Republic of the Philippines 4. The costs of this suit.

4
SUPREME COURT
Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990, 5
Manila hence this petition with the central issue herein being
whether respondent court erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the
SECOND DIVISION damages claimed.

G.R. No. 95582 October 7, 1991 It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by this
Court on appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court are contrary
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners, to those of the trial court, in which case a reexamination of the facts and evidence may be undertaken. 6
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT,
MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim is guilty of negligence. Perforce, we have had to conduct an evaluation of the
CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by Inocencia Cudiamat, respondents.
evidence in this case for the prope calibration of their conflicting factual findings and legal conclusions.

Francisco S. Reyes Law Office for petitioners.

The lower court, in declaring that the victim was negligent, made the following findings:
Antonio C. de Guzman for private respondents.

This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands holding an umbrella. And, without having given the driver or the conductor
any indication that he wishes to board the bus. But defendants can also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased Cudiamat attempted to board
REGALADO, J.:
defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard to believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed.
1 Here lies the defendant's lack of diligence. Under such circumstances, equity demands that there must be something given to the heirs of the victim to assuage their feelings. This, also considering that initially,
On May 13, 1985, private respondents filed a complaint for damages against petitioners for the death of Pedrito Cudiamat as a
defendant common carrier had made overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's heirs. 7
result of a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was
alleged that on said date, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation
in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it
ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, However, respondent court, in arriving at a different opinion, declares that:
in utter bad faith and without regard to the welfare of the victim, first brought his other passengers and cargo to their respective
destinations before banging said victim to the Lepanto Hospital where he expired.

On the other hand, petitioners alleged that they had observed and continued to observe the extraordinary diligence required in the
operation of the transportation company and the supervision of the employees, even as they add that they are not absolute insurers
of the safety of the public at large. Further, it was alleged that it was the victim's own carelessness and negligence which gave rise From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was precisely on this

to the subject incident, hence they prayed for the dismissal of the complaint plus an award of damages in their favor by way of a instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his intention to board the bus as can be seen from the testimony of the

counterclaim. said witness when he declared that Pedrito Cudiamat was no longer walking and made a sign to board the bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was
closing his umbrella at the platform of the bus when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal portion:

IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was negligent, which negligence
was the proximate cause of his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator and in not waiting for the passenger to first secure his seat especially so when we

the sum of P10,000.00 which approximates the amount defendants initially offered said heirs for the amicable settlement of the take into account that the platform of the bus was at the time slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as common carrier to the end

case. No costs. that they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to the circumstances of each case (Article 1733, New Civil
Code). 8
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3
in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set
aside the decision of the lower court, and ordered petitioners to pay private respondents: After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own witnesses.
One of them, Virginia Abalos, testified on cross-examination as follows:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim Pedrito Cudiamat;

2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;

3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and compensatory damages;
Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?

Page 1 of 31
A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this particular place in Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an umbrella about a split second and I signalled again the driver, so the driver
stopped and we went down and we saw Pedrito Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down — from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the
bus was at full stop when the victim boarded the same is correct. They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated forward and was run over
by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the bus when it stopped. Under such circumstances, it cannot be said that the deceased
was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had supposedly not manifested his intention to board the same, does not
merit consideration. When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous
offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to
board the same. The premature acceleration of the bus in this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an
opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the circumstances. As clearly explained in the testimony of the aforestated
witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow motion" at the point where the victim had boarded and was on its platform. 13
Page 2 of 31
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14
An ordinarily prudent person would have made the
attempt board the moving conveyance under the same or similar circumstances. The fact that passengers board and alight from
slowly moving vehicle is a matter of common experience both the driver and conductor in this case could not have been unaware
of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the
rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier passengers
owes to its patrons extends to persons boarding cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the safety of the passengers transported by the according to all the circumstances
of each case. 16
A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the
utmost diligence very cautious persons, with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay
the damages sought by the passenger. By contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and observe extraordinary diligence with a due regard
for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must
be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a patent and incontrovertible proof of their
negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to the hospital,
but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator, despite the serious condition of the victim. The vacuous reason given by petitioners that it was
the wife of the deceased who caused the delay was tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is rather scandalous
and deplorable for a wife whose husband is at the verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to help her distressed and helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the companion
of the victim who informed his family thereof. 20
In fact, it was only after the refrigerator was unloaded that one of the passengers thought of sending
somebody to the house of the victim, as shown by the testimony of Virginia Abalos again, to wit:
Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place to our house and when I went down and asked somebody to bring
down the refrigerator, I also asked somebody to call the family of Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the actual damages based on the gross income of the victim. The rule is that the
amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net
earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income and minus living and other incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or compensatory
damages, respondent court found that the deceased was 48 years old, in good health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual income
as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on computation based on the net earnings, said award must be, as it hereby is, rectified and 22 Villa Rey Transit, Inc. vs. Court of Appeals, et al., 31 SCRA 511 (1970); Davila, et al. vs. Philippine Airlines, Inc., 49 SCRA 497 (1973).
reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23
23 People vs. Sazon, 189 SCRA 700 (1990).

WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are hereby AFFIRMED in all other respects.

SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

# Footnotes

1 Civil Case No. 584-R, Regional Trial Court, Branch 7, Baguio City.

2 Rollo, 51.

3 Penned by Justice Bonifacio A. Cacdac, Jr., with Justices Gloria C. Paras and Serafin V.C. Guingona concurring.

4 Rollo, 26-27.

5 Ibid., 48.

6 Sabinosa vs. Court of Appeals, et al., 175 SCRA 552 (1989).

7 Original Record, 169; Judge Rodolfo D. Rodrigo, presiding.

8 Rollo, 25.

9 TSN, January 20, 1987, 26-27.

10 TSN, November 18, 1986, 3-4.

11 See Del Prado vs. Manila Electric Co., 52 Phil. 900 (1929).

12 14 Am. Jur. 2d 436.

13 TSN, January 20, 1987, 11.

14 Am. Jur. 2d 414.

15 Del Prado vs. Manila Electric Co., supra.

16 Art. 1733, Civil Code.

17 Art. 1755, Civil Code.

18 Sy vs. Malate Tajdcab & Garage, Inc., 102 Phil. 482 (1957); Batangas Transportation Co. vs. Caguimbal, et al., 22 SCRA 171 (1968).

19 Rollo, 25.

20 TSN, June 20, 1986, 3-4.

21 TSN, January 20, 1987, 16.

Page 3 of 31

FIRST DIVISION
[G.R. No. 131621. September 28, 1999]
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC., respondents.
DECISION
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, seeks to reverse and set aside the following:(a) the 30 January 1997 decision [1] of the Court of Appeals
in CA-G.R. CV No. 36401, which affirmed the decision of 4 October 1991 [2] of the Regional Trial Court of Manila, Branch 16, in
Civil Case No. 85-29110, ordering LOADSTAR to pay private respondent Manila Insurance Co. (hereafter MIC) the amount of
P6,067,178, with legal interest from the filing of the complaint until fully paid, P8,000 as attorneys fees, and the costs of the suit;
and (b) its resolution of 19 November 1997,[3] denying LOADSTARs motion for reconsideration of said decision.
The facts are undisputed.
On 19 November 1984, LOADSTAR received on board its M/V Cherokee (hereafter, the vessel) the following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and others; and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks including TOTAL LOSS
BY TOTAL LOSS OF THE VESSEL. The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter
PGAI) for P4 million. On 20 November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along
with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR
which, however, ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter
executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the
fault and negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from
the loss of the vessel directly to MIC, said amount to be deducted from MICs claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shippers goods and claimed that the sinking of its vessel was
due to force majeure. PGAI, on the other hand, averred that MIC had no cause of action against it, LOADSTAR being the party
insured. In any event, PGAI was later dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter to the
Court of Appeals, which, however, agreed with the trial court and affirmed its decision in toto.
In dismissing LOADSTARs appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single shipper on that fateful voyage. The
court noted that the charter of the vessel was limited to the ship, but LOADSTAR retained control over its crew. [4]
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in determining the rights and
liabilities of the parties.
Page 4 of 31
3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had been seaworthy, it could have
withstood the natural and inevitable action of the sea on 20 November 1984, when the condition of the sea was moderate. The
vessel sank, not because of force majeure, but because it was not seaworthy. LOADSTARS allegation that the sinking was
probably due to the convergence of the winds, as stated by a PAGASA expert, was not duly proven at the trial. The limited liability
rule, therefore, is not applicable considering that, in this case, there was an actual finding of negligence on the part of the carrier.[5]
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said provisions bind only the
shipper/consignee and the carrier. When MIC paid the shipper for the goods insured, it was subrogated to the latters rights as
against the carrier, LOADSTAR.[6]
5) There was a clear breach of the contract of carriage when the shippers goods never reached their destination. LOADSTARs
defense of diligence of a good father of a family in the training and selection of its crew is unavailing because this is not a proper
or complete defense in culpa contractual.
6) Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are delivered on board a ship in
good order and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the
shipowner to both allege and prove that the goods were damaged by reason of some fact which legally exempts him from
liability. Transportation of the merchandise at the risk and venture of the shipper means that the latter bears the risk of loss or
deterioration of his goods arising from fortuitous events, force majeure, or the inherent nature and defects of the goods, but not
those caused by the presumed negligence or fault of the carrier, unless otherwise proved. [7]
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V Cherokee a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued a certificate of public
convenience, it did not have a regular trip or schedule nor a fixed route, and there was only one shipper, one consignee for a special
cargo.
In refutation, MIC argues that the issue as to the classification of the M/V Cherokee was not timely raised below; hence, it is barred
by estoppel. While it is true that the vessel had on board only the cargo of wood products for delivery to one consignee, it was also
carrying passengers as part of its regular business. Moreover, the bills of lading in this case made no mention of any charter party
but only a statement that the vessel was a general cargo carrier. Neither was there any special arrangement between LOADSTAR
and the shipper regarding the shipment of the cargo. The singular fact that the vessel was carrying a particular type of cargo for
one shipper is not sufficient to convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the
burden of proving otherwise devolved upon MIC.[8]
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the vessel was
allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by the maritime safety engineers of the Philippine
Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at the time was experienced, licensed and
unquestionably competent. With all these precautions, there could be no other conclusion except that LOADSTAR exercised the
diligence of a good father of a family in ensuring the vessels seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force majeure. It points out
that when the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine until the next day when the vessel
sank due to strong waves. MICs witness, Gracelia Tapel, fully established the existence of two typhoons, WELFRING and
YOLING, inside the Philippine area of responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern
Visayas, which includes Limasawa Island. Tapel also testified that the convergence of winds brought about by these two typhoons
strengthened wind velocity in the area, naturally producing strong waves and winds, in turn, causing the vessel to list and eventually
sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what transpired in this case,
is valid. Since the cargo was being shipped at owners risk, LOADSTAR was not liable for any loss or damage to the
same. Therefore, the Court of Appeals erred in holding that the provisions of the bills of lading apply only to the shipper and the
carrier, and not to the insurer of the goods, which conclusion runs counter to the Supreme Courts ruling in the case of St. Paul Fire
& Marine Insurance Co. v. Macondray & Co., Inc.,[9] and National Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen
Phils., Inc.[10]
Finally, LOADSTAR avers that MICs claim had already prescribed, the case having been instituted beyond the period stated in
the bills of lading for instituting the same suits based upon claims arising from shortage, damage, or non-delivery of shipment
shall be instituted within sixty days from the accrual of the right of action. The vessel sank on 20 November 1984; yet, the case
for recovery was filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due to force
majeure, because the same concurred with LOADSTARs fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be deemed waived.
Thirdly, the limited liability theory is not applicable in the case at bar because LOADSTAR was at fault or negligent, and because
it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is tantamount to
negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a
certificate of public convenience, and this public character is not altered by the fact that the carriage of the goods in question was
periodic, occasional, episodic or unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship Agencies,
Inc.,[11] where this Court held that a common carrier transporting special cargo or chartering the vessel to a special person becomes
a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in the charter party absolving the owner
from liability for loss due to the negligence of its agent is void only if the strict policy governing common carriers is upheld. Such
policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single
party. LOADSTAR also cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals[12] and National Steel Corp.
v. Court of Appeals,[13] both of which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for simple reason that the factual settings are
different. The records do not disclose that the M/V Cherokee, on the date in question, undertook to carry a special cargo or was
chartered to a special person only. There was no charter party. The bills of lading failed to show any special arrangement, but only
a general provision to the effect that the M/V Cherokee was a general cargo carrier.[14] Further, the bare fact that the vessel was
carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the
vessel from a common to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying
passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Article 1732
of the Civil Code. In the case of De Guzman v. Court of Appeals,[15] the Court juxtaposed the statutory definition of common
carriers with the peculiar circumstances of that case, viz.:
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
Page 5 of 31
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom, as a sideline. Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the general public, i.e., the general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such
distinctions.
xxx
It appears to the Court that private respondent is properly characterized as a common carrier even though he merely back-hauled
goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondents principal occupation was not the carriage of goods for
others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that that fee frequently fell
below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was
not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability
under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute
and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience,
would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with
applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well
being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and
liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common
carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
Moving on to the second assigned error, we find that the M/V Cherokee was not seaworthy when it embarked on its voyage on 19
November 1984. The vessel was not even sufficiently manned at the time. For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to
maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755
of the Civil Code.[16]
Neither do we agree with LOADSTARs argument that the limited liability theory should be applied in this case. The doctrine of
limited liability does not apply where there was negligence on the part of the vessel owner or agent. [17] LOADSTAR was at fault
or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching
typhoon. In any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition
in the area where it sank was determined to be moderate. Since it was remiss in the performance of its duties, LOADSTAR cannot
hide behind the limited liability doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter disregard of this
Courts pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., [18] and National Union Fire Insurance v.
Stolt-Nielsen Phils., Inc.[19] It was ruled in these two cases that after paying the claim of the insured for damages under the insurance
policy, the insurer is subrogated merely to the rights of the assured, that is, it can recover only the amount that may, in turn, be
recovered by the latter. Since the right of the assured in case of loss or damage to the goods is limited or restricted by the provisions
in the bills of lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and restrictions. We do not
agree. In the first place, the cases relied on by LOADSTAR involved a limitation on the carriers liability to an amount fixed in the
bill of lading which the parties may enter into, provided that the same was freely and fairly agreed upon (Articles 1749-1750). On
the other hand, the stipulation in the case at bar effectively reduces the common carriers liability for the loss or destruction of the
goods to a degree less than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to
shipments made at owners risk. Such stipulation is obviously null and void for being contrary to public policy. [20] It has been said:
 [14]
Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability A general ship carrying goods for hire, whether employed in internal, in coasting, or in foreign commerce is a common
for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to carrier. (Baer, Senior & Co.s Successors v. La Compania Maritima, 6 Phil. 215, 217-218, quoting Liverpool Steamship Co. v.
an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a Phoenix Ins. Co., 129 U.S. 397, 437), cited in 3 TEODORICO C. MARTIN, PHILIPPINE COMMERCIAL LAWS 118 (Rev. Ed.
higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of 1989).
stipulations are invalid as being contrary to public policy, but the third is valid and enforceable. [21]
[15]
168 SCRA 612, 617-619 [1988].
Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights
[16]
which the latter has against the common carrier, LOADSTAR. Trans-Asia Shipping Lines, Inc. v. Court of Appeals, 254 SCRA 260, 272-273 [1996], citing Chan Keep v. Chan Gioco, 14
Phil. 5.
Neither is there merit to the contention that the claim in this case was barred by prescription. MICs cause of action had not yet
[17]
prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive See JOSE C. VITUG, PANDECT OF COMMERCIAL LAW AND JURISPRUDENCE 311-313 (3rd ed. 1997) (hereinafter
period on the matter, the Carriage of Goods by Sea Act (COGSA) which provides for a one-year period of limitation on claims for VITUG). Also, Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., 217 SCRA 359
loss of, or damage to, cargoes sustained during transit may be applied suppletorily to the case at bar. This one-year prescriptive [1993]; American Home Assurance, Co. v. CA, 208 SCRA 343 [1992], citing National Development Co. v. Court of Appeals, 164
period also applies to the insurer of the good.[22] In this case, the period for filing the action for recovery has not yet SCRA 593 [1988]; Heirs of Amparo de los Santos v. Court of Appeals, 186 SCRA 649 [1990].
elapsed. Moreover, a stipulation reducing the one-year period is null and void;[23] it must, accordingly, be struck down. [18]
70 SCRA 122 [1976].
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of Appeals in CA- [19]
G.R. CV No. 36401 is AFFIRMED. Costs against petitioner. 184 SCRA 682 [1990].
[20]
The stipulations on the limitations on the common carriers liability, subject matter of Articles 1749-1750 and Articles 1744-
SO ORDERED.
1745 of the New Civil Code are not to be confused with each other. (See VITUG 244)
Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur. [21]
3 MARTIN, 96-97, citing H.E. Heacock Co. v. Macondray & Co., Inc., 42 Phil. 205. See Arts. 1744 and 1745 of the New Civil
Code.
[22]
VITUG, 220-222, 224, 256 and 334, citing Filipino Merchants Insurance Co., Inc. v. Alejandro, 145 SCRA 42 (1986); see also
3 MARTIN 302, 307 and Sec. 3. (6) of the Carriage of Goods by Sea Act, which provides, inter alia.

