2A - Transpo Reviewer

TRANSPORTATION LAW
Part 1. COMMON CARRIERS

I. GENERAL CONSIDERATIONS
A. Public Utilities
1. Art. XII, Sec. 11, 17, 18, 19, 1987 Constitution
Art. XII (National Economy and Patrimony)

Sec. 11 - No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least
sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be
exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so
requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign
investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and
all the executive and managing officers of such corporation or association must be citizens of the Philippines.
Sec. 17 - In times of national emergency, when the public interest so requires, the State may, during the emergency and
under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or
business affected with public interest.
Sec. 18 - The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon
payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the
Government.
Sec. 19 - The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint
of trade or unfair competition shall be allowed.
a. What is public utility?

Public utilities are privately owned and operated businesses whose service are essential to the general public. They
are enterprises which specially cater to the needs of the public and conduce to their comfort and convenience. As
such, public utility services are impressed with public interest and concern. The same is true with respect to the
business of common carrier which holds such a peculiar relation to the public interest that there is superinduced
upon it the right of public regulation when private properties are affected with public interest, hence, they cease to
be juris privati only. When, therefore, one devotes his property to a use in which the public has an interest, he, in
effect grants to the public an interest in that use, and must submit to the control by the public for the common good,
to the extent of the interest he has thus created (Kilusang Mayo Uno Labor Center v. Garcia, 239 SCRA 386).
b. What is public service?
So understood, 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:
" x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, 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 wireless communications systems, wire or wireless broadcasting stations
and other similar public services x x x" (Calvo v. UCPB General Insurance, G.R. No. 148496, 19 March
2002).
Cases:
Public convenience or necessity generally means something fitting or suited to the public need. As one of the basic
requirements for the grant of a Certificate of Public Convenience (CPC), public convenience and necessity exists when the
proposed facility or service meets a reasonable want of the public and supply a need which the existing facilities do not
adequately supply. The existence or non-existence of public convenience and necessity is therefore a question of fact that
must be established by evidence, real and/or testimonial; empirical data; statistics and such other means necessary, in a
public hearing conducted for that purpose. The object and purpose of such procedure, among other things, is to look out
for, and protect, the interests of both the public and the existing transport operators (Kilusang Mayo Uno Labor Center v.
Garcia, 239 SCRA 386).
A "Public utility" is a business or service engaged in regularly supplying the public with some commodity or service of public
consequence such as electricity, gas, water, transportation, telephone or telegraph service. Apart from statutes which define
the public utilities. Franchises issued by Congress are not required before each and every public utility may operate. Thus,
the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain
public utilities (Albano v. Reyes, 175 SCRA 264).
We perceive no cogent reason to depart, in connection with the commercial air transport service, from the policy of our
public service law, which sanctions the issuance of temporary or provisional permits or certificates of public convenience
and necessity, before the submission of a case for decision on the merits. The overriding considerations in both instances
are the same, namely, that the service be required by public convenience and necessity, and, that the applicant is fit, as
well as willing and able to render such service properly, in conformity with law and the pertinent rules, regulations and
requirements (Phil. Airlines, Inc. v. Civil Aeronautics Board, 270 SCRA 541).
NTC has the sole authority to issue Certificates of Public Convenience and Necessity (CPCN) for the installation, operation,
and maintenance of communications facilities and services, radio communications systems, telephone and telegraph
systems. Such power includes the authority to determine the areas of operations of applicants for telecommunications
Never lose your convictions over material gains. -Happy To Be in LPU Law
services. Specifically, Section 16 of the Public Service Act authorizes the then PSC, upon notice and hearing, to issue
Certificates of Public Convenience for the operation of public services within the Philippines "whenever the Commission
finds that the operation of the public service proposed and the authorization to do business will promote the public interests
in a proper and suitable manner. The NTC is clothed with sufficient discretion to act on matters solely within its competence.
Clearly, the need for a healthy competitive environment in telecommunications is sufficient impetus for the NTC to consider
all those applicants who are willing to offer competition, develop the market and provide the environment necessary for
greater public service. This was the intention that came to light with the issuance of Memorandum Circular 9-3-2000,
allocating new frequency bands for use of CMTS (Republic v. Express Telecommunications, 373 SCRA 316).
2. CA 146, as amended, Sec. 13 (b)
B. Transportation
1. Definition
Transport or transportation is the movement of humans, animals and goods from one location to another. Modes of transport
include air, land (rail and road), water, cable, pipeline and space. The field can be divided into infrastructure, vehicles and
operations.
2. Public Nature
a. Public Service Act. Secs. 13, 14, 15, 16, 18, 19 and 20 (a), (b), (e), (g), (h) and (i)
Section 13 - (a) The Commission shall have jurisdiction, supervision, and control over all public services and their
franchises, equipment, and other properties, and in the exercise of its authority, it shall have the necessary powers and the
aid of the public force: Provided, That public services owned or operated by government entities or government-owned or
controlled corporations shall be regulated by the Commission in the same way as privately-owned public services, but
certificates of public convenience or certificates of public convenience and necessity shall not be required of such entities
or corporations: And provided, further, That it shall have no authority to require steamboats, motor ships and steamship
lines, whether privately-owned, or owned or operated by any Government controlled corporation or instrumentality to obtain
certificate of public convenience or to prescribe their definite routes or lines of service.
(b) The term "public service" includes every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle,
either for freight or passenger, or both with or without fixed route and whether may be its classification, freight or carrier
service of any class, express service, steamboat or steamship line, pontines, ferries, and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine railways, marine repair shop, [warehouse] wharf or dock,
ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power water supply and power,
petroleum, sewerage system, wire or wireless communications system, wire or wireless broadcasting stations and other
similar public services: Provided, however, That a person engaged in agriculture, not otherwise a public service, who owns
a motor vehicle and uses it personally and/or enters into a special contract whereby said motor vehicle is offered for hire or
compensation to a third party or third parties engaged in agriculture, not itself or themselves a public service, for operation
by the latter for a limited time and for a specific purpose directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products of such third party or third parties shall not be considered
as operating a public service for the purposes of this Act.
(c) The word "person" includes every individual, co-partnership, joint-stock company or corporation, whether domestic or
foreign, their lessees, trustees, or receivers, as well as any municipality, province, city, government-owned or controlled
corporation, or agency of the Government of the Philippines, and whatever other persons or entities that may own or possess
or operate public services.
Section 14 - The following are exempted from the provisions of the preceding section: (a) Warehouses; (b) Vehicles drawn
by animals and bancas moved by oar or sail, and tugboats and lighters; (c) Airships within the Philippines except as regards
the fixing of their maximum rates on freight and passengers; (d) Radio companies except with respect to the fixing of rates;
(e) Public services owned or operated by any instrumentality of the National Government or by any government-owned or
controlled corporation, except with respect to the fixing of rates.
Section 15 - With the exception of those enumerated in the preceding section, no public service shall operate in the
Philippines without possessing a valid and subsisting certificate from the Public Service Commission known as "certificate
of public convenience," or "certificate of public convenience and necessity," as the case may be, to the effect that the
operation of said service and the authorization to do business will promote the public interests in a proper and suitable
manner.
The Commission may prescribe as a condition for the issuance of the certificate provided in the preceding paragraph that
the service can be acquired by the Republic of the Philippines or any instrumentality thereof upon payment of the cost price
of its useful equipment, less reasonable depreciation; and likewise, that the certificate shall be valid only for a definite period
of time; and that the violation of any of these conditions shall produce the immediate cancellation of the certificate without
the necessity of any express action on the part of the Commission.
In estimating the depreciation, the effect of the use of the equipment, its actual condition, the age of the model, or other
circumstances affecting its value in the market shall be taken into consideration.
The foregoing is likewise applicable to any extension or amendment of certificates actually in force and to those which may
hereafter be issued, to permit to modify itineraries and time schedules of public services, and to authorizations to renew
and increase equipment and properties.
Section 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:
(a) To issue certificates which shall be known as certificates of public convenience, authorizing the operation of public
service within the Philippines whenever the Commission finds 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. Provided, That thereafter,
certificates of public convenience and certificates of public convenience and necessity will be granted only to citizens of the
Philippines or of the United States or to corporations, co-partnerships, associations or joint-stock companies constituted
and organized under the laws of the Philippines; Provided, That sixty per centum of the stock or paid-up capital of any such
corporations, co-partnership, association or joint-stock company must belong entirely to citizens of the Philippines or of the
United States: Provided, further, That no such certificates shall be issued for a period of more than fifty years.
(b) To approve, subject to constitutional limitations any franchise or privilege granted under the provisions of Act No. Six
Hundred and Sixty-seven, as amended by Act No. One Thousand and twenty-two, by any political subdivision of the
Philippines when, in the judgment of the Commission, such franchise or privilege will properly conserve the public interests,
and the Commission shall in so approving impose such conditions as to construction, equipment, maintenance, service, or
operation as the public interests and convenience may reasonably require, and to issue certificates of public convenience
and necessity when such is required or provided by any law or franchise.
(c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as commutation,
mileage, kilometrage, and other special rates which shall be imposed observed and followed thereafter by any public
service: Provided, That the Commission may, in its discretion, approve rates proposed by public services provisionally and
without necessity of any hearing; but it shall call a hearing thereon within thirty days, thereafter, upon publication and notice
to the concerns operating in the territory affected: Provided, further, That in case the public service equipment of an operator
is used principally or secondarily for the promotion of a private business, the net profits of said private business shall be
considered in relation with the public service of such operator for the purpose of fixing the rates.
(d) To fix just and reasonable standards, classifications, regulations, practices, measurement, or service to be furnished,
imposed, observed, and followed thereafter by any public service.
(e) To ascertain and fix adequate and serviceable standards for the measurement of quantity, quality, pressure, initial
voltage, or other condition pertaining to the supply of the product or service rendered by any public service, and to prescribe
reasonable regulations for the examination and test of such product or service and for the measurement thereof.
(f) To establish reasonable rules, regulations, instructions, specifications, and standards, to secure the accuracy of all
meters and appliances for measurements.
(g) To compel any public service to furnish safe, adequate, and proper service as regards the manner of furnishing the
same as well as the maintenance of the necessary material and equipment.
(h) To require any public service to establish, construct, maintain, and operate any reasonable extension of its existing
facilities, where in the judgment of said Commission, such extension is reasonable and practicable and will furnish sufficient
business to justify the construction and maintenance of the same and when the financial condition of the said public service
reasonably warrants the original expenditure required in making and operating such extension.
(i) To direct any railroad, street railway or traction company to establish and maintain at any junction or point of connection
or intersection with any other line of said road or track, or with any other line of any other railroad, street railway or traction
to promote, such just and reasonable connection as shall be necessary to promote the convenience of shippers of property,
or of passengers, and in like manner direct any railroad, street railway, or traction company engaged in carrying
merchandise, to construct, maintain and operate, upon reasonable terms, a switch connection with any private sidetrack
which may be constructed by any shipper to connect with the railroad, street railway or traction company line where, in the
judgment of the Commission, such connection is reasonable and practicable and can be out in with safety and will furnish
sufficient business to justify the construction and maintenance of the same.
(j) To authorize, in its discretion, any railroad, street railway or traction company to lay its tracks across the tracks of any
other railroad, street railway or traction company or across any public highway.
(k) To direct any railroad or street railway company to install such safety devices or about such other reasonable measures
as may in the judgment of the Commission be necessary for the protection of the public are passing grade crossing of (1)
public highways and railroads, (2) public highways and streets railway, or (3) railways and street railways.
(l) To fix and determine proper and adequate rates of depreciation of the property of any public service which will be
observed in a proper and adequate depreciation account to be carried for the protection of stockholders, bondholders or
creditors in accordance with such rules, regulations, and form of account as the Commission may prescribe. Said rates shall
be sufficient to provide the amounts required over and above the expense of maintenance to keep such property in a state
of efficiency corresponding to the progress of the industry. Each public service shall conform its depreciation accounts to
the rates so determined and fixed, and shall set aside the moneys so provided for out of its earnings and carry the same in
a depreciation fund. The income from investments of money in such fund shall likewise be carried in such fund. This fund
shall not be expended otherwise than for depreciation, improvements, new construction, extensions or conditions to the
properly of such public service.
(m) To amend, modify or revoke at any time certificate issued under the provisions of this Act, whenever the facts and
circumstances on the strength of which said certificate was issued have been misrepresented or materially changed.
(n) To suspend or revoke any certificate issued under the provisions of this Act whenever the holder thereof has violated or
willfully 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.
(o) To fix, determine, and regulate, as the convenience of the state may require, a special type for auto-busses, trucks, and
motor trucks to be hereafter constructed, purchased, and operated by operators after the approval of this Act; to fix and
determine a special registration fee for auto-buses, trucks, and motor trucks so constructed, purchased and operated:
Provided, That said fees shall be smaller than more those charged for auto-busses, trucks, and motor trucks of types not
made regulation under the subsection.
Section 17 - Proceedings of Commission without previous hearing. - The Commission shall have power without previous
hearing, subject to established limitations and exception and saving provisions to the contrary:
(a) To investigate, upon its own initiative, or upon complaint in writing, any matter concerning any public service as regards
matters under its jurisdiction; to require any public service to furnish safe, adequate, and proper service as the public interest
may require and warrant; to enforce compliance with any standard, rule, regulation, order or other requirement of this Act
or of the Commission, and to prohibit or prevent any public service as herein defined from operating without having first
secured a certificate of public convenience or public necessity and convenience, as the case may be and require existing
public services to pay the fees provided for in this Act for the issuance of the proper certificate of public convenience or
certificate of public necessity and convenience, as the case may be, under the penalty, in the discretion by the Commission,
of the revocation and cancellation of any acquired rights.
(b) To require any public service to pay the actual expenses incurred by the Commission in any investigation if it shall be
found in the same that any rate, tool, charge, schedule, regulation, practice, act or service thereof is in violation of any
provision of this Act or any certificate, order, rule, regulation or requirement issued or established by the Commission. The
Commission may also assess against any public service costs not to exceed twenty-five pesos with reference to such
investigation.
(c) From time to time appraise and value the property of any public service, whenever in the judgment of the Commission it
shall be necessary so to do, for the purpose of carrying out any of the provisions of this Act, and in making such valuation
the Commission may have access to and use any books, documents, or records in the possession of any department,
bureau, office, or board of the government of the Philippines or any political subdivision thereof.
(d) To provide, on motion by or at the request of any consumer or user of a public service, for the examination and test of
any appliance used for the measuring of any product or service of a public service, and for that purpose, by its agents,
experts, or examiners to enter upon any premises where said appliances may be, and other premises of the public service,
for the purpose of setting up and using on said premises any apparatus necessary therefor. and to fix the fees to be paid
by any consumer or user who may apply to the Commission for such examination or test to be made, and if the appliance
be found defective or incorrect to the disadvantage of the consumer or user to require the fees paid to be refunded to the
consumer or user by the public service concerned.
(e) To permit any street railway or traction company to change its existing gauge to standard steam railroad gauge, upon
such terms and conditions as the Commission shall prescribe.
(f) To grant to any public service special permits to make extra or special trips within the territory covered by its certificates
of public convenience, and to make special excursion trips outside of its own territory if the public interest or special
circumstances required it: Provided, however, that in case a public service cannot render such extra service on its own line
or in its own territory, a special permit for such extra service may be granted to any other public service.
(g) To require any public service to keep its books, records, and accounts so as to afford an intelligent understanding of the
conduct of its business and to that end to require every such public service of the same class to adopt a uniform system of
accounting. Such system conform to any system approved and confirmed by the Auditor General.
(h) To require any public service to furnish annual reports of finances and operations. Such reports shall set forth in detail
the capital stock issued, the amounts of said capital stock paid up and the form of payment thereof; the dividends paid, the
surplus, if any and the number of stockholders, the consolidated and pending obligations and the interest paid thereon; the
cost and value of the property of the operator; concessions or franchises and equipment; the number of employees and
salaries paid to each class; the accidents to passengers, employees, and other person, and the causes thereof; the annual
expenditures on improvements; the manner of their investment and nature of such improvements; the receipts and profits
in each of the branches of the business and of whatever source; the operating and other expenses; the balance of profits
and losses; and a complete statement of the annual financial operations of the operator, including an annual balance sheet.
Such reports shall also contain any information which the Commission may require concerning freight and passenger rates,
or agreements, compromises or contracts affecting the same. Said reports shall cover a period of twelve months, ending
on December thirty-first of each year, and shall be sworn to by the officer or functionary of the public service authorized
therefor. The Commission shall also have power to require from time to time special reports containing such information as
above provided for or on other matters as the Commission may deem necessary or advisable.
(i) To require every public service to file with the Commission a statement in writing, verified by the oaths of the owner or
the president and the secretary thereof, if a corporation, setting forth the name, title of office or portion, and post-office
address, and the authority, power and duties of every officer, member of the board of directors, trustees executive
committee, superintendent, chief or head of construction and operation thereof, in such form as to disclose the source and
origin of each administrative act, rule, decision, order or other action of the operator of such public service; and, within ten
days after any change is made in the title of, or authority, powers or duties appertaining to any such office or position, or
the person holding the same, filed with the Commission a like statement, verified in like manner, setting forth such change.
(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 duties imposed upon it thereby or by the provisions of its own character,
whether obtained under any general or special law of the Philippines.
(k) To investigate any or all accidents that may occur on the property of any public service or directly or indirectly arising
from or connected with its maintenance or operation in the Philippines; to require any public service to give the Commission
immediate and effective notice of all any such accidents, and to make such order or recommendation with respect thereto
as the public interest may warrant or require.
(l) To require every public service s herein defined to file within complete schedules of every classification employed and of
every individual or joint rate, toll fare or charge made, charged or exacted by it for any product supplied or service rendered
within the Philippines and, in the case of public carriers, to file with it a statement showing the itineraries or routes served
as specified in such requirement.
CHAPTER III
OPERATORS OF PUBLIC SERVICES REGULATIONS AND PROHIBITIONS
Section 18 - It shall be unlawful for any individual, co-partnership, association, corporation or joint-stock company, their
lessees, trustees or receivers appointed by any court whatsoever, or any municipality, province, or other department of the
Government of the Philippines to engage in any public service business without having first secured from the Commission
a certificate of public convenience or certificate of public convenience and necessity as provided for in this Act, except
grantees of legislative franchises expressly exempting such grantees from the requirement of securing a certificate from
this Commission as well as concerns at present existing expressly exempted from the jurisdiction of the Commission, either
totally or in part, by the provisions of section thirteen of this Act.
Section 19 - Unlawful Acts. - It shall be unlawful for any public service:

