Prop Grane ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW TIMOTEO B. AQUINO Professor of Law and PreBar Reviewer Author, Torts and Damages Notes and Cases on Banking Law and ‘Negotiable Instruments Law, Vole. and I Philippine Corporate Law Compendium Essentials of Insurance Law Co-Author, Reviewer on Commercial Law Handbook on Summary and Small Claims Procedure, and Bouncing Checks Law Rovised Rules on Summary Procedure: Revisited Fundamentals of Obligations and Contracts Fundamentals of Negotiable Instruments Law RAMON PAUL L. HERNANDO ‘Associate Justice Court of Appeals Professor of Law, Kavior University-Ateneo de Cagayan Schoo! of Law, Angeles University tion College of Law Boda Colleye of Law, ‘Tomas Faculty of Civil Law versity Inatitute of Law of Par Eastern Us Universi Ses Pubished & sted by REX Book Store Nleanoe Bayes, oe Meter SE Stas UP COLLEGE oF Law Litany wae (NN raises ‘eT SNe renePhilippine Copyright, 2011 by, Loitje, ASE rima ISBN 978-971-23-5898-2 No portion of this book may be copied or reproduced in books, pamphlets, outlines oF notes, whether printed, mimeographed, typewritten, copied indifferent electronic devices orn any other form, for distribution orsale, without the written permission of the authors except brief passages in books, articles, reviews, legal papers, and judicial or other official proceedings with proper citation. Any copy of this book withoutthe correspond- ing number and the signature of the authors on this page either proceeds from an illegitimate source or is in possession of one who has no authority to dispose of the same. ALL RIGHTS RESERVED BY THE AUTHOR Ne 1684 ll ll (05-CM-00035 Print by Rex printing company, inc. oc 8 echne cea et P Prne tcszecy Toe 12a T2488 For my wife, Bernadette and our children Leona Isabelle, Lean Carlo, and Lauren Margaret, my parents Bernabe C. Aquino Sr. and Obdulia B. Aquino, and my aunt Felisa C. Aquino. ‘TIMOTEO B. AQUINO For my wife Cherry Chiara and my parents Judge Teodoro Hernando Sr. and Prescilla L. Hernando. RAMON PAUL L. HERNANDO6.02. Contract of Adhesion.. 6.08. Parol Evidence Rule... 6.04. Bill of Lading as Evidence... c 6.05. Bill of Lading as Actionable Document... 6.06. Shipment Terms... Basie Stipulations 7.01. Overland Transportation 7.02. Maritime Commerce. 7.08. Electronic Documents... Prohibited and Limiting Stipulations... 8.01. Purpose of Limiting Stipulations 8.02, Stipulation Limiting Diligence ....... 8.03. Stipulations Fixing the Limit of Recovery. 8.04. Carriage of Goods by Sea Act... Bill of Lading as Receipt Bill of Lading as Document of Title... 10.01. Negotiabitity 2 10,02. How Negotiated... 10.08. Effects of Nogotiation. CHAPTER 5 - ACTIONS AND DAMAGES IN CASE OF BREACH Distinetions.. 1.01. Distinctions Between Culpa Contractual ‘and Culpa Aquilina... : Concurrent Causes of Action . 201. Concurrence with Third Persons... 2.02, Solidary Liability 2.03. Alternative Compensation Scheme . Notice of Claim and Prescriptive Period ....m 3.01. Claim in Overland Transportation and Coastwise Shipping... : 3.02, Prescription in Overland Transporation and Coastvrixe Shipping. 3.03. Claim in International Carriage ‘of Goods By Sea 8.04, Preseription in Internation of Goods. . Recoverable Damages 4.01, Extent of Recovery. 4.02, Kinds of Damages. 229 229 230 230 281 231 232 233 238 240 241 246 247 4.09. Actual or Gompenantory Damages 4.04, Attorney's Feet 4.05. Interests... 4.96, Moral Damage 4.07. Nominal Damages 4.08. ‘Temperate or Moderate Damages. 4,09. Liquidated Damages 4.10. Exemplary or Corrective Damages.. PART Il- MARITIME LAW. CHAPTER 6 - GENERAL CONCEPTS Maritime Law Defined... Real and Hypothecary Nature. 2.01. Statutory Provisions.. 2.02. Coverage of Limited Liability. 2.03, Exceptions to Limited Liability. 2.04. Negligence of Shipowner und Agent.. 2.05. Not Applicable to Insurance Claims.. 2.06, Workmen's Compensation 2.07. Abandonment 2.08, Procedure for Enforcement. Protests Admiralty Jurisdiction. Forfeiture Due to Smuggling Maritime Pollution 6.01. Prohibited Act. 6.02. Definitions. ‘Marine Insurance... CHAPTER 7 - VESSELS Definitions... 1.01. 1.02. Construction, Equipment and Manning. Vessel as Personal Property. Acquisition 4.01. Prescription.. 4.02. Sale... 4.03. Co-owner's Right .. 248, 251 252 258 258 260 261 261 266 267 271 272 274 275 217 278 279 280 285 286 287 288 288 289 290Nationality of Vessels 304 5.01. Rights Under the Tariff and Customs Code...... 306 5.02, Flags of Convenience. eat 207) . Registration of Vessel: 307 6.01. Register of Philippine Vessels. 309 6.02. Registrations of Chartered Vessels Bu Ship's Manifest. 313 Logbook. 313 Safety Regulations 314 CHAPTER 8 - SHIP MORTGAGE AND MARITIME LIENS. Applicable Laws and Rules 316 1.01. The Ship Mortgage Decree of 1978. 316 1.02. Code of Commerce Provisions.. 1.03. History of Ship Mortgage Decree ... 08. Waiver of Lien . 2.04. Prescription and Lach 2.05. Maritime Liens for Necessaries. 2.08. Maritime Tort 2.07. Salvage Lien .. 2.08, Subrogation, 2.09. When Proceeds not Sufficient. . 2.10, Tests to Determine the Presence of Lien wun. 340 Who May Constitute Preferred Ship Mortgage... 345 3.01. Purpose 345 3.02, Formal Requirements . 346 3.03, Marina Rules.. 346 |. Mortgage of Vessel with Other Properties... 348 4.01 Mortgage with Non-maritime Property 348 4.02, Fleet mortgage... 348 Arrest and Foreclosure... 349 CHAPTER 9 - PERSONS WHO TAKE PART IN MARITIME COMMERCE Liability of Ship Owners and Ship Agents... 350 LOL. Ship Agent Defined 351 1.02, Extent of Liability 1.08. When Captain Acts in Excess of Authority... 1.04. Liability for Extra-contractual Obligations BRA Part Owners.. Ship Agent 3.01. Powers of Ship Agent . Captains and Masters of Vessels. 4.01. Qualifications. 4,02. Powers and Functions. 4.03, Discretion of Captain Or Master. 4.04, Liability of Captains and Masters. Pilotage... 5.01. Master and Pilet.. 5.02. Ship owner and Pil 5.03, Pilot and His Association... Other Code of Commerce Provisions on Captains. 381 Officers and Crew of Vessels.. 388 7.01. Regulation of Merchant Marine Profession. 390 Minimum Safe Manning 395 Security of Tenure 396 Other Officers and Crew under the Code seo of Commerce. : 10.01. Salling Mates. 399 40.02, Second Mate and Marine Engincer.. 401 10.03, Cro 408 10.04. Supereargoes. 411 CHAPTER 10 ~ CHARTER PARTIES 412 413 413 4u4 Effect of Charter on Character of Carrier. 415 Persons Who May Make Charter = 416 4.01. Charterer 47 4.02. Part Owners. 417 4.03, Ship Agent 417 4.04, Captain or au fequisites ofa Valid Charter Paty. 118 Requi is Freight10. coe Port of Unloading... 420 Demurrage: 421 8.01. Computation of Lay Days 421 8.02. Deadfreight. 422 Rights and Obligations of the Charter Parties, 422 9.01. Shipowner or Captain 7 9.02. Charterer Bifect of Bill of Lading . Code of Commerce Provisious.. CHAPTER 11 - LOANS ON BOTTOMRY "AND RESPONDENTIA, Definitions and Concep\ 442 Distinguished From Simple Loan. 443 2.01. When Simple Loan Applies. rr Authority to Constitute Loan on Bottomry... 445 3.01. Authority to Constitute Loan on Respondentia = 445 Form of the Loans... 445 ‘Consequences of Loss of Effects of the Loans. 446 Code of Commerce Provisions... 447 CHAPTER 12- AVERAGES “Averages in General... Simple Average. 2.01. By Whom Borne. 2.02. Examples of Simple Averages. 484 General Average.. o 456 Requisites of General Average. 456 4.01. Common Danger. 458 4.02, Deliberate Sacrifice... 461 4.08. Successful Sacrifice . : 463 4.04. Compliance with Legal Steps 464 4.05, Examples of General Average 465 Who Bears General Average. 466 5.01. Insurers... 487 5.02. Lenders on Bottomry and Respondent. 468 5.08. Who is Entitled to Indemnity. 468 Eifect of Negligence. 468 Apportionment, : 468 Proof and Liquidation of Aver of Commerce. at ‘York-Antwerp Rules... 481 CHAPTER 13 - CCLLISIONS Definition. 493 Zones in Collision 493 2.01. Error in Bxtremis 494 Applicable Law... 495 8.01. Colregs.... 496 Rules on Liability 497 Contributory Negligence and Last Clear Chance Not Applicable, Specific Rules Under the Code of Commerce 6.01. One Vessel at Fault..nns 6.02. Both Vessels at Fault. 6.03. Party At Fault Cannot Be Determin« 6.04, Cause is Fortuitous Event 6.05. Third Person At Fault. Sinking on the Way to Port. Presence of Pilots. Extent Of Liability . Collision In Foreign Waters. Protest... 11,01. Protest Mandatory Limited Liability Rule. CHAPTER 14 ARRIVAL UNDER STRESS AND SHIPWRECKS Arrival Under Stress 513, 1.01. Determination of Propriety. 513, 1.02. When Arrival Under Stress is Improper. 51d 1.03. Expenses 515 1.04. Unloading of Cargoes to N : 515 1.05. Custody of Cargo 515 1.06. Liability of Captain... 516 Shipwrecks... 516 2.01. Code of Commerce Provisions. 516CHAPTER 15 - SALVAGE Governing Law Definition Rationale Kinds of Salvage Services Claim for Valid Salvage 5.01. Persons Not Entitled to Saivage Compensation. 5.02. Requisites of Compensation 5.03. Derelict Required 5.04. Jetsam and Flotsam... Basis of Entitlement to Salvage Reward... 6.01. Quantum Meruit not Applicable .. 6.02. Circumstances to Consider Rights and Obligations of Salvor and Owners. 7.01. Maritime Lien... : ‘The Salvage Law CHAPTER 16 - CARRIAGE OF GOODS BY SEA History Applicable Inverational Shipping fo the Philippines : Parties. Duties of Carrier. Document of Title Required. Notice of Claim and Prescriptive Perio Defenses and Immunities .. Waiver nnn Limiting Provision. Right to Discharge Dengerous Cargo.. PART Ill - AVIATION LAW CHAPTER 17 ~ THE AIRCRAFT AND CIVIL AVIATION Applicable Laws 1.01. Regulatory Perspectives. Civil Aviation sn Registration of Aireraft.. Recording of Conveyance. Marine Insurance. 519 519 520 520 522 523 523 525 582 532 533, 533 535 537 537 557 557 558 B58, 561 563 Air Transportation in General. Persons Involved in Marine Transportation. Charter of Aircraft. Sovereignty and Freedoms. 9.01, Freedoms of the Air : 9.02. Cancellation of Commercial Agreement.. CHAPTER 18 - OBLIGATIONS OF CARRIER IN AIR TRANSPORATION Extraordinary Diligence in Air Traneportation 101. Airworthiness. Care of Baggage. Duty of Passenger. 3.01. Denied Boarding Passengers... 3.02 Travel Documents . Inspection of Aireraft and Cargo... Warsaw Convention. 5.01. Meaning of International Transportation 5.02. Period Covered by International ‘Transportation... 5.03. When International Carrier is Liable . 5.04. Limit of Liability 5.05. Tort Liability 5.06. Venue of Action. 5.07, Successive Carrier 5.08. Formalities.. PUBLIC UTILITIES - IV CHAPTER 19 - PUBLIC SERVICE REGULATIONS: Concept Constitutional Provision: Regulatory Agencies Bases of Regulation of Public Utilities. Ownership of Public Utilities. 501, Ownership of Facilities. Regulation of Rates. 6.01. Non-delegation.. 6.02. Deregulation of Domestic Shipping. 6.03. Prohibition Against Discrimination em. B71 572 572 575. 580 581 587 591 591 591 B92 592 593 595 597 606 el 613 614 614 eid 6196.04. Standard in Fixing Rates. 627 9. National Telecommuniecations Commission. 691 6.05. Fixing Rates for Electric Companies... 628 01. Powers of NTC. 693 6.06. LTFRB.. he 629 9.02, ‘Telecommunications Policies 694 6.07. Provisional Increase.. 629 9.08. Broadcast Industry. 700 6.08. Provisional Rate Increase Under Epira. 630 9.04. Cable Television industry 702 . Authority to Operate as Public Utility. 622 10. Energy regulatory Commission.. 702 7.01. Franchise and Certificate of Public 10.01. Franchise 708 Convenience soon 684 10.02. Power Generator... : 708 Wahoo Legislative Erenctiloe te Neceneaey cea 00) 11, Local Water Utilities Administration 708 Issuance Of Certificate of Public Convenience... 638 1LOL, Metropolitan Waterworks And Basic Requirements 640 Sewerage System. m1 Public Interest is Overriding Principle. 640 Other Rules and Policies. 641 4 A Free Competition. 643 pce eaeaate " m Nature Of Certificate of Publie Conveniencs 645 Appendix 2... 717 Instances When CPC Is Not Required . 646 Appendix 8... 724 ‘Transfer of Cextificate 647 Appendix 4... 48 Revocation of Certificate... 648 endint a 9.01. When NTC has no Power to Cancel 649 poe had Due Process. 651 Appendix 6... m7 10.01. When no Heering is Required. 658 Appendix 7. 782 20-0 rear Appendix 8... 7192 CHAPTER 20 ~ POWERS OF ADMINISTRATIVE ecuees Appendix 9. 805 Appendix 10 810 Department of Transportation and Communications... 661 Appendix 11 835 LIFRB... 664 oe F Land Transportation Office 666 pence 376 Civil Aeronautics Board. 667 Appendix 13... 883 401. li 667 Appendix 14. 887 4.02. Powers and Duties of CAB.. 668 4.08. Summary of CAB Powers. 613 ae oe Civil Aviation Authority of the Philippines... 674 eed 5.01. Declared Policy... 674 Appendix 17. 917 5.02. Powers of the CAAP Board... 