TRANSPORTATION)LAW)

REVIEWER)
Prof. Nicky Ty
! U.P. College of Law

Jocs Dilag

Law 138 – Transportation and Public Utilities

Caveat Lector Last Updated:
Read to be informed and updated because most of the time you just don’t know what you don’t know. 9-Nov-14
Public Utilities
GENERAL DISCUSSION
I. WHAT IS A PUBLIC UTILITY?
Definition:
A public utility is a business/service engaged in regularly
supplying the public with some commodity or service of
public consequence such as electricity, gas, water,
transportation, telephone, or telegraph service1.
Elements of a public utility
1. There must be public interest/consequence;
2. Private property devoted to public use;
3. Offers to the public indiscriminately; and
4. For hire/compensation.
Consequences of being a public utility2
1. Ceases to be juris privati;
2. Grants to the public an interest in its use/utility; and
3. Can be regulated
MUNN V ILLINOIS (1876)
WHEN%ONE%DEVOTES%HIS!PROPERTY'TO'A'USE'IN!
WHICH%THE%PUBLIC%HAS!AN#INTEREST,#HE,#IN#
EFFECT,&GRANTS&TO&THE"PUBLIC"AN"INTEREST!IN#
THAT$USE,$AND$MUST$SUBMIT&TO&BE&
CONTROLLED)BY)THE)PUBLIC%FOR%THE%COMMON%
GOOD,%TO%THE%EXTENT#OF#THE#INTEREST#HE"HAS"
THUS%CREATED.%HE%MAY!WITHDRAW(HIS(GRANT(
BY#DISCONTINUING#THE!USE,%BUT,%SO%LONG%AS!
HE#MAINTAINS#THE#USE,"HE"MUST"SUBMIT"TO"
THE$CONTROL.!
Munn & Scott were found guilty of violating the
Illinois general assembly act that regulates public
warehouses by operating their ‘public warehouse’
[receiving and storing grains; rates are based on
F:
annually published rates of storage as agreed upon
by different warehouse owners] without procuring
license as required by the act and by charging more
than the rates fixed by the law.
Can the general assembly regulate the warehouse
I: business of Munn & Scot without violating the
constitutional protection on property rights?
YES. Court held that the Act does not constitute a
‘deprivation of property without due process’ as the
State has inherent power to regulate property
clothed with public interest. In the case at hand,
R:
Munn’s business ceased to be a private property as
their business most certainly "tends to a common
charge, and is become a thing of public interest and
use."
1 NPC V CA
2 REPUBLIC V MERALCO, CITING MUNN V ILLINOIS
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
LUZON STEVEDORING V PSC (1953)
PUBLIC'UTILITY'IS'NOT"DETERMINED"BY"THE"
NUMBER'OF'PEOPLE'ACTUALLY%SERVED.%NOR%
DOES%THE%MERE%FACT%THAT$SERVICE$IS$
RENDERED%ONLY%UNDER%CONTRACT'PREVENT'A'
COMPANY(FROM(BEING(A!PUBLIC'UTILITY.$IT$IS$
ONLY%NECESSARY%THAT%IT#MUST#IN#SOME#WAY#
BE#IMPRESSED#WITH#A#PUBLIC'INTEREST.'!
!
WHETHER&THE&OPERATION"OF"A"GIVEN"BUSINESS"
IS#A#PUBLIC#UTILITY#DEPENDS&UPON&WHETHER!
OR#NOT#THE#SERVICE#RENDERED%BY%IT%IS%OF%A"
PUBLIC'CHARACTER'AND!OF#PUBLIC#
CONSEQUENCE!AND$CONCERN.!!!
Petitioners argued that they could not come under
the PSC’s regulation because they were not public
utilities, as they only offered services to a limited
F:
clientele and not to the public at large, through
private lease agreements and not ordinary
transportation contracts.
I: WON Luzon Stevedoring is a public utility.
YES. SC ruled that they were engaged in ordinary
transportation contracts, and that they were public
R: utilities despite having a limited clientele since the
circumstances showed that their business was
impressed with public concern.
II. WHAT IS A PUBLIC SERVICE
Elements of a public service:
1. It must be for hire/compensation;
2. Serving a general/Limited clientle;
3. Either permanent, occassional or accidental; and
4. For general business purposes.
PUBLIC SERVICE VIS-À-VIS PUBLIC UTILITY
Class notes:
Public Service: Defined under Section 13 (b), CA 1463
Public Utility: Defined by tests in jurisprudence
All public services are public utilities but not all public
utilities are public services.
- But in essence, they are the same.
3
"includes every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction
railway, sub-way motor vehicle, either for freight or passenger, or both with or
without fixed route and whatever may be its classification, freight or carrier
service or any class, express service, steamboat, or steamship line, pontines,
ferries, and water craft, engaged in the transportation of passengers and freight
or both, shipyard, marine repairshop, [warehouse], wharf or dock, ice plant, ice
refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power, petroleum, sewerage system, wire or wireless
communications system, wire or wireless broadcasting stations and other
similar public services..."
1 56
III. LEGAL BASIS AND RATIONALE ALBANO V REYES (1989)
THE$LIMITATION$IN$THE"CONSTITUTION"
FOR REGULATION REGARDING(THE(ISSUANCE#OF#FRANCHISES#
BEING&SUBJECT&TO&AMENDMENT,'ALTERATION'
Legal Basis: Sec. 6, Article XII, 1987 Constitution OR#REPEAL#BY#CONGRESS"DOES"NOT"
Rationale: Police Power NECESSARILY*IMPLY*ONLY#CONGRESS#HAS#THE#
POWER&TO&GRANT.&THE&LAW$GRANTS'ADMIN'
Rules on exercise of police power4: AGENCIES(THE(POWER(TO"GRANT"LICENSES"OR"
Protection against arbitrary and excessive rates. TO#AUTHORIZE#THE#OPERATION'OF'CERTAIN'
But not rates that are so low as to deprive the public utility PUBLIC'UTILITIES.!
of a reasonable return on investment. After bidding, the President of the Philippine then
- Requires the balancing of investor and consumer approved the proposed MICT contract. The next day,
interests the PPA and ICTSI perfected the MCTI contract.
Now, petitioner assails the award of the contract on
F:
the argument that since the MICT is a public utility, it
REPUBLIC V MERALCO (2002) needs a legislative franchise (as provided under the
THE$REGULATION$OF$RATES$TO$BE$CHARGED$BY!
1987 Const.) before it can legally operate as a public
PUBLIC'UTILITIES'IS'FOUNDED'UPON%THE%POLICE%
POWERS'OF'THE'STATE'AND$STATUTES$
utility.
PRESCRIBING*RULES*FOR"THE"CONTROL"AND" I: WON the PPA may grant the authority
REGULATION+OF+PUBLIC!UTILITIES'ARE'A'VALID" R: YES. See doctrine.
EXERCISE'THEREOF.'!
!
THE$STATE$PROTECTS$THE#PUBLIC#AGAINST#
KMU LABOR CENTER V GARCIA (1994)
ARBITRARY'AND'EXCESSIVE$RATES$WHILE$
THE!DOCTRINE)OF)POTESTAS'DELEGATA'NON"
MAINTAINING'THE'EFFICIENCY&AND&QUALITY'OF'
DELEGARI(POTEST!IS#BASED#ON#THE#ETHICAL$
SERVICES'RENDERED.'HOWEVER,'THE'POWER'TO!
PRINCIPLE(THAT(A(DELEGATED&POWER&IS&NOT&
REGULATE(RATES(DOES(NOT$GIVE$THE$STATE$
ONLY%A%RIGHT%BUT%A%DUTY$TO$BE$PERFORMED$BY#
THE$RIGHT$TO$PRESCRIBE#RATES#WHICH#ARE#SO"
THE$DELEGATE$THROUGH!ITS$OWN$JUDGMENT$
LOW$AS$TO$DEPRIVE$THE"PUBLIC"UTILITY"OF"A"
AND$NOT$THROUGH$THE$INTERVENING(MIND(OF(
REASONABLE)RETURN)ON!INVESTMENT.)!
ANOTHER.)IN)THIS)CASE,#THE#POLICY#ALLOWING#
!
BUS$OPERATORS$TO$CHANGE$THEIR#FARES#
THE$FIXING$OF$JUST$AND#REASONABLE#RATES#
WOULD&RESULT&INTO&A&CHAOTIC'SITUATION'
INVOLVES"A"BALANCING"OF"THE!INVESTOR)AND)
WHERE%THE%RIDING%PUBLIC$WOULD$BE$LEFT$TO!
THE$CONSUMER$INTERESTS.!
THE$MERCY$OF$SUCH$OPERATORS.!
MERALCO applied for a rate increase, which ERB
DOTC issued a Memorandum Order allowing
provisionally granted. After COA audit, ERB reduced
F: F: provincial bus operators to fix transportation fares
the rate increase granted and ordered the excess to
without any approval from the LTFRB.
be refunded.
I: WON it was proper for the LTFRB to issue such order
NO. SC ruled that there was undue delegation of
IV. WHERE DOES THE POWER TO legislative authority when the LTFRB gave provincial
R:
bus operators the power to fix and make
REGULATE PUBLIC UTILITIES transportation rates.
RESIDE?
RATIONALE/BASIS
LEGISLATIVE By virtue of police power and the law-
making powers under the
constitution.
ADMINISTRATIVE By virtue of delegated powers by
AGENCIES Congress, as it would be very
impractical for Congress to handle
everything.

4 REPUBLIC V MERALCO
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 2 56
BATANGAS CATV V CA (2004)
LGU$REGULATION+UNDER+THE!GENERAL'
V. WHAT IS NOT A PUBLIC UTILITY
WELFARE'CLAUSE'(LOCGOV#CODE):#CATV#
SYSTEM&COMMITS&THE&INDISCRETION*OF* CASE QUICK FACTS WHAT MADE IT NOT A
CROSSING(PUBLIC(PROPERTIES—IT#USES#PUBLIC# NAME PUBLIC UTILITY
STREETS,&RIGHTS&OF&WAYS,%FOUNDING%OF% NEBBIA V Price-fixing for the Not private property
STRUCTURES,(AND(THE(PARCELING*OF*LARGE* NEW YORK milk industry. devoted for public use.
REGIONS.!
But state intervened
!
WHEN%EO%436%DECREES%THAT$THE$REGULATORY*
anyway, in its exercise
POWER&SHALL&BE&VESTED"SOLELY"IN"THE"NTC,!IT# of police power.
PERTAINS)TO)THE)REGULATORY'POWER'OVER' TATAD V EDSA LRT, a The Constitution limits
THOSE&MATTERS&WHICH&ARE$PECULIARLY$ GARCIA foreign corp, was the foreign ownership
WITHIN&NTC’S&COMPETENCE$–!RATE% granted by the of corp operating public
DETERMINATION,+ETC.! DOTC the award utilities.
to construct the
LGU v NTC. Sangguniang Panlungsod granted a
LRT III project EDSA LRT does not
permit to operate to CATV through a resolution, with
under a BLT devote the property for
a condition that any increase of rates shall be
F: agreement. public use.
subject to SP’s approval. CATV increased rate
ILOILO ICE Ice company with Does not offer the
without seeking approval. Mayor threatened to
V PUB limited supply that property to the public
revoke permit.
only caters to indiscriminately.
WON the LGU has the right to regulate the rates of
I: specific clientele.
the CATV
TERESA Application for a Plant not for providing
NO. Based on the laws enumerated below, the NTC
ELECTRIC company electric service to the general
exercises regulatory power over those matters which
R: V PSC plant in Rizal. public but exclusively
are peculiarly within the NTC’s competence to the
for its own use.
exclusion of other bodies.
JG SUMMIT Shipyard Not legally obliged to
V CA render its services
What happened to the PSC5? indiscriminately to the
PERIOD HIGHLIGHTS IN PUBLIC UTILITY public
REGULATION List of enterprises that are not covered by the definition
20TH Birth and growth of public utility regulation of “public service” as stated under the CA 146:
CENTURY in the PH; creation of the Coastwise Rate 1. Warehouses;
Commission, Board of Rate Regulation, 2. Vehicles drawn by animals and bancas moved by oar or
Board of Public Utility Commission and the sail, and tugboats and lighters;
Public Utility Commission 3. Airships within the Philippines except as regards rate
COMMON National Assembly passed CA No. 146 or the fixing;
WEALTH Public Service Act, which created the Public 4. Radio companies except as regards rate fixing;
Service Commission (PSC) 5. Public services owner or operated by any instrumentality
1972 PD No. 1, PSC was abolished and replaced by of the Government/GOCC except as regards rate fixing.
the Board of Transportation (BOT) [lasted 13
years], Board of Communications and the Nature of concession agreements
Board of Power and Waterworks. BOT was FREEDOM FROM DEBT COALITION V MWSS (2007)
later abolished along with the Bureau of GOVERNMENT)PRIVATIZED"MWSS"BY"ENTERING"
Land Transportation. Their powers were INTO%CONCESSION%AGREEMENTS&WITH&MANILA%
merged into the Land Transportation WATER%AND%MAYNILAD.%A%NOTICE%OF%PRICE#
Commission (LTC). ADJUSTMENT*(NEPA)*WAS"ISSUED"BECAUSE"OF"
1987 LTC was abolished and LTFRB was created. REPUBLIC)VS)MERALCO.!MANILA%WATER%AND%
MAYNILAD(OPPOSED(THE!NEPA%ARGUING%THAT%
LTFRB is the existing franchising and
THEY%WERE%NOT%PUBLIC!UTILITIES.(MWSS(
regulatory body for overland transportation ADOPTED'THE'FINDINGS!OF#A#TECHNICAL#
today. WORKING(GROUP,(SAYING"THAT"INDEED,"
MANILA&WATER%AND%MAYNILAD%WERE#NOT#
PUBLIC'UTILITIES.!

THIS%CASE%WAS%NOT%RESOLVED'BY'THE'COURT!

5
Footnote #2 of KMU v Garcia
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 3 56
 GAMBOA V TEVES (2011)
CONSTITUTIONAL PROVISIONS THE$TERM$“CAPITAL”$REFERS%TO%COMMON%
Section 6, Article XII, 1987 Constitution SHARES.!
The use of property bears a social function, and all economic
agents shall contribute to the common good. Individuals and This case involved the validity of the sale of shares of
private groups, including corporations, cooperatives, and similar F: stock of PTIC by the government to MPAH, an
collective organizations, shall have the right to own, establish, and affiliate of a foreign firm.
operate economic enterprises, subject to the duty of the State to WON the sale of such stock violated the ownership
promote distributive justice and to intervene when the common I:
rule under the Constitution
good so demands. PARTLY YES. To construe broadly the term "capital"
as the total outstanding capital stock, including both
Section 11 Four constitutional limitations of foreign involvement in public utilities common and non-voting preferred shares, grossly
No franchise, certificate, or any other form of authorization for the R: contravenes the intent and letter of the Constitution
operation of a public utility shall be granted except to citizens of that the "State shall develop a self-reliant and
the Philippines or to corporations or associations organized under independent national economy effectively controlled
the laws of the Philippines, at least sixty per centum of whose
capital is owned by such citizens; nor shall such franchise, by Filipinos."
certificate, or authorization be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or right be IN RE: CORPORATE REHAB OF BAYANTEL (2012)
granted except under the condition that it shall be subject to DEBT%TO%EQUITY%CONVERSION&AGREEMENTS&
amendment, alteration, or repeal by the Congress when the
WITH%FOREIGN%CORPORATIONS&WILL&BE&VALID&
common good so requires. The State shall encourage equity
participation in public utilities by the general public. The ONLY%UNTIL%THE%40%%ALLOWED'UNDER'THE'LAW!
participation of foreign investors in the governing body of any Bayantel was unable to pay off its debts, hence it
public utility enterprise shall be limited to their proportionate was put under rehabilitation.
share in its capital, and all the executive and managing officers of
such corporation or association must be citizens of the Philippines.
The Rehab Court and the CA limited the equity
F: conversion of the unsustainable to debt to 40% of its
paid-up capital in accordance with the constitutional
Section 17 limitation of the allowable foreign equity in Filipino
In times of national emergency, when the public interest so corporations.
requires, the State may, during the emergency and under
WON the CA erred in giving a ceiling on the
reasonable terms prescribed by it, temporarily take over or direct I:
the operation of any privately-owned public utility or business conversion agreement
affected with public interest. NO. The Court ruled that this would violate the
constitutional limit of foreign ownership of public
utilities. In the plan proposed by the petitioners, the
Section 18 R:
The State may, in the interest of national welfare or defense,
capital stock that would end up in the hands of
establish and operate vital industries and, upon payment of just foreign companies would reach up to 77.7% which is
compensation, transfer to public ownership utilities and other above the 40% limit provided by law.
private enterprises to be operated by the Government.

Section 19
B. EXCLUSIVITY
The State shall regulate or prohibit monopolies when the public METRO CEBU WATER V ADALA (2007)
interest so requires. No combinations in restraint of trade or unfair SEC.%47%OF%PD%198%IS#UNCONSTITUTIONAL#AS!
competition shall be allowed. THE$CONSTITUTION!PROHIBITS)EXCLUSIVE)
FRANCHISES*FOR*THE*OPERATION)OF)PUBLIC)
A. OWNERSHIP UTILITIES.(!
MCWD contests the granting of NWRB a CPC to
Class Notes:
Respondent pursuant to P.D. 198 wherein it was
Rationale: For public utilities to be under the effective
F: required that before a ‘franchise’ may be granted,
control by the Filipino people.
MCWD’s BOD must give their consent through a
The evident purpose of the citizenship resolution, which was not given in this case.
requirement is to prevent aliens from WON MCWS must consent to the granting of
assuming control of public utilities, which may I:
franchise to other water companies.
be inimical to the national interest.6
R: NO. See doctrine.

