a) FRANCISCO S. TATAD vs.HON. JESUS B. GARCIA
While a franchise is needed to
Facts: In 1989, DOTC planned to construct a light railway
transit line along EDSA, a major thoroughfare in Metropolitan
Manila, which shall traverse the cities of Pasay, Quezon,
Mandaluyong and Makati. The plan, referred to as EDSA Light
Rail Transit III (EDSA LRT III), was intended to provide a mass
transit system along EDSA and alleviate the congestion and
growing transportation problem in the metropolis.
On July 9, 1990, Republic Act No. 6957 entitled "An Act
Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector,
and For Other Purposes," was signed by President Corazon C.
Aquino. Referred to as the Build-Operate-Transfer (BOT) Law.
A (PBAC) and the Technical Committee was created. After its
constitution, the PBAC issued guidelines for the
prequalification of contractors for the financing and
implementation of the project.
Five groups responded to the invitation. On the last day for
submission of prequalification documents, the prequalification
criteria proposed by the Technical Committee were adopted by
the PBAC. The criteria totalling 100 percent, are as follows: (a)
Legal aspects — 10 percent; (b) Management/Organizational
capability — 30 percent; and (c) Financial capability — 30
percent; and (d) Technical capability — 30 percent.
Only the EDSA LRT Consortium "met the requirements of
garnering at least 21 points per criteria [sic], except for Legal
Aspects, and obtaining an over-all passing mark of at least 82
points" (Rollo, p. 146). The Legal Aspects referred to provided
that the BOT/BT contractor-applicant meet the requirements
specified in the Constitution and other pertinent laws.
An agreement was then made between the government,
through the Department of Transportation and Communication
(DOTC), and EDSA LRT Consortium. The agreement was
based on the Build-Operate-Transfer scheme provided for by
law (RA 6957, amended by RA 7718). Under the agreement,
EDSA LRT Consortium shall build the facilities, i.e., railways,
and shall supply the train cabs. Every phase that is completed
shall be turned over to the DOTC and the latter shall pay rent
for the same for 25 years. By the end of 25 years, it was
projected that the government shall have fully paid EDSA LRT
Consortium. Thereafter, EDSA LRT Consortium shall sell the
facilities to the government for $1.00.
However, Senators Francisco Tatad, John Osmeña, and
Rodolfo Biazon opposed the implementation of said agreement
as they averred that EDSA LRT Consortium is a foreign
corporation as it was organized under Hongkong laws; that as
such, it cannot own a public utility such as the EDSA railway
transit because this falls under the nationalized areas of
activities. The petition was filed against Jesus Garcia, Jr. in his
capacity as DOTC Secretary.
Issue: W/N an respondent EDSA LRT Corporation, Ltd., a
foreign corporation own EDSA LRT III; a public utility.
Held: What private respondent owns are the rail tracks, rolling
stocks like the coaches, rail stations, terminals and the power
plant, not a public utility.
operate these facilities to serve the public, they do not by
themselves constitute a public utility. What constitutes a public
utility is not their ownership but their use to serve the public.
The Constitution, in no uncertain terms, requires a franchise
for the operation of a public utility. However, it does not require
a franchise before one can own the facilities needed to operate
a public utility so long as it does not operate them to serve the
public.
Section 11 of Article XII of the Constitution provides: No
franchise, certificate or any other form of authorization for the
operation of a public utility shall be granted except to citizens
of the Philippines or to corporations or associations organized
under the laws of the Philippines at least sixty per centum of
whose capital is owned by such citizens, nor shall such
franchise, certificate or authorization be exclusive character or
for a longer period than fifty years
In law, there is a clear distinction between the "operation" of a
public utility and the ownership of the facilities and equipment
used to serve the public.
Ownership is defined as a relation in law by virtue of which a
thing pertaining to one person is completely subjected to his
will in everything not prohibited by law or the concurrence with
the rights of another. The right to operate a public utility may
exist independently and separately from the ownership of the
facilities thereof. One can own said facilities without operating
them as a public utility, or conversely, one may operate a
public utility without owning the facilities used to serve the
public. The devotion of property to serve the public may be
done by the owner or by the person in control thereof who may
not necessarily be the owner thereof.
b) NATIONAL DEVELOPMENT COMPANY vs. THE
COURT OF APPEALS
Facts: A memorandum agreement entered into between
defendants NDC and MCP on September 13, 1962, defendant
NDC as the first preferred mortgagee of three ocean going
vessels including one with the name 'Dona Nati' appointed
defendant MCP as its agent to manage and operate said
vessel for and in its behalf and account. Thus, on February 28,
1964 the E. Philipp Corporation of New York loaded on board
the vessel "Dona Nati" at San Francisco, California, a total of
1,200 bales of American raw cotton consigned to the order of
Manila Banking Corporation. Also loaded on the same vessel
at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa,
Ltd., consigned to the order of Manila Banking Corporation
consisting of 200 cartons of sodium lauryl sulfate and 10 cases
of aluminum foil. En route to Manila the vessel Dofia Nati
figured in a collision at 6:04 a.m. on April 15, 1964 with a
Japanese vessel 'SS Yasushima Maru as a result of which 550
bales of aforesaid cargo of American raw cotton were lost
and/or destroyed. ). The damaged and lost cargoes was worth
P344,977.86 which amount, the plaintiff as insurer, paid to the
Riverside Mills Corporation as holder of the negotiable bills of
lading duly endorsed. Also considered totally lost were the
aforesaid shipments of Kyokuto. The total loss was P19,938.00
which the plaintiff as insurer paid to Guilcon as holder of the
duly endorsed bill of lading. Thus, the plaintiff had paid as
insurer the total amount of P364,915.86 to the consignees or
their successors-in-interest, for the said lost or damaged
cargoes.
Issue: W/N the Carriage of Goods by Sea Act should apply to
the case at bar and not the Civil Code or the Code of
Commerce.
Held: This issue has already been laid to rest by this Court of
Eastern Shipping Lines Inc. v. IAC (1 50 SCRA 469-470
[1987]) where it was held under similar circumstance "that the
law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss,
destruction or deterioration" (Article 1753, Civil Code). Thus,
the rule was specifically laid down that for cargoes transported
from Japan to the Philippines, the liability of the carrier is
governed primarily by the Civil Code and in all matters not
regulated by said Code, the rights and obligations of common
carrier shall be governed by the Code of commerce and by
laws (Article 1766, Civil Code). Hence, the Carriage of Goods
by Sea Act, a special law, is merely suppletory to the provision
of the Civil Code.
In the case at bar, it has been established that the goods in
question are transported from San Francisco, California and
Tokyo, Japan to the Philippines and that they were lost or due
to a collision which was found to have been caused by the
negligence or fault of both captains of the colliding vessels.
Under the above ruling, it is evident that the laws of the
Philippines will apply, and it is immaterial that the collision
actually occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the
nature of their business and for reasons of public policy are
bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by
them according to all circumstances of each case. Accordingly,
under Article 1735 of the same Code, in all other than those
mentioned is Article 1734 thereof, the common carrier shall be
presumed to have been at fault or to have acted negligently,
unless it proves that it has observed the extraordinary
diligence required by law.
It appears, however, that collision falls among matters not
specifically regulated by the Civil Code, so that no reversible
error can be found in respondent courses application to the
case at bar of Articles 826 to 839 of the Code of Commerce,
which deal exclusively with collision of vessels. Under the
provisions of the Code of Commerce, particularly Articles 826
to 839, the shipowner or carrier, is not exempt from liability for
damages arising from collision due to the fault or negligence of
the captain. Primary liability is imposed on the shipowner or
carrier in recognition of the universally accepted doctrine that
the shipmaster or captain is merely the representative of the
owner who has the actual or constructive control over the
conduct of the voyage (Y'eung Sheng Exchange and Trading
Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the
Code of Commerce should apply only to domestic trade and
not to foreign trade. Aside from the fact that the Carriage of
Goods by Sea Act (Com. Act No. 65) does not specifically
provide for the subject of collision, said Act in no uncertain
terms, restricts its application "to all contracts for the carriage
of goods by sea to and from Philippine ports in foreign trade."
Under Section I thereof, it is explicitly provided that "nothing in
this Act shall be construed as repealing any existing provision
of the Code of Commerce which is now in force, or as limiting
its application." By such incorporation, it is obvious that said
law not only recognizes the existence of the Code of
Commerce, but more importantly does not repeal nor limit its
application.
c) RADIO COMMUNICATIONS OF THE PHILIPPINES,
INC. vs. NATIONAL TELECOMMUNICATIONS
COMMISSION
Facts: Petitioner has been operating a radio communications
system since 1957 under its legislative franchise granted by
Republic Act No. 2036 which was enacted on June 23, 1957.
In 1968, the petitioner established a radio telegraph service in
Sorsogon, Sorsogon. In 1971, another radio telegraph service
was put up in San Jose, Mindoro followed by another in
Catarman, Samar in 1976. The installation of radio telephone
services started in 1971 in San Jose, Mindoro; then in
Sorsogon, Sorsogon and Catarman, Samar in 1983.
In a decision dated June 24, 1980, private respondent
Kayumanggi Radio Network Incorporated was authorized by
the public respondent to operate radio communications
systems in Catarman, Samar and in San Jose, Mindoro.
On December 14, 1983, the private respondent filed a
complaint with the NTC alleging that the petitioner was
operating in Catarman, Samar and in San Jose, Mindoro
without a certificate of public covenience and necessity. The
petitioner, on the other hand, counter-alleged that its telephone
services in the places subject of the complaint are covered by
the legislative franchise recognized by both the public
respondent and its predecessor, the Public Service
Commission. In its supplemental reply, the petitioner further
stated that it has been in operation in the questioned places
long before private respondent Kayumanggi filed its application
to operate in the same places.
After conducting a hearing, NTC ordered petitioner RCPI to
immediately cease or desist from the operation of its radio
telephone services in Catarman Northern Samar; San Jose,
Occidental Mindoro; and Sorsogon, Sorsogon stating that
under Executive Order No. 546, a certificate of public
convenience and necessity is mandatory for the operation of
communication utilities and services including radio
communications.
