VOL.

300, DECEMBER 29, 1998 661

First Philippine Industrial Corporation vs. Court of Appeals
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.
Contracts; Common Carriers; A “common carrier” is 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.—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.”
Same; Same; Test for determining whether a party is a common carrier of goods.—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.
Same; Same; The fact that petitioner has a limited clientele does not exclude it from the definition
of a common carrier.—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
___________

*
 SECOND DIVISION.

662

662 SUPREME COURT REPORTS

ANNOTATED
First Philippine Industrial Corporation vs. Court of
Appeals
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.
Same; Same; Words and Phrases; 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.—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.
Same; Same; Taxation; 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.”—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. To tax
petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose
of the Local Government Code.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Quiason, Makalintal, Barot, Torres & Ibarra for petitioner.
     Teodulfo A. Deguito for respondents.

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial
Court
663
VOL. 300, DECEMBER 29, 1998 663
First Philippine Industrial Corporation vs. Court of Appeals
of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners’ complaint for
a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in
1967  and renewed by the Energy Regulatory Board in 1992.
1 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.  The respondent City Treasurer assessed a
3

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:
___________

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

With gross receipts for the Amount of Tax Per Annum

calendar year in the amount of:
xxx xxx
P2,000,000.00 or more at a rate not exceeding fifty
percent (50%) of one percent
(1%)
664
664 SUPREME COURT REPORTS ANNOTATED
 First Philippine Industrial Corporation vs. Court of Appeals
“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 x x x x
“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  for tax refund with prayer for writ of preliminary injunction against respondents City
6

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 Govern-
___________

4
 Letter Protest dated January 20, 1994, Rollo, pp. 110-111.
5
 Letter of respondent City Treasurer, Rollo, p. 112.
6
 Complaint, Annex “C,” Rollo, pp. 51-56.

665
VOL. 300, DECEMBER 29, 1998 665
First Philippine Industrial Corporation vs. Court of Appeals
ment 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:
“x x x Plaintiff is either a contractor or other independent contractor.
x x x 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.
__________

7
 Rollo, pp. 51-57.
8
 Answer, Annex “J,” Rollo, pp. 122-127.

666
666 SUPREME COURT REPORTS ANNOTATED
First Philippine Industrial Corporation vs. Court of Appeals
“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. 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. 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, x x x 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.  On November 29, 1995, the respondent court rendered a decision  affirming the
10 11

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.  Petitioner
13

___________

9
 RTC Decision, Rollo, pp. 58-62.
10
 Rollo, p. 84.
11
 CA-G.R. SP No. 36801; Penned by Justice Jose C. De la Rama and concurred in by Justice Jaime M. Lantin and
Justice Eduardo G. Montenegro; Rollo, pp. 33-47.
12
 Rollo, p. 49.
13
 Resolution dated November 11, 1996 excerpts of which are hereunder quoted:
“The petition is unmeritorious.

667
VOL. 300, DECEMBER 29, 1998 667
First Philippine Industrial Corporation vs. Court of Appeals
moved for a reconsideration which was granted by this Court in a Resolution  of January 22, 14

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 car-
___________

“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 or both, by land, water, or air, for compensation, offering their services to the public.
“We sustain the view that petitioner is a special carrier. Based on the facts on hand, it appears that petitioner is not offering its
services to the public.
“We agree with the findings of the appellate court that the claim for exemption from taxation must be strictly construed against the
taxpayer. The present understanding of the concept of “common 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.”

 G.R. No. 125948 (First Philippine Industrial Corporation vs. Court of Appeals, et al.)—Considering the grounds of
14

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:

1. (a)to GRANT the motion for reconsideration and to REINSTATE the petition; and
2. (b)to require respondent to COMMENT on the petition, within ten (10) days from notice.

668
668 SUPREME COURT REPORTS ANNOTATED
First Philippine Industrial Corporation vs. Court of Appeals
rier 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. 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. 2.He must undertake to carry goods of the kind to which his business is confined;
3. 3.He must undertake to carry by the method by which his business is conducted and over his
established roads; and
4. 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
___________
  Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5.
15

669
VOL. 300, DECEMBER 29, 1998 669
First Philippine Industrial Corporation vs. Court of Appeals
common carrier. In De Guzman vs. Court of Appeals  we ruled that:
16

“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 x x x avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the ‘general public,’ i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the general population. We think
that Article 1877 deliberately refrained from making such distinctions.
So understood, the concept of ‘common carrier’ under Article 1732 may be seen to coincide neatly
with the notion of ‘public service,’ under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public Service Act, ‘public service’ includes:
‘every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft,  engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system gas, electric light heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar
public services.” (Italics supplied)
____________

 168 SCRA 617-618 [1988].

16

670
670 SUPREME COURT REPORTS ANNOTATED
First Philippine Industrial Corporation vs. Court of Appeals
Also, respondent’s argument that the term “common car-rier” as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of “common carriers” in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air. It does
not provide that the transportation of the passengers or goods should be by motor vehicle. In fact,
in the United States, oil pipe line operators are considered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
“common carrier.” Thus, Article 86 thereof provides that:
“Art. 86. Pipe line concessionaire as common carrier.—A pipe line shall have the preferential right to
utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the
remaining transportation capacity pro rata for the transportation of such other petroleum as may be
offered by others for transport, and to charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural Resources.”
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article
7 thereof provides:
“that everything relating to the exploration for and exploitation of petroleum x x x and everything relating
to the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby
declared to be a public utility.” (Italics Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a “common carrier.” In BIR
Ruling No. 069-83, it declared:
____________

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.

671
VOL. 300, DECEMBER 29, 1998 671
First Philippine Industrial Corporation vs. Court of Appeals
“x x x 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 x x x. 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 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:
x x x      x x x      x x x
(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.” x x x
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
672
672 SUPREME COURT REPORTS ANNOTATED
First Philippine Industrial Corporation vs. Court of Appeals
impose a tax on business enjoying a franchise at the rate of not more than one-half of 1 percent of the
gross annual receipts. So, transportation contractors who are enjoying a franchise would be subject to tax
by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government
units on the carrier business. Local government units may impose taxes on top of what is already being
imposed by the National Internal Revenue Code which is the so-called “common carriers tax.”  We do not
want a duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that
a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x 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.  To tax petitioner again on its gross
19

receipts in its transportation of petroleum business would defeat the purpose of the Local
Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
     Bellosillo  (Chairman), Puno and Mendoza, JJ., concur.
Petition granted, judgment reversed and set aside.
___________

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

1990; Italics Ours.

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

673
VOL. 300, DECEMBER 29, 1998 673
First Philippine Industrial Corporation vs. Court of Appeals
Notes.—It has been held that the true test of a common carrier is the carriage of passengers or
goods, provided it has space, for all who opt to avail themselves, its transportation service for a
fee. (National Steel Corporation vs. Court of Appeals, 283 SCRA 45 [1997])
The rights and obligations of a private carrier and a shipper, including their respective
liability for damage to the cargo, are determined primarily by stipulations in their contract of
private carriage or charter party. (Id.)

——o0o——

674
476 SUPREME COURT REPORTS ANNOTATED
Planters Products, Inc. vs. Court of Appeals
G.R. No. 101503. September 15, 1993. *

PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT

STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents.
Words and Phrases; Shipping; “Charter Party” defined.—A “charter-party” is defined as a contract
by which an entire ship, or some principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the
whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage,
in consideration of the payment of freight; 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. In both cases, the charter-party provides
for the hire of the vessel only, either for a determinate period of time or for a single or consecutive
voyage, the 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.
Same; Same; “Common Carrier” defined.—Upon the other hand, the term “common or public
carrier” is defined in Art. 1732 of the Civil Code. The definition extends to carriers either by land, air or
water which hold themselves out as ready to engage in carrying goods or transporting passengers or both
for compensation as a public employment and not as a casual occupation. 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.
Shipping; Transportation; Evidence; Common carriers required to observe extraordinary diligence
and presumed at fault; no such

_______________

 FIRST DIVISION.
*

477
VOL. 226, SEPTEMBER 15, 1993 477
Planters Products, Inc. vs. Court of Appeals
presumption applies to private carriers.—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. 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. 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.
Same; Same; Same; In a time or voyage charter, in contrast to a bareboat charter, the ship remains
a common or public carrier.—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.
Same; Same; Same; In the common carriage of highly soluble goods, like fertilizer, it is the shipper
or owner of the goods that commonly face risk of loss or damage.—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.

PETITION for review of the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Gonzales, Sinense, Jimenez & Associates for petitioner.
     Siguion Reyna, Montecillo & Ongsiako Law Office for pri-
478
478 SUPREME COURT REPORTS ANNOTATED
Planters Products, Inc. vs. Court of Appeals
vate respondents.

BELLOSILLO, J.:

Does a charter-party  between a shipowner and a charterer transform a common carrier into a
1

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  was entered into between Mitsubishi as
2

shipper/charterer and KKKK as shipowner, in Tokyo, Japan.  Riders to the aforesaid charter-
3

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,
_______________

 A charter-party is a contract by which an entire ship or some principal part thereof, is let by the owner to another
1

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).
 The Baltic and International Maritime Uniform General Charter (As Revised 1922 and 1976), Including “F.I.O.S.”
2

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.
  Rollo, pp. 105-128.
3

479
VOL. 226, SEPTEMBER 15, 1993 479
Planters Products, Inc. vs. Court of Appeals
20th, 21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds  were all presumably
4

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. x x x x 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.” (italics 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
steelbodied 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).  The hatches remained open throughout the duration of the discharge.
6 7

_______________

 Although par. 40 of the Rider (Description of “Sun Plum),” states that the vessel has 3 holds/3 hatches, Hatch No. 4
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.
 Id., p. 129.
5

 Under the terms and conditions of the charter-party, F.I.O.S. (Free In and Out Shipping/Stevedoring) means that the
6

shipper takes care of the loading, while the unloading is the sole responsibility of the consignee (Rollo, pp. 128, 184).
 TSN, 20 July 1977, p. 17.
7

480
480 SUPREME COURT REPORTS ANNOTATED
Planters Products, Inc. vs. Court of Appeals
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.  The petitioner’s warehouse
8

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).  A private marine and cargo surveyor, Cargo Superintendents Company
10

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.  The survey report submitted by CSCI to the
11

consignee (PPI) dated 19 July 1974 revealed a shortage in the

_______________

8
 TSN, 20 July 1977, p. 18.
9
 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 bearthing 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.
481
VOL. 226, SEPTEMBER 15, 1993 481
Planters Products, Inc. vs. Court of Appeals
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.”  Hence, on 18 July 1975, PPI filed an action
14

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

“x x x x 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

_______________

12
 Id., p. 106.
13
 Id., pp. 49, 68.
14
 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.
482
482 SUPREME COURT REPORTS ANNOTATED
Planters Products, Inc. vs. Court of Appeals
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.  Relying on the 1968 case of Home
16

Insurance Co. v. American Steamship Agencies, Inc.,  the appellate court ruled that the cargo
17

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—
“x x x x 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

_______________

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 Risen 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
 No. L-25599, 4 April 1968, 23 SCRA 24.
483
VOL. 226, SEPTEMBER 15, 1993 483
Planters Products, Inc. vs. Court of Appeals
negligent in performing its obligations x x x x”  (italics supplied).
18

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 charter-party
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.  Petitioner further argues that since the possession and control
19

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 charterparty; 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;  a contract of 20

affreightment by
_______________

 Rollo, p. 109.
18

 Rollo, pp. 8 & 9.

19

 Charter Parties; Charters of Demise and Contracts of Affreightment; 70 Am Jur 2d, p. 580; citing Ward v.
20

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
484
484 SUPREME COURT REPORTS ANNOTATED
Planters Products, Inc. vs. Court of Appeals
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;  Charter parties are of two types: (a) contract of affreightment which involves the use of
21

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.  In both cases, 22

the charter-party provides for the hire of the vessel only, either for a determinate period of time
or for a single or consecutive voyage, the 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.  The definition extends to carriers either by land, air or water which hold themselves out
23

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
involv-
_______________

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
 Bouvier’s Law Dictionary, Third Rev., Vol. I, p. 470.
22
 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.
485
VOL. 226, SEPTEMBER 15, 1993 485
Planters Products, Inc. vs. Court of Appeals
ing 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.  In the case of private carriers, however, the exercise of ordinary diligence in the carriage
25

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.  On the contrary, no such presumption applies to private
26

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
_______________

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.
486
486 SUPREME COURT REPORTS ANNOTATED
Planters Products, Inc. vs. Court of Appeals
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 shipowners 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,  does not find application in our jurisdiction, for we
29
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

_______________

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.
487
VOL. 226, SEPTEMBER 15, 1993 487
Planters Products, Inc. vs. Court of Appeals
“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 collusion
occur; and the same difficulty in discovering the truth as to what has taken place arises x x x x”
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 Attache 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

_______________

 See Ynchausti Steamship Co. v. Dexter, No. 15652, 41 Phil. 289, 14 Dec. 1920; Mirasol v. Robert Dollar Co., No.
31

29721, 53 Phil. 124, 27 March 1929.

 Deposition of Capt. Lee Tae Bo, Exh. “4”, pp. 22-23.
32

488
488 SUPREME COURT REPORTS ANNOTATED
Planters Products, Inc. vs. Court of Appeals
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.  When M/V “Sun Plum” docked at its berthing place, representatives of the consignee
33

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 the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was confirmed by respondent appellate court thus—
“x x x x 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. 15-18)” (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
_______________

 TSN, 20 July 1977, p. 14.

33

 TSN, 5 April 1978, pp. 24-25.

34

489
VOL. 226, SEPTEMBER 15, 1993 489
Planters Products, Inc. vs. Court of Appeals
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.  Moreover, a shipowner is
36

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.  The carrier, nonetheless,
37

shall be liable for the loss and damage resulting from the preceding causes if it is proved, as
against him, that they arose through his negligence or by reason of his having failed to take the
precautions which usage has established among careful persons. 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
_______________

 See Note 6.
35

 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.
36

 Art. 361, par. 4, Code of Commerce.

37

 Art. 362, par. 1, id.

38

490
490 SUPREME COURT REPORTS ANNOTATED
Planters Products, Inc. vs. Court of Appeals
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.
491
VOL. 226, SEPTEMBER 15, 1993 491
Planters Products, Inc. vs. Court of Appeals
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 (Chairman), J., No part. Related to respondents’ counsel.
     Griño-Aquino, J., On official leave.
Petition dismissed. Assailed decision affirmed.
Note.—Common carriers are bound to observe extra-ordinary vigilance over goods x x x
according to all circumstances of each case (Eastern Shipping Lines, Inc. vs. Court of
Appeals, 196 SCRA 570).

——o0o——

492
426 SUPREME COURT REPORTS ANNOTATED
Fabre, Jr. vs. Court of Appeals
G.R. No. 111127. July 26, 1996. *

MR. & MRS. ENGRACIO FABRE, JR.  and PORFIRIO CABIL, petitioners, vs. COURT OF
**

APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE
ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI
CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA,
JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO
NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR
GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO
MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA
CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON,
ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and
BERNADETTE FERRER, respondents.
Civil Law; Negligence; Damages; Cabil was grossly negligent and should be held liable for the
injuries suffered by private respondent Amyline Antonio.—Considering the foregoing—the fact that it was
raining and the road was slippery, that it was dark, that he drove his bus at 50 kilometers an hour when
even on a good day the normal speed was only 20 kilometers an hour, and that he was unfamiliar with the
terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by private
respondent Amyline Antonio.

________________

 SECOND DIVISION.
*

 The name of petitioner Engracio Fabre, Jr.’s wife cannot be ascertained from the record. Hence she is unnamed.
**

427
VOL. 259, JULY 26, 1996 427
Fabre,Jr. vs. Court of Appeals
Same; Same; Same; Cabil’s negligence gave rise to the presumption that his employers, the
Fabres, were themselves negligent in the selection and supervision of their employee.—Pursuant to Arts.
2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the
Fabres, were themselves negligent in the selection and supervision of their employee.
Same; Same; Same; Employer should also examine the applicant for his qualifications, experience
and record of service.—Due diligence in selection of employees is not satisfied by finding that the
applicant possessed a professional driver’s license. The employer should also examine the applicant for
his qualifications, experience and record of service. Due diligence in supervision, on the other hand,
requires the formulation of rules and regulations for the guidance of employees and the issuance of proper
instructions as well as actual implementation and monitoring of consistent compliance with the rules.
Same; Same; Same; The existence of hiring procedures and supervisory policies cannot be casually
invoked to overturn the presumption of negligence on the part of an employer.—In the case at bar, the
Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had
been driving for school children only, from their homes to the St. Scholastica’s College in Metro Manila.
They had hired him only after a two-week apprenticeship. They had tested him for certain matters, such
as whether he could remember the names of the children he would be taking to school, which were
irrelevant to his qualification to drive on a long distance travel, especially considering that the trip to La
Union was his first. The existence of hiring procedures and supervisory policies cannot be casually
invoked to overturn the presumption of negligence on the part of an employer.
Same; Same; Same; As common carriers, the Fabres were bound to exercise “extraordinary
diligence” for the safe transportation of the passengers to their destination.—As common carriers, the
Fabres were bound to exercise “extraordinary diligence” for the safe transportation of the passengers to
their destination. This duty of care is not excused by proof that they exercised the diligence of a good
father of the family in the selection and supervision of their employee.
428
428 SUPREME COURT REPORTS ANNOTATED
Fabre, Jr. vs. Court of Appeals
Same; Same; Same; On the theory that petitioners are liable for breach of contract of carriage, the
award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabil’s gross
negligence amounted to bad faith.—With respect to the other awards, while the decisions of the trial court
and the Court of Appeals do not sufficiently indicate the factual and legal basis for them, we find that
they are nevertheless supported by evidence in the records of this case. Viewed as an action for  quasi
delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of moral
damages in cases of quasi delict. On the theory that petitioners are liable for breach of contract of
carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabil’s
gross negligence amounted to bad faith. Amyline Antonio’s testimony, as well as the testimonies of her
father and copassengers, fully establish the physical suffering and mental anguish she endured as a result
of the injuries caused by petitioners’ negligence.
Same; Same; Same; In Dangwa Trans. Co., Inc. vs. Court of Appeals, the Court held the bus
company and the driver jointly and severally liable for damages for injuries suffered by a passenger.—
The decision of the Court of Appeals can be sustained either on the theory of quasi delict or on that of
breach of contract. The question is whether, as the two courts below held, petitioners, who are the owners
and driver of the bus, may be made to respond jointly and severally to private respondent. We hold that
they may be. In Dangwa Trans. Co., Inc. v. Court of Appeals, on facts similar to those in this case, this
Court held the bus company and the driver jointly and severally liable for damages for injuries suffered
by a passenger. Again, in Bachelor Express, Inc. v. Court of Appeals a driver found negligent in failing to
stop the bus in order to let off passengers when a fellow passenger ran amuck, as a result of which the
passengers jumped out of the speeding bus and suffered injuries, was held also jointly and severally liable
with the bus company to the injured passengers.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Maria del Valle for petitioners.
429
VOL. 259, JULY 26, 1996 429
Fabre,Jr. vs. Court of Appeals
     Eduardo Claudio II for private respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals  in CA-GR No.
1

