1..G.R. No.

115381 December 23, 1994
KILUSANG MAYO UNO LABOR CENTER, petitioner,
vs.
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION
FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL
BUS OPERATORS ASSOCIATION OF THE
PHILIPPINES, respondents.
private respondent Provincial Bus Operators Association of
the Philippines, Inc. (PBOAP) filed an application for fare rate
increase. An across-the-board increase of eight and a half
centavos (P0.085) per kilometer
private respondent PBOAP reduced its applied proposed fare
to an across-the-board increase of six and a half (P0.065)
centavos per kilometer for ordinary buses. The decrease was
due to the drop in the expected price of diesel.

On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos,
issued Memorandum Circular
LTFRB Chairman, Remedios A.S. Fernando allowing
provincial bus operators to charge passengers rates
within a range of 15% above and 15% below the LTFRB
official rate   (ii)Entry Into and Exit Out of the Industry and (ii) Rate and
Finding the implementation of the fare range scheme "not
legally feasible,"  policy of the DOTC allowing provincial bus operators to
petition for certiorari assails the constitutionality and validity of
certain memoranda, circulars and/or orders of the Department
of Transportation and Communications (DOTC) and the Land
Transportation Franchising and Regulatory Board
LTFRB)  LTFRB fares in the wake of the devastation, death
2
issued a memorandum to the Acting Chairman of the LTFRB
suggesting swift action on the adoption of rules and
procedures to implement above-quoted Department Order
No. 92-587 that laid down deregulation and other
liberalization policies for the transport sector
Fare Setting, with comments and suggestions from the World
Bank incorporated therein.
private respondent PBOAP, availing itself of the deregulation
collect plus 20% and minus 25% of the prescribed fare
without first having filed a petition for the purpose and
without the benefit of a public hearing, announced a fare
increase of twenty (20%) percent of the existing fares. S
petitioner KMU filed a petition before the LTFRB opposing the
upward adjustment of bus fares.

and suffering caused by the July 16 earthquake will not be
socially warranted and will be politically unsound;  order enjoining, prohibiting and preventing respondents from
(a) authorize provincial bus and jeepney operators to increase
or decrease the prescribed transportation fares without
application therefor with the LTFRB and without hearing and
approval thereof by said agency in violation of Public
Service Act And LTFRB's duty to fix and determine just and
reasonable fares by delegating that function to bus operators.
(b) establish a presumption of public need in favor of
applicants for certificates of public convenience (CPC) and
place on the oppositor the burden of proving that there is no
need for the proposed service, in patent violation not only
Sec. 16(c) of CA 146, as amended, but also of Sec. 20(a) of
the same
Act mandating that fares should be "just and reasonable." It
is, likewise, violative of the Rules of Court which places upon
each party the burden to prove his own affirmative allegations
Public Service Act prescribes
(a) the rates to be approved should be proposed by public
service operators; (b) there should be a publication and notice demands
to concerned or affected parties in the territory affected; (c) a
public hearing should be held for the fixing of the rates;
===Court, on June 20, 1994, issued a temporary restraining
implementing the bus fare rate increase 
PBOAP, It asserts that the petitioner has no legal standing to
sue or has no real interest in the case at bench and in
obtaining the reliefs prayed for.
Office of the Solicitor General, public respondents DOTC
Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate
that the petitioner does not have the standing to maintain the
instant suit. They further claim that it is within DOTC and
LTFRB's authority to set a fare range scheme and establish a
presumption of public need in applications for certificates of
public convenience.
Held: petition impressed with merit.
KMU members, who avail of the use of buses, trains and
jeepneys everyday, are directly affected by the burdensome
cost of arbitrary increase in passenger fares. They are part of
the millions of commuters who comprise the riding public.
Certainly, their rights must be protected, not neglected nor
ignored.
"the transcendental importance to the public of these cases
 
Section 16(c) of the Public Service Act, as amended, reads:

Sec. 16. Proceedings of the Commission,

upon notice and hearing. — The Commission
 shall have power, upon proper notice and
hearing in accordance with the rules and
provisions of this Act, subject to the limitations
and exceptions mentioned and saving
provisions to the contrary:
xxx xxx xxx
(c) To fix and determine individual or joint
rates, tolls, charges,
Such delegation of legislative power to an administrative
agency is permitted in order to adapt to the increasing
complexity of modern life. As subjects for governmental
regulation multiply, so does the difficulty of administering the
laws. Hence, specialization even in legislation has become
necessary. Given the task of determining sensitive and
delicate matters as
route-fixing and rate-making for the transport sector, the
responsible regulatory body is entrusted with the power of
subordinate legislation.
 the authority given by the LTFRB to the provincial bus
operators to set a fare range over and above the authorized
existing fare, is illegal and invalid as it is tantamount to an
undue delegation of legislative authority. Potestas delegata
non delegari potest. What has been delegated cannot be
delegated
A further delegation of such power would indeed constitute a
negation of the duty in violation of the trust reposed in the
delegate mandated to discharge it directly.  The policy of
11
allowing the provincial bus operators to change and increase
their fares at will would result not only to a chaotic situation
but to an anarchic state of affairs. This would leave the riding
public at the mercy of transport operators who may increase
fares every hour, every day, every month or every year,
whenever it pleases them or whenever they deem it
"necessary" to do so. 
onsequence of the deregulation of transport fares is
a compounded fare. If transport operators will be authorized
to impose and collect an additional amount equivalent to 20%
over and above the authorized fare over a period of time, this
will unduly prejudice a commuter who will be made to pay a
fare that has been computed in a manner similar to those of
compounded bank interest rates.
To do away with such a procedure and allow just one party,
an interested party at that, to determine what the rate should
be, will undermine the right of the other parties to due
process. The purpose of a hearing is precisely to determine
what a just and reasonable rate is.  Discarding such
15
procedural and constitutional right is certainly inimical to our
fundamental law and to public interest.
On the presumption of public need. A certificate of public
convenience (CPC) is an authorization granted by the
LTFRB for the operation of land transportation services for
public use as required by law. 
Section 16(a) of the Public Service Act, as amended, the
following requirements must be met before a CPC may be
granted, to wit:
(i) the applicant must be a citizen of the Philippines, or a
corporation or co-partnership, association or joint-stock
company constituted and organized under the laws of the
Philippines, at least 60 per centum of its stock or paid-up
capital must belong entirely to citizens of the Philippines;
(ii) the applicant must be financially capable of undertaking
the proposed service and meeting the responsibilities incident
to its operation; and
(iii) the applicant must prove that the operation of the public
service proposed and the authorization to do business will
promote the public interest in a proper and suitable
manner. It is understood that there must be proper notice and
hearing before the PSC can exercise its power to issue a
CPC.
The issuance of a Certificate of Public Convenience is
determined by public need. The presumption of public need
for a service shall be deemed in favor of the applicant, while
the burden of proving that there is no need for the proposed
service shall be the oppositor's. (Emphasis ours)
The above-quoted provision is entirely incompatible and
inconsistent with Section 16(c)(iii) of the Public Service Act
which requires that before a CPC will be issued, the applicant
must prove by proper notice and hearing that the operation of
the public service proposed will promote public interest in a
proper and suitable manner. On the contrary, the policy
guideline states that the presumption of public need for a
public service shall be deeme
n question would in effect amend the Rules of Court by
adding another disputable presumption in the enumeration of
37 presumptions under Rule 131, Section 5 of the Rules of
Court. Such usurpation of this Court's authority cannot be
countenanced as only this Court is mandated by law to
promulgate rules concerning pleading, practice and
procedure.
Advocacy of liberalized franchising and regulatory process is
tantamount to an abdication by the government of its inherent
right to exercise police power, that is, the right of government
to regulate public utilities for protection of the public and the
utilities themselves.
While we recognize the authority of the DOTC and the LTFRB
to issue administrative orders to regulate the transport sector,
we find that they committed grave abuse of discretion in
issuing DOTC Department Orde
twenty (20%) per centum fare increase imposed by
respondent PBOAP on March 16, 1994 without the benefit of
a petition and a public hearing is null and void and of no force
and effect.  DEPARTMENT; HON. ENRIQUE MEDINA, PSC
WHEREFORE, in view of the foregoing, the instant petition is
hereby GRANTED
The 20th century ushered in the birth and growth of public
utility regulation in the country. After the Americans
introduced public utility regulation at the turn of the century,
various regulatory bodies were created. They were the
COASTWISE RATE COMMISSION UNDER ACT No. 520
passed by the Philippine Commission on November 17, 1902;
the Board of Rate Regulation under Act No. 1779 dated
October 12, 1907; the Board of Public Utility Commission
under Act No. 2307 dated December 19, 1913; and the Public PASSENGER BUSES AND JEEPNEYS
Utility Commission under Act No. 3108 dated March 19, 1923.
During the Commonwealth period, the National Assembly
passed a more comprehensive public utility law. This was
Commonwealth Act No. 146, as amended or the Public
Service A2ct, as amended. Said law created a regulatory and
franchising body known as the Public Service Commission
(PSC). The Commission (PSC) existed for thirty-six (36)
years from 1936 up to 1972.
On September 24, 1972, Presidential Decree No. 1 was
issued and declared "part of the law of the land." The same
effected a major revamp of the executive department. Under
Article III, Part X of P.D. No. 1, the Public Service