675 Maritime Industry Authority 678 Philippine Coast Guard. 679 7.01. Power : 680 7.02. Delineation of Fanctions.. 682 Philippine Ports Authority. 686 8.01. Powers of the PPA.. 689P mart tp 10. uw 12, TABLE OF CONTENTS PART | COMMON CARRIERS CHAPTER 1 - GENERAL CONSIDERATIONS Definition of Contract of Transportation Parties.. 201, Carriage of Passenger 2.02. Carriage of Goods Perfection... 3.01. Airer 3.02, Buses, Jeepneys, and Street cars. 3.03. Trains. Common Cartier nnn 4.01, Public Service . Characteristics. 6.01. Broader Concept.. 6.02, Ancilliary Business. 6.03, Limited Clientele. 6.04. Means of Transportation... Eifect af Charter Party.. Common Carrier Distinguished from Private Carrier... Common Carrier Distinguished from Other Distinguished from Arrastre, 9.03. Distinguished from Stevedoring. 9.04. Distinguished from Travel Agency. ‘Tramp Service and Line Service. Governing Laws... 11.01. Summary of Ri Nature of Business 18 21 a1 22 23 25 25 27 28,18, M4, Registered Owner Rule and Kabit System 18.01. Registration Laws. 13,02. Registered Owner Rule. 18.03. Kabit System ...... 13.04, Pari Delicto Rule .. 18.05. Aircrafts and Vessel. Boundary System CHAPTER 2~ OBLIGATIONS OF THE PARTIES Obligation of the Carrier. 1.01. Duty to Accept 1.02, Valid Grounds for Non-acceptance 1.03. Duty to Deliver the Goods. 1.04. Consequences of Delay... 1.05. Rights of Passengers in Case of Delay . 1.06. Place of Delivery. 1.07. To Whom Delivered nn 1.08. Delay to Transport Passengers. Duty to Exercise Extraordinary Diligence. 2.01. Code of Commerce Provision: 2.02. Presumption of Negligence... 2.08. Duration of Duty in Carriage of Goods 2.04. Commencement of Duty in Carriage of Pasaengets.. Defenses of Common Carriers. Proximate Causation. New Civil Code Provisions Defense in Carriage of Passengers. Fortuitous Event Public Enemy. Improper Packing. Order of Public Authority Defenses of Carriage of Passengers. Acts of Employees... 3.10. Act of Other Passengers and Third Persons. Passenger’s Baggages... 4.01, “Baggage Defined 4.02, Checked.in Baggage... 4.03. Hand Carried Luggage. Obligations of Shipper, Consignee and Passenger 5.01. Negligence of Shipper or Passenger... 7 118 123 126 128 131 136 137 187 137 140 140 5.02. Payment of Freight... 5.08. Who Will Pay the Freight. 5.04. Time to Pay the Freight. 5.05. Carriers Lien, 5.06. Payment of Demurrage. CHAPTER 3 — EXTRAORDINARY DILIGENCE Rationale How Duty is Complied With 2.01. Duty to Third Person: Effet of Stipulation on Uxtraordinary Diligence Extraordinary Diligence in Carriage by Sea, 4.01. Seaworthiness 4.02, Meaning of Seaworthiness.. 4.08. Cargoworthiness.. 4.04. Proper Manning. 4.05. Adequate Equipment 4.08. Overloading... 4.07. Proper Storage 4.08. Negligence of Captain and Crew... 4.09. Rules on Passenger Safety.. 410. Deviation 4.11, Transshipment Extraordinary Diligence in Carriage by Land. 5.01. Condition of Vehicle 5.02. Pratiie Rate: 5.03. Duty to Inspec. Duty to Inapect in Carriage By Sea. CHAPTER 4 BILL OF LADING AND OTHER FORMALITIES Concepts, Definition Kinds of ill of Lading . Nature of Bll of Lading. When Bifective. Bill of Lading as Contract. 6.01. Parties: wi 154 155 155 197 157 158 159 160 161 161 161 163 163 166 168 169 470 1 11 174 175: 178 179 181 181 182 183, 187 189 189 190 191 191 192PARTI - COMMON CARRIERS Long-distance trade is said to be both a symptom and motor of change.' Quijano De Manila commented that: “historians say that, ‘yuman civilization began with the invention of the wheel. And it can be argued that only when we entered wheel cultare did Philippine Civilization begin. This does not mean that we were uncivilized before; we had a fine culture but it was a pre-wheel culture, With the introduction of the wheel we took a giant step into tool culture, into technology, into urban civilization.” However, as Historian Benito J. Legarda, Jr. observed, the principal mode of transportation for the most part of the Spanish period was by water.‘ For almost the entire period of their colonial, rule, Spanish authorities in the Philippines were not able “to develop the insular transportation system beyond the trails, paths and river routes used by the natives.™ It was only late in the Spanish period when “balance began to tilt toward land transportation with the inauguration of the Manila-Dagupan railroad.” More than a hundred years after the Spanish colonizers left this country, different means of transportation proliferate. We travel by land, water and air. Long-distance trade, through different ‘means of transportation, is commonplace. But as one of the authors noted in an earlier work, every offering of technology brings about ‘causes of discontent and the development of new or improved means of transportation is inevitably coupled with the bane of hazards. It “EM Robert A Short History ofthe Wor, 1998 Ea, p. 79, *Quijano de Manila, A Question of Identity: Bringing Out the Yaviaible Filipino in History, 1996, ‘Benito J. Legarda, Jr, Expanded Research Horizon in Philippine Beonomic History, fom Encuentro, 2008 Ba, p. 18, Ma. Luisa T. Camagay, editor. ‘Arturo G. Corpus, The Colonial Iron Hore, 1999 Bd, p. 14, “Legarda, Jr, oupre2 [ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW is precisely for this reason that special rules are provided for in the New Civil Code. The imposition of a higher degree of care on common carriers “was calculated to protect the passengers from the tragic mishaps that frequently occur in connection with rapid modern transportation. This high standard of care is imperatively demanded by the preciousness of human life and by the consideration that every person must in every way be safeguarded against all injury.” Part I of this work consists of general concepts and basic rules that apply to all types of transportation. Unless otherwise indicated, these concepts and rules apply to transportation by land, water and air. Tho New Civil Code provisions on Common Carriers take center-stage so to speak. Special rules that apply to maritime transportation and transportation by air are separately discussed in Parts II and III. respectively. The duties of common carriers are discussed and analyzed and extended discussions on the duty to exercise extraordinary diligence can be found in Chapter 3. The formalities of the contract of carriage, including the Code of Commerce provisionson bills oflading and New Civil Code provisions on documents of title, were also extensively discussed in Chapter 4. Rules on formalities that apply specifically to transportation by air are discussed in Part III, The last chapter ofthe first part, Chapter 5, discusses matters relating to causes action, conditions precedent in filing cases, statute of limitations, and damages that may recovered {in cases filed against common carriers. Report of the Code Commission, reproduced in Civil Code Reader, 2008, Bd, 682, Carmele V. Sion, Editor CHAPTER 1 GENERAL CONSIDERATIONS 1. DEFINITION OF CONTRACT OF TRANSPORTA- TION. 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. The person who obligates himself to transport the goods or passengers may be a common carrier or a private ear- rier. 2, PARTIES. The parties to a contract of transportation ‘would depend on whether itis for carringe of passengers or carriage of goods. 2.01. CARRIAGE OF PASSENGERS. The parties in a contract of carriage of passengers are the common carrier and the passenger. A passenger is defined as 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 a. Gratuitous or reduced fare. It should be noted in this connection, however, that a passenger is still considered as such (passenger) even if he is being carried gratuitously or under a reduced fare. This is subject to the rule in Article 1768 of the Civil Code which provides that when a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid* b. In Baliwag Transit Corporation v. Court of Appeal,’ a complaint for damages against the petitioner bus company was filed by the injured party (a person of legal age) and his "Jonuaa Vda, De Nucca, tal. v. The Manila Ratiroad Company, No. 31731-R, “anuary 40, 1868, 18 CAR2s 49, 5, ‘S00 Chapter 3. °G.R No. 80447, January 31, 1989, 169 SORA 549. 2‘ ESSENTIALS OF TRANSPORTATION AND PURLIC UTILITIES LAW parents for the injuries that the said injured party sustained in a vehicular accident when he was a passenger in one of the buses of the petitioner. Later, the injured party received payment from the petitioner's insurer and executed a Release of Claim. In due course, the complaint was dismissed because the trial court believed that the execution of the Release of Claim discharged the petitioner and its insurance. Only the parents of the injured passenger appealed. However, the Supreme Court sustained the dismissal, ruling that since the suit was for breach of contract of carriage, the real party-in-interest was the injured passenger because the latter is the contracting party. Hence, his parents cannot maintain an action because they are not real parties-in-interest in an action for breach of contract of carriage. Every action based on contract must be brought by the person whose contractual right has been invaded. 2.02. CARRIAGE OF GOODS. ‘The parties are the shipper and the carrier when the contract is for carriage of ‘oods. The shipper is the person who detivers the goods to the carrier for transportation. The shipper is the person who pays the consideration or on whose behalf payment is made. a. Consignee. The consignee is the person to whom the goods are to be delivered. The consignee may be the shipper himself as in the case where the goods will be delivered to one of the branch offices of the shipper. However, the consignee may be a third person who is not actually a party to the contract. b. When Consignee is bound by Contract. Never theless, there are instances when the third-party consignee is ‘bound by the agreement hetween the shipper and the carrier. For instance, in one case, the Supreme Court ruled that the consignee may be deemed to be bound by the terms and conditions of the bill of lading where it was established that he accepted the same and is trying to enforce the agreement.+ 3. PERFECTION. The Supreme Court has adopted in one case the view that there are two (2) types of contracts of carriage of passengers The first type is the contract to carry, that is, an “vorott Steamhip Corporation v, Court of Appeals ta, No, 122494, Octobor 1, 1998, 297 SCRA 496, 505. "Butish Airways ¥. Court of Appeals, No, 92288, February 8, 1998, 218 SCRA 600, citing Paras, Civil Code Annotated, Vol. Vp. 428. PART I — COMMON PROVISIONS: 5 (Chapter 1 — General Considerations agreement to carry the passenger at some future date. This contract, is consensuel and is therefore perfected by mere consent. The second is the contract of carriage or of common carriage itself which should be considered a real contract for not until the facilities of the carrier are actually used can the earrier be said to have already assumed the obligation of the carrier * a. Perfection of Contract.of Carriage of Goods. With respect to carriage of goods, there imay be @ consensual contract to carry goods whereby the carrier agrees to accept and transport goods at some future date, However, by the act of delivery of the g00ds, that is, “when the goods (are) unconditionally placed in the possession and control of the carrier, and upon their receipt by the carrier for transportation, the contract of carriage [is] perfected.”” b. In British Airways, Inc. v. The Hon. Court of Appeals' the Supreme Court ruled that an action for damages may be sustained for breach of contract to carry. Even if no tickets were issued, a verbal contract to carry is already a binding consensual contract. In the said case, the petitioner repeatedly failed to transport contract workers bound for Jeddah, Saudi Arabia although the costs of airfare tickets were already paid to the petitioner. Confirmed bookings were cancelled without prior notice. Hence, the petitioner was made liable for its breach of obligation to transport the contract workers. 