ESTELA

L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS and CARAVAN TRAVEL & TOURS INTERNATIONAL,
INC., respondents.

D E C I S I O N
YNARES-SANTIAGO, J.:

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of
Europe. The package tour included the countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland
and France at a total cost of P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare,
and the booking fee was also waived because petitioners niece, Meriam Menor, was respondent companys ticketing
manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday to deliver
petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for the package
tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her
flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the flight
for the first leg of her journey from Manila to Hongkong. To petitioners dismay, she discovered that the flight she
was supposed to take had already departed the previous day. She learned that her plane ticket was for the flight
scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant which included
England, Scotland and Wales in its itinerary. For this tour package, petitioner was asked anew to pay US$785.00 or
P20,881.00 (at the then prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as partial
payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the reimbursement of P61,421.70,
representing the difference between the sum she paid for Jewels of Europe and the amount she owed respondent
for the British Pageant tour. Despite several demands, respondent company refused to reimburse the amount,
[1]
contending that the same was non-refundable. Petitioner was thus constrained to file a complaint against
respondent for breach of contract of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled
to Branch 59 of the Regional Trial Court of Makati City.
[2]
In her complaint, petitioner alleged that her failure to join Jewels of Europe was due to respondents fault
since it did not clearly indicate the departure date on the plane ticket.Respondent was also negligent in informing
her of the wrong flight schedule through its employee Menor. She insisted that the British Pageant was merely a
substitute for the Jewels of Europe tour, such that the cost of the former should be properly set-off against the sum
paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied responsibility
for petitioners failure to join the first tour. Chipeco insisted that petitioner was informed of the correct departure
date, which was clearly and legibly printed on the plane ticket. The travel documents were given to petitioner two
days ahead of the scheduled trip.Petitioner had only herself to blame for missing the flight, as she did not bother to
read or confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels of Europe, considering that
the same had already been remitted to its principal in Singapore, Lotus Travel Ltd., which had already billed the same
even if petitioner did not join the tour. Lotus European tour organizer, Insight International Tours Ltd., determines
the cost of a package tour based on a minimum number of projected participants. For this reason, it is accepted
[3]
industry practice to disallow refund for individuals who failed to take a booked tour.
Lastly, respondent maintained that the British Pageant was not a substitute for the package tour that petitioner
missed. This tour was independently procured by petitioner after realizing that she made a mistake in missing her
flight for Jewels of Europe. Petitioner was allowed to make a partial payment of only US$300.00 for the second tour
because her niece was then an employee of the travel agency. Consequently, respondent prayed that petitioner be
ordered to pay the balance of P12,901.00 for the British Pageant package tour.
[4]
After due proceedings, the trial court rendered a decision, the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three Thousand
Nine Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43) with legal interest
thereon at the rate of twelve percent (12%) per annum starting January 16, 1992, the date when
the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00) Pesos as and for
reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
[5]
SO ORDERED.

The trial court held that respondent was negligent in erroneously advising petitioner of her departure date
through its employee, Menor, who was not presented as witness to rebut petitioners testimony. However, petitioner
should have verified the exact date and time of departure by looking at her ticket and should have simply not relied
on Menors verbal representation. The trial court thus declared that petitioner was guilty of contributory negligence
and accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault. However, the
appellate court held that petitioner is more negligent than respondent because as a lawyer and well-traveled person,
she should have known better than to simply rely on what was told to her. This being so, she is not entitled to any
form of damages. Petitioner also forfeited her right to the Jewels of Europe tour and must therefore pay respondent
the balance of the price for the British Pageant tour. The dispositive portion of the judgment appealed from reads
as follows:

WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26, 1995 is hereby
REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the plaintiff-appellee to pay to the
defendant-appellant the amount of P12,901.00, representing the balance of the price of the British Pageant
Package Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per annum, to be computed from the
time the counterclaim was filed until the finality of this decision. After this decision becomes final and executory,
the rate of TWELVE PERCENT (12%) interest per annum shall be additionally imposed on the total obligation until
payment thereof is satisfied. The award of attorneys fees is DELETED. Costs against the plaintiff-appellee.
[6]
SO ORDERED.

[7]
Upon denial of her motion for reconsideration, petitioner filed the instant petition under Rule 45 on the
following grounds:
I

It is respectfully submitted that the Honorable Court of Appeals committed a reversible error in reversing and
setting aside the decision of the trial court by ruling that the petitioner is not entitled to a refund of the cost of
unavailed Jewels of Europe tour she being equally, if not more, negligent than the private respondent, for in the
contract of carriage the common carrier is obliged to observe utmost care and extra-ordinary diligence which is
higher in degree than the ordinary diligence required of the passenger. Thus, even if the petitioner and private
respondent were both negligent, the petitioner cannot be considered to be equally, or worse, more guilty than the
private respondent. At best, petitioners negligence is only contributory while the private respondent [is guilty] of
gross negligence making the principle of pari delicto inapplicable in the case;

II

The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour was not indivisible and the
amount paid therefor refundable;

III
The Honorable Court erred in not granting to the petitioner the consequential damages due her as a result of
[8]
breach of contract of carriage.

Petitioner contends that respondent did not observe the standard of care required of a common carrier when
it informed her wrongly of the flight schedule. She could not be deemed more negligent than respondent since the
latter is required by law to exercise extraordinary diligence in the fulfillment of its obligation. If she were negligent
at all, the same is merely contributory and not the proximate cause of the damage she suffered. Her loss could only
be attributed to respondent as it was the direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person or association of persons
[9]
obligate themselves to transport persons, things, or news from one place to another for a fixed price. Such person
or association of persons are regarded as carriers and are classified as private or special carriers and common or
[10]
public carriers. A common carrier is defined under Article 1732 of the Civil Code 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.
It is obvious from the above definition that respondent is not an entity engaged in the business of transporting
either passengers or goods and is therefore, neither a private nor a common carrier. Respondent did not undertake
to transport petitioner from one place to another since its covenant with its customers is simply to make travel
arrangements in their behalf. Respondents services as a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent company, this does not
mean that the latter ipso facto is a common carrier. At most, respondent acted merely as an agent of the airline,
with whom petitioner ultimately contracted for her carriage to Europe. Respondents obligation to petitioner in this
regard was simply to see to it that petitioner was properly booked with the airline for the appointed date and time.
Her transport to the place of destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service of arranging and
facilitating petitioners booking, ticketing and accommodation in the package tour. In contrast, the object of a
contract of carriage is the transportation of passengers or goods. It is in this sense that the contract between the
parties in this case was an ordinary one for services and not one of carriage. Petitioners submission is premised on
a wrong assumption.
The nature of the contractual relation between petitioner and respondent is determinative of the degree of
care required in the performance of the latters obligation under the contract. For reasons of public policy, a common
carrier in a contract of carriage is bound by law to carry passengers as far as human care and foresight can provide
[11]
using the utmost diligence of very cautious persons and with due regard for all the circumstances. As earlier
stated, however, respondent is not a common carrier but a travel agency. It is thus not bound under the law to
observe extraordinary diligence in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of care required of
[12]
respondent is that of a good father of a family under Article 1173 of the Civil Code. This connotes reasonable care
consistent with that which an ordinarily prudent person would have observed when confronted with a similar
situation. The test to determine whether negligence attended the performance of an obligation is: did the defendant
in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would
[13]
have used in the same situation? If not, then he is guilty of negligence.
In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of the wrong
day of departure. Petitioners testimony was accepted as indubitable evidence of Menors alleged negligent act since
respondent did not call Menor to the witness stand to refute the allegation. The lower court applied the presumption
[14]
under Rule 131, Section 3 (e) of the Rules of Court that evidence willfully suppressed would be adverse if produced
and thus considered petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and maintains that
petitioners assertion is belied by the evidence on record. The date and time of departure was legibly written on the
plane ticket and the travel papers were delivered two days in advance precisely so that petitioner could prepare for
the trip. It performed all its obligations to enable petitioner to join the tour and exercised due diligence in its dealings
with the latter.
 We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony could not give rise to an
inference unfavorable to the former. Menor was already working in France at the time of the filing of the
[15]
complaint, thereby making it physically impossible for respondent to present her as a witness. Then too, even if
it were possible for respondent to secure Menors testimony, the presumption under Rule 131, Section 3(e) would
still not apply. The opportunity and possibility for obtaining Menors testimony belonged to both parties, considering
that Menor was not just respondents employee, but also petitioners niece. It was thus error for the lower court to
invoke the presumption that respondent willfully suppressed evidence under Rule 131, Section 3(e). Said
presumption would logically be inoperative if the evidence is not intentionally omitted but is simply unavailable, or
[16]
when the same could have been obtained by both parties.
In sum, we do not agree with the finding of the lower court that Menors negligence concurred with the
negligence of petitioner and resultantly caused damage to the latter. Menors negligence was not sufficiently proved,
considering that the only evidence presented on this score was petitioners uncorroborated narration of the events.
It is well-settled that the party alleging a fact has the burden of proving it and a mere allegation cannot take the
[17]
place of evidence. If the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a
satisfactory manner facts upon which he bases his claim, the defendant is under no obligation to prove his exception
[18]
or defense.
Contrary to petitioners claim, the evidence on record shows that respondent exercised due diligence in
performing its obligations under the contract and followed standard procedure in rendering its services to petitioner.
[19]
As correctly observed by the lower court, the plane ticket issued to petitioner clearly reflected the departure date
and time, contrary to petitioners contention. The travel documents, consisting of the tour itinerary, vouchers and
instructions, were likewise delivered to petitioner two days prior to the trip. Respondent also properly booked
petitioner for the tour, prepared the necessary documents and procured the plane tickets. It arranged petitioners
hotel accommodation as well as food, land transfers and sightseeing excursions, in accordance with its avowed
undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well as everything else
that was essential to book petitioner for the tour. Had petitioner exercised due diligence in the conduct of her affairs,
there would have been no reason for her to miss the flight. Needless to say, after the travel papers were delivered
to petitioner, it became incumbent upon her to take ordinary care of her concerns. This undoubtedly would require
that she at least read the documents in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care
[20]
and prudence in the performance of the obligation as the nature of the obligation so demands. There is no fixed
standard of diligence applicable to each and every contractual obligation and each case must be determined upon
its particular facts. The degree of diligence required depends on the circumstances of the specific obligation and
whether one has been negligent is a question of fact that is to be determined after taking into account the particulars
[21]
of each case.
The lower court declared that respondents employee was negligent. This factual finding, however, is not
supported by the evidence on record. While factual findings below are generally conclusive upon this court, the rule
is subject to certain exceptions, as when the trial court overlooked, misunderstood, or misapplied some facts or
[22]
circumstances of weight and substance which will affect the result of the case.
In the case at bar, the evidence on record shows that respondent company performed its duty diligently and
did not commit any contractual breach. Hence, petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-G.R.
CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay respondent the amount of P12,901.00
representing the balance of the price of the British Pageant Package Tour, with legal interest thereon at the rate of
6% per annum, to be computed from the time the counterclaim was filed until the finality of this Decision. After this
Decision becomes final and executory, the rate of 12% per annum shall be imposed until the obligation is fully settled,
[23]
this interim period being deemed to be by then an equivalent to a forbearance of credit.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan.
Upon gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for
resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip
to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to
differing establishments in Pangasinan. For that service, respondent charged freight rates which were commonly
lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk
Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of
Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on
or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on
to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on
board the other truck which was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner,
since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui,
Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of
Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and
attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise
the extraordinary 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.
1
On 10 December 1975, the trial court rendered a Decision finding private respondent to be a common carrier and
holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a
common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him
from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in
transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by
way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set
forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article
1732 also carefully avoids making any distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the Philippines,
for hire or compensation, with general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any common carrier, railroad, street railway,
traction railway, subway motor vehicle, either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice
plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless communications systems, wire or
wireless broadcasting stations and other similar public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even though he
merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was done
on a periodic or occasional rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight
rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and
concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite
for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the
moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also
complied with the requirements of the applicable regulatory statute and implementing regulations and has been
granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of
a common carrier because he has not secured the necessary certificate of public convenience, would be offensive
to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable
statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and
well being and property of those members of the general community who happen to deal with such carrier. The
law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their
services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by
simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
2
Common carriers, "by the nature of their business and for reasons of public policy" are held to a very high degree
of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific
import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers;
and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the
common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they
appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed extraordinary diligence as
required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant
case the hijacking of the carrier's truck does not fall within any of the five (5) categories of exempting causes
listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under
the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have
been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's
goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a security
guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however,
that in the instant case, the standard of extraordinary diligence required private respondent to retain a security
guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the
driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in
the vigilance over the goods carried in the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given
additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article
1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary
to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or omissions
of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of
robbers who donot 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
3
court shows that the accused acted with grave, if not irresistible, threat, violence or force. Three (3) of the five (5)
hold-uppers were armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped
the driver and his helper, detaining them for several days and later releasing them in another province (in
Zambales). The hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance
4
convicted all the accused of robbery, though not of robbery in band.
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the
control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not
held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied
with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable
for the value of the undelivered merchandise which was lost because of an event entirely beyond private
respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals
dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL SERVICES, INC.,
petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.

