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Transportation Law

I. Governing Laws
1.) New Civil Code (Articles 1732 1766 NCC)
2.) Warsaw Convention (International Treaty)
3.) Code of Commerce (Special Law)
4.) Carriage of Goods by Sea Act (International Treaty)
5.) Salvage Law (Special Law PD 601)
6.) Public Service Act (Special Law CA 146)
7.) Article XII, Sec 11 on Operation of a Public Utility (Constitution)

II. Transportation Laws

1.) Coastwise Shipping
a.) Civil Code (NCC Articles 1732 1766)
b.) Code of Commerce: Supplemental Application
Eastern Shipping Lines Inc. v. IAC (1 50 SCRA 469-470 [1987])
where it was held under similar circumstance "that the law of the country to
which the goods are to be transported governs the liability of the common carrier
in case of their loss, destruction or deterioration" (Article 1753, Civil Code).
Thus, the rule was specifically laid down that for cargoes transported from Japan
to the Philippines, the liability of the carrier is governed primarily by the Civil
Code and in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of

2.) Carriage from Foreign ports to Philippine Ports

a.) Civil Code
b.) Code of Commerce: Supplemental Application
c.) COGSA: Supplemental Application
National Devt Co. vs CA G.R. No. L-49407, August 19, 1988
where it was held under similar circumstance "that the law of the country to
which the goods are to be transported governs the liability of the common carrier
in case of their loss, destruction or deterioration" (Article 1753, Civil Code).
Thus, the rule was specifically laid down that for cargoes transported from Japan
to the Philippines, the liability of the carrier is governed primarily by the Civil
Code and in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of commerce
and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act,
a special law, is merely suppletory to the provision of the Civil Code.

3.) Carriage from Philippine ports to Foreign Ports

a.) Civil Code (Art. 1753)
Article 1753. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or

4.) Overland Transportation

a.) Civil Code
b.) Code of Commerce: Supplemental Application

5.) Air Transportation

a.) Civil Code
b.) Code of Commerce
c.) Warsaw Convention
d.) Chicago Convention: Convention on International Civil Aviation, signed on
December 7, 1944
6.) RA 9497: Civil Aviation Authority of Act of 2008 (Section (3) - Refers to the operation of
any civil aircraft for the purpose of general aviation operations, aerial work or
commercial air transport).

7.) RA 776: Act to reorganize the Civil Aeronautics Board passed on June 20, 1952 (Section(4)
Declaration of Policies)
Governs the Economic regulation and the regulations issued by the civil
aeronautics board
8.) Act 2694: Public Utility Act, defines which industries are considered Public Utilities

9.) CA 146: Defines the parameters of what is considered Public Service

III. Constitutional Provisions

1.) Article XII Sec (11) 1987 Philippine Constitution Any franchise or right may be granted
under the condition that it shall be subject to amendment, alteration, or repeal by the
Congress when the common good so requires it.
A franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted only to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines at least sixty (60) per centum of whose capital is
owned by Filipino citizens.

A franchise or a certificate of any other shall not be exclusive in character nor for a period of
more than fifty (50) years.

2.) Lim vs Pacquing, G.R. No. 115044, January 27, 1955 A franchise is not in the strict sense a
simple contract but rather it is, more importantly, a mere privilege specially in matters
which are within the govts power to regulate and even prohibit through the exercise of
police power, Thus a gambling franchise is always subject to the exercise of police power for
the public welfare.

3.) Article XII Sec (11) 1987 Philippine Constitution The participation of foreign investors in
the governing body of any public utility enterprise shall be limited to their proportionate
share in its capital and all the executive and managing officers of such corporation or
association must be citizens of the Philippines.

