G.R. No. L-55347 October 4, 1985
PHILIPPINE NATIONAL RAILWAYS, petitioner, vs. THE HONORABLE COURT OF APPEALS and ROSARIO TUPANG, respondents.

FACTS

On September 10, 1972, Winifredo Tupang boarded PNR Train No. 516 as a paying passenger bound for Manila. The train experienced mechanical issues, stopping at Sipocot, Camarines Sur, for two hours of repairs. Upon passing the Iyam Bridge in Lucena, Quezon, Tupang fell from the train and died. The train did not stop despite alarms from other passengers; the conductor only requested verification from a station agent. Police found Tupang’s body, and an autopsy confirmed death from traumatic injury. His widow, Rosario Tupang, filed a complaint for damages.
The Court of First Instance of Rizal held PNR liable for breach of contract of carriage, awarding damages. The Court of Appeals affirmed this decision, increasing the award by adding exemplary damages. In its motion for reconsideration, PNR raised, for the first time on appeal, the defense of state immunity from suit. It argued that as a government agency, its funds were governmental and not subject to execution. The appellate court denied the motion, ruling this defense was raised too late.

ISSUE

The primary issue is whether the Philippine National Railways can invoke state immunity from suit to avoid liability for damages arising from a breach of contract of carriage.

RULING

The Supreme Court denied the petition and held PNR liable. The Court ruled that the defense of state immunity cannot be sustained. PNR is a government-owned and controlled corporation created under Republic Act No. 4156 , which grants it all the powers of a corporation under the Corporation Law. This includes the capacity to sue and be sued. When the government engages in commercial business through a corporate instrumentality, it descends to the level of an ordinary corporation and sheds its sovereign immunity for that purpose. The Court cited precedents, including Philippine National Railways v. Union de Maquinistas, establishing that funds of such corporations are not exempt from garnishment or execution.
On the merits, the Court found PNR negligent. The train was overcrowded, forcing passengers, including the deceased, to sit on open platforms—a clear failure to exercise the extraordinary diligence required of a common carrier under Articles 1733 and 1755 of the Civil Code. However, the deceased was also contributorily negligent by choosing to sit in a perilous spot without holding securely to available handrails. This contributory negligence did not absolve PNR but justified deleting the awards for moral and exemplary damages, as there was no evidence of wanton or malicious conduct by PNR. The decision was modified by removing these specific damages.