Commission (PSC) was abolished and replaced by three (3)
specialized regulatory boards. These were the Board of
Transportation, the Board of Communications, and the Board
of Power and Waterworks.
The Board of Transportation (BOT) lasted for thirteen (13)
years. On March 20, 1985, Executive Order No. 1011 was
issued abolishing the Board of Transportation and the Bureau
of Land Transportation. Their powers and functions were
merged into the Land Transportation Commission (LTC).
Two (2) years later, LTC was abolished by Executive Order
Nos. 125 dated January 30, 1987 and 125-A dated April 13,
1987 which reorganized the Department of Transportation
and Communications. On June 19, 1987, the Land
Transportation Franchising and Regulatory Board (LTFRB)
was created by Executive Order No. 202. The LTFRB,
successor of LTC, is the existing franchising and regulatory
body for overland transportation today.
2.. G.R. No. L-22545      November 28, 1969
BALDOMERO S. LUQUE AND OTHER PASSENGERS
FROM THE PROVINCE OF CAVITE AND BATANGAS;
AND PUBLIC SERVICE OPERATORS FILOMENA
ABALOS, AND OTHERS, petitioners,
vs.
HON. ANTONIO J. VILLEGAS, MAYOR OF MANILA;
MUNICIPAL BOARD OF MANILA; MANILA POLICE
COMMISSIONER; PUBLIC SERVICE COMMISSION;
SAULOG TRANSIT, INC.; AND BATANGAS
TRANSPORTATION CO., INC., respondents.
Original petitioners are passengers from the provinces of
Cavite and Batangas who ride on buses plying along the
routes between the said provinces and Manila. Other
petitioners are public service operators operating PUB and
PUJ public service vehicles from the provinces with terminals
in Manila, while the rest are those allegedly operating PUB,
PUJ or AC motor vehicles operating within Manila and
suburbs.
ORDINANCE 4986
RULE II. ENTRY POINTS AND ROUTES OF PROVINCIAL
1. Provincial passenger buses and jeepneys (PUB and PUJ)
shall be allowed to enter Manila, but only through the
following entry points and routes, from 6:30 A.M. to 8:30 P.M.
every day except Sundays and holidays:
All such public utility vehicles authorized by this Order to
enter the City of Manila and to carry their passengers thru the
boundary line, are not permitted to load or unload or to pick
and/or drop passengers along the way, but must do so only in
the following places:
xxx      xxx      xxx
c. Vehicles coming from the SOUTH may load or unload at
the San Andres-Taft Rotonda; at Plaza Lawton or at the
Corner of Harrison and Mabini Streets near the Manila Zoo.
Commissioner issued Administrative Order No. 3 which
resolved motions for reconsideration (of the first
administrative order — Administrative Order No. 1, series of
1964) filed by several affected operators. This order (No. 3),
amongst others, states that only 10% of the provincial buses
and jeepneys shall be allowed to enter Manila; 
On the main, nothing new there is in the present petition.
certiorari and mandamus For, the validity of Ordinance 4986
and the Commissioner's Administrative Order No. 1, series of
1964, here challenged, has separately passed judicial tests in
two cases brought before this Court.
 Lagman vs. City of Manila (June 30, 1966), 17 SCRA 579,
petitioner Lagman was an operator of PU auto trucks
that said ordinance was unconstitutional, illegal, ultra
vires and null and void. He alleged, amongst others, that
(1) "the power conferred upon respondent City of Manila,
under said Section 18 (hh) of Republic Act No. 409, as
amended, does not include the right to enact an ordinance
such as the one in question, which has the effect of amending
or modifying a certificate of public convenience granted by the
Public Service Commission, because any amendment or
modification of said certificate is solely vested by law in the
latter governmental agency, and only after notice and hearing
(Sec. 16 [m], Public Service Act); but since this procedure
was not adopted or followed by respondents in enacting the
disputed ordinance, the same is likewise illegal and null and
void";
(2) "the enforcement of said ordinance is arbitrary, oppressive there is the validity of the Commissioner's Administrative
and unreasonable because the city streets from which he had Order No. 1, series of 1964, also disputed herein. It was there
been prevented to operate his buses are the cream of his
business"; and
(3) "even assuming that Ordinance No. 4986 is valid, it is only
the Public Service Commission which can require compliance
with its provisions (Sec. 17[j], Public Service Act), but since its
implementation is without the sanction or approval of the
Commission, its enforcement is also unauthorized and
illegal." This Court, in a decision impressive because of its
unanimity, upheld the ordinance. Speaking through Mr.
Justice J.B.L. Reyes, we ruled:
===HELD::as correctly maintained by respondents, Republic
Act No. 409, as amended, otherwise known as the Revised
Charter of the City of Manila, is a special law and of later
enactment than Commonwealth Act No. 548 and the Public
Service Law (Commonwealth Act No. 146, as amended), so
that even if conflict exists between the provisions of the
former act and the latter acts, Republic Act No. 409 should
prevail over both Commonwealth Acts Nos. 548 and 146
duties imposed upon it thereby, or by
the provisions of its own charter,
whether obtained under any general
or special law of the Philippines."
e second case for certiorari and prohibition, filed by same
petitioner in the first case just mentioned, is entitled "Lagman
vs. Medina" (December 24, 1968), 26 SCRA 442. Put at issue
alleged, inter alia, that "the provisions of the bus ban had not
been incorporated into his certificate of public convenience";
"to be applicable to a grantee of such certificate subsequently
to the issuance of the order establishing the ban, there should
be a decision, not merely by the Commissioner, but, also, by
the PSC, rendered after due notice and hearing, based upon
material changes in the facts and circumstances under which
the certificate had been granted"; and "the ban is unfair,
unreasonable and oppressive." We dismissed this petition
and upheld the validity of the questioned order of the
Commissioner. On the aforequoted issues, Chief Justice
Roberto Concepcion, speaking for an equally unanimous
Court, said —
Petitioners' other gripe against Ordinance 4986 is that it
destroys vested rights of petitioning public services to operate
inside Manila and to proceed to their respective terminals
located in the City. They would want likewise to nullify said
ordinance upon the averment that it impairs the vested rights
of petitioning bus passengers to be transported directly to
downtown Manila.

Contending that they possess valid and subsisting

certificates of public convenience, the petitioning public
services aver that they acquired a vested right to operate
repugnancy between a general and a special law or provision, their public utility vehicles to and from Manila as
the latter will control the former without regard to the appearing in their said respective certificates of public
respective dates of passage convenience.

That the powers conferred by law upon the Public

Service Commission were not designed to deny or
supersede the regulatory power of local governments
over motor traffic, in the streets subject to their control
is made evident by section 17 (j) of the Public Service
Act (Commonwealth Act No. 146) that provides as
follows:
"SEC. 17. Proceedings of Commission
without previous hearing. — The Commission
shall have power, without previous hearing,
subject to established limitations and
exceptions, and saving provisions to the
contrary:
xxx      xxx      xxx.
(j) To require any public service to
comply with the laws of the
Philippines, and with any provincial
resolution or municipal ordinance
relating thereto, and to conform to the
We need but add that the Public Service Commission, a
government agency vested by law with "jurisdiction,
supervision, and control over all public services and their
franchises, equipment, and other properties"12 is empowered,
upon proper notice and hearing, amongst others: (
1) "[t]o amend, modify or revoke at any time a certificate
issued under the provisions of this Act [Commonwealth Act
146, as amended], whenever the facts and circumstances on
the strength of which said certificate was issued have been
misrepresented or materially changed"; 13 and
(2) "[t]o suspend or revoke any certificate issued under the
provisions of this Act whenever the holder thereof has
violated or wilfully and contumaciously refused to comply with
any order, rule or regulation of the Commission or any
provision of this Act: Provided, That the Commission, for good
cause, may prior to the hearing suspend for a period not to
exceed thirty days any certificate or the exercise of any right
or authority issued or granted under this Act by order of the
Commission, whenever such step shall in the judgment of the
Commission be necessary to avoid serious and irreparable
damage or inconvenience to the public or to private
interests."14 Jurisprudence echoes the rule that the
Commission is authorized to make reasonable rules and
regulation
Police power in both was properly exercised.
 into the concept of promotion of the general welfare.
Expressive of the purpose of Ordinance 4986 is Section 1
thereof, thus — "As a positive measure to relieve the critical
traffic congestion in the City of Manila, which has grown to
alarming and emergency proportions, and in the best interest
of public welfare and convenience, the following traffic rules
and regulations are hereby promulgated." Along the same
lines, the bus ban instituted by the Commissioner has for its
object "to minimize the 'traffic problem in the City of Manila'
and the 'traffic congestion, delays and even accidents'
resulting from the free entry into the streets of said City and
the operation 'around said streets, loading and unloading or
picking up passengers and cargoes' of PU buses in great
'number and size.'"
We find no difficulty in saying that, contrary to the assertion
made by petitioners, Ordinance 4986 is not a class
legislation.
It is true that inter-urban buses are allowed to enter the
City of Manila, while provincial buses are not given the same
privilege, although they are allowed shuttle service into the
City of Manila. There is no point, however, in placing
provincial buses on the same level as the inter-urban buses
plying to and from Manila and its suburban towns and cities
(Makati, Pasay, Mandaluyong, Caloocan, San Juan, Quezon
City and Navotas). Inter-urban buses are used for
transporting passengers only. Provincial buses are used
for passengers and freight. Provincial buses, because of the
freight or baggage which the passengers usually bring along
with them, take longer time to load or unload than inter-urban
buses. Provincial buses generally travel along national
highways and provincial roads, cover long distances, have
fixed trip schedules. Provincial buses are greater in size and
weight than inter-urban buses. The routes of inter-urban
buses are short, covering contiguous municipalities and cities
only. Inter-urban buses mainly use city and municipal streets.
No unjustified discrimination there is under the law.
The obvious inequality in treatment is but the result flowing
from the classification made by the ordinance and does not
trench upon the equal protection clause.2
3.. G.R. No. 8095. November 5, 1914 & March
31, 1915. ]
F. C. FISHER, Plaintiff, v. YANGCO STEAMSHIP
COMPANY, J. S. STANLEY, as Acting Collector of
Custom of the Philippine Islands, IGNACIO
VILLAMOR, as Attorney-General of the
Philippine Islands, and W. H. BISHOP, as
prosecuting attorney of the city of
Manila, Respondents.
The real question involved in these proceedings is
whether the refusal of the owners and officers of a
steam vessel, duly licensed to engage in the
coastwise trade of the Philippine Islands and engaged
in that trade as a common carrier, to accept for
carriage "dynamite, powder or other explosives" from
any and all shippers who may offer such explosives
for carriage 
as to the suitableness of the vessel for the
transportation of such explosives, or as to the
possibility that the refusal to accept such articles of
commerce in a particular case may have the effect of
subjecting any person or locality or the traffic in such
explosives to an undue, unreasonable or unnecessary
prejudice or discrimination.
Yangco Steamship Company, the owner of a large
number of steam vessels, duly licensed to engage in
