G.R. No. 157917. August 29, 2012.

SPOUSES TEODORO1 and NANETTE PEREÑA, petitioners, vs. SPOUSES NICOLAS and TERESITA L. ZARATE,
PHILIPPINE NATIONAL RAILWAYS, and the COURT OF APPEALS, respondents.

Civil Law; Common Carriers; Words and Phrases; A carrier is a person or corporation who undertakes to
transport or convey goods or persons from one place to another, gratuitously or for hire.―A carrier is a
person or corporation who undertakes to transport or convey goods or persons from one place to
another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a
common/public carrier. A private carrier is one who, without making the activity a vocation, or without
holding himself or itself out to the public as ready to act for all who may desire his or its services,
undertakes, by special agreement in a particular instance only, to transport goods or persons from one
place to another either gratuitously or for hire. The provisions on ordinary contracts of the Civil Code
govern the contract of private carriage. The diligence required of a private carrier is only ordinary, that
is, the diligence of a good father of the family. In contrast, a common carrier is a person, corporation,
firm or association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering such services to the public. Contracts

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* FIRST DIVISION.

1 In the title of the case, the petitioner’s name appears as Teodoro Pereña, but he signed his name as
Teodorico Pereña in the verification/certification of the petition for review on certiorari.

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of common carriage are governed by the provisions on common carriers of the Civil Code, the Public
Service Act, and other special laws relating to transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to have acted negligently in case of the loss of
the effects of passengers, or the death or injuries to passengers.

Same; Same; The true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by the carrier that he has held out to the general public
as his business or occupation.―The true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the
general public as his business or occupation. If the undertaking is a single transaction, not a part of the
general business or occupation engaged in, as advertised and held out to the general public, the
individual or the entity rendering such service is a private, not a common, carrier. The question must be
determined by the character of the business actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert when charged with the duties and obligations
that the law imposes.

Same; Same; School Buses; Despite catering to a limited clientèle, the Pereñas operated as a common
carrier because they held themselves out as a ready transportation indiscriminately to the students of a
particular school living within or near where they operated the service and for a fee.―Applying these
considerations to the case before us, there is no question that the Pereñas as the operators of a school
bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual
occupation; (b) undertaking to carry passengers over established roads by the method by which the
business was conducted; and (c) transporting students for a fee. Despite catering to a limited clientèle,
the Pereñas operated as a common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near where they operated the
service and for a fee.

Same; Same; Extraordinary Diligence; The common carrier is bound to observe extraordinary diligence in
the vigilance over the

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goods and for the safety of the passengers transported by them, according to all the circumstances of
each case.―The common carrier’s standard of care and vigilance as to the safety of the passengers is
defined by law. Given the nature of the business and for reasons of public policy, the common carrier is
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.” Article 1755 of the
Civil Code specifies that the common carrier should “carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all
the circumstances.” To successfully fend off liability in an action upon the death or injury to a passenger,
the common carrier must prove his or its observance of that extraordinary diligence; otherwise, the
legal presumption that he or it was at fault or acted negligently would stand. No device, whether by
stipulation, posting of notices, statements on tickets, or otherwise, may dispense with or lessen the
responsibility of the common carrier as defined under Article 1755 of the Civil Code.

Same; Same; Negligence; Words and Phrases; Negligence is the omission to do something which a
reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man would not do.―The
omissions of care on the part of the van driver constituted negligence, which, according to Layugan v.
Intermediate Appellate Court, 167 SCRA 363 (1988), is “the omission to do something which a
reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man would not do, or as Judge
Cooley defines it, ‘(t)he failure to observe for the protection of the interests of another person, that
degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other
person suffers injury.’ ”

Same; Same; Joint and Solidary Liability; Although the basis of the right to relief of the Zarates (i.e.,
breach of contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ right to
relief against the Philippine National Railways (PNR) (i.e., quasi-delict under Article 2176, Civil Code),
they nonetheless could be held jointly and severally liable by virtue of their respective negligence
combining to cause the death of Aaron.―At any rate, the lower

