Up Transpo Notes

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TRANSPORTATION AND MARITIME LAW

Based on the outline of Prof. Rodrigo Quimbo

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I. General Considerations

A. Public Utilities

1. Article XII, 1987 Constitution

Art. XII, Section 11. No franchise, certificate or any other form of authorization for theoperation of a public utility shall be granted except to citizens of the Philippines or tocorporations or associations organized under the laws of the Philippines at least 60% of whosecapital is owned by such citizens, nor shall such franchise, certificate or authorization beexclusive in character or for a longer period than fifty years. Neither shall any franchise orright be granted except under the condition that it shall be subject to amendment, alteration orrepeal by the Congress when the common good so requires. The State shall encourage equityparticipation in public utilities by the general public. The participation of foreign investors inthe governing body of any public utility enterprise shall be limited to their proportionate sharein its capital, and all the executive and managing officers of such corporation or association mustbe citizens of the Philippines.

Section 17. In times of national emergency, when the public interest so requires, theState may, during the emergency and under reasonable terms prescribed by it, temporarily takeover or direct the operation of any privately owned public utility or business affected with publicinterest.

Section 18. The State may, in the interest of national welfare or defense, establish andoperate vital industries and, upon payment of just compensation, transfer to public ownershiputilities and other private enterprises to be operated by the Government.

Section 19. The State shall regulate or prohibit monopolies when the public interest sorequires. No combinations in restraint of trade or unfair competition shall be allowed.

(a) What is a public utility?

A public utility is a business or service engaged in regularly supplying the public with somecommodity or service of public consequence such as electricity, gas, water, transportation, telephoneor telegraph service. Apart from statutes which define the public utilities that are within the purviewof such statutes, it would be difficult to construct a definition of a public utility which would fit every


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1. Definition - A contract of transportation is one whereby a certain person orassociation of persons obligate themselves to transport persons, things, news from one place to anotherfor a fixed price. It is the removal of goods or persons from one place to another.

2. Public Nature

(a) Public Service Act

Section 13 (a) The Commission (PSC) shall have jurisdiction, supervision, and controlover all public services and their franchises, eqpt., and other properties, and in the exercise of itsauthority, it shall have the necessary powers and the aid of the public force: Provided, Thatpublic services owned or operated by govt. entities or GOOCs shall be regulated by theCommission in the same way as privately owned public services, but certificates of publicconvenience or certificates of public convenience and necessity shall not be required of suchentities or corporations: And provided, further, That it shall have no authority to requiresteamboats, motorships and steamship lines, whether privately owned or owned or operated byany govt. controlled corporation or instrumentality to obtain certificates of public convenience

or to prescribe their definite routes or lines of service.

(b) The term public service includes every person that now or hereafter may 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, anycommon carrier, railroad, street railway, traction railway, sub-way motor vehicle, either forfreight or passenger, or both with or without fixed route and whatever may be its classification,freight or carrier service or any class, express service, steamboat, or steamship line, pontines,ferries, and water craft, engaged in the transportation of passengers and freight or both,shipyard, marine repairshop, warehouse, 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 stationsand other similar public services: Provided, however, that a person engaged in agriculture, nototherwise a public service, who owns a motor vehicle and uses it personally and/or enters into aspecial contract whereby said motor vehicle is offered for hire or compensation to a third partyor third parties engaged in agriculture, not itself or themselves a public service, for operation bythe latter for a limited time and for a specific purpose directly connected with the cultivation ofhis or their farm, the transportation, processing, and marketing of agricultural products of suchthird party or third parties shall not be considered as operating a public service for the purposesof this Act.

(c) The word "person" includes every individual, co- partnership, joint stock co. orcorporation, whether domestic or foreign, their lessees, trustees, or receivers, as well as any

municipality, province, city, GOOC, or agency of the govt. of the Philippines, and whateverother person or entities that may own or possess or operate public services.

Section 14. The ff. are exempted from the provisions of the preceding section :(a) Warehouses;(b) Vehicles drawn by animals and bancas moved by oar or sail, and tugboats and

lighters;(c) Airships within the Philippines except as regards the fixing of their maximum rates

on freight and passengers;


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(d) Radio companies except with respect to the fixing of rates;(e) Public services owned or operated by any instrumentality of the Natl. Govt. or by any

GOOC, except with respect to the fixing of rates.

Section 15. With the exception of those enumerated in the preceding section, no publicservice shall operate in the Philippines without possessing a valid and subsisting certificate from

the PSC known as the certificate of public convenience, or certificate of public convenience andnecessity as the case may be, to the effect that the operation of said service and the authorizationto do business will promote the public interests in a proper and suitable manner.

The Commission may prescribe as a condition for the issuance of the certificate providedin the preceding paragraph that the service can be acquired by the Republic of the Philippinesor any instrumentality thereof upon payment of the cost price of its useful eqpt., less reasonabledepn.; and likewise, that the certificate shall be valid only for a definite period of time; and thatthe violation of any of these conditions shall produce the immediate cancellation of the certificatewithout the necessity of any express action on the part of the Commission.

In estimating the depn., the effect of the use of the eqpt., its actual condition, the age ofthe model, or other circumstances affecting its value in the market shall be taken intoconsideration.

The foregoing is likewise applicable to any extension or amendment of certificatesactually in force and to those which may hereafter be issued, to permit to modify itineraries andtime schedules of public services, and to authorizations to renew and increase eqpt. andproperties.

Section 16. Proceedings of the Commission, upon notice and hearing. The Commissionshall have power, upon proper notice and hearing in accordance with the rules and provisions ofthis Act, subject to the limitations and exceptions mentioned and saving provisions to thecontrary.

(a) To issue certificates ... authorizing the operation of public services within the

Philippines, whenever the Commission finds that the operation of the public service proposedand the authorization to do business will promote the public interest in a proper and suitablemanner. Provided, that certificates will be granted only to citizens of the Philippines or of the USor to corps., co-partnerships, associations or joint stock companies constituted and organizedunder the laws of the Philippines; Provided, that 60% of the stock or paid-up capital ... mustbelong entirely to citizens of the Philippines or of the US; Provided, further, that no suchcertificate shall be issued for a period of more than 50 years.

(b) To approve, subject to constitutional limitations any franchise, privilege grantedunder the provisions of Act No. 667, as amended by Act. No. 1022, by any political subdivision ofthe Philippines when, in the judgment of the Commission, such franchise or privilege willproperly conserve the public interests xxx

(c) To fix and determine individual or joint rates, tolls, charges, classifications, orschedules thereof, as well as commutation, mileage, kilometrage, and other special rates whichshall be imposed, observed and followed thereafter by any public service ; Provided, further thatin case the public service equipment of an operator is used principally or secondarily for thepromotion of a private business, the net profits of said business shall be considered in relationwith the public service of such operator for the purpose of fixing the rates.


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(d) To fix just and reasonable standards, classifications, regulations, practices,measurements, or service to be furnished, imposed, observed, and followed thereafter by anypublic service.

(e) To ascertain and fix adequate and serviceable standards for the measurement ofquantity, quality, pressure, initial voltage, or other condition pertaining to the supply of the

product or service rendered by any public service, and to prescribe reasonable regulations forthe examination and test of such product or service and for the measurement thereof.

(f) To establish reasonable rules, regulations, instructions, specifications, and standards,to secure the accuracy of all meters and appliances for measurements.

(g) To compel any public service to furnish safe, adequate, and proper service as regardsthe manner of furnishing the same as well as the maintenance of the necessary material andeqpt.

(h) To require any public service to establish, construct, maintain and operate anyreasonable extension of its existing facilities, where, in the judgment of said commission, suchextension is reasonable and practicable, and will furnish sufficient business to justify theconstruction and maintenance of the same, and when the financial condition of the said publicservice reasonably warrants the original expenditure required in making and operating suchextension.

