HOMEWORK NO.

ART 1732 CIVIL CODE- DEFINITION OF COMMON CARRIERS 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.

1. DE GUZMAN V. CA common carrier definition, exempting circumstances, exception to exempting circumstances Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates. Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo. On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods. In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure. On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees. On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees. The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight "as a casual occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:

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1. 2. 3.

that private respondent was not a common carrier; that the hijacking of respondent's truck was force majeure; and that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly characterized as a common carrier. The Civil Code defines "common carriers" in the following terms: Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberaom making such distinctions. So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: ... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. ... (Emphasis supplied) It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here. The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public

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convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. We turn then to the liability of private respondent as a common carrier. Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code. Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is due to any of the following causes only: (1) (2) (3) (4) (5) Flood, storm, earthquake, lightning or other natural disaster or calamity; Act of the public enemy in war, whether international or civil; Act or omission of the shipper or owner of the goods; The character-of the goods or defects in the packing or-in the containers; and Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows: In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. (Emphasis supplied) Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case the hijacking of the carrier's truck does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent. Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence required private respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver and his helper.

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The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery. As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part: Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) that the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; and (7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account of the defective condition of the car vehicle, ship, airplane or other equipment used in the contract of carriage. (Emphasis supplied) Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) holduppers were armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of robbery in band. 4 In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence. We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of the undelivered merchandise which was lost because of an event entirely beyond private respondent's control.

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ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs. SO ORDERED. 2. CRUZ V. SUN HOLIDAYS JUNE 29 2010 - definition of common carrier Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011 against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent. The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a tour package-contract with respondent that included transportation to and from the Resort and the point of departure in Batangas. Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of the incident that led to the filing of the complaint as follows: Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the Resort in the afternoon of September 10, 2000, but was advised to stay for another night because of strong winds and heavy rains. On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners son and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas. Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward to the front, leaving the wheel to one of the crew members. The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco Beach III capsized putting all passengers underwater. The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the captain, Matute and the other passengers who reached the surface asked him what they could do to save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save yourselves). Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four crew members, who were brought to Pisa Island. Eight passengers, including petitioners son and his wife, died during the incident. At the time of Ruelitos death, he was 28 years old and employed as a contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.3 Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the death of their son in the amount of at least P4,000,000.

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Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incident which it considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of P10,000 to petitioners upon their signing of a waiver. As petitioners declined respondents offer, they filed the Complaint, as earlier reflected, alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.6 In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available to the general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that it exercised the utmost diligence in ensuring the safety of its passengers; contrary to petitioners allegation, there was no storm on September 11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not filled to capacity and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged that it is entitled to an award for attorneys fees and litigation expenses amounting to not less than P300,000. Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3) there is clearance from the captain and (4) there is clearance from the Resorts assistant manager.8 He added that M/B Coco Beach III met all four conditions on September 11, 2000,9 but a subasco or squall, characterized by strong winds and big waves, suddenly occurred, causing the boat to capsize.10 By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners Complaint and respondents Counterclaim. Petitioners Motion for Reconsideration having been denied by Order dated September 2, 2005,12 they appealed to the Court of Appeals. By Decision of August 19, 2008,13 the appellate court denied petitioners appeal, holding, among other things, that the trial court correctly ruled that respondent is a private carrier which is only required to observe ordinary diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B Coco Beach III; and that the proximate cause of the incident was a squall, a fortuitous event. Petitioners Motion for Reconsideration having been denied by Resolution dated January 16, 2009,14 they filed the present Petition for Review.15 Petitioners maintain the position they took before the trial court, adding that respondent is a common carrier since by its tour package, the transporting of its guests is an integral part of its resort business. They inform that another division of the appellate court in fact held respondent liable for damages to the other survivors of the incident. Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a common carrier; that the Resorts ferry services for guests cannot be considered as ancillary to its business as no income is derived therefrom; that it exercised extraordinary diligence as shown by the conditions it had imposed before allowing M/B Coco Beach III to sail; that the incident was caused by a fortuitous event without any contributory negligence on its part; and that the other case wherein the appellate court held it liable for damages involved different plaintiffs, issues and evidence.16 The petition is impressed with merit.

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Petitioners correctly rely on De Guzman v. Court of Appeals17 in characterizing respondent as a common carrier. The Civil Code defines "common carriers" in the following terms: Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions. So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: . . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services . . .18 (emphasis and underscoring supplied.) Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly considered ancillary thereto. The constancy of respondents ferry services in its resort operations is underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the ferry services, may be availed of by anyone who can afford to pay the same. These services are thus available to the public. That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort operators offering tour packages to factor the transportation fee in arriving at the tour package price. That guests who opt not to avail of respondents ferry services pay the same amount is likewise inconsequential. These guests may only be deemed to have overpaid. As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately refrained from making distinctions on whether the carrying of persons or goods is the carriers principal business, whether it is offered on a regular basis, or whether it is offered to the general public. The intent of the law is thus to not consider such distinctions. Otherwise, there is no telling how many other distinctions may be concocted by unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid the legal obligations and liabilities of common carriers.

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Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence for the safety of the passengers transported by them, according to all the circumstances of each case.19 They are bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.20 When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the common carrier is at fault or negligent. In fact, there is even no need for the court to make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.21 Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondents position does not impress. The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in Northern Luzon which would also affect the province of Mindoro.22 By the testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected under such weather condition.23 A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put other peoples lives at risk. The extraordinary diligence required of common carriers demands that they take care of the goods or lives entrusted to their hands as if they were their own. This respondent failed to do. Respondents insistence that the incident was caused by a fortuitous event does not impress either. The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.24 To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only cause of the loss. And it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event.25 Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls was expected under the weather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it capsized and sank.26 The incident was, therefore, not completely free from human intervention. The Court need not belabor how respondents evidence likewise fails to demonstrate that it exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the squall. Article 176427 vis--vis Article 220628 of the Civil Code holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages. Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000.29

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As for damages representing unearned income, the formula for its computation is: Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses). Life expectancy is determined in accordance with the formula: 2 / 3 x [80 age of deceased at the time of death]30 The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at death]) adopted in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality.31 The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or income and less living and other incidental expenses.32 The loss is not equivalent to the entire earnings of the deceased, but only such portion as he would have used to support his dependents or heirs. Hence, to be deducted from his gross earnings are the necessary expenses supposed to be used by the deceased for his own needs.33 In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v. Borja34 teaches that when, as in this case, there is no showing that the living expenses constituted the smaller percentage of the gross income, the living expenses are fixed at half of the gross income. Applying the above guidelines, the Court determines Ruelito's life expectancy as follows: Life expectancy = 2/3 x [80 - age of deceased at the time of death] 2/3 x [80 - 28] 2/3 x [52] Life expectancy = 35 Documentary evidence shows that Ruelito was earning a basic monthly salary of $90035 which, when converted to Philippine peso applying the annual average exchange rate of $1 = P44 in 2000,36 amounts to P39,600. Ruelitos net earning capacity is thus computed as follows: Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses). = 35 x (P475,200 - P237,600) = 35 x (P237,600) Net Earning Capacity = P8,316,000 Respecting the award of moral damages, since respondent common carriers breach of contract of carriage resulted in the death of petitioners son, following Article 1764 vis--vis Article 2206 of the Civil Code, petitioners are entitled to moral damages. Since respondent failed to prove that it exercised the extraordinary diligence required of common carriers, it is presumed to have acted recklessly, thus warranting the award too of exemplary damages, which are granted in contractual obligations if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.37 Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as moral damages and P100,000 as exemplary damages.381avvphi1 Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where exemplary damages are awarded. The Court finds that 10% of the total amount adjudged against respondent is reasonable for the purpose.

