SECOND DIVISION

[G.R. No. 125948. December 29, 1998]

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT

OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS

CITY and ADORACION C. ARELLANO, in her official capacity as

City Treasurer of Batangas, respondents.

D E C I S I O N

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated

November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial

Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'

complaint for a business tax refund imposed by the City of Batangas.

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to

contract, install and operate oil pipelines. The original pipeline concession was granted in 19671

and renewed by the Energy Regulatory Board in 1992.2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the

Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent

City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year

1993 pursuant to the Local Government Code.3 The respondent City Treasurer assessed a

business tax on the petitioner amounting to P956,076.04 payable in four installments based on

the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to

P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in

1 Rollo, pp. 90-94.

2 Decision of the Energy Regulatory Board in ERB Case No. 92-94, renewing the Pipeline Concession of petitioner

First Philippine Industrial Corporation, formerly known as Meralco Securities Industrial Corporation , (Rollo, pp.

95-100).

3 Sec. 143. Tax on Business. The municipality may impose taxes on the following business:

xxx xxx xxx

(e) On contractors and other independent contractors, in accordance with the following schedule:

With gross receipts for the preceding Amount of Tax Per Annum

Calendar year in the amount:

x x x x x x

P2,000,000.00 or more at a rate not exceeding fifty

Percent (50%) of one (1%)

the amount of P239,019.01 for the first quarter of 1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City

Treasurer, the pertinent portion of which reads:

"Please note that our Company (FPIC) is a pipeline operator with a government concession

granted under the Petroleum Act. It is engaged in the business of transporting petroleum

products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As

such, our Company is exempt from paying tax on gross receipts under Section 133 of the Local

Government Code of 1991 x x x x

"Moreover, Transportation contractors are not included in the enumeration of contractors

under Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to

impose tax 'on contractors and other independent contractors' under Section 143, Paragraph (e)

of the Local Government Code does not include the power to levy on transportation contractors.

"The imposition and assessment cannot be categorized as a mere fee authorized under

Section 147 of the Local Government Code. The said section limits the imposition of fees and

charges on business to such amounts as may be commensurate to the cost of regulation,

inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the

imposition thereof based on gross receipts is violative of the aforecited provision. The amount

of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation,

inspection and licensing. The fee is already a revenue raising measure, and not a mere

regulatory imposition."4

On March 8, 1994, the respondent City Treasurer denied the protest contending that

petitioner cannot be considered engaged in transportation business, thus it cannot claim

exemption under Section 133 (j) of the Local Government Code.5

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a

complaint6 for tax refund with prayer for a writ of preliminary injunction against respondents

City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint,

petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its

gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities to

impose and collect a tax on the gross receipts of "contractors and independent contractors" under

Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation

contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation

contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said

tax, thus meriting the immediate refund of the tax paid.7

Traversing the complaint, the respondents argued that petitioner cannot be exempt from

taxes under Section 133 (j) of the Local Government Code as said exemption applies only to

"transportation contractors and persons engaged in the transportation by hire and common

carriers by air, land and water." Respondents assert that pipelines are not included in the term

"common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the

4 Letter Protest dated January 20, 1994, Rollo, pp. 110-111.

5 Letter of respondent City Treasurer, Rollo, p. 112.

6 Complaint, Annex "C", Rollo, pp. 51-56.

7 Rollo, pp. 51-57.

like. Respondents further posit that the term "common carrier" under the said code pertains to

the mode or manner by which a product is delivered to its destination.8

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in

this wise:

"xxx Plaintiff is either a contractor or other independent contractor.

xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax

exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the

government. Exemption may therefore be granted only by clear and unequivocal provisions of

law.

"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387,

(Exhibit A) whose concession was lately renewed by the Energy Regulatory Board (Exhibit B).

Yet neither said law nor the deed of concession grant any tax exemption upon the plaintiff.

"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of

the Local Tax Code. Such being the situation obtained in this case (exemption being unclear

and equivocal) resort to distinctions or other considerations may be of help:

1. That the exemption granted under Sec. 133 (j) encompasses only

common carriers so as not to overburden the riding public or

commuters with taxes. Plaintiff is not a common carrier, but a special

carrier extending its services and facilities to a single specific or

"special customer" under a "special contract."

2. The Local Tax Code of 1992 was basically enacted to give more and

effective local autonomy to local governments than the previous

enactments, to make them economically and financially viable to serve

the people and discharge their functions with a concomitant obligation

to accept certain devolution of powers, x x x So, consistent with this

policy even franchise grantees are taxed (Sec. 137) and contractors are

also taxed under Sec. 143 (e) and 151 of the Code."9

Petitioner assailed the aforesaid decision before this Court via a petition for review. On

February 27, 1995, we referred the case to the respondent Court of Appeals for consideration and

adjudication.10 On November 29, 1995, the respondent court rendered a decision11 affirming the

trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was

denied on July 18, 1996.12

Hence, this petition. At first, the petition was denied due course in a Resolution dated

November 11, 1996.13 Petitioner moved for a reconsideration which was granted by this Court in

8 Answer, Annex "J", Rollo, pp. 122-127.

9 RTC Decision, Rollo, pp. 58-62.

10 Rollo, p. 84.

11 CA-G.R. SP No.36801; Penned by Justice Jose C. De la Rama and concurred in by Justice Jaime M. Lantin and

Justice Eduardo G. Montenegro; Rollo, pp. 33-47.

12 Rollo, p. 49.

13 Resolution dated November 11, 1996 excerpts of which are hereunder quoted:

a Resolution14 of January 20, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner

is not a common carrier or a transportation contractor, and (2) the exemption sought for by

petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as

engaged in the business of transporting persons or property from place to place, for

compensation, offering his services to the public generally.

Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm

or association engaged in the business of carrying or transporting passengers or goods or both, by

land, water, or air, for compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of carrying goods for others as a public

employment, and must hold himself out as ready to engage in the transportation of

goods for person generally as a business and not as a casual occupation;

2. He must undertake to carry goods of the kind to which his business is confined;

3. He must undertake to carry by the method by which his business is conducted and

over his established roads; and

4. The transportation must be for hire.15

Based on the above definitions and requirements, there is no doubt that petitioner is a

"The petition is unmeritorious.

"As correctly ruled by respondent appellate court, petitioner is not a common carrier as it is not offering its

services to the public.

"Art. 1732 of the Civil Code defines Common Carriers as: persons, corporations, firms or association

engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for

compensation, offering their services to the public.

"We sustain the view that petitioner is a special carrier. Based on the facts on hand, it appears that

petitioner is not offering its services to the public.

"We agree with the findings of the appellate court that the claim for exemption from taxation must be

strictly construed against the taxpayer. The present understanding of the concept of "common carriers" does not

include carriers of petroleum using pipelines. It is highly unconventional to say that the business of transporting

petroleum through pipelines involves "common carrier" business. The Local Government Code intended to give

exemptions from local taxation to common carriers transporting goods and passengers through moving vehicles or

vessels and not through pipelines. The term common carrier under Section 133 (j) of the Local Government Code

must be given its simple and ordinary or generally accepted meaning which would definitely not include operators

of pipelines."

14 G.R. No. 125948 (First Philippine Industrial Corporation vs. Court of Appeals, et. al.)- Considering the grounds of

the motion for reconsideration, dated December 23, 1996, filed by counsel for petitioner, of the resolution of

November 11, 1996 which denied the petition for review on certiorari, the Court Resolved:

(a) to GRANT the motion for reconsideration and to REINSTATE the petition; and

(b) to require respondent to COMMENT on the petition, within ten (10) days from notice.

15 Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5.

common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum

products, for hire as a public employment. It undertakes to carry for all persons indifferently,

that is, to all persons who choose to employ its services, and transports the goods by land and for

compensation. The fact that petitioner has a limited clientele does not exclude it from the

definition of a common carrier. In De Guzman vs. Court of Appeals16 we ruled that:

"The above article (Art. 1732, Civil Code) makes no distinction between one whose

principal business activity is the carrying of persons or goods or both, and one who does such

carrying only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x x avoids

making any distinction between a person or enterprise offering transportation service on a

regular or scheduled basis and one offering such service on an occasional, episodic or

unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its

services to the 'general public,' i.e., the general community or population, and one who

offers services or solicits business only from a narrow segment of the general population.

We think that Article 1877 deliberately refrained from making such distinctions.

So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide

neatly with the notion of 'public service,' under the Public Service Act (Commonwealth Act No.

1416, as amended) which at least partially supplements the law on common carriers set forth in

the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, 'public service'

includes:

'every person that now or hereafter may own, operate, manage, or control in the

Philippines, for hire or compensation, with general or limited clientele, whether

permanent, occasional or accidental, and done for general business purposes, any

common carrier, railroad, street railway, traction railway, subway motor vehicle,

either for freight or passenger, or both, with or without fixed route and whatever may

be its classification, freight or carrier service of any class, express service, steamboat,

or steamship line, pontines, ferries and water craft, engaged in the transportation of

passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,

ice-refrigeration plant, canal, irrigation system gas, electric light heat and power,

water supply and power petroleum, sewerage system, wire or wireless

communications systems, wire or wireless broadcasting stations and other similar

public services.' "(Underscoring Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the

Local Government Code refers only to common carriers transporting goods and passengers

through moving vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code

makes no distinction as to the means of transporting, as long as it is by land, water or air. It does

not provide that the transportation of the passengers or goods should be by motor vehicle. In

fact, in the United States, oil pipe line operators are considered common carriers.17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a

"common carrier." Thus, Article 86 thereof provides that:

"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the

16

168 SCRA 617-618 [1998].

17 Giffin v. Pipe Lines, 172 Pa. 580, 33 Alt. 578; Producer Transp. Co. v. Railroad Commission, 241 US 228, 64 L

ed 239, 40 S Ct 131.

preferential right to utilize installations for the transportation of petroleum owned by him, but is

obligated to utilize the remaining transportation capacity pro rata for the transportation of such

other petroleum as may be offered by others for transport, and to charge without discrimination

such rates as may have been approved by the Secretary of Agriculture and Natural Resources."

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of

Article 7 thereof provides:

"that everything relating to the exploration for and exploitation of petroleum x x and

everything relating to the manufacture, refining, storage, or transportation by special methods

of petroleum, is hereby declared to be a public utility." (Underscoring Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In

BIR Ruling No. 069-83, it declared:

"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting

petroleum products, it is considered a common carrier under Republic Act No. 387 x x x. Such

being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-

78, as amended."

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,

therefore, exempt from the business tax as provided for in Section 133 (j), of the Local

Government Code, to wit:

"Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless

otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,

and barangays shall not extend to the levy of the following :

x x x x x x x x x

(j) Taxes on the gross receipts of transportation contractors and persons engaged in

the transportation of passengers or freight by hire and common carriers by air,

land or water, except as provided in this Code."

The deliberations conducted in the House of Representatives on the Local Government Code

of 1991 are illuminating:

"MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec.

