Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
 
G.R. No. 119197 May 16, 1997
TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND
INSURANCE CO., LTD., petitioners,
vs.
NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents.
BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co., Ltd., in
this petition for review on certiorari, assail the 22 December 1994 decision of the Court of Appeals and its Resolution of
16 February 1995 which affirmed the 1 June 1993 decision of the Regional Trial Court dismissing their complaint for
damages against North Front Shipping Services, Inc.
On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped on board  North Front 777, a
vessel owned by North Front Shipping Services, Inc. The cargo was consigned to Republic Flour Mills Corporation in
Manila under Bill of Lading No. 001   and insured with the herein mentioned insurance companies. The vessel was
1

inspected prior to actual loading by representatives of the shipper and was found fit to carry the merchandise. The
cargo was covered with tarpaulins and wooden boards. The hatches were sealed and could only be opened by
representatives of Republic Flour Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August 1990. Republic Flour Mills
Corporation was advised of its arrival but it did not immediately commence the unloading operations. There were days
when unloading had to be stopped due to variable weather conditions and sometimes for no apparent reason at all.
When the cargo was eventually unloaded there was a shortage of 26.333 metric tons. The remaining merchandise was
already moldy, rancid and deteriorating. The unloading operations were completed on 5 September 1990 or twenty
(20) days after the arrival of the barge at the wharf of Republic Flour Mills Corporation in Pasig City.
Precision Analytical Services, Inc., was hired to examine the corn grains and determine the cause of deterioration.
A Certificate of Analysis was issued indicating that the corn grains had 18.56% moisture content and the wetting was
due to contact with salt water. The mold growth was only incipient and not sufficient to make the corn grains toxic and
unfit for consumption. In fact the mold growth could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and formally demanded from North Front Shipping Services,
Inc., payment for the damages suffered by it. The demands however were unheeded. The insurance companies were
perforce obliged to pay Republic Flour Mills Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were subrogated to the rights of Republic Flour Mills
Corporation. Thusly, they lodged a complaint for damages against North Front Shipping Services, Inc., claiming that
the loss was exclusively attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the
insurance companies conducted a survey and found cracks in the bodega of the barge and heavy concentration of
molds on the tarpaulins and wooden boards. They did not notice any seals in the hatches. The tarpaulins were not
brand new as there were patches on them, contrary to the claim of North Front Shipping Services, Inc., thus making it
possible for water to seep in. They also discovered that the bulkhead of the barge was rusty.
North Front Shipping Services, Inc., averred in refutation that it could not be made culpable for the loss and
deterioration of the cargo as it was never negligent. Captain Solomon Villanueva, master of the vessel, reiterated that
the barge was inspected prior to the actual loading and was found adequate and seaworthy. In addition, they were
issued a permit to sail by the Coast Guard. The tarpaulins were doubled and brand new and the hatches were properly
sealed. They did not encounter big waves hence it was not possible for water to seep in. He further averred that the
corn grains were farm wet and not properly dried when loaded.
The court below dismissed the complaint and ruled that the contract entered into between North Front Shipping
Services, Inc., and Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary diligence in
the care of goods was required of North Front Shipping Services, Inc. The inspection of the barge by the shipper and
the representatives of the shipping company before actual loading, coupled with the Permit to Sail issued by the Coast
Guard, sufficed to meet the degree of diligence required of the carrier.
On the other hand, the Court of Appeals ruled that as a common carrier required to observe a higher degree of
diligence North Front 777 satisfactorily complied with all the requirements hence was issued a Permit to Sail after
proper inspection. Consequently, the complaint was dismissed and the motion for reconsideration rejected.
The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not
in any way convert the common carrier into a private carrier. We have already resolved this issue with finality
in Planters Products, Inc. v. Court of Appeals   thus —
2
 A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time or use; a contract of affreightment by which the
owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the payment of freight . . . Contract of
affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period
of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-
party provides for the hire of the vessel only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the
crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. The
definition extends to carriers either by land, air or water which hold themselves out as ready to engage
in carrying goods or transporting passengers or both for compensation as a public employment and not
as a casual occupation . . .
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the shin only, as
in the case of a time-charter or voyage-charter (emphasis supplied).
North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its
services indiscriminately to the public. It is without doubt a common carrier. As such it is required to
observe extraordinary diligence in its vigilance over the goods it transports.   When goods placed in its care are lost or
3

damaged, the carrier is presumed to have been at fault or to have acted negligently.    North Front Shipping Services,
4

Inc., therefore has the burden of proving that it observed extraordinary diligence in order to avoid responsibility for the
lost cargo.
North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual loading by representatives of
the shipper and was found fit to take a load of corn grains. They were also issued  Permit to Sail by the Coast Guard.
The master of the vessel testified that the corn grains were farm wet when loaded. However, this testimony was
disproved by the clean bill of lading issued by North Front Shipping Services, Inc., which did not contain a notation that
the corn grains were wet and improperly dried. Having been in the service since 1968, the master of the vessel would
have known at the outset that corn grains that were farm wet and not properly dried would eventually deteriorate when
stored in sealed and hot compartments as in hatches of a ship. Equipped with this knowledge, the master of the vessel
and his crew should have undertaken precautionary measures to avoid or lessen the cargo's possible deterioration as
they were presumed knowledgeable about the nature of such cargo. But none of such measures was taken.
In Compania Maritima v. Court of Appeals   we ruled —
5

. . . Mere proof of delivery of the goods in good order to a common carrier, and of their arrival at the
place of destination in bad order, makes out prima facie case against the common carrier, so that if no
explanation is given as to how the loss, deterioration or destruction of the goods occurred, the common
carrier must be held responsible. Otherwise stated, it is incumbent upon the common carrier to prove
that the loss, deterioration or destruction was due to accident or some other circumstances inconsistent
with its liability . . .
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 safe 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
characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires" (emphasis supplied).
In fine, we find that the carrier failed to observe the required extraordinary diligence in the vigilance over the goods
placed in its care. The proofs presented by North Front Shipping Services, Inc., were insufficient to rebut the  prima
facie presumption of private respondent's negligence, more so if we consider the evidence adduced by petitioners.
It is not denied by the insurance companies that the vessel was indeed inspected before actual loading and that North
Front 777 was issued a Permit to Sail. They proved the fact of shipment and its consequent loss or damage while in
the actual possession of the carrier. Notably, the carrier failed to volunteer any explanation why there was spoilage and
how it occurred. On the other hand, it was shown during the trial that the vessel had rusty bulkheads and the wooden
boards and tarpaulins bore heavy concentration of molds. The tarpaulins used were not new, contrary to the claim of
North Front Shipping Services, Inc., as there were already several patches on them, hence, making it highly probable
for water to enter.
Laboratory analysis revealed that the corn grains were contaminated with salt water. North Front Shipping Services,
Inc., failed to rebut all these arguments. It did not even endeavor to establish that the loss, destruction or deterioration
of the goods was due to the following: (a) flood, storm, earthquake, lightning, or other natural disaster or calamity; (b)
act of the public enemy in war, whether international or civil; (c) act or omission of the shipper or owner of the goods;
(d) the character of the goods or defects in the packing or in the containers; (e) order or act of competent public
authority.   This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated
6

circumstances, then the carrier is rightly liable therefor.