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Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. (emphasis supplied). Since the amounts payable by respondent have been determined with certainty only in the present petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction, in accordance with paragraph number 3 of the immediately cited guideline in Easter Shipping Lines, Inc. WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE. Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity for Ruelitos loss of earning capacity; (3) P100,000 as moral damages; (4) P100,000 as exemplary damages; (5) 10% of the total amount adjudged against respondent as attorneys fees; and (6) the costs of suit. The total amount adjudged against respondent shall earn interest at the rate of 12% per annum computed from the finality of this decision until full payment. SO ORDERED. 3. FIRST PHIL IND V. CA 1998 - test to determine common carrier This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a business tax refund imposed by the City of Batangas.

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Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967[1] and renewed by the Energy Regulatory Board in 1992.[2] Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code.[3] The respondent City Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of 1993. On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which reads: "Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the Petroleum Act. It is engaged in the business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 x xxx "Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax 'on contractors and other independent contractors' under Section 143, Paragraph (e) of the Local Government Code does not include the power to levy on transportation contractors. "The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local Government Code. The said section limits the imposition of fees and charges on business to such amounts as may be commensurate to the cost of regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts is violative of the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and licensing. The fee is already a revenue raising measure, and not a mere regulatory imposition."[4] On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code.[5] On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint[6] for tax refund with prayer for a writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid.[7] Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local Government Code as said exemption applies only to "transportation contractors and persons engaged in the transportation by hire and common carriers by air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the

HOMEWORK NO. 1
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: "xxx Plaintiff is either a contractor or other independent contractor. xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only by clear and unequivocal provisions of law. "Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A) whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption upon the plaintiff. "Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to distinctions or other considerations may be of help: 1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and facilities to a single specific or "special customer" under a "special contract." 2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local governments than the previous enactments, to make them economically and financially viable to serve the people and discharge their functions with a concomitant obligation to accept certain devolution of powers, 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.[10] On November 29, 1995, the respondent court rendered a decision[11] affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996.[12] Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a Resolution[14] of January 20, 1997. Thus, the petition was reinstated. Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear under the law. There is merit in the petition. A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally. Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public."

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The test for determining whether a party is a common carrier of goods is: 1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; 2. He must undertake to carry goods of the kind to which his business is confined;

3. He must undertake to carry by the method by which his business is conducted and over his established roads; and 4. The transportation must be for hire.[15]

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals[16] we ruled that: "The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 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.' "(Underscoring Supplied) Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous. As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers.[17]

HOMEWORK NO. 1
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 a 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 and everything relating to the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared to be a public utility." (Underscoring Supplied) The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared: "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 : xxx xxx xxx

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code." The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating: "MR. AQUINO (A). Thank you, Mr. Speaker. Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local Government Units." 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?

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MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph 5. It states that local government units may not impose taxes on the business of transportation, except as otherwise provided in this code. Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces have the power to impose a tax on business enjoying a franchise at the rate of not more than one-half of 1 percent of the gross annual receipts. So, transportation contractors who are enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker. What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on the carrier business. Local government units may impose taxes on top of what is already being imposed by the National Internal Revenue Code which is the so-called "common carriers tax." We do not want a duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a province may impose this tax at a specific rate. MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. 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.[19] To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code. WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE. SO ORDERED. Bellosillo, (Chairman), Puno, and Mendoza, JJ., concur.

4. CALVO (TCTSI ) V. UCPB MARCH 19 2002 This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of Appeals, affirming the decision[2] of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest, representing the value of damaged cargo handled by petitioner, 25% thereof as attorneys fees, and the cost of the suit. The facts are as follows: Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc. On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board M/V Hayakawa Maru and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her

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contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMCs warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were wet/stained/torn and 3 reels of kraft liner board were likewise torn. The damage was placed at P93,112.00. SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for the damage to the shipment. The trial court held: It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants. Evidence such as the Warehouse Entry Slip (Exh. E); the Damage Report (Exh. F) with entries appearing therein, classified as TED and TSN, which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of the subject damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. H - H-4-A) confirms the fact of the damaged condition of the subject cargoes. The surveyor[s] report (Exh. H-4-A) in particular, which provides among others that: . . . we opine that damages sustained by shipment is attributable to improper handling in transit presumably whilst in the custody of the broker . . . . is a finding which cannot be traversed and overturned. The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not liable. Defendant by reason of the nature of [her] business should have devised ways and means in order to prevent the damage to the cargoes which it is under obligation to take custody of and to forthwith deliver to the consignee. Defendant did not present any evidence on what precaution [she] performed to prevent [the] said incident, hence the presumption is that the moment the defendant accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the cargo. . . . . Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they have observed the extraordinary diligence required by law. The burden of the plaintiff, therefore, is to prove merely that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has exercised the extraordinary diligence required by law. Thus, it has been held that the mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstances inconsistent with its liability. (cited in Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.) Defendant, being a customs brother, warehouseman and at the same time a common carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received by the carrier for transportation until the same are delivered actually or constructively by the carrier to the consignee or to the person who has the right to receive the same.[3] Accordingly, the trial court ordered petitioner to pay the following amounts !

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1. The sum of P93,112.00 plus interest; 2. 25% thereof as lawyers fee; 3. Costs of suit.[4] The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari. Petitioner contends that: I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE. II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5] It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable beyond what ordinary diligence in the vigilance over the goods transported by her, would require.[6] Consequently, any damage to the cargo she agrees to transport cannot be presumed to have been due to her fault or negligence. Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a common carrier but a private carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her services out to the public but only offers the same to select parties with whom she may contract in the conduct of her business. The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a similar contention and held the party to be a common carrier, thus ! The Civil Code defines common carriers in the following terms: Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity . . . Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the general public, i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions. So understood, the concept of common carrier under Article 1732 may be seen to coincide neatly with the notion of public service, under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, public service includes:

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x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. x x x [8] There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral part of her business. To uphold petitioners contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of petitioners business. Now, as to petitioners liability, Art. 1733 of the Civil Code provides: Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. . . . In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in the vigilance over goods was explained thus: The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires. In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the spoilage or wettage took place while the goods were in the custody of either the carrying vessel M/V Hayakawa Maru, which transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit: MAXU-2062880 ICSU-363461-3 PERU-204209-4 TOLU-213674-3 MAXU-201406-0 ICSU-412105-0 rain gutter deformed/cracked left side rubber gasket on door distorted/partly loose with pinholes on roof panel right portion wood flooring we[t] and/or with signs of water soaked with dent/crack on roof panel rubber gasket on left side/door panel partly detached loosened.[10]

