G.R. No.
L-47822 December 22, 1988 diligence required of him by the law, should be held liable for the value of the undelivered
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and
scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material,
respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler
trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan,
respondent would load his vehicles with cargo which various merchants wanted delivered to
differing establishments in Pangasinan. For that service, respondent charged freight rates
which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized
dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with
respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General
Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December
1970. Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on
to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600
cartons were placed on board the other truck which was driven by Manuel Estrada,
respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never
reached petitioner, since the truck which carried these boxes was hijacked somewhere
along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the
truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of
First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the
lost merchandise, plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise the extraordinary
goods.
In his Answer, private respondent denied that he was a common carrier and argued that he
could not be held responsible for the value of the lost goods, such loss having been due to
force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to
be a common carrier and holding him liable for the value of the undelivered goods (P
22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking services
to the public; in not exempting him from liability on the ground of force majeure; and in
ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had
been engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner
came to this Court by way of a Petition for Review assigning as errors the following
conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may,
under the facts earlier set forth, be properly characterized as a common carrier. Yes
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that
Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law on
common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar public services. ... (Emphasis
supplied)
It appears to the Court that private respondent is properly characterized as a common
carrier even though he merely "back-hauled" goods for other merchants from Manila to
Pangasinan, although such back-hauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent's principal occupation
was not the carriage of goods for others. There is no dispute that private respondent
charged his customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of
public convenience, and concluded he was not a common carrier. This is palpable error. A
certificate of public convenience is not a requisite for the incurring of liability under the Civil
Code provisions governing common carriers. That liability arises the moment a person or
firm acts as a common carrier, without regard to whether or not such carrier has also
complied with the requirements of the applicable regulatory statute and implementing
regulations and has been granted a certificate of public convenience or other franchise. To
exempt private respondent from the liabilities of a common carrier because he has not
secured the necessary certificate of public convenience, would be offensive to sound public
policy; that would be to reward private respondent precisely for failing to comply with
applicable statutory requirements. The business of a common carrier impinges directly and
intimately upon the safety and well being and property of those members of the general
community who happen to deal with such carrier. The law imposes duties and liabilities
upon common carriers for the safety and protection of those who utilize their services and
the law cannot allow a common carrier to render such duties and liabilities merely
facultative by simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier. No
Common carriers, "by the nature of their business and for reasons of public policy" 2 are
held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of
goods as well as of passengers. The specific import of extraordinary diligence in the care of
goods transported by a common carrier is, according to Article 1733, "further expressed in
Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of
the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration
which exempt the common carrier for responsibility therefor, is a closed list. Causes falling
outside the foregoing list, even if they appear to constitute a species of force majeure fall
within the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article,
if the goods are lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause
alleged in the instant case — the hijacking of the carrier's truck — does not fall within any of
the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore,
that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article
1735, in other words, that the private respondent as common carrier is presumed to have
been at fault or to have acted negligently. This presumption, however, may be overthrown
by proof of extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the
care of petitioner's goods. Petitioner argues that in the circumstances of this case, private
respondent should have hired a security guard presumably to ride with the truck carrying
the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case,
the standard of extraordinary diligence required private respondent to retain a security
guard to ride with the truck and to engage brigands in a firelight at the risk of his own life
and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of
hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under
Article 1733, given additional specification not only by Articles 1734 and 1735 but also by
Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or omissions of his or its
employees;
(6) that the common carrier's liability for acts committed by thieves, or of robbers who do
not act with grave or irresistible threat, violence or force, is dispensed with or diminished;
and
(7) that the common carrier shall not responsible for the loss, destruction or deterioration of
goods on account of the defective condition of the car vehicle, ship, airplane or other
equipment used in the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and will not be
allowed to divest or to diminish such responsibility — even for acts of strangers like thieves
or robbers, except where such thieves or robbers in fact acted "with grave or irresistible
threat, violence or force." We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent
which carried petitioner's cargo. The record shows that an information for robbery in band
was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled
"People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar
Oria and one John Doe." There, the accused were charged with willfully and unlawfully
taking and carrying away with them the second truck, driven by Manuel Estrada and loaded
with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in
Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with
grave, if not irresistible, threat, violence or force.3 Three (3) of the five (5) hold-uppers were
armed with firearms. The robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several days and later releasing
them in another province (in Zambales). The hijacked truck was subsequently found by the
police in Quezon City. The Court of First Instance convicted all the accused of robbery,
though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be
regarded as quite beyond the control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common carriers are not made absolute
insurers against all risks of travel and of transport of goods, and are not held liable for acts
or events which cannot be foreseen or are inevitable, provided that they shall have
complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise which was
lost because of an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of
the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. —
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm,
or association engaged in the business of carrying or transporting passengers or goods or
both, by land, water or air, for compensation, offering their services to the public." The test
to determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted." . . . The holding of the Court
in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil
Code, it held thus: "The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its
services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population.
We think that Article 1732 deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN
PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN
PRESUMPTION MADE ABSOLUTE. — Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods are lost, destroyed
or deteriorated. There are very few instances when the presumption of negligence does not
attach and these instances are enumerated in Article 1734. In those cases where the
presumption is applied, the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption . . . The presumption of negligence was
raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her
assertion, private respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the presumption
conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER
ABSOLVED FROM LIABILITY. — In De Guzman vs. Court of Appeals, the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that
the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is
in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the
following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy . . . (6) That the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violences or force, is dispensed with
or diminished"; In the same case, the Supreme Court also held that: "Under Article 1745 (6)
above, a common carrier is held responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers like thieves or robbers, except
where such thieves or robbers in fact acted "with grave of irresistible threat, violence of
force," We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, petitioner
herself has made the admission that she was in the trucking business, offering her trucks to
those with cargo to move. Judicial admissions are conclusive and no evidence is required to
prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner
presented no other proof of the existence of the contract of lease. He who alleges a fact has
the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS
WITNESSES. — While the affidavit of Juanito Morden, the truck helper in the hijacked truck,
was presented as evidence in court, he himself was a witness as could be gleaned from the
contents of the petition. Affidavits are not considered the best evidence if the affiants are
available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE.
— Granting that the said evidence were not self-serving, the same were not sufficient to
prove that the contract was one of lease. It must be understood that a contract is what the
law defines it to be and not what it is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in
"RODOLFO A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES
plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is
quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is
hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered
into a hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former
bound itself to haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del
Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its
obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from
the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner
failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair
Shipping Agency the amount of the lost goods in accordance with the contract which stated
that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking
and non-delivery or damages to the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay.
Eventually, Cipriano filed a complaint for a sum of money and damages with writ of
preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ of
Preliminary Attachment was supported by an affidavit 5 which contained the following
allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of
Court, whereby a writ of preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is about to
do so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the present
action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal
counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of
carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to
Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the
cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and
that petitioner and the police exerted all efforts to locate the hijacked properties ; that after
preliminary investigation, an information for robbery and carnapping were filed against Jose
Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any
liability to CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which reads as
follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant
ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per annum
to be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by
defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's
judgment.
Consequently, petitioner filed this petition where she makes the following assignment of
errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT
LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT
THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT
WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER
LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE,
NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT
PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS
BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common
carrier?; Yes and (2) was the hijacking referred to a force majeure? No
The Court of Appeals, in holding that petitioner was a common carrier, found that she
admitted in her answer that she did business under the name A.M. Bascos Trucking and that
said admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of
proofs that petitioner was a common carrier. The respondent Court also adopted in toto the
trial court's decision that petitioner was a common carrier, Moreover, both courts
appreciated the following pieces of evidence as indicators that petitioner was a common
carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo
consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo
Sanglay; the fact that the truck helper, Juanito Morden, was also an employee of petitioner;
and the fact that control of the cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common
carrier, she alleged in this petition that the contract between her and Rodolfo A. Cipriano,
representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which
referred to the contract as "lease". These affidavits were made by Jesus Bascos 8 and by
petitioner herself. 9 She further averred that Jesus Bascos confirmed in his testimony his
statement that the contract was a lease contract. 10 She also stated that: she was not
catering to the general public. Thus, in her answer to the amended complaint, she said that
she does business under the same style of A.M. Bascos Trucking, offering her trucks for lease
to those who have cargo to move, not to the general public but to a few customers only in
view of the fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm,
or association engaged in the business of carrying or transporting passengers or goods or
both, by land, water or air, for compensation, offering their services to the public ." The test
to determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted." 12 In this case, petitioner
herself has made the admission that she was in the trucking business, offering her trucks to
those with cargo to move. Judicial admissions are conclusive and no evidence is required to
prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their
services only to a select group of people and because the private respondents, plaintiffs in
the lower court, did not object to the presentation of affidavits by petitioner where the
transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals
14 is instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that
Article 1732 deliberately refrained from making such distinctions."

