FIRST DIVISION

G.R. No. 72275 November 13, 1991

PACIFIC BANKING CORPORATION, petitioner, vs.
HON INTERMEDIATE APPELLATE COURT AND ROBERTO REGALA, JR., respondents.

MEDIALDEA, J.:p
This is a petition for review on certiorari of the decision (pp 21-31, Rollo) of the Intermediate Appellate Court
(now Court of Appeals) in AC-G.R. C.V. No. 02753, 1 which modified the decision of the trial court against
herein private respondent Roberto Regala, Jr., one of the defendants in the case for sum of money filed by
Pacific Banking Corporation.
The facts of the case as adopted by the respondent appellant court from herein petitioner's brief before said
court are as follows:
On October 24, 1975, defendant Celia Syjuco Regala (hereinafter referred to as Celia
Regala for brevity), applied for and obtained from the plaintiff the issuance and use of
Pacificard credit card (Exhs. "A", "A-l",), under the Terms and Conditions Governing the
Issuance and Use of Pacificard (Exh. "B" and hereinafter referred to as Terms and
Conditions), a copy of which was issued to and received by the said defendant on the
date of the application and expressly agreed that the use of the Pacificard is governed by
said Terms and Conditions. On the same date, the defendant-appelant Robert Regala, Jr.,
spouse of defendant Celia Regala, executed a "Guarantor's Undertaking" (Exh. "A-1-a") in
favor of the appellee Bank, whereby the latter agreed "jointly and severally of Celia
Aurora Syjuco Regala, to pay the Pacific Banking Corporation upon demand, any and all
indebtedness, obligations, charges or liabilities due and incurred by said Celia Aurora
Syjuco Regala with the use of the Pacificard, or renewals thereof, issued in her favor by
the Pacific Banking Corporation". It was also agreed that "any changes of or novation in
the terms and conditions in connection with the issuance or use of the Pacificard, or any
extension of time to pay such obligations, charges or liabilities shall not in any manner
release me/us from responsibility hereunder, it being understood that I fully agree to such
charges, novation or extension, and that this understanding is a continuing one and shall
subsist and bind me until the liabilities of the said Celia Syjuco Regala have been fully
satisfied or paid.
Plaintiff-appellee Pacific Banking Corporation has contracted with accredited business
establishments to honor purchases of goods and/or services by Pacificard holders and the
cost thereof to be advanced by the plaintiff-appellee for the account of the defendant
cardholder, and the latter undertook to pay any statements of account rendered by the
plaintiff-appellee for the advances thus made within thirty (30) days from the date of the

statement, provided that any overdue account shall earn interest at the rate of 14% per
annum from date of default.
The defendant Celia Regala, as such Pacificard holder, had purchased goods and/or
services on credit (Exh. "C", "C-l" to "C-112") under her Pacificard, for which the plaintiff
advanced the cost amounting to P92,803.98 at the time of the filing of the complaint.
In view of defendant Celia Regala's failure to settle her account for the purchases made
thru the use of the Pacificard, a written demand (Exh. "D") was sent to the latter and also
to the defendant Roberto Regala, Jr. (Exh. " ") under his "Guarantor's Undertaking."
A complaint was subsequently filed in Court for defendant's (sic) repeated failure to settle
their obligation. Defendant Celia Regala was declared in default for her failure to file her
answer within the reglementary period. Defendant-appellant Roberto Regala, Jr., on the
other hand, filed his Answer with Counterclaim admitting his execution of the
"Guarantor's Understanding", "but with the understanding that his liability would be
limited to P2,000.00 per month."
In view of the solidary nature of the liability of the parties, the presentation of
evidence ex-parte as against the defendant Celia Regala was jointly held with the trial of
the case as against defendant Roberto Regala.
After the presentation of plaintiff's testimonial and documentary evidence, fire struck the
City Hall of Manila, including the court where the instant case was pending, as well as all
its records.
Upon plaintiff-appellee's petition for reconstitution, the records of the instant case were
duly reconstituted. Thereafter, the case was set for pre-trial conference with respect to
the defendant-appellant Roberto Regala on plaintiff-appellee's motion, after furnishing the
latter a copy of the same. No opposition thereto having been interposed by defendantappellant, the trial court set the case for pre-trial conference. Neither did said defendantappellant nor his counsel appear on the date scheduled by the trial court for said
conference despite due notice. Consequently, plaintiff-appellee moved that the defendantappellant Roberto Regala he declared as in default and that it be allowed to present its
evidence ex-parte, which motion was granted. On July 21, 1983, plaintiff-appellee
presented its evidence ex-parte. (pp. 23-26, Rollo)
After trial, the court a quo rendered judgment on December 5, 1983, the dispositive portion of which reads:
WHEREFORE, the Court renders judgment for the plaintiff and against the defendants
condemning the latter, jointly and severally, to pay said plaintiff the amount of
P92,803.98, with interest thereon at 14% per annum, compounded annually, from the
time of demand on November 17, 1978 until said principal amount is fully paid; plus 15%
of the principal obligation as and for attorney's fees and expense of suit; and the costs.
The counterclaim of defendant Roberto Regala, Jr. is dismissed for lack of merit.

SO ORDERED. (pp. 22-23, Rollo)

The defendants appealed from the decision of the court a quo to the Intermediate Appellate Court.
On August 12, 1985, respondent appellate court rendered judgment modifying the decision of the trial court.
Private respondent Roberto Regala, Jr. was made liable only to the extent of the monthly credit limit granted
to Celia Regala, i.e., at P2,000.00 a month and only for the advances made during the one year period of the
card's effectivity counted from October 29, 1975 up to October 29, 1976. The dispositive portion of the
decision states:
WHEREFORE, the judgment of the trial court dated December 5, 1983 is modified only as
to appellant Roberto Regala, Jr., so as to make him liable only for the purchases made by
defendant Celia Aurora Syjuco Regala with the use of the Pacificard from October 29,
1975 up to October 29, 1976 up to the amount of P2,000.00 per month only, with interest
from the filing of the complaint up to the payment at the rate of 14% per annum without
pronouncement as to costs. (p. 32, Rollo)
A motion for reconsideration was filed by Pacific Banking Corporation which the respondent appellate court
denied for lack of merit on September 19, 1985 (p. 33, Rollo).
On November 8, 1985, Pacificard filed this petition. The petitioner contends that while the appellate court
correctly recognized Celia Regala's obligation to Pacific Banking Corp. for the purchases of goods and
services with the use of a Pacificard credit card in the total amount of P92,803.98 with 14% interest per
annum, it erred in limiting private respondent Roberto Regala, Jr.'s liability only for purchases made by Celia
Regala with the use of the card from October 29, 1975 up to October 29, 1976 up to the amount of
P2,000.00 per month with 14% interest from the filing of the complaint.

We need not look elsewhere to determine the nature and extent of private respondent Roberto Regala, Jr.'s
undertaking. As a surety he bound himself jointly and severally with the debtor Celia Regala "to pay the
Pacific Banking Corporation upon demand, any and all indebtedness, obligations, charges or liabilities due
and incurred by said Celia Syjuco Regala with the use of Pacificard or renewals thereof issued in (her) favor
by Pacific Banking Corporation." This undertaking was also provided as a condition in the issuance of the
Pacificard to Celia Regala, thus:
5. A Pacificard is issued to a Pacificard-holder against the joint and several signature of a
third party and as such, the Pacificard holder and the guarantor assume joint and several
liabilities for any and all amount arising out of the use of the Pacificard. (p. 14, Rollo)
The respondent appellate court held that "all the other rights of the guarantor are not thereby lost by the
guarantor becoming liable solidarily and therefore a surety." It further ruled that although the surety's
liability is like that of a joint and several debtor, it does not make him the debtor but still the guarantor (or
the surety), relying on the case of Government of the Philippines v. Tizon. G.R. No. L-22108, August 30,
1967, 20 SCRA 1182. Consequently, Article 2054 of the Civil Code providing for a limited liability on the part
of the guarantor or debtor still applies.
It is true that under Article 2054 of the Civil Code, "(A) guarantor may bind himself for less, but not for more
than the principal debtor, both as regards the amount and the onerous nature of the conditions. 2 It is
likewise not disputed by the parties that the credit limit granted to Celia Regala was P2,000.00 per month
and that Celia Regala succeeded in using the card beyond the original period of its effectivity, October 29,
1979. We do not agree however, that Roberto Jr.'s liability should be limited to that extent. Private
respondent Roberto Regala, Jr., as surety of his wife, expressly bound himself up to the extent of the
debtor's (Celia) indebtedness likewise expressly waiving any "discharge in case of any change or novation of
the terms and conditions in connection with the issuance of the Pacificard credit card." Roberto, in fact,
made his commitment as a surety a continuing one, binding upon himself until all the liabilities of Celia
Regala have been fully paid. All these were clear under the "Guarantor's Undertaking" Roberto signed, thus:

There is merit in this petition.

The pertinent portion of the "Guarantor's Undertaking" which private respondent Roberto Regala, Jr. signed
in favor of Pacific Banking Corporation provides:
I/We, the undersigned, hereby agree, jointly and severally with Celia Syjuco Regala to
pay the Pacific Banking Corporation upon demand any and all indebtedness, obligations,
charges or liabilities due and incurred by said Celia Syjuco Regala with the use of the
Pacificard or renewals thereof issued in his favor by the Pacific Banking Corporation. Any
changes of or Novation in the terms and conditions in connection with the issuance or use
of said Pacificard, or any extension of time to pay such obligations, charges or liabilities
shall not in any manner release me/us from the responsibility hereunder, it being
understood that the undertaking is a continuing one and shall subsist and bind me/us
until all the liabilities of the said Celia Syjuco Regala have been fully satisfied or paid. (p.
12,Rollo)
The undertaking signed by Roberto Regala, Jr. although denominated "Guarantor's Undertaking," was in
substance a contract of surety. As distinguished from a contract of guaranty where the guarantor binds
himself to the creditor to fulfill the obligation of the principal debtor only in case the latter should fail to do
so, in a contract of suretyship, the surety binds himself solidarily with the principal debtor (Art. 2047, Civil
Code of the Philippines).