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no personal knowledge on whether the container vans were first stored in petitioners warehouse prior to

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their delivery to the consignee. She likewise claims that after withdrawing the container vans from the arrastre operator, her driver, Ricardo Nazarro, immediately delivered the cargo to SMCs warehouse in Ermita, Manila, which is a mere thirty-minute drive from the Port Area where the cargo came from. Thus, the damage to the cargo could not have taken place while these were in her custody.[11] Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean Equipment Interchange Report (EIR) and, when petitioners employees withdrew the cargo from the arrastre operator, they did so without exception or protest either with regard to the condition of container vans or their contents. The Survey Report pertinently reads ! Details of Discharge: Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30 x 20 secure metal vans, covered by clean EIRs. Except for slight dents and paint scratches on side and roof panels, these containers were deemed to have [been] received in good condition. . . . . Transfer/Delivery: On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] by Transorient Container Services, Inc. . . . without exception. [The cargo] was finally delivered to the consignees storage warehouse located at Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.[12] As found by the Court of Appeals: From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre, Marina Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange Reports (EIRs). Had there been any damage to the shipment, there would have been a report to that effect made by the arrastre operator. The cargoes were withdrawn by the defendantappellant from the arrastre still in good order and condition as the same were received by the former without exception, that is, without any report of damage or loss. Surely, if the container vans were deformed, cracked, distorted or dented, the defendant-appellant would report it immediately to the consignee or make an exception on the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these took place. To put it simply, the defendant-appellant received the shipment in good order and condition and delivered the same to the consignee damaged. We can only conclude that the damages to the cargo occurred while it was in the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this legal presumption and the presumption of negligence attached to a common carrier in case of loss or damage to the goods.[13] Anent petitioners insistence that the cargo could not have been damaged while in her custody as she immediately delivered the containers to SMCs compound, suffice it to say that to prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used all reasonable means to ascertain the nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the handling [thereof]. Petitioner failed to do this.

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Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides ! Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: . . . . (4) The character of the goods or defects in the packing or in the containers. . . . . For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom.[14] In this case, petitioner accepted the cargo without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the presumption of negligence as provided under Art. 1735[15] holds. WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED. SO ORDERED.

5. ASIA LIGHTERAGE V. CA, PRUDENTIAL AUG 19 2003 - extra ordinary diligence of common carriers, negligence On appeal is the Court of Appeals May 11, 2000 Decision[1] in CA-G.R. CV No. 49195 and February 21, 2001 Resolution[2] affirming with modification the April 6, 1994 Decision[3] of the Regional Trial Court of Manila which found petitioner liable to pay private respondent the amount of indemnity and attorney's fees. First, the facts. On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192.35[4] was shipped by Marubeni American Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.[5] The shipment was insured by the private respondent Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.[6] On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City. On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by Lighterage Receipt No. 0364[7] for delivery to consignee. The cargo did not reach its destination. It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other barges which arrived ahead of it while weathering out the storm that night. A few days after, the barge developed a list because of a hole it sustained after hitting an unseen protuberance underneath

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the water. The petitioner filed a Marine Protest on August 28, 1990.[8] It likewise secured the services of Gaspar Salvaging Corporation which refloated the barge.[9] The hole was then patched with clay and cement. The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current. To avoid the complete sinking of the barge, a portion of the goods was transferred to three other barges.[10] The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining cargo.[11] A second Marine Protest was filed on September 7, 1990.[12] On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and loaded on the three other barges.[13] The total proceeds from the sale of the salvaged cargo was P201,379.75.[14] On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and another letter dated September 18, 1990 to the private respondent for the value of the lost cargo. On January 30, 1991, the private respondent indemnified the consignee in the amount of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to no avail. On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the amount of indemnity, attorney's fees and cost of suit.[16] Petitioner filed its answer with counterclaim.[17] The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its Decision states: WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991 until fully satisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's counterclaim is hereby DISMISSED. With costs against defendant.[18] Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate court affirmed the decision of the trial court with modification. The dispositive portion of its decision reads: WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense that the salvage value of P201,379.75 shall be deducted from the amount of P4,104,654.22. Costs against appellant. SO ORDERED. Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate court in a Resolution promulgated on February 21, 2001. Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate court, viz:[19]

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(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER. (2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED. (3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE CONSIGNEES CARGO. The issues to be resolved are: (1) Whether the petitioner is a common carrier; and,

(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its care and custody of the consignees cargo. On the first issue, we rule that petitioner is a common carrier. Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the general public.[20] We disagree. In De Guzman vs. Court of Appeals,[21] we held that the definition of common carriers in Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. We also did not distinguish between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to the general public, and one who offers services or solicits business only from a narrow segment of the general population. In the case at bar, the principal business of the petitioner is that of lighterage and drayage[22] and it offers its barges to the public for carrying or transporting goods by water for compensation. Petitioner is clearly a common carrier. In De Guzman, supra,[23] we considered private respondent Ernesto Cendaa to be a common carrier even if his principal occupation was not the carriage of goods for others, but that of buying used bottles and scrap metal in Pangasinan and selling these items in Manila.

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We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets. To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals.[24] The test to determine a common carrier is whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted.[25] In the case at bar, the petitioner admitted that it is engaged in the business of shipping and lighterage,[26] offering its barges to the public, despite its limited clientele for carrying or transporting goods by water for compensation.[27] On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise extraordinary diligence in its care and custody of the consignees goods. Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them.[28] They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated.[29] To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach: Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) (2) (3) (4) (5) Flood, storm, earthquake, lightning, or other natural disaster or calamity; Act of the public enemy in war, whether international or civil; Act or omission of the shipper or owner of the goods; The character of the goods or defects in the packing or in the containers; Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize the loss.[30] The evidence show that, even before the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states: CROSS-EXAMINATION BY ATTY. DONN LEE:[31] xxx xxx xxx

q - Can you tell us what else transpired after that incident?

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a - After the first accident, through the initiative of the barge owners, they tried to pull out the barge from the place of the accident, and bring it to the anchor terminal for safety, then after deciding if the vessel is stabilized, they tried to pull it to the consignees warehouse, now while on route another accident occurred, now this time the barge totally hitting something in the course. q - You said there was another accident, can you tell the court the nature of the second accident? a - The sinking, sir. q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking? a - Mostly it was related to the first accident because there was already a whole (sic) on the bottom part of the barge. xxx xxx xxx

This is not all. Petitioner still headed to the consignees wharf despite knowledge of an incoming typhoon. During the time that the barge was heading towards the consignee's wharf on September 5, 1990, typhoon Loleng has already entered the Philippine area of responsibility.[32] A part of the testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals: DIRECT-EXAMINATION BY ATTY. LEE:[33] xxx xxx xxx

q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie where she was instead of towing it? a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the consignee) as I have said was in a hurry for their goods to be delivered at their Wharf since they needed badly the wheat that was loaded in PSTSI-3. It was needed badly by the consignee. q - And this is the reason why you towed the Barge as you did? a - Yes, sir. xxx xxx xxx

CROSS-EXAMINATION BY ATTY. IGNACIO:[34] xxx qaqxxx xxx

And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I correct? The next day, in the morning, we hired for additional two (2) tugboats as I have stated. Despite of the threats of an incoming typhoon as you testified a while ago?

a - It is already in an inner portion of Pasig River. The typhoon would be coming and it would be dangerous if we are in the vicinity of Manila Bay. qaBut the fact is, the typhoon was incoming? Yes or no? Yes.

