1st assignment transpo

8/22/2019 1st Assignment Transpo

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1732-1733

1. First Phil. Industrial Corp v. CA..................................................................................................2

2. De Guzman v. CA........................................................................................................................93. Gelisan v. Alday.........................................................................................................................16

4. Benedicto v. IAC.......................................................................................................................205. Lita Enterprises v. IAC..............................................................................................................25

6. Teja Marketing v. IAC...............................................................................................................29

7. Magboo v. Bernardo..................................................................................................................32

8. Planters Products v. CA.............................................................................................................359. LRT Authority v. Navidad.........................................................................................................44


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1. First Phil. Industrial Corp v. CA

SECOND DIVISION

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

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS,

HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO,in her official capacity as City Treasurer of Batangas, respondents.

SYLLABUS

1. CIVIL LAW; TRANSPORTATION; COMMON CARRIER; DEFINED; APPLICATION INCASE AT BAR. A "common carrier" may be defined, broadly, as one who holdshimself out to the public as engaged in the business of transporting persons orproperty from place to place, for compensation, offering his services to the publicgenerally.Article 1732 of the Civil Code defines a "common carrier" as "any person,corporation, firm or association engaged in the business of carrying ortransporting passengers or goods or both, by land, water, or air, forcompensation, offering their services to the public."

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

1. He must be engaged in the business of carrying goods for others as a publicemployment, and must hold himself out as ready to engage in the transportationof goods for person generally as a business and not as a casual occupation;

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

3. He must undertake to carry by the method by which his business is conductedand over his established roads: and 4. The transportation must be for hire.

Based on the above definitions and requirements, there is no doubt that petitioner is acommon carrier. It is engaged in the business of transporting or carrying goods, i.e.,petroleum products, for hire as a public employment. It undertakes to carry for allpersons indifferently, that is, to all persons who choose to employ its services and transportsthe goods by land and for compensation. The fact that petitioner has a limited clientele doesnot exclude it from the definition of a common carrier. As correctly pointed out by petitioner,the definition of "common carrier" in the Civil Code makes no distinction as to themeans of transporting, as long as it is by land, water or air. It does not providethat the transportation of the passengers or goods should be by motor vehicle. Infact, in the United Sates, oil pipe line operators are considered common carriers.

2. TAXATION; WHEN COMMON CARRIER MAY BE EXEMPT FROM BUSINESS TAX;CASE AT BAR. Under the Petroleum Act of the Philippines (Republic Act 387),petitioner is considered a "common carrier." Thus, Article 86 thereof provides that:"Article 86. Pipe line concessionaire as common carrier. A pipe line shall have thepreferential right to utilize installations for the transportation of petroleumowned by him, but is obligated to utilize the remaining transportation capacity pro rata forthe transportation of such other petroleum as may be offered by others for transport and tocharge without discrimination such rates as may have been approved by the Secretary of

Agriculture and Natural Resources." Republic Act 387 also regards petroleumoperation as a public utility. Pertinent portion of Article 7 thereof provides: "thateverything relating to the exploration for and exploitation of petroleum . . . andeverything relating to the manufacturer, refining, storage or transportation byspecial methods of petroleum, is hereby declared to be a public utility." TheBureau of Internal Revenue likewise considers the petitioner a "common carrier."

The BIR Ruling No. 069-83, it declared: " . . . since [petitioner] is a pipeline concessionairethat is engaged only in transporting petroleum products, it is considered a common carrierunder Republic Act No. 387 . . .. Such being the case, it is not subject to withholding taxprescribed by Revenue Regulations No. 13-78 as amended." From the foregoing


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disquisition there is no doubt that petitioner is a "common carrier" and, therefore,exempt from the business tax as provided for in Section 133 (j) of the LocalGovernment Code, to wit: "Section 133. Common Limitations on the Taxing Power of LocalGovernment Units. Unless otherwise provided herein, the exercise of the taxing powers ofprovinces, cities, municipalities, and barangays shall not extend to the levy of thefollowing: . . . (j) Taxes on the gross receipts of transportation contractors and

persons engaged in the transportation of passengers or freight by hire andcommon carriers by air, land or water except as provided in this Code. DIECTc

D E C I S I O N

MARTINEZ, J p:

This petition for review on certiorari assails the Decision of the Court of Appeals datedNovember 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional TrialCourt of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'complaint for a business tax refund imposed by the City of Batangas. cdll

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, asamended, to contract, install and operate oil pipelines. The original pipelineconcession was granted in 1967 1 and renewed by the Energy Regulatory Board in 1992. 2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office ofthe Mayor of Batangas City. However, before the mayor's permit could be issued, therespondent City Treasurer required petitioner to pay a local tax based on its grossreceipts for the fiscal year 1993 pursuant to the Local Government Code. 3 Therespondent City Treasurer assessed a business tax on the petitioner amounting toP956,076.04 payable in four installments based on the gross receipts for products pumpedat GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not tohamper its operations, petitioner paid the tax under protest in the amount of P239,019.01for the first quarter of 1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondentCity Treasurer, the pertinent portion of which reads:

"Please note that our Company (FPIC) is a pipeline operator with a government concessiongranted under the Petroleum Act. It is engaged in the business of transportingpetroleum products from the Batangas refineries, via pipeline, to Sucat and JTFPandacan Terminals. As such, our Company is exempt from paying tax on gross receiptsunder Section 133 of the Local Government Code of 1991 . . .

"Moreover, Transportation contractors are not included in the enumeration of contractorsunder Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority toimpose tax on contractors and other independent contractors' under Section 143, Paragraph(e) of the Local Government Code does not include the power to levy on transportationcontractors.

"The imposition and assessment cannot be categorized as a mere fee authorized underSection 147 of the Local Government Code. The said section limits the imposition of fees andcharges on business to such amounts as may be commensurate to the cost of regulation,inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the license fee,

the imposition thereof based on gross receipts is violative of the aforecited provision. Theamount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost ofregulation, inspection and licensing. The fee is already a revenue raising measure, and not amere regulatory imposition." 4

On March 8, 1994, the respondent City Treasurer denied the protest contending thatpetitioner cannot be considered engaged in transportation business, thus itcannot claim exemption under Section 133 (j) of the Local Government Code. 5


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On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint6 for tax refund with prayer for writ of preliminary injunction against respondents City ofBatangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint,petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on itsgross receipts violates Section 133 of the Local Government Code; (2) the authority of citiesto impose and collect a tax on the gross receipts of "contractors and independent

contractors" under Sec. 141(e) and 151 does not include the authority to collect such taxeson transportation contractors for, as defined under Sec. 131 (h), the term "contractors"excludes transportation contractors; and, (3) the City Treasurer illegally and erroneouslyimposed and collected the said tax, thus meriting the immediate refund of the tax paid. 7

Traversing the complaint, the respondents argued that petitioner cannot be exempt fromtaxes under Section 133 (j) of the Local Government Code as said exemption applies only to"transportation contractors and persons engaged in the transportation by hire and commoncarriers by air, land and water." Respondents assert that pipelines are notincluded in the term "common carrier" which refers solely to ordinary carrierssuch as trucks, trains, ships and the like. Respondents further posit that the term"common carrier" under the said code pertains to the mode or manner by which aproduct is delivered to its destination. 8

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling inthis wise:

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

. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that taxexemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of thegovernment. Exemption may therefore be granted only by clear and unequivocal provisionsof law.

"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (ExhibitA) whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yetneither said law nor the deed of concession grant any tax exemption upon the plaintiff.

"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of theLocal Tax Code. Such being the situation obtained in this case (exemption being unclear and

equivocal) resort to distinctions or other considerations may be of help:1. That the exemption granted under Sec. 133 (j) encompasses only common carriersso as not to overburden the riding public or commuters with taxes. Plaintiff is not a commoncarrier, but a special carrier extending its services and facilities to a single specific or"special customer" under a "special contract."