(a) To provide or maintain any service that is unsafe, improper, or inadequate or withhold or refuse any service which can
reasonably be demanded and furnished, as found and determined by the Commission in a final order which shall be
conclusive and shall take effect in accordance with this Act, upon appeal of otherwise.
(b) To make or give, directly or indirectly, by itself or through its agents, attorneys or brokers, or any of them, discounts or
rebates on authorized rates, or grant credit for the payment of freight charges, or any undue or unreasonable preference or
advantage to any person of corporation or to any locality or to any particular description of traffic or service, or subject any
particular person or corporation or locality or any particular description of traffic to any prejudice or disadvantage in any
respect whatsoever; to adopt, maintain, or enforce any regulation, practice or measurement which shall be found or
determined by the Commission to be unjust, unreasonable, unduly preferential or unjustly discriminatory in a final order
which shall be conclusive and shall take effect in accordance with the provisions of this Act, upon repeal or otherwise.
(c) To refuse or neglect, when requested by the Director of Posts or his authorized representative, to carry public mail on
the regular trips of any public land transportation service maintained or operated by any such public service; upon such
terms and conditions and for a consideration in such amount as may be agreed upon between the Director of Posts and the
public service carrier of fixed by the Commission in the absence of an agreement between the Director of Posts and the
carrier. In case the Director of Posts and public service carrier are unable to agree on the amount of the compensation to
be paid for the carriage of the mail, the Director of Posts shall forthwith request the Commission to fix a just and reasonable
compensation for such carriage and the same shall be promptly fixed by the Commission in accordance with Section sixteen
of this Act.
CASES:
From the explanatory note to House Bill No. 4030, that later became Republic Act No. 2677, it was explicit that the
jurisdiction conferred upon the Public Service Commission over the public utilities operated by government-owned or
controlled corporations is to be confined to the fixing of rates of such public services, "in order to avoid cutthroat or ruinous
and unfair competition detrimental to operators and to the public interests." the authority of the Public Service Commission
under Republic Act 2677, over the fixing of rates of charges of public utilities owned or operated by government-owned or
controlled corporations, can only be exercised where the charter of the government corporation concerned does not contain
any provision to the contrary. Thus, whether or not the Public Service Commission had authority to pass upon the petitioner's
revised rates, it is undeniable that respondents companies had the right to resort to the respondent court of first instance in
quest of injunctive relief against their enforcement which were claimed to be unauthorized by law and violative of
respondents' contracts; and it equally lay within the lower court's jurisdiction to entertain their action. The grant of the
injunction complained of was merely incidental to the authority of the court to take cognizance of and adjudicate the main
controversy submitted to it (Olongapo Electric Light and Power Corp. v. National Power Corp., 149 SCRA 153).
The records of the case do not show any grant of authority from the then Secretary of Public Works and Communications
before the petitioner installed the questioned radio telephone services in San Jose, Mindoro in 1971. The same is true as
regards the radio telephone services opened in Sorsogon, Sorsogon and Catarman, Samar in 1983. No certificate of public
convenience and necessity appears to have been secured by the petitioner from the public respondent when such certificate
was required by the applicable public utility regulations. It was well within the powers of the public respondent to authorize
the installation by the private respondent network of radio communications systems in Catarman, Samar and San Jose,
Mindoro. Under the circumstances of this case, the mere fact that the petitioner possesses a franchise to put up and operate
a radio communications system in certain areas is not an insuperable obstacle to the public respondent's issuing the proper
certificate to an applicant desiring to extend the same services to those areas. The Constitution mandates that a franchise
cannot be exclusive in nature nor can a franchise be granted except that it must be subject to amendment, alteration, or
even repeal by the legislature when the common good so requires (Art. XII, sec. 11 of the 1986 Constitution) (Radio
Communications of the Phils. V. Phil. Telegraph and Telephone Corp., 184 SCRA 517).
Tricycles are a popular means of transportation, specially in the countryside. They are, unfortunately, being allowed to drive
along highways and principal thoroughfares where they pose hazards to their passengers arising from potential collisions
with buses, cars and jeepneys. The operation of tricycles within a municipality may be regulated by the Sangguniang Bayan.
In this connection, the Sangguniang concerned would do well to consider prohibiting the operation of tricycles along or
across highways invite collisions with faster and bigger vehicles and impede the flow of traffic. The need for ensuring public
safety and convenience to commuters and pedestrians alike is paramount. It might be well, indeed, for public officials
concerned to pay heed to a number of provisions in our laws that can warrant in appropriate cases an incurrence of criminal
and civil liabilities. Thus —
The Revised Penal Code —

Art. 208. Prosecution of offenses; negligence and tolerance. — The penalty of prision correccional in its minimum
period and suspension shall be imposed upon any public officer, or officer of the law, who, in dereliction of the
duties of his office, shall maliciously refrain from instituting prosecution for the punishment of violators of the law, or
shall tolerate the commission of offenses.
The Civil Code —

Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects,
without just cause, to perform his official duty may file an action for damages and other relief against the latter,
without prejudice to any disciplinary administrative action that may be taken.1âwphi1.nêt
Art. 34. When a member of a city or municipal police force refuses or fails to render aid or protection to any person
in case of danger to life or property, such peace officer shall be primarily liable for damages, and the city or
municipality shall be subsidiarily responsible therefor. The civil action herein recognized shall be independent of
any criminal proceedings, and a preponderance of evidence shall suffice to support such action.
Art. 2189. Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by,
any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works
under their control or supervision.
The Local Government Code —

Sec. 24. Liability for Damages. — Local government units and their officials are not exempt from liability for death
or injury to persons or damage to property (LTO v. City of Butuan, 322 SCRA 805).
b. The Certificate of Public Convenience (CPC), the Cert. of Public Convenience and
Necessity (CPCN) and the “Prior Operator Rule”
TERMS:
The Certificate of Public Convenience (CPC)
(i) "No public utility as herein defined shall operate in the Philippine Islands without having first secured from the
Commission a certificate, which shall be known as Certificate of Public Convenience, to the effect that the operation
of said public utility and the authorization to do business will promote the public interest in a proper and suitable
manner." [Section 15 (i) of Act No. 3108].
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. Pursuant to 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 (KMU Labor Center v. Garcia Jr., 239 SCRA 386).
The Certificate of Public Convenience and Necessity (CPCN).

A certificate of convenience and necessity for the operation of an auto truck line in occupied territory will not be
granted, where there is no complaint as to existing rates and the present company is rendering adequate service
(In Re Haydis (Cal.), P. U. R., 1920A, 923).
A showing must be clear and affirmative that an existing is unable or has refused to maintain adequate and
satisfactory service, before a certificate of convenience and necessity will be granted for the operation of an
additional service (In Re Branham (Ariz.), P. U. R., 1924C, 500).
The Nevada Commission denied an application for a certificate of convenience and necessity for the operation of
an automobile passenger service in view of the fact that the service within the territory proposed to be served
appeared to be adequate and it was the policy of the Commission to protect the established line in the enjoyment
of business which it had built, and in view of the further fact that it was very uncertain whether the applicant could
secure sufficient business to enable him to operate profitably (In Re Nevada California Stage Co., P. U. R., 1924A,
460).
“Prior Operator Rule”

Before permitting a new company or a new operator to invade the territory of another already established with a certificate
of public convenience, thereby entering into competition with it, if this be for the benefit of the public, the prior operator must
be given an opportunity to extend its service in order to meet the public needs in the matter of transportation. This refers to
a definite line, operated by one operator, on which a new operator should not be allowed to operate, without the former
having refused to extend its services on the line already operated to meet the public needs in the matter of transportation.
But this rule is not applicable to lines or roads not operated by the old carrier, in which case the opportunity to exploit the
transportation business along those new lines must be given to all those who may apply for it, notwithstanding the fact that
the former carrier has a certificate of public convenience to engage in this business in a definite province (Batangas Trans.
v. Orlanes, 52 Phil. 455).
CASES:
It remains to be determined whether, under the law, certificates of public convenience are liable to attachment and seizure
by legal process. The law is silent as to this matter. It can not be denied that such franchises are valuable. They are subject
to being sold for a consideration as much as any other property. They are even more valuable than ordinary properties,
taking into consideration that they are not granted to everyone who applies for them but only to those who undertake to
furnish satisfactory and convenient service to the public. It may also be said that dealers in motor vehicles even extend
credit to owners of such certificates or franchises. The law permits the seizure by means of a writ of attachment not only of
chattels but also for shares and credits. While these franchises may be said to be intangible character, they are however of
value and are considered properties which can be seized through legal process. For all the foregoing, the court is of the
opinion that the plaintiff is entitled to the remedy it prays for in its motion which is hereby granted (Raymundo v. Luneta
Motor, 58 Phil 889).
The Government having taken over the control and supervision of all public utilities, so long as an operator under a prior
license complies with the terms and conditions of his license and reasonable rules and regulation for its operation and meets
the reasonable demands of the public, it is the duty of the Commission to protect rather than to destroy his investment by
the granting of a subsequent license to another for the same thing over the same route of travel. The granting of such a
license does not serve its convenience or promote the interests of the public. The decision of the Public Service Commission,
granting to Orlanes the license in question, is revoked and set aside, and the case is remanded to the Commission for such
other and further proceedings as are not inconsistent with this opinion. Neither party to recover costs on this appeal
(Batangas Trans. v. Orlanes, 52 Phil. 455).
The granting of a license to the petitioners would not be "the granting of a subsequent license to another for the same thing
over the same route of travel," for as to whether or not the taxi travels at all or where it goes or when it goes or how far it
goes is a matter exclusively at the call and in the discretion of the customer; otherwise, the taxi would remain idle -- not so
with an autobus operating on a fixed schedule between certain points on a provincial road. There is no valid, legal reason
why Monserrat should have the exclusive right of operating a taxicab service within the limits of the City of Manila, and it is
very apparent that such an exclusive right would be against the best interest of the public. Neither is there any valid reason
why the petitioners should not have a like certificate of public convenience, subject only to the reasonable rules and
regulations of the commission. In the last analysis, the only real question presented in the record is one of law. The decision
of the commission denying the petitioners a certificate of public convenience is reversed and the case is remanded to the
commission, with instructions to grant the petition and for such other and further proceedings as are not inconsistent with
this opinion, with costs against Monserrat (Carmelo v. Monserrat, 55 Phil 644).
What appears clear from the record is that at the beginning PANTRANCO planned to operate such ferry boat service
between Matnog and Alien as a common carrier so it requested authority from MARINA to purchase the vessel M/V "Black
Double in accordance with the procedure provided for by law for such application for a certificate of public convenience.
However when its request was denied as the said routes "are adequately serviced by existing/authorized operators, it
nevertheless purchased the vessel and started operating the same. Obviously to go about this obstacle to its operation, it
then contrived a novel theory that what it proposes to operate is a private ferryboat service across a small body of water for
the exclusive use of its buses, trucks and passengers as an incident to its franchise to convey passengers and cargo on
land from Pasay City to Tacloban so that it believes it need not secure a separate certificate of public convenience. Based
on this representation, no less than the Secretary of Justice was led to render an affirmative opinion on October 20, 1981,
followed a few days later by the questioned decision of public respondent of October 23, 1981. Certainly the Court cannot
give its imprimatur to such a situation. Thus the Court holds that the water transport service between Matnog and Allen is
not a ferry boat service but a coastwise or interisland shipping service. Before private respondent may be issued a franchise
or CPC for the operation of the said service as a common carrier, it must comply with the usual requirements of filing an
application, payment of the fees, publication, adducing evidence at a hearing and affording the oppositors the opportunity
to be heard, among others, as provided by law (San Pablo v. Pantranco, 153 SCRA 199).
In order to arrive at a conclusion as to the need for "additional services to adequately serve the traveling public" on the lines
applied for the TPU auto-truck operator, the Public Service Commission may take into account its own record "on TPU auto-
truck service already authorized" on those lines. Where the Commission has reached a conclusion of fact after weighing
the conflicting evidence, that conclusion must be respected, and the Supreme Court will not interfere unless it clearly
appears that there is no evidence to support the decision of the Commission (Pangasinan Transportation Company, Inc.
v. Simplicio de la Cruz, 95 Phil 278).
We are not impressed that Qualitrans has successfully shown that it is entitled to the injunctive writ. Its appeal to "ruinous
competition" 25 is not well-taken. Under the Constitution, the national economy stands for, "competi[tion] in both domestic
and foreign markets." 26 Obviously, not every kind of competition is "ruinous competition." All things considered and all
things equal, competition is a healthy thing. Besides, there is no showing that Qualitrans stood to lose its capital investment
with the approval of Royal Class’ franchise. 27 Our considered opinion is that Qualitrans should improve its services as a
counterbalance to Royal Class’ own toehold in the market. And let that be its challenge (Qualitrans Limousine Service,
Inc. v. Royal Class Limousine Service, 179 SCRA 569).
The finding of the trial court that the pick-up was running at more than 40 kilometers per hour is not supported by the
evidence. This is a mere surmise made by the trial court considering the time the pick-up left barrio Samoay and the time
the accident occured in relation to the distance covered by the pick-up. And even if this is correct, still we say that such
speed is not unreasonable considering that they were traveling on a national road and the traffic then was not heavy. We
may rather attribute the incident to lack of care on the part of the deceased considering that the pick-up was open and he
was then in a crouching position. Indeed, the law provides that "A passenger must observe the diligence of a good father
of a family to avoid injury to himself" (Article 1761, new Civil Code), which means that if the injury to the passenger has
been proximately caused by his own negligence, the carrier cannot be held liable. All things considered, we are persuaded
to conclude that the accident occurred not due to the negligence of defendant but to circumstances beyond his control and
so he should be exempt from liability (Lara v. Valencia, 104 Phil 65).
Three kinds of stipulations have often been made in a bill of lading. The first one exempting the carrier from any and all
liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of
such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the
shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the
first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.
Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's cause of action had not
yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) — which provides for a one-year period of
limitation on claims for loss of, or damage to, cargoes sustained during transit — may be applied suppletorily to the case at
bar. This one-year prescriptive period also applies to the insurer of the goods. In this case, the period for filing the action for
recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and void; it must, accordingly, be
struck down (Loadstar v. CA, 315 SCRA 339).
3. Private nature, rights and obligations of parties arising from transactions relating to
transportation.
a. Absent a transportation contract
Even if we admit as true the facts found by the trial court, still we find that the same are not sufficient to show that defendant
has failed to take the precaution necessary to conduct his passengers safely to their place of destination for there is nothing
there to indicate that defendant has acted with negligence or without taking the precaution that an ordinary prudent man
would have taken under similar circumstances. It should be noted that Lara went to the lumber concession of defendant in
answer to a call of duty which he was bound to perform because of the requirement of his office and he contracted the
malaria fever in the course of the performance of that duty. It should also be noted that defendant was not in duty bound to
take the deceased in his own pick-up to Davao because from Parang to Cotabato there was a line of transportation that
regularly makes trips for the public, and if defendant agreed to take the deceased in his own car, it was only to accommodate
him considering his feverish condition and his request that he be so accommodated. It should also be noted that the
passengers who rode in the pick-up of defendant took their respective seats therein at their own choice and not upon
indication of defendant with the particularity that defendant invited the deceased to sit with him in the front seat but which
invitation the deceased declined. The reason for this can only be attributed to his desire to be at the back so that he could
sit on a bag and travel in a reclining position because such was more convenient for him due to his feverish condition. All
the circumstances therefore clearly indicate that defendant had done what a reasonable prudent man would have done
under the circumstances. There is every reason to believe that the unfortunate happening was only due to an unforeseen
accident accused by the fact that at the time the deceased was half asleep and must have fallen from the pick-up when it
ran into some stones causing it to jerk considering that the road was then bumpy, rough and full of stones (Lara v. Valencia,
104 Phil 65)
b. Arising from transportation contract

i. Contract of transportation, defined
A Contract of Transportation is a contract whereby a person, natural or juridical, obligates himself to transport persons or
goods, or both, from one place to another, by land, water or air, for a price or compensation. A Contract of Transportation
is imbued with public interest, and that is the reason why it is considered a public utility. As a public utility, the State has the
power to regulate it for public welfare and the common good. The Constitution mandates that the investment in public utility
must comply with the equity requirement of 60/40 Rule (60% Filipino-owned and 40% any nationality).
DISTINCTIONS COMMON CARRIER PRIVATE CARRIER
Obligations to carry Bound to carry ALL who choose to employ CAN CHOOSE the persons whom it may
it contract
Diligence required Extraordinary diligence Ordinary diligence
ii. Contract of transportation, elements
Elements of a common carrier:

1. persons' corporations, firms or associations,
2. engaged in the business of carrying or transporting passengers, goods or both,
3. means of carriage is by land, water or air,
4. the carrying of passengers , goods or both is for compensation, and
5. the service is offered to the public without distinction.
C. Regulation of Transportation Industry

1. The Department of Transportation (EO 125, Sec. 4, EO 125-A, Sec. 5).
a. Air
i. Air Transportation Office, EO 125, as amended by EO 125-A, Sec. 25, as amended
ii. Civil Aeronautics Board, RA 776, as amended, Secs. 5, 10 (a) (c); Secs. 11, 12
SECTION 5. Composition of the Board. - The Civil Aeronautics Board shall be composed of the Secretary of
Transportation and Communications or his designated representative as Chairman, the Assistant Secretary for Air
Transportation of the Department of Transportation and Communications as Vice-Chairman, the Commanding General of
the Philippine Air Force* and two (2) members to be appointed by the President of the Philippines. They shall hold office at
the pleasure of the President. No member of the Board shall have any pecuniary interest in, or own any stock or bond of,
any civil aeronautics enterprise (Sec. 5, RA 776).
SECTION 10. Powers and duties of the Board. - (A) Except as otherwise provided herein, the Board shall have the power
to regulate the economic aspect of air transportation, and shall have the general supervision and regulation of, the
jurisdiction and control over, air carriers, general sales agents, cargo sales agents, and airfreight forwarders as well as their
property, property rights, equipment, facilities, and franchise, in so far as may be necessary for the purpose of carrying out
the provisions of this Act. xxx
(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter 4 of this Act, to issue, deny, amend, revise, alter, modify, cancel, suspend,
or revoke, in whole or in part, upon petition or complaint, or upon its own initiative, any temporary operating permit or
Certificate of Public Convenience and Necessity; Provided, however, That in the case of foreign air carriers, the permit shall
be issued with the approval of the President of the Republic of the Philippines.
(2) To fix and determine reasonable individual, joint or special rates, charges or fares, which an air carrier may demand,
collect or receive for any service in connection with air commerce. The Board may adopt any original, amended, or new
individual, joint or special rates, charges or fares proposed by an air carrier if the proposed individual, joint, or special rates,
charges for fares are not unduly preferential or unduly discriminatory or unreasonable. The burden of proof to show that the
proposed individual, joint or special rates, charges or fares are just and reasonable shall be upon the air carrier proposing
the same.
In fixing rates, charges, fares under the provisions of this Act, the Board shall take into consideration, among other factors:
(a) The effect of such rates upon the movement of traffic;
(b) The need in the public interest of adequate and efficient transportation of persons and property by air carriers
at the lowest cost consistent with the furnishing of such service.
(c) Such standards respecting the character and quality of service to be rendered by air carriers as may be
prescribed by or pursuant to law;
(d) The inherent advantages of transportation by aircraft; and
(e) The need of each air carrier for revenues sufficient to enable such air carrier, under honest, economical, and
efficient management, to provide adequate and efficient air carrier service.
(3) To authorize any type of charters whether domestic or international and special air services or flight under such terms
and conditions as in its judgment public interest requires. Notwithstanding the existence of bilateral air agreement, the CAB
is authorized to grant any foreign airline increase in frequencies and/or capacities on international routes when in its
judgment the national interest requires it, provided that the utilization of the increase frequencies and capacities is not more
than thirty days. All grants of frequencies and/or capacities shall be subject to the approval of the President.
(4) To approve or disapprove increase and/or decrease of capital, lease, purchase, sales of aircraft of air carrier engaged
in air commerce; consolidation, merger, purchase, lease and acquisition and control of operating contracts between
domestic
foreign air carriers, or between domestic air carriers or any person engaged in any phase of aeronautics.
(5) To inquire into the management of the business of any air carrier and, to the extent reasonably necessary for such
inquiry, to obtain from such carrier, and from any person controlling, or controlled by, or under common control with, such
air carrier,
full and complete reports and other informations. Such reports shall be under oath whenever the Board so requires.
(6) To require annual, monthly, periodical, and special reports from any air carrier, to prescribe the manner and form in
which such reports shall be made, and to require from any air carrier specific answers to all questions upon which the Board
may
deem information to be necessary. Such reports shall be under oath whenever the Board so requires. The Board may also
require any air carrier to file with it any contract, agreement, understanding or arrangement, or a true copy thereof, between
such air carrier and any other carrier or person, in relation to any traffic affected by the provisions of this Act.
(7) To prescribe the forms of any and all accounts, records, and memoranda of the movement of traffic, as well as of the
receipts and expenditures of money, and the length of times such accounts, records and memoranda shall be preserved:
Provided, that any air carrier may keep additional accounts, records, or memoranda if they do not impair the integrity of the
accounts, records, or memoranda prescribed or approved by the Board and do not constitute an undue financial burden on
such air carrier.
(8) To require each officer and director of any air carrier to transmit a report describing the shares of stock with any persons
engaged in any phase or other interest held by such air carrier of aeronautics, and the holding of the stock in and control
of, other persons engaged in any phase of aeronautics.
CASE:
Many and varied are the definitions of certificates of public convenience which courts and legal writers have drafted. Some
statutes use the terms "convenience and necessity" while others use only the words "public convenience." The terms
"convenience and necessity", if used together in a statute, are usually held not to be separable, but are construed together.
Both words modify each other and must be construed together. The word ‘necessity’ is so connected, not as an additional
requirement but to modify and qualify what might otherwise be taken as the strict significance of the word necessity. Public
convenience and necessity exists when the proposed facility will meet a reasonable want of the public and supply a need
which the existing facilities do not adequately afford. It does not mean or require an actual physical necessity or an
indispensable thing. The use of the word "necessity", in conjunction with "public convenience" in a certificate of authorization
to a public service entity to operate, does not in any way modify the nature of such certification, or the requirements for the
issuance of the same. It is the law which determines the requisites for the issuance of such certification, and not the title
indicating the certificate (PAL v. CAB, 270 SCRA 541).
b. Land
i. Land Transportation Office, EO 125-A, Secs. 9,11,13
(a), Administrative Code of 1987; Title XV, Sec. 9(1)
SECTION 9. Line Offices.—The Department shall have the following line offices: (1) The Office of the Assistant
Secretary for Land Transportation;
ii.Land Transportation Franchising and Regulatory Board, EO 202, Secs. 1, 2, 4, 5, 6,

