#6 MALAYAN INSURANCE CO., INC.

, Petitioner,
vs. PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE FORWARDER SERVICES, INC.,

DECISION

REYES, J.:

Before the Court is a petition for review on certiorari filed by petitioner Malayan Insurance Co., lnc. (Malayan)
assailing the Decision1 dated February 29, 2008 and Resolution2 dated August 28, 2008 of the Court of Appeals
(CA) in CA-G.R. CV No. 71204 which affirmed with modification the decision of the Regional Trial Court (RTC),
Branch 38 of Manila.

Antecedent Facts

Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Forwarder Services, Inc. (Reputable)
had been annually executing a contract of carriage, whereby the latter undertook to transport and deliver the
former’s products to its customers, dealers or salesmen.3

On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from respondent
Philippines First Insurance Co., Inc. (Philippines First) to secure its interest over its own products.
Philippines First thereby insured Wyeth’s nutritional, pharmaceutical and other products usual or incidental to the
insured’s business while the same were being transported or shipped in the Philippines. The policy covers all
risks of direct physical loss or damage from any external cause, if by land, and provides a limit of P6,000,000.00
per any one land vehicle.

On December 1, 1993, Wyeth executed its annual contract of carriage with Reputable. It turned out, however,
that the contract was not signed by Wyeth’s representative/s. 4 Nevertheless, it was admittedly signed by
Reputable’s representatives, the terms thereof faithfully observed by the parties and, as previously stated, the
same contract of carriage had been annually executed by the parties every year since 1989.5

Under the contract, Reputable undertook to answer for "all risks with respect to the goods and shall be liable to
the COMPANY (Wyeth), for the loss, destruction, or damage of the goods/products due to any and all causes
whatsoever, including theft, robbery, flood, storm, earthquakes, lightning, and other force majeure while the
goods/products are in transit and until actual delivery to the customers, salesmen, and dealers of the
COMPANY".6

The contract also required Reputable to secure an insurance policy on Wyeth’s goods.7 Thus, on February 11,
1994, Reputable signed a Special Risk Insurance Policy (SR Policy) with petitioner Malayan for the
amount of P1,000,000.00.

On October 6, 1994, during the effectivity of the Marine Policy and SR Policy, Reputable received from
Wyeth 1,000 boxes of Promil infant formula worth P2,357,582.70 to be delivered by Reputable to Mercury
Drug Corporation in Libis, Quezon City. Unfortunately, on the same date, the truck carrying Wyeth’s
products was hijacked by about 10 armed men. They threatened to kill the truck driver and two of his
helpers should they refuse to turn over the truck and its contents to the said highway robbers. The hijacked
truck was recovered two weeks later without its cargo.

On March 8, 1995, Philippines First, after due investigation and adjustment, and pursuant to the Marine Policy,
paid Wyeth P2,133,257.00 as indemnity. Philippines First then demanded reimbursement from Reputable,
having been subrogated to the rights of Wyeth by virtue of the payment. The latter, however, ignored the
demand.

Consequently, Philippines First instituted an action for sum of money against Reputable on August 12,
1996.8 In its complaint, Philippines First stated that Reputable is a "private corporation engaged in the business
of a common carrier." In its answer,9 Reputable claimed that it is a private carrier. It also claimed that it cannot be
made liable under the contract of carriage with Wyeth since the contract was not signed by Wyeth’s representative
and that the cause of the loss was force majeure, i.e., the hijacking incident.

Subsequently, Reputable impleaded Malayan as third-party defendant in an effort to collect the amount covered
in the SR Policy. According to Reputable, "it was validly insured with Malayan for P1,000,000.00 with respect to
1
the lost products under the latter’s Insurance Policy No. SR-0001-02577 effective February 1, 1994 to February
1, 1995" and that the SR Policy covered the risk of robbery or hijacking.10

Disclaiming any liability, Malayan argued, among others, that under Section 5 of the SR Policy, the
insurance does not cover any loss or damage to property which at the time of the happening of such loss
or damage is insured by any marine policy and that the SR Policy expressly excluded third-party liability.

After trial, the RTC rendered its Decision11 finding Reputable liable to Philippines First for the amount of
indemnity it paid to Wyeth, among others. In turn, Malayan was found by the RTC to be liable to Reputable to
the extent of the policy coverage. The dispositive portion of the RTC decision provides:

WHEREFORE, on the main Complaint, judgment is hereby rendered finding [Reputable] liable for the loss of
the Wyeth products and orders it to pay Philippines First the following:

1. the amount of P2,133,257.00 representing the amount paid by Philippines First to Wyeth for the loss
of the products in question;

2. the amount of P15,650.00 representing the adjustment fees paid by Philippines First to hired
adjusters/surveyors;

3. the amount of P50,000.00 as attorney’s fees; and

4. the costs of suit.

On the third-party Complaint, judgment is hereby rendered finding

Malayan liable to indemnify [Reputable] the following:

1. the amount of P1,000,000.00 representing the proceeds of the insurance policy;

2. the amount of P50,000.00 as attorney’s fees; and

3. the costs of suit.

SO ORDERED.12

Dissatisfied, both Reputable and Malayan filed their respective appeals from the RTC decision.

Reputable asserted that the RTC erred in holding that its contract of carriage with Wyeth was binding despite
Wyeth’s failure to sign the same. Reputable further contended that the provisions of the contract are
unreasonable, unjust, and contrary to law and public policy.

For its part, Malayan invoked Section 5 of its SR Policy, which provides:

Section 5. INSURANCE WITH OTHER COMPANIES. The insurance does not cover any loss or damage to
property which at the time of the happening of such loss or damage is insured by or would but for the existence
of this policy, be insured by any Fire or Marine policy or policies except in respect of any excess beyond the
amount which would have been payable under the Fire or Marine policy or policies had this insurance not been
effected.

Malayan argued that inasmuch as there was already a marine policy issued by Philippines First securing the
same subject matter against loss and that since the monetary coverage/value of the Marine Policy is more than
enough to indemnify the hijacked cargo, Philippines First alone must bear the loss.

Malayan sought the dismissal of the third-party complaint against it. In the alternative, it prayed that it be held
liable for no more than P468,766.70, its alleged pro-rata share of the loss based on the amount covered by the
policy, subject to the provision of Section 12 of the SR Policy, which states:

2
12. OTHER INSURANCE CLAUSE. If at the time of any loss or damage happening to any property hereby
insured, there be any other subsisting insurance or insurances, whether effected by the insured or by any other
person or persons, covering the same property, the company shall not be liable to pay or contribute more than
its ratable proportion of such loss or damage.

On February 29, 2008, the CA rendered the assailed decision sustaining the ruling of the RTC, the decretal
portion of which reads:

WHEREFORE, in view of the foregoing, the assailed Decision dated 29 September 2000, as modified in the Order
dated 21 July 2001, is AFFIRMED with MODIFICATION in that the award of attorney’s fees in favor of Reputable
is DELETED.

SO ORDERED.13

The CA ruled, among others, that: (1) Reputable is estopped from assailing the validity of the contract of carriage
on the ground of lack of signature of Wyeth’s representative/s; (2) Reputable is liable under the contract for the
value of the goods even if the same was lost due to fortuitous event; and (3) Section 12 of the SR Policy prevails
over Section 5, it being the latter provision; however, since the ratable proportion provision of Section 12 applies
only in case of double insurance, which is not present, then it should not be applied and Malayan should be held
liable for the full amount of the policy coverage, that is, P1,000,000.00.14

On March 14, 2008, Malayan moved for reconsideration of the assailed decision but it was denied by the CA in
its Resolution dated August 28, 2008.15

Hence, this petition.

Malayan insists that the CA failed to properly resolve the issue on the "statutory limitations on the liability of
common carriers" and the "difference between an ‘other insurance clause’ and an ‘over insurance clause’."

Malayan also contends that the CA erred when it held that Reputable is a private carrier and should be bound by
the contractual stipulations in the contract of carriage. This argument is based on its assertion that Philippines
First judicially admitted in its complaint that Reputable is a common carrier and as such, Reputable should not be
held liable pursuant to Article 1745(6) of the Civil Code. 16 Necessarily, if Reputable is not liable for the loss, then
there is no reason to hold Malayan liable to Reputable.

Further, Malayan posits that there resulted in an impairment of contract when the CA failed to apply the express
provisions of Section 5 (referred to by Malayan as over insurance clause) and Section 12 (referred to by Malayan
as other insurance clause) of its SR Policy as these provisions could have been read together there being no
actual conflict between them.

Reputable, meanwhile, contends that it is exempt from liability for acts committed by thieves/robbers who act with
grave or irresistible threat whether it is a common carrier or a private/special carrier. It, however, maintains the
correctness of the CA ruling that Malayan is liable to Philippines First for the full amount of its policy coverage
and not merely a ratable portion thereof under Section 12 of the SR Policy.

Finally, Philippines First contends that the factual finding that Reputable is a private carrier should be accorded
the highest degree of respect and must be considered conclusive between the parties, and that a review of such
finding by the Court is not warranted under the circumstances. As to its alleged judicial admission that Reputable
is a common carrier, Philippines First proffered the declaration made by Reputable that it is a private carrier. Said
declaration was allegedly reiterated by Reputable in its third party complaint, which in turn was duly admitted by
Malayan in its answer to the said third-party complaint. In addition, Reputable even presented evidence to prove
that it is a private carrier.

As to the applicability of Sections 5 and 12 in the SR Policy, Philippines First reiterated the ruling of the CA.
Philippines First, however, prayed for a slight modification of the assailed decision, praying that Reputable and
Malayan be rendered solidarily liable to it in the amount of P998,000.00, which represents the balance from the
P1,000.000.00 coverage of the SR Policy after deducting P2,000.00 under Section 10 of the said SR Policy. 17

Issues

3
The liability of Malayan under the SR Policy hinges on the following issues for resolution:

1) Whether Reputable is a private carrier;

2) Whether Reputable is strictly bound by the stipulations in its contract of carriage with Wyeth, such that
it should be liable for any risk of loss or damage, for any cause whatsoever, including that due to theft or
robbery and other force majeure;

3) Whether the RTC and CA erred in rendering "nugatory" Sections 5 and Section 12 of the SR Policy;
and

4) Whether Reputable should be held solidarily liable with Malayan for the amount of P998,000.00 due
to Philippines First.

The Court’s Ruling

On the first issue – Reputable is a private carrier.

The Court agrees with the RTC and CA that Reputable is a private carrier. Well-entrenched in jurisprudence is
the rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the
highest degree of respect and considered conclusive between the parties, save for certain exceptional and
meritorious circumstances, none of which are present in this case.18

Malayan relies on the alleged judicial admission of Philippines First in its complaint that Reputable is a common
carrier.19 Invoking Section 4, Rule 129 of the Rules on Evidence that "an admission verbal or written, made by a
party in the course of the proceeding in the same case, does not require proof," it is Malayan’s position that the
RTC and CA should have ruled that

Reputable is a common carrier. Consequently, pursuant to Article 1745(6) of the Civil Code, the liability of
Reputable for the loss of Wyeth’s goods should be dispensed with, or at least diminished.

It is true that judicial admissions, such as matters alleged in the pleadings do not require proof, and need not be
offered to be considered by the court. "The court, for the proper decision of the case, may and should consider,
without the introduction of evidence, the facts admitted by the parties."20 The rule on judicial admission, however,
also states that such allegation, statement, or admission is conclusive as against the pleader,21 and that the facts
alleged in the complaint are deemed admissions of the plaintiff and binding upon him. 22 In this case, the pleader
or the plaintiff who alleged that Reputable is a common carrier was Philippines First. It cannot, by any stretch of
imagination, be made conclusive as against Reputable whose nature of business is in question.

It should be stressed that Philippines First is not privy to the SR Policy between Wyeth and Reputable; rather, it
is a mere subrogee to the right of Wyeth to collect from Reputable under the terms of the contract of carriage.
Philippines First is not in any position to make any admission, much more a definitive pronouncement, as to the
nature of Reputable’s business and there appears no other connection between Philippines First and Reputable
which suggests mutual familiarity between them.

Moreover, records show that the alleged judicial admission of Philippines First was essentially disputed by
Reputable when it stated in paragraphs 2, 4, and 11 of its answer that it is actually a private or special carrier.23
In addition, Reputable stated in paragraph 2 of its third-party complaint that it is "a private carrier engaged in the
carriage of goods."24 Such allegation was, in turn, admitted by Malayan in paragraph 2 of its answer to the third-
party complaint.25 There is also nothing in the records which show that Philippines First persistently maintained
its stance that Reputable is a common carrier or that it even contested or proved otherwise Reputable’s position
that it is a private or special carrier.

Hence, in the face of Reputable’s contrary admission as to the nature of its own business, what was
stated by Philippines First in its complaint is reduced to nothing more than mere allegation, which must
be proved for it to be given any weight or value. The settled rule is that mere allegation is not proof. 26

More importantly, the finding of the RTC and CA that Reputable is a special or private carrier is warranted by the
evidence on record, primarily, the unrebutted testimony of Reputable’s Vice President and General Manager,

4
Mr. William Ang Lian Suan, who expressly stated in open court that Reputable serves only one customer,
Wyeth.27

Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations
engaged in the business of carrying or transporting passenger or goods, or both by land, water or air for
compensation, offering their services to the public. On the other hand, a private carrier is one wherein the
carriage is generally undertaken by special agreement and it does not hold itself out to carry goods for
the general public.28 A common carrier becomes a private carrier when it undertakes to carry a special
cargo or chartered to a special person only.29 For all intents and purposes, therefore, Reputable operated
as a private/special carrier with regard to its contract of carriage with Wyeth.

On the second issue – Reputable is bound by the terms of the contract of carriage.

The extent of a private carrier’s obligation is dictated by the stipulations of a contract it entered into,
provided its stipulations, clauses, terms and conditions are not contrary to law, morals, good customs,
public order, or public policy. "The Civil Code provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier. Public policy governing common carriers has no force where
the public at large is not involved."30

Thus, being a private carrier, the extent of Reputable’s liability is fully governed by the stipulations of the
contract of carriage, one of which is that it shall be liable to Wyeth for the loss of the goods/products due
to any and all causes whatsoever, including theft, robbery and other force majeure while the
goods/products are in transit and until actual delivery to Wyeth’s customers, salesmen and dealers.31

On the third issue – other insurance vis-à-vis over insurance.

Malayan refers to Section 5 of its SR Policy as an "over insurance clause" and to Section 12 as a "modified ‘other
insurance’ clause".32 In rendering inapplicable said provisions in the SR Policy, the CA ruled in this wise:

Since Sec. 5 calls for Malayan’s complete absolution in case the other insurance would be sufficient to cover the
entire amount of the loss, it is in direct conflict with Sec. 12 which provides only for a pro-rated contribution
between the two insurers. Being the later provision, and pursuant to the rules on interpretation of contracts, Sec.
12 should therefore prevail.

xxxx

x x x The intention of both Reputable and Malayan should be given effect as against the wordings of Sec. 12 of
their contract, as it was intended by the parties to operate only in case of double insurance, or where the benefits
of the policies of both plaintiff-appellee and Malayan should pertain to Reputable alone. But since the court a quo
correctly ruled that there is no double insurance in this case inasmuch as Reputable was not privy thereto, and
therefore did not stand to benefit from the policy issued by plaintiff-appellee in favor of Wyeth, then Malayan’s
stand should be rejected.

To rule that Sec. 12 operates even in the absence of double insurance would work injustice to Reputable which,
despite paying premiums for a P1,000,000.00 insurance coverage, would not be entitled to recover said amount
for the simple reason that the same property is covered by another insurance policy, a policy to which it was not
a party to and much less, from which it did not stand to benefit. Plainly, this unfair situation could not have been
the intention of both Reputable and Malayan in signing the insurance contract in question.33

In questioning said ruling, Malayan posits that Sections 5 and 12 are separate provisions applicable under distinct
circumstances. Malayan argues that "it will not be completely absolved under Section 5 of its policy if it were the
assured itself who obtained additional insurance coverage on the same property and the loss incurred by Wyeth’s
cargo was more than that insured by Philippines First’s marine policy. On the other hand, Section 12 will not
completely absolve Malayan if additional insurance coverage on the same cargo were obtained by someone
besides Reputable, in which case Malayan’s SR policy will contribute or share ratable proportion of a covered
cargo loss."34

Malayan’s position cannot be countenanced.

5
Section 5 is actually the other insurance clause (also called "additional insurance" and "double insurance"), one
akin to Condition No. 3 in issue in Geagonia v. CA,35 which validity was upheld by the Court as a warranty that no
other insurance exists. The Court ruled that Condition No. 336 is a condition which is not proscribed by law as its
incorporation in the policy is allowed by Section 75 of the Insurance Code. It was also the Court’s finding that
unlike the other insurance clauses, Condition No. 3 does not absolutely declare void any violation thereof but
expressly provides that the condition "shall not apply when the total insurance or insurances in force at the time
of the loss or damage is not more than P200,000.00."

In this case, similar to Condition No. 3 in Geagonia, Section 5 does not provide for the nullity of the SR Policy but
simply limits the liability of Malayan only up to the excess of the amount that was not covered by the other
insurance policy. In interpreting the "other insurance clause" in Geagonia, the Court ruled that the prohibition
applies only in case of double insurance. The Court ruled that in order to constitute a violation of the clause, the
other insurance must be upon same subject matter, the same interest therein, and the same risk. Thus, even
though the multiple insurance policies involved were all issued in the name of the same assured, over the same
subject matter and covering the same risk, it was ruled that there was no violation of the "other insurance clause"
since there was no double insurance.

Section 12 of the SR Policy, on the other hand, is the over insurance clause. More particularly, it covers the
situation where there is over insurance due to double insurance. In such case, Section 15 provides that Malayan
shall "not be liable to pay or contribute more than its ratable proportion of such loss or damage." This is in accord
with the principle of contribution provided under Section 94(e) of the Insurance Code,37 which states that "where
the insured is over insured by double insurance, each insurer is bound, as between himself and the other insurers,
to contribute ratably to the loss in proportion to the amount for which he is liable under his contract."

Clearly, both Sections 5 and 12 presuppose the existence of a double insurance. The pivotal question that now
arises is whether there is double insurance in this case such that either Section 5 or Section 12 of the SR Policy
may be applied.

By the express provision of Section 93 of the Insurance Code, double insurance exists where the same person
is insured by several insurers separately in respect to the same subject and interest. The requisites in order for
double insurance to arise are as follows:38

1. The person insured is the same;

2. Two or more insurers insuring separately;

3. There is identity of subject matter;

4. There is identity of interest insured; and

5. There is identity of the risk or peril insured against.

In the present case, while it is true that the Marine Policy and the SR Policy were both issued over the same
subject matter, i.e. goods belonging to Wyeth, and both covered the same peril insured against, it is, however,
beyond cavil that the said policies were issued to two different persons or entities. It is undisputed that Wyeth is
the recognized insured of Philippines First under its Marine Policy, while Reputable is the recognized insured of
Malayan under the SR Policy. The fact that Reputable procured Malayan’s SR Policy over the goods of Wyeth
pursuant merely to the stipulated requirement under its contract of carriage with the latter does not make
Reputable a mere agent of Wyeth in obtaining the said SR Policy.

The interest of Wyeth over the property subject matter of both insurance contracts is also different and distinct
from that of Reputable’s. The policy issued by Philippines First was in consideration of the legal and/or equitable
interest of Wyeth over its own goods. On the other hand, what was issued by Malayan to Reputable was over the
latter’s insurable interest over the safety of the goods, which may become the basis of the latter’s liability in case
of loss or damage to the property and falls within the contemplation of Section 15 of the Insurance Code. 39

Therefore, even though the two concerned insurance policies were issued over the same goods and cover the
same risk, there arises no double insurance since they were issued to two different persons/entities having distinct
insurable interests. Necessarily, over insurance by double insurance cannot likewise exist. Hence, as correctly
ruled by the RTC and CA, neither Section 5 nor Section 12 of the SR Policy can be applied.

6
Apart from the foregoing, the Court is also wont to strictly construe the controversial provisions of the SR Policy
against Malayan.1âwphi1 This is in keeping with the rule that:

"Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any
ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of
insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the
insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer.
Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to
preclude the insurer from noncompliance with its obligations."40

Moreover, the CA correctly ruled that:

To rule that Sec. 12 operates even in the absence of double insurance would work injustice to Reputable which,
despite paying premiums for a P1,000,000.00 insurance coverage, would not be entitled to recover said amount
for the simple reason that the same property is covered by another insurance policy, a policy to which it was not
a party to and much less, from which it did not stand to benefit. x x x41

On the fourth issue – Reputable is not solidarily liable with Malayan.

There is solidary liability only when the obligation expressly so states, when the law so provides or when the
nature of the obligation so requires.

In Heirs of George Y. Poe v. Malayan lnsurance Company., lnc., 42 the Court ruled that:

Where the insurance contract provides for indemnity against liability to third persons, the liability of the insurer is
direct and such third persons can directly sue the insurer. The direct liability of the insurer under indemnity
contracts against third party[- ]liability does not mean, however, that the insurer can be held solidarily liable with
the insured and/or the other parties found at fault, since they are being held liable under different obligations. The
liability of the insured carrier or vehicle owner is based on tort, in accordance with the provisions of the Civil Code;
while that of the insurer arises from contract, particularly, the insurance policy: 43 (Citation omitted and emphasis
supplied)

Suffice it to say that Malayan's and Reputable's respective liabilities arose from different obligations- Malayan's
is based on the SR Policy while Reputable's is based on the contract of carriage.

All told, the Court finds no reversible error in the judgment sought to be reviewed.

WHEREFORE, premises considered, the petition is DENIED. The Decision dated February 29, 2008 and
Resolution dated August 28, 2008 of the Court of Appeals in CA-G.R. CV No. 71204 are hereby AFFIRMED.

Cost against petitioner Malayan Insurance Co., Inc.

SO ORDERED.

BIENVENIDO L. REYES
Associate justice

WE CONCUR:

7
#7 7. HOME INSURANCE COMPANY (insurer), plaintiff-appellee, vs. AMERICAN STEAMSHIP AGENCIES,
INC. and LUZON STEVEDORING CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., (owner of the ship) defendant-appellant.

BENGZON, J.P., J.:

"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags
of Peruvian fish meal through SS Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated
January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and insured
by Home Insurance Company for $202,505, arrived in Manila on March 7, 1963 and was discharged into the
lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery, Inc.,
there were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring
Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of
SS Crowborough.
Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 - the insurance
value of the loss, as full settlement of the claim. Having been refused reimbursement by both the Luzon
Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to the
consignee, filed against them on March 6, 1964 before the Court of First Instance of Manila a complaint for
recovery of P14,870.71 with legal interest, plus attorney's fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same
quantity and quality that it had received the same from the carrier. It also claimed that plaintiff's claim had
prescribed under Article 366 of the Code of Commerce stating that the claim must be made within 24 hours from
receipt of the cargo.
American Steamship Agencies denied liability by alleging that under the provisions of the Charter party re-
ferred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or damage of
the cargo. Furthermore, it claimed to have exercised due diligence in stowing the goods and that as a mere
forwarding agent, it was not responsible for losses or damages to the cargo.
On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring Corporation, hav-
ing found the latter to have merely delivered what it received from the carrier in the same condition and quality,
and ordered American Steamship Agencies to pay plaintiff P14,870.71 with legal interest plus P1,000
attorneys fees. Said court cited the following grounds:
(a) The non-liability claim of American Steamship Agencies under the charter party contract is not
tenable because Article 587 of the Code of Commerce makes the ship agent also civilly liable for damages
in favor of third persons due to the conduct of the captain of the carrier;
(b) The stipulation in the charter party contract exempting the owner from liability is against public policy
under Article 1744 of the Civil Code;
(c) In case of loss, destruction or deterioration of goods, common carriers are presumed at fault or negligent
under Article 1735 of the Civil Code unless they prove extraordinary diligence, and they cannot by contract
exempt themselves from liability resulting from their negligence or that of their servants; and
(d) When goods are delivered to the carrier in good order and the same are in bad order at the place of des-
tination, the carrier is primafacie liable.
Disagreeing with such judgment, American Steamship Agencies appealed directly to Us. The appeal brings forth
for determination this legal issue: Is the stipulation in the charter party of the owner's non-liability valid so
as to absolve the American Steamship Agencies from liability for loss?

8
The bills of lading,[1] covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading
shall be governed by and subject to the terms and conditions of the charter party, if any, otherwise, the bills of
lading prevail over all the agreements.[2] On the face of the bills are stamped "Freight prepaid as per charter
party. Subject to all terms, conditions and exceptions of charter party dated London, Dec. 13, 1962."
A perusal of the charter party[3] referred to shows that while the possession and control of the ship were not
entirely transferred to the charterer,[4] the vessel was chartered to its full and complete capacity (Exh.
3). Furthermore, the charterer had the option to go north or south, or vice-versa,[5] loading, stowing and
discharging at its risk and expense.[6] Accordingly, the charter party contract is one of affrrightment over
the whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of
its captain and crew, would remain in the absence of stipulation.
Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the goods
caused by personal want of due diligence on its part or its manager to make the vessel in all respects
seaworthy and to secure that she be properly manned, equipped and supplied or by the personal act or default
of the owner or its manager. Said paragraph, however, exempts the owner of the vessel from any loss or damage
or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person
employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph.
Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of the Code
of Commerce making the ship agent civilly liable for indemnities suffered by third persons arising from acts or
omissions of the captain in the care of the goods and Article 1744 of the Civil Code under which a stipulation
between the common carrier and the shipper or owner limiting the liability of the former for loss or destruction of
the goods to a degree less than extraordinary diligence is valid provided it be reasonable, just and not contrary
to public policy. The release from liability in this case was held unreasonable and contrary to the public policy on
common carriers.
The provisions of our Civil Code on common carriers were taken from Anglo-American law.[7] Under American
Jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person
only, becomes a private carrier.[8] As a private carrier, a stipulation exerting the owner from liability for
the negligence of its agent is not against public policy,[9] and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied
where the carrier is not acting as such but as a private carrier. The stipulation in the charter party
absolving the owner from liability for loss due to the negligence of its agent would be void only if the
strict public policy governing common carriers is applied. Such policy has no force where the public at
large is not involved, as in the case of a ship totally chartered for the use of a single party.
And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as
shipper, is in fact and legal contemplation merely a receipt and a document of title not a contract, for the contract
is the charter party.[10] The consignee may not claim ignorance of said charter party because the bills of lading
expressly referred to the same. Accordingly, the consignees under the bills of lading must likewise abide by the
terms of the charter party. And as stated recovery cannot be had thereunder, for loss or damage to the cargo,
against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as
distinguished from its other agents or employees. In this case, no such personal act or negligence has been
proved.
WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from liability to plain-
tiff. No costs.
SO ORDERED.

Reyes, J.B.L., (Acting C.J.), Makalintal, Zaldivar, Sanchez, Ruiz Castro, Angeles, and Fernando, JJ., concur.

#8 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.:

9
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;

10
 (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;

11
 (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).

12
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:

13
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,
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,15viz:

14
"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

15
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.28He thereby violated a specific traffic regulation on right of way, by virtue of
which he was immediately presumed to be negligent.29

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

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

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

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

16
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.

17
 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." 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.

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.

18
LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

#9 ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL
GUARANTEE AND ASSURANCE, INC., respondents.

DECISION
PUNO, J.:

On appeal is the Court of Appeals May 11, 2000 Decision [1] in CA-G.R. CV No. 49195 and February 21,
2001 Resolution[2] affirming with modification the April 6, 1994 Decision[3] of the Regional Trial Court of Manila
which found petitioner liable to pay private respondent the amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.35[4] was shipped by Marubeni American Corporation of Portland, Oregon on board the vessel
M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in Manila, evidenced by
Bill of Lading No. PTD/Man-4.[5] The shipment was insured by the private respondent Prudential Guarantee
and Assurance, Inc. against loss or damage for P14,621,771.75 under Marine Cargo Risk Note RN
11859/90.[6]
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of
the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consignee as
carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by
Lighterage Receipt No. 0364[7] for delivery to consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an
incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering Island off
Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other barges which arrived
ahead of it while weathering out the storm that night. A few days after, the barge developed a list because of a
hole it sustained after hitting an unseen protuberance underneath the water. The petitioner filed a Marine
Protest on August 28, 1990.[8] It likewise secured the services of Gaspar Salvaging Corporation which refloated
the barge.[9] The hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf on
September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong
current. To avoid the complete sinking of the barge, a portion of the goods was transferred to three other
barges.[10]
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in
the total loss of the remaining cargo.[11] A second Marine Protest was filed on September 7, 1990.[12]

19
 On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and loaded
on the three other barges.[13] The total proceeds from the sale of the salvaged cargo was P201,379.75.[14]
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and another letter
dated September 18, 1990 to the private respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the amount
of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to no
avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the amount of
indemnity, attorney's fees and cost of suit.[16] Petitioner filed its answer with counterclaim.[17]
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its Decision
states:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia Lighterage &
Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with
interest from the date complaint was filed on July 3, 1991 until fully satisfied plus 10% of the amount awarded as
and for attorney's fees. Defendant's counterclaim is hereby DISMISSED. With costs against defendant.[18]

Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate court
affirmed the decision of the trial court with modification. The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense that the salvage
value of P201,379.75 shall be deducted from the amount of P4,104,654.22. Costs against appellant.

SO ORDERED.

Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate court in a
Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW
AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT HELD
THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW
AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF THE
PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, THE LOSS OF
THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE
FIVE (5) CASES ENUMERATED.
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW
AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE DILIGENCE
AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE CONSIGNEES CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its care and
custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly
known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry
indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its
services to the general public.[20]
20
 We disagree.
In De Guzman vs. Court of Appeals,[21] we held that the definition of common carriers in Article 1732 of the
Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity. We also did not distinguish 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. Further, we ruled that Article 1732 does not distinguish between
a carrier offering its services to the general public, and one who offers services or solicits business only from a
narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage [22] and it offers its
barges to the public for carrying or transporting goods by water for compensation. Petitioner is clearly a common
carrier. In De Guzman, supra,[23] we considered private respondent Ernesto Cendaa to be a common carrier even
if his principal occupation was not the carriage of goods for others, but that of buying used bottles and scrap metal
in Pangasinan and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not
have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.[24] The test to determine a common carrier is whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation rather
than the quantity or extent of the business transacted. [25] In the case at bar, the petitioner admitted that it
is engaged in the business of shipping and lighterage, [26] offering its barges to the public, despite its
limited clientele for carrying or transporting goods by water for compensation. [27]
On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise
extraordinary diligence in its care and custody of the consignees goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported
by them.[28] They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed
or deteriorated.[29] To overcome the presumption of negligence in the case of loss, destruction or deterioration of
the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however,
exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of
negligence does not attach:

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, 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;

(5) Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its
cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the
cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the
goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent
or minimize the loss.[30] The evidence show that, even before the towing bits of the barge broke, it had already
previously sustained damage when it hit a sunken object while docked at the Engineering Island. It even suffered
a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but
its hole was patched with only clay and cement. The patch work was merely a provisional remedy, not enough
for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the
cargo to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue
Adjustment Co., Inc., states:

CROSS-EXAMINATION BY ATTY. DONN LEE:[31]

21
 xxxxxxxxx
q - Can you tell us what else transpired after that incident?
a - After the first accident, through the initiative of the barge owners, they tried to pull out the barge from
the place of the accident, and bring it to the anchor terminal for safety, then after deciding if the
vessel is stabilized, they tried to pull it to the consignees warehouse, now while on route another
accident occurred, now this time the barge totally hitting something in the course.
q - You said there was another accident, can you tell the court the nature of the second accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?
a - Mostly it was related to the first accident because there was already a whole (sic) on the bottom part
of the barge.
xxxxxxxxx
This is not all. Petitioner still headed to the consignees wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee's wharf on September 5, 1990,
typhoon Loleng has already entered the Philippine area of responsibility. [32] A part of the testimony of Robert
Boyd, Cargo Operations Supervisor of the petitioner, reveals:

DIRECT-EXAMINATION BY ATTY. LEE:[33]

xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie where she
was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the consignee) as
I have said was in a hurry for their goods to be delivered at their Wharf since they needed badly
the wheat that was loaded in PSTSI-3. It was needed badly by the consignee.
q - And this is the reason why you towed the Barge as you did?
a - Yes, sir.
xxxxxxxxx

CROSS-EXAMINATION BY ATTY. IGNACIO:[34]

xxxxxxxxx

q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I correct?

a - The next day, in the morning, we hired for additional two (2) tugboats as I have stated.

q - Despite of the threats of an incoming typhoon as you testified a while ago?

a - It is already in an inner portion of Pasig River. The typhoon would be coming and it would be
dangerous if we are in the vicinity of Manila Bay.

q - But the fact is, the typhoon was incoming? Yes or no?

a - Yes.

q - And yet as a standard operating procedure of your Company, you have to secure a sort of
Certification to determine the weather condition, am I correct?

a - Yes, sir.

q - So, more or less, you had the knowledge of the incoming typhoon, right?
22
 a - Yes, sir.

q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are already inside
the vicinity or inside Pasig entrance, it is a safe place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability
for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short of due diligence
required from a common carrier. More importantly, the officers/employees themselves of petitioner admitted that
when the towing bits of the vessel broke that caused its sinking and the total loss of the cargo upon reaching the
Pasig River, it was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of
the cargo; a human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 49195
dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

#10ESTRELLITA M. BASCOS, petitioners,

vs. COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.

Modesto S. Bascos for petitioner.

Pelaez, Adriano & Gregorio for private respondent.

SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. — Article 1732
of the Civil Code defines a common carrier as "(a) person, corporation or 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 to determine a common carrier is "whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." . . . The holding of the Court in
De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held thus:
"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 distinguished 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."

2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION
OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE.
— Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported
by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not
attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the
common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption . . .
The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it.
Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her
negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption
conclusive against her.

23
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED FROM
LIABILITY. — In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the
provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence,
or force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following
or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . . (6) That the
common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme Court also held that:
"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 of irresistible threat, violence of 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."

4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, petitioner herself has
made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same.

5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner presented no
other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it.

6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES. —
While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court,
he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not considered the
best evidence if the affiants are available as witnesses.

7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. — Granting
that the said evidence were not self-serving, the same were not sufficient to prove that the contract was one of
lease. It must be understood that a contract is what the law defines it to be and not what it is called by the
contracting parties.