D E C I S I O N
MENDOZA, J.:

[1]
This is a petition for review of the decision, dated May 31, 2001, of the Court of Appeals, affirming the
[2]
decision 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 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
[3]
receive the same.

Accordingly, the trial court ordered petitioner to pay the following amounts

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;
[4]
3. Costs of suit.

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
[5]
ITS SERVICES TO THE PUBLIC.
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
[6]
what ordinary diligence in the vigilance over the goods transported by her, would require. 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.
[7]
The contention has no merit. In De Guzman v. Court of Appeals, the Court dismissed a similar contention and
held the party to be a common carrier, thus

The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the
public.

The above article makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity . . . Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the general public, i.e., the general community or population,
and one who offers services or solicits business only from a narrow segment of the general population. We think
that Article 1732 deliberately refrained from making such distinctions.
So understood, the concept of common carrier under Article 1732 may be seen to coincide neatly with the notion
of public service, under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, public service includes:

x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other
[8]
similar public services. x x x

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. . . .

[9]
In Compania Maritima v. Court of Appeals, the meaning of extraordinary diligence in the vigilance over goods
was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to
know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for
sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and
to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as their nature requires.

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the spoilage or wettage
took place while the goods were in the custody of either the carrying vessel M/V Hayakawa Maru, which transported
the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly kept them in
open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the containers were
deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit:

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
[10]
ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.

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 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
[11]
place while these were in her custody.
 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,
[12]
Romualdez Street, Ermita, Manila from July 23/25, 1990.

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre, Marina
Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange Reports (EIRs). Had
there been any damage to the shipment, there would have been a report to that effect made by the arrastre
operator. The cargoes were withdrawn by the defendant-appellant from the arrastre still in good order and
condition as the same were received by the former without exception, that is, without any report of damage or
loss. Surely, if the container vans were deformed, cracked, distorted or dented, the defendant-appellant would
report it immediately to the consignee or make an exception on the delivery receipt or note the same in the
Warehouse Entry Slip (WES). None of these took place. To put it simply, the defendant-appellant received the
shipment in good order and condition and delivered the same to the consignee damaged. We can only conclude
that the damages to the cargo occurred while it was in the possession of the defendant-appellant. Whenever the
thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss (or
damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this legal
presumption and the presumption of negligence attached to a common carrier in case of loss or damage to the
[13]
goods.

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.
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
[14]
resulting therefrom. 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
[15]
under Art. 1735 holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC., respondents.

D E C I S I O N
DAVIDE, JR., C.J.:

Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the following: (a) the 30 January 1997
[1] [2]
decision of the Court of Appeals in CA-G.R. CV No. 36401, which affirmed the decision of 4 October 1991 of the
Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, ordering LOADSTAR to pay private respondent
Manila Insurance Co. (hereafter MIC) the amount of P6,067,178, with legal interest from the filing of the complaint
until fully paid, P8,000 as attorneys fees, and the costs of the suit; and (b) its resolution of 19 November
[3]
1997, denying LOADSTARs motion for reconsideration of said decision.
The facts are undisputed.
On 19 November 1984, LOADSTAR received on board its M/V Cherokee (hereafter, the vessel) the following
goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and others; and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks including
TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. The vessel, in turn, was insured by Prudential Guarantee & Assurance,
Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its way to Manila from the port of Nasipit, Agusan del
Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the
consignee made a claim with LOADSTAR which, however, ignored the same. As the insurer, MIC paid P6,075,000 to
the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel
was due to the fault and negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the
insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted from MICs claim from
LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shippers goods and claimed that the sinking of
its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause of action against it,
LOADSTAR being the party insured. In any event, PGAI was later dropped as a party defendant after it paid the
insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to elevate
the matter to the Court of Appeals, which, however, agreed with the trial court and affirmed its decision in toto.
In dismissing LOADSTARs appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single shipper
on that fateful voyage. The court noted that the charter of the vessel was limited to the ship, but
[4]
LOADSTAR retained control over its crew.
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in
determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had been
seaworthy, it could have withstood the natural and inevitable action of the sea on 20 November 1984,
when the condition of the sea was moderate. The vessel sank, not because of force majeure, but
because it was not seaworthy. LOADSTARS allegation that the sinking was probably due to the
convergence of the winds, as stated by a PAGASA expert, was not duly proven at the trial. The limited
liability rule, therefore, is not applicable considering that, in this case, there was an actual finding of
[5]
negligence on the part of the carrier.
 4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said provisions
bind only the shipper/consignee and the carrier. When MIC paid the shipper for the goods insured, it
[6]
was subrogated to the latters rights as against the carrier, LOADSTAR.
5) There was a clear breach of the contract of carriage when the shippers goods never reached their
destination. LOADSTARs defense of diligence of a good father of a family in the training and selection
of its crew is unavailing because this is not a proper or complete defense in culpa contractual.
6) Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are
delivered on board a ship in good order and condition, and the shipowner delivers them to the shipper
in bad order and condition, it then devolves upon the shipowner to both allege and prove that the
goods were damaged by reason of some fact which legally exempts him from liability. Transportation
of the merchandise at the risk and venture of the shipper means that the latter bears the risk of loss
or deterioration of his goods arising from fortuitous events, force majeure, or the inherent nature and
defects of the goods, but not those caused by the presumed negligence or fault of the carrier, unless
[7]
otherwise proved.
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V Cherokee a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued a
certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only one
shipper, one consignee for a special cargo.
In refutation, MIC argues that the issue as to the classification of the M/V Cherokee was not timely raised
below; hence, it is barred by estoppel. While it is true that the vessel had on board only the cargo of wood products
for delivery to one consignee, it was also carrying passengers as part of its regular business. Moreover, the bills of
lading in this case made no mention of any charter party but only a statement that the vessel was a general cargo
carrier. Neither was there any special arrangement between LOADSTAR and the shipper regarding the shipment of
the cargo. The singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to
convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been
[8]
negligent, and the burden of proving otherwise devolved upon MIC.
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the
vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by the maritime safety
engineers of the Philippine Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at the
time was experienced, licensed and unquestionably competent. With all these precautions, there could be no other
conclusion except that LOADSTAR exercised the diligence of a good father of a family in ensuring the vessels
seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force
majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather was
fine until the next day when the vessel sank due to strong waves. MICs witness, Gracelia Tapel, fully established the
existence of two typhoons, WELFRING and YOLING, inside the Philippine area of responsibility. In fact, on 20
November 1984, signal no. 1 was declared over Eastern Visayas, which includes Limasawa Island. Tapel also testified
that the convergence of winds brought about by these two typhoons strengthened wind velocity in the area,
naturally producing strong waves and winds, in turn, causing the vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what
transpired in this case, is valid. Since the cargo was being shipped at owners risk, LOADSTAR was not liable for any
loss or damage to the same. Therefore, the Court of Appeals erred in holding that the provisions of the bills of lading
apply only to the shipper and the carrier, and not to the insurer of the goods, which conclusion runs counter to the
[9]
Supreme Courts ruling in the case of St. Paul Fire & Marine Insurance Co. v. Macondray & Co., Inc., and National
[10]
Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen Phils., Inc.
Finally, LOADSTAR avers that MICs claim had already prescribed, the case having been instituted beyond the
period stated in the bills of lading for instituting the same suits based upon claims arising from shortage, damage, or
non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action. The vessel sank
on 20 November 1984; yet, the case for recovery was filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due
to force majeure, because the same concurred with LOADSTARs fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be
deemed waived.
Thirdly, the limited liability theory is not applicable in the case at bar because LOADSTAR was at fault or
negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its
knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the carrier
be issued a certificate of public convenience, and this public character is not altered by the fact that the carriage of
the goods in question was periodic, occasional, episodic or unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship
[11]
Agencies, Inc., where this Court held that a common carrier transporting special cargo or chartering the vessel to
a special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in
the charter party absolving the owner from liability for loss due to the negligence of its agent is void only if the strict
policy governing common carriers is upheld. Such policy has no force where the public at large is not involved, as in
the case of a ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and
[12] [13]
Industrial Supply, Inc. v. Court of Appeals and National Steel Corp. v. Court of Appeals, both of which upheld
the Home Insurancedoctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for simple reason that the factual
settings are different. The records do not disclose that the M/V Cherokee, on the date in question, undertook to
carry a special cargo or was chartered to a special person only. There was no charter party. The bills of lading failed
to show any special arrangement, but only a general provision to the effect that the M/V Cherokee was a general
[14]
cargo carrier. Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which
appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier,
especially where, as in this case, it was shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier
[15]
under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals, the Court juxtaposed the
statutory definition of common carriers with the peculiar circumstances of that case, viz.:

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.

x x x

It appears to the Court that private respondent is properly characterized as a common carrier even though he
merely back-hauled goods for other merchants from Manila to Pangasinan, although such backhauling was done
on a periodic or occasional rather than regular or scheduled manner, and even though private
respondents 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 that fee frequently fell below commercial
freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and
concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite
for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the
moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also
complied with the requirements of the applicable regulatory statute and implementing regulations and has been
granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of
a common carrier because he has not secured the necessary certificate of public convenience, would be offensive
to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable
statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and
well being and property of those members of the general community who happen to deal with such carrier. The
law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their
services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by
simply failing to obtain the necessary permits and authorizations.

