G.R. No.

80447 January 31, 1989

BALIWAG TRANSIT, INC., petitioner,

vs.
HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA
LOPEZ and GEORGE L. CAILIPAN, respondents.

Sta. Maria & Associates for petitioner.

Punzalan and Associates Law Office for respondents.

MELENCIO-HERRERA, J.:

On 10 April 1985 a Complaint for damages arising from breach of contract of carriage
was filed by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez,
and their son George, of legal age, against petitioner Baliwag Transit (Baliwag, for
brevity). The Complaint alleged that George, who was a paying passenger on a Baliwag
bus on 17 December 1984, suffered multiple serious physical injuries when he was
thrown off said bus driven in a careless and negligent manner by Leonardo Cruz, the
authorized bus driver, along Barangay Patubig, Marilao, Bulacan. As a result, he was
confined in the hospital for treatment, incurring medical expenses, which were borne by
his parents, the respondent Spouses, in the sum of about P200,000.00 plus other
incidental expenses of about P10,000.00.

On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries
sustained by George was solely attributable to his own voluntary act in that, without
warning and provocation, he suddenly stood up from his seat and headed for the door
of the bus as if in a daze, opened it and jumped off while said bus was in motion, in
spite of the protestations by the driver and without the knowledge of the conductor.

Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety
Company, Inc., on its third-party liability insurance in the amount of P50,000.00. In its
Answer, Fortune Insurance claimed limited liability, the coverage being subject to a
Schedule of Indemnities forming part of the insurance policy.

On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and

Baliwag each filed Motions to Dismiss on the ground that George, in consideration of
the sum of P8,020.50 had executed a "Release of Claims" dated 16 May 1985. These
Motions were denied by the Trial Court in an Order dated 13 January 1986 as they were
filed beyond the time for pleading and after the Answer were already filed.

On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was
granted by the Trial Court. The Amended Answer incorporated the affirmative defense
in the Motion to Dismiss to the effect that on 16 May 1985, George bad been paid all his
claims for damages arising from the incident subject matter of the complaint when he
executed the following "Release of Claims":

For and in consideration of the payment to me/us of the sum of EIGHT

THOUSAND TWENTY and 50/100 PESOS ONLY (P8,020.50), the receipt
of which is hereby acknowledged, I/we, being of lawful age, do hereby
release, acquit and forever discharge Fortune Insurance and/or Baliwag
transit, Inc. his/her heirs, executors and assigns, from any and all liability
now accrued or hereafter to accrue on account of any and all claims or
causes of action which I/we now or may here after have for personal
injuries, damage to property, loss of services, medical expenses, losses or
damages of any and every kind or nature whatsoever, now known or what
may hereafter develop by me/us sustained or received on or about 17th
day of December, 1984 through Reckless Imprudence Resulting to
Physical Injuries, and I/we hereby declare that I/we fully understand the
terms of this settlement and voluntarily accept said sum for the purpose of
making a full and final compromise adjustment and settlement of the
injuries and damages, expenses and inconvenience above mentioned.
(Rollo, p. 11)

During the preliminary hearing on the aforementioned affirmative defense, Baliwag

waived the presentation of testimonial evidence and instead offered as its Exhibit "1" the
"Release of Claims" signed by George and witnessed by his brother Benjamin L.
Cailipan, a licensed engineer.

By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr.

testified that be is the father of George, who at the time of the incident was a student,
living with his parents and totally dependent on them for their support; that the expenses
for his hospitalization were shouldered by his parents; and that they had not signed the
"Release of Claims."

In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1
dismissed the Complaint and Third-party Complaint, ruling that since the contract of
carriage is between Baliwag and George L. Cailipan, the latter, who is of legal age, had
the exclusive right to execute the Release of Claims despite the fact that he is still a
student and dependent on his parents for support. Consequently, the execution by
George of the Release of Claims discharges Baliwag and Fortune Insurance.

Aggrieved, the Spouses appealed to respondent Court of Appeals.

On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the
appealed Order and holding that the "Release of Claims" cannot operate as a valid
ground for the dismissal of the case because it does not have the conformity of all the
parties, particularly George's parents, who have a substantial interest in the case as
they stand to be prejudiced by the judgment because they spent a sizeable amount for
the medical bills of their son; that the Release of Claims was secured by Fortune
Insurance for the consideration of P8,020.50 as the full and final settlement of its liability
under the insurance policy and not for the purpose of releasing Baliwag from its liability
as a carrier in this suit for breach of contract. The Appellate Court also ordered the
remand of the case to the lower Court for trial on the merits and for George to return the
amount of P8,020.50 to Fortune Insurance.

Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court
judgment.

The issue brought to the fore is the legal effect of the Release of Claims executed by
George during the pendency of this case.

We hold that since the suit is one for breach of contract of carriage, the Release of
Claims executed by him, as the injured party, discharging Fortune Insurance and
Baliwag from any and all liability is valid. He was then of legal age, a graduating student
of Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37
in relation to Article 402, Civil Code). Thus, he could sue and be sued even without the
assistance of his parents.

Significantly, the contract of carriage was actually between George, as the paying
passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound to
carry its passengers safely as far as human care and foresight could provide, and is
liable for injuries to them through the negligence or wilful acts of its employees (Articles
1755 and 1759, Civil Code). Thus, George had the right to be safely brought to his
destination and Baliwag had the correlative obligation to do so. Since a contract may be
violated only by the parties thereto, as against each other, in an action upon that
contract, the real parties in interest, either as plaintiff or as defendant, must be parties to
said contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234,
December 14, 1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a
legal right while a real party-in-interest-defendant is one who has a correlative legal
obligation whose act or omission violates the legal right of the former (Lee vs. Romillo,
Jr., G.R. No. 60973, May 28, 1988). In the absence of any contract of carriage between
Baliwag and George's parents, the latter are not real parties-in-interest in an action for
breach of that contract.

The general rule of the common law is that every action must be brought
in the name of the party whose legal right has been invaded or infringed.
15 Enc. P1. & Pr. p. 484. "For the immediate wrong and damage the
person injured is the only one who can maintain the action." Id. p. 578.
The person who sustains an injury is the person to bring an action for the
injury against the wrongdoer." Dicey parties to Actions, 347. (Cited in
Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).

There is no question regarding the genuineness and due execution of the Release of
Claims. It is a duly notarized public document. It clearly stipulates that the consideration
of P8,020.50 received by George was "to release and forever discharge Fortune
Insurance and/or Baliwag from any and all liabilities now accrued or to accrue on
account of any and all claims or causes of action ... for personal injuries, damage to
property, loss of services, medical expenses, losses or damages of any and every kind
or nature whatsoever, sustained by him on 17 December 1984 thru Reckless
Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent
Appellate Court that the "Release of Claims" was intended only as the full and final
settlement of a third-party liability for bodily injury claim and not for the purpose of
releasing Baliwag from its liability, if any, in a breach of a contract of carriage, has to be
rejected for being contrary to the very terms thereof. If the terms of a contract are clear
and leave no doubt upon the intention of the contracting parties, the literal meaning of
its stipulations shall control (Article 1370, Civil Code). The phraseology "any and all
claims or causes of action" is broad enough to include all damages that may accrue to
the injured party arising from the unfortunate accident.

The Release of Claims had the effect of a compromise agreement since it was entered
into for the purpose of making a full and final compromise adjustment and settlement of
the cause of action involved. A compromise is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to one already
commenced (Article 2028, Civil Code). The Release of Claims executed by the injured
party himself wrote finish to this litigation.

WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is

SET ASIDE, the Decision of the Regional Trial Court of Bulacan, Branch 20, is
REINSTATED, and the Complaint and Third-Party Complaint are hereby ordered
DISMISSED. No costs.

SO ORDERED.

Paras, Padilla, Sarmiento and Regalado, JJ., concur.

[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. LOPEZ, JULIUS CAESAR
GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO
MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA
CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON,
ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and
BERNADETTE FERRER, respondents.

DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appealsi[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. Scholasticas College
in Malate, Manila.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc.
(WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults
Ministry from Manila to La Union and back in consideration of which private respondent paid
petitioners the amount of P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the afternoon.
However, as several members of the party were late, the bus did not leave the Tropical Hut at the
corner of Ortigas Avenue and EDSA until 8:00 oclock in the evening. Petitioner Porfirio Cabil
drove the minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his
first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen,
Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway,
running on a south to east direction, which he described as siete. The road was slippery because
it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid
to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and
rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a
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 off after being unscrewed. It took three
persons to safely remove her from this position. She was in great pain and could not move.

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was
not familiar with the area and he could not have seen the curve despite the care he took in driving
the bus, because it was dark and there was no sign on the road. He said that he saw the curve
when he was already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per
hour, but it was too late.
The Lingayen police 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 latters fence. On the basis of Escanos affidavit of desistance the case against
petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial she described the operations she underwent and
adduced evidence regarding the cost of her treatment and therapy. Immediately after the
accident, she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not
adequately equipped, she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay,
where she was given sedatives. An x-ray was taken and the damage to her spine was determined
to be too severe to be treated there. She was therefore brought to Manila, first to the Philippine
General Hospital and later to the Makati Medical Center where she underwent an operation to
correct the dislocation of her spine.

In its decision dated April 17, 1989, 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 attorneys 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 attorneys fees; and

6) Costs of suit.

The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to exercise due
care and precaution in the operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were themselves presumptively negligent.
Hence, this petition. Petitioners raise the following issues:

I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES

SUFFERED BY PRIVATE RESPONDENTS.

III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP

TO WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable, an award of
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a
casual employee of a company called Suaco, earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees
do not have security of tenure, the award of P600,000.00, considering Amyline Antonios
earnings, is without factual basis as there is no assurance that she would be regularly earning
these amounts.