Regarding the affidavits presented by petitioner to the court, both the trial and appellate
courts have dismissed them as self-serving and petitioner contests the conclusion. We are
bound by the appellate court's factual conclusions. Yet, granting that the said evidence were
not self-serving, the same were not sufficient to prove that the contract was one of lease. It
must be understood that a contract is what the law defines it to be and not what it is called
by the contracting parties. 15 Furthermore, petitioner presented no other proof of the
existence of the contract of lease. He who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not
due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the
goods transported by them. 17 Accordingly, they are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or deteriorated. 18 There are very
few instances when the presumption of negligence does not attach and these instances are
enumerated in Article 1734. 19 In those cases where the presumption is applied, the
common carrier must prove that it exercised extraordinary diligence in order to overcome
the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her
from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held
that hijacking, not being included in the provisions of Article 1734, must be dealt with under
the provisions of Article 1735 and thus, the common carrier is presumed to have been at
fault or negligent. To exculpate the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do
not act with grave or irresistible threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible — and will not be
allowed to divest or to diminish such responsibility — even for acts of strangers like thieves
or robbers except where such thieves or robbers in fact acted with grave or irresistible
threat, violence or force. We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22
Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court
and the Court of Appeals have concluded that these affidavits were not enough to overcome
the presumption. Petitioner's affidavit about the hijacking was based on what had been told
her by Juanito Morden. It was not a first-hand account. While it had been admitted in court
for lack of objection on the part of private respondent, the respondent Court had discretion
in assigning weight to such evidence. We are bound by the conclusion of the appellate
court. In a petition for review on certiorari, We are not to determine the probative value of
evidence but to resolve questions of law. Secondly, the affidavit of Jesus Bascos did not
dwell on how the hijacking took place. Thirdly, while the affidavit of Juanito Morden, the
truck helper in the hijacked truck, was presented as evidence in court, he himself was a
witness as could be gleaned from the contents of the petition. Affidavits are not considered
the best evidence if the affiants are available as witnesses. 25 The subsequent filing of the
information for carnapping and robbery against the accused named in said affidavits did not
necessarily mean that the contents of the affidavits were true because they were yet to be
determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to
overcome it. Thus, contrary to her assertion, private respondent need not introduce any
evidence to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We
find no reason to disturb the conclusion that the motion to lift/dissolve the writ of
preliminary attachment has been rendered moot and academic by the decision on the
merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be
sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION
C. ARELLANO, in her official capacity as City Treasurer of Batangas, respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial
Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in
19671 and renewed by the Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on its gross receipts
for the fiscal year 1993 pursuant to the Local Government Code3. The respondent City
Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in
four installments based on the gross receipts for products pumped at GPS-1 for the fiscal
year 1993 which amounted to P181,681,151.00. In order not to hamper its operations,
petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of
1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a government concession
granted under the Petroleum Act. It is engaged in the business of transporting petroleum
products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As
such, our Company is exempt from paying tax on gross receipts under Section 133 of the
Local Government Code of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration of contractors
under Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to
impose tax "on contractors and other independent contractors" under Section 143,
Paragraph (e) of the Local Government Code does not include the power to levy on
transportation contractors.
The imposition and assessment cannot be categorized as a mere fee authorized under
Section 147 of the Local Government Code. The said section limits the imposition of fees and
charges on business to such amounts as may be commensurate to the cost of regulation,
inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the license fee,
the imposition thereof based on gross receipts is violative of the aforecited provision. The
amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of
regulation, inspection and licensing. The fee is already a revenue raising measure, and not a
mere regulatory imposition.4
On March 8, 1994, the respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government Code.5
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint6 for tax refund with prayer for writ of preliminary injunction against respondents
City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its
gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities
to impose and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes
on transportation contractors for, as defined under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax paid.7
Traversing the complaint, the respondents argued that petitioner cannot be exempt from
taxes under Section 133 (j) of the Local Government Code as said exemption applies only to
"transportation contractors and persons engaged in the transportation by hire and common
carriers by air, land and water." Respondents assert that pipelines are not included in the
term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships
and the like. Respondents further posit that the term "common carrier" under the said code
pertains to the mode or manner by which a product is delivered to its destination.8
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in
this wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax
exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the
government. Exemption may therefore be granted only by clear and unequivocal provisions
of law.
Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit
A) whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet
neither said law nor the deed of concession grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the
Local Tax Code. Such being the situation obtained in this case (exemption being unclear and
equivocal) resort to distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as
not to overburden the riding public or commuters with taxes. Plaintiff is not a common
carrier, but a special carrier extending its services and facilities to a single specific or "special
customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local
autonomy to local governments than the previous enactments, to make them economically
and financially viable to serve the people and discharge their functions with a concomitant
obligation to accept certain devolution of powers, . . . So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e) and
151 of the Code.9
Petitioner assailed the aforesaid decision before this Court via a petition for review. On
February 27, 1995, we referred the case to the respondent Court of Appeals for
consideration and adjudication. 10 On November 29, 1995, the respondent court rendered a
decision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion
for reconsideration was denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996. 13 Petitioner moved for a reconsideration which was granted by this
Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the
petitioner is not a common carrier or a transportation contractor, Yes common carrier… and
(2) the exemption sought for by petitioner is not clear under the law. Yes exempted
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment,
and must hold himself out as ready to engage in the transportation of goods for person
generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over
his established roads; and
4. The transportation must be for hire. 15
Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the
goods by land and for compensation. The fact that petitioner has a limited clientele does not
exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals 16 we
ruled that:
The above article (Art. 1732, Civil Code) makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making
any distinction between a person or enterprise offering transportation service on a regular
or scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that
Article 1877 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law on
common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:
every person that now or hereafter may own, operate. manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system gas, electric light heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of
the Local Government Code refers only to common carriers transporting goods and
passengers through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air. It
does not provide that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are considered common carriers.
17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the preferential
right to utilize installations for the transportation of petroleum owned by him, but is
obligated to utilize the remaining transportation capacity pro rata for the transportation of
such other petroleum as may be offered by others for transport, and to charge without
discrimination such rates as may have been approved by the Secretary of Agriculture and
Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of
Article 7 thereof provides:
that everything relating to the exploration for and exploitation of petroleum . . . and
everything relating to the manufacture, refining, storage, or transportation by special
methods of petroleum, is hereby declared to be a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting
petroleum products, it is considered a common carrier under Republic Act No. 387 . . . . Such
being the case, it is not subject to withholding tax prescribed by Revenue Regulations No.
13-78, as amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. — Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
xxx xxx xxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water,
except as provided in this Code.
The deliberations conducted in the House of Representatives on the Local Government Code
of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local
Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to
be one of those being deemed to be exempted from the taxing powers of the local
government units. May we know the reason why the transportation business is being
excluded from the taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131),
line 16, paragraph 5. It states that local government units may not impose taxes on the
business of transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see
there that provinces have the power to impose a tax on business enjoying a franchise at the
rate of not more than one-half of 1 percent of the gross annual receipts. So, transportation
contractors who are enjoying a franchise would be subject to tax by the province. That is the
exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local
government units on the carrier business. Local government units may impose taxes on top
of what is already being imposed by the National Internal Revenue Code which is the so-
called "common carriers tax." We do not want a duplication of this tax, so we just provided
for an exception under Section 125 [now Sec. 137] that a province may impose this tax at a
specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18
It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code. 19 To tax petitioner again on its
gross receipts in its transportation of petroleum business would defeat the purpose of the
Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
Bellosillo, Puno and Mendoza, JJ., concur.
G.R. No. 147246 August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.