[1]
Rollo, 58. Sec. 3. (6) xxx.

[2]
Ibid., 58-59. In any event the carrier and the ship shall be discharged from all liability in respect of the loss or damage unless suit is brought
within one year after delivery of the goods or the date when the goods should have been delivered
[3]
Id., 72.
[23]
VITUG, 334, citing Elser, Inc. v. Court of Appeals, 96 Phil. 264.
[4]
Citing Planters Products, Inc. v. Court of Appeals, 226 SCRA 476 [1993].
Republic of the Philippines
[5]
Citing Aboitiz Shipping Corp. v. General Accident Fire and Life Assurance Corp., Ltd., 217 SCRA 359 [1993]. SUPREME COURT
Manila
[6]
Citing Firemans Fund Insurance Co. v. Jamila & Co., Inc., 70 SCRA 323 [1976].
EN BANC
[7]
Rollo, 18.
G.R. No. L-20761 July 27, 1966
[8]
Citing National Steel Corporation v. Court of Appeals, 283 SCRA 45 [1997].
LA MALLORCA, petitioner,
[9]
70 SCRA 122 [1976]. vs.
[10]
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., respondents.
184 SCRA 682 [1990].
[11]
G. E. Yabut, R. Monterey and M.C. Lagman for petitioner.
23 SCRA 24 [1968]. Ahmed Garcia for respondents.
[12]
274 SCRA 642 [1997]. BARRERA, J.:
[13]
Supra note 8. La Mallorca seeks the review of the decision of the Court of Appeals in CA-G.R. No. 23267-R, holding it liable for quasi-delict
and ordering it to pay to respondents Mariano Beltran, et al., P6,000.00 for the death of his minor daughter Raquel Beltran, plus
P400.00 as actual damages.
Page 6 of 31
The facts of the case as found by the Court of Appeals, briefly are:
On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with their minor daughters, namely, Milagros,
13 years old, Raquel, about 4½ years old, and Fe, over 2 years old, boarded the Pambusco Bus No. 352, bearing plate TPU No.
757 (1953 Pampanga), owned and operated by the defendant, at San Fernando, Pampanga, bound for Anao, Mexico, Pampanga.
At the time, they were carrying with them four pieces of baggages containing their personal belonging. The conductor of the bus,
who happened to be a half-brother of plaintiff Mariano Beltran, issued three tickets (Exhs. A, B, & C) covering the full fares of
the plaintiff and their eldest child, Milagros. No fare was charged on Raquel and Fe, since both were below the height at which
fare is charged in accordance with the appellant's rules and regulations.
After about an hour's trip, the bus reached Anao whereat it stopped to allow the passengers bound therefor, among whom were the
plaintiffs and their children to get off. With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of their
baggages, was the first to get down the bus, followed by his wife and his children. Mariano led his companions to a shaded spot
on the left pedestrians side of the road about four or five meters away from the vehicle. Afterwards, he returned to the bus in
controversy to get his other bayong, which he had left behind, but in so doing, his daughter Raquel followed him, unnoticed by
her father. While said Mariano Beltran was on the running board of the bus waiting for the conductor to hand him his bayong which
he left under one of its seats near the door, the bus, whose motor was not shut off while unloading, suddenly started moving
forward, evidently to resume its trip, notwithstanding the fact that the conductor has not given the driver the customary signal to
start, since said conductor was still attending to the baggage left behind by Mariano Beltran. Incidentally, when the bus was again
placed into a complete stop, it had travelled about ten meters from the point where the plaintiffs had gotten off.
Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the running board without getting
his bayong from the conductor. He landed on the side of the road almost in front of the shaded place where he left his wife and
children. At that precise time, he saw people beginning to gather around the body of a child lying prostrate on the ground, her skull
crushed, and without life. The child was none other than his daughter Raquel, who was run over by the bus in which she rode
earlier together with her parents.
For the death of their said child, the plaintiffs commenced the present suit against the defendant seeking to recover from the latter
an aggregate amount of P16,000 to cover moral damages and actual damages sustained as a result thereof and attorney's fees. After
trial on the merits, the court below rendered the judgment in question.
On the basis of these facts, the trial court found defendant liable for breach of contract of carriage and sentenced it to pay P3,000.00
for the death of the child and P400.00 as compensatory damages representing burial expenses and costs.
On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of contract in the case, for the reason that
when the child met her death, she was no longer a passenger of the bus involved in the incident and, therefore, the contract of
carriage had already terminated. Although the Court of Appeals sustained this theory, it nevertheless found the defendant-appellant
guilty of quasi-delict and held the latter liable for damages, for the negligence of its driver, in accordance with Article 2180 of the
Civil Code. And, the Court of Appeals did not only find the petitioner liable, but increased the damages awarded the plaintiffs-
appellees to P6,000.00, instead of P3,000.00 granted by the trial court.
In its brief before us, La Mallorca contends that the Court of Appeals erred (1) in holding it liable for quasi-delict, considering that
respondents complaint was one for breach of contract, and (2) in raising the award of damages from P3,000.00 to P6,000.00
although respondents did not appeal from the decision of the lower court.
Under the facts as found by the Court of Appeals, we have to sustain the judgement holding petitioner liable for damages for the
death of the child, Raquel Beltran. It may be pointed out that although it is true that respondent Mariano Beltran, his wife, and
their children (including the deceased child) had alighted from the bus at a place designated for disembarking or unloading of
passengers, it was also established that the father had to return to the vehicle (which was still at a stop) to get one of his bags
or bayong that was left under one of the seats of the bus. There can be no controversy that as far as the father is concerned, when
he returned to the bus for his bayongwhich was not unloaded, the relation of passenger and carrier between him and the petitioner
remained subsisting. For, the relation of carrier and passenger does not necessarily cease where the latter, after alighting from the
car, aids the carrier's servant or employee in removing his baggage from the car.1 The issue to be determined here is whether as to
Page 7 of 31
the child, who was already led by the father to a place about 5 meters away from the bus, the liability of the carrier for her safety
under the contract of carriage also persisted.
It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from
the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a
reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay
within this rule is to be determined from all the circumstances. Thus, a person who, after alighting from a train, walks along the
station platform is considered still a passenger.2 So also, where a passenger has alighted at his destination and is proceeding by the
usual way to leave the company's premises, but before actually doing so is halted by the report that his brother, a fellow passenger,
has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, he is deemed
reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad and
company and its agents.3
In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the
bus. Raquel, the child that she was, must have followed the father. However, although the father was still on the running board of
the bus awaiting for the conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump
down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. In the
circumstances, it cannot be claimed that the carrier's agent had exercised the "utmost diligence" of a "very cautions person" required
by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its obligation to transport safely its
passengers. In the first place, the driver, although stopping the bus, nevertheless did not put off the engine. Secondly, he started to
run the bus even before the bus conductor gave him the signal to go and while the latter was still unloading part of the baggages
of the passengers Mariano Beltran and family. The presence of said passengers near the bus was not unreasonable and they are,
therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage.
But even assuming arguendo that the contract of carriage has already terminated, herein petitioner can be held liable for the
negligence of its driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the Civil Code. Paragraph 7 of the complaint,
which reads —
That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence
and want of exercise of the utmost diligence of a very cautious person on the part of the defendants and their agent, necessary to
transport plaintiffs and their daughter safely as far as human care and foresight can provide in the operation of their vehicle.
is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while incompatible with the other claim
under the contract of carriage, is permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to
allege causes of action in the alternative, be they compatible with each other or not, to the end that the real matter in controversy
may be resolved and determined.4
The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated when it was alleged in the
complaint that "the death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and want of exercise of the utmost
diligence of a very cautious person on the part of the defendants and their agent." This allegation was also proved when it was
established during the trial that the driver, even before receiving the proper signal from the conductor, and while there were still
persons on the running board of the bus and near it, started to run off the vehicle. The presentation of proof of the negligence of
its employee gave rise to the presumption that the defendant employer did not exercise the diligence of a good father of the family
in the selection and supervision of its employees. And this presumption, as the Court of Appeals found, petitioner had failed to
overcome. Consequently, petitioner must be adjudged peculiarily liable for the death of the child Raquel Beltran.
The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals, however, cannot be sustained.
Generally, the appellate court can only pass upon and consider questions or issues raised and argued in appellant's brief. Plaintiffs
did not appeal from that portion of the judgment of the trial court awarding them on P3,000.00 damages for the death of their
daughter. Neither does it appear that, as appellees in the Court of Appeals, plaintiffs have pointed out in their brief the inadequacy
of the award, or that the inclusion of the figure P3,000.00 was merely a clerical error, in order that the matter may be treated as an
exception to the general rule.5Herein petitioner's contention, therefore, that the Court of Appeals committed error in raising the
amount of the award for damages is, evidently, meritorious.1äwphï1.ñët
Wherefore, the decision of the Court of Appeals is hereby modified by sentencing, the petitioner to pay to the respondents Mariano Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido, Renato dela Cruz Ocfemia was driving
Beltran, et al., the sum of P3,000.00 for the death of the child, Raquel Beltran, and the amount of P400.00 as actual damages. No with expired license and positive for alcoholic breath. Hence, Manila Assistant City Prosecutor Oscar A. Pascua recommended
costs in this instance. So ordered. the filing of information for reckless imprudence resulting to (sic) damage to property and physical injuries.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur. The original complaint was amended twice: first, impleading Auto Palace Car Exchange as commercial agent and/or buyer-seller
Makalintal, J., concurs in the result. and second, impleading Albert Jaucian as principal defendant doing business under the name and style of Auto Palace Car
Exchange.
Footnotes
Except for Ocfemia, all the defendants filed separate answers to the complaint. [Petitioner] Nostradamus Villanueva claimed that
1
Ormond v. Hayer, 60 Tex. 180, cited in 10 C.J. 626. he was no longer the owner of the car at the time of the mishap because it was swapped with a Pajero owned by Albert Jaucian/Auto
2
Palace Car Exchange. For her part, Linda Gonzales declared that her presence at the scene of the accident was upon the request of
Keefe v. Boston, etc., R. Co., 142 Mass. 251, 7 NE 874. the actual owner of the Mitsubishi Lancer (PHK 201 91) [Albert Jaucian] for whom she had been working as agent/seller. On the
3 other hand, Auto Palace Car Exchange represented by Albert Jaucian claimed that he was not the registered owner of the car.
Layne v. Chesapeake, etc. R. Co., 68 W. Va. 213, 69 SE 700, 31 LRANS 414.
Moreover, it could not be held subsidiary liable as employer of Ocfemia because the latter was off-duty as utility employee at the
4
Melayan, et al. v. Melayan, et al., G.R. No. L-14518, Aug. 29, 1960. time of the incident. Neither was Ocfemia performing a duty related to his employment. [3]

5
Sec. 7, Rule 51, new Rules of Court. After trial, the trial court found petitioner liable and ordered him to pay respondent actual, moral and exemplary damages plus
appearance and attorney’s fees:

THIRD DIVISION
[G.R. No. 144274. September 20, 2004]
NOSTRADAMUS VILLANUEVA petitioner, vs. PRISCILLA R. DOMINGO and LEANDRO LUIS R.
DOMINGO, respondents.
DECISION
CORONA, J.:
This is a petition to review the decision[1] of the Court of Appeals in CA-G.R. CV No. 52203 affirming in turn the decision of the
trial court finding petitioner liable to respondent for damages. The dispositive portion read:
WHEREFORE, the appealed decision is hereby AFFIRMED except the award of attorneys fees including appearance fees which
is DELETED.
[2]
SO ORDERED.
The facts of the case, as summarized by the Court of Appeals, are as follows:
[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer Car model 1980 bearing plate No. NDW
781 91 with [co-respondent] Leandro Luis R. Domingo as authorized driver. [Petitioner] Nostradamus Villanueva was then the
registered owner of a green Mitsubishi Lancer bearing Plate No. PHK 201 91.
On 22 October 1991 at about 9:45 in the evening, following a green traffic light, [respondent] Priscilla Domingos silver Lancer
car with Plate No. NDW 781 91 then driven by [co-respondent] Leandro Luis R. Domingo was cruising along the middle lane of
South Superhighway at moderate speed from north to south. Suddenly, a green Mitsubishi Lancer with plate No. PHK 201 91
driven by Renato Dela Cruz Ocfemia darted from Vito Cruz Street towards the South Superhighway directly into the path of NDW
781 91 thereby hitting and bumping its left front portion. As a result of the impact, NDW 781 91 hit two (2) parked vehicles at the
roadside, the second hitting another parked car in front of it.
WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering Nostradamus Villanueva to pay the amount of P99,580 as
actual damages, P25,000.00 as moral damages, P25,000.00 as exemplary damages and attorneys fees in the amount of P10,000.00
plus appearance fees of P500.00 per hearing with legal interest counted from the date of judgment. In conformity with the law on
equity and in accordance with the ruling in First Malayan Lending and Finance Corporation vs. Court of Appeals (supra), Albert
Jaucian is hereby ordered to indemnify Nostradamus Villanueva for whatever amount the latter is hereby ordered to pay under the
judgment.
SO ORDERED.[4]
The CA upheld the trial courts decision but deleted the award for appearance and attorneys fees because the justification for the
grant was not stated in the body of the decision. Thus, this petition for review which raises a singular issue:
MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR DAMAGES ARISING FROM A
VEHICULAR ACCIDENT INVOLVING HIS MOTOR VEHICLE WHILE BEING OPERATED BY THE EMPLOYEE OF ITS
BUYER WITHOUT THE LATTERS CONSENT AND KNOWLEDGE?[5]
Yes.
We have consistently ruled that the registered owner of any vehicle is directly and primarily responsible to the public and third
persons while it is being operated.[6] The rationale behind such doctrine was explained way back in 1957 in Erezo vs. Jepte[7]:
The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public
has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to
enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should
be required to prove who the actual owner is. How would the public or third persons know against whom to enforce their rights in
case of subsequent transfers of the vehicles? We do not imply by his doctrine, however, that the registered owner may not recover
whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or
conveyed the vehicle.
Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily be responsible
to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. The
members of the Court are in agreement that the defendant-appellant should be held liable to plaintiff-appellee for the injuries
occasioned to the latter because of the negligence of the driver, even if the defendant-appellant was no longer the owner of the

