the selection
and supervision of their employee is fully supported by the
evidence on record. These factual findings of the two courts
we regard as final and conclusive, supported as they are by
the evidence. Indeed, it was admitted by Cabil that on the
night in question, it was raining, and as a consequence, the
road was slippery, and it was dark. He averred these facts to
justify his failure to see that there lay a sharp curve ahead.
However, it is undisputed that Cabil drove his bus at the
speed of 50 kilometers per hour and only slowed down when
he noticed the curve some 15 to 30 meters ahead. 3 By then it
was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabil's
first one outside of Manila, Cabil should have driven his
vehicle at a moderate speed. There is testimony 4 that the
vehicles passing on that portion of the road should only be
running 20 kilometers per hour, so that at 50 kilometers per
hour, Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining and
the road was slippery, that it was dark, that he drove his bus
at 50 kilometers an hour when even on a good day the normal
speed was only 20 kilometers an hour, and that he was
unfamiliar with the terrain, Cabil was grossly negligent and
should be held liable for the injuries suffered by private
respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his
negligence gave rise to the presumption that his employers,
the Fabres, were themselves negligent in the selection and
supervisions of their employee.
Due diligence in selection of employees is not satisfied by
finding that the applicant possessed a professional driver's
license. The employer should also examine the applicant for
his qualifications, experience and record of service. 5 Due
diligence in supervision, on the other hand, requires the
formulation of rules and regulations for the guidance of
employees and issuance of proper instructions as well as
actual implementation and monitoring of consistent
compliance with the rules. 6
In the case at bar, the Fabres, in allowing Cabil to drive the
bus to La Union, apparently did not consider the fact that
Cabil had been driving for school children only, from their
homes to the St. Scholastica's College in Metro Manila. 7 They
had hired him only after a two-week apprenticeship. They had
hired him only after a two-week apprenticeship. They had
tested him for certain matters, such as whether he could
remember the names of the children he would be taking to
school, which were irrelevant to his qualification to drive on a
long distance travel, especially considering that the trip to La
Union was his first. The existence of hiring procedures and
supervisory policies cannot be casually invoked to overturn
the presumption of negligence on the part of an employer. 8

Petitioners argue that they are not liable because (1) an

earlier departure (made impossible by the congregation's
delayed meeting) could have a averted the mishap and (2)
under the contract, the WWCF was directly responsible for the
conduct of the trip. Neither of these contentions hold water.
The hour of departure had not been fixed. Even if it had been,
the delay did not bear directly on the cause of the accident.
With respect to the second contention, it was held in an early
case that:
[A] person who hires a public automobile and gives the driver
directions as to the place to which he wishes to be conveyed,
but exercises no other control over the conduct of the driver,
is not responsible for acts of negligence of the latter or
prevented from recovering for injuries suffered from a collision
between the automobile and a train, caused by the
negligence or the automobile driver. 9
As already stated, this case actually involves a contract of
carriage. Petitioners, the Fabres, did not have to be engaged
in the business of public transportation for the provisions of
the Civil Code on common carriers to apply to them. As this
Court has held: 10
Art. 1732. Common carriers are persons, corporations, firms
or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air for compensation, offering their services to the public.
The above article makes no distinction between one whose
principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as "a sideline"). Article
1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community
or population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained
from making such distinctions.
As common carriers, the Fabres were found to exercise
"extraordinary diligence" for the safe transportation of the
passengers to their destination. This duty of care is not
excused by proof that they exercise the diligence of a good
father of the family in the selection and supervision of their
employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the
former's employees although such employees may have
acted beyond the scope of their authority or in violation of
the orders of the common carriers.
This liability of the common carriers does not cease upon
proof that they exercised all the diligence of a good father
of a family in the selection and supervision of their
employees.
The same circumstances detailed above, supporting the
finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180 for quasi
delict, fully justify findings them guilty of breach of contract of
carriage under Arts. 1733, 1755 and 1759 of the Civil Code.