(i) To direct any railroad, street, railway or traction co. to establish and maintain at anyjunction or point of connection or intersection with any other line of said road or track, or withany other line of any other railroad, street, railway or traction co., such just and reasonableconnection as shall be necessary to promote the convenience of shippers of property, or ofpassengers, and in like manner to direct any railroad, street railway or traction co. engaged incarrying merchandise, to construct, maintain and operate, upon reasonable terms, a switch

connection with any private sidetrack which may be constructed by any shipper to connect withthe railroad, street railway or traction company line where, in the judgment of the commission,such connection is reasonable and practicable, and can be put in with safety, and will furnishsufficient business to justify the construction and maintenance of the same.

(j) To authorize, in its discretion, any railroad, street railway of traction company to layits tracks across tracks of any other railroad, street railway or traction company, or across anypublic highway.

(k) To direct any railroad or street railway co. to install such safety devices or to adoptsuch other reasonable measures as may in the judgment of the commission be necessary for theprotection of the public at passing grade crossings of (1) public highways and railroads, (2)public highways and street railways, or (3) railroads and street railways.

(l) To fix and determine the proper and adequate rates of depn. of the property of anypublic service which will be observed in proper and adequate depn. account to be carried for theprotection of stockholders, or bondholders or creditors, in accordance with such rules,regulations, and forms of account as the commission may prescribe. Said rates shall besufficient to provide the amounts required over and above the expenses of maintenance to keepsuch property in a state of efficiency corresponding to the progress of the industry. Each publicservice shall conform its depreciation accounts to the rates so determined and fixed, and shall setaside the money so provided for out of its earnings and carry the same in a depreciation fund.


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(f) To grant any public service special permits to make extra or special trips within theterritory covered by its certificate and to make special excursions outside if the public interest orspecial circumstances so require; Provided where the public service cannot render such extraservice on its own line or in its own territory, a special permit for such extra service may begranted to any other public service

(g) To require any public service to keep its books, records, and accounts; to adopt auniform system of accounting as approved by the auditor general

(h) To require any public service to furnish annual reports of finances and operations,covering the 12 month period ending December 31

(i) To require every public service to file with the commission a written, verifiedstatement made by the owner, president or secretary setting forth the officers, authority, powerand duties of every officer, as to disclose the source and origin of each administrative act or rule

(j) To require any public service to comply with the laws of the Philippines and with anylocal resolution or ordinance or its charter

(k) To investigate accidents directly or indirectly arising from or connected with themaintenance or operation of the public service

(l) To require every public service to file a complete schedule of every classification,individual or joint rate, toll, fare or charge, and in case of public carriers, a complete statementof itineraries or routes

o Section 18 - It shall be unlawful for any individual, co- partnership, association, corporation or joint-stock company, their lessees, trustees or receivers xxx to engage in any public servicebusiness without having first secured from the commission a certificate, except grantees oflegislative franchises expressly exempting such grantee from the reqts of securing a certificate

from the commission, as well as those expressly exempted from the jurisdiction of thecommission

Section 19. Unlawful acts - It shall be unlawful for any public service :

(a) To provide or maintain any service that is unsafe, improper or inadequate ,orwithhold or refuse any service which can reasonably be demanded and furnished, as found anddetermined by the commission in a final order which shall be conclusive and shall take effect inaccordance with this act, upon appeal or otherwise.

(b) To make or give, directly or indirectly, by itself or through its agents, attorneys orbrokers, or any of them, discounts or rebates on authorized rates, or grant credit for the

payment of freight charges, or any undue or unreasonable preference or advantage to anyperson or corporation or to any locality or to any particular person or corporation or locality orany particular description of traffic or service, or subject any particular person or corporationor locality or any particular description of traffic to any prejudice or disadvantage in anyrespect whatsoever; to adopt, maintain, or enforce any regulation, practice or measurementwhich shall be found or determined by the commission to be unjust, unreasonable, undulypreferential, or unjustly discriminatory, in a final order which shall be conclusive and shall takeeffect in accordance with the provisions of this act, upon appeal or otherwise.


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(c) To refuse or neglect, when requested by the director of posts or his authorizedrepresentative to carry public mail on the regular trips of any public land transportation servicemaintained or operated by any such public service, upon such terms and conditions and for aconsideration in such amount as may be agreed upon between the Director of Posts and thepublic service carrier or fixed by the commission in the absence of an agreement between theDirector of Posts and the carrier. In case the Director of Posts and the public service carrier are

unable to agree on the amount of the compensation to be paid for the carriage of the mail, theDirector of Posts shall forthwith request the commission to fix a just and reasonablecompensation for such carriage and the same shall be promptly fixed by the commission inaccordance with section 16 of this act.

Section 20. Acts requiring the approval of the Commission - Subject to establishedlimitations and exceptions and saving provisions to the contrary, it shall be unlawful for anypublic service or for the owner, lessee or operator thereof, without the approval andauthorization of the Commission previously had -

(a) To adopt, establish, fix, impose, maintain, collect or carry into effect any individualor joint rates, commutation, mileage or other special rate, toll, fare, charge, classification oritinerary. The Commission shall approve only those that are just and reasonable and not naythat are unjustly discriminatory or unduly preferential, only upon reasonable notice to thepublic services and other parties concerned, giving them a reasonable opportunity to be heardand the burden of the proof to show that the proposed rates or regulations are just anreasonable shall be upon the public service proposing the same.

(b) To establish, construct, maintain or operate new units or extend existing facilities ormake any other addition to or general extension of the service.

(e) Hereafter to issue any stock or stock certificates representing an increase of capital;or issue any share of stock without par value; or issue any bonds or other evidence of

indebtedness payable in more than one year from the issuance thereof, provided that it shall bethe duty of the Commission, after hearing, to approve any such issue maturing in more than oneyear from the date thereof, when satisfied that the same is to be made in accordance with law,and the purpose of such issue be approved by the Commission.

(g) To sell, alienate, mortgage, encumber or lease its property, franchises, certificates,privileges or rights or any part thereof; or merge or consolidate its property, franchises,privileges or rights, or any part thereof, with those of any public service. The approval hereinrequired shall be given, after notice to the public and after hearing, if it be shown that there arejust and reasonable grounds for making the mortgage or encumbrance, for liabilities of morethan one year maturity, or the sale, alienation, lease , merger or consolidation to be approved,and that the same are not detrimental to the public interest, and in case of a sale, the date on

which the same is to be consummated shall be fixed in the order of approval: Provided, however,that nothing herein contained shall be construed to prevent the transaction from beingnegotiated or completed before its approval or to prevent the sale, alienation, or lease by anypublic service of any of its property in the ordinary course of its business.

(h) To sell or register in its books the transfer or sale of shares of its capital stock, if theresult of that sale in itself or in connection with another previous sale, shall be to vest in thetransferee more than 40% of the subscribed capital of said public service. Any transfer made inviolation of this provision shall be void and of no effect and shall not be registered in the books


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of the public service corporation. Nothing herein contained shall be construed to prevent theholding of shares lawfully acquired.

(i) To sell, alienate or in any manner transfer shares of its capital stock to any alien ifthe result of that sale, alienation, or transfer in itself or in connection with another previous saleshall be the reduction to less than 60% of the capital stock belonging to Philippine citizens. Such

sale, alienation or transfer shall be void and of no effect and shall be sufficient cause forordering the cancellation of the certificate.

(b) The Certificate of Public Convenience (CPC), the Certificate of PublicConvenience and Necessity (CPCN), and the Prior Operator Rule

Difference between CPC and CPCN : A CPCN is issued by the PSC to a public service to which anypolitical subdivision has granted a franchise under Act 667 after the PSC has approved the same underSection 16(b). A CPC is any authorization to operate a public service issued by the PSC. A CPC is anauthorization issued by the Commission for the operation of public services for which no franchise,either municipal or legislative, is required by law (e.g. auto-trucks and motor vehicles). A CPCN is an

authorization issued by the PSC for the operation of public services for which a franchise is requiredby law (e.g. electric, telephone services).

Nature of certificate : It constitutes neither a franchise nor a contract, confers no property rights and isa mere license or privilege, and such privilege is forfeited when the grantee fails to comply with hiscommitments behind which lies the paramount interest of the public, for public necessity cannot bemade to wait, nor sacrificed for private convenience.