3.01.AIRCRAFT, There is a perfected contract to carry pascengers even if no tickets have been issued to said passengers so long as there was already a meeting of minds with respect to the subject matter and the consideration a. On the other hand, there is a perfected contract of carriage between a passenger and an airline if it can be established that the passenger had checked in at the departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of the aireraft. and that his baggage had already been loaded in the aircraft to be flown with the passenger to his destination.” “rb. "Meuro Ganzon v, Court of Appeals, ea, No. L-48767, May 80,1988, 161 SCRA 646, 650. "GR. No, 92288, February 9, 1998, bi. ‘Korean Airlines Co, Lid. v. Court of Appeals, No. 124061, August 3, 1994, 254 SCRA T7I7, 728,6 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW 3.02, BUSES, JEEPNEYS, AND STREET CARS, With respect to buses, jeepneys, or street cars, the Supreme Court explained in one ease" that once a public utility bus (or jeepney) stops, it is in effect making a continuous offer to bus riders: Hence, it is the duty of the drivers to stop their conveyances for a reasonable length of time in order to afford passengers an ‘opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up of the carrier. Liability of the carrier is already based on contract, It follows that 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 from that point. 8.08 TRAINS, A person who wants to board a train in a railway station must purchase a ticket and must present himself at the proper place and in a proper manner for transportation. Such person must have a bona fide intention ‘to use the facilities of the carrier, possess sufficient fare with ‘which to pay for his passage, and present himself to the carrier for transportation in the place and manner provided. If he doos not do so, he will not be considered a passenger a. Consequently, there was breach of contract of carriage in Light Rail Transit Authority (LRTA), et al. v. ‘Marjorie Navidad, et al. when a certain Nicanor Navidad died after he fell on the LRT tracks and was struck by a moving train which was coming in at the exact moment that Mr. Navidad fell from the platform. Mr. Navidad was treated as a passenger because he entered the LRT station after having purchased a “token” and he fell while he was on the platform waiting for fa train, Thus, Mr. Navidad was in the place designated for boarding the train with the intention of riding the oncoming train, Dangwa Transportation Co, Ine v. Court of Appeals ea, No, 95582, October 7 1991, 202 SCRA 574,580 ‘MJosusa Vda. de Nuoca, foi. v. The Manilar Railroad Company, CA-GR. No, 31781, January 80, 1968, 18 CAR2s 49. "No, 145804, Fabruary 6, 2003, PART I - COMMON PROVISIONS (Chapter 1 — General Considerations PROBLEM: 1. X>brought seven (7) sacks of palay to the PNR. He paid its freight charges and was issued Way Bill no. 1. The cargo ‘was lotded on the freight wagon of the train. Without any permission, X boarded the freight wagon and not the passenger coach. Shortly after the train started, it was derailed, The freight wagon fell on its side, killing X. ‘There is no evidence that X brought a ticket or paid his fare at the same time that he paid the freight charges for his cargo. Is X a passenger of PNR? A: No, X was not a “passenger.” X, who was a “stowaway,” was a mere trespasser. Hence, the carrier assumes no duty of eare in favor of X. (1989) 2. City Railways, Ine. (CRD provides train serviee, for a fee, to commuters from Manila to Calamba, Laguna. Commuters are required to purchase tickets and then proceed to designated loading and unloading facilities to hoard the train, Ricardo Santos purchased a ticket for Calamba and entered the station. While waiting, he had ‘an altercation with the security guards of CRI leading to a fistfight. Ricardo Santos fell on the railway just as a train ‘was entering the station. Ricardo Santos was run over by the train, He died In the action for damages filed by the heirs of Ricardo ‘Santos, CRI interposed luck of eause of action, contending, that the mishap occurred before Ricardo Santos boarded the train and that it was not guilty of negligence. Decide. A; ‘The contention of CRI that the heirs have nocause of action is untenable, There was already a perfected contract to cearry Ricardo Santos and the carrier already owed him extraordinary diligence. The obligation of the carrier to cearry Ricardo Santos to his destination was breached, hhenee, CRI is liable for-culpa-contractual. (2008) 4, COMMON CARRIER. Article 1732 of the Civil Code provides the definition of common carriers, viz.: ARTICLE 1732. Common carriers are persons, cor- porations, firms or associations engaged In the busi ness of carrying or transporting passengers or goods cor both, by land, water, or alr, for compensation, offering their services to the public.5 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW a. It has also been defined as “one that holds itself out as ready to engage in the transportation of goods for hire az a public ‘employment and not as a casual occupation.”* 4.01. PUBLIC SERVICE. The concept of “common carrier” under Article 1732 may be seen to coincide neatly with the notion of “public service,” under the Public Service ‘Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code." Under Section 13, paragraph (b) of the Public Service Act, “public service” includes: «every person that now or hereafter may own, ‘operate, manage, or control In the Philippines, for hire oF compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, rallroad, street rallway, traction rallway, subway motor ‘lther for frelght or passenger, or both, with or without fixed route and whatever may be its classifica tion, freight or carrier service of any class, express ser- vico, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers ‘or freight or both, shipyard, marine repair shop, 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 wire- loss communications systems, wire or wireless broad- casting stations and other simitar public services...” TEST. In First Philippine Industrial Corporation Court of Appeals, the Supreme Court reiterated that the tests for determining whether a party is a common carrier of goods are: (1) Hemust 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 person generally as a business and not as a casual occupation; (2) He must undertake to carry goods of the kind to which his business is confined; "De Gurmen v. Court of Appeals, No. L-47822, December 22, 1988, 168 SCRA "De Guzman v. Court of Appeals, Ibi. 300 SCRA 66 1296}; 1098 Bs PART I ~ COMMON PROVISIONS 9 (Chapter 1 — General Considerations (8) He must undertake to carry by the method by which his business is conducted and over his established roads; and (4) The transportation must be for hire. a, In National Steel Corporation v. Court of Appeals," the Supreme Court reiterated the ruling that the true test of a common carrier is the carriage of goods or passengers, provided it has space for all who opt to avail themselves of its transportation for a fee. b. In Bascos v, Court of Appeals® the Supreme Court explained that the test to determine a common carrier is whether the given undertaking is 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 extent of the business transacted. ¢. TheSupreme Courtruled in Spouses Cruz v. Sun Holidays, Inc.» that the operator of a beach resort that accepts clients by virtue ofa tour package-contracts that inchided 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 50 intertwined with its main business as to be properly considered ancillary thereto, The constancy of respondent's ferry services in its resort operations is underscored hy its having its own boats. And the tour packages it offers, which include the ferry services, may be availed of by anyone who can afford to pay the same. These services are thus available to the public. 6. _ CHARACTERISTICS. The concept of common carriers contemplated under Article 1732 of the Civil Code and the fact that the said concept corresponds to the concept of “public service” under the Public Service Act results in the application of the following rales or principles: (1). Article 1782:makes no distinction between one whose principal business activity is the carrying of persons or goods ‘or both, and one who does such carrying only as an ancillary activity (in local idiom, as “a sideline”) (2) Article 1732 also carefully avoids making any dis- tinction between a person or enterprise offering transportation lo 119087, December 12,1097, 28 SCRA 45,61 GR. No, 101080, Apel 7, 1099, 221 SCRA 318. 8GLR. No. 186312, June 29,2010. De Guaman ¥. Court of Appeals, eupra., at pp. 617-018,10 BSSBNTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis." (8) Article 1732 does not distinguish betwoon a carrier offering its services to the “general public,” i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population.” (4) A person or entity is a common carrier and has the obligations of the common carrier under the Civil Code even if hhe did not secure a Certificate of Public Convenience. (5) ‘The Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. (6) The Civil Code does not provide that the ‘transportation should be by motor vehicle.* (1) A person or entity may be a common carrier even if he has no fixed and publicly known route, maintains no terminals, and issues no tickets. (8) A person or entity need not be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them.” 6.01.BROADER CONCEPT. The above-enumerated characteristies of common carriers derived from case law indi- cate an expanding concept of common carriers. Carriers which are considered common carriers in a number of decisions do not fall neatly into the concept of common carriers contemplated in the test announced in National Steel Corporation v. Court of Appeals. 6.02, ANCILLIARY BUSINESS. Article 1732 makes no distinetion between one whose principal business activity he Gunman: Court of Ape, id 2s Gasman v Gnu of Append "De Gutman Cort ot rea “Pit Pine dunt Carporeton Cour of Appel a, No, 25068, December 29, 1988, 300 SCRA 661. _ " ‘Shit Filpne ltl Corpirton , Cour of Ape Att Lighorge end Shipping, Ie. Court of Appeal na 8 2088 "re Corot pen Ne 11127, July 25, 105,28 SORA 5,8. re ibid, GR No. 147246, 2002. PART I — COMMON PROVISIONS a Chapter 1 — General Considerations is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, fas “a sideline”). Hence, in De Guzman v. Court of Appeals,” private respondent Cendafia was considered a common carrior although his principal business was as a junk dealer. Said respondent was engaged in buying used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which hhe owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to establishments in Pangesinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rrates. Thus, even if the transportation of goods was ancillary to the main business of buying and selling used bottles and scrap metals, the Supreme Court considered the private respondent a common carrier. 6.03, LIMITED CLIENTELE. Although the clientele is limited, the regularity of the activities of a carrier may indicate that the same carrier is a common carrier. ‘a. In’one case, the petitioner, a customs broker and ‘warchouseman, was declared a common carrier although she does not indiscriminately hold her services out to the public but offers the same to select parties with whom she may contract in the conduct of her business. In the said case, petitioner entered into a contract with SMC to transfer paper and kraft board from the Port Area in Manila to SMC’s warchouse in Ermita, Manila, As a common carrier, she is bound to exercise extraordinary diligence in transporting the goods and is presumed to be negligent when she failed to deliver the same.” b. In Phil. American General Insurance Company, et al. v. PKS Shipping Company," respondent PKS Shipping Corporation transported the 78,000 bags of cement of poti- tioner DUMC in a barge. The bags of cement sank together with the barge when the latter was being towed by a tug boat. ‘The Supreme Court declared that PKS was a common carrier Supra ‘eVifeines Calvo v. UCPR General Insurance Co,,G.R, No. 148496, March 19, “iG.R, No, 149058, Apsi 9, 2008,ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW because it was engaged in the business of carrying goods for others for a fee. “The regularity of its activities in the area indicates more than just a casual activity on its part. Neither can the concept of a common carrier change merely because individual contracts are executed or entered into with the patrons of the carrier.” PKS was declared a common carrier although it had a limited clientele. ©. In Asia Lighterage and Shipping, Inc. v. Court of Appeals,® the petitioner was also involved in the business of carrying goods through its barges. It has no fixed and publicly known route, maintains no terminals, and issues no tickets. ‘The Supreme Court still ruled that the petitioner is a common carrier pointing out that the principal business of the petitioner is that of lighterage and drayage and it offers its barges to the public for carrying or transporting by water for compensation, Petitioner was considered a common carrier whether ita business of carrying of goods is done on an irregular basis rather than scheduled manner and with a limited clientele. A common cartier need not have a fixed and publicly known route nor does it have to maintain terminals or issue tickets. £04, MEANS OF TRANSPORATION. The Supreme Court ruled in First Philippine Industrial Corp. v. Court of Appeale» that pipeline operators ate common carriers that ere subject to business taxes on common carriers. Such operators are common carriers even if the oil or petroleum products are being transported not through motor vehicles but through pipelines. The Court used the tests to determine the existence of common carriers enumerated earlier and observed that: “Based on the above definitions and requirements, there is no doubt that petitioner is a common earrier, [tis engaged in the business of transporting or carrying goods, i.e, petroleum produets, for hire as a public emaployment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods ty land and for compensation. The fact that the petitioner has a limited clientele docs not exclude it frome the definition of a common carrier. Supra, Supra PARTI — COMMON PROVISIONS 13 Chapter 1 — General Considerations acta as te “eterna tice wet cit any dene a mar wicean rst ta Sa na en Mt, tat ey Mo coe Pr cea neta aera installations for the transportation of petroleum owned by este ene Se er ig tee tea ate eco inter a olen ‘been approved by the Secretary of Agriculture and Natu- sa 7, EFFECT OF CHARTER PARTY. A charter party may transform a common catvier into a private carrier. However, it mst Loa bercboat or demise charter where the charterer mans the vessel writ his own people and becomes, in ffect, the owner forthe voyAge Jr service stipulated.» The common carrier is not transformed into @ Qrivate earner if the charter party isa contract of affreightment like voyage charter or atime charter." In a voyage charter, the carey is answerable ta the loss of the goods received for transportsticn ‘The Supreme Court gave this explanation in Planters Products, Inc. v. Court of Appeals, et al." ichanentire “Rcharter-party is defined asacontract by Whi ship, or some prinipal part thereof isletby the owner to another econ fora specified time or use; a contract of afreightment By Pevich the owner ofa ship or other vessel lets the whole ora part Miner toa merchant or other person forthe conveyance of goods, cansrarticular voyage, inconeideration ofthe payment of freight —TGaltex (Phin) v, Supleto Lines, 315 SCRA 709 (2980), ‘Landstar Shipping Co, Ine. . Bloneer Asia Insurance Corp onary 206. ; none 208 aa) v- Sulpcio Lines, iid; Contine ighterage Coty conn as te 2 SUE tar ay, Cab Savane Cororation¥ PTDDin® Seer Renee cop 8, No 18003, anaary 25,207 are o15te plese 18, 385,208 5CRA 76, 49-486 GR. No, 187481,“ ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW Charter partios are of to types: (a) contract of affreightment which invelves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others, and (@) charter by demise or bareboat charter, by the terms of which the whole vessel islet to the charterer with a transfer to him of itn entire command and possession and eonsequent control over its navigation, including the miaster and the erev, who are servants. Contract ofaffreightment may either be time charter, ‘wherein the vessel i Tease tothe charterer fora xed period of time, oF voyage charter, whercin the ship is lease fora single voyage. In bath eats, the charter-party provides for th hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to aupply the sh ‘ores, pay for the wayos of the master and the crew, and defray ‘he expenses for the maintenance ofthe ship. Upon the other hand, the tarm ‘common or public carrier” is defined in Art. 1732 of the Civil Code, The definition extends ta carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation, The distinction between a ‘common or public ‘ari’ and a ‘private or special earrier’ lies in the character of the business, such that if the undertaking is a single transaction, not a part of the generah business or occupation, although involving the earriage of goods fora fee, the person at corporation offering such service isa private carrie. Article 1733. of the New Civil Code mandates that ‘common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In. the ease of private carriers, however, the exercise of ordinary diligence in the carriage of goods will sullice. Moreover, ia ease of loss, destruction or deterioraticn of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or Aeterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier, It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V “Sun Plum,” the ship captain, its officers and compliment were under the employ ofthe ehipowner rand therefere continued to be under its direct supervision and control. Hardly then can we charge the chartorer, a stranger to the crew and to the ship, with the duty of earing for his cargo PARTI ~ COMMON PROVISIONS 15 ‘Chapter 1 — General Considerstions when the charterer did not have any control of the means in doing so, This is evident in the present ease considering that te steoring of the ship, the manning ofthe decks, the determination of the course of the voyage and other technical incidents of Shasitime navigation were all consigned to the officers and crew ‘who were screened, chosen and hired by the shipowner. Itis therefore imperative that a publi carrier shall remain tas such, notwithstanding the charter bf the whole or portion of @ ‘Vessel by one or more persons, provided the charter is limited to the ship only, asin the case of a time-charter or vayage-charter. It is only when the charter includes both the vessel and its crew, as ina bareboat oF demise that a common carrier becomes private, at leaet insofar as the particular voyage covering the Sharter-party is concerned, Sndubitably, a shipowner in a time fr voyage charter retains possession and control of the ship, flthough her holds may, for the moment, be the property of the charterer. We quote with approval the observations of Raoul Colinvaui, the learned barrister-at-law — ‘As a matter of principle, it is diffieuit to find a valid distinction between cases in which a chip is used to convey the {goods of one and of several persons, Where the ship herself is let toa charterer, so that he takes over the charge and control of her, the case is different; the shipovner is not then a carrier. But where her services only are let, the some grounds for imposing 2 strict responsibiiity exist, whether he is employed by One oF any. The mastet and the crew are in each case his servants, the freighter in each case is usually without any representative tn board the ship; the same opportunities for fraud or collusion ‘occur; and the same diffcalty in discovering the truth as to what thas taken place arises...” ‘a. A-case usually relied upon in support of the argument that a carrier that is chartered is eonverted into a private carrier ‘Home Insurance Co. v. American Steamship Agencies, Inc* ‘Although the charter party involved in the said case was a contract of affreightment, the Court still ruled that it was a private carrier. However, the ruling in the said case has no doctrinal force because it was explained in the above-quoted Planters Products, Inc. case that the earrier’s heavy reliance on the case of Home Insurance Co. v, American Steamship Agencies, is misplaced for the reason that Wie: 1-25699, April 4, 1968, 28 SCRA 24.16 the meat of the controversy therein was the validity of a stipulation arty exempting the shipowner from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. Moreover, it was pointed out that the rrule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not find application in our jurisdiction, for it was observed that the growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, in the charter. ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW more particularly, the rules governing common carriers. CASES: 1 ‘AM ‘Trucking, a small company, operates two trucks for hire on selective basia, It caters to only a few customers, ‘and its irucks do not make regular or scheduled trips. It does not even have a certificate of public convenience. On ‘one occasion, Reynaldo contracted AM to transport, for a ‘ee, 100 sacks of rice from Manila to Tarlac, However, AM failed to deliver the cargo, because its truck was hijacked when the driver stopped in Bulacan to visit his girlfriend May Reynaldo bold AM as 2 comman carrier? Yes. Reynaldo may be held liable as common carrier Article 1782 of the Civil Code makes no distinction ‘between one whose principal business activity is the ‘carrying of persons or goods or both and one who does such carrying only as an ancillary activity. Article 1732 does not make any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on sn occasional, episodic or unscheduled basis. Neither doos Article 1732 distinguish between a carrier offering its services to the ‘general public, £2. the general community or population, ‘and one who offers services or solicits business only from, 1 narrow segment of the general population. This is also consistent with the definition of publie service under the Public Service Act (De Guzman v. CA, 168 SCRA 612 1988p. On November 12, 1984, Cebu Salvage Corporation (C80) and Maria Cristina Chemicals Industries, Ine. {MCCII) (as charterer) entered into a voyage charter wherein Petitioner was to load 800 to 1,100 metric tons of silica quartz on board the MT Espiritu Santo at Ayungon, Negros Occidental for transport to and discharge at ‘Tagoloan, Misamis Orientai to conshgnee Ferrochrome Phils., Ine, Pursuant to the contract, on December 23, PARTI — COMMON PROVISIONS Chepter 1 — General Considerations sioner retived and loaded 1100 metre tons sae reraen on boed the M/T Expt Santo wish sien tear Togaton the nextday. The shipment to Avungon ( entination, however, beenuse the MT Sere reer sa in the afternoon of December 2, rar the beac of Opal, Migaria Oriental sling oe oi haa erg. MCCIT Sled a claim forthe loss eel lomnt ith ts inure, respondent Pipe of the shipment orportion Respondent pad the cam aoe earereer BETL 200 and was subrogated to the sae SE MCCD Thereafter, fed a ease inthe RTC eee ecTy pambareement of the amount it paid aint CSG cease tat swt able ialtng that the eee ar meray contrat of hire wherein MCT fermen wes te owner, ALS Timber Enterprises (ALS). Not being the owner of the M/T Espiritu Santo, ae neat nat ve contol and superision over the reer ater anderen, Ths it euld not allegedly Tees Meter to oe ofthe tipmentenused by the aaa we up ta nt evn Wil the action prosper? Yes the action wl proaer. Teresa contract of carriage Fen eae CSC tad MCI; the crgo was Todd on ord even on ot nn-lery there s on boar the Vegan fated to prove that i exerci Prove nary diligence to prevent such toe or that it was due to some casualty or force majeure. The voyage Charter here being a contract of affreightment, the carrier hart ere fn th Tos of the goods recived for Tanaporation CHC was th one wish embraced with MOOI a tetpor a the cargo Thad contol over what ve Fal througout its dealings with MCI, 1 trad ital na atcommon cari. ‘The fact that it repre ayn) tdaled to ue toconnamamate the a ced not gate ts character and duties seamen cer, MCL Cerpnaent bE? ‘could not be reasonably expected to inquire about the onli ofthe woul which ptidone enrir ered to aaa actic matter, is very difieult an often te ete th general pole to enforce ta rights of impos fr tec of enriage it ould be ruled acto er ee etal owner othe vse. In fact 1e Gicauethe voyage charter. tal? denominated the petitioner as the “owner/operator” of the vessel. "Te bl of lading was merely a recsptinued by ‘aus cidane tho fo det te gods had bon roclved tee een wos not signed by MCC, a Infact ra18 [BSSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW it was simply signed by the supercargo of ALS. This is consistent with the fact that MCCII did not coatract directly with ALS, While it is true that a bill of lading may serve as the contract of earriage between the parties, it cannot prevail over the express provision of the voyage charter that MCCII and petitioner executed. Finally, petitioner cannot argue that MCI should be held liable for its own loss since the voyage charter stipulated that cargo insurance was for the charterer’s account, This deserves seant consideration. This simply ‘meant that the charierer would talc care of having the goods insured, It could not exculpate the carrier from liability for the breach of its contract of carriage. The law, in fac, prohibits it and condemns it as unjust and contrary +o publie policy. ‘The idea proposed by petitioner is not only preposterous, itis also dangerous. It says that a carrier ‘that enters into a contract of carriage is not liable to the charterer or shipper ifi does not own the vessel it chooses to use, MCCTI never dealt with ALS and yet petitioner insists that MCCH should sue ALS for reimbursement for its loss, Certainly, to permit a common carrier to escape its responsibilty for the goods it agreed to transport (by the expedient of alleging non-ownership of the vessel it employed) would radically derogate from the carrier's duty of extraordinary diligence. It would also open the door to collusion between the earrier and the supposed owner and to the possible shifting of liability from the carrier to one without any financial eapability to answer for the resulting damages (Cebu Salvage Corporation v. Philippine Home Assurance Corp., G.R. No. 150408, January 25, 2007). 