Secondly, we sustain the award of damages in favor of

Amyline Antonio. However, we think the Court of Appeals
erred in increasing the amount of compensatory damages
because private respondents did not question this award as
inadequate. 11 To the contrary, the award of P500,000.00 for
compensatory damages which the Regional Trial Court made
is reasonable considering the contingent nature of her income
as a casual employee of a company and as distributor of
beauty products and the fact that the possibility that she
might be able to work again has not been foreclosed. In fact
she testified that one of her previous employers had
expressed willingness to employ her again.
With respect to the other awards, while the decisions of the
trial court and the Court of Appeals do not sufficiently indicate
the factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this
case. Viewed as an action for quasi delict, this case falls
squarely within the purview of Art. 2219(2) providing for the
payment of moral damages in cases of quasi delict. On the
theory that petitioners are liable for breach of contract of
carriage, the award of moral damages is authorized by Art.
1764, in relation to Art. 2220, since Cabil's gross negligence
amounted to bad faith. 12 Amyline Antonio's testimony, as well
as the testimonies of her father and copassengers, fully
establish the physical suffering and mental anguish she
endured as a result of the injuries caused by petitioners'
negligence.
The award of exemplary damages and attorney's fees was
also properly made. However, for the same reason that it was
error for the appellate court to increase the award of
compensatory damages, we hold that it was also error for it to
increase the award of moral damages and reduce the award
of attorney's fees, inasmuch as private respondents, in whose
favor the awards were made, have not appealed. 13
As above stated, the decision of the Court of Appeals can be
sustained either on the theory of quasi delict or on that of
breach of contract. The question is whether, as the two courts
below held, petitioners, who are the owners and driver of the
bus, may be made to respond jointly and severally to private
respondent. We hold that they may be. In Dangwa
Trans. Co. Inc. v. Court of Appeals, 14 on facts similar to those
in this case, this Court held the bus company and the driver
jointly and severally liable for damages for injuries suffered by
a passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in
order to let off passengers when a fellow passenger ran
amuck, as a result of which the passengers jumped out of the
speeding bus and suffered injuries, was held also jointly and
severally liable with the bus company to the injured
passengers.
The same rule of liability was applied in situations where the
negligence of the driver of the bus on which plaintiff was
riding concurred with the negligence of a third party who was
the driver of another vehicle, thus causing an accident.
In Anuran v. Buo, 16 Batangas Laguna Tayabas Bus
Co. v. Intermediate Appellate Court, 17 and Metro Manila
Transit Corporation v. Court of Appeals, 18 the bus company,
its driver, the operator of the other vehicle and the driver of
the vehicle were jointly and severally held liable to the injured
passenger or the latters' heirs. The basis of this allocation of
liability was explained in Viluan v. Court of Appeals, 19 thus:
Nor should it make any difference that the liability of
petitioner [bus owner] springs from contract while that of
respondents [owner and driver of other vehicle] arises

from quasi-delict. As early as 1913, we already ruled

in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury
to a passenger due to the negligence of the driver of the
bus on which he was riding and of the driver of another
vehicle, the drivers as well as the owners of the two
vehicles are jointly and severally liable for damages. Some
members of the Court, though, are of the view that under
the circumstances they are liable on quasi-delict. 20
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of
Appeals 21 this Court exonerated the jeepney driver from
liability to the injured passengers and their families while
holding the owners of the jeepney jointly and severally liable,
but that is because that case was expressly tried and decided
exclusively on the theory of culpa contractual. As this Court
there explained:
The trial court was therefore right in finding that Manalo (the
driver) and spouses Mangune and Carreon (the jeepney
owners) were negligent. However, its ruling that spouses
Mangune and Carreon are jointly and severally liable with
Manalo is erroneous. The driver cannot be held jointly and
severally liable with carrier in case of breach of the contract of
carriage. The rationale behind this is readily discernible.
Firstly, the contract of carriage is between the carrier is
exclusively responsible therefore to the passenger, even if
such breach be due to the negligence of his driver (see Viluan
v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29,
1966, 16 SCRA 742). 22
As in the case of BLTB, private respondents in this case and
her coplaintiffs did not stake out their claim against the carrier
and the driver exclusively on one theory, much less on that of
breach of contract alone. After all, it was permitted for them
to allege alternative causes of action and join as many parties
as may be liable on such causes of action 23 so long as private
respondent and her coplaintiffs do not recover twice for the
same injury. What is clear from the cases is the intent of the
plaintiff there to recover from both the carrier and the driver,
thus, justifying the holding that the carrier and the driver were
jointly and severally liable because their separate and distinct
acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with MODIFICATION as to award of damages.
Petitioners are ORDERED to PAY jointly and severally the
private respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning
capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;

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.