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q And yet as a standard operating procedure of your Company, you have to secure a sort of Certification to determine the weather condition, am I correct? aqaqYes, sir. So, more or less, you had the knowledge of the incoming typhoon, right? Yes, sir. And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are already inside the vicinity or inside Pasig entrance, it is a safe place to tow upstream. Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short of due diligence required from a common carrier. More importantly, the officers/employees themselves of petitioner admitted that when the towing bits of the vessel broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a human factor, i.e., negligence had intervened. IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner.

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6. ASIAN TERMINAL V. DAEHAN FEB 4 2010 -arrastre operator akin to common carrier, due diligence

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA) September 14, 2005 Decision[1] and December 20, 2005 Resolution[2] in CA-G.R. CV No. 83647. The assailed Decision reversed and set aside the Regional Trial Court (RTC)[3] August 4, 2004 Decision[4] in Civil Case No. 01-101309, while the assailed resolution denied petitioner Asian Terminals, Inc.s motion for reconsideration. The case stemmed from the following facts: On July 8, 2000, Doosan Corporation (Doosan) shipped twenty-six (26) boxes of printed aluminum sheets on board the vessel Heung-A Dragon owned by Dongnama Shipping Co., Ltd. (Dongnama).[5] The shipment was covered by Bill of Lading No. DNALHMBUMN010010[6] and consigned to Access International, with address at No. 9 Parada St., San Juan, Metro Manila. Doosan insured the subject shipment with respondent Daehan Fire and Marine Insurance Co., Ltd. under an all-risk marine cargo insurance policy,[7] payable to its settling agent in the Philippines, the Smith Bell & Co., Inc. (Smith Bell). On July 12, 2000, the vessel arrived in Manila and the containerized van was discharged and unloaded in apparent good condition, as no survey and exceptions were noted in the Equipment Interchange Receipt (EIR) issued by petitioner.[8] The container van was stored in the Container Yard of the Port. On July 18, 2000, Access International requested[9] from petitioner and the licensed Customs Broker, Victoria Reyes Lazo (V. Reyes Lazo), a joint survey of the shipment at the place of storage in the Container Yard, but no such inspection was conducted. On July 19, 2000, V. Reyes Lazo withdrew, and petitioner released, the shipment and delivered it to Access Internationals warehouse in Binondo, Manila.[10] While the shipment was at Access Internationals warehouse, the latter, together with its surveyor, Lloyds Agency, conducted an inspection and noted that only twelve (12) boxes were accounted for, while fourteen (14) boxes were missing.[11] Access International thus filed a claim against petitioner and V. Reyes Lazo for the missing shipment amounting to $34,993.28.[12] For failure to collect its claim, Access International sought indemnification from respondent in the amount of $45,742.81.[13] On November 8, 2000, respondent paid the amount of the claim and Access International accordingly executed a Subrogation Receipt in favor of the former.[14] On July 10, 2001, respondent, represented by Smith Bell, instituted the present case against Dongnama, Uni-ship, Inc. (Uni-ship), petitioner, and V. Reyes Lazo before the RTC.[15] Respondent alleged that the losses, shortages and short deliveries sustained by the shipment were caused by the joint fault and negligence of Dongnama, petitioner and V. Reyes Lazo. Dongnama and Uni-ship filed a Motion to Dismiss[16] on the grounds that Daehan lacked legal capacity to sue and that the complaint stated no cause of action. The trial court, however, denied the motion in an Order dated August 31, 2001.[17] Thereafter, Dongnama and Uni-ship filed their Answer with Counterclaim and Cross-Claim Ad Cautelam denying any liability for the damages/losses sustained by the shipment, pointing out that it was on a Full Container Load, Said to Contain, and Shippers Load and Count bases, under which they had no means of verifying the contents of the containers. They also alleged that the container van was properly discharged from the vessel with seals intact and no exceptions noted. Moreover, they claimed that the losses occurred while the subject shipment was in the custody, possession or control of the shipper, its trucker, the arrastre operator, or their representatives, or due to the consignees own negligence. They further questioned the absence of notice of loss within the three

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(3)-day period provided under the Carriage of Goods by Sea Act. Finally, they averred that their liability, if there be any, should only be limited to US$500.00 per package or customary freight unit. [18] For its part, petitioner denied liability, claiming that it exercised due diligence in handling and storing the subject container van. It, likewise, assailed the timeliness of the complaint, having been filed beyond the fifteen (15)-day period under its Contract for Cargo Handling Services with the Philippine Ports Authority (PPA). If at all, petitioner added, its liability should only be limited to P5,000.00.[19] In her Answer, V. Reyes Lazo questioned respondents capacity to sue in Philippine courts. She accused respondent of engaging in a fishing expedition since the latter could not determine with clarity the party at fault.[20] On December 2, 2002, in their Joint Motion to Dismiss,[21] respondent, on one hand, and Dongnama and Uni-ship, on the other, prayed that the complaint be dismissed against the latter, alleging that they could not be held liable based on the EIR. The motion was granted on December 9, 2002.[22] Consequently, the case proceeded as against petitioner and V. Reyes Lazo. As no amicable settlement was reached during the pretrial, trial on the merits ensued. On August 4, 2004, the RTC dismissed the complaint for insufficiency of evidence.[23] It found the complaint fatally flawed, having been signed by a person who had no authority from complainant (respondent herein) corporation to act for and on behalf of the latter.[24] The RTC, likewise, held that respondent failed to prove that the loss/damage of the subject cargoes was due to the fault or negligence of petitioner or V. Reyes Lazo. It added that the cargoes were damaged when they were already in Access Internationals possession, considering that an inspection was conducted in the latters warehouse.[25] On appeal, the CA reversed and set aside the RTC decision. The dispositive portion of the CA decision reads: WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision dated August 4, 2004 of the Regional Trial Court of Manila, Branch 21 in Civil Case No. 01-101309 is hereby REVERSED and SET ASIDE. A new judgment is hereby entered ordering the defendants-appellees Asian Terminals, Inc. and V. Reyes Lazo to pay, jointly and severally, the plaintiff-appellant Daehan Fire & Marine Insurance Co., Ltd. the sums of P2,295,374.20 with interest at the legal rate (6% per annum) from the date of the filing of the complaint and P229,537.42 by way of attorneys fees. No pronouncement as to costs. SO ORDERED.[26]

Applying the principle of substantial compliance, the CA recognized the validity of respondents complaint after the submission, albeit late, of the board resolution, indicating the authority of the signatory to represent the corporation.[27] Pursuant to the Management Contract between petitioner and the PPA, the former may not disclaim responsibility for the shortage of the subject cargoes while the container van remained in its custody for seven (7) days, despite the withdrawal of the subject shipment by the brokers representative without any complaint. Applying E. Razon, Inc. v. Court of Appeals,[28] the CA refused to impose the P5,000.00 limitation, considering