Page 8 of 31
vehicle at the time of the damage because he had previously sold it to another. What is the legal basis for his (defendant-appellants)
liability?
There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered owner in the Motor
Vehicles Office. Should he not be allowed to prove the truth, that he had sold it to another and thus shift the responsibility for the
injury to the real and actual owner? The defendant holds the affirmative of this proposition; the trial court held the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon any public
highway unless the same is property registered. It has been stated that the system of licensing and the requirement that each
machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury
to pedestrians and other travelers from the careless management of automobiles. And to furnish a means of ascertaining the identity
of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways (2 R.C.L. 1176).
Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered for
the current year, but that dealers in motor vehicles shall furnish thee Motor Vehicles Office a report showing the name and address
of each purchaser of motor vehicle during the previous month and the manufacturers serial number and motor number. (Section
5(c), Act No. 3992, as amended.)
Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land
registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale
between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon
any public highway (section 5 [a], Act No. 3992, as amended). The main aim of motor vehicle registration is to identify the owner
so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility
therefore can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public
highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or
with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the
motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries
caused on public highways:
One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident;
and another is that the knowledge that means of detection are always available may act as a deterrent from lax observance of the
law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the
last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of
lack of means to discover him. The purpose of the statute is thwarted, and the displayed number becomes a share and delusion, if
courts would entertain such defenses as that put forward by appellee in this case. No responsible person or corporation could be
held liable for the most outrageous acts of negligence, if they should be allowed to pace a middleman between them and the public,
and escape liability by the manner in which they recompense servants. (King vs. Brenham Automobile Co., Inc. 145 S.W. 278,
279.)
With the above policy in mind, the question that defendant-appellant poses is: should not the registered owner be allowed at the
trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility by and lay the
same on the person actually owning the vehicle? We hold with the trial court that the law does not allow him to do so; the law,
with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an
incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed
transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer
the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury
done. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing
the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who
is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the
opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered
owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or
another has become the owner, so that he may thereby be relieved of the responsibility to the injured person.
Page 9 of 31
The above policy and application of the law may appear quite harsh and would seem to conflict with truth and justice. We do not
think it is so. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint, in the
same action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle. The
inconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to
comply with the registration that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to
the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the
amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.[8]
Petitioner insists that he is not liable for damages since the driver of the vehicle at the time of the accident was not an authorized
driver of the new (actual) owner of the vehicle. He claims that the ruling in First Malayan Leasing and Finance Corporation vs.
CA[9] implies that to hold the registered owner liable for damages, the driver of the vehicle must have been authorized, allowed
and permitted by its actual owner to operate and drive it. Thus, if the vehicle is driven without the knowledge and consent of the
actual owner, then the registered owner cannot be held liable for damages.
He further argues that this was the underlying theory behind Duavit vs. CA[10] wherein the court absolved the registered owner
from liability after finding that the vehicle was virtually stolen from the owners garage by a person who was neither authorized
nor employed by the owner. Petitioner concludes that the ruling in Duavit and not the one in First Malayan should be applicable
to him.
Petitioners argument lacks merit. Whether the driver is authorized or not by the actual owner is irrelevant to determining the
liability of the registered owner who the law holds primarily and directly responsible for any accident, injury or death caused by
the operation of the vehicle in the streets and highways. To require the driver of the vehicle to be authorized by the actualowner
before the registered owner can be held accountable is to defeat the very purpose why motor vehicle legislations are enacted in
the first place.
Furthermore, there is nothing in First Malayan which even remotely suggests that the driver must be authorized before the
registered owner can be held accountable. In First Malayan, the registered owner, First Malayan Corporation, was held liable for
damages arising from the accident even if the vehicle involved was already owned by another party:
This Court has consistently ruled that regardless of who the actual owner is of a motor vehicle might be, the registered owner is
the operator of the same with respect to the public and third persons, and as such, directly and primarily responsible for the
consequences of its operation. In contemplation of law, the owner/operator of record is the employer of the driver, the actual
operator and employer being considered merely as his agent (MYC-Agro-Industrial Corporation vs. Vda. de Caldo, 132 SCRA
10, citing Vargas vs. Langcay, 6 SCRA 174; Tamayo vs. Aquino, 105 Phil. 949).
We believe that it is immaterial whether or not the driver was actually employed by the operator of record. It is even not necessary
to prove who the actual owner of the vehicle and the employer of the driver is. Granting that, in this case, the father of the driver
is the actual owner and that he is the actual employer, following the well-settled principle that the operator of record continues to
be the operator of the vehicle in contemplation of law, as regards the public and third person, and as such is responsible for the
consequences incident to its operation, we must hold and consider such owner-operator of record as the employer, in contemplation
of law, of the driver. And, to give effect to this policy of law as enunciated in the above cited decisions of this Court, we must now
extend the same and consider the actual operator and employer as the agent of the operator of record.[11]
Contrary to petitioners position, the First Malayan ruling is applicable to him since the case involves the same set of facts ― the
registered owner had previously sold the vehicle to someone else and was being driven by an employee of the new (actual)
owner. Duavit is inapplicable since the vehicle there was not transferred to another; the registered and the actual owner was one
and the same person. Besides, in Duavit, the defense of the registered owner, Gilberto Duavit, was that the vehicle was practically
stolen from his garage by Oscar Sabiano, as affirmed by the latter:
 [9]
Defendant Sabiano, in his testimony, categorically admitted that he took the jeep from the garage of defendant Duavit without the G.R. No. 91378, 9 June 1992, 209 SCRA 660.
consent and authority of the latter. He testified further that Duavit even filed charges against him for the theft of the jeep but which
[10]
Duavit did not push through as his (Sabianos) parents apologized to Duavit on his behalf. [12] G.R. No. 82318, 18 May 1989, 173 SCRA 490.
[11]
As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioners case since the circumstance of unauthorized Supra note 9 at 663.
use was not present. He in fact voluntarily delivered his car to Albert Jaucian as part of the downpayment for a vehicle he purchased [12]
from Jaucian. Thus, he could not claim that the vehicle was stolen from him since he voluntarily ceded possession thereof to Supra note 10 at 493.
Jaucian. It was the latter, as the new (actual) owner, who could have raised the defense of theft to prove that he was not liable for [13]
G.R. No. 98275, 13 November 1992, 215 SCRA 715.
the acts of his employee Ocfemia. Thus, there is no reason to apply the Duavit ruling to this case.
[14]
412 Phil 834 (2001).
The ruling in First Malayan has been reiterated in BA Finance Corporation vs. CA[13] and more recently in Aguilar, Sr. vs.
Commercial Savings Bank.[14] In BA Finance, we held the registered owner liable even if, at the time of the accident, the vehicle THIRD DIVISION
was leased by another party and was driven by the lessees employee. In Aguilar, the registered owner-bank answered for damages
for the accident even if the vehicle was being driven by the Vice-President of the Bank in his private capacity and not as an officer [G.R. No. 143360. September 5, 2002]
of the Bank, as claimed by the Bank. We find no reason to deviate from these decisions.
EQUITABLE LEASING CORPORATION, petitioner, vs. LUCITA SUYOM, MARISSA ENANO, MYRNA TAMAYO
The main purpose of vehicle registration is the easy identification of the owner who can be held responsible for any accident, and FELIX OLEDAN, respondents.
damage or injury caused by the vehicle. Easy identification prevents inconvenience and prejudice to a third party injured by one
who is unknown or unidentified. To allow a registered owner to escape liability by claiming that the driver was not authorized by DECISION
the new (actual) owner results in the public detriment the law seeks to avoid.
PANGANIBAN, J.:
Finally, the issue of whether or not the driver of the vehicle during the accident was authorized is not at all relevant to determining
the liability of the registered owner. This must be so if we are to comply with the rationale and principle behind the registration In an action based on quasi delict, the registered owner of a motor vehicle is solidarily liable for the injuries and damages caused
requirement under the motor vehicle law. by the negligence of the driver, in spite of the fact that the vehicle may have already been the subject of an unregistered Deed of
Sale in favor of another person. Unless registered with the Land Transportation Office, the sale -- while valid and binding between
WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the Court of Appeals is AFFIRMED. the parties -- does not affect third parties, especially the victims of accidents involving the said transport equipment. Thus, in the
present case, petitioner, which is the registered owner, is liable for the acts of the driver employed by its former lessee who has
SO ORDERED. become the owner of that vehicle by virtue of an unregistered Deed of Sale.

Panganiban (Chairman) and Sandoval-Gutierrez, JJ., concur. Statement of the Case

Carpio-Morales, J., on leave. Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the May 12, 2000 Decision[1] of the Court of
Appeals[2] (CA) in CA-GR CV No. 55474. The decretal portion of the Decision reads as follows:

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit. The assailed decision, dated May
5, 1997, of the Regional Trial Court of Manila, Branch 14, in Civil Case No. 95-73522, is
hereby AFFIRMED with MODIFICATION that the award of attorneys fees is DELETED.[3]
[1]
Penned by Associate Justice Buenaventura J. Guerrero and concurred in by Associate Justices Hilarion L. Aquino and Elvi John On the other hand, in Civil Case No. 95-73522, the Regional Trial Court (RTC) of Manila (Branch 14) had earlier disposed in this
S. Asuncion of the Eighth Division. wise:
[2]
Court of Appeals Decision, Rollo, p. 30. WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant Equitable Leasing Corporation
[3]
ordering said defendant to pay to the plaintiffs the following:
Rollo, pp. 24-25.
[4]
A. TO MYRNA TAMAYO
Rollo, pp. 23-24.
[5]
1. the sum of P50,000.00 for the death of Reniel Tamayo;
Petition for Review, Rollo, p. 10.
[6]
2. P50,000.00 as moral damages; and
St.Marys Academy vs. Carpitanos, et al., 426 Phil 878 (2002); BA Finance Corporation vs. CA, G.R. No. 98275, 13 November
1992, 215 SCRA 715, 720, citing Erezo vs. Jepte, 102 Phil 103 (1957). 3. P56,000.00 for the damage to the store and its contents, and funeral expenses.
[7]
102 Phil 103 (1957). B. TO FELIX OLEDAN
[8]
Ibid at 106-110. 1. the sum of P50,000.00 for the death of Felmarie Oledan;
Page 10 of 31
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical treatment of her two sons.
The sum of P120,000.00 as and for attorneys fees.[4]
The Facts
On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the house cum store of Myrna Tamayo located at Pier
18, Vitas, Tondo, Manila. A portion of the house was destroyed. Pinned to death under the engine of the tractor were Respondent
Myrna Tamayos son, Reniel Tamayo, and Respondent Felix Oledans daughter, Felmarie Oledan. Injured were Respondent Oledan
himself, Respondent Marissa Enano, and two sons of Respondent Lucita Suyom.
Tutor was charged with and later convicted of reckless imprudence resulting in multiple homicide and multiple physical injuries
in Criminal Case No. 296094-SA, Metropolitan Trial Court of Manila, Branch 12.[5]
Upon verification with the Land Transportation Office, respondents were furnished a copy of Official Receipt No. 62204139[6] and
Certificate of Registration No. 08262797,[7] showing that the registered owner of the tractor was Equitable Leasing
Corporation/leased to Edwin Lim. On April 15, 1995, respondents filed against Raul Tutor, Ecatine Corporation (Ecatine) and
Equitable Leasing Corporation (Equitable) a Complaint[8] for damages docketed as Civil Case No. 95-73522 in the RTC of Manila,
Branch 14.
The trial court, upon motion of plaintiffs counsel, issued an Order dropping Raul Tutor, Ecatine and Edwin Lim from the
Complaint, because they could not be located and served with summonses.[9] On the other hand, in its Answer with
Counterclaim,[10] petitioner alleged that the vehicle had already been sold to Ecatine and that the former was no longer in possession
and control thereof at the time of the incident. It also claimed that Tutor was an employee, not of Equitable, but of Ecatine.
After trial on the merits, the RTC rendered its Decision ordering petitioner to pay actual and moral damages and attorneys fees to
respondents. It held that since the Deed of Sale between petitioner and Ecatine had not been registered with the Land Transportation
Office (LTO), the legal owner was still Equitable.[11] Thus, petitioner was liable to respondents.[12]
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner was still to be legally deemed the owner/operator of the tractor, even if that vehicle
had been the subject of a Deed of Sale in favor of Ecatine on December 9, 1992. The reason cited by the CA was that the Certificate
of Registration on file with the LTO still remained in petitioners name. [13] In order that a transfer of ownership of a motor vehicle
can bind third persons, it must be duly recorded in the LTO.[14]
The CA likewise upheld respondents claim for moral damages against petitioner because the appellate court considered Tutor, the
driver of the tractor, to be an agent of the registered owner/operator. [15]
Hence, this Petition.[16]
Issues
In its Memorandum, petitioner raises the following issues for the Courts consideration:
Page 11 of 31
I
Whether or not the Court of Appeals and the trial court gravely erred when they decided and held that petitioner [was] liable for
damages suffered by private respondents in an action based on quasi delict for the negligent acts of a driver who [was] not the
employee of the petitioner.
II
Whether or not the Court of Appeals and the trial court gravely erred when they awarded moral damages to private respondents
despite their failure to prove that the injuries they suffered were brought by petitioners wrongful act.[17]
This Courts Ruling
The Petition has no merit.
First Issue:
Liability for Wrongful Acts
Petitioner contends that it should not be held liable for the damages sustained by respondents and that arose from the negligence
of the driver of the Fuso Road Tractor, which it had already sold to Ecatine at the time of the accident. Not having employed Raul
Tutor, the driver of the vehicle, it could not have controlled or supervised him.[18]
We are not persuaded. In negligence cases, the aggrieved party may sue the negligent party under (1) Article 100[19] of the Revised
Penal Code, for civil liability ex delicto; or (2) under Article 2176[20] of the Civil Code, for civil liability ex quasi delicto.[21]
Furthermore, under Article 103 of the Revised Penal Code, employers may be held subsidiarily liable for felonies committed by
their employees in the discharge of the latters duties.[22]This liability attaches when the employees who are convicted of crimes
committed in the performance of their work are found to be insolvent and are thus unable to satisfy the civil liability adjudged.[23]
On the other hand, under Article 2176 in relation to Article 2180 [24] of the Civil Code, an action predicated on quasi delict may be
instituted against the employer for an employees act or omission. The liability for the negligent conduct of the subordinate
is direct and primary, but is subject to the defense of due diligence in the selection and supervision of the employee. [25]The
enforcement of the judgment against the employer for an action based on Article 2176 does not require the employee to be
insolvent, since the liability of the former is solidary -- the latter being statutorily considered a joint tortfeasor.[26] To sustain a
claim based on quasi delict, the following requisites must be proven: (a) damage suffered by the plaintiff, (b) fault or negligence
of the defendant, and (c) connection of cause and effect between the fault or negligence of the defendant and the damage incurred
by the plaintiff.[27]
These two causes of action (ex delicto or ex quasi delicto) may be availed of, subject to the caveat[28] that the offended party cannot
recover damages twice for the same act or omission or under both causes. [29] Since these two civil liabilities are distinct and
independent of each other, the failure to recover in one will not necessarily preclude recovery in the other. [30]
In the instant case, respondents -- having failed to recover anything in the criminal case -- elected to file a separate civil action for
damages, based on quasi delict under Article 2176 of the Civil Code. [31] The evidence is clear that the deaths and the injuries
suffered by respondents and their kins were due to the fault of the driver of the Fuso tractor.
Dated June 4, 1991, the Lease Agreement[32] between petitioner and Edwin Lim stipulated that it is the intention of the parties to
enter into a FINANCE LEASE AGREEMENT.[33] Under such scheme, ownership of the subject tractor was to be registered in the
name of petitioner, until the value of the vehicle has been fully paid by Edwin Lim. [34] Further, in the Lease Schedule,[35] the
monthly rental for the tractor was stipulated, and the term of the Lease was scheduled to expire on December 4, 1992. After a few
months, Lim completed the payments to cover the full price of the tractor. [36] Thus, on December 9, 1992, a Deed of Sale[37] over
the tractor was executed by petitioner in favor of Ecatine represented by Edwin Lim. However, the Deed was not registered with
the LTO.
We hold petitioner liable for the deaths and the injuries complained of, because it was the registered owner of the tractor at the
time of the accident on July 17, 1994.[38] The Court has consistently ruled that, regardless of sales made of a motor vehicle, the
registered owner is the lawful operator insofar as the public and third persons are concerned; consequently, it is directly and
primarily responsible for the consequences of its operation.[39] In contemplation of law, the owner/operator of record is the
employer of the driver, the actual operator and employer being considered as merely its agent.[40] The same principle applies even
if the registered owner of any vehicle does not use it for public service.[41]
Since Equitable remained the registered owner of the tractor, it could not escape primary liability for the deaths and the injuries
arising from the negligence of the driver.[42]
The finance-lease agreement between Equitable on the one hand and Lim or Ecatine on the other has already been superseded by
the sale. In any event, it does not bind third persons.The rationale for this rule has been aptly explained in Erezo v. Jepte,[43] which
we quote hereunder:
proportional to and in approximation of the suffering inflicted.[52] This is so because moral damages are in the category of an award
designed to compensate the claimant for actual injury suffered, not to impose a penalty on the wrongdoer. [53]
Viewed as an action for quasi delict, the present case falls squarely within the purview of Article 2219 (2), [54] which provides for
the payment of moral damages in cases of quasi delict.[55] Having established the liability of petitioner as the registered owner of
the vehicle,[56] respondents have satisfactorily shown the existence of the factual basis for the award [57] and its causal connection
to the acts of Raul Tutor, who is deemed as petitioners employee. [58] Indeed, the damages and injuries suffered by respondents
were the proximate result of petitioners tortious act or omission.[59]
Further, no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount of indemnity being left
to the discretion of the court.[60] The evidence gives no ground for doubt that such discretion was properly and judiciously exercised
by the trial court.[61] The award is in fact consistent with the rule that moral damages are not intended to enrich the injured party,
but to alleviate the moral suffering undergone by that party by reason of the defendants culpable action. [62]