5) 25% of the recoverable amount as attorney's fees; and

6) costs of suit.
SO ORDERED.
G.R. No. L-47822 December 22, 1988

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 orin the containers; and
(5) Order or act of competent public authority.

It is important to point out that the above list of causes of

loss, destruction or deterioration which exempt the common
carrier for responsibility therefor, is a closed list. Causes
falling outside the foregoing list, even if they appear to
constitute a species of force majeure fall within the scope of
Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3,
4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed
to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as
required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note
firstly that the specific cause alleged in the instant case the
hijacking of the carrier's truck does not fall within any of
the five (5) categories of exempting causes listed in Article
1734. It would follow, therefore, that the hijacking of the
carrier's vehicle must be dealt with under the provisions of
Article 1735, in other words, that the private respondent as
common carrier is presumed to have been at fault or to have
acted negligently. This presumption, however, may be
overthrown by proof of extraordinary diligence on the part of
private respondent.
Petitioner insists that private respondent had not observed
extraordinary diligence in the care of petitioner's goods.
Petitioner argues that in the circumstances of this case,
private respondent should have hired a security guard
presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the
instant case, the standard of extraordinary diligence required
private respondent to retain a security guard to ride with the
truck and to engage brigands in a firelight at the risk of his
own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific
requirements of the duty of extraordinary diligence in the
vigilance over the goods carried in the specific context of
hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the
vigilance over goods is, under Article 1733, given additional
specification not only by Articles 1734 and 1735 but also by
Article 1745, numbers 4, 5 and 6, Article 1745 provides in
relevant part:
Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public
policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for
the acts or omissions of his or its employees;
(6) that the common carrier's liability for acts committed
by thieves, or of robbers who donot act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and
(7) that the common carrier shall not responsible for the
loss, destruction or deterioration of goods on account of
the defective condition of the car vehicle, ship, airplane
or other equipment used in the contract of carriage.
(Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held

responsible and will not be allowed to divest or to diminish
such responsibility even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted
"with grave or irresistible threat, violence or force." We
believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck
owned by private respondent which carried petitioner's cargo.
The record shows that an information for robbery in band was
filed in the Court of First Instance of Tarlac, Branch 2, in
Criminal Case No. 198 entitled "People of the Philippines v.
Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar
Oria and one John Doe." There, the accused were charged
with willfully and unlawfully taking and carrying away with
them the second truck, driven by Manuel Estrada and loaded
with the 600 cartons of Liberty filled milk destined for delivery
at petitioner's store in Urdaneta, Pangasinan. The decision of
the trial court shows that the accused acted with grave, if not
irresistible, threat, violence or force. 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. Plaintif 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.

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

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

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. 1378, 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 del berations
conducted in the House of Representatives on the Local
Government Code of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.

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. 157917

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,

vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L.
ZARATE, NATIONAL RAILWAYS, and the COURT OF
APPEALS Respondents.
DECISION

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

August 29, 2012

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 airconditioning 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) 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;

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

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

(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

(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.

On December 3, 1999, the RTC rendered its

decision,3 disposing:

The trial court erred in awarding excessive damages and

attorneys fees.

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:

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

The petition has no merit.

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 P59,502.76; Moral Damages is
reduced to P 2,500,000.00; and the award for Attorneys Fees
is Deleted.

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.