8, COMMON CARRIER DISTINGUISHED FROM PRI- VATE CARRIER. The distinction between a “common or public carrier” 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 such service isa private carrier.» For instance, ifa person agrees to carry a person to the airport using his privately-owned car that is meant for personal use, he will be considered a private carrier. ‘SPlantore Product, Ine. v. Court of Appeals, supra.; Philippine American General Insurance Company v. PKS Shipping Company, G.R. Nv. 149098, Apel 9, 2008, 01 SCRA 222,295. PART I ~— COMMON PROVISIONS 19 CChepter 1 — General Considerations a. In National Steel Corporation v. Court of Appeals the vessel involved, the MV Viasons I, rendered tramping services and, as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into fa special contract of charter party with its owner. Consequently, the earrier was considered a private carrier by the Supreme Court explaining that: “Article 1782 of the Civil Code defines a common carrier ‘as “persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.” It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, forall who opt to avail themselves of its transportation service for a fee. A carrier which does not qualify under the above test is deemed a private carrier. "Generally, private carriage is undertaken by special agreement and the carrier ‘does not hold himself out to carry goods for the general public. ‘The most typical, although not the only form of private carriage, js the charter party, a maritime contract by which the charterer, ‘a party other than the shipowner, obtains the use and service ‘of al or some part of a ship for a period of time or a voyage or voyages.” In the instant cage, it is undisputed that VSI did not offer ite services tothe general publi. As found by the Regional Trial : ssengers or goods only for those it chose under 1 “special contract of charter party.” As correctly concluded by ‘the Court of Appedls, the MV Viasons I “was not a common but a private carrier." Consequently, the rights and obligations of VSI fand NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their eontract, of private carriage or charter party. Recently, in Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals and ‘Seven Brothers Shipping Corporation, the Court ruled: sn a contract of private carriage, the parties may freely stipulate their duties and obligations, which perforco would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen ‘or remove the protection given by law in contracts involving TGR No. 112287, December 12, 1907, 289 SCRA 4S.20 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW b. _Ttfollows that while a common carrier is bound to exercise extraordinary diligence, a private carrier owes only diligence of a good father of a family. Moreover, while a common carrier cannot stipulate that it is exempt from liability for the negligence of its agents or employees, a private carrier may validly enter into such stipulation. The stipulation involving a common carrier is void for being contrary to public policy. There is no presumption on the part of the private carrier. He who alleges negligence must prove such negligence. PROBLEM! 1. Titso Molina charters a vessel owned and operated by Star Shipping Co., a common carrier, for the purpose of transporting two tractors to his logging concession. ‘The erane operator of the shipping company somehow negligently puts the tractors in a place where they would tilt each other. During the trip, a strong wind hits the causing severe damage to the tractors. Tirso ‘Molina sues the shipping company for damages. The latter cites a stipulation in the charter agreement exempting the company from liability for loss or damage arising from the negligence ofits agents. Tirso Molina countered by stating that the aforementioned stipulation is against. public policy and therefore, null and void. Is the stipulation valid? Would you hold the shipping company liable? Yes. The stipulation is valid if there was bareboat charter. Acommon carrier that undertakes to carry a special cargo ‘or charter to a special porson only, becomes a private carrier. As a private carrier, a stipulation exempting the ‘owner from liability forthe negligence of its agent is valid, being not against publie policy. Hence, Star Shipping Company is not liable 2. During the elections Iast May, AB, a congressional can- didate in Marinduque, chartered the helicopter owned by Lobe Mining Corporation (LMC) for use in the election campaign. AB paid LMC the same rate normally charged by companies regularly engaged in the plane chartering business, In the charter agreement between LMC and AB, LMC expressly disclaimed any responsibility for the ‘act8 or omissions of its pilot or for the defective condition of the plane's engine. The helicopter erashed iilling AB. Investigations disclose that the pilot's error was the cause of the accident. LMC now consults you on its possible liability for AB's death in the light of the above findings. How would you reply to LMC’s query? i PARTI — COMMON PROVISIONS a Chapter 1 — General Considerations ‘A: would reply to LMC that it may not be held Hable for the death of AB. A stipulation with private carrier that would diselaim’ responsibility for simple negligence of the carzier’s employees is a valid stipulation, Such stipulation, however, will nct held in case of liability for trons negligence or bad faith. 3. C00, shipped 20,000 baga of soy beans through 8 Melon, owned and operated by X Shipping Lines, consigned to the Toyo Factory aud insured by the Surety Tasurance Co, against all risks. C Co. hired the entire vessel, with the option to go north or south, loading, stowing and discharging at its risks and expense. The owner and the shipper agree on a stipulation exempting the owmer from liability for the negligence of its agents When the cargo as delivered tothe consignee, there were shortages amounting to 10,500.00. The insurance company paid forthe damage and sought reimbursement from the X Shipping Lines as carrier. Is the carver liable? A: X Shipping Lines is not liable if there was bareboat charter. X Shipping Lines agreed to carry a special cargo fr chartered to a special person only, becomes a private carrier. Honce, the New Civil Code provisions on common carriers cannot be applied where the carrier is not acting ‘as such but as a private carrier. As a private carrier, a stipulation exempting the ship owner from liability for the negligence ofits agents is not against policy and is deemed valid 9. COMMON CARRIAGE DISTINGUISHED FROM OTHER CONTRACTS. Common carriers that carry or transport ‘goods by sea should be distinguished from those who are engaged in towage and from arrastre operators. 9.01. DISTINGUISHED FROM TOWAGE. In towage, one vessel is hired to bring another vessel to another place. ‘Thus, a tugboat may be hired by a common carrier to bring @ ‘barge to a port. In this case, the operator of the tugboat eannot be considered a common carrier. In maritime law, it refers toa service rendered to a vessel by towing for the mere purpose of expediting her voyage without reference to any circumstances of danger. It is usually confined to vessels that have received no injury or damage. “Blass Law Dietionary, 6th Ba, p. 1287.2 SSSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW a. The party that provides the service in a contract of towage is required to observe the due diligence of a good father of the family. The negligence of the obligor in the performance of the obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care and prudence in the performance of the obligation as the nature of the obligation s0 demands.* b. For instance, the exercise of ordinary prudence by the operator includes the duty to ensure that its tugboat is free of mechanical problems. While adverse weather has always been a real threat to maritime commerce, the least that the operator of a tug boat should do is to ensure that the tugboat would be able to secure the vessel being towed at all times during the engagement. 9.02. DISTINGUISHED FROM ARRASTRE. Arrastre, a Spanish word which refers to hauling of cargo, comprehends the handling of cargo on the wharf or between the establish- tment of the consignee or shipper and the ship's tackle. The responsibility of the arrastre operator lasts until the delivery of the eargo to the consignee. The service is usually performed by longshoremen.* a. The functions ofan arrastve operator usually include the following: (1) to rece've, handle, care for, and deliver all merchandise imported and exported, upon or passing over Government-owned wharves and piers in the port; (2) to record or check all merchandise which may be delivered to said port at shipside, and in general and; (8) to furnish light, and water services and other incidental services in order to undertake its arrastre service." b, Hence, the functions of an arrastre operator have nothing to do with the trade and business of navigation, nor to the use or operation of vessels. Both as to the nature of the Gargoift Shipping, Ine. v. 1. Actuario Marketing Corp. and Skyland Brokerage, ae, GRNo. 145425, June 2, 2006 ‘SCargolif Shipping, nev, Actuorio Marketing Corp. and Skyland Brokerage, Ine, Ii ‘“Mindanco ‘Terminal and Brokerage Servico, Ine. v. Phoonix Assurance Company of Naw YorkiMegoe Co, Tne, .R. No. 162467, May 8, 2008 “eDelgado Brothors, Ine. v. Home Insurance, Ine, No. T-16667, March 27, 196, SCRA 8 “titi Am Jur 564, 568, PARTI — COMMON PROVISIONS 28 Chapter 1 — General Considerations functions and the place of their performance (upon wharves and piers shipside), the arrastre operator's services are clearly not maritime. They are, in fact, no different from those of a depositary or warchouseman. Even if the arrastre service depends on, assists, or furthers maritime transportation, it may bbe deemed merely incidental to its aforementioned functions as arrastre operator and does not, thereby, make the service maritime in character.” The operation of an arrastre operator starts on and its responsibility for the merchandise and goods begins from the time they are placed upon the wharves or piers or delivered along sides of ships ©. In Summa Insurance Corporation v. CA and Port Service Inc. the Supreme Court imposed a higher degree of diligence on the arrastre operator explaining that: “xxx The relationship therefore between the con- signee and the arrastre operator must he examined ‘This relationship much akin to that existing between the consignee or owner of shipped goods and the common ear rier, or that between a depositor and a warehouseman. In the performance af ita obligations, an arrastre operator should observe the same degree of diligence as that required of a common carrier and a warehouseman fs enunciated under Artile 1783 of the Civil Code and Section 3(b) ofthe Warehouse Receipts Law, respectively Being the custodian of tie goods discharged fron Jan arrastre operators duty isto take good care of the goods and to turn them over to the party ‘entitled to their possession. (Emphasis supplied "* 9.03, DISTINGUISHED FROM STEVEDORING. Note further that the common carriers and arrastre operators should be distinguished from persons or entities engaged in stevedoring, The function of stevedores involves the loading and unloading of coastwise vessels calling at the port. a, The word stevedoring originated from the Letin word “stipare,” meaning “to stuff. Stevedoring was derived bid 49329 Phil 214 (1996). “Tia, citing Malayan Insurance Co, Ine. v. Manila Port Services, 138 Phil 69 (3960 "Cebu Arvastre Service v, Collector of Internal Revenue, G.R, No. L-7444, May 30,1956, J Thannapan, Marine Lave, 2007 Raition, p. 185, hereinafter citod as “Than epan.”Pa [ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW directly from Spain and Portugal. It started as a phonetic spelling of Spanish escribador or Portugese estivador which literally means a man who stuffs in the sense of a man who Toads ships." Stevedoring refers to the handling of the cargo in the holds of the vessel or between the ship's tackle and the holds of the vessel. The responsibility of the stevedore ends upon the Toading and stosting of the cargo in the vessel. b. _‘Thediligence required of a stevedore is the diligence ofa good father ofa family." A stevedoreis nots common carrier for it does not transport goods or passongers; itis not akin to a warehouseman for it does not store goods for profit. The loading and stowing of cargoes would not have a far reaching public ramification as that of a common carrier and a warehouseman; the public is adequately protected by our laws on eontract and on quasi-delict, ‘The public policy considerations in legally imposing upon a common carrier of a warchouseman a higher degree of diligence ic not present in a stovodoring outtit which tainly provides borin loading and stowing of eangoe for its dlionts.