Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 157917               August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, vs.SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF APPEALS Respondents.

D E C I S I O N

BERSAMIN, J.:

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary diligence in the conduct of his business. He is presumed to be negligent when death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if the deceased passenger may only be an unemployed high school student at the time of the accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification the decision rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Parañaque City that had decreed them jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school student of Don Bosco Technical Institute (Don Bosco).

Antecedents

The Pereñas were engaged in the business of transporting students from their respective residences in Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two of whom would be seated in the front beside the driver, and the others in the rear, with six students on either side. They employed Clemente Alfaro (Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his place on the left side of the van near the rear door. The van, with its air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath the Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the narrow path was marked by piles of construction materials and parked passenger jeepneys, and the railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other responsible persons manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked because he overtook the passenger bus on its left side. The train blew its horn to warn motorists of its approach. When the train was about 50 meters away from the passenger bus and the van, Alano applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was imminent. The passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the van, and the impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path of the train, which dragged his body and severed his head, instantaneously killing him. Alano fled the scene on board the train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective answers, with cross-claims against each other, but Alfaro could not be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe transportation carriage of the former spouses' son from their residence in Parañaque to his school at the Don Bosco Technical Institute in Makati City;

(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor son of spouses Zarate died in connection with a vehicular/train collision which occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses Pereña, then driven and operated by the latter's employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a railroad crossing used by motorists for crossing the railroad tracks;

(5) During the said time of the vehicular/train collision, there were no appropriate and safety warning signs and railings at the site commonly used for railroad crossing;

(6) At the material time, countless number of Makati bound public utility and private vehicles used on a daily basis the site of the collision as an alternative route and short-cut to Makati;

(7) The train driver or operator left the scene of the incident on board the commuter train involved without waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad operator for railroad crossing at the time of the vehicular collision;

(9) PNR received the demand letter of the spouses Zarate;

(10) PNR refused to acknowledge any liability for the vehicular/train collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between the former and its project contractor; and

(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for negligence constituting the proximate cause of the vehicular collision, which resulted in the death of plaintiff spouses' son;

(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable for any negligence which may be attributed to defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is liable for negligence in failing to provide adequate safety warning signs and railings in the area commonly used by motorists for railroad crossings, constituting the proximate cause of the vehicular collision which resulted in the death of the plaintiff spouses' son;

(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son;

(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the accident, in allowing or tolerating the motoring public to cross, and its failure to install safety devices or equipment at the site of the accident for the protection of the public;

(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever amount the latter may be held answerable or which they may be ordered to pay in favor of plaintiffs by reason of the action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the latter in their Complaint by reason of its gross negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary damages and attorney's fees.2

The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code.

In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision,3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them to jointly and severally pay the plaintiffs as follows:

(1) (for) the death of Aaron- Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

(4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorney’s fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,4 reiterating that the cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established circumstances.

The CA’s Ruling

Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with defendant-appellants spouses Teodorico and Nanette Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite overwhelming documentary evidence on record, supporting the case of defendants-appellants Philippine National Railways.

The Pereñas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary damages and attorney’s fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine National Railways and in not holding the latter and its train driver primarily responsible for the incident.

The trial court erred in awarding excessive damages and attorney’s fees.

The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the absence of sufficient basis for such an award.

On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral damages to P 2,500,000.00; and deleted the attorney’s fees because the RTC did not state the factual and legal bases, to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Parañaque City is AFFIRMED with the modification that the award of Actual Damages is reduced to P59,502.76; Moral Damages is reduced to P 2,500,000.00; and the award for Attorney’s Fees is Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum representing the loss of the deceased’s earning capacity despite Cariaga being only a medical student at the time of the fatal incident. Applying the formula adopted in the American Expectancy Table of Mortality:–

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21 (the age when he would have graduated from college and started working for his own livelihood) instead of 15 years (his age when he died). Considering that the nature of his work and his salary at the time of Aaron’s death were unknown, it used the prevailing minimum wage of P 280.00/day to compute Aaron’s gross annual salary to be P 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3 years, his gross income would aggregate to P 4,351,164.30, from which his estimated expenses in the sum of P 2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aaron’s computed net income turning out to be higher than the amount claimed by the Zarates, only P 2,109,071.00, the amount expressly prayed for by them, was granted.

On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8

Issues

In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and severally liable to pay damages with Philippine National Railways and dismissing their cross-claim against the latter.

II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning capacity of a minor who was only a high school student at the time of his death in the absence of sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at all.

Ruling

The petition has no merit.

1.Were the Pereñas and PNR jointlyand severally liable for damages?

The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing their claim against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.

The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a driver’s license and that he had not been involved in any vehicular accident prior to the fatal collision with the train; that they even had their own son travel to and from school on a daily basis; and that Teodoro Pereña himself sometimes accompanied Alfaro in transporting the passengers to and from school. The RTC gave scant consideration to such defense by regarding such defense as inappropriate in an action for breach of contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated as a common carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a private carrier,9primarily because he only caters to some specific or privileged individuals, and his operation is neither open to the indefinite public nor for public use, the exact nature of the operation of a school bus service has not been finally settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public carrier.10 A private carrier is one who, without making the activity a vocation, or without holding himself or itself out to the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular instance only, to transport goods or persons from one place to another either gratuitously or for hire.11The provisions on ordinary contracts of the Civil Code govern the contract of private carriage.The diligence required of a private carrier is only ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering such services to the public.12Contracts of common carriage are governed by the provisions on common carriers of the Civil Code, the Public Service Act,13 and other special laws relating to transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to passengers.14

In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco,15viz:

"Public use" is the same as "use by the public". The essential feature of the public use is not confined to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look not only to the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law compels the owner to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge the character of the use is whether the public may enjoy it by right or only by permission.

In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any distinction between a person or an enterprise offering transportation on a regular or an isolated basis; and has not distinguished a carrier offering his services to the general public, that is, the general community or population, from one offering his services only to a narrow segment of the general population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the notion of public service under the Public Service Act, which supplements the law on common carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service Act, includes:

x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientèle, whether permanent or occasional, and done for the general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. x x x.17

Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if they had limited clientèle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the general public as his business or occupation. If the undertaking is a single transaction, not a part of the general business or occupation engaged in, as advertised and held out to the general public, the individual or the entity rendering such service is a private, not a common, carrier. The question must be determined by the character of the business actually carried on by the carrier, not by any secret intention or mental reservation it may entertain or assert when charged with the duties and obligations that the law imposes.21

Applying these considerations to the case before us, there is no question that the Pereñas as the operators of a school bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual occupation; (b) undertaking to carry passengers over established roads by the method by which the business was conducted; and (c) transporting students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a common carrier because they held themselves out as a ready transportation indiscriminately to the students of a particular school living within or near where they operated the service and for a fee.

The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law. Given the nature of the business and for reasons of public policy, the common carrier is bound "to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case."22 Article 1755 of the Civil Code specifies that the common carrier should "carry the passengers safely as far as human care and foresight can provide, using the

utmost diligence of very cautious persons, with a due regard for all the circumstances." To successfully fend off liability in an action upon the death or injury to a passenger, the common carrier must prove his or its observance of that extraordinary diligence; otherwise, the legal presumption that he or it was at fault or acted negligently would stand.23 No device, whether by stipulation, posting of notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of the common carrier as defined under Article 1755 of the Civil Code. 24

And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court might now reverse the CA’s findings on their liability. On the contrary, an examination of the records shows that the evidence fully supported the findings of the CA.

As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the accident because death had occurred to their passenger.25 The presumption of negligence, being a presumption of law, laid the burden of evidence on their shoulders to establish that they had not been negligent.26 It was the law no less that required them to prove their observance of extraordinary diligence in seeing to the safe and secure carriage of the passengers to their destination. Until they did so in a credible manner, they stood to be held legally responsible for the death of Aaron and thus to be held liable for all the natural consequences of such death.

There is no question that the Pereñas did not overturn the presumption of their negligence by credible evidence. Their defense of having observed the diligence of a good father of a family in the selection and supervision of their driver was not legally sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier did not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employee. This was the reason why the RTC treated this defense of the Pereñas as inappropriate in this action for breach of contract of carriage.