. . . Any changes of or novation in the terms and conditions in connection with the
issuance or use of said Pacificard, or any extension of time to pay such obligations,
charges or liabilities shall not in any manner release me/us from the responsibility
hereunder, it being understood that the undertaking is a continuing one and shall subsist
and bind me/us until all the liabilities of the said Celia Syjuco Regala have been fully
satisfied or paid. (p. 12, supra; emphasis supplied)
Private respondent Roberto Regala, Jr. had been made aware by the terms of the undertaking of future
changes in the terms and conditions governing the issuance of the credit card to his wife and that,
notwithstanding, he voluntarily agreed to be bound as a surety. As in guaranty, a surety may secure
additional and future debts of the principal debtor the amount of which is not yet known (see Article
2053, supra).
The application by respondent court of the ruling in Government v. Tizon, supra is misplaced. It was held in
that case that:
. . . although the defendants bound themselves in solidum, the liability of the Surety
under its bond would arise only if its co-defendants, the principal obligor, should fail to
comply with the contract. To paraphrase the ruling in the case of Municipality of Orion vs.
Concha, the liability of the Surety is "consequent upon the liability" of Tizon, or "so

dependent on that of the principal debtor" that the Surety "is considered in law as being
the same party as the debtor in relation to whatever is adjudged, touching the obligation
of the latter"; or the liabilities of the two defendants herein "are so interwoven and
dependent as to be inseparable." Changing the expression, if the defendants are held
liable, their liability to pay the plaintiff would be solidary, but the nature of the Surety's
undertaking is such that it does not incur liability unless and until the principal debtor is
held liable.
A guarantor or surety does not incur liability unless the principal debtor is held liable. It is in this sense that
a surety, although solidarily liable with the principal debtor, is different from the debtor. It does not mean,
however, that the surety cannot be held liable to the same extent as the principal debtor. The nature and
extent of the liabilities of a guarantor or a surety is determined by the clauses in the contract of
suretyship(see PCIB v. CA, L-34959, March 18, 1988, 159 SCRA 24).

Industrial Management Development Corporation (INIMACO), for payment of separation pay and unpaid
wages. Sc-jj
In a Decision dated March 10, 1987, Labor Arbiter Bonifacio B. Tumamak held that:
"RESPONSIVE, to all the foregoing, judgment is hereby entered, ordering respondents
Filipinas Carbon and Mining Corp. Gerardo Sicat, Antonio Gonzales/Industrial
Management Development Corp. (INIMACO), Chiu Chin Gin and Lo Kuan Chin, to pay
complainants Enrique Sulit, the total award of P82,800.00; ESMERALDO PEGARIDO the
full award of P19,565.00; Roberto Nemenzo the total sum of P29,623.60 and DARIO GO
the total award of P6,599.71, or the total aggregate award of ONE HUNDRED THIRTYEIGHT THOUSAND FIVE HUNDRED EIGHTY-EIGHT PESOS AND 31/100 (P138,588.31) to
be deposited with this Commission within ten (10) days from receipt of this Decision for
appropriate disposition. All other claims are hereby Dismiss (sic) for lack of merit. Jjs-c

ACCORDINGLY, the petition is GRANTED. The questioned decision of respondent appellate court is SET ASIDE
and the decision of the trial court is REINSTATED.

"SO ORDERED.

SO ORDERED.

"Cebu City, Philippines.

"10 March 1987."0[1]
SECOND DIVISION
[G.R. No. 101723. May 11, 2000]

INDUSTRIAL MANAGEMENT INTERNATIONAL DEVELOPMENT CORP. (INIMACO), petitioner,

vs. NATIONAL LABOR RELATIONS COMMISSION, (Fourth Division) Cebu City, and ENRIQUE
SULIT, SOCORRO MAHINAY, ESMERALDO PEGARIDO, TITA BACUSMO, GINO NIERE, VIRGINIA
BACUS, ROBERTO NEMENZO, DARIO GO, and ROBERTO ALEGARBES, respondents.
DECISION
BUENA, J.:
This is a petition for certiorari assailing the Resolution dated September 4, 1991 issued by the National Labor
Relations Commission in RAB-VII-0711-84 on the alleged ground that it committed a grave abuse of
discretion amounting to lack of jurisdiction in upholding the Alias Writ of Execution issued by the Labor
Arbiter which deviated from the dispositive portion of the Decision dated March 10, 1987, thereby holding
that the liability of the six respondents in the case below is solidary despite the absence of the word
"solidary" in the dispositive portion of the Decision, when their liability should merely be joint. S-jcj
The factual antecedents are undisputed: Supr-eme
In September 1984, private respondent Enrique Sulit, Socorro Mahinay, Esmeraldo Pegarido, Tita Bacusmo,
Gino Niere, Virginia Bacus, Roberto Nemenzo, Dariogo, and Roberto Alegarbes filed a complaint with the
Department of Labor and Employment, Regional Arbitration Branch No. VII in Cebu City against Filipinas
Carbon Mining Corporation, Gerardo Sicat, Antonio Gonzales, Chiu Chin Gin, Lo Kuan Chin, and petitioner

No appeal was filed within the reglementary period thus, the above Decision became final and executory. On
June 16, 1987, the Labor Arbiter issued a writ of execution but it was returned unsatisfied. On August 26,
1987, the Labor Arbiter issued an Alias Writ of Execution which ordered thus: Ed-pm-is
"NOW THEREFORE, by virtue of the powers vested in me by law, you are hereby
commanded to proceed to the premises of respondents Antonio Gonzales/Industrial
Management Development Corporation (INIMACO) situated at Barangay Lahug, Cebu
City, in front of La Curacha Restaurant, and/or to Filipinas Carbon and Mining corporation
and Gerardo Sicat at 4th Floor Universal RE-Bldg. 106 Paseo de Roxas, Legaspi Village,
Makati Metro Manila and at Philippine National Bank, Escolta, Manila respectively, and
collect the aggregate award of ONE HUNDRED THIRTY-EIGHT THOUSAND FIVE HUNDRED
EIGHTY-EIGHT PESOS AND THIRTY ONE CENTAVOS (P138,588.31) and thereafter turn
over said amount to complainants ENRIQUE SULIT, ESMERALDO PEGARIDO, ROBERTO
NEMENZO AND DARIO GO or to this Office for appropriate disposition. Should you fail to
collect the said sum in cash, you are hereby authorized to cause the satisfaction of the
same on the movable or immovable property(s) of respondents not exempt from
execution. You are to return this writ sixty (6) (sic) days from your receipt hereof,
together with your corresponding report.
"You may collect your legal expenses from the respondents as provided for by law.
"SO ORDERED."[2]
On September 3, 1987, petitioner filed a "Motion to Quash Alias Writ of Execution and Set Aside
Decision,"[3] alleging among others that the alias writ of execution altered and changed the tenor of the
decision by changing the liability of therein respondents from joint to solidary, by the insertion of the words
"AND/OR" between "Antonio Gonzales/Industrial Management Development Corporation and Filipinas Carbon

and Mining Corporation, et al." However, in an order dated September 14, 1987, the Labor Arbiter denied the
motion. Mis-oedp

"WHEREFORE, in view of all the foregoing, this appeal is DISMISSED and the Order
appealed from is hereby AFFIRMED.Sce-dp

On October 2, 1987, petitioner appealed[4] the Labor Arbiters Order dated September 14, 1987 to the
respondent NLRC. Mis-edp

"With double costs against appellant."

The respondent NLRC dismissed the appeal in a Decision [5] dated August 31, 1988, the pertinent portions of
which read:
"In matters affecting labor rights and labor justice, we have always adopted the liberal
approach which favors the exercise of labor rights and which is beneficial to labor as a
means to give full meaning and import to the constitutional mandate to afford protection
to labor. Considering the factual circumstances in this case, there is no doubt in our mind
that the respondents herein are called upon to pay, jointly and severally, the claims of the
complainants as was the latters prayers. Inasmuch as respondents herein never
controverted the claims of the complainants below, there is no reason why complainants
prayer should not be granted. Further, in line with the powers granted to the Commission
under Article 218 (c) of the Labor code, to waive any error, defect or irregularity whether
in substance or in form in a proceeding before Us, We hold that the Writ of Execution be
given due course in all respects." Ed-p
On July 31, 1989, petitioner filed a "Motion To Compel Sheriff To Accept Payment Of P23,198.05
Representing One Sixth Pro Rata Share of Respondent INIMACO As Full and Final Satisfaction of Judgment
As to Said Respondent."[6] The private respondents opposed the motion. In an Order[7] dated August 15,
1989, the Labor Arbiter denied the motion ruling thus:
"WHEREFORE, responsive to the foregoing respondent INIMACOs Motions are hereby
DENIED. The Sheriff of this Office is order (sic) to accept INIMACOs tender payment (sic)
of the sum of P23,198.05, as partial satisfaction of the judgment and to proceed with the
enforcement of the Alias Writ of Execution of the levied properties, now issued by this
Office, for the full and final satisfaction of the monetary award granted in the instant
case.
"SO ORDERED." Ed-psc
Petitioner appealed the above Order of the Labor Arbiter but this was again dismissed by the respondent
NLRC in its Resolution[8] dated September 4, 1991 which held that:
"The arguments of respondent on the finality of the dispositive portion of the decision in
this case is beside the point. What is important is that the Commission has ruled that the
Writ of Execution issued by the Labor Arbiter in this case is proper. It is not really correct
to say that said Writ of Execution varied the terms of the judgment. At most, considering
the nature of labor proceedings there was, an ambiguity in said dispositive portion which
was subsequently clarified by the Labor Arbiter and the Commission in the incidents which
were initiated by INIMACO itself. By sheer technicality and unfounded assertions,
INIMACO would now reopen the issue which was already resolved against it. It is not in
keeping with the established rules of practice and procedure to allow this attempt of
INIMACO to delay the final disposition of this case.

Dissatisfied with the foregoing, petitioner filed the instant case, alleging that the respondent NLRC
committed grave abuse of discretion in affirming the Order of the Labor Arbiter dated August 15, 1989,
which declared the liability of petitioner to be solidary.
The only issue in this petition is whether petitioners liability pursuant to the Decision of the Labor Arbiter
dated March 10, 1987, is solidary or not. Calrs-pped
Upon careful examination of the pleadings filed by the parties, the Court finds that petitioner INIMACOs
liability is not solidary but merely joint and that the respondent NLRC acted with grave abuse of discretion in
upholding the Labor Arbiters Alias Writ of Execution and subsequent Orders to the effect that petitioners
liability is solidary.
A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and
each creditor is entitled to demand the whole obligation. [9] In a joint obligation each obligor answers only for
a part of the whole liability and to each obligee belongs only a part of the correlative rights. [10]
Well-entrenched is the rule that solidary obligation cannot lightly be inferred. [11] There is a solidary liability
only when the obligation expressly so states, when the law so provides or when the nature of the obligation
so requires.[12]
In the dispositive portion of the Labor Arbiter, the word "solidary" does not appear. The said fallo expressly
states the following respondents therein as liable, namely: Filipinas Carbon and Mining Corporation, Gerardo
Sicat, Antonio Gonzales, Industrial Management Development Corporation (petitioner INIMACO), Chiu Chin
Gin, and Lo Kuan Chin. Nor can it be inferred therefrom that the liability of the six (6) respondents in the
case below is solidary, thus their liability should merely be joint.
Moreover, it is already a well-settled doctrine in this jurisdiction that, when it is not provided in a judgment
that the defendants are liable to pay jointly and severally a certain sum of money, none of them may be
compelled to satisfy in full said judgment. In Oriental Commercial Co. vs. Abeto and Mabanag[13] this
Court held:
"It is of no consequence that, under the contract of suretyship executed by the parties,
the obligation contracted by the sureties was joint and several in character. The final
judgment, which superseded the action for the enforcement of said contract, declared the
obligation to be merely joint, and the same cannot be executed otherwise." [14]
Granting that the Labor Arbiter has committed a mistake in failing to indicate in the dispositive portion that
the liability of respondents therein is solidary, the correction -- which is substantial -- can no longer be
allowed in this case because the judgment has already become final and executory. Scc-alr
It is an elementary principle of procedure that the resolution of the court in a given issue as embodied in the
dispositive part of a decision or order is the controlling factor as to settlement of rights of the parties.
[15]
Once a decision or order becomes final and executory, it is removed from the power or jurisdiction of the

court which rendered it to further alter or amend it.[16] It thereby becomes immutable and unalterable and
any amendment or alteration which substantially affects a final and executory judgment is null and void for
lack of jurisdiction, including the entire proceedings held for that purpose. [17] An order of execution which
varies the tenor of the judgment or exceeds the terms thereof is a nullity.[18]
None of the parties in the case before the Labor Arbiter appealed the Decision dated March 10, 1987, hence
the same became final and executory. It was, therefore, removed from the jurisdiction of the Labor Arbiter
or the NLRC to further alter or amend it. Thus, the proceedings held for the purpose of amending or altering
the dispositive portion of the said decision are null and void for lack of jurisdiction. Also, the Alias Writ of
Execution is null and void because it varied the tenor of the judgment in that it sought to enforce the final
judgment against "Antonio Gonzales/Industrial Management Development Corp. (INIMACO) and/or Filipinas
Carbon and Mining Corp. and Gerardo Sicat," which makes the liability solidary. Ca-lrsc
WHEREFORE, the petition is hereby GRANTED. The Resolution dated September 4, 1991 of the respondent
National Labor Relations is hereby declared NULL and VOID. The liability of the respondents in RAB-VII0711-84 pursuant to the Decision of the Labor Arbiter dated March 10, 1987 should be, as it is hereby,
considered joint and petitioners payment which has been accepted considered as full satisfaction of its
liability, without prejudice to the enforcement of the award, against the other five (5) respondents in the said
case. Sppedsc
SO ORDERED.

SECOND DIVISION
[G.R. No. 144134. November 11, 2003]
MARIVELES SHIPYARD CORP., petitioner, vs. HON. COURT OF APPEALS, LUIS REGONDOLA,
MANUELIT GATALAN, ORESCA AGAPITO, NOEL ALBADBAD, ROGELIO PINTUAN, DANILO
CRISOSTOMO, ROMULO MACALINAO, NESTOR FERER, RICKY CUESTA, ROLLY ANDRADA,
LARRY ROGOLA, FRANCISCO LENOGON, AUGUSTO QUINTO, ARFE BERAMO, BONIFACIO
TRINIDAD, ALFREDO ASCARRAGA, ERNESTO MAGNO, HONORARIO HORTECIO, NELBERT
PINEDA, GLEN ESTIPULAR, FRANCISCO COMPUESTO, ISABELITO CORTEZ, MATURAN
ROSAURO, SAMSON CANAS, FEBIEN ISIP, JESUS RIPARIP, ALFREDO SIENES, ADOLAR
ALBERT, HONESTO CABANILLAS, AMPING CASTILLO and ELWIN REVILLA,respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the Resolution,[1] dated December 29, 1999, of the Court of Appeals in CAG.R. SP No. 55416, which dismissed outright the petition for certiorari of Mariveles Shipyard Corp., due to a
defective certificate of non-forum shopping and non-submission of the required documents to accompany
said petition. Mariveles Shipyard Corp., had filed a special civil action for certiorari with the Court of Appeals
to nullify the resolution[2] of the National Labor Relations Commission (NLRC), dated April 22, 1999, in NLRC
NCR Case No. 00-09-005440-96-A, which affirmed the Labor Arbiters decision, [3] dated May 22, 1998,
holding petitioner jointly and severally liable with Longest Force Investigation and Security Agency, Inc., for
the underpayment of wages and overtime pay due to the private respondents. Likewise challenged in the
instant petition is the resolution[4] of the Court of Appeals, dated July 12, 2000, denying petitioners motion
for reconsideration.
The facts, as culled from records, are as follows:
Sometime on October 1993, petitioner Mariveles Shipyard Corporation engaged the services of Longest
Force Investigation and Security Agency, Inc. (hereinafter, Longest Force) to render security services at its
premises. Pursuant to their agreement, Longest Force deployed its security guards, the private respondents
herein, at the petitioners shipyard in Mariveles, Bataan.
According to petitioner, it religiously complied with the terms of the security contract with Longest
Force, promptly paying its bills and the contract rates of the latter. However, it found the services being

rendered by the assigned guards unsatisfactory and inadequate, causing it to terminate its contract with
Longest Force on April 1995. [5] Longest Force, in turn, terminated the employment of the security guards it
had deployed at petitioners shipyard.
On September 2, 1996, private respondents filed a case for illegal dismissal, underpayment of wages
pursuant to the PNPSOSIA-PADPAO rates, non-payment of overtime pay, premium pay for holiday and rest
day, service incentive leave pay, 13 th month pay and attorneys fees, against both Longest Force and
petitioner, before the Labor Arbiter. Docketed as NLRC NCR Case No. 00-09-005440-96-A, the case sought
the guards reinstatement with full backwages and without loss of seniority rights.
For its part, Longest Force filed a cross-claim [6] against the petitioner. Longest Force admitted that it
employed private respondents and assigned them as security guards at the premises of petitioner
from October 16, 1993 to April 30, 1995, rendering a 12 hours duty per shift for the said period. It likewise
admitted its liability as to the non-payment of the alleged wage differential in the total amount ofP2,618,025
but passed on the liability to petitioner alleging that the service fee paid by the latter to it was way below the
PNPSOSIA and PADPAO rate, thus, contrary to the mandatory and prohibitive laws because the right to
proper compensation and benefits provided under the existing labor laws cannot be waived nor
compromised.
The petitioner denied any liability on account of the alleged illegal dismissal, stressing that no
employer-employee relationship existed between it and the security guards. It further pointed out that it
would be the height of injustice to make it liable again for monetary claims which it had already paid. Anent
the cross-claim filed by Longest Force against it, petitioner prayed that it be dismissed for lack of merit.
Petitioner averred that Longest Force had benefited from the contract, it was now estopped from questioning
said agreement on the ground that it had made a bad deal.
On May 22, 1998, the Labor Arbiter decided NLRC NCR Case No. 00-09-005440-96-A, to wit:
WHEREFORE, conformably with the foregoing, judgment is hereby rendered ordering the respondents as
follows:
1.
DECLARING respondents Longest Force Investigation & Security Agency, Inc. and Mariveles Shipyard
Corporation jointly and severally liable to pay the money claims of complainants representing underpayment
of wages and overtime pay in the total amount of P2,700,623.40 based on the PADPAO rates of pay covering
the period from October 16, 1993 up to April 29, 1995 broken down as follows:
UNDERPAYMENT OF WAGES:
PERIOD
MONTHLY
COVERED
PADPAO
ACTUAL
UNDERPAYMENT
RATES
SALARY FOR THE
Wage
(8 hrs. duty)
RECEIVED
PERIOD
DIFFERENTIALS
Oct. 16-Dec.
P5,485.00
P5,000
P 485.00
P970.00
15/93 (2 mos.)
Dec. 16/93Mar.
6,630.00
5,000
1,630.00
5,705.00
31/94 (3.5 mos.)
Apr. 1Dec.
7,090.00
5,810
1,280.00
11,520.00
31/94 (9 mos.)
Jan. 1Apr.
7,220.00
5,810
1,410.00
5,597.70
29/95 (3.97 mos.)
TOTAL UNDERPAYMENTS - - - - - - - - - - - - - - - P23,792.70
OVERTIME:
Oct. 16-Dec. 15/93 P5,485 x 2
= P 5,485.00
(2 mos.)
2
Dec. 16/93-Mar.
6,630 x 3.5
= 11,602.50
31/94 (3.5 mos.)
2
Apr. 1-Dec.
7,090 x 9
= 31,905.00
31/94 (9 mos.)
2
Jan. 1-Apr.
7,220 x 3.97 = 14,331.70
29/95 (3.97 mos.)
2
TOTAL OVERTIME- - - - - - - - - P63,324.20

Sub-Total of Underpayments and Overtime P87,116.90

1. Luis Regondula
(the same)
P
87,116.90
2. Manolito Catalan
(the same)
87,116.90
3. Oresca Agapito
(the same)
87,116.90
4. Noel Alibadbad
(the same)
87,116.90
5. Rogelio Pintuan
(the same)
87,116.90
6. Danilo Crisostomo
(the same)
87,116.90
7. Romulo Macalinao
(the same)
87,116.90
8. Nestor Ferrer
(the same)
87,116.90
9. Ricky Cuesta
(the same)
87,116.90
10. Andrada Ricky
(the same)
87,116.90
11. Larry Rogola
(the same)
87,116.90
12. Francisco Lenogon
(the same)
87,116.90
13. Augosto Quinto
(the same)
87,116.90
14. Arfe Beramo
(the same)
87,116.90
15. Bonifacio Trinidad
(the same)
87,116.90
16. Alfredo Azcarraga
(the same)
87,116.90
17. Ernesto Magno
(the same)
87,116.90
18. Honario Hortecio
(the same)
87,116.90
19. Nelbert Pineda
(the same)
87,116.90
20. Glen Estipular
(the same)
87,116.90
21. Francisco Compuesto (the same)
87,116.90
22. Isabelito Cortes
(the same)
87,116.90
23. Maturan Rosauro
(the same)
87,116.90
24. Samson Canas
(the same)
87,116.90
25. Febien Isip
(the same)
87,116.90
26. Jesus Riparip
(the same)
87,116.90
27. Alfredo Sienes
(the same)
87,116.90
28. Adolar Albert
(the same)
87,116.90
29. Cabanillas Honesto
(the same)
87,116.90
30. Castillo Amping
(the same)
87,116.90
31. Revilla Elwin
(the same)
87,116.90
GRAND TOTAL
P 2,700,623.90
2. DECLARING both respondents liable to pay complainants attorneys fees equivalent to ten (10%) percent
of the total award recovered or the sum ofP270,062.34.
3. ORDERING respondent Longest Force Investigation & Security Agency, Inc. to reinstate all the herein
complainants to their former or equivalent positions without loss of seniority rights and privileges with full
backwages which as computed as of the date of this decision are as follows:
Backwages:
10/16 12/15/93 =2 mos.
P 5,485.00 x 2 mos.
=
P 10,970.00
12/16/93 3/31/94=3.5 mos.
P 6,630.00 x 3.5 mos.
=
23,205.00
4/1 12/31/94 = 9 mos.
P 7,090.00 x 9 mos.
=
63,810.00
1/1 4/29/95 = 3.97 mos.
P 7,220.00 x 3.97 mos.
=
28,663.40
TOTAL
P 126,684.40[7]
1. Luis Regondula
(same)
P
126,684.40[8]
2. Manolito Catalan
(same)
126,684.40
3. Oresca Agapito
(same)
126,684.40
4. Noel Alibadbad
(same)
126,684.40
5. Rogelio Pintuan
(same)
126,684.40
6. Danilo Crisostomo
(same)
126,684.40
7. Romulo Macalinao
(same)
126,684.40
8. Nestor Ferrer
(same)
126,684.40
9. Ricky Cuesta
(same)
126,684.40
10. Andrada Rolly
(same)
126,684.40
11. Larry Rogola
(same)
126,684.40

12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.

Francisco Lenogon
(same)
126,684.40
Augosto Quinto
(same)
126,684.40
Arfe Beramo
(same)
126,684.40
Bonifacio Trinidad
(same)
126,684.40
Alfredo Azcarraga
(same)
126,684.40
Ernesto Magno
(same)
126,684.40
Honario Hortecio
(same)
126,684.40
Nelbert Pineda
(same)
126,684.40
Glen Estipular
(same)
126,684.40
Francisco Compuesto (same)
126,684.40
Isabelito Cortes
(same)
126,684.40
Maturan Rosauro
(same)
126,684.40
Samson Canas
(same)
126,684.40
Febien Isip
(same)
126,684.40
Jesus Riparip
(same)
126,684.40
Alfredo Sienes
(same)
126,684.40
Adolar Albert
(same)
126,684.40
Cabanillas Honesto
(same)
126,684.40
Castillo Amping
(same)
126,684.40
Revilla Elwin
(same)
126,684.40
GRAND TOTAL
P3,927,216.40[9]
4. ORDERING said Longest Force Investigation & Security Agency, Inc. to pay attorneys fees equivalent to
ten (10%) percent of the total award recovered representing backwages in the amount of P392,721.64.[10]
5. DISMISSING all other claims for lack of legal basis.
SO ORDERED.[11]
Petitioner appealed the foregoing to the NLRC in NLRC NCR Case No. 00-09-005440-96-A. The labor
tribunal, however, affirmed in toto the decision of the Labor Arbiter. Petitioner moved for reconsideration, but
this was denied by the NLRC.
The petitioner then filed a special civil action for certiorari assailing the NLRC judgment for having been
rendered with grave abuse of discretion with the Court of Appeals, docketed as CA-G.R. SP No. 55416. The
Court of Appeals, however, denied due course to the petition and dismissed it outright for the following
reasons:
1. The verification and certification on non-forum shopping is signed not by duly authorized
officer of petitioner corporation, but by counsel (Section 1, Rule 65, 1997 Rules of Civil
Procedure).
2. The petition is unaccompanied by copies of relevant and pertinent documents, particularly the
motion for reconsideration filed before the NLRC (Section 1, Rule 65, 1997 Rules of Civil
Procedure).[12]
The petitioner then moved for reconsideration of the order of dismissal. The appellate court denied the
motion, pointing out that under prevailing case law subsequent compliance with formal requirements for
filing a petition as prescribed by the Rules, does not ipso factowarrant a reconsideration. In any event, it
found no grave abuse of discretion on the part of the NLRC to grant the writ of certiorari.
Hence, this present petition before us. Petitioner submits that THE COURT OF APPEALS GRAVELY
ERRED:
1. .IN DISMISSING THE PETITION AND DENYING THE MOTION FOR RECONSIDERATION
DESPITE THE FACT THAT PETITIONER SUBSTANTIALLY COMPLIED WITH THE REQUIREMENTS
OF SECTION 1, RULE 65, 1997 RULES OF CIVIL PROCEDURE.
2. .IN RULING THAT PETITIONER WAS NOT DENIED DUE PROCESS OF LAW.
3. .IN AFFIRMING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION THAT
LONGEST FORCE AND PETITIONER ARE JOINTLY AND SEVERALLY LIABLE FOR PAYMENT OF
WAGES AND OVERTIME PAY DESPITE THE CLEAR SHOWING THAT PETITIONER HAVE
ALREADY PAID THE SECURITY SERVICES THAT WAS RENDERED BY PRIVATE RESPONDENTS.
4. WHEN IT FAILED TO RULE THAT ONLY LONGEST FORCE SHOULD BE SOLELY AND
ULTIMATELY LIABLE IN THE INSTANT CASE.[13]
We find the issues for our resolution to be: (1) Was it error for the Court of Appeals to sustain its order
of dismissal of petitioners special civil action for certiorari, notwithstanding subsequent compliance with the
requirements under the Rules of Court by the petitioner? (2) Did the appellate court err in not holding that
petitioner was denied due process of law by the NLRC? and (3) Did the appellate court grievously err in

finding petitioner jointly and severally liable with Longest Force for the payment of wage differentials and
overtime pay owing to the private respondents?
On the first issue, the Court of Appeals in dismissing CA-G.R. SP No. 55416 observed that: (1) the
verification and certification of non-forum shopping was not signed by any duly authorized officer of
petitioner but merely by petitioners counsel; and (2) the petition was not accompanied by a copy of motion
for reconsideration filed before the NLRC, thus violating Section 1, [14] Rule 65 of the Rules of Court. Hence, a
dismissal was proper under Section 3,[15] Rule 46 of the Rules.
In assailing the appellate courts ruling, the petitioner appeals to our sense of compassion and kind
consideration. It submits that the certification signed by its counsel and attached to its petition filed with the
Court of Appeals is substantial compliance with the requirement. Moreover, petitioner calls our attention to
the fact that when it filed its motion for reconsideration before the Court of Appeals, a joint verification and
certification of non-forum shopping duly signed by its Personnel Manager [16] and a copy of the Motion for
Reconsideration[17]filed before the NLRC were attached therein. Thus, petitioner prays that we take a liberal
stance to promote the ends of justice.
Petitioners plea for liberality, however, cannot be granted by the Court for reasons herein elucidated.
It is settled that the requirement in the Rules that the certification of non-forum shopping should be
executed and signed by the plaintiff or the principal means that counsel cannot sign said certification unless
clothed with special authority to do so.[18] The reason for this is that the plaintiff or principal knows better
than anyone else whether a petition has previously been filed involving the same case or substantially the
same issues. Hence, a certification signed by counsel alone is defective and constitutes a valid cause for
dismissal of the petition.[19] In the case of natural persons, the Rule requires the parties themselves to sign
the certificate of non-forum shopping. However, in the case of the corporations, the physical act of signing
may be performed, on behalf of the corporate entity, only by specifically authorized individuals for the simple
reason that corporations, as artificial persons, cannot personally do the task themselves. [20] In this case, not
only was the originally appended certification signed by counsel, but in its motion for reconsideration, still
petitioner utterly failed to show that Ms. Rosanna Ignacio, its Personnel Manager who signed the verification
and certification of non-forum shopping attached thereto, was duly authorized for this purpose. It cannot be
gainsaid that obedience to the requirements of procedural rule is needed if we are to expect fair results
therefrom. Utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal
construction.[21]
Thus, on this point, no error could be validly attributed to respondent Court of Appeals. It did not err
in dismissing the petition for non-compliance with the requirements governing the certification of non-forum
shopping.
Anent the second issue, petitioner avers that there was denial of due process of law when the Labor
Arbiter failed to have the case tried on the merits. Petitioner adds that the Arbiter did not observe the
mandatory language of the then Sec. 5(b) Rule V (now Section 11, per amendment in Resolution No. 01-02,
Series of 2002) of the NLRC New Rules of Procedure which provided that:
If the Labor Arbiter finds no necessity of further hearing after the parties have submitted their position
papers and supporting documents, he shall issue an Order to that effect and shall inform the parties, stating
the reasons therefor. [22]
Petitioners contention, in our view, lacks sufficient basis. Well settled is the rule that the essence of
due process is simply an opportunity to be heard, or, as applied to administrative proceedings, an
opportunity to explain ones side or an opportunity to seek a reconsideration of the action or ruling
complained of.[23] Not all cases require a trial-type hearing. The requirement of due process in labor cases
before a Labor Arbiter is satisfied when the parties are given the opportunity to submit their position papers
to which they are supposed to attach all the supporting documents or documentary evidence that would
prove their respective claims, in the event the Labor Arbiter determines that no formal hearing would be
conducted or that such hearing was not necessary.[24] In any event, as found by the NLRC, petitioner was
given ample opportunity to present its side in several hearings conducted before the Labor Arbiter and in the
position papers and other supporting documents that it had submitted. We find that such opportunity more
than satisfies the requirement of due process in labor cases.
On the third issue, petitioner argues that it should not be held jointly and severally liable with Longest
Force for underpayment of wages and overtime pay because it had been religiously and promptly paying the
bills for the security services sent by Longest Force and that these are in accordance with the statutory
minimum wage. Also, petitioner contends that it should not be held liable for overtime pay as private
respondents failed to present proof that overtime work was actually performed. Lastly, petitioner claims that
the Court of Appeals failed to render a decision that finally disposed of the case because it did not specifically
rule on the immediate recourse of private respondents, that is, the matter of reimbursement between

petitioner and Longest Force in accordance with Eagle Security Agency Inc. v. NLRC,[25] and Philippine
Fisheries Development Authority v. NLRC.[26]
Petitioners liability is joint and several with that of Longest Force, pursuant to Articles 106, 107 and
109 of the Labor Code which provide as follows:
ART. 106. CONTRACTOR OR SUBCONTRACTOR Whenever an employer enters into a contract with
another person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he
is liable to employees directly employed by him.
xxx
ART. 107. INDIRECT EMPLOYER. The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.
ART. 109. SOLIDARY LIABILITY. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation
of any provision of this Code. For purposes of determining the extent of their civil liability under this
Chapter, they shall be considered as direct employers.
In this case, when petitioner contracted for security services with Longest Force as the security agency
that hired private respondents to work as guards for the shipyard corporation, petitioner became an indirect
employer of private respondents pursuant to Article 107 abovecited. Following Article 106, when the agency
as contractor failed to pay the guards, the corporation as principal becomes jointly and severally liable for
the guards wages. This is mandated by the Labor Code to ensure compliance with its provisions, including
payment of statutory minimum wage. The security agency is held liable by virtue of its status as direct
employer, while the corporation is deemed the indirect employer of the guards for the purpose of paying
their wages in the event of failure of the agency to pay them. This statutory scheme gives the workers the
ample protection consonant with labor and social justice provisions of the 1987 Constitution. [27]
Petitioner cannot evade its liability by claiming that it had religiously paid the compensation of guards
as stipulated under the contract with the security agency. Labor standards are enacted by the legislature to
alleviate the plight of workers whose wages barely meet the spiraling costs of their basic needs. Labor laws
are considered written in every contract. Stipulations in violation thereof are considered null. Similarly,
legislated wage increases are deemed amendments to the contract. Thus, employers cannot hide behind
their contracts in order to evade their (or their contractors or subcontractors) liability for noncompliance
with the statutory minimum wage.[28]
However, we must emphasize that the solidary liability of petitioner with that of Longest Force does not
preclude the application of the Civil Code provision on the right of reimbursement from his co-debtor by the
one who paid.[29] As held in Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, [30] the joint and several
liability imposed on petitioner is without prejudice to a claim for reimbursement by petitioner against the
security agency for such amounts as petitioner may have to pay to complainants, the private respondents
herein. The security agency may not seek exculpation by claiming that the principals payments to it were
inadequate for the guards lawful compensation. As an employer, the security agency is charged with
knowledge of labor laws; and the adequacy of the compensation that it demands for contractual services is
its principal concern and not any others.[31]
On the issue of the propriety of the award of overtime pay despite the alleged lack of proof thereof,
suffice it to state that such involves a determination and evaluation of facts which cannot be done in a
petition for review. Well established is the rule that in an appeal via certiorari, only questions of law may be
reviewed.[32]
One final point. Upon review of the award of backwages and attorneys fees, we discovered certain
errors that happened in the addition of the amount of individual backwages that resulted in the erroneous
total amount of backwages and attorneys fees. These errors ought to be properly rectified now. Thus, the
correct sum of individual backwages should be P126,648.40 instead of P126,684.40, while the correct sum
of total backwages awarded and attorneys fees should be P3,926,100.40 and P392,610.04, instead
of P3,927,216.40 andP392,721.64, respectively.
WHEREFORE, the Resolution of the Court of Appeals in CA-G.R. SP No. 55416 is
AFFIRMED with MODIFICATION. Petitioner and Longest Force are held liable jointly and severally for
underpayment of wages and overtime pay of the security guards, without prejudice to petitioners right of
reimbursement from Longest Force Investigation and Security Agency, Inc. The amounts payable to

complaining security guards, herein private respondents, by way of total backwages and attorneys fees are
hereby set at P3,926,100.40 andP392,610.04, respectively. Costs against petitioner.
SO ORDERED.
FIRST DIVISION
G.R. No. 147791
September 8, 2006
CONSTRUCTION DEVELOPMENT CORPORATION OF THE PHILIPPINES, petitioner,
vs.REBECCA G. ESTRELLA, RACHEL E. FLETCHER, PHILIPPINE PHOENIX SURETY & INSURANCE
INC., BATANGAS LAGUNA TAYABAS BUS CO., and WILFREDO DATINGUINOO, respondents.
YNARES-SANTIAGO, J.:
This petition for review assails the March 29, 2001 Decision1 of the Court of Appeals in CA-G.R. CV No.
46896, which affirmed with modification the February 9, 1993 Decision2 of the Regional Trial Court of Manila,
Branch 13, in Civil Case No. R-82-2137, finding Batangas Laguna Tayabas Bus Co. (BLTB) and Construction
Development Corporation of the Philippines (CDCP) liable for damages.
The antecedent facts are as follows:
On December 29, 1978, respondents Rebecca G. Estrella and her granddaughter, Rachel E. Fletcher, boarded
in San Pablo City, a BLTB bus bound for Pasay City. However, they never reached their destination because
their bus was rammed from behind by a tractor-truck of CDCP in the South Expressway. The strong impact
pushed forward their seats and pinned their knees to the seats in front of them. They regained
consciousness only when rescuers created a hole in the bus and extricated their legs from under the seats.
They were brought to the Makati Medical Center where the doctors diagnosed their injuries to be as follows:
Medical Certificate of Rebecca Estrella
Fracture, left tibia mid 3rd
Lacerated wound, chin
Contusions with abrasions, left lower leg
Fracture, 6th and 7th ribs, right3
Medical Certificate of Rachel Fletcher
Extensive lacerated wounds, right leg posterior aspect popliteal area
and antero-lateral aspect mid lower leg with severance of muscles.
Partial amputation BK left leg with severance of gastro-soleus and
antero-lateral compartment of lower leg.
Fracture, open comminuted, both tibial4
Thereafter, respondents filed a Complaint5 for damages against CDCP, BLTB, Espiridion Payunan, Jr. and
Wilfredo Datinguinoo before the Regional Trial Court of Manila, Branch 13. They alleged (1) that Payunan, Jr.
and Datinguinoo, who were the drivers of CDCP and BLTB buses, respectively, were negligent and did not
obey traffic laws; (2) that BLTB and CDCP did not exercise the diligence of a good father of a family in the
selection and supervision of their employees; (3) that BLTB allowed its bus to operate knowing that it lacked
proper maintenance thus exposing its passengers to grave danger; (4) that they suffered actual damages
amounting to P250,000.00 for Estrella and P300,000.00 for Fletcher; (5) that they suffered physical
discomfort, serious anxiety, fright and mental anguish, besmirched reputation and wounded feelings, moral
shock, and lifelong social humiliation; (6) that defendants failed to act with justice, give respondents their
due, observe honesty and good faith which entitles them to claim for exemplary damage; and (7) that they
are entitled to a reasonable amount of attorney's fees and litigation expenses.
CDCP filed its Answer6 which was later amended to include a third-party complaint against Philippine Phoenix
Surety and Insurance, Inc. (Phoenix).7
On February 9, 1993, the trial court rendered a decision finding CDCP and BLTB and their employees liable
for damages, the dispositive portion of which, states:
WHEREFORE, judgment is rendered:
In the Complaint
1. In favor of the plaintiffs and against the defendants BLTB, Wilfredo Datinguinoo, Construction
and Development Corporation of the Philippines (now PNCC) and Espiridion Payunan, Jr., ordering
said defendants, jointly and severally to pay the plaintiffs the sum of P79,254.43 as actual
damages and to pay the sum of P10,000.00 as attorney's fees or a total of P89,254.43;
2. In addition, defendant Construction and Development Corporation of the Philippines and
defendant Espiridion Payunan, Jr., shall pay the plaintiffs the amount of Fifty Thousand
(P50,000.00) Pesos to plaintiff Rachel Fletcher and Twenty Five Thousand (P25,000.00) Pesos to
plaintiff Rebecca Estrella;
3. On the counterclaim of BLTB Co. and Wilfredo Datinguinoo

Dismissing the counterclaim;

4. On the crossclaim against Construction and Development Corporation of the Philippines (now
PNCC) and Espiridion Payunan, Jr.
Dismissing the crossclaim;
5. On the counterclaim of Construction and Development Corporation of the Philippines (now PNCC)

Dismissing the counterclaim;