131]. Common Limitations on the Taxing Powers of Local Government Units." x x x

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears

to be one of those being deemed to be exempted from the taxing powers of the local

government units. May we know the reason why the transportation business is being

excluded from the taxing powers of the local government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec.

131), line 16, paragraph 5. It states that local government units may not impose taxes on the

business of transportation, except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see

there that provinces have the power to impose a tax on business enjoying a franchise at the rate

of not more than one-half of 1 percent of the gross annual receipts. So, transportation

contractors who are enjoying a franchise would be subject to tax by the province. That is the

exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is the imposition of taxes by local

government units on the carrier business. Local government units may impose taxes on top

of what is already being imposed by the National Internal Revenue Code which is the so-called

"common carriers tax." We do not want a duplication of this tax, so we just provided for an

exception under Section 125 [now Sec. 137] that a province may impose this tax at a specific

rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x18

It is clear that the legislative intent in excluding from the taxing power of the local

government unit the imposition of business tax against common carriers is to prevent a

duplication of the so-called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross

sales/earnings under the National Internal Revenue Code.19 To tax petitioner again on its gross

receipts in its transportation of petroleum business would defeat the purpose of the Local

Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court

of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET

ASIDE.

SO ORDERED.

Bellosillo, (Chairman), Puno, and Mendoza, JJ., concur.

18

Journal and Record of the House of Representatives, Fourth Regular Session, Volume 2, pp. 87-89, September 6,

1990; Underscoring Ours.

19 Annex "D" of Petition, Rollo, pp. 101-109.

Republic of the Philippines SUPREME 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 casual occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

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

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

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

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

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

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

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

... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the

transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. ... (Emphasis supplied)

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

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

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

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a

very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

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

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

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the

foregoing list, even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:

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

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

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

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

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

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

xxx xxx xxx

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

(6) that the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; and

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

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility — even for acts of strangers like thieves or robbers, except

where such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) 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 Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-9605 September 30, 1957

GAUDIOSO EREZO, ET AL., plaintiff-appellee, vs. AGUEDO JEPTE, defendant-appellant.

Gesolgon, Matti and Custodio for appellees. Aguedo Y. Jepte in his own behalf.

LABRADOR, J.:

Appeal from a judgment of the Court of First Instance of Manila ordering defendant to pay plaintiff Gaudioso Erezo P3,000 on the death of Ernesto Erezo, son of plaintiff Gaudioso Erezo.

Defendant-appellant is the registered owner of a six by six truck bearing plate No. TC-1253. On August, 9, 1949, while the same was being driven by Rodolfo Espino y Garcia, it collided with a taxicab at the intersection of San Andres and Dakota Streets, Manila. As the truck went off the street, it hit Ernesto Erezo and another, and the former suffered injuries, as a result of which he died. The driver was prosecuted for homicide through reckless negligence in criminal case No. 10663 of the Court of First Instance of Manila. The accused pleaded guilty and was sentenced to suffer imprisonment and to pay the heirs of Ernesto Erezo the sum of P3,000. As the amount of the judgment could not be enforced against him, plaintiff brought this action against the registered owner of the truck, the defendant-appellant. The circumstances material to the case are stated by the court in its decision.

The defendant does not deny at the time of the fatal accident the cargo truck driven by Rodolfo Espino y Garcia was registered in his name. He, however, claims that the vehicle belonged to the Port Brokerage, of which he was the broker at the time of the accident. He explained, and his explanation was corroborated by Policarpio Franco, the manager of the corporation, that the trucks of the corporation were registered in his name as a convenient arrangement so as to enable the corporation to pay the registration fee with his backpay as a pre-war government employee. Franco, however, admitted that the arrangement was not known to the Motor Vehicle Office.

The trial court held that as the defendant-appellant represented himself to be the owner of the truck and the Motor Vehicle Office, relying on his representation, registered the vehicles in his name, the Government and all persons affected by the representation had the right to rely on his declaration of ownership and registration. It, therefore, held that the defendant-appellant is liable because he cannot be permitted to repudiate his own declaration. (Section 68 [a], Rule 123, and Art. 1431, New Civil Code.).

Against the judgment, the defendant has prosecuted this appeal claiming that at the time of the accident the relation of employer and employee between the driver and defendant-appellant was not established, it having been proved at the trial that the owner of the truck was the Port Brokerage, of which defendant-appellant was merely a broker. We find no merit or justice in the above contention. In previous decisions, We already have held that the registered owner of a certificate of public

convenience is liable to the public for the injuries or damages suffered by passengers or third persons caused by the operation of said vehicle, even though the same had been transferred to a third person. (Montoya vs. Ignacio, 94 Phil., 182, 50 Off. Gaz., 108; Roque vs. Malibay Transit Inc.,1 G. R. No. L- 8561, November 18,1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.)The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who the actual owner is. How would the public or third persons know against whom to enforce their rights in case of subsequent transfers of the vehicles? We do not imply by this doctrine, however, that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle.

Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. The members of the Court are in agreement that the defendant-appellant should be held liable to plaintiff-appellee for the injuries occasioned to the latter because of the negligence of the driver even if the defendant-appellant was no longer the owner of the vehicle at the time of the damage because he had previously sold it to another. What is the legal basis for his (defendant-appellant's) liability?.

There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered owner in the Motor Vehicle Office. Should he not be allowed to prove the truth, that he had sold it to another and thus shift the responsibility for the injury to the real and actual owner? The defendant holds the affirmative of this proposition; the trial court held the negative.

The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon any public highway unless the same is properly registered. It has been stated that the system of licensing and the requirement that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury to pedestrians and other travelers from the careless management of automobiles, and to furnish a means of ascertaining the identity of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways (2 R. C. L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered for the current year, but that dealers in motor vehicles shall furnish the Motor Vehicles Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer's serial number and motor number. (Section 5 [c], Act. No. 3992, as amended.).

Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, as amended).The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicles on the public highways, responsibility therefore can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall those circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries caused on public highways.

One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and another is that the knowledge that means of detection are always available may act as a deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of means to discover him." The purpose of the statute is thwarted, and the displayed number becomes a "snare and delusion," if courts will entertain such defenses as that put forward by appellee in this case. No responsible person or corporation could be held liable for the most outrageous acts of negligence, if they should be allowed to place a "middleman" between them and the public, and escape liability by the manner in which they recompense their servants. (King vs. Brenham Automobile Co., 145 S. W. 278,279.)

With the above policy in mind, the question that defendant-appellant poses is: should not be registered owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with the trial court that the laws does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should be allowed to prove the contrary to the prejudice of the person injured that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured person.1âwphïl.nêt

The above policy and application of the law may appear quite harsh and would seem to conflict with truth and justice. We do not think it is so. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to comply with the registration that the law demands and requires.

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.1âwphïl .nêt

Bengzon, Paras, C.J., Bautista Angelo, Concepcion, Reyes, J. B. L., and Felix, JJ., concur. Montemayor, J., concurs in the result.

Footnotes

1 97 Phil., 1004.

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 82318 May 18, 1989

GILBERTO M. DUAVIT, petitioner, vs. THE HON. COURT OF APPEALS, Acting through the Third Division, as Public Respondent, and ANTONIO SARMIENTO, SR. & VIRGILIO CATUAR respondents.

Rodolfo d. Dela Cruz for petitioner.

Bito, Lozada, Ortega & Castillo for respondents.

GUTIERREZ, JR., J.:

This petition raises the sole issue of whether or not the owner of a private vehicle which figured in an accident can be held liable under Article 2180 of the Civil Code when the said vehicle was neither driven by an employee of the owner nor taken with the consent of the latter.

The facts are summarized in the contested decision, as follows:

From the evidence adduced by the plaintiffs, consisting of the testimonies of witnesses Virgilio Catuar, Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and Norberto Bernarte it appears that on July 28, 1971 plaintiffs Antonio Sarmiento, Sr. and Virgilio Catuar were aboard a jeep with plate number 77-99-F-I Manila, 1971, owned by plaintiff, Ruperto Catuar was driving the said jeep on Ortigas Avenue, San Juan, Rizal; that plaintiff's jeep, at the time, was running moderately at 20 to 35 kilometers per hour and while approaching Roosevelt Avenue, Virgilio Catuar slowed down; that suddenly, another jeep with plate number 99-97-F-J Manila 1971 driven by defendant Oscar Sabiniano hit and bumped plaintiff's jeep on the portion near the left rear wheel, and as a result of the impact plaintiff's jeep fell on its right and skidded by about 30 yards; that as a result plaintiffs jeep was damaged, particularly the windshield, the differential, the part near the left rear wheel and the top cover of the jeep; that plaintiff Virgilio Catuar was thrown to the middle of the road; his wrist was broken and he sustained contusions on the head; that likewise plaintiff Antonio Sarmiento, Sr. was trapped inside the fallen jeep, and one of his legs was fractured.

Evidence also shows that the plaintiff Virgilio Catuar spent a total of P2,464.00 for repairs of the jeep, as shown by the receipts of payment of labor and spare parts (Exhs. H to H-7 Plaintiffs likewise tried to prove that plaintiff Virgilio Catuar, immediately after the accident was taken to Immaculate Concepcion Hospital, and then was transferred to the National Orthopedic Hospital; that while plaintiff Catuar was not confined in the hospital, his wrist was in a plaster cast for a period of one month, and the contusions on his head were under treatment for about two (2)

weeks; that for hospitalization, medicine and allied expenses, plaintiff Catuar spent P5,000.00.

Evidence also shows that as a result of the incident, plaintiff Antonio Sarmiento, Sr. sustained injuries on his leg; that at first, he was taken to the National Orthopedic Hospital (Exh. K but later he was confined at the Makati Medical Center from July 29, to August 29, 1971 and then from September 15 to 25, 1971; that his leg was in a plaster cast for a period of eight (8) months; and that for hospitalization and medical attendance, plaintiff Antonio Sarmiento, Sr. spent no less than P13,785.25 as evidenced by receipts in his possession. (Exhs. N to N-1).

Proofs were adduced also to show that plaintiff Antonio sarmiento Sr. is employed as Assistant Accountant of the Canlubang Sugar Estate with a salary of P1,200.00 a month; that as sideline he also works as accountant of United Haulers Inc. with a salary of P500.00 a month; and that as a result of this incident, plaintiff Sarmiento was unable to perform his normal work for a period of at least 8 months. On the other hand, evidence shows that the other plaintiff Virgilio Catuar is a Chief Clerk in Canlubang Sugar Estate with a salary of P500.00 a month, and as a result of the incident, he was incapacitated to work for a period of one (1) month.

The plaintiffs have filed this case both against Oscar Sabiniano as driver, and against Gualberto Duavit as owner of the jeep.

Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate No. 99-07-F-J Manila, 1971), denied that the other defendant (Oscar Sabiniano) was his employee. Duavit claimed that he has not been an employer of defendant Oscar Sabiniano at any time up to the present.