Issue: W/N petitioner RCPI, a grantee of a legislative franchise
to operate a radio company, is required to secure a certificate
of public convenience and necessity before it can validly
operate its radio stations
Held: the Public Service Commission was abolished and its
functions were transferred to three specialized regulatory
boards, as follows: the Board of Transportation, the Board of
Communications and the Board of Power and Waterworks.
The functions so transferred were still subject to the limitations
provided in sections 14 and 15 of the Public Service Law, as
amended. With the enactment of Executive Order No. 546 on
July 23, 1979 implementing P.D. No.1, the Board of
Communications and the Telecommunications Control Bureau
were abolished and their functions were transferred to the
NTC.
The exemption enjoyed by radio companies from the
jurisdiction of the Public Service Commission and the Board of
Communications no longer exists because of the changes
effected by the Reorganization Law and implementing
executive orders. The petitioner's claim that its franchise
cannot be affected by Executive Order No. 546 on the ground
that it has long been in operation since 1957 cannot be
sustained.
A franchise started out as a "royal privilege or (a) branch of the
King's prerogative, subsisting in the hands of a subject." This
definition was given by Finch, adopted by Blackstone, and
accepted by every authority since (State v. Twin Village Water
Co., 98 Me 214, 56 A 763 (1903)). Today, a franchise, being
merely a privilege emanating from the sovereign power of the
state and owing its existence to a grant, is subject to regulation
by the state itself by virtue of its police power through its
administrative agencies.
1. BALIWAG TRANSIT, INC.vs. COURT OF APPEALS
Facts: 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.
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
Fortune Insurance claimed limited liability, the coverage
being subject to a Schedule of Indemnities forming part of the
insurance policy.
November 14 1985 and November 18 1985: 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 notarized "Release of Claims" dated 16 May 1985.
- denied as they were filed beyond the time for pleading and
after the Answer were already filed so Baliwag amended its
answer to include such.
RTC: dismissed the Complaint and Third-party Complaint,
ruling that since the contract of carriage is between Baliwag
and George L. Cailipan (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
October 22 1987: 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.
Issue: W/N the contract signed by George during case
pendency is valid discharging Fortune Insurance and Baliwag
from any and all liability.
Held: 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
(MarimperioCompaniaNaviera, 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.
 2. BRITISH AIRWAYS, INC., petitioner, vs. COURT
OF APPEALS
Facts: February 15, 1981: First International Trading and
General Services Co. (First Int'l), a duly licensed domestic
recruitment and placement agency, received a telex message
from its principal ROLACO Engineering and Contracting
Services (ROLACO) in Jeddah, Saudi Arabia to recruit Filipino
contract workers in its behalf
Early March 1981: ROLACO paid British Airways, Inc. (BA)
Jeddah branch the airfare tickets for 93 contract workers with
specific instruction to transport the workers to Jeddah on or
before March 30, 1981. As soon as BA received a prepaid
ticket advice from its Jeddah branch informed First Int'l.
Thereafter, First Int'l instructed ADB Travel and Tours. Inc. (its
travel agent) to book the 93 workers with BA but it failed
So First Int'l had to borrow P304,416.00 for the purchase of
airline tickets from the other airlines for the 93 workers who
must leave immediately since the visas 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
First week of June, 1981: First Int'l was again informed by BA
that it had received a prepaid ticket advice from its Jeddah
branch for the transportation of 27 contract workers.
Immediately, First Int'l instructed its ADB to book the 27
contract workers with the BA but only 16 seats were confirmed
and booked on its June 9, 1981 flight.
June 9, 1981: only 9 workers were able to board said flight
while the remaining 7 workers were rebooked to:
June 30, 1981 - again cancelled by British without any prior
notice to either First Int'l or the workers
July 4,1981 - (6 + 7 workers) 13 workers were again
cancelled and rebooked to July 7, 1981.
July 6, 1981: First Int'l paid the travel tax of the workers as
required by BA but when the receipt of the tax payments was
submitted, only 12 seats were confirmed for July 7, 1981 flight
July 7, 1981: Flight was again cancelled without any prior
notice
12 workers were finally able to leave for Jeddah after First
Int'l had bought tickets from the other airlines.
As a result of these incidents, First Int'l sent a letter to BA
demanding compensation for the damages it had incurred by
the repeated failure to transport its contract workers despite
confirmed bookings and payment of the corresponding travel
taxes.
July 23, 1981: the counsel of First Int'l sent another letter to BA
demanding P350,000.00 damages and unrealized profit or
income - denied
August 8, 1981: First Int'l received a telex message from
ROLACO cancelling the hiring of the remaining recruited
workers due to the delay in transporting the workers to Jeddah.
January 27, 1982: First Int'l filed a complaint for damages
against First Int'l
CA Affirmed RTC: BA to pay First Int'l damages, attorneys
fees and costs
Issue: W/N British Airways is not liable because there was no
contract of carriage as no ticket was ever issued.
Held: 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 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.
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.
 3. DANGWA TRANSPORTATION CO., INC. and
THEODORE LARDIZABAL y MALECDAN vs.
COURT OF APPEALS
Facts: On May 13, 1985, private respondents filed a complaint
1 for damages against petitioners for the death of Pedrito
Cudiamat as a result of a vehicular accident which occurred on
March 25, 1985, it was alleged that on said date, while
petitioner Theodore M. Lardizabal was driving a passenger bus
belonging to petitioner corporation in a reckless and imprudent
manner and without due regard to traffic rules and regulations
and safety to persons and property, it ran over its passenger,
Pedrito Cudiamat. However, instead of bringing Pedrito
immediately to the nearest hospital, the said driver, first
brought his other passengers and cargo to their respective
destinations before banging said victim to the Lepanto Hospital
where he expired.
On the other hand, petitioners alleged that they had observed
and continued to observe the extraordinary diligence required
in the operation of the transportation company and the
supervision of the employees, even as they add that they are
not absolute insurers of the safety of the public at large.
Further, it was alleged that it was the victim's own
carelessness and negligence which gave rise to the subject
incident, hence they prayed for the dismissal of the complaint
plus an award of damages in their favor by way of a
counterclaim.
Respondent court, in arriving at a different opinion, declares
that:
From the testimony of appellees'own witness in the person of
Vitaliano Safarita, it is evident that the subject bus was at full
stop when the victim Pedrito Cudiamat boarded the same as it
was precisely on this instance where a certain Miss Abenoja
alighted from the bus. Moreover, contrary to the assertion of
the appellees, the victim did indicate his intention to board the
bus as can be seen from the testimony of the said witness
when he declared that Pedrito Cudiamat was no longer
walking and made a sign to board the bus when the latter was
still at a distance from him. It was at the instance when Pedrito
Cudiamat was closing his umbrella at the platform of the bus
when the latter made a sudden jerk movement (as) the driver
commenced to accelerate the bus.
Issue: W/N Dangwa should be held liable for the negligence of
its driver Theodore.
Held: Yes. It is the duty of common carriers of passengers,
including common carriers by railroad train, streetcar, or
motorbus, to stop their conveyances a reasonable length of
time in order to afford passengers an opportunity to board and
enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of
their conveyances while they are doing so. The victim herein,
by stepping and standing on the platform of the bus, is already
considered a passenger and is entitled all the rights and
protection pertaining to such a contractual relation. Hence, it
has been held that the duty which the carrier passengers owes
to its patrons extends to persons boarding cars as well as to
those alighting therefrom. 15
Common carriers, from the nature of their business and
reasons of public policy, are bound to observe extraordina
diligence for the safety of the passengers transported by the
according to all the circumstances of each case. 16 A common
carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost
diligence very cautious persons, with a due regard for all the
circumstances.
By contract of carriage, the carrier assumes the express
obligation to transport the passenger to his destination safely
and observe extraordinary diligence with a due regard for all
the circumstances, and any injury that might be suffered by the
passenger is right away attributable to the fault or negligence
of the carrier. This is an exception to the general rule that
negligence must be proved, and it is therefore incumbent upon
the carrier to prove that it has exercised extraordinary diligence
as prescribed in Articles 1733 and 1755 of the Civil Code.
Moreover, the circumstances under which the driver and the
conductor failed to bring the gravely injured victim immediately
to the hospital for medical treatment is a patent and
incontrovertible proof of their negligence. It defies
understanding and can even be stigmatized as callous
indifference.
4. LIGHT RAIL TRANSIT AUTHORITY & RODOLFO
ROMAN, petitioners, vs. MARJORIE NAVIDAD
Facts: 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 ). 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.
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. 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.
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.
Issue: W/N LRTA and Roman should be liable according to
the contract of carriage.
Held: 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. 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. Such duty of a common carrier to
provide safety to its passengers so obligates it not only during
the course of the trip but for so long as the passengers are
within its premises and where they ought to be in pursuance to
the contract of carriage. The statutory provisions render a
common carrier liable for death of or injury to passengers (a)
through the negligence or willful acts of its employees or b) on
account of willful acts or negligence of other passengers or of
strangers if the common carriers employees through the
exercise of due diligence could have prevented or stopped the
act or omission. In case of such death or injury, a carrier is
presumed to have been at fault or been negligent, and by
simple proof of injury, the passenger is relieved of the duty to
still establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove that
the injury is due to an unforeseen event or to force majeure. In
the absence of satisfactory explanation by the carrier on how
the accident occurred, which petitioners, according to the
appellate court, have failed to show, the presumption would be
that it has been at fault, an exception from the general rule
that negligence must be proved.
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 and
related provisions, in conjunction with Article 2180, 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.
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.
5. PEDRO DE GUZMAN vs. COURT OF APPEALS
Facts: 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.
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.
Issue/s:
1. W/N private respondent Ernesto Cendana maybe properly
characterized as a common carrier.
1. Held: The Civil Code defines "common carriers" in the
following terms:
Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose
principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary
activity Article 1732 also carefully avoids making any
distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population.
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.
2. W/N private respondent is liable as a common carrier.
2. Held: Art. 1745(6): that the common carrier's liability for acts
committed by thieves, or of robbers who do not act with grave
or irresistible threat, violence or force, is dispensed with or
diminished.
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."
