G.R. No.

L-9605 September 30, 1957

GAUDIOSO EREZO, ET AL., plaintiff-appellee, vs.AGUEDO JEPTE, defendant-appellant.

Gesolgon, Matti and Custodio for appellees.

Aguedo Y. Jepte in his own behalf.

LABRADOR, J.:

Appeal from a judgment of the Court of First Instance of Manila ordering defendant to pay plaintiff Gaudioso Erezo P3,000
on the death of Ernesto Erezo, son of plaintiff Gaudioso Erezo.

Defendant-appellant is the registered owner of a six by six truck bearing plate No. TC-1253. On August, 9, 1949, while the
same was being driven by Rodolfo Espino y Garcia, it collided with a taxicab at the intersection of San Andres and Dakota
Streets, Manila. As the truck went off the street, it hit Ernesto Erezo and another, and the former suffered injuries, as a
result of which he died. The driver was prosecuted for homicide through reckless negligence in criminal case No. 10663 of
the Court of First Instance of Manila. The accused pleaded guilty and was sentenced to suffer imprisonment and to pay
the heirs of Ernesto Erezo the sum of P3,000. As the amount of the judgment could not be enforced against him, plaintiff
brought this action against the registered owner of the truck, the defendant-appellant. The circumstances material to the
case are stated by the court in its decision.

The defendant does not deny at the time of the fatal accident the cargo truck driven by Rodolfo Espino y
Garcia was registered in his name. He, however, claims that the vehicle belonged to the Port Brokerage,
of which he was the broker at the time of the accident. He explained, and his explanation was
corroborated by Policarpio Franco, the manager of the corporation, that the trucks of the corporation were
registered in his name as a convenient arrangement so as to enable the corporation to pay the
registration fee with his backpay as a pre-war government employee. Franco, however, admitted that the
arrangement was not known to the Motor Vehicle Office.

The trial court held that as the defendant-appellant represented himself to be the owner of the truck and the Motor Vehicle
Office, relying on his representation, registered the vehicles in his name, the Government and all persons affected by the
representation had the right to rely on his declaration of ownership and registration. It, therefore, held that the defendant-
appellant is liable because he cannot be permitted to repudiate his own declaration. (Section 68 [a], Rule 123, and Art.
1431, New Civil Code.).

Against the judgment, the defendant has prosecuted this appeal claiming that at the time of the accident the relation of
employer and employee between the driver and defendant-appellant was not established, it having been proved at the
trial that the owner of the truck was the Port Brokerage, of which defendant-appellant was merely a broker. We find no
merit or justice in the above contention. In previous decisions, We already have held that the registered owner of a
certificate of public convenience is liable to the public for the injuries or damages suffered by passengers or third persons
caused by the operation of said vehicle, even though the same had been transferred to a third person. (Montoya vs.
Ignacio, 94 Phil., 182, 50 Off. Gaz., 108; Roque vs. Malibay Transit Inc., 1 G. R. No. L- 8561, November 18,1955; Vda. de
Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.)The principle upon which this doctrine is based is that in
dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume that the
registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may
have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who
the actual owner is. How would the public or third persons know against whom to enforce their rights in case of
subsequent transfers of the vehicles? We do not imply by this doctrine, however, that the registered owner may not
recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually
sold, assigned or conveyed the vehicle.

Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily be
responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways
or streets. The members of the Court are in agreement that the defendant-appellant should be held liable to plaintiff-
appellee for the injuries occasioned to the latter because of the negligence of the driver even if the defendant-appellant
was no longer the owner of the vehicle at the time of the damage because he had previously sold it to another. What is
the legal basis for his (defendant-appellant's) liability?.

There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered owner in the
Motor Vehicle Office. Should he not be allowed to prove the truth, that he had sold it to another and thus shift the
responsibility for the injury to the real and actual owner? The defendant holds the affirmative of this proposition; the trial
court held the negative.

The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon any
public highway unless the same is properly registered. It has been stated that the system of licensing and the requirement
that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce
the danger of injury to pedestrians and other travelers from the careless management of automobiles, and to furnish a
means of ascertaining the identity of persons violating the laws and ordinances, regulating the speed and operation of
machines upon the highways (2 R. C. L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be
used or operated without being properly registered for the current year, but that dealers in motor vehicles shall furnish the
Motor Vehicles Office a report showing the name and address of each purchaser of motor vehicle during the previous
month and the manufacturer's serial number and motor number. (Section 5 [c], Act. No. 3992, as amended.).

Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in
land registration cases, because the administrative proceeding of registration does not bear any essential relation to the
contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and
operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, as amended).The main aim of motor vehicle
registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicles
on the public highways, responsibility therefore can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very scant means of identification. It is to forestall those
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or injuries caused on public highways.

One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the
operator, in case of accident; and another is that the knowledge that means of detection are always
available may act as a deterrent from lax observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary
purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape
because of lack of means to discover him." The purpose of the statute is thwarted, and the displayed
number becomes a "snare and delusion," if courts will entertain such defenses as that put forward by
appellee in this case. No responsible person or corporation could be held liable for the most outrageous
acts of negligence, if they should be allowed to place a "middleman" between them and the public, and
escape liability by the manner in which they recompense their servants. (King vs. Brenham Automobile
Co., 145 S. W. 278,279.)

With the above policy in mind, the question that defendant-appellant poses is: should not be registered owner be allowed
at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility
and lay the same on the person actually owning the vehicle? We hold with the trial court that the laws does not allow him
to do so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and
places upon him as an incident or consequence of registration. Were a registered owner allowed to evade responsibility
by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to
escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which
to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without
means to discover or identify the person actually causing the injury or damage. He has no means other than by a
recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to
extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and carried out, the registered owner should be allowed to prove the
contrary to the prejudice of the person injured that is, to prove that a third person or another has become the owner, so
that he may thereby be relieved of the responsibility to the injured person.1âwphïl.nêt

The above policy and application of the law may appear quite harsh and would seem to conflict with truth and justice. We
do not think it is so. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party
complaint, in the same action brought against him to recover for the damage or injury done, against the vendee or
transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability; said inconvenience is
the price he pays for failure to comply with the registration that the law demands and requires.

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage
caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or
actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-
appellant.1âwphïl.nêt
G.R. No. 98275 November 13, 1992

BA FINANCE CORPORATION, petitioner, vs.HON. COURT OF APPEALS, REGIONAL TRIAL COURT OF ANGELES
CITY, BRANCH LVI, CARLOS OCAMPO, INOCENCIO TURLA, SPOUSES MOISES AGAPITO and SOCORRO M.
AGAPITO and NICOLAS CRUZ, respondents.

MELO, J.:

The question of petitioner's responsibility for damages when on March 6, 1983, an accident occurred involving petitioner's
Isuzu ten-wheeler truck then driven by an employee of Lino Castro is the thrust of the petition for review on certiorari now
before Us considering that neither the driver nor Lino Castro appears to be connected with petitioner.

On October 13, 1988, the disputed decision in the suit below was rendered by the court of origin in this manner:

1. Ordering Rock B.A. and Rogelio Villar y Amare jointly and severally to pay the plaintiffs as follows:

a) To the plaintiff Carlos Ocampo — P121,650.00;

b) To the plaintiff Moises Ocampo — P298,500.00

c) To the plaintiff Nicolas Cruz — P154,740.00

d) To the plaintiff Inocencio Turla, Sr. — 48,000.00

2. Dismissing the case against Lino Castro

3. Dismissing the third-party complaint against STRONGHOLD

4. Dismissing all the counterclaim of the defendants and third-party defendants.

5. Ordering ROCK to reimburse B.A. the total amount of P622,890.00 which the latter is adjudged to pay
to the plaintiffs. (p. 46, Rollo)

Respondent Court of Appeals affirmed the appealed disposition in toto through Justice Rasul, with Justices De Pano, Jr.
and Imperial concurring, on practically the same grounds arrived at by the court a quo (p. 28, Rollo). Efforts exerted
towards re-evaluation of the adverse were futile (p. 37, Rollo). Hence, the instant petition.

The lower court ascertained after due trial that Rogelio Villar y Amare, the driver of the Isuzu truck, was at fault when the
mishap occurred in as much as he was found guilty beyond reasonable doubt of reckless imprudence resulting in triple
homicide with multiple physical injuries with damage to property in a decision rendered on February 16, 1984 by the
Presiding Judge of Branch 6 of the Regional Trial Court stationed at Malolos, Bulacan. Petitioner was adjudged liable for
damages in as much as the truck was registered in its name during the incident in question, following the doctrine laid
down by this Court in Perez vs. Gutierrez (53 SCRA 149 [1973]) and Erezo, et al. vs. Jepte (102 Phil. 103 [1957]). In the
same breadth, Rock Component Philippines, Inc. was ordered to reimburse petitioner for any amount that the latter may
be adjudged liable to pay herein private respondents as expressly stipulated in the contract of lease between petitioner
and Rock Component Philippines, Inc. Moreover, the trial court applied Article 2194 of the new Civil Code on solidary
accountability of join tortfeasors insofar as the liability of the driver, herein petitioner and Rock Component Philippines was
concerned (pp. 6-7, Decision; pp. 44-45, Rollo).