DECISION

CAMPOS, JR., J p:

This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO,
doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M.
BASCOS, doing business under the name of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No.
25216, the dispositive portion of which is quoted hereunder:

"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in
toto. Costs against appellant." 1

The facts, as gathered by this Court, are as follows:

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling
contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000
m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in
Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita
Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila
Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the said cargo. As
a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance
with the contract which stated that:

"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or
damages to the cargo during transport at market value, . . ." 3

Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a
complaint for a sum of money and damages with writ of preliminary attachment 4 for breach of a contract of

24
carriage. The prayer for a Writ of Preliminary Attachment was supported by an affidavit 5 which contained the
following allegations:

"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of
preliminary attachment may lawfully issue, namely:

"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent to
defraud his creditors;"

5. That there is no sufficient security for the claim sought to be enforced by the present action;

6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"

The trial court granted the writ of preliminary attachment on February 17, 1987.

In her answer, petitioner interposed the following defenses: that there was no contract of carriage since
CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was liable
to petitioner in the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was hijacked
along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was immediately reported
to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked properties; that after
preliminary investigation, an information for robbery and carnapping were filed against Jose Opriano, et al.; and
that hijacking, being a force majeure, exculpated petitioner from any liability to CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay
the former:

1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00) as
an (sic) for actual damages with legal interest of 12% per cent per annum to be counted from December 4, 1986
until fully paid;

2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and

3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is DENIED
for being moot and academic.

SO ORDERED." 6

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.

Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:

"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP BETWEEN
PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO
TRUCK.

II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE
OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER
BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.

III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT
PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN
RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7

25
The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was
the hijacking referred to a force majeure?

The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that
she did business under the name A.M. Bascos Trucking and that said admission dispensed with the presentation
by private respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The respondent Court
also adopted in toto the trial court's decision that petitioner was a common carrier, Moreover, both courts
appreciated the following pieces of evidence as indicators that petitioner was a common carrier: the fact that the
truck driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean meal
as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito Morden,
was also an employee of petitioner; and the fact that control of the cargo was placed in petitioner's care.

In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in
this petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the
truck. She cited as evidence certain affidavits which referred to the contract as "lease". These affidavits were
made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in his
testimony his statement that the contract was a lease contract. 10 She also stated that: she was not catering to
the general public. Thus, in her answer to the amended complaint, she said that she does business under the
same style of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to the
general public but to a few customers only in view of the fact that it is only a small business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier.

Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or 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 to determine a common carrier is "whether the given
undertaking is a part of the business engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business transacted." 12 In this case, petitioner
herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to
move. Judicial admissions are conclusive and no evidence is required to prove the same. 13

But petitioner argues that there was only a contract of lease because they offer their services only to a select
group of people and because the private respondents, plaintiffs in the lower court, did not object to the
presentation of affidavits by petitioner where the transaction was referred to as a lease contract.

Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In
referring to Article 1732 of the Civil Code, it held thus:

"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."

Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed
them as self-serving and petitioner contests the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-serving, the same were not sufficient to prove
that the contract was one of lease. It must be understood that a contract is what the law defines it to be
and not what it is called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the
existence of the contract of lease. He who alleges a fact has the burden of proving it. 16

Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force majeure.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by
them. 17 Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost,
destroyed or deteriorated. 18 There are very few instances when the presumption of negligence does not attach
and these instances are enumerated in Article 1734. 19 In those cases where the presumption is applied, the
common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.
26
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the
loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included in the
provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier
is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he
must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:

"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy;

xxx xxx xxx

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

In the same case, 21 the Supreme Court also held that:

"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."

To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit,
23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have concluded
that these affidavits were not enough to overcome the presumption. Petitioner's affidavit about the hijacking was
based on what had been told her by Juanito Morden. It was not a first-hand account. While it had been admitted
in court for lack of objection on the part of private respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the conclusion of the appellate court. In a petition for review on
certiorari, We are not to determine the probative value of evidence but to resolve questions of law. Secondly, the
affidavit of Jesus Bascos did not dwell on how the hijacking took place. Thirdly, while the affidavit of Juanito
Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as
could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the affiants
are available as witnesses. 25 The subsequent filing of the information for carnapping and robbery against the
accused named in said affidavits did not necessarily mean that the contents of the affidavits were true because
they were yet to be determined in the trial of the criminal cases.

The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own
failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to
disturb the conclusion that the motion to lift/dissolve the writ of preliminary attachment has been rendered moot
and academic by the decision on the merits.

In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The petition
is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

#11

G.R. No. 112287 December 12, 1997

NATIONAL STEEL CORPORATION, petitioner,
vs.
COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents.

27
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS AND NATIONAL STEEL CORPORATION, respondents.

PANGANIBAN, J.:

The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner's responsibility
for damage to the cargo and its liability for demurrage and attorney's fees. The Court also reiterates the well-
known rule that findings of facts of trial courts, when affirmed by the Court of Appeals, are binding on this Court.

The Case

Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons
Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals. 1 The Court of
Appeals modified the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil Case No.
23317. The RTC disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing
the complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the
counterclaim as follows:

1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate
on both amounts from April 7, 1976 until the same shall have been fully paid;

2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and

3. Costs of suit.

SO ORDERED.2

On the other hand, the Court of Appeals ruled:

WHEREFORE, premises considered, the decision appealed from is modified by reducing the award
for demurrage to P44,000.00 and deleting the award for attorney's fees and expenses of litigation.
Except as thus modified, the decision is AFFIRMED. There is no pronouncement as to costs.

SO ORDERED.3

The Facts

The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or
shipment for the general public. Its services are available only to specific persons who enter into a special
contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it is in the
capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage
charter hire with National Steel Corporation.

The facts as found by Respondent Court of Appeals are as follows:

(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons
Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit "B"; also
Exhibit "1") whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load
steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms
and conditions, viz:

1. . . .

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.

28
3. . . .

4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within
fifteen (15) days.

5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.

6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours,
Sundays and Holidays Included).

7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.

8. . . .

9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not
responsible for losses/damages except on proven willful negligence of the officers of the vessel.

10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized
Charter Party Agreement shall form part of this Contract.

xxx xxx xxx

The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in the NANYOZAI
Charter Party which stands for "Freight In and Out including Stevedoring and Trading", which means
that the handling, loading and unloading of the cargoes are the responsibility of the Charterer.
Under Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge
the cargo free of risk and expenses to owners. . . . (Emphasis supplied).

Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the beginning of the voyage,
exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and
to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception,
carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting
from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the
vessel seaworthy, and to secure that the vessel is properly manned,equipped and supplied and to make
the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage
and preservation; . . . ; perils, dangers and accidents of the sea or other navigable waters; . . . ; wastage
in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the cargo;
insufficiency of packing; . . . ; latent defects not discoverable by due diligence; any other cause arising
without the actual fault or privity of Owners or without the fault of the agents or servants of owners."

Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be responsible for
split, chafing and/or any damage unless caused by the negligence or default of the master and crew."

(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV
"VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates
and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about
2,481.19 metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of the
ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel[,] acknowledged receipt of the cargo
on board and signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974.

(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The
following day, August 13, 1974, when the vessel's three (3) hatches containing the shipment were
opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were allegedly
found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the
Charterer. Unloading was completed only on August 24, 1974 after incurring a delay of eleven (11)
days due to the heavy rain which interrupted the unloading operations. (Exhibit "E")

(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment
by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975
(Exhibit "G"), MASCO made a report of its ocular inspection conducted on the cargo, both while it was
29
still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where
the cargo was taken and stored. MASCO reported that it found wetting and rusting of the packages
of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at
various extents; that container/metal casings of the skids were rusting all over. MASCO ventured the
opinion that "rusting of the tinplates was caused by contact with SEA WATER sustained while still
on board the vessel as a consequence of the heavy weather and rough seas encountered while
en route to destination (Exhibit "F"). It was also reported that MASCO's surveyors drew at random
samples of bad order packing materials of the tinplates and delivered the same to the M.I.T. Testing
Laboratories for analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770
(Exhibit "I") which in part, states, "The analysis of bad order samples of packing materials . . . shows that
wetting was caused by contact with SEA WATER".

(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the
defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the
amount of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said claim
but defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April
21, 1976 which was docketed as Civil Case No. 23317, CFI, Rizal.

(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18
as a result of the act, neglect and default of the master and crew in the management of the vessel
as well as the want of due diligence on the part of the defendant to make the vessel seaworthy
and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe
for its reception, carriage and preservation — all in violation of defendant's undertaking under
their Contract of Voyage Charter Hire.

(7) In its answer, defendant denied liability for the alleged damage claiming that the MV "VLASONS
I" was seaworthy in all respects for the carriage of plaintiff's cargo; that said vessel was not a
"common carrier" inasmuch as she was under voyage charter contract with the plaintiff as
charterer under the charter party; that in the course of the voyage from Iligan City to Manila, the
MV "VLASONS I" encountered very rough seas, strong winds and adverse weather condition,
causing strong winds and big waves to continuously pound against the vessel and seawater to
overflow on its deck and hatch covers, that under the Contract of Voyage Charter Hire, defendant
shall not be responsible for losses/damages except on proven willful negligence of the officers
of the vessel, that the officers of said MV "VLASONS I" exercised due diligence and proper
seamanship and were not willfully negligent; that furthermore the Voyage Charter Party provides that
loading and discharging of the cargo was on FIOST terms which means that the vessel was free of risk
and expense in connection with the loading and discharging of the cargo; that the damage, if any,
was due to the inherent defect, quality or vice of the cargo or to the insufficient packing thereof or to latent
defect of the cargo not discoverable by due diligence or to any other cause arising without the actual fault
or privity of defendant and without the fault of the agents or servants of defendant; consequently,
defendant is not liable; that the stevedores of plaintiff who discharged the cargo in Manila were negligent
and did not exercise due care in the discharge of the cargo; land that the cargo was exposed to rain and
seawater spray while on the pier or in transit from the pier to plaintiff's warehouse after discharge from
the vessel; and that plaintiff's claim was highly speculative and grossly exaggerated and that the small
stain marks or sweat marks on the edges of the tinplates were magnified and considered total loss of the
cargo. Finally, defendant claimed that it had complied with all its duties and obligations under the Voyage
Charter Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged the following
counterclaim:

(a) That despite the full and proper performance by defendant of its obligations under
the Voyage Charter Hire Contract, plaintiff failed and refused to pay the agreed charter
hire of P75,000.00 despite demands made by defendant;

(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant
the sum of P8,000.00 per day for demurrage. The vessel was on demurrage for eleven
(11) days in Manila waiting for plaintiff to discharge its cargo from the vessel. Thus,
plaintiff was liable to pay defendant demurrage in the total amount of P88,000.00.

(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered
to pay defendant attorney's fees and all expenses of litigation in the amount of not less
than P100,000.00.

30
(8) From the evidence presented by both parties, the trial court came out with the following findings which
were set forth in its decision:

(a) The MV "VLASONS I" is a vessel of Philippine registry engaged in the tramping
service and is available for hire only under special contracts of charter party as in this
particular case.

(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire
(Exh. "1"), the MV VLASONS I" was covered by the required seaworthiness certificates
including the Certification of Classification issued by an international classification
society, the NIPPON KAIJI KYOKAI (Exh. "4"); Coastwise License from the Board of
Transportation (Exh. "5"); International Loadline Certificate from the Philippine Coast
Guard (Exh. "6"); Cargo Ship Safety Equipment Certificate also from the Philippine Coast
Guard (Exh. "7"); Ship Radio Station License (Exh. "8"); Certificate of Inspection by the
Philippine Coast Guard (Exh. "12"); and Certificate of Approval for Conversion issued by
the Bureau of Customs (Exh. "9"). That being a vessel engaged in both overseas and
coastwise trade, the MV "VLASONS I" has a higher degree of seaworthiness and safety.

(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of
Voyage Charter Hire, the MV "VLASONS I" underwent drydocking in Cebu and was
thoroughly inspected by the Philippine Coast Guard. In fact, subject voyage was the
vessel's first voyage after the drydocking. The evidence shows that the MV "VLASONS
I" was seaworthy and properly manned, equipped and supplied when it undertook the
voyage. It has all the required certificates of seaworthiness.

(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch
openings were covered by hatchboards which were in turn covered by two or double
tarpaulins. The hatch covers were water tight. Furthermore, under the hatchboards were
steel beams to give support.

(e) The claim of the plaintiff that defendant violated the contract of carriage is not
supported by evidence. The provisions of the Civil Code on common carriers pursuant
to which there exists a presumption of negligence in case of loss or damage to the cargo
are not applicable. As to the damage to the tinplates which was allegedly due to the
wetting and rusting thereof, there is unrebutted testimony of witness Vicente Angliongto
that tinplates "sweat" by themselves when packed even without being in contract (sic)
with water from outside especially when the weather is bad or raining. The rust caused
by sweat or moisture on the tinplates may be considered as a loss or damage but then,
defendant cannot be held liable for it pursuant to Article 1734 of the Civil Case which
exempts the carrier from responsibility for loss or damage arising from the "character of
the goods . . ." All the 1,769 skids of the tinplates could not have been damaged by water
as claimed by plaintiff. It was shown as claimed by plaintiff that the tinplates themselves
were wrapped in kraft paper lining and corrugated cardboards could not be affected by
water from outside.

(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent
in not closing the hatch openings of the MV "VLASONS I" when rains occurred during
the discharging of the cargo thus allowing rainwater to enter the hatches. It was proven
that the stevedores merely set up temporary tents to cover the hatch openings in case
of rain so that it would be easy for them to resume work when the rains stopped by just
removing the tent or canvas. Because of this improper covering of the hatches by the
stevedores during the discharging and unloading operations which were interrupted by
rains, rainwater drifted into the cargo through the hatch openings. Pursuant to paragraph
5 of the NANYOSAI [sic] Charter Party which was expressly made part of the Contract
of Voyage Charter Hire, the loading, stowing and discharging of the cargo is the sole
responsibility of the plaintiff charterer and defendant carrier has no liability for whatever
damage may occur or maybe [sic] caused to the cargo in the process.

(g) It was also established that the vessel encountered rough seas and bad weather
while en route from Iligan City to Manila causing sea water to splash on the ship's deck
on account of which the master of the vessel (Mr. Antonio C. Dumlao) filed a "Marine

31
 Protest" on August 13, 1974 (Exh. "15"); which can be invoked by defendant as a force
majeure that would exempt the defendant from liability.

(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage
Charter Hire contract that it was to insure the cargo because it did not. Had plaintiff
complied with the requirement, then it could have recovered its loss or damage from the
insurer. Plaintiff also violated the charter party contract when it loaded not only "steel
products", i.e. steel bars, angular bars and the like but also tinplates and hot rolled sheets
which are high grade cargo commanding a higher freight. Thus plaintiff was able to ship
grade cargo at a lower freight rate.

(i) As regards defendant's counterclaim, the contract of voyage charter hire under
Paragraph 4 thereof, fixed the freight at P30.00 per metric ton payable to defendant
carrier upon presentation of the bill of lading within fifteen (15) days. Plaintiff has not paid
the total freight due of P75,000.00 despite demands. The evidence also showed that the
plaintiff was required and bound under paragraph 7 of the same Voyage Charter Hire
contract to pay demurrage of P8,000.00 per day of delay in the unloading of the cargoes.
The delay amounted to eleven (11) days thereby making plaintiff liable to pay defendant
for demurrage in the amount of P88,000.00.

Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:

The trial court erred in finding that the MV "VLASONS I" was seaworthy, properly manned, equipped and
supplied, and that there is no proof of willful negligence of the vessel's officers.

II

The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent nature or
character of the goods and not due to contact with seawater.

III

The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSC's
shipment.

IV

The trial court erred in exempting VSI from liability on the ground of force majeure.

The trial court erred in finding that NSC violated the contract of voyage charter hire.

VI

The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to VSI. 4

As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage from
P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed
separate motions for reconsideration. In a Resolution5 dated October 20, 1993, the appellate court denied both
motions. Undaunted, NSC and VSI filed their respective petitions for review before this Court. On motion of VSI,
the Court ordered on February 14, 1994 the consolidation of these petitions. 6

The Issues

In its petition7 and memorandum,8 NSC raises the following questions of law and fact:

32
Questions of Law

1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused
by weather interruption;

2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7", "8", "9", "11" and
"12") were admissible in evidence and constituted evidence of the vessel's seaworthiness at the
beginning of the voyages; and

3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from liability for cargo
damage.

Questions of Fact

1. Whether or not the vessel was seaworthy and cargo-worthy;

2. Whether or not vessel's officers and crew were negligent in handling and caring for NSC's cargo;

3. Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence, rusted on their own;
and

4. Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of NSC's tinplates.

In its separate petition,9 VSI submits for the consideration of this Court the following alleged errors of the CA:

A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage from
P88,000.00 to P44,000.00.

B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for
attorney's fees and expenses of litigation.

Amplifying the foregoing, VSI raises the following issues in its memorandum: 10

I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which
there exist[s] a presumption of negligence against the common carrier in case of loss or damage to the
cargo are applicable to a private carrier.

II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai
Charter, are valid and binding on both contracting parties.

The foregoing issues raised by the parties will be discussed under the following headings:

1. Questions of Fact

2. Effect of NSC's Failure to Insure the Cargo

3. Admissibility of Certificates Proving Seaworthiness

4. Demurrage and Attorney's Fees.

The Court's Ruling

The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.

Preliminary Matter: Common Carrier or Private Carrier?

33
At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a private
carrier. The resolution of this preliminary question determines the law, standard of diligence and burden of proof
applicable to the present case.

Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public." It has been held that the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a
fee.11 A carrier which does not qualify under the above test is deemed a private carrier. "Generally, private
carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for
the general public. The most typical, although not the only form of private carriage, is the charter party, a
maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or
some part of a ship for a period of time or a voyage or voyages."12

In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the
Regional Trial Court, it carried passengers or goods only for those it chose under a "special contract of
charter party." 13 As correctly concluded by the Court of Appeals, the MV Vlasons I "was not a common but a
private carrier."14Consequently, the rights and obligations of VSI and NSC, including their respective liability for
damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter
party.15 Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers
Shipping Corporation,16 the Court ruled:

. . . in a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does
not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a
private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving common carriers.17

Extent of VSI's Responsibility and

Liability Over NSC's Cargo

It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall not be
responsible for losses except on proven willful negligence of the officers of the vessel." The NANYOZAI
Charter Party, which was incorporated in the parties' contract of transportation further provided that the
shipowner shall not be liable for loss of or a damage to the cargo arising or resulting from
unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy
or to ensure that the same was "properly manned, equipped and supplied," and to "make the holds and
all other parts of the vessel in which cargo [was] carried, fit and safe for its reception, carriage and
preservation."18 The NANYOZAI Charter Party also provided that "[o]wners shall not be responsible for
split, chafing and/or any damage unless caused by the negligence or default of the master or crew." 19

Burden of Proof

In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment was
caused by VSI's willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy
and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on
NSC by the parties' agreement.

This view finds further support in the Code of Commerce which pertinently provides:

Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not
been expressly stipulated.

Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous
event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of
the shipper.

The burden of proof of these accidents is on the carrier.

34
 Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the
preceding article if proofs against him show that they occurred on account of his negligence or his
omission to take the precautions usually adopted by careful persons, unless the shipper committed fraud
in the bill of lading, making him to believe that the goods were of a class or quality different from what
they really were.

Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the
foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places
the prima faciepresumption of negligence on a common carrier. It is a hornbook doctrine that:

In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff
to prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or
damaged while in the carrier's custody does not put the burden of proof on the carrier.

Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the
protection of the goods committed to its care, the burden of proving negligence or a breach of
that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carrier's
possession does not cast on it the burden of proving proper care and diligence on its part or that
the loss occurred from an excepted cause in the contract or bill of lading. However, in discharging
the burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences by which the law
aids the bailor in an action against a bailee, and since the carrier is in a better position to know the cause
of the loss and that it was not one involving its liability, the law requires that it come forward with the
information available to it, and its failure to do so warrants an inference or presumption of its liability.
However, such inferences and presumptions, while they may affect the burden of coming forward with
evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes forward
with evidence explaining the loss or damage, the burden of going forward with the evidence is again on
plaintiff.

Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a breach
thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the
goods were lost or damaged while in the carrier's possession does not cast on it the burden of proving
seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for unseaworthiness
not discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due
diligence to make the vessel seaworthy.20

In the instant case, the Court of Appeals correctly found the NSC "has not taken the correct position in
relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10
and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-appellant's [NSC's] interpretation of Clause
12 is not even correct), it argues that 'a careful examination of the evidence will show that VSI miserably failed to
comply with any of these obligation's as if defendant-appellee [VSI] had the burden of
proof."21

First Issue: Questions of Fact

Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1) whether
VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose under the charter party;
(2) whether the damage to the cargo should be attributed to the willful negligence of the officers and crew of the
vessel or of the stevedores hired by NSC; and (3) whether the rusting of the tinplates was caused by its own
"sweat" or by contact with seawater.

These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to
hear the parties' conflicting claims and to carefully weigh their respective evidence. The findings of the trial court
were subsequently affirmed by the Court of Appeals. Where the factual findings of both the trial court and the
Court of Appeals coincide, the same are binding on this Court.22 We stress that, subject to some exceptional
instances,23only questions of law — not questions of fact — may be raised before this Court in a petition for review
under Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find no reason to disturb the
lower court's factual findings, as indeed NSC has not successfully proven the application of any of the aforecited
exceptions.

Was MV Vlasons I Seaworthy?

35
In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for
the carriage of NSC's cargo of steel and tinplates. This is shown by the fact that it was drylocked and
inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the
contract of voyage charter hire.24The vessel's voyage from Iligan to Manila was the vessel's first voyage after
drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it
met all requirements for trading as cargo vessel.25 The Court of Appeals itself sustained the conclusion of the
trial court that MV Vlasons I was seaworthy. We find no reason to modify or reverse this finding of both the trial
and the appellate courts.

Who Were Negligent:

Seamen or Stevedores?

As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the
negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for the
carriage of tinplates. NSC failed to discharge this burden.

Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas to cover
the hatches through which the cargo was loaded into the cargo hold of the ship. It faults the Court of Appeals for
failing to consider such claim as an "uncontroverted fact"26 and denies that MV Vlasons I "was equipped with new
canvas covers in tandem with the old ones as indicated in the Marine Protest . . ." 27 We disagree.

The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to the new
one used primarily to make the ship's hatches watertight. The foregoing are clear from the marine protest of the
master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship's boatswain, Jose Pascua. The
salient portions of said marine protest read:

. . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8, 1974, loaded with
approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation; that
before departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or about
August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very rough
seas and strong winds and Manila office was advised by telegram of the adverse weather conditions
encountered; that in the morning of August 10, 1974, the weather condition changed to worse and strong
winds and big waves continued pounding the vessel at her port side causing sea water to overflow on
deck andhatch (sic) covers and which caused the first layer of the canvass covering to give way while
the new canvass covering still holding on;

That the weather condition improved when we reached Dumali Point protected by Mindoro; that we re-
secured the canvass covering back to position; that in the afternoon of August 10, 1974, while entering
Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while approaching
Fortune Island, we encountered again rough seas, strong winds and big waves which caused the same
canvass to give way and leaving the new canvass holding on;

xxx xxx xxx 28

And the relevant portions of Jose Pascua's deposition are as follows:

q What is the purpose of the canvas cover?

a So that the cargo would not be soaked with water.

q And will you describe how the canvas cover was secured on the hatch opening?

WITNESS

a It was placed flat on top of the hatch cover, with a little canvas flowing over the sides
and we place[d] a flat bar over the canvas on the side of the hatches and then we place[d]
a stopper so that the canvas could not be removed.

ATTY DEL ROSARIO

36
 q And will you tell us the size of the hatch opening? The length and the width of the hatch
opening.

a Forty-five feet by thirty-five feet, sir.

xxx xxx xxx

q How was the canvas supported in the middle of the hatch opening?

a There is a hatch board.

ATTY DEL ROSARIO

q What is the hatch board made of?

a It is made of wood, with a handle.

q And aside from the hatch board, is there any other material there to cover the hatch?

a There is a beam supporting the hatch board.

q What is this beam made of?

a It is made of steel, sir.

q Is the beam that was placed in the hatch opening covering the whole hatch opening?

a No, sir.

q How many hatch beams were there placed across the opening?

a There are five beams in one hatch opening.

ATTY DEL ROSARIO

q And on top of the beams you said there is a hatch board. How many pieces of wood
are put on top?

a Plenty, sir, because there are several pieces on top of the hatch beam.

q And is there a space between the hatch boards?

a There is none, sir.

q They are tight together?

a Yes, sir.

q How tight?

a Very tight, sir.

q Now, on top of the hatch boards, according to you, is the canvass cover. How many
canvas covers?

a Two, sir.29

37
That due diligence was exercised by the officers and the crew of the MV Vlasons I was further
demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give
way and the ship's hatches and cargo holds remained waterproof. As aptly stated by the Court of Appeals,
". . . we find no reason not to sustain the conclusion of the lower court based on overwhelming evidence, that
the MV 'VLASONS I' was seaworthy when it undertook the voyage on August 8, 1974 carrying on board thereof
plaintiff-appellant's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769
packages from NSC's pier in Iligan City arriving safely at North Harbor, Port Area, Manila, on August 12, 1974; .
. .30

Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew
of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were negligent
in unloading the cargo from the ship.

The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by
a passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was clearly
inadequate for keeping rain and seawater away from the hatches of the ship. Vicente Angliongto, an officer of
VSI, testified thus:

ATTY ZAMORA:

Q Now, during your testimony on November 5, 1979, you stated on August 14 you went
on board the vessel upon notice from the National Steel Corporation in order to conduct
the inspection of the cargo. During the course of the investigation, did you chance to see
the discharging operation?

WITNESS:

A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged
on the pier but majority of the tinplates were inside the hall, all the hatches were opened.

Q In connection with these cargoes which were unloaded, where is the place.

A At the Pier.

Q What was used to protect the same from weather?

ATTY LOPEZ:

We object, your Honor, this question was already asked. This particular matter . . . the
transcript of stenographic notes shows the same was covered in the direct examination.

ATTY ZAMORA:

Precisely, your Honor, we would like to go on detail, this is the serious part of the
testimony.

COURT:

All right, witness may answer.

ATTY LOPEZ:

Q What was used in order to protect the cargo from the weather?

A A base of canvas was used as cover on top of the tin plates, and tents were built at
the opening of the hatches.

38
 Q You also stated that the hatches were already opened and that there were tents
constructed at the opening of the hatches to protect the cargo from the rain. Now, will
you describe [to] the Court the tents constructed.

A The tents are just a base of canvas which look like a tent of an Indian camp raise[d]
high at the middle with the whole side separated down to the hatch, the size of the hatch
and it is soaks [sic] at the middle because of those weather and this can be used only to
temporarily protect the cargo from getting wet by rains.

Q Now, is this procedure adopted by the stevedores of covering tents proper?

A No, sir, at the time they were discharging the cargo, there was a typhoon passing by
and the hatch tent was not good enough to hold all of it to prevent the water soaking
through the canvass and enter the cargo.

Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter
and soak into the canvass and tinplates.

A Yes, sir, the second time I went there, I saw it.

Q As owner of the vessel, did you not advise the National Steel Corporation [of] the
procedure adopted by its stevedores in discharging the cargo particularly in this tent
covering of the hatches?

A Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the
stevedores did not mind at all, so, called the attention of the representative of the National
Steel but nothing was done, just the same. Finally, I wrote a letter to them. 31

NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain immediately about
the stevedores' negligence on the first day of unloading, pointing out that he wrote his letter to petitioner only
seven days later.32 The Court is not persuaded. Angliongto's candid answer in his aforequoted testimony
satisfactorily explained the delay. Seven days lapsed because he first called the attention of the stevedores, then
the NSC's representative, about the negligent and defective procedure adopted in unloading the cargo. This
series of actions constitutes a reasonable response in accord with common sense and ordinary human
experience. Vicente Angliongto could not be blamed for calling the stevedores' attention first and then the NSC's
representative on location before formally informing NSC of the negligence he had observed, because he was
not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for
NSC which was ultimately responsible for the stevedores it had hired and the performance of their task to unload
the cargo.

We see no reason to reverse the trial and the appellate courts' findings and conclusions on this point, viz:

In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired
by NSC were negligent in the unloading of NSC's shipment. We do not think so. Such negligence
according to the trial court is evident in the stevedores hired by [NSC], not closing the hatch of MV
'VLASONS I' when rains occurred during the discharging of the cargo thus allowing rain water and
seawater spray to enter the hatches and to drift to and fall on the cargo. It was proven that the stevedores
merely set up temporary tents or canvas to cover the hatch openings when it rained during the unloading
operations so that it would be easier for them to resume work after the rains stopped by just removing
said tents or canvass. It has also been shown that on August 20, 1974, VSI President Vicente Angliongto
wrote [NSC] calling attention to the manner the stevedores hired by [NSC] were discharging the cargo
on rainy days and the improper closing of the hatches which allowed continuous heavy rain water to leak
through and drip to the tinplates' covers and [Vicente Angliongto] also suggesting that due to four (4)
days continuos rains with strong winds that the hatches be totally closed down and covered with canvas
and the hatch tents lowered. (Exh. "13"). This letter was received by [NSC] on 22 August 1974 while
discharging operations were still going on (Exhibit "13-A").33

The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable weather
will not make VSI liable for any damage caused thereby. In passing, it may be noted that the NSC may seek
indemnification, subject to the laws on prescription, from the stevedoring company at fault in the discharge
operations. "A stevedore company engaged in discharging cargo . . . has the duty to load the cargo . . . in a
39
prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence . . . and where the officers
and members and crew of the vessel do nothing and have no responsibility in the discharge of cargo by
stevedores . . . the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the
stevedores . . ."34 as in the instant case.

Do Tinplates "Sweat"?

The trial court relied on the testimony of Vicente Angliongto in finding that ". . . tinplates 'sweat' by themselves
when packed even without being in contact with water from outside especially when the weather is bad or
raining . . ."35 The Court of Appeals affirmed the trial court's finding.

A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the damage to the
tinplates was occasioned not by airborne moisture but by contact with rain and seawater which the stevedores
negligently allowed to seep in during the unloading.

Second Issue: Effect of NSC's Failure to

Insure the Cargo

The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate
and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage to the cargo
caused by the willful negligence of the officers and the crew of MV Vlasons I. Clearly, therefore, NSC's failure to
insure the cargo will not affect its right, as owner and real party in interest, to file an action against VSI for damages
caused by the latter's willful negligence. We do not find anything in the charter party that would make the liability
of VSI for damage to the cargo contingent on or affected in any manner by NSC's obtaining an insurance over
the cargo.

Third Issue: Admissibility of Certificates

Proving Seaworthiness

NSC's contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the
certificates of seaworthiness offered in evidence by VSI. The said certificates include the following:

1. Certificate of Inspection of the Philippines Coast Guard at Cebu

2. Certificate of Inspection from the Philippine Coast Guard

3. International Load Line Certificate from the Philippine Coast Guard

4. Coastwise License from the Board of Transportation

5. Certificate of Approval for Conversion issued by the Bureau of Customs 36

NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules of Court.
It points out that Exhibits 3, 4 and 11 allegedly are "not written records or acts of public officers"; while Exhibits
5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official publications or certified true copies" as required by Sections
25 and 26, Rule 132, of the Rules of Court.37

After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible,
for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by private parties,
but they have not been proven by one who saw the writing executed, or by evidence of the genuineness of the
handwriting of the maker, or by a subscribing witness. Exhibits, 5, 6, 7, 8, 9, and 12 are photocopies, but their
admission under the best evidence rule have not been demonstrated.

We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44
of Rule 130 of the Rules of Court, which provides that "(e)ntries in official records made in the performance of a
duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law,
are prima facie evidence of the facts therein stated."38 Exhibit 11 is an original certificate of the Philippine Coast
Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel 'VLASONS I' was
drydocked . . . and PCG Inspectors were sent on board for inspection . . . After completion of drydocking and duly
inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all
40
requirements, fitted and equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and
sailed for Cebu Port on July 10, 1974." (sic) NSC's claim, therefore, is obviously misleading and erroneous.

At any rate, it should be stressed that NSC has the burden of proving that MV Vlasons I was not
seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the obligation
of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of
proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo.
Assailing the genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was
not seaworthy.

Fourth Issue: Demurrage and Attorney's Fees

The contract of voyage charter hire provides inter alia:

xxx xxx xxx

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.

xxx xxx xxx

6. Loading/Discharging Rate: 750 tons per WWDSHINC.

7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day. 39

The Court defined demurrage in its strict sense as the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for
loading and unloading of cargo.40It is given to compensate the shipowner for the nonuse of the vessel.
On the other hand, the following is well-settled:

Laytime runs according to the particular clause of the charter party. . . . If laytime is expressed in "running
days," this means days when the ship would be run continuously, and holidays are not excepted. A
qualification of "weather permitting" excepts only those days when bad weather reasonably prevents the
work contemplated.41

In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as
WWDSHINC or weather working days Sundays and holidays included. 42 The running of laytime was thus made
subject to the weather, and would cease to run in the event unfavorable weather interfered with the unloading of
cargo.43 Consequently, NSC may not be held liable for demurrage as the four-day laytime allowed it did not lapse,
having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the
parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively
that NSC incurred eleven days of delay in unloading the cargo. The trial court arrived at this erroneous finding by
subtracting from the twelve days, specifically August 13, 1974 to August 24, 1974, the only day of unloading
unhampered by unfavorable weather or rain, which was August 22, 1974. Based on our previous discussion,
such finding is a reversible error. As mentioned, the respondent appellate court also erred in ruling that NSC was
liable to VSI for demurrage, even if it reduced the amount by half.

