Pangasinan Transport Co. vs. Public Service CommissionGR NO.

47065, June 26, 1940

FACTS:
This is a case on the certificate of public convenience of petitioner Pangasinan Transportation
Co. Inc (Pantranco). The petitioner has been engaged for the past twenty years in the business
of transporting passengers in the province of Pangasinan and Tarlac, Nueva Ecija and Zambales.
On August 26, 1939, Pantranco filed with the Public Service Commission (PSC) an application to
operate 10 additional buses. PSC granted the application with 2 additional conditions which was
made to apply also on their existing business. Pantranco filed a motion for reconsideration with
the Public Service Commission. Since4 it was denied, Pantranco then filed a petition/ writ of
certiorari.

ISSUES:
Whether the legislative power granted to Public Service Commission:-
- is unconstitutional and void because it is without limitation
- constitutes undue delegation of powers

HELD:
The challenged provisions of Commonwealth Act No. 454 are valid and constitutional because it
is a proper delegation of legislative power, so called Subordinate Legislation . It is a valid
delegation because of the growing complexities of modern government, the complexities or
multiplication of the subjects of governmental regulation and the increased difficulty of
administering the laws. All that has been delegated to the Commission is the administrative
function, involving the use of discretion to carry out the will of the National Assembly having in
view, in addition, the promotion of public interests in a proper and suitable manner. The
Certificate of Public Convenience is neither a franchise nor contract, confers no property rights
and is a mere license or privilege, subject to governmental control for the good of the public.
PSC has the power, upon notice and hearing, to amend, modify, or revoked at any time any
certificate issued, whenever the facts and circumstances so warranted. The limitation of 25
years was never heard, so the case was remanded to PSC for further proceedings. In addition,
the Court ruled that, the liberty and property of the citizens should be protected by the
rudimentary requirements of fair play. Not only must the party be given an opportunity to
present his case and to adduce evidence tending to establish the rights that he asserts but the
tribunal must consider the evidence presented. When private property is affected with a public
interest, it ceased to be juris privati or private use only.
National Development Corporation v. Court of Appeals
G.R. No. L-49407, 19 August 1988, 164 SCRA 593

FACTS:
NDC as the first preferred mortgagee of three ocean going vessels including one with the name
‘Dona Nati’ appointed MCP as its agent to manage and operate said vessel for and in its behalf
and account. Thus, the E. Philipp Corporation of New York loaded on board the vessel “Dona
Nati” at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the
order of Manila Banking Corporation, Manila and the People’s Bank and Trust Company acting
for and in behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills
Corporation. Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui,
Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of
sodium lauryl sulfate and 10 cases of aluminum foil.
En route to Manila the vessel Dona Nati figured in a collision at Ise Bay, Japan with a Japanese
vessel ‘SS Yasushima Maru’ as a result of which 550 bales of aforesaid cargo of American raw
cotton were lost and/or destroyed. The damaged and lost cargoes were paid by the insurer to
the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed.
Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd.,
consigned to the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila. The
total loss was paid by the insurer to Guilcon as holder of the duly endorsed bill of lading. Hence,
plaintiff filed this complaint to recover said amount from the NDC and MCP as owner and ship
agent respectively, of the said ‘Dona Nati’ vessel.

ISSUE:
Which laws govern loss or destruction of goods due to collision of vessels outside Philippine
waters?

HELD:
This issue has already been laid to rest by this Court in Eastern Shipping Lines Inc. v. IAC where it
was held under similar circumstance “that the law of the country to which the goods are to be
transported governs the liability of the common carrier in case of their loss, destruction or
deterioration” (Article 1753, Civil Code). Thus, the rule was specifically laid down that for
cargoes transported from Japan to the Philippines, the liability of the carrier is governed
primarily by the Civil Code and in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of commerce and by laws (Article
1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to
the provision of the Civil Code.
It is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan. It
appears, however, that collision falls among matters not specifically regulated by the Civil Code,
so that no reversible error can be found in respondent courses application to the case at bar of
Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision
of vessels.
Commercial Law. Transportation. Operation of public utility. Disqualification of foreign
corporations.
Francisco Tatad, John Osmena and Rodolfo Biazon, vs. Jesus Garcia, and EDSA LRT
CORPORATION, LTD
GR NO. 114222 April 6, 1995
Quiason, J.,
FACTS:
Petitioners Francisco Tatad, John Osmena, and Rodolfo Biazon are members of the Philippine
Senate and are suing in their capacities as Senators and as taxpayers. Respondent Jesus Garcia
was then Secretary of the DOTC, while private respondent EDSA LRT CORPORATION, Ltd. is a
private corporation organized under the laws of Hongkong. DOTC planned to construct a light
railway transit line along EDSA, which shall traverse the cities of Pasay, Quezon, Mandaluyong,
and Makati. Then DOTC Secretary Oscar Orbos, acting upon a proposal to construct the EDSA
LRT III on a Build-Operate-Transfer (BOT) basis, had invited Elijahu Levin from the Eli Levin
Enterprises, Inc to send a technical team to discuss the project with the DOTC.
Subsequently, RA No. 6957 referred to as the Build-Operate-Transfer (BOT) was signed by then
President Corazon Aquino which Act provides for two schemes for the financing, construction
and operation of government projects through private initiative and investment: BOT or Build-
Transfer (BT). In accordance with the provisions of RA 6957 and to set the EDSA LRT III project
underway, the Prequalification Bids and Awards Committee and the Technical Committee were
formed.
Of the 5 applicants, only the EDSA LRT Consortium “met the requirements of garnering at least
21 points per criteria, except for Legal aspects, and obtaining an overall passing mark of at least
82 points.” The Legal aspects referred to provided that the BOT/BT contractor-applicant meet
the requirements specified in the Constitution and other pertinent laws. Sec. Orbos was
appointed Executive Secretary to the President of the Philippines and was replaced by
Nicomedes Prado. The latter recommended the award of the EDSA LRT III project to the sole
complying bidder, the EDSA LRT Consortium, and requested for authority to negotiate with the
said firm for the contract pursuant to the BOT Law. Authority was granted to proceed with the
negotiations.

DOTC and EDSA LRT Corporation, Ltd., in substitution of the EDSA LRT Consortium, entered into
an “An Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA” under the
terms of the BOT Law. Secretary Prado, thereafter, requested presidential approval of the
contract. The request cannot, however, be granted for failure to comply with the requirements
of the BOT Law. In view whereof, Sec. Drilon, the DOTC, and private respondent re-negotiated
the agreement. Thereafter, the parties entered into a “Revised and Restated Agreement to
Build, Lease and Transfer and Light Rail Transit System for EDSA. DOTC, represented by Sec.
Jesus Garcia, Sec. Prado and private respondent also entered into a Supplemental Agreement to
the April Revised Agreement so as to clarify their respective rights and responsibilities. The two
agreements were approved by President Fidel Ramos. According to the agreements, the EDSA
LRT III will use light rail vehicles from the Czech and Slovak Federal Republics.
Petitioners argued that the agreement, as amended by the Supplemental Agreement, in so far
as it grants EDSA LRT CORPORATION, LTD., a foreign corporation, the ownership of EDSA LRT III,
a public utility, violates the constitution, and hence, is unconstitutional. They contend that the
EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the
Constitution to Filipino citizens and domestic corporations, not foreign corporations like private
respondent.
ISSUE:
Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a public
utility?
HELD:
YES. What private respondent owns are the rail tracks, rolling stocks like the coaches, rail
stations, terminals and the power plant, not a public utility. While a franchise is needed to
operate these facilities to serve the public, they do not by themselves constitute a public utility.
What constitutes a public utility is not their ownership but their use to serve the public.
The right to operate a public utility may exist independently and separately from the ownership
of the facilities thereof. One can own said facilities without operating them as a public utility, or
conversely, one may operate a public utility without owning the facilities used to serve the
public. The devotion of property to serve the public may be done by the owner or by the person
in control thereof who may not necessarily be the owner thereof.
While private respondent is the owner of the facilities necessary to operate the EDSA LRT III, it
admits that it is not enfranchised to operate a public utility as per requirement of Section 11 of
Article XII of the Constitution. In view of this incapacity, private respondent and DOTC agreed
that on the completion date, the private respondent will immediately deliver possession of the
LRT system by of lease for 25 years, during which period DOTC shall operate the same as a
common carrier and private respondent shall provide technical maintenance and repair services
to DOTC.
Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a
common carrier. For this purpose, DOTC shall indemnify and hold harmless private respondent
from any losses, damages, injuries or death which may be claimed in the operation or
implementation of the system, except losses, damages, injury or death due to defects in the
EDSA LRT III on account of the defective condition of equipment or facilities or the defective
maintenance of such equipment facilities.
RCPI V. NTC G.R. No. L-68729 May 29, 1987

