Munn v Illinois, 94 U.S.

113 (1876)
Munn v. Illinois, 94 U.S. 113 (1876), was a landmark decision of the U.S. Supreme Court that
established the power of the government to regulate private industries for the public interest. The
case involved an Illinois law that regulated grain elevators, which were owned by private individuals
and used to store and transport grain.

The law required the owners of grain elevators to obtain a license, set maximum rates for storage
and transportation, and authorized government inspectors to monitor the elevators and ensure
compliance with the regulations. The owners of the Munn and Scott grain elevators challenged the
law, arguing that it violated their property rights and the Due Process Clause of the Fourteenth
Amendment.

However, the Supreme Court upheld the law, stating that the state had the power to regulate private
industries that served a public interest. The Court argued that grain elevators were an essential part
of the public transportation network and that the regulation was necessary to prevent monopoly and
ensure fair rates.

The decision in Munn v. Illinois had far-reaching implications for the regulation of private industries,
and it established the legal basis for government intervention in various sectors of the economy,
including transportation, utilities, and telecommunications. The case set an important precedent for
the government's power to regulate private industries for the public interest, which continues to be
an important legal principle in modern times.

Luzon Stevedoring Co., Inc. v. PSC, G.R. No L-5458, September 16, 1953
Luzon Stevedoring Co., Inc. v. PSC (Philippine Shipping Company), G.R. No L-5458, September 16,
1953, is a Philippine Supreme Court case that deals with the regulation of public utilities.

The case involved a dispute between the Luzon Stevedoring Company and the Philippine Shipping
Company over the rates charged for stevedoring services in the Port of Manila. The Philippine
Shipping Company, which owned several vessels, claimed that the rates were too high and requested
that the Public Service Commission (PSC) investigate the matter.

The PSC conducted an investigation and found that the rates charged by Luzon Stevedoring
Company were indeed excessive. As a result, the PSC ordered the company to lower its rates and
imposed penalties for overcharging.

Luzon Stevedoring Company appealed the decision to the Philippine Supreme Court, arguing that
the PSC had exceeded its jurisdiction by regulating a private business. The company claimed that it
was not a public utility and therefore not subject to regulation by the PSC.

However, the Supreme Court rejected this argument and upheld the PSC's decision, stating that
Luzon Stevedoring Company was in fact a public utility because it provided an essential service that
 affected the public interest. The Court ruled that the PSC had the authority to regulate the rates
charged by public utilities and to ensure that they were reasonable and just.

The decision in Luzon Stevedoring Co., Inc. v. PSC established an important legal principle in the
Philippines, namely that businesses that provide essential services to the public, even if privately
owned, can be considered public utilities and are subject to government regulation in the interest of
public welfare.

Epstein, Richard A. The History of Public Utility Rate Regulation in the United States Supreme Court:
Of Reasonable and Nondiscriminatory Rates, 38(3) Journal of Supreme Court History 345-368 (2013)
In "The History of Public Utility Rate Regulation in the United States Supreme Court: Of Reasonable
and Nondiscriminatory Rates," Richard A. Epstein explores the history of public utility rate regulation
in the United States Supreme Court.

Epstein begins by discussing the emergence of public utilities in the late 19th and early 20th
centuries and the problems that arose due to the lack of government regulation. He then traces the
development of public utility regulation in the United States, focusing on the role of the Supreme
Court in shaping this regulatory framework.

Epstein argues that the Supreme Court played a significant role in establishing the legal principles
that govern public utility regulation. He notes that the Court's early decisions were focused on
protecting property rights and limiting government interference in the market, but that over time,
the Court came to recognize the importance of government regulation in ensuring that public
utilities operated in the public interest.

Epstein also discusses the legal standard of "reasonable and nondiscriminatory rates," which
emerged in the early 20th century as a way to balance the interests of public utilities and consumers.
He argues that this standard has been the subject of much debate and controversy over the years,
but that it remains a central part of public utility regulation in the United States.

Overall, Epstein's article provides a detailed and nuanced account of the history of public utility rate
regulation in the United States Supreme Court. By tracing the development of this regulatory
framework over time, he sheds light on the complex legal and political issues that have shaped the
relationship between public utilities, government regulation, and consumer interests.

What is a public service? Commonwealth Act No. 146 or the Public Service Act, as amended, Sec
13(b)
A public service, as defined in Commonwealth Act No. 146 or the Public Service Act, as amended,
refers to any person or entity that operates, manages, or controls the following:

1. Transportation and conveyance of passengers or freight by land, water, or air;

2. Pipelines, gas, electric light, heat and power, water supply, and sewerage systems;
3. Steamship and shipping companies, shipping agencies, ship-chandlers, and lighter operators;
4. Wire or wireless communications systems;
5. Ice plants, ice refrigeration plants, and cold storage plants;
6. Public warehouses, marine insurance, wharfage, and dockage;
7. Banks, and other financial institutions, pawnshops, and lending investors;
8. Hospitals, dispensaries, clinics, and other similar establishments;
9. Gasoline stations, ice dealers, and service stations; and
10. Other similar public services.

Section 13(b) of the Public Service Act specifically lists down the types of businesses that are
considered as public services and subject to government regulation in the Philippines.

Differentiate public utility from public service USe aquino and hermando notes and cases on law of
transportation and public utilities
The terms "public utility" and "public service" are often used interchangeably, but they actually have
different legal meanings.

According to Aquino and Hernandez in their notes and cases on the law of transportation and public
utilities, a public utility is a business that provides essential services to the public, such as electricity,
water, and transportation. Public utilities are regulated by the government because they provide
services that are essential to the public welfare and cannot be left to the vagaries of the free market.

On the other hand, a public service is a broader term that encompasses any service that is offered to
the public, whether essential or not. While public utilities are considered a subset of public services,
not all public services are public utilities.

The regulation of public utilities is based on the principle of public interest. The government ensures
that public utilities are operated in a way that promotes the public welfare, by setting standards for
safety, reliability, and affordability. This regulation can take many forms, including price controls,
quality standards, and service obligations.

In contrast, the regulation of public services is generally more limited. While the government may
regulate some aspects of public services, such as health and safety standards, it does not exercise the
same level of control over these businesses as it does over public utilities.

Overall, the key difference between public utility and public service lies in the nature of the services
they provide. Public utilities are essential services that are subject to extensive government
regulation, while public services are a broader category of services that may or may not be subject to
government regulation depending on the specific circumstances.

Legal Basis and Rationale for Regulation Republic of the Philippines v. Meralco, 391 SCRA 700 (G.R.
No. 141314, November 15, 2002)
The case of Republic of the Philippines v. Meralco (G.R. No. 141314, November 15, 2002) discussed
the legal basis and rationale for the regulation of public utilities in the Philippines.

In this case, the Supreme Court upheld the regulatory authority of the Energy Regulatory
Commission (ERC) over the Manila Electric Company (Meralco), which is a public utility engaged in
the distribution of electricity in Metro Manila.

The Court cited Section 43 of the Electric Power Industry Reform Act (EPIRA), which provides for the
regulation of the power industry in the Philippines. The EPIRA recognizes the need for government
intervention to ensure the reliability, quality, and affordability of electricity services to the public.

The Court also noted that the regulation of public utilities is based on the principle of public interest.
The government has a duty to protect the welfare of the public by ensuring that public utilities
operate in a manner that is safe, reliable, and affordable. This duty is recognized by the Constitution,
which provides that the State shall regulate or even take over businesses that are necessary to the
public interest.

Moreover, the Court emphasized that the regulation of public utilities is not meant to stifle business,
but rather to ensure that public utilities operate in a way that is fair and reasonable to both the
public and the utility itself. The Court recognized that public utilities are entitled to earn a fair return
on their investments, but this should be balanced against the need to provide affordable services to
the public.

In summary, the legal basis and rationale for the regulation of public utilities in the Philippines is
rooted in the principle of public interest. The government has a duty to ensure that public utilities
operate in a way that is safe, reliable, and affordable to the public, while at the same time
recognizing the need for public utilities to earn a fair return on their investments. This is achieved
through government intervention and regulation, as provided for by the relevant laws and the
Constitution.

Miller, Edythe S., Is the Public Utility Concept Obsolete? Land Economics, Vol. 71, No. 3, Social
Control of Private Power: The Past and Future of Public Utility Regulation (August 1995), as discussed
in page 273- 285
In her article "Is the Public Utility Concept Obsolete?" published in Land Economics in August 1995,
Edythe S. Miller examines the continued relevance of the public utility concept in the context of
evolving economic and regulatory conditions.

Miller argues that the public utility concept, which originated in the early 20th century, was based on
the assumption that utilities were natural monopolies that required government regulation to
prevent abuse of market power. However, she notes that changes in technology, deregulation, and
competition have called into question the validity of this assumption.

Miller cites the example of telecommunications, where technological advances have made it possible
for multiple providers to offer services, thereby undermining the natural monopoly rationale for
regulation. She also notes that the trend towards deregulation and market competition has led to
increased reliance on market mechanisms to ensure efficiency and consumer welfare.

Despite these challenges, Miller argues that the public utility concept remains relevant in certain
contexts. She suggests that regulation is still necessary in cases where natural monopolies exist, such
as in the provision of water, electricity, and gas distribution. Additionally, she notes that regulation
may be necessary to address externalities and other market failures, such as environmental impacts
or inadequate investment in infrastructure.

In summary, Miller's article explores the continued relevance of the public utility concept in the face
of changing economic and regulatory conditions. While acknowledging the challenges to the natural
monopoly rationale for regulation, she suggests that the public utility concept may still be necessary
in certain contexts where regulation is needed to ensure efficiency, consumer welfare, and address
externalities.

Where does the Power to Regulate Public Utilities Reside? Albano v. Reyes, 175 SCRA 264 KMU Labor
Center v. Garcia, 239 SCRA 386
The power to regulate public utilities resides in the state, as the state has the inherent authority to
protect the general welfare of its citizens. This power is recognized and affirmed in several Supreme
Court cases, including Albano v. Reyes (175 SCRA 264) and KMU Labor Center v. Garcia (239 SCRA
386).

In Albano v. Reyes, the Supreme Court held that the state's power to regulate public utilities is
"paramount and plenary." This means that the state has full and complete authority to regulate
public utilities, subject only to limitations imposed by the Constitution and other applicable laws.

Similarly, in KMU Labor Center v. Garcia, the Supreme Court emphasized that the state's power to
regulate public utilities is grounded in its duty to promote the general welfare. The Court held that
the state has the power to regulate public utilities to ensure that their rates and charges are just and
reasonable, and that their services are adequate and efficient.

Overall, the cases of Albano v. Reyes and KMU Labor Center v. Garcia make clear that the power to
regulate public utilities resides in the state, as an inherent aspect of its duty to protect the general
welfare of its citizens.

Relate to Public Service Act 13(a)

Section 13(a) of the Public Service Act (Commonwealth Act No. 146) defines a public service as "the
performance or rendition, for compensation, of service to the public or to a limited clientele or both,
including any service in connection with the provision of common carrier, warehousing, wharfage,
handling, stevedoring, lighterage, or terminal facilities for others."

This definition encompasses a wide range of services, including those provided by public utilities. In
the context of public utilities, the Public Service Act grants the state the power to regulate rates,
 services, and operations to ensure that they are just and reasonable, and that the public interest is
protected.

The cases of Albano v. Reyes and KMU Labor Center v. Garcia discussed earlier relate to the Public
Service Act 13(a) by affirming the state's inherent power to regulate public utilities as part of its duty
to promote the general welfare. These cases recognize that the state's regulatory authority over
public utilities extends to all aspects of their operations, including rates, services, and facilities.

Overall, the Public Service Act 13(a) provides a broad definition of public service that encompasses
public utilities, and the state's regulatory authority over public utilities is grounded in the Public
Service Act's mandate to protect the public interest.

What happened to the Public Service Commission? See footnote #2 in KMU Labor Center v. Garcia,
239 SCRA 386
Footnote #2 in KMU Labor Center v. Garcia, 239 SCRA 386, refers to the abolition of the Public
Service Commission (PSC) in 1987, through Executive Order No. 1011 issued by former President
Corazon Aquino. The PSC was replaced by the Energy Regulatory Board (ERB), which was tasked with
regulating the rates and operations of electric utilities and other energy-related entities.

The creation of the ERB was part of the government's efforts to reform the regulation of public
utilities, including electric power, water, and transportation. The ERB was intended to be a more
streamlined and efficient regulatory body that would be better equipped to address the changing
needs of the energy industry.

The KMU Labor Center v. Garcia case, which was decided in 1994, discussed the role of the ERB in
regulating public utilities and affirmed the state's power to regulate public utilities to protect the
public interest. Since then, the ERB has been renamed as the Energy Regulatory Commission (ERC),
and it continues to play a key role in regulating public utilities in the Philippines.

Not a Public Utility Tatad v. Garcia, 243 SCRA 436 JG Summit Holdings, Inc. v. Court of Appeals, G.R.
No. 124293, September 24, 2003 See Public Service Act, Sec. 14 for enterprises not covered by
definition of public service
Under the Public Service Act (PSA), there are certain enterprises that are not considered as public
services and therefore, are not regulated by the state. Section 14 of the PSA provides a list of these
enterprises, including among others:

1. Those that are owned or operated by government entities or agencies, except for those engaged in
providing public services for which there is a need for regulation;
2. Those that are owned or operated by private entities and are used solely for their own purposes and
not for public use;
3. Those that are engaged in the sale of goods or commodities that are not normally considered public
services, such as retail stores or shopping centers;
 The cases of Tatad v. Garcia and JG Summit Holdings, Inc. v. Court of Appeals both involve
enterprises that are not considered public services under the PSA.