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courts correctly held both the Pereñas and the PNR “jointly and severally” liable for damages arising
from the death of Aaron. They had been impleaded in the same complaint as defendants against whom
the Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising
out of the accident and questions of fact and of law were common as to the Zarates. Although the basis
of the right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct
from the basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil
Code), they nonetheless could be held jointly and severally liable by virtue of their respective negligence
combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of
negligence despite the school van of the Pereñas traversing the railroad tracks at a point not dedicated
by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure the
safety of others through the placing of crossbars, signal lights, warning signs, and other permanent
safety barriers to prevent vehicles or pedestrians from crossing there. The RTC observed that the fact
that a crossing guard had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium
that the PNR was aware of the risks to others as well as the need to control the vehicular and other
traffic there. Verily, the Pereñas and the PNR were joint tortfeasors.

Same; Same; Loss of Earning Capacity; The basis for the computation of Aaron’s earning capacity was
not what he would have become or what he would have wanted to be if not for his untimely death, but
the minimum wage in effect at the time of his death.―The RTC awarded indemnity for loss of Aaron’s
earning capacity. Although agreeing with the RTC on the liability, the CA modified the amount. Both
lower courts took into consideration that Aaron, while only a high school student, had been enrolled in
one of the reputable schools in the Philippines and that he had been a normal and able-bodied child
prior to his death. The basis for the computation of Aaron’s earning capacity was not what he would
have become or what he would have wanted to be if not for his untimely death, but the minimum wage
in effect at the time of his death. Moreover, the RTC’s computation of Aaron’s life expectancy rate was
not reckoned from his age of 15 years at the time of his death, but on 21 years, his age when he would
have graduated from college. We find the consid-

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erations taken into account by the lower courts to be reasonable and fully warranted.

Same; Same; Same; Our law itself states that the loss of the earning capacity of the deceased shall be
the liability of the guilty party in favor of the heirs of the deceased, and shall in every case be assessed
and awarded by the court “unless the deceased on account of permanent physical disability not caused
by the defendant, had no earning capacity at the time of his death.―The fact that Aaron was then
without a history of earnings should not be taken against his parents and in favor of the defendants
whose negligence not only cost Aaron his life and his right to work and earn money, but also deprived
his parents of their right to his presence and his services as well. Our law itself states that the loss of the
earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the
deceased, and shall in every case be assessed and awarded by the court “unless the deceased on
account of permanent physical disability not caused by the defendant, had no earning capacity at the
time of his death.” Accordingly, we emphatically hold in favor of the indemnification for Aaron’s loss of
earning capacity despite him having been unemployed, because compensation of this nature is awarded
not for loss of time or earnings but for loss of the deceased’s power or ability to earn money.

Same; Same; Damages; Moral Damages; The moral damages of P2,500,000.00 were really just and
reasonable under the established circumstances of this case because they were intended by the law to
assuage the Zarates’ deep mental anguish over their son’s unexpected and violent death, and their
moral shock over the senseless accident.―The moral damages of P2,500,000.00 were really just and
reasonable under the established circumstances of this case because they were intended by the law to
assuage the Zarates’ deep mental anguish over their son’s unexpected and violent death, and their
moral shock over the senseless accident. That amount would not be too much, considering that it would
help the Zarates obtain the means, diversions or amusements that would alleviate their suffering for the
loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice, given
the passage of a long time from when their mental anguish was inflicted on them on August 22, 1996.

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Same; Same; Damages; Exemplary Damages; Anent the P1,000,000.00 allowed as exemplary damages,
we should not reduce the amount if only to render effective the desired example for the public
good.―Anent the P1,000,000.00 allowed as exemplary damages, we should not reduce the amount if
only to render effective the desired example for the public good. As a common carrier, the Pereñas
needed to be vigorously reminded to observe their duty to exercise extraordinary diligence to prevent a
similarly senseless accident from happening again. Only by an award of exemplary damages in that
amount would suffice to instill in them and others similarly situated like them the ever-present need for
greater and constant vigilance in the conduct of a business imbued with public interest.

PETITION for review on certiorari of a decision of the Court of Appeals.

   The facts are stated in the opinion of the Court.

  Saguisag and Associates for petitioners.

