DEFINITION
board British Airways.
[G.R. No. 138334. August 25, 2003]
ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT
OF APPEALS and CARAVAN TRAVEL & TOURS
INTERNATIONAL, INC., respondents.
FACTS:
In May 1991, petitioner Estela L. Crisostomo contracted
the services of respondent Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed Jewels of
Europe. The package tour included the countries of
England, Holland, Germany, Austria, Liechstenstein,
Switzerland and France at a total cost of P74,322.70.
Petitioner was given a 5% discount on the amount, which
included airfare, and the booking fee was also waived
because petitioners niece, Meriam Menor, was
respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts
residence on June 12, 1991 a Wednesday to deliver
petitioners travel documents and plane tickets. Petitioner,
in turn, gave Menor the full payment for the package tour.
Menor then told her to be at the Ninoy Aquino International
Airport (NAIA) on Saturday, two hours before her flight on
Without checking her travel documents, petitioner went to
NAIA on Saturday, June 15, 1991, to take the flight for the
first leg of her journey from Manila to Hongkong. To
petitioners dismay, she discovered that the flight she was
supposed to take had already departed the previous day.
She learned that her plane ticket was for the flight
scheduled on June 14, 1991. She thus called up Menor to
complain. Subsequently, Menor prevailed upon petitioner
to take another tour the British Pageant which included
England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or
P20,881.00 (at the then prevailing exchange rate of
P26.60). She gave respondent US$300 or P7,980.00 as
partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from
respondent the reimbursement of P61,421.70,
representing the difference between the sum she paid for
Jewels of Europe and the amount she owed respondent
for the British Pageant tour. Despite several demands,
respondent company refused to reimburse the amount,
contending that the same was non-refundable. Petitioner
was thus constrained to file a complaint against
1
respondent for breach of contract of carriage.
Petitioners Contentions: Her failure to join Jewels of
Europe was due to respondents fault since it did not
clearly indicate the departure date on the plane ticket.
Respondent was also negligent in informing her of the
wrong flight schedule through its employee Menor.
Trial Courts Decision: Respondent was negligent in
erroneously advising petitioner of her departure date
through its employee, Menor, who was not presented as
witness to rebut petitioners testimony. However, petitioner
should have verified the exact date and time of departure
by looking at her ticket and should have simply not relied
on Menors verbal representation.
Court of Appeals: Petitioner is more negligent than
respondent because as a lawyer and well-traveled person,
she should have known better than to simply rely on what
was told to her. This being so, she is not entitled to any
form of damages. Petitioner also forfeited her right to the
Jewels of Europe tour and must therefore pay respondent
the balance of the price for the British Pageant tour.
Petitioners Contention: Respondent did not observe the
standard of care required of a common carrier when it
informed her wrongly of the flight schedule. She could not
be deemed more negligent than respondent since the
latter is required by law to exercise extraordinary diligence
in the fulfillment of its obligation.
ISSUE: WON Respondent Company was not able to
observe standard of care required of a common carrier
HELD:
NO. By definition, a CONTRACT OF CARRIAGE OR
TRANSPORTATION is one whereby a certain person or
association of persons obligate themselves to transport
persons, things, or news from one place to another for a
fixed price. Such person or association of persons are
regarded as carriers and are classified as private or
special carriers and common or public carriers. A
common carrier is defined under Article 1732 of the Civil
Code as persons, corporations, firms or associations
engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
It is obvious from the above definition that respondent is
not an entity engaged in the business of transporting
either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to another
2
since its covenant with its customers is simply to make
travel arrangements in their behalf. Respondents services
as a travel agency include procuring tickets and facilitating
travel permits or visas as well as booking customers for
tours. At most, respondent acted merely as an agent of the
airline, with whom petitioner ultimately contracted for her
carriage to Europe. Respondents obligation to petitioner in
this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and
time. Her transport to the place of destination, meanwhile,
pertained directly to the airline.
The object of petitioners contractual relation with
respondent is the latters service of arranging and
facilitating petitioners booking, ticketing and
accommodation in the package tour. In contrast, the object
of a contract of carriage is the transportation of
passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for
services and not one of carriage. Petitioners submission is
premised on a wrong assumption. For reasons of public
policy, a common carrier in a contract of carriage is bound
by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very
cautious persons and with due regard for all the
circumstances. As earlier stated, however, respondent is
not a common carrier but a travel agency. It is thus not
bound under the law to observe extraordinary diligence in
the performance of its obligation, the standard of care
required of respondent is that of a good father of a family
under Article 1173 of the Civil Code.
In the case at bar, the evidence on record shows that
respondent company performed its duty diligently and did
not commit any contractual breach. Hence, petitioner
cannot recover and must bear her own damage.
TESTS AND CHARACTERS
DE GUZMAN V. CA
CALVO V. UCPB GENERAL INSURANCE CORP.
FACTS:
Petitioner Virgines Calvo is the owner of Transorient
Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker. He entered into a contract
with San Miguel Corporation (SMC) for the transfer of 114
reels of semi-chemical fluting paper and 124 reels of kraft
liner board from the Port Area in Manila to SMCs
warehouse at the Tabacalera Compound, Romualdez St.,
Ermita, Manila. The cargo was insured by respondent
UCPB General Insurance Co., Inc.
3
July 14, 1990: the shipment in question, contained in 30
metal vans, arrived in Manila on board, were unloaded
from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc. Petitioner, pursuant to her
contract with SMC, withdrew the cargo from the arrastre
operator and delivered it to SMCs warehouse in Ermita,
Manila
July 25, 1990: the goods were inspected by Marine Cargo
Surveyors, who found that 15 reels of the semi-chemical
fluting paper were wet/stained/torn and 3 reels of kraft liner
board were likewise torn. The damage was placed
at P93,112.00.
SMC collected payment from respondent UCPB under its
insurance contract for the aforementioned amount. In turn,
respondent, as subrogee of SMC, brought suit against for
the damage to the shipment.
Trial Court: The subject cargoes sustained damage while
in the custody of defendants (herein petitioner). Defendant
did not present any evidence on what precaution [she]
performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the
cargo [she] shall perform such extraordinary diligence
because of the nature of the cargo.
Court of Appeals: Affirmed decision on appeal.
ISSUE: WON Calvo can be extempted from liability
HELD:
Generally speaking under Article 1735 of the Civil Code, if
the goods are proved to have been lost, destroyed or
deteriorated, common carriers are presumed to have been
at fault or to have acted negligently, unless they prove that
they have observed the extraordinary diligence required
by law. The burden of the plaintiff, therefore, is to prove
merely that the goods he transported have been lost,
destroyed or deteriorated. Thereafter, the burden is shifted
to the carrier to prove that he has exercised the
extraordinary diligence required by law. Thus, it has been
held that the mere proof of delivery of goods in good order
to a carrier, and of their arrival at the place of destination
in bad order, makes out a prima facie case against the
carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It is
incumbent upon the carrier to prove that the loss was due
to accident or some other circumstances inconsistent with
its liability.