the coastwise trade of the Philippine Islands; that on
or about June 10, 1912,
the directors of the company adopted a’ resolution
which was thereafter ratified and affirmed by the
shareholders of the company, "expressly declaring
and providing that the classes of merchandise to be
carried by the company in its business as a common
carrier do not include dynamite, powder or other
explosives, and expressly prohibiting the
officers, agents and servants of the company
from offering to carry, accepting for carriage or
carrying said dynamite, powder or other
explosives;" 
respondent Acting Collector of Customs demanded
and required of the company the acceptance and
carriage of such explosives; that he has refused and
suspended the issuance of the necessary clearance
documents of the vessels of the company unless and
until the company consents to accept such explosives
for carriage; 
 that plaintiff is advised and believes that should the
company decline to accept such explosives for
carriage, the respondent Attorney-General of the
Philippine Islands
ntend to institute proceedings under the penal
provisions of sections 4, 5, and 6 of Act No. 98 of the
Philippine Commission against the company, its
managers, agents and servants, to enforce the
requirements of the Acting-Collector of Customs as to
the acceptance of such explosives for carriage; 
action be issued a writ of prohibition perpetually
restraining the respondent Yangco Steamship
Company,
omplaint the respondents demurred, and we are of
opinion that the demurrer must be sustained, on the
ground that the complaint does not set forth facts
sufficient to constitute a cause of action.
plaintiff seeks in these proceedings to enjoin the
steamship company from accepting for carriage on
any of its vessels, dynamite, powder or other
explosives, under any conditions whatsoever; to
prohibit the Collector of Customs and the prosecuting
officers of the government from all attempts to
compel the company to accept such explosives for
carriage on any of its vessels under any conditions
whatsoever;  statute against undue, unnecessary, or
whether, in the absence of statute, the principles on
which the American and English cases were decided
would be applicable in this jurisdiction. Act No. 98 of
the Philippine Commission,  own free will and accord.
"SEC. 3. No common carrier engaged in the carriage
of passengers or property as aforesaid shall, under
any pretense whatsoever, fail or refuse to receive for
carriage, and as promptly as it is able to do so
without discrimination, to carry any person or
property offering for carriage,  such regulations must not have the effect of depriving
is not to be construed in its literal sense and
without regard to the context, so as to impose an
imperative duty on all common carriers to accept for
carriage, and to carry all and any kind of freight
which may be offered for carriage without regard to
the facilities which they may have at their disposal.  aside from such constitutional limitations, the
clearly intended merely to forbid failures or refusals
to receive persons or property for carriage involving
any "unnecessary or unreasonable preference or
advantage to any particular person, company, firm,
corporation or locality, or any particular kind of traffic
in any respect whatsoever," or which would "subject
any particular person, company, firm, corporation or
locality, or any particular kind of traffic to any undue
or unreasonable prejudice or discrimination
whatsoever." cralaw virtua1a
involves a consideration as to whether the acts
complained of had the effect of making or giving an
"unreasonable or unnecessary preference or
advantage" to any person,
held
Whatever may have been the rule at common law,
common carriers in this jurisdiction cannot lawfully
decline to accept a particular class of goods for
carriage to the prejudice of the traffic in those goods
unless it appears that for some sufficient reason the
discrimination against the traffic in such goods is
reasonable and necessary. Mere prejudice or whim
will not suffice. The grounds of the discrimination
must be substantial ones, such as will justify the
courts in holding the discrimination to have been
reasonable and necessary under all the circumstances
of the case.
here is nothing in that statute which would deprive
any person of his liberty "by requiring him to engage
in business against his will." The prohibition of the
unreasonable preferences and discriminations
are merely the reasonable regulations which the
legislator has seen fit to prescribe for the conduct of
the business in which the carrier is engaged of his
 The nature of the business of a common carrier as a
public employment is such that it is clearly within the
power of the state to impose such just and
reasonable regulations thereon in the interest of the
public as the legislator may deem proper. Of course
an owner of his property without due course of law,
nor of confiscating or appropriating private property
without just compensation, nor of limiting or
prescribing irrevocably vested rights or privileges
lawfully acquired under a charter or franchise. But
determination of the nature and extent of the
regulations which should be prescribed rests in the
hands of the legislator.
The right to enter the public employment as a
common carrier and to offer one’s services to the
public for hire does not carry with it the right to
conduct that business as one pleases, without regard
to the interests of the public, and free from such
reasonable and just regulations as may be prescribed
for the protection of the public from the reckless or
careless indifference of the carrier as to the public
welfare and for the prevention of unjust and
unreasonable discriminations of any kind whatsoever
in the performance of the carrier’s duties as a servant
of the public.

The traffic in dynamite, gunpowder and other
explosives is vitally essential to the material and
general welfare of the inhabitants of these Islands,
and if these products are to continue in general use
throughout the Philippines they must be transported
by water from port to port in the various islands
which make up the Archipelago. It follows that the
refusal by a particular vessel engaged as a common
carrier of merchandise in the coastwise trade in the
Philippine Islands to accept such explosives for
carriage constitutes a violation of the prohibitions
against discrimination penalized under the statute,
unless it can be shown that there is so real and
substantial a danger of disaster necessarily involved
in the carriage of any or all of these articles of
merchandise as to render such refusal a due or a
necessary or a reasonable exercise of prudence and
discretion on the part of the shipowner.
4.. G.R. No. 141910            August 6, 2002
FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and
LAMBERT M. EROLES,  ‘Art. 2185. Unless there is proof to the contrary, it is
G.P. Sarmiento Trucking Corporation (GPS) undertook to
deliver on 18 June 1994 thirty (30) units of Condura S.D.
white refrigerators aboard one of its Isuzu truck, driven by
Lambert Eroles, from the plant site of Concepcion Industries,
Inc., along South Superhighway in Alabang, Metro Manila, to
the Central Luzon Appliances in Dagupan City. While the
truck was traversing the north diversion road along McArthur
highway in Barangay Anupol, Bamban, Tarlac, it collided with
an unidentified truck, causing it to fall into a deep canal,
resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the
shipment, paid to Concepcion Industries, Inc., the value of the
covered cargoes in the sum of P204,450.00. FGU, in turn,
being the subrogee of the rights and interests of Concepcion
Industries, Inc., sought reimbursement of the amount it had
paid to the latter from GPS. Since the trucking company failed
to heed the claim, FGU filed a complaint for damages and
breach of contract of carriage against GPS and its driver
Lambert Eroles with the Regional Trial Court, Branch 66, of
Makati City. In its answer, respondents asserted that GPS
was the exclusive hauler only of Concepcion Industries, Inc.,
since 1988, and it was not so engaged in business as a
common carrier. Respondents further claimed that the cause
of damage was purely accidental.
1âwphi1.nêt
The issues having thus been joined, FGU presented its
evidence, establishing the extent of damage to the cargoes
and the amount it had paid to the assured. GPS, instead of
submitting its evidence, filed with leave of court a motion to
dismiss the complaint by way of demurrer to evidence on the
ground that petitioner had failed to prove that it was a
common carrier.
==rtc "Accordingly, the application of the law on common
carriers is not warranted and the presumption of fault or
negligence on the part of a common carrier in case of loss,
damage or deterioration of goods during transport under 1735
of the Civil Code is not availing.
"Thus, the laws governing the contract between the owner of
the cargo to whom the plaintiff was subrogated and the owner
of the vehicle which transports the cargo are the laws on
obligation and contract of the Civil Code as well as the law on
quasi delicts.
"Under the law on obligation and contract, negligence or fault
is not presumed. The law on quasi delict provides for some
presumption of negligence but only upon the attendance of
some circumstances. Thus, Article 2185 provides:
presumed that a person driving a motor vehicle has
been negligent if at the time of the mishap, he was
violating any traffic regulation.’
"Evidence for the plaintiff shows no proof that defendant was
violating any traffic regulation. Hence, the presumption of
negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that
defendant is a common carrier and defendant’s driver was the
one negligent, defendant cannot be made liable for the
damages of the subject cargoes."2
===ca
The Court of Appeals rejected the appeal of petitione
 ==held
Ca is correct
being an exclusive contractor and hauler of Concepcion
Industries, Inc., rendering or offering its services to no other
individual or entity, cannot be considered a common carrier. 
Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land,
water, or air, for hire or compensation, offering their
services to the public
whether to the public in general or to a limited clientele in
particular, but never on an exclusive basis.

