a) FRANCISCO S. TATAD vs.HON. JESUS B.
GARCIA However, Senators Francisco Tatad, John Osmeña, and Rodolfo Biazon opposed the
Facts: In 1989, DOTC planned to construct a light railway transit line along EDSA, a major
thoroughfare in Metropolitan Manila, which shall traverse the cities of Pasay, Quezon,
Mandaluyong and Makati. The plan, referred to as EDSA Light Rail Transit III (EDSA LRT III),
was intended to provide a mass transit system along EDSA and alleviate the congestion
and growing transportation problem in the metropolis.
On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the Financing,
Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector,
and For Other Purposes," was signed by President Corazon C. Aquino. Referred to as the
Build-Operate-Transfer (BOT) Law. A (PBAC) and the Technical Committee was created.
After its constitution, the PBAC issued guidelines for the prequalification of contractors for
the financing and implementation of the project.
Five groups responded to the invitation. On the last day for submission of prequalification
documents, the prequalification criteria proposed by the Technical Committee were
adopted by the PBAC. The criteria totalling 100 percent, are as follows: (a) Legal aspects —
10 percent; (b) Management/Organizational capability — 30 percent; and (c) Financial
capability — 30 percent; and (d) Technical capability — 30 percent.
Only the EDSA LRT Consortium "met the requirements of garnering at least 21 points per
criteria [sic], except for Legal Aspects, and obtaining an over-all passing mark of at least 82
points" (Rollo, p. 146). The Legal Aspects referred to provided that the BOT/BT contractor-
applicant meet the requirements specified in the Constitution and other pertinent laws.
An agreement was then made between the government, through the Department of
Transportation and Communication (DOTC), and EDSA LRT Consortium. The agreement
was based on the Build-Operate-Transfer scheme provided for by law (RA 6957, amended
by RA 7718). Under the agreement, EDSA LRT Consortium shall build the facilities, i.e.,
railways, and shall supply the train cabs. Every phase that is completed shall be turned
over to the DOTC and the latter shall pay rent for the same for 25 years. By the end of 25
years, it was projected that the government shall have fully paid EDSA LRT Consortium.
Thereafter, EDSA LRT Consortium shall sell the facilities to the government for $1.00.
implementation of said agreement as they averred that EDSA LRT Consortium is a foreign
corporation as it was organized under Hongkong laws; that as such, it cannot own a public
utility such as the EDSA railway transit because this falls under the nationalized areas of
activities. The petition was filed against Jesus Garcia, Jr. in his capacity as DOTC Secretary.
Issue: W/N an respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA
LRT III; a public utility.
Held: What private respondent owns are the rail tracks, rolling stocks like the coaches, rail
stations, terminals and the power plant, not a public utility. While a franchise is needed to
operate these facilities to serve the public, they do not by themselves constitute a public
utility. What constitutes a public utility is not their ownership but their use to serve the
public. The Constitution, in no uncertain terms, requires a franchise for the operation of a
public utility. However, it does not require a franchise before one can own the facilities
needed to operate a public utility so long as it does not operate them to serve the public.
Section 11 of Article XII of the Constitution provides: No franchise, certificate or any other
form of authorization for the operation of a public utility shall be granted except to
citizens of the Philippines or to corporations or associations organized under the laws of
the Philippines at least sixty per centum of whose capital is owned by such citizens, nor
shall such franchise, certificate or authorization be exclusive character or for a longer
period than fifty years
In law, there is a clear distinction between the "operation" of a public utility and the
ownership of the facilities and equipment used to serve the public.
Ownership is defined as a relation in law by virtue of which a thing pertaining to one
person is completely subjected to his will in everything not prohibited by law or the
concurrence with the rights of another. The right to operate a public utility may exist
independently and separately from the ownership of the facilities thereof. One can own
said facilities without operating them as a public utility, or conversely, one may operate a
public utility without owning the facilities used to serve the public. The devotion of
property to serve the public may be done by the owner or by the person in control thereof
who may not necessarily be the owner thereof.
 b) NATIONAL DEVELOPMENT COMPANY vs. THE COURT OF APPEALS
Facts: A memorandum agreement entered into between defendants NDC and MCP on
September 13, 1962, defendant NDC as the first preferred mortgagee of three ocean
going vessels including one with the name 'Dona Nati' appointed defendant MCP as its
agent to manage and operate said vessel for and in its behalf and account. Thus, on
February 28, 1964 the E. Philipp Corporation of New York loaded on board the vessel
"Dona Nati" at San Francisco, California, a total of 1,200 bales of American raw cotton
consigned to the order of Manila Banking Corporation. Also loaded on the same vessel at
Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of
Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10
cases of aluminum foil. En route to Manila the vessel Dofia Nati figured in a collision at
6:04 a.m. on April 15, 1964 with a Japanese vessel 'SS Yasushima Maru as a result of which
550 bales of aforesaid cargo of American raw cotton were lost and/or destroyed. ). The
damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer,
paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly
endorsed. Also considered totally lost were the aforesaid shipments of Kyokuto. The total
loss was P19,938.00 which the plaintiff as insurer paid to Guilcon as holder of the duly
endorsed bill of lading. Thus, the plaintiff had paid as insurer the total amount of
P364,915.86 to the consignees or their successors-in-interest, for the said lost or damaged
cargoes.
Issue: W/N the Carriage of Goods by Sea Act should apply to the case at bar and not the
Civil Code or the Code of Commerce.
Held: This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v.
IAC (1 50 SCRA 469-470 [1987]) where it was held under similar circumstance "that the
law of the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil
Code). Thus, the rule was specifically laid down that for cargoes transported from Japan to
the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all
matters not regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of commerce and by laws (Article 1766, Civil Code). Hence, the
Carriage of Goods by Sea Act, a special law, is merely suppletory to the provision of the
Civil Code.
In the case at bar, it has been established that the goods in question are transported from
San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or
due to a collision which was found to have been caused by the negligence or fault of both
captains of the colliding vessels. Under the above ruling, it is evident that the laws of the
Philippines will apply, and it is immaterial that the collision actually occurred in foreign
waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, 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 circumstances of each case. Accordingly, under Article 1735 of the same
Code, in all other than those mentioned is Article 1734 thereof, the common carrier shall
be presumed to have been at fault or to have acted negligently, unless it proves that it has
observed the extraordinary diligence required by law.
It appears, however, that collision falls among matters not specifically regulated by the
Civil Code, so that no reversible error can be found in respondent courses application to
the case at bar of Articles 826 to 839 of the Code of Commerce, which deal exclusively
with collision of vessels. Under the provisions of the Code of Commerce, particularly
Articles 826 to 839, the shipowner or carrier, is not exempt from liability for damages
arising from collision due to the fault or negligence of the captain. Primary liability is
imposed on the shipowner or carrier in recognition of the universally accepted doctrine
that the shipmaster or captain is merely the representative of the owner who has the
actual or constructive control over the conduct of the voyage (Y'eung Sheng Exchange and
Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should
apply only to domestic trade and not to foreign trade. Aside from the fact that the
Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically provide for the
subject of collision, said Act in no uncertain terms, restricts its application "to all contracts
for the carriage of goods by sea to and from Philippine ports in foreign trade." Under
Section I thereof, it is explicitly provided that "nothing in this Act shall be construed as
repealing any existing provision of the Code of Commerce which is now in force, or as
limiting its application." By such incorporation, it is obvious that said law not only
recognizes the existence of the Code of Commerce, but more importantly does not repeal
nor limit its application.
c) RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. vs. NATIONAL
TELECOMMUNICATIONS COMMISSION
Facts: Petitioner has been operating a radio communications system since 1957 under its
legislative franchise granted by Republic Act No. 2036 which was enacted on June 23,
1957.
In 1968, the petitioner established a radio telegraph service in Sorsogon, Sorsogon. In
1971, another radio telegraph service was put up in San Jose, Mindoro followed by
another in Catarman, Samar in 1976. The installation of radio telephone services started in
1971 in San Jose, Mindoro; then in Sorsogon, Sorsogon and Catarman, Samar in 1983.
In a decision dated June 24, 1980, private respondent Kayumanggi Radio Network
Incorporated was authorized by the public respondent to operate radio communications
systems in Catarman, Samar and in San Jose, Mindoro.
On December 14, 1983, the private respondent filed a complaint with the NTC alleging
that the petitioner was operating in Catarman, Samar and in San Jose, Mindoro without a
certificate of public covenience and necessity. The petitioner, on the other hand, counter-
alleged that its telephone services in the places subject of the complaint are covered by
the legislative franchise recognized by both the public respondent and its predecessor, the
Public Service Commission. In its supplemental reply, the petitioner further stated that it
has been in operation in the questioned places long before private respondent
Kayumanggi filed its application to operate in the same places.