6 GAMBOA V TEVES CITING FR. BERNAS

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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 4 56
TAWANG MULTI-PURPOSE COOP V LA TRINIDAD
WATER DISTRICT (2011)
THERE%IS%NO%"REASONABLE$AND$LEGITIMATE"$
GROUND'TO'VIOLATE'THE"CONSTITUTION."
POLICE'POWER'DOES'NOT"INCLUDE"THE"POWER"
TO#VIOLATE#THE#CONSTITUTION.!
TMPC applied with NWRB for CPC to operate a
F: waterworks system. Court also invalidated the
exclusive franchise granted LTWD.
C. SUBJECT TO AMENDMENT
G.R.: An administrative agency may amend a legislative
franchise. Citation needed
E: Violative of the constitution
RCPI V NTC (1987)
A"FRANCHISE,"BEING"MERELY%A%PRIVILEGE%
EMANATING(FROM(THE(SOVEREIGN(POWER(OF(
THE$STATE$AND$OWING$ITS$EXISTENCE$TO$A$
GRANT,'IS'SUBJECT'TO!REGULATION+BY+THE+
STATE%ITSELF%BY%VIRTUE#OF#ITS#POLICE#POWER#
THROUGH'ITS'ADMINISTRATIVE'AGENCIES.!
THE$CONSTITUTION$MANDATES&THAT&A&
FRANCHISE*CANNOT*BE*EXCLUSIVE)IN)NATURE)
NOR$CAN$A$FRANCHISE$BE#GRANTED'EXCEPT'
THAT$IT$MUST$BE$SUBJECT$TO$AMENDMENT,$
ALTERATION,*OR*EVEN*REPEAL&BY&THE&
LEGISLATURE*WHEN*THE!COMMON%GOOD%SO%
REQUIRES.!
RCPI put up a radio telecommunications service
pursuant to its legislative franchise granted to it.
F: When Kayumanggi Radio started to operate, it filed
a complaint against RCPI for not having a certificate
of public convenience and necessity.
I: WON RCPI needs to have a CPCN
YES. EO No. 546 now requires radio
R: communications services to secure a certificate
(unlike before in CA 146)
D. FIXED – TERM
Class note:
Under Francisco, it does not mean that PNCC cannot
anymore ask for a new franchise from the government that
is more than 50 years. What is prohibited is the handling
the same franchise for an accumulated period of more than
50 years.
FRANCISCO V TRB (2010)
PNCC entered into JVAs with private entities for toll
operation. PD 1113 granted PNCC a franchise to
construct, maintain and operate toll facilities in
F : NLEX and SLEX, with the right to collect toll fees at
such rates as the TRB may fix and/or authorize for
30 years. Prior to the franchise’s expiration, it
entered into a STOA with MNTC, which granted the
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
latter the option to extend the concession for 50
years.
I: WON such stipulation is valid
YES, BUT ONLY FOR A MAXIMUM OF 20 YEARS
(ACCUMULATED = 50 YEARS). While the TRB is
vested by law with the power to extend the
R: administrative franchise or authority that it granted,
nevertheless, it cannot do so for an accumulated
period exceeding fifty years. Otherwise, it would
violate the Constitution.
E. TAKE OVER POWER
Principles in the exercise of emergency powers7:
1. There must be a war or other emergency.
2. The delegation must be for a limited period only.
3. The delegation must be subject to such restrictions as
the congress may prescribe.
4. The emergency powers must be exercised to carry out a
national policy declared by congress.
DAVID V MACAPAGAL-ARROYO (2006)
THE$PRESIDENT$MAY$DECLARE&A&STATE&OF&
NATIONAL'EMERGENCY'WITHOUT&ANY&
CONGRESSIONAL+ENACTMENT.%WHEN%THE%
PRESIDENT&SEEKS&TO&EXERCISE$EMERGENCY$
POWERS,(THE(PRESIDENT"MUST"WAIT"FOR"THE"
CONGRESS(TO(DELEGATE!THAT$POWER$FIRST.!
!
WITHOUT'LEGISLATION,!THE$PRESIDENT$HAS$NO!
POWER&TO&POINT&OUT&THE#TYPES#OF#
BUSINESSES'AFFECTED'WITH%PUBLIC%INTEREST!
THAT$SHOULD$BE$TAKEN!OVER.&THE$PRESIDENT$
HAS$THE$POWER$TO$DECLARE%A%STATE%OF%
NATIONAL'EMERGENCY'BUT#CANNOT,#BY#ITSELF,"
EXERCISE'ITS'POWER'TO"TAKEOVER"PRIVATELY$
OWNED&PUBLIC&UTILITIES#AND#BUSINESS#
AFFECTED'WITH'PUBLIC!INTEREST.!
PP No. 1017 and GO No. 5 were issued as a response
to rising unrest and plots to destabilize government
F: and assassinate. The police also raided The Daily
Tribune and confiscated anything pertaining to a
“mock-up” of the dispersal that took place.
AGAN V PIATCO (2004)
POLICE'POWER'CANNOT'BE#DIMINISHED,#LET#
ALONE&DEFEATED&BY&ANY"CONTRACT"FOR"ITS"
PARAMOUNT)CONSIDERATION$IS$PUBLIC$
WELFARE'AND'INTEREST.!
PIATCO won the bid for operation of NAIA IPT III. In
an earlier decision, this court held that there were
F: irregularities in the granting of the bid to PIATCO
and declared the contracts for the NAIA IPT III
project null and void. Respondents contests this
7 DAVID V MACAPAGAL-ARROYO
5 56
 decision and to ask for compensation for the take SUMMARY OF CONSTITUTIONAL RULES
over of the government of NAIA IPT III, as provided RULES
under the concession agreement. OWNERSHIP & What is regulated is the OPERATION of
WON the State could validly take over the operation OPERATION public utilties.
I:
of NAIA III without just compensation Who may operate?
YES. This is an exercise of police power and not the - Filipino citizens; or
power of eminent domain, and therefore does not - Corpo/assocs organized under the
R:
require the payment of just compensation. See laws of the PH with at least 60%
doctrine. Filipino ownership.
What are the control mechanisms?
F. PRIVATIZATION OF STATE-OPERATED - Foreigners can only occupy seats on
the Board of Directors
PUBLIC UTILITIES proportionate to their share in the
capital.
KUWAIT AIRWAYS V PAL (2009) - Managing and executive officers
SINCE&PAL&WAS&PRIVATIZED%ALREADY,%THE% must be Filipino citizens.
POWER&OF&THE&GOVERNMENT$IS$LIMITED$TO$ITS" EXCLUSIVITY - No franchise, certificate, or
CAPACITY'AS'REGULATOR.! authorization be exclusive in
There was an existing commercial agreement character.
between PAL and KA which gives the former a share - Monopolies are not per se
in the revenue earned by the latter in transporting prohibited. The state may regulate
F: or prohibit them, depending on the
passengers from Manila to Kuwait. However this was
removed in the subsequent agreement contracted public interest.
by representatives of the government. SUBJECT TO - Franchises, certificates, or
WON the bilateral agreement between the AMENDMENT authorizations shall be subject to
I: government and KA is superior than the comercial amendment, alteration, or repeal
agreement by Congress WHEN THE COMMON
NO. The court held that by virtue of PAL’s GOOD REQUIRES.
privatization, the role of the state was limited to its FIXED-TERM - No franchise, certificate, or
R:
regulatory capacity. It could not infringe the property authorization be longer than 50
rights of PAL without the due process of law. years (continuous or accumulated).
TAKE-OVER Temporary take-over/control of public
POWER utility OR business affected with public
interest
1. In times of national emergency;
2. When the public interest so requires;
and
3. Under reasonable terms prescribed
by Congress

Permanent control of private

enterprises [NATIONALIZATION]
OR establishment of vital industries
(utilities or private enterprises) [ORIGINAL
CREATION]
1. In the interest of national
welfare/defense; and
2. Payment of just compensation.
PRIVATIZATION - State policy to encourage equity
participation by the general public.

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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 6 56
 NAPOCOR V CA (1997)
REGULATION OF PUBLIC EXAMPLE'OF'A'LEGISLATIVE%FRANCHISE!
UTILITIES PIA no longer needs to acquire a certificate of public
convenience for it to avail of a direct power
Ways of regulation F: connection from the NPC. This is because it has
1. Authority to operate been authorized by law, PD 538, to perform the
2. Rate-fixing functions of a public utility.
3. Area of operation
4. Approval of sale, mortgage, lease of public utility
assets/equities OROPORT V PHIVIDEC (2008)
FRANCHISES*FROM*CONGRESS$ARE$NOT$
5. Power to set fees and other charges
REQUIRED'BEFORE'EACH!AND$EVERY$PUBLIC$
6. Other means of regulation
UTILITY&MAY&OPERATE&BECAUSE'THE'LAW'HAS'
GRANTED(CERTAIN#ADMINISTRATIVE#AGENCIES&
THE$POWER$TO$GRANT$LICENSES&FOR&OR&TO&
I. AUTHORITY TO OPERATE AUTHORIZE*THE*OPERATION$OF$CERTAIN$PUBLIC"
Types of authorizations UTILITIES.!
1. Management contracts Main forms: CPC and CPCN
2. JVA
3. TOA/STOA A. GENERAL QUALIFICATIONS
4. Provisional authority
According to Vda. De Lat:
5. Administrative franchise
6. Legislative franchise 1. Nationality requirements;
7. CPC 2. Financial capability and technical know-how; and
8. CPCN 3. Applicant must prove that the operation of such will
promote the public interest in a proper and suiitable
manner.
ALBANO V REYES
EXAMPLE'OF'AUTHORITY!TO#ENTER#INTO# Test for ruinous competition8:
MANAGEMENT'CONTRACTS!! It must be shown that the existing businesses would not
EO 30 (which authorized the PPA to take over, have sufficient gains to pay a fair rate of interest in its
manage and operate the Manila International Port capital investments.
in accordance with PD 857) and PD 857, specifically The mere possibility of reduction in the earnings is not
Section 6, empowers the PPA to provide services sufficient.
F:
within the Port Districts “whether on its own, by
contract, or otherwise” and to “make or enter into FRANCHISE CPC
contracts of any kind or nature to enable it to Grant or privilege from Form of regulation through
discharge its functions.” sovereign power administrative agencies

PLDT V NTC (1990) VDA DE LAT V PSC (1988)

EXAMPLE'OF'AUTHORITY!TO#GRANT#
PROVISIONAL*AUTHORITY!
NTC is the regulatory agency of the government with
jurisdiction over all telecommunications
F: entities. It is legally clothed with authority and given
ample discretion to grant a provisional permit or
authority.
FRANCISCO V TRB
EXAMPLE'OF'AUTHORITY!TO#GRANT#
ADMINISTRATIVE+FRANCHISE!
PD 1112, in relation to Sec 49 of PD 1894, have
vested the TRB with sufficient power to grant a
qualified person or entity with authority to construct,
maintain, and operate a toll facility and to issue the
F:
corresponding toll operating permit or TOC. By
explicit provision of law, the TRB was given the
power to grant administrative franchise for toll
facility projects.
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
NOBODY&HAS&THE&EXCLUSIVE%RIGHT%TO%SECURE&
A"FRANCHISE"OR"A"CPC."THE"PARAMOUNT"
CONSIDERATION+SHOULD!ALWAYS&BE&THE&
PUBLIC'INTEREST'AND'PUBLIC'CONVENIENCE.!
Private respondent applied for a CPC for an ice plant
F: in Davao City but was opposed by the petitioners,
due to ruinous competition
I: WON CPC may be granted
YES. The Court held that the private respondents
have met the requirements (see above) for the
R:
awarding of a CPC and that there is insufficient
proof of ruinous competition.
8 VDA DE LAT V PSC
7 56
KMU LABOR CENTER V GARCIA
NOWHERE'UNDER'THE'PUBLIC%SERVICE'ACT'DOES'
IT#PROVIDE#THAT#REGULATORY'BODIES'SUCH'AS"
THE$LTFRB$ARE$AUTHORIZED%TO%DELEGATE%THAT"
POWER&TO&A&COMMON&CARRIER,%A%TRANSPORT%
OPERATOR,(OR(OTHER(PUBLIC&SERVICE.!
B. REVOCATION / CANCELLATION
Grounds for the revocation/cancellation of a CPC9:
1. The holder is a mere dummy;
2. Operator has ceased operations and placed vehicles on
storage; or
3. Operator totally abandoned service.
* A CPC cannot be revoked if there is no showing of willful and
contumacious violation of the law and rules.
DIVINAGRACIA V CBS (2009)
BASED&ON&EO&546,&EVEN"AS"THE"NTC"IS"VESTED#
WITH%THE%POWER%TO%ISSUE$CPCS$TO$BROADCAST"
STATIONS,(IT(IS(NOT(EXPRESSLY(VESTED(WITH"
THE$POWER$TO$CANCEL$SUCH%CPCS,%OR%
OTHERWISE)EMPOWERED)TO#PREVENT#
BROADCAST)STATIONS)WITH$DULY$ISSUED$
FRANCHISES*AND*CPCS*FROM%OPERATING%RADIO!
OR#TELEVISION#STATIONS.!
Divinagracia sought before the NTC the cancellation
or revocation of the provisional authorities or CPCs
F: granted to PBS and CBS, alleging that PBS and CBS
failed to comply with the conditions set forth in their
respective legislative franchises.
I: WON NTC can cancel the CPC issued by the old PSC
NO. See doctrine. Although the PSC originally had
the power to cancel/ revoke, the same did not pass
on to the NTC as broadcast stations were not under
R: the PSC’s authority back then. Industries over which
the PSC does not have jurisdiction are spared from
the jurisdiction of the administrative entities
subsequently replacing the PSC.
C. CPC V. CPN
TRADITIONAL DIFFERENCE
CPC CPCN
Does not require a prior Requires prior issuance of
issuance of municipal municipal franchise
franchise
* Currently, there is no need to differentiate
because of PAL v CAB
bus CPC
water utilities CPC
telecom CPCN
9
Aquino notes
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
PAL V CAB (1997)
PUBLIC'CONVENIENCE'AND#NECESSITY#EXISTS#
WHEN%THE%PROPOSED%FACILITY&WILL&MEET&A&
REASONABLE)WANT)OF)THE#PUBLIC#AND#SUPPLY!
A"NEED"WHICH"THE"EXISTING&FACILITIES&DO&NOT$
ADEQUATELY)AFFORD.!
PAL questions the issuance of a temporary
operating permit (TOP) and the authority of the CAB
F:
to grant CPCNs to GrandAir despite it not having a
legislative franchise.
WON a legislative franchise is necessary before the
I:
issuance of a TOP
NO. There is nothing in the constitution which
indicates that a legislative franchise is an
indispensable requirement for an entity to operate
as a domestic air transport operator. The use of the
word "necessity", in conjunction with "public
convenience" in a certificate of authorization to a
R:
public service entity to operate, does not in any way
modify the nature of such certification, or the
requirements for the issuance of the same. It is the
law which determines the requisites for the issuance
of such certification, and not the title indicating the
certificate.
II. RATE-FIXING
Class notes:
This is a balancing of public interest and return on interest
of enterprises, both protected by the constitution.
State policy will declare whether rate-fixing would be strict
or liberal.
Rationale for control by government10:
By embarking capital in a utility, an investor agrees that its
charges to the public shall be reasonable. It becomes a
public servant – a substitute for the State in the
performance of the public service. The compensation or
opportunity to earn guaranteed by the Constitution is the
reasonable cost of conducting the business.
What is just and reasonable11?
It is not a question of formula but of sound business
judgment based upon the evidence it is a question of fact
calling for the exercise of discretion, good sense, and a fair,
enlightened and independent judgment.
According to Republic v Meralco, the SC has consistently
adopted a 12% rate of return for public utilities.
10 REPUBLIC V MERALCO, CITING J. BRANDEIS
11 FRANCISCO V TRB
8 56
PADUA V RANADA (2002)
AN#ADMINISTRATIVE#AGENCY%MAY%
III. AREA OF OPERATION
PROVISIONALLY+APPROVE"RATES"OF"PUBLIC"
UTILITIES'WITHOUT'A'HEARING,)WHEN)
DEMANDED&BY"URGENT"PUBLIC"NEED."THE"
REASON'IS'THAT'PROVISIONAL'RATES'ARE,'BY!
THEIR&NATURE,&TEMPORARY.!
Citra, an investor in the Skyway Project, filed before
the TRB an application to increase toll rates, in view
F: of the depreciation of the peso to the US dollar. TRB
approved a provisional adjustment, which
petitioners sought to set aside.
WON notice and hearing is necessary before the
I:
issuance of a provisional adjustment in rates.
IV. APPROVAL OF SALE AND
R: NO. See doctrine.
KMU LABOR CENTER V GARCIA
RATE%MAKING%OR%RATE%FIXING&IS!A"DELICATE"
AND$SENSITIVE$GOVERNMENT%FUNCTION%THAT%
REQUIRES'DEXTERITY'OF"JUDGMENT"AND"SOUND!
DISCRETION*WITH*THE*SETTLED&GOAL&OF&
ARRIVING'AT'A'JUST'AND#REASONABLE#RATE#
ACCEPTABLE(TO(BOTH(THE#PUBLIC#UTILITY#AND"
THE$PUBLIC!
FRANCISCO V TRB
THE$TRB$SHOULD$EXERCISE'ITS'RATE$FIXING&
POWERS'VESTED'TO'IT'BY#LAW#WITHIN#THE#
CONTEXT'OF'THE'AGREED"FORMULA,"BUT"
ALWAYS&HAVING&IN&MIND"THAT"THE"RATES"
SHOULD'BE'JUST'AND'REASONABLE.!
By express legal provision, the TRB is authorized to
approve the initial toll rates without the necessity of
a hearing. It is only when a challenge on the initial
F: toll rates fixed ensues that public hearings are
required. On the other hand, subsequent toll rate
adjustments are mandated by law to undergo both
the requirements of public hearing and publication.
BF HOMES V MERALCO (2010)
THE$OFF$SETTING'OF'THE'AMOUNT"OF"REFUND""
FROM%MERALCO%AGAINST!THE$ELECTRIC$BILLS$
THEY%ARE%TO%PAY%FALLS"SQUARELY"WITHIN"THE"
ERC’S&PRIMARY&JURISDICTION.!
After the Meralco refund cases, Meralco cut the
power supply on some of petitioners’ water pumps,
asking the latter to pay their overdue bill
F:
immediately. Petitioners, relying on the refund case,
asked that Meralco apply said bill to the amount it
owes petitioners.
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
NAPOCOR V CA
IT#IS#ONLY#AFTER#A#HEARING#WHERE$IT$IS$
ESTABLISHED*THAT*THE!AFFECTED'PRIVATE'
FRANCHISE*HOLDER*IS*INCAPABLE)OR)
UNWILLING'TO'MATCH'THE#RELIABILITY#AND#
RATES&OF&NPC&THAT&A&DIRECT'CONNECTION'
WITH%NPC%MAY%BE%GRANTED.%(TO%AVOID%
INFRINGEMENT)OF)CONTRACS)!
MORTGAGES OF PUBLIC UTILITY
ASSETS OR EQUITY
Process:
PSC has to hold a public hearing with notice to all
interested parties to determine if there are good and
reasonable grounds to justify the transfer.
Rationale12:
A franchise is personal in nature therefore any transfer or
lease thereof should be notified to the PSC.
The PSC is in charge of safeguarding the public interest.
Class notes:
The sale, lease, mortgage, or any form of alienation of the
property or franchise of a public utility must be approved by
the PSC, otherwise, such shall not be binding with the
PSC13.
- But in any case, the contract between the parties shall
be binding between them.
- This acts as a limitation to the rights of an owner to
dispose/abuse his/her property
MONTOYA V IGNACIO (1953)
BEING&THAT&A&FRANCHISE#IS#PERSONAL#IN#
NATURE,(THEN(THE(LAW!CREATES'SEVERAL'
SAFEGUARDS)TO)PROTECT"THE"PUBLIC."ONE"OF!
THESE%SAFEGUARDS%IS%REQUIRING(THE(
12 MONTOYA V IGNACIO
13
Public Service Act, Section 20: Acts requiring the approval of the
Commission.
(g) To sell, alienate, mortgage, encumber or lease its property, franchises,
certificates, privileges, or rights or any part thereof; or merge or consolidate its
property, franchises privileges or rights, or any part thereof, with those of any
other public service. The approval herein required shall be given, after notice to
the public and hearing the persons interested at a public hearing, if it be shown
that there are just and reasonable grounds for making the mortgaged or
encumbrance, for liabilities of more than one year maturity, or the sale, alienation,
lease, merger, or consolidation to be approved, and that the same are not
detrimental to the public interest, and in case of a sale, the date on which the
same is to be consummated shall be fixed in the order of approval: Provided,
however, that nothing herein contained shall be construed to prevent the
transaction from being negotiated or completed before its approval or to prevent
the sale, alienation, or lease by any public service of any of its property in the
ordinary course of its business.
9 56
 APPROVAL'OF'THE'PSC'BEFORE&A&FRANCHISE&
HOLDER'CAN'ALLOW'ANOTHER%PERSON%TO%
AVAIL%OF%ITS%(THE%FRANCHISE)$BENEFITS.!
Jeep killed someone and respondent asserts non-
F: ownership of the car and therefore, excuse from
liability.
I: WON Ignacio will be held liable.
YES. Based on the facts, the sale of the franchise by
Ignacio was never approved by the PSC. See
doctrine. Failure to comply with this requirement
renders the original grantee of the franchise
R:
(Ignacio) liable in case of any accident
notwithstanding the existence of any unapproved
lease agreement. Insofar as the law is concerned, it
is Ignacio who is still the operator of the jeep.
PEREZ V GUTIERREZ (1973)
THE$GRANTEE$CONTINUES"TO"BE"RESPONSIBLE"
UNDER&THE&FRANCHISE&IN#RELATION#TO#THE#PSC#
AND$THE$PUBLIC$FOR$THE"CONSEQUENCES"
INCIDENTAL)TO)THE)OPERATION(OF(THE(
VEHICLE,(ONE(OF(THEM!BEING&COLLISIONS.!
ZAMBOANGA TRANSPORT V PUC (1927)
APPROVAL'DOES'NOT'AFFECT%THE%ESSENTIAL%
REQUISITES(OF(THE(CONTRACT,'BUT'ITS'
EFFICACY.!
Zamboanga and Bachrach entered into a mortgage
to secure the purchase of two trucks. According to
the Public Utility Law, the public utility is the one
F: that must seek approval from the commissioner for
the sale or mortgage of its properties but it was
Bachrach,which sought the approval as the
mortgagee.
WON the mortgagee may seek the approval by the
I:
PSC.
YES. The Court held that the purpose of approval is
the protection of the public interest, and Bachrach
R: may be the one to seek approval from the
commissioner in order to protect its intrest as the
mortgagee.
Y TRANSIT V NLRC (1994)
LACKING(APPROVAL,(THE"TRANSFEREES"MERELY!
HELD%THE%BUSES%AS%AGENTS%OF%THE%
REGISTERED(OWNERS.!
Bus company transferred ownership of its buses to
its President. While a labor case was pending
against the bus company, the President sold the
buses to petitioner company. The LA issued a ruling
holding the bus company liable for non-payment of
F:
allowance and levied upon the bus company’s
property, including the buses which were sold to the
petitioner, so the petitioner filed a third party
complaint. Third party complaint was granted, but
the NLRC reversed and ordered the levy.
I: WON the levy may be enforced on the buses.
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
YES. SC held that the transfer(s) lacked approval of
R:
the Public Service Commission. See doctrine.
FRANCISCO V TRB
There is nothing illegal, let alone unconstitutional,
with the delegation to the President of the authority
to approve the assignment by PNCC of its rights and
F:
interest in its franchise, the assignment and
delegation being circumscribed by restrictions in the
delegating law itself.
PLDT V NTC
EVEN$IF$THE$ORIGINAL!STOCKHOLDERS+HAD+
TRANSFERRED)THEIR)SHARES%TO%ANOTHER%
GROUP&OF&SHAREHOLDERS,#THE#FRANCHISE#
GRANTED(TO(THE(CORPORATION"SUBSISTS"AS"
LONG%AS%THE%CORPORATION,%AS%AN%ENTITY,%
CONTINUES)TO)EXIST.!
V. POWER TO SET FEES AND OTHER
CHARGES
Rationale:
Such fees and other charges is used for the reimbursement
of the expenses in the operations of the administrative
agency and is not a tax measure.
REPUBLIC V ICC (2006)
SECTION(40(G)(OF(THE!PUBLIC'SERVICE'ACT'IS"
NOT$A$TAX$MEASURE$BUT"A"SIMPLE"
REGULATORY*PROVISION!PURSUANT(TO(THE(
EXERCISE'OF'THE'STATE’S$POLICE$POWER.!
ICC applied for a CPCN with the NTC. This was
F: accepted on the condition that ICC pay a permit fee
of P1.19M.
WON the NTC may impose a fee upon application of
I:
a CPCN
YES, BUT THIS AMOUNT WAS EXORBITANT AND
THE CASE AT BAR HAD A PARITY CLAUSE,
THEREFORE THE FEE MUST BE RETURNED. The
SC ruled that the subject provision of RA7925 did
not amend the Public Service Act. The absence
alone of the word “authorization” in Section 5(g) of
R: RA 7921 cannot be construed to mean that the NTC
has been deprived of the power to collect such fees.
The words “authorization, supervision and/or
regulation” used in Section 40(g) of the Public
Service Act are not distinct and completely
separable concepts which may be taken singly or
piecemeal.
10 56