However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the
consignee Republic Flour Mills Corporation guilty of contributory negligence. It was seasonably notified of the arrival of
the barge but did not immediately start the unloading operations. No explanation was proffered by the consignee as to
why there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been
completely avoided or at least minimized. As testified to by the chemist who analyzed the corn samples, the mold
growth was only at its incipient stage and could still be arrested by drying. The corn grains were not yet toxic or unfit for
consumption. For its contributory negligence, Republic Flour Mills Corporation should share at least 40% of the loss.  7

WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its Resolution of 16 February 1995 are
REVERSED and SET ASIDE. Respondent North Front Shipping Services, Inc., is ordered to pay petitioners
Tabacalera Insurance Co., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co. Ltd.,
P1,313,660.00 which is 60% of the amount paid by the insurance companies to Republic Flour Mills Corporation, plus
interest at the rate of 12% per annum from the time this judgment becomes final until full payment.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-46340 April 28, 1983
SWEET LINES, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, MICAELA B. QUINTOS, FR. JOSE BACATAN, S.J., MARCIANO
CABRAS and ANDREA VELOSO, respondents.
Felixberto Leonardo and Ramon Tuangco for petitioner.
Expedito P. Bugarin for respondents.
RESOLUTION
 
MELENCIO-HERRERA, J.:
For having by-passed a port of call without previous notice, petitioner shipping company and the ship captain were
sued for damages by four of its passengers, private respondents herein, before the then Court of First Instance of
Cebu, Branch VIII,
Briefly, the facts of record show that private respondents purchased first- class tickets from petitioner at the latter's
office in Cebu City. They were to board petitioner's vessel, M/V Sweet Grace, bound for Catbalogan, Western Samar.
Instead of departing at the scheduled hour of about midnight on July 8, 1972, the vessel set sail at 3:00 A.M. of July 9,
1972 only to be towed back to Cebu due to engine trouble, arriving there at about 4:00 P.M. on the same day. Repairs
having been accomplished, the vessel lifted anchor again on July 10, 1972 at around 8:00 A.M.
Instead of docking at Catbalogan, which was the first port of call, the vessel proceeded direct to Tacloban at around
9:00 P.M. of July 10, 1972. Private respondents had no recourse but to disembark and board a ferryboat to
Catbalogan.
Hence, this suit for damages for breach of contract of carriage which the Trial Court, affirmed by respondent Appellate
Court, awarded as follows:
IN THE LIGHT OF THE FOREGOING OBSERVATIONS, judgment is rendered ordering the defendant
Sweet Lines, Incorporated to pay to the plaintiffs the following:
l) P175,000.00 as moral damages divided among the plaintiffs as follows: P30,000.00 for Mrs. Micaela
B. Quintos, P26,000.00 for Jesuit Father Jose Bacatan; P10,000.00 for Mrs. Andrea Veloso and
P10,000.00 for plaintiff Mike Cabras;
2) P30,000.00 as exemplary or corrective damages;
3) Interest at the legal rate of 6% per annum on the moral and exemplary damages as set forth above
from the date of this decision until said damages are fully paid;
4) P5,000.00 as attorney's fees; and
5) The costs.
Counterclaim dismissed.
The governing provisions are found in the Code of Commerce and read as follows:
ART. 614. A captain who, having agreed to make a voyage, fails to fulfill his undertaking, without being
prevented by fortuitous event or force majeure, shall indemnify all the losses which his failure may
cause, without prejudice to criminal penalties which may be proper.
and
ART. 698. In case of interruption of a voyage already begun, the passengers shall only be obliged to
pay the fare in proportion to the distance covered, without right to recover damages if the interruption is
due to fortuitous event or force majeure, but with a right to indemnity, if the interruption should have
been caused by the captain exclusively. If the interruption should be caused by the disability of the
vessel, and the passenger should agree to wait for her repairs, he may not be required to pay any
increased fare of passage, but his living expenses during the delay shall be for his own account.
The crucial factor then is the existence of a fortuitous event or force majeure. Without it, the right to damages and
indemnity exists against a captain who fails to fulfill his undertaking or where the interruption has been caused by the
captain exclusively.
As found by both Courts below, there was no fortuitous event or force majeure which prevented the vessel from
fulfilling its undertaking of taking private respondents to Catbalogan. In the first place, mechanical defects in the carrier
are not considered a caso fortuito that exempts the carrier from responsibility.  1

In the second place, even granting arguendo that the engine failure was a fortuitous event, it accounted only for the
delay in departure. When the vessel finally left the port of Cebu on July 10, 1972, there was no longer any force
majeure that justified by-passing a port of call. The vessel was completely repaired the following day after it was towed
back to Cebu. In fact, after docking at Tacloban City, it left the next day for Manila to complete its voyage.  2

The reason for by-passing the port of Catbalogan, as admitted by petitioner's General Manager, was to enable the
vessel to catch up with its schedule for the next week. The record also discloses that there were 50 passengers for
Tacloban compared to 20 passengers for Catbalogan,  so that the Catbalogan phase could be scrapped without too
3

much loss for the company.

In defense, petitioner cannot rely on the conditions in small bold print at the back of the ticket reading.
The passenger's acceptance of this ticket shall be considered as an acceptance of the following
conditions:
3. In case the vessel cannot continue or complete the trip for any cause whatsoever, the carrier
reserves the right to bring the passenger to his/her destination at the expense of the carrier or to cancel
the ticket and refund the passenger the value of his/her ticket;
xxx xxx xxx
11. The sailing schedule of the vessel for which this ticket was issued is subject to change without
previous notice. (Exhibit "l -A")
Even assuming that those conditions are squarely applicable to the case at bar, petitioner did not comply with the
same. It did not cancel the ticket nor did it refund the value of the tickets to private respondents. Besides, it was not the
vessel's sailing schedule that was involved. Private respondents' complaint is directed not at the delayed departure the
next day but at the by- passing of Catbalogan, their destination. Had petitioner notified them previously, and offered to
bring them to their destination at its expense, or refunded the value of the tickets purchased, perhaps, this controversy
would not have arisen.
Furthermore, the conditions relied upon by petitioner cannot prevail over Articles 614 and 698 of the Code of
Commerce heretofore quoted.
The voyage to Catbalogan was "interrupted" by the captain upon instruction of management. The "interruption" was not
due to fortuitous event or for majeure nor to disability of the vessel. Having been caused by the captain upon
instruction of management, the passengers' right to indemnity is evident. The owner of a vessel and the ship agent
shall be civilly liable for the acts of the captain. 
4