The decision of the trial court shows that the accused acted
with grave, if not irresistible, threat, violence or force. Three (3)
of the five (5) hold-uppers were armed with firearms. The
robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several
days and later releasing them in another province (in
Zambales). The hijacked truck was subsequently found by the
police in Quezon City. The Court of First Instance 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.
6. Spouses Cruz vs Sun Holidays Inc.
Facts: Spouses Dante and Leonora Cruz lodged a Complaint
on January 25, 2001 [1] against Sun Holidays, Inc.for damages
arising from the death of their son Ruelitowho perished with his
wife on September 11, 2000 on board the boat M/B Coco
Beach III that capsized en route to Batangas from Puerto
Galera, Oriental Mindoro where the couple had stayed at Coco
Beach Island Resort owned and operated by respondent.
On September 11, 2000, as it was still windy, Matute and 25
other Resort guests including petitioners son and his wife
trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach
III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved
farther away from Puerto Galera and into the open seas, the
rain and wind got stronger, causing the boat to tilt from side to
side and the captain to step forward to the front, leaving the
wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big
waves which came one after the other, M/B Coco Beach III
capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to
get out of the boat. Upon seeing the captain, Matute and the
other passengers who reached the surface asked him what
they could do to save the people who were still trapped under
the boat. The captain replied Iligtas niyo na lang ang sarili niyo.
The stay of the newlywed Ruelito and his wife at the Resort
from September 9 to 11, 2000 was by virtue of a tour package-
contract with respondent that included transportation to and
from the Resort and the point of departure in Batangas. Help
came after about 45 minutes.
At the time of Ruelitos death, he was 28 years old and
employed as a contractual worker for Mitsui Engineering &
Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly
salary of $900.
Petitioners demanded indemnification from respondent for the
death of their son in the amount of at least P4,000,000.
Replying denied any responsibility for the incident which it
considered to be a fortuitous event. It nevertheless offered, as
an act of commiseration, the amount of P10,000 to petitioners
upon their signing of a waiver.
Petitioners filed the Complaint alleging that respondent, as a
common carrier, was guilty of negligence in allowing M/B Coco
Beach III to sail notwithstanding storm warning bulletins issued
by the Philippine Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000. Respondent denied being a common
carrier, alleging that its boats are not available to the general
public as they only ferry Resort guests and crew members.
Both RTC and CA ruled against petitioners. Hence, this
petition.
(Carlos Bonquin, captain of M/B Coco Beach III, averred that
the Resort customarily requires four conditions to be met
before a boat is allowed to sail, to wit: (1) the sea is calm, (2)
there is clearance from the Coast Guard, (3) there is clearance
from the captain and (4) there is clearance from the Resorts
assistant manager. [8] He added that M/B Coco Beach III met
all four conditions on September 11, 2000, [9] but a subasco or
squall, characterized by strong winds and big waves, suddenly
occurred, causing the boat to capsize)
Issue: W/N respondent is a common carrier.
Held: The petition is impressed with merit. Petitioners correctly
rely on De Guzman v. Court of Appeals (See ruling in the first
issue). Indeed, respondent is a common carrier. Its ferry
services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of
respondents ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the
tour packages it offers, which include the ferry services, may
be availed of by anyone who can afford to pay the same.
These services are thus available to the public.
As De Guzman instructs, Article 1732 of the Civil Code
defining common carriers has deliberately refrained from
making distinctions on whether the carrying of persons or
goods is the carriers principal business, whether it is offered on
a regular basis, or whether it is offered to the general public.
The intent of the law is thus to not consider such distinctions.
Otherwise, there is no telling how many other distinctions may
be concocted by unscrupulous businessmen engaged in the
carrying of persons or goods in order to avoid the legal
obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the
nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence for the safety of the
passengers transported by them, according to all the
circumstances of each case. [19] They are bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons,
with due regard for all the circumstance.
The evidence shows that PAGASA issued 24-hour public
weather forecasts and tropical cyclone warnings for shipping
on September 10 and 11, 2000 advising of tropical
depressions in Northern Luzon which would also affect the
province of Mindoro.
7. ASIA LIGHTERAGE AND SHIPPING, INC.,
petitioner, vs. COURT OF APPEALS
Facts: On June 13, 1990, 3,150 metric tons of Better Western
White Wheat in bulk, valued at US$423,192.35 was shipped by
Marubeni American Corporation of Portland, Oregon on board
the vessel M/V NEO CYMBIDIUM V-26 for delivery to the
consignee, General Milling Corporation in Manila. The
shipment was insured by the private respondent Prudential
Guarantee and Assurance, Inc. against loss or damage for
P14,621,771.75 under Marine Cargo Risk Note. On July 25,
1990, the carrying vessel arrived in Manila and the cargo was
transferred to the custody of the petitioner Asia Lighterage and
Shipping, Inc. The petitioner was contracted by the consignee
as carrier to deliver the cargo to consignee's warehouse at Bo.
Ugong, Pasig City. On August 15, 1990, 900 metric tons of the
shipment was loaded on barge PSTSI III, for delivery to
consignee. The cargo did not reach its destination.
On August 17, 1990, the transport of said cargo was
suspended due to a warning of an incoming typhoon. On
August 22, 1990, the petitioner proceeded to pull the barge to
Engineering Island off Baseco to seek shelter from the
approaching typhoon. PSTSI III was tied down to other barges
which arrived ahead of it while weathering out the storm that
night. A few days after, the barge developed a list because of a
hole it sustained after hitting an unseen protuberance
underneath the water.
Upon reaching the Sta. Mesa spillways, the barge again ran
aground due to strong current. To avoid the complete sinking
of the barge, a portion of the goods was transferred to three
other barges. The next day, September 6, 1990, the towing
bits of the barge broke. It sank completely, resulting in the total
loss of the remaining cargo.
On September 14, 1990, a bidding was conducted to dispose
of the damaged wheat retrieved and loaded on the three other
barges. The total proceeds from the sale of the salvaged cargo
was P201,379.75. [14]
On the same date, September 14, 1990, consignee sent a
claim letter to the petitioner, and another letter dated
September 18, 1990 to the private respondent for the value of
the lost cargo.
On January 30, 1991, the private respondent indemnified the
consignee in the amount of P4,104,654.22. [15] Thereafter, as
subrogee, it sought recovery of said amount from the
petitioner, but to no avail.
Issue/s:
1) W/N the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, W/N it
exercised extraordinary diligence in its care and custody of the
consignees cargo.
Held:
1. On the first issue, we rule that petitioner is a common
carrier. Article 1732 of the Civil Code defines common carriers
as persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers. In De
Guzman vs. Court of Appeals, we held that the definition of
common carriers in Article 1732 of the Civil Code makes no
distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity. We also did not
distinguish between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or
unscheduled basis. Further, we ruled that Article 1732 does
not distinguish between a carrier offering its services to the
general public, and one who offers services or solicits business
only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is
that of lighterage and drayage and it offers its barges to the
public for carrying or transporting goods by water for
compensation. Petitioner is clearly a common carrier.
(Petitioner fits the test of a common carrier as laid down in
Bascos vs. Court of Appeals. The test to determine a common
carrier is whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to
the general public as his occupation rather than the quantity or
extent of the business transacted. In the case at bar, the
petitioner admitted that it is engaged in the business of
shipping and lighterage, offering its barges to the public,
despite its limited clientele for carrying or transporting goods
by water for compensation)
2. On the second issue, we uphold the findings of the lower
courts that petitioner failed to exercise extraordinary diligence
in its care and custody of the consignees goods.
Common carriers are bound to observe extraordinary diligence
in the vigilance over the goods transported by them. [28] They
are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. [29]
To overcome the presumption of negligence in the case of
loss, destruction or deterioration of the goods, the common
carrier must prove that it exercised extraordinary diligence.
There are, however, exceptions to this rule. Article 1734 of the
Civil Code enumerates the instances when the presumption of
negligence does not attach:
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international
or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing
or in the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing
bits broke, resulting in the total loss of its cargo. Petitioner
claims that this was caused by a typhoon, hence, it should not
be held liable for the loss of the cargo. However, petitioner
failed to prove that the typhoon is the proximate and only
cause of the loss of the goods, and that it has exercised due
diligence before, during and after the occurrence of the
typhoon to prevent or minimize the loss. [30] The evidence
shows that, even before the towing bits of the barge broke, it
had already previously sustained damage when it hit a sunken
object while docked at the Engineering Island. It even suffered
a hole. Clearly, this could not be solely attributed to the
typhoon. The partly-submerged vessel was refloated but its
hole was patched with only clay and cement. The patch work
was merely a provisional remedy, not enough for the barge to
sail safely.
8. FIRST PHILIPPINE INDUSTRIAL CORPORATION
vs. COURT OF APPEALS
Facts: Petitioner is a grantee of a pipeline concession under
R.A. No. 387, as amended, a contract, install and operate oil
pipelines. The original pipeline concession was granted in
1967 and renewed by the Energy Regulatory Board in 1992.
Sometime in January 1995, petitioner applied for a mayor’s
permit with the Office of the Mayor of Batangas City. However,
before the mayor’s permit could be issued, the respondent City
Treasurer required petitioner to pay a local tax based on its
gross receipts for the fiscal year 1993 pursuant to the Local
Government Code. The respondent City Treasure 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 June 15, 1994, petitioner filed with the RTC of Batangas
City a complaint for tax refund with prayer for writ of
preliminary injunction against respondents City of Batangas
and Adoracion Arellano in her capacity as City Treasurer. In its
complaint, petitioner alleged, inter alia, that: (1) the imposition
and collection of the business tax on its gross receipts violates
Sec. 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 contactors; and
(3) the City Treasurer illegally and erroneously imposed and
collected the said tax, thus meriting the immediate refund of
the tax paid.
Traversing the complaint, the respondents argued that
petitioner cannot be exempt from taxes under Sec. 133 (J) of
the Local Government Code as said exemption applied 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 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.
Issue: W/N the petitioner is a common carrier so that in the
affirmative, he is not liable to pay the carriers tax under the
Local Government Code of 1991.
Held: 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.
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. Under
the Petroleum Act of the Philippines petitioner is considered a
"common carrier.
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.
From the foregoing disquisition, there is no doubt that
petitioner is a "common carrier" and, therefore, exempt from
the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of
Local Government Units. - Unless otherwise provided herein,
the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of
the following :
xxx xxx xxx
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air, land
or water, except as provided in this Code."
9. PLANTERS PRODUCTS, INC. vs. COURT OF
APPEALS
Facts: Planters Products, Inc. (PPI), purchased from
Mitsubishi International Corporation of New York, U.S.A.,
9,329.7069 metric tons of Urea 46% fertilizer which the latter
shipped in bulk on 16 June 1974 aboard the cargo vessel M/V
"Sun Plum" owned by private respondent Kyosei Kisen
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro
Point, San Fernando, La Union, Philippines. On 17 May 1974,
or prior to its voyage, a time charter-party on the vessel M/V
"Sun Plum" pursuant to the Uniform General Charter was
entered into between Mitsubishi as shipper/charterer and
KKKK as shipowner, in Tokyo, Japan. Before loading the
fertilizer aboard the vessel, four (4) of her holds were all
presumably inspected by the charterer's representative and
found fit to take a load of urea in bulk.
After the Urea fertilizer was loaded in bulk by stevedores hired
by and under the supervision of the shipper, the steel hatches
were closed with heavy iron lids, covered with three (3) layers
of tarpaulin, then tied with steel bonds. The hatches remained
closed and tightly sealed throughout the entire voyage. On 3
July 1974, the steel pontoon hatches were opened with the
use of the vessel's boom. Petitioner unloaded the cargo from
the holds into its steel-bodied dump trucks which were parked
alongside the berth, using metal scoops attached to the ship,
pursuant to the terms and conditions of the charter-partly.
Cargo Superintendents Company Inc. (CSCI), was hired by
PPI to determine the "outturn" of the cargo shipped, by taking
draft readings of the vessel prior to and after discharge.
Shortage in the cargo of 106.726 M/T and that a portion of the
Urea fertilizer approximating 18 M/T was contaminated with
dirt. PPI sent a claim letter dated 18 December 1974 to
Soriamont Steamship Agencies (SSA), the resident agent of
the carrier, KKKK, for P245,969.31 representing the cost of the
alleged shortage in the goods shipped and the diminution in
value of that portion said to have been contaminated with dirt.
Respondent SSA explained that they were not able to respond
to the consignee's claim for payment because, according to
them, what they received was just a request for shortlanded
certificate and not a formal claim, and that this "request" was
denied by them because they "had nothing to do with the
discharge of the shipment."
The court a quo however sustained the claim of the plaintiff
against the defendant carrier for the value of the goods lost or
damaged. On appeal, respondent Court of Appeals reversed
the lower court and absolved the carrier from liability for the
value of the cargo that was lost or damaged.
Issue/s:
1. W/N a common carrier becomes a private carrier by reason
of a charter-party;
2. In the negative, W/N the shipowner in the instant case was
able to prove that he had exercised that degree of diligence
required of him under the law.
Held:
1. No. A "charter-party" is defined as a contract by which an
entire ship, or some principal part thereof, is let by the owner to
another person for a specified time or use; 20 a contract of
affreightment by which the owner of a ship or other vessel lets
the whole or a part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration
of the payment of freight. the term "common or public carrier"
is defined in Art. 1732 of the Civil Code. 23 The definition
extends to carriers either by land, air or water which hold
themselves out as ready to engage in carrying goods or
transporting passengers or both for compensation as a public
employment and not as a casual occupation. The distinction
between a "common or public carrier" and a "private or special
carrier" lies in the character of the business, such that if the
undertaking is a single transaction, not a part of the general
business or occupation, although involving the carriage of
goods for a fee, the person or corporation offering such service
is a private carrier. 24
Article 1733 of the New Civil Code mandates that common
carriers, by reason of the nature of their business, should
observe extraordinary diligence in the vigilance over the goods
they carry.25 In the case of private carriers, however, the
exercise of ordinary diligence in the carriage of goods will
suffice. Moreover, in the case of loss, destruction or
deterioration of the goods, common carriers are presumed to
have been at fault or to have acted negligently, and the burden
of proving otherwise rests on them.26 On the contrary, no such
presumption applies to private carriers, for whosoever alleges
damage to or deterioration of the goods carried has the onus
of proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course
of business, operates as a common carrier, transporting goods
indiscriminately for all persons. When petitioner chartered the
vessel M/V "Sun Plum", the ship captain, its officers and
compliment were under the employ of the shipowner and
therefore continued to be under its direct supervision and
control. Hardly then can we charge the charterer, a stranger to
the crew and to the ship, with the duty of caring for his cargo
when the charterer did not have any control of the means in
doing so. This is evident in the present case considering that
the steering of the ship, the manning of the decks, the
determination of the course of the voyage and other technical
incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the
shipowner.
It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is limited
to the ship only, as in the case of a time-charter or voyage-
charter. The rule in the United States that a ship chartered by a
single shipper to carry special cargo is not a common carrier,
29 does not find application in our jurisdiction, for we have
observed that the growing concern for safety in the
transportation of passengers and /or carriage of goods by sea
requires a more exacting interpretation of admiralty laws, more
particularly, the rules governing common carriers.
2. In an action for recovery of damages against a common
carrier on the goods shipped, the shipper or consignee should
first prove the fact of shipment and its consequent loss or
damage while the same was in the possession, actual or
constructive, of the carrier. Thereafter, the burden of proof
shifts to respondent to prove that he has exercised
extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its
liability.
To our mind, respondent carrier has sufficiently overcome, by
clear and convincing proof, the prima facie presumption of
negligence. It was also shown during the trial that the hull of
the vessel was in good condition, foreclosing the possibility of
spillage of the cargo into the sea or seepage of water inside
the hull of the vessel. 33 When M/V "Sun Plum" docked at its
berthing place, representatives of the consignee boarded, and
in the presence of a representative of the shipowner, the
foreman, the stevedores, and a cargo surveyor representing
CSCI, opened the hatches and inspected the condition of the
hull of the vessel. The stevedores unloaded the cargo under
the watchful eyes of the shipmates who were overseeing the
whole operation on rotation basis.
Verily, the presumption of negligence on the part of the
respondent carrier has been efficaciously overcome by the
showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo.
10. MR. & MRS. ENGRACIO FABRE, JR. and
PORFIRIO CABIL vs. COURT OF APPEALS
Facts: Petitioners Engracio Fabre, Jr. and his wife were
owners of a 1982 model Mazda minibus. They used the bus
principally in connection with a bus service for school children
which they operated in Manila. The couple had a driver,
Porfirio J. Cabil, whom they hired in 1981, after trying him out
for two weeks. His job was to take school children to and from
the St. Scholasticas College in Malate, Manila.
On November 2, 1984 private respondent Word for the World
Christian Fellowship Inc. (WWCF) arranged with petitioners for
the transportation of 33 members of its Young Adults Ministry
from Manila to La Union and back in consideration of which
private respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at
5:00 oclock in the afternoon. However, as several members of
the party were late, the bus did not leave the Tropical Hut at
the corner of Ortigas Avenue and EDSA until 8:00 oclock in the
evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen,
Pangasinan. However, the bridge at Carmen was under repair,
so that petitioner Cabil, who was unfamiliar with the area (it
being his first trip to La Union), was forced to take a detour
through the town of Ba-ay in Lingayen, Pangasinan. At 11:30
that night, petitioner Cabil came upon a sharp curve on the
highway, running on a south to east direction, which he
described as siete. The road was slippery because it was
raining, causing the bus, which was running at the speed of 50
kilometers per hour, to skid to the left road shoulder. The bus
hit the left traffic steel brace and sign along the road and
rammed the fence of one Jesus Escano, then turned over and
landed on its left side, coming to a full stop only after a series
of impacts. The bus came to rest off the road. A coconut tree
which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline
Antonio was thrown on the floor of the bus and pinned down by
a wooden seat which came off after being unscrewed. It took
three persons to safely remove her from this position. She was
in great pain and could not move.
Issue: W/N the spouses Fabre are common carriers
Held: Petition was denied. Spouses Fabre are common
carriers.
The Supreme Court held that 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.
It was admitted by Cabil that on the night in question, it was
raining, and, as a consequence, the road was slippery, and it
was dark. He averred these facts to justify his failure to see
that there lay a sharp curve ahead. However, it is undisputed
that Cabil drove his bus at the speed of 50 kilometers per hour
and only slowed down when he noticed the curve some 15 to
30 meters ahead. [3] By then it was too late for him to avoid
falling off the road. Given the conditions of the road and
considering that the trip was Cabils first one outside of Manila,
Cabil should have driven his vehicle at a moderate speed.
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.
Pursuant to Arts. 2176 and 2180 of the Civil Code his
negligence gave rise to the presumption that his employers,
the Fabres, were themselves negligent in the selection and
supervision of their employee.
Due diligence in selection of employees is not satisfied by
finding that the applicant possessed a professional drivers
license. The employer should also examine the applicant for
his qualifications, experience and record of service. Due
diligence in supervision, on the other hand, requires the
formulation of rules and regulations for the guidance of
employees and the issuance of proper instructions as well as
actual implementation and monitoring of consistent compliance
with the rules.
11. ESTRELLITA M. BASCOS, petitioners, vs. COURT
OF APPEALS and RODOLFO A. CIPRIANO
Facts: Rodolfo A. Cipriano representing Cipriano Trading
Enterprise (CIPTRADE for short) entered into a hauling
contract 2 with Jibfair Shipping Agency Corporation whereby
the former bound itself to haul the latter's 2,000 m/tons of soya
bean meal. To carry out its obligation, CIPTRADE, through
Rodolfo Cipriano, subcontracted with Estrellita Bascos to
transport and to deliver 400 sacks of soya bean meal worth
P156,404.00 at the rate of P50.00 per metric ton. Petitioner
failed to deliver the said cargo. As a consequence of that
failure, Cipriano paid Jibfair Shipping Agency the amount of
the lost goods in accordance with the contract which stated
that:
"1. CIPTRADE shall be held liable and answerable for any loss
in bags due to theft, hijacking and non-delivery or damages to
the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the
latter refused to pay. Eventually, Cipriano filed a complaint for
a sum of money and damages with writ of preliminary
attachment 4 for breach of a contract of carriage.
both courts appreciated the following pieces of evidence as
indicators that petitioner was a common carrier: the fact that
the truck driver of petitioner, Maximo Sanglay, received the
cargo consisting of 400 bags of soya bean meal as evidenced
by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of
petitioner; and the fact that control of the cargo was placed in
petitioner's care.