PUNO, J.:
On appeal is the Court of Appeals' May 11, 2000 Decision1 in CA-G.R. CV No. 49195 and
February 21, 2001 Resolution2 affirming with modification the April 6, 1994 Decision3 of the
Regional Trial Court of Manila which found petitioner liable to pay private respondent the
amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.354 was shipped by Marubeni American Corporation of Portland, Oregon on
board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling
Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.5 The shipment was
insured by the private respondent Prudential Guarantee and Assurance, Inc. against loss or
damage for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.6
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the
custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by
the consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig
City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III,
evidenced by Lighterage Receipt No. 03647 for delivery to consignee. The cargo did not
reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a
warning of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the
barge to Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI
III was tied down to other barges which arrived ahead of it while weathering out the storm
that night. A few days after, the barge developed a list because of a hole it sustained after
hitting an unseen protuberance underneath the water. The petitioner filed a Marine Protest
on August 28, 1990.8 It likewise secured the services of Gaspar Salvaging Corporation which
refloated the barge.9 The hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the
consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge
again ran aground due to strong current. To avoid the complete sinking of the barge, a
portion of the goods was transferred to three other barges.10
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely,
resulting in the total loss of the remaining cargo.11 A second Marine Protest was filed on
September 7, 1990.12
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat
retrieved and loaded on the three other barges.13 The total proceeds from the sale of the
salvaged cargo was P201,379.75.14
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and
another letter dated September 18, 1990 to the private respondent for the value of the lost
cargo.
On January 30, 1991, the private respondent indemnified the consignee in the amount of
P4,104,654.22.15 Thereafter, as subrogee, it sought recovery of said amount from the
petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery
of the amount of indemnity, attorney's fees and cost of suit.16 Petitioner filed its answer
with counterclaim.17
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of
its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia
Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc.
the sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991
until fully satisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's
counterclaim is hereby DISMISSED. With costs against defendant.18
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier . The
appellate court affirmed the decision of the trial court with modification. The dispositive
portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the
sense that the salvage value of P201,379.75 shall be deducted from the amount of
P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioner's Motion for Reconsideration dated June 3, 2000 was likewise denied by the
appellate court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the
appellate court, viz:19
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT HELD
THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF THE
PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, "THE LOSS OF THE
CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES
ENUMERATED."
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE DILIGENCE AND/OR
WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE CONSIGNEE'S CARGO.
The issues to be resolved are:

(1) Whether the petitioner is a common carrier; and, YES
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary
diligence in its care and custody of the consignee's cargo. NO
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no
fixed and publicly known route, maintains no terminals, and issues no tickets. It points out
that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods
unless it consents. In short, it does not hold out its services to the general public.20
We disagree.
In De Guzman vs. Court of Appeals,21 we held that the definition of common carriers in
Article 1732 of the Civil Code makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity. We also did not distinguish between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does not
distinguish between a carrier offering its services to the general public, and one who offers
services or solicits business only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage22
and it offers its barges to the public for carrying or transporting goods by water for
compensation. Petitioner is clearly a common carrier. In De Guzman, supra,23 we
considered private respondent Ernesto Cendaña to be a common carrier even if his principal
occupation was not the carriage of goods for others, but that of buying used bottles and
scrap metal in Pangasinan and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done
on an irregular rather than scheduled manner, and with an only limited clientele. A common
carrier need not have fixed and publicly known routes. Neither does it have to maintain
terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.24 The test to determine a common carrier is "whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to the general public as
his occupation rather than the quantity or extent of the business transacted ."25 In the case
at bar, the petitioner admitted that it is engaged in the business of shipping and
lighterage,26 offering its barges to the public, despite its limited clientele for carrying or
transporting goods by water for compensation.27
On the second issue, we uphold the findings of the lower courts that petitioner failed to
exercise extraordinary diligence in its care and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the
goods transported by them.28 They are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated.29 To overcome the presumption
of negligence in the case of loss, destruction or deterioration of the goods, the common
carrier must prove that it exercised extraordinary diligence. There are, however, exceptions
to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption
of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total
loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be
held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is
the proximate and only cause of the loss of the goods, and that it has exercised due
diligence before, during and after the occurrence of the typhoon to prevent or minimize the
loss.30 The evidence show that, even before the towing bits of the barge broke, it had
already previously sustained damage when it hit a sunken object while docked at the
Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed to the
typhoon. The partly-submerged vessel was refloated but its hole was patched with only clay
and cement. The patch work was merely a provisional remedy, not enough for the barge to q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to
sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed lie where she was instead of towing it?
the cargo to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-
surveyor of Tan-Gatue Adjustment Co., Inc., states: a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the
consignee) as I have said was in a hurry for their goods to be delivered at their Wharf since
CROSS-EXAMINATION BY ATTY. DONN LEE:31 they needed badly the wheat that was loaded in PSTSI-3. It was needed badly by the
consignee.
xxx xxx xxx
q - And this is the reason why you towed the Barge as you did?
q - Can you tell us what else transpired after that incident?
a - Yes, sir.
a - After the first accident, through the initiative of the barge owners, they tried to pull
out the barge from the place of the accident, and bring it to the anchor terminal for safety, xxx xxx xxx
then after deciding if the vessel is stabilized, they tried to pull it to the consignee's
warehouse, now while on route another accident occurred, now this time the barge totally CROSS-EXAMINATION BY ATTY. IGNACIO:34
hitting something in the course.
xxx xxx xxx
q - You said there was another accident, can you tell the court the nature of the second
accident? q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I
correct?
a - The sinking, sir.
a - The next day, in the morning, we hired for additional two (2) tugboats as I have
q - Can you tell the nature . . . can you tell the court, if you know what caused the stated.
sinking?
q - Despite of the threats of an incoming typhoon as you testified a while ago?
a - Mostly it was related to the first accident because there was already a whole (sic) on
the bottom part of the barge. a - It is already in an inner portion of Pasig River. The typhoon would be coming and it
would be dangerous if we are in the vicinity of Manila Bay.
xxx xxx xxx
q - But the fact is, the typhoon was incoming? Yes or no?
This is not all. Petitioner still headed to the consignee's wharf despite knowledge of an
incoming typhoon. During the time that the barge was heading towards the consignee's a - Yes.
wharf on September 5, 1990, typhoon "Loleng" has already entered the Philippine area of
responsibility.32 A part of the testimony of Robert Boyd, Cargo Operations Supervisor of the q - And yet as a standard operating procedure of your Company, you have to secure a
petitioner, reveals: sort of Certification to determine the weather condition, am I correct?

DIRECT-EXAMINATION BY ATTY. LEE:33 a - Yes, sir.

xxx xxx xxx q - So, more or less, you had the knowledge of the incoming typhoon, right?

a - Yes, sir.
q - And yet you proceeded to the premises of the GMC?
a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are
already inside the vicinity or inside Pasig entrance, it is a safe place to tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to
escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon
head-on falls short of due diligence required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted that when the towing bits of the
vessel broke that caused its sinking and the total loss of the cargo upon reaching the Pasig
River, it was no longer affected by the typhoon. The typhoon then is not the proximate
cause of the loss of the cargo; a human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R.
CV No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban, and Sandoval-Gutierrez, JJ., concur.
Corona, and Carpio-Morales, JJ., on official leave.
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011
against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for
damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his
wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to
Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach
Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000
was by virtue of a tour package-contract with respondent that included transportation to
and from the Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his
account of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to
leave the Resort in the afternoon of September 10, 2000, but was advised to stay for
another night because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners’ son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them
to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera
and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to
side and the captain to step forward to the front, leaving the wheel to one of the crew
members.
The waves got more unwieldy. After getting hit by two big waves which came one after the
other, M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon
seeing the captain, Matute and the other passengers who reached the surface asked him
what they could do to save the people who were still trapped under the boat. The captain
replied "Iligtas niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto
Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22
persons, consisting of 18 passengers and four crew members, who were brought to Pisa
Island. Eight passengers, including petitioners’ son and his wife, died during the incident.
At the time of Ruelito’s death, he was 28 years old and employed as a contractual worker
for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly
salary of $900.3

Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for
the death of their son in the amount of at least ₱4,000,000.
Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the
incident which it considered to be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of ₱10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected,
alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B
Coco Beach III to sail notwithstanding storm warning bulletins issued by the Philippine
Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as early as
5:00 a.m. of September 11, 2000.6
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not
available to the general public as they only ferry Resort guests and crew members .
Nonetheless, it claimed that it exercised the utmost diligence in ensuring the safety of its
passengers; contrary to petitioners’ allegation, there was no storm on September 11, 2000
as the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not filled to
capacity and had sufficient life jackets for its passengers. By way of Counterclaim,
respondent alleged that it is entitled to an award for attorney’s fees and litigation expenses
amounting to not less than ₱300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires
four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2)
there is clearance from the Coast Guard, (3) there is clearance from the captain and (4)
there is clearance from the Resort’s assistant manager.8 He added that M/B Coco Beach III
met all four conditions on September 11, 2000,9 but a subasco or squall, characterized by
strong winds and big waves, suddenly occurred, causing the boat to capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners’
Complaint and respondent’s Counterclaim.