With the exception of the award of damages, the petition is devoid of merit.

First, it is unnecessary for our purpose to determine whether to decide this case on the theory that
petitioners are liable for breach of contract of carriage or culpa contractual or on the theory of
quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held,
for although the relation of passenger and carrier is contractual both in origin and nature,
nevertheless the act that breaks the contract may be also a tort.ii[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.iii[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 Cabils first one outside of Manila, Cabil should have
driven his vehicle at a moderate speed. There is testimonyiv[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 supervision of
their employee.

Due diligence in selection of employees is not satisfied by finding that the applicant possessed a
professional drivers license. The employer should also examine the applicant for his
qualifications, experience and record of service.v[5] Due diligence in supervision, on the other
hand, requires the formulation of rules and regulations for the guidance of employees and the
issuance of proper instructions as well as actual implementation and monitoring of consistent
compliance with the rules.vi[6]

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not
consider the fact that Cabil had been driving for school children only, from their homes to the St.
Scholasticas College in Metro Manila.vii[7] 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.viii[8]
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the
congregations delayed meeting) could have averted the mishap and (2) under the contract, the
WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold
water. The hour of departure had not been fixed. Even if it had been, the delay did not bear
directly on the cause of the accident. With respect to the second contention, it was held in an
early case that:

[A] person who hires a public automobile and gives the driver directions as to the place to which
he wishes to be conveyed, but exercises no other control over the conduct of the driver, is not
responsible for acts of negligence of the latter or prevented from recovering for injuries suffered
from a collision between the automobile and a train, caused by the negligence either of the
locomotive engineer or the automobile driver.ix[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:x[10]

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

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

As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof
that they exercised the diligence of a good father of the family in the selection and supervision of
their employee. As Art. 1759 of the Code provides:

Common carriers are liable for the death of or injuries to passengers through the negligence or
wilful acts of the formers employees, although such employees may have acted beyond the scope
of their authority or in violation of the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.

The same circumstances detailed above, supporting the finding of the trial court and of the
appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify
finding them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the
Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the
Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate.xi[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 Cabils
gross negligence amounted to bad faith.xii[12] Amyline Antonios testimony, as well as the
testimonies of her father and co-passengers, fully establish the physical suffering and mental
anguish she endured as a result of the injuries caused by petitioners negligence.

The award of exemplary damages and attorneys fees was also properly made. However, for the
same reason that it was error for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award of moral damages and reduce
the award of attorneys fees, inasmuch as private respondents, in whose favor the awards were
made, have not appealed.xiii[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,xiv[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 Appealsxv[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,xvi[16] Batangas Laguna
Tayabas Bus Co. v. Intermediate Appellate Court,xvii[17] and Metro Manila Transit
Corporation v. Court of Appeals,xviii[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,xix[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.xx[20]

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appealsxxi[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 the carrier in case of breach of the contract of carriage. The
rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier
and the passenger, and in the event of contractual liability, the carrier is exclusively responsible
therefore to the passenger, even if such breach be due to the negligence of his driver (see Viluan
v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742) . .
.xxii[22]

As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out
their claim against the carrier and the driver exclusively on one theory, much less on that of
breach of contract alone. After all, it was permitted for them to allege alternative causes of action
and join as many parties as may be liable on such causes of actionxxiii[23] so long as private
respondent and her co-plaintiffs do not recover twice for the same injury. What is clear from the
cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus
justifying the holding that the carrier and the driver were jointly and severally liable because
their separate and distinct acts concurred to produce the same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as

to the award of damages. Petitioners are ORDERED to PAY jointly and severally the private
respondent Amyline Antonio the following amounts:

1) P93,657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline

Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) 25% of the recoverable amount as attorneys fees; and

6) costs of suit.

SO ORDERED.

Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.

EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF APPEALS and

HERNANDEZ TRADING CO. INC., respondents.

DECISION

MARTINEZ, J.:

Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of
the decisionxxiv[1] of the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which
affirmed the decision of the Regional Trial Court of Kalookan City, Branch 126, in Civil Case
No. C-15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the
value of the lost cargo.

Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12,
MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd.
(Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were
shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by
petitioners principal, Everett Orient Lines. The said crates were covered by Bill of Lading No.
NGO53MN.

Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14
was missing. This was confirmed and admitted by petitioner in its letter of January 13, 1992
addressed to private respondent, which thereafter made a formal claim upon petitioner for the
value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five
Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November
14, 1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen,
the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the
liability of petitioner.

Private respondent rejected the offer and thereafter instituted a suit for collection docketed as
Civil Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan City,
Branch 126.

At the pre-trial conference, both parties manifested that they have no testimonial evidence to
offer and agreed instead to file their respective memoranda.
On July 16, 1993, the trial court rendered judgmentxxv[2] in favor of private respondent, ordering
petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the
actual value of the lost cargo and the material and packaging cost; (c) 10% of the total amount as
an award for and as contingent attorneys fees; and (d) to pay the cost of the suit. The trial court
ruled:

Considering defendants categorical admission of loss and its failure to overcome the
presumption of negligence and fault, the Court conclusively finds defendant liable to the
plaintiff. The next point of inquiry the Court wants to resolve is the extent of the liability
of the defendant. As stated earlier, plaintiff contends that defendant should be held liable
for the whole value for the loss of the goods in the amount of Y1,552,500.00 because
the terms appearing at the back of the bill of lading was so written in fine prints and that
the same was not signed by plaintiff or shipper thus, they are not bound by the clause
stated in paragraph 18 of the bill of lading. On the other hand, defendant merely
admitted that it lost the shipment but shall be liable only up to the amount of
Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil Code -
Art. 1750. A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely
agreed upon.
It is required, however, that the contract must be reasonable and just under the
circumstances and has been fairly and freely agreed upon. The requirements provided in
Art. 1750 of the New Civil Code must be complied with before a common carrier can
claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of
the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have not
been met. The fact that those conditions are printed at the back of the bill of lading in
letters so small that they are hard to read would not warrant the presumption that the
plaintiff or its supplier was aware of these conditions such that he had fairly and freely
agreed to these conditions. It can not be said that the plaintiff had actually entered into a
contract with the defendant, embodying the conditions as printed at the back of the bill
of lading that was issued by the defendant to plaintiff.

On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial courts
findings with the additional observation that private respondent can not be bound by the terms
and conditions of the bill of lading because it was not privy to the contract of carriage. It said:

As to the amount of liability, no evidence appears on record to show that the appellee
(Hernandez Trading Co.) consented to the terms of the Bill of Lading. The shipper
named in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett
Steamship Corp.) contracted with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms
of the bill of lading when it delivered the cargo to the appellant, still it does not
 necessarily follow that appellee Hernandez Trading Company as consignee is bound
thereby considering that the latter was never privy to the shipping contract.

xxx xxx xxx

Never having entered into a contract with the appellant, appellee should therefore not be
bound by any of the terms and conditions in the bill of lading.
Hence, it follows that the appellee may recover the full value of the shipment lost, the
basis of which is not the breach of contract as appellee was never a privy to the any
contract with the appellant, but is based on Article 1735 of the New Civil Code, there
being no evidence to prove satisfactorily that the appellant has overcome the
presumption of negligence provided for in the law.

Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent
of the consignee to the terms and conditions of the bill of lading is necessary to make such
stipulations binding upon it; (2) in holding that the carriers limited package liability as stipulated
in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to
fully recover the full alleged value of its lost cargo.

We shall first resolve the validity of the limited liability clause in the bill of lading.

A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of
a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by
law, particularly Articles 1749 and 1750 of the Civil Code which provide:

ART. 1749. A stipulation that the common carriers liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for
the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been freely and fairly agreed upon.

Such limited-liability clause has also been consistently upheld by this Court in a number of
cases.xxvi[3] Thus, in Sea Land Service, Inc. vs Intermediate Appellate Courtxxvii[4], we ruled:

It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist,
the validity and binding effect of the liability limitation clause in the bill of lading here are
nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said
stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in
providing a limit to liability only if a greater value is not declared for the shipment in the bill of
lading. To hold otherwise would amount to questioning the justness and fairness of the law itself,
and this the private respondent does not pretend to do. But over and above that consideration, the
just and reasonable character of such stipulation is implicit in it giving the shipper or owner the
option of avoiding accrual of liability limitation by the simple and surely far from onerous
expedient of declaring the nature and value of the shipment in the bill of lading..
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the
common carriers liability for loss must be reasonable and just under the circumstances, and has
been freely and fairly agreed upon.

The bill of lading subject of the present controversy specifically provides, among others:

18. All claims for which the carrier may be liable shall be adjusted and settled on the
basis of the shippers net invoice cost plus freight and insurance premiums, if paid, and
in no event shall the carrier be liable for any loss of possible profits or any consequential
loss.
The carrier shall not be liable for any loss of or any damage to or in any connection
with, goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency
(Y100,000.00) or its equivalent in any other currency per package or customary freight
unit (whichever is least) unless the value of the goods higher than this amount is
declared in writing by the shipper before receipt of the goods by the carrier and inserted
in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)

The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier
made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen.
However, the shipper, Maruman Trading, had the option to declare a higher valuation if the
value of its cargo was higher than the limited liability of the carrier. Considering that the
shipper did not declare a higher valuation, it had itself to blame for not complying with the
stipulations.

The trial courts ratiocination that private respondent could not have fairly and freely agreed to
the limited liability clause in the bill of lading because the said conditions were printed in small
letters does not make the bill of lading invalid.