Under Article 2220 of the Civil Code, moral damages are justly due in breaches of contract where the defendant acted
fraudulently or in bad faith. Both the Trial Court and the Appellate Court found that there was bad faith on the part of
petitioner in that:
(1) Defendants-appellants did not give notice to plaintiffs- appellees as to the change of schedule of the
vessel;
(2) Knowing fully well that it would take no less than fifteen hours to effect the repairs of the damaged
engine, defendants-appellants instead made announcement of assurance that the vessel would leave
within a short period of time, and when plaintiffs-appellees wanted to leave the port and gave up the
trip, defendants-appellants' employees would come and say, 'we are leaving, already.'
(3) Defendants-appellants did not offer to refund plaintiffs-appellees' tickets nor provide them with
transportation from Tacloban City to Catbalogan. 5

That finding of bad faith is binding on us, since it is not the function of the Court to analyze and review evidence on this
point all over again,   aside from the fact that we find it faithful to the meaning of bad faith enunciated thus:
6

Bad faith means a breach of a known duty through some motive or interest or illwill. Self-enrichment or
fraternal interest, and not personal illwill may have been the motive, but it is malice nevertheless.
7

Under the circumstances, however, we find the award of moral damages excessive and accordingly reduce them to
P3,000.00, respectively, for each of the private respondents.
The total award of attorney's fees of P5,000.00 is in order considering that the case has reached this Tribunal.
Insofar as exemplary damages are concerned, although there was bad faith, we are not inclined to grant them in
addition to moral damages. Exemplary damages cannot be recovered as a matter of right; the Court decides whether
or not they should be adjudicated.  The objective to meet its schedule might have been called for, but petitioner should
8

have taken the necessary steps for the protection of its passengers under its contract of carriage.
Article 2215(2) of the Civil Code   invoked by petitioner is inapplicable herein. The harm done to private respondents
9

outweighs any benefits they may have derived from being transported to Tacloban instead of being taken to
Catbalogan, their destination and the vessel's first port of call, pursuant to its normal schedule.
ACCORDINGLY, the judgment appealed from is hereby modified in that petitioner is hereby sentenced to indemnify
private respondents in the sum of P3,000.00 each, without interest, plus P1,250.00, each, by way of att/rney's fees and
litigation expenses. Costs against petitioner.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-45637 May 31, 1985
ROBERTO JUNTILLA, petitioner,
vs.
CLEMENTE FONTANAR, FERNANDO BANZON and BERFOL CAMORO, respondents.
Valentin A. Zozobrado for petitioner.
Ruperto N. Alfarara for respondents.

