1732-1733

1. First Phil. Industrial Corp v. CA..................................................................................................2 2. De Guzman v. CA........................................................................................................................9 3. Gelisan v. Alday.........................................................................................................................16 4. Benedicto v. IAC.......................................................................................................................20 5. Lita Enterprises v. IAC..............................................................................................................25 6. Teja Marketing v. IAC...............................................................................................................29 7. Magboo v. Bernardo..................................................................................................................32 8. Planters Products v. CA.............................................................................................................35 9. LRT Authority v. Navidad.........................................................................................................44

1. First Phil. Industrial Corp v. CA SECOND DIVISION [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. SYLLABUS 1. CIVIL LAW; TRANSPORTATION; COMMON CARRIER; DEFINED; APPLICATION IN CASE AT BAR. A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally. Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." The test for determining whether a party is a common carrier of goods is: 1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation ; 2. He must undertake to carry goods of the kind to which his business is confined ; 3. He must undertake to carry by the method by which his business is conducted and over his established roads: and 4. The transportation must be for hire. Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e., petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. As correctly pointed out by petitioner, the definition of "common carrier" 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 Sates, oil pipe line operators are considered common carriers. 2. TAXATION; WHEN COMMON CARRIER MAY BE EXEMPT FROM BUSINESS TAX; CASE AT BAR. Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, Article 86 thereof provides that: "Article 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 manufacturer, refining, storage or transportation by special methods of petroleum, is hereby declared to be a public utility." The Bureau of Internal Revenue likewise considers the petitioner a "common carrier ." The 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: "Section 133. Common Limitations on the Taxing Power 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: . . . (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. DIECTc DECISION MARTINEZ, J p: 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. cdll Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines . The original pipeline concession was granted in 1967 1 and renewed by the Energy Regulatory Board in 1992. 2 Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code . 3 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 complaint 6 for tax refund with prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141(e) and 151 does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid. 7 Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local Government Code as said exemption applies only to "transportation contractors and persons engaged in the transportation by hire and common carriers by air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the said code pertains to the mode or manner by which a product is delivered to its destination . 8 On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise: ". . . Plaintiff is either a contractor or other independent contractor. . . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only by clear and unequivocal provisions of law. "Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A) whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption upon the plaintiff. "Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to distinctions or other considerations may be of help: 1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and facilities to a single specific or "special customer" under a "special contract." 2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local governments than the previous enactments, to make them economically and financially viable to serve the people and discharge their functions with a concomitant obligation to accept certain devolution of powers, . . . So, consistent with this policy even franchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e) and 151 of the Code." 9 Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we referred the case to the respondent Court of Appeals for consideration and adjudication. 10 On November 29, 1995, the respondent court rendered a decision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996. 12 Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996. 13 Petitioner moved for a reconsideration which was granted by this Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a transportation contractor , and (2) the exemption sought for by petitioner is not clear under the law. There is merit in the petition. A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally . Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." The test for determining whether a party is a common carrier of goods is: 1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; 2. He must undertake to carry goods of the kind to which his business is confined; 3. He must undertake to carry by the method by which his business is conducted and over his established roads; and 4. The transportation must be for hire. 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: Cdpr '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 obliged 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 change 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:,m 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 Section 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. dctai Bellosillo, Puno and Mendoza, JJ ., concur. Footnotes 1. Rollo, pp. 90-94. 2. Decision of the Energy Regulatory Board in ERB Case No. 92-94, renewing the Pipeline Concession of petitioner First Philippine Industrial Corporation, formerly known as Meralco Securities Industrial Corporation. (Rollo, pp. 95-100). 3. Sec. 143. Tax on Business. The municipality may impose taxes on the following business: xxx xxx xxx (e) On contractors and other independent contractors, in accordance with the following schedule: With gross receipts for the preceding calendar year in the amount of: xxx xxx xxx at a rate not exceeding fifty P2,000,000.00 or more 4. Amount of Tax Per Annum

percent (50%) of one percent (1%) Letter Protest dated January 20, 1994, Rollo, pp. 110-111.

5. 6. 7. 8. 9. 10.

Letter of respondent City Treasurer, Rollo, p. 112. Complaint, Annex "C", Rollo, pp. 51-56. Rollo, pp. 51-57. Answer, Annex "J", Rollo, pp. 122-127. RTC Decision, Rollo, pp. 58-62. Rollo, p. 84.

11. CA-G.R. SP No. 36801; Penned by Justice Jose C. De la Rama and concurred in by Justice Jaime M. Lantin and Justice Eduardo G. Montenegro; Rollo, pp. 33-47. 12. 13. Rollo, p. 49. Resolution dated November 11, 1996 excerpts of which are hereunder quoted:

"The petition is unmeritorious. "As correctly ruled by respondent appellate court, petitioner is not a common carrier as it is not offering its services to the public. "Art. 1732 of the Civil Code defines Common Carriers as: persons, corporations, firms or association engaged in the business of carrying or transporting passengers or goods both, by land, water, or air, for compensation, offering their services to the public. "We sustain the view that petitioner is a special carrier. Based on the facts on hand, it appears that petitioner is not offering its services to the public. "We agree with the findings of the appellate court that the claim for exemption from taxation must be strictly construed against the taxpayer. The present understanding of the concept of "common carriers" does not include carriers of petroleum using pipelines. It is highly unconventional to say that the business of transporting petroleum through pipelines involves "common carrier" business. The Local Government Code intended to give exemptions from local taxation to common carriers transporting goods and passengers through moving vehicles or vessels and not through pipelines. The term common carrier under Section 133 (j) of the Local Government Code must be given its simple and ordinary or generally accepted meaning which would definitely not include operators of pipelines." 14 G.R. No. 125948 (First Philippine Industrial Corporation vs. Court of Appeals, et. al.) Considering the grounds of the motion for reconsideration, dated December 23, 1996, filed by counsel for petitioner, of the resolution of November 11, 1996 which denied the petition for review on certiorari, the Court Resolved: (a) (b) 15. 16. to GRANT the motion for reconsideration and to REINSTATE the petition; and to require respondent to COMMENT on the petition, within ten (10) days from notice. Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5. 168 SCRA 617-618 (1988).

17. Giffin v. Pipe Lines, 172 Pa. 580, 33 Alt. 578; Producer Transp. Co. v. Railroad Commission, 241 US 228, 64 L ed. 239, 40 S Ct 131. 18. Journal and Record of the House of Representatives, Fourth Regular Session, Volume 2, pp. 87-89, September 6, 1990; Emphasis Ours. 19. Annex "D" of Petition, Rollo, pp. 101-109.

2. De Guzman v. CA THIRD DIVISION [G.R. No. L-47822. December 22, 1988.] PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO CENDAA, respondents. Vicente D. Millora for petitioner. Jacinto Callanta for private respondent. SYLLABUS 1. CIVIL CODE; COMMON CARRIERS; ARTICLE 1732, DEFINITION UNDER ARTICLE 1732 OF THE CODE. 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. 2. ID.; ID.; ID.; LAW ON COMMON CARRIERS SUPPLEMENTED BY THE PUBLIC SERVICE ACT; SCOPE OF PUBLIC SERVICE. 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, icerefrigeration 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 backhauling 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. 3. ID.; ID.; ID.; ID.; CERTIFICATE OF PUBLIC CONVENIENCE; NOT A REQUISITE FOR INCURRING LIABILITY AS A COMMON CARRIER; NATURE OF THE BUSINESS OF A

COMMON CARRIER. 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. 4. ID.; ID.; DEGREE OF DILIGENCE REQUIRED OF, COMMON CARRIERS. Common carriers, "by the nature of their business and for reasons of public policy," 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. 5. ID.; ID.; ID.; LIABILITY OF COMMON CARRIERS. 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) 6. ID.; ID.; ID.; ID.; COMMON CARRIER'S ARE NOT ABSOLUTE INSURERS AGAINST ALL RISKS; NO LIABILITY ATTACHES IN CASE OF FORTUITOUS EVENTS. 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 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.