In disputing the conclusion of the trial and appellate courts that
petitioner was a common carrier, she alleged in this petition
that the contract between her and Rodolfo A. Cipriano,
representing CIPTRADE, was lease of the truck. She cited as
evidence certain affidavits which referred to the contract as
"lease".
Issue/s:
(1) W/N petitioner a common carrier; and
(2) W/N the hijacking referred to a force majeure.
Held:
1. We agree with the respondent Court in its finding that
petitioner is a common carrier. Article 1732 of the Civil Code
defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to
determine a common carrier is "whether the given undertaking
is a part of the business engaged in by the carrier which he
has held out to the general public as his occupation rather than
the quantity or extent of the business transacted." In this case,
petitioner herself has made the admission that she was in the
trucking business, offering her trucks to those with cargo to
move. Judicial admissions are conclusive and no evidence is
required to prove the same. Regarding the affidavits presented
by petitioner to the court, both the trial and appellate courts
have dismissed them as self-serving and petitioner contests
the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-
serving, the same were not sufficient to prove that the contract
was one of lease. It must be understood that a contract is what
the law defines it to be and not what it is called by the
contracting parties. 15 Furthermore, petitioner presented no
other proof of the existence of the contract of lease. He who
alleges a fact has the burden of proving it.
2. We affirm the holding of the respondent court that the loss of
the goods was not due to force majeure.
Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them.
17 Accordingly, they are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or
deteriorated. 18 There are very few instances when the
presumption of negligence does not attach and these
instances are enumerated in Article 1734. 19 In those cases
where the presumption is applied, the common carrier must
prove that it exercised extraordinary diligence in order to
overcome the presumption.
In this case, petitioner alleged that hijacking constituted force
majeure which exculpated her from liability for the loss of the
cargo.
"Art. 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished;"
To establish grave and irresistible force, petitioner presented
her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and
Juanito Morden's 24 "Salaysay". However, both the trial court
and the Court of Appeals have concluded that these affidavits
were not enough to overcome the presumption. Petitioner's
affidavit about the hijacking was based on what had been told
her by Juanito Morden. It was not a first-hand account. While it
had been admitted in court for lack of objection on the part of
private respondent, the respondent Court had discretion in
assigning weight to such evidence. We are bound by the
conclusion of the appellate court.
12. FGU INSURANCE CORPORATION, petitioner, vs.
G.P. SARMIENTO TRUCKING CORPORATION
Facts: G.P. Sarmiento Trucking Corporation (GPS) undertook
to deliver on 18 June 1994 thirty (30) units of Condura S.D.
white refrigerators aboard one of its Isuzu truck, driven by
Lambert Eroles, from the plant site of Concepcion Industries,
Inc to the Central Luzon Appliances in Dagupan City. While the
truck was traversing it collided with an unidentified truck,
causing it to fall into a deep canal, resulting in damage to the
cargoes. FGU), an insurer of the shipment, paid to Concepcion
Industries, Inc., the value of the covered cargoes in the sum of
P204,450.00. FGU, in turn, being the subrogee of the rights
and interests of Concepcion Industries, Inc., sought
reimbursement of the amount it had paid to the latter from
GPS. Since the trucking company failed to heed the claim,
FGU filed a complaint for damages and breach of contract of
carriage against GPS and its driver Lambert Eroles with the
Regional Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only
of Concepcion Industries, Inc., since 1988, and it was not so
engaged in business as a common carrier. Respondents
further claimed that the cause of damage was purely
accidental.
FGU presented its evidence, establishing the extent of damage
to the cargoes and the amount it had paid to the assured.
GPS, instead of submitting its evidence, filed with leave of
court a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove that
it was a common carrier.
The trial court, in its order of 30 April 1996, granted the motion
to dismiss, explaining thusly:
Under Section 1 of Rule 131 of the Rules of Court, it is
provided that: Each party must prove his own affirmative
allegation, xxx.
In the instant case, plaintiff did not present any single evidence
that would prove that defendant is a common carrier.
xxx xxx xxx
Accordingly, the application of the law on common carriers is
not warranted and the presumption of fault or negligence on
the part of a common carrier in case of loss, damage or
deterioration of goods during transport under 1735 of the Civil
Code is not availing.
Thus, the laws governing the contract between the owner of
the cargo to whom the plaintiff was subrogated and the owner
of the vehicle which transports the cargo are the laws on
obligation and contract of the Civil Code as well as the law on
quasi delicts. The Court of Appeals rejected the appeal of
petitioner and ruled in favor of GPS.
Issue/s:
1. W/N RESPONDENT GPS MAY BE CONSIDERED AS A
COMMON CARRIER.
2. WHETHER RESPONDENT GPS MAY BE PRESUMED TO
HAVE BEEN NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY WERE
SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE
CUSTODY AND POSSESSION.
3. WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS
APPLICABLE IN THE INSTANT CASE.
Held:
1. On the first issue, the Court finds the conclusion of the trial
court and the Court of Appeals to be amply justified. GPS,
being an exclusive contractor and hauler of Concepcion
Industries, Inc., rendering or offering its services to no other
individual or entity, cannot be considered a common carrier.
Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air, for hire or compensation, offering their services to the
public, [8] whether to the public in general or to a limited
clientele in particular, but never on an exclusive basis. [9] The
true test of a common carrier is the carriage of passengers or
goods, providing space for those who opt to avail themselves
of its transportation service for a fee.
2. The above conclusion nothwithstanding, GPS cannot
escape from liability.
In culpa contractual, upon which the action of petitioner rests
as being the subrogee of Concepcion Industries, Inc., the mere
proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.
The law, recognizing the obligatory force of contracts, will not
permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a
contravention of the tenor thereof. A breach upon the contract
confers upon the injured party a valid cause for recovering that
which may have been lost or suffered. The remedy serves to
preserve the interests of the promisee that may include his
expectation interest, which is his interest in having the benefit
of his bargain by being put in as good a position as he would
have been in had the contract been performed, or his reliance
interest, which is his interest in being reimbursed for loss
caused by reliance on the contract by being put in as good a
position as he would have been in had the contract not been
made; or his restitution interest, which is his interest in having
restored to him any benefit that he has conferred on the other
party.
Respondent Trucking Corporation recognizes the existence of
a contract of carriage between it and petitioners assured, and
admit that the cargoes it has assumed to deliver have been
lost or damaged while in its custody. In such a situation, a
default on, or failure of compliance with, the obligation in this
case, the delivery of the goods in its custody to the place of
destination - gives rise to a presumption of lack of care and
corresponding liability on the part of the contractual obligor the
burden being on him to establish otherwise. GPS has failed to
do so.
Respondent driver, on the other hand, without concrete proof
of his negligence or fault, may not himself be ordered to pay
petitioner. The driver, not being a party to the contract of
carriage between petitioners principal and defendant, may not
be held liable under the agreement. A contract can only bind
the parties who have entered into it or their successors who
have assumed their personality or their juridical position.
3. The maxim simply places on the defendant the burden of
going forward with the proof. [20] Resort to the doctrine,
however, may be allowed only when (a) the event is of a kind
which does not ordinarily occur in the absence of negligence;
(b) other responsible causes, including the conduct of the
plaintiff and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the scope
of the defendant's duty to the plaintiff. [21] Thus, it is not
applicable when an unexplained accident may be attributable
to one of several causes, for some of which the defendant
could not be responsible. [22]
Res ipsa loquitur generally finds relevance whether or not a
contractual relationship exists between the plaintiff and the
defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the
nature of the relation of the parties. [23] Nevertheless, the
requirement that responsible causes other than those due to
defendants conduct must first be eliminated, for the doctrine to
apply, should be understood as being confined only to cases of
pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out,
immediately attaches by a failure of the covenant or its tenor.
In the case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be
said to have been in control and management of the vehicle
which figured in the accident, it is not equally shown, however,
that the accident could have been exclusively due to his
negligence, a matter that can allow, forthwith, res ipsa loquitur
to work against him.
13. ESTELA L. CRISOSTOMO vs. THE COURT OF
APPEALS and CARAVAN TRAVEL & TOURS
INTERNATIONAL, INC
Facts: In May 1991, petitioner Estela L. Crisostomo contracted
the services of respondent Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed Jewels of
Europe. The package tour included the countries of England,
Holland, Germany, Austria, Liechstenstein, Switzerland and
France at a total cost of P74,322.70. Petitioner was given a 5%
discount on the amount, which included airfare, and the
booking fee was also waived because petitioners niece,
Meriam Menor, was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence
on June 12, 1991 a Wednesday to deliver petitioners travel
documents and plane tickets. Petitioner, in turn, gave Menor
the full payment for the package tour. Menor then told her to
be at the NAIA) on Saturday, two hours before her flight on
board British Airways.
Without checking her travel documents, petitioner went to
NAIA on Saturday, June 15, 1991, to take the flight for the first
leg of her journey from Manila to Hongkong. To petitioners
dismay, she discovered that the flight she was supposed to
take had already departed the previous day. She learned that
her plane ticket was for the flight scheduled on June 14, 1991.
She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another
tour the British Pageant which included England, Scotland and
Wales in its itinerary. Upon petitioners return from Europe, she
demanded from respondent the reimbursement of P61,421.70,
representing the difference between the sum she paid for
Jewels of Europe and the amount she owed respondent for the
British Pageant tour. Despite several demands, respondent
company refused to reimburse the amount, contending that the
same was non-refundable. Petitioner was thus constrained to
file a complaint against respondent for breach of contract of
carriage and damage.
Petitioner alleged that her failure to join Jewels of Europe was
due to respondents fault since it did not clearly indicate the
departure date on the plane ticket. Respondent was also
negligent in informing her of the wrong flight schedule through
its employee Menor.