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that petitioner was aware of the value of the subject goods shown in the pertinent shipping documents.[29] The CA added that petitioner could not disclaim any liability, having refused or ignored Access Internationals request for a joint survey at the time when the goods were still in the possession and custody of the former.[30] Lastly, V. Reyes Lazo was also made liable jointly and severally with petitioner in negligently withdrawing the container van from the premises of the pier, notwithstanding Access Internationals request for a joint survey.[31] Aggrieved, petitioner comes before us in this petition for review on certiorari, raising the following issues: 1. WHETHER OR NOT PETITIONER ATI IS LIABLE FOR THE LOSS TO THE SUBJECT SHIPMENT NOTWITHSTANDING THE ACKNOWLEDGMENT BY THE CONSIGNEES BROKER/REPRESENTATIVE IN THE EQUIPMENT INTERCHANGE RECEIPT THAT THE SHIPMENT WAS RECEIVED IN GOOD ORDER AND WITHOUT EXCEPTION. 2. WHAT IS THE EXTENT OF PETITIONER ATIS LIABILITY, IF ANY?[32] Simply put, we are tasked to determine the propriety of making petitioner, as arrastre operator, liable for the loss of the subject shipment, and if so, the extent of its liability. Petitioner denies liability for the loss of the subject shipment, considering that the consignees representative signified receipt of the goods in good order without exception. This being the case, respondent, as subrogee, is bound by such acknowledgment. As to the extent of its liability, if there be any, petitioner insists that it be limited to P5,000.00 per package, as provided for in its Management Contract with the PPA.[33] We do not agree with petitioner. Respondent, as insurer, was subrogated to the rights of the consignee, pursuant to the subrogation receipt executed by the latter in favor of the former. The relationship, therefore, between the consignee and the arrastre operator must be examined. This relationship is akin to that existing between the consignee and/or the owner of the shipped goods and the common carrier, or that between a depositor and a warehouseman.[34] In the performance of its obligations, an arrastre operator should observe the same degree of diligence as that required of a common carrier and a warehouseman. Being the custodian of the goods discharged from a vessel, an arrastre operators duty is to take good care of the goods and to turn them over to the party entitled to their possession.[35] The loss of 14 out of 26 boxes of printed aluminum sheets is undisputed. It is, likewise, settled that Dongnama (the shipping company) and Uni-ship were absolved from liability because respondent realized that they had no liability based on the EIR issued by Dongnama. This resulted in the withdrawal of the complaint against them. What remained was the complaint against petitioner as the arrastre operator and V. Reyes Lazo as the customs broker. Records show that the subject shipment was discharged from the vessel and placed under the custody of petitioner for a period of seven (7) days. Thereafter, the same was withdrawn from the container yard by the customs broker, then delivered to the consignee. It was after such delivery that the loss of 14 boxes was discovered. Hence, the complaint against both the arrastre operator and the customs broker. In a claim for loss filed by the consignee (or the insurer), the burden of proof to show compliance with the obligation to deliver the goods to the appropriate party devolves upon the arrastre operator. Since the safekeeping of the goods is its responsibility, it must prove that the losses were not due to its negligence or to that of its employees.[36] To prove the exercise of diligence in handling the subject cargoes, petitioner must do more than merely show the possibility that some other party could be responsible for the loss or the damage. It must prove that it exercised due care in the handling thereof.[37] Petitioner failed to do this. Instead, it insists that it be exonerated from liability, because

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the customs brokers representative received the subject shipment in good order and condition without exception. The appellate courts conclusion on this matter is instructive: ATI may not disclaim responsibility for the shortage/pilferage of fourteen (14) boxes of printed aluminum sheet while the container van remained in its custody for seven (7) days (at the Container Yard) simply because the alleged representative of the customs broker had withdrawn the shipment from its premises and signed the EIR without any complaint. The signature of the person/broker representative merely signifies that said person thereby frees the ATI from any liability for loss or damage to the cargo so withdrawn while the same was in the custody of such representative to whom the cargo was released. It does not foreclose any remedy or right of the consignee to prove that any loss or damage to the subject shipment occurred while the same was under the custody, control and possession of the arrastre operator.[38]

Clearly, petitioner cannot be excused from culpability simply because another person could be responsible for the loss. This is especially true in the instant case because, while the subject shipment was in petitioners custody, Access International requested[39] that a joint survey be conducted at the place of storage. And as correctly observed by the CA: There is no dispute that it was the customs broker who in behalf of the consignee took delivery of the subject shipment from the arrastre operator. However, the trial court apparently disregarded documentary evidence showing that the consignee made a written request on both the appellees ATI and V. Reyes Lazo for a joint survey of the container van on July 18, 2000 while the same was still in the possession, control and custody of the arrastre operator at the Container Yard of the pier. Both ATI and Lazo merely denied being aware of the letters (Exhibits M and N). The fact remains that the consignee complained of short-delivery and while inspection of the cargo was made only at its warehouse after delivery by the customs broker, the arrastre ATI together with said broker both refused or ignored the written request for a joint survey at the premises of the arrastre. Instead of complying with the consignees demand, the broker withdrew and the arrastre released the shipment the very next day, July 19, 2000 without even acting upon the consignees request for a joint survey.[40]

Moreover, it was shown in the Survey Report prepared by Access Internationals surveyor that petitioner was remiss in its obligations to handle the goods with due care and to ensure that they reach the proper party in good order as to quality and quantity. Specifically, the Survey Report states:

DELIVERY On July 19, 2000, V. Reyes-Lazo (Licensed Customs Broker) effected delivery of the 1 x 20 Van Container from the Container Yard of said port to the Consignees designated warehouse at No. 622 Asuncion Street, Binondo, Manila. Prior to withdrawal from the said port, the Brokers representative noticed that the padlock secured to the doors of the Van Container was forcibly pulled-out resulting to its breakage. He then immediately informed the Arrastre Contractors (ATI) and requested that Van Container be opened and inventory of its contents be made as he suspected the contents might have been pilfered. However, his request was denied averring that stripping of FCL Van Containers are not allowed inside the Customs Zone. As all efforts exerted proved futile, he instead bought new padlock and