On the other hand documentary and testimonial evidence show that defendant Oscar Sabiniano was an employee of the Board of Liquidators from November 14, 1966 up to January 4, 1973 (Annex A of Answer).

Defendant Sabiniano, in his testimony, categorically admitted that he took the jeep from the garage of defendant Duavit without the consent or authority of the latter (TSN, September 7, 1978, p. 8). He testified further, that Duavit even filed charges against him for theft of the jeep, but which Duavit did not push through as his (Sabiniano's) parents apologized to Duavit on his behalf.

Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself from liability, makes it appear that he was taking all necessary precaution while driving and the accident occurred due to the negligence of Virgilio Catuar. Sabiniano claims that it was plaintiffs vehicle which hit and bumped their jeep. (Reno, pp. 21-23)

The trial court found Oscar Sabiniano negligent in driving the vehicle but found no employer-employee relationship between him and the petitioner because the latter was then a government employee and he took the vehicle without the authority and consent of the owner. The petitioner was, thus, absolved from liability under Article 2180 of the Civil Code.

The private respondents appealed the case.

On January 7, 1988, the Court of Appeals rendered the questioned decision holding the petitioner jointly and severally liable with Sabiniano. The appellate court in part ruled:

We cannot go along with appellee's argument. It will be seen that in Vargas v. Langcay, supra, it was held that it is immaterial whether or not the driver was actually employed by the operator of record or registered owner, and it is even not necessary to prove who the actual owner of the vehicle and who the employer of the driver is. When the Supreme Court ruled, thus: 'We must hold and consider such owner-operator of record (registered owner) as the employer in contemplation of law, of the driver,' it cannot be construed other than that the registered owner is the employer of the driver in contemplation of law. It is a conclusive presumption of fact and law, and is not subject to rebuttal of proof to the contrary. Otherwise, as stated in the decision, we quote:

The purpose of the principles evolved by the decisions in these matters will be defeated and thwarted if we entertain the argument of petitioner that she is not liable because the actual owner and employer was established by the evidence. . . .

Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to prove that the driver Sabiniano was not his employee at the time of the vehicular accident.

The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to the effect that the burden of proving the non-existence of an employer-employee relationship is upon the defendant and this he must do by a satisfactory preponderance of evidence, has to defer to the doctrines evolved by the Supreme Court in cases of damages arising from vehicular mishaps involving registered motor vehicle. (See Tugade v. Court of Appeals, 85 SCRA 226, 230). (Rollo, pp. 26-27)

The appellate court also denied the petitioner's motion for reconsideration. Hence, this petition.

The petitioner contends that the respondent appellate court committed grave abuse of discretion in holding him jointly and severally liable with Sabiniano in spite of the absence of an employer-employee relationship between them and despite the fact that the petitioner's jeep was taken out of his garage and was driven by Sabiniano without his consent.

As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for an accident involving the said vehicle if the same was driven without his consent or knowledge and by a person not employed by him. Thus, in Duquillo v. Bayot (67 Phil. 131-133-134) [1939] we said:

Under the facts established, the defendant cannot be held liable for anything. At the time of the accident, James McGurk was driving the truck, and he was not an employee of the defendant, nor did he have anything to do with the latter's business; neither the defendant nor Father Ayson, who was in charge of her business, consented to have any of her trucks driven on the day of the accident, as it was a holy day, and much less by a chauffeur who was not in charge of driving it; the use of the defendant's truck in the circumstances indicated was done without her consent or knowledge; it may, therefore, be said, that there was not the remotest contractual relation between the deceased Pio Duquillo and the defendant. It necessarily follows from all this that articles 1101 and following of the Civil Code, cited by the appellant, have no application in this case, and, therefore, the errors attributed to the inferior court are without basis.

The Court upholds the above ruling as still relevant and better applicable to present day circumstances.

The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103 [1957] and Vargas v. Langcay (6 SCRA 174 [1962]) cannot be sustained. In the Erezo case, Jepte, the registered owner of the truck which collided with a taxicab, and which resulted in the killing of Erezo, claimed that at the time of the accident, the truck belonged to the Port Brokerage in an arrangement with the corporation but the same was not known to the Motor Vehicles Office. This Court sustained the trial court's ruling that since Jepte represented himself to be the owner of the truck and the Motor Vehicles Office, relying on his representation, registered the vehicle in his name, the Government and all persons affected by the representation had the right to rely on his declaration of ownership and registration. Thus, even if Jepte were not the owner of the truck at the time of the accident, he was still held liable for the death of Erezo significantly, the driver of the truck was fully authorized to drive it.

Likewise, in the Vargas case, just before the accident occurred Vargas had sold her jeepney to a third person, so that at the time of the accident she was no longer the owner of the jeepney. This court, nevertheless, affirmed Vargas' liability since she failed to surrender to the Motor Vehicles Office the corresponding AC plates in violation of the Revised Motor Vehicle Law and Commonwealth Act No. 146. We further ruled that the operator of record continues to be the operator of the vehicle in contemplation of law, as regards the public and third persons, and as such is responsible for the consequences incident to its operator. The vehicle involved was a public utility jeepney for hire. In such cases, the law does not only require the surrender of the AC plates but orders the vendor operator to stop the operation of the jeepney as a form of public transportation until the matter is reported to the authorities.

As can be seen, the circumstances of the above cases are entirely different from those in the present case. Herein petitioner does not deny ownership of the vehicle involved in tire mishap but completely denies having employed the driver Sabiniano or even having authorized the latter to drive his jeep. The jeep was virtually stolen from the petitioner's garage. To hold, therefore, the petitioner liable for the accident caused by the negligence of Sabiniano who was neither his driver nor employee would be absurd as it would be like holding liable the owner of a stolen vehicle for an accident caused by the person who stole such vehicle. In this regard, we cannot ignore the many cases of vehicles forcibly taken from their owners at gunpoint or stolen from garages and parking areas and the instances of service station attendants or mechanics of auto repair shops using, without the owner's consent, vehicles entrusted to them for servicing or repair.

We cannot blindly apply absolute rules based on precedents whose facts do not jibe four square with pending cases. Every case must be determined on its own peculiar factual circumstances. Where, as in this case, the records of the petition fail to indicate the slightest indicia of an employer-employee relationship between the owner and the erring driver or any consent given by the owner for the vehicle's use, we cannot hold the owner liable.

We, therefore, find that the respondent appellate court committed reversible error in holding the petitioner jointly and severally liable with Sabiniano to the private respondent.

WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are hereby ANNULLED and SET ASIDE. The decision of the then Court of First Instance (now Regional Trial Court) of Laguna, 8th Judicial District, Branch 6, dated July 30, 1981 is REINSTATED.

SO ORDERED. Fernan, C.J., (Chairman), Feliciano, Bidin and Cortes JJ., concur.

G.R. No. 98275 November 13, 1992

BA FINANCE CORPORATION, petitioner, vs. HON. COURT OF APPEALS, REGIONAL TRIAL COURT OF ANGELES CITY, BRANCH LVI, CARLOS OCAMPO, INOCENCIO TURLA, SPOUSES MOISES AGAPITO and SOCORRO M. AGAPITO and NICOLAS CRUZ, respondents.

MELO, J.:

The question of petitioner's responsibility for damages when on March 6, 1983, an accident occurred involving petitioner's Isuzu ten-wheeler truck then driven by an employee of Lino Castro is the thrust of the petition for review on certiorari now before Us considering that neither the driver nor Lino Castro appears to be connected with petitioner.

On October 13, 1988, the disputed decision in the suit below was rendered by the court of origin in this manner:

1. Ordering Rock B.A. and Rogelio Villar y Amare jointly and severally to pay the plaintiffs as follows:

a) To the plaintiff Carlos Ocampo — P121,650.00;

b) To the plaintiff Moises Ocampo — P298,500.00

c) To the plaintiff Nicolas Cruz — P154,740.00

d) To the plaintiff Inocencio Turla, Sr. — 48,000.00

2. Dismissing the case against Lino Castro

3. Dismissing the third-party complaint against STRONGHOLD

4. Dismissing all the counterclaim of the defendants and third-party defendants.

5. Ordering ROCK to reimburse B.A. the total amount of P622,890.00 which the latter is adjudged to pay to the plaintiffs. (p. 46, Rollo)

Respondent Court of Appeals affirmed the appealed disposition in toto through Justice Rasul, with Justices De Pano, Jr. and Imperial concurring, on practically the same grounds arrived at by the court a quo (p. 28, Rollo). Efforts exerted towards re-evaluation of the adverse were futile (p. 37, Rollo). Hence, the instant petition.

The lower court ascertained after due trial that Rogelio Villar y Amare, the driver of the Isuzu truck, was at fault when the mishap occurred in as much as he was found guilty beyond reasonable doubt of reckless imprudence resulting in triple homicide with multiple physical injuries with damage to property in a decision rendered on February 16, 1984 by the Presiding Judge of Branch 6 of the Regional Trial Court stationed at Malolos, Bulacan. Petitioner was adjudged liable for damages in as much as the truck was registered in its name during the incident in question, following the doctrine

laid down by this Court in Perez vs. Gutierrez (53 SCRA 149 [1973]) and Erezo, et al. vs. Jepte (102 Phil. 103 [1957]). In the same breadth, Rock Component Philippines, Inc. was ordered to reimburse petitioner for any amount that the latter may be adjudged liable to pay herein private respondents as expressly stipulated in the contract of lease between petitioner and Rock Component Philippines, Inc. Moreover, the trial court applied Article 2194 of the new Civil Code on solidary accountability of join tortfeasors insofar as the liability of the driver, herein petitioner and Rock Component Philippines was concerned (pp. 6-7, Decision; pp. 44-45, Rollo).

To the question of whether petitioner can be held responsible to the victim albeit the truck was leased to Rock Component Philippines when the incident occurred, the appellate court answered in the affirmative on the basis of the jurisprudential dogmas which, as aforesaid, were relied upon by the trial court although respondent court was quick to add the caveat embodied in the lease covenant between petitioner and Rock Component Philippines relative to the latter's duty to reimburse any amount which may be adjudged against petitioner (pp. 32-33, Rollo).

Petitioner asseverates that it should not have been haled to court and ordered to respond for the damage in the manner arrived at by both the trial and appellate courts since paragraph 5 of the complaint lodged by the plaintiffs below would indicate that petitioner was not the employer of the negligent driver who was under the control an supervision of Lino Castro at the time of the accident, apart from the fact that the Isuzu truck was in the physical possession of Rock Component Philippines by virtue of the lease agreement.

Aside from casting clouds of doubt on the propriety of invoking the Perez and Erezo doctrines, petitioner continue to persist with the idea that the pronouncements of this Court in Duavit vs. Court of Appeals (173 SCRA 490 [1989]) and Duquillo vs. Bayot (67 Phil 131 [1939]) dovetail with the factual and legal scenario of the case at hand. Furthermore, petitioner assumes, given the so-called hiatus on the basis for the award of damages as decreed by the lower and appellate courts, that Article 2180 of the new Civil Code on vicarious liability will divest petitioner of any responsibility absent as there is any employer-employee relationship between petitioner and the driver.