The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope of his authority or even in violation of the orders of the common carrier.27 In this connection, the records showed their driver’s actual negligence. There was a showing, to begin with, that their driver traversed the railroad tracks at a point at which the PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although that point had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into taking that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his passengers but he still disregarded the risks. Compounding his lack of care was that loud music was playing inside the air-conditioned van at the time of the accident. The loudness most probably reduced his ability to hear the warning horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost his view of the train that was then coming from the opposite side of the passenger bus, leading him to miscalculate his chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided a collision with the train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop before traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop were in observance of the right of way at railroad tracks as defined by the traffic laws and regulations.28 He thereby violated a specific traffic regulation on right of way, by virtue of which he was immediately presumed to be negligent.29

The omissions of care on the part of the van driver constituted negligence,30 which, according to Layugan v. Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury.’"33

The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of course be always determined in the light of human experience and in view of the facts involved in the particular case. Abstract speculation cannot here be of much value but this much can be profitably said: Reasonable men govern their conduct by the circumstances which are before them or known to them. They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to take care only when there is something before them to suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the course actually pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he traversed the railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware of the grave harm to be thereby caused to his passengers; and when he disregarded the foresight of harm to his passengers by overtaking the bus on the left side as to leave himself blind to the approach of the oncoming train that he knew was on the opposite side of the bus.

Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court held the PNR solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus that was then traversing the railroad crossing. But the circumstances of that case and this one share no similarities. In Philippine National Railways v. Intermediate Appellate Court, no evidence of contributory negligence was adduced against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary diligence by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the Pereñas and the PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate Appellate Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school van traversed the railroad tracks at a point not intended for that purpose.

At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable for damages arising from the death of Aaron. They had been impleaded in the same complaint as defendants against whom the Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising out of the accident, and questions of fact and of law were common as to the Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of negligence despite the school van of the Pereñas traversing the railroad tracks at a point not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure the safety of others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others as well as the need to control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint tortfeasors.

2.Was the indemnity for loss of

Aaron’s earning capacity proper?

The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the liability, the CA modified the amount. Both lower courts took into consideration that Aaron, while only a high school student, had been enrolled in one of the reputable schools in the Philippines and that he had been a normal and able-bodied child prior to his death. The basis for the computation of Aaron’s earning capacity was not what he would have become or what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his death. Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at the time of his death, but on 21 years, his age when he would have graduated from college.

We find the considerations taken into account by the lower courts to be reasonable and fully warranted.

Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and unfounded. 1âwphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim Jussi Leino’s loss of earning capacity as a pilot for being speculative due to his having graduated from high school at the International School in Manila only two years before the shooting, and was at the time of the shooting only enrolled in the first semester at the Manila Aero Club to pursue his ambition to become a professional pilot. That meant, according to the Court, that he was for all intents and purposes only a high school graduate.

We reject the Pereñas’ submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation of Aaron’s earning capacity was premised on him being a lowly minimum wage earner despite his being then enrolled at a prestigious high school like Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and in favor of the defendants whose negligence not only cost Aaron his life and his right to work and earn money, but also deprived his parents of their right to his presence and his services as well. Our law itself states that the loss of the earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and shall in every case be assessed and awarded by the court "unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death."38Accordingly, we emphatically hold in favor of the indemnification for Aaron’s loss of earning capacity despite him having been unemployed, because compensation of this nature is awarded not for loss of time or earnings but for loss of the deceased’s power or ability to earn money.39

This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,40 fourth-year medical student Edgardo Carriaga’s earning capacity,

although he survived the accident but his injuries rendered him permanently incapacitated, was computed to be that of the physician that he dreamed to become. The Court considered his scholastic record sufficient to justify the assumption that he could have finished the medical course and would have passed the medical board examinations in due time, and that he could have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined that murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying jobs had they graduated in due time, and that their jobs would probably pay them high monthly salaries from P 10,000.00 to P 15,000.00 upon their graduation. Their earning capacities were computed at rates higher than the minimum wage at the time of their deaths due to their being already senior agriculture students of the University of the Philippines in Los Baños, the country’s leading educational institution in agriculture.

3.Were the amounts of damages excessive?

The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective amounts of P 2,500,000.00 and P 1,000,000.00 on the ground that such amounts were excessive.

The plea is unwarranted.

The moral damages of P 2,500,000.00 were really just and reasonable under the established circumstances of this case because they were intended by the law to assuage the Zarates’ deep mental anguish over their son’s unexpected and violent death, and their moral shock over the senseless accident. That amount would not be too much, considering that it would help the Zarates obtain the means, diversions or amusements that would alleviate their suffering for the loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice, given the passage of a long time from when their mental anguish was inflicted on them on August 22, 1996.

Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective the desired example for the public good. As a common carrier, the Pereñas needed to be vigorously reminded to observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from happening again. Only by an award of exemplary damages in that amount would suffice to instill in them and others similarly situated like them the ever-present need for greater and constant vigilance in the conduct of a business imbued with public interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMINAssociate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENOChief Justice

TERESITA J. LEONARDO-DE CASTROAssociate Justice

MARTIN S. VILLARAMA, JR.Associate Justice

BIENVENIDO L. REYESAssociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENOChief Justice

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner, vs.COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

 

FELICIANO, J.:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight "as a casualoccupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

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

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberaom making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:

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

It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent'sprincipal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;(2) Act of the public enemy in war, whether international or civil;(3) Act or omission of the shipper or owner of the goods;(4) The character-of the goods or defects in the packing or-in the containers; and(5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at

fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case — the hijacking of the carrier's truck — does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence required private respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or its employees;

(6) that the common carrier's liability for acts committed by thieves, or of robbers who donot act with grave or irresistible threat, violence or force, is dispensed with or diminished; and

(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account of the defective condition of the car vehicle, ship, airplane or other equipment used in the contract of carriage. (Emphasis supplied)

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

In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of the undelivered merchandise which was lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

 

Footnotes

1 Rollo, p. 14.

2 Article 1733, Civil Code.

3 Rollo, p. 22.

4 The evidence of the prosecution did not show that more than three (3) of the five (5) hold-uppers were armed. Thus, the existence of a "band" within the technical meaning of Article 306 of the Revised Penal Code, was not affirmatively proved by the prosecution.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 149038            April 9, 2003

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner, vs.PKS SHIPPING COMPANY, respondent.

VITUG, J.:

The petition before the Court seeks a review of the decision of the Court of Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which has affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 65, of Makati, dismissing the complaint for damages filed by petitioner insurance corporation against respondent shipping company.

Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping Company (PKS Shipping) for the shipment to Tacloban City of seventy-five thousand (75,000) bags of cement worth Three Million Three Hundred Seventy-Five Thousand Pesos (P3,375,000.00). DUMC insured the goods for its full value with petitioner Philippine American General Insurance Company (Philamgen). The goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the evening of 22 December 1988, about nine o’clock, whileLimar I was being towed by respondent’s tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement.

DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly made payment; it then sought reimbursement from PKS Shipping of the sum paid to DUMC but the shipping company refused to pay, prompting Philamgen to file suit against PKS Shipping with the Makati RTC.

The RTC dismissed the complaint after finding that the total loss of the cargo could have been caused either by a fortuitous event, in which case the ship owner was not liable, or through the negligence of the captain and crew of the vessel and that, under Article 587 of the Code of Commerce adopting the "Limited Liability Rule," the ship owner could free itself of liability by abandoning, as it apparently so did, the vessel with all her equipment and earned freightage.

Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision of the trial court. The appellate court ruled that evidence to establish that PKS Shipping was a common carrier at the time it undertook to transport the bags of cement was wanting because the peculiar method of the shipping company’s carrying goods for others was not generally held out as a business but as a casual occupation. It then concluded that PKS Shipping, not being a common carrier, was not expected to observe the stringent extraordinary diligence required of common carriers in the care of goods. The appellate court, moreover, found that the loss of the goods was sufficiently established as having been due to fortuitous event, negating any liability on the part of PKS Shipping to the shipper.

In the instant appeal, Philamgen contends that the appellate court has committed a patent error in ruling that PKS Shipping is not a common carrier and that it is not liable for the loss of the subject cargo. The fact that respondent has a limited clientele, petitioner argues, does not militate against respondent’s being a common carrier and that the only way by which such carrier can be held exempt for the loss of the cargo would be if the loss were caused by natural disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered the Philippine area of responsibility and that, even if it did, respondent would not be exempt from liability because its employees, particularly the tugmaster, have failed to exercise due diligence to prevent or minimize the loss.