Petitioner contends that contrary to the findings of the trial
court and the Court of Appeals, she is not a common
4
carrier but a private carrier because, as a customs broker
and warehouseman, she does not indiscriminately hold
her services out to the public but only offers the same to
select parties with whom she may contract in the conduct
of her business.
The contention has no merit.
The Civil Code defines common carriers in the following
terms:
Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to the
public
The above article makes no distinction between one
whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as
an ancillary activity . . . Article 1732 also carefully avoids
making any distinction between a person or enterprise
offering transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to
the general public, i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1732 deliberately
refrained from making such distinctions.
There is greater reason for holding petitioner to be a
common carrier because the transportation of goods is an
integral part of her business. To uphold petitioners
contention would be to deprive those with whom she
contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry
goods for her customers, as already noted, is part and
parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code
provides:
Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them,
according to all the circumstances of each case. . . .
The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to
know and to follow the required precaution for avoiding
damage to, or destruction of the goods entrusted to it for
5
sale, carriage and delivery. It requires common carriers to
render service with the greatest skill and foresight and to
use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including
such methods as their nature requires.
In the case at bar, petitioner denies liability for the damage
to the cargo. She claims that the spoilage or wettage took
place while the goods were in the custody of either the
carrying vessel which transported the cargo to Manila, or
the arrastre operator, to whom the goods were unloaded
and who allegedly kept them in open air for nine days
Contrary to petitioners assertion, the Survey Reportof the
Marine Cargo Surveyors indicates that when the shipper
transferred the cargo in question to the arrastre operator,
these were covered by clean Equipment Interchange
Report (EIR) and, when petitioners employees withdrew
the cargo from the arrastre operator, they did so without
exception or protest either with regard to the condition of
container vans or their contents.
Anent petitioners insistence that the cargo could not have
been damaged while in her custody as she immediately
delivered the containers to SMCs compound, suffice it to
say that to prove the exercise of extraordinary diligence,
petitioner must do more than merely show the possibility
that some other party could be responsible for the
damage. It must prove that it used all reasonable means
to ascertain the nature and characteristic of goods
tendered for [transport] and that [it] exercise[d] due care in
the handling [thereof]. Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under
Art. 1734(4), which provides
Common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to
any of the following causes only:
....
(4) The character of the goods or defects in the packing or
in the containers.
....
For this provision to apply, the rule is that if the improper
packing or, in this case, the defect/s in the container, is/are
known to the carrier or his employees or apparent upon
ordinary observation, but he nevertheless accepts the
same without protest or exception notwithstanding such
condition, he is not relieved of liability for damage
resulting therefrom
6
In this case, petitioner accepted the cargo without
exception despite the apparent defects in some of the
container vans. Hence, for failure of petitioner to prove that
she exercised extraordinary diligence in the carriage of
goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art.
1735 holds.
The decision of the Court of Appeals AFFIRMED.
LOADSTAR SHIPPING CORP. V. CA
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION,
petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V.
TAC-AN, BATANGAS CITY and ADORACION C.
ARELLANO, in her official capacity as City Treasurer
of Batangas, respondents.
MARTINEZ, J.:
Facts: Petitioner is a grantee of a pipeline concession
under Republic Act No. 387, as amended, to contract,
install and operate oil pipelines. The original pipeline
concession was granted in 19671 and renewed by the
Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a
mayor's permit with the Office of the Mayor of Batangas
City. However, before the mayor's permit could be issued,
the respondent City Treasurer required petitioner to pay a
local tax based on its gross receipts for the fiscal year 1993
pursuant to the Local Government Code3. The respondent
City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments
based on the gross receipts for products pumped at GPS-
1 for the fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its operations,
petitioner paid the tax under protest in the amount of
P239,019.01 for the first quarter of 1993. On January 20,
1994, petitioner filed a letter-protest addressed to the
respondent City Treasurer claiming that our Company
(FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged
in the business of transporting petroleum products from
the Batangas refineries, via pipeline, to Sucat and JTF
Pandacan Terminals. As such, our Company is exempt
from paying tax on gross receipts under Section 133 of the
Local Government Code of 1991.
On March 8, 1994, the respondent City Treasurer denied
7
the protest contending that petitioner cannot be
considered engaged in transportation business, thus it
cannot claim exemption under Section 133 (j) of the Local
Government Code.
On June 15, 1994, petitioner filed with the Regional Trial
Court of Batangas City a complaint for tax refund with
prayer for writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in
her capacity as City Treasurer. In its complaint, petitioner
alleged, inter alia, that: (1) the imposition and collection of
the business tax on its gross receipts violates Section 133
of the Local Government Code; (2) the authority of cities
to impose and collect a tax on the gross receipts of
"contractors and independent contractors" under Sec. 141
(e) and 151 does not include the authority to collect such
taxes on transportation contractors for, as defined under
Sec. 131 (h), the term "contractors" excludes
transportation contractors; and, (3) the City Treasurer
illegally and erroneously imposed and collected the said
tax, thus meriting the immediate refund of the tax paid.
Traversing the complaint, the respondents argued that
petitioner cannot be exempt from taxes under Section 133
(j) of the Local Government Code as said exemption
applies only to "transportation contractors and persons
engaged in the transportation by hire and common carriers
by air, land and water." Respondents assert that pipelines
are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and
the like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or
manner by which a product is delivered to its destination.
Issue: WoN the pipeline business is included in the term
common carrier so as to entitle the petitioner to the
exemption
Held: A "common carrier" may be defined, broadly, as one
who holds himself out to the public as engaged in the
business of transporting persons or property from place to
place, for compensation, offering his services to the public
generally.
Art. 1732 of the Civil Code defines a "common carrier" as
"any person, corporation, firm or association engaged in
the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their services to the public."
The test for determining whether a party is a common
carrier of goods is:
8
1. He must be engaged in the business of carrying goods
for others as a public employment, and must hold himself
out as ready to engage in the transportation of goods for
person generally as a business and not as a casual
occupation;
2. He must undertake to carry goods of the kind to which
his business is confined;
3. He must undertake to carry by the method by which his
business is conducted and over his established roads; and
4. The transportation must be for hire.
Based on the above definitions and requirements, there is
no doubt that petitioner is a common carrier. It is engaged
in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to
all persons who choose to employ its services, and
transports the goods by land and for compensation. The
fact that petitioner has a limited clientele does not exclude
it from the definition of a common carrier.
As correctly pointed out by petitioner, the definition of
"common carriers" in the Civil Code makes no distinction
as to the means of transporting, as long as it is by land,
water or air. It does not provide that the transportation of
the passengers or goods should be by motor vehicle.
