4 COMMERCIAL-LAW (2).docx

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Republic of the Philippines
Supreme Court
Manila
2022 BAR EXAMINATIONS
COMMERCIAL LAW
November 13, 2022 2:00 p.m. to 5:00 p.m.
INSTRUCTIONS
1. This is a 3-hour examination consisting of 12 items, each worth 5 points.
If the item contains sub-questions, please mark your answer separately with
“(a)” followed by the corresponding answer, then “(b)” followed by the
answer.
2. Read each question carefully. Do not assume facts that are not provided in
the question.
3. Answer the questions clearly and concisely. Your answer should
demonstrate your ability to analyze the facts, identify issues, apply the law
and jurisprudence, and arrive at a sound and logical conclusion. A mere “Yes”
or “No” answer, or a mere legal conclusion without an explanation will not be
given full credit.
4. Allocate your time efficiently. The items are in random sequence. You may
skip items and move to items that you may find easier to answer. Use
the 'Flag' feature so that you can return to the unanswered items.
5. Do not write your name, distinguishing marks, or extraneous words or
phrases in any of your answers. This may be considered cheating and may
disqualify you from the entire Bar Examinations.
6. Do not type your final answer in the notes box, which is an optional tool.
Any text written in the notes box will not be included in your final answer.
7. Technical issues during the exam are rare, but if you experience one, do
not panic. Do not attempt to submit your exam answers. Call the attention
of your proctor for assistance.
8. If you need to step out of the room, use the Hide Screen feature to prevent
anyone else from seeing your answers.
9. You have until 5:00 p.m. to finish the exam. Make sure you have completed
and reviewed your answers before then. When submitting, the system will ask

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you one more time to confirm if you are ready to submit your answer file, to
give you another opportunity to review your answers.
10.Once done, show your proctor the green screen confirming your
submission. If the green screen does not appear, check with your proctor
before leaving the room.
ALFREDO BENJAMIN S. CAGUIOA
Associate Justice and
2022 Bar Examinations Chairperson

1. Samson Manufacturing, Inc. insured its own goods with Delilah
Insurance for Php 2,000,000.00. The same goods were insured by Alibaba
Shipping Co. with Assured Corp. for the same amount pursuant to its contract
of carriage with SamsonManufacturing, Inc. Both policies warranted that no
other insurance exists, and in case another insurance does exist, such would
not void either policy, but in no caseshould the claim exceed the total amount
of Php 2,000,000.00 at the time of loss.
Is this a case of double insurance? Explain briefly. (5 points)
ANSWER:
No, this case is not double insurance.
A double insurance exists where the same person is insured by several
insurers separately in respect of the same subject and interest. Samson’s
interest is different from Alibaba’s interest.
Samson Manufacturing, as owner of the goods shipment, has an
insurable interest different from Alibaba shipping, as the common
carrier who can incur liability for failure to deliver Samson’s goods.
(Geagonia vs. Country Bankers Insurance, G.R. No. 114427, Feb. 6,
1995)
ANOTHER ANSWER:
No, it is not a case of double insurance.
By the express provision of Section 93 of the Insurance Code, double
insurance exists where the same person is insured by several insurers
separately in respect to the same subject and interest. The requisites in
order for double insurance to arise are as follows:
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
In the present case, while it is true that Samson Manufacturing, Inc. and
Alibaba Shipping Co. insured the same goods and both covered the same
peril insured against, it is, however, beyond cavil that the said policies

were issued to two different persons or entities. The interest of Samson
Manufacturing, Inc. over the property subject matter of both insurance
contracts is also different and distinct from that of Alibaba Shipping Co.
Therefore, even though the two concerned insurance policies were issued
over the same goods and cover the same risk, there arises no double
insurance since they were issued to two different persons/entities having
distinct insurable interests.
Hence, there is no double insurance in this case.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 184300 July 11, 2012
MALAYAN INSURANCE CO., INC., Petitioner,
vs.
PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE FORWARDER
SERVICES, INC., Respondents.
D E C I S I O N
REYES, J.:
Before the Court is a petition for review on certiorari filed by petitioner Malayan Insurance Co.,
lnc. (Malayan) assailing the Decision1
dated February 29, 2008 and Resolution2
dated August
28, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 71204 which affirmed with
modification the decision of the Regional Trial Court (RTC), Branch 38 of Manila.
Antecedent Facts
Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Forwarder Services,
Inc. (Reputable) had been annually executing a contract of carriage, whereby the latter
undertook to transport and deliver the former’s products to its customers, dealers or salesmen.3
On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from
respondent Philippines First Insurance Co., Inc. (Philippines First) to secure its interest over
its own products. Philippines First thereby insured Wyeth’s nutritional, pharmaceutical and
other products usual or incidental to the insured’s business while the same were being
transported or shipped in the Philippines. The policy covers all risks of direct physical loss or
damage from any external cause, if by land, and provides a limit of P6,000,000.00 per any one
land vehicle.
On December 1, 1993, Wyeth executed its annual contract of carriage with Reputable. It turned
out, however, that the contract was not signed by Wyeth’s representative/s.4
Nevertheless, it

was admittedly signed by Reputable’s representatives, the terms thereof faithfully observed
by the parties and, as previously stated, the same contract of carriage had been annually
executed by the parties every year since 1989.5
Under the contract, Reputable undertook to answer for "all risks with respect to the goods and
shall be liable to the COMPANY (Wyeth), for the loss, destruction, or damage of the
goods/products due to any and all causes whatsoever, including theft, robbery, flood, storm,
earthquakes, lightning, and other force majeure while the goods/products are in transit and
until actual delivery to the customers, salesmen, and dealers of the COMPANY".6
The contract also required Reputable to secure an insurance policy on Wyeth’s goods.7
Thus,
on February 11, 1994, Reputable signed a Special Risk Insurance Policy (SR Policy) with
petitioner Malayan for the amount of P1,000,000.00.
On October 6, 1994, during the effectivity of the Marine Policy and SR Policy, Reputable
received from Wyeth 1,000 boxes of Promil infant formula worth P2,357,582.70 to be delivered
by Reputable to Mercury Drug Corporation in Libis, Quezon City. Unfortunately, on the same
date, the truck carrying Wyeth’s products was hijacked by about 10 armed men. They
threatened to kill the truck driver and two of his helpers should they refuse to turn over the
truck and its contents to the said highway robbers. The hijacked truck was recovered two
weeks later without its cargo.
On March 8, 1995, Philippines First, after due investigation and adjustment, and pursuant to
the Marine Policy, paid Wyeth P2,133,257.00 as indemnity. Philippines First then demanded
reimbursement from Reputable, having been subrogated to the rights of Wyeth by virtue of the
payment. The latter, however, ignored the demand.
Consequently, Philippines First instituted an action for sum of money against Reputable on
August 12, 1996.8
In its complaint, Philippines First stated that Reputable is a "private
corporation engaged in the business of a common carrier." In its answer,9
Reputable claimed
that it is a private carrier. It also claimed that it cannot be made liable under the contract of
carriage with Wyeth since the contract was not signed by Wyeth’s representative and that the
cause of the loss was force majeure, i.e., the hijacking incident.
Subsequently, Reputable impleaded Malayan as third-party defendant in an effort to collect
the amount covered in the SR Policy. According to Reputable, "it was validly insured with
Malayan for P1,000,000.00 with respect to the lost products under the latter’s Insurance Policy
No. SR-0001-02577 effective February 1, 1994 to February 1, 1995" and that the SR Policy
covered the risk of robbery or hijacking.10
Disclaiming any liability, Malayan argued, among others, that under Section 5 of the SR Policy,
the insurance does not cover any loss or damage to property which at the time of the
happening of such loss or damage is insured by any marine policy and that the SR Policy
expressly excluded third-party liability.
After trial, the RTC rendered its Decision11
finding Reputable liable to Philippines First for the
amount of indemnity it paid to Wyeth, among others. In turn, Malayan was found by the RTC
to be liable to Reputable to the extent of the policy coverage. The dispositive portion of the
RTC decision provides:
WHEREFORE, on the main Complaint, judgment is hereby rendered finding [Reputable] liable
for the loss of the Wyeth products and orders it to pay Philippines First the following:

1. the amount of P2,133,257.00 representing the amount paid by Philippines First to
Wyeth for the loss of the products in question;
2. the amount of P15,650.00 representing the adjustment fees paid by Philippines
First to hired adjusters/surveyors;
3. the amount of P50,000.00 as attorney’s fees; and
4. the costs of suit.
On the third-party Complaint, judgment is hereby rendered finding
Malayan liable to indemnify [Reputable] the following:
1. the amount of P1,000,000.00 representing the proceeds of the insurance policy;
2. the amount of P50,000.00 as attorney’s fees; and
3. the costs of suit.
SO ORDERED.12
Dissatisfied, both Reputable and Malayan filed their respective appeals from the RTC
decision.
Reputable asserted that the RTC erred in holding that its contract of carriage with Wyeth was
binding despite Wyeth’s failure to sign the same. Reputable further contended that the
provisions of the contract are unreasonable, unjust, and contrary to law and public policy.
For its part, Malayan invoked Section 5 of its SR Policy, which provides:
Section 5. INSURANCE WITH OTHER COMPANIES. The insurance does not cover any loss
or damage to property which at the time of the happening of such loss or damage is insured
by or would but for the existence of this policy, be insured by any Fire or Marine policy or
policies except in respect of any excess beyond the amount which would have been payable
under the Fire or Marine policy or policies had this insurance not been effected.
Malayan argued that inasmuch as there was already a marine policy issued by Philippines
First securing the same subject matter against loss and that since the monetary
coverage/value of the Marine Policy is more than enough to indemnify the hijacked cargo,
Philippines First alone must bear the loss.
Malayan sought the dismissal of the third-party complaint against it. In the alternative, it prayed
that it be held liable for no more than P468,766.70, its alleged pro-rata share of the loss based
on the amount covered by the policy, subject to the provision of Section 12 of the SR Policy,
which states:
12. OTHER INSURANCE CLAUSE. If at the time of any loss or damage happening to any
property hereby insured, there be any other subsisting insurance or insurances, whether
effected by the insured or by any other person or persons, covering the same property, the