7;
SECTION 1. Creation of the Land Transportation Franchising and Regulatory Board. – There is hereby created in the
Department of Transportation and Communications, the Land Transportation Franchising and Regulatory Board, hereinafter
referred to as the “Board”.
SECTION 2. Composition of the Board – The Board shall be composed of a Chairman and two (2) members with the same
rank, salary and privileges of an Assistant Secretary, all of whom shall be appointed by the President of the Philippines
upon recommendation of the Secretary of Transportation and Communications. One (1) member of the Board shall be a
member of the Bar and shall have engaged in the practice of law in the Philippines for at least five (5) years, another a
holder of a degree in civil engineering , and the other a holder of a degree in economics, finance or management both with
the same number of years of experience and practice.
SECTION 4. Supervision and Control over the Board. – The Secretary of Transportation and Communications, through his
duly designated Undersecretary, shall exercise administrative supervision and control over the Land Transportation
Franchising and Regulatory Board.
SEC. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board. – The Board shall have the
following powers and functions :
a. To prescribe and regulate routes of service, economically viable capacities and zones or areas of operation of public
land transportation services provided by motorized vehicles in accordance with the public land transportation
development plans and programs approved by the Department of Transportation and Communications;
b. To issue , amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation
of public Land Transportation services provided by motorized vehicles, and to prescribe the appropriate terms and
conditions therefore;
c. To determine, prescribe and approve and periodically review and adjust, reasonable fares, rates and other related
charges, relative to the operation of public land transportation services provided by motorized vehicles;
d. To issue preliminary or permanent injunctions, whether prohibitory or Mandatory, in all cases in which it has
jurisdiction, and in which cases the pertinent provisions of the Rules of Court shall apply;
e. To punish for contempt of the Board, both direct and indirect, in accordance with the pertinent provisions of, and
the penalties prescribe by, the Rules of Court;
f. To issue subpoena and subpoena duces tecum and to summon witnesses to appear in any proceedings of the
Board, to administer oaths and affirmations;
g. To conduct investigations and hearings of complaints for violation of the public service laws on land transportation
and of the Board’s rules and regulations, orders, decisions and/ or ruling and to impose fines and/ or penalties for
such violations;
h. To review motu propio the decisions/actions of the Regional Franchising and Regulatory Office herein created;
i. To promulgate rules and regulations governing proceedings before the Board and the Regional Franchising and
Regulatory Office: Provided, That except with respect to paragraphs d,e,f and g hereof, the rules of procedure and
evidence prevailing in the courts of law should not be controlling and it is the spirit and intention of said rules that
the Board and the Regional Franchising and Regulatory Offices shall use every and all reasonable means to
ascertain facts in its case speedily and objectively and without regard to technicalities of law and procedures, all in
the interest of due process;
j. To fix, impose and collect, and periodically review and adjust, reasonable fees and other related charges for
services rendered;
k. To formulate. Promulgate, administer, implement and enforce rules and Regulations on land transportation public
utilities, standard of measurements and/ or design, and rules and regulations requiring operators of any public land
transportation service to equip, install and provide in their stations such devices, equipment facilities and operating
procedures and techniques as may promote safety, protection, comfort and convenience to persons and property
in their charges as well as the safety of persons and property within their areas of operations;
l. To coordinate and cooperate with other government agencies and entities Concerned with any aspect involving
public land transportation services with the end in view of effecting continuing improvement of such services; and
m. To perform such other functions and duties as may be provided by law, as may be provided by law, as may be
necessary, or proper or incidental to the purposes and objectives of this Executive Order.
SECTION 6. Decision of the Board; Appeals Therefrom and / or Review Thereof. – The Board, in the exercise of its powers
and functions, shall sit and render its decision en banc. Every such decision, order, or resolution of the Board must bear the
concurrence and signature of at least two (2) members thereof. The decision, order or resolution of the Board shall be
appealable to the Secretary within thirty (30) days from receipt of the decision: Provided, That the Secretary may motu
propio review any decision or action or the Board before the same becomes final.
Administrative Code of 1987; Title XV, Secs. 15-22
c. Water
i. Maritime Industry Authority, EO 125 Sec. 14, as amended by EO 125-A, Sec. 3
Read Annotation 270 SCRA 157 et sec.
II. CONTRACT OF TRANSPORTATION

1. Definition
Transport contracts refer to legally enforceable agreements for the provision of transportation services. These contracts can
be created for a wide range of transportation services, from domestic rail freight transportation to motor carrier services. A
transport contract documents all the important details of a transportation service agreement, including the obligations of
both parties, shipping method, delivery times, and fees and costs.
2. Parties
The parties to the contract of carriage are the following, namely:

1. Carrier – the party who agrees to transport
2. Shipper – the party whose goods are transported
3. Passenger – the person object of the transportation, and
4. Consignee – the person to whom the goods are sent.
3. Perfection of Contract
CASES:
In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of the
same, namely: (a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected
by mere consent (See Article 1356, Civil Code of the Philippines), and (b) the contract "of carriage" or "of common carriage"
itself which should be considered as a real contract for not until the carrier is actually used can the carrier be said to have
already assumed the obligation of a carrier (Paras, Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.).
In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the mere consent of
the parties. There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from Manila
to Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid
ticket advice that ROLACO Engineering has prepaid the airfares of the appellee's contract workers advising the appellant
that it must transport the contract workers on or before the end of March, 1981 and the other batch in June, 1981. Even if a
PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket was yet issued,
the fact remains that the passage had already been paid for by the principal of the appellee, and the appellant had accepted
such payment. The existence of this payment was never objected to nor questioned by the appellant in the lower court.
Thus, the cause or consideration which is the fare paid for the passengers exists in this case.
The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is the transport of
the passengers from the place of departure to the place of destination as stated in the telex (British Airways v. CA, 218
SCRA 699).
For Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration arising
from the causes enumerated in Art. 1734; and in these instances, the burden of proving that damages were caused by the
fault or negligence of the carrier rests upon him. However, the carrier must first establish that the loss or deterioration was
occasioned by one of the excepted causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar
as Art. 362 appears to require of the carrier only ordinary diligence, the same is .deemed to have been modified by Art.
1733 of the Civil Code (Mauro Ganzon v. CA, et. al. 161 SCRA 646).
The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in
the passenger manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly shows that
he had indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage
between them when it failed to bring Lapuz to his destination. This Court has held that a contract to transport passengers
is different in kind and degree from any other contractual relation. The business of the carrier is mainly with the traveling
public. It invites people to avail themselves of the comforts and advantages it offers. The contract of air carriage generates
a relation attended with a public duty. Passengers have the right to be treated by the carrier's employees with kindness,
respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language,
indignities and abuses from such employees. So it is that any discourteous conduct on the part of these employees toward
a passenger gives the latter an action for damages against the carrier. The breach of contract was aggravated in this case
when, instead of courteously informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted "Down!
Down!" while pointing at him, thus causing him embarrassment and public humiliation (Korean Airlines v. CA, 234 SCRA
717).
4. Tests and Characteristics
CASES:
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association 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." The test to determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of
the business transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals is instructive. In referring to
Article 1732 of the Civil Code, it held thus: "The above article 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"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguished between 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. We think that Article 1732 deliberately refrained from making such distinctions." Hijacking, not being
included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with
Article 1745 of the Civil Code (Bascos v. CA, 221 SCRA 318).
The occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly
regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against
all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are
inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence. We, therefore, agree
with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of the undelivered
merchandise which was lost because of an event entirely beyond private respondent's control (De Guzman v. CA, 168
SCRA 612).
Bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a variable weather
condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to
face. Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it highly vulnerable
to deterioration; as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proof
was adduced by the petitioner showing that the carrier was remise in the exercise of due diligence in order to minimize the
loss or damage to the goods it carried (Planters Products Inc., v. CA, 226 SCRA 476).
Art. 1732. 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 compensation, offering their services to the
public.
The above article 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"). Article 1732 also
carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between 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. We think that Article 1732
deliberately refrained from making such distinctions. As common carriers, the Fabres were found to exercise "extraordinary
diligence" for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that
they exercise the diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of
the Code provides:
Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the
former's employees although such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father
of a family in the selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that petitioners
are liable under Arts. 2176 and 2180 for quasi delict, fully justify findings them guilty of breach of contract of carriage under
Arts. 1733, 1755 and 1759 of the Civil Code (Fabre v. CA, 259 SCRA 426).
Much of 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 an isolated transaction, not a part of the business or occupation, and the carrier
does not hold itself out to carry the goods for the general public or to a limited clientele, although involving the carriage of
goods for a fee, the person or corporation providing such service could very well be just a private carrier. A typical case is
that of a charter party which includes both the vessel and its crew, such as in a bareboat or demise, where the charterer
obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages and gets the control of
the vessel and its crew. Contrary to the conclusion made by the appellate court, its factual findings indicate that PKS
Shipping has engaged itself in the business of carrying goods for others, although for a limited clientele, undertaking to
carry such goods for a fee. The regularity of its activities in this 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
patrons of the carrier. Such restrictive interpretation would make it easy for a common carrier to escape liability by the simple
expedient of entering into those distinct agreements with clients (Philippine American General Insurance v. PKS
Shipping Co., G.R. No. 149038, April 9, 2003).
The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with
all legal requirements. The duty rests upon the common carrier simply for being engaged in "public service." The Civil Code
demands diligence which is required by the nature of the obligation and that which corresponds with the circumstances of
the persons, the time and the place. Hence, considering the nature of the obligation between Caltex and MT Vector, liability
as found by the Court of Appeals is without basis. The relationship between the parties in this case is governed by special
laws. Because of the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are
not expected to inquire into the vessel's seaworthiness, genuineness of its licenses and compliance with all maritime laws.
To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws
insofar as the protection of the public in general is concerned. By the same token, we cannot expect passengers to inquire
every time they board a common carrier, whether the carrier possesses the necessary papers or that all the carrier's
employees are qualified. Such a practice would be an absurdity in a business where time is always of the essence.
Considering the nature of transportation business, passengers and shippers alike customarily presume that common
carriers possess all the legal requisites in its operation. Caltex had the right to presume that the ship was seaworthy as
even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to
hold petitioner liable for damages (Caltex v. Sulpicio Lines, G.R. No. 131166, Sept. 30, 1999).
Petitioner claims that the loss of the goods was due to a fortuitous event under paragraph 1. Yet, its claim is not
substantiated. On the contrary, we find supported by evidence on record the conclusion of the trial court and the Court of
Appeals that the loss of the entire shipment of cement was due to the gross negligence of petitioner. Records show that in
the evening of June 24, 1984, the sea and weather conditions in the vicinity of Negros Occidental were calm. The records
reveal that petitioner took a shortcut route, instead of the usual route, which exposed the voyage to unexpected hazard.
Petitioner has only itself to blame for its misjudgment (Loadstar Shipping Co., v. Pioneer Asia Insurance Corp., G.R.
No. 157481, Jan. 24, 2006).
The rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his
employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for damage resulting therefrom. In this case, petitioner accepted
the cargo without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to
prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 1735 holds (Calvo v. UCPB General Insurance Cp., 379 SCRA 510).
It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business
tax against common carriers is to prevent a duplication of the so-called "common carrier's tax." Petitioner is already paying
three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue Code. To tax
petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local
Government Code (First Philippine Industrial Corp. v. CA, 300 SCRA 661).
Petitioner still headed to the consignee's wharf despite knowledge of an incoming typhoon. During the time that the barge
was heading towards the consignee's wharf on September 5, 1990, typhoon "Loleng" has already entered the Philippine
area of responsibility. The petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability for the
loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short of due diligence required from a
common carrier. More importantly, the officers/employees themselves of petitioner admitted that when the towing bits of the
vessel broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it was no longer affected
by the typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a human factor, i.e., negligence had
intervened (Asia Lighterage and Shipping Inc. v. CA, 409 SCRA 340).
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the
defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the
nature of the relation of the parties. Nevertheless, the requirement that responsible causes other than those due to
defendant's conduct must first be eliminated, for the doctrine to apply, should be understood as being confined only to cases
of pure (non-contractual) tort since obviously the presumption of negligence in culpa contractual, as previously so pointed
out, immediately attaches by a failure of the covenant or its tenor. In the case of the truck driver, whose liability in a civil
action is predicated on culpa acquiliana, while he admittedly can be said to have been in control and management of the
vehicle which figured in the accident, it is not equally shown, however, that the accident could have been exclusively due to
his negligence, a matter that can allow, forthwith, res ipsa loquitur to work against him (FGU Insurance v. GP Sarmiento
Trucking Corp., 386 SCRA 312).
5. Distinguished from Private Carriers and other Contracts
CASES:
The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence,
a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As
a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy,
and is deemed valid. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as
such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the
negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has
no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. And
furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact
and legal contemplation merely a receipt and a document of title not a contract, for the contract is the charter party. The
consignee may not claim ignorance of said charter party because the bills of lading expressly referred to the same.
Accordingly, the consignees under the bills of lading must likewise abide by the terms of the charter party. And as stated,
recovery cannot be had thereunder, for loss or damage to the cargo, against the shipowners, unless the same is due to
personal acts or negligence of said owner or its manager, as distinguished from its other agents or employees. In this case,
no such personal act or negligence has been proved (Home Insurance Co. v. American Steamship, 23 SCRA 24).
It is undisputed that VSI did not offer its services to the general public. As found by the Regional Trial Court, it carried
passengers or goods only for those it chose under a "special contract of charter party." As correctly concluded by the Court
of Appeals, the MV Vlasons I "was not a common but a private carrier.” Consequently, the rights and obligations of VSI and
NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of
private carriage or charter party (National Steel Corp. v. CA, 283 SCRA 45).
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer,
exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain.
Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the
same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage
is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their
duties and obligations which perforce 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 common carriers (Valenzuela Hardwood and Industrial Supply Inc. v. CA, 274 SCRA
642).
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 so demands. There is no fixed standard of diligence applicable
to each and every contractual obligation and each case must be determined upon its particular facts. The degree of diligence
required depends on the circumstances of the specific obligation and whether one has been negligent is a question of fact
that is to be determined after taking into account the particulars of each case. The lower court declared that respondent’s
employee was negligent. This factual finding, however, is not supported by the evidence on record. While factual findings
below are generally conclusive upon this court, the rule is subject to certain exceptions, as when the trial court overlooked,
misunderstood, or misapplied some facts or circumstances of weight and substance which will affect the result of the case.
In the case at bar, the evidence on record shows that respondent company performed its duty diligently and did not commit
any contractual breach. Hence, petitioner cannot recover and must bear her own damage (Crisostomo v. CA, 409 SCRA
528).
6. Governing Laws
a. 1987 Philippine Constitution
There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a situation where
the goods had already reached their place of destination and are stored in the warehouse of the carrier. The subject goods
were still awaiting transshipment to their port of destination, and were stored in the warehouse of a third party when last
seen and/or heard of. However, Article 1736 is applicable to the instant suit. Under said article, the carrier may be relieved
of the responsibility for loss or damage to the goods upon actual or constructive delivery of the same by the carrier to the
consignee, or to the person who has a right to receive them. In sales, actual delivery has been defined as the ceding of
corporeal possession by the seller, and the actual apprehension of corporeal possession by the buyer or by some person
authorized by him to receive the goods as his representative for the purpose of custody or disposal. By the same token,
there is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or to
his duly authorized agent and a reasonable time is given him to remove the goods. The court a quo found that there was
actual delivery to the consignee through its duly authorized agent, the carrier (Samar Mining Co., Inc. v. Nordeutscher
Lloyd, 132 SCRA 529).
The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their
loss, destruction or deterioration. As the cargoes in question were transported from Japan to the Philippines, the liability of
Petitioner Carrier is governed primarily by the Civil Code. However, in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of Commerce and by special laws. Thus, the Carriage of
Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code (Eastern Shipping Lines, Inc. v. IAC,
150 SCRA 463).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to domestic trade and
not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically
provide for the subject of collision, said Act in no uncertain terms, restricts its application "to all contracts for the carriage of
goods by sea to and from Philippine ports in foreign trade." Under Section I thereof, it is explicitly provided that "nothing in
this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting
its application." By such incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce,
but more importantly does not repeal nor limit its application.
As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package or per bale of raw
cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the law on averages should be applied in
determining their liability. MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of
lading and corroborated no less by invoices offered as evidence ' during the trial. Besides, common carriers, in the language
of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of
goods where such injury or loss was caused by its own negligence." Negligence of the captains of the colliding vessel being
the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court
and the Court of Appeals acted correctly in not applying the law on averages (Articles 806 to 818, Code of Commerce)
(National Development Co., v. CA, 164 SCRA 593).
7. Government Regulation
a. Nature of Business
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 such regulations must not have the effect of depriving an owner of his property without due process 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 aside from such constitutional limitations, the
determination of the nature and extent of the regulations which should be prescribed rests in the hands of the legislator
(Fisher v. Yangco Steamship Co., 31 Phil 1).
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 Order No. 92-587 defining the policy
framework on the regulation of transport services and LTFRB Memorandum Circular No. 92-009 promulgating the
implementing guidelines on DOTC Department Order No. 92-587, the said administrative issuances being amendatory and
violative of the Public Service Act and the Rules of Court. Consequently, we rule that the 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. No grave abuse of discretion however was committed in the issuance of DOTC
Memorandum Order No. 90-395 and DOTC Memorandum dated October 8, 1992, the same being merely internal
communications between administrative officers (KMU Labor Center v. Garcia Jr., 239 SCRA 386).
b. Registered Owner Rule
The Court has invariably held in several decisions that the registered owner of a public service vehicle is responsible for
damages that may arise from consequences incident to its operation or that may be caused to any of the passengers
therein. The claim of the petitioner that he is not hable in view of the lease contract executed by and between him and
Roberto Espiritu which exempts him from liability to third persons, cannot be sustained because it appears that the lease
contract, adverted to, had not been approved by the Public Service Commission. It is settled in our jurisprudence that if the
property covered by a franchise is transferred or leased to another without obtaining the requisite approval, the transfer is
not binding upon the public and third persons. Bienvenido Gelisan, the registered owner, is not, however, without recourse.
He has a right to be indemnified by Roberto Espiritu for the amount that he may be required to pay as damages for the
injury caused to Benito Alday, since the lease contract in question, although not effective against the public for not having
been approved by the Public Service Commission, is valid and binding between the contracting parties (Gelisan v. Alday,
154 SCRA 388).
The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the operations
of the carrier, even though the specific vehicle involved may already have been transferred to another person. This doctrine
rests upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the right to
assume that the registered owner is the actual or lawful owner thereof It would be very difficult and often impossible as a
practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by
the vehicles being negligently operated if they should be required to prove who the actual owner is. The registered owner
is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's claim, private
respondent is not required to go beyond the vehicle's certificate of registration to ascertain the owner of the carrier. In this
regard, the letter presented by petitioner allegedly written by Benjamin Tee admitting that Licuden was his driver, had no
evidentiary value not only because Benjamin Tee was not presented in court to testify on this matter but also because of
the aforementioned doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set
at naught the purpose or public policy which infuses that doctrine (Benedicto v. IAC, 187 SCRA 547).
We have consistently held that the liability of the registered owner of a public service vehicle, like petitioner Philtranco, for
damages arising from the tortious acts of the driver is primary, direct, and joint and several or solidary with the driver. As to
solidarity, Article 2194 expressly provides:
Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary.
Since the employer's liability is primary, direct and solidary, its only recourse if the judgment for damages is satisfied by it
is to recover what it has paid from its employee who committed the fault or negligence which gave rise to the action based
on quasi-delict. Article 2181 of the Civil Code provides:
Art. 2181. Whoever pays for the damage caused by his dependents or employees may recover from the latter
what he has paid or delivered in satisfaction of the claim (Philtranco Service Enterprises, Inc. v. CA, 273
SCRA 562).
c. Kabit System
The parties herein operated under an arrangement, commonly known as the "kabit system" whereby a person who has
been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such
franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this
privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes
of the prevalence of graft and corruption in the government transportation offices. Although not outrightly penalized as a
criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and in
existent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce
an illegal contract, but will leave both where it finds then. Upon this premise it would be error to accord the parties relief
from their predicament. Article 1412 of the Civil Code denies them such aid. It provides:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the
following rules shall be observed:
1. When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of the
contract, or demand, the performance of the other's undertaking.
The defect in existence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of
time cannot give efficacy to contracts that are null and void (Teja v. IAC, 148 SCRA 347 & Lita Enterprises, Inc. v. CA,
129 SCRA 79).
In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the registered owner and operator of
record at the time of the accident. lt is true that VIDAD had executed a re-sale to SANTOS, but the document was not
registered. Although SANTOS, as the kabit was the true owner as against VIDAD, the latter, as the registered
owner/operator and grantee of the franchise, is directly and primarily responsible and liable for the damages caused to
SIBUG, the injured party, as a consequence of the negligent or careless operation of the vehicle. This ruling is based on
the principle that the operator of record is considered the operator of the vehicle in contemplation of law as regards the
public and third persons even if the vehicle involved in the accident had been sold to another where such sale had not been
approved by the then Public Service Commission. For the same basic reason, as the vehicle here in question was registered
in VIDAD'S name, the levy on execution against said vehicle should be enforced so that the judgment in the BRANCH XVII
CASE may be satisfied, notwithstanding the fact that the secret ownership of the vehicle belonged to another. SANTOS, as
the kabit should not be allowed to defeat the levy on his vehicle and to avoid his responsibilities as a kabitowner for he had
led the public to believe that the vehicle belonged to VIDAD. This is one way of curbing the pernicious kabit system that
facilitates the commission of fraud against the travelling public. As indicated in the Erezo case, supra, SANTOS' remedy.
as the real owner of the vehicle, is to go against VIDAD, the actual operator who was responsible for the accident, for the
recovery of whatever damages SANTOS may suffer by reason of the execution. In fact, if SANTOS, as the kabit had been
impleaded as a party defendant in the BRANCH XVII CASE, he should be held jointly and severally liable with VIDAD and
the driver for damages suffered by SIBUG, as well as for exemplary damages (Santos v. Sibug, 104 SCRA 520).
In the present case it is at once apparent that the evil sought to be prevented in enjoining the kabit system does not exist.
First, neither of the parties to the pernicious kabit system is being held liable for damages. Second, the case arose from the
negligence of another vehicle in using the public road to whom no representation, or misrepresentation, was necessary.
Thus it cannot be said that private respondent Gonzales and the registered owner of the jeepney were in estoppel for leading
the public to believe that the jeepney belonged to the registered owner. Third, the riding public was not bothered nor
inconvenienced at the very least by the illegal arrangement. On the contrary, it was private respondent himself who had
been wronged and was seeking compensation for the damage done to him. Certainly, it would be the height of inequity to
deny him his right. In light of the foregoing, it is evident that private respondent has the right to proceed against petitioners
for the damage caused on his passenger jeepney as well as on his business. Any effort then to frustrate his claim of
damages by the ingenuity with which petitioners framed the issue should be discouraged, if not repelled (Abelardo Lim v.
CA, 373 SCRA 394).
d. Boundary System
The owner and operator of a passenger jeepney leased it to another, but without the approval of the Public Service
Commission. In a subsequent collision a passenger died. We ruled that since the lease was made without such approval,
which was required by law, the owner continued to be the operator of the vehicle in legal contemplation and as such was
responsible for the consequences incident to its operation. The same responsibility was held to attach in a case where the
injured party was not a passenger but a third person, who sued on the theory of culpa aquiliana (Timbol vs. Osias, L-7547,
April 30, 1955). There is no reason why a different rule should be applied in a subsidiary liability case under Article 103 of
the Revised Penal Code. As in the existence of an employer-employee relationship between the owner of the vehicle and
the driver. Indeed to exempt from liability the owner of a public vehicle who operates it under the "boundary system" on the
ground that he is a mere lessor would be not only to abet flagrant violations of the Public Service law but also to place the
riding public at the mercy of reckless and irresponsible drivers - reckless because the measure of their earnings depends
largely upon the number of trips they make and, hence, the speed at which they drive; and irresponsible because most if
not all of them are in no position to pay the damages they might cause (Magboo v. Bernardo, 7 SCRA 952).
III. OBLIGATIONS OF THE PARTIES