Moving on to the second assigned error, we find that the M/V Cherokee was not seaworthy when it embarked
on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time.For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent
officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract
[16]
of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.
Neither do we agree with LOADSTARs argument that the limited liability theory should be applied in this
case. The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or
[17]
agent. LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel
to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be
deemed as force majeure, inasmuch as the wind condition in the area where it sank was determined to be
moderate. Since it was remiss in the performance of its duties, LOADSTAR cannot hide behind the limited liability
doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter
[18]
disregard of this Courts pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., and National
[19]
Union Fire Insurance v. Stolt-Nielsen Phils., Inc. It was ruled in these two cases that after paying the claim of the
insured for damages under the insurance policy, the insurer is subrogated merely to the rights of the assured, that
is, it can recover only the amount that may, in turn, be recovered by the latter. Since the right of the assured in case
of loss or damage to the goods is limited or restricted by the provisions in the bills of lading, a suit by the insurer as
subrogee is necessarily subject to the same limitations and restrictions. We do not agree. In the first place, the cases
relied on by LOADSTAR involved a limitation on the carriers liability to an amount fixed in the bill of lading which the
parties may enter into, provided that the same was freely and fairly agreed upon (Articles 1749-1750).On the other
hand, the stipulation in the case at bar effectively reduces the common carriers liability for the loss or destruction
of the goods to a degree less than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss
or damage to shipments made at owners risk. Such stipulation is obviously null and void for being contrary to public
[20]
policy. It has been said:

Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any
and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified
limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an
agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an
almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public
[21]
policy, but the third is valid and enforceable.

Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all
the rights which the latter has against the common carrier, LOADSTAR.
 Neither is there merit to the contention that the claim in this case was barred by prescription. MICs cause of
action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of
Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) which
provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit may
be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the insurer of the
[22]
good. In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing
[23]
the one-year period is null and void; it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of
Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO
RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA,
and JOSE JANOLO, respondents.