  Donato, Zarate & Rodriguez for respondent Sps. Zarate.

  Ramos, Rojo, Estrada, Licayu, Reyes and Bayot for respondent Philippine National Railways.

BERSAMIN, J.:

The operator of a school bus service is a common carrier in the eyes of the law. He is bound to observe
extraordinary diligence in the conduct of his business. He is presumed to be negligent when death
occurs to a passenger. His liability may include indemnity for loss of earning capacity even if the
deceased passenger may only be an unemployed high school student at the time of the accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Pereña (Pereñas) appeal the adverse
decision promulgated on November 13, 2002, by which the Court of Appeals

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(CA) affirmed with modification the decision rendered on December 3, 1999 by the Regional Trial Court
(RTC), Branch 260, in Parañaque City that had decreed them jointly and severally liable with Philippine
National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the
death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school student of Don Bosco
Technical Institute (Don Bosco).
Antecedents

The Pereñas were engaged in the business of transporting students from their respective residences in
Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereñas used
a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14 students at a time,
two of whom would be seated in the front beside the driver, and the others in the rear, with six students
on either side. They employed Clemente Alfaro (Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August
22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates’
residence. Aaron took his place on the left side of the van near the rear door. The van, with its air-
conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14 student riders on
their way to Don Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and that
they were already running late because of the heavy vehicular traffic on the South Superhighway, Alfaro
took the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath the
Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into
Makati. At the time, the narrow path was marked by piles of construction materials and parked
passenger jeepneys, and the railroad crossing in the narrow path had no railroad warning signs, or

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watchmen, or other responsible persons manning the crossing. In fact, the bamboo barandilla was up,
leaving the railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train),
operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling
northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the railroad
tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked because he
overtook the passenger bus on its left side. The train blew its horn to warn motorists of its approach.
When the train was about 50 meters away from the passenger bus and the van, Alano applied the
ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did
not. The train hit the rear end of the van, and the impact threw nine of the 12 students in the rear,
including Aaron, out of the van. Aaron landed in the path of the train, which dragged his body and
severed his head, instantaneously killing him. Alano fled the scene on board the train, and did not wait
for the police investigator to arrive.

 Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for
damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective
answers, with cross-claims against each other, but Alfaro could not be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz.:

A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe transportation
carriage of the

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Pereña vs. Zarate

former spouses’ son from their residence in Parañaque to his school at the Don Bosco Technical Institute
in Makati City;

(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the
minor son of spouses Zarate died in connection with a vehicular/train collision which occurred while
Aaron was riding the contracted carrier Kia Ceres van of spouses Pereña, then driven and operated by
the latter’s employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at
around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City,
Metro Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a
railroad crossing used by motorists for crossing the railroad tracks;

(5) During the said time of the vehicular/train collision, there were no appropriate and safety warning
signs and railings at the site commonly used for railroad crossing;

(6) At the material time, countless number of Makati bound public utility and private vehicles used on
a daily basis the site of the collision as an alternative route and short-cut to Makati;

(7) The train driver or operator left the scene of the incident on board the commuter train involved
without waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad
operator for railroad crossing at the time of the vehicular collision;

(9) PNR received the demand letter of the spouses Zarate;

(10) PNR refused to acknowledge any liability for the vehicular/train collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement
between the former and its project contractor; and

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(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the
Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for
negligence constituting the proximate cause of the vehicular collision, which resulted in the death of
plaintiff spouses’ son;

(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable
for any negligence which may be attributed to defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is
liable for negligence in failing to provide adequate safety warning signs and railings in the area
commonly used by motorists for railroad crossings, constituting the proximate cause of the vehicular
collision which resulted in the death of the plaintiff spouses’ son;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with
plaintiff-spouses in failing to provide adequate and safe transportation for the latter’s son;

(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and
attorney’s fees;

(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of
employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in
the accident, in allowing or tolerating the motoring public to cross, and its failure to install safety devices
or equipment at the site of the accident for the protection of the public;

(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and
whatever amount

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Pereña vs. Zarate

the latter may be held answerable or which they may be ordered to pay in favor of plaintiffs by reason of
the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by
the latter in their Complaint by reason of its gross negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary
damages and attorney’s fees.2

The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe transport
of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code.