VI. OTHER MEANS OF REGULATION
1. Law requiring to interconnect telcos
2. Emission standards
3. Ridjo Tape14 doctrine
4. Provisional reliefs
5. Reasonable standard in establishing
regulations.
Ridjo Tape doctrine:
A public utility has the imperative duty to make a
reasonable and proper inspection of its apparatus and
equipment to ensure that they don’t malfunction.
- Failure to do so is negligence on their part – burdening
them with the consequence of such oversight.
PLDT V NTC
INTERCONNECTION(IS(A!FORM%OF!INTERVENTION(
WITH%PROPERTY%RIGHTS!DICTATED'BY'
GOVERNMENT)GOALS)OF)PROMOTING)THE)RAPID)
GROWTH'AND'EXPANSION!OF#
TELECOMMUNICATIONS,SERVICES'IN'THE'
PHILIPPINES(–!THE$UNDOUBTEDLY$
ENCOMPASSING+OBJECTIVE#IS#THE#COMMON#
GOOD.!
HENARES V LTFRB (2006)
Petitioners filed a petition for mandamus to compel
F : the respondents to require the use of CNG by motor-
vehicle owners as alternative fuel.
I: WON the petition was proper.
NO. The Court held that mandamus in this case was
an improper remedy since there is no law
R:
compelling respondents to order the owners of such
vehicles to use CNG.
MERALCO V WILCON (2008)
PUBLIC'SERVICE'COMPANIES%WHICH%DO%NOT%
EXERCISE'PRUDENCE'IN!THE$DISCHARGE$OF$
THEIR&DUTIES&SHALL&BE"MADE"TO"BEAR"THE"
CONSEQUENCES(OF(SUCH!OVERSIGHT.!
MERALCO claims that on 1984, Wilcon’s electricity
consumption dropped. 7 years later, they inspected
F:
respondent’s premise and found the meter to be
tampered with.
I: WON Meralco may enforce its claim against Wilcon
NO. See doctrine. The rationale behind this ruling is
that public utilities should be put on notice, as a
deterrent, that if they completely disregard their
duty of keeping their electric meters in serviceable
R:
condition, they run the risk of forfeiting, by reason of
their negligence, amounts originally due from their
customers. Certainly, we cannot sanction a situation
wherein the defects in the electric meter are allowed
to continue indefinitely until suddenly the public
utilities concerned demand payment for the
unrecorded electricity utilized when, in the first
place, they should have remedied the situation
immediately. If we turn a blind eye on MERALCO's
omission, it may encourage negligence on the part
rules and of public utilities, to the detriment of the consuming
public.
BF HOMES V MERALCO
ERB$THE$POWER$TO$GRANT#PROVISIONAL#RELIEF.!
TAXICAB OPERATORS V BOT (1982)
IT#IS#IMPRACTICAL#TO!SUBJECT(EVERY(TAXICAB"
TO#CONSTANT#AND#RECURRING%EVALUATION,%
NOT$TO$SPEAK$OF$THE$FACT%THAT%IT%CAN%OPEN"
THE$DOOR$TO$THE$ADOPTION%OF%MULTIPLE%
STANDARDS,(POSSIBLE'COLLUSION,'AND#EVEN#
GRAFT&AND&CORRUPTION."A"REASONABLE"
STANDARD'MUST'BE'ADOPTED%TO%APPLY%TO%ALL!
VEHICLES(AFFECTED(UNIFORMLY,)FAIRLY,)AND!
JUSTLY.!
BOT and BLT issued memo phasing out taxis which
are already 6 years old. Taxi operators alleged that
F: they were not consulted depriving them of due
process and that the circulars violate the equal
protection clause.
WON there was a violation of due process and equal
I:
protection
NO. Court said the law provides that the agencies
can choose how they would gather their info hence
there was no need to consult the operators, and that
R: it did not violate the equal protection clause since
there was a substantial distinction between them
and operators in other areas given the volume of
traffic in Manila.

14 RIDJO TAPE & CHEMICAL CORP. V CA

_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 11 56
VII. DUE PROCESS REQUIREMENTS
PANTRANCO V PSC (1940)
THERE%ARE%CARDINAL%PRIMARY&RIGHTS!(ANG%
TIBAY&V&CIR)!WHICH%MUST%BE%RESPECTED$EVEN$
IN#PROCEEDINGS#OF#THIS#CHARACTER.#THE#
FIRST&OF&THESE&RIGHTS"IS"THE"RIGHT"OF"A"
HEARING,)WHICH)INCLUDES$THE$RIGHT$OF$THE!
PARTY&INTERESTED&OR&AFFECTED'TO'PRESENT'
HIS$OWN$CASE$AND$SUBMIT$EVIDENCE$IN$
SUPPORT'THEREOF.'THE!TRIBUNAL)MUST$ALSO$
CONSIDER)THE)EVIDENCE"PRESENTED"AND"MUST!
HAVE%SOMETHING%TO%SUPPORT%ITS%DECISION%
(NOT%NECESSARILY%REQUIRED&TO&DECIDE&
RIGHT).!
PANTRANCO’s application was for an increase of its
equipment to enable it to comply with the conditions
of its certificates of public convenience (CPCs).
F: On the matter of limitation of 25 years on the life of
its CPCs, there had been neither notice nor
opportunity given the petitioner to be heard or
present evidence.
I: WON there was violation of due process
YES. See doctrine. This principle emanates from the
more fundamental principle that the genius of
R: constitutional government is contrary to the vesting
of unlimited power anywhere. Law is both a grant
and a limitation upon power.

KMU LABOR CENTER V GARCIA

ESTABLISHING(A(PRESUMPTION#OF#PUBLIC#NEED#
FOR$IN$THE$ISSUANCE$OF#CPCS#IS#ENTIRELY#
INCOMPATIBLE,AND,INCONSISTENT'WITH'SEC.'16#
OF#THE#PUBLIC#SERVICE"ACT,"WHICH"REQUIRES"
THAT$AN$APPLICANT$MUST#FIRST#PROVE#BY#
PROPER%NOTICE%AND%HEARING&THAT&THE&
OPERATION)OF)THE)PUBLIC$SERVICE$PROPOSED!
WILL$PROMOTE$PUBLIC$INTEREST'IN'A'PROPER!
AND$SUITABLE$MANNER.!

_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 12 56
 Transportation
Law
GENERAL DISCUSSION
I. DEFINITION
A contract of transportation is one whereby a persons or
association of person obligate themselves to transport
persons, things or news from one place to another for a
fixed price15.
II. RELATIONSHIP TO A PUBLIC
UTILITY
If you examine Section 13(b) of the Public Service Act,
various modes of transportation are listed, thus putting
such modes within the coverage of the term “public service”
if used by certain persons for hire or compensation, with
general or limited clientele.
III. NATURE OF A FRANCHISE
According to jurisprudence:
A CPC can be sold as it has considerable material value
(considered as a valuable asset)16.
It is affected with public interest and therefore, must be
submitted to the control of government17.
A CPC does not confer upon the holder any properietary
right over the route covered thereby18.
RAYMUNDO V LUNETA (1933)
A"CERTIFICATE"OF"PUBLIC$CONVENIENCE$CAN$BE#
SOLD%BY%THE%HOLDER%THEREOF&BECAUSE&IT&HAS"
CONSIDERABLE,MATERIAL"VALUE"AND"IS"
CONSIDERED)A)VALUABLE"ASSET"!
GT defaulted on its loans. Its CPC and trucks were
subject to a writ of attachment. Pending the case,
Guzco sold the said property to Raymundo. The
F:
lower court then ordered the sale of the attached
property via public auction. Two sales occurred. The
PSC approved the second sale.
I: WON
YES. The Court holds that it is the sale via public
auction that should prevail. The Court discussed the
nature of a franchise and CPC is that, since it is
R:
“property”, it can be subject to writs of attachment
and execution, however, still subject to the approval
of the PSC.
15 CRISOSTOMO V CA
16 RAYMUNDO V LUNETA
17 COGEO-CUBAO V CA
18
Id.
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
COGEO-CUBAO V CA (1992)
ALTHOUGH(THERE(IS(NO!DOUBT&THAT&IT&IS&
PRIVATE(PROPERTY,(IT!IS#AFFECTED#WITH#A#
PUBLIC'INTEREST'AND'MUST%BE%SUBMITTED%TO!
THE$CONTROL$OF$THE$GOVERNMENT(FOR(THE(
COMMON%GOOD!
CPC was given to respondent to ply the Cogeo-
Cubao route. Perturbed by respondent’s Bandera
F: System, Petitioner formed a human barricade and
assumed the dispatching of passenger jeepneys
within the respondent’s route.
WON petitioner usurped the property rights of
I:
respondent
YES. Petitioner forcibly took over operation of the
jeepney service without authorization from the PSC,
R:
in violation of the right of respondent to operate its
services in the said route under its CPC.
IV. SCOPE OF A FRANCHISE
SAN PABLO V PANTRANCO (1987)
FERRY%SERVICE:!CONDUCTED(EITHER(BY(BARGES,(
RAFTS,'MOTOR'OR'STEAM"VESSELS"BETWEEN"
THE$BANKS$OF$A$RIVER!OR#STREAM.#IT#IS#A#
CONTINUATION(OF(THE(HIGHWAY'WHEN'
CROSSING(RIVERS(OR(EVEN$LAKES$WHICH$ARE$
SMALL%BODY%OF%WATERS!SEPARATING*THE*
LAND.!
!
INTERISLAND*OR*COASTWISE%TRADE:!A"SERVICE"
THAT$INVOLVES$THE$USE"OF"STEAMBOAT"OR"
MOTORBOAT'SERVICE'BETWEEN%DIFFERENT%
ISLANDS,(INVOLVING(MORE$OR$LESS$GREAT$
DISTANCE)AND)OVER)MORE#OR#LESS#TURBULENT!
AND$DANGEROUS$WATERS!OF#THE#OPEN#SEA.!
PANTRANCO extended its bus operations to include
ferry services between Matnog (Sorsogon) and Allen
(Samar). Its theory is that the ferry service is a
F: continuation of the highway which is interrupted by
the water, therefore no need of a separate CPC as
the same was necessary and incidental to the
transporation of passengers and cargoes.
I: WON A CPC is still necessary
YES. The court held that the respondent is engaged
in interisland/coastal service (see doctrine). A
R:
separate CPC is needed to operate such service as
mandated by law.
13 56