FACTS:
Petitioner has been operating a radio communications system since 1957 under its legislative
franchise granted by Republic Act No. 2036 which was enacted on June 23, 1957.
Petitioner RCPI established a radio telegraph service in Catarman, Northern Samar; San Jose,
Occidental Mindoro; and Sorsogon, Sorsogon.
In a decision dated June 24, 1980 in NTC Case No. 80-08, private respondent Kayumanggi Radio
Network Incorporated was authorized by the public respondent to operate radio
communications systems in Catarman, Samar and in San Jose, Mindoro.
The private respondent filed a complaint with the NTC alleging that the petitioner was operating
in Catarman, Samar and in San Jose, Mindoro without a certificate of public convenience and
necessity.
RCPI counter-alleged that its telephone services in the areas are covered by the legislative
franchise recognized by NTC and its predecessor Public Service Commission.
In its supplemental reply, the petitioner RCPI further stated that it has been in operation in the
questioned places long before private respondent Kayumanggi filed its application to operate in
the same places.
After conducting the hearing, NTC ordered RCPI to immediately cease from operating in these
areas. Stating that EO 546 a certificate of public convenience and necessity is mandatory for the
operation of communication utilities and services including radio communications.
RCPI’s MR was denied.
Hence, this petition.
ISSUE:
WON RCPI is required to secure a certificate of public convenience
HELD:
YES. The petitioner's main argument states that the abolition of the Public Service Commission
under Presidential Decree No. 1 and the creation of the National Telecommunications
Commission under Executive Order No. 546 to replace the defunct Public Service Commission
did not affect sections 14 and 15 of the Public Service Law (Commonwealth Act. No. 146, as
amended) has no merit.
it is clear that Executive Order No. 546, Section 15 that the exemption enjoyed by radio
companies from the jurisdiction of the Public Service Commission and the Board of
Communications no longer exists because of the changes effected by the Reorganization Law
and implementing executive orders. The petitioner's claim that its franchise cannot be affected
by Executive Order No. 546 on the ground that it has long been in operation since 1957 cannot
be sustained.
A franchise, being merely a privilege emanating from the sovereign power of the state and
owing its existence to a grant, is subject to regulation by the state itself by virtue of its police
power through its administrative agencies.
WHEREFORE, the challenged order of the public respondent (NTC) dated August 22, 1984 is
hereby AFFIRMED
PHILIPPINE AIRLINES, INC. vs. CIVIL AERONAUTICS BOARD and GRAND INTERNATIONAL
AIRWAYS, INC.
Commercial Law. Transportation. Legislative franchise. Certificate of Public Convenience and
Necessity.
G.R. No. 11952; March 26, 1997FACTS:
This Special Civil Action seeks to prohibit respondent Civil Aeronautics Board from exercising
jurisdiction over private respondent’s Application for the issuance of a Certificate of Public
Convenience and Necessity, and to annul and set aside a temporary operating permit issued by
the Civil Aeronautics Board in favor of Grand International Airways, allowing the same to engage
in scheduled domestic air transportation services, particularly the Manila-Cebu, Manila-Davao,
and converse routes.
Philippine Airlines, Inc. (PAL) alleges that GrandAir does not possess a legislative franchise
authorizing it to engage in air transportation service within the Philippines or elsewhere. Such
franchise is, as argued, a requisite for the issuance of a Certificate of Public Convenience or
Necessity by the respondent Board, as mandated under Section 11, Article XII of the
Constitution.
Respondent GrandAir, on the other hand, posits that a legislative franchise is no longer a
requirement for the issuance of a Certificate of Public Convenience and Necessity or a
Temporary Operating Permit, following the Court’s pronouncements in various jurisprudential
cases.
ISSUE:
Whether or not Congress, in enacting Republic Act 776, has delegated the authority to authorize
the operation of domestic air transport services to the respondent Board, such that
Congressional mandate for the approval of such authority is no longer necessary.
HELD:
It is generally recognized that a franchise may be derived indirectly from the state through a
duly designated agency, and to this extent, the power to grant franchises has frequently been
delegated, even to agencies other than those of a legislative nature. In pursuance of this, it has
been held that privileges conferred by a grant by local authorities as agents for the state
constitute as much a legislative franchise as though the grant had been made by an act of the
Legislature. The trend of modern legislation is to vest the Public Service Commissioner with the
power to regulate and control the operation of public services under reasonable rules and
regulations, and as a general rule, courts will not interfere with the exercise of that discretion
when it is just and reasonable and founded upon a legal right.
The Civil Aeronautics Board has the authority to issue a Certificate of Public Convenience and
Necessity, or Temporary Operating Permit to a domestic air transport operator, who, though
not possessing a legislative franchise, meets all the other requirements prescribed by the law.
Such requirements were enumerated in Section 21 of R.A. 776. There is nothing in the law nor
in the Constitution, which indicates that a legislative franchise is an indispensable
requirement for an entity to operate as a domestic air transport operator. Although Section 11
of Article XII recognizes Congress’ control over any franchise, certificate or authority to operate
a public utility, it does not mean Congress has exclusive authority to issue the same. Franchises
issued by Congress are not required before each and every public utility may operate. In many
instances, Congress has seen it fit to delegate this function to government agencies, particularly
specialized in their respective areas of public service.
1 JOSE MENDOZA vs. PHILIPPINE AIRLINES, INC.,

Emergency Recit: Mendoza contracted with LVN Pictures for him to exhibit “Himala ng Birhen” in his theater during
the town fiesta. The can of film was loaded on a PAL plane. However, the same was not unloaded upon arrival at the
airport. Mendoza was not able to exhibit the film on time, causing him unrealized profits. He filed a case against PAL
but the trial court dismissed his complaint. The SC held that common carriers are not obligated by law to carry and to
deliver merchandise, and persons are not vested with the right of prompt delivery, unless such common carriers
previously assume the obligation. In this case, Mendoza did not inform PAL of the special circumstances surrounding
the film delivery.