PKS Shipping, in its comment, urges that the petition should be denied because what Philamgen seeks is not a review on points or errors of law but a review of the undisputed factual findings of the RTC and the appellate court. In any event, PKS Shipping points out, the findings and conclusions of both courts find support from the evidence and applicable jurisprudence.

The determination of possible liability on the part of PKS Shipping boils down to the question of whether it is a private carrier or a common carrier and, in either case, to the other question of whether or not it has observed the proper diligence (ordinary, if a private carrier, or extraordinary, if a common carrier) required of it given the circumstances.

The findings of fact made by the Court of Appeals, particularly when such findings are consistent with those of the trial court, may not at liberty be reviewed by this Court in a petition for review under Rule 45 of the Rules of Court.1 The conclusions derived from those factual findings, however, are not necessarily just matters of fact as when they are so linked to, or inextricably intertwined with, a requisite appreciation of the applicable law. In such instances, the conclusions made could well be raised as being appropriate issues in a petition for review before this Court. Thus, an issue whether a carrier is private or common on the basis of the facts found by a trial court or the appellate court can be a valid and reviewable question of law.

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."

Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act; it defines "public service" to be –

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

The prevailing doctrine on the question is that enunciated in the leading case of De Guzman vs. Court of Appeals.2 Applying Article 1732 of the Code, in conjunction with Section 13(b) of the Public Service Act, this Court has held:

"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.

"So understood, the concept of `common carrier’ under Article 1732 may be seen to coincide neatly with the notion of `public service,’ under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code."

Much of 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 an isolated transaction, not a part of the business or occupation, and the carrier does not hold itself out to carry the goods for the general public or to a limited clientele, although involving the carriage of goods for a fee,3 the person or corporation providing such service could very well be just a private carrier. A typical case is that of a charter party which includes both the vessel and its crew, such as in a bareboat or demise, where the charterer obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages4 and gets the control of the vessel and its crew.5 Contrary to the conclusion made by the appellate court, its factual findings indicate that PKS Shipping has engaged itself in the business of carrying goods for others, although for a limited clientele, undertaking to carry such goods for a fee. The regularity of its activities in this area indicates more than just a casual activity on its part.6 Neither can the concept of a common carrier change merely because individual contracts are executed or entered into with patrons of the carrier. Such restrictive interpretation would make it easy for a common carrier to escape liability by the simple expedient of entering into those distinct agreements with clients.

Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence demanded of common carriers, Article 1733 of the Civil Code requires common carriers to observe extraordinary diligence in the vigilance over the goods they carry. In case of loss, destruction or deterioration of goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them.7 The provisions of Article 1733, notwithstanding, common carriers are exempt from liability for loss, destruction, or deterioration of the goods due to any of the following causes:

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

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers; and

(5) Order or act of competent public authority.8

The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective vessel masters of Limar I and MT Iron Eagle, that there was no way by which the barge’s or the tugboat’s crew could have prevented the sinking of Limar I. The vessel was suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the entry of water into the barge’s hatches. The official Certificate of Inspection of the barge issued by the Philippine Coastguard and the Coastwise Load Line Certificate would attest to the seaworthiness of Limar I and should strengthen the factual findings of the appellate court.

Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized exceptions from the rule - (1) when the factual findings of the Court of Appeals and the trial court are contradictory; (2) when the conclusion is a finding grounded entirely on speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible; (4) when there is a grave abuse of discretion in the appreciation of facts; (5) when the appellate court, in making its findings, went beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the Court of Appeals is premised on a misapprehension of facts; (7) when the Court of Appeals failed to notice certain relevant facts which, if properly considered, would justify a different conclusion; (8) when the findings of fact are themselves conflicting; (9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings are contradicted by the evidence on record – would appear to be clearly extant in this instance.

All given then, the appellate court did not err in its judgment absolving PKS Shipping from liability for the loss of the DUMC cargo.

WHEREFORE, the petition is DENIED. No costs.

SO ORDERED.

Davide, Jr., C.J., Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

Footnotes

1 National Steel Corporation vs. Court of Appeals, 283 SCRA 45.

2 168 SCRA 612.

3 Planters Products, Inc. vs. Court of Appeals, G.R. No. 101503, 15 September 1993, 226 SCRA 476.

4 National Steel Corporation vs. Court of Appeals, G.R. No. 112287, 12 December 1997, 283 SCRA 45.

5 National Steel Corporation vs. Court of Appeals, G.R. No. 112287, 12 December 1997, 283 SCRA 45.

6 The testimony of respondent’s own witness, Capt. Andres Elbena, is quite revealing. He testified that he had been working for respondent as tugmaster for the past twenty-five (25) years and that the company owns several vessels.

7 Article 1735, Civil Code of the Philippines.

8 Article 1734, Civil Code of the Philippines.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 113003 October 17, 1997

ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners, vs.COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY, respondents.

 

ROMERO, J.:

In this petition for review on certiorari of the decision of the Court of Appeals, the issue is whether or not the explosion of a newly installed tire of a passenger vehicle is a fortuitous event that exempts the carrier from liability for the death of a passenger.

On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and Jasmin, bearded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The bus fell into a ravine around three (3) feet from the road and struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy and physical injuries to other passengers.

On November 21, 1988, a complaint for breach of contract of carriage, damages and attorney's fees was filed by Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver, before the Regional Trial Court of Davao City. When the defendants therein filed their answer to the complaint, they raised the affirmative defense of caso fortuito. They also filed a third-party complaint against Philippine Phoenix Surety and Insurance, Inc. This third-party defendant filed an answer with compulsory counterclaim. At the pre-trial conference, the parties agreed to a stipulation of facts.  1

Upon a finding that the third party defendant was not liable under the insurance contract, the lower court dismissed the third party complaint. No amicable settlement having been arrived at by the parties, trial on the merits ensued.

The plaintiffs asserted that violation of the contract of carriage between them and the defendants was brought about by the driver's failure to exercise the diligence required of the carrier in transporting passengers safely to their place of destination. According to Leny Tumboy, the bus left Mangagoy at 3:00 o'clock in the afternoon. The winding road it traversed was not cemented and was wet due to the rain; it was rough with crushed rocks. The bus which was full of passengers had cargoes on top. Since it was "running fast," she cautioned the driver to slow down but he merely stared at her through the mirror. At around 3:30 p.m., in Trento, she heard something explode and immediately, the bus fell into a ravine.

For their part, the defendants tried to establish that the accident was due to a fortuitous event. Abundio Salce, who was the bus conductor when the incident happened, testified that the 42-seater bus was not full as there were only 32 passengers, such that he himself managed to get a seat. He added that the bus was running at a speed of "60 to 50" and that it was going slow because of the zigzag road. He affirmed that the left front tire that exploded was a "brand new tire" that he mounted on the bus on April 21, 1988 or only five (5) days before the incident. The Yobido Liner secretary, Minerva Fernando, bought the new Goodyear tire from Davao Toyo Parts on April 20, 1988 and she was present when it was mounted on the bus by Salce. She stated that all driver applicants in Yobido Liner underwent actual driving tests before they were employed. Defendant Cresencio Yobido underwent such test and submitted his professional driver's license and clearances from the barangay, the fiscal and the police.

On August 29, 1991, the lower court rendered a decision 2 dismissing the action for lack of merit. On the issue of whether or not the tire blowout was a caso fortuito, it found that "the falling of the bus to the cliff was a result of no other outside factor than the tire blow-out." It held that the ruling in the La Mallorca and Pampanga Bus Co. v. De Jesus 3 that a tire blowout is "a mechanical defect of the conveyance or a fault in its equipment which was easily discoverable if the bus had been subjected to a more thorough or rigid check-up before it took to the road that morning" is inapplicable to this case. It reasoned out that in said case, it was found that the blowout was caused by the established fact that the inner tube of the left front tire "was pressed between the inner circle of the left wheel and the rim which had slipped out of the wheel." In this case, however, "the cause of the explosion remains a mystery until at present." As such, the court added, the tire blowout was "a caso fortuito which is completely an extraordinary circumstance independent of the will" of the defendants who should be relieved of "whatever liability the plaintiffs may have suffered by reason of the explosion pursuant to Article 11744 of the Civil Code."