However, certificates represent property rights to the extent that if the rights which any publicutility is exercising pursuant to lawful orders of the PSC has been invaded by another public utility, inappropriate cases actions may be maintained by the complainant public utility. Owners of publicutilities have the right to maintain appropriate actions against other public utilities not authorized tooperate in competition with the complainant.

Certificates are considered as property as used in Civil Procedure as they have material valueand are material assets. They are subject to attachment and seizure by legal process, and may beacquired by purchase.

Determination of WON an issuance of a certificate is for public convenience - (1) financialresponsibility of the applicant, (2) reliability of the applicant, (3) priority of filing the application for acertificate, and (4) priority of operation

Prior operator rule - to carry out the purpose and intent for which the PSC was created the lawcontemplates that the first licensee will be protected in his investment and will not be subjected to aruinous competition. It is not therefore the policy of the law for the PSC to issue a CPC to a secondoperator to cover the same field and in competition with a first operator who is rendering sufficient,

adequate and satisfactory service, and who in all things and respects is complying with the rules andregulations of the PSC. Accordingly, a CPC or CPCN ought not to be granted where there is nocomplaint as to existing rates and the co. in the field is rendering adequate services.- regular operators are preferred over irregular operators- prior operator is given opportunity to improve service- prior operator given opportunity to extend lines- basis of rule : to prevent ruinous and wasteful competition in order that the interests of the publicwould be conserved and preserved; so long as the operator complied with the terms and conditions of


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the license and the reasonable demands of the public, it is the duty of the PSC to protect rather than todestroy its investment

Raymundo vs Luneta Motor 58 Phil 889

F: Nicanor de Guzman signing as Guzco Transit purchased trucks from Luneta Motor and executed PNs

guaranteed by a chattel mortgage on several trucks. Failing to pay the PNs, a suit for collection was filed. Awrit of attachment was issued and garnishment was served on the PSC attaching the right, title, and participationof Guzco Transit in the CPC covering the bus transportation lines between Manila and Rizal. The CFI orderedthe selling of these certificates in a public bidding in which Luneta Motor was the highest bidder.

Nine days after the certificates were attached, these were sold to Raymundo (including certificate No.25951 which was not included in the sale to Luneta Motor Co.). The approval of the sale was sought from thePSC. The PSC approved the sale in the public bidding and disapproved the sale to Raymundo except withrespect to Certificate No. 25951 which Raymundo could apply for its approval.

Issue : Which of the two sales should prevail? public auction by virtue of an attachment vs voluntarysaleHeld : Sale to Luneta Motor Co. in a public auction

The Public Service Law authorizes certificates of public convenience to be secured by publicservice operators from the PSC. A CPC grants a right in the nature of a limited franchise. The Code ofCivil Procedure does not exclude franchises or certificates from the word "property." The test bywhich to determine WON a property can be attached and sold upon execution is whether thejudgment debtor has such a beneficial interest therein that he can sell or otherwise dispose of it forvalue. The Public Service Law permits the PSC to approve the sale, alienation, mortgaging,encumbering or leasing of property, franchises, privileges, or rights or any part thereof. If the holderof a certificate can voluntary sell it, there is no reason why the same cannot be sold involuntarilypursuant to court process.

CPCs have considerable material value. They are valuable assets. They are subject to beingsold for consideration as much as any other property. They are even more valuable than ordinaryproperties, taking into consideration that they are not granted to every one who applies for them butonly to those who undertake to furnish satisfactory and convenient service to the public. Thoughintangible, they are of value and are considered properties which can be seized through legal process.

Batangas Transportation Co. vs Orlanes 52 Phil 455

F: Orlanes sought to have a CPC to operate a line of auto trucks with fixed times of departure betweenTaal and Bantilan, with the right to receive passengers and freight from intermediate points. The evidence isconclusive that at the time of his application, Orlanes was an irregular operator between Bantilan and Taal, andthat BTC was a regular operator between Batangas and Rosario. Orlanes sought to have his irregular operationchanged into a regular operation, and to set aside and nullify the prohibition against him in his CPC that he shallnot have or receive any passengers or freight at any of the points served by the BTC which holds a prior licensefrom the PSC. His petition is based on the fact that to comply with the growing demands of the public, the BTC

applied for a permit to increase the no. of trip hours at and between the same places and for an order that allirregular operators be prohibited from operating unless they should observe an interval of 2 hours before or onehour after the regular hours of the BTC. The PSC granted the petition of Orlanes.

Issue : WON a CPC should be issued to a second operator in a field where, and in competition with, afirst operator who is already operating a sufficient, adequate and satisfactory service.

Held : NO. Decision of PSC is revoked.


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An autobus line is a public utility, and as such, is a common carrier and an impt. factor in thebusiness affairs of the community.

The PSC has the power to specify and define the terms and conditions upon which any publicutility shall operate and to make reasonable rules and regulations for its operation, and to fix thecompensation that it shall receive for its service to the public, and for good cause may suspend oreven revoke a license granted.

It is not the policy of the law for the PSC to issue a CPC to a second operator to cover thesame field and in competition with a first operator who is rendering sufficient, adequate andsatisfactory service, and who in all things and respects is complying with the rules and regulations ofthe PSC.

The power of the PSC to issue a CPC is founded on the condition precedent that after a fullhearing and investigation, it shall find as a fact that the proposed operation is for the convenience ofthe public.

So long as the first operator keeps and performs his terms and conditions of its license andcomplies with the reasonable demands of the public, it has more or less of a vested and preferentialright over another who seeks to acquire a later license to operate over the same route.

To carry out the purpose and intent for which the PSC was created, the law contemplates thatthe first license will be protected in his investment and will not be subjected to ruinous competition.

The primary purpose of the PSC is to secure adequate, sustained service for the public at theleast possible cost and to protect and conserve investments which have already been made for thatpurpose. A CPCN for the operation of an auto truck line in occupied territory should not be grantedwhere there is no complaint as to existing rates and the co. in the field is rendering adequate service.It is the duty of the PSC to protect rather than to destroy the investment of a public utility.

The policy of regulation upon which the present public utility commission plan is based andwhich tends to do away with competition among public utilities as they are natural monopolies, is atonce the reason that the regulation of an existing system of transportation, which is properly serving agiven field, or may be required to do so, is to be preferred to competition among several independentsystems. While requiring a proper service from a single system for a territory in consideration forprotecting it as a monopoly for all the service required and in conserving its resources, no economicwaste results and service may be furnished at a minimum cost.

Carmelo vs Monserrat 55 Phil 644

F: Monserrat twice applied to Congress for an exclusive franchise to operate a taxicab service in Manila.The Governor General twice vetoed the bill. Monserrat then applied to the PSC for a CPC. It was granted.

Carmelo and Oriol then applied to the PSC for a CPC to operate a taxicab service within Manila.Monserrat opposed. The PSC denied the application.

Held : There is no valid, legal reason why Monserrat should have the exclusive right of operating ataxicab service. In the granting and refusal of a CPC, the question is what is for the best interest of thepublic. Tested by that rule, it is hard to conceive how it would be for the best interests of the public to

have one taxicab service only, and how the public would be injured by the granting of the certificate inquestion, for it must be conceded that two companies in the field would stimulate the business, andthe public would much sooner and much easier become educated in the use of taxi.

Monserrat does not have a vested right in the business of any person that might want the useof a taxi, for the simple reason that the use of any taxi is the sole discretion of the customer. This isunlike the BTC case which dealt with an autobus service with fixed schedules and routes.


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San Pablo vs Pantranco South Express, Inc. 153 SCRA 199

F: Pantranco operates passenger buses from Metro Manila to Bicol and Eastern Samar. It wrote to theMaritime Industry Authority (MARINA) requesting authority to lease/purchase MV Black Double to be used in

operating a ferryboat service from Matnog, Sorsogon and Allen, Samar that will provide service to co. buses andfreight trucks that have to cross the Bernardo Strait. MARINA denied the petition on the ground that theMatnog- Allen run is adequately serviced by the Cardinal Shipping Corp. and Epitacio San Pablo and thatmarket conditions cannot support the entry of additional tonnage.