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

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

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,9primarily because he only caters to some specific or
privileged individuals, and his operation is neither open to the
indefinite public nor for public use, the exact nature of the
operation of a school bus service has not been finally settled.
This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to
transport or convey goods or persons from one place to
another, gratuitously or for hire. The carrier is classified either
as a private/special carrier or as a common/public carrier.10 A
private carrier is one who, without making the activity a
vocation, or without holding himself or itself out to the public
as ready to act for all who may desire his or its services,
undertakes, by special agreement in a particular instance
only, to transport goods or persons from one place to another
either gratuitously or for hire.11The 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.12Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public
Service Act,13 and other special laws relating to transportation.
A common carrier is required to observe extraordinary
diligence, and is presumed to be at fault or to have acted
negligently in case of the loss of the effects of passengers, or
the death or injuries to passengers.14

In relation to common carriers, the Court defined public use in

the following terms in United States v. Tan Piaco, 15viz:
"Public use" is the same as "use by the public". The essential
feature of the public use is not confined to privileged
individuals, but is open to the indefinite public. It is this
indefinite or unrestricted quality that gives it its public
character. In determining whether a use is public, we must
look not only to the character of the business to be done, but
also to the proposed mode of doing it. If the use is merely
optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of
the jurisdiction of the public utility commission. There must
be, in general, a right which the law compels the owner to
give to the general public. It is not enough that the general
prosperity of the public is promoted. Public use is not
synonymous with public interest. The true criterion by which
to judge the character of the use is whether the public may
enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that
Article 1732 of the Civil Code avoided any distinction between
a person or an enterprise offering transportation on a regular
or an isolated basis; and has not distinguished a carrier
offering his services to the general public, that is, the general
community or population, from one offering his services only
to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in
Article 1732 of the Civil Code coincides neatly with the notion
of public service under the Public Service Act, which
supplements the law on common carriers found in the Civil
Code. Public service, according to Section 13, paragraph (b) of
the Public Service Act, includes:
x x x every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited 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."38Accordingly, 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.

G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES
AND KYOSEI KISEN KABUSHIKI KAISHA,respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private

respondents.

BELLOSILLO, J.:
Does a charter-party 1 between a shipowner and a charterer
transform a common carrier into a private one as to negate
the civil law presumption of negligence in case of loss or
damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi
International Corporation (MITSUBISHI) of New York, U.S.A.,
9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the
latter shipped in bulk on 16 June 1974 aboard the cargo
vessel M/V "Sun Plum" owned by private respondent Kyosei
Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to
Poro Point, San Fernando, La Union, Philippines, as evidenced
by Bill of Lading No. KP-1 signed by the master of the vessel
and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party
on the vessel M/V "Sun Plum" pursuant to the Uniform General
Charter 2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo,
Japan. 3 Riders to the aforesaid charter-party starting from par.
16 to 40 were attached to the pre-printed agreement.
Addenda Nos. 1, 2, 3 and 4 to the charter-party were also
subsequently entered into on the 18th, 20th, 21st and 27th of
May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her
holds 4 were all presumably inspected by the charterer's
representative and found fit to take a load of urea in bulk
pursuant to par. 16 of the charter-party which reads:
16. . . . At loading port, notice of readiness to be
accomplished by certificate from National Cargo Bureau
inspector or substitute appointed by charterers for his
account certifying the vessel's readiness to receive cargo
spaces. The vessel's hold to be properly swept, cleaned and
dried at the vessel's expense and the vessel to be
presented clean for use in bulk to the satisfaction of the
inspector before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired
by and under the supervision of the shipper, the steel hatches
were closed with heavy iron lids, covered with three (3) layers
of tarpaulin, then tied with steel bonds. The hatches remained
closed and tightly sealed throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974,
the steel pontoon hatches were opened with the use of the
vessel's boom. Petitioner unloaded the cargo from the holds
into its steelbodied dump trucks which were parked alongside
the berth, using metal scoops attached to the ship, pursuant
to the terms and conditions of the charter-partly (which
provided for an F.I.O.S. clause). 6 The hatches remained open
throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was
covered with tarpaulin before it was transported to the
consignee's warehouse located some fifty (50) meters from
the wharf. Midway to the warehouse, the trucks were made to
pass through a weighing scale where they were individually
weighed for the purpose of ascertaining the net weight of the