Petitioners’ Motion for Reconsideration having been denied by Order dated September 2,
2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners’ appeal, holding,
among other things, that the trial court correctly ruled that respondent is a private carrier
which is only required to observe ordinary diligence; that respondent in fact observed
extraordinary diligence in transporting its guests on board M/B Coco Beach III; and that the
proximate cause of the incident was a squall, a fortuitous event.
Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16,
2009,14 they filed the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding that respondent is
a common carrier since by its tour package, the transporting of its guests is an integral part
of its resort business. They inform that another division of the appellate court in fact held
respondent liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to
prove that it is a common carrier; that the Resort’s ferry services for guests cannot be
considered as ancillary to its business as no income is derived therefrom; that it exercised
extraordinary diligence as shown by the conditions it had imposed before allowing M/B
Coco Beach III to sail; that the incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case wherein the appellate court held
it liable for damages involved different plaintiffs, issues and evidence.16
WON respondent is a common carrier. YES
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals17 in characterizing respondent
as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that
Article 1733 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law on
common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:
. . . every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services . . .18 (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main
business as to be properly considered ancillary thereto. The constancy of respondent’s ferry
services in its resort operations is underscored by its having its own Coco Beach boats. And
the tour packages it offers, which include the ferry services, may be availed of by anyone
who can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no
moment. It would be imprudent to suppose that it provides said services at a loss. The Court
is aware of the practice of beach resort operators offering tour packages to factor the
transportation fee in arriving at the tour package price. That guests who opt not to avail of
respondent’s ferry services pay the same amount is likewise inconsequential. These guests
may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has
deliberately refrained from making distinctions on whether the carrying of persons or goods
is the carrier’s principal business, whether it is offered on a regular basis, or whether it is
offered to the general public. The intent of the law is thus to not consider such distinctions.
Otherwise, there is no telling how many other distinctions may be concocted by
unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid the
legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each case.19 They are bound to
carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances.20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed
that the common carrier is at fault or negligent. In fact, there is even no need for the court
to make an express finding of fault or negligence on the part of the common carrier. This
statutory presumption may only be overcome by evidence that the carrier exercised
extraordinary diligence.21
Respondent nevertheless harps on its strict compliance with the earlier mentioned
conditions of voyage before it allowed M/B Coco Beach III to sail on September 11, 2000.
Respondent’s position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical
cyclone warnings for shipping on September 10 and 11, 2000 advising of tropical
depressions in Northern Luzon which would also affect the province of Mindoro.22 By the
testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be
expected under such weather condition.23
A very cautious person exercising the utmost diligence would thus not brave such stormy
weather and put other people’s lives at risk. The extraordinary diligence required of
common carriers demands that they take care of the goods or lives entrusted to their hands
as if they were their own. This respondent failed to do.
Respondent’s insistence that the incident was caused by a fortuitous event does not impress
either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have
been such as to render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in the aggravation
of the resulting injury to the creditor.24
To fully free a common carrier from any liability, the fortuitous event must have been the
proximate and only cause of the loss. And it should have exercised due diligence to prevent
or minimize the loss before, during and after the occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the voyage as the fortuitous event that
overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls was
expected under the weather condition of September 11, 2000. Moreover, evidence shows
that M/B Coco Beach III suffered engine trouble before it capsized and sank.26 The incident
was, therefore, not completely free from human intervention.
The Court need not belabor how respondent’s evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the squall.
Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common carrier in breach
of its contract of carriage that results in the death of a passenger liable to pay the following:
(1) indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at ₱50,000.29
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary
living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 — age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age at
death]) adopted in the American Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality.31
The second factor is computed by multiplying the life expectancy by the net earnings of the
deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or
income and less living and other incidental expenses.32 The loss is not equivalent to the
entire earnings of the deceased, but only such portion as he would have used to support his
dependents or heirs. Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own needs.33
In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping
Agency Corp. v. Borja34 teaches that when, as in this case, there is no showing that the
living expenses constituted the smaller percentage of the gross income, the living expenses
are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $90035
which, when converted to Philippine peso applying the annual average exchange rate of $1
= ₱44 in 2000,36 amounts to ₱39,600. Ruelito’s net earning capacity is thus computed as
follows:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary
living expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)
Net Earning Capacity = ₱8,316,000
Respecting the award of moral damages, since respondent common carrier’s breach of
contract of carriage resulted in the death of petitioners’ son, following Article 1764 vis-à-vis
Article 2206 of the Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence required of
common carriers, it is presumed to have acted recklessly, thus warranting the award too of
exemplary damages, which are granted in contractual obligations if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.37
Under the circumstances, it is reasonable to award petitioners the amount of ₱100,000 as
moral damages and ₱100,000 as exemplary damages.381avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where
exemplary damages are awarded. The Court finds that 10% of the total amount adjudged
against respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for payment of interest in the concept of
actual and compensatory damages, subject to the following rules, to wit —
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims
or damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the demand
is made, the interest shall begin to run only from the date the judgment of the court is made
(at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit. (emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in the
present petition, the interest due shall be computed upon the finality of this decision at the
rate of 12% per annum until satisfaction, in accordance with paragraph number 3 of the
immediately cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.
Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the
following: (1) ₱50,000 as indemnity for the death of Ruelito Cruz; (2) ₱8,316,000 as
indemnity for Ruelito’s loss of earning capacity; (3) ₱100,000 as moral damages; (4)
₱100,000 as exemplary damages; (5) 10% of the total amount adjudged against respondent
as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per
annum computed from the finality of this decision until full payment.
SO ORDERED.
G.R. No. 150403 January 25, 2007
CEBU SALVAGE CORPORATION, Petitioner,
vs.
PHILIPPINE HOME ASSURANCE CORPORATION, Respondent.
DECISION
CORONA, J.:
May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does
not own?
This is the issue presented for the Court’s resolution in this petition for review on certiorari1
assailing the March 16, 2001 decision2 and September 17, 2001 resolution3 of the Court of
Appeals (CA) in CA-G.R. CV No. 40473 which in turn affirmed the December 27, 1989
decision4 of the Regional Trial Court (RTC), Branch 145, Makati, Metro Manila.5
The pertinent facts follow.
On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina
Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter6 wherein
petitioner was to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu
Santo7 at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis
Oriental to consignee Ferrochrome Phils., Inc.8
Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100
metric tons of silica quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan
the next day.9 The shipment never reached its destination, however, because the M/T
Espiritu Santo sank in the afternoon of December 24, 1984 off the beach of Opol, Misamis
Oriental, resulting in the total loss of the cargo.10
MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home
Assurance Corporation.11 Respondent paid the claim in the amount of P211,500 and was
subrogated to the rights of MCCII.12 Thereafter, it filed a case in the RTC13 against
petitioner for reimbursement of the amount it paid MCCII.
After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to pay
respondent P211,500 plus legal interest, attorney’s fees equivalent to 25% of the award and
costs of suit.
On appeal, the CA affirmed the decision of the RTC. Hence, this petition.
Petitioner and MCCII entered into a "voyage charter," also known as a contract of
affreightment wherein the ship was leased for a single voyage for the conveyance of goods,
in consideration of the payment of freight.14 Under a voyage charter, the shipowner retains
the possession, command and navigation of the ship, the charterer or freighter merely
having use of the space in the vessel in return for his payment of freight.15 An owner who
retains possession of the ship remains liable as carrier and must answer for loss or non-
delivery of the goods received for transportation.16
Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage charter
it entered into with MCCII was a contract of carriage.17 It insists that the agreement was
merely a contract of hire wherein MCCII hired the vessel from its owner, ALS Timber
Enterprises (ALS).18 Not being the owner of the M/T Espiritu Santo, petitioner did not have
control and supervision over the vessel, its master and crew.19 Thus, it could not be held
liable for the loss of the shipment caused by the sinking of a ship it did not own.
WON petitioner is a common carrier. YES
We disagree.
