G.R. No.

L-55347 October 4, 1985

PHILIPPINE NATIONAL RAILWAYS, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and ROSARIO TUPANG, respondents.

Arturo Samaniego for private respondent.

ESCOLIN, J.:

Invoking the principle of state immunity from suit, the Philippine National Railways,
PNR for short, instituted this petition for review on certiorari to set aside the decision
of the respondent Appellate Court which held petitioner PNR liable for damages for
the death of Winifredo Tupang, a paying passenger who fell off a train operated by
the petitioner.

The pertinent facts are summarized by the respondent court as follows:

The facts show that on September 10, 1972, at about 9:00 o'clock in
the evening, Winifredo Tupang, husband of plaintiff Rosario Tupang,
boarded 'Train No. 516 of appellant at Libmanan, Camarines Sur, as a
paying passenger bound for Manila. Due to some mechanical defect,
the train stopped at Sipocot, Camarines Sur, for repairs, taking some
two hours before the train could resume its trip to Manila.
Unfortunately, upon passing Iyam Bridge at Lucena, Quezon, Winifredo
Tupang fell off the train resulting in his death.The train did not stop
despite the alarm raised by the other passengers that somebody fell
from the train. Instead, the train conductor Perfecto Abrazado, called
the station agent at Candelaria, Quezon, and requested for verification
of the information. Police authorities of Lucena City were dispatched to
the Iyam Bridge where they found the lifeless body of Winifredo
Tupang.

As shown by the autopsy report, Winifredo Tupang died of cardio-

respiratory failure due to massive cerebral hemorrhage due to
traumatic injury [Exhibits B and C, Folder of Exhibits],Tupang was later
buried in the public cemetery of Lucena City by the local police
authorities. [Rollo, pp. 91-92]

Upon complaint filed by the deceased's widow, Rosario Tupang, the then Court of
First Instance of Rizal, after trial, held the petitioner PNR liable for damages for
breach of contract of carriage and ordered "to pay the plaintiff the sum of
P12,000,00 for the death of Winifredo Tupang, plus P20,000.00 for loss of his
earning capacity and the further sum of P10,000.00 as moral damages, and
P2,000.00 as attorney's fees, and costs. 1

On appeal, the Appellate Court sustained the holding of the trial court that the PNR
did not exercise the utmost diligence required by law of a common carrier. It further
increased the amount adjudicated by the trial court by ordering PNR to pay the
plaintiff an additional sum of P5,000.00 as exemplary damages.

Moving for reconsideration of the above decision, the PNR raised for the first time,
as a defense, the doctrine of state immunity from suit. It alleged that it is a mere
agency of the Philippine government without distinct or separate personality of its
own, and that its funds are governmental in character and, therefore, not subject to
garnishment or execution. The motion was denied; the respondent court ruled that
the ground advanced could not be raised for the first time on appeal.

Hence, this petition for review.

The petition is devoid of merit. The PNR was created under Rep. Act 4156, as
amended. Section 4 of the said Act provides:

The Philippine national Railways shall have the following powers:

a. To do all such other things and to transact all such business directly
or indirectly necessary, incidental or conducive to the attainment of the
purpose of the corporation; and

b. Generally, to exercise all powers of a corporation under the

Corporation Law.

Under the foregoing section, the PNR has all the powers, the characteristics and
attributes of a corporation under the Corporation Law. There can be no question
then that the PNR may sue and be sued and may be subjected to court processes
just like any other corporation. 2

The petitioner's contention that the funds of the PNR are not subject to garnishment
or execution hardly raises a question of first impression. In Philippine National
Railways v. Union de Maquinistas, et al., 3 then Justice Fernando, later Chief Justice,
said. "The main issue posed in this certiorari proceeding, whether or not the funds of
the Philippine National Railways, could be garnished or levied upon on execution
was resolved in two recent decisions, the Philippine National Bank v. Court of
Industrial Relations [81 SCRA 314] and Philippine National Bank v. Hon. Judge
Pabalan [83 SCRA 595]. This Court in both cases answered the question in the
affirmative. There was no legal bar to garnishment or execution. The argument
based on non-suability of a state allegedly because the funds are governmental in
character was unavailing.So it must be again."
In support of the above conclusion, Justice Fernando cited the Court's holding
in Philippine National Bank v. Court of Industrial Relations, to wit: "The premise that
the funds could be spoken of as public in character may be accepted in the sense
that the People's Homesite and Housing Corporation was a government-owned
entity. It does not follow though that they were exempt from garnishment. National
Shipyard and Steel Corporation v. Court of Industrial Relations is squarely in point.
As was explicitly stated in the opinion of then Justice, later Chief Justice,
Concepcion: "The allegation to the effect that the funds of the NASSCO are public
funds of the government, and that, as such, the same may not be garnished,
attached or levied upon, is untenable for, as a government- owned and controlled
corporation, the NASSCO has a personality of its own, distinct and separate from
that of the Government. It has-pursuant to Section 2 of Executive Order No. 356,
dated October 23, 1950 * * *, pursuant to which the NASSCO has been established-
'all the powers of a corporation under the Corporation Law * * *. 4