After conducting a hearing, NTC ordered petitioner RCPI to immediately cease or desist
from the operation of its radio telephone services in Catarman Northern Samar; San Jose,
Occidental Mindoro; and Sorsogon, Sorsogon stating that under Executive Order No. 546,
a certificate of public convenience and necessity is mandatory for the operation of
communication utilities and services including radio communications.
Issue: W/N petitioner RCPI, a grantee of a legislative franchise to operate a radio
company, is required to secure a certificate of public convenience and necessity before it
can validly operate its radio stations
Held: the Public Service Commission was abolished and its functions were transferred to
three specialized regulatory boards, as follows: the Board of Transportation, the Board of
Communications and the Board of Power and Waterworks. The functions so transferred
were still subject to the limitations provided in sections 14 and 15 of the Public Service
Law, as amended. With the enactment of Executive Order No. 546 on July 23, 1979
implementing P.D. No.1, the Board of Communications and the Telecommunications
Control Bureau were abolished and their functions were transferred to the NTC.
The exemption enjoyed by radio companies from the jurisdiction of the Public Service
Commission and the Board of Communications no longer exists because of the changes
effected by the Reorganization Law and implementing executive orders. The petitioner's
claim that its franchise cannot be affected by Executive Order No. 546 on the ground that
it has long been in operation since 1957 cannot be sustained.
A franchise started out as a "royal privilege or (a) branch of the King's prerogative,
subsisting in the hands of a subject." This definition was given by Finch, adopted by
Blackstone, and accepted by every authority since (State v. Twin Village Water Co., 98 Me
214, 56 A 763 (1903)). Today, a franchise, being merely a privilege emanating from the
sovereign power of the state and owing its existence to a grant, is subject to regulation by
the state itself by virtue of its police power through its administrative agencies.
1. BALIWAG TRANSIT, INC.vs. COURT OF APPEALS
Facts: On 10 April 1985 a Complaint for damages arising from breach of contract of
carriage was filed by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida
Lopez, and their son George, of legal age, against petitioner Baliwag Transit. The
Complaint alleged that George, who was a paying passenger on a Baliwag bus on 17
December 1984, suffered multiple serious physical injuries when he was thrown off said
bus driven in a careless and negligent manner by Leonardo Cruz, the authorized bus
driver, along Barangay Patubig, Marilao, Bulacan. As a result, he was confined in the
hospital for treatment, incurring medical expenses, which were borne by his parents, the
respondent Spouses, in the sum of about P200,000.00 plus other incidental expenses of
about P10,000.00.
On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries
sustained by George was solely attributable to his own voluntary act in that, without
warning and provocation, he suddenly stood up from his seat and headed for the door of
the bus as if in a daze, opened it and jumped off while said bus was in motion, in spite of
the protestations by the driver and without the knowledge of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company,
Inc., on its third-party liability insurance in the amount of P50,000.00
Fortune Insurance claimed limited liability, the coverage being subject to a Schedule
of Indemnities forming part of the insurance policy.
November 14 1985 and November 18 1985: Fortune Insurance and Baliwag each filed
Motions to Dismiss on the ground that George, in consideration of the sum of P8,020.50
had executed a notarized "Release of Claims" dated 16 May 1985. - denied as they were
filed beyond the time for pleading and after the Answer were already filed so Baliwag
amended its answer to include such.
RTC: dismissed the Complaint and Third-party Complaint, ruling that since the contract of
carriage is between Baliwag and George L. Cailipan (of legal age) had the exclusive right to
execute the Release of Claims despite the fact that he is still a student and dependent on
his parents for support
October 22 1987: setting aside the appealed Order and holding that the "Release of
Claims" cannot operate as a valid ground for the dismissal of the case because it does not
have the conformity of all the parties, particularly George's parents, who have a
substantial interest in the case as they stand to be prejudiced by the judgment because
they spent a sizeable amount for the medical bills of their son.
Issue: W/N the contract signed by George during case pendency is valid discharging
Fortune Insurance and Baliwag from any and all liability.
Held: We hold that since the suit is one for breach of contract of carriage, the Release of
Claims executed by him, as the injured party, discharging Fortune Insurance and Baliwag
from any and all liability is valid. He was then of legal age, a graduating student of
Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in
relation to Article 402, Civil Code). Thus, he could sue and be sued even without the
assistance of his parents.
Significantly, the contract of carriage was actually between George, as the paying
passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound to
carry its passengers safely as far as human care and foresight could provide, and is liable
for injuries to them through the negligence or wilful acts of its employees (Articles 1755
and 1759, Civil Code). Thus, George had the right to be safely brought to his destination
and Baliwag had the correlative obligation to do so. Since a contract may be violated only
by the parties thereto, as against each other, in an action upon that contract, the real
parties in interest, either as plaintiff or as defendant, must be parties to said contract
(MarimperioCompaniaNaviera, S.A. vs. Court of Appeals, No. L-40234, December 14, 1987,
156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right while a real
party-in-interest-defendant is one who has a correlative legal obligation whose act or
omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28,
1988). In the absence of any contract of carriage between Baliwag and George's parents,
the latter are not real parties-in-interest in an action for breach of that contract.
2. BRITISH AIRWAYS, INC., petitioner, vs. COURT OF APPEALS
Facts: February 15, 1981: First International Trading and General Services Co. (First Int'l),
a duly licensed domestic recruitment and placement agency, received a telex message
from its principal ROLACO Engineering and Contracting Services (ROLACO) in Jeddah, Saudi
Arabia to recruit Filipino contract workers in its behalf
Early March 1981: ROLACO paid British Airways, Inc. (BA) Jeddah branch the airfare tickets
for 93 contract workers with specific instruction to transport the workers to Jeddah on or
before March 30, 1981. As soon as BA received a prepaid ticket advice from its Jeddah
branch informed First Int'l.
Thereafter, First Int'l instructed ADB Travel and Tours. Inc. (its travel agent) to book the 93
workers with BA but it failed
So First Int'l had to borrow P304,416.00 for the purchase of airline tickets from the other
airlines for the 93 workers who must leave immediately since the visas are valid only for
45 days and the Bureau of Employment Services mandates that contract workers must be
sent to the job site within a period of 30 days
First week of June, 1981: First Int'l was again informed by BA that it had received a prepaid
ticket advice from its Jeddah branch for the transportation of 27 contract workers.
Immediately, First Int'l instructed its ADB to book the 27 contract workers with the BA but
only 16 seats were confirmed and booked on its June 9, 1981 flight.
June 9, 1981: only 9 workers were able to board said flight while the remaining 7
workers were rebooked to:
June 30, 1981 - again cancelled by British without any prior notice to either First Int'l or
the workers
July 4,1981 - (6 + 7 workers) 13 workers were again cancelled and rebooked to July 7,
1981.
July 6, 1981: First Int'l paid the travel tax of the workers as required by BA but when the
receipt of the tax payments was submitted, only 12 seats were confirmed for July 7, 1981
flight
July 7, 1981: Flight was again cancelled without any prior notice
12 workers were finally able to leave for Jeddah after First Int'l had bought tickets from
the other airlines.
As a result of these incidents, First Int'l sent a letter to BA demanding compensation for
the damages it had incurred by the repeated failure to transport its contract workers
despite confirmed bookings and payment of the corresponding travel taxes.
July 23, 1981: the counsel of First Int'l sent another letter to BA demanding P350,000.00
damages and unrealized profit or income - denied
August 8, 1981: First Int'l received a telex message from ROLACO cancelling the hiring of
the remaining recruited workers due to the delay in transporting the workers to Jeddah.
January 27, 1982: First Int'l filed a complaint for damages against First Int'l
CA Affirmed RTC: BA to pay First Int'l damages, attorneys fees and costs
Issue: W/N British Airways is not liable because there was no contract of carriage as no
ticket was ever issued.
Held: Petitioner's contention is untenable. Private respondent had a valid cause of action
for damages against petitioner. A cause of action is an act or omission of one party in
violation of the legal right or rights of the other.9 Petitioner's repeated failures to
transport private respondent's workers in its flight despite confirmed booking of said
workers clearly constitutes breach of contract and bad faith on its part.
In dealing with the contract of common carriage of passengers for purpose of accuracy,
there are two (2) aspects of the same, namely: (a) the contract "to carry (at some future
time)," which contract is consensual and is necessarily perfected by mere consent (See
Article 1356, Civil Code of the Philippines), and (b) the contract "of carriage" or "of
common carriage" itself which should be considered as a real contract for not until the
carrier is actually used can the carrier be said to have already assumed the obligation of a
carrier.
In the instant case, the contract "to carry" is the one involved which is consensual and is
perfected by the mere consent of the parties.
There is no dispute as to the appellee's consent to the said contract "to carry" its contract
workers from Manila to Jeddah. The appellant's consent thereto, on the other hand, was
manifested by its acceptance of the PTA or prepaid ticket advice that ROLACO Engineering
has prepaid the airfares of the appellee's contract workers advising the appellant that it
must transport the contract workers on or before the end of March, 1981 and the other
batch in June, 1981.
Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a
ticket and thus no ticket was yet issued, the fact remains that the passage had already
been paid for by the principal of the appellee, and the appellant had accepted such
payment. The existence of this payment was never objected to nor questioned by the
appellant in the lower court. Thus, the cause or consideration which is the fare paid for
the passengers exists in this case.
The third essential requisite of a contract is an object certain. In this contract "to carry",
such an object is the transport of the passengers from the place of departure to the place
of destination as stated in the telex.
Accordingly, there could be no more pretensions as to the existence of an oral contract of
carriage imposing reciprocal obligations on both parties.
3. DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y
MALECDAN vs. COURT OF APPEALS
Facts: On May 13, 1985, private respondents filed a complaint 1 for damages against
petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which
occurred on March 25, 1985, it was alleged that on said date, while petitioner Theodore
M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless
and imprudent manner and without due regard to traffic rules and regulations and safety
to persons and property, it ran over its passenger, Pedrito Cudiamat. However, instead of
bringing Pedrito immediately to the nearest hospital, the said driver, first brought his
other passengers and cargo to their respective destinations before banging said victim to
the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe
the extraordinary diligence required in the operation of the transportation company and
the supervision of the employees, even as they add that they are not absolute insurers of
the safety of the public at large. Further, it was alleged that it was the victim's own
carelessness and negligence which gave rise to the subject incident, hence they prayed for
the dismissal of the complaint plus an award of damages in their favor by way of a
counterclaim.
Respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is
evident that the subject bus was at full stop when the victim Pedrito Cudiamat boarded
the same as it was precisely on this instance where a certain Miss Abenoja alighted from
the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his
intention to board the bus as can be seen from the testimony of the said witness when he
declared that Pedrito Cudiamat was no longer walking and made a sign to board the bus
when the latter was still at a distance from him. It was at the instance when Pedrito
Cudiamat was closing his umbrella at the platform of the bus when the latter made a
sudden jerk movement (as) the driver commenced to accelerate the bus.
Issue: W/N Dangwa should be held liable for the negligence of its driver Theodore.
Held: Yes. It is the duty of common carriers of passengers, including common carriers by
railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of
time in order to afford passengers an opportunity to board and enter, and they are liable
for injuries suffered by boarding passengers resulting from the sudden starting up or
jerking of their conveyances while they are doing so. The victim herein, by stepping and
standing on the platform of the bus, is already considered a passenger and is entitled all
the rights and protection pertaining to such a contractual relation. Hence, it has been held
that the duty which the carrier passengers owes to its patrons extends to persons
boarding cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are
bound to observe extraordina diligence for the safety of the passengers transported by
the according to all the circumstances of each case. 16 A common carrier is bound to carry
the passengers safely as far as human care and foresight can provide, using the utmost
diligence very cautious persons, with a due regard for all the circumstances.
By contract of carriage, the carrier assumes the express obligation to transport the
passenger to his destination safely and observe extraordinary diligence with a due regard
for all the circumstances, and any injury that might be suffered by the passenger is right
away attributable to the fault or negligence of the carrier. This is an exception to the
general rule that negligence must be proved, and it is therefore incumbent upon the
carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733
and 1755 of the Civil Code.
Moreover, the circumstances under which the driver and the conductor failed to bring the
gravely injured victim immediately to the hospital for medical treatment is a patent and
incontrovertible proof of their negligence. It defies understanding and can even be
stigmatized as callous indifference.
4. LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs.
MARJORIE NAVIDAD
Facts: On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor
Navidad, then drunk, entered the EDSA LRT station after purchasing a token ). While
Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security
guard assigned to the area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No evidence, however, was
adduced to indicate how the fight started or who, between the two, delivered the first
blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell,
an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by
the moving train, and he was killed instantaneously.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead of
presenting evidence, filed a demurrer contending that Navidad had failed to prove that
Escartin was negligent in his assigned task. Prudent appealed to the Court of Appeals. On
27 August 2000, the appellate court promulgated its now assailed decision exonerating
Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA
and Roman jointly and severally liable.
The appellate court ratiocinated that while the deceased might not have then as yet
boarded the train, a contract of carriage theretofore had already existed when the victim
entered the place where passengers were supposed to be after paying the fare and
getting the corresponding token therefor. In exempting Prudent from liability, the court
stressed that there was nothing to link the security agency to the death of Navidad. It said
that Navidad failed to show that Escartin inflicted fist blows upon the victim and the
evidence merely established the fact of death of Navidad by reason of his having been hit
by the train owned and managed by the LRTA and operated at the time by Roman. The
appellate court faulted petitioners for their failure to present expert evidence to establish
the fact that the application of emergency brakes could not have stopped the train.
Issue: W/N LRTA and Roman should be liable according to the contract of carriage.
Held: Law and jurisprudence dictate that a common carrier, both from the nature of its
business and for reasons of public policy, is burdened with the duty of exercising utmost
diligence in ensuring the safety of passengers. The Civil Code, governing the liability of a
common carrier for death of or injury to its passengers, provides:
Article 1755. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances.
Article 1756. In case of death of or injuries to passengers, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries to passengers through
the negligence or willful acts of the formers employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
Article 1763. A common carrier is responsible for injuries suffered by a passenger on
account of the willful acts or negligence of other passengers or of strangers, if the
common carriers employees through the exercise of the diligence of a good father of a
family could have prevented or stopped the act or omission.
The law requires common carriers to carry passengers safely using the utmost diligence of
very cautious persons with due regard for all circumstances. Such duty of a common
carrier to provide safety to its passengers so obligates it not only during the course of the
trip but for so long as the passengers are within its premises and where they ought to be
in pursuance to the contract of carriage. The statutory provisions render a common
carrier liable for death of or injury to passengers (a) through the negligence or willful acts
of its employees or b) on account of willful acts or negligence of other passengers or of
strangers if the common carriers employees through the exercise of due diligence could
have prevented or stopped the act or omission. In case of such death or injury, a carrier is
presumed to have been at fault or been negligent, and by simple proof of injury, the
passenger is relieved of the duty to still establish the fault or negligence of the carrier or of
its employees and the burden shifts upon the carrier to prove that the injury is due to an
unforeseen event or to force majeure. In the absence of satisfactory explanation by the
carrier on how the accident occurred, which petitioners, according to the appellate court,
have failed to show, the presumption would be that it has been at fault, an exception
from the general rule that negligence must be proved.
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. The premise, however, for the employers liability is negligence or fault on
the part of the employee. Once such fault is established, the employer can then be made
liable on the basis of the presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and supervision of its employees. The liability
is primary and can only be negated by showing due diligence in the selection and
supervision of the employee, a factual matter that has not been shown.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad is not itself a juridical relation between the
latter and Roman; thus, Roman can be made liable only for his own fault or negligence.
5. PEDRO DE GUZMAN vs. COURT OF APPEALS
Facts: 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.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized
dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted
with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of
General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4
December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent
himself, while 600 cartons were placed on board the other truck which was driven by
Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes
never reached petitioner, since the truck which carried these boxes was hijacked
somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took
with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court
of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of
the lost merchandise, plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise the extraordinary
diligence required of him by the law, should be held liable for the value of the undelivered
goods.
In his Answer, private respondent denied that he was a common carrier and argued that
he could not be held responsible for the value of the lost goods, such loss having been due
to force majeure.
Issue/s:
1. W/N private respondent Ernesto Cendana maybe properly characterized as a common
carrier.
1. Held: 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 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.
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.
2. W/N private respondent is liable as a common carrier.
2. Held: Art. 1745(6): that the common carrier's liability for acts committed by thieves, or
of robbers who do not act with grave or irresistible threat, violence or force, is dispensed
with or diminished.
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."
The decision of the trial court shows that the accused acted with grave, if not irresistible,
threat, violence or force. 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.
6. Spouses Cruz vs Sun Holidays Inc.
Facts: Spouses Dante and Leonora Cruz lodged a Complaint on January 25, 2001 [1]
against Sun Holidays, Inc.for damages arising from the death of their son Ruelitowho
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 owned and operated by respondent.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners son and his wife trekked to the other side of the Coco Beach mountain that
was sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry
them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto
Galera and into the open seas, the rain and wind got stronger, causing the boat to tilt from
side to side and the captain to step forward to the front, leaving the wheel to one of the
crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after
the other, M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon
seeing the captain, Matute and the other passengers who reached the surface asked him
what they could do to save the people who were still trapped under the boat. The captain
replied Iligtas niyo na lang ang sarili niyo. The stay of the newlywed 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. Help came after about 45 minutes.
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.
Petitioners demanded indemnification from respondent for the death of their son in the
amount of at least P4,000,000.
Replying 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.
Petitioners filed the Complaint 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. 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. Both RTC and CA ruled against
petitioners. Hence, this petition.
(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)
Issue: W/N respondent is a common carrier.
Held: The petition is impressed with merit. Petitioners correctly rely on De Guzman v.