28245, dated September 30, 1992, which affirmed with modification the decision of the Regional
Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to
private respondent Amyline Antonio, and its resolution which denied petitioners’ motion for
reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus.
They used the bus principally in connection with a bus service for school children which they
operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after
trying him out for two weeks. His job was to take school children to and from the St.
Scholastica’s College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship, Inc.
(WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults
Ministry from Manila to La Union and back in consideration of which private respondent paid
petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 o’clock in the afternoon.
However, as several members of the party were late, the bus did not leave the Tropical Hut at the
corner of Ortigas Avenue and EDSA until 8:00 o’clock in the evening. Petitioner Porfirio Cabil
drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his
first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen,
Pangasinan.
_______________

 Per Justice Jainal D. Rasul and concurred in by Justices Emeterio C. Cui and Segundino G. Chua.
1

430
430 SUPREME COURT REPORTS ANNOTATED
Fabre, Jr. vs. Court of Appeals
At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south
to east direction, which he described as “siete.” The road was slippery because it was raining,
causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road
shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of
one Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a
series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and
smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the
floor of the bus and pinned down by a wooden seat which came off after being unscrewed. It
took three persons to safely remove her from this position. She was in great pain and could not
move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he
was not familiar with the area and he could not have seen the curve despite the care he took in
driving the bus, because it was dark and there was no sign on the road. He said that he saw the
curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30
kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the basis
of their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was
later filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano
P1,500.00 for the damage to the latter’s fence. On the basis of Escano’s affidavit of desistance
the case against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial she described the operations she underwent and
adduced evidence regarding the cost of her treatment and therapy. Immediately after the
accident, she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not
adequately equipped, she was transferred to the Sto. Niño Hospi-
431
VOL. 259, JULY 26, 1996 431
Fabre,Jr. vs. Court of Appeals
tal, also in the town of Ba-ay, where she was given sedatives. An x-ray was taken and the
damage to her spine was determined to be too severe to be treated there. She was therefore
brought to Manila, first to the Philippine General Hospital and later to the Makati Medical Center
where she underwent an operation to correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel to a long distance
trip and that the driver was properly screened and tested before being admitted for employment. Indeed,
all the evidence presented have shown the negligent act of the defendants which ultimately resulted to the
accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were
the only ones who adduced evidence in support of their claim for damages, the Court is therefore not in a
position to award damages to the other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. &
Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code
of the Philippines and said defendants are ordered to pay jointly and severally to the plaintiffs the
following amount:

1. 1)P93,657.11 as compensatory and actual damages;

2. 2)P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
3. 3)P20,000.00 as moral damages;
4. 4)P20,000.00 as exemplary damages; and
5. 5)25% of the recoverable amount as attorney’s fees;
6. 6)Costs of suit.

SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio
but dismissed it with
432
432 SUPREME COURT REPORTS ANNOTATED
Fabre, Jr. vs. Court of Appeals
respect to the other plaintiffs on the ground that they failed to prove their respective claims. The
Court of Appeals modified the award of damages as follows:

1. 1)P93,657.11 as actual damages;

2. 2)P600,000.00 as compensatory damages;
3. 3)P50,000.00 as moral damages;
4. 4)P20,000.00 as exemplary damages;
5. 5)P10,000.00 as attorney’s fees; and
6. 6)Costs of suit.

The Court of Appeals sustained the trial court’s finding that petitioner Cabil failed to exercise
due care and precaution in the operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were themselves presumptively negligent.
Hence, this petition. Petitioners raise the following issues:

1. I.WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

2. II.WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
3. III.WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO
WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable, an award of
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a
casual employee of a company called “Suaco,” earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees
do not have security of tenure, the award of P600,000.00, considering Amyline Antonio’s
earnings, is without factual basis as there is no assurance that she would be regularly earning
these amounts.
433
VOL. 259, JULY 26, 1996 433
Fabre,Jr. vs. Court of Appeals
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on the theory
that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory
of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals
held, for although the relation of passenger and carrier is “contractual both in origin and nature,”
nevertheless “the act that breaks the contract may be also a tort.”  In either case, the question is
2

whether the bus driver, petitioner Porfirio Cabil, was negligent.

The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned
the bus, failed to exercise the diligence of a good father of the family in the selection and
supervision of their employee is fully supported by the evidence on record. These factual
findings of the two courts we regard as final and conclusive, supported as they are by the
evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a
consequence, the road was slippery, and it was dark. He averred these facts to justify his failure
to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the
speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30
meters ahead.  By then it was too late for him to avoid falling off the road. Given the conditions
3

of the road and considering that the trip was Cabil’s first one outside of Manila, Cabil should
have driven his vehicle at a moderate speed. There is testimony  that the vehicles passing on that
4

portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per
_______________

2
 Air France v. Carrascoso, 18 SCRA 155, 168 (1966). Accord, Singson v. Bank of the Philippine Islands, 23 SCRA
1117, 1119 (1968).
3
 Testimony of Porfirio Cabil, TSN, p. 14, Oct. 26, 1987.
4
 Testimony of Pat. Chito Esmenda, TSN, pp. 37-38, Sept. 12, 1985.
434
434 SUPREME COURT REPORTS ANNOTATED
 Fabre, Jr. vs. Court of Appeals
hour, Cabil was running at a very high speed.
Considering the foregoing—the fact that it was raining and the road was slippery, that it was
dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed
was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly
negligent and should be held liable for the injuries suffered by private respondent Amyline
Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and supervision of
their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant
possessed a professional driver’s license. The employer should also examine the applicant for his
qualifications, experience and record of service.  Due diligence in supervision, on the other hand,
5

requires the formulation of rules and regulations for the guidance of employees and the issuance
of proper instructions as well as actual implementation and monitoring of consistent compliance
with the rules. 6

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did
not consider the fact that Cabil had been driving for school children only, from their homes to the
St. Scholastica’s College in Metro Manila.  They had hired him only after a two-week
7

apprenticeship. They had tested him for certain matters, such as whether he could remember the
names of the children he would be taking to school, which were irrelevant to his qualification to
drive on a long distance travel, especially considering that the trip to La Union was his first. The
existence of hiring procedures and supervisory policies cannot be casually invoked to overturn
_______________

 Metro Manila Transit Corp. v. Court of Appeals, 223 SCRA 521 (1993); Campo v. Camarote, 100 Phil. 459 (1956).
5

 Filamer Christian Institute v. Intermediate Appellate Court, 212 SCRA 637 (1992).

6

 Testimony of Porfirio Cabil, TSN, p. 7, Oct. 26, 1987.

7

435
VOL. 259, JULY 26, 1996 435
Fabre,Jr. vs. Court of Appeals
the presumption of negligence on the part of an employer. 8

Petitioners argue that they are not liable because (1) an earlier departure (made impossible by
the congregation’s delayed meeting) could have averted the mishap and (2) under the contract,
the WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold
water. The hour of departure had not been fixed. Even if it had been, the delay did not bear
directly on the cause of the accident. With respect to the second contention, it was held in an
early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to which he
wishes to be conveyed, but exercises no other control over the conduct of the driver, is not responsible for
acts of negligence of the latter or prevented from recovering for injuries suffered from a collision between
the automobile and a train, caused by the negligence either of the locomotive engineer or the automobile
driver.9

As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did
not have to be engaged in the business of public transportation for the provisions of the Civil
Code on common carriers to apply to them. As this Court has held: 10
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering
their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom,
as “a sideline”). Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one of-

_______________

8
 Supra note 5.
9
 Yamada v. Manila Railroad Co., 33 Phil. 8, 14 (1915).
10
 De Guzman v. Court of Appeals, 168 SCRA 612, 618 (1988); Bascos v. Court of Appeals, 221 SCRA 318 (1993).
436
436 SUPREME COURT REPORTS ANNOTATED
Fabre, Jr. vs. Court of Appeals
fering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the “general public,” i.e., the general community or population,
and one who offers services or solicits business only from a narrow segment of the general population.
We think that Article 1732 deliberately refrained from making such distinctions.
As common carriers, the Fabres were bound to exercise “extraordinary diligence” for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof
that they exercised the diligence of a good father of the family in the selection and supervision of
their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the negligence or wilful 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.
The same circumstances detailed above, supporting the finding of the trial court and of the
appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify
finding them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the
Civil Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think
the Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate.  To the contrary, the award of
11

P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she
_______________

 Philippine Airlines v. Court of Appeals, 226 SCRA 423 (1993).

11

437
VOL. 259, JULY 26, 1996 437
Fabre,Jr. vs. Court of Appeals
might be able to work again has not been foreclosed. In fact she testified that one of her previous
employers had expressed willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the Court of
Appeals do not sufficiently indicate the factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this case. Viewed as an action for quasi
delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of
moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of
contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art.
2220, since Cabil’s gross negligence amounted to bad faith.  Amyline Antonio’s testimony, as
12

well as the testimonies of her father and copassengers, fully establish the physical suffering and
mental anguish she endured as a result of the injuries caused by petitioners’ negligence.
The award of exemplary damages and attorney’s fees was also properly made. However, for
the same reason that it was error for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award of moral damages and reduce
the award of attorney’s fees, inasmuch as private respondents, in whose favor the awards were
made, have not appealed. 13

As above stated, the decision of the Court of Appeals can be sustained either on the theory
of quasi delict or on that of breach of contract. The question is whether, as the two courts below
held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and
severally to private respondent. We hold that they may be. In Dangwa Trans. Co., Inc. v. Court
of Appeals,  on facts similar to those in this case, this Court held the bus company and the driver
14

jointly and severally liable for damages for injuries suffered by a passen-
_______________

 Gatchalian v. Delim, 203 SCRA 126 (1991); Prudenciado v. Alliance Transport System, Inc., 148 SCRA 440 (1987).
12

 La Mallorca v. Court of Appeals, 175 SCRA 739 (1989).

13

 202 SCRA 574 (1991).

14

438
438 SUPREME COURT REPORTS ANNOTATED
Fabre, Jr. vs. Court of Appeals
ger. Again, in Bachelor Express, Inc. v. Court of Appeals  a driver found negligent in failing to
15

stop the bus in order to let off passengers when a fellow passenger ran amuck, as a result of
which the passengers jumped out of the speeding bus and suffered injuries, was held also jointly
and severally liable with the bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of the
bus on which plaintiff was riding concurred with the negligence of a third party who was the
driver of another vehicle, thus causing an accident. In Anuran v. Buño,   Batangas Laguna 16

Tayabas Bus Co. v. Intermediate Appellate Court,  and Metro Manila Transit Corporation v.
17

Court of Appeals,  the bus company, its driver, the operator of the other vehicle and the driver of
18

the vehicle were jointly and severally held liable to the injured passenger or the latter’s heirs.
The basis of this allocation of liability was explained in Viluan v. Court of Appeals,  thus: 19

Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while
that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we
already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the drivers
as well as the owners of the two vehicles are jointly and severally liable for damages. Some members of
the Court, though, are of the view that under the circumstances they are liable on quasi-delict. 20

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals  this Court exonerated the
21

jeepney driver from

_______________
  188 SCRA 216 (1990).
15

 17 SCRA 224 (1966).

16

 167 SCRA 379 (1988).

17

 223 SCRA 521 (1993).

18

 16 SCRA 742 (1966).

19

 Id., at 747.
20

 189 SCRA 158 (1988).

21

439
VOL. 259, JULY 26, 1996 439
Fabre,Jr. vs. Court of Appeals
liability to the injured passengers and their families while holding the owners of the jeepney
jointly and severally liable, but that is because that case was expressly tried and decided
exclusively on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune and Carreon
[the jeepney owners] were negligent. However, its ruling that spouses Mangune and Carreon are jointly
and severally liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with
the carrier in case of breach of the contract of carriage. The rationale behind this is readily discernible.
Firstly, the contract of carriage is between the carrier and the passenger, and in the event of contractual
liability, the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the
negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29,
1966, 16 SCRA 742) . . . 22

As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out
their claim against the carrier and the driver exclusively on one theory, much less on that of
breach of contract alone. After all, it was permitted for them to allege alternative causes of action
and join as many parties as may be liable on such causes of action  so long as 23

_________________

 Id., at 172-173.
22

 La Mallorca v. Court of Appeals, 17 SCRA 739 (1966).

23

Rule 8, §2 provides: “Alternative causes of action or defenses.—A party may set forth two or more statements of a
claim or defense alternatively or hypothetically, either in one cause of action or defense or in separate causes of action or
defenses. When two or more statements are made in the alternative and one of them if made independently would be
sufficient, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements.”
Rule 3, §6 provides: “Permissive joinder of parties.—All persons in whom or against whom any right to relief in
respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in
the alternative, may, except as otherwise provided in these rules, join as plaintiffs or be joined as
440
440 SUPREME COURT REPORTS ANNOTATED
Fabre, Jr. vs. Court of Appeals
private respondent and her coplaintiffs do not recover twice for the same injury. What is clear
from the cases is the intent of the plaintiff there to recover from both the carrier and the driver,
thus justifying the holding that the carrier and the driver were jointly and severally liable because
their separate and distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION
as to the award of damages. Petitioners are ORDERED to PAY jointly and severally the private
respondent Amyline Antonio the following amounts:

1. 1)P93,657.11 as actual damages;

2. 2)P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
3. 3)P20,000.00 as moral damages;
 4. 4)P20,000.00 as exemplary damages;
5. 5)25% of the recoverable amount as attorney’s fees; and
6. 6)costs of suit.

SO ORDERED.
     Regalado  (Chairman), Romero, Puno and Torres, Jr., JJ., concur.
Judgment affirmed with modification.
_______________

defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such defendants
may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he may have no interest.”
441
VOL. 259, JULY 26, 1996 441
People vs. Diaz
Note.—Responsibility arising from negligence in the performance of every kind of obligation
is demandable. (Metropolitan Bank and Trust Company vs. Court of Appeals, 237 SCRA
761 [1994])

——o0o——
318 SUPREME COURT REPORTS ANNOTATED
Bascos vs. Court of Appeals
G.R. No. 101089. April 7, 1993. *

ESTRELLITA M. BASCOS, petitioner, vs. COURT OF APPEALS and RODOLFO A.

CIPRIANO, respondents.
Civil Law; Common Carriers defined.—Article 1732 of the Civil Code defines a common carrier as
“(a) person, corporation or firm, or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, offering their services to the public.”
The test to determine a common carrier is “whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation rather than the
quantity or extent of the business transacted.” In this case, petitioner herself has made the admission that
she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are
conclusive and no evidence is required to prove the same.
Same; Same; No distinction between person offering service on regular basis and one offering
service on occasional basis.—But petitioner argues that there was only a contract of lease because they
offer their services only to a select group of people and because the private respondents, plaintiffs in the
lower court, did not object to the presentation of affidavits by petitioner where the transaction was
referred to as a lease contract. Regarding the first contention, the holding of the Court in De Guzman vs.
Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held thus: “The above
article makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
“sideline”). Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the “general public,” i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population. We think that
Article 1732 deliberately refrained from making such distinctions.”
Same; Same; Obligation of carrier to observe extraordinary diligence; Presumption of negligence.
—Common carriers are obliged to

_______________

 SECOND DIVISION.
*

319
VOL. 221, APRIL 7, 1993 319
Bascos vs. Court of Appeals
observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly,
they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption of negligence does not attach and these
instances are enumerated in Article 1734. In those cases where the presumption is applied, the common
carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.
Same; Same; Same; Liability arising from hijacking.—To exculpate the carrier from liability
arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible
threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which provides: “Art.
1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary
to public policy: x x x x x x (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.”

PETITION for review on certiorari of the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.
     Modesto S. Bascos for petitioner.
     Pelaez,  Adriano & Gregorio for private respondent.

CAMPOS, JR., J.:

This is a petition for review on certiorari of the decision  of the Court of Appeals in “RODOLFO
**

A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES,

plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant,” C.A.-G.R. CV No. 25216, the dispositive portion of which is
quoted hereunder:
_______________

 July 17, 1991; penned by Associate Justice Nicolas P. Lapeña, Jr., and concurred in by Associate Justices Ricardo L.
**

Pronove, Jr., and Consuelo V. Santiago.

320
320 SUPREME COURT REPORTS ANNOTATED
Bascos vs. Court of Appeals
“PREMISES considered, We find no reversible error in the decision appealed from, which is hereby
affirmed in toto. Costs against appellant.” 1

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

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered
into a hauling contract  with Jibfair Shipping Agency Corporation whereby the former bound
2

itself to haul the latter’s 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan,
Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its
obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the
Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to
deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency
the amount of the lost goods in accordance with the contract which stated that:
“1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-
delivery or damages to the cargo during transport at market value. x x x” 3

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

was supported by an affidavit  which contained the following allegations:

5

1. “4.That this action is one of those specifically mentioned in Sec. 1, Rule 57 of the Rules of Court,
whereby a writ of preliminary

_______________

 Rollo, p. 59.
1

 Annex “K” of Memorandum for Petitioner; Rollo, p. 229.

2

 Ibid.
3

 Civil Case No. 49965, Regional Trial Court, Quezon City, Branch 83.
4

 Annex “L” of Memorandum for Petitioner; Rollo, p. 230.

5

321
 VOL. 221, APRIL 7, 1993 321
Bascos vs. Court of Appeals

1. attachment may lawfully issue, namely:

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

1. 5.That there is no sufficient security for the claim sought to be enforced by the present action;
2. 6.That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;”

The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of
carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to
Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the
cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked properties; that after
preliminary investigation, an information for robbery and carnapping were filed against Jose
Opriano, et al; and that hijacking, being a force majeure, exculpated petitioner from any liability
to CIPTRADE.
After trial, the trial court rendered a decision  the dispositive portion of which reads as
***

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

1. 1.The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per annum to be
counted from December 4, 1986 until fully paid;
2. 2.The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney’s fees; and
3. 3.The costs of the suit.