Dissatisfied, the plaintiffs appealed to the Court of Appeals. They ascribed to the lower court the following errors: (a) finding that the tire blowout was a caso fortuito; (b) failing to hold that the defendants did not

exercise utmost and/or extraordinary diligence required of carriers under Article 1755 of the Civil Code, and (c) deciding the case contrary to the ruling in Juntilla v. Fontanar, 5 and Necesito v. Paras. 6

On August 23, 1993, the Court of Appeals rendered the Decision 7 reversing that of the lower court. It held that:

To Our mind, the explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory defect, improper mounting, excessive tire pressure, is not an unavoidable event. On the other hand, there may have been adverse conditions on the road that were unforeseeable and/or inevitable, which could make the blow-out a caso fortuito. The fact that the cause of the blow-out was not known does not relieve the carrier of liability. Owing to the statutory presumption of negligence against the carrier and its obligation to exercise the utmost diligence of very cautious persons to carry the passenger safely as far as human care and foresight can provide, it is the burden of the defendants to prove that the cause of the blow-out was a fortuitous event. It is not incumbent upon the plaintiff to prove that the cause of the blow-out is not caso-fortuito.

Proving that the tire that exploded is a new Goodyear tire is not sufficient to discharge defendants' burden. As enunciated in Necesito vs. Paras, the passenger has neither choice nor control over the carrier in the selection and use of its equipment, and the good repute of the manufacturer will not necessarily relieve the carrier from liability.

Moreover, there is evidence that the bus was moving fast, and the road was wet and rough. The driver could have explained that the blow-out that precipitated the accident that caused the death of Toto Tumboy could not have been prevented even if he had exercised due care to avoid the same, but he was not presented as witness.

The Court of Appeals thus disposed of the appeal as follows:

WHEREFORE, the judgment of the court a quo is set aside and another one entered ordering defendants to pay plaintiffs the sum of P50,000.00 for the death of Tito Tumboy, P30,000.00 in moral damages, and P7,000.00 for funeral and burial expenses.

SO ORDERED.

The defendants filed a motion for reconsideration of said decision which was denied on November 4, 1993 by the Court of Appeals. Hence, the instant petition asserting the position that the tire blowout that caused the death of Tito Tumboy was a caso fortuito. Petitioners claim further that the Court of Appeals, in ruling contrary to that of the lower court, misapprehended facts and, therefore, its findings of fact cannot be considered final which shall bind this Court. Hence, they pray that this Court review the facts of the case.

The Court did re-examine the facts and evidence in this case because of the inapplicability of the established principle that the factual findings of the Court of Appeals are final and may not be reviewed on appeal by this Court. This general principle is subject to exceptions such as the one present in this case, namely, that the lower court and the Court of Appeals arrived at diverse factual findings.  8 However, upon such re-examination, we found no reason to overturn the findings and conclusions of the Court of Appeals.

As a rule, when a passenger boards a common carrier, he takes the risks incidental to the mode of travel he has taken. After all, a carrier is not an insurer of the safety of its passengers and is not bound absolutely and at all events to carry them safely and without injury. 9 However, when a passenger is injured or dies while travelling, the law presumes that the common carrier is negligent. Thus, the Civil Code provides:

Art. 1756. In case of death 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 1755 provides that "(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." Accordingly, in culpa contractual, once a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently. This disputable presumption may only be overcome by evidence that the carrier had observed extraordinary diligence as prescribed by Articles 1733,  10 1755 and 1756 of the Civil Code or that the death or injury of the passenger was due to a fortuitous event. 11 Consequently, the court need not make an express finding of fault or negligence on the part of the carrier to hold it responsible for damages sought by the passenger.  12

In view of the foregoing, petitioners' contention that they should be exempt from liability because the tire blowout was no more than a fortuitous event that could not have been foreseen, must fail. A fortuitous event is possessed of the following characteristics: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obliger must be free from any participation in the aggravation of the injury resulting to the creditor. 13 As Article 1174 provides, no person shall be responsible for a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable. In other words, there must be an entire exclusion of human agency from the cause of injury or loss. 14

Under the circumstances of this case, the explosion of the new tire may not be considered a fortuitous event. There are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within five days' use. Be that as it may, it is settled that an accident caused either by defects in the automobile or through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages. 15

Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident. 16 This Court has had occasion to state:

While it may be true that the tire that blew-up was still good because the grooves of the tire were still visible, this fact alone does not make the explosion of the tire a fortuitous event. No evidence was presented to show that the accident was due to adverse road conditions or that precautions were taken by the jeepney driver to compensate for any conditions liable to cause accidents. The sudden blowing-up, therefore, could have been caused by too much air pressure injected into the tire coupled by the fact that the jeepney was overloaded and speeding at the time of the accident.  17

It is interesting to note that petitioners proved through the bus conductor, Salce, that the bus was running at "60-50" kilometers per hour only or within the prescribed lawful speed limit. However, they failed to rebut the testimony of Leny Tumboy that the bus was running so fast that she cautioned the driver to slow down. These contradictory facts must, therefore, be resolved in favor of liability in view of the presumption of negligence of the carrier in the law. Coupled with this is the established condition of the road — rough, winding and wet due to the rain. It was incumbent upon the defense to establish that it took precautionary measures considering partially dangerous condition of the road. As stated above, proof that the tire was new and of good quality is not sufficient proof that it was not negligent. Petitioners should have shown that it undertook extraordinary diligence in the care of its carrier, such as conducting daily routinary check-ups of the vehicle's parts. As the late Justice J.B.L. Reyes said:

It may be impracticable, as appellee argues, to require of carriers to test the strength of each and every part of its vehicles before each trip; but we are of the opinion that a due regard for the carrier's obligations toward the traveling public demands adequate periodical tests to determine the condition and strength of those vehicle portions the failure of which may endanger the safety of the passengers. 18

Having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for damages. Article 1764  19 in relation to Article 2206 20 of the Civil Code prescribes the amount of at least three thousand pesos as damages for the death of a passenger. Under prevailing jurisprudence, the award of damages under Article 2206 has been increased to fifty thousand pesos (P50,000.00). 21

Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven. However, the same damages may be recovered when breach of contract of carriage results in the death of a passenger, 22 as in this case. Exemplary damages, awarded by way of example or correction for the public good when moral damages are awarded, 23 may likewise be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.  24 Because petitioners failed to exercise the extraordinary diligence required of a common carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted recklessly. 25 As such, private respondents shall be entitled to exemplary damages.

WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED subject to the modification that petitioners shall, in addition to the monetary awards therein, be liable for the award of exemplary damages in the amount of P20,000.00. Costs against petitioners.

SO ORDERED.

Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

Footnotes

1 Record, pp. 77-78.

2 Penned by Judge William M. Layague.

3 123 Phil. 875 (1966).

4 Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.

5 L-45637, May 31, 1985, 136 SCRA 624.

6 104 Phil. 75 (1958).

7 Penned by Associate Justice Minerva P. Gonzaga-Reyes and concurred in by Associate Justices Vicente V. Mendoza and Pacita Cañizares-Nye.

8 Philippine Rabbit Bus Lines, Inc. v. IAC, G.R. Nos. 66102-04, August 30, 1990, 189 SCRA 158, 159.

9 TOLENTINO, CIVIL CODE OF THE PHILIPPINES, Vol. V, 1992 ed., p. 312.

10 Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.

11 Phil. Rabbit Bus Lines, Inc. vs. IAC, supra, at pp. 171-172 citing Lasam v. Smith, Jr., 45 Phil. 657 (1924).

12 Batangas Trans. Co. v. Caguimbal, 130 Phil. 166, 171 (1968) citing Brito Sy v. Malate Taxicab & Garage, Inc., 102 Phil. 482 (1957).

13 Metal Forming Corp. v. Office of the President, 317 Phil. 853, 859 (1995); Vasquez v. Court of Appeals, L-42926, September 13, 1985, 138 SCRA 553, 557 citing Lasam v. Smith, supra at p. 661 and Austria v. Court of Appeals, 148-A Phil. 462 (1971); Estrada v. Consolacion, L-40948, June 29, 1976, 71 SCRA 523, 530; Republic of the Phil. v. Luzon Stevedoring Corporation, 128 Phil. 313 (1967).