4.) Article XII Sec (17) 1987 Philippine Constitution In times of national emergency, when
the public interest so requires, the state may, during the emergency and under reasonable
terms prescribed by it, temporarily take over or direct the operation of any privately owned
public utility or business affected with public interest: [Seizure by Police Power]

5.) Article XII Sec (18) 1987 Philippine Constitution The state may, in the interest of national
welfare or defense, establish and operate vital industries and upon payment of just
compensation, transfer to public ownership utilities and other private enterprises to be
operated by the government [Seizure of Business Impressed with Public Interest, Eminent

6.) Article XII Sec (19) 1987 Philippine Constitution The state shall regulate or prohibit
monopolies when the public interest so requires. No combinations in restraint of trade or
unfair competition shall be allowed.

IV. Concepts

1.) Contract of Carriage or Transportation

There is a contract of transportation when a person obligates himself to transport persons or
property from one place to another for a consideration.
The contract may involve carriage of passengers or carriage of goods and the person who
obligates himself to transport the goods and passengers may be a common carrier or a
private carrier

2.) Classifications of a Contract of Carriage

a.) Common or Private
b.) Goods or Persons
c.) For hire or For Gratuity
d.) Over land, water, and air
e.) Domestic or International

3.) Parties to a contract of Transportation

a.) Carriage of Passengers
i. Carrier
Persons, Corporations, Associations, Firms, engaged in the business of
carrying or transporting passengers, goods, or both by land, water, or air
for compensation, offering their services to the public (Civil Code, Article
1732)[distinguish between private and common carrier]

ii. Passenger
One who travels in a public conveyance by virtue of contract, express, or
implied, with the carrier as to the payment of fare or that which is
accepted as an equivalent thereof (Vda. De Nueca vs. Manila Railroad
Co., C.A. No. 31731 R, January 30, 1968)

The following are not considered passengers hence do no enjoy the

protection afforded to passengers.

o One who has not yet boarded any part of vehicle regardless of
whether or not he has purchased a ticket [variance with common carrier
terminals and the vicinity of their control and protection]
o One who remains on board the carrier for an unreasonable length of
time after he has been afforded every safe opportunity to alight.
o One who has boarded by fraud, stealth, or deceit.
o One who attempts to board a moving vehicle, although he has a
ticket, unless the attempt be with the knowledge and consent of the
o One who boards a wrong vehicle and is duly informed of that fact
and injures himself while alighting from the wrong vehicle
o One who rides any part of the vehicle which is unsuitable or
dangerous or which he knows is not designed nor intended for
passengers (Vda. De Nueca vs Manila Railroad Co., C.A. No. 31731-
R, January 30, 1968)

b.) Carriage of Goods

i. Shipper
Any person, partnership or corporation who delivers goods to the carrier
for transportation and pays the consideration or on whose behalf
payment is made
ii. Carrier
iii. Consignee
The person to whom the goods are to be delivered. The consignee may
The shipper himself When the shipper delivers the goods to
another of his many branches or offices.
Any 3rd person not party to the contract of carriage.
[However a stipulation pour atrui that signifies the consignees
acceptance of the stipulation effectively binds the consignee to the
terms envisioned as long as the same is not contrary to lows, public
policy, morals and customs]

4.) Perfection of Contract of Transportation

a.) Contract to Carry
An agreement to carry the passenger at some future date. This is purely consensual;
perfected by consent

An action for damages may be sustained for breach of contract to carry (British
Airways, Inc. vs CA G.R. No. 92288, February 9, 1993)

b.) Contract of Carriage

Considered a real contract for not until the facilities of the common carrier are
actually used can the carrier be said to have already assumed the obligation of the

a.) Contract to Carry Passengers
Perfected even when no tickets are issued as long as there is already a
meeting of the minds with regard to the subject matter and the consideration.

b.) Contract of Carriage between Passengers

Perfected when the passenger has already made use of the facilities of the
airline, this includes checking in at the counter, passed through customs and
inspections, the loading of ones luggage and made to stay in the terminal
facilities awaiting boarding.