D E C I S I O N
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters
and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of
land in Sta. Rosa, Laguna? Does the doctrine of apparent authority apply in this case? If so, may the Central Bank-
appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such apparent
authority after said contract has been deemed perfected? During the pendency of a suit for specific performance,
does the filing of a derivative suit by the majority shareholders and directors of the distressed bank to prevent the
enforcement or implementation of the sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant Petition for review on
certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the
[1]
respondent Court of Appeals in CA-G.R. CV No. 35756 and the Resolution promulgated June 14, 1994 denying the
motion for reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under
paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to
P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter,
to legally refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
[2]
The dispositive portion of the trial courts decision dated July 10, 1991, on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don
Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer
Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs as
buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the
plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the
aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owners copies of T.C.T. Nos.
T-106932 to T-106937, inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in
the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums
of P 200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P 100,000.00 as exemplary damages;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of
attorneys fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount
of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was
given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and
reply memoranda. The First Division transferred this case to the Third Division per resolution dated October 23,
1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned
ponente for the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for
brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner
Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head
Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original
plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside
through this petition.
The Facts
[3]
The facts of this case are summarized in the respondent Courts Decision, as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of
land with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna, and covered by Transfer Certificates
of Title Nos. T-106932 to T-106937. The property used to be owned by BYME Investment and Development
Corporation which had them mortgaged with the bank as collateral fora loan. The original plaintiffs, Demetrio
Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME Investments legal counsel, Jose
Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the
defendant bank. The meeting was held pursuant to plaintiffs plan to buy the property (TSN of Jan. 16, 1990, pp. 7-
10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to
the bank through a letter dated August 30, 1987 (Exh. B), as follows:
August 30, 1987
The Producers Bank of the Philippines
Makati, Metro Manila
Attn. Mr. Mercurio Q. Rivera
Manager, Property Management Dept.
Gentlemen:
I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at
Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.
TCT NO. AREA
T-106932 113,580 sq.m.
T-106933 70,899 sq.m.
T-106934 52,246 sq.m.
T-106935 96,768 sq.m.
T-106936 187,114 sq.m.
T-106937 481,481 sq.m.
My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash.
Kindly contact me at Telephone Number 921-1344.
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is
hereunder quoted (Exh. C):
September 1, 1987
J-P M-P GUTIERREZ ENTERPRISES
142 Charisma St., Doa Andres II
Rosario, Pasig, Metro Manila
Attention: JOSE O. JANOLO Dear Sir:
Dear Sir:
Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by
Byme industrial Corp.). Please be informed however that the banks counter-offer is at P5.5 million for more than
101 hectares on lot basis.
We shall be very glad to hear your position on the matter.
Best regards.
(4)On September 17, 1987, plaintiff Janolo, responding to Riveras aforequoted reply, wrote (Exh.
September 17, 1987
Producers Bank
Paseo de Roxas
Makati, Metro Manila
 Attention: Mr. Mercurio Rivera
Gentlemen:
In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa Laguna, I would
like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH.
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolos foregoing letter of September 17, 1987. What took place was a meeting
on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as
well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo
sent to the bank, through Rivera, the following letter (Exh. E):
The Producers Bank of the Philippines
Paseo de Roxas, Makati
Metro Manila
Attention: Mr. Mercurio Rivera
Re: 101 Hectares of Land in Sta. Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer
for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme In-vestment, for a total price of
PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central
Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion.
On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. F):
Attention: Atty. Demetrio Demetria
Dear Sir:
Your proposal to buy the properties the bank foreclosed from Byme Investment Corp. located at Sta. Rosa, Laguna
is under study yet as of this time by the newly created committee for submission to the newly designated Acting
Conservator of the bank.
For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what
plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by the
bank. As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant
Rivera (Exhibit G) tendered payment of the amount of P5.5 million pursuant to (our) perfected sale agreement.
Defendants refused to receive both the payment and the letter. Instead, the parcels of land involved in the
transaction were advertised by the bank for sale to any interested buyer (Exhs. H and H-1). Plaintiffs demanded the
execution by the bank of the documents on what was considered as a perfected agreement. Thus:
Mr. Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in Sta.
Rosa, Laguna, and which are covered by TCT No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the
amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by you
on October 5, 1987.
In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that
despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead, you
have advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the
necessary actions/documentation within three (3) days from your receipt hereof We are ready to remit the agreed
amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary court action to
protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its
communication of December 2, 1987 (Exh. I), that said letter has been referred x x x to the office of our
Conservator for proper disposition. However, no response came from the Acting Conservator. On December 14,
1987, the plaintiffs made a second tender of payment (Exhs. L and L-1), this time through the Acting Conservator,
defendant Encarnacion. Plaintiffs letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION Central Bank Conservator
Gentlemen:
We are sending you herewith, in-behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the amount
of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934,
106935, 106936 and 106937 and registered under Producers Bank.
This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price
of the said lots. Please inform us of the date of documentation of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through
counsel, made a final demand for compliance by the bank with its obligations under the considered perfected
contract of sale (Exhibit N). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12,
1988 (Annex 4 of defendants answer to amended complaint), the defendants through Acting Conservator
Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs,
particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified the
refusal of the tenders of payment and the non-compliance with the obligations under what the plaintiffs
considered to be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager
Rivera and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank
resulted in a perfected contract of sale. The defendants took the position that there was no such perfected sale
because the defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as
to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan,
filed a motion to intervene in the trial court, alleging that as owner of 80% of the Banks outstanding shares of
stock, he had a substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order
denying the motion to intervene on the ground that it was filed after trial had already been concluded. It also
denied a motion for reconsideration filed thereafter. From the trial courts decision, the Bank, petitioner Rivera and
conservator Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said
judgment. Henry Co did not appeal the denial of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of
Demetria and Janolo, in view of the assignment of the latters rights in the matter in litigation to said private
respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other
stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the
Second Case) -purportedly a derivative suit - with the Regional Trial Court of Makati, Branch 134, docketed as Civil
Case No. 92-1606, against Encarnacion, Demetria and Janolo to declare any perfected sale of the property as
[4]
unenforceable and to stop Ejercito from enforcing or implementing the sale. In his answer, Janolo argued that the
Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-
trial conference in the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice.
Private respondent opposed this motion on the ground, among others, that plaintiffs act of forum shopping justifies
[5]
the dismissal of both cases, with prejudice. Private respondent, in his memorandum, averred that this motion is
still pending in the Makati RTC.
[6] [7]
In their Petition and Memorandum, petitioners summarized their position as follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of
Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of
previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the evidence on record.
[8]
On the other hand, private respondents prayed for dismissal of the instant suit on the ground that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no
longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted
by respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the
agency and the contract, has no authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or
to revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised
Circular No. 28-91 requiring that a party must certify under oath x x x [that] (a) he has not (t)heretofore commenced
any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other
tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is pending in said courts or
agencies. A violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions
or complaints. To be sure, petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating for the
record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving
a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is
[9]
the subject of a pending Motion to Dismiss Without Prejudice.
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual
forum shopping because the instant petition pending before this Court involves identical parties or interests
represented, rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court, Makati
Branch 134 in the Second Case. In fact, the issues in the two cases are so intertwined that a judgment or resolution
[10]
in either case will constitute res judicata in the other.
[11]
On the other hand, petitioners explain that there is no forum-shopping because:
1) In the earlier or First Case from which this proceeding arose, the Bank was impleaded as a defendant, whereas
in the Second Case (assuming the Bank is the real party in interest in a derivative suit), it was the plaintiff;
2) The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances;
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition
identifies the action as a derivative suit, it does not mean that it is one and (t)hat is a legal question for the courts
to decide;
4) Petitioners did not hide the Second Case as they mentioned it in the said VERIFICATION/CERTIFICATION.
We rule for private respondent.
 [12]
To begin with, forum-shopping originated as a concept in private international law, where non-resident
litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses,
including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to
select a more friendly venue. To combat these less than honorable excuses, the principle of forum non
conveniens was developed whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction where
it is not the most convenient or available forum and the parties are not precluded from seeking remedies elsewhere.
[13]
In this light, Blacks Law Dictionary says that forum-shopping occurs when a party attempts to have his action
tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict. Hence,
[14]
according to Words and Phrases, a litigant is open to the charge of forum shopping whenever he chooses a forum
with slight connection to factual circumstances surrounding his suit, and litigants should be encouraged to attempt
to settle their differences without imposing undue expense and vexatious situations on the courts.
In the Philippines, forum-shopping has acquired a connotation encompassing not only a choice of venues, as it
was originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues), the
Rules of Court, for example, allow a plaintiff to commence personal actions where the defendant or any of the
defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the
plaintiff (Rule 4, Sec. 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing civil
liabilities independently of the criminal, arising from the same set of facts. A passenger of a public utility vehicle
involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal - each remedy being
available independently of the others - although he cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his
action. This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the
encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts and
consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme inconvenience
to some of the parties to the action.
Thus, forum-shopping had acquired a different concept - which is unethical professional legal practice. And this
necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the
[15]
practice.
What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for
solving problems has been abused and misused to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned,
promulgated Circular 28-91. And even before that, the Court had proscribed it in the Interim Rules and Guidelines
[16]
issued on January 11, 1983 and had struck down in several cases the inveterate use of this insidious malpractice.
Forum-shopping as the filing of repetitious suits in different courts has been condemned by Justice Andres R. Narvasa
(now Chief Justice) in Minister of Natural Resources, et al. vs. Heirs of Orval Hughes, et al., as a reprehensible
[17]
manipulation of court processes and proceedings x x x. When does forum-shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable
opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in
the courts but also in connection with litigations commenced in the courts while an administrative proceeding is
pending, as in this case, in order to defeat administrative processes and in anticipation of an unfavorable
administrative ruling and a favorable court ruling. This is specially so, as in this case, where the court in which the
[18]
second suit was brought, has no jurisdiction
The test for determining whether a party violated the rule against forum-shopping has been laid down in the
[19]
1986 case of Buan vs. Lopez, also by Chief Justice Narvasa, and that is, forum-shopping exists where the elements
of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other, as
follows:
There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at least
such parties as represent the same interests in both actions, as well as identity of rights asserted and relief prayed
for, the relief being founded on the same facts, and the identity on the two preceding particulars is such that any
judgment rendered in the other action, will, regardless of which party is successful, amount to res adjudicata in the
action under consideration: all the requisites, in fine, of auter action pendant.
xxx xxx xxx
As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards parties,
or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree sufficient to give
rise to the ground for dismissal known as auter action pendant or lis pendens. That same identity puts into
operation the sanction of twin dismissals just mentioned. The application of this sanction will prevent any further
delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to
appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986, which
dismissed the petition upon grounds which appear persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the same party against
whom another action or actions for the alleged violation of the same right and the enforcement of the same relief
is/are still pending, the defense of litis pendencia in one case is a bar to the others; and, a final judgment in one
would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could
[20]
be cited by the other party as a ground to ask for summary dismissal of the two (or more) complaints or petitions,
and for the imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and
disciplinary action against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that
there exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by
the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to
[21]
enforce the alleged perfected sale of real estate. On the other hand, the complaint in the Second Case seeks to
declare such purported sale involving the same real property as unenforceable as against the Bank, which is the
petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are
seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or
the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape
[22]
from the obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission on Audit, this
Court ruled that the filing by a party of two apparently different actions, but with the same objective, constituted
forum shopping:
In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein
- PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be
different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October
10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the
PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from
conducting a rebidding and from selling to other parties the vessel T/T Andres Bonifacio, and for an extension of
time for it to comply with the paragraph 1 of the memorandum of agreement and damages. One can see that
although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in both actions is
the same, that is, the approval of the sale of vessel in favor of petitioner, and to overturn the letter-directive of the
COA of October 10, 1988disapproving the sale. (italics supplied)
[23]
In an earlier case, but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in this
Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-shopping. Both
actions unquestionably involve the same transactions, the same essential facts and circumstances. The petitioners
claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did not
involve certain acts which transpired after its commencement, is specious. In the RTC action, as in the action
before this Court, the validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had
been efficaciously rescinded, and the propriety of implementing the same (by paying the pledgee banks the
amount of their loans, obtaining the release of the pledged shares, etc.) were the basic issues. So, too, the relief
was the same: the prevention of such implementation and/or the restoration of the status quo ante. When the
acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining
order, the RTC suit did not become functus oflcio. It remained an effective vehicle for obtention of relief; and
petitioners remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in
the RTC suit, so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined but
nonetheless done. The remedy was certainly not the institution of another action in another forum based on
essentially the same facts. The adoption of this latter recourse renders the petitioners amenable to disciplinary
action and both their actions, in this Court as well as in the Court a quo, dismissible.
 In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the
plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same
interest and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in
controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed
contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a derivative
suit. In the caption itself, petitioners claim to have brought suit for and in behalf of the Producers Bank of
[24]
the Philippines. Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds
stock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or
are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as
a nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979];
italics supplied).
In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite
strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the
minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the outstanding capital
stock, but also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they really
represent the Bank. So, whether they sued derivatively or directly, there is undeniably an identity of interests/entity
represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate and
distinct from its shareholders. But the rulings of this Court are consistent: When the fiction is urged as a means of
perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of
statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil
with which the law covers and isolates the corporation from the members or stockholders who compose it will be
[25]
lifted to allow for its consideration merely as an aggregation of individuals.
[26]
In addition to the many cases where the corporate fiction has been disregarded, we now add the instant
case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the
prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority
in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the
corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and
applying remedies available to it. To rule otherwise would be to encourage corporate litigants to use their
shareholders as fronts to circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there
is identity of parties, causes of action and reliefs sought, because it (the Bank) was the defendant in the (first) case
while it was the plaintiff in the other (Second Case), citing as authority Victronics Computers, Inc. vs. Regional Trial
[27]
Court, Branch 63, Makati, etc. et al., where the Court held:
The rule has not been extended to a defendant who, for reasons known only to him, commences a new action
against the plaintiff - instead of filing a responsive pleading in the other case - setting forth therein, as causes of
action, specific denials, special and affirmative defenses or even counterclaims. Thus, Velhagens and Kings motion
to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the
first place. (italics supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the
forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the
present suit. In the former, as underscored in the above-quoted Court ruling, the defendants did not file
any responsive pleading in the first case. In other words, they did not make any denial or raise any defense or
counter-claim therein. In the case before us however, petitioners filed a responsive pleading to the complaint - as a
result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings, the
petitioners became plaintiffs themselves in the original case, giving unto themselves the very remedies they
repeated in the Second Case.
 Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the
vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies
to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process
creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. In this case,
this is exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of
sale will directly conflict with a possible decision in the Second Case barring the parties from enforcing or
[28]
implementing the said sale. Indeed, a final decision in one would constitute res judicata in the other.
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible
now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners
present counsel entered their appearance only during the proceedings in this Court, and the Petitions
VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good
faith in observing Circular 28-91. The lawyers who filed the Second Case are not before us; thus the rudiments of
due process prevent us from motu propio imposing disciplinary measures against them in this Decision. However,
petitioners themselves (and particularly Henry Co, et al.) as litigants are admonished to strictly follow the rules
against forum-shopping and not to trifle with court proceedings and processes. They are warned that a repetition of
the same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-
shopping but also because of the substantive issues raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the basis of the facts
established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has been established,
respondent Court stated:
There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired
assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T-106932 to
T-106937. It is likewise beyond cavil that the bank intended to sell the property. As testified to by the Banks
Deputy Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs
wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera,
Manager of the Property Management Department of the defendant bank, in early August 1987. The procedure in
the sale of acquired assets as well as the nature and scope of the authority of Rivera on the matter is clearly
delineated in the testimony of Rivera himself, which testimony was relied upon by both the bank and by Rivera in
their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an
inter-office memorandum distributed to all branches that these are acquired assets for sale. I was instructed to
advertise acquired assets for sale so on that basis, I have to entertain offer; to accept offer, formal offer and upon
having been offered, I present it to the Committee. I provide the Committee with necessary information about the
property such as original loan of the borrower, bid price during the foreclosure, total claim of the bank, the
appraised value at the time the property is being offered for sale and then the information which are relative to
the evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as against
the exposure of the bank and it is also the Committee that submit to the Conservator for final approval and once
approved, we have to execute the deed of sale and it is the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt with
and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were dealing
with the bank official authorized to entertain offers, to accept offers and to present the offer to the Committee
before which the said official is authorized to discuss information relative to price determination. Necessarily, too,
it being inherent in his authority, Rivera is the officer from whom official information regarding the price, as
determined by the Committee and approved by the Conservator, can be had. And Rivera confirmed his authority
when he talked with the plaintiff in August 1987. The testimony of plaintiff Demetria is clear on this point (TSN of
May 31, 1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-
blank his authority to sell any property?
A: No, sir. Not point blank although it came from him. (W)hen I asked him how long it would take because
he was saying that the matter of pricing will be passed upon by the committee. And when I asked
him how long it will take for the committee to decide and he said the committee meets every week.
 If I am not mistaken Wednesday and in about two weeks (sic) time, in effect what he was saying he
was not the one who was to decide. But he would refer it to the committee and he would relay the
decision of the committee to me.
Q: Please answer the question.
A: He did not say that he had the authority(.) But he said he would refer the matter to the committee and
he would relay the decision to me and he did just like that.
Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with Jose
Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera
and the banks internal procedure in the matter of the sale of banks assets. As advised by Rivera, the plaintiffs
made a formal offer by a letter dated August 20, 1987 stating that they would buy at the price of P3.5 Million in
cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers.
Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with
their proposed buying price on one hand, and the bank Committee, the Conservator and ultimately the bank itself
with the set price on the other, and considering further the discussion of price at the meeting of August resulting
in a formal offer of P3.5 Million in cash, there can be no other logical conclusion than that when, on September 1,
1987, Rivera informed plaintiffs by letter that the banks counter-offer is at P5.5 Million for more than 101 hectares
on lot basis, such counter-offer price had been determined by the Past Due Committee and approved by the
Conservator after Rivera had duly presented plaintiffs offer for discussion by the Committee of such matters as
original loan of borrower, bid price during foreclosure, total claim of the bank, and market value. Tersely put,
under the established facts, the price of P5.5 Million was, as clearly worded in Riveras letter (Exh. E), the official