GUTIERREZ, JR., J.:
This is a petition for review, on questions of law, of the decision of the Court of First Instance of Cebu which reversed
the decision of the City Court of Cebu and exonerated the respondents from any liability arising from a vehicular
accident.
The background facts which led to the filing of a complaint for breach of contract and damages against the
respondents are summarized by the Court of First Instance of Cebu as follows:
The facts established after trial show that the plaintiff was a passenger of the public utility jeepney
bearing plate No. PUJ-71-7 on the course of the trip from Danao City to Cebu City. The jeepney was
driven by defendant Berfol Camoro. It was registered under the franchise of defendant Clemente
Fontanar but was actually owned by defendant Fernando Banzon. When the jeepney reached
Mandaue City, the right rear tire exploded causing the vehicle to turn turtle. In the process, the plaintiff
who was sitting at the front seat was thrown out of the vehicle. Upon landing on the ground, the plaintiff
momentarily lost consciousness. When he came to his senses, he found that he had a lacerated wound
on his right palm. Aside from this, he suffered injuries on his left arm, right thigh and on his back. (Exh.
"D"). Because of his shock and injuries, he went back to Danao City but on the way, he discovered that
his "Omega" wrist watch was lost. Upon his arrival in Danao City, he immediately entered the Danao
City Hospital to attend to his injuries, and also requested his father-in-law to proceed immediately to the
place of the accident and look for the watch. In spite of the efforts of his father-in-law, the wrist watch,
which he bought for P 852.70 (Exh. "B") could no longer be found.
xxx xxx xxx
Petitioner Roberto Juntilla filed Civil Case No. R-17378 for breach of contract with damages before the City Court of
Cebu City, Branch I against Clemente Fontanar, Fernando Banzon and Berfol Camoro.
The respondents filed their answer, alleging inter alia that the accident that caused losses to the petitioner was beyond
the control of the respondents taking into account that the tire that exploded was newly bought and was only slightly
used at the time it blew up.
After trial, Judge Romulo R. Senining of the Civil Court of Cebu rendered judgment in favor of the petitioner and
against the respondents. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants and the
latter are hereby ordered, jointly and severally, to pay the plaintiff the sum of P750.00 as
reimbursement for the lost Omega wrist watch, the sum of P246.64 as unrealized salary of the plaintiff
from his employer, the further sum of P100.00 for the doctor's fees and medicine, an additional sum of
P300.00 for attorney's fees and the costs.
The respondents appealed to the Court of First Instance of Cebu, Branch XIV.
Judge Leonardo B. Canares reversed the judgment of the City Court of Cebu upon a finding that the accident in
question was due to a fortuitous event. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered exonerating the defendants from any liability to the
plaintiff without pronouncement as to costs.
A motion for reconsideration was denied by the Court of First Instance.
The petitioner raises the following alleged errors committed by the Court of First Instance of Cebu on appeal—
a. The Honorable Court below committed grave abuse of discretion in failing to take cognizance of the
fact that defendants and/or their employee failed to exercise "utmost and/or extraordinary diligence"
required of common carriers contemplated under Art. 1755 of the Civil Code of the Philippines.
b. The Honorable Court below committed grave abuse of discretion by deciding the case contrary to the
doctrine laid down by the Honorable Supreme Court in the case of Necesito et al. v. Paras, et al.
We find the petition impressed with merit.
The City Court and the Court of First Instance of Cebu found that the right rear tire of the passenger jeepney in which
the petitioner was riding blew up causing the vehicle to fall on its side. The petitioner questions the conclusion of the
respondent court drawn from this finding of fact.
The Court of First Instance of Cebu erred when it absolved the carrier from any liability upon a finding that the tire blow
out is a fortuitous event. The Court of First Instance of Cebu ruled that:
After reviewing the records of the case, this Court finds that the accident in question was due to a
fortuitous event. A tire blow-out, such as what happened in the case at bar, is an inevitable accident
that exempts the carrier from liability, there being absence of a showing that there was misconduct or
negligence on the part of the operator in the operation and maintenance of the vehicle involved. The
fact that the right rear tire exploded, despite being brand new, constitutes a clear case of caso fortuito
which can be a proper basis for exonerating the defendants from liability. ...
The Court of First Instance relied on the ruling of the Court of Appeals in Rodriguez v. Red Line Transportation
Co., CA G.R. No. 8136, December 29, 1954, where the Court of Appeals ruled that:
A tire blow-out does not constitute negligence unless the tire was already old and should not have been
used at all. Indeed, this would be a clear case of fortuitous event.
The foregoing conclusions of the Court of First Instance of Cebu are based on a misapprehension of overall facts from
which a conclusion should be drawn. The reliance of the Court of First Instance on the  Rodriguez case is not in order.
In La Mallorca and Pampanga Bus Co. v. De Jesus, et al. (17 SCRA 23), we held that:
Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no liability for negligence,
citing the rulings of the Court of Appeals in Rodriguez v. Red Line Transportation Co., CA G.R. No.
8136, December 29, 1954, and People v. Palapad, CA-G.R. No. 18480, June 27, 1958. These rulings,
however, not only are not binding on this Court but were based on considerations quite different from
those that obtain in the case at bar. The appellate court there made no findings of any specific acts of
negligence on the part of the defendants and confined itself to the question of whether or not a tire
blow-out, by itself alone and without a showing as to the causative factors, would generate liability. ...
In the case at bar, there are specific acts of negligence on the part of the respondents. The records show that the
passenger jeepney turned turtle and jumped into a ditch immediately after its right rear tire exploded. The evidence
shows that the passenger jeepney was running at a very fast speed before the accident. We agree with the
observation of the petitioner that a public utility jeep running at a regular and safe speed will not jump into a ditch when
its right rear tire blows up. There is also evidence to show that the passenger jeepney was overloaded at the time of
the accident. The petitioner stated that there were three (3) passengers in the front seat and fourteen (14) passengers
in the rear.
While it may be true that the tire that blew-up was still good because the grooves of the tire were still visible, this fact
alone does not make the explosion of the tire a fortuitous event. No evidence was presented to show that the accident
was due to adverse road conditions or that precautions were taken by the jeepney driver to compensate for any
conditions liable to cause accidents. The sudden blowing-up, therefore, could have been caused by too much air
pressure injected into the tire coupled by the fact that the jeepney was overloaded and speeding at the time of the
accident.
In Lasam v. Smith (45 Phil. 657), we laid down the following essential characteristics of caso fortuito:
xxx xxx xxx
... In a legal sense and, consequently, also in relation to contracts, a caso fortuito presents the following
essential characteristics: (1) The cause of the unforeseen and unexpected occurrence, or of the failure
of the debtor to comply with his obligation, must be independent of the human will. (2) It must be
impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be
impossible to avoid. (3) The occurrence must be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner. And (4) the obligor (debtor) must be free from any participation in the
aggravation of the injury resulting to the creditor. (5 Encyclopedia Juridica Espanola, 309.)
In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the human will.
The accident was caused either through the negligence of the driver or because of mechanical defects in the tire.
Common carriers should teach their drivers not to overload their vehicles, not to exceed safe and legal speed limits,
and to know the correct measures to take when a tire blows up thus insuring the safety of passengers at all times.
Relative to the contingency of mechanical defects, we held in Necesito, et al. v. Paras, et al. (104 Phil. 75), that:
... The preponderance of authority is in favor of the doctrine that a passenger is entitled to recover
damages from a carrier for an injury resulting from a defect in an appliance purchased from a
manufacturer, whenever it appears that the defect would have been discovered by the carrier if it had
exercised the degree of care which under the circumstances was incumbent upon it, with regard to
inspection and application of the necessary tests. For the purposes of this doctrine, the manufacturer is
considered as being in law the agent or servant of the carrier, as far as regards the work of constructing
the appliance. According to this theory, the good repute of the manufacturer will not relieve the carrier
 from liability' (10 Am. Jur. 205, s, 1324; see also Pennsylvania R. Co. v. Roy, 102 U.S. 451; 20 L. Ed.
141; Southern R. Co. v. Hussey, 74 ALR 1172; 42 Fed. 2d 70; and Ed Note, 29 ALR 788.: Ann. Cas.
1916E 929).
The rationale of the carrier's liability is the fact that the passenger has neither choice nor control over
the carrier in the selection and use of the equipment and appliances in use by the carrier. Having no
privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no
remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while not
an insurer of the safety of his passengers, should nevertheless be held to answer for the flaws of his
equipment if such flaws were at all discoverable. ...
It is sufficient to reiterate that the source of a common carrier's legal liability is the contract of carriage, and by entering
into the said contract, it binds itself to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of a very cautious person, with a due regard for all the circumstances. The records show
that this obligation was not met by the respondents.
The respondents likewise argue that the petitioner cannot recover any amount for failure to prove such damages
during the trial. The respondents submit that if the petitioner was really injured, why was he treated in Danao City and
not in Mandaue City where the accident took place. The respondents argue that the doctor who issued the medical
certificate was not presented during the trial, and hence not cross-examined. The respondents also claim that the
petitioner was not wearing any wrist watch during the accident.
It should be noted that the City Court of Cebu found that the petitioner had a lacerated wound on his right palm aside
from injuries on his left arm, right thigh and on his back, and that on his way back to Danao City, he discovered that his
"Omega" wrist watch was lost. These are findings of facts of the City Court of Cebu which we find no reason to disturb.
More so when we consider the fact that the Court of First Instance of Cebu impliedly concurred in these matters when
it confined itself to the question of whether or not the tire blow out was a fortuitous event.
WHEREFORE, the decision of the Court of First Instance of Cebu, Branch IV appealed from is hereby REVERSED
and SET ASIDE, and the decision of the City Court of Cebu, Branch I is REINSTATED, with the modification that the
damages shall earn interest at 12% per annum and the attorney's fees are increased to SIX HUNDRED PESOS
(P600.00). Damages shall earn interests from January 27, 1975.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 77679 September 30, 1987
VICENTE VERGARA, petitioner,
vs.
THE COURT OF APPEALS and AMADEO AZARCON, respondents.
RESOLUTION
 