Buses, Jeepneys, and Street Cars

The act of a driver in stopping their conveyances is a continuous offer to riders.
The passenger is deemed to be accepting the offer if he is already attempting to
board the conveyances and the contract of carriage is perfected at that point
(Dangwa Transportation Co. Inc Vs. CA, G.r. No. 95582, October 7, 1991)

a.) Contract to Carry Passengers
May include an agreement to carry the passenger at a later date whether or
not there was a ticket as long as the elements of a consensual contract is

b.) Contract of Carriage of Goods or Passengers

For passengers When the passenger possesses adequate fair and presents
himself to the vicinity of control of the train operator for transportation.

For goods When the goods are unconditionally placed in the possession
and control of the carrier, and upon their receipt by the carrier for

V. Common Carrier
1.) Statutory Definition (Article 1732 New Civil Code)
Common Carriers are persons, corporations, firms, or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, air, for compensation,
offering their services to the public (Civil Code Art. 1732)

Tests for Determining a Common Carrier (Carriage of Goods)

Engaged in the business of carrying goods for others as a public employment
and must hold itself out as ready to engage in the transportation of goods
generally as a business and not as a casual occupation.
Must undertake to carry goods of the kind to which its business is confined.
It must undertake to carry by method by which his business is conducted and
over its established roads
The transportation must be for hire (First Philippine Industrial Corporation vs.
CA G.R. No. 125948, December 29, 1998)

i. Elements of a Common Carrier

Person, Corporation, Firm, or Association
Engaged in the business of carrying or transporting passengers, goods, or
Land, Water, and Air
For Compensation
Offered to the public without any distinction

ii. Classification of Carriers

Private or Common
For Goods or For Passengers
For Fee or For Gratuitous
Land, Water, Air
Domestic or International

iii. Private or Special Carrier

A private carrier is defined as one who without making the activity a vocation or
without making himself available to the public as ready to act for all who may desire his
or its services, undertakes by special agreement in a particular instance only, to
transport goods or persons from one place to another either for free or for hire.

The diligence required is merely ordinary diligence and that is the diligence of a good
father of a family (Sps Perena vs Sps Zarate G.R. No. 157917, August 29, 2012)

2.) Characteristics of Common Carriers

A. The Supreme Court held that the true test of a common carrier is the carriage of goods or
passengers provided it has space for all those who opt to avail themselves of its transportation
for a fee (National Steel Corp. vs. CA, G.R. No. 118126)

B. There is no distinction between one whose principal business is carrying persons or goods and
one who carries them as an ancillary activity (De Guzman vs. CA. G.R. No. L-47822, December 22,

C. There is no distinction between one who offers its service to the general public or to a limited
clientele (De Guzman vs. CA. G.R. No. L-47822, December 22, 1988)

D. A common carrier is subject to its obligation under the Civil Code even if he did not secure a
Certificate of Public Convenience (De Guzman vs. CA. G.R. No. L-47822, December 22, 1988)

E. It is not necessary that the carriage of goods or persons be undertaken regularly to be

considered as a common carrier. (Loadstar Shipping Co., Inc. Vs. CA G.R. No. 131621, September 28,

F. The transportation need not be a motor vehicle (First Philippine Industrial Corporation, Vs. CA,
G.R. No 125948, December 29, 1998)

G. A Common Carrier need not have a fixed and publicly known route not does it have to
maintain terminals or issue tickets (Asia Lighterage and Shipping, Inc. Vs. CA G.R. No. 147426,
August 19, 2003)
H. Need not be engaged in the business of public transportation (Fabre Jr. Vs CA, G.R. No. 111127,
July 26, 1996)

3.) Common Carrier by Operation of Law

Under the Petroleum Act of the Philippines (RA 387) oil pipeline operators are considered
common carriers.