and definitive price at which the bank was selling the property.
There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not
discussed by the Committee and that it was merely quoted to start negotiations regarding the price. As correctly
characterized by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point are
at best equivocal and considering the gratuitous and self-serving character of these declarations, the banks
submission on this point does not inspire belief. Both Co and Entereso, as members of the Past Due Committee of
the bank, claim that the offer of the plaintiff was never discussed by the Committee. In the same vein, both Co and
Entereso openly admit that they seldom attend the meetings of the Committee. It is important to note that
negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase
price, having been made to understand by Rivera, the official in charge of the negotiation, that the price will be
submitted for approval by the bank and that the banks decision will be relayed to plaintiffs. From the facts, the
amount of P5.5 Million has a definite significance. It is the official bank price. At any rate, the bank placed its
official, Rivera, in a position of authority to accept offers to buy and negotiate the sale by having the offer officially
acted upon by the bank. The bank cannot turn around and later say, as it now does, that what Rivera states as the
banks action on the matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a
corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent
authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as
against any one who has in good faith dealt with the corporation through such agent, he estopped from denying
his authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential
[29]
Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993).
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: (1) Consent
of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation
which is established.
There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of
land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by Transfer
Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first and third requisites.
Petitioners allege that there is no counter-offer made by the Bank, and any supposed counter-offer which
Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank, there was nothing for
[30]
Ejercito (in substitution of Demetria and Janolo) to accept. They disputed the factual basis of the respondent
Courts findings that there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5
million. We have perused the evidence but cannot find fault with the said Courts findings of fact. Verily, in a petition
under Rule 45 such as this, errors of fact -if there be any - are, as a rule, not reviewable. The mere fact that
respondent Court (and the trial court as well) chose to believe the evidence presented by respondent more than
that presented by petitioners is not by itself a reversible error. in fact, such findings merit serious consideration by
this Court, particularly where, as in this case, said courts carefully and meticulously discussed their findings. This is
basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the
question of Riveras authority to act and petitioners allegations that the P5.5 million counter-offer was extinguished
by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be drawn from the factual
findings of the respondent Court. They also delve into the contractual elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of
[31]
apparent authority, with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals, where
it was held that:
Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the
agent. The agents apparent representation yields to the principals true representation and the contract is
considered as entered into between the principal and the third person (citing National Food Authority vs.
Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the
officers in their representative capacity but not for acts outside the scope of their authority (9 C.J.S., p. 417). A
bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they
may thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its
responsibility for such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114).
Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the
course of its business by an agent acting within the general scope of his authority even though, in the particular
case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some
other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks have a fiduciary relationship with the public
and their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be
eroded where banks do not exercise strict care in the selection and supervision of its employees, resulting in
prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied
authority to act for the Bank in the matter of selling its acquired assets. This evidence includes the following:
(a) The petition itself in par. II-1 (p. 3) states that Rivera was at all times material to this case, Manager of the
Property Management Department of the Bank. By his own admission, Rivera was already the person in charge of
the Banks acquired assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial meeting
between the buyers and Rivera, the latter suggested that the buyers offer should be no less than P3.3 million (TSN,
April 26, 1990, pp. 16-17);
(c) Rivera received the buyers letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p. 11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July 30, p.
11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers proposal to buy the property for
P4.25 million (TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN,
January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1987, during which the Banks
offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major
shareholder and officer of the Bank, confirmed Riveras statement as to the finality of the Banks counter-offer of
P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for the
Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was the officer
mentioned in the Banks advertisements offering for sale the property in question (cf. Exhs. S and S-I).
[32]
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et al., the Court, through Justice
Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of
the Bank of P.I. in charge of acquired assets is borne out by similar circumstances surrounding his dealings with
buyers.
To be sure, petitioners attempted to repudiate Riveras apparent authority through documents and testimony
which seek to establish Riveras actual authority. These pieces of evidence, however, are inherently weak as they
consist of Riveras self-serving testimony and various inter-office memoranda that purport to show his limited actual
authority, of which private respondent cannot be charged with knowledge. In any event, since the issue is apparent
authority, the existence of which is borne out by the respondent Courts findings, the evidence of actual authority is
[33]
immaterial insofar as the liability of a corporation is concerned.
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their law firm had once
acted for the Bank in three criminal cases, they should be charged with actual knowledge of Riveras limited authority.
But the Court of Appeals in its Decision (p. 12) had already made a factual finding that the buyers had no notice of
Riveras actual authority prior to the sale. In fact, the Bank has not shown that they acted as its counsel in respect to
any acquired assets; on the other hand, respondent has proven that Demetria and Janolo merely associated with a
loose aggrupation of lawyers (not a professional partnership), one of whose members (Atty. Susana Parker) acted in
said criminal cases.
Petitioners also alleged that Demetrias and Janolos P4.25 million counter-offer in the letter dated September
[34]
17, 1987 extinguished the Banks offer of P5.5 million. They disputed the respondent Courts finding that there was
a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex L (letter dated September 30,
1987) accepted Riveras counter offer of P5.5 million under Annex J (letter dated September 17, 1987), citing the late
[35] [36] [37]
Justice Paras, Art. 1319 of the Civil Code and related Supreme Court rulings starting with Beaumont vs. Prieto.
However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the
respondent Court which reviewed the testimonies on this point, what was accepted by Janolo in his letter dated
September 30, 1987 was the Banks offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose
Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of September 30,
1987 begins with (p)ursuant to our discussion last 28 September 1987 x x x.
Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that
the September 28, 1987 meeting was meant to have the offerors improve on their position of P5.5
[38]
million. However, both the trial court and the Court of Appeals found petitioners testimonial evidence not
credible, and we find no basis for changing this finding of fact.
Indeed, we see no reason to disturb the lower courts (both the RTC and the CA) common finding that private
respondents evidence is more in keeping with truth and logic - that during the meeting on September 28, 1987, Luis
Co and Rivera confirmed that the P5.5 million price has been passed upon by the Committee and could no longer be
[39]
lowered (TSN of April 27, 1990, pp. 34-35). Hence, assuming arguendo that the counter-offer of P4.25 million
extinguished the offer of P5.5 million, Luis Cos reiteration of the said P5.5 million price during the September 28,
1987 meeting revived the said offer. And by virtue of the September 30, 1987 letter accepting this revived offer,
there was a meeting of the minds, as the acceptance in said letter was absolute and unqualified.
We note that the Banks repudiation, through Conservator Encarnacion, of Riveras authority and action,
particularly the latters counter-offer of P5.5 million, as being unauthorized and illegal came only on May 12, 1988 or
more than seven (7) months after Janolos acceptance. Such delay, and the absence of any circumstance which might
have justifiably prevented the Bank from acting earlier, clearly characterizes the repudiation as nothing more than
a last-minute attempt on the Banks part to get out of a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied admission on the part of the
petitioners that the written offer made on September 1, 1987 was carried through during the meeting of September
28, 1987. This is the conclusion consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Banks offer of P5.5 million was raised for the first
time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of fact
and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be,
considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC, No. 74243,
[40]
November 14, 1986, 145 SCRA 592).
xxx It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in
the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play,
justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos
Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R.
[41]
77029, August 30, 1990).
Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an
opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of due
process. But we passed upon the issue anyway, if only to avoid deciding the case on purely procedural grounds, and
we repeat that, on the basis of the evidence already in the record and as appreciated by the lower courts, the
inevitable conclusion is simply that there was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?
[42]
The petition alleged:
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28
September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September
1987, the contract produced thereby would be unenforceable by action - there being no note, memorandum or
writing subscribed by the Bank to evidence such contract. (Please see Article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p. 14) stated:
x x x Of course, the banks letter of September 1, 1987 on the official price and the plaintiffs acceptance of the price
on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear embodiments of
the fact that a contract of sale was perfected between the parties, such contract being binding in whatever form it
may have been entered into (case citations omitted). Stated simply, the banks letter of September 1, 1987, taken
together with plaintiffs letter dated September 30, 1987, constitute in law a sufficient memorandum of a perfected
contract of sale.
The respondent Court could have added that the written communications commenced not only
from September 1, 1987 but from Janolos August 20, 1987 letter. We agree that, taken together, these letters
constitute sufficient memoranda - since they include the names of the parties, the terms and conditions of the
contract, the price and a description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute
a new offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by reason
of the failure of petitioners to object to oral testimony proving petitioner Banks counter-offer of P5.5 million. Hence,
petitioners - by such utter failure to object - are deemed to have waived any defects of the contract under the statute
of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure
to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.
As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-
offer of P5.5 million is aplenty -and the silence of petitioners all throughout the presentation makes the evidence
binding on them thus:
A - Yes, sir. I think it was September 28, 1987 and I was again present because Atty. Demetria told me to
accompany him and we were able to meet Luis Co at the Bank.
xxx xxx xxx
Q - Now, what transpired during this meeting with Luis Co of the Producers Bank?
A - Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q - What price?
A - The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final
price and that is the price they intends (sic) to have, sir.
Q - What do you mean?
A - That is the amount they want, sir.
Q - What is the reaction of the plaintiff Demetria to Luis Cos statment (sic) that the defendant Riveras
counter-offer of 5.5 million was the defendants bank (sic) final offer?
A - He said in a day or two, he will make final acceptance, sir.
Q - What is the response of Mr. Luis Co?
A - He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
----0----
Q - What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
 A - We went straight to the point because he being a busy person, I told him if the amount of P5.5 million
could still be reduced and he said that was already passed upon by the committee. What the bank
expects which was contrary to what Mr. Rivera stated. And he told me that is the final offer of the
bank P5.5 million and we should indicate our position as soon as possible.
Q - What was your response to the answer of Mr. Luis Co?
A - I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and
I and Mr. Mercurio [Rivera] was with us at the time at his office.
Q - For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office
in Producers Bank Building during this meeting?
A - Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q - By Mr. Co you are referring to?
A - Mr. Luis Co.
Q - After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the
bank?
A - Yes, sir, we did. Two days thereafter we sent our acceptance to the bank which offer we accepted, the
offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
---- 0 ----
Q - According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and
it is not within his power to reduce this amount. What can you say to that statement that the amount
of P5.5 million was reached by the Committee?
A - It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty.
Demetrio Demetria and Atty. Pajardo (sic), in that September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract?
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of
the Philippines during the time that the negotiation and perfection of the contract of sale took place. Petitioners
energetically contended that the conservator has the power to revoke or overrule actions of the management or
the board of directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank
Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the
Monetary Board finds that a bank or a non-bank financial intermediary performing quasi - banking functions is in a
state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the
interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets,
liabilities, and the management of that institution, collect all monies and debts due said institution and exercise all
powers necessary to preserve the assets of the institution, reorganize the management thereof, and restore its
viability. He shall have the power to overrule or revoke the actions of the previous management and board of
directors of the bank or non-bank financial intermediary performing quasi-banking functions, any provision of law
to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary.
In the first place, this issue of the Conservators alleged authority to revoke or repudiate the perfected contract
of sale was raised for the first time in this Petition - as this was not litigated in the trial court or Court of Appeals. As
already stated earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, cannot
[43]
be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process.
In the second place, there is absolutely no evidence that the Conservator, at the time the contract was
perfected, actually repudiated or overruled said contract of sale. The Banks acting conservator at the time, Rodolfo
Romey, never objected to the sale of the property to Demetria and Janolo. What petitioners are really referring to
is the letter of Conservator Encarnacion, who took over from Romey after the sale was perfected on September 30,
1987 (Annex V, petition) which unilaterally repudiated - not the contract - but the authority of Rivera to make a
binding offer - and which unarguably came months after the perfection of the contract. Said letter dated May 12,
1988 is reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6) parcels
of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a contract to
sell and buy with any of them for the following reasons.
In the Inter-Office Memorandum dated April 25, 1986 addressed to and approved by former Acting Conservator Mr.
Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the functions of Property
Management Department (PMD) staff and officers (Annex A), you will immediately read that Manager Mr.
Mercurio Rivera or any of his subordinates has no authority, power or right to make any alleged counter-offer. In
short, your lawyer-clients did not deal with the authorized officers of the bank.
Moreover, under Secs. 23 and 36 of the Corporation Code of the Philippines (Batas Pambansa Blg. 68) and Sec. 28-A
of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator may authorize the
sale of any property of the corporation/bank.
Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators
(starting January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place were just
preliminary discussions/ consultations between him and your clients, which everyone knows cannot bind the Banks
Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently violative of
corporate and banking laws. We believe that this is more than sufficient legal justification for refusing said alleged
tender.
Rest assured that we have nothing personal against your clients. All our acts are official, legal and in accordance
with law. We also have no personal interest in any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. ENCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator
of a bank, it must be pointed out that such powers must be related to the (preservation of) the assets of the bank,
(the reorganization of) the management thereof and (the restoration of) its viability. Such powers, enormous and
extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would
[44]
infringe against the non-impairment clause of the Constitution. If the legislature itself cannot revoke an existing
valid contract, how can it delegate such non-existent powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under
existing law, deemed to be defective - i.e., void, voidable, unenforceable or rescissible. Hence, the conservator
merely takes the place of a banks board of directors. What the said board cannot do - such as repudiating a contract
validly entered into under the doctrine of implied authority - the conservator cannot do either. Ineluctably, his power
is not unilateral and he cannot simply repudiate valid obligations of the Bank. His authority would be only to bring
court actions to assail such contracts - as he has already done so in the instant case. A contrary understanding of the
law would simply not be permitted by the Constitution. Neither by common sense. To rule otherwise would be to
enable a failing bank to become solvent, at the expense of third parties, by simply getting the conservator to
unilaterally revoke all previous dealings which had one way or another come to be considered unfavorable to the
Bank, yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with
the Bank.
The Fifth Issue: Were There Reversible Errors of Fact?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the
Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust
[45]
Corporation, we held:
x x x. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of
the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA
138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of
the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is
limited to reviewing and revising the errors of law imputed to it, its findings of the fact being conclusive [Chan vs.
Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has
emphatically declared that it is not the function of the Supreme Court to analyze or weigh such evidence all
over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower
court (Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No.
L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G.R. No. L-47531, February 20, 1984, 127
SCRA 596). Barring, therefore, a showing that the findings complained of are totally devoid of support in the record,
or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for
this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the
parties [Santa Ana, Jr. vs. Hernandez, G.R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]
[46]
Likewise, in Bernardo vs. Court of Appeals, we held:
The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency of
evidence and the credibility of witnesses presented. This Court so held that it is not the function of the Supreme
Court to analyze or weigh such evidence all over again. The Supreme Courts jurisdiction is limited to reviewing
errors of law that may have been committed by the lower court. The Supreme Court is not a trier of facts. x x x
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development
[47]
Corp.:
The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final
and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment
of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation,
surmises or conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is
grave abuse of discretion in the appreciation of facts; when the judgment is premised on a misapprehension of
facts; when the findings went beyond the issues of the case and the same are contrary to the admissions of both
appellant and appellee. After a careful study of the case at bench, we find none of the above grounds present to
justify the re-evaluation of the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company, Inc.
[48]
vs. Hon. Court of Appeals, et al. is equally applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the function of this
Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties,
particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide.
(italics supplied)
Petitioners, however, assailed the respondent Courts Decision as fraught with findings and conclusions which
were not only contrary to the evidence on record but have no bases at all, specifically the findings that (1) the Banks
counter-offer price of P5.5 million had been determined by the past due committee and approved by conservator
Romey, after Rivera presented the same for discussion and (2) the meeting with Co was not to scale down the price
and start negotiations anew, but a meeting on the already determined price of P5.5 million. Hence, citing Philippine
[49]
National Bank vs. Court of Appeals, petitioners are asking us to review and reverse such factual findings.
[50]
The first point was clearly passed upon by the Court of Appeals, thus:
There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter
that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counter-offer price had
been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented
plaintiffs offer for discussion by the Committee x x x. Tersely put, under the established fact, the price of P5.5
Million was, as clearly worded in Riveras letter (Exh. E), the official and definitive price at which the bank was
selling the property. (p. 11, CA Decision)
xxx xxx xxx
xxx. The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September 28,
1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic was the
possible lowering of the price, the bank official refused it and confirmed that the P5.5 Million price had been
passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA
Decision).
The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as not
credible and at best equivocal, and considering the gratuitous and self-serving character of these declarations, the
banks submissions on this point do not inspire belief.
To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to
testify on their behalf, as he would have been in the best position to establish their thesis. Under the rules on
[51]
evidence, such suppression gives rise to the presumption that his testimony would have been adverse, if
produced.
The second point was squarely raised in the Court of Appeals, but petitioners evidence was deemed insufficient
by both the trial court and the respondent Court, and instead, it was respondents submissions that were believed
and became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are
valid and correct. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they
are espousing. This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court
[52]
of Appeals. We have studied both the records and the CA Decision and we find no such exceptions in this case.
On the contrary, the findings of the said Court are supported by a preponderance of competent and credible
evidence. The inferences and conclusions are reasonably based on evidence duly identified in the Decision. Indeed,
the appellate court patiently traversed and dissected the issues presented before it, lending credibility and
dependability to its findings. The best that can be said in favor of petitioners on this point is that the factual findings
of respondent Court did not correspond to petitioners claims, but were closer to the evidence as presented in the
trial court by private respondent. But this alone is no reason to reverse or ignore such factual findings, particularly
where, as in this case, the trial court and the appellate court were in common agreement thereon. Indeed,
conclusions of fact of a trial judge - as affirmed by the Court of Appeals - are conclusive upon this Court, absent any
serious abuse or evident lack of basis or capriciousness of any kind, because the trial court is in a better position to
observe the demeanor of the witnesses and their courtroom manner as well as to examine the real evidence
presented.
Epilogue
In summary, there are two procedural issues involved - forum-shopping and the raising of issues for the first
time on appeal [viz., the extinguishment of the Banks offer of P5.5 million and the conservators powers to repudiate
contracts entered into by the Banks officers] - which per se could justify the dismissal of the present case. We did
not limit ourselves thereto, but delved as well into the substantive issues - the perfection of the contract of sale and
its enforceability, which required the determination of questions of fact. While the Supreme Court is not a trier of
facts and as a rule we are not required to look into the factual bases of respondent Courts decisions and resolutions,
we did so just the same, if only to find out whether there is reason to disturb any of its factual findings, for we are
only too aware of the depth, magnitude and vigor by which the parties, through their respective eloquent counsel,
argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a
government-appointed conservator and there is need to rehabilitate the Bank in order to get it back on its feet x x x
as many people depend on (it) for investments, deposits and well as employment. As of June 1987, the Banks
overdraft with the Central Bank had already reached P1.023 billion x x x and there were (other) offers to buy the
[53]
subject properties for a substantial amount of money.
While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally
close its eyes to overriding considerations of substantive and procedural law, like respect for perfected contracts,
non-impairment of obligations and sanctions against forum-shopping, which must be upheld under the rule of law
and blind justice.
This Court cannot just gloss over private respondents submission that, while the subject properties may
currently command a much higher price, it is equally true that at the time of the transaction in 1987, the price agreed
upon of P5.5 million was reasonable, considering that the Bank acquired these properties at a foreclosure sale for
[54]
no more than P 3.5 million. That the Bank procrastinated and refused to honor its commitment to sell cannot now
be used by it to promote its own advantage, to enable it to escape its binding obligation and to reap the benefits of
the increase in land values. To rule in favor of the Bank simply because the property in question has algebraically
accelerated in price during the long period of litigation is to reward lawlessness and delays in the fulfillment of
binding contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby DENIES
the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in forum-
shopping and WARNED that a repetition of the same or similar acts will be dealt with more severely. Costs against
petitioners.
SO ORDERED.
Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE AND
ASSURANCE, INC., respondents.