Respondent company denied responsibility for petitioners
failure to join the first tour that petitioner was informed of the
correct departure date, which was clearly and legibly printed
on the plane ticket. The travel documents were given to
petitioner two days ahead of the scheduled trip. Petitioner had
only herself to blame for missing the flight, as she did not
bother to read or confirm her flight schedule as printed on the
ticket. The trial court held that respondent was negligent in
erroneously advising petitioner of her departure date through
its employee, Menor, who was not presented as witness to
rebut petitioners testimony. Respondent appealed to the Court
of Appeals, which likewise found both parties to be at fault.
However, the appellate court held that petitioner is more
negligent than respondent because as a lawyer and well-
traveled person, she should have known better than to simply
rely on what was told to her. This being so, she is not entitled
to any form of damages.
Issue: W/N respondent is a common carrier.
Held: A common carrier is defined under Article 1732 of the
Civil Code as persons, corporations, firms or associations
engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an
entity engaged in the business of transporting either
passengers or goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake to transport
petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their
behalf. Respondents services as a travel agency include
procuring tickets and facilitating travel permits or visas as well
as booking customers for tours.
While petitioner concededly bought her plane ticket through
the efforts of respondent company, this does not mean that the
latter ipso facto is a common carrier. At most, respondent
acted merely as an agent of the airline, with whom petitioner
ultimately contracted for her carriage to Europe. Respondents
obligation to petitioner in this regard was simply to see to it that
petitioner was properly booked with the airline for the
appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.
We do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and
resultantly caused damage to the latter. Menors negligence
was not sufficiently proved, considering that the only evidence
presented on this score was petitioners uncorroborated
narration of the events. It is well-settled that the party alleging
a fact has the burden of proving it and a mere allegation
cannot take the place of evidence.
As correctly observed by the lower court, the plane ticket [19]
issued to petitioner clearly reflected the departure date and
time, contrary to petitioners contention. The travel documents,
consisting of the tour itinerary, vouchers and instructions, were
likewise delivered to petitioner two days prior to the trip.
Respondent also properly booked petitioner for the tour,
prepared the necessary documents and procured the plane
tickets. It arranged petitioners hotel accommodation as well as
food, land transfers and sightseeing excursions, in accordance
with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation
under the contract as well as everything else that was
essential to book petitioner for the tour. Had petitioner
exercised due diligence in the conduct of her affairs, there
would have been no reason for her to miss the flight. Needless
to say, after the travel papers were delivered to petitioner, it
became incumbent upon her to take ordinary care of her
concerns. This undoubtedly would require that she at least
read the documents in order to assure herself of the important
details regarding the trip.
14. CARGOLIFT SHIPPING, INC vs. L. ACUARIO
MARKETING CORP. and SKYLAND BROKERAGE,
INC
Facts: Sometime in March 1993 Acuario and respondent
Skyland entered into a time charter agreement [4] whereby
Acuario leased to Skyland its L. Acuario II barge for use by the
latter in transporting electrical posts from Manila to Limay,
Bataan. At the same time, Skyland also entered into a
separate contract with petitioner Cargolift, for the latters
tugboats to tow the aforesaid barge. Petitioner has two
tugboats M/T Beejay and M/T Count. Off-loading operations
went underway until April 7, 1993, when operations were
interrupted for the next two days to give way to the observance
of the lenten season. The unloading of the cargo was
concluded on April 12, 1993, by which time M/T Beejay had
gone back to Bataan for the return trip. The M/T Beejay and
the barge returned to the port of Manila on April 13, 1993.
On the same day, the barge was brought to Acuarios shipyard
where it was allegedly discovered that the barge was listing
due to a leak in its hull. It was learned later the due to strong
winds and large waves, the barge repeatedly hit its hull on the
wall, thus prompting the barge patron to alert the tugboat
captain of the M/T Count to tow the barge farther out to sea.
However, the tugboat failed to pull the barge to a safer
distance due to engine malfunction, thereby causing the barge
to sustain a hole in its hull.
Acuario spent the total sum of P97,021.20 for the repairs, and,
pursuant to the contract, sought reimbursement from Skyland,
failing which, it filed a suit before the RTC which was granted.
On appeal, it was affirmed by the CA. Skyland, in turn, filed a
third-party complaint against petitioner alleging that it was
responsible for the damage sustained by the barge.
Issue: W/N petitioner is liable for the damage incurred by
Acuario.
Held: it is not correct for petitioner to assert that Acuario could
not recover damages from it due to lack of privity of contract
between them. It is not Acuario that is seeking damages from
petitioner but Skyland, with whom it undoubtedly had a juridical
tie. While Acuario could hold Skyland liable under its charter
agreement, Skyland in turn could enforce liability on petitioner
based on the latters obligation to Skyland. In other words,
petitioner is being held liable by Skyland and not by Acuario.
Thus, in the performance of its contractual obligation
to Skyland, petitioner was required to observe the due
diligence of a good father of the family. This much was held in
the old but still relevant case of Baer Senior & Co.s
Successors v. La Compania Maritima where the Court
explained that a tug and its owners must observe ordinary
diligence in the performance of its obligation under a contract
of towage. The negligence of the obligor in the performance of
the obligation renders him liable for damages for the resulting
loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so
demands.
In the case at bar, the exercise of ordinary prudence
by petitioner means ensuring that its tugboat is free of
mechanical problems. While adverse weather has always been
a real threat to maritime commerce, the least that petitioner
could have done was to ensure that the M/T Count or any of its
other tugboats would be able to secure the barge at all times
during the engagement. This is especially true when
considered with the fact that Acuarios barge was wholly
dependent upon petitioners tugboat for propulsion. The barge
was not equipped with any engine and needed a tugboat for
maneuvering.
 15. GAUDIOSO EREZO, plaintiff-appellee vs.
AGUEDO JEPTE, defendant-appellant
Facts: Defendant-appellant is the registered owner of a six by
six truck On August, 9, 1949, while the same was being driven
by Rodolfo it collided with a taxicab at the intersection of San
Andres and Dakota Streets, Manila. As the truck went off the
street, it hit Ernesto Erezo and another, and the former
suffered injuries, as a result of which he died. The driver was
prosecuted for homicide through reckless negligence. The
accused pleaded guilty and was sentenced to suffer
imprisonment and to pay the heirs of Ernesto Erezo the sum of
P3,000. As the amount of the judgment could not be enforced
against him, plaintiff brought this action against the registered
owner of the truck, the defendant-appellant. The trial court held
that as the defendant-appellant represented himself to be the
owner of the truck and the Motor Vehicle Office registered the
vehicles in his name, the Government and all persons affected
by the representation had the right to rely on his declaration of
ownership and registration. It, therefore, held that the
defendant-appellant is liable because he cannot be permitted
to repudiate his own declaration. The defendant has
prosecuted this appeal claiming that at the time of the accident
the relation of employer and employee between the driver and
defendant-appellant was not established, it having been
proved at the trial that the owner of the truck was the Port
Brokerage, of which defendant-appellant was merely a broker.
Issue: W/N Jepte should be held liable being the registered
owner of the truck.
Held: Yes. We already have held that the registered owner of a
certificate of public convenience is liable to the public for the
injuries or damages suffered by passengers or third persons
caused by the operation of said vehicle, even though the same
had been transferred to a third person. The principle upon
which this doctrine is based is that in dealing with vehicles
registered under the Public Service Law, the public has the
right to assume or presume that the registered owner is the
actual owner thereof, for it would be difficult for the public to
enforce the actions that they may have for injuries caused to
them by the vehicles being negligently operated if the public
should be required to prove who the actual owner is. The main
aim of motor vehicle registration is to identify the owner so that
if any accident happens, or that any damage or injury is
caused by the vehicles on the public highways, responsibility
therefore can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on
public highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or
drivers, or with very scant means of identification.
The above policy and application of the law may appear quite
harsh and would seem to conflict with truth and justice. We do
not think it is so. A registered owner who has already sold or
transferred a vehicle has the recourse to a third-party
complaint, in the same action brought against him to recover
for the damage or injury done, against the vendee or
transferee of the vehicle. The inconvenience of the suit is no
justification for relieving him of liability; said inconvenience is
the price he pays for failure to comply with the registration that
the law demands and requires.
16. ADOLFO L. SANTOS, petitioner, vs. ABRAHAM
SIBUG and COURT OF APPEALS, respondents
Facts: Vicente U. Vidad was a duly authorized passenger
jeepney operator. Petitioner Adolfo L. Santos was the owner of
a passenger jeep, but he had no certificate of public
convenience for the operation of the vehicle as a public
passenger jeep. SANTOS then transferred his jeep to the
name of VIDAD so that it could be operated under the latter's
certificate of public convenience. ln other words, SANTOS
became what is known in ordinary parlance as a kabit
operator. For the protection of SANTOS, VIDAD executed a re-
transfer document to the former, which was to be a private
document presumably to be registered if and where it was
decided that the passenger jeep of SANTOS was to be
withdrawn from the kabit arrangement.
On the ACCIDENT DATE, private respondent Abraham Sibug
was bumped by a passenger jeepney operated by VIDAD and
driven by Severe Gragas. As a result thereof, SIBUG filed a
complaint for damages against VIDAD and Gragas with the
CFI of Manila. On December 5, 1963, a judgment was
rendered sentencing VIDAD and Gragas, jointly and severally,
to pay SIBUG. On April 10, 1964, the Sheriff of Manila levied
on a motor vehicle registered in the name of VIDAD, and
scheduled the public auction sale thereof. On April 11, 1964,
SANTOS presented a third-party claim with the Sheriff alleging
actual ownership of the motor vehicle levied upon, and stating
that registration thereof in the name of VIDAD was merely to
enable SANTOS to make use of VIDAD'S Certificate of Public
Convenience.
Sibug submitted a bond to the sheriff to save the latter from
liability if he were to proceed with the sale and the third-party
complaint would be ultimately upheld. On April 22, petitioner
instituted with CFI Branch X an action for Damages and
Injunction, with Preliminary Mandatory Injunction against
Sibug, Vidad and the sheriff. The complaint was amended to
include the bonding company. On May 11, Branch X issued a
restraining order enjoining the sheriff from conducting the
auction sale. On October 14, 1965, Branch X upheld
petitioner’s ownership. Sibug appealed from the decision of
Branch X. The Court of Appeals nullified the appealed
decision.