* 9.04. DISTINGUISHED FROM TRAVEL AGENCY. ‘A travel agency is not a common carrier. In many cases, the object of contractual relation of a person who purchases a ticket through a travel ageney is only the agency's service of arranging and facilitating the booking, ticketing and accommodation in a package tour. In contrast, the object of the contract with a common earrier is transportation, The contract; between the travel agency is a contract of service and not a contract of carriage.» The diligence required of a travel agency 4s nat extraordinary digence but that of a god father ofa family" ""SThannapan, p. 186. Mtndaneo ‘Terminal and Brokerage Service, in. Phoonix Assurance company of New Yor/ege fo, ne supra. "Atindanao Terminal and Brokerage Service, Ie. v. Phoonix Aasurence ‘Company of New Yorkfegee& Ca Ie, supre “hind Terminal and Brokerage Service, tn. . Phonniz Aamurance omy few YoruMegs& On re oe ereouom w The ort of Appeal ea, GR. No, 198984, August 26,209, 409 SCRA 528, 534. a coma iba PARTI — COMMON PROVISIONS 28 Chapter 1 — General Coneiderations 10. TRAMP SERVICE AND LINE SERVICE. Cargo operation may be classified into two types, namely, line service and tramp service ‘a. Republic Act (RA) No. 9515 defines “Line servieo” as the operation ofa common carrier which publicly offers services without Giserimination to any user, has regular ports of call/destination, fined sailing schedules and frequencies and published freight rates and attendant charges and usually carries multiple consignments. Liners earry “general cargoes," meaning whatever is offered is accepted for shipment.» b. On the other hand, RA No. 9515 defines “Tramp service” as the operation of a contract carrier which has no regular and fixed routes and schedules but accepts cargo wherever and whenever the shipper desires, is hired on a contractual basis, or chartered by any one or few shippers under mutually agreed terms and usually carries bulk or broak bulk cargoes. Tramps “offer their capacity for the carriage of bulk eargoos as desired by the shipper, who ordinarily fengages the whole of the ship; each voyage is thus a matter of special arrangement between the shipowner and shipper."* The tramp seeks and usually gets a full cargo loaded by a single shipper and such cargoes are most often in bulk or in standard packages and typically consist of raw materials, fuels and waprocessed foods so vital to the world economy." c. Noticeably, while RA No, 9516 refers to anentity engage in ine Service” as a common carrier, an entity that provides “Tramp Service” is only referred to as a “contract carrier.” Nevertheless, those engaged in “Tramp Service” may also be considered common carriers depending on the circumstances. 11, GOVERNING LAWS, Article 1766 of the Civil Code expresses the primacy of the said Code over the laws that were is foreo prior to its enactment. Article 1766 provides: ARTICLE 1766. In all matters not regulated by this, Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. TSoction HTeh R.A. Act No, 9516. ‘Scrant Gilmore end Chesles L, Black, Jt, The Law of Admiralty, 2nd Baition, 1976 Batten 9. 13, hereinafter refered to ax “Gilmore and Black” “ PROBLE! 1. A, in Manila, shipped on board a vessel of B, chairs to bbe used in the movie house of-consignee C in Cebu, No date for delivery or indemnity for delay was stipulated. ‘The chairs, however, were not claimed promptly by C and vere shipped by mistake back to Manila, where it was discovered and re-shipped to Cebu. By the time the chairs arrived, the date of inauguration of the movie house passed by and it had to be postponed. C brings an action for damages against B claiming loss of profits during the Christmas season when he expected the movie house to be ‘opened. Decide ¢he case with reasons. A: © may sue B for the loss of his profits provided that ample proof thereof are presented in court. The carrier is obligated to transport the goods without delay, The earri is liable if he is guilty of delay in the shipment of cargo, causing damages to the consignee, (1979) 1.04. CONSEQUENCES OF DELAY. Excusable delays in carriage suspend, but do not generally terminate, the contract of carriage, and when the cause is removed, the master must proceed with the voyage and make delivery, During ~~ ira Line v. Court of Appeals, May 27, 1893, 299 SCRA 208. eng Se dissenting opinion in Ten Chiong Sian v, Inchaweti, No, 6082, March 8, 1912, 22 Phil 152,17082 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES Law the detention or delay, the vessel continues to be liable as a common carrier, nota warehouseman, and remains duty bound to exercise extraordinary diligence." If the delay is legally inexcusable, the following consequences results: (1) the earrier isstill able even if naturel disaster cause the damage; (2) the stipulation limiting the linbility of the carrier is inoperative; (8) the carrier is liable for the damages eaused hy the delay; and the consignee may exercise his right to abandon under Article 371 of the Code of Commerce. a. Deviation. ‘The carrier is obligated to follow the ‘usual reasonable commercial or customary route. The carrier will be liable if there is damage because of delay or because of improper deviation. If there is no evidence of the usual route, the route is presumed to be the direct geographical route. However, this may be modified in many eases for navigational or other reasons.* (1) There will be no improper deviation if the voyage is customarily in stages to replenish the ship's fuel. It may be reasonable that a voyage may be in stages to enable a shipowner to start with fuel sufficient for a stage and necessarily involves calling at a port for refueling to kkeep the ship seaworthy. b. _ New Civil Code Provisions on Delay. The provi sions of the Civil Code on Common Carriers expressly provide for certain effeets of delay in transporting goods. Articles 1740 and 1747 provide: ARTICLE 1746. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsiblity. ARTICLE 1747, If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in case of the loss, destruction, or deterioration of the goods. ™70 Am Jar 24 939 ‘Reardon Smith Line La, v. Back Sen and Baltic Insurance Co,, AC 862 (4, 939) "Reardon Smith Line Ltd . Black Sea and Beltc Insurance Co, bid. PART — COMMON PROVISIONS 53 Chapter 2— Obligations of the Pertios ©. Code Of Commerce Provisions on Delay. The Gode of Commerce provisions on Overland Transportation likewise deal with delay on the part ofthe carrier. Articles 370 to 374 of tho Code of Commerce provide: ARTICLE 370. If a period has been fixed for the delivery of the goods, it must be made within such time, and, for failure to do so, the carrier shall pay the indemnity stipulated in the bill of lading, neither the shipper nor the consignee being entitled to anything else. If no indemnity has been stipulated and the delay exceeds the time fixed in the bill of lading, the carrier shall be liable for the damages which the delay may have caused, ARTICLE 371. In case of delay through the fault of the carrier, referred to in the preceding articles, the consignee may leave the goods transported in’ the hands of the former, advising him thereof in writing before their arrival at the point of destination. When this abandonment takes place, the carrier shall pay the full value of the goods as If they had been lost or mis! Ifthe abandonmentis not made, the indemnification for losses and damages by reason of the delay cannot exceed the current price which the goods transported would have had on the day and at the place in which they should have been delivered; this same rule is to be observed in all other cases in which this indemnity may be due. ARTICLE 372. The value of the goods which the carrier must pay In cases of loss or misplacement shall be determined In accordance with that dectared in the bill of lading, the shipper not being allowed to present roof that among the goods declared therein there were articles of greater value and money. Horses, vehicles, vessels, equipment and all other principal and accessory means of transportation shall be ‘especially bound in favor of the shipper, although with respectto railroads sald liability shall be subordinated toESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW the provisions of the laws of concession with respect to the property, and to what this Code established as tothe ‘manner and form of effecting selzures and attachments against said companies. ARTICLE 373. The carrier who makes the delivery of the merchandise to the consignee by virtue of combined agreements or services with other carriers shall assume the obligations of those who preceded him In the conveyance, reserving his right to proceed against the latter if he was not the party directly responsible for the fault which gave rise to the claim of the shipper or consignes The carrier who makes the dolivery shall likewise acquire all the actions and rights of those who preceded him in the conveyance. ‘The shipper and the consignee shall have an im- mediate right of action against the carrier who executed the transportation contract, or against the other carriers who may have received the goods transported without reservation. However, tho reservation made by the latter shall not relieve them from the responsibilities which they ‘may have incurred by their own acts. ARTICLE 374, The consignees to whom the ship- ment was made may not defer the payment of the expenses and transportation charges of the goods they receive after the lapse of twenty-iour hours following thelr delivery; and in caso of delay in this payment, the carrier may demand the judicial sale of the goo transported in an amount necessary to cover the cost of transportation and the expenses incurred. ¢. Right to Abandon. The first paragraph of Article 811 of the Code of Commerce provides that in cases of delay ‘on account of the fault of the carrier, the consignee may leave the goods transported in the hands of the carrier, informing him thereof in writing before the arrival of the same at the point of destination. The currier shall be liable for tho total value of such goods. The foregoing provision “confers upon the consignee an exceptional but limited right to abandon the 1001, 1991, PART I — COMMON PROVISIONS: ca Chapter 2 — 0 goods transported during the period intervening between the moment when the fault of the carrier produces a delay which is the generative cause of action, until the moment just before the arrival of the goods at the place of delivery, by communicating such abandonment to the carrier in writing; and when these conditions do not concur, the refusal to accept cannot be effective."