V. PRIOR OPERATOR RULE
Creates preference, not exclusivity
Definition of the Prior Operator Rule19
A first licensee/operator with a prior license should have
more or less a vested and preferential right over a person
who seeks to acquire another and a later license over the
same route provided that the following are complied with:
1. Keeps and performs with the terms and conditions of the
license;
2. Complies with the reasonable rules and regulations of
the commission; and
3. Meets the reasonable demands of the public.
Rationale
To secure adequate sustained service for the public at the
least possible cost, and to protect and conserve investments
already made for this purpose.
To prevent ruinous competition
BATANGAS TRANSPO V ORLANES (1928)
SO#LONG#AS#THE#FIRST!LICENSEE'OR'AN'
OPERATOR'WITH'A'PRIOR"LICENSE"KEEPS"AND"
PERFORMS(THE(TERMS(AND!
CONDITIONS$OF$ITS$LICENSE$AND#COMPLIES#
WITH%THE%REASONABLE%RULES&AND&
REGULATIONS,OF,THE,COMMISSION&AND&MEETS&
THE$REASONABLE$DEMANDS#OF#THE#PUBLIC,#IT!
SHOULD'HAVE'MORE'OR'LESS$OF$A$VESTED$AND!
PREFERENTIAL*RIGHT*OVER$A$PERSON$WHO$
SEEKS$TO$ACQUIRE$ANOTHER%AND%A%LATER"
LICENSE'OVER'THE'SAME"ROUTE.!
Orlanes, an irregular operator of an autobus line,
F: applied for a CPC to become a regular operator. BTC
opposed but PSC granted Orlanes’ petition.
I: WON Orlanes may be granted a CPC
NO. See doctrine. In this case, BTC has complied with
R:
the prior –operator rule.
VI. KABIT SYSTEM
Definition of a kabit system:
A system where the grantee of a CPC allows another person
to operate under such franchise for a fee.
Rationale against the system:
A CPC is a special privilege conferred by government. Any
abuse of such privilege is against public policy and cannot
be countenanced20.
- It is not per se illegal as there is no law punishing it as a
crime.
- Against public policy as if we are to allow such, owners
wil just transfer the erring vehicle to another who do
not have property to escape liability.
19 BTCO V ORLANES
20 TEJA V IAC
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
It has been identified as one of the root causes of the
prevalence of graft and corruption in the government
transportation offices21.
KABIT SYSTEM UNREGISTERED SALE
Sale is registered but not with No approval by the
the owner of the assets regulator
Void as to the parties and 3rd Binding between the
persons parties
Effects of Kabit system:
The operator on record is considered the operator of the
vehicles under it as regards the public or 3rd persons22.
Ratio: To protect the riding public23
Parties to a kabit system will not be given any relief under
the law against each other (in pari delicto)24.
- But a kabit may enforce a claim against an offending
party as the evil sought to be prevented by the law
enjoining the kabit system is not present therein25.
TEJA V IAC (1987)
THE$“KABIT&SYSTEM,”#WHILE#NOT#OUTRIGHTLY$
PENALIZED)AS)A)CRIMINAL$OFFENSE,$OFFENDS!
AGAINST'PUBLIC'POLICY"AS"IT"DEFEATS"THE"
NATURE'OF'A'CERTIFICATE$OF$PUBLIC$
CONVENIENCE'AS'A'SPECIAL%PRIVILEGE%
CONFERRED(BY(THE(GOVERNMENT.'IT'AMOUNTS'
TO#AN#ABUSE#BY#THE#GRANTEE&OF&SAID&
PRIVILEGE,)WHICH)CANNOT$BE$COUNTENANCED$
BY#THE#COURT.!
Teja sued Nale for the unpaid price, with interest
and damages, of a motorcycle. Their transaction
included an agreement where Jaucian (Teja) was to
F:
be registered as owner of the motorcycle with the
LTC, while simultaneously allowing Nale to use
Teja’s existing transport franchise.
I: WON they are in pari delicto
YES. SC held that this agreement constituted a
“kabit system,” which is a fictitious registration of the
motor vehicle in the name of one party while
allowing another person to use his franchise and
R:
operate a transport service, and is therefore void for
being against public policy. Thus, the SC upheld the
IAC’s ruling that neither party can recover from one
another on the basis of said void agreement.
SANTOS V SIBUG (1981)
THE$OPERATOR$OF$RECORD#IS#CONSIDERED#THE!
OPERATOR'OF'THE'VEHICLE$IN$CONTEMPLATION!
21 LITA ENTERPRISES V CA
22 SANTOS V SIBUG
23 LIM V CA
24 LITA ENTERPRISES V CA
25 LIM V CA
14 56
 OF#LAW#AS#REGARDS#THE"PUBLIC"AND"THIRD" BALIWAG TRANSIT V CA (1987)
PERSONS'EVEN'IF'THE'VEHICLE'INVOLVED'IN' THE$DETERMINING)FACTOR)OF"THE"EXISTENCE"
THE$ACCIDENT$HAD$BEEN"SOLD"TO"ANOTHER" OF#A#KABIT#SYSTEM#IS!POSSESSION'OF'A'
WHERE%SUCH%SALE%HAD%NOT$BEEN$APPROVED$BY! FRANCHISE*TO*OPERATE,"NOT"THE"ISSUANCE"OF"
THE$THEN$PUBLIC$SERVICE'COMMISSION.! 1"SSS"ID#.!
Santos owns a jeep, Vidad has a CPC. Santos has a 2 bus lines, BT and BTI, were granted separate
kabit arrangement with Vidad. The jeep hit Sibug. franchises but only 1 SSS ID#. Martinez (EE of BT)
F: F:
Sibug filed a case against Vidad and won. Jeep was filed a petition with SSC to compel BTI to remit his
levied. SSS premiums.
I: WON the levy was proper I: WON the bus lines are in a kabit system
YES. As far as Sibug is concerned, Vidad is the owner
of the jeep. The recourse of Santos is to go after R: NO. See doctrine.
Vidad for his jeep that was levied upon. Jeep was
R:
registered in Vidad’s name, although Santos and
Vidad has a private document evidencing the true VII. PRIVATE NATURE; RIGHTS AND
ownership of the jeep.
OBLIGATIONS OF PARTIES INTER
LITA ENTERPRISES V CA (1984)
SE ARISING FROM
THE$KABIT$SYSTEM$IS$A"PERNICIOUS"SYSTEM" TRANSACTIONS RELATING TO
THAT$CANNOT$BE$TOO$SEVERELY&CONDEMNED.& TRANSPORTATION
IT#CONSTITUTES#AN#IMPOSITION'UPON'THE'
GOOD$FAITH$OF$THE$GOVERNMENT.! Private Vehicles
The Sps. Ocampo made kabit to Lita Enterprises’ They are not public utilities (since no compensation) and
CPC for the formers’ taxi cabs. Subsequently, an their passengers are considered accommodation
accident occurred where the taxi collided with a passengers.
F:
motorcycle, killing the driver of the latter. After the Their responsibility is to exercise ordinary or reasonable care
incident, the Sps. wanted the registration of the taxis to avoid injuring his/her passengers26.
back, so they filed a case. Note that under Art. 1761, passengers must also observe
WON the lower court erred in granting relief to the due diligence to avoid injury to him/herself.
I:
parties
YES. The SC held that this kabit system is void for
COMMON PRIVATE
being contrary to public policy and therefore, the
R: CARRIER CARRIER
parties, being in pari delicto, must not be given any
AVAILABILITY Holding out Contracts with
remedies.
indiscriminately special groups or
individuals
LIM V CA (2002) REQUIRED Extraordinary Ordinary diligence
THRUST&OF&THE&LAW&ENJOINING&THE&KABIT& DILIGENCE diligence
SYSTEM:!NOT!SO!MUCH!AS!TO!PENALIZE!THE!
PARTIES!BUT!TO!IDENTIFY!THE!PERSON!UPON!
REGULATION Subject to state Not subject
WHOM!RESPONSIBILITY!MAY!BE!FIXED&IN&CASE& regulation
OF#AN#ACCIDENT#WITH#THE$END$VIEW$OF$ LIMITATION OF Allowed as Allowed, provided
PROTECTING*THE*RIDING"PUBLIC.! LIABILITY provided by law not contrary to
law, morals, good
Gonzales’ passenger jeepney collided with a truck customs, public
due to the truck driver’s fault. Gonzales sued for policy
F: damages but the truck owner alleged that Gonzales EXEMPTING Proving EOD and Caso fortuito, Art.
had no legal personality to sue since he was not the CIRCUMSTANCE Art. 1733 1174
registered owner of the jeepney.
I: WON the kabit may claim damages PRESUMPTION There is a No presumption
YES. SC awarded damages to Gonzales, despite OF NEGLIGENCE presumption
being a kabit, since the evil sought to be prevented GOVERNING LAW Law on common Law on oblicon
R: carrier
by the law enjoining the kabit system was not
present in this case.
A KABIT HAS RIGHTS TOO!

26 LARA V VALENCIA
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 15 56
 A. ABSENT A TRANSPORTATION REGULATION OF THE
CONTRACT
TRANSPORTATION INDUSTRY
LARA V VALENCA (1958) General areas of regulation:
THE$OWNER$OR$OPERATOR"OF"AN"AUTOMOBILE" 1. Area of service
OWES%THE%DUTY%TO%AN%INVITED'GUEST'TO' 2. Rate-fixing
EXERCISE'REASONABLE'CARE%IN%ITS%OPERATION,# 3. Penalties
AND$NOT$UNREASONABLY!TO#EXPOSE#HIM#TO# 4. Permits
DANGER'AND'INJURY'BY!INCREASING)THE) 5. Equipment
HAZARD&OF&TRAVEL.&HE!MUST%EXERCISE%
ORDINARY(OR(REASONABLE#CARE#TO#AVOID#
INJURING'HIS'PASSENGER.!
DIFFERENTIATING REGULATORY AGENCIES
CAAP CAB
Lara, sick with malaria, hitched a ride with Valencia LTO LTFRB
to Davao. He chose to sit in the back of the pick-up. In-charge with the policy Regulates the business or
F:
En route, Lara fell from the pick-up and sustained planning, direction and economic aspect of the
serious injuries leading to his death. general welfare of the franchise.
I: WON Valencia is liable industry.
NO. The Court held that Valencia could not be liable
for Lara’s death. Lara was merely an
accommodation passenger, to whom Valencia was I. DOTC
only obligated to extend reasonable care, and not LINE AGENCY ATTACHED AGENCY
R: the extraordinary diligence required of common LTO, LTFRB MARINA, CAAP, CAB
carriers. Further, Lara himself had negligently Subject to control and Only required to
declined the invitation to sit in front. Lara’s death supervision by the DOTC communicate with the
was thus ruled to be an accident, for which Valencia DOTC for policy and
could not be responsible. program coordination
DOTC may amend, modify More or less autonomous
and revoke their actions
B. LIABILITY OF REGISTERED OWNER
Responsibilities of registered owner: MIRASOL V DPWH (2006)
Liable for any quasi-delict caused by his/her vehicle even if THE$AUTHORITY$TO$REGULATE&THE&FLOW&OF&
a 3rd person was driving it. VEHICULAR*TRAFFIC*ALONG$MAJOR$ROADS$
RESIDES&WITH&THE&DOTC!AND$NOT$THE$DPWH.!

PCI LEASING V UCPB (2008) IN#ENACTING#MEANS#OF!REGULATION!BY#VIRTUE#

A"LEASE,"FINANCIAL"LEASE$THAT$IS$NOT$
REGISTERED(WITH(THE(LTO$STILL$DOES$NOT$
BIND%3RD%PERSONS%WHO!ARE$AGGRIEVED$IN$
TORTUOUS&INCIDENTS&FOR#THE#LATTER#NEED#
ONLY%TO%RELY%ON%THE%PUBLIC'REGISTRATION'AS#
A"CONCLUSIVE"EVIDENCE"OF"OWNERSHIP.!
Accident involving a truck owned by petitioner but
leased by a 3rd party. 1st tried to evade liability by
F:
saying that the registration requirement does not
apply because it’s not a public utility.
I: WON PCI, as financing company, is liable
YES. Court said that even if it’s a private vehicle, the
registered owner must be held responsible to avoid
R: prolonging the suffering of those injured
Lastly, the court said that the financing company act
will only take effect it the lease is registered.
OF#ITS#POLICE#POWER,!THE$STATE$IS$BOUND$
ONLY%BY%THE%STANDARD!OF#REASONABLENESS.!
A. AIR
Civil Aviation Authority of the Philippines (CAAP)
Responsible for implementing policies on civil aviation to
assure safe, economic, and efficient air travel. The agency
prescribes safety standards and also investigates aviation
accidents. It undertakes the maintenance and operation of
airports and other similar facilities; registers aircrafts and
other incidents concerning the same and provides safety
regulations for air travel.
Civil Aeronautics Board (CAB)
Mandated to regulate, promote, and develop the economic
aspect of air transportation. Among others, it has
supervision and jurisdiction and control over air carrier,
general sales agents, cargo sales agents and airfreight
forwarders, as well as their property, property rights,
equipment, facilities and franchise. It issues CPC for air
carriers.

_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 16 56
PAL V CAB (1968)
CAB!HAS$THE$POWER$TO$ISSUE#"TEMPORARY#
OPERATING*PERMITS"!
PAL opposes the grant by CAB to Fairways of a
F: temporary operating permit, as it had not yet
presented evidence in the economic proceedings.
I: WON CAB may grant the TOP
YES. The SC ruled that the CAB has the authority to
issue such permits on its own initiative, and that
R: there was no denial of due process since what was at
issue is a mere interlocutory order and not a decision
on the merits.
B. LAND
Land Transportation Office (LTO)
Concerned with the registration of drivers and motor
vehicles. RA 4136 prescribes procedure for the examination,
licensing and bonding of drivers; the registration and re-
registration of motor vehicles, transfer of ownership, change
of status, etc.
Land Transportation Franchising and Regulatory Board
(LTFRB)
Exercises quasi-judicial and regulatory powers with respect
to land transportation; among its more important powers
include the power to issue, amend, revise CPCs; prescribe
routes, reasonable fare rates.
Class notes:
DOTC has control and supervision over land agencies, which
is not the case in air agencies.
Rationale: Land transportation is more sensitive and
requires more care and caution.
KMU LABOR CENTER V GARCIA
UNDER&SEC.&16&OF&THE!PUBLIC'SERVICE'ACT,'THE$
LEGISLATURE*DELEGATED"TO"THE"LTFRB"THE"
POWER&“TO&DETERMINE.!PRESCRIBE,(APPROVE(
AND$PERIODICALLY$REVIEW$AND$ADJUST,$
REASONABLE)FARES,)RATES$AND$OTHER$
RELATED'CHARGES,'RELATIVE&TO&THE&
OPERATION)OF)PUBLIC)LAND%TRANSPORTATION%
SERVICES'PROVIDED'BY!MOTORIZED)VEHICLES.”!
SUCH%DELEGATION%IS%ALLOWED&IN&ORDER&TO&
ADAPT%TO%THE%INCREASING)COMPLEXITY!OF#
MODERN'LIFE.!
COMMON CARRIERS
I. IN GENERAL
A. DEFINITIONS, ESSENTIAL ELEMENTS
What is a common carrier27?
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.
REQUISITES OF A COMMON CARRIER OF
GOODS
FPIC Test
1. He must be engaged in the business of carrying goods
for others as a public employment, and must hold
himself out as ready to engage in the transportation of
goods for person generally as a business and not as a
casual occupation;
2. He must undertake to carry goods of the kind to which
his business is confined;
3. He must undertake to carry by the method by which his
business is conducted and over his established roads;
and
4. The transportation must be for hire.
Bascos Test:
Whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the
general public as his occupation rather than the quantity or
extent of the business transacted.
Extraordinary diligence
A common carrier must render service with the greatest skill
and utmost foresight.
Rationale: The nature of the business of common carriers
and the exigencies of public policy
Rationale of Presumption28:
In requiring compliance with the standard which is in fact
that of the highest possible degree of diligence, from
common carriers and in creating a presumption of
negligence against them, the law seels to compel them to
control their employees, to tame their reckless instincts
and to force them to take adequate care of human beings
and their property.