x x x. The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.
injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other SO ORDERED.
vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest Puno, (Chairman), Corona, and Carpio-Morales, JJ., concur.
of the determination of persons responsible for damages or injuries caused on public highways.[44]
Sandoval-Gutierrez, J., on leave.
[45]
Further, petitioners insistence on FGU Insurance Corp. v. Court of Appeals is misplaced. First, in FGU Insurance, the
registered vehicle owner, which was engaged in a rent-a-car business, rented out the car. In this case, the registered owner of the
truck, which is engaged in the business of financing motor vehicle acquisitions, has actually sold the truck to Ecatine, which in
turn employed Tutor. Second, in FGU Insurance, the registered owner of the vehicle was not held responsible for the negligent
acts of the person who rented one of its cars, because Article 2180 of the Civil Code was not applicable. We held that no vinculum
juris as employer and employee existed between the owner and the driver. [46] In this case, the registered owner of the tractor is [1]
Rollo, pp. 21-31.
considered under the law to be the employer of the driver, while the actual operator is deemed to be its agent.[47] Thus, Equitable,
[2]
the registered owner of the tractor, is -- for purposes of the law on quasi delict -- the employer of Raul Tutor, the driver of the Third Division. Written by Justice B. A. Adefuin-de la Cruz and concurred in by Justices Quirino D. Abad Santos Jr. (Division
tractor. Ecatine, Tutors actual employer, is deemed as merely an agent of Equitable. [48] chairman) and Renato C. Dacudao (member).
[3]
True, the LTO Certificate of Registration, dated 5/31/91, qualifies the name of the registered owner as EQUITABLE LEASING Assailed Decision, p. 11; rollo, p. 31.
CORPORATION/Leased to Edwin Lim. But the lease agreement between Equitable and Lim has been overtaken by the Deed of [4]
Sale on December 9, 1992, between petitioner and Ecatine. While this Deed does not affect respondents in this quasi delict suit, it RTC Decision, p. 8; rollo, p. 57; penned by Judge Inocencio D. Maliaman.
definitely binds petitioner because, unlike them, it is a party to it. [5]
See Annex E; rollo, p 38.
We must stress that the failure of Equitable and/or Ecatine to register the sale with the LTO should not prejudice respondents, who [6]
See Annex C; id., p. 35.
have the legal right to rely on the legal principle that the registered vehicle owner is liable for the damages caused by the negligence
of the driver. Petitioner cannot hide behind its allegation that Tutor was the employee of Ecatine. This will effectively prevent [7]
See Annex C-1; ibid.
respondents from recovering their losses on the basis of the inaction or fault of petitioner in failing to register the sale. The non-
registration is the fault of petitioner, which should thus face the legal consequences thereof. [8]
Annex F; rollo, p. 38.
[9]
Second Issue: Respondents Memorandum, p. 1; rollo, p. 117.
[10]
Moral Damages Annex G; rollo, p. 45; penned by Judge Lydia Querubin Layosa.

Petitioner further claims that it is not liable for moral damages, because respondents failed to establish or show the causal [11]
RTC Decision, p. 5; rollo, p. 54.
connection or relation between the factual basis of their claim and their wrongful act or omission, if any. [49]
[12]
Petitioners Memorandum, p. 5; rollo, p. 11.
Moral damages are not punitive in nature, but are designed to compensate[50] and alleviate in some way the physical suffering,
[13]
mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar CA Decision, p. 7; rollo, p. 27.
injury unjustly caused a person.[51] Although incapable of pecuniary computation, moral damages must nevertheless be somehow [14]
Id., pp. 9 & 29.

Page 12 of 31
[15] [30]
Id., pp. 10 & 30. Rafael Reyes Trucking Corpration v. People, supra.
[16] [31]
The case was deemed submitted for decision on December 13, 2001, upon the Courts receipt of respondents Memorandum, Ibid.
which was signed by Atty. Yolando F. Lim of Mercado Lim and Associates. Petitioners Memorandum, filed on October 24, 2001,
[32]
was signed by Atty. Sergio M. Ceniza of Santos Pilapil and Associates. Annex B; rollo, p. 32
[33]
[17]
Page 7; rollo, p. 101. Original in upper case. Annex B-1; rollo, p. 34.
[34]
[18]
Petitioners Memorandum, p. 9; rollo, p. 103. Petitioners Memorandum, p. 2; rollo, p. 8.
[35]
[19]
This article provides: Annex B-1; rollo, p. 34.
[36]
ART. 100. Civil Liability of a person guilty of felony. - Every person criminally liable for a felony is also civilly liable. Petitioners Memorandum, p. 2; rollo, p. 8.
[37]
[20]
This article provides: Annex D; rollo, p. 36
[38]
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage Aguilar v. Commercial Savings Bank, GR No. 128705, June 29, 2001.
done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is [39]
governed by the provision of this Chapter. MYC-Agro-Industrial Corporation v. Vda. de Caldo, 132 SCRA 10, September 7, 1984, citing Vargas v. Langcay, 6 SCRA
174, September 29, 1962; Vda. de Medina v. Cresencia, 99 Phil. 506, July 11, 1956; Timbol v. Osias, 96 Phil. 989, April 30,
[21]
Rafael Reyes Trucking Corporation v. People, 329 SCRA 600, April 3, 2000; Casupanan and Capitulo v. Laroya, GR No. 1955; Montoya v. Ignacio, 94 Phil. 182, December 29, 1953; Tamayo v. Aquino et al., 105 Phil. 949, May 29, 1959.
145391, August 26, 2002. [40]
First Malayan Leasing and Finance Corporation v. Court of Appeals, 209 SCRA 660, June 9, 1992.
[22]
Ibid. [41]
BA Finance Corporation v. Court of Appeals, 215 SCRA 715, November 13, 1992.
[23]
Franco v. Intermediate Appellate Court, 178 SCRA 333, October 5, 1989. [42]
Aguilar v. Commercial Savings Bank, supra.
[24]
This article provides: [43]
102 Phil. 103, September 30, 1957, per Labrador, J.
ART. 2180. The obligation imposed by article 2176 is demandable not only for ones own acts or omissions, but also for those of [44]
persons for whom one is responsible. Id., p. 108, per Labrador, J.
[45]
xxxxxxxxx Maloles II v. Philips, 324 SCRA 172, January 31, 2000.
[46]
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business or industry. [47]
First Malayan Leasing and Finance Corporation v. Court of Appeals, 209 SCRA 660, June 9, 1992.
xxxxxxxxx [48]
Ibid.
[25]
Rafael Reyes Trucking Corporation v. People, supra. [49]
Petitioners Memorandum, p. 15; rollo, p. 109.
[26]
Article 2194 Civil Code provides, Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is [50]
Dee Hua Liong Electrical Equipment Corp. v. Reyes, 145 SCRA 713, November 25, 1986.
solidary.
[51]
[27]
Expertravel & Tours Inc. v. Court of Appeals, 309 SCRA 141, June 25, 1999.
FGU Insurance Corporation v. Court of Appeals, 287 SCRA 718, March 23, 1998, citing Andamo v. Intermediate Appellate
Court, 191 SCRA 195, November 6, 1990. [52]
Philtranco Services Enterprises Inc. v. Court of Appeals, 273 SCRA 562, June 17, 1997.
[28]
This caveat is found in Art. 2177 of the Civil Code which states: [53]
Radio Communication v. Rodriguez, 182 SCRA 899 February 28, 1990; San Miguel Brewery Inc., 21 SCRA 292, September
29, 1967
ART. 2177. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil liability
arising from negligence under the Penal Code. But the plaintiff cannot recover damages twice for the same act or omission of the [54]
Art. 2219. Moral damages may be recovered in the following and analogous cases:
defendant.
(1) A criminal offense resulting in physical injuries;
[29]
Padilla v. Court of Appeals, 129 SCRA 558, March 31, 1984; Mendoza v. Arrieta, 91 SCRA 113, June 29, 1979; Barredo v.
Garcia, 73 Phil. 607, July 8, 1942. (2) Quasi-delicts causing physical injuries;

Page 13 of 31
x x x x x x x x x. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
[55]
Fabre Jr. v. Court of Appeals, 259 SCRA 426, July 26, 1996.
[56]
BA Finance Corporation v. Court of Appeals, supra.
[57]
ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded DECISION
feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendants wrongful act or omission.
[58]
Philippine Veterans Bank v. NLRC, 317 SCRA 510, October 26, 1999.
[59]
San Miguel Brewery, Inc. v. Magno, 21 SCRA 292, September 29, 1967; Dee Hua Liong Electrical Equipment Corp v. CARPIO, J.:
Reyes, supra.
[60]
ART. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages,
may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the
circumstances of each case.
The Case
[61]
Salao v. Court of Appeals, 284 SCRA 493, January 22, 1998.
[62]
Philippine Airlines v. Court of Appeals, supra.

SECOND DIVISION
This is a petition for review on certiorari1 of the 9 October 2007 Decision2 and the 18 January 2008 Resolution3 of the Court of
Appeals in CA-G.R. CV No. 81446. The 9 October 2007 Decision affirmed the 30 October 2003 Decision 4 of the Regional Trial
Court (Branch 35) of Gapan City in Civil Case No. 2334 ordering petitioner to pay respondents damages. The 18 January 2008
Resolution denied petitioners motion for reconsideration.

FEB LEASING AND FINANCE G.R. No. 181398

CORPORATION (now BPI The Facts

LEASING CORPORATION) , Present:

Petitioner, On 2 September 2000, an Isuzu oil tanker running along Del Monte Avenue in Quezon City and bearing plate number TDY 712
hit Loretta V. Baylon (Loretta), daughter of respondent spouses Sergio P. Baylon and Maritess Villena-Baylon (spouses Baylon).
CARPIO, J., Chairperson, At the time of the accident, the oil tanker was registered 5 in the name of petitioner FEB Leasing and Finance
Corporation6 (petitioner). The oil tanker was leased7 to BG Hauler, Inc. (BG Hauler) and was being driven by the latters driver,
LEONARDO-DE CASTRO,* Manuel Y. Estilloso. The oil tanker was insured8 by FGU Insurance Corp. (FGU Insurance).

BRION,

- versus - PEREZ, and The accident took place at around 2:00 p.m. as the oil tanker was coming from Balintawak and heading towards Manila. Upon
reaching the intersection of Bonifacio Street and Del Monte Avenue, the oil tanker turned left. While the driver of the oil tanker
SERENO, JJ. was executing a left turn side by side with another vehicle towards Del Monte Avenue, the oil tanker hit Loretta who was then
crossing Del Monte Avenue coming from Mayon Street. Due to the strong impact, Loretta was violently thrown away about three
SPOUSES SERGIO P. BAYLON
to five meters from the point of impact. She fell to the ground unconscious. She was brought for treatment to the Chinese General
and MARITESS VILLENA-BAYLON, Hospital where she remained in a coma until her death two days after. 9

BG HAULER, INC., and Promulgated:

MANUEL Y. ESTILLOSO, The spouses Baylon filed with the RTC (Branch 35) of Gapan City a Complaint10 for damages against petitioner, BG Hauler, the
driver, and FGU Insurance. Petitioner filed its answer with compulsory counterclaim while FGU Insurance filed its answer with
Respondents. June 29, 2011

Page 14 of 31
counterclaim. On the other hand, BG Hauler filed its answer with compulsory counterclaim and cross-claim against FGU
Insurance.
Petitioner claimed that the spouses Baylon had no cause of action against it because under its lease contract with BG Hauler,
petitioner was not liable for any loss, damage, or injury that the leased oil tanker might cause. Petitioner claimed that no employer-
employee relationship existed between petitioner and the driver.
BG Hauler alleged that neither do the spouses Baylon have a cause of action against it since the oil tanker was not registered in its
name. BG Hauler contended that the victim was guilty of contributory negligence in crossing the street. BG Hauler claimed that
even if its driver was at fault, BG Hauler exercised the diligence of a good father of a family in the selection and supervision of its
driver. BG Hauler also contended that FGU Insurance is obliged to assume all liabilities arising from the use of the insured oil
tanker.
For its part, FGU Insurance averred that the victim was guilty of contributory negligence. FGU Insurance concluded that the
spouses Baylon could not expect to be paid the full amount of their claims. FGU Insurance pointed out that the insurance policy
covering the oil tanker limited any claim to a maximum of P400,000.00.
During trial, FGU Insurance moved that (1) it be allowed to deposit in court the amount of P450,000.00 in the joint names of the
spouses Baylon, petitioner, and BG Hauler and (2) it be released from further participating in the proceedings. After the RTC
granted the motion, FGU Insurance deposited in the Branch Clerk of Court a check in the names of the spouses Baylon, petitioner,
and BG Hauler. The RTC then released FGU Insurance from its contractual obligations under the insurance policy.
The Ruling of the RTC
After weighing the evidence submitted by the parties, the RTC found that the death of Loretta was due to the negligent act of the
driver. The RTC held that BG Hauler, as the employer, was solidarily liable with the driver. The RTC further held that petitioner,
as the registered owner of the oil tanker, was also solidarily liable.
The RTC found that since FGU Insurance already paid the amount of P450,000.00 to the spouses Baylon, BG Hauler, and
petitioner, the insurers obligation has been satisfactorily fulfilled. The RTC thus dismissed the cross-claim of BG Hauler against
FGU Insurance. The decretal part of the RTCs decision reads:
Wherefore, premises considered, judgment is hereby rendered in favor of the plaintiffs and against defendants FEB Leasing (now
BPI Leasing), BG Hauler, and Manuel Estilloso, to wit:
1. Ordering the defendants, jointly and severally, to pay plaintiffs the following:
Page 15 of 31
a. the amount of P62,000.00 representing actual expenses incurred by the plaintiffs;
b. the amount of P50,000.00 as moral damages;
c. the amount of P2,400,000.00 for loss of earning capacity of the deceased victim, Loretta V. Baylon;
d. the sum of P50,000.00 for death indemnity;
e. the sum of P50,000.00 for and as attorneys fees; and
f. with costs against the defendants.
2. Ordering the dismissal of defendants counter-claim for lack of merit and the cross claim of defendant BG Hauler against
defendant FGU Insurance.
SO ORDERED.11
Petitioner, BG Hauler, and the driver appealed the RTC Decision to the Court of Appeals. Petitioner claimed that as financial lessor,
it is exempt from liability resulting from any loss, damage, or injury the oil tanker may cause while being operated by BG Hauler
as financial lessee.
On the other hand, BG Hauler and the driver alleged that no sufficient evidence existed proving the driver to be at fault. They
claimed that the RTC erred in finding BG Hauler negligent despite the fact that it had exercised the diligence of a good father of a
family in the selection and supervision of its driver and in the maintenance of its vehicles. They contended that petitioner, as the
registered owner of the oil tanker, should be solely liable for Lorettas death.
The Ruling of the Court of Appeals
The Court of Appeals held that petitioner, BG Hauler, and the driver are solidarily liable for damages arising from Lorettas death.
Petitioners liability arose from the fact that it was the registered owner of the oil tanker while BG Haulers liability emanated from
a provision in the lease contract providing that the lessee shall be liable in case of any loss, damage, or injury the leased oil tanker
may cause.
Thus, the Court of Appeals affirmed the RTC Decision but with the modification that the award of attorneys fees be deleted for
being speculative. The dispositive part of the appellate courts Decision reads:
WHEREFORE, in the light of the foregoing, the instant appeal is DENIED. Consequently, the assailed Decision of the lower court
is AFFIRMED with the MODIFICATION that the award of attorneys fees is DELETED.
IT IS SO ORDERED.12