Attorney's Fees

VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We disagree. While VSI
was compelled to litigate to protect its rights, such fact by itself will not justify an award of attorney's fees under
Article 2208 of the Civil Code when ". . . no sufficient showing of bad faith would be reflected in a party's
persistence in a case other than an erroneous conviction of the righteousness of his cause . .
."44 Moreover, attorney's fees may not be awarded to a party for the reason alone that the judgment rendered
was favorable to the latter, as this is tantamount to imposing a premium on one's right to litigate or seek judicial
redress of legitimate grievances.45

Epilogue

At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the cargo?
Ranged against NSC are two formidable truths. First, both lower courts found that such damage was brought
41
about during the unloading process when rain and seawater seeped through the cargo due to the fault or
negligence of the stevedores employed by it. Basic is the rule that factual findings of the trial court, when affirmed
by the Court of Appeals, are binding on the Supreme Court. Although there are settled exceptions, NSC has not
satisfactorily shown that this case is one of them. Second, the agreement between the parties — the Contract of
Voyage Charter Hire — placed the burden of proof for such loss or damage upon the shipper, not upon the
shipowner. Such stipulation, while disadvantageous to NSC, is valid because the parties entered into a contract
of private charter, not one of common carriage. Basic too is the doctrine that courts cannot relieve a parry from
the effects of a private contract freely entered into, on the ground that it is allegedly one-sided or unfair to the
plaintiff. The charter party is a normal commercial contract and its stipulations are agreed upon in consideration
of many factors, not the least of which is the transport price which is determined not only by the actual costs but
also by the risks and burdens assumed by the shipper in regard to possible loss or damage to the cargo. In
recognition of such factors, the parties even stipulated that the shipper should insure the cargo to protect itself
from the risks it undertook under the charter party. That NSC failed or neglected to protect itself with such
insurance should not adversely affect VSI, which had nothing to do with such failure or neglect.

WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The questioned
Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is
deleted. No pronouncement as to costs.

SO ORDERED.

# 12

G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,

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

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in
CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil
Case No. 4293, which dismissed petitioners' complaint for a business tax refund imposed by the City of
Batangas.

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and
operate oil pipelines. The original pipeline concession was granted in 1967 1 and renewed by the Energy
Regulatory Board in 1992. 2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City.
However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a
local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government 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 . . . .

42
 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.

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
43
 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.
44
 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:
45
 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.

46
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.

Bellosillo, Puno and Mendoza, JJ., concur.

Footnotes

1 Rollo, pp. 90-94.

2 Decision of the Energy Regulatory Board in ERB Case No. 92-94, renewing the Pipeline
Concession of petitioner First Philippine Industrial Corporation, formerly known as Meralco
Securities Industrial Corporation. (Rollo, pp. 95-100).

3 Sec. 143. Tax on Business. The municipality may impose taxes on the following business:

xxx xxx xxx

(e) On contractors and other independent contractors, in accordance with the following schedule:

With gross receipts for the preceding Amount of Tax Per Annum

calendar year in the amount of

......

P2, 000,000.00 or more at a rate not exceeding fifty

percent (50%) of one percent (1%)

4 Letter Protest dated January 20, 1994, Rollo, pp. 110-111.

5 Letter of respondent City Treasurer, Rollo, p. 112.

6 Complaint, Annex "C", Rollo, pp. 51-56.

7 Rollo, pp. 51-57.

8 Answer, Annex "J", Rollo, pp. 122-127.

9 RTC Decision, Rollo, pp. 58-62.

10 Rollo, p. 84.

11 CA-G.R. SP No. 36801; Penned by Justice Jose C. De la Rama and concurred in by Justice
Jaime M. Lantin and Justice Eduardo G. Montenegro; Rollo, pp. 33-47.

12 Rollo, p. 49.

13 Resolution dated November 11, 1996 excerpts of which are hereunder quoted:

"The petition is unmeritorious

"As correctly ruled by respondent appellate court, petitioner is not a common carrier as it is not
offering its services to the public.

47
 "Art. 1732 of the Civil Code defines Common Carriers as: persons, corporations, 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.

"We sustain the view that petitioner is a special carrier. Based on the facts on hand, it appears
that petitioner is not offering its services to the public.

"We agree with the findings of the appellate court that the claim for exemption from taxation must
be strictly construed against the taxpayer. The present understanding of the concept of "common
carries" does not include carriers of petroleum using pipelines. It is highly unconventional to say
that the business of transporting petroleum through pipelines involves "common carrier"
business. The Local Government Code intended to give exemptions from local taxation to
common carriers transporting goods and passengers through moving vehicles or vessels and
not through pipelines. The term common carrier under Section 133 (j) of the Local Government
Code must be given its simple and ordinary or generally accepted meaning which definitely not
include operators of pipelines."

14 G.R. No. 125948 (First Philippine Industrial Corporation vs. Court of Appeals, et. al.) —
Considering the grounds of the motion for reconsideration, dated December 23, 1996, filed by
counsel for petitioner, of the resolution of November 11, 1996 which denied the petition for review
on certiorari, the Court Resolved:

(a) to GRANT the motion for reconsideration and to REINSTATE the petition; and

(b) to require respondent to COMMENT on the petition, within ten (10) days from notice.

15 Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5.

16 168 SCRA 617-618 [1988].

17 Giffin v. Pipe Lines, 172 Pa. 580, 33 Alt. 578; Producer Transp. Co. v. Railroad Commission,
241 US 228, 64 L ed 239, 40 S Ct 131.

18 Journal and Record of the House of Representatives, Fourth Regular Session, Volume 2, pp.
87-89, September 6, 1990; Emphasis Ours.

19 Annex "D" of Petition, Rollo, pp. 101-109.

#13

VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL
SERVICES, INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied
Guarantee Ins. Co., Inc.) respondent.

DECISION
MENDOZA, J.:

This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of Appeals, affirming the
decision[2] of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent, as
subrogee, the amount of P93,112.00 with legal interest, representing the value of damaged cargo handled by
petitioner, 25% thereof as attorneys fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board
from the Port Area in Manila to SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila.
The cargo was insured by respondent UCPB General Insurance Co., Inc.
48
 On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board M/V
Hayakawa Maru and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew
the cargo from the arrastre operator and delivered it to SMCs warehouse in Ermita, Manila. On July 25, 1990, the
goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper
were wet/stained/torn and 3 reels of kraft liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount.
In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch 148,
Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for the
damage to the shipment.
The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants. Evidence
such as the Warehouse Entry Slip (Exh. E); the Damage Report (Exh. F) with entries appearing therein, classified
as TED and TSN, which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and
tearrage at the middle of the subject damaged cargoes respectively, coupled with the Marine Cargo Survey
Report (Exh. H - H-4-A) confirms the fact of the damaged condition of the subject cargoes. The surveyor[s] report
(Exh. H-4-A) in particular, which provides among others that:

. . . we opine that damages sustained by shipment is attributable to improper handling in transit presumably whilst
in the custody of the broker . . . .

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not
liable. Defendant by reason of the nature of [her] business should have devised ways and means in order to
prevent the damage to the cargoes which it is under obligation to take custody of and to forthwith deliver to the
consignee. Defendant did not present any evidence on what precaution [she] performed to prevent [the] said
incident, hence the presumption is that the moment the defendant accepts the cargo [she] shall perform such
extraordinary diligence because of the nature of the cargo.

....

Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove
that they have observed the extraordinary diligence required by law. The burden of the plaintiff, therefore, is to
prove merely that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is
shifted to the carrier to prove that he has exercised the extraordinary diligence required by law. Thus, it has been
held that the mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination
in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances inconsistent with its liability. (cited in Commercial Laws of the
Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

Defendant, being a customs brother, warehouseman and at the same time a common carrier is supposed [to]
exercise [the] extraordinary diligence required by law, hence the extraordinary responsibility lasts from the time
the goods are unconditionally placed in the possession of and received by the carrier for transportation until the
same are delivered actually or constructively by the carrier to the consignee or to the person who has the right to
receive the same.[3]

Accordingly, the trial court ordered petitioner to pay the following amounts

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;

3. Costs of suit.[4]

The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari.
49
 Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING
THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS
AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING
THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER
WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5]
It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common
carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable beyond
what ordinary diligence in the vigilance over the goods transported by her, would require.[6] Consequently, any
damage to the cargo she agrees to transport cannot be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a
common carrier but a private carrier because, as a customs broker and warehouseman, she does not
indiscriminately hold her services out to the public but only offers the same to select parties with whom she may
contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a similar contention
and held the party to be a common carrier, thus

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 anancillary activity . . . 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.

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:

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 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. x x x [8]

There is greater reason for holding petitioner to be a common carrier because the transportation of goods is
an integral part of her business. To uphold petitioners contention would be to deprive those with whom she
contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for
her customers, as already noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:

Common carriers, from the nature of their business and for reasons of public policy, are 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. . . .

50
 In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in the vigilance over
goods was explained thus:

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

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the spoilage or
wettage took place while the goods were in the custody of either the carrying vessel M/V Hayakawa Maru, which
transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly
kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the
containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to
wit:

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose

PERU-204209-4 - with pinholes on roof panel right portion

TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked

MAXU-201406-0 - with dent/crack on roof panel

ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened. [10]

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no personal
knowledge on whether the container vans were first stored in petitioners warehouse prior to their delivery to the
consignee. She likewise claims that after withdrawing the container vans from the arrastre operator, her driver,
Ricardo Nazarro, immediately delivered the cargo to SMCs warehouse in Ermita, Manila, which is a mere thirty-
minute drive from the Port Area where the cargo came from. Thus, the damage to the cargo could not have taken
place while these were in her custody. [11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that
when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean
Equipment Interchange Report (EIR) and, when petitioners employees withdrew the cargo from the arrastre
operator, they did so without exception or protest either with regard to the condition of container vans
or their contents. The Survey Report pertinently reads

Details of Discharge:

Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier #13 South
Harbor, Manila on 14 July 1990, containerized onto 30 x 20 secure metal vans, covered by clean EIRs. Except
for slight dents and paint scratches on side and roof panels, these containers were deemed to have [been]
received in good condition.

....

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] by Transorient Container
Services, Inc. . . . without exception.

[The cargo] was finally delivered to the consignees storage warehouse located at Tabacalera Compound,
Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]

As found by the Court of Appeals:

51
From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre, Marina
Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange Reports
(EIRs). Had there been any damage to the shipment, there would have been a report to that effect made by the
arrastre operator. The cargoes were withdrawn by the defendant-appellant from the arrastre still in good order
and condition as the same were received by the former without exception, that is, without any report of damage
or loss. Surely, if the container vans were deformed, cracked, distorted or dented, the defendant-appellant would
report it immediately to the consignee or make an exception on the delivery receipt or note the same in the
Warehouse Entry Slip (WES). None of these took place. To put it simply, the defendant-appellant received the
shipment in good order and condition and delivered the same to the consignee damaged. We can only conclude
that the damages to the cargo occurred while it was in the possession of the defendant-appellant. Whenever the
thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss (or
damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this legal
presumption and the presumption of negligence attached to a common carrier in case of loss or damage to the
goods.[13]

Anent petitioners insistence that the cargo could not have been damaged while in her custody as she
immediately delivered the containers to SMCs compound, suffice it to say that to prove the exercise of
extraordinary diligence, petitioner must do more than merely show the possibility that some other party
could be responsible for the damage. It must prove that it used all reasonable means to ascertain the
nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the
handling [thereof].Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides

Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:

....

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

....

For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container,
is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts
the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom.[14] In this case, petitioner accepted the cargo without exception despite the apparent defects
in some of the container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence
in the carriage of goods in this case or that she is exempt from liability, the presumption of negligence as provided
under Art. 1735[15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.
SO ORDERED.

# 14

G.R. No. 150255. April 22, 2005

SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner, vs. TRANSPORT VENTURE, INC.,
INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, respondents.

DECISION
CARPIO-MORALES, J.:

52
 On petition for review is the June 27, 2001 Decision [1] of the Court of Appeals, as well as its
Resolution[2] dated September 28, 2001 denying the motion for reconsideration, which affirmed that of Branch 21
of the Regional Trial Court (RTC) of Manila in Civil Case No. 92-63132[3] holding petitioner Schmitz Transport
Brokerage Corporation (Schmitz Transport), together with Black Sea Shipping Corporation (Black Sea),
represented by its ship agent Inchcape Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for
the loss of 37 hot rolled steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board
M/V Alexander Saveliev (a vessel of Russian registry and owned by Black Sea) 545 hot rolled steel sheets in
coil weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel
Pipe Corporation (Little Giant),[4] were insured against all risks with Industrial Insurance Company Ltd. (Industrial
Insurance) under Marine Policy No. M-91-3747-TIS.[5]
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority (PPA)
assigned it a place of berth at the outside breakwater at the Manila South Harbor. [6]
Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to
receive the cargoes from the shipside, and to deliver them to its (the consignees) warehouse at Cainta,
Rizal,[7] in turn engaged the services of TVI to send a barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed the barge Erika V to shipside. [8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the vessel, left and
returned to the port terminal.[9] At 9:00 p.m., arrastre operator Ocean Terminal Services Inc. commenced to
unload 37 of the 545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an
approaching storm, the unloading unto the barge of the 37 coils was accomplished.]No tugboat pulled the barge
back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,[11] the crew of the barge abandoned it and
transferred to the vessel. The barge pitched and rolled with the waves and eventually capsized, washing
the 37 coils into the sea.[12] At 7:00 a.m., a tugboat finally arrived to pull the already empty and damaged barge
back to the pier.[13]
Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover the lost
cargoes proved futile.[14]
Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount
of P5,246,113.11. Little Giant thereupon executed a subrogation receipt[15] in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through
its representative Inchcape (the defendants) before the RTC of Manila, for the recovery of the amount it
paid to Little Giant plus adjustment fees, attorneys fees, and litigation expenses.[16]
Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while
typhoon signal No. 1 was raised in Metro Manila.[17]
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for unloading
the cargoes outside of the breakwater notwithstanding the storm signal.[18] The dispositive portion of the decision
reads:

WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, ordering the defendants
to pay plaintiff jointly and severally the sum of P5,246,113.11 with interest from the date the complaint was filed
until fully satisfied, as well as the sum of P5,000.00 representing the adjustment fee plus the sum of 20% of the
amount recoverable from the defendants as attorneys fees plus the costs of suit. The counterclaims and cross
claims of defendants are hereby DISMISSED for lack of [m]erit.[19]

To the trial courts decision, the defendants Schmitz Transport and TVI filed a joint motion for
reconsideration assailing the finding that they are common carriers and the award of excessive attorneys
fees of more than P1,000,000. And they argued that they were not motivated by gross or evident bad faith
and that the incident was caused by a fortuitous event. [20]
By resolution of February 4, 1998, the trial court denied the motion for reconsideration. [21]

53
 All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001, affirmed in
toto the decision of the trial court, [22] it finding that all the defendants were common carriers Black Sea and
TVI for engaging in the transport of goods and cargoes over the seas as a regular business and not as an isolated
transaction,[23] and Schmitz Transport for entering into a contract with Little Giant to transport the cargoes from
ship to port for a fee.[24]
In holding all the defendants solidarily liable, the appellate court ruled that each one was essential such that
without each others contributory negligence the incident would not have happened and so much so that the
person principally liable cannot be distinguished with sufficient accuracy.[25]
In discrediting the defense of fortuitous event, the appellate court held that although defendants obviously
had nothing to do with the force of nature, they however had control of where to anchor the vessel, where
discharge will take place and even when the discharging will commence. [26]
The defendants respective motions for reconsideration having been denied by Resolution [27] of September
28, 2001, Schmitz Transport (hereinafter referred to as petitioner) filed the present petition against TVI,
Industrial Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal,
consignee Little Giant, hence, the transportation contract was by and between Little Giant and TVI.[28]
By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI were
required to file their respective Comments.[29]
By its Comment, Black Sea argued that the cargoes were received by the consignee through petitioner
in good order, hence, it cannot be faulted, it having had no control and supervision thereover. [30]
For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and
transferred them unto the barge upon the instruction of petitioner.[31]
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of
negligence on the part of petitioner Black Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and all
liability arising therefrom:

ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which though foreseen, were
inevitable.

In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will; (2) it
must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must be
impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation
in any manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to
the creditor.

[T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the
violence of nature. Human intervention is to be excluded from creating or entering into the cause of the mischief.
When the effect is found to be in part the result of the participation of man, whether due to his active intervention
or neglect or failure to act, the whole occurrence is then humanized and removed from the rules applicable to the
acts of God.

The appellate court, in affirming the finding of the trial court that human intervention in the form of contributory
negligence by all the defendants resulted to the loss of the cargoes,[34] held that unloading outside the breakwater,
instead of inside the breakwater, while a storm signal was up constitutes negligence. [35] It thus concluded that the
proximate cause of the loss was Black Seas negligence in deciding to unload the cargoes at an unsafe place and
while a typhoon was approaching.[36]
From a review of the records of the case, there is no indication that there was greater risk in loading the
cargoes outside the breakwater. As the defendants proffered, the weather on October 26, 1991 remained normal
with moderate sea condition such that port operations continued and proceeded normally. [37]
54
 The weather data report,[38] furnished and verified by the Chief of the Climate Data Section of PAG-ASA and
marked as a common exhibit of the parties, states that while typhoon signal No. 1 was hoisted over Metro Manila
on October 23-31, 1991, the sea condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991
was moderate. It cannot, therefore, be said that the defendants were negligent in not unloading the
cargoes upon the barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were completely loaded by 12:30
in the morning[39] is, however, a material fact which the appellate court failed to properly consider and
appreciate[40] the proximate cause of the loss of the cargoes. Had the barge been towed back promptly to
the pier, the deteriorating sea conditions notwithstanding, the loss could have been avoided. But the
barge was left floating in open sea until big waves set in at 5:30 a.m., causing it to sink along with the
cargoes.[41] The loss thus falls outside the act of God doctrine.
The proximate cause of the loss having been determined, who among the parties is/are responsible therefor?
Contrary to petitioners insistence, this Court, as did the appellate court, finds that petitioner is a common
carrier. For it undertook to transport the cargoes from the shipside of M/V Alexander Saveliev to the
consignees warehouse at Cainta, Rizal. As the appellate court put it, as long as a person or corporation
holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is already considered
a common carrier regardless if [it] owns the vehicle to be used or has to hire one. [42] That petitioner is a
common carrier, the testimony of its own Vice-President and General Manager Noel Aro that part of the services
it offers to its clients as a brokerage firm includes the transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President and
General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the company. I
also handle the various division heads of the company for operation matters, and all other related
functions that the President may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will you please tell the
Honorable Court if you came to know the company by the name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you can recall?

A: Since 1990, Sir.

Q: Now, you said that you are the brokerage firm of this Company. What work or duty did you perform
in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are] also in-
charged of the delivery of the goods to their warehouses. We also handled the clearances of
their shipment at the Bureau of Customs, Sir.

xxx

Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation with regards
to this shipment? What work did you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery of [the]
cargo[es] from lighter to BASECO then to the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed to perform,
what equipment do (sic) you require or did you use in order to effect this unloading, transfer and
delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to lighter, and
on this we hired or we sub-contracted with [T]ransport Ventures, Inc. which [was] in-charged (sic)
of the barges. Also, in BASECO compound we are leasing cranes to have the cargo unloaded from
the barge to trucks, [and] then we used trucks to deliver [the cargoes] to the consignees warehouse,
Sir.
Q: And whose trucks do you use from BASECO compound to the consignees warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.

55
xxx

ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to contract for
the barges of Transport Ventures Incorporated in this particular operation?
A: Firstly, we dont own any barges. That is why we hired the services of another firm whom we know
[al]ready for quite sometime, which is Transport Ventures, Inc. (Emphasis supplied)[43]
It is settled that under a given set of facts, a customs broker may be regarded as a common carrier.
Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,[44] held:

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

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

xxx

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one
who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a common
carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper
shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods
for pecuniary consideration.[45]

And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the transportation of goods is
an integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise would
be to deprive those with whom [it] contracts the protection which the law affords them notwithstanding the fact
that the obligation to carry goods for [its] customers, is part and parcel of petitioners business.[47]
As for petitioners argument that being the agent of Little Giant, any negligence it committed was
deemed the negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In effecting the
transportation of the cargoes from the shipside and into Little Giants warehouse, however, petitioner was
discharging its own personal obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler [48] to provide
the barge and the tugboat. In their Service Contract,[49] while Little Giant was named as the consignee, petitioner
did not disclose that it was acting on commission and was chartering the vessel for Little Giant.[50] Little Giant did
not thus automatically become a party to the Service Contract and was not, therefore, bound by the terms and
conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it can maintain
a cause of action for negligence.[51]
In the case of TVI, while it acted as a private carrier for which it was under no duty to observe
extraordinary diligence, it was still required to observe ordinary diligence to ensure the proper and careful
handling, care and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:

ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for damages.

ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by
the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place.
When negligence shows bad faith, the provisions of articles 1171 and 2202, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in the performance, that which
is expected of a good father of a family shall be required.

56
 Was the reasonable care and caution which an ordinarily prudent person would have used in the same
situation exercised by TVI?[52]
This Court holds not.
TVIs failure to promptly provide a tugboat did not only increase the risk that might have been reasonably
anticipated during the shipside operation, but was the proximate cause of the loss. A man of ordinary
prudence would not leave a heavily loaded barge floating for a considerable number of hours, at such a
precarious time, and in the open sea, knowing that the barge does not have any power of its own and is
totally defenseless from the ravages of the sea. That it was nighttime and, therefore, the members of the
crew of a tugboat would be charging overtime pay did not excuse TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article 1739[53] of the Civil Code, prove
that it exercised due diligence to prevent or minimize the loss, before, during and after the occurrence of
the storm in order that it may be exempted from liability for the loss of the goods.
While petitioner sent checkers[54] and a supervisor[55] on board the vessel to counter-check the operations of
TVI, it failed to take all available and reasonable precautions to avoid the loss. After noting that TVI failed
to arrange for the prompt towage of the barge despite the deteriorating sea conditions, it should have
summoned the same or another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable[56] for the loss of the cargoes. The
following pronouncement of the Supreme Court is instructive:

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

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article
2176 and related provisions, in conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask further, how
then must the liability of the common carrier, on one hand, and an independent contractor, on the other
hand, be described? It would be solidary. A contractual obligation can be breached by tort and when the
same act or omission causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even under a
contract, where tort is that which breaches the contract. 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.[57]

As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or
unconditionally placed in its possession and received for transportation until they were delivered actually or
constructively to consignee Little Giant.[58]
Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the services
rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides that delivery be
made to the port of discharge or so near thereto as she may safely get, always afloat.[59] The delivery of the goods
to the consignee was not from pier to pier but from the shipside of M/V Alexander Saveliev and into barges,
for which reason the consignee contracted the services of petitioner. Since Black Sea had constructively
delivered the cargoes to Little Giant, through petitioner, it had discharged its duty. [60]
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorneys fees in an amount over P1,000,000.00 to Industrial Insurance, for lack of
factual and legal basis, this Court sets it aside. While Industrial Insurance was compelled to litigate its rights, such
fact by itself does not justify the award of attorneys fees under Article 2208 of the Civil Code. For no sufficient
showing of bad faith would be reflected in a partys persistence in a case other than an erroneous
conviction of the righteousness of his cause.[61] To award attorneys fees to a party just because the judgment
is rendered in its favor would be tantamount to imposing a premium on ones right to litigate or seek judicial redress
of legitimate grievances.[62]
On the award of adjustment fees: The adjustment fees and expense of divers were incurred by Industrial
Insurance in its voluntary but unsuccessful efforts to locate and retrieve the lost cargo. They do not constitute
actual damages.[63]

57
 As for the court a quos award of interest on the amount claimed, the same calls for modification following
the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals [64] that when the demand cannot be reasonably
established at the time the demand is made, the interest shall begin to run not from the time the claim is made
judicially or extrajudicially but from the date the judgment of the court is made (at which the time the quantification
of damages may be deemed to have been reasonably ascertained). [65]
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage
Corporation, and Transport Venture Incorporation jointly and severally liable for the amount of P5,246,113.11
with the MODIFICATION that interest at SIX PERCENT per annum of the amount due should be computed from
the promulgation on November 24, 1997 of the decision of the trial court.
Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.

# 15

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. (load scraps and backload various merchandise)

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.

58
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)
59
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,

60
that in the instant case, the standard of extraordinary diligence required private respondent to retain a security
guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver
and his helper.

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

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

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

xxx xxx xxx

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

(6) that the common carrier's liability for acts committed by thieves, or of
robbers who donot act with grave or irresistible threat, violence or force, is
dispensed with or diminished; and

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

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

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

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

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

61
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.

#16

THIRD DIVISION

SPOUSES DANTE CRUZ and G.R. No. 186312

LEONORA CRUZ,
Petitioners, Present:

CARPIO MORALES, J.,

Chairperson,
BRION,
- versus - BERSAMIN,
ABAD,* and
SUN HOLIDAYS, INC., VILLARAMA, JR., JJ.
Respondent.
Promulgated:
June 29, 2010

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

DECISION

CARPIO MORALES, J.:

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

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

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

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

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

62
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open
seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward to
the front, leaving the wheel to one of the crew members.

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

Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by
the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and
four crew members, who were brought to Pisa Island. Eight passengers, including petitioners son and his wife,
died during the incident.

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

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

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

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

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

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

By Decision of August 19, 2008,[13] the appellate court denied petitioners appeal, holding, among other
things, that the trial court correctly ruled that respondent is a private carrier which is only required to observe
ordinary diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B
Coco Beach III; and that the proximate cause of the incident was a squall, a fortuitous event.

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

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

Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a common
carrier; that the Resorts ferry services for guests cannot be considered as ancillary to its business as no income
is derived therefrom; that it exercised extraordinary diligence as shown by the conditions it had imposed before
63
allowing M/B Coco Beach III to sail; that the incident was caused by a fortuitous event without any contributory
negligence on its part; and that the other case wherein the appellate court held it liable for damages involved
different plaintiffs, issues and evidence.[16]

The petition is impressed with merit.

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

The Civil Code defines common carriers in the following terms:

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

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

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

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

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

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

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

64
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence for the safety of the passengers transported by them, according to all
the circumstances of each case.[19] They are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.[20]

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

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

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

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

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

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

Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco
Beach III. As reflected above, however, the occurrence of squalls was expected under the weather condition
of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it
capsized and sank.[26] The incident was, therefore, not completely free from human intervention.

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

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

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

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

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

Life expectancy is determined in accordance with the formula:

65
 2 / 3 x [80 age of deceased at the time of death][30]

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

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

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

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

2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35

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

Net Earning Capacity = life expectancy x (gross annual income -

reasonable and necessary living expenses).

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

Net Earning Capacity = P8,316,000

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

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

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

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

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

1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it
is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum
to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
66
 2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court at the
rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall begin
to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when
such certainty cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

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

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

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

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

SO ORDERED.

67
#17

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

NOSTRADAMUS VILLANUEVA petitioner, vs. PRISCILLA R. DOMINGO and LEANDRO LUIS R.

DOMINGO, respondents.

DECISION
CORONA, J.:

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

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

SO ORDERED.[2]

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

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

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

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

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

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

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

68
WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering Nostradamus Villanueva to pay the
amount of P99,580 as actual damages, P25,000.00 as moral damages, P25,000.00 as exemplary damages and
attorneys fees in the amount of P10,000.00 plus appearance fees of P500.00 per hearing with legal interest
counted from the date of judgment. In conformity with the law on equity and in accordance with the ruling in First
Malayan Lending and Finance Corporation vs. Court of Appeals (supra), Albert Jaucian is hereby ordered to
indemnify Nostradamus Villanueva for whatever amount the latter is hereby ordered to pay under the judgment.

SO ORDERED.[4]

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

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

Yes.

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

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

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

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

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

Registration is required not to make said registration the operative act by which ownership in vehicles is
transferred, as in land registration cases, because the administrative proceeding of registration does not bear any
essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888),
but to permit the use and operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, as
amended). The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or
that any damage or injury is caused by the vehicle on the public highways, responsibility therefore can be fixed
69
on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways
caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers,
or with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to
the public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways:

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

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

The above policy and application of the law may appear quite harsh and would seem to conflict with truth and
justice. We do not think it is so. A registered owner who has already sold or transferred a vehicle has the recourse
to a third-party complaint, in the same action brought against him to recover for the damage or injury done, against
the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability;
said inconvenience is the price he pays for failure to comply with the registration that the law demands and
requires.

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

Petitioner insists that he is not liable for damages since the driver of the vehicle at the time of the accident
was not an authorized driver of the new (actual) owner of the vehicle. He claims that the ruling in First Malayan
Leasing and Finance Corporation vs. CA[9] implies that to hold the registered owner liable for damages, the driver
of the vehicle must have been authorized, allowed and permitted by its actual owner to operate and drive it. Thus,
if the vehicle is driven without the knowledge and consent of the actual owner, then the registered owner cannot
be held liable for damages.
He further argues that this was the underlying theory behind Duavit vs. CA[10] wherein the court absolved the
registered owner from liability after finding that the vehicle was virtually stolen from the owners garage by a person
who was neither authorized nor employed by the owner. Petitioner concludes that the ruling in Duavit and not the
one in First Malayan should be applicable to him.
Petitioners argument lacks merit. Whether the driver is authorized or not by the actual owner is irrelevant to
determining the liability of the registered owner who the law holds primarily and directly responsible for any
accident, injury or death caused by the operation of the vehicle in the streets and highways. To require the driver
of the vehicle to be authorized by the actual owner before the registered owner can be held accountable is to
defeat the very purpose why motor vehicle legislations are enacted in the first place.

70
 Furthermore, there is nothing in First Malayan which even remotely suggests that the driver must be
authorized before the registered owner can be held accountable. In First Malayan, the registered owner, First
Malayan Corporation, was held liable for damages arising from the accident even if the vehicle involved was
already owned by another party:

This Court has consistently ruled that regardless of who the actual owner is of a motor vehicle might be, the
registered owner is the operator of the same with respect to the public and third persons, and as such, directly
and primarily responsible for the consequences of its operation. In contemplation of law, the owner/operator of
record is the employer of the driver, the actual operator and employer being considered merely as his agent
(MYC-Agro-Industrial Corporation vs. Vda. de Caldo, 132 SCRA 10, citing Vargas vs. Langcay, 6 SCRA 174;
Tamayo vs. Aquino, 105 Phil. 949).

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

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

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

As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioners case since the
circumstance of unauthorized use was not present. He in fact voluntarily delivered his car to Albert Jaucian as
part of the downpayment for a vehicle he purchased from Jaucian. Thus, he could not claim that the vehicle was
stolen from him since he voluntarily ceded possession thereof to Jaucian. It was the latter, as the new (actual)
owner, who could have raised the defense of theft to prove that he was not liable for the acts of his employee
Ocfemia. Thus, there is no reason to apply the Duavit ruling to this case.
The ruling in First Malayan has been reiterated in BA Finance Corporation vs. CA[13] and more recently
in Aguilar, Sr. vs. Commercial Savings Bank.[14] In BA Finance, we held the registered owner liable even if, at the
time of the accident, the vehicle was leased by another party and was driven by the lessees employee. In Aguilar,
the registered owner-bank answered for damages for the accident even if the vehicle was being driven by the
Vice-President of the Bank in his private capacity and not as an officer of the Bank, as claimed by the Bank. We
find no reason to deviate from these decisions.
The main purpose of vehicle registration is the easy identification of the owner who can be held responsible
for any accident, damage or injury caused by the vehicle. Easy identification prevents inconvenience and
prejudice to a third party injured by one who is unknown or unidentified. To allow a registered owner to escape
liability by claiming that the driver was not authorized by the new (actual) owner results in the public detriment the
law seeks to avoid.
Finally, the issue of whether or not the driver of the vehicle during the accident was authorized is not at all
relevant to determining the liability of the registered owner. This must be so if we are to comply with the rationale
and principle behind the registration requirement under the motor vehicle law.
WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the Court of Appeals is
AFFIRMED.
SO ORDERED.
Panganiban (Chairman) and Sandoval-Gutierrez, JJ., concur.
Carpio-Morales, J., on leave.
71
#18

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 82318 May 18, 1989

GILBERTO M. DUAVIT, petitioner,

vs.
THE HON. COURT OF APPEALS, Acting through the Third Division, as Public Respondent, and
ANTONIO SARMIENTO, SR. & VIRGILIO CATUAR respondents.

Rodolfo d. Dela Cruz for petitioner.

Bito, Lozada, Ortega & Castillo for respondents.

GUTIERREZ, JR., J.:

This petition raises the sole issue of whether or not the owner of a private vehicle which figured in an accident
can be held liable under Article 2180 of the Civil Code when the said vehicle was neither driven by an employee
of the owner nor taken with the consent of the latter.

The facts are summarized in the contested decision, as follows:

From the evidence adduced by the plaintiffs, consisting of the testimonies of witnesses Virgilio
Catuar, Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and Norberto Bernarte it appears that on
July 28, 1971 plaintiffs Antonio Sarmiento, Sr. and Virgilio Catuar were aboard a jeep with plate
number 77-99-F-I Manila, 1971, owned by plaintiff, Ruperto Catuar was driving the said jeep on
Ortigas Avenue, San Juan, Rizal; that plaintiff's jeep, at the time, was running moderately at 20
to 35 kilometers per hour and while approaching Roosevelt Avenue, Virgilio Catuar slowed
down; that suddenly, another jeep with plate number 99-97-F-J Manila 1971 driven by
defendant Oscar Sabiniano hit and bumped plaintiff's jeep on the portion near the left rear
wheel, and as a result of the impact plaintiff's jeep fell on its right and skidded by about 30
yards; that as a result plaintiffs jeep was damaged, particularly the windshield, the differential,
the part near the left rear wheel and the top cover of the jeep; that plaintiff Virgilio Catuar was
thrown to the middle of the road; his wrist was broken and he sustained contusions on the
head; that likewise plaintiff Antonio Sarmiento, Sr. was trapped inside the fallen jeep, and one
of his legs was fractured.

Evidence also shows that the plaintiff Virgilio Catuar spent a total of P2,464.00 for repairs of the
jeep, as shown by the receipts of payment of labor and spare parts (Exhs. H to H-7 Plaintiffs
likewise tried to prove that plaintiff Virgilio Catuar, immediately after the accident was taken to
Immaculate Concepcion Hospital, and then was transferred to the National Orthopedic
Hospital; that while plaintiff Catuar was not confined in the hospital, his wrist was in a plaster
cast for a period of one month, and the contusions on his head were under treatment for about
two (2) weeks; that for hospitalization, medicine and allied expenses, plaintiff Catuar spent
P5,000.00.

Evidence also shows that as a result of the incident, plaintiff Antonio Sarmiento, Sr. sustained
injuries on his leg; that at first, he was taken to the National Orthopedic Hospital (Exh. K but
later he was confined at the Makati Medical Center from July 29, to August 29, 1971 and then
from September 15 to 25, 1971; that his leg was in a plaster cast for a period of eight (8)

72
 months; and that for hospitalization and medical attendance, plaintiff Antonio Sarmiento, Sr.
spent no less than P13,785.25 as evidenced by receipts in his possession. (Exhs. N to N-1).