PADILLA, J.:
An action for damages based on quasi-delict (Art. 2176 of the Civil Code) was filed by private respondent against
petitioner. The action arose from a vehicular accident that occurred on 5 August 1979 in Gapan, Nueva Ecija, when
Martin Belmonte, while driving a cargo truck belonging to petitioner, rammed "head-on" the store-residence of the
private respondent, causing damages thereto which were inventoried and assessed at P53,024.22.
In his answer to the complaint, the petitioner alleged principally: "that his driver Martin Belmonte operated said cargo
truck in a very diligent (and) careful manner; that the steering wheel refused to respond to his effort and as a result of a
blown-out tire and despite application of his brakes, the said cargo truck hit the store-residence of plaintiff (private
respondent) and that the said accident was an act of God for which he cannot be held liable."  1
Petitioner also filed a third party complaint against Travellers Insurance and Surety Corporation, alleging that said cargo truck involved in the vehicular accident,
belonging to the petitioner, was insured by the third party defendant insurance company. Petitioner asked that the latter be ordered to pay him whatever amount he
may be ordered by the court to pay to the private respondent.
The trial court rendered judgment in favor of private respondent. Upon appeal to the Court of Appeals, the latter court
affirmed in toto the decision of the trial court, which ordered Petitioner to pay, jointly and severally with Travellers
Insurance and Surety Corporation, to the private, respondent the following: (a) P53,024.22 as actual damages; (b)
P10,000.00 as moral damages; (c) P10,000.00 as exemplary damages; and (d) the sum of P5,000.00 for attorney's
fees and the costs. On the third party complaint, the insurance company was sentenced to pay to the petitioner the
following: (a) P50,000.00 for third party liability under its comprehensive accident insurance policy; and (b) P3,000.00
for and as attorney's fees.
Hence, this petition for review on certiorari.
Petitioner's contention that the respondent court erred in finding him guilty of fault or negligence is not tenable. It was
established by competent evidence that the requisites of a quasi-delict are present in the case at bar. These requisites
are: (1) damages to the plaintiff; (2) negligence, by act or omission, of which defendant, or some person for whose acts
he must respond, was guilty; and (3) the connection of cause and effect between such negligence and the damages.
It is undisputed that private respondent suffered damages as a result of an act or omission of petitioner. The issue of
whether or not this act or omission can be considered as a "negligent" act or omission was passed upon by the trial
court. The findings of said court, affirmed by the respondent court, which we are not prepared to now disturb, show that
the fact of occurrence of the "vehicular accident" was sufficiently established by the policy report and the testimony of
Patrolman Masiclat. And the fact of negligence may be deduced from the surrounding circumstances thereof.
According to the police report, "the cargo truck was travelling on the right side of the road going to Manila and then it
crossed to the center line and went to the left side of the highway; it then bumped a tricycle; and then another bicycle;
and then said cargo truck rammed the store warehouse of the plaintiff." 2