* (1) The Supreme Court observed in one case that such rule in Article 371 of the Code of Commerce that the shipper ean abandon the goods in case of unreasonable delay in delivery in overland transportation, can also be made to apply to marine transportation even if the provision is in the Chapter of the Code of Commerce dealing with overland transportation. (2) Moreover, the Supreme Court ruled that abandonment may also be made by virtue of stipulation ‘or agreement between the parties. The Supreme Court explained in Magellan Mfg. Marketing Corp. v. Court of Appeals: “Now, there is no dispute that private respondents expressly and on their own volition granted petitioner an option with respect to the satisfaction of freightage and demurrage charges. Having given euch option, especially since it was accepted by petitioner, private respondents are estopped from reneging thereon. Petitioner, on its part, was well within its right to exercise eaid option, Private respondents, in giving the option, and petitioner, in exercising that option, are concluded by their respective actions. To allow either of them to unilaterally back out on the offer and on the exercise of the option would be to countenance abuse of rights as an order of the day, doing slenee tothe long entrenched principe of mutuality of contracts. It will be remembered that in overland transporta- tion, an unreasonable delay in the delivery of transported ‘goods is sufficient ground for the abandonment of goods. SFrandaco,rupra., 119, elting Decision of Sup. Ct. of Spuln dated Nov. 16, "Magellan Marketing Mfg. Corp v. Court of Appeals, No, 88529, August 22, 201 SCRA 102, 128, “re ™ ‘bid6 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW By analogy, this can also apply to maritime transporta- ton, Further, with much more reason can petitioner in the {instant case properly abandon the goods, not anly because of the unreasonable delay in its delivery but because of the ‘option which was categorically granted to and exercised by it as a means of settling its liability for the cost and expenses ofreshipment. And, said choice having been duly communicated, the san is binding upon the parties on legal and equitable considerations of estoppel. (Emphasis supplied)” 1.05.RIGHTS OF PASSENGERS IN CASE OF DELAY. The Supreme Court explained in Trans-Asia Shipping Lines, Inc. v. Court of Appeals, et al." that “as to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent.” However, Article 698 of the Code of Commerce specifically provides for such a situation. It reads: ARTICLE 898. in case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. ifthe inter- ruption should be caused by the disability of the vesset and @ passenger should agree to awalt the repairs, he ‘may not ke required to pay any increased price of pas- ‘sage, but his living expenses during the stay shall be for his own account. a, Suppletory Application. Article 698 of the Code of Commerce applies suppletorily pursuant to Article 1766 of the Civil Code. In addition, Article 698 must be reed together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. Consequently, the carrior is liable for any loss or damage, including any pecuniary loss or loss of profit, which ‘the passenger may have suffered by reason thereof" %G, R, No, 118126, March 4, 1906. "id, PART — COMMON PROVISIONS 81 ‘Chapter 2 — Obligation: ofthe Parties b, Effect of Decision of Passenger. In Trans-Asia Shipping Lines, Inc, v. Court of Appeals, et al,® the passenger was not able to recover lost profits which resulted because of his own decision to disombark, In said ease, the plaintiff, a public attorney, boarded a vessel for its voyage from Cebu City to Cagayan de Oro City. The vessel departed at around 11:00 in the evening with only one (1) engine running. After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage to Cagayan de Oro City. The captain acceded to their request and thus the vessel headed back to Cebu City. At Cebu City, the plaintiff together with the other passengers, who requested to be brought back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant. ‘The Supreme Court explained that the carrier would have been liable for loss of income if the plaintiff was unable to report to his office on the day he was supposed to arrive were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not. Consequently, any further delay then in the plaintiffs arrival at the port of destination was caused by his decision to disembark. Had he remained on the first vessel, he would have reached his destination at noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore, would have lost only the salary for half of a day. c. MARINA Regulation. It should be noted in this, connectior. that Memorandum Circular No. 112 issued by the Maritime Industry Authority provides that “in case the vescel is not able to depart on time and the delay is unreasonable, the passenger may opt to have his/her ticket immodiately refunded without any refund service fee from the authorized issuing/ ticketing Office.”* lary wns not even awarded beenuse there was no prof that t was not vecelvad by the plant Section 1.3,58 ESSENTIALS OF TRANSPORTATION AND PUBLIC ‘UTILITIES LAW 1.06. PLACE OF DELIVERY. The goods should be delivered to the consignee in the place agreed upon by the parties, If the specific place or warehouse is designated in the Dill of lading, the goods must be delivered in such place even if itis not the usual place of delivery in the place of destination. ‘The Code of Commerce provisions on Overland Transportation likowise provide: ARTICLE 360. The shipper, without changing the place where the delivery is to be made, may change the consignment of the goods which he delivered to the carrier, provided that at the time of ordering the change of consignee the bill of lading signed by the carrier, if ‘one has been issued, be returned to him, in exchange for another wherein the novation of the contract appears. The expenses which this change of consignment ‘occasions shall be for the account of the shipper. PROBLEM: 1. Ifa shipper, without changing the place of delivery changes the consignment of consignee of the goods (after ‘sald goods had been delivered to the carrier), under what condition will the earrier be required to comply with the new orders of the shipper? ‘A: Article 860 provides that ifthe shipper should change the ‘consignee of the goods without changing their destination, ‘the carrier shall comply with the new order provided the shipper returns to the carrier the bill of lading and ‘a new one is issued showing the novation of the contract. However, all expenses for the change must be paid by the shipper. (1975) 107.70 WHOM DELIVERED. The goods should be delivered to the consignee or any other person to whom the bill of lading was validly transferred or negotiated. “Delivery must generally be made to the owner or consignee or to someone lawfully authorized by him to receive the goods for his account. By issuing a bill of lading, by stipulating delivery to order, the ship becomes bound to deliver only to one who has the order of the shipper; and it is no excuse for delivery to the wrong person rancioes, p10. PARTI ~ COMMON PROVISIONS 59 Chapter 2 — Obligations ofthe Parties that the endorse of the bill is unknown or that he delayed presenting the bill when such delivery is not instrumental in causing the wrong delivery or misleading the ship." The Code of Commerce provides in this connection: ARTICLE 368. The carrier must deliver to the con- signee, without any delay or obstruction, the goods which he may have received, by the mere fact of being named in the bill of lading to receive them; and if he does not do so, he shall be liable for the damages which may be caused thereby. ARTICLE 369. If the consignee cannot be found at the residence indicated in the bill of lading, or if he refuses to pay the transportation charges and expenses, or if he refuses to receive the goods, the municipal judge, where there is none of the first instance, shall provide for their deposit at the disposal of the shipper, this deposit producing all the effects of delivery without Prejudice to third parties with a better right. a. Effect of Negotiable Bill of Lading. It should also be recalled that a negotiable bill of lading is a document of title that may be transferred to a holder for value. In case of such transfer, the carrier is obligated to deliver the goods to the transferee or holder. Tho transferee to whom the bill of lading has been negotiated acquires the direct obligation of the carrier from the time of such negotiation. There is even no need to notify the carrier that there was such a transfor. The pertinent provision of the Civil Code states: Art. 1513.A person to whom a negotiable document of title has been duly negotiated acquires thereby: (1) Such title to the goods as the person negoti- ating the document to him had or had ability to conve toa purchaser In good falth for value and also such title to the goods as the person to whose order the goods wore to be delivered by the terrss of the document had to convey to a purchaser in good faith for 770 kin Jur Ba 946.047,oo ESSENTIALS OF TRANSPORTATION AND PUBLIC OTTLITIES LAW (2) The direct obiigation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if ‘such bailee had contracted directly with him. (n) 1.08, DELAY TO TRANSPORT PASSENGERS. The basie rule that applies to carriage of goods shall also apply to carriage of passengers, that is, the carrier must commence its trip within a reasonable time. A carrier is duty bound to ‘transport the passenger with reasonable dispatch. The carrier shall be made liable when the vessel or vehicle is unreasonably delayed.” a. _Inter-Island Vessels. With respect to inter-island vessels, the Maritime Industry Authority issued Memorandum Circular No. 112 on December 15, 1995” which provides for the following effects of “delayed and unfinished voyage:” Incasethe vessel can notcontinue or complete her voyage for any cause, the carrier is under obfigation to transport the passenger to his/her destination at the ‘expense of the carrier including free meals and todging before the sald passenger is transported to his/her destination. A passenger may opt to have his/her th refunded in full if the cause of the unfinished voyage is due to the negligence of the carrier, or, to an amount that will suffice to defray transportation cost at the shortest possible route towards his/her destination If the cause fof the unfinished voyage is a fortuitous event. 3.2. The carrier shall provide meals, free of charge, during mealtime in case the vessel is delayed the arrival at the port of destination. 3.3. In case of delay in the departure at the port of origin due to the carrier's negligence, the carrier is also under the obligation to provide meals, free of charge, during meal time to ticketed passengers for the particular voyage. ifthe cause of the delay is a fortuitous event, the carrier is under no obligation to serve free meals to the passengers. Fro Am Farad 874. Published in © newspaper of general circulation on December 16, 1996 and submitted to the UP. Law Conter on December 20,1996. PART I — COMMON PROVISIONS. 2 Chapter 2— Obligations of the Parties 3.4. The cartier is under obligation to duly inform the passengers of the change in salling schedule of the vessel(s). 2 DUTY TO EXERCISE EXTRAORDINARY DILI- GENCE. A common carrier is requiréd to faithfully comply with his obligation to deliver the goods and to ferry the passenger to the point of destination. Compliance with this obligation must be with the element of integrity in the sense that the goods should be deliv- ered in the same condition that they were received and to transport passengers without encountering any harm or loss. In the exercise of this obligation, the common carrier is obligated to exercise ox- traordinary diligence by Ailes 1788 and 1755 of the Civil Code which provide: ARTICLE 1733. Common carriers, from the nature of their business and for reasons of public policy, aro bound to observe extraordinary diligence inthe vigilance over the goods and for the safety of the passengers transported by them, according to all 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 of the passengers is further set forth in Articles 1755 and 1756. ARTICLE 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. a The manner of exercising extraordinary diligence is discussed extensively in the next chapter, Chapter 3. This section will just focus on basie rules concerning the duty of care imposed on the carrier. 