C. WATER
US V TAN PIACO (1920)
Maritime Industry Authority (MARINA) No rate-fixing power SO#LONG#AS#THE#INDIVIDUAL&OR&
COPARTNERSHIP,-IS-ENGAGED%IN%A%PURELY%
Has jurisdiction over the development, promotion, and
PRIVATE(ENTERPRISE,(WITHOUT'ATTEMPTING'TO"
regulation of all enterprises engaged in the business of
RENDER%SERVICE%TO%ALL"WHO"MAY"APPLY,"HE"
vessels, shipyards, dry-docks, marine railways, shipping and
freight forwarding agencies and similar enterprises.
Rationale for deregulation of shipping industry
To encourage investments in the industry by existing
operators and attract new investments. 27
Art. 1732
28 MECENAS V CA
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 17 56
CANNOT&BE&CONSIDERED!A"PUBLIC"UTILITY,"FOR"
PUBLIC'USE.!
Tan Piaco rented two automobile trucks in Leyte for
the purpose of carrying some passengers and
F:
freight. They were charged with violating the Public
Utility Law for operating without a permit.
I: WON such operation was a public utility
NO. These trucks furnished service under special
R: agreements to carry particular persons and property
and therefore, not for public use.
NOT A GOOD CASE ANYMORE
HOME INSURANCE V AMERICAN STEAM. (1968)
A"COMMON"CARRIER"UNDERTAKING)TO)CARRY)
ONLY%A%SPECIAL%CARGO!OR#CHARTERED(ONLY(TO(
A"SPECIAL"PERSON"BECOMES%A%PRIVATE%
CARRIER.!
Fish meal was shipped through American Steam.
F: Upon arrival in Manila, the cargo was discharged but
there were shortages in the cargo.
I: WON American Steam is liable.
NO. See doctrine. It has already been established
that the SS Crowborough is a private carrier for the
R:
fish meal of San Miguel. Thus, the provisions on
common carriers cannot apply for its case.
NOT A GOOD CASE ANYMORE
*** DE GUZMAN V CA (1988)
UNDER&ART.&1732,&THERE#IS#NO#DISTINCTION!
BETWEEN&ONE&WHOSE&PRINCIPAL'BUSINESS'IS'
THE$CARRIAGE$OF$$PERSON/GOODS,(AND(ONE(
WHO$ONLY$PERFORMS$THIS#ACTIVITY#AS#AN#
ANCILLARY(ACTIVITY.(FURTHERMORE,*NO*
DISTINCTION(IS((MADE!BETWEEN&A&PERSON&
OFFERING(THIS(SERVICE"ON!A"REGULAR,OR"
SCHEDULED(BASIS,(AND!A"PERSON"OFFERING"
THIS%SERVICE%ON%%AN%OCCASIONAL(OR(EPISODIC#
BASIS.&&LASTLY,&NO&DISTINCTION'IS'MADE'
BETWEEN&A&CARRIER&OFFERING'ITS'SERVICES'TO#
THE$GENERAL$PUBLIC,$AND$ONE$WHO$OFFERS$IT"
TO#SPECIFIC#PARTIES.!!!
Respondent was a junk dealer who occasionally
engaged in carrying the goods of others as a side
business. Petitioner had him deliver 750 cartons of
F:
milk to his establishment. However, 600 cartons
were undelivered because one of the trucks got
hijacked by armed men.
I: WON respondent was a common carrier
R: YES. See doctrine.
BASCOS V CA (1993)
THE$TEST$IS$WHETHER$THE$GIVEN$UNDERTAKING"
IS#A#PART#OF#THE#BUSINESS%ENGAGED%IN%BY%THE$
CARRIER&WHICH&HE&HAS!HELD%OUT%TO%THE%
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
GENERAL'PUBLIC'AS'HIS"OCCUPATION"RATHER"
THAN%THE$QUANTITY$OR$EXTENT#OF#THE#
BUSINESS'TRANSACTED.!
Cipriano subcontracted with BT to help him with the
F: delivery of soya bean meal pursuant to hauling
contract he had with Jibfair. BT failed to deliver
I: WON Bascos is a common carrier
YES. See doctrine. Bascos herself made a judicial
admission that she was in the trucking business,
R: offering her trucks to those with cargo to move.
Judicial admissions are conclusive and no evidence
is required to prove the same.
PPI V CA (1993)
IT#IS#ONLY#WHEN#THE#CHARTER#INCLUDES$BOTH$
THE$VESSEL$AND$ITS$CREW,%AS%IN%A%BAREBOAT"
OR#DEMISE#THAT#A#COMMON$CARRIER$BECOMES$
PRIVATE,)AT)LEAST)INSOFAR&AS&THE&
PARTICULAR)VOYAGE)COVERING'THE'CHARTER$
PARTY&IS&CONCERNED.!
PPI ordered Urea from Mitsubishi who entered into a
time charter-party with KKKK. PPI sued KKKK
F: because some of its urea was damaged/lost. KKKK’s
defense was that it was not a common carrier by
virtue of the time charter-party agreement.
I: WON KKKK is a common carrier
R: YES. See doctrine.
FPIC V CA (1998)
SEE#ENUMERATION#ABOVE.#THIS#WAS#A#
CITATION'OF'PROF.'AGBAYANI’S(COMMENTARIES!
FPIC is a grantee of a pipeline concession. City
Treasurer required FPIC to pay a local tax. FPIC
F:
claims exemption by virtue of its being a common
carrier.
I: WON FPIC is exempt from paying local tax
YES. See doctrine. It is engaged in the business of
R: transporting or carrying goods, i.e. petroleum
products, for hire as a public employment.
LOADSTAR V CA (1999)
IT#IS#NOT#NECESSARY#THAT$THE$CARRIER$BE$
ISSUED&A!CPC#TO#BE#CONSIDERED!AS#A#COMMON#
CARRIER!
F: Loadstar sank on its way to Manila.
I: WON Loadstar is liable as a common carrier
YES. See doctrine. Then the Court found that
Loadstar is negligent in embarking on its voyage.
R:
The vessel was found to be not seaworthy when it
embarked.
ASIA LIGHTERAGE V CA (2003)
A"COMMON"CARRIER"NEED"NOT"HAVE"FIXED"AND!
PUBLICLY(KNOWN(ROUTES.#NEITHER#DOES#IT#
HAVE%TO%MAINTAIN%TERMINALS*OR*ISSUE*
TICKETS.!
18 56
 Petitioner is engaged in carrying goods (white
wheat) by water. Typhoon came. A few days after,
the barge developed a list because of a hole it
F:
sustained after hitting an unseen protuberance
underneath the water. The hole was then patched
with clay and cement. Towed then sank.
I: WON Asia Lighterage is liable as a common carrier
R: YES. See doctrine. They were clearly negligent.

CRISOSTOMO V CA (2008)
A"CONTRACT"OF"CARRIAGE#OR#TRANSPORTATION!
IS#ONE#WHEREBY#A#CERTAIN%PERSON'OR'
ASSOCIATION(OF(PERSONS#OBLIGATE#
THEMSELVES(TO(TRANSPORT$PERSONS,$THINGS,!
OR#NEWS#FROM#ONE#PLACE#TO#ANOTHER#FOR#A#
FIXED&PRICE.!
Missed flight for Jewels of Europe. She accused the
F: travel agency of negligence for wrongly informing
her of her trip details.
I: WON the agency is liable as a common carrier
NO. See doctrine. The contract entered into by the
petitioner and the respondent is an ordinary contract
R:
of service and only required diligence of a good
father of a family.

CRUZ V SUN HOLIDAYS (2010)

Child of couply died when the boat that was included
F : as transportation to and from the resort in a tour they
booked sank during a typhoon.
I: WON Sun Holidays is liable
YES. Here are the reasons:
a) Sun’s ferry services are so intertwined with its main
business as to be properly considered ancillary
thereto.
b) The constancy of Sun’s ferry services in its resort
operations is underscored by its having its own
R: boats.
c) The tour packages it offers, which include the ferry
services, may be availed of by anyone who can
afford to pay
d) The fact that Sun does not charge separate fee for
boat fare is of no moment because transportation
fee is factored in at the tour package price
THIS IS AN EXAMPLE OF A COMPANY THAT
INCLUDES A CONTRACT OF CARRIAGE AS PART OF
ITS SERVICES.

B. NATURE AND BASIS OF LIABILITY

Basis of Liability
The basis is the breach of contract of carriage
Nature of Liability
The nature is direct and immediate.

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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 19 56
CULPA ACQUILIANA V CULPA CONTRACTUAL FORES V MIRANDA (1959)
CULPA CULPA THE$ACTION'FOR'BREACH'OF!CONTRACT'
CONTRACTUAL AQUILIANA IMPOSES'ON'THE'DEFENDANT%CARRIER%A%
CAUSE OF The breach of the The wrongful or PRESUMPTION+OF+LIABILITY%UPON%MERE%PROOF!
OF#INJURY#TO#THE#PASSENGER;'THEN'THE'
ACTION obligation under negligent act or
BURDEN'IS'PLACED'ON'THE$CARRIER$TO$PROVE!
the contract omission
THAT$IT$WAS$DUE$TO$AN"UNFORSEEN"EVENT"OR!
NATURE OF Direct and Vicarious TO#FORCE#MAJEURE#TO#ESCAPE&LIABILITY!
LIABILITY OF immediate
COMMON Driver Eugenio Luga lost control of jeepney while
CARRIER descending Sta. Mesa bridge at excessive speeds. 5
F:
passengers injured including Ireneo, who suffered a
29
Principles governing the liability of the common carrier fracture of the upper right humerus.
1. The liability of a carrier is contractual and arises upon I: WON jeepney is liable
breach of its obligation, said breach occurring if it fails to YES. There was a clear breach of contract of
exert extraordinary diligence according to all R: carriage. And since the sale was not recorded with
circumstances of each case; the PSC, the original owner is liable.
2. A carrier is obliged to carry its passenger with the
utmost diligence of a very cautious person, having due PHIL RABBIT V IAC (1990)
regard for all the circumstances; SUBSTANTIAL)FACTOR)TEST:"IF"THE"ACTOR’S"
3. A carrier is presumed to be at fault or to have acted CONDUCT'IS'A'SUBSTANTIAL%FACTOR%IN%
negligently in case of death of, or injury to, passengers, it BRINGING&ABOUT&THE&HARM$TO$ANOTHER,$THE$!
being its duty to prove that it exercised extraordinary FACT%THAT%THE%ACTOR%NEITHER'FORESAW'NOR'
diligence; and SHOULD'HAVE'FORESEEN!THE$EXTENT$OF$THE$
4. It is not an insurer against all risks of travel. HARM%OR%THE%MANNER%IN"WHICH"IT""OCCURRED!
OES$NOT$PREVENT$HIM$FROM%BEING%LIABLE.%!

CANGCO V MRR (1918) The jeep suddenly U-turned because of one of its
THE$FOUNDATION$OF$LEGAL$LIABILITY$IS$THE! rear wheels got detached. Almost at the same time
F:
CONTRACT'OF'CARRIAGE!AND$THE$NATURE$OF$ it turned, a bus coming from the opposite direction
THE$LIABILITY$IS$DIRECT$AND$IMMEDIATE.! bumped its rear, killing 3 passengers.
I: WON jeepney owners were liable
Watermelons on the platform left by the train
YES. Court held that in this case, the jeepney owners
F: employees tripped the alighting passenger, causing
were liable (for breach of contract of carriage) and
injuries. R:
for being negligent (failed to rebut the presumption
I: WON MRR is liable
of negligence using extra-ordinary diligence).
YES. MRR was liable because of breach of contract
of carriage and such liability, being direct and
R: LRTA V NAVIDAD (2003)
immediate, could not be excused by proof that fault
was imputable only to its employees. THE$FOUNDATION$OF$LIABILITY'IS'THE'
CONTRACT'OF'CARRIAGE'AND'ITS'OBLIGATION'
TO#INDEMNIFY#THE#VICTIM$ARISES$FROM$THE$
ISAAC V A.L. AMMEN (1957) BREACH'OF'THAT'CONTRACT$BY$REASON$OF$ITS!
SEE#ENUMERATION#ABOVE.! FAILURE(TO(EXERCISE(THE$HIGH$DILIGENCE$
Isaac boarded Ammen’s bus, placed his left arm REQUIRED'OF'COMMON'CARRIERS.!
F: outside the window. Bus figured in a collision that Navidad had an altercation with the security guard
resulted to Isaac’s left arm being severed. F: in LRT, fell on the LRT tracks, struck by a moving
I: WON bus is liable LRT train then died.
NO. the Court agreed that appellee Ammen had
done everything they had in their power to avoid the
R: accident, but could not do it due to the attending C. CLASSES OF COMMON CARRIERS
circumstances. (Case with pile of rocks that caused
the blocking of a lane) As to service
- Carrier of goods;
- Carrier of passengers
As to mode of transportation
- Land
- Water
- Air

29 ISAAC V AMMEN
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 20 56
 D. LAW APPLICABLE
Applicability of laws (in order)
1. Civil Code
2. Code of Commerce
3. Special laws
Note:
According to Art. 1753, the law of the country to which the
goods are to be transported shall govern the liability of the
common carrier for their loss, destruction, or deterioration.
NAECO V CA (1988)
THE$LIABILITY$OF$A$CARRIER%IS%GOVERNED(
PRIMARILY(BY(THE(CIVIL#CODE#AND,#IN#ALL#
MATTERS'NOT'REGULATED"BY"IT,"THE"RIGHTS"
AND$OBLIGATIONS$OF$A!COMMON%CARRIER%
SHALL%BE%GOVERNED%BY!THE$CODE$OF$
COMMERCE&AND&BY$LAWS!
Ship owned by NDC and managed by MCP as NDC’s
agent figured in a collision near Japan. NDC argues
F: that CA 65 should be applied, which removes
liability from shipowner when the captain is found at
fault.
II. COMMON CARRIAGE OF GOODS
A. LIABILITY AND PRESUMPTION OF
NEGLIGENCE
G.R.: When loss, destruction or deterioration of goods
occurred during carriage, there is a presumption of
negligence30.
E: Natural Disaster
Act of public enemy
Act/Commission of shipper
Character of goods; defects in packaging
Order of competent public authority
Restatement requisites of presumption from Ynchausti:
1. There is a contract of carriage;
2. Goods were delivered in control/custody of carrier;
3. Goods were received in good condition; and
4. Goods were lost, damaged, deteriorated.
How to rebut presumption:
Proof of exercise of extraordinary diligence31.
YNCHAUSTI V DEXTER (1920)
THE$PRESUMPTION$THAT!THE$LOSS$HAD$
OCCURRED'DUE'TO'THE'COMMON%CARRIER’S%
FAULT&ARISES&WHEN&THERE#IS#PROOF#OF#
DELIVERY(OF(GOODS(IN!GOOD$ORDER$TO$A$
30
Art. 1734
31
Art. 1735
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
CARRIER,'THAT'SUBSEQUENTLY'ARRIVE'AT'THE!
DESTINATION)IN)BAD)ORDER.!
The Government enlisted Ynchausti’s services to
make two shipments of mineral oil on different
F:
dates. Both shipments were found to be short by one
case, and this was noted in the bills of lading.
I: WON Ynchausti is liable
YES. See doctrine. The Court held that Ynchausti was
not entitled to mandamus, because it had failed to
R:
refute the presumption that the loss had occurred
due to its fault.
MIRASOL V DOLLAR (1929)
WHEN%GOODS%ARE%DELIVERED$ON$BOARD$A$SHIP!
IN#GOOD#ORDER#AND#CONDITION,'AND'THE$
SHIPOWNER*DELIVERS*THEM$TO$THE$SHIPPER$IN"
BAD$ORDER$AND$CONDITION,%IT%THEN%DEVOLVES"
UPON%THE%SHIPOWNER%TO"BOTH"ALLEGE"AND"
PROVE&THAT&THE&GOODS!WERE$DAMAGED$BY$
THE$REASON$OF$SOME$FACT$WHICH$ALLEGEDLY$
EXEMPTS'IT'FROM'LIABILITY.!
Package of books in good condition when received
F:
by shipowner. Damaged when it got to Manila.
I: WON carrier is liable
YES. Court ruled that 1st, since it was not proven that
plaintiff signed the bill of lading, then the same
would not bind it. Even if he did sign it, since the
provisions limiting liability are contrary to public
policy, then they are considered void.
Since the goods were damaged within the trip,
R:
defendant shipowner had the burden of proof to
show that the goods were damaged by
circumstances which would exempt it from liability
(ie accident, peril, acts of god, things beyond its
control). Defendant failed to prove such
circumstances. See doctrine.
B. EXEMPTION FROM LIABILITY
1. NATURAL DISASTER
Requisites for the exemption32:
1. The natural disaster must be the proximate and sole
cause of the loss, damage or deterioration;
2. Common carrier must exercise due diligence before,
during and after the disaster; and
3. There must be no delay.
TAN CHIONG V INCHAUSTI (1912)
EXAMPLE'OF'DILIGENCE!BEFORE,'DURING'AND'
AFTER&FORCE&MAJEURE!
Lorcha owned by the defendant sank due to a storm.
F: The defendant presented several circumstances in
an attempt to prove that the loss was through force
32
Art. 1739 and 1740
21 56
 majeure. The circumstances were:
1. There was no way to move the lorcha to another
location that was less exposed to the elements
2. The captain deployed did everything to prepare
the lorcha for the storm
3. There was equal interest on the part of the
defendant company to preserve the lorcha
because it contained the goods of the defendant
as well
4. Following the storm, the crew recovered what
they could and immediately sold them in an
effort to minimize the loss of the plaintiff
WON the carrier is exempted from liability due to
I:
force majeure.
YES. Court ruled that the defendant had done all
R: that it could in order to avoid the loss and did not
incur any liability.
MARTINI V MACONDRAY (1919)
WHERE%THE%SHIPPER%AGREES$TO$HAVE$HIS$
GOODS%CARRIED%ON%DECK,#HE#TAKES#THE#RISK!
OF#ANY#DAMAGE#OR#LOSS"SUSTAINED"AS"A"
CONSEQUENCE(OF(THEIR!BEING&SO&CARRIED.!
! sole cause of the loss, damage or deterioration; and
THE$BURDEN'SHIFTS'TO'THE!CARRIER&IF&IT&
ALLEGES&THAT&THE&LOSS"ON"DECK"WAS"DUE"TO!
AN#EXCEPTED#PERIL,#BUT#EVEN#IF#IT#WERE#DUE#
TO#AN#EXCEPTED#PERIL,"THE"CARRIER"MAY"BE!
HELD%LIABLE%IF%THE%SHIPPER&IS&ABLE&TO&PROVE$
THAT$THE$CARRIER$HAD!BEEN$NEGLIGENT.!
Goods were carried on deck and upon arrival it was
found that they were damaged due to the effects of
F:
fresh and salt water (a peril of the sea). Shipper
consented to have them on deck (took the risk)
I: WON carrier is liable for the damage on the goods
NO. Despite such consent, the carrier may still be
held liable if the shipper was able to prove that the
carrier had failed to observe due diligence in
R:
handling goods carried on deck. In this case, carrier
was not negligent, as there was no allegation of
negligence.
EASTERN SHIPPING V IAC (1987)
FIRE%IS%NOT%CONSIDERED#A#NATURAL#DISASTER"
OR#CALAMITY.#THIS#MUST#BE#SO#AS#IT#ARISES"
ALMOST'INVARIABLY'FROM#SOME#ACT#OF#MAN#
OR#BY#HUMAN#MEANS.!
The vessel caught fire and sank, resulting in the total
F:
loss of ship and cargo.
I: WON the carrier is liable
YES. See doctrine. Having failed to discharge the
burden of proving that it had exercised the
R: extraordinary diligence required by law, Eastern
Shipping Lines cannot escape liability for the loss of
the cargo
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
ASIA LIGHTERAGE V CA (2003)
NOT$HAVING$FIXED$AND!PUBLICLY(KNOWN(
ROUTES,(TERMINALS(AND"TICKETS"DOES"NOT"
EXEMPT&A&CARRIER&FROM"BEING"A"COMMON"
CARRIER.!
Petitioner is engaged in carrying goods by water. It
claims that it is not a common carrier because it has
no fixed and publicly known route, maintains no
terminals, and issues no tickets. It points out that it
F:
is not obliged to carry indiscriminately for any
person. It is not bound to carry goods unless it
consents. In short, it does not hold out its services to
the general public.
I: WON the vessel is not a common carrier
NO. Court held that Petitioner is a common carrier
and petitioner’s defenses does not matter as Article
R:
1732 does not make any distinctions (see De
Guzman)
2. ACT OF PUBLIC ENEMY
Requisites for the exemption33:
1. The act of the public enemy must be the proximate and
2. Common carrier must exercise due diligence before,
during and after the disaster.
3. ACT OR OMISSION OF SHIPPER
Requisite for the exemption34:
The act/omission of the shipper or owner must be the
proximate cause of the loss, damage or deterioration.
If the the proximate cause of the loss, damage, or
deterioration was that of the carrier and there was
negligence on the part of the shipper or owner, damages
are equitable reduced.
4. CHARACTER OF GOODS / PACKAGING
Requisites for the exemption35:
1. The character of the goods or the faulty nature of the
packaging must be the cause of the loss, damage or
deterioration; and
2. Common carrier must exercise due diligence to
forestall or lessen the loss.
GOVERNMENT V YNCHAUSTI (1919)
EXAMPLE'OF'CHARACTER!OF#GOODS#BEING#
CAUSE&OF&EXEMPTION&FROM$LIABILITY!
Government shipped tiles to its consignee in Iloilo,
F: through Ynchausti. When it arrived, it was found that
the tiles were damaged. Government filed an action
33
Art. 1739
34
Art. 1741
35
Art. 1742
22 56
 to recover.
I: WON Ynchausti is liable
NO. In their complaint, they did not dispute that the
tiles were fragile or that it was loaded by Ynchausti
properly. Ynchausti proved that the tiles were brittle
R: and fragile and that they were delivered without any
packing. It also proved that there was no negligence
on its part by showing that the tiles were loaded and
stowed in a diligent manner.
SOUTHERN LINES V CA (1962)
AN#EXAMPLE#OF#NEGLIGENCE$IN$CHECKING$THE!
PACKAGING(OF(GOODS(ON"BOARD.!
City of Iloilo ordered rice from NARIC. The rice was
delivered through a ship owned by Southern Lines.
F: Upon delivery and payment, it was discovered that
there was a shortage of rice. Iloilo then filed for the
recovery of the value of the undelivered rice.
I: WON the carrier is liable for the shortage
YES. In applying Arts. 361 and 362, the damage was
not caused by the inherent nature/defect of the
goods, but by petitioner’s own negligence (Southern
Lines itself frankly admitted that the strings that tied
R: the bags of rice were broken; some bags were with
holes and plenty of rice were spilled inside the hull
of the boat, and that the personnel of the boat
collected no less than 26 sacks of rice which they
had distributed among themselves.)
5. ORDER OF COMPETENT AUTHORITY
Requisites for the exemption36:
1. Public authority had power to issue the order; and
2. Order was issued with legal process.
GANZON V CA (1988)
THE$AUTHORITY$WHO$GAVE#THE#ORDER#MUST#
HAVE%THE%POWER%TO%ISSUE$THE$DISPUTED$
ORDER,&OR&THAT&IT#WAS#LAWFUL,"OR"THAT"IT"
WAS$ISSUED$UNDER$LEGAL#PROCESS#OF#
AUTHORITY.!
Ganzon’s employees ended up dumping the scrap
iron that they were contracted to deliver to Manila
F:
into the ocean due to the intervention of the Acting
Mayor of Mariveles. Shipper sued for damages.
I: WON the carrier is liable.
YES. The Court said that Ganzon cannot escape
liability because (1) he failed to exercise EOD; and (2)
he failed to prove that the loss was caused by the
intervention of competent authority. The Court
R:
pointed out that since there was no showing that the
Acting Mayor’s order was backed up by any power to
issue the same, it wasn’t considered as an order by
competent authority.
Additional reason: Robbery37
Common carriers are responsible even for the acts of
strangers/thieves/robbers BUT the duty of extraordinary
diligence is reached where the goods are lost as a result of
robbery attended by grave or irresistible threat, violence or
force.
SUMMARY ON RULES ON EXEMPTING
CIRCUMSTANCES:
REQUISITES
NATURAL 1. The natural disaster must be the
DISASTER proximate and sole cause of the loss,
ART. 1739 & damage or deterioration;
13740 2. Exercise of due diligence before,
during and after the disaster; and
3. There must be no delay.
ACT OF ENEMY 1. The act of public enemy must be the
ART. 1739 proximate cause of the loss, damage
or deterioration;
2. Common carrier must exercise due
diligence before, during and after
the act of enemy.
ACT/OMISSION The act/omission must be the
OF SHIPPER proximate cause of the loss, damage or
ART. 1741 deterioration.
If proximate cause was that of the
carrier and both were negligent,
damages are equitably reduced.
CHARACTER OF 1. The character of the goods or the
GOODS OR faulty nature of the packaging must
PACKAGING be the proximate cause of the loss,
ART. 1742 damage or deterioration; and
2. CC must exercise due diligence to
forestall or lessen the loss.
ORDER OF 1. Power to issue the order; and
COMPETENT 2. Issued with legal process.
AUTHORITY
ART. 1743
C. DURATION OF EXTRAORDINARY
RESPONSIBILITY
Instances when carrier has extraordinary responsibility:
1. From the time the goods are unconditionally placed in
the possession of, and received by the carrier38 or its
authorized agent (ability to exercise control and
possession)39 for transportation;
Test: If there is nothing remainds to be done by the
shipper, then carrier has control and possession
2. During storage in a warehouse of the carrier at the place