To the question of whether petitioner can be held responsible to the victim albeit the truck was leased to Rock Component
Philippines when the incident occurred, the appellate court answered in the affirmative on the basis of the jurisprudential
dogmas which, as aforesaid, were relied upon by the trial court although respondent court was quick to add
the caveat embodied in the lease covenant between petitioner and Rock Component Philippines relative to the latter's
duty to reimburse any amount which may be adjudged against petitioner (pp. 32-33, Rollo).
Petitioner asseverates that it should not have been haled to court and ordered to respond for the damage in the manner
arrived at by both the trial and appellate courts since paragraph 5 of the complaint lodged by the plaintiffs below would
indicate that petitioner was not the employer of the negligent driver who was under the control an supervision of Lino
Castro at the time of the accident, apart from the fact that the Isuzu truck was in the physical possession of Rock
Component Philippines by virtue of the lease agreement.

Aside from casting clouds of doubt on the propriety of invoking the Perez and Erezo doctrines, petitioner continue to
persist with the idea that the pronouncements of this Court in Duavit vs. Court of Appeals (173 SCRA 490 [1989])
and Duquillo vs. Bayot (67 Phil 131 [1939]) dovetail with the factual and legal scenario of the case at hand. Furthermore,
petitioner assumes, given the so-called hiatus on the basis for the award of damages as decreed by the lower and
appellate courts, that Article 2180 of the new Civil Code on vicarious liability will divest petitioner of any responsibility
absent as there is any employer-employee relationship between petitioner and the driver.

Contrary to petitioner's expectations, the recourse instituted from the rebuffs it encountered may not constitute a sufficient
foundation for reversal of the impugned judgment of respondent court. Petitioner is of the impression that
the Perez and Erezo cases are inapplicable due to the variance of the generative facts in said cases as against those
obtaining in the controversy at bar. A contrario, the lesson imparted by Justice Labrador in Erezo is still good law, thus:

. . . In previous decisions, We already have held that the registered owner of a certificate of public
convenience is liable to the public for the injuries or damages suffered by passengers or third persons
caused by the operation of said vehicle, even though the same had been transferred to a third person.
(Montoya vs. Ignacio, 94 Phil., 182 50 Off. Gaz., 108; Roque vs. Malibay Transit, Inc., G.R. No. L-8561,
November 18, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.) The principle
upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law,
the public has the right to assume or presumed that the registered owner is the actual owner thereof, for it
would be difficult with the public to enforce the actions that they may have for injuries caused to them by
the vehicles being negligently operated if the public should be required to prove who actual the owner is.
How would the public or third persons know against whom to enforce their rights in case of subsequent
transfer of the vehicles? We do not imply by this doctrine, however, that the registered owner may not
recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he
had actually sold, assigned or conveyed the vehicle.

Under the same principle the registered owner of any vehicle, even if not used for a public service, should
primarily responsible to the public or to the third persons for injuries caused the latter while the vehicle is
being driven on the highways or streets. The members of the Court are in agreement that the defendant-
appellant should be held liable to plaintiff-appellee for the injuries occasioned to the latter because of the
negligence of the driver, even if the defendant-appellant was no longer an owner of the vehicle at the time
of the damage because he had previously sold it to another. What is the legal basis for his (defendants-
appellant's) liability?

There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the
registered owner in the Motor Vehicle Office. Should he not be allowed to prove the truth, that he had sold
it to another and thus shift the responsibility for the injury to the real and the actual owner? The
defendants hold the affirmative of this proposition; the trial court hold the negative.

The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that the vehicle may be used or
operated upon any public highway unless the same is properly registered. It has been stated that the
system of licensing and the requirement that each machine must carry a registration number,
conspicuously displayed, is one of the precautions taken to reduce the danger of injury of pedestrians and
other travelers from the careless management of automobiles, and to furnish a means of ascertaining the
identity of persons violating the laws and ordinances, regulating the speed and operation of machines
upon the highways (2 R. C. L. 1176). Not only are vehicles to be registered and that no motor vehicles
are to be used or operated without being properly registered from the current year, furnish the Motor
Vehicle Office a report showing the name and address of each purchaser of motor vehicle during the
previous month and the manufacturer's serial number and motor number. (Section 5[c], Act No. 3992, as
amended.)

Registration is required not to make said registration the operative act by which ownership in vehicles is
transferred, as in land registration cases, because the administrative proceeding of registration does not
bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and
Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway
 (section 5[a], Act No. 3992, as amended). the main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other
vehicles without positive identification of the owner or drivers, or with very scant means of identification. It
is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily obtained, in the interest of the determinations of persons responsible for damages
or injuries caused on public highways.

One of the principle purposes of motor vehicles legislation is identification of the vehicle
and of the operator, in case of accident; and another is that the knowledge that means of
detection are always available my act as a deterrent from lax observance of the law and
of the rules of conservative and safe operation. Whatever purpose there may be in these
statutes, it is subordinate at the last to the primary purpose of rendering it certain that the
violator of the law or of the rules of safety shall not escape because of lack of means to
discover him. The purpose of the statute is thwarted, and the displayed number becomes
a "share and delusion," if courts would entertain such defenses as that put forward by
appellee in this case. No responsible person or corporation could be held liable for the
most outrageous acts of negligence, if they should be allowed to pace a "middleman"
between them and the public, and escape liability by the manner in which they
recompense their servants. (King vs. Breham Automobile Co., Inc. 145 S. W. 278, 279.)

With the above policy in mind, the question that defendant-appellant poses is: should not the registered
owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof
escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with
the trial court that the law does not allow him to do so; the law, with its aim and policy in mind, does not
relieve him directly of the responsibility that the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to
escape said responsibility and transfer the same to an indefinite person, or to one who possesses no
property with which to respond financially for the damage or injury done. A victim of recklessness on the
public highways is usually without means to discover or Identify the person actually causing the injury or
damage. He has no means other then by a recourse to the registration in the Motor Vehicles Office to
determine who is the owner. The protection that the law aims to extend to him would become illusory
were the registered owner given the opportunity to escape liability by disproving his ownership. If the
policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove
the contrary to the prejudice of the person injured, that is, to prove that a third person or another has
become the owner, so that he may thereby be relieved of the responsibility to the injured person.

The above policy and application of the law may appear quite harsh and would seem to conflict with truth
and justice. We do not think it is so. A registered owner who has already sold or transferred a vehicle has
the recourse to a third-party complaint, in the same action brought against him to recover for the damage
or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no
justification for relieving him of liability; said inconvenience is the price he pays for failure to comply with
the registration that the law demands and requires.

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible
for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to
be indemnified by the real or actual owner of the amount that he may be required to pay as damage for
the injury caused to the plaintiff-appellant.

If the foregoing words of wisdom were applied in solving the circumstance whereof the vehicle had been alienated or sold
to another, there certainly can be no serious exception against utilizing the same rationale to the antecedents of this case
where the subject vehicle was merely leased by petitioner to Rock Component Philippines, Inc., with petitioner retaining
ownership over the vehicle.

Petitioner's reliance on the ruling of this Court in Duavit vs. Court of Appeals and in Duquillo vs. Bayot (supra) is legally
unpalatable for the purpose of the present discourse. The vehicles adverted to in the two cases shared a common thread,
so to speak, in that the jeep and the truck were driven in reckless fashion without the consent or knowledge of the
respective owners. Cognizant of the inculpatory testimony spewed by defendant Sabiniano when he admitted that he took
the jeep from the garage of defendant Dauvit without the consent or authority of the latter, Justice Gutierrez, Jr.
in Duavit remarked;

. . . Herein petitioner does not deny ownership of the vehicle involved in the mishap but completely denies
having employed the driver Sabiniano or even having authorized the latter to drive his jeep. The jeep was
virtually stolen from the petitioner's garage. To hold, therefore, the petitioner liable for the accident caused
by the negligence of Sabiniano who was neither his driver nor employee would be absurd as it would be
like holding liable the owner of a stolen vehicle for an accident caused by the person who stole such
vehicle. In this regard, we cannot ignore the many cases of vehicles forcibly taken from their owners at
gunpoint or stolen from garages and parking areas and the instances of service station attendants or
mechanics of auto repair shops using, without the owner's consent, vehicles entrusted to them for
servicing or repair.(at p. 496.)

In the Duquillo case, the defendant therein cannot, according to Justice Diaz, be held liable for anything because of
circumstances which indicated that the truck was driven without the consent or knowledge of the owner thereof.

Consequently, there is no need for Us to discuss the matter of imputed negligence because petitioner merely presumed,
erroneously, however, that judgment was rendered against it on the basis of such doctrine embodied under Article 2180 of
the new Civil Code.

WHEREFORE, the petition is hereby DISMISSED and decision under review AFFIRMED without special pronouncement
as to costs.