DECISION FELICIANO, J p: Respondent Ernesto Cendaa, 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. llcd 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 P22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods. In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure. On 10 December 1975, the trial court rendered a Decision' finding private respondent to be a common carrier and holding him liable for the value of the undelivered goods (P22,150.00) as well as for P4,000.00 as damages and P2,000.00 as attorney's fees. cdrep 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. 2. 3. that private respondent was not a common carrier; that the hijacking of respondent's truck was force majeure; and 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 Cendaa may, under the facts earlier set forth, be properly characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms: "Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public." The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis . Neither does Article 1732 distinguish between a carrier offering its services to the "general public ," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 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) 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 backhauling 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. cdphil We turn then to the liability of private respondent as a common carrier. Common carriers, "by the nature of their business and for reasons of public policy," 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734, 1735 and 1745, numbers 5, 6 and 7" of the Civil Code. Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is due to any of the following causes only: (1) (2) (3) (4) (5) Flood, storm, earthquake, lightning, or other natural disaster or calamity; Act of the public enemy in war, whether international or civil; Act or omission of the shipper or owner of the goods; The character of the goods or defects in the packing or in the containers; and 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. cdll 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 fire fight 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. prLL We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendaa 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 Corts, JJ., concur. Footnotes 1. 2. 3. Rollo, p. 14. Article 1733, Civil Code. Rollo, p. 22.

4. The evidence of the prosecution did not show that more than three (3) of the five (5) hold-uppers were armed. Thus, the existence of a "band" within the technical meaning of Article 306 of the Revised Penal Code, was not affirmatively proved by the prosecution.

3. Gelisan v. Alday SECOND DIVISION [G.R. No. L-30212. September 30, 1987.] BIENVENIDO GELISAN, petitioner, vs. BENITO ALDAY, respondent. DECISION PADILLA, J p: Review on certiorari of the judgment * rendered by the Court of Appeals, dated 11 October 1968, as amended by its resolution, dated 11 February 1969, in CA-G.R. No. 32670-R, entitled: "Benito Alday, plaintiff-appellant, vs. Roberto Espiritu and Bienvenido Gelisan, defendants-appellees," which ordered the herein petitioner Bienvenido Gelisan to pay, jointly and severally, with Roberto Espiritu, the respondent Benito Alday the amount of P5,397.30, with legal interest thereon from the filing of the complaint, and the costs of suit; and for the said Roberto Espiritu to pay or refund the petitioner Bienvenido Gelisan whatever amount the latter may have paid to the respondent Benito Alday by virtue of the judgment. LLpr The uncontroverted facts of the case are, as follows: "Defendant Bienvenido Gelisan is the owner of a freight truck bearing plate No. TH2377. On January 31, 1962, defendant Bienvenido Gelisan and Roberto Espiritu entered into a contract marked Exhibit 3-Gelisan under which Espiritu hired the same freight truck of Gelisan for the purpose of hauling rice, sugar, flour and fertilizer at an agreed price of P18.00 per trip within the limits of the City of Manila provided the loads shall not exceed 200 sacks. It is also agreed that Espiritu shall bear and pay all losses and damages attending the carriage of the goods to be hauled by him . The truck was taken by a driver of Roberto Espiritu on February 1, 1962. Plaintiff Benito Alday, a trucking operator, and who owns about 15 freight trucks, had known the defendant Roberto Espiritu since 1948 as a truck operator. Plaintiff had a contract to haul the fertilizers of the Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in Mandaluyong. Alday met Espiritu at the gate of Pier 4 and the latter offered the use of his truck with the driver and helper at 9 centavos per bag of fertilizer. The offer was accepted by plaintiff Alday and he instructed his checker Celso Henson to let Roberto Espiritu haul the fertilizer. Espiritu made two hauls of 200 bags of fertilizer per trip. The fertilizer was delivered to the driver and helper of Espiritu with the necessary way bill receipts, Exhibits A and B. Espiritu, however, did not deliver the fertilizer to the Atlas Fertilizer bodega at Mandaluyong . The signatures appearing in the way bill receipts Exhibits A and B of the Alday Transportation admittedly not the signature of any representative or employee of the Atlas Fertilizer Corporation. Roberto Espiritu could not be found, and plaintiff reported the loss to the Manila Police Department. Roberto Espiritu was later arrested and booked for theft. . . .. "Subsequently, plaintiff Alday saw the truck in question on Sto. Cristo St. and he notified the Manila Police Department, and it was impounded by the police , It was claimed by Bienvenido Gelisan from the Police Department after he had been notified by his employees that the truck had been impounded by the police; but as he could not produce at the time the registration papers, the police would not release the truck to Gelisan. As a result of the impounding of the truck according to Gelisan, . . . and that for the release of the truck he paid the premium of P300 to the surety company." 1 Benito Alday was compelled to pay the value of the 400 bags of fertilizer , in the amount of P5,397.33, to Atlas Fertilizer Corporation so that, on 12 February 1962, he (Alday) filed a complaint against Roberto Espiritu and Bienvenido Gelisan with the Court

of First Instance of Manila, docketed therein as Civil Case No. 49603, for the recovery of damages suffered by him thru the criminal acts committed by the defendants. The defendant, Roberto Espiritu failed to file an answer and was, accordingly, declared in default. The defendant, Bienvenido Gelisan, upon the other hand, disowned responsibility. He claimed that he had no contractual relations with the plaintiff Benito Alday as regards the hauling and/or delivery of the 400 bags of fertilizer mentioned in the complaint; that the alleged misappropriation or non-delivery by defendant Roberto Espiritu of plaintiff's 400 bags of fertilizer, was entirely beyond his (Gelisan's) control and knowledge, and which fact became known to him, for the first time, on 8 February 1962 when his freight truck, with plate No. TH-2377, was impounded by the Manila Police Department, at the instance of the plaintiff; and that in his written contract of hire with Roberto Espiritu, it was expressly provided that the latter will bear and pay all losses and damages attending the carriage of goods to be hauled by said Roberto Espiritu. LexLib After trial, the Court of First Instance of Manila ruled that Roberto Espiritu alone was liable to Benito Alday, since Bienvenido Gelisan was not privy to the contract between Espiritu and Alday. The dispositive portion of the decision reads, as follows: "WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Roberto Espiritu for the sum of P6,000 with interest at the legal rate from the time of the filing of the complaint, and the costs of the suit. Plaintiff's complaint is dismissed with respect to defendant Bienvenido Gelisan, and judgment is rendered in favor of defendant Bienvenido Gelisan and against the plaintiff for the sum of P350." 2 On appeal, however, the Court of Appeals, citing the case of Montoya vs. Ignacio, 3 a found that Bienvenido Gelisan is likewise liable for being the registered owner of the truck; and that the lease contract, executed by and between Bienvenido Gelisan and Roberto Espiritu, is not binding upon Benito Alday for not having been previously approved by the Public Service Commission. Accordingly, it sentenced Bienvenido Gelisan to pay, jointly and severally with Roberto Espiritu, Benito Alday the amount of P5,397.30, with legal interest thereon from the filing of the complaint; and to pay the costs. Roberto Espiritu, in turn, was ordered to pay or refund Bienvenido Gelisan whatever amount the latter may have paid to Benito Alday by virtue of the judgment. 4 Hence, the present recourse by Bienvenido Gelisan. The petition is without merit. The judgment rendered by the Court of Appeals, which is sought to be reviewed, is in accord with the facts and the law on the case and we find no cogent reason to disturb the same. The Court has invariably held in several decisions that the registered owner of a public service vehicle is responsible for damages that may arise from consequences incident to its operation or that may be caused to any of the passengers therein. 5 The claim of the petitioner that he is not liable in view of the lease contract executed by and between him and Roberto Espiritu which exempts him from liability to third persons, cannot be sustained because it appears that the lease contract, adverted to, had not been approved by the Public Service Commission. It is settled in our jurisprudence that if the property covered by a franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not binding upon the public and third persons. 6 We also find no merit in the petitioner's argument that the rule requiring the previous approval by the Public Service Commission of the transfer or lease of the motor vehicle, may be applied only in cases where there is no positive identification of the owner or driver, or where there are very scant means of identification, but not in those instances where the person responsible for damages has been fixed or determined before hand, as in the case at bar. The reason for the rule we reiterate in the present case, was explained by the Court in Montoya vs. Ignacio, 7 thus:

"There is merit in this contention. The law really requires the approval of the Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee. The reason is obvious. Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service Commission so that the latter may take proper safeguards to protect the interest of the public. In fact, the law requires that, before the approval is granted, there should be a public hearing, with notice to all interested parties, in order that the Commission may determine if there are good and reasonable grounds justifying the transfer or lease of the property covered by the franchise, or if the sale or lease is detrimental to public interest. Such being the reason and philosophy behind this requirement, it follows that if the property covered by the franchise is transferred, or leased to another without obtaining the requisite approval the transfer is not binding against the Public Service Commission and in contemplation of law the grantee continues to be responsible under the franchise in relation to the Commission and to the Public. Since the lease of the jeepney in question was made without such approval, the only conclusion that can be drawn is that Marcelino Ignacio still continues to be its operator in contemplation of law, and as such is responsible for the consequences incident to its operation, one of them being the collision under consideration." Bienvenido Gelisan, the registered owner, is not however without recourse . He has a right to be indemnified by Roberto Espiritu for the amount that he may be required to pay as damages for the injury caused to Benito Alday , since the lease contract in question, although not effective against the public for not having been approved by the Public Service Commission, is valid and binding between the contracting parties. 8 We also find no merit in the petitioner's contention that his liability is only subsidiary. The Court has consistently considered the registered owner/operator of a public service vehicle to be jointly and severally liable with the driver for damages incurred by passengers or third persons as a consequence of injuries sustained in the operation of said vehicles. Thus, in the case of Vargas vs. Langcay, 9 the Court said: "We hold that the Court of Appeals erred in considering appellant-petitioner Diwata Vargas only subsidiarily liable under Article 103 of the Revised Penal Code. This court, in previous decisions, has always considered the registered owner/operator of a passenger vehicle, jointly and severally liable with the driver, for damages incurred by passengers or third persons as a consequence of injuries (or death) sustained in the operation of said vehicles. (Montoya vs. Ignacio, 94 Phil., 182; Timbol vs. Osias, G.R. No. L-7547, April 30, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506; Necesito vs. Paras, 104 Phil., 75; Erezo vs. Jepte, 102 Phil., 103; Tamayo vs. Aquino and Rayos vs. Tamayo, 105 Phil., 949; 56 Off. Gaz. [36] 5617.) In the case of Erezo vs. Jepte, Supra, We held: ". . . In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused . . ." In the case of Tamayo vs. Aquino, supra, We said: ". . . As Tamayo is the registered owner of the truck, his responsibility to the public or to any passenger riding in the vehicle or truck must be direct . . . WHEREFORE, the petition is hereby DENIED. With costs against the petitioner. SO ORDERED. Yap, Melencio-Herrera, Paras and Sarmiento, JJ., concur. Footnotes * Penned by Justice Angel H. Mojica with the concurrence of Justices Julio Villamor and Hermogenes Concepcion, Jr.

1. 2. 3. 4.

Rollo, pp. 18-19. Record on Appeal, p. 47. 94 Phil. 182. Rollo, pp. 17, 38.

5. Vargas vs. Langcay, 116 Phil. 478 and cases cited; Juaniza vs. Jose, G.R. No. 5012728, March 30, 1979, 89 SCRA 306 and cases cited; MYC Agro-Industrial Corp. vs. Vda. de Caldo, G.R. No. 57298, Sept. 7, 1984, 132 SCRA 10 and cases cited. 6. 7. 8. 9. Montoya vs. Ignacio, 94 Phil. 182. Supra. Montoya vs. Ignacio, supra. 116 Phil. 478, 481.

4. Benedicto v. IAC THIRD DIVISION [G.R. No. 70876. July 19, 1990.] MA. LUISA BENEDICTO, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and GREENHILLS WOOD INDUSTRIES COMPANY, INC., respondents. Britanico, Panganiban, Benitez, Africa, Linsangan and Barinaga for petitioner. Abelardo V. Viray for private respondent. DECISION FELICIANO, J p: This Petition for Review asks us to set aside the Decision of the then Intermediate Appellate Court dated 30 January 1985 in A.C.-G.R. CV No. 01454, which affirmed in toto the decision of the Regional Trial Court ("RTC") of Dagupan City in Civil Case No. 5206. There, the RTC held petitioner Ma. Luisa Benedicto liable to pay private respondent Greenhills Wood Industries Company, Inc. ("Greenhills") the amounts of P16,016.00 and P2,000.00 representing the cost of Greenhills' lost sawn lumber and attorney's fees, respectively. Private respondent Greenhills, a lumber manufacturing firm with business address at Dagupan City, operates a sawmill in Maddela, Quirino. Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc. ("Blue Star"), a company with business operations in Valenzuela, Bulacan 100,000 board feet of sawn lumber with the understanding that an initial delivery would be made on 15 May 1980. 1 To effect its first delivery, private respondent's resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck bearing Plate No. 225 GA TH to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan . This cargo truck was registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise engaged in hauling freight, with main office in B.F. Homes, Paraaque. On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, supervised the loading of 7,690 board feet of sawn lumber with invoice value of P16,918.00 aboard the cargo truck. Before the cargo truck left Maddela for Valenzuela, Bulacan, Cruz issued to Licuden Charge Invoices Nos. 3259 and 3260 both of which were initialed by the latter at the bottom left corner . 2 The first invoice was for the amount of P11,822.80 representing the value of 5,374 board feet of sawn lumber, while the other set out the amount of P5,095.20 as the value of 2,316 board feet. Cruz instructed Licuden to give the original copies of the two (2) invoices to the consignee upon arrival in Valenzuela, Bulacan 3 and to retain the duplicate copies in order that he could afterwards claim the freightage from private respondent's Manila office. 4 On 16 May 1980, the Manager of Blue Star called up by long distance telephone Greenhills' president, Henry Lee Chuy, informing him that the sawn lumber on board the subject cargo truck had not yet arrived in Valenzuela, Bulacan. The latter in turn informed Greenhills' resident manager in its Maddela sawmill of what had happened. In a letter 5 dated 18 May 1980, Blue Star's administrative and personnel manager, Manuel R. Bautista, formally informed Greenhills' president and general manager that Blue Star still had not received the sawn lumber which was supposed to arrive on 15 May 1980 and because of this delay, "they were constrained to look for other suppliers ." On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to continue with their contract, private respondent Greenhills filed Criminal Case No. 668 against driver Licuden for estafa. Greenhills also filed against petitioner

Benedicto Civil Case No. D-5206 for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan City. LexLib In her answer, 6 petitioner Benedicto denied liability alleging that she was a complete stranger to the contract of carriage, the subject truck having been earlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a deed of sale. 7 She claimed that the truck had remained registered in her name notwithstanding its earlier sale to Tee because the latter had paid her only P50,000.00 out of the total agreed price of P68,000.00 However, she averred that Tee had been operating the said truck in Central Luzon from that date (28 February 1980) onwards, and that, therefore, Licuden was Tee's employee and not hers. On 20 June 1983, based on the finding that petitioner Benedicto was still the registered owner of the subject truck, and holding that Licuden was her employee, the trial court adjudged as follows: "WHEREFORE, in the light of the foregoing considerations, this Court hereby renders judgment against defendant Maria Luisa Benedicto, ordering her to pay the Greenhills Wood Industries Co. Inc., thru its President and General Manager, the amount of P16,016 cost of the sawn lumber loaded on the cargo truck, with legal rate of interest from the filing of the complaint; to pay attorney's fees in the amount of P2,000.00; and to pay the costs of this suit. SO ORDERED." 8 On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate Court affirmed 9 the decision of the trial court in toto. Like the trial court, the appellate court held that since petitioner was the registered owner of the subject vehicle, Licuden, the driver of the truck, was her employee, and that accordingly petitioner should be responsible for the negligence of said driver and bear the loss of the sawn lumber plus damages. Petitioner moved for reconsideration, without success. 10 In the present Petition for Review, the sole issue raised is whether or not under the facts and applicable law, the appellate court was correct in finding that petitioner , being the registered owner of the carrier, should be held liable for the value of the undelivered or lost sawn lumber. Petitioner urges that she could not be held answerable for the loss of the cargo, because the doctrine which makes the registered owner of a common carrier vehicle answerable to the public for the negligence of the driver despite the sale of the vehicle to another person, applies only to cases involving death of or injury to passengers. What applies in the present case, according to petitioner, is the rule that a contract of carriage requires proper delivery of the goods to and acceptance by the carrier. Thus, petitioner contends that the delivery to a person falsely representing himself to be an agent of the carrier prevents liability from attaching to the registered owner. The Court considers that petitioner has failed to show that appellate court committed reversible error in affirming the trial court's holding that petitioner was liable for the cost of the sawn lumber plus damages. There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in the business of hauling or transporting goods for hire or compensation. Petitioner Benedicto is, in brief, a common carrier. The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the operations of the carrier, even though the specific vehicle involved may already have been transferred to another person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the right to assume that the registered owner is the actual or lawful owner thereof. It would be very difficult and often impossible as a

practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is . 11 The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's claim, private respondent is not required to go beyond the vehicle's certificate of registration to ascertain the owner of the carrier. In this regard, the letter presented by petitioner allegedly written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not presented in court to testify on this matter but also because of the aforementioned doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that doctrine. cdphil In fact, private respondent had no reason at all to doubt the authority of Licuden to enter into a contract of carriage on behalf of the registered owner . It appears that, earlier, in the first week of May 1980, private respondent Greenhills had contracted Licuden who was then driving the same cargo truck to transport and carry a load of sawn lumber from the Maddela sawmill to Dagupan City . 12 No one came forward to question that contract or the authority of Licuden to represent the owner of the carrier truck. Moreover, assuming the truth of her story, petitioner Benedicto retained registered ownership of the freight truck for her own benefit and convenience, that is, to secure the payment of the balance of the selling price of the truck . She may have been unaware of the legal security device of chattel mortgage; or she, or her buyer, may have been unwilling to absorb the expenses of registering a chattel mortgage over the truck. In either case, considerations both of public policy and of equity require that she bear the consequences flowing from registered ownership of the subject vehicle. Petitioner Benedicto, however, insists that the said principle should apply only to cases involving negligence and resulting injury to or death of passengers, and not to cases involving merely carriage of goods. We believe otherwise. A common carrier, both from the nature of its business and for insistent reasons of public policy, is burdened by the law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers but also in caring for goods transported by it. 13 The loss or destruction or deterioration of goods turned over to the common carrier for conveyance to a designated destination, raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity or act of the public enemy in time of war, or from an act or omission of the shipper himself or from the character of the goods or their packaging or container. 14 This presumption may be overcome only by proof of extraordinary diligence on the part of the carrier. 15 Clearly, to permit a common carrier to escape its responsibility for the passengers or goods transported by it by proving a prior sale of the vehicle or means of transportation to an alleged vendee would be to attenuate drastically the carrier's duty of extraordinary diligence. It would also open wide the door to collusion between the carrier and the supposed vendee and to shifting liability from the carrier to one without financial capability to respond for the resulting damages. In other words, the thrust of the public policy here involved is as sharp and real in the case of carriage of goods as it is in the transporting of human beings. Thus, to sustain petitioner Benedicto's contention, that is, to require the shipper to go behind a certificate of registration of a public utility vehicle, would be utterly subversive of the purpose of the law and doctrine.

Petitioner further insists that there was no perfected contract of carriage for the reason that there was no proof that her consent or that of Tee had been obtained ; no proof that the driver, Licuden, was authorized to bind the registered owner; and no proof that the parties had agreed on the freightage to be paid. Once more, we are not persuaded by petitioner's arguments which appear to be a transparent attempt to evade statutory responsibilities. Driver Licuden was entrusted with possession and control of the freight truck by the registered owner (and by the alleged secret owner, for that matter). Driver Licuden, under the circumstances, was clothed with at least implied authority to contract to carry goods and to accept delivery of such goods for carriage to a specified destination. That the freight to be paid may not have been fixed before loading and carriage, did not prevent the contract of carriage from arising, since the freight was at least determinable if not fixed by the tariff schedules in petitioner's main business office. Put in somewhat different terms , driver Licuden is in law regarded as the employee and agent of the petitioner, for whose acts petitioner must respond. A contract of carriage of goods was shown; the sawn lumber was loaded on board the freight truck; loss or non-delivery of the lumber at Blue Star's premises in Valenzuela, Bulacan was also proven; and petitioner has not proven either that she had exercised extraordinary diligence to prevent such loss or nondelivery or that the loss or non-delivery was due to some casualty or force majeure inconsistent with her liability. 16 Petitioner's liability to private respondent Greenhills was thus fixed and complete, without prejudice to petitioner's right to proceed against her putative transferee Benjamin Tee and driver Licuden for reimbursement or contribution. 17 WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the former Intermediate Appellate Court dated 30 January 1985 is hereby AFFIRMED. Costs against petitioner. SO ORDERED. Fernan, C.J., Gutierrez, Jr. and Cortes, JJ., concur. Bidin, J., took no part. Footnotes 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. TSN, 5 February 1982, p. 3. Folder of Exhibits, Exhibits "A" and "B", pp. 1-2. TSN, 2 February 1982, p. 17. Ibid., p. 27. Folder of Exhibits, Exhibits "C", p. 3. Rollo, Annex "B" of Petition, pp. 21-23. Folder of Exhibits, Exhibit "1", p. 1. Record, pp. 175-177. Rollo, pp. 25-27. Id., Annex "E", p. 36.

11. Perez vs. Gutierrez, 53 SCRA 149 (1973); Tamayo vs. Aquino, 105 Phil. 949 (1959); Erezo vs. Jepte, 102 Phil. 106 (1957). 12. 13. 14. 15. TSN, 29 March 1982, pp. 7-8. Article 1733, Civil Code. Article 1734, id. Article 1735, id.

16. De Peralta vs. Mangusang, 11 SCRA 598 (1964); Jereos vs. Court of Appeals, 117 SCRA 395 (1982). 17. Mirasol v. Robert Dollar Co., 53 Phil. 124 (1929); Ynchausti Steamship Co. v. Dexter and Unson, 41 Phil. 289 (1920).

5. Lita Enterprises v. IAC EN BANC [G.R. No. 64693. April 27, 1984.] LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA, respondents. SYLLABUS 1. MERCANTILE LAW; TRANSPORTATION; CERTIFICATE OF PUBLIC CONVENIENCE; USE OF SAME UNDER "KABIT SYSTEM p" CONDEMNED. The parties herein operated under an arrangement, commonly known as the "kabit system," whereby a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice Makalintal, (Dizon vs. Octavio, 51 O.G. 4059) "this is a pernicious system that cannot be too severely condemned. It constitutes an imposition upon the good faith of the government." 2. ID.; ID.; ID.; ID.; AGREEMENT UNDER THE SYSTEM, VOID FOR BEING CONTRARY TO PUBLIC POLICY. Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code . It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. 3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; VOID CONTRACTS, CANNOT BE CURED BY RATIFICATION OR PRESCRIPTION. The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in Eugenio vs. Perdido, 97 Phil. 41, "the mere lapse of time cannot give efficacy to contracts that are null and void." 4. ID.; PRINCIPLES OF IN PARI DELICTO, DEFINED; APPLIED IN CASE AT BAR . The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other ." (Pomeroy's Equity Jurisprudence, Vol. 3, 5th ed. p. 728) Although certain exceptions to the rule are provided by law, We see no cogent reason why the full force of the rule should not be applied in the instant case. DECISION ESCOLIN, J p: "Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the timehonored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts. LLpr The factual background of this case is undisputed.

Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate said agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc. Possession, however, remained with the spouses Ocampo who operated and maintained the same under the name Acme Taxi, petitioner's trade name. About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab. In the latter case, Civil Case No. 72067 of the Court of First Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for attorney's fees. This decision having become final, a writ of execution was issued. One of the vehicles of respondent spouses with Engine No. 2R- 914472 was levied upon and sold at public auction for P2,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon and sold at public auction for P8,000.00 to a certain Mr. Lopez. LibLex Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of motor vehicles with damages , docketed as Civil Case No. 90988 of the Court of First Instance of Manila. Trial on the merits ensued and on July 22, 1975, the said court rendered a decision, the dispositive portion of which reads: "WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff of Manila are concerned. "Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota cars not levied upon with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in favor of the plaintiff. "Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate of convenience from March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars." (Annex A, Record on Appeal, p. 102-103, Rollo). Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by the court a quo on October 27, 1975. (p. 121, Ibid.) On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified the decision by including as part of its dispositive portion another paragraph, to wit: "In the event the condition of the three Toyota cars will no longer serve the purpose of the deed of conveyance because of their deterioration, or because they are no longer serviceable, or because they are no longer available, the Lita Enterprises, Inc. is ordered

to pay the plaintiffs their fair market value as of July 22, 1975." (Annex "D", p. 167, Rollo.). Its first and second motions for reconsideration having been denied, petitioner came to Us, praying that: "1. ... "2. . . . after legal proceedings, decision be rendered or resolution be issued, reversing, annulling or amending the decision of public respondent so that: "(a) the additional paragraph added by the public respondent to the DECISION of the lower court (CFI) be deleted; "(b) that private respondents be declared liable to petitioner for whatever amount the latter has paid or was declared liable (in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim Florante Galvez, who died as a result of the gross negligence of private respondents' driver while driving one private respondents' taxicabs." (p. 39, Rollo.) Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system", whereby a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been identified as one of the root causes of this prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too severely condemned. It constitutes an imposition upon the good faith of the government." Cdpr Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides: "ART. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: "(1) when the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking." The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to contracts that are null and void." The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where common law prevails. Under American jurisdiction, the doctrina is stated thus: "The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or damages for its violation . The rule has sometimes been laid down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other." 3 Although certain exceptions to the rule are provided by law, We see no cogent reason why the full force of the rule should not be applied in the instant case. LLphil WHEREFORE, all proceedings had in Civil Case No. 90988 entitle "Nicasio Ocampo and Francisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P.