14 Vasquez v. Court of Appeals, supra, at p. 557.

15 Son v. Cebu Autobus Co., 94 Phil. 893, 896 (1954) citing Lasam v. Smith, supra.

16 Bachelor Express, Inc. v. Court of Appeals, G.R. No. 85691, July 31, 1990, 188 SCRA 216, 222-223.

17 Juntilla v. Fontanar, supra, at p. 630.

18 Necesito v. Paras, supra at p. 82.

19 Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused, by the breach of contract by a common carrier.

20 Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. . . . .

21 Sulpicio Lines, Inc. v. Court of Appeals, 316 Phil. 455, 460 (1995) citing People v. Flores, G.R. Nos. 103801-02, October 19, 1994, 237 SCRA 653.

22 Sulpicio Lines, Inc. v. Court of Appeals, supra at pp. 460-461 citing Trans World Air Lines v. Court of Appeals, G.R. No. 78656, August 30, 1988, 165 SCRA 143; Philippine Rabbit Bus Lines, Inc. v. Esguerra, 203 Phil. 107 (1982) and Vasquez v. Court of Appeals, supra.

23 Art. 2229, Civil Code.

24 Art. 2232, supra.

25 Sulpicio Lines, Inc. v. Court of Appeals, supra at p. 461.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 

G.R. No. 119756 March 18, 1999

FORTUNE EXPRESS, INC., petitioner, vs.COURT OF APPEALS, PAULIE U.CAORONG, and minor childrenYASSER KING CAORONG, ROSE HEINNI and PRINCE ALEXANDER, all surnamed CAORONG, and represented by their mother PAULIE U. CAORONG, respondents.

 

MENDOZA, J.:

This is an appeal by petition for review on certiorari of the decision, dated July 29, 1994, of the Court of Appeals, which reversed the decision of the Regional Trial Court, Branch VI, Iligan City. The aforesaid decision of the trial court dismissed the complaint of public respondents against petitioner for damages for breach of contract of carriage filed on the ground that petitioner had not exercised the required degree of diligence in the operation of one of its buses. Atty. Talib Caorong, whose heirs are private respondents herein, was a passenger of the bus and was killed in the ambush involving said bus.

The facts of the instant case are as follows:

Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the widow of Atty. Caorong, while private respondents Yasser King, Rose Heinni, and Prince Alexander are their minor children.

On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary Regional Security Unit No. X, conducted an investigation of the accident. He found that the owner of the jeepney was a Maranao residing in Delabayan, Lanao del Norte and that certain Maranaos were planning to take revenge on the petitioner by burning some of its buses. Generalao rendered a report on his findings to Sgt. Reynaldo Bastasa of the Philippine Constabulary Regional Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he went to see Diosdado Bravo, operations manager of petitioner, its main office in Cagayan de Oro City. Bravo assured him that the necessary precautions to insure the safety of lives and property would be taken.  1

At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner at Linamon, Lanao del Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader of the Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of the highway. Mananggolo then shot Cabatuan on the arm, which caused him to slump on the steering wheel. The one of the companions of Mananggolo started pouring gasoline inside the bus, as the other held the passenger at bay with a handgun. Mananggolo then ordered the passenger to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus and went behind the bushes in a field some distance from the highway. 2

However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time, one of the armed men was pouring gasoline on the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a living. The armed men were, however, adamant as they repeated the warning that they were going to burn the bus along with its driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left window of the bus and crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing operation.3

The private respondents brought this suit for breach of contract of carriage in the Regional Trial Court, Branch VI, Iligan City. In its decision, dated December 28, 1990, the trial court dismissed the complaint, holding as follows:

The fact that defendant, through Operations Manager Diosdado Bravo, was informed of the "rumors" that the Moslems intended to take revenge by burning five buses of defendant is established since the latter also utilized Crisanto Generalao as a witness. Yet despite this information, the plaintiffs charge, defendant did not take proper precautions. . . . Consequently, plaintiffs now fault the defendant for ignoring the report. Their position is that the defendant should have provided its buses with security guards. Does the law require common carriers to install security guards in its buses for the protection and safety of its passengers? Is the failure to post guards on omission of the duty to "exercise the diligence of a good father of the family" which could have prevented the killing of Atty. Caorong? To our

mind, the diligence demanded by law does not include the posting of security guard in buses. It is an obligation that properly belongs to the State. Besides, will the presence of one or two security guards suffice to deter a determined assault of the lawless and thus prevent the injury complained of? Maybe so, but again, perhaps not. In other words, the presence of a security guard is not a guarantee that the killing of Atty. Caorong would have been definitely avoided.

xxx xxx xxx

Accordingly, the failure of defendant to accord faith and credit to the report of Mr. Generalao and the fact that it did not provide security to its buses cannot, in the light of the circumstances, be characterized as negligence.

Finally, the evidence clearly shows that the assalants did not have the least intention of the harming any of the passengers. They ordered all the passengers to alight and set fire on the bus only after all the passengers were out of danger. The death of Atty. Caorong was an unexpected and unforseen occurrense over which defendant had no control. Atty. Caorong performed an act of charity and heroism in coming to the succor of the driver even in the face of danger. He deserves the undying gratitude of the driver whose life he saved. No one should blame him for an act of extraordinary charity and altruism which cost his life. But neither should any blame be laid on the doorstep of defendant. His death was solely due to the willfull acts of the lawless which defendant could neither prevent nor to stop.

WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack of merit, the counter-claim is likewise dismissed. No costs. 4

On appeal, however, the Court of Appeals reversed. It held:

In the case at bench, how did defendant-appellee react to the tip or information that certain Maranao hotheads were planning to burn five of its buses out of revenge for the deaths of two Maranaos in an earlier collision involving appellee's bus? Except for the remarks of appellee's operations manager that "we will have our action . . . . and I'll be the one to settle it personally," nothing concrete whatsoever was taken by appellee or its employees to prevent the execution of the threat. Defendant-appellee never adopted even a single safety measure for the protection of its paying passengers. Were there available safeguards? Of course, there were: one was frisking passengers particularly those en route to the area where the threats were likely to be carried out such as where the earlier accident occurred or the place of influence of the victims or their locality. If frisking was resorted to, even temporarily, . . . . appellee might be legally excused from liabilty. Frisking of passengers picked up along the route could have been implemented by the bus conductor; for those boarding at the bus terminal, frisking could have been conducted by him and perhaps by additional personnel of defendant-appellee. On hindsight, the handguns and especially the gallon of gasoline used by the felons all of which were brought inside the bus would have been discovered, thus preventing the burning of the bus and the fatal shooting of the victim.

Appellee's argument that there is no law requiring it to provide guards on its buses and that the safety of citizens is the duty of the government, is not well taken. To be sure, appellee is not expected to assign security guards on all its buses; if at all, it has the duty to post guards only on its buses plying predominantly Maranaos areas. As discussed in the next preceding paragraph, least appellee could have done in response to the report was to adopt a system of verification such as the frisking of passengers boarding at its buses. Nothing, and no repeat, nothing at all, was done by defendant-appellee to protect its innocent passengers from the danger arising from the "Maranao threats." It must be observed that frisking is not a novelty as a safety measure in our society. Sensitive places — in fact, nearly all important places — have applied this method of security enhancement. Gadgets and devices are avilable in the market for this purpose. It would not have weighed much against the budget of the bus company if such items were made available to its personnel to cope up with situations such as the "Maranaos threats."

In view of the constitutional right to personal privacy, our pronouncement in this decision should not be construed as an advocacy of mandatory frisking in all public conveyances. What we are saying is that given the circumstances obtaining in the case at bench that: (a) two Maranaos died because of a vehicular collision involving one of appellee's vehicles; (b) appellee received a written report from a member of the Regional Security Unit, Constabulary Security Group, that the tribal/ethnic group of the two deceased were planning to burn five buses of appellee out of revenge; and (c) appelle did nothing — absolutely nothing — for the safety of its passengers travelling in the area of influence of the victims, appellee has failed to exercise the degree of dilegence required of common carriers. Hence, appellee must be adjudge liable.

xxx xxx xxx

WHEREFORE the decision appealed from is hereby REVERSED and another rendered ordering defendant-appellee to pay plaintiffs-appellants the following:

1) P3,399,649.20 as death indemnity;

2) P50,000.00 and P500.00 per appearance as attorney's fee and

Costs against defendant-appellee. 5

Hence, this appeal. Petitioner contends:

(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT DATED DECEMBER 28, 1990 DISMISSING THE COMPLAINT AS WELL AS THE COUNTERCLAIM, AND FINDING FOR PRIVATE RESPONDENTS BY ORDERING PETITIONER TO PAY THE GARGANTUAN SUM OF P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEY'S FEES, AS WELL AS DENYING PETITIONERS MOTION FRO RECONSIDERATION AND THE SUPPLEMENT TO SAID MOTION, WHILE HOLDING, AMONG OTHERS, THAT THE PETITIONER BREACHED THE CONTRACT OF THE CARRIAGE BY ITS FAILURE TO EXCERCISE THE REQUIRED DEGREE OF DILIGENCE;

(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE, IRRESISTABLE, VIOLENT, AND FORCEFULL, AS TO BE REGARDED ASCASO FORTUITO; AND

(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER COULD HAVE PROVIDED ADEQUATE SECURITY IN PREDOMINANTLY MUSLIM AREAS AS PART OF ITS DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS A COMMON CARRIER.

The instant has no merit.

First. Petitioner's Breach of the Contract of Carriage.

Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a family. In the present case, it is clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his men was made possible.

Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers.

Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been employed without violating the passenger's constitutional rights. As this Court amended in Gacal v. Philippine Air Lines, Inc., 6 a common carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their baggages.

From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's buses because they did not exercise the diligence of a good father of a family. Hence, petitioner should be held liable for the death of Atty. Caorong.

Second. Seizure of Petitioner's Bus not a Case of Force Majeure

The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it could not be held liable.

Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not be foreseen, is inevitable. In Yobido v. Court of Appeals, 7 we held that to considered as force majeure, it is necessary that (1) the cause of the breach of the obligation must be independent of the human will; (2) the event must be either unforeseeable or unavoidable; (3) the occurence must be render it impossible for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must be free of participation in, or aggravation of, the injury to the creditor. The absence of any of the requisites mentioned above would prevent the obligor from being excused from liability.

Thus, in Vasquez v. Court of Appeals, 8 it was held that the common carrier was liable for its failure to take the necessary precautions against an approaching typhoon, of which it was warned, resulting in the loss of the lives of several passengers. The event was forseeable, and, thus, the second requisite mentioned above was not fulfilled. This ruling applies by analogy to the present case. Despite the report of PC agent Generalao that the Maranaos were going to attack its buses, petitioner took no steps to safeguard the lives and properties of its passengers. The seizure of the bus of the petitioner was foreseeable and, therefore, was not a fortuitous event which would exempt petitioner from liabilty.

Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De Guzman v. Court of Appeals, 10 in support of its contention that the seizure of its bus by the assailants constitutes force majeure. In Pilapil v. Court of Appeals, 11 it was held that a common carrier is not liable for failing to install window grills on its buses to protect the passengers from injuries cause by rocks hurled at the bus by lawless elements. On the other hand, in De Guzman v. Court of Appeals, 12 it was ruled that a common carriers is not responsible for goods lost as a result of a robbery which is attended by grave or irresistable threat, violence, or force.

It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case. Art. 1755 of the Civil Code provides that "a common carrier is bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." Thus, we held in Pilapil and De Guzman that the respondents therein were not negligent in failing to take special precautions against threats to the safety of passengers which could not be foreseen, such as tortious or criminal acts of third persons. In the present case, this factor of unforeseeability (the second requisite for an event to be considered force majeure) is lacking. As already stated, despite the report of PC agent Generalao that the Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's operation manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by petitioner to protect the safety of passengers.

Third. Deceased not Guilty of Contributory Negligence

The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something. But Atty. Caorong did not act recklessly. It should be pointed out that the intended targets of the violence were petitioners and its employees, not its passengers. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus, ordered the passengers to get off the bus as they intended to burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot considered an act of negligence, let alone recklessness.

Fourth. Petitioner Liable to Private Respaondents for Damages

We now consider the question of damages that the heirs of Atty. Caorong, private respondents herein, are entitled to recover from the petitioner.

Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides for the payment of indemnity for the death of passengers caused by the breach of contract of carriage by a common carrier. Initially fixed in Art. 2206 at P3,000.00, the amount of the said indemnity for death has through the years been gradually increased in view of the declining value of the peso. It is presently fixed at P50,000.00. 13 Private respondents are entitled to this amount.

Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as has duly proved." The trial court found that the private respondents spent P30,000.00 for the wake and burial of Atty. Caorong. 14 Since petitioner does not question this finding of the trial court, it is liable to private respondent in the said amount as actual damages.

Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased." The trial court found that private respondent Paulie Caorong suffered pain from the death of her husband and worry on how to provide support for their minor children, private respondents Yasser King, Rose Heinni, and Prince Alexander. 15 The petitioner likewise does not question this finding of the trial court. Thus, in accordance with recent decisions of this Court, 16 we hold that the petitioner is liable to the private respondents in the amount of P100,000.00 as moral damages for the death of Atty. Caorong.

Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent reckless manner." In the present case, the petitioner acted in a wanton and reckless manner. Despite warning that the Maranaos were planning to take revenge against the petitioner by burning some of its buses, and contary to the assurance made by its operations manager that the necessary precautions would be take, the petitioner and its employees did nothing to protect the safety of passengers. Under the circumtances, we deem it reasonable to award private respondents exemplary damages in the amount of P100,000.00.  17

Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in the instant case, exemplary damages are awarded. In the recent case of Sulpicio Lines, Inc. v. Court of Appeals, 18 we held an

award of P50,000.00 as attorney's fees to be reasonable. Hence, the private respondents are entitled to attorney's fees in that amount.

Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides that in addition to the indemnity for death arising from the breach of contrtact of carriage by a common carrier, the "defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter." The formula established in decided cases for computing net earning capacity is as follows:19

Gross Necessary

Net Earning = Life x Annual — Living

Capacity Expectancy Income Expenses

Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty (80) and the age of the deceased. 20 Since Atty. Caorong was 37 years old at that time of his death, 21 he had a life expectancy of 28 2/3 more years. 22 His projected gross annual income, computed based on his monthly salary of P11,385.00. 23 as a lawyer in the Department of Agrarian Reform at the time of his death, was P148,005.00. 24 Allowing for necessary living expenses of fifty percent (50%) 25 of his projected gross annual income, his total earning capacity amounts to P2,121,404.90. 26 Hence, the petitioner is liable to the private respondents in the said amount as a compensation for loss of earning capacity.

WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby AFFIRMED with the MODIFICATION that petitioner Fortune Express, Inc. is ordered to pay the following amounts to private respondents Paulie, Yasser King, Rose Heinni, and Prince Alexander Caorong:

1. death indemnity in the amount of fifty thousand pesos (P50,000.00);

2. actual damages in the amount of thirty thousand pesos (P30,000.00);

3. moral damages in the amount of one hundred thousand pesos (P100,000.00);

4. exemplary damages in the amount of one hundred thousand pesos (P100,000.00);

5. attorney's fees in the amount of fifty thousand pesos (P50,000.00);

6. compensation for loss of earning capacity in the amount of two million one hundred twenty-one thousand four hundred four pesos and ninety centavos (P2,121,404.90); and

7. cost of suits.

SO ORDERED.

Bellosillo, Puno and Buena, JJ., concur.

Quisumbing, J., abroad on official business.

Footnotes

1 Petition, Rollo, pp. 5-6.

2 Petition, Rollo, pp. 6-7.

3 Id., p. 7.

4 Petition, Annex B, Rollo, pp. 52-54.

5 Petition, Annex A. Rollo, pp. 41-43.

6 183 SCRA 189, 195-196 (1990).

7 281 SCRA 1, 9 (1997).

8 138 SCRA 553, 557-559 (1985).

9 180 SCRA 546 (1989).

10 168 SCRA 612 (1988).