We ruled in PAL, Inc. vs. Court of Appealsxxviii[5] that the jurisprudence on the matter reveals
the consistent holding of the court that contracts of adhesion are not invalid per se and that it has
on numerous occasions upheld the binding effect thereof. Also, in Philippine American General
Insurance Co., Inc. vs. Sweet Lines , Inc.xxix[6] this Court , speaking through the learned Justice
Florenz D. Regalado, held:

x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of adhesion wherein
one party imposes a ready-made form of contract on the other x x x are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres he gives his consent. In the present case, not even an allegation of
ignorance of a party excuses non-compliance with the contractual stipulations since the
responsibility for ensuring full comprehension of the provisions of a contract of carriage
devolves not on the carrier but on the owner, shipper, or consignee as the case may be.
(Emphasis supplied)

It was further explained in Ong Yiu vs Court of Appealsxxx[7] that stipulations in contracts of
adhesion are valid and binding.
 While it may be true that petitioner had not signed the plane ticket x x, he is nevertheless
bound by the provisions thereof. Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger regardless of the latters
lack of knowledge or assent to the regulation. It is what is known as a contract of
adhesion, in regards which it has been said that contracts of adhesion wherein one party
imposes a ready-made form of contract on the other, as the plane ticket in the case at
bar, are contracts not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his consent. x x x , a contract
limiting liability upon an agreed valuation does not offend against the policy of the law
forbidding one from contracting against his own negligence. (Emphasis supplied)

Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in
that the said contracts must be carefully scrutinized in order to shield the unwary (or weaker
party) from deceptive schemes contained in ready-made covenants,xxxi[8] such as the bill of
lading in question. The stringent requirement which the courts are enjoined to observe is in
recognition of Article 24 of the Civil Code which mandates that (i)n all contractual, property or
other relations, when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age or other handicap, the
courts must be vigilant for his protection.

The shipper, Maruman Trading, we assume, has been extensively engaged in the trading
business. It can not be said to be ignorant of the business transactions it entered into involving
the shipment of its goods to its customers. The shipper could not have known, or should know
the stipulations in the bill of lading and there it should have declared a higher valuation of the
goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been
deceived or rushed into agreeing to ship the cargo in petitioners vessel. In fact, it was not even
impleaded in this case.

The next issue to be resolved is whether or not private respondent, as consignee, who is not a
signatory to the bill of lading is bound by the stipulations thereof.

Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if
the consignee was not a signatory to the contract of carriage between the shipper and the carrier,
the consignee can still be bound by the contract. Speaking through Mr. Chief Justice Narvasa, we
ruled:

To begin with, there is no question of the right, in principle, of a consignee in a bill of

lading to recover from the carrier or shipper for loss of, or damage to goods being
transported under said bill, although that document may have been- as in practice it
oftentimes is-drawn up only by the consignor and the carrier without the
intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent here, to recover for
loss of a shipment consigned to him under a bill of lading drawn up only by and
between the shipper and the carrier, springs from either a relation of agency that
may exist between him and the shipper or consignor, or his status as stranger in
whose favor some stipulation is made in said contract, and who becomes a party
 thereto when he demands fulfillment of that stipulation, in this case the delivery of
the goods or cargo shipped. In neither capacity can he assert personally, in bar to
any provision of the bill of lading, the alleged circumstance that fair and free
agreement to such provision was vitiated by its being in such fine print as to be
hardly readable. Parenthetically, it may be observed that in one comparatively recent
case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15) where this
Court found that a similar package limitation clause was printed in the smallest type
on the back of the bill of lading, it nonetheless ruled that the consignee was bound
thereby on the strength of authority holding that such provisions on liability
limitation are as much a part of a bill of lading as though physically in it and as
though placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability
of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the
liability of the carrier to an agreed valuation unless the shipper declares a higher
value and inserts it into said contract or bill. This proposition, moreover, rests upon
an almost uniform weight of authority. (Underscoring supplied)

When private respondent formally claimed reimbursement for the missing goods from petitioner
and subsequently filed a case against the latter based on the very same bill of lading, it (private
respondent) accepted the provisions of the contract and thereby made itself a party thereto, or at
least has come to court to enforce it.xxxii[9] Thus, private respondent cannot now reject or
disregard the carriers limited liability stipulation in the bill of lading. In other words, private
respondent is bound by the whole stipulations in the bill of lading and must respect the same.

Private respondent, however, insists that the carrier should be liable for the full value of the lost
cargo in the amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had
"fully declared the shipment x x x, the contents of each crate, the dimensions, weight and value
of the contents,"xxxiii[10] as shown in the commercial Invoice No. MTM-941.

This claim was denied by petitioner, contending that it did not know of the contents, quantity and
value of "the shipment which consisted of three pre-packed crates described in Bill of Lading
No. NGO-53MN merely as 3 CASES SPARE PARTS.xxxiv[11]

The bill of lading in question confirms petitioners contention. To defeat the carriers limited
liability, the aforecited Clause 18 of the bill of lading requires that the shipper should have
declared in writing a higher valuation of its goods before receipt thereof by the carrier and
insert the said declaration in the bill of lading, with the extra freight paid. These requirements
in the bill of lading were never complied with by the shipper, hence, the liability of the carrier
under the limited liability clause stands. The commercial Invoice No. MTM-941 does not in
itself sufficiently and convincingly show that petitioner has knowledge of the value of the cargo
as contended by private respondent. No other evidence was proffered by private respondent to
support is contention. Thus, we are convinced that petitioner should be liable for the full value of
the lost cargo.

In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand
(Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No.
42803 is hereby REVERSED and SET ASIDE.

SO ORDERED.

Regalado, (Acting Chief Justice), Melo, Puno, and Mendoza, JJ., concur.

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

Petitioner,
Present:

CARPIO, J., Chairperson,

- versus - LEONARDO-DE CASTRO,
BRION,
DEL CASTILLO, and
ABAD, JJ.
SHIN YANG BROKERAGE
CORPORATION, Promulgated:
Respondent. December 18, 2009

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

DECISION
DEL CASTILLO, J.:

The necessity of proving lies with the person who sues.

The refusal of the consignee named in the bill of lading to pay the freightage on the
claim that it is not privy to the contract of affreightment propelled the shipper to sue for
collection of money, stressing that its sole evidence, the bill of lading, suffices to prove that
the consignee is bound to pay. Petitioner now comes to us by way of Petition for Review
on Certiorari1[1] under Rule 45 praying for the reversal of the Court of Appeals' (CA)
judgment that dismissed its action for sum of money for insufficiency of evidence.

Factual Antecedents

On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to
Manila secondhand cars and other articles on board the vessel Hanjin Busan 0238W. The
bill of lading covering the shipment, i.e., Bill of Lading No. HJSCPUSI14168303,2[2]
which was prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin), named respondent
Shin Yang Brokerage Corp. (Shin Yang) as the consignee and indicated that payment was
on a Freight Collect basis, i.e., that the consignee/receiver of the goods would be the one
to pay for the freight and other charges in the total amount of P57,646.00.3[3]
 The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF
Company, Inc. (MOF), Hanjins exclusive general agent in the Philippines, repeatedly
demanded the payment of ocean freight, documentation fee and terminal handling charges
from Shin Yang. The latter, however, failed and refused to pay contending that it did not
cause the importation of the goods, that it is only the Consolidator of the said shipment,
that the ultimate consignee did not endorse in its favor the original bill of lading and that
the bill of lading was prepared without its consent.

Thus, on March 19, 2003, MOF filed a case for sum of money before the
Metropolitan Trial Court of Pasay City (MeTC Pasay) which was docketed as Civil Case
No. 206-03 and raffled to Branch 48. MOF alleged that Shin Yang, a regular client, caused
the importation and shipment of the goods and assured it that ocean freight and other
charges would be paid upon arrival of the goods in Manila. Yet, after Hanjin's compliance,
Shin Yang unjustly breached its obligation to pay. MOF argued that Shin Yang, as the
named consignee in the bill of lading, entered itself as a party to the contract and bound
itself to the Freight Collect arrangement. MOF thus prayed for the payment of P57,646.00
representing ocean freight, documentation fee and terminal handling charges as well as
damages and attorneys fees.

Claiming that it is merely a consolidator/forwarder and that Bill of Lading No.

HJSCPUSI14168303 was not endorsed to it by the ultimate consignee, Shin Yang denied
any involvement in shipping the goods or in promising to shoulder the freightage. It
asserted that it never authorized Halla Trading Co. to ship the articles or to have its name
included in the bill of lading. Shin Yang also alleged that MOF failed to present supporting
documents to prove that it was Shin Yang that caused the importation or the one that
assured payment of the shipping charges upon arrival of the goods in Manila.

Ruling of the Metropolitan Trial Court

On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision4[4] in
favor of MOF. It ruled that Shin Yang cannot disclaim being a party to the contract of
affreightment because:

x x x it would appear that defendant has business transactions with plaintiff. This
is evident from defendants letters dated 09 May 2002 and 13 May 2002 (Exhibits 1 and 2,
defendants Position Paper) where it requested for the release of refund of container deposits
x x x. [In] the mind of the Court, by analogy, a written contract need not be necessary; a
mutual understanding [would suffice]. Further, plaintiff would have not included the name
of the defendant in the bill of lading, had there been no prior agreement to that effect.

In sum, plaintiff has sufficiently proved its cause of action against the defendant
and the latter is obliged to honor its agreement with plaintiff despite the absence of a written
contract.5[5]

The dispositive portion of the MeTC Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of

plaintiff and against the defendant, ordering the latter to pay plaintiff as follows:

1. P57,646.00 plus legal interest from the date of demand until fully paid,
2. P10,000.00 as and for attorneys fees and
3. the cost of suit.

SO ORDERED.6[6]
Ruling of the Regional Trial Court

The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto the
Decision of the MeTC. It held that:

MOF and Shin Yang entered into a contract of affreightment which Blacks Law
Dictionary defined as a contract with the ship owner to hire his ship or part of it, for the
carriage of goods and generally take the form either of a charter party or a bill of lading.

The bill of lading contain[s] the information embodied in the contract.