Garcia, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisions rendered therein are hereby annulled and set aside. No costs. SO ORDERED. Fernando, C .J ., Teehankee, Makasiar, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Melencio-Herrera Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ ., concur. Aquino, J ., took no part. Footnotes 1. 2. 3. Dizon v. Octavio, 51 O.G. 4059. 97 Phil. 41. Pomeroy's Equity Jurisprudence, Vol. 3, 5th ed., p. 728.

6. Teja Marketing v. IAC SECOND DIVISION [G.R. No. 65510. March 9, 1987.] TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner, vs. HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents. Cirilo A. Diaz, Jr. for petitioner. Henry V. Briguera for private respondent. DECISION PARAS, J p: "'Ex pacto illicito' non oritur actio' (No action arises out of illicit bargain) is the timehonored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129 SCRA 81.) The factual background of this case is undisputed. The same is narrated by the respondent court in its now assailed decision, as follows: "On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a sidecar in the total consideration o f P8,000.00 as shown by Invoice No. 144 (Exh. "A"). Out of the total purchase price the defendant gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. The defendant, however, failed to comply with his promise and so upon his own request, the period of paying the balance was extended to one year in monthly installments until January 1976 when he stopped paying anymore . The plaintiff made demands but just the same the defendant failed to comply with the same thus forcing the plaintiff to consult a lawyer and file this action for his damage in the amount of P546.21 for attorney's fees and P100.00 for expenses of litigation. The plaintiff also claims that as of February 20, 1978, the total account of the defendant was already P2,731,05 as shown in a statement of account (Exhibit "B"). This amount includes not only the balance of P1,700.00 but an additional 12% interest per annum on the said balance from January 26, 1976 to February 27, 1978; a 2% service charge; and P546.21 representing attorney's fees. "In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a security for the payment of the balance of the purchase price . It has been the practice of financing firms that whenever there is a balance of the purchase price the registration papers of the motor vehicle subject of the sale are not given to the buyer. The records of the LTC show that the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the defendant had no franchise of his own and he attached the unit to the plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation Commission. Pursuant to this agreement the defendant on February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for the mortgage fee and the P82.00 for the registration fee of the motorcycle. The plaintiff, however failed to register the motorcycle on that year on the ground that the defendant failed to comply with some requirements such as the payment of the insurance premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was hiding the motorcycle from him. Lastly, the plaintiff explained also that though the ownership of the motorcycle was already transferred to the defendant the vehicle was still mortgaged with the consent of the defendant to the Rural Bank of Camaligan for the reason that all motorcycle purchased from the plaintiff on credit was rediscounted with the bank.

"On his part the defendant did not dispute the sale and the outstanding balance of P1,700.00 still payable to the plaintiff. The defendant was persuaded to buy from the plaintiff the motorcycle with the side car because of the condition that the plaintiff would be the one to register every year the motorcycle with the Land Transportation Commission. In 1976, however, the plaintiff failed to register both the chattel mortgage and the motorcycle with the LTC notwithstanding the fact that the defendant gave him P90.00 for mortgage fee and registration fee and had the motorcycle insured with La Perla Compaa de Seguros (Exhibit "6") as shown also by the Certificate of cover (Exhibit "3"). Because of this failure of the plaintiff to comply with his obligation to register the motorcycle the defendant suffered damages when he failed to claim any insurance indemnity which would amount to no less than P15,000.00 for the more than two times that the motorcycle figured in accidents aside from the loss of the daily income of P15.00 as boundary fee beginning October 1976 when the motorcycle was impounded by the LTC for not being registered. "The defendant disputed the claim of the plaintiff that he was hiding from the plaintiff the motorcycle resulting in its not being registered. The truth being that the motorcycle was being used for transporting passengers and it kept on travelling from one place to another. The motor vehicle sold to him was mortgaged by the plaintiff with the Rural Bank of Camaligan without his consent and knowledge and the defendant was not even given a copy of the mortgage deed. The defendant claims that it is not true that the motorcycle was mortgaged because of re-discounting for re-discounting is only true with Rural Banks and the Central Bank. The defendant puts the blame on the plaintiff for not registering the motorcycle with the LTC and for not giving him the registration papers inspite of demands made. Finally, the evidence of the defendant shows that because of the filing of this case he was forced to retain the services of a lawyer for a fee on not less than P1,000.00. xxx xxx xxx ". . . it also appears and the Court so finds that defendant purchased the motorcycle in question, particularly for the purpose of engaging and using the same in the transportation business and for this purpose said trimobile unit was attached to the plaintiff's transportation line who had the franchise, so much so that in the registration certificate, the plaintiff appears to be the owner of the unit. Furthermore, it appears to have been agreed, further between the plaintiff and the defendant, that plaintiff would undertake the yearly registration of the unit in question with the LTC. Thus, for the registration of the unit for the year 1976, per agreement, the defendant gave to the plaintiff the amount of P82.00 for its registration, as well as the insurance coverage of the unit." Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with Damages" against private respondent Pedro N. Nale in the City Court of Naga City. The City Court rendered judgment in favor of petitioner, the dispositive portion of which reads: LLjur "WHEREFORE, decision is hereby rendered dismissing the counterclaim and ordering the defendant to pay plaintiff the sum of P1,700.00 representing the unpaid balance of the purchase price with legal rate of interest from the date of the filing of the complaint until the same is fully paid; to pay plaintiff the sum of P546.21 as attorney's fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and to pay the costs. "SO ORDERED." On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private respondent filed a petition for review with the Intermediate Appellate Court and on July 18, 1983. The said Court promulgated its decision, the pertinent portion of which reads "However, as the purchase of the motorcycle for operation as a trimobile under the franchise of the private respondent Jaucian, pursuant to what is commonly known as the 'kabit

system,' without the prior approval of the Board of Transportation (formerly the Public Service Commission) was an illegal transaction involving the fictitious registration of the motor vehicle in the name of the private respondent so that he may traffic with the privileges of his franchise, or certificate of public convenience, to operate a tricycle service, the parties being in pari delicto, neither of them may bring an action against the other to enforce their illegal contract [Art. 1412 (a), Civil Code]." xxx xxx xxx "WHEREFORE, the decision under review is hereby set aside. The complaint of respondent Teja Marketing and/or Angel Jaucian, as well as the counterclaim of petitioner Pedro Nale in Civil Case No. 1153 of the Court of First Instance of Camarines Sur (formerly Civil Case No. 5856 of the City Court of Naga City) are dismissed. No pronouncement as to costs. "SO ORDERED." The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel Jaucian presenting a lone assignment of error whether or not respondent court erred in applying the doctrine of "pari delicto." We find the petition devoid of merit . cdrep Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system" whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds them. Upon this premise it would be error to accord the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides: "Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: "1. When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of the contract, or demand, the performance of the other's undertaking." The defect of inexistence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of time cannot give efficacy to contracts that are null and void. llcd WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs. SO ORDERED. Fernan, Gutierrez, Jr., Padilla, Bidin and Cortez, JJ ., concur. Alampay, J ., took no part. Footnotes * Penned by Justice Carolina C. Grino-Aquino; concurred in by Justice Nestor B. Alampay and Reynato S. Puno.

7. Magboo v. Bernardo EN BANC [G.R. No. L-16790. April 30, 1963.] URBANO MAGBOO and EMILIA C. MAGBOO, plaintiffs-appellees, vs. DELFIN BERNARDO, defendant-appellant. Paredes, Gaw & Associates for plaintiffs-appellees. Bonifacio B. Camacho for defendant-appellant. SYLLABUS 1. BOUNDARY SYSTEM; NATURE OF RELATIONSHIP BETWEEN OWNER OF VEHICLE AND DRIVER; LIABILITY OF VEHICLE-OWNER. An employer-employee relationship exists between a jeepney-owner and a driver under a "boundary system" namely, the fact that the driver does not receive a fixed wage but gets only the excess of the amount of fares collected by him over the amount he pays to the jeep-owner, and that the gasoline consumed by the jeeps is for the account of the driver are not sufficient to withdraw the relationship between them from that of employer and employee. Consequently, the jeepney-owner is subsidiary liable as employer in accordance with Art. 103, Revised Penal Code. DECISION MAKALINTAL, J p: Appeal from the Court of First Instance of Manila to the Court of Appeals, and certified by the latter to this Court on the ground that only questions of law are involved. The action of the spouses Urbano Magboo and Emilia C. Magboo against Delfin Bernardo is for enforcement of his subsidiary liability as employer in accordance with Article 103, Revised Penal Code. The trial court ordered defendant to pay plaintiffs P3,000.00 and costs upon the following stipulated facts: "1. That plaintiffs are the parents of Cesar Magboo, a child of 8 years old, who lived with them and was under their custody until his death on October 24, 1956 when he was killed in a motor vehicle accident, the fatal vehicle being a passenger jeepney with Plate No. AC-1963 (56) owned by the defendant; "2. That at the time of the accident, said passenger jeepney was driven by Conrado Roque; "3. That the contract between Conrado Roque and defendant Delfin Bernardo was that Roque was to pay to defendant the sum of P8.00, which he paid to said defendant, for privilege of driving the jeepney on October 24, 1956, it being their agreement that whatever earnings Roque could make out of the use of the jeepney in transporting passengers from one point to another in the City of Manila would belong entirely to Conrado Roque; "4. That as a consequence of the accident and as a result of the death of Cesar Magboo in said accident, Conrado Roque was prosecuted for homicide thru reckless imprudence before the Court of First Instance of Manila, the information having been docketed as Criminal Case No. 37736, and that upon arraignment Conrado Roque pleaded guilty to the information and was sentenced to six (6) months of arresto mayor, with the accessory penalties of the law; to indemnify the heirs of the deceased in the sum of P3,000.00, with subsidiary imprisonment in case of insolvency, and to pay the costs; "5. That pursuant to said judgment Conrado Roque served his sentence but he was not able to pay the indemnity because he was insolvent." Appellant assails said decision, assigning three errors which boil down to the question of whether or not an employer-employee relationship exists between a jeepney-

owner and a driver under a "boundary system" arrangement . Appellant contends that the relationship is essentially that of lessor and lessee. A similar contention has been rejected by this Court in several cases . In National Labor Union vs. Dinglasan, 52 O.G. No. 4, 1933, it was held that the features which characterize the "boundary system" namely, the fact that the driver does not receive a fixed wage but gets only the excess of the amount of fares collected by him over the amount he pays to the jeep-owner, and that the gasoline consumed by the jeep is for the account of the driver are not sufficient to withdraw the relationship between them from that of the employer and employee . The ruling was subsequently cited and applied in Doce vs. Workmen's Compensation Commission, L9417, December 22, 1958, which involved the liability of a bus owner for injury compensation to a conductor working under the "boundary system." The same principle applies with greater reason in negligence cases concerning the right of third parties to recover damages for injuries sustained. In Montoya vs. Ignacio, L-5868, December 29, 1953, the owner and operator of a passenger jeepney leased it to another, but without the approval of the Public Service Commission. In a subsequent collision a passenger died. We ruled that since the lease was made without such approval, which was required by law, the owner continued to be the operator of the vehicle in legal contemplation and as such was responsible for the consequences incident to its operation. The same responsibility was held to attach in a case where the injured party was not a passenger but a third person, who sued on the theory of culpa aquiliana (Timbol vs. Osias, L-7547, April 30, 1955). There is no reason why a different rule should be applied in a subsidiary liability case under Article 103 of the Revised Penal Code. As in the existence of an employer-employee relationship between the owner of the vehicle and the driver. Indeed to exempt from liability the owner of a public vehicle who operates it under the "boundary system" on the ground that he is a mere lessor would be not only to abet flagrant violations of the Public Service Law but also to place the riding public at the mercy of reckless and irresponsible drivers reckless because the measure of their earnings depends largely upon the number of trips they make and, hence, the speed at which they drive; and irresponsible because most if not all of them are in no position to pay the damages they might cause. (See Erezo vs. Jepte, L-9605, September 30, 1957). Appellant further argues that he should not have been held subsidiarily liable because Conrado Roque (the driver of the jeepney) pleaded guilty to the charge in the criminal case without appellant's knowledge and contrary to the agreement between them that such plea would not be entered but instead evidence would be presented to prove Roque's innocence. On this point we quote with approval the pertinent portion of the decision appealed from: "'With respect to the contention of the defendant that he was taken unaware by the spontaneous plea of guilt entered by the driver Conrado Roque, and that he did not have a chance to prove the innocence of said Conrado Roque, the Court holds that at this stage, it is already too late to try the criminal case all over again. Defendant's allegation that he relied on his belief that Conrado Roque would defend himself and they had sufficient proof to show that Roque was not guilty of the crime charged cannot be entertained. Defendant should have taken it to himself to aid in the defense of Conrado Roque. Having failed to take this step and the accused having been declared guilty by final judgment of the crime of homicide thru reckless imprudence, there appears no more way for the defendant to escape his subsidiary liability as provided for in Article 103 of the Revised Penal Code." WHEREFORE, the judgment appealed from, being in accordance with law, is hereby affirmed, with costs against defendant-appellant. Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon and Regala, JJ., concur.

Padilla, J., took no part.

8. Planters Products v. CA FIRST DIVISION [G.R. No. 101503. September 15, 1993.] PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents. Gonzales, Sinense, Jimenez & Associates for petitioner. Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents. DECISION BELLOSILLO, J p: Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo? Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure. On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively. Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-party which reads: "16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo Bureau inspector or substitute appointed by charterers for his account certifying the vessel's readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's expense and the vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime commences" (emphasis supplied). After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage . 5 Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel's boom . Petitioner unloaded the cargo from the holds into its steel-bodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-party (which provided for an F.I.O.S. clause). 6 The hatches remained open throughout the duration of the discharge. 7 Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they were individually weighed for the purpose of

ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. 8 The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the fertilizer. 9 It took eleven (11) days for PPI to unload the cargo , from 5 July to 18 July 1974 (except July 12th, 14th and 18th). 10 A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt. 12 Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13 Respondent SSA explained that they were not able to respond to the consignee's claim for payment because, according to them, what they received was just a request for shortlanded certificate and not a formal claim, and that this "request" was denied by them because they "had nothing to do with the discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have become private carriers by reason of the provisions of the charter-party . The court a quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or damaged when it ruled thus: 15 ". . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and delivery by it of less than what it received . After that, the burden of proving that the loss or damage was due to any of the causes which exempt him from liability is shifted to the carrier, common or private he may be. Even if the provisions of the charter-party aforequoted are deemed valid, and the defendants considered private carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo. This they failed to do. By this omission, coupled with their failure to destroy the presumption of negligence against them, the defendants are liable" (italics supplied). On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time charter-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. Thus ". . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce sufficient evidence to prove the negligence of the defendant carrier as alleged in its

complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove his exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202). "But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action, i.e., the alleged negligence of defendant carrier. It appears that the plaintiff was under the impression that it did not have to establish defendant's negligence. Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligations . . ." 18 (emphasis supplied). Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the issue raised therein is the validity of a stipulation in the charterparty delimiting the liability of the shipowner for loss or damage to goods caused by want of due diligence on its part or that of its manager to make the vessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil Code applies only to common carriers and not to private carriers. 19 Petitioner further argues that since the possession and control of the vessel remain with the shipowner, absent any stipulation to the contrary, such shipowner should be made liable for the negligence of the captain and crew. In fine, PPI faults the appellate court in not applying the presumption of negligence against respondent carrier, and instead shifting the onus probandi on the shipper to show want of due diligence on the part of the carrier, when he was not even at hand to witness what transpired during the entire voyage. As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that he had exercised that degree of diligence required of him under the law. It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it fitting to first define important terms which are relevant to our discussion. A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; 20 a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight . 21 Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter , by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. 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. 22 In both cases, the charterparty provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and 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. 23 The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not

a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. 24 Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. 25 In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice . Moreover, in case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. 26 On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier. It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons . When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so . This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 27 It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. 28 Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowner from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, 29 does not find application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers. We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 "As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons . Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collussion occur; and the same difficulty in discovering the truth as to what has taken place arises . . ."

In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability . 31 To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence. The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attach in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship's boom. 32 It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. 34 Verily, the presumption of negligence on the part of respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. This was confirmed by respondent appellate court thus ". . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligations. Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly show absence of negligence by the defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed and nobody could open the same except in the presence of the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would have to be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16)" (italics supplied). The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was re-examined by the consignee, but prior to unloading . This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier . 35 Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control

and supervision, not when the same is done by the consignee or stevedores under the employ of the latter. 36 Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the character of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. 37 38 Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process. The dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market value. The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it. The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bad order cargo" as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo. The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee's warehouse. Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face . Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which

further contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was remiss in the exercise of due diligence in order to minimize the loss or damage to the goods it carried. WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is hereby, DISMISSED. Costs against petitioner. SO ORDERED. Davide, Jr. and Quiason, JJ ., concur. Cruz, J ., took no part. Grio-Aquino, J ., is on leave. Footnotes 1. A charter-party is 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 (70 Am Jur 2d, p. 580, citing Ward v. Thompson, 63 US 330, 16 L Ed 249; a contract in which the owner of a vessel lets for consideration the whole or part thereof for the conveyance of goods and/or passengers on a particular voyage to one or more places or until the expiration of a specified time and surrenders unto the lessee or charterer the control, by vesting upon the latter the right to appoint the captain, officers and members of the crew, of the vessel leased or chartered during the duration of the contract (R.A. 913). 2. The Baltic and International Maritime Uniform General Charter (As Revised 1922 and 1976), Including "F.I.O.S." Alternative, etc., Code Name: "GENCON" Adopted by the Documentary Committee of the General Council of British Shipping, London, and the Documentary Committee of the Japan Shipping Exchange, Inc., Tokyo. 3. Rollo, pp. 105, 128. 4. Although par. 40 of the Rider (Description of "Sun Plum") states that the vessel has 3 holds/3 hatches, Hatch No. 4 which usually was not used for cargo, was converted for such purpose. The time sheet for 12 July 1974 shows that Hatch No. 4 was first to be discharged of cargo. This was also testified to by the master of the vessel, Captain Lee Tae Bo. 5. Id., p. 129. 6. Under the terms and conditions of the charter-party, F.I.O.S. (Free In and Out Shipping/Stevedoring) means that the shipper takes care of the loading, while the unloading is the sole responsibility of the consignee (Rollo, pp. 128, 184). 7. 8. 9. TSN, 20 July 1977, p. 17. TSN, 20 July 1977, p. 18. Rollo, p. 130.

10. Id., p. 129; ADDENDUM NO. 4 dated 17 May 1974 provides: "The cargo to be discharged at the average rate of 1,000 metric tons per day of 24 hours weather working days, Sundays, Holidays excluded unless used, assuming four (4) sets of vessel's gear simultaneously workable at vessel's berthing side." 11. TSN, 5 April 1978, pp. 7-8. "Drop survey" is the drop of the vessel showing certain meters or centimeters of the vessel. In the ship there is a draft from one meter upward. When the vessel arrives, (CSCI) conducted initial draft survey before discharging, together with the ship's representative by getting the draft forward and aft. They divided it by 2 to get the mean draft and the average draft. After getting the mean draft, they got the displacement scale of the vessel to show certain tons of the ship, then deducted the non-

cargo weight, like the fuel oil, the fresh water. Finally, the total load of the ship is taken. After discharging, CSCI went over same procedure to get the weight of the vessel. These figures were then subtracted from the total load of the ships to get the weight of the cargo. 12. 13. 14. Id., p. 106. Id., pp. 49, 68. TSN, 28 Aug. 1979, pp. 9-10.

15. Id., p. 68; "Planters Products, Inc. v. Soriamont Steamship Agencies, et al.," Civil Case No. 98623, CFI of Manila, Br. 27, decision penned by Judge E.L. Peralta, 24 March 1980. 16. The Court of Appeals (Twelfth Division) rendered its decision on 13 August 1991 in CA-G.R. CV No. 02736 entitled "Planters Products, Inc. vs. Kyosei Kisen Kabushiki Kaisha & Soriamont Steamship Agencies." Decision penned by Justice Alfredo L. Benipayo, concurred in by Justices Manuel C. Herrera and Cancio C. Garcia, Rollo, pp. 13-24. 17. 18. 19. No. L-25599, 4 April 1968, 23 SCRA 24. Rollo, p. 109. Rollo, pp. 8 & 9.

20. Charter Parties; Charters of Demise and Contracts of Affreightment; 70 Am Jur 2d, p. 580; citing Ward v. Thompson, 63 US 330, 16 L Ed 249; E.R. Harvey Ivamy, Carriage of Goods by Sea, 13th Ed., Chap. 2, pp. 5, 8-10. The term is also defined under R.A. No. 913, known as "An Act Defining 'Lease' or 'Charter' of Vessels" as to mean a "contract in which the owner of a vessel lets for consideration the whole or principal part thereof for the conveyance of goods and/or passengers on a particular voyage to one or more places or until the expiration of a specified time and surrenders unto the lessee or charterer the control, by vesting upon the latter the right to appoint the captain, officers and members of the crew, of the vessel leased or chartered during the duration of the contract." 21. 22. Bouvier's Law Dictionary, Third Rev., Vol. I, p. 470. Id. pp. 581-582.

23. Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public. 24. See De Guzman v. Court of Appeals, No. L-47822, 22 December 1988, 168 SCRA 612; U.S. v. Quinajon, No. 8686, 30 July 1915. 25. Art. 1733. 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. Such extraordinary diligence in the vigilance over the goods is further expressed in Arts. 1734, 1735 and 1745, Nos. 5, 6 and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Arts. 1755 and 1756. 26. Art. 1735. In all cases other than those mentioned in Nos. 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. 27. E.R. Harvey Ivamy, pp. 8-10. 28. 70 Am Jur 2nd, p. 608 S 238, citing Grace v. Palmer, 21 US 605, 5 L Ed 696, and Kerry v. Pacific Marine Co., 12 CAL 564, 54, p. 89. 29. 30 C.J.S., pp. 269-693.

30. British Shipping Laws, Vol. 2, "Carver's Carriage by Sea," By Raoul Colinvaux, Vol. 1, 12th Ed., Published by Stevens & Sons Limited of London, Printed in Great Britain, 1971. 31. See Ynchausti Steamship Co. v. Dexter, No. 15652, 41 Phil. 289, 14 Dec. 1920; Mirasol v. Robert Dollar, Co., No. 29721, 53 Phil. 124, 27 March 1929. 32. 33. 34. 35. Deposition of Capt. Lee Tae Bo, Exh. "4", pp. 22-23. TSN, 20 July 1977, p. 14. TSN, 5 April 1978, pp. 24-25. See Note 6.

36. 70 Am Jur 2d, p. 603 S 230, citing Oxford Paper Co. v. The Nidarholm, 282 US 681, 75L Ed 614, 51 S Ct 266. 37. 38. Art. 361, par. 4, Code of Commerce. Art. 362, par. 1, id.