The true test of a common carrier is the carriage of

passengers or goods, providing space for those who opt to
avail themselves of its transportation service for a fee. 10 Given
accepted standards, GPS scarcely falls within the term
"common carrier."

Petitioner’s civil action against the driver can only be based

on culpa aquiliana, which, unlike culpa contractual, would
require the claimant for damages to prove negligence or
fault on the part of the defendant
1
Respondent driver, on the other hand, without concrete
proof of his negligence or fault, may not himself be
ordered to pay petitioner. The driver, not being a party to
the contract of carriage between petitioner’s principal and
defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or
their successors who have assumed their personality or their
juridical position.17 Consonantly with the axiom res inter alios
acta aliis neque nocet prodest, such contract can neither
favor nor prejudice a third person. Petitioner’s civil action
against the driver can only be based on culpa
aquiliana, which, unlike culpa contractual, would require the
claimant for damages to prove negligence or fault on the part
of the defendant.18

Resort to the doctrine, however, may be allowed only when

(a) the event is of a kind which does not ordinarily occur in the
absence of negligence; (b) other responsible causes,
including the conduct of the plaintiff and third persons, are
sufficiently eliminated by the evidence; and (c) the indicated
negligence is within the scope of the defendant's duty to the
plaintiff.21 Thus, it is not applicable when an unexplained
accident may be attributable to one of several causes, for
some of which the defendant could not be responsible. 2

G.P. Sarmiento Trucking Corporation which, instead, is

hereby ordered to pay FGU Insurance Corporation the value
of the damaged and lost cargoes in the amount of
P204,450.00. No costs.