37 DE GUZMAN V CA CITING ART. 1745(6)

38
Art. 1736
36 39 COMPANIA MARITIMA V INSURANCE CO.
Art. 1743
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 23 56
 of destination;
Until consignee has been advised of the arrival of the
goods + reasonable opportunity to remove or dispose of
them40
3. During temporary unloading or stored in transit (unless
such storage is due to the exercise of the right to
stoppage in transitu)41;
4. Until actual or constructive delivery to consignee, a duly
authorized agent, a person who has a right to receive, a
stipulated authority42, or the shipper43.
Must be given reasonable time to remove goods.
5. The responsibility to provide safety to its passengers
obligates it not only during the course of the trip but for
so long as the passengers are within its premises and
where they ought to be in pursuance to the contract of
carriage44.
When extraordinary responsibility ceases (ordinary
diligence is still required):
1. When shipper/owner made use of the right of stoppage
in transitu45;
2. After the lapse of the reasonable time for the
acceptance by the authorized receiver46.
COMPANIA MARITIMA V INSURANCE CO (1964)
THE$LIABILITY$AND$RESPONSIBILITY*OF*THE*
CARRIER&UNDER&A&CONTRACT&FOR!THE$CARRIAGE$
OF#GOODS#COMMENCE#ON!THEIR&ACTUAL&
DELIVERY(TO,(OR(RECEIPT$BY,$THE$CARRIER$OR#
AN#AUTHORIZED#AGENT!
! liability. See doctrine.
WHENEVER'THE'CONTROL!AND$POSSESSION$OF$
GOODS%PASSES%TO%THE%CARRIER&AND&NOTHING&
REMAINS(TO(BE(DONE(BY"THE"SHIPPER,"THEN"IT#
CAN"BE"SAID"WITH"CERTAINTY%THAT%THE%
RELATION)OF)SHIPPER)AND$CARRIER$HAS$BEEN!
ESTABLISHED.!
Macleod contracted Maritima to ship hemp from
Davao to Boston. At Davao, Maritima placed the
F:
cargo into 2 leased lighters. While waiting for S.S.
Bowline Knot, one of the barges sank.
I: WON Maritima is liable
YES. See doctrine. The court held that the Maritima
R: is liable despite the fact that the hemp was not
loaded to S.S. Bowline.
LU DO V BINAMIRA (1957)
A"STIPULATION"LIMITING#LIABILITY#UNTIL#THE#
GOODS%ARE%TRANSFERRED"TO"CUSTOMS"OR"
40
Art. 1738
41
Art. 1737
42 LU DO V BINAMIRA
43
Art. 1737 and SAMAR MINING V N.LLOYD
44 LRTA V NAVIDAD
45
Art. 1737
46 EASTERN SHIPPING V CA
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
SOME%AUTHORITY%IS%VALID!
Parties stipulated that: “The responsibility of the
Carrier in any capacity shall altogether cease and
the goods shall be considered to be delivered and at
F:
their own risk and expense in every respect when
taken into the custody of customs or other
authorities.”
I: WON such stipulation is valid.
YES. The Court found nothing therein that is
R: contrary to morals or public policy that may justify
their nullification.
SAMAR MINING V N. LLOYD (1984)
THERE%IS%ACTUAL%DELIVERY%IN%CONTRACTS%FOR"
THE$TRANSPORT$OF$GOODS#WHEN#POSSESSION#
HAS$BEEN$TURNED$OVER!TO#THE#CONSIGNEE#OR#
TO#HIS#DULY#AUTHORIZED#AGENT#AND#A#
REASONABLE)TIME)IS)GIVEN%HIM%TO%REMOVE%
THE$GOODS.!
A provision in their contract states: “This carrier, in
making arrangements for any transshipping or
forwarding vessels, or means of transportation not
operated by this carrier, shall be considered solely
F:
the forwarding agent of the shipper and without any
other responsibility whatsoever even though the
freight for the whole transport has been collected by
him.”
I: WON the carrier is liable
NO. Upon entering Manila, the carrier becomes the
R: agent of the shipper and therefore is exempted from
Class notes:
Note that Lu Do and Samar Mining are examples of a
limitation to the duration of extraordinary responsibility by
virtue of contractual stipulations.
APL V KLEPPER (1960)
THE$EXTRAORDINARY$RESPONSIBILITY*OF*THE*
COMMON%CARRIER%LASTS!FROM%THE%TIME%THE%
GOODS%ARE%UNCONDITIONALLY%PLACED%IN%THE%
POSSESSION'OF,'AND'RECEIVED&BY&THE&CARRIER#
FOR$TRANSPORTATION$UNTIL%THE%SAME%ARE%
DELIVERED,(ACTUALLY(OR#CONSTRUCTIVELY,#BY"
THE$CARRIER$TO$THE$CONSIGNEE,(OR(TO(THE(
PERSON'WHO'HAS'A'RIGHT#TO#RECEIVE#THEM,#
WITHOUT'PREJUDICE'TO!THE$PROVISIONS$OF$
ART$1738.!
While the lift van was being unloaded by the Gantry
F: crane operated by Delgado Brothers, Inc., it fell on
the pier and its contents were spilled and scattered.
I: WON APL is liable
YES. Petitioner does not dispute its liability as
common carrier, it however contends that the same
R: cannot exceed $500. This was agreed to by the
Court, stating that the limitation of liability in the Bill
of Lading was valid.
24 56
EASTERN SHIPPING V CA (1994)
THE$COMMON$CARRIER'S!DUTY%TO%OBSERVE%THE%
REQUISITE(DILIGENCE(IN#THE#SHIPMENT#OF#
GOODS%LASTS%FROM%THE!TIME%THE%ARTICLES%
ARE$SURRENDERED$TO$OR"UNCONDITIONALLY"
PLACED'IN'THE'POSSESSION%OF,%AND%RECEIVED"
BY,$THE$CARRIER$FOR$TRANSPORTATION)UNTIL!
DELIVERED'TO,'OR!UNTIL&THE&LAPSE&OF&A!
REASONABLE)TIME)FOR)THEIR&ACCEPTANCE&BY,!
THE$PERSON$ENTITLED$TO#RECEIVE#THEM.!
2 fiber drums of riboflavin were shipped from Japan.
F: Upon arrival, one drum contained spillages, while
the rest of the contents were adulterated/fake.
EASTERN SHIPPING V BPI/MS INSURANCE (2014)
AS#A#CONSEQUENCE#OF#THIS%HIGH%STANDARD%OF"
DILIGENCE(REQUIRED(OF"THEM,"COMMON"
CARRIERS'ARE'PRESUMED"TO"BE"AT"FAULT"OR"
NEGLIGENT'IF'THE'GOODS#THEY#TRANSPORTED#
DETERIORATED(OR(WAS(LOST%OR%DESTROYED%
UNLESS&THEY&PROVE&THAT&THEY&OBSERVED%
SUCH%HIGH%LEVEL%OF%DILIGENCE.!
Some of the steel coils shipped by Sumitomo with
ESLI were not in good condition as evidenced by
F:
TOSBOC and RBOC jointly executed by ESLI and the
arrastre stevedoring company ALI.
D. AGREEMENT LIMITING LIABILITY
1. AS TO DILIGENCE REQUIRED
Requisites for a valid limitation of diligence47:
1. Must be in writing and signed by the shipper or owner;
2. Supported by a valuable consideration other than the
service rendered by the common carrier; and
3. Reasonable, just and not contrary to public policy.
Unreasonable, unjust or contrary to public policy48:
1. Goods transported at risk of shipper;
2. Complete exoneration from liability for any loss, damage
or deterioration;
3. Any level of diligence is dispensed with;
4. Diligence lower than ordinary diligence;
5. No responsibility for acts/omissions of employees;
6. Dispensed with or diminished liability for acts of thieves
or robbers without grave/irresistible threat, violence or
force; or
7. No liability for loss on account of defective condition of
vehicle or equipment used in the contract of carriage.
2. AS TO AMOUNT OF LIABILITY
Allowed stipulations:
1. Fixing of a sum that may be recovered if49:
47
Art. 1744
48
Art. 1745
49
Art. 1750
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
a. Reasonable and just under the circumstances; (c.f.
Art. 1751) and
b. Fairly and freely agreed upon.
2. Limitation of liability upon delay due to strikes or riots50;
3. Limitation of liability to amount in the bill of lading,
unless shipper declares a greater value and pays a
higher rate of freight51;
Exceptions to the limitation on liability
4. If the injury or loss was caused by the carrier’s own
negligence52.
Class note:
- These rules are only applicable to land and air
transport.
HEACOCK V MACONDRAY (1921)
THERE%ARE%THREE%KINDS"OF"STIPULATIONS"
OFTEN&FOUND&IN&BILLS!OF#LADING.#THE#FIRST!
INVOLVES(EXEMPTING(THE#CARRIER!FROM%ANY%
AND$ALL$LIABILITY$FOR"LOSS"OR"DAMAGE"
OCCASIONED)BY)ITS)OWN"NEGLIGENCE."THE"
SECOND'PROVIDES'FOR'AN#UNQUALIFIED#
LIMITATION(OF(SUCH(LIABILITY'TO'AN'AGREED"
VALUATION.*THE*THIRD!LIMITS&THE&LIABILITY!OF#
THE$CARRIER$TO$AN$AGREED$VALUATION,$
UNLESS&THE&SHIPPER%DECLARES%A%HIGHER$
VALUE&AND&PAYS&A&HIGHER$RATE$OF$FREIGHT.!
!
ACCORDING)TO)AN)ALMOST#UNIFORM#WEIGHT#OF!
AUTHORITY,*THE*FIRST!AND$SECOND$KINDS$OF$
STIPULATIONS*ARE*INVALID%AS%BEING%
CONTRARY(TO(PUBLIC(POLICY,'BUT'THE'THIRD!IS#
VALID&AND&ENFORCEABLE.!
The parties argue as to the valuation of the carrier’s
F:
liability for the lost Edmond clocks.
The rationale: estoppel — that, having accepted the
benefit of the lower rate, in common honesty, the
R:
shipper may not repudiate the conditions on which it
was obtained.
SHEWARAM V PAL (1966)
A"CARRIER"CANNOT"LIMIT#ITS#LIABILITY#FOR!
INJURY'TO'OR'LOSS'OF!GOODS%SHIPPED%WHERE%
SUCH%INJURY%OR%LOSS%WAS$CAUSED$BY$ITS$OWN"
NEGLIGENCE.!
The liability, if any, for loss or damage to checked
baggage or for delay in the delivery thereof is limited
to its value and, unless the passenger declares in
F:
advance a higher valuation and pay an additional
charge therefor, the value shall be conclusively
deemed not to exceed P100.00 for each ticket.
I: WON the carrier is exempt from liability.
50
Art. 1748
51
Art. 1749
52 SHEWARAM V PAL
25 56
 NO. The fact that those conditions are printed at the
back of the ticket stub in letters so small that they
are hard to read would not warrant the presumption
R:
that the appellee was aware of those conditions
such that he had "fairly and freely agreed" to those
conditions. Passengers also do not sign the ticket.
ONG YIU V CA (1979)
A"CONTRACT"LIMITING"LIABILITY'UPON'AN'
AGREED&VALUATION&DOES"NOT"OFFEND"AGAINST!
THE$POLICY$OF$THE$LAW"FORBIDDING"ONE"FROM"
CONTRACTING)AGAINST)HIS$OWN$NEGLIGENCE.!
BAGGAGE LIABILITY ... The total liability of the
Carrier for lost or damaged baggage of the
passenger is LIMITED TO P100.00 for each ticket
F: unless a passenger declares a higher valuation in
excess of P100.00, but not in excess, however, of a
total valuation of P1,000.00 and additional charges
are paid pursuant to Carrier's tariffs.
I: WON the carrier has limited liability.
YES. Since the Petitioner did not declare a higher
R: valuation on the luggage, he is therefore bound to
be indemnified to a maximum of P100.00 only.
PAN AM V IAC (1988)
EXAMPLE'OF'THE'APPLICATION'OF'PREVIOUS'
JURISPRUDENCE!
Liability for loss, delay, or damage to baggage is
limited as follows unless a higher value is declared
in advance and additional charges are paid: (1) for
most international travel (including domestic
F:
portions of international journeys) to approximately
$9.07 per pound ($20.00 per kilo) for checked
baggage and $400 per passenger for unchecked
baggage.
I: WON the limitation on liability is valid
YES. Based on the conditions stipulated in the
airline ticket, Pan Am’s liability is limited to $20 per
R:
kilo since Pangan did not declare a high value in
advance nor did he pay for addtl charges
CATHAY PACIFIC V CA (1993)
THE$WARSAW$CONVENTION(DOES(NOT(OPERATE'
AS#AN#EXCLUSIVE#ENUMERATION(OF(THE(
INSTANCES(FOR(DECLARING$A$CARRIER$LIABLE!
FOR$BREACH$OF$CONTRACT#OF#CARRIAGE#OR#AS!
AN#ABSOLUTE#LIMIT#OF!THE$EXTENT$OF$THAT$
LIABILITY.(IT(DOES(NOT#PRECLUDE#THE#
OPERATION)OF)THE)CIVIL#CODE.!
Tomas (EVP of a company) was travelling to Jakarta
from Hong Kong to attend a conference with the
Director General of Trade of Indonesia. His checked-
in luggage containing all his clothing and
F: documents needed for the conference got delayed +
he was rudely treated by the airline employees, so he
sued for damages. Cathay contends that Tomas
cannot sue for damages for the delay, since this case
falls under the ambit of the Warsaw convention that
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
does not provide for claiming of damages due to
delay in the delivery.
I: WON the Warsaw Convention is an exclusive list
NO. See doctrine. It does not regulate, much less
exempt, the carrier from liability for damages for
violating the rights of its passengers under the
R:
contract of carriage, especially if wilfull misconduct
on the part of the carrier's employees is found or
established, which is clearly the case in point.
3. AS TO DELAY IN DELIVERY
Note:
Remember that under Art. 1165, if the carrier is in delay, it is
responsible for any fortuitous event until it has effected the
delivery.
MAERSK V CA (1993)
COMMON%CARRIERS%ARE%ONLY%OBLIGATED%TO%
MAKE%DELIVERY%WITHIN!A"REASONABLE"TIME,"
UNLESS&BY&SPECIAL&CONTRACT&THEY&
UNDERTAKE)TO)DELIVER!ON#A#SPECIFIC#DATE.!
Castillo ordered empty gel capsules from a supplier
in Puerto Rico. For unknown reasons, the cargo was
diverted to Richmond, Virginia, before being
F:
redirected to Oakland, CA, and then, finally, to the
PH on 10 June 1977. Hence, there was a delay of over
2 months.
I: WON Maersk is liable for the delay
YES. The Court held that this delay entitled Castillo
to damages. See doctrine. In this case, the bill of
R:
lading specified the delivery date, which Maersk was
bound to observe.
4. FACTORS AFFECTING AGREEMENT
Factors that would render the stipulation on limitation of
liability ineffective:
1. Common carrier refuses to carry the goods53;
2. Common carrier delays, without just cause, the
transportation of the goods54;
3. Common carrier changes the stipulated/usual route55
Notes:
The fact of absence of competitor in a line/route will be part
of the test on reasonableness of stipulations limiting
liability56.
Notwithstanding limitation of liability, presumption of
negligence will still hold.
53
Art. 1746
54
55
Art. 1747
Id.
56
Art. 1751
26 56
 E. APPLICABLE LAW IN FOREIGN TRADE Nature of responsibility60
1. Bound to carry passengers safely as far as human care
Law of country of port of destination shall govern the
and foresight can provide;
liability of the common carrier57.
2. Using the utmost diligence of very cautious persons; and
3. With due regard for all the circumstances.
F. RULES ON PASSENGER BAGGAGE Extent of responsibility:
HAND-CARRIED CHECKED-IN 1. Passengers;
LEGAL Necessary deposit, if Considered as 2. Crew and complement61;
NATURE OF such baggage is not in “transportation of 3. Strangers within its premises, when their presence was
BAGGAGE his personal custody goods” called for by the contract of carriage and known and
or that of his consented to by the carrier.62
employees58 Instances where carrier is liable
REQUIRED Due diligence Extraordinary
1. Defects in the parts of the vehicle63
DILIGENCE diligence
2. Discoverable manufacturing defects64
APPLICABLE Arts. 1998, 2000 – Arts. 1733 - 1753
RULES 2003 (hotels, etc.) Instances where carrier is not liable
1. Acts of strangers outside the carrier’s control or even
SUMMARY OF DEFENSES OF A COMMON CARRIER knowledge or could not have prevented65
2. Sovereign acts66
(IN ORDER) 3. Negligence or abuse by unscrupulous passengers67
Total exoneration from liability
1. Not a common carrier ISAAC V A.L.AMMEN
2. Damage happened outside the duration of the contract A"COMMON"CARRIER"IS"NOT$AN$INSURER$OF$ALL"
of carriage RISKS!
3. Presence of exempting circumstances
4. Exercise of extraordinary diligence LANDINGIN V PANTRANCO (1970)
Partial exoneration from liability AN#ACCIDENT(CAUSED(BY(DEFECTS&IN&THE&
AUTOMOBILE*IS*NOT*A*CASO%FORTUITO.!
5. Stipulation limiting liability
6. Contributory negligence Bus in steep Baguio road. Broken crossjoint. Dead.
F: Inspected the day before. Unable to prove that they
took into account all circumstances (negligence).
III. COMMON CARRIAGE OF I: WON PANTRANCO is liable
PASSENGERS YES. The rationale of the carrier’s liability is the fact
that the “passenger has neither the choice nor
R:
A. NATURE AND EXTENT OF control over the carrier in the selection and use of
RESPONSIBILITY the equipment and appliances in use by the carrier