2.01. CODE OF COMMERCE PROVISIONS. Related provisions of the Code of Commerce” as modified by the above- ‘quoted Civil Code provisions are as follows:@ [ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW ARTICLE 363. Outside of the cases mentioned in the second paragraph of Article 361, the carrier shalt be obliged to deliver the goods shipped in the same condition in which, according to the hill of lading, they were found at the time they were received, without any damage or impairment, and failing to do so, to pay the value which those not delivered may have at the point and at the time at which their delivery should have been made. If those not delivered form part of the goods transported, the consignee may refuse to receive the latter, when he proves that he cannot make use of them independently of the others. ARTICLE 364. if tho offect of the damage referred to in Article 361 is merely a diminution in the value of the goods, the obligation of the carrier shall be reduced to the payment of the amount which, in the judgment of experts, constitutes such difference in value. ARTICLE 365. If, in consequence of the damage, the goods are rendered useless for sale and consumption for the purposes for which they are properly destined, the consignee shall not be bound to receive them, and he may have them in the hands of the carrier, demanding of the latter thelr value at the current price on that day. If among the damaged goods there should be ‘some pieces in good condition and without any defect, the foregoing provision shall be applicable with respect to those damaged and the consignee shall receive those which are sound, this segregation to be made by distinct and separate pieces and without dividing a single ‘object, unless the consignee proves the impossibility of ‘conveniently making use of them in this form. ‘The same rule shall be applied to merchandise in hales or packages, separating those parcels which appear sound. PROBLEMS: 1. Maria boarded a passenger truck owned by Metro Transit, ‘and driven by Juan. While the truck was proceeding to its| destination, it fell into a ravine and several passengers, PARTI — COMMON PROVISIONS 6 Chapter 2 — Obligations of the Parties including Maria were killed. The truck was insured under # Common Carrier's policy with Island Insurance ‘Company. State the liabilities if any, of Metro Transit to the heirs of Maria. A: Metro Transit is liable to the heirs of Maria for breach of contract of carriage. It is clear that there was breach of contract of carriage because the passenger died while riding the earrier. The fact that death or injury was caused ives rise to the presumption of nogligence. (1968) ‘A shipped 100 pieces of plywood from Davao City to Manila. He took marine insurance policy to insure the shipment against loss or damage due Co ‘perils ofthe sea, harratry, fie, jettison, pirates and other such perils When the ship left the port of Davao, the shipman in charge forgot to secure one ofthe portholes, thra which sea water seeped during the voyage, damaging the plywood. A filed a claim agatnst the insurance company which refused to pay on the ground that the loss or damage was: due to a peril of the sea or any of the riske covered by the policy. It was admitted that the sea was reasonably calm during the voyage and that no strong winds or waves ‘were encountered by the vessel. How would you decide the cease? Explain. ‘A: ‘The insurer validly refused to pay because the proximate cause of the damage to the plywood was not the perils or risks insured against but rather the nogligence of the shipman in charge in forgetting to secure one of the portholes of the ship. However, A can recover his damages from the shipowner or ship agent of said vessel, for not having exercised extraordinary diligence on vigilance over goods. (1983) 2.02. PRESUMPTION OF NEGLIGENCE, In case of loss of effects or cargo or passengers or death or injuries to passengers, the common carrier is presumed to be at fault or have acted negligently unless he had observed extraordinary diligence in the vigilance thereof The court need not make ‘an express finding of fault or negligence of common carriers, the law imposes liability upon common carriers, as long as it, signal Contato Lines (RCL of Singapore v The Nethstande Insurance Co,, (Philippines Sacer] GR. No. 166640, July 31, 2009; Aboitiz Shipping Co. v. New India Assurance Gompany, Lid Gat No, 1odT4 May 2 2008 Tne, LR, No, 161, Sptersber 4, 2000; Mariano, de. v. Cal6 ESSENTIALS OF TRANSPORTATION AND PUBLIC ‘UTILITIES LAW 4s chown that: (1) there exist a contract between the passenger or the shipper and the common carrier; and (2) that the loss, deterioration, injury or death took place during the existence of ‘the contract. The Civil Code provide ARTICLE 1738. In all cases other than those men- tioned in Nos. 1, 2, 3, 4, and 5 of the precading article, If the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to han acted negligently, unless they prove that they observed extraordinary diligence as required In Article 1733. ARTICLE 1756. In case of death of or injuries to passengers, common carrlers are presumed to. have been at fault or to have acted negligently, unless they prove that they observed extraordinary dillgence as pre- scribed in Articles 1733 and 1755. a. Mere proof of delivery of the goods in good order to a common carrier and their arrival in bad order at their destina- tion (or failure to transport the passenger safely) constitutes a prima facie case of fault or negligence against the carrier. Ifno ‘adequate explanation is given as to how the deterioration, loss, ‘or destruction of the goods happened, the transporter shall be held responsible. b, Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier, This statutory presumption may only be overcome by evidence that the carrier exercised ex- ‘traordinary diligence.* ¢. The presumption of negligence was rebutted by the common carrier in Mariano Jr, v, Calleja® when it was estab- lished that the accident was solely eaused by the negligence of the other vehicle that was involved in the collision. The evi- dence in the case shows that before the collision, the passenger bus was cruising on its rightful lane along the Aguinaldo High- way when the trailer truck coming from the opposite direction, on full speed, suddenly swerved and encroached on its lane, “Bilgian, Oversees Chartering ad Shipping, N.Y, v. Phil Firat Int. Co, No. 1143138, June 5, 2002. “CVietory Liner, ne . Gammad, G-R, No. 189638, Noversber 25,2004 “O.R, No. 166840, July 83, 2000, PARTI — COMMON PROVISIONS 6 Chapter 2 — Obligations of the Perties and bumped the passenger bus on its left middle portion. The driver of the bus had every right to expect that the trailer truck coming from the opposite direction would stay on its proper lane. He was not expected to know that the trailer truck had lost its brakes. The swerving of the trailer truck was abrupt and it was running on a fast speed as it was found 500 meters away from the point of collision. Any doubt as to the culpabil: ity ofthe driver of the trailer truck likewise vanished when he pleaded guilty to the charge of reckless imprudence resulting ‘to multiple slight physica! injuries and damage to property in ‘criminal case involving the same incident. PROBLEMS: 1. Peter hailed taxicab owned and operated by Jimmy ‘Cheng and driven by Hamio Cortes. Poter asked Cortez to take him to his office in Malate. On the way to Malate, the taxicab collided with a passenger jeepney, as a result of which Peter was injured, i, he fractured his left leg. Peter sued Jimmy for damages, based upon a contract of ‘carriage, and Peter won. Jirnmy wanted to challenge the decision before the Supreme Court on the ground that the ‘rial court erred in not making an express finding 2s to whether or not Jimmy was reaponsible for the collision and, heneo, civilly liable to Peter, He went to see you for advice, What will you tell him? Explain your answer. ‘A: I will counsel Jimmy to desist from challenging the decision, The eause of action of Peter is culpa contractual, hhence, the carrier's negligence is presumed. The pre- sumption arises because there is no question that there ‘was a contract of carriage between Peter and the carrier and Peter was injured while under the care of the said carrier. Consequently, the burden of proof rests on Jimmy to establish that despite an exercise of utmost diligence the collision could not have been avoided. (1990) 2, _Inan action grounded on the contract of carriage, ia thore ‘8 need for the court to make an express finding of fault ‘or negligence on the part of the carrier in order to hold it liable for claims in behalf of the injured or deceased passengers? Explain, A: No, common earriors are presumed to have been at fault ‘or to have acted negligently in the case of desth or injuries ‘to passengers, The burden is upon the carrier to prove that he observed the utmost diligence of a very cautious person, with due regard forall circumstances. (1982)CASE: ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW In a court case involving claims for damages arising from death and injury of bus passengers, counsel for the bus operator files a detqurrer to evidence arguing that the complaint should be dismissed because the plaintiffs did not submit any evidence that the operator oritsempoyees were negligent. IF you were the judge, would you dismiss the complaint? No, I will not dismiss the complaint provided that there ‘was proof of the death of and/or injury to passengers. ‘Nogligence on the part of the carrier is presumed the moment tho passenger with whom the carrier had a contract is injured. The burden is on the common carrier to prove that he has a valid defense. (1997) Plaintiff alleges that he is the owner and consignee of too cases of books, shipped in good order and condi at New York, U.S.A. on board the defendant’ steams! President Garfield, or transport and. delivery to the plaintiff in the City of Manila, all freight charges paid ‘The two cases arrived in Manila on September 1, 1827, in bad order and damaged condition resulting inthe total loss of one case and a partial loss of the other. The loss in one case ia P1,680, and the other P700, fir which he fled his claims, and defendant has refused and noglectod to pay, giving as its reason that the damage in question ‘was caused by sea water.” Is the defendant liable to the plaintiff? Yes, the defendant ia liable. The defendant having received the two boxes in good condition, ils legal duty ‘was to deliv them tothe plaintiff in the same condition in which it received them. From the time oftheir delivery to the defendant in New York until they are delivered 10 the plaintiff in Manite, che boxes were Under the control and supervision ofthe defendant and beyond the contro ofthe plaintif. The defendant having admitted that the boxes were damaged while in transit and in ts possession, the burden of proof then shifted, and it devolved upon the defendant to both allege and prove was caused by reason of some fact which exempted it from liability. As to how the boxes were damaged, when or where, was a matter peculiarly and oxclusively within the knowledge of the defendant and in the Very nature of things could not be in the knowledge of the plainti. ‘To require the plaintiff to prove as to when and how the damage was caused would force him to call and rely upan PART I — COMMON PROVISIONS Chapter 2 ~ Obligations ofthe Parties the employees ofthe defendant's ship, which in legal effect ‘would be to say that he could not recover any damage for any reason. That is not the Jaw. ‘Shippers who are forced to ship goods on an ocean liner or any other ship have some logal rights, and when foods are delivered on board ship in good order and condition, and the shipowner delivers them to the shipper in bad otder and condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by the reason of aome fact whieh legally exempts hhim from liability; otherwise, the shipper would be lef. without any redress, no matter what may have caused the damage. ‘And the evidence for the defendant shows that the damage was largely caused by “sea water,” from which it contends that itis exempt under the provisions of its bill of lading and the provisions of the Article 361 of the Code of Commerce, In the final analysis, the cases were received by the defendant in New York in good order and condition, and when they arrived in Manila, they ware in bad condition, ‘and one Wax 9 total loss. The fact that the cases were damaged by “sea water,” standing alone and within itself, is not evidence that they were damaged by force majeure or for a cause beyond the defendant's control. The words “perils ofthe sea,” as stated in defendant's brief apply toll kinds of marine casualties, such as shipwreck, foundering, stranding,” and among other things, itis said: “Tempest, rocks, shoals, icebergs and other obstacles are within the expression,” and “where the peril is the proximate cause of the lose, the shipowner is excused,” “Something fortuitous and out of the ordinary course is involved in both words ‘peril’ or ‘aceident."* (Amado Mirasol v. The Robert Dollar Co., GR. No. L-29721, March 27, 1929) 67 2.03.DURATION OF DUTY IN CARRIAGE OF GOODS. The New Civil Code is explicit when it comes to the duration of extraordinary responsibility with respect to goods. Duo diligence should be exercised the moment the goods are delivered to the carrier. Avticles 1736, 1737 and 1738 of the Civil Code provide: ARTICLE 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed In the possession of, and