Proofs were adduced also to show that plaintiff Antonio sarmiento Sr. is employed as Assistant
Accountant of the Canlubang Sugar Estate with a salary of P1,200.00 a month; that as sideline
he also works as accountant of United Haulers Inc. with a salary of P500.00 a month; and that
as a result of this incident, plaintiff Sarmiento was unable to perform his normal work for a
period of at least 8 months. On the other hand, evidence shows that the other plaintiff Virgilio
Catuar is a Chief Clerk in Canlubang Sugar Estate with a salary of P500.00 a month, and as a
result of the incident, he was incapacitated to work for a period of one (1) month.

The plaintiffs have filed this case both against Oscar Sabiniano as driver, and against
Gualberto Duavit as owner of the jeep.

Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate No. 99-07-F-J
Manila, 1971), denied that the other defendant (Oscar Sabiniano) was his employee. Duavit
claimed that he has not been an employer of defendant Oscar Sabiniano at any time up to the
present.

On the other hand documentary and testimonial evidence show that defendant Oscar
Sabiniano was an employee of the Board of Liquidators from November 14, 1966 up to January
4, 1973 (Annex A of Answer).

Defendant Sabiniano, in his testimony, categorically admitted that he took the jeep from the
garage of defendant Duavit without the consent or authority of the latter (TSN, September 7,
1978, p. 8). He testified further, that Duavit even filed charges against him for theft of the jeep,
but which Duavit did not push through as his (Sabiniano's) parents apologized to Duavit on his
behalf.

Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself from liability,
makes it appear that he was taking all necessary precaution while driving and the accident
occurred due to the negligence of Virgilio Catuar. Sabiniano claims that it was plaintiffs vehicle
which hit and bumped their jeep. (Reno, pp. 21-23)

The trial court found Oscar Sabiniano negligent in driving the vehicle but found no employer-employee
relationship between him and the petitioner because the latter was then a government employee and he took
the vehicle without the authority and consent of the owner. The petitioner was, thus, absolved from liability
under Article 2180 of the Civil Code.

The private respondents appealed the case.

On January 7, 1988, the Court of Appeals rendered the questioned decision holding the petitioner jointly and
severally liable with Sabiniano. The appellate court in part ruled:

We cannot go along with appellee's argument. It will be seen that in Vargas v. Langcay, supra,
it was held that it is immaterial whether or not the driver was actually employed by the operator
of record or registered owner, and it is even not necessary to prove who the actual owner of the
vehicle and who the employer of the driver is. When the Supreme Court ruled, thus: 'We must
hold and consider such owner-operator of record (registered owner) as the employer in
contemplation of law, of the driver,' it cannot be construed other than that the registered owner
is the employer of the driver in contemplation of law. It is a conclusive presumption of fact and
law, and is not subject to rebuttal of proof to the contrary. Otherwise, as stated in the decision,
we quote:

The purpose of the principles evolved by the decisions in these matters will be defeated and
thwarted if we entertain the argument of petitioner that she is not liable because the actual
owner and employer was established by the evidence. . . .

Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to prove that the driver
Sabiniano was not his employee at the time of the vehicular accident.

73
 The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to the effect that
the burden of proving the non-existence of an employer-employee relationship is upon the
defendant and this he must do by a satisfactory preponderance of evidence, has to defer to the
doctrines evolved by the Supreme Court in cases of damages arising from vehicular mishaps
involving registered motor vehicle. (See Tugade v. Court of Appeals, 85 SCRA 226, 230).
(Rollo, pp. 26-27)

The appellate court also denied the petitioner's motion for reconsideration. Hence, this petition.

The petitioner contends that the respondent appellate court committed grave abuse of discretion in holding him
jointly and severally liable with Sabiniano in spite of the absence of an employer-employee relationship between
them and despite the fact that the petitioner's jeep was taken out of his garage and was driven by Sabiniano
without his consent.

As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for an accident involving the
said vehicle if the same was driven without his consent or knowledge and by a person not employed by him.
Thus, in Duquillo v. Bayot (67 Phil. 131-133-134) [1939] we said:

Under the facts established, the defendant cannot be held liable for anything. At the time of the
accident, James McGurk was driving the truck, and he was not an employee of the defendant,
nor did he have anything to do with the latter's business; neither the defendant nor Father
Ayson, who was in charge of her business, consented to have any of her trucks driven on the
day of the accident, as it was a holy day, and much less by a chauffeur who was not in charge
of driving it; the use of the defendant's truck in the circumstances indicated was done without
her consent or knowledge; it may, therefore, be said, that there was not the remotest
contractual relation between the deceased Pio Duquillo and the defendant. It necessarily
follows from all this that articles 1101 and following of the Civil Code, cited by the appellant,
have no application in this case, and, therefore, the errors attributed to the inferior court are
without basis.

The Court upholds the above ruling as still relevant and better applicable to present day circumstances.

The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103 [1957] and Vargas v.
Langcay (6 SCRA 174 [1962]) cannot be sustained. In the Erezo case, Jepte, the registered owner of the truck
which collided with a taxicab, and which resulted in the killing of Erezo, claimed that at the time of the accident,
the truck belonged to the Port Brokerage in an arrangement with the corporation but the same was not known
to the Motor Vehicles Office. This Court sustained the trial court's ruling that since Jepte represented himself to
be the owner of the truck and the Motor Vehicles Office, relying on his representation, registered the vehicle in
his name, the Government and all persons affected by the representation had the right to rely on his declaration
of ownership and registration. Thus, even if Jepte were not the owner of the truck at the time of the accident, he
was still held liable for the death of Erezo significantly, the driver of the truck was fully authorized to drive it.

Likewise, in the Vargas case, just before the accident occurred Vargas had sold her jeepney to a third person,
so that at the time of the accident she was no longer the owner of the jeepney. This court, nevertheless,
affirmed Vargas' liability since she failed to surrender to the Motor Vehicles Office the corresponding AC plates
in violation of the Revised Motor Vehicle Law and Commonwealth Act No. 146. We further ruled that the
operator of record continues to be the operator of the vehicle in contemplation of law, as regards the public and
third persons, and as such is responsible for the consequences incident to its operator. The vehicle involved
was a public utility jeepney for hire. In such cases, the law does not only require the surrender of the AC plates
but orders the vendor operator to stop the operation of the jeepney as a form of public transportation until the
matter is reported to the authorities.

As can be seen, the circumstances of the above cases are entirely different from those in the present case.
Herein petitioner does not deny ownership of the vehicle involved in tire mishap but completely denies having
employed the driver Sabiniano or even having authorized the latter to drive his jeep. The jeep was virtually
stolen from the petitioner's garage. To hold, therefore, the petitioner liable for the accident caused by the
negligence of Sabiniano who was neither his driver nor employee would be absurd as it would be like holding
liable the owner of a stolen vehicle for an accident caused by the person who stole such vehicle. In this regard,
we cannot ignore the many cases of vehicles forcibly taken from their owners at gunpoint or stolen from
garages and parking areas and the instances of service station attendants or mechanics of auto repair shops
using, without the owner's consent, vehicles entrusted to them for servicing or repair.

74
We cannot blindly apply absolute rules based on precedents whose facts do not jibe four square with pending
cases. Every case must be determined on its own peculiar factual circumstances. Where, as in this case, the
records of the petition fail to indicate the slightest indicia of an employer-employee relationship between the
owner and the erring driver or any consent given by the owner for the vehicle's use, we cannot hold the owner
liable.

We, therefore, find that the respondent appellate court committed reversible error in holding the petitioner jointly
and severally liable with Sabiniano to the private respondent.

WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are hereby
ANNULLED and SET ASIDE. The decision of the then Court of First Instance (now Regional Trial Court) of
Laguna, 8th Judicial District, Branch 6, dated July 30, 1981 is REINSTATED.

SO ORDERED.

Fernan, C.J., (Chairman), Feliciano, Bidin and Cortes JJ., concur.

#19

THIRD DIVISION

[G.R. No. 143360. September 5, 2002]

EQUITABLE LEASING CORPORATION, petitioner, vs. LUCITA SUYOM, MARISSA ENANO, MYRNA
TAMAYO and FELIX OLEDAN, respondents.

DECISION

PANGANIBAN, J.:

In an action based on quasi delict, the registered owner of a motor vehicle is solidarily liable for the injuries and
damages caused by the negligence of the driver, in spite of the fact that the vehicle may have already been the
subject of an unregistered Deed of Sale in favor of another person. Unless registered with the Land Transportation
Office, the sale -- while valid and binding between the parties -- does not affect third parties, especially the victims
of accidents involving the said transport equipment. Thus, in the present case, petitioner, which is the registered
owner, is liable for the acts of the driver employed by its former lessee who has become the owner of that vehicle
by virtue of an unregistered Deed of Sale.

Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the May 12, 2000 Decision[1] of
the Court of Appeals[2] (CA) in CA-GR CV No. 55474. The decretal portion of the Decision reads as follows:

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit. The assailed
decision, dated May 5, 1997, of the Regional Trial Court of Manila, Branch 14, in Civil Case No. 95-73522, is
hereby AFFIRMED with MODIFICATION that the award of attorneys fees is DELETED.[3]

75
On the other hand, in Civil Case No. 95-73522, the Regional Trial Court (RTC) of Manila (Branch 14) had earlier
disposed in this wise:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant Equitable Leasing
Corporation ordering said defendant to pay to the plaintiffs the following:

A. TO MYRNA TAMAYO

1. the sum of P50,000.00 for the death of Reniel Tamayo;

2. P50,000.00 as moral damages; and

3. P56,000.00 for the damage to the store and its contents, and funeral expenses.

B. TO FELIX OLEDAN

1. the sum of P50,000.00 for the death of Felmarie Oledan;

2. P50,000.00 as moral damages; and

3. P30,000.00 for medical expenses, and funeral expenses.

C. TO MARISSA ENANO

1. P7,000.00 as actual damages

D. TO LUCITA SUYOM

1. The sum of P5,000.00 for the medical treatment of her two sons.

The sum of P120,000.00 as and for attorneys fees.[4]

The Facts

On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the house cum store of Myrna Tamayo
located at Pier 18, Vitas, Tondo, Manila. A portion of the house was destroyed. Pinned to death under the engine
of the tractor were Respondent Myrna Tamayos son, Reniel Tamayo, and Respondent Felix Oledans daughter,

76
Felmarie Oledan. Injured were Respondent Oledan himself, Respondent Marissa Enano, and two sons of
Respondent Lucita Suyom.

Tutor was charged with and later convicted of reckless imprudence resulting in multiple homicide and multiple
physical injuries in Criminal Case No. 296094-SA, Metropolitan Trial Court of Manila, Branch 12.[5]

Upon verification with the Land Transportation Office, respondents were furnished a copy of Official Receipt No.
62204139[6] and Certificate of Registration No. 08262797,[7] showing that the registered owner of the tractor
was Equitable Leasing Corporation/leased to Edwin Lim. On April 15, 1995, respondents filed against Raul Tutor,
Ecatine Corporation (Ecatine) and Equitable Leasing Corporation (Equitable) a Complaint[8] for damages
docketed as Civil Case No. 95-73522 in the RTC of Manila, Branch 14.

The trial court, upon motion of plaintiffs’ counsel, issued an Order dropping Raul Tutor, Ecatine and Edwin Lim
from the Complaint, because they could not be located and served with summonses.[9] On the other hand, in its
Answer with Counterclaim,[10] petitioner alleged that the vehicle had already been sold to Ecatine and that the
former was no longer in possession and control thereof at the time of the incident. It also claimed that Tutor was
an employee, not of Equitable, but of Ecatine.

After trial on the merits, the RTC rendered its Decision ordering petitioner to pay actual and moral damages and
attorney’s fees to respondents. It held that since the Deed of Sale between petitioner and Ecatine had not been
registered with the Land Transportation Office (LTO), the legal owner was still Equitable.[11] Thus, petitioner was
liable to respondents.[12]

Ruling of the Court of Appeals

Sustaining the RTC, the CA held that petitioner was still to be legally deemed the owner/operator of the tractor,
even if that vehicle had been the subject of a Deed of Sale in favor of Ecatine on December 9, 1992. The reason
cited by the CA was that the Certificate of Registration on file with the LTO still remained in petitioners name.[13]
In order that a transfer of ownership of a motor vehicle can bind third persons, it must be duly recorded in the
LTO.[14]

The CA likewise upheld respondents claim for moral damages against petitioner because the appellate court
considered Tutor, the driver of the tractor, to be an agent of the registered owner/operator.[15]

Hence, this Petition.[16]

Issues

In its Memorandum, petitioner raises the following issues for the Courts consideration:

77
Whether or not the Court of Appeals and the trial court gravely erred when they decided and held that petitioner
[was] liable for damages suffered by private respondents in an action based on quasi delict for the negligent acts
of a driver who [was] not the employee of the petitioner.

II

Whether or not the Court of Appeals and the trial court gravely erred when they awarded moral damages to
private respondents despite their failure to prove that the injuries they suffered were brought by petitioners
wrongful act.[17]

This Court’s Ruling

The Petition has no merit.

First Issue:

Liability for Wrongful Acts

Petitioner contends that it should not be held liable for the damages sustained by respondents and that arose
from the negligence of the driver of the Fuso Road Tractor, which it had already sold to Ecatine at the time of the
accident. Not having employed Raul Tutor, the driver of the vehicle, it could not have controlled or supervised
him.[18]

We are not persuaded. In negligence cases, the aggrieved party may sue the negligent party under (1) Article
100[19] of the Revised Penal Code, for civil liability ex delicto; or (2) under Article 2176[20] of the Civil Code, for
civil liability ex quasi delicto.[21]

Furthermore, under Article 103 of the Revised Penal Code, employers may be held subsidiarily liable for felonies
committed by their employees in the discharge of the latters duties.[22] This liability attaches when the employees
who are convicted of crimes committed in the performance of their work are found to be insolvent and are thus
unable to satisfy the civil liability adjudged.[23]

On the other hand, under Article 2176 in relation to Article 2180[24] of the Civil Code, an action predicated on
quasi delict may be instituted against the employer for an employees act or omission. The liability for the negligent
conduct of the subordinate is direct and primary, but is subject to the defense of due diligence in the selection
and supervision of the employee.[25] The enforcement of the judgment against the employer for an action based
on Article 2176 does not require the employee to be insolvent, since the liability of the former is solidary -- the
latter being statutorily considered a joint tortfeasor.[26] To sustain a claim based on quasi delict, the following
requisites must be proven: (a) damage suffered by the plaintiff, (b) fault or negligence of the defendant, and (c)
connection of cause and effect between the fault or negligence of the defendant and the damage incurred by the
plaintiff.[27]

78
These two causes of action (ex delicto or ex quasi delicto) may be availed of, subject to the caveat[28] that the
offended party cannot recover damages twice for the same act or omission or under both causes.[29] Since these
two civil liabilities are distinct and independent of each other, the failure to recover in one will not necessarily
preclude recovery in the other.[30]

In the instant case, respondents -- having failed to recover anything in the criminal case -- elected to file a separate
civil action for damages, based on quasi delict under Article 2176 of the Civil Code.[31] The evidence is clear that
the deaths and the injuries suffered by respondents and their kins were due to the fault of the driver of the Fuso
tractor.

Dated June 4, 1991, the Lease Agreement[32] between petitioner and Edwin Lim stipulated that it is the intention
of the parties to enter into a FINANCE LEASE AGREEMENT.[33] Under such scheme, ownership of the subject
tractor was to be registered in the name of petitioner, until the value of the vehicle has been fully paid by Edwin
Lim.[34] Further, in the Lease Schedule,[35] the monthly rental for the tractor was stipulated, and the term of the
Lease was scheduled to expire on December 4, 1992. After a few months, Lim completed the payments to cover
the full price of the tractor.[36] Thus, on December 9, 1992, a Deed of Sale[37] over the tractor was executed by
petitioner in favor of Ecatine represented by Edwin Lim. However, the Deed was not registered with the LTO.

We hold petitioner liable for the deaths and the injuries complained of, because it was the registered owner of the
tractor at the time of the accident on July 17, 1994.[38] The Court has consistently ruled that, regardless of sales
made of a motor vehicle, the registered owner is the lawful operator insofar as the public and third persons are
concerned; consequently, it is directly and primarily responsible for the consequences of its operation.[39] In
contemplation of law, the owner/operator of record is the employer of the driver, the actual operator and employer
being considered as merely its agent.[40] The same principle applies even if the registered owner of any vehicle
does not use it for public service.[41]

Since Equitable remained the registered owner of the tractor, it could not escape primary liability for the deaths
and the injuries arising from the negligence of the driver.[42]

The finance-lease agreement between Equitable on the one hand and Lim or Ecatine on the other has already
been superseded by the sale. In any event, it does not bind third persons. The rationale for this rule has been
aptly explained in Erezo v. Jepte,[43] which we quote hereunder:

x x x. The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that
any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a
definite individual, the registered owner. Instances are numerous where vehicles running on public highways
caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers,
or with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to
the public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways.[44]

Further, petitioners insistence on FGU Insurance Corp. v. Court of Appeals is misplaced.[45] First, in FGU
Insurance, the registered vehicle owner, which was engaged in a rent-a-car business, rented out the car. In this
case, the registered owner of the truck, which is engaged in the business of financing motor vehicle acquisitions,
has actually sold the truck to Ecatine, which in turn employed Tutor. Second, in FGU Insurance, the registered
owner of the vehicle was not held responsible for the negligent acts of the person who rented one of its cars,
because Article 2180 of the Civil Code was not applicable. We held that no vinculum juris as employer and
employee existed between the owner and the driver.[46] In this case, the registered owner of the tractor is
considered under the law to be the employer of the driver, while the actual operator is deemed to be its agent.[47]

79
Thus, Equitable, the registered owner of the tractor, is -- for purposes of the law on quasi delict -- the employer
of Raul Tutor, the driver of the tractor. Ecatine, Tutors actual employer, is deemed as merely an agent of
Equitable.[48]

True, the LTO Certificate of Registration, dated 5/31/91, qualifies the name of the registered owner as
EQUITABLE LEASING CORPORATION/Leased to Edwin Lim. But the lease agreement between Equitable and
Lim has been overtaken by the Deed of Sale on December 9, 1992, between petitioner and Ecatine. While this
Deed does not affect respondents in this quasi delict suit, it definitely binds petitioner because, unlike them, it is
a party to it.

We must stress that the failure of Equitable and/or Ecatine to register the sale with the LTO should not prejudice
respondents, who have the legal right to rely on the legal principle that the registered vehicle owner is liable for
the damages caused by the negligence of the driver. Petitioner cannot hide behind its allegation that Tutor was
the employee of Ecatine. This will effectively prevent respondents from recovering their losses on the basis of the
inaction or fault of petitioner in failing to register the sale. The non-registration is the fault of petitioner, which
should thus face the legal consequences thereof.

Second Issue:

Moral Damages

Petitioner further claims that it is not liable for moral damages, because respondents failed to establish or show
the causal connection or relation between the factual basis of their claim and their wrongful act or omission, if
any. [49]

Moral damages are not punitive in nature, but are designed to compensate[50] and alleviate in some way the
physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury unjustly caused a person.[51] Although incapable of pecuniary computation,
moral damages must nevertheless be somehow proportional to and in approximation of the suffering inflicted.[52]
This is so because moral damages are in the category of an award designed to compensate the claimant for
actual injury suffered, not to impose a penalty on the wrongdoer.[53]

Viewed as an action for quasi delict, the present case falls squarely within the purview of Article 2219 (2),[54]
which provides for the payment of moral damages in cases of quasi delict.[55] Having established the liability of
petitioner as the registered owner of the vehicle,[56] respondents have satisfactorily shown the existence of the
factual basis for the award[57] and its causal connection to the acts of Raul Tutor, who is deemed as petitioners
employee.[58] Indeed, the damages and injuries suffered by respondents were the proximate result of petitioners
tortious act or omission.[59]

Further, no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount of
indemnity being left to the discretion of the court.[60] The evidence gives no ground for doubt that such discretion
was properly and judiciously exercised by the trial court.[61] The award is in fact consistent with the rule that
moral damages are not intended to enrich the injured party, but to alleviate the moral suffering undergone by that
party by reason of the defendants culpable action.[62]

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

80
SO ORDERED.

Puno, (Chairman), Corona, and Carpio-Morales, JJ., concur.

Sandoval-Gutierrez, J., on leave.

#20

G.R. No. 170631, February 10, 2016

CARAVAN TRAVEL AND TOURS INTERNATIONAL, INC., Petitioner, v. ERMILINDA R.

ABEJAR, Respondent.

DECISION

LEONEN, J.:

The plaintiff may first prove the employer's ownership of the vehicle involved in a mishap by presenting the
vehicle's registration in evidence. Thereafter, a disputable presumption that the requirements for an employer's
liability under Article 21801 of the Civil Code have been satisfied will arise. The burden of evidence then shifts to
the defendant to show that no liability under Article 2180 has ensued. This case, thus, harmonizes the
requirements of Article 2180, in relation to Article 2176 2 of the Civil Code, and the so-called registered-owner rule
as established in this court's rulings in Aguilar, Sr. v. Commercial Savings Bank,3Del Carmen, Jr. v. Bacoy,4Filcar
Transport Services v. Espinas,5 and Mendoza v. Spouses Gomez.6

Through this Petition for Review on Certiorari,7 Caravel Travel and Tours International, Inc. (Caravan) prays that
the Decision8 dated October 3, 2005 and the Resolution9 dated November 29, 2005 of the Court of Appeals
Twelfth Division be reversed and set aside. 10

On July 13, 2000, Jesmariane R. Reyes (Reyes) was walking along the west-bound lane of Sampaguita Street,
United Parañaque Subdivision IV, Parañaque City. 11 A Mitsubishi L-300 van with plate number PKM 19512 was
travelling along the east-bound lane, opposite Reyes.13 To avoid an incoming vehicle, the van swerved to its left
and hit Reyes.14 Alex Espinosa (Espinosa), a witness to the accident, went to her aid and loaded her in the back
of the van.15 Espinosa told the driver of the van, Jimmy Bautista (Bautista), to bring Reyes to the
hospital.16 Instead of doing so, Bautista appeared to have left the van parked inside a nearby subdivision with
Reyes still in the van.17 Fortunately for Reyes, an unidentified civilian came to help and drove Reyes to the
hospital.18

Upon investigation, it was found that the registered owner of the van was Caravan.19 Caravan is a corporation
engaged in the business of organizing travels and tours. 20 Bautista was Caravan's employee assigned to drive
the van as its service driver.21

Caravan shouldered the hospitalization expenses of Reyes.22 Despite medical attendance, Reyes died two (2)
days after the accident.23

Respondent Ermilinda R. Abejar (Abejar), Reyes' paternal aunt and the person who raised her since she was
nine (9) years old,24 filed before the Regional Trial Court of Parañaque a Complaint25 for damages against
Bautista and Caravan. In her Complaint, Abejar alleged that Bautista was an employee of Caravan and that
Caravan is the registered owner of the van that hit Reyes. 26
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Summons could not be served on Bautista.27 Thus, Abejar moved to drop Bautista as a defendant.28 The Regional
Trial Court granted her Motion.29

After trial, the Regional Trial Court found that Bautista was grossly negligent in driving the vehicle. 30 It awarded
damages in favor of Abejar, as follows:
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WHEREFORE, considering that the [respondent] was able to provide by preponderance of evidence her cause
of action against the defendants, judgment is hereby rendered ordering defendants JIMMY BAUTISTA and
CARAVAN TRAVEL and TOURS[,] INC., to jointly and solidarity pay the plaintiff, the following, to wit:
chanRoblesvirtualLawlibrary

1. The amount of P35,000.00 representing actual damages;

2. The amount of P300,000.00 as moral damages;

3. The amount of P30,000.00 as exemplary damages;

4. The amount of P50,000.00 as and by way of attorney's fees; and

5. The cost of suit.

SO ORDERED.31ChanRoblesVirtualawlibrary

Caravan's Motion for Reconsideration32 was denied through the October 20, 2003 Order 33 of the Regional Trial
Court.

The Court of Appeals affirmed with modification the Regional Trial Court's July 31, 2003 Decision and October
20, 2003 Order, as follows:
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WHEREFORE, premises considered, the instant appeal is DENIED for lack of merit. The assailed Decision dated
31 July 2003 and Order dated 20 October 2003 of the Regional Trial Court, City of Para[ñ]aque, Branch 258, in
Civil Case No. 00-0447 are AFFIRMEDwith the following MODIFICATIONS:

1. Moral Damages is REDUCED to Php 200,000.00;

2. Death Indemnity of Php 50,000.00 is awarded;

3. The Php 35,000.00 actual damages, Php 200,000.00 moral damages, Php 30,000.00 exemplary
damages and Php 50,000.00 attorney's fees shall earn interest at the rate of 6% per
annum computed from 31 July 2003, the date of the [Regional Trial Court's] decision; and upon
finality of this Decision, all the amounts due shall earn interest at the rate of 12% per annum, in
lieu of 6% per annum, until full payment; and

4. The Php 50,000.00 death indemnity shall earn interest at the rate of 6% per annumcomputed
from the date of promulgation of this Decision; and upon finality of this Decision, the amount due
shall earn interest at the rate of 12% per annum, in lieu of 6% per annum, until full payment.

Costs against [Caravan].

SO ORDERED.34ChanRoblesVirtualawlibrary

Caravan filed a Motion for Reconsideration, but it was denied in the Court of Appeals' assailed November 29,
2005 Resolution.35

Hence, this Petition was filed.

Caravan argues that Abejar has no personality to bring this suit because she is not a real party in interest.
According to Caravan, Abejar does not exercise legal or substitute parental authority. She is also not the
82
judicially appointed guardian or the only living relative of the deceased.36 She is also not "the executor or
administrator of the estate of the deceased."37 According to Caravan, only the victim herself or her heirs can
enforce an action based on culpa aquiliana such as Abejar's action for damages.38

Caravan adds that Abejar offered no documentary or testimonial evidence to prove that Bautista, the driver,
acted "within the scope of his assigned tasks"39 when the accident occurred.40 According to Caravan, Bautista's
tasks only pertained to the transport of company personnel or products, and when the accident occurred, he
had not been transporting personnel or delivering products of and for the company. 41

Caravan also argues that "it exercised the diligence of a good father of a family in the selection and supervision
of its employees."42

Caravan further claims that Abejar should not have been awarded moral damages, actual damages, death
indemnity, exemplary damages, and attorney's fees.43 It questions the Certificate provided by Abejar as proof of
expenses since its signatory, a certain Julian Peñaloza (Peñaloza), was not presented in court, and Caravan
was denied the right to cross-examine him.44 Caravan argues that the statements in the Certification constitute
hearsay.45 It also contends that based on Article 2206(3)46 of the Civil Code, Abejar is not entitled to moral
damages.47 It insists that moral and exemplary damages should not have been awarded to Abejar because
Caravan acted in good faith.48 Considering that moral and exemplary damages are unwarranted, Caravan
claims that the award of attorney's fees should have also been removed. 49

Lastly, Caravan argues that it should not be held solidarily liable with Bautista since Bautista was already
dropped as a party.50

Abejar counters that Caravan failed to provide proof that it exercised the requisite diligence in the selection and
supervision of Bautista.51 She adds that the Court of Appeals' ruling that Caravan is solidarily liable with
Bautista for moral damages, exemplary damages, civil indemnity ex delicto, and attorney's fees should be
upheld.52 Abejar argues that since Caravan is the registered owner of the van, it is directly, primarily, and
solidarity liable for the tortious acts of its driver.53

For resolution are the following issues:

First, whether respondent Ermilinda R. Abejar is a real party in interest who may bring an action for damages
against petitioner Caravan Travel and Tours International, Inc. on account of Jesmariane R. Reyes' death; and

Second, whether petitioner should be held liable as an employer, pursuant to Article 2180 of the Civil Code.

We deny the Petition.

Having exercised substitute parental authority, respondent suffered actual loss and is, thus, a real party in
interest in this case.

In her Complaint, respondent made allegations that would sustain her action for damages: that she exercised
substitute parental authority over Reyes; that Reyes' death was caused by the negligence of petitioner and its
driver; and that Reyes' death caused her damage.54 Respondent properly filed an action based on quasi-delict.
She is a real party in interest.

Rule 3, Section 2 of the 1997 Rules of Civil Procedure defines a real party in interest:
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RULE 3. Parties to Civil Actions

. . . .

83
SECTION 2. Parties in Interest. — A real party in interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these
Rules, every action must be prosecuted or defended in the name of the real party in interest.

"To qualify a person to be a real party in interest in whose name an action must be prosecuted, he [or she] must
appear to be the present real owner of the right sought to be enforced."55 Respondent's capacity to file a
complaint against petitioner stems from her having exercised substitute parental authority over Reyes.

Article 216 of the Family Code identifies the persons who exercise substitute parental authority:
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Art. 216. In default of parents or a judicially appointed guardian, the following persons shall exercise substitute
parental authority over the child in the order indicated:

(1) The surviving grandparent, as provided in Art. 214; 56

(2) The oldest brother or sister, over twenty-one years of age, unless unfit or disqualified; and

(3) The child's actual custodian, over twenty-one years of age, unless unfit or disqualified.

Whenever the appointment or a judicial guardian over the property of the child becomes necessary, the same
order of preference shall be observed. (Emphasis supplied)

Article 233 of the Family Code provides for the extent of authority of persons exercising substitute parental
authority, that is, the same as those of actual parents:
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Art. 233. The person exercising substitute parental authority shall have the same authority over the person of the
child as the parents. (Emphasis supplied)

Both of Reyes' parents are already deceased.57 Reyes' paternal grandparents are also both deceased.58The
whereabouts of Reyes' maternal grandparents are unknown. 59 There is also no record that Reyes has brothers
or sisters. It was under these circumstances that respondent took custody of Reyes when she was a child,
assumed the role of Reyes' parents, and thus, exercised substitute parental authority over her. 60 As Reyes'
custodian, respondent exercised the full extent of the statutorily recognized rights and duties of a parent.
Consistent with Article 22061 of the Family Code, respondent supported Reyes' education62 and provided for her
personal needs.63 To echo respondent's words in her Complaint, she treated Reyes as if she were her own
daughter.64

Respondent's right to proceed against petitioner, therefore, is based on two grounds.

First, respondent suffered actual personal loss. With her affinity for Reyes, it stands to reason that when Reyes
died, respondent suffered the same anguish that a natural parent would have felt upon the loss of one's child. It
is for this injury — as authentic and personal as that of a natural parent — that respondent seeks to be
indemnified.

Second, respondent is capacitated to do what Reyes' actual parents would have been capacitated to do.

In Metro Manila Transit Corporation v. Court of Appeals,65Tapdasan, Jr. v. People,66 and Aguilar, Sr. v.
Commercial Savings Bank,67 this court allowed natural parents of victims to recover damages for the death of
their children. Inasmuch as persons exercising substitute parental authority have the full range of competencies
of a child's actual parents, nothing prevents persons exercising substitute parental authority from similarly
possessing the right to be indemnified for their ward's death.

We note that Reyes was already 18 years old when she died. Having reached the age of majority, she was
already emancipated upon her death. While parental authority is terminated upon emancipation, 68respondent
continued to support and care for Reyes even after she turned 18.69 Except for the legal technicality of Reyes'
emancipation, her relationship with respondent remained the same. The anguish and damage caused to
respondent by Reyes' death was no different because of Reyes' emancipation.

84
In any case, the termination of respondent's parental authority is not an insurmountable legal bar that precludes
the filing of her Complaint. In interpreting Article 190270 of the old Civil Code, which is substantially similar to the
first sentence of Article 217671 of the Civil Code, this court in The Receiver For North Negros Sugar Company,
Inc. v. Ybañez, et al.72 ruled that brothers and sisters may recover damages, except moral damages, for the
death of their sibling.73 This court declared that Article 1902 of the old Civil Code (now Article 2176) is broad
enough to accommodate even plaintiffs who are not relatives of the deceased, thus: 74

This Court said: "Article 1902 of the Civil Code declares that any person who by an act or omission, characterized
by fault or negligence, causes damage to another shall be liable for the damage done ... a person is liable for
damage done to another by any culpable act; and by any culpable act is meant any act which is blameworthy
when judged by accepted legal standards. The idea thus expressed is undoubtedly broad enough to include any
rational conception of liability for the tortious acts likely to be developed in any society." The word "damage" in
said article, comprehending as it does all that are embraced in its meaning, includes any and all damages that a
human being may suffer in any and all the manifestations of his life: physical or material, moral or psychological,
mental or spiritual, financial, economic, social, political, and religious.

It is particularly noticeable that Article 1902 stresses the passive subject of the obligation to pay damages caused
by his fault or negligence. The article does not limit or specify the active subjects, much less the relation that must
exist between the victim of the culpa aquiliana and the person who may recover damages, thus warranting the
inference that, in principle, anybody who suffers any damage from culpa aquiliana, whether a relative or not of
the victim, may recover damages from the person responsible therefor[.]75(Emphasis supplied, citations omitted)

II

Respondent's Complaint is anchored on an employer's liability for quasi-delict provided in Article 2180, in
relation to Article 2176 of the Civil Code. Articles 2176 and 2180 read:
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ARTICLE 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged
to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this Chapter.

. . . . .

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

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

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

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

Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry.

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

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

85
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage. (Emphasis supplied)

Contrary to petitioner's position, it was not fatal to respondent's cause that she herself did not adduce proof that
Bautista acted within the scope of his authority. It was sufficient that Abejar proved that petitioner was the
registered owner of the van that hit Reyes.

The resolution of this case must consider two (2) rules. First, Article 2180's specification that "[e]mployers shall
be liable for the damages caused by their employees . . . acting within the scope of their assigned tasks[.]"
Second, the operation of the registered-owner rule that registered owners are liable for death or injuries caused
by the operation of their vehicles.76

These rules appear to be in conflict when it comes to cases in which the employer is also the registered owner
of a vehicle. Article 2180 requires proof of two things: first, an employment relationship between the driver and
the owner; and second, that the driver acted within the scope of his or her assigned tasks. On the other hand,
applying the registered-owner rule only requires the plaintiff to prove that the defendant-employer is the
registered owner of the vehicle.

The registered-owner rule was articulated as early as 1957 in Erezo, et al. v. Jepte,77 where this court explained
that the registration of motor vehicles, as required by Section 5(a)78 of Republic Act No. 4136, the Land
Transportation and Traffic Code, was necessary "not to make said registration the operative act by which
ownership in vehicles is transferred, . . . but to permit the use and operation of the vehicle upon any public
highway[.]"79 Its "main aim . . . is to identify the owner so that if any accident happens, or that any damage or
injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite
individual, the registered owner."80

Erezo notwithstanding, Castilex Industrial Corporation v. Vasquez, Jr.81 relied on Article 2180 of the Civil Code
even though the employer was also the registered owner of the vehicle.82 The registered-owner rule was not
mentioned.