Court of Appeals (See ruling in the first issue). 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.
As De Guzman instructs, Article 1732 of the Civil Code defining common carriers has
deliberately refrained from making distinctions on whether the carrying of persons or
goods is the carriers principal business, whether it is offered on a regular basis, or whether
it is offered to the general public. The intent of the law is thus to not consider such
distinctions. Otherwise, there is no telling how many other distinctions may be concocted
by unscrupulous businessmen engaged in the carrying of persons or goods in order to
avoid the legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence for the safety of the
passengers transported by them, according to all the circumstances of each case. [19]
They are bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstance.
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.
7. ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS
Facts: On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued
at US$423,192.35 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. 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. 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, for delivery to consignee. The cargo did not reach its
destination.
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.
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. 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.
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat
retrieved and loaded on the three other barges. 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.
Issue/s:
1) W/N the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, W/N it exercised extraordinary
diligence in its care and custody of the consignees cargo.
Held:
1. 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. In De Guzman vs. Court of Appeals,
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
and it offers its barges to the public for carrying or transporting goods by water for
compensation. Petitioner is clearly a common carrier.
(Petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals.
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. In the case at
bar, the petitioner admitted that it is engaged in the business of shipping and lighterage,
offering its barges to the public, despite its limited clientele for carrying or transporting
goods by water for compensation)
2. 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 shows 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.
8. FIRST PHILIPPINE INDUSTRIAL CORPORATION vs. COURT OF APPEALS
Facts: Petitioner is a grantee of a pipeline concession under R.A. No. 387, as amended, a
contract, install and operate oil pipelines. The original pipeline concession was granted in
1967 and renewed by the Energy Regulatory Board in 1992.
Sometime in January 1995, petitioner applied for a mayor’s permit with the Office of the
Mayor of Batangas City. However, before the mayor’s permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on its gross receipts
for the fiscal year 1993 pursuant to the Local Government Code. The respondent City
Treasure 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 June 15, 1994, petitioner filed with the RTC of Batangas City a complaint 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 Sec. 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 contactors; and (3) the City Treasurer illegally and erroneously imposed
and collected the said tax, thus meriting the immediate refund of the tax paid.
Traversing the complaint, the respondents argued that petitioner cannot be exempt from
taxes under Sec. 133 (J) of the Local Government Code as said exemption applied 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 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.
Issue: W/N the petitioner is a common carrier so that in the affirmative, he is not liable to
pay the carriers tax under the Local Government Code of 1991.
Held: 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.
Article 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.
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.
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. Under the Petroleum Act of the Philippines petitioner is considered a "common
carrier.
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 x x and
everything relating to the manufacture, refining, storage, or transportation by special
methods of petroleum, is hereby declared to be a public utility.
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:
"Section 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."
9. PLANTERS PRODUCTS, INC. vs. COURT OF APPEALS
Facts: Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
of New York, U.S.A., 9,329.7069 metric tons of Urea 46% fertilizer which the latter shipped
in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private
respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point,
San Fernando, La Union, Philippines. On 17 May 1974, or prior to its voyage, a time
charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter was
entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo,
Japan. Before loading the fertilizer aboard the vessel, four (4) of her holds were all
presumably inspected by the charterer's representative and found fit to take a load of
urea in bulk.
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the
supervision of the shipper, the steel hatches were closed with heavy iron lids, covered
with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed
and tightly sealed throughout the entire voyage. On 3 July 1974, the steel pontoon
hatches were opened with the use of the vessel's boom. Petitioner unloaded the cargo
from the holds into its steel-bodied dump trucks which were parked alongside the berth,
using metal scoops attached to the ship, pursuant to the terms and conditions of the
charter-partly. Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine
the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after
discharge.
Shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt. PPI sent a claim letter dated 18
December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier,
KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped
and the diminution in value of that portion said to have been contaminated with dirt.
Respondent SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for
shortlanded certificate and not a formal claim, and that this "request" was denied by them
because they "had nothing to do with the discharge of the shipment."
The court a quo however sustained the claim of the plaintiff against the defendant carrier
for the value of the goods lost or damaged. On appeal, respondent Court of Appeals
reversed the lower court and absolved the carrier from liability for the value of the cargo
that was lost or damaged.
Issue/s:
1. W/N a common carrier becomes a private carrier by reason of a charter-party;
2. In the negative, W/N the shipowner in the instant case was able to prove that he had
exercised that degree of diligence required of him under the law.
Held:
1. No. A "charter-party" is defined as a contract by which an entire ship, or some principal
part thereof, is let by the owner to another person for a specified time or use; 20 a
contract of affreightment by which the owner of a ship or other vessel lets the whole or a
part of her to a merchant or other person for the conveyance of goods, on a particular
voyage, in consideration of the payment of freight. the term "common or public carrier" is
defined in Art. 1732 of the Civil Code. 23 The definition extends to carriers either by land,
air or water which hold themselves out as ready to engage in carrying goods or
transporting passengers or both for compensation as a public employment and not as a
casual occupation. The distinction between a "common or public carrier" and a "private or
special carrier" lies in the character of the business, such that if the undertaking is a single
transaction, not a part of the general business or occupation, although involving the
carriage of goods for a fee, the person or corporation offering such service is a private
carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the
nature of their business, should observe extraordinary diligence in the vigilance over the
goods they carry.25 In the case of private carriers, however, the exercise of ordinary
diligence in the carriage of goods will suffice. Moreover, in the case of loss, destruction or
deterioration of the goods, common carriers are presumed to have been at fault or to
have acted negligently, and the burden of proving otherwise rests on them.26 On the
contrary, no such presumption applies to private carriers, for whosoever alleges damage
to or deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When petitioner
chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were
under the employ of the shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer, a stranger to the crew
and to the ship, with the duty of caring for his cargo when the charterer did not have any
control of the means in doing so. This is evident in the present case considering that the
steering of the ship, the manning of the decks, the determination of the course of the
voyage and other technical incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the shipowner.
It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or voyage-charter. The rule in the
United States that a ship chartered by a single shipper to carry special cargo is not a
common carrier, 29 does not find application in our jurisdiction, for we have observed
that the growing concern for safety in the transportation of passengers and /or carriage of
goods by sea requires a more exacting interpretation of admiralty laws, more particularly,
the rules governing common carriers.
2. In an action for recovery of damages against a common carrier on the goods shipped,
the shipper or consignee should first prove the fact of shipment and its consequent loss or
damage while the same was in the possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to respondent to prove that he has exercised
extraordinary diligence required by law or that the loss, damage or deterioration of the
cargo was due to fortuitous event, or some other circumstances inconsistent with its
liability.
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof,
the prima facie presumption of negligence. It was also shown during the trial that the hull
of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into
the sea or seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum" docked
at its berthing place, representatives of the consignee boarded, and in the presence of a
representative of the shipowner, the foreman, the stevedores, and a cargo surveyor
representing CSCI, opened the hatches and inspected the condition of the hull of the
vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who
were overseeing the whole operation on rotation basis.
Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo.
10. MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL vs. COURT OF APPEALS
Facts: Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for school children
which they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired
in 1981, after trying him out for two weeks. His job was to take school children to and
from the St. Scholasticas College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc.
(WWCF) arranged with petitioners for the transportation of 33 members of its Young
Adults Ministry from Manila to La Union and back in consideration of which private
respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the afternoon.
However, as several members of the party were late, the bus did not leave the Tropical
Hut at the corner of Ortigas Avenue and EDSA until 8:00 oclock in the evening. Petitioner
Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge
at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it
being his first trip to La Union), was forced to take a detour through the town of Ba-ay in
Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on
the highway, running on a south to east direction, which he described as siete. The road
was slippery because it was raining, causing the bus, which was running at the speed of 50
kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace
and sign along the road and rammed the fence of one Jesus Escano, then turned over and
landed on its left side, coming to a full stop only after a series of impacts. The bus came to
rest off the road. A coconut tree which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the
floor of the bus and pinned down by a wooden seat which came off after being
unscrewed. It took three persons to safely remove her from this position. She was in great
pain and could not move.
Issue: W/N the spouses Fabre are common carriers
Held: Petition was denied. Spouses Fabre are common carriers.
The Supreme Court held that this case actually involves a contract of carriage. Petitioners,
the Fabres, did not have to be engaged in the business of public transportation for the
provisions of the Civil Code on common carriers to apply to them. As this Court has held:
10 Art. 1732, Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular
or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population.
We think that Article 1732 deliberately refrained from making such distinctions.