_______________

***
 Civil Case No. 49965, October 12, 1989, Penned by Judge Reynaldo Roura.
322
322 SUPREME COURT REPORTS ANNOTATED
Bascos vs. Court of Appeals
The “Urgent Motion To Dissolve/Lift preliminary Attachment” dated March 10, 1987 filed by
defendant is DENIED for being moot and academic.
SO ORDERED.” 6

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court’s
judgment.
Consequently, petitioner filed this petition where she makes the following assignment of
errors; to wit:
 1. “I.THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.
2. II.GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT
COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS,
IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF
THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
3. III.THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL
COURT THAT PETITIONER’S MOTION TO DISSOLVE/LIFT THE WRIT OF
PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY
THE DECISION OF THE MERITS OF THE CASE.” 7

The petition presents the following issues for resolution: (1) was petitioner a common carrier?;
and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she
admitted in her answer that she did business under the name A.M. Bascos Trucking and that said
admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs
that petitioner was a common carrier. The respondent Court also adopted in toto the trial
_______________

 Rollo, p. 217.
6

 Rollo, p. 16.
7

323
VOL. 221, APRIL 7, 1993 323
Bascos vs. Court of Appeals
court’s decision that petitioner was a common carrier. Moreover, both courts appreciated the
following pieces of evidence as indicators that petitioner was a common carrier: the fact that the
truck driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya
bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck
helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo
was placed in petitioner’s care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common
carrier, she alleged in this petition that the contract between her and Rodolfo A. Cipriano,
representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which
referred to the contract as “lease”. These affidavits were made by Jesus Bascos  and by petitioner
8

herself.  She further averred that Jesus Bascos confirmed in his testimony his statement that the
9

contract was a lease contract.  She also stated that she was not catering to the general public.
10

Thus, in her answer to the amended complaint, she said that she does business under the same
style of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move,
not to the general public but to a few customers only in view of the fact that it is only a small
business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as “(a) person, corporation or firm,
or association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public.” The test to determine a
common carrier is “whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the quantity or
extent of the business
_______________

 Petition, pp. 12-13; Rollo, pp. 20-21; Annex “G” of Memorandum for Petitioner; Rollo, p. 225.
8

 Petition, pp. 13-14; Rollo, pp. 21-22.

9

 Ibid.; Rollo, p. 21; Annex “E” of Memorandum for Petitioner; Rollo, p. 222.

10

 Court of Appeals Decision, p. 5; Rollo, p. 55.

11

324
324 SUPREME COURT REPORTS ANNOTATED
Bascos vs. Court of Appeals
transacted.”  In this case, petitioner herself has made the admission that she was in the trucking
12

business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and
no evidence is required to prove the same. 13

But petitioner argues that there was only a contract of lease because they offer their services
only to a select group of people and because the private respondents, plaintiffs in the lower court,
did not object to the presentation of affidavits by petitioner where the transaction was referred to
as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of
Appeals  is instructive. In referring to Article 1732 of the Civil Code, it held thus:
14

“The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as
a “sideline”). Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the “general public,” i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population. We think that
Article 1732 deliberately refrained from making such distinctions.”
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts
have dismissed them as self-serving and petitioner contests the conclusion. We are bound by the
appellate court’s factual conclusions. Yet, granting that the said evidence were not self-serving,
the same were not sufficient to prove that the contract was one of lease. It must be understood
that a contract is what the law defines it to be and not what it is called by the contracting
parties.  Furthermore, petitioner pre-
15

_______________

 4 AGBAYANI, COMMENTARIES AND JURISPRUDENCE ON THE COMMERCIAL LAWS OF THE

12

PHILIPPINES, 5 (1987).
 Solivio vs. Court of Appeals, 182 SCRA 119 (1990).
13

 168 SCRA 612 (1988).

14

 Schmid and Oberly, Inc. vs. RJL Martinez Fishing Corp., 166 SCRA 493 (1988).
15

325
VOL. 221, APRIL 7, 1993 325
Bascos vs. Court of Appeals
sented no other proof of the existence of the contract of lease. He who alleges a fact has the
burden of proving it. 16

Likewise, We affirm the holding of the respondent court that the loss of the goods was not
due to force majeure.
 Common carriers are obliged to observe extraordinary diligence in the vigilance over the
goods transported by them.  Accordingly, they are presumed to have been at fault or to have
17

acted negligently if the goods are lost, destroyed or deteriorated.  There are very few instances
18

when the presumption of negligence does not attach and these instances are enumerated in
Article 1734.  In those cases where the presumption is applied, the common carrier must prove
19

that it exercised extraordinary diligence in order to overcome the presumption.

_______________

16
 Imperial Vitory Shipping Agency vs. NLRC, 200 SCRA 178 (1991).
17
 “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 vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5,
6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.”
18
 “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.”
19
 “Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same
is due to any of the following causes only:

1. (1)Flood, storm, earthquake, lightning, or other natural disaster or calamity;

2. (2)Act of the public enemy in war, whether international or civil;
3. (3)Act or omission of the shipper or owner of the goods;
4. (4)The character of the goods or defects in the packing or in the containers;
5. (5)Order or act of competent public authority.”

326
326 SUPREME COURT REPORTS ANNOTATED
Bascos vs. Court of Appeals
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her
from liability for the loss of the cargo. In De Guzman vs. Court of Appeals,  the Court held that 20

hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:
“Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
x x x     x x x
(6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not act
with grave or irresistible threat, violences or force, is dispensed with or diminished;”
In the same case,  the Supreme Court also held that:
21

“Under Article 1745 (6) above, a common carrier is held responsible—and will not be allowed to divest
or to diminish such responsibility—even for acts of strangers like thieves or robbers, except where such
thieves or robbers in fact acted “with grave or irresistible threat, violence or force.” We believe and so
hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is attended by “grave or irresistible threat,
violence or force.”
To establish grave and irresistible force, petitioner presented her accusatory affidavit,  Jesus
22

Baseos’ affidavit,  and Juanito Morden’s  “Salaysay”. However, both the trial court and the
23 24

Court of Appeals have concluded that these affidavits were not

_______________

 “Supra, note 14.
20

 Ibid., p. 621.
21

 Annex “G” of Memorandum for Petitioner; Rollo, p. 225; and Juanito Morden’s affidavit Annex “H” of
22

Memorandum for Petitioner; Rollo, p. 226.

 Annex “E” of Memorandum for Petitioner; Rollo, p. 222.
23

 Annex “H” of Memorandum for Petitioner; Rollo, p. 226.

24

327
VOL. 221, APRIL 7, 1993 327
Bascos vs. Court of Appeals
enough to overcome the presumption. Petitioner’s affidavit about the hijacking was based on
what had been told her by Juanito Morden. It was not a first-hand account. While it had been
admitted in court for lack of objection on the part of private respondent, the respondent Court
had discretion in assigning weight to such evidence. We are bound by the conclusion of the
appellate court. In a petition for review on certiorari, We are not to determine the probative value
of evidence but to resolve questions of law. Secondly, the affidavit of Jesus Bascos did not dwell
on how the hijacking took place. Thirdly, while the affidavit of Juanito Morden, the truck helper
in the hijacked truck, was presented as evidence in court, he himself was a witness as could be
gleaned from the contents of the petition. Affidavits are not considered the best evidence if the
affiants are available as witnesses.  The subsequent filing of the information for carnapping and
25

robbery against the accused named in said affidavits did not necessarily mean that the contents of
the affidavits were true because they were yet to be determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner’s burden to
overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence
to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence
made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We
find no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner’s claim cannot be
sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
     Narvasa (C.J., Chairman), Padilla,  Regalado and Nocon,
_______________

 Ayco vs. Fernandez, 195 SCRA 328 (1991).

25

328
328 SUPREME COURT REPORTS ANNOTATED
Candido vs. Macapagal
JJ., concur.
Petition dismissed. Decision affirmed.
 Note.—In culpa contractual, the moment a passenger dies or is injured, the carrier is
presumed to have been at fault or to have acted negligently, and this disputable presumption may
only be overcome by evidence that it had observed extra-ordinary diligence or that the death or
injury of the passenger was due to a fortuitous event (Philippine Rabbit Bus Lines, Inc. vs.
Intermediate Appellate Court, 189 SCRA 158).

——o0o——
312 SUPREME COURT REPORTS ANNOTATED
FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corporation
G.R. No. 141910. August 6, 2002. *

FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING

CORPORATION and LAMBERT M. EROLES, respondents.
Transportation; Common Carriers; A trucking company which is an exclusive contractor and
hauler of another company, rendering or offering its services to no other individual or entity, cannot be
considered a common carrier.—On the first issue, the Court finds the conclusion of the trial court and the
Court of Appeals to be amply justified. GPS, being an exclusive contractor and hauler of Concepcion
Industries, Inc., rendering or
_______________

*
 FIRST DIVISION.

313

VOL. 386, AUGUST 6, 2002 313

FGU Insurance Corporation vs. G.P. Sarmiento
Trucking Corporation
offering its services to no other individual or entity, cannot be considered a common carrier.
Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their
services to the public, whether to the public in general or to a limited clientele in particular, but never on
an exclusive basis. The true test of a common carrier is the carriage of passengers or goods, providing
space for those who opt to avail themselves of its transportation service for a fee. Given accepted
standards, GPS scarcely falls within the term “common carrier.”
Same; Contracts; Breach of Contracts; In culpa contractual, the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a corresponding right of relief; Indeed,
agreements can accomplish little, either for their makers or for society, unless they are made the basis for
action—the effect of every infraction is to create a new duty, that is, to make recompense to the one who
has been injured by the failure of another to observe his contractual obligation unless he can show
extenuating circumstances, like proof of his exercise of due diligence or of the attendance of fortuitous
event, to excuse him from his ensuing liability.—In culpa contractual, upon which the action of petitioner
rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract
and the failure of its compliance justify, prima facie, a corresponding right of relief. The law, recognizing
the obligatory force of contracts, will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the
contract confers upon the injured party a valid cause for recovering that which may have been lost or
suffered. The remedy serves to preserve the interests of the promisee that may include his “expectation
interest,” which is his interest in having the benefit of his bargain by being put in as good a position as he
would have been in had the contract been performed, or his “reliance interest,” which is his interest in
being reimbursed for loss caused by reliance on the contract by being put in as good a position as he
would have been in had the contract not been made; or his “restitution interest,” which is his interest in
having restored to him any benefit that he has conferred on the other party. Indeed, agreements can
accomplish little, either for their makers or for society, unless they are made the basis for action. The
effect of every infraction is to create a new duty, that is, to make recompense to the one who has been
injured unless he can show extenuating circumstances, like proof of his exercise of due diligence
(normally that of the diligence of a good father of a family or, exceptionally by stipulation or by law such
as in the case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event,
to excuse him from his ensuing liability.
314

314 SUPREME COURT REPORTS

ANNOTATED
FGU Insurance Corporation vs. G.P. Sarmiento
Trucking Corporation
Same; Same; Same; Quasi-Delicts; Torts; The driver, not being a party to the contract of carriage,
may not be held liable under the agreement—action against him can only be based on culpa aquiliana,
which, unlike culpa contractual, would require the claimant for damages to prove negligence or fault on
his part.—Respondent driver, on the other hand, without concrete proof of his negligence or fault, may
not himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage between
petitioner’s principal and defendant, may not be held liable under the agreement. A contract can only bind
the parties who have entered into it or their successors who have assumed their personality or their
juridical position. Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract
can neither favor nor prejudice a third person. Petitioner’s civil action against the driver can only be based
on culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to prove
negligence or fault on the part of the defendant.
Same; Same; Same; Same; Same; Res Ipsa Loquitur; Requisites; Words and Phrases; Res ipsa
loquitur is not a rule of substantive law and, as such, it does not create an independent ground of liability
—instead, it is regarded as a mode of proof, and relieves the plaintiff of the burden of producing specific
proof of negligence.—A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds
a defendant liable where the thing which caused the injury complained of is shown to be under the latter’s
management and the accident is such that, in the ordinary course of things, cannot be expected to happen
if those who have its management or control use proper care. It affords reasonable evidence, in the
absence of explanation by the defendant, that the accident arose from want of care. It is not a rule of
substantive law and, as such, it does not create an independent ground of liability. Instead, it is regarded
as a mode of proof, or a mere procedural convenience since it furnishes a substitute for, and relieves the
plaintiff of, the burden of producing specific proof of negligence. The maxim simply places on the
defendant the burden of going forward with the proof.Resort to the doctrine, however, may be allowed
only when (a) the event is of a kind which does not ordinarily occur in the absence of negligence; (b)
other responsible causes, including the conduct of the plaintiff and third persons, are sufficiently
eliminated by the evidence; and (c) the indicated negligence is within the scope of the defendant’s duty to
the plaintiff. Thus, it is not applicable when an unexplained accident may be attributable to one of several
causes, for some of which the defendant could not be responsible.
315

VOL. 386, AUGUST 6, 2002 315

FGU Insurance Corporation vs. G.P. Sarmiento
Trucking Corporation
Same; Same; Same; Same; Same; Same; While res ipsa loquitur generally finds relevance whether
or not a contractual relationship exists between the plaintiff and the defendant—for the inference of
negligence arises from the circumstances and nature of the occurrence and not from the nature of the
relation of the parties—the requirement that responsible causes other than those due to defendant’s
conduct must first be eliminated, for the doctrine to apply, should be understood as being confined only
to cases of pure (non-contractual) tort since obviously the presumption of negligence in culpa contractual
immediately attaches by a failure of the covenant or its tenor.—Res ipsa loquitur generally finds
relevance whether or not a contractual relationship exists between the plaintiff and the defendant, for the
inference of negligence arises from the circumstances and nature of the occurrence and not from the
nature of the relation of the parties. Nevertheless, the requirement that responsible causes other than those
due to defendant’s conduct must first be eliminated, for the doctrine to apply, should be understood as
being confined only to cases of pure (non-contractual) tort since obviously the presumption of negligence
in culpa contractual, as previously so pointed out, immediately attaches by a failure of the covenant or its
tenor. In the case of the truck driver, whose liability in a civil action is predicated on culpa
acquiliana, while he admittedly can be said to have been in control and management of the vehicle which
figured in the accident, it is not equally shown, however, that the accident could have been exclusively
due to his negligence, a matter that can allow, forthwith, res ipsa loquitur to work against him.
Actions; Pleadings and Practice; Demurrer to Evidence; If a demurrer to evidence is granted but
on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the right to
present evidence.—If a demurrer to evidence is granted but on appeal the order of dismissal is reversed,
the movant shall be deemed to have waived the right to present evidence. Thus, respondent corporation
may no longer offer proof to establish that it has exercised due care in transporting the cargoes of the
assured so as to still warrant a remand of the case to the trial court.

PETITION for certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Dollete, Blanco, Ejercito and Associates for petitioner.
     Marbibi & Associates Law Office for private respondents.
316
316 SUPREME COURT REPORTS ANNOTATED
FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corporation

VITUG, J.:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert
Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing
the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it
collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the
cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion
Industries, Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being
the subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of
the amount it had paid to the latter from GPS. Since the trucking company failed to heed the
claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its
driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc.,
since 1988, and it was not so engaged in business as a common carrier. Respondents further
claimed that the cause of damage was purely accidental.
The issues having thus been joined, FGU presented its evidence, establishing the extent of
damage to the cargoes and the amount it had paid to the assured. GPS, instead of submitting its
evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,  granted the motion to dismiss, explaining thusly:
1
“Under Section 1 of Rule 131 of the Rules of Court, it is provided that ‘Each party must prove his own
affirmative allegation, x x x.’
_______________

1
 Rollo, p. 14.

317
VOL. 386, AUGUST 6, 2002 317
FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corporation
“In the instant case, plaintiff did not present any single evidence that would prove that defendant is a
common carrier.
“x x x      x x x      x x x
“Accordingly, the application of the law on common carriers is not warranted and the presumption of
fault or negligence on the part of a common carrier in case of loss, damage or deterioration of goods
during transport under 1735 of the Civil Code is not availing.
“Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was
subrogated and the owner of the vehicle which transports the cargo are the laws on obligation and
contract of the Civil Code as well as the law on quasi delicts.
“Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi
delict provides for some presumption of negligence but only upon the attendance of some circumstances.
Thus, Article 2185 provides:
‘Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any traffic regulation.’

“Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence,
the presumption of negligence is not obtaining.
“Considering that plaintiff failed to adduce evidence that defendant is a common carrier and
defendant’s driver was the one negligent, defendant cannot be made liable for the damages of the subject
cargoes.” 2

The subsequent motion for reconsideration having been denied,  plaintiff interposed an appeal to
3

the Court of Appeals, contending that the trial court had erred (a) in holding that the appellee
corporation was not a common carrier defined under the law and existing jurisprudence; and (b)
in dismissing the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The
appellate court, in its decision of 10 June 1999, discoursed, among other things, that—
4

_______________

2
 Rollo, pp. 14-15.
3
 Rollo, p. 17.
4
 Rollo, p. 20.

318
318 SUPREME COURT REPORTS ANNOTATED
FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corporation
“x x x in order for the presumption of negligence provided for under the law governing common carrier
(Article 1735, Civil Code) to arise, the appellant must first prove that the appellee is a common carrier.
Should the appellant fail to prove that the appellee is a common carrier, the presumption would not arise;
consequently, the appellant would have to prove that the carrier was negligent.
 “x x x      x x x      x x x
“Because it is the appellant who insists that the appellees can still be considered as a common carrier,
despite its ‘limited clientele,’ (assuming it was really a common carrier), it follows that it (appellant) has
the burden of proving the same. It (plaintiff-appellant) must establish his case by a preponderance of
evidence, which means that the evidence as a whole adduced by one side is superior to that of the other.’
(Summa Insurance Corporation vs. Court of Appeals, 243 SCRA 175). This, unfortunately, the appellant
failed to do—hence, the dismissal of the plaintiffs complaint by the trial court is justified.
“x x x      x x x      x x x
“Based on the foregoing disquisitions and considering the circumstances that the appellee trucking
corporation has been ‘its exclusive contractor, hauler since 1970, defendant has no choice but to comply
with the directive of its principal,’ the inevitable conclusion is that the appellee is a private carrier.
“x x x      x x x      x x x
“x x x the lower court correctly ruled that ‘the application of the law on common carriers is not
warranted and the presumption of fault or negligence on the part of a common carrier in case of loss,
damage or deterioration of good[s] during transport under [article] 1735 of the Civil Code is not availing.’
x x x.
“Finally, We advert to the long established rule that conclusions and findings of fact of a trial court
are entitled to great weight on appeal and should not be disturbed unless for strong and valid reasons.” 5

Petitioner’s motion for reconsideration was likewise denied;  hence, the instant petition,  raising
6 7

the following issues:

_______________

5
 Rollo, pp. 24-28.
6
 Rollo, p. 32.
7
 Rollo, p. 3.

319
VOL. 386, AUGUST 6, 2002 319
FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corporation
I

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED

UNDER THE LAW AND EXISTING JURISPRUDENCE.