In Tatad v. Garcia, the Supreme Court held that the Philippine Long Distance Telephone Company
(PLDT), which was then a government-owned and controlled corporation engaged in the business of
providing telecommunication services, was not a public utility. The Court reasoned that the term
"public utility" must be strictly construed and limited to those enterprises that are "affected with
public interest" and are necessary for the public convenience and welfare. Since PLDT was not
essential to the public welfare and could not be considered a monopoly, it was not subject to state
regulation as a public utility.

In JG Summit Holdings, Inc. v. Court of Appeals, the Court held that a petrochemical plant that was
owned and operated by a private corporation was not a public utility. The Court applied the same
reasoning as in Tatad v. Garcia and held that the plant did not provide a service that was essential to
the public welfare or affected with public interest. Therefore, it was not subject to state regulation as
a public utility.

Overall, the Public Service Act provides a specific list of enterprises that are not considered public
services and therefore not subject to state regulation. The cases of Tatad v. Garcia and JG Summit
Holdings, Inc. v. Court of Appeals demonstrate how the courts have interpreted and applied the
PSA's definition of public service in specific cases.

II. Constitutional Provisions a. See Article XII, Secs. 6, 11, 17, 18, 19, 1987 Constitution b. Ownership
Gamboa v. Teves, G.R. No. 176579, June 28, 2011 In the Matter of: The Corporate Rehabilitation of
Bayan Telecommunications, Inc., G.R. Nos. 175418-20 Additional readings: SEC MC No. 8-2013
(Guidelines on Compliance with Filipino- Foreign Ownership Requirements) Relate to Public Service
Act, Sec. 16 (a) and Sec. 20 (i) c. Exclusivity Metro Cebu Water v. Adala, G.R. No. 168914, July 4, 2007
d. Subject to Amendment RCPI v. NTC, 150 SCRA 450 (L-68729) e. Fixed-Term 3 Francisco v. Toll
Regulatory Board, G.R. No. 166910, October 19, 2010 f. Take-over Power David v. Macapagal-Arroyo,
G.R. No. 171396, May 3, 2006 Agan v. Piatco, G.R. No. 155001, January 21, 2004 g. Privatization of
State-Operated Public Utilities Kuwait Airways v. Philippine Airlines, G.R. No. 156087, May 8, 2009
a. Article XII, Secs. 6, 11, 17, 18, 19, 1987 Constitution

 Section 6: The utilization of natural resources shall be under the full control and supervision of the
State.
 Section 11: The ownership and management of mass media shall be limited to citizens of the
Philippines, or to corporations, cooperatives, or associations, wholly-owned and managed by such
citizens.
 Section 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.
 Section 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.
 Section 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. b. Ownership
 Gamboa v. Teves, G.R. No. 176579, June 28, 2011: The court held that 60-40 ownership requirement
in favor of Filipino citizens is mandatory and should be complied with by corporations engaged in
nationalized and partly nationalized industries.
 In the Matter of: The Corporate Rehabilitation of Bayan Telecommunications, Inc., G.R. Nos. 175418-
20: The court affirmed the rule that common carriers, telecommunications entities, and public utilities
must be owned at least 60% by Filipino citizens or corporations. c. Exclusivity
 Metro Cebu Water v. Adala, G.R. No. 168914, July 4, 2007: The court held that a franchise does not
necessarily confer exclusivity on a public utility. d. Subject to Amendment
 RCPI v. NTC, 150 SCRA 450 (L-68729): The court ruled that the grant of a franchise to operate a
public utility is always subject to amendment, alteration, or repeal by the State. e. Fixed-Term
 Francisco v. Toll Regulatory Board, G.R. No. 166910, October 19, 2010: The court held that the fixed
term of a legislative franchise does not mean that the franchise is absolute and beyond amendment
or revocation. f. Take-over Power
 David v. Macapagal-Arroyo, G.R. No. 171396, May 3, 2006: The court held that the President has the
power to take over public utilities in times of national emergency or when the public interest
requires.
 Agan v. Piatco, G.R. No. 155001, January 21, 2004: The court held that the State may repossess or
expropriate property, including public utilities, for public use or purpose upon payment of just
compensation. g. Privatization of State-Operated Public Utilities
 Kuwait Airways v. Philippine Airlines, G.R. No. 156087, May 8, 2009: The court held that the State may
privatize state-operated public utilities subject to the constitutional requirements of due process and
just compensation.

discuss Gamboa v. Teves, G.R. No. 176579, June 28, 2011 In the Matter of: The Corporate
Rehabilitation of Bayan Telecommunications, Inc., G.R. Nos. 175418-20
Gamboa v. Teves and In the Matter of: The Corporate Rehabilitation of Bayan Telecommunications,
Inc. are two related cases that deal with the issue of foreign ownership in public utility companies.

In Gamboa v. Teves, the Supreme Court upheld the constitutionality of the Foreign Investments Act
(FIA), which sets limits on the extent of foreign ownership in certain industries, including public
utilities. The FIA provides that no foreign corporation shall be allowed to own more than 40% of a
public utility company.

The case stemmed from a dispute over the validity of a deed of assignment transferring ownership of
a telecommunications company to a foreign corporation. The petitioner argued that the deed of
assignment violated the constitutional provision on foreign ownership, which limits foreign
ownership of public utilities to 40%. However, the Supreme Court held that the FIA, which allows
foreign ownership of up to 40%, was a valid exercise of the State's police power and was not
unconstitutional.

In In the Matter of: The Corporate Rehabilitation of Bayan Telecommunications, Inc., the Supreme
Court addressed the issue of whether a public utility company can be considered a Filipino
corporation even if a majority of its shares are owned by foreigners. The Court held that the
determination of whether a corporation is a Filipino corporation or a foreign corporation is based on
the nationality of the controlling interest. In this case, the Court found that despite the fact that the
majority of Bayan's shares were owned by foreigners, the corporation was still considered a Filipino
corporation because the majority of the members of its Board of Directors were Filipinos.

Both cases highlight the importance of complying with the constitutional provisions on foreign
ownership in public utility companies. The rulings also emphasize the need to carefully examine the
structure and composition of a corporation to determine whether it is considered a Filipino
corporation or a foreign corporation.

SEC MC No. 8-2013 (Guidelines on Compliance with Filipino- Foreign Ownership Requirements)
Relate to Public Service Act, Sec. 16 (a) and Sec. 20 (i)
SEC MC No. 8-2013 provides guidelines for the compliance of corporations with Filipino-foreign
ownership requirements under the Constitution and other relevant laws, particularly the Public
Service Act.

Section 16(a) of the Public Service Act provides that public utilities must be owned and operated by
Filipino citizens or corporations at least 60% of the capital of which is owned by Filipino citizens.
Section 20(i), on the other hand, states that the Public Service Commission may authorize the
operation of public services by persons or corporations not organized under Philippine laws if such
operation is for the public convenience and necessity and will promote the public interest.

SEC MC No. 8-2013 provides the specific requirements and procedures for compliance with these
ownership requirements, including the submission of documents and information to the Securities
and Exchange Commission (SEC) for verification, and the consequences of non-compliance.

Overall, SEC MC No. 8-2013 aims to ensure that corporations operating in the Philippines comply
with the constitutional and legal requirements on ownership, particularly in the public service sector,
in order to promote the public interest and protect national security.

discuss the rule in Exclusivity

The rule of exclusivity in public utilities refers to the principle that a franchise or license to operate a
public utility is granted exclusively to one entity or company within a specified geographical area.
This means that no other entity or company can operate the same public utility within the same
geographical area without the consent of the franchise holder.

The rule of exclusivity is based on the idea that the grant of a franchise is a valuable privilege that is
intended to provide the holder with an opportunity to recover its investment and earn a reasonable
profit. The exclusivity rule ensures that the franchise holder has a protected market for its services,
allowing it to charge rates that will enable it to recover its investment and earn a reasonable return.
The rule of exclusivity has been recognized and affirmed in several Philippine Supreme Court
decisions. In Metro Cebu Water v. Adala (G.R. No. 168914, July 4, 2007), the Supreme Court held that
the exclusivity clause in a water supply contract was valid and enforceable. The Court emphasized
that the exclusivity clause was necessary to ensure that the concessionaire could recover its
investment and earn a reasonable return.

However, the rule of exclusivity is not absolute. In certain cases, the government may authorize the
entry of other players in the same public utility service in order to promote competition and provide
better services to the public. This can be seen in cases where the government grants additional
franchises or licenses to operate the same public utility service within the same geographical area.

Overall, the rule of exclusivity plays an important role in the regulation of public utilities, providing
franchise holders with a protected market and ensuring the provision of essential services to the
public.

discuss Metro Cebu Water v. Adala, G.R. No. 168914, July 4, 2007
Metro Cebu Water District (MCWD) is a government-owned and controlled corporation that was
granted a legislative franchise to operate a waterworks system in the Province of Cebu. MCWD
alleged that Adala, a private corporation, was illegally operating a waterworks system within its
franchise area, in violation of its exclusive right to operate a waterworks system. Adala claimed that it
was authorized to operate a waterworks system by the local government unit.

The Supreme Court ruled in favor of MCWD, holding that the franchise granted to it by the
legislature gave it the exclusive right to operate a waterworks system in the area covered by the
franchise. The Court emphasized that a franchise is a legislative grant of a special privilege to a
person or corporation to do that which is not authorized by law and is a matter of public concern. As
such, the grant of a franchise is strictly construed and any doubt is resolved against the grantee.

The Court also noted that the Public Service Act grants public utilities such as MCWD the exclusive
right to operate their respective services within their franchise areas. While the Local Government
Code grants local government units the power to regulate water supply systems, this power is
subject to existing franchises or vested rights.

In conclusion, Metro Cebu Water v. Adala upholds the principle of exclusivity in franchise grants and
recognizes the exclusive rights of public utilities to operate within their franchise areas.

discuss Subject to Amendment RCPI v. NTC, 150 SCRA 450 (L-68729)

In RCPI v. NTC, the issue was whether or not Republic Act No. 5183, which amended the Public
Service Act, could be applied retroactively to a telecommunications company's existing franchise. The
company argued that the amendment could not be applied retroactively without violating the
constitutional prohibition against impairment of contracts.
The Supreme Court held that the amendment could be applied retroactively because the company's
franchise was subject to amendment or repeal by the government, which had the authority to amend
the Public Service Act. The Court emphasized that a franchise is a mere privilege that is subject to
regulation and amendment by the government in the interest of the public.

The Court further explained that the government's power to regulate public utilities is a police power
measure aimed at promoting the general welfare, and is not intended to impair the obligation of
contracts. The Court also noted that the company's franchise was granted subject to the condition
that it would be subject to amendments of laws and regulations affecting public utilities.

Thus, the Court held that the amendment to the Public Service Act could be applied retroactively to
the company's franchise without violating the constitutional prohibition against impairment of
contracts.

discuss Fixed-Term Francisco v. Toll Regulatory Board, G.R. No. 166910, October 19, 2010
In Francisco v. Toll Regulatory Board, the Supreme Court of the Philippines was tasked to determine
the validity of the toll rate increases of the Manila North Tollways Corporation (MNTC) on the North
Luzon Expressway (NLEX). The toll rate increases were authorized by the Toll Regulatory Board (TRB)
and were implemented for a period of ten years.

Petitioners argued that the 10-year fixed-term period violates the Constitution and the Public Service
Act, which require that rates be subject to review and revision by the government to ensure that they
are just and reasonable. They also claimed that the TRB exceeded its jurisdiction by approving the
toll rate increases without conducting public hearings and consultations.

The Court held that while the TRB has the power to approve toll rate increases, it does not have the
power to fix a rate for an unreasonably long period of time. The Court declared that the 10-year
fixed-term period of the toll rate increases was unconstitutional and void because it violates the
principles of fairness and reasonableness. It also held that the TRB must conduct public hearings and
consultations before approving any toll rate increase to ensure that the public is given a fair
opportunity to participate in the process.

The Court clarified that while the government may delegate its power to regulate toll rates to private
entities, it must still ensure that the regulatory framework is reasonable and that the delegated
powers are not abused. The government also retains its power to intervene and regulate rates when
necessary to protect the public interest.

Overall, the Francisco case established that fixed-term toll rate increases are unconstitutional and
that the TRB must conduct public hearings and consultations before approving any toll rate increase.
It also emphasized the importance of ensuring that the government's regulatory framework for
delegated powers is reasonable and that the public interest is protected.

discuss Take-over Power

2/2
Take-over power refers to the authority of the state to take control or ownership of a private
business or industry, particularly those that are deemed to be of national interest, in times of national
emergency or crisis. This power is typically exercised by the government through its various agencies
or instrumentalities, such as the National Power Corporation, Philippine National Railways, and the
like.

In David v. Macapagal-Arroyo (G.R. No. 171396, May 3, 2006), the Supreme Court upheld the validity
of the President's power to take over private businesses and industries in the event of a national
emergency, as provided under Section 17, Article VII of the 1987 Constitution. However, the exercise
of such power must be done in accordance with the requirements of due process and equal
protection of the law.

In Agan v. Piatco (G.R. No. 155001, January 21, 2004), the Supreme Court declared unconstitutional
the exercise of the take-over power by the government in relation to the Ninoy Aquino International
Airport Terminal III project. The Court ruled that the take-over was done in bad faith and without just
compensation to the affected private parties, thereby violating their right to due process and equal
protection of the law.

Overall, while the take-over power is an important tool

Privatization of State-Operated Public Utilities

The privatization of state-operated public utilities refers to the transfer of ownership and control of
public utilities from the government to private entities. This process usually involves the sale of
government assets to private investors, who then assume the responsibility of managing and
operating the utilities.