Facts:
1. Mendoza was the owner of the Cita Theater in Naga City, Camarines Sur, where he used to exhibit movie pictures
booked from movie producers or film owners in Manila.
2. The Naga fiesta was usually attended by many people, mostly from the Bicol region, especially since the Patron
Saint Virgin of Peña Francia was believed by many to be miraculous.
3. Mendoza, taking advantage of these circumstances, decided to exhibit a film which would fit the occasion and
have a special attraction and significance to the people attending said fiesta.
4. A month before the holiday, he contracted with the LVN pictures, Inc., a movie producer in Manila for him to show
during the town fiesta the Tagalog film entitled "Himala ng Birhen"
5. He made extensive preparations; he had two thousand posters printed and later distributed not only in the City of
Naga but also in the neighboring towns. He also advertised in a weekly of general circulation in the province.
6. The advertisements state that the film would be shown in the Cita theater on the eve and day of the fiesta itself.
7. LVN Pictures Inc. delivered to Philippine Airlines (PAL) a can containing the film "Himala ng Birhen" consigned to
the Cita Theater.
8. PAL issued its Air Way Bill No. 317133. This can of films was loaded on flight 113 of the defendant, the plane
arriving at the Air Port at Pili a little after four o'clock in the afternoon of the same day.
9. However, the can of film was not unloaded at Pili Air Port and it was brought back to Manila.
10. Mendoza inquired about the can of film but it could not be found. When they finally located it, and delivered the
same to Mendoza, it was too late. He had missed his opportunity to realize a large profit since the fiesta-goers
had already gone home.
11. Mendoza brought an action against the PAL. The court dismissed the complaint.
12. To avoid liability, PAL, showed the terms and conditions of paragraph 6 of the Way Bill printed on the back thereof
which paragraph reads as follows:
a. 6. The Carrier does not obligate itself to carry the Goods by any specified aircraft or on a specified time.
Said Carrier being hereby authorized to deviate from the route of the shipment without any liability
therefor.
13. The trial court found and held that although the defendant was not obligated to load the film on any specified
plane or on any particular day, once said can film was loaded and shipped on one of its planes making trip to
Camarines, then it assumed the obligation to unload it at its point of destination and deliver it to the consignee,
and its unexplained failure to comply with this duty constituted negligence.
a. It however found that fraud was not involved and that the defendant was a debtor in good faith.
b. The trial court held that inasmuch as these damages suffered by Mendoza were not foreseen or could not
have been foreseen at the time that the defendant accepted the can of film for shipment, for the reason that
neither the shipper LVN Pictures Inc. nor the consignee Mendoza had called its attention to the special
circumstances attending the shipment and the showing of the film during the town fiesta of Naga, plaintiff
may not recover the damages sought.
14. Counsel for Mendoza insists that the articles of the Code of Commerce rather than those of the Civil Code should
have been applied in deciding this case for the reason that the shipment of the can of film is an act of commerce;
a. that the contract of transportation in this case should be considered commercial under Art. 349 of the Code
of Commerce because it only involves merchandise or an object of commerce but also the transportation
company, PAL, was a common carrier, that is to say, customarily engaged in transportation for the public,
b. and that although the contract of transportation was not by land or waterways as defined in said Art. 349,
nevertheless, air transportation being analogous to land and water transportation, should be considered as
included, especially in view of the second paragraph of Art. 2 of the same Code which says that transactions
covered by the Code of Commerce and all others of analogous character shall be deemed acts of
commerce.

Issue: Whether or not the trial court made an error in dismissing the complaint. NO.

Held/Ratio:
 A contract of transportation by air may be regarded as commercial.

 The reason is that the transportation company (PAL) is a common carrier; besides, air transportation is clearly
similar or analogous to land and water transportation. The obvious reason for its non-inclusion in the Code of
Commerce was that at the time of its promulgation, transportation by air on a commercial basis was not yet
known.

 The test of whether one is a common carrier by air is whether he holds out that he will carry for hire, so long as he
has room, goods for everyone bringing goods to him for carriage, not whether he is carrying as a public
employment or whether he carries to a fixed place.
 Under Art. 1107 of the Civil Code, a debtor in good faith like PAL, may be held liable only for damages that were
foreseen or might have been foreseen at the time the contract of the transportation was entered into.
o The trial court correctly found that PAL could not have foreseen the damages that would be suffered by
Mendoza upon failure to deliver the can of film on the 17th of September, 1948 for the reason that the plans
of Mendoza to exhibit that film during the town fiesta and his preparations, specially the announcement of
said exhibition by posters and advertisement in the newspaper, were not called to the PAL's attention.
 In order to impose on the defaulting party further liability than for damages naturally and directly arising from a
breach of contract, such unusual or extraordinary damages must have been brought within the contemplation of
the parties as the probable result of a breach at the time of or prior to contracting. Generally, notice then of any
special circumstances which will show that the damages to be anticipated from a breach would be enhanced has
been held sufficient for this effect.

 Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with
the right of prompt delivery, unless such common carriers previously assume the obligation. Said rights and
obligations are created by a specific contract entered into by the parties.

 In situations like the present where failure to exhibit films on a certain day would spell substantial damages or
considerable loss of profits, including waste of efforts on preparations and expenses incurred in advertisements,
exhibitors, for their security, may either get hold of the films well ahead of the time of exhibition in order to make
allowance for any hitch in the delivery, or else enter into a special contract or make a suitable arrangement with
the common carrier for the prompt delivery of the films, calling the attention of the carrier to the circumstances
surrounding the case and the approximate amount of damages to be suffered in case of delay.

NATIONAL STEEL CORPORATION v. COURT OF APPEALS

G.R. No. 112287 December 12, 1997
Panganiban, J.
Doctrine:
The stringent provisions of the Civil Code on common carriers protecting the general public
cannot justifiably be applied to a private carrier.
Facts:
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 VSI’s vessel, the
MV Vlasons I to make one voyage to load steel products at Iligan City and discharge them at
North Harbor, Manila. The handling, loading and unloading of the cargoes were the
responsibility of the Charterer.
The skids of tinplates and hot rolled sheets shipped were allegedly found to be wet and rusty.
Plaintiff, alleging negligence, filed a claim for damages against the defendant who denied
liability claiming that the MV Vlasons I was seaworthy in all respects for the carriage of plaintiff’s
cargo; that said vessel was not a “common carrier” inasmuch as she was under voyage charter
contract with the plaintiff as charterer under the charter party; that in the course its voyage, the
vessel encountered very rough seas.
Issue:
Whether or not the provisions of the Civil Code on common carriers pursuant to which there
exists a presumption of negligence against the common carrier in case of loss or damage to the
cargo are applicable to a private carrier.
Held:
No. 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.
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
[Mendoza vs. Philippine Airlines, Inc., 90 Phil. 836, 842-843 (1952)]. 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.
Because the MV Vlasons I was a private carrier, the ship owner’s obligations are governed by the
foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general
rule, places the prima facie presumption of negligence on a common carrier.

Vlasons Shipping Inc v. CA GR no. L-112350

Facts:
National Steel Corporation (NSC) as Charterer and Vlasons Shipping, Inc. (VSI) as Owner, entered
into a Contract of Voyage Charter Hire (Affreightment) whereby NSC hired VSI‟s vessel, the MV
„VLASONS I‟ to make one (1) voyage to load steel products at Iligan City and discharge them at
North Harbor, Manila. VSI carried passengers or goods only for those it chose under a “special
contract of charter party. “The vessel arrived with the cargo in Manila, but when the vessel‟s
three (3) hatches containing the shipment were opened, nearly all the skids often plates and hot
rolled sheets were allegedly found to be wet and rusty. NSC filed its complaint against
defendant before the CFI wherein it claimed that it sustained losses as a result of the “act,
neglect and default of the master and crew in the management of the vessel as well as the want
of due diligence on the part of the defendant to make the vessel seaworthy …-- all in violation of
defendant’s undertaking under their Contract of Voyage Charter Hire.”
In its answer, defendant denied liability for the alleged damage claiming that the MV VLASONS I
was seaworthy in all respects for the carriage of plaintiff’s cargo; that said vessel was not a
„common carrier‟ inasmuch as she was under voyage charter contract with the plaintiff as
charterer under the charter party. The trial court ruled in favor of VSI; it was affirmed by the CA
on appeal.
ISSUE: Whether or not Vlazons is a private carrier so that it is free from liabilities re the damages
incurred by NSC with respect to its cargoes.
HELD:
Yes. 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:
“ x x x [I]n 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.”
Spouses Cruz vs. Sun Holidays, Inc.
GR No. 186312
29 June 2010

FACTS
Spouses Cruz files a complaint for damages against Sun Holidays arising from the death of their
son who perished with his wife on board the boat M/B Coco Beach III that capsized en route
Batangas from Puerto Galera where the couple had stayed at Coco Beach Island Resort owned
and operated by respondent. Their stay was by virtue of a tour package-contract with respondent
that included transportation to and from the Resort and the point of departure in Batangas. Eight
of the passengers, including petitioners’ son and his wife, died during the accident. Sun denied
any responsibility for the incident which it considered to be a fortuitous event. Petitioners allege
that as a common carrier, Sun was negligent in allowing the boat to sail despite the storm warning
bulletins issued by PAGASA. Respondent denied being a common carrier, alleging that its boats
are not available to the public but are only used as ferry resort carrier. It also claimed to have
exercised the utmost diligence in ensuring the safety of its passengers, and that contrary to
petitioners’ allegation, there was no storm as the Coast Guard in fact cleared the voyage. M/B
Coco Beach III was not filled to capacity and had sufficient life jackets for its passengers.

RTC dismissed the complaint. CA denied the appeal holding that Sun is a private carrier which is
only required to observe ordinary diligence and that the proximate cause of the incident was a
fortuitous event.

ISSUE
Whether M/B Coco Beach III breached a contract of carriage

HELD
Respondent is a common carrier. Its ferry services are so intertwined with its business as to be
properly considered ancillary thereto. The constancy of respondent’s ferry services in its resort
operations is underscored by its having its own Coco Beach boats. And the tour packages it
offers, which include the ferry services, may be availed of by anyone who can afford to pay the
same. These services are thus available to the public.

In the De Guzman case, Article 1732 of the Civil Code defining “common carriers” has
deliberately refrained from making distinctions on whether the carrying of persons or goods is the
carrier’s principal business, whether it is offered on a regular basis, or whether it is offered to the
general public.

Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each case. They are bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all the circumstances.

When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that
the common carrier is at fault or negligent. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence.
AF Sanchez Brokerage vs CA and FGU Insurance (Dec 21, 2004)
Facts:
AF Sanchez is engaged in a broker business wherein its main job is to calculate customs duty,
fees and charges as well as storage fees for the cargoes. Part also of the services being given by
AF Sanchez is the delivery of the shipment to the consignee upon the instruction of the shipper.
Wyett engaged the services of AF Sanchez where the latter delivered the shipment to Hizon
Laboratories upon instruction of Wyett. Upon inspection, it was found out that at least 44
cartons containing contraceptives were in bad condition. Wyett claimed insurance from FGU.
FGU exercising its right of subrogation claims damages against AF Sanchez who delivered the
damaged goods. AF Sanchez contended that it is not a common carrier but a brokerage firm.
Issue:
Is AF Sanchez a common carrier?
Held:
SC held that Art 1732 of the Civil Code in defining common carrier does not distinguish whether
the activity is undertaken as a principal activity or merely as an ancillary activity. In this case,
while it is true that AF Sanchez is principally engaged as a broker, it cannot be denied from the
evidence presented that part of the services it offers to its customers is the delivery of the goods
to their respective consignees.
Addendum:
AF Sanchez claimed that the proximate cause of the damage is improper packing. Under the CC,
improper packing of the goods is an exonerating circumstance. But in this case, the SC held that
though the goods were improperly packed, since AF Sanchez knew of the condition and yet it
accepted the shipment without protest or reservation, the defense is deemed waived.
Foul Bill of Lading – reservation or protest on a shipment or goods improperly packed.
Crisostomo v. CA
G.R. No. 138334, August 25, 2003, 409 SCRA 528
FACTS:
Petitioner 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. Pursuant to said contract, the travel documents and plane tickets were delivered to the
petitioner who in turn gave the full payment for the package tour on June 12, 1991. 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 petitioner’s 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. Upon petitioner’s return from Europe, she demanded from respondent the
reimbursement of the difference between the sum she paid for Jewels of Europe and the
amount she owed respondent for the British Pageant tour.
Petitioner filed a complaint against respondent for breach of contract of carriage and damages
alleging that her failure to join Jewels of Europe was due to respondent’s fault since it did not
clearly indicate the departure date on the plane, failing to observe the standard of care required
of a common carrier when it informed her wrongly of the flight schedule. For its part,
respondent company, denied responsibility for petitioner’s failure to join the first tour, insisting
that petitioner was informed of the correct departure date, which was clearly and legibly
printed on the plane ticket. The travel documents were given to petitioner two days ahead of
the scheduled trip. Respondent further contend that petitioner had only herself to blame for
missing the flight, as she did not bother to read or confirm her flight schedule as printed on the
ticket.
ISSUE:
Whether or not Caravan Travel & Tours International Inc. is negligent in the fulfilment of its
obligation to petitioner Crisostomo thus granting to the petitioner the consequential damages
due her as a result of breach of contract of carriage.
RULING:
Contention of petitioner has no merit. 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. Respondent is not an entity engaged in the business of transporting either passengers
or goods and is therefore, neither a private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf. Respondent’s services as a
travel agency include procuring tickets and facilitating travel permits or visas as well as booking
customers for tours.
The object of petitioner’s contractual relation with respondent is the 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. Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family under Article 1173 of
the Civil Code. The evidence on record shows that respondent exercised due diligence in
performing its obligations under the contract and followed standard procedure in rendering its
services to petitioner. As correctly observed by the lower court, the plane ticket issued to
petitioner clearly reflected the departure date and time, contrary to petitioner’s contention. The
travel documents, consisting of the tour itinerary, vouchers and instructions, were likewise
delivered to petitioner two days prior to the trip. Respondent also properly booked petitioner
for the tour, prepared the necessary documents and procured the plane tickets. It arranged
petitioner’s hotel accommodation as well as food, land transfers and sightseeing excursions, in
accordance with its avowed undertaking. 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.

FIRST PHILIPPINE INDUSTRIAL CORPORATION v. CA, GR No. 125948, 1998-12-29

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
1967[1] and renewed by the Energy Regulatory Board in 1992.
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... pursuant to the Local Government Code.
The respondent City Treasurer assessed a business tax on the petitioner... based on the gross
receipts for products pumped... petitioner paid the tax under protest... respondent City
Treasurer denied the protest contending that petitioner cannot be considered engaged in
transportation business, thus it cannot claim exemption
Issues:
Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a
transportation contractor, and (2) the exemption sought for by petitioner is not clear under the
law.
Ruling:
There is merit in the petition.
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over
his established roads; and
4. The transportation must be for hire.
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.
Asia Lighterage Shipping Inc vs CA Case Digest