According to the driver of the cargo truck, he applied the brakes but the latter did not work due to mechanical defect.
Contrary to the claim of the petitioner, a mishap caused by defective brakes can not be consideration as fortuitous in
character. Certainly, the defects were curable and the accident preventable.
Furthermore, the petitioner failed to adduce any evidence to overcome the disputable presumption of negligence on his
part in the selection and supervision of his driver.
Based on the foregoing finding by the respondent Court that there was negligence on the part of the petitioner, the
petitioner's contention that the respondent court erred in awarding private respondent actual, moral and exemplary
damages as well as attorney's fees and costs, is untenable.
ACCORDINGLY, the petition is DENIED.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12986             March 31, 1966
THE SPOUSES BERNABE AFRICA and SOLEDAD C. AFRICA, and the HEIRS OF DOMINGA ONG, petitioners-
appellants,
vs.
CALTEX (PHIL.), INC., MATEO BOQUIREN and THE COURT OF APPEALS, respondents-appellees.
Ross, Selph, Carrascoso and Janda for the respondents.
Bernabe Africa, etc. for the petitioners.
MAKALINTAL., J.:
This case is before us on a petition for review of the decision of the Court of Appeals, which affirmed that of the Court
of First Instance of Manila dismissing petitioners' second amended complaint against respondents.
The action is for damages under Articles 1902 and 1903 of the old Civil Code. It appears that in the afternoon of March
18, 1948 a fire broke out at the Caltex service station at the corner of Antipolo street and Rizal Avenue, Manila. It
started while gasoline was being hosed from a tank truck into the underground storage, right at the opening of the
receiving tank where the nozzle of the hose was inserted. The fire spread to and burned several neighboring houses,
including the personal properties and effects inside them. Their owners, among them petitioners here, sued
respondents Caltex (Phil.), Inc. and Mateo Boquiren, the first as alleged owner of the station and the second as its
agent in charge of operation. Negligence on the part of both of them was attributed as the cause of the fire.
The trial court and the Court of Appeals found that petitioners failed to prove negligence and that respondents had
exercised due care in the premises and with respect to the supervision of their employees.
The first question before Us refers to the admissibility of certain reports on the fire prepared by the Manila Police and
Fire Departments and by a certain Captain Tinio of the Armed Forces of the Philippines. Portions of the first two reports
are as follows:
1. Police Department report: —
Investigation disclosed that at about 4:00 P.M. March 18, 1948, while Leandro Flores was transferring
gasoline from a tank truck, plate No. T-5292 into the underground tank of the Caltex Gasoline Station
located at the corner of Rizal Avenue and Antipolo Street, this City, an unknown Filipino lighted a
cigarette and threw the burning match stick near the main valve of the said underground tank. Due to
the gasoline fumes, fire suddenly blazed. Quick action of Leandro Flores in pulling off the gasoline hose
connecting the truck with the underground tank prevented a terrific explosion. However, the flames
scattered due to the hose from which the gasoline was spouting. It burned the truck and the following
accessorias and residences.
2. The Fire Department report: —
In connection with their allegation that the premises was (sic) subleased for the installation of a coca-cola and
cigarette stand, the complainants furnished this Office a copy of a photograph taken during the fire and which is
submitted herewith. it appears in this picture that there are in the premises a coca-cola cooler and a rack which
according to information gathered in the neighborhood contained cigarettes and matches, installed between the
gasoline pumps and the underground tanks.
The report of Captain Tinio reproduced information given by a certain Benito Morales regarding the history of the
gasoline station and what the chief of the fire department had told him on the same subject.
The foregoing reports were ruled out as "double hearsay" by the Court of Appeals and hence inadmissible. This ruling
is now assigned as error. It is contended: first, that said reports were admitted by the trial court without objection on the
part of respondents; secondly, that with respect to the police report (Exhibit V-Africa) which appears signed by a
Detective Zapanta allegedly "for Salvador Capacillo," the latter was presented as witness but respondents waived their
right to cross-examine him although they had the opportunity to do so; and thirdly, that in any event the said reports
are admissible as an exception to the hearsay rule under section 35 of Rule 123, now Rule 130.
The first contention is not borne out by the record. The transcript of the hearing of September 17, 1953 (pp. 167-170)
shows that the reports in question, when offered as evidence, were objected to by counsel for each of respondents on
the ground that they were hearsay and that they were "irrelevant, immaterial and impertinent." Indeed, in the court's
resolution only Exhibits J, K, K-5 and X-6 were admitted without objection; the admission of the others, including the
disputed ones, carried no such explanation.
On the second point, although Detective Capacillo did take the witness stand, he was not examined and he did not
testify as to the facts mentioned in his alleged report (signed by Detective Zapanta). All he said was that he was one of
those who investigated "the location of the fire and, if possible, gather witnesses as to the occurrence, and that he
brought the report with him. There was nothing, therefore, on which he need be cross-examined; and the contents of
the report, as to which he did not testify, did not thereby become competent evidence. And even if he had testified, his
testimony would still have been objectionable as far as information gathered by him from third persons was concerned.
Petitioners maintain, however, that the reports in themselves, that is, without further testimonial evidence on their
contents, fall within the scope of section 35, Rule 123, which provides that "entries in official records made in the
performance of his duty by a public officer of the Philippines, or by a person in the performance of a duty specially
enjoined by law, are prima facie evidence of the facts therein stated."
There are three requisites for admissibility under the rule just mentioned: (a) that the entry was made by a public
officer, or by another person specially enjoined by law to do so; (b) that it was made by the public officer in the
performance of his duties, or by such other person in the performance of a duty specially enjoined by law; and (c) that
the public officer or other person had sufficient knowledge of the facts by him stated, which must have been acquired
by him personally or through official information (Moran, Comments on the Rules of Court, Vol. 3 [1957] p. 398).
Of the three requisites just stated, only the last need be considered here. Obviously the material facts recited in the
reports as to the cause and circumstances of the fire were not within the personal knowledge of the officers who
conducted the investigation. Was knowledge of such facts, however, acquired by them through official information? As
to some facts the sources thereof are not even identified. Others are attributed to Leopoldo Medina, referred to as an
employee at the gas station were the fire occurred; to Leandro Flores, driver of the tank truck from which gasoline was
being transferred at the time to the underground tank of the station; and to respondent Mateo Boquiren, who could not,
according to Exhibit V-Africa, give any reason as to the origin of the fire. To qualify their statements as "official
information" acquired by the officers who prepared the reports, the persons who made the statements not only must
have personal knowledge of the facts stated but must have the duty to give such statements for record. 1
The reports in question do not constitute an exception to the hearsay rule; the facts stated therein were not acquired by
the reporting officers through official information, not having been given by the informants pursuant to any duty to do
so.
The next question is whether or not, without proof as to the cause and origin of the fire, the doctrine of res ipsa
loquitur should apply so as to presume negligence on the part of appellees. Both the trial court and the appellate court
refused to apply the doctrine in the instant case on the grounds that "as to (its) applicability ... in the Philippines, there
seems to he nothing definite," and that while the rules do not prohibit its adoption in appropriate cases, "in the case at
bar, however, we find no practical use for such doctrine." The question deserves more than such summary dismissal.
The doctrine has actually been applied in this jurisdiction, in the case of Espiritu vs. Philippine Power and Development
Co. (CA-G.R. No. 3240-R, September 20, 1949), wherein the decision of the Court of Appeals was penned by Mr.
Justice J.B.L. Reyes now a member of the Supreme Court.
The facts of that case are stated in the decision as follows:
In the afternoon of May 5, 1946, while the plaintiff-appellee and other companions were loading grass between
the municipalities of Bay and Calauan, in the province of Laguna, with clear weather and without any wind
blowing, an electric transmission wire, installed and maintained by the defendant Philippine Power and
Development Co., Inc. alongside the road, suddenly parted, and one of the broken ends hit the head of the
plaintiff as he was about to board the truck. As a result, plaintiff received the full shock of 4,400 volts carried by
the wire and was knocked unconscious to the ground. The electric charge coursed through his body and
caused extensive and serious multiple burns from skull to legs, leaving the bone exposed in some parts and
causing intense pain and wounds that were not completely healed when the case was tried on June 18, 1947,
over one year after the mishap.
The defendant therein disclaimed liability on the ground that the plaintiff had failed to show any specific act of
negligence, but the appellate court overruled the defense under the doctrine of res ipsa loquitur. The court said:
The first point is directed against the sufficiency of plaintiff's evidence to place appellant on its defense. While it
is the rule, as contended by the appellant, that in case of noncontractual negligence, or culpa aquiliana, the
burden of proof is on the plaintiff to establish that the proximate cause of his injury was the negligence of the
defendant, it is also a recognized principal that "where the thing which caused injury, without fault of the injured
person, is under the exclusive control of the defendant and the injury is such as in the ordinary course of things
does not occur if he having such control use proper care, it affords reasonable evidence, in the absence of the
explanation, that the injury arose from defendant's want of care."
And the burden of evidence is shifted to him to establish that he has observed due care and diligence. (San
Juan Light & Transit Co. v. Requena, 244, U.S. 89, 56 L. ed. 680.) This rule is known by the name of  res ipsa
loquitur (the transaction speaks for itself), and is peculiarly applicable to the case at bar, where it is
unquestioned that the plaintiff had every right to be on the highway, and the electric wire was under the sole
 control of defendant company. In the ordinary course of events, electric wires do not part suddenly in fair
weather and injure people, unless they are subjected to unusual strain and stress or there are defects in their
installation, maintenance and supervision; just as barrels do not ordinarily roll out of the warehouse windows to
injure passersby, unless some one was negligent. (Byrne v. Boadle, 2 H & Co. 722; 159 Eng. Reprint 299, the
leading case that established that rule). Consequently, in the absence of contributory negligence (which is
admittedly not present), the fact that the wire snapped suffices to raise a reasonable presumption of negligence
in its installation, care and maintenance. Thereafter, as observed by Chief Baron Pollock, "if there are any facts
inconsistent with negligence, it is for the defendant to prove."
It is true of course that decisions of the Court of Appeals do not lay down doctrines binding on the Supreme Court, but
we do not consider this a reason for not applying the particular doctrine of res ipsa loquitur in the case at bar. Gasoline
is a highly combustible material, in the storage and sale of which extreme care must be taken. On the other hand, fire
is not considered a fortuitous event, as it arises almost invariably from some act of man. A case strikingly similar to the
one before Us is Jones vs. Shell Petroleum Corporation, et al., 171 So. 447:
Arthur O. Jones is the owner of a building in the city of Hammon which in the year 1934 was leased to the Shell
Petroleum Corporation for a gasoline filling station. On October 8, 1934, during the term of the lease, while
gasoline was being transferred from the tank wagon, also operated by the Shell Petroleum Corporation, to the
underground tank of the station, a fire started with resulting damages to the building owned by Jones. Alleging
that the damages to his building amounted to $516.95, Jones sued the Shell Petroleum Corporation for the
recovery of that amount. The judge of the district court, after hearing the testimony, concluded that plaintiff was
entitled to a recovery and rendered judgment in his favor for $427.82. The Court of Appeals for the First Circuit
reversed this judgment, on the ground the testimony failed to show with reasonable certainty any negligence on
the part of the Shell Petroleum Corporation or any of its agents or employees. Plaintiff applied to this Court for
a Writ of Review which was granted, and the case is now before us for decision. 1äwphï1.ñët