II

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE

CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS
PROTECTIVE CUSTODY AND POSSESSION.

III

WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT

CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be
amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc.,
rendering or offering its services to no other individual or entity, cannot be considered a common
carrier. Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for hire or
compensation, offering their services to the public,  whether to the public in general or to a
8

limited clientele in particular, but never on an exclusive basis.  The true test of a common carrier
9

is the carriage of passengers or goods, providing space for those who opt to avail themselves of
its transportation service for a fee.  Given accepted standards, GPS scarcely falls within the term
10

“common carrier.”
The above conclusion nothwithstanding, GPS cannot escape from liability.
_______________

8
 Article 1732, Civil Code.
9
 Sec. 13 [b], Public Service Act as amended; see also Guzman vs. Court of Appeals, G.R. L-47822, 22 December
1988, 168 SCRA 612.
10
 National Steel Corporation vs. Court of Appeals, 283 SCRA 45 (1997).

320
320 SUPREME COURT REPORTS ANNOTATED
FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corporation
In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.  The law, recognizing the
11

obligatory force of contracts,  will not permit a party to be set free from liability for any kind of
12

misperformance of the contractual undertaking or a contravention of the tenor thereof.  A breach 13

upon the contract confers upon the injured party a valid cause for recovering that which may
have been lost or suffered. The remedy serves to preserve the interests of the promisee that may
include his “expectation interest,” which is his interest in having the benefit of his bargain by
being put in as good a position as he would have been in had the contract been performed, or his
“reliance interest,” which is his interest in being reimbursed for loss caused by reliance on the
contract by being put in as good a position as he would have been in had the contract not been
made; or his “restitution interest,” which is his interest in having restored to him any benefit that
he has conferred on the other party.  Indeed, agreements can accomplish little, either for their
14

makers or for society, unless they are made the basis for action.  The effect of every infraction is
15

to create a new duty, that is, to make recompense to the one who has been injured  unless he can
16

show extenuating circumstances, like proof of his exercise of due diligence (normally that of the
diligence of a good father of a family or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event,
to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it
and petitioner’s assured, and ad-
_______________

 Calalas vs. Court of Appeals, 332 SCRA 356 (2000); Sabena Belgian World Airlines vs. Court of Appeals, 255
11

SCRA 38 (1996).
 See Articles 1159, 1308, 1315, 1356, Civil Code.
12

 Anson on Contracts, 1939, p. 424; 17A Am Jur 2d, p. 728 citing Parks vs. Parks, 187 P2d 145.
13

 Restatement, Second, Contracts, §344.

14

 Fuller and Purdue, The Reliance Interest in Contract Damages, 46 Yale L.J. 61 (1936).
15

 Richardson on Contracts, 1951, p. 309.

16

321
 VOL. 386, AUGUST 6, 2002 321
FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corporation
mits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In
such a situation, a default on, or failure of compliance with, the obligation—in this case, the
delivery of the goods in its custody to the place of destination—gives rise to a presumption of
lack of care and corresponding liability on the part of the contractual obligor the burden being on
him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may
not himself be ordered to pay petitioner. The driver, not-being a party to the contract of carriage
between petitioner’s principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their successors who have assumed
their personality or their juridical position.  Consonantly with the axiom res inter alios acta aliis
17

neque nocet prodest, such contract can neither favor nor prejudice a third person. Petitioner’s
civil action against the driver can only be based on culpa aquiliana, which, unlike culpa
contractual, would require the claimant for damages to prove negligence or fault on the part of
the defendant. 18

A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a

defendant liable where the thing which caused the injury complained of is shown to be under the
latter’s management and the accident is such that, in the ordinary course of things, cannot be
expected to happen if those who have its management or control use proper care. It affords
reasonable evidence, in the absence of explanation by the defendant, that the accident arose from
want of care.  It is not a rule of substantive law and, as such, it does not create an independent
19

ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience

since it furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific
proof of negligence. The maxim simply places on the defendant the burden of going forward
with the
_______________

17
 Article 1311, Civil Code.
18
 Calalas vs. Court of Appeals, supra; See Article 2176, Civil Code.
19
 Africa vs. Caltex (Phils.) Inc., 16 SCRA 448 (1966); Layugan vs. Intermediate Appellate Court, 167 SCRA
376 (1988).

322
322 SUPREME COURT REPORTS ANNOTATED
FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corporation
proof.  Resort to the doctrine, however, may be allowed only when (a) the event is of a kind
20

which does not ordinarily occur in the absence of negligence; (b) other responsible causes,
including the conduct of the plaintiff and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the scope of the defendant’s duty to the
plaintiff.  Thus, it is not applicable when an unexplained accident may be attributable to one of
21

several causes, for some of which the defendant could not be responsible. 22

Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the nature of the relation of the
parties.  Nevertheless, the requirement that responsible causes other than those due to
23

defendant’s conduct must first be eliminated, for the doctrine to apply, should be understood as
being confined only to cases of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure
of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be said to have been in control and
management of the vehicle which figured in the accident, it is not equally shown, however, that
the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the
movant shall be deemed to have waived the right to present evidence.  Thus, respondent 24

corporation may no longer offer proof to establish that it has exercised due care in
_______________

20
 Ramos vs. Court of Appeals, 321 SCRA 600 (1999).
21
 Sangco, Torts and Damages V.1, 1993, p. 29, citing 58 Am Jur 2d, pp. 56-58. See Ramos vs. Court of Appeals,
supra.
22
 Words and Phrases Vol. 37, p. 483.
23
 57B Am Jur 2d, p. 496.
24
 Section 1, Rule 35, Rules of Court; Section 1, Rule 33, 1997 Rules of Civil Procedure.

323
VOL. 386, AUGUST 6, 2002 323
FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corporation
transporting the cargoes of the assured so as to still warrant a remand of the case to the trial
court.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of
Makati City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED
only insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the trial
court and decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking
Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value of the
damaged and lost cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
     Davide, Jr. (C.J., Chairman), Kapunan, Ynares-Santiago and Austria-Martinez,
JJ., concur.
Judgment affirmed in part and reversed in part.
Notes.—While common carriers are required to observe extraordinary diligence and are
presumed at fault, no such presumption applies to private carriers. (Planters Products, Inc. vs.
Court of Appeals, 226 SCRA 476 [1993])
In quasi-delict, the negligence or fault should be clearly established because it is the basis of
the action, whereas in breach of contract, the action can be prosecuted merely by proving the
existence of the contract and the fact that the obligor, in this case the common carrier, failed to
transport his passenger safely to his destination. (Calalas vs. Court of Appeals, 332 SCRA
356 [2000])
The standard of extraordinary diligence is peculiar to common carriers. (Reyes vs. Sisters of
Mercy Hospital, 341 SCRA 760 [2000])
 ——o0o——

324
 VOL. 493, JUNE 27, 2006 157
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
G.R. No. 146426. June 27, 2006. *

CARGOLIFT SHIPPING, INC., petitioner, vs. L. ACUARIO MARKETING CORP. and

SKYLAND BROKERAGE, INC., respondents.
Appeals; Questions of fact are not reviewable by the Supreme Court except under certain
exceptional circumstances.—On the first assigned error, petitioner is asking this Court to resolve factual
issues that have already been settled by the courts below. The question of whether the barge had been
damaged during its charter to Skyland is a factual matter, the determination of which may not be
generally disturbed on appeal. Questions of fact are not reviewable by this Court except under certain
exceptional circumstances. No such exceptional circumstance exists in the case at bar.
Same; The Supreme Court is bound by the factual determinations of the appellate court especially
when these are supported by substantial evidence and merely affirm those of the trial court. —We find no
cogent reason to disturb the lower courts’ finding that the barge sustained a hole in its hull when
petitioner’s tugboat failed to tow it to a safer distance as the weather changed in the port of Limay. This
Court is bound by the factual determinations of the appel-late court especially when these are supported
by substantial evidence and merely affirm those of the trial court, as in this case. There is no showing here
that the inferences made by the Court of Appeals were manifestly mistaken, or that the appealed judgment
was based on a misapprehension of facts, or that the appellate court overlooked certain relevant,
undisputed facts which, if properly considered, would justify a different conclusion. Thus, a reversal of
the factual findings in this case is unwarranted.
Maritime Law; Contract of Towage; Negligence; A tug and its owners must observe ordinary
diligence in the performance of its obligation under a contract of towage; While adverse weather has
always been a real threat to maritime commerce, the least that the tug owner could do is to ensure that its
tugboats would be able to secure the barge at all times during the engagement.—In the performance of
_______________

*
 FIRST DIVISION.

158

158 SUPREME COURT REPORTS ANNOTATED

Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
its contractual obligation to Skyland, petitioner was required to observe the due diligence of a good
father of the family. This much was held in the old but still relevant case of Baer Senior & Co.’s
Successors v. La Compania Maritima, 6 Phil. 215, 217-218 (1906), where the Court explained that a tug
and its owners must observe ordinary diligence in the performance of its obligation under a contract of
towage. The negligence of the obligor in the performance of the obligation renders him liable for damages
for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to
exercise due care and prudence in the performance of the obligation as the nature of the obligation so
demands. In the case at bar, the exercise of ordinary prudence by petitioner means ensuring that its
tugboat is free of mechanical problems. While adverse weather has always been a real threat to maritime
commerce, the least that petitioner could have done was to ensure that the M/T Count or any of its other
tugboats would be able to secure the barge at all times during the engagement. This is especially true
when considered with the fact that Acuario’s barge was wholly dependent upon petitioner’s tugboat for
propulsion. The barge was not equipped with any engine and needed a tugboat for maneuvering.
Same; Same; Same; Considering that a barge has no power of its own and is totally defenseless
against the ravages of the sea, it is incumbent on the tug owner to see to it that it could secure the barge
by providing a seaworthy tugboat.—That petitioner’s negligence was the proximate cause of the damage
to the barge cannot be doubted. Had its tugboat been serviceable, the barge could have been moved away
from the stone wall with facility. It is too late in the day for petitioner to insist that the proximate cause of
the damage was the barge patron’s negligence in not objecting to the position of the barge by the stone
wall. Aside from the fact that the position of the barge is quite understandable since off-loading
operations were then still underway, the alleged negligence of the barge patron is a matter that is also
being raised for the first time before this Court. Thus, the damage to the barge could have been avoided
had it not been for the tugboat’s inability to tow it away from the stone wall. Considering that a barge has
no power of its own and is totally defenseless against the ravages of the sea, it was incumbent upon
petitioner to see to it that it could secure the barge by providing a seaworthy tugboat. Petitioner’s failure
to do so did not only increase the risk that might have been reasonably anticipated during the shipside
159

VOL. 493, JUNE 27, 2006 159

Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
operation but was the proximate cause of the damage. Hence, as correctly found by the courts
below, it should ultimately be held liable therefor.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Madrid & Associates for petitioner.
     Conrado R. Mangahas for respondent Skyland Brokerage, Inc.
     Emmanuel M. Basa for respondent L. Acuario Marketing Corp.

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari of the July 6, 2000 Decision  of the Court of Appeals
1

in CA-G.R. CV No. 55664, which affirmed the judgment  of the Regional Trial Court of
2

Caloocan City, Branch 121, in Civil Case No. C-16120 in so far as it found petitioner Cargolift
Shipping, Inc. (“Cargolift”) liable, as third-party defendant, for actual damages in the sum of
P97,021.20, as well as the November 28, 2000 Resolu-tion  denying the motion for 3

reconsideration.
The antecedent facts of the case are as follows: Sometime in March 1993, respondent L.
Acuario Marketing Corp., (“Acuario”) and respondent Skyland Brokerage, Inc., (“Skyland”)
entered into a time charter agreement  whereby Acuario leased to Skyland its L. Acuario II barge
4

for use by the latter in transporting electrical posts from Manila to Li-
_______________

1
 Rollo, pp. 27-34. Penned by Associate Justice Rodrigo V. Co-sico and concurred in by Associate Justices Godardo A.
Jacinto and Remedios Salazar-Fernando.
2
 Id., at pp. 58-67. Penned by Judge Adoracion G. Angeles.
3
 Id., at pp. 36-37.
4
 Id., at p. 38.

160
160 SUPREME COURT REPORTS ANNOTATED
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
may, Bataan. At the same time, Skyland also entered into a separate contract  with petitioner 5

Cargolift, for the latter’s tugboats to tow the aforesaid barge.

 In accordance with the foregoing contracts, petitioner’s tug-boat M/T Beejay left the Manila
South Harbor on April 1, 1993 with Acuario’s barge in tow. It reached the port of Li-may,
Bataan on April 3, 1993, whereupon M/T Beejay disengaged and once again set sail for Manila.
Petitioner’s other tugboat, the M/T Count, remained in Bataan to secure the barge for unloading.
Off-loading operations went underway until April 7, 1993, when operations were interrupted
for the next two days to give way to the observance of the lenten season. The unloading of the
cargo was concluded on April 12, 1993, by which time M/T Beejay had gone back to Bataan for
the return trip. The M/T Beejay and the barge returned to the port of Manila on April 13, 1993.
On the same day, the barge was brought to Acuario’s ship-yard where it was allegedly
discovered by Acuario’s dry-docking officer, Guillermo Nacu, Jr., that the barge was listing due
to a leak in its hull. According to Nacu, he was informed by the skipper of the tugboat that the
damage was sustained in Bataan. To confirm the same, Nacu ordered an underwater survey of
the barge and prepared a damage report dated April 14, 1993. No representative of Skyland was
present during the inspection although it was furnished with a copy of the said report.
The barge was consequently dry-docked for repairs at the Western Shipyard from April 16 to
April 26, 1993. Acuario spent the total sum of P97,021.20 for the repairs. 6

Pursuant to its contract with Skyland which provided that “(a)ny damage or loss on the barge
due to the fault or negligence of charterers shall be the responsibility of the
_______________

 Id., at pp. 45-47.

5

 Id., at p. 28.
6

161
VOL. 493, JUNE 27, 2006 161
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
(c)harterer or his representative,”  Acuario wrote Skyland seeking reimbursement of its repair
7

costs, failing which, it filed a complaint for damages against Skyland before the Regional Trial
Court of Caloocan City, where the case was docketed as Civil Case No. C-16120 and raffled to
Branch 121. Skyland, in turn, filed a third-party complaint  against petitioner alleging that it was
8

responsible for the damage sustained by the barge.

According to Acuario and its witnesses, the weather in Bataan shifted drastically at dawn of
April 7, 1993 while the barge was docked at the Limay port eight meters away from the stone
wall. Due to strong winds and large waves, the barge repeatedly hit its hull on the wall, thus
prompting the barge patron to alert the tugboat captain of the M/T Count to tow the barge farther
out to sea. However, the tugboat failed to pull the barge to a safer distance due to engine
malfunction, thereby causing the barge to sustain a hole in its hull. Fortunately, no part of the
cargo was lost even if only half of it had been unloaded at that time.9

On the other hand, petitioner and Skyland denied that the barge had been damaged. One of its
witnesses, Salvador D. Ocampo, claimed that he was involved in all aspects of the operation and
that no accident of any sort was brought to his knowledge. He alleged that the barge patron and
tug master made no mention of any maritime casualty during the clearing of the vessels at the
Philippine Ports Authority in Limay, Bataan. The barge was in good condition and was not
damaged when it was turned over to Acuario on April 13, 1993. 10

In due course, the trial court promulgated its decision dated June 10, 1996, the dispositive
part of which reads:
_______________
  Id., at p. 38.
7

 Id., at pp. 42-44.

8

 Id., at p. 28.
9

 Id., at p. 29.
10

162
162 SUPREME COURT REPORTS ANNOTATED
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
“WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. 1.Ordering the defendant Skyland Brokerage to pay to the plaintiff L. Acuario Marketing
Corporation the cost of repairs of the barge L. Acuario II in the amount of P97,021.20 and to
seek reimbursement from the third-party defendant Cargolift Shipping;
2. 2.Ordering the defendant to pay attorney’s fees in the amount of P24,255.30 and to seek
reimbursement thereof from the third-party defendant; and
3. 3.Ordering the defendant to pay the costs of suit subject to reimbursement from the third-party
defendant.

SO ORDERED.” 11

The trial court gave credence to the testimonies of Acuario’s witnesses that the barge sustained
damage while it was being chartered by Skyland. It held that the positive testimonies of
Acuario’s witnesses, coupled with documentary evidence detailing the nature and extent of the
damage as well as the repairs done on the barge, should prevail over the bare denials of Skyland
and petitioner. It also noted that two of the latter’s three witnesses were not in Limay, Bataan
when the incident happened.
The trial court further held that Skyland was liable under its time charter agreement with
Acuario pursuant to Article 1159 of the Civil Code which states that “contracts have the force of
law between the contracting parties.” Skyland must bear the consequences of the tugboat’s
incapacity to respond to the barge’s request for assistance because Acuario had no control in the
selection of the tugboats used by Skyland. But since the ultimate fault lies with petitioner, justice
demands that the latter reimburse Skyland for whatever it may be adjudged to pay Acuario. 12

_______________

11
 Id., at p. 67.
12
 Id., at pp. 64-66.

163
VOL. 493, JUNE 27, 2006 163
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
Both Skyland and petitioner elevated the matter to the Court of Appeals which, on July 6, 2000,
rendered the assailed Decision affirming the trial court, but deleting the award of attorney’s fees.
Upon denial of its motion for recon-sideration,  petitioner brought the instant petition raising the
13

following issues:
I

WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE FINDING OF THE TRIAL
COURT THAT L. ACUARIO II SUSTAINED DAMAGE AND THAT IT WAS SUSTAINED DURING
ITS CHARTER TO RESPONDENT SKYLAND.
 II

ASSUMING THAT L. ACUARIO II SUFFERED DAMAGE, WHETHER THE COURT OF

APPEALS ERRED IN UPHOLDING THE TRIAL COURT DECISION HOLDING PETITIONER
LIABLE THEREFOR. 14

The petition lacks merit.

On the first assigned error, petitioner is asking this Court to resolve factual issues that have
already been settled by the courts below. The question of whether the barge had been damaged
during its charter to Skyland is a factual matter, the determination of which may not be generally
disturbed on appeal. Questions of fact are not reviewable by this Court except under certain
exceptional circumstances.  No such exceptional circumstance exists in the case at bar.
15

On the contrary, the factual conclusions reached by the courts below are consistent with the
evidence on record. Acuario’s witnesses testified that strong winds and waves caused the barge
to bump into the walls of the pier where it
_______________

 Id., at pp. 36-37.

13

 Id., at p. 11.
14

 Central Shipping Company, Inc. v. Insurance Company of North America, G.R. No. 150751, September 20,
15

2004, 438 SCRA 511, 518.

