1.VDA. DE NUECA v. MANILA RAILROAD CO. G.R.No.

31731-R 01-30-1968

 At 3 p.m. on Dec. 22, 1958, Fermin Nueca brought 7 sacks of palay to Manila Railroad Co. (MRC) at its station in
Barrio del Rosario, Camarines Sur, to be shipped to the municipality of Libmanan of the same province.
 He paid P 0.70 as freight charge and was issued Way Bill No. 56515.
 The cargo was loaded on the freight wagon of Train 537. Passengers boarded the train and shunting operations
started to hook a wagon thereto.
 Before the train reached the turnoff switch, its passenger coach fell on its side some 40 m from the station. The
wagon pinned Nueca, killing him instantly.
 Nueca’s widow and children bring this claim for damages, alleging that the Nueca was a passenger and his death
was caused by MRC’s negligence.
 MRC disclaimed liability stating: (1) it exercised due care in safeguarding the passengers during the shunting
operation, (2) Nueca was not a passenger but a trespasser, (3) even if Nueca were a passenger, he illegally
boarded the train without permission by not paying the fare, (4) the mishap was not attributable to any defect in
MRC equipment, (5) that the accident happened due to force majeur.
 MRC presented evidence showing there was no mechanical defect, but it did not explain why the accident
occurred or show that force majeur caused the mishap.The lower court absolved MRC of liability and held that
Nueca was a trespasser since he did not buy any ticket, and in any case, was not in a proper place for passengers.

1. W/N Nueca was a passenger?

No, Nueca was not a passenger thus, MRC did not owe him extraordinary diligence.
A passenger is one who travels in a public conveyance by virtue of a contract, express or implied, with the carrier as to
the payment of the fare, or that which is accepted as an equivalent.
The relation of passenger and carrier commences when one puts himself in the care of the carrier, or directly under
its control, with the bona fide intention of becoming a passenger, and is accepted as such by the carrier – as where he
makes a contract for trasportation and presents himself at the proper place and in a proper manner to be
transported.
Even disregarding the matter of tickets, and assuming Nueca intended to be a passenger, he was never accepted as
such by MRC as he did not present himself at the proper place and in a proper manner to be transported.
2. W/N MRC is liable?
Yes, the liability of railroad companies to persons upon the premises is determined by the general rules of
negligence relating to duties of owners/occupiers of property.
While railroad companies are not bound to the same degree of care in regard to strangers who are unlawfully upon
the premises of its passengers, it may still be liable to such strangers for negligent or tortious acts.
Here, Nueca was not on the track, but either unlawfully inside the baggage car or beside the track.
It is normal for people to walk on the track or roadbed when there is no oncoming train and to walk beside the track
when a train passes. This practice is tolerated by MRC. Generally, MRC’s stations are not enclosed, and is easily
accessible to the public.
3. Was the accident due to MRC’s negligence or force majeur?
MRC is negligent; doctrine of res ipsa loquitur applied.
The train was under the complete control of the railroad company at the time of the accident. The baggage car would
not have been derailed if the train had been properly operated.
Res ipsa loquitur is a rule of evidence peculiar to the law of negligence which recognizes that prima facie negligence
may be established without direct proof and furnishes a substitute for specific proof of negligence.
4. Is Nueca liable for contributory negligence?
No. An invitation to stay in the premises is implied from the lack of prohibition to outsiders to keep off the premises,
hence, a stranger who is injured by a derailed train while staying beside a railroad track is not guilty of contributory
negligence.
Note: Our law on common carriers is lifted from Anglo-American statutes.
 2. BALIWAG TRANSIT, INC., petitioner, vs.
HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and GEORGE L. CAILIPAN, respondents.
(G.R. No. 80447 January 31, 1989)

 On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was filed by private
respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son George, of legal age, against
petitioner Baliwag Transit (Baliwag, for brevity).
 The Complaint alleged that George, who was a paying passenger on a Baliwag bus on 17 December 1984, suffered
multiple serious physical injuries when he was thrown off said bus driven in a careless and negligent manner by
Leonardo Cruz, the authorized bus driver, along Barangay Patubig, Marilao, Bulacan. As a result, he was confined
in the hospital for treatment, incurring medical expenses, which were borne by his parents, the respondent
Spouses, in the sum of about P200,000.00 plus other incidental expenses of about P10,000.00.
 On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries sustained by George was
solely attributable to his own voluntary act in that, without warning and provocation, he suddenly stood up from
his seat and headed for the door of the bus as if in a daze, opened it and jumped off while said bus was in motion,
in spite of the protestations by the driver and without the knowledge of the conductor.
 Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its third-party
liability insurance in the amount of P50,000.00. In its Answer, Fortune Insurance claimed limited liability
 On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag each filed Motions to
Dismiss on the ground that George, in consideration of the sum of P8,020.50 had executed a "Release of Claims"
dated 16 May 1985.
 These Motions were denied by the Trial Court in an Order dated 13 January 1986 as they were filed beyond the
time for pleading and after the Answer were already filed.
 On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by the Trial Court. The
Amended Answer incorporated the affirmative defense in the Motion to Dismiss to the effect that on 16 May
1985, George bad been paid all his claims for damages arising from the incident subject matter of the complaint
when he executed the "Release of Claims"
 By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified that be is the
father of George, who at the time of the incident was a student, living with his parents and totally dependent on
them for their support; that the expenses for his hospitalization were shouldered by his parents; and that they
had not signed the "Release of Claims."
 In an Order dated 29 August 1986, the Regional Trial Court of Bulacan ruled that since the contract of carriage is
between Baliwag and George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute the
Release of Claims despite the fact that he is still a student and dependent on his parents for support.
 Consequently, the execution by George of the Release of Claims discharges Baliwag and Fortune Insurance.
 The Spouses appealed to respondent Court of Appeals.
 On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed Order and holding that
the "Release of Claims" cannot operate as a valid ground for the dismissal of the case because it does not have
the conformity of all the parties, particularly George's parents, who have a substantial interest in the case as they
stand to be prejudiced by the judgment because they spent a sizeable amount for the medical bills of their son;
that the Release of Claims was secured by Fortune Insurance for the consideration of P8,020.50 as the full and
final settlement of its liability under the insurance policy and not for the purpose of releasing Baliwag from its
liability as a carrier in this suit for breach of contract. The Appellate Court also ordered the remand of the case to
the lower Court for trial on the merits and for George to return the amount of P8,020.50 to Fortune Insurance.
 Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court judgment.
 The issue brought to the fore is the legal effect of the Release of Claims executed by George during the pendency
of this case.
 We hold that since the suit is one for breach of contract of carriage, the Release of Claims executed by him, as the
injured party, discharging Fortune Insurance and Baliwag from any and all liability is valid. He was then of legal
 age, a graduating student of Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37
in relation to Article 402, Civil Code). Thus, he could sue and be sued even without the assistance of his parents.
 Significantly, the contract of carriage was actually between George, as the paying passenger, and Baliwag, as the
common carrier. As such carrier, Baliwag was bound to carry its passengers safely as far as human care and
foresight could provide, and is liable for injuries to them through the negligence or wilful acts of its employees
(Articles 1755 and 1759, Civil Code). Thus, George had the right to be safely brought to his destination and
Baliwag had the correlative obligation to do so.
 Since a contract may be violated only by the parties thereto, as against each other, in an action upon that
contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract
(Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14, 1987, 156 SCRA 368). A real
party-in-interest -plaintiff is one who has a legal right while a real party-in-interest-defendant is one who has a
correlative legal obligation whose act or omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R.
No. 60973, May 28, 1988). In the absence of any contract of carriage between Baliwag and George's parents, the
latter are not real parties-in-interest in an action for breach of that contract.
 The general rule of the common law is that every action must be brought in the name of the party whose legal
right has been invaded or infringed. 15 Enc. P1. & Pr. p. 484. "For the immediate wrong and damage the person
injured is the only one who can maintain the action." Id. p. 578. The person who sustains an injury is the person to
bring an action for the injury against the wrongdoer." Dicey parties to Actions, 347. (Cited in Green v. Shoemaker,
73 A 688, 23 L.R.A., N.S. 667).
 There is no question regarding the genuineness and due execution of the Release of Claims. It is a duly notarized
public document. It clearly stipulates that the consideration of P8,020.50 received by George was "to release and
forever discharge Fortune Insurance and/or Baliwag from any and all liabilities now accrued or to accrue on
account of any and all claims or causes of action ... for personal injuries, damage to property, loss of services,
medical expenses, losses or damages of any and every kind or nature whatsoever, sustained by him on 17
December 1984 thru Reckless Imprudence Resulting to Physical Injuries."
 The Release of Claims had the effect of a compromise agreement since it was entered into for the purpose of
making a full and final compromise adjustment and settlement of the cause of action involved. A compromise is a
contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already
commenced (Article 2028, Civil Code). The Release of Claims executed by the injured party himself wrote finish to
this litigation.

3. MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO CABIL, vs. COURT OF APPEALS [G.R. No. 111127. July 26, 1996]

 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.
 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 ,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.
 The Lingayen police investigated. they filed a criminal complaint against the driver, Porfirio Cabil. The case was
later filed with the Lingayen Regional Trial Court.
 Amyline Antonio suffers from paraplegia and is permanently paralyzed from the waist down.
 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.
 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.

 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.
 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 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,There is testimony[4] 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.
 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
service.[5]
 Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the
guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring
of consistent compliance with the rules.[6]
 In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact
that Cabil had been driving for school children only, from their homes to the St. Scholasticas College in Metro
Manila.[7] They had hired him only after a two-week apprenticeship. They had tested him for certain matters,
such as whether he could remember the names of the children he would be taking to school, which were
irrelevant to his qualification to drive on a long distance travel, especially considering that the trip to La Union was
his first.The existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the
presumption of negligence on the part of an employer.[8]
 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, caused by the negligence either of the
locomotive engineer or the automobile driver.[9]
 As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be
engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply
to them.
 As this Court has held:[10]Art. 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
 The above article makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article
1732 also carefully avoids making any distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one 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.
 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.
 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.
 On the theory that petitioners are liable for breach of contract of carriage, the award of moral damages is
authorized by Art. 1764, in relation to Art. 2220, since Cabils gross negligence amounted to bad faith.[12] 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
respondents, in whose favor the awards were made, have not appealed.[13]
 As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on
that of breach of contract. The question is whether, as the two courts below held, petitioners, who are the
owners and driver of the bus, may be made to respond jointly and severally to private respondent. We hold that
they may be.
 In Dangwa Trans. Co. Inc. v. Court of Appeals,[14] on facts similar to those in this case, this Court held the bus
company and the driver jointly and severally liable for damages for injuries suffered by a passenger.Again,
in Bachelor Express, Inc. v. Court of Appeals[15] 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 an accident.
 In Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court,[17] and Metro Manila
Transit Corporation v. Court of Appeals,[18] 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 of
this allocation of liability was explained in Viluan v. Court of Appeals,[19] 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
under the circumstances they are liable on quasi-delict.[20]
 It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] 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. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16
SCRA 742) . . .[22]
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.
4. EVERETT STEAMSHIP CORPORATION, vs. COURT OF APPEALS and HERNANDEZ TRADING CO. INC., [G.R. No.
122494. October 8, 1998]

 Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13
and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign
corporation based in Inazawa, Aichi, Japan.
 The crates were shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by petitioners
principal, Everett Orient Lines. The said crates were covered by Bill of Lading No. NGO53MN.
 Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This
was confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent,
which thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to One Million
Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-
941, dated November 14, 1991.
 However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount
stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner.
 Private respondent rejected the offer and thereafter instituted a suit for collection against petitioner before the
Regional Trial Court of Caloocan City, Branch 126.
 At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed
instead to file their respective memoranda.
 On July 16, 1993, the trial court rendered judgment[2] in favor of private respondent, ordering petitioner to
pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and
the material and packaging cost; (c) 10% of the total amount as an award for and as contingent attorneys fees;
and (d) to pay the cost of the suit. The trial court ruled:
 Considering defendants categorical admission of loss and its failure to overcome the presumption of negligence
and fault, the Court conclusively finds defendant liable to the plaintiff.
 The next point of inquiry the Court wants to resolve is the extent of the liability of the defendant.
 As stated earlier, plaintiff contends that defendant should be held liable for the whole value for the loss of the
goods in the amount of Y1,552,500.00 because the terms appearing at the back of the bill of lading was so written
in fine prints and that the same was not signed by plaintiff or shipper thus, they are not bound by the clause
stated in paragraph 18 of the bill of lading.
 On the other hand, defendant merely admitted that it lost the shipment but shall be liable only up to the amount
of Y100,000.00.
 The Court subscribes to the provisions of Article 1750 of the New Civil Code Art. 1750. A contract fixing the sum
that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it
is reasonable and just under the circumstances, and has been fairly and freely agreed upon.
 It is required, however, that the contract must be reasonable and just under the circumstances and has been
fairly and freely agreed upon. The requirements provided in Art. 1750 of the New Civil Code must be complied
with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or
deterioration of the goods it has undertaken to transport.
 In the case at bar, the Court is of the view that the requirements of said article have not been met. The fact that
those conditions are printed at the back of the bill of lading in letters so small that they are hard to read would
not warrant the presumption that the plaintiff or its supplier was aware of these conditions such that he had fairly
and freely agreed to these conditions. It can not be said that the plaintiff had actually entered into a contract with
 the defendant, embodying the conditions as printed at the back of the bill of lading that was issued by the
defendant to plaintiff.
 On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial courts findings with the
additional observation that private respondent can not be bound by the terms and conditions of the bill of lading
because it was not privy to the contract of carriage. It said: As to the amount of liability, no evidence appears on
record to show that the appellee (Hernandez Trading Co.) consented to the terms of the Bill of Lading. The
shipper named in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.)
contracted with for the transportation of the lost goods.
 Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the bill of lading
when it delivered the cargo to the appellant, still it does not necessarily follow that appellee Hernandez Trading
Company as consignee is bound thereby considering that the latter was never privy to the shipping contract.
 Never having entered into a contract with the appellant, appellee should therefore not be bound by any of the
terms and conditions in the bill of lading.
 Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of which is not the
breach of contract as appellee was never a privy to the any contract with the appellant, but is based on Article
1735 of the New Civil Code, there being no evidence to prove satisfactorily that the appellant has overcome the
presumption of negligence provided for in the law.
 Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of the consignee
to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it; (2) in
holding that the carriers limited package liability as stipulated in the bill of lading does not apply in the instant
case; and (3) in allowing private respondent to fully recover the full alleged value of its lost cargo.
 We shall first resolve the validity of the limited liability clause in the bill of lading.
 A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certain
sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and
1750 of the Civil Code which provide:
 ART. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill
of lading, unless the shipper or owner declares a greater value, is binding.
 ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and
fairly agreed upon.
 Such limited-liability clause has also been consistently upheld by this Court in a number of cases.[3] Thus, in Sea
Land Service, Inc. vs Intermediate Appellate Court[4], we ruled: It seems clear that even if said section 4 (5) of the
Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill
of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said
stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would
amount to questioning the justness and fairness of the law itself, and this the private respondent does not
pretend to do. But over and above that consideration, the just and reasonable character of such stipulation is
implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and
surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading..
 Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carriers
liability for loss must be reasonable and just under the circumstances, and has been freely and fairly agreed upon.
 The bill of lading subject of the present controversy specifically provides, among others: 18. All claims for which
the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice cost plus freight and
insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any
consequential loss. The carrier shall not be liable for any loss of or any damage to or in any connection with,
goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent
in any other currency per package or customary freight unit (whichever is least) unless the value of the goods
 higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and
inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)
 The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman
Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability
of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not
complying with the stipulations.
 The trial courts ratiocination that private respondent could not have fairly and freely agreed to the limited liability
clause in the bill of lading because the said conditions were printed in small letters does not make the bill of
lading invalid.
 We ruled in PAL, Inc. vs. Court of Appeals[5] that the jurisprudence on the matter reveals the consistent holding
of the court that contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the
binding effect thereof. Also, in Philippine American General Insurance Co., Inc. vs. Sweet Lines , Inc.[6] this Court ,
speaking through the learned Justice Florenz D. Regalado, held: x x x Ong Yiu vs. Court of Appeals, et.al., instructs
us that contracts of adhesion wherein one party imposes a ready-made form of contract on the other x x x are
contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he
adheres he gives his consent.
 In the present case, not even an allegation of ignorance of a party excuses non-compliance with the contractual
stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage
devolves not on the carrier but on the owner, shipper, or consignee as the case may be. (Emphasis supplied)
 It was further explained in Ong Yiu vs Court of Appeals[7] that stipulations in contracts of adhesion are valid and
binding. While it may be true that petitioner had not signed the plane ticket x x, he is nevertheless bound by the
provisions thereof. Such provisions have been held to be a part of the contract of carriage, and valid and binding
upon the passenger regardless of the latters lack of knowledge or assent to the regulation. It is what is known as a
contract of adhesion,
 Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said
contracts must be carefully scrutinized in order to shield the unwary (or weaker party) from deceptive schemes
contained in ready-made covenants,[8] such as the bill of lading in question. The stringent requirement which the
courts are enjoined to observe is in recognition of Article 24 of the Civil Code which mandates that (i)n all
contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant
for his protection.
 The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be
said to be ignorant of the business transactions it entered into involving the shipment of its goods to its
customers. The shipper could not have known, or should know the stipulations in the bill of lading and there it
should have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has not been heard
to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioners vessel. In fact, it was
not even impleaded in this case.
 The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the bill
of lading is bound by the stipulations thereof.
 Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the consignee was
not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound
by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled:
 To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the
carrier or shipper for loss of, or damage to goods being transported under said bill, although that document may
have been- as in practice it oftentimes is-drawn up only by the consignor and the carrier without the intervention
of the consignee. The right of a party in the same situation as respondent here, to recover for loss of a shipment
consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs from
either a relation of agency that may exist between him and the shipper or consignor, or his status as stranger in
 whose favor some stipulation is made in said contract, and who becomes a party thereto when he demands
fulfillment of that stipulation, in this case the delivery of the goods or cargo shipped. In neither capacity can he
assert personally, in bar to any provision of the bill of lading, the alleged circumstance that fair and free
agreement to such provision was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it
may be observed that in one comparatively recent case (Phoenix Assurance Company vs. Macondray & Co., Inc.,
64 SCRA 15) where this Court found that a similar package limitation clause was printed in the smallest type on
the back of the bill of lading, it nonetheless ruled that the consignee was bound thereby on the strength of
authority holding that such provisions on liability limitation are as much a part of a bill of lading as though
physically in it and as though placed therein by agreement of the parties.
 There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon
stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and inserts it into said contract or bill. This proposition,
moreover, rests upon an almost uniform weight of authority. (Underscoring supplied)
 When private respondent formally claimed reimbursement for the missing goods from petitioner and
subsequently filed a case against the latter based on the very same bill of lading, it (private respondent) accepted
the provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce
it.[9]
 Thus, private respondent cannot now reject or disregard the carriers limited liability stipulation in the bill of
lading. In other words, private respondent is bound by the whole stipulations in the bill of lading and must respect
the same.
 Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo in the
amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the shipment x x x,
the contents of each crate, the dimensions, weight and value of the contents,"[10] as shown in the commercial
Invoice No. MTM-941.
 This claim was denied by petitioner, contending that it did not know of the contents, quantity and value of "the
shipment which consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN merely as 3
CASES SPARE PARTS.[11]

The bill of lading in question confirms petitioners contention. To defeat the carriers limited liability, the aforecited
Clause 18 of the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods
before receipt thereof by the carrier and insert the said declaration in the bill of lading, with the extra freight
paid. These requirements in the bill of lading were never complied with by the shipper, hence, the liability of the
carrier under the limited liability clause stands. The commercial Invoice No. MTM-941 does not in itself sufficiently
and convincingly show that petitioner has knowledge of the value of the cargo as contended by private
respondent. No other evidence was proffered by private respondent to support is contention. Thus, we are convinced
that petitioner should be liable for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen,
pursuant to Clause 18 of the bill of lading.
5. MOF Co. vs Shin Yang Brokerage Co (G.R.NO. 172822; Dec.18, 2009)
The necessity of proving lies with the person who sues.
The refusal of the consignee named in the bill of lading to pay the freightage on the claim that it is not privy to the
contract of affreightment propelled the shipper to sue for collection of money, stressing that its sole evidence, the bill
of lading, suffices to prove that the consignee is bound to pay. Petitioner now comes to us by way of Petition for
Review on Certiorari[1] under Rule 45 praying for the reversal of the Court of Appeals' (CA) judgment that dismissed
its action for sum of money for insufficiency of evidence.
Factual Antecedents

 On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manila secondhand cars and other
articles on board the vessel Hanjin Busan 0238W.
 The bill of lading covering the shipment, , which was prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin),
named respondent Shin Yang Brokerage Corp. (Shin Yang) as the consignee and indicated that payment was on a
Freight Collect basis, i.e., that the consignee/receiver of the goods would be the one to pay for the freight and
other charges in the total amount of P57,646.00.
 The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF Company, Inc. (MOF), Hanjins
exclusive general agent in the Philippines, repeatedly demanded the payment of ocean freight, documentation
fee and terminal handling charges from Shin Yang.
 The latter, however, failed and refused to pay contending that it did not cause the importation of the goods, that
it is only the Consolidator of the said shipment, that the ultimate consignee did not endorse in its favor the
original bill of lading and that the bill of lading was prepared without its consent.
 Thus, on March 19, 2003, MOF filed a case for sum of money before
the Metropolitan Trial Court of Pasay City (MeTC Pasay).
 MOF alleged that Shin Yang, a regular client, caused the importation and shipment of the goods and assured it
that ocean freight and other charges would be paid upon arrival of the goods in Manila.
 Yet, after Hanjin's compliance, Shin Yang unjustly breached its obligation to pay.
 MOF argued that Shin Yang, as the named consignee in the bill of lading, entered itself as a party to the contract
and bound itself to the Freight Collect arrangement.
 MOF thus prayed for the payment of P57,646.00 representing ocean freight, documentation fee and terminal
handling charges as well as damages and attorneys fees.
 Claiming that it is merely a consolidator/forwarder and that Bill of Lading No. HJSCPUSI14168303 was not
endorsed to it by the ultimate consignee, Shin Yang denied any involvement in shipping the goods or in promising
to shoulder the freightage.
 It asserted that it never authorized Halla Trading Co. to ship the articles or to have its name included in the bill of
lading.
 Shin Yang also alleged that MOF failed to present supporting documents to prove that it was Shin Yang that
caused the importation or the one that assured payment of the shipping charges upon arrival of the goods
in Manila.