Issue/s:
1. W/N the CFI has jurisdiction to issue an injunction
restraining the execution sale of the jeepney levied upon by a
judgment creditor in another CFI
2. W/N the third-party claimant has a right to vindicate his
claim to the vehicle levied upon through a separate action.
Held: It is noteworthy that, generally, the rule, that no court has
authority to interfere by injunction with the judgments or
decrees of a concurrent or coordinate jurisdiction having equal
power to grant the injunctive relief, is applied in cases, where
no third-party claimant is involved, in order to prevent one
court from nullifying the judgment or process of another court
of the same rank or category, a power which devolves upon
the proper appellate court.
xxx xxx xxx
When the sheriff, acting beyond the bounds of his authority,
seizes a stranger's property, the writ of injunction, which is
issued to stop the auction sale of that property, is not an
interference with the writ of execution issued by another court
because the writ of execution was improperly implemented by
the sheriff. Under that writ, he could attach the property of the
judgment debtor. He is not authorized to levy upon the
property of the third-party claimant.
Under section 17 of Rule 39 a third person who claims
property levied upon on execution may vindicate such claim by
action. A judgment rendered in his favor - declaring him to be
the owner of the property - would not constitute interference
with the powers or processes of the court which rendered the
judgment to enforce which the execution was levied. lf that be
so - and it is so because the property, being that of a stranger,
is not subject to levy - then an interlocutory order, such as
injunction, upon a claim and prima facie showing of ownership
by the claimant, cannot be considered as such interference
either.
The right of a person who claims to be the owner of property
levied upon on execution to file a third-party claim with the
sheriff is not exclusive, and he may file an action to vindicate
his claim even if the judgment creditor files an indemnity bond
in favor of the sheriff to answer for any damages that may be
suffered by the third party claimant. By "action", as stated in
the Rule, what is meant is a separate and independent action.
Applied to the case at bar it was appropriate, as a matter of
procedure, for SANTOS, as an ordinary third-party claimant, to
vindicate his claim of ownership in a separate action under
Section 17 of Rule 39. And the judgment rendered in his favor
by Branch X, declaring him to be the owner of the property, did
not as a basic proposition, constitute interference with the
powers or processes of Branch XVII which rendered the
judgment, to enforce which the was levied upon. And this is so
because property belonging to a stranger is not ordinarily
subject to levy.
17. LITA ENTERPRISES, INC vs SECOND CIVIL
CASES DIVISION, INTERMEDIATE APPELLATE
COURT, NICASIO M. OCAMPO and FRANCISCA P.
GARCIA
Facts: Spouses Nicasio Ocampo and Francisca Garcia
(private respondents) purchased in installment from the Delta
Motor Sales Corporation five (5) Toyota Corona Standard cars
to be used as taxi. Since they had no franchise to operate
taxicabs, they contracted with petitioner Lita Enterprise, Inc.,
through its representative Manuel Concordia, for the use of the
latter’s certificate of public convenience for a consideration of
P1, 000.00 and a monthly rental of P200.00/taxicab unit. For
the agreement to take effect, the cars were registered in the
name of Lita Enterprises, Inc. The possession, however,
remains with spouses Ocampo and Garcia who operated and
maintained the same under Acme Taxi, petitioner’s trade
name.
A year later, one of the taxicabs, driven by their employee,
Emeterio Martin, collided with a motorcycle. Unfortunately the
driver of the motorcycle, Florante Galvez died from the injuries
it sustained.
Criminal case was filed against Emeterio Martin, while a civil
case was filed by the heir of the victim against Lita Enterprises.
In the decision of the lower court Lita Enterprises was held
liable for damages for the amount of P25, 000.00 and P7,
000.00 for attorney’s fees.
A writ of execution for the decision followed, 2 of the cars of
the respondent’s spouses were levied and were sold to a
public auction.
On March 1973, respondent Ocampo decided to register his
taxicabs in his own name. The manager of petitioner refused to
give him the registration papers. Thus, making spouses file a
complaint against petitioner. In the decision, Lita Enterprise
was ordered to return the three certificate of registration not
levied in the prior case.
Petitioner now prays that private respondent be held liable to
pay the amount they have given to the heir of Galvez.
Issue: W/N petitioner can recover from private respondent,
knowing they are in an arrangement known as “kabit system”.
Held: “Kabit system” is defined as, when a person who has
been granted a certificate of convenience allows another
person who owns a motor vehicle to operate under such
franchise for a fee. This system is not penalized as a criminal
offense but is recognized as one that is against public policy;
therefore it is void and inexistent.
It is fundamental that the court will not aid either of the party to
enforce an illegal contract, but will leave them both where it
finds them. Upon this premise, it was flagrant error on the part
of both trial and appellate courts to have accorded the parties
relief from their predicament. Specifically Article 1412 states
that:
“If the act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules shall
be observed: “when the fault, is on the part of both contracting
parties, neither may recover what he has given by virtue of the
contract, or demand the performance of the other’s
undertaking.”
The principle of in pari delicto is evident in this case. “the
proposition is universal that no action arises, in equity or at
law, from an illegal contract; no suit can be maintained for its
specific performance, or to recover the property agreed to sold
or delivered, or damages for its property agreed to be sold or
delivered, or damages for its violation.” The parties in this case
are in pari delicto, therefore no affirmative relief can be granted
to them.
 18. PCI LEASING AND FINANCE, INC., vs UCPB
GENERAL INSURANCE CO., INC
Facts: On October 19, 1990 at about 10:30 p.m., a Mitsubishi
Lancer car owned by United Coconut Planters Bank was
traversing The car was insured with UCPB General Insurance
Inc.], then driven by Flaviano Isaac with Conrado Geronimo,
the Asst. Manager of said bank, was hit and bumped by an 18-
wheeler Fuso Tanker Truck owned by PCI Leasing & Finance,
Inc. allegedly leased to and operated by Superior Gas &
Equitable Co., Inc. (SUGECO) and driven by its
employee,Renato Gonzaga.The impact caused heavy damage
to the Mitsubishi Lancer car resulting in an explosion of the
rear part of the car. The driver and passenger suffered
physical injuries. However, the driver defendant-appellant
Gonzaga continued on its [sic] way to its [sic] destination and
did not bother to bring his victims to the hospital.Plaintiff-
appellee paid the assured UCPB the amount of P244,500.00
representing the insurance coverage of the damaged car.
As the 18-wheeler truck is registered under the name of PCI
Leasing, repeated demands were made by plaintiff-appellee
for the payment of the aforesaid amounts. However, no
payment was made. Thus, plaintiff-appellee filed the instant
case on March 13, 1991.
Petitioner interposed the defense that it could not be held liable
for the collision, since the driver of the truck, Gonzaga, was not
its employee, but that of its co-defendant (SUGECO).4 In fact,
it was SUGECO, and not petitioner, that was the actual
operator of the truck, pursuant to a Contract of Lease signed
by petitioner and SUGECO.5 Petitioner, however, admitted
that it was the owner of the truck in question. The RTC
rendered its Decision in favor of plaintiff UCPB General
Insurance. the CA affirmed the RTC's decision.
Issue/s:
1. W/N petitioner, as registered owner of a motor vehicle that
figured in a quasi-delict may be held liable, jointly and
severally, with the driver thereof, for the damages caused to
third parties.
2. W/N petitioner, as a financing company, is absolved from
liability by the enactment of Republic Act (R.A.) No. 8556, or
the Financing Company Act of 1998.
Held:
1. The principle of holding the registered owner of a vehicle
liable for quasi-delicts resulting from its use is well-established
in jurisprudence. Erezo v. Jepte. For damage or injuries arising
out of negligence in the operation of a motor vehicle, the
registered owner may be held civilly liable with the negligent
driver either 1) subsidiarily, if the aggrieved party seeks relief
based on a delict or crime under Articles 100 and 103 of the
Revised Penal Code; or 2) solidarily, if the complainant seeks
relief based on a quasi-delict under Articles 2176 and 2180 of
the Civil Code.
In contemplation of law, the registered owner of a motor
vehicle is the employer of its driver, with the actual operator
and employer, such as a lessee, being considered as merely
the owner's agent.18 This being the case, even if a sale has
been executed before a tortious incident, the sale, if
unregistered, has no effect as to the right of the public and
third persons to recover from the registered owner.19 The
public has the right to conclusively presume that the registered
owner is the real owner, and may sue accordingly.20
In the case now before the Court, there is not even a sale of
the vehicle involved, but a mere lease, which remained
unregistered up to the time of the occurrence of the quasi-
delict that gave rise to the case. Since a lease, unlike a sale,
does not even involve a transfer of title or ownership, but the
mere use or enjoyment of property, there is more reason,
therefore, in this instance to uphold the policy behind the law,
which is to protect the unwitting public and provide it with a
definite person to make accountable for losses or injuries
suffered in vehicular accidents.21 This is and has always been
the rationale behind compulsory motor vehicle registration
under the Land Transportation and Traffic Code and similar
laws, which has been guiding the courts in their disposition of
cases involving motor vehicular incidents. It is also important to
emphasize that such principles apply to all vehicles in general,
not just those offered for public service or utility.
2. Republic Act (R.A.) No. 8556,28 which provides:
Section 12. Liability of lessors. - Financing companies shall not
be liable for loss, damage or injury caused by a motor vehicle,
aircraft, vessel, equipment, machinery or other property leased
to a third person or entity except when the motor vehicle,
aircraft, vessel, equipment or other property is operated by the
financing company, its employees or agents at the time of the
loss, damage or injury.
Petitioner's argument that the enactment of R.A. No. 8556 is
deemed to have absolved petitioner from liability, fails to
convince the Court.
These developments, indeed, point to a seeming emancipation
of financing companies from the obligation to compensate
claimants for losses suffered from the operation of vehicles
covered by their lease. Such, however, are not applicable to
petitioner and do not exonerate it from liability in the present
case.
The new law, R.A. No. 8556, notwithstanding developments in
foreign jurisdictions, do not supersede or repeal the law on
compulsory motor vehicle registration. No part of the law
expressly repeals Section 5(a) and (e) of the Land
Transportation and Traffic Code.