Based on the agreement signed by the parties and the testimony of petitioner’s operations
manager, it is clear that it was a contract of carriage petitioner signed with MCCII. It actively
negotiated and solicited MCCII’s account, offered its services to ship the silica quartz and
proposed to utilize the M/T Espiritu Santo in lieu of the M/T Seebees or the M/T Shirley (as
previously agreed upon in the voyage charter) since these vessels had broken down.20
There is no dispute that petitioner was a common carrier. At the time of the loss of the
cargo, it was engaged in the business of carrying and transporting goods by water, for
compensation, and offered its services to the public.21
From the nature of their business and for reasons of public policy, common carriers are
bound to observe extraordinary diligence over the goods they transport according to the
circumstances of each case.22 In the event of loss of the goods, common carriers are
responsible, unless they can prove that this was brought about by the causes specified in
Article 1734 of the Civil Code.23 In all other cases, common carriers are presumed to be at
fault or to have acted negligently, unless they prove that they observed extraordinary
diligence.24
Petitioner was the one which contracted with MCCII for the transport of the cargo. It had
control over what vessel it would use. All throughout its dealings with MCCII, it represented
itself as a common carrier. The fact that it did not own the vessel it decided to use to
consummate the contract of carriage did not negate its character and duties as a common
carrier. The MCCII (respondent’s subrogor) could not be reasonably expected to inquire
about the ownership of the vessels which petitioner carrier offered to utilize. As a practical
matter, it is very difficult and often impossible for the general public to enforce its rights of
action under a contract of carriage if it should be required to know who the actual owner of
the vessel is.25 In fact, in this case, the voyage charter itself denominated petitioner as the
"owner/operator" of the vessel.26
Petitioner next contends that if there was a contract of carriage, then it was between MCCII
and ALS as evidenced by the bill of lading ALS issued.27
Again, we disagree.
The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had
been received for transportation. It was not signed by MCCII, as in fact it was simply signed
by the supercargo of ALS.28 This is consistent with the fact that MCCII did not contract
directly with ALS. While it is true that a bill of lading may serve as the contract of carriage
between the parties,29 it cannot prevail over the express provision of the voyage charter
that MCCII and petitioner executed:
[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard
a vessel under a charter party, and the charterer is also the holder of the bill of lading, "the
bill of lading operates as the receipt for the goods, and as document of title passing the
property of the goods, but not as varying the contract between the charterer and the
shipowner." The Bill of Lading becomes, therefore, only a receipt and not the contract of
carriage in a charter of the entire vessel, for the contract is the Charter Party, and is the law
between the parties who are bound by its terms and condition provided that these are not
contrary to law, morals, good customs, public order and public policy. 30
Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage
charter stipulated that cargo insurance was for the charterer’s account.31 This deserves
scant consideration. This simply meant that the charterer would take care of having the
goods insured. It could not exculpate the carrier from liability for the breach of its contract
of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary to public
policy.32
To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on
board the vessel; loss or non-delivery of the cargo was proven; and petitioner failed to prove
that it exercised extraordinary diligence to prevent such loss or that it was due to some
casualty or force majeure. The voyage charter here being a contract of affreightment, the
carrier was answerable for the loss of the goods received for transportation.33
The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a
carrier that enters into a contract of carriage is not liable to the charterer or shipper if it
does not own the vessel it chooses to use. MCCII never dealt with ALS and yet petitioner
insists that MCCII should sue ALS for reimbursement for its loss. Certainly, to permit a
common carrier to escape its responsibility for the goods it agreed to transport (by the
expedient of alleging non-ownership of the vessel it employed) would radically derogate
from the carrier's duty of extraordinary diligence. It would also open the door to collusion
between the carrier and the supposed owner and to the possible shifting of liability from the
carrier to one without any financial capability to answer for the resulting damages.34
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER
TERMINAL SERVICES, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.
MENDOZA, J.:
This is a petition for review of the decision,1 dated May 31, 2001, of the Court of Appeals,
affirming the decision2 of the Regional Trial Court, Makati City, Branch 148, which ordered
petitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest,
representing the value of damaged cargo handled by petitioner, 25% thereof as attorney's
fees, and the cost of the suit.1âwphi1.nêt
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc.
(TCTSI), a sole proprietorship customs broker. At the time material to this case, petitioner
entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of
semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila
to SMC's warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo
was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on
board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the
custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990,
petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre
operator and delivered it to SMC's warehouse in Ermita, Manila. On July 25, 1990, the goods
were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical
fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn.
The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against
petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20,
1995, rendered judgment finding petitioner liable to respondent for the damage to the
shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of
defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the Damage Report (Exh.
"F") with entries appearing therein, classified as "TED" and "TSN", which the claims
processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the
middle of the subject damaged cargoes respectively, coupled with the Marine Cargo Survey
Report (Exh. "H" - "H-4-A") confirms the fact of the damaged condition of the subject
cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular, which provides among others
that:
" . . . we opine that damages sustained by shipment is attributable to improper handling in
transit presumably whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense that [she is]
are not liable. Defendant by reason of the nature of [her] business should have devised ways
and means in order to prevent the damage to the cargoes which it is under obligation to
take custody of and to forthwith deliver to the consignee. Defendant did not present any
evidence on what precaution [she] performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the cargo [she] shall perform such
extraordinary diligence because of the nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have
been lost, destroyed or deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they have observed the extraordinary
diligence required by law. The burden of the plaintiff, therefore, is to prove merely that the
goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is
shifted to the carrier to prove that he has exercised the extraordinary diligence required by
law. Thus, it has been held that the mere proof of delivery of goods in good order to a
carrier, and of their arrival at the place of destination in bad order, makes out a prima facie
case against the carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances inconsistent with its liability." (cited in
Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common
carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the
extraordinary responsibility lasts from the time the goods are unconditionally placed in the
possession of and received by the carrier for transportation until the same are delivered
actually or constructively by the carrier to the consignee or to the person who has the right
to receive the same.3
Accordingly, the trial court ordered petitioner to pay the following amounts --
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review
on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING
THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND
MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING
THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO
DID NOT HOLD ITS SERVICES TO THE PUBLIC.5
It will be convenient to deal with these contentions in the inverse order, for if petitioner is
not a common carrier, although both the trial court and the Court of Appeals held
otherwise, then she is indeed not liable beyond what ordinary diligence in the vigilance over
the goods transported by her, would require.6 Consequently, any damage to the cargo she
agrees to transport cannot be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of Appeals,
she is not a common carrier but a private carrier because, as a customs broker and
warehouseman, she does not indiscriminately hold her services out to the public but only
offers the same to select parties with whom she may contract in the conduct of her
business.
WON petitioner is a common carrier. YES
The contention has no merit. In De Guzman v. Court of Appeals,7 the Court dismissed a
similar contention and held the party to be a common carrier, thus -
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public."
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as 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. We think that Article 1732 deliberately refrained
from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law on
common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:
" x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services. x x x" 8
There is greater reason for holding petitioner to be a common carrier because the
transportation of goods is an integral part of her business. To uphold petitioner's contention
would be to deprive those with whom she contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for her customers, as
already noted, is part and parcel of petitioner's business.
WON petitioner is liable for the damage. YES
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety
of the passengers transported by them, according to all the circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary diligence in the
vigilance over goods" was explained thus:
The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to,
or destruction of the goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight and "to use all
reasonable means to ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage, including such methods as
their nature requires."
In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the
"spoilage or wettage" took place while the goods were in the custody of either the carrying
vessel "M/V Hayakawa Maru," which transported the cargo to Manila, or the arrastre
operator, to whom the goods were unloaded and who allegedly kept them in open air for
nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the containers
were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh.
H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.10
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he
has no personal knowledge on whether the container vans were first stored in petitioner's
warehouse prior to their delivery to the consignee. She likewise claims that after
withdrawing the container vans from the arrastre operator, her driver, Ricardo Nazarro,
immediately delivered the cargo to SMC's warehouse in Ermita, Manila, which is a mere
thirty-minute drive from the Port Area where the cargo came from. Thus, the damage to the
cargo could not have taken place while these were in her custody.11
Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors
indicates that when the shipper transferred the cargo in question to the arrastre operator,
these were covered by clean Equipment Interchange Report (EIR) and, when petitioner's
employees withdrew the cargo from the arrastre operator, they did so without exception or
protest either with regard to the condition of container vans or their contents. The Survey
Report pertinently reads --
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel to dock
of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30' x 20' secure metal
vans, covered by clean EIRs. Except for slight dents and paint scratches on side and roof
panels, these containers were deemed to have [been] received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30' x 20' cargo containers was [withdrawn] by
Transorient Container Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignee's storage warehouse located at
Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.12
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to
the arrastre, Marina Port Services Inc., in good order and condition as evidenced by clean
Equipment Interchange Reports (EIRs). Had there been any damage to the shipment, there
would have been a report to that effect made by the arrastre operator. The cargoes were
withdrawn by the defendant-appellant from the arrastre still in good order and condition as
the same were received by the former without exception, that is, without any report of
damage or loss. Surely, if the container vans were deformed, cracked, distorted or dented,
the defendant-appellant would report it immediately to the consignee or make an exception
on the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these
took place. To put it simply, the defendant-appellant received the shipment in good order
and condition and delivered the same to the consignee damaged. We can only conclude that
the damages to the cargo occurred while it was in the possession of the defendant-
appellant. Whenever the thing is lost (or damaged) in the possession of the debtor (or
obligor), it shall be presumed that the loss (or damage) was due to his fault, unless there is
proof to the contrary. No proof was proffered to rebut this legal presumption and the
presumption of negligence attached to a common carrier in case of loss or damage to the
goods.13
Anent petitioner's insistence that the cargo could not have been damaged while in her
custody as she immediately delivered the containers to SMC's compound, suffice it to say
that to prove the exercise of extraordinary diligence, petitioner must do more than merely
show the possibility that some other party could be responsible for the damage. It must
prove that it used "all reasonable means to ascertain the nature and characteristic of goods
tendered for [transport] and that [it] exercise[d] due care in the handling [thereof]."
Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides --
Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
....
(4) The character of the goods or defects in the packing or in the containers.
....
For this provision to apply, the rule is that if the improper packing or, in this case, the
defect/s in the container, is/are known to the carrier or his employees or apparent upon
ordinary observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for damage resulting
therefrom.14 In this case, petitioner accepted the cargo without exception despite the
apparent defects in some of the container vans. Hence, for failure of petitioner to prove that
she exercised extraordinary diligence in the carriage of goods in this case or that she is
exempt from liability, the presumption of negligence as provided under Art. 173515 holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.1âwphi1.nêt
SO ORDERED.
Bellosillo, Quisumbing, Buena, and De Leon, Jr., JJ., concur.
G.R. No. 141910 August 6, 2002
FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
VITUG, J.:
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., along South Superhighway in
Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck
was traversing the north diversion road along McArthur highway in Barangay Anupol,
Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal,
resulting in damage to the cargoes.
FGU Insurance Corporation (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.1âwphi1.nêt
The issues having thus been joined, 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 1996,1 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.
"x x x 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.
"Under the law on obligation and contract, negligence or fault is not presumed. The law on
quasi delict provides for some presumption of negligence but only upon the attendance of
some circumstances. Thus, Article 2185 provides:
‘Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he was violating any traffic
regulation.’
"Evidence for the plaintiff shows no proof that defendant was violating any traffic
regulation. Hence, the presumption of negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that defendant is a common carrier and
defendant’s driver was the one negligent, defendant cannot be made liable for the damages
of the subject cargoes."2
The subsequent motion for reconsideration having been denied,3 plaintiff interposed an
appeal to the Court of Appeals, contending that the trial court had erred (a) in holding that
the appellee corporation was not a common carrier defined under the law and existing
jurisprudence; and (b) in dismissing the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The
appellate court, in its decision of 10 June 1999,4 discoursed, among other things, that -
"x x x in order for the presumption of negligence provided for under the law governing
common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the
appellee is a common carrier. Should the appellant fail to prove that the appellee is a
common carrier, the presumption would not arise; consequently, the appellant would have
to prove that the carrier was negligent.
"x x x xxx xxx
"Because it is the appellant who insists that the appellees can still be considered as a
common carrier, despite its `limited clientele,’ (assuming it was really a common carrier), it
follows that it (appellant) has the burden of proving the same. It (plaintiff-appellant) `must
establish his case by a preponderance of evidence, which means that the evidence as a
whole adduced by one side is superior to that of the other.’ (Summa Insurance Corporation
vs. Court of Appeals, 243 SCRA 175). This, unfortunately, the appellant failed to do -- hence,
the dismissal of the plaintiff’s complaint by the trial court is justified.
"x x x xxx xxx
"Based on the foregoing disquisitions and considering the circumstances that the appellee
trucking corporation has been `its exclusive contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its principal,’ the inevitable conclusion is that the
appellee is a private carrier.
"x x x xxx xxx
"x x x the lower court correctly ruled that '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 good[s] during transport under [article] 1735 of
the Civil Code is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a trial
court are entitled to great weight on appeal and should not be disturbed unless for strong
and valid reasons."5
Petitioner's motion for reconsideration was likewise denied;6 hence, the instant petition,7
raising the following issues:
I he would have been in had the contract not been made; or his "restitution interest," which
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED
UNDER THE LAW AND EXISTING JURISPRUDENCE. …………….NO
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, 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.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.
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.10 Given accepted standards, GPS scarcely falls within the term "common carrier."
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.11 The law, recognizing
the obligatory force of contracts,12 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.13 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
is his interest in having restored to him any benefit that he has conferred on the other
party.14 Indeed, agreements can accomplish little, either for their makers or for society,
unless they are made the basis for action.15 The effect of every infraction is to create a new
duty, that is, to make recompense to the one who has been injured by the failure of another
to observe his contractual obligation16 unless he can show extenuating circumstances, like
proof of his exercise of due diligence (normally that of the diligence of a good father of a
family or, exceptionally by stipulation or by law such as in the case of common carriers, that
of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his
ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between
it and petitioner’s assured, and admits 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 petitioner’s 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.17 Consonantly with the
axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor
prejudice a third person. Petitioner’s civil action against the driver can only be based on
culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to
prove negligence or fault on the part of the defendant.18
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a
defendant liable where the thing which caused the injury complained of is shown to be
under the latter’s management and the accident is such that, in the ordinary course of
things, cannot be expected to happen if those who have its management or control use
proper care. It affords reasonable evidence, in the absence of explanation by the defendant,
that the accident arose from want of care.19 It is not a rule of substantive law and, as such,
it does not create an independent ground of liability. Instead, it is regarded as a mode of
proof, or a mere procedural convenience since it furnishes a substitute for, and relieves the
plaintiff of, the burden of producing specific proof of negligence. 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
defendant’s 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.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the
movant shall be deemed to have waived the right to present evidence.24 Thus, respondent
corporation may no longer offer proof to establish that it has exercised due care in
transporting the cargoes of the assured so as to still warrant a remand of the case to the
trial court.1âwphi1.nêt
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of
Makati City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED
only insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the
trial court and decision of the appellate court are REVERSED as regards G.P. Sarmiento
Trucking Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation
the value of the damaged and lost cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
Davide, Jr., C.J., Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.
G.R. No. 157917 August 29, 2012
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the
COURT OF APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound
to observe extraordinary diligence in the conduct of his business. He is presumed to be
negligent when death occurs to a passenger. His liability may include indemnity for loss of
earning capacity even if the deceased passenger may only be an unemployed high school
student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal
the adverse decision promulgated on November 13, 2002, by which the Court of Appeals
(CA) affirmed with modification the decision rendered on December 3, 1999 by the Regional
Trial Court (RTC), Branch 260, in Parañaque City that had decreed them jointly and severally
liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and
Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron),
then a high school student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students from their respective
residences in Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the
capacity to transport 14 students at a time, two of whom would be seated in the front
beside the driver, and the others in the rear, with six students on either side. They employed
Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco.
On August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m.
from the Zarates’ residence. Aaron took his place on the left side of the van near the rear
door. The van, with its air-conditioning unit turned on and the stereo playing loudly,
ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the
students were due at Don Bosco by 7:15 a.m., and that they were already running late
because of the heavy vehicular traffic on the South Superhighway, Alfaro took the van to an
alternate route at about 6:45 a.m. by traversing the narrow path underneath the
Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short
cut into Makati. At the time, the narrow path was marked by piles of construction materials
and parked passenger jeepneys, and the railroad crossing in the narrow path had no railroad
warning signs, or watchmen, or other responsible persons manning the crossing. In fact, the
bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302
(train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange
travelling northbound. As the train neared the railroad crossing, Alfaro drove the van
eastward across the railroad tracks, closely tailing a large passenger bus. His view of the
oncoming train was blocked because he overtook the passenger bus on its left side. The
train blew its horn to warn motorists of its approach. When the train was about 50 meters
away from the passenger bus and the van, Alano applied the ordinary brakes of the train. He
applied the emergency brakes only when he saw that a collision was imminent. The
passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not.