6. On the crossclaim against BLTB
Dismissing the crossclaim;
7. On the Third Party Complaint by Construction and Development Corporation of the Philippines
against Philippine Phoenix Surety and Insurance, Incorporated
Dismissing the Third Party Complaint.
SO ORDERED.8
The trial court held that BLTB, as a common carrier, was bound to observe extraordinary diligence in the
vigilance over the safety of its passengers. It must carry the passengers safely as far as human care and
foresight provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances. Thus, where a passenger dies or is injured, the carrier is presumed to have been at fault or
has acted negligently. BLTB's inability to carry respondents to their destination gave rise to an action for
breach of contract of carriage while its failure to rebut the presumption of negligence made it liable to
respondents for the breach.9
Regarding CDCP, the trial court found that the tractor-truck it owned bumped the BLTB bus from behind.
Evidence showed that CDCP's driver was reckless and driving very fast at the time of the incident. The gross
negligence of its driver raised the presumption that CDCP was negligent either in the selection or in the
supervision of its employees which it failed to rebut thus making it and its driver liable to respondents. 10
Unsatisfied with the award of damages and attorney's fees by the trial court, respondents moved that the
decision be reconsidered but was denied. Respondents elevated the case 11 to the Court of Appeals which
affirmed the decision of the trial court but modified the amount of damages, the dispositive portion of which
provides:
WHEREFORE, the assailed decision dated October 7, 1993 of the Regional Trial Court, Branch 13,
Manila is hereby AFFIRMED with the following MODIFICATION:
1. The interest of six (6) percent per annum on the actual damages of P79,354.43 should
commence to run from the time the judicial demand was made or from the filing of the complaint
on February 4, 1980;
2. Thirty (30) percent of the total amount recovered is hereby awarded as attorney's fees;
3. Defendants-appellants Construction and Development Corporation of the Philippines (now PNCC)
and Espiridion Payunan, Jr. are ordered to pay plaintiff-appellants Rebecca Estrella and Rachel
Fletcher the amount of Twenty Thousand (P20,000.00) each as exemplary damages and
P80,000.00 by way of moral damages to Rachel Fletcher.
SO ORDERED.12
The Court of Appeals held that the actual or compensatory damage sought by respondents for the injuries
they sustained in the form of hospital bills were already liquidated and were ascertained. Accordingly, the
6% interest per annum should commence to run from the time the judicial demand was made or from the
filing of the complaint and not from the date of judgment. The Court of Appeals also awarded attorney's fees
equivalent to 30% of the total amount recovered based on the retainer agreement of the parties. The
appellate court also held that respondents are entitled to exemplary and moral damages. Finally, it affirmed
the ruling of the trial court that the claim of CDCP against Phoenix had already prescribed.
Hence, this petition raising the following issues:
I
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING RESPONDENTS
BLTB AND/OR ITS DRIVER WILFREDO DATINGUINOO SOLELY LIABLE FOR THE DAMAGES
SUSTAINED BY HEREIN RESPONDENTS FLETCHER AND ESTRELLA.
II
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN AWARDING EXCESSIVE OR
UNFOUNDED DAMAGES, ATTORNEY'S FEES AND LEGAL INTEREST TO RESPONDENTS FLETCHER
AND ESTRELLA.
III
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING RESPONDENT
PHOENIX LIABLE UNDER ITS INSURANCE POLICY ON THE GROUND OF PRESCRIPTION.

The issues for resolution are as follows: (1) whether BLTB and its driver Wilfredo Datinguinoo are solely
liable for the damages sustained by respondents; (2) whether the damages, attorney's fees and legal
interest awarded by the CA are excessive and unfounded; (3) whether CDCP can recover under its insurance
policy from Phoenix.
Petitioner contends that since it was made solidarily liable with BLTB for actual damages and attorney's fees
in paragraph 1 of the trial court's decision, then it should no longer be held liable to pay the amounts stated
in paragraph 2 of the same decision. Petitioner claims that the liability for actual damages and attorney's
fees is based on culpa contractual, thus, only BLTB should be held liable. As regards paragraph 2 of the trial
court's decision, petitioner claims that it is ambiguous and arbitrary because the dispositive portion did not
state the basis and nature of such award.
Respondents, on the other hand, argue that petitioner is also at fault, hence, it was properly joined as a
party. There may be an action arising out of one incident where questions of fact are common to all. Thus,
the cause of action based on culpa aquiliana in the civil suit they filed against it was valid.
The petition lacks merit.
The case filed by respondents against petitioner is an action for culpa aquiliana or quasi-delict under Article
2176 of the Civil Code.13 In this regard, Article 2180 provides that the obligation imposed by Article 2176 is
demandable for the acts or omissions of those persons for whom one is responsible. Consequently, an action
based on quasi-delict may be instituted against the employer for an employee's act or omission. The liability
for the negligent conduct of the subordinate is direct and primary, but is subject to the defense of due
diligence in the selection and supervision of the employee.14 In the instant case, the trial court found that
petitioner failed to prove that it exercised the diligence of a good father of a family in the selection and
supervision of Payunan, Jr.
The trial court and the Court of Appeals found petitioner solidarily liable with BLTB for the actual damages
suffered by respondents because of the injuries they sustained. It was established that Payunan, Jr. was
driving recklessly because of the skid marks as shown in the sketch of the police investigator.
It is well-settled in Fabre, Jr. v. Court of Appeals,15 that the owner of the other vehicle which collided with a
common carrier is solidarily liable to the injured passenger of the same. We held, thus:
The same rule of liability was applied in situations where the negligence of the driver of the bus on
which plaintiff was riding concurred with the negligence of a third party who was the driver of
another vehicle, thus causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v.
Intermediate Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus
company, its driver, the operator of the other vehicle and the driver of the vehicle were
jointly and severally held liable to the injured passenger or the latter's heirs. The basis of
this allocation of liability was explained in Viluan v. Court of Appeals, thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs
from contract while that of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that
in case of injury to a passenger due to the negligence of the driver of the bus on which he was
riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are
jointly and severally liable for damages. x x x
xxxx
As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out their
claim against the carrier and the driver exclusively on one theory, much less on that of breach of
contract alone.After all, it was permitted for them to allege alternative causes of action
and join as many parties as may be liable on such causes of action so long as private
respondent and her co-plaintiffs do not recover twice for the same injury. What is clear
from the cases is the intent of the plaintiff there to recover from both the carrier and the driver,
thus justifying the holding that the carrier and the driver were jointly and severally liable because
their separate and distinct acts concurred to produce the same injury.16(Emphasis supplied)
In a "joint" obligation, each obligor answers only for a part of the whole liability; in a "solidary" or "joint and
several" obligation, the relationship between the active and the passive subjects is so close that each of
them must comply with or demand the fulfillment of the whole obligation. In Lafarge Cement v. Continental
Cement Corporation,17we reiterated that joint tort feasors are jointly and severally liable for the tort which
they commit. Citing Worcester v. Ocampo,18 we held that:
x x x The difficulty in the contention of the appellants is that they fail to recognize that the basis of
the present action is tort. They fail to recognize the universal doctrine that each joint tort feasor is
not only individually liable for the tort in which he participates, but is also jointly liable with his tort
feasors. x x x

It may be stated as a general rule that joint tort feasors are all the persons who command,
instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a
tort, or who approve of it after it is done, if done for their benefit. They are each liable as
principals, to the same extent and in the same manner as if they had performed the wrongful act
themselves. x x x
Joint tort feasors are jointly and severally liable for the tort which they commit. The persons
injured may sue all of them or any number less than all. Each is liable for the whole damages
caused by all, and all together are jointly liable for the whole damage. It is no defense for one sued
alone, that the others who participated in the wrongful act are not joined with him as defendants;
nor is it any excuse for him that his participation in the tort was insignificant as compared to that of
the others. x x x
Joint tort feasors are not liable pro rata. The damages can not be apportioned among them, except
among themselves. They cannot insist upon an apportionment, for the purpose of each paying an
aliquot part. They are jointly and severally liable for the whole amount. x x x
A payment in full for the damage done, by one of the joint tort feasors, of course satisfies any
claim which might exist against the others. There can be but satisfaction. The release of one of the
joint tort feasors by agreement generally operates to discharge all. x x x
Of course the court during trial may find that some of the alleged tort feasors are liable and that
others are not liable. The courts may release some for lack of evidence while condemning others of
the alleged tort feasors. And this is true even though they are charged jointly and severally.19
Petitioner's claim that paragraph 2 of the dispositive portion of the trial court's decision is ambiguous and
arbitrary and also entitles respondents to recover twice is without basis. In the body of the trial court's
decision, it was clearly stated that petitioner and its driver Payunan, Jr., are jointly and solidarily liable for
moral damages in the amount of P50,000.00 to respondent Fletcher and P25,000.00 to respondent
Estrella.20 Moreover, there could be no double recovery because the award in paragraph 2 is for moral
damages while the award in paragraph 1 is for actual damages and attorney's fees.
Petitioner next claims that the damages, attorney's fees, and legal interest awarded by the Court of Appeals
are excessive.
Moral damages may be recovered in quasi-delicts causing physical injuries.21 The award of moral damages in
favor of Fletcher and Estrella in the amount of P80,000.00 must be reduced since prevailing jurisprudence
fixed the same at P50,000.00.22 While moral damages are not intended to enrich the plaintiff at the expense
of the defendant, the award should nonetheless be commensurate to the suffering inflicted. 23
The Court of Appeals correctly awarded respondents exemplary damages in the amount of P20,000.00 each.
Exemplary damages may be awarded in addition to moral and compensatory damages. 24 Article 2231 of the
Civil Code also states that in quasi-delicts, exemplary damages may be granted if the defendant acted with
gross negligence.25 In this case, petitioner's driver was driving recklessly at the time its truck rammed the
BLTB bus. Petitioner, who has direct and primary liability for the negligent conduct of its subordinates, was
also found negligent in the selection and supervision of its employees. In Del Rosario v. Court of
Appeals,26 we held, thus:
ART. 2229 of the Civil Code also provides that such damages may be imposed, by way of example
or correction for the public good. While exemplary damages cannot be recovered as a matter of
right, they need not be proved, although plaintiff must show that he is entitled to moral, temperate
or compensatory damages before the court may consider the question of whether or not exemplary
damages should be awarded. Exemplary Damages are imposed not to enrich one party or
impoverish another but to serve as a deterrent against or as a negative incentive to curb socially
deleterious actions.
Regarding attorney's fees, we held in Traders Royal Bank Employees Union-Independent v. National Labor
Relations Commission,27 that:
There are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by
the court to be paid by the losing party in a litigation. The basis of this is any of the cases
provided by law where such award can be made, such as those authorized in Article 2208, Civil
Code, and is payable not to the lawyer but to the client, unless they have agreed that the
award shall pertain to the lawyer as additional compensation or as part
thereof.28 (Emphasis supplied)