Principles governing the liability of the common carrier59 LANDICHO V BTCO

1. The liability of a carrier is contractual and arises upon
breach of its obligation, said breach occurring if it fails to
exert extraordinary diligence according to all
circumstances of each case;
2. A carrier is obliged to carry its passenger with the
utmost diligence of a very cautious person, having due
regard for all the circumstances;
3. A carrier is presumed to be at fault or to have acted
negligently in case of death of, or injury to, passengers, it
being its duty to prove that it exercised extraordinary
diligence; and
4. It is not an insurer against all risks of travel.
A"CARRIER"IS"NOT"AN"ABSOLUTE)INSURER)
AGAINST'ALL'RISKS'AND"INJURIES."RULING"
OTHERWISE)WOULD)MAKE!TRANSPORTATION)
CONTRACTS(OPEN(TO(ABUSE$BY$UNSCRUPULOUS$
PASSENGERS(WHO(MAY(WILLINGLY&CAUSE&
THEMSELVES(HARM(DURING#THE#TRIP#IN#ORDER!
TO#EXACT#FINANCIAL#COMPENSATION*FROM*THE!
COMMON%CARRIER.!
F: Petitioner fell off bus while trying to save chickens
60
Art. 1755
61 PAL V CA
62 SULPICIO V CA

63 LANDINGIN V PANTRANCO

64 NECESITO V PARAS
57 65 PILAPIL V CA
Art. 1753
58 66 JAL V CA
Art. 1754
59 ISAAC V AMMEN 67 LANDICHO V BTCO

_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 27 56
 and suffered injuries.
I: WON carrier is liable
NO, HE WAS SLEEPY. The 3 requisites were not
met. Absent overt manifestations, a common carrier
cannot be expected to know the mental/physical
R: well-being of its passengers (whether or not the
same are sleepy or dizzy, for example)—part of the
responsibility for his safety falls upon the passenger
himself as well.
NECESITO V PARAS (1958)
THE$CARRIER,$WHILE&NOT&AN&INSURER!OF#
SAFETY,(IS(LIABLE(FOR"THE"FLAWS"OF"ITS"
EQUIPMENT,*IF*DISCOVERABLE!
A"MERE"VISUAL"INSPECTION%IS%NOT%ENOUGH,%
FOR$THE$OBLIGATIONS$OF#A#CARRIER#DEMANDS!
ADEQUATE'PERIODICAL'TESTING'TO'DETERMINE!
THE$CONDITION$AND$STRENGTH'OF'THE'
VEHICLES.!
Bus fell into the river because of the failure of its
F:
steering knuckles.
I: WON carrier is liable
YES. The rationale for this rule is because the
passenger has neither choice nor control over the
carrier in the selection and use of its equipment and
appliances. Having no privity with the maufacturer,
the passenger has no remedy against him, but the
carrier has.
R:
While it may be impractical to require to test the
strength of each and every part of its vehicles before
each trip, due regard for the carrier's obligation to
the travelling public demands adequate periodical
tests to determine the condition and strength of the
vehicles.
PAL V CA (1981)
THE$DUTY$TO$EXERCISE!THE$UTMOST$DILIGENCE!
ON#THE#PART#OF#COMMON"CARRIERS"IS"FOR"THE"
SAFETY'OF'PASSENGERS!AS#WELL#AS#FOR#THE#
MEMBERS&OF&THE&CREW&OR#THE#COMPLEMENT#
OPERATING*THE*CARRIER.#!
Due to old age of pilot, plane overshot, causing
F:
severe injuries to co-pilot.
I: WON PAL is liable
YES. See doctrine. This must be so for any omission,
lapse or neglect thereof will certainly result to the
R: damage, prejudice, nay injuries and even death to all
aboard the plane, passengers and crew members
alike.
SULPICIO V CA (1995)
A"CARRIER"IS"ALSO"RESPONSIBLE)FOR)INJURIES#
CAUSED'TO'NON$CREW/NON$PASSENGERS(
WITHIN&ITS&PREMISES,!WHEN%THEIR%PRESENCE%
WAS$CALLED$FOR$BY$THE"CONTRACT"OF"
CARRIAGE'AND'KNOWN!AND$CONSENTED$TO$BY$
THE$CARRIER.!
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
One of the stevedores hired by carrier to load and
F: unload copra lost consciousness and eventually died
of gas poisoning when he entered the room.
I: WON carrier is liable.
YES. It was not enough that Sulpicio’s EEs warned
the stevedores not to enter because of the gas.
Sulpicio’s employees should have been sufficiently
instructed to see to it that the hatch of the barge
was not opened by any unauthorized person and
R:
that it could not be easily opened by anyone.
Precautionary measures also should have been
observed by Sulpicio's employees to see to it that no
one could enter until after they made sure that it
was safe.
JAL V CA (2005)
THE$PASSENGER$HAS$EVERY$RIGHT$TO$EXPECT$
THAT$HE$BE$TRANSPORTED#ON#THAT#FLIGHT#
AND"ON"THAT"DATE"AND"IT"BECOMES"THE"
CARRIER’S(OBLIGATION!TO#CARRY#HIM#AND#HIS!
LUGGAGE&SAFELY&TO&THE"AGREED"DESTINATION."
IF#THE#PASSENGER#IS#NOT$SO$TRANSPORTED$OR"
IF#IN#THE#PROCESS#OF!TRANSPORTING*HE*DIES!
OR#IS#INJURED,#THE#CARRIER%MAY%BE%HELD%
LIABLE&FOR&A&BREACH%OF%CONTRACT%OF%
CARRIAGE.!
Respondents flew to Japan for a stop-over but they
were denied shore passes due to an inconsistency in
the passport, and were ordered to stay in the Airport
F:
Rest House overnight. Because of this incident, the
respondents filed for damages against JAL for
breach of contract.
I: WON JAL is liable
NO. It may be true that JAL has the duty to inspect
whether its passengers have the necessary travel
R: documents, however, such duty does not extend to
checking the veracity of every entry in these
documents.
B. DURATION OF RESPONSIBILITY
Jurisprudential basis:
1. During ingress68 and egress69
2. Even after alighting from the vehicle until the passenger
had a reasonable time or a reasonable opportunity to
leave the carrier's premises70
Test: The primary factor to be considered is the
existence of a reasonable cause as will justify the
presence of the victim on or near the vessel71.
3. Even during stop-overs, until the passenger reaches the
port of destination72.
68 DEL PRADO V MERALCO
69 CANGCO V MRR
70 LA MALLORCA V CA
71 ABOITIZ V CA
72 PAL V CA
28 56
CANGCO V MRR
MRR#WAS#BOUND#BY#REASON$OF$ITS$DUTY$AS$A!
PUBLIC'CARRIER'TO'AFFORD%TO%ITS%PASSENGERS#
FACILITIES)FOR)SAFE)EGRESS%FROM%ITS%TRAINS.!
DEL PRADO V MERALCO (1929)
THE$CARRIER’S$DUTY$EVEN$EXTENDS$TO$
PERSONS'BOARDING'THE!CAR$AS$WELL$AS$TO$
THOSE&ALIGHTING&THEREFROM.!
Del Prado got on a moving motorcar and fell when
F: the driver accelerated the same before he got his
balance.
I: WON MERALCO is liable
YES. Meralco breached its obligations as a carrier,
R: and as such, is liable for the injury suffered by the
plaintiff. See Doctrine.
LA MALLORCA V CA (1966)
THE$RELATION$OF$CARRIER$AND$PASSENGER$
DOES%NOT%CEASE%AT%THE"MOMENT"THE"
PASSENGER(ALIGHTS$FROM$THE$CARRIER'S#
VEHICLE'AT'A'PLACE'SELECTED&BY&THE&CARRIER#
AT#THE#POINT#OF#DESTINATION,'BUT'CONTINUES#
UNTIL&THE&PASSENGER&HAS$HAD$A$REASONABLE!
TIME%OR%A%REASONABLE!OPPORTUNITY)TO)
LEAVE%THE%CARRIER'S%PREMISES.!
Beltran and family alighted from the bus and were
now situated 5 meters from the vehicle. Mariano
went back to get their bayong which they left inside.
F:
While waiting, the bus suddenly started to move and
unfortunately ran over his daughter’s skull, killing
her.
I: WON the bus company is liable
YES. See doctrine. Court held that they are still
R:
entitled to claim based on breach.
BATACLAN V MEDINA (1957)
TEST$FOR$NEGLIGENCE:!WHETHER&THE&
NEGLIGENT'CONDUCT'IS!A"CAUSE"WITHOUT"
WHICH%THE%INJURY%WOULD#NOT#HAVE#TAKEN#
PLACE&(SINE&QUA&NON&RULE)&OR!IS#THE#
EFFICIENT'CAUSE'WHICH"SET"IN"MOTION"THE"
CHAIN&OF&CIRCUMSTANCES#LEADING#TO#THE#
INJURY!
F: The famous bus that turned turtle and caught fire.
I: WON the bus company is liable
YES. See doctrine. This case shows that the
responsibility to exercise EOD still continues even
after the bus turned turtle.
heir negligence was the proximate cause of the
deaths. The fire resulting from the torch was not the
R: proximate cause; it was merely a consequence of the
accident, and an immediate cause. The trapped
passengers needed help, and people came to help.
The proximate cause of their deaths was the turning
turtle of the bus, which resulted from negligent
driving.
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
ABOITIZ V CA (1989)
ONCE%CREATED,%THE%RELATIONSHIP&WILL&NOT&
ORDINARILY)TERMINATE!UNTIL&THE&PASSENGER&
HAS,%AFTER%REACHING%HIS$DESTINATION,$
SAFELY'ALIGHTED'FROM!THE$CARRIER'S$
CONVEYANCE(OR(HAD(A(REASONABLE)
OPPORTUNITY)TO)LEAVE!THE$CARRIER'S$
PREMISES.(!
Anacleto Viana, a passenger of an Aboitiz vessel,
returned to the vessel to get his cargo. He was hit by
F:
a crane used for the unloading of cargo.
Consequently, Anacleto died.
I: WON carrier is liable
YES. See doctrine. All persons who remain on the
premises a reasonable time after leaving the
conveyance are to be deemed passengers, and what
is a reasonable time or a reasonable delay within
this rule is to be determined from all the
circumstances, and includes a reasonable time to
R:
see after his baggage and prepare for his departure.
The carrier-passenger relationship is not terminated
merely by the fact that the person transported has
been carried to his destination if, for example, such
person remains in the carrier's premises to claim his
baggage
PAL V CA (1983)
THE$RELATION$OF$CARRIER$AND$PASSENGER(
CONTINUES)UNTIL)THE)LATTER&HAS&BEEN&
LANDED&AT&THE&PORT&OF"DESTINATION"AND"HAS"
LEFT%THE%CARRIER’S%PREMISES.!
Pedro’s flight had to be diverted because of a storm.
F: PAL left him hanging without food, accommodation,
or transportation in a vicinity of armed conflict.
I: WON PAL is liable.
YES. See doctrine. It invites people to avail of the
R:
comforts and advantages it offers.
C. PRESUMPTION OF NEGLIGENCE
When presumption of negligence attaches73
In case of death of or injuries to passengers.
How to rebut presumption
1. Exercise of extraordinary diligence74
2. Force majeure/caso fortuito/fortuitous event + no
negligence on its part75
3. Passenger’s own negligence76
73
74
Art. 1756
Id.
75 BACHELOR EXPRESS V CA
76 LANDICHO V BTCO
29 56

