24. G.R. No.

L-47822 December 22, 1988

PEDRO
DE
GUZMAN, petitioner,
CENDANA, respondents.

vs.

COURT

OF

APPEALS

and

ERNESTO

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal
in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring
such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling
the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with
cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that
service, respondent charged freight rates which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the
hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a
truck driven by respondent himself, while 600 cartons were placed on board the other truck 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 boxes never reached
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the
cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First
Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a
common carrier, and having failed to exercise the extraordinary diligence required of him by the law,
should be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that 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 1 finding private respondent to be a common
carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00
as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering
him a common carrier; in finding that he had habitually offered trucking services to the public; in not
exempting him from liability on the ground of force majeure; and in ordering him to pay damages and
attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been
engaged
in
transporting
return
loads
of
freight
"as
a
casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to
this Court by way of a Petition for Review assigning as errors the following 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 of whether or not private respondent Ernesto Cendana may, under the
facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water,
or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (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 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide 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 Public Service Act, "public service" includes:
... 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 or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, 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 broadcasting stations and other similar public services. ...
(Emphasis supplied)
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
back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even
though private respondent'sprincipal 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 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.
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 are held to a very
high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of
passengers. The specific import of extraordinary diligence in the care of goods transported by a common
carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and
7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same 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 deterioration which
exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force majeure fall within the scope of
Article 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
to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in
the instant case the hijacking of the carrier's truck does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. It would follow, 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 as common carrier is presumed to have been at fault or to have acted negligently.
This presumption, however, may be overthrown by proof of extraordinary diligence on the part of
private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should
have hired a security guard presumably 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 of extraordinary diligence
required private respondent to retain a security guard to ride with the truck and to engage brigands
in a firelight at the risk of his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or
armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733,
given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4,
5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of
robbers who donot act with grave or irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss, destruction
or deterioration 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 be allowed to
divest or to diminish such responsibility even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence
or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance
over the goods carried are reached where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence or force."
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 band was 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 Oria and one John Doe." There, the accused
were charged with willfully and unlawfully taking and carrying away with them the second truck,
driven by Manuel Estrada and loaded with the 600 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 not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers were
armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver
and his helper, detaining them for several days and later releasing them in another province (in
Zambales). The hijacked truck was subsequently found by the police in Quezon City. The Court of First
Instance convicted all the accused of robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite
beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary
to recall that even common carriers are not made absolute insurers against all risks of travel and of
transport of goods, and are not held liable for acts or events which cannot be foreseen or are
inevitable, provided that they shall have complied with the rigorous standard of extraordinary
diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana
is not liable for the value of the undelivered merchandise which 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.

25. [G.R. No. 125817. January 16, 2002]

ABELARDO LIM and ESMADITO GUNNABAN, petitioners, vs. COURT

OF APPEALS and DONATO H. GONZALES, respondents.
When a passenger jeepney covered by a certificate of public convenience is
sold to another who continues to operate it under the same certificate of public
convenience under the so-called kabit system, and in the course thereof the
vehicle meets an accident through the fault of another vehicle, may the new
owner sue for damages against the erring vehicle? Otherwise stated, does the
new owner have any legal personality to bring the action, or is he the real
party in interest in the suit, despite the fact that he is not the registered owner
under the certificate of public convenience?
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu
passenger jeepney from Gomercino Vallarta, holder of a certificate of public
convenience for the operation of public utility vehicles plying the MonumentoBulacan route. While private respondent Gonzales continued offering the
jeepney for public transport services he did not have the registration of the
vehicle transferred in his name nor did he secure for himself a certificate of
public convenience for its operation. Thus Vallarta remained on record as its
registered owner and operator.
On 22 July 1990, while the jeepney was running northbound along the North
Diversion Road somewhere in Meycauayan, Bulacan, it collided with a tenwheeler-truck owned by petitioner Abelardo Lim and driven by his co-petitioner
Esmadito Gunnaban. Gunnaban owned responsibility for the accident,
explaining that while he was traveling towards Manila the truck suddenly lost
its brakes. To avoid colliding with another vehicle, he swerved to the left until

he reached the center island. However, as the center island eventually came to
an end, he veered farther to the left until he smashed into a Ferroza
automobile, and later, into private respondent's passenger jeepney driven by
one Virgilio Gonzales. The impact caused severe damage to both the Ferroza
and the passenger jeepney and left one (1) passenger dead and many others
wounded.
Petitioner Lim shouldered the costs for hospitalization of the wounded,
compensated the heirs of the deceased passenger, and had the Ferroza
restored to good condition.He also negotiated with private respondent and
offered to have the passenger jeepney repaired at his shop. Private respondent
however did not accept the offer so Lim offered him P20,000.00, the
assessment of the damage as estimated by his chief mechanic. Again,
petitioner Lim's proposition was rejected; instead, private respondent
demanded a brand-new jeep or the amount of P236,000.00. Lim increased his
bid to P40,000.00 but private respondent was unyielding. Under the
circumstances, negotiations had to be abandoned; hence, the filing of the
complaint for damages by private respondent against petitioners.
In his answer Lim denied liability by contending that he exercised due
diligence in the selection and supervision of his employees. He further asserted
that as the jeepney was registered in Vallartas name, it was Vallarta and not
private respondent who was the real party in interest. For his part, petitioner
Gunnaban averred that the accident was a fortuitous event which was beyond
his control.
[1]