In Castilex, Benjamin Abad (Abad) was a manager of Castilex Industrial Corporation (Castilex). Castilex was
also the registered owner of a Toyota Hi-Lux pick-up truck. While Abad was driving the pick-up truck, it collided
with a motorcycle driven by Romeo Vasquez (Vasquez). Vasquez died a few days after. Vasquez's parents filed
a case for damages against Abad and Castilex.83 Castilex denied liability, arguing that Abad was acting in his
private capacity at the time of the accident.84

This court absolved Castilex of liability, reasoning that it was incumbent upon the plaintiff to prove that the
negligent employee was acting within the scope of his assigned tasks.85 Vasquez's parents failed to prove
this.86 This court outlined the process necessary for an employer to be held liable for the acts of its employees
and applied the process to the case:
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Under the fifth paragraph of Article 2180, whether or not engaged in any business or industry, an employer is
liable for the torts committed by employees within the scope of his assigned tasks. But it is necessary to establish
the employer-employee relationship; once this is done, the plaintiff must show, to hold the employer liable, that
the employee was acting within the scope of his assigned task when the tort complained of was committed. It is
only then that the employer may find it necessary to interpose the defense of due diligence in the selection and
supervision of the employee.

. . . .

Since there is paucity of evidence that ABAD was acting within the scope of the functions entrusted to him,
petitioner CASTILEX had no duty to show that it exercised the diligence of a good father of a family in providing
ABAD with a service vehicle. Thus, justice and equity require that petitioner be relieved of vicarious liability for
the consequences of the negligence of ABAD in driving its vehicle. (Emphasis supplied, citations
omitted)87ChanRoblesVirtualawlibrary

Aguilar, Sr. v. Commercial Savings Bank recognized the seeming conflict between Article 2180 and the
registered-owner rule and applied the latter.88

86
In Aguilar, Sr., a Mitsubishi Lancer, registered in the name of Commercial Savings Bank and driven by the
bank's assistant vice-president Ferdinand Borja, hit Conrado Aguilar, Jr. The impact killed Conrado Aguilar, Jr.
His father, Conrado Aguilar, Sr. filed a case for damages against Ferdinand Borja and Commercial Savings
Bank. The Regional Trial Court found Commercial Savings Bank solidarity liable with Ferdinand Borja. 89

However, the Court of Appeals disagreed with the trial court's Decision and dismissed the complaint against the
bank. The Court of Appeals reasoned that Article 2180 requires the plaintiff to prove that at the time of the
accident, the employee was acting within the scope of his or her assigned tasks. The Court of Appeals found no
evidence that Ferdinand Borja was acting as the bank's assistant vice-president at the time of the accident.90

The Court of Appeals' ruling was reversed by this court. 91Aguilar, Sr. reiterated the following pronouncements
made in Erezo in ruling that the bank, as the registered owner of the vehicle, was primarily liable to the
plaintiff:92

The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite
individual, the registered owner....

....

A victim of recklessness on the public highways is usually without means to discover or identify the person actually
causing the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles
Office to determine who is the owner. The protection that the law aims to extend to him would become illusory
were the registered owner given the opportunity to escape liability by disproving his
ownership.93ChanRoblesVirtualawlibrary

Thus, Aguilar, Sr. concluded:

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In our view, respondent bank, as the registered owner of the vehicle, is primarily liable for Aguilar, Jr.'s death. The
Court of Appeals erred when it concluded that the bank was not liable simply because (a) petitioner did not prove
that Borja was acting as the bank's vice president at the time of the accident; and (b) Borja had, according to
respondent bank, already bought the car at the time of the mishap. For as long as the respondent bank remained
the registered owner of the car involved in the vehicular accident, it could not escape primary liability for the death
of petitioner's son.94 (Emphasis supplied)

Preference for the registered-owner rule became more pronounced in Del Carmen, Jr. v. Bacoy:95

Without disputing the factual finding of the [Court of Appeals] that Allan was still his employee at the time of the
accident, a finding which we see no reason to disturb, Oscar Jr. contends that Allan drove the jeep in his private
capacity and thus, an employer's vicarious liability for the employee's fault under Article 2180 of the Civil Code
cannot apply to him.

The contention is no longer novel. In Aguilar Sr. v. Commercial Savings Bank, the car of therein respondent bank
caused the death of Conrado Aguilar, Jr. while being driven by its assistant vice president. Despite Article 2180,
we still held the bank liable for damages for the accident as said provision should defer to the settled doctrine
concerning accidents involving registered motor vehicles, i.e., that the registered owner of any vehicle, even
if not used for public service, would primarily be responsible to the public or to third persons for injuries caused
the latter while the vehicle was being driven on the highways or streets. We have already ratiocinated that:
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The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite
individual, the registered owner. Instances are numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with
very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the

87
public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways. 96 (Emphasis supplied, citations omitted)

Filcar Transport Services v. Espinas97 stated that the registered owner of a vehicle can no longer use the
defenses found in Article 2180:98

Neither can Filcar use the defenses available under Article 2180 of the Civil Code - that the employee acts beyond
the scope of his assigned task or that it exercised the due diligence of a good father of a family to prevent damage
- because the motor vehicle registration law, to a certain extent, modified Article 2180 of the Civil Code by making
these defenses unavailable to the registered owner of the motor vehicle. Thus, for as long as Filcar is the
registered owner of the car involved in the vehicular accident, it could not escape primary liability for the damages
caused to Espinas.99ChanRoblesVirtualawlibrary

Mendoza v. Spouses Gomez100 reiterated this doctrine.

However, Aguilar, Sr., Del Carmen, Filcar, and Mendoza should not be taken to mean that Article 2180 of the
Civil Code should be completely discarded in cases where the registered-owner rule finds application.

As acknowledged in Filcar, there is no categorical statutory pronouncement in the Land Transportation and
Traffic Code stipulating the liability of a registered owner. 101 The source of a registered owner's liability is not a
distinct statutory provision, but remains to be Articles 2176 and 2180 of the Civil Code:
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While Republic Act No. 4136 or the Land Transportation and Traffic Code does not contain any provision on the
liability of registered owners in case of motor vehicle mishaps, Article 2176, in relation with Article 2180, of the
Civil Code imposes an obligation upon Filcar, as registered owner, to answer for the damages caused to Espinas'
car.102ChanRoblesVirtualawlibrary

Thus, it is imperative to apply the registered-owner rule in a manner that harmonizes it with Articles 2176 and
2180 of the Civil Code. Rules must be construed in a manner that will harmonize them with other rules so as to
form a uniform and consistent system of jurisprudence.103 In light of this, the words used in Del Carmen are
particularly notable. There, this court stated that Article 2180 "should defer to"104 the registered-owner rule. It
never stated that Article 2180 should be totally abandoned.

Therefore, the appropriate approach is that in cases where both the registered-owner rule and Article 2180
apply, the plaintiff must first establish that the employer is the registered owner of the vehicle in question. Once
the plaintiff successfully proves ownership, there arises a disputable presumption that the requirements of
Article 2180 have been proven. As a consequence, the burden of proof shifts to the defendant to show that no
liability under Article 2180 has arisen.

This disputable presumption, insofar as the registered owner of the vehicle in relation to the actual driver is
concerned, recognizes that between the owner and the victim, it is the former that should carry the costs of
moving forward with the evidence. The victim is, in many cases, a hapless pedestrian or motorist with hardly
any means to uncover the employment relationship of the owner and the driver, or any act that the owner may
have done in relation to that employment.

The registration of the vehicle, on the other hand, is accessible to the public.

Here, respondent presented a copy of the Certificate of Registration 105 of the van that hit Reyes.106 The
Certificate attests to petitioner's ownership of the van. Petitioner itself did not dispute its ownership of the van.
Consistent with the rule we have just stated, a presumption that the requirements of Article 2180 have been
satisfied arises. It is now up to petitioner to establish that it incurred no liability under Article 2180. This it can do
by presenting proof of any of the following: first, that it had no employment relationship with Bautista; second,
that Bautista acted outside the scope of his assigned tasks; or third, that it exercised the diligence of a good
father of a family in the selection and supervision of Bautista. 107

On the first, petitioner admitted that Bautista was its employee at the time of the accident.108

On the second, petitioner was unable to prove that Bautista was not acting within the scope of his assigned

88
tasks at the time of the accident. When asked by the court why Bautista was at the place of the accident when it
occurred, Sally Bellido, petitioner's accountant and supervisor,109 testified that she did not "have the personal
capacity to answer [the question]"110 and that she had no knowledge to answer it:
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COURT : Madam Witness, do you know the reason why your driver, Jimmy Bautista, at around
10:00 o' clock in the morning of July 13, 2000 was in the vicinity of Barangay Marcelo
Green, United Parañaque Subdivision 4?

WITNESS : I don't have the personal capacity to answer that, Sir.

Q : So you don't have any knowledge why he was there?

A : Yes, Sir.111 (Emphasis supplied)

Sally Bellido's testimony does not affect the presumption that Article 2180's requirements have been satisfied.
Mere disavowals are not proof that suffice to overturn a presumption. To this end, evidence must be adduced.
However, petitioner presented no positive evidence to show that Bautista was acting in his private capacity at
the time of the incident.

On the third, petitioner likewise failed to prove that it exercised the requisite diligence in the selection and
supervision of Bautista.

In its selection of Bautista as a service driver, petitioner contented itself with Bautista's submission of a non-
professional driver's license.112 Hence, in Sally Balledo's cross-examination:
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Q : . . . when he was promoted as service driver, of course, there were certain requirements
and among other else, you made mention about a driver's license.

A : Yes, Sir.

Q : Would you be able to show to this Honorable Court whether indeed this person did submit a
driver's license to your company?

89
 A : Yes, Sir.

....

Q : Do you recall what kind of driver's license is this?

A : The Land Transportation Office.

Q : Is it a professional driver's license or non-proffesional [sic] driver's license?

A : Non-professional.

Q : You are not sure?

COURT : Non professional, professional?

A : It's a non-professional.113 (Emphasis supplied)

Employing a person holding a non-professional driver's license to operate another's motor vehicle violates
Section 24 of the Land Transportation and Traffic Code, which provides:
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SEC. 24. Use of driver's license and badge. — ...

. . . .

No owner of a motor vehicle shall engage, employ, or hire any person to operate such motor vehicle, unless the
person sought to be employed is a duly licensed professional driver.
90
Evidently, petitioner did not only fail to exercise due diligence when it selected Bautista as service driver; it also
committed an actual violation of law.

To prove that it exercised the required diligence in supervising Bautista, petitioner presented copies of several
memoranda and company rules.114 These, however, are insufficient because petitioner failed to prove actual
compliance. Metro Manila Transit Corporation v. Court of Appeals115 emphasized that to establish diligence in
the supervision of employees, the issuance of company policies must be coupled with proof of compliance:
chanRoblesvirtualLawlibrary

Due diligence in the supervision of employees, on the other hand, includes the formulation of suitable rules and
regulations for the guidance of employees and the issuance of proper instructions intended for the protection of
the public and persons with whom the employer has relations through his or its employees and the imposition of
necessary disciplinary measures upon employees in case of breach or as may be warranted to ensure the
performance of acts indispensable to the business of and beneficial to their employer. To this, we add that actual
implementation and monitoring of consistent compliance with said rules should be the constant concern of the
employer, acting through dependable supervisors who should regularly report on their supervisory functions.

In order that the defense of due diligence in the selection and supervision of employees may be deemed sufficient
and plausible, it is not enough to emptily invoke the existence of said company guidelines and policies on
hiring and supervision. As the negligence of the employee gives rise to the presumption of negligence on the
part of the employer, the latter has the burden of proving that it has been diligent not only in the selection of
employees but also in the actual supervision of their work. The mere allegation of the existence of hiring
procedures and supervisory policies, without anything more, is decidedly not sufficient to overcome presumption.

We emphatically reiterate our holding, as a warning to all employers, that "(t)he mere formulation of various
company policies on safety without showing that they were being complied with is not sufficient to exempt
petitioner from liability arising from negligence of its employees. It is incumbent upon petitioner to show that in
recruiting and employing the erring driver the recruitment procedures and company policies on efficiency and
safety were followed." Paying lip-service to these injunctions or merely going through the motions of compliance
therewith will warrant stern sanctions from the Court.116(Emphasis supplied, citations omitted)

For failing to overturn the presumption that the requirements of Article 2180 have been satisfied, petitioner must
be held liable.

III

Petitioner's argument that it should be excused from liability because Bautista was already dropped as a party
is equally unmeritorious. The liability imposed on the registered owner is direct and primary. 117 It does not
depend on the inclusion of the negligent driver in the action. Agreeing to petitioner's assertion would render
impotent the rationale of the motor registration law in fixing liability on a definite person.

Bautista, the driver, was not an indispensable party under Rule 3, Section 7 118 of the 1997 Rules of Civil
Procedure. Rather, he was a necessary party under Rule 3, Section 8.119 Instead of insisting that Bautista —
who was nothing more than a necessary party — should not have been dropped as a defendant, or that
petitioner, along with Bautista, should have been dropped, petitioner (as a co-defendant insisting that the action
must proceed with Bautista as party) could have opted to file a cross-claim against Bautista as its remedy.

The 1997 Rules of Civil Procedure spell out the rules on joinder of indispensable and necessary parties. These
are intended to afford "a complete determination of all possible issues, not only between the parties themselves
but also as regards to other persons who may be affected by the judgment." 120

However, while an exhaustive resolution of disputes is desired in every case, the distinction between
indispensable parties and necessary parties delineates a court's capacity to render effective judgment. As
defined by Rule 3, Section 7, indispensable parties are "[p]arties in interest without whom no final determination
can be had of an action[.]" Thus, their non-inclusion is debilitating: "the presence of indispensable parties is a
condition for the exercise of juridical power and when an indispensable party is not before the court, the action
should be dismissed."121
91
In contrast, a necessary party's presence is not imperative, and his or her absence is not debilitating.
Nevertheless, it is preferred that they be included in order that relief may be complete.

The concept of indispensable parties, as against parties whose inclusion only allows complete relief, was
explained in Arcelona v. Court of Appeals:122

An indispensable party is a party who has such an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has not only
an interest in the subject matter of the controversy, but also has an interest of such nature that a final decree
cannot be made without affecting his interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience. It has also been considered that an
indispensable party is a person in whose absence there cannot be a determination between the parties already
before the court which is effective, complete, or equitable. Further, an indispensable party is one who must be
included in an action before it may properly go forward.

A person is not an indispensable party, however, if his interest in the controversy or subject matter is separable
from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a decree
which does complete justice between them. Also, a person is not an indispensable party if his presence would
merely permit complete relief between him and those already parties to the action, or if he has no interest in the
subject matter of the action. It is not a sufficient reason to declare a person to be an indispensable party that his
presence will avoid multiple litigation.123ChanRoblesVirtualawlibrary

Petitioner's interest and liability is distinct from that of its driver. Regardless of petitioner's employer-employee
relationship with Bautista, liability attaches to petitioner on account of its being the registered owner of a vehicle
that figures in a mishap. This alone suffices. A determination of its liability as owner can proceed independently
of a consideration of how Bautista conducted himself as a driver. While certainly it is desirable that a
determination of Bautista's liability be made alongside that of the owner of the van he was driving, his non-
inclusion in these proceedings does not absolutely hamper a judicious resolution of respondent's plea for relief.

IV

The Court of Appeals committed no reversible error when it awarded actual damages to respondent.
Respondent's claim for actual damages was based on the Certificate124 issued and signed by a certain
Peñaloza showing that respondent paid Peñaloza P35,000.00 for funeral expenses.

Contrary to petitioner's claim, this Certificate is not hearsay. Evidence is hearsay when its probative value is
based on the personal knowledge of a person other than the person actually testifying. 125 Here, the Certificate
sought to establish that respondent herself paid Peñaloza P35,000.00 as funeral expenses for Reyes' death: 126

3. Na ang aking kontrata ay nagkakahalaga ng P35,000-00 [sic] sa lahat ng nagamit na materiales

at labor nito kasama ang lote na ibinayad sa akin ni Gng. ERMILINDA REYES ABEJAR na
siyang aking kakontrata sa pagsasagawa ng naturang paglilibingan. 127 (Emphasis supplied)

It was respondent herself who identified the Certificate. She testified that she incurred funeral expenses
amounting to P35,000.00, that she paid this amount to Peñaloza, and that she was present when Peñaloza
signed the Certificate:
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[ATTY. LIM] Did you incur any expenses?

:

92
A: Meron po.

Q: How much did you spend for the death of Jesmarian [sic] Reyes?

A: 'Yun pong P35,000.00 na pagpapalibing at saka...

Q: You said that you spent P35,000.00. Do you have any evidence or proof that you spent
that amount?

A: Meron po.

Q: Showing to you this sort of certification. What relation has this...

A: 'Yan po' yung contractor nagumawa.

Q: Contractor of what?

A: 'Yan po' yung mismong binilhan ko ng lupa at nitso.

....

93
 ATTY. LIM : There is a signature at the top of the printed name Julian Penalosa [sic]. Whose signature
is this?

A: 'Yan po' yung mismong contractor.

....

Q: Did you see him sign this?

A: Opo.128 (Emphasis supplied)

Respondent had personal knowledge of the facts sought to be proved by the Certificate, i.e. that she spent
P35,000.00 for the funeral expenses of Reyes. Thus, the Certificate that she identified and testified to is not
hearsay. It was not an error to admit this Certificate as evidence and basis for awarding P35,000.00 as actual
damages to respondent.

The Court of Appeals likewise did not err in awarding civil indemnity and exemplary damages.

Article 2206 of the Civil Code provides:

chanRoblesvirtualLawlibrary

ARTICLE 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been mitigating circumstances[.]

Further, Article 2231 of the Civil Code provides:

chanRoblesvirtualLawlibrary

ARTICLE 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross
negligence.

Both the Court of Appeals and the Regional Trial Court found Bautista grossly negligent in driving the van and
concluded that Bautista's gross negligence was the proximate cause of Reyes' death. Negligence and
causation are factual issues.129 Findings of fact, when established by the trial court and affirmed by the Court of
Appeals, are binding on this court unless they are patently unsupported by evidence or unless the judgment is
grounded on a misapprehension of facts.130 Considering that petitioner has not presented any evidence
disputing the findings of the lower courts regarding Bautista's negligence, these findings cannot be disturbed in
this appeal. The evidentiary bases for the award of civil indemnity and exemplary damages stand. As such,
petitioner must pay the exemplary damages arising from the negligence of its driver.131 For the same reasons,
the award of P50,000.00 by way of civil indemnity is justified. 132

The award of moral damages is likewise proper.

94
Article 2206(3) of the Civil Code provides:
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ARTICLE 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been mitigating circumstances. In addition:

. . . .

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the deceased. (Emphasis supplied)

For deaths caused by quasi-delict, the recovery of moral damages is limited to the spouse, legitimate and
illegitimate descendants, and ascendants of the deceased.133

Persons exercising substitute parental authority are to be considered ascendants for the purpose of awarding
moral damages. Persons exercising substitute parental authority are intended to stand in place of a child's
parents in order to ensure the well-being and welfare of a child.134 Like natural parents, persons exercising
substitute parental authority are required to, among others, keep their wards in their company, 135 provide for
their upbringing,136 show them love and affection,137 give them advice and counsel,138 and provide them with
companionship and understanding.139 For their part, wards shall always observe respect and obedience
towards the person exercising parental authority.140 The law forges a relationship between the ward and the
person exercising substitute parental authority such that the death or injury of one results in the damage or
prejudice of the other.

Moral damages are awarded to compensate the claimant for his or her actual injury, and not to penalize the
wrongdoer.141 Moral damages enable the injured party to alleviate the moral suffering resulting from the
defendant's actions.142 It aims to restore — to the extent possible — "the spiritual status quo ante[.]"143

Given the policy underlying Articles 216 and 220 of the Family Code as well as the purposes for awarding moral
damages, a person exercising substitute parental authority is rightly considered an ascendant of the deceased,
within the meaning of Article 2206(3) of the Civil Code. Hence, respondent is entitled to moral damages.

As exemplary damages have been awarded and as respondent was compelled to litigate in order to protect her
interests, she is rightly entitled to attorney's fees.144

However, the award of interest should be modified. This modification must be consistent with Nacar v. Gallery
Frames,145 in which we ruled:
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2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on

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

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6%
per annum from such finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.146 (Emphasis supplied)

WHEREFORE, the Decision of the Court of Appeals dated October 3, 2005 is AFFIRMED with the
following MODIFICATIONS: (a) actual damages in the amount of P35,000.00 shall earn interest at the rate of
95
6% per annum from the time it was judicially or extrajudicially demanded from petitioner Caravan Travel and
Tours International, Inc. until full satisfaction; (b) moral damages, exemplary damages, and attorney's fees shall
earn interest at the rate of 6% per annum from the date of the Regional Trial Court Decision until full
satisfaction; and (c) civil indemnity shall earn interest at the rate of 6% per annum from the date of the Court of
Appeals Decision until full satisfaction.

SO ORDERED.cralawlawlibrary

Carpio, (Chairperson), Brion, Del Castillo, and Mendoza, JJ., concur.chanroblesvirtuallawlibrary

Endnotes:

1 CIVIL CODE, art. 2180 provides:

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

. . . .

Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry.

. . . .

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage.

2 CIVIL CODE, art. 2176 provides:

ARTICLE 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged
to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this Chapter.

3 412 Phil. 834, 839-841 (2001) [Per J. Quisumbing, Second Division].

4 686 Phil. 799, 817 (2012) [Per J. Del Castillo, First Division].

5 688 Phil. 430, 436-442 (2012) [Per J. Brion, Second Division].

6 G.R. No. 160110, June 18, 2014, 726 SCRA 505, 518-521 [Per J. Perez, Second Division].

7Rollo, pp. 91-131. The Petition was filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure.

8 Id. at 133-165. The Decision was penned by Associate Justice Celia C. Librea-Leagogo and concurred in by
Associate Justices Renato C. Dacudao (Chair) and Lucas P. Bersamin (now Associate Justice of this court) of
the Twelfth Division.

9 Id. at 166-167. The Resolution was penned by Associate Justice Celia C. Librea-Leagogo and concurred in by
Associate Justices Renato C. Dacudao (Chair) and Lucas P. Bersamin (now Associate Justice of this court) of
the Twelfth Division.

10 Id. at 129, Petition for Review on Certiorari.

11 Id. at 134, Court of Appeals Decision.

96
12 Id.

13 TSN, May 31, 2002, p. 948.

14 RTC records, p. 445, Regional Trial Court Decision.

15 Id.

16 CA rollo, p. 31, Regional Trial Court Decision.

17 Id.

18 Id.

19Rollo, p. 134, Court of Appeals Decision.

20 RTC records, pp. 2, Complaint; and 47, Answer with Counterclaim.

21Rollo, p. 134, Court of Appeals Decision.

22 Id. at 139.

23 Id. at 134.

24 Id. at 138.cralawred

25 RTC records, pp. 1-5.

26 Id. at 2.cralawred

27 CA rollo, p. 48, Caravan's Reply Brief.

28Rollo, p. 138, Court of Appeals Decision.

29Rollo, p. 138, Court of Appeals Decision.

30RTC records, p. 447, Regional Trial Court Decision. The trial court included Bautista in the Decision even
though it already granted Abejar's motion to drop him as a defendant.

31Id. at 449. The case was docketed as Civil Case No. 00-0447. The Decision, promulgated on July 31, 2003,
was penned by Judge Raul E. De Leon of Branch 258.

32 Id. at 450-462.

33 Id. at 513.

34Rollo, p. 162, Court of Appeals Decision. The case was docketed as CA-G.R. CV No. 81694.

35 Id. at 166-167, Court of Appeals Resolution.

36 Id. at 231, Caravan's Memorandum.

37 Id.

38 Id. at 232.

39 Id. at 42, Petition for Review on Certiorari.cralawred

97
40 Id. at 42-43.

41 Id. at 42.

42 Id. at 31.

43 Id. at 43.

44 Id. at 44.

45 Id. at 233, Caravan's Memorandum.

46 CIVIL CODE, art. 2206(3) provides:

ARTICLE 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been mitigating circumstances. In addition:

. . . .

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral
damages for mental anguish by reason of the death of the deceased.

47Rollo, pp. 45-46, Petition for Review on Certiorari.

48 Id. at 50.

49 Id. at 50-51.

50 Id. at 43.

51 Id. at 203, Abejar's Memorandum.

52 Id. at 206.

53 Id. at 207.

54 RTC records, pp. 1-3, Complaint.

55National Housing Authority v. Magat, 611 Phil. 742, 747 (2009) [Per J. Carpio, First Division], citing Shipside
Inc. v. Court of Appeals, 404 Phil. 981, 998 (2001) [Per J. Melo, Third Division].

56 FAMILY CODE, art. 214 provides:

Art. 214. In case of death, absence or unsuitability of the parents, substitute parental authority shall be exercised
by the surviving grandparent. In case several survive, the one designated by the court, taking into account the
same consideration mentioned in the preceding article, shall exercise the authority.

57 RTC records, pp. 179, Abejar's Formal Offer of Documentary Exhibits; 187, Death Certificate of Edwin Cortez
issued by the Municipal Civil Registrar of Calamba, Laguna; 188, Death Certificate of Leonora R. Landicho issued
by the Municipal Civil Registrar of Candelaria, Quezon; and 189, Certificate of Death of Leonora R. Landicho
issued by the Parish of San Pedro Bautista, Candelaria, Quezon.

58Id. at 179, Abejar's Formal Offer of Documentary Exhibits; 190, Death Certificate of Leticia Cortez Reyes issued
by the Municipal Civil Registrar of Tiong, Quezon; and 191, Certificate of Death of Domingo Estiva Reyes issued
by the City Civil Registrar of Manila.

59 TSN, April 10, 2002, p. 760.

98
60 TSN, June 22, 2001, p. 605.

61 FAMILY CODE, art. 220 provides:

Art. 220. The parents and those exercising parental authority shall have with the respect to their unemancipated
children on wards the following rights and duties:

(1) To keep them in their company, to support, educate and instruct them by right precept and good
example, and to provide for their upbringing in keeping with their means;

(2) To give them love and affection, advice and counsel, companionship and understanding;

(3) To provide them with moral and spiritual guidance, inculcate in them honesty, integrity, self-
discipline, self-reliance, industry and thrift, stimulate their interest in civic affairs, and inspire in them
compliance with the duties of citizenship;

(4) To furnish them with good and wholesome educational materials, supervise their activities, recreation
and association with others, protect them from bad company, and prevent them from acquiring habits
detrimental to their health, studies and morals;

(5) To represent them in all matters affecting their interests;

(6) To demand from them respect and obedience;

(7) To impose discipline on them as may be required under the circumstances; and

(8) To perform such other duties as are imposed by law upon parents and guardians.

62 TSN, June 22, 2001, p. 607.

63 Id.

64 RTC records, p. 2, Complaint.

65 359 Phil. 18, 26-27 (1998) [Per J. Mendoza, Second Division].

66 440 Phil. 864, 880 (2002) [Per J. Callejo, Sr., Second Division].

67 412 Phil. 834, 835 (2001) [Per J. Quisumbing, Second Division].

68 FAMILY CODE, art. 236.

69Rollo, p. 138, Court of Appeals Decision.

70 CIVIL CODE (1889), art. 1902 provides:

ARTICLE 1902. Any person who by an act or omission causes damage to another by his fault or negligence shall
be liable for the damage so done.

99
71 CIVIL CODE, art. 2176, first sentence, provides:

ARTICLE 2176: Whoever by act or omission causes damage to another, there being fault or negligence, is obliged
to pay for the damage done.

72 133 Phil. 825 (1968) [Per J. Zaldivar, En Banc].

73 Id. at 832-833.

74 Id. at 831. This court ruled that while Article 1902 of the old Civil Code (now Article 2176) does not require any
relation between the plaintiff and the victim of the quasi-delict, Article 2206(3) of the Civil Code does. Hence, the
recovery of moral damages requires that the plaintiff is the victim's spouse, legitimate or illegitimate descendant
or ascendant (Id. at 833).

75 Id. at 831.

76See Filcar Transport Services v. Espinas, 688 Phil. 430, 435 (2012) [Per J. Brion, Second Division].

77 102 Phil. 103 (1957) [Per J. Labrador, En Banc].

78 TRANSP. & TRAFFIC CODE, sec. 5 provides:

SECTION 5. Compulsory Registration of Motor Vehicles. - (a) All motor vehicles and trailer of any type used or
operated on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation
for the current year in accordance with the provisions of this Act.

79Erezo, et al. v. Jepte, 102 Phil. 103, 108 (1957) [Per J. Labrador, En Banc].

80 Id.

81 378 Phil. 1009 (1999) [Per C. J. Davide, Jr., First Division].

82 Id. at 1016-1018.

83 Id. at 1012-1013.

84 Id. at 1018.

85 Id. at 1022-1023.

86 Id. at 1018.

87 Id. at 1017-1022.

88Aguilar, Sr. v. Commercial Savings Bank, 412 Phil. 834, 839-841 (2001) [Per J. Quisumbing, Second Division].

89 Id. at 835-837.

90 Id. at 837.

91 Id. at 841.

92Aguilar, Sr. v. Commercial Savings Bank, 412 Phil. 834, 839-841 (2001) [Per J. Quisumbing, Second Division].

93 Id. at 839-840.

94 Id. at 841.

100
95 686 Phil. 799 (2012) [Per J. Del Castillo, First Division].

96 Id. at 817.

97 688 Phil. 430 (2012) [Per J. Brion, Second Division].

98 Id. at 441.

99 Id.

100 G.R. No. 160110, June 18, 2014, 726 SCRA 505, 518-521 [Per J. Perez, Second Division].

101Filcar Transport Services v. Espinas, 688 Phil. 430, 441 (2012) [Per J. Brion, Second Division].

102 Id. at 441-442.

103Spouses Algura v. The Local Government Unit of the City of Naga, 536 Phil. 819, 835 (2006) [Per J. Velasco,
Jr., Third Division].

104Del Carmen, Jr. v. Bacoy, 686 Phil. 799, 817 (2012) [Per J. Del Castillo, First Division].

105 RTC records, p. 182.

106 Id. at 177, Abejar's Formal Offer of Documentary Evidence.

107A reading of Article 2180 reveals that in order for an employer to be liable for the acts of its employee, it is
required that the employment relationship is established, that the employee acted within the scope of his or her
assigned tasks, and that the employer failed to exercise the diligence of a good father of a family in the selection
and supervision of the employee. See Castilex Industrial Corp. v. Vasquez, Jr., 378 Phil. 1009, 1017 (1999) [Per
C.J. Davide, Jr., First Division] and Metro Manila Transit Corporation v. Court of Appeals, G.R. No. 104408, June
21, 1993, 223 SCRA 521, 539 [Per J. Regalado, Second Division].

108 RTC records, pp 2, Complaint; and 47, Answer with Counterclaim.

109 TSN, September 25, 2002, pp. 1247-1248.

110 Id. at 1284.

111 Id. at 1284-1285.

112 Id. at 1274-1275.

113 Id. at 1273-1275.

114 RTC records, pp. 227-229, Caravan's Formal Offer of Evidence.

115 G.R. No. 104408, June 21, 1993, 223 SCRA 521 [Per J. Regalado, Second Division].

116 Id. at 540-541.

117Filcar
Transport Services v. Espinas, 688 Phil. 430, 439 (2012) [Per J. Brion, Second Division]; Aguilar, Sr. v.
Commercial Savings Bank, 412 Phil. 834, 839-841 (2001) [Per J. Quisumbing, Second Division].

118 1997 RULES OF CIV. PROC., Rule 3, sec. 7 provides:

RULE 3. Parties to Civil Actions

. . . .

101
SECTION 7. Compulsory Joinder of Indispensable Parties. — Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.

119 1997 RULES OF CIV. PROC., Rule 3, sec. 8 provides:

RULE 3. Parties to Civil Actions

SECTION 8. Necessary Party. — A necessary party is one who is not indispensable but who ought to be joined
as a party if complete relief is to be accorded as to those already parties, or for a complete determination or
settlement of the claim subject of the action.

120Director of Lands v. Court of Appeals, 181 Phil. 432, 440-441 (1979) [Per J. Guerrero, First Division].

121Lucman v. Malawi, 540 Phil. 289, 302 (2006) [Per J. Tinga, Third Division].

122 345 Phil. 250 (1997) [Per J. Panganiban, Third Division].

123 Id. at 269-270.

124 RTC records, p. 186.

125Valencia v. Atty. Cabanting, 273 Phil. 534, 545 (1991) [Per Curiam, En Banc].

126 RTC records, pp. 178-179, Abejar's Formal Offer of Documentary Exhibits.

127 Id. at 186, Certificate issued by Julian Peñaloza.

128 TSN, June 22, 2001, pp. 615-616.

129Kierulf v. Court of Appeals, 336 Phil. 414, 423 (1997) [Per J. Panganiban, Third Division].

130Pangonorom v. People, 495 Phil. 195, 204 (2005) [Per J. Carpio, First Division], citing China Airlines, Ltd. v.
Court of Appeals, 453 Phil. 959, 978 (2003) [Per J. Carpio, First Division]; Romago Electric Co., Inc. v. Court of
Appeals, 388 Phil. 964, 974-975 (2000) [Per J. Gonzaga-Reyes, Third Division]; Austria v. Court of Appeals, 384
Phil. 408, 415 (2000) [Per J. Quisumbing, Second Division]; and Halili v. Court of Appeals, 350 Phil. 906, 912
(1998) [Per J. Panganiban, First Division].

131See Del Carmen, Jr. v. Bacoy, 686 Phil. 799 (2012) [Per J. Del Castillo, First Division].

132Mendoza v. Casumpang, et al., 684 Phil. 459, 462 (2012) [Per J. Abad, Third Division].

133The Receiver For North Negros Sugar Company, Inc. v. Ybañez, et al., 133 Phil. 825, 833 (1968) [Per J.
Zaldivar, En Banc].

134See Murdock, Sr. and Murdock v. Chuidian, 99 Phil. 821, 824 (1956) [Per J. Padilla, En Banc].

135 FAMILY CODE, art. 220(1).

136 FAMILYCODE, art. 220(1).

137 FAMILY CODE, art. 220(2).

138 FAMILY CODE, art. 220(2).

139 FAMILY CODE, art. 220(2).

140 FAMILY CODE, art. 220(7).

102
141Kierulf v. Court of Appeals, 336 Phil. 414, 432 (1997) [Per J. Panganiban, Third Division].

142 Id.

143 Id.

144 CIVIL CODE, art. 2208 (1) and (2).

145 G.R. No. 189871, August 13, 2013, 703 SCRA 439 [Per J. Peralta, En Banc].

146 Id. at 458.

SEPARATE CONCURRING OPINION

BRION, J.:

I concur with the ponencia's conclusions that, first, Ermilinda Abejar (Abejar) is a real party in interest
and, second, Caravan Travel and Tours International, Inc. (Caravan) is vicariously liable for damages as Jimmy
Bautista (Bautista)'s employer.

I write this Opinion (1) to express my reservation on the reasoning employed in resolving the first issue, and (2)
to reflect my view on the interplay between Articles 2176 and 2180 of the Civil Code and the registered owner
rule.

In resolving the first issue, the ponencia reasoned out that Abejar is a real party in interest because she
exercised substitute parental authority over the victim, Jesmariane Reyes (Reyes).1 Having acted as a parent to
Reyes, Abejar suffered actual and personal loss due to her death.2 Furthermore, Abejar was capacitated to do
what Reyes' actual parents would have been capacitated to do.3 In a number of cases, the Court allowed
natural parents to recover damages for the death of their children. 4

I disagree with the ponencia's reasoning. In my view, Abejar is a real party in interest, not because she
exercised substitute parental authority over Reyes, but because she has an interest in claiming actual and
exemplary damages from Caravan.

Parental authority has no bearing on one's status as a real party in interest in a quasi-delict case. Parental
authority refers to the rights and obligations which parents have over their children's person and property until
their majority age.5 This authority is granted to parents to facilitate the performance of their duties to their
children.6 If a child has no parents, grandparents, or siblings, the child's actual custodian shall exercise
substitute parental authority over him or her.7 Moreover, the child's emancipation terminates parental authority.8

On the other hand, real party in interest refers to the person who is entitled to the avails of the suit. 9 He or she
stands to be benefited or injured by the judgment.10 The interest involved must be personal and not based on
another person's rights.11

The fact that Abejar exercised substitute parental authority over Reyes does not translate to Abejar's legal
interest to recover damages for Reyes' death. Furthermore, Abejar's parental authority over Reyes ceased
when the latter turned eighteen. Thus, at the time of her death, Reyes was no longer under Abejar's parental
103
authority.

Nevertheless, I agree that Abejar is a real party in interest, because she incurred actual damages when she
paid for Reyes' funeral expenses. Courts may also impose exemplary damages, in addition to compensatory
damages, if the defendant acted with gross negligence.12 In the present case, Bautista's act of leaving Reyes
rather than bringing her to a hospital amounts to gross negligence. 13 Thus, Abejar may recover these damages
from Caravan.

On the second point, I discuss the registered owner rule in relation to Articles 2180 and 2176 of the Civil Code.
To stress, I agree that Caravan is directly and primarily liable for damages as Bautista's employer and as the
van's registered owner.

As early as 1957, this Court held in Erezo v. Jepte14 that a vehicle's registered owner is primarily
responsible for the damage caused to another person. The Revised Motor Vehicle Law 15 requires vehicles to
be registered before they may be used in any public highway. The Court stressed that the main purpose of the
registration is to identify the owner so that if any accident happens or damage is caused on the public
highways, responsibility can be fixed on a definite individual - the registered owner.16

In Filcar Transport Services v. Espinas,17 the Court had the opportunity to discuss the interplay between Articles
2176 and 2180 of the Civil Code and the registered owner rule. The Court ruled that the registered owner of a
vehicle is deemed the employer of the vehicle's driver.18 Thus, the vehicle's registered owner is vicariously
liable for the driver's negligent acts pursuant to Articles 2176 and Article 2180 of the Civil Code. 19 The vicarious
liability remains with the registered owner even when the vehicle had been sold to another person before the
accident but the registration has not yet been transferred.20The Court emphasized in R. Transport Corporation
v. Yu21 that the employer's liability for the negligent acts of its subordinate is direct and primary.

Based on the foregoing, I concur with the ponencia's results.chanroblesvirtuallawlibrary

#41

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 84458 November 6, 1989

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
104
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and
GORGONIA VIANA, and PIONEER STEVEDORING CORPORATION, respondents.

Herenio E. Martinez for petitioner.

M.R. Villaluz Law Office for private respondent.

REGALADO, J.:

In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the decision 1 of respondent
Court of Appeals, dated July 29, 1988, the decretal portion of which reads:

WHEREFORE, the judgment appealed from as modified by the order of October 27, 1982, is hereby affirmed
with the modification that appellant Aboitiz Shipping is hereby ordered to pay plaintiff-appellees the amount of
P30,000.00 for the death of Anacleto Viana; actual damages of P9,800.00; P150,000.00 for unearned income;
P7,200.00 as support for deceased's parents; P20,000.00 as moral damages; P10,000.00 as attorney's fees; and
to pay the costs.

The undisputed facts of the case, as found by the court a quo and adopted by respondent court, are as follows: .

The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel M/V Antonia, owned by
defendant, at the port at San Jose, Occidental Mindoro, bound for Manila, having purchased a ticket (No. 117392)
in the sum of P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North Harbor, Manila, and the
passengers therein disembarked, a gangplank having been provided connecting the side of the vessel to the pier.
Instead of using said gangplank Anacleto Viana disembarked on the third deck which was on the level with the
pier. After said vessel had landed, the Pioneer Stevedoring Corporation took over the exclusive control of the
cargoes loaded on said vessel pursuant to the Memorandum of Agreement dated July 26, 1975 (Exh. '2') between
the third party defendant Pioneer Stevedoring Corporation and defendant Aboitiz Shipping Corporation.

The crane owned by the third party defendant and operated by its crane operator Alejo Figueroa was placed
alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it started operation
by unloading the cargoes from said vessel. While the crane was being operated, Anacleto Viana who had already
disembarked from said vessel obviously remembering that some of his cargoes were still loaded in the vessel,
went back to the vessel, and it was while he was pointing to the crew of the said vessel to the place where his
cargoes were loaded that the crane hit him, pinning him between the side of the vessel and the crane. He was
thereafter brought to the hospital where he later expired three (3) days thereafter, on May 15, 1975, the cause of
his death according to the Death Certificate (Exh. "C") being "hypostatic pneumonia secondary to traumatic
fracture of the pubic bone lacerating the urinary bladder" (See also Exh. "B"). For his hospitalization, medical,
burial and other miscellaneous expenses, Anacleto's wife, herein plaintiff, spent a total of P9,800.00 (Exhibits "E",
"E-1", to "E-5"). Anacleto Viana who was only forty (40) years old when he met said fateful accident (Exh. 'E') was
in good health. His average annual income as a farmer or a farm supervisor was 400 cavans of palay annually.
His parents, herein plaintiffs Antonio and Gorgonia Viana, prior to his death had been recipient of twenty (20)
cavans of palay as support or P120.00 monthly. Because of Anacleto's death, plaintiffs suffered mental anguish
and extreme worry or moral damages. For the filing of the instant case, they had to hire a lawyer for an agreed
fee of ten thousand (P10,000.00) pesos. 2

Private respondents Vianas filed a complaint 3 for damages against petitioner corporation (Aboitiz, for brevity) for
breach of contract of carriage.

In its answer. 4 Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely
under the control of respondent Pioneer Stevedoring Corporation (Pioneer, for short) as the exclusive stevedoring
contractor of Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. It is also averred that
since the crane operator was not an employee of Aboitiz, the latter cannot be held liable under the fellow-servant
rule.

105
Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer imputing liability thereto
for Anacleto Viana's death as having been allegedly caused by the negligence of the crane operator who was an
employee of Pioneer under its exclusive control and supervision.

Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no cause of action
against Pioneer considering that Aboitiz is being sued by the Vianas for breach of contract of carriage to which
Pioneer is not a party; that Pioneer had observed the diligence of a good father of a family both in the selection
and supervision of its employees as well as in the prevention of damage or injury to anyone including the victim
Anacleto Viana; that Anacleto Viana's gross negligence was the direct and proximate cause of his death; and that
the filing of the third-party complaint was premature by reason of the pendency of the criminal case for homicide
through reckless imprudence filed against the crane operator, Alejo Figueroa.

In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the Vianas for damages
incurred, and Pioneer was ordered to reimburse Aboitiz for whatever amount the latter paid the Vianas. The
dispositive portion of said decision provides:

WHEREFORE, judgment is hereby rendered in favor of the plantiffs:

(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum of P12,000.00 for the death
of Anacleto Viana P9,800.00 as actual damages; P533,200.00 value of the 10,664 cavans of palay computed at
P50.00 per cavan; P10,000.00 as attorney's fees; F 5,000.00, value of the 100 cavans of palay as support for five
(5) years for deceased (sic) parents, herein plaintiffs Antonio and Gorgonia Viana computed at P50.00 per cavan;
P7,200.00 as support for deceased's parents computed at P120.00 a month for five years pursuant to Art. 2206,
Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and

(2) ordering the third party defendant Pioneer Stevedoring Corporation to reimburse defendant and third
party plaintiff Aboitiz Shipping Corporation the said amounts that it is ordered to pay to herein plaintiffs.

Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly raised the trial court's
failure to declare that Anacleto Viana acted with gross negligence despite the overwhelming evidence presented
in support thereof. In addition, Aboitiz alleged, in opposition to Pioneer's motion, that under the memorandum of
agreement the liability of Pioneer as contractor is automatic for any damages or losses whatsoever occasioned
by and arising from the operation of its arrastre and stevedoring service.

In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure of the Vianas and
Aboitiz to preponderantly establish a case of negligence against the crane operator which the court a quo ruled
is never presumed, aside from the fact that the memorandum of agreement supposedly refers only to Pioneer's
liability in case of loss or damage to goods handled by it but not in the case of personal injuries, and, finally that
Aboitiz cannot properly invoke the fellow-servant rule simply because its liability stems from a breach of contract
of carriage. The dispositive portion of said order reads:

WHEREFORE, judgment is hereby modified insofar as third party defendant Pioneer Stevedoring Corporation is
concerned rendered in favor of the plaintiffs-,:

(1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the sum of P12,000.00 for the death
of Anacleto Viana; P9,000.00 (sic) as actual damages; P533,200.00 value of the 10,664 cavans of palay
computed at P50.00 per cavan; P10,000.00 as attorney's fees; P5,000.00 value of the 100 cavans of palay as
support for five (5) years for deceased's parents, herein plaintiffs Antonio and Gorgonia Viana,computed at
P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00 a month for five years
pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and

(2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic) any liability for the death of
Anacleto Viana the passenger of M/V Antonia owned by defendant third party plaintiff Aboitiz Shipping
Corporation it appearing that the negligence of its crane operator has not been established therein.

Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to respondent Court of
Appeals which affirmed the findings of of the trial court except as to the amount of damages awarded to the
Vianas.

106
Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred:

(A) In holding that the doctrine laid down by this honorable Court in La Mallorca vs. Court of Appeals, et al.
(17 SCRA 739, July 27, 1966) is applicable to the case in the face of the undisputable fact that the factual situation
under the La Mallorca case is radically different from the facts obtaining in this case;

(B) In holding petitioner liable for damages in the face of the finding of the court a quo and confirmed by the
Honorable respondent court of Appeals that the deceased, Anacleto Viana was guilty of contributory negligence,
which, We respectfully submit contributory negligence was the proximate cause of his death; specifically the
honorable respondent Court of Appeals failed to apply Art. 1762 of the New Civil Code;

(C) In the alternative assuming the holding of the Honorable respondent Court of Appears that petitioner may
be legally condemned to pay damages to the private respondents we respectfully submit that it committed a
reversible error when it dismissed petitioner's third party complaint against private respondent Pioneer
Stevedoring Corporation instead of compelling the latter to reimburse the petitioner for whatever damages it may
be compelled to pay to the private respondents Vianas. 9

At threshold, it is to be observed that both the trial court and respondent Court of Appeals found the victim
Anacleto Viana guilty of contributory negligence, but holding that it was the negligence of Aboitiz in prematurely
turning over the vessel to the arrastre operator for the unloading of cargoes which was the direct, immediate and
proximate cause of the victim's death.

I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana
disembarked from the vessel and that he was given more than ample opportunity to unload his cargoes prior to
the operation of the crane, his presence on the vessel was no longer reasonable e and he consequently ceased
to be a passenger. Corollarily, it insists that the doctrine in La Mallorca vs. Court of Appeals, et al. 10 is not
applicable to the case at bar.

The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of
destination and has left the vessel owner's dock or premises. 11 Once created, the relationship will not ordinarily
terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or
had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a
reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time
to see after his baggage and prepare for his departure.12 The carrier-passenger relationship is not terminated
merely by the fact that the person transported has been carried to his destination if, for example, such person
remains in the carrier's premises to claim his baggage.13

It was in accordance with this rationale that the doctrine in the aforesaid case of La Mallorca was enunciated, to
wit:

It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the
passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but
continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's
premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the
circumstances. Thus, a person who, after alighting from a train, walks along the station platform is considered
still a passenger. So also, where a passenger has alighted at his destination and is proceeding by the usual way
to leave the company's premises, but before actually doing so is halted by the report that his brother, a fellow
passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve
his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as
such to the protection of the railroad company and its agents.

In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they
alighted from the bus. Racquel, the child that she was, must have followed the father. However, although the
father was still on the running board of the bus waiting for the conductor to hand him the bag or bayong, the bus
started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that
the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the

107
carrier's agent had exercised the 'utmost diligence' of a 'very cautious person' required by Article 1755 of the Civil
Code to be observed by a common carrier in the discharge of its obligation to transport safely its passengers. ...
The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered
still as passengers of the carrier, entitled to the protection under their contract of carriage. 14

It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the
passenger's reasonable presence within the carrier's premises. That reasonableness of time should be made to
depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business,
the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without
taking into account such other factors. It is thus of no moment whether in the cited case of La Mallorca there was
no appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar,
an interval of one (1) hour had elapsed before the victim met the accident. The primary factor to be considered is
the existence of a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel.
We believe there exists such a justifiable cause.

It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels
are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger
bus. With respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of
accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently,
a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his
baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of
time. Verily, petitioner cannot categorically claim, through the bare expedient of comparing the period of time
entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On
the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we cannot in reason doubt
that the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the
victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier
stated, a carrier is duty bound not only to bring its passengers safely to their destination but also to afford them a
reasonable time to claim their baggage.

It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the
vessel. Petitioner failed to prove this. What is clear to us is that at the time the victim was taking his cargoes, the
vessel had already docked an hour earlier. In consonance with common shipping procedure as to the minimum
time of one (1) hour allowed for the passengers to disembark, it may be presumed that the victim had just gotten
off the vessel when he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his
presence in petitioner's premises was not without cause. The victim had to claim his baggage which was possible
only one (1) hour after the vessel arrived since it was admittedly standard procedure in the case of petitioner's
vessels that the unloading operations shall start only after that time. Consequently, under the foregoing
circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death.

II. Under the law, common carriers are, from the nature of their business and for reasons of public policy,
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. 15 More particularly, 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. 16 Thus, where a passenger dies or is
injured, the common carrier is presumed to have been at fault or to have acted negligently. 17 This gives rise to
an action for breach of contract of carriage where all that is required of plaintiff is to prove the existence of the
contract of carriage and its non-performance by the carrier, that is, the failure of the carrier to carry the passenger
safely to his destination, 18 which, in the instant case, necessarily includes its failure to safeguard its passenger
with extraordinary diligence while such relation subsists.

The presumption is, therefore, established by law that in case of a passenger's death or injury the operator of the
vessel was at fault or negligent, having failed to exercise extraordinary diligence, and it is incumbent upon it to
rebut the same. This is in consonance with the avowed policy of the State to afford full protection to the
passengers of common carriers which can be carried out only by imposing a stringent statutory obligation upon
the latter. Concomitantly, this Court has likewise adopted a rigid posture in the application of the law by exacting
the highest degree of care and diligence from common carriers, bearing utmost in mind the welfare of the
passengers who often become hapless victims of indifferent and profit-oriented carriers. We cannot in reason
deny that petitioner failed to rebut the presumption against it. Under the facts obtaining in the present case, it

108
cannot be gainsaid that petitioner had inadequately complied with the required degree of diligence to prevent the
accident from happening.

As found by the Court of Appeals, the evidence does not show that there was a cordon of drums around the
perimeter of the crane, as claimed by petitioner. It also adverted to the fact that the alleged presence of visible
warning signs in the vicinity was disputable and not indubitably established. Thus, we are not inclined to accept
petitioner's explanation that the victim and other passengers were sufficiently warned that merely venturing into
the area in question was fraught with serious peril. Definitely, even assuming the existence of the supposed
cordon of drums loosely placed around the unloading area and the guard's admonitions against entry therein,
these were at most insufficient precautions which pale into insignificance if considered vis-a-vis the gravity of the
danger to which the deceased was exposed. There is no showing that petitioner was extraordinarily diligent in
requiring or seeing to it that said precautionary measures were strictly and actually enforced to subserve their
purpose of preventing entry into the forbidden area. By no stretch of liberal evaluation can such perfunctory acts
approximate the "utmost diligence of very cautious persons" to be exercised "as far as human care and foresight
can provide" which is required by law of common carriers with respect to their passengers.

While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to exercise extraordinary
diligence was the proximate and direct cause of, because it could definitely have prevented, the former's death.
Moreover, in paragraph 5.6 of its petition, at bar, 19 petitioner has expressly conceded the factual finding of
respondent Court of Appeals that petitioner did not present sufficient evidence in support of its submission that
the deceased Anacleto Viana was guilty of gross negligence. Petitioner cannot now be heard to claim otherwise.

No excepting circumstance being present, we are likewise bound by respondent court's declaration that there
was no negligence on the part of Pioneer Stevedoring Corporation, a confirmation of the trial court's finding to
that effect, hence our conformity to Pioneer's being absolved of any liability.

As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross negligence of the victim,
hence its present contention that the death of the passenger was due to the negligence of the crane operator
cannot be sustained both on grounds, of estoppel and for lack of evidence on its present theory. Even in its
answer filed in the court below it readily alleged that Pioneer had taken the necessary safeguards insofar as its
unloading operations were concerned, a fact which appears to have been accepted by the plaintiff therein by not
impleading Pioneer as a defendant, and likewise inceptively by Aboitiz by filing its third-party complaint only after
ten (10) months from the institution of the suit against it. Parenthetically, Pioneer is not within the ambit of the rule
on extraordinary diligence required of, and the corresponding presumption of negligence foisted on, common
carriers like Aboitiz. This, of course, does not detract from what we have said that no negligence can be imputed
to Pioneer but, that on the contrary, the failure of Aboitiz to exercise extraordinary diligence for the safety of its
passenger is the rationale for our finding on its liability.

WHEREFORE, the petition is DENIED and the judgment appealed from is hereby AFFIRMED in toto.

SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

#42

G.R. No. 199282, March 14, 2016

TRAVEL & TOURS ADVISERS, INCORPORATED, Petitioner, v. ALBERTO CRUZ, SR., EDGAR
HERNANDEZ AND VIRGINIA MUÑOZ, Respondents.
DECISION
PERALTA, J.:
For resolution of this Court is the Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
dated December 28, 2011, of petitioner Travel & Tours Advisers, Inc. assailing the Decision 1 dated May 16, 2011
and Resolution2 dated November 10, 2011 of the Court of Appeals (CA), affirming with modifications the
Decision3 dated January 30, 2008 of the Regional Trial Court (RTC), Branch 61, Angeles City finding petitioner
jointly and solidarity liable for damages incurred in a vehicular accident.

109
The facts follow.

Respondent Edgar Hernandez was driving an Isuzu Passenger Jitney (jeepney) that he owns with plate number
DSG-944 along Angeles-Magalang Road, Barangay San Francisco, Magalang, Pampanga, on January 9, 1998,
around 7:50 p.m. Meanwhile, a Daewoo passenger bus (RCJ Bus Lines) with plate number NXM-116, owned by
petitioner Travel and Tours Advisers, Inc. and driven by Edgar Calaycay travelled in the same direction as that of
respondent Edgar Hernandez vehicle. Thereafter, the bus bumped the rear portion of the jeepney causing it to
ram into an acacia tree which resulted in the death of Alberto Cruz, Jr. and the serious physical injuries of Virginia
Muñoz.

Thus, respondents Edgar Hernandez, Virginia Muñoz and Alberto Cruz, Sr., father of the deceased Alberto Cruz,
Jr., filed a complaint for damages, docketed as Civil Case No. 9006 before the RTC claiming that the collision
was due to the reckless, negligent and imprudent manner by which Edgar Calaycay was driving the bus, in
complete disregard to existing traffic laws, rules and regulations, and praying that judgment be rendered ordering
Edgar Calaycay and petitioner Travel & Tours Advisers, Inc. to pay the following:
chanRoblesvirtualLawlibrary
1. For plaintiff Alberto Cruz, Sr.

a. The sum of P140,000.00 for the reimbursement of the expenses incurred for coffin, funeral expenses, for vigil,
food, drinks for the internment (sic) of Alberto Cruz, Jr. as part of actual damages;

b. The sum of P300,000.00, Philippine Currency, as moral, compensatory and consequential damges.

c. The sum of P6,000.00 a month as lost of (sic) income from January 9, 1998 up to the time the Honorable Court
may fixed (sic);

2. For plaintiff Virginia Muñoz:

a. The sum of P40,000.00, Philippine Currency, for the reimbursement of expenses for hospitalization, medicine,
treatment and doctor's fee as part of actual damages;

b. The sum of P150,000.00 as moral, compensatory and consequential damages;

3. For plaintiff Edgar Hernandez:

a. The sum of P42,400.00 for the damage sustained by plaintiffs Isuzu Passenger Jitney as part of actual
damages, plus P500.00 a day as unrealized net income for four (4) months;

b. The sum of P150,000.00, Philippine Currency, as moral, compensatory and consequential damages;

4. The sum of P50,000.00 pesos, Philippine Currency, as attorney's fees, plus P1,000.00 per appearance fee in
court;

5. Litigation expenses in the sum of P30,000.00; and

6. To pay the cost of their suit.

Other reliefs just and equitable are likewise prayed for.4ChanRoblesVirtualawlibrary

For its defense, the petitioner claimed that it exercised the diligence of a good father of a family in the selection
and supervision of its employee Edgar Calaycay and further argued that it was Edgar Hernandez who was driving
his passenger jeepney in a reckless and imprudent manner by suddenly entering the lane of the petitioner's bus
without seeing to it that the road was clear for him to enter said lane. In addition, petitioner alleged that at the time
of the incident, Edgar Hernandez violated his franchise by travelling along an unauthorized line/route and that the
jeepney was overloaded with passengers, and the deceased Alberto Cruz, Jr. was clinging at the back thereof.

On January 30, 2008, after trial on the merits, the RTC rendered judgment in favor of the respondents, the
dispositive portion of the decision reads:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered ordering the defendants Edgar Calaycay
Ranese and Travel & Tours Advisers, Inc. to jointly and solidarity pay the following:
chanRoblesvirtualLawlibrary
I. 1. To plaintiff Alberto Cruz, Sr. and his family -

110
a) the sum of P50,000.00 as actual and compensatory damages;

b) the sum of P250,000.00 for loss of earning capacity of the decedent Alberto Cruz, Jr. and;

c) the sum of P50,000.00 as moral damages.

2. To plaintiff Virginia Muñoz -
a) the sum of P16,744.00 as actual and compensatory damages; and

b) the sum of P150,000.00 as moral damages.

3. To Edgar Hernandez -
a) the sum of P50,000.00 as actual and compensatory damages.
II. The sum of P50,000.00 as attorney's fees, and

III. The sum of P4,470.00 as cost of litigation

SO ORDERED.

Angeles City, Philippines, January 30, 2008.5ChanRoblesVirtualawlibrary

Petitioner filed its appeal with the CA, and on May 16, 2011, the appellate court rendered its decision, the decretal
portion of which reads as follows:
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WHEREFORE, the instant appeal is PARTLY GRANTED. The assailed Decision of the RTC, Branch 61, Angeles
City, dated January 30, 2008, is AFFIRMED with MODIFICATIONS. The defendants are ordered to pay, jointly
and severally, the following:

1. To plaintiff Alberto Cruz, Sr. and family -

a) the sum of P25,000.00 as actual damages;

b) the sum of P250.000.00 for the loss of earning capacity of the decedent Alberto Cruz, Jr.;

c) the sum of P50,000.00 as civil indemnity for the death of Alberto Cruz, Jr.;

d) the sum of P50,000.00 as moral damages.

2. To plaintiff Virginia Muñoz -

a) the sum of P16,744.00 as actual damages; and

b) the sum of P30,000.00 as moral damages.

3. To plaintiff Edgar Hernandez -

a) The sum of P40,200.00 as actual damages.

4. The award of attorney's fees (P50,000.00) and cost of litigation (P4,470.00) remains.

SO ORDERED.6ChanRoblesVirtualawlibrary
Hence, the present petition wherein the petitioner assigned the following errors:
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I.

THE PETITIONER'S BUS WAS NOT "OUT OF LINE;"

II.

THE FACT THAT THE JEEPNEY WAS BUMPED ON ITS LEFT REAR PORTION DOES NOT
PREPONDERANTLY PROVE THAT THE DRIVER OF THE BUS WAS THE NEGLIGENT PARTY;
III.

THE DECEASED ALBERTO CRUZ, JR. WAS POSITIONED AT THE RUNNING BOARD OF THE JEEPNEY;
IV.

THE BUS DRIVER WAS NOT SPEEDING OR NEGLIGENT WHEN HE FAILED TO STEER THE BUS TO A
COMPLETE STOP;
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V.

THE PETITIONER EXERCISED EXTRAORDINARY DILIGENCE OF A GOOD FATHER OF A FAMILY IN ITS

SELECTION AND SUPERVISION OF DRIVER CALAYCAY; AND
VI.

THERE IS NO FACTUAL AND LEGAL BASIS FOR THE VARIOUS AWARDS OF MONETARY
DAMAGES.7ChanRoblesVirtualawlibrary
According to petitioner, contrary to the declaration of the RTC, the petitioner's passenger bus was not "out-of-
line" and that petitioner is actually the holder of a PUB (public utility bus) franchise for provincial operation from
Manila-Ilocos Norte/Cagayan-Manila, meaning the petitioner's passenger bus is allowed to traverse any point
between Manila-Ilocos Norte/Cagayan-Manila. Petitioner further asseverates that the fact that the driver of the
passenger bus took the Magalang Road instead of the Bamban Bridge is of no moment because the bridge was
under construction due to the effects of the lahar; hence closed to traffic and the Magalang Road is still in between
the points of petitioner's provincial operation. Furthermore, petitioner claims that the jeepney was traversing a
road way out of its allowed route, thus, the presumption that respondent Edgar Hernandez was the negligent
party.

Petitioner further argues that respondent Edgar Hernandez failed to observe that degree of care, precaution and
vigilance that his role as a public utility called for when he allowed the deceased Alberto Cruz, Jr., to hang on to
the rear portion of the jeepney.

After due consideration of the issues and arguments presented by petitioner, this Court finds no merit to grant the
petition.

Jurisprudence teaches us that "(a)s a rule, the jurisdiction of this Court in cases brought to it from the Court of
Appeals x x x is limited to the review and revision of errors of law allegedly committed by the appellate court, as
its findings of fact are deemed conclusive. As such, this Court is not duty-bound to analyze and weigh all over
again the evidence already considered in the proceedings below. 8 This rule, however, is not without
exceptions."9 The findings of fact of the Court of Appeals, which are, as a general rule, deemed conclusive, may
admit of review by this Court:10
(1) when the factual findings of the Court of Appeals and the trial court are contradictory;

(2) when the findings are grounded entirely on speculation, surmises, or conjectures;

(3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or
impossible;

(4) when there is grave abuse of discretion in the appreciation of facts;

(5) when the appellate court, in making its findings, goes beyond the issues of the case, and such findings are
contrary to the admissions of both appellant and appellee;

(6) when the judgment of the Court of Appeals is premised on a misapprehension of facts;

(7) when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a
different conclusion;

(8) when the findings of fact are themselves conflicting;

(9) when the findings of fact are conclusions without citation of the specific evidence on which they are based;
and

(10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings
are contradicted by the evidence on record.
The issues presented are all factual in nature and do not fall under any of the exceptions upon which this Court
may review. Moreover, well entrenched is the prevailing jurisprudence that only errors of law and not of facts are
reviewable by this Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court, which
applies with greater force to the Petition under consideration because the factual findings by the Court of Appeals
are in full agreement with what the trial court found. 11

Nevertheless, a review of the issues presented in this petition would still lead to the finding that petitioner is still
liable for the damages awarded to the respondents but with certain modifications.
112
The RTC and the CA are one in finding that both vehicles were not in their authorized routes at the time of the
incident. The conductor of petitioner's bus admitted on cross-examination that the driver of the bus veered off
from its usual route to avoid heavy traffic. The CA thus observed:
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First. As pointed out in the assailed Decision, both vehicles were not in their authorized routes at the time of the
mishap. FRANCISCO TEJADA, the conductor of defendant-appellant's bus, admitted on cross-examination that
the driver of the bus passed through Magalang Road instead of Sta. Ines, which was the usual route, thus:

x x x

Q: What route did you take from Manila to Laoag, Ilocos Sur?
A: Instead of Sta. Ines, we took Magalang Road, sir.

Q: So that is not your usual route that you are taking?

A: No, sir, it so happened that there was heavy traffic at Bamban, Tarlac, that is why we took the Magalang
Road.

x x x

The foregoing testimony of defendant-appellant's own witness clearly belies the contention that its driver took the
Magalang Road instead of the Bamban Bridge because said bridge was closed and under construction due to
the effects of lahar. Regardless of the reason, however, the irrefutable fact remains that defendant-appellant's
bus likewise veered from its usual route.12ChanRoblesVirtualawlibrary
Petitioner now claims that the bus was not out of line when the vehicular accident happened because the PUB
(public utility bus) franchise that the petitioner holds is for provincial operation from Manila-Ilocos Norte/Cagayan-
Manila, thus, the bus is allowed to traverse any point between Manila-Ilocos Norte/Cagayan-Manila. Such
assertion is correct. "Veering away from the usual route" is different from being "out of line." A public utility vehicle
can and may veer away from its usual route as long as it does not go beyond its allowed route in its franchise, in
this case, Manila-Ilocos Norte/Cagayan-Manila. Therefore, the bus cannot be considered to have violated the
contents of its franchise. On the other hand, it is indisputable that the jeepney was traversing a road out of its
allowed route. Necessarily, this case is not that of "in pari delicto" because only one party has violated a traffic
regulation. As such, it would seem that Article 2185 of the New Civil Code is applicable where it provides that:
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Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any traffic regulation.
The above provision, however, is merely a presumption. From the factual findings of both the RTC and the CA
based on the evidence presented, the proximate cause of the collision is the negligence of the driver of petitioner's
bus. The jeepney was bumped at the left rear portion. Thus, this Court's past ruling, 13 that drivers of vehicles who
bump the rear of another vehicle are presumed to be the cause of the accident, unless contradicted by other
evidence, can be applied. The rationale behind the presumption is that the driver of the rear vehicle has full control
of the situation as he is in a position to observe the vehicle in front of him. 14 Thus, as found by the CA:
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Second. The evidence on record preponderantly shows that it was the negligence of defendant-appellant's driver,
EDGAR CALAYCAY, that was the proximate cause of the collision.

Even without considering the photographs (Exhibit "N", " " and "N-2") showing the damage to the jeepney, it
cannot be denied that the said vehicle was bumped in its left rear portion by defendant-appellant's bus.
The same was established by the unrebutted testimonies of plaintiffs-appellees EDGAR HERNANDEZ and
VIRGINIA MUÑOZ, as follows:
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EDGAR HERNANDEZ

x x x

Q: Now, according to you, you were not able to reach the town proper of Magalang because your vehicle was
bumped. In what portion of your vehicle was it bumped, Mr. Witness?
A: At the left side edge portion of the vehicle, sir.

Q: When it was bumped on the rear left side portion, what happened to your vehicle?
A: It was bumped strongly, sir, and then, "sinulpit ya", sir.

Q: When your vehicle was "sinulpit" and hit an acacia tree, what happened to the acacia tree?
113
A: The jeepney stopped and Alberto Cruz died and some of my passengers were injured, sir.

x x x

VIRGINIA MUÑOZ

x x x

Q: what portion of the vehicle wherein you were boarded that was hit by the Travel Tours Bus?
A: The rear portion of the jeep, sir.

Q: It was hit by the Travel Tours Bus?

A: Yes, sir.

Q: What happened to you when the vehicle was bumped?

A: I was thrown off the vehicle, sir.

xxx
It has been held that drivers of vehicles "who bump the rear of another vehicle" are presumed to be "the cause
of the accident, unless contradicted by other evidence." The rationale behind the presumption is that the driver of
the rear vehicle has full control of the situation as he is in a position to observe the vehicle in front of him.

In the case at bar, defendant-appellant failed to overturn the foregoing presumption. FRANCISCO TEJADA, the
conductor of the bus who was admittedly "seated in front, beside the driver's seat," and thus had an unimpeded
view of the road, declared on direct examination that the jeepney was about 10 to 15 meters away from the bus
when he first saw said vehicle on the road. Clearly, the bus driver, EDGAR CALAYCAY, would have also been
aware of the presence of the jeepney and, thus, was expected to anticipate its movements.

However, on cross-examination, TEJADA claimed that the jeepney "suddenly appeared" before the bus, passing
it diagonally, and causing it to be hit in its left rear side. Such uncorroborated testimony cannot be accorded
credence by this Court because it is inconsistent with the physical evidence of the actual damage to the jeepney.
On this score, We quote with approval the following disquisition of the trial court:
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x x x (F)rom the evidence presented, it was established that it was the driver of the RCJ Line Bus which was
negligent and recklessly driving the bus of the defendant corporation.

Francisco Tejada, who claimed to be the conductor of the bus, testified that it was the passenger jeepney coming
from the pavement which suddenly entered diagonally the lane of the bus causing the bus to hit the rear left
portion of the passenger jeepney. But such testimony is belied by the photographs of the jeepney (Exhs. N and
N-1). As shown by Exh. N-1, the jeepney was hit at the rear left portion and not when the jeepney was in a
diagonal position to the bus otherwise, it should have been the left side of the passenger jeepney near the rear
portion that could have been bumped by the bus. It is clear from Exh. N-1 and it was even admitted that the rear
left portion of the passenger jeepney was bumped by the bus. Further, if the jeepney was in diagonal position
when it was hit by the bus, it should have been the left side of the body of the jeepney that could have sustained
markings of such bumping. In this case, it is clear that it is the left rear portion of the jeepney that shows the
impact of the markings of the bumping. The jeepney showed that it had great damage on the center of the front
portion (Exh. N-2). It was the center of the front portion that hit the acacia tree (Exh. N). As admitted by the parties,
both vehicles were running along the same direction from west to east. As testified to by Francisco Tejada, the
jeepney was about ten (10) to fifteen (15) meters away from the bus when he noticed the jeepney entering
diagonally the lane of the bus. If this was so, the middle left side portion of the jeepney could have been hit, not
the rear portion. The evidence is clear that the bus was in fast running condition, otherwise, it could have stopped
to evade hitting the jeepney. The hitting of the acacia tree by the jeepney, and the damages caused on the
jeepney in its front (Exh. N-2) and on its rear left side show that the bus was running very fast.

xxxx
Assuming ex gratia argumenti that the jeepney was in a "stop position," as claimed by defendant-appellant, on
the pavement of the road 10 to 15 meters ahead of the bus before swerving to the left to merge into traffic, a
cautious public utility driver should have stepped on his brakes and slowed down. The distance of 10 to 15 meters
would have allowed the bus with slacked speed to give way to the jeepney until the latter could fully enter the
lane. Obviously, as correctly found by the court a quo, the bus was running very fast because even if the driver
stepped on the brakes, it still made contact with the jeepney with such force that sent the latter vehicle crashing
head-on against an acacia tree. In fact, FRANCISCO TEJADA effectively admitted that the bus was very fast
when he declared that the driver "could not suddenly apply the break (sic) in full stop because our bus might turn
114
turtle xxx." Incidentally, the allegation in the appeal brief that the driver could not apply the brakes with force
because of the possibly that the bus might turn turtle "as they were approaching the end of the gradient or the
decline of the sloping terrain or topography of the roadway" was only raised for the first time in this appeal and,
thus, may not be considered. Besides, there is nothing on record to substantiate the same.

Rate of speed, in connection with other circumstances, is one of the principal considerations in determining
whether a motorist has been reckless in driving a vehicle, and evidence of the extent of the damage caused may
show the force of the impact from which the rate of speed of the vehicle may be modestly inferred. From the
evidence presented in this case, it cannot be denied that the bus was running very fast. As held by the Supreme
Court, the very fact of speeding is indicative of imprudent behavior, as a motorist must exercise ordinary care and
drive at a reasonable rate of speed commensurate with the conditions encountered, which will enable him to keep
the vehicle under control and avoid injury to others using the highway. 15ChanRoblesVirtualawlibrary
From the above findings, it is apparent that the proximate cause of the accident is the petitioner's bus and that
the petitioner was not able to present evidence that would show otherwise. Petitioner also raised the issue that
the deceased passenger, Alberto Cruz, Jr. was situated at the running board of the jeepney which is a violation
of a traffic regulation and an indication that the jeepney was overloaded with passengers. The CA correctly ruled
that no evidence was presented to show the same, thus:
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That the deceased passenger, ALBERTO CRUZ, JR., was clinging at the back of the jeepney at the time of the
mishap cannot be gleaned from the testimony of plaintifff-appellee VIRGINIA MUÑOZ that it was she who was
sitting on the left rearmost of the jeepney.

VIRGINIA MUÑOZ herself testified that there were only about 16 passengers on board the jeepney when the
subject incident happened. Considering the testimony of plaintiff-appellee EDGAR HERNANDEZ that the seating
capacity of his jeepney is 20 people, VIRGINIA'S declaration effectively overturned defendant-appellant's defense
that plaintiff-appellee overloaded his jeepney and allowed the deceased passenger to cling to the outside railings.
Yet, curiously, the defense declined to cross-examine VIRGINIA, the best witness from whom defendant-
appellant could have extracted the truth about the exact location of ALBERTO CRUZ, JR. in or out of the jeepney.
Such failure is fatal to defendant-appellant's case. The only other evidence left to support its claim is the testimony
of the conductor, FRANCISCO TEJADA, that there were 3 passengers who were clinging to the back of
the jeepney, and it was the passenger clinging to the left side that was bumped by the bus. However, in
answer to the clarificatory question from the court a quo, TEJADA admitted that he did not really see
what happened, thus:
Q: What happened to the passenger clinging to the left side portion?
A: He was bumped, your Honor.

Q: Why, the passenger fell?

A: I did not really see what happened, Mam [sic], what I know he was bumped.
This, despite his earlier declaration that he was seated in front of the bus beside the driver's seat and knew what
happened to the passengers who were clinging to the back of the jeepney. Indubitably, therefore, TEJADA was
not a credible witness, and his testimony is not worthy of belief. 16ChanRoblesVirtualawlibrary
Consequently, the petitioner, being the owner of the bus and the employer of the driver, Edgar Calaycay, cannot
escape liability. Article 2176 of the Civil Code provides:
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Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.
Complementing Article 2176 is Article 2180 which states the following:
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The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those
of persons for whom one is responsible x x x.

Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry x x x.

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage.
Article 2180, in relation to Article 2176, of the Civil Code provides that the employer of a negligent employee is
liable for the damages caused by the latter. When an injury is caused by the negligence of an employee there
instantly arises a presumption of the law that there was negligence on the part of the employer either in the
selection of his employee or in the supervision over him after such selection. The presumption, however, may be
rebutted by a clear showing on the part of the employer that it had exercised the care and diligence of a good
father of a family in the selection and supervision of his employee. Hence, to escape solidary liability for quasi-
115
delict committed by an employee, the employer must adduce sufficient proof that it exercised such degree of
care.17 In this case, the petitioner failed to do so. The RTC and the CA exhaustively and correctly ruled as to the
matter, thus:
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Thus, whenever an employee's (defendant EDGAR ALAYCAY) negligence causes- damage or injury to another,
there instantly arises a presumption that the employer (defendant-appellant) failed to exercise the due diligence
of a good father of the family in the selection or supervision of its employees. To avoid liability for a quasi-delict
committed by its employee, an employer must overcome the presumption by presenting convincing proof that it
exercised the care and diligence of a good father of a family in the selection and supervision of its employee. The
failure of the defendant-appellant to overturn this presumption was meticulously explained by the court a quo as
follows:
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The position of the defendant company that it cannot be held jointly and severally liable for such damages
because it exercised the diligence of a good father of a family, that (sic) does not merit great credence.

As admitted, Edgar Calaycay was duly authorized by the defendant company to drive the bus at the time of the
incident. Its claim that it has issued policies, rules and regulation's to be followed, conduct seminars and see to it
that their drivers and employees imbibe such policies, rules and regulations, have their drivers and conductors
medically checked-up and undergo drug-testing, did not show that all these rudiments were applied to Edgar
Calaycay. No iota of evidence was presented that Edgar Calaycay had undergone all these activities to ensure
that he is a safe and capable drivers [sic]. In fact, the defendant company did not put up a defense on the said
driver. The defendant company did not even secure a counsel to defend the driver. It did not present any evidence
to show it ever counseled such driver to be careful in his driving. As appearing from the evidence of the defendant
corporation, the driver at the time of the incident was Calaycay Francisco (Exh. 9) and the conductor was Tejada.
This shows that the defendant corporation does not exercise the diligence of a good father of a family in the
selection and supervision of the employees. It does not even know the correct and true name of its drivers. The
testimony of Rolando Abadilla, Jr. that they do not have the records of Edgar Calaycay because they ceased
operation due to the death of his father is not credible. Why only the records of Edgar Calaycay? It has the
inspection and dispatcher reports for January 9, 1998 and yet it could not find the records of Edgar Calaycay. As
pointed out by the Supreme Court in a line of cases, the evidence must not only be credible but must come from
a credible witness. No proof was submitted that Edgar Calaycay attended such alleged seminars and
examinations. Thus, under Art. 2180 of the Civil Code, Employers shall be liable for the damage caused by their
employees and household helper acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry. The liability of the employer for the tortuous acts or negligence of its
employer [sic] is primary and solidary, direct and immediate, and not conditional upon the insolvency of prior
recourse against the negligent employee. The cash voucher for the alleged lecture on traffic rules and regulations
(Exh. 12) presented by the defendant corporation is for seminar allegedly conducted on May 20 and 21, 1995
when Edgar Calaycay was not yet in the employ of the defendant corporation. As testified to by Rolando Abadilla,
Jr., Edgar Calaycay stated his employment with the company only in 1996. Rolando Abadilla, Jr. testified that
copies of the manual (Exh. 8) are given to the drivers and conductors for them to memorize and know the same,
but no proof was presented that indeed Edgar Calaycay was among the recipients. Nobody testified categorically
that indeed Edgar Calaycay underwent any of the training before being employed by the defendant company. All
the testimonies are generalizations as to the alleged policies, rules and regulations but no concrete evidence was
presented that indeed Edgar Calaycay underwent such familiarization, trainings and seminars before he got
employed and during that time that he was performing his duties as a bus driver of the defendant corporation.
Moreover, the driver's license of the driver was not even presented. These omissions did not overcome the liability
of the defendant corporation under Article 2180 of the Civil Code. x x x
The observation of the court a quo that defendant-appellant failed to show proof that EDGAR CALAYCAY did in
fact undergo the seminars conducted by it assumes greater significance when viewed in the light of the following
admission made by ROLANDO ABADILLA, JR., General Manager of the defendant-appellant corporation, that
suggest compulsory attendance of said seminars only among drivers and conductors in Manila, thus:
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x x x x

Q: How many times does (sic) the seminars being conducted by your company a year?
A: Normally, it is a minimum of two (2) seminars per year, sir.

Q: In these seminars that you conduct, are all drivers and conductors obliged to attend?
A: Yes, sir, if they are presently in Manila.

Q: It is only in Manila that you conduct seminars?

A: Yes, sir.

116
xxx
Moreover, with respect to the selection process, ROLANDO ABADILLA, JR. categorically admitted in open court
that EDGAR CALAYCAY was not able to produce the clearances required by defendant-appellant upon
employment, thus:
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x x x x

Q: By the way, Mr. Witness, do you know this Edgar Calaycay who was once employed by your company as a
driver?
A: Yes, sir.

Q: Have you seen the application of Edgar Calaycay?

A: Yes, sir.

Q: From what I have seen, what documents did he submit in applying as a driver in your business?

Atty. De Guzman: Very leading, your Honor.

Q: Before a driver could be accepted, what document is he required to submit?

A: The company application form; NBI clearance; police clearance; barangay clearance; mayor's clearance and
other clearances, sir.

Q: Was he able to reproduce these clearances by Mr. Calaycay?

A: No, sir.

x x x18ChanRoblesVirtualawlibrary
In the selection of prospective employees, employers are required to examine them as to their qualifications,
experience, and service records.19 On the other hand, due diligence in the supervision of employees includes the
formulation of suitable rules and regulations for the guidance of employees, the issuance of proper instructions
intended for the protection of the public and persons with whom the employer has relations through his or its
employees and the imposition of necessary disciplinary measures upon employees in case of breach or as may
be warranted to ensure the performance of acts indispensable to the business of and beneficial to their employer.
To this, we add that actual implementation and monitoring of consistent compliance with said rules should be the
constant concern of the employer, acting through dependable supervisors who should regularly report on their
supervisory functions.20 In this case, as shown by the above findings of the RTC, petitioner was not able to prove
that it exercised the required diligence needed in the selection and supervision of its employee.

Be that as it may, this doesn't erase the fact that at the time of the vehicular accident, the jeepney was in violation
of its allowed route as found by the RTC and the CA, hence, the owner and driver of the jeepney likewise, are
guilty of negligence as defined under Article 2179 of the Civil Code, which reads as follows:
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When the plaintiffs negligence was the immediate and proximate cause of his injury, he cannot recover damages.
But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant's
lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.
The petitioner and its driver, therefore, are not solely liable for the damages caused to the victims. The petitioner
must thus be held liable only for the damages actually caused by his negligence.21 It is, therefore, proper to
mitigate the liability of the petitioner and its driver. The determination of the mitigation of the defendant's liability
varies depending on the circumstances of each case.22 The Court had sustained a mitigation of 50% in Rakes v.
AG & P;23 20% in Phoenix Construction, Inc. v. Intermediate Appellate Court 24 and LBC Air Cargo, Inc. v. Court
of Appeals;25 and 40% in Bank of the Philippine Islands v. Court of Appeals 26 and Philippine Bank of Commerce
v. Court of Appeals.27cralawred

In the present case, it has been established that the proximate cause of the death of Alberto Cruz, Jr. is the
negligence of petitioner's bus driver, with the contributory negligence of respondent Edgar Hernandez, the driver
and owner of the jeepney, hence, the heirs of Alberto Cruz, Jr. shall recover damages of only 50% of the award
from petitioner and its driver. Necessarily, 50% shall be bourne by respondent Edgar Hernandez. This is pursuant
to Rakes v. AG & P and after considering the circumstances of this case.

In awarding damages for the death of Alberto Cruz, Jr., the CA ruled as follows:
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For the death of ALBERTO CRUZ, JR. the court a quo awarded his heirs P50,000.00 as actual and compensatory
damages; P250,000.00 for loss of earning capacity; and another P50,000.00 as moral damages. However, as
117
pointed out in the assailed Decision dated January 30, 2008, only the amount paid (P25,000.00) for funeral
services rendered by Magalena Memorial Home was duly receipted (Exhibit "E-1"). It is settled that actual
damages must be substantiated by documentary evidence, such as receipts, in order to prove expenses incurred
as a result of the death of the victim. As such, the award for actual damages in the amount of P50,000.00 must
be modified accordingly.

Under Article 2206 of the Civil Code, the damages for death caused by a quasi-delict shall, in addition to the
indemnity for the death itself which is fixed by current jurisprudence at P50,000.00 and which the court a
quo failed to award in this case, include loss of the earning capacity of the deceased and moral damages for
mental anguish by reason of such death. The formula for the computation of loss of earning capacity is as follows:

Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses (50% of gross annual income)],
where life expectancy = 2/3 (80 - the age of the deceased)

Evidence on record shows that the deceased was earning P6,000.00 a month as smoke house operator at
Pampanga's Best, Inc., as per Certification (Exhibit "K") issued by the company's Production Manager, Enrico
Ma. O. Hizon, on March 18, 1998, His gross income therefore amounted to P72,000.00 [P6,000.00 x 12].
Deducting 50% therefrom (P36,000.00) representing the living expenses, his net annual income amounted to
P36,000.00. Multiplying this by his life expectancy of 40.67 years [2/3(80-19)] having died at the young age of 19,
the award for loss of earning capacity should have been P1,464,000.00. Considering, however, that his heirs
represented by his father, ALBERTO CRUZ, SR., no longer appealed from the assailed Decision dated January
30, 2008, and no discussion thereon was even attempted in plaintiffs-appellees' appeal brief, the award for loss
of earning capacity in the amount of P250,000.00 stands.

Moral damages in the amount of P50,000.00 is adequate and reasonable, bearing in mind that the purpose for
making such award is not to enrich the heirs of the victim but to compensate them however inexact for injuries to
their feelings.

xxx28ChanRoblesVirtualawlibrary
In summary, the following were awarded to the heirs of Alberto Cruz, Jr.:
chanRoblesvirtualLawlibrary
1) P25,000.00 as actual damages;

2) P250,000.00 for the loss of earning;

3) P50,000.00 as civil indemnity for the death of Alberto Cruz, Jr.; and

4) P50,000.00 as moral damages

Petitioner contends that the CA erred in awarding an amount for the loss of earning capacity of Alberto Cruz, Jr.
It claims that the certification from the employer of the deceased stating that when he was still alive - he earned
P6,000.00 per month was not presented and identified in open court.

In that aspect, petitioner is correct. The records are bereft that such certification was presented and identified
during the trial. It bears stressing that compensation for lost income is in the nature of damages and as such
requires due proof of the damages suffered; there must be unbiased proof of the deceased's average income. 29

Therefore, applying the above disquisitions, the heirs of Alberto Cruz, Jr. shall now be awarded the following:
chanRoblesvirtualLawlibrary
1) P12,500.00 as actual damages;

2) P25,000.00 as civil indemnity for the death of Alberto Cruz, Jr., and

3) P25,000.00 as moral damages.

In the same manner, petitioner is also partly responsible for the injuries sustained by respondent Virginia Muñoz
hence, of the P16,744.00 actual damages and P30,000.00 moral damages awarded by the CA, petitioner is liable
for half of those amounts. Anent respondent Edgar Hernandez, due to his contributory negligence, he is only
entitled to receive half the amount (P40,200.00) awarded by the CA as actual damages which is P20,100.00.

As to the award of attorney's fees, it is settled that the award of attorney's fees is the exception rather than the
general rule; counsel's fees are not awarded every time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate. Attorney's fees, as part of damages, are not necessarily equated
to the amount paid by a litigant to a lawyer. In the ordinary sense, attorney's fees represent the reasonable
compensation paid to a lawyer by his client for the legal services he has rendered to the latter; while in its
118
extraordinary concept, they may be awarded by the court as indemnity for damages to be paid by the losing party
to the prevailing party. Attorney's fees as part of damages are awarded only in the instances specified in Article
220830 of the Civil Code. As such, it is necessary for the court to make findings of fact and law that would bring
the case within the ambit of these enumerated instances to justify the grant of such award, and in all cases it
must be reasonable.31 In this case, the RTC, in awarding attorney's fees, reasoned out that [w]hile there is no
document submitted to prove that the plaintiffs spent attorney's fees, it is clear that they paid their lawyer in the
prosecution of this case for which they are entitled to the same.32 Such reason is conjectural and does not justify
the grant of the award, thus, the attorney's fees should be deleted. However, petitioner shall still have to settle
half of the cost of the suit.chanrobleslaw

WHEREFORE, the Petition for Review on Certiorari under Rule 45, dated December 28, 2011, of petitioner Travel
& Tours Advisers, Inc. is DENIED. However, the Decision dated May 16, 2011 of the Court of Appeals
is MODIFIED as follows:

The petitioner and Edgar Calaycay are ORDERED to jointly and severally PAY the following:
chanRoblesvirtualLawlibrary
1. To respondent Alberto Cruz, Sr. and family:
chanRoblesvirtualLawlibrary
a) P12,500.00 as actual damages;

b) P25,000.00 as civil indemnity for the death of Alberto Cruz, Jr., and

c) P25,000.00 as moral damages.

2. To respondent Virginia Muñoz:
chanRoblesvirtualLawlibrary
a) P8,372.00 as actual damages;

b) P15,000.00 as moral damages.

3. To respondent Edgar Hernandez:
chanRoblesvirtualLawlibrary
a) P20,100.00 as actual damages, and
4. The sum of P2,235.00 as cost of litigation.
Respondent Edgar Hernandez is also ORDERED to PAY the following:
chanRoblesvirtualLawlibrary
1. To respondent Alberto Cruz, Sr. and family:
chanRoblesvirtualLawlibrary
a) P12,500.00 as actual damages;

b) P25,000.00 as civil indemnity for the death of Alberto Cruz, Jr., and

c) P25,000.00 as moral damages.

2. To respondent Virginia Muñoz:
chanRoblesvirtualLawlibrary
a) P8,372.00 as actual damages;

b) P15,000.00 as moral damages, and

3. The sum of P2,235.00 as cost of litigation.
SO ORDERED.

Velasco, Jr., (Chairperson), Perez, Reyes, and Jardeleza, JJ., concur.chanroblesvirtuallawlibrary

#43

G.R. No. 160110, June 18, 2014

MARIANO C. MENDOZA AND ELVIRA LIM, Petitioners, v. SPOUSES LEONORA J. GOMEZ AND GABRIEL
V. GOMEZ, Respondent.

DECISION

PEREZ, J.:
119
Assailed in the present appeal by certiorari is the Decision1 dated 29 September 2003 of the Special Fourth
Division of the Court of Appeals (CA) in CA-G.R. CV No. 71877, which affirmed with modification the Decision2
dated 31 January 2001 of the Regional Trial Court (RTC), Branch 172, Valenzuela City in Civil Case No. 5352-
V-97, and which effectively allowed the award of actual, moral, and exemplary damages, as well as
attorney's fees and costs of the suit in favor of respondent Spouses Leonora and Gabriel Gomez
(respondents).

Antecedent Facts

On 7 March 1997, an Isuzu Elf truck (Isuzu truck) with plate number UAW 582,3 owned by respondent Leonora
J. Gomez (Leonora)4 and driven by Antenojenes Perez (Perez),5 was hit by a Mayamy Transportation bus
(Mayamy bus) with temporary plate number 1376-1280,6 registered under the name of petitioner Elvira Lim
(Lim)7 and driven by petitioner Mariano C. Mendoza (Mendoza). 8cralawred

Owing to the incident, an Information for reckless imprudence resulting in damage to property and multiple
physical injuries was filed against Mendoza.9 Mendoza, however, eluded arrest, thus, respondents filed a
separate complaint for damages against Mendoza and Lim, seeking actual damages, compensation for lost
income, moral damages, exemplary damages, attorney’s fees and costs of the suit. 10 This was docketed as Civil
Case No. 5352-V-97.

According to PO1 Melchor F. Rosales (PO1 Rosales), investigating officer of the case, at around 5:30 a.m., the
Isuzu truck, coming from Katipunan Road and heading towards E. Rodriguez, Sr. Avenue, was travelling along
the downward portion of Boni Serrano Avenue when, upon reaching the corner of Riviera Street, fronting St.
Ignatius Village, its left front portion was hit by the Mayamy bus.11 According to PO1 Rosales, the Mayamy bus,
while traversing the opposite lane, intruded on the lane occupied by the Isuzu truck. 12cralawred

PO1 Rosales also reported that Mendoza tried to escape by speeding away, but he was apprehended in
Katipunan Road corner C. P. Garcia Avenue by one Traffic Enforcer Galante and a security guard of St. Ignatius
Village.13cralawred

As a result of the incident, Perez, as well as the helpers on board the Isuzu truck, namely Melchor V. Anla (Anla),
Romeo J. Banca (Banca), and Jimmy Repisada (Repisada), sustained injuries necessitating medical treatment
amounting to P11,267.35, which amount was shouldered by respondents. Moreover, the Isuzu truck sustained
extensive damages on its cowl, chassis, lights and steering wheel, amounting to P142,757.40. 14cralawred

Additionally, respondents averred that the mishap deprived them of a daily income of P1,000.00. Engaged in the
business of buying plastic scraps and delivering them to recycling plants, respondents claimed that the Isuzu
truck was vital in the furtherance of their business.

For their part, petitioners capitalized on the issue of ownership of the bus in question. Respondents argued
that although the registered owner was Lim, the actual owner of the bus was SPO1 Cirilo Enriquez
(Enriquez), who had the bus attached with Mayamy Transportation Company (Mayamy Transport) under
the so-called “kabit system.” Respondents then impleaded both Lim and Enriquez.

Petitioners, on the other hand, presented Teresita Gutierrez (Gutierrez), whose testimony was offered to prove
that Mayamy Bus or Mayamy Transport is a business name registered under her name, and that such business
is a sole proprietorship. Such was presented by petitioners to rebut the allegation of respondents that Mayamy
Transport is a corporation;15 and to show, moreover, that although Gutierrez is the sole proprietor of Mayamy
Transport, she was not impleaded by respondents in the case at bar. 16cralawred

After weighing the evidence, the RTC found Mendoza liable for direct personal negligence under Article 2176 of
the Civil Code, and it also found Lim vicariously liable under Article 2180 of the same Code.

As regards Lim, the RTC relied on the Certificate of Registration issued by the Land Transportation Office on 9
December 199617 in concluding that she is the registered owner of the bus in question. Although actually owned
by Enriquez, following the established principle in transportation law, Lim, as the registered owner, is the one who
can be held liable.

Thus, the RTC disposed of the case as follows:chanRoblesvirtualLawlibrary

WHEREFORE, judgment is hereby rendered in favor of the [respondents] and against the [petitioners]:

120
 1. Ordering the [petitioners] except Enriquez to pay [respondents], jointly and severally, the costs of repair
of the damaged vehicle in the amount of P142,757.40;
2. Ordering the defendants except Enriquez to pay [respondents], jointly and severally, the amount of
P1,000.00 per day from March 7, 1997 up to November 1997 representing the unrealized income of the
[respondents] when the incident transpired up to the time the damaged Isuzu truck was repaired;
3. Ordering the [petitioners] except Enriquez to pay [respondents], jointly and severally, the amount of
P100,000.00 as moral damages, plus a separate amount of P50,000.00 as exemplary damages;
4. Ordering the [petitioners] except Enriquez to pay [respondents], jointly and severally, the amount of
P50,000.00 as attorney’s fees;
5. Ordering the [petitioners] except Enriquez to pay [respondents] the costs of suit. 18

Displeased, petitioners appealed to the CA, which appeal was docketed as CA-G.R. CV No. 71877. After
evaluating the damages awarded by the RTC, such were affirmed by the CA with the exception of the award of
unrealized income which the CA ordered deleted, viz:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the appeal is PARTLY GRANTED. The judgment of the Regional Trial
Court of Valenzuela City, Branch 172 dated January 31, 2001, is MODIFIED, in that the award of P1,000.00 per
day from March 1997 up to November 1997 representing unrealized income is DELETED. The award of
P142,757.40 for the cost of repair of the damaged vehicle, the award of P100,000.00 as moral damages, the
award of P50,000.00 as exemplary damages, the award of P50,000.00 as attorney’s fees and the costs of the
suit are hereby MAINTAINED.19cralawlawlibrary

The Present Petition

Unsatisfied with the CA ruling, petitioners filed an appeal by certiorari before the Court, raising the following
issues:20cralawred

1. The court a quo has decided questions of substance in a way not in accord with law or with the applicable
decisions of the Supreme Court when it awarded:

a. Moral damages in spite of the fact that the [respondents’] cause of action is clearly based on quasi-
delict and [respondents] did not sustain physical injuries to be entitled thereto pursuant to Article
2219 (2) of the New Civil Code and pertinent decisions of the Supreme Court to that effect. The court a
quo erroneously concluded that the driver acted in bad faith and erroneously applied the provision of
Article 21 of the same code to justify the award for bad faith is not consistent with quasi-delict which is
founded on fault or negligence.

b. Exemplary damages in spite of the fact that there is no finding that the vehicular accident was due to
petitioner-driver’s gross negligence to be entitled thereto pursuant to Article 2231 of the New Civil Code
and pertinent decisions of the Supreme Court to that effect. The factual basis of the court a quo that “the
act of the driver of the bus in attempting to escape after causing the accident in wanton disregard of the
consequences of his negligent act is such gross negligence that justifies an award of exemplary
damages” is an act after the fact which is not within the contemplation of Article 2231 of the New Civil
Code.

c. Attorney’s fees in spite of the fact that the assailed decisions of the trial court and the court a quo are
bereft with jurisdictions for the award of attorney’s fees pursuant to the pertinent decisions of the Supreme
Court on the matter and provision Article 2208 of the New Civil Code. The court a quo erroneously applied
the decision of the Supreme Court in Bañas, Jr. vs. Court of Appeals, 325 SCRA 259.

The Court’s Ruling

The petition is partially meritorious.

Respondents anchor their claim for damages on Mendoza’s negligence, banking on Article 2176 of the Civil
Code, to wit:chanRoblesvirtualLawlibrary

Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.

121
In impleading Lim, on the other hand, respondents invoke the latter’s vicarious liability as espoused in Article
2180 of the same Code:chanRoblesvirtualLawlibrary

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

x x x x

Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business of industry.

The first question to address, then, is whether or not Mendoza’s negligence was duly proven. Negligence is
defined as the 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.21cralawred

As found by the RTC, and affirmed by the CA, Mendoza was negligent in driving the subject Mayamy bus,
as demonstrated by the fact that, at the time of the collision, the bus intruded on the lane intended for the
Isuzu truck. Having encroached on the opposite lane, Mendoza was clearly in violation of traffic laws.
Article 2185 of the Civil Code provides that unless there is proof to the contrary, it is presumed that a
person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic
regulation. In the case at bar, Mendoza’s violation of traffic laws was the proximate cause of the harm.

Proximate cause is defined as that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the result would not have occurred.
And more comprehensively, the proximate legal cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate predecessor, the final event in the chain
immediately effecting the injury as a natural and probable result of the cause which first acted, under
such circumstances that the person responsible for the first event should, as an ordinary prudent and
intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to
some person might probably result therefrom. 22cralawred

The evidence on record shows that before the collision, the Isuzu truck was in its rightful lane, and was
even at a stop, having been flagged down by a security guard of St. Ignatius Village.23 The mishap occurred
when the Mayamy bus, travelling at a fast speed as shown by the impact of the collision, and going in the opposite
direction as that of the Isuzu truck, encroached on the lane rightfully occupied by said Isuzu truck, and caused
the latter to spin, injuring Perez, Anla, Banca, and Repisada, and considerably damaging the Isuzu truck.

Having settled the fact of Mendoza’s negligence, then, the next question that confronts us is who may be held
liable.

According to Manresa, liability for personal acts and omissions is founded on that indisputable principle of justice
recognized by all legislations that when a person by his act or omission causes damage or prejudice to another,
a juridical relation is created by virtue of which the injured person acquires a right to be indemnified and the
person causing the damage is charged with the corresponding duty of repairing the damage. The reason for this
is found in the obvious truth that man should subordinate his acts to the precepts of prudence and if he fails to
observe them and causes damage to another, he must repair the damage. 24 His negligence having caused the
damage, Mendoza is certainly liable to repair said damage.

Additionally, Mendoza’s employer may also be held liable under the doctrine of vicarious liability or imputed
negligence. Under such doctrine, a person who has not committed the act or omission which caused damage or
injury to another may nevertheless be held civilly liable to the latter either directly or subsidiarily under certain
circumstances.25 In our jurisdiction, vicarious liability or imputed negligence is embodied in Article 2180 of the
Civil Code and the basis for damages in the action under said article is the direct and primary negligence of the
employer in the selection or supervision, or both, of his employee. 26cralawred

In the case at bar, who is deemed as Mendoza’s employer? Is it Enriquez, the actual owner of the bus or Lim, the
registered owner of the bus?

In Filcar Transport Services v. Espinas,27 we held that the registered owner is deemed the employer of the
negligent driver, and is thus vicariously liable under Article 2176, in relation to Article 2180, of the Civil Code.
122
Citing Equitable Leasing Corporation v. Suyom,28 the Court ruled that in so far as third persons are concerned,
the registered owner of the motor vehicle is the employer of the negligent driver, and the actual employer is
considered merely as an agent of such owner. Thus, whether there is an employer-employee relationship
between the registered owner and the driver is irrelevant in determining the liability of the registered owner who
the law holds primarily and directly responsible for any accident, injury or death caused by the operation of the
vehicle in the streets and highways.29cralawred

As early as Erezo v. Jepte,30 the Court, speaking through Justice Alejo Labrador summarized the justification for
holding the registered owner directly liable, to wit:chanRoblesvirtualLawlibrary

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

“‘One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in
case of accident; and another is that the knowledge that means of detection are always available may act as a
deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever purpose
there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it certain that the
violator of the law or of the rules of safety shall not escape because of lack of means to discover him.” The
purpose of the statute is thwarted, and the displayed number becomes a “snare and delusion,” if courts will
entertain such defenses as that put forward by appellee in this case. No responsible person or corporation could
be held liable for the most outrageous acts of negligence, if they should be allowed to place a “middleman”
between them and the public, and escape liability by the manner in which they recompense their servants. 31

Generally, when an injury is caused by the negligence of a servant or employee, there instantly arises a
presumption of law that there was negligence on the part of the master or employer either in the selection of the
servant or employee (culpa in eligiendo) or in the supervision over him after the selection (culpa vigilando), or
both. The presumption is juris tantum and not juris et de jure; consequently, it may be rebutted. Accordingly, the
general rule is that if the employer shows to the satisfaction of the court that in the selection and supervision of
his employee he has exercised the care and diligence of a good father of a family, the presumption is overcome
and he is relieved of liability.32 However, with the enactment of the motor vehicle registration law, the defenses
available under Article 2180 of the Civil Code - that the employee acts beyond the scope of his assigned task or
that it exercised the due diligence of a good father of a family to prevent damage – are no longer available to the
registered owner of the motor vehicle, because the motor vehicle registration law, to a certain extent, modified
Article 2180.33cralawred

As such, there can be no other conclusion but to hold Lim vicariously liable with Mendoza.

This does not mean, however, that Lim is left without any recourse against Enriquez and Mendoza. Under the
civil law principle of unjust enrichment, the registered owner of the motor vehicle has a right to be indemnified by
the actual employer of the driver; and under Article 2181 of the Civil Code, whoever pays for the damage caused
by his dependents or employees may recover from the latter what he has paid or delivered in satisfaction of the
claim.

Having identified the persons liable, our next question is what may be awarded.

Actual or Compensatory Damages. Actual or compensatory damages are those awarded in satisfaction of, or
in recompense for, loss or injury sustained. They simply make good or replace the loss caused by the
wrong.34cralawred

Article 2202 of the Civil Code provides that in crimes and quasi- delicts, the defendant shall be liable for all
damages which are the natural and probable consequences of the act or omission complained of. It is not
necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant.
Article 2199 of the same Code, however, sets the limitation that, except as provided by law or by stipulation, one
is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. As
such, to warrant an award of actual or compensatory damages, the claimant must prove that the damage
sustained is the natural and probable consequences of the negligent act and, moreover, the claimant must
adequately prove the amount of such damage.

123
In the case at bar, the RTC, basing on the receipts submitted by respondents and which receipts petitioners had
the opportunity to examine, found that the total repairs on the Isuzu truck amounted to P142,757.40, and that the
full hospitalization and medical expenses of Perez, Anla, Banca, and Repisada amounted to P11,267.35. As
such, these are the amounts that respondents are entitled to as actual and compensatory damages.

Although respondents alleged in their complaint that the damage to their Isuzu truck caused them the loss of a
daily income of P1,000.00, such claim was not duly substantiated by any evidence on record, and thus cannot be
awarded in their favor.