The train hit the rear end of the van, and the impact threw nine of the 12 students in the
rear, including Aaron, out of the van. Aaron landed in the path of the train, which dragged
his body and severed his head, instantaneously killing him. Alano fled the scene on board
the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action
for damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their
respective answers, with cross-claims against each other, but Alfaro could not be served
with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe
transportation carriage of the former spouses' son from their residence in Parañaque to his
school at the Don Bosco Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the implementation thereof,
Aaron, the minor son of spouses Zarate died in connection with a vehicular/train collision
which occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses
Pereña, then driven and operated by the latter's employee/authorized driver Clemente
Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of August 22, 1996,
within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train
collision was a railroad crossing used by motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no appropriate and
safety warning signs and railings at the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound public utility and private
vehicles used on a daily basis the site of the collision as an alternative route and short-cut to
Makati;
(7) The train driver or operator left the scene of the incident on board the commuter train
involved without waiting for the police investigator;
(8) The site commonly used for railroad crossing by motorists was not in fact intended by
the railroad operator for railroad crossing at the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters
from the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable
for negligence constituting the proximate cause of the vehicular collision, which resulted in
the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro
are liable for any negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the
railroad system is liable for negligence in failing to provide adequate safety warning signs
and railings in the area commonly used by motorists for railroad crossings, constituting the
proximate cause of the vehicular collision which resulted in the death of the plaintiff
spouses' son;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of
carriage with plaintiff-spouses in failing to provide adequate and safe transportation for the
latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary
damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the
diligence of employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron
John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train
involved in the accident, in allowing or tolerating the motoring public to cross, and its failure
to install safety devices or equipment at the site of the accident for the protection of the
public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any
and whatever amount the latter may be held answerable or which they may be ordered to
pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts
claimed by the latter in their Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and
exemplary damages and attorney's fees.2
The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the
safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176,
Civil Code.
In their defense, the Pereñas adduced evidence to show that they had exercised the
diligence of a good father of the family in the selection and supervision of Alfaro, by making
sure that Alfaro had been issued a driver’s license and had not been involved in any
vehicular accident prior to the collision; that their own son had taken the van daily; and that
Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the
students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the
reckless crossing of the van whose driver had not first stopped, looked and listened; and
that the narrow path traversed by the van had not been intended to be a railroad crossing
for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering them to jointly and severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,4 reiterating that
the cooperative gross negligence of the Pereñas and PNR had caused the collision that led to
the death of Aaron; and that the damages awarded to the Zarates were not excessive, but
based on the established circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and severally liable
together with defendant-appellants spouses Teodorico and Nanette Pereña and defendant-
appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and
damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses
despite overwhelming documentary evidence on record, supporting the case of defendants-
appellants Philippine National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual,
moral and exemplary damages and attorney’s fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas against the
Philippine National Railways and in not holding the latter and its train driver primarily
responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of earning capacity
in the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC,
but limited the moral damages to ₱ 2,500,000.00; and deleted the attorney’s fees because
the RTC did not state the factual and legal bases, to wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch
260 of Parañaque City is AFFIRMED with the modification that the award of Actual Damages
is reduced to ₱ 59,502.76; Moral Damages is reduced to ₱ 2,500,000.00; and the award for
Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the
ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein
the Court gave the heirs of Cariaga a sum representing the loss of the deceased’s earning
capacity despite Cariaga being only a medical student at the time of the fatal incident.
Applying the formula adopted in the American Expectancy Table of Mortality:–

2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life
expectancy from age of 21 (the age when he would have graduated from college and started
working for his own livelihood) instead of 15 years (his age when he died). Considering that
the nature of his work and his salary at the time of Aaron’s death were unknown, it used the
prevailing minimum wage of ₱ 280.00/day to compute Aaron’s gross annual salary to be ₱
110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s
life expectancy of 39.3 years, his gross income would aggregate to ₱ 4,351,164.30, from
which his estimated expenses in the sum of ₱ 2,189,664.30 was deducted to finally arrive at
P 2,161,500.00 as net income. Due to Aaron’s computed net income turning out to be
higher than the amount claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly
prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8
Issues
In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial court’s decision holding the petitioners
jointly and severally liable to pay damages with Philippine National Railways and dismissing
their cross-claim against the latter.
II. The lower court erred in affirming the trial court’s decision awarding damages for loss of
earning capacity of a minor who was only a high school student at the time of his death in
the absence of sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereñas and the
PNR, basing their claim against the Pereñas on breach of contract of carriage and against the
PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereñas’ defense was that they exercised the diligence of a good father of
the family in the selection and supervision of Alfaro, the van driver, by seeing to it that
Alfaro had a driver’s license and that he had not been involved in any vehicular accident
prior to the fatal collision with the train; that they even had their own son travel to and from
school on a daily basis; and that Teodoro Pereña himself sometimes accompanied Alfaro in
transporting the passengers to and from school. The RTC gave scant consideration to such
defense by regarding such defense as inappropriate in an action for breach of contract of
carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the
Pereñas operated as a common carrier; and that their standard of care was extraordinary
diligence, not the ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has been usually regarded
as a private carrier,9 primarily because he only caters to some specific or privileged
individuals, and his operation is neither open to the indefinite public nor for public use, the
exact nature of the operation of a school bus service has not been finally settled. This is the
occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons
from one place to another, gratuitously or for hire. The carrier is classified either as a
private/special carrier or as a common/public carrier.10 A private carrier is one who,
without making the activity a vocation, or without holding himself or itself out to the public
as ready to act for all who may desire his or its services, undertakes, by special agreement in
a particular instance only, to transport goods or persons from one place to another either
gratuitously or for hire.11 The provisions on ordinary contracts of the Civil Code govern the
contract of private carriage.The diligence required of a private carrier is only ordinary, that
is, the diligence of a good father of the family. In contrast, a common carrier is a person,
corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering such services
to the public.12 Contracts of common carriage are governed by the provisions on common
carriers of the Civil Code, the Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is
presumed to be at fault or to have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers.14
In relation to common carriers, the Court defined public use in the following terms in United
States v. Tan Piaco,15 viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining whether a use is public,
we must look not only to the character of the business to be done, but also to the proposed
mode of doing it. If the use is merely optional with the owners, or the public benefit is
merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the
public utility commission. There must be, in general, a right which the law compels the
owner to give to the general public. It is not enough that the general prosperity of the public
is promoted. Public use is not synonymous with public interest. The true criterion by which
to judge the character of the use is whether the public may enjoy it by right or only by
permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code
avoided any distinction between a person or an enterprise offering transportation on a
regular or an isolated basis; and has not distinguished a carrier offering his services to the
general public, that is, the general community or population, from one offering his services
only to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code
coincides neatly with the notion of public service under the Public Service Act, which
supplements the law on common carriers found in the Civil Code. Public service, according
to Section 13, paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientèle, whether permanent
or occasional, and done for the general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight or passenger, or
both, with or without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public
services. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court has
considered as common carriers pipeline operators,18 custom brokers and
warehousemen,19 and barge operators20 even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent
of the business actually transacted, or the number and character of the conveyances used in
the activity, but whether the undertaking is a part of the activity engaged in by the carrier
that he has held out to the general public as his business or occupation . If the undertaking is
a single transaction, not a part of the general business or occupation engaged in, as
advertised and held out to the general public, the individual or the entity rendering such
service is a private, not a common, carrier. The question must be determined by the
character of the business actually carried on by the carrier, not by any secret intention or
mental reservation it may entertain or assert when charged with the duties and obligations
that the law imposes.21
Applying these considerations to the case before us, there is no question that the Pereñas as
the operators of a school bus service were: (a) engaged in transporting passengers generally
as a business, not just as a casual occupation; (b) undertaking to carry passengers over
established roads by the method by which the business was conducted; and (c) transporting
students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a
common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near where they
operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the passengers is
defined by law. Given the nature of the business and for reasons of public policy, the
common carrier is bound "to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them, according to all the circumstances
of each case."22 Article 1755 of the Civil Code specifies that the common carrier should
"carry the passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all the circumstances." To
successfully fend off liability in an action upon the death or injury to a passenger, the
common carrier must prove his or its observance of that extraordinary diligence; otherwise,
the legal presumption that he or it was at fault or acted negligently would stand.23 No
device, whether by stipulation, posting of notices, statements on tickets, or otherwise, may
dispense with or lessen the responsibility of the common carrier as defined under Article
1755 of the Civil Code. 24

And, secondly, the Pereñas have not presented any compelling defense or reason by which
the Court might now reverse the CA’s findings on their liability. On the contrary, an
examination of the records shows that the evidence fully supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be
negligent at the time of the accident because death had occurred to their passenger. 25 The
presumption of negligence, being a presumption of law, laid the burden of evidence on their
shoulders to establish that they had not been negligent.26 It was the law no less that
required them to prove their observance of extraordinary diligence in seeing to the safe and
secure carriage of the passengers to their destination. Until they did so in a credible manner,
they stood to be held legally responsible for the death of Aaron and thus to be held liable
for all the natural consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their negligence
by credible evidence. Their defense of having observed the diligence of a good father of a
family in the selection and supervision of their driver was not legally sufficient. According to
Article 1759 of the Civil Code, their liability as a common carrier did not cease upon proof
that they exercised all the diligence of a good father of a family in the selection and
supervision of their employee. This was the reason why the RTC treated this defense of the
Pereñas as inappropriate in this action for breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might have
acted beyond the scope of his authority or even in violation of the orders of the common
carrier.27 In this connection, the records showed their driver’s actual negligence. There was
a showing, to begin with, that their driver traversed the railroad tracks at a point at which
the PNR did not permit motorists going into the Makati area to cross the railroad tracks.