As far back as 1941, this Court in the case of Manila Hotel Employees Association
v. Manila Hotel Co., 5 laid down the rule that "when the government enters into
commercial business, it abandons its sovereign capacity and is to be treated like any
other corporation. [Bank of the U.S. v. Planters' Bank, 9 Waitch 904, 6 L. ed. 244].
By engaging in a particular business through the instrumentality of a corporation the
government divests itself pro hac vice of its sovereign character, so as to render the
corporation subject to the rules of law governing private corporations. 6 Of Similar
import is the pronouncement in Prisco v. CIR,' that "when the government engages
in business, it abdicates part of its sovereign prerogatives and descends to the level
of a citizen, ... . " In fine, the petitioner PNR cannot legally set up the doctrine of non-
suability as a bar to the plaintiff's suit for damages.

The appellate court found, the petitioner does not deny, that the train boarded by the
deceased Winifredo Tupang was so over-crowded that he and many other
passengers had no choice but to sit on the open platforms between the coaches of
the train. It is likewise undisputed that the train did not even slow down when it
approached the Iyam Bridge which was under repair at the time, Neither did the train
stop, despite the alarm raised by other passengers that a person had fallen off the
train at lyam Bridge. 7

The petitioner has the obligation to transport its passengers to their destinations and
to observe extraordinary diligence in doing so. Death or any injury suffered by any of
its passengers gives rise to the presumption that it was negligent in the performance
of its obligation under the contract of carriage. Thus, as correctly ruled by the
respondent court, the petitioner failed to overthrow such presumption of negligence
with clear and convincing evidence.

But while petitioner failed to exercise extraordinary diligence as required by law, 8 it

appears that the deceased was chargeable with contributory negligence. Since he
opted to sit on the open platform between the coaches of the train, he should have
held tightly and tenaciously on the upright metal bar found at the side of said
platform to avoid falling off from the speeding train. Such contributory negligence,
while not exempting the PNR from liability, nevertheless justified the deletion of the
amount adjudicated as moral damages. By the same token, the award of exemplary
damages must be set aside. Exemplary damages may be allowed only in cases
where the defendant acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner. 9 There being no evidence of fraud, malice or bad faith on the
part of petitioner, the grant of exemplary damages should be discarded.

WHEREFORE, the decision of the respondent appellate court is hereby modified by

eliminating therefrom the amounts of P10,000.00 and P5,000.00 adjudicated as
moral and exemplary damages, respectively. No costs.

SO ORDERED.

Concepcion, Jr., Cuevas, and Alampay, JJ., concur.

 Separate Opinions

AQUINO, J., concurring:

The case of Malong vs. PNR, L-49930, Aug. 7, 1985 (en banc) hold that the PNR is
not immune from suit and is liable as a common carrier for the negligent acts of its
employeees. It is expressly liable for moral damages for the death of a passanger
under arts. 1764 and 2206 of the Civil Code.

ABAD SANTOS, J., concurring:

I concur with the admonition that government owned and/or controlled corporations
should desist from invoking the baseless immunity from suit.

 Separate Opinions

AQUINO, J., concurring:

The case of Malong vs. PNR, L-49930, Aug. 7, 1985 (en banc) hold that the PNR is
not immune from suit and is liable as a common carrier for the negligent acts of its
employeees. It is expressly liable for moral damages for the death of a passanger
under arts. 1764 and 2206 of the Civil Code.

ABAD SANTOS, J., concurring:
I concur with the admonition that government owned and/or controlled corporations
should desist from invoking the baseless immunity from suit.