It was admitted by Cabil that on the night in question, it was raining, and, as a
consequence, the road was slippery, and it was dark. He averred these facts to justify his
failure to see that there lay a sharp curve ahead. However, it is undisputed that Cabil
drove his bus at the speed of 50 kilometers per hour and only slowed down when he
noticed the curve some 15 to 30 meters ahead. [3] By then it was too late for him to avoid
falling off the road. Given the conditions of the road and considering that the trip was
Cabils first one outside of Manila, Cabil should have driven his vehicle at a moderate
speed. There is testimony [4] that the vehicles passing on that portion of the road should
only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was
running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that it
was dark, that he drove his bus at 50 kilometers an hour when even on a good day the
normal speed was only 20 kilometers an hour, and that he was unfamiliar with the terrain,
Cabil was grossly negligent and should be held liable for the injuries suffered by private
respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the
presumption that his employers, the Fabres, were themselves negligent in the selection
and supervision of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant
possessed a professional drivers license. The employer should also examine the applicant
for his qualifications, experience and record of service. Due diligence in supervision, on
the other hand, requires the formulation of rules and regulations for the guidance of
employees and the issuance of proper instructions as well as actual implementation and
monitoring of consistent compliance with the rules.
11. ESTRELLITA M. BASCOS, petitioners, vs. COURT OF APPEALS and RODOLFO A.
CIPRIANO
Facts: 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. To carry out its
obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos to
transport and to deliver 400 sacks of soya bean meal worth P156,404.00 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 carriage.
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".
Issue/s:
(1) W/N petitioner a common carrier; and
(2) W/N the hijacking referred to a force majeure.
Held:
1. 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." 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. 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.
2. 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.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated
her from liability for the loss of the cargo.
"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;"
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.
12. FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING
CORPORATION
Facts: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994
thirty (30) units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by
Lambert Eroles, from the plant site of Concepcion Industries, Inc to the Central Luzon
Appliances in Dagupan City. While the truck was traversing it collided with an unidentified
truck, causing it to fall into a deep canal, resulting in damage to the cargoes. FGU), an
insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered
cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and
interests of Concepcion Industries, Inc., sought reimbursement of the amount it had paid
to the latter from GPS. Since the trucking company failed to heed the claim, FGU filed a
complaint for damages and breach of contract of carriage against GPS and its driver
Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only of Concepcion Industries,
Inc., since 1988, and it was not so engaged in business as a common carrier. Respondents
further claimed that the cause of damage was purely accidental.
FGU presented its evidence, establishing the extent of damage to the cargoes and the
amount it had paid to the assured. GPS, instead of submitting its evidence, filed with leave
of court a motion to dismiss the complaint by way of demurrer to evidence on the ground
that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996, granted the motion to dismiss, explaining
thusly:
Under Section 1 of Rule 131 of the Rules of Court, it is provided that: Each party must
prove his own affirmative allegation, xxx.
In the instant case, plaintiff did not present any single evidence that would prove that
defendant is a common carrier.
xxx xxx xxx
Accordingly, the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss,
damage or deterioration of goods during transport under 1735 of the Civil Code is not
availing.
Thus, the laws governing the contract between the owner of the cargo to whom the
plaintiff was subrogated and the owner of the vehicle which transports the cargo are the
laws on obligation and contract of the Civil Code as well as the law on quasi delicts. The
Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS.
Issue/s:
1. W/N RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER.
2. WHETHER RESPONDENT GPS MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN
THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED
WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.
3. WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.
Held:
1. On the first issue, the Court finds the conclusion of the trial court and the Court of
Appeals to be amply justified. GPS, being an exclusive contractor and hauler of Concepcion
Industries, Inc., rendering or offering its services to no other individual or entity, cannot be
considered a common carrier. 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 hire or compensation, offering their services to the public,
[8] whether to the public in general or to a limited clientele in particular, but never on an
exclusive basis. [9] The true test of a common carrier is the carriage of passengers or
goods, providing space for those who opt to avail themselves of its transportation service
for a fee.
2. The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure
of its compliance justify, prima facie, a corresponding right of relief. The law, recognizing
the obligatory force of contracts, will not permit a party to be set free from liability for any
kind of misperformance of the contractual undertaking or a contravention of the tenor
thereof. A breach upon the contract confers upon the injured party a valid cause for
recovering that which may have been lost or suffered. The remedy serves to preserve the
interests of the promisee that may include his expectation interest, which is his interest in
having the benefit of his bargain by being put in as good a position as he would have been
in had the contract been performed, or his reliance interest, which is his interest in being
reimbursed for loss caused by reliance on the contract by being put in as good a position
as he would have been in had the contract not been made; or his restitution interest,
which is his interest in having restored to him any benefit that he has conferred on the
other party.
Respondent Trucking Corporation recognizes the existence of a contract of carriage
between it and petitioners assured, and admit that the cargoes it has assumed to deliver
have been lost or damaged while in its custody. In such a situation, a default on, or failure
of compliance with, the obligation in this case, the delivery of the goods in its custody to
the place of destination - gives rise to a presumption of lack of care and corresponding
liability on the part of the contractual obligor the burden being on him to establish
otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault,
may not himself be ordered to pay petitioner. The driver, not being a party to the contract
of carriage between petitioners principal and defendant, may not be held liable under the
agreement. A contract can only bind the parties who have entered into it or their
successors who have assumed their personality or their juridical position.
3. The maxim simply places on the defendant the burden of going forward with the proof.
[20] Resort to the doctrine, however, may be allowed only when (a) the event is of a kind
which does not ordinarily occur in the absence of negligence; (b) other responsible causes,
including the conduct of the plaintiff and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the scope of the defendant's duty to
the plaintiff. [21] Thus, it is not applicable when an unexplained accident may be
attributable to one of several causes, for some of which the defendant could not be
responsible. [22]
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the nature of the relation of the
parties. [23] Nevertheless, the requirement that responsible causes other than those due
to defendants conduct must first be eliminated, for the doctrine to apply, should be
understood as being confined only to cases of pure (non-contractual) tort since obviously
the presumption of negligence in culpa contractual, as previously so pointed out,
immediately attaches by a failure of the covenant or its tenor. In the case of the truck
driver, whose liability in a civil action is predicated on culpa acquiliana, while he
admittedly can be said to have been in control and management of the vehicle which
figured in the accident, it is not equally shown, however, that the accident could have
been exclusively due to his negligence, a matter that can allow, forthwith, res ipsa loquitur
to work against him.
13. ESTELA L. CRISOSTOMO vs. THE COURT OF APPEALS and CARAVAN TRAVEL &
TOURS INTERNATIONAL, INC
Facts: In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent
Caravan Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing
and accommodation in a tour dubbed Jewels of Europe. The package tour included the
countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland and France at
a total cost of P74,322.70. Petitioner was given a 5% discount on the amount, which
included airfare, and the booking fee was also waived because petitioners niece, Meriam
Menor, was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in turn,
gave Menor the full payment for the package tour. Menor then told her to be at the NAIA)
on Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15,
1991, to take the flight for the first leg of her journey from Manila to Hongkong. To
petitioners dismay, she discovered that the flight she was supposed to take had already
departed the previous day. She learned that her plane ticket was for the flight scheduled
on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant
which included England, Scotland and Wales in its itinerary. Upon petitioners return from
Europe, she demanded from respondent the reimbursement of P61,421.70, representing
the difference between the sum she paid for Jewels of Europe and the amount she owed
respondent for the British Pageant tour. Despite several demands, respondent company
refused to reimburse the amount, contending that the same was non-refundable.
Petitioner was thus constrained to file a complaint against respondent for breach of
contract of carriage and damage.
Petitioner alleged that her failure to join Jewels of Europe was due to respondents fault
since it did not clearly indicate the departure date on the plane ticket. Respondent was
also negligent in informing her of the wrong flight schedule through its employee Menor.
Respondent company denied responsibility for petitioners failure to join the first tour that
petitioner was informed of the correct departure date, which was clearly and legibly
printed on the plane ticket. The travel documents were given to petitioner two days ahead
of the scheduled trip. Petitioner had only herself to blame for missing the flight, as she did
not bother to read or confirm her flight schedule as printed on the ticket. The trial court
held that respondent was negligent in erroneously advising petitioner of her departure
date through its employee, Menor, who was not presented as witness to rebut petitioners
testimony. Respondent appealed to the Court of Appeals, which likewise found both
parties to be at fault. However, the appellate court held that petitioner is more negligent
than respondent because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so, she is not entitled to any
form of damages.
Issue: W/N respondent is a common carrier.
Held: A common carrier is defined under Article 1732 of the Civil Code as persons,
corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, offering their
services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the
business of transporting either passengers or goods and is therefore, neither a private nor
a common carrier. Respondent did not undertake to transport petitioner from one place
to another since its covenant with its customers is simply to make travel arrangements in
their behalf. Respondents services as a travel agency include procuring tickets and
facilitating travel permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent
company, this does not mean that the latter ipso facto is a common carrier. At most,
respondent acted merely as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondents obligation to petitioner in this regard
was simply to see to it that petitioner was properly booked with the airline for the
appointed date and time. Her transport to the place of destination, meanwhile, pertained
directly to the airline.