cargo. The port area was windy, certain portions of the route
to the warehouse were sandy and the weather was variable,
raining occasionally while the discharge was in progress. 8 The
petitioner's warehouse was made of corrugated galvanized
iron (GI) sheets, with an opening at the front where the dump
trucks entered and unloaded the fertilizer on the warehouse
floor. Tarpaulins and GI sheets were placed in-between and
alongside the trucks to contain spillages of the ferilizer. 9
It took eleven (11) days for PPI to unload the cargo, from 5
July to 18 July 1974 (except July 12th, 14th and 18th).10 A
private marine and cargo surveyor, Cargo Superintendents
Company Inc. (CSCI), was hired by PPI to determine the
"outturn" of the cargo shipped, by taking draft readings of the
vessel prior to and after discharge. 11 The survey report
submitted by CSCI to the consignee (PPI) dated 19 July 1974
revealed a shortage in the cargo of 106.726 M/T and that a
portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a
Certificate of Shortage/Damaged Cargo dated 18 July 1974
prepared by PPI which showed that the cargo delivered was
indeed short of 94.839 M/T and about 23 M/T were rendered
unfit for commerce, having been polluted with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December
1974 to Soriamont Steamship Agencies (SSA), the resident
agent of the carrier, KKKK, for P245,969.31 representing the
cost of the alleged shortage in the goods shipped and the
diminution in value of that portion said to have been
contaminated with dirt. 13
Respondent SSA explained that they were not able to respond
to the consignee's claim for payment because, according to
them, what they received was just a request for shortlanded
certificate and not a formal claim, and that this "request" was
denied by them because they "had nothing to do with the
discharge of the shipment." 14Hence, on 18 July 1975, PPI filed
an action for damages with the Court of First Instance of
Manila. The defendant carrier argued that the strict public
policy governing common carriers does not apply to them
because they have become private carriers by reason of the
provisions of the charter-party. The court a quo however
sustained the claim of the plaintiff against the defendant
carrier for the value of the goods lost or damaged when it
ruled thus: 15
. . . Prescinding from the provision of the law that a common
carrier is presumed negligent in case of loss or damage of
the goods it contracts to transport, all that a shipper has to
do in a suit to recover for loss or damage is to show receipt
by the carrier of the goods and to delivery by it of less than
what it received. After that, the burden of proving that the
loss or damage was due to any of the causes which exempt
him from liability is shipted to the carrier, common or
private he may be. Even if the provisions of the charterparty aforequoted are deemed valid, and the defendants
considered private carriers, it was still incumbent upon
them to prove that the shortage or contamination sustained
by the cargo is attributable to the fault or negligence on the
part of the shipper or consignee in the loading, stowing,
trimming and discharge of the cargo. This they failed to do.
By this omission, coupled with their failure to destroy the
presumption of negligence against them, the defendants
are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower
court and absolved the carrier from liability for the value of
the cargo that was lost or damaged. 16 Relying on the 1968

case of Home Insurance Co. v. American Steamship Agencies,

Inc., 17 the appellate court ruled that the cargo vessel M/V
"Sun Plum" owned by private respondent KKKK was a private
carrier and not a common carrier by reason of the time
charterer-party. Accordingly, the Civil Code provisions on
common carriers which set forth a presumption of negligence
do not find application in the case at bar. Thus
. . . In the absence of such presumption, it was incumbent
upon the plaintif-appellee to adduce sufficient evidence to
prove the negligence of the defendant carrier as alleged in
its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause
of action, fails to show in a satisfactory manner the facts
upon which he bases his claim, the defendant is under no
obligation to prove his exception or defense
(Moran, Commentaries on the Rules of Court, Volume 6, p.
2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintif-appellee dismally
failed to prove the basis of its cause of action, i.e. the
alleged negligence of defendant carrier. It appears that the
plaintiff was under the impression that it did not have to
establish defendant's negligence. Be that as it may,
contrary to the trial court's finding, the record of the instant
case discloses ample evidence showing that defendant
carrier was not negligent in performing its
obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review
assailing the decision of the Court of Appeals. Petitioner
theorizes that the Home Insurance case has no bearing on the
present controversy because the issue raised therein is the
validity of a stipulation in the charter-party delimiting the
liability of the shipowner for loss or damage to goods cause by
want of due deligence on its part or that of its manager to
make the vessel seaworthy in all respects, and not whether
the presumption of negligence provided under the Civil Code
applies only to common carriers and not to private
carriers. 19 Petitioner further argues that since the possession
and control of the vessel remain with the shipowner, absent
any stipulation to the contrary, such shipowner should made
liable for the negligence of the captain and crew. In fine, PPI
faults the appellate court in not applying the presumption of
negligence against respondent carrier, and instead shifting
the onus probandi on the shipper to show want of due
deligence on the part of the carrier, when he was not even at
hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a
common carrier becomes a private carrier by reason of a
charter-party; in the negative, whether the shipowner in the
instant case was able to prove that he had exercised that
degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial
decisions in commercial cases. This being so, we find it fitting
to first define important terms which are relevant to our
discussion.
A "charter-party" is defined as a contract by which an entire
ship, or some principal part thereof, is let by the owner to
another person for a specified time or use; 20 a contract of
affreightment by which the owner of a ship or other vessel lets
the whole or a part of her to a merchant or other person for
the conveyance of goods, on a particular voyage, in
consideration of the payment of freight; 21 Charter parties are
of two types: (a) contract of affreightment which involves the
use of shipping space on vessels leased by the owner in part

or as a whole, to carry goods for others; and, (b) charter by

demise or bareboat charter, by the terms of which the whole
vessel is let to the charterer with a transfer to him of its entire
command and possession and consequent control over its
navigation, including the master and the crew, who are his
servants. Contract of affreightment may either be time
charter, wherein the vessel is leased to the charterer for a
fixed period of time, or voyage charter, wherein the ship is
leased for a single voyage. 22 In both cases, the charter-party
provides for the hire of vessel only, either for a determinate
period of time or for a single or consecutive voyage, the
shipowner to supply the ship's stores, pay for the wages of the
master and the crew, and defray the expenses for the
maintenance of the ship.
Upon the other hand, the term "common or public carrier" is
defined in Art. 1732 of the Civil Code. 23 The definition extends
to carriers either by land, air or water which hold themselves
out as ready to engage in carrying goods or transporting
passengers or both for compensation as a public employment
and not as a casual occupation. The distinction between a
"common or public carrier" and a "private or special carrier"
lies in the character of the business, such that if the
undertaking is a single transaction, not a part of the general
business or occupation, although involving the carriage of
goods for a fee, the person or corporation offering such
service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common
carriers, by reason of the nature of their business, should
observe extraordinary diligence in the vigilance over the
goods they carry. 25 In the case of private carriers, however,
the exercise of ordinary diligence in the carriage of goods will
suffice. Moreover, in the case of loss, destruction or
deterioration of the goods, common carriers are presumed to
have been at fault or to have acted negligently, and the
burden of proving otherwise rests on them. 26 On the contrary,
no such presumption applies to private carriers, for whosoever
alleges damage to or deterioration of the goods carried has
the onus of proving that the cause was the negligence of the
carrier.
It is not disputed that respondent carrier, in the ordinary
course of business, operates as a common carrier,
transporting goods indiscriminately for all persons. When
petitioner chartered the vessel M/V "Sun Plum", the ship
captain, its officers and compliment were under the employ of
the shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the
duty of caring for his cargo when the charterer did not have
any control of the means in doing so. This is evident in the
present case considering that the steering of the ship, the
manning of the decks, the determination of the course of the
voyage and other technical incidents of maritime navigation
were all consigned to the officers and crew who were
screened, chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is limited
to the ship only, as in the case of a time-charter or voyagecharter. It is only when the charter includes both the vessel
and its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned. Indubitably, a
shipowner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment,
be the property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home

Insurance Co. v. American Steamship Agencies, supra, is
misplaced for the reason that the meat of the controversy
therein was the validity of a stipulation in the charter-party
exempting the shipowners from liability for loss due to the
negligence of its agent, and not the effects of a special
charter on common carriers. At any rate, the rule in the United
States that a ship chartered by a single shipper to carry
special cargo is not a common carrier, 29 does not find
application in our jurisdiction, for we have observed that the
growing concern for safety in the transportation of passengers
and /or carriage of goods by sea requires a more exacting
interpretation of admiralty laws, more particularly, the rules
governing common carriers.
We quote with approval the observations of Raoul Colinvaux,
the learned barrister-at-law 30
As a matter of principle, it is difficult to find a valid
distinction between cases in which a ship is used to convey
the goods of one and of several persons. Where the ship
herself is let to a charterer, so that he takes over the charge
and control of her, the case is different; the shipowner is not
then a carrier. But where her services only are let, the same
grounds for imposing a strict responsibility exist, whether
he is employed by one or many. The master and the crew
are in each case his servants, the freighter in each case is
usually without any representative on board the ship; the
same opportunities for fraud or collusion occur; and the
same difficulty in discovering the truth as to what has taken
place arises . . .
In an action for recovery of damages against a common
carrier on the goods shipped, the shipper or consignee should
first prove the fact of shipment and its consequent loss or
damage while the same was in the possession, actual or
constructive, of the carrier. Thereafter, the burden of proof
shifts to respondent to prove that he has exercised
extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its
liability. 31
To our mind, respondent carrier has sufficiently overcome, by
clear and convincing proof, the prima faciepresumption of
negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his
deposition taken on 19 April 1977 before the Philippine Consul
and Legal Attache in the Philippine Embassy in Tokyo, Japan,
testified that before the fertilizer was loaded, the four (4)
hatches of the vessel were cleaned, dried and fumigated.
After completing the loading of the cargo in bulk in the ship's
holds, the steel pontoon hatches were closed and sealed with
iron lids, then covered with three (3) layers of serviceable
tarpaulins which were tied with steel bonds. The hatches
remained close and tightly sealed while the ship was in transit
as the weight of the steel covers made it impossible for a
person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel
was in good condition, foreclosing the possibility of spillage of
the cargo into the sea or seepage of water inside the hull of
the vessel. 33 When M/V "Sun Plum" docked at its berthing
place, representatives of the consignee boarded, and in the
presence of a representative of the shipowner, the foreman,
the stevedores, and a cargo surveyor representing CSCI,
opened the hatches and inspected the condition of the hull of
the vessel. The stevedores unloaded the cargo under the

watchful eyes of the shipmates who were overseeing the

whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the
respondent carrier has been efficaciously overcome by the
showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was confirmed by
respondent appellate court thus
. . . Be that as it may, contrary to the trial court's
finding, the record of the instant case discloses ample
evidence showing that defendant carrier was not negligent
in performing its obligations. Particularly, the following
testimonies of plaintiff-appellee's own witnesses clearly
show absence of negligence by the defendant carrier; that
the hull of the vessel at the time of the discharge of the
cargo was sealed and nobody could open the same except
in the presence of the owner of the cargo and the
representatives of the vessel (TSN, 20 July 1977, p. 14); that
the cover of the hatches was made of steel and it was
overlaid with tarpaulins, three layers of tarpaulins and
therefore their contents were protected from the weather
(TSN, 5 April 1978, p. 24); and, that to open these hatches,
the seals would have to be broken, all the seals were found
to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis
supplied).
The period during which private respondent was to observe
the degree of diligence required of it as a public carrier began
from the time the cargo was unconditionally placed in its
charge after the vessel's holds were duly inspected and
passed scrutiny by the shipper, up to and until the vessel
reached its destination and its hull was reexamined by the
consignee, but prior to unloading. This is clear from the
limitation clause agreed upon by the parties in the Addendum
to the standard "GENCON" time charter-party which provided
for an F.I.O.S., meaning, that the loading, stowing, trimming
and discharge of the cargo was to be done by the charterer,
free from all risk and expense to the carrier. 35 Moreover, a
shipowner is liable for damage to the cargo resulting from
improper stowage only when the stowing is done by
stevedores employed by him, and therefore under his control
and supervision, not when the same is done by the consignee
or stevedores under the employ of the latter. 36
Article 1734 of the New Civil Code provides that common
carriers are not responsible for the loss, destruction or
deterioration of the goods if caused by the charterer of the
goods or defects in the packaging or in the containers. The
Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the
transportation by reason of fortuitous event, force majeure, or
the inherent defect of the goods, shall be for the account and
risk of the shipper, and that proof of these accidents is
incumbent upon the carrier. 37 The carrier, nonetheless, shall
be liable for the loss and damage resulting from the preceding
causes if it is proved, as against him, that they arose through
his negligence or by reason of his having failed to take the
precautions which usage has established among careful
persons. 38
Respondent carrier presented a witness who testified on the
characteristics of the fertilizer shipped and the expected risks
of bulk shipping. Mr. Estanislao Chupungco, a chemical
engineer working with Atlas Fertilizer, described Urea as a
chemical compound consisting mostly of ammonia and carbon
monoxide compounds which are used as fertilizer. Urea also
contains 46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia do not

normally evaporate even on a long voyage, provided that the

temperature inside the hull does not exceed eighty (80)
degrees centigrade. Mr. Chupungco further added that in
unloading fertilizer in bulk with the use of a clamped shell,
losses due to spillage during such operation amounting to one
percent (1%) against the bill of lading is deemed "normal" or
"tolerable." The primary cause of these spillages is the
clamped shell which does not seal very tightly. Also, the wind
tends to blow away some of the materials during the
unloading process.

estimate made by them after the fertilizer was discharged

from the vessel and segregated from the rest of the cargo.

The dissipation of quantities of fertilizer, or its daterioration in

value, is caused either by an extremely high temperature in
its place of storage, or when it comes in contact with water.
When Urea is drenched in water, either fresh or saline, some
of its particles dissolve. But the salvaged portion which is in
liquid form still remains potent and usable although no longer
saleable in its original market value.

Indeed, we agree with respondent carrier that bulk shipment

of highly soluble goods like fertilizer carries with it the risk of
loss or damage. More so, with a variable weather condition
prevalent during its unloading, as was the case at bar. This is
a risk the shipper or the owner of the goods has to face.
Clearly, respondent carrier has sufficiently proved the
inherent character of the goods which makes it highly
vulnerable to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the other
hand, no proof was adduced by the petitioner showing that
the carrier was remise in the exercise of due diligence in order
to minimize the loss or damage to the goods it carried.

The probability of the cargo being damaged or getting mixed

or contaminated with foreign particles was made greater by
the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the
grimy condition of the various pieces of equipment used in
transporting and hauling it.
The evidence of respondent carrier also showed that it was
highly improbable for sea water to seep into the vessel's holds
during the voyage since the hull of the vessel was in good
condition and her hatches were tightly closed and firmly
sealed, making the M/V "Sun Plum" in all respects seaworthy
to carry the cargo she was chartered for. If there was loss or
contamination of the cargo, it was more likely to have
occurred while the same was being transported from the ship
to the dump trucks and finally to the consignee's warehouse.
This may be gleaned from the testimony of the marine and
cargo surveyor of CSCI who supervised the unloading. He
explained that the 18 M/T of alleged "bar order cargo" as
contained in their report to PPI was just an approximation or

The Court notes that it was in the month of July when the
vessel arrived port and unloaded her cargo. It rained from
time to time at the harbor area while the cargo was being
discharged according to the supply officer of PPI, who also
testified that it was windy at the waterfront and along the
shoreline where the dump trucks passed enroute to the
consignee's warehouse.

WHEREFORE, the petition is DISMISSED. The assailed decision

of the Court of Appeals, which reversed the trial court,
is AFFIRMED. Consequently, Civil Case No. 98623 of the then
Court of the First Instance, now Regional Trial Court, of Manila
should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.