THIRD DIVISION

G.R. No. 82318 May 18, 1989 GILBERTO M. DUAVIT, petitioner, vs.THE HON. COURT OF APPEALS, Acting through
the Third Division, as Public Respondent, and ANTONIO SARMIENTO, SR. & VIRGILIO CATUAR respondents.
GUTIERREZ, JR., J.:

This petition raises the sole issue of whether or not the owner of a private vehicle which figured in an accident can be held
liable under Article 2180 of the Civil Code when the said vehicle was neither driven by an employee of the owner nor
taken with the consent of the latter.

The facts are summarized in the contested decision, as follows:

From the evidence adduced by the plaintiffs, consisting of the testimonies of witnesses Virgilio
Catuar, Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and Norberto Bernarte it appears that on July
28, 1971 plaintiffs Antonio Sarmiento, Sr. and Virgilio Catuar were aboard a jeep with plate
 number 77-99-F-I Manila, 1971, owned by plaintiff, Ruperto Catuar was driving the said jeep on
Ortigas Avenue, San Juan, Rizal; that plaintiff's jeep, at the time, was running moderately at 20 to
35 kilometers per hour and while approaching Roosevelt Avenue, Virgilio Catuar slowed down;
that suddenly, another jeep with plate number 99-97-F-J Manila 1971 driven by defendant Oscar
Sabiniano hit and bumped plaintiff's jeep on the portion near the left rear wheel, and as a result of
the impact plaintiff's jeep fell on its right and skidded by about 30 yards; that as a result plaintiffs
jeep was damaged, particularly the windshield, the differential, the part near the left rear wheel
and the top cover of the jeep; that plaintiff Virgilio Catuar was thrown to the middle of the road; his
wrist was broken and he sustained contusions on the head; that likewise plaintiff Antonio
Sarmiento, Sr. was trapped inside the fallen jeep, and one of his legs was fractured.

Evidence also shows that the plaintiff Virgilio Catuar spent a total of P2,464.00 for repairs of the
jeep, as shown by the receipts of payment of labor and spare parts (Exhs. H to H-7 Plaintiffs
likewise tried to prove that plaintiff Virgilio Catuar, immediately after the accident was taken to
Immaculate Concepcion Hospital, and then was transferred to the National Orthopedic Hospital;
that while plaintiff Catuar was not confined in the hospital, his wrist was in a plaster cast for a
period of one month, and the contusions on his head were under treatment for about two (2)
weeks; that for hospitalization, medicine and allied expenses, plaintiff Catuar spent P5,000.00.

Evidence also shows that as a result of the incident, plaintiff Antonio Sarmiento, Sr. sustained
injuries on his leg; that at first, he was taken to the National Orthopedic Hospital (Exh. K but later
he was confined at the Makati Medical Center from July 29, to August 29, 1971 and then from
September 15 to 25, 1971; that his leg was in a plaster cast for a period of eight (8) months; and
that for hospitalization and medical attendance, plaintiff Antonio Sarmiento, Sr. spent no less than
P13,785.25 as evidenced by receipts in his possession. (Exhs. N to N-1).

Proofs were adduced also to show that plaintiff Antonio sarmiento Sr. is employed as Assistant
Accountant of the Canlubang Sugar Estate with a salary of P1,200.00 a month; that as sideline
he also works as accountant of United Haulers Inc. with a salary of P500.00 a month; and that as
a result of this incident, plaintiff Sarmiento was unable to perform his normal work for a period of
at least 8 months. On the other hand, evidence shows that the other plaintiff Virgilio Catuar is a
Chief Clerk in Canlubang Sugar Estate with a salary of P500.00 a month, and as a result of the
incident, he was incapacitated to work for a period of one (1) month.

The plaintiffs have filed this case both against Oscar Sabiniano as driver, and against Gualberto
Duavit as owner of the jeep.

Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate No. 99-07-F-J
Manila, 1971), denied that the other defendant (Oscar Sabiniano) was his employee. Duavit
claimed that he has not been an employer of defendant Oscar Sabiniano at any time up to the
present.

On the other hand documentary and testimonial evidence show that defendant Oscar Sabiniano
was an employee of the Board of Liquidators from November 14, 1966 up to January 4, 1973
(Annex A of Answer).

Defendant Sabiniano, in his testimony, categorically admitted that he took the jeep from the
garage of defendant Duavit without the consent or authority of the latter (TSN, September 7,
1978, p. 8). He testified further, that Duavit even filed charges against him for theft of the jeep, but
which Duavit did not push through as his (Sabiniano's) parents apologized to Duavit on his
behalf.

Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself from liability,
makes it appear that he was taking all necessary precaution while driving and the accident
occurred due to the negligence of Virgilio Catuar. Sabiniano claims that it was plaintiffs vehicle
which hit and bumped their jeep. (Reno, pp. 21-23)

The trial court found Oscar Sabiniano negligent in driving the vehicle but found no employer-employee relationship
between him and the petitioner because the latter was then a government employee and he took the vehicle without the
authority and consent of the owner. The petitioner was, thus, absolved from liability under Article 2180 of the Civil Code.
The private respondents appealed the case.

On January 7, 1988, the Court of Appeals rendered the questioned decision holding the petitioner jointly and severally
liable with Sabiniano. The appellate court in part ruled:

We cannot go along with appellee's argument. It will be seen that in Vargas v. Langcay, supra, it
was held that it is immaterial whether or not the driver was actually employed by the operator of
record or registered owner, and it is even not necessary to prove who the actual owner of the
vehicle and who the employer of the driver is. When the Supreme Court ruled, thus: 'We must
hold and consider such owner-operator of record (registered owner) as the employer in
contemplation of law, of the driver,' it cannot be construed other than that the registered owner is
the employer of the driver in contemplation of law. It is a conclusive presumption of fact and law,
and is not subject to rebuttal of proof to the contrary. Otherwise, as stated in the decision, we
quote:

The purpose of the principles evolved by the decisions in these matters will be defeated and
thwarted if we entertain the argument of petitioner that she is not liable because the actual owner
and employer was established by the evidence. . . .

Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to prove that the driver Sabiniano was
not his employee at the time of the vehicular accident.

The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to the effect that
the burden of proving the non-existence of an employer-employee relationship is upon the
defendant and this he must do by a satisfactory preponderance of evidence, has to defer to the
doctrines evolved by the Supreme Court in cases of damages arising from vehicular mishaps
involving registered motor vehicle. (See Tugade v. Court of Appeals, 85 SCRA 226, 230). (Rollo,
pp. 26-27)

The appellate court also denied the petitioner's motion for reconsideration. Hence, this petition.

The petitioner contends that the respondent appellate court committed grave abuse of discretion in holding him jointly and
severally liable with Sabiniano in spite of the absence of an employer-employee relationship between them and despite
the fact that the petitioner's jeep was taken out of his garage and was driven by Sabiniano without his consent.

As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for an accident involving the said
vehicle if the same was driven without his consent or knowledge and by a person not employed by him. Thus, in Duquillo
v. Bayot (67 Phil. 131-133-134) [1939] we said:

Under the facts established, the defendant cannot be held liable for anything. At the time of the
accident, James McGurk was driving the truck, and he was not an employee of the defendant,
nor did he have anything to do with the latter's business; neither the defendant nor Father Ayson,
who was in charge of her business, consented to have any of her trucks driven on the day of the
accident, as it was a holy day, and much less by a chauffeur who was not in charge of driving it;
the use of the defendant's truck in the circumstances indicated was done without her consent or
knowledge; it may, therefore, be said, that there was not the remotest contractual relation
between the deceased Pio Duquillo and the defendant. It necessarily follows from all this that
articles 1101 and following of the Civil Code, cited by the appellant, have no application in this
case, and, therefore, the errors attributed to the inferior court are without basis.

The Court upholds the above ruling as still relevant and better applicable to present day circumstances.

The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103 [1957] and Vargas v. Langcay (6
SCRA 174 [1962]) cannot be sustained. In the Erezo case, Jepte, the registered owner of the truck which collided with a
taxicab, and which resulted in the killing of Erezo, claimed that at the time of the accident, the truck belonged to the Port
Brokerage in an arrangement with the corporation but the same was not known to the Motor Vehicles Office. This Court
sustained the trial court's ruling that since Jepte represented himself to be the owner of the truck and the Motor Vehicles
Office, relying on his representation, registered the vehicle in his name, the Government and all persons affected by the
representation had the right to rely on his declaration of ownership and registration. Thus, even if Jepte were not the
owner of the truck at the time of the accident, he was still held liable for the death of Erezo significantly, the driver of the
truck was fully authorized to drive it.

Likewise, in the Vargas case, just before the accident occurred Vargas had sold her jeepney to a third person, so that at
the time of the accident she was no longer the owner of the jeepney. This court, nevertheless, affirmed Vargas' liability
since she failed to surrender to the Motor Vehicles Office the corresponding AC plates in violation of the Revised Motor
Vehicle Law and Commonwealth Act No. 146. We further ruled that the operator of record continues to be the operator of
the vehicle in contemplation of law, as regards the public and third persons, and as such is responsible for the
consequences incident to its operator. The vehicle involved was a public utility jeepney for hire. In such cases, the law
does not only require the surrender of the AC plates but orders the vendor operator to stop the operation of the jeepney
as a form of public transportation until the matter is reported to the authorities.

As can be seen, the circumstances of the above cases are entirely different from those in the present case. Herein
petitioner does not deny ownership of the vehicle involved in tire mishap but completely denies having employed the
driver Sabiniano or even having authorized the latter to drive his jeep. The jeep was virtually stolen from the petitioner's
garage. To hold, therefore, the petitioner liable for the accident caused by the negligence of Sabiniano who was neither
his driver nor employee would be absurd as it would be like holding liable the owner of a stolen vehicle for an accident
caused by the person who stole such vehicle. In this regard, we cannot ignore the many cases of vehicles forcibly taken
from their owners at gunpoint or stolen from garages and parking areas and the instances of service station attendants or
mechanics of auto repair shops using, without the owner's consent, vehicles entrusted to them for servicing or repair.

We cannot blindly apply absolute rules based on precedents whose facts do not jibe four square with pending cases.
Every case must be determined on its own peculiar factual circumstances. Where, as in this case, the records of the
petition fail to indicate the slightest indicia of an employer-employee relationship between the owner and the erring driver
or any consent given by the owner for the vehicle's use, we cannot hold the owner liable.

We, therefore, find that the respondent appellate court committed reversible error in holding the petitioner jointly and
severally liable with Sabiniano to the private respondent.

WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are hereby ANNULLED and SET
ASIDE. The decision of the then Court of First Instance (now Regional Trial Court) of Laguna, 8th Judicial District, Branch
6, dated July 30, 1981 is REINSTATED.SO ORDERED.

G.R. No. 125817 January 16, 2002

ABELARDO LIM and ESMADITO GUNNABAN, petitioners,

vs.
COURT OF APPEALS and DONATO H. GONZALES, respondents.

BELLOSILLO, J.:

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 Monumento-Bulacan
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.1âwphi1.nêt

On 22 July 1990, while the jeepney was running northbound along the North Diversion Road somewhere in Meycauayan,
Bulacan, it collided with a ten-wheeler-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
₱20,000.00, 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 ₱236,000.00. Lim increased his bid to
₱40,000.00 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 Vallarta’s name, it was Vallarta and not private
respondent who was the real party in interest.1 For his part, petitioner Gunnaban averred that the accident was a fortuitous
event which was beyond his control.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 ₱236,000.00
to restore his jeepney to its original condition.4 On the other hand, petitioners insisted that they could have the vehicle
repaired for ₱20,000.00.5

On 1 October 1993 the trial court upheld private respondent's claim and awarded him ₱236,000.00 with legal interest from
22 July 1990 as compensatory damages and ₱30,000.00 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.7 Hence this petition.

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 ₱30,000.00, an award of ₱236,000.00
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 quoare 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.9 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.
In the early case of Dizon v. Octavio10 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.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 kabit system 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 ₱30,000.00 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
₱300.00 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 ₱236,000.00 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 ₱236,000.00 being refuted by petitioners who argue
that they could have the vehicle repaired easily for ₱20,000.00. 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 ₱236,000.00 with legal interest
from 22 July 1990 as compensatory damages and ₱30,000.00 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.1âwphi1.nêtCosts against
petitioners.SO ORDERED.

G.R. No. 116617 November 16, 1998

METRO MANILA TRANSIT CORPORATION (MMTC), PEDRO A. MUSA, CONRADO TOLENTINO, FELICIANA
CELEBRADO and THE GOVERNMENT SERVICE INSURANCE SYSTEM, petitioners,
vs.
COURT OF APPEALS, SPS. RODOLFO V. ROSALES and LILY R. ROSALES, respondents.

G.R. No. 126395 November 16, 1998

RODOLFO V. ROSALES, and LILY R. ROSALES, petitioners,

vs.
THE COURT OF APPEALS, METRO MANILA TRANSIT CORPORATION, (MMTC) PEDRO A. MUSA, CONRADO
TOLENTINO, FELICIANA CELEBRADO and THE GOVERNMENT SERVICE INSURANCE SYSTEM, respondents.

MENDOZA, J.:

These are appeals brought, on the one hand, by the Metro Manila Transit Corporation (MMTC) and Pedro Musa and, on
the other, by the spouses Rodolfo V. Rosales and Lily R. Rosales from the decision, 1 dated August 5, 1994, of the Court
of Appeals, which affirmed with modification the judgment of the Regional Trial Court of Quezon City holding
MMTC and Musa liable to the spouses Rosales for actual, moral, and exemplary damages, attorney's fees, and
the costs of suit for the death of the latter's daughter. MMTC and Musa in G.R. No. 116617 appeal insofar as they
are held liable for damages, while the spouses Rosales in G.R. No. 126395 appeal insofar as the amounts
awarded are concerned.

The facts are as follows:

MMTC is the operator of a fleet of passenger buses within the Metro Manila area. Musa was its driver assigned to
MMTC Bus No. 27. The spouses Rosales were parents of Liza Rosalie, a third-year high school student at the
University of the Philippines Integrated School.

At around a quarter past one in the afternoon of August 9, 1986, MMTC Bus No. 27, which was driven by Musa, hit
Liza Rosalie who was then crossing Katipunan Avenue in Quezon City. An eye witness said the girl was already
near the center of the street when the bus, then bound for the south, hit her. 2 She fell to the ground upon impact,
rolled between the two front wheels of the bus, and was run over by the left rear tires thereof.3 Her body was
dragged several meters away from the point of impact. Liza Rosalie was taken to the Philippine Heart Center, 4 but
efforts to revive her proved futile.

Pedro Musa was found guilty of reckless imprudence resulting in homicide and sentenced to imprisonment for a
term of 2 years and 4 months, as minimum, to 6 years, as maximum, by the Regional Trial Court of Quezon
City.5 The trial court found:

All told, this Court, therefore, holds that the accused, who was then, the driver of MMTC Bus No.
027, is criminally responsible for the death of the girl victim in violation of Article 365 (2) of the
Revised Penal Code. For, in the light of the evidence that the girl victim was already at the center
of the Katipunan Road when she was bumped, and, therefore, already past the right lane when the
MMTC Bus No. 027 was supposed to have passed; and, since the said bus was then running at a
speed of about 25 kilometers per hour which is inappropriate since Katipunan road is a busy
street, there is, consequently, sufficient proof to show that the accused was careless, reckless
and imprudent in the operation of his MMTC Bus No. 027, which is made more evident by the
circumstance that the accused did not blow his horn at the time of the accident, and he did not
even know that he had bumped the girl victim and had ran over her, demonstrating thereby that he
did not exercise diligence and take the necessary precaution to avoid injury to persons in the
operation of his vehicle, as, in fact, he ran over the girl victim who died as a result thereof. 6

The spouses Rosales filed an independent civil action for damages against MMTC, Musa, MMTC Acting General
Manager Conrado Tolentino, and the Government Service Insurance System (GSIS). They subsequently amended
their complaint to include Feliciana Celebrado, a dispatcher of the MMTC, as a defendant therein. The counsel of
MMTC and Musa attempted to introduce testimony that Musa was not negligent in driving Bus No. 27 but was
told by the trial judge:

COURT:

That is it. You can now limit your question to the other defendant here but to re-try again the
actual facts of the accident, this Court would not be in the position. It would be improper for this
Court to make any findings with respect to the negligence of herein driver. You ask questions only
regarding the civil aspect as to the other defendant but not as to the
accused. 7

8
The counsel submitted to the ruling of the court.

In a decision rendered on March 6, 1990, the Regional Trial Court of Quezon City found MMTC and Musa guilty of
negligence and ordered them to pay damages and attorney's fees, as follows:

WHEREFORE, foregoing premises considered, judgment is hereby rendered ordering defendant

Metro Manila Transit Corporation primarily and defendant Pedro Musa subsidiarily liable to
plaintiffs-spouses Rodolfo V. Rosales and Lily R. Rosales as follows:

1. Actual damages in the amount of P150,000.00;

2. Moral damages in the amount of P500,000.00;

3. Exemplary damages in the amount of P100,000.00;

4. Attorney's fees in the amount of P50,000.00; and

5. Costs of suit.9

Both parties appealed to the Court of Appeals. On August 5, 1994, the Court of Appeals affirmed the decision of
the trial court with the following modification:

WHEREFORE, except for the modification deleting the award of P150,000.00 as actual damages
and awarding in lieu thereof the amount of P30,000.00 as death indemnity, the decision appealed
from is, in all other aspects, hereby AFFIRMED. 10
The spouses Rosales filed a motion for reconsideration, which the appellate court, in a resolution, dated
September 12, 1996, partly granted by increasing the indemnity for the death of Liza Rosalie from P30,000.00 to
P50,000.00. Hence, these appeals.

In G.R. No. 116617, MMTC and Musa assail the decision of the Court of Appeals on the following grounds:

PUBLIC RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE COURT A

QUO'SDECISION PARTICULARLY IN NOT HOLDING THAT APPELLANT MMTC EXERCISED THE
DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF ITS
DRIVERS. THIS BEING THE CASE, APPELLANT MMTC IS ENTITLED TO BE ABSOLVED FROM
ANY LIABILITY OR AT LEAST TO A REDUCTION OF THE RECOVERABLE DAMAGES.

THE PUBLIC RESPONDENT COURT OF APPEALS, JUST LIKE THE COURT A QUO, OVERLOOKED
THE FACT THAT PETITIONER MMTC, A GOVERNMENT-OWNED CORPORATION, COMMITTED NO
FRAUD, MALICE, BAD FAITH, NOR WANTON, FRAUDULENT, OPPRESSIVE AND MALEVOLENT
ACTUATIONS AGAINST HEREIN RESPONDENTS-APPELLEES.

THE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE COURT A

QUO'SDECISION TO HOLD PETITIONER-APPELLANT MMTC PRIMARILY LIABLE TO PRIVATE
RESPONDENTS-APPELLEES IN THE AMOUNT OF P500,000 AS MORAL DAMAGES, P100,000 AS
EXEMPLARY DAMAGES AND P30,000 BY WAY OF DEATH INDEMNITY.

THE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE COURT A

QUO'S DECISION IN RENDERING JUDGMENT FOR ATTORNEY'S FEES IN THE AMOUNT OF
P50,000.00 IN FAVOR OF PRIVATE RESPONDENTS-APPELLEES.

On the other hand, in G.R. No. 126395, the spouses Rosales contend:

The Court of Appeals erred in:

First, considering that death indemnity which this Honorable Court set at P50,000.00 is akin to
actual damages;

Second, not increasing the amount of damages awarded;

Third, refusing to hold all the defendants, now private respondents, solidarily liable.

MMTC and Musa do not specifically question the findings of the Court of Appeals and the Regional Trial Court of
Quezon City that Liza Rosalie was hit by MMTC Bus No. 27. Nonetheless, their petition contains discussions
which cast doubts on this point. 11 Not only can they not do this as the rule is that an appellant may not be heard
on a question not specifically assigned as error, but the rule giving great weight, and even finality, to the factual
conclusions of the Court of Appeals which affirm those of the trial court bars a reversal of the finding of liability
against petitioners MMTC and Musa. Only where it is shown that such findings are whimsical, capricious, and
arbitrary can they be overturned. To the contrary, the findings of both the Court of Appeals and the Regional Trial
Court are solidly anchored on the evidence submitted by the parties. We, therefore, regard them as conclusive in
resolving the petitions at bar. 12 Indeed, as already stated, petitioners' counsel submitted to the ruling of the court
that the finding of the trial court in the criminal case was conclusive on them with regard to the questions of
whether Liza Rosalie was hit by MMTC Bus No. 27 and whether its driver was negligent. Rather, the issue in this
case turns on Art. 2180 of the Civil Code, which provides that "employers shall be liable for the damages caused
by their employees and household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry." The responsibility of employers for the negligence of their
employees in the performance of their duties is primary, that is, the injured party may recover from the
employers directly, regardless of the solvency of their employees. 13 The rationale for the rule on vicarious
liability has been adumbrated thus:

What has emerged as the modern justification for vicarious liability is a rule of policy, a deliberate
allocation of a risk. The losses caused by the torts of employees, which as a practical matter are
sure to occur in the conduct of the employer's enterprise, are placed upon that enterprise itself,
as a required cost of doing business. They are placed upon the employer because, having
engaged in an enterprise, which will on the basis of all past experience involve harm to others
 through the tort of employees, and sought to profit by it, it is just that he, rather than the innocent
injured plaintiff, should bear them; and because he is better able to absorb them, and to distribute
them, through prides, rates or liability insurance, to the public, and so to shift them to society, to
the community at large. Added to this is the makeweight argument that an employer who is held
strictly liable is under the greatest incentive to be careful in the selection, instruction and
supervision of his servants, and to take every precaution to see that the enterprise is conducted
safely. 14

In Campo v. Camarote, 15 we explained the basis of the presumption of negligence in this wise:

The reason for the law is obvious. It is indeed difficult for any person injured by the carelessness
of a driver to prove the negligence or lack of due diligence of the owner of the vehicle in the
choice of the driver. Were we to require the injured party to prove the owner's lack of diligence,
the right will in many cases prove illusory, as seldom does a person in the community, especially
in the cities, have the opportunity to observe the conduct of all possible car owners therein. So
the law imposes the burden of proof of innocence on the vehicle owner. If the driver is negligent
and causes damage, the law presumes that the owner was negligent and imposes upon him the
burden of proving the contrary.

Employers may be relieved of responsibility for the negligent acts of their employees within the scope of their
assigned tasks only if they can show that "they observed all the diligence of a good father of a family to prevent
damage."16 For this purpose, they have the burden of proving that they have indeed exercised such diligence,
both in the selection of the employee who committed the quasi-delict and in the supervision of the performance
of his duties.

In the selection of prospective employees, employers are required to examine them as to their qualifications,
experience, and service records. 17 On the other hand, with respect to the supervision of employees, employers
should formulate standard operating, procedures, monitor their implementation, and impose disciplinary
measures for breaches thereof. 18 To establish these factors in a trial involving the issue of vicarious liability,
employers must submit concrete proof, including documentary evidence. 19

In this case, MMTC sought to prove that it exercised the diligence of a good father of a family with respect to the
selection of employees by presenting mainly testimonial evidence on its hiring procedure. According to MMTC,
applicants are required to submit professional driving licenses, certifications of work experience, and clearances
from the National Bureau of Investigation; to undergo tests of their driving skills, concentration, reflexes, and
vision; and, to complete training programs on traffic rules, vehicle maintenance, and standard operating
procedures during emergency cases. 20

MMTC's evidence consists entirely of testimonial evidence (1) that transport supervisors are assigned to oversee
field operations in designated areas; (2) that the maintenance department daily inspects the engines of the
vehicles; and, (3) that for infraction of company rules there are corresponding penalties. 21Although testimonies
were offered that in the case of Pedro Musa all these precautions were followed, 22 the records of his interview, of
the results of his examinations, and of his service were not presented.

MMTC submitted brochures and programs of seminars for prospective employees on vehicle maintenance, traffic
regulations, and driving skills and claimed that applicants are given tests to determine driving skills,
concentration, reflexes, and vision, 23 but there is no record that Musa attended such training programs and
passed the said examinations before he was employed. No proof was presented that Musa did not have any
record of traffic violations. Nor were records of daily inspections, allegedly conducted by supervisors, ever
presented.

Normally, employers' keep files concerning the qualifications, work experience, training evaluation, and
discipline of their employees. The failure of MMTC to present such documentary proof puts in doubt the
credibility of its witnesses. What was said in Central Taxicab Corporation v. Ex-Meralco Employees
Transportation Corporation 24 applies to this case:

This witness spoke of an affidavit of experience which a driver-applicant must accomplish before
he is employed by the company, a written time schedule for each bus, and a record of the
inspections and thorough checks pertaining to each bus before it leaves the car barn; yet no
 attempt was ever made to present in evidence any of these documents, despite the fact that they
were obviously in the possession and control of the defendant company.

....

Albert also testified that he kept records of the preliminary and final tests given by him as well as
a record of the qualifications and experience of each of the drivers of the company. It is rather'
strange, therefore, that he failed to produce in court the all important record of Roberto, the driver
involved in this case.

The failure of the defendant company to produce in court any record or other documentary proof
tending to establish that it had exercised all the diligence of a good father of a family in the
selection and supervision of its drivers and buses, notwithstanding the calls therefor by both the
trial court and the opposing counsel, argues strongly against its pretensions.

It is noteworthy that, in another case involving MMTC, testimonial evidence of identical content, which MMTC
presented to show that it exercised the diligence of a good father of a family in the selection and supervision of
employees and thus avoid vicarious liability for the negligent acts of its employees, was held to be insufficient to
overcome the presumption of negligence against it. In Metro Manila Transit Corp. v. Court of Appeals, 25 this
Court said:

Coming now to the case at bar, while there is no rule which requires that testimonial evidence, to
hold sway, must be corroborated by documentary evidence, or even object evidence for that
matter, inasmuch as the witnesses' testimonies dwelt on mere generalities, we cannot consider
the same as sufficiently persuasive proof that there was observance of due diligence in the
selection and supervision of employees. Petitioner's attempt to prove its diligentissimi patris
familias in the selection and supervision of employees through oral evidence must fail as it was
unable to buttress the same with any other evidence, object or documentary, which might obviate
the apparent biased nature of the testimony.

Having found both MMTC and its driver Pedro Musa liable for negligence for the death of Liza Rosalie on August
9, 1986; we now consider the question of damages which her parents, the spouses Rosales, are entitled to
recover, which is the subject of the appeal in G.R. No. 126395.

Indemnity for Death. Art. 2206 provides for the payment of indemnity for death caused by a crime or quasi-delict.
Initially fixed in said article of the Civil Code at P3,000.00, the amount of the indemnity has through the years
been gradually increased based on the value of the peso. At present, it is fixed at P50,000.00. 26 To conform to
this new ruling, the Court of Appeals correctly increased the indemnity it had originally ordered the spouses
Rosales to be paid from P30,000.00 to P50,000.00 in its resolution, dated September 12, 1996.

Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation, one is entitled to an
adequate compensation only for such pecuniary loss suffered by him as he has duly proved." The spouses
Rosales are claiming actual damages in the amount of P239,245.40. However, during the trial, they submitted
receipts showing that expenses for the funeral, wake, and interment of Liza Rosalie amounted only to P60,226.65
itemized as follows: 27

Medical Attendance P 739.65

Funeral Services 5,100.00

Wreaths 2,500.00

Embalment 1,000.00

Obituaries 7,125.00

Interment fees 2,350.00

Expenses during wake 14,935.00

 Mourning clothes 5,000.00

Photography 3,500.00

Video Coverage 10,000.00

Printing of invitation cards 7,977.00

TOTAL 60,226.65

Hence, apart from the indemnity for death, the spouses Rosales are entitled to recover the above amount as
actual damages.

Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of the deceased." The reason
for the grant of moral damages has been explained thus:

. . . the award of moral damages is aimed at a restoration, within the limits of the possible, of the
spiritual status quo ante; and therefore, it must be proportionate to the suffering inflicted. The
intensity of the pain experienced by the relatives of the victim is proportionate to the intensity of
affection for him and bears no relation whatsoever with the wealth or means of the offender. 28

In the instant case, the spouses Rosales presented evidence of the intense moral suffering they had gone
through as a result of the loss of Liza Rosalie who was their youngest child. Rodolfo Rosales recounted the place
of Liza Rosalie in the family and their relationship with her in the following words:

Q: Mr. Rosales, how was Liza to you as a daughter?

A: Well, Liza as a daughter was the greatest joy of the family; she was our pride,
and everybody loved her — all her brothers and sisters — because she was sweet
and unspoiled. . . . She was soft-spoken to all of us; and she still slept with us at
night although she had her own room. Sometimes in the middle of the night she
would open our door and ask if she could sleep with us. So we let her sleep with
us, as she was the youngest. 29

The death of Liza Rosalie left a void in their lives. Rodolfo Rosales testified on the devastating effect of the death
of Liza Rosalie:

Q: And after she died, what changes, if any, did you feel in your family?

A: Well, there is something hollow in our family, something is missing. She used to
greet me when I came home and smell if I was drunk and would tell me to dress up
and take a shower before her mommy could see me. She would call me up at the
office and say: "Daddy, come home, please help me with my homework." Now, all
these things, I am missing, you know. . . I do not feel like going home early.
Sometimes my wife would complain and ask: "Where did you go?" But I cannot
explain to her how I feel. 30

Lily Rosales described life without Liza Rosalie thus:

Q: Now, your life without Liza, how would you describe it, Dr. Rosales?

A: You know it is very hard to describe. The family was broken apart. We could not
go together because we remember Liza. Every time we go to the cemetery we try
as much as possible not to go together. So, we go to the cemetery one at a time,
sometimes, my husband and I, or my son and another one, but we never go
together because we remember Liza. But before her death we would always be
together, the whole family on weekends and on our days off. My husband works
 very hard, I also work very hard and my children go to school. They study very
hard. Now we cannot go together on outings because of the absence of Liza. 31

The spouses Rosales claim moral damages in the amount of P5,000,000.00. In People v. Teehankee, Jr.,32this
Court awarded P1 million as moral damages to the heirs of a seventeen-year-old girl who was murdered. This
amount seems reasonable to us as moral damages for the loss of a minor child, whether he or she was a victim
of a crime or a quasi-delict. Hence, we hold that the MMTC and Musa are solidarily liable to the spouses Rosales
in the amount of P1,000,000.00 as moral damages for the death of Liza Rosalie.

Exemplary Damages. Art. 2231 provides that exemplary damages may be recovered in cases involving quasi-
delicts if "the defendant acted with gross negligence." This circumstance obtains in the instant case. The records
indicate that at the time of the mishap, there was a pending criminal case against Musa for reckless imprudence
resulting in slight physical injuries with another branch of the Regional Trial Court, Quezon City. 33 The evidence
also shows that he failed to stop his vehicle at once even after eye witnesses shouted at him. The spouses
Rosales claim exemplary damages in the amount of P5,000,000.00. Under the circumstances, we deem it
reasonable to award the spouses Rosales exemplary damages in the amount of five hundred thousand pesos
(P500,000.00).

Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in the instant case, exemplary
damages are awarded. In the recent case of Sulpicio Lines, Inc. v. Court of Appeals, 34 which involved the death
of a minor child in the sinking of a vessel, we held an award of P50,000.00 as attorney's fees to be reasonable.
Hence, we affirm the award of attorney's fees made by the Court of Appeals to the spouses Rosales in that
amount.

Compensation for Loss of Earning Capacity. Art. 2206 of the Civil Code provides that in addition to the indemnity
for death caused by a crime or quasi delict, the "defendant shall be liable for the loss of the earning capacity of
the deceased, and the indemnity shall be paid to the heirs of the latter; . . ." Compensation of this nature is
awarded not for loss of earnings but for loss of capacity to earn money. 35Evidence must be presented that the
victim, if not yet employed at the time of death, was reasonably certain to complete training for a specific
profession. 36 In People v. Teehankee 37 no award of compensation for loss of earning capacity was granted to
the heirs of a college freshman because there was no sufficient evidence on record to show that the victim would
eventually become a professional pilot. 38 But compensation should be allowed for loss of earning capacity
resulting from the death of a minor who has not yet commenced employment or training for a specific profession
if sufficient evidence is presented to establish the amount thereof. In the United States it has been observed:

This raises the broader question of the proper measure of damages in death cases involving
children, housewives, the old, and others who do not have market income so that there is no
pecuniary loss to survivors or to the estate of the decedent. The traditional approach was to
award no or merely nominal damages in such cases. . . . Increasingly, however, courts allow
expert testimony to be used to project those lost earnings. 39

Thus, in Haumersen v. Ford Motor Co., 40 the court allowed the heirs of a seven-year-old boy who was killed in a
car accident to recover compensation for loss of earning capacity:

Considerable evidence was presented by plaintiffs in an effort to give the jury a foundation on
which to make an award. Briefly stated, this evidence showed Charles Haumersen was a seven-
year-old of above average characteristics. He was described as "very intelligent" and "all-
American." He received high marks in school. He was active in church affairs and participated in
recreational and athletic events, often with, children older than himself. In addition, he had an
unusual talent for creating numerous cartoons and other drawings, some of which plaintiffs
introduced at trial.

The record does not disclose passion and prejudice. The key question is whether the verdict of
$100,000 has support in the evidence.

Upon analysis of the record, we conclude that we should not disturb the award.

The argument for allowing compensation for loss of earning capacity of a minor is even stronger if he or she was
a student, whether already training for a specific profession or still engaged in general studies. InKrohmer v.
Dahl, 41 the court, in affirming the award by the jury of $85,000.00 to the heirs of an eighteen-year-old college
freshman who died of carbon monoxide poisoning, stated as follows:

There are numerous cases that have held admissible evidence of prospective earnings of a
student or trainee. . . . The appellants contend that such evidence is not admissible unless the
course under study relates to a given occupation or profession and it is shown that the student is
reasonably certain to follow that occupation or profession. It is true that the majority of these
decisions deal with students who are studying for a specific occupation or profession. However,
not one of these cases indicate that evidence of one's education as a guide to future earnings is
not admissible where the student is engaged in general studies or whose education does not
relate to a specific occupation.

In sharp contrast with the situation obtaining in People v. Teehankee, where the prosecution merely presented
evidence to show the fact of the victim's graduation from high school and the fact of his enrollment in a flying
school, spouses Rosales did not content themselves with simply establishing Liza Rosalie's enrollment at UP
Integrated School. They presented evidence to show that Liza Rosalie was a good student, promising artist, and
obedient child. She consistently performed well in her studies since grade school. 42 A survey taken in 1984 when
Liza Rosalie was twelve years old showed that she had good study habits and attitudes. 43 Cleofe Chi, guidance
counselor of the University of the Philippines Integrated School, described Liza Rosalie as personable, well-liked,
and with a balanced personality. 44 Professor Alfredo Rebillon, a faculty member of the University of the
Philippines College of Fine Arts, who organized workshops which Liza Rosalie attended in 1982 and 1983,
testified that Liza Rosalie had the potential of eventually becoming an artist. 45 Professor Rebillon's testimony is
more than sufficiently established by the 51 samples of Liza Rosalie's watercolor, charcoal, and pencil drawings
submitted as exhibits by the spouses Rosales. 46 Neither MMTC nor Pedro Musa controverted this evidence.

Considering her good academic record, extra-curricular activities, and varied interests, it is reasonable to
assume that Liza Rosalie would have enjoyed a successful professional career had it not been for her untimely
death. Hence, it is proper that compensation for loss of earning capacity should be awarded to her heirs in
accordance with the formula established in decided cases 47 for computing net earning capacity, to wit:

Net Earning = Life [Gross Necessary

Capacity Expectancy x [Annual — Living

[Income Expenses

Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty (80) and the age of the
deceased.48 Since Liza Rosalie was 16 at the time of her death, her life expectancy was 44 more years. 49 Her
projected gross annual income, computed based on the minimum wage for workers in the non-agricultural sector
in effect at the time of her death, 50 then fixed at P37.00, 51 is P14,630.46. 52 Allowing for necessary living
expenses of fifty percent (50%) of her projected gross annual income, 53 her total net earning capacity amounts to
P321,870.12. 54

Finally, the spouses Rosales argue that the Court of Appeals erred in absolving Conrado Tolentino, Feliciana
Celebrado, and the GSIS of liability. The Spouses Rosales alleged that Tolentino, as Acting General Manager of
the MMTC, and Celebrado, as a dispatcher thereof, were charged with the supervision of Musa and should,
therefore, be held vicariously liable under Art. 2180 of the Civil Code. With respect to the GSIS, they contend that
it was the insurer in a contract for third party liability it had with the MMTC.

Although the fourth paragraph of Art. 2180 mentions "managers" among those made responsible for the
negligent acts of others, it is settled that this term is used in the said provision in the sense of
"employers." 55 Thus, Tolentino and Celebrado cannot be held liable for the tort of Pedro Musa.

In Vda. de Maglana v. Consolacion, 56 it was ruled that an insurer in an indemnity contract for third party liability
is directly liable to the injured party up to the extent specified in the agreement, but it cannot be held solidarily
liable beyond that amount. The GSIS admitted in its answer that it was the insurer of the MMTC for third party
liability with respect to MMTC Bus No. 27 to the extent of P50,000.00. 57 Hence, the spouses Rosales have the
option either to claim the said amount from the GSIS and the balance of the award from MMTC and Musa or to
enforce the entire judgment against the latter, subject to reimbursement from the former to the extent of the
insurance coverage. 58
One last word. The Regional Trial Court of Quezon City erred in holding MMTC primarily and Musa secondarily
liable for damages arising from the death of Liza Rosalie. It was error for the appellate court to affirm this aspect
of the trial court's decision.

As already stated, MMTC is primarily liable for damages for the negligence of its employee in view of Art. 2180.
Pursuant to Art. 2181, it can recover from its employee what it may pay. This does not make the employee's
liability subsidiary. It only means that if the judgment for damages is satisfied by the common carrier, the latter
has a right to recover what it has paid from its employee who committed the fault or negligence which gave rise
to the action based on quasi-delict. 59 Hence, the spouses Rosales have the option of enforcing the judgment
against either MMTC or Musa.

From another point of view, Art. 2194 provides that "the responsibility of two or more persons who are liable for
a quasi-delict is solidary." We ruled in Gelisan v. Alday 60 that "the registered owner/operator of a public service
vehicle is jointly and severally liable with the driver for damages incurred by passengers or third persons as a
consequence of injuries sustained in the operation of said vehicle." In Baliwag Transit Inc. v. Court of
Appeals 61 it was held that "to escape solidary liability for a quasi-delict committed by an employee, the employer
must adduce sufficient proof that it exercised such degree of care." Finally, we held in the recent case
of Philtranco Service Enterprises, Inc. v. Court of Appeals 62 that "the liability of the registered owner of a public
service vehicle . . . for damages arising from the tortious acts of the driver is primary, direct, and joint and
several or solidary with the driver."

WHEREFORE, the decision of the Court of Appeals is SET ASIDE and another one is RENDERED holding the
Metro Manila Transit Corporation and Pedro Musa jointly and severally liable for the death of Liza Rosalie R.
Rosales and ORDERING them as such to pay to the spouses Rodolfo V. Rosales and Lily R. Rosales the
following amounts:

1) death indemnity in the amount of fifty-thousand pesos (P50,000,00);

2) actual damages in the amount of sixty thousand two hundred twenty six pesos and sixty five centavos
(P60,226.65);

3) moral damages in the amount of one million pesos (P1,000,000.00);

4) exemplary damages in the amount of five hundred thousand pesos (P500,000.00);

5) attorney's fees in the amount of fifty thousand pesos (P50,000.00);

6) compensation for loss of earning capacity in the amount of three hundred twenty-one thousand eight hundred
seventy pesos and twelve centavos (P321,870.12); and

7) the costs of suit.

SO ORDERED.

THIRD DIVISION

G.R. No. 83613 February 21, 1990

FIREMAN'S FUND INSURANCE CO., petitioner, vs.METRO PORT SERVICE, INC., (Formerly E. Razon,
Inc.), respondent.

This is a petition for review of the decision and resolution denying reconsideration of the Court of Appeals in CA-G.R. CV
No. 00673 entitled "Fireman's Fund Insurance Co. v. Maersk Line, Compañia General de Tabacos de Filipinas and E.
Razon, Inc."

The facts are as follows:

Vulcan Industrial and Mining Corporation imported from the United States several machineries and equipment which were
loaded on board the SIS Albert Maersk at the port of Philadelphia, U.S.A., and transhipped for Manila through the vessel
S/S Maersk Tempo.

The cargo which was covered by a clean bill of lading issued by Maersk Line and Compania General de Tabacos de
Filipinas (referred to as the CARRIER) consisted of the following:

xxx xxx xxx

1 piece truck mounted core drill

1 piece trailer mounted core drill

1 (40') container of 321 pieces steel tubings

1 (40') container of 170 pieces steel tubings

1 (40') container of 13 cases, 3 crates, 2 pallets and 26 mining machinery parts. (Rollo, p. 4)

The shipment arrived at the port of Manila on June 3, 1979 and was turned over complete and in good order condition to
the arrastre operator E. Razon Inc. (now Metro Port Service Inc. and referred to as the ARRASTRE).

At about 10:20 in the morning of June 8, 1979, a tractor operator, named Danilo Librando and employed by the
ARRASTRE, was ordered to transfer the shipment to the Equipment Yard at Pier 3. While Librando was maneuvering the
tractor (owned and provided by Maersk Line) to the left, the cargo fell from the chassis and hit one of the container vans of
American President Lines. It was discovered that there were no twist lock at the rear end of the chassis where the cargo
was loaded.

There was heavy damage to the cargo as the parts of the machineries were broken, denied, cracked and no longer useful
for their purposes.

The value of the damage was estimated at P187,500.00 which amount was paid by the petitioner insurance company to
the consignee, Vulcan Industrial and Mining Corporation.

The petitioner, under its subrogation rights, then filed a suit against Maersk Line, Compania General de Tabacos (as
agent) and E. Razon, Inc., for the recovery of the amount it paid the assured under the covering insurance policy. On
October 26, 1980, the trial court rendered judgment, the decretal portion of which reads as follows:

xxx xxx xxx

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants by
ordering the latter to pay, jointly and severally, the plaintiff the sum of P187,500.00, with legal interest
thereon from August 29, 1980 until full payment thereof.

Defendants are also ordered to pay, in solidum, the sum of P10,000.00 as attorney's fees to the plaintiff,
and to pay the costs of this suit.

There shall be no award for exemplary damages in favor of the plaintiff, for the reason that defendants
are probably acting in good faith in resisting the complaint. (Rollo, pp. 45-46)

All the defendants appealed to the Court of Appeals. Eventually, Maersk Line and Compania General de Tabacos
negotiated with the petitioner for the settlement of the latter's claim and no longer pursued their appeal.

On the appeal of the ARRASTRE, the Court of Appeals rendered a decision with the following dispositive portion:

WHEREFORE, foregoing premises considered, the decision of the court a quo insofar as herein
defendant-appellant is concerned is REVERSED It is hereby ordered that the complaint against herein
defendant-appellant be dismissed. No costs. (Rollo, p. 50)
Reconsideration of the decision was denied in a resolution dated May 23, 1988.

Hence, the present recourse.

The petitioner raises this lone assignment of error:

THE HONORABLE COURT OF APPEALS ERRED IN LIMITING LIABILITY SOLELY ON CO-

DEFENDANT MAERSK LINES, CONTRARY TO THE FINDINGS OF FACTS OF THE TRIAL COURT A
QUO AND OTHER FACTORS SHOWING CLEAR JOINT LIABILITY OF DEFENDANTS IN SOLIDUM.

There is merit in this petition.

This Court has held in a number of cases that findings of fact of the Court of Appeals are, in general, conclusive on the
Supreme Court when supported by the evidence on record. The rule is not absolute, however, and allows exceptions,
which we find present in the case at bar. The respondent court's findings of facts are contrary to those of the trial court
and appear to be contradicted by the evidence on record thus calling for our review. (Metro Port Service, Inc. v. Court of
Appeals, 131 SCRA 365 [1984]).

In absolving the ARRASTRE, the respondent Court ruled that although Librando was an employee of the ARRASTRE,
since he was included in its payroll, he was technically and strictly an employee of Maersk Line in this particular instance
when he drove the tractor admittedly owned by the foreign shipping line. The Court ruled that he received instructions not
from Metro Port but from Maersk Line relative to this job. He was performing a duty that properly pertained to Maersk Line
which, for lack of a tractor operator, had to get or hire from the ARRASTRE as per their management contract.
Nevertheless, Librando was not remiss in his duty as tractor-driver considering that the proximate and direct cause of the
damage was the absence of twist locks in the rear end of the chassis which Maersk Line failed to provide. The respondent
court thereby placed the entire burden of liability on the owner of the Chassis which in this case was the foreign shipping
company, Maersk Line.

The foregoing conclusion disregarded the pertinent findings of facts made by the lower court which are supported by the
evidence on record, to wit:

1. The accident occurred while the cargoes were in the custody of the arrastre operator.

2. The tractor operator was an employee of the arrastre operator.

xxx xxx xxx

4. By the management contract inasmuch as the foreign shipping company has no tractor operator in its
employ, the arrastre provided the operator.

xxx xxx xxx

8. It was likewise the responsibility of the tractor operator, an employee of the arrastre operator to inspect
the chassis and tractor before driving the same, but which obligation the operator failed to do.

9. It was also the responsibility of the supervisor in the employ of the arrastre operator to see that their
men complied with their respective tasks, which included the examination if the chassis has twist lock.
(Rollo, pp. 44-45)

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman
(Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]). The relationship between the consignee and the common carrier is
similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253
[1960]). Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in
good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the
CARRIER are therefore charged with and obligated to deliver the goods in good condition to the consignee.

In general, the nature of the work of an arrastre operator covers the handling of cargoes at piers and wharves (Visayan
Cebu Terminal Co., Inc. v. Commissioner of Internal Revenue, 13 SCRA 357 [1965]). This is embodied in the
Management Contract drawn between the Bureau of Customs and E. Razon Inc., as the Arrastre Operator. The latter
agreed to bind itself, to wit:

CLAIMS AND LIABILITY FOR LOSSES AND DAMAGES

1. Responsibility and Liability for Losses and Damages;

Claims. — The CONTRACTOR shall, at its own expense handle all merchandise in the piers and other
designated places and at its own expense perform all work undertaken by it hereunder diligently and in
skillful workmanlike and efficient manner; That the CONTRACTOR shall be solely responsible as an
independent CONTRACTOR, and hereby agrees to accept liability and to promptly pay to the s hip
company, consignee, consignor or other interested party or parties for the loss, damage, or non-delivery
of cargoes to the extent of the actual invoice value of each package which in no case shall be more than
Three Thousand Five Hundred Pesos (P3,500.00) for each package unless the value of the importation is
otherwise specified or manifested or communicated in writing together with the invoice value and
supported by a certified packing list to the CONTRACTOR by the interested party or parties before the
discharge of the goods, as well as all damage that may be suffered on account of loss, damage, or
destruction of any merchandise while in custody or under the control of the CONTRACTOR in any pier,
shed, warehouse, facility; or other designated place under the supervision of the BUREAU, but said
CONTRACTOR shall not be responsible for the condition of the contents of any package received nor for
the weight, nor for any loss, injury or damage to the said cargo before or while the goods are being
received or remained on the piers, sheds, warehouse or facility if the loss, injury or damage is caused by
force majeure, or other cause beyond the CONTRACTORS control or capacity to prevent or remedy; ...

xxx xxx xxx

The CONTRACTOR shall be solely responsible for any and all injury or damage that may arise on
account of the negligence or carelessness of the CONTRACTOR, its agent or employees in the
performance of the undertaking by it to be performed under the terms of the contract, and the
CONTRACTOR hereby agree to and hold the BUREAU at all times harmless therefrom and whole or any
part thereof. (Original Records, pp. 110-112; Emphasis supplied)

To carry out its duties, the ARRASTRE is required to provide cargo handling equipment which includes among others
trailers, chassis for containers. In some cases, however, the shipping line has its own cargo handling equipment.

In this particular instance, the records reveal that Maersk Line provided the chassis and the tractor which carried the
carried the subject shipment. It merely requested the ARRASTRE to dispatch a tractor operator to drive the tractor
inasmuch as the foreign shipping line did not have any truck operator in its employ. Such arrangement is allowed between
the ARRASTRE and the CARRIER pursuant to the Management Contract. It was clearly one of the services offered by
the ARRASTRE. We agree with the petitioner that it is the ARRASTRE which had the sole discretion and prerogative to
hire and assign Librando to operate the tractor. It was also the ARRASTRE's sole decision to detail and deploy Librando
for the particular task from among its pool of tractor operators or drivers. It is, therefore, inacurrate to state that Librando
should be considered an employee of Maersk Line on that specific occasion.

Handling cargo is mainly the s principal work so its driver/operators, "cargadors", or employees should observe the stand"
and indispensable measures necessary to prevent losses and damage to shipments under its custody. Since the
ARRASTRE offered its drivers for the operation of tractors in the handling of cargo and equipment, then the ARRASTRE
should see to it that the drivers under its employ must exercise due diligence in the performance of their work. From the
testimonies of witnesses presented, we gather that driver/operator Librando was remiss in his duty. Benildez Cepeda, an
arrastre-investigator of Metro Port admitted that Librando as tractor-operator should first have inspected the chassis and
made sure that the cargo was securely loaded on the chassis. He testified:

xxx xxx xxx

Q My question is in your investigation report including enclosures, the principal reason

was that the chassis has no rear twist lock?

A Yes, sir.
 Q Did you investigate whether the driver Librando inspected the the truck before he
operated the same whether there was rear twist lock or not?

A I have asked him about that question whether he had inspected the has any rear twist
lock and the answer he did not inspect, sir.

Q As a operator, do you agree with me that it is the duty also of Librando to see to it that
the truck is in good condition and fit to travel, is that correct?

A Yes, sir.

Q And as a tractor operator it is his duty to see to it that the van mounted on top of the
tractor was properly is that correct?

A Yes, sir. (At pp. 18-20, T.S.N., February 17, 1982)

Again Danilo Librando also admitted that it was usually his practice to inspect not only the tractor but the chassis as well
but failed to do so in this particular instance.

xxx xxx xxx

Q You mentioned of the absence of a twist lock. Will you tell us where is this twist lock
supposed to be located?

A At the rear end of the chassis.

Q Before you operated the tractor which carried the mounted cord drill truck and trailer
did you examine if the chasiss had any twist locks?

A No, sir, because I presumed that it had twist locks and I was confident that it had twist
locks.

Q As a matter of procedure and according to you, you examined the tractor, do you not
make it a practice to examine whether the chassis had any twist locks?

A I used to do that but in that particular instance I thought it had already its twist locks. (p.
8, T.S.N., October 5, 1981)

It is true that Maersk Line is also at fault for not providing twist locks on the chassis. However, we find the testimony of
Manuel Heraldez who is the Motor Pool General Superintendent of Metro Port rather significant. On cross-examination, he
stated that:

Q In your experience, Mr. witness, do you know which is ahead of the placing of the
container van or the placing of the twist lock on the chassis?

A The twist lock is already permanently attached on the chassis, sir.

Q Earlier, you mentioned that you cannot see the twist lock if the chassis is loaded,
correct?

A Yes, sir.

Q Do you what to impress upon the Honorable Court that, by mere looking at a loaded
chassis, the twist lock cannot be seen by the naked eye? Because the van contained a
hole in which the twist lock thus entered inside the hold and locked itself. It is already
loaded. So. you cannot no longer see it.
 Q But if you closely examine this chassis which has a load of container van. You can see
whether a twist lock is present or not?

A Yes, sir. A twist lock is present.

Q In other words, if the driver of this tractor closely examined this van, he could have
detected whether or not a twist lock is present?

A Yes, sir. (pp. 33-35, T.S.N., March 23, 1982; Emphasis supplied)

Whether or not the twist lock can be seen by the naked eye when the cargo has been loaded on the chassis, an efficient
and diligent tractor operator must nevertheless check if the cargo is securely loaded on the chassis.

We, therefore, find Metro Port Service Inc., solidarily liable in the instant case for the negligence of its employee. With
respect to the limited liability of the ARRASTRE, the records disclose that the value of the importation was relayed to the
arrastre operator and in fact processed by its chief claims examiner based on the documents submitted.

WHEREFORE, the appealed judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE and that of
the Court of First Instance of Manila, 6th Judicial District, Branch II is REINSTATED. No costs.

SO ORDERED.

Fernan, C.J. (Chairman), Feliciano, Bidin and Cortes, JJ., concur.