The same goes for the distribution of Electricity to end-users shall be a regulated common
carrier business requiring a franchise. (R.A. 9136 Sec (22))

4.) Private Carrier

One which without being engaged in the business of carrying as a public employment,
undertakes to deliver goods or passengers for compensation (Home Insurance Co vs. American
Steamship Agency, G.R. No. L-25599, April 4, 1968)

The distinction between a common or public and a private or special carrier lies in the character
of the business, such that if the undertaking is a SINGLE TRANSACTION, not a part of a
general business or occupation, although involving the carriage of the goods for a fee, the
person or corporation offering the service is a private carrier. (Planters Products Inc. Vs CA. G.R.
No. 101503, September 15, 1953)

5.) Conversion of a Common Carrier into a Private Carrier

A charter party may transform a common carrier into a private carrier. However, it must be a
bareboat or demise charter where the charterer mans the vessel with his own people and
becomes in effect the owner of the voyage or service stipulated (Caltex [Phils], Inc Vs. Sulpicio
Lines, G.R. No. 131166, September 30, 1999)

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use (Planters Products Inc. Vs. CA, G.R. No.
101503, September 15, 1993)

6.) Jurisprudence where a Court has held an Entity is a Common Carrier

A. The operator of a beach resort that accepts clients by virtue of a tour package contracts that
included transportation to and from the resort and the point of departure in Batangas is
considered a common carrier. The court observed that its ferry services are so closely
intertwined with its main business as to be properly considered ancillary thereto (Spouses Cruz
Vs. Sun Holidays G.R. No. 186312, June 29, 2010)

B. A junk dealer which backhauls goods for other merchants on a periodic or occasional manner
and even though the principal occupation was not the carriage of goods for others was
considered a common carrier (De Guzman vs. CA G.R. No. L-47822, December 22, 1988)

C. Pipeline Operators are common carriers even if the oil or petroleum products are being
transported not through motor vehicles but through pipelines. (First Philippine Industrial
Corporation Vs. CA, G.R. No. 111127, July 26, 1996)

D. The bus principally used as bus service for school children and which was hired by a group of
persons although the owners are not engaged in the business of public transportation. (Fabre Jr.
Vs. CA, G.R. no. 125948, December 29, 1998)

E. The owner whose principal business is lighterage and drayage and offers its barges to the
public for carrying or transporting goods by water for compensation. (Asia Lighterage and
Shipping, Inc. Vs. CA, G.R. No. 147246, August 19, 2003)
7.) Jurisprudence where a Court has held an Entity is a Private Carrier
A. A vessel which rendered tramping services and as such, does not transport cargo or shipment
for the general public and in which services are available only to specific persons who enter into
a special contract of a charter party with its owner is a private carrier (National Steel Corp. Vs.
CA, G.R. No. 118126, December 12, 1997)

B. An exclusive contractor and hauler, rendering or offering its services to no other individual or
entity, was not considered a common carrier (FGU Insurance Corporation Vs. G.P. Sarmiento
Trucking Corporation, G.R. No. 141610, August 6, 2002)

8.) Distinctions between a Common Carrier and a Private Carrier

Common Carrier Private Carrier

Law on Common Carriers Obligations & Contracts

State Regulation No State Regulation

Indiscriminately Available Exclusively Available

Extraordinary Diligence Ordinary Diligence

Presumption of Negligence No Presumption of Negligence

Prove Exercise of Diligence Prove Fortuitous Event

May not agree on limiting liability May limit liability

9.) Distinction between a Common Carrier from Travel Agency, Towage, Arrastre, and Stevedoring
A. Travel Agency
A travel agency is not a common carrier. The object of contractual relation of a person who
purchases a ticket through a travel agency is only the agencys service of arranging and
facilitating the booking, ticketing, and accommodation in a package tour. In contrast the object
of the contract in a common carrier is transportation. (Crisostomo Vs. CA, G.R. No. 138334,
August 25, 2003)

B. Towage
One vessel is hired to bring another vessel to another place. It refers to a service rendered to a
vessel by towing for the mere purpose of expediting her voyage without reference to any
circumstance of danger.