Under the Petroleum Act of the Philippines (Republic Act
387), petitioner is considered a "common carrier." Thus,
Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. A
pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by
him, but is obligated to utilize the remaining transportation
capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and
to charge without discrimination such rates as may have
been approved by the Secretary of Agriculture and Natural
Resources.
Republic Act 387 also regards petroleum operation as a
public utility. Pertinent portion of Article 7 thereof provides:
that everything relating to the exploration for and
exploitation of petroleum . . . and everything relating to the
manufacture, refining, storage, or transportation by special
methods of petroleum, is hereby declared to be a public
utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the
9
petitioner a "common carrier." In BIR Ruling No. 069-83, it
declared:
. . . since [petitioner] is a pipeline concessionaire that is
engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387
. . . . Such being the case, it is not subject to withholding
tax prescribed by Revenue Regulations No. 13-78, as
amended.
From the foregoing disquisition, there is no doubt that
petitioner is a "common carrier" and, therefore, exempt
from the business tax as provided for in Section 133 (j), of
the Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of
Local Government Units. Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the
levy of the following:
xxx xxx xxx
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air,
land or water, except as provided in this Code.
WHEREFORE, the petition is hereby GRANTED. The
decision of the respondent Court of Appeals dated
November 29, 1995 in CA-G.R. SP No. 36801 is
REVERSED and SET ASIDE.
SO ORDERED.
ASIA LIGHTERAGE AND SHIPPING, INC. VS. COURT
OF APPEALS
G.R. No. 147246
August 19, 2003
Puno, J.
Facts:
Better Western White Wheat was shipped by
Marubeni American Corporation of Oregon for
delivery to General Milling Corporation (GMC).
The shipment was insured by Prudential Guarantee
and Assurance, Inc. (private respondent)
When the cargo arrived at Manila it was transferred
to the custody of Asia Lighterage and Shipping Inc.
(ALSI)
ALSI was contracted by GMC to deliver the cargo
to GMCs warehouse at Pasig City.
The shipment was loaded on a barge for delivery to
GMC.
The transport of cargo was suspended due to
incoming typhoon.
10
 While weathering out the storm the cargo was tied
into other barges.
After few days, the barges developed a list because
of a hole it sustained.
ALSI secured the servises of Gaspar Salvaging
Corporation to refloat the barge.
While transporting and before it arrived at GMC
wharf, the goods was transferred to 3 other barges
because of strong current and to avoid complete
sinking.
On the next day, the towing bits of the barge broke
and it completely sank.
The cargo had never reached GMC.
GMC seek from ALSI and private respondent the
payment for the lost cargo.
Private respondent indemnified GMC.
Private respondent sought recovery from ALSI but
to no avail.
Priate respondent filed a case with RTC and the trial
court ruled in favor of private respondent.
Upon appeal by ALSI, CA affirmed the decision of
RTC.
Motion for Reconsideration was filed but denied.
Hence, this case.
ALSI contends that:
o It is not a common carrier
o It is not liable for the lost of the cargo.
Issue: WON ALSI is a common carrier and can be held
liable. YES/YES
Held:
The definition of common carriers in Article 1732 of
the Civil Code makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity.
We also did not distinguish between a person or
enterprise offering transportation service on a
regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled
basis.
we ruled that Article 1732 does not distinguish
between a carrier offering its services to the general
public, and one who offers services or solicits
business only from a narrow segment of the general
population.
The test to determine a common carrier is
o WHETHER THE GIVEN UNDERTAKING
IS A PART OF THE BUSINESS ENGAGED
IN BY THE CARRIER WHICH HE HAS
HELD OUT TO THE GENERAL PUBLIC AS
HIS OCCUPATION RATHER THAN THE
QUANTITY OR EXTENT OF THE
BUSINESS TRANSACTED.
Common carriers are bound to observe
extraordinary diligence in the vigilance over the
goods transported by them.
They are presumed to have been at fault or to have
acted negligently if the goods are lost, destroyed or
deteriorated.
To overcome the presumption of negligence in the
case of loss, destruction or deterioration of the
11
 goods, the common carrier must prove that it
exercised extraordinary diligence.
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same
is due to any of the following causes only:
1. Flood, storm, earthquake, lightning, or other
natural disaster or calamity;
xxx
In the case at bar, the barge completely sank after
its towing bits broke, resulting in the total loss of its
cargo. Petitioner claims that this was caused by a
typhoon; hence, it should not be held liable for the
loss of the cargo. However, petitioner failed to prove
that the typhoon is the proximate and only cause of
the loss of the goods, and that it has exercised due
diligence before, during and after the occurrence of
the typhoon to prevent or minimize the loss.
this could not be solely attributed to the typhoon.
The partly-submerged vessel was refloated but its
hole was patched with only clay and cement.
FGU INSURANCE V. G.P. SARMIENTO TRUCKING
CORP
G.R. No. 101089. April 7, 1993.
BASCOS vs. COURT OF APPEALS
This is a petition for review on certiorari of the decision **
of the Court of Appeals in "RODOLFO A. CIPRIANO,
doing business under the name CIPRIANO TRADING
ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M.
BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant,"
FACTS:
Rodolfo A. Cipriano representing Cipriano Trading
Enterprise (CIPTRADE for short) entered into a hauling
contract 2 with Jibfair Shipping Agency Corporation
whereby the former bound itself to haul the latter's 2,000
m/tons of soya bean meal from Magallanes Drive, Del Pan,
Manila to the warehouse of Purefoods Corporation in
Calamba, Laguna. To carry out its obligation, CIPTRADE,
through Rodolfo Cipriano, subcontracted with Estrellita
Bascos (petitioner) to transport and to deliver 400 sacks of
soyabean meal worth P156,404.00 from the Manila Port
Area to Calamba, Laguna at the rate of P50.00 per metric
ton. Petitioner failed to deliver the said cargo because the
truck carrying the cargo was hijacked along Canonigo St.,
Paco, Manila on the night of October 21, 1988. As a
consequence of that failure, Cipriano paid Jibfair Shipping
Agency the amount of the lost goods in accordance with
the Contract.
Cipriano demanded reimbursement from petitioner but the
latter refused to pay. Eventually, Cipriano filed a complaint
for a sum of money and damages with writ of preliminary
attachment for breach of a contract of carriage. The trial
court granted the writ of preliminary attachment.
In her answer, petitioner interposed the defense that there
was no contract of carriage since CIPTRADE leased her
cargo truck to load the cargo from Manila Port Area to
Laguna and that the truck carrying the cargo was hijacked
and being a force majeure, exculpated petitioner from any
liability After trial, the trial court rendered a decision in
favor of Cipriano and against Bascos ordering the latter to
12
pay the former for actual damages for attorneys fees and
cost of suit.
The Urgent Motion To Dissolve/Lift preliminary
Attachment Bascos is DENIED for being moot and
academic. Petitioner appealed to the Court of Appeals but
respondent Court affirmed the trial courts judgment.