2. The Local Tax Code of 1992 was basically enacted to give more and effective localautonomy to local governments than the previous enactments, to make them economicallyand financially viable to serve the people and discharge their functions with a concomitantobligation to accept certain devolution of powers, . . . So, consistent with this policy evenfranchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e)and 151 of the Code." 9

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

February 27, 1995, we referred the case to the respondent Court of Appeals forconsideration and adjudication. 10 On November 29, 1995, the respondent court rendered adecision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner's motionfor reconsideration was denied on July 18, 1996. 12

Hence, this petition. At first, the petition was denied due course in a Resolution datedNovember 11, 1996. 13 Petitioner moved for a reconsideration which was granted by thisCourt in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.


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Petitioner claims that the respondent Court of Appeals erred in holding that (1) thepetitioner is not a common carrier or a transportation contractor, and (2) theexemption sought for by petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to thepublic as engaged in the business of transporting persons or property from placeto place, for compensation, offering his services to the public generally.

Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation,firm or association engaged in the business of carrying or transportingpassengers or goods or both, by land, water, or air, for compensation, offeringtheir services to the public."

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

1. He must be engaged in the business of carrying goods for others as a publicemployment, and must hold himself out as ready to engage in the transportationof goods for person generally as a business and not as a casual occupation;

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

3. He must undertake to carry by the method by which his business isconducted and over his established roads; and

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that petitioner is acommon carrier. It is engaged in the business of transporting or carrying goods,i.e. petroleum products, for hire as a public employment. It undertakes to carry forall persons indifferently, that is, to all persons who choose to employ its services,and transports the goods by land and for compensation. The fact that petitionerhas a limited clientele does not exclude it from the definition of a common carrier.In De Guzman vs. Court of Appeals 16 we ruled that:

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

principal business activity is the carrying of persons or goods or both, and onewho does such carrying only as an ancillary activity (in local idiom, as a 'sideline').Article 1732 . . . avoids making any distinction between a person or enterpriseoffering transportation service on a regular or scheduled basis and one offeringsuch service on an occasional, episodic or unscheduled basis. Neither does Article1732 distinguish between a carrier offering its services to the 'general public,'i.e., the general community or population, and one who offers services or solicitsbusiness only from a narrow segment of the general population. We think thatArticle 1877 deliberately refrained from making such distinctions.

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

Service Act, 'public service' includes: Cdpr'every person that now or hereafter may own, operate, manage, or control in the Philippines,for hire or compensation, with general or limited clientele, whether permanent,occasional or accidental, and done for general business purposes, any common carrier,railroad, street railway, traction railway, subway motor vehicle, either for freight orpassenger, or both, with or without fixed route and whatever may be its classification,freight or carrier service of any class, express service, steamboat, or steamship line,pontines, ferries and water craft, engaged in the transportation of passengers or freight orboth, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,


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irrigation system gas, electric light heat and power, water supply and power petroleum,sewerage system, wire or wireless communications systems, wire or wireless broadcastingstations and other similar public services." (Emphasis supplied)

Also, respondent's argument that the term "common carrier" as used in Section133 (j) of the Local Government Code refers only to common carriers transportinggoods and passengers through moving vehicles or vessels either by land, sea or

water, is erroneous.As correctly pointed out by petitioner, the definition of "common carriers" in the CivilCode makes no distinction as to the means of transporting, as long as it is byland, water or air. It does not provide that the transportation of the passengers or goodsshould be by motor vehicle. In fact, in the United States, oil pipe line operators areconsidered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner isconsidered a "common carrier."Thus, Article 86 thereof provides that:

"Art. 86. Pipe line concessionaire as common carrier. A pipe line shall have thepreferential right to utilize installations for the transportation of petroleum owned by him,but is obliged to utilize the remaining transportation capacity pro rata for the transportationof such other petroleum as may be offered by others for transport, and to change without

discrimination such rates as may have been approved by the Secretary of Agriculture andNatural Resources."

Republic Act 387 also regards petroleum operation as a public utility. Pertinentportion of Article 7 thereof provides:

"that everything relating to the exploration for and exploitation of petroleum . . .and everything relating to the manufacture, refining, storage, or transportation by specialmethods of petroleum, is hereby declared to be a public utility." (Emphasis Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "commoncarrier." In BIR Ruling No. 069-83, it declared:

". . . since (petitioner) is a pipeline concessionaire that is engaged only in transportingpetroleum products, it is considered a common carrier under Republic Act No. 387 . . . Such

being the case, it is not subject to withholding tax prescribed by Revenue Regulations No.13-78, as amended."

From the foregoing disquisition, there is no doubt that petitioner is a "commoncarrier" and, therefore, exempt from the business tax as provided for inSection 133 (j), of the Local Government Code, to wit:

"Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces,cities, municipalities, and barangays shall not extend to the levy of the following:,m

xxx xxx xxx

(j.) Taxes on the gross receipts of transportation contractors andpersons engaged in the transportation of passengers or freight by hire andcommon carriers by air, land or water, except as provided in this Code."

The deliberations conducted in the House of Representatives on the Local Government Codeof 1991 are illuminating:

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

Mr. Speaker, we would like to proceed to page 95, line 1. It states: "SEC. 121 (now Sec. 131).Common Limitations on the Taxing Powers of Local Government Units." . . .

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


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Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears tobe one of those being deemed to be exempted from the taxing powers of the localgovernment units. May we know the reason why the transportation business is beingexcluded from the taxing powers of the local government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131),line 16, paragraph 5. It states that local government units may not impose taxes on

the business of transportation, except as otherwise provided in this code.Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can seethere that provinces have the power to impose a tax on business enjoying a franchise at therate of not more than one-half of 1 percent of the gross annual receipts. So, transportationcontractors who are enjoying a franchise would be subject to tax by the province. That is theexception, Mr. Speaker.

What we want to guard against here, Mr. Speaker is the imposition of taxes by localgovernment units on the carrier business. Local government units may impose taxeson top of what is already being imposed by the National Internal Revenue Codewhich is the so-called "common carriers tax."We do not want a duplication of thistax, so we just provided for an exception under Section 125 (now Section 137) that aprovince may impose this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . .18

It is clear that the legislative intent in excluding from the taxing power of thelocal government unit the imposition of business tax against common carriers isto prevent a duplication of the so-called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its grosssales/earnings under the National Internal Revenue Code. 19 To tax petitioneragain on its gross receipts in its transportation of petroleum business woulddefeat the purpose of the Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court ofAppeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.

SO ORDERED. dctai

Bellosillo, Puno and Mendoza, JJ ., concur.

Footnotes

1. Rollo, pp. 90-94.

2. Decision of the Energy Regulatory Board in ERB Case No. 92-94, renewing thePipeline Concession of petitioner First Philippine Industrial Corporation, formerly known asMeralco Securities Industrial Corporation. (Rollo, pp. 95-100).

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

xxx xxx xxx

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

schedule:With gross receipts for the preceding Amount of Tax Per Annum

calendar year in the amount of:

xxx xxx xxx

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

percent (50%) of one percent (1%)

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


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

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

7. Rollo, pp. 51-57.

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

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

10. Rollo, p. 84.

11. CA-G.R. SP No. 36801; Penned by Justice Jose C. De la Rama and concurred in byJustice Jaime M. Lantin and Justice Eduardo G. Montenegro; Rollo, pp. 33-47.

12. Rollo, p. 49.

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

"The petition is unmeritorious.

"As correctly ruled by respondent appellate court, petitioner is not a common carrier as it isnot offering its services to the public.