Facts: Wheat in bulk, was shipped by Marubeni American Corporation of Portland, Oregon on
board the vessel M/V NEO for delivery to the consignee, General Milling Corporation in Manila.
The shipment was insured by the private respondent Prudential Guarantee and Assurance, Inc.
against loss or damage. The carrying vessel arrived in Manila and the cargo was transferred to
the custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by
the consignee as carrier to deliver the cargo to consignee's warehouse. On, 900 metric tons of
the shipment was loaded on barge PSTSI III for delivery to consignee. The cargo did not reach its
destination.
It appears that the transport of said cargo was suspended due to a warning of an incoming
typhoon. The petitioner proceeded to pull the barge to Engineering Island off Baseco to seek
shelter from the approaching typhoon. A few days after, the barge developed a list because of a
hole it sustained after hitting an unseen protuberance underneath the water. The barge was
then towed to ISLOFF terminal before it finally headed towards the consignee's wharf. Upon
reaching the Sta. Mesa spillways, the barge again ran aground due to strong current. To avoid
the complete sinking of the barge, a portion of the goods was transferred to three other barges.
The next day, the towing bits of the barge broke. It sank completely, resulting in the total loss of
the remaining cargo. Private respondent indemnified the consignee.15Thereafter, as subrogee,
it sought recovery of said amount from the petitioner, but to no avail.
The private respondent filed a complaint against the petitioner for recovery of the amount of
indemnity, attorney's fees and cost of suit.
The Regional Trial Court ruled in favor of the private respondent.
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier.
Issue: Whether the petitioner is a common carrier
Held: Common Carrier. Petitioner is a common carrier whether its carrying of goods is done on
an irregular rather than scheduled manner, and with an only limited clientele. A common carrier
need not have fixed and publicly known routes. Neither does it have to maintain terminals or
issue tickets. To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs.
Court of Appeals. The test to determine a common carrier is "whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." In the case at bar, the
petitioner admitted that it is engaged in the business of shipping and lighterage, offering its
barges to the public, despite its limited clientele for carrying or transporting goods by water for
compensation.
Planters Products, Inc. v. CA
Facts:
Planters Products, Inc. purchased from Mitsubishi International Corporation 9,329.7069 metric
tons of Urea 46% fertilizer, which the latter shipped aboard the cargo vessel M/V Sun Plum on
June 16, 1974. Prior to its voyage, a time-charter party was entered into between Mitsubishi as
shipper, and Kyosei Kisen Kabushiki Kaisha as shipowner. Before loading the fertilizer aboard the
vessel, four of her holds were presumably inspected by the charterer’s representative and found
it fit to take the load. After loading the cargo, the steel hatches were closed with heavy iron lids,
covered with 3 layers of tarpaulin then tied with steel bonds. It remained sealed throughout the
entire voyage.
Upon arrival of the vessel, petitioner unloaded the cargo, which took 11 days. A private marine
and cargo surveyor, Cargo Superintendents Company, Inc. (CSCI) was hired by petitioner to
determine the outturn of the cargo shipped. CSCI reported shortage of 106.726 metric tons, and
contamination of 18 metric tons due to dirt. PPI sent a claim letter against Soriamont Steamship
Agencies, the resident agent of KKKK. The request was denied, hence, PPI filed an action for
damages before the CFI Manila. The lower court sustained the petitioner’s claim, but such
decision was reversed by the appellate court, which absolved the carrier from liability. The
appellate court ruled that the vessel was a private carrier and not a common carrier by reason
of the charter party.
Issues:
(1) Whether a common carrier becomes a private carrier by reason of a charter party
(2) Whether the ship owner was able to prove the exercise of the diligence required under the
circumstances
Held:
(1) A "charter-party" is defined as a contract by which an entire ship, or some principal part
thereof, is let by the owner to another person for a specified time or use; Charter parties are of
two types: (a) contract of affreightment which involves the use of shipping space on vessels
leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise
or bareboat charter, by the terms of which the whole vessel is let to the charterer with a
transfer to him of its entire command and possession and consequent control over its
navigation, including the master and the crew, who are his servants. Contract of affreightment
may either be time charter, wherein the vessel is leased to the charterer for a fixed period of
time, or voyage charter, wherein the ship is leased for a single voyage.
Upon the other hand, 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. Moreover, in case of loss, destruction or
deterioration of the goods, common carriers are presumed to have been at fault or to have
acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such
presumption applies to private carriers, for whosoever alleges damage to or deterioration of the
goods carried has the onus of proving that the cause was the negligence of the carrier.
When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and
compliment were under the employ of the shipowner and therefore continued to be under its
direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew
and to the ship, with the duty of caring for his cargo when the charterer did not have any control
of the means in doing so. This is evident in the present case considering that the steering of the
ship, the manning of the decks, the determination of the course of the voyage and other
technical incidents of maritime navigation were all consigned to the officers and crew who were
screened, chosen and hired by the shipowner. It is 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.
(2) In an action for recovery of damages against a common carrier on the goods shipped, the
shipper or consignee should first prove the fact of shipment and its consequent loss or damage
while the same was in the possession, actual or constructive, of the carrier. Thereafter, the
burden of proof shifts to respondent to prove that he has exercised extraordinary diligence
required by law or that the loss, damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its liability. To our mind, respondent
carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of
negligence.
Before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and
fumigated. 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. When M/V "Sun Plum" docked at its
berthing place, representatives of the consignee boarded, and in the presence of a
representative of the shipowner, the foreman, the stevedores, and a cargo surveyor
representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The
stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing
the whole operation on rotation basis.
The period during which private respondent was to observe the degree of diligence required of
it as a public carrier began from the time the cargo was unconditionally placed in its charge after
the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the
vessel reached its destination and its hull was re-examined by the consignee, but prior to
unloading. A shipowner is liable for damage to the cargo resulting from improper stowage only
when the stowing is done by stevedores employed by him, and therefore under his control and
supervision, not when the same is done by the consignee or stevedores under the employ of the
latter.
Common carriers are not responsible for the loss, destruction or deterioration of the goods if
caused by the character of the goods or defects in the packaging or in the containers. The
primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the
wind tends to blow away some of the materials during the unloading process. The probability of
the cargo being damaged or getting mixed or contaminated with foreign particles was made
greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the
inimical effects of the elements and the grimy condition of the various pieces of equipment used
in transporting and hauling it. If there was loss or contamination of the cargo, it was more likely
to have occurred while the same was being transported from the ship to the dump trucks and
finally to the consignee's warehouse.
Bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage,
more so, with a variable weather condition prevalent during its unloading, as was the case at
bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier
has sufficiently proved the inherent character of the goods which makes it highly vulnerable
to deterioration; as well as the inadequacy of its packaging which further contributed to the
loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was
remiss in the exercise of due diligence in order to minimize the loss or damage to the goods it
carried.
BASCOS vs. COURT OF APPEALS and RODOLFO A. CIPRIANO
G.R. No. 101089 April 7, 1993
FACTS: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short)
entered into a hauling contract with Jibfair Shipping Agency Corp whereby the former bound
itself to haul the latter’s 2,000 m/tons of soya bean meal to the warehouse in Calamba, Laguna.
To carry out its obligation, CIPTRADE, through Cipriano, subcontracted with Bascos to transport
and to deliver 400 sacks of soya bean meal from the Manila Port Area to Calamba, Laguna.
Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair
Shipping Agency the amount of the lost goods in accordance with their 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 pay the former for actual damages for attorney’s 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 court’s
judgment.
Hence this petition for review on certiorari

ISSUE:
(1) WON petitioner a common carrier
(2) WON the hijacking referred to a force majeure

HELD: The petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
1. YES
In disputing the conclusion of the trial and appellate courts that petitioner was a common
carrier, she alleged in this petition that the contract between her and Cipriano was lease of the
truck. She also stated that: she was not catering to the general public. Thus, in her answer to the
amended complaint, she said that she does business under the same style of A.M. Bascos
Trucking, offering her trucks for lease to those who have cargo to move, not to the general
public but to a few customers only in view of the fact that it is only a small business.
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as “(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public.” The test to determine
a common carrier is “whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the quantity or
extent of the business transacted.” 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. 13
But petitioner argues that there was only a contract of lease because they offer their services
only to a select group of people. Regarding the first contention, the holding of the Court in De
Guzman vs. Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it
held thus:
“The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a “sideline”). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the “general public,” i.e., the
general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732 deliberately refrained
from making such distinctions.”

2. NO
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. Accordingly, they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. There are very few instances when
the presumption of negligence does not attach and these instances are enumerated in Article
1734. 19 In those cases where the presumption is applied, the common carrier must prove that
it exercised extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her
from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, the Court held that
hijacking, 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. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:
“Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy; xx
(6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished;” xx
[G.R. No. 141910. August 6, 2002]
FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT
M. EROLES, respondents.
VITUG, J.:
Facts:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of
Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant
site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the Central
Luzon Appliances in Dagupan City. While the truck was traversing the north diversion road along
McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to
fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the
value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights
and interests of Concepcion Industries, Inc., sought reimbursement of the amount it had paid to the latter
from GPS. Since the trucking company failed to heed the claim, FGU filed a complaint for damages and
breach of contract of carriage against GPS and its driver Lambert Eroles with the Regional Trial Court,
Branch 66, of Makati City. In its answer, respondents asserted that GPS was the exclusive hauler only of
Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common carrier.
Respondents further claimed that the cause of damage was purely accidental.
Issues:
Whether or not GPS may be considered as a common carrier
Whether or not GPS, either as a common carrier or a private carrier, may be presumed to have been
negligent when the goods it undertook to transport safely were subsequently damaged while in its
protective custody and possession
Held:
GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its
services to no other individual or entity, cannot be considered a common carrier. Common carriers are
persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for hire or compensation, offering their services to the
public, whether to the public in general or to a limited clientele in particular, but never on an exclusive
basis. The true test of a common carrier is the carriage of passengers or goods, providing space for those
who opt to avail themselves of its transportation service for a fee. Given accepted standards, GPS scarcely
falls within the term “common carrier.”
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion
Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance
justify,prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts,
will not permit a party to be set free from liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured
party a valid cause for recovering that which may have been lost or suffered. The remedy serves to
preserve the interests of the promisee that may include his “expectation interest,” which is his interest in
having the benefit of his bargain by being put in as good a position as he would have been in had the
contract been performed, or his “reliance interest,” which is his interest in being reimbursed for loss
caused by reliance on the contract by being put in as good a position as he would have been in had the
contract not been made; or his “restitution interest,” which is his interest in having restored to him any
benefit that he has conferred on the other party. Indeed, agreements can accomplish little, either for
their makers or for society, unless they are made the basis for action.
Respondent trucking corporation recognizes the existence of a contract of carriage between it and
petitioner’s assured, and admits that the cargoes it has assumed to deliver have been lost or damaged
while in its custody. In such a situation, a default on, or failure of compliance with, the obligation – in this
case, the delivery of the goods in its custody to the place of destination - gives rise to a presumption of
lack of care and corresponding liability on the part of the contractual obligor the burden being on him to
establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself
be ordered to pay petitioner. The driver, not being a party to the contract of carriage between
petitioner’s principal and defendant, may not be held liable under the agreement. A contract can only
bind the parties who have entered into it or their successors who have assumed their personality or their
juridical position. Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract
can neither favor nor prejudice a third person. Petitioner’s civil action against the driver can only be
based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to
prove negligence or fault on the part of the defendant.