ISSUE:
Was petitioner a common carrier and was the hijacking
referred to a force majeure that would exempt the
petitioner from liability?
HELD:
The petitioner is a common carrier and hijacking as for, not
being included in the provisions of Article 1734, must be
dealt with under the provisions of Article 1735 and thus,
the common carrier is presumed to have been at fault or
negligent.
The Court of Appeals, in holding that petitioner was a
common carrier, found that she admitted in her answer
that she did business under the name A.M. Bascos
Trucking and that said admission dispensed with the
presentation by private respondent, Rodolfo Cipriano, of
proofs that petitioner was a common carrier.
The respondent Court also adopted in toto the trial court's
decision that petitioner was a common carrier, Moreover,
both courts appreciated the following pieces of evidence
as indicators that petitioner was a common carrier: the fact
that the truck driver of petitioner, Maximo Sanglay,
received the cargo consisting of 400 bags of soya bean
meal as evidenced by a cargo receipt signed by Maximo
Sanglay; the fact that the truck helper, Juanito Morden,
was also an employee of petitioner; and the fact that
control of the cargo was placed in petitioner's care.
Article 1732 of the Civil Code defines a common carrier as
"(a) person, corporation or firm, or association engaged in
the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation,
offering their services to the public." The test to determine
a common carrier is "whether the given undertaking is a
part of the business engaged in by the carrier which he has
held out to the general public as his occupation rather than
the quantity or extent of the business transacted." 12 In
this case, petitioner herself has made the admission that
she was in the trucking business, offering her trucks to
those with cargo to move. Judicial admissions are
conclusive and no evidence is required to prove the same.
Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the
general community or population, and one who offers
services or solicits business only from a narrow segment
of the general population.
We think that Article 1732 deliberately refrained from
making such distinctions." (De Guzman vs. Court of
Appeals) Likewise, We affirm the holding of the
respondent court that the loss of the goods was not due to
force majeure. Common carriers are obliged to observe
extraordinary diligence in the vigilance over the goods
transported by them. 17 Accordingly, they are presumed
to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated.
"Under Article 1745 (6) above, a common carrier is held
responsible and will not be allowed to divest or to
13
diminish such responsibility even for acts of strangers
like thieves or robbers except where such thieves or
robbers in fact acted with grave or irresistible threat,
violence or force. We believe and so hold that the limits of
the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or
irresistible threat, violence or force."
FABRE V. CA
DISTINGUISHED FROM PRIVATE CARRIER,
TOWAGE, ARRASTRE AND STEVEDOING
HOME INSURANCE CO. V. AMERICAN STEAMSHIP
PLANTERS PRODUCTS, INC. vs. COURT OF
APPEALS
G.R. No. 101503, September 15, 1993
TOPIC: Distinguished From Private Carrier, Towage
FACTS:
Planters Products, Inc. (PPI), purchased from
Mitsubishi International Corporation (MITSUBISHI) of New
York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46%
fertilizer which the latter shipped in bulk on 16 June 1974
aboard the cargo vessel M/V "Sun Plum" owned by private
respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from
Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La
Union, Philippines, as evidenced by Bill of Lading No. KP-
1 signed by the master of the vessel and issued on the
date of departure. On 17 May 1974, or prior to its voyage,
a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter was entered into
between Mitsubishi as shipper/charterer and KKKK as
shipowner, in Tokyo, Japan.
It took eleven (11) days for PPI to unload the cargo,
from 5 July to 18 July 1974 (except July 12th, 14th and
18th). A private marine and cargo surveyor, Cargo
Superintendents Company Inc. (CSCI), was hired by PPI
to determine the "outturn" of the cargo shipped, by taking
draft readings of the vessel prior to and after discharge. 11
The survey report submitted by CSCI to the consignee
(PPI) dated 19 July 1974 revealed a shortage in the cargo
of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt. The
same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974 prepared
by PPI which showed that the cargo delivered was indeed
short of 94.839 M/T and about 23 M/T were rendered unfit
for commerce, having been polluted with sand, rust and
dirt.
The defendant carrier argued that the strict public
policy governing common carriers does not apply to them
because they have become private carriers by reason of
the provisions of the charter-party.
ISSUE: Whether a common carrier becomes a private
carrier by reason of a charter-party
HELD:
14
 NO. A public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or
voyage-charter. It is only when the charter includes both
the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned.
Indubitably, a shipowner in a time or voyage charter
retains possession and control of the ship, although her
holds may, for the moment, be the property of the
charterer.
The term "common or public carrier" is defined in
Art. 1732 of the Civil Code. The definition extends to
carriers either by land, air or water which hold themselves
out as ready to engage in carrying goods or transporting
passengers or both for compensation as a public
employment and not as a casual occupation. The
distinction between a "common or public carrier" and a
"private or special carrier" lies in the character of the
business, such that if the undertaking is a single
transaction, not a part of the general business or
occupation, although involving the carriage of goods for a
fee, the person or corporation offering such service is a
private carrier.
Article 1733 of the New Civil Code mandates that
common carriers, by reason of the nature of their business,
should observe extraordinary diligence in the vigilance
over the goods they carry. In the case of private carriers,
however, the exercise of ordinary diligence in the carriage
of goods will suffice.
Respondent carrier has sufficiently overcome, by
clear and convincing proof, the prima facie presumption of
negligence. After completing the loading of the cargo in
bulk in the ship's holds, the steel pontoon hatches were
closed and sealed with iron lids, then covered with three
(3) layers of serviceable tarpaulins which were tied with
steel bonds. The hatches remained close and tightly
sealed while the ship was in transit as the weight of the
steel covers made it impossible for a person to open
without the use of the ship's boom.
It was also shown during the trial that the hull of the
vessel was in good condition, foreclosing the possibility of
spillage of the cargo into the sea or seepage of water
inside the hull of the vessel.
Verily, the presumption of negligence on the part of
the respondent carrier has been efficaciously overcome by
the showing of extraordinary zeal and assiduity exercised
by the carrier in the care of the cargo.
Article 1734 of the New Civil Code provides that
common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the
charterer of the goods or defects in the packaging or in the
containers. The Code of Commerce also provides that all
losses and deterioration which the goods may suffer
during the transportation by reason of fortuitous event,
force majeure, or the inherent defect of the goods, shall be
for the account and risk of the shipper, and that proof of
these accidents is incumbent upon the carrier.