Article 652 of the Code of Commerce provides that the charter party must be in
writing; however, Article 653 says: If the cargo should be received without charter party
having been signed, the contract shall be understood as executed in accordance with what
appears in the bill of lading, the sole evidence of title with regard to the cargo for
determining the rights and obligations of the ship agent, of the captain and of the charterer.
Thus, the Supreme Court opined in the Market Developers, Inc. (MADE) vs. Honorable
Intermediate Appellate Court and Gaudioso Uy, G.R. No. 74978, September 8, 1989, this
kind of contract may be oral. In another case, Compania Maritima vs. Insurance Company
of North America, 12 SCRA 213 the contract of affreightment by telephone was
recognized where the oral agreement was later confirmed by a formal booking.

xxxx

Defendant is liable to pay the sum of P57,646.00, with interest until fully paid,
attorneys fees of P10,000.00 [and] cost of suit.

Considering all the foregoing, this Court affirms in toto the decision of the Court
a quo.

SO ORDERED.7[7]
Ruling of the Court of Appeals

Seeing the matter in a different light, the CA dismissed MOFs complaint and
refused to award any form of damages or attorneys fees. It opined that MOF failed to
substantiate its claim that Shin Yang had a hand in the importation of the articles to the
Philippines or that it gave its consent to be a consignee of the subject goods. In its March
22, 2006 Decision,8[8] the CA said:

This Court is persuaded [that except] for the Bill of Lading, respondent has not
presented any other evidence to bolster its claim that petitioner has entered [into] an
agreement of affreightment with respondent, be it verbal or written. It is noted that the Bill
of Lading was prepared by Hanjin Shipping, not the petitioner. Hanjin is the principal while
respondent is the formers agent. (p. 43, rollo)

The conclusion of the court a quo, which was upheld by the RTC Pasay City,
Branch 108 xxx is purely speculative and conjectural. A court cannot rely on speculations,
conjectures or guesswork, but must depend upon competent proof and on the basis of the
best evidence obtainable under the circumstances. Litigation cannot be properly resolved
by suppositions, deductions or even presumptions, with no basis in evidence, for the truth
must have to be determined by the hard rules of admissibility and proof (Lagon vs. Hooven
Comalco Industries, Inc. 349 SCRA 363).

While it is true that a bill of lading serves two (2) functions: first, it is a receipt for
the goods shipped; second, it is a contract by which three parties, namely, the shipper, the
carrier and the consignee who undertake specific responsibilities and assume stipulated
obligations (Belgian Overseas Chartering and Shipping N.V. vs. Phil. First Insurance Co.,
Inc., 383 SCRA 23), x x x if the same is not accepted, it is as if one party does not accept
the contract. Said the Supreme Court:

A bill of lading delivered and accepted constitutes the contract of

carriage[,] even though not signed, because the acceptance of a paper containing
the terms of a proposed contract generally constitutes an acceptance of the
contract and of all its terms and conditions of which the acceptor has actual or
constructive notice (Keng Hua Paper Products Co., Inc. vs. CA, 286 SCRA 257).
 In the present case, petitioner did not only [refuse to] accept the bill of lading, but
it likewise disown[ed] the shipment x x x. [Neither did it] authorize Halla Trading
Company or anyone to ship or export the same on its behalf.

It is settled that a contract is upheld as long as there is proof of consent, subject

matter and cause (Sta. Clara Homeowners Association vs. Gaston, 374 SCRA 396). In the
case at bar, there is not even any iota of evidence to show that petitioner had given its
consent.

He who alleges a fact has the burden of proving it and a mere allegation
is not evidence (Luxuria Homes Inc. vs. CA, 302 SCRA 315).

The 40-footer van contains goods of substantial value. It is highly improbable for
petitioner not to pay the charges, which is very minimal compared with the value of the
goods, in order that it could work on the release thereof.

For failure to substantiate its claim by preponderance of evidence, respondent has

not established its case against petitioner.9[9]

Petitioners filed a motion for reconsideration but it was denied in a

Resolution10[10] dated May 25, 2006. Hence, this petition for review on certiorari.

Petitioners Arguments

In assailing the CAs Decision, MOF argues that the factual findings of both the
MeTC and RTC are entitled to great weight and respect and should have bound the CA. It
stresses that the appellate court has no justifiable reason to disturb the lower courts
judgments because their conclusions are well-supported by the evidence on record.
 MOF further argues that the CA erred in labeling the findings of the lower courts as
purely speculative and conjectural. According to MOF, the bill of lading, which expressly
stated Shin Yang as the consignee, is the best evidence of the latters actual participation in
the transportation of the goods. Such document, validly entered, stands as the law among
the shipper, carrier and the consignee, who are all bound by the terms stated therein.
Besides, a carriers valid claim after it fulfilled its obligation cannot just be rejected by the
named consignee upon a simple denial that it ever consented to be a party in a contract of
affreightment, or that it ever participated in the preparation of the bill of lading. As against
Shin Yangs bare denials, the bill of lading is the sufficient preponderance of evidence
required to prove MOFs claim. MOF maintains that Shin Yang was the one that supplied
all the details in the bill of lading and acquiesced to be named consignee of the shipment
on a Freight Collect basis.

Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot avoid
its obligation to pay, because it never objected to being named as the consignee in the bill
of lading and that it only protested when the shipment arrived in the Philippines,
presumably due to a botched transaction between it and Halla Trading Co. Furthermore,
Shin Yangs letters asking for the refund of container deposits highlight the fact that it was
aware of the shipment and that it undertook preparations for the intended release of the
shipment.

Respondents Arguments

Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove that
it consented to take part in the contract of affreightment. Shin Yang argues that MOF
miserably failed to present any evidence to prove that it was the one that made preparations
for the subject shipment, or that it is an actual shipping practice that
forwarders/consolidators as consignees are the ones that provide carriers details and
information on the bills of lading.

Shin Yang contends that a bill of lading is essentially a contract between the shipper
and the carrier and ordinarily, the shipper is the one liable for the freight charges. A
consignee, on the other hand, is initially a stranger to the bill of lading and can be liable
only when the bill of lading specifies that the charges are to be paid by the consignee. This
liability arises from either a) the contract of agency between the shipper/consignor and the
consignee; or b) the consignees availment of the stipulation pour autrui drawn up by and
between the shipper/ consignor and carrier upon the consignees demand that the goods be
delivered to it. Shin Yang contends that the fact that its name was mentioned as the
consignee of the cargoes did not make it automatically liable for the freightage because it
never benefited from the shipment. It never claimed or accepted the goods, it was not the
shippers agent, it was not aware of its designation as consignee and the original bill of
lading was never endorsed to it.

Issue

The issue for resolution is whether a consignee, who is not a signatory to the bill of
lading, is bound by the stipulations thereof. Corollarily, whether respondent who was not
an agent of the shipper and who did not make any demand for the fulfillment of the
stipulations of the bill of lading drawn in its favor is liable to pay the corresponding freight
and handling charges.

Our Ruling
 Since the CA and the trial courts arrived at different conclusions, we are constrained
to depart from the general rule that only errors of law may be raised in a Petition for Review
on Certiorari under Rule 45 of the Rules of Court and will review the evidence
presented.11[11]

The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier
without the intervention of the consignee. However, the latter can be bound by the
stipulations of the bill of lading when a) there is a relation of agency between the shipper
or consignor and the consignee or b) when the consignee demands fulfillment of the
stipulation of the bill of lading which was drawn up in its favor.12[12]

In Keng Hua Paper Products Co., Inc. v. Court of Appeals,13[13] we held that once
the bill of lading is received by the consignee who does not object to any terms or
stipulations contained therein, it constitutes as an acceptance of the contract and of all of
its terms and conditions, of which the acceptor has actual or constructive notice.
 In Mendoza v. Philippine Air Lines, Inc.,14[14] the consignee sued the carrier for
damages but nevertheless claimed that he was never a party to the contract of transportation
and was a complete stranger thereto. In debunking Mendozas contention, we held that:

x x x First, he insists that the articles of the Code of Commerce should be applied;
that he invokes the provisions of said Code governing the obligations of a common carrier
to make prompt delivery of goods given to it under a contract of transportation. Later, as
already said, he says that he was never a party to the contract of transportation and was a
complete stranger to it, and that he is now suing on a tort or a violation of his rights as a
stranger (culpa aquiliana). If he does not invoke the contract of carriage entered into with
the defendant company, then he would hardly have any leg to stand on. His right to prompt
delivery of the can of film at the Pili Air Port stems and is derived from the contract of
carriage under which contract, the PAL undertook to carry the can of film safely and to
deliver it to him promptly. Take away or ignore that contract and the obligation to carry
and to deliver and right to prompt delivery disappear. Common carriers are not obligated
by law to carry and to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the obligation. Said
rights and obligations are created by a specific contract entered into by the parties. In the
present case, the findings of the trial court which as already stated, are accepted by
the parties and which we must accept are to the effect that the LVN Pictures Inc. and
Jose Mendoza on one side, and the defendant company on the other, entered into a
contract of transportation (p. 29, Rec. on Appeal). One interpretation of said finding
is that the LVN Pictures Inc. through previous agreement with Mendoza acted as the
latter's agent. When he negotiated with the LVN Pictures Inc. to rent the film
'Himala ng Birhen' and show it during the Naga town fiesta, he most probably
authorized and enjoined the Picture Company to ship the film for him on the PAL
on September 17th. Another interpretation is that even if the LVN Pictures Inc. as
consignor of its own initiative, and acting independently of Mendoza for the time
being, made Mendoza a consignee. [Mendoza made himself a party to the contract
of transportaion when he appeared at the Pili Air Port armed with the copy of the
Air Way Bill (Exh. 1) demanding the delivery of the shipment to him.] The very
citation made by appellant in his memorandum supports this view. Speaking of the
possibility of a conflict between the order of the shipper on the one hand and the order of
the consignee on the other, as when the shipper orders the shipping company to return or
retain the goods shipped while the consignee demands their delivery, Malagarriga in his
book Codigo de Comercio Comentado, Vol. 1, p. 400, citing a decision of the Argentina
Court of Appeals on commercial matters, cited by Tolentino in Vol. II of his book entitled
'Commentaries and Jurisprudence on the Commercial Laws of the Philippines' p. 209, says
that the right of the shipper to countermand the shipment terminates when the
consignee or legitimate holder of the bill of lading appears with such bill of lading
 before the carrier and makes himself a party to the contract. Prior to that time he is
a stranger to the contract.