In the instant case, the Court of Appeals correctly awarded attorney's fees and other expenses of litigation
as they may be recovered as actual or compensatory damages when exemplary damages are awarded;
when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's valid, just and
demandable claim; and in any other case where the court deems it just and equitable that attorney's fees
and expenses of litigation should be recovered.29
Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the complaint, we
held inEastern Shipping Lines, Inc. v. Court of Appeals,30 that when an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory damages,31 subject to the following
rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum.No interest, however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be
so reasonably established at the time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of
credit.32 (Emphasis supplied)
Accordingly, the legal interest of 6% shall begin to run on February 9, 1993 when the trial court rendered
judgment and not on February 4, 1980 when the complaint was filed. This is because at the time of the filing
of the complaint, the amount of the damages to which plaintiffs may be entitled remains unliquidated and
unknown, until it is definitely ascertained, assessed and determined by the court and only upon presentation
of proof thereon.33 From the time the judgment becomes final and executory, the interest rate shall be 12%
until its satisfaction.
Anent the last issue of whether petitioner can recover under its insurance policy from Phoenix, we affirm the
findings of both the trial court and the Court of Appeals, thus:
As regards the liability of Phoenix, the court a quo correctly ruled that defendant-appellant CDCP's
claim against Phoenix already prescribed pursuant to Section 384 of P.D. 612, as amended, which
provides:
Any person having any claim upon the policy issued pursuant to this chapter shall,
without any unnecessary delay, present to the insurance company concerned a written
notice of claim setting forth the nature, extent and duration of the injuries sustained as
certified by a duly licensed physician. Notice of claim must be filed within six months from
date of the accident, otherwise, the claim shall be deemed waived. Action or suit for
recovery of damage due to loss or injury must be brought in proper cases, with the
Commissioner or Courts within one year from denial of the claim, otherwise, the
claimant's right of action shall prescribe. (As amended by PD 1814, BP 874.)34
The law is clear and leaves no room for interpretation. A written notice of claim must be filed within six
months from the date of the accident. Since petitioner never made any claim within six months from the
date of the accident, its claim has already prescribed.
WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No.
46896 dated March 29, 2001, which modified the Decision of the Regional Trial Court of Manila, Branch 13, in
Civil Case No. R-82-2137, is AFFIRMED with the MODIFICATIONS that petitioner is held jointly and
severally liable to pay (1) actual damages in the amount of P79,354.43; (2) moral damages in the amount of
P50,000.00 each for Rachel Fletcher and Rebecca Estrella; (3) exemplary damages in the amount of
P20,000.00 each for Rebecca Estrella and Rachel Fletcher; and (4) thirty percent (30%) of the total amount

recovered as attorney's fees. The total amount adjudged shall earn interest at the rate of 6% per annum
from the date of judgment of the trial court until finality of this judgment. From the time this Decision
becomes final and executory and the judgment amount remains unsatisfied, the same shall earn interest at
the rate of 12% per annum until its satisfaction.
SO ORDERED.

G.R. No. 157917

August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,

vs.SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the
COURT OF APPEALS Respondents.
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe
extraordinary diligence in the conduct of his business. He is presumed to be negligent when death occurs to
a passenger. His liability may include indemnity for loss of earning capacity even if the deceased passenger
may only be an unemployed high school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse
decision promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification
the decision rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Paraaque City
that had decreed them jointly and severally liable with Philippine National Railways (PNR), their codefendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron
John L. Zarate (Aaron), then a high school student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereas were engaged in the business of transporting students from their respective residences in
Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereas used a
KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two
of whom would be seated in the front beside the driver, and the others in the rear, with six students on
either side. They employed Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco. On August 22,
1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates residence.
Aaron took his place on the left side of the van near the rear door. The van, with its air-conditioning unit
turned on and the stereo playing loudly, ultimately carried all the 14 student riders on their way to Don
Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and that they were already
running late because of the heavy vehicular traffic on the South Superhighway, Alfaro took the van to an
alternate route at about 6:45 a.m. by traversing the narrow path underneath the Magallanes Interchange
that was then commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the narrow
path was marked by piles of construction materials and parked passenger jeepneys, and the railroad
crossing in the narrow path had no railroad warning signs, or watchmen, or other responsible persons
manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing
motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by
Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train
neared the railroad crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large
passenger bus. His view of the oncoming train was blocked because he overtook the passenger bus on its
left side. The train blew its horn to warn motorists of its approach. When the train was about 50 meters
away from the passenger bus and the van, Alano applied the ordinary brakes of the train. He applied the
emergency brakes only when he saw that a collision was imminent. The passenger bus successfully crossed
the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the van, and the impact
threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path of the
train, which dragged his body and severed his head, instantaneously killing him. Alano fled the scene on
board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages
against Alfaro, the Pereas, PNR and Alano. The Pereas and PNR filed their respective answers, with crossclaims against each other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Perea for the adequate and safe
transportation carriage of the former spouses' son from their residence in Paraaque to his school
at the Don Bosco Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the
minor son of spouses Zarate died in connection with a vehicular/train collision which occurred while
Aaron was riding the contracted carrier Kia Ceres van of spouses Perea, then driven and operated
by the latter's employee/authorized driver Clemente Alfaro, which van collided with the train of
PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes Interchange in
Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a
railroad crossing used by motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no appropriate and safety
warning signs and railings at the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound public utility and private vehicles used
on a daily basis the site of the collision as an alternative route and short-cut to Makati;

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

(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement
between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from
the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for
negligence constituting the proximate cause of the vehicular collision, which resulted in the death
of plaintiff spouses' son;
(2) Whether or not the defendant spouses Perea being the employer of defendant Alfaro are liable
for any negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad system
is liable for negligence in failing to provide adequate safety warning signs and railings in the area
commonly used by motorists for railroad crossings, constituting the proximate cause of the
vehicular collision which resulted in the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Perea are liable for breach of the contract of carriage with
plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages,
and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Perea observed the diligence of
employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John
Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved
in the accident, in allowing or tolerating the motoring public to cross, and its failure to install safety
devices or equipment at the site of the accident for the protection of the public;

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

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

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

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

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

PNR assigned the following errors, to wit:5

The Court a quo erred in:

The Zarates claim against the Pereas was upon breach of the contract of carriage for the safe transport of
Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code.
In their defense, the Pereas adduced evidence to show that they had exercised the diligence of a good
father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a
drivers license and had not been involved in any vehicular accident prior to the collision; that their own son
had taken the van daily; and that Teodoro Perea had sometimes accompanied Alfaro in the vans trips
transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of
the van whose driver had not first stopped, looked and listened; and that the narrow path traversed by the
van had not been intended to be a railroad crossing for motorists.
Ruling of the RTC

1. In finding the defendant-appellant Philippine National Railways jointly and severally liable
together with defendant-appellants spouses Teodorico and Nanette Perea and defendant-appellant
Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite
overwhelming documentary evidence on record, supporting the case of defendants-appellants
Philippine National Railways.
The Pereas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and
exemplary damages and attorneys fees with the other defendants.

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

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

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

The trial court erred in awarding excessive damages and attorneys fees.

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

(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorneys fees in the amount of Php200,000.00; and

The trial court erred in awarding damages in the form of deceaseds loss of earning capacity in the absence
of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the
moral damages to P 2,500,000.00; and deleted the attorneys fees because the RTC did not state the factual
and legal bases, to wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of
Paraaque City is AFFIRMED with the modification that the award of Actual Damages is reduced
to P59,502.76; Moral Damages is reduced to P 2,500,000.00; and the award for Attorneys Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of the ruling in Cariaga
v. Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga
a sum representing the loss of the deceaseds earning capacity despite Cariaga being only a medical student
at the time of the fatal incident. Applying the formula adopted in the American Expectancy Table of
Mortality:

(7) Cost of suit.

SO ORDERED.
On June 29, 2000, the RTC denied the Pereas motion for reconsideration, 4 reiterating that the cooperative
gross negligence of the Pereas and PNR had caused the collision that led to the death of Aaron; and that
the damages awarded to the Zarates were not excessive, but based on the established circumstances.
The CAs Ruling
Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).

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

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age
of 21 (the age when he would have graduated from college and started working for his own livelihood)
instead of 15 years (his age when he died). Considering that the nature of his work and his salary at the
time of Aarons death were unknown, it used the prevailing minimum wage of P 280.00/day to compute

Aarons gross annual salary to be P 110,716.65, inclusive of the thirteenth month pay. Multiplying this
annual salary by Aarons life expectancy of 39.3 years, his gross income would aggregate to P 4,351,164.30,
from which his estimated expenses in the sum of P 2,189,664.30 was deducted to finally arrive at P
2,161,500.00 as net income. Due to Aarons computed net income turning out to be higher than the amount
claimed by the Zarates, only P 2,109,071.00, the amount expressly prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereas motion for reconsideration.8
Issues
In this appeal, the Pereas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial courts decision holding the petitioners jointly and severally
liable to pay damages with Philippine National Railways and dismissing their cross-claim against the latter.
II. The lower court erred in affirming the trial courts decision awarding damages for loss of earning capacity
of a minor who was only a high school student at the time of his death in the absence of sufficient basis for
such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are
liable at all.
Ruling
The petition has no merit.
1.
Were the Pereas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereas and the PNR, basing their
claim against the Pereas on breach of contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereas defense was that they exercised the diligence of a good father of the family in the
selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a drivers license and that
he had not been involved in any vehicular accident prior to the fatal collision with the train; that they even
had their own son travel to and from school on a daily basis; and that Teodoro Perea himself sometimes
accompanied Alfaro in transporting the passengers to and from school. The RTC gave scant consideration to
such defense by regarding such defense as inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereas operated as a
common carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a
good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
carrier,9primarily because he only caters to some specific or privileged individuals, and his operation is
neither open to the indefinite public nor for public use, the exact nature of the operation of a school bus
service has not been finally settled. This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place
to another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a
common/public carrier.10 A private carrier is one who, without making the activity a vocation, or without
holding himself or itself out to the public as ready to act for all who may desire his or its services,
undertakes, by special agreement in a particular instance only, to transport goods or persons from one place
to another either gratuitously or for hire.11The provisions on ordinary contracts of the Civil Code govern the
contract of private carriage.The diligence required of a private carrier is only ordinary, that is, the diligence
of a good father of the family. In contrast, a common carrier is a person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering such services to the public.12Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act, 13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at
fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.14
In relation to common carriers, the Court defined public use in the following terms in United States v. Tan
Piaco,15viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not confined to
privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives
it its public character. In determining whether a use is public, we must look not only to the character of the
business to be done, but also to the proposed mode of doing it. If the use is merely optional with the
owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of the
jurisdiction of the public utility commission. There must be, in general, a right which the law compels the
owner to give to the general public. It is not enough that the general prosperity of the public is promoted.
Public use is not synonymous with public interest. The true criterion by which to judge the character of the
use is whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any
distinction between a person or an enterprise offering transportation on a regular or an isolated basis; and
has not distinguished a carrier offering his services to the general public, that is, the general community or
population, from one offering his services only to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly
with the notion of public service under the Public Service Act, which supplements the law on common
carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service
Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientle, whether permanent or occasional, and done for the general
business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop,

ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as
common carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if
they had limited clientle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business
actually transacted, or the number and character of the conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by the carrier that he has held out to the general public as
his business or occupation. If the undertaking is a single transaction, not a part of the general business or
occupation engaged in, as advertised and held out to the general public, the individual or the entity
rendering such service is a private, not a common, carrier. The question must be determined by the
character of the business actually carried on by the carrier, not by any secret intention or mental reservation
it may entertain or assert when charged with the duties and obligations that the law imposes. 21
Applying these considerations to the case before us, there is no question that the Pereas as the operators
of a school bus service were: (a) engaged in transporting passengers generally as a business, not just as a
casual occupation; (b) undertaking to carry passengers over established roads by the method by which the
business was conducted; and (c) transporting students for a fee. Despite catering to a limited clientle, the
Pereas operated as a common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near where they operated the service
and for a fee.
The common carriers standard of care and vigilance as to the safety of the passengers is defined by law.
Given the nature of the business and for reasons of public policy, the common carrier is bound "to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case."22 Article 1755 of the Civil Code specifies that the
common carrier should "carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the circumstances." To successfully
fend off liability in an action upon the death or injury to a passenger, the common carrier must prove his or
its observance of that extraordinary diligence; otherwise, the legal presumption that he or it was at fault or
acted negligently would stand.23 No device, whether by stipulation, posting of notices, statements on tickets,
or otherwise, may dispense with or lessen the responsibility of the common carrier as defined under Article
1755 of the Civil Code. 24
And, secondly, the Pereas have not presented any compelling defense or reason by which the Court might
now reverse the CAs findings on their liability. On the contrary, an examination of the records shows that the
evidence fully supported the findings of the CA.
As earlier stated, the Pereas, acting as a common carrier, were already presumed to be negligent at the
time of the accident because death had occurred to their passenger.25 The presumption of negligence, being
a presumption of law, laid the burden of evidence on their shoulders to establish that they had not been
negligent.26 It was the law no less that required them to prove their observance of extraordinary diligence in
seeing to the safe and secure carriage of the passengers to their destination. Until they did so in a credible
manner, they stood to be held legally responsible for the death of Aaron and thus to be held liable for all the
natural consequences of such death.

There is no question that the Pereas did not overturn the presumption of their negligence by credible
evidence. Their defense of having observed the diligence of a good father of a family in the selection and
supervision of their driver was not legally sufficient. According to Article 1759 of the Civil Code, their liability
as a common carrier did not cease upon proof that they exercised all the diligence of a good father of a
family in the selection and supervision of their employee. This was the reason why the RTC treated this
defense of the Pereas as inappropriate in this action for breach of contract of carriage.
The Pereas were liable for the death of Aaron despite the fact that their driver might have acted beyond the
scope of his authority or even in violation of the orders of the common carrier.27 In this connection, the
records showed their drivers actual negligence. There was a showing, to begin with, that their driver
traversed the railroad tracks at a point at which the PNR did not permit motorists going into the Makati area
to cross the railroad tracks. Although that point had been used by motorists as a shortcut into the Makati
area, that fact alone did not excuse their driver into taking that route. On the other hand, with his familiarity
with that shortcut, their driver was fully aware of the risks to his passengers but he still disregarded the
risks. Compounding his lack of care was that loud music was playing inside the air-conditioned van at the
time of the accident. The loudness most probably reduced his ability to hear the warning horns of the
oncoming train to allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he
sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so
doing, he lost his view of the train that was then coming from the opposite side of the passenger bus,
leading him to miscalculate his chances of beating the bus in their race, and of getting clear of the train. As a
result, the bus avoided a collision with the train but the van got slammed at its rear, causing the fatality.
Lastly, he did not slow down or go to a full stop before traversing the railroad tracks despite knowing that his
slackening of speed and going to a full stop were in observance of the right of way at railroad tracks as
defined by the traffic laws and regulations.28 He thereby violated a specific traffic regulation on right of way,
by virtue of which he was immediately presumed to be negligent.29
The omissions of care on the part of the van driver constituted negligence, 30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something
which a prudent and reasonable man would not do,32 or as Judge Cooley defines it, (t)he failure to observe
for the protection of the interests of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury." 33
The test by which to determine the existence of negligence in a particular case has been aptly stated in the
leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may be stated as follows: Did
the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here
in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias
of the Roman law. The existence of negligence in a given case is not determined by reference to the personal
judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy,
or negligent in the man of ordinary intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of course
be always determined in the light of human experience and in view of the facts involved in the particular
case. Abstract speculation cannot here be of much value but this much can be profitably said: Reasonable
men govern their conduct by the circumstances which are before them or known to them. They are not, and
are not supposed to be, omniscient of the future. Hence they can be expected to take care only when there
is something before them to suggest or warn of danger. Could a prudent man, in the case under

consideration, foresee harm as a result of the course actually pursued? If so, it was the duty of the actor to
take precautions to guard against that harm. Reasonable foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary before negligence can be held to exist. Stated in these
terms, the proper criterion for determining the existence of negligence in a given case is this: Conduct is
said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect
harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its
consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely negligent when he
traversed the railroad tracks at a point not allowed for a motorists crossing despite being fully aware of the
grave harm to be thereby caused to his passengers; and when he disregarded the foresight of harm to his
passengers by overtaking the bus on the left side as to leave himself blind to the approach of the oncoming
train that he knew was on the opposite side of the bus.
Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate Court, 35 where the Court held
the PNR solely liable for the damages caused to a passenger bus and its passengers when its train hit the
rear end of the bus that was then traversing the railroad crossing. But the circumstances of that case and
this one share no similarities. In Philippine National Railways v. Intermediate Appellate Court, no evidence of
contributory negligence was adduced against the owner of the bus. Instead, it was the owner of the bus who
proved the exercise of extraordinary diligence by preponderant evidence. Also, the records are replete with
the showing of negligence on the part of both the Pereas and the PNR. Another distinction is that the
passenger bus in Philippine National Railways v. Intermediate Appellate Court was traversing the dedicated
railroad crossing when it was hit by the train, but the Pereas school van traversed the railroad tracks at a
point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and severally" liable for
damages arising from the death of Aaron. They had been impleaded in the same complaint as defendants
against whom the Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to
or arising out of the accident, and questions of fact and of law were common as to the Zarates.36 Although
the basis of the right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereas was
distinct from the basis of the Zarates right to relief against the PNR (i.e., quasi-delict under Article 2176,
Civil Code), they nonetheless could be held jointly and severally liable by virtue of their respective
negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty
of negligence despite the school van of the Pereas traversing the railroad tracks at a point not dedicated by
the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure the safety of
others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to
prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard
had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of
the risks to others as well as the need to control the vehicular and other traffic there. Verily, the Pereas and
the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aarons earning capacity proper?
The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with the RTC on the
liability, the CA modified the amount. Both lower courts took into consideration that Aaron, while only a high
school student, had been enrolled in one of the reputable schools in the Philippines and that he had been a
normal and able-bodied child prior to his death. The basis for the computation of Aarons earning capacity
was not what he would have become or what he would have wanted to be if not for his untimely death, but

the minimum wage in effect at the time of his death. Moreover, the RTCs computation of Aarons life
expectancy rate was not reckoned from his age of 15 years at the time of his death, but on 21 years, his age
when he would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully warranted.
Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1wphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim
Jussi Leinos loss of earning capacity as a pilot for being speculative due to his having graduated from high
school at the International School in Manila only two years before the shooting, and was at the time of the
shooting only enrolled in the first semester at the Manila Aero Club to pursue his ambition to become a
professional pilot. That meant, according to the Court, that he was for all intents and purposes only a high
school graduate.
We reject the Pereas submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not
akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid
professional, like a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation
of Aarons earning capacity was premised on him being a lowly minimum wage earner despite his being then
enrolled at a prestigious high school like Don Bosco in Makati, a fact that would have likely ensured his
success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his
parents and in favor of the defendants whose negligence not only cost Aaron his life and his right to work
and earn money, but also deprived his parents of their right to his presence and his services as well. Our law
itself states that the loss of the earning capacity of the deceased shall be the liability of the guilty party in
favor of the heirs of the deceased, and shall in every case be assessed and awarded by the court "unless the
deceased on account of permanent physical disability not caused by the defendant, had no earning capacity
at the time of his death."38Accordingly, we emphatically hold in favor of the indemnification for Aarons loss
of earning capacity despite him having been unemployed, because compensation of this nature is awarded
not for loss of time or earnings but for loss of the deceaseds power or ability to earn money.39
This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus
Company and Manila Railroad Company,40 fourth-year medical student Edgardo Carriagas earning capacity,
although he survived the accident but his injuries rendered him permanently incapacitated, was computed to
be that of the physician that he dreamed to become. The Court considered his scholastic record sufficient to
justify the assumption that he could have finished the medical course and would have passed the medical
board examinations in due time, and that he could have possibly earned a modest income as a medical
practitioner. Also, in People v. Sanchez,41 the Court opined that murder and rape victim Eileen Sarmienta and
murder victim Allan Gomez could have easily landed good-paying jobs had they graduated in due time, and
that their jobs would probably pay them high monthly salaries from P 10,000.00 to P 15,000.00 upon their
graduation. Their earning capacities were computed at rates higher than the minimum wage at the time of
their deaths due to their being already senior agriculture students of the University of the Philippines in Los
Baos, the countrys leading educational institution in agriculture.
3.
Were the amounts of damages excessive?

The Pereas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the
respective amounts of P 2,500,000.00 and P 1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of P 2,500,000.00 were really just and reasonable under the established circumstances
of this case because they were intended by the law to assuage the Zarates deep mental anguish over their
sons unexpected and violent death, and their moral shock over the senseless accident. That amount would
not be too much, considering that it would help the Zarates obtain the means, diversions or amusements
that would alleviate their suffering for the loss of their child. At any rate, reducing the amount as excessive
might prove to be an injustice, given the passage of a long time from when their mental anguish was
inflicted on them on August 22, 1996.

Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to
render effective the desired example for the public good. As a common carrier, the Pereas needed to be
vigorously reminded to observe their duty to exercise extraordinary diligence to prevent a similarly senseless
accident from happening again. Only by an award of exemplary damages in that amount would suffice to
instill in them and others similarly situated like them the ever-present need for greater and constant
vigilance in the conduct of a business imbued with public interest.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on
November 13, 2002; and ORDER the petitioners to pay the costs of suit.
SO ORDERED.