Dissatisfied, petitioner and BG Hauler, joined by the driver, filed two separate motions for reconsideration. In its 18 January 2008
Resolution, the Court of Appeals denied both motions for lack of merit.
Unconvinced, petitioner alone filed with this Court the present petition for review on certiorari impleading the spouses Baylon,
BG Hauler, and the driver as respondents.13
The Issue
The sole issue submitted for resolution is whether the registered owner 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.
The Courts Ruling
Petitioner contends 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.
Petitioner claims that the Court of Appeals erred in holding petitioner solidarily liable with BG Hauler despite having found the
latter liable under the lease contract.
For their part, the spouses Baylon counter that the lease contract between petitioner and BG Hauler cannot bind third parties like
them. The spouses Baylon maintain that the existence of the lease contract does not relieve petitioner of direct responsibility as
the registered owner of the oil tanker that caused the death of their daughter.
On the other hand, BG Hauler and the driver argue that at the time petitioner and BG Hauler entered into the lease contract,
Republic Act No. 598014 was still in effect. They point out that the amendatory law, Republic Act No. 8556,15 which exempts from
liability in case of any loss, damage, or injury to third persons the registered owners of vehicles financially leased to another, was
not yet enacted at that time.
In point is the 2008 case of PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc. 16 There, we held liable PCI
Leasing and Finance, Inc., the registered owner of an 18-wheeler Fuso Tanker Truck leased to Superior Gas & Equitable Co., Inc.
(SUGECO) and being driven by the latters driver, for damages arising from a collision. This despite an express provision in the
lease contract to the effect that the lessee, SUGECO, shall indemnify and hold the registered owner free from any liabilities,
damages, suits, claims, or judgments arising from SUGECOs use of the leased motor vehicle.
In the instant case, Section 5.1 of the lease contract between petitioner and BG Hauler provides:
Page 16 of 31
Sec. 5.1. It is the principle of this Lease that while the title or ownership of the EQUIPMENT, with all the rights consequent
thereof, are retained by the LESSOR, the risk of loss or damage of the EQUIPMENT from whatever source arising, as well as any
liability resulting from the ownership, operation and/or possession thereof, over and above those actually compensated by
insurance, are hereby transferred to and assumed by the LESSEE hereunder which shall continue in full force and
effect.17 (Emphasis supplied)
If it so wishes, petitioner may proceed against BG Hauler to seek enforcement of the latters contractual obligation under Section
5.1 of the lease contract. In the present case, petitioner did not file a cross-claim against BG Hauler. Hence, this Court cannot
require BG Hauler to reimburse petitioner for the latters liability to the spouses Baylon. However, as the registered owner of the
oil tanker, petitioner may not escape its liability to third persons.
Under Section 5 of Republic Act No. 4136,18 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.19 Furthermore, any encumbrances of motor vehicles must be recorded with the Land Transportation Office in order to be
valid against third parties.20
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.21 Well-settled is the rule that the registered owner of the vehicle is
liable for quasi-delicts resulting from its use. Thus, even if the vehicle has already been sold, leased, or transferred to another
person at the time the vehicle figured in an accident, the registered vehicle owner would still be liable for damages caused by the
accident. The sale, transfer or lease of the vehicle, which is not registered with the Land Transportation Office, will not bind third
persons aggrieved in an accident involving the vehicle. The compulsory motor vehicle registration underscores the importance of
registering the vehicle in the name of the actual owner.
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 Land Transportation Office. 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.
As the Court held in PCI Leasing:
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. 22
In the landmark case of Erezo v. Jepte,23 the Court succinctly laid down the public policy behind the rule, thus:
The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury b. P50,000.00 as moral damages;
is caused by the vehicle on the public highways, responsibility thereforcan be fixed on a definite individual, the registered owner.
Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles c. P2,400,000.00 for loss of earning capacity of the deceased victim, Loretta V. Baylon; and
without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest d. P50,000.00 for death indemnity.
of the determination of persons responsible for damages or injuries caused on public highways.

Costs against petitioner.

xxx

SO ORDERED.
Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for
him, by collusion with others or, or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one
who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public
highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other
than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims ANTONIO T. CARPIO
to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the Associate Justice
contrary to the prejudice of the person injured, that is to prove that a third person or another has become the owner, so that he may
be thereby be relieved of the responsibility to the injured person. 24

WE CONCUR:

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 latters driver, and
despite a provision in the lease contract exonerating the registered owner from liability.

As a final point, we agree with the Court of Appeals that the award of attorneys fees by the RTC must be deleted for lack of basis. TERESITA J. LEONARDO-DE CASTRO
The RTC failed to justify the award of P50,000attorneys fees to respondent spouses Baylon. The award of attorneys fees must
have some factual, legal and equitable bases and cannot be left to speculations and conjectures.25Consistent with prevailing Associate Justice
jurisprudence,26 attorneys fees as part of damages are awarded only in the instances enumerated in Article 2208 of the Civil
Code.27 Thus, the award of attorneys fees is the exception rather than the rule. Attorneys fees are not awarded every time a party
prevails in a suit because of the policy that no premium should be placed on the right to litigate. 28
ARTURO D. BRION JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

WHEREFORE, we DENY the petition. We AFFIRM the 9 October 2007 Decision and the 18 January 2008 Resolution of the
Court of Appeals in CA-G.R. CV No. 81446 affirming with modification the 30 October 2003 Decision of the Regional Trial
Court (Branch 35) of Gapan City in Civil Case No. 2334 ordering petitioner FEB Leasing and Finance Corporation, BG Hauler,
MARIA LOURDES P.A. SERENO
Inc., and driver Manuel Y. Estilloso to solidarily pay respondent spouses Sergio P. Baylon and Maritess Villena-Baylon the
following amounts: Associate Justice

a. P62,000.00 representing actual expenses incurred by the plaintiffs; ATTESTATION

Page 17 of 31
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of 11 Rollo, pp. 64-65.
the opinion of the Courts Division.
12 Id. at 47.

13Rollo, p. 99. BG Hauler and the driver filed in this Court (Third Division) a separate petition for review, which the Court denied
in its Resolution dated 9 April 2008. The subsequent motion for reconsideration was likewise denied with finality.

14AN ACT REGULATING THE ORGANIZATION AND OPERATION OF FINANCING COMPANIES. Approved on 4
August 1969.
ANTONIO T. CARPIO
15AN ACT AMENDING REPUBLIC ACT NO. 5980, AS AMENDED, OTHERWISE KNOWN AS THE FINANCING
Associate Justice COMPANY ACT. Approved on 26 February 1998. Section 10 of Republic Act No. 8556 states:
Chairperson

SEC. 10. There is hereby inserted after Section 8 as renumbered, new Sections 9, 10, 11, 12 and 13 to read as follows:

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions
in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts
Division.
xxx
SEC. 12. Liability of Lessors. ‒ Financing companies shall not be liable for loss, damage or injury caused by a motor vehicle,
aircraft, vessel, equipment or other property leased to a third person or entity except where 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.

xxx

16 G.R. No. 162267, 4 July 2008, 557 SCRA 141.

RENATO C. CORONA
17 Rollo, p. 86 (back page); records (Vol. I), p. 123 (back page).
Chief Justice
18Otherwise known as the Land Transportation and Traffic Code.

19Section 5 of RA 4136 reads:

* Designated acting member per Special Order No. 1006 dated 10 June 2011.
SEC. 5. Compulsory registration of motor vehicles. ‒ (a) All motor vehicles and trailers of any type used or operated on or upon
1 Under Rule 45 of the Rules of Court. any highway of the Philippines must be registered with the bureau of Land Transportation for the current year in accordance with
the provisions of this Act.
2Rollo, pp. 31-48. Penned by Associate Justice Apolinario D. Bruselas, Jr., with Associate Justices Bienvenido L. Reyes and
Aurora Santiago-Lagman, concurring. xxx
3Id. at 50-52. Penned by Associate Justice Apolinario D. Bruselas, Jr., with Associate Justices Bienvenido L. Reyes (e) Encumbrances of motor vehicles.‒Mortgages, attachments, and other encumbrances of motor vehicles, in order to be valid
and Monina Arevalo Zenarosa, concurring. against third parties must be recorded in the bureau. 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.
4 Id. at 53-65. Penned by Judge Dorentino Z. Floresta.
Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be recorded, and in the absence
5 Records (Vol. I), p. 8.
of such cancellation, no certificate of registration shall be issued without the corresponding notation of mortgage, attachment
6Now BPI Leasing Corporation; records (Vol. II), pp. 14-24. and/or other encumbrances.

7 Rollo, pp. 86-89. xxx

8 Records (Vol. I), p. 33. 20Id.

9 Id. at 10. 21PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc., G.R. No. 162267, 4 July 2008, 557 SCRA 141; Equitable
Leasing Corporation v. Suyom, 437 Phil. 244 (2002); First Malayan Leasing and Finance Corporation v. Court of Appeals, G.R.
10 Id. at 1-7. No. 91378, 9 June 1992, 209 SCRA 660.

Page 18 of 31
22PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc., G.R. No. 162267, 4 July 2008, 557 SCRA 141, 154. Gesolgon, Matti and Custodio for appellees.
Aguedo Y. Jepte in his own behalf.
23 102 Phil. 103 (1957).
LABRADOR, J.:
24Id. at 108-109.
Appeal from a judgment of the Court of First Instance of Manila ordering defendant to pay plaintiff Gaudioso Erezo P3,000 on
25V.V. Soliven Realty Corp. v. Ong, 490 Phil. 229 (2005). the death of Ernesto Erezo, son of plaintiff Gaudioso Erezo.

26Delos Santos v. Papa, G.R. No. 154427, 8 May 2009, 587 SCRA 385; Filipinas Broadcasting Network, Inc. v. Ago Medical &
Educational Center Bicol Christian College of Medicine, 489 Phil. 380 (2005); Pajuyo v. Court of Appeals, G.R. No. 146364, 3
June 2004, 430 SCRA 492.
27 Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered,
except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect
his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
Defendant-appellant is the registered owner of a six by six truck bearing plate No. TC-1253. On August, 9, 1949, while the same
was being driven by Rodolfo Espino y Garcia, it collided with a taxicab at the intersection of San Andres and Dakota Streets,
Manila. As the truck went off the street, it hit Ernesto Erezo and another, and the former suffered injuries, as a result of which he
died. The driver was prosecuted for homicide through reckless negligence in criminal case No. 10663 of the Court of First Instance
of Manila. The accused pleaded guilty and was sentenced to suffer imprisonment and to pay the heirs of Ernesto Erezo the sum of
P3,000. As the amount of the judgment could not be enforced against him, plaintiff brought this action against the registered owner
of the truck, the defendant-appellant. The circumstances material to the case are stated by the court in its decision.
The defendant does not deny at the time of the fatal accident the cargo truck driven by Rodolfo Espino y Garcia was registered in
his name. He, however, claims that the vehicle belonged to the Port Brokerage, of which he was the broker at the time of the
accident. He explained, and his explanation was corroborated by Policarpio Franco, the manager of the corporation, that the trucks
of the corporation were registered in his name as a convenient arrangement so as to enable the corporation to pay the registration
fee with his backpay as a pre-war government employee. Franco, however, admitted that the arrangement was not known to the
Motor Vehicle Office.

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable The trial court held that as the defendant-appellant represented himself to be the owner of the truck and the Motor Vehicle Office,
claim; 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
(6) In actions for legal support; he cannot be permitted to repudiate his own declaration. (Section 68 [a], Rule 123, and Art. 1431, New Civil Code.).

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers; Against the judgment, the defendant has prosecuted this appeal claiming that at the time of the accident the relation of employer
and employee between the driver and defendant-appellant was not established, it having been proved at the trial that the owner of
(8) In actions for indemnity under workmens compensation and employers liability laws; the truck was the Port Brokerage, of which defendant-appellant was merely a broker. We find no merit or justice in the above
contention. In previous decisions, We already have held that the registered owner of a certificate of public convenience is liable to
(9) In a separate civil action to recover civil liability arising from a crime;
the public for the injuries or damages suffered by passengers or third persons caused by the operation of said vehicle, even though
(10) When at least double judicial costs are awarded; the same had been transferred to a third person. (Montoya vs. Ignacio, 94 Phil., 182, 50 Off. Gaz., 108; Roque vs. Malibay Transit
Inc.,1 G. R. No. L- 8561, November 18,1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.)The principle
(11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public has the right
to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the
In all cases, the attorneys fees and expenses of litigation must be reasonable. actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required
to prove who the actual owner is. How would the public or third persons know against whom to enforce their rights in case of
28Lapanday Agricultural and Development Corporation (LADECO) v. Angala, G.R. No. 153076, 21 June 2007, 525 SCRA 229. subsequent transfers of the vehicles? We do not imply by this doctrine, however, that the registered owner may not recover
whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or
conveyed the vehicle.
Republic of the Philippines
Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily be responsible
SUPREME COURT
to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. The
Manila
members of the Court are in agreement that the defendant-appellant should be held liable to plaintiff-appellee for the injuries
EN BANC occasioned to the latter because of the negligence of the driver even if the defendant-appellant was no longer the owner of the
vehicle at the time of the damage because he had previously sold it to another. What is the legal basis for his (defendant-appellant's)
G.R. No. L-9605 September 30, 1957 liability?.

GAUDIOSO EREZO, ET AL., plaintiff-appellee, There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered owner in the Motor
vs. Vehicle Office. Should he not be allowed to prove the truth, that he had sold it to another and thus shift the responsibility for the
AGUEDO JEPTE, defendant-appellant. injury to the real and actual owner? The defendant holds the affirmative of this proposition; the trial court held the negative.
Page 19 of 31
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon any public In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to
highway unless the same is properly registered. It has been stated that the system of licensing and the requirement that each the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the
machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.1âwphïl.nêt
to pedestrians and other travelers from the careless management of automobiles, and to furnish a means of ascertaining the identity
of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways (2 R. C. L. 1176). Bengzon, Paras, C.J., Bautista Angelo, Concepcion, Reyes, J. B. L., and Felix, JJ., concur.
Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered for Montemayor, J., concurs in the result.
the current year, but that dealers in motor vehicles shall furnish the Motor Vehicles Office a report showing the name and address
of each purchaser of motor vehicle during the previous month and the manufacturer's serial number and motor number. (Section 5
[c], Act. No. 3992, as amended.).

Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land
registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale
between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon
any public highway (section 5 [a], Act No. 3992, as amended).The main aim of motor vehicle registration is to identify the owner
so that if any accident happens, or that any damage or injury is caused by the vehicles on the public highways, responsibility
therefore can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public
highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or
with very scant means of identification. It is to forestall those circumstances, so inconvenient or prejudicial to the public, that the
motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries
caused on public highways.
One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident;
and another is that the knowledge that means of detection are always available may act as a deterrent from lax observance of the
law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the
last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of
lack of means to discover him." The purpose of the statute is thwarted, and the displayed number becomes a "snare and delusion,"
if courts will entertain such defenses as that put forward by appellee in this case. No responsible person or corporation could be
held liable for the most outrageous acts of negligence, if they should be allowed to place a "middleman" between them and the
public, and escape liability by the manner in which they recompense their servants. (King vs. Brenham Automobile Co., 145 S.
W. 278,279.)
With the above policy in mind, the question that defendant-appellant poses is: should not be registered owner be allowed at the
trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility and lay the same
on the person actually owning the vehicle? We hold with the trial court that the laws does not allow him to do so; the law, with its
aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or
owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an
indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim
of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury or
damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner.
The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape
liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should be
allowed to prove the contrary to the prejudice of the person injured that is, to prove that a third person or another has become the
owner, so that he may thereby be relieved of the responsibility to the injured person.1âwphïl.nêt
The above policy and application of the law may appear quite harsh and would seem to conflict with truth and justice. We do not
think it is so. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint, in the
same action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle. The
inconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to
comply with the registration that the law demands and requires.
Footnotes
1
97 Phil., 1004.
FIRST DIVISION
[G.R. No. 131166. September 30, 1999]
CALTEX (PHILIPPINES), INC. petitioner, vs. SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S.
GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S.
GO, EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, TERESITA
G. CAEZAL AND SOTERA E. CAEZAL, respondents.
DECISION
PARDO, J.:
Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship?
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products of Caltex (Philippines), Inc.
(hereinafter Caltex) no one could have guessed that it would collide with MV Doa Paz, killing almost all the passengers and crew
members of both ships, and thus resulting in one of the countrys worst maritime disasters.
The petition before us seeks to reverse the Court of Appeals decision [1]holding petitioner jointly liable with the operator of MT
Vector for damages when the latter collided with Sulpicio Lines, Inc.s passenger ship MV Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to Masbate, loaded with 8,800
barrels of petroleum products shipped by petitioner Caltex.[2] MT Vector is a tramping motor tanker owned and operated by Vector
Shipping Corporation, engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and crude oil. During
that particular voyage, the MT Vector carried on board gasoline and other oil products owned by Caltex by virtue of a charter
contract between them.[3]
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port of Tacloban headed for Manila with a
complement of 59 crew members including the master and his officers, and passengers totaling 1,493 as indicated in the Coast
Guard Clearance.[4] The MV Doa Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route
of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the vicinity of Dumali Point between
Marinduque and Oriental Mindoro. All the crewmembers of MV Doa Paz died, while the two survivors from MT Vector claimed
that they were sleeping at the time of the incident.