Still another view of this phase of the case is that contemplated in Art. 1257,
paragraph 2, of the old Civil Code (now Art. 1311, second paragraph) which reads
thus:

Should the contract contain any stipulation in favor of a third

person, he may demand its fulfillment provided he has given notice of his
acceptance to the person bound before the stipulation has been revoked.'

Here, the contract of carriage between the LVN Pictures Inc. and the
defendant carrier contains the stipulations of delivery to Mendoza as consignee. His
demand for the delivery of the can of film to him at the Pili Air Port may be regarded
as a notice of his acceptance of the stipulation of the delivery in his favor contained in
the contract of carriage and delivery. In this case he also made himself a party to the
contract, or at least has come to court to enforce it. His cause of action must
necessarily be founded on its breach.15[15] (Emphasis Ours)

In sum, a consignee, although not a signatory to the contract of carriage between the
shipper and the carrier, becomes a party to the contract by reason of either a) the
relationship of agency between the consignee and the shipper/ consignor; b) the
unequivocal acceptance of the bill of lading delivered to the consignee, with full knowledge
of its contents or c) availment of the stipulation pour autrui, i.e., when the consignee, a
third person, demands before the carrier the fulfillment of the stipulation made by the
consignor/shipper in the consignees favor, specifically the delivery of the goods/cargoes
shipped.16[16]
 In the instant case, Shin Yang consistently denied in all of its pleadings that it
authorized Halla Trading, Co. to ship the goods on its behalf; or that it got hold of the bill
of lading covering the shipment or that it demanded the release of the cargo. Basic is the
rule in evidence that the burden of proof lies upon him who asserts it, not upon him who
denies, since, by the nature of things, he who denies a fact cannot produce any proof of
it.17[17] Thus, MOF has the burden to controvert all these denials, it being insistent that
Shin Yang asserted itself as the consignee and the one that caused the shipment of the
goods to the Philippines.

In civil cases, the party having the burden of proof must establish his case by
preponderance of evidence,18[18] which means evidence which is of greater weight, or
more convincing than that which is offered in opposition to it.19[19] Here, MOF failed to
meet the required quantum of proof. Other than presenting the bill of lading, which, at
most, proves that the carrier acknowledged receipt of the subject cargo from the shipper
and that the consignee named is to shoulder the freightage, MOF has not adduced any other
credible evidence to strengthen its cause of action. It did not even present any witness in
support of its allegation that it was Shin Yang which furnished all the details indicated in
the bill of lading and that Shin Yang consented to shoulder the shipment costs. There is
also nothing in the records which would indicate that Shin Yang was an agent of Halla
Trading Co. or that it exercised any act that would bind it as a named consignee. Thus, the
CA correctly dismissed the suit for failure of petitioner to establish its cause against
respondent.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of

Appeals dated March 22, 2006 dismissing petitioners complaint and the Resolution dated
May 25, 2006 denying the motion for reconsideration are AFFIRMED.

SO ORDERED.

G.R. No. 92288 February 9, 1993

BRITISH AIRWAYS, INC., petitioner,

vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND GENERAL SERVICES, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.

Monina P. Lee for private respondent.

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of Appeals1 affirming the
decision of the trial court2 in ordering petitioner British Airways, Inc. to pay private respondent First International Trading and General
Services actual damages, moral damages, corrective or exemplary damages, attorney's fees and the costs as well as the Resolution dated
February 15, 19903 denying petitioner's Motion for Reconsideration in the appealed decision.

It appears on record that on February 15, 1981, private respondent First International Trading and General Services Co., a duly licensed
domestic recruitment and placement agency, received a telex message from its principal ROLACO Engineering and Contracting Services in
Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal.4

During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways, Inc. airfare tickets for 93 contract
workers with specific instruction to transport said workers to Jeddah on or before March 30, 1981.

As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private respondent was
immediately informed by petitioner that its principal had forwarded 93 prepaid tickets. Thereafter, private respondent instructed its travel
agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but the latter failed to fly said workers, thereby compelling private
respondent to borrow money in the amount of P304,416.00 in order to purchase airline tickets from the other airlines as evidenced by the
cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave immediately since the visas of said
workers are valid only for 45 days and the Bureau of Employment Services mandates that contract workers must be sent to the job site within
a period of 30 days.

Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had received a prepaid ticket advice
from its Jeddah branch for the transportation of 27 contract workers. Immediatety, private respondent instructed its travel agent to book the
27 contract workers with the petitioner but the latter was only able to book and confirm 16 seats on its June 9, 1981 flight. However, on the
date of the scheduled flight only 9 workers were able to board said flight while the remaining 7 workers were rebooked to June 30, 1981
which bookings were again cancelled by the petitioner without any prior notice to either private respondent or the workers. Thereafter, the 7
workers were rebooked to the July 4,1981 flight of petitioner with 6 more workers booked for said flight. Unfortunately, the confirmed
bookings of the 13 workers were again cancelled and rebooked to July 7, 1981.

On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when the receipt of the tax
payments was submitted, the latter informed private respondent that it can only confirm the seats of the 12 workers on its July 7, 1981 flight.
However, the confirmed seats of said workers were again cancelled without any prior notice either to the private respondent or said workers.
The 12 workers were finally able to leave for Jeddah after private respondent had bought tickets from the other airlines.

As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the damages it had incurred by the
latter's repeated failure to transport its contract workers despite confirmed bookings and payment of the corresponding travel taxes.

On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to pay the amount of
P350,000.00 representing damages and unrealized profit or income which was denied by the petitioner.

On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the remaining recruited workers
due to the delay in transporting the workers to Jeddah.5

On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial Court of Manila, Branch 1 in
Civil Case No. 82-4653.

On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message from Jeddah March 20, 1981 advising
that the principal of private respondent had prepaid the airfares of 100 persons to transport private respondent's contract workers from
Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space and limited time, petitioner had to return to its
sponsor in Jeddah the prepaid ticket advice consequently not even one of the alleged 93 contract workers were booked in any of its flights.

On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private respondent to Jeddah but the
travel agent of the private respondent booked only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9 contract workers
boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine Airlines' passenger manifest for Flight BA-020
(Exhibit "7", "7-A", "7-B" and "7-C").6

Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981 flight but said travel agent
cancelled the booking of 2 passengers while the other 3 passengers did not show up on said flight.

Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to the previous 5 contract
workers who were not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight which was accepted by petitioner subject to
reconfirmation.

However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a reconfirmation from Saudi
Arabia Airlines causing the automatic cancellation of the bookings of private respondent's 12 contract workers. In the morning of July 7,
1981, the computer system of the petitioner was reinstalled and immediately petitioner tried to reinstate the bookings of the 12 workers with
either Gulf Air or Saudi Arabia Airlines but both airlines replied that no seat was available on that date and had to place the 12 workers on the
wait list. Said information was duly relayed to the private respondent and the 12 workers before the scheduled flight.

After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which reads as follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00;

3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or exemplary damages;

4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; and
 5. To pay the costs.7

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied its Motion for Reconsideration
on February 28, 1986.

On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the dispositive portion of which reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant.8

On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.

Hence, this petition.

It is the contention of petitioner that private respondent has no cause of action against it there being no perfected contract of carriage existing
between them as no ticket was ever issued to private respondent's contract workers and, therefore, the obligation of the petitioner to
transport said contract workers did not arise. Furthermore, private respondent's failure to attach any ticket in the complaint further proved that
it was never a party to the alleged transaction.

Petitioner's contention is untenable.

Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission of one party in
violation of the legal right or rights of the other.9 Petitioner's repeated failures to transport private respondent's workers in its flight despite
confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part. In resolving petitioner's theory that private
respondent has no cause of action in the instant case, the appellate court correctly held that:

In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of the
same, namely: (a) the contract "to carry (at some future time)," which contract is consensual and is necessarily
perfected by mere consent (See Article 1356, Civil Code of the Philippines), and (b) the contract "of carriage" or "of
common carriage" itself which should be considered as a real contract for not until the carrier is actually used can the
carrier be said to have already assumed the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p. 429,
Eleventh Ed.)

In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the mere consent
of the parties.

There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from Manila to
Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid
ticket advice that ROLACO Engineering has prepaid the airfares of the appellee's contract workers advising the
appellant that it must transport the contract workers on or before the end of March, 1981 and the other batch in June,
1981.

Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket
was yet issued, the fact remains that the passage had already been paid for by the principal of the appellee, and the
appellant had accepted such payment. The existence of this payment was never objected to nor questioned by the
appellant in the lower court. Thus, the cause or consideration which is the fare paid for the passengers exists in this
case.

The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is the transport
of the passengers from the place of departure to the place of destination as stated in the telex.

Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing reciprocal
obligations on both parties.

In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its willingness for
its contract workers to leave for their place of destination.

On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the contract workers on
their flight despite confirmation and bookings made by appellee's travelling agent.

xxx xxx xxx

Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period of
compliance therewith, and with emphasis that it could only be used if the passengers fly on BA. Under the
 circumstances, the appellant should have refused acceptance of the PTA from appellee's principal or to at least inform
appellee that it could not accommodate the contract workers.

xxx xxx xxx

While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the appellee's contract
workers who were recruited for ROLACO Engineering and the said contract workers were the intended passengers in
the aircraft of the appellant, the said contract "to carry" also involved the appellee for as recruiter he had to see to it that
the contract workers should be transported to ROLACO Engineering in Jeddah thru the appellant's transportation. For
that matter, the involvement of the appellee in the said contract "to carry" was well demonstrated when
the appellant upon receiving the PTA immediately advised the appellee thereof. 10

Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to private respondent since
all expenses had already been subsequently reimbursed by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00 representing actual damages
refers to private respondent's second cause of action involving the expenses incurred by the latter which were not reimbursed by ROLACO
Engineering. However, in the Complaint 11 filed by private respondent, it was alleged that private respondent suffered actual damages in the
amount of P308,016.00 representing the money it borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets and
P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages private respondent seeks to recover are the airline
tickets and travel taxes it spent for its workers which were already reimbursed by its principal and not for any other expenses it had incurred
in the process of recruiting said contract workers. Inasmuch as all expenses including the processing fees incurred by private respondent
had already been paid for by the latter's principal on a staggered basis as admitted in open court by its managing director, Mrs. Bienvenida
Brusellas. 12 We do not find anymore justification in the appellate court's decision in granting actual damages to private respondent.

Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its contract workers when
petitioner failed to transport said workers, the reimbursements made by its principal to private respondent failed to support the latter's claim
that it suffered actual damages as a result of petitioner's failure to transport said workers. It is undisputed that private respondent had
consistently admitted that its principal had reimbursed all its expenses.

Article 2199 of the Civil Code provides that:

Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of
certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon
competent proof that they have suffered and on evidence of the actual amount thereof. 13

However, private respondent is entitled to an award of moral and exemplary damages for the injury suffered as a result of petitioner's failure
to transport the former's workers because of the latter's patent bad faith in the performance of its obligation. As correctly pointed out by the
appellate court:

As evidence had proved, there was complete failure on the part of the appellant to transport the 93 contract workers of
the appellee on or before March 30, 1981 despite receipt of the payment for their airfares, and acceptance of the same
by the appellant, with specific instructions from the appellee's principal to transport the contract workers on or before
March 30, 1981. No previous notice was ever registered by the appellant that it could not comply with the same. And
then followed the detestable act of appellant in unilaterally cancelling, booking and rebooking unreasonably the flight of
appellee's contract workers in June to July, 1981 without prior notice. And all of these actuations of the appellant
indeed constitute malice and evident bad faith which had caused damage and besmirched the reputation and business
image of the appellee. 14

As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for said damages was
ever made by the petitioner immediately after their alleged occurrence therefore said counterclaims were mere afterthoughts when private
respondent filed the present case.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be deleted from said
decision.

SO ORDERED.

Narvasa, C.J., Feliciano, Regalado and Campos, Jr., JJ., concur.

G.R. No. L-48757 May 30, 1988

MAURO GANZON, petitioner,

vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.

Antonio B. Abinoja for petitioner.

Quijano, Arroyo & Padilla Law Office for respondents.

SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based on culpa
contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:

On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles,
Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38). Pursuant
to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of water (t.s.n., September 28,
1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter, for
loading which was actually begun on the same date by the crew of the lighter under the captain's supervision. When about half of the scrap
iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00
from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his
gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<äre||anº•1àw> The gunshot was not fatal
but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).

After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by three
policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was docked
(t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later on Acting
Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron (Stipulation of Facts, Record on
Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)

On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:

WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering
defendant-appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual
damages, the sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees. Costs
against defendant-appellee Ganzon. 3

In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:

THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF TRANSPORTATION
AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND
CONTROL HAVE NO BASIS IN FACT AND IN LAW.

II

THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE
SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.

III

THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS EVENT AND THE
PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his custody and control to
make him liable. However, he completely agrees with the respondent Court's finding that on December 1, 1956, the private respondent
delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his employees, actually received
the scraps is freely admitted. Significantly, there is not the slightest allegation or showing of any condition, qualification, or restriction
accompanying the delivery by the private respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the contrary,
soon after the scraps were delivered to, and received by the petitioner-common carrier, loading was commenced.

By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their
receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary
responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility
would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them.
5 The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods
remained in the custody and control of the carrier, albeit still unloaded.

The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil
Code, namely:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of this presumption, the court is not even
required to make an express finding of fault or negligence before it could hold the petitioner answerable for the breach of the contract of
carriage. Still, the petitioner could have been exempted from any liability had he been able to prove that he observed extraordinary diligence
in the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an unforeseen event
or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove that he exercised such extraordinary
diligence.

It is in the second and third assignments of error where the petitioner maintains that he is exempt from any liability because the loss of the
scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article 1174 of
the Civil Code. 7

We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps was due to an
"order or act of competent public authority," and this contention was correctly passed upon by the Court of Appeals which ruled that:

... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was
ordered by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the
power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The
appellee failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in
evidence. Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we
have in the record is the stipulation of the parties that the cargo of scrap iron was accilmillated by the appellant through
separate purchases here and there from private individuals (Record on Appeal, pp. 38-39). The fact remains that the
order given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose
Advincula to shakedown the appellant for P5,000.00. The order of the acting mayor did not constitute valid authority for
appellee Mauro Ganzon and his representatives to carry out.

Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we cannot, however, allow. In any case, the
intervention of the municipal officials was not In any case, of a character that would render impossible the fulfillment by the carrier of its
obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is absence of
sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the
petitioner's employees. The mere difficulty in the fullfilment of the obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the
local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage.

There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the Code of Commerce
which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner invokes in
tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration arising from the
causes enumerated in Art. 1734; and in these instances, the burden of proving that damages were caused by the fault or negligence of the
carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of the excepted causes
or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier only ordinary
diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these were not sufficiently
controverted by the petitioner.

WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against the petitioner.

This decision is IMMEDIATELY EXECUTORY.

Yap, C.J., Paras and Padilla, JJ., concur.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

I am constrained to dissent.
It is my view that petitioner can not be held liable in
damages for the loss and destruction of the scrap iron.
The loss of said cargo was due to an excepted cause an
'order or act of competent public authority" (Article
1734[5], Civil Code).
The loading of the scrap iron on the lighter had to be
suspended because of Municipal Mayor Jose Advincula's
intervention, who was a "competent public authority."
Petitioner had no control over the situation as, in fact,
Tumambing himself, the owner of the cargo, was impotent
to stop the "act' of said official and even suffered a
gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor
Basilio Rub, accompanied by three policemen, who
ordered the dumping of the scrap iron into the sea right
where the lighter was docked in three feet of water. Again,
could the captain of the lighter and his crew have defied
said order?
Through the "order" or "act" of "competent public
authority," therefore, the performance of a contractual
obligation was rendered impossible. The scrap iron that
was dumped into the sea was "destroyed" while the rest of
the cargo was "seized." The seizure is evidenced by the
receipt issues by Acting Mayor Rub stating that the
Municipality of Mariveles had taken custody of the scrap
iron. Apparently, therefore, the seizure and destruction of
the goods was done under legal process or authority so
that petitioner should be freed from responsibility.
Art. 1743. If through order of public authority the
goods are seized or destroyed, the common
carrier is not responsible, provided said public
authority had power to issue the order.

Separate Opinions
MELENCIO-HERRERA, J., dissenting:
I am constrained to dissent.
It is my view that petitioner can not be held liable in
damages for the loss and destruction of the scrap iron.
The loss of said cargo was due to an excepted cause an
'order or act of competent public authority" (Article
1734[5], Civil Code).
The loading of the scrap iron on the lighter had to be
suspended because of Municipal Mayor Jose Advincula's
intervention, who was a "competent public authority."
Petitioner had no control over the situation as, in fact,
Tumambing himself, the owner of the cargo, was impotent
to stop the "act' of said official and even suffered a
gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor
Basilio Rub, accompanied by three policemen, who
ordered the dumping of the scrap iron into the sea right
where the lighter was docked in three feet of water. Again,
could the captain of the lighter and his crew have defied
said order?
Through the "order" or "act" of "competent public
authority," therefore, the performance of a contractual
obligation was rendered impossible. The scrap iron that
was dumped into the sea was "destroyed" while the rest of
the cargo was "seized." The seizure is evidenced by the
receipt issues by Acting Mayor Rub stating that the
Municipality of Mariveles had taken custody of the scrap
iron. Apparently, therefore, the seizure and destruction of
the goods was done under legal process or authority so
that petitioner should be freed from responsibility.
Art. 1743. If through order of public authority the
goods are seized or destroyed, the common
 carrier is not responsible, provided said public
authority had power to issue the order.
G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,

vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering
sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks
which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which
various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in
Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in
Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent
loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were
placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried
these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its
driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding
payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the
lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common carrier and holding him liable for the
value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in finding that he
had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him
to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of
freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for
Review assigning as errors the following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

 3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly
characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

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

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

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under
the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth
in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:

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

It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for
other merchants from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than regular or
scheduled manner, and even though private respondent's principal occupation was not the carriage of goods for others. There is no dispute
that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not
relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a
common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code
provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether
or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been
granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because
he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and
intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier.
The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law
cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence
("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of
goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7"
of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which
they carry, "unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility
therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure fall within the
scope of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case — the hijacking of the
carrier's truck — does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that
the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as
common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner argues that in
the circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600
cartons of Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence required private
respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the
driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in the vigilance over the
goods carried in the specific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only
by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or its
employees;

(6) that the common carrier's liability for acts committed by thieves, or of robbers who do not act
with grave or irresistible threat, violence or force, is dispensed with or diminished; and

(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods
on account of the defective condition of the car vehicle, ship, airplane or other equipment used in
the contract of carriage. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility —
even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence
or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows
that an information for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People
of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged
with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons
of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused
acted with grave, if not irresistible, threat, violence or force.3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not
only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them
in another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common
carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers
against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable,
provided that they shall have complied with the rigorous standard of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of the
undelivered merchandise which was lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE
NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY,
respondents.