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secured same to the Van. He then informed the Consignee about the incident upon delivery of the Container at the Consignees designated warehouse, who immediately requested for survey.[41] Considering that both petitioner and V. Reyes Lazo were negligent in the performance of their duties in the handling, storage and delivery of the subject shipment to the consignee, resulting in the loss of 14 boxes of printed aluminum sheets, both shall be solidarily liable for such loss. As to the extent of petitioners liability, we cannot sustain its contention that it be limited to P5,000.00 per package. Petitioners responsibility and liability for losses and damages are set forth in Section 7.01 of the Management Contract drawn between the PPA and the Marina Port Services, Inc., petitioners predecessor-in-interest, to wit: CLAIMS AND LIABILITY FOR LOSSES AND DAMAGES Section 7.01. Responsibility and Liability for Losses and Damages; Exceptions. The CONTRACTOR shall, at its own expense, handle all merchandise in all work undertaken by it, hereunder, diligently and in a skillful, workman-like and efficient manner. The CONTRACTOR shall be solely responsible as an independent contractor, and hereby agrees to accept liability and to pay to the shipping company, consignees, consignors or other interested party or parties for the loss, damage or non-delivery of cargoes in its custody and control to the extent of the actual invoice value of each package which in no case shall be more than FIVE THOUSAND PESOS (P5,000.00) each, unless the value of the cargo shipment is otherwise specified or manifested or communicated in writing together with the declared Bill of Lading value and supported by a certified packing list to the CONTRACTOR by the interested party or parties before the discharge or loading unto vessel of the goods. This amount of Five Thousand Pesos (P5,000.00) per package may be reviewed and adjusted by the AUTHORITY from time to time. The CONTRACTOR shall not be responsible for the condition or the contents of any package received, nor for the weight nor for any loss, injury or damage to the said cargo before or while the goods are being received or remains in the piers, sheds, warehouses or facility, if the loss, injury or damage is caused by force majeure or other causes beyond the CONTRACTORS control or capacity to prevent or remedy; PROVIDED that a formal claim together with the necessary copies of Bill of Lading, Invoice, Certified Packing List and Computation arrived at covering the loss, injury or damage or non-delivery of such goods shall have been filed with the CONTRACTOR within fifteen (15) days from day of issuance by the CONTRACTOR of a certificate of non-delivery; PROVIDED, however, that if said CONTRACTOR fails to issue such certification within fifteen (15) days from receipt of a written request by the shipper/consignee or his duly authorized representative or any interested party, said certification shall be deemed to have been issued, and thereafter, the fifteen (15) day period within which to file the claim commences; PROVIDED, finally, that the request for certification of loss shall be made within thirty (30) days from the date of delivery of the package to the consignee. xxxx The CONTRACTOR shall be solely responsible for any and all injury or damage that may arise on account of the negligence or carelessness of the CONTRACTOR, its agent or employees in the performance of the undertaking under the Contract. Further, the CONTRACTOR hereby agrees to hold free the AUTHORITY, at all times, from any claim that may be instituted by its employee by reason of the provisions of the Labor Code, as amended.[42]

As clearly stated above, such limitation does not apply if the value of the cargo shipment is communicated to the arrastre operator before the discharge of the cargoes. It is undisputed that Access International, upon arrival of the shipment, declared the same for taxation purposes, as well as for the assessment of arrastre charges and other fees. For the purpose, the

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invoice, packing list and other shipping documents were presented to the Bureau of Customs as well as to petitioner for the proper assessment of the arrastre charges and other fees. Such manifestation satisfies the condition of declaration of the actual invoices of the value of the goods before their arrival, to overcome the limitation on the liability of the arrastre operator.[43] Then, the arrastre operator, by reason of the payment to it of a commensurate charge based on the higher declared value of the merchandise, could and should take extraordinary care of the special or valuable cargo.[44] What would, indeed, be unfair and arbitrary is to hold the arrastre operator liable for the full value of the merchandise after the consignee has paid the arrastre charges only on a basis much lower than the true value of the goods.[45] What is essential is knowledge beforehand of the extent of the risk to be undertaken by the arrastre operator, as determined by the value of the property committed to its care. This defines its responsibility for loss of or damage to such cargo and ascertains the compensation commensurate to such risk assumed. Having been duly informed of the actual invoice value of the merchandise under its custody and having received payment of arrastre charges based thereon, petitioner cannot therefore insist on a limitation of its liability under the contract to less than the value of each lost cargo.[46] The stipulation requiring the consignee to inform the arrastre operator and to give advance notice of the actual invoice value of the goods to be put in its custody is adopted for the purpose of determining its liability, that it may obtain compensation commensurate to the risk it assumes, not for the purpose of determining the degree of care or diligence it must exercise as a depositary or warehouseman.[47] WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit. The Court of Appeals September 14, 2005 Decision and December 20, 2005 Resolution in CA-G.R. CV No. 83647 are AFFIRMED. SO ORDERED. 7. SPS PERENA V. ZARATE AUG 29 2012 -school bus service operator is a common carrier - extraordinary diligence in conduct of business - presumed negligence when death occurs to passenger - liability may include indemnity for loss of earning capacity even if passenger is unemployed - common carrier v. private carrier - negligence The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary diligence in the conduct of his business. He is presumed to be negligent when death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if the deceased passenger may only be an unemployed high school student at the time of the accident. The Case By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification the decision rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Paraaque City that had decreed them jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school student of Don Bosco Technical Institute (Don Bosco). Antecedents

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The Pereas were engaged in the business of transporting students from their respective residences in Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two of whom would be seated in the front beside the driver, and the others in the rear, with six students on either side. They employed Clemente Alfaro (Alfaro) as driver of the van. In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco. On August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates residence. Aaron took his place on the left side of the van near the rear door. The van, with its air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath the Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the narrow path was marked by piles of construction materials and parked passenger jeepneys, and the railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other responsible persons manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing motorists. At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked because he overtook the passenger bus on its left side. The train blew its horn to warn motorists of its approach. When the train was about 50 meters away from the passenger bus and the van, Alano applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was imminent. The passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the van, and the impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path of the train, which dragged his body and severed his head, instantaneously killing him. Alano fled the scene on board the train, and did not wait for the police investigator to arrive. Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against Alfaro, the Pereas, PNR and Alano. The Pereas and PNR filed their respective answers, with cross-claims against each other, but Alfaro could not be served with summons. At the pre-trial, the parties stipulated on the facts and issues, viz: A. FACTS: (1)) That spouses Zarate were the legitimate parents of Aaron John L. Zarate; (2)) Spouses Zarate engaged the services of spouses Perea for the adequate and safe transportation carriage of the former spouses' son from their residence in Paraaque to his school at the Don Bosco Technical Institute in Makati City; (3)) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor son of spouses Zarate died in connection with a vehicular/train collision which occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses Perea, then driven and operated by the latter's employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;

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(4)) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a railroad crossing used by motorists for crossing the railroad tracks; (5)) During the said time of the vehicular/train collision, there were no appropriate and safety warning signs and railings at the site commonly used for railroad crossing; (6)) At the material time, countless number of Makati bound public utility and private vehicles used on a daily basis the site of the collision as an alternative route and short-cut to Makati; (7)) The train driver or operator left the scene of the incident on board the commuter train involved without waiting for the police investigator; (8)) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad operator for railroad crossing at the time of the vehicular collision; (9)) PNR received the demand letter of the spouses Zarate; (10)0) PNR refused to acknowledge any liability for the vehicular/train collision; (11)) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between the former and its project contractor; and (12)) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the Magallanes station of PNR. B. ISSUES (1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for negligence constituting the proximate cause of the vehicular collision, which resulted in the death of plaintiff spouses' son; (2) Whether or not the defendant spouses Perea being the employer of defendant Alfaro are liable for any negligence which may be attributed to defendant Alfaro; (3) Whether or not defendant Philippine National Railways being the operator of the railroad system is liable for negligence in failing to provide adequate safety warning signs and railings in the area commonly used by motorists for railroad crossings, constituting the proximate cause of the vehicular collision which resulted in the death of the plaintiff spouses' son; (4) Whether or not defendant spouses Perea are liable for breach of the contract of carriage with plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son; (5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and attorney's fees; (6) Whether or not defendants spouses Teodorico and Nanette Perea observed the diligence of employers and school bus operators; (7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate; (8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the accident, in allowing or tolerating the motoring public to cross, and its failure to install safety devices or equipment at the site of the accident for the protection of the public;