Ruling of the Metropolitan Trial Court

On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision[4] in favor of MOF. It ruled that Shin Yang
cannot disclaim being a party to the contract of affreightment because:

x x x it would appear that defendant has business transactions with plaintiff. This is evident from defendants letters
dated 09 May 2002 and 13 May 2002 (Exhibits 1 and 2, defendants Position Paper) where it requested for the release
of refund of container deposits x x x. [In] the mind of the Court, by analogy, a written contract need not be necessary;
a mutual understanding [would suffice]. Further, plaintiff would have not included the name of the defendant in the
bill of lading, had there been no prior agreement to that effect.

In sum, plaintiff has sufficiently proved its cause of action against the defendant and the latter is obliged to honor its
agreement with plaintiff despite the absence of a written contract.[5]

The dispositive portion of the MeTC Decision reads:

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

1. P57,646.00 plus legal interest from the date of demand until fully paid,
2. P10,000.00 as and for attorneys fees and
3. the cost of suit.
Ruling of the Regional Trial Court
The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto the Decision of the MeTC. It held that:

MOF and Shin Yang entered into a contract of affreightment which Blacks Law Dictionary defined as a contract with
the ship owner to hire his ship or part of it, for the carriage of goods and generally take the form either of a charter
party or a bill of lading.

The bill of lading contain[s] the information embodied in the contract.

Article 652 of the Code of Commerce provides that the charter party must be in writing; however, Article 653 says: If
the cargo should be received without charter party having been signed, the contract shall be understood as executed
in accordance with what appears in the bill of lading, the sole evidence of title with regard to the cargo for
determining the rights and obligations of the ship agent, of the captain and of the charterer. Thus, the Supreme Court
opined in the Market Developers, Inc. (MADE) vs. Honorable Intermediate Appellate Court and Gaudioso Uy, G.R. No.
74978, September 8, 1989, this kind of contract may be oral. In another case, Compania Maritima vs. Insurance
Company of North America, 12 SCRA 213 the contract of affreightment by telephone was recognized where the oral
agreement was later confirmed by a formal booking.
Defendant is liable to pay the sum of P57,646.00, with interest until fully paid, attorneys fees of P10,000.00 [and] cost
of suit.
Considering all the foregoing, this Court affirms in toto the decision of the Court a quo.
Ruling of the Court of Appeals
Seeing the matter in a different light, the CA dismissed MOFs complaint and refused to award any form of damages or
attorneys fees. It opined that MOF failed to substantiate its claim that Shin Yang had a hand in the importation of the
articles to the Philippines or that it gave its consent to be a consignee of the subject goods. In its March 22,
2006 Decision,[8] the CA said:

This Court is persuaded [that except] for the Bill of Lading, respondent has not presented any other evidence to
bolster its claim that petitioner has entered [into] an agreement of affreightment with respondent, be it verbal or
written. It is noted that the Bill of Lading was prepared by Hanjin Shipping, not the petitioner. Hanjin is the principal
while respondent is the formers agent. (p. 43, rollo)

The conclusion of the court a quo, which was upheld by the RTC Pasay City, Branch 108 xxx is purely speculative and
conjectural. A court cannot rely on speculations, conjectures or guesswork, but must depend upon competent proof
and on the basis of the best evidence obtainable under the circumstances. Litigation cannot be properly resolved by
suppositions, deductions or even presumptions, with no basis in evidence, for the truth must have to be determined
by the hard rules of admissibility and proof (Lagon vs. Hooven Comalco Industries, Inc. 349 SCRA 363).

While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the goods shipped; second, it is a
contract by which three parties, namely, the shipper, the carrier and the consignee who undertake specific
responsibilities and assume stipulated obligations (Belgian Overseas Chartering and Shipping N.V. vs. Phil. First
Insurance Co., Inc., 383 SCRA 23), x x x if the same is not accepted, it is as if one party does not accept the
contract. Said the Supreme Court:

A bill of lading delivered and accepted constitutes the contract of carriage[,] even though not signed, because the
acceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the
contract and of all its terms and conditions of which the acceptor has actual or constructive notice (Keng Hua Paper
Products Co., Inc. vs. CA, 286 SCRA 257).
In the present case, petitioner did not only [refuse to] accept the bill of lading, but it likewise disown[ed] the shipment
x x x. [Neither did it] authorize Halla Trading Company or anyone to ship or export the same on its behalf.

It is settled that a contract is upheld as long as there is proof of consent, subject matter and cause (Sta. Clara
Homeowners Association vs. Gaston, 374 SCRA 396). In the case at bar, there is not even any iota of evidence to show
that petitioner had given its consent.

He who alleges a fact has the burden of proving it and a mere allegation is not evidence (Luxuria Homes Inc. vs. CA,
302 SCRA 315).

The 40-footer van contains goods of substantial value. It is highly improbable for petitioner not to pay the charges,
which is very minimal compared with the value of the goods, in order that it could work on the release thereof.

For failure to substantiate its claim by preponderance of evidence, respondent has not established its case against
petitioner.[9]

Petitioners filed a motion for reconsideration but it was denied in a Resolution[10] dated May 25, 2006. Hence, this
petition for review on certiorari.
Petitioners Arguments
In assailing the CAs Decision, MOF argues that the factual findings of both the MeTC and RTC are entitled to great
weight and respect and should have bound the CA. It stresses that the appellate court has no justifiable reason to
disturb the lower courts judgments because their conclusions are well-supported by the evidence on record.
MOF further argues that the CA erred in labeling the findings of the lower courts as purely speculative and
conjectural. According to MOF, the bill of lading, which expressly stated Shin Yang as the consignee, is the best
evidence of the latters actual participation in the transportation of the goods. Such document, validly entered, stands
as the law among the shipper, carrier and the consignee, who are all bound by the terms stated therein. Besides, a
carriers valid claim after it fulfilled its obligation cannot just be rejected by the named consignee upon a simple denial
that it ever consented to be a party in a contract of affreightment, or that it ever participated in the preparation of
the bill of lading. As against Shin Yangs bare denials, the bill of lading is the sufficient preponderance of evidence
required to prove MOFs claim. MOF maintains that Shin Yang was the one that supplied all the details in the bill of
lading and acquiesced to be named consignee of the shipment on a Freight Collect basis.

Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot avoid its obligation to pay, because it never
objected to being named as the consignee in the bill of lading and that it only protested when the shipment arrived in
the Philippines, presumably due to a botched transaction between it and Halla Trading Co. Furthermore, Shin Yangs
letters asking for the refund of container deposits highlight the fact that it was aware of the shipment and that it
undertook preparations for the intended release of the shipment.
Respondents Arguments
Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove that it consented to take part in the
contract of affreightment. Shin Yang argues that MOF miserably failed to present any evidence to prove that it was
the one that made preparations for the subject shipment, or that it is an actual shipping practice that
forwarders/consolidators as consignees are the ones that provide carriers details and information on the bills of
lading.

Shin Yang contends that a bill of lading is essentially a contract between the shipper and the carrier and ordinarily, the
shipper is the one liable for the freight charges. A consignee, on the other hand, is initially a stranger to the bill of
lading and can be liable only when the bill of lading specifies that the charges are to be paid by the consignee. This
liability arises from either a) the contract of agency between the shipper/consignor and the consignee; or b) the
consignees availment of the stipulation pour autrui drawn up by and between the shipper/ consignor and carrier upon
the consignees demand that the goods be delivered to it. Shin Yang contends that the fact that its name was
mentioned as the consignee of the cargoes did not make it automatically liable for the freightage because it never
benefited from the shipment. It never claimed or accepted the goods, it was not the shippers agent, it was not aware
of its designation as consignee and the original bill of lading was never endorsed to it.
Issue
The issue for resolution is whether a consignee, who is not a signatory to the bill of lading, is bound by the stipulations
thereof. Corollarily, whether respondent who was not an agent of the shipper and who did not make any demand for
the fulfillment of the stipulations of the bill of lading drawn in its favor is liable to pay the corresponding freight and
handling charges.
Our Ruling
Since the CA and the trial courts arrived at different conclusions, we are constrained to depart from the general rule
that only errors of law may be raised in a Petition for Review on Certiorari under Rule 45 of the Rules of Court and will
review the evidence presented.[11]

The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the intervention of the
consignee. However, the latter can be bound by the stipulations of the bill of lading when a) there is a relation of
agency between the shipper or consignor and the consignee or b) when the consignee demands fulfillment of the
stipulation of the bill of lading which was drawn up in its favor.[12]

In Keng Hua Paper Products Co., Inc. v. Court of Appeals,[13] we held that once the bill of lading is received by the
consignee who does not object to any terms or stipulations contained therein, it constitutes as an acceptance of the
contract and of all of its terms and conditions, of which the acceptor has actual or constructive notice.

In Mendoza v. Philippine Air Lines, Inc.,[14] the consignee sued the carrier for damages but nevertheless claimed that
he was never a party to the contract of transportation and was a complete stranger thereto. In
debunking Mendozas contention, we held that:

x x x First, he insists that the articles of the Code of Commerce should be applied; that he invokes the provisions of
said Code governing the obligations of a common carrier to make prompt delivery of goods given to it under a
contract of transportation. Later, as already said, he says that he was never a party to the contract of transportation
and was a complete stranger to it, and that he is now suing on a tort or a violation of his rights as a stranger (culpa
aquiliana). If he does not invoke the contract of carriage entered into with the defendant company, then he would
hardly have any leg to stand on. His right to prompt delivery of the can of film at the Pili Air Port stems and is derived
from the contract of carriage under which contract, the PAL undertook to carry the can of film safely and to deliver it
to him promptly. Take away or ignore that contract and the obligation to carry and to deliver and right to prompt
delivery disappear. Common carriers are not obligated by law to carry and to deliver merchandise, and persons are
not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said
rights and obligations are created by a specific contract entered into by the parties. In the present case, the findings
of the trial court which as already stated, are accepted by the parties and which we must accept are to the effect that
the LVN Pictures Inc. and Jose Mendoza on one side, and the defendant company on the other, entered into a
contract of transportation (p. 29, Rec. on Appeal). One interpretation of said finding is that the LVN Pictures Inc.
through previous agreement with Mendoza acted as the latter's agent. When he negotiated with the LVN Pictures Inc.
to rent the film 'Himala ng Birhen' and show it during the Naga town fiesta, he most probably authorized and enjoined
the Picture Company to ship the film for him on the PAL on September 17th. Another interpretation is that even if the
LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza for the time being,
made Mendoza a consignee. [Mendoza made himself a party to the contract of transportaion when he appeared at
the Pili Air Port armed with the copy of the Air Way Bill (Exh. 1) demanding the delivery of the shipment to him.] The
very citation made by appellant in his memorandum supports this view. Speaking of the possibility of a conflict
between the order of the shipper on the one hand and the order of the consignee on the other, as when the shipper
orders the shipping company to return or retain the goods shipped while the consignee demands their delivery,
Malagarriga in his book Codigo de Comercio Comentado, Vol. 1, p. 400, citing a decision of the Argentina Court of
Appeals on commercial matters, cited by Tolentino in Vol. II of his book entitled 'Commentaries and Jurisprudence on
the Commercial Laws of the Philippines' p. 209, says that the right of the shipper to countermand the shipment
terminates when the consignee or legitimate holder of the bill of lading appears with such bill of lading before the
carrier and makes himself a party to the contract. Prior to that time he is a stranger to the contract.

Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of the old Civil Code (now
Art. 1311, second paragraph) which reads thus:

Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment provided he has
given notice of his acceptance to the person bound before the stipulation has been revoked.'

Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the stipulations of
delivery to Mendoza as consignee. His demand for the delivery of the can of film to him at the Pili Air Port may be
regarded as a notice of his acceptance of the stipulation of the delivery in his favor contained in the contract of
carriage and delivery. In this case he also made himself a party to the contract, or at least has come to court to
enforce it. His cause of action must necessarily be founded on its breach.[15] (Emphasis Ours)

In sum, a consignee, although not a signatory to the contract of carriage between the shipper and the carrier,
becomes a party to the contract by reason of either a) the relationship of agency between the consignee and the
shipper/ consignor; b) the unequivocal acceptance of the bill of lading delivered to the consignee, with full knowledge
of its contents or c) availment of the stipulation pour autrui, i.e., when the consignee, a third person, demands before
the carrier the fulfillment of the stipulation made by the consignor/shipper in the consignees favor, specifically the
delivery of the goods/cargoes shipped.[16]

In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla Trading, Co. to ship the
goods on its behalf; or that it got hold of the bill of lading covering the shipment or that it demanded the release of
the cargo. Basic is the rule in evidence that the burden of proof lies upon him who asserts it, not upon him who
denies, since, by the nature of things, he who denies a fact cannot produce any proof of it.[17] Thus, MOF has the
burden to controvert all these denials, it being insistent that Shin Yang asserted itself as the consignee and the one
that caused the shipment of the goods to the Philippines.

In civil cases, the party having the burden of proof must establish his case by preponderance of evidence,[18] which
means evidence which is of greater weight, or more convincing than that which is offered in opposition to
it.[19] Here, MOF failed to meet the required quantum of proof. Other than presenting the bill of lading, which, at
most, proves that the carrier acknowledged receipt of the subject cargo from the shipper and that the consignee
named is to shoulder the freightage, MOF has not adduced any other credible evidence to strengthen its cause of
action. It did not even present any witness in support of its allegation that it was Shin Yang which furnished all the
details indicated in the bill of lading and that Shin Yang consented to shoulder the shipment costs. There is also
nothing in the records which would indicate that Shin Yang was an agent of Halla Trading Co. or that it exercised any
act that would bind it as a named consignee. Thus, the CA correctly dismissed the suit for failure of petitioner to
establish its cause against respondent.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated March 22, 2006 dismissing
petitioners complaint and the Resolution dated May 25, 2006denying the motion for reconsideration are AFFIRMED.

6. BRITISH AIRWAYS, INC., petitioner,

vs.
 THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND GENERAL
SERVICES, respondents. G.R. No. 92288 February 9, 1993

This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of
Appeals1 affirming the decision of the trial court2 in ordering petitioner British Airways, Inc. to pay private
respondent First International Trading and General Services actual damages, moral damages, corrective or exemplary
damages, attorney's fees and the costs as well as the Resolution dated February 15, 19903 denying petitioner's
Motion for Reconsideration in the appealed decision.

 On February 15, 1981, private respondent First International Trading and General Services Co., a duly licensed
domestic recruitment and placement agency, received a telex message from its principal ROLACO Engineering
and Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal.
 During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways, Inc.
airfare tickets for 93 contract workers with specific instruction to transport said workers to Jeddah on or before
March 30, 1981.
 As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private
respondent was immediately informed by petitioner that its principal had forwarded 93 prepaid tickets.
 Thereafter, private respondent instructed its travel agent, ADB Travel and Tours. Inc., to book the 93 workers with
petitioner but the latter failed to fly said workers, thereby compelling private respondent to borrow money in the
amount of P304,416.00 in order to purchase airline tickets from the other airlines as evidenced by the cash
vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave immediately since
the visas of said workers are valid only for 45 days and the Bureau of Employment Services mandates that
contract workers must be sent to the job site within a period of 30 days.
 Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had
received a prepaid ticket advice from its Jeddah branch for the transportation of 27 contract workers.
 Immediatety, private respondent instructed its travel agent to book the 27 contract workers with the petitioner
but the latter was only able to book and confirm 16 seats on its June 9, 1981 flight.
 However, on the date of the scheduled flight only 9 workers were able to board said flight while the remaining 7
workers were rebooked to June 30, 1981 which bookings were again cancelled by the petitioner without any prior
notice to either private respondent or the workers.
 Thereafter, the 7 workers were rebooked to the July 4,1981 flight of petitioner with 6 more workers booked for
said flight. Unfortunately, the confirmed bookings of the 13 workers were again cancelled and rebooked to July 7,
1981.
 On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when
the receipt of the tax payments was submitted, the latter informed private respondent that it can only confirm
the seats of the 12 workers on its July 7, 1981 flight. However, the confirmed seats of said workers were again
cancelled without any prior notice either to the private respondent or said workers. The 12 workers were finally
able to leave for Jeddah after private respondent had bought tickets from the other airlines.
 As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the
damages it had incurred by the latter's repeated failure to transport its contract workers despite confirmed
bookings and payment of the corresponding travel taxes.
 On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to
pay the amount of P350,000.00 representing damages and unrealized profit or income which was denied by the
petitioner.
 On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the
remaining recruited workers due to the delay in transporting the workers to Jeddah.5
 On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial
Court of Manila, Branch 1 in Civil Case No. 82-4653.
 On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message from
Jeddah on March 20, 1981 advising that the principal of private respondent had prepaid the airfares of 100
persons to transport private respondent's contract workers from Manila to Jeddah on or before March 30, 1981.
However, due to the unavailability of space and limited time, petitioner had to return to its sponsor in Jeddah the
prepaid ticket advice consequently not even one of the alleged 93 contract workers were booked in any of its
flights.
 On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private
respondent to Jeddah but the travel agent of the private respondent booked only 10 contract workers for
petitioner's June 9, 1981 flight. However, only 9 contract workers boarded the scheduled flight with 1 passenger
not showing up as evidenced by the Philippine Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A",
"7-B" and "7-C").6
 Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981
flight but said travel agent cancelled the booking of 2 passengers while the other 3 passengers did not show up on
said flight.
 Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to
the previous 5 contract workers who were not able to board the July 4, 1981 flight with the petitioner's July 7,
1981 flight which was accepted by petitioner subject to reconfirmation.
 However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a
reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the bookings of private
respondent's 12 contract workers. In the morning of July 7, 1981, the computer system of the petitioner was
reinstalled and immediately petitioner tried to reinstate the bookings of the 12 workers with either Gulf Air or
Saudi Arabia Airlines but both airlines replied that no seat was available on that date and had to place the 12
workers on the wait list. Said information was duly relayed to the private respondent and the 12 workers before
the scheduled flight.
 After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which
reads as follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00;
2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00;
3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or exemplary damages;
4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; and
5. To pay the costs.7

 On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied
its Motion for Reconsideration on February 28, 1986.On November 15, 1989, respondent appellate court
affirmed the decision of the trial court, the dispositive portion of which reads: WHEREFORE, the decision
appealed from is hereby AFFIRMED with costs against the appellant.8
 On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.

Hence, this petition.

 It is the contention of petitioner that private respondent has no cause of action against it there being no perfected
contract of carriage existing between them as no ticket was ever issued to private respondent's contract workers
and, therefore, the obligation of the petitioner to transport said contract workers did not arise.
 Furthermore, private respondent's failure to attach any ticket in the complaint further proved that it was never a
party to the alleged transaction.

Petitioner's contention is untenable.

 Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or
omission of one party in violation of the legal right or rights of the other.9 Petitioner's repeated failures to
 transport private respondent's workers in its flight despite confirmed booking of said workers clearly constitutes
breach of contract and bad faith on its part.
 In resolving petitioner's theory that private respondent has no cause of action in the instant case, the appellate
court correctly held that:
 In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects
of the same, namely:
 (a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected by
mere consent (See Article 1356, Civil Code of the Philippines), and
 (b) the contract "of carriage" or "of common carriage" itself which should be considered as a real contract for not
until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier. (Paras,
Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.)
 In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the mere
consent of the parties.
 There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from Manila to
Jeddah.
 The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid ticket
advice that ROLACO Engineering has prepaid the airfares of the appellee's contract workers advising the appellant
that it must transport the contract workers on or before the end of March, 1981 and the other batch in June,
1981.
 Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket
was yet issued, the fact remains that the passage had already been paid for by the principal of the appellee, and
the appellant had accepted such payment. The existence of this payment was never objected to nor questioned
by the appellant in the lower court.
 Thus, the cause or consideration which is the fare paid for the passengers exists in this case.
 The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is the
transport of the passengers from the place of departure to the place of destination as stated in the telex.
 Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing
reciprocal obligations on both parties.
 In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its
willingness for its contract workers to leave for their place of destination.
 On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the contract
workers on their flight despite confirmation and bookings made by appellee's travelling agent.
 Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the
period of compliance therewith, and with emphasis that it could only be used if the passengers fly on BA. Under
the circumstances, the appellant should have refused acceptance of the PTA from appellee's principal or to at
least inform appellee that it could not accommodate the contract workers.
 While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the appellee's
contract workers who were recruited for ROLACO Engineering and the said contract workers were the intended
passengers in the aircraft of the appellant, the said contract "to carry" also involved the appellee for as recruiter
he had to see to it that the contract workers should be transported to ROLACO Engineering in Jeddah thru the
appellant's transportation. For that matter, the involvement of the appellee in the said contract "to carry" was
well demonstrated when the appellant upon receiving the PTA immediately advised the appellee thereof.
 Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00
to private respondent since all expenses had already been subsequently reimbursed by the latter's principal.
 In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00
representing actual damages refers to private respondent's second cause of action involving the expenses
incurred by the latter which were not reimbursed by ROLACO Engineering.
 However, in the Complaint 11 filed by private respondent, it was alleged that private respondent suffered actual
damages in the amount of P308,016.00 representing the money it borrowed from friends and financiers which is
P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax of the 12 workers.
 It is clear therefore that the actual damages private respondent seeks to recover are the airline tickets and travel
taxes it spent for its workers which were already reimbursed by its principal and not for any other expenses it had
incurred in the process of recruiting said contract workers. Inasmuch as all expenses including the processing fees
incurred by private respondent had already been paid for by the latter's principal on a staggered basis as
admitted in open court by its managing director, Mrs. Bienvenida Brusellas.
 We do not find anymore justification in the appellate court's decision in granting actual damages to private
respondent.
 Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its
contract workers when petitioner failed to transport said workers, the reimbursements made by its principal to
private respondent failed to support the latter's claim that it suffered actual damages as a result of petitioner's
failure to transport said workers. It is undisputed that private respondent had consistently admitted that its
principal had reimbursed all its expenses.
 Article 2199 of the Civil Code provides that: Except as provided by law or by stipulations, one is entitled to an
adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is
referred to as actual or compensatory damages.
 Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with
reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and
amount of damages, but must depend upon competent proof that they have suffered and on evidence of the
actual amount thereof.
 However, private respondent is entitled to an award of moral and exemplary damages for the injury suffered as a
result of petitioner's failure to transport the former's workers because of the latter's patent bad faith in the
performance of its obligation. As correctly pointed out by the appellate court:
 As evidence had proved, there was complete failure on the part of the appellant to transport the 93 contract
workers of the appellee on or before March 30, 1981 despite receipt of the payment for their airfares, and
acceptance of the same by the appellant, with specific instructions from the appellee's principal to transport the
contract workers on or before March 30, 1981.
 No previous notice was ever registered by the appellant that it could not comply with the same. And then
followed the detestable act of appellant in unilaterally cancelling, booking and rebooking unreasonably the flight
of appellee's contract workers in June to July, 1981 without prior notice. And all of these actuations of the
appellant indeed constitute malice and evident bad faith which had caused damage and besmirched the
reputation and business image of the appellee.
 As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no
claim for said damages was ever made by the petitioner immediately after their alleged occurrence therefore said
counterclaims were mere afterthoughts when private respondent filed the present case.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be
deleted from said decision.

7. COMPAÑIA MARITIMA, petitioner, vs.

INSURANCE COMPANY OF NORTH AMERICA, respondent. G.R. No. L-18965 October 30, 1964

 Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the
Compañia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa
private pier at Davao City to Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. on
board the S.S. Steel Navigator.
 This oral contract was later on confirmed by a formal and written booking issued by Macleod's branch office in
Sasa and handcarried to Compañia Maritima's branch office in Davao in compliance with which the latter sent to
 Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was completed on October
29, 1952. These two lighters were manned each by a patron and an assistant patron. The patrons of both barges
issued the corresponding carrier's receipts and that issued by the patron of Barge No. 1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF
PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator. FINAL DESTINATION: Boston.
 Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's
marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging to Compañia Maritima on
which the hemp was to be loaded.
 During the night of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the
damage or loss of 1,162 bales of hemp loaded therein.
 On October 30, 1952, Macleod promptly notified the carrier's main office in Manila and its branch in Davao
advising it of its liability.
 The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning,
and redrying.
 During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at
Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324
piculs which had a total value of 116,835.00. After reclassification, the value of the reconditioned hemp was
reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30
representing Macleod's expenses in checking, grading, rebating, and other fees for washing, cleaning and redrying
in the amount of P19.610.00, the total loss adds up to P60,421.02.
 All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with
the Insurance Company of North America against all losses and damages.
 In due time, Macleod filed a claim for the loss it suffered as above stated with said insurance company, and after
the same had been processed, the sum of P64,018.55 was paid, which was noted down in a document which
aside from being a receipt of the amount paid, was a subrogation agreement between Macleod and the insurance
company wherein the former assigned to the latter its rights over the insured and damaged cargo.
 Having failed to recover from the carrier the sum of P60,421.02, which is the only amount supported by receipts,
the insurance company instituted the present action on October 28, 1953.
 After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of
P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs.
This judgment was affirmed by the Court of Appeals on December 14, 1960.
 Hence, this petition for review.The issues posed before us are:
 (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp
was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the
S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore?;
 YES. As found by the Court of Appeals, Macleod and Company contracted by telephone the services of petitioner
to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently
transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written
booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to
undertake the service.
 It also appears that the patrons of said lighters were employees of the carrier with due authority to undertake the
transportation and to sign the documents that may be necessary therefor so much so that the patron of LCT No.
1025 signed the receipt covering the cargo of hemp loaded therein as follows: Received in behalf of S.S. Bowline
Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment
at Manila onto S.S. Steel Navigator. FINAL DESTINATION: Boston.
 The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa
preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already
entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract
of carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and
 the hemp delivered to the carrier's employees, the rights and obligations of the parties attached thereby
subjecting them to the principles and usages of the maritime law. In other words, here we have a complete
contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the
carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees,
under which Macleod became entitled to the privilege secured to him by law for its safe transportation and
delivery, and the carrier to the full payment of its freight upon completion of the voyage.
 The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and
if actually no goods are received there can be no such contract. The liability and responsibility of the carrier under
a contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an
authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the
custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability
commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods from
one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring
the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods as
soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied)
 The test as to whether the relation of shipper and carrier had been established is, Had the control and possession
of the cotton been completely surrendered by the shipper to the railroad company? Whenever the control and
possession of goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with
certainty that the relation of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30
S.W. 419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews &
Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade,
et al., 200 S.W. 148).
 The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship
that was to take it from Davao City to Manila is of no moment, for, as already stated, the delivery of the hemp to
the carrier's lighter is in line with the contract. In fact, the receipt signed by the patron of the lighter that carried
the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in good order and condition." On
the other hand, the authorities are to the effect that a bill of lading is not indispensable for the creation of a
contract of carriage.
 Bill of lading not indispensable to contract of carriage. — As to the issuance of a bill of lading, although article 350
of the Code of Commerce provides that "the shipper as well as the carrier of merchandise or goods may mutua-lly
demand that a bill of lading is not indispensable. As regards the form of the contract of carriage it can be said that
provided that there is a meeting of the minds and from such meeting arise rights and obligations, there should be
no limitations as to form." The bill of lading is not essential to the contract, although it may become obligatory by
reason of the regulations of railroad companies, or as a condition imposed in the contract by the agreement of
the parties themselves. The bill of lading is juridically a documentary proof of the stipulations and conditions
agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code
does not demand, as necessary requisite in the contract of transportation, the delivery of the bill of lading to the
shipper, but gives right to both the carrier and the shipper to mutually demand of each other the delivery of said
bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13)
 The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and
not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary
to complete delivery and acceptance. Even where it is provided by statute that liability commences with the
issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)

• (2) Was the damage caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous
event, storm or natural disaster that would exempt the carrier from liability?;

 2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim
of force majeure or storm which occurred on the night of October 29, 1952. But the evidence fails to bear this
out.
 Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of
adequate precautions or measures taken by the carrier to prevent the loss as may be inferred from the following
findings of the Court of Appeals:
 Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp.
18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same manner as rain entered "thru tank man-
holes", according to the patron of LCT No. 1023 (exh. JJJ-4) — conclusively showing that the barge was not
seaworthy — it should be noted that on the night of the nautical accident there was no storm, flood, or other
natural disaster or calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles
per hour then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For according to
Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather
Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as storm
(Northern Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).
 The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the
sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy compartments' (exh. JJJ); and this
report finds confirmation on the above-mentioned admission of two witnesses for appellant concerning the
cracks of the lighter's bottom and the entrance of the rain water 'thru manholes'." We are not prepared to
dispute this finding of the Court of Appeals.
 (3) Can respondent insurance company sue the carrier under its insurance contract as assignee of Macleod in
spite of the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?;
 There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of
the cargo for the insurance amount it paid to the latter under the insurance contract. And this is so because since
the cargo that was damaged was insured with respondent company and the latter paid the amount represented
by the loss, it is but fair that it be given the right to recover from the party responsible for the loss.
 The instant case, therefore, is not one between the insured and the insurer, but one between the shipper and the
carrier, because the insurance company merely stepped into the shoes of the shipper. And since the shipper has a
direct cause of action against the carrier on account of the damage of the cargo, no valid reason is seen why such
action cannot be asserted or availed of by the insurance company as a subrogee of the shipper. Nor can the
carrier set up as a defense any defect in the insurance policy not only because it is not a privy to it but also
because it cannot avoid its liability to the shipper under the contract of carriage which binds it to pay any loss that
may be caused to the cargo involved therein. Thus, we find fitting the following comments of the Court of
Appeals: It was not imperative and necessary for the trial court to pass upon the question of whether or not the
disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134 isued by appellee. Appellant was
neither a party nor privy to this insurance contract, and therefore cannot avail itself of any defect in the policy
which may constitute a valid reason for appellee, as the insurer, to reject the claim of Macleod, as the insured.
Anyway, whatever defect the policy contained, if any, is deemed to have been waived by the subsequent
payment of Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as a common carrier, and
appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as above demonstrated, appellant
is liable to Macleod and Company of the Philippines for the los or damage to the 1,162 bales of hemp after these
were received in good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows that
appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped into the shoes of and substi-
tuted the latter in demanding from appellant the payment for the loss and damage aforecited.
 (4) Has the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of the
correctness and sufficiency of the shipper's statement of accounts contrary to the burden of proof rule?; and
 It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower
court to order the production of the books of accounts of the Odell Plantation containing the charges it made for
the loss of the damaged hemp for verification of its accountants, but later it desisted therefrom on the claim that
it finds their production no longer necessary. This desistance notwithstanding, the shipper however pre-sented
other documents to prove the damage it suffered in connection with the cargo and on the strength thereof the
court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of Appeals affirmed this award
 upon the theory that the desistance of the carrier from producing the books of accounts of Odell Plantation
implies an admission of the correctness of the statements of accounts contained therein, petitioner now
contends that the Court of Appeals erred in basing the affirmance of the award on such erroneous interpretation.
 There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell
Plantation presented in court is tantamount to an admission that the statements contained therein are correct
and their verification not necessary because its main defense here, as well as below, was that it is not liable for
the loss because there was no contract of carriage between it and the shipper and the loss caused, if any, was due
to a fortuitous event. Hence, under the carrier's theory, the correctness of the account representing the loss was
not so material as would necessitate the presentation of the books in question. At any rate, even if the books of
accounts were not produced, the correctness of the accounts cannot now be disputed for the same is supported
by the original documents on which the entries in said books were based which were presented by the shipper as
part of its evidence. And according to the Court of Appeals, these documents alone sufficiently establish the
award of P60,412.02 made in favor of respondent.

• (5) Can the insurance company maintain this suit without proof of its personality to do so?

 Finally, with regard to the question concerning the personality of the insurance company to maintain this action,
we find the same of no importance, for the attorney himself of the carrier admitted in open court that it is a
foreign corporation doing business in the Philippines with a personality to file the present action.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.
8. MAURO GANZON vs. COURT OF APPEALS and GELACIO E. TUMAMBING G.R. No. L-48757 May 30, 1988

 The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for
damages based on culpa contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:
 On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of
scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation
of Facts, Amended Record on Appeal, p. 38).
 Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three
feet of water (t.s.n., September 28, 1972, p. 31).
 On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the
lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain's
supervision.
 When about half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of
Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown
and after a heated argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing
March 19, 1971, The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for
treatment
 After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub,
accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron where the
lighter was docked
 The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating that the
Municipality of Mariveles had taken custody of the scrap iron
 On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which
states: WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering
defendant-appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as
actual damages, the sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees.
Costs against defendant-appellee Ganzon.

In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF
TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP WAS
PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE
SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS
PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS EVENT AND
THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4

 The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed
under his custody and control to make him liable. However, he completely agrees with the respondent Court's
finding that on December 1, 1956, the private respondent delivered the scraps to Captain Filomeno Niza for
loading in the lighter "Batman,"
 That the petitioner, thru his employees, actually received the scraps is freely admitted. Significantly, there is not
the slightest allegation or showing of any condition, qualification, or restriction accompanying the delivery by the
private respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the contrary, soon after
the scraps were delivered to, and received by the petitioner-common carrier, loading was commenced.
 By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common
carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected.
 Consequently, the petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration of the
goods commenced.
 Pursuant to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or
constructive, by the carrier to the consignee, or to the person who has a right to receive them. 5 The fact that
part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation
as the goods remained in the custody and control of the carrier, albeit still unloaded.
 The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in
Article 1734 of the Civil Code, namely:

(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.

 Hence, the petitioner is presumed to have been at fault or to have acted negligently. By reason of this
presumption, the court is not even required to make an express finding of fault or negligence before it could hold
the petitioner answerable for the breach of the contract of carriage.
 Still, the petitioner could have been exempted from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the
case, or that the loss was due to an unforeseen event or to force majeure. As it was, there was hardly any attempt
on the part of the petitioner to prove that he exercised such extraordinary diligence.
 In the second and third assignments of error where the petitioner maintains that he is exempt from any liability
because the loss of the scraps was due mainly to the intervention of the municipal officials of Mariveles which
constitutes a caso fortuito as defined in Article 1174 of the Civil Code. 7
 We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of
the scraps was due to an "order or act of competent public authority," and this contention was correctly passed
upon by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was
ordered by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had
the power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority.