Contrary to petitioner's expectations, the recourse instituted from the rebuffs it encountered may not constitute a sufficient foundation for reversal of the impugned judgment of respondent court. Petitioner is of the impression that the Perez and Erezo cases are inapplicable due to the variance of the generative facts in said cases as against those obtaining in the controversy at bar. A contrario, the lesson imparted by Justice Labrador in Erezo is still good law, thus:

. . . In previous decisions, We already have held that the registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by passengers or third persons caused by the operation of said vehicle, even though the same had been transferred to a third person. (Montoya vs. Ignacio, 94 Phil., 182 50 Off. Gaz., 108; Roque vs. Malibay Transit, Inc., G.R. No. L-8561, November 18, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.) The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presumed that the registered owner is the actual owner thereof, for it would be difficult with the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who actual the owner is. How would the public or third persons know against whom to enforce their rights in case of subsequent transfer of the vehicles? We do not imply by this doctrine, however, that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle.

Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily responsible to the public or to the third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. The members of the Court are in agreement that the defendant-appellant should be held liable to plaintiff-appellee for the injuries occasioned to the latter because of the negligence of the driver, even if the defendant-appellant was no longer an owner of the vehicle at the time of the damage because he had previously sold it to another. What is the legal basis for his (defendants-appellant's) liability?

There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered owner in the Motor Vehicle Office. Should he not be allowed to prove the truth, that he had sold it to another and thus shift the responsibility for the injury to the real and the actual owner? The defendants hold the affirmative of this proposition; the trial court hold the negative.

The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that the vehicle may be used or operated upon any public highway unless the same is properly registered. It has been stated that the system of licensing and the requirement that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury of pedestrians and other travelers from the careless management of automobiles, and to furnish a means of ascertaining the identity of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways (2 R. C. L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered from the current year, furnish the Motor Vehicle Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer's serial number and motor number. (Section 5[c], Act No. 3992, as amended.)

Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway (section 5[a], Act No. 3992, as amended). the main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily obtained, in the interest of the determinations of persons responsible for damages or injuries caused on public highways.

One of the principle purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and another is that the knowledge that means of detection are always available my act as a deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of means to discover

him. The purpose of the statute is thwarted, and the displayed number becomes a "share and delusion," if courts would entertain such defenses as that put forward by appellee in this case. No responsible person or corporation could be held liable for the most outrageous acts of negligence, if they should be allowed to pace a "middleman" between them and the public, and escape liability by the manner in which they recompense their servants. (King vs. Breham Automobile Co., Inc. 145 S. W. 278, 279.)

With the above policy in mind, the question that defendant-appellant poses is: should not the registered owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without means to discover or Identify the person actually causing the injury or damage. He has no means other then by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured person.

The above policy and application of the law may appear quite harsh and would seem to conflict with truth and justice. We do not think it is so. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to comply with the registration that the law demands and requires.

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.

If the foregoing words of wisdom were applied in solving the circumstance whereof the vehicle had been alienated or sold to another, there certainly can be no serious exception against utilizing the same rationale to the antecedents of this case where the subject vehicle was merely leased by petitioner to Rock Component Philippines, Inc., with petitioner retaining ownership over the vehicle.

Petitioner's reliance on the ruling of this Court in Duavit vs. Court of Appeals and in Duquillo vs. Bayot (supra) is legally unpalatable for the purpose of the present discourse. The vehicles adverted to in the two cases shared a common thread, so to speak, in that the jeep and the truck were driven

in reckless fashion without the consent or knowledge of the respective owners. Cognizant of the inculpatory testimony spewed by defendant Sabiniano when he admitted that he took the jeep from the garage of defendant Dauvit without the consent or authority of the latter, Justice Gutierrez, Jr. in Duavit remarked;

. . . Herein petitioner does not deny ownership of the vehicle involved in the mishap but completely denies having employed the driver Sabiniano or even having authorized the latter to drive his jeep. The jeep was virtually stolen from the petitioner's garage. To hold, therefore, the petitioner liable for the accident caused by the negligence of Sabiniano who was neither his driver nor employee would be absurd as it would be like holding liable the owner of a stolen vehicle for an accident caused by the person who stole such vehicle. In this regard, we cannot ignore the many cases of vehicles forcibly taken from their owners at gunpoint or stolen from garages and parking areas and the instances of service station attendants or mechanics of auto repair shops using, without the owner's consent, vehicles entrusted to them for servicing or repair.(at p. 496.)

In the Duquillo case, the defendant therein cannot, according to Justice Diaz, be held liable for anything because of circumstances which indicated that the truck was driven without the consent or knowledge of the owner thereof.

Consequently, there is no need for Us to discuss the matter of imputed negligence because petitioner merely presumed, erroneously, however, that judgment was rendered against it on the basis of such doctrine embodied under Article 2180 of the new Civil Code.

WHEREFORE, the petition is hereby DISMISSED and decision under review AFFIRMED without special pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr., Romero and Melo, JJ. concur.

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-30115 September 28, 1973

FE PEREZ, plaintiff-appellant, vs. JOSEFINA GUTIERREZ, defendant third-party plaintiff-appellee, PANFILO ALAJAR, third-party defendant-appellee.

Julian C. Gonzales, Jr. for plaintiff-appellant.

Gerardo E. Angeles for defendant-third-party plaintiff-appellee.

Apostadera, Palabrica and Muyco for third-party defendant-appellee.

CASTRO, J.:

This appeal from the decision dated June 9, 1967 of the Court of First Instance of Davao in its civil case 3163 poses objections to the manner the trial court adjudicated the claim for damages filed by the plaintiff-appellant Fe Perez against the defendant-third-party plaintiff-appellee Josefina Gutierrez.

The complaint (later amended) filed on October 29, 1959 by Fe Perez with the Court of First Instance of Davao against Josefina Gutierrez, for breach of contract of carriage, alleges that on September 6, 1959 while she, together with nine co-teachers, was a passenger of an AC jeepney registered under the name of the defendant Gutierrez, the said vehicle, due to the reckless negligence of its driver Leopoldo Cordero, met with an accident, resulting in injuries to herself which required her hospitalization. In her answer, Josefina Gutierrez averred that if the claim of Fe Perez is at all justified, responsibility therefor should devolve on one Panfilo Alajar, the actual owner, by purchase, of the said passenger jeepney when the accident occurred and against whom she has filed a third-party complaint.

The deed of sale attached to the third-party complaint recites, inter alia,

That it is mutually agreed by the herein vendor and vendee that the TITLE to the aforementioned vehicle shall remain with the VENDOR, pending approval of the herein SALE by the Public Service Commission, said motor vehicle being registered as a public utility auto-calesa under "AC" denomination; ...

That the vendee herein, by these presents, do [sic] hereby binds himself and do [sic] hereby assume, [sic] responsibility for all actions, claims, demands, and rights of action, and whatever kind and nature, that may hereafter develop as a consequence of or in the course of operation of the aforementioned vehicle; ...

In his answer to the third-party complaint, Panfilo Alajar disclaimed responsibility for the accident, alleging that (a) the mentioned deed of sale is null and void because it has not been registered with the Public Service Commission despite repeated demands on the 3rd-party complainant to do so; (b) the said passenger jeepney remained in the control of the 3rd-party complainant who, together with her lawyer-husband, had been collecting rentals from him for the use of the said vehicle; and (c) by express agreement, title to the said vehicle remained with the 3rd-party complainant pending approval of the sale by the Public Service Commission.

The defendant Leopoldo Cordero was declared in default and did not appeal.

On June 9, 1967, after trial on the merits, the court a quo rendered its decision, in the main finding Leopoldo Cordero guilty of reckless imprudence, and finding that Panfilo Alajar owned and operated the auto calesa in question and, in fact, after the accident, even assumed responsibility for the payment of the hospital bills due to the Brokenshire Memorial Hospital for treatment of the injuries suffered by Fe Perez. Based on these findings as well as the proof of the damages suffered by Fe Perez, the court adjudged as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering third-party defendant Panfilo Alajar to pay plaintiff the amount of P1,552.20 hospital expenses; P2,000.00, actual damages; P5,000.00 moral damages; P500.00 incidental expenses; and P2,000.00 attorney's fees.

Ordering likewise Panfilo Alajar to pay defendant third-party plaintiff Josefina Gutierrez P500.00 moral damages; and P1,000.00 attorney's fees, and to pay the costs of the proceedings on both cases.

The present appeal questions the correctness of the dispositive portion of the decision a quo which adjudged Panfilo Alajar, instead of Josefina Gutierrez, as the party liable to her for the payment of the damages adjudicated in her favor. Specifically, Fe Perez argues that the registered owner of a motor vehicle should be the one held liable for damages resulting from breach of contract of carriage by a common carrier.

We find the appeal meritorious and in accord with settled law on the matter.

In Peralta vs. Mangusang 1 this Court, in approbation of a similar argument, said:

The law (Sec. 20 [g], Public Service Act) really requires the approval of the Public Service Commission in order that a franchise, or any privileges pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee. The reason is obvious. Since a franchise is personal in nature any transfer or lease thereof should be submitted for approval of the Public Service Commission, so that the latter may take proper safeguards to protect the interest of the public. It follows that if the property covered by the franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not binding on the Public Service Commission and, in contemplation of law, the grantee continues to be responsible under the franchise in relation to the Commission and to the public for the consequences incident to the operation of the vehicle, one of them being the collision under consideration. (Montoya v. Ignacio, 50 O.G. No. 1. 108; Vda. de Medina, et al. v. Cresencia, et al., 52 O.G. No. 10, 4604; Erezo v. Jepte, et al., G.R. No. L-9605, Sept. 30, 1957; Tamayo v. Aquino, 56 O.G. No. 36,5617).

In the earlier case of Erezo vs. Jepte, 2 which is cited in the foregoing opinion, this Court held that the

doctrine making the registered owner of a common carrier answerable to the public for negligence injuries to its passengers or third persons, even though the vehicle had already been transferred to another, is based upon the principle —

... that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who the actual owner is. How would the public or third persons know against whom to enforce their rights in case of subsequent transfers of the vehicles? We do not imply by this doctrine, however, that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle.