Pantranco acquired the vessel. It then applied to BOT claiming that it can operate a ferry service inconnection with its franchise for bus operation in the highway from Pasay City to Tacloban City for the purposeof continuing the highway, which is interrupted by a small body of water, and that the proposed ferry operationis merely a necessary and incidental service to its main service and obligation of transferring passengers fromPasay City to Tacloban City. Accdg. to it, there is no need to obtain a separate CPC to operate a ferry service tocater exclusively to its passenger buses and ferry trucks. Pantranco began operating its ferry service. The BOTheld that the ferryboat service is part of Pantranco's CPC and amended Pantranco's CPC to provide so. The twoother ferry boat services filed motions for reconsideration.

Issue : WON the sea can be considered as a continuation of the highway. WON a land transpo co. canbe authorized to operate a ferry service or coastwise or interisland shipping service along itsauthorized route as an incident to its franchise without the need of filing a separate application for thesame.Held : The water transport service between Matnog and Allen is not a ferryboat service but a coastwiseor interisland shipping service. Before private respondent may be issued a franchise or CPC for theoperation of the said service as a common carrier, it must comply with the usual reqts. of filing anapplication, payment of the fees, publication, adducing evidence at a hearing and affording theoppositors the opportunity to be heard.

Considering the environmental circumstances of the case, the conveyance of passengers fromMatnog to Allen is not a ferryboat service but a coastwise or interisland shipping service. Under nocircumstances can the sea between Matnog and Allen be considered a continuation of the highway.

While a ferryboat service has been considered as a continuation of the highway when crossing riversor even lakes, which are small body of waters separating the land, however, when as in this case thetwo terminals are separated by an open sea, it cannot be considered a continuation of the highway.Pantranco must secure a separate CPC for the operation of an interisland or coastwise shippingservice. Its CPC cannot be merely amended to include this water service under the guise that it is amere private ferry service.

Pantranco does not deny that it charges its passengers separately from the charges for the bustrips and issues separate tickets whenever they board the MV Black Double. It cannot pretend that itissued tickets as a private carrier and not as a common carrier. It in fact accepts walk in passengersduring the trips. It cannot claim that it is both a private carrier and a common carrier at the same time.

In the case of Javellana vs PSC, the Court differentiated between ferry service and interisland

or coastwide service. Ferry means service either by barges or rafts, even by motor or steam vessels,between the banks of a river or stream to continue the highway which is interrupted by a body ofwater, or in some cases, to connect two points on opposite shores of an arm of the sea such as a bay orlake which does not involve too great a distance or too long a time to navigate. But where the line orservice involves crossing a body of water which is wide and dangerous with big waves, then such lineor service belongs properly to interisland or coastwide trade.

3. Private nature: rights and obligations of parties inter se arising from transactionsrelating to transportation


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and components to complement and support, as much as possible, the expansion, development,operation and maintenance of the nationwide telecommunication network;

(g) Provide for a safe, reliable and efficient postal system for the country.

EO 125-A, Sec. 5. To accomplish its mandate, the Dept. shall have the ff. powers and

functions:(a) formulate and recommend national policies and guidelines for the preparation and

implementation of integrated and comprehensive transportation and communications systems atthe national, regional and local levels; (b) establish and administer comprehensive andintegrated programs for transportation and communications, xxx call on any agency, corp., ororganization xxx to participate and assist in the preparation and implementation of suchprogram;

(c) assess, review and provide direction to xxx research and devt. programs of the govtxxx;

(d) administer and enforce all laws xxx in the field of transportation andcommunication;

(e) coordinate with the DPWH in the design, location, devt, rehabilitation, improvement,etc. of all infrastructure projects and facilities of the Dept. xxx

(f) establish, operate and maintain a nationwide postal system xxx;(g) issue certificates of public convenience for the operation of public land and rail

transportation utilities and services;(h) accredit foreign aircraft and manufactures xxx;(i) establish and prescribe rules and regulations for identification of routes, zones and/or

areas of operation of particular operator of public land services;(j) establish and prescribe rules xxx for the establishment, operation and maintenance of

such telecommunication facilities in areas not adequately served by the private sector xxx;(k) establish and prescribe rules xxx operation and maintenance of a nationwide postal

system xxx;

(l) establish and prescribe rules xxx issuance of CPCs for public land transportationutilities, such as motor vehicles, trimobiles, and railways;(m) establish and prescribe rules xxx inspection and registration of air and land

transportation facilities, such as motor vehicles, trimobiles, and aircrafts;(n) establish and prescribe rules xxx issuance of licenses xxx;(o) establish and prescribe rules xxx enforcement of laws governing transportation xxx;(p) determine, fix and/or prescribe charges and/or rates pertinent to the operation of

public air and land transportation utility facilities and services xxx;(q) establish and prescribe rules xxx accreditation of driving schools;(r) administer and operate the Civil Aviation Training Center xxx;(s) perform such other powers and functions as it may be prescribed by law, or as may

be necessary, incidental, or proper to its mandate, or as may be assigned from time to time by

the President.

(a) Air

(i) Air Transportation Office

EO 125, as amended by EO 125-ASec. 10. Assistant Secretaries and Service Chiefs.xxx


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h) Office of the Assistant Secretary for Air Transportation

Sec. 11. xxx The present Airport Offices of the Bureau of Air Transportation are herebyabolished and their functions are transferred to the Dept. Airport Offices. xxx

Sec. 13. xxxd) The Civil Aeronautics Board is hereby transferred from the Dept. of Tourism to the

Dept. as an attached agency xxx. The Secretary of Transportation and Communications or hisdesignated representative shall be the Chairman of the Board xxx

Sec. 25, RA 776. The Civil Aeronautics Administration shall be under the administrativesupervision and control of the Dept. of Commerce and Industry (now the DOTC) xxx

(ii) Civil Aeronautics Board

RA 776, as amended

Section 5. The Civil Aeronautics Board shall be composed of the Secretary of Commerceand Industry (now DOTC) as Chairman, the CAB Administrator, the Commanding Officer ofthe Phil. Air Force, and 2 others to be appointed by the President xxx

Section 10 (A) Except as otherwise provided herein, the Board shall have the power toregulate the economic aspect of air transportation, and shall have the general supervision andregulation of, and jurisdiction and control over, air carriers, as well as their property, propertyrights, equipment, facilities, and franchise, in so far as may be necessary for the purpose ofcarrying out the provisions of this Act.

Section 10 (C) Powers and Duties of the CAB1. issue, deny, amend, revise, alter, modify, cancel, suspend, or revoke xxx any

temporary operating permit or CPCN xxx2. fix and determine reasonable individual, joint or special rates, charges, or fares which

an air carrier may demand, collect or receive for any service in connection with air commercexxx

3. authorize charters whether domestic or intl. and special air services or flights xxx;4. approve or disapprove increase of capital, sale of equipment of an air carrier engaged

in air commerce, consolidation, merger, purchase, lease, operating contract, or acquisition andcontrol between domestic air carriers xxx

5. inquire into the mgmt. of the business of any air carrier xxx;

6. require annual, monthly, periodical and special reports from any carrier xxx;7. prescribe the forms of any and all accounts, records, and memoranda of the movementof traffic, as well as of the receipt and expenditures of money and the length of time suchaccounts, records, and memoranda shall be preserved xxx;

8. require each officer and director of any air carrier to transmit a report describing theshares of stock or other interest held by such air carrier with any person engaged in any phaseof aeronautics, and the holding of the stock in, and control of, other persons engaged in anyphase of aeronautics.


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Section 11. A CPCN is a permit issued by the Board authorizing a person to engage inair commerce and/or air transportation, foreign and/or domestic.

Any permit may be altered, amended, modified, suspended, canceled and revoked by theBoard xxx whenever the Board finds such action to be in the public interest.