In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good
father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been
issued a driver’s license and had not been involved in any vehicular accident prior to the collision; that
their own son had taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in
the van’s trips transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing
of the van whose driver had not first stopped, looked and listened; and that the narrow path traversed
by the van had not been intended to be a railroad crossing for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision,3 disposing:

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2 CA Rollo, pp. 47-49.

3 Id., at pp. 47-55.

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WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the
defendants ordering them to jointly and severally pay the plaintiffs as follows:

(1) (for) the death of Aaron – Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity – Php2,109,071.00;

(4) Moral damages in the amount of (Php)4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorney’s fees in the amount of Php200,000.00; and

(7) Cost of suit.
 SO ORDERED.

 On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,4 reiterating that the
cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death of
Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established
circumstances.

 The CA’s Ruling

 Both the Pereñas and PNR appealed (CA-G.R. CV No. 68916).

 PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together
with defendant-appellants spouses Teodorico and Nanette Pereña and defendant-appellant Clemente
Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and damages.

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4 Id., at p. 142.

5 Id., at pp. 25-46.

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Pereña vs. Zarate

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite
overwhelming documentary evidence on record, supporting the case of defendants-appellants
Philippine National Railways.

The Pereñas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and
exemplary damages and attorney’s fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine
National Railways and in not holding the latter and its train driver primarily responsible for the incident.

The trial court erred in awarding excessive damages and attorney’s fees.

The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the
absence of sufficient basis for such an award.

On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited
the moral damages to P2,500,000.00; and deleted the attorney’s fees because the RTC did not state the
factual and legal bases, to wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of
Parañaque City is AFFIRMED with the modification that the award of Actual Damages is reduced to
P59,502.76; Moral Damages is reduced to P2,500,000.00; and the award for Attorney’s Fees is Deleted.

 SO ORDERED.

The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in
Cariaga v. La-

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6 Rollo, pp. 70-80.

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guna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga
a sum representing the loss of the deceased’s earning capacity despite Cariaga being only a medical
student at the time of the fatal incident. Applying the formula adopted in the American Expectancy
Table of Mortality:―

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from
age of 21 (the age when he would have graduated from college and started working for his own
livelihood) instead of 15 years (his age when he died). Considering that the nature of his work and his
salary at the time of Aaron’s death were unknown, it used the prevailing minimum wage of P280.00/day
to compute Aaron’s gross annual salary to be P110,716.65, inclusive of the thirteenth month pay.
Multiplying this annual salary by Aaron’s life expectancy of 39.3 years, his gross income would aggregate
to P4,351,164.30, from which his estimated expenses in the sum of P2,189,664.30 was deducted to
finally arrive at P2,161,500.00 as net income. Due to Aaron’s computed net income turning out to be
higher than the amount claimed by the Zarates, only P2,109,071.00, the amount expressly prayed for by
them, was granted.

 On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8

Issues

 In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:

______________________________

7 110 Phil. 346 (1960).

8 Id., at p. 82.

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Pereña vs. Zarate

I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and
severally liable to pay damages with Philippine National Railways and dismissing their cross-claim
against the latter.

II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning
capacity of a minor who was only a high school student at the time of his death in the absence of
sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.

Ruling

 The petition has no merit.

1.

Were the Pereñas and PNR jointly

and severally liable for damages?

  The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing
their claim against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.

The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in
the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a driver’s license
and that he had not been involved in any vehicular accident prior to the fatal collision with the train;
that they even had their own son travel to and from school on a daily basis; and that Teodoro Pereña
himself sometimes accompanied Alfaro in transporting the passengers

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to and from school. The RTC gave scant consideration to such defense by regarding such defense as
inappropriate in an action for breach of contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated
as a common carrier; and that their standard of care was extraordinary diligence, not the ordinary
diligence of a good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
carrier,9 primarily because he only caters to some specific or privileged individuals, and his operation is
neither open to the indefinite public nor for public use, the exact nature of the operation of a school bus
service has not been finally settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from one
place to another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a
common/public carrier.10 A private carrier is one who, without making the activity a vocation, or
without holding himself or itself out to the public as ready to act for all who may desire his or its
services, undertakes, by special agreement in a particular instance only, to transport goods or persons
from one place to another either gratuitously or for hire.11 The provisions on ordinary contracts of the
Civil Code govern the contract of private carriage. The diligence required of a private carrier is only
ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a person,
corporation, firm or association engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation,

______________________________

9  Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, 1993 Edition,
at p. 7.

10 Id., at p. 4.

11 Perez, Transportation Laws and Public Service Act, 2001 Edition, p. 6.

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offering such services to the public.12 Contracts of common carriage are governed by the provisions on
common carriers of the Civil Code, the Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be
at fault or to have acted negligently in case of the loss of the effects of passengers, or the death or
injuries to passengers.14 
In relation to common carriers, the Court defined public use in the following terms in United States v.
Tan Piaco,15 viz.:

 “Public use” is the same as “use by the public.” The essential feature of the public use is not confined to
privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that
gives it its public character. In determining whether a use is public, we must look not only to the
character of the business to be done, but also to the proposed mode of doing it. If the use is merely
optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the
exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the
law compels the owner to give to the general public. It is not enough that the general prosperity of the
public is promoted. Public use is not synonymous with public interest. The true criterion by which to
judge the character of the use is whether the public may enjoy it by right or only by permission. 

______________________________

12 Article 1732 of the Civil Code states:

 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.

13 Commonwealth Act No. 146, as amended, particularly by PD No. 1, Integrated Reorganization Plan
and E.O. 546.

14 Article 1756 of the Civil Code reads:

 Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence
as prescribed in articles 1733 and 1755.
15 40 Phil. 853, 856 (1920).

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In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any
distinction between a person or an enterprise offering transportation on a regular or an isolated basis;
and has not distinguished a carrier offering his services to the general public, that is, the general
community or population, from one offering his services only to a narrow segment of the general
population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides
neatly with the notion of public service under the Public Service Act, which supplements the law on
common carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of the
Public Service Act, includes:

 x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientèle, whether permanent or occasional, and done for
the general business purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be
its classification, freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar public services. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as
common carriers

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16 G.R. No. L-47822, December 22, 1988, 168 SCRA 612, 617-618.

17 Public Service Act.

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Pereña vs. Zarate

pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if they had
limited clientèle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the
general public as his business or occupation. If the undertaking is a single transaction, not a part of the
general business or occupation engaged in, as advertised and held out to the general public, the
individual or the entity rendering such service is a private, not a common, carrier. The question must be
determined by the character of the business actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert when charged with the duties and obligations
that the law imposes.21
Applying these considerations to the case before us, there is no question that the Pereñas as the
operators of a school bus service were: (a) engaged in transporting passengers generally as a business,
not just as a casual occupation; (b) undertaking to carry passengers over established roads by the
method by which the business was conducted; and (c) transporting students for a fee. Despite catering
to a limited clientèle, the Pereñas operated as a common carrier because they held themselves out as a
ready transportation indiscriminately to the students of a particular school living within or near where
they operated the service and for a fee.

The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law.
Given the na-

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18 First Philippine Industrial Corporation v. Court of Appeals, G.R. No. 125948, December 29, 1998, 300
SCRA 661, 670.

19 Calvo v. UCPB General Insurance Co., G.R. No. 148496, March 19, 2002, 379 SCRA 510, 516.

20 Asia Lighterage and Shipping, Inc. v. Court of Appeals, G.R. No. 147246, August 9, 2003, 409 SCRA
340.

21 Agbayani, supra, note 9, pp. 7-8.

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ture of the business and for reasons of public policy, the common carrier is 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.”22 Article 1755 of the Civil Code specifies that
the common carrier should “carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard for all the circumstances.” To
successfully fend off liability in an action upon the death or injury to a passenger, the common carrier
must prove his or its observance of that extraordinary diligence; otherwise, the legal presumption that
he or it was at fault or acted negligently would stand.23 No device, whether by stipulation, posting of
notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of the
common carrier as defined under Article 1755 of the Civil Code.24

And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court
might now reverse the CA’s findings on their liability. On the contrary, an examination of the records
shows that the evidence fully supported the findings of the CA.