15
National Steel Corporation vs CA
G.R. No 112287; December 12, 1997
FACTS:
The MV Vlasons I is a vessel which renders
tramping service and, as such, does not transport cargo or
shipment for the general public. Its services are available
only to specific persons who enter into a special contract
of charter party with its owner. It is undisputed that the ship
is a private carrier. And it is in this capacity that its owner,
Vlasons Shipping, Inc., entered into a contract of
affreightment or contract of voyage charter hire with
National Steel Corporation. Plaintiff National Steel
Corporation (NSC) as Charterer and defendant Vlasons
Shipping, Inc. (VSI) as Owner, entered into a Contract of
Voyage Charter Hire whereby NSC hired VSIs vessel, the
MV VLASONS I to make one (1) voyage to load steel
products at Iligan City and discharge them at North Harbor,
Manila
The terms F.I.O.S.T. which is used in the shipping
business is a standard provision in the NANYOZAI Charter
Party which stands for Freight In and Out including
Stevedoring and Trading, which means that the handling,
loading and unloading of the cargoes are the responsibility
of the Charterer. Under Paragraph 5 of the NANYOZAI
Charter Party, it states, Charterers to load, stow and
discharge the cargo free of risk and expenses to owners.
When the vessels three (3) hatches containing the
shipment were opened by plaintiffs agents, nearly all the
skids of tinplates and hot rolled sheets were allegedly
found to be wet and rusty. Plaintiff filed with the defendant
its claim for damages suffered due to the downgrading of
the damaged tinplates in the amount of P941,145.18. Then
on October 3, 1974, plaintiff formally demanded payment
of said claim but defendant VSI refused and failed to pay.
ISSUE:
Whether VSI contracted with NSC as a common carrier or
as a private carrier
HELD:
Article 1732 of the Civil Code defines a common carrier as
"persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their services to the public." It has been held that
the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all
who opt to avail themselves of its transportation
service for a fee. A carrier which does not qualify
under the above test is deemed a private carrier.
"Generally, private carriage is undertaken by special
agreement and the carrier does not hold himself out to
carry goods for the general public. The most typical,
although not the only form of private carriage, is the charter
party, a maritime contract by which the charterer, a party
other than the shipowner, obtains the use and service of
all or some part of a ship for a period of time or a voyage
or voyages."
16
In the instant case, it is undisputed that VSI did not
offer its services to the general public. As found by the
Regional Trial Court, it carried passengers or goods
only for those it chose under a "special contract of
charter party." As correctly concluded by the Court of
Appeals, the MV Vlasons I "was not a common but a
private carrier." Consequently, the rights and obligations of
VSI and NSC, including their respective liability for
damage to the cargo, are determined primarily by
stipulations in their contract of private carriage or charter
party. Recently, in Valenzuela Hardwood and Industrial
Supply, Inc., vs. Court of Appeals and Seven Brothers
Shipping Corporation, the Court ruled:
. . . in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would
be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the
general public. Hence, the stringent provisions of the Civil
Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the
public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common
carriers
VALENZUELA HARDWOOD AND INDUSTRY SUPPLY,
INC. V. CA
GOVERNING LAWS
Samar Mining Company, Inc. vs. Nordeutscher Lloyd
132 SCRA 529 (1984)
Facts:
Samar Mining Company, Inc. (SMCI) imported one (1)
crate Optima welded wedge wire sieves from Germany,
through a vessel owned by common carrier, Nordeutscher
Lloyd, represented in the Philippines by its agent, CF.
Sharp & Co., Inc. which shipment is covered by Bill of
Lading No. 18 duly issued to consignee, SMCI.
Upon arrival of the vessel at the port of Manila, the goods
were unloaded and delivered by the carrier to the bonded
warehouse of AMCYL where the goods were stored before
its transshipment to Davao, which was the agreed point of
destination. However, the goods were never transhipped
to Davao hence, were not received by the consignee.
Consequently, SMCI filed an extrajudicial claim for the
value of the goods against the carrier, but was not paid.
Hence, SMCI filed the instant suit to enforce such
payment.
17
The trial court rendered a decision in favor of SMCI,
ordering defendants to pay the value of the goods.
Hence, this petition.
Issue:
W/N the petitioners are liable for the loss of the shipment.
Ruling:
No. The liability of the common carrier for the loss,
destruction or deterioration of goods transported from a
foreign country to the Philippines is governed primarily by
the New Civil Code. In all matters not regulated by said
Code, the rights and obligations of common carriers shall
be governed by the Code of Commerce and by special
laws.
Here, Article 1736 of the New Civil Code provisions on
common carriers was applied by the Supreme Court.
Under said article, the carrier may be relieved of the
responsibility for loss or damage to the goods upon actual
or constructive delivery of the same by the carrier to the
consignee, or to the person who has a right to receive
them.
There is actual delivery in contracts for the transport of
goods when possession has been turned over to the
consignee or to his duly authorized agent and a
reasonable time is given him to remove the goods.
In finding that the appellant was not responsible for the
loss of the goods since there was actual delivery to the
consignee through his duly authorized agent, who turned
out to be carrier-appellant herein, the Court ruled in this
wise:
Under the bill of lading, the appellant-carrier assumed 2
undertakings:The first is for the transport of goods from
Bremen, Germany to Manila. The second, the
transshipment of the same goods from Manila to Davao,
with appellant acting as agent of the consignee.
At the hiatus between these two undertakings of appellant,
which is the moment when the subject goods are
discharged in Manila, its personality changes from that of
carrier to that of agent of the consignee.
Thus, the character of appellants possession also
changes, from possession in its own name as carrier, into
possession in the name of consignee as the latters agent.
Such being the case, there was, in effect, actual delivery
of the goods from appellant as carrier to the same
appellant as agent of the consignee.
18
Upon such delivery, the appellant, as erstwhile carrier,
ceases to be responsible for any loss or damage that may
befall the goods from that point onwards.
This is the full import of Article 1736 as applied in this case.
EASTER SHIPPING LINES V. IAC
NATIONAL DEVELOPMENT CO. V. CA
GOVERNMENT REGULATION OF COMMON
CARRIERS BUSINESS
NATURE OF BUSINESS
Government Regulation of Common Carriers Business
Case Number: 31 Phil 1 (1915)
Case Name: Fisher v Yangco Steamship Co
FACTS
Plaintiff FC Fisher was a stockholder in the Yangco
Steamship Company, the owner of a large number of
steam vessels, duly licensed to engage in the coastwise
trade of the Philippine Islands . The directors of the
company adopted a resolution which was thereafter
ratified and affirmed by the shareholders of the company,
"expressly declaring and providing that the classes of
merchandise to be carried by the company in its
business as a common carrier do not include
dynamite, powder or other explosives, and expressly
prohibiting the officers, agents and servants of the
company from offering to carry, accepting for carriage
said dynamite, powder or other explosives.
Respondent JS Stanley, Acting Collector of Customs
demanded and required the company the acceptance and
carriage of such explosives otherwise, the issuance of
necessary clearance documents of the vessel of the
company will be suspended. The plaintiff is advised and
believes that should the company decline to accept such
explosives for carriage, Ignacio Villamor, Attorney-
General of the Philippine Islands and prosecuting attorney
of the city of Manila intend to prosecute proceedings under
the penal provisions of sections 4, 5, and 6 of Act No. 98
of the Philippine Commission against the company, its
managers, agents and servants and to enforce the
requirements of the Acting Collector of Customs as to the
acceptance of such explosives for carriage. Despite the
demands of the plaintiff to the company, the latter declined
and refused to cease the carriage of such explosives.