A. Obligation of the Carrier
1. Duty to Accept
We should not finally dispose of the case without indicating that since the institution of these proceedings the enactment of
Acts No. 2307 and No. 2362 (creating a Board of Public Utility Commissioners and for other purposes) may have materially
modified the right to institute and maintain such proceedings in this jurisdiction. But the demurrer having been formally
submitted for judgment before the enactment of these statutes, counsel have not been heard in this connection. We
therefore refrain from any comment upon any questions which might be raised as to whether or not there may be another
adequate and appropriate remedy for the alleged wrong set forth in the complaint. Our disposition of the question raised by
the demurrer renders that unnecessary at this time, though it may not be improper to observe that a careful examination of
those acts confirms us in the holding upon which we base our ruling on this demurrer, that is to say "That whatever may
have been the rule at the 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" (Fisher v. Yangco Steamship Co., supra).
2. Duty to Deliver
While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not
vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given
date or time (Mendoza v. Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or cargo should at least be
made within a reasonable time. In the case before us, we find that a delay in the delivery of the goods spanning a period of
two (2) months and seven (7) days falls was beyond the realm of reasonableness. Described as gelatin capsules for use in
pharmaceutical products, subject shipment was delivered to, and left in, the possession and custody of petitioner-carrier for
transport to Manila via Oakland, California. But through petitioner's negligence was mishipped to Richmond, Virginia.
Petitioner's insistence that it cannot be held liable for the delay finds no merit (Maersk Line v. CA, 222 SCRA 108).
Demurrage, in its strict sense, is the compensation provided for in the contract of affreightment for the detention of the
vessel beyond the time agreed on for loading and unloading. Essentially, demurrage is the claim for damages for failure to
accept delivery. In a broad sense, every improper detention of a vessel may be considered a demurrage. Liability for
demurrage, using the word in its strictly technical sense, exists only when expressly stipulated in the contract. Using the
term in its broader sense, damages in the nature of demurrage are recoverable for a breach of the implied obligation to load
or unload the cargo with reasonable dispatch, but only by the party to whom the duty is owed and only against one who is
a party to the shipping contract. Notice of arrival of vessels or conveyances, or of their placement for purposes of unloading
is often a condition precedent to the right to collect demurrage charges. It will be remembered that in overland transportation,
an unreasonable delay in the delivery of transported goods is sufficient ground for the abandonment of goods. By analogy,
this can also apply to maritime transportation. Further, with much more reason can petitioner in the instant case properly
abandon the goods, not only 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 of reshipment. And,
said choice having been duly communicated, the same is binding upon the parties on legal and equitable considerations of
estoppel (Magellan Manufacturing Marketing Corp. v. CA, 201 SCRA 102).
We hold that the petitioner's defense cannot exculpate it nor mitigate its liability. On the contrary, such a claim demonstrates
beyond cavil the petitioner's lack of genuine concern for the safety of its passengers. It was, perhaps, only providential then
the sea happened to be calm. Even so, the petitioner should not expect its passengers to act in the manner it desired. The
passengers were not stoics; becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar
zone as nighttime is not the sole prerogative of the faint-hearted. More so in the light of the many tragedies at sea resulting
in the loss of lives of hopeless passengers and damage to property simply because common carriers failed in their duty to
exercise extraordinary diligence in the performance of their obligations (Trans-Asia Shipping Lines, Inc. v. CA, 254 SCRA
260).
3. Where and to Whom Delivered
4. Duty to Exercise Extraordinary Diligence

a. Presumption of Negligence
i. Carriage of Goods
Common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting
the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they
observed such diligence. However, the presumption of fault or negligence will not arise if the loss is due to any of the
following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy
in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the
goods or defects in the packing or the container; or (5) an order or act of competent public authority. This is a closed list. If
the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor
(Belgian Overseas Chartering v. Phil. First Insurance Co., 383 SCRA 23).
We find that the carrier failed to observe the required extraordinary diligence in the vigilance over the goods placed in its
care. The proofs presented by North Front Shipping Services, Inc., were insufficient to rebut the prima facie presumption of
private respondent's negligence, more so if we consider the evidence adduced by petitioners. However, we cannot attribute
the destruction, loss or deterioration of the cargo solely to the carrier. We find the consignee Republic Flour Mills Corporation
guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not immediately start the
unloading operations. No explanation was proffered by the consignee as to why there was a delay of six (6) days. Had the
unloading been commenced immediately the loss could have been completely avoided or at least minimized. As testified to
by the chemist who analyzed the corn samples, the mold growth was only at its incipient stage and could still be arrested
by drying. The corn grains were not yet toxic or unfit for consumption. For its contributory negligence, Republic Flour Mills
Corporation should share at least 40% of the loss (Tabacalera Insurance Co. v. North Front Shipping Inc., 272 SCRA
597).
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 (FGU Insurance Co. v. Sarmiento Trucking Corp., supra).
ii. Carriage of Passengers
The provisions of the Civil Code on this question of liability are clear and explicit. Article 1733 binds common carriers, "from
the nature of their business and by reasons of public policy, ... to observe extraordinary diligence in the vigilance ... for the
safety of the passengers transported by them according to all the circumstances of each case." Article 1755 establishes the
standard of care required of a common carrier, which is, "to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." Article 1756
fixes the burden of proof by providing that "in case of death of or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed extra-ordinary diligence as prescribed
in Articles 1733 and 1755." Lastly, Article 1757 states that "the responsibility of a common carrier for the safety of
passengers ... cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or
otherwise." At any rate, in the absence of a satisfactory explanation by appellant as to how the accident occurred, the
presumption is, it is at fault (Abeto v. PAL, 115 SCRA 489 BLTB v. IAC, 167 SCRA 379).
b. Duration of Duty
i. Carriage of Goods
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an
insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a reasonable time, in the absence, of any agreement as to the time
of delivery. But where a carrier has made an express contract to transport and deliver property within a specified time, it is
bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen. This result logically
follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled from performing it
without any default in himself, and has no remedy over, then the law will excuse him, but where the party by his own contract
creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable
necessity because he might have provided against it by contract. Whether or not there has been such an undertaking on
the part of the carrier to be determined from the circumstances surrounding the case and by application of the ordinary rules
for the interpretation of contracts (Saludo v. CA, 207 SCRA 498).
We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of
lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as
buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint
before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which,
conformably with Art. 1736 had, other than the consignee, the right to receive them was proper (Macam v. CA, 313 SCRA
77).
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its
loss or of any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same effects
as the return of the bill of lading. Conformably with the aforecited provision, the surrender of the original bill of lading is not
a condition precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill of
lading is not possible, acknowledgment of the delivery by signing the delivery receipt suffices (Republic v. Lorenzo
Shipping Corp., 450 SCRA 550).
ii. Carriage of Passengers
It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger
alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger
has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances. Thus, a person who, after alighting from a
train, walks along the station platform is considered still a passenger. So also, where a passenger has alighted at his
destination and is proceeding by the usual way to leave the company's premises, but before actually doing so is halted by
the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the
difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a
passenger entitled as such to the protection of the railroad and company and its agents (La Mallorca v. CA, 17 SCRA 739).
The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination
and has left the vessel owner's dock or premises. Once created, the relationship will not ordinarily terminate until the
passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity
to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance
are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from
all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. The carrier-
passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination
if, for example, such person remains in the carrier's premises to claim his baggage
Under the law, common carriers are, from the nature of their business and for reasons of public policy, bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case. More particularly, 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. Thus, where a passenger dies or is injured, the common carrier is presumed to have been at fault or to have
acted negligently. This gives rise to an action for breach of contract of carriage where all that is required of plaintiff is to
prove the existence of the contract of carriage and its non-performance by the carrier, that is, the failure of the carrier to
carry the passenger safely to his destination, which, in the instant case, necessarily includes its failure to safeguard its
passenger with extraordinary diligence while such relation subsists (Aboitiz Shipping v. CA, 179 SCRA 95).
The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due
regard for all circumstances. Such duty of a common carrier to provide safety to its passengers so obligates it not only
during the course of the trip but for so long as the passengers are within its premises and where they ought to be in
pursuance to the contract of carriage. The statutory provisions render a common carrier liable for death of or injury to
passengers (a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other
passengers or of strangers if the common carrier’s employees through the exercise of due diligence could have prevented
or stopped the act or omission. In case of such death or injury, a carrier is presumed to have been at fault or been negligent,
and by simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or
of its employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force
majeure. In the absence of satisfactory explanation by the carrier on how the accident occurred, which petitioners, according
to the appellate court, have failed to show, the presumption would be that it has been at fault, an exception from the general
rule that negligence must be proved (LRTA, et. al. v. Navidad, et. al., G.R. No. 145804, Feb. 6, 2003).
The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all
the rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier
passengers owes to its patrons extends to persons boarding cars as well as to those alighting therefrom. Moreover, the
circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital
for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be
stigmatized as callous indifference (Dangwa Transportation v. CA, 202 SCRA 574).
5. Defenses of Common Carrier

a. Fortuitous Event
In order to constitute a caso fortuito or force majeure that would exempt a person from liability under Article 1174 of the Civil
Code, it is necessary that the following elements must concur: (a) the cause of the breach of the obligation must be
independent of the human will (the will of the debtor or the obligor); (b) the event must be either unforeseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner;
and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. Caso fortuito or force
majeure, by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which,
though foreseen, are inevitable. It is, therefore, not enough that the event should not have been foreseen or anticipated, as
is commonly believed, but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is
not impossibility to foresee the same (Gacal v. PAL, 183 SCRA 189).
The record is to the effect that the only test applied to the steering knuckle in question was a purely visual inspection every
thirty days, to see if any cracks developed. It nowhere appears that either the manufacturer or the carrier at any time tested
the steering knuckle to ascertain whether its strength was up to standard, or that it had no hidden flaws would impair that
strength. And yet the carrier must have been aware of the critical importance of the knuckle's resistance; that its failure or
breakage would result in loss of balance and steering control of the bus, with disastrous effects upon the passengers. No
argument is required to establish that a visual inspection could not directly determine whether the resistance of this critically
important part was not impaired. Nor has it been shown that the weakening of the knuckle was impossible to detect by any
known test; on the contrary, there is testimony that it could be detected. We are satisfied that the periodical visual inspection
of the steering knuckle as practiced by the carrier's agents did not measure up to the required legal standard of "utmost
diligence of very cautious persons" — "as far as human care and foresight can provide", and therefore that the knuckle's
failure can not be considered a fortuitous event that exempts the carrier from responsibility. It may be impracticable, as
appellee argues, to require of carriers to test the strength of each and every part of its vehicles before each trip; but we are
of the opinion that a due regard for the carrier's obligations toward the traveling public demands adequate periodical tests
to determine the condition and strength of those vehicle portions the failure of which may endanger the safe of the
passengers (Necesito v. Paras, 104 Phil. 84).
T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the violence
of nature. Human intervention is to be excluded from creating or entering into the cause of the mischief. When the effect is
found to be in part the result of the participation of man, whether due to his active intervention or neglect or failure to act,
the whole occurrence is then humanized and removed from the rules applicable to the acts of God. The appellate court, in
affirming the finding of the trial court that human intervention in the form of contributory negligence by all the defendants
resulted to the loss of the cargoes, held that unloading outside the breakwater, instead of inside the breakwater, while a
storm signal was up constitutes negligence. It thus concluded that the proximate cause of the loss was Black Sea's
negligence in deciding to unload the cargoes at an unsafe place and while a typhoon was approaching. Parties to a contract
of carriage may, however, agree upon a definition of delivery that extends the services rendered by the carrier. In the case
at bar, Bill of Lading No. 2 covering the shipment provides that delivery be made "to the port of discharge or so near thereto
as she may safely get, always afloat.” The delivery of the goods to the consignee was not from "pier to pier" but from the
shipside of "M/V Alexander Saveliev" and into barges, for which reason the consignee contracted the services of petitioner.
Since Black Sea had constructively delivered the cargoes to Little Giant, through petitioner, it had discharged its duty
(Schmitz Transport v. Transport Ventures, Inc., 456 SCRA 557).
Under the circumstances of this case, the explosion of the new tire may not be considered a fortuitous event. There are
human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from
manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used in
the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within five days' use.
Be that as it may, it is settled that an accident caused either by defects in the automobile or through the negligence of its
driver is not a caso fortuito that would exempt the carrier from liability for damages. Moreover, a common carrier may not
be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was
not negligent in causing the death or injury resulting from an accident (Yobido v. CA, 281 SCRA 1).
b. Public Enemy
c. Improper Packing
d. Order of Public Authority
There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 and 362 of the Code of
Commerce which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and
which the petitioner invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will
suffer the losses and deterioration arising from the causes enumerated in Art. 1734; and in these instances, the burden of
proving that damages were caused by the fault or negligence of the carrier rests upon him. However, the carrier must first
establish that the loss or deterioration was occasioned by one of the excepted causes or was due to an unforeseen event
or to force majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier only ordinary diligence, the same
is .deemed to have been modified by Art. 1733 of the Civil Code.
DISSENT (Melencio-Herrera): Through the "order" or "act" of "competent public authority," therefore, the performance of a
contractual obligation was rendered impossible. The scrap iron that was dumped into the sea was "destroyed" while the
rest of the cargo was "seized." The seizure is evidenced by the receipt issues by Acting Mayor Rub stating that the
Municipality of Mariveles had taken custody of the scrap iron. Apparently, therefore, the seizure and destruction of the goods
was done under legal process or authority so that petitioner should be freed from responsibility.
Art. 1743. If through order of public authority the goods are seized or destroyed, the common carrier is not
responsible, provided said public authority had power to issue the order (Ganzon v. CA, 161 SCRA 646).
e. Defenses in Carriage of Passenger

i. Employees
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the second view. At
least three very cogent reasons underlie this rule. (1) the special undertaking of the carrier requires that it furnish its
passenger that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter
alia from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier's
own servants charged with the passenger's safety; (2) said liability of the carrier for the servant's violation of duty to
passengers, is the result of the formers confiding in the servant's hands the performance of his contract to safely transport
the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as
between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's
employees against passengers, since it, and not the passengers, has power to select and remove them. Accordingly, it is
the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence
and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers,
and social attitude (Maranan v. Perez, 20 SCRA 412).
The only good reason for making the carrier responsible for the misconduct of the servant perpetrated in his own interest,
and not in that of his employer, or otherwise within the scope of his employment, is that the servant is clothed with the
delegated authority, and charge with the duty by the carrier, to execute his undertaking with the passenger. And it cannot
be said, we think, that there is any such delegation to the employees at a station with reference to passenger embarking at
another or traveling on the train. Of course, we are speaking only of the principle which holds a carrier responsible for wrong
done to passenger by servants acting in their own interest, and not in that of the employer. That principle is not the ordinary
rule,respondent superior, by which the employer is held responsible only for act or omissions of the employee in the scope
of his employment; but the only reason in our opinion for a broader liability arises from the fact that the servant, in mistreating
the passenger wholly for some private purpose of his own, in the very act, violates the contractual obligation of the employer
for the performance of which he has put the employee in his place. The reason does not exist where the employee who
committed the assault was never in a position in which it became his duty to his employer to represent him in discharging
any duty of the latter toward the passenger. The proposition that the carrier clothes every employee engaged in the
transportation business with the comprehensive duty of protecting every passenger with whom he may in any way come in
contact, and hereby makes himself liable for every assault committed by such servant, without regard to the inquiry whether
or not the passenger has come within the sphere of duty of that servant as indicated by the employment, is regarded as not
only not sustained by the authorities, but as being unsound and oppressive both to the employer and the employee (Gillaco
v. Manila Railroad, 97 Phil 884).
ii. Other Passengers and Third Persons

Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity
of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such
as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before
allowing them on board could have been employed without violating the passenger's constitutional rights. As this Court
amended in Gacal v. Philippine Air Lines, Inc., a common carrier can be held liable for failing to prevent a hijacking by
frisking passengers and inspecting their baggages. From the foregoing, it is evident that petitioner's employees failed to
prevent the attack on one of petitioner's buses because they did not exercise the diligence of a good father of a family.
Hence, petitioner should be held liable for the death of Atty. Caorong (Fortune Express, Inc. v. CA, 188 SCRA 216).
Although the suggested precaution could have prevented the injury complained of, the rule of ordinary care and prudence
is not so exacting as to require one charged with its exercise to take doubtful or unreasonable precautions to guard against
unlawful acts of strangers. The carrier is not charged with the duty of providing or maintaining vehicles as to absolutely
prevent any and all injuries to passengers. Where the carrier uses cars of the most approved type, in general use by others
engaged in the same occupation, and exercises a high degree of care in maintaining them in suitable condition, the carrier
cannot be charged with negligence in this respect. Finally, petitioner contends that it is to the greater interest of the State if
a carrier were made liable for such stone-throwing incidents rather than have the bus riding public lose confidence in the
transportation system. Sad to say, we are not in a position to so hold; such a policy would be better left to the consideration
of Congress which is empowered to enact laws to protect the public from the increasing risks and dangers of lawlessness
in society (Pilapil v. CA, 180 SCRA 546).
Considering the factual findings of the Court of Appeals-the bus driver did not immediately stop the bus at the height of the
commotion; the bus was speeding from a full stop; the victims fell from the bus door when it was opened or gave way while
the bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the
bus was not properly equipped with doors in accordance with law-it is clear that the petitioners have failed to overcome the
presumption of fault and negligence found in the law governing common carriers. The petitioners' argument that the
petitioners "are not insurers of their passengers" deserves no merit in view of the failure of the petitioners to prove that the
deaths of the two passengers were exclusively due to force majeure and not to the failure of the petitioners to observe
extraordinary diligence in transporting safely the passengers to their destinations as warranted by law (Bachelor Express
v. CA, 188 SCRA 216).
f. Passenger’s Baggages
The mandatory use of the most sophisticated electronic detection devices and magnetometers, the imposition of severe
penalties, the development of screening procedures, the compilation of hijacker behavioural profiles, the assignment of sky
marshals, and the weight of outraged world opinion may have minimized hijackings but all these have proved ineffective
against truly determined hijackers. World experience shows that if a group of armed hijackers want to take over a plane in
flight, they can elude the latest combined government and airline industry measures. And as our own experience in
Zamboanga City illustrates, the use of force to overcome hijackers, results in the death and injury of innocent passengers
and crew members. We are not in the least bit suggesting that the Philippine Airlines should not do everything humanly
possible to protect passengers from hijackers' acts. We merely state that where the defendant has faithfully complied with
the requirements of government agencies and adhered to the established procedures and precautions of the airline industry
at any particular time, its failure to take certain steps that a passenger in hindsight believes should have been taken is not
the negligence or misconduct which mingles with force majeure as an active and cooperative cause. Under the circumstance
of the instant case, the acts of the airline and its crew cannot be faulted as negligence. The hijackers had already shown
their willingness to kill. One passenger was in fact killed and another survived gunshot wounds. The lives of the rest of the
passengers and crew were more important than their properties. Cooperation with the hijackers until they released their
hostages at the runway end near the South Superhighway was dictated by the circumstances (Quisumbing, Sr. v. CA, 189
SCRA 605).
Passengers are also allowed one handcarried bag each provided it conforms to certain prescribed dimensions. If Mr.
Rapadas was not allowed to handcarry the lost attache case, it can only mean that he was carrying more than the allowable
weight for all his luggages or more than the allowable number of handcarried items or more than the prescribed dimensions
for the bag or valise. The evidence on any arbitrary behavior of a Pan Am employee or inexcusable negligence on the part
of the carrier is not clear from the petition. Absent such proof, we cannot hold the carrier liable because of arbitrariness,
discrimination, or mistreatment. We are not by any means suggesting that passengers are always bound to the stipulated
amounts printed on a ticket, found in a contract of adhesion, or printed elsewhere but referred to in handouts or forms. We
simply recognize that the reasons behind stipulations on liability limitations arise from the difficulty, if not impossibility, of
establishing with a clear preponderance of evidence the contents of a lost valise or suitcase. Unless the contents are
declared, it will always be the word of a passenger against that of the airline. If the loss of life or property is caused by the
gross negligence or arbitrary acts of the airline or the contents of the lost luggage are proved by satisfactory evidence other
than the self-serving declarations of one party, the Court will not hesitate to disregard the fine print in a contract of adhesion
(Pan American World Airways v. Rapadas, 209 SCRA 67).
Contrary to petitioner’s contention, there was nothing in the conduct of respondent which showed that they were motivated
by malice or bad faith in loading her baggages on another plane. Due to weight and balance restrictions, as a safety
measure, respondent airline had to transport the baggages on a different flight, but with the same expected date and time
of arrival in the Philippines (Tan v. Northwest, 327 SCRA 263).
The cause of the loss in the case at bar was petitioner’s negligence in not ensuring that the doors of the baggage
compartment of its bus were securely fastened. As a result of this lack of care, almost all of the luggage was lost, to the
prejudice of the paying passengers. Where the common carrier accepted its passenger’s baggage for transportation and
even had it placed in the vehicle by its own employee, its failure to collect the freight charge is the common carrier’s own
lookout. It is responsible for the consequent loss of the baggage. In the instant case, defendant appellant’s employee even
helped Fatima Minerva Fortades and her brother load the luggages/baggages in the bus’ baggage compartment, without
asking that they be weighed, declared, receipted or paid for. Neither was this required of the other passengers (Sarkies
Tours v. CA, 280 SCRA 58).
B. Obligation of the Shipper, Consignee and Passenger
1. Negligence of Shipper or Passenger
a. Last Clear Chance
We reiterate that the principle about "the last clear" chance, would call for application in a suit between the owners and
drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce
its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its owners on the
ground that the other driver was likewise guilty of negligence. Thus, the respondent court erred in applying said doctrine.
On the presumption that drivers who bump the rear of another vehicle guilty and the cause of the accident, unless
contradicted by other evidence. The above discussion would have been correct were it not for the undisputed fact that the
U-turn made by the jeepney was abrupt (Exhibit "K," Pascua). The jeepney, which was then traveling on the eastern
shoulder, making a straight, skid mark of approximately 35 meters, crossed the eastern lane at a sharp angle, making a
skid mark of approximately 15 meters from the eastern shoulder to the point of impact (Exhibit "K" Pascua). Hence, delos
Reyes could not have anticipated the sudden U-turn executed by Manalo. The respondent court did not realize that the
presumption was rebutted by this piece of evidence (Phil. Rabbit Bus Lines v. IAC, 189 SCRA 158).
The respondent court adopted the doctrine of "last clear chance." The doctrine, stated broadly, is that the negligence of the
plaintiff does not preclude a recovery for the negligence of the defendant where it appears that the defendant, by exercising
reasonable care and prudence, might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff's
negligence. In other words, the doctrine of last clear chance means that even though a person's own acts may have placed
him in a position of peril, and an injury results, the injured person is entitled to recovery. As the doctrine is usually stated, a
person who has the last clear chance or opportunity of avoiding an accident, notwithstanding the negligent acts of his
opponent or that of a third person imputed to the opponent is considered in law solely responsible for the consequences of
the accident. The practical import of the doctrine is that a negligent defendant is held liable to a negligent plaintiff, or even
to a plaintiff who has been grossly negligent in placing himself in peril, if he, aware of the plaintiffs peril, or according to
some authorities, should have been aware of it in the reasonable exercise of due case, had in fact an opportunity later than
that of the plaintiff to avoid an accident (Bustamante v. CA, 193 SCRA 603).
b. Assumption of Risk
A circumstance which militates against the stand of appellant is the fact borne out by the evidence that when he boarded
the bus in question, he seated himself on the left side thereof resting his left arm on the window sill but with his left elbow
outside the window, this being his position in the bus when the collision took place. It is for this reason that the collision
resulted in the severance of said left arm from the body of appellant thus doing him a great damage. It is therefore apparent
that appellant is guilty of contributory negligence (Isaac v. A.L. Ammen Transportation, 101 Phil 1046).
It is settled that every person or motorist crossing a railroad track should use ordinary prudence and alertness to determine
the proximity of a train before attempting to cross. We are persuaded that the circumstances were beyond the control of
Amores for no person would sacrifice his precious life if he had the slightest opportunity to evade the catastrophe. Besides,
the authority in this jurisdiction is that the failure of a railroad company to install a semaphore or at the very least, to post a
flagman or watchman to warn the public of the passing train amounts to negligence (Philippine Nat’l Railways v. CA, 139
SCRA 87).
Furthermore, it has been held that airline passengers must take such risks incident to the mode of travel. In this regard,
adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of
which the passenger must assume or expect. After all, common carriers are not the insurer of all risks. The reliance is
misplaced. The factual background of the PAL case is different from the instant petition. In that case there was indeed a
fortuitous event resulting in the diversion of the PAL flight. However, the unforeseen diversion was worsened when "private
respondents (passenger) was left at the airport and could not even hitch a ride in a Ford Fiera loaded with PAL personnel,”
not to mention the apparent apathy of the PAL station manager as to the predicament of the stranded passengers. In light
of these circumstances, we held that if the fortuitous event was accompanied by neglect and malfeasance by the carrier's
employees, an action for damages against the carrier is permissible. Unfortunately, for private respondents, none of these
conditions are present in the instant petition. We are not oblivious to the fact that the cancellation of JAL flights to Manila
from June 15 to June 21, 1991 caused considerable disruption in passenger booking and reservation. In fact, it would be
unreasonable to expect, considering NAIA's closure, that JAL flight operations would be normal on the days affected.
Nevertheless, this does not excuse JAL from its obligation to make the necessary arrangements to transport private
respondents on its first available flight to Manila. After all, it had a contract to transport private respondents from the United
States to Manila as their final destination (Japan Airlines v. CA, 189 SCRA 158).
We find it hard to give serious thought to petitioner's contention that Sunga's taking an "extension seat" amounted to an
implied assumption of risk. It is akin to arguing that the injuries to the many victims of the tragedies in our seas should not
be compensated merely because those passengers assumed a greater risk of drowning by boarding an overloaded ferry.
This is also true of petitioner's contention that the jeepney being bumped while it was improperly parked constitutes caso
fortuito. A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable. This requires
that the following requirements be present: (a) the cause of the breach is independent of the debtor's will; (b) the event is
unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a normal
manner, and (d) the debtor did not take part in causing the injury to the creditor. Petitioner should have foreseen the danger
of parking his jeepney with its body protruding two meters into the highway (Calalas v. CA, 332 SCRA 356).
c. Freight
Freight transport is the physical process of transporting commodities and merchandise goods and cargo. The term shipping
originally referred to transport by sea but in American English, it has been extended to refer to transport by land or air as
well.
d. Demurrage
The term "demurrage" from Old French demeurage, from demeurer – to linger, tarry – originated in vessel chartering and
referred to the period when the charterer remained in possession of the vessel after the period normally allowed to load and
unload cargo.
C. Duty to Exercise Extraordinary Diligence

1. Rationale
That the business of common carriers is impressed with a special duty is recognized in the Philippines through the laws
which subject the same to control and regulation by the Public Service Commission. The public must of necessity rely on
the care and skill of common carriers in the vigilance over the goods and the safety of the passengers. Furthermore, with
the modern development of science and invention, transportation has become more rapid, but more complicated and
hazardous, so the public is forced to trust all the more in the utmost diligence and foresight of common carriers, whether by
land, sea, or air (Durano, Vol, XLII, No. 1).
2. How Duty is Complied With

it may be said that the relation of carrier and would-be passenger first begins when a person offers to become a passenger
and the carrier accepts the offer. It may also be said that a common carrier, being engaged in a public duty, makes a
continuous offer of its services and is therefore the offeror, with the would-be passenger accepting the offer, thereby binding
the carrier to a contract (Durano, Vol, XLII, No. 1).
3. Effect of Stipulation
When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid, but not
for willful acts or gross negligence. The reduction of fare does not justify any limitation of the common carrier's liability.
D. Extraordinary Diligence by Carriage by Sea

1. Seaworthiness
Seaworthiness relates to a vessel’s actual condition. Neither the granting of classification or the issuance of certificates
established seaworthiness. Authorities are clear that diligence in securing certificates of seaworthiness does not satisfy the
vessel owner’s obligation. Also securing the approval of the shipper of the cargo, or his surveyor, of the condition of the
vessel or her stowage does not establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has no
obligation in relation to seaworthiness (Delsan Transport v. CA, 369 SCRA 24).
The relationship between the parties in this case is governed by special laws. Because of the implied warranty of
seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessel's
seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold
them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in
general is concerned. By the same token, we cannot expect passengers to inquire every time they board a common carrier,
whether the carrier possesses the necessary papers or that all the carrier's employees are qualified. Such a practice would
be an absurdity in a business where time is always of the essence. Considering the nature of transportation business,
passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation.
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargoes.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine
Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable
for damages (Caltex v. Sulpicio Lines, 315 SCRA 709).
2. Overloading
The Court found that the Don Juan was overloaded. The Certificate of Inspection, dated August 27, 1979, issued by the
Philippine Coast Guard Commander at Iloilo City stated that the total number of persons allowed on the ship was 864, of
whom 810 are passengers, but there were actually 1,004 on board the vessel when it sank, 140 persons more than the
maximum number that could be safely carried by it. Taking these circumstances together, and the fact that the M/V Don
Juan, as the faster and better-equipped vessel, could have avoided a collision with the PNOC tanker, this Court held that
even if the Tacloban City had been at fault for failing to observe an internationally-recognized rule of navigation, the Don
Juan was guilty of contributory negligence (Negros Navigation v. CA, 281 SCRA 534).
3. Proper Storage
The words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no showing
that petitioners exercised due diligence to forestall or lessen the loss. Having been in the service for several years, the
master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate
when not properly stored while in transit. Equipped with the proper knowledge of the nature of steel sheets in coils and of
the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures
to avoid possible deterioration of the cargo. But none of these measures was taken. Having failed to discharge the burden
of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the
damage to the four coils (Belgian Overseas Chartering v. Phil. First Insurance Co., supra)
4. Negligence of Captain and Crew
We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with
the collision of the "Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of
passengers. We find no necessity for passing upon the degree of negligence or culpability properly attributable to PNOC
and PNOC Shipping or the master of the "Tacloban City," since they were never impleaded here. While the failure of Capt.
Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to
prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless
contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence
exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the two (2)
vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of the
"imminent danger of collision" but even of "the actual collision itself (Mecenas v. CA, 180 SCRA 83).
5. Deviation and Transhipment
E. Extraordinary Diligence in Carriage by Land
1. Roadworthiness
It is a well known physical tact that cars may skid on greasy or slippery roads, as in the instant case, without fault on account
of the manner of handling the car. Skidding means partial or complete loss of control of the car under circumstances not
necessarily implying negligence. It may occur without fault. No negligence as a matter of law can, therefore, be charged to
the petitioner. In fact, the moment he felt that the rear wheels of the jeep skidded, he promptly drove it to the left hand side
of the road, parallel to the slope of the mountain, because as he said, he wanted to play safe and avoid the embankment.
Under the particular circumstances of the instant case, the petitioner- driver who skidded could not be regarded as negligent,
the skidding being an unforeseen event, so that the petitioner had a valid excuse for his departure from his regular course.
The negligence of the petitioner not having been sufficiently established, his guilt of the crime charged has not been proven
beyond reasonable doubt. He is, therefore, entitled to acquittal (Bayasen v. CA, 103 SCRA 197).
2. Traffic Rules
Provided That on a highway, within a business or residential district, having two or more lanes for movement of traffic in
one direction, the driver of a vehicle may overtake or pass another vehicle on the right. The rule is settled that a driver
abandoning his proper lane for the purpose of overtaking another vehicle in an ordinary situation has the duty to see to it
that the road is clear and not to proceed if he cannot do so in safety. When a motor vehicle is approaching or rounding a
curve, there is special necessity for keeping to the right side of the road and the driver does not have the right to drive on
the left hand side relying upon having time to turn to the right if a car approaching from the opposite direction comes into
view (Mallari v. CA, 324 SCRA 147).
The CA said that allowing Pestaño to ply his route with a defective speedometer showed laxity on the part of Metro Cebu in
the operation of its business and in the supervision of its employees. The negligence alluded to here is in its supervision
over its driver, not in that which directly caused the accident. The fact that Pestaño was able to use a bus with a faulty
speedometer shows that Metro Cebu was remiss in the supervision of its employees and in the proper care of its vehicles.
It had thus failed to conduct its business with the diligence required by law (Pestano v. Sumayang, 346 SCRA 870).
3. Duty to Inspect
It must be considered that while it is true the passengers of appellant's bus should not be made to suffer for something over
which they had no control, as enunciated in the decision of this Court cited by His Honor, fairness demands that in measuring
a common carrier's duty towards its passengers, allowance must be given to the reliance that should be reposed on the
sense of responsibility of all the passengers in regard to their common safety. It is to be presumed that a passenger will not
take with him anything dangerous to the lives and limbs of his co-passengers, not to speak of his own. Not to be lightly
considered must be the right to privacy to which each passenger is entitled. He cannot be subjected to any unusual search,
when he protests the innocuousness of his baggage and nothing appears to indicate the contrary, as in the case at bar. In
other words, inquiry may be verbally made as to the nature of a passenger's baggage when such is not outwardly
perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. Calling a policeman to
his aid, as suggested by the service manual invoked by the trial judge, in compelling the passenger to submit to more rigid
inspection, after the passenger had already declared that the box contained mere clothes and other miscellaneous, could
not have justified invasion of a constitutionally protected domain. Police officers acting without judicial authority secured in
the manner provided by law are not beyond the pale of constitutional inhibitions designed to protect individual human rights
and liberties. Withal, what must be importantly considered here is not so much the infringement of the fundamental sacred
rights of the particular passenger herein involved, but the constant threat any contrary ruling would pose on the right of
privacy of all passengers of all common carriers, considering how easily the duty to inspect can be made an excuse for
mischief and abuse. Of course, when there are sufficient indications that the representations of the passenger regarding
the nature of his baggage may not be true, in the interest of the common safety of all, the assistance of the police authorities
may be solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed investigation
consistent with the rules of propriety and, above all, the constitutional rights of the passenger. It is in this sense that the
mentioned service manual issued by appellant to its conductors must be understood (Nocum v. Laguna Tayabas Bus Co.,
83 SCRA 386).
F. Extraordinary Diligence in Carriage by Air
Respondent TWA was also guilty of not informing its passengers of its alleged policy of giving less priority to discounted
tickets. While the petitioners had checked in at the same time, and held confirmed tickets, yet, only one of them was allowed
to board the plane ten minutes before departure time because the full-fare ticket he was holding was given priority over
discounted tickets. The other two petitioners were left behind.
It is respondent TWA's position that the practice of overbooking and the airline system of boarding priorities are reasonable
policies, which when implemented do not amount to bad faith. But the issue raised in this case is not the reasonableness
of said policies but whether or not said policies were incorporated or deemed written on petitioners' contracts of carriage.
Respondent TWA failed to show that there are provisions to that effect. Neither did it present any argument of substance to
show that petitioners were duly apprised of the overbooked condition of the flight or that there is a hierarchy of boarding
priorities in booking passengers. It is evident that petitioners had the right to rely upon the assurance of respondent TWA,
thru its agent in Manila, then in New York, that their tickets represented confirmed seats without any qualification. The failure
of respondent TWA to so inform them when it could easily have done so thereby enabling respondent to hold on to them as
passengers up to the last minute amounts to bad faith. Evidently, respondent TWA placed its self-interest over the rights of
petitioners under their contracts of carriage. Such conscious disregard of petitioners' rights makes respondent TWA liable
for moral damages. To deter breach of contracts by respondent TWA in similar fashion in the future, we adjudge respondent
TWA liable for exemplary damages, as well (Zalamea v. CA, 228 SCRA 23).
IV. BILL OF LADING AND OTHER FORMALITIES

A. Definition and Kinds
An on board bill of lading is one in which it is stated that the goods have been received on board the vessel which is to carry
the goods, whereas a received for shipment bill of lading is one in which it is stated that the goods have been received for
shipment with or without specifying the vessel by which the goods are to be shipped. Received for shipment bills of lading
are issued whenever conditions are not normal and there is insufficiency of shipping space. An on board bill of lading is
issued when the goods have been actually placed aboard the ship with every reasonable expectation that the shipment is
as good as on its way. It is, therefore, understandable that a party to a maritime contract would require an on board bill of
lading because of its apparent guaranty of certainty of shipping as well as the seaworthiness of the vessel which is to carry
the goods (Magellan Manufacturing Marketing Corp. v. CA, supra).
12 Common Types of Bill of Lading Forms & When To Use Them.