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(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever amount the latter may be held answerable or which they may be ordered to pay in favor of plaintiffs by reason of the action; (10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the latter in their Complaint by reason of its gross negligence; (11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary damages and attorney's fees.2 The Zarates claim against the Pereas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code. In their defense, the Pereas adduced evidence to show that they had exercised the diligence of a good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a drivers license and had not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that Teodoro Perea had sometimes accompanied Alfaro in the vans trips transporting the students to school. For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists. Ruling of the RTC On December 3, 1999, the RTC rendered its decision,3 disposing: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them to jointly and severally pay the plaintiffs as follows: (1) (for) the death of Aaron- Php50,000.00; (2) Actual damages in the amount of Php100,000.00; (3) For the loss of earning capacity- Php2,109,071.00; (4) Moral damages in the amount of Php4,000,000.00; (5) Exemplary damages in the amount of Php1,000,000.00; (6) Attorneys fees in the amount of Php200,000.00; and (7) Cost of suit. SO ORDERED. On June 29, 2000, the RTC denied the Pereas motion for reconsideration,4 reiterating that the cooperative gross negligence of the Pereas and PNR had caused the collision that led to the death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established circumstances. The CAs Ruling Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).

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PNR assigned the following errors, to wit:5 The Court a quo erred in: 1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with defendant-appellants spouses Teodorico and Nanette Perea and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and damages. 2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite overwhelming documentary evidence on record, supporting the case of defendants-appellants Philippine National Railways. The Pereas ascribed the following errors to the RTC, namely: The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary damages and attorneys fees with the other defendants. The trial court erred in dismissing the cross-claim of the appellants Pereas against the Philippine National Railways and in not holding the latter and its train driver primarily responsible for the incident. The trial court erred in awarding excessive damages and attorneys fees. The trial court erred in awarding damages in the form of deceaseds loss of earning capacity in the absence of sufficient basis for such an award. On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral damages to P 2,500,000.00; and deleted the attorneys fees because the RTC did not state the factual and legal bases, to wit:6 WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Paraaque City is AFFIRMED with the modification that the award of Actual Damages is reduced to P 59,502.76; Moral Damages is reduced to P 2,500,000.00; and the award for Attorneys Fees is Deleted. SO ORDERED. The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of the ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum representing the loss of the deceaseds earning capacity despite Cariaga being only a medical student at the time of the fatal incident. Applying the formula adopted in the American Expectancy Table of Mortality: 2/3 x (80 - age at the time of death) = life expectancy the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21 (the age when he would have graduated from college and started working for his own livelihood) instead of 15 years (his age when he died). Considering that the nature of his work and his salary at the time of Aarons death were unknown, it used the prevailing minimum wage of P 280.00/day to compute Aarons gross annual salary to be P 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aarons life expectancy of 39.3 years, his gross income would aggregate to P 4,351,164.30, from which his estimated expenses in the sum of P 2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aarons computed net income

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turning out to be higher than the amount claimed by the Zarates, only P 2,109,071.00, the amount expressly prayed for by them, was granted. On April 4, 2003, the CA denied the Pereas motion for reconsideration.8 Issues In this appeal, the Pereas list the following as the errors committed by the CA, to wit: I. The lower court erred when it upheld the trial courts decision holding the petitioners jointly and severally liable to pay damages with Philippine National Railways and dismissing their cross-claim against the latter. II. The lower court erred in affirming the trial courts decision awarding damages for loss of earning capacity of a minor who was only a high school student at the time of his death in the absence of sufficient basis for such an award. III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at all. Ruling The petition has no merit. 1. Were the Pereas and PNR jointly and severally liable for damages? The Zarates brought this action for recovery of damages against both the Pereas and the PNR, basing their claim against the Pereas on breach of contract of carriage and against the PNR on quasi-delict. The RTC found the Pereas and the PNR negligent. The CA affirmed the findings. We concur with the CA. To start with, the Pereas defense was that they exercised the diligence of a good father of the family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a drivers license and that he had not been involved in any vehicular accident prior to the fatal collision with the train; that they even had their own son travel to and from school on a daily basis; and that Teodoro Perea himself sometimes accompanied Alfaro in transporting the passengers to and from school. The RTC gave scant consideration to such defense by regarding such defense as inappropriate in an action for breach of contract of carriage. We find no adequate cause to differ from the conclusions of the lower courts that the Pereas operated as a common carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a good father of a family. Although in this jurisdiction the operator of a school bus service has been usually regarded as a private carrier,9 primarily because he only caters to some specific or privileged individuals, and his operation is neither open to the indefinite public nor for public use, the exact nature of the operation of a school bus service has not been finally settled. This is the occasion to lay the matter to rest. A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to another, gratuitously or for hire. The carrier is classified either as a private/special carrier or

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as a common/public carrier.10 A private carrier is one who, without making the activity a vocation, or without holding himself or itself out to the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular instance only, to transport goods or persons from one place to another either gratuitously or for hire.11 The provisions on ordinary contracts of the Civil Code govern the contract of private carriage.The diligence required of a private carrier is only ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering such services to the public.12 Contracts of common carriage are governed by the provisions on common carriers of the Civil Code, the Public Service Act,13 and other special laws relating to transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to passengers.14 In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco,15 viz: "Public use" is the same as "use by the public". The essential feature of the public use is not confined to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look not only to the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law compels the owner to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge the character of the use is whether the public may enjoy it by right or only by permission. In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any distinction between a person or an enterprise offering transportation on a regular or an isolated basis; and has not distinguished a carrier offering his services to the general public, that is, the general community or population, from one offering his services only to a narrow segment of the general population. Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the notion of public service under the Public Service Act, which supplements the law on common carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service Act, includes: x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientle, whether permanent or occasional, and done for the general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. x x x.17 Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if they had limited clientle.