As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the
time of the accident because death had occurred to their passenger.25 The presumption of negligence,
being a presumption of law, laid the burden of evidence on their shoulders to establish that they had
not been negligent.26 It was the law no less that

______________________________

22 Article 1733, Civil Code.

23 Article 1756, Civil Code.

24 Article 1757, Civil Code.

25 Supra, note 13.

26 31A CJS, Evidence §134, citing State Tax Commission v. Phelps Dodge Corporation, 157 P. 2d 693, 62
Ariz. 320; Kott v. Hilton, 114 P. 2d 666, 45 C.A. 2d 548;Lindley v. Mowell, Civ. Ap. 232 S.W. 2d 256.

228

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Pereña vs. Zarate

required them to prove their observance of extraordinary diligence in seeing to the safe and secure
carriage of the passengers to their destination. Until they did so in a credible manner, they stood to be
held legally responsible for the death of Aaron and thus to be held liable for all the natural
consequences of such death.

There is no question that the Pereñas did not overturn the presumption of their negligence by credible
evidence. Their defense of having observed the diligence of a good father of a family in the selection and
supervision of their driver was not legally sufficient. According to Article 1759 of the Civil Code, their
liability as a common carrier did not cease upon proof that they exercised all the diligence of a good
father of a family in the selection and supervision of their employee. This was the reason why the RTC
treated this defense of the Pereñas as inappropriate in this action for breach of contract of carriage.

The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted
beyond the scope of his authority or even in violation of the orders of the common carrier.27 In this
connection, the records showed their driver’s actual negligence. There was a showing, to begin with,
that their driver traversed the railroad tracks at a point at which the PNR did not permit motorists going
into the Makati area to cross the railroad tracks. Although that point had been used by motorists as a
shortcut into the Makati area, that fact alone did not excuse their driver into taking that route. On the
other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding his lack of care was that loud music was
playing inside the air-conditioned van at the time of the accident. The loudness most probably reduced
his ability to hear the warning horns of the oncoming train to allow him to correctly appreciate the
lurking dangers on the

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27 Article 1759, Civil Code.

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railroad tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles traversed
the railroad tracks. In so doing, he lost his view of the train that was then coming from the opposite side
of the passenger bus, leading him to miscalculate his chances of beating the bus in their race, and of
getting clear of the train. As a result, the bus avoided a collision with the train but the van got slammed
at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop before traversing the
railroad tracks despite knowing that his slackening of speed and going to a full stop were in observance
of the right of way at railroad tracks as defined by the traffic laws and regulations.28 He thereby violated
a specific traffic regulation on right of way, by virtue of which he was immediately presumed to be
negligent.29

The omissions of care on the part of the van driver constituted negligence,30 which, according to
Layugan v. Intermediate Appellate Court,31 is “the omission to do something which a reasonable man,
guided by those considerations which ordi-
______________________________

28 E.g., Section 42(d) of Republic Act No. 4136 (Land Transportation and Traffic Code), which pertinently
provides:

Section 42. Right of way.―xxx

xxx

 (d) The driver of a vehicle upon a highway shall bring to a full stop such vehicle before traversing any
“through highway” or railroad crossing:provided, that when it is apparent that no hazard exists, the
vehicle may be slowed down to five miles per hour instead of bringing it to a full stop.

29 Article 2185 of the Civil Code provides:

 Article 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle
has been negligent if at the time of the mishap, he was violating any traffic regulation. (n)

See also BLT Bus Company v. Intermediate Appellate Court, Nos. L-74387-90, November 14, 1988, 167
SCRA 379.