D E C I S I O N
PUNO, J.:
[1]
On appeal is the Court of Appeals May 11, 2000 Decision in CA-G.R. CV No. 49195 and February 21, 2001
[2] [3]
Resolution affirming with modification the April 6, 1994 Decision 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.
[4]
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192.35 was
shipped by Marubeni American Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for
[5]
delivery to the consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4. The
shipment was insured by the private respondent Prudential Guarantee and Assurance, Inc. against loss or damage
[6]
for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.
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
[7]
Receipt No. 0364 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
[8]
hitting an unseen protuberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990. It
[9]
likewise secured the services of Gaspar Salvaging Corporation which refloated the barge. 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
[10]
avoid the complete sinking of the barge, a portion of the goods was transferred to three other barges.
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the total
[11] [12]
loss of the remaining cargo. A second Marine Protest was filed on September 7, 1990.
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and loaded on
[13] [14]
the three other barges. The total proceeds from the sale of the salvaged cargo was P201,379.75.
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
[15]
of P4,104,654.22. 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
[16] [17]
indemnity, attorney's fees and cost of suit. Petitioner filed its answer with counterclaim.
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
[18]
attorney's fees. Defendant's counterclaim is hereby DISMISSED.With costs against defendant.
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.
[19]
Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate court, viz:
 (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
[20]
general public.
We disagree.
[21]
In De Guzman vs. Court of Appeals, 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.
[22]
In the case at bar, the principal business of the petitioner is that of lighterage and drayage and it offers its
barges to the public for carrying or transporting goods by water for compensation. Petitioner is clearly a common
[23]
carrier. In De Guzman, supra, 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.
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.
[24]
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals. 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
[25]
transacted. In the case at bar, the petitioner admitted that it is engaged in the business of shipping and
[26]
lighterage, offering its barges to the public, despite its limited clientele for carrying or transporting goods by water
[27]
for compensation.
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
[28]
them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
[29]
deteriorated. To overcome the presumption of negligence in the case of loss, destruction or deterioration of the
goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to
this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not
attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its
cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the
cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods,
and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize
[30]
the loss. 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:
[31]
CROSS-EXAMINATION BY ATTY. DONN LEE:
x x x x x x x x x
q - Can you tell us what else transpired after that incident?
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.
x x x x x x x x x
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
[32]
Loleng has already entered the Philippine area of responsibility. A part of the testimony of Robert Boyd, Cargo
Operations Supervisor of the petitioner, reveals:
[33]
DIRECT-EXAMINATION BY ATTY. LEE:
x x x x x x x x x
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.
x x x x x x x x x
[34]
CROSS-EXAMINATION BY ATTY. IGNACIO:
x x x x x x x x x
q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I correct?
a - The next day, in the morning, we hired for additional two (2) tugboats as I have stated.
q - 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.
q - But the fact is, the typhoon was incoming? Yes or no?
a - Yes.
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?
a - Yes, sir.
q - So, more or less, you had the knowledge of the incoming typhoon, right?
a - Yes, sir.
q - And yet you proceeded to the premises of the GMC?
a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are already inside
the vicinity or inside Pasig entrance, it is a safe place to tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability
for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short of due diligence
required from a common carrier. More importantly, the officers/employees themselves of petitioner admitted that
when the towing bits of the vessel broke that caused its sinking and the total loss of the cargo upon reaching the
Pasig River, it was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of the
cargo; a human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 49195 dated
May 11, 2000 and its Resolution dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.





FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M.
EROLES, respondents.

D E C I S I O N
VITUG, J.:

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

Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove his own affirmative
allegation, xxx.
In the instant case, plaintiff did not present any single evidence that would prove that defendant is a common
carrier.
x x x x x x x x x
Accordingly, the application of the law on common carriers is not warranted and the presumption of fault or
negligence on the part of a common carrier in case of loss, damage or deterioration of goods during transport
under 1735 of the Civil Code is not availing.
Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was subrogated and
the owner of the vehicle which transports the cargo are the laws on obligation and contract of the Civil Code as
well as the law on quasi delicts.
Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi delict provides for
some presumption of negligence but only upon the attendance of some circumstances. Thus, Article 2185
provides:

Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any traffic regulation.

Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence, the
presumption of negligence is not obtaining.
Considering that plaintiff failed to adduce evidence that defendant is a common carrier and defendants driver was
[2]
the one negligent, defendant cannot be made liable for the damages of the subject cargoes.
 [3]
The subsequent motion for reconsideration having been denied, plaintiff interposed an appeal to the Court
of Appeals, contending that the trial court had erred (a) in holding that the appellee corporation was not a common
carrier defined under the law and existing jurisprudence; and (b) in dismissing the complaint on a demurrer to
evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court, in its
[4]
decision of 10 June 1999, discoursed, among other things, that -

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

[6] [7]
Petitioner's motion for reconsideration was likewise denied; hence, the instant petition, raising the
following issues:
I

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED UNDER THE LAW AND
EXISTING JURISPRUDENCE.

II

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO
HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY
DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.

III

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

On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be amply
justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its
services to no other individual or entity, cannot be considered a common carrier. Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both,
[8]
by land, water, or air, for hire or compensation, offering their services to the public, whether to the public in
 [9]
general or to a limited clientele in particular, but never on an exclusive basis. The true test of a common carrier is
the carriage of passengers or goods, providing space for those who opt to avail themselves of its transportation
[10]
service for a fee. Given accepted standards, GPS scarcely falls within the term common carrier.
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries,
Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a
[11] [12]
corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to
be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the
[13]
tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the interests of the promisee that may include his
expectation interest, which is his interest in having the benefit of his bargain by being put in as good a position as
he would have been in had the contract been performed, or his reliance interest, which is his interest in being
reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in
had the contract not been made; or his restitution interest, which is his interest in having restored to him any benefit
[14]
that he has conferred on the other party. Indeed, agreements can accomplish little, either for their makers or for
[15]
society, unless they are made the basis for action. The effect of every infraction is to create a new duty, that is, to
make recompense to the one who has been injured by the failure of another to observe his contractual
[16]
obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence (normally that
of the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the case of common
carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing
liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioners
assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In
such a situation, a default on, or failure of compliance with, the obligation in this case, the delivery of the goods in
its custody to the place of destination - gives rise to a presumption of lack of care and corresponding liability on the
part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be
ordered to pay petitioner. The driver, not being a party to the contract of carriage between petitioners principal and
defendant, may not be held liable under the agreement. A contract can only bind the parties who have entered into
[17]
it or their successors who have assumed their personality or their juridical position. Consonantly with the
axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third
person.Petitioners civil action against the driver can only be based on culpa aquiliana, which, unlike culpa
[18]
contractual, would require the claimant for damages to prove negligence or fault on the part of the defendant.
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable where the
thing which caused the injury complained of is shown to be under the latters management and the accident is such
that, in the ordinary course of things, cannot be expected to happen if those who have its management or control
use proper care. It affords reasonable evidence, in the absence of explanation by the defendant, that the accident
[19]
arose from want of care. It is not a rule of substantive law and, as such, it does not create an independent ground
of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute
for, and relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim simply places on
[20]
the defendant the burden of going forward with the proof. Resort to the doctrine, however, may be allowed only
when (a) the event is of a kind which does not ordinarily occur in the absence of negligence; (b) other responsible
causes, including the conduct of the plaintiff and third persons, are sufficiently eliminated by the evidence; and (c)
[21]
the indicated negligence is within the scope of the defendant's duty to the plaintiff. Thus, it is not applicable when
an unexplained accident may be attributable to one of several causes, for some of which the defendant could not
[22]
be responsible.
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff
and the defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and
[23]
not from the nature of the relation of the parties. Nevertheless, the requirement that responsible causes other
than those due to defendants conduct must first be eliminated, for the doctrine to apply, should be understood as
being confined only to cases of pure (non-contractual) tort since obviously the presumption of negligence in culpa
contractual, as previously so pointed out, immediately attaches by a failure of the covenant or its tenor. In the case
of the truck driver, whose liability in a civil action is predicated on culpa acquiliana, while he admittedly can be said
to have been in control and management of the vehicle which figured in the accident, it is not equally shown,
however, that the accident could have been exclusively due to his negligence, a matter that can allow, forthwith, res
ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be
[24]
deemed to have waived the right to present evidence. Thus, respondent corporation may no longer offer proof
to establish that it has exercised due care in transporting the cargoes of the assured so as to still warrant a remand
of the case to the trial court.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the
decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles
is concerned, but said assailed order of the trial court and decision of the appellate court are REVERSED as regards
G.P. Sarmiento Trucking Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value
of the damaged and lost cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.

Modesto S. Bascos for petitioner.

Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. Article 1732 of the Civil
Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their
services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation rather than the
quantity or extent of the business transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals is
instructive. In referring to Article 1732 of the Civil Code, it held thus: "The above article makes no distinction
between one whose principal business activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguished
between a carrier offering its services to the "general public," i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the general population. We think that
Article 1732 deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION OF
NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE. Common
carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them.
Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed
or deteriorated. There are very few instances when the presumption of negligence does not attach and these
instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier
must prove that it exercised extraordinary diligence in order to overcome the presumption . . . The presumption of
negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion,
private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY.
In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article
1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have
been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article
1745 of the Civil Code which provides: "Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy . . . (6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible threat, violences or force, is dispensed with or
diminished"; In the same case, the Supreme Court also held that: "Under Article 1745 (6) above, a common carrier
is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of
strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave of irresistible
threat, violence of force," We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by
"grave or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case, petitioner herself has made the
admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner presented no other proof of
the existence of the contract of lease. He who alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES. While the
affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself
was a witness as could be gleaned from the contents of the petition. Affidavits are not considered the best
evidence if the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. Granting that the
said evidence were not self-serving, the same were not sufficient to prove that the contract was one of lease. It
must be understood that a contract is what the law defines it to be and not what it is called by the contracting
parties.
D E C I S I O N
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO,
doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS,
doing business under the name of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the
dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in toto.
Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract 2
with Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000 m/tons of soya
bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba,
Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port Area
to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a
consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with
the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or
damages to the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a
complaint for a sum of money and damages with writ of preliminary attachment 4 for breach of a contract of
carriage. The prayer for a Writ of Preliminary Attachment was supported by an affidavit 5 which contained the
following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of
preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent to
defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of carriage since CIPTRADE
leased her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in
the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was hijacked along Canonigo St.,
Paco, Manila on the night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked properties; that after preliminary investigation,
an information for robbery and carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force
majeure, exculpated petitioner from any liability to CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay
the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic) for
actual damages with legal interest of 12% per cent per annum to be counted from December 4, 1986 until fully
paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is DENIED
for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER
AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT,
NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS
DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT PETITIONER'S
MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND
ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the
hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that
she did business under the name A.M. Bascos Trucking and that said admission dispensed with the presentation by
private respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The respondent Court also
adopted in toto the trial court's decision that petitioner was a common carrier, Moreover, both courts appreciated
the following pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck driver
of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean meal as evidenced by a
cargo receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an employee of
petitioner; and the fact that control of the cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in
this petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck.
She cited as evidence certain affidavits which referred to the contract as "lease". These affidavits were made by
Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in his testimony his
statement that the contract was a lease contract. 10 She also stated that: she was not catering to the general
public. Thus, in her answer to the amended complaint, she said that she does business under the same style of
A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to the general public but
to a few customers only in view of the fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged
in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation,
offering their services to the public." The test to determine a common carrier is "whether the given undertaking is
a part of the business engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted." 12 In this case, petitioner herself has made the
admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their services only to a select
group of people and because the private respondents, plaintiffs in the lower court, did not object to the
presentation of affidavits by petitioner where the transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In
referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article
1732 also carefully avoids making any distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed
them as self-serving and petitioner contests the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-serving, the same were not sufficient to prove that
the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what
it is called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the existence of the
contract of lease. He who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by
them. 17 Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost,
destroyed or deteriorated. 18 There are very few instances when the presumption of negligence does not attach
and these instances are enumerated in Article 1734. 19 In those cases where the presumption is applied, the
common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the
loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included in the
provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is
presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or
irresistible threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to
diminish such responsibility even for acts of strangers like thieves or robbers except where such thieves or
robbers in fact acted with grave or irresistible threat, violence or force. We believe and so hold that the limits of
the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as
a result of a robbery which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit, 23
and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have concluded that
these affidavits were not enough to overcome the presumption. Petitioner's affidavit about the hijacking was
based on what had been told her by Juanito Morden. It was not a first-hand account. While it had been admitted in
court for lack of objection on the part of private respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the conclusion of the appellate court. In a petition for review on
certiorari, We are not to determine the probative value of evidence but to resolve questions of law. Secondly, the
affidavit of Jesus Bascos did not dwell on how the hijacking took place. Thirdly, while the affidavit of Juanito
Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as
could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the affiants
are available as witnesses. 25 The subsequent filing of the information for carnapping and robbery against the
accused named in said affidavits did not necessarily mean that the contents of the affidavits were true because
they were yet to be determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own
failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to
disturb the conclusion that the motion to lift/dissolve the writ of preliminary attachment has been rendered moot
and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The petition
is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.

 *
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners, vs. COURT OF APPEALS, THE WORD FOR THE
WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES,
VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA,
JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA
LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C.
CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES,
JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ,
LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.

D E C I S I O N
MENDOZA, J.:
[1]
This is a petition for review on certiorari of the decision of the Court of Appeals in CA-GR No. 28245, dated
September 30, 1992, which affirmed with modification the decision of the Regional Trial Court of Makati, Branch 58,
ordering petitioners jointly and severally to pay damages to private respondent Amyline Antonio, and its resolution
which denied petitioners motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus
principally in connection with a bus service for school children which they operated in Manila. The couple had a
driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks. His job was to take school
children to and from the St. Scholasticas College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with
petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in
consideration of which private respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the afternoon. However, as several
members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA
until 8:00 oclock in the evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under
repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to
take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a
sharp curve on the highway, running on a south to east direction, which he described as siete. The road was slippery
because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left
road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus
Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus
came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and
pinned down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her
from this position. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar
with the area and he could not have seen the curve despite the care he took in driving the bus, because it was dark
and there was no sign on the road. He said that he saw the curve when he was already within 15 to 30 meters of
it. He allegedly slowed down to 30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding
they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen Regional
Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latters fence. On the basis of Escanos
affidavit of desistance the case against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a result
of the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist down. During the
trial she described the operations she underwent and adduced evidence regarding the cost of her treatment and
therapy. Immediately after the accident, she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital
was not adequately equipped, she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay, where she was
given sedatives. An x-ray was taken and the damage to her spine was determined to be too severe to be treated
there. She was therefore brought to Manila, first to the Philippine General Hospital and later to the Makati Medical
Center where she underwent an operation to correct the dislocation of her spine.
 In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel to a long distance trip and
that the driver was properly screened and tested before being admitted for employment. Indeed, all the evidence
presented have shown the negligent act of the defendants which ultimately resulted to the accident subject of this
case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were the only
ones who adduced evidence in support of their claim for damages, the Court is therefore not in a position to award
damages to the other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs. Engracio
Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and said
defendants are ordered to pay jointly and severally to the plaintiffs the following amount:
1) P93,657.11 as compensatory and actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it
with respect to the other plaintiffs on the ground that they failed to prove their respective claims. The Court of
Appeals modified the award of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorneys fees; and
6) Costs of suit.
The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to exercise due care and
precaution in the operation of his vehicle considering the time and the place of the accident. The Court of Appeals
held that the Fabres were themselves presumptively negligent. Hence, this petition. Petitioners raise the following
issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is
insisted that, on the assumption that petitioners are liable, an award of P600,000.00 is unconscionable and highly
speculative. Amyline Antonio testified that she was a casual employee of a company called Suaco, earning P1,650.00
a month, and a dealer of Avon products, earning an average of P1,000.00 monthly. Petitioners contend that as casual
employees do not have security of tenure, the award of P600,000.00, considering Amyline Antonios earnings, is
without factual basis as there is no assurance that she would be regularly earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners
are liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as
both the Regional Trial Court and the Court of Appeals held, for although the relation of passenger and carrier is
[2]
contractual both in origin and nature, nevertheless the act that breaks the contract may be also a tort. In either
case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to
exercise the diligence of a good father of the family in the selection and supervision of their employee is fully
supported by the evidence on record. These factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence.Indeed, it was admitted by Cabil that on the night in question, it was raining,
and, as a consequence, the road was slippery, and it was dark. He averred these facts to justify his failure to see that
there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per
 [3]
hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. By then it was too late for
him to avoid falling off the road. Given the conditions of the road and considering that the trip was Cabils first one
[4]
outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony that the vehicles
passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour,
Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that it was dark, that he drove
his bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and
that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered
by private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his
employers, the Fabres, were themselves negligent in the selection and supervision of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional
drivers license. The employer should also examine the applicant for his qualifications, experience and record of
[5]
service. Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the
guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of
[6]
consistent compliance with the rules.
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the
fact that Cabil had been driving for school children only, from their homes to the St. Scholasticas College in Metro
[7]
Manila. They had hired him only after a two-week apprenticeship. They had tested him for certain matters, such
as whether he could remember the names of the children he would be taking to school, which were irrelevant to his
qualification to drive on a long distance travel, especially considering that the trip to La Union was his first. The
existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the presumption of
[8]
negligence on the part of an employer.
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the
congregations delayed meeting) could have averted the mishap and (2) under the contract, the WWCF was directly
responsible for the conduct of the trip. Neither of these contentions hold water. The hour of departure had not been
fixed. Even if it had been, the delay did not bear directly on the cause of the accident. With respect to the second
contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to which he wishes to be
conveyed, but exercises no other control over the conduct of the driver, is not responsible for acts of negligence of
the latter or prevented from recovering for injuries suffered from a collision between the automobile and a train,
[9]
caused by the negligence either of the locomotive engineer or the automobile driver.
As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be
engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to
[10]
them. As this Court has held:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the
public.
The above article makes no distinction between one whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article
1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one 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.
As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe transportation of the
passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good
father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of
the formers employees, although such employees may have acted beyond the scope of their authority or in violation
of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good
father of a family in the selection and supervision of their employees.
 The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify finding them guilty of breach of contract
of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of
Appeals erred in increasing the amount of compensatory damages because private respondents did not question
[11]
this award as inadequate. To the contrary, the award of P500,000.00 for compensatory damages which the
Regional Trial Court made is reasonable considering the contingent nature of her income as a casual employee of a
company and as distributor of beauty products and the fact that the possibility that she might be able to work again
has not been foreclosed. In fact she testified that one of her previous employers had expressed willingness to employ
her again.
With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not
sufficiently indicate the factual and legal basis for them, we find that they are nevertheless supported by evidence
in the records of this case. Viewed as an action for quasi delict, this case falls squarely within the purview of Art.
2219(2) providing for the payment of moral damages in cases of quasi delict. On the theory that petitioners are liable
for breach of contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220,
[12]
since Cabils gross negligence amounted to bad faith. Amyline Antonios testimony, as well as the testimonies of
her father and co-passengers, fully establish the physical suffering and mental anguish she endured as a result of the
injuries caused by petitioners negligence.
The award of exemplary damages and attorneys fees was also properly made. However, for the same reason
that it was error for the appellate court to increase the award of compensatory damages, we hold that it was also
error for it to increase the award of moral damages and reduce the award of attorneys fees, inasmuch as private
[13]
respondents, in whose favor the awards were made, have not appealed.
As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or
on that of breach of contract. The question is whether, as the two courts below held, petitioners, who are the owners
and driver of the bus, may be made to respond jointly and severally to private respondent. We hold that they may
[14]
be. In Dangwa Trans. Co. Inc. v. Court of Appeals, on facts similar to those in this case, this Court held the bus
company and the driver jointly and severally liable for damages for injuries suffered by a passenger. Again,
[15]
in Bachelor Express, Inc. v. Court of Appeals a driver found negligent in failing to stop the bus in order to let off
passengers when a fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus
and suffered injuries, was held also jointly and severally liable with the bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of the bus on which
plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing
[16] [17]
an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro
[18]
Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the operator of the other vehicle and
the driver of the vehicle were jointly and severally held liable to the injured passenger or the latters heirs. The basis
[19]
of this allocation of liability was explained in Viluan v. Court of Appeals, thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while that of
respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we already ruled in
Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the
bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two
vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view that
[20]
under the circumstances they are liable on quasi-delict.
[21]
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals this Court exonerated the jeepney driver
from liability to the injured passengers and their families while holding the owners of the jeepney jointly and
severally liable, but that is because that case was expressly tried and decided exclusively on the theory of culpa
contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune and Carreon [the
jeepney owners] were negligent. However, its ruling that spouses Mangune and Carreon are jointly and severally
liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with the carrier in case of
breach of the contract of carriage. The rationale behind this is readily discernible.Firstly, the contract of carriage is
between the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively
responsible therefore to the passenger, even if such breach be due to the negligence of his driver (see Viluan v.
[22]
The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742) . . .
 As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out their claim against
the carrier and the driver exclusively on one theory, much less on that of breach of contract alone. After all, it was
permitted for them to allege alternative causes of action and join as many parties as may be liable on such causes
[23]
of action so long as private respondent and her co-plaintiffs do not recover twice for the same injury. What is
clear from the cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus justifying
the holding that the carrier and the driver were jointly and severally liable because their separate and distinct acts
concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to the award of
damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline Antonio the
following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.