11 Supra note10, at pp. 553-554.

12 Supra note 11, at pp. 619-622.

13 E.g., Philtranco Service Enterprises, Inc. v. Court of Appeals, 273 SCRA 562 (1997).

14 Petition, Annex B, Rollo, p. 50.

15 Petition, Annex B, Rollo, p. 50.

16 E.g., Negros Navigation Co., Inc. v. Court of Appeals, 281 SCRA 534 (1997).

17 Id.

18 246 SCRA 376 (1995).

19 E.g., Metro Manila Transit Corporation v. Court of Appeals, G.R. No. 116617, Nov. 16, 1998.

20 Villa Rey Transit Inc., v. Court of Appeals, 31 SCRA 511 (1970).

21 Petition, Annex B, Rollo, p. 50.

22 2/3 x (80-37) = 28 2/3.

23 Petition, Annex B, Rollo, p. 50.

24 P11,385.00

x 13

—————

P148,005.00 gross annual income

To account for the thitheenth month pay, the monthly salary of the deceased is not applied by thirteen.

25 Metro Manila Transit Corporation v. Court of Appeals, G.R. No. 116617, Nov, 16, 1998.

26 P148,005.00 P74,002.50

x .50 x 28 2/3

————— —————

P74,002.50 net annual income P2,121,404.90 net earning capacity

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 200289               November 25, 2013

WESTWIND SHIPPING CORPORATION, Petitioner, vs.UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.

x - - - - - - - - - - - - - - - - - - - - - - - x

G.R. No. 200314

ORIENT FREIGHT INTERNATIONAL INC., Petitioner, vs.UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.

D E C I S I O N

PERALTA, J.:

These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of the 1997 Rules of Civil Procedure, September 13, 2011 Decision1 and January 19, 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 86752, which reversed and set aside the January 27, 2006 Decision3 of the Manila City Regional Trial Court Branch (RTC) 30. The facts, as established by the records, are as follows:

On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation (SMC). The shipment, covered by Bill of Lading No. KBMA-1074,4 was loaded and received clean on board M/V Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind Shipping Corporation (Westwind).

SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for US Dollars: One Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven Centavos (US$184,798.97), which, at the time, was equivalent to Philippine Pesos: Six Million Two Hundred Nine Thousand Two Hundred Forty-Five and Twenty-Eight Centavos (P6,209,245.28).

The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the custody of the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services, Inc.5 During the unloading operation, however, six containers/skids worth Philippine Pesos: One Hundred Seventeen Thousand Ninety-Three and Twelve Centavos (P117,093.12) sustained dents and punctures from the forklift used by the stevedores of Ocean Terminal Services, Inc. (OTSI) in centering and shuttling the containers/skids. As a consequence, the local ship agent of the vessel, Baliwag Shipping Agency, Inc., issued two Bad Order Cargo Receipt dated September 1, 1993.

On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC, withdrew from ATI the 197 containers/skids, including the six in damaged condition, and delivered the same at SMC’s warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was discovered upon discharge that additional nine containers/skids valued at Philippine Pesos: One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine and Sixty-Eight Centavos (P175,639.68) were also damaged due to the forklift operations; thus, making the total number of 15 containers/skids in bad order.

Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI, and OFII to recover the amount corresponding to the damaged 15 containers/skids. When UCPB paid the total sum of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven Hundred Thirty-Two and Eighty Centavos (P292,732.80), SMC signed the subrogation receipt. Thereafter, in the exercise of its right of subrogation, UCPB instituted on August 30, 1994 a complaint for damages against Westwind, ATI, and OFII.6

After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind, ATI, and OFII. It ruled that the right, if any, against ATI already prescribed based on the stipulation in the 16 Cargo Gate Passes issued, as well as the doctrine laid down in International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co. Inc.7 that a claim for reimbursement for damaged goods must be filed within 15 days from the date of consignee’s knowledge. With respect to Westwind, even if the action against it is not yet barred by prescription, conformably with Section 3 (6) of the Carriage of Goods by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court of Appeals, et al.8 and Belgian Overseas Chartering and Shipping N.V. v. Phil. First Insurance Co., Inc.,9 the court a quo still opined that Westwind is not liable, since the discharging of the cargoes were done by ATI personnel using forklifts and that there was no allegation that it (Westwind) had a hand in the conduct of the stevedoring operations. Finally, the trial court likewise absolved OFII from any liability, reasoning that it never undertook the operation of the forklifts which caused the dents and punctures, and that it merely facilitated the release and delivery of the shipment as the customs broker and representative of SMC.

On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its September 13, 2011 Decision directed:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision dated January 27, 2006 rendered by the court a quo is REVERSED AND SET ASIDE. Appellee Westwind Shipping Corporation is hereby ordered to pay to the appellant UCPB General Insurance Co., Inc., the amount of One Hundred Seventeen Thousand and Ninety-Three Pesos and Twelve Centavos (Php117,093.12), while Orient Freight International, Inc. is hereby ordered to pay to UCPB the sum of One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine Pesos and Sixty-Eight Centavos (Php175,639.68). Both sums shall bear interest at the rate of six (6%) percent per annum, from the filing of the complaint on August 30, 1994 until the judgment becomes final and executory. Thereafter, an interest rate of twelve (12%) percent per annum shall be imposed from the time this decision becomes final and executory until full payment of said amounts.

SO ORDERED.10

While the CA sustained the RTC judgment that the claim against ATI already prescribed, it rendered a contrary view as regards the liability of Westwind and OFII. For the appellate court, Westwind, not ATI, is responsible for the six damaged containers/skids at the time of its unloading. In its rationale, which substantially followed Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.,11 it concluded that the common carrier, not the arrastre operator, is responsible during the unloading of the cargoes from the vessel and that it is not relieved from liability and is still bound to exercise extraordinary diligence at the time in order to see to it that the cargoes under its possession remain in good order and condition. The CA also considered that OFII is liable for the additional nine damaged containers/skids, agreeing with UCPB’s contention that OFII is a common carrier bound to observe extraordinary diligence and is presumed to be at fault or have acted negligently for such damage. Noting the testimony of OFII’s own witness that the delivery of the shipment to the consignee is part of OFII’s job as a cargo forwarder, the appellate court ruled that Article 1732 of the New Civil Code (NCC) does not distinguish between one whose principal business activity is the carrying of persons or goods or both and one who does so as an ancillary activity. The appellate court further ruled that OFII cannot excuse itself from liability by insisting that JBL undertook the delivery of the cargoes to SMC’s warehouse. It opined that the delivery receipts signed by the inspector of SMC showed that the containers/skids were received from OFII, not JBL. At the most, the CA said, JBL was engaged by OFII to supply the trucks necessary to deliver the shipment, under its supervision, to SMC.

Only Westwind and OFII filed their respective motions for reconsideration, which the CA denied; hence, they elevated the case before Us via petitions docketed as G.R. Nos. 200289 and 200314, respectively.

Westwind argues that it no longer had actual or constructive custody of the containers/skids at the time they were damaged by ATI’s forklift operator during the unloading operations. In accordance with the stipulation of the bill of lading, which allegedly conforms to Article 1736 of the NCC, it contends that its responsibility already ceased from the moment the cargoes were delivered to ATI, which is reckoned from the moment the goods were taken into the latter’s custody. Westwind adds that ATI, which is a completely independent entity that had the right to receive the goods as exclusive operator of stevedoring and arrastre functions in South Harbor, Manila, had full control over its employees and stevedores as well as the manner and procedure of the discharging operations.

As for OFII, it maintains that it is not a common carrier, but only a customs broker whose participation is limited to facilitating withdrawal of the shipment in the custody of ATI by overseeing and documenting the turnover and counterchecking if the quantity of the shipments were in tally with the shipping documents at hand, but without participating in the physical withdrawal and loading of the shipments into the delivery trucks of JBL. Assuming that it is a common carrier, OFII insists that there is no need to rely on the presumption of the law – that, as a common carrier, it is presumed to have been at fault or have acted negligently in case of damaged goods – considering the undisputed fact that the damages to the containers/skids were caused by the forklift blades, and that there is no evidence presented to show that OFII and Westwind were the owners/operators of the forklifts. It asserts that the loading to the trucks were made by way of forklifts owned and operated by ATI and the unloading from the trucks at the SMC warehouse was done by way of forklifts owned and operated by SMC employees. Lastly, OFII avers that neither the undertaking to deliver nor the acknowledgment by the consignee of the fact of delivery makes a person or entity a common carrier, since delivery alone is not the controlling factor in order to be considered as such.