1. Straight Bill of Lading: This is typically used when shipping to a customer. The “Straight Bill of Lading” is for
shipping items that have already been paid for.
2. To Order Bill of Lading: Used for shipments when payment is not made in advance. This can be shipping to one
of your distributors or a customer on terms.
3. Clean Bill of Lading: A Clean Bill of Lading is simply a BOL that the shipping carrier has to sign off on saying that
when the packages were loaded they were in good condition. If the packages are damaged or the cargo is marred
in some way (rusted metal, stained paper, etc.), they will need to issue a “Soiled Bill of Lading” or a “Foul Bill of
Lading.”
4. Inland Bill of Lading: This allows the shipping carrier to ship cargo, by road or rail, across domestic land, but not
over seas.
5. Ocean Bill of Lading: Ocean Bills of Lading allows the shipper to transport the cargo over seas, nationally or
internationally.
6. Through Bill of Lading: Through Bills of Lading are a little more complex than most BOLs. It allows for the shipping
carrier to pass the cargo through several different modes of transportation and/or several different distribution
centers. This Bill of Lading needs to include an Inland Bill of Lading and/or an Ocean Bill of Lading depending on
its final destination.
7. Multimodal/Combined Transport Bill of Lading: This is a type of Through Bill of Lading that involves a minimum
of two different modes of transport, land or ocean. The modes of transportation can be anything from freight boat
to air.
8. Direct Bill of Lading: Use a Direct Bill of Lading when you know the same vessel that picked up the cargo will
deliver it to its final destination.
9. Stale Bill of Lading: Occasionally in cases of short-over-seas cargo transportation, the cargo arrives to port before
the Bill of Lading. When that happens, the Bill of Lading is then “stale.”
10. Shipped On Board Bill of Lading: A Shipped On Board Bill of Lading is issued when the cargo arrives at the port
in good, expected condition from the shipping carrier and is then loaded onto the cargo ship for transport over seas.
11. Received Bill of Lading: It is simply a Bill of Lading stating that the cargo has arrived at the port and is cleared to
be loaded on the ship, but does not necessary mean it has been loaded. Used as a temporary BOL when a ship is
late and will be replaced by a Shipped On Board Bill of Lading when the ship arrives and the cargo is loaded.
12. Claused Bill of Lading: If the cargo is damaged or there are missing quantities, a Claused Bill of Lading is issued.
B. Nature of Bill of Lading; when effective
C. Bill of Lading as Contract

1. Prohibited and Limiting Stipulations
The ship in question was a common carrier and, as such, must have been operated as a public utility. It is a matter of
common knowledge that large quantities of silk are imported in the Philippine Islands, and that after being imported, they
are sold by the merchants in Manila and other large seaports, and then shipped to different points and places in the Islands.
Hence, there is nothing unusual about the shipment of silk. In truth and in fact, it is a matter of usual and ordinary business.
There was no fraud or concealment in the shipment in question. Clause 12 above quoted places a limit of P300 "for any
single package of silk." The evidence shows that 164 "cases" were shipped, and that the value of each case was very near
P2,500. In this situation, the limit of defendants' liability for each case of silk "for loss or damage from any cause or for any
reason" would put it in the power of the defendants to have taken the whole cargo of 164 cases of silk at a valuation of P300
for each case, or less than one-eight of its actual value. If that rule of law should be sustained, no silk would ever be shipped
from one island to another in the Philippines. Such a limitation of value is unconscionable and void as against public policy
(Ysmael v. Barreto, 51 Phil 90).
The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim
a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport.
In the case before us We believe that the requirements of said article have not been met. It can not be said that the appellee
had actually entered into a contract with the appellant, embodying the conditions as printed at the back of the ticket stub
that was issued by the appellant to the appellee. The fact that those conditions are printed at the back of the ticket stub in
letters so small that they are hard to read would not warrant the presumption that the appellee was aware of those conditions
such that he had "fairly and freely agreed" to those conditions. The trial court has categorically stated in its decision that the
"Defendant admits that passengers do not sign the ticket, much less did plaintiff herein sign his ticket when he made the
flight on November 23, 1959." We hold, therefore, that the appellee is not, and can not be, bound by the conditions of
carriage found at the back of the ticket stub issued to him when he made the flight on appellant's plane on November 23,
1959 (Shewaram v. PAL, 17 SCRA 606).
While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the provisions
thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation". It is what is known as a contract of "adhesion", in
regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the
other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his consent. A contract limiting liability upon an agreed valuation does
not offend against the policy of the law forbidding one from contracting against his own negligence. Considering, therefore,
that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of
P100.00.Besides, passengers are advised not to place valuable items inside their baggage but "to avail of our V-cargo
service. It is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost
by petitioner (Ong Yiu v. CA, 91 SCRA 223).
The CONSIGNEE itself admits in its memorandum that the value of the goods shipped does not appear in the bills of lading.
Hence, the stipulation on the carrier's limited liability applies. There is no question that the stipulation is just and reasonable
under the circumstances and have been fairly and freely agreed upon. In Sea-land Service, Inc. vs. Intermediate Appellate
Court, et al. we there explained what is a just and reasonable, and a fair and free, stipulation, in this wise: . . . That said
stipulation is just and reasonable arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a
greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justice
and fairness of that law itself, and this the private respondent does not pretend to do. But over and above that consideration
the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual
of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment
in the bill of lading. And since the shipper here has not been heard to complain of having been "rushed," imposed upon or
deceived in any significant way into agreeing to ship the cargo under a bill of lading carrying such a stipulation — in fact, it
does not appear, that said party has been heard from at all insofar as this dispute is concerned — there is simply no ground
for assuming that its agreement thereto was not as the law would require, freely and fairly sought and well (Citadel Lines,
Inc. v. CA, 184 SCRA 544).
The private respondent admits that as early as on April 22, 1981, Sea-Land had offered to settle his claim for US$4,000.00,
the limit of said carrier's liability for loss of the shipment under the bill of lading. This Court having reached the conclusion
that said sum is all that is justly due said respondent, it does not appear just or equitable that Sea-Land, which offered that
amount in good faith as early as six years ago, should, by being made to pay at the current conversion rate of the dollar to
the peso, bear for its own account all of the increase in said rate since the time of the offer of settlement. The decision of
the Regional Trial Court awarding the private respondent P186,048.00 as the peso value of the lost shipment is clearly
based on a conversion rate of P8.00 to US$1.00, said respondent having claimed a dollar value of $23,256.00 for said
shipment. All circumstances considered, it is just and fair that Sea-Land's dollar obligation be convertible at the same rate
(Sea Land Services, Inc. v. IAC, 153 SCRA 552).
In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen.
However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher
than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame
for not complying with the stipulations. The trial court's ratiocination that private respondent could not have "fairly and freely"
agreed to the limited liability clause in the bill of lading because the said conditions were printed in small letters does not
make the bill of lading invalid.
The bill of lading in question confirms petitioner's contention. To defeat the carrier's limited liability, the aforecited Clause
18 of the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt
thereof by the carrier and insert the said declaration in the bill of lading, with extra freight paid. These requirements in the
bill of lading were never complied with by the shipper, hence, the liability of the carrier under the limited liability clause
stands. The commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly show that petitioner has
knowledge of the value of the cargo as contended by private respondent. No other evidence was proffered by private
respondent to support is contention. Thus, we are convinced that petitioner should be liable for the full value of the lost
cargo. In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen,
pursuant to Clause 18 of the bill of lading (Everett Steamship Corp. v. CA, 297 SCRA 496).
It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of and acute shortage in inter-
island vessels plying between the country's several islands, and the facilities they offer leave much to be desired. Thus,
even under ordinary circumstances, the piers are congested with passengers and their cargo waiting to be transported. The
conditions are even worse at peak and/or the rainy seasons, when Passengers literally scramble to whatever
accommodations may be availed of, even through circuitous routes, and/or at the risk of their safety — their immediate
concern, for the moment, being to be able to board vessels with the hope of reaching their destinations. The schedules are
— as often as not if not more so — delayed or altered. This was precisely the experience of private respondents when they
were relocated to M/S "Sweet Town" from M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust
coming from the ship's cargo of corn grits, " because even the latter was filed to capacity. Under these circumstances, it is
hardly just and proper to expect the passengers to examine their tickets received from crowded/congested counters, more
often than not during rush hours, for conditions that may be printed much charge them with having consented to the
conditions, so printed, especially if there are a number of such conditions m fine print, as in this case (Sweet Lines v.
Teves, 83 SCRA 361).
a. Civil Code
b. Carriage of Goods by Sea Act (COGSA)
c. International Air Transportation
The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International
Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention
was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession
was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November
9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President
Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto. "to the end that the same and
every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens
thereof." The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has
the force and effect of law in this country. The place of destination, within the meaning of the Warsaw Convention, is
determined by the terms of the contract of carriage or, specifically in this case, the ticket between the passenger and the
carrier. Examination of the petitioner's ticket shows that his ultimate destination is San Francisco. Although the date of the
return flight was left open, the contract of carriage between the parties indicates that NOA was bound to transport the
petitioner to San Francisco from Manila. Manila should therefore be considered merely an agreed stopping place and not
the destination (Santos v. Northwest, 210 SCRA 256).
The Warsaw Convention has invariably been held inapplicable, or as not restrictive of the carrier's liability, where there was
satisfactory evidence of malice or bad faith attributable to its officers and employees. Thus, an air carrier was sentenced to
pay not only compensatory but also moral and exemplary damages, and attorney's fees, for instance, where its employees
rudely put a passenger holding a first-class ticket in the tourist or economy section, or ousted a brown Asiatic from the plane
to give his seat to a white man, or gave the seat of a passenger with a confirmed reservation to another, or subjected a
passenger to extremely rude, even barbaric treatment, as by calling him a "monkey." In the case at bar, no bad faith or
otherwise improper conduct may be ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was eventually
returned to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless, that some special species
of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the
time appointed — a breach of its contract of carriage, to be sure — with the result that she was unable to read the paper
and make the scientific presentation (consisting of slides, autoradiograms or films, tables and tabulations) that she had
painstakingly labored over, at the prestigious international conference, to attend which she had traveled hundreds of miles,
to her chagrin and embarrassment and the disappointment and annoyance of the organizers. She felt, not unreasonably,
that the invitation for her to participate at the conference, extended by the Joint FAO/IAEA Division of Atomic Energy in
Food and Agriculture of the United Nations, was a singular honor not only to herself, but to the University of the Philippines
and the country as well, an opportunity to make some sort of impression among her colleagues in that field of scientific
activity. The opportunity to claim this honor or distinction was irretrievably lost to her because of Alitalia's breach of its
contract (Alitalia v. IAC, 192 SCRA 10).
As may be seen, that New York case is a stronger one than the present case for the reason that the attention of the common
carrier in said case was called to the nature of the articles shipped, the purpose of shipment, and the desire to rush the
shipment, circumstances and facts absent in the present case. Thus, applying the foregoing ruling to the facts of the instant
case, in the absence of a showing that petitioner's attention was called to the special circumstances requiring prompt
delivery of private respondent Pangan's luggages, petitioner cannot be held liable for the cancellation of private respondents'
contracts as it could not have foreseen such an eventuality when it accepted the luggages for transit (Pan Am v. IAC, 164
SCRA 268).
In the present case, we stress that respondent had repeatedly secured confirmations of his PR 311 flight on November 24,
1981 -- initially from CAL and subsequently from the PAL office in Hong Kong. The status of this flight was marked "OK" on
a validating sticker placed on his ticket. That sticker also contained the entry "RMN6V." Ms Chan explicitly acknowledged
that such entry was a computer reference that meant that respondents name had been entered in PALs computer. Since
the status of respondent on Flight PR 311 was "OK," as a matter of right testified to by PALs witness, he should have been
automatically transferred to and allowed to board Flight 307 the following day. Clearly resulting from negligence on the part
of PAL was its claim that his name was not included in its list of passengers for the November 24, 1981 PR 311 flight and,
consequently, in the list of the replacement flight PR 307. Since he had secured confirmation of his flight -- not only once,
but twice -- by personally going to the carriers offices where he was consistently assured of a seat thereon -- PALs
negligence was so gross and reckless that it amounted to bad faith (China Airlines v. Chiok, 107 SCRA).
Respondent filed his complaint more than two (2) years later, beyond the period of limitation prescribed by the Warsaw
Convention for filing a claim for damages. However, it is obvious that respondent was forestalled from immediately filing an
action because petitioner airline gave him the runaround, answering his letters but not giving in to his demands. True,
respondent should have already filed an action at the first instance when his claims were denied by petitioner but the same
could only be due to his desire to make an out-of-court settlement for which he cannot be faulted. Hence, despite the
express mandate of Art. 29 of the Warsaw Convention that an action for damages should be filed within two (2) years from
the arrival at the place of destination, such rule shall not be applied in the instant case because of the delaying tactics
employed by petitioner airline itself. Thus, private respondent's second cause of action cannot be considered as time-barred
under Art. 29 of the Warsaw Convention (United Airlines v. Uy, 318 SCRA 576).
D. Bill of Lading as Receipt
A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a
specified place to a person named or on his order. Such instrument may be called a shipping receipt, forwarder's receipt
and receipt for transportation. The designation, however, is immaterial. It has been hold that freight tickets for bus companies
as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition.
Under the Tariff and Customs Code, a bill of lading includes airway bills of lading. The two-fold character of a bill of lading
is all too familiar; it is a receipt as to the quantity and description of the goods shipped and a contract to transport the goods
to the consignee or other person therein designated, on the terms specified in such instrument.
Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally
precedes the issuance of the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in
commercial practice as simultaneous acts. However, except as may be prohibited by law, there is nothing to prevent an
inverse order of events, that is, the execution of the bill of lading even prior to actual possession and control by the carrier
of the cargo to be transported. There is no law which requires that the delivery of the goods for carriage and the issuance
of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter.
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is
competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed
and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment. Except as
modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of
lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt alone,
is not conclusive, but may be explained, varied or contradicted by parol or other evidence (Saludo v. CA, 207 SCRA 498).
E. Bill of Lading as Document of Title

1. Negotiability
A “document of title” is a document that enables the holder (the person who “possesses” it) to deal with the goods described
in it as if he was the owner. “Title” is the right to ownership. “Ownership” can be explained as the right of using, altering,
disposing of (that is, selling) and destroying the goods.
If the “property” can “pass” by indorsing and/or delivering the document, this is as if ownership is being transferred or
assigned. The bill of lading may sometimes be called a “negotiable” document but the word “negotiable” is connected with
“negotiable instruments” which deal with the rights to money, fox example, a cheque. The transferability of the bill of lading
gives its transferee/ holder rights to goods and a transfer of rights is an “assignment”. The transfer of title to the goods
depends on the terms in the contract of sale and the title is transferred (“property passes”) when the parties intend it to
pass. Such transfer can be by endorsement of the bill of lading by its holder.
2. How Negotiated
This “ownership” or “title” can be transferred by a formal transfer of the document, such transfer being an “endorsement”
and/or delivery of the document itself. While the goods are in transit from the shipper, for example, when the cargo is at
seas they cannot be physically delivered to the buyer or person entitled to have the goods. “During this period of transit and
voyage the bill of lading.. . is universally recognised as its symbol and the endorsement and delivery of the bill of lading
operates as a symbolic delivery of the cargo. Property in the goods passes by such endorsement and delivery of the bill of
lading whenever it is the intention of the parties that the property should pass, just as under similar circumstances the
property would pass by an actual delivery of the goods . . .” (Sanders v. Maclean, 1883). The “parties” include the seller and
buyer of the goods and “property” is that thing which is capable of “ownership”
3. Effects of Negotiation
The goods can therefore be bought and sold while they are in transit at sea. This passes the property in the goods and also
the right to possession when the vessel arrives at the port of delivery. The right to possession is exercised by the holder
presenting the document and claiming the goods. Problems can arise if the claimant does not have the document, perhaps
because it is delayed through the documentary credit system.
V. ACTIONS AND DAMAGES IN CASE OF BREACH

A. Distinctions
Actions in case of breach.

A contract is a binding agreement between the parties which obligates them to perform certain tasks. If one of the parties
fails to perform without justifiable excuse, that party is in breach of contract and subject to civil liability.
Typical Examples of Breaches of Contract.

● Failure to provide services on time or in full
● Defective work or goods
● Non-payment
● Breaches of warranties
The Legal Remedies
Some of the potential remedies you are able to pursue may be explicitly excluded in the contract. Before initiating court
proceedings it is worth having a look at the initial contractual agreement to see what options are open to you.
Some of the most common monetary remedies include:

A. Compensatory damages - the defendant pays money to reimburse costs and compensates for any losses
incurred.
B. Consequential and incidental damages - this type of remedy is awarded when everyone involved was aware of
potential losses in case of a breach when the contract was still signed or accepted.
C. Liquidated damages - if a number is specified in the contract then this type of reward gives the claimant this
amount.
D. Punitive damages - this is a rare type of damages to be granted in breach of contract cases. Traditionally they’re
awarded for offensive behaviour or actions from the defendant. Sometimes there is more for a court to consider
than just money.
These cases tend to be resolved by one of three ways:

1. Specific performance: here a court will order for each party to the contract to follow through with the original
agreement.
2. Rescission: here a court may order the contract is cancelled and any money is returned. It basically makes it seem
like the matter never took place in the first place.
3. Reformation: this is a do-over. The contract will be re-written to better reflect the original intentions of entering
into the agreement. Nowadays parties can agree to have a mediator review a contract dispute or may agree to
binding arbitration. These out-of-court options are two methods of “alternative dispute resolution.”
Damages in case of breach.

There are two general categories of damages that may be awarded if a breach of contract claim is proved. They are:
1. Compensatory Damages.
Compensatory damages (also called “actual damages”) cover the loss the nonbreaching party incurred as a result of the
breach of contract. The amount awarded is intended to make good or replace the loss caused by the breach.
2. Punitive Damages.
Punitive damages (also called “exemplary damages”) are awarded to punish or make an example of a wrongdoer who has
acted willfully, maliciously or fraudulently. Unlike compensatory damages that are intended to cover actual loss, punitive
damages are intended to punish the wrongdoer for egregious behavior and to deter others from acting in a similar manner.
Punitive damages are awarded in addition to compensatory damages. Punitive damages are rarely awarded for breach of
contract. They arise more often in tort cases, to punish deliberate or reckless misconduct that results in personal harm.
There are two kinds of compensatory damages that the nonbreaching party may be entitled to recover:
1. General Damages.
General damages cover the loss directly and necessarily incurred by the breach of contract. General damages are the most
common type of damages awarded for breaches of contract.
2. Special Damages.
Special damages (also called “consequential damages”) cover any loss incurred by the breach of contract because of
special circumstances or conditions that are not ordinarily predictable. These are actual losses caused by the breach, but
not in a direct and immediate way. To obtain damages for this type of loss, the nonbreaching party must prove that the
breaching party knew of the special circumstances or requirements at the time the contract was made.
B. Concurrent Causes of Actions
As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out their claim against the carrier
and the driver exclusively on one theory, much less on that of breach of contract alone. After all, it was permitted for them
to allege alternative causes of action and join as many parties as may be liable on such causes of action so long as private
respondent and her co-plaintiffs do not recover twice for the same injury. What is clear from the cases is the intent of the
plaintiff there to recover from both the carrier and the driver, thus, justifying the holding that the carrier and the driver were
jointly and severally liable because their separate and distinct acts concurred to produce the same injury (Fabre v. CA,
supra).
A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because
of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people
to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with
a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious
language, indignities and abuses from such employees. So it is, that any rule or discourteous conduct on the part of
employees towards a passenger gives the latter an action for damages against the carrier. Thus, "Where a steamship
company had accepted a passenger's check, it was a breach of contract and a tort, giving a right of action for its agent in
the presence of third persons to falsely notify her that the check was worthless and demand payment under threat of ejection,
though the language used was not insulting and she was not ejected.” And this, because, although the relation of passenger
and carrier is "contractual both in origin and nature" nevertheless "the act that breaks the contract may be also a tort” (Air
France v. Carrascoso, 437 SCRA 427).
The nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily intended to provide compensation for
the death or bodily injuries suffered by innocent third parties or passengers as a result of the negligent operation and use
of motor vehicles. The victims and/or their dependents are assured of immediate financial assistance, regardless of the
financial capacity of motor vehicle owners. While the immediate beneficiaries of the standard of extraordinary diligence are,
of course, the passengers and owners of cargo carried by a common carrier, they are not the only persons that the law
seeks to benefit. For if common carriers carefully observed the statutory standard of extraordinary diligence in respect of
their own passengers, they cannot help but simultaneously benefit pedestrians and the passengers of other vehicles who
are equally entitled to the safe and convenient use of our roads and highways. The law seeks to stop and prevent the
slaughter and maiming of people (whether passengers or not) on our highways and buses, the very size and power of which
seem to inflame the minds of their drivers. Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary
damages in cases of quasi-delicts “if the defendant acted with gross negligence” (Tiu v. Arriesgado, G.R. No. 138060).
C. Notice of Claim and Prescriptive Period