In Tamayo vs. Aquino, 3 also cited in Mangusang, supra, this Court, reiterating what was stated en passant in Jepte, supra, described the nature of the liability of the actual transferee of a vehicle the negligent operation of which gives rise to injuries to its passengers:

The question that is posed, therefore, is how should the holder of the certificate of public convenience Tamayo participate with his transferee operator Rayos, in the damages recoverable by the heirs of the deceased passenger, if their liability is not that of joint tortfeasors in accordance with Article 2194 of the Civil Code. The following considerations must be borne in mind in determining this question. As Tamayo is the registered owner of the truck, his responsibility to the public or to any passenger riding in the vehicle or truck must be direct, for the reasons given in our decision in the case of Erezo vs. Jepte, supra, as quoted above. But as the transferee, who operated the vehicle when the passenger died, is the one directly responsible for the accident and death, he should in turn be made responsible to the registered owner for what the latter may have been adjudged to pay. In operating the truck without transfer thereof having been approved by the Public Service Commission, the transferee acted merely as agent of the registered owner and should be responsible to him (the registered owner), for any damages that he may cause the latter by his negligence."

Upon the foregoing, it is quite clear that the court below erred in holding Panfilo Alajar, rather than Josefina Gutierrez, as the one directly liable to Fe Perez for the latter's injuries and the corresponding damages incurred. This Court notes moreover, that the court below inexplicably failed to hold the driver (Leopoldo Cordero), whom it found guilty of reckless imprudence, jointly and solidarily liable with Josefina Gutierrez to Fe Perez in accordance with the provisions of article 2184 in relation to article 2180 of the new Civil Code. 4

ACCORDINGLY, the judgment below is hereby modified in the sense that Josefina Gutierrez and Leopoldo Cordero are hereby adjudged directly and jointly and solidarily liable to Fe Perez for the sums adjudicated in the judgment below in her (Fe Perez') favor, while Panfilo Alajar is, in turn, hereby held answerable to Josefina Gutierrez for such amount as the latter may pay to Fe Perez in satisfaction of the judgment appealed from. Costs against both the defendant-third party plaintiff-appellee Josefina Gutierrez and the third party defendant-appellee Panfilo Alajar.

Makalintal, Actg.. C.J., Zaldivar, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

Footnotes

1 L-18110, July 31, 1964, 11 SCRA 598.

2 102 Phil. 106. (See also Roque vs. Malibay Transit, Inc. 97 Phil. 1004).

3 105 Phil. 949.

4 Viluan vs. Court of Appeals, L-21477-81, April 29, 1966.

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 125817 January 16, 2002

ABELARDO LIM and ESMADITO GUNNABAN, petitioners, vs. COURT OF APPEALS and DONATO H. GONZALES, respondents.

BELLOSILLO, J.:

When a passenger jeepney covered by a certificate of public convenience is sold to another who continues to operate it under the same certificate of public convenience under the so-called kabit system, and in the course thereof the vehicle meets an accident through the fault of another vehicle, may the new owner sue for damages against the erring vehicle? Otherwise stated, does the new owner have any legal personality to bring the action, or is he the real party in interest in the suit, despite the fact that he is not the registered owner under the certificate of public convenience?

Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney from Gomercino Vallarta, holder of a certificate of public convenience for the operation of public utility vehicles plying the Monumento-Bulacan route. While private respondent Gonzales continued offering the jeepney for public transport services he did not have the registration of the vehicle transferred in his name nor did he secure for himself a certificate of public convenience for its operation. Thus Vallarta remained on record as its registered owner and operator.1âw phi1.nêt

On 22 July 1990, while the jeepney was running northbound along the North Diversion Road somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler-truck owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadito Gunnaban. Gunnaban owned responsibility for the accident, explaining that while he was traveling towards Manila the truck suddenly lost its brakes. To avoid colliding with another vehicle, he swerved to the left until he reached the center island. However, as the center island eventually came to an end, he veered farther to the left until he smashed into a Ferroza automobile, and later, into private respondent's passenger jeepney driven by one Virgilio Gonzales. The impact caused severe damage to both the Ferroza and the passenger jeepney and left one (1) passenger dead and many others wounded.

Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of the deceased passenger, and had the Ferroza restored to good condition. He also negotiated with private respondent and offered to have the passenger jeepney repaired at his shop. Private respondent however did not accept the offer so Lim offered him P20,000.00, the assessment of the damage as estimated by his chief mechanic. Again, petitioner Lim's proposition was rejected; instead, private respondent demanded a brand-new jeep or the amount of P236,000.00. Lim increased his bid to P40,000.00 but private respondent was unyielding. Under the circumstances, negotiations had to be abandoned; hence, the filing of the complaint for damages by private respondent against petitioners.

In his answer Lim denied liability by contending that he exercised due diligence in the selection and supervision of his employees. He further asserted that as the jeepney was registered in Vallarta’s name, it was Vallarta and not private respondent who was the real party in interest.1 For his part, petitioner Gunnaban averred that the accident was a fortuitous event which was beyond his control.2

Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and decay. Private respondent explained that although he wanted to take his jeepney home he had no capability, financial or otherwise, to tow the damaged vehicle.3

The main point of contention between the parties related to the amount of damages due private respondent. Private respondent Gonzales averred that per estimate made by an automobile repair shop he would have to spend P236,000.00 to restore his jeepney to its original condition.4 On the other hand, petitioners insisted that they could have the vehicle repaired for P20,000.00.5

On 1 October 1993 the trial court upheld private respondent's claim and awarded him P236,000.00 with legal interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney's fees. In support of its decision, the trial court ratiocinated that as vendee and current owner of the passenger jeepney private respondent stood for all intents and purposes as the real party in interest. Even Vallarta himself supported private respondent's assertion of interest over the jeepney for, when he was called to testify, he dispossessed himself of any claim or pretension on the property. Gunnaban was found by the trial court to have caused the accident since he panicked in the face of an emergency which was rather palpable from his act of directing his vehicle to a perilous streak down the fast lane of the superhighway then across the island and ultimately to the opposite lane where it collided with the jeepney.

On the other hand, petitioner Lim's liability for Gunnaban's negligence was premised on his want of diligence in supervising his employees. It was admitted during trial that Gunnaban doubled as mechanic of the ill-fated truck despite the fact that he was neither tutored nor trained to handle such task.6

Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the decision of the trial court. In upholding the decision of the court a quo the appeals court concluded that while an operator under the kabit system could not sue without joining the registered owner of the vehicle as his principal, equity demanded that the present case be made an exception.7 Hence this petition.

It is petitioners' contention that the Court of Appeals erred in sustaining the decision of the trial court despite their opposition to the well-established doctrine that an operator of a vehicle continues to be its operator as long as he remains the operator of record. According to petitioners, to recognize an operator under the kabit system as the real party in interest and to countenance his claim for damages is utterly subversive of public policy. Petitioners further contend that inasmuch as the passenger jeepney was purchased by private respondent for only P30,000.00, an award of P236,000.00 is inconceivably large and would amount to unjust enrichment.8

Petitioners' attempt to illustrate that an affirmance of the appealed decision could be supportive of the pernicious kabit system does not persuade. Their labored efforts to demonstrate how the questioned rulings of the courts a quo are diametrically opposed to the policy of the law requiring operators of public utility vehicles to secure a certificate of public convenience for their operation is quite unavailing.

The kabit system is an arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings.9 Although the parties to such an agreement are not outrightly penalized by law, the kabit system is invariably recognized as being contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code.

In awarding damages for tortuous injury, it becomes the sole design of the courts to provide for adequate compensation by putting the plaintiff in the same financial position he was in prior to the tort. It is a fundamental principle in the law on damages that a defendant cannot be held liable in damages for more than the actual loss which he has inflicted and that a plaintiff is entitled to no more than the just and adequate compensation for the injury suffered. His recovery is, in the absence of circumstances giving rise to an allowance of punitive damages, limited to a fair compensation for the harm done. The law will not put him in a position better than where he should be in had not the wrong happened.12

In the present case, petitioners insist that as the passenger jeepney was purchased in 1982 for only P30,000.00 to award damages considerably greater than this amount would be improper and unjustified. Petitioners are at best reminded that indemnification for damages comprehends not only the value of the loss suffered but also that of the profits which the obligee failed to obtain. In other words, indemnification for damages is not limited to damnum emergens or actual loss but extends to lucrum cessans or the amount of profit lost.13

Had private respondent's jeepney not met an accident it could reasonably be expected that it would have continued earning from the business in which it was engaged. Private respondent avers that he derives an average income of P300.00 per day from his passenger jeepney and this earning was included in the award of damages made by the trial court and upheld by the appeals court. The award therefore of P236,000.00 as compensatory damages is not beyond reason nor speculative as it is based on a reasonable estimate of the total damage suffered by private respondent, i.e. damage wrought upon his jeepney and the income lost from his transportation business. Petitioners for their part did not offer any substantive evidence to refute the estimate made by the courts a quo.

However, we are constrained to depart from the conclusion of the lower courts that upon the award of compensatory damages legal interest should be imposed beginning 22 July 1990, i.e. the date of the accident. Upon the provisions of Art. 2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty." It is axiomatic that if the suit were for damages, unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof, interest at the rate of six percent (6%) per annum should be from the date the judgment of the court is made (at which time the quantification of damages may be deemed to be reasonably ascertained).14

In this case, the matter was not a liquidated obligation as the assessment of the damage on the vehicle was heavily debated upon by the parties with private respondent's demand for P236,000.00 being refuted by petitioners who argue that they could have the vehicle repaired easily for P20,000.00. In fine, the amount due private respondent was not a liquidated account that was already demandable and payable.

One last word. We have observed that private respondent left his passenger jeepney by the roadside at the mercy of the elements. Article 2203 of the Civil Code exhorts parties suffering from loss or injury to exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. One who is injured then by the wrongful or negligent act of another should exercise reasonable care and diligence to minimize the resulting damage. Anyway, he can recover from the wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries incurred in attempting to prevent damage to it.15

However we sadly note that in the present case petitioners failed to offer in evidence the estimated amount of the damage caused by private respondent's unconcern towards the damaged vehicle. It is the burden of petitioners to show satisfactorily not only that the injured party could have mitigated his

damages but also the amount thereof; failing in this regard, the amount of damages awarded cannot be proportionately reduced.

WHEREFORE, the questioned Decision awarding private respondent Donato Gonzales P236,000.00 with legal interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney's fees is MODIFIED. Interest at the rate of six percent (6%) per annum shall be computed from the time the judgment of the lower court is made until the finality of this Decision. If the adjudged principal and interest remain unpaid thereafter, the interest shall be twelve percent (12%) per annum computed from the time judgment becomes final and executory until it is fully satisfied. 1âwphi1.nêt

Costs against petitioners.

SO ORDERED.

Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Footnote

1 Original Records, pp. 23-26.

2 Id., pp. 15-18.

3 TSN, 6 February 1992, pp. 1-14.

4 Ibid.

5 See Note 1, p. 109.

6 Decision penned by Judge Basilio R. Gabo, RTC-Br. 11, Malolos, Bulacan; CA Rollo, pp. 41-44.

7 Decision penned by Associate Justice Maximiano C. Asuncion, concurred in by Associate Justices Salome A. Montoya and Godardo A. Jacinto; Rollo, pp 25-33.

8 Id., pp. 12-23.

9 Baliwag Transit Inc. v. Court of Appeals, G.R. No. 57493, 7 January 1987, 147 SCRA 82; Teja Marketing v. IAC, G.R. No. 65510, 9 March 1987, 148 SCRA 347; Lita Enterprises, Inc. v. Second Civil Cases Division, IAC, G.R. No. 64693, 27 April 1984, 129 SCRA 79.

10 51 O.G. 4059 (1955).

11 Santos v. Sibug, No. L-26815, 26 May 1981, 104 SCRA 520; Vargas v. Langcay, 116 Phil 478 (1962); Tamayo v. Aquino 105 Phil. 949 (1959); Erezo v. Jepte, 102 Phil. 103 (1957) .

12 Ong v. Court of Appeals, G.R. No. 117103, 21 January 1999, 301 SCRA 387; Congregation of the Religious of the Virgin Mary v. Court of Appeals, 353 Phil 591 (1998); Llorente v. Sandiganbayan, G.R. No. 122166, 11 March 1998, 287 SCRA 382.

13 Magat, Jr. v. CA, G.R. No. 124221, 4 August 2000, 337 SCRA 298; Integrated Packaging Corp. v. CA, G.R. No. 115117, 8 June 2000, 333 SCRA 171; Coca-Cola Bottlers Packaging Inc., v. Henson, 367 Phil 493 (1999); Associated Realty Development Co., Inc. v. CA, No. L-18056, 30 January 1956, 13 SCRA 52.

14 Eastern Assurance and Surety Corporation, G.R. No. 127135, 18 January 2000, 322 SCRA 73; Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78; Rivera v. Matute, 98 Phil 516 (1956).

15 Puentebella v. Negros Coal, 50 Phil 69 (1927); De Castelvi v. Compania de Tabaccos, 49 Phil 998 (1926).

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-64693 April 27, 1984

LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA, respondents.

Manuel A. Concordia for petitioner.

Nicasio Ocampo for himself and on behalf of his correspondents.

ESCOLIN, J.:ñé+.£ªwph!1

"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts.

The factual background of this case is undisputed.

Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated and maintained the same under the name Acme Taxi, petitioner's trade name.

About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for attorney's fees.

This decision having become final, a writ of execution was issued. One of the vehicles of respondent spouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon and sold at public auction for P8,000.00 to a certain Mr. Lopez.

Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of Manila. Trial on the merits ensued and on July 22, 1975, the said court rendered a decision, the dispositive portion of which reads: têñ.£îhqwâ£

WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff of Manila are concerned.

Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota cars not levied upon with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in favor of the plaintiff.

Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate of convenience from March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars. (Annex A, Record on Appeal, p. 102-103, Rollo)

Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by the court a quo on October 27, 1975. (p. 121, Ibid.)

On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified the decision by including as part of its dispositive portion another paragraph, to wit: têñ.£îhqw â£

In the event the condition of the three Toyota rears will no longer serve the purpose of the deed of conveyance because of their deterioration, or because they are no longer serviceable, or because they are no longer available, then Lita Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of July 22, 1975. (Annex "D", p. 167, Rollo.)

Its first and second motions for reconsideration having been denied, petitioner came to Us, praying that: têñ.£îhqwâ£

1. ...

2. ... after legal proceedings, decision be rendered or resolution be issued, reversing, annulling or amending the decision of public respondent so that:

(a) the additional paragraph added by the public respondent to the DECISION of the lower court (CFI) be deleted;

(b) that private respondents be declared liable to petitioner for whatever amount the latter has paid or was declared liable (in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim Florante Galvez, who died as a result ot the gross negligence of private respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)

Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system", whereby a person who has been granted a certificate of convenience allows another person who owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too severely condemned. It constitutes an

imposition upon the goo faith of the government.

Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides: têñ.£îhqw â£

ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed;

(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking.

The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time

cannot give efficacy to contracts that are null void."

The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or damages for its property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other." 3 Although certain

exceptions to the rule are provided by law, We see no cogent reason why the full force of the rule should not be applied in the instant case.

WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisions rendered therein are hereby annuleled and set aside. No costs.

SO ORDERED.1äw phï1.ñët

Feranando, C.J., Teehankee, Makasiar, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Melencio-Herrera, Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.

Aquino, J., took no part.

Footnotestêñ.£îhqwâ£

1 Dizon v. Octavio, 51 O.G. 4059.

2 97 Phil. 41.

3 Pomeroy's Equity Jurisprudence, Vol. 3, 5th ed., p. 728.

EN BANC

[G.R. No. L-20761. July 27, 1966.]

LA MALLORCA, Petitioner, v. HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., Respondents.

G. E. Yabut, R. Monterey and M. C. Lagman for Petitioner.

Achmed Garcia for Respondents.

SYLLABUS

1. COMMON CARRIERS; CARRIER - PASSENGER RELATION CONTINUES UNTIL PASSENGER HAS REASONABLE TIME TO LEAVE CARRIER’S PREMISES. — The relation of carrier and passenger does not cease at the moment the passenger alights from the carrier’s vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier’s premises (Ormond v. Hayes, 60 Tex. 180, cited in 10 C.J. 626).

2. ID.; ID.; "REASONABLE TIME" CONSTRUED. — What is a reasonable time or a reasonable delay is to be determined from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform, is considered still a passenger (Keefe v. Boston, etc. R. Co., 142 Mass. 251, 7 N.E. 874). So also, where a passenger has alighted at his destination and is proceeding by the usual way to

leave the company’s premises, but before actually doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad and company and its agents (Layne v. Chesapeake, etc., R. Co., 68 W. Va. 213, 69 S.E. 700, 31 L.R.A., [N.S.] 414).

3. ID.; ID.; CARRIER’S RESPONSIBILITY FOR NEGLIGENCE; CASE AT BAR. — In the present case, the father returned to the bus to get one of his baggages which was not unloaded when he end other members of his family alighted from the bus. The victim, one of his minor daughters, must have followed her father. However, although the father was still on the running board of the bus awaiting for the conductor to hand to him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. Held: In the circumstances, it cannot be claimed that the carrier’s agent had exercised the "utmost diligence" of a "very cautious person" required by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its obligation to transport safely its passengers. In the first place, the driver, although stopping the bus, did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to go and while the latter was still unloading a baggage of some passengers. The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage.

4. ID.; ID.; ID.; AVERMENT FOR QUASI-DELICT, ALTHOUGH INCOMPATIBLE WITH CLAIM UNDER CONTRACT OF CARRIAGE, PERMISSIBLE. — The inclusion of the averment for quasi-delict in appellee’s complaint in the court a quo, while incompatible with the other claim under the contract of carriage, is permissible under Section 2, Rule 8 of the new Rules of Court, which allows a plaintiff to allege causes of action in the alternative, be they compatible with each other or not, to the end that the real matter in controversy may be resolved and determined (Nelayan, Et. Al. v. Nelayan, Et Al., 109 Phil., 183).

5. ID.; ID.; ID.; ID.; EFFECT OF PRESENTATION OF PROOF OF CARRIER’S NEGLIGENCE; CASE AT BAR. - The presentation of proof of the negligence of its employee gave rise to the presumption that the defendant employer did not exercise the diligence of a good father of the family in the selection and supervision of its employees. This presumption not having been overcome, the employer must be adjudged pecuniarily liable for the death of the passenger.

6. ID.; ID.; ID.; ID.; ID.; SUFFICIENT ALLEGATION IN THE COMPLAINT; CASE AT BAR. — The allegation in the complaint to the effect that "the death of Raquel Beltran, plaintiffs’ daughter, was caused by the negligence and want of exercise of

the utmost diligence of a very cautious person on the part of the defendants and their agent," sufficiently pleads the culpa or negligence upon which the claim was predicated. This allegation was proved when it was established during the trial that the driver, even before receiving the proper signal from the conductor, and while there were still persons on the running board of the bus and near it, started to run off the vehicle.

7. APPEALS; WHAT CAN BE PASSED UPON ON APPEAL; CASE AT BAR. — Generally, the appellate court can only pass upon and consider questions or issues raised and argued in appellant’s brief. In the case at bar, plaintiffs did not appeal from that portion of the judgment of the trial court awarding them only P3,000.00 as damages for the death of their daughter. Neither did they point out in their brief in the Court of Appeals that the award was inadequate, or that the inclusion of that figure was merely a clerical error, in order that the matter may be treated as an exception to the general rule (Section 7, Rule 51, new Rules of Court). The Court of Appeals therefore erred in raising the amount of the award.

D E C I S I O N

BARRERA, J.:

La Mallorca seeks the review of the decision of the Court of Appeals in CA- G. R. No. 23267-R, holding it liable for quasi-delict and ordering it to pay to respondents Mariano Beltran, Et. Al. P6,000.00 for the death of his minor daughter Raquel Beltran, plus P400.00 as actual damages.chanrobles virtual lawlibrary

The facts of the case, as found by the Court of Appeals, briefly are:jgc:chanrobles.com.ph

"On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with their minor daughters, namely Milagros, 13 years old, Raquel, about 4-1/2 years old, and Fe, over 2 years old, boarded the Pambusco Bus No. 352, bearing plate TPU No. 757 (1953 Pampanga), owned and operated by the defendant, at San Fernando, Pampanga, bound for Anao, Mexico, Pampanga. At the time, they were carrying with them four pieces of baggages containing their personal belongings. The conductor of the bus who happened to be a half-brother of plaintiff Mariano Beltran, issued three tickets (Exhs. A, B, & C) covering the full fares of the plaintiff and their eldest child, Milagros. No fare was charged on Raquel and Fe, since both were below the height at which fare is charged in accordance with the appellant’s rules and regulations.

"After about an hour’s trip, the bus reached Anao, whereat it stopped to allow the passengers bound therefor, among whom were the plaintiffs and their children to get off. With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of their baggages, was the first to get down the bus, followed by his wife and his children. Mariano led his companions to a shaded spot on the left pedestrians side of the road about four or five meters away from the vehicle. Afterwards, he returned to the bus in controversy to get his other bayong, which he had left behind, but in so doing, his daughter Raquel followed him unnoticed by her father. While said Mariano Beltran was on the running board of the bus waiting for the conductor to hand him his bayong which he left under one of its seats near the door; the bus, whose motor was not shut off while unloading, suddenly started moving forward, evidently to resume its trip, notwithstanding the fact that the conductor has not given the driver the customary signal to start, since said conductor was still attending to the baggage left behind by Mariano Beltran. Incidentally, when the bus was again placed into a complete stop, it had travelled about ten meters from the point where the plaintiffs had gotten off.

"Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the running board without getting his bayong from the conductor. He landed on the side of the road almost in front of the shaded place where he left his wife and children. At that precise time, he saw people beginning to gather around the body of the child lying prostrate on the ground, her skull, crushed, and without life. The child was none other than his daughter Raquel, who was run over by the bus in which she rode earlier together with her parents.