Baliwag Transit Inc v Court of Appeals

G.R. No. 57493
January 01, 1987

Facts:
Martinez, claiming to be an employee of two bus lines operating under different grants of
franchise but were issued only one ID Number: “Baliwag Transit” owned and operated
by the late Tuazon and “Baliwag Transit Inc” (BTI) owned by de Tengco, (Martinez)
filed a petition with the Social Security Commission to compel BTI to remit his premium
contributions to SSS. BTI denied ever employing Martinez, and alleges that he was in
fact employed by Tuason who operated a separate and distinct bus line from BTI. The
Social Security Commission granted Martinez’s petition. On appeal, the CA reversed the
decision of the commission, finding that Tuason was operating under the kabit system;
that while Tuason was the owner and operator, his buses were not registered with the
Public Service Commission in his own name; and thus ordered BTI to remit Martinez’
premiums to SSS.

Issue:
Whether or not the issuance by SSS of one ID Number to the two bus lines necessarily
indicates that one of them is operating under the kabit system.

Held:
No. The “Kabit System” has been defined by the Supreme Court as an arrangement
whereby a person who has been granted a certificate of convenience allows another
person who owns motor vehicles to operate under such franchise for a fee.

The determining factor, therefore, is the possession of a franchise to operate which

negates the existence of the “Kabit System” and not the issuance of one SSS ID Number
for both bus lines from which the existence of said system was inferred.

Thus, it is evident that both bus lines operated under their own franchises but opted to
retain the firm name “Baliwag Transit” with slight modification, by the inclusion of the
word “Inc.” in the case of herein petitioner, obviously to take advantage of the goodwill
such firm name enjoys with the riding public. Conversely, the conclusion of the Court of
Appeals that the late Pascual Tuazon, during the time material to this case operated his
buses under the “Kabit System” on the ground that while he was actually the owner and
operator, his buses were not registered with the Public Service Commission (now the
Bureau of Land Transportation) in his own name, is not supported by the records.
BRITISH AIRWAYS VS CA
FACTS:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. He asked Mr. Gumar to
prepare his travel plans.
Mr. Gumar purchased a ticket from British Airways (BA).
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong
via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board
BA.
Before departure, Mahtani checked in at PAL counter his two pieces of luggage containing his
clothings and personal effects, confident that upon reaching Hongkong, the same would be
transferred to the BA flight bound for Bombay.
when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon
inquiry from the BA representatives, he was told that the same might have been diverted to
London.
After waiting for 1 week, BA finally advised him to file a claim by accomplishing the "Property
Irregularity Report.
In the Philippines, on June 11, 1990 Mahtani filed his complaint for damages and attorney's
fees5 against BA and Mr. Gumar before the RTC.L alleging that the reason for the non-transfer of
the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the
proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.
The RTC rendered its decision in favor of Mahtani.
BA is ordered to pay Mahtani P7,000 for the value of the 2 suitcases
$400 for the value of the contents of the luggage
P50,000 for moral and exemplary damages and 20% for attorney’s fees and cost of the action.
This decision was affirmed by CA.
ISSUE: WON the award of the damages was without basis since Mahtani failed to declare a
higher valuation w/ respect to his luggage.
RULING: The SC ruled in the negative.
the nature of an airline's contract of carriage partakes of two types, namely: a contract to deliver
a cargo or merchandise to its destination and a contract to transport passengers to their
destination. A business intended to serve the traveling public primarily, it is imbued with public
interest, hence, the law governing common carriers imposes an exacting standard. 14 Neglect or
malfeasance by the carrier's employees could predictably furnish bases for an action for
damages.
Admittedly, in a contract of air carriage a declaration by the passenger of a higher
value is needed to recover a greater amount. Article 22(1) of the Warsaw Convention
However , we have held that benefits of limited liability are subject to waiver such as when the
air carrier failed to raise timely objections during the trial when questions and answers regarding
the actual claims and damages sustained by the passenger were asked.
Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of
limited liability when it allowed Mahtani to testify as to the actual damages he incurred due to the
misplacement of his luggage, without any objection.
Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel
of the adverse party to be inadmissible for any reason, the latter has the right to object.
However, such right is a mere privilege which can be waived. Necessarily, the objection must be
made at the earliest opportunity, lest silence when there is opportunity to speak may operate as
a waiver of objections. 25 BA has precisely failed in this regard.
To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even
conducted his own cross-examination as well.
Lim & Gunnaban vs. CA & Gonzales
Facts:
Gonzales purchased an Isuzu passenger jeepney from Vallarta. Vallarta remained as the holder
of a certificate of public convenience and the registered owner of the jeepney. Subsequently,
the jeepney collided with a ten-wheeler truck owned by Lim, driven by Gunnaban which
resulted in the death of 1 passenger and injuries to all others. Failure to arrive to a settlement
with Lim for the repair of the jeepney, Gonzales brought an action for damages against Lim &
Gunnaban. Lim denied liability asserting that Vallarte, and not Gonzales, is the real party in
interest being the registered owner of the jeepney. He further asserts that an operator of the
vehicle continues to be its operator as he remains the operator of record; and that to recognize
an operator under the kabit system as the real party in interest and to countenance his claim for
damages is utterly subversive of public policy.

Issue: WON Gonzales, an operator under the kabit system (considering that he is not the
registered owner of the jeepney), may sue for damages against Lim. Or, WON Gonzales is a real
party in interest.

Held: Yes, Gonzales may sue.

The evil sought to be prevented in enjoining the kabit system* does not exist.
1 Neither of the parties to the pernicious kabit system is being held liable for damages.
2 The case arose from the negligence of another vehicle in using the public road to whom no
representation, or misrepresentation, as regards the ownership and operation of the
passenger jeepney was made and to whom no such representation, or misrepresentation, was
necessary. Thus it cannot be said that Gonzales and the registered owner of the jeepney were in
estoppels for leading the public to believe that the jeepney belonged to the registered owner.
3 The riding public was not bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent himself who had been wronged and
was seeking compensation for the damage done to him. Certainly, it would be the height of
inequity to deny him his right.
Thus, it is evident that private respondent has the right to proceed against petitioners for the
damage caused on his passenger jeepney as well as on his business.
LITA ENTERPRISES, INC., vs.INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA
P. GARCIA.
[G.R. No. L-64693 April 27, 1984]
FACTS:
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents,
purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard
cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with
petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the
latter’s certificate of public convenience in consideration of an initial payment of P1,000.00 and a
monthly rental of P200.00 per taxicab unit. To effectuate Id agreement, the aforesaid cars were
registered in the name of petitioner Lita Enterprises, Inc, Possession, however, remained with tile
spouses Ocampo who operated and maintained the same under the name Acme Taxi, petitioner’s
trade name.
About a year later one of said taxicabs driven by their employee, Emeterio Martin, collided with a
motorcycle whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A
criminal case was eventually filed against the driver Emeterio Martin, while a civil case for damages
was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as
registered owner of the taxicab in the latter case. Petitioner Lita Enterprises, Inc. was adjudged liable
for damages by the CFI.
This decision having become final, a writ of execution was issued. Two of the vehicles of respondent
spouses were levied upon and sold at public auction.
Thereafter, Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager
of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly
refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Mrs. de Galvez and the
Sheriff of Manila for reconveyance of motor vehicles with damages.
ISSUE: Whether or not petitioner has a cause of action against defendants.
HELD:
No. Unquestionably, the parties herein operated under an arrangement, commonly known as the
“kabit system”, whereby a person who has been granted a certificate of convenience allows another
person who owns motors vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government . Abuse of this privilege by the
grantees thereof cannot be countenanced. The “kabit system” has been Identified as one of the root
causes of the prevalence of graft and corruption in the government transportation offices. In the
words of Chief Justice Makalintal, “this is a pernicious system that cannot be too severely
condemned. It constitutes an imposition upon the goo faith of the government.
Although not outrightly penalized as a criminal offense, the “kabit system” is invariably recognized as
being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil
Code, It is a fundamental principle that the court will not aid either party to enforce an illegal
contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on
the part of both the trial and appellate courts to have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It provides:
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.
Having entered into an illegal contract, neither can seek relief from the courts, and each must bear
the consequences of his acts.
The defect of inexistence of a contract is permanent and incurable, and cannot be cured by
ratification or by prescription. As this Court said in Eugenio v. Perdido, “the mere lapse of time
cannot give efficacy to contracts that are null void.”
The principle of in pari delicto is well known not only in this jurisdiction but also in the United States
where common law prevails. Under American jurisdiction, the doctrine is stated thus: “The
proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can
be maintained for its specific performance, or to recover the property agreed to be sold or delivered,
or damages for its property agreed to be sold or delivered, or damages for its violation. The rule has
sometimes been laid down as though it was equally universal, that where the parties are in pari
delicto, no affirmative relief of any kind will be given to one against the other.” Although certain
exceptions to the rule are provided by law, We see no cogent reason why the full force of the rule
should not be applied in the instant case.
Erezo v. Jepte
Facts:
• Defendant-appellant is the registered owner of a six by six truck bearing. On August, 9, 1949,
while the same was being driven by Rodolfo Espino y Garcia, it collided with a taxicab at the
intersection of San Andres and Dakota Streets, Manila. As the truck went off the street, it hit Ernesto
Erezo and another, and the former suffered injuries, as a result of which he died.
• The driver was prosecuted for homicide through reckless negligence. The accused pleaded
guilty and was sentenced to suffer imprisonment and to pay the heirs of Ernesto Erezo the sum of
P3,000. As the amount of the judgment could not be enforced against him, plaintiff brought this
action against the registered owner of the truck, the defendant-appellant.
• The defendant does not deny at the time of the fatal accident the cargo truck driven by
Rodolfo Espino y Garcia was registered in his name. He, however, claims that the vehicle belonged to
the Port Brokerage, of which he was the broker at the time of the accident. He explained, and his
explanation was corroborated by Policarpio Franco, the manager of the corporation, that the trucks
of the corporation were registered in his name as a convenient arrangement so as to enable the
corporation to pay the registration fee with his backpay as a pre-war government employee. Franco,
however, admitted that the arrangement was not known to the Motor Vehicle Office.
• The trial court held that as the defendant-appellant represented himself to be the owner of
the truck and the Motor Vehicle Office, relying on his representation, registered the vehicles in his
name, the Government and all persons affected by the representation had the right to rely on his
declaration of ownership and registration. It, therefore, held that the defendant-appellant is liable
because he cannot be permitted to repudiate his own declaration.

Issue:
WoN Jepte should be liable to Erezo for the injuries occasioned to the latter because of the
negligence of the driver even if he was no longer the owner of the vehicle at the time of the damage
(because he had previously sold it to another)
Held:
YES.
• The registered owner, the defendant-appellant herein, is primarily responsible for the
damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be
indemnified by the real or actual owner of the amount that he may be required to pay as damage for
the injury caused to the plaintiff-appellant
• The Revised Motor Vehicle Law provides that no vehicle may be used or operated upon any
public highway unless the same is properly registered. Not only are vehicles to be registered and that
no motor vehicles are to be used or operated without being properly registered for the current year,
but that dealers in motor vehicles shall furnish the Motor Vehicles Office a report showing the name
and address of each purchaser of motor vehicle during the previous month and the manufacturer's
serial number and motor number.
• Registration is required not to make said registration the operative act by which ownership
in vehicles is transferred, as in land registration cases, because the administrative proceeding of
registration does not bear any essential relation to the contract of sale between the parties, but to
permit the use and operation of the vehicle upon any public
• The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicles on the public highways,
responsibility therefore can be fixed on a definite individual, the registered owner.
• A registered owner who has already sold or transferred a vehicle has the recourse to a third-
party complaint, in the same action brought against him to recover for the damage or injury done,
against the vendee or transferee of the vehicle.
 FEB LEASING AND FINANCECORPORATION (now BPI LEASING CORPORATION),
- versus -
SPOUSES SERGIO P. BAYLON and MARITESS VILLENA-BAYLON,BG HAULER, INC.,
and
MANUEL Y. ESTILLOSO,
G.R. No. 181398
(June 29, 2011)

FACTS:
An Isuzu oil tanker running along Del Monte Avenue, Quezon City and bearing plate number
TDY 712 hit Loretta V. Baylon, daughter of respondent spouses Baylon. At the time of the accident, the
oil tanker was registered in the name of petitioner FEB Leasing and Finance Corporation. The oil tanker
was leased to BG Hauler and was being driven by the latter’s driver, M. Estilloso. The oil tanker was
insured by FGU Insurance.
Spouses Baylon filed with the RTC a Complaint for damages against petitioner, BG Hauler, the
driver, and FGU Insurance. Petitioner FEB contended that the lease contract between BG Hauler and
petitioner specifically provides that BG Hauler shall be liable for any loss, damage, or injury the leased oil
tanker may cause even if petitioner is the registered owner of the said oil tanker. It further claimed that
the CA erred in holding petitioner solidarily liable with BG Hauler despite having found the latter liable
under the lease contract.
RTC found FEB Leasing, BG Hauler, and driver jointly and severally liable; While, the insurer’s
obligation has been satisfactorily fulfilled upon payment of P450, 000.00. CA affirmed with RTC.

ISSUE: Whether registered owner (FEB Leasing) of a financially leased vehicle remains liable for loss,
damage, or injury caused by the vehicle notwithstanding an exemption provision in the financial lease
contract.

RULING:
YES. Under Section 5 of Republic Act No. 4136, as amended, all motor vehicles used or operated
on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation
(now Land Transportation Office) for the current year. Furthermore, any encumbrances of motor
vehicles must be recorded with the Land Transportation Office in order to be valid against third parties.
In accordance with the law on compulsory motor vehicle registration, this Court has consistently
ruled that, with respect to the public and third persons, the registered owner of a motor vehicle is
directly and primarily responsible for the consequences of its operation regardless of who the actual
vehicle owner might be. Well-settled is the rule that the registered owner of the vehicle is liable for quasi-
delicts resulting from its use.
The policy behind the rule is to enable the victim to find redress by the expedient recourse of
identifying the registered vehicle owner in the records of the LTO. The registered owner can be
reimbursed by the actual owner, lessee or transferee who is known to him. Unlike the registered owner,
the innocent victim is not privy to the lease, sale, transfer or encumbrance of the vehicle. Hence, the
victim should not be prejudiced by the failure to register such transaction or encumbrance.
In this case, petitioner admits that it is the registered owner of the oil tanker that figured in an
accident causing the death of Loretta. As the registered owner, it cannot escape liability for the loss
arising out of negligence in the operation of the oil tanker. Its liability remains even if at the time of the
accident, the oil tanker was leased to BG Hauler and was being driven by the latter’s driver, and despite a
provision in the lease contract exonerating the registered owner from liability.
 PCI LEASING v. UCPB GENERAL INSURANCE CO.
July 4, 2008 | Austria-Martinez, J. | Petition for Review on Certiorari | Rights and obligations of parties
inter se arising from transactions relating to transportation

PETITIONER: PCI Leasing and Finance, Inc.

RESPONDENT: UCPB General Insurance Co., Inc.

SUMMARY: Respondent paid P244k to UCPB after the latter got into a
vehicular accident with an 18-wheeler truck. UCPB General Insurance filed a
case against PCI Leasing for its failure to pay despite repeated demands.

DOCTRINE: A sale, lease, or financial lease that is not registered with the Land
Transportation Office still does not bind third persons who are aggrieved in
tortious incidents, for the latter need only to rely on the public registration of a
motor vehicle as conclusive evidence of ownership.

FACTS:
1. On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer owned by UCPB and insured with
UCPB General Insurance Inc. was hit and bumped by an 18-wheeler Fuso Tanker Truck owned by
PCI Leasing & Finance. The truck was allegedly leased to and operated by Superior Gas &
Equitable Co., Inc. (SUGECO) and driven by its employee Renato Gonzaga. The impact caused
heavy damage to the Lancer resulting in an explosion of the rear part of the car. Gonzaga
continued on his way and did not bother to bring the victims to the hospital.
2. UCPB was paid P244, 500.00 by its insurance company representing the coverage of the damaged
car. As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were
made by UCPB General Insurance Co. for the payment of the aforesaid amounts. However, no
payment was made. Thus, UCPB filed a case on March 13, 1991.
3. Petitioner interposed the defense that it could not be held liable for the collision, since the driver of
the truck, Gonzaga, was not its employee, but that of its co-defendant SUGECO. In fact, it was
SUGECO, and not petitioner, that was the actual operator of the truck, pursuant to a Contract of
Lease signed by petitioner and SUGECO. Petitioner, however, admitted that it was the owner of
the truck in question.
4. The trial court rendered a decision in favor of UCPB General Insurance and ordered PCI Leasing
and Gonzaga to pay the principal amount with 12% interest as of the filing of the complaint plus
attorney’s fees.
5. On appeal to the CA, the same was affirmed with modification in that the award of attorney’s fees
was deleted and the rate of interest was lowered to 6% per annum. The CA found petitioner liable
for the damage caused by the collision since under the Public Service Act, if the property covered
by a franchise is transferred or leased to another without obtaining the requisite approval, the
transfer is not binding on the Public Service Commission and, in contemplation of law, the grantee
continues to be responsible under the franchise in relation to the operation of the vehicle, such as
damage or injury to third parties due to collisions.
6. Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the said law
applies only to cases involving common carriers, or those which have franchises to operate as
public utilities. In contrast, the case before this Court involves a private commercial vehicle for
business use, which is not offered for service to the general public.

ISSUES:
1. WoN PCI Leasing, as registered owner of a motor vehicle may be held liable with the driver therof
for damages caused to third parties - YES
2. WoN PCI Leasing is absolved from liability by the enactment of RA 8556 1 or the Financing
Company Act of 1998 – NO

RULING: Petition DENIED. CA decision AFFIRMED.

1
Section 12. Liability of lessors. - Financing companies shall not be liable for loss, damage or injury caused by a motor
vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person or entity except when the
motor vehicle, aircraft, vessel, equipment or other property is operated by the financing company, its employees or
agents at the time of the loss, damage or injury.
RATIO:
1. Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar are not
common carriers, which makes the Public Service Act inapplicable. However, the registered
owner of the vehicle driven by a negligent driver may still be held liable under applicable
jurisprudence involving laws on compulsory motor vehicle registration and the liabilities of
employers for quasi- delicts under the Civil Code. The principle of holding the registered owner of
a vehicle liable for quasi-delicts resulting from its use is well established in jurisprudence.
2. For damage or injuries arising out of negligence in the operation of a motor vehicle, the registered
owner may be held civilly liable with the negligent driver either 1) subsidiarily, if the aggrieved
party seeks relief based on a delict or crime under Articles 100 and 103 of the RPC; or 2)
solidarily, if the complainant seeks relief based on a quasi-delict under Articles 2176 and 2180 of
the Civil Code. It is the option of the plaintiff whether to waive completely the filing of the civil
action, or institute it with the criminal action, or file it separately or independently of a criminal
action; his only limitation is that he cannot recover damages twice for the same act or omission of
the defendant. In case a separate civil action is filed, the long-standing principle is that the
registered owner of a motor vehicle is primarily and directly responsible for the consequences of
its operation, including the negligence of the driver, with respect to the public and all third
persons. In contemplation of law, the registered owner of a motor vehicle is the employer of its
driver, with the actual operator and employer, such as a lessee, being considered as merely the
owner's agent. This being the case, even if a sale has been executed before a tortious incident, the
sale, if unregistered, has no effect as to the right of the public and third persons to recover from the
registered owner. The public has the right to conclusively presume that the registered owner is the
real owner, and may sue accordingly.
3. In the case now before the Court, there is not even a sale of the vehicle involved, but a mere lease,
which remained unregistered up to the time of the occurrence of the quasi-delict that gave rise to
the case. Since a lease, unlike a sale, does not even involve a transfer of title or ownership, but the
mere use or enjoyment of property, there is more reason, therefore, in this instance to uphold the
policy behind the law, which is to protect the unwitting public and provide it with a definite
person to make accountable for losses or injuries suffered in vehicular accidents. This is and has
always been the rationale behind compulsory motor vehicle registration under the Land
Transportation and Traffic Code and similar laws, which, as early as Erezo v. Jepte, has been
guiding the courts in their disposition of cases involving motor vehicular incidents. It is also
important to emphasize that such principles apply to all vehicles in general, not just those offered
for public service or utility.
4. The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not
supersede or repeal the law on compulsory motor vehicle registration. No part of the law expressly
repeals Section 5(a) and (e) of R.A. No. 41362, as amended, otherwise known as the Land
Transportation and Traffic Code. Neither is there an implied repeal of R.A. No. 4136. As a rule,
repeal by implication is frowned upon, unless there is clear showing that the later statute is so
irreconcilably inconsistent and repugnant to the existing law that they cannot be reconciled and
made to stand together. There is nothing in R.A. No. 4136 that is inconsistent and incapable of
reconciliation.
5. A lease such as the one involved in the instant case is an encumbrance in contemplation of law,
which needs to be registered in order for it to bind third parties. Under this policy, the evil sought
to be avoided is the exacerbation of the suffering of victims of tragic vehicular accidents in not
being able to identify a guilty party. A contrary ruling will not serve the ends of justice. The
failure to register a lease, sale, transfer or encumbrance, should not benefit the parties responsible,
to the prejudice of innocent victims. The non-registration of the lease contract between petitioner
and its lessee precludes the former from enjoying the benefits under Section 12 of R.A. No. 8556.
6. This ruling may appear too severe and unpalatable to leasing and financing companies, but the
Court believes that petitioner and other companies so situated are not entirely left without a
remedy. They may resort to third-party complaints against their lessees or whoever are the actual
operators of their vehicles. In the case at bar, there is, in fact, a provision in the lease contract
between petitioner and SUGECO to the effect that the latter shall indemnify and hold the former
free and harmless from any "liabilities, damages, suits, claims or judgments" arising from the
latter's use of the motor vehicle. Whether petitioner would act against SUGECO based on this
provision is its own option.
7. The burden of registration of the lease contract is minuscule compared to the chaos that may result
if registered owners or operators of vehicles are freed from such responsibility. Petitioner pays the
price for its failure to obey the law on compulsory registration of motor vehicles for registration is
a pre-requisite for any person to even enjoy the privilege of putting a vehicle on public roads.

2
Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and trailer of any type used or operated
on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation (now the Land
Transportation Office, per Executive Order No. 125, January 30, 1987, and Executive Order No. 125-A, April 13,
1987) for the current year in accordance with the provisions of this Act.
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of motor vehicles, in order to
be valid against third parties must be recorded in the Bureau (now the Land Transportation Office). Voluntary
transactions or voluntary encumbrances shall likewise be properly recorded on the face of all outstanding copies of the
certificates of registration of the vehicle concerned.