Page 20 of 31
The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger manifest. Only 24 survived the
tragedy after having been rescued from the burning waters by vessels that responded to distress calls. [5] Among those who perished
were public school teacher Sebastian Caezal (47 years old) and his daughter Corazon Caezal (11 years old), both unmanifested
passengers but proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after investigation found that the MT Vector, its
registered operator Francisco Soriano, and its owner and actual operator Vector Shipping Corporation, were at fault and responsible
for its collision with MV Doa Paz.[6]
On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother respectively, filed with the
Regional Trial Court, Branch 8, Manila, a complaint for Damages Arising from Breach of Contract of Carriage against Sulpicio
Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith
knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a result,
it rammed against MV Doa Paz in the open sea setting MT Vectors highly flammable cargo ablaze.
On September 15, 1992, the trial court rendered decision dismissing the third party complaint against petitioner. The dispositive
portion reads:
WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against defendant-3rd party plaintiff Sulpicio Lines, Inc.,
to wit:
1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G. Caezal, including loss of future earnings of said
Sebastian, moral and exemplary damages, attorneys fees, in the total amount of P 1,241,287.44 and finally;
2. The statutory costs of the proceedings.
Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with costs against the 3rd party plaintiff.
IT IS SO ORDERED.
DONE IN MANILA, this 15th day of September 1992.
ARSENIO M. GONONG
Judge [7]
On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of Appeal modified the trial
courts ruling and included petitioner Caltex as one of the those liable for damages. Thus:
WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is hereby MODIFIED as follows:
WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Caezal and Corazon Caezal:
1. Compensatory damages for the death of Sebastian E.Caezal and Corazon Caezal the total amount of ONE HUNDRED
THOUSAND PESOS (P100,000);
2. Compensatory damages representing the unearned income of Sebastian E. Caezal, in the total amount of THREE HUNDRED
SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00) PESOS;
3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P 300,000.00);
4. Attorneys fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS (P 50,000.00);
5. Costs of the suit.
Page 21 of 31
Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable under the third party complaint to
reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-mentioned damages, attorneys fees and costs which the latter is
adjudged to pay plaintiffs, the same to be shared half by Vector Shipping Co. (being the vessel at fault for the collision) and the
other half by Caltex (Phils.), Inc. (being the charterer that negligently caused the shipping of combustible cargo aboard an
unseaworthy vessel).
SO ORDERED.
JORGE S. IMPERIAL
Associate Justice
WE CONCUR:
RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS
Associate Justice Associate Justice[8]
Hence, this petition.
We find the petition meritorious.
First: The charterer has no liability for damages under Philippine Maritime laws.
The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on whether
the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract
on the other.[9]
Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.[10]
A charter party is 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; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her
to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight.[11]
A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of
time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the
vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ships store,
pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. [12]
Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes, in effect,
the owner for the voyage or service stipulated, subject to liability for damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the
rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the
ship.[13]
Second : MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage charter. Does a charter party
agreement turn the common carrier into a private one? We need to answer this question in order to shed light on the responsibilities
of the parties.
In this case, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage
charter, which retains the character of the vessel as a common carrier.
In Planters Products, Inc. vs. Court of Appeals,[14] we said:
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel
by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only
when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least
insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter
retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer.
Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals:[15]
Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of
affreightment xxx
A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may
choose to employ and to remunerate him.[16] MT Vector fits the definition of a common carrier under Article 1732 of the Civil
Code. In Guzman vs. Court of Appeals,[17] we ruled:
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers for passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one
offering such services on a an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the general public, i.e., the general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such
distinctions.
It appears to the Court that private respondent is properly characterized as a common carrier even though he merely back-hauled
goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic, occasional rather than
regular or scheduled manner, and even though respondents principal occupation was not the carriage of goods for others. There is
no dispute that private respondent charged his customers a fee for hauling their goods; that the fee frequently fell below commercial
freight rates is not relevant here.
Under the Carriage of Goods by Sea Act :
Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to -
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code.[18]
The provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special
public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety
of the passengers, especially because with the modern development of science and invention, transportation has become more
Page 22 of 31
rapid, more complicated and somehow more hazardous.[19] For these reasons, a passenger or a shipper of goods is under no
obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.
This aside, we now rule on whether Caltex is liable for damages under the Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an unseaworthy vessel such as the MT
Vector when Caltex:
1. Did not take steps to have M/T Vectors certificate of inspection and coastwise license renewed;
2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery Corporation;
3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo despite these deficiencies:
1. The master of M/T Vector did not posses the required Chief Mate license to command and navigate the vessel;
2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only in bays and rivers when the
subject collision occurred in the open sea;
3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;
4. The vessel did not have a Third Mate, a radio operator and a lookout; and
5. The vessel had a defective main engine.[20]
As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil Code, which provide:
Article 20. - Every person who contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for
the same.
Article 2176. - Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.
And what is negligence?
The Civil Code provides:
Article 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of
the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad
faith, the provisions of Article 1171 and 2201 paragraph 2, shall apply.
If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a
family shall be required.
In Southeastern College, Inc. vs. Court of Appeals,[21] we said that negligence, as commonly understood, is conduct which naturally
or reasonably creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and vigilance,
which the circumstances justly demand, or the omission to do something which ordinarily regulate the conduct of human affairs,
would do.
The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all Atty. Sarenas: xxx
legal requirements. The duty rests upon the common carrier simply for being engaged in public service.[22] The Civil Code demands
diligence which is required by the nature of the obligation and that which corresponds with the circumstances of the persons, the Atty. Poblador: The certificate of Inspection?
time and the place.Hence, considering the nature of the obligation between Caltex and MT Vector, the liability as found by the
Court of Appeals is without basis. A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, those three years, they were allowed to
sail by the Coast Guard. That are some that make me believe that they in fact were able to secure the necessary renewal.
The relationship between the parties in this case is governed by special laws. Because of the implied warranty of
seaworthiness,[23] shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels Q: If the Coast Guard clears a vessel to sail, what would that mean?
seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them
Atty. Sarenas: Objection.
liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is
concerned. By the same token, we cannot expect passengers to inquire every time they board a common carrier, whether the carrier Court: He already answered that in the cross examination to the effect that if it was allowed, referring to MV Vector, to sail, where
possesses the necessary papers or that all the carriers employees are qualified. Such a practice would be an absurdity in a business it is loaded and that it was scheduled for a destination by the Coast Guard, it means that it has Certificate of Inspection extended
where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily as assured to this witness by Restituto Abalos. That in no case MV Vector will be allowed to sail if the Certificate of Inspection
presume that common carriers possess all the legal requisites in its operation. is, indeed, not to be extended. That was his repeated explanation to the cross-examination. So, there is no need to clarify the same
in the re-direct examination.[27]
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargoes.
Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic incident
A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector could legally transport cargo that
occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence.
time of the year.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast
Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries here under VESSELS
Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for damages.
DOCUMENTS
As Vector Shipping Corporation did not appeal from the Court of Appeals decision, we limit our ruling to the liability of Caltex
1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7, 1987, Mr. Witness, what steps did
alone. However, we maintain the Court of Appeals ruling insofar as Vector is concerned .
you take regarding the impending expiry of the C.I. or the Certificate of Inspection No. 1290-85 during the hiring of MT Vector?
WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court of Appeals in CA-G. R. CV
Apolinar Ng: At the time when I extended the Contract, I did nothing because the tanker has a valid C.I. which will expire on
No. 39626, promulgated on April 15, 1997, insofar as it held Caltex liable under the third party complaint to reimburse/indemnify
December 7, 1987 but on the last week of November, I called the attention of Mr. Abalos to ensure that the C.I. be renewed and
defendant Sulpicio Lines, Inc. the damages the latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of
Mr. Abalos, in turn, assured me they will renew the same.
the Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Caezal and Corazon Caezal damages
Q: What happened after that? as set forth therein. Third-party defendant-appellee Vector Shipping Corporation and Francisco Soriano are held liable to
reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys fees and costs the latter is adjudged to pay
A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were going to send me a copy as soon plaintiffs-appellees in the case.
as possible, sir.[24]
No costs in this instance.
xxx xxx xxx
SO ORDERED.
Q: What did you do with the C.I.?
Davide, Jr., C.J., (Chairman), Kapunan, and Ynares-Santiago, JJ., concur.
A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our long business relation, we
trust Mr. Abalos and the fact that the vessel was able to sail indicates that the documents are in order. xxx[25] Puno, J., took no part due to close relation with a party.

On cross examination -

Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of Inspection has expired on December
7. Did it occur to you not to let the vessel sail on that day because of the very approaching date of expiration?
[1]
Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able to secure a renewal of the In CA-G.R CV No. 29526 promulgated on April 15, 1997, Justice Jorge S. Imperial, ponente, Justices Mabutas and
Certificate of Inspection and that they will in time submit us a copy.[26] Hormachuelos, concurring.
[2]
Finally, on Mr. Ngs redirect examination: Findings and Recommendation of the Board of Marine Inquiry dated March 22, 1988, Rollo, p. 358.
[3]
Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection in the coastwise license on Ibid., Rollo, p. 350.
December 7, 1987. What was your assurance for the record that this document was renewed by the MT Vector? [4]
Ibid., Rollo, p. 357. Actually, there were more than 4,000 passengers.

Page 23 of 31
[5]
Decision, Court of Appeals, dated April 15, 1997, Rollo, pp. 54-75. Republic of the Philippines
SUPREME COURT
[6]
Finding and Recommendations of the Board of Marine Inquiry dated March 22, 1988, Rollo, pp. 347-402. Manila
[7]
Rollo, pp. 156-225. THIRD DIVISION
[8]
Court of Appeals decision in CA-G. R. CV No. 39526, dated April 15, 1997, Rollo, pp. 54-75. G.R. No. 82318 May 18, 1989
[9]
Philippine Admiralty and Maritime Law, by Attys. Eduardo Hernandez and Antero Peasales, 1987, p. 237, citing Schoenbaum GILBERTO M. DUAVIT, petitioner,
& Yiannopoulos, Admiralty and Maritime Law, at p. 364. vs.
[10]
THE HON. COURT OF APPEALS, Acting through the Third Division, as Public Respondent, and ANTONIO
Ibid., p.495, citing Healy & Sharp, Admiralty, p. 405. SARMIENTO, SR. & VIRGILIO CATUAR respondents.
[11]
Tabacalera Insurance Co. vs. North Front Shipping Services, 272 SCRA 527 (1997), citing Planters Products, Inc. vs. Court of Rodolfo d. Dela Cruz for petitioner.
Appeals, 226 SCRA 476 (1993).
[12]
Bito, Lozada, Ortega & Castillo for respondents.
Ibid., citing Planters Products, Inc. vs. Court of Appeals, 226 SCRA 476 (1993).
[13]
Puromines vs. Court of Appeals, 220 SCRA 281 (1993).
[14]
GUTIERREZ, JR., J.:
226 SCRA 476 (1993).
[15]
This petition raises the sole issue of whether or not the owner of a private vehicle which figured in an accident can be held liable
245 SCRA 797 (1995). under Article 2180 of the Civil Code when the said vehicle was neither driven by an employee of the owner nor taken with the
[16] consent of the latter.
United States vs. Quinajon, 31 Phil. 189, (1915); United States. vs. Tan Piaoco, 40 Phil. 853 (1920).
[17] The facts are summarized in the contested decision, as follows:
168 SCRA 612, 617-619 (1988).
[18] From the evidence adduced by the plaintiffs, consisting of the testimonies of witnesses Virgilio Catuar, Antonio Sarmiento, Jr.,
Trans-Asia Shipping Lines vs. Court of Appeals, 254 SCRA 260 (1996), citing Chan Keep vs. Chan Gioco, 14 Phil. 5 (1909).
Ruperto Catuar, Jr. and Norberto Bernarte it appears that on July 28, 1971 plaintiffs Antonio Sarmiento, Sr. and Virgilio Catuar
[19]
Arturo M. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Volume V, 1992, p. 298, citing were aboard a jeep with plate number 77-99-F-I Manila, 1971, owned by plaintiff, Ruperto Catuar was driving the said jeep on
Commission Report, pp. 66-67. Ortigas Avenue, San Juan, Rizal; that plaintiff's jeep, at the time, was running moderately at 20 to 35 kilometers per hour and
while approaching Roosevelt Avenue, Virgilio Catuar slowed down; that suddenly, another jeep with plate number 99-97-F-J
[20]
Memorandum of Sulpicio Lines, Inc., Rollo, pp. 493-520. Manila 1971 driven by defendant Oscar Sabiniano hit and bumped plaintiff's jeep on the portion near the left rear wheel, and as a
result of the impact plaintiff's jeep fell on its right and skidded by about 30 yards; that as a result plaintiffs jeep was damaged,
[21]
292 SCRA 422 (1998), citing Valenzuela vs. Court of Appeals, 253 SCRA 303 (1996); Cf. Quibal vs. Sandiganbayan, 244 particularly the windshield, the differential, the part near the left rear wheel and the top cover of the jeep; that plaintiff Virgilio
SCRA 224 (1995); Citibank, NA vs. Gatchalian, 240 SCRA 212 (1995). Catuar was thrown to the middle of the road; his wrist was broken and he sustained contusions on the head; that likewise plaintiff
[22]
Antonio Sarmiento, Sr. was trapped inside the fallen jeep, and one of his legs was fractured.
De Guzman vs. Court of Appeals, 168 SCRA 612 (1988).
[23]
Evidence also shows that the plaintiff Virgilio Catuar spent a total of P2,464.00 for repairs of the jeep, as shown by the receipts of
Under Section 3 (1) of the Carriage of Goods by Sea Act. payment of labor and spare parts (Exhs. H to H-7 Plaintiffs likewise tried to prove that plaintiff Virgilio Catuar, immediately after
[24] the accident was taken to Immaculate Concepcion Hospital, and then was transferred to the National Orthopedic Hospital; that
TSN, May 7, 1991, pp. 18-19.
while plaintiff Catuar was not confined in the hospital, his wrist was in a plaster cast for a period of one month, and the contusions
[25]
TSN, Direct Examination of Apolinario Ng, dated May 7, 1991, pp. 21-22. on his head were under treatment for about two (2) weeks; that for hospitalization, medicine and allied expenses, plaintiff Catuar
spent P5,000.00.
[26]
TSN, Cross-Examination of Apolinario Ng, dated May 13, 1991, p. 7.
Evidence also shows that as a result of the incident, plaintiff Antonio Sarmiento, Sr. sustained injuries on his leg; that at first, he
[27] was taken to the National Orthopedic Hospital (Exh. K but later he was confined at the Makati Medical Center from July 29, to
TSN, Re-direct Examination of Apolinario Ng, dated May 13, 1991, p. 51.
August 29, 1971 and then from September 15 to 25, 1971; that his leg was in a plaster cast for a period of eight (8) months; and
that for hospitalization and medical attendance, plaintiff Antonio Sarmiento, Sr. spent no less than P13,785.25 as evidenced by
receipts in his possession. (Exhs. N to N-1).