We do not agree with the finding of the lower court that Menors negligence concurred
with the negligence of petitioner and resultantly caused damage to the latter. Menors
negligence was not sufficiently proved, considering that the only evidence presented on
this score was petitioners uncorroborated narration of the events. It is well-settled that
the party alleging a fact has the burden of proving it and a mere allegation cannot take the
place of evidence.
As correctly observed by the lower court, the plane ticket [19] issued to petitioner clearly
reflected the departure date and time, contrary to petitioners contention. The travel
documents, consisting of the tour itinerary, vouchers and instructions, were likewise
delivered to petitioner two days prior to the trip. Respondent also properly booked
petitioner for the tour, prepared the necessary documents and procured the plane tickets.
It arranged petitioners hotel accommodation as well as food, land transfers and
sightseeing excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well
as everything else that was essential to book petitioner for the tour. Had petitioner
exercised due diligence in the conduct of her affairs, there would have been no reason for
her to miss the flight. Needless to say, after the travel papers were delivered to petitioner,
it became incumbent upon her to take ordinary care of her concerns. This undoubtedly
would require that she at least read the documents in order to assure herself of the
important details regarding the trip.
14. CARGOLIFT SHIPPING, INC vs. L. ACUARIO MARKETING CORP. and SKYLAND
BROKERAGE, INC
Facts: Sometime in March 1993 Acuario and respondent Skyland entered into a time
charter agreement [4] whereby Acuario leased to Skyland its L. Acuario II barge for use by
the latter in transporting electrical posts from Manila to Limay, Bataan. At the same time,
Skyland also entered into a separate contract with petitioner Cargolift, for the latters
tugboats to tow the aforesaid barge. Petitioner has two tugboats M/T Beejay and M/T
Count. Off-loading operations went underway until April 7, 1993, when operations were
interrupted for the next two days to give way to the observance of the lenten season. The
unloading of the cargo was concluded on April 12, 1993, by which time M/T Beejay had
gone back to Bataan for the return trip. The M/T Beejay and the barge returned to the
port of Manila on April 13, 1993.
On the same day, the barge was brought to Acuarios shipyard where it was allegedly
discovered that the barge was listing due to a leak in its hull. It was learned later the due
to strong winds and large waves, the barge repeatedly hit its hull on the wall, thus
prompting the barge patron to alert the tugboat captain of the M/T Count to tow the
barge farther out to sea. However, the tugboat failed to pull the barge to a safer distance
due to engine malfunction, thereby causing the barge to sustain a hole in its hull.
Acuario spent the total sum of P97,021.20 for the repairs, and, pursuant to the contract,
sought reimbursement from Skyland, failing which, it filed a suit before the RTC which was
granted. On appeal, it was affirmed by the CA. Skyland, in turn, filed a third-party
complaint against petitioner alleging that it was responsible for the damage sustained by
the barge.
Issue: W/N petitioner is liable for the damage incurred by Acuario.
Held: it is not correct for petitioner to assert that Acuario could not recover damages from
it due to lack of privity of contract between them. It is not Acuario that is seeking damages
from petitioner but Skyland, with whom it undoubtedly had a juridical tie. While Acuario
could hold Skyland liable under its charter agreement, Skyland in turn could enforce
liability on petitioner based on the latters obligation to Skyland. In other words, petitioner
is being held liable by Skyland and not by Acuario.
Thus, in the performance of its contractual obligation to Skyland, petitioner was
required to observe the due diligence of a good father of the family. This much was held in
the old but still relevant case of Baer Senior & Co.s Successors v. La Compania Maritima
where the Court explained that a tug and its owners must observe ordinary diligence in
the performance of its obligation under a contract of towage. The negligence of the
obligor in the performance of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his
failure to exercise due care and prudence in the performance of the obligation as the
nature of the obligation so demands.
In the case at bar, the exercise of ordinary prudence by petitioner means ensuring
that its tugboat is free of mechanical problems. While adverse weather has always been a
real threat to maritime commerce, the least that petitioner could have done was to
ensure that the M/T Count or any of its other tugboats would be able to secure the barge
at all times during the engagement. This is especially true when considered with the fact
that Acuarios barge was wholly dependent upon petitioners tugboat for propulsion. The
barge was not equipped with any engine and needed a tugboat for maneuvering.
15. GAUDIOSO EREZO, plaintiff-appellee vs. AGUEDO JEPTE, defendant-appellant
Facts: Defendant-appellant is the registered owner of a six by six truck On August, 9, 1949,
while the same was being driven by Rodolfo it collided with a taxicab at the intersection of
San Andres and Dakota Streets, Manila. As the truck went off the street, it hit Ernesto
Erezo and another, and the former suffered injuries, as a result of which he died. The
driver was prosecuted for homicide through reckless negligence. The accused pleaded
guilty and was sentenced to suffer imprisonment and to pay the heirs of Ernesto Erezo the
sum of P3,000. As the amount of the judgment could not be enforced against him, plaintiff
brought this action against the registered owner of the truck, the defendant-appellant.
The trial court held that as the defendant-appellant represented himself to be the owner
of the truck and the Motor Vehicle Office registered the vehicles in his name, the
Government and all persons affected by the representation had the right to rely on his
declaration of ownership and registration. It, therefore, held that the defendant-appellant
is liable because he cannot be permitted to repudiate his own declaration. The defendant
has prosecuted this appeal claiming that at the time of the accident the relation of
employer and employee between the driver and defendant-appellant was not established,
it having been proved at the trial that the owner of the truck was the Port Brokerage, of
which defendant-appellant was merely a broker.
Issue: W/N Jepte should be held liable being the registered owner of the truck.
Held: Yes. We already have held that the registered owner of a certificate of public
convenience is liable to the public for the injuries or damages suffered by passengers or
third persons caused by the operation of said vehicle, even though the same had been
transferred to a third person. 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. 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 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.
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.
16. ADOLFO L. SANTOS, petitioner, vs. ABRAHAM SIBUG and COURT OF APPEALS,
respondents
Facts: Vicente U. Vidad was a duly authorized passenger jeepney operator. Petitioner
Adolfo L. Santos was the owner of a passenger jeep, but he had no certificate of public
convenience for the operation of the vehicle as a public passenger jeep. SANTOS then
transferred his jeep to the name of VIDAD so that it could be operated under the latter's
certificate of public convenience. ln other words, SANTOS became what is known in
ordinary parlance as a kabit operator. For the protection of SANTOS, VIDAD executed a re-
transfer document to the former, which was to be a private document presumably to be
registered if and where it was decided that the passenger jeep of SANTOS was to be
withdrawn from the kabit arrangement.
On the ACCIDENT DATE, private respondent Abraham Sibug was bumped by a passenger
jeepney operated by VIDAD and driven by Severe Gragas. As a result thereof, SIBUG filed a
complaint for damages against VIDAD and Gragas with the CFI of Manila. On December 5,
1963, a judgment was rendered sentencing VIDAD and Gragas, jointly and severally, to pay
SIBUG. On April 10, 1964, the Sheriff of Manila levied on a motor vehicle registered in the
name of VIDAD, and scheduled the public auction sale thereof. On April 11, 1964, SANTOS
presented a third-party claim with the Sheriff alleging actual ownership of the motor
vehicle levied upon, and stating that registration thereof in the name of VIDAD was merely
to enable SANTOS to make use of VIDAD'S Certificate of Public Convenience.
Sibug submitted a bond to the sheriff to save the latter from liability if he were to proceed
with the sale and the third-party complaint would be ultimately upheld. On April 22,
petitioner instituted with CFI Branch X an action for Damages and Injunction, with
Preliminary Mandatory Injunction against Sibug, Vidad and the sheriff. The complaint was
amended to include the bonding company. On May 11, Branch X issued a restraining order
enjoining the sheriff from conducting the auction sale. On October 14, 1965, Branch X
upheld petitioner’s ownership. Sibug appealed from the decision of Branch X. The Court of
Appeals nullified the appealed decision.
Issue/s:
1. W/N the CFI has jurisdiction to issue an injunction restraining the execution sale of the
jeepney levied upon by a judgment creditor in another CFI
2. W/N the third-party claimant has a right to vindicate his claim to the vehicle levied upon
through a separate action.
Held: It is noteworthy that, generally, the rule, that no court has authority to interfere by
injunction with the judgments or decrees of a concurrent or coordinate jurisdiction having
equal power to grant the injunctive relief, is applied in cases, where no third-party
claimant is involved, in order to prevent one court from nullifying the judgment or process
of another court of the same rank or category, a power which devolves upon the proper
appellate court.
xxx xxx xxx
When the sheriff, acting beyond the bounds of his authority, seizes a stranger's property,
the writ of injunction, which is issued to stop the auction sale of that property, is not an
interference with the writ of execution issued by another court because the writ of
execution was improperly implemented by the sheriff. Under that writ, he could attach
the property of the judgment debtor. He is not authorized to levy upon the property of
the third-party claimant.