1. Overland Transportation of Goods and Coastwise Shipping
It has long been held that Article 366 of the Code of Commerce applies not only to overland and river transportation but
also to maritime transportation. Moreover, we agree that in this jurisdiction, as viewed from another angle, it is more accurate
to state that the filing of a claim with the carrier within the time limitation therefor under Article 366 actually constitutes a
condition precedent to the accrual of a right of action against a carrier for damages caused to the merchandise. The shipper
or the consignee must allege and prove the fulfillment of the condition and if he omits such allegations and proof, no right
of action against the carrier can accrue in his favor. As the requirements in Article 366, restated with a slight modification in
the assailed paragraph 5 of the bills of lading, are reasonable conditions precedent, they are not limitations of action. Being
conditions precedent, their performance must precede a suit for enforcement and the vesting of the right to file spit does
not take place until the happening of these conditions. Now, before an action can properly be commenced all the essential
elements of the cause of action must be in existence, that is, the cause of action must be complete. All valid conditions
precedent to the institution of the particular action, whether prescribed by statute, fixed by agreement of the parties or
implied by law must be performed or complied with before commencing the action, unless the conduct of the adverse party
has been such as to prevent or waive performance or excuse non-performance of the condition. It bears restating that a
right of action is the right to presently enforce a cause of action, while a cause of action consists of the operative facts which
give rise to such right of action. The right of action does not arise until the performance of all conditions precedent to the
action and may be taken away by the running of the statute of limitations, through estoppel, or by other circumstances which
do not affect the cause of action. Performance or fulfillment of all conditions precedent upon which a right of action depends
must be sufficiently alleged, considering that the burden of proof to show that a party has a right of action is upon the person
initiating the suit.
More particularly, where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to
the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the carrier's
liability. Such requirement is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to
relieve the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged
with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by
affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to
safeguard itself from false and fraudulent claims.
Stipulations in bills of lading or other contracts of shipment which require notice of claim for loss of or damage to goods
shipped in order to impose liability on the carrier operate to prevent the enforcement of the contract when not complied with,
that is, notice is a condition precedent and the carrier is not liable if notice is not given in accordance with the stipulation, as
the failure to comply with such a stipulation in a contract of carriage with respect to notice of loss or claim for damage bars
recovery for the loss or damage suffered.
On the other hand, the validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the
statutory period therefor has generally been upheld as such stipulation merely affects the shipper's remedy and does not
affect the liability of the carrier. In the absence of any statutory limitation and subject only to the requirement on the
reasonableness of the stipulated limitation period, the parties to a contract of carriage may fix by agreement a shorter time
for the bringing of suit on a claim for the loss of or damage to the shipment than that provided by the statute of limitations.
Such limitation is not contrary to public policy for it does not in any way defeat the complete vestiture of the right to recover,
but merely requires the assertion of that right by action at an earlier period than would be necessary to defeat it through the
operation of the ordinary statute of limitations (Phil. American Gen. Insurance v. Sweet Lines, 212 SCRA 194).
2. COGSA
Dole concedes that its action is subject to the one-year period of limitation prescribe in the above-cited provision. The
substance of its argument is that since the provisions of the Civil Code are, by express mandate of said Code, suppletory
of deficiencies in the Code of Commerce and special laws in matters governed by the latter, and there being "*** a patent
deficiency *** with respect to the tolling of the prescriptive period ***" provided for in the Carriage of Goods by Sea Act,
prescription under said Act is subject to the provisions of Article 1155 of the Civil Code on tolling and because Dole's claim
for loss or damage made on May 4, 1972 amounted to a written extrajudicial demand which would toll or interrupt
prescription under Article 1155, it operated to toll prescription also in actions under the Carriage of Goods by Sea Act. To
much the same effect is the further argument based on Article 1176 of the Civil Code which provides that the rights and
obligations of common carriers shag be governed by the Code of Commerce and by special laws in all matters not regulated
by the Civil Code.
These arguments might merit weightier consideration were it not for the fact that the question has already received a
definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American
President Lines, Inc. There, in a parallel factual situation, where suit to recover for damage to cargo shipped by vessel from
Tokyo to Manila was filed more than two years after the consignee's receipt of the cargo, this Court rejected the contention
that an extrajudicial demand toiled the prescriptive period provided for in the Carriage of Goods by Sea Act.
Moreover, no different result would obtain even if the Court were to accept the proposition that a written extrajudicial demand
does toll prescription under the Carriage of Goods by Sea Act. The demand in this instance would be the claim for damage-
filed by Dole with Maritime on May 4, 1972. The effect of that demand would have been to renew the one- year prescriptive
period from the date of its making. Stated otherwise, under Dole's theory, when its claim was received by Maritime, the one-
year prescriptive period was interrupted — "tolled" would be the more precise term — and began to run anew from May 4,
1972, affording Dole another period of one (1) year counted from that date within which to institute action on its claim for
damage. Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No. 91043 only on June
11, 1973, more than one month after that period has expired and its right of action had prescribed (DOLE Phils. v. Maritime
Co., 148 SCRA 118).
The one-year period in the cases at bar should commence on October 20, 1979, when the last item was delivered to the
consignee. Union's complaint was filed against Hongkong on September 19, 1980, but tardily against Macondray on April
20, 1981. The consequence is that the action is considered prescribed as far as Macondray is concerned but not against
its principal, which is what matters anyway. As regards the goods damaged or lost during unloading, the charterer is liable
therefor, having assumed this activity under the charter party "free of expense to the vessel." The difficulty is that
Transcontinental has not been impleaded in these cases and so is beyond our jurisdiction. The liability imposable upon it
cannot be borne by Maritime which, as a mere agent, is not answerable for injury caused by its principal. It is a well-settled
principle that the agent shall be liable for the act or omission of the principal only if the latter is undisclosed.
There are three general categories of charters, to wit, the demise or "bareboat charter," the time charter and the
voyage charter.
1. A demise involves the transfer of full possession and control of the vessel for the period covered by the contract,
the charterer obtaining the right to use the vessel and carry whatever cargo it chooses, while manning and supplying
the ship as well.
2. A time charter is a contract to use a vessel for a particular period of time, the charterer obtaining the right to direct
the movements of the vessel during the chartering period, although the owner retains possession and control.
3. A voyage charter is a contract for the hire of a vessel for one or a series of voyages usually for the purpose of
transporting goods for the charterer. The voyage charter is a contract of affreightment and is considered a private
carriage (Maritime Agencies v. CA, 187 SCRA 846).
D. Recoverable Damages
1. Kinds of Damages
a. Actual or Compensatory Damages
The damages involved in the case at bar do not come under any of these provisions or of the other provisions forming part
of Chapter 3, Title VI, of Book I of the Civil Code, which chapter is entitled "Paraphernal Property." What is more, if "(t)hat
which is acquired by right of redemption or by exchange with other property belonging to only one of the spouses," and
"(t)hat which is purchased with exclusive money of the wife or of the husband,” belong exclusively to such wife or husband,
it follows necessarily that that which is acquired with money of the conjugal partnership belongs thereto or forms part thereof.
The rulings in Maramba v. Lozano and Perez v. Lantin, cited in defendant's motion for reconsideration, are, in effect, adverse
thereto. In both cases, it was merely held that the presumption under Article 160 of our Civil Code — to the effect that all
property of the marriage belong to the conjugal partnership — does not apply unless it is shown that it was acquired during
marriage. In the present case, the contract of carriage was concededly entered into, and the damages claimed by the
plaintiffs were incurred, during marriage. Hence, the rights accruing from said contract, including those resulting from breach
thereof by the defendant, are presumed to belong to the conjugal partnership of Mr. and Mrs. Zulueta. The fact that such
breach of contract was coupled, also, with a quasi-delict constitutes an aggravating circumstance and can not possibly have
the effect of depriving the conjugal partnership of such property rights (Zulueta v. Pan Am, 43 SCRA 397).
Petitioner's claim for the cost of plastic surgery for removal of the scar on her forehead, is another matter. A person is
entitled to the physical integrity of his or her body; if that integrity is violated or diminished, actual injury is suffered for which
actual or compensatory damages are due and assessable. Petitioner Gatchalian is entitled to be placed as nearly as
possible in the condition that she was before the mishap. A scar, especially one on the face of the woman, resulting from
the infliction of injury upon her, is a violation of bodily integrity, giving raise to a legitimate claim for restoration to her conditio
ante. If the scar is relatively small and does not grievously disfigure the victim, the cost of surgery may be expected to be
correspondingly modest. In Araneta, et al. vs. Areglado, et al., this Court awarded actual or compensatory damages for,
among other things, the surgical removal of the scar on the face of a young boy who had been injured in a vehicular collision.
Turning to petitioner's claim for moral damages, the long-established rule is that moral damages may be awarded where
gross negligence on the part of the common carrier is shown. Since we have earlier concluded that respondent common
carrier and his driver had been grossly negligent in connection with the bus mishap which had injured petitioner and other
passengers, and recalling the aggressive manuevers of respondent, through his wife, to get the victims to waive their right
to recover damages even as they were still hospitalized for their injuries, petitioner must be held entitled to such moral
damages. Considering the extent of pain and anxiety which petitioner must have suffered as a result of her physical injuries
including the permanent scar on her forehead, we believe that the amount of P30,000.00 would be a reasonable award.
Petitioner's claim for P1,000.00 as atttorney's fees is in fact even more modest (Gatchalian v. Delim, 203 SCRA 126).
From the above legal provisions it appears that exemplary damages may be imposed by way of example or correction only
in addition, among others, to compensatory damages, but that they cannot be recovered as a matter of right, their
determination depending upon the discretion of the court. It further appears that the amount of exemplary damages need
not be proved, because its determination depends upon the amount of compensatory damages that may be awarded to the
claimant. If the amount of exemplary damages need not be proved, it need not also be alleged, and the reason is obvious
because it is merely incidental or dependent upon what the court may award as compensatory damages. Unless and until
this premise is determined and established, what may be claimed as exemplary damages would amount to a mere surmise
or speculation. It follows as a necessary consequence that the amount of exemplary damages need not be pleaded in the
complaint because the same cannot be predetermined. One can merely ask that it be determined by the court if in the use
of its discretion the same is warranted by the evidence, and this is just what appellee has done (Marchan v. Mendoza, 24
SCRA 888).
The pension of the decedent being a sure income that was cut short by her death for which Dalmacio was responsible, the
surviving heir of the former is entitled to the award of P 10,000.00 which is just equivalent to the pension the decedent would
have received for one year if she did not die. On the other hand, the P5,000.00 paid to the herein petitioner by the insurer
of the passenger bus which figured in the accident may be deemed to have come from the bus owner who procured the
insurance. Since the civil liability (ex-delicto) of the latter for the death caused by his driver is subsidiary and, at bottom,
arises from the same culpa, the insurance proceeds should be credited in favor of the errant driver (De Caliston v. CA, 122
SCRA 958).
b. Moral Damages
The discrimination is obvious and the humiliation to which private respondent was subjected is undeniable. Consequently,
the award of moral and exemplary damages by the respondent court is in order. Indeed, private respondent had shown that
the alleged switch of planes from a Lockheed 1011 to a smaller Boeing 707 was because there were only 138 confirmed
economy class passengers who could very well be accommodated in the smaller plane and not because of maintenance
problems. Petitioner sacrificed the comfort of its first class passengers including private respondent Vinluan for the sake of
economy. Such inattention and lack of care for the interest of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles the passenger to the award of moral damages. More
so in this case where instead of courteously informing private respondent of his being downgraded under the circumstances,
he was angrily rebuffed by an employee of petitioner.
At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law firm in
Manila. He was a director of several companies and was active in civic and social organizations in the Philippines.
Considering the circumstances of this case and the social standing of private respondent in the community, he is entitled to
the award of moral and exemplary damages. However, the moral damages should be reduced to P300,000.00, and the
exemplary damages should be reduced to P200,000.00. This award should be reasonably sufficient to indemnify private
respondent for the humiliation and embarrassment that he suffered and to serve as an example to discourage the repetition
of similar oppressive and discriminatory acts (Transworld Airlines v. CA, 165 SCRA 143).
c. Nominal Damages
Nominal damages refers to a damage award issued by a court when a legal wrong has occurred, but where there was no
actual financial loss as a result of that legal wrong. Sometimes, he wants vindication that he was right. Sometimes, an award
of nominal damages will also allow him to obtain punitive damages, which are damages designed to punish a defendant,
rather than compensate a plaintiff. In other cases, the plaintiff may be suing because he is fighting for a cause, like if he
believes his Constitutional Rights are being violated.
d. Temperate Damages
Temperate damages mean reasonable damages. It is usually more than nominal damages but less than compensatory
damages and may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot,
from the nature of the case, be proved with certainty.
e. Exemplary Damages
Often called punitive damages, these are damages requested and/or awarded in a lawsuit when the defendant's willful acts
were malicious, violent, oppressive, fraudulent, wanton or grossly reckless.
Part 2: AVIATION LAW
VI. THE AIRCRAFT AND CIVIL AVIATION

VII. OBLIGATIONS OF CARRIER IN AIR TRANSPORTATION
VIII. THE WARSAW CONVENTION and MONTREAL CONVENTION (1999)
Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of a passenger or
injury suffered by him, or of destruction or loss of, or damage to any checked baggage or any goods, or of delay in the
transportation by air of passengers, baggage or goods. This pretense is not borne out by the language of said Articles. The
same merely declare the carrier liable for damages in the enumerated cases, if the conditions therein specified are present.
Neither said provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of
contract by the carrier. Under petitioner's theory, an air carrier would be exempt from any liability for damages in the event
of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd (Northwest v. Cuenca, 14 SCRA
1063).
The Convention's provisions, in short, do not "regulate or exclude liability for other breaches of contract by the carrier" or
misconduct of its officers and employees, or for some particular or exceptional type of damage. Otherwise, "an air carrier
would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of
carriage, which is absurd." Nor may it for a moment be supposed that if a member of the aircraft complement should inflict
some physical injury on a passenger, or maliciously destroy or damage the latter's property, the Convention might
successfully be pleaded as the sole gauge to determine the carrier's liability to the passenger. Neither may the Convention
be invoked to justify the disregard of some extraordinary sort of damage resulting to a passenger and preclude recovery
therefor beyond the limits set by said Convention. It is in this sense that the Convention has been applied, or ignored,
depending on the peculiar facts presented by each case (Alitalia v. IAC, 192 SCRA 10).
Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the validity of provisions of the
Warsaw Convention. Consequently, by no stretch of the imagination may said quotation from Northwest be considered as
supportive of the appellate court's statement that the provisions of the Warsaw Convention limited a carrier's liability are
against public policy. The Court finds itself unable to agree with the decision of the trial court, and affirmed by the Court of
Appeals, awarding private respondents damages as and for lost profits when their contracts to show the films in Guam and
San Francisco, California were cancelled. The Warsaw Convention actually provides that "[i]n the transportation of checked
baggage and of goods, the liability of the carrier shall be limited to a sum of 250 francs per kilogram, unless the consignor
has made, at the time when the package was handed over to the carrier, a special declaration of the value of delivery and
has paid a supplementary sum if the case so requires. In that case, the carrier will be liable to pay a sum not exceeding the
declared sum, unless he proves that the sum is greater than the actual value to the consignor at delivery. The sums
mentioned above shall be deemed to refer to the French franc consisting of 65-1/2 milligrams of gold at the standard of
fineness of nine hundred thousandths. These sums may be converted into any national currency in round figures (Pan Am
v. IAC, 164 SCRA 268).
We are unable to agree however with petitioners that Art. 25 of the Convention operations to exclude the other provisions
of the Convention if damage is caused by the common carrier's willful misconduct. As correctly pointed out by private
respondent, Art. 25 refers only to the monetary ceiling on damages found in Art. 22 should damage be caused by the
carrier's willful misconduct. Hence, only the provisions of Art. 22 limiting the carrier's liability and imposing a monetary ceiling
in case of willful misconduct on its part that the carrier cannot invoke. This issue however has become academic in the light
of our ruling that the trial courts erred in dismissing petitioners' respective complaints. We are not prepared to subscribed
to petitioners' argument that the failure of private respondent to deliver their luggage at the designated time and place
amounted ipso facto to willful misconduct. For willful misconduct to exist, there must be a showing that the acts complained
of were impelled by an intention to violate the law, or were in persistent disregard of one's rights. It must be evidenced by a
flagrantly or shamefully wrong or improper conduct (Luna v. CA, 216 SCRA 107).
Part 3: MARITIME LAW