 The appellee failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was
given in evidence.
 Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have
in the record is the stipulation of the parties that the cargo of scrap iron was accilmillated by the appellant
through separate purchases here and there from private individuals.
 The fact remains that the order given by the acting mayor to dump the scrap iron into the sea was part of the
pressure applied by Mayor Jose Advincula to shakedown the appellant for P5,000.00. The order of the acting
mayor did not constitute valid authority for appellee Mauro Ganzon and his representatives to carry out.
 Now the petitioner is changing his theory to caso fortuito.
 Such a change of theory on appeal we cannot, however, allow.
 In any case, the intervention of the municipal officials was not In any case, of a character that would render
impossible the fulfillment by the carrier of its obligation.
 The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron.
 Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force
or intimidation as to completely overpower the will of the petitioner's employees.
 The mere difficulty in the fullfilment of the obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or at the NASSCO compound, so that
after the dispute with the local officials concerned was settled, the scraps could then be delivered in accordance
with the contract of carriage.

There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the
Code of Commerce which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti &
Co.10 and which the petitioner invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that
the shipper will suffer the losses and deterioration arising from the causes enumerated in Art. 1734; and in these
instances, the burden of proving that damages were caused by the fault or negligence of the carrier rests upon him.
However, the carrier must first establish that the loss or deterioration was occasioned by one of the excepted causes
or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Art. 362 appears to require of the
carrier only ordinary diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these
were not sufficiently controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against
the petitioner.
This decision is IMMEDIATELY EXECUTORY.
9. LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN vs. MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD &
PRUDENT SECURITY AGENCY [G.R. No. 145804. February 6, 2003]
The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27
April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled Marjorie Navidad and Heirs of the
Late Nicanor Navidad vs. Rodolfo Roman, et. al., which has modified the decision of 11 August 1998 of the Regional
Trial Court, Branch 266, Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail
Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor Navidad.

 On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then drunk, entered
the EDSA LRT station after purchasing a token (representing payment of the fare).
 While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned to
the area approached Navidad. A misunderstanding or an altercation between the two apparently ensued that led
 to a fist fight. No evidence, however, was adduced to indicate how the fight started or who, between the two,
delivered the first blow or how Navidad later fell on the LRT tracks.
 At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming
in. Navidad was struck by the moving train, and he was killed instantaneously.
 On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed
a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc.
(Metro Transit), and Prudent for the death of her husband.
 LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent.
 Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection and
supervision of its security guards.
 The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a
demurrer contending that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11
August 1998, the trial court rendered its decision; it adjudged:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants Prudent Security and
Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs the following:
a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
b) Moral damages of P50,000.00;
c) Attorneys fees of P20,000;
d) Costs of suit.
The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.
The compulsory counterclaim of LRTA and Roman are likewise dismissed.[1]

 Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now assailed
decision exonerating Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA
and Roman jointly and severally liable thusly:

WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any liability for the
death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held
liable for his death and are hereby directed to pay jointly and severally to the plaintiffs-appellees, the following
amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees.[2]

 The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a contract
of carriage theretofore had already existed when the victim entered the place where passengers were supposed
to be after paying the fare and getting the corresponding token therefor.
 In exempting Prudent from liability, the court stressed that there was nothing to link the security agency to the
death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon the victim and the
evidence merely established the fact of death of Navidad by reason of his having been hit by the train owned and
managed by the LRTA and operated at the time by Roman.
 The appellate court faulted petitioners for their failure to present expert evidence to establish the fact that the
application of emergency brakes could not have stopped the train.

The appellate court denied petitioners motion for reconsideration in its resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL
COURT
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE LIABLE FOR THE DEATH OF
NICANOR NAVIDAD, JR.
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF
LRTA.[3]

 Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court
by holding them liable on the basis of a sweeping conclusion that the presumption of negligence on the part of a
common carrier was not overcome.
 Petitioners would insist that Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an
act of a stranger that could not have been foreseen or prevented.
 The LRTA would add that the appellate courts conclusion on the existence of an employer-employee relationship
between Roman and LRTA lacked basis because Roman himself had testified being an employee of Metro Transit
and not of the LRTA.
 Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed
created from the moment Navidad paid the fare at the LRT station and entered the premises of the latter,
entitling Navidad to all the rights and protection under a contractual relation,
 and that the appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to
exercise extraordinary diligence imposed upon a common carrier.
 Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of
public policy, is burdened with the duty of exercising utmost diligence in ensuring the safety of passengers.[4]
 The Civil Code, governing the liability of a common carrier for death of or injury to its passengers, provides:
 Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.
 Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles
1733 and 1755.
 Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or
willful acts of the 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.
 Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the common carriers employees through the exercise of the
diligence of a good father of a family could have prevented or stopped the act or omission.
 The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons
with due regard for all circumstances.[5] Such duty of a common carrier to provide safety to its passengers so
obligates it not only during the course of the trip but for so long as the passengers are within its premises and
where they ought to be in pursuance to the contract of carriage
 .[6] The statutory provisions render a common carrier liable for death of or injury to passengers (a) through
the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other passengers or
of strangers if the common carriers employees through the exercise of due diligence could have prevented or
stopped the act or omission.[7]
 In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and[8] by simple
proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its
 employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to
force majeure.[9] In the absence of satisfactory explanation by the carrier on how the accident occurred, which
petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at
fault,[10] an exception from the general rule that negligence must be proved.[11]
 The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim arises from
the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier.
 In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own
employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either
case, the common carrier is not relieved of its responsibilities under the contract of carriage.
 Should Prudent be made likewise liable?
 If at all, that liability could only be for tort under the provisions of Article 2176[12] and related provisions, in
conjunction with Article 2180,[13] of the Civil Code.
 The premise, however, for the employers liability is negligence or fault on the part of the employee. Once such
fault is established, the employer can then be made liable on the basis of the presumption juris tantum that the
employer failed to exercise diligentissimi patris families in the selection and supervision of its employees.
 The liability is primary and can only be negated by showing due diligence in the selection and supervision of the
employee, a factual matter that has not been shown. Absent such a showing, one might ask further, how then
must the liability of the common carrier, on the one hand, and an independent contractor, on the other hand, be
described? It would be solidary.
 A contractual obligation can be breached by tort and when the same act or omission causes the injury, one
resulting in culpa contractual and the other in culpa aquiliana, Article 2194[14] of the Civil Code can well
apply.[15]In fine, a liability for tort may arise even under a contract, where tort is that which breaches the
contract.[16] Stated differently, when an act which constitutes a breach of contract would have itself constituted
the source of a quasi-delictual liability had no contract existed between the parties, the contract can be said to
have been breached by tort, thereby allowing the rules on tort to apply.[17]
 Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is
concluded by the factual finding of the Court of Appeals that there is nothing to link (Prudent) to the death of
Nicanor (Navidad), for the reason that the negligence of its employee, Escartin, has not been duly proven x x
x. This finding of the appellate court is not without substantial justification in our own review of the records of the
case.
 There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission,
he must also be absolved from liability.
 Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation between the
latter and Roman; thus, Roman can be made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized,
and not for the purpose of indemnifying the plaintiff for any loss suffered by him.[18] It is an established rule that
nominal damages cannot co-exist with compensatory damages.[19]
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but only in that (a) the
award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No costs.
SO ORDERED.
10. PEDRO DE GUZMAN vs. COURT OF APPEALS and ERNESTO CENDANA
G.R. No. L-47822 December 22, 1988

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

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.
 Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high
degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The
specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to
Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
 Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:

(1) 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 court shows that the
accused acted with grave, if not irresistible, threat, violence or force.3 Three (3) of the five (5) hold-uppers were
armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver and his
helper, detaining them for several days and later releasing them in another province (in Zambales). The hijacked truck
was subsequently found by the police in Quezon City. The Court of First Instance convicted all the accused of robbery,
though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the
control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common
carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for
acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous
standard of extraordinary diligence.
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.
11. FIRST PHILIPPINE INDUSTRIAL CORPORATION vs. COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS
CITY and ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas [G.R. No. 125948. December
29, 1998]
This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in CA-G.R.
SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293,
which dismissed petitioners' complaint for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and
operate oil pipelines. The original pipeline concession was granted in 1967[1] and renewed by the Energy Regulatory
Board in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas
City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a
local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code.[3] The
respondent City Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in four
installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted
to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the amount
of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent
portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the
Petroleum Act. It is engaged in the business of transporting petroleum products from the Batangas refineries, via
pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on gross receipts
under Section 133 of the Local Government Code of 1991 x x x x
"Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131,
Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax 'on contractors and other
independent contractors' under Section 143, Paragraph (e) of the Local Government Code does not include the power
to levy on transportation contractors.
"The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local
Government Code. The said section limits the imposition of fees and charges on business to such amounts as may be
commensurate to the cost of regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable for
the license fee, the imposition thereof based on gross receipts is violative of the aforecited provision. The amount
of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and
licensing. The fee is already a revenue raising measure, and not a mere regulatory imposition."[4]
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered
engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government
Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint[6] for tax refund with
prayer for a writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity
as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the business
tax on its gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities to impose and
collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151 does not
include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term
"contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and
collected the said tax, thus meriting the immediate refund of the tax paid.[7]
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j)
of the Local Government Code as said exemption applies only to "transportation contractors and persons engaged in
the transportation by hire and common carriers by air, land and water." Respondents assert that pipelines are not
included in the term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the
like. Respondents further posit that the term "common carrier" under the said code pertains to the mode or manner
by which a product is delivered to its destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly
construed against the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted
only by clear and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A) whose concession was
lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any
tax exemption upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such
being the situation obtained in this case (exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to overburden the
riding public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and
facilities to a single specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local governments
than the previous enactments, to make them economically and financially viable to serve the people and discharge
their functions with a concomitant obligation to accept certain devolution of powers, x x x So, consistent with this
policy even franchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e) and 151 of the
Code."[9]
Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we
referred the case to the respondent Court of Appeals for consideration and adjudication.[10]On November 29, 1995,
the respondent court rendered a decision[11] affirming the trial court's dismissal of petitioner's
complaint. Petitioner's motion for reconsideration was denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,
1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a Resolution[14]of January 20,
1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier
or a transportation contractor, and (2) the exemption sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of
transporting persons or property from place to place, for compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself
out as ready to engage in the transportation of goods for person generally as a business and not as a casual
occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established roads; and
4. The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged
in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it
from the definition of a common carrier. In De Guzman vs. Court of Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
'sideline'). Article 1732 x x x avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the 'general public,' i.e., the
general community or population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1877 deliberately refrained from making such distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide neatly with the notion of
'public service,' under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, 'public service' includes:
'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system gas, electric light heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar
public services.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code
refers only to common carriers transporting goods and passengers through moving vehicles or vessels either by land,
sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to
the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the
passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered
common carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus,
Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other petroleum as may be offered by others for
transport, and to charge without discrimination such rates as may have been approved by the Secretary of Agriculture
and Natural Resources."
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum x x and everything relating to the
manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared to be a public
utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it
declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387 x x x. Such being the case, it is not subject to withholding
tax prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from
the business tax as provided for in Section 133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided
herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the
levy of the following :
xxxxxxxxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers
or freight by hire and common carriers by air, land or water, except as provided in this Code."
The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131]. Common Limitations on
the Taxing Powers of Local Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those being
deemed to be exempted from the taxing powers of the local government units. May we know the reason why the
transportation business is being excluded from the taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph 5. It
states that local government units may not impose taxes on the business of transportation, except as otherwise
provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces have the
power to impose a tax on business enjoying a franchise at the rate of not more than one-half of 1 percent of the gross
annual receipts. So, transportation contractors who are enjoying a franchise would be subject to tax by the
province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top of what is already being imposed by the National Internal
Revenue Code which is the so-called "common carriers tax." We do not want a duplication of this tax, so we just
provided for an exception under Section 125 [now Sec. 137] that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]
It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of
business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National
Internal Revenue Code.[19] To tax petitioner again on its gross receipts in its transportation of petroleum business
would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29,
1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
12. 0SPOUSES TEODORO and NANETTE PERENA vs. SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL
RAILWAYS, and the COURT OF APPEALS G.R. No. 157917 August 29, 2012
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary
diligence in the conduct of his business. He is presumed to be negligent when death occurs to a passenger. His liability
may include indemnity for loss of earning capacity even if the deceased passenger may only be an unemployed high
school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision
promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Parañaque City that had decreed
them jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and
Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students from their respective residences in Parañaque
City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereñas used a KIA Ceres Van (van)
with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two of whom would be seated in
the front beside the driver, and the others in the rear, with six students on either side. They employed Clemente
Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996, as
on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his place
on the left side of the van near the rear door. The van, with its air-conditioning unit turned on and the stereo playing
loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the students were due
at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the
South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path
underneath the Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into
Makati. At the time, the narrow path was marked by piles of construction materials and parked passenger jeepneys,
and the railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other responsible
persons manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing
motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny
Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train neared the
railroad crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus. His
view of the oncoming train was blocked because he overtook the passenger bus on its left side. The train blew its
horn to warn motorists of its approach. When the train was about 50 meters away from the passenger bus and the
van, Alano applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a
collision was imminent. The passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did
not. The train hit the rear end of the van, and the impact threw nine of the 12 students in the rear, including Aaron,
out of the van. Aaron landed in the path of the train, which dragged his body and severed his head, instantaneously
killing him. Alano fled the scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against
Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective answers, with cross-claims against
each other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe transportation carriage of the
former spouses' son from their residence in Parañaque to his school at the Don Bosco Technical Institute in Makati
City;
(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor son of
spouses Zarate died in connection with a vehicular/train collision which occurred while Aaron was riding the
contracted carrier Kia Ceres van of spouses Pereña, then driven and operated by the latter's employee/authorized
driver Clemente Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of August 22, 1996, within the
vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a railroad crossing
used by motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no appropriate and safety warning signs and
railings at the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound public utility and private vehicles used on a daily basis
the site of the collision as an alternative route and short-cut to Makati;
(7) The train driver or operator left the scene of the incident on board the commuter train involved without waiting
for the police investigator;
(8) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad operator for
railroad crossing at the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between the former
and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the Magallanes
station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for negligence
constituting the proximate cause of the vehicular collision, which resulted in the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable for any
negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is liable for
negligence in failing to provide adequate safety warning signs and railings in the area commonly used by motorists for
railroad crossings, constituting the proximate cause of the vehicular collision which resulted in the death of the
plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with plaintiff-spouses in
failing to provide adequate and safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of employers and
school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the accident, in
allowing or tolerating the motoring public to cross, and its failure to install safety devices or equipment at the site of
the accident for the protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever amount
the latter may be held answerable or which they may be ordered to pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the latter in
their Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary damages and
attorney's fees.2
The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe transport of Aaron;
but that against PNR was based on quasi-delict under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had
not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that
Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van
whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been
intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants
ordering them to jointly and severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,4 reiterating that the cooperative gross
negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages
awarded to the Zarates were not excessive, but based on the established circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with defendant-
appellants spouses Teodorico and Nanette Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-
appellees for the death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite overwhelming
documentary evidence on record, supporting the case of defendants-appellants Philippine National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary
damages and attorney’s fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine National Railways
and in not holding the latter and its train driver primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the absence of
sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral
damages to ₱ 2,500,000.00; and deleted the attorney’s fees because the RTC did not state the factual and legal bases,
to wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Parañaque City is
AFFIRMED with the modification that the award of Actual Damages is reduced to ₱ 59,502.76; Moral Damages is
reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum
representing the loss of the deceased’s earning capacity despite Cariaga being only a medical student at the time of
the fatal incident. Applying the formula adopted in the American Expectancy Table of Mortality:–
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21
(the age when he would have graduated from college and started working for his own livelihood) instead of 15 years
(his age when he died). Considering that the nature of his work and his salary at the time of Aaron’s death were
unknown, it used the prevailing minimum wage of ₱ 280.00/day to compute Aaron’s gross annual salary to be ₱
110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3
years, his gross income would aggregate to ₱ 4,351,164.30, from which his estimated expenses in the sum of ₱
2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aaron’s computed net income
turning out to be higher than the amount claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly prayed
for by them, was granted.
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8
Issues
In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and severally liable to
pay damages with Philippine National Railways and dismissing their cross-claim against the latter.
II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning capacity of a
minor who was only a high school student at the time of his death in the absence of sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at
all.
Ruling
The petition has no merit.
1. Were the Pereñas and PNR jointly and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing their claim
against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in the selection
and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a driver’s license and that he had not been
involved in any vehicular accident prior to the fatal collision with the train; that they even had their own son travel to
and from school on a daily basis; and that Teodoro Pereña himself sometimes accompanied Alfaro in transporting the
passengers to and from school. The RTC gave scant consideration to such defense by regarding such defense as
inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated as a common
carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a good father of a
family.
Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
carrier,9primarily because he only caters to some specific or privileged individuals, and his operation is neither open
to the indefinite public nor for public use, the exact nature of the operation of a school bus service has not been
finally settled. This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to
another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public
carrier.10 A private carrier is one who, without making the activity a vocation, or without holding himself or itself out
to the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular
instance only, to transport goods or persons from one place to another either gratuitously or for hire.11 The
provisions on ordinary contracts of the Civil Code govern the contract of private carriage.The diligence required of a
private carrier is only ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a
person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering such services to the public.12 Contracts of common carriage
are governed by the provisions on common carriers of the Civil Code, the Public Service Act,13 and other special laws
relating to transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at
fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.14
In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco,15viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not confined to privileged
individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public
character. In determining whether a use is public, we must look not only to the character of the business to be done,
but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is
merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission.
There must be, in general, a right which the law compels the owner to give to the general public. It is not enough that
the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion
by which to judge the character of the use is whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any distinction
between a person or an enterprise offering transportation on a regular or an isolated basis; and has not distinguished
a carrier offering his services to the general public, that is, the general community or population, from one offering his
services only to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the
notion of public service under the Public Service Act, which supplements the law on common carriers found in the
Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientèle, whether permanent or occasional, and done for the general business
purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation
of passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public services. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common
carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if they had limited
clientèle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a
part of the activity engaged in by the carrier that he has held out to the general public as his business or occupation. If
the undertaking is a single transaction, not a part of the general business or occupation engaged in, as advertised and
held out to the general public, the individual or the entity rendering such service is a private, not a common, carrier.
The question must be determined by the character of the business actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert when charged with the duties and obligations that the law
imposes.21
Applying these considerations to the case before us, there is no question that the Pereñas as the operators of a
school bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual
occupation; (b) undertaking to carry passengers over established roads by the method by which the business was
conducted; and (c) transporting students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a
common carrier because they held themselves out as a ready transportation indiscriminately to the students of a
particular school living within or near where they operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law. Given the
nature of the business and for reasons of public policy, the common carrier is bound "to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the
circumstances of each case."22 Article 1755 of the Civil Code specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances." To successfully fend off liability in an action upon the death or injury to a
passenger, the common carrier must prove his or its observance of that extraordinary diligence; otherwise, the legal
presumption that he or it was at fault or acted negligently would stand.23 No device, whether by stipulation, posting
of notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of the common carrier
as defined under Article 1755 of the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court might now
reverse the CA’s findings on their liability. On the contrary, an examination of the records shows that the evidence
fully supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the
accident because death had occurred to their passenger.25 The presumption of negligence, being a presumption of
law, laid the burden of evidence on their shoulders to establish that they had not been negligent.26 It was the law no
less that required them to prove their observance of extraordinary diligence in seeing to the safe and secure carriage
of the passengers to their destination. Until they did so in a credible manner, they stood to be held legally responsible
for the death of Aaron and thus to be held liable for all the natural consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their negligence by credible evidence.
Their defense of having observed the diligence of a good father of a family in the selection and supervision of their
driver was not legally sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier did not
cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of
their employee. This was the reason why the RTC treated this defense of the Pereñas as inappropriate in this action
for breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope
of his authority or even in violation of the orders of the common carrier.27 In this connection, the records showed
their driver’s actual negligence. There was a showing, to begin with, that their driver traversed the railroad tracks at a
point at which the PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although that
point had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into
taking that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to
his passengers but he still disregarded the risks. Compounding his lack of care was that loud music was playing inside
the air-conditioned van at the time of the accident. The loudness most probably reduced his ability to hear the
warning horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the railroad tracks.
Also, he sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing,
he lost his view of the train that was then coming from the opposite side of the passenger bus, leading him to
miscalculate his chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided
a collision with the train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to
a full stop before traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop
were in observance of the right of way at railroad tracks as defined by the traffic laws and regulations.28He thereby
violated a specific traffic regulation on right of way, by virtue of which he was immediately presumed to be
negligent.29
The omissions of care on the part of the van driver constituted negligence,30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for the
protection of the interests of another person, that degree of care, precaution, and vigilance which the circumstances
justly demand, whereby such other person suffers injury.’"33
The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading
case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person
would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of course be always
determined in the light of human experience and in view of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much can be profitably said: Reasonable men govern their conduct
by the circumstances which are before them or known to them. They are not, and are not supposed to be, omniscient
of the future. Hence they can be expected to take care only when there is something before them to suggest or warn
of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of
harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is
this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that
an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its
consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he traversed the
railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware of the grave harm to be
thereby caused to his passengers; and when he disregarded the foresight of harm to his passengers by overtaking the
bus on the left side as to leave himself blind to the approach of the oncoming train that he knew was on the opposite
side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court held the PNR
solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus
that was then traversing the railroad crossing. But the circumstances of that case and this one share no similarities. In
Philippine National Railways v. Intermediate Appellate Court, no evidence of contributory negligence was adduced
against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary diligence
by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the
Pereñas and the PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate
Appellate Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school
van traversed the railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable for damages
arising from the death of Aaron. They had been impleaded in the same complaint as defendants against whom the
Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising out of the
accident, and questions of fact and of law were common as to the Zarates.36 Although the basis of the right to relief
of the Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ right
to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and
severally liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the RTC
rightly found the PNR also guilty of negligence despite the school van of the Pereñas traversing the railroad tracks at a
point not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure
the safety of others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers
to prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard had been
assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others as
well as the need to control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint
tortfeasors.
2. Was the indemnity for loss of Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the liability, the
CA modified the amount. Both lower courts took into consideration that Aaron, while only a high school student, had
been enrolled in one of the reputable schools in the Philippines and that he had been a normal and able-bodied child
prior to his death. The basis for the computation of Aaron’s earning capacity was not what he would have become or
what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his
death. Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at
the time of his death, but on 21 years, his age when he would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully warranted.
Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and unfounded.1âwphi1 They
cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim Jussi Leino’s loss of earning
capacity as a pilot for being speculative due to his having graduated from high school at the International School in
Manila only two years before the shooting, and was at the time of the shooting only enrolled in the first semester at
the Manila Aero Club to pursue his ambition to become a professional pilot. That meant, according to the Court, that
he was for all intents and purposes only a high school graduate.
We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to
that of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid professional, like
a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation of Aaron’s earning
capacity was premised on him being a lowly minimum wage earner despite his being then enrolled at a prestigious
high school like Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at
work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and
in favor of the defendants whose negligence not only cost Aaron his life and his right to work and earn money, but
also deprived his parents of their right to his presence and his services as well. Our law itself states that the loss of the
earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and shall
in every case be assessed and awarded by the court "unless the deceased on account of permanent physical disability
not caused by the defendant, had no earning capacity at the time of his death."38 Accordingly, we emphatically hold
in favor of the indemnification for Aaron’s loss of earning capacity despite him having been unemployed, because
compensation of this nature is awarded not for loss of time or earnings but for loss of the deceased’s power or ability
to earn money.39
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and
Manila Railroad Company,40 fourth-year medical student Edgardo Carriaga’s earning capacity, although he survived
the accident but his injuries rendered him permanently incapacitated, was computed to be that of the physician that
he dreamed to become. The Court considered his scholastic record sufficient to justify the assumption that he could
have finished the medical course and would have passed the medical board examinations in due time, and that he
could have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined
that murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying
jobs had they graduated in due time, and that their jobs would probably pay them high monthly salaries from ₱
10,000.00 to ₱ 15,000.00 upon their graduation. Their earning capacities were computed at rates higher than the
minimum wage at the time of their deaths due to their being already senior agriculture students of the University of
the Philippines in Los Baños, the country’s leading educational institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective
amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established circumstances of this
case because they were intended by the law to assuage the Zarates’ deep mental anguish over their son’s unexpected
and violent death, and their moral shock over the senseless accident. That amount would not be too much,
considering that it would help the Zarates obtain the means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice, given
the passage of a long time from when their mental anguish was inflicted on them on August 22, 1996.
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render
effective the desired example for the public good. As a common carrier, the Pereñas needed to be vigorously
reminded to observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from
happening again. Only by an award of exemplary damages in that amount would suffice to instill in them and others
similarly situated like them the ever-present need for greater and constant vigilance in the conduct of a business
imbued with public interest.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13,
2002; and ORDER the petitioners to pay the costs of suit.
13. BRITISH AIRWAYS, INC.vs. THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND
GENERAL SERVICES G.R. No. 92288 February 9, 1993
This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of
Appeals1 affirming the decision of the trial court2 in ordering petitioner British Airways, Inc. to pay private
respondent First International Trading and General Services actual damages, moral damages, corrective or exemplary
damages, attorney's fees and the costs as well as the Resolution dated February 15, 19903 denying petitioner's
Motion for Reconsideration in the appealed decision.
It appears on record that on February 15, 1981, private respondent First International Trading and General Services
Co., a duly licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO
Engineering and Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said
principal.4
During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways, Inc. airfare
tickets for 93 contract workers with specific instruction to transport said workers to Jeddah on or before March 30,
1981.
As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private
respondent was immediately informed by petitioner that its principal had forwarded 93 prepaid tickets. Thereafter,
private respondent instructed its travel agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but
the latter failed to fly said workers, thereby compelling private respondent to borrow money in the amount of
P304,416.00 in order to purchase airline tickets from the other airlines as evidenced by the cash vouchers (Exhibits
"B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave immediately since the visas of said
workers are valid only for 45 days and the Bureau of Employment Services mandates that contract workers must be
sent to the job site within a period of 30 days.

Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had
received a prepaid ticket advice from its Jeddah branch for the transportation of 27 contract workers. Immediatety,
private respondent instructed its travel agent to book the 27 contract workers with the petitioner but the latter was
only able to book and confirm 16 seats on its June 9, 1981 flight. However, on the date of the scheduled flight only 9
workers were able to board said flight while the remaining 7 workers were rebooked to June 30, 1981 which bookings
were again cancelled by the petitioner without any prior notice to either private respondent or the workers.
Thereafter, the 7 workers were rebooked to the July 4,1981 flight of petitioner with 6 more workers booked for said
flight. Unfortunately, the confirmed bookings of the 13 workers were again cancelled and rebooked to July 7, 1981.

On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when the
receipt of the tax payments was submitted, the latter informed private respondent that it can only confirm the seats
of the 12 workers on its July 7, 1981 flight. However, the confirmed seats of said workers were again cancelled
without any prior notice either to the private respondent or said workers. The 12 workers were finally able to leave
for Jeddah after private respondent had bought tickets from the other airlines.

As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the
damages it had incurred by the latter's repeated failure to transport its contract workers despite confirmed bookings
and payment of the corresponding travel taxes.

On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to pay
the amount of P350,000.00 representing damages and unrealized profit or income which was denied by the
petitioner.

On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the
remaining recruited workers due to the delay in transporting the workers to Jeddah.5

On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial
Court of Manila, Branch 1 in Civil Case No. 82-4653.

On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message from Jeddah
on March 20, 1981 advising that the principal of private respondent had prepaid the airfares of 100 persons to
transport private respondent's contract workers from Manila to Jeddah on or before March 30, 1981. However, due
to the unavailability of space and limited time, petitioner had to return to its sponsor in Jeddah the prepaid ticket
advice consequently not even one of the alleged 93 contract workers were booked in any of its flights.

On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private
respondent to Jeddah but the travel agent of the private respondent booked only 10 contract workers for petitioner's
June 9, 1981 flight. However, only 9 contract workers boarded the scheduled flight with 1 passenger not showing up
as evidenced by the Philippine Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C").6

Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981 flight
but said travel agent cancelled the booking of 2 passengers while the other 3 passengers did not show up on said
flight.

Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to the
previous 5 contract workers who were not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight
which was accepted by petitioner subject to reconfirmation.

However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a
reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the bookings of private respondent's
12 contract workers. In the morning of July 7, 1981, the computer system of the petitioner was reinstalled and
immediately petitioner tried to reinstate the bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines
but both airlines replied that no seat was available on that date and had to place the 12 workers on the wait list. Said
information was duly relayed to the private respondent and the 12 workers before the scheduled flight.

After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which reads as
follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00;

3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or exemplary damages;

4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; and

5. To pay the costs.7

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied its
Motion for Reconsideration on February 28, 1986.

On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the dispositive portion of
which reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant.8

On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.
Hence, this petition.

It is the contention of petitioner that private respondent has no cause of action against it there being no perfected
contract of carriage existing between them as no ticket was ever issued to private respondent's contract workers and,
therefore, the obligation of the petitioner to transport said contract workers did not arise. Furthermore, private
respondent's failure to attach any ticket in the complaint further proved that it was never a party to the alleged
transaction.

Petitioner's contention is untenable.

Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission
of one party in violation of the legal right or rights of the other.9 Petitioner's repeated failures to transport private
respondent's workers in its flight despite confirmed booking of said workers clearly constitutes breach of contract and
bad faith on its part. In resolving petitioner's theory that private respondent has no cause of action in the instant case,
the appellate court correctly held that:

In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of
the same, namely: (a) the contract "to carry (at some future time)," which contract is consensual and is necessarily
perfected by mere consent (See Article 1356, Civil Code of the Philippines), and (b) the contract "of carriage" or "of
common carriage" itself which should be considered as a real contract for not until the carrier is actually used can the
carrier be said to have already assumed the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p. 429,
Eleventh Ed.)

In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the mere
consent of the parties.

There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from Manila to
Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid
ticket advice that ROLACO Engineering has prepaid the airfares of the appellee's contract workers advising the
appellant that it must transport the contract workers on or before the end of March, 1981 and the other batch in
June, 1981.

Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket
was yet issued, the fact remains that the passage had already been paid for by the principal of the appellee, and the
appellant had accepted such payment. The existence of this payment was never objected to nor questioned by the
appellant in the lower court. Thus, the cause or consideration which is the fare paid for the passengers exists in this
case.

The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is the
transport of the passengers from the place of departure to the place of destination as stated in the telex.

Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing
reciprocal obligations on both parties.

In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its willingness
for its contract workers to leave for their place of destination.

On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the contract workers
on their flight despite confirmation and bookings made by appellee's travelling agent.
Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period of
compliance therewith, and with emphasis that it could only be used if the passengers fly on BA. Under the
circumstances, the appellant should have refused acceptance of the PTA from appellee's principal or to at least
inform appellee that it could not accommodate the contract workers.

While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the appellee's contract
workers who were recruited for ROLACO Engineering and the said contract workers were the intended passengers in
the aircraft of the appellant, the said contract "to carry" also involved the appellee for as recruiter he had to see to it
that the contract workers should be transported to ROLACO Engineering in Jeddah thru the appellant's
transportation. For that matter, the involvement of the appellee in the said contract "to carry" was well demonstrated
when
the appellant upon receiving the PTA immediately advised the appellee thereof. 10

Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to
private respondent since all expenses had already been subsequently reimbursed by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00
representing actual damages refers to private respondent's second cause of action involving the expenses incurred by
the latter which were not reimbursed by ROLACO Engineering. However, in the Complaint 11 filed by private
respondent, it was alleged that private respondent suffered actual damages in the amount of P308,016.00
representing the money it borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets and
P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages private respondent seeks
to recover are the airline tickets and travel taxes it spent for its workers which were already reimbursed by its
principal and not for any other expenses it had incurred in the process of recruiting said contract workers. Inasmuch
as all expenses including the processing fees incurred by private respondent had already been paid for by the latter's
principal on a staggered basis as admitted in open court by its managing director, Mrs. Bienvenida Brusellas. 12 We
do not find anymore justification in the appellate court's decision in granting actual damages to private respondent.

Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its
contract workers when petitioner failed to transport said workers, the reimbursements made by its principal to
private respondent failed to support the latter's claim that it suffered actual damages as a result of petitioner's failure
to transport said workers. It is undisputed that private respondent had consistently admitted that its principal had
reimbursed all its expenses.

Article 2199 of the Civil Code provides that:

Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with
reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and
amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual
amount thereof. 13

However, private respondent is entitled to an award of moral and exemplary damages for the injury suffered as a
result of petitioner's failure to transport the former's workers because of the latter's patent bad faith in the
performance of its obligation. As correctly pointed out by the appellate court:
As evidence had proved, there was complete failure on the part of the appellant to transport the 93 contract workers
of the appellee on or before March 30, 1981 despite receipt of the payment for their airfares, and acceptance of the
same by the appellant, with specific instructions from the appellee's principal to transport the contract workers on or
before March 30, 1981. No previous notice was ever registered by the appellant that it could not comply with the
same. And then followed the detestable act of appellant in unilaterally cancelling, booking and rebooking
unreasonably the flight of appellee's contract workers in June to July, 1981 without prior notice. And all of these
actuations of the appellant indeed constitute malice and evident bad faith which had caused damage and besmirched
the reputation and business image of the appellee. 14
As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for
said damages was ever made by the petitioner immediately after their alleged occurrence therefore said
counterclaims were mere afterthoughts when private respondent filed the present case.
WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be
deleted from said decision.