Moral Damages. Moral damages are awarded to enable the injured party to obtain means, diversions or
amusements that will serve to alleviate the moral suffering he has undergone, by reason of the defendant's
culpable action.35cralawred

In prayers for moral damages, however, recovery is more an exception rather than the rule. Moral damages are
not meant to be punitive but are designed to compensate and alleviate the physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar harm
unjustly caused to a person. To be entitled to such an award, the claimant must satisfactorily prove that he has
suffered damages and that the injury causing it has sprung from any of the cases listed in Articles 2219 and 2220
of the Civil Code. Moreover, the damages must be shown to be the proximate result of a wrongful act or omission.
The claimant must thus establish the factual basis of the damages and its causal tie with the acts of the
defendant.36cralawred

In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched reputation or physical,
mental or psychological suffering sustained by the claimant; 2) a culpable act or omission factually established;
3) proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by
the claimant; and 4) the proof that the act is predicated on any of the instances expressed or envisioned by Article
2219 and Article 2220 of the Civil Code.37cralawred

A review of the complaint and the transcript of stenographic notes yields the pronouncement that respondents
neither alleged nor offered any evidence of besmirched reputation or physical, mental or psychological suffering
incurred by them. All that Leonora and her counsel had to say on the matter of damages other than actual or
compensatory damages is this:38cralawred

Q: Did you ever spend covering attorney’s fees?

A: Yes, sir. P50,000.00.
Q: Aside from the actual damage that you have mentioned x x x, how much more would you like this Court to
award you by way of moral damages?
A: P100,000.00, sir.
Q: How about exemplary damages?
A: P50,000.00, sir.
Q: What happened to you, what did you feel when the defendants failed to immediately repair your vehicle that
was damaged Madam Witness?
A: I have incurred expenses and I was forced to apply for a loan, sir.

In Kierulf v. CA,39 we observed that this Court cannot remind the bench and the bar often enough that in order
that moral damages may be awarded, there must be pleading and proof of moral suffering, mental anguish, fright
and the like. Citing Francisco v. GSIS,40 the Court held that there must be clear testimony on the anguish and
other forms of mental suffering. Thus, if the plaintiff fails to take the witness stand and testify as to his social
humiliation, wounded feelings and anxiety, moral damages cannot be awarded.

Moreover, respondents were not able to show that their claim properly falls under Articles 2219 and 2220 of the
Civil Code. Respondents cannot rely on Article 2219 (2) of the Civil Code which allows moral damages in quasi-
delicts causing physical injuries because in physical injuries, moral damages are recoverable only by the injured
party,41 and in the case at bar, herein respondents were not the ones who were actually injured.

In B.F. Metal (Corp.) v. Sps. Lomotan, et al.,42 the Court, in a claim for damages based on quasi-delict causing
physical injuries, similarly disallowed an award of moral damages to the owners of the damaged vehicle, when
neither of them figured in the accident and sustained injuries.

Neither can respondents rely on Article 21 of the Civil Code as the RTC erroneously did. Article 21 deals with
acts contra bonus mores, and has the following elements: (1) There is an act which is legal; (2) but which is
contrary to morals, good custom, public order, or public policy; (3) and it is done with intent to injure. 43 In the
present case, it can hardly be said that Mendoza’s negligent driving and violation of traffic laws are legal acts.
124
Moreover, it was not proven that Mendoza intended to injure Perez, et al. Thus, Article 21 finds no application to
the case at bar.

All in all, we find that the RTC and the CA erred in granting moral damages to respondents.

Exemplary Damages. Article 2229 of the Civil Code provides that exemplary or corrective damages are imposed,
by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory
damages. Article 2231 of the same Code further states that in quasi-delicts, exemplary damages may be granted
if the defendant acted with gross negligence.

Our jurisprudence sets certain conditions when exemplary damages may be awarded: First, they may be imposed
by way of example or correction only in addition, among others, to compensatory damages, and cannot be
recovered as a matter of right, their determination depending upon the amount of compensatory damages that
may be awarded to the claimant. Second, the claimant must first establish his right to moral, temperate, liquidated
or compensatory damages. Third, the wrongful act must be accompanied by bad faith, and the award would be
allowed only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.44cralawred

In motor vehicle accident cases, exemplary damages may be awarded where the defendant’s misconduct is so
flagrant as to transcend simple negligence and be tantamount to positive or affirmative misconduct rather than
passive or negative misconduct. In characterizing the requisite positive misconduct which will support a claim for
punitive damages, the courts have used such descriptive terms as willful, wanton, grossly negligent, reckless, or
malicious, either alone or in combination.45cralawred

Gross negligence is the absence of care or diligence as to amount to a reckless disregard of the safety of persons
or property. It evinces a thoughtless disregard of consequences without exerting any effort to avoid
them.46cralawred

In the case at bar, having established respondents’ right to compensatory damages, exemplary damages are
also in order, given the fact that Mendoza was grossly negligent in driving the Mayamy bus. His act of intruding
or encroaching on the lane rightfully occupied by the Isuzu truck shows his reckless disregard for safety.

In Baño v. Bachelor Express, Inc., et al.,47 where an erring bus, in the process of overtaking a jeepney, also
encroached on the opposite lane, and consequently collided with a dump truck, the Court held the driver of the
bus grossly negligent and affirmed the award of exemplary damages.

Attorney’s Fees. Article 2208 of the Civil Code enumerates the instances when attorney’s fees may be
recovered:ChanRob
lesVirtualawlibrary
Art. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot
be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s valid and
demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation
should be recovered;

In all cases, the attorney’s fees and expenses of litigation must be reasonable.

From the very opening sentence of Article 2208 of the Civil Code, it is clearly intended to retain the award of
attorney’s fees as the exception in our law, as the general rule remains that attorney’s fees are not recoverable
in the absence of a stipulation thereto, the reason being that it is not sound policy to set a premium on the right
to litigate.48cralawred
125
As such, in Spouses Agustin v. CA,49 we held that, the award of attorney’s fees being an exception rather than
the general rule, it is necessary for the court to make findings of facts and law that would bring the case within
the exception and justify the grant of such award. Thus, the reason for the award of attorney’s fees must be stated
in the text of the court’s decision; otherwise, if it is stated only in the dispositive portion of the decision, the same
must be disallowed on appeal.

In the case at bar, the RTC Decision had nil discussion on the propriety of attorney’s fees, and it merely awarded
such in the dispositive. The CA Decision, on the other hand, merely stated that the award of attorney’s fees is
merited as such is allowed when exemplary damages are awarded.50 Following established jurisprudence,51
however, the CA should have disallowed on appeal said award of attorney’s fees as the RTC failed to substantiate
said award.

Costs of suit. The Rules of Court provide that, generally, costs shall be allowed to the prevailing party as a matter
of course, thus:52cralawred

Section 1. Costs ordinarily follow results of suit.- Unless otherwise provided in these rules, costs shall be allowed
to the prevailing party as a matter of course, but the court shall have power, for special reasons, to adjudge that
either party shall pay the costs of an action, or that the same be divided, as may be equitable. No costs shall be
allowed against the Republic of the Philippines, unless otherwise provided by law.

In the present case, the award of costs of suit to respondents, as the prevailing party, is in order.

Interests. Interest by way of damages has been defined as interest allowed in actions for breach of contract or
tort for the unlawful detention of money already due. This type of interest is frequently called “moratory interest.”
Interest as a part of damage, is allowed, not by application of arbitrary rules, but as a result of the justice of the
individual case and as compensation to the injured party. 53cralawred

The legal provision on interests in quasi-delicts is Article 2211 of the Civil Code which provides that in crimes and
quasi-delicts, interest as part of the damage, may, in a proper case, be adjudicated in the discretion of the court.

Generally, interest is allowed as a matter of right for failure to pay liquidated claims when due.54 For unliquidated
claims, however, Article 2213 of the Civil Code provides that interest cannot be recovered upon unliquidated
claims or damages, except when the demand can be established with reasonable certainty.

In the case at bar, although the award of exemplary damages is unliquidated in the sense that petitioners cannot
know for sure, before judgment, the exact amount that they are required to pay to respondents, the award of
actual or compensatory damages, however, such as the truck repairs and medical expenses, is arguably
liquidated in that they can be measured against a reasonably certain standard. 55 Moreover, justice would seem
to require that the delay in paying for past losses which can be made reasonably certain should be compensated
through an award of interest.56cralawred

WHEREFORE, premises considered, the Court Resolves to PARTIALLY GRANT the appeal by certiorari, as
follows:

1) DECLARE Mariano Mendoza and Elvira Lim solidarily liable to respondent Spouses Leonora and Gabriel
Gomez ;
2) MAINTAIN the award of actual or compensatory damages in the amount of Pl42,757.40 for the repair of the
Isuzu Elf truck, with legal interest beginning 31 January 2001 until fully paid;
3) GRANT additional actual or compensatory damages in the amount of P11,267.35 for the medical expenses
shouldered by respondent Spouses Leonora and Gabriel Gomez, with legal interest beginning 31 January
2001 until fully paid;
4) DELETE the award of moral damages;
5) MAINTAIN the award of exemplary damages at P50,000.00;
6) DELETE the award of attorney's fees; and
7) MAINTAIN the award of costs of suit.

SO ORDERED.

#44

FILCAR TRANSPORT SERVICES VS JOSE A. ESPINAS

G.R. No. 174156 June 20, 2012
126
 DECISION

BRION, J.:

We resolve the present petition for review on certiorari[1] filed by petitioner Filcar Transport Services (Filcar),
challenging the decision[2] and the resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No. 86603.

The facts of the case, gathered from the records, are briefly summarized below.

On November 22, 1998, at around 6:30 p.m., respondent Jose A. Espinas was driving his car along Leon
Guinto Street in Manila. Upon reaching the intersection of Leon Guinto and President Quirino Streets, Espinas
stopped his car. When the signal light turned green, he proceeded to cross the intersection. He was already in
the middle of the intersection when another car, traversing President Quirino Street and going to Roxas
Boulevard, suddenly hit and bumped his car. As a result of the impact, Espinas car turned clockwise. The other
car escaped from the scene of the incident, but Espinas was able to get its plate number.

After verifying with the Land Transportation Office, Espinas learned that the owner of the other car, with plate
number UCF-545, is Filcar.

Espinas sent several letters to Filcar and to its President and General Manager Carmen Flor, demanding
payment for the damages sustained by his car. On May 31, 2001, Espinas filed a complaint for damages
against Filcar and Carmen Flor before the Metropolitan Trial Court (MeTC) of Manila, and the case was
raffled to Branch 13. In the complaint, Espinas demanded that Filcar and Carmen Flor pay the amount
of P97,910.00, representing actual damages sustained by his car.

Filcar argued that while it is the registered owner of the car that hit and bumped Espinas car, the
car was assigned to its Corporate Secretary Atty. Candido Flor, the husband of Carmen Flor. Filcar further
stated that when the incident happened, the car was being driven by Atty. Flors personal driver, Timoteo
Floresca.

Atty. Flor, for his part, alleged that when the incident occurred, he was attending a birthday celebration
at a nearby hotel, and it was only later that night when he noticed a small dent on and the cracked signal light of
the car. On seeing the dent and the crack, Atty. Flor allegedly asked Floresca what happened, and the driver
replied that it was a result of a hit and run while the car was parked in front of Bogota on Pedro Gil
Avenue, Manila.

Filcar denied any liability to Espinas and claimed that the incident was not due to its fault or
negligence since Floresca was not its employee but that of Atty. Flor. Filcar and Carmen Flor both said
that they always exercised the due diligence required of a good father of a family in leasing or assigning
their vehicles to third parties.

The MeTC Decision

The MeTC, in its decision dated January 20, 2004,[4] ruled in favor of Espinas, and ordered Filcar and Carmen
Flor, jointly and severally, to pay Espinas P97,910.00 as actual damages, representing the cost of repair, with
interest at 6% per annum from the date the complaint was filed; P50,000.00 as moral damages; P20,000.00 as
exemplary damages; and P20,000.00 as attorneys fees. The MeTC ruled that Filcar, as the registered owner
of the vehicle, is primarily responsible for damages resulting from the vehicles operation.

The RTC Decision

The Regional Trial Court (RTC) of Manila, Branch 20, in the exercise of its appellate jurisdiction, affirmed the
MeTC decision.[5] The RTC ruled that Filcar failed to prove that Floresca was not its employee as no proof was
adduced that Floresca was personally hired by Atty. Flor. The RTC agreed with the MeTC that the registered
owner of a vehicle is directly and primarily liable for the damages sustained by third persons as a
consequence of the negligent or careless operation of a vehicle registered in its name. The RTC added
that the victim of recklessness on the public highways is without means to discover or identify the person actually
causing the injury or damage. Thus, the only recourse is to determine the owner, through the vehicles registration,
and to hold him responsible for the damages.

The CA Decision

127
On appeal, the CA partly granted the petition in CA-G.R. SP No. 86603; it modified the RTC decision by
ruling that Carmen Flor, President and General Manager of Filcar, is not personally liable to Espinas. The
appellate court pointed out that, subject to recognized exceptions, the liability of a corporation is not the liability
of its corporate officers because a corporate entity subject to well-recognized exceptions has a separate and
distinct personality from its officers and shareholders. Since the circumstances in the case at bar do not fall under
the exceptions recognized by law, the CA concluded that the liability for damages cannot attach to Carmen Flor.

The CA, however, affirmed the liability of Filcar to pay Espinas damages. According to the CA, even
assuming that there had been no employer-employee relationship between Filcar and the driver of the vehicle,
Floresca, the former can be held liable under the registered owner rule.

The CA relied on the rule that the registered owner of a vehicle is directly and primarily
responsible to the public and to third persons while the vehicle is being operated. Citing Erezo, et al. v.
Jepte,[6] the CA said that the rationale behind the rule is to avoid circumstances where vehicles running on public
highways cause accidents or injuries to pedestrians or other vehicles without positive identification of the owner
or drivers, or with very scant means of identification. In Erezo, the Court said that the main aim of motor vehicle
registration is to identify the owner, so that if a vehicle causes damage or injury to pedestrians or other vehicles,
responsibility can be traced to a definite individual and that individual is the registered owner of the vehicle. [7]

The CA did not accept Filcars argument that it cannot be held liable for damages because the driver
of the vehicle was not its employee. In so ruling, the CA cited the case of Villanueva v. Domingo[8] where the
Court said that the question of whether the driver was authorized by the actual owner is irrelevant in determining
the primary and direct responsibility of the registered owner of a vehicle for accidents, injuries and deaths caused
by the operation of his vehicle.

Filcar filed a motion for reconsideration which the CA denied in its Resolution dated July 6, 2006.

Hence, the present petition.

The Issue
Simply stated, the issue for the consideration of this Court is: whether Filcar, as registered owner of
the motor vehicle which figured in an accident, may be held liable for the damages caused to Espinas.

Our Ruling

The petition is without merit.

Filcar, as registered owner, is deemed the employer of the

driver, Floresca, and is thus vicariously liable under Article 2176
in relation with Article 2180 of the Civil Code

It is undisputed that Filcar is the registered owner of the motor vehicle which hit and caused damage to
Espinas car; and it is on the basis of this fact that we hold Filcar primarily and directly liable to Espinas for
damages.

As a general rule, one is only responsible for his own act or omission. [9] Thus, a person will generally be
held liable only for the torts committed by himself and not by another. This general rule is laid down in Article
2176 of the Civil Code, which provides to wit:

Article 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.

Based on the above-cited article, the obligation to indemnify another for damage caused by ones act or omission
is imposed upon the tortfeasor himself, i.e., the person who committed the negligent act or omission. The law,
however, provides for exceptions when it makes certain persons liable for the act or omission of another.

One exception is an employer who is made vicariously liable for the tort committed by his employee.
Article 2180 of the Civil Code states:
128
 Article 2180. The obligation imposed by Article 2176 is demandable not only for ones
own acts or omissions, but also for those of persons for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not engaged
in any business or industry.

xxxx

The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to prevent
damage.

Under Article 2176, in relation with Article 2180, of the Civil Code, an action predicated on an employees
act or omission may be instituted against the employer who is held liable for the negligent act or omission
committed by his employee.

Although the employer is not the actual tortfeasor, the law makes him vicariously liable on the basis of
the civil law principle of pater familias for failure to exercise due care and vigilance over the acts of ones
subordinates to prevent damage to another.[10] In the last paragraph of Article 2180 of the Civil Code, the employer
may invoke the defense that he observed all the diligence of a good father of a family to prevent damage.

As its core defense, Filcar contends that Article 2176, in relation with Article 2180, of the Civil Code is
inapplicable because it presupposes the existence of an employer-employee relationship. According to Filcar, it
cannot be held liable under the subject provisions because the driver of its vehicle at the time of the accident,
Floresca, is not its employee but that of its Corporate Secretary, Atty. Flor.

We cannot agree. It is well settled that in case of motor vehicle mishaps, the registered owner of the
motor vehicle is considered as the employer of the tortfeasor-driver, and is made primarily liable for the tort
committed by the latter under Article 2176, in relation with Article 2180, of the Civil Code.

In Equitable Leasing Corporation v. Suyom,[11] we ruled that in so far as third persons are concerned, the
registered owner of the motor vehicle is the employer of the negligent driver, and the actual employer is
considered merely as an agent of such owner.
In that case, a tractor registered in the name of Equitable Leasing Corporation (Equitable) figured in an
accident, killing and seriously injuring several persons. As part of its defense, Equitable claimed that the tractor
was initially leased to Mr. Edwin Lim under a Lease Agreement, which agreement has been overtaken by a Deed
of Sale entered into by Equitable and Ecatine Corporation (Ecatine). Equitable argued that it cannot be held liable
for damages because the tractor had already been sold to Ecatine at the time of the accident and the negligent
driver was not its employee but of Ecatine.

In upholding the liability of Equitable, as registered owner of the tractor, this Court said that regardless of
sales made of a motor vehicle, the registered owner is the lawful operator insofar as the public and third persons
are concerned; consequently, it is directly and primarily responsible for the consequences of its operation. [12] The
Court further stated that [i]n contemplation of law, the owner/operator of record is the employer of the
driver, the actual operator and employer being considered as merely its agent.[13] Thus, Equitable, as the
registered owner of the tractor, was considered under the law on quasi delict to be the employer of the driver,
Raul Tutor; Ecatine, Tutors actual employer, was deemed merely as an agent of Equitable.

Thus, it is clear that for the purpose of holding the registered owner of the motor vehicle primarily and
directly liable for damages under Article 2176, in relation with Article 2180, of the Civil Code, the existence of an
employer-employee relationship, as it is understood in labor relations law, is not required. It is sufficient to
establish that Filcar is the registered owner of the motor vehicle causing damage in order that it may be held
vicariously liable under Article 2180 of the Civil Code.

Rationale for holding the registered owner vicariously liable

129
 The rationale for the rule that a registered owner is vicariously liable for damages caused by the operation
of his motor vehicle is explained by the principle behind motor vehicle registration, which has been discussed by
this Court in Erezo, and cited by the CA in its decision:

The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on public highways caused accidents
or injuries to pedestrians or other vehicles without positive identification of the owner or drivers,
or with very scant means of identification. It is to forestall these circumstances, so inconvenient
or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest
of the determination of persons responsible for damages or injuries caused on public
highways.[emphasis ours]

Thus, whether there is an employer-employee relationship between the registered owner and the driver
is irrelevant in determining the liability of the registered owner who the law holds primarily and directly
responsible for any accident, injury or death caused by the operation of the vehicle in the streets and highways.

As explained by this Court in Erezo, the general public policy involved in motor vehicle registration is the
protection of innocent third persons who may have no means of identifying public road malefactors and, therefore,
would find it difficult if not impossible to seek redress for damages they may sustain in accidents resulting in
deaths, injuries and other damages; by fixing the person held primarily and directly liable for the damages
sustained by victims of road mishaps, the law ensures that relief will always be available to them.

To identify the person primarily and directly responsible for the damages would also prevent a situation
where a registered owner of a motor vehicle can easily escape liability by passing on the blame to another who
may have no means to answer for the damages caused, thereby defeating the claims of victims of road accidents.
We take note that some motor vehicles running on our roads are driven not by their registered owners, but by
employed drivers who, in most instances, do not have the financial means to pay for the damages caused in case
of accidents.

These same principles apply by analogy to the case at bar. Filcar should not be permitted to evade its
liability for damages by conveniently passing on the blame to another party; in this case, its Corporate Secretary,
Atty. Flor and his alleged driver, Floresca. Following our reasoning in Equitable, the agreement between Filcar
and Atty. Flor to assign the motor vehicle to the latter does not bind Espinas who was not a party to and has no
knowledge of the agreement, and whose only recourse is to the motor vehicle registration.

Neither can Filcar use the defenses available under Article 2180 of the Civil Code - that the employee
acts beyond the scope of his assigned task or that it exercised the due diligence of a good father of a family to
prevent damage - because the motor vehicle registration law, to a certain extent, modified Article 2180 of the Civil
Code by making these defenses unavailable to the registered owner of the motor vehicle. Thus, for as long as
Filcar is the registered owner of the car involved in the vehicular accident, it could not escape primary liability for
the damages caused to Espinas.

The public interest involved in this case must not be underestimated. Road safety is one of the most
common problems that must be addressed in this country. We are not unaware of news of road accidents
involving reckless drivers victimizing our citizens. Just recently, such pervasive recklessness among most drivers
took the life of a professor of our state university. [14] What is most disturbing is that our existing laws do not seem
to deter these road malefactors from committing acts of recklessness.

We understand that the solution to the problem does not stop with legislation. An effective administration
and enforcement of the laws must be ensured to reinforce discipline among drivers and to remind owners of motor
vehicles to exercise due diligence and vigilance over the acts of their drivers to prevent damage to others.

Thus, whether the driver of the motor vehicle, Floresca, is an employee of Filcar is irrelevant in arriving at the
conclusion that Filcar is primarily and directly liable for the damages sustained by Espinas. While Republic Act
No. 4136 or the Land Transportation and Traffic Code does not contain any provision on the liability of registered
owners in case of motor vehicle mishaps, Article 2176, in relation with Article 2180, of the Civil Code imposes an
obligation upon Filcar, as registered owner, to answer for the damages caused to Espinas car. This interpretation
is consistent with the strong public policy of maintaining road safety, thereby reinforcing the aim of the State to
promote the responsible operation of motor vehicles by its citizens.

130
This does not mean, however, that Filcar is left without any recourse against the actual employer of the driver
and the driver himself. Under the civil law principle of unjust enrichment, the registered owner of the motor vehicle
has a right to be indemnified by the actual employer of the driver of the amount that he may be required to pay
as damages for the injury caused to another.

The set-up may be inconvenient for the registered owner of the motor vehicle, but the inconvenience cannot
outweigh the more important public policy being advanced by the law in this case which is the protection of
innocent persons who may be victims of reckless drivers and irresponsible motor vehicle owners.

WHEREFORE, the petition is DENIED. The decision dated February 16, 2006 and the resolution dated July 6,
2006 of the Court of Appeals are AFFIRMED. Costs against petitioner Filcar Transport Services.

SO ORDERED.

#45

EQUITABLE LEASING CORPORATION, petitioner, vs. LUCITA SUYOM, MARISSA ENANO, MYRNA
TAMAYO and FELIX OLEDAN, respondents.
DECISION
PANGANIBAN, J.:

In an action based on quasi delict, the registered owner of a motor vehicle is solidarily liable for the
injuries and damages caused by the negligence of the driver, in spite of the fact that the vehicle may have
already been the subject of an unregistered Deed of Sale in favor of another person. Unless registered with the
Land Transportation Office, the sale -- while valid and binding between the parties -- does not affect third parties,
especially the victims of accidents involving the said transport equipment. Thus, in the present case, petitioner,
which is the registered owner, is liable for the acts of the driver employed by its former lessee who has become
the owner of that vehicle by virtue of an unregistered Deed of Sale.

Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the May 12, 2000 Decision [1] of
the Court of Appeals[2] (CA) in CA-GR CV No. 55474. The decretal portion of the Decision reads as follows:

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit. The assailed
decision, dated May 5, 1997, of the Regional Trial Court of Manila, Branch 14, in Civil Case No. 95-73522, is
hereby AFFIRMED with MODIFICATION that the award of attorneys fees is DELETED.[3]

On the other hand, in Civil Case No. 95-73522, the Regional Trial Court (RTC) of Manila (Branch 14) had
earlier disposed in this wise:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant Equitable
Leasing Corporation ordering said defendant to pay to the plaintiffs the following:
A. TO MYRNA TAMAYO
1. the sum of P50,000.00 for the death of Reniel Tamayo;
2. P50,000.00 as moral damages; and
3. P56,000.00 for the damage to the store and its contents, and funeral expenses.
B. TO FELIX OLEDAN
1. the sum of P50,000.00 for the death of Felmarie Oledan;
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical treatment of her two sons.
The sum of P120,000.00 as and for attorneys fees.[4]

The Facts

On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the house cum store of Myrna
Tamayo located at Pier 18, Vitas, Tondo, Manila. A portion of the house was destroyed. Pinned to death under
the engine of the tractor were Respondent Myrna Tamayos son, Reniel Tamayo, and Respondent Felix Oledans

131
daughter, Felmarie Oledan. Injured were Respondent Oledan himself, Respondent Marissa Enano, and two sons
of Respondent Lucita Suyom.

Tutor was charged with and later convicted of reckless imprudence resulting in multiple homicide
and multiple physical injuries in Criminal Case No. 296094-SA, Metropolitan Trial Court of Manila, Branch 12.[5]
Upon verification with the Land Transportation Office, respondents were furnished a copy of Official Receipt
No. 62204139[6] and Certificate of Registration No. 08262797,[7] showing that the registered owner of the
tractor was Equitable Leasing Corporation/leased to Edwin Lim. On April 15, 1995, respondents filed
against Raul Tutor, Ecatine Corporation (Ecatine) and Equitable Leasing Corporation (Equitable) a
Complaint[8] for damages docketed as Civil Case No. 95-73522 in the RTC of Manila, Branch 14.

The trial court, upon motion of plaintiffs counsel, issued an Order dropping Raul Tutor, Ecatine and Edwin
Lim from the Complaint, because they could not be located and served with summonses.[9] On the other
hand, in its Answer with Counterclaim,[10] petitioner alleged that the vehicle had already been sold to Ecatine
and that the former was no longer in possession and control thereof at the time of the incident. It also
claimed that Tutor was an employee, not of Equitable, but of Ecatine.

After trial on the merits, the RTC rendered its Decision ordering petitioner to pay actual and moral
damages and attorneys fees to respondents. It held that since the Deed of Sale between petitioner and Ecatine
had not been registered with the Land Transportation Office (LTO), the legal owner was still
Equitable.[11] Thus, petitioner was liable to respondents.[12]

Ruling of the Court of Appeals

Sustaining the RTC, the CA held that petitioner was still to be legally deemed the owner/operator of
the tractor, even if that vehicle had been the subject of a Deed of Sale in favor of Ecatine on December 9,
1992. The reason cited by the CA was that the Certificate of Registration on file with the LTO still remained in
petitioners name.[13] In order that a transfer of ownership of a motor vehicle can bind third persons, it must
be duly recorded in the LTO.[14]
The CA likewise upheld respondents claim for moral damages against petitioner because the appellate court
considered Tutor, the driver of the tractor, to be an agent of the registered owner/operator. [15]
Hence, this Petition.[16]

Issues

In its Memorandum, petitioner raises the following issues for the Courts consideration:
I
Whether or not the Court of Appeals and the trial court gravely erred when they decided and held that petitioner
[was] liable for damages suffered by private respondents in an action based on quasi delict for the
negligent acts of a driver who [was] not the employee of the petitioner.
II
Whether or not the Court of Appeals and the trial court gravely erred when they awarded moral damages to
private respondents despite their failure to prove that the injuries they suffered were brought by petitioners
wrongful act.[17]

This Courts Ruling

The Petition has no merit.

First Issue:

Liability for Wrongful Acts

Petitioner contends that it should not be held liable for the damages sustained by respondents and that arose
from the negligence of the driver of the Fuso Road Tractor, which it had already sold to Ecatine at the time of the
accident. Not having employed Raul Tutor, the driver of the vehicle, it could not have controlled or supervised
him.[18]

We are not persuaded. In negligence cases, the aggrieved party may sue the negligent party under (1)
Article 100[19] of the Revised Penal Code, for civil liability ex delicto; or (2) under Article 2176[20] of the
Civil Code, for civil liability ex quasi delicto.

Furthermore, under Article 103 of the Revised Penal Code, employers may be held subsidiarily
liable for felonies committed by their employees in the discharge of the latters duties. [22] This liability
132
attaches when the employees who are convicted of crimes committed in the performance of their work
are found to be insolvent and are thus unable to satisfy the civil liability adjudged. [23]

On the other hand, under Article 2176 in relation to Article 2180 [24] of the Civil Code, an action
predicated on quasi delict may be instituted against the employer for an employees act or omission. The
liability for the negligent conduct of the subordinate is direct and primary, but is subject to the defense
of due diligence in the selection and supervision of the employee. [25] The enforcement of the judgment
against the employer for an action based on Article 2176 does not require the employee to be insolvent,
since the liability of the former is solidary -- the latter being statutorily considered a joint tortfeasor.[26] To
sustain a claim based on quasi delict, the following requisites must be proven: (a) damage suffered by the plaintiff,
(b) fault or negligence of the defendant, and (c) connection of cause and effect between the fault or negligence
of the defendant and the damage incurred by the plaintiff.[27]

These two causes of action (ex delicto or ex quasi delicto) may be availed of, subject to the caveat[28] that
the offended party cannot recover damages twice for the same act or omission or under both
causes.[29] Since these two civil liabilities are distinct and independent of each other, the failure to recover in one
will not necessarily preclude recovery in the other.[30]

In the instant case, respondents -- having failed to recover anything in the criminal case -- elected to
file a separate civil action for damages, based on quasi delict under Article 2176 of the Civil Code. [31] The
evidence is clear that the deaths and the injuries suffered by respondents and their kins were due to the fault of
the driver of the Fuso tractor.

Dated June 4, 1991, the Lease Agreement[32] between petitioner and Edwin Lim stipulated that it is the
intention of the parties to enter into a FINANCE LEASE AGREEMENT.[33] Under such scheme, ownership of the
subject tractor was to be registered in the name of petitioner, until the value of the vehicle has been fully paid by
Edwin Lim.[34] Further, in the Lease Schedule,[35] the monthly rental for the tractor was stipulated, and the term of
the Lease was scheduled to expire on December 4, 1992. After a few months, Lim completed the payments to
cover the full price of the tractor.[36] Thus, on December 9, 1992, a Deed of Sale[37] over the tractor was
executed by petitioner in favor of Ecatine represented by Edwin Lim. However, the Deed was not
registered with the LTO.

We hold petitioner liable for the deaths and the injuries complained of, because it was the registered
owner of the tractor at the time of the accident on July 17, 1994. [38] The Court has consistently ruled that,
regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as the
public and third persons are concerned; consequently, it is directly and primarily responsible for the
consequences of its operation.[39] In contemplation of law, the owner/operator of record is the employer
of the driver, the actual operator and employer being considered as merely its agent.[40] The same
principle applies even if the registered owner of any vehicle does not use it for public service. [41]
Since Equitable remained the registered owner of the tractor, it could not escape primary liability for
the deaths and the injuries arising from the negligence of the driver.[42]

The finance-lease agreement between Equitable on the one hand and Lim or Ecatine on the other has
already been superseded by the sale. In any event, it does not bind third persons. The rationale for this rule has
been aptly explained in Erezo v. Jepte,[43] which we quote hereunder:
x x x. The main aim of motor vehicle registration is to identify the owner so that if any accident happens,
or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can
be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on
public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the
owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so inconvenient
or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest of the
determination of persons responsible for damages or injuries caused on public highways. [44]

Further, petitioners insistence on FGU Insurance Corp. v. Court of Appeals is misplaced.[45] First, in FGU
Insurance, the registered vehicle owner, which was engaged in a rent-a-car business, rented out the car. In this
case, the registered owner of the truck, which is engaged in the business of financing motor vehicle acquisitions,
has actually sold the truck to Ecatine, which in turn employed Tutor. Second, in FGU Insurance, the registered
owner of the vehicle was not held responsible for the negligent acts of the person who rented one of its cars,
because Article 2180 of the Civil Code was not applicable. We held that no vinculum juris as employer and
employee existed between the owner and the driver. [46] In this case, the registered owner of the tractor is
considered under the law to be the employer of the driver, while the actual operator is deemed to be
its agent.[47] Thus, Equitable, the registered owner of the tractor, is -- for purposes of the law on quasi delict -- the

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employer of Raul Tutor, the driver of the tractor. Ecatine, Tutors actual employer, is deemed as merely an agent
of Equitable.[48]

True, the LTO Certificate of Registration, dated 5/31/91, qualifies the name of the registered owner as
EQUITABLE LEASING CORPORATION/Leased to Edwin Lim. But the lease agreement between Equitable and
Lim has been overtaken by the Deed of Sale on December 9, 1992, between petitioner and Ecatine. While this
Deed does not affect respondents in this quasi delict suit, it definitely binds petitioner because, unlike them, it is
a party to it.

We must stress that the failure of Equitable and/or Ecatine to register the sale with the LTO should
not prejudice respondents, who have the legal right to rely on the legal principle that the registered
vehicle owner is liable for the damages caused by the negligence of the driver. Petitioner cannot hide
behind its allegation that Tutor was the employee of Ecatine. This will effectively prevent respondents from
recovering their losses on the basis of the inaction or fault of petitioner in failing to register the sale. The non-
registration is the fault of petitioner, which should thus face the legal consequences thereof.

Second Issue:

Moral Damages

Petitioner further claims that it is not liable for moral damages, because respondents failed to establish or
show the causal connection or relation between the factual basis of their claim and their wrongful act or omission,
if any. [49]
Moral damages are not punitive in nature, but are designed to compensate[50] and alleviate in some way
the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury unjustly caused a person. [51] Although incapable of
pecuniary computation, moral damages must nevertheless be somehow proportional to and in
approximation of the suffering inflicted.[52] This is so because moral damages are in the category of an
award designed to compensate the claimant for actual injury suffered, not to impose a penalty on the
wrongdoer.[53]
Viewed as an action for quasi delict, the present case falls squarely within the purview of Article 2219
(2),[54] which provides for the payment of moral damages in cases of quasi delict.[55]Having established the liability
of petitioner as the registered owner of the vehicle,[56] respondents have satisfactorily shown the existence of the
factual basis for the award[57] and its causal connection to the acts of Raul Tutor, who is deemed as petitioners
employee.[58] Indeed, the damages and injuries suffered by respondents were the proximate result of petitioners
tortious act or omission.[59]

Further, no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount
of indemnity being left to the discretion of the court.[60] The evidence gives no ground for doubt that such discretion
was properly and judiciously exercised by the trial court.[61] The award is in fact consistent with the rule that moral
damages are not intended to enrich the injured party, but to alleviate the moral suffering undergone by that party
by reason of the defendants culpable action.[62]

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.

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