The operator of a tugboat cannot be considered a common carrier. Thus a tug and its owners
must observe ordinary diligence in the performance of its obligation under a contract of towage
(Baer Senior & Co.s Successors Vs. La Compania Maritima, G.R. No. 1963, April 30, 1906)

C. Arrastre Service
A Contract for the unloading of goods from a Vessel. It comprehends the handling of Cargo on
the wharf or between the establishment of the consignee or the shipper and the ships tackle. Its
responsibility lasts until the delivery of the cargo to the consignee. (Mindanao Terminal and
Brokerage Service, Inc. Vs. Phoenix Assurance Company of New York / Mcgee & Co., Inc., G.R. No.
162467, May 8, 2009)

Arrastre Service applies in Overseas Trade Only

When a person brings in cargo from abroad, he cannot unload and deliver the cargo by himself.
The unloading must be done be the arrastre operator, which will then deliver the cargo to the

Unlike a common carrier, an arrastre operator does not labor under a presumption of
negligence in case of loss, destruction or deterioration of goods discharged into its custody. In
other words to hold an Arrastre operator liable for loss or damage to goods in its custody, there
must be preponderant evidence that it did not exercise due diligence in handling the care of
goods. (Philippine American General Insurance Co., Inc. Vs. Sweet Lines, Inc. G.R. No. 87434, August
5, 1992)

D. Stevedoring Service
It refers to the handling of the cargo in the holds of the vessel or between the ships tackle and
holds of the vessel. (Mindanao Terminal and Brokerage Service, Inc. Vs. Phoenix Assurance Company
of New York / Mcgee & Co., Inc. G.R. No. 164467, May 8, 2009)

Unlike a common carrier or arrastre operator, a stevedore mainly provides labor in loading and
stowing of cargoes and does not transport goods or its passengers.

10.) Registered Owner Rule & The Kabit System

General Rule: The person who is the registered owner of the vehicle is liable for any damage
caused by the negligent operation of the vehicle although the same was already sold or
conveyed to another person at the time of the complaint.

Exception: The registered owner rule does not apply in case of a vehicle stolen from a garage
without the owners knowledge and consent. To hold the owner liable for the accident would be
absurd as it would be like holding liable the owner of a stolen vehicle for an accident caused by
the person who stole such vehicle. (Duavit Vs. CA. G.R. No. 82318, May 18, 1989)

The revised Motor Vehicles Law (Act No. 3992, as amended) provides that no vehicle may be
used or operated upon any public highway unless the same is properly registered. (Erezo, et al.
Vs. Jepte, G.R. No. L-9605, September 30, 1957)

The liability of the registered owner of a public service vehicle for damages arising from the
tortious acts of the driver is primary direct, direct, and joint and several or solidary with the
driver. (Philtranco Service Enterprises, Inc. Vs. CA, G.R. No. 120553, June 1, 1997)

The registered owner is the lawful operator insofar as public and third persons are concerned;
consequently, it is directly and primary responsible for the consequences of its operation. In
contemplation of law, the owner/operator of record is the employer of the driver, the actual
employer and operator being considered merely as its agent. The same rule applies if the
registered owner of any vehicle does not use it for public service. (Equitable Leasing Corp Vs.
Suyom, G.R. No. 143360, September 5, 2002)

The Kabit System

The registered owner of the certificate of public conveyance is primarily liable for all the
consequences flowing from the operations of the carrier.

Article 1412 of the Civil Code or the in pari delicto rule is applicable. The registered owner
cannot recover from the actual owner and the latter cannot obtain transfer of the vehicle to
himself, both being in pari delicto. (Teja Marketing Vs. IAC, G.R. No. L-65510. March 9, 1987)

11.) Lease of the Vehicle

A lease is an encumbrance in contemplation of law, which needs to be registered in order for it
to bind third parties. (PCI Leasing and Finance, Inc Vs. UCPB General Insurance Co., Inc., G.R. No.
162267, July 4, 2008)

A registered owner who has already sold or transferred a vehicle has recourse to a third-party
complaint in the same action brought against him to recover for the damage or injury done,
against the vendee or transferee of the vehicle. (Villanueva Vs. Domingo, G.R. No. 144274,
September 20, 2004)
For the better protection of the public, both the registered owner and the actual owner are
jointly and severally liable with the driver. (Zamboanga Transportation Co. Vs. CA, G.R. No. L-
25292, November 29, 1969)