In resolving the issue of negligence, the Supreme Court of Louisiana held:

Plaintiff's petition contains two distinct charges of negligence — one relating to the cause of the fire and the
other relating to the spreading of the gasoline about the filling station.
Other than an expert to assess the damages caused plaintiff's building by the fire, no witnesses were placed on
the stand by the defendant.
Taking up plaintiff's charge of negligence relating to the cause of the fire, we find it established by the record
that the filling station and the tank truck were under the control of the defendant and operated by its agents or
employees. We further find from the uncontradicted testimony of plaintiff's witnesses that fire started in the
underground tank attached to the filling station while it was being filled from the tank truck and while both the
tank and the truck were in charge of and being operated by the agents or employees of the defendant,
extended to the hose and tank truck, and was communicated from the burning hose, tank truck, and escaping
gasoline to the building owned by the plaintiff.
Predicated on these circumstances and the further circumstance of defendant's failure to explain the cause of
the fire or to show its lack of knowledge of the cause, plaintiff has evoked the doctrine of  res ipsa loquitur.
There are many cases in which the doctrine may be successfully invoked and this, we think, is one of them.
Where the thing which caused the injury complained of is shown to be under the management of defendant or
his servants and the accident is such as in the ordinary course of things does not happen if those who have its
management or control use proper care, it affords reasonable evidence, in absence of explanation by
defendant, that the accident arose from want of care. (45 C.J. #768, p. 1193).
This statement of the rule of res ipsa loquitur has been widely approved and adopted by the courts of last
resort. Some of the cases in this jurisdiction in which the doctrine has been applied are the following, viz.: Maus
v. Broderick, 51 La. Ann. 1153, 25 So. 977; Hebert v. Lake Charles Ice, etc., Co., 111 La. 522, 35 So. 731, 64
L.R.A. 101, 100 Am. St. Rep. 505; Willis v. Vicksburg, etc., R. Co., 115 La. 63, 38 So. 892; Bents v. Page, 115
La. 560, 39 So. 599.
The principle enunciated in the aforequoted case applies with equal force here. The gasoline station, with all its
appliances, equipment and employees, was under the control of appellees. A fire occurred therein and spread to and
burned the neighboring houses. The persons who knew or could have known how the fire started were appellees and
their employees, but they gave no explanation thereof whatsoever. It is a fair and reasonable inference that the
incident happened because of want of care.
In the report submitted by Captain Leoncio Mariano of the Manila Police Department (Exh. X-1 Africa) the following
appears:
Investigation of the basic complaint disclosed that the Caltex Gasoline Station complained of occupies a lot
approximately 10 m x 10 m at the southwest corner of Rizal Avenue and Antipolo. The location is within a very
busy business district near the Obrero Market, a railroad crossing and very thickly populated neighborhood
where a great number of people mill around t
until
gasoline
 tever be theWactjvities of these peopleor lighting a cigarette cannot be excluded and this constitute a
secondary hazard to its operation which in turn endangers the entire neighborhood to conflagration.
Furthermore, aside from precautions already taken by its operator the concrete walls south and west adjoining
the neighborhood are only 2-1/2 meters high at most and cannot avoid the flames from leaping over it in case
of fire.
Records show that there have been two cases of fire which caused not only material damages but desperation
and also panic in the neighborhood.
Although the soft drinks stand had been eliminated, this gasoline service station is also used by its operator as
a garage and repair shop for his fleet of taxicabs numbering ten or more, adding another risk to the possible
outbreak of fire at this already small but crowded gasoline station.
The foregoing report, having been submitted by a police officer in the performance of his duties on the basis of his own
personal observation of the facts reported, may properly be considered as an exception to the hearsay rule. These
facts, descriptive of the location and objective circumstances surrounding the operation of the gasoline station in
question, strengthen the presumption of negligence under the doctrine of res ipsa loquitur, since on their face they
called for more stringent measures of caution than those which would satisfy the standard of due diligence under
ordinary circumstances. There is no more eloquent demonstration of this than the statement of Leandro Flores before
the police investigator. Flores was the driver of the gasoline tank wagon who, alone and without assistance, was
transferring the contents thereof into the underground storage when the fire broke out. He said: "Before loading the
underground tank there were no people, but while the loading was going on, there were people who went to drink
coca-cola (at the coca-cola stand) which is about a meter from the hole leading to the underground tank." He added
that when the tank was almost filled he went to the tank truck to close the valve, and while he had his back turned to
the "manhole" he, heard someone shout "fire."
Even then the fire possibly would not have spread to the neighboring houses were it not for another negligent omission
on the part of defendants, namely, their failure to provide a concrete wall high enough to prevent the flames from
leaping over it. As it was the concrete wall was only 2-1/2 meters high, and beyond that height it consisted merely of
galvanized iron sheets, which would predictably crumple and melt when subjected to intense heat. Defendants'
negligence, therefore, was not only with respect to the cause of the fire but also with respect to the spread thereof to
the neighboring houses.
There is an admission on the part of Boquiren in his amended answer to the second amended complaint that "the fire
was caused through the acts of a stranger who, without authority, or permission of answering defendant, passed
through the gasoline station and negligently threw a lighted match in the premises." No evidence on this point was
adduced, but assuming the allegation to be true — certainly any unfavorable inference from the admission may be
taken against Boquiren — it does not extenuate his negligence. A decision of the Supreme Court of Texas, upon facts
analogous to those of the present case, states the rule which we find acceptable here. "It is the rule that those who
distribute a dangerous article or agent, owe a degree of protection to the public proportionate to and commensurate
with a danger involved ... we think it is the generally accepted rule as applied to torts that 'if the effects of the actor's
negligent conduct actively and continuously operate to bring about harm to another, the fact that the active and
substantially simultaneous operation of the effects of a third person's innocent, tortious or criminal act is also a
substantial factor in bringing about the harm, does not protect the actor from liability.' (Restatement of the Law of Torts,
vol. 2, p. 1184, #439). Stated in another way, "The intention of an unforeseen and unexpected cause, is not sufficient
to relieve a wrongdoer from consequences of negligence, if such negligence directly and proximately cooperates with
the independent cause in the resulting injury." (MacAfee, et al. vs. Traver's Gas Corporation, 153 S.W. 2nd 442.)
The next issue is whether Caltex should be held liable for the damages caused to appellants. This issue depends on
whether Boquiren was an independent contractor, as held by the Court of Appeals, or an agent of Caltex. This