One notable case in the Philippines involving the privatization of a state-operated public utility is
Kuwait Airways v. Philippine Airlines (PAL), G.R. No. 156087, May 8, 2009. In this case, Kuwait Airways,
a foreign corporation, challenged the legality of the sale of PAL, a Philippine flag carrier and
previously a government-owned corporation, to a group of private investors.

The Supreme Court upheld the legality of the sale, ruling that the government had the authority to
privatize PAL and that the sale was in accordance with the law. The Court also held that foreign
corporations could not invoke the constitutional prohibition on foreign ownership of public utilities
to challenge the sale, as PAL was not a public utility under the Public Service Act.

The privatization of state-operated public utilities is often viewed as a means of promoting efficiency,
increasing competition, and improving the quality of service. However, critics argue that privatization
can also result in higher prices, reduced access to essential services, and job losses for employees of
the public utility.

III. Regulation of Public Utilities

Regulation of public utilities is an essential aspect of ensuring the proper and efficient functioning of
essential services that have been deemed to be of public interest. The regulation of public utilities
ensures that the services provided are affordable, accessible, and of acceptable quality. Public utilities
are typically natural monopolies, meaning that it is not feasible to have multiple providers of the
same service due to high capital and operational costs.

In the Philippines, public utilities are regulated by the government through various agencies and
statutes. One such agency is the Energy Regulatory Commission (ERC), which regulates the electric
power industry in the country. The ERC ensures that electricity rates are reasonable and
nondiscriminatory and that service quality is maintained.

Another agency that regulates public utilities is the National Telecommunications Commission (NTC),
which regulates the telecommunications industry. The NTC is responsible for ensuring that
telecommunications services are accessible, affordable, and of acceptable quality.

The regulation of public utilities is typically done through a combination of rate-setting, licensing,
and oversight mechanisms. The rates charged by public utilities are often set by the regulatory
agency, which ensures that they are reasonable and nondiscriminatory. Licensing requirements
ensure that only qualified operators are allowed to provide essential services. Oversight mechanisms
ensure that operators comply with regulations and that service quality is maintained.

Overall, the regulation of public utilities is crucial in ensuring that essential services are accessible
and affordable to the public. It ensures that natural monopolies do not exploit their market power
and that service quality is maintained.

a. Authority to Operate
The authority to operate a public utility is granted by the government through a franchise, certificate
of public convenience, or other similar permits or licenses. This is because public utilities involve the
use of public property and affect the public interest, thus requiring regulation and control by the
government.

Franchise refers to a grant or privilege offered by the government to any person, corporation, or
entity to operate and maintain a public utility. It is the basic law that governs and defines the rights,
obligations, and limitations of the grantee in the operation of the public utility.

Certificate of public convenience (CPC), on the other hand, is a document that authorizes a person or
entity to operate a public utility. It is issued by the appropriate government agency, such as the
Energy Regulatory Commission (ERC) or the Land Transportation Franchising and Regulatory Board
(LTFRB), after a showing of compliance with the requirements and standards set by the law and the
regulatory body.

The grant of a franchise or CPC is not absolute, as it is subject to the terms and conditions set by the
government, such as the period of validity, rates to be charged, quality of service to be provided, and
compliance with safety and environmental standards. Failure to comply with these terms and
conditions may result in the revocation or suspension of the franchise or CPC.

In summary, the authority to operate a public utility is a privilege granted by the government, subject
to regulation and control in the interest of the public. The grantee must comply with the terms and
conditions of the franchise or CPC, and failure to do so may result in sanctions or penalties.

Albano v. Reyes, supra

Albano v. Reyes, 175 SCRA 264, is a landmark case that discusses the authority to operate a public
utility. In this case, the Supreme Court ruled that the power to operate a public utility is a franchise
that can only be granted by the state. A public utility must secure a franchise from the state before it
can operate.

The case involved a dispute between two bus companies, one of which was operating without a
franchise. The court ruled that the bus company operating without a franchise was doing so illegally
and ordered it to cease operations immediately.

The decision in Albano v. Reyes affirmed the principle that the state has the authority to regulate the
operation of public utilities in the interest of the public. It also emphasized the importance of
securing a franchise from the state before operating a public utility.

PLDT v. NTC, G.R. No. 88404, October 18, 1990

In PLDT v. NTC, the Supreme Court upheld the regulatory power of the National Telecommunications
Commission (NTC) over public utilities, particularly with regards to granting provisional authority to
operate.

The case arose from a dispute between the Philippine Long Distance Telephone Company (PLDT) and
the NTC over the latter's issuance of a provisional authority to operate to a competing
telecommunications company, Islacom. PLDT argued that the NTC had no authority to grant
provisional authority to Islacom, as it was already granted to PLDT under its franchise.

The Supreme Court, however, held that the NTC had the power to grant provisional authority to
Islacom, as it was within its regulatory power to do so in order to promote competition and improve
the quality of telecommunications services in the country. The Court emphasized that the grant of
provisional authority was only temporary and subject to the final determination of the validity of
Islacom's franchise.

The case established the NTC's regulatory power over public utilities and affirmed its authority to
grant provisional authority to operate, subject to the limitations set forth by law.
discuss Francisco v. Toll Regulatory Board, GR 166910, Oct. 19, 2010 on the grounds of regulation of
public utilities
Francisco v. Toll Regulatory Board, GR 166910, Oct. 19, 2010 is a case that involves the regulation of
a public utility, specifically tollways. The Toll Regulatory Board (TRB) regulates tollway operations and
has the power to approve toll fee increases, subject to certain conditions and limitations.

In this case, the petitioner, a consumer group, challenged the TRB's approval of a toll fee increase on
the grounds that it violated the Constitution and various laws, such as the Public Service Act and the
Consumer Act. The petitioner argued that the tollway operator was a public utility and that the TRB
had failed to consider certain factors, such as the operator's income and expenses, in setting the toll
fees.

The Supreme Court upheld the TRB's power to regulate toll fees and found that tollway operators are
public utilities under the Public Service Act. However, the Court also recognized that tollway
operations are unique in that they are generally operated under fixed-term contracts with the
government, unlike traditional public utilities. As such, the Court held that the TRB's power to
regulate toll fees is subject to the terms and conditions of the contract between the government and
the tollway operator.

Furthermore, the Court held that the TRB must consider various factors, including the operator's
income and expenses, in setting toll fees, as required by law. The TRB must ensure that the toll fees
are just and reasonable, taking into account the interests of both the public and the tollway operator.
The Court also noted that tollway operators have the right to a reasonable return on their
investment, but this must be balanced with the public's right to affordable and efficient
transportation.

Overall, the Francisco case highlights the importance of regulating public utilities, even those with
unique characteristics like tollways. It underscores the need to balance the interests of the public and
private operators, and to ensure that the regulation of public utilities is done in accordance with the
law and the Constitution.

Napocor v. Court of Appeals, 279 SCRA 506, G.R. 112702, Sept. 1997
In Napocor v. Court of Appeals, the Supreme Court addressed the issue of whether the National
Power Corporation (Napocor), a government-owned and controlled corporation (GOCC) engaged in
the generation and distribution of electricity, is a public utility subject to regulation by the Energy
Regulatory Board (ERB).

The Court held that Napocor is a public utility, despite being a GOCC, because it is engaged in the
distribution and sale of electricity to the public. As such, it is subject to regulation by the ERB
pursuant to the provisions of the EPIRA (Electric Power Industry Reform Act).

The Court explained that the EPIRA defines a public utility as a person or entity engaged in the
distribution and sale of electricity to the public. This definition is broad enough to include both
private and government-owned entities. Moreover, the Court noted that the regulatory powers of
 the ERB extend not only to private electric utilities, but also to government-owned utilities like
Napocor.

In summary, Napocor was held to be a public utility subject to regulation by the ERB, despite being a
GOCC, because it is engaged in the distribution and sale of electricity to the public.

Relate to Public Service Act, Section 16 (a), Sec. 18

Section 16 (a) of the Public Service Act defines "public service" to include "every person that now or
hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, any
common carrier, railroad, street railway, subway motor vehicle, either for freight or passenger, 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."

On the other hand, Section 18 of the Public Service Act provides that "No public service shall operate
in the Philippines without possessing a valid and subsisting certificate of public convenience issued
by the Commission or by virtue of a valid and subsisting franchise granted by Congress."

Together, these provisions highlight the requirement for public services to obtain the necessary
regulatory approvals before they can operate in the Philippines. This ensures that these services meet
the standards set by the government in terms of safety, quality, and affordability, among others.

i. General Qualifications Vda. De Lat v. PSC, G.R. No. L-34978, Feb. 26, 1988 KMU Labor Center v.
Garcia, 239 SCRA 386
In Vda. De Lat v. PSC, G.R. No. L-34978, Feb. 26, 1988, the Supreme Court discussed the general
qualifications required for members of the Public Service Commission (PSC), which include the
following:

1. Must be a natural-born citizen of the Philippines;

2. Must be a resident of the Philippines for at least five (5) years prior to appointment;
3. Must be at least thirty-five (35) years old;
4. Must be a person of recognized ability, integrity, and independence;
5. Must not have been a candidate for any elective office in the immediately preceding election;
6. Must not have been a member of the Philippine National Police or the Armed Forces of the
Philippines for at least one (1) year prior to appointment;
7. Must not have direct or indirect pecuniary interest in any public utility or in any contract or franchise
granted by the government, any of its subdivisions, or instrumentalities, including government-
owned or controlled corporations or their subsidiaries.

In KMU Labor Center v. Garcia, 239 SCRA 386, the Supreme Court emphasized the importance of the
qualifications of the members of the Energy Regulatory Board (ERB), which replaced the PSC as the
regulatory body for the energy sector. The Court held that the members of the ERB must be
 technically competent and possess the necessary expertise in the field of energy regulation. They
must also be of proven integrity, independence, and impartiality, and must not have any pecuniary
interest in any energy-related business.

ii. Revocation or Cancellation

The revocation or cancellation of a public utility franchise or certificate of public convenience is a
serious matter that should not be done arbitrarily. It must be based on valid grounds and in
accordance with due process.

Under Section 16 of the Public Service Act, a public utility franchise may be revoked or cancelled by
the proper authorities for reasons of:

1. Violation of the franchise terms and conditions

2. Violation of any provision of the Public Service Act
3. Violation of any law, rule or regulation in relation to the operation of the public utility
4. Failure to operate continuously for two years or more
5. Refusal or neglect to comply with an order, decision, or regulation of the regulatory body
6. Gross incompetence, insolvency, or violations of the law committed by the franchise holder

In addition, the Supreme Court has held that the revocation or cancellation of a public utility
franchise should be done only after the franchise holder has been given notice and an opportunity to
be heard. This is to ensure that the franchise holder's right to due process is respected.

Overall, the revocation or cancellation of a public utility franchise should only be done in accordance
with the law and with due process, and not based on personal whims or political considerations.

Divinagracia v. Consolidated Broadcasting System, Inc. G.R. No. 162272, April 7, 2009
In Divinagracia v. Consolidated Broadcasting System, Inc., G.R. No. 162272, April 7, 2009, the
Supreme Court held that the National Telecommunications Commission (NTC) has the power to
revoke a franchise for a radio or television broadcasting station for violation of the terms and
conditions of the franchise or of the rules and regulations promulgated by the NTC.

In this case, Consolidated Broadcasting System, Inc. (CBS) was granted a legislative franchise to
operate a radio and television broadcasting station. However, CBS failed to comply with the
requirement to submit an annual report on its operations, as well as the rule prohibiting the transfer
of ownership or management of the franchise without prior approval from the NTC.

The NTC thus issued an order revoking CBS' franchise. CBS questioned the NTC's order, arguing that
only Congress has the power to revoke a legislative franchise. However, the Supreme Court ruled
that while it is true that only Congress can grant a franchise, the NTC has the power to revoke or
cancel a franchise for reasons provided by law.
The Court further explained that the power to revoke a franchise is inherent in the power to grant it,
and that the grant of a franchise is always subject to the condition that it may be revoked for cause.
In this case, CBS violated the terms and conditions of its franchise, and the NTC was well within its
power to revoke it.

Relate to Public Service Act, Section 16(m)

Section 16(m) of the Public Service Act states that the term "public service" includes the transmission
and distribution of electric power to the public for compensation, but it does not include generation,
except as otherwise provided by law or presidential proclamation. This means that electric power
generation is not considered a public service unless a law or presidential proclamation provides
otherwise.

One example of such a law is the Electric Power Industry Reform Act (EPIRA) of 2001, which declared
the generation, transmission, and distribution of electric power as areas of investment and allowed
private companies to participate in these activities. The EPIRA also created the Energy Regulatory
Commission (ERC) as the primary regulatory body for the electric power industry, with the power to
issue and revoke licenses and permits for the operation of electric power utilities.

discuss PLDT v NTC, supra BF Homes v. Meralco, GR 171624, Dec. 6, 2010 Taxicab Operators of Metro
Manila v. Board of Transportation, G.R. No L-59234, September 30, 1982
PLDT v. NTC, G.R. No. 88404, October 18, 1990, is a landmark case that tackled the issue of
regulatory power over telecommunications companies in the Philippines. The case involved the
National Telecommunications Commission's (NTC) issuance of Memorandum Circular No. 9-9-88,
which required telecommunications companies to pay an annual supervisory fee to the government
based on their gross revenues. PLDT, one of the largest telecommunications companies in the
country, challenged the circular, arguing that it was unconstitutional and violative of the Public
Service Act.

The Supreme Court, in upholding the validity of the NTC's circular, held that telecommunications
companies are public utilities and are therefore subject to regulation by the government. The Court
noted that the government has the power to regulate public utilities in order to ensure that they
provide adequate, safe, and reliable services to the public. The Court also emphasized that the
regulation of public utilities is a valid exercise of the state's police power, which is aimed at
promoting the general welfare.

