TRANSPO LAW CLASS # 3

weather despite PAGASA’s 24-hour public weather forecasts and tropical

cyclone warnings for shipping on the day of the accident. The elements of
Sps. Cruz v. Sun Holidays | 29 June 2010 | Carpio Morales, J. fortuitous event was also not met in this case.

garcia

FACTS: Ruelito Cruz and his wife died from M/B Coco Beach Boat that
capsized en route from Puerto Galera to Batangas. The complaint for A.F SANCHEZ BROKERAGE V CA | G.R. No. 147079 | December 21,
damages was brought to court by the parents of Ruelito Cruz. 2004 | Carpio Morales, J.

Ruelito Cruz and his wife paid for a tour package-contract with the FACTS: On July 8, 1992, Wyeth-Pharma GMBH shipped on board an
responded that included transportation to and from the Resort and the aircraft of KLM Royal Dutch Airlines at Germany oral contraceptives for
point of departure in Batangas. On Sep 11, 2000, amid warnings from delivery to Manila in favor of the consignee, Wyeth-Suaco Laboratories,
PAGASA of a typhoon, Ruelito and 25 other resort guests trekked to the Inc. The tablets were placed in cartons packed together in one aluminum
other side of the Coco Beach mountain that was sheltered from the wind container. Wyeth-Suaco insured the shipment against all risks with FGU
where they boarded the M/B Coco Beach III which was to ferry them to Insurance.
Batangas. While sailing away from Puerto Galera, the waves for more
unwieldy and the boat capsized. Eight passengers died. Upon arrival of the shipment at NAIA, it was discharged “without
exception” and delivered to the warehouse of the Philippine Skylanders,
Respondent’s defense is that they are not a common carrier and that it Inc. for safekeeping. In order to secure the release of the cargoes,
was a fortuitous event that was the cause of the incident. Respondent’s Wyeth-Suaco engaged the services of Sanchez Brokerage which had
defense is that they are not a common carrier because the boats are not been its licensed broker since 1984. As its customs broker, Sanchez
available to the general public as they only ferry Resort guests and crew Brokerage calculates and pays the customs duties, taxes and storage
members; that it was merely ancillary to their business. fees for the cargo and thereafter delivers it to Wyeth-Suaco.

ISSUE: W/N Sun Holiday’s M/B Coco Beach is a common carrier? On July 29, 1992, Morales and Mendoza, representatives of Sanchez
Brokerage, paid PSI storage fee amounting to P8,572.35, a receipt for
RULING: Yes; M/B Coco Beach is a common carrier and Sun Holiday is which was issued. On the receipt, another representative of Sanchez
liable. Art 1732 provides the definition of Common carriers and it makes Brokerage, M. Sison, acknowledged that ​he received the cargoes
no distinction between one whose principal business activity is the consisting of three pieces in good condition.
carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a “sideline”). The intention of Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon
the law is not to make any distinctions because otherwise, there is not Laboratories Inc. for quality control check. On July 31, 1992, Ronnie
telling how many other distinctions may be invented by unscrupulous Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the
businessmen engaged in the carrying of persons and goods in order to cargoes. Upon inspection, however, he discovered that 44 cartons were in
avoid liability. bad order. He thus placed a note above his signature on the delivery
receipts that 44 cartons were in bad order. The remaining 160 cartons
Common carriers are bound to observe extraordinary diligence that when were accepted as complete and in good order. Alonzo, along with Likas,
a passenger dies, it is presumed that the common carrier is at fault. This thus prepared and signed a survey report stating that 44 cartons were
statutory presumption may only be overcome by evidence that the carrier “wetted.”
exercised extraordinary diligence. In this case, Sun Holiday failed to
exercise extraordinary diligence because it chose to brave the stormy On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction
Report confirming that packs of tablets were heavily damaged with water goods for pecuniary consideration.
and emitted foul smell. The next day. Wyeth-Suaco issued a Notice of
Materials Rejection on the ground that they were “delivered to Hizon In this light, petitioner as a common carrier is mandated to observe, under
Laboratories with heavy water damaged causing the cartons to sagged Art. 1733 of the Civil Code, extraordinary diligence in the vigilance over
emitting a foul order and easily attracted flies.” the goods it transports according to all the circumstances of each case. In
the case at bar, it was established that petitioner received the cargoes
Wyeth-Suaco later demanded from Sanchez brokerage the payment of from the warehouse in NAIA in good order and condition; and that upon
P191,384.25 representing the value of its loss arising from the damaged delivery by petitioner to Hizon Laboratories, some of the cargoes were
tablets. Sanchez Brokerage refused to heed the demand. Wyeth-Suaco found to be in bad order.
filed an insurance claim against FGU Insurance which paid Wyeth-Suaco
the amount of P181,431.49 in settlement of its claim. While Art. 1734 of the Civil Code exempts a common carrier from liability
if the loss or damage is due to the character of the goods or defects in the
On demand by FGU Insurance, Sanchez Brokerage disclaimed liability for packing or in the containers, the rule is that if the improper packing is
the damaged goods, positing that the damage was due to improper and known to the carrier or his employees or is apparent upon ordinary
insufficient export packaging; that when the sealed containers were observation, but he nevertheless accepts the same without protest or
opened outside the warehouse, it was discovered that some of the loose exception notwithstanding such condition, he is not relieved of liability for
cartons were wet, prompting its representative to inform the Import-Export the resulting damage. If the claim of petitioner that some of the cartons
Assistant of Wyeth-Suaco about the condition of the cargoes but that the were already damaged upon delivery to it were true, then it should
latter advised to still deliver them to Hizon Laboratories where an adjuster naturally have received the cargo under protest or with reservations duly
would assess the damage. Hence, the filing by FGU Insurance of a noted on the receipt. But it made no such protest or reservation.
complaint for damages before the RTC.
Since petitioner received all the cargoes in good order and condition at
The trial court dismissed the complaint, holding that the Survey Report the time they were turned over by the warehouseman, and upon delivery
prepared by the Elite Surveyors is bereft of any evidentiary support and a to Hizon Laboratories a portion thereof was found to be in bad order, it
mere product of pure guesswork. On appeal, ​the CA reversed the was incumbent on petitioner to prove that it exercised extraordinary
decision of the trial court, holding that Sanchez Brokerage engaged not diligence in the carriage of the goods. It did not however. ​Hence, its
only in the business of customs brokerage but also in the transportation presumed negligence under Art. 1735 of the Civil Code remains
and delivery of the cargo of its clients, hence, a common carrier within the unrebutted.
context of Art. 1732 of the New Civil Code.

ISSUE: W/N petitioner is a common carrier within the context of Art. 1732
CRISOSTOMO V CA GR No. 138334 August 25, 2003
RULING: The appellate court did not err in finding petitioner, a customs
broker, to be also a common carrier.
FACTS: Petitioner Estela L. Crisostomo contracted the services of
respondent Caravan Travel and Tours International, Inc. (Caravan) to
Art. 1732. Common carriers are persons, corporations, firms or
arrange and facilitate her booking, ticketing and accommodation in a tour
associations engaged in the business of carrying or transporting
dubbed “Jewels of Europe”. Pursuant to said contract, Meriam Menor,
passengers or goods or both, by land, water, or air, for compensation,
who is also the niece of Crisostomo, went to the latter’s residence to
offering their services to the public.
deliver the travel documents and plane tickets. Crisostomo, in turn,
gave Menor the full payment for the package tour. Without checking her
Art. 1732 does not distinguish between one whose principal business
travel documents, Crisostomo went to NAIA. However, she discovered
activity is the carrying of goods and one who does such carrying only as
that the flight she was supposed to take had already departed the
an ancillary activity. It suffices that petitioner undertakes to deliver the
previous day. She thus called up Menor to complain. RULING: No. A travel agency is not an entity engaged in the business of
transporting either passengers or goods and is therefore, neither a private
Subsequently, Menor prevailed upon Crisostomo to take another tour – nor a common carrier. By definition, a contract of carriage or
the “British Pageant” to which Crisostomo was asked to pay once again. transportation is one whereby a certain person or association of persons
Upon Crisostomo’s return from Europe, she demanded from Caravan the obligate themselves to transport persons, things, or news from one
reimbursement of P61,421.70, representing the difference between the place to another for a fixed price. Such person or association of
sum she paid for “Jewels of Europe” and the amount she owed Caravan persons are regarded as carriers and are classified as private or
for the “British Pageant” tour. Despite several demands, Caravan refused special carriers and common or public carriers. A common carrier is
to reimburse the amount, contending that the same was non-refundable. defined under Article 1732 of the Civil Code as persons,
corporations, firms or associations engaged in the business of
Crisostomo thus filed a case. Crisostomo alleged that her failure to join carrying or transporting passengers or goods or both, by land, water or
“Jewels of Europe” was due to Caravan’s fault since it did not clearly air, for compensation, offering their services to the public.
indicate the departure date on the plane ticket. Caravan was also
negligent in informing her of the wrong flight schedule through its It is obvious from the above definition that respondent is not an
employee Menor. Caravan insisted that Crisostomo was informed of entity engaged in the business of transporting either passengers or
the correct departure date, which was clearly and legibly printed on goods. Respondent did not undertake to transport petitioner from
the plane ticket. The travel documents were given two days ahead of the one place to another since its covenant with its customers is simply
scheduled trip.Crisostomo had only herself to blame for missing the flight, to make travel arrangements in their behalf. Respondent’s services as
as she did not bother to read or confirm her flight schedule as printed on a travel agency include procuring tickets and facilitating travel permits or
the ticket. visas as well as booking customers for tours. The object of petitioner’s
contractual relation with respondent is the latter’s service of arranging
RTC: Caravan was negligent in erroneously advising Crisostomo of and facilitating petitioner’s booking, ticketing and accommodation in the
the wrong date. Crisostomo incurred contributory negligence for not package tour. In contrast, the object of a contract of carriage is the
checking her travel documents.Caravan should reimburse Crisostomo but transportation of passengers or goods. It is in this sense that the contract
with deductions due to her contributory negligence. between the parties in this case was an ordinary one for services and not
one of carriage.
CA: Both parties were at fault. However, Crisostomo is more negligent
because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so,
she is not entitled to any form of damages. De Guzman v. Court of Appeals
G.R. No. L-47822, 22 December 1988, 186 SCRA 612
Crisostomo appealed to SC. She contended that Caravan did not observe
the standard of care required of a common carrier when it informed her FACTS: Respondent Ernesto Cendaña, a junk dealer, was engaged in
wrongly of the flight schedule. She could not be deemed more negligent buying up used bottles and scrap metal in Pangasinan. Upon gathering
than Caravan since the latter is required by law to exercise sufficient quantities of such scrap material, respondent would bring such
extraordinary diligence in the fulfillment of its obligation. If she were material to Manila for resale. He utilized two (2) six-wheeler trucks which
negligent at all, the same is merely contributory and not the proximate he owned for hauling the material to Manila. On the return trip to
cause of the damage she suffered. Pangasinan, respondent would load his vehicles with cargo which various
merchants wanted delivered to differing establishments in Pangasinan.
ISSUE: Whether or not a travel agency is a common carrier and is For that service, respondent charged freight rates which were commonly
therefore required to exercise extraordinary diligence. lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman, a merchant between a person or enterprise offering transportation service on a
and authorized dealer of General Milk Company (Philippines), Inc. in regular or scheduled basis and one offering such service on an
Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 occasional, episodic or unscheduled basis. Neither does Article 1732
cartons of Liberty filled milk from a warehouse of General Milk in Makati, distinguish between a carrier offering its services to the general public i.e.,
Rizal, to petitioner’s establishment in Urdaneta on or before 4 December the general community or population, and one who offers services or
1970. Accordingly, on 1 December 1970, respondent loaded in Makati the solicits business only from a narrow segment of the general population.
merchandise on to his trucks: 150 cartons were loaded on a truck driven We think that Article 1733 deliberately refrained from making such
by respondent himself; while 600 cartons were placed on board the other distinctions.
truck which was driven by Manuel Estrada, respondent’s driver and
employee. The concept of “common carrier” under Art. 1732 may be seen to coincide
neatly with the notion of “public service” under the Public Service Act
Only 150 boxes of Liberty filled milk were delivered to petitioner. The which states in section 13, par b, public service includes: xxx every
other 600 boxes never reached petitioner, since the truck which carried person that now or hereafter may own, operate, manage, or control in the
these boxes was hijacked somewhere along the MacArthur Highway in Philippines, for hire or compensation, with general or limited clientele,
Paniqui, Tarlac, by armed men who took with them the truck, its driver, his whether permanent, occasional or accidental, and done for general
helper and the cargo. business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both,
On 6 January 1971, petitioner commenced action against private with or without fixed route and whatever may be its classification, freight
respondent in the Court of First Instance of Pangasinan, demanding or carrier service of any class, express service, steamboat, or steamship
payment of P22,150.00, the claimed value of the lost merchandise, plus line, pontines, ferries and water craft, engaged in the transportation of
damages and attorney’s fees. On December 10, 1975, the trial court passengers or freight or both, shipyard, marine repair shop, wharf or
rendered a Decision finding private respondent to be a common carrier dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas,
and holding him liable for the value of the undelivered goods (P22,150.00) electric light, heat and power, water supply and power petroleum,
as well as for P4,000.00 as damages and P2,000.00 as attorney’s fees. sewerage system, wire or wireless communications systems, wire or
The Court of Appeals reversed the judgment of the trial court and held wireless broadcasting stations and other similar public services. Xxx
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 Further, a certificate of public convenience is not a requisite for the
common carrier. incurring of liability under the Civil Code provisions governing common
carriers. That liability arises the moment a person or firm acts as a
ISSUES: common carrier, without regard to whether or not such carrier has also
1. Whether or not the private respondent is considered a common carrier. complied with the requirements of the applicable regulatory statute and
2. Whether or not the hijacking of respondent’s truck was force majeure. implementing regulations and has been granted a certificate of public
convenience or other franchise.
RULING:
1. The Civil Code defines common carriers in the following terms: 2. The hijacking of the carrier’s truck does not fall within any of the five (5)
Article 1732. Common carriers are persons, corporations, firms, or categories of exempting causes in Art. 1734. Hence, the private
associations engaged in the business of carrying or transporting respondent as common carrier is presumed to have been at fault or to
passengers or goods or both, by land, water, or air for compensation, have acted negligently. This presumption, however, may be overthrown
offering their services to the public. by proof of extraordinary diligence on the part of private respondent.
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who However, under Article 1745 (6) above, a common carrier is held
does such carrying only as an ancillary activity (in local idiom, as a responsible and will not be allowed to divest or to diminish such
sideline). Article 1732 also carefully avoids making any distinction responsibility• even for acts of strangers like thieves or robbers, except
where such thieves or robbers in fact acted with grave or irresistible Appeals.
threat, violence or force. The court believes and so holds that the limits of
the duty of extraordinary diligence in the vigilance over the goods carried ISSUE: Whether petitioner, engaged in pipeline business, is considered
are reached where the goods are lost as a result of a robbery which is as a “common carrier” and therefore entitled to a tax exemption
attended by grave or irresistible threat, violence or force.
RULING: Yes. ​A "common carrier" may be defined, broadly, as one who
In the instant case, armed men held up the second truck owned by private holds himself out to the public as engaged in the business of transporting
respondent which carried petitioner’s cargo. The robbers not only took persons or property from place to place, for compensation, offering his
away the truck and its cargo but also kidnapped the driver and his helper, services to the public generally.
detaining them for several days and later releasing them in another
province (in Zambales). In these circumstances, we hold that the Art. 1732 of the Civil Code defines a "common carrier" as "any person,
occurrence of the loss must reasonably be regarded as quite beyond the corporation, firm or association engaged in the business of carrying or
control of the common carrier and properly regarded as a fortuitous event. transporting passengers or goods or both, by land, water, or air, for
It is necessary to recall that even common carriers are not made absolute compensation, offering their services to the public."
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, The test for determining whether a party is a common carrier of goods is:
provided that they shall have complied with the rigorous standard of
extraordinary diligence. 1. He must be engaged in the business of carrying goods for others as a
public employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation;
FIRST PHIL. INDUSTRIAL V CA
2. He must undertake to carry goods of the kind to which his business is
santos confined;

FACTS: ​Petitioner FPIC is a grantee of a pipeline concession under 3. He must undertake to carry by the method by which his business is
Republic Act No. 387, as amended, to contract, install and operate oil conducted and over his established roads; and
pipelines. The original pipeline concession was granted in 1967 and
renewed by the Energy Regulatory Board in 1992. 4. The transportation must be for hire.

Sometime in January 1995, petitioner applied for mayor’s permit in Based on the above definitions and requirements, there is no doubt that
Batangas. However, the Treasurer required petitioner to pay a local tax petitioner is a common carrier. It is engaged in the business of
based on gross receipts amounting to P956,076.04. In order not to transporting or carrying goods, i.​ ​e.​ petroleum products, for hire as a public
hamper its operations, petitioner paid the taxes for the first quarter of employment. It undertakes to carry for all persons indifferently, that is, to
1993 amounting to P239,019.01 under protest. On January 20, 1994, all persons who choose to employ its services, and transports the goods
petitioner filed a letter-protest to the City Treasurer, claiming that it is by land and for compensation. The fact that petitioner has a limited
exempt from local tax since it is engaged in transportation business. The clientele does not exclude it from the definition of a common carrier.
respondent City Treasurer denied the protest, thus, petitioner filed a
complaint before the Regional Trial Court of Batangas for tax refund. As correctly pointed out by petitioner, the definition of "common carriers"
Respondents assert that pipelines are not included in the term “common in the Civil Code makes no distinction as to the means of transporting, as
carrier” which refers solely to ordinary carriers or motor vehicles. The trial long as it is by land, water or air. It does not provide that the
court dismissed the complaint, and such was affirmed by the Court of transportation of the passengers or goods should be by motor vehicle. In
fact, in the United States, oil pipe line operators are considered common declaration of ownership and registration. It, therefore, held that the
carriers. defendant-appellant is liable because he cannot be permitted to repudiate
his own declaration.
Petitioner is already paying three (3%) percent common carrier's tax on its
gross sales/earnings under the National Internal Revenue Code. To tax ISSUE: WoN Jepte should be liable to Erezo for the injuries occasioned to
petitioner again on its gross receipts in its transportation of petroleum the latter because of the negligence of the driver even if he was no longer
business would defeat the purpose of the Local Government Code. the owner of the vehicle at the time of the damage (because he had
previously sold it to another)

RULING: The registered owner, the defendant-appellant herein, is

primarily responsible for the damage caused to the vehicle of the
plaintiff-appellee, but he (defendant-appellant) has a right to be
GAUDIOSO EREZO, ET AL vs. AGUEDO JEPTE, | G.R. No. L-9605 indemnified by the real or actual owner of the amount that he may be
September 30, 1957 | sichon required to pay as damage for the injury caused to the plaintiff-appellant
The Revised Motor Vehicle Law provides that no vehicle may be used or
FACTS: Defendant-appellant is the registered owner of a six by six truck operated upon any public highway unless the same is properly registered.
bearing plate No. TC-1253. On August, 9, 1949, while the same was Not only are vehicles to be registered and that no motor vehicles are to be
being driven by Rodolfo Espino y Garcia, it collided with a taxicab at the used or operated without being properly registered for the current year,
intersection of San Andres and Dakota Streets, Manila. As the truck went but that dealers in motor vehicles shall furnish the Motor Vehicles Office a
off the street, it hit Ernesto Erezo and another, and the former suffered report showing the name and address of each purchaser of motor vehicle
injuries, as a result of which he died. The driver was prosecuted for during the previous month and the manufacturer's serial number and
homicide through reckless negligence. motor number.
The accused pleaded guilty and was sentenced to suffer imprisonment Registration is required not to make said registration the operative act by
and to pay the heirs of Ernesto Erezo the sum of P3,000. As the amount which ownership in vehicles is transferred, as in land registration cases,
of the judgment could not be enforced against him, plaintiff brought this because the administrative proceeding of registration does not bear any
action against the registered owner of the truck, the defendant-appellant. essential relation to the contract of sale between the parties, but to permit
the use and operation of the vehicle upon any public.
The defendant does not deny at the time of the fatal accident the cargo
truck driven by Rodolfo Espino y Garcia was registered in his name. He, The main aim of motor vehicle registration is to identify the owner so that
however, claims that the vehicle belonged to the Port Brokerage, of which if any accident happens, or that any damage or injury is caused by the
he was the broker at the time of the accident. He explained, and his vehicles on the public highways, responsibility therefore can be fixed on a
explanation was corroborated by Policarpio Franco, the manager of the definite individual, the registered owner.
corporation, that the trucks of the corporation were registered in his name
as a convenient arrangement so as to enable the corporation to pay the A registered owner who has already sold or transferred a vehicle has the
registration fee with his backpay as a pre-war government employee. recourse to a third-party complaint, in the same action brought against
Franco, however, admitted that the arrangement was not known to the him to recover for the damage or injury done, against the vendee or
Motor Vehicle Office. transferee of the vehicle.
The trial court held that as the defendant-appellant represented himself to
be the owner of the truck and the Motor Vehicle Office, relying on his
representation, registered the vehicles in his name, the Government and
all persons affected by the representation had the right to rely on his LIM V CA
young Court of Appeals affirmed the decision concluding that while the operator
was working under the kabit system, equity demanded that the present
FACTS: case may be made an exception.
Donato Gonzales purchased an Isuzu passenger jeepney from
Gomercino Vallarta, holder of a certificate of public convenience for the ISSUE:
operation of public utility vehicles plying the Monumento-Bulacan route. Whether Gonzales is a real party in interest even if he is working under
the kabit system? ​YES
While private respondent Gonzales continued offering the jeepney for
public transport services, he did not have the registration of the vehicle RULING:
transferred in his name nor did he secure for himself a certificate of public The evil sought to be prevented by the prohibition against the kabit
convenience for its operation. Thus vallarta remained on record as tis system is not present in the case.
registered owner and operator.
Purpose of liability under the kabit system is to identify the person to be
While jeepney was running northbound along the North Diversion Road held liable by passengers who are injured by those operating under such
somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler truck system. Since Gonzales, was not at fault in the present case, he is the
of herein petitioners Lim and Gunnaban. real party in interest.

Gunnaban owned responsibility for the accident, explaining that while he

was traveling towards Manila the truck suddenly lost its brakes. To avoid LITA ENTERPRISES V IAC | 27 Apr 1984
collision he swerved the truck to the center island and veered to the left
until he smashed into a Ferroza automobile and later, into private garcia
respondent’s passenger jeepney. It left one passenger dead and others
wounded.
Facts: Spouses Nicasio Ocampo and Francisca Garcia (private
respondents) purchased in installment from the Delta Motor Sales
Lim shouldered the medical treatment of the wounded and compensated
Corporation five (5) Toyota Corona Standard cars to be used as taxi.
the heirs of the deceased. He also restored restored the damaged
Since they had no franchise to operate taxicabs, they contracted with
vehicles and negotiated to repair Gonzales’ jeep at Lim’s shop.
petitioner Lita Enterprise, Inc., through its representative Manuel
Alternatively, Lim offered P20,000 as compensation but Gonzales did not
Concordia, for the use of the latter’s certificate of public convenience for a
accept the offer and demanded a brand new jeep in the amount of
consideration of P1, 000.00 and a monthly rental of P200.00/taxicab unit.
P236,000. Lim increased the offer to P40,000
For the agreement to take effect, the cars were registered in the name of
Lita Enterprises, Inc. The possession, however, remains with spouses
Gonzales then filed a complaint for damages against petitioners. Lim
Ocampo and Garcia who operated and maintained the same under Acme
denied liability contending that he exercised due diligence in the selection
Taxi, petitioner’s trade name.
and supervision of his employees. Lim also alleged that Vallarta is the
real party in interest and not Gonzales because the latter was merely
working under the kabit system which is against public policy. A year later, one of the taxicabs, driven by their employee, Emeterio
Martin, collided with a motorcycle. Unfortunately the driver of the
Gunnaban, the driver, averred that the accident was a fortuitous event motorcycle, Florante Galvez died from the injuries it sustained.
which was beyond his control.

Trial Court ruled in favor of Gonzales because he was the real party in
interest.
 constitute a criminal offense, the following rules shall be observed: “when
Criminal case was filed against Emeterio Martin, while a civil case was the fault, is on the part of both contracting parties, neither may recover
filed by the heir of the victim against Lita Enterprises. In the decision of what he has given by virtue of the contract, or demand the performance of
the lower court Lita Enterprises was held liable for damages for the the other’s undertaking.”
amount of P25, 000.00 and P7, 000.00 for attorney’s fees.
The principle of in pari delicto is evident in this case. “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
A writ of execution for the decision followed, 2 of the cars of the property agreed to sold or delivered, or damages for its property agreed to
respondent’s spouses were levied and were sold to a public auction. be sold or delivered, or damages for its violation.” The parties in this case
are in pari delicto, therefore no affirmative relief can be granted to them.
On March 1973, respondent Ocampo decided to register his taxicabs in
his own name. The manager of petitioner refused to give him the
registration papers. Thus, making spouses file a complaint against
petitioner. In the decision, Lita Enterprise was ordered to return the three
certificate of registration not levied in the prior case. TEJA MARKETING v IAC and PEDRO NALE | G.R. No. L-65510 | March
9, 1987 | Paras, J.
Petitioner now prays that private respondent be held liable to pay the
FACTS: On May 9, 1975, Pedro Nale bought from the plaintiff a
amount they have given to the heir of Galvez. motorcycle with complete accessories and a sidecar in the total
consideration of P8,000. Downpayment of P1,700 with a promise that he
would pay the balance within 60 days. However, he failed to comply with
ISSUE: Whether or not petitioner can recover from private respondent, his promise and so upon his own request, the period of paying the
knowing they are in an arrangement known as “kabit system” for the balance was extended to one year in monthly installments until January
franchise of the taxi service? 1976, when he stopped paying anymore. There was a chattel mortgage
as a security, where it was made to show that it was first mortgaged to
RULING: “Kabit system” is defined as, when a person who has been Teja Marketing by Angel Jaucian, though Teja Marketing and Angel
granted a certificate of convenience allows another person who owns a Jaucian are one and the same. It was made to appear that way because
motor vehicle to operate under such franchise for a fee. This system is not Pedro had no franchise of his own and he attached the unit to the
penalized as a criminal offense but is recognized as one that is against plaintiff’s MCH Line. Also, Teja Marketing/Jaucian was to undertake the
public policy; therefore it is void and inexistent. yearly registration of the motorcycle. Lastly, the plaintiff explained also
that though the ownership of the motorcycle was already transferred to
It is fundamental that the court will not aid either of the party to enforce an Pedro, the vehicle was still mortgaged with the consent of the defendant
illegal contract, but will leave them both where it finds them. Upon this to the Rural Bank of Camaligan for the reason that all motorcycle
purchased from the plaintiff on credit was rediscounted with the bank.
premise, it was flagrant error on the part of both trial and appellate courts
to have accorded the parties relief from their predicament. Specifically Pedro does not deny the sale and its terms. He, however, claims that he
Article 1412 states that: was not hiding the motorcycle, as it was only being used for transporting
passengers and it kept on travelling from one place to another. Also, the
“If the act in which the unlawful or forbidden cause consists does not vehicle sold to him mortgaged by the plaintiff with the Rural Bank of
Camaligan without his consent and knowledge and the defendant was not prescription. The mere lapse of time cannot give efficacy to contracts that
even given a copy of the mortgage deed. Lastly, the plaintiff is to blame are null and void.
for not registering the motorcycle with the LTC and for not giving him the
registration papers inspite of demands made. “Ex pacto illicito non oritur actio” (No action arises out of illicit bargain) is
the time-honored maxim that must be applied to the parties in the case at
The lower court found that Pedro purchased the motorcycle particularly bar. Having entered into an illegal contract, neither can seek relief from
for the purpose of engaging and using the same in the transportation the courts, and each must bear the consequences of his acts.
business. For this purpose, the trimobile unit was attached to the plaintiff’s
transportation line who had the franchise, so much so that in the
registration certificate, the plaintiff appears to be the owner of the unit.
Furthermore, it appears to have been agreed, by both parties, that plaintiff
would undertake the yearly registration of the unit in question with the NOSTRDAMUS V DOMINGO ​G.R. No. 144274 September 20, 2004
LTC. Thus, for the registration of the unit for the year 1976, per
agreement, the defendant gave to the plaintiff the amount of P82 for its FACTS: Priscilla Domingo is the registered owner of a silver Mitsubishi
registration, as well as the insurance coverage of the unit. Lancer Car model 1980 with Plate No. NDW 781 with co-respondent
Leandro Luis Domingo as authorized driver. Petitioner Nostradamus
On appeal, CA held that the purchase for the said operation was Villanueva was then the registered “owner” of a green Mitsubishi Lancer
commonly known as the “kabit system.” Without the prior approval of the bearing Plate No. PHK 201.
Board of Transportation, it was an illegal transaction involving the fictitious
registration of the motor vehicle in the name of the private respondent so On Oct. 22, 1991, following a green traffic light, Priscilla Domingo’s silver
that he may traffic with the privileges of his franchise, or certificate of Lancer then driven by Leandro Domingo was cruising the middle lane of
public convenience, to operate a tricycle service. Thus, parties in the case South Superhighway at moderate speed when suddenly, a green
were in pari delicto. Mitsubishi Lancer with Plate No. PHK 201 driven by Renato Dela Cruz
Ocfemia darted from Vito Cruz St. towards the South Superhighway
ISSUE: W/N the arrangement between the parties can be considered as a directly into the path of Domingo’s car thereby hitting and bumping its left
legal contract front portion. As a result of the impact, NDW 781 hit two parked vehicles
at the roadside, the second hitting another car parked in front of it.
RULING: NO. Unquestionably, the parties herein operated under an
Traffic accident report found Ocfemia driving with expired license and
arrangement, commonly known as the “kabit system” whereby a person
positive for alcoholic breath. Manila Asst. Prosecutor Pascua
who has been granted a certificate of public convenience allows another
recommended filing of information for reckless imprudence resulting to
person who own motor vehicles to operate under such franchise for a fee.
damage to property and physical injuries. The original complaint was
A certificate of public convenience is a special privilege conferred by the
amended twice: first impleading Auto Palace Car Exchange as
government. Abuse of this privilege by the grantees thereof cannot be
commercial agent and/or buyer-seller and second, impleading Albert
countenanced. The “kabit system” has been identified as one of the root
Jaucian as principal defendant doing business under the name and style
causes of the prevalence of graft and corruption in the government
of Auto Palace Car Exchange. Except Ocfemia, all defendants filed
transportation offices.
separate answers to the complaint.
Although not outrightly penalized as a criminal offense, the kabit system is
Petitioner Nostradamus Villanueva claimed that he was no longer the
invariably recognized as being contrary to public policy and, therefore,
owner of the car at the time of the mishap because it was swapped with a
void and inexistent under Art. 1409 of the Civil Code. It is a fundamental
Pajero owned by Albert Jaucian/Auto Palace Car Exchange. Linda
principle that the court will not aid either party to enforce an illegal
Gonzales declared that her presence at the scene of the accident was
contract, but will leave both where it finds then. The defect of inexistence
upon the request of the actual owner of the Mitsubishi Lancer PHK 201,
of a contract is permanent and cannot be cured by ratification or by
Albert Jaucian for whom she had been working as agent/seller. Auto the owner of the vehicle at the time of the damage because he had
Palace Car Exchange represented by Albert Jaucian claimed that he was previously sold it to another.
not the registered owner of the car. Moreover, it could not be held
subsidiarily liable as employer of Ocfemia because the latter was off-duty A registered owner who has already sold or transferred a vehicle has the
as utility employee at the time of the incident. Neither was Ocfemia recourse to a third-party complaint, in the same action brought against
performing a duty related to his employment. him to recover for the damage or injury done, against the vendee or
transferee of the vehicle. The inconvenience of the suit is no justification
RTC found petitioner Villanueva liable and ordered him to pay respondent for relieving him of liability; said inconvenience is the price he pays for
actual, moral and exemplary damages plus appearance and attorney’s failure to comply with the registration that the law demands and requires.
fees. CA upheld trial court’s decision but deleted the award for
appearance and attorney’s fees as the same was not justified in the body In synthesis, we hold that the registered owner, the defendant-appellant
of the decision. herein, is primarily responsible for the damage caused to the vehicle of
the plaintiff-appellee, but he (defendant-appellant) has a right to be
ISSUE: May the registered owner of a motor vehicle be held liable for indemnified by the real or actual owner of the amount that he may be
damages arising from a vehicular accident involving his motor vehicle required to pay as damage for the injury caused to the plaintiff-appellant.
while being operated by the employee of its buyer without the latter’s
consent and knowledge?

RULING: YES, the registered owner of any vehicle is directly and HERNANDEZ v. DOLOR
primarily responsible for the public and third persons while it is being G.R. No. 160286 | July 30, 2004 | J. Ynares-Santiago
operated. The rationale behind such doctrine was explained way back in
1957 in ​Erezo vs. Jepte:
Facts: Jeep driven by Gonzalez hits another car, resulting in the deaths of
people inside the latter. Gonzalez and Sps. Hernandez were sued.
The principle upon which this doctrine is based is that in dealing with
Hernandez said Gonzalez is not an employee since boundary system. SC
vehicles registered under the Public Service Law, the public has the right
says they gave ER-EE relationship.
to assume or presume that the registered owner is the actual owner
thereof, for it would be difficult for the public to enforce the actions that
Lorenzo Menard Boyet Dolor, Jr. was driving an owner-type jeepney,
they may have for injuries caused to them by the vehicles being
towards Anilao, Batangas. As he was traversing the road his vehicle
negligently operated if the public should be required to prove who the
collided with a passenger jeepney driven by petitioner Juan Gonzales and
actual owner is. How would the public or third persons know against
owned by his co-petitioner Francisco Hernandez, which was travelling
whom to enforce their rights in case of subsequent transfers of the
towards Batangas City.
vehicles? We do not imply by his doctrine, however, that the registered
owner may not recover whatever amount he had paid by virtue of his
Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the
liability to third persons from the person to whom he had actually sold,
collision. Fred Panopio, Rene Castillo and Joseph Sandoval, who were
assigned or conveyed the vehicle.
also on board the owner-type jeep, which was totally wrecked, suffered
physical injuries.
Under the same principle the registered owner of any vehicle, even if not
used for a public service, should primarily be responsible to the public or
The collision also damaged the passenger jeepney of Francisco
to third persons for injuries caused the latter while the vehicle is being
Hernandez and caused physical injuries to its passengers, namely, Virgie
driven on the highways or streets. The members of the Court are in
Cadavida, Fiscal Artemio Reyes and Francisca Corona.
agreement that the defendant-appellant should be held liable to
plaintiff-appellee for the injuries occasioned to the latter because of the
Respondents commenced an action for damages against petitioners
negligence of the driver, even if the defendant-appellant was no longer
alleging that driver Juan Gonzales was guilty of negligence and lack of tanker was insured by FGU Insurance.
care and that the Hernandez spouses were guilty of negligence in the
selection and supervision of their employees. Spouses Baylon filed with the RTC a Complaint for damages against
petitioner, BG Hauler, the driver, and FGU Insurance. Petitioner FEB
Petitioners countered that the proximate cause of the death and injuries contended that the lease contract between BG Hauler and petitioner
sustained by the passengers of both vehicles was the recklessness of specifically provides that BG Hauler shall be liable for any loss, damage,
Boyet Dolor, the driver of the owner-type jeepney, who was driving in a or injury the leased oil tanker may cause even if petitioner is the
zigzagging manner under the influence of alcohol. registered owner of the said oil tanker. It further claimed that the CA erred
in holding petitioner solidarily liable with BG Hauler despite having found
The trial court rendered a decision in favor of respondents. the latter liable under the lease contract.

Issue: WON Julian Gonzales is an employee of the Hernandez spouses. RTC found FEB Leasing, BG Hauler, and driver jointly and severally
– YES, therefore the Hernandez Spouses are subsidiarily liable for liable; While, the insurer’s obligation has been satisfactorily fulfilled upon
Julian’s acts. payment of P450, 000.00. CA affirmed with RTC.

RULING: The Hernandez spouses maintained that Julian Gonzales is not ISSUE:​ Whether registered owner (FEB Leasing) of a financially leased
their employee since their relationship relative to the use of the jeepney is vehicle remains liable for loss, damage, or injury caused by the vehicle
that of a lessor and a lessee. notwithstanding an exemption provision in the financial lease contract.

They argue that Julian Gonzales pays them a daily rental of P150.00 for RULING:​ YES.
the use of the jeepney. In essence, petitioners are practicing the boundary Under Section 5 of Republic Act No. 4136, as amended, all motor
system of jeepney operation albeit disguised as a lease agreement vehicles used or operated on or upon any highway of the Philippines must
between them for the use of the jeepney. be registered with the Bureau of Land Transportation (now Land
Transportation Office) for the current year. Furthermore, any
To exempt from liability the owner of a public vehicle who operates it encumbrances of motor vehicles must be recorded with the Land
under the boundary system on the ground that he is a mere lessor would Transportation Office in order to be valid against third parties.
be not only to abet flagrant violations of the Public Service Law, but also
to place the riding public at the mercy of reckless and irresponsible drivers In accordance with the law on compulsory motor vehicle
reckless because the measure of their earnings depends largely upon the registration, this Court has consistently ruled that, with respect to the
number of trips they make and, hence, the speed at which they drive; and
irresponsible because most if not all of them are in no position to pay the public and third persons, the registered owner of a motor vehicle is
damages they might cause. directly and primarily responsible for the consequences of its operation
regardless of who the actual vehicle owner might be. Well-settled is the
rule that the registered owner of the vehicle is liable for quasi-delicts
resulting from its use.
FEB LEASING AND FINANCE V SPS. SERGIO BAYLON
The policy behind the rule is to enable the victim to find redress
FACTS: ​An Isuzu oil tanker running along Del Monte Avenue, Quezon by the expedient recourse of identifying the registered vehicle owner in
City hit Loretta V. Baylon, daughter of respondent spouses Baylon. At the
time of the accident, the oil tanker was registered in the name of petitioner the records of the LTO. The registered owner can be reimbursed by the
FEB Leasing and Finance Corporation. The oil tanker was leased to BG actual owner, lessee or transferee who is known to him. Unlike the
Hauler and was being driven by the latter’s driver, M. Estilloso. The oil registered owner, the innocent victim is not privy to the lease, sale,
transfer or encumbrance of the vehicle. Hence, the victim should not be Is the petitioner a common carrier?
prejudiced by the failure to register such transaction or encumbrance.
RULING: YES. A school bus operator is a common carrier.
In this case, petitioner admits that it is the registered owner of
Perena’s defense of diligence of a good father in the selection and
the oil tanker that figured in an accident causing the death of Loretta. As supervision of their driver is unavailable for breach of contract of carriage.
the registered owner, it cannot escape liability for the loss arising out of Perenas operated as a common carrier; and their standard of care was
negligence in the operation of the oil tanker. Its liability remains even if at extraordinary diligence, not only diligence of a good father.
the time of the accident, the oil tanker was leased to BG Hauler and was
A carrier is a person or corporation who undertakes to transport or convey
being driven by the latter’s driver, and despite a provision in the lease goods from one place to another, gratuitously or for hire. They may be
contract exonerating the registered owner from liability. private or common

Private carrier is one who, without holding himself or itself out to the public
as ready to act for all who may desire his or its services, undertakes, by
special agreement in a particular instance only, to transport goods or
SPOUSES TEODORO1 and NANETTE PERENA vs. persons from one place to another either gratutitously or for hire. The
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, diligence required of a private carrier is only ordinary
NATIONAL RAILWAYS | G.R. No. 157917 | August 29, 2012 | Sichon
Common Carrier is a person, corporation, firm or association engaged in
Sichon the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering such services to the public.
FACTS: Perenas were engaged in the business of transporting students Diligence required is to observe extraordinary diligence, and is presumed
to Don Bosco. The Zarates engaged Perenas services to transport their to be at fault or to have acted negligently in case of the loss of effects of
son, Aaron, to school. passengers, or death or injuries to passengers
While on the way to school, the van’s air-conditioning unit was turned on The true test for a common carrier is not the quantity or extent of business
and the stereo playing loudly. The driver took a detour because they were actually transacted, or the number of conveyances, BUT WHETHER the
running late due to the traffic in SLEX. The detour was through a narrow undertaking is a part of the activity that he has held out to the general
path underneath the Magallanes Interchange used as short cut into public as his business or occupation.
Makati. When the van was to traverse the PNR railroad crossing, the van
was tailing a large passenger bus so the driver’s view of the oncoming
train was blocked. The train hit the van at the rear end and the impact The Perenas held themselves out as a ready transportation
threw 9 students including Aaron out of the van. Aaron landed in the path indiscriminately to the students of a particular school living within or near
of the train which dragged his body and severed his head, where they operated the service and for a fee. Perena, being a common
instantaneously killing him. carrier, was already presumed to be negligent at the time of the accident
because death occurred to their passenger. The omissions of care on the
The Zarates filed for damages against Alfaro, Perenas, PNR, and the part of the driver constituted negligence.
train driver. The cause of action against Perena was for contract of
carriage while for PNR, quasi delict. Perena posited the defense of
diligence of a good father in the selection and supervision of their driver What is a common Carrier? ART 1732 NCC

ISSUE: Were Perenas and PNR jointly and severally liable for damages?
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.
Distinguish a common carrier from a private carrier? From towage, arrestre
and stevedoring?

What are tests to determine common carrier?

Who are parties to the contract of carriage?