Under section 17 of Rule 39 a third person who claims property levied upon on execution
may vindicate such claim by action. A judgment rendered in his favor - declaring him to be
the owner of the property - would not constitute interference with the powers or
processes of the court which rendered the judgment to enforce which the execution was
levied. lf that be so - and it is so because the property, being that of a stranger, is not
subject to levy - then an interlocutory order, such as injunction, upon a claim and prima
facie showing of ownership by the claimant, cannot be considered as such interference
either.
The right of a person who claims to be the owner of property levied upon on execution to
file a third-party claim with the sheriff is not exclusive, and he may file an action to
vindicate his claim even if the judgment creditor files an indemnity bond in favor of the
sheriff to answer for any damages that may be suffered by the third party claimant. By
"action", as stated in the Rule, what is meant is a separate and independent action.
Applied to the case at bar it was appropriate, as a matter of procedure, for SANTOS, as an
ordinary third-party claimant, to vindicate his claim of ownership in a separate action
under Section 17 of Rule 39. And the judgment rendered in his favor by Branch X,
declaring him to be the owner of the property, did not as a basic proposition, constitute
interference with the powers or processes of Branch XVII which rendered the judgment,
to enforce which the was levied upon. And this is so because property belonging to a
stranger is not ordinarily subject to levy.
17. LITA ENTERPRISES, INC vs SECOND CIVIL CASES DIVISION, INTERMEDIATE
APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA
Facts: Spouses Nicasio Ocampo and Francisca Garcia (private respondents) purchased in
installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars
to be used as taxi. Since they had no franchise to operate taxicabs, they contracted with
petitioner Lita Enterprise, Inc., through its representative Manuel Concordia, for the use of
the latter’s certificate of public convenience for a consideration of P1, 000.00 and a
monthly rental of P200.00/taxicab unit. For the agreement to take effect, the cars were
registered in the name of Lita Enterprises, Inc. The possession, however, remains with
spouses Ocampo and Garcia who operated and maintained the same under Acme Taxi,
petitioner’s trade name.
A year later, one of the taxicabs, driven by their employee, Emeterio Martin, collided with
a motorcycle. Unfortunately the driver of the motorcycle, Florante Galvez died from the
injuries it sustained.
Criminal case was filed against Emeterio Martin, while a civil case was filed by the heir of
the victim against Lita Enterprises. In the decision of the lower court Lita Enterprises was
held liable for damages for the amount of P25, 000.00 and P7, 000.00 for attorney’s fees.
A writ of execution for the decision followed, 2 of the cars of the respondent’s spouses
were levied and were sold to a public auction.
On March 1973, respondent Ocampo decided to register his taxicabs in his own name. The
manager of petitioner refused to give him the registration papers. Thus, making spouses
file a complaint against petitioner. In the decision, Lita Enterprise was ordered to return
the three certificate of registration not levied in the prior case.
Petitioner now prays that private respondent be held liable to pay the amount they have
given to the heir of Galvez.
Issue: W/N petitioner can recover from private respondent, knowing they are in an
arrangement known as “kabit system”.
Held: “Kabit system” is defined as, when a person who has been granted a certificate of
convenience allows another person who owns a motor vehicle to operate under such
franchise for a fee. This system is not penalized as a criminal offense but is recognized as
one that is against public policy; therefore it is void and inexistent.
It is fundamental that the court will not aid either of the party to enforce an illegal
contract, but will leave them both where it finds them. Upon this premise, it was flagrant
error on the part of both trial and appellate courts to have accorded the parties relief
from their predicament. Specifically Article 1412 states that:
“If the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed: “when the fault, is on the part of both
contracting parties, neither may recover what he has given by virtue of the contract, or
demand the performance of the other’s undertaking.”
The principle of in pari delicto is evident in this case. “the proposition is universal that no
action arises, in equity or at law, from an illegal contract; no suit can be maintained for its
specific performance, or to recover the property agreed to sold or delivered, or damages
for its property agreed to be sold or delivered, or damages for its violation.” The parties in
this case are in pari delicto, therefore no affirmative relief can be granted to them.
18. PCI LEASING AND FINANCE, INC., vs UCPB GENERAL INSURANCE CO., INC
Facts: On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car owned by United
Coconut Planters Bank was traversing The car was insured with UCPB General Insurance
Inc.], then driven by Flaviano Isaac with Conrado Geronimo, the Asst. Manager of said
bank, was hit and bumped by an 18-wheeler Fuso Tanker Truck owned by PCI Leasing &
Finance, Inc. allegedly leased to and operated by Superior Gas & Equitable Co., Inc.
(SUGECO) and driven by its employee,Renato Gonzaga.The impact caused heavy damage
to the Mitsubishi Lancer car resulting in an explosion of the rear part of the car. The driver
and passenger suffered physical injuries. However, the driver defendant-appellant
Gonzaga continued on its [sic] way to its [sic] destination and did not bother to bring his
victims to the hospital.Plaintiff-appellee paid the assured UCPB the amount of
P244,500.00 representing the insurance coverage of the damaged car.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands
were made by plaintiff-appellee for the payment of the aforesaid amounts. However, no
payment was made. Thus, plaintiff-appellee filed the instant case on March 13, 1991.
Petitioner interposed the defense that it could not be held liable for the collision, since the
driver of the truck, Gonzaga, was not its employee, but that of its co-defendant
(SUGECO).4 In fact, it was SUGECO, and not petitioner, that was the actual operator of the
truck, pursuant to a Contract of Lease signed by petitioner and SUGECO.5 Petitioner,
however, admitted that it was the owner of the truck in question. The RTC rendered its
Decision in favor of plaintiff UCPB General Insurance. the CA affirmed the RTC's decision.
Issue/s:
1. W/N petitioner, as registered owner of a motor vehicle that figured in a quasi-delict
may be held liable, jointly and severally, with the driver thereof, for the damages caused
to third parties.
2. W/N petitioner, as a financing company, is absolved from liability by the enactment of
Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.
Held:
1. The principle of holding the registered owner of a vehicle liable for quasi-delicts
resulting from its use is well-established in jurisprudence. Erezo v. Jepte. For damage or
injuries arising out of negligence in the operation of a motor vehicle, the registered owner
may be held civilly liable with the negligent driver either 1) subsidiarily, if the aggrieved
party seeks relief based on a delict or crime under Articles 100 and 103 of the Revised
Penal Code; or 2) solidarily, if the complainant seeks relief based on a quasi-delict under
Articles 2176 and 2180 of the Civil Code.
In contemplation of law, the registered owner of a motor vehicle is the employer of its
driver, with the actual operator and employer, such as a lessee, being considered as
merely the owner's agent.18 This being the case, even if a sale has been executed before a
tortious incident, the sale, if unregistered, has no effect as to the right of the public and
third persons to recover from the registered owner.19 The public has the right to
conclusively presume that the registered owner is the real owner, and may sue
accordingly.20
In the case now before the Court, there is not even a sale of the vehicle involved, but a
mere lease, which remained unregistered up to the time of the occurrence of the quasi-
delict that gave rise to the case. Since a lease, unlike a sale, does not even involve a
transfer of title or ownership, but the mere use or enjoyment of property, there is more
reason, therefore, in this instance to uphold the policy behind the law, which is to protect
the unwitting public and provide it with a definite person to make accountable for losses
or injuries suffered in vehicular accidents.21 This is and has always been the rationale
behind compulsory motor vehicle registration under the Land Transportation and Traffic
Code and similar laws, which has been guiding the courts in their disposition of cases
involving motor vehicular incidents. It is also important to emphasize that such principles
apply to all vehicles in general, not just those offered for public service or utility.
2. Republic Act (R.A.) No. 8556,28 which provides:
Section 12. Liability of lessors. - Financing companies shall not be liable for loss, damage or
injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property
leased to a third person or entity except when the motor vehicle, aircraft, vessel,
equipment or other property is operated by the financing company, its employees or
agents at the time of the loss, damage or injury.
Petitioner's argument that the enactment of R.A. No. 8556 is deemed to have absolved
petitioner from liability, fails to convince the Court.
These developments, indeed, point to a seeming emancipation of financing companies
from the obligation to compensate claimants for losses suffered from the operation of
vehicles covered by their lease. Such, however, are not applicable to petitioner and do not
exonerate it from liability in the present case.
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not
supersede or repeal the law on compulsory motor vehicle registration. No part of the law
expressly repeals Section 5(a) and (e) of the Land Transportation and Traffic Code.
Sec. 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
(now the Land Transportation Office, per Executive Order No. 125, January 30, 1987, and Executive Order No.
125-A, April 13, 1987) for the current year in accordance with the provisions of this Act.
xxxx
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of motor vehicles, in
order to be valid against third parties must be recorded in the Bureau (now the Land Transportation Office).
Voluntary transactions or voluntary encumbrances shall likewise be properly recorded on the face of all
outstanding copies of the certificates of registration of the vehicle concerned.
Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be recorded,
and in the absence of such cancellation, no certificate of registration shall be issued without the corresponding
notation of mortgage, attachment and/or other encumbrances.
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is
not registered with the Land Transportation Office, still does not bind third persons who
are aggrieved in tortious incidents, for the latter need only to rely on the public
registration of a motor vehicle as conclusive evidence of ownership.30 A lease such as the
one involved in the instant case is an encumbrance in contemplation of law, which needs
to be registered in order for it to bind third parties.31 Under this policy, the evil sought to
be avoided is the exacerbation of the suffering of victims of tragic vehicular accidents in
not being able to identify a guilty party. A contrary ruling will not serve the ends of justice.
The failure to register a lease, sale, transfer or encumbrance, should not benefit the
parties responsible, to the prejudice of innocent victims.
The non-registration of the lease contract between petitioner and its lessee precludes the
former from enjoying the benefits under Section 12 of R.A. No. 8556.
This ruling may appear too severe and unpalatable to leasing and financing companies,
but the Court believes that petitioner and other companies so situated are not entirely left
without recourse. They may resort to third-party complaints against their lessees or
whoever are the actual operators of their vehicles.
19. ABELARDO LIM and ESMADITO GUNNABAN, petitioners, vs. COURT OF APPEALS
and DONATO H. GONZALES
Facts: Sometime in 1982 private respondent Donato Gonzales an Isuzu passenger jeepney
from Gomercino Vallarta, a holder of a certificate of public convenience for the operation
of a public utility vehicle. He continued to operate the public transport business without
transferring the registration of the vehicle to his name. Thus, the original owner remained
to be the registered owner and operator of the vehicle.
On 22 July 1990, while the jeepney was running northbound it collided with a ten-
wheeler-truck owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadito
Gunnaban. Gunnaban owned responsibility for the accident, explaining that while he was
traveling towards Manila the truck suddenly lost its brakes. To avoid colliding with another
vehicle, he swerved to the left until he reached the center island. However, as the center
island eventually came to an end, he veered farther to the left until he smashed into a
Ferroza automobile, and later, into private respondent's passenger jeepney driven by one
Virgilio Gonzales. The impact caused severe damage to both the Ferroza and the
passenger jeepney and left one (1) passenger dead and many others wounded.
Gunnaban admitted responsibility for the accident, so that petitioner Lim shouldered the
costs of hospitalization of those wounded, compensation for the heirs of the deceased
passenger and the restoration of the other vehicle involved. He also negotiated for the
repair of the private respondent's jeepney but the latter refused and demanded for its
replacement. Hence, private respondent filed a complaint for damages against petitioners.
Meanwhile, the jeepney was left by the roadside to corrode and decay. The trial court
decided in favor of private respondent and awarded him his claim. On appeal, the Court of
Appeals affirmed the decision of the trial court. Hence, petitioner filed this petition.
Issue: W/N the new owner of a passenger jeepney who continued to operate the same
under the so-called kabit system and in the course thereof met an accident has the legal
personality to bring the action for damages against the erring vehicle.
Held: YES. According to the Court, the thrust of the law in enjoining the kabit system is not
much as to penalize the parties but to identify the person upon whom responsibility may
be fixed in case of an accident with the end view of protecting the riding public. In the
present case, it is once apparent that the evil sought to be prevented in enjoining the
kabit system does not exist. First, neither of the parties to the pernicious kabit system is
being held liable for damages. Second, the case arose from the negligence of another
vehicle in using the public road to whom no representation, or misrepresentation, as
regards the ownership and operation of the passenger jeepney was made and to whom
no such representation, or misrepresentation, was necessary. Thus it cannot be said that
private respondent Gonzales and the registered owner of the jeepney were in estoppel for
leading the public to believe that the jeepney belonged to the registered owner. Third, the
riding public was not bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent himself who had been wronged
and was seeking compensation for the damage done to him. Certainly, it would be the
height of inequity to deny him his right. Hence, the private respondent has the right to
proceed against petitioners for the damage caused on his passenger jeepney as well as on
his business
KABIT SYSTEM:
The kabit system is an arrangement whereby a person who has been granted a certificate
of public convenience allows other persons who own motor vehicles to operate them
under his license, sometimes for a fee or percentage of the earnings. Although the parties
to such an agreement are not outrightly penalized by law, the kabit system is invariably
recognized as being contrary to public policy and therefore void and inexistent under Art.
1409 of the Civil Code. In the early case of Dizon v. Octavio the Court explained that one of
the primary factors considered in the granting of a certificate of public convenience for
the business of public transportation is the financial capacity of the holder of the license,
so that liabilities arising from accidents may be duly compensated. The kabit system
renders illusory such purpose and, worse, may still be availed of by the grantee to escape
civil liability caused by a negligent use of a vehicle owned by another and operated under
his license. If a registered owner is allowed to escape liability by proving who the
supposed owner of the vehicle is, it would be easy for him to transfer the subject vehicle
to another who possesses no property with which to respond financially for the damage
done. Thus, for the safety of passengers and the public who may have been wronged and
deceived through the baneful kabit system, the registered owner of the vehicle is not
allowed to prove that another person has become the owner so that he may be thereby
relieved of responsibility. Subsequent cases affirm such basic doctrine. It would seem then
that the thrust of the law in enjoining the kabit system is not so much as to penalize the
parties but to identify the person upon whom responsibility may be fixed in case of an
accident with the end view of protecting the riding public. The policy therefore loses its
force if the public at large is not deceived, much less involved.
20. Teja Marketing v. Intermediate Appellate Court
Facts: Pedro Nale bought from Teja Marketing a motorcycle with completea ccessories
and a sidecar. A chattel mortgage was constituted as a security for the payment of the
balance of the purchase price. The records of the Land Transportation Commission show
that the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by
Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same,
because it was made to appear that way only as the defendant had no franchise of his
own and he attached the unit to the plaintiffs MCH Line. The agreement also of the parties
here was for the plaintiff to undertake the yearly registration of the motorcycle with the
Land Transportation Commission.
The plaintiff, however failed to register the motorcycle on that year on the ground that
the defendant failed to comply with some requirements such as the payment of the
insurance premiums and the bringing of the motorcycle to the LTC for stenciling, the public convenience allows another person who owns motor vehicles to operate under
plaintiff said that the defendant was hiding the motorcycle from him. Lastly, the plaintiff such franchise for a fee. A certificate of public convenience is a special privilege conferred
also explained that though the ownership of the motorcycle was already transferred to by the government. Abuse of this privilege by the grantees thereof cannot be
the defendant, the vehicle was still mortgaged with the consent of the defendant to the countenanced. The "kabit system" has been identified as one of the root causes of the
Rural Bank of Camaligan for the reason that all motorcycle purchased from the plaintiff on prevalence of graft and corruption in the government transportation offices. Although not
credit was rediscounted with the bank. Teja Marketing made demands for the payment of out rightly penalized as a criminal offense, the kabit system is invariably recognized as
the motorcycle but just the same Nale failed to comply, thus forcing Teja Marketing to being contrary to public policy and, therefore, void and in existent under Article 1409 of
consult a lawyer and file an action for damage before the City Court of Naga in the the Civil Code. It is a fundamental principle that the court will not aid either party to
amount of P546.21 for attorneys fees and P100.00 for expenses of litigation. enforce an illegal contract, but will leave both where it finds then. Upon this premise it
would be error to accord the parties relief from their predicament.
Teja Marketing also claimed that as of 20 February 1978, the total account of Nale was
already P2, 731, 05 as shown in a statement of account; includes not only the balance of
P1, 700.00 but an additional 12% interest per annum on the said balance from 26 January
1976 to 27 February 1978; a 2% service charge; and P546.21 representing attorneys fees.
On his part, Nale did not dispute the sale and the outstanding balance of P1,700.00 still
payable to Teja Marketing; but contends that because of this failure of Teja Marketing to
comply with his obligation to register the motorcycle, Nale suffered damages when he
failed to claim any insurance indemnity which would amount to no less than P15,000.00
for the more than 2 times that the motorcycle figured in accidents aside from the loss of
the daily income of P15.00 as boundary fee beginning October 1976 when the motorcycle
was impounded by the LTC for not being registered.

The City Court rendered judgment in favor of Teja Marketing, dismissing the counterclaim,
and ordered Nale to pay Teja Marketing On appeal to the Court of First Instance of
Camarines Sur, the decision was affirmed in toto. Nale filed a petition for review with the
Intermediate Appellate Court. On 18 July 1983, the appellate court set aside the decision
under review on the basis of doctrine of "pari delicto," and accordingly, dismissed the
complaint of Teja Marketing, as well as the counterclaim of Nale; without
pronouncements as to costs. Hence, the petition for review was filed by Teja Marketing
and/or Angel Jaucian.

Issue: W/N the defendant can recover damages against the plaintiff

Held: Unquestionably, the parties herein operated under an arrangement, commonly

known as the "kabit system" whereby a person who has been granted a certificate of