company shall not be liable to pay or contribute more than its ratable proportion of such loss
or damage.
On February 29, 2008, the CA rendered the assailed decision sustaining the ruling of the RTC,
the decretal portion of which reads:
WHEREFORE, in view of the foregoing, the assailed Decision dated 29 September 2000, as
modified in the Order dated 21 July 2001, is AFFIRMED with MODIFICATION in that the award
of attorney’s fees in favor of Reputable is DELETED.
SO ORDERED.13
The CA ruled, among others, that: (1) Reputable is estopped from assailing the validity of the
contract of carriage on the ground of lack of signature of Wyeth’s representative/s; (2)
Reputable is liable under the contract for the value of the goods even if the same was lost due
to fortuitous event; and (3) Section 12 of the SR Policy prevails over Section 5, it being the
latter provision; however, since the ratable proportion provision of Section 12 applies only in
case of double insurance, which is not present, then it should not be applied and Malayan
should be held liable for the full amount of the policy coverage, that is, P1,000,000.00.14
On March 14, 2008, Malayan moved for reconsideration of the assailed decision but it was
denied by the CA in its Resolution dated August 28, 2008.15
Hence, this petition.
Malayan insists that the CA failed to properly resolve the issue on the "statutory limitations on
the liability of common carriers" and the "difference between an ‘other insurance clause’ and
an ‘over insurance clause’."
Malayan also contends that the CA erred when it held that Reputable is a private carrier and
should be bound by the contractual stipulations in the contract of carriage. This argument is
based on its assertion that Philippines First judicially admitted in its complaint that Reputable
is a common carrier and as such, Reputable should not be held liable pursuant to Article
1745(6) of the Civil Code.16
Necessarily, if Reputable is not liable for the loss, then there is no
reason to hold Malayan liable to Reputable.
Further, Malayan posits that there resulted in an impairment of contract when the CA failed to
apply the express provisions of Section 5 (referred to by Malayan as over insurance clause)
and Section 12 (referred to by Malayan as other insurance clause) of its SR Policy as these
provisions could have been read together there being no actual conflict between them.
Reputable, meanwhile, contends that it is exempt from liability for acts committed by
thieves/robbers who act with grave or irresistible threat whether it is a common carrier or a
private/special carrier. It, however, maintains the correctness of the CA ruling that Malayan is
liable to Philippines First for the full amount of its policy coverage and not merely a ratable
portion thereof under Section 12 of the SR Policy.
Finally, Philippines First contends that the factual finding that Reputable is a private carrier
should be accorded the highest degree of respect and must be considered conclusive between
the parties, and that a review of such finding by the Court is not warranted under the
circumstances. As to its alleged judicial admission that Reputable is a common carrier,

Philippines First proffered the declaration made by Reputable that it is a private carrier. Said
declaration was allegedly reiterated by Reputable in its third party complaint, which in turn was
duly admitted by Malayan in its answer to the said third-party complaint. In addition, Reputable
even presented evidence to prove that it is a private carrier.
As to the applicability of Sections 5 and 12 in the SR Policy, Philippines First reiterated the
ruling of the CA. Philippines First, however, prayed for a slight modification of the assailed
decision, praying that Reputable and Malayan be rendered solidarily liable to it in the amount
of P998,000.00, which represents the balance from the P1,000.000.00 coverage of the SR
Policy after deducting P2,000.00 under Section 10 of the said SR Policy.17
Issues
The liability of Malayan under the SR Policy hinges on the following issues for resolution:
1) Whether Reputable is a private carrier;
2) Whether Reputable is strictly bound by the stipulations in its contract of carriage
with Wyeth, such that it should be liable for any risk of loss or damage, for any cause
whatsoever, including that due to theft or robbery and other force majeure;
3) Whether the RTC and CA erred in rendering "nugatory" Sections 5 and Section 12
of the SR Policy; and
4) Whether Reputable should be held solidarily liable with Malayan for the amount of
P998,000.00 due to Philippines First.
The Court’s Ruling
On the first issue – Reputable is a private carrier.
The Court agrees with the RTC and CA that Reputable is a private carrier. Well-entrenched in
jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the
appellate court, are accorded the highest degree of respect and considered conclusive
between the parties, save for certain exceptional and meritorious circumstances, none of
which are present in this case.18
Malayan relies on the alleged judicial admission of Philippines First in its complaint that
Reputable is a common carrier.19
Invoking Section 4, Rule 129 of the Rules on Evidence that
"an admission verbal or written, made by a party in the course of the proceeding in the same
case, does not require proof," it is Malayan’s position that the RTC and CA should have ruled
that Reputable is a common carrier. Consequently, pursuant to Article 1745(6) of the Civil
Code, the liability of Reputable for the loss of Wyeth’s goods should be dispensed with, or at
least diminished.
It is true that judicial admissions, such as matters alleged in the pleadings do not require proof,
and need not be offered to be considered by the court. "The court, for the proper decision of
the case, may and should consider, without the introduction of evidence, the facts admitted by
the parties."20
The rule on judicial admission, however, also states that such allegation,
statement, or admission is conclusive as against the pleader,21
and that the facts alleged in the
complaint are deemed admissions of the plaintiff and binding upon him.22
In this case, the

pleader or the plaintiff who alleged that Reputable is a common carrier was Philippines First.
It cannot, by any stretch of imagination, be made conclusive as against Reputable whose
nature of business is in question.
It should be stressed that Philippines First is not privy to the SR Policy between Wyeth and
Reputable; rather, it is a mere subrogee to the right of Wyeth to collect from Reputable under
the terms of the contract of carriage. Philippines First is not in any position to make any
admission, much more a definitive pronouncement, as to the nature of Reputable’s business
and there appears no other connection between Philippines First and Reputable which
suggests mutual familiarity between them.
Moreover, records show that the alleged judicial admission of Philippines First was essentially
disputed by Reputable when it stated in paragraphs 2, 4, and 11 of its answer that it is actually
a private or special carrier.23
In addition, Reputable stated in paragraph 2 of its third-party
complaint that it is "a private carrier engaged in the carriage of goods."24
Such allegation was,
in turn, admitted by Malayan in paragraph 2 of its answer to the third-party complaint.25
There
is also nothing in the records which show that Philippines First persistently maintained its
stance that Reputable is a common carrier or that it even contested or proved otherwise
Reputable’s position that it is a private or special carrier.
Hence, in the face of Reputable’s contrary admission as to the nature of its own business,
what was stated by Philippines First in its complaint is reduced to nothing more than mere
allegation, which must be proved for it to be given any weight or value. The settled rule is that
mere allegation is not proof.26
More importantly, the finding of the RTC and CA that Reputable is a special or private carrier
is warranted by the evidence on record, primarily, the unrebutted testimony of Reputable’s
Vice President and General Manager, Mr. William Ang Lian Suan, who expressly stated in
open court that Reputable serves only one customer, Wyeth.27
Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or
associations engaged in the business of carrying or transporting passenger or goods, or both
by land, water or air for compensation, offering their services to the public. On the other hand,
a private carrier is one wherein the carriage is generally undertaken by special agreement and
it does not hold itself out to carry goods for the general public.28
A common carrier becomes a
private carrier when it undertakes to carry a special cargo or chartered to a special person
only.29
For all intents and purposes, therefore, Reputable operated as a private/special carrier
with regard to its contract of carriage with Wyeth.
On the second issue – Reputable is bound by the terms of the contract of carriage.
The extent of a private carrier’s obligation is dictated by the stipulations of a contract it entered
into, provided its stipulations, clauses, terms and conditions are not contrary to law, morals,
good customs, public order, or public policy. "The Civil Code provisions on common carriers
should not be applied where the carrier is not acting as such but as a private carrier. Public
policy governing common carriers has no force where the public at large is not involved."30
Thus, being a private carrier, the extent of Reputable’s liability is fully governed by the
stipulations of the contract of carriage, one of which is that it shall be liable to Wyeth for the
loss of the goods/products due to any and all causes whatsoever, including theft, robbery and
other force majeure while the goods/products are in transit and until actual delivery to Wyeth’s
customers, salesmen and dealers.31

On the third issue – other insurance vis-à-vis over insurance.
Malayan refers to Section 5 of its SR Policy as an "over insurance clause" and to Section 12
as a "modified ‘other insurance’ clause".32
In rendering inapplicable said provisions in the SR
Policy, the CA ruled in this wise:
Since Sec. 5 calls for Malayan’s complete absolution in case the other insurance would be
sufficient to cover the entire amount of the loss, it is in direct conflict with Sec. 12 which
provides only for a pro-rated contribution between the two insurers. Being the later provision,
and pursuant to the rules on interpretation of contracts, Sec. 12 should therefore prevail.
x x x x
x x x The intention of both Reputable and Malayan should be given effect as against the
wordings of Sec. 12 of their contract, as it was intended by the parties to operate only in case
of double insurance, or where the benefits of the policies of both plaintiff-appellee and Malayan
should pertain to Reputable alone. But since the court a quo correctly ruled that there is no
double insurance in this case inasmuch as Reputable was not privy thereto, and therefore did
not stand to benefit from the policy issued by plaintiff-appellee in favor of Wyeth, then
Malayan’s stand should be rejected.
To rule that Sec. 12 operates even in the absence of double insurance would work injustice to
Reputable which, despite paying premiums for a P1,000,000.00 insurance coverage, would
not be entitled to recover said amount for the simple reason that the same property is covered
by another insurance policy, a policy to which it was not a party to and much less, from which
it did not stand to benefit. Plainly, this unfair situation could not have been the intention of both
Reputable and Malayan in signing the insurance contract in question.33
In questioning said ruling, Malayan posits that Sections 5 and 12 are separate provisions
applicable under distinct circumstances. Malayan argues that "it will not be completely
absolved under Section 5 of its policy if it were the assured itself who obtained additional
insurance coverage on the same property and the loss incurred by Wyeth’s cargo was more
than that insured by Philippines First’s marine policy. On the other hand, Section 12 will not
completely absolve Malayan if additional insurance coverage on the same cargo were
obtained by someone besides Reputable, in which case Malayan’s SR policy will contribute or
share ratable proportion of a covered cargo loss."34
Malayan’s position cannot be countenanced.
Section 5 is actually the other insurance clause (also called "additional insurance" and "double
insurance"), one akin to Condition No. 3 in issue in Geagonia v. CA,35
which validity was upheld
by the Court as a warranty that no other insurance exists. The Court ruled that Condition No.
336
is a condition which is not proscribed by law as its incorporation in the policy is allowed by
Section 75 of the Insurance Code. It was also the Court’s finding that unlike the other insurance
clauses, Condition No. 3 does not absolutely declare void any violation thereof but expressly
provides that the condition "shall not apply when the total insurance or insurances in force at
the time of the loss or damage is not more than P200,000.00."
In this case, similar to Condition No. 3 in Geagonia, Section 5 does not provide for the nullity
of the SR Policy but simply limits the liability of Malayan only up to the excess of the amount
that was not covered by the other insurance policy. In interpreting the "other insurance clause"
in Geagonia, the Court ruled that the prohibition applies only in case of double insurance. The

Court ruled that in order to constitute a violation of the clause, the other insurance must be
upon same subject matter, the same interest therein, and the same risk. Thus, even though
the multiple insurance policies involved were all issued in the name of the same assured, over
the same subject matter and covering the same risk, it was ruled that there was no violation of
the "other insurance clause" since there was no double insurance.
Section 12 of the SR Policy, on the other hand, is the over insurance clause. More particularly,
it covers the situation where there is over insurance due to double insurance. In such case,
Section 15 provides that Malayan shall "not be liable to pay or contribute more than its ratable
proportion of such loss or damage." This is in accord with the principle of contribution provided
under Section 94(e) of the Insurance Code,37
which states that "where the insured is over
insured by double insurance, each insurer is bound, as between himself and the other insurers,
to contribute ratably to the loss in proportion to the amount for which he is liable under his
contract."
Clearly, both Sections 5 and 12 presuppose the existence of a double insurance. The pivotal
question that now arises is whether there is double insurance in this case such that either
Section 5 or Section 12 of the SR Policy may be applied.
By the express provision of Section 93 of the Insurance Code, double insurance exists where
the same person is insured by several insurers separately in respect to the same subject and
interest. The requisites in order for double insurance to arise are as follows:38
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
In the present case, while it is true that the Marine Policy and the SR Policy were both issued
over the same subject matter, i.e. goods belonging to Wyeth, and both covered the same peril
insured against, it is, however, beyond cavil that the said policies were issued to two different
persons or entities. It is undisputed that Wyeth is the recognized insured of Philippines First
under its Marine Policy, while Reputable is the recognized insured of Malayan under the SR
Policy. The fact that Reputable procured Malayan’s SR Policy over the goods of Wyeth
pursuant merely to the stipulated requirement under its contract of carriage with the latter does
not make Reputable a mere agent of Wyeth in obtaining the said SR Policy.
The interest of Wyeth over the property subject matter of both insurance contracts is also
different and distinct from that of Reputable’s. The policy issued by Philippines First was in
consideration of the legal and/or equitable interest of Wyeth over its own goods. On the other
hand, what was issued by Malayan to Reputable was over the latter’s insurable interest over
the safety of the goods, which may become the basis of the latter’s liability in case of loss or
damage to the property and falls within the contemplation of Section 15 of the Insurance
Code.39

Therefore, even though the two concerned insurance policies were issued over the same
goods and cover the same risk, there arises no double insurance since they were issued to
two different persons/entities having distinct insurable interests. Necessarily, over insurance
by double insurance cannot likewise exist. Hence, as correctly ruled by the RTC and CA,
neither Section 5 nor Section 12 of the SR Policy can be applied.
Apart from the foregoing, the Court is also wont to strictly construe the controversial provisions
of the SR Policy against Malayan.1âwphi1 This is in keeping with the rule that:
"Indemnity and liability insurance policies are construed in accordance with the general rule of
resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared
by the insurer. A contract of insurance, being a contract of adhesion, par excellence, any
ambiguity therein should be resolved against the insurer; in other words, it should be construed
liberally in favor of the insured and strictly against the insurer. Limitations of liability should be
regarded with extreme jealousy and must be construed in such a way as to preclude the insurer
from noncompliance with its obligations."40
Moreover, the CA correctly ruled that:
To rule that Sec. 12 operates even in the absence of double insurance would work injustice to
Reputable which, despite paying premiums for a P1,000,000.00 insurance coverage, would
not be entitled to recover said amount for the simple reason that the same property is covered
by another insurance policy, a policy to which it was not a party to and much less, from which
it did not stand to benefit. x x x41
On the fourth issue – Reputable is not solidarily liable with Malayan.
There is solidary liability only when the obligation expressly so states, when the law so
provides or when the nature of the obligation so requires.
In Heirs of George Y. Poe v. Malayan lnsurance Company., lnc.,42
the Court ruled that:
Where the insurance contract provides for indemnity against liability to third persons, the
liability of the insurer is direct and such third persons can directly sue the insurer. The direct
liability of the insurer under indemnity contracts against third party[- ]liability does not mean,
however, that the insurer can be held solidarily liable with the insured and/or the other parties
found at fault, since they are being held liable under different obligations. The liability of the
insured carrier or vehicle owner is based on tort, in accordance with the provisions of the Civil
Code; while that of the insurer arises from contract, particularly, the insurance policy:43
(Citation
omitted and emphasis supplied)
Suffice it to say that Malayan's and Reputable's respective liabilities arose from different
obligations- Malayan's is based on the SR Policy while Reputable's is based on the contract
of carriage.
All told, the Court finds no reversible error in the judgment sought to be reviewed.
WHEREFORE, premises considered, the petition is DENIED. The Decision dated February
29, 2008 and Resolution dated August 28, 2008 of the Court of Appeals in CA-G.R. CV No.
71204 are hereby AFFIRMED.

Cost against petitioner Malayan Insurance Co., Inc.
SO ORDERED.
BIENVENIDO L. REYES
Associate justice
WE CONCUR:
ANTONIO T. CARPIO
Senior Associate Justice
Chairperson, Second Division
ARTURO D. BRION
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice
MARIA LOURDES P.A. SERENO
Associate justice
C E R T I F I C A T I O N
I certify that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court's Division.
ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296, The Judiciary Act of 1948, as amended)
Footnotes
1
Penned by Associate Justice Ricardo R. Rosario, with Associate Justices Rebecca
de Guia-Salvador and Magdangal M. de Leon. concurring; rollo, pp. 12-25.
2
Id. at 27.
3
Id. at p. 40.
4
Id.
5
Id.
6
Records, p. 266.
7
Id. at 267.
8
Docketed as Civil Case No. 96-79498; id. at 1-4.
9
Id. at 15-22.
10
Id. at 31.

11
Rollo, pp. 35-45.
12
Id. at 44-45.
13
Id. at 25.
14
Id. at 20-24.
15
Id. at 27.
16
Article 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:
x x x x
(6) That the common carrier’s liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violence or force, is
dispensed with or diminished; x x x.
17
Records, p. 310.
18
The exceptions include: (1) when the findings of a trial court are grounded entirely on
speculation, surmises or conjectures; (2) when a lower court’s inference from its factual
findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse
of discretion in the appreciation of facts; (4) when the findings of the appellate court go
beyond the issues of the case, or fail to notice certain relevant facts which, if properly
considered, will justify a different conclusion; (5) when there is a misappreciation of
facts; (6) when the findings of fact are conclusions without mention of the specific
evidence on which they are based, are premised on the absence of evidence, or are
contradicted by evidence on record. (Philippine Health-Care Providers, Inc. (Maxicare)
v. Estrada, G.R. No. 171052, January 28, 2008, 542 SCRA 616, 621, citing Ilao-
Quianay v. Mapile, 510 Phil. 736, 744-745 (2005).
19
Rollo, p. 29.
20
Asia Banking Corporation v. Walter E. Olsen & Co., 48 Phil. 529, 532 (1925).
21
Del Rosario v. Gerry Roxas Foundation, Inc., G.R. No. 170575, June 8, 2011, 651
SCRA 414, 424-425, citing Alfelor v. Halasan, 520 Phil. 982, 991 (2006); see also
Spouses Binarao v. Plus Builders, Inc., 524 Phil. 361, 366 (2006).
22
Del Rosario v. Gerry Roxas Foundation, Inc., id.
23
Records, pp. 15-25.
24
Id. at 30.
25
Id. at 43-46.
26
Lee v. Dela Paz, G.R. No. 183606, October 27, 2009, 604 SCRA 522, 536.

27
TSN dated September 26, 1997, p. 4.
28
Loadmasters Customs Services, Inc, v. Glodel Brokerage Corporation and R&B
Insurance Corporation, G.R. No. 179446, January 10, 2011, 639 SCRA 69, 80.
29
Valenzuela Hardwood and Industrial Supply, Inc. v. CA, 340 Phil. 745, 755 (1997).
30
Home Insurance Co. v. American Steamship Agencies, Inc., et al., 131 Phil. 552,
555-556 (1968).
31
Records, p. 266.
32
Rollo, p. 6.
33
Id. at 22-23.
34
Id. at 6.
35
311 Phil. 152 (1995).
36
Condition No. 3 states: The insured shall give notice to the Company of any insurance
or insurances already affected, or which may subsequently be effected, covering any
of the property or properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured, and unless such notice be given and the particulars
of such insurance or insurances be stated therein or endorsed in this policy pursuant
to Section 50 of the Insurance Code, by or on behalf of the Company before the
occurrence of any loss or damage, all benefits under this policy shall be deemed
forfeited, provided however, that this condition shall not apply when the total insurance
or insurances in force at the time of the loss or damage is not more than P200,000.00.
37
See De Leon, H. and De Leon, Jr., THE INSURANCE CODE OF THE PHILIPPINES,
Annotated (2010).
38
Id. at 298.
39
Section 15. A carrier or depository of any kind has an insurable interest in a thing
held by him as such, to the extent of his liability but not to exceed the value thereof.
40
Eternal Gardens Memorial Park Corporation v. Philippine American Life Insurance
Company, G.R. No. 166245, April 9, 2008, 551 SCRA 1, 13, citing Malayan Insurance
Corp. v. Hon. CA, 336 Phil. 977, 989 (1997).
41
Rollo, p. 24.
42
G.R. No. 156302, April 7, 2009,584 SCRA 152.
43
Id. at 172-173.

2. [This item has two questions.] Muviel obtained a life insurance policy
from X Insurance Corp. Muviel underwent a medical examination and was
certified as qualified to be insured. Unknown to X Insurance Corp., Muviel
had a mild stroke some years earlier. The insurance policy expressly
provided that any misrepresentation in the questionnaire filled up by Muviel
for the issuance of the policy would render the policy null, void and of no
effect.
(a) If Muviel dies within the two-year period from the time of issuance
of the policy, will the beneficiaries of Muviel be entitled to claim the
proceeds of the life insurance policy? Explain briefly.
ANSWER:
No, Muviel’s beneficiaries cannot claim the life insurance proceeds
when he dies within the two (2) years period. The insurance company
can contest the police for concealment or misrepresentation.
ANOTHER ANSWER:
No, the beneficiaries of Muviel will not be entitled to claim the proceeds
of the life insurance policy. As a rule, failure on the part of the insured
to disclose conditions affecting the risk, of which he is aware, makes the
contract voidable at the insurer’s option.
In this case, Muviel concealed and misrepresented that she had a mild
stroke some years earlier. As it is clearly stated in the insurance policy
that any misrepresentation in the questionnaire filled up by Muviel for
the issuance of the policy would render the policy null, void and of no
effect, the insurer may rescind the contract.
Hence, the beneficiaries cannot claim the proceeds of the life insurance
policy after Muriel died.
(b) Should Muviel die after the two-year period, will your answer be the
same?Explain briefly.
ANSWER:
My answer will not be the same. Muviel’s beneficiaries can claim the life

insurance proceeds when he dies after two (2) years, the incontestability
period. The insurance company can no longer annul the insurance policy
even when there was concealment or misrepresentation after the policy
has been in effect after two (2) years. (Manila Banker’s Life Insurance
vs. Abas, G.R. No. 175666, July 29, 2013; Tan vs. Philam Life Insurance,
G.R. No. 48549, June 29, 1989)
ANOTHER ANSWER:
No, my answer would be different. The beneficiaries of Muriel will be
entitled to claim the proceeds of the life insurance policy.
Section 48 of the Insurance Code provides that after a policy of life
insurance made payable on the death of the insured shall have been paid
in force during the lifetime of the insured for a period of two (2) years
from the date of its issue or of its last reinstatement, the insurer cannot
prove that the policy is void ab initio or is rescindable by reason of the
fraudulent concealment or misrepresentation of the insured or his agent.
In this case, two years had already passed from the time of the issuance
of the policy. The insurance company already had enough time to know
whether or not there in indeed material concealment. However, the
insurance company failed to do so within the so-called contestability
period.
Hence, the insurance company is already barred to claim that the policy
is void ab initio.
Notes:
the "incontestability clause" is a provision in law that after a policy of
life insurance made payable on the death of the insured shall have been
in force during the lifetime of the insured for a period of two (2) years
from the date of its issue or of its last reinstatement, the insurer cannot
prove that the policy is void ab initio or is rescindible by reason of
fraudulent concealment or misrepresentation of the insured or his agent.
3. [This item has two questions.] Kotse Corp. is an entity that provides pre-
arrangedtransportation services for a fee using an online-enabled platform
technology that connects passengers with drivers using their own vehicles.

(a) Is Kotse Corp. a common carrier? Explain briefly.
ANSWER:
No, Kotse Corporation is not a common carrier. Kotse does not carry or
transport passengers, as its business. Kotse’s pre-arranged service is
simply to connect passengers and the driver(s) who wishes to do the
actual carrying or transporting the passenger.
ANOTHER ANSWER:
Yes, a Transport Network Company (TNC), like Kotse Corp. (or
GRAB), is a common carrier and must exercise extraordinary diligence.
Common carriers are:
a) persons’ corporations, firms or association;
b) engaged in the business of carrying or transporting passengers, good
or both;
c) means of carriage is by land, water or air;
d) the carrying of passengers, goods or both is for compensation;
e) the service is offered to the public without distinction (Art. 1732, Civil
Code)
Kotse Corp. as a TNVS are common carriers:
1) The fact that the drivers are not physically hailed on the street does
not automatically render them private carriers.
2) When these driver go online, they indiscriminately offer their services
to the public;
3) There is no contractual discretion between a driver and the passenger
because the app automatically pairs them together based on
algorithm. Thus, the absence of any true choice on these material
contractual points contradicts the position that the apps merely
facilitate a purely private arrangement between the driver and the
passenger.
As defined by the Department of Transportation, a TNC refers to a
person or entity that provides pre-arranged transportation services for
compensation using an internet-based technology application or digital
platform technology to connect passengers with drivers using their

personal vehicles. (Sec. 1 thereof). It said that a TNVS (Transportation
Network Vehicle Service) is a TNC-accredited private vehicle owner,
which is a common carrier, using the internet-based technology app or
digital platform technology transporting passengers from one point to
another for compensation. The TNVS cannot operate as a common
carrier outside of, or independent from the use of the internet-based
technology of the TNC to which they are accredited. (Section 2). The
TNCs and the TNVS, as public transport providers, shall observe the
diligence required of common carriers in accordance with the New Civil
Code. (Section 8. Liability) The TNCs and the TNVS shall comply with
all the pertinent laws, particularly the law governing common carriers,
and all rules and regulations promulgated by the Department and the
LTFRB. (Section 9. Compliance)
(Department Order 2018-12 (13) of the DOTr issued on June 11, 2018
officially declares TNVS as common carriers and governed by the law on
common carriers, including the exercise of extraordinary diligence. See
LTFRB vs. Valenzuela)
SECOND DIVISION
G.R. No. 242860, March 11, 2019
THE LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD
(LTFRB) AND THE DEPARTMENT OF TRANSPORTATION (DOTR),
PETITIONERS, v. HON. CARLOS A. VALENZUELA, IN HIS CAPACITY AS
PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF MANDALUYONG
CITY, BRANCH 213 AND DBDOYC, INC., RESPONDENTS.
D E C I S I O N
PERLAS-BERNABE, J.:
Assailed in this petition for certiorari1
is the Order2
dated August 20, 2018
(Assailed Order) rendered by public respondent Judge Carlos A. Valenzuela of the
Regional Trial Court of Mandaluyong City, Branch 213 (RTC) in R-MND-18-01453-
SC which directed the issuance of a writ of preliminary injunction in favor of private
respondent DBDOYC, Inc. (DBDOYC) essentially enjoining petitioners the Land
Transportation Franchising and Regulatory Board (LTFRB) and the Department of
Transportation (DOTr; collectively, petitioners) from regulating DBDOYC's
business operations conducted through the Angkas mobile application.
The Facts
On May 8, 2015, the Department of Transportation and Communications (DOTC),

the predecessor of DOTr, issued Department Order No. (DO) 2015-11,3
amending
DO 97-1097,4
which set the standard classifications for public transport
conveyances to be used as basis for the issuance of a Certificate of Public
Convenience (CPC)5
for public utility vehicles (PUVs). In recognition of
technological innovations which allowed for the proliferation of new ways of
delivering and offering public transportation, the DOTC, through DO 2015-11,
created two (2) new classifications, namely, Transportation Network
Companies (TNC) and Transportation Network Vehicle Service (TNVS).6
Under DO 2015-11, a TNC is defined as an "organization whether a
corporation, partnership, sole proprietor, or other form, that provides
pre-arranged transportation services for compensation using an online-
enabled application or platform technology to connect passengers with
drivers using their personal vehicles."7
Although DO 2015-11 made mention
of TNVS, the term was not clearly defined until June 19, 2017, when the DOTr
issued DO 2017-118
which set the rules and procedures on the issuance of
franchises for public transport routes and services,9
including TNCs and TNVS.
Under DO 2017-11, TNVS is defined as "a [PUV] accredited with a [TNC],
which is granted authority or franchise by the LTFRB to run a public
transport service."10
DO 2017-11 further provided in Item 2.2 thereof that
"[m]otorcycles x x x are likewise not allowed as public transport
conveyance."11
Consequently, the LTFRB issued various memorandum circulars12
to govern the
issuance of the necessary CPC for a TNVS and the accreditation of a TNC. In its
issuances, the LTFRB declared that a TNC is treated as a transport
provider.13
whose accountability commences from the acceptance by its TNVS
while online.14 On the other hand, the accountability of the TNVS, as a common
carrier, attaches from the time the TNVS is online and offers its services to the
riding public.15
Meanwhile, on May 26, 2016, DBDOYC registered its business with the Securities
and Exchange Commission (SEC), and subsequently, in December 2016, launched
"Angkas," an online and on-demand motorcycle-hailing mobile application
(Angkas or Angkas app) that pairs drivers of motorcycles with potential
passengers without, however, obtaining the mandatory certificate of TNC
accreditation from the LTFRB. In this regard, DBDOYC accredited Angkas drivers
and allowed them to offer their transport services to the public despite the absence
of CPCs.16
Cognizant of the foregoing, the LTFRB issued a press release on January 27, 2017
informing the riding public that DBDOYC, which is considered as a TNC, cannot
legally operate.17
Despite such warning, however, DBDOYC continued to operate
and offer its services to the riding public sans any effort to obtain a certificate of
TNC accreditation.18
In response, DBDOYC, on July 4, 2018, filed a Petition for Declaratory Relief with
Application for Temporary Restraining Order/Writ of Preliminary Injunction19
against petitioners before the RTC alleging that:

(a) it is not a public transportation provider since Angkas app is a mere tool that
connects the passenger and the motorcycle driver; (b) Angkas and its drivers are
not engaged in the delivery of a public service; (c) alternatively, should it be
determined that it is performing a public service that requires the issuance of a
certificate of accreditation and/or CPC, then DO 2017-11 should be declared invalid
because it violates Section 7 of Republic Act No. (RA) 4136 or the "Land and
Transportation Traffic Code,"20
which does not prohibit motorcycles from being
used as a PUV; and (d) neither the LTFRB nor the DOTr has jurisdiction to regulate
motorcycles for hire.21
The RTC Proceedings and The Assailed Order
In an Order22
dated July 13, 2018, the RTC issued a Temporary Restraining Order
(TRO) finding DBDOYC's business not subject to any regulation nor prohibited
under existing law. It added that since the use of DBDOYC's internet-based mobile
application is not contrary to law, morals, good customs, public order, or public
policy,23
a clear and unmistakable right has been established in favor of DBDOYC
such that if petitioners prohibit the operation of Angkas, the same would cause
irreparable injury to the company.24
Proceedings were thereafter conducted relative to the application for a writ of
preliminary injunction. Eventually, through the Assailed Order,25
the RTC issued
the said writ to enjoin petitioners and anyone acting on their behalf: (a) from
interfering, whether directly or indirectly, with DBDOYC's operations; (b) from
apprehending Angkas bikers who are in lawful pursuit of their trade or occupation
based on Angkas mobile application; and (c) from performing any act/acts that
will impede, obstruct, frustrate, or defeat DBDOYC's pursuit of its lawful business
or trade as owner and operator of Angkas.26
In so ruling, the RTC found that DBDOYC has a clear and unmistakable right "to
conduct its business based on its constitutional right to liberty," which includes
"the right of an individual to x x x earn his livelihood by any lawful calling; [and]
to pursue any [vocation] and essentially to do and perform anything unless
otherwise prohibited by law."27
In this light, the RTC concluded that DBDOYC has
a right to enter into an independent contract with its Angkas riders as an
application provider, further reiterating that DBDOYC's business is not yet subject
to any regulation nor prohibited by any existing law, and that the Angkas biker's
offer of transportation services to a potential passenger is a purely private
arrangement using DBDOYC's application.28
Thus, should petitioners prohibit
DBDOYC from operating Angkas, an irreparable injury will result, thereby entitling
it to the issuance of the injunctive relief prayed for.29
Aggrieved, petitioners are now before the Court ascribing grave abuse of discretion
on the part of the RTC in issuing the writ of preliminary injunction through the
Assailed Order. Notably, in the present petition, petitioners sought the issuance of
a TRO to enjoin the RTC from enforcing its injunctive writ, which the Court granted
in a Resolution30
dated December 5, 2018.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the RTC committed

grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing
a writ of preliminary injunction in favor of DBDOYC and against petitioners.
The Court's Ruling
Preliminarily, despite the absence of the required prior motion for
reconsideration,31 the Court finds it proper to give due course to the petition in
view of the public interest involved, and further, the urgent necessity of resolving
this case so as not to prejudice the interests of the government.32
The petition is meritorious.
Case law states that "grave abuse of discretion arises when a lower court or
tribunal patently violates the Constitution, the law or existing jurisprudence."33
According to its classic formulation:
By grave abuse of discretion is meant capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is not
enough. It must be grave abuse of discretion as when the power is exercised in
an arbitrary or despotic manner by reason of passion or personal hostility, and
must be so patent and so gross as to amount to an evasion of a positive duty or
to a virtual refusal to perform the duty enjoined or to act at all in contemplation
of law.34
In ruling on whether or not the RTC gravely abused its discretion in this case, the
Court turns to the basic principles governing the issuance of preliminary injunctive
writs.
The first and foremost requisite in the issuance of a writ of preliminary injunction
is the existence of a clear legal right. The rationale therefor hews with the
nature of these writs being mere provisional reliefs. In Department of Public Works
and Highways v. City Advertising Ventures Corporation,35
the Court explained that
a writ of preliminary injunction is issued to:
[P]revent threatened or continuous irremediable injury to some of the
parties before their claims can be thoroughly studied and adjudicated. Its sole aim
is to preserve the status quo until the merits of the case can be heard
fully[.] Thus, it will be issued only upon a showing of a clear and
unmistakable right that is violated. Moreover, an urgent necessity for its
issuance must be shown by the applicant.36
(Emphasis and underscoring supplied)
In Spouses Nisce v. Equitable PCI Bank, Inc.,37
the Court held that "[t]he plaintiff
praying for a writ of preliminary injunction must x x x establish[, inter alia,] that
he or she has a present and unmistakable right to be protected; x x x [t]hus,
where the plaintiffs right is doubtful or disputed, a preliminary injunction
is not proper. The possibility of irreparable damage without proof of an actual
existing right is not a ground for a preliminary injunction."38
In this case, the RTC premised its issuance of the assailed injunctive writ on
DBDOYC's purported clear and unmistakable legal right "to conduct its business
based on its constitutional right to liberty."39
Prescinding therefrom, the RTC

concludes that DBDOYC has "the right to enter into an independent contract with
its Angkas bikers as an [application] provider [without] initially requiring it to
secure [a CPC]."40
As in all fundamental rights, the State has a legitimate interest in regulating these
rights when their exercise clearly affects the public. To recount, "[p]olice power is
the inherent power of the State to regulate or to restrain the use of liberty and
property for public welfare."41
Accordingly, the State "may interfere with personal
liberty, property, lawful businesses and occupations to promote the general
welfare [as long as] the interference [is] reasonable and not arbitrary."42
Here, it is petitioners' position that DBDOYC is a transportation
provider and its accredited drivers are common carriers engaged in
rendering public service which is subject to their regulation.43
The regulatory
measures against DBDOYC, as mentioned above, pertain to DOs 2015-11 and
2017-11, which have created new classifications of transportation services,
namely TNC and TNVS, in light of modern innovations. These issuances may be
traced to Commonwealth Act No. 146,44
otherwise known as the "Public Service
Act," as amended.45
Under Section 13 (b) thereof, a "public service" is defined as
follows:
(b) The term "public service" includes every person that now or hereafter may
own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, sub-way motor
vehicle, either for freight or passenger, or both with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat or steamship line, pontines, ferries, and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
railway, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas electric light, heat and power, water supply and power,
petroleum, sewerage system, wire or wireless communications system, wire or
wireless broadcasting stations and other similar public services; Provided,
however, That a person engaged in agriculture, not otherwise a public service,
who owns a motor vehicle and uses it personally and/or enters into a special
contract whereby said motor vehicle is offered for hire or compensation to a third
party or third [parties] engaged in agriculture, not itself or themselves a public
service, for operation by the latter for a limited time and for a specific purpose
directly connected with the cultivation of his or their farm, the transportation,
processing, and marketing of agricultural products of such third party or third
parties shall not be considered as operating a public service for the purposes of
this Act. (Emphases and underscoring supplied).
Section 15 of the same law requires that, except for certain exemptions, no public
service shall operate in the Philippines without possessing a CPC.46
In turn, the
then DOTC (which had supervision and control over the LTFRB that had assumed
certain powers of the old Public Service Commission47
) issued DO 97-1097
providing for the standard classifications of all PUVs before they can be issued a
CPC. This department order was later amended by the above-stated DOs 2015-11
and 2017-11 and thereafter, the LTFRB issued various memorandum circulars

governing the rules for TNC and TNVS accreditation, which rules DBDOYC
purportedly failed to comply.
As stated in the Public Service Act, the term "public service" covers any person
who owns, operates, manages, or controls in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any common carrier.48
The
Civil Code defines "common earners" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public. (Emphases supplied)
For its part, DBDOYC claims reprieve from the above-stated regulatory measures,
claiming that it and its accredited drivers are not common carriers or
transportation providers.49
It argues that "[its] technology [only] allows a biker
willing to give a ride and a passenger willing to pay the set price to meet and
contract with each other. Under this set-up, an Angkas biker does not offer his/her
service to an indefinite public."50
Since the application "merely pairs an Angkas
biker with a potential passenger under a fare scheme which [DBDOYC] fixes for
both, [DBDOYC] may not compel an Angkas driver to pick up a potential passenger
even after the latter confirms a booking because as between the biker and the
passenger, there is but a purely private contractual arrangement."51
However, it seems that DBDOYC's proffered operations is not enough to extricate
its business from the definition of common carriers, which, as mentioned, fall
under the scope of the term "public service." As the DBDOYC itself
describes, Angkas is a mobile application which seeks to "pair an available and
willing Angkas biker with a potential passenger, who requested for a motorcycle
ride, relying on geo-location technology."52
Accordingly, it appears that it is
practically functioning as a booking agent, or at the very least, acts as a third-
party liaison for its accredited bikers. Irrespective of the application's limited
market scope, i.e., Angkas users, it remains that, on the one hand, these bikers
offer transportation services to wiling public consumers, and on the other hand,
these services may be readily accessed by anyone who chooses to download
the Angkas app.
In De Guzman v. Court of Appeals,53
the Court discussed the relation between
Article 1732 of the Civil Code and Section 13 (b) of the Public Service Act,
explaining that Article 1732 of the Civil Code does not distinguish between a carrier
who offers its services to the general public and one who offers services or solicits
business only from a narrow segment of the general population:
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled

basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article [1732]
deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. x x
x.54
(Emphases and underscoring supplied)
In this relation, DBDOYC posits that its accredited bikers are private carriers as
they do not hold out their services generally to the public because they cannot just
be hailed on the street as they only contract via the Angkas online front. However,
the Court is hard-pressed to rule - at least at this point, and for the purpose of
determining the validity of the writ of preliminary injunction - that these bikers are
only private carriers who may publicly ply their trade without any regulation. As
the Court observes, the genius behind the Angkas app is that it removes the
inconvenience of having to physically hail for public transportation by creating a
virtual system wherein practically the same activity may now be done at the tip of
one's fingers. As it is the trend of modern technology, previously cumbersome
mundane activities, such as paying bills, ordering food, or reserving
accommodations, can now be accomplished through a variety of online platforms.
By DBDOYC's own description,55 it seems to be that Angkas app is one of such
platforms. As such, the fact that its drivers are not physically hailed on the street
does not automatically render Angkas-accredited drivers as private carriers.
While DBDOYC further claims that another distinguishing factor of its business is
that "[its] drivers may refuse at any time any legitimate demand for service by
simply not going online or not logging in to the online platform,"56
still when they
do so log-in, they make their services publicly available. In other words, when
they put themselves online, their services are bound for indiscriminate public
consumption. Again, as also-mentioned above, Article 1732 defining a common
carrier "[c]arefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis."57
This doctrinal
statement seems to be the apt response to DBDOYC's assertion.
Moreover, based on the way the app works, it appears that there is really no
contractual discretion between the Angkas bikers and would-be passengers
because the app automatically pairs them up based on algorithmic procedures.
Whether or not the parties once paired with each other have the choice to freely
accept, reject, or modify the terms of their engagement based solely on their
discretion is a matter which appears to have not yet been traversed in the
proceedings below. Verily, the absence of any true choice on these material
contractual points apparently contradicts the postulation that the Angkas app
merely facilitates a purely private arrangement between the biker and his
passenger.

At any rate, even if it is assumed that Angkas-accredited bikers are not treated as
common carriers and hence, would not make DBDOYC fall under the "public
service" definition, it does not necessarily mean that the business of holding out
private motorcycles for hire is a legitimate commercial venture. Section 7 of RA
4136 states that:
Section 7. Registration Classification. - Every motor vehicle shall be registered
under one of the following described classifications:
(a) private passenger automobiles; (b) private trucks; and (c) private
motorcycles, scooters, or motor wheel attachments. Motor vehicles registered
under these classifications shall not be used for hire under any
circumstances and shall not be used to solicit, accept, or be used to
transport passengers or freight for pay.
x x x x (Emphases and underscoring supplied)
That being said, the Court therefore concludes that no clear and unmistakable
right exists in DBDOYC's favor; hence, the RTC gravely abused its discretion in
issuing the assailed injunctive writ. In the final analysis, the business of holding
one's self out as a transportation service provider, whether done through online
platforms or not, appears to be one which is imbued with public interest and thus,
deserves appropriate regulations. With the safety of the public further in mind,
and given that, at any rate, the above-said administrative issuances are presumed
to be valid until and unless they are set aside,58
the nullification of the assailed
injunctive writ on the ground of grave abuse of discretion is in order.
Lest it be misunderstood, the pronounced grave abuse of discretion of the RTC
exists only with respect to its issuance of the assailed injunctive writ. It is
fundamental that preliminary injunction proceedings are separate and distinct
from the main case. In Buyco v. Baraquia,59
the Court discussed the ancillary and
provisional nature of these writs:
A writ of preliminary injunction is an order granted at any stage of an action or
proceeding prior to the judgment or final order, requiring a party or a court, agency
or a person to refrain from a particular act or acts. It is merely a provisional
remedy, adjunct to the main case subject to the latter's outcome. It is not a cause
of action in itself. Being an ancillary or auxiliary remedy, it is available during the
pendency of the action which may be resorted to by a litigant to preserve and
protect certain rights and interests therein pending rendition, and for purposes of
the ultimate effects, of a final judgment in the case.
The writ is provisional because it constitutes a temporary measure availed of
during the pendency of the action and it is ancillary because it is a mere incident
in and is dependent upon the result of the main action.60
Under this limited scope, it is thus beyond the power of the Court to determine the
ultimate rights and obligations of the parties, else it unduly prejudges the main
case for declaratory relief which is still pending before the court a quo. While the
Court acknowledges the contemporary relevance of the topic at hand, it remains
self-aware of this case's procedural and jurisdictional parameters. Accordingly, the

definitive resolution of the issue of regulating ride-booking or ride-sharing
applications must await the proper case therefor.
As a final word, "[e]very court should remember that an injunction should not be
granted lightly or precipitately because it is a limitation upon the freedom of the
defendant's action. It should be granted only when the court is fully satisfied that
the law permits it and the emergency demands it, for no power exists whose
exercise is more delicate, which requires greater caution and deliberation, or is
more dangerous in a doubtful case, than the issuance of an injunction."61
WHEREFORE, the petition is GRANTED. The Order dated August 20, 2018 issued
by the Regional Trial Court of Mandaluyong City, Branch 213 (RTC) directing the
issuance of a writ of preliminary injunction in R-MND-18-01453-SC
is ANNULLED and SET ASIDE. The RTC is hereby ORDERED to conduct further
proceedings, and thereafter, resolve R-MND-18-01453-SC with utmost dispatch.
SO ORDERED.
Carpio, Senior Associate Justice, (Chairperson), Caguioa, J. Reyes, Jr., and Lazaro-
Javier, JJ., concur.
Endnotes:
1 With Very Urgent Prayer for the Issuance of a Temporary Restraining Order
and/or Writ of Preliminary Injunction; rollo, pp. 3-57.
2 Id. at 219-225.
3 Entitled "FURTHER AMENDING DEPARTMENT ORDER NO. 97-1097 TO PROMOTE
MOBILITY" (see rollo, pp. 226-231).
4
Entitled "PROVIDING STANDARD CLASSIFICATION FOR ALL PUBLIC TRANSPORT
CONVEYANCES," issued on September 29, 1997.
5
See Section 15 of Commonwealth Act No. 146, entitled "AN ACT TO REORGANIZE
THE PUBLIC SERVICE COMMISSION, PRESCRIBE ITS POWERS AND DUTIES,
DEFINE AND REGULATE PUBLIC SERVICES, PROVIDE AND FIX THE RATES AND
QUOTA OF EXPENSES TO BE PAID BY THE SAME, AND FOR OTHER PURPOSES,"
otherwise known as the "PUBLIC SERVICE ACT" (November 7, 1936).
6
See rollo, pp. 229-230.
7
Id. at 229; emphasis supplied.
8
Entitled "OMNIBUS GUIDELINES ON THE PLANNING AND IDENTIFICATION OF
PUBLIC ROAD TRANSPORTATION SERVICES AND FRANCHISE ISSUANCE"
(see rollo, pp. 232-249).
9Rollo, p. 232.

10
See Item 1.34 of DO 2017-11 (rollo, p. 233); emphasis supplied.
11
Item 2.2 of DO 2017-11 reads in full:
2.2 Hierarchy and Classification of Public Transportation Modes
As a matter of policy, the modes of transportation shall follow the hierarchy of
roads. Thus, higher capacity transportation modes shall have priority in terms of
CPC allocation and transit right of way in trunk lines or main thoroughfares over
lower capacity modes. Taxis, TNVS, tourist transport services, and shuttle services
are excluded as they are considered door-to-door services and do not have specific
routes. Thus, as a general rule, assigning higher capacity modes to routes
currently traversed by lower capacity modes in the Local Public Transport Route
Plan may be allowed, but not otherwise.
The operation of tricycles shall be in accordance with Joint Memorandum Circular
No. 1, series of 2008 of the DILG and the DOTC, which states that tricycle
operation should only be confined along city or municipal roads, not along national
roads and is limited only to routes not traversed by higher modes of public
transport. Motorcycles and other farm implements such as the kuliglig are
likewise not allowed as public transport conveyance. Further basis of the
provision of this mode should also be the LPTRP [(Local Public Transport Route
Plan; No. 1.15)]. (Emphasis and underscoring supplied)
12 These include: LTFRB Memorandum Circular No. 2015-015-A or the "RULES AND
REGULATIONS TO GOVERN THE ACCREDITATION OF TRANSPORTATION
NETWORK COMPANIES," issued on October 23, 2017 (see rollo, pp. 250-253);
LTFRB Memorandum Circular No. 2015-016-A or the "TERMS AND CONDITIONS
OF A CERTIFICATE OF TRANSPORTATION NETWORK COMPANY ACCREDITATION,"
issued on October 23, 2017 (see rollo, pp. 254-257); LTFRB Memorandum Circular
No. 2015-017 or the "IMPLEMENTING GUIDELINES ON THE ACCEPTANCE OF
APPLICATIONS FOR A CERTIFICATE OF PUBLIC CONVENIENCE TO OPERATE A
TRANSPORTATION NETWORK VEHICLE SERVICE," issued on May 28, 2015
(see rollo, pp. 258-260); and LTFRB Memorandum Circular No. 2015-018-A or the
"TERMS AND CONDITIONS OF A CERTIFICATE OF PUBLIC CONVENIENCE TO
OPERATE A TRANSPORTATION NETWORK VEHICLE SERVICE," issued on October
23, 2017 (see rollo, pp. 261-263).
13
See LTFRB Memorandum Circular No. 2015-015-A (see rollo, p. 250).
14
See LTFRB Memorandum Circular No. 2015-016-A (see rollo, p. 254).
15 See LTFRB Memorandum Circular No. 2015-018-A (see rollo, p. 261).
16
See rollo, pp. 13-14 and 604.
17 See id. at 14.
18
Id.

19
Dated June 26, 2018. Id. at 86-123.
20
Pertinent portions of Section 7 of RA 4136, entitled "AN ACT TO COMPILE THE
LAWS RELATIVE TO LAND TRANSPORTATION AND TRAFFIC RULES, TO CREATE A
LAND TRANSPORTATION COMMISSION AND FOR OTHER PURPOSES" (June 20,
1964), read:
Section 7. Registration Classification. - Every motor vehicle shall be registered
under one of the following described classifications:
(a) private passenger automobiles; (b) private trucks; and (c) private motorcycles,
scooters, or motor wheel attachments. Motor vehicles registered under these
classifications shall not be used for hire under any circumstances and shall not be
used to solicit, accept, or be used to transport passengers or freight for pay.
x x x x
For the purpose of this section, a vehicle habitually used to carry freight not
belonging to the registered owner thereof, or passengers not related by
consanguinity or affinity within the fourth civil degree to such owner, shall be
conclusively presumed to be "for hire."
x x x x
21 See rollo, pp. 97-120.
22
Id. at 299-305.
23 See id. at 303.
24
Id at 304.
25 Referring to the Order dated August 20, 2018; id. at 219-225.
26 Id. at 224.
27
Id. at 223.
28
See id.
29
See id. at 224.
30 Id. at 502-503. See also TRO dated December 5, 2018; id. at 502-506.
31
See Malay ang Manggagawa ng Stayfast Phils., Inc. v. National Labor Relations
Commission, 716 Phil. 500, 514 (2013).
32 See id. at 514-515.
33
The Office of the Ombudsman v. Valencerina, 739 Phil. 11, 24 (2014).

34
Department of Public Works and Highways v. City Advertising Ventures
Corporation, 799 Phil. 47, 62 (2016).
35
Id.
36
Id.
37
545 Phil. 138 (2007).
38
Id. at 160-161.
39
Rollo, p. 223.
40
Id.
41
Manila Memorial Park, Inc. v. Secretary of the Department of Social Welfare and
Development, 722 Phil. 538, 575 (2013).
42
Id. at 575-576.
43
Rollo, p. 31.
44
Entitled "AN ACT TO REORGANIZE THE PUBLIC SERVICE COMMISSION,
PRESCRIBE ITS POWERS AND DUTIES, DEFINE AND REGULATE PUBLIC
SERVICES, PROVIDE AND FIX THE RATES AND QUOTA OF EXPENSES TO BE PAID
BY THE SAME, AND FOR OTHER PURPOSES" (November 7, 1936).
45 As Amended by RA 2677, entitled "AN ACT TO AMEND SECTIONS TWO, THREE,
FOUR, TEN, THIRTEEN, AND AND FOURTEEN OF COMMONWEALTH ACT
NUMBERED ONE HUNDRED FORTY-SIX, AS AMEN OTHERWISE KNOWN AS THE
PUBLIC SERVICE ACT, AND FOR OTHER PURPOSES" (June 18, 1960).
46
Section 15 of CA 146 (as amended by Commonwealth Act No. 454, entitled "AN
ACT TO AMEND VARIOUS SECTIONS OF COMMONWEALTH ACT NUMBERED ONE
HUNDRED AND FORTY-SIX, KNOWN AS THE PUBLIC SERVICE ACT" [June 8,
1939]) pertinently reads:
Section 15. With the exception of those enumerated in the preceding section, no
public service shall operate in the Philippines without possessing a valid
and subsisting certificate from the Public Service Commission, known as
"certificate of public convenience," or "certificate of convenience and
public necessity," as the case may be, to the effect that the operation of said
service and the authorization to do business will promote the public interests in a
proper and suitable manner.
x x x x (Emphasis supplied)
47 See Executive Order No. 202, entitled "CREATING THE LAND TRANSPORTATION
FRANCHISING AND REGULATORY BOARD" (June 19, 1987).

48
See Section 1 of RA 1270, entitled "AN ACT TO AMEND SECTION THIRTEEN OF
COMMONWEALTH ACT NUMBERED ONE HUNDRED AND FORTY-SIX, OTHERWISE
KNOWN AS THE PUBLIC SERVICE ACT, AS AMENDED BY COMMONWEALTH ACT
NUMBERED FOUR HUNDRED AND FIFTY-FOUR" (June 14, 1955), Amending
Section 13 of Commonwealth Act No. 146. See also Section 1 of RA 2677.
49
See Comment dated December 17, 2018; rollo, p. 635.
50 Id. at 100; underscoring supplied.
51
Id. at 100-101; underscoring supplied.
52
Id. at 99.
53
250 Phil. 613 (1988).
54 Id. at 618-619.
55
See rollo, pp. 91 and 604.
56 Id. at 642.
57
De Guzman v. Court of Appeals, supra note 53, at 618.
58 "It is elementary that rules and regulations issued by administrative bodies to
interpret the law which they are entrusted to enforce, have the force of law, and
are entitled to great respect. Administrative issuances partake of the nature of a
statute and have in their favor a presumption of legality. As such, courts cannot
ignore administrative issuances especially when, as in this case, its validity was
not put in issue. Unless an administrative order is declared invalid, courts have no
option but to apply the same." (Landbank of the Philippines v. Celada, 515 Phil.
467, 479 [2006]).
59
623 Phil. 596 (2009).
60 Id. at 600-601.
61
Bank of the Philippine Islands v. Hontanosas, Jr., 737 Phil. 38, 59-60 (2014);
citations omitted.
(b) Are the drivers engaged in common carrier service? Explain briefly.
(
(5 points)
ANSWER:
A driver, with his vehicle registered with a Certificate of Public
Convenience, is the common carrier when he actually carries or transport
the passengers. The on-line enabled platform technology which Kotse
Corporation renders is simply a communication mechanism which the

common carrier owner pays for. (Iloilo Ice and Cold Storage Company
vs. Public Utility Board, G.R. No. 19857, March 2, 1923)
ANOTHER ANSWER:
Yes, drivers are engaged in common carrier service. A TNVS Driver
shuttles passengers from point of origin to desired destination in a
comfortable, safe and timely manner. The accountability of the TNVS, as
a common carrier, attaches from the time the TNVS is online and offers
its services to the riding public.
For a cause of action based on culpa contractual, the driver is not liable
because it is the common carrier that is the party to the contract of
carriage and not the driver.
For a cause of action based on a quasi-delict, the common carrier and the
employee are solidarily liable:
“The premise, however, for the employer’s liability is negligence or fault
on the part of the employee. Once such fault is established, the employer
can then be made liable on the basis of the presumption juris tantum that
the employer failed to exercise diligentissimi patris families in the selection
and supervision of its employees. The liability is primary and can only be
negated by showing due diligence in the selection and supervision of the
employee, a factual matter that has not been shown. Absent such a
showing, one might ask further, how then must the liability of the
common carrier, on the one hand, and an independent contractor, on the
other hand, be described? It would be solitary.” (LRTA v. Navidad, 2003)
However, to reiterate, the common carrier can escape liability if it can
clearly show that it exercised the care and diligence of a good father of a
family in the selection and supervision of his employee:
“Article 2180, in relation to Article 2176, of the Civil Code provides that
the employer of a negligent employee is liable for the damages caused by
the latter. When an injury is caused by the negligence of an employee
there instantly arises a presumption of the law that there was negligence
on the part of the employer either in the selection of his employee or in
the supervision over him after such selection. The presumption, however,
may be rebutted by a clear showing on the part of the employer that it
had exercised the care and diligence of a good father of a family in the

selection and supervision of his employee. Hence, to escape solidary
liability for quasi-delict committed by an employee, the employer must
adduce sufficient proof that it exercised such degree of care.”
–Travel and Tours v. Cruz, 2016
IT IS IMPORTANT TO ESTABLISH that there was a contract of
carriage, because, in a contract of carriage, the common carrier
CANNOT ESCAPE LIABILITY by showing that it exercised the care
and diligence of a good father of a family in the selection and supervision
of his employee.
For a cause of action based on culpa criminal, the common carrier is
subsidiarily liable. However, there has to be conviction and the driver has
to be insolvent:
“In order that an employer may be held subsidiarily liable for the
employee’s civil liability in the criminal action, it should be shown (1) that
the employer, etc. is engaged in any kind of industry, (2) that the
employee committed the offense in the discharge of his duties and (3) that
he is insolvent (Basa Marketing Corp. v. Bolinao, 117 SCRA 156). The
subsidiary liability of the employer, however, arises only after conviction
of the employee in the criminal action. All these requisites present, the
employer becomes ipso facto subsidiarily liable upon the employee’s
conviction and upon proof of the latter’s insolvency.” (Carpio v. Doroja,
1989)
4. At around 4:00 p.m. of December 25, 2020, Christmas Day, Queenie and
her child, Paeng, boarded a jeepney being operated by Emil and driven
by Amor. Queenie was made to sit on an empty beer case at the edge of the
rear entrance/exit of the jeepney with her sleeping child on her lap. When
they reached an uphill incline on the road, the jeepney slid backwards.
Queenie pushed both her feet against the step board to prevent herself and
her child from being thrown out ofthe exit, but because the step board was
wet, her left foot slipped and was crushed between the step board and the
coconut tree which halted the jeepney’s backward motion. As a result,
Queenie’s leg was badly injured and had to be amputated.
Queenie then sued Emil and Amor for breach of contract of carriage. Emil
and Amorcountered that the injuries Queenie sustained were due to her own
fault since Amor had instructed everyone not to panic, but Queenie

nevertheless tried to disembark which caused her foot to be crushed.
If you were the judge, would you hold Emil and Amor solidarily liable?
Explainbriefly. (5 points)
ANSWER:
I will hold Emil, the Operator, liable for breach of contract of carriage.
Mother Queenie and child Paeng were passengers, of Emil’s common
carrier, who did not reach their destination safe and sound. When
Queenie’s leg was injured while she was a passenger in Emil’s jeepney,
the presumption of fault or negligence on Emil’s part arose. He did not
exercise the needed extraordinary diligence with said injury.
The driver Amot is not liable for the contract breach because he is not
part of the contract but merely an employee of Emil, the Operator.
(Sanico vs. Calipano, G.R. No. 209969, September 27, 2017)
ANOTHER ANSWER:
If I were the judge, I would hold only Emil (operator/owner) liable. Since
the cause of action is based on a breach of a contract of carriage, the
liability of Emil was direct as the contract is between him and Queenie.
Amor, being merely the driver of Emil's jeepney, cannot be made liable
as she is not a party to the contract of carriage. In Soberano v. Manila
Railroad Co., 124 Phil. 1330, 1966, the Court ruled that a complaint for
breach of a contract of carriage is dismissible as against the employee
who was driving the bus because the parties to the contract of carriage
are only the passenger, the bus owner, and the operator. Emil is liable as
operator and owner of a common carrier. Specific to a contract of
carriage, the Civil Code requires common carriers to observe
extraordinary diligence in safely transporting their passengers. Article
1733 of the Civil Code states:
ART. 1733. Common carriers, from the nature of their
business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by
them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods
is further expressed in Articles 1734, 1735 and 1745, Nos. 5,
6, and 7, while the extraordinary diligence for the safety of
the passengers is further set forth in Articles 1755 and 1756.
In case of death of or injury to their passengers, Article 1756 of the Civil
Code provides that common carriers are presumed to have been at fault
or negligent, and this presumption can be overcome only by proof of the
extraordinary diligence exercised to ensure the safety of the passengers.
In this case, Queenie was made to sit on an empty beer case at the edge
of the rear entrance/exit of the jeepney with her sleeping child on her lap.
When they reached an uphill incline on the road, the jeepney slid
backwards. Queenie pushed both her feet against the step board to
prevent herself and her child from being thrown out ofthe exit, but
because the step board was wet, her left foot slipped and was crushed
between the step board and the coconut tree which halted the jeepney’s
backward motion. As a result, Queenie’s leg was badly injured and had
to be amputated. When Queenie was made to sit on an empty beer case
at the edge of the rear entrance/exit of the jeepney with her sleeping child
on her lap, she was placed in a peril greater than that to which the other
passengers were exposed." In such case, Emil was not only "unable to
overcome the presumption of negligence imposed upon him for the
injury sustained by Queenie, but also, the evidence shows that he was
actually negligent in transporting passengers."
Further, common carriers may also be liable for damages when they
contravene the tenor of their obligations. Article 1170 of the Civil Code
states:
ART. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable
for damages.
Emil’s attempt to evade liability by arguing that he exercised
extraordinary diligence when he hired Amor (even if she was an
experienced and time-tested driver and in whom he was personally
convinced of the driving skills), are not enough to exonerate him from

liability - because the liability of common carriers does not cease upon
proof that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees. This is the express
mandate of Article 1759 of the Civil Code:
ART. 1759. Common carriers are liable for the death of or
injuries to passengers through the negligence or willful acts
of the former's employees, although such employees may
have acted beyond the scope of their authority or in violation
of the orders of the common carriers.
This liability of the common carriers does not cease upon
proof that they exercised all the diligence of a good father of
a family in the selection and supervision of their employees.
The only defenses available to common carriers are (1) proof that they
observed extraordinary diligence as prescribed in Article 1756,31
and
(2) following Article 1174 of the Civil Code, proof that the injury or
death was brought about by an event which "could not be foreseen, or
which, though foreseen, were inevitable," or a fortuitous event.
Philippine Supreme Court
Jurisprudence
SECOND DIVISION
G.R. No. 209969, September 27, 2017
JOSE SANICO AND VICENTE CASTRO, Petitioners, v. WERHERLINA P.
COLIPANO, Respondent.
D E C I S I O N
CAGUIOA, J.:

Before the Court is a Petition for Review on Certiorari1
under Rule 45 of
the Rules of Court filed by petitioners Jose Sanico (Sanico) and Vicente
Castro (Castro), assailing the Decision2
dated September 30, 2013 of the
Court of Appeals (CA) in CA-G.R. CEB-CV No. 01889. The CA affirmed with
modification the Decision3
dated October 27, 2006 of the Regional Trial
Court, Branch 25, Danao City (RTC) which found Sanico and Castro liable
for breach of' contract of carriage and awarded actual and compensatory
damages for loss of income in favor of respondent Werherlina P. Colipano
(Colipano). The CA reduced the compensatory damages that the RTC
awarded.
Antecedents
Colipano filed a complaint on January 7, 1997 for breach of contract of
carriage and damages against Sanico and Castro.4
In her complaint,
Colipano claimed that at 4:00 P.M. more or less of December 25,
1993, Christmas Day, she and her daughter were; paying passengers in
the jeepney operated by Sanico, which was driven by Castro.5
Colipano
claimed she was made to sit on an empty beer case at the edge of the rear
entrance/exit of the jeepney with her sleeping child on her lap.6
And, at
an uphill incline in the road to Natimao-an, Carmen, Cebu, the jeepney
slid backwards because it did not have the power to reach the
top.7
Colipano pushed both her feet against the step board to prevent
herself and her child from being thrown out of the exit, but because the
step board was wet, her left foot slipped and got crushed between the
step board and a coconut tree which the jeepney bumped, causing the
jeepney to stop its backward movement.8
Colipano's leg was badly
injured and was eventually amputated.9
Colipano prayed for actual
damages, loss of income, moral damages, exemplary damages, and
attorney's fees.10
In their answer, Sanico and Castro admitted that Colipano's leg was
crushed and amputated but claimed that it! was Colipano's fault that her
leg was crushed.11 They admitted that the jeepney slid backwards
because the jeepney lost power.12
The conductor then instructed
everyone not to panic but Colipano tried to disembark and her foot got
caught in between the step board and the coconut tree.13
Sanico claimed
that he paid for all the hospital and medical expenses of Colipano,14
and
that Colipano eventually freely and voluntarily executed an Affidavit of
Desistance and Release of Claim.15
After trial, the RTC found that Sanico and Castro breached the contract of
carriage between them and Colipano but only awarded actual and
compensatory damages in favor of Colipano. The dispositive portion of the
RTC Decision states:
WHEREFORE, premises considered, this Court finds the
defendants LIABLE for breach of contract of carriage and are solidarily
liable to pay plaintiff:

1. Actual damages in the amount of P2,098.80; and
2. Compensatory damages for loss of income in the amount of
P360,000.00.
No costs.
SO ORDERED.16
Only Sanico and Castro appealed to the CA, which affirmed with
modification the RTC Decision. The dispositive portion of the CA Decision
states:
IN LIGHT OF ALL THE FOREGOING, the instant appeal is PARTIALLY
GRANTED. The Decision dated October 27, 2006 of the Regional Trial
Court, Branch 25, Danao City, in Civil Case No. DNA-418, is AFFIRMED with
MODIFICATION in that the award for compensatory damages for loss of
income in paragraph 2 of the dispositive portion of the RTC's decision, is
reduced to P200,000.00.
SO ORDERED.17
Without moving for the reconsideration of the CA Decision, Sanico and
Castro filed this petition before the Court assailing the CA Decision.
Issues
a. Whether the CA erred in finding that Sanico and Castro breached
the contract of carriage with Colipano;
b. Whether the Affidavit of Desistance and Release of Claim is
binding on Colipano; and
c. Whether the CA erred in the amount of damages awarded.
The Court's Ruling
The Court partly grants the petition.
Only Sanico breached the contract of carriage.
Here, it is beyond dispute that Colipano was injured while she was a
passenger in the jeepney owned and operated by Sanico that was being
driven by Castro. Both the CA and RTC found Sanico and Castro jointly and
severally liable. This, however, is erroneous because only Sanico was the
party to the contract of carriage with Colipano.
Since the cause of action is based on a breach of a contract of carriage,
the liability of Sanico is direct as the contract is between him and

Colipano. Castro, being merely the driver of Sanico's jeepney, cannot be
made liable as he is not a party to the contract of carriage.
In Soberano v. Manila Railroad Co.,18
the Court ruled that a complaint for
breach of a contract of carriage is dismissible as against the employee
who was driving the bus because the parties to the contract of carriage
are only the passenger, the bus owner, and the operator, viz.:
The complaint against Caccam was therefore properly dismissed. He was
not a party to the contract; he was a mere employee of the BAL. The
parties to that contract are Juana Soberano, the passenger, and the MRR
and its subsidiary, the BAL, the bus owner and operator, respectively; and
consequent to the inability of the defendant companies to carry Juana
Soberano and her baggage arid personal effects securely and safely to her
destination as imposed by law (art. 1733, in relation to arts. 1736 and
1755, N.C.C.), their liability to her becomes direct and immediate.19
Since Castro was not a party to the contract of carriage, Colipano had no
cause of action against him and the pomplaint against him should be
dismissed. Although he was driving the jeepney, he was a mere employee
of Sanico, who was the operator and owner of the jeepney. The obligation
to carry Colipano safely to her destination was with Sanico. In fact, the
elements of a contract of carriage existeid between Colipano and
Sanico: consent, as shown when Castro, as employee of Sanico, accepted
Colipano as a passenger when he allowed Colipano to board the jeepney,
and as to Colipano, when she boarded the jeepney; cause or
consideration, when Colipano, for her part, paid her fare; and, object, the
transportation of Colipano from the place of departure to the place of
destination.20
Having established that the contract of carriage was only between Sanico
and Colipano and that therefore Colipano had no cause of action against
Castro, the Court next determines whether Sanico breached his
obligations to Colipano under the contract.
Sanico is liable as operator and owner of a common carrier.
Specific to a contract of carriage, the Civil Code requires common carriers
to observe extraordinary diligence in safely transporting their
passengers. Article 1733 of the Civil Code states:
ART. 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in Articles 1734, 1735 and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set
forth in Articles 1755 and 1756.

This extraordinary diligence, following Article 1755 of the Civil Code,
means that common carriers have the obligation to carry passengers
safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the
circumstances.
In case of death of or injury to their passengers, Article 1756 of the Civil
Code provides that common carriers are presumed to have been at fault
or negligent, and this presumption can be overcome only by proof of the
extraordinary diligence exercised to ensure the safety of the
passengers.21
Being an operator and owner of a common carrier, Sanico was required
to observe extraordinary diligence in safely transporting Colipano. When
Colipano's leg was injured while she was a passenger in Sanico's jeepney,
the presumption of fault or negligence on Sanico's part arose and he had
the burden to prove that he exercised the extraordinary diligence required
of him. He failed to do this.
In Calalas v. Court of Appeals,22 the Court found that allowing the
respondent in that case to be seated in an extension seat, which was a
wooden stool at the rear of the jeepney, "placed [the respondent] in a
peril greater than that to which the other passengers were
exposed."23 The Court further ruled that the petitioner in Calalas was not
only "unable to overcome the presumption of negligence imposed on him
for the injury sustained by [the respondent], but also, the evidence shows
he was actually negligent in transporting passengers."24
Calalas squarely applies here. Sanico failed to rebut the presumption of
fault or negligence under the Civil Code. More than this, the evidence
indubitably established Sanico's negligence when Castro made Colipano
sit on an empty beer case at the edge of the rear entrance/exit of the
jeepney with her sleeping child on her lap, which put her and her child in
greater peril than the other passengers. As the CA correctly held:
For the driver, Vicente Castro, to allow a seat extension made of an empty
case of beer clearly indicates lack of prudence. Permitting Werherlina to
occupy an improvised seat in the rear portion of the jeepney, with a child
on her lap to boot, exposed her and her child in a peril greater than that
to which the other passengers were exposed. The use of an improvised
seat extension is undeniable, in view of the testimony of plaintiffs
witness, which is consistent with Werherlina's testimonial assertion.
Werherlina and her witness's testimony were accorded belief by the RTC.
Factual findings of the trial court are entitled to great weight on appeal
and should not be disturbed except for strong and valid reasons, because
the trial court ip in a better position to examine the demeanor of the
witnesses while testifying.25

The CA also correctly held that the!defense of engine failure, instead of
exonerating Sanico, only aggravated his already precarious
position.26
The engine failure "hinted lack of regular check and
maintenance to ensure that the engine is at its best, considering that the
jeepney regularly passes through a mountainous area."27
This failure to
ensure that the jeepney can safely transport passengers through its route
which required navigation through a mountainous area is proof of fault
on Sanico's part. In the face of such evidence, there is no question as to
Sanico's fault or negligence.
Further, common carriers may also be liable for damages when they
contravene the tenor of their obligations. Article 1170 of the Civil Code
states:
ART. 1170. Those who in the performance of their obligations are guilty
of fraud, negligence, or delay, and those who in any manner contravene
the tenor thereof, are liable for damages.
In Magat v. Medialdea,28
the Court ruled: "The phrase 'in any manner
contravene the tenor' of the obligation includes any illicit act or omission
which impairs the strict and faithful fulfillment of the obligation and every
kind of defective performance."29 There is no question here that making
Colipano sit on the empty beer case was a clear showing of how Sanico
contravened the tenor of his obligation to safely transport Colipano from
the place of departure to the place of destination as far as human care
and foresight can provide, using the utmost diligence of very cautious
persons, and with due regard for all the circumstances.
Sanico's attempt to evade liability by arguing that he exercised
extraordinary diligence when he hired; Castro, who was allegedly an
experienced and time-tested driver, whom he had even accompanied on
a test-drive and in whom he was personally convinced of the driving
skills,30
are not enough to exonerate him from liability - because the
liability of common carriers does not cease upon p!roof that they
exercised all the diligence of a good father of a family irii the selection.
and supervision of their employees. This is the express mandate of Article
1759 of the Civil Code:
ART. 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former's
employees, although such employees may have acted beyond the scope
of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
The only defenses available to common carriers are (1) proof that they
observed extraordinary diligence as prescribed in Article 1756,31 and (2)
following Article 1174 of the Civil Code, proof that the injury or death was

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