There shall be attached to the exercise of the privileges xxx such reasonable terms,conditions, or limitations as, in the judgment of the Board, the public interest may require.

xxx

Section 12. Except as otherwise provided in the Constitution and existing treaty ortreaties, a permit authorizing a person to engage in domestic air commerce and/or airtransportation shall be issued only to citizens of the Philippines.

(b) Land

(i) Land Transportation OfficeEO 125-A

Section 9. Assistant Secretaries and Service Chiefsxxxe) Office of the Assistant Secretary for Land Transportation

Section 11. xxx The present Regional Offices of the Land Transportation Commissionare hereby abolished and their functions are transferred to the respective Department Regionaloffices for Land Transportation. xxx

Section 13 (a) The Land Transportation Commission is hereby abolished and its stafffunctions are transferred to the service offices of the Dept. Proper and line functions aretransferred to the Dept. Regional Offices for Land Transportation as provided in Section 11herein. xxx The quasi-judicial powers and functions of the Commission are transferred to theDept. The corresponding position structure and staffing pattern shall be approved andprescribed by the Secretary xxx.

Administrative Code of 1987, Title XV

Sec. 9. The Department shall have the following line offices :(1) The Office of the Assistant Secretary for Land Transportation.xxx

(ii) Land Transportation Franchising and Regulatory Board

EO 202

Sec.1. There is hereby created in the DOTC, the Land Transportation Franchising andRegulatory Board.

Sec.2. The Board shall be composed of a Chairman and 2 members with the same rank,salary and privileges of an Assistant Secretary, xxx


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Sec.4. The Secretary of Transportation and Communications, through his dulydesignated Undersecretary, shall exercise administrative supervision and control over theLTFRB.

Sec.5. Powers and functions:a. prescribe and regulate routes of service, xxx zones or areas of operation of public land

transportation services provided by motorized vehicles xxx;b. issue, amend, revise, suspend or cancel CPCs or permits authorizing the operation of

public land transportation services provided by motorized vehicles xxx;c. determine, prescribe, approve and periodically review and adjust reasonable fares,

rates and other related charges, relative to the operation of public land transportation servicesprovided by motorized vehicles;

d. issue preliminary or permanent injunction xxx;e. punish for contempt of the Board, both direct and indirect xxx;f. issue subpoena and subpoena duces tecum and to summon witnesses to appear in any

proceedings of the Board, to administer oaths and affirmations;g. conduct investigations and hearings of complaints for violation of the public service

laws on land transportation and of the Board's rules and regulations xxx;h. to review motu proprio the decisions, actions of the Regional Franchising and

Regulatory Office herein created;i. promulgate rules and regulations governing proceedings before the Board and the

Regional Franchising and Regulatory Office xxx;j. fix, impose, and collect, and periodically review and adjust reasonable fees and other

related charges for services rendered;k. formulate, promulgate, administer, implement and enforce rules and regulations on

land transportation public utilities, standards of measurements and/or design, and rules andregulations requiring operators of any public land transportation service to equip, install andprovide in their utilities and in their stations such devices, eqpt. facilities and operatingprocedures and techniques as may promote safety, protection, comfort and convenience to

persons and property in their charges as well as the safety of persons and property within theirareas of operations;l. coordinate and cooperate with other govt. agencies and entities xxx;m. perform such other functions and duties as may be provided by law, or as may be

necessary, or proper or incidental to the purposes and objectives of this Executive Order.

Sec.6. The Board xxx shall sit and render its decision en banc; xxx concurrence andsignature of at least 2 members xxx

The decision shall be appealable to the Secretary within 30 days from receipt of thedecision; Provided, that the Secretary may motu proprio review any decision or action of theBoard before the same becomes final.

Sec.7. There shall be a Regional Franchising and Regulatory Office in each of theadministrative regions of the country which shall be headed by a Board Regional Managerhaving the rank, salary and privileges of a Dept. Assistant Regional Director. The RegionalFranchising and Regulatory Offices shall hear and decide uncontested applications/petitions forroutes, within their respective administrative regions: Provided, that applications/petitions forroutes extending their respective territorial jurisdictions shall be heard and decided by theBoard.


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Administrative Code, Title XV

Sec. 15. The quasi-judicial powers and functions with respect to land transportation shallbe exercised through the Land Transportation and Regulatory Board.

Sec. 16. The Board shall be composed of a Chairman and 2 members with the rank,

salary and privileges of an Assistant Secretary, all of whom shall be appointed by the Presidentupon the recommendation of the Secretary of Transportation and Communications xxx

Sec. 17. The Board shall have an Executive Director who shall also be appointed by thePresident xxx. He shall have the rank, salary and privileges of a Dept. Service Chief. He shallassist the Board in the performance of its powers and functions.

The Board shall be supported by the Technical Evaluation Division, Legal Division,Management Information Division, Administrative Division and Finance Division.

Sec. 18. The Secretary of Transportation and Communications shall exerciseadministrative supervision and control over the Board.

Sec. 19. Powers and functions of the Board:1. prescribe and regulate routes xxx;2. issue, amend, revise, suspend, or cancel CPCs or permits, xxx;3. determine, prescribe, approve and periodically review and adjust reasonable fares

xxx;4. issue injunctions xxx;5. punish for contempt of the Board xxx;6. issue subpoena and subpoena duces tecum and to summon witnesses xxx; 7.

conduct investigations and hearings of complaints for violation of the public service laws on landtransportation xxx;

8. review motu proprio the decisions, actions of the Regional Franchising and RegulatoryOffices xxx;

9. promulgate rules and regulations governing proceedings before the Board and theRegional Franchising and Regulatory Office xxx;

10. fix, impose and collect, and periodically review and adjust reasonable fees, and otherrelated charges for services rendered;

11. formulate, promulgate, administer, implement and enforce rules and regulations onland transportation xxx;

12. coordinate and cooperate with other govt. agencies and entities concerned with anyaspect involving public land transportation services xxx;

13. perform such other functions and duties as may be provided by law, or as may benecessary, or proper or incidental to the purposes and objectives of the Dept.

Sec. 20. The Board shall xxx sit and decide en banc; concurrence and signature of atleast 2 members; decision shall be appealable to the Secretary within 30 days from receipt of thedecision; the Secretary may motu proprio review any decision or action of the Board before itbecomes final.

Sec. 21. Regional Franchising and Regulatory Offices - hear and decide uncontestedapplications/ petitions for routes xxx;


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Sec. 22. decisions of the Regional Franchising and Regulatory Offices shall be appealableto the Board within 30 days from receipt of the decision.

(c) Water

(i) Maritime Industry Authority

EO 125, Sec. 14 as amended by EO 125-A, Sec. 3

The Maritime Industry Authority is hereby retained and shall have the ff. functions:a. develop and formulate plans, policies, projects xxx geared toward the promotion and

devt. of the maritime industry, the growth and effective regulation of shipping enterprises, andfor the national security objectives of the country;

b. establish, prescribe and regulate routes, zones and/or areas of operation of particularoperators of public water services;

c. issue CPCs for the operation of domestic and overseas water carriers;d. register vessels as well as issue certificates, licenses or document necessary or incident

thereto;e. undertake the safety regulatory functions pertaining to vessel construction and

operation including the determination or manning levels and issuance of certificates ofcompetency to seamen;

f. enforce laws, prescribe and enforce rules and regulations, including penalties forviolations thereof, governing water transportation and the Phil. merchant marine xxx;

g. undertake the issuance of licenses to qualified seamen and harbor, bay and riverpilots;

h. determine, fix, prescribe charges/rates pertinent to the operation of public watertransport utilities xxx;

i. accredit marine surveyors and maritime enterprises engaged in shipbuilding, shiprepair xxx;

j. issue and register the continuous discharge book of Filipino seamen;k. establish and prescribe rules and regulations, standards and procedures for the

efficient and effective discharge of the above functions;l. perform such other functions as may now or hereafter be provided by law.


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II. Common Carriers

A. In General

1. Definitions; essential elements

Art. 1732. Common carriers are persons, corporations, firms or associations engaged inthe business of carrying or transporting passengers or goods or both, by land, water or air, forcompensation, offering their services to the public.

Aguedo F. Agbayani, COMMERCIAL LAWS OF THE PHILIPPINES, vol. 4, 1989 ed. (hereinafter 4Agbayani)

Transportation defined.-- a contract of transportation is one whereby a certain person or associationof persons obligate themselves to transport persons, things, or news from one place to another for afixed price

Classification :1. As to object: (1) things; (2) persons; (3) news

2. As to place of travel: (1) land; (2) water; (3) air

Parties to contract of transportation:

(1) shipper or consignor.-- person to be transported; one who gives rise to the contract oftransportation by agreeing to deliver the things or news to be transported, or to present his own personor those of other or others in the case of transportation of passengers


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(2) carrier or conductor.-- one who binds himself to transport persons, things, or news as thecase may be; one employed in or engaged in the business of carrying goods for other for hire

(3) consignee.-- the party to whom the carrier is to deliver the things being transported; one towhom the carrier may lawfully make delivery in accordance with its contract of carriage (but theshipper and the consignee may be one person)

Freight defined.-- The terms has been defined as: (1) the price or compensation paid for thetransportation of goods by a carrier, at sea, from port to port. But the term is also used to denote (2)the hire paid for the carriage of goods on land from place to place, or on inland streams or lakes. Thename is also applied to (3) the goods or merchandise transported at sea, on land, or inland streams orlakes. Thus the term is used in 2 senses: to designate the price for the carriage, also calledfreightage,or to designate the goods carried.

Contracts through transportation agents.-- A contract of transportation is not changed, altered oraffected by the mere fact that the obligor avails of other parties to effect the transportation agreedupon, as in the case of transportation agents.

Carriers defined.-- Persons or corporations who undertake to transport or convey goods, property or

persons, from one place to another, gratuitously or for hire, and are classified as private or specialcarriers, and common or public carriers

Private carriers defined.-- Those who transport or undertake to transport in a particular instance forhire or reward

Common carriers vs Private carriers:

(1) the common carrier holds (1) the private carrier agreeshimself out in common, that is, in some special case with someto all persons who choose to em- private individual to carryploy him, as ready to carry for for hire

hire; no one can be a commoncarrier unless he has held himselfout to the public as a carrier insuch a manner as to render himliable to an action if he shouldrefuse to carry for anyone whowished to employ him

(2) a common carrier is bound to (2) a private carrier is notcarry all who offer such goods as bound to carry for any reason,it is accustomed to carry and unless it enter into a specialtender reasonable compensation agreement to do so

for carrying them

(3) a common carrier is a public service (3) a private carrier does notand is therefore subject to regulation hold itself out as engaged in

the business for the public,and is therefore not subjectto regulation as a common carrier


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Test for a common carrier:

(1) He must be engaged in the business of carrying goods for others as a public employment,and must hold himself out as ready to engage in the transportation of goods for persons generally as abusiness, and not a casual occupation.

(2) He must undertake to carry goods of the kind to which his business is confined.(3) He must undertake to carry by the methods by which his business is conducted, and over

his established roads.(4) The transportation must be for hire.The true test is whether the given undertaking is a part of the business engaged in by the

carrier which he has held out to the general public as his occupation rather than the quantity or extentof the business actually transacted, or the no. and character of the conveyances used in theemployment (the test is therefore the character of the business actually carried on by the carrier.)

Case : an airplane owner is a common carrier where he undertakes for hire to carry all persons whoapply for passage indiscriminately as long as there is room and no legal excuse for refusing; airlinesengaged in the passenger service on regular schedules on definite routes, who solicit patronage of the

traveling public, advertise schedules for routes, times of leaving and rates of fare, and make the usualstipulation as to baggage are common carriers

Characteristics of common carriers:

(1) The common carrier undertakes to carry for all people indifferently; he holds himself outas ready to engage in the transportation of goods for hire as a public employment and not as a casualoccupation, and he undertakes to carry for all persons indifferently, within the limits of his capacityand the sphere of the business required of him, so that he is bound to serve all who apply and is liablefor refusal, without sufficient reason, to do so

(2) The common carrier cannot lawfully decline to accept a particular class of goods for

carriage to the prejudice of the traffic in those goodsException : for some sufficient reason, where the discrimination in such goods is reasonable

and necessary (substantial grounds)(3) No monopoly is favored - the Commission has the power to say what is a reasonable

compensation to the utility and to make reasonable rules and regulations for the convenience of thetraveling public and to enforce them

(4) Public convenience - for the best interests of the public

Meaning of Public use.-- It is not confined to privileged individuals, but is open to the indefinitepublic; there must be a right which the law compels the owner to give to the general public. Publicuse is not synonymous with public interest. The true criterion is whether the public may enjoy it byright or only by permission

The law prohibits unreasonable discrimination by common carriers.-- The law requires commoncarriers to carry for all persons, either passengers or property, for exactly the same charge for a like orcontemporaneous service in the transportation of like kind of traffic under substantially similarcircumstances or conditions. The law prohibits common carriers (CC) from subjecting any person, etc.or locality, or any kind of traffic, to any undue or unreasonable prejudice or discriminationwhatsoever.


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Exception: When the actual cost of handling and transporting is different, then different ratesmay be charged

Cases : (1) merchandise of like quantity may not be considered alike - the quantity, kind and qualitymay be exactly the same, and yet not be alike, so far as the cost of transportation is concerned

(2) shipments may be alike although composed of different classes of merchandise - difference

in the charge for handling and transporting may only be made when the difference is based uponactual cost

Determination of justifiable refusal:

This involves a consideration of the following--

(1) suitability of the vessels of the company for the transportation of such products;(2) reasonable possibility of danger or disaster, resulting from their transportation in the form

and under the conditions in which they are offered for carriage;(3) the general nature of the business done by the carrier;

(4) all the attendant circumstances which might affect the question of the reasonable necessityfor the refusal by the carrier to undertake the transportation of this class of merchandise

Case: The mere fact that the carriage of dynamites may lead to destructive explosions is not sufficientto justify refusal if it can be proven that in the condition in which it is offered for carriage there is noreal danger to the carrier nor reasonable ground to fear that the vessel and those on board will beexposed to unnecessary or unreasonable risks

US vs Tan Piaco, 40 Phil 853

F: Tan Piaco rented two automobile trucks and was using them upon the highways of Leyte for the

purpose of carrying some passengers and freight. He carried passengers and freight under a special contract ineach case and had not held himself out to carry all passengers and freight for all persons who might offerpassengers and freight. He was convicted for violation of the Public Utility Law for operating a public utilitywithout permission from the Public Utility Commission.

Issue: WON defendant operated a public utility. NO.

Held: There is no public use. The trucks were used under special agreements to carry particularpersons and property.

Under the Public Service Law, two things are necessary : (1) the individual, co-partnership,etc. must be a public utility; and (2) the business in which such individual, co-partnership, etc. isengaged must be for public use. "Public use" means the same as "use by the public." The essential

feature of public use is that it is not confined to privileged individuals, but is open to the indefinitepublic. In determining whether a use is public, we must look not only to the character of the businessto be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, orthe public benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdictionof the public utility commission. There must be, in general, a right which the law compels the ownerto 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 characterof the use is whether the public may enjoy it by right or only by permission.


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Home Insurance Co. vs American Steamship Agencies, 23 SCRA 24

F: A Peruvian firm shipped fishmeal through the SS Crowborough consigned to the SMB and insured bythe Home Insurance Co. The cargo arrived with shortages. SMB demanded and Home Insurance Co. paidP14,000 in settlement of SMB's claim. Home Insurance filed for recovery from Luzon Stevedoring and

American Steamship Agencies. Luzon Stevedoring claimed that it merely delivered what it received from thecarrier in the same condition it received it. American Steamship contended that it was not liable because of astipulation in the charter party that the charterer and not the shipowner was to be liable for any loss or damage tothe cargo. The CFI absolved Luzon Stevedoring but ordered American Steamship to reimburse the P14,000 toHome Insurance, declaring that Art. 587 of the Code of Commerce makes the ship agent civilly liable fordamages in favor of third persons due to the conduct of carrier's captain and that the stipulation in the charterparty exempting owner from liability is against public policy under Art. 1744 of NCC.

Issue : Is the stipulation valid? YES.

Held : The provisions of our Civil Code on common carriers were taken from Anglo-American law.Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to aspecial person only, becomes a private carrier. As a private carrier, a stipulation exempting the ownerfrom liability for the negligence of its agents is not against public policy and is deemed valid.

The Civil Code provisions on common carriers should not be applied where the carrier is notacting as such but as a private carrier. The stipulation in the charter party absolving the owner fromliability for loss due to the negligence of the agent would be void only if the strict public policygoverning CC is applied. Such policy has no force where the public at large is not involved, as in thecase of a ship totally chartered (as in this case) for the use of a single party. Based on the stipulation,recovery cannot be had, for loss or damage to the cargo against shipowners, unless the same is due topersonal acts or negligence of said owner or its managers, as distinguished from agents or employees.No personal act or negligence has been proved.

In a charter of the entire vessel, the bill of lading issued by the master to the charterer, asshipper, is in fact and legal contemplation merely a receipt and a document of title and not a contract,for the contract is the charter party.

De Guzman vs CA, 168 SCRA 612

F: Cendana was a junk dealer and was engaged in buying used bottles and scrap materials in Pangasinanand brought these to Manila for resale. He used two 6-wheeler trucks. On the return trip to Pangasinan, hewould load his vehicles with cargo which various merchants wanted delivered to Pangasinan. For that service,he charged freight lower than regular rates. General Milk Co. contracted with him for the hauling of 750 cartonsof mild. On the way to Pangasinan, one of the trucks was hijacked by armed men who took with them the truckand its cargo and kidnapped the driver and his helper. Only 150 cartons of milk were delivered. The Milk Co.sued to claim the value of the lost merchandise based on an alleged contract of carriage. Cendana denied that hewas a common carrier and contended that he could not be liable for the loss since it was due to force majeure.The TC ruled that he was a common carrier. The CA reversed.

Issue : WON Cendana is a common carrier. YES.

Held : Cendana is properly characterized as a common carrier even though he merely backhauledgoods for other merchants, and even if it was done on a periodic basis rather than on a regular basis,and even if his principal occupation was not the carriage of goods.

Art. 1732 makes no distinction between one whose principal business activity is the carryingof persons or goods or both, and one who does such carrying only as an ancillary activity. It alsoavoids making a distinction between a person or enterprise offering transportation services on a


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regular or scheduled basis and one offering service on an occasional, episodic or unscheduled basis.Neither does it make a distinction between a carrier offering its services to the general public and onewho offers services or solicits business only from a narrow segment of the population.

The fact that Cendana does not hold a CPC is no excuse to exempt him from incurringliabilities as a CC. Otherwise, it would be to reward persons who fail to comply with applicablestatutory reqts. and would be offensive to public policy. The liability arises the moment a person or

firm acts as a common carrier, without regard to whether or not such carrier has also complied with therequirements of the applicable regulatory statute and implementing regulations.

Issue : WON Cendana may be held liable for the loss of the milk. NO.

Held: Common carriers by the very nature of their business and for reasons of public policy are heldto a very high degree of care and diligence (extra-ordinary diligence) in the carriage of goods as wellas passengers. Article 1734 establishes the general rule that CC are responsible for the loss,destruction, or deterioration of the goods which they carry unless the same is due to the causesenumerated therein. Such enumeration is a closed list. Causes falling outside the list, even if they areforce majeure, fall within the scope of Art. 1735 which provides that CC are presumed to have been atfault or to have acted negligently, unless they prove that they observed extraordinary diligence

required under Art. 1733.However, Art. 1745 provides that a CC cannot be allowed to divest or diminish his

responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbersacted with grave or irresistible threat, violence or force. The limits of extraordinary diligence arereached where there is grave or irresistible threat, violence or force. In this case, the loss was quitebeyond the control of the CC. Even CC are not made absolute insurers against all risks of travel andof transport of goods, and are not liable for acts or events which cannot be foreseen or are inevitable,provided that they shall have complied with the rigorous standard of extraordinary diligence.

Planters Products vs CA, G.R. 101503 (Sept. 15, 1993)

F: Planters purchased urea fertilizer from Mitsubishi, New York. The fertilizer was shipped on MV SunPlum, which is owned by KKKK, from Alaska to San Fernando, La Union. A time charter party was enteredinto between Mitsubishi as shipper/charterer and KKKK as shipowner. Upon arrival in the port, PPI unloadedthe cargo. It took PPI 11 days to unload the cargo. PPI hired a marine and cargo surveyor to determine if therewas any shortage. A shortage and contamination of the fertilizer was discovered. PPI sent a claim letter to SSA,the resident agent of KKKK for the amount of the loss. An action for damages was filed. SSA contended thatthe provisions on CC do not apply to them because they have become private carriers by reason of the charter-party. The TC awarded damages. The CA reversed.

Issue : Does a charter party between a shipowner and a charterer transform a CC into a private one asto negate the civil law presumption of negligence in case of loss or damage to its cargo? NO.

Held : A charter-party is a contract by which an entire ship, or some principal part thereof, is let bythe owner to another person for a specified time or use. There are 2 kinds: (1) contract ofaffreightmentwhich involves the use of shipping space or vessels leased by the owner in part or as awhole, to carry goods for others; and (2) charter by demise or bareboat charter where the wholevessel is let to the charterer with a transfer to him of its entire command and possession andconsequent control over its navigation, including the master and the crew, who are his servants.

It is not disputed that the carrier operates as a CC in the ordinary course of business. WhenPPI chartered the vessel, the ship captain, its officers and crew were under the employ of the


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shipowner and therefore continued to be under its direct supervision and control. Thus it continued tobe a public carrier.

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charterof the whole or portion of a vessel, provided the charter is limited to the ship only, as in the case of atime-charter or a voyage-charter. It is only when the charter includes both the vessel and the crew, asin a bareboat or demise that a CC becomes private, insofar as such particular voyage is concerned.

Issue : WON the carrier is liable for damages. NO.

Held : The presumption of negligence on the part of respondent carrier has been overcome by theshowing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. On theother hand, no proof was adduced by the petitioner showing that the carrier was remiss in the exerciseof due diligence in order to minimize the loss or damage to the goods it carried.

Coastwise Lighterage Corp. vs. CA, GR No. 114167, July 12, 1995

F: Pag-asa Sales, Inc. entered into a contract to transport molasses from Negros to Mla. w/ Coastwise,

using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marcia, w/c is likewiseowned by Coastwise.

Upon reaching Mla. Bay, while approaching Pier 18, one of the barges, "Coastwise 9," struck anunknown sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole2 inches wide and 22 inches long. As a consequence, the molasses at the cargo tanks were contaminated andrendered unfit for the use it was intended. This prompted the consignee, Pag-asa to reject the shipment ofmolasses as a total loss. Thereafter, Pag-asa filed a formal claim w/ the insurer of its cargo, herein pvt. resp.,Phil. Gen. Insurance Co. (Philgen) and against the carrier, herein petitioner Coastwise. Coastwise denied theclaim and it was Philgen w/c paid the consignee the amount of P700,000 representing the value of the damagedcargo of molasses.

In turn, Phil-gen filed an action agsint Coastwise bef. RTC-Mla. seeking to recover the P700,000 it paidto Pag-asa. RTC ruled in favor of Philgen. CA affirmed the RTC decision. Hence, this petition.

RULINGS: (1) Bareboat charter and contract of affreightment, difference; Coastwise, by thecontract of affreightment, was not converted into a private carrier, but remained a common carrier.--

Under the demise or bareboat charterof the vessel, the charterer will generally be regarded as theowner of the voyage or service stipulated. The charterer mans the vessel w/ his own people andbecomes the ownerpro hac vice, subject to liability to others for damages caused by negligence. Tocreate a demise, the owner of a vessel must completely and exclusively relinquish possession,

command and navigation thereof to the charterer; anything short of such a complete transfer is a

contract of affreightment (time or voyage charter party) or not a charter party at all.