ISSUE/S
Whether or not the refusal of the Yangco Steamship
Compnay to accept for carriage dynamite, powder or ther
explosives from any and all shippers who may offer such
explosives can be held to be a lawful act
HELD
No. The mere fact that violent and destructive explosions
can be obtained by the use of dynamite under certain
19
conditions would not be sufficient in itself to justify the such refusal a due or a necessary or a reasonable
refusal of a vessel, duly licensed as a common carrier of exercise of prudence and discretion on the part of the
merchandise, to accept it for carriage, if it can be proven shipowner.
that in the condition in which it is offered for carriage there
is no real danger to the carrier, nor reasonable ground to KMU LABOR CENTER v. GARCIA, JR
fear that his vessel or those on board his vessel will be
exposed to unnecessary and unreasonable risk in
transporting it, having in mind the nature of his business
G.R. No. 115381 December 23, 1994
as a common carrier engaged in the coastwise trade in the
Philippine Islands, and his duty as a servant of the public
engaged in a public employment. So also, if by the
exercise of due diligence and the taking of unreasonable Kapunan, J.:
precautions the danger of explosions can be practically
eliminated, the carrier would not be justified in subjecting FACTS:
the traffic in this commodity to prejudice or discrimination
by proof that there would be a possibility of danger from
explosion when no such precautions are taken. 1. On June 26, 1990, Secretary of DOTC, Oscar Orbos,
issued Memorandum Circular No. 90-395 to then
The traffic in dynamite, gunpowder and other explosives is LTFRB Chariman, Remedios Fernando, allowing
vitally essential to the material and general welfare of the
people of these Islands. If dynamite, gunpowder and other provincial bus operators to charge passengers rate
explosives are to continue in general use throughout the within a range of 15% above and 15% below the
Philippines, they must be transported by water from port to LTFRB official rate for a period of 1 year.
port in the various islands which make up the Archipelago.
We are satisfied therefore that the refusal by a particular 2. The range was later increased by the LTFRB thru
vessel, engaged as a common carrier of merchandise in
the coastwise trade of the Philippine Islands, to accept any Memorandum Circular No. 92-009 providing,
or all of these explosives for carriage would constitute a among others, that (1) The existing authorized fare
violation of the prohibitions against discriminations range system of plus or minus 15 percent for
penalized under the statute, unless it can be shown by provincial buses and jeepneys shall be widened to
affirmative evidence that there is so real and substantial a
danger of disaster necessarily involved in the carriage of 20% and -25% limit in 1994 with the authorized fare
any or all of these articles of merchandise as to render to be replaced by an indicative or reference rate as

20
 the basis for the expanded fare range; and (2) The
presumption of public need for a service shall be
deemed in favor of the applicant, while burden of
proving that there is no need for the proposed
service shall be the oppositor(s)
3. Private respondent PBOAP, availing itself of the
deregulation policy of the DOTC allowing provincial
bus operators to collect plus 20% and minus 25%
of the prescribed fare without the benefit of a public
hearing, announced a fare increase of 20% of the
existing fares.
4. Petitioner KMU filed a petition opposing the upward
adjustment of bus fares before the LTFRB.
However, said petition was dismissed for lack of
merit.
Petitioners contention:1. Memorandum Circular No. 92-
009 is unconstitutional, invalid and illegal.2.
Establishment of a presumption of public need in favor of
an applicant for a proposed transport service
without having to prove public necessity is illegal for being
violative of the Public Service Act and the Rules of Court.
Respondents contention:1. It is within DOTC and
LTFRBs authority to set a fare range scheme and
establish a presumption of public need in applications for
certificates of public convenience.
ISSUE/S:
1. Whether or not the authority given by the LTFRB to the
provincial bus operators to set a fare range over and above
the authorized existing fare is unconstitutional - YES
HELD:
1. The Legislature delegated to the defunct Public Service
Commission the power of fixing the rates of public
service. Respondent LTFRB is likewise vested with
the same under E.O 202. However, nowhere under
the aforesaid provisions of law are the regulatory
bodies, the PSC and LTFRB alike, authorized to
delegate that power to a common carrier, a
transport operator, or other public service.
2. The policy of allowing the provincial bus operators to
change and increase their fares at will would result
not only to a chaotic situation but to an anarchic
state of affairs. This would leave the riding public at
the mercy of transport operators who may increase
21
 fares every hour, every day, every month or every
year, whenever it pleases them or whenever they
deem it necessary to do so.
3. Moreover, rate making or rate fixing is not an easy task
because it requires dexterity of judgment snd sound
discretion with the settled goal of arriving at a just
and reasonable rate acceptable to both the public
utility and the public Therefore, rate should enable
public utilities to generate revenues sufficient to
cover operational costs, provide reasonable return
on its investments, and must be affordable to the
end user who will utilize the services.
4. Furthermore, public utilities are privately owned and
operated businesses whose services are essential
to the general public. They are enterprises which
specially cater to the needs of the public and
conduce to their comfort and convenience. As such,
public utility services are impressed with public
interest and concern. When, therefore, one devotes
his property to a use in which the public has an
interest, he, in effect grants to the public an interest
in that use, and must submit to the control by the
public for the common good, to the extent of the
interest he has thus created.
REGISTERED OWNER RULE
GELISAN V. ALDAY
BENEDICTO V. IAC
PHILANTRO V. CA
KABIT SYSTEM
SANTOS VS. SIBUG
G.R. No. L-26815 May 26, 1981
Topic: Government Regulation of Common Carriers
Business Kabit System
FACTS: Vicente U. Vidad (VIDAD, for short) was a duly
authorized passenger jeepney operator. Petitioner Adolfo
L. Santos (SANTOS, for short) was the owner of a
passenger jeep, but he had no certificate of public
convenience for the operation of the vehicle as a public
passenger jeep. SANTOS then transferred his jeep to the
name of VIDAD so that it could be operated under the
latter's certificate of public convenience. ln other words,
SANTOS became what is known in ordinary parlance as a
kabit operator. For the protection of SANTOS, VIDAD
executed a re-transfer document to SANTOS.
On April 26, 1983, private respondent Abraham
Sibug (SIBUG for short) was bumped by a passenger
jeepney operated by VIDAD and driven by Severe Gragas.
SIBUG filed a complaint for damages against VIDAD and
Gragas with the Court of First Instance of Manila, Branch
XVII and judgment was rendered in favor of SIBUG. The
22
Sheriff of Manila levied on a motor vehicle registered in the
name of VIDAD, and scheduled the public auction sale.
SANTOS presented a third-party claim with the
Sheriff alleging actual ownership of the motor vehicle
levied upon. He then instituted an action for Damages and
injunction with a prayer for Preliminary Mandatory
Injunction against SIBUG, VIDAD, and the Sheriff in Civil
Case No. 56842 of Branch X, of the same Court of First
Instance of Manila.
No public sale was conducted and Branch X issued
a Restraining Order enjoining the Sheriff from conducting
the public auction sale of the motor vehicle levied upon.
Branch X also affirmed SANTOS' ownership of the
jeepney in question.
Respondent Count of Appeals rendered the herein
challenged Decision nullifying the judgment rendered in
the Branch X Case and permanently restraining V from
taking cognizance of the BRANCH X CASE SANTOS. It
further held that SANTOS may not be permitted to prove
his ownership over a particular vehicle being levied upon
but registered in another's name in a separated action.
SANTOS now seeks a review of respondent Court's
Decision.
ISSUE: Whether or not SANTOS should be allowed to
defeat the levy on his vehicle
HELD: NO. The Supreme Court agreed with the
conclusions of the respondent Court of Appeals.
Respondent Court of Appeals ruled that
As the vehicle in question was registered in the
name of Vicente U. Vidad, the government or any person
affected by the representation that said vehicle is
registered under the name of a particular person had the
right to rely on his declaration of ownership and
registration: and the registered owner or any other person
for that matter cannot be permitted to repudiate said
declaration with the objective of proving that said
registered vehicle is owned by another person and not by
the registered owner (sec. 68, (a), Rule 123, and art. 1431,
New Civil Code)
Were we to allow a third person to prove that he is
the real owner of a particular vehicle and not the registered
owner it would in effect be tantamount to sanctioning the
attempt of the registered owner of the particular vehicle in
evading responsibility for it cannot be dispelled that the
door would be opened to collusion between a person and
a registered owner for the latter to escape said
responsibility to the public or to any person.
The Supreme Court also ruled that in this case,
SANTOS had fictitiously sold the jeepney to VIDAD, who
had become the registered owner and operator of record
at the time of the accident. lt is true that VIDAD had
executed a re-sale to SANTOS, but the document was not
registered. Although SANTOS, as the kabit was the true
owner as against VIDAD, the latter, as the registered
owner/operator and grantee of the franchise, is directly
and primarily responsible and liable for the damages
caused to SIBUG, the injured party, as a consequence of
the negligent or careless operation of the vehicle. This
ruling is based on the principle that the operator of record
is considered the operator of the vehicle in contemplation
of law as regards the public and third persons even if the
vehicle involved in the accident had been sold to another
where such sale had not been approved by the then Public
Service Commission. For the same basic reason, as the
vehicle here in question was registered in VIDAD'S name,
the levy on execution against said vehicle should be
23
enforced so that the judgment in the BRANCH XVII CASE
may be satisfied, notwithstanding the fact that the secret
ownership of the vehicle belonged to another. SANTOS,
as the kabit should not be allowed to defeat the levy on his
vehicle and to avoid his responsibilities as a kabit owner
for he had led the public to believe that the vehicle
belonged to VIDAD. This is one way of curbing the
pernicious kabit system that facilitates the commission of
fraud against the travelling public.
G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner, vs.SECOND CIVIL
CASES DIVISION, INTERMEDIATE APPELLATE
COURT, NICASIO M. OCAMPO and FRANCISCA P.
GARCIA, respondents.
Manuel A. Concordia for petitioner. Nicasio Ocampo for
himself and on behalf of his correspondents.
Ponente: Escolin, J.
Facts: Spouses Nicasio M. Ocampo and Francisca Garcia
purchased in installment from the Delta Motor Sales
Corporation five (5) Toyota Corona Standard cars to be
used as taxicabs. Since they had no franchise to operate
taxicabs, they contracted with petitioner Lita Enterprises,
Inc., through its representative, Manuel Concordia, for the
use of the latter's certificate of public convenience in
consideration of an initial payment of P1,000.00 and a
monthly rental of P200.00 per taxicab unit. To effectuate
Id agreement, the aforesaid cars were registered in the
name of petitioner Lita Enterprises, Inc, Possession,
however, remained with title spouses Ocampo who
operated and maintained the same under the name Acme
Taxi, petitioner's trade name.
One of said taxicabs driven by their employee, Emeterio
Martin, collided with a motorcycle whose driver, one
Florante Galvez, died from the head injuries sustained
therefrom. A criminal case was eventually filed against the
driver Emeterio Martin, while a civil case for damages was
instituted against Lita Enterprises, Inc., petitioner Lita
Enterprises, Inc. was adjudged liable for damages.
A writ of execution was levied and two of the vehicles of
respondent spouses was levied upon and sold at public
auction.
Respondent Nicasio Ocampo decided to register his
taxicabs in his name. He requested the manager of
24
petitioner Lita Enterprises, Inc. to turn over the registration
papers to him, but the latter allegedly refused. Respondent
filed for reconveyance of motor vehicles with damages and
also prays that herein petitioner be held liable to pay the
amount given to the heirs of Galvez.
Issue: Whether or not respondent spouses may recover
damages from Lita Enterprises
Held: NO
The parties herein operated under an arrangement,
comonly known as the "kabit system", whereby a person
who has been granted a certificate of convenience allows
another person who owns motors vehicles to operate
under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the
government . Abuse of this privilege by the grantees
thereof cannot be countenanced.
Although not outrightly penalized as a criminal offense, the
"kabit system" is invariably recognized as being contrary
to public policy and, therefore, void and inexistent under
Article 1409 of the Civil Code, It is a fundamental principle
that the court will not aid either party to enforce an illegal
contract, but will leave them both where it finds them. Upon
this premise, it was flagrant error on the part of both the
trial and appellate courts to have accorded the parties
relief from their predicament. Article 1412 of the Civil Code
denies them such aid. It provides:
ART. 1412. if the act in which the unlawful or
forbidden cause consists does not constitute
a criminal offense, the following rules shall
be observed;
(1) when the fault, is on the part of both
contracting parties, neither may recover
what he has given by virtue of the contract,
or demand the performance of the other's
undertaking.
The defect of inexistence of a contract is permanent and
incurable, and cannot be cured by ratification or by
prescription.
Notes: "Ex pacto illicito non oritur actio" [No action arises
out of an illicit bargain]. Having entered into an illegal
contract, neither can seek relief from the courts, and each
must bear the consequences of his acts.
No action arises, in equity or at law, from an illegal
contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold
or delivered, or damages for its property agreed to be sold
or delivered, or damages for its violation.
25
TEJA VS INTERMEDIATE APPELLATE COURT
FACTS: Angel Jaucian (defendant) bought from Pedro
Nale (plaintiff) a motorcycle with complete accessories and
a sidecar in the total consideration of P8,000.00. Out of the
total purchase price the defendant gave a downpayment
of P1,700.00 with a promise that he would pay plaintiff the
balance within sixty days.