Similarly, in BF Homes v. Meralco, GR 171624, Dec. 6, 2010, the Supreme Court reiterated the
government's regulatory power over public utilities. The case involved the issue of whether or not
the Manila Electric Company (Meralco), a major electricity provider in the country, could legally
impose a "system loss charge" on its customers. The Court, in ruling against Meralco, held that the
imposition of such a charge must be subject to regulation by the Energy Regulatory Commission
(ERC) to ensure that it is reasonable and not excessive.
In Taxicab Operators of Metro Manila v. Board of Transportation, G.R. No L-59234, September 30,
1982, the Supreme Court also emphasized the government's power to regulate public utilities. The
case involved the issue of whether or not the Board of Transportation (BOT) had the authority to
regulate taxicab operators in Metro Manila. The Court, in ruling in favor of the BOT, held that taxicab
operators are public utilities and are therefore subject to regulation by the government. The Court
noted that the regulation of public utilities is necessary in order to promote the public interest and
ensure that services are provided in a safe and efficient manner.

In summary, these cases all highlight the government's regulatory power over public utilities,
including telecommunications companies, electricity providers, and taxicab operators. The regulation
of public utilities is a valid exercise of the state's police power, aimed at promoting the general
welfare and ensuring that services are provided in a safe and efficient manner.

g. Due process requirements

In the regulation of public utilities, due process requirements must be observed by regulatory bodies
to ensure that the rights of the utility companies and their customers are protected. These due
process requirements include notice and hearing.

Notice and hearing are essential in administrative proceedings to ensure that affected parties are
given the opportunity to present their side and that the decisions rendered are based on substantial
evidence. The right to notice means that parties must be informed of the charges or issues to be
resolved, while the right to hearing means that they should be given the chance to present evidence
and arguments in support of their case.

In the case of Pangasinan II Electric Cooperative, Inc. v. NLRC (G.R. No. 108441, August 16, 1993), the
Supreme Court emphasized that the basic requirements of notice and hearing should not be
disregarded even in cases where the law or the rules of procedure do not expressly require them.
The Court held that the due process clause of the Constitution mandates that no person shall be
deprived of life, liberty, or property without due process of law, and that administrative proceedings
are not exempt from such requirement.

Therefore, regulatory bodies must observe due process requirements in their proceedings to ensure
that their actions are not arbitrary, capricious, or violative of the rights of affected parties.

thoroughly discuss Pantranco v. PSC, 70 Phil. 221 KMU Labor Center v. Garcia, 239 SCRA 386
Pantranco v. PSC, 70 Phil. 221, is a landmark case that dealt with the revocation of a franchise for
public transportation. In this case, the Pantranco North Express, Inc. had its franchise revoked by the
Public Service Commission (PSC) due to alleged violations of the terms and conditions of its
franchise.

Pantranco argued that the PSC's revocation of its franchise was unconstitutional, as it violated its
right to due process. The Supreme Court held that the revocation of a franchise was a quasi-judicial
act, and as such, the PSC was required to follow due process in revoking Pantranco's franchise.
The Court further held that the requirements of due process in revoking a franchise included notice
and hearing. Specifically, the Court held that the franchise holder must be given notice of the
charges against them and be given an opportunity to be heard in their defense.

The Court also held that the hearing must be conducted in a fair and impartial manner, and that the
franchise holder must be given the opportunity to present evidence in their defense.

In KMU Labor Center v. Garcia, 239 SCRA 386, the Supreme Court further expounded on the due
process requirements in the revocation of a franchise. In this case, the Board of Transportation (BOT)
revoked the franchise of certain bus companies due to alleged violations of the terms and conditions
of their franchises.

The Supreme Court held that the BOT's revocation of the franchises violated the bus companies'
right to due process. The Court held that the bus companies were entitled to notice and hearing, and
that the hearing must be conducted in a fair and impartial manner.

The Court also held that the bus companies were entitled to present evidence in their defense and
that the evidence presented against them must be competent and admissible.

Furthermore, the Court held that the BOT's decision must be based on substantial evidence, or such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion. The Court
stressed that the BOT's decision must be supported by evidence on record and not on mere
conjecture or surmise.

In summary, Pantranco v. PSC and KMU Labor Center v. Garcia emphasized the importance of due
process in the revocation of a franchise. These cases held that due process requires notice and
hearing, a fair and impartial hearing, the opportunity to present evidence in one's defense, and a
decision based on substantial evidence.

THIS SEGENT WILL START THE DISCUSSION OF TRANSPORTATION LAW-- ARE YOU READY?
Yes, I'm ready to discuss transportation law. What specific topics would you like to cover?

General Discussion OF TRANSPORTATION LAW OF THE PHILIPPINES

Transportation law in the Philippines refers to the set of laws, regulations, and policies that govern
the movement of people and goods through various modes of transportation, including land, sea,
and air transport. It aims to ensure the safety and efficiency of transportation systems, as well as
protect the rights of passengers and operators.

The main laws and regulations governing transportation in the Philippines include the Civil Aviation
Act of 2008, the Land Transportation and Traffic Code, the Maritime Industry Authority Act, and the
Public Service Act. These laws cover a wide range of issues, such as licensing and regulation of
 operators, vehicle and equipment standards, traffic rules and regulations, and liability and
compensation for accidents.

In recent years, transportation law in the Philippines has undergone significant changes and updates,
particularly in response to the growing demand for more sustainable and efficient transport systems.
This includes the development of policies and initiatives to promote alternative modes of transport,
such as cycling, walking, and public transportation, as well as the adoption of new technologies and
innovations in the transportation sector.

Overall, transportation law plays a crucial role in shaping the country's transportation systems and
ensuring the safety, accessibility, and sustainability of these systems for all stakeholders.

transportation law base on quino, Timoteo B. & Hernando, Ramon Paul L., Notes and Cases on the
Law of Transportation and Public Utilities
Transportation Law in the Philippines refers to the body of laws, regulations, and policies that govern
the transportation sector in the country. It covers various modes of transportation, such as land, air,
and water, as well as the various players involved in the industry, including operators, drivers, and
passengers.

The main sources of Transportation Law in the Philippines are the following:

1. Constitution of the Philippines - This serves as the fundamental law of the land and provides the
framework for the legal system of the country, including the transportation sector.
2. Republic Act No. 4136 or the Land Transportation and Traffic Code - This law regulates land
transportation in the Philippines and provides for the requirements and qualifications for drivers,
vehicles, and operators.
3. Republic Act No. 9295 or the Domestic Shipping Development Act of 2004 - This law promotes the
development of the domestic shipping industry in the Philippines and provides for the registration,
licensing, and regulation of domestic shipping operators and vessels.
4. Civil Aviation Authority Act of the Philippines - This law provides for the establishment of the Civil
Aviation Authority of the Philippines (CAAP), which is responsible for the regulation and supervision
of civil aviation in the country.
5. Philippine Ports Authority Act - This law created the Philippine Ports Authority (PPA), which is tasked
with managing and regulating the operations of ports in the country.
6. Various administrative issuances - Various government agencies issue administrative orders, rules,
and regulations to supplement the provisions of the above-mentioned laws and to address emerging
issues in the transportation sector.

Transportation Law is crucial in ensuring the safety and efficiency of transportation operations in the
country. It aims to protect the rights of passengers, promote fair competition among transportation
operators, and ensure compliance with environmental and safety standards.

Relationship to a public utility

Transportation is considered a public utility in the Philippines, along with other services such as
electricity, water, and telecommunications. As a public utility, transportation is subject to regulation
by the government, particularly the Land Transportation Franchising and Regulatory Board (LTFRB)
and the Land Transportation Office (LTO).

The LTFRB is responsible for granting franchises, regulating routes and schedules, setting fares, and
enforcing safety standards for public transportation services such as buses, jeepneys, taxis, and ride-
sharing services. The LTO, on the other hand, is responsible for licensing drivers, registering vehicles,
and enforcing traffic laws and regulations.

Because transportation is essential to daily life and the economy, the government plays an important
role in ensuring that transportation services are efficient, safe, and accessible to the public. This
involves balancing the interests of operators, drivers, and passengers, and implementing policies and
regulations that promote the public interest.

2/2
c. Nature of a Franchise transportation law
In transportation law, a franchise is a special privilege granted by the government, usually through a
legislative franchise, to a person or entity to operate a public utility, such as a transportation service.
It is a privilege that is not a matter of right but is subject to the state's control and regulation.

A franchise grants the holder the exclusive right to operate a transportation service within a certain
geographic area for a certain period, subject to certain conditions and limitations. These conditions
and limitations are usually imposed by the government agency that granted the franchise, such as
the Land Transportation Franchising and Regulatory Board (LTFRB) or the local government unit
(LGU).

The nature of a franchise is contractual in nature, as it involves an agreement between the

government and the franchise holder. The franchise holder must comply with the terms and
conditions of the franchise agreement, such as paying the required fees, operating the service in a
safe and efficient manner, and complying with the regulations and standards set by the government
agency.

A franchise is not a property right that can be bought, sold, or inherited, but it can be revoked or
cancelled by the government agency that granted it for various reasons, such as failure to comply
with the terms and conditions of the franchise agreement, violation of the law or regulations, or
public interest.

discuss the cases Raymundo v. Luneta Motor, 58 Phil. 889 Cogeo-Cubao Operator & Driver
Association v. CA, G.R. No. 100727, March 18, 1992
Raymundo v. Luneta Motor, 58 Phil. 889, is a case decided by the Philippine Supreme Court in 1933.
The case involved a dispute over the validity of a contract between a passenger and a bus operator.
The bus operator argued that the contract was valid and binding because it was issued a franchise by
the government. However, the Supreme Court ruled that the franchise did not give the operator the
authority to bind passengers to contracts that were not in accordance with the law. The Court
emphasized that the franchise was granted for the convenience of the public, and that it was the
operator's duty to provide safe and efficient transportation services.

Cogeo-Cubao Operator & Driver Association v. CA, G.R. No. 100727, is a case decided by the
Philippine Supreme Court in 1992. The case involved a dispute over the cancellation of a franchise
issued to a bus operator. The operator argued that the cancellation was invalid because it was done
without due process. However, the Supreme Court ruled that the franchise was a privilege granted by
the government, and that the operator had the duty to comply with the terms and conditions of the
franchise. The Court emphasized that the government had the power to regulate the operation of
public utility vehicles to ensure the safety and convenience of the riding public. The Court also noted
that the operator had been given ample opportunity to contest the cancellation of the franchise.

d. Scope of a Franchise
The scope of a franchise in transportation law pertains to the authority and limitations granted to the
franchise holder. Generally, a franchise only allows the holder to operate within a specific
geographical area, a particular type of service, and a defined period. Any operation outside of these
limitations is considered unauthorized and may result in sanctions or revocation of the franchise.

For instance, in the case of Cagayan Valley Bus Lines, Inc. v. Intermediate Appellate Court (G.R. No.
70919, November 27, 1987), the Supreme Court held that the franchise granted to a bus company
only authorizes it to engage in the business of transporting passengers and goods within the limits
of its fixed route. Any operation beyond the authorized limits is considered as an unauthorized
service and subjects the operator to sanctions.

Moreover, the scope of the franchise may also be subject to regulatory laws and policies, such as the
imposition of minimum standards for the operation of the transport service, including the required
qualifications of the operators and the vehicles used. In the case of Frivaldo v. COMELEC (G.R. No.
120295, June 28, 1996), the Supreme Court emphasized that the franchise holder must comply with
the regulatory policies and standards imposed by the government to ensure public safety and
convenience.

Overall, the scope of a franchise in transportation law is essential in regulating the operation of
transport services and ensuring the protection and welfare of the riding public.

San Pablo v. Pantranco, 153 SCRA 199

San Pablo v. Pantranco, 153 SCRA 199, is a case that tackled the scope of a franchise in the context of
a bus company. The case involved a dispute between the municipality of San Pablo and Pantranco
South Express Inc., a bus company, over the latter's operations within San Pablo's jurisdiction.
San Pablo claimed that Pantranco's franchise only covered inter-provincial routes and did not include
operations within its municipality. On the other hand, Pantranco argued that its franchise allowed it
to operate within San Pablo as long as it did not depart from the inter-provincial route.

The Supreme Court ruled in favor of San Pablo, stating that Pantranco's franchise only authorized it
to operate on the inter-provincial route and did not extend to intra-provincial or city services. The
Court emphasized that a franchise is a special privilege granted by the government and should be
strictly construed against the grantee.

The case established the principle that the scope of a franchise is limited to what is specifically stated
therein and should be strictly construed. It also highlighted the importance of complying with the
terms and conditions of a franchise, as failure to do so may result in its revocation or cancellation.

Prior-operator rule
The prior-operator rule is a principle in transportation law that gives preference to the existing
franchise holder over new applicants for a franchise in the same route or service. The rule is based on
the idea that the prior operator has already established goodwill and reputation among the riding
public, and that the grant of a new franchise to another operator would cause undue competition
and disruption in the market.

Under the prior-operator rule, the grant of a new franchise to another operator should be allowed
only if there is a clear showing of inadequacy of the existing service or if the existing operator has
shown a pattern of abuse or neglect of its franchise obligations. The burden of proving inadequacy
or abuse/neglect is on the new applicant seeking to displace the prior operator.

The prior-operator rule is not an absolute rule, and its application depends on the specific
circumstances of each case. The rule has been upheld by the Supreme Court in several cases,
including San Pablo v. Pantranco, 153 SCRA 199 and Cagayan Electric Power and Light Co. v. Court of
Appeals, 290 SCRA 223. However, the rule has also been subject to exceptions and qualifications,
particularly in cases where there is no existing operator in the route or where the public interest
would be better served by granting a new franchise to another operator.

Batangas Transportation v. Orlanes, 52 Phil. 455

The case of Batangas Transportation v. Orlanes, 52 Phil. 455, is a landmark case in transportation law
in the Philippines. In this case, the Supreme Court upheld the "prior-operator rule" as a valid exercise
of the police power of the state in regulating public utilities.

The case arose from a dispute between two bus companies, Batangas Transportation Company and
Orlanes Transportation Company, over the right to operate a route between Manila and Batangas.
The Public Service Commission (now the Land Transportation Franchising and Regulatory Board)
granted a franchise to Batangas Transportation in 1930, but in 1934, it granted a similar franchise to
Orlanes Transportation. Batangas Transportation challenged the grant of the franchise to Orlanes
 Transportation, arguing that it had been operating the route continuously since 1927 and that the
prior-operator rule should apply.

The Supreme Court agreed with Batangas Transportation and upheld the prior-operator rule, stating
that "the grant of a franchise to a new operator of a public utility service, which is already being
adequately serviced by an existing operator, cannot be justified on the grounds of public
convenience or necessity." The Court further held that the prior-operator rule was a valid exercise of
the police power of the state, which allows the government to regulate public utilities in the interest
of the public.

The ruling in Batangas Transportation v. Orlanes has since been cited in numerous cases as a
precedent for the application of the prior-operator rule in transportation law in the Philippines. It
remains an important case in the regulation of public utilities and the granting of franchises in the
country.

exception to prior-operator rule

There are exceptions to the prior-operator rule, which include:

1. Non-compliance with legal requirements – if the prior operator did not comply with legal
requirements, such as failing to renew their franchise or not following safety regulations, the
franchise may be awarded to another operator.
2. Public interest – the government may take over a public utility service or grant a franchise to a new
operator if it is in the public interest, such as improving the quality of service or expanding coverage.
3. Bad faith – if the prior operator acted in bad faith, such as colluding with government officials or
engaging in unfair competition, the franchise may be awarded to another operator.
4. Expiration of franchise – if the franchise of the prior operator has expired, a new franchise may be
awarded to another operator through a competitive bidding process or other lawful means.
5. Lack of capacity – if the prior operator lacks the financial or technical capacity to continue operating
the franchise, a new franchise may be awarded to another operator who has the necessary resources
to provide adequate and efficient service.

f. Kabit System
The "kabit system" in transportation law refers to the practice where an unqualified person or entity,
known as a "kabit," is used as a front for a franchise holder in the transportation business. The kabit
system is a violation of the law and public policy as it allows the unauthorized use of public utility
vehicles.

The practice is prohibited under Section 299 of the Revised Penal Code, which punishes any person
who acts as a dummy, agent, or nominee of a public service operator without authorization from the
proper authorities. Likewise, the Public Service Act prohibits the operation of a public utility vehicle
without a valid franchise.
In the case of De Guzman v. Comelec (G.R. No. 104712, March 31, 1994), the Supreme Court held
that the kabit system is a circumvention of the law and public policy. The Court emphasized that the
law seeks to protect the riding public and the government by ensuring that only qualified persons
and entities are granted franchises to operate public utility vehicles.

The Court further declared that the kabit system is not only illegal but also immoral and against
public policy. The use of dummies in the transportation industry deprives qualified and deserving
individuals or entities of the opportunity to obtain a franchise and compete in the market on a level
playing field. It also exposes the riding public to unsafe and unreliable transportation services.

In summary, the kabit system is a violation of the law and public policy as it involves the
unauthorized use of public utility vehicles. It is illegal and immoral, and the law seeks to protect the
riding public and promote fair competition in the transportation industry.

Teja v. IAC, 148 SCRA 347 Lim v. CA, G.R. No. 125817, January 16, 2002
Teja v. IAC, 148 SCRA 347:

In this case, the respondent operator of a jeepney applied for a franchise to operate a route
previously held by a corporation. The application was granted by the Public Service Commission
(PSC), and the franchise was granted in respondent's name. The petitioner, who was the president of
the corporation that previously held the franchise, claimed that the respondent only entered into a
kabit system with him and that he was the real owner of the franchise.

The Supreme Court held that the kabit system is a circumvention of the law and public policy, and
that the franchise granted to the respondent was validly granted in his name. The Court also held
that the petitioner's claim of ownership was unsubstantiated and without merit.

Lim v. CA, G.R. No. 125817, January 16, 2002:

In this case, the petitioner filed a complaint against the respondent jeepney operator, alleging that
the respondent was only operating under a kabit system and did not have a valid franchise. The
respondent claimed that he acquired the franchise through a valid sale.

The Supreme Court held that the kabit system is illegal and that the sale of a franchise without the
approval of the Land Transportation Franchising and Regulatory Board (LTFRB) is also illegal.
However, the Court also held that the petitioner failed to prove that the respondent's franchise was
acquired through a kabit system, and that there was sufficient evidence to support the respondent's
claim of a valid sale. Therefore, the respondent's franchise was upheld as valid.

g. Private nature;; rights and obligations of parties inter se arising from transactions relating to
transportation
In private transactions relating to transportation, the parties involved have their respective rights and
obligations that are determined by the terms of their contract. The transportation service provider,
such as a common carrier, has the obligation to transport the passenger or cargo to the agreed
destination safely and in a timely manner. On the other hand, the passenger or shipper has the
obligation to pay the agreed fare or shipping fees.

The terms of the contract may also include provisions regarding liability for loss or damage to the
cargo, limitations on liability, and remedies for breach of contract. These provisions should be agreed
upon by the parties in good faith and should not contravene public policy or the law.

In case of disputes arising from private transactions relating to transportation, the parties may resort
to mediation, arbitration, or the courts for resolution. The applicable laws and regulations on
transportation, as well as the terms of the contract, will be considered in determining the rights and
obligations of the parties.

i. absent a transportation contract

When there is no transportation contract between the parties, the common carrier is still obliged to
carry passengers or goods for hire, subject to the terms and conditions imposed by law. Common
carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them. They are responsible for the loss, destruction, or
deterioration of the goods, as well as for the personal safety of the passengers.

In the absence of a contract, the law will determine the rights and obligations of the parties. For
example, in case of loss or damage to the goods, the common carrier is presumed to be at fault or to
have acted negligently, unless it can prove that it observed the extraordinary diligence required by
law. In case of delay or non-delivery of goods, the common carrier is presumed to be at fault, unless
it can prove that it took all necessary steps to prevent the delay or non-delivery.

Lara v. Valencia, 104 Phil 65

Lara v. Valencia, 104 Phil 65 is a case that deals with the rights and obligations of parties in the
absence of a transportation contract. The case involves a passenger who boarded a bus operated by
the defendant and was injured during the journey. The passenger sued the defendant for damages,
arguing that the defendant was negligent in the operation of the bus.

The defendant argued that there was no transportation contract between them and that the plaintiff
was a mere passenger who boarded the bus without any agreement or arrangement with the
defendant. As such, the defendant argued that it did not owe any duty of care to the plaintiff.

The Supreme Court rejected the defendant's argument and held that the defendant, as a common
carrier, had the duty to ensure the safety of its passengers. This duty arises from the nature of the
business of common carriers, which is to transport passengers safely and securely to their
destination. The Court held that the defendant's duty to the plaintiff arose from the moment she
boarded the bus, regardless of whether there was a transportation contract between them.
 The Court also noted that the defendant had failed to provide the plaintiff with a safe and secure
means of transportation, as evidenced by the fact that the plaintiff was injured during the journey.
The Court held that the defendant was liable for damages to the plaintiff as a result of its negligence.

In summary, Lara v. Valencia established that common carriers owe a duty of care to their
passengers, regardless of whether there is a transportation contract between them. The case also
emphasized the importance of ensuring the safety and security of passengers during transportation.

establishing transportation contract common carrier

A transportation contract is a legally binding agreement between a common carrier and a shipper or
passenger that sets out the terms and conditions of transportation services to be provided. The
contract establishes the rights and obligations of both parties and serves as a guide for resolving
disputes.

To establish a transportation contract, certain elements must be present. These include:

1. Offer and acceptance: The carrier must make an offer to provide transportation services, which the
shipper or passenger must accept.
2. Consideration: There must be a mutual exchange of something of value, such as money or goods,
between the carrier and the shipper or passenger.
3. Competent parties: Both parties must be legally capable of entering into a contract.
4. Legal purpose: The contract must be for a lawful purpose.
5. Certainty of terms: The terms of the contract must be clear and specific, including the type of services
to be provided, the price, and the time and place of delivery.

Once a transportation contract has been established, both parties have certain rights and
obligations. The carrier has a duty to transport the goods or passengers safely and in a timely
manner, while the shipper or passenger has a duty to pay the agreed-upon price for the services
provided. The carrier also has a duty to exercise reasonable care in handling the goods or
passengers, and may be liable for any damage or injury caused by its negligence.

In the event of a dispute, the terms of the transportation contract will govern the resolution of the
dispute. The contract may also specify the forum for resolving disputes, such as arbitration or a court
of law.

ii. liability of registered owner

Under the law, the registered owner of a public utility vehicle is presumed to be the operator and is
liable for damages that may arise from accidents or other incidents involving the vehicle, even if he
or she was not the actual operator at the time of the incident. This presumption may be overcome by
proof that the vehicle was being operated without the owner's consent, knowledge, or participation.
This principle was affirmed in the case of Viron Transportation Co. v. Delos Santos, where the
Supreme Court held that the registered owner of a public utility vehicle is responsible for damages
caused by the negligence of the driver, unless it can be proven that the vehicle was being operated
without the owner's knowledge or consent.

The purpose of this rule is to ensure that the public has a recourse for damages caused by public
utility vehicles, regardless of the identity of the actual operator or driver. However, the registered
owner may also seek indemnification from the actual operator or driver if the incident was caused by
their negligence or fault.

PCI Leasing v UCPB General Insurance, 557 SCRA 141 (GR 162267)
PCI Leasing v. UCPB General Insurance is a case that discusses the liability of a registered owner of a
motor vehicle for damages caused by the negligence of the driver.

In this case, a passenger jeepney owned by PCI Leasing was involved in a vehicular accident resulting
in the death of a passenger and injury to others. The driver of the jeepney was found to be negligent
in the operation of the vehicle. UCPB General Insurance, the insurer of the vehicle, paid the claims of
the victims and filed a complaint against PCI Leasing for reimbursement.

PCI Leasing argued that it cannot be held liable since it was not the employer of the driver, but
merely the registered owner of the vehicle. However, the Supreme Court held that as a registered
owner of a public utility vehicle, PCI Leasing is considered a common carrier and is therefore held to
a high degree of diligence in the selection and supervision of its employees. The court ruled that the
registered owner can be held liable for damages caused by the negligence of the driver, unless the
owner can prove that he exercised the diligence of a good father of a family in the selection and
supervision of the driver.

The court also emphasized that the liability of the registered owner is not based on any contractual
obligation but is imposed by law due to its status as a common carrier.

II. Regulation of the Transportation Industry

Sure, I can help you with that. What would you like to know about the regulation of the
transportation industry?

discuss Regulation of the Transportation Industry

The transportation industry is regulated in the Philippines by various government agencies, including
the Land Transportation Franchising and Regulatory Board (LTFRB), the Land Transportation Office
(LTO), and the Department of Transportation (DOTr). The regulation of the transportation industry is
primarily aimed at ensuring the safety and convenience of the public.
 The LTFRB is responsible for regulating public land transportation services, including taxis, buses,
jeepneys, and other public utility vehicles. The LTFRB issues franchises and regulates the routes, fares,
and operations of these public utility vehicles. It also monitors the compliance of operators and
drivers with the rules and regulations.

The LTO, on the other hand, is responsible for the registration and licensing of all types of motor
vehicles, including public utility vehicles. It also enforces traffic rules and regulations, and monitors
the roadworthiness of motor vehicles.

The DOTr, as the lead agency of the government in the transportation sector, has the overall
responsibility for the formulation and implementation of policies, plans, programs, and regulations
for the transportation industry. It coordinates the activities of the LTFRB, LTO, and other agencies
involved in the transportation sector.

The regulation of the transportation industry is necessary to ensure the safety of the public, promote
fair competition among operators, and provide efficient and reliable transportation services. It also
helps prevent abuse and exploitation of commuters, as well as ensure that operators comply with
environmental and other regulations.

Overall, the regulation of the transportation industry in the Philippines is essential to promote the
development and growth of the sector, which is crucial to the country's economic progress.

a. The Department of Transportation and Communication, EO 292 Book IV, Title XV

The Department of Transportation and Communication (DOTC) is the primary agency responsible for
the regulation and development of the transportation industry in the Philippines. Its creation is
authorized by Executive Order 292, also known as the Administrative Code of 1987, under Book IV,
Title XV.

Under the law, the DOTC is mandated to:

1. Develop and promote the transportation industry in the country;

2. Formulate and implement policies, plans, programs, and standards for the transportation industry,
including the construction, operation, and maintenance of transportation infrastructure;
3. Regulate all transportation services and facilities, including land, sea, and air transport, and
telecommunications facilities and services;
4. Ensure the safety, reliability, and efficiency of all transportation services and facilities;
5. Monitor and regulate the rates, charges, and tariffs of public transportation services to protect the
public interest and ensure a level playing field among industry players; and
6. Enforce compliance with all laws, rules, and regulations related to the transportation industry.

The DOTC has several agencies under it, including the Land Transportation Franchising and
Regulatory Board (LTFRB), the Maritime Industry Authority (MARINA), the Civil Aviation Authority of
the Philippines (CAAP), and the Philippine Ports Authority (PPA). These agencies are tasked with
implementing the policies and regulations set by the DOTC in their respective areas of jurisdiction.
Overall, the DOTC plays a crucial role in the regulation and development of the transportation
industry in the Philippines. Its mandate to ensure the safety, reliability, and efficiency of
transportation services and facilities is vital in providing a safe and convenient means of transport for
the public.

Mirasol v. DPWH, G.R. No. 158793, June 8, 2006

In Mirasol v. DPWH, the Supreme Court discussed the powers and functions of the Department of
Public Works and Highways (DPWH) in relation to the regulation of the transportation industry. The
case involved a complaint filed by a landowner whose property was affected by a road widening
project implemented by the DPWH. The landowner argued that the DPWH had no authority to
undertake the project since it did not comply with the requirements of the National Building Code.

The Supreme Court held that the DPWH has the authority to implement road widening projects as
part of its mandate to provide infrastructure for the transportation industry. The Court also noted
that the DPWH is empowered to enforce laws and regulations related to public works and highways,
including the National Building Code. However, in this particular case, the Court found that the
DPWH did not follow the proper procedures for the acquisition of private property for the project,
and ordered the government to compensate the landowner for the taking of his property.

Overall, the case highlights the role of the DPWH in regulating and providing infrastructure for the
transportation industry, as well as the importance of following proper procedures and complying
with relevant laws and regulations in the implementation of projects.

discuss Air 1. Civil Aviation Authority of the Philippines, Republic Act No. 9497 (2008), Sec. 4, 21, 24,
25, 35 Additional readings: Convention for International Civil Aviation (“Chicago Convention”), Arts 6,
9, 37, 38, 43, 44 and 87 2. Civil Aeronautics Board, RA 776, as amended, Secs. 5, 10 (A), (C);; Secs. 11,
12 PAL v. CAB, 23 SCRA 992 PAL v. CAB, supra Kuwait Airways v. PAL, GR 156087 May 8, 2009
The civil aviation industry in the Philippines is governed by various laws and regulations aimed at
ensuring the safety and efficiency of air transportation. One of the primary agencies tasked with
regulating the industry is the Civil Aviation Authority of the Philippines (CAAP), which was created
under Republic Act No. 9497 (2008).

Under RA 9497, the CAAP is responsible for the promotion, development, and regulation of civil
aviation in the Philippines. It has the power to issue, suspend, or revoke certificates of airworthiness,
air operator certificates, airport operating certificates, and other licenses or certificates necessary for
the operation of aircraft and airports in the country. It is also tasked with investigating aviation
accidents and incidents and enforcing aviation safety standards.

In addition to the CAAP, the Civil Aeronautics Board (CAB) is another agency that plays a role in
regulating the civil aviation industry. It was created under Republic Act No. 776, as amended. The
CAB has the power to regulate the economic aspect of air transportation, including setting the rates
and charges for air travel, granting or revoking certificates of public convenience and necessity for air
carriers, and determining routes for domestic and international air travel.
 One of the landmark cases involving the regulation of the air transportation industry is PAL v. CAB
(23 SCRA 992). In this case, Philippine Airlines (PAL) challenged the CAB's authority to regulate its
fares, arguing that the regulation amounted to a taking of property without just compensation. The
Supreme Court, however, upheld the CAB's power to regulate airfares, stating that the regulation was
a valid exercise of the police power of the state to promote the common good.

In another case, Kuwait Airways v. PAL (GR 156087, May 8, 2009), the issue involved the CAB's
authority to regulate international air travel. Kuwait Airways argued that the CAB had no jurisdiction
over international air travel since it was governed by international law. However, the Supreme Court
ruled that the CAB had the authority to regulate international air travel for carriers operating in the
Philippines, provided that the regulation did not conflict with international treaties and agreements
to which the Philippines was a party.

Overall, the regulation of the air transportation industry in the Philippines is aimed at promoting
safety and efficiency, as well as ensuring that air travel is accessible to the public at reasonable rates.
The CAAP and CAB play crucial roles in this regard, and their powers and functions are clearly
defined under relevant laws and regulations.

Civil Aviation Authority of the Philippines, Republic Act No. 9497 (2008), Sec. 4, 21, 24, 25, 35
Republic Act No. 9497, also known as the Civil Aviation Authority of the Philippines (CAAP) Act of
2008, provides for the creation of the CAAP, which is a government agency that is responsible for
regulating the aviation industry in the Philippines. The following are some of the provisions of the
said law:

 Section 4: The CAAP is created as an independent regulatory body with quasi-judicial powers and
functions to oversee and regulate civil aviation in the Philippines.
 Section 21: The CAAP has the power to investigate and prosecute any person who violates any
provision of the law, including the regulations, standards, and requirements issued by the agency.
 Section 24: The CAAP is authorized to issue, suspend, or revoke certificates, licenses, permits, and
approvals to operate or perform any activity related to civil aviation in the Philippines.
 Section 25: The CAAP may promulgate rules, regulations, orders, and other issuances to ensure the
safety, security, and efficiency of civil aviation operations in the country.
 Section 35: The CAAP has the power to impose fines, penalties, and sanctions on any person or entity
that violates any provision of the law or any regulation, standard, or requirement issued by the
agency.

Convention for International Civil Aviation (“Chicago Convention”), Arts 6, 9, 37, 38, 43, 44 and 87
The Chicago Convention, also known as the Convention on International Civil Aviation, is an
international treaty that established the rules and principles governing international civil aviation. It
was signed in 1944 and has been ratified by over 190 countries.

Here are some relevant articles of the Chicago Convention:

 Article 6: States have complete and exclusive sovereignty over their airspace.
 Article 9: Each contracting State agrees to collaborate in securing the highest practicable degree of
uniformity in regulations, standards, procedures, and organization in relation to aircraft, personnel,
airways, and auxiliary services in all matters in which such uniformity will facilitate and improve air
navigation.
 Article 37: Each contracting State undertakes not to discriminate against the aircraft of other
contracting States or to impose unreasonable charges, regulations, or restrictions on them.
 Article 38: Each contracting State undertakes to provide without delay to the appropriate authorities
of other contracting States any necessary information regarding the arrival, departure, and
movement of aircraft subject to its jurisdiction.
 Article 43: Each contracting State undertakes to ensure that its aeronautical facilities are provided
safely and efficiently.
 Article 44: Each contracting State undertakes to ensure that its personnel responsible for the
operation, maintenance, and repair of aircraft meet the standards prescribed by the International
Civil Aviation Organization (ICAO).
 Article 87: The Council of the International Civil Aviation Organization shall adopt and amend from
time to time international standards and recommended practices dealing with the design,
construction, and operation of aircraft, and shall adopt and amend airworthiness standards for
aircraft engines and equipment.

Civil Aeronautics Board, RA 776, as amended, Secs. 5, 10 (A), (C);; Secs. 11, 12
RA 776, also known as the Civil Aeronautics Act of the Philippines, created the Civil Aeronautics
Board (CAB) to regulate and supervise the country's air transportation industry. Below are the
relevant sections of the law:

 Section 5: This section outlines the powers and functions of the CAB, which includes the regulation of
air carriers, air commerce, and other aspects of air transportation.
 Section 10: This section provides for the issuance of certificates of public convenience and necessity
(CPCN) by the CAB. Subsections (A) and (C) outline the requirements and procedures for obtaining a
CPCN.
 Section 11: This section grants the CAB the power to investigate and penalize air carriers for
violations of the law, regulations, or orders issued by the CAB.
 Section 12: This section authorizes the CAB to suspend or revoke CPCNs issued to air carriers for
violations of the law or regulations, or for failure to comply with the terms and conditions of their
CPCNs.

These provisions give the CAB broad regulatory powers over the air transportation industry in the
Philippines, including the authority to grant and revoke CPCNs, investigate and penalize violations,
and establish rules and regulations to ensure the safety and efficiency of air transportation.

PAL v. CAB, 23 SCRA 992 PAL v. CAB, supra Kuwait Airways v. PAL, GR 156087 May 8, 2009
PAL v. CAB, 23 SCRA 992 is a landmark case which involved a dispute between Philippine Airlines
(PAL) and the Civil Aeronautics Board (CAB) over CAB's issuance of a temporary operating permit
(TOP) to another airline, Air Manila, to operate on PAL's exclusive route. PAL argued that the TOP was
illegal as it violated PAL's franchise rights and CAB's regulations.

The Supreme Court held that while a franchise may be exclusive, it is not absolute and can be subject
to reasonable regulation. CAB has the power to regulate and control air carriers to promote the
public interest and prevent unjust discrimination. The issuance of the TOP to Air Manila was found to
be valid as it was based on reasonable grounds and did not cause undue prejudice to PAL.

In Kuwait Airways v. PAL, GR 156087, the Supreme Court affirmed the CAB's decision to deny Kuwait
Airways' application to operate a new route from Manila to Kuwait. The Court held that the grant of a
permit to operate a new international route is discretionary on the part of CAB, and it may consider
various factors such as the viability of the proposed route, the capacity of the applicant airline, and
the public interest.

Overall, these cases demonstrate the important role of the Civil Aeronautics Board in regulating and
controlling air carriers to promote the public interest and prevent unjust discrimination. Franchise
rights of airlines are not absolute and can be subject to reasonable regulation.

Land
Sure, we can discuss the regulation of land transportation in the Philippines. What specific topics or
cases do you want to discuss?

land-transportation law
3/3
Land transportation law refers to the set of laws and regulations that govern the use and operation
of land vehicles for public and private transportation. These laws cover various aspects, such as the
registration and licensing of vehicles and drivers, the operation of public utility vehicles, the liability
of operators and drivers, and the regulation of traffic and transportation facilities.

In the Philippines, the primary law governing land transportation is Republic Act No. 4136 or the
Land Transportation and Traffic Code. This law establishes the rules and regulations for the operation
and maintenance of motor vehicles and provides for the registration and licensing of drivers and
vehicles. It also sets forth the standards for the construction, equipment, and operation of public
utility vehicles, as well as the penalties for violations of traffic rules and regulations.

Aside from the Land Transportation and Traffic Code, there are also other laws and regulations that
regulate land transportation in the Philippines. These include Republic Act No. 8794 or the Motor
Vehicle User's Charge Law, which imposes fees and charges on motor vehicle users to fund the
maintenance and improvement of national and local roads and bridges; and Republic Act No. 10771
or the Philippine Railways Act, which provides for the establishment, development, and regulation of
railways in the country.
 The Land Transportation Franchising and Regulatory Board (LTFRB) is the government agency
responsible for implementing and enforcing the laws and regulations on land transportation. It is
tasked with issuing franchises for public utility vehicles, regulating their operation, and ensuring the
safety and welfare of the riding public. The agency also has the power to impose sanctions and
penalties on violators of transportation rules and regulations.

1. Land Transportation Office, EO 125-A, Secs. 9, 11, 13(a);; Administrative Code of 1987, Title XV, Sec.
9(1) 2. Land Transportation Franchising and Regulatory Board, EO 202, Secs. 1, 2, 4, 5, 6, 7;;
Administrative Code of 1987, Title XV, Secs. 15-22 7 KMU Labor Center v. Garcia, 239 SCRA 386
Land transportation law in the Philippines is governed by various laws and regulations. Some of the
important laws related to land transportation are discussed below:

1. Land Transportation Office (LTO): The LTO is a government agency responsible for the registration of
motor vehicles and issuance of drivers' licenses. Executive Order No. 125-A governs the organization,
powers, and functions of the LTO. It provides for the powers and functions of the LTO, including the
registration of motor vehicles, issuance of drivers' licenses, and enforcement of traffic rules and
regulations. Section 9 of the EO provides for the powers and functions of the LTO in relation to the
registration of motor vehicles. Section 11 provides for the issuance and renewal of drivers' licenses,
while Section 13(a) provides for the enforcement of traffic rules and regulations.
2. Land Transportation Franchising and Regulatory Board (LTFRB): The LTFRB is a government agency
responsible for the regulation of public land transportation services, including the issuance of
franchises for public utility vehicles (PUVs). Executive Order No. 202 governs the organization,
powers, and functions of the LTFRB. Section 1 provides for the powers and functions of the LTFRB,
including the regulation of land transportation services, issuance of franchises for PUVs, and
enforcement of laws and regulations governing land transportation. Sections 2, 4, 5, 6, and 7 provide
for the specific powers and functions of the LTFRB related to the issuance of franchises, monitoring
of compliance with franchise conditions, suspension or cancellation of franchises, and imposition of
fines and penalties.

The Administrative Code of 1987 also contains provisions related to land transportation. Title XV of
the code contains provisions related to transportation, including the powers and functions of the
LTO and LTFRB. Section 9(1) of Title XV provides for the powers and functions of the LTO in relation
to the registration of motor vehicles.

One of the notable cases related to land transportation law is KMU Labor Center v. Garcia, 239 SCRA
386. In this case, the Supreme Court held that the government may regulate the operation of public
utility vehicles (PUVs) to ensure the safety and convenience of the riding public. The Court also held
that the government may impose fines and penalties on PUV operators and drivers who violate
traffic rules and regulations. However, the government must ensure that the fines and penalties
imposed are reasonable and proportionate to the offense committed.

transportation law water

 Water transportation law refers to the legal framework governing the operation of vessels and other
watercraft used for commercial, recreational, or other purposes on navigable waterways. It includes
laws and regulations related to the construction, maintenance, registration, and operation of vessels,
as well as liability and insurance issues related to accidents and injuries that may occur on or near
watercraft.

In the Philippines, the Maritime Industry Authority (MARINA) is the government agency responsible
for the implementation of laws and regulations related to the maritime industry, including water
transportation. The agency oversees the registration and licensing of vessels and seafarers, ensures
compliance with safety and environmental standards, and regulates the activities of shipping
companies and other maritime businesses.

There are several laws and regulations that govern water transportation in the Philippines, including
the following:

1. Republic Act No. 9295, or the Domestic Shipping Development Act of 2004, which aims to promote
the development of domestic shipping by providing incentives to shipping companies and
improving the regulatory framework for the industry.
2. Republic Act No. 9993, or the Philippine Coast Guard Law of 2009, which strengthens the role of the
Philippine Coast Guard in promoting safety and security in Philippine waters, including the
prevention and response to maritime accidents and incidents.
3. The International Convention for the Safety of Life at Sea (SOLAS), which sets minimum safety
standards for ships engaged in international trade.
4. The Code of Safe Practice for Ships Carrying Timber Deck Cargoes, which provides guidelines for the
safe stowage and securing of timber deck cargoes on ships.
5. The International Convention for the Prevention of Pollution from Ships (MARPOL), which aims to
prevent pollution of the marine environment from ships by setting standards for the discharge of
harmful substances and pollutants.
6. The Code of Safe Practice for Oil Tankers, which provides guidelines for the safe transport and
handling of oil cargoes on tankers.
7. The Code of Safe Practice for Cargo Stowage and Securing, which provides guidelines for the safe
stowage and securing of cargo on ships.

Water transportation law in the Philippines also covers issues such as liability for maritime accidents
and injuries, salvage operations, and the protection of marine ecosystems.

1. Maritime Industry Authority, EO 125, Sec. 14, as amended by EO-125-A, Sec. 4, RA 9295, Sec. 9, 10
and 11, and RA 10635, Sec.
The Maritime Industry Authority (MARINA) is the primary government agency responsible for the
implementation and enforcement of maritime laws in the Philippines. Its powers and functions are
primarily governed by Executive Order No. 125, as amended by Executive Order No. 125-A.

Section 14 of EO 125 grants MARINA the power to regulate the establishment, operation, and
maintenance of shipping companies, as well as the registration, documentation, and inspection of
 ships. MARINA is also authorized to issue licenses, permits, and certificates of competency to ship
officers and crews, as well as to impose penalties and sanctions for violations of maritime laws.

RA 9295, also known as the Domestic Shipping Development Act of 2004, further empowers
MARINA to regulate domestic shipping activities, including the establishment and operation of
domestic shipping companies, the registration and documentation of domestic ships, and the
training and certification of domestic ship officers and crews.

RA 10635, known as the Philippine Coast Guard Law of 2013, created the Philippine Coast Guard as
an independent armed service under the Department of Transportation. The law also grants the
Philippine Coast Guard the power to enforce maritime laws and regulations, conduct search and
rescue operations, and perform other maritime security and safety functions.

Overall, the laws and regulations governing the maritime industry in the Philippines aim to ensure
the safety and security of ships, crews, and passengers, as well as to promote the development and
growth of the domestic shipping industry.

III. Common Carriers

Common carriers refer to entities that are engaged in the business of transporting goods or people
from one place to another in exchange for compensation. They are held to a higher standard of care
and diligence compared to private carriers because they offer their services to the general public.

The legal framework that governs common carriers in the Philippines is rooted in the Civil Code of
the Philippines, which defines common carriers as those who "offer to the public their services for the
transportation of persons or goods." The following are some of the key provisions that apply to
common carriers:

1. Obligation to observe extraordinary diligence - Common carriers are required to observe

extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them. They are presumed to be at fault or to have acted negligently if the goods or
passengers they are transporting are lost, destroyed, or injured, unless they can prove that they
observed extraordinary diligence.
2. Liability for loss or damage to cargo - Common carriers are liable for loss, destruction, or
deterioration of the goods they are transporting, unless they can prove that the loss, destruction, or
deterioration was due to any of the following causes:
a. An act of God or force majeure b. An act of the public enemy in war, whether international or civil
c. The fault or negligence of the shipper or owner of the goods d. The character of the goods or
defects in the packing or in the containers e. Order or act of competent public authority
3. Liability for injury or death of passengers - Common carriers are also liable for the death or injury of
passengers, unless they can prove that they observed extraordinary diligence or that the injury or
death was caused by any of the following:
a. Force majeure b. The act or omission of the passenger c. The negligence of a third party not
connected with the carrier's business d. The character of the passenger or his or her defects
4. Limitations of liability - The Civil Code provides that the common carrier's liability for the loss or
damage to goods is limited to the value of the goods at the time they were delivered to the carrier,
unless the shipper or owner declares a higher value and pays the corresponding premium. For death
or injury of passengers, the carrier's liability is limited to the amount of the insurance premium,
unless the carrier acted in bad faith or with gross negligence.
5. Rights and obligations of common carriers and passengers - The Civil Code also sets out the rights
and obligations of common carriers and passengers. For example, common carriers have the right to
demand payment of the agreed fare, to refuse passengers who are intoxicated or under the influence
of drugs, and to impose reasonable rules and regulations. Passengers, on the other hand, have the
right to be transported safely and to be treated with civility and respect.

Overall, the legal framework governing common carriers in the Philippines aims to protect the
interests of both the carriers and the public they serve. It emphasizes the need for carriers to observe
a high standard of care and diligence, while also providing them with some protection against
unreasonable claims for damages or liability.

In General i. Definitions, essential elements;; Art. 1732 U.S. v. Tan Piaco, 40 Phil. 853 Home Insurance
Co. v, American Steamship, 23 SCRA 24 De Guzman v. CA, 168 SCRA 612 Bascos v. CA, 221 SCRA 318
Planters Products Inc. v. Court of Appeals, 226 SCRA 476 Fabre v. Court of Appeals, 259 SCRA 426
First Philippine Industrial Corporation v. Court of Appeals, 300 SCRA 661, GR 125948, 12/29/98
Loadstar Shipping Co., Inc. v. Court of Appeals, 315 SCRA 339 (GR 131621;; 9/28/99) Crisostomo v.
Court of Appeals, 409 SCRA 528 (GR 138334;; 8/25/03) Cruz v. Sun Holidays, G.R. No. 186312, June
29, 2010
i. Definitions, essential elements; Art. 1732

Common carriers are entities that are engaged in the business of transporting goods, passengers, or
both, for compensation, whether publicly or privately owned. Article 1732 of the Civil Code of the
Philippines defines a common carrier as:

"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."

To be considered a common carrier, the following elements must be present:

1. The carrier must be engaged in the business of transporting goods, passengers, or both;
2. The carrier must be transporting these goods, passengers, or both for compensation or hire; and
3. The carrier must hold itself out to the public as a ready, willing, and able transporter of goods,
passengers, or both indiscriminately.

The essential feature of a common carrier is that it offers its services to the public, which means that
it is not selective in choosing its customers. A common carrier is also required to observe the degree
of diligence required by law in the carriage of goods or passengers.
Case law has further clarified that not all vehicles or vessels that transport passengers or goods for
compensation are common carriers. The distinction depends on whether the carrier is offering its
services to the public generally, or is instead merely serving a limited number of specific customers.

Some of the cases that discuss the definition and essential elements of common carriers in the
Philippines include U.S. v. Tan Piaco, Home Insurance Co. v. American Steamship, De Guzman v. CA,
Bascos v. CA, Planters Products Inc. v. Court of Appeals, Fabre v. Court of Appeals, First Philippine
Industrial Corporation v. Court of Appeals, Loadstar Shipping Co., Inc. v. Court of Appeals,
Crisostomo v. Court of Appeals, and Cruz v. Sun Holidays.

discuss the cases U.S. v. Tan Piaco, 40 Phil. 853 Home Insurance Co. v, American Steamship, 23 SCRA
24 De Guzman v. CA, 168 SCRA 612 Bascos v. CA, 221 SCRA 318 Planters Products Inc. v. Court of
Appeals, 226 SCRA 476 Fabre v. Court of Appeals, 259 SCRA 426 First Philippine Industrial
Corporation v. Court of Appeals, 300 SCRA 661, GR 125948, 12/29/98 Loadstar Shipping Co., Inc. v.
Court of Appeals, 315 SCRA 339 (GR 131621;; 9/28/99) Crisostomo v. Court of Appeals, 409 SCRA 528
(GR 138334;; 8/25/03) Cruz v. Sun Holidays, G.R. No. 186312, June 29, 201
U.S. v. Tan Piaco, 40 Phil. 853 - In this case, the Supreme Court held that common carriers are
persons or corporations engaged in transporting goods, passengers, or both, by land, water, or air
for compensation, offering their services to the public. The essential elements of a common carrier
are (1) he must be engaged in the business of carrying goods for others as a public employment, and
(2) he must hold himself out as ready to engage in the transportation of goods for persons generally
as a business and not as a casual occupation.

Home Insurance Co. v. American Steamship, 23 SCRA 24 - In this case, the Supreme Court held that
the liability of a common carrier for the loss or damage to the goods it transports arises from the
moment the goods are unconditionally placed in its possession for shipment until the same are
delivered, actually or constructively, by the carrier to the consignee or to the person who has the
right to receive them.

De Guzman v. CA, 168 SCRA 612 - In this case, the Supreme Court held that the mere fact that a
person or entity undertakes to transport goods or passengers for a fee does not automatically make
him or it a common carrier. To be considered a common carrier, the carrier must hold itself out as
ready to engage in the transportation of goods or passengers to the public.

Bascos v. CA, 221 SCRA 318 - In this case, the Supreme Court held that a contract of private carriage
may be entered into by any person or entity, as long as the carriage is not for the purpose of
engaging in the business of carrying goods or passengers for the public. In a contract of private
carriage, the parties may agree on the extent of the carrier's liability, which may be less than that of a
common carrier.

Planters Products Inc. v. Court of Appeals, 226 SCRA 476 - In this case, the Supreme Court held that
the negligence of the common carrier need not be the sole and proximate cause of the loss or
damage to the goods in order for the carrier to be held liable. It is enough that the carrier's
negligence was a contributing cause to the loss or damage.
Fabre v. Court of Appeals, 259 SCRA 426 - In this case, the Supreme Court held that the carrier's
liability for the loss or damage to the goods it transports does not depend on the character of the
goods or the stipulations in the contract of carriage. The carrier is liable as long as the loss or
damage occurred while the goods were in its custody, and the carrier failed to exercise the diligence
required of it under the law.

First Philippine Industrial Corporation v. Court of Appeals, 300 SCRA 661, GR 125948, 12/29/98 - In
this case, the Supreme Court held that the carrier's liability for the loss or damage to the goods it
transports is not limited to the actual value of the goods, but also includes other damages such as
lost profits and unrealized earnings.

Loadstar Shipping Co., Inc. v. Court of Appeals, 315 SCRA 339 (GR 131621;; 9/28/99) - In this case, the
Supreme Court held that the carrier's liability for the loss or damage to the goods it transports may
be limited by stipulation in the contract of carriage, but such limitation must be reasonable and just
under the circumstances.

Crisostomo v. Court of Appeals, 409 SCRA 528 (GR 138334;; 8/25/03) - In this case, the Supreme
Court held that a common carrier is presumed to be negligent in case of loss or damage to the
goods it transports

ii. Nature and Basis of Liability Art. 1733 Cangco v. MRR, 38 Phil. 767 Isaac v. A.L. Ammen, 101 Phil.
1046 Fores v. Miranda, 105 Phil. 266 Phil. Rabbit v. IAC, 189 SCRA 159 LRTA v. Navidad, 397 SCRA 75
(GR 145804;; 2/6/03)
Article 1733 of the Civil Code provides that common carriers are presumed to have been at fault or
to have acted negligently, unless they can prove that they observed extraordinary diligence in the
carriage of the goods or passengers. This is based on the public policy of the state to protect its
citizens who use the services of common carriers.

In Cangco v. Manila Railroad Co., the Supreme Court emphasized that common carriers are 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. They are required to
exercise extraordinary diligence in the vigilance over goods and passengers they transport.

In Isaac v. A.L. Ammen, the Supreme Court held that common carriers are presumed to be at fault or
to have acted negligently in case of death or injury to passengers, unless they can prove that they
have observed extraordinary diligence as required by law.

In Fores v. Miranda, the Supreme Court held that the carrier's duty of extraordinary diligence extends
to the passengers' baggage and belongings they bring with them in the trip.

In Philippine Rabbit Bus Lines v. Intermediate Appellate Court, the Supreme Court ruled that the
death of a passenger in a bus accident gives rise to a presumption of negligence on the part of the
carrier. To overcome this presumption, the carrier must show that it has exercised extraordinary
diligence to prevent the accident.
In LRTA v. Navidad, the Supreme Court held that the concept of extraordinary diligence requires the
common carrier to do more than what is ordinarily required of a good father of a family. It is a
standard of care that is higher than that of an ordinary reasonable man, and it requires that the
carrier exert extra efforts to avoid injury or damage to the passenger.

Overall, the nature and basis of the liability of common carriers is grounded on the public policy of
the state to protect its citizens who use their services. Common carriers are required to observe
extraordinary diligence in the carriage of goods or passengers, and they are presumed to have acted
negligently in case of injury, death or damage to the transported property, unless they can prove
otherwise.

iii. Classes of common carriers Art. 1732, 1733, 1755

Article 1732 of the Civil Code provides that common carriers are either "land, sea, or air carriers."
Land carriers include those that operate on roads, such as buses, trucks, and vans. Sea carriers, on
the other hand, pertain to those that operate on water, such as ships and vessels. Finally, air carriers
refer to those that operate in the air, such as planes and helicopters.

Article 1733 of the Civil Code states that a common carrier may be a "private carrier" or a "common
carrier in fact," depending on the circumstances of the case. A private carrier is one who does not
engage in the business of carrying goods or passengers for the general public, but only for specific
persons or groups of persons. A common carrier in fact, on the other hand, is a person or entity that
undertakes to carry goods or passengers for compensation, regardless of whether it has been
granted a certificate of public convenience or not.

Article 1755 of the Civil Code further provides that common carriers may be "by land, sea, or air."
This article emphasizes the broad scope of common carriers, which includes all forms of
transportation that fall under the categories of land, sea, or air.

iv. Law applicable Arts. 1766, 1753 National Development Co. v. Court of Appeals, 164 SCRA 593 (GR
L-49407;; 8/19/88)
In National Development Co. v. Court of Appeals, the Supreme Court held that the laws that govern
common carriers are the Civil Code and the Code of Commerce, insofar as they are not inconsistent
with special laws such as the Public Service Act, the Transportation Law, and the Maritime Law. The
Court emphasized that the provisions of the Civil Code and the Code of Commerce are merely
suppletory and will apply only in the absence of special laws or regulations that cover a particular
subject matter.

Moreover, the Court clarified that in case of conflicts between the Civil Code and the Code of
Commerce, the latter shall prevail because it is a special law governing maritime commerce. On the
other hand, if there is a special law that covers the subject matter, it shall take precedence over the
Code of Commerce and the Civil Code.
 Common Carriage of Goods i. Liability and presumption of negligence Arts. 1733, 1734, 1735
Under Article 1733 of the Civil Code, a common carrier is presumed to have been at fault or to have
acted negligently in case of loss or damage to the goods it is transporting. This is a presumption of
negligence that can be overcome by proof that the common carrier has observed extraordinary
diligence in transporting the goods.

Article 1734 of the Civil Code provides that common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless they can prove that such loss, destruction, or deterioration was
due to any of the following causes:

1. Flood, storm, earthquake, lightning, or other natural disaster or calamity;

2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.

Article 1735 of the Civil Code states that in all cases other than those mentioned in Article 1734, the
common carrier shall be presumed to have been at fault or to have acted negligently, unless it
proves that it has observed extraordinary diligence as required by law.

In other words, a common carrier is generally liable for loss, damage, or delay of goods entrusted to
it for transportation, except in cases where the loss or damage was due to causes beyond its control
or was caused by the shipper or owner of the goods. The burden of proof is on the common carrier
to show that it has observed extraordinary diligence to avoid the loss, damage, or delay of the
goods.

Ynchausti Steamship Co. v. Dexter, 41 Phil. 289 Mirasol v. Dollar, 53 Phil 125
Ynchausti Steamship Co. v. Dexter, 41 Phil. 289, is a landmark case in Philippine common carrier law
that established the doctrine of presumption of negligence in the carriage of goods. The case
involved a shipment of sugar that was damaged while being transported by the Ynchausti Steamship
Co. The court held that the common carrier was liable for the damage to the sugar because of the
presumption of negligence, which arose from the mere fact that the goods were damaged while in
the carrier's custody. The carrier had the burden of proving that it was not negligent, which it failed
to do.

Mirasol v. Dollar, 53 Phil. 125, is another case that involved the carriage of goods by a common
carrier. In this case, the plaintiff shipped a number of boxes of personal effects from the United
States to Manila on board a vessel owned by the Dollar Steamship Lines. When the boxes arrived in
Manila, the plaintiff discovered that some of the items inside had been stolen. The court held that
the carrier was liable for the loss because it had failed to exercise due diligence in the handling and
care of the goods. The carrier was also held liable for damages resulting from the delay in the
delivery of the goods.
 Exemption from liability
Common carriers may be exempted from liability for the loss or damage of goods under certain
circumstances. These exemptions are provided for by law and may be express or implied.

Article 1744 of the Civil Code provides for instances where common carriers are exempt from liability
for loss or damage to goods, including cases where the loss or damage was due to:

1. Force majeure;
2. The inherent nature or defect of the goods;
3. The act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packaging or in the containers;
5. The order or act of competent public authority.

However, it should be noted that these exemptions may not apply if the common carrier is found to
have acted fraudulently or with gross negligence. The burden of proof to show that the loss or
damage was due to any of these causes falls on the common carrier.

1. Natural Disaster Arts. 1734 (1), 1739, 1740;; Art. 361, Code of Commerce Tan Chiong v. Inchausti,
22 Phil 153 Martini v. Macondray, 39 Phil. 934 Eastern Shipping v. IAC, 150 SCRA 463 Asia Lighterage
v. Court of Appeals, 409 SCRA 340
Under Article 1734 of the Civil Code, common carriers are not liable for loss, destruction, or
deterioration of goods if it is due to natural disasters, such as floods or earthquakes. However, if the
common carrier could have prevented or minimized the damage by taking necessary measures, then
the exemption will not apply.

In Tan Chiong v. Inchausti, the Supreme Court ruled that the carrier was not liable for the loss of
cargo caused by a typhoon because it was considered a natural disaster beyond the carrier's control.

In Martini v. Macondray, the carrier was also held not liable for the damage caused by a typhoon
since it was considered a natural disaster.

In Eastern Shipping v. IAC, the Supreme Court affirmed that common carriers are not presumed
negligent in case of loss, destruction or deterioration of goods due to natural disaster under Article
1734(1) of the Civil Code. However, if there is a special agreement limiting the carrier's liability, the
carrier will still be liable to the extent agreed upon.

In Asia Lighterage v. Court of Appeals, the Court held that the carrier was not liable for the damage
caused by a typhoon, as it was considered a natural disaster beyond the carrier's control. However,
the carrier was still held liable for damages caused by its own negligence in securing the cargo, as
well as the damages caused by its failure to exercise due diligence in the selection and supervision of
its employees.
Act of public enemy – Art. 1734(2), 1739 9 3. Act of omission of shipper – Art. 1734(3), 1741
Under Article 1734(3) of the Civil Code, a common carrier is exempt from liability for loss or damage
to the goods if such loss or damage was due to the act or omission of the shipper or owner of the
goods. This means that if the loss or damage to the goods was caused by the shipper or owner's
own negligence or fault, the common carrier will not be held liable.

On the other hand, Article 1741 of the Civil Code provides that the shipper or owner shall be liable
for all damages and expenses incurred by the carrier, as well as for those suffered by other
passengers or third persons, if the loss, destruction or deterioration of the goods is due to his fault
or negligence. This means that if the loss or damage to the goods was caused by the shipper or
owner's own fault or negligence, he will be held liable for any damages and expenses incurred by the
common carrier, as well as for any damages suffered by other passengers or third persons.

4. Character of goods, etc Arts. 1734(4), 1742 Art. 366, Code of Commerce Government v. Ynchausti,
40 Phil 219 Southern Lines v. CA, 4 SCRA 258
Under Article 1734(4) of the Civil Code, a common carrier is exempt from liability for loss or damage
to goods if such loss or damage was caused by the "character of the goods or defects in the packing
or in the containers." This means that if the nature of the goods or the way they were packaged was
the reason why they got damaged or lost, the common carrier may not be held liable for the same.

Article 1742 provides that the shipper has the responsibility to properly package the goods and to
inform the carrier of the nature of the goods. Failure to do so may result in the shipper being held
liable for any damage or loss that may occur during transportation.

In Government of the Philippine Islands v. Ynchausti (40 Phil. 219), the Supreme Court held that a
common carrier cannot be held liable for damages caused by the inherent nature of the goods being
transported, such as the natural tendency of copra to heat up and self-ignite. However, if the carrier
was aware of such inherent characteristics and failed to take necessary precautions, it may still be
held liable.

In Southern Lines v. CA (4 SCRA 258), the Supreme Court held that a common carrier cannot be held
liable for loss or damage to goods that are inherently fragile or susceptible to damage, such as
delicate musical instruments. However, if the carrier accepts such goods for transportation despite
their fragile nature, it has a higher degree of responsibility to ensure their safe transport.

5. Order of competent authority Arts. 1734(5), 1743 Ganzon v. Court of Appeals, 161 SCRA 646
Ganzon v. Court of Appeals, 161 SCRA 646, is a case that involves the exemption from liability of a
common carrier due to the order of a competent authority. In this case, a shipment of tires was
seized and detained by the Bureau of Customs due to the failure of the consignee to pay the
corresponding customs duties and taxes. The consignee sued the carrier for damages for the delay
and detention of the shipment.
 The Supreme Court held that the carrier was not liable for the delay and detention of the shipment
because it was due to the order of the Bureau of Customs. The carrier cannot be expected to disobey
the lawful order of a competent government authority. The Court emphasized that the carrier is not
required to look beyond the face of the bill of lading to determine the legality of the shipment. It is
only when the illegality of the shipment is manifest that the carrier may be held liable for its
transportation.

Duration of Extraordinary Responsibility Arts. 1736 to 1738

Articles 1736 to 1738 of the Civil Code provide for the duration of extraordinary responsibility of
common carriers.

Article 1736 states that the extraordinary responsibility of common carriers continues to be in effect
during the entire time that the goods are in their possession or until they are delivered to the
consignee, or to the person who has the right to receive them, unless the contract of carriage or
applicable laws provide for a shorter period.

Article 1737 provides that in case of temporary cessation of the carrier's business, the extraordinary
responsibility also ceases, but it resumes as soon as the carrier resumes its business. However, the
carrier must give notice to the public of the temporary cessation of its business.

Article 1738 states that if the goods are stored in a warehouse, the extraordinary responsibility of the
carrier ceases after the lapse of the time fixed for their storage by the warehouseman, or if none has
been fixed, after the lapse of 10 days after the arrival of the goods at the warehouse. However, if the
goods are placed in storage upon the consignee's request or with his knowledge, the carrier shall
continue to be liable for the goods as a common carrier.

Overall, these provisions ensure that common carriers are held accountable for the goods they
transport or store until the goods are delivered to the rightful recipient or for the duration specified
in the law or contract.

Compania Maritima v. Insurance Company, 12 SCRA 213 Lu Do v. Binamira, 101 Phil 120 APL v.
Klepper, 110 Phil 243 Samar Mining Co., Inc. v. Nordeutscher Lloyd, 132 SCRA 529 (GR L-28673;;
10/23/84) Eastern Shipping v. CA, 234 SCRA 79 (GR 97412;; 7/12/94)
These cases are related to the liability and responsibility of common carriers:

1. Compania Maritima v. Insurance Company - This case involves the sinking of a vessel due to a
typhoon. The insurance company of the cargo claimed damages from the shipping company. The
Supreme Court held that the shipping company was not liable for the damage caused by the
typhoon because it was considered a natural disaster.
2. Lu Do v. Binamira - This case involves the liability of a common carrier for the loss of cargo due to
theft. The Supreme Court held that the common carrier is liable for the loss of cargo unless it can
prove that it has taken all the necessary precautions to prevent such loss.
3. APL v. Klepper - This case involves the sinking of a vessel due to a collision with another ship. The
Supreme Court held that the shipping company was liable for the damage caused to the cargo
because it failed to exercise the extraordinary diligence required of common carriers.
4. Samar Mining Co., Inc. v. Nordeutscher Lloyd - This case involves the liability of a common carrier for
the loss of cargo due to a fire. The Supreme Court held that the common carrier was not liable for
the loss because it was caused by an act of God.
5. Eastern Shipping v. CA - This case involves the liability of a common carrier for the delay in the
delivery of cargo. The Supreme Court held that the common carrier was liable for the delay because
it failed to exercise the required degree of diligence in transporting the cargo. The Court also
discussed the different kinds of damages that can be awarded for the delay.

Agreement Limiting Liability 1. As to diligence required Arts. 1744, 1745, 1751

Under Article 1744 of the Civil Code, a common carrier may limit its liability for loss or damage to the
goods transported if it shows that it has observed extraordinary diligence as required by law.
However, the law does not allow the carrier to stipulate for a lesser degree of diligence than that
prescribed by law.

Article 1745 further provides that any stipulation that relieves the carrier or the shipowner of
responsibility for loss or damage is void, except as allowed by law.

Article 1751 specifies that the common carrier's liability for the loss, destruction or deterioration of
the goods may be limited to the value declared by the shipper, provided that such value is
reasonable and just under the circumstances and has been declared by the shipper.

In summary, while common carriers may limit their liability for loss or damage to goods if they can
prove that they have observed extraordinary diligence, they cannot stipulate for a lesser degree of
diligence than what is required by law. Any agreement that relieves the carrier of responsibility for
loss or damage is void, except as allowed by law. Moreover, the carrier's liability may be limited to
the value declared by the shipper, provided that such value is reasonable and just under the
circumstances and has been declared by the shipper.

2. As to amount of liability Arts 1749 and 1750 Heacock v. Macondray 42 Phil 205 Shewaram v. PAL
17 SCRA 606 Ong Yiu v. CA, 91 SCRA 223 Pan Am v. IAC, 164 SCRA 268 Cathay Pacific v. CA, 219
SCRA 520
In Heacock v. Macondray, 42 Phil 205, the Supreme Court held that an agreement between the
parties fixing the value of the goods at the time of shipment, and not exceeding that allowed by law,
is valid and binding.

In Shewaram v. PAL, 17 SCRA 606, the Supreme Court held that a stipulation in a passenger ticket
limiting the liability of an airline for death or injury to a passenger to a certain sum is valid, as long as
it is not contrary to law, morals, or public policy.
In Ong Yiu v. CA, 91 SCRA 223, the Supreme Court held that a stipulation in a contract limiting the
liability of a common carrier to an amount less than the value of the goods, unless the shipper
declares a higher value and pays an additional fee, is valid and binding.

In Pan Am v. IAC, 164 SCRA 268, the Supreme Court held that a limitation of liability of a carrier in
the transportation of passengers and their baggage by air, as provided in the Warsaw Convention, is
valid and binding.

In Cathay Pacific v. CA, 219 SCRA 520, the Supreme Court held that a stipulation in a ticket limiting
the carrier's liability for damages to a passenger's baggage, unless the passenger declares a higher
value and pays an additional fee, is valid and binding.