30 Yamada v. Manila Railroad Co., No. 10073, 33 Phil. 8, 11 (1915).

31 G.R. No. L-73998, November 14, 1988, 167 SCRA 363.

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SUPREME COURT REPORTS ANNOTATED

Pereña vs. Zarate

narily regulate the conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for the
protection of the interests of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury.’ ”33  

The test by which to determine the existence of negligence in a particular case has been aptly stated in
the leading case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be stated as follows:
Did the defendant in doing the alleged negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence.
The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined
by reference to the personal judgment of the actor in the situation before him. The law considers what
would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and
determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of
course be always determined in the light of human experience and in view of the facts involved in the
particular case. Abstract speculation cannot here be of much value but this much can be profitably said:
Reasonable men govern their conduct by the circumstances which are before them or known to them.
They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to take
care only when there is something before them to suggest or warn of danger. Could a prudent man, in
the case under consideration, foresee harm as a result of the course actually pursued? If so, it was the
duty of the actor to take
______________________________

32 Citing Black Law Dictionary, Fifth Edition, p. 930.

33 Citing Cooley on Torts, Fourth Edition, Volume 3, p. 265.

34 37 Phil. 809 (1918).

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precautions to guard against that harm. Reasonable foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary before negligence can be held to exist. Stated in
these terms, the proper criterion for determining the existence of negligence in a given case is this:
Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have
foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing the
conduct or guarding against its consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he
traversed the railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware of
the grave harm to be thereby caused to his passengers; and when he disregarded the foresight of harm
to his passengers by overtaking the bus on the left side as to leave himself blind to the approach of the
oncoming train that he knew was on the opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court
held the PNR solely liable for the damages caused to a passenger bus and its passengers when its train
hit the rear end of the bus that was then traversing the railroad crossing. But the circumstances of that
case and this one share no similarities. In Philippine National Railways v. Intermediate Appellate Court,
no evidence of contributory negligence was adduced against the owner of the bus. Instead, it was the
owner of the bus who proved the exercise of extraordinary diligence by preponderant evidence. Also,
the records are replete with the showing of negligence on the part of both the Pereñas and the PNR.
Another distinction is that the passenger bus in Philippine National Railways v. Intermediate Appellate
Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school
van traversed the railroad tracks at a point not intended for that purpose.

______________________________

35 G.R. No. 70547, January 22, 1993, 217 SCRA 401.

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At any rate, the lower courts correctly held both the Pereñas and the PNR “jointly and severally” liable
for damages arising from the death of Aaron. They had been impleaded in the same complaint as
defendants against whom the Zarates had the right to relief, whether jointly, severally, or in the
alternative, in respect to or arising out of the accident and questions of fact and of law were common as
to the Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of contract of
carriage) against the Pereñas was distinct from the basis of the Zarates’ right to relief against the PNR
(i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally
liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the
RTC rightly found the PNR also guilty of negligence despite the school van of the Pereñas traversing the
railroad tracks at a point not dedicated by the PNR as a railroad crossing for pedestrians and motorists,
because the PNR did not ensure the safety of others through the placing of crossbars, signal lights,
warning signs, and other permanent safety barriers to prevent vehicles or pedestrians from crossing
there. The RTC observed that the fact that a crossing guard had been assigned to man that point from 7
a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others as well as the need to
control

______________________________

36 The rule on permissive joinder of parties is Section 6, Rule 3, of the Rules of Court, to wit:

 Section 6. Permissive joinder of parties.―All persons in whom or against whom any right to relief in
respect to or arising out of the same transaction or series of transactions is alleged to exist, whether
jointly, severally, or in the alternative, may, except as otherwise provided in these Rules, join as plaintiffs
or be joined as defendants in one complaint, where any question of law or fact common to all such
plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may
be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection
with any proceedings in which he may have no interest. (6)

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the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint tortfeasors.

2.
Was the indemnity for loss of

Aaron’s earning capacity proper?

The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the
liability, the CA modified the amount. Both lower courts took into consideration that Aaron, while only a
high school student, had been enrolled in one of the reputable schools in the Philippines and that he
had been a normal and able-bodied child prior to his death. The basis for the computation of Aaron’s
earning capacity was not what he would have become or what he would have wanted to be if not for his
untimely death, but the minimum wage in effect at the time of his death. Moreover, the RTC’s
computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at the time of his
death, but on 21 years, his age when he would have graduated from college.

We find the considerations taken into account by the lower courts to be reasonable and fully warranted.

Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and unfounded.
They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim Jussi Leino’s
loss of earning capacity as a pilot for being speculative due to his having graduated from high school at
the International School in Manila only two years before the shooting, and was at the time of the
shooting only enrolled in the first semester at the Manila Aero Club to pursue his ambition to become a
professional pilot. That meant, according to the Court, that he was for all intents and purposes only a
high school graduate.

______________________________

37 G.R. Nos. 111206-08, October 6, 1995, 249 SCRA 54.

234

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Pereña vs. Zarate

We reject the Pereñas’ submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was
not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be some
highly-paid professional, like a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead,
the computation of Aaron’s earning capacity was premised on him being a lowly minimum wage earner
despite his being then enrolled at a prestigious high school like Don Bosco in Makati, a fact that would
have likely ensured his success in his later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his
parents and in favor of the defendants whose negligence not only cost Aaron his life and his right to
work and earn money, but also deprived his parents of their right to his presence and his services as
well. Our law itself states that the loss of the earning capacity of the deceased shall be the liability of the
guilty party in favor of the heirs of the deceased, and shall in every case be assessed and awarded by the
court “unless the deceased on account of permanent physical disability not caused by the defendant,
had no earning capacity at the time of his death.”38 Accordingly, we emphatically hold in favor of the
indemnification for Aaron’s loss of earning capacity despite him having been unemployed, because
compensation of this nature is awarded not for loss of time or earnings but for loss of the deceased’s
power or ability to earn money.39

This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus
Company and Manila Railroad Company,40 fourth-year medical student Edgardo Carriaga’s earning
capacity, although he survived

______________________________

38 Article 2206 (1), Civil Code.

39 People v. Teehankee, Jr., supra, note 37, at p. 207. See also 25 CJS, Damages, §40.

40 No. L-11037, 110 Phil. 346 (1960).

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the accident but his injuries rendered him permanently incapacitated was computed to be that of the
physician that he dreamed to become. The Court considered his scholastic record sufficient to justify the
assumption that he could have finished the medical course and would have passed the medical board
examinations in due time, and that he could have possibly earned a modest income as a medical
practitioner. Also, in People v. Sanchez,41 the Court opined that murder and rape victim Eileen
Sarmienta and murder victim Allan Gomez could have easily landed good-paying jobs had they
graduated in due time, and that their jobs would probably pay them high monthly salaries from
P10,000.00 to P15,000.00 upon their graduation. Their earning capacities were computed at rates higher
than the minimum wage at the time of their deaths due to their being already senior agriculture
students of the University of the Philippines in Los Baños, the country’s leading educational institution in
agriculture.

3.

Were the amounts of damages excessive?

 The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the
respective amounts of P2,500,000.00 and P1,000,000.00 on the ground that such amounts were
excessive.
 The plea is unwarranted.

 The moral damages of P2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates’ deep mental
anguish over their son’s unexpected and violent death, and their moral shock over the senseless
accident. That amount would not be too much, considering that it would help the Zarates obtain the
means, diversions or amusements that would alleviate their suffering for the loss of their child. At any
rate, reducing the amount as excessive

______________________________

41 G.R. Nos. 121039-121045, October 18, 2001, 367 SCRA 520.

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might prove to be an injustice, given the passage of a long time from when their mental anguish was
inflicted on them on August 22, 1996.

Anent the P1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to
render effective the desired example for the public good. As a common carrier, the Pereñas needed to
be vigorously reminded to observe their duty to exercise extraordinary diligence to prevent a similarly
senseless accident from happening again. Only by an award of exemplary damages in that amount
would suffice to instill in them and others similarly situated like them the ever-present need for greater
and constant vigilance in the conduct of a business imbued with public interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on
November 13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

Sereno (C.J.), Leonardo-De Castro, Villarama, Jr. and Reyes, JJ., concur. 

Petition denied, judgment affirmed.

Notes.―Common carriers, like petitioner bus company, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each case. (R Transport Corporation vs.
Pante, 599 SCRA 747 [2009])

Common carriers are liable for the death or injury 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. (Id.)

――o0o―― 

© Copyright 2020 Central Book Supply, Inc. All rights reserved. Pereña vs. Zarate, 679 SCRA 208, G.R. No.
157917 August 29, 2012