"For the death of their said child, the plaintiffs commenced the present suit against the defendant seeking to recover from the latter an aggregate amount of P6,000 to cover moral damages and actual damages sustained as a result thereof and attorney’s fees. After trial on the merits the court below rendered the judgment in question."cralaw virtua1aw library

On the basis of these facts, the trial court found defendant liable for breach of contract of carriage and sentenced it to pay P3,000.00 for the death of the child and P400.00 as compensatory damages representing burial expenses and costs.chanrobles law library : red

On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of contract in the case, for the reason that when the child met her death, she was no longer a passenger of the bus involved in the incident and, therefore, the contract of carriage had already terminated. Although the Court of Appeals sustained this theory, it nevertheless found the defendant-appellant guilty of quasi- delict and held the latter liable for damages, for the negligence of its driver, in accordance with Article 2180 of the Civil Code. And, the Court of Appeals did not only find the petitioner liable, but increased the damages awarded the plaintiffs-appellees to P6,000.00, instead of P3,000.00 granted by the trial court.

In its brief now before us, La Mallorca contends that the Court of Appeals erred (1) in holding it liable for quasi- delict, considering that respondents’ complaint was one for breach of contract, and (2) in raising the award of damages from P3,000.00 to P6,000.00 although respondents did not appeal from the decision of the lower court.

Under the facts as found by the Court of Appeals we have to sustain the judgment holding petitioner liable for damages for the death of the child, Raquel Beltran. It may be pointed out that although it is true that respondent Mariano Beltran, his wife, and their children (including the deceased child) had alighted from the bus at a place designated for disembarking or unloading of passengers, it was also established that the father had to return to the vehicle (which was still at a stop) to get one of his bags or bayong that was left under one of the seats of the bus. There can be no controversy that as far as the father is concerned, when he returned to the bus for his bayong which was not unloaded, the relation of passenger and carrier between him and the petitioner remained subsisting. For, the relation of carrier and passenger does not necessarily cease where the latter, after alighting from the car, aids the carrier’s servant or employee in removing his baggage from the car. 1 The issue to be determined here is whether as to the child, who was already led by the father to a place about 5 meters away from the bus, the liability of the carrier for her safety under the contract of carriage also persisted.cralawnad

It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier’s vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier’s premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform is considered still a passenger. 2 So also, where a passenger has alighted at his destination and is proceeding by the usual

way to leave the company’s premises, but before actually doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad and company and its agents. 3

In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the bus. Raquel, the child that she was, must have followed the father. However, although the father was still on the running board of the bus awaiting for the conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier’s agent had exercised the "utmost diligence" of a "very cautious person" required by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its obligation to transport safely its passengers. In the first place, the driver, although stopping the bus, nevertheless did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to go and while the latter was still unloading part of the baggages of the passengers Mariano Beltran and family. The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage.

But even assuming arguendo that the contract of carriage has already terminated, herein petitioner can be held liable for the negligence of its driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the Civil Code. Paragraph 7 of the complaint, which reads —

"That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiff’s daughter, was caused by the negligence and want of uxorious of the utmost diligence of a very cautious person on the part of the defendants and their agent, necessary to transport plaintiffs and their daughter safely as far as human and care and foresight can provide in the operation of their vehicle."cralaw virtua1aw library

is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while incompatible with the other claim under the contract of carriage, is permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to allege causes of action in the alternative, be they compatible with each other or not, to the end that the real matter in controversy may be resolved and determined. 4

The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated when it was alleged in the complaint that "the death of Raquel Beltran,

plaintiffs’ daughter, was caused by the negligence and want of exercise of the utmost diligence of a very cautious person on the part of the defendants and their agent." This allegation was also proved when it was established during the trial that the driver, even before receiving the proper signal from the conductor, and while there were still persons on the running board of the bus and near it, started to run off the vehicle. The presentation of proof of the negligence of its employee gave rise to the presumption that the defendant employer did not exercise the diligence of a good father of the family in the selection and supervision of its employees. And this presumption, as the Court of Appeals found, petitioner had failed to overcome. Consequently, petitioner must be adjudged pecuniarily liable for the death of the child Raquel Beltran.

The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals, however, cannot be sustained. Generally, the appellate court can only pass upon and consider questions or issues raised and argued in appellant’s brief. Plaintiffs did not appeal from that portion of the judgment of the trial court awarding them only P3,000.00 damages for the death of their daughter. Neither does it appear that, as appellees in the Court of Appeals, plaintiffs have pointed out in their brief the inadequacy of the award, or that the inclusion of the figure P3,000.00 was merely a clerical error, in order that the matter may be treated as an exception to the general rule. 5 Herein petitioner’s contention, therefore, that the Court of Appeals committed error in raising the amount of the award for damages is, evidently, meritorious.chanrobles virtual lawlibrary

WHEREFORE, the decision of the Court of Appeals is hereby modified by sentencing the petitioner to pay to the respondents Mariano Beltran, Et Al., the sum of P3,000.00 for the death of the child, Raquel Beltran, and the amount of P400.00 as actual damages. No costs in this instance. So ordered.

Concepcion, C.J., J.B.L., Reyes, Dizon, Regala, J.P. Bengzon, Zaldivar, Sanchez and Castro, JJ., concur.

Makalintal, J., concurs in the result.

G.R. No. 85331 August 25, 1989

KAPALARAN BUS LINE, petitioner,

vs.

ANGEL CORONADO, LOPE GRAJERA, DIONISIO SHINYO, and THE COURT OF APPEALS, respondents,

Leopoldo M. Consunto for petitioner.

Danilo S. Cruz for intervenor-appellee.

Conrado Manicad for private respondents.

FELICIANO, J.:

Petitioner Kapalaran Bus Line ("Kapalaran") seeks the reversal or modification of the Court of Appeals' decision in CA G.R. CV No. 12476 and the absolution of petitioner from all liability arising from the collision between one of petitioner's buses and a jeepney owned by respondent Coronado, driven by respondent Grajera and in which jeepney respondent Shinyo was a passenger.

The facts of this case as found by the trial court and adopted by the Court of Appeals, are summarized in the trial court's decision and quoted in the Court of Appeals' own judgment in the following terms:

The accident happened on the National Highway at 10:30 A.M. on August 2, 1982. The jeepney driven by Lope Grajera was then corning from Pila, Laguna on its way towards the direction of Sta. Cruz, traversing the old highway. As it reached the intersection where there is a traffic sign 'yield,' it stopped and cautiously treated the intersection as a "Thru Stop' street, which it is not. The KBL bus was on its way from Sta. Cruz, Laguna, driven by its regular driver Virgilio Llamoso, on its way towards Manila. The regular itinerary of the KBL bus is through the town proper of Pila, Laguna, but at times it avoids this if a bus is already fully loaded with passengers and can no longer accommodate additional passengers. As the KBL bus neared the

intersection, Virgilio Llamoso inquired from his conductor if they could still accommodate passengers and learning that they were already full, he decided to bypass Pila and instead, to proceed along the national highway. Virgilio Llamoso admitted that there was another motor vehicle ahead of him.

The general rule is that the vehicle on the national highway has the right-of-way as against a feeder road. Another general rule is that the vehicle coming from the right has the right-of-way over the vehicle coming from the left. The general rules on right-of-way may be invoked only if both vehicles approach the intersection at almost the same time. In the case at bar, both roads are national roads. Also, the KBL bus was still far from the intersection when the jeepney reached the same. As testified to by Atty. Conrado L. Manicad who was driving a Mustang car coming from the direction of Sta. Cruz and proceeding towards the direction of Manila, he stopped at the intersection to give way to the jeepney driven by Grajera. Behind Manicad were two vehicles, a car of his client and another car. A Laguna Transit bus had just entered the town of Pila ahead of Atty. Manicad.

The sketch marked Exhibit 'E' indicates very clearly that the jeepney had already traversed the intersection when it met the KBL bus head-on. It is also obvious that the point of impact was on the right lane of the highway which is the lane properly belonging to the jeepney. As testified to by Lope Grajera, the KBL bus ignored the stopped vehicles of Atty. Manicad and the other vehicles behind Atty. Manicad and overtook both vehicles at the intersection, therefore, causing the accident.

Judging from the testimony of Atty. Conrado L. Manicad and the sketch (Exhibit 'E'), the sequence of events shows that the first vehicle to arrive at the intersection was the jeepney. Seeing that the road was clear, the jeepney which had stopped at the intersection began to move forward, and for his part, Atty. Manicad stopped his car at the intersection to give way to the jeepney. At about this time, the KBL bus was approaching the intersection and its driver was engaged in determining from his conductor if they would still pass through the town proper of Pila. Upon learning that they were already full, he turned his attention to the road and found the stopped vehicles at the intersection with the jeepney trying to cross the intersection. The KBL bus had no more room within which to stop without slamming into the rear of the vehicle behind the car of Atty. Manicad. The KBL driver chose to gamble on proceeding on its way, unfortunately, the jeepney driven by Grajera, which had the right-of-way, was about to cross the center of the highway and was directly on the path of the KBL bus. The gamble made by Llamoso did not pay off. The impact indicates that the KBL bus was travelling at a fast rate of speed because, after the collision, it did not stop; it travelled for another 50 meters and stopped only when it hit an electric post (pp. 3-4, Decision; pp. 166167, Record). 1

On 14 September 1982, Kapalaran, apparently believing that the best defense was offense, filed a complaint for damage to property and physical injuries through reckless imprudence against respondents Angel Coronado and Lope Grajera in the Regional Trial Court, Branch 27, Sta. Cruz, Laguna. Respondents answered with their own claims (counter-claims) for damages. A third-party complaint and/or a

complaint for intervention was also filed in the same case against Kapalaran by jeepney passenger Dionisio Shinyo.

On 15 October 1986, after trial, the trial court rendered a judgment in favor of private respondents and ordering Kapalaran

(a) to pay Angel Coronado the sum of P40,000.00 as compensation for the totally wrecked jeepney, plus the sum of P5,000.00 as attorney's fees and litigation expenses, and

(b) to Dionisio Shinyo the sum of P35,000.00 representing the expenses incurred by said intervenor for his treatment including his car-hire, the further sum of P30,000.00 representing the expenses said defendant will incur for his second operation to remove the intramedulary nail from his femur, the additional sum of P50,000.00 to serve as moral damages for the pain and suffering inflicted on said defendant, plus the sum of P10,000.00 in the concept of exemplary damages to serve as a deterrent to others who, like the plaintiff, may be minded to induce accident victims to perjure themselves in a sworn statement, and the sum of P15,000.00 as attorney's fees and litigation expenses.

From the above judgment, Kapalaran appealed to the Court of Appeals assailing the trial court's findings on the issue of fault and the award of damages. The Court of Appeals, on 28 June 1988, affirmed the decision of the trial court but modified the award of damages by setting aside the grant of exemplary damages as well as the award of attomey's fee and litigation expenses made to Dionisio Shinyo. 2

This decision of the Court of Appeals is now before us on a Petition for Review, a motion for reconsideration by Kapalaran having been denied by that court on 13 October 1988.