[2]

Meanwhile, the damaged passenger jeepney was left by the roadside to

corrode and decay. Private respondent explained that although he wanted to
take his jeepney home he had no capability, financial or otherwise, to tow the
damaged vehicle.
[3]

The main point of contention between the parties related to the amount of
damages due private respondent. Private respondent Gonzales averred that
per estimate made by an automobile repair shop he would have to
spend P236,000.00 to restore his jeepney to its original condition. On the
other hand, petitioners insisted that they could have the vehicle repaired
for P20,000.00.
[4]

[5]

On 1 October 1993 the trial court upheld private respondent's claim and
awarded him P236,000.00 with legal interest from 22 July 1990 as
compensatory damages andP30,000.00 as attorney's fees. In support of its

decision, the trial court ratiocinated that as vendee and current owner of the
passenger jeepney private respondent stood for all intents and purposes as the
real party in interest. Even Vallarta himself supported private respondent's
assertion of interest over the jeepney for, when he was called to testify, he
dispossessed himself of any claim or pretension on the property. Gunnaban
was found by the trial court to have caused the accident since he panicked in
the face of an emergency which was rather palpable from his act of directing
his vehicle to a perilous streak down the fast lane of the superhighway then
across the island and ultimately to the opposite lane where it collided with the
jeepney.
On the other hand, petitioner Lim's liability for Gunnaban's negligence was
premised on his want of diligence in supervising his employees. It was
admitted during trial that Gunnaban doubled as mechanic of the ill-fated truck
despite the fact that he was neither tutored nor trained to handle such task.
[6]

Forthwith, petitioners appealed to the Court of Appeals which, on 17 July

1996, affirmed the decision of the trial court. In upholding the decision of the
court a quo the appeals court concluded that while an operator under
the kabit system could not sue without joining the registered owner of the
vehicle as his principal, equity demanded that the present case be made an
exception. Hence this petition.
[7]

It is petitioners' contention that the Court of Appeals erred in sustaining the

decision of the trial court despite their opposition to the well-established
doctrine that an operator of a vehicle continues to be its operator as long as he
remains the operator of record. According to petitioners, to recognize an
operator under the kabit system as the real party in interest and to
countenance his claim for damages is utterly subversive of public
policy. Petitioners further contend that inasmuch as the passenger jeepney was
purchased by private respondent for only P30,000.00, an award of P236,000.00
is inconceivably large and would amount to unjust enrichment.
[8]

Petitioners' attempt to illustrate that an affirmance of the appealed decision

could be supportive of the pernicious kabit system does not persuade. Their
labored efforts to demonstrate how the questioned rulings of the courts a
quo are diametrically opposed to the policy of the law requiring operators of
public utility vehicles to secure a certificate of public convenience for their
operation is quite unavailing.

The kabit system is an arrangement whereby a person who has been

granted a certificate of public convenience allows other persons who own
motor vehicles to operate them under his license, sometimes for a fee or
percentage of the earnings. Although the parties to such an agreement are
not outrightly penalized by law, the kabit system is invariably recognized as
being contrary to public policy and therefore void and inexistent under Art.
1409 of the Civil Code.
[9]

In the early case of Dizon v. Octavio the Court explained that one of the
primary factors considered in the granting of a certificate of public
convenience for the business of public transportation is the financial capacity
of the holder of the license, so that liabilities arising from accidents may be
duly compensated. The kabit system renders illusory such purpose and, worse,
may still be availed of by the grantee to escape civil liability caused by a
negligent use of a vehicle owned by another and operated under his license.If
a registered owner is allowed to escape liability by proving who the supposed
owner of the vehicle is, it would be easy for him to transfer the subject vehicle
to another who possesses no property with which to respond financially for the
damage done. Thus, for the safety of passengers and the public who may have
been wronged and deceived through the baneful kabit system, the registered
owner of the vehicle is not allowed to prove that another person has become
the owner so that he may be thereby relieved of responsibility. Subsequent
cases affirm such basic doctrine.
[10]

[11]

It would seem then that the thrust of the law in enjoining the kabit system
is not so much as to penalize the parties but to identify the person upon whom
responsibility may be fixed in case of an accident with the end view of
protecting the riding public. The policy therefore loses its force if the public at
large is not deceived, much less involved.
In the present case it is at once apparent that the evil sought to be
prevented in enjoining the kabit system does not exist. First, neither of the
parties to the pernicious kabitsystem is being held liable for damages. Second,
the case arose from the negligence of another vehicle in using the public road
to whom no representation, or misrepresentation, as regards the ownership
and operation of the passenger jeepney was made and to whom no such
representation, or misrepresentation, was necessary.Thus it cannot be said that
private respondent Gonzales and the registered owner of the jeepney were in
estoppel for leading the public to believe that the jeepney belonged to the
registered owner. Third, the riding public was not bothered nor inconvenienced

at the very least by the illegal arrangement. On the contrary, it was private
respondent himself who had been wronged and was seeking compensation for
the damage done to him. Certainly, it would be the height of inequity to deny
him his right.
In light of the foregoing, it is evident that private respondent has the right
to proceed against petitioners for the damage caused on his passenger
jeepney as well as on his business. Any effort then to frustrate his claim of
damages by the ingenuity with which petitioners framed the issue should be
discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the sole design of the
courts to provide for adequate compensation by putting the plaintiff in the
same financial position he was in prior to the tort. It is a fundamental principle
in the law on damages that a defendant cannot be held liable in damages for
more than the actual loss which he has inflicted and that a plaintiff is entitled
to no more than the just and adequate compensation for the injury
suffered. His recovery is, in the absence of circumstances giving rise to an
allowance of punitive damages, limited to a fair compensation for the harm
done. The law will not put him in a position better than where he should be in
had not the wrong happened.
[12]

In the present case, petitioners insist that as the passenger jeepney was
purchased in 1982 for only P30,000.00 to award damages considerably greater
than this amount would be improper and unjustified. Petitioners are at best
reminded that indemnification for damages comprehends not only the value of
the loss suffered but also that of the profits which the obligee failed to
obtain. In other words, indemnification for damages is not limited to damnum
emergens or actual loss but extends to lucrum cessans or the amount of profit
lost.
[13]

Had private respondent's jeepney not met an accident it could reasonably

be expected that it would have continued earning from the business in which it
was engaged.Private respondent avers that he derives an average income
of P300.00 per day from his passenger jeepney and this earning was included
in the award of damages made by the trial court and upheld by the appeals
court. The award therefore of P236,000.00 as compensatory damages is not
beyond reason nor speculative as it is based on a reasonable estimate of the
total damage suffered by private respondent, i.e. damage wrought upon his
jeepney and the income lost from his transportation business. Petitioners for

their part did not offer any substantive evidence to refute the estimate made
by the courts a quo.
However, we are constrained to depart from the conclusion of the lower
courts that upon the award of compensatory damages legal interest should be
imposed beginning 22 July 1990, i.e. the date of the accident. Upon the
provisions of Art. 2213 of the Civil Code, interest "cannot be recovered upon
unliquidated claims or damages, except when the demand can be established
with reasonable certainty." It is axiomatic that if the suit were for damages,
unliquidated and not known until definitely ascertained, assessed and
determined by the courts after proof, interest at the rate of six percent (6%)
per annum should be from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to be reasonably
ascertained).
[14]

In this case, the matter was not a liquidated obligation as the assessment of
the damage on the vehicle was heavily debated upon by the parties with
private respondent's demand for P236,000.00 being refuted by petitioners who
argue that they could have the vehicle repaired easily for P20,000.00. In fine,
the amount due private respondent was not a liquidated account that was
already demandable and payable.
One last word. We have observed that private respondent left his passenger
jeepney by the roadside at the mercy of the elements. Article 2203 of the Civil
Code exhorts parties suffering from loss or injury to exercise the diligence of a
good father of a family to minimize the damages resulting from the act or
omission in question. One who is injured then by the wrongful or negligent act
of another should exercise reasonable care and diligence to minimize the
resulting damage. Anyway, he can recover from the wrongdoer money lost in
reasonable efforts to preserve the property injured and for injuries incurred in
attempting to prevent damage to it.
[15]

However we sadly note that in the present case petitioners failed to offer in
evidence the estimated amount of the damage caused by private respondent's
unconcern towards the damaged vehicle. It is the burden of petitioners to show
satisfactorily not only that the injured party could have mitigated his damages
but also the amount thereof; failing in this regard, the amount of damages
awarded cannot be proportionately reduced.
WHEREFORE, the questioned Decision awarding private respondent
Donato Gonzales P236,000.00 with legal interest from 22 July 1990 as

compensatory
damages
andP30,000.00
as
attorney's
fees
is
MODIFIED. Interest at the rate of six percent (6%) per annum shall be
computed from the time the judgment of the lower court is made until the
finality of this Decision. If the adjudged principal and interest remain unpaid
thereafter, the interest shall be twelve percent (12%) per annum computed
from the time judgment becomes final and executory until it is fully satisfied.
Costs against petitioners.