The defendant, however, failed to comply with his promise
and so upon his own request, the period of paying the
balance was extended to one year in monthly installments
until he stopped paying anymore. The plaintiff made
demands but just the same the defendant failed to comply
with the same thus forcing the plaintiff to consult a lawyer
and file this action for his damage.
In this particular transaction a chattel mortgage was
constituted as a security for the payment of the balance of
the purchase price. It has been the practice of financing
firms that whenever there is a balance of the purchase
price the registration papers of the motor vehicle subject
of the sale are not given to the buyer. The records of the
LTC show that the motorcycle sold to the defendant was
first mortgaged to the Teja Marketing by Angel Jaucian
though the Teja Marketing and Angel Jaucian are one and
the same, because it was made to appear that way only
as the defendant had no franchise of his own and he
attached the unit to the plaintiff's MCH Line.
The agreement also of the parties here was for the plaintiff
to undertake the yearly registration of the motorcycle with
the Land Transportation Commission. The plaintiff,
however failed to register the motorcycle on that year on
the ground that the defendant failed to comply with some
requirements such as the payment of the insurance
premiums and the bringing of the motorcycle to the LTC
for stenciling, the plaintiff saying that the defendant was
hiding the motorcycle from him. Lastly, the plaintiff
explained also that though the ownership of the motorcycle
was already transferred to the defendant the vehicle was
still mortgaged with the consent of the defendant to the
Rural Bank of Camaligan for the reason that all motorcycle
purchased from the plaintiff on credit was rediscounted
with the bank.
Because of this failure of the plaintiff to comply with his
obligation to register the motorcycle the defendant
suffered damages when he failed to claim any insurance
indemnity which would amount to no less than P15,000.00
for the more than two times that the motorcycle figured in
accidents aside from the loss of the daily income of P15.00
as boundary fee beginning October 1976 when the
motorcycle was impounded by the LTC for not being
registered.
The defendant disputed the claim of the plaintiff that he
was hiding from the plaintiff the motorcycle resulting in its
not being registered. The truth being that the motorcycle
was being used for transporting passengers and it kept on
travelling from one place to another. The motor vehicle
sold to him was mortgaged by the plaintiff with the Rural
Bank of Camaligan without his consent and knowledge
and the defendant was not even given a copy of the
mortgage deed. The defendant claims that it is not true that
the motorcycle was mortgaged because of re-discounting
for rediscounting is only true with Rural Banks and the
Central Bank. The defendant puts the blame on the plaintiff
for not registering the motorcycle with the LTC and for not
giving him the registration papers inspite of demands
made. Finally, the evidence of the defendant shows that
26
because of the filing of this case he was forced to retain
the services of a lawyer for a fee on not less than
P1,000.00.
ISSUE: WON respondent court erred in applying the
doctrine of "pari delicto."
RULING: No. Ex pacto illicito' non oritur actio" (No action
arises out of illicit bargain) is the time-honored maxim that
must be applied to the parties in the case at bar. Having
entered into an illegal contract, neither can seek relief from
the courts, and each must bear the consequences of his
acts."
Unquestionably, the parties herein operated under an
arrangement, commonly known as the "kabit system"
whereby a person who has been granted a certificate of
public convenience allows another person who owns
motor vehicles to operate under such franchise for a fee.
A certificate of public convenience is a special privilege
conferred by the government. Abuse of this privilege by
the grantees thereof cannot be countenanced. The "kabit
system" has been Identified as one of the root causes of
the prevalence of graft and corruption in the government
transportation offices.
Although not outrightly penalized as a criminal offense, the
kabit system is invariably recognized as being contrary to
public policy and, therefore, void and in existent under
Article 1409 of the Civil Code. It is a fundamental principle
that the court will not aid either party to enforce an illegal
contract, but will leave both where it finds then. Upon this
premise it would be error to accord the parties relief from
their predicament. Article 1412 of the Civil Code denies
them such aid. It provides:
Art. 1412. If the act in which the unlawful or forbidden
cause consists does not constitute a criminal offense, the
following rules shall be observed:
1. When the fault is on the part of both contracting
parties, neither may recover that he has given by
virtue of the contract, or demand, the performance
of the other's undertaking.
The defect of in existence of a contract is permanent and
cannot be cured by ratification or by prescription. The mere
lapse of time cannot give efficacy to contracts that are null
and void.
ABELARDO LIM V. CA
BOUNDARY SYSTEM
URBANO MAGBOO and EMILIA C. MAGBOO v.
DELFIN BERNARDO
G.R. No. L-16790 April 30, 1963 .
MAKALINTAL, J.:
FACTS: Urbano Magboo and Emilia C. Magboo were the
parents of Cesar Magboo, a child of 8 years old, who lived
with them and was under their custody until his death on
October 24, 1956 when he was killed in a motor vehicle
accident, the fatal vehicle being a passenger jeepney with
27
Plate No, AC-1963 (56) owned by Delfin Bernardo and
driven by Conrado Roque at the time of the incident.
Conrado and Delfin were in a contract where the former
was to pay Delfin the sum of P8.00 for the privilege of
driving the jeepney on October 24, 1956, it being their
agreement that whatever earnings Conrado could make
out of the use of the jeepney in transporting passengers
from one point to another in the City of Manila would
belong entirely to Conrado. Eventually, Conrado was
prosecuted for homicide thru reckless imprudence before
the Court of First Instance of Manila. He served his
sentence but was not able to pay the indemnity because
he was insolvent.
ISSUE: Whether or not an employer-employee
relationship exists between a jeepney-owner
and a driver under a "boundary system" arrangement.
HELD: YES. In National Labor Union v. Dinglasan, 52
O.G., No. 4, 1933, it was held that the features which
characterize the "boundary system" namely, the fact
that the driver does not receive a fixed wage but gets only
the excess of the receipt of fares collected by him over the
amount he pays to the jeep-owner and that the gasoline
consumed by the jeep is for the account of the driver
are not sufficient to withdraw the relationship between
them from that of employer and employee.
The same principle applies with greater reason in
negligence cases concerning the right of third parties to
recover damages for injuries sustained.
Similar to Montoya v. Ignacio where the owner was held
responsible, the same responsibility was held to attach in
a case where the injured party was not a passenger but a
third person, who sued on the theory of culpa aquiliana
(Timbol vs. Osias, L-7547, April 30, 1955). There is no
reason why a different rule should be applied in a
subsidiary liability case under Article 103 of the Revised
Penal Code involving the existence of an employer-
employee relationship between the owner of the vehicle
and the driver. Indeed to exempt from liability the owner of
a public vehicle who operates it under the "boundary
system" on the ground that he is a mere lessor would be
not only to abet flagrant violations of the Public Service law
but also to place the riding public at the mercy of reckless
and irresponsible drivers - reckless because the measure
of their earnings depends largely upon the number of trips
they make and, hence, the speed at which they drive; and
irresponsible because most if not all of them are in no
position to pay the damages they might cause.
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