164
164 SUPREME COURT REPORTS ANNOTATED
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
was berthed for unloading. Petitioner’s tugboat failed to tow it farther away due to engine
breakdown, thus causing the barge to sustain a hole in its hull. These testimonies were duly
supported and corroborated by documentary evidence detailing the damage and repairs done on
the barge.16

On the other hand, petitioner and Skyland’s denial that there was inclement weather in the
early hours of April 7, 1993 and that the barge sustained no damage on this occasion were not
supported by evidence to overcome the positive allegations of Acuario’s witnesses who were
present at the place and time of the incident. The categorical declaration of Acuario’s witnesses
regarding the events which led to the damage on the barge shifted the burden of evidence on
petitioner and Skyland. They could have easily disproved Acuario’s claims by presenting
competent proof that there was no weather disturbance on that day or, by presenting the
testimony of individuals who have personal knowledge of the events which transpired.
Moreover, the inability of petitioner’s and Skyland’s witnesses to unequivocally declare that
it was still the M/T Count that secured the barge during the resumption of off-loading operations
casts suspicion on their credibility. As aptly observed by the trial court, such hesitation on the
part of its witnesses is indicative of uncertainty, if not a propensity to withhold information that
could be unfavorable to their cause.  To our mind, therefore, the trial court rightly concluded that
17

petitioner’s M/T Count indeed encountered mechanical trouble, as asserted by Acuario. The fact
that petitioner did not categorically deny the allegation of mechanical trouble only serves to
strengthen the trial court’s conclusion. Petitioner’s assertion that it is contrary to human
experience for the barge to have made the return trip to Manila if it sustained the alleged damage
deserves short shrift. The trial
_______________
  Rollo, p. 64.
16

 Id., at p. 66.
17

165
VOL. 493, JUNE 27, 2006 165
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
court found that the damage on the barge was not too extensive as to render it incapable of
staying afloat and being used in operation. Neither was it impossible for the barge’s cargo to
remain intact and undamaged during the weather disturbance. Apart from the fact that the cargo
which consisted of wooden electric poles are, by nature, not easily damaged by adverse
weather,  part of it had already been unloaded when the unfortunate incident occurred.
18

Consequently, we find no cogent reason to disturb the lower courts’ finding that the barge
sustained a hole in its hull when petitioner’s tugboat failed to tow it to a safer distance as the
weather changed in the port of Limay. This Court is bound by the factual determinations of the
appellate court especially when these are supported by substantial evidence and merely affirm
those of the trial court,  as in this case. There is no showing here that the inferences made by the
19

Court of Appeals were manifestly mistaken, or that the appealed judgment was based on a
misapprehension of facts, or that the appellate court overlooked certain relevant, undisputed facts
which, if properly considered, would justify a different conclusion.  Thus, a reversal of the
20

factual findings in this case is unwarranted.

As for the second assigned error, petitioner asserts that it could not be held liable for the
damage sustained by Acuario’s barge because the latter sought to recover upon its contract with
Skyland, to which petitioner was not a party. Since it had no contractual relation with Acuario,
only Skyland should be held liable under the contract. Besides, Skyland contractually assumed
the risk that the tugboat might encounter engine trouble when it acknowledged in its contract
with petitioner that the latter’s vessels were in good order and in sea-
_______________

 Id., at p. 65.
18

 Smith Bell Dodwell Shipping Agency Corporation v. Borja, 432 Phil. 913, 922; 383 SCRA 341, 348 (2002).
19

 Central Shipping Company, Inc. v. Insurance Company of North America, supra note 15 at p. 518.
20

166
166 SUPREME COURT REPORTS ANNOTATED
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
worthy condition. At any rate, it was neither negligent in the performance of its obligation nor
the proximate cause of the damage.
We do not agree.
It was not Acuario that seeks to hold petitioner liable for the damage to the barge, as the
former in fact sued only Skyland pursuant to their charter agreement. It was Skyland that
impleaded petitioner as third-party defendant considering that Skyland was being held
accountable for the damage attributable to petitioner. In other words, petitioner was not sued
under Skyland’s charter agreement with Acuario, but pursuant to its separate undertaking with
Skyland. Strictly speaking, therefore, petitioner is not being held liable under any charter
agreement with Acuario.
Consequently, it is not correct for petitioner to assert that Acuario could not recover damages
from it due to lack of privity of contract between them. It is not Acuario that is seeking damages
from petitioner but Skyland, with whom it undoubtedly had a juridical tie. While Acuario could
hold Skyland liable under its charter agreement, Skyland in turn could enforce liability on
petitioner based on the latter’s obligation to Skyland. In other words, petitioner is being held
liable by Skyland and not by Acuario.
Thus, in the performance of its contractual obligation to Skyland, petitioner was required to
observe the due diligence of a good father of the family. This much was held in the old but still
relevant case of Baer Senior & Co.’s Successors v. La Compania Maritima  where the Court 21

explained that a tug and its owners must observe ordinary diligence in the performance of its
obligation under a contract of towage. The negligence of the obligor in the performance of the
obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to exercise due care and prudence in the perfor-
_______________

 6 Phil. 215, 217-218 (1906).

21

167
VOL. 493, JUNE 27, 2006 167
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
mance of the obligation as the nature of the obligation so demands. 22

In the case at bar, the exercise of ordinary prudence by petitioner means ensuring that its
tugboat is free of mechanical problems. While adverse weather has always been a real threat to
maritime commerce, the least that petitioner could have done was to ensure that the M/T Count
or any of its other tugboats would be able to secure the barge at all times during the engagement.
This is especially true when considered with the fact that Acuario’s barge was wholly dependent
upon petitioner’s tugboat for propulsion. The barge was not equipped with any engine and
needed a tugboat for maneuvering. 23

Needless to say, if petitioner only subjected the M/T Count to a more rigid check-up or
inspection, the engine malfunction could have been discovered or avoided. The M/T Count was
exclusively controlled by petitioner and the latter had the duty to see to it that the tugboat was in
good running condition. There is simply no basis for petitioner’s assertion that Skyland
contractually assumed the risk of any engine trouble that the tugboat may encounter. Skyland
merely procured petitioner’s towing service but in no way assumed any such risk.
That petitioner’s negligence was the proximate cause of the damage to the barge cannot be
doubted. Had its tugboat been serviceable, the barge could have been moved away from the
stone wall with facility. It is too late in the day for petitioner to insist that the proximate cause of
the damage was the barge patron’s negligence in not objecting to the position of the barge by the
stone wall. Aside from the fact that the position of the barge is quite understandable since off-
loading
_______________

 Bayne Adjusters and Surveyors, Inc. v. Court of Appeals, 380 Phil. 196, 201; 323 SCRA 231, 235-236 (2000).
22

 Rollo, p. 32.
23

168
168 SUPREME COURT REPORTS ANNOTATED
Cargolift Shipping, Inc. vs. L. Acuario Marketing Corp.
operations were then still underway,  the alleged negligence of the barge patron is a matter that is
24

also being raised for the first time before this Court.
 Thus, the damage to the barge could have been avoided had it not been for the tugboat’s
inability to tow it away from the stone wall. Considering that a barge has no power of its own
and is totally defenseless against the ravages of the sea, it was incumbent upon petitioner to see
to it that it could secure the barge by providing a seaworthy tugboat. Petitioner’s failure to do so
did not only increase the risk that might have been reasonably anticipated during the shipside
operation but was the proximate cause of the damage.  Hence, as correctly found by the courts
25

below, it should ultimately be held liable therefor.

WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of
Appeals in CA-G.R. CV No. 55664 dated July 6, 2000 and the Resolution dated November 28,
2000, finding petitioner Cargolift Shipping, Inc. liable, as third-party defendant, for actual
damages in the sum of P97,021.20, are AFFIRMED.
SO ORDERED.
     Panganiban (C.J., Chairperson),  Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ.,
concur.
Petition denied, judgment and resolution affirmed.
Notes.—Being of foreign origin, the provisions of the Ship Mortgage Decree of 1978 may
thus be construed with the aid of foreign jurisprudence from which they are derived except
insofar as they conflict with existing laws or are inconsistent with local customs and institutions.
(Philippine National Bank vs. Court of Appeals, 337 SCRA 381 [2000])
_______________

 Id., at p. 189.
24

 Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., G.R. No. 150255, April 22, 2005, 456
25

SCRA 557, 572.

169

VOL. 493, JUNE 27, 2006 169

Government Service Insurance System vs. City Assessor of
Iloilo City
A man of ordinary prudence would not leave a heavily loaded barge floating for a considerable
number of hours, at a precarious time, and in the open sea, knowing that the barge does not have
any power of its own and is totally defenseless from the ravages of the sea. (Schmitz Transport
& Brokerage Corporation vs. Transport Venture, Inc., 456 SCRA 557 [2005])

——o0o——
520 SUPREME COURT REPORTS ANNOTATED
Santos vs. Sibug
No. L-26815. May 26, 1981. *

ADOLFO L. SANTOS, petitioner, vs. ABRAHAM SIBUG and COURT OF APPEALS,

respondents.
Judgment; Jurisdiction; Injunction; The public sale by the sheriff of properties on execution cannot
be restrained by another
______________

*
 FIRST DIVISION

521

VOL. 104, MAY 26, 1981 521

Santos vs. Sibug
court or a branch of the same court.—No public sale was conducted on May 8, 1964. On May 11,
1964, Branch X issued a Restraining Order enjoining the Sheriff from conducting the public auction sale
of the motor vehicle levied upon. The Restraining Order was issued wrongfully. Under the provisions of
Section 17, Rule 39, the action taken by the Sheriff cannot be restrained by another Court or by another
Branch of the same Court. The Sheriff has the right to continue with the public sale on his own
responsibility, or he can desist from conducting the public sale unless the attaching creditor files a bond
securing him against the third-party-claim. But the decision to proceed or not with the public sale lies
with him.
Same; Same; Same.—It appears from the above that if the attaching creditor should furnish an
adequate bond, the Sheriff has to proceed with the public auction. When such bond is not filed, then the
Sheriff shall decide whether to proceed, or to desist from proceeding, with the public auction If he decides
to proceed, he will incur personal liability in favor of the successful third-party claimant.
Same; Suretyship; Where Sheriff’s sale did not proceed because it was restrained, the liability of
the bonding company of the judgment-creditor does not become effective.—The judgment in the
BRANCH X CASE appears to be quite legally unpalatable. For instance, since the undertaking furnished
to the Sheriff by the BONDING COMPANY did not become effective for the reason that the jeep was not
sold, the public sale thereof having been restrained, there was no reason for promulgating judgment
against the BONDING COMPANY. It has also been noted that the Complaint against VIDAD was
dismissed.
Same; Same; It is proper for a third-party claimant in an execution sale to file a separate action to
vindicate his ownership of the levied property.—Applied to the case at bar, it will have to be held that,
contrary to the rationale in the Decision of respondent Court, it was appropriate, as a matter of procedure,
for SANTOS, as an ordinary third-party claimant, to vindicate his claim of ownership in a separate action
under Section 17 of Rule 39. And the judgment rendered in his favor by Branch X, declaring him to be
the owner of the property, did not as a basic proposition, constitute interference with the powers or
processes of Branch XVII which rendered the judgment, to enforce which the jeepney was levied upon.
And this is so because property belonging to a stranger is not ordinarily subject
522

522 SUPREME COURT REPORTS ANNOTATED

Santos vs. Sibug
to levy. While it is true that the vehicle in question was in custodia legis, and should not be
interfered with without the permission of the proper Court, the property must be one in which the
defendant has proprietary interest. Where the Sheriff seizes a stranger’s property, the rule does not apply
and interference with his custody is not interference with another Court’s Order of attachment.
 Same; Same; Same; Where a jeepney is registered in the name of an authorized public utility
operator but is actually owned by another (a so called “kabit” operator) and the same bumped somebody
thru the negligence of its driver, such a jeepney can be sold at public auction to satisfy the court’s award.
It cannot be considered a “stranger’s property.”—However, as a matter of substance and on the merits,
the ultimate conclusion of respondent Court nullifying the Decision of Branch X permanently enjoining
the auction sale, should be upheld. Legally speaking, it was not a “stranger’s property” that was levied
upon by the Sheriff pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact,
registered in the name of VIDAD, one of the judgment debtors. And what is more, the aspect of public
service, with its effects on the riding public, is involved. Whatever legal technicalities may be invoked,
we find the judgment of respondent Court of Appeals to be in consonance with justice.

PETITION from the decision of the Court of First Instance of Manila.

The facts are stated in the opinion of the Court.

MELENCIO-HERRERA, J.:

The controversy in this case will be resolved on the basis of the following facts and
expositions. Prior to April 26, 1963 (the ACCIDENT DATE), Vicente U. Vidad (VIDAD, for
short) was a duly authorized passenger jeepney operator. Also prior to the ACCIDENT DATE,
petitioner Adolfo L. Santos (SANTOS, for short) was the owner of a passenger jeep, but he had
no certificate of public convenience for the operation of the vehicle as a public passenger jeep.
SANTOS then transferred his jeep to the name of VIDAD so that it could be operated under the
latter’s certificate of public convenience. In other
523
VOL. 104, MAY 26, 1981 523
Santos vs. Sibug
words, SANTOS became what is known in ordinary parlance as a kabit operator. For the
protection of SANTOS, VIDAD executed a re-transfer document to the former, which was to be
a private document presumably to be registered if and when it was decided that the passenger
jeep of SANTOS was to be withdrawn from the kabit arrangement.
On the ACCIDENT DATE, private respondent Abraham Sibug (SIBUG, for short) was
bumped by a passenger jeepney operated by VIDAD and driven by Severo Gragas. As a result
thereof, SIBUG filed a complaint for damages against VIDAD and Gragas with the Court of
First Instance of Manila, Branch XVII, then presided by Hon. Arsenio Solidum. That Civil Case
will hereinafter be referred to as the BRANCH XVII CASE.
On December 5, 1963, a judgment was rendered by Branch XVII, sentencing VIDAD and
Gragas, jointly and severally, to pay SIBUG the sums of P506.20 as actual damages; P3,000.00
as moral damages; P500.00 as attorney’s fees, and costs. 1

On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, with Plate No. PUJ-343-
64, registered in the name of VIDAD, and scheduled the public auction sale thereof on May 8,
1964.
On April 11, 1964, SANTOS presented a third-party claim with the Sheriff alleging actual
ownership of the motor vehicle levied upon, and stating that registration thereof in the name of
VIDAD was merely to enable SANTOS to make use of VIDAD’s Certificate of Public
Convenience. After the third-party complaint was filed, SIBUG submitted to the Sheriff a bond
issued by the Philippine Surety Insurance Company (THE BONDING COMPANY, for short), to
save the Sheriff from liability if he were to proceed with the sale and if SANTOS’ third-party
claim should be ultimately upheld.
On April 22, 1964, that is, before the scheduled sale of May 8, 1964, SANTOS instituted an
action for Damages and Injunction with a prayer for Preliminary Mandatory Injunction
_______________

 p. 82, Court of Appeals Rollo.

1

524
524 SUPREME COURT REPORTS ANNOTATED
Santos vs. Sibug
against SIBUG; VIDAD; and the Sheriff in Civil Case No. 56842 of Branch X, of the same
Court of First Instance of Manila (hereinafter referred to as the BRANCH X CASE). The
complaint was later amended to include the BONDING COMPANY as a party defendant
although its bond had not become effective. In the Complaint, SANTOS alleged essentially that
he was the actual owner of the motor vehicle subject of levy; that a fictitious Deed of Sale of said
motor vehicle was executed by him in VIDAD’s favor for purposes of operating said vehicle as a
passenger jeepney under the latter’s franchise; that SANTOS did not receive any payment from
VIDAD in consideration of said sale; that to protect SANTOS’ proprietary interest over the
vehicle in question, VIDAD in turn had executed a Deed of Sale in favor of SANTOS on June
27, 1962; that SANTOS was not a party in the BRANCH XVII CASE and was not in any
manner liable to the registered owner VIDAD and the driver Gragas; that SANTOS derived a
daily income of P30.00 from the operation of said motor vehicle as a passenger jeepney and
stood to suffer irreparable damage if possession of said motor vehicle were not restored to him.
SANTOS then prayed that 1) pending trial, a Writ of Preliminary Mandatory Injunction be
issued ex-parte commanding the Sheriff of Manila to restore the motor vehicle to him and that
the Sheriff be enjoined from proceeding with its sale; 2) that, after trial, the Deed of Sale in favor
of VIDAD be declared absolutely fictitious and, therefore, null and void, and adjudging
SANTOS to be the absolute owner of the vehicle in question; and 3) that damages be awarded to
SANTOS as proven during the trial plus attorney’s fees in the amount of P450.00 and costs. 2

No public sale was conducted on May 8, 1964. On May 11, 1964, Branch X issued a
Restraining Order enjoining the Sheriff from conducting the public auction sale of the motor
vehicle levied upon.  The Restraining Order was issued wrongfully. Under the provisions of
3

Section 17, Rule 39, the

_____________

 pp. 14-17, ibid.
2

 p. 23, ibid.
3

525
VOL. 104, MAY 26, 1981 525
Santos vs. Sibug
action taken by the Sheriff cannot be restrained by another Court or by another Branch of the
same Court. The Sheriff has the right to continue with the public sale on his own
responsibility, or he can desist from conducting the public sale unless the attaching creditor files
a bond securing him against the third-party-claim. But the decision to proceed or not with the
public sale lies with him. As said in Uy Piaoco vs. Osmeña, 9 Phil. 299, 307, “the powers of the
Sheriff involve both discre-tional power and personal liability.” The mentioned discre-tional
power and personal liability have been further elucidated in Planas and Verdon vs. Madrigal &
Co., et al., 94 Phil. 754, where it was held.
“The duty of the sheriff in connection with the execution and satisfaction of judgment of the court is
governed by Rule 39 of the Rules of Court. Section 15 thereof provides for the procedure to be followed
where the property levied on execution is claimed by a third person. If the third-party claim is sufficient,
the sheriff, upon receiving it, is not bound to proceed with the levy of the property, unless he is given by
the judgment creditor an indemnity bond against the claim (Mangaoang vs. Provincial Sheriff, 91 Phil.,
368). Of course, the sheriff may proceed with the levy even without the indemnity bond, but in such case
he will answer for any damages with his own personal funds (Waite vs. Peterson, et al., 8 Phil.,
419; Alzua, et al. vs. Johnson, 21 Phil. 308; Consulta No. 341 de los abogados de Smith, Bell & Co., 48
Phil., 565). And the rule also provides that nothing therein contained shall prevent a third person from
vindicating his claim to the property by any proper action (Sec. 15 of Rule 39).”
It appears from the above that if the attaching creditor should furnish an adequate bond, the
Sheriff has to proceed with the public auction. When such bond is not filed, then the Sheriff shall
decide whether to proceed, or to desist from proceeding, with the public auction. If he decides to
proceed, he will incur personal liability in favor of the successful third-party claimant.
On October 14, 1965, Branch X affirmed SANTOS’ ownership of the jeepney in question
based on the evidence adduced, and decreed:
526
526 SUPREME COURT REPORTS ANNOTATED
Santos vs. Sibug
“WHEREFORE, judgment is hereby rendered, enjoining the defendants from proceeding with the sale of
the vehicle in question ordering its return to the plaintiff and furthermore sentencing the defendant
Abraham Sibug to pay the plaintiff the sum of P15.00 a day from April 10, 1964 until the vehicle is
returned to him, and P500.00 as attorney’s fees as well as the costs.” 
4

This was subsequently amended on December 5, 1965, upon motion for reconsideration filed by
SANTOS, to include the BONDING COMPANY as jointly and severally liable with SIBUG. 5

“x x x provided that the liability of the Philippine Surety & Insurance Co., Inc shall in no case exceed
P6,500 00. Abraham Sibug is furthermore condemned to pay the Philippine Surety & Insurance Co., Inc.,
the same sums it is ordered to pay under this decision.”
The judgment in the BRANCH X CASE appears to be quite legally unpalatable. For instance,
since the undertaking furnished to the Sheriff by the BONDING COMPANY did not become
effective for the reason that the jeep was not sold, the public sale thereof having been restrained,
there was no reason for promulgating judgment against the BONDING COMPANY. It has also
been noted that the Complaint against VIDAD was dismissed.
Most important of all, the judgment against SIBUG was inequitable. In asserting his rights of
ownership to the vehicle in question, SANTOS candidly admitted his participation in the illegal
and pernicious practice in the transportation business known as the kabit system. Sec. 20 (g) of
the Public Service Act, then the applicable law, specifically provided:
“x x x it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the
approval and authorization of the Commission previously had—x x x (g) to sell, alienate, mortgage,
encumber or lease its property, franchise, certificates, privileges, or rights, or any part thereof.”
________________

4
 pp. 30-31, ibid.
5
 p. 44, Supreme Court Rollo.
 527
VOL. 104, MAY 26, 1981 527
Santos vs. Sibug
In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the
registered owner and operator of record at the time of the accident. It is true that VIDAD had
executed a re-sale to SANTOS, but the document was not registered. Although SANTOS, as
the kabit, was the true owner as against VIDAD, the latter, as the registered owner/operator and
grantee of the franchise, is directly and primarily responsible and liable for the damages caused
to SIBUG, the injured party, as a consequence of the negligent or careless operation of the
vehicle.  This ruling is based on the principle that the operator of record is considered the
6

operator of the vehicle in contemplation of law as regards the public and third persons  even if 7

the vehicle involved in the accident had been sold to another where such sale had not been
approved by the then Public Service Commission.  For the same basic reason, as the vehicle here
8

in question was registered in VIDAD’s name, the levy on execution against said vehicle should
be enforced so that the judgment in the BRANCH XVII CASE may be satisfied, notwithstanding
the fact that the secret ownership of the vehicle belonged to another. SANTOS, as
the kabit, should not be allowed to defeat the levy on his vehicle and to avoid his responsibilities
as a kabit owner for he had led the public to believe that the vehicle belonged to VIDAD. This is
one way of curbing the pernicious kabit system that facilitates the commission of fraud against
the travelling public.
As indicated in the Erezo case, supra, SANTOS’ remedy, as the real owner of the vehicle, is
to go against VIDAD, the actual operator who was responsible for the accident, for the recovery
of whatever damages SANTOS may suffer by reason of the execution. In fact, if SANTOS, as
the kabit, had been impleaded as a party defendant in the BRANCH XVII CASE, he should be
held jointly and severally liable with VIDAD and
_____________

 Erezo, et al. vs. Jepte, 102 Phil. 103; Perez vs. Gutierrez, 53 SCRA 149 (1973).
6

 Vargas vs. Langcay, 6 SCRA 174 (1962).

7

 Erezo vs. Jepte, supra.

8

528
528 SUPREME COURT REPORTS ANNOTATED
Santos vs. Sibug
the driver for damages suffered by SIBUG,  as well as for exemplary damages.
9 10

From the judgment in the BRANCH X CASE, SIBUG appealed. Meanwhile, SANTOS
moved for immediate execution. SIBUG opposed it on the ground that Branch X had no
jurisdiction over the BRANCH XVII CASE, and that Branch X had no power to interfere by
injunction with the judgment of Branch XVII, a Court of concurrent or coordinate jurisdiction. 11

On November 13, 1965, Branch X released an order authorizing immediate execution on the

theory that the BRANCH X CASE is “principally an action for the issuance of a writ of
prohibition to forbid the Sheriff from selling at public auction property not belonging to the
judgment creditor (sic) and there being no attempt in this case to interfere with the judgment or
decree of another court of concurrent jurisdiction.” 12

Without waiting for the resolution of his Motion for Reconsideration, SIBUG sought relief
from respondent Appellate Court in a Petition for Certiorari with Preliminary Injunction. On
November 18, 1965, respondent Court of Appeals enjoined the enforcement of the Branch
X Decision and the Order of execution issued by said Branch.  On September 28, 1966, 13
respondent Court of Appeals rendered the herein challenged Decision nullifying the judgment
rendered in the Branch X Case and permanently restraining Branch X from taking cognizance of
the BRANCH X CASE filed by SANTOS, it ruled that:
“x x x the respondent Court Branch X, indeed, encroached and interfered with the judgment of Branch
XVII when it issued a restraining order and finally a decision permanently enjoining the other court
_______________

9
 Dizon vs. Octavio & Gamu, 51 O.G. 4059; see Zamboanga Transportation Co., Inc. vs. Court of Appeals, 30 SCRA
718 (1969).
10
 Cañares, et al. vs. Arias, et al., Vol. 1 CA Reports. 1961.
11
 pp. 34-42, Court of Appeals Rollo.
12
 pp. 46-47, ibid.
13
 pp. 88-89, ibid.

529
VOL. 104, MAY 26, 1981 529
Santos vs. Sibug
from executing the decision rendered in Civil Case No. 54335. This, to our mind constitutes an
interference with the powers and authority of the other court having co-equal and coordinate jurisdiction.
To rule otherwise, would indubitably lead to confusion which might hamper or hinder the proper
administration of justice. x x x” 14

Respondent Court further held that SANTOS may not be permitted to prove his ownership over a
particular vehicle being levied upon but registered in another’s name in a separate action,
observing that:
“As the vehicle in question was registered in the name of Vicente U. Vidad, the government of any
person affected by the representation that said vehicle is registered under the name of a particular person
had the right to rely on his declaration of ownership and registration, and the registered owner or any
other person for that matter cannot he permitted to repudiate said declaration with the objective of
proving that said registered vehicle is owned by another person and not by the registered owner (sec. 68,
(a), Rule 123, and art. 1431, New Civil Code)”

xxxx

“Were we to allow a third person to prove that he is the real owner of a particular vehicle and not the
registered owner it would in effect be tantamount to sanctioning the attempt of the registered owner of the
particular vehicle in evading responsibility for it cannot be dispelled that the door would be opened to
collusion between a person and a registered owner for the latter to escape said responsibility to the public
or to any person. x x x”
SANTOS now seeks a review of respondent Court’s Decision contending that:

1. 1)The respondent Court of Appeals erred in holding that Branch X of the Court of First
Instance of Manila has no jurisdiction to restrain by Writ of Injunction the auction sale
of petitioner’s motor vehicle to satisfy the judgment indebtedness of another person;
2. 2)The respondent Court of Appeals erred in holding that petitioner as owner of a motor
vehicle that was levied upon pursuant to a

______________

 p. 16, Supreme Court Rollo.

14
 530
530 SUPREME COURT REPORTS ANNOTATED
Santos vs. Sibug

1. Writ of Execution issued by Branch XVII of the Court of First Instance of Manila in Civil
Case No. 54335 cannot be allowed to prove in a separate suit filed in Branch X of the
same court (Civil Case No. 56842) that he is the true owner of the said motor vehicle
and not its registered owner;
2. 3)The respondent Court of Appeals erred in declaring null and void the decision of the
Court of First instance of Manila (Branch X) in Civil Case No. 56482.

We gave due course to the Petition for Review on Certiorari on December 14, 1966 and
considered the case submitted for decision on July 20, 1967.
One of the issues ventilated for resolution is the general question of jurisdiction of a Court of
First Instance to issue, at the instance of a third-party claimant, an Injunction restraining the
execution sale of a passenger jeepney levied upon by a judgment creditor in another Court of
First Instance. The corollary issue is whether or not the third-party claimant has a right to
vindicate his claim to the vehicle levied upon through a separate action.
Since this case was submitted for decision in July, 1967, this Court, in Arabay, Inc. vs. Hon.
Serafin Salvador,  speaking through Mr. Justice Ramon Aquino, succinctly held:
15

“It is noteworthy that, generally, the rule, that no court has authority to interfere by injunction with the
judgments or decrees of a concurrent or coordinate jurisdiction having equal power to grant the injunctive
relief, is applied in cases, where no third-party claimant is involved, in order to prevent one court from
nullifying the judgment or process of another court of the same rank or category, a power which devolves
upon the proper appellate court.”

x      x      x      x      x      x

“When the sheriff, acting beyond the bounds of his authority, seizes a stranger’s property, the writ of
injunction, which is issued to stop the auction sale of that property, is not an interference with the writ of
execution issued by another court because the writ of execunon was improperly implemented by the
sheriff. Under that writ, he
______________

15
 82 SCRA 138 (1978).

531
VOL. 104, MAY 26, 1981 531
Santos vs. Sibug
could attach the property of the judgment debtor. He is not authorized to levy upon the property of the
third-party claimant (Polaris Marketing Corporation vs. Plan, L-40666, January 22, 1976, 69 SCRA 93,
97; Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94, 102).”
An earlier case, Abiera vs. Hon. Court of Appeals, et al.,  explained the doctrine more
16

extensively:
“Courts; Jurisdiction; Courts without power to interfere by injunction with judgments or decrees of a
court of concurrent jurisdiction.—No court has power to interfere by injunction with the judgments or
decrees of a court of concurrent or coordinate jurisdiction having equal power to grant the relief sought by
injunction.
 “Same; Same; Same; When applicable.—For this doctrine to apply, the injunction issued by one court
must interfere with the judgment or decree issued by another court of equal or coordinate jurisdiction and
the relief sought by such injunction must be one which could be granted by the court which rendered the
judgment or issued the decree.
“Same; Same; Same; Exception; Judgment rendered by another court in favor of a third person who
claims property levied upon on execution.—Under section 17 of Rule 39 a third person who claims
property levied upon on execution may vindicate such claim by action. A judgment rendered in his favor -
declaring him to be the owner of the property - would not constitute interference with the powers or
processes of the court which rendered the judgment to enforce which the execution was levied. If that be
so - and it is so because the property, being that of a stranger, is not subject to levy - then an interlocutory
order, such as injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be
considered as such interference either.
“Execution; Where property levied on claimed by third person; ‘Action’ in section 17, Rule 39 of the
Rules of Court, interpreted.—The right of a person who claims to be the owner of property levied upon
on execution to file a third-party claim with the sheriff is not exclusive, and he may file an action to
vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to
______________

 45 SCRA 314 (1972).

16

532
532 SUPREME COURT REPORTS ANNOTATED
Santos vs. Sibug
answer for any damages that may be suffered by the third party claimant. By ‘action’, as stated in the
Rule, what is meant is a separate and independent action.”
Applied to the case at bar, it will have to be held that, contrary to the rationale in the Decision of
respondent Court, it was appropriate, as a matter of procedure, for SANTOS, as an ordinary
third-party claimant, to vindicate his claim of ownership in a separate action under Section 17 of
Rule 39. And the judgment rendered in his favor by Branch X, declaring him to be the owner of
the property, did not as a basic proposition, constitute interference with the powers or processes
of Branch XVII which rendered the judgment, to enforce which the jeepney was levied upon.
And this is so because property belonging to a stranger is not ordinarily subject to levy. While it
is true that the vehicle in question was in custodia legis, and should not be interfered with
without the permission of the proper Court, the property must be one in which the defendant has
proprietary interest. Where the Sheriff seizes a stranger’s property, the rule does not apply and
interference with his custody is not interference with another Court’s Order of attachment. 17

However, as a matter of substance and on the merits, the ultimate conclusion of respondent
Court nullifying the Decision of Branch X permanently enjoining the auction sale, should be
upheld. Legally speaking, it was not a “stranger’s property” that was levied upon by the Sheriff
pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact, registered in the
name of VIDAD, one of the judgment debtors. And what is more, the aspect of public service,
with its effects on the riding public, is involved. Whatever legal technicalities may be invoked,
we find the judgment of respondent Court of Appeals to be in consonance with justice.
WHEREFORE, as prayed for by private respondent Abraham Sibug, the petition for review
on certiorari filed by
_______________

 Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94 (1951)

17
 533
VOL. 104, MAY 26, 1981 533
Santos vs. Sibug
Adolfo L. Santos is dismissed, with costs against the petitioner.
SO ORDERED.
     Makasiar,  Guerrero and De Castro,* JJ., concur.
     Teehankee (Chairman), in the result.
Petition dismissed.
Notes.—A Caloocan City Court of First Instance can enjoin the sheriff from selling
properties he levied upon to satisfy the judgment of the Court of First Instance of Manila.
(Arabay, Inc. vs. Salvador, 82 SCRA 138)
The rule that no court has authority to interfere by injunction with the judgment of another
court of coordinate jurisdiction is generally applied in cases where no third-party claimant is
involved. (Arabay, Inc. vs. Salvador, 82 SCRA 138)
The Rules do not provide any lifetime for a writ of attachment unlike a writ of execution. But
even granting that a writ of attachment is valid for only 60 days, yet, since there was constructive
levy within that period the fact that actual seizure was effected only thereafter cannot affect the
validity of that levy. (Roque vs. Court of Appeals, 93 SCRA 540)
A 3rd person claiming to be the owner of property attached or levied upon is required to file a
separate or independent action to determine whether the property should answer for the claim of
the attaching or judgment creditor instead of being allowed to raise that issue in the case where
the writ of attachment or execution was issued. (See Rule 17, Rule 39, and Sec. 14, Rule 57.
Bayer Philippines, Inc. vs. Agana, 63 SCRA 355)
The registered owner/operator of a passenger vehicle is jointly and severally liable with the
driver for damages incurred by passengers or third persons, as a consequence of in-
________________

 Justice Pacifico P. de Castro was designated to sit in the First Division, vice Justice Ramon C. Fernandez who is on
*

leave.

534

534 SUPREME COURT REPORTS ANNOTATED

Vda. de Haberer vs. Court of Appeals
juries or death sustained in the operation of said vehicle. (Vargas vs. Lancay, 8 SCRA 174)
The life expectancy of the victim in a vehicular accident is not only relevant, but also an
important element in fixing the amount recoverable as damages. (Villa Key Transit, Inc. vs.
Court of Appeals, 31 SCRA 511)
Insurance carrier is subrogated merely to rights of the assured and cars recover from common
carrier only the amount recoverable by the latter. (St Paul Fire & Marine Insurance Co. vs.
Macondray & Co., 72 SCRA 122)
Although Article 2180 of the Civil Code provides for the liability of an employer for the
tortious acts of his employees, this does not exempt the employees from personal liability,
especially if there is proof of the existence of negligence on their part. (Belizur vs. Brasas, 2
SCRA 526)
Negligence of employee is presumed to be negligence of his employer who may escape
liability only by proof that it exercised diligence of good father of family to prevent damage not
only in selection of employees but in adequately supervising their work. (Umali vs. Bacani, 69
SCRA 263)

——o0o——
 G.R. No. 162267. July 4, 2008.*
PCI LEASING AND FINANCE, INC., petitioner, vs. UCPB GENERAL INSURANCE CO.,
INC., respondent.
Civil Law; Quasi-delicts; Damages; Negligence; Registered owner of a motor vehicle may be held
civilly liable with the negligent driver either subsidiarily or solidarily.—For damage or injuries arising
out of negligence in the operation of a motor vehicle, the registered owner may be held civilly liable with
the negligent driver either 1) subsidiarily, if the aggrieved party seeks relief based on a delict or crime
under Articles 100 and 103 of the Revised Penal Code; or 2) solidarily, if the complainant seeks relief
based on a quasi-delict under Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff
whether to waive completely the filing of the civil action, or institute it with the criminal action, or file it
separately or independently of a criminal action; his only limitation is that he cannot recover damages
twice for the same act or omission of the defendant.
Same; Same; Same; Same; In case a separate civil action is filed, the long-standing principle is that
the registered owner of a motor vehicle is primarily and directly responsible for the consequences of its
operation, including the negligence of the driver, with respect to the public and all third persons; In
contemplation of law, the registered owner of a motor vehicle is the employer of its driver, with the actual
operator and employer, such as a lessee, being considered as merely the owner’s agent.—In case a
separate civil action is filed, the long-standing principle is that the registered owner of a motor vehicle is
primarily and directly responsible for the consequences of its operation, including the negligence of the
driver, with respect to the public and all third persons. In contemplation of law, the registered owner of a
motor vehicle is the employer of its driver, with the actual operator and employer, such as a lessee, being
considered as merely the owner’s agent. This being the case, even if a sale has been executed before a
tortious incident, the sale, if unregistered, has no effect as to the right of the public and third persons to
recover from the registered owner. The public has the right to con-
_______________

* THIRD DIVISION.

142

142 SUPREME COURT REPORTS

ANNOTATED
PCI Leasing and Finance, Inc. vs. UCPB General
Insurance Co., Inc.
clusively presume that the registered owner is the real owner, and may sue accordingly.
Same; Same; Same; Same; Land Transportation and Traffic Code; RA No. 8556 does not supersede
or repeal the law on compulsory motor vehicle registration.—The new law, R.A. No. 8556,
notwithstanding developments in foreign jurisdictions, does not supersede or repeal the law on
compulsory motor vehicle registration. No part of the law expressly repeals Section 5(a) and (e) of R.A.
No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code.
Same; Same; Same; Same; Same; The failure to register a lease, sale, transfer or encumbrance,
should not benefit the parties responsible, to the prejudice of innocent victims.—The rule remains the
same: a sale, lease, or financial lease, for that matter, that is not registered with the Land Transportation
Office, still does not bind third persons who are aggrieved in tortious incidents, for the latter need only to
rely on the public registration of a motor vehicle as conclusive evidence of ownership. A lease such as the
one involved in the instant case is an encumbrance in contemplation of law, which needs to be registered
in order for it to bind third parties. Under this policy, the evil sought to be avoided is the exacerbation of
the suffering of victims of tragic vehicular accidents in not being able to identify a guilty party. A
contrary ruling will not serve the ends of justice. The failure to register a lease, sale, transfer or
encumbrance, should not benefit the parties responsible, to the prejudice of innocent victims.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
   The facts are stated in the opinion of the Court.
  Agcaoili & Associates for petitioner.
  Tumangan, Payumo & Partners for respondent.
  Jesus B. Roldan for Sugeco and Renato Gonzaga.
143
VOL. 557, JULY 4, 2008 143
PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking a reversal of the Decision1 of the Court of Appeals (CA) dated December 12, 2003
affirming with modification the Decision of the Regional Trial Court (RTC) of Makati City
which ordered petitioner and Renato Gonzaga (Gonzaga) to pay, jointly and severally,
respondent the amount of P244,500.00 plus interest; and the CA Resolution 2 dated February 18,
2004 denying petitioner’s Motion for Reconsideration.
The facts, as found by the CA, are undisputed:
“On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate Number PHD-206
owned by United Coconut Planters Bank was traversing the Laurel Highway, Barangay Balintawak, Lipa
City. The car was insured with plaintiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano
Isaac with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by an 18-wheeler
Fuso Tanker Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133, owned by defendants-
appellants PCI Leasing & Finance, Inc. allegedly leased to and operated by defendant-appellant Superior
Gas & Equitable Co., Inc. (SUGECO) and driven by its employee, defendant appellant Renato Gonzaga.
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of the rear
part of the car. The driver and passenger suffered physical injuries. However, the driver defendant-
appellant Gonzaga continued on its [sic] way to its [sic] destination and did not bother to bring his victims
to the hospital.
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing the insurance
coverage of the damaged car.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made by
plaintiff-appellee for the
_______________

1 Penned by Associate Justice Eugenio S. Labitoria with the concurrence of Associate Justices Mercedes Gozo-Dadole and
Rosmari D. Carandang, Rollo, pp. 41-47.
2 Id., at p. 49.

144

144 SUPREME COURT REPORTS ANNOTATED

PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
payment of the aforesaid amounts. However, no payment was made. Thus, plaintiff-appellee filed the
instant case on March 13, 1991.” 3

PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held
liable for the collision, since the driver of the truck, Gonzaga, was not its employee, but that of
its co-defendant Superior Gas & Equitable Co., Inc. (SUGECO).4 In fact, it was SUGECO, and
not petitioner, that was the actual operator of the truck, pursuant to a Contract of Lease signed by
petitioner and SUGECO.5 Petitioner, however, admitted that it was the owner of the truck in
question.6
After trial, the RTC rendered its Decision dated April 15, 1999, 7 the dispositive portion of
which reads:
“WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff UCPB
General Insurance [respondent], ordering the defendants PCI Leasing and Finance, Inc., [petitioner] and
Renato Gonzaga, to pay jointly and severally the former the following amounts: the principal amount of
P244,500.00 with 12% interest as of the filing of this complaint until the same is paid; P50,000.00 as
attorney’s fees; and P20,000.00 as costs of suit.
SO ORDERED.” 8

Aggrieved by the decision of the trial court, petitioner appealed to the CA.
In its Decision dated December 12, 2003, the CA affirmed the RTC’s decision, with certain
modifications, as follows:
“WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED with modification
that the award of attorney’s fees is hereby deleted and the rate of interest shall be six percent
_______________

3 Rollo, p. 42.
4 Id., at p. 72.
5 Id., at pp. 72-73.
6 Id., at p. 72.
7 Id., at pp. 52-56.
8 Id., at p. 56.

145

VOL. 557, JULY 4, 2008 145

PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
(6%) per annum computed from the time of the filing of the complaint in the trial court until the finality
of the judgment. If the adjudged principal and the interest remain unpaid thereafter, the interest rate shall
be twelve percent (12%) per annum computed from the time the judgment becomes final and executory
until it is fully satisfied.
SO ORDERED.” 9

Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated
February 18, 2004.
Hence, herein Petition for Review.
The issues raised by petitioner are purely legal:
“Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held
liable, jointly and severally, with the driver thereof, for the damages caused to third parties.
Whether petitioner, as a financing company, is absolved from liability by the enactment of Republic
Act (R.A.) No. 8556, or the Financing Company Act of 1998.”
Anent the first issue, the CA found petitioner liable for the damage caused by the collision
since under the Public Service Act, if the property covered by a franchise is transferred or leased
to another without obtaining the requisite approval, the transfer is not binding on the Public
Service Commission and, in contemplation of law, the grantee continues to be responsible under
the franchise in relation to the operation of the vehicle, such as damage or injury to third parties
due to collisions.10
 Petitioner claims that the CA’s reliance on the Public Service Act is misplaced, since the said
law applies only to cases involving common carriers, or those which have franchises to operate
as public utilities. In contrast, the case before this
_______________

9 Id., at p. 47.
10 Id., at pp. 44-45.

146
146 SUPREME COURT REPORTS ANNOTATED
PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
Court involves a private commercial vehicle for business use, which is not offered for service to
the general public.11
Petitioner’s contention has partial merit, as indeed, the vehicles involved in the case at bar are
not common carriers, which makes the Public Service Act inapplicable.
However, the registered owner of the vehicle driven by a negligent driver may still be held
liable under applicable jurisprudence involving laws on compulsory motor vehicle registration
and the liabilities of employers for quasi-delicts under the Civil Code.
The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting
from its use is well-established in jurisprudence. Erezo v. Jepte,12 with Justice Labrador
as ponente,  wisely explained the reason behind this principle, thus:
“Registration is required not to make said registration the operative act by which ownership in
vehicles is transferred, as in land registration cases, because the administrative proceeding of registration
does not bear any essential relation to the contract of sale between the parties ( Chinchilla vs. Rafael and
Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway
(section 5 [a], Act No. 3992, as amended.) The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other
vehicles without positive identification of the owner or drivers, or with very scant means of identification.
It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons responsible for damages
or injuries caused on public highways.
_______________

11 Id., at pp. 21-22.

12 102 Phil. 103 (1957).

147

VOL. 557, JULY 4, 2008 147

PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
“ ‘One of the principal purposes of motor vehicles legislation is identification of the vehicle
and of the operator, in case of accident; and another is that the knowledge that means of detection
are always available may act as a deterrent from lax observance of the law and of the rules of
conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate
at the last to the primary purpose of rendering it certain that the violator of the law or of the rules
of safety shall not escape because of lack of means to discover him.’ The purpose of the statute is
thwarted, and the displayed number becomes a ‘snare and delusion,’ if courts would entertain such
 defenses as that put forward by appellee in this case. No responsible person or corporation could be
held liable for the most outrageous acts of negligence, if they should be allowed to place a
‘middleman’ between them and the public, and escape liability by the manner in which they
recompense their servants.” (King vs. Brenham Automobile Co., 145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is: should not the registered
owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof
escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with
the trial court that the law does not allow him to do so; the law, with its aim and policy in mind, does not
relieve him directly of the responsibility that the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape
said responsibility and transfer the same to an indefinite person, or to one who possesses no property with
which to respond financially for the damage or injury done. A victim of recklessness on the public
highways is usually without means to discover or identify the person actually causing the injury or
damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to
determine who is the owner. The protection that the law aims to extend to him would become illusory
were the registered owner given the opportunity to escape liability by disproving his ownership. If the
policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove
the contrary to the prejudice of the person injured, that is, to prove that a third person or another 148

148 SUPREME COURT REPORTS ANNOTATED

PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
has become the owner, so that he may thereby be relieved of the responsibility to the injured person.
The above policy and application of the law may appear quite harsh and would seem to conflict with
truth and justice. We do not think it is so. A registered owner who has already sold or transferred a
vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for
the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit
is no justification for relieving him of liability; said inconvenience is the price he pays for failure to
comply with the registration that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily
responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has
a right to be indemnified by the real or actual owner of the amount that he may be required to pay as
damage for the injury caused to the plaintiff-appellant.” 13

The case is still good law and has been consistently cited in subsequent cases. 14 Thus, there is
no good reason to depart from its tenets.
For damage or injuries arising out of negligence in the operation of a motor vehicle, the
registered owner may be held civilly liable with the negligent driver either 1) subsidiarily, if the
aggrieved party seeks relief based on a delict or crime under Articles 100 and 103 of the Revised
Penal Code; or 2) solidarily,  if the complainant seeks relief based on a quasi-delict under
Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff whether to waive
completely the filing of the civil action, or institute it with the criminal action, or file it
separately or independently of a criminal action;15 his
_______________

13 Id., at pp. 108-110.

14 Equitable Leasing Corp. v. Suyom, 437 Phil. 244, 256; 388 SCRA 445 (2002); Aguilar v. Commercial Savings
Bank, 412 Phil. 834, 841; 360 SCRA 395 (2001); Spouses Hernandez v. Spouses Dolor, 479 Phil. 593, 603; 435 SCRA
668 (2004).
15 Rules of Court, Rule 111, Sec. 1, par. (a), sub-par. 1.
149
VOL. 557, JULY 4, 2008 149
PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
only limitation is that he cannot recover damages twice for the same act or omission of the
defendant.16
In case a separate civil action is filed, the long-standing principle is that the registered owner
of a motor vehicle is primarily and directly responsible for the consequences of its operation,
including the negligence of the driver, with respect to the public and all third persons. 17 In
contemplation of law, the registered owner of a motor vehicle is the employer of its driver, with
the actual operator and employer, such as a lessee, being considered as merely the
owner’s agent.18 This being the case, even if a sale has been executed before a tortious incident,
the sale, if unregistered, has no effect as to the right of the public and third persons to recover
from the registered owner.19 The public has the right to conclusively presume that the registered
owner is the real owner, and may sue accordingly.20
_______________

16 Civil Code, Art. 2177.

17 Equitable Leasing Corp. v. Suyom, supra note 14, at p. 255; p. 453; First Malayan Leasing and Finance Corp. v.
Court of Appeals, G.R. No. 91378, June 9, 1992, 209 SCRA 660, 663.
18 Equitable Leasing Corp. v. Suyom, supra 14, at p. 255; pp. 453-454, citing First Malayan Leasing and Finance
Corp. v. Court of Appeals, supra note 17; MYC-Agro-Industrial Corp. v. Camerino, 217 Phil. 11, 17; 132 SCRA 10, 17
(1984); and Vargas v. Langcay, 116 Phil. 478, 481-482; 6 SCRA 174, 178 (1962).
The only known exception to the rule is that enunciated in FGU Insurance Corp. v. Court of Appeals, 351 Phil. 219,
225; 287 SCRA 718, 722 (1998), where it was held that a rent-a-car company is not liable for the damages caused by the
negligence of its lessee, who drove the subject vehicle. Here, it was established that between a rent-a-car company and a
client who drove a leased vehicle, there was a clear absence of vinculum juris as employer and employee.
19 Equitable Leasing Corp. v. Suyom, supra; note 14, at p. 255; p. 454; First Malayan Leasing and Finance Corp. v.
Court of Appeals, supra note 17, at p. 664.
20 First Malayan Leasing and Finance Corp. v. Court of Appeals, supra note 17, at p. 664.

150
150 SUPREME COURT REPORTS ANNOTATED
PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
In the case now before the Court, there is not even a sale of the vehicle involved, but a mere
lease, which remained unregistered up to the time of the occurrence of the quasi-delict that gave
rise to the case. Since a lease, unlike a sale, does not even involve a transfer of title or ownership,
but the mere use or enjoyment of property, there is more reason, therefore, in this instance to
uphold the policy behind the law, which is to protect the unwitting public and provide it with a
definite person to make accountable for losses or injuries suffered in vehicular accidents. 21 This is
and has always been the rationale behind compulsory motor vehicle registration under the Land
Transportation and Traffic Code and similar laws, which, as early as Erezo, has been guiding the
courts in their disposition of cases involving motor vehicular incidents. It is also important to
emphasize that such principles apply to all vehicles in general, not just those offered for public
service or utility.22
The Court recognizes that the business of financing companies has a legitimate and
commendable purpose.23 In earlier cases, it considered a financial lease or financing lease a legal
contract,24 though subject to the restrictions of the so-called Recto Law or Articles 1484 and 1485
of the Civil Code.25 In previous cases, the Court adopted the statutory definition of a financial
lease or financing lease, as:
_______________

21 Erezo v. Jepte, supra note 12, at p. 108.

22 Erezo v. Jepte, supra note 12, at p. 107; Equitable Leasing Corp. v. Suyom, supra note 14, at p. 256; p. 455; BA
Finance Corp. v. Court of Appeals, G.R. No. 98275, November 13, 1992, 215 SCRA 715, 720.
23 PCI Leasing and Finance Inc. v. Giraffe-X Creative Imaging Inc., G.R. No. 142618, July 12, 2007, 527 SCRA
405, 420-421.
24 Cebu Contractors Consortium Co. v. Court of Appeals, 454 Phil. 650, 656; 407 SCRA 154, 159 (2003).
25 Elisco Tool Manufacturing Corp. v. Court of Appeals, 367 Phil. 242, 255; 307 SCRA 731, 743 (1999); PCI
Leasing and Finance Inc. v. Giraffe-X Creative Imaging Inc., supra note 23, at pp. 424-426.

151
VOL. 557, JULY 4, 2008 151
PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
“[A] mode of extending credit through a non-cancelable lease contract under which the lessor purchases
or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and
office machines, and other movable or immovable property in consideration of the periodic payment by
the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price
or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of
not less than two (2) years during which the lessee has the right to hold and use the leased property, x x x
but with no obligation or option on his part to purchase the leased property from the owner-lessor at the
end of the lease contract.” 26

Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which
apparently tends to favor absolving financing companies from liability for the consequences
of quasi-delictual acts or omissions involving financially leased property.27 The petition adds that
these developments have been legislated in our jurisdiction in Republic Act (R.A.) No.
8556,28 which provides:
“Section 12. Liability of lessors.—Financing companies shall not be liable for loss, damage or
injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third
person or entity except when the motor vehicle, aircraft, vessel, equipment or other property is operated
by the financing company, its employees or agents at the time of the loss, damage or injury.”
Petitioner’s argument that the enactment of R.A. No. 8556, especially its addition of the new
Sec. 12 to the old law, is deemed to have absolved petitioner from liability, fails to convince the
Court.
_______________

26 Republic Act No. 5980 (1969), as amended by Republic Act No. 8556 (1998), Sec. 3 (d), quoted in Cebu
Contractors Consortium Co. v. Court of Appeals, supra note 24, at p. 657; p. 160; PCI Leasing and Finance, Inc. v.
Giraffe-X Creative Imaging Inc., supra note 23, at p. 416.
27 Rollo, pp. 29-30.
28 Amending R.A. No. 5980, or the old Financing Company Act.

152
152 SUPREME COURT REPORTS ANNOTATED
PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
 These developments, indeed, point to a seeming emancipation of financing companies from
the obligation to compensate claimants for losses suffered from the operation of vehicles covered
by their lease. Such, however, are not applicable to petitioner and do not exonerate it from
liability in the present case.
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not
supersede or repeal the law on compulsory motor vehicle registration. No part of the law
expressly repeals Section 5(a) and (e) of R.A. No. 4136, as amended, otherwise known as the
Land Transportation and Traffic Code, to wit:
“Sec. 5. Compulsory registration of motor vehicles.—(a) All motor vehicles and trailer of any type
used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land
Transportation (now the Land Transportation Office, per Executive Order No. 125, January 30, 1987, and
Executive Order No. 125-A, April 13, 1987) for the current year in accordance with the provisions of this
Act.
x x x x
(e) Encumbrances of motor vehicles.—Mortgages, attachments, and other encumbrances of motor
vehicles, in order to be valid against third parties must be recorded in the Bureau (now the Land
Transportation Office). Voluntary transactions or voluntary encumbrances shall likewise be properly
recorded on the face of all outstanding copies of the certificates of registration of the vehicle concerned.
Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be
recorded, and in the absence of such cancellation, no certificate of registration shall be issued without the
corresponding notation of mortgage, attachment and/or other encumbrances.
x x x x” (Emphasis supplied)
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is frowned
upon, unless there is clear showing that the later statute is so irreconcilably inconsistent153
VOL. 557, JULY 4, 2008 153
PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
and repugnant to the existing law that they cannot be reconciled and made to stand
together.29 There is nothing in R.A. No. 4136 that is inconsistent and incapable of reconciliation.
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not
registered with the Land Transportation Office, still does not bind third persons who are
aggrieved in tortious incidents, for the latter need only to rely on the public registration of a
motor vehicle as conclusive evidence of ownership.30 A lease such as the one involved in the
instant case is an encumbrance in contemplation of law, which needs to be registered in order for
it to bind third parties.31 Under this policy, the evil sought to be avoided is the exacerbation of the
suffering of victims of tragic vehicular accidents in not being able to identify a guilty party. A
contrary ruling will not serve the ends of justice. The failure to register a lease, sale, transfer or
encumbrance, should not benefit the parties responsible, to the prejudice of innocent victims.
The non-registration of the lease contract between petitioner and its lessee precludes the
former from enjoying the benefits under Section 12 of R.A. No. 8556.
This ruling may appear too severe and unpalatable to leasing and financing companies, but
the Court believes that petitioner and other companies so situated are not entirely
_______________

29 Agujetas v. Court of Appeals, 329 Phil. 721, 745; 261 SCRA 17 (1996).

30 First Malayan Leasing and Finance Corp. v. Court of Appeals, supra note 17, at p. 664.
31 Roxas v. Court of Appeals, G.R. No. 92245, June 26, 1991, 198 SCRA 541, 546; also Black’s Law
Dictionary (abridged 5th edition) defines an encumbrance as “any right to, or interest in, land which may subsist in
another to diminution of its value, but consistent with the passing of the fee. A claim, lien, charge, or liability attached to
and binding real property; e.g., a mortgage; judgment lien; mechanics’ lien; lease; security interest; easement of right of
way; accrued and unpaid taxes.” (Emphasis supplied.)

154
154 SUPREME COURT REPORTS ANNOTATED
PCI Leasing and Finance, Inc. vs. UCPB General Insurance
Co., Inc.
left without recourse. They may resort to third-party complaints against their lessees or whoever
are the actual operators of their vehicles. In the case at bar, there is, in fact, a provision in the
lease contract between petitioner and SUGECO to the effect that the latter shall indemnify and
hold the former free and harmless from any “liabilities, damages, suits, claims or judgments”
arising from the latter’s use of the motor vehicle. 32 Whether petitioner would act against
SUGECO based on this provision is its own option.
The burden of registration of the lease contract is minuscule compared to the chaos that may
result if registered owners or operators of vehicles are freed from such responsibility. Petitioner
pays the price for its failure to obey the law on compulsory registration of motor vehicles for
registration is a pre-requisite for any person to even enjoy the privilege of putting a vehicle on
public roads.
WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and
Resolution dated February 18, 2004 of the Court of Appeals are AFFIRMED.
Costs against petitioner.
SO ORDERED.
Ynares-Santiago (Chairperson), Chico-Nazario, Nachura and Reyes, JJ., concur.
Petition denied, judgment and resolution affirmed.
Note.—In case of injury to a passenger due to the negligence of the driver of the bus on
which he was riding and of the driver of another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for damages. (Tiu vs. Arriesgado, 437 SCRA 426
[2004])
——o0o——
_______________

32 Exhibit “1-A,” Records, p. 359.

394 SUPREME COURT REPORTS ANNOTATED
Lim vs. Court of Appeals
G.R. No. 125817. January 16, 2002. *

ABELARDO LIM and ESMADITO GUNNABAN, petitioners, vs. COURT OF APPEALS and

DONATO H. GONZALES, respondents.
Civil Law; Damages; Interest; It is axiomatic that if the suit were for damages, unliquidated and
not known until definitely ascertained, assessed and determined by the courts after proof, interest at the
rate of six percent (6%) per annum should be from the date the judgment of the court is made.—We are
constrained to depart from the conclusion of the lower courts that upon the award of compensatory
damages legal interest should be imposed beginning 22 July 1990, i.e. the date of the accident. Upon the
provisions of Art. 2213 of the Civil Code, interest “cannot be recovered upon unliquidated claims or
damages, except when the demand can be established with reasonable certainty.” It is axiomatic that if the
suit were for damages, unliquidated and not known until definitely ascertained, assessed and determined
by the courts after proof, interest at the rate of six percent (6%) per annum should be from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to be
reasonably ascertained).
Same; Same; One who is injured by the wrongful or negligent act of another should exercise
reasonable care and diligence to minimize the resulting damage.—We have observed that private
respondent left his passenger jeepney by the roadside at the mercy of the elements. Article 2203 of the
Civil Code exhorts parties suffering from loss or injury to exercise the diligence of a good father of a
family to minimize the damages resulting from the act or omission in question. One who is injured then
by the wrongful or negligent act of another should exercise reasonable care
_______________

*
 SECOND DIVISION.

395

VOL. 373, JANUARY 16, 2002 395

Lim vs. Court of Appeals
and diligence to minimize the resulting damage. Anyway, he can recover from the wrongdoer
money lost in reasonable efforts to preserve the property injured and for injuries incurred in attempting to
prevent damage to it.
Same; Same; It is a fundamental principle in the law on damages that a defendant cannot be held
liable in damages for more than the actual loss which he has inflicted and that a plaintiff is entitled to no
more than the just and adequate compensation for the injury suffered.—In awarding damages for tortuous
injury, it becomes the sole design of the courts to provide for adequate compensation by putting the
plaintiff in the same financial position he was in prior to the tort. It is a fundamental principle in the law
on damages that a defendant cannot be held liable in damages for more than the actual loss which he has
inflicted and that a plaintiff is entitled to no more than the just and adequate compensation for the injury
suffered. His recovery is, in the absence of circumstances giving rise to an allowance of punitive
damages, limited to a fair compensation for the harm done. The law will not put him in a position better
than where he should be in had not the wrong happened.
Same; Same; Indemnification for damages is not limited to damnum emergens or actual loss but
extends to lucrum cessans or the amount of profit lost.—In the present case, petitioners insist that as the
passenger jeepney was purchased in 1982 for only P30,000.00 to award damages considerably greater
than this amount would be improper and unjustified. Petitioners are at best reminded that indemnification
for damages comprehends not only the value of the loss suffered but also that of the profits which the
obligee failed to obtain. In other words, indemnification for damages is not limited to damnum
emergens or actual loss but extends to lucrum cessans or the amount of profit lost.
PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Tranquilino F. Meris for petitioners.
     Narciso E. Ramirez for private respondent.

BELLOSILLO, J.:

When a passenger jeepney covered by a certificate of public convenience is sold to another who
continues to operate it under the
396
396 SUPREME COURT REPORTS ANNOTATED
Lim vs. Court of Appeals
same certificate of public convenience under the so-called “kabit system,” and in the course
thereof the vehicle meets an accident through the fault of another vehicle, may the new owner
sue for damages against the erring vehicle? Otherwise stated, does the new owner have any legal
personality to bring the action, or is he the real party-in-interest in the suit, despite the fact that
he is not the registered owner under the certificate of public convenience?
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney
from Gomercino Vallarta, holder of a certificate of public convenience for the operation of
public utility vehicles plying the Monumento-Bulacan route. While private respondent Gonzales
continued offering the jeepney for public transport services, he did not have the registration of
the vehicle transferred in his name nor did he secure for himself a certificate of public
convenience for its operation. Thus Vallarta remained on record as its registered owner and
operator.
On 22 July 1990, while the jeepney was running northbound along the North Diversion Road
somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler truck owned by petitioner
Abelardo Lim and driven by his co-petitioner Esmadito Gunnaban. Gunnaban owned
responsibility for the accident, explaining that while he was traveling towards Manila the truck
suddenly lost its brakes. To avoid colliding with another vehicle, he swerved to the left until he
reached the center island. However, as the center island eventually came to an end, he veered
farther to the left until he smashed into a Ferroza automobile, and later, into private respondent’s
passenger jeepney driven by one Virgilio Gonzales. The impact caused severe damage to both
the Ferroza and the passenger jeepney and left one (1) passenger dead and many others wounded.
Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs
of the deceased passenger, and had the Ferroza restored to good condition. He also negotiated
with private respondent and offered to have the passenger jeepney repaired at his shop. Private
respondent, however, did not accept the offer so Lim offered him P20,000.00, the assessment of
the damage as estimated by his chief mechanic. Again, petitioner Lim’s proposition was rejected;
instead, private respondent demanded a brand-
397
VOL. 373, JANUARY 16, 2002 397
Lim vs. Court of Appeals
new jeep or the amount of P236,000.00. Lim increased his bid to P40,000.00 but private
respondent was unyielding. Under the circumstances, negotiations had to be abandoned; hence,
the filing of the complaint for damages by private respondent against petitioners.
 In his answer, Lim denied liability by contending that he exercised due diligence in the
selection and supervision of his employees. He further asserted that as the jeepney was registered
in Vallarta’s name, it was Vallarta and not private respondent who was the real party-in-
interest.  For his part, petitioner Gunnaban averred that the accident was a fortuitous event which
1

was beyond his control. 2

Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and decay.
Private respondent explained that although he wanted to take his jeepney home he had no
capability, financial or otherwise, to tow the damaged vehicle.3

The main point of contention between the parties related to the amount of damages due
private respondent. Private respondent Gonzales averred that per estimate made by an
automobile repair shop, he would have to spend P236,000.00 to restore his jeepney to its original
condition.  On the other hand, petitioners insisted that they could have the vehicle repaired for
4

P20,000.00. 5

On 1 October 1993 the trial court upheld private respondent’s claim and awarded him
P236,000.00 with legal interest from 22 July 1990 as compensatory damages and P30,000.00 as
attorney’s fees. In support of its decision, the trial court ratiocinated that as vendee and current
owner of the passenger jeepney, private respondent stood for all intents and purposes as the real
party-in-interest. Even Vallarta himself supported private respondent’s assertion of interest over
the jeepney for, when he was called to testify, he dispossessed himself of any claim or pretension
on the property. Gunnaban was found by the trial court to have caused
_______________

 Original Records, pp. 23-26.

1

 Id., pp. 15-18.

2

 TSN, 6 February 1992, pp. 1-14.

3

 Ibid.
4

 See Note 1, p. 109.

5

398
398 SUPREME COURT REPORTS ANNOTATED
Lim vs. Court of Appeals
the accident since he panicked in the face of an emergency which was rather palpable from his
act of directing his vehicle to a perilous streak down the fast lane of the superhighway then
across the island and ultimately to the opposite lane where it collided with the jeepney.
On the other hand, petitioner Lim’s liability for Gunnaban’s negligence was premised on his
want of diligence in supervising his employees. It was admitted during trial that Gunnaban
doubled as mechanic of the ill-fated truck despite the fact that he was neither tutored nor trained
to handle such task. 6

Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the
decision of the trial court. In upholding the decision of the court a quo the appeals court
concluded that while an operator under the kabit system could not sue without joining the
registered owner of the vehicle as his principal, equity demanded that the present case be made
an exception.  Hence this petition.
7

It is petitioners’ contention that the Court of Appeals erred in sustaining the decision of the
trial court despite their opposition to the well-established doctrine that an operator of a vehicle
continues to be its operator as long as he remains the operator of record. According to
petitioners, to recognize an operator under the kabit system as the real party-in-interest and to
countenance his claim for damages is utterly subversive of public policy. Petitioners further
contend that inasmuch as the passenger jeepney was purchased by private respondent for only
P30,000.00, an award of P236,000.00 is inconceivably large and would amount to unjust
enrichment. 8

Petitioners’ attempt to illustrate that an affirmance of the appealed decision could be

supportive of the pernicious kabit system does not persuade. Their labored efforts to demonstrate
how the
_______________

 Decision penned by Judge Basilio R. Gabo, RTC-Br. 11, Malolos, Bulacan; CA Rollo, pp. 41-44.
6

 Decision penned by Associate Justice Maximiano C. Asuncion, concurred in by Associate Justices Salome A.
7

Montoya and Godardo A. Jacinto; Rollo, pp. 25-33.

 Id., pp. 12-23.
8

399
VOL. 373, JANUARY 16, 2002 399
Lim vs. Court of Appeals
questioned rulings of the courts a quo are diametrically opposed to the policy of the law
requiring operators of public utility vehicles to secure a certificate of public convenience for their
operation is quite unavailing.
The kabit system is an arrangement whereby a person who has been granted a certificate of
public convenience allows other persons who own motor vehicles to operate them under his
license, sometimes for a fee or percentage of the earnings.  Although the parties to such an
9

agreement are not outrightly penalized by law, the kabit system is invariably recognized as being
contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio,  the Court explained that one of the primary factors
10

considered in the granting of a certificate of public convenience for the business of public
transportation is the financial capacity of the holder of the license, so that liabilities arising from
accidents may be duly compensated. The kabit system renders illusory such purpose and, worse,
may still be availed of by the grantee to escape civil liability caused by a negligent use of a
vehicle owned by another and operated under his license. If a registered owner is allowed to
escape liability by proving who the supposed owner of the vehicle is, it would be easy for him to
transfer the subject vehicle to another who possesses no property with which to respond
financially for the damage done. Thus, for the safety of passengers and the public who may have
been wronged and deceived through the baneful kabit system, the registered owner of the vehicle
is not allowed to prove that another person has become the owner so that he may be thereby
relieved of responsibility. Subsequent cases affirm such basic doctrine. 11

_______________

9
 Baliwag Transit, Inc. v. Court of Appeals, G.R. No. 57493, 7 January 1987, 147 SCRA 82; Teja Marketing v.
IAC, G.R. No. 65510, 9 March 1987, 148 SCRA 347; Lita Enterprises, Inc. v. Second Civil Cases Division, IAC, G.R. No.
64693, 27 April 1984, 129 SCRA 79.
10
 51 O.G. 4059 (1955).
11
 Santos v. Sibug, No. 1-26815, 26 May 1981, 104 SCRA 520; Vargas v. Langcay, 116 Phil. 478; 6 SCRA
174 (1962); Tamayo v. Aquino, 105 Phil. 949 (1959); Erezo v. Jepte, 102 Phil. 103 (1957).

400
400 SUPREME COURT REPORTS ANNOTATED
Lim vs. Court of Appeals
It would seem then that the thrust of the law in enjoining the kabit system is not so much as to
penalize the parties but to identify the person upon whom responsibility may be fixed in case of
an accident with the end view of protecting the riding public. The policy, therefore, loses its
force if the public at large is not deceived, much less involved.
In the present case it is at once apparent that the evil sought to be prevented in enjoining
the kabit system does not exist. First, neither of the parties to the pernicious kabit system is
being held liable for damages. Second, the case arose from the negligence of another vehicle in
using the public road to whom no representation, or misrepresentation, as regards the ownership
and operation of the passenger jeepney was made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said that private respondent Gonzales and
the registered owner of the jeepney were in estoppel for leading the public to believe that the
jeepney belonged to the registered owner. Third, the riding public was not bothered nor
inconvenienced at the very least by the illegal arrangement. On the contrary, it was private
respondent himself who had been wronged and was seeking compensation for the damage done
to him. Certainly, it would be the height of inequity to deny him his right.
In light of the foregoing, it is evident that private respondent has the right to proceed against
petitioners for the damage caused on his passenger jeepney as well as on his business. Any effort
then to frustrate his claim of damages by the ingenuity with which petitioners framed the issue
should be discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the sole design of the courts to provide
for adequate compensation by putting the plaintiff in the same financial position he was in prior
to the tort. It is a fundamental principle in the law on damages that a defendant cannot be held
liable in damages for more than the actual loss which he has inflicted and that a plaintiff is
entitled to no more than the just and adequate compensation for the injury suffered. His recovery
is, in the absence of circumstances giving rise to an allowance of punitive damages, limited to a
fair compensation
401
VOL. 373, JANUARY 16, 2002 401
Lim vs. Court of Appeals
for the harm done. The law will not put him in a position better than where he should be in had
not the wrong happened. 12

In the present case, petitioners insist that as the passenger jeepney was purchased in 1982 for
only P30,000.00 to award damages considerably greater than this amount would be improper and
unjustified. Petitioners are at best reminded that indemnification for damages comprehends not
only the value of the loss suffered but also that of the profits which the obligee failed to obtain.
In other words, indemnification for damages is not limited to damnum emergens or actual loss
but extends to lucrum cessans or the amount of profit lost. 13

Had private respondent’s jeepney not met an accident it could reasonably be expected that it
would have continued earning from the business in which it was engaged. Private respondent
avers that he derives an average income of P300.00 per day from his passenger jeepney and this
earning was included in the award of damages made by the trial court and upheld by the appeals
court. The award therefore of P236,000.00 as compensatory damages is not beyond reason nor
speculative as it is based on a reasonable estimate of the total damage suffered by private
respondent, i.e. damage wrought upon his jeepney and the income lost from his transportation
business. Petitioners for their part did not offer any substantive evidence to refute the estimate
made by the courts a quo.
 However, we are constrained to depart from the conclusion of the lower courts that upon the
award of compensatory damages legal interest should be imposed beginning 22 July 1990, i.e.,
the date of the accident. Upon the provisions of Art. 2213 of the Civil
_______________

12
 Ong v. Court of Appeals, G.R. No. 117103, 21 January 1999, 301 SCRA 387; Congregation of the Religious of the
Virgin Mary v. Court of Appeals, 353 Phil. 591; 291 SCRA 385 (1998); Llorente v. Sandiganbayan, G.R. No. 122166, 11
March 1998, 287 SCRA 382.
13
 Magat, Jr. v. CA, G.R. No. 124221, 4 August 2000, 337 SCRA 298; Integrated Packaging Corp. v. CA, G.R. No.
115117, 8 June 2000, 333 SCRA 171; Coca-Cola Bottlers Packaging, Inc. v. Roque, 367 Phil. 493; 308 SCRA
215 (1999); Associated Realty Development Co., Inc. v. CA, No. L-18056, 30 January 1956, 13 SCRA 52.

402
402 SUPREME COURT REPORTS ANNOTATED
Lim vs. Court of Appeals
Code, interest “cannot be recovered upon unliquidated claims or damages, except when the
demand can be established with reasonable certainty.” It is axiomatic that if the suit were for
damages, unliquidated and not known until definitely ascertained, assessed and determined by
the courts after proof, interest at the rate of six percent (6%) per annum should be from the date
the judgment of the court is made (at which time the quantification of damages may be deemed
to be reasonably ascertained). 14

In this case, the matter was not a liquidated obligation as the assessment of the damage on the
vehicle was heavily debated upon by the parties with private respondent’s demand for
P236,000.00 being refuted by petitioners who argue that they could have the vehicle repaired
easily for P20,000.00. In fine, the amount due private respondent was not a liquidated account
that was already demandable and payable.
One last word. We have observed that private respondent left his passenger jeepney by the
roadside at the mercy of the elements. Article 2203 of the Civil Code exhorts parties suffering
from loss or injury to exercise the diligence of a good father of a family to minimize the damages
resulting from the act or omission in question. One who is injured then by the wrongful or
negligent act of another should exercise reasonable care and diligence to minimize the resulting
damage. Anyway, he can recover from the wrongdoer money lost in reasonable efforts to
preserve the property injured and for injuries incurred in attempting to prevent damage to it. 15

However, we sadly note that in the present case petitioners failed to offer in evidence the
estimated amount of the damage caused by private respondent’s unconcern towards the damaged
vehicle. It is the burden of petitioners to show satisfactorily not only that the injured party could
have mitigated his damages but also the amount thereof; failing in this regard, the amount of
damages awarded cannot be proportionately reduced.
_______________

14
 Eastern Assurance and Surety Corporation, G.R. No. 127135, 18 January 2000, 322 SCRA 73; Eastern Shipping
Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78; Rivera v. Matute, 98 Phil. 516 (1956).
15
 Puentebella v. Negros Coal, 50 Phil. 69 (1927); De Castelvi v. Compania de Tobaccos, 49 Phil. 998 (1926).

403
VOL. 373, JANUARY 16, 2002 403
Lim vs. Court of Appeals
WHEREFORE, the questioned Decision awarding private respondent Donato Gonzales
P236,000.00 with legal interest from 22 July 1990 as compensatory damages and P30,000.00 as
attorney’s fees is MODIFIED. Interest at the rate of six percent (6%) per annum shall be
computed from the time the judgment of the lower court is made until the finality of this
Decision. If the adjudged principal and interest remain unpaid thereafter, the interest shall be
twelve percent (12%) per annum computed from the time judgment becomes final and executory
until it is fully satisfied.
Costs against petitioners.
SO ORDERED.
     Mendoza,  Quisumbing, Buena and De Leon, Jr., JJ., concur.
Judgment modified.
Note.—Fundamental in the law on damages is that one injured by a breach of a contract or by
a wrongful or negligent act or omission shall have a fair and just compensation commensurate to
the loss sustained as a consequence of the defendant’s act. (Llorente, Jr. vs. Sandiganbayan, 287
SCRA 382 [1998])

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