Kapalaran assails the findings of fact of the Regional Trial Court and of the Court of Appeals, and insists before this Court that respondent Grajera, driver of the jeepney, was at fault and not the driver of Kapalaran's bus. It must be remembered that it is not the function of this Court to analyze and weigh evidence presented by the parties all over again and that our jurisdiction is in principle limited to reviewing errors of law that might have been committed by the Court of Appeals. Kapalaran has made no compelling showing of any misapprehension of facts on the part of the Court of Appeals that would require us to review and overturn the factual findings of that court. On the contrary, examination of the record shows that not only are the

conclusions of fact of the Court of Appeals and the trial court on who — the bus driver or the jeepney driver — had acted negligently and was at fault in the collision of their vehicles, amply supported by the evidence of record, but also that Kapalaran's bus driver was grossly negligent and had acted wantonly and in obvious disregard of the applicable rules on safety on the highway.

Kapalaran's driver had become aware that some vehicles ahead of the bus and travelling in the same direction had already stopped at the intersection obviously to give way either to pedestrians or to another vehicle about to enter the intersection. The bus driver, who was driving at a speed too high to be safe and proper at or near an intersection on the highway, and in any case too high to be able to slow down and stop behind the cars which had preceded it and which had stopped at the intersection, chose to swerve to the left lane and overtake such preceding vehicles, entered the intersection and directly smashed into the jeepney within the intersection. Immediately before the collision, the bus driver was actually violating the following traffic rules and regulations, among others, in the Land Transportation and Traffic Code, Republic Act No. 4136, as amended:

Sec. 35. Restriction as to speed. — (a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and or any other condition then and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead.

xxx xxx xxx

Sec. 41. Restrictions on overtaking and passing. _1 (a) The driver of a vehicle shall not drive to the left side of the center line of a highway in overtaking or passing another vehicle, proceeding in the same direction, unless such left side is clearly visible, and is free of oncoming traffic for a sufficient distance ahead to permit such overtaking or passing to be made in safety.

xxx xxx xxx

(c) The driver of a vehicle shall not overtake or pass any other vehicle proceeding in the same direction, at any railway grade crossing, or at any intersection of highways, unless such intersection or crossing is controlled by traffic signal, or unless permitted

to do so by a watchman or a peace officer, except on a highway having two or more lanes for movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle on the right. Nothing in this section shall be construed to prohibit a driver overtaking or passing, upon the right, another vehicle which is making or about to make a left turn.

xxx xxx xxx

(Emphasis supplied)

Thus, a legal presumption arose that the bus driver was negligent 3 a presumption Kapalaran was unable to overthrow.

Petitioner's contention that the jeepney should have stopped before entering the "Y-intersection" because of the possibility that another vehicle behind the cars which had stopped might not similarly stop and might swerve to the left to proceed to the highway en route to Manila, is more ingenious than substantial. It also offers illustration of the familiar litigation tactic of shifting blame from one's own shoulders to those of the other party. But the jeepney driver, seeing the cars closest to the intersection on the opposite side of the highway come to a stop to give way to him, had the right to assume that other vehicles further away and behind the stopped cars would similarly come to a stop and not seek illegally to overtake the stopped vehicles and come careening into the intersection at an unsafe speed. 4 Petitioner's bus was still relatively far away from the intersection when the jeepney entered the same; the bus collided head on into the jeepney because the bus had been going at an excessively high velocity immediately before and at the time of overtaking the stopped cars, and so caught the jeepney within the intersection. It was also the responsibility of the bus driver to see to it, when it overtook the two (2) cars ahead which had stopped at the intersection, that the left lane of the road within the intersection and beyond was clear. The point of impact was on the left side of the intersection (the light lane so far as concerns the jeepney coming from the opposite side), which was precisely the lane or side on which the jeepney had a right to be.

Petitioner Kapalaran also assails the award of moral damages against itself, upon the ground that its own bus driver, third-party defendant, was apparently not held liable by the trial court . 5 Hence, Kapalaran argues that there was no justification for holding it, the employer, liable for damages, considering that such liability was premised upon the bus driver's negligence and that petitioner "as mere employer" was not guilty of such negligence or imprudence. 6 This contention in thoroughly unpersuasive. The patent and gross negligence on the part of the petitioner Kapalaran's driver raised the legal presumption that Kapalaran as employer was guilty of negligence either in the selection or in the supervision of its bus driver, 7

Where the employer is held liable for damages, it has of course a right of recourse against its own negligent employee. If petitioner Kapalaran was interested in maintaining its right of recourse against or reimbursement from its own driver, 8 it should have appealled from that portion of the trial court's decision which had failed to hold the bus driver is not "merely subsidiary," and is not limited to cases where the employee "cannot pay his liability" nor are private respondents compelled frist to proceed against the bus driver. The liability of the employer under Article 2180 of the Civil Code is direct and immediate; it is not conditioned upon prior recourse against the negligent employee and a prior showing of the insolvency of such employee. 9 So far as the record shows, petitioner Kapalaran was unable to rebut the presumption of negligence on its own part. The award of moral damages against petitioner Kapalaran is not only entirely in order; it is also quite modest consideirng Dionisio Shinyo's death during the pendency of this petition, a death hastened by, if not directly due to, the grievous injuries sustained by him in the violent collision.

The Court of Appeals deleted the award of exemplary damages which the trial court had granted in order "to serve as a deterrent to others who, like the plaintiff [Kapalaran], may be minded to induce accident victims to perjure themselves in a sworn statement." The Court of Appeals held that htere was no basis for this award of exemplary damages, stating that it was not "such a reprehensible act to try to gather witnesses for one's cause" and that there was no evidence of use of "presure or influence" to induce the accident victims to perjure themselves While that might have been so, both the trial court and the Court of Appeals overlook another and far more compelling basis for the award of exemplary damages against petitioner Kapalaran in this case. There is no question that petitioner's bus driver was grossly and very probably criminally negligent in his reckless disregard of the rights of other vehicles and their pasangers and of pedestrian as well The Court is entitled to take judicial notice of the gross negligence and the appalling disregard of the physical safety and property of others so commonly exhibited today by the drivers of passanger bussses and similar vehicles on our highways. The law requires petitioner as common carrier to exercise extraordinary diligence incarrying and transporting their passanger safely "as far as human care and foresight can proved, using the utmost diligence of very cautious persons, with due regard for all circumstances." 10 In requiring the highest possible degree of diligence from common carriers and creating a presumption of negligence against them, the law compels them to curb the recklessness of their drivers. 11 While the immediate beneficiaries of the standard of extraordinary diligence are, of course, the passengers and owners of cargo carried by a common carrier, they are not only persons that the law seeks to benefit. For if common carriers carefully observed the statutory standard of extraordinary diligence in respect of of their own passengers, they cannot help but simultaneously benefit pedestrians and the owners and passengers of other vehicles who are equally entitled to the safe and convenient use of our roads and highways. 12 The law seeks to stop and prevent the slaughter and maiming of people (whether passengers or not) and the destruction of property (whether freight or not) on our highways by buses, the very size and power of which seem often to inflame the minds of their drivers. Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary damages in cases of quasi-delicts "if the defendant acted with gross negligence." Thus we believe that the award of exemplary damages by the trial court was quite proper, although granted for the wrong reason, and should not only be restored but augmented in the present case. The Court is aware that respondent Shinyo did not file a separate petition for review to set aside that portion of the Court

of Appeals'decision which deleted the grant by the trial court of exemplary damages. It is settled, however, that issues which must be resolved if substantial justice is to be rendered to the parties, may and should be considered and decided by this Court even if those issues had not been explicitly raised by the party affected. 13 In the instant case, it is not only the demands of substantial justice but also the compelling considerations of public policy noted above, which impel us to the conclusion that the trial court's award of exemplary damages was erroneously deleted and must be restored and brought more nearly to the level which public policy and substantial justice require.

In much the same vein, we believe that the award by the trial court of P15,000.00 as attorney's fees and litigation expenses, deleted by the Court of Appeals, should similarly be restored, being both authorized by law 14 and demanded by substantial justice in the instant case.

WHEREFORE, the Petition for Review on certiorari is DENIED for lack of merit and the Decision of the Court of Appeals is hereby AFFIRMED, except (1) that the award of exemplary damages to Dionisio Shinyo shall be restored and increased from P10,000.00 to P25,000.00, and (2) that the grant of attorney's fees and litigation expenses in the sum of P15,000.00 to Dionisio Shinyo shall similarly be restored. Costs against petitioner.

SO ORDERED.

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

Footnotes

1 Record, pp. 63-65.

2 Rollo, p. 34.

3 Article 2185, Civil Code.

4 Section 42 (a) of Republic Act No. 4136, as amended:

"Sec. 42. Right of way. — 4a) When two vehicles approach or enter an intersection at approximately the same time, the driver of the vehicle on the left shall yield the right of way to the vehicle on the right, except as otherwise hereinafter provided. The driver of any vehicle traveling at any unlawful speed shall forfeit any right of way which he might otherwise have hereunder." (Emphasis supplied)

5 The other grounds adduced by Kapalaran in its petition for review of the Court of Appeals' decision are clearly insubstantial and require no discussion.

6 Petition for Review, p. 15; Rollo, p. 16.

7 Phoenix Construction, Inc. v. Intermediate Appellate court, 148 SCRA 370 (1987); Poblete v. Fabros, 93 SCRA 202 (1979); Umali v. Bacani, 69 SCRA 263 (1976).

8 Article 2181, Civil Code.

9 Bienvenido Galisan v. Benito Alday, 154 SCRA 388 (1987); Rufo Mauricio Construction v. intermediate Appellate Court, 1555 SCRA 713 (1987); Malipol v. Tan, 55 SCRA 214 (1974).

10 Article 1255, Civil Code.

11 Nucom v. Laguna Tayabas Bus Company, 30 SCAR 69 (1969).

12 Under Executive Order No. 202, dated 19 June 1987 (83 Official Gazette No. 27, p. 3122-B [6 July 19871), the Land Transportation Franchising and Regulatory Board is authorized, among other things:

"k. To formulate, promulgate, administer, implement and enforce rules and regulations on land transportation, public utilities, standards of measurements and/or design and rules and regulations requiring operators of any public land transportation service to equip, install and provide in their utilities and in their stations such devices, equipment, facilities and operating procedures and techniques as may promote safety, protection, comfort and convenience to persons and property in their charges as well as safety of persons and property within their areas of operations;

x x x x x x x x x"

(Emphasis supplied)

13 Heirs of Enrique Zambales v. Court of Appeals, 120 SCRA 897 (1983); Miguel v. Court of Appeals, 29 SCRA 760 (1969); Saura Import and Export Co., Inc. v. Philippine International Surety Go., Inc., 8 SCRA 148 (1963).

14 Article 2208 (1), (2) and (5), Civil Code.