3-fold test to exonerate common carriers from liability77:
1. The common carrier makes sure that a passenger paces
himself inside the vehicle;
2. The vehicle is operated carefully; and
3. Its mechanism is perfectly alright to avoid mishaps.
Notes:
Carrier may still file a 3rd party complaint against another
erring vehicle.
The defense of “last clear chance” is not applicable, since
this is a defense in contributory negligence between 2
vehicles.
D. FORCE MAJEURE
Essential characteristics of a caso fortuito78:
1. The cause of the unforeseen and unexpected
occurrence, or of the failure of the debtor to comply with
his obligation, must be independent of the human will;
2. It must be impossible to foresee the event which
constitutes the caso fortuito, or if it can be foreseen, it
must be impossible to avoid;
3. The occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in a normal
manner; and
4. The obligor (debtor) must be free from any participation
in the aggravation of the injury resulting to the creditor.
BACHELOR EXPRESS V CA (1990)
IN#ORDER#FOR#A#COMMON"CARRIER"TO"BE"
RELIEVED'FROM'LIABILITY$DUE$TO$A$
FORTUITOUS(EVENT,(IT!MUST%STILL%PROVE%THAT"
THERE%WAS%NO%NEGLIGENCE$OR$LACK$OF$CARE$
AND$DILIGENCE$ON$THE!PART%OF%THE%
DEFENDANT'COMPANY'OR!ITS$AGENTS$AND$
EXCLUSIVELY*WITHOUT*HUMAN&INTERVENTION!
A passenger stabbed a soldier while on the bus,
F: causing passengers to panic. Two passengers
jumped out of the window and died.
I: WON bus is liable
YES. See doctrine. In the case at hand, it was found
that the driver was running at a fast speed even after
it had just come from a full stop and was not able to
immediately stop when the passengers were
R:
panicking, plus, it was equipped with only a solitary
door for a bus its size and loading capacity, in
contravention of rules and regulations provided for
under the Land Transportation and Traffic Code.
YOBIDO V CA (1997)
THE$FACT$THAT$THE$TIRE#WAS#NEW#DID#NOT#
IMPLY&THAT&IT&WAS&ENTIRELY'FREE'FROM'
77
Id.
78
Id.
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
MANUFACTURING+DEFECTS.#NEITHER#CAN#THE#
PETITIONERS!SEEK$SOLACE$IN$THE$BRAND%NAME%
(GOOD%YEAR)%OF%THE%TIRE$FOR$ITS$QUALITY.!
E. LIMITATION OF LIABILITY; VALIDITY OF
STIPULATIONS
Invalid stipulations79:
1. Dispensing or diminishing of responsibility for the safety
of passengers;
Note that for goods, level of diligence may be decreased to
ordinary diligence.
2. Limitation of liability caused by willful acts or gross
negligence by carrier during gratuitous carriage.
Effect of gratuitous carriage80
Parties may stipulate the common carrier’s liability for
negligence, but not for willful act or gross negligence.
A/N: I BELIEVE THAT ART. 1757 TALKS ABOUT LEVEL OF DLIGENCE WHILE
ART. 1758 TALKS ABOUT AMOUNT OF LIABILITY. THEREFORE, THE EXERCISE
OF THE DILIGENCE REQUIRED UNDER ARTS. 1733 AND 1755 CAN NEVER BE
REDUCED OR LIMITED.
F. RESPONSIBILITY FOR ACTS OF
EMPLOYEES
G.R.: A passenger is entitled to protection from personal
violence by the carrier, it’s agents or employees EVEN
IF they acted beyond the scope of their authority or in
violation of an order81.
E: Acts falling under force majeure (unforeseeable or
unavoidable)
Notes:
A common carrier cannot be absolved from liability by
proving diligence in the selection and supervision of
employees nor by notices or signages82.
There is a difference between “scope of authority” and “line
of duty”. The law covers actions even beyond the scope of
authority. If the person was outside the line of duty during
the mishap, the common carrier is absolved from liability
(e.g. De Gillaco v MRR, where the court treated the security
guard as a passenger.)
79
Arts. 1757 and 1758
80
Art. 1758
81
Art. 1759
82
Art. 1760
30 56
DE GILLACO V MRR (1955)
A"PASSENGER"IS"ENTITLED$TO$PROTECTION$
FROM%PERSONAL%VIOLENCE#BY#THE#CARRIER#OR!
ITS$AGENTS$OR$EMPLOYEES#BUT#THIS#
RESPONSIBILITY,EXTENDS#ONLY#TO#THOSE#THAT"
THE$CARRIER$COULD$FORESEE$OR$AVOID#
THROUGH'THE'EXERCISE!OF#THE#DEGREE#OF#
CARE%AND%DILIGENCE%REQUIRED'OF'IT.!
Gillaco was shot by MRR’s guard because of a
F:
personal grudge.
I: WON MRR can be held liable
NO. See doctrine. MRR had no means to ascertain or
anticipate that the two would meet, nor could it
reasonably foresee every personal rancor that might
R: exist between each one of its many employees and
any one of the thousands of eventual passengers
riding in its trains. The Court considered the guard
as a passenger during the time of the mishap.
MARANAN V PEREZ (1967)
APPLICATION)OF)ART.)1759%(C.F.%GILLACO)!
Cab driver shot his passenger, while the latter was
F:
on board said cab.
I: WON the cab company may be held liable.
YES. Unlike in Gillaco, the killing of the passenger
here took place in the course of duty of the guilty
R:
employee and when the employee was acting within
the scope of his duties.
LRTA V NAVIDAD
IN#THE#ABSENCE#OF#SATISFACTORY*
EXPLANATION*BY*THE*CARRIER%ON%HOW%THE%
ACCIDENT(OCCURRED((BETWEEN%ITS%EMPLOYEE'
AND$A$PASSENGER),$THE"PRESUMPTION"WOULD"
BE#THAT#IT#HAS#BEEN#AT#FAULT.!
G. RESPONSIBILITY FOR ACTS OF
STRANGERS AND CO-PASSENGERS
G.R.: A common carrier is not liable for injuries inflicted by
strangers and co-passengers83.
E: Carrier’s employees could have prevented or stopped
such acts/omissions with the exercise of ordinary
diligence.
Note:
“Death” is included in the term “injuries”
83
Art. 1759
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
PILAPIL V CA (1989)
WHILE&THE&LAW&REQUIRES#THE#HIGHEST#DEGREE"
OF#DILIGENCE#FROM#COMMON$CARRIERS$IN$THE!
SAFE%TRANSPORT(OF(THEIR(PASSENGERS'AND'
CREATES'A'PRESUMPTION"OF"NEGLIGENCE"
AGAINST'THEM,'IT'DOES"NOT,"HOWEVER,"MAKE!
THE$CARRIER$AN$INSURER#OF#THE#ABSOLUTE#
SAFETY'OF'ITS'PASSENGERS.!
Some guy threw a stone at the bus Pilapil was riding
F:
and hit his eye.
I: WON the bus is liable
NO. See doctrine. The injuries of Pilapil was in no way
due to any defect in the means of transport or in the
method of transporting or to the negligent or willful
acts of private respondent's employees, and
therefore involving no issue of negligence in its duty.
R:
The injury arose wholly from causes created by
strangers over which the carrier had no control or
even knowledge or could not have prevented, the
presumption is rebutted and the carrier is not and
ought not to be held liable.
H. DUTY OF PASSENGER; EFFECT OF
CONTRIBUTORY NEGLIGENCE
Duty of passenger84:
To exercise ordinary diligence to avoid injury to him/herself.
Effect of contributory negligence85:
It does not bar recovery of damages but reduces the
amount of such.
Effect of passenger’s negligence as proximate cause of
injury
Common carrier shall be exonerated from liability.
CANGCO V MRR
NO#CONTRIBUTORY#NEGLIGENCE,'AS'THIS'WAS'
NORMAL'PRACTICE.'THOUSANDS&OF&PERSON&
ALIGHT'FROM'TRAINS'UNDER%THESE%CONDITIONS"
EVERY%DAY%OF%THE%YEAR,#AND#SUSTAIN#NO#
INJURY'WHERE'THE'COMPANY%HAS%KEPT#ITS#
PLATFORM)FREE)FROM)DANGEROUS)
OBSTRUCTIONS.!
ISAAC V A.L.AMNEN
WHILE&CONTRIBUTORY&NEGLIGENCE'DOES'NOT'
AUTOMATICALLY*EXCULPATE,%IT%MITIGATES%THE"
LIABILITY'OF'THE'COMMON$CARRIER!
84
Art. 1761
85
Art. 1762
31 56
DIFFERENCE BETWEEN CARRIAGE OF GOODS AND be recovered if:
PASSENGERS a. Reasonable and just
GOODS PASSENGERS under the
circumstances; and
PRESUMPTION OF NEGLIGENCE
b. Fairly and freely
In case of loss, damage or In case of injury or death
agreed upon.
deterioration
3. Limitation of liability
LEVEL OF DILIGENE
upon delay due to strikes
Greatest skill and foresight, As far as human care and
or riots
according to all the foresight may provide, with
circumstances of each case the utmost diligence of very
cautious persons, with due
IV. DAMAGES RECOVERABLE FROM
regard to all circumstances. COMMON CARRIERS
DURATION OF RESPONSIBILITY
1. From the time the goods are 1. During ingress A. IN GENERAL
unconditionally placed in the and egress Damages recoverable (MENTAL)
possession of, and received by 2. Even after
1. Actual or compensatory
the carrier86 or its authorized alighting from the
2. Moral damages
agent (ability to exercise control vehicle until the
3. Exemplary damages
and possession)87 for passenger had a
4. Nominal, Temperate, Liquidated damages
transportation; reasonable time
Test: If there is nothing or a reasonable B. ACTUAL OR COMPENSATORY
remainds to be done by the opportunity to
shipper, then carrier has control leave the carrier's How applied?
and possession premises Damages in cases under breach of contract of carriage shall
2. During storage in a warehouse Test: The primary be awarded in accordance with the provisions concerning
of the carrier at the place of factor to be damages. Article 2206 shall also apply to the death of a
destination; until consignee has considered is the passenger caused by the breach of contract by a common
been advised of the arrival of existence of a carrier88.
the goods + reasonable reasonable cause
opportunity to remove or as will justify the What forms part of actual damages?
dispose of them presence of the 1. Proven pecuniary losses89;
3. During temporary unloading or victim on or near a. Loss of earning capacity90
stored in transit; the vessel. b. Loss of support;
4. Until actual or constructive 3. Even during stop- c. Medical and funeral expenses91.
delivery to consignee, a duly overs, until the 2. For breach of contract of carriage:
authorized agent, a person who passenger reaches a. Good faith carrier: Natural and probable
has a right to receive, a the port of consequence of the breach + forseeable or reasonaby
stipulated authority, or the destination. foreseen at the time of constitution of obligation;
shipper with reasonable time to b. Bad faith carrier: All damages reasonable attributed
remove goods. to non-performance of obligation;
VALID STIPULATIONS 3. For quasi-delict (Air France): Natural and probable
consequences of the act;
As to diligence As to diligence
4. P50k for death;
1. Must be in writing; None
2. Must have a separate Formula for lost earning capacity92:
consideration; and 2
3. Must not be against !"#$!!"#!$%&'$(!(!") = ×[80 − !"#!!"!!"#$ℎ]
3
public policy
As to liability As to liability !"#!!"#$%$&!!"#"$%&'!(!"#)
1. Limitation of liability to Parties may stipulate the = !""#$%!!"#$%& − !"#$%&$&
amount in the bill of common carrier’s liability for
lading, unless shipper negligence, but not for !"#$!!"#$%$&!!"#"!$%& = !"!!!!"#
declares a greater value; willful act or gross
2. Fixing of a sum that may negligence.

88
Art. 1764
89
Art. 2199
90
Art. 2206
86 91 CARIAGA V LTBCO
Art. 1736
87 COMPANIA MARITIMA V INSURANCE CO. 92 VILLA-REY V CA

_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 32 56
Main factors to be considered in awarding lost earning PANAM V IAC
capacity93: Liability for loss, delay, or damage to baggage is
1. The number of years on the basis of which the damages limited as follows unless a higher value is declared
shall be computed; and in advance and additional charges are paid: (1) for
2. The rate at which the losses sustained should be fixed most international travel (including domestic
F:
(average annual income; industry rate, etc.) portions of international journeys) to approximately
$9.07 per pound ($20.00 per kilo) for checked
Rules on documentary evidence for lost earning capacity baggage and $400 per passenger for unchecked
G.R.: Documentary evidence should be presented to baggage.
substantiate the claim for damages.
E: No need to present if deceased is: VILLA-REY V CA (1970)
a. Self-employed, earning less than the minimum THERE%CAN%BE%NO%EXACT/UNIFORM*RULE*FOR*
wage under current labor laws; or MEASURING*THE*VALUE*OF#A#HUMAN#LIFE#AND#
b. Employed as a daily wage worker earning less THE$MEASURE$OF$DAMAGES#CANNOT#BE#ARRIVED!
than the minimum wage under current labor AT#BY#PRECISE#MATHEMATICAL&CALCULATION,&
laws. BUT$THE$AMOUNT"RECOVERABLE"DEPENDS"ON"
c. Testimonial evidence of the decedent’s payroll by THE$PARTICULAR$FACTS!AND$CIRCUMSTANCES$
competent officers of the corporation where the OF#EACH#CASE.#!
decedent was working with no timely objection to Tuhog case. The Villa Rey bus figured in an accident
such testimonies94. F: in Pampanga where one of its paying passengers,
Note: Quintos, sustained injuries and later died.
Only net earnings, not gross earnings, are to be considered
that is, the total of the earnings less expenses necessary in PAL V CA (1990)
the creation of such earnings or income and less living and THE$AWARD$OF#DAMAGES#FOR#DEATH!IS#
other incidental expenses95. COMPUTED)ON)THE)BASIS"OF"THE"LIFE"
96
A/N: NOTE THE DIFFERENCE IN THE RULINGS IN PAL V CA AND VICTORY V
EXPECTANCY)OF)THE)DECEASED,'NOT'OF'HIS'
GAMMAD AS REGARDS THE REQUIREMENT OF DOCUMENTARY PROOF. BENEFICIARY.!
BOTH CASES ONLY HAD TESTIMONIAL EVIDENCE OF THE DECEDENT’S
INCOME BUT ONLY PAL ALLOWED RECOVERY. TO RECONCILED SUCH F: Son died in plane crash. Mom sued for damages.
CONFLICT, I ADDED PAL AS AN ADDITION TO THE EXCEPTIONS TO THE
RULE ON THE REQUIREMENT OF DOCUMENTARY EVIDENCE AS PROOF OF
ACTUAL DAMAGES. VICTORY LINER V GAMMAD (2004)
ACTUAL&DAMAGES&CAN&ALSO$ONLY$BE$AWARDED$
UPON%THE%PRESENTATION"OF"THE"OFFICIAL"
CARIAGA V LTBCO (1960) RECEIPTS(OF(EXPENSES!INCURRED(INCIDENT(TO!
THE$INCOME,$WHICH$CARIAGA%COULD%EARN%IF%HE# THE$DEATH$OF$THE$DECEASED
SHOULD'FINISH'THE'MEDICAL&COURSE&AND&PASS"
THE$CORRESPONDING$BOARD$EXAMINATIONS,$ The respondents’ wife/mother died when a Victory
MUST%BE%DEEMED%TO%BE!WITHIN&THE&SAME& Liner bus bound for Tuguegarao from Manila was
F:
CATEGORY)BECAUSE!THE$PARTIES$COULD$HAVE# running at high speed and fell into a ravine in Nueva
REASONABLY*FORESEEN*THEM%AT%THE%TIME%HE% Vizcaya.
BOARDED'THE'BUS.!
Bus bumped train and caused grave and irreparable C. MORAL DAMAGES
F:
injury to Ed Cariaga, a UST 4th year med student.
WON bus company is liable for compensatory When can moral damages be claimed?
I:
damages. 1. Breach of contract of carriage with bad faith, fraud97, or
YES. The Court ruled that aside from the medical malice98
and other expenses, the bus company should pay 2. Mental anguish by descendants and ascendants of the
R:
compensatory damages as to the possible future deceased by reason of his/her death99
earnings of the victim. 3. Mishap attended by death of the passenger100

93
Id.
94 PAL V CA
95
Id.
96
“The payrolls of the companies and the decedent's income tax returns
could, it is true, have constituted the best evidence of his salaries, but there is
97
no rule disqualifying competent officers of the corporation from testifying on Art. 2220
the compensation of the deceased as an officer of the same corporation, and 98 AIR FRANCE V GILLEGO
99
in any event, no timely objection was made to their testimonies.” Art. 2206 (3)
100 CATHAY PACIFIC V VASQUEZ, CITING CATHAY V CA

_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 33 56

Different definitions of bad faith according to
jurisprudence:
- A breach of a known duty through some motive of self-
interest or ill-will101;
- Self-enrichment or fraternal interest, and not personal
ill-will, may well have been the motive; but it is malice
nevertheless102 ;
- Wanton disregard of rights and dignity as a human
being103;
- Inattention and lack of care on the part of the carrier
resulting in the failure of the passenger to be
accommodated in the class contracted for104;
- Inattention to and lack of care for the interest of its
passengers who are entitled to its utmost
consideration, particularly as to their convenience.105
- Overbooking exceeding 10%106;
FORES V MIRANDA (1959)
AN#ACCIDENT#DOES#NOT!AUTOMATICALLY*
RESULT'IN'A'BREACH'OF"THE"CONTRACT"IN"BAD"
FAITH!
AIR FRANCE V CARRASCOSO (1876)
ALTHOUGH(THE(RELATION"OF"PASSENGER"AND"
CARRIER&IS&“CONTRACTUAL$BOTH$IN$ORIGIN$AND#
NATURE”(NEVERTHELESS!“THE%ACT%THAT%
BREAKS'THE'CONTRACT'MAY$ALSO$BE$A$TORT”!
Carrascoso bought a “first class” airplane ticket from
Manila to Rome from Air France. However, in his
flight from Manila to Bangkok, he was forced to
F:
vacate his seat by the manager of the airline
because a “white man” had a “better right” to the
first class seat.
I: WON moral damages are in order
YES. The acts of petitioner’s employee in forcing
respondent to vacate constituted the breach of the
contract, attended with evident bad faith. Therefore
R: the contention of petitioner that there was no bad
faith fails: though bad faith was not alleged
expressly, it may be implied from the airline’s
actions.
LOPEZ V PANAM (1966)
SEE#DEFINITION#OF#BAD"FAITH"ABOVE!
Petitioners had to travel in economy as opposed to
F: first class because Pan Am messed up their
reservations.
I: WON there was bad faith
101 AIR FRANCE V CARRASCOSO
102 LOPEZ V PAN AM
103 ORTIGAS V LUFTHANSA
104
Id
105 AIR FRANCE V GILLEGO
106 UNITED AIRLINES V CA
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
YES. The court awarded moral damages mostly on
the basis of the petitioner’s status as a senator of the
R: Philippines (he was Senate President Pro Tempore)
and the accompanying expectations of people
occupying such an esteemed position.
ORTIGAS V LUFTHANSA (1975)
ANOTHER(EXAMPLE(OF(BAD$FAITH!
Despite having first class tickets, plaintiff was
F: shoved to economy in order to accommodate a
Belgian.
I: WON there was bad faith
YES. The court awarded moral damages because of
the bad faith of the carrier and exemplary damages
R: in order to serve as a deterrent against racial
discrimination and indifference over the plight of
airline passengers.
PAL V MIANO (1995)
BAD$FAITH$MUST$BE$SUBSTANTIATED)BY)
EVIDENCE.((CITING'LBC'V'CA):"BAD"FAITH"UNDER"
THE$LAW$CANNOT$BE$PRESUMED;'IT'MUST'BE'
ESTABLISHED'BY'CLEAR'AND'CONVINCING'
EVIDENCE!!
UNITED AIRLINES V CA (2001)
ECONOMIC'REGULATIONS!7"STATES"WHEN"
OVERBOOKING*DOES*NOT!EXCEED%10%,"IT"IS"NOT!
CONSIDERED)DELIBERATE"AND"DOES"NOT"
AMOUNT'TO'BAD'FAITH.!
CATHAY PACIFIC V VASQUEZ (2003)
MORAL&DAMAGES&PREDICATED)UPON)A)BREACH%
OF#CONTRACT#OF#CARRIAGE$MAY$ONLY$BE$
RECOVERABLE)IN)INSTANCES%WHERE%THE%
CARRIER&IS&GUILTY&OF!FRAUD&OR&BAD&FAITH&OR"
WHERE%THE%MISHAP%RESULTED&IN&THE&DEATH&OF!
A"PASSENGER.!
AIR FRANCE V GILLEGO (2010)
MORAL&DAMAGES&IN&BREACH$OF$CONTRACT$OF$
CARRIAGE'CASES'MUST'SHOW%THAT%THE%BREACH!
WAS$WANTON$AND$DELIBERATELY'INJURIOUS'OR!
THAT$THE$ONE$RESPONSIBLE%ACTED%
FRAUDULENTLY+OR+WITH!MALICE'OR'BAD'FAITH.!
!
(CITING'CHINA'AIRLINES#V#CA):"NOT"EVERY"CASE"OF"
MENTAL'ANGUISH,'FRIGHT#OR#SERIOUS#ANXIETY"
CALLS#FOR#THE#AWARD#OF#MORAL&DAMAGES.!
34 56
 D. EXEMPLARY DAMAGES
When can exemplary damages be awarded?
1. