PART I COMMON CARRIERSINTRODUCTION Public Utility, defined. A “public utility” is a business or service which is engaged in regularly supplying the public with some commodity or serv- ice of public consequences, such as electricity, gas, water, trans- portation, or telephone or telegraph service (64 Am Jur 2d, Public Utilities, Sec. 1). As its name indicates, the term “public utility” implies a public use and service to the public, and indeed, the principal determinative characteristic of a public utility is that of serv- ice to, or readiness to serve, an indefinite public (or portion of the public as such) which has a legal right to demand and re- ceive its services or commodities. There must be a dedication or holding out, either express or implied, of produce or serv- ices to the public as a class (64 Am Jur 2d, Public Utilities, Sec. 1). Public Service, extent of use or service. In respect of the public service or use of public utilities, the word “public” does not mean the whole public nor does it mean all the people in a certain area or political subdivision. Rather, it means individuals in general without restriction or selection to the extent that the capacity of the utility may ad- mit of such service or use. Accordingly, the use and enjoyment of the utility service may be local and limited in the territory served, and the fact that the service is limited to a particular district or a part of a town does not prevent the organization or business from being a public utility (64 Am Jur 2d, Public Utilities, Sec. 2). The number of people actually served does not determine whether a person or company is a public utility. Such a person or company which holds himself or itself out to serve all who 3THE LAW ON TRANSPORTATION wish to avail themselves of the service may be a public utility even though only one or two people actually receive service. Furthermore, the mere fact that service is rendered only un- der contract does not prevent a company from being a public utility (64 Am Jur 2d, Public Utilities, Sec. 2). Transportation, defined. Transportation is simply defined, as ita etymology would indicate, and as its derivation would denote, as a movement of things or persons from one place to another; a carrying across; and it is immaterial whether the carrying be by rail, by water, or by air (87 C.J.S. Transportation). The word “transportation” in its practical signification in- cludes waiting time, loading and unloading, stopping in tran- sit, and all other accessorial services in connection with the loaded movement (87 C.J.S. Transportation). The word “transportation” is defined in the Interstate Commerce Act, 49 U.S.C.A, Section 1, also known as the Hepburn Act, and as used in this act the word has a meaning broader in scope than that which attaches to its ordinary us- age, and includes locomotives and cars and other vehicles and all instrumentalities and facilities of shipment or carriage, ir- respective of ownership or of any contract, express or implied, for the use thereof, and all services in connection with the re- ceipt, delivery, elevation, and transfer in transit, ventilation, refrigerating or icing, storage, and handling of property trans- port (87 C.J.S. Transportation). The word “transportation” in the Act was intended to in- clude every phase logically or reasonably connected with the transportation of property, from the time of its initial delivery to the carrier until its final redelivery by the carrier to the consignee (87 C.J.S. Transportation). State Regulations of Public Utilities including the Trans- portation Industry. The basis for the State to regulate public utilities, includ- ing those engaged in transportation, is police power. Since a state may, under the police power, regulate a busi- ness affected with a public interest, and since the prime char-INTRODUCTION 6 acteristic of a public utility is that of public use or service, it is clear that a state may regulate and control public utilities to protect the public interests and to promote the health, comfort, safety, and welfare of the people. In the exercise of its police power the legislature may interfere with the management of public utilities whenever public interests demand, and it has a large discretion to determine not only what the interests of the public require, but also what measures are necessary for the protection of such interests. The state may thus regulate the manner in which public utility corporations shall construct their systems and carry on their business within the state (64 Am Jur 2d, Public Utilities, Sec. 9). A rightful exercise of the police power in the supervision of public utilities does not deprive them of their property with- out due process of law, or deny compensation, nor does it im- pair the obligation of any contract. Therefore, by granting a franchise to a public utility, a state does not abrogate its right to exercise the police power of the state over it (64 Am Jur 2d, Public Utilities, Sec. 9). In short, the right to regulate a public utility under the police power does not extend beyond: (1) the right to regulate rates, and charges; (2) the right to prevent discrimination upon the part of the public utility against those who employ it; and (3) the right to make orders governing the conduct of the pub- lic utility, to the ends that its efficiency may be built up and maintained and that the public and its employees be accorded desirable safeguards and conveniences (64 Am Jur 2d, Public Utilities, Sec. 9). The State may delegate to public service commissions the power to regulate public utilities. Under Commonwealth Act 103, a Public Service Commission was established to regulate public utilities. This was later replaced by the Land Transpor- tation Franchising and Regulatory Board, the Maritime Indus- try Authority and the Civil Aeronautics Board which regulate land, water and air transportation, respectively. The power of the State to regulate public utilities includ- ing transportation is expressly provided for under Sections 11, 17, 18 and 19 of the 1987 Constitution to wit: “Sec. 11. No franchise, certificate, or any other form of au- thorization for the operation of a public utility shall be grantedTHE LAW ON TRANSPORTATION except to citizens of the Philippines or to corporations or asso- ciations 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 exclu- sive in character or for a longer period than fifty years. Nei- ther shall any franchise or right to be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good 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 executive and managing officers of such corporation or association must be citizens of the Philippines. SEC. 17. In times of national emergency, when the pub- lic 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 util- ity or business affected with public interest. SEC. 18. The State may, in the interest of national wel- fare 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 States shall regulate or prohibit monopo- lies when the public interest so require. No combinations in restraint of trade or unfair competition shall be allowed.” Common Carrier, defined. 1. Common Law definition. Acommon carrier may be defined, very generally, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for com- pensation, offering his services to the public generally. x x x The dominant and controlling factor in determining the sta- tus of one, as a common carrier, is his public profession or hold- ing, by words or by a course of conduct as to the service offered or performed, with the result the he may be held liable for refusal, if there is no valid excuse, to carry for all who apply. xxx The distinctive characteristics of a common carrier is thatINTRODUCTION 7 he undertakes to carry for all people indifferently, and he is regarded in some aspects a public servant. Hence, one perform- ing transportation service for himself only is not a common carrier. One does not have the status of common carrier where he undertakes carriage for a particular group or class of per- sons under special contractual agreements, or for a particular person only. Nor, although one solicits patronage from the pub- lic generally, is a common carrier, where he reserves the right to accept or reject the offered business (13 Am Jur 2d, Sec. 2). 2. Civil Code definition. Art. 1732, of the New Civil Code defines common carrier as persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation offering their services to the public.Chapter | COMMON CARRIERS IN GENERAL A. Definition; liability of registered owner. Art, 1732, NCC. Common carriers are persons, corpora- tions, firms or associations engaged in the business of car- rying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. 1, Civil Code definition of common carrier. BASCOS v. CA 221 SCRA 318, April 7, 1993 Campos, Jr., J. FACTS: Rodolfo Cipriano representing Cipriano Trading En- terprise (CIPTRADE)entered into a hauling contract with dJibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000M/tons of soya bean meal from Manila to Laguna. CIPTRADE, through Cipriano, sub- contracted with petitioner Estrellita M. Bascos doing business under the name A.M. Bascos Trucking to deliver 400 sacks of soya bean meal from Manila to Laguna. Petitioner failed to deliver the cargo. Consequently, Cipriano paid Jibfair the amount of the lost goods. Cipriano demanded reimbursement from petitioner but the latter refused to pay, causing him to file a complaint. Trial court rendered a decision in favor of Cipriano, which order was affirmed by the C.A. HELD: in disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in thisCOMMON CARRIERS 9 Common Carriers in General petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits and testimonies which referred to the contract ae “lease.” She said that she does business under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who gave cargo to move, not to the general pub- lic but a few customers only in view of the fact that it is only a small business. We agree with the respondent Court in its finding that petitioner is a common carrier. Article 1732 of the Civil Code defines a common carrier. The test to determine a common carrier is “whether the given undertaking is a part of the business engaged in by the car- rier which he has held out to the general public as his occupa- tion rather than the quantity or extent of the business trans- acted.” Petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. But petitioner argues that there was only a contract of lease because they offer their services only to a select group of people and because the private respondents, plaintiffs in the lower court, did not object to the presentation of affidavits by petitioner where the transaction was referred to as a lease con- tract. Regarding the first contention, the holding of the Court in De Guzman us. Court of Appeals, 168 SCRA 612, is in- structive. 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 per- sons 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10 THE LAW ON TRANSPORTATION general community or population, and one who offers serv- ices or solicits business only from a narrow segment of the general population. We think that Article 1732 deliber- ately refrained from making such distinctions.” CA decision is AFFIRMED. NATIONAL STEEL CORP. v. CA 283 SCRA 45, December 12, 1997 Panganiban, J. FACTS: On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire whereby NSC hired VSI's vessel, the MV ‘“VLASONS I’ to make one (1) voyage to load steel products at Iligan City and dis- charge them at North Harbor, Manila. When the vessel’s three (3) hatches containing the ship- ment were opened by plaintiff’s agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and unloaded by steve- dores hired by the plaintiff. Plaintiff filed with the defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941,145.18 but defendant VSI refused and failed to pay. Hence, this suit. HELD: It is essential to establish whether VSI contracted with NSC as a common carrier or as a private carrier. The resolu- tion of this preliminary question determines the law, standard of diligence and burden of proof applicable to the present case. Article 1732 of the Civil Code defines a common carrier. It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee. A carrier which does not qualify under the above test is deemed a private carrier. Generally, private carriage is under- taken by special agreement and the carrier does not hold him- self out to carry goods for the general public. The most typi- cal, although not the only form of private carriage, is theCOMMON CARRIERS i Common Carriers in General charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages. In the instant case, it is undisputed that VSI did not of- fer its services to the general public. It carried passengers or goods only for those it chose under a special contract of char- ter party. MV Vlasons I was not a common but a private car- rier. It is a private carrier that renders tramping service and, as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. Consequently, the rights and obligations of VSI and NSC, in- cluding their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of pri- vate carriage or charter party. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the strin- gent provisions of the Civil Code on common carriers protect- ing the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. It is clear from the parties’ Contract of Voyage Charter Hire, dated July 17, 1974, that VSI “shall nct be responsible for losses except on proven willful negligence of the officers of the vessel.” The NANYOZAI Charter Party, which was incor- porated in the parties’ contract of transportation, further pro- vided that the shipowner shall not be liable for loss of or dam- age to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was “properly manned, equipped and supplied.” In view of the above, NSC must prove that the damage to its shipment was caused by VSI’s willful negligence or fail- ure to exercise due diligence in making MV Vlasons I seawor- thy and fit for holding, carrying and safekeeping the cargo. In- eluctably, the burden of proof was placed on NSC by the par- ties’ agreement. The CA decision, affirming the RTC decision in favor of defendant and dismissing the complaint is AFFIRMED.12 THE LAW ON TRANSPORTATION FIRST PHILIPPINE INDUSTRIAL CORP. v. CA 300 SCRA 661, December 29, 1998 Martinez, J. FACTS: Petitioner is a grantee of a pipeline concession under R.A. 387 to contract, install and operate oil pipelines. The first pipeline concession was granted in 1967 and was renewed by the Energy Regulatory Board in 1992. In 1995, petitioner ap- plied for a Mayor's permit in Batangas City. Respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year in 1993 pursuant to the Local Government Code. To avoid hampering its operations, petitioner paid the amount of tax for the first quarter under protest. Petitioner argued that as a pipeline operator with a government conces- sion engaged in transporting petroleum products via pipeline and as such, it is exempted from payment of tax based on gross receipts as provided under Section 133 of the Local Government Code. Respondent, however, refused to make reimbursement on the ground that petitioner is not a common carrier engaged in transportation business by land, water or air. HELD: Based on Article 1732 of the Civil Code, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e., petroleum prod- ucts, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clien- tele does not exclude it from the definition of a common car- rier. In De Guzman v. Court of Appeals, 168 SCRA 617, we Tuled that: “The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activ- ity 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 x x x avoids mak- ing any distinction between a person or enterprise offer- ing transportation service on a regular or scheduled ba- sis and one offering such service on an occasional episodic or unscheduled basis. Neither does Article 1732 distin- guish between a carrier offering its services to the ‘gen- eral public,’ i.e., the general community or population, andCOMMON CARRIERS 13 Common Carriers in General one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1877 deliberately refrained from making such dis- tinctions.” Also, respondent's argument that the term “common car- rier” as used in Section 133(j) of the Local Government Code refers only to common carriers transporting goods and passen- gers through moving vehicles or vessels either by land, sea or water, is erroneous. The definition of “common carriers” in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the trans- porting of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are con- sidered common carriers. Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a “common carrier.” Petitioner is already paying three percent (3%) 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 de- feat the purpose of the Local Government Code. CALVO v. UCPB GENERAL INSURANCE TERMINAL SERVICES, INC. G.R. No. 148496, March 19, 2002 Mendoza, J. FACTS: Petitioner Virgines Calvo, the owner of Transorient Container Terminal Services, Inc. (TCTSI), which is a customs broker, entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC’s warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by re- spondent UCPB General Insurance Co., Inc. On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board “M/V Hayakawa Maru” and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator, Manila Port Services, Inc.THE LAW ON TRANSPORTATION From July 23 to July 25, 1990, petitioner, pursuant to her con- tract with SMC, withdrew the cargo from the arrastre opera- tor and delivered it to SMC’s warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine Cargo Sur- veyors, who found that 15 reels of the semi-chemical fluting paper were “wet/stained/torn” and 3 reels of kraft liner board were likewise torn. The damage was placed at P93,112.00. SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the RTC, Makati City, which, on December 20, 1995, ren- dered judgment finding petitioner liable to respondent for the damage to the shipment. This was affirmed by the CA. HELD: If petitioner is not a common carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable beyond what ordinary diligence in the vigi- lance over the goods transported by her, would require. Con- sequently, any damage to the cargo she agrees to transport cannot be presumed to have been due to her fault or negligence. Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a common car- rier but a private carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her services out to the public but only offers the same to select parties with whom she may contract in the conduct of her business. Art. 1732 makes no distinction between one whose prin- cipal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary ac- tivity. 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 popula- tion, and one who offers services or solicits business only from a narrow segment of the general population. We think that Ar- ticle 1732 deliberately refrained from making such distinctions (De Guzman v. CA, 68 SCRA 612 [1988]). So understood, the concept of “common carrier” under Article 1732 may be seen to coincide neatly with the notion ofCOMMON CARRIERS 16 Common Carriers in General “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 serv- ice” 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, 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 steam- ship 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-refrig- eration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sew- erage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. . .” There is greater reason for holding petitioner to be a com- mon carrier because the transportation of goods is an integral part of her business. To uphold petitioner's contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of petitioner’s business. FGU INSURANCE CORPORATION v. G.P. SARMIENTO TRUCKING CORPORATION G.R. No. 141910, August 6, 2002 Vitug, J. FACTS: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was tra- versing the north diversion road along McArthur highway in16 THE LAW ON TRANSPORTATION Barangay Anupol, Bamban, Tarlac, it collided with an uniden- tified truck, causing it to fall into a deep canal, resulting in damage to the cargoes. FGU Insurance Corporation (FGU), an insurer of the ship- ment, paid to Concepcion Industries, Inc., the value of the cov- ered cargoes in the sum of P204,450.00 and sued GPS and Eroles. FGU presented its evidence, establishing the extent of damage to the cargoes and the amount it had paid to the as- sured. GPS, instead of submitting its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a common carrier. The trial court, in its order of 30 April 1996, granted the motion to dismiss. The CA affirmed the RTC ruling. HELD: The Court finds the conclusion of the trial court and the Court of Appeals to be amply justified. GPS, being an ex- clusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual or en- tity. cannot be considered a common carrier. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their services to the public, whether to the public in general or to a limited clientele in particular, but never on an exclu- sive basis. The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt to avail themselves of its transportation service for a fee. Given ac- cepted standards, GPS scarcely falls within the term “common carrier.” The above conclusion notwithstanding, GPS cannot escape from liability. In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of re- lief. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contraven- tion of the tenor thereof. A breach upon the contract confersCOMMON CARRIERS 7 Common Carriers in General upon the injured party a valid cause for recovering that which may have been lost or suffered. Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioner's assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on, or failure of compliance with, the obligation — in this case, the delivery of the goods in its cuatody to the place of destination — gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so. 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. Petitioner’s civil action against the driver can only be based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for dam- ages to prove negligence or fault on the part of the defendant. If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the right to present evidence. Thus, respondent corporation may no longer offer proof to establish that it has exercised due care in transporting the cargoes of the assured so as to still warrant a remand of the case to the trial court. The RTC and CA decisions are AFFIRMED only insofar as respondent Eroles is concerned, but are REVERSED as re- gards G.P. Sarmiento Trucking Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value of the damaged and lost cargoes in the amount of P204,450.00. 2. Can acommon carrier become a private carrier? HOME INSURANCE CO. v. AMERICAN STEAMSHIP AGENCIES 23 SCRA 24, April 4, 1968 Bengzon, J.P., J. FACTS: A Peruvian firm shipped fishmeal through the ss Crowborough consigned to the San Miguel Brewery and insuredTHE LAW ON TRANSPORTATION by the Home Insurance Co. The cargo arrived with shortages. SMB demanded and Home Insurance Co. paid P14,000 in set- tlement for SMB’s claim. Home Insurance Co. filed for recov- ery of P14,000 from Luzon Stevedoring and American Steam- ship Agencies. CFI absolved Luzon Stevedoring but ordered the American Steamship Agencies to reimburse the P14,000 to HIC, declaring that Art. 587 of Code of Commerce makes the ship agent civilly liable for damages in favor of third persons due to the conduct of carrier’s captain and that the stipulation in the charter party exempting owner from liability is against public policy under Art. 1744, of NCC. ASA appealed. HELD: The NCC provisions on common carriers should not apply where the common carrier is not acting as such but as a private carrier. Under American Jurisprudence, a common car- rier undertaking to carry a special cargo or chartered to a spe- cial person only becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negli- gence of its agent is valid. 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 strict public policy governing common carrier 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. The stipulation exempting the owner from liability for negligence of its agent is not against public policy and is deemed valid. Recovery can’t be had, for loss or damage to the cargo against shipowners, unless the same is due to per- sonal acts or negligence of said owner or its managers, as dis- tinguished from agents or employees. Judgment REVERSED. ARADA v. CA 210 SCRA 624, July 1, 1992 Paras, J. FACTS: Petitioner Alejandro Arada operates the South Negros Enterprises which was engaged in small scale shipping busi- ness. It entered into a contract with San Miguel Corporation to transport cargoes of the latter from San Carlos City to Mandaue City. Arada’s vessel sank after encountering a ty- phoon. SMC’s cargoes were lost.COMMON CARRIERS 19 Common Carriers in General HELD: Petitioner contends that it was not in the exercise of its function as a common carrier when it entered into a con- tract with private respondent, but was then acting as a pri- vate carrier not bound by the requirement of extraordinary diligence. The petition is devoid of merit. Common carriers are persons, corporations, firms or as- sociations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compen- sation offering their services to the public (Art. 1732 of the New Civil Code). In the case at bar, there is no doubt that petitioner was exercising its function as a common carrier when it entered into contract with private respondent to carry and transport the latter's cargoes. This fact is best supported by the admission of petitioner’s son, Mr. Eric Arada, who testified as the officer- in-charge for operations of South Negros Enterprises in Cebu City. Q__ How many vessels are you operating? A There were all in all around five (5). Q_ And you were entering to service hauling of cargoes to different companies, is that correct? A Yes, Sir. Q__Inone word, the South Negros Enterprises is engaged in the business of common carriers, is that correct? A Yes, Sir. Q And in fact, at the time of the hauling of the San Miguel Beer, it was also in the same category as a common car- rier? A Yes, sir. A common carrier, both from the nature of its business and for insistent reasons of public is burdened by law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers but in caring for the goods transported by it. The loss or destruction or deterioration of goods turned over to common carrier for the conveyance to a designated desti-THE LAW ON TRANSPORTATION nation raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natu- ral disaster or calamity x x x (Benedicto v. IAC, G.R. No 708776, duly 19, 1990, 187 SCRA 547). PLANTERS PRODUCTS, INC. v. CA 226 SCRA 476, September 15, 1993 Bellosillo, J. FACTS: Planters Products, Inc. (PPI) purchased from Mitsu- bishi International Corp. of USA metric tons of Urea fertilizer which the latter shipped aboard the cargo vessel owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from America to Poro Point in La Union. Prior to its voyage, a time charter-party on the vessel was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner. The report submitted by private marine and cargo sur- veyor revealed a shortage in the cargo of 106,726 M/T and that a portion of the Urea fertilizer was contaminated with dirt, rendering the same unfit for commerce. PPI filed an action for damages with the CFI of Manila which sustained PPIs claim for damages. Court of Appeals absolved the carrier from liabil- ity. HELD: It is not disputed that respondent carrier, in the ordi- nary course of business, operates as a common carrier, trans- porting goods indiscriminately for all persons. When petitioner chartered the veasel M/V “Sun Plum,” the ship captain, its of- ficers 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 deter- mination of the course of the voyage and other technical inci- dents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the ship- owner.COMMON CARRIERS 21 Common Carriers in General It is therefore imperative that a public carrier shall re- main as such, notwithstanding the charter of the whole or por- tion 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 voy- age covering the charter-party is concerned. Indubitably, a ship- owner in a time or voyage charter retains possession and con- trol of the ship, although her holds may, for the moment, be the property of the charterer. Respondent carrier’s heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, 23 SCRA 24, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charger-party exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not find application in our juris- diction, for we have observed that the growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admi- ralty laws, more particularly, the rules governing common car- Tiers. ‘To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence. After completing the loading of the cargo in bulk in the ship’s holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches re- mained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a per- gon to open without the use of the ship’s boom. It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spill- age of the cargo into the sea or seepage of water inside the hull of the veasel. Indeed, we agree with respondent carrier that bulk ship- ment of highly soluble goods like fertilizer carries with it the22 THE LAW ON TRANSPORTATION risk of loss or damage. More so, with a variable weather con- dition 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 inher- ent 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 remiss in the exercise of due diligence in order to minimize the loss or damage to the goods it carried. VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY v. CA 274 SCRA 642, June 30, 1997 Panganiban, J. FACTS: Plaintiff shipped at Maconcon Port, Isabela 940 round logs on board M/V Seven Ambassador, a vessel owned by de- fendant Seven Brothers Shipping Corporation. Plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the lat- ter issued its Marine Cargo Insurance Policy on said date. In the meantime, the M/V Seven Ambassador sank resulting in the loss of the plaintiff's insured logs. Plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff like- wise filed a formal claim with defendant Seven Brothers Ship- ping Corporation for the value of the lost logs but the latter denied the claim. HELD: The charter party between the petitioner and private respondent stipulated that the owners shall not be responsi- ble for loss, split, short-landing, breakages and any kind of damages to the cargo. The validity of this stipulation is the lis mota of this case. There is no dispute between the parties that the proxi- mate cause of the sinking of M/V Seven Ambassadors result- ing in the loss of its cargo was the snapping of the iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the logsCOMMON CARRIERS 23 Common Carriers in General on board the vessel and not due to fortuitous event. Likewise undisputed is the status of Private Respondent Seven Broth- ers as a private carrier when it contracted to transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition. 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 stipu- lation 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. 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 com- mon carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a pri- vate 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 contacts involving com- mon carriers. LOADSTAR SHIPPING CO. v. CA 315 SCRA 339, September 28, 1999 Davide, Jr., C.J. FACTS: On 19 November 1984, LOADSTAR received on board its M/V “Cherokee” goods for shipment. The goods, amounting to P6,067,178, were insured for the same amount with Manila Insurance Co. (MIC) against various risks including “TOTAL LOSS BY TOTAL LOSS OF THE VESSEL.” The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (here- after PGAI) for P4 million. On 20 November 1984, on its way to Manila from Nasipit, Agusan del Norte, the vessel sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full settle- ment of its claim.24 THE LAW ON TRANSPORTATION On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of LOADSTAR and its employees. LOADSTAR claimed force majeure. PGAI averred that MIC had no cause of action against it, LOADSTAR being the party insured. PGAI was later dropped as a party defend- ant after it paid the insurance proceeds to LOADSTAR. The trial court rendered judgment for MIC, prompting LOADSTAR to go to the CA which affirmed the decision. HELD: LOADSTAR submits that the vessel was a private car- rier because it was not issued a certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only “one shipper, one consignee for a special cargo.” We hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public con- venience, and this character is not altered by the fact that the carriage of the goods in question was periodic, occasional, epi- sodic or unscheduled. In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 23 SCRA 24, where this Court held that a common car- rier transporting special cargo or chartering the vessel to a spe- cial person becomes a private carrier that is not subject to the provisions of the Civil Code. LOADSTAR also cited Valenzuela Hardwood and Indus- trial Supply, Inc. v. Court of Appeals, 274 SCRA 642 and Na- tional Steel Corp. v. Court of Appeals, 283 SCRA 45, both of which upheld the Home Insurance doctrine. These cases invoked by LOADSTAR are not applicable in the case at bar for simple reason that the actual settings are different. The records do not disclose that the M/V “Cherokee,” on the date in question, undertook to carry a special cargo or was chartered to a special person only. There was no charter party. The bills of lading failed to show any special arrange- ment, but only a general provision to the effect that the M/V “Cherokee” was a “general cargo carrier.” Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private car-COMMON CARRIERS 25 Common Carriers in General rier, especially where, as in this case, it was shown that the vessel was also carrying passengers. Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Ar- ticle 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals, 168 SCRA 612, the Court juxtaposed the statutory definition of “common carriers” with the peculiar circumstances of that case, viz.: “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 an- cillary 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 sched- uled basis and one offering such service on an occasional, epi- sodic or unscheduled basis. Neither does Article 1732 distin- guish 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 1733 deliber- ately refrained from making such distinctions.” The CA decision is AFFIRMED. 3. Registered owner liable for operation of common carriers. BENEDICTO v. IAC 187 SCRA 547, July 19, 1990 Feliciano, J. FACTS: Private respondent Greenhills Wood Industries Com- pany, Inc. a lumber manufacturing firm in Dagupan City, op- erates a sawmill in Maddela, Quirino. In May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc. 100,000 board feet of sawn lumber with the understanding that an initial delivery would be made on 15 May 1980. To effect its first delivery, private respondent's resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck to trans- port ita sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. This cargo truck was registered in the name of peti-26 THE LAW ON TRANSPORTATION tioner Ma. Luis Benedicto, the proprietor of Macoven Truck- ing, a business enterprise engaged in hauling freight, with main office in B.F. Homes, Paranaque. On 15 May 1980, Cruz in the presence and with the con- sent of driver Licuden, supervised the loading of 7,690 board feet of sawn lumber with invoice value of P16,918.00 aboard the cargo truck. The cargo never reached Blue Star. HELD: Petitioner urges that she could not be held answerable for the loss of the cargo, because the doctrine which makes the registered owner of a common carrier vehicle answerable to the public for the negligence of the driver despite the sale of the vehicle to another person, applies only to cases involving death of or injury to passengers. There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in the business of hauling of transporting goods for hire or compensation. Peti- tioner Benedicto is in brief, a common carrier. The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the op- erations 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 law- ful owner thereof. It would be very difficult and often impossi- ble 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 reg- istered owner is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petition- er’s claim, private respondent is not required to go beyond the vehicle's certificate of registration to ascertain the owner of the carrier. Clearly, to permit a common carrier to escape its respon- sibility for the passengers or good transported by it by proving a prior sale of the vehicle or means of transportation to an al- leged vendee would be to attenuate drastically the carrier's duty of extraordinary diligence.COMMON CARRIERS 27 Common Carriers in General BA FINANCE CORP. v. CA 215 SCRA 715, November 13, 1992 Melo, J. FACTS: The Isuzu ten-wheeler truck is registered in the name of petitioner BA Finance Corp. which it leased to Rock Compo- nent, Inc. At the time of the accident, it was driven by Rogelio Villar an employee of Lino Castro. Is BA Finance liable for the resulting damages even if neither the driver nor Castro appears to be connected with it. HELD: The lesson imparted by Justice Labrador in Erezo v. depte, 102 Phil. 103, is still good law, thus: “In previous decisions, We already have held that the registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by passengers or third persons caused by the operations of said vehicle, even though the same had been trans- ferred to a third person (Montoya v. Ignacio, 94 Phil. 182; Roque v. Malibay Transit, Inc., G.R. No. L-8561, Novem- ber 18, 1955; Vda. de Medina v. Cresencia, 99 Phil. 506). The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehi- cles being negligently operated if the public should be required to prove who the actual owner is x x x.” “Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. The members of the Court are in agreement that the defendant-appellant should be held liable to plaintiff-appellee for the injuries occasioned to the latter because of the negligence of the driver, even if the defendant-appellant was no longer the owner of the vehicle at the time of the damage because he had previously sold it to another.” If the foregoing words of wisdom were applied in solving the circumstance whereof the vehicle had been alienated or sold G8b8I C2 HNU TAGBIGARAN28 B. THE LAW ON TRANSPORTATION to another, there certainly can be no serious exception against utilizing the same rationale to the antecedents of this case where the subject vehicle was merely leased by petitioner to Rock Component, Philippines, Inc. with petitioner retaining ownership over the vehicle. State Regulation of Common Carriers Art. 1765, NCC. The Public Service Commission may, on its own motion or on petition of any interested party, after due hearing, cancel the certificate of public convenience granted to any common carrier thaf repeatedly fails to com- ply with his or its duty to observe extraordinary diligence as prescribed in this Section. (Note: The Public Service Commission has been replaced by the Land Transportation Franchising and Regulatory Board, Maritime Industry Authority and Civil Aeronautics Board.) FISHER v. YANGCO STEAMSHIP CO. 31 Phil. 5 November 5, 1914 and March 31, 1915 Carson, J. FACTS: The board of Yangco Steamship Co. adopted a resolu- tion which was ratified by the stockholders declaring classes of merchandise which are not to be carried by the vessels of the company and prohibiting the employees to carry dynamite, powder or other explosives. The Collector of Customs suspended the issuance of clearances for the vessels unless they carry the explosives. Fisher, a stockholder of YSC, filed a petition for prohibition. ELD: In construing and applying the statute (Act 98 of the Philippine Commission), for alleged violation, the question in- volves a consideration as to whether the refusal of YSC to carry the explosives without conditions may have the effect of sub- jecting any person or locality or the traffic in such explosives to an undue, unreasonable or unnecessary prejudice or discrimi- nation. 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‘COMMON CARRIERS 29 ‘Common Carriers in General for some sufficient reason the discrimination for such is rea- sonable and necessary. YSC has not met these conditions. The nature of the business of a common carrier as a pub- lic employment is such that it is within the power of the State to impose such just regulations in the interest of the public as the legislator may deem proper. Petition DISMISSED. PANTRANCO v. PSC 70 Phil. 221, June 26, 1940 Laurel, J. FACTS: Pantranco has been engaged for 20 years in transport- ing passengers in certain provinces by means of a public trans- portation utility in accordance with the certificates of public convenience and their terms. In 1939, Pantranco applied for authorization to operate 10 additional trucks. The application was granted with two conditions: that the service can be ac- quired by the government upon payment of the cost price less depreciation, and, that the certificate shall be valid only for a definite period of time. Not being agreeable to the new condi- tions incorporated in its certificates, Pantranco filed a motion for reconsideration which PSC denied. Certiorari. HELD: The constitutionality and applicability of Common- wealth Act 454 authorizing the imposition of such conditions are in question. Statutes enacted for the regulation of public utilities, being proper exercise by the State of its police power, are applicable not only to those public utilities coming into existence after its passage, but likewise to those already estab- lished and in operation. There is no merit in petitioner's con- tention that because of its establishment prior to May 1, 1937, they are not subject to the regulation of the Commission. The right of the State to regulate public utilities ie founded upon its police power, and statutes for the control and regulation of utilities are a legitimate exercise thereof, for the protection of the public as well as of the utilities themselves. Such statutes are therefore not unconstitutional, either as impairing the obligation of contracts, taking property without due process, or denying equal protection of the laws; and the consequent burdens assumed is ordinarily for the owners toTHE LAW ON TRANSPORTATION decide; and if he voluntarily places his property in public serv- ice, he cannot complain that it becomes subject to the regula- tory powers of the State. This is more so in the light of authori- ties which hold that a certificate of public convenience consti- tutes neither a franchise nor a contract confers no property rights and is a mere license or privilege. Commonwealth Act 454 is constitutional and applicable. PHILIPPINE AIRLINES, INC. v. CIVIL AERONAUTICS BOARD 270 SCRA 538, March 26, 1997 Torres, Jr., J. FACTS: Private respondent GrandAir applied for a Certificate of Public Convenience and Necessity with the Board. The CAB issued a Notice of Hearing setting the application for initial hearing on December 16, 1994, and directing GrandAir to serve a copy of the application and corresponding notice to all sched- uled Philippine Domestic operators. GrandAir filed its Compli- ance, and requested for the issuance of a Temporary Operat- ing Permit. Petitioner, itself the holder of a legislative franchise to operate air transport services, filed an Opposition to the application. Petitioner argued that the respondent Board acted beyond its powers in taking cognizance of GrandAir’s application and in issuing a temporary operating permit, since GrandAir has not been granted a legislative franchise to engage in scheduled domestic air transportation. HELD: The Civil Aeronautics Board has the authority to is- sue a Certificate of Public Convenience and Necessity, or Tem- porary Operating Permit to a domestic air transport operator, who, though not possessing a legislative franchise, meets all the other requirements prescribed by the law. Such require- ments were enumerated in Section 21 of R.A. No. 776. There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an indispensable re- quirement for an entity to operate as a domestic air transport operator. Although Section 11 of Article XII recognizes Congress’ control over any franchise, certificate or authority to operate a public utility, it does not mean Congress has exclusive author-COMMON CARRIERS: 31 Common Carriers in General ity to issue the same. Franchises issued by Congress are not required before each and every public utility may operate. In many instances, Congress has seen it fit to delegate thus func- tion to government agencies, specialized particularly in their respective areas of public service. A reading of Section 10 of the same R.A. No. 776 reveals the clear intent of Congress to delegate the authority to regu- late the issuance of a license to operate domestic air transport services. Petitioner argues that since R.A. No. 776 gives the Board the authority to issue “Certificates of Public Convenience and Necessity,” this, according to petitioner, means that a legisla- tive franchise is an absolute requirement. It cites a number of authorities supporting the view that a Certificate of Public Convenience and Necessity is issued to a public service for which a franchise is required by law, as distinguished from a “Certificate of Public Convenience” which is an authorization issued for the operation of public services for which no fran- chise, either municipal or legislative, is required by law. Many and varied are the definitions of certificates of pub- lic 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 “con- venience and necessity,” if used together in a statute, are usu- ally 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 require- ment but to modify and qualify what might otherwise be taken as the atrict 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 con- junction with “public convenience” in a certificate of authori- zation 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.