FACTS:

The case involves a vehicular collision between a van and a train operated by the Philippine National Railways (PNR) which resulted in the death of the Zarate family's son, Aaron. The Zarates filed a case against the driver of the van, the Pereña spouses who were the employers of the van driver, and PNR. The Pereñas argued that they exercised due diligence in the selection and supervision of the van driver, as they ensured that he had a driver's license and had no previous accidents. They also claimed that their own son had ridden the van daily and that Teodoro Pereña sometimes accompanied the driver on trips. PNR, on the other hand, argued that the proximate cause of the collision was the van's reckless crossing, as the driver failed to stop, look, and listen. They also claimed that the path taken by the van was not intended to be a railroad crossing for motorists. The RTC ruled in favor of the Zarates and ordered the defendants to pay various damages to the plaintiffs. The Pereñas and PNR appealed to the Court of Appeals (CA). The CA affirmed the RTC's findings but reduced the amount of moral damages awarded.

ISSUES:

1. Whether or not the Pereñas operated as a common carrier.

2. Whether or not the standard of care applicable to the Pereñas is that of extraordinary diligence.

3. Whether the Pereñas were considered common carriers and therefore held to the standard of extraordinary diligence in ensuring the safety of their passengers.

4. Whether the Pereñas were able to prove their observance of extraordinary diligence, thus overturning the presumption of negligence.

5. Whether the Pereñas' driver was guilty of negligence.

6. Whether the Pereñas and the PNR can be held jointly and severally liable for the death of Aaron.

7. Whether the award of indemnity for loss of Aaron's earning capacity was proper.

8. Whether the computation of Aaron's earning capacity based on his age at the time of his death was reasonable and warranted.

9. Whether the indemnification for Aaron's loss of earning capacity was speculative and unfounded.

10. Whether the amounts of damages awarded were excessive.

RULING:

1. The Supreme Court held that the Pereñas and the PNR were jointly and severally liable for damages. The Pereñas’ defense that they exercised the diligence of a good father of the family in the selection and supervision of the van driver was not sufficient to absolve them of liability. The Court found no reason to differ from the lower courts’ conclusion that the Pereñas operated as a common carrier and that their standard of care was extraordinary diligence. The Court also clarified that a carrier can be classified as either a private or common carrier, and in this case, the Pereñas were considered common carriers. The Court affirmed the CA’s award for the loss of Aaron’s earning capacity, using the formula to determine his life expectancy. The Court denied the Pereñas’ appeal and upheld the CA’s decision.

2. The Pereñas operated as a common carrier.

3. The standard of care applicable to the Pereñas is extraordinary diligence.

4. The Pereñas were considered common carriers because they were engaged in the business of transporting passengers, transported students for a fee, and held themselves out as ready transportation to students of a particular school living within their vicinity. As common carriers, they were bound to observe extraordinary diligence in ensuring the safety of their passengers.

5. The Pereñas failed to prove their observance of extraordinary diligence. Their defense of having exercised the diligence of a good father of a family in the selection and supervision of their driver was deemed legally insufficient. Their driver's negligence in traversing a prohibited railroad crossing, driving with loud music playing, attempting to overtake a bus, and disregarding traffic regulations established his negligence.

6. Yes, the Pereñas' driver was guilty of negligence. According to the Picart v. Smith test of negligence, the driver failed to exercise the reasonable care and caution that an ordinarily prudent person would have used in the same situation. He traversed the railroad tracks at a point not allowed for a motorist's crossing, despite being aware of the harm it could cause to his passengers. He also ignored the foresight of harm by overtaking the bus on the left side, leaving himself blind to the oncoming train.

7. Yes, the Pereñas and the PNR can be held jointly and severally liable for the death of Aaron. Both parties were found to have been negligent, and their respective negligence combined to cause Aaron's death. The Pereñas were negligent for their driver's actions, while the PNR was negligent for failing to ensure the safety of others by not implementing necessary safety barriers at the railroad crossing.

8. The award of indemnity for loss of Aaron's earning capacity was proper. The amount was based on the minimum wage in effect at the time of Aaron's death, taking into consideration that he was enrolled in a reputable school and was a normal and able-bodied child prior to his death. The computation of Aaron's life expectancy rate was also proper, despite not being reckoned from his age of 15 years at the time of his death.

9. The computation of Aaron's earning capacity based on his age at the time of his death was reasonable and warranted.

10. The indemnification for Aaron's loss of earning capacity was not speculative and unfounded.

11. The amounts of damages awarded were not excessive.

PRINCIPLES:

• A carrier can be classified as either a private/special carrier or a common/public carrier.

• A private carrier is one who undertakes transportation services in a particular instance only and the diligence required of them is only ordinary.

• A common carrier is engaged in the business of carrying or transporting passengers or goods for compensation, offering such services to the public. They are required to observe extraordinary diligence.

• The concept of a common carrier in the Civil Code coincides with the notion of public service under the Public Service Act.

• The true test to determine if a carrier is a common carrier is whether the undertaking is a part of the activity engaged in by the carrier that is held out to the general public as his business or occupation.

• Common carriers are bound to observe extraordinary diligence in transporting passengers, ensuring their safety, and avoiding negligence. They must carry passengers safely as far as human care and foresight can provide.

• Common carriers cannot escape or lessen their responsibility through stipulations, posted notices, or statements on tickets.

• The burden of proof lies with the common carrier to establish their observance of extraordinary diligence and overturn the presumption of negligence.

• The negligence of the common carrier's driver can be imputed to the carrier itself, making them liable for the consequences of such negligence.

• The test to determine negligence is whether the defendant used the reasonable care and caution that an ordinarily prudent person would have used in the same situation.

• Negligence is determined by considering what would be reckless, blameworthy, or negligent in a person of ordinary intelligence and prudence.

• Conduct is said to be negligent when a prudent person in the position of the tortfeasor would have foreseen that harmful consequences were sufficiently probable to warrant foregoing the conduct or guarding against its consequences.

• Joint and several liability can be imposed on parties who are found to have been negligent and whose negligence combined to cause harm.

• Indemnity for loss of earning capacity can be awarded based on the minimum wage at the time of the victim's death, taking into consideration their education and abilities prior to their death.

• The computation of the earning capacity of a deceased person should be based on reasonable and warranted considerations.

• The absence of a history of earnings should not be taken against the deceased and in favor of the defendants in a negligence case when determining indemnification for loss of earning capacity.

• Indemnification for loss of earning capacity is awarded not for loss of time or earnings but for loss of the deceased's power or ability to earn money.

• A person's potential earning capacity may be computed based on their educational accomplishments and potential career prospects.

• Moral damages should be just and reasonable, commensurate with the mental anguish suffered by the aggrieved party.

• Exemplary damages may be awarded to serve as an example and reminder for the public good, particularly in cases involving common carriers who have a duty to exercise extraordinary diligence.