Although that point had been used by motorists as a shortcut into the Makati area, that fact
alone did not excuse their driver into taking that route. On the other hand, with his
familiarity with that shortcut, their driver was fully aware of the risks to his passengers but
he still disregarded the risks. Compounding his lack of care was that loud music was playing
inside the air-conditioned van at the time of the accident. The loudness most probably
reduced his ability to hear the warning horns of the oncoming train to allow him to correctly
appreciate the lurking dangers on the railroad tracks. Also, he sought to overtake a
passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he
lost his view of the train that was then coming from the opposite side of the passenger bus,
leading him to miscalculate his chances of beating the bus in their race, and of getting clear
of the train. As a result, the bus avoided a collision with the train but the van got slammed
at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop before
traversing the railroad tracks despite knowing that his slackening of speed and going to a full
stop were in observance of the right of way at railroad tracks as defined by the traffic laws
and regulations.28 He thereby violated a specific traffic regulation on right of way, by virtue
of which he was immediately presumed to be negligent.29
The omissions of care on the part of the van driver constituted negligence,30 which,
according to Layugan v. Intermediate Appellate Court,31 is "the omission to do something
which a reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for
the protection of the interests of another person, that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such other person suffers
injury.’"33
The test by which to determine the existence of negligence in a particular case has been
aptly stated in the leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may be
stated as follows: Did the defendant in doing the alleged negligent act use that reasonable
care and caution which an ordinarily prudent person would have used in the same situation?
If not, then he is guilty of negligence. The law here in effect adopts the standard supposed
to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the personal
judgment of the actor in the situation before him. The law considers what would be
reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and
determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation
must of course be always determined in the light of human experience and in view of the
facts involved in the particular case. Abstract speculation cannot here be of much value but
this much can be profitably said: Reasonable men govern their conduct by the
circumstances which are before them or known to them. They are not, and are not
supposed to be, omniscient of the future. Hence they can be expected to take care only
when there is something before them to suggest or warn of danger. Could a prudent man, in
the case under consideration, foresee harm as a result of the course actually pursued? If so,
it was the duty of the actor to take precautions to guard against that harm. Reasonable
foresight of harm, followed by the ignoring of the suggestion born of this prevision, is always
necessary before negligence can be held to exist. Stated in these terms, the proper criterion
for determining the existence of negligence in a given case is this: Conduct is said to be
negligent when a prudent man in the position of the tortfeasor would have foreseen that an
effect harmful to another was sufficiently probable to warrant his foregoing the conduct or
guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent
when he traversed the railroad tracks at a point not allowed for a motorist’s crossing despite
being fully aware of the grave harm to be thereby caused to his passengers; and when he
disregarded the foresight of harm to his passengers by overtaking the bus on the left side as
to leave himself blind to the approach of the oncoming train that he knew was on the
opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35
where the Court held the PNR solely liable for the damages caused to a passenger bus and
its passengers when its train hit the rear end of the bus that was then traversing the railroad
crossing. But the circumstances of that case and this one share no similarities. In Philippine
National Railways v. Intermediate Appellate Court, no evidence of contributory negligence
was adduced against the owner of the bus. Instead, it was the owner of the bus who proved
the exercise of extraordinary diligence by preponderant evidence. Also, the records are
replete with the showing of negligence on the part of both the Pereñas and the PNR.
Another distinction is that the passenger bus in Philippine National Railways v. Intermediate
Appellate Court was traversing the dedicated railroad crossing when it was hit by the train,
but the Pereñas’ school van traversed the railroad tracks at a point not intended for that
purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and
severally" liable for damages arising from the death of Aaron. They had been impleaded in
the same complaint as defendants against whom the Zarates had the right to relief, whether
jointly, severally, or in the alternative, in respect to or arising out of the accident, and
questions of fact and of law were common as to the Zarates.36 Although the basis of the
right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereñas was
distinct from the basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict under
Article 2176, Civil Code), they nonetheless could be held jointly and severally liable by virtue
of their respective negligence combining to cause the death of Aaron. As to the PNR, the
RTC rightly found the PNR also guilty of negligence despite the school van of the Pereñas
traversing the railroad tracks at a point not dedicated by the PNR as a railroad crossing for
pedestrians and motorists, because the PNR did not ensure the safety of others through the
placing of crossbars, signal lights, warning signs, and other permanent safety barriers to
prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a
crossing guard had been assigned to man that point from 7 a.m. to 5 p.m. was a good
indicium that the PNR was aware of the risks to others as well as the need to control the
vehicular and other traffic there. Verily, the Pereñas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the
RTC on the liability, the CA modified the amount. Both lower courts took into consideration
that Aaron, while only a high school student, had been enrolled in one of the reputable
schools in the Philippines and that he had been a normal and able-bodied child prior to his
death. The basis for the computation of Aaron’s earning capacity was not what he would
have become or what he would have wanted to be if not for his untimely death, but the
minimum wage in effect at the time of his death. Moreover, the RTC’s computation of
Aaron’s life expectancy rate was not reckoned from his age of 15 years at the time of his
death, but on 21 years, his age when he would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and
fully warranted.
Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1âwphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the
indemnity for victim Jussi Leino’s loss of earning capacity as a pilot for being speculative due
to his having graduated from high school at the International School in Manila only two
years before the shooting, and was at the time of the shooting only enrolled in the first
semester at the Manila Aero Club to pursue his ambition to become a professional pilot.
That meant, according to the Court, that he was for all intents and purposes only a high
school graduate.
We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi
Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that
Aaron would be some highly-paid professional, like a pilot (or, for that matter, an engineer,
a physician, or a lawyer). Instead, the computation of Aaron’s earning capacity was
premised on him being a lowly minimum wage earner despite his being then enrolled at a
prestigious high school like Don Bosco in Makati, a fact that would have likely ensured his
success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings should not be
taken against his parents and in favor of the defendants whose negligence not only cost
Aaron his life and his right to work and earn money, but also deprived his parents of their
right to his presence and his services as well. Our law itself states that the loss of the earning prove to be an injustice, given the passage of a long time from when their mental anguish
capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the was inflicted on them on August 22, 1996.
deceased, and shall in every case be assessed and awarded by the court "unless the
deceased on account of permanent physical disability not caused by the defendant, had no Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount
earning capacity at the time of his death."38 Accordingly, we emphatically hold in favor of if only to render effective the desired example for the public good. As a common carrier, the
the indemnification for Aaron’s loss of earning capacity despite him having been Pereñas needed to be vigorously reminded to observe their duty to exercise extraordinary
unemployed, because compensation of this nature is awarded not for loss of time or diligence to prevent a similarly senseless accident from happening again. Only by an award
earnings but for loss of the deceased’s power or ability to earn money.39 of exemplary damages in that amount would suffice to instill in them and others similarly
situated like them the ever-present need for greater and constant vigilance in the conduct
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna of a business imbued with public interest.
Tayabas Bus Company and Manila Railroad Company,40 fourth-year medical student
Edgardo Carriaga’s earning capacity, although he survived the accident but his injuries WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision
rendered him permanently incapacitated, was computed to be that of the physician that he promulgated on November 13, 2002; and ORDER the petitioners to pay the costs of suit.
dreamed to become. The Court considered his scholastic record sufficient to justify the
assumption that he could have finished the medical course and would have passed the SO ORDERED.
medical board examinations in due time, and that he could have possibly earned a modest
income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined that
murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily
landed good-paying jobs had they graduated in due time, and that their jobs would probably
pay them high monthly salaries from ₱ 10,000.00 to ₱ 15,000.00 upon their graduation.
Their earning capacities were computed at rates higher than the minimum wage at the time
of their deaths due to their being already senior agriculture students of the University of the
Philippines in Los Baños, the country’s leading educational institution in agriculture.

3.
Were the amounts of damages excessive?

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

The plea is unwarranted.

The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates’
deep mental anguish over their son’s unexpected and violent death, and their moral shock
over the senseless accident. That amount would not be too much, considering that it would
help the Zarates obtain the means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the amount as excessive might