question, in the light of the facts not controverted, is one of law and hence may be passed upon by this Court. These
facts are: (1) Boquiren made an admission that he was an agent of Caltex; (2) at the time of the fire Caltex owned the
gasoline station and all the equipment therein; (3) Caltex exercised control over Boquiren in the management of the
state; (4) the delivery truck used in delivering gasoline to the station had the name of CALTEX painted on it; and (5) the
license to store gasoline at the station was in the name of Caltex, which paid the license fees. (Exhibit T-Africa; Exhibit
U-Africa; Exhibit X-5 Africa; Exhibit X-6 Africa; Exhibit Y-Africa).
In Boquiren's amended answer to the second amended complaint, he denied that he directed one of his drivers to
remove gasoline from the truck into the tank and alleged that the "alleged driver, if one there was, was not in his
employ, the driver being an employee of the Caltex (Phil.) Inc. and/or the owners of the gasoline station." It is true that
Boquiren later on amended his answer, and that among the changes was one to the effect that he was not acting as
agent of Caltex. But then again, in his motion to dismiss appellants' second amended complaint the ground alleged
was that it stated no cause of action since under the allegations thereof he was merely acting as agent of Caltex, such
that he could not have incurred personal liability. A motion to dismiss on this ground is deemed to be an admission of
the facts alleged in the complaint.
Caltex admits that it owned the gasoline station as well as the equipment therein, but claims that the business
conducted at the service station in question was owned and operated by Boquiren. But Caltex did not present any
contract with Boquiren that would reveal the nature of their relationship at the time of the fire. There must have been
one in existence at that time. Instead, what was presented was a license agreement manifestly tailored for purposes of
this case, since it was entered into shortly before the expiration of the one-year period it was intended to operate. This
so-called license agreement (Exhibit 5-Caltex) was executed on November 29, 1948, but made effective as of January
1, 1948 so as to cover the date of the fire, namely, March 18, 1948. This retroactivity provision is quite significant, and
gives rise to the conclusion that it was designed precisely to free Caltex from any responsibility with respect to the fire,
as shown by the clause that Caltex "shall not be liable for any injury to person or property while in the property herein
licensed, it being understood and agreed that LICENSEE (Boquiren) is not an employee, representative or agent of
LICENSOR (Caltex)."
But even if the license agreement were to govern, Boquiren can hardly be considered an independent contractor.
Under that agreement Boquiren would pay Caltex the purely nominal sum of P1.00 for the use of the premises and all
the equipment therein. He could sell only Caltex Products. Maintenance of the station and its equipment was subject to
the approval, in other words control, of Caltex. Boquiren could not assign or transfer his rights as licensee without the
consent of Caltex. The license agreement was supposed to be from January 1, 1948 to December 31, 1948, and
thereafter until terminated by Caltex upon two days prior written notice. Caltex could at any time cancel and terminate
the agreement in case Boquiren ceased to sell Caltex products, or did not conduct the business with due diligence, in
the judgment of Caltex. Termination of the contract was therefore a right granted only to Caltex but not to Boquiren.
These provisions of the contract show the extent of the control of Caltex over Boquiren. The control was such that the
latter was virtually an employee of the former.
Taking into consideration the fact that the operator owed his position to the company and the latter could
remove him or terminate his services at will; that the service station belonged to the company and bore its
tradename and the operator sold only the products of the company; that the equipment used by the operator
belonged to the company and were just loaned to the operator and the company took charge of their repair and
maintenance; that an employee of the company supervised the operator and conducted periodic inspection of
the company's gasoline and service station; that the price of the products sold by the operator was fixed by the
company and not by the operator; and that the receipts signed by the operator indicated that he was a mere
agent, the finding of the Court of Appeals that the operator was an agent of the company and not an
independent contractor should not be disturbed.
To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it
by the contracting parties, should thereby a controversy as to what they really had intended to enter into, but
the way the contracting parties do or perform their respective obligations stipulated or agreed upon may be
shown and inquired into, and should such performance conflict with the name or title given the contract by the
parties, the former must prevail over the latter. (Shell Company of the Philippines, Ltd. vs. Firemens' Insurance
Company of Newark, New Jersey, 100 Phil. 757).
The written contract was apparently drawn for the purpose of creating the apparent relationship of employer
and independent contractor, and of avoiding liability for the negligence of the employees about the station; but
the company was not satisfied to allow such relationship to exist. The evidence shows that it immediately
assumed control, and proceeded to direct the method by which the work contracted for should be performed.
By reserving the right to terminate the contract at will, it retained the means of compelling submission to its
orders. Having elected to assume control and to direct the means and methods by which the work has to be
performed, it must be held liable for the negligence of those performing service under its direction. We think the
evidence was sufficient to sustain the verdict of the jury. (Gulf Refining Company v. Rogers, 57 S.W. 2d, 183).
Caltex further argues that the gasoline stored in the station belonged to Boquiren. But no cash invoices were
presented to show that Boquiren had bought said gasoline from Caltex. Neither was there a sales contract to prove the
same.
As found by the trial court the Africas sustained a loss of P9,005.80, after deducting the amount of P2,000.00 collected
by them on the insurance of the house. The deduction is now challenged as erroneous on the ground that Article 2207
of the New Civil Code, which provides for the subrogation of the insurer to the rights of the insured, was not yet in
effect when the loss took place. However, regardless of the silence of the law on this point at that time, the amount that
should be recovered be measured by the damages actually suffered, otherwise the principle prohibiting unjust
enrichment would be violated. With respect to the claim of the heirs of Ong P7,500.00 was adjudged by the lower court
on the basis of the assessed value of the property destroyed, namely, P1,500.00, disregarding the testimony of one of
the Ong children that said property was worth P4,000.00. We agree that the court erred, since it is of common
knowledge that the assessment for taxation purposes is not an accurate gauge of fair market value, and in this case
should not prevail over positive evidence of such value. The heirs of Ong are therefore entitled to P10,000.00.
Wherefore, the decision appealed from is reversed and respondents-appellees are held liable solidarily to appellants,
and ordered to pay them the aforesaid sum of P9,005.80 and P10,000.00, respectively, with interest from the filing of
the complaint, and costs.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Regala, Bengzon, J.P., Zaldivar and Sanchez,
JJ., concur.
Dizon, J., took no part.