Sec. 5. Compulsory registration of motor vehicles. - (a)
All motor vehicles and trailer of any type used or
operated on or upon any highway of the Philippines
must be registered with the Bureau of Land
Transportation (now the Land Transportation Office, per
Executive Order No. 125, January 30, 1987, and
Executive Order No. 125-A, April 13, 1987) for the
current year in accordance with the provisions of this
Act.
xxxx
 (e) Encumbrances of motor vehicles. - Mortgages,
attachments, and other encumbrances of motor
vehicles, in order to be valid against third parties must
be recorded in the Bureau (now the Land
Transportation Office). Voluntary transactions or
voluntary encumbrances shall likewise be properly
recorded on the face of all outstanding copies of the
certificates of registration of the vehicle concerned.
Cancellation or foreclosure of such mortgages,
attachments, and other encumbrances shall likewise
be recorded, and in the absence of such cancellation,
no certificate of registration shall be issued without the
corresponding notation of mortgage, attachment
and/or other encumbrances.
Thus, the rule remains the same: a sale, lease, or financial
lease, for that matter, that is not registered with the Land
Transportation Office, still does not bind third persons who are
aggrieved in tortious incidents, for the latter need only to rely
on the public registration of a motor vehicle as conclusive
evidence of ownership.30 A lease such as the one involved in
the instant case is an encumbrance in contemplation of law,
which needs to be registered in order for it to bind third
parties.31 Under this policy, the evil sought to be avoided is
the exacerbation of the suffering of victims of tragic vehicular
accidents in not being able to identify a guilty party. A contrary
ruling will not serve the ends of justice. The failure to register a
lease, sale, transfer or encumbrance, should not benefit the
parties responsible, to the prejudice of innocent victims.
The non-registration of the lease contract between petitioner
and its lessee precludes the former from enjoying the benefits
under Section 12 of R.A. No. 8556.
This ruling may appear too severe and unpalatable to leasing
and financing companies, but the Court believes that petitioner
and other companies so situated are not entirely left without
recourse. They may resort to third-party complaints against
their lessees or whoever are the actual operators of their
vehicles.
19. ABELARDO LIM and ESMADITO GUNNABAN,
petitioners, vs. COURT OF APPEALS and
DONATO H. GONZALES
Facts: Sometime in 1982 private respondent Donato Gonzales
an Isuzu passenger jeepney from Gomercino Vallarta, a holder
of a certificate of public convenience for the operation of a
public utility vehicle. He continued to operate the public
transport business without transferring the registration of the
vehicle to his name. Thus, the original owner remained to be
the registered owner and operator of the vehicle.
On 22 July 1990, while the jeepney was running northbound it
collided with a ten-wheeler-truck owned by petitioner Abelardo
Lim and driven by his co-petitioner Esmadito Gunnaban.
Gunnaban owned responsibility for the accident, explaining
that while he was traveling towards Manila the truck suddenly
lost its brakes. To avoid colliding with another vehicle, he
swerved to the left until he reached the center island. However,
as the center island eventually came to an end, he veered
farther to the left until he smashed into a Ferroza automobile,
and later, into private respondent's passenger jeepney driven
by one Virgilio Gonzales. The impact caused severe damage
to both the Ferroza and the passenger jeepney and left one (1)
passenger dead and many others wounded.
Gunnaban admitted responsibility for the accident, so that
petitioner Lim shouldered the costs of hospitalization of those
wounded, compensation for the heirs of the deceased
passenger and the restoration of the other vehicle involved. He
also negotiated for the repair of the private respondent's
jeepney but the latter refused and demanded for its
replacement. Hence, private respondent filed a complaint for
damages against petitioners. Meanwhile, the jeepney was left
by the roadside to corrode and decay. The trial court decided
in favor of private respondent and awarded him his claim. On
appeal, the Court of Appeals affirmed the decision of the trial
court. Hence, petitioner filed this petition.
Issue: W/N the new owner of a passenger jeepney who
continued to operate the same under the so-called kabit
system and in the course thereof met an accident has the legal
personality to bring the action for damages against the erring
vehicle.
Held: YES. According to the Court, the thrust of the law in
enjoining the kabit system is not much as to penalize the
parties but to identify the person upon whom responsibility may
be fixed in case of an accident with the end view of protecting
the riding public. In the present case, it is once apparent that
the evil sought to be prevented in enjoining the kabit system
does not exist. First, neither of the parties to the pernicious
kabit system is being held liable for damages. Second, the
case arose from the negligence of another vehicle in using the
public road to whom no representation, or misrepresentation,
as regards the ownership and operation of the passenger
jeepney was made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said that
private respondent Gonzales and the registered owner of the
jeepney were in estoppel for leading the public to believe that
the jeepney belonged to the registered owner. Third, the riding
public was not bothered nor inconvenienced at the very least
by the illegal arrangement. On the contrary, it was private
respondent himself who had been wronged and was seeking
compensation for the damage done to him. Certainly, it would
be the height of inequity to deny him his right. Hence, the
private respondent has the right to proceed against petitioners
for the damage caused on his passenger jeepney as well as
on his business
KABIT SYSTEM:
The kabit system is an arrangement whereby a person who
has been granted a certificate of public convenience allows
other persons who own motor vehicles to operate them under
his license, sometimes for a fee or percentage of the earnings.
Although the parties to such an agreement are not outrightly
penalized by law, the kabit system is invariably recognized as
being contrary to public policy and therefore void and
inexistent under Art. 1409 of the Civil Code. In the early case
of Dizon v. Octavio the Court explained that one of the primary
factors considered in the granting of a certificate of public
convenience for the business of public transportation is the
financial capacity of the holder of the license, so that liabilities
arising from accidents may be duly compensated. The kabit
system renders illusory such purpose and, worse, may still be
availed of by the grantee to escape civil liability caused by a
negligent use of a vehicle owned by another and operated
under his license. If a registered owner is allowed to escape
liability by proving who the supposed owner of the vehicle is, it
would be easy for him to transfer the subject vehicle to another
who possesses no property with which to respond financially
for the damage done. Thus, for the safety of passengers and
the public who may have been wronged and deceived through
the baneful kabit system, the registered owner of the vehicle is
not allowed to prove that another person has become the
owner so that he may be thereby relieved of responsibility.
Subsequent cases affirm such basic doctrine. It would seem
then that the thrust of the law in enjoining the kabit system is
not so much as to penalize the parties but to identify the
person upon whom responsibility may be fixed in case of an
accident with the end view of protecting the riding public. The
policy therefore loses its force if the public at large is not
deceived, much less involved.
20. Teja Marketing v. Intermediate Appellate Court
Facts: Pedro Nale bought from Teja Marketing a motorcycle
with completea ccessories and a sidecar. A chattel mortgage
was constituted as a security for the payment of the balance of
the purchase price. The records of the Land Transportation
Commission show that the motorcycle sold to the defendant
was first mortgaged to the Teja Marketing by Angel Jaucian
though the Teja Marketing and Angel Jaucian are one and the
same, because it was made to appear that way only as the
defendant had no franchise of his own and he attached the unit
to the plaintiffs MCH Line. The agreement also of the parties
here was for the plaintiff to undertake the yearly registration of
the motorcycle with the Land Transportation Commission.
The plaintiff, however failed to register the motorcycle on that
year on the ground that the defendant failed to comply with
some requirements such as the payment of the insurance
premiums and the bringing of the motorcycle to the LTC for
stenciling, the plaintiff said that the defendant was hiding the
motorcycle from him. Lastly, the plaintiff also explained that
though the ownership of the motorcycle was already
transferred to the defendant, the vehicle was still mortgaged
with the consent of the defendant to the Rural Bank of
Camaligan for the reason that all motorcycle purchased from
the plaintiff on credit was rediscounted with the bank. Teja
Marketing made demands for the payment of the motorcycle
but just the same Nale failed to comply, thus forcing Teja
Marketing to consult a lawyer and file an action for damage
before the City Court of Naga in the amount of P546.21 for
attorneys fees and P100.00 for expenses of litigation.
Teja Marketing also claimed that as of 20 February 1978, the
total account of Nale was already P2, 731, 05 as shown in a
statement of account; includes not only the balance of P1,
700.00 but an additional 12% interest per annum on the said
balance from 26 January 1976 to 27 February 1978; a 2%
service charge; and P546.21 representing attorneys fees. On
his part, Nale did not dispute the sale and the outstanding
balance of P1,700.00 still payable to Teja Marketing; but
contends that because of this failure of Teja Marketing to
comply with his obligation to register the motorcycle, Nale
suffered damages when he failed to claim any insurance
indemnity which would amount to no less than P15,000.00 for
the more than 2 times that the motorcycle figured in accidents
aside from the loss of the daily income of P15.00 as boundary
fee beginning October 1976 when the motorcycle was
impounded by the LTC for not being registered.
The City Court rendered judgment in favor of Teja Marketing,
dismissing the counterclaim, and ordered Nale to pay Teja
Marketing On appeal to the Court of First Instance of
Camarines Sur, the decision was affirmed in toto. Nale filed a
petition for review with the Intermediate Appellate Court. On 18
July 1983, the appellate court set aside the decision under
review on the basis of doctrine of "pari delicto," and
accordingly, dismissed the complaint of Teja Marketing, as well
as the counterclaim of Nale; without pronouncements as to
costs. Hence, the petition for review was filed by Teja
Marketing and/or Angel Jaucian.
Issue: W/N the defendant can recover damages against the
plaintiff
Held: Unquestionably, the parties herein operated under an
arrangement, commonly known as the "kabit system" whereby
a person who has been granted a certificate of public
convenience allows another person who owns motor vehicles
to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the
government. Abuse of this privilege by the grantees thereof
cannot be countenanced. The "kabit system" has been
identified as one of the root causes of the prevalence of graft
and corruption in the government transportation offices.
Although not out rightly penalized as a criminal offense, the
kabit system is invariably recognized as being contrary to
public policy and, therefore, void and in existent under Article
1409 of the Civil Code. It is a fundamental principle that the
court will not aid either party to enforce an illegal contract, but
will leave both where it finds then. Upon this premise it would
be error to accord the parties relief from their predicament.