"Art. 1732 of the Civil Code defines Common Carriers as: persons, corporations, firms orassociation engaged in the business of carrying or transporting passengers or goods both,

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

"We sustain the view that petitioner is a special carrier. Based on the facts on hand, itappears that petitioner is not offering its services to the public.

"We agree with the findings of the appellate court that the claim for exemption fromtaxation must be strictly construed against the taxpayer. The present understanding of theconcept of "common carriers" does not include carriers of petroleum using pipelines. It ishighly unconventional to say that the business of transporting petroleum through pipelinesinvolves "common carrier" business. The Local Government Code intended to giveexemptions from local taxation to common carriers transporting goods and passengersthrough moving vehicles or vessels and not through pipelines. The term common carrierunder Section 133 (j) of the Local Government Code must be given its simple and ordinaryor generally accepted meaning which would definitely not include operators of pipelines."

14 G.R. No. 125948 (First Philippine Industrial Corporation vs. Court of Appeals, et. al.)Considering the grounds of the motion for reconsideration, dated December 23, 1996, filedby counsel for petitioner, of the resolution of November 11, 1996 which denied the petitionfor review on certiorari, the Court Resolved:

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

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

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

16. 168 SCRA 617-618 (1988).

17. Giffin v. Pipe Lines, 172 Pa. 580, 33 Alt. 578; Producer Transp. Co. v. RailroadCommission, 241 US 228, 64 L ed. 239, 40 S Ct 131.

18. Journal and Record of the House of Representatives, Fourth Regular Session, Volume2, pp. 87-89, September 6, 1990; Emphasis Ours.

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


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2. De Guzman v. CA

THIRD DIVISION

[G.R. No. L-47822. December 22, 1988.]

PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO CENDAA,

respondents.Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

SYLLABUS

1. CIVIL CODE; COMMON CARRIERS; ARTICLE 1732, DEFINITION UNDER ARTICLE1732 OF THE CODE. The Civil Code defines "common carriers" in the following terms:"Article 1732. Common carriers are persons, corporations, firms or associationsengaged 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." Theabove article makes no distinction between one whose principal business activity is thecarrying of persons or goods or both, and one who does such carrying only as an ancillaryactivity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making anydistinction between a person or enterprise offering transportation service on aregular or scheduled basis and one offering such service on an occasional,episodic or unscheduled basis. Neither does Article 1732 distinguish between acarrier offering its services to the "general public," i.e., the general community orpopulation, and one who offers services or solicits business only from a narrowsegment of the general population. We think that Article 1733 deliberatelyrefrained from making such distinctions.

2. ID.; ID.; ID.; LAW ON COMMON CARRIERS SUPPLEMENTED BY THE PUBLICSERVICE ACT; SCOPE OF PUBLIC SERVICE. So understood, the concept of"common carrier" under Article 1732 may be seen to coincide neatly with thenotion of "public service," under the Public Service Act (Commonwealth Act No. 1416,as amended) which at least partially supplements the law on common carriers set forth in

the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"includes: ". . . every person that now or hereafter may own, operate, manage, orcontrol in the Philippines, for hire or compensation, with general or limited clientele,whether permanent, occasional or accidental, and done for general business purposes, anycommon carrier, railroad, street railway, traction railway, subway motor vehicle, either forfreight or passenger, or both, with or without fixed route and whatever may be itsclassification, freight or carrier service of any class, express service, steamboat, orsteamship line, pontines, ferries and water craft, engaged in the transportation ofpassengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supplyand power petroleum, sewerage system, wire or wireless communications systems, wire orwireless broadcasting stations and other similar public services . . ." (Emphasissupplied) It appears to the Court that private respondent is properly characterized asa common carrier even though he merely "back-hauled" goods for othermerchants from Manila to Pangasinan, although such backhauling was done on aperiodic or occasional rather than regular or scheduled manner, and even thoughprivate respondent's principal occupation was not the carriage of goods forothers. There is no dispute that private respondent charged his customers a fee forhauling their goods; that fee frequently fell below commercial freight rates is notrelevant here.

3. ID.; ID.; ID.; ID.; CERTIFICATE OF PUBLIC CONVENIENCE; NOT A REQUISITE FORINCURRING LIABILITY AS A COMMON CARRIER; NATURE OF THE BUSINESS OF A


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COMMON CARRIER. The Court of Appeals referred to the fact that private respondentheld no certificate of public convenience, and concluded he was not a common carrier. Thisis palpable error. A certificate of public convenience is not a requisite for theincurring of liability under the Civil Code provisions governing common carriers.

That liability arises the moment a person or firm acts as a common carrier, withoutregard to whether or not such carrier has also complied with the requirements of

the applicable regulatory statute and implementing regulations and has beengranted a certificate of public convenience or other franchise. To exempt privaterespondent from the liabilities of a common carrier because he has not securedthe necessary certificate of public convenience, would be offensive to soundpublic policy; that would be to reward private respondent precisely for failing tocomply with applicable statutory requirements. The business of a common carrierimpinges directly and intimately upon the safety and well being and property of thosemembers of the general community who happen to deal with such carrier. The law imposesduties and liabilities upon common carriers for the safety and protection of those who utilizetheir services and the law cannot allow a common carrier to render such duties and liabilitiesmerely facultative by simply failing to obtain the necessary permits and authorizations.

4. ID.; ID.; DEGREE OF DILIGENCE REQUIRED OF, COMMON CARRIERS. Common carriers, "by the nature of their business and for reasons of public

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

5. ID.; ID.; ID.; LIABILITY OF COMMON CARRIERS. Article 1734 establishes thegeneral rule that common carriers are responsible for the loss, destruction ordeterioration of the goods which they carry, "unless the same is due to any of thefollowing causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster orcalamity; (2) Act of the public enemy in war, whether international or civil; (3) Act oromission of the shipper or owner of the goods; (4) The character of the goods or defects inthe packing or in the containers; and (5) Order or act of competent public authority." It isimportant to point out that the above list of causes of loss, destruction or deterioration

which exempt the common carrier for responsibility therefor, is a closed list. Causes fallingoutside the foregoing list, even if they appear to constitute a species of force majeure, fallwithin the scope of Article 1735, which provides as follows: "In all cases other than thosementioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost,destroyed or deteriorated, common carriers are presumed to have been at fault or to haveacted negligently, unless they prove that they observed extraordinary diligence as requiredin Article 1733." (Emphasis supplied)

6. ID.; ID.; ID.; ID.; COMMON CARRIER'S ARE NOT ABSOLUTE INSURERS AGAINSTALL RISKS; NO LIABILITY ATTACHES IN CASE OF FORTUITOUS EVENTS. UnderArticle 1745 (6) above, a common carrier is held responsible and will not beallowed to divest or to diminish such responsibility even for acts of strangerslike thieves or robbers, except where such thieves or robbers in fact acted "withgrave or irresistible threat, violence or force." We believe and so hold that the limits ofthe duty of extraordinary diligence in the vigilance over the goods carried are reachedwhere the goods are lost as a result of a robbery which is attended by "grave or irresistiblethreat, violence or force." In these circumstances, we hold that the occurrence of the lossmust reasonably be regarded as quite beyond the control of the common carrierand properly regarded as a fortuitous event. It is necessary to recall that evencommon carriers are not made absolute insurers against all risks of travel and of transportof goods, and are not held liable for acts or events which cannot be foreseen or areinevitable, provided that they shall have complied with the rigorous standard ofextraordinary diligence.