DECISION

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court of Appeals,
promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720,
entitled Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.,
which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266,
Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail
Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of
Nicanor Navidad.

On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then
drunk, entered the EDSA LRT station after purchasing a token (representing payment of the
fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the
security guard assigned to the area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to
indicate how the fight started or who, between the two, delivered the first blow or how Navidad
later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was
killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with
her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the
LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her
husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against
Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due
diligence in the selection and supervision of its security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of
presenting evidence, filed a demurrer contending that Navidad had failed to prove that Escartin
was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it
adjudged:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the
plaintiffs the following:

a) 1) Actual damages of P44,830.00;

 2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;

b) Moral damages of P50,000.00;

c) Attorneys fees of P20,000;

d) Costs of suit.

The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.

The compulsory counterclaim of LRTA and Roman are likewise dismissed.20[1]

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated
its now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad
and, instead, holding the LRTA and Roman jointly and severally liable thusly:

WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants

from any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and
the Light Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to
pay jointly and severally to the plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorneys fees.21[2]

The appellate court ratiocinated that while the deceased might not have then as yet boarded the
train, a contract of carriage theretofore had already existed when the victim entered the place
where passengers were supposed to be after paying the fare and getting the corresponding token
therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the
security agency to the death of Navidad. It said that Navidad failed to show that Escartin
inflicted fist blows upon the victim and the evidence merely established the fact of death of
Navidad by reason of his having been hit by the train owned and managed by the LRTA and
operated at the time by Roman. The appellate court faulted petitioners for their failure to present
expert evidence to establish the fact that the application of emergency brakes could not have
stopped the train.

The appellate court denied petitioners motion for reconsideration in its resolution of 10 October
2000.

In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:

I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE

FINDINGS OF FACTS BY THE TRIAL COURT

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.

III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

RODOLFO ROMAN IS AN EMPLOYEE OF LRTA.22[3]

Petitioners would contend that the appellate court ignored the evidence and the factual findings
of the trial court by holding them liable on the basis of a sweeping conclusion that the
presumption of negligence on the part of a common carrier was not overcome. Petitioners would
insist that Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an act
of a stranger that could not have been foreseen or prevented. The LRTA would add that the
appellate courts conclusion on the existence of an employer-employee relationship between
Roman and LRTA lacked basis because Roman himself had testified being an employee of
Metro Transit and not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of carriage
was deemed created from the moment Navidad paid the fare at the LRT station and entered the
premises of the latter, entitling Navidad to all the rights and protection under a contractual
relation, and that the appellate court had correctly held LRTA and Roman liable for the death of
Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.

Law and jurisprudence dictate that a common carrier, both from the nature of its business and for
reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the
safety of passengers.23[4] The Civil Code, governing the liability of a common carrier for death of
or injury to its passengers, provides:

Article 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for
all the circumstances.

Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.

Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the formers employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.

Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of
the willful acts or negligence of other passengers or of strangers, if the common carriers
employees through the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission.

The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances.24[5] Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage.25[6] The statutory provisions render a common carrier liable for death of or
injury to passengers (a) through the negligence or wilful acts of its employees or b) on account
of wilful acts or negligence of other passengers or of strangers if the common carriers
employees through the exercise of due diligence could have prevented or stopped the act or
omission.26[7] In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and27[8] by simple proof of injury, the passenger is relieved of the duty to still establish
the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to
prove that the injury is due to an unforeseen event or to force majeure.28[9] In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners, according
to the appellate court, have failed to show, the presumption would be that it has been at fault,29[10]
an exception from the general rule that negligence must be proved.30[11]

The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the safety
of passengers, a carrier may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the common carrier is not
relieved of its responsibilities under the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 217631[12] and related provisions, in conjunction with Article 2180,32[13] of
the Civil Code. The premise, however, for the employers liability is negligence or fault on the
part of the employee. Once such fault is established, the employer can then be made liable on the
basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris
families in the selection and supervision of its employees. The liability is primary and can only
be negated by showing due diligence in the selection and supervision of the employee, a factual
matter that has not been shown. Absent such a showing, one might ask further, how then must
the liability of the common carrier, on the one hand, and an independent contractor, on the other
hand, be described? It would be solidary. A contractual obligation can be breached by tort and
when the same act or omission causes the injury, one resulting in culpa contractual and the other
in culpa aquiliana, Article 219433[14] of the Civil Code can well apply.34[15] In fine, a liability for
tort may arise even under a contract, where tort is that which breaches the contract.35[16] Stated
differently, when an act which constitutes a breach of contract would have itself constituted the
source of a quasi-delictual liability had no contract existed between the parties, the contract can
be said to have been breached by tort, thereby allowing the rules on tort to apply.36[17]

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that there is
nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of
its employee, Escartin, has not been duly proven x x x. This finding of the appellate court is not
without substantial justification in our own review of the records of the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the contractual
tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman;
thus, Roman can be made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him.37[18] It is an established rule that nominal damages cannot co-exist
with compensatory damages.38[19]
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with
MODIFICATION but only in that (a) the award of nominal damages is DELETED and (b)
petitioner Rodolfo Roman is absolved from liability. No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.

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 19671 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
Code3. 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
complaint6 for tax refund with prayer for writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in her capacity as City
Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition
and collection of the business tax on its gross receipts violates Section 133 of the
Local Government Code; (2) the authority of cities to impose and collect a tax on
the gross receipts of "contractors and independent contractors" under Sec. 141
(e) and 151 does not include the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131 (h), the term "contractors" excludes
transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax
paid.7

Traversing the complaint, the respondents argued that petitioner cannot be

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

On October 3, 1994, the trial court rendered a decision dismissing the complaint,
ruling in this wise:

. . . Plaintiff is either a contractor or other independent contractor.

. . . the exemption to tax claimed by the plaintiff has become unclear.

It is a rule that tax exemptions are to be strictly construed against
the taxpayer, taxes being the lifeblood of the government. Exemption
may therefore be granted only by clear and unequivocal provisions
of law.

Plaintiff claims that it is a grantee of a pipeline concession under

Republic Act 387. (Exhibit A) whose concession was lately renewed
by the Energy Regulatory Board (Exhibit B). Yet neither said law nor
the deed of concession grant any tax exemption upon the plaintiff.

Even the Local Government Code imposes a tax on franchise

holders under Sec. 137 of the Local Tax Code. Such being the
situation obtained in this case (exemption being unclear and
equivocal) resort to distinctions or other considerations may be of
help:

1. That the exemption granted under Sec.

133 (j) encompasses only common carriers
so as not to overburden the riding public or
commuters with taxes. Plaintiff is not a
common carrier, but a special carrier
extending its services and facilities to a
single specific or "special customer" under
a "special contract."

2. The Local Tax Code of 1992 was basically

enacted to give more and effective local
autonomy to local governments than the
previous enactments, to make them
economically and financially viable to serve
the people and discharge their functions
with a concomitant obligation to accept
certain devolution of powers, . . . So,
consistent with this policy even franchise
grantees are taxed (Sec. 137) and
 contractors are also taxed under Sec. 143
(e) and 151 of the Code.9

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

Hence, this petition. At first, the petition was denied due course in a Resolution
dated November 11, 1996. 13 Petitioner moved for a reconsideration which was
granted by this Court in a Resolution 14 of January 22, 1997. Thus, the petition
was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1)
the petitioner is not a common carrier or a transportation contractor, and (2) the
exemption sought for by petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the
public as engaged in the business of transporting persons or property from place
to place, for compensation, offering his services to the public generally.

Art. 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of

carrying goods for others as a public
employment, and must hold himself out as
ready to engage in the transportation of
goods for person generally as a business
and not as a casual occupation;

2. He must undertake to carry goods of the

kind to which his business is confined;

3. He must undertake to carry by the

method by which his business is conducted
and over his established roads; and
 4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that

petitioner is a common carrier. It is engaged in the business of transporting or
carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it
from the definition of a common carrier. In De Guzman vs. Court of Appeals 16 we
ruled that:

The above article (Art. 1732, Civil Code) makes no

distinction between one whose principal business
activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity
(in local idiom, as a "sideline"). Article 1732 . . . avoids
making any distinction between a person or enterprise
offering transportation service on a regular or
scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general
community or population, and one who offers services
or solicits business only from a narrow segment of the
general population. We think that Article 1877
deliberately refrained from making such distinctions.

So understood, the concept of "common carrier" under

Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers
set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, "public service" includes:

every person that now or hereafter may

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

Also, respondent's argument that the term "common carrier" as used in Section
133 (j) of the Local Government Code refers only to common carriers transporting
goods and passengers through moving vehicles or vessels either by land, sea or
water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the

Civil Code makes no distinction as to the means of transporting, as long as it is
by land, water or air. It does not provide that the transportation of the passengers
or goods should be by motor vehicle. In fact, in the United States, oil pipe line
operators are considered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
considered a "common carrier." Thus, Article 86 thereof provides that:

Art. 86. Pipe line concessionaire as common carrier. —

A pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned
by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of
such other petroleum as may be offered by others for
transport, and to charge without discrimination such
rates as may have been approved by the Secretary of
Agriculture and Natural Resources.