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As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the general public as his business or occupation. If the undertaking is a single transaction, not a part of the general business or occupation engaged in, as advertised and held out to the general public, the individual or the entity rendering such service is a private, not a common, carrier. The question must be determined by the character of the business actually carried on by the carrier, not by any secret intention or mental reservation it may entertain or assert when charged with the duties and obligations that the law imposes.21 Applying these considerations to the case before us, there is no question that the Pereas as the operators of a school bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual occupation; (b) undertaking to carry passengers over established roads by the method by which the business was conducted; and (c) transporting students for a fee. Despite catering to a limited clientle, the Pereas operated as a common carrier because they held themselves out as a ready transportation indiscriminately to the students of a particular school living within or near where they operated the service and for a fee. The common carriers standard of care and vigilance as to the safety of the passengers is defined by law. Given the nature of the business and for reasons of public policy, the common carrier is bound "to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case."22 Article 1755 of the Civil Code specifies that the common carrier should "carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances." To successfully fend off liability in an action upon the death or injury to a passenger, the common carrier must prove his or its observance of that extraordinary diligence; otherwise, the legal presumption that he or it was at fault or acted negligently would stand.23 No device, whether by stipulation, posting of notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of the common carrier as defined under Article 1755 of the Civil Code. 24 And, secondly, the Pereas have not presented any compelling defense or reason by which the Court might now reverse the CAs findings on their liability. On the contrary, an examination of the records shows that the evidence fully supported the findings of the CA. As earlier stated, the Pereas, acting as a common carrier, were already presumed to be negligent at the time of the accident because death had occurred to their passenger.25 The presumption of negligence, being a presumption of law, laid the burden of evidence on their shoulders to establish that they had not been negligent.26 It was the law no less that required them to prove their observance of extraordinary diligence in seeing to the safe and secure carriage of the passengers to their destination. Until they did so in a credible manner, they stood to be held legally responsible for the death of Aaron and thus to be held liable for all the natural consequences of such death. There is no question that the Pereas did not overturn the presumption of their negligence by credible evidence. Their defense of having observed the diligence of a good father of a family in the selection and supervision of their driver was not legally sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier did not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employee. This was the reason why the RTC treated this defense of the Pereas as inappropriate in this action for breach of contract of carriage. The Pereas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope of his authority or even in violation of the orders of the common carrier.27 In this connection, the records showed their drivers actual negligence. There was a showing, to begin with,

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that their driver traversed the railroad tracks at a point at which the PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although that point had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into taking that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his passengers but he still disregarded the risks. Compounding his lack of care was that loud music was playing inside the air-conditioned van at the time of the accident. The loudness most probably reduced his ability to hear the warning horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost his view of the train that was then coming from the opposite side of the passenger bus, leading him to miscalculate his chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided a collision with the train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop before traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop were in observance of the right of way at railroad tracks as defined by the traffic laws and regulations.28 He thereby violated a specific traffic regulation on right of way, by virtue of which he was immediately presumed to be negligent.29 The omissions of care on the part of the van driver constituted negligence,30 which, according to Layugan v. Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do,32 or as Judge Cooley defines it, (t)he failure to observe for the protection of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury."33 The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading case of Picart v. Smith,34 thuswise: The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that. The question as to what would constitute the conduct of a prudent man in a given situation must of course be always determined in the light of human experience and in view of the facts involved in the particular case. Abstract speculation cannot here be of much value but this much can be profitably said: Reasonable men govern their conduct by the circumstances which are before them or known to them. They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to take care only when there is something before them to suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the course actually pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its consequences. (Emphasis supplied) Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely negligent when he traversed the railroad tracks at a point not allowed for a motorists crossing despite being fully aware

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of the grave harm to be thereby caused to his passengers; and when he disregarded the foresight of harm to his passengers by overtaking the bus on the left side as to leave himself blind to the approach of the oncoming train that he knew was on the opposite side of the bus. Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court held the PNR solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus that was then traversing the railroad crossing. But the circumstances of that case and this one share no similarities. In Philippine National Railways v. Intermediate Appellate Court, no evidence of contributory negligence was adduced against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary diligence by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the Pereas and the PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate Appellate Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereas school van traversed the railroad tracks at a point not intended for that purpose. At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and severally" liable for damages arising from the death of Aaron. They had been impleaded in the same complaint as defendants against whom the Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising out of the accident, and questions of fact and of law were common as to the Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereas was distinct from the basis of the Zarates right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of negligence despite the school van of the Pereas traversing the railroad tracks at a point not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure the safety of others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others as well as the need to control the vehicular and other traffic there. Verily, the Pereas and the PNR were joint tortfeasors. 2. Was the indemnity for loss of Aarons earning capacity proper? The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with the RTC on the liability, the CA modified the amount. Both lower courts took into consideration that Aaron, while only a high school student, had been enrolled in one of the reputable schools in the Philippines and that he had been a normal and able-bodied child prior to his death. The basis for the computation of Aarons earning capacity was not what he would have become or what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his death. Moreover, the RTCs computation of Aarons life expectancy rate was not reckoned from his age of 15 years at the time of his death, but on 21 years, his age when he would have graduated from college. We find the considerations taken into account by the lower courts to be reasonable and fully warranted. Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative and unfounded.1wphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim Jussi Leinos loss of earning capacity as a pilot for being speculative due to his having graduated from high school at the International School in Manila only two years before the shooting, and was at the time of the shooting only enrolled in the first semester at the Manila Aero Club to

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pursue his ambition to become a professional pilot. That meant, according to the Court, that he was for all intents and purposes only a high school graduate. We reject the Pereas submission. First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation of Aarons earning capacity was premised on him being a lowly minimum wage earner despite his being then enrolled at a prestigious high school like Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at work. And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and in favor of the defendants whose negligence not only cost Aaron his life and his right to work and earn money, but also deprived his parents of their right to his presence and his services as well. Our law itself states that the loss of the earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and shall in every case be assessed and awarded by the court "unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death."38 Accordingly, we emphatically hold in favor of the indemnification for Aarons loss of earning capacity despite him having been unemployed, because compensation of this nature is awarded not for loss of time or earnings but for loss of the deceaseds power or ability to earn money.39 This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,40 fourth-year medical student Edgardo Carriagas earning capacity, although he survived the accident but his injuries rendered him permanently incapacitated, was computed to be that of the physician that he dreamed to become. The Court considered his scholastic record sufficient to justify the assumption that he could have finished the medical course and would have passed the medical board examinations in due time, and that he could have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined that murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying jobs had they graduated in due time, and that their jobs would probably pay them high monthly salaries from P 10,000.00 to P 15,000.00 upon their graduation. Their earning capacities were computed at rates higher than the minimum wage at the time of their deaths due to their being already senior agriculture students of the University of the Philippines in Los Baos, the countrys leading educational institution in agriculture. 3. Were the amounts of damages excessive? The Pereas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective amounts of P 2,500,000.00 and P 1,000,000.00 on the ground that such amounts were excessive. The plea is unwarranted. The moral damages of P 2,500,000.00 were really just and reasonable under the established circumstances of this case because they were intended by the law to assuage the Zarates deep mental anguish over their sons unexpected and violent death, and their moral shock over the senseless accident. That amount would not be too much, considering that it would help the Zarates obtain the means, diversions or amusements that would alleviate their suffering for the loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice, given the passage of a long time from when their mental anguish was inflicted on them on August 22, 1996.

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Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective the desired example for the public good. As a common carrier, the Pereas needed to be vigorously reminded to observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from happening again. Only by an award of exemplary damages in that amount would suffice to instill in them and others similarly situated like them the ever-present need for greater and constant vigilance in the conduct of a business imbued with public interest. WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13, 2002; and ORDER the petitioners to pay the costs of suit.