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D E C I S I O N

FELICIANO, J p:

Respondent Ernesto Cendaa, a junk dealer, was engaged in buying up usedbottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of suchscrap material, respondent would bring such material to Manila for resale. He utilizedtwo (2) six-wheeler trucks which he owned for hauling the material to Manila. On thereturn trip to Pangasinan, respondent would load his vehicles with cargo whichvarious merchants wanted delivered to differing establishments in Pangasinan.For that service, respondent charged freight rates which were commonly lower thanregular commercial rates. llcd

Sometime in November 1970, petitioner Pedro de Guzman, a merchant andauthorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,Pangasinan, contracted with respondent for the hauling of 750 cartons of Libertyfilled milkfrom a warehouse of General Milk in Makati, Rizal, to petitioner's establishmentin Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondentloaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truckdriven by respondent himself; while 600 cartons were placed on board the othertruck which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxesnever reached petitioner, since the truck which carried these boxes was hijackedsomewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men whotook with them the truck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in theCourt of First Instance of Pangasinan, demanding payment of P22,150.00, the claimedvalue of the lost merchandise, plus damages and attorney's fees. Petitioner argued thatprivate respondent, being a common carrier, and having failed to exercise the extraordinarydiligence required of him by the law, should be held liable for the value of the undeliveredgoods.

In his Answer, private respondent denied that he was a common carrier and arguedthat he could not be held responsible for the value of the lost goods, such loss

having been due to force majeure.On 10 December 1975, the trial court rendered a Decision' finding private respondent to bea common carrier and holding him liable for the value of the undelivered goods (P22,150.00)as well as for P4,000.00 as damages and P2,000.00 as attorney's fees. cdrep

On appeal before the Court of Appeals, respondent urged that the trial court had erred inconsidering him a common carrier; in finding that he had habitually offered trucking servicesto the public; in not exempting him from liability on the ground of force majeure; and inordering him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent hadbeen engaged in transporting return loads of freight "as a casual occupation a sideline tohis scrap iron business" and not as a common carrier.

Petitioner came to this Court by way of a Petition for Review assigning as errors thefollowing conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

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

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

We consider first the issue ofwhether or not private respondent Ernesto Cendaamay, under the facts earlier set forth, be properly characterized as a commoncarrier.


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

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

The above article makes no distinction between one whose principal businessactivity is the carrying of persons or goods or both, and one who does suchcarrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732also carefully avoids making any distinction between a person or enterpriseoffering transportation service on a regular or scheduled basis and one offeringsuch service on an occasional, episodic or unscheduled basis. Neither does Article1732 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 onlyfrom a narrow segment of the general population. We think that Article 1733 deliberatelyrefrained from making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen tocoincide neatly with the notion of "public service," under the Public Service Act(Commonwealth Act No. 1416, as amended) which at least partially supplements the law on

common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the PublicService Act, "public service" includes:

". . . every person that now or hereafter may own, operate, manage, or control in thePhilippines, for hire or compensation, with general or limited clientele, whether permanent,occasional or accidental, and done for general business purposes, any common carrier,railroad, street railway, traction railway, subway motor vehicle, either for freight orpassenger, or both, with or without fixed route and whatever may be its classification,freight or carrier service of any class, express service, steamboat, or steamship line,pontines, ferries and water craft, engaged in the transportation of passengers or freight orboth, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,irrigation system, gas, electric light, heat and power, water supply and power petroleum,sewerage system, wire or wireless communications systems, wire or wireless broadcastingstations and other similar public services . . ." (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a commoncarrier even though he merely "back-hauled" goods for other merchants from Manila toPangasinan, although such backhauling was done on a periodic or occasional rather thanregular or scheduled manner, and even though private respondent's principal occupationwas not the carriage of goods for others. There is no dispute that private respondentcharged his customers a fee for hauling their goods; that fee frequently fell belowcommercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of publicconvenience, and concluded he was not a common carrier. This is palpable error. Acertificate of public convenience is not a requisite for the incurring of liabilityunder the Civil Code provisions governing common carriers. That liability arisesthe 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 applicableregulatory statute and implementing regulations and has been granted acertificate of public convenience or other franchise. To exempt private respondentfrom the liabilities of a common carrier because he has not secured the necessarycertificate of public convenience, would be offensive to sound public policy; thatwould be to reward private respondent precisely for failing to comply withapplicable statutory requirements. The business of a common carrier impinges directlyand intimately upon the safety and well being and property of those members of the generalcommunity who happen to deal with such carrier. The law imposes duties and liabilities uponcommon carriers for the safety and protection of those who utilize their services and the law


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cannot allow a common carrier to render such duties and liabilities merely facultative bysimply failing to obtain the necessary permits and authorizations. cdphil

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

Common carriers, "by the nature of their business and for reasons of public policy," 2 areheld to a very high degree of care and diligence ("extraordinary diligence") in the carriage ofgoods as well as of passengers. The specific import of extraordinary diligence in the care ofgoods transported by a common carrier is, according to Article 1733, "further expressed inArticles 1734, 1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

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

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers; and

(5) Order or act of competent public authority."

It is important to point out that the above list of causes of loss, destruction or deteriorationwhich exempt the common carrier for responsibility therefor, is a closed list. Causes fallingoutside the foregoing list, even if they appear to constitute a species of force majeure, fallwithin the scope ofArticle 1735, which provides as follows:

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

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific causealleged in the instant case the hijacking of the carrier's truck - does not fall withinany of the five (5) categories of exempting causes listed in Article 1734. It wouldfollow, therefore, that the hijacking of the carrier's vehicle must be dealt with under

the provisions of Article 1735, in other words, that the private respondent ascommon carrier is presumed to have been at fault or to have acted negligently.

This presumption, however, may be overthrown by proof of extraordinarydiligence on the part of private respondent. cdll

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

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

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

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


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xxx xxx xxx

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

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

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

Under Article 1745 (6) above, a common carrier is held responsible and will not beallowed to divest or to diminish such responsibility even for acts of strangers like thievesor robbers, except where such thieves or robbers in fact acted "with grave or irresistiblethreat, violence or force." We believe and so hold that the limits of the duty ofextraordinary diligence in the vigilance over the goods carried are reached wherethe goods are lost as a result of a robbery which is attended by "grave orirresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent which

carried petitioner's cargo. The record shows that an information for robbery in bandwas filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled"People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oriaand one John Doe." There, the accused were charged with willfully and unlawfully taking andcarrying away with them the second truck, driven by Manuel Estrada and loaded with the600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta,Pangasinan. The decision of the trial court shows that the accused acted with grave, if notirresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers were armed withfirearms. The robbers not only took away the truck and its cargo but alsokidnapped the driver and his helper, detaining them for several days and laterreleasing them in another province (in Zambales).The hijacked truck wassubsequently found by the police in Quezon City. The Court of First Instance convicted allthe accused of robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably beregarded as quite beyond the control of the common carrier and properlyregarded as a fortuitous event. It is necessary to recall that even common carriersare not made absolute insurers against all risks of travel and of transport ofgoods, and are not held liable for acts or events which cannot be foreseen or areinevitable, provided that they shall have complied with the rigorous standard ofextraordinary diligence. prLL

We, therefore, agree with the result reached by the Court of Appeals that privaterespondent Cendaa is not liable for the value of the undelivered merchandisewhich was lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on Certiorari is hereby DENIED and the Decision of

the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

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

Footnotes

1. Rollo, p. 14.

2. Article 1733, Civil Code.

3. Rollo, p. 22.


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4. The evidence of the prosecution did not show that more than three (3) of the five (5)hold-uppers were armed. Thus, the existence of a "band" within the technical meaning ofArticle 306 of the Revised Penal Code, was not affirmatively proved by the prosecution.


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3. Gelisan v. Alday

SECOND DIVISION

[G.R. No. L-30212. September 30, 1987.]

BIENVENIDO GELISAN, petitioner, vs. BENITO ALDAY, respondent.

D E C I S I O N

PADILLA, J p:

Review on certiorari of the judgment * rendered by the Court of Appeals, dated 11 October1968, as amended by its resolution, dated 11 February 1969, in CA-G.R. No. 32670-R,entitled: "Benito Alday, plaintiff-appellant, vs. Roberto Espiritu and Bienvenido Gelisan,defendants-appellees," which ordered the herein petitioner Bienvenido Gelisan to pay,

jointly and severally, with Roberto Espiritu, the respondent Benito Alday the amount ofP5,397.30, with legal interest thereon from the filing of the complaint, and the costs of suit;and for the said Roberto Espiritu to pay or refund the petitioner Bienvenido Gelisan whateveramount the latter may have paid to the respondent Benito Alday by virtue of the judgment.LLpr

The uncontroverted facts of the case are, as follows:

"Defendant Bienvenido Gelisan is the owner of a freight truck bearingplate No. TH-2377. On January 31, 1962, defendant Bienvenido Gelisan and Roberto Espirituentered into a contract marked Exhibit 3-Gelisan under which Espiritu hired the samefreight truck of Gelisan for the purpose of hauling rice, sugar, flour and fertilizerat an agreed price of P18.00 per trip within the limits of the City of Manila provided theloads shall not exceed 200 sacks. It is also agreed that Espiritu shall bear and pay alllosses and damages attending the carriage of the goods to be hauled by him. Thetruck was taken by a driver of Roberto Espiritu on February 1, 1962. Plaintiff BenitoAlday, a trucking operator, and who owns about 15 freight trucks, had known thedefendant Roberto Espiritusince 1948 as a truck operator. Plaintiff had a contract tohaul the fertilizers of the Atlas Fertilizer Corporation from Pier 4, North Harbor, toits Warehouse in Mandaluyong. Alday met Espiritu at the gate of Pier 4 and the latter

offered the use of his truck with the driver and helper at 9 centavos per bag of fertilizer. Theoffer was accepted by plaintiff Alday and he instructed his checker Celso Hensonto let Roberto Espiritu haul the fertilizer. Espiritu made two hauls of 200 bags offertilizer per trip. The fertilizer was delivered to the driver and helper of Espiritu with thenecessary way bill receipts, Exhibits A and B. Espiritu, however, did not deliver thefertilizer to the Atlas Fertilizer bodega at Mandaluyong. The signatures appearingin the way bill receipts Exhibits A and B of the Alday Transportation admittedlynot the signature of any representative or employee of the Atlas FertilizerCorporation. Roberto Espiritu could not be found, and plaintiff reported the loss tothe Manila Police Department. Roberto Espiritu was later arrested and booked fortheft. . . ..

"Subsequently, plaintiff Alday saw the truck in question on Sto. Cristo St. and henotified the Manila Police Department, and it was impounded by the police, It was

claimed by Bienvenido Gelisan from the Police Department after he had beennotified by his employees that the truck had been impounded by the police; but ashe could not produce at the time the registration papers, the police would not release thetruck to Gelisan. As a result of the impounding of the truck according to Gelisan, . . . andthat for the release of the truck he paid the premium of P300 to the surety company." 1

Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in theamount of P5,397.33, to Atlas Fertilizer Corporation so that, on 12 February 1962, he (Alday)filed a complaint against Roberto Espiritu and Bienvenido Gelisan with the Court


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of First Instance of Manila, docketed therein as Civil Case No. 49603, for the recovery ofdamages suffered by him thru the criminal acts committed by the defendants.

The defendant, Roberto Espiritu failed to file an answer and was, accordingly, declared indefault.

The defendant, Bienvenido Gelisan, upon the other hand, disowned responsibility.He claimed that he had no contractual relations with the plaintiff Benito Alday asregards the hauling and/or delivery of the 400 bags of fertilizer mentioned in thecomplaint; that the alleged misappropriation or non-delivery by defendant Roberto Espirituof plaintiff's 400 bags of fertilizer, was entirely beyond his (Gelisan's) control andknowledge, and which fact became known to him, for the first time, on 8 February1962 when his freight truck, with plate No. TH-2377, was impounded by theManila Police Department, at the instance of the plaintiff; and that in his written contractof hire with Roberto Espiritu, it was expressly provided that the latter will bear and pay alllosses and damages attending the carriage of goods to be hauled by said Roberto Espiritu.LexLib

After trial, the Court of First Instance of Manila ruled that Roberto Espiritu alone was liable toBenito Alday, since Bienvenido Gelisan was not privy to the contract between Espiritu andAlday. The dispositive portion of the decision reads, as follows:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against thedefendant Roberto Espiritu for the sum of P6,000 with interest at the legal rate from thetime of the filing of the complaint, and the costs of the suit. Plaintiff's complaint is dismissedwith respect to defendant Bienvenido Gelisan, and judgment is rendered in favor ofdefendant Bienvenido Gelisan and against the plaintiff for the sum of P350." 2

On appeal, however, the Court of Appeals, citing the case of Montoya vs. Ignacio, 3 afound that Bienvenido Gelisan is likewise liable for being the registered owner of thetruck; and that the lease contract, executed by and between Bienvenido Gelisanand Roberto Espiritu, is not binding upon Benito Alday for not having beenpreviously approved by the Public Service Commission. Accordingly, it sentencedBienvenido Gelisan to pay, jointly and severally with Roberto Espiritu, Benito Alday theamount of P5,397.30, with legal interest thereon from the filing of the complaint; and to paythe costs. Roberto Espiritu, in turn, was ordered to pay or refund Bienvenido Gelisanwhatever amount the latter may have paid to Benito Alday by virtue of the judgment. 4

Hence, the present recourse by Bienvenido Gelisan.

The petition is without merit. The judgment rendered by the Court of Appeals, which issought to be reviewed, is in accord with the facts and the law on the case and we find nocogent reason to disturb the same. The Court has invariably held in several decisions thatthe registered owner of a public service vehicle is responsible for damages thatmay arise from consequences incident to its operation or that may be caused toany of the passengers therein. 5 The claim of the petitioner that he is not liable inview of the lease contract executed by and between him and Roberto Espirituwhich exempts him from liability to third persons, cannot be sustained because itappears that the lease contract, adverted to, had not been approved by the PublicService Commission. It is settled in our jurisprudence that if the property covered by a

franchise is transferred or leased to another without obtaining the requisiteapproval, the transfer is not binding upon the public and third persons. 6

We also find no merit in the petitioner's argument that the rule requiring theprevious approval by the Public Service Commission of the transfer or lease of themotor vehicle, may be applied only in cases where there is no positiveidentification of the owner or driver, or where there are very scant means ofidentification, but not in those instances where the person responsible for damages hasbeen fixed or determined before hand, as in the case at bar. The reason for the rule wereiterate in the present case, was explained by the Court in Montoya vs. Ignacio, 7 thus:


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"There is merit in this contention. The law really requires the approval of the PublicService Commission in order that a franchise, or any privilege pertaining thereto,may be sold or leased without infringing the certificate issued to the grantee.Thereason is obvious. Since a franchise is personal in nature any transfer or leasethereof should be notified to the Public Service Commission so that the latter maytake proper safeguards to protect the interest of the public. In fact, the law requires

that, before the approval is granted, there should be a public hearing, with notice to allinterested parties, in order that the Commission may determine if there are good andreasonable grounds justifying the transfer or lease of the property covered by the franchise,or if the sale or lease is detrimental to public interest. Such being the reason and philosophybehind this requirement, it follows that if the property covered by the franchise istransferred, or leased to another without obtaining the requisite approval the transfer is notbinding against the Public Service Commission and in contemplation of law the granteecontinues to be responsible under the franchise in relation to the Commission and to thePublic. Since the lease of the jeepney in question was made without such approval, the onlyconclusion that can be drawn is that Marcelino Ignacio still continues to be its operator incontemplation of law, and as such is responsible for the consequences incident to itsoperation, one of them being the collision under consideration."

Bienvenido Gelisan, the registered owner, is not however without recourse. He has

a right to be indemnified by Roberto Espiritu for the amount that he may berequired to pay as damages for the injury caused to Benito Alday, since the leasecontract in question, although not effective against the public for not having beenapproved by the Public Service Commission, is valid and binding between thecontracting parties. 8

We also find no merit in the petitioner's contention that his liability is onlysubsidiary. The Court has consistently considered the registered owner/operator of apublic service vehicle to be jointly and severally liable with the driver fordamages incurred by passengers or third persons as a consequence of injuriessustained in the operation of said vehicles. Thus, in the case of Vargas vs. Langcay, 9the Court said:

"We hold that the Court of Appeals erred in considering appellant-petitioner Diwata Vargas

only subsidiarily liable under Article 103 of the Revised Penal Code. This court, in previousdecisions, has always considered the registered owner/operator of a passenger vehicle,jointly and severally liable with the driver, for damages incurred by passengers or thirdpersons as a consequence of injuries (or death) sustained in the operation of said vehicles.(Montoya vs. Ignacio, 94 Phil., 182; Timbol vs. Osias, G.R. No. L-7547, April 30, 1955; Vda. deMedina vs. Cresencia, 99 Phil., 506; Necesito vs. Paras, 104 Phil., 75; Erezo vs. Jepte, 102Phil., 103; Tamayo vs. Aquino and Rayos vs. Tamayo, 105 Phil., 949; 56 Off. Gaz. [36] 5617.)In the case of Erezo vs. Jepte, Supra, We held:

". . . In synthesis, we hold that the registered owner, the defendant-appellant herein,is primarily responsible for the damage caused . . ."

In the case of Tamayo vs. Aquino, supra, We said:

". . . As Tamayo is the registered owner of the truck, his responsibility to the public or to any

passenger riding in the vehicle or truck must be direct . . .WHEREFORE, the petition is hereby DENIED. With costs against the petitioner.

SO ORDERED.

Yap, Melencio-Herrera, Paras and Sarmiento, JJ., concur.

Footnotes

* Penned by Justice Angel H. Mojica with the concurrence of Justices Julio Villamor andHermogenes Concepcion, Jr.


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1. Rollo, pp. 18-19.

2. Record on Appeal, p. 47.

3. 94 Phil. 182.

4. Rollo, pp. 17, 38.

5. Vargas vs. Langcay, 116 Phil. 478 and cases cited; Juaniza vs. Jose, G.R. No. 50127-

28, March 30, 1979, 89 SCRA 306 and cases cited; MYC Agro-Industrial Corp. vs. Vda. deCaldo, G.R. No. 57298, Sept. 7, 1984, 132 SCRA 10 and cases cited.

6. Montoya vs. Ignacio, 94 Phil. 182.

7. Supra.

8. Montoya vs. Ignacio, supra.

9. 116 Phil. 478, 481.


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4. Benedicto v. IAC

THIRD DIVISION

[G.R. No. 70876. July 19, 1990.]

MA. LUISA BENEDICTO, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and

GREENHILLS WOOD INDUSTRIES COMPANY, INC., respondents.Britanico, Panganiban, Benitez, Africa, Linsangan and Barinaga for petitioner.

Abelardo V. Viray for private respondent.

D E C I S I O N

FELICIANO, J p:

This Petition for Review asks us to set aside the Decision of the then Intermediate AppellateCourt dated 30 January 1985 in A.C.-G.R. CV No. 01454, which affirmed in toto the decisionof the Regional Trial Court ("RTC") of Dagupan City in Civil Case No. 5206. There, the RTCheld petitioner Ma. Luisa Benedicto liable to pay private respondent Greenhills WoodIndustries Company, Inc. ("Greenhills") the amounts of P16,016.00 and P2,000.00representing the cost of Greenhills' lost sawn lumber and attorney's fees, respectively.

Private respondent Greenhills, a lumber manufacturing firm with businessaddress at Dagupan City, operates a sawmill in Maddela, Quirino.

Sometime in May 1980, private respondent bound itself to sell and deliver to BlueStar Mahogany, Inc. ("Blue Star"), a company with business operations inValenzuela, Bulacan 100,000 board feet of sawn lumber with the understanding that aninitial delivery would be made on 15 May 1980. 1 To effect its first delivery,private respondent's resident manager in Maddela, Dominador Cruz, contractedVirgilio Licuden, the driver of a cargo truck bearing Plate No. 225 GA TH totransport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. Thiscargo truck was registered in the name of petitioner Ma. Luisa Benedicto, theproprietor of Macoven Trucking, a business enterprise engaged in hauling freight,with main office in B.F. Homes, Paraaque.

On 15 May 1980, Cruz in the presence and with the consent of driver Licuden,supervised the loading of 7,690 board feet of sawn lumber with invoice value ofP16,918.00 aboard the cargo truck. Before the cargo truck left Maddela for Valenzuela,Bulacan, Cruz issued to Licuden Charge Invoices Nos. 3259 and 3260 both of which wereinitialed by the latter at the bottom left corner. 2 The first invoice was for the amountof P11,822.80 representing the value of 5,374 board feet of sawn lumber, while the other setout the amount of P5,095.20 as the value of 2,316 board feet. Cruz instructed Licuden togive the original copies of the two (2) invoices to the consignee upon arrival inValenzuela, Bulacan 3 and to retain the duplicate copies in order that he could afterwardsclaim the freightage from private respondent's Manila office. 4

On 16 May 1980, the Manager of Blue Star called up by long distance telephoneGreenhills' president, Henry Lee Chuy, informing him that the sawn lumber onboard the subject cargo truck had not yet arrived in Valenzuela, Bulacan. The latterin turn informed Greenhills' resident manager in its Maddela sawmill of what had happened.In a letter 5 dated 18 May 1980, Blue Star's administrative and personnel manager, ManuelR. Bautista, formally informed Greenhills' president and general manager that Blue Star stillhad not received the sawn lumber which was supposed to arrive on 15 May 1980 andbecause of this delay, "they were constrained to look for other suppliers."

On 25 June 1980, after confirming the above with Blue Star and after trying vainly topersuade it to continue with their contract, private respondent Greenhills filed CriminalCase No. 668 against driver Licuden for estafa. Greenhills also filed against petitioner


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Benedicto Civil Case No. D-5206 for recovery of the value of the lost sawn lumberplus damages before the RTC of Dagupan City. LexLib

In her answer, 6 petitioner Benedicto denied liability alleging that she was acomplete stranger to the contract of carriage, the subject truck having beenearlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a deed ofsale. 7 She claimed that the truck had remained registered in her name

notwithstanding its earlier sale to Tee because the latter had paid her onlyP50,000.00 out of the total agreed price of P68,000.00 However, she averred that Teehad been operating the said truck in Central Luzon from that date (28 February 1980)onwards, and that, therefore, Licuden was Tee's employee and not hers.

On 20 June 1983, based on the finding that petitioner Benedicto was still the registeredowner of the subject truck, and holding that Licuden was her employee, the trial courtadjudged as follows:

"WHEREFORE, in the light of the foregoing considerations, this Court hereby rendersjudgment against defendant Maria Luisa Benedicto, ordering her to pay the Greenhills WoodIndustries Co. Inc., thru its President and General Manager, the amount of P16,016 cost ofthe sawn lumber loaded on the cargo truck, with legal rate of interest from the filing of thecomplaint; to pay attorney's fees in the amount of P2,000.00; and to pay the costs of this

suit.SO ORDERED." 8

On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate Court affirmed 9the decision of the trial court in toto. Like the trial court, the appellate court held that sincepetitioner was the registered owner of the subject vehicle, Licuden, the driver of the truck,was her employee, and that accordingly petitioner should be responsible for the negligenceof said driver and bear the loss of the sawn lumber plus damages. Petitioner moved forreconsideration, without success. 10

In the present Petition for Review, the sole issue raised is whether or not under the facts andapplicable law, the appellate court was correct in finding that petitioner, being theregistered owner of the carrier, should be held liable for the value of theundelivered or lost sawn lumber.