Both petitions lack merit.

The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.12 applies, as it settled the query on which between a common carrier and an arrastre operator should be responsible for damage or loss incurred by the shipment during its unloading. We elucidated at length:

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 transported by them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.

For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless agreed otherwise. In

Standard Oil Co. of New York v. Lopez Castelo, the Court interpreted the ship captain’s liability as ultimately that of the shipowner by regarding the captain as the representative of the shipowner.

Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities set forth in the Act. Section 3 (2) thereof then states that among the carriers’ responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

x x x x

On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the wharf or between the establishment of the consignee or shipper and the ship's tackle. Being the custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to turn them over to the party entitled to their possession.

Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees should observe the standards and measures necessary to prevent losses and damage to shipments under its custody.

In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the relationship and responsibility of an arrastre operator to a consignee of a cargo, to quote:

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the goods in good condition to the consignee. (Emphasis supplied) (Citations omitted)

The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals with the clarification that the arrastre operator and the carrier are not always and necessarily solidarily liable as the facts of a case may vary the rule.

Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator and a carrier may not be held solidarily liable at all times. But the precise question is which entity had custody of the shipment during its unloading from the vessel?

The aforementioned Section 3 (2) of the COGSA states that among the carriers’ responsibilities are to properly and carefully load, care for and discharge the goods carried. The bill of lading covering the subject shipment likewise stipulates that the carrier’s liability for loss or damage to the goods ceases after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is turned over to him until its delivery at the port of unloading.

In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled that like the duty of seaworthiness, the duty of care of the cargo is non-delegable, and the carrier is accordingly responsible for the acts of the master, the crew, the stevedore, and his other agents. It has also been held that it is ordinarily the duty of the master of a vessel to unload the cargo and place it in readiness for delivery to the consignee, and there is an implied obligation that this shall be accomplished with sound machinery, competent hands, and in such manner that no unnecessary injury shall be done thereto. And the fact that a consignee is required to furnish persons to assist in unloading a shipment may not relieve the carrier of its duty as to such unloading.

x x x x

It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier x x x.13

In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines), Inc. 14 and Asian Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court echoed the doctrine that cargoes, while being unloaded, generally remain under the custody of the carrier. We cannot agree with Westwind’s disputation that "the carrier in Wallem clearly exercised supervision during the discharge of the shipment and that is why it was faulted and held liable for the damage incurred by the shipment during such time." What Westwind failed to realize is that the extraordinary responsibility of the common carrier lasts until the time the goods are actually or constructively delivered by the carrier to the consignee or to the person who has a right to receive them. There is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and a reasonable time is given him to remove the goods. 16 In this case, since the discharging of the containers/skids, which were covered by only one bill of lading, had not yet been completed at the time the damage occurred, there is no reason to imply that there was already delivery, actual or constructive, of the cargoes to ATI. Indeed, the earlier case of Delsan Transport Lines, Inc. v. American Home Assurance Corp.17serves as a useful guide, thus:

Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already been actually and legally delivered to Caltex at the time it entered the shore tank holds no water. It had been settled that the subject cargo was still in the custody of Delsan because the discharging thereof has not yet been finished when the backflow occurred. Since the discharging of the cargo into the depot has not yet been completed at the time of the spillage when the backflow occurred, there is no reason to imply that there

was actual delivery of the cargo to the consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank of Caltex on shore, there was legally, at that moment, a complete delivery thereof to Caltex. To be sure, the extraordinary responsibility of common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to a person who has the right to receive them. The discharging of oil products to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to guard and preserve the goods, a duty incident to its having the goods transported.

To recapitulate, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. The mere proof of delivery of goods in good order to the carrier, and their arrival in the place of destination in bad order, make out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstances inconsistent with its liability.18

The contention of OFII is likewise untenable. A customs broker has been regarded as a common carrier because transportation of goods is an integral part of its business.19 In Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc.,20 the Court already reiterated: It is settled that under a given set of facts, a customs broker may be regarded as a common carrier. 1âwphi1 Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals held:

The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit, 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.

x x x x

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of goods is an integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise "would be to deprive those with whom [it] contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel of petitioner’s business."21

That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric Panganiban Cueto, that part of the services it offers to clients is cargo forwarding, which includes the delivery of the shipment to the consignee.22 Thus, for undertaking the transport of cargoes from ATI to SMC’s warehouse in Calamba, Laguna, OFII is considered a common carrier. As long as a person or corporation holds itself to the public for the purpose of transporting goods as a business, it is already considered a common carrier regardless of whether it owns the vehicle to be used or has to actually hire one.

As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil Code,23 extraordinary diligence in the vigilance over the goods24 it transports according to the peculiar circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently unless it proves that it observed extraordinary diligence.25 In the case at bar it was established that except for the six containers/skids already damaged OFII received the cargoes from ATI in good order and condition; and that upon its delivery to SMC additional nine containers/skids were found to be in bad order as noted in the Delivery Receipts issued by OFII and as indicated in the Report of Cares Marine Cargo Surveyors. Instead of merely excusing itself from liability by putting the blame to ATI and SMC it is incumbent upon OFII to prove that it actively took care of the goods by exercising extraordinary diligence in the carriage thereof. It failed to do so. Hence its presumed negligence under Article 1735 of the Civil Code remains unrebutted.

WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and 200314 respectively are DENIED. The September 13 2011 Decision and January 19 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 86752 which reversed and set aside the January 27 2006 Decision of the Manila City Regional Trial Court Branch 30 are AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTAAssociate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.Associate Justice

Chairperson

LUCAS P. BERSAMIN*Associate Justice

ROBERTO A. ABADAssociate Justice

JOSE CATRAL MENDOZAAssociate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

PRESBITERO J. VELASCO, JR.Associate JusticeChairperson, Third Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P. A. SERENOChief Justice

Footnotes

* Designated as Acting Member in lieu of Associate Justice Marvic Mario Victor F. Leonen, per Special Order No. 1605 dated November 20, 2013.

1 Penned by Associate Justice Elihu A. Ybañez, with Associate Justices Estela M. Perlas-Bernabe (now Supreme Court Associate Justice) and Remedios Salazar-Fernando, concurring; rollo (G.R. 200289), pp. 7-29, (G.R. 200314), pp. 25-47.

2 Rollo, (G.R. 200289), pp. 31-33; rollo (G.R. 200314), pp. 49-51.

3 Id. at 79-88, id. at 59-68.

4 Rollo, (G.R. 200289), p. 63.

5 Records, p. 343.

6 Id. at 1-8; rollo (G.R. 200289), pp. 59-62.

7 377 Phil. 1082 (1999).

8 96 Phil. 264 (1954).

9 432 Phil. 567 (2002).

10 Rollo (G.R. 200289), pp. 27-28, rollo (G.R. 200314), pp. 45-46. (Emphasis in the original)

11 G.R. No. 165647, March 26, 2009, 582 SCRA 457.

12 Id.

13 Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc., supra note 11, at 466-472. (Emphasis supplied)

14 G.R. No. 168151, September 4, 2009, 598 SCRA 304.

15 G.R. Nos. 181163, 181262 and 181319, July 24, 2013.

16 Samar Mining Company, Inc. v. Nordeutscher Lloyd and C.F. Sharp & Company, Inc., 217 Phil. 497, 506 (1984), citing 11Words and Phrases 676, citing Yazoo & MVR Company v. Altman, 187 SW 656, 657.

17 530 Phil. 332 (2006).

18 Delsan Transport Lines, Inc. v. American Home Assurance Corp., supra, at 340-341.

19 Loadmasters Customs Services, Inc. v. Glodel Brokerage Corporation, G.R. No. 179446, January 10, 2011, 639 SCRA 69, 80.

20 496 Phil. 437 (2005).

21 Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., supra, at 450-551.

22 TSN, February 1, 1999, p. 11.

23 Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. x x x x

24 In Compania Maritima v. Court of Appeals (G.R. No. L-31379, August 29, 1958, 164 SCRA 685, 692), the meaning of "extraordinary diligence in the vigilance over goods" was explained, thus: The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."

25 Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article if the goods are lost destroyed or deteriorated common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as required on Article 1733.

The Lawphil Project - Arellano Law Foundation