Proofs were adduced also to show that plaintiff Antonio sarmiento Sr. is employed as Assistant Accountant of the Canlubang
Sugar Estate with a salary of P1,200.00 a month; that as sideline he also works as accountant of United Haulers Inc. with a salary
of P500.00 a month; and that as a result of this incident, plaintiff Sarmiento was unable to perform his normal work for a period
Page 24 of 31
of at least 8 months. On the other hand, evidence shows that the other plaintiff Virgilio Catuar is a Chief Clerk in Canlubang Sugar
Estate with a salary of P500.00 a month, and as a result of the incident, he was incapacitated to work for a period of one (1) month.
The plaintiffs have filed this case both against Oscar Sabiniano as driver, and against Gualberto Duavit as owner of the jeep.
Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate No. 99-07-F-J Manila, 1971), denied that the other
defendant (Oscar Sabiniano) was his employee. Duavit claimed that he has not been an employer of defendant Oscar Sabiniano at
any time up to the present.
On the other hand documentary and testimonial evidence show that defendant Oscar Sabiniano was an employee of the Board of
Liquidators from November 14, 1966 up to January 4, 1973 (Annex A of Answer).
Defendant Sabiniano, in his testimony, categorically admitted that he took the jeep from the garage of defendant Duavit without
the consent or authority of the latter (TSN, September 7, 1978, p. 8). He testified further, that Duavit even filed charges against
him for theft of the jeep, but which Duavit did not push through as his (Sabiniano's) parents apologized to Duavit on his behalf.
Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself from liability, makes it appear that he was taking
all necessary precaution while driving and the accident occurred due to the negligence of Virgilio Catuar. Sabiniano claims that it
was plaintiffs vehicle which hit and bumped their jeep. (Reno, pp. 21-23)
The trial court found Oscar Sabiniano negligent in driving the vehicle but found no employer-employee relationship between him
and the petitioner because the latter was then a government employee and he took the vehicle without the authority and consent of
the owner. The petitioner was, thus, absolved from liability under Article 2180 of the Civil Code.
The private respondents appealed the case.
On January 7, 1988, the Court of Appeals rendered the questioned decision holding the petitioner jointly and severally liable with
Sabiniano. The appellate court in part ruled:
We cannot go along with appellee's argument. It will be seen that in Vargas v. Langcay, supra, it was held that it is immaterial
whether or not the driver was actually employed by the operator of record or registered owner, and it is even not necessary to prove
who the actual owner of the vehicle and who the employer of the driver is. When the Supreme Court ruled, thus: 'We must hold
and consider such owner-operator of record (registered owner) as the employer in contemplation of law, of the driver,' it cannot
be construed other than that the registered owner is the employer of the driver in contemplation of law. It is a conclusive
presumption of fact and law, and is not subject to rebuttal of proof to the contrary. Otherwise, as stated in the decision, we quote:
The purpose of the principles evolved by the decisions in these matters will be defeated and thwarted if we entertain the argument
of petitioner that she is not liable because the actual owner and employer was established by the evidence. . . .
Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to prove that the driver Sabiniano was not his
employee at the time of the vehicular accident.
The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to the effect that the burden of proving the non-
existence of an employer-employee relationship is upon the defendant and this he must do by a satisfactory preponderance of
evidence, has to defer to the doctrines evolved by the Supreme Court in cases of damages arising from vehicular mishaps involving
registered motor vehicle. (See Tugade v. Court of Appeals, 85 SCRA 226, 230). (Rollo, pp. 26-27)
The appellate court also denied the petitioner's motion for reconsideration. Hence, this petition.
The petitioner contends that the respondent appellate court committed grave abuse of discretion in holding him jointly and severally
liable with Sabiniano in spite of the absence of an employer-employee relationship between them and despite the fact that the
petitioner's jeep was taken out of his garage and was driven by Sabiniano without his consent.
Page 25 of 31
As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for an accident involving the said vehicle if the
same was driven without his consent or knowledge and by a person not employed by him. Thus, in Duquillo v. Bayot (67 Phil.
131-133-134) [1939] we said:
Under the facts established, the defendant cannot be held liable for anything. At the time of the accident, James McGurk was
driving the truck, and he was not an employee of the defendant, nor did he have anything to do with the latter's business; neither
the defendant nor Father Ayson, who was in charge of her business, consented to have any of her trucks driven on the day of the
accident, as it was a holy day, and much less by a chauffeur who was not in charge of driving it; the use of the defendant's truck
in the circumstances indicated was done without her consent or knowledge; it may, therefore, be said, that there was not the
remotest contractual relation between the deceased Pio Duquillo and the defendant. It necessarily follows from all this that articles
1101 and following of the Civil Code, cited by the appellant, have no application in this case, and, therefore, the errors attributed
to the inferior court are without basis.
The Court upholds the above ruling as still relevant and better applicable to present day circumstances.
The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103 [1957] and Vargas v. Langcay (6 SCRA
174 [1962]) cannot be sustained. In the Erezo case, Jepte, the registered owner of the truck which collided with a taxicab, and
which resulted in the killing of Erezo, claimed that at the time of the accident, the truck belonged to the Port Brokerage in an
arrangement with the corporation but the same was not known to the Motor Vehicles Office. This Court sustained the trial court's
ruling that since Jepte represented himself to be the owner of the truck and the Motor Vehicles Office, relying on his representation,
registered the vehicle in his name, the Government and all persons affected by the representation had the right to rely on his
declaration of ownership and registration. Thus, even if Jepte were not the owner of the truck at the time of the accident, he was
still held liable for the death of Erezo significantly, the driver of the truck was fully authorized to drive it.
Likewise, in the Vargas case, just before the accident occurred Vargas had sold her jeepney to a third person, so that at the time of
the accident she was no longer the owner of the jeepney. This court, nevertheless, affirmed Vargas' liability since she failed to
surrender to the Motor Vehicles Office the corresponding AC plates in violation of the Revised Motor Vehicle Law and
Commonwealth Act No. 146. We further ruled that the operator of record continues to be the operator of the vehicle in
contemplation of law, as regards the public and third persons, and as such is responsible for the consequences incident to its
operator. The vehicle involved was a public utility jeepney for hire. In such cases, the law does not only require the surrender of
the AC plates but orders the vendor operator to stop the operation of the jeepney as a form of public transportation until the matter
is reported to the authorities.
As can be seen, the circumstances of the above cases are entirely different from those in the present case. Herein petitioner does
not deny ownership of the vehicle involved in tire mishap but completely denies having employed the driver Sabiniano or even
having authorized the latter to drive his jeep. The jeep was virtually stolen from the petitioner's garage. To hold, therefore, the
petitioner liable for the accident caused by the negligence of Sabiniano who was neither his driver nor employee would be absurd
as it would be like holding liable the owner of a stolen vehicle for an accident caused by the person who stole such vehicle. In this
regard, we cannot ignore the many cases of vehicles forcibly taken from their owners at gunpoint or stolen from garages and
parking areas and the instances of service station attendants or mechanics of auto repair shops using, without the owner's consent,
vehicles entrusted to them for servicing or repair.
We cannot blindly apply absolute rules based on precedents whose facts do not jibe four square with pending cases. Every case
must be determined on its own peculiar factual circumstances. Where, as in this case, the records of the petition fail to indicate the
slightest indicia of an employer-employee relationship between the owner and the erring driver or any consent given by the owner
for the vehicle's use, we cannot hold the owner liable.
We, therefore, find that the respondent appellate court committed reversible error in holding the petitioner jointly and severally
liable with Sabiniano to the private respondent.
WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are hereby ANNULLED and SET
ASIDE. The decision of the then Court of First Instance (now Regional Trial Court) of Laguna, 8th Judicial District, Branch 6,
dated July 30, 1981 is REINSTATED.
SO ORDERED.
Fernan, C.J., (Chairman), Feliciano, Bidin and Cortes JJ., concur.
THIRD DIVISION
[G.R. No. 146018. June 25, 2003]
EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB GENERAL INSURANCE COMPANY,
INC., respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by
the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and
the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.
The Case
Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the August 31, 2000
Decision[2] and the November 17, 2000 Resolution[3] of the Court of Appeals[4] (CA) in CA-GR SP No. 62751. The dispositive part
of the Decision reads:
IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from is REVERSED. [Petitioner] is
hereby condemned to pay to [respondent] the total amount of P148,500.00, with interest thereon, at the rate of 6% per annum,
from date of this Decision of the Court. [Respondents] claim for attorneys fees [is] DISMISSED. [Petitioners] counterclaims
are DISMISSED.[5]
The assailed Resolution denied petitioners Motion for Reconsideration.
On the other hand, the disposition of the Regional Trial Courts[6] Decision,[7] which was later reversed by the CA, states:
WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.
No cost.[8]
The Facts
The facts of the case are summarized by the appellate court in this wise:
Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping
Lines), [petitioner] for brevity, cargo consisting of one (1) carton of Christmas dcor and two (2) sacks of plastic toys, to be
transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on December 12, 1991, for
Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor Angelia was both
the shipper and consignee of the cargo valued, on the face thereof, in the amount of P6,500.00.Zosimo Mercado likewise delivered
cargo to [petitioner], consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one (1) bundle
of various or assorted goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board the said vessel, and
said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which, on the face thereof, was valued in the amount
of P14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper and consignee of the cargo.
On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB General Insurance
Co., Inc., [respondent] for brevity, for the amount of P100,000.00 against all risks under Open Policy No. 002/91/254 for which
she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She also insured the cargo covered by Bill of Lading
Page 26 of 31
No. 58, with [respondent], for the amount of P50,000.00, under Open Policy No. 002/91/254 on the basis of which [respondent]
issued Marine Risk Note No. 18410 on said date.
When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board, including the goods of Legaspi. After the
vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the officers and
crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the cargoes therein. The
Captain filed the required Marine Protest.
Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo insured under Marine Risk Note
No. 18409 and covered by Bill of Lading No. 59. She submitted, in support of her claim, a Receipt, dated December 11, 1991,
purportedly signed by Zosimo Mercado, and Order Slips purportedly signed by him for the goods he received from Feliciana
Legaspi valued in the amount of P110,056.00. [Respondent] approved the claim of Feliciana Legaspi and drew and issued UCPB
Check No. 612939, dated March 9, 1992, in the net amount of P99,000.00, in settlement of her claim after which she executed
a Subrogation Receipt/Deed, for said amount, in favor of [respondent]. She also filed a claim for the value of the cargo covered
by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated December 11, 1991 and Order Slips, purportedly signed
by Nestor Angelia for the goods he received from Feliciana Legaspi valued at P60,338.00. [Respondent] approved her claim and
remitted to Feliciana Legaspi the net amount of P49,500.00, after which she signed a Subrogation Receipt/Deed, dated March 9,
1992, in favor of [respondent].
On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner], with the
Regional Trial Court of Makati City, for the collection of the total principal amount of P148,500.00, which it paid to Feliciana
Legaspi for the loss of the cargo, praying that judgment be rendered in its favor and against the [petitioner] as follows:
WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment be rendered ordering [petitioner]
to pay [respondent] the following.
1. Actual damages in the amount of P148,500.00 plus interest thereon at the legal rate from the time of filing of this complaint
until fully paid;
2. Attorneys fees in the amount of P10,000.00; and
3. Cost of suit.
[Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem just and equitable under the
premises.
[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was delivered to, and received by,
[petitioner] for transportation to Tandag, Surigao del Sur under Bill of Ladings, Annexes A and B of the complaint; that the loss
of the cargo was due to the negligence of the [petitioner]; and that Feliciana Legaspi had executed Subrogation Receipts/Deeds in
favor of [respondent] after paying to her the value of the cargo on account of the Marine Risk Notes it issued in her favor covering
the cargo.
In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board of Marine Inquiry of any
negligence in the burning of the vessel; (b) the complaint stated no cause of action against [petitioner]; and (c) the
shippers/consignee had already been paid the value of the goods as stated in the Bill of Lading and, hence, [petitioner] cannot be
held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading.
After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to take the depositions of Chester
Cokaliong, the Vice-President and Chief Operating Officer of [petitioner], and a resident of Cebu City, and of Noel Tanyu, an
officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be given before the Presiding Judge of
Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by way of deposition, before
the Court and declared inter alia, that: [petitioner] is a family corporation like the Chester Marketing, Inc.; Nestor Angelia had
been doing business with [petitioner] and Chester Marketing, Inc., for years, and incurred an account with Chester Marketing, Inc.
for his purchases from said corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for the cargo described therein with
Zosimo Mercado and Nestor Angelia as shippers/consignees, respectively; the engine room of the M/V Tandag caught fire after
it passed the Mandaue/Mactan Bridge resulting in the total loss of the vessel and its cargo; an investigation was conducted by the
Board of Marine Inquiry of the Philippine Coast Guard which rendered a Report, dated February 13, 1992 absolving [petitioner]
of any responsibility on account of the fire, which Report of the Board was approved by the District Commander of the Philippine
Coast Guard; a few days after the sinking of the vessel, a representative of the Legaspi Marketing filed claims for the values of the
goods under Bills of Lading Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia and Zosimo Mercado;
[petitioner] was able to ascertain, from the shippers/consignees and the representative of the Legaspi Marketing that the cargo
covered by Bill of Lading No. 59 was owned by Legaspi Marketing and consigned to Zosimo Mercado while that covered by Bill
of Lading No. 58 was purchased by Nestor Angelia from the Legaspi Marketing; that [petitioner] approved the claim of Legaspi
Marketing for the value of the cargo under Bill of Lading No. 59 and remitted to Legaspi Marketing the said amount under
Equitable Banking Corporation Check No. 20230486 dated August 12, 1992, in the amount of P14,000.00 for which the
representative of the Legaspi Marketing signed Voucher No. 4379, dated August 12, 1992, for the said amount of P14,000.00 in
full payment of claims under Bill of Lading No. 59; that [petitioner] approved the claim of Nestor Angelia in the amount
of P6,500.00 but that since the latter owed Chester Marketing, Inc., for some purchases, [petitioner] merely set off the amount due
to Nestor Angelia under Bill of Lading No. 58 against his account with Chester Marketing, Inc.; [petitioner] lost/[misplaced] the
original of the check after it was received by Legaspi Marketing, hence, the production of the microfilm copy by Noel Tanyu of
the Equitable Banking Corporation; [petitioner] never knew, before settling with Legaspi Marketing and Nestor Angelia that the
cargo under both Bills of Lading were insured with [respondent], or that Feliciana Legaspi filed claims for the value of the cargo
with [respondent] and that the latter approved the claims of Feliciana Legaspi and paid the total amount of P148,500.00 to her;
[petitioner] came to know, for the first time, of the payments by [respondent] of the claims of Feliciana Legaspi when it was served
with the summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x x x executed the Release and
Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor of [respondent]; hence, [petitioner] was absolved of any
liability for the loss of the cargo covered by Bills of Lading Nos. 58 and 59; and even if it was, its liability should not exceed the
value of the cargo as stated in the Bills of Lading.
[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x[9] (Citations omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed to prove that the fire which consumed the vessel and its cargo was caused by something
other than its negligence in the upkeep, maintenance and operation of the vessel.[10]
Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59. The CA, however, held that the
payment did not extinguish petitioners obligation to respondent, because there was no evidence that Feliciana Legaspi (the insured)
was the owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating the claim under Bill of Lading
No. 58 -- covering cargo valued therein at P6,500 -- as a setoff against Nestor Angelias account with Chester Enterprises, Inc.
Finally, it ruled that respondent is not bound by the valuation of the cargo under the Bills of Lading, x x x nor is the value of the
cargo under said Bills of Lading conclusive on the [respondent]. This is so because, in the first place, the goods were insured with
the [respondent] for the total amount of P150,000.00, which amount may be considered as the face value of the goods. [11]
Hence this Petition.[12]
Issues
Petitioner raises for our consideration the following alleged errors of the CA:
I vigilance over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in exercising the required vigilance.
The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that petitioners liability should be
based on the actual insured value of the goods and not from actual valuation declared by the shipper/consignee in the bill of lading.
Page 27 of 31
II
The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as sustained by the trial court a quo,
holding that the cause of loss of the aforesaid cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure and due
diligence was [exercised] by petitioner prior to, during and immediately after the fire on [petitioners] vessel.
III
The Court of Appeals erred in not holding that respondent UCPB General Insurance has no cause of action against the petitioner.[13]
In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability?
This Courts Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure. It adds that its exercise of due
diligence was adequately proven by the findings of the Philippine Coast Guard.
We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire,
which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the heating
exhaust manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a mere
two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force
majeure. Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake,
a tempest or a public enemy.[14] Hence, fire is not considered a natural disaster or calamity. In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court,[15] we explained:
x x x. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the category
of an act of God unless caused by lighting or by other natural disaster or calamity. It may even be caused by the actual fault or
privity of the carrier.
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases or rural lands where a
reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law
adopts a protective policy towards agriculture.
As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article 1735 of the Civil Code provides that
in all cases other than those mentioned in Article 1734, the common carrier shall be presumed to have been at fault or to have
acted negligently, unless it proves that it has observed the extraordinary diligence required by law.
Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the existence
of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officials. [16]
The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary
Petitioner did not present sufficient evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the
vessel. It failed to show when the last inspection and care of the auxiliary engine fuel oil service tank was made, what the normal
practice was for its maintenance, or some other evidence to establish that it had exercised extraordinary diligence. It merely stated
that constant inspection and care were not possible, and that the last time the vessel was dry-docked was in November
1990. Necessarily, in accordance with Article 1735[17] of the Civil Code, we hold petitioner responsible for the loss of the goods
covered by Bills of Lading Nos. 58 and 59.
Second Issue:
Extent of Liability
Respondent contends that petitioners liability should be based on the actual insured value of the goods, subject of this case. On the
other hand, petitioner claims that its liability should be limited to the value declared by the shipper/consignee in the Bill of Lading.
[18]
The records show that the Bills of Lading covering the lost goods contain the stipulation that in case of claim for loss or for
damage to the shipped merchandise or property, [t]he liability of the common carrier x x x shall not exceed the value of the goods
as appearing in the bill of lading.[19] The attempt by respondent to make light of this stipulation is unconvincing.As it had the
consignees copies of the Bills of Lading,[20] it could have easily produced those copies, instead of relying on mere allegations and
suppositions. However, it presented mere photocopies thereof to disprove petitioners evidence showing the existence of the above
stipulation.
A stipulation that limits liability is valid[21] as long as it is not against public policy. In Everett Steamship Corporation v. Court of
Appeals,[22] the Court stated:
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certain sum, unless
the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
provides:
Art. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless
the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of cases. Thus, in Sea-Land Service, Inc.
vs. Intermediate Appellate Court, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of
the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code
Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit
to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this the private respondent does not pretend to do. But over and above
that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of
avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of
the shipment in the bill of lading.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carriers liability for loss must
be reasonable and just under the circumstances, and has been freely and fairly agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice cost plus
freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any
consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One
Hundred Thousand Yen in Japanese Currency (100,000.00) or its equivalent in any other currency per package or customary
Page 28 of 31
freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before
receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required.
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would
only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a
higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not
declare a higher valuation, it had itself to blame for not complying with the stipulations. (Italics supplied)
In the present case, the stipulation limiting petitioners liability is not contrary to public policy. In fact, its just and reasonable
character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the true
value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop them from placing
the actual value of the goods therein. In fact, they committed fraud against the common carrier by deliberately undervaluing the
goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare.
Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such stipulation obliges
the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case of loss of the goods. The
common carrier can then take appropriate measures -- getting insurance, if needed, to cover or protect itself.This precaution on the
part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the real worth of the goods it seeks to
transport does not only violate a valid contractual stipulation, but commits a fraudulent act when it seeks to make the common
carrier liable for more than the amount it declared in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their respective Bills of
Lading. Hence, petitioner was exposed to a risk that was deliberately hidden from it, and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid the
correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for transporting
the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them, the insurer should
bear the loss in excess of the value declared in the Bills of Lading. This is the just and equitable solution.
In Aboitiz Shipping Corporation v. Court of Appeals,[23] the description of the nature and the value of the goods shipped were
declared and reflected in the bill of lading, like in the present case. The Court therein considered this declaration as the basis of
the carriers liability and ordered payment based on such amount. Following this ruling, petitioner should not be held liable for
more than what was declared by the shippers/consignees as the value of the goods in the bills of lading.
We find no cogent reason to disturb the CAs finding that Feliciana Legaspi was the owner of the goods covered by Bills of Lading
Nos. 58 and 59. Undoubtedly, the goods were merely consigned to Nestor Angelia and Zosimo Mercado, respectively; thus,
Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to compensation therefor.There is no
evidence showing that petitioner paid her for the loss of those goods. It does not even claim to have paid her.
On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of Lading No. 59, for which the
latter subsequently paid P14,000. But nothing in the records convincingly shows that the former was the owner of the
goods. Respondent was, however, able to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled
to payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have been extinguished,
because payment was made to a person who was not entitled thereto.
With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued at P6,500, the parties have not
convinced us to disturb the findings of the CA that compensation could not validly take place. Thus, we uphold the appellate courts
ruling on this point.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED in the sense that petitioner
is ORDERED to pay respondent the sums of P14,000 and P6,500, which represent the value of the goods stated in Bills of Lading
Nos. 59 and 58, respectively. No costs.
 [21]
SO ORDERED. Article 1749 of the Civil Code. See also St. Paul Fire & Marine Insurance Co. v. Macondray & Co., Inc., 70 SCRA 122, March
25, 1976.
Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.
[22]
358 SCRA 129, 135-136, October 8, 1998, per Martinez, J.
[23]
188 SCRA 387, August 6, 1990.

[1]
Rollo, pp. 10-34. Republic of the Philippines
SUPREME COURT
[2]
Id., pp. 36-60. Manila
[3]
Id., p. 62. EN BANC
[4]
First Division. Penned by Justice Romeo J. Callejo Sr. (now a member of this Court) and concurred in by Justices Salome A. G.R. No. L-22491 January 27, 1967
Montoya (Division chair) and Martin S. Villarama (member).
DOMINGO ANG, plaintiff-appellant,
[5]
Assailed Decision, p. 7; rollo, p. 36. vs.
[6]
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellee.
Branch 146, Makati City.
[7]
Juan T. David and M.C. Ginigundo for plaintiff-appellant.
Penned by Judge Salvador S. Tensuan. Ross, Salcedo, Del Rosario, Bito & Misa for defendant-appellee.
[8]
RTC Decision, p. 4; rollo, p. 66.
[9]
Assailed Decision, pp. 1-5; rollo, pp. 36-40; emphases in original. BENGZON, J.P., J.:
[10]
Id., pp. 12 & 47. Yau Yue Commercial Bank Ltd. of Hongkong, referred to hereafter as Yau Yue agreed to sell 140 packages of galvanized steel
[11] durzinc sheets to one Herminio G. Teves (the date of said agreement is not shown in the record here) for the sum of $32,458.26
Id., pp. 23 & 58.
(US). Said agreement was subject to the following terms and arrangements: (a) the purchase price should be covered by a bank
[12]
The case was deemed submitted for decision on September 24, 2001, upon receipt by this Court of respondents Memorandum, draft for the corresponding amount which should be paid by Herminio G. Teves in exchange for the delivery to him of the
which was signed by Atty. Bernard D. Sy. Petitioners Memorandum, signed by Atty. Melvyn S. Florencio, was received by this corresponding bill of lading to be deposited with a local bank, the Hongkong & Shanghai Bank of Manila (b) upon arrival of the
Court on August 31, 2001. articles in Manila, Teves would be notified and he would have to pay the amount called for in the corresponding demand draft,
after which the bill of lading would be delivered to him; and (c) Teves would present said bill of lading to the carrier's agent,
[13]
Petitioners Memorandum, pp. 12-13; rollo, pp. 134-135. Original in upper case. American Steamship Agencies, Inc. which would then issue the corresponding "Permit To Deliver Imported Articles" to be
presented to the Bureau of Customs to obtain the release of the articles.
[14]
Pons y Compaia v. La Compaia Maritima, 9 Phil. 125, October 26, 1907.
Pursuant to said terms and arrangements, Yau Yue through Tokyo Boeki Ltd. of Tokyo, Japan, shipped the articles at Yawata,
[15]
Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, 150 SCRA 463, May 29, 1987, per Melencio-Herrera, J. Japan, on April 30, 1961 aboard the S.S. TENSAI MARU, Manila, belonging to the Nissho Shipping Co., Ltd. of Japan, of which
[16]
the American Steamship Agencies, Inc. is the agent in the Philippines, under a shipping agreement, Bill of Lading No. WM-2
Ibid. dated April 30, 1961, consigned "to order of the shipper with Herminio G. Teves as the party to be notified of the arrival of the
[17] 140 packages of galvanized steel durzinc sheets in Manila.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed
or deteriorated, common carriers are presumed to have [been] at fault or to have acted negligently, unless they prove that they The bill of lading was indorsed to the order of and delivered to Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a
observed extraordinary diligence as required in Article 1733. demand draft together with the bill of lading against Herminio G. Teves, through the Hongkong & Shanghai Bank.
[18]
See the Deposition dated September 30, 1996 of Chester C. Cokaliong, petitioners vice president and chief operating officer. When the articles arrived in Manila on or about May 9, 1961, Hongkong & Shanghai Bank notified Teves, the "notify party" under
Deposition, p. 16; records, p. 276. the bill of lading, of the arrival of the goods and requested payment of the demand draft representing the purchase price of the
[19] articles. Teves, however, did not pay the demand draft, prompting the bank to make the corresponding protest. The bank likewise
Exhibit 7-A-2; id., p. 233.
returned the bill of lading and demand draft to Yau Yue which indorsed the said bill of lading to Domingo Ang.
[20]
TSN, August 8, 1996, p. 4.
Meanwhile, despite his non-payment of the purchase price of the articles, Teves was able to obtain a bank guaranty in favor of the
American Steamship Agencies, Inc., as carrier's agent, to the effect that he would surrender the original and negotiable bill of

Page 29 of 31
lading duly indorsed by Yau Yue. On the strength of this guaranty, Teves succeeded in securing a "Permit To Deliver Imported
Articles" from the carrier's agent, which he presented to the Bureau of Customs which in turn released to him the articles covered
by the bill of lading.
Subsequently, Domingo Ang claimed for the articles from American Steamship Agencies, Inc., by presenting the indorsed bill of
lading, but he was informed by the latter that it had delivered the articles to Teves.
On October 30, 1963 Domingo Ang filed a complaint in the Court of First Instance of Manila against the American Steamship
Agencies, Inc., for having allegedly wrongfully delivered and/or converted the goods covered by the bill of lading belonging to
plaintiff Ang, to the damage and prejudice of the latter.
On December 2, 1963, defendant filed a motion to dismiss upon the ground that plaintiff's cause of action has prescribed under the
Carriage of Goods by Sea Act (Commonwealth Act No. 65), more particularly Section 3 (6), paragraph 4, which provides:
In any event, the carrier and the ship shall be discharged from all liability in respect to loss or damage unless suit is brought within
one year, after delivery of the goods or the date when the goods should have been delivered.
It argued that the cargo should have been delivered to the person entitled to the delivery thereof (meaning the plaintiff) on May 9,
1961, the date of the vessel's arrival in Manila, and that even allowing a reasonable time (even one month) after such arrival within
which to make delivery, still, the action commenced on October 30, 1963 was filed beyond the prescribed period of one year.
By order dated December 21, 1963, copy of which was received by plaintiff on December 26, 1963, the lower court dismissed the
action on the ground of prescription. His motion for reconsideration dated December 26, 1963 having been denied by the lower
court in its order dated January 13, 1964, plaintiff appealed directly to this Court on a question of law: Has plaintiff-appellant's
cause of action prescribed under Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act?
The provision of law involved in this case speaks of "loss or damage". That there was no damage caused to the goods which were
delivered intact to Herminio G. Teves who did not file any notice of damage, is admitted by both parties in this case. What is to
be resolved — in order to determine the applicability of the prescriptive period of one year to the case at bar — is whether or not
there was "loss" of the goods subject matter of the complaint.
Nowhere is "loss" defined in the Carriage of Goods by Sea Act. Therefore, recourse must be had to the Civil Code which provides
in Article 18 thereof that, "In matters which are governed by the Code of Commerce and special laws, their deficiency shall be
supplied by the provisions of this Code."
Article 1189 of the Civil Code defines the word "loss" in cases where conditions have been imposed with the intention of
suspending the efficacy of an obligation to give. The contract of carriage under consideration entered into by and between
American Steamship Agencies, Inc. and the Yau Yue (which later on endorsed the bill of lading covering the shipment to plaintiff
herein Domingo Ang), is one involving an obligation to give or to deliver the goods "to the order of shipper", that is, upon the
presentation and surrender of the bill of lading. This being so, said article can be applied to the present controversy, more
specifically paragraph 2 thereof which provides that, "... it is understood that a thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence unknown or it cannot be recovered."
As defined in the Civil Code and as applied to Section 3 (6) paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates
merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared that their existence is unknown or they cannot be recovered. It does not include a situation where there
was indeed delivery — but delivery to the wrong person, or a misdelivery, as alleged in the complaint in this case.
The distinction between non-delivery and misdelivery has reference to bills of lading. As this Court shall in Tan Pho vs. Hassamal
Dalamal, 67 Phil. 555, 557-558:
Considering that the bill of lading covering the goods in question has been made to order, which means that said goods cannot be
delivered without previous payment of the value thereof, it is evident that, the said goods having been delivered to Aldeguer
without paying the price of the same, these facts constitute misdelivery and not nondelivery, because their was in fact delivery of
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merchandise. We do not believe it can be seriously and reasonably argued that what took place, as contended of by the petitioner,
is a case of misdelivery with respect to Aldeguer and at the same time nondelivery with respect to the PNB who had the bill of
lading, because the only thing to consider in this question is whether Enrique Aldeguer was entitled to get the merchandise or
whether, on the contrary, the PNB is the one entitled thereto. Under the facts, the defendant petitioner should not have delivered
the goods to Aldeguer but to the Philippine National Bank. Having made the delivery to Aldeguer, the delivery is a case of
misdelivery. If the goods have been delivered, it cannot at the same time be said that they have not been delivered.
According to the bill of lading which was issued in the case at bar to the order of the shipper, the carrier was under a duty not to
deliver the merchandise mentioned in the bill of lading except upon presentation of the bill of lading duly endorsed by the shipper.
(10 C.J., 259) Hence, the defendant-petitioner Tan Pho having delivered the goods to Enrique Aldeguer without the presentation
by the latter of the bill of lading duly endorsed to him by the shipper, the said defendant made a misdelivery and violated the bill
of lading, because his duty was not only to transport the goods entrusted to him safely, but to deliver them to the person indicated
in the bill of lading. (Emphasis supplied)
Now, it is well settled in this jurisdiction that when a defendant files a motion to dismiss, he thereby hypothetically admits the
truth of the allegations of fact contained in the complaint (Philippine National Bank v. Hipolito, et al., L-16463, Jan. 30, 1965;
Republic v. Ramos, L-15484, Jan. 31, 1963; Pascual v. Secretary of Public Works & Communications, L-10405, Dec. 29, 1960;
Pangan v. Evening News Publishing Co., Inc., L-13308, Dec. 29, 1960). Thus, defendant-appellant having filed a motion to
dismiss, it is deemed to have admitted, hypothetically, paragraphs 6, 7 and 8 of the complaint, and these alleges:
6. — That, when the said articles arrived in Manila, the defendant authorized the delivery thereof to Herminio G. Teves, through
the issuance of the corresponding Permit To Deliver Imported Articles, without the knowledge and consent of the plaintiff, who
is the holder in due course of said bill of lading, notwithstanding the fact that the said Herminio G. Teves could not surrender the
corresponding bill of lading; .
7. — That, without any evidence of the fact that Herminio G. Teves is the holder of the corresponding bill of lading in due course;
without the surrender of the bill of lading without the knowledge and consent of the plaintiff, as holder thereof in due course, and
in violation of the provision on the bill of lading which requires that the articles are only to be delivered to the person who is the
holder in due course of the said bill of lading, or his order, the defendant issued the corresponding 'Permit To Deliver Imported
Articles' in favor of the defendant, without the knowledge and consent of the plaintiff as holder in due course of said bill of lading,
which, originally was Yau Yue subsequently, the plaintiff Domingo Ang;
8. — That, as a result of the issuance by the defendant of said permit, Herminio G. Teves was able to secure the release of the
articles from the Bureau of Customs, which is not legally possible without the presentation of said permit to the said Bureau; ...
From the allegations of the complaint, therefore, the goods cannot be deemed "lost". They were delivered to Herminio G. Teves,
so that there can only be either delivery, if Teves really was entitled to receive them, or misdelivery, if he was not so entitled. It is
not for Us now to resolve whether or not delivery of the goods to Teves was proper, that is, whether or not there was rightful
delivery or misdelivery.
The point that matters here is that the situation is either delivery or misdelivery, but not nondelivery. Thus, the goods were either
rightly delivered or misdelivered, but they were not lost. There being no loss or damage to the goods, the aforequoted provision of
the Carriage of Good by Sea Act stating that "In any event, the carrier and the ship shall be discharged from all liability in respect
of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been
delivered," does not apply. The reason is not difficult to see. Said one-year period of limitation is designed to meet the exigencies
of maritime hazards. In a case where the goods shipped were neither last nor damaged in transit but were, on the contrary, delivered
in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation
in cases of loss or damage caused by maritime perils does not obtain.
It follows that for suits predicated not upon loss or damage but on alleged misdelivery (or conversion) of the goods, the applicable
rule on prescription is that found in the Civil Code, namely, either ten years for breach of a written contract or four years for quasi-
delict. (Arts. 1144[1], 1146, Civil Code) In either case, plaintiff's cause of action has not vet prescribed, since his right of action
would have accrued at the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October 30, 1963.
Wherefore, the dismissal order appealed from is hereby reversed and set aside and this case is remanded to the court a quo for
further proceedings. No costs. So ordered.

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

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