9. LRT Authority v. Navidad FIRST DIVISION [G.R. No. 145804. February 6, 2003.] LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY, respondents. Office of the Government Corporate Counsel for petitioners. Mario F. Estayan for Prudent Security Agency. Arias Law Offices for M. Navidad and the Heirs of Navidad. SYNOPSIS On 14 October 1993, Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare ). Junelito Escartin, the security guard assigned to the area, approached Navidad. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously. Private respondent Marjorie Navidad, the widow of Nicanor, along with her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. and Prudent Security Agency for the death of her husband. The trial court ruled in favor of private respondent by awarding actual, moral and compensatory damages. Prudent Security Agency appealed to the Court of Appeals. The appellate court exonerated Prudent from any liability for the death of Nicanor and instead held LRTA and Roman jointly and severally liable. In exempting Prudent from liability, the appellate court stressed that there was nothing to link the security agency to the death of Navidad. It ruled that Navidad failed to show that Escartin inflicted fist blows upon the victim and the evidence merely established the fact of death of Navidad by reason of his having been hit by the train owned and managed by the LRTA and operated at the time by Roman. The appellate court faulted petitioners for their failure to present expert evidence to establish the fact that the application of emergency brakes could not have stopped the train. Hence, the present petition for review. IcTEaC The Supreme Court affirmed the decision of the Court of Appeals . If there is any liability that could be attributed to Prudent, it could only be for tort under the provisions of Article 2176 and related provisions, in conjunction with Article 2180, of the Civil Code. In the absence of satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault, an exception from the general rule that negligence must be proved. Regrettably for LRT, as well as the surviving spouse and heirs of the late Nicanor Navidad, the Court is concluded by the factual finding of the Court of Appeals that there was nothing to link Prudent to the death of Nicanor Navidad, for the reason that the negligence of its employee, Escartin, has not been duly proven. The Court also absolved petitioner Rodolfo Roman, there being no showing that he is guilty of any culpable act or omission and also for the reason that the contractual tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman ; thus, Roman can be made liable only for his own fault or negligence. The Court also ruled that the award of nominal damages, in addition to actual damages, is untenable stressing that nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the

plaintiff for any loss suffered by him. It is also an established rule that nominal damages cannot co-exist with compensatory damages. SYLLABUS 1. CIVIL LAW; COMMON CARRIERS; LIABILITY FOR DEATH OR INJURY TO PASSENGERS. The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all circumstances. Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage. The statutory provisions render a common carrier liable for death of or injury to passengers (a) through the negligence or willful acts of its employees or b) on account of willful acts or negligence of other passengers or of strangers if the common carrier's employees through the exercise of due diligence could have prevented or stopped the act or omission. In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and by simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force majeure . In the absence of satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault, an exception from the general rule that negligence must be proved. STIHaE 2. ID.; EXTRA CONTRACTUAL OBLIGATIONS; QUASI-DELICTS; AN EMPLOYER CANNOT BE HELD LIABLE FOR DAMAGES ABSENT PROOF OF FAULT OR NEGLIGENCE ON THE PART OF ITS EMPLOYEE; CASE AT BAR. The foundation of LRTA's liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier . In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage. Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 2176 and related provisions, in conjunction with Article 2180, of the Civil Code. The premise, however, for the employer's liability is negligence or fault on the part of the employee. Once such fault is established, the employer can then be made liable on the basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and supervision of its employees . The liability is primary and can only be negated by showing due diligence in the selection and supervision of the employee, a factual matter that has not been shown. Absent such a showing, one might ask further, how then must the liability of the common carrier, on the one hand, and an independent contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract . Stated differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply. Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals that "there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its employee, Escartin, has not been duly proven . . . ." This finding of the appellate court is not without substantial justification in our own review of the records of the case. There being, similarly, no showing

that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must also be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence . 3. ID.; DAMAGES; AWARD OF NOMINAL DAMAGES IN ADDITION TO ACTUAL DAMAGES IS UNTENABLE; NOMINAL DAMAGES CANNOT CO-EXIST WITH COMPENSATORY DAMAGES. The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. It is an established rule that nominal damages cannot co-exist with compensatory damages. ISAcHD DECISION VITUG, J p: The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et al.," which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor Navidad. THAECc On 14 October 1993, about half an hour past seven o'clock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously. On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection and supervision of its security guards. The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it adjudged: "WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs the following: "a) 2) 3) "b) "c) 1) Actual damages of P44,830.00; Compensatory damages of P443,520.00; Indemnity for the death of Nicanor Navidad in the sum of P50,000.00; Moral damages of P50,000.00; Attorney's fees of P20,000;

"d)

Costs of suit.

"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit. "The compulsory counterclaim of LRTA and Roman are likewise dismissed." 1 Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally liable thusly: "WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly and severally to the plaintiffs-appellees, the following amounts: a) b) c) d) e) P44,830.00 as actual damages; P50,000.00 as nominal damages; P50,000.00 as moral damages; P50,000.00 as indemnity for the death of the deceased; and P20,000.00 as and for attorney's fees." 2

The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a contract of carriage theretofore had already existed when the victim entered the place where passengers were supposed to be after paying the fare and getting the corresponding token therefor . In exempting Prudent from liability, the court stressed that there was nothing to link the security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon the victim and the evidence merely established the fact of death of Navidad by reason of his having been hit by the train owned and managed by the LRTA and operated at the time by Roman. The appellate court faulted petitioners for their failure to present expert evidence to establish the fact that the application of emergency brakes could not have stopped the train. The appellate court denied petitioners' motion for reconsideration in its resolution of 10 October 2000. In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz: "I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT. "II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR. "III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA." 3 Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by holding them liable on the basis of a sweeping conclusion that the presumption of negligence on the part of a common carrier was not overcome. Petitioners would insist that Escartin's assault upon Navidad, which caused the latter to fall on the tracks, was an act of a stranger that could not have been foreseen or prevented. The LRTA would add that the appellate court's conclusion on the existence of an employer-employee relationship between Roman and LRTA lacked

basis because Roman himself had testified being an employee of Metro Transit and not of the LRTA. Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created from the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights and protection under a contractual relation, and that the appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier. Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the safety of passengers. 4 The Civil Code, governing the liability of a common carrier for death of or injury to its passengers, provides: "Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. "Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755." "Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. "This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees." "Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission." The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all circumstances . 5 Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage . 6 The statutory provisions render a common carrier liable for death of or injury to passengers (a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other passengers or of strangers if the common carrier's employees through the exercise of due diligence could have prevented or stopped the act or omission. 7 In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and 8 by simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force majeure. 9 In the absence of satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault, 10 an exception from the general rule that negligence must be proved. 11 The foundation of LRTA's liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier . In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or

an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage. Should Prudent be made likewise liable ? If at all, that liability could only be for tort under the provisions of Article 2176 12 and related provisions, in conjunction with Article 2180, 13 of the Civil Code. The premise, however, for the employer's liability is negligence or fault on the part of the employee . Once such fault is established, the employer can then be made liable on the basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and supervision of its employees. The liability is primary and can only be negated by showing due diligence in the selection and supervision of the employee, a factual matter that has not been shown. Absent such a showing, one might ask further, how then must the liability of the common carrier, on the one hand, and an independent contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 14 of the Civil Code can well apply. 15 In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract. 16 Stated differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasidelictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply. 17 Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals that " there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its employee, Escartin, has not been duly proven . . . ." This finding of the appellate court is not without substantial justification in our own review of the records of the case. There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must also be absolved from liability . Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence. The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. 18 It is an established rule that nominal damages cannot co-exist with compensatory damages. 19 WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No costs. DaAIHC SO ORDERED. Davide, Jr., C.J., Ynares-Santiago, Carpio and Azcuna, JJ., concur. Footnotes 1. 2. 3. 4. 5. 6. 7. Rollo, p. 16. Rollo, pp. 46-47. Rollo, pp. 18-19. Arada vs. Court of Appeals, 210 SCRA 624. Philippine Airlines, Inc. vs. Court of Appeals, 226 SCRA 423. Dangwa Transportation Co., Inc. vs. Court of Appeals, 202 SCRA 575. Article 1763, Civil Code.

8. Gatchalian vs. Delim, 203 SCRA 126; Yobido vs. Court of Appeals, 281 SCRA 1; Landingin vs. Pangasinan Transportation Co., 33 SCRA 284. 9. 10. 11. Mercado vs. Lira, 3 SCRA 124. Article 1756, Civil Code. Vda. De Abeto vs. Phil. Air Lines, Inc., 30 July 1982.

12. Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. 13. Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company. Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in their company. The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. The State is responsible in like manner when it acts through a special agent, but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in Article 2176 shall be applicable. Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody. The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. 14. Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary. 15. 16. Air France vs. Carrascoso, 124 Phil. 722. PSBA vs. CA, 205 SCRA 729.

17. Cangco vs. Manila Railroad, 38 Phil. 768; Manila Railroad vs. Compania Transatlantica, 38 Phil. 875. 18. 19. Article 2221, Civil Code. Medina, et al. vs. Cresencia, 99 Phil. 506.