IX. GENERAL CONCEPTS
A. Maritime Law
B. Real and Hypothecary Nature
That which distinguishes the maritime from the civil law and even from the mercantile law in general is the real and
hypothecary nature of the former, and the many securities of a real nature that maritime customs from time immemorial, the
laws, the codes, and the later jurisprudence, have provided for the protection of the various and conflicting interests which
are ventured and risked in maritime expeditions, such as the interests of the vessel and of the agent, those of the owners
of the cargo and consignees, those who salvage the ship, those who make loans upon the cargo, those of the sailors and
members of the crew as to their wages, and those of a constructor as to repairs made to the vessel.
As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value
of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel even
in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will
be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by
abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also
just that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement
of his rights by a final judgment, even to the prejudice of a third person.
This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lost no personal action
lies against the owner or agent of the vessel. For instance, where the vessel is lost the sailors and members of the crew
cannot recover their wages; in case of collision, the liability of the agent is limited as aforesaid, and in case of shipwreck,
those who loan their money on the vessel and cargo lose all their rights and cannot claim reimbursement under the law.
There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which the thing is exposed,
and (2) the real nature of the maritime law, exclusively real, according to which the liability of the parties is limited to a thing
which is at the mercy of the waves. If the agent is only liable with the vessel and freight money and both may be lost through
the accidents of navigation it is only just that the maritime creditor have some means to obviating this precarious nature of
his rights by detaining the ship, his only security, before it is lost.
The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same would be obliged to respect
and recognize are — in addition to those existing in favor of the State by virtue of the privileges which are granted to it by
all the laws — pilot, tonnate, and port dues and other similar charges, the wages of the crew earned during the last voyage
as provided in article 646 of the Code of Commerce, salvage dues under article 842, the indemnification due to the captain
of the vessel in case his contract is terminated on account of the voluntary sale of the ship and the insolvency of the owner
as provided in article 608, and all other liabilities arising from collisions under articles 837 and 838 (Yangco v. Laserna, 73
Phil. 330).
1. Limited Liability Rule
X. VESSELS
A. General Concepts
Vessels are considered personal property under the civil law. (Code of Commerce, article 585.) Similarly under the common
law, vessels are personal property although occasionally referred to as a peculiar kind of personal property. Since the term
"personal property" includes vessels, they are subject to mortgage agreeably to the provisions of the Chattel Mortgage Law.
(Act No. 1508, section 2.) Indeed, it has heretofore been accepted without discussion that a mortgage on a vessel is in
nature a chattel mortgage. The only difference between a chattel mortgage of a vessel and a chattel mortgage of other
personality is that it is not now necessary for a chattel mortgage of a vessel to be noted in the registry of the register of
deeds, but it is essential that a record of documents affecting the title to a vessel be entered in the record of the Collector
of Customs at the port of entry. Otherwise a mortgage on a vessel is generally like other chattel mortgages as to its requisites
and validity.
The Chattel Mortgage Law in its section 5, in describing what shall be deemed sufficient to constitute a good chattel
mortgage, includes the requirement of an affidavit of good faith appended to the mortgage and recorded therewith. The
absence of the affidavit vitiates a mortgage as against creditors and subsequent encumbrancers. As a consequence a
chattel mortgage of a vessel wherein the affidavit of good faith required by the Chattel Mortgage Law is lacking, is
unenforceable against third persons (Phil. Refining Corp. v. Jarque, 61 Phil. 229).
B. Ownership
XI. SHIP MORTGAGE AND MARITIME LIENS
XII. PERSONS WHO TAKE PART IN MARITIME COMMERCE
A. Ship owners and Ship agents; Captains and Masters of Vessels; Officers and Crew, Supercargoes
Direct liability is moderated and limited by the ship agent's or ship owner's right of abandonment of the vessel and earned
freight. This expresses the universal principle of limited liability under maritime law. The most fundamental effect of
abandonment is the cessation of the responsibility of the ship agent/owner. It has thus been held that by necessary
implication, the ship agent's or ship owner's liability is confined to that which he is entitled as of right to abandon the vessel
with all her equipment and the freight it may have earned during the voyage," and "to the insurance thereof if any." In other
words, the ship owner's or agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The total destruction of the
vessel extinguishes maritime liens as there is no longer any res to which it can attach.
The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a passenger is due
either to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain (Manila Steamship
Co., Inc. vs. Abdulhaman supra); (2) where the vessel is insured; and (3) in workmen's compensation claims Abueg vs. San
Diego, supra). In this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the
private respondent as shipowners, or to their concurrent negligence with the captain of the vessel.
What about the provisions of the Civil Code on common carriers? Considering the "real and hypothecary nature" of liability
under maritime law, these provisions would not have any effect on the principle of limited liability for ship owners or ship
agents.
In arriving at this conclusion, the fact is not ignored that the ill fated, S.S. Negros, as a vessel engaged in interisland trade,
is a common carrier, and that the relationship between the petitioner and the passengers who died in the mishap rests on
a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively 'real and
hypothecary nature of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if
any. In the instant case it does not appear that the vessel was insured (Chua Yek Hong v. IAC, 166 SCRA 183).
Art. 587 of the Code of Commerce is not applicable to the case at bar. Simply put, the ship agent is liable for the negligent
acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through abandonment of
the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein
the ship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of
the shipowner and the captain. The international rule is to the effect that the right of abandonment of vessels, as a legal
limitation of a shipowner's liability, does not apply to cases where the injury or average was occasioned by the shipowner's
own fault. It must be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed
solely by the captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be
covered by the provisions of the Civil Code on common carrier. It is generally held that in every marine insurance policy the
assured impliedly warrants to the assurer that the vessel is seaworthy and such warranty is as much a term of the contract
as if expressly written on the face of the policy. Thus Sec. 113 of the Insurance Code provides that "(i)n every marine
insurance upon a ship or freight, or freightage, or upon anything which is the subject of marine insurance, a warranty is
implied that the ship is seaworthy." Under Sec. 114, a ship is "seaworthy when reasonably fit to perform the service, and to
encounter the ordinary perils of the voyage, contemplated by the parties to the policy." Thus it becomes the obligation of
the cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy condition. He may have no
control over the vessel but he has full control in the selection of the common carrier that will transport his goods. He also
has full discretion in the choice of assurer that will underwrite a particular venture (Phil. American Gen. Insurance Co. v.
CA, 273 SCRA 262).
B. Arrastre Operator
To carry out its duties, the ARRASTRE is required to provide cargo handling equipment which includes among others
trailers, chassis for containers. In some cases, however, the shipping line has its own cargo handling equipment. Handling
cargo is mainly the s principal work so its driver/operators, "cargadors", or employees should observe the stand" and
indispensable measures necessary to prevent losses and damage to shipments under its custody. Since the ARRASTRE
offered its drivers for the operation of tractors in the handling of cargo and equipment, then the ARRASTRE should see to
it that the drivers under its employ must exercise due diligence in the performance of their work. From the testimonies of
witnesses presented, we gather that driver/operator Librando was remiss in his duty. Benildez Cepeda, an arrastre-
investigator of Metro Port admitted that Librando as tractor-operator should first have inspected the chassis and made sure
that the cargo was securely loaded on the chassis. We, therefore, find Metro Port Service Inc., solidarily liable in the instant
case for the negligence of its employee. With respect to the limited liability of the ARRASTRE, the records disclose that the
value of the importation was relayed to the arrastre operator and in fact processed by its chief claims examiner based on
the documents submitted (Fireman’s Fund Insurance Co. v. Metro Port Services, 182 SCRA 455).
The legal relationship between an arrastre operator and a consignee is akin to that between a warehouseman and a
depositor. As to both the nature of the functions and the place of their performance, an arrastre operator's services are
clearly not maritime in character. In a claim for loss filed by a consignee, the burden of proof to show compliance with the
obligation to deliver the goods to the appropriate party devolves upon the arrastre operator. Since the safekeeping of the
goods rests within its knowledge, it must prove that the losses were not due to its negligence or that of its employees. More
important, the cosigned goods were shipped under "Shipper's Load and Count." This means that the shipper was solely
responsible for the loading of the container, while the carrier was oblivious to the contents of the shipment. Protection
against pilferage of the shipment was the consignee's lookout. The arrastre operator was, like any ordinary depositary, duty-
bound to take good care of the goods received from the vessel and to turn the same over to the party entitled to their
possession, subject to such qualifications as may have validly been imposed in the contract between the parties. The
arrastre operator was not required to verify the contents of the container received and to compare them with those declared
by the shipper because, as earlier stated, the cargo was at the shipper's load and count. The arrastre operator was expected
to deliver to the consignee only the container received from the carrier (ICTSI v. Prudential, 121 SCRA 244).
C. Pilots
While it is indubitable that in exercising his functions a pilot is in sole command of the ship and supersedes the master for
the time being in the command and navigation of a ship and that he becomes master pro hac vice of a vessel piloted by
him, there is overwhelming authority to the effect that the master does not surrender his vessel to the pilot and the pilot is
not the master. The master is still in command of the vessel notwithstanding the presence of a pilot. There are occasions
when the master may and should interfere and even displace the pilot, as when the pilot is obviously incompetent or
intoxicated and the circumstances may require the master to displace a compulsory pilot because of incompetency or
physical incapacity. If, however, the master does nor observe that a compulsory pilot is incompetent or physically
incapacitated, the master is justified in relying on the pilot, but not blindly. The master is not wholly absolved from his duties
while a pilot is on board his vessel, and may advise with or offer suggestions to him. He is still in command of the vessel,
except so far as her navigation is concerned, and must cause the ordinary work of the vessel to be properly carried on and
the usual precaution taken. Thus, in particular, he is bound to see that there is sufficient watch on deck, and that the men
are attentive to their duties, also that engines are stopped, towlines cast off, and the anchors clear and ready to go at the
pilot's order (Far Eastern Shipping v. CA, 297 SCRA 301)
XIII. CHARTER PARTIES
A. Definition and Concept

Charter party is a contract by which the owner of a ship lets it to others for use in transporting cargo. The shipowner
continues to control the navigation and management of the vessel, but its carrying capacity is engaged by the charterer.
B. Different Kinds of Charter Parties

In modern maritime law and usage, there are three (3) distinguishable types of charter parties: (a) the "bareboat" or "demise"
charter; (b) the "time" charter; and (c) the "voyage" or "trip" charter. A bareboat or demise charter is a demise of a vessel,
much as a lease of an unfurnished house is a demise of real property. The shipowner turns over possession of his vessel
to the charterer, who then undertakes to provide a crew and victuals and supplies and fuel for her during the term of the
charter. The shipowner is not normally required by the terms of a demise charter to provide a crew, and so the charterer
gets the "bare boat", i.e., without a crew. Sometimes, of course, the demise charter might provide that the shipowner is to
furnish a master and crew to man the vessel under the charterer's direction, such that the master and crew provided by the
shipowner become the agents and servants or employees of the charterer, and the charterer (and not the owner) through
the agency of the master, has possession and control of the vessel during the charter period.
A time charter, upon the other hand, like a demise charter, is a contract for the use of a vessel for a specified period of time
or for the duration of one or more specified voyages. In this case, however, the owner of a time-chartered vessel (unlike the
owner of a vessel under a demise or bare-boat charter), retains possession and control through the master and crew who
remain his employees. What the time charterer acquires is the right to utilize the carrying capacity and facilities of the vessel
and to designate her destinations during the term of the charter. A voyage charter, or trip charter, is simply a contract of
affreightment, that is, a contract for the carriage of goods, from one or more ports of loading to one or more ports of
unloading, on one or on a series of voyages. In a voyage charter, master and crew remain in the employ of the owner of
the vessel. It is well settled that in a demise or bare boat charter, the charterer is treated as owner pro hac vice of the vessel,
the charterer assuming in large measure the customary rights and liabilities of the shipowner in relation to third persons
who have dealt with him or with the vessel. In such case, the Master of the vessel is the agent of the charterer and not of
the shipowner. The charterer or owner pro hac vice, and not the general owner of the vessel, is held liable for the expenses
of the voyage including the wages of the seamen (Litonjua Shipping v. National Seamen Board).
C. Effect of Charter on Character of 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 of the shipowner and therefore continued to be under its direct supervision and
control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo
when the charterer did not have any control of the means in doing so. This is evident in the present case considering that
the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents
of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner.
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-
charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier
becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner
in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the
property of the charterer (Planters Products v. CA, supra).
If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the
voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons
in respect of the ship (Caltex v. Sulpicio Lines, 315 SCRA 709).
D. Persons Who Make Charter E. Requisites
XIV. LOAN ON RESPONDENTIA AND BOTTOMRY
XV. AVERAGES
XVI. COLLISIONS
Since the wife resided in Georgia the court determined that Georgia retained jurisdiction of the support order and affirmed
the lower court's dismissal for lack of jurisdiction. This case similarly involved a Georgia support order and a Mississippi
petitioner. The party that the order demanded support from also still resides in Georgia leaving Georgia as the state with
jurisdiction over the Georgia support order. Accordingly, the chancery court ruled correctly by determining that Mississippi
lacked jurisdiction to hear Williams' contempt order regarding anything after 1992 (Williams v. Yatco Smith).
A "proper look-out" is one who has been trained as such and who is given no other duty save to act as a look-out and who
is stationed where he can see and hear best and maintain good communication with the officer in charge of the vessel, and
who must, of course, be vigilant. In the case at bar, the failure of the "Don Carlos" to recognize in a timely manner the risk
of collision with the “Yotai Maru” coming in from the opposite direction, was at least in part due to the failure of the "Don
Carlos" to maintain a proper look-out (Bell v. CA, 27 Phil. 68).
Taken together with related articles, the foregoing cover only liability for injuries to third parties (Art. 587), acts of the captain
(Art. 590) and collisions (Art. 837). In view of the foregoing, this Court shall not take the application of such limited liability
rule, which is a matter of near absolute application in other jurisdictions, so lightly as to merely "imply" its inapplicability,
because as could be seen, the reasons for its being are still apparently much in existence and highly regarded (Aboitiz
Shipping v. Gen. Accident Fire and Life Insurance Corp., 217 SCRA 359).
At around eight forty-five, the vessel suddenly listed to portside and before the captain could decide on his next move, some
of the cargo on deck were thrown overboard and seawater entered the engine room and cargo holds of the vessel. At that
instance, the master of the vessel ordered his crew to abandon ship. Shortly thereafter, "MV Asilda" capsized and sank. He
ascribed the sinking to the entry of seawater through a hole in the hull caused by the vessel's collision with a partially
submerged log. We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that the proximate cause
of the sinking of "MV Asilda" was its being top-heavy. Contrary to the ship captain's allegations, evidence shows that
approximately 2,500 cases of softdrink bottles were stowed on deck. Several days after "MV Asilda" sank, an estimated
2,500 empty Coca-Cola plastic cases were recovered near the vicinity of the sinking. Considering that the ship's hatches
were properly secured, the empty Coca-Cola cases recovered could have come only from the vessel's deck cargo. It is
settled that carrying a deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo
will not interfere with the proper management of the ship. However, in this case it was established that "MV Asilda" was not
designed to carry substantial amount of cargo on deck (Phil. American Gen. Insurance Co. v. CA, 273 SCRA 262).
XVII. ARRIVAL UNDER STRESS AND SHIPWRECKS
XVIII. SALVAGE
When a vessel is found at sea, deserted, and has been abandoned by the master and crew without the intention of returning
and resuming the possession, she is, in the sense of the law, derelict, and the finder who takes the possession with the
intention of saving her, gains a right of possession, which he can maintain against the true owner. The owner does not,
indeed, renounce his right of property. This is not presumed to be his intention, nor does the finder acquire any such right.
But the owner does abandon temporarily his right of possession, which is transferred to the finder, who becomes bound to
preserve the property with good faith, and bring it to a place of safety for the owner's use; and he acquired a right to be paid
for his services a reasonable and proper compensation, out of the property itself. He is not bound to part with the possession
until this is paid, or it is taken into the custody of the law, preparatory to the amount of salvage being legally ascertained.
Should be salvors meet with the owner after an abandonment, and he should tender his assistance in saving and securing
the property, surely this ought not, without good reasons, to be refused, as this would be no bar to the right of salvage, and
should it be unreasonably rejected it might affect the judgment of a court materially, as to the amount proper to be allowed.
Still, as I understand the law, the right of possession is in the salvor. But when the owner, or the master and crew who
represent him, leave a vessel temporarily, without any intention of a final abandonment, but with the intent to return and
resume the possession, she is not considered as a legal derelict, nor is the right of possession lost by such temporary
absence for the purpose of obtaining assistance, although no individual may be remaining on board for the purpose of
retaining the possession. Property is not, in the sense of the law, derelict and the possession left vacant for the finder, until
the spes recuperandi is gone, and the animus revertendi is finally given up. But when a man finds property thus temporarily
left to the mercy of the elements, whether from necessity or any other cause, though not finally abandoned and legally
derelict, and he takes possession of it with the bona fide intention of saving it for the owner, he will not be treated as a
trespasser. On the contrary, if by his exertions he contributes materially to the preservation of the property, he will entitle
himself to a remuneration according to the merits of his service as a salvor (Erlanger v. Swedish East Asiatic, 32 Phil
178).
The pertinent provision of the Salvage Law (Act No. 2616), provides:
SECTION 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall
have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be
entitled to a reward for the salvage.
Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall
be entitled to a like reward.
According to this provision, those who assist in saving a vessel or its cargo from shipwreck, shall be entitled to a reward
(salvage). "Salvage" has been defined as "the compensation allowed to persons by whose assistance a ship or her cargo
has been saved, in whole or in part, from impending peril on the sea, or in recovering such property from actual loss, as in
case of shipwreck, derelict, or recapture." In the Erlanger & Galinger case, it was held that three elements are necessary to
a valid salvage claim, namely, (1) a marine peril, (2) service voluntarily rendered when not required as an existing duty or
from a special contract, and (3) success in whole or in part, or that the service rendered contributed to such success (Barrios
v. Go Thong, 1 SCRA 535).
XIX. CARRIAGE OF GOODS BY SEA ACT (COGSA)
Granting arguendo that the Philippines was a territory or possession of the United States for the purposes of said Act and
that the trade between the Philippines and the United States before the advent of independence was not foreign trade or
can only be considered in a domestic sense, still we are of the opinion that the Carriage of Goods by Sea Act of 1936 may
have application to the present case it appearing that the parties have expressly agreed to make and incorporate the
provisions of said Act as integral part of their contract of carriage. This is an exception to the rule regarding the applicability
of said Act. This is expressly recognized by section 13 of said Act which contains the following proviso:
Nothing in this Act shall be held to apply to contracts for carriage of gods by sea between any port of the United
States or its possessions, and any other port of the United States or its possessions: Provided, however, That any
bill of lading or similar document of title which evidence of a contract for the carriage of goods by sea between such
ports, containing an express statement that it shall be subject to the provisions of this Act, shall be subjected hereto
as fully as if subject hereto by the express provisions of this Act.
Having reached the foregoing conclusion, it would appear clear that action of petitioners has not yet lapsed or prescribed,
as erroneously held by the Court of Appeals, it appearing that the present action was brought within one year after the
delivery of the shipment in question (Elser Inc. v. CA, 96 Phil. 178).
In the American Steamship Agencies cases, it was held that the action of Ang is based on misdelivery of the cargo which
should be distinguished from loss thereof. The one-year period provided for in section 3 (6) of the Carriage of Goods by
Sea Act refers to loss of the cargo. What is applicable is the four-year period of prescription for quasi-delicts prescribed in
article 1146 (2) of the Civil Code or ten years for violation of a written contract as provided for in article 1144 (1) of the same
Code. As Ang filed the action less than three years from the date of the alleged misdelivery of the cargo, it has not yet
prescribed. Ang, as indorsee of the bill of lading, is a real party in interest with a cause of action for damages (Ang v.
Compania Maritima, 133 SCRA 600).
no different result would obtain even if the Court were to accept the proposition that a written extrajudicial demand does toll
prescription under the Carriage of Goods by Sea Act. The demand in this instance would be the claim for damage-filed by
Dole with Maritime on May 4, 1972. The effect of that demand would have been to renew the one- year prescriptive period
from the date of its making. Stated otherwise, under Dole's theory, when its claim was received by Maritime, the one-year
prescriptive period was interrupted — "tolled" would be the more precise term — and began to run anew from May 4, 1972,
affording Dole another period of one (1) year counted from that date within which to institute action on its claim for damage.
Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973,
more than one month after that period has expired and its right of action had prescribed (DOLE Phils. v. Maritime Co. of
the Phils., supra).
Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already quoted is repugnant to or inconsistent with
any of the just-cited provisions of the Civil Code. Said section merely gives more flesh and greater specificity to the rather
general terms of Article 1749 (without doing any violence to the plain intent thereof) and of Article 1750, to give effect to just
agreements limiting carriers' liability for loss or damage which are freely and fairly entered into.
It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect
of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil
Code provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in
providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise
would amount to questioning the justice and fairness of that law itself, and this the private respondent does not pretend to
do. But over and above that consideration, the lust and reasonable character of such stipulation is implicit in it giving the
shipper or owner the option of avoiding acrrual of liability limitation by the simple and surely far from onerous expedient of
declaring the nature and value of the shipment in the bill of lading. And since the shipper here has not been heard to
complaint of having been "rushed," imposed upon or deceived in any significant way into agreeing to ship the cargo under
a bill of lading carrying such a stipulation — in fact, it does not appear that said party has been heard from at all insofar as
this dispute is concerned — there is simply no ground for assuming that its agreement thereto was not as the law would
require, freely and fairly sought and given (Sea Land Service Inc. v, IAC, supra).
Respondent court erred in applying Section 3(6) of the Carriage of Goods by Sea Act.
Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all
liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when
they should have been delivered. Under this provision, only the carrier's liability is extinguished if no suit is brought
within one year. But the liability of the insurer is not extinguished because the insurer's liability is based not on the
contract of carriage but on the contract of insurance. A close reading of the law reveals that the Carriage of Goods
by Sea Act governs the relationship between the carrier on the one hand and the shipper, the consignee and/or the
insurer on the other hand. It defines the obligations of the carrier under the contract of carriage. It does not, however,
affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code.
The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or
the insurer. When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the
insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period
provided in the law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis
of the insurer's liability is the insurance contract. An insurance contract is a contract whereby one party, for a consideration
known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril. An "all
risks" insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured. Thus, when
private respondents issued the "all risks" policies to petitioner Mayer, they bound themselves to indemnify the latter in case
of loss or damage to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New
Civil Code (Mayer Steel Pipe v. CA, 274 SCRA 452).

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TRANSPORTATION LAW

Part 1. COMMON CARRIERS

Art. XII (National Economy and Patrimony)

a. What is public utility?

b. What is public service?

2. CA 146, as amended, Sec. 13 (b)

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

The Revised Penal Code —

The Civil Code —

The Local Government Code —

The Certificate of Public Convenience and Necessity (CPCN).

“Prior Operator Rule”

b. Arising from transportation contract

DISTINCTIONS COMMON CARRIER PRIVATE CARRIER

Diligence required Extraordinary diligence Ordinary diligence

ii. Contract of transportation, elements

Elements of a common carrier:

C. Regulation of Transportation Industry

ii.Land Transportation Franchising and Regulatory Board, EO 202, Secs. 1, 2, 4, 5, 6,

Read Annotation 270 SCRA 157 et sec.

II. CONTRACT OF TRANSPORTATION

The parties to the contract of carriage are the following, namely:

4. Tests and Characteristics

5. Distinguished from Private Carriers and other Contracts

b. Registered Owner Rule

III. OBLIGATIONS OF THE PARTIES

3. Where and to Whom Delivered

4. Duty to Exercise Extraordinary Diligence

ii. Carriage of Passengers

ii. Carriage of Passengers

5. Defenses of Common Carrier

e. Defenses in Carriage of Passenger

ii. Other Passengers and Third Persons

C. Duty to Exercise Extraordinary Diligence

2. How Duty is Complied With

D. Extraordinary Diligence by Carriage by Sea

4. Negligence of Captain and Crew

5. Deviation and Transhipment

E. Extraordinary Diligence in Carriage by Land

F. Extraordinary Diligence in Carriage by Air

IV. BILL OF LADING AND OTHER FORMALITIES

12 Common Types of Bill of Lading Forms & When To Use Them.

B. Nature of Bill of Lading; when effective

C. Bill of Lading as Contract

D. Bill of Lading as Receipt

E. Bill of Lading as Document of Title

V. ACTIONS AND DAMAGES IN CASE OF BREACH

Actions in case of breach.

Typical Examples of Breaches of Contract.

Some of the most common monetary remedies include:

These cases tend to be resolved by one of three ways:

Damages in case of breach.

B. Concurrent Causes of Actions

C. Notice of Claim and Prescriptive Period

Part 2: AVIATION LAW

VI. THE AIRCRAFT AND CIVIL AVIATION

Part 3: MARITIME LAW

XI. SHIP MORTGAGE AND MARITIME LIENS

XII. PERSONS WHO TAKE PART IN MARITIME COMMERCE

XIII. CHARTER PARTIES

A. Definition and Concept

B. Different Kinds of Charter Parties

C. Effect of Charter on Character of Carrier

D. Persons Who Make Charter E. Requisites