Petitioner urges that she could not be held answerable for the loss of the cargo, because thedoctrine which makes the registered owner of a common carrier vehicleanswerable to the public for the negligence of the driver despite the sale of thevehicle to another person, applies only to cases involving death of or injury topassengers. What applies in the present case, according to petitioner, is the rule that acontract of carriage requires proper delivery of the goods to and acceptance bythe carrier. Thus, petitioner contends that the delivery to a person falselyrepresenting himself to be an agent of the carrier prevents liability fromattaching to the registered owner.

The Court considers that petitioner has failed to show that appellate court committedreversible error in affirming the trial court's holding that petitioner was liable for the cost ofthe sawn lumber plus damages.

There is no dispute that petitioner Benedicto has been holding herself out to thepublic as engaged in the business of hauling or transporting goods for hire orcompensation. Petitioner Benedicto is, in brief, a common carrier.

The prevailing doctrine on common carriers makes the registered owner liable forconsequences flowing from the operations of the carrier, even though the specificvehicle involved may already have been transferred to another person. Thisdoctrine rests upon the principle that in dealing with vehicles registered under the PublicService Law, the public has the right to assume that the registered owner is theactual or lawful owner thereof. It would be very difficult and often impossible as a


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practical matter, for members of the general public to enforce the rights of actionthat they may have for injuries inflicted by the vehicles being negligentlyoperated if they should be required to prove who the actual owner is. 11 Theregistered owner is not allowed to deny liability by proving the identity of thealleged transferee. Thus, contrary to petitioner's claim, private respondent is notrequired to go beyond the vehicle's certificate of registration to ascertain the

owner of the carrier. In this regard, the letter presented by petitioner allegedly written byBenjamin Tee admitting that Licuden was his driver, had no evidentiary value not onlybecause Benjamin Tee was not presented in court to testify on this matter but also becauseof the aforementioned doctrine. To permit the ostensible or registered owner toprove who the actual owner is, would be to set at naught the purpose or publicpolicy which infuses that doctrine. cdphil

In fact, private respondent had no reason at all to doubt the authority of Licudento enter into a contract of carriage on behalf of the registered owner. It appearsthat, earlier, in the first week of May 1980, private respondent Greenhills hadcontracted Licuden who was then driving the same cargo truck to transport andcarry a load of sawn lumber from the Maddela sawmill to Dagupan City. 12 No onecame forward to question that contract or the authority of Licuden to represent the owner ofthe carrier truck.

Moreover, assuming the truth of her story, petitioner Benedicto retainedregistered ownership of the freight truck for her own benefit and convenience,that is, to secure the payment of the balance of the selling price of the truck. Shemay have been unaware of the legal security device of chattel mortgage; or she, or herbuyer, may have been unwilling to absorb the expenses of registering a chattel mortgageover the truck. In either case, considerations both of public policy and of equityrequire that she bear the consequences flowing from registered ownership of thesubject vehicle.

Petitioner Benedicto, however, insists that the said principle should apply only to casesinvolving negligence and resulting injury to or death of passengers, and not tocases involving merely carriage of goods. We believe otherwise.

A common carrier, both from the nature of its business and for insistent reasons of public

policy, is burdened by the law with the duty of exercising extraordinary diligence notonly in ensuring the safety of passengers but also in caring for goods transportedby it. 13 The loss or destruction or deterioration of goods turned over to thecommon carrier for conveyance to a designated destination, raises instantly apresumption of fault or negligence on the part of the carrier, save only wheresuch loss, destruction or damage arises from extreme circumstances such as anatural disaster or calamity or act of the public enemy in time of war, or from anact or omission of the shipper himself or from the character of the goods or theirpackaging or container. 14

This presumption may be overcome only by proof of extraordinary diligence on the part ofthe carrier. 15 Clearly, to permit a common carrier to escape its responsibility forthe passengers or goods transported by it by proving a prior sale of the vehicle ormeans of transportation to an alleged vendee would be to attenuate drasticallythe carrier's duty of extraordinary diligence. It would also open wide the door tocollusion between the carrier and the supposed vendee and to shifting liabilityfrom the carrier to one without financial capability to respond for the resultingdamages. In other words, the thrust of the public policy here involved is as sharp and realin the case of carriage of goods as it is in the transporting of human beings. Thus, to sustainpetitioner Benedicto's contention, that is, to require the shipper to go behind acertificate of registration of a public utility vehicle, would be utterly subversive ofthe purpose of the law and doctrine.


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Petitioner further insists that there was no perfected contract of carriage for thereason that there was no proof that her consent or that of Tee had been obtained;no proof that the driver, Licuden, was authorized to bind the registered owner; and no proofthat the parties had agreed on the freightage to be paid.

Once more, we are not persuaded by petitioner's arguments which appear to be atransparent attempt to evade statutory responsibilities. Driver Licuden was entrusted with

possession and control of the freight truck by the registered owner (and by the allegedsecret owner, for that matter). Driver Licuden, under the circumstances, was clothedwith at least implied authority to contract to carry goods and to accept delivery ofsuch goods for carriage to a specified destination. That the freight to be paid may nothave been fixed before loading and carriage, did not prevent the contract of carriage fromarising, since the freight was at least determinable if not fixed by the tariff schedules inpetitioner's main business office. Put in somewhat different terms, driver Licuden is inlaw regarded as the employee and agent of the petitioner, for whose actspetitioner must respond. A contract of carriage of goods was shown; the sawn lumberwas loaded on board the freight truck; loss or non-delivery of the lumber at Blue Star'spremises in Valenzuela, Bulacan was also proven; and petitioner has not proven eitherthat she had exercised extraordinary diligence to prevent such loss or non-delivery or that the loss or non-delivery was due to some casualty or force

majeure inconsistent with her liability. 16 Petitioner's liability to private respondentGreenhills was thus fixed and complete, without prejudice to petitioner's right to proceedagainst her putative transferee Benjamin Tee and driver Licuden for reimbursement orcontribution. 17

WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of theformer Intermediate Appellate Court dated 30 January 1985 is hereby AFFIRMED. Costsagainst petitioner.

SO ORDERED.

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

Bidin, J., took no part.

Footnotes

1. TSN, 5 February 1982, p. 3.

2. Folder of Exhibits, Exhibits "A" and "B", pp. 1-2.

3. TSN, 2 February 1982, p. 17.

4. Ibid., p. 27.

5. Folder of Exhibits, Exhibits "C", p. 3.

6. Rollo, Annex "B" of Petition, pp. 21-23.

7. Folder of Exhibits, Exhibit "1", p. 1.

8. Record, pp. 175-177.

9. Rollo, pp. 25-27.

10. Id., Annex "E", p. 36.

11. Perez vs. Gutierrez, 53 SCRA 149 (1973); Tamayo vs. Aquino, 105 Phil. 949 (1959);Erezo vs. Jepte, 102 Phil. 106 (1957).

12. TSN, 29 March 1982, pp. 7-8.

13. Article 1733, Civil Code.

14. Article 1734, id.

15. Article 1735, id.


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16. De Peralta vs. Mangusang, 11 SCRA 598 (1964); Jereos vs. Court of Appeals, 117SCRA 395 (1982).

17. Mirasol v. Robert Dollar Co., 53 Phil. 124 (1929); Ynchausti Steamship Co. v. Dexterand Unson, 41 Phil. 289 (1920).


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5. Lita Enterprises v. IAC

EN BANC

[G.R. No. 64693. April 27, 1984.]

LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES DIVISION,

INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P.GARCIA, respondents.

SYLLABUS

1. MERCANTILE LAW; TRANSPORTATION; CERTIFICATE OF PUBLIC CONVENIENCE;USE OF SAME UNDER "KABIT SYSTEM p" CONDEMNED. The parties herein operatedunder an arrangement, commonly known as the "kabit system," whereby a person whohas been granted a certificate of convenience allows another person who ownsmotor vehicles to operate under such franchise for a fee. A certificate of publicconvenience is a special privilege conferred by the government. Abuse of this privilege bythe grantees thereof cannot be countenanced. The "kabit system" has been identifiedas one of the root causes of the prevalence of graft and corruption in thegovernment transportation offices. In the words of Chief Justice Makalintal, (Dizon vs.Octavio, 51 O.G. 4059) "this is a pernicious system that cannot be too severelycondemned. It constitutes an imposition upon the good faith of the government."

2. ID.; ID.; ID.; ID.; AGREEMENT UNDER THE SYSTEM, VOID FOR BEINGCONTRARY TO PUBLIC POLICY. Although not outrightly penalized as a criminaloffense, the "kabit system" is invariably recognized as being contrary to publicpolicy and, therefore, void and inexistent under Article 1409 of the Civil Code. It isa fundamental principle that the court will not aid either party to enforce an illegalcontract, but will leave them both where it finds them. Upon this premise, it wasflagrant error on the part of both the trial and appellate courts to have accorded the partiesrelief from their predicament. Article 1412 of the Civil Code denies them such aid.

3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; VOID CONTRACTS, CANNOT BECURED BY RATIFICATION OR PRESCRIPTION. The defect of inexistence of a contractis permanent and incurable, and cannot be cured by ratification or by prescription. As this

Court said in Eugenio vs. Perdido, 97 Phil. 41, "the mere lapse of time cannot giveefficacy to contracts that are null and void."

4. ID.; PRINCIPLES OF IN PARI DELICTO, DEFINED; APPLIED IN CASE AT BAR. The principle of in pari delicto is well known not only in this jurisdiction but also in the UnitedStates where common law prevails. Under American jurisdiction, the doctrine is stated thus:"The proposition is universal that no action arises, in equity or at law, from an illegalcontract; no suit can be maintained for its specific performance, or to recover the propertyagreed to be sold or delivered, or damages for its violation. The rule has sometimes beenlaid down as though it was equally universal, that where the parties are in pari delicto,no affirmative relief of any kind will be given to one against the other." (Pomeroy'sEquity Jurisprudence, Vol. 3, 5th ed. p. 728) Although certain exceptions to the rule areprovided by law, We see no cogent reason why the full force of the rule shouldnot be applied in the instant case.

D E C I S I O N

ESCOLIN, J p:

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

The factual background of this case is undisputed.


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Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia,herein private respondents, purchased in installment from the Delta MotorSales Corporation five (5) Toyota Corona Standard cars to be used astaxicabs. Since they had no franchise to operate taxicabs, they contractedwith petitioner Lita Enterprises, Inc., through its representative, ManuelConcordia, for the use of the latter's certificate of public convenience in

consideration of an initial payment of P1,000.00 and a monthly rental ofP200.00 per taxicab unit. To effectuate said agreement, the aforesaid cars wereregistered in the name of petitioner Lita Enterprises, Inc.Possession,however, remained with the spouses Ocampo who operated and maintainedthe same under the name Acme Taxi, petitioner's trade name.

About a year later, on March 18, 1967, one of said taxicabs driven by theiremployee, Emeterio Martin, collided with a motorcycle whose driver, oneFlorante Galvez, died from the head injuries sustained therefrom. A criminalcase was eventually filed against the driver Emeterio Martin, while a civilcase for damages was instituted by Rosita Sebastian Vda. de Galvez, heir ofthe victim, against Lita Enterprises, Inc., as registered owner of thetaxicab. In the latter case, Civil Case No. 72067 of the Court of First Instance ofManila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the

amount of P25,000.00 and P7,000.00 for attorney's fees.This decision having become final, a writ of execution was issued. One of thevehicles of respondent spouses with Engine No. 2R- 914472 was levied upon andsold at public auction for P2,150.00 to one Sonnie Cortez, the highest bidder. Another carwith Engine No. 2R-915036 was likewise levied upon and sold at public auction for P8,000.00to a certain Mr. Lopez. LibLex

Thereafter, in March 1973, respondent Nicasio Ocampo decided to register histaxicabs in his name. He requested the manager of petitioner Lita Enterprises,Inc. to turn over the registration papers to him, but the latter allegedly refused.Hence, he and his wife filed a complaint against Lita Enterprises, Inc., RositaSebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff ofManila for reconveyance of motor vehicles with damages, docketed as Civil Case No.

90988 of the Court of First Instance of Manila. Trial on the merits ensued and on July 22,1975, the said court rendered a decision, the dispositive portion of which reads:

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

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

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

Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was

denied by the court a quo on October 27, 1975. (p. 121, Ibid.)

On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate AppellateCourt modified the decision by including as part of its dispositive portion anotherparagraph, to wit:

"In the event the condition of the three Toyota cars will no longer serve the purpose of thedeed of conveyance because of their deterioration, or because they are no longerserviceable, or because they are no longer available, the Lita Enterprises, Inc. is ordered


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to pay the plaintiffs their fair market value as of July 22, 1975." (Annex "D", p. 167,Rollo.).

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

"1. . . .

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

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

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

Unquestionably, the parties herein operated under an arrangement, commonly known as the"kabit system", whereby a person who has been granted a certificate ofconvenience allows another person who owns motor vehicles to operate under

such franchise for a fee. A certificate of public convenience is a special privilegeconferred by the government. Abuse of this privilege by the grantees thereof cannot becountenanced. The "kabit system" has been identified as one of the root causes of thisprevalence of graft and corruption in the government transportation offices. In the words ofChief Justice Makalintal, 1 "this is a pernicious system that cannot be too severelycondemned. It constitutes an imposition upon the good faith of the government." Cdpr

Although not outrightly penalized as a criminal offense, the "kabit system" is invariablyrecognized as being contrary to public policy and, therefore, void and inexistent underArticle 1409 of the Civil Code. It is a fundamental principle that the court will not aid eitherparty to enforce an illegal contract, but will leave them both where it finds them. Upon thispremise, it was flagrant error on the part of both the trial and appellate courts to haveaccorded the parties relief from their predicament. Article 1412 of the Civil Code deniesthem such aid. It provides:

"ART. 1412. If the act in which the unlawful or forbidden cause consists does notconstitute a criminal offense, the following rules shall be observed:

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

The defect of inexistence of a contract is permanent and incurable, and cannot becured by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "themere lapse of time cannot give efficacy to contracts that are null and void."

The principle of in pari delicto is well known not only in this jurisdiction but also in the UnitedStates where common law prevails. Under American jurisdiction, the doctrina is stated thus:"The proposition is universal that no action arises, in equity or at law, from an illegal

contract; no suit can be maintained for its specific performance, or to recover the propertyagreed to be sold or delivered, or damages for its violation. The rule has sometimesbeen laid down as though it was equally universal, that where the parties are inpari delicto, no affirmative relief of any kind will be given to one against theother." 3 Although certain exceptions to the rule are provided by law, We see no cogentreason why the full force of the rule should not be applied in the instant case. LLphil

WHEREFORE, all proceedings had in Civil Case No. 90988 entitle "Nicasio Ocampo andFrancisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court ofFirst Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P.


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Garcia, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-Appellant," of theIntermediate Appellate Court, as well as the decisions rendered therein are herebyannulled and set aside. No costs.

SO ORDERED.

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

Aquino, J ., took no

1st assignment transpo

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