A contract of affreightmentis one in w/c the owner of the vessel leases part or all of its spaceto haul goods for others. It is a contract for special service to be rendered by the owner of the vesseland under such contract the general owner retains the possession, command and navigation of theships, the charterer or freighter merely having use of the space in the vessel in return for his payment

of the charter hire. xxxxxxAlthough a charter party may transform a common carrier into a private one, the same,

however, is not true in a contract of affreightment on account of the aforementioned distinctions bet.the two.

Petitioner admits that the contract it entered into w/ the consignee was one of afreightment.We agree. Pag-asa only leased 3 of petitioner's vessels, in order to carry cargo from one point toanother, but the possession, command and navigation of the vessels remained w/ petitioner.


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(2) Petitioner is liable for breach of contract of carriage, having failed to overcome thepresumption of negligence w/ the loss and destruction of goods it transported, by proof of its exercise

of extraordinary diligence.-- Mere proof of delivery of goods to a carrier and the subsequent arrival ofthe same goods at the place of destination in bad order makes for a prima facie case against the carrier.Jesus Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. This

violates the rule in the Code of Commerce (Art. 609) w/c requires that patrons must "have the legalcapacity to contract in accordance w/ this code, and prove the skill, capacity and qualificationsnecessary to command and direct the vessel xxx and must be qualified xxx for the discharge of theduties of the position. xxx" Coastwise cannot safely claim to have extraordinary diligence, by placinga person whose navigational skills are questionable, at the helm of the vessel w/c eventually met thefateful accident. xxx Had the patron been licensed, he could be presumed to have both the skill andthe knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay on theirway to Pier 8. RAM.

2. Nature of business; power of State to regulate

Art. 1765. The [Public Service Commission] Board of Transportation may, on its ownmotion or on petition of any interested party, after due hearing, cancel the certificate of publicconvenience granted to any common carrier that repeatedly fails to comply with his or its dutyto observe extraordinary diligence as prescribed in this Section.

4 Agbayani:

Common carriers are subject to legislative regulation.-- The business of a common carrier holdssuch a peculiar relation to the public interest that there is superinduced upon it the right of publicregulation. The business of a common carrier is affected with public interest. When, therefore, onedevotes his property to a use in which the public has an interest, he, in effect, grants to the public aninterest in that use, and must submit to be controlled by the public for the common good, to the extent

of the interest he had thus created.

Limitation on power to regulate.-- Such regulations must not have the effect of depriving an ownerof his property without due process of law, nor of confiscating, or appropriating private propertywithout just compensation, nor of limiting or prescribing irrevocably vested rights or privilegeslawfully acquired under a charter or franchise [just compensation, due process of law]

When judiciary may interfere with legislative regulation of common carriers.-- The judiciaryought not to interfere with legislative regulations unless they are so plainly and palpably unreasonableas to make their enforcement equivalent to the taking of property for public use without suchcompensation as under all circumstances is just both to the owner and to the public.

Pantranco vs PSC, 70 Phil 221

F: Pantranco has been engaged for the past 20 years in the business of transporting passengers by meansof motor vehicles in accordance with the CPCN issued to it. It filed with the PSC an application forauthorization to operate 10 addtl. new trucks. The application was granted with two conditions : (1) that theCPCN would be valid for only 25 years and (2) that the service can be acquired by the govt. upon payment ofcost price of its useful eqpt. less reasonable depreciation. Pantranco challenged the constitutionality of Art. 15,CA 146 as an undue delegation of legislative powers.


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Issue : WON the PSC may prescribe the 2 conditions as a prerequisite to the issuance of the CPCN.

Held : Yes. CA 146 provides a sufficient standard, which is public interest, by which the PSC isguided in imposing such conditions.

The business of a common carrier holds such a peculiar relation to the public interest that

there is superinduced upon it the right of public regulation. When private property is affected with apublic interest, it ceases to bejuris privati only. When, therefore, one devotes his property to a use inwhich the public has an interest, he, in effect, grants to the public an interest in that use, and mustsubmit to be controlled by the public for the common good, to the extent of the interest he had thuscreated. He may withdraw his grant by discontinuing the use, but so long as he maintains the use, hemust submit to control. Indeed this right is so far beyond question that it is settled that the power of thestate to exercise legislative control over public utilities may be exercised through the board ofcommissioners. This right of the state to regulate public utilities is founded upon the police power,and statutes for the control and regulation of utilities are a legitimate exercise thereof, for theprotection of the public as well as the utilities themselves. Such statutes are not unconstitutional,either as impairing the obligation of contracts, taking property without due process, or denying theequal protection of the laws, especially inasmuch as the question WON private property shall be

devoted to a public use and the consequent burdens assumed is ordinarily for the owner to decide; andif he voluntarily places his property in public service he cannot complain that it becomes subject to theregulatory powers of the state. This is more so in the light of authorities which hold that a CPCconstitutes neither a franchise nor a contract, confers no property rights and is a mere license orprivilege.

3. Nature and Basis of Liability

Art. 1733. Common carriers, from the nature of their business and for reasons of publicpolicy, are bound to observe extraordinary diligence in the vigilance over the goods and for thesafety of the passengers transported by them, according to 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 ofthe passengers is further set forth in Articles 1755 and 1756.

Art. 1734. Common carriers are responsible for the loss, destruction, ordeterioration of the goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;(2) Act of the public enemy in war, whether international or civil;(3) Act or omission of the shipper or owner of the goods;(4) The character of the goods or defects in the packaging or in the containers;(5) Order or act of competent public authority.

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of thepreceding article, if the goods are lost, destroyed or deteriorated, common carriers arepresumed to have been at fault or to have acted negligently, unless they prove that theyobserved extraordinary diligence as required in Art. 1733.

Art. 1745. Any of the ff. or similar stipulations shall be considered unreasonable,unjust and contrary to public policy:

xxx(5) That the common carrier shall not be responsible for the acts or omissions of

his or its employees;


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(6) That the common carrier's liability for acts committed by thieves, or ofrobbers who do not act with grave or irresistible threat, violence or force, is dispensedwith or diminished;

(7) That the common carrier is not responsible for the loss, destruction, ordeterioration of goods on account of the defective condition of the car, vehicle, ship,airplane or other equipment used in the contract of carriage.

Art. 1755. A common carrier is bound to carry the passengers safely as far ashuman care and foresight can provide, using the utmost diligence of very cautiouspersons, with a due regard for all circumstances.

Art. 1756. In case of death of or injuries to passengers, common carriers arepresumed to have been at fault or to have acted negligently, unless they prove that theyobserved extraordinary diligence as prescribed in articles 1733 and 1755.

4 Agbayani:

Extraordinary diligence required of common carriers.-- The law requires CC to exercise extra-ordinary diligence which means that they must render service with the greatest skill and utmost

foresight. The extra-ordinary diligence required of carriers in the handling of the goods of theshippers and consignees last from the time the cargoes are loaded in the vessels until they aredischarged and delivered to the consignees.

Reasons for requiring extra-ordinary diligence.-- The nature of the business of common carriersand the exigencies of public policy demand that they observe extra-ordinary diligence; the business ofCC is impressed with a special public duty and therefore subject to control and regulation by the state.The public must of necessity rely on the care and skill of CC in the vigilance over the goods and safetyof the passengers

Rigorous law on common carriers not applicable to special employment as carrier.-- The lawsapplicable to CC are rigorous and should not be extended to a person who has neither expressly

assumed that character, nor by his conduct and from the nature of his business justified the belief onthe part of the public that he intended to assume it.

Registered owner primarily and solidarily liable with driver, under the "kabit system."--Registered owner is primarily and solidarily liable for the damage caused by the vehicle registered inhis name, even if the said vehicle had already been sold, leased or transferred to another person whowas, at the time of the accident, actually operating the vehicle. The operator of record continues to bethe operator of the vehicle in contemplation of law, as regards the p

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