Republic Act 387 also regards petroleum operation as a public utility. Pertinent
portion of Article 7 thereof provides:

that everything relating to the exploration for and

exploitation of petroleum . . . and everything relating to
the manufacture, refining, storage, or transportation by
special methods of petroleum, is hereby declared to be
a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common
carrier." In BIR Ruling No. 069-83, it declared:

. . . since [petitioner] is a pipeline concessionaire that is

engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No.
387 . . . . Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No.
13-78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common

carrier" and, therefore, exempt from the business tax as provided for in Section
133 (j), of the Local Government Code, to wit:

Sec. 133. Common Limitations on the Taxing Powers of

Local Government Units. — Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to
the levy of the following:

xxx xxx xxx

(j) Taxes on the gross receipts

of transportation contractors
and persons engaged in the
transportation of passengers
or freight by hire and common
carriers by air, land or water,
except as provided in this
Code.

The deliberations conducted in the House of Representatives on the Local

Government Code of 1991 are illuminating:

MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line

1. It states: "SEC. 121 [now Sec. 131]. Common

Limitations on the Taxing Powers of Local Government
Units." . . .

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the

business of transportation. This appears to be one of
 those being deemed to be exempted from the taxing
powers of the local government units. May we know the
reason why the transportation business is being
excluded from the taxing powers of the local
government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception

contained in Section 121 (now Sec. 131), line 16,
paragraph 5. It states that local government units may
not impose taxes on the business of transportation,
except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to

page 98 of Book II, one can see there that provinces
have the power to impose a tax on business enjoying a
franchise at the rate of not more than one-half of 1
percent of the gross annual receipts. So, transportation
contractors who are enjoying a franchise would be
subject to tax by the province. That is the exception, Mr.
Speaker.

What we want to guard against here, Mr. Speaker, is the

imposition of taxes by local government units on the
carrier business. Local government units may impose
taxes on top of what is already being imposed by the
National Internal Revenue Code which is the so-called
"common carriers tax." We do not want a duplication of
this tax, so we just provided for an exception under
Section 125 [now Sec. 137] that a province may impose
this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr.

Speaker. . . . 18

It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to
prevent a duplication of the so-called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code. 19 To tax petitioner
again on its gross receipts in its transportation of petroleum business would
defeat the purpose of the Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent

Court of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is
REVERSED and SET ASIDE.
SO ORDERED.

G.R. No. 157917 August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,

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

DECISION

BERSAMIN, J.:

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

The Case

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

Antecedents

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

In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On
August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the
Zarates’ residence. Aaron took his place on the left side of the van near the rear door. The van,
with its air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14
student riders on their way to Don Bosco. Considering that the students were due at Don Bosco
by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on
the South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by
traversing the narrow path underneath the Magallanes Interchange that was then commonly used
by Makati-bound vehicles as a short cut into Makati. At the time, the narrow path was marked by
piles of construction materials and parked passenger jeepneys, and the railroad crossing in the
narrow path had no railroad warning signs, or watchmen, or other responsible persons manning
the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to
traversing motorists.

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 Pereñas, PNR and Alano. The Pereñas and PNR filed their
respective answers, with cross-claims against each other, but Alfaro could not be served with
summons.

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

A. FACTS:

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

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

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

(4) At the time of the vehicular/train collision, the subject site of the vehicular/train
collision was a railroad crossing used by motorists for crossing the railroad tracks;
 (5) During the said time of the vehicular/train collision, there were no appropriate and
safety warning signs and railings at the site commonly used for railroad crossing;

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

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

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

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

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

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

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

B. ISSUES

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

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

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

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

(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary
damages, and attorney's fees;
 (6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the
diligence of employers and school bus operators;

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

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

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

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

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

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

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

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

Ruling of the RTC

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

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

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

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

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

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

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

(6) Attorney’s fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

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

The CA’s Ruling

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

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and severally

liable together with defendant-appellants spouses Teodorico and Nanette Pereña and
defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron
Zarate and damages.

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

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

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

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

The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in
the absence of sufficient basis for such an award.

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

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

SO ORDERED.

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

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

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

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

Issues

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

I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly
and severally liable to pay damages with Philippine National Railways and dismissing their
cross-claim against the latter.
II. The lower court erred in affirming the trial court’s decision awarding damages for loss of
earning capacity of a minor who was only a high school student at the time of his death in the
absence of sufficient basis for such an award.

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

Ruling

The petition has no merit.

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

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

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

We concur with the CA.

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

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

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

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

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

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

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

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

x x x every person that now or hereafter may own, operate, manage, or control in the Philippines,
for hire or compensation, with general or limited clientèle, 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 clientèle.

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

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

The common carrier’s standard of care and vigilance as to the safety of the passengers is defined
by law. Given the nature of the business and for reasons of public policy, the common carrier is
bound "to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the circumstances of each case."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 Pereñas have not presented any compelling defense or reason by which the
Court might now reverse the CA’s findings on their liability. On the contrary, an examination of
the records shows that the evidence fully supported the findings of the CA.

As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent
at the time of the accident because death had occurred to their passenger.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 Pereñas did not overturn the presumption of their negligence by
credible evidence. Their defense of having observed the diligence of a good father of a family in
the selection and supervision of their driver was not legally sufficient. According to Article 1759
of the Civil Code, their liability as a common carrier did not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their employee.
This was the reason why the RTC treated this defense of the Pereñas as inappropriate in this
action for breach of contract of carriage.

The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted
beyond the scope of his authority or even in violation of the orders of the common carrier.27 In
this connection, the records showed their driver’s actual negligence. There was a showing, to
begin with, that their driver traversed the railroad tracks at a point at which the PNR did not
permit motorists going into the Makati area to cross the railroad tracks. Although that point had
been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their
driver into taking that route. On the other hand, with his familiarity with that shortcut, their
driver was fully aware of the risks to his passengers but he still disregarded the risks.
Compounding his lack of care was that loud music was playing inside the air-conditioned van at
the time of the accident. The loudness most probably reduced his ability to hear the warning
horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the
railroad tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles
traversed the railroad tracks. In so doing, he lost his view of the train that was then coming from
the opposite side of the passenger bus, leading him to miscalculate his chances of beating the bus
in their race, and of getting clear of the train. As a result, the bus avoided a collision with the
train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go
to a full stop before traversing the railroad tracks despite knowing that his slackening of speed
and going to a full stop were in observance of the right of way at railroad tracks as defined by the
traffic laws and regulations.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 Pereñas’ driver was entirely negligent
when he traversed the railroad tracks at a point not allowed for a motorist’s crossing despite
being fully aware of the grave harm to be thereby caused to his passengers; and when he
disregarded the foresight of harm to his passengers by overtaking the bus on the left side as to
leave himself blind to the approach of the oncoming train that he knew was on the opposite side
of the bus.

Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,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 Pereñas and the PNR. Another distinction is that the
passenger bus in Philippine National Railways v. Intermediate Appellate Court was traversing
the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school van traversed
the railroad tracks at a point not intended for that purpose.

At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally"
liable for damages arising from the death of Aaron. They had been impleaded in the same
complaint as defendants against whom the Zarates had the right to relief, whether jointly,
severally, or in the alternative, in respect to or arising out of the accident, and questions of fact
and of law were common as to the Zarates.36 Although the basis of the right to relief of the
Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct from the basis of the
Zarates’ right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they
nonetheless could be held jointly and severally liable by virtue of their respective negligence
combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also
guilty of negligence despite the school van of the Pereñas traversing the railroad tracks at a point
not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR
did not ensure the safety of others through the placing of crossbars, signal lights, warning signs,
and other permanent safety barriers to prevent vehicles or pedestrians from crossing there. The
RTC observed that the fact that a crossing guard had been assigned to man that point from 7 a.m.
to 5 p.m. was a good indicium that the PNR was aware of the risks to others as well as the need
to control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint
tortfeasors.

2.
Was the indemnity for loss of
Aaron’s earning capacity proper?

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

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

Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1âwphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the
indemnity for victim Jussi Leino’s loss of earning capacity as a pilot for being speculative due to
his having graduated from high school at the International School in Manila only two years
before the shooting, and was at the time of the shooting only enrolled in the first semester at the
Manila Aero Club to pursue his ambition to become a professional pilot. That meant, according
to the Court, that he was for all intents and purposes only a high school graduate.

We reject the Pereñas’ submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi
Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron
would be some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician,
or a lawyer). Instead, the computation of Aaron’s earning capacity was premised on him being a
lowly minimum wage earner despite his being then enrolled at a prestigious high school like Don
Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at
work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken
against his parents and in favor of the defendants whose negligence not only cost Aaron his life
and his right to work and earn money, but also deprived his parents of their right to his presence
and his services as well. Our law itself states that the loss of the earning capacity of the deceased
shall be the liability of the guilty party in favor of the heirs of the deceased, and shall in every
case be assessed and awarded by the court "unless the deceased on account of permanent
physical disability not caused by the defendant, had no earning capacity at the time of his
death."38 Accordingly, we emphatically hold in favor of the indemnification for Aaron’s loss of
earning capacity despite him having been unemployed, because compensation of this nature is
awarded not for loss of time or earnings but for loss of the deceased’s power or ability to earn
money.39

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

3.
Were the amounts of damages excessive?

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

The plea is unwarranted.

The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates’ deep
mental anguish over their son’s unexpected and violent death, and their moral shock over the
senseless accident. That amount would not be too much, considering that it would help the
Zarates obtain the means, diversions or amusements that would alleviate their suffering for the
loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice,
given the passage of a long time from when their mental anguish was inflicted on them on
August 22, 1996.
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if
only to render effective the desired example for the public good. As a common carrier, the
Pereñas needed to be vigorously reminded to observe their duty to exercise extraordinary
diligence to prevent a similarly senseless accident from happening again. Only by an award of
exemplary damages in that amount would suffice to instill in them and others similarly situated
like them the ever-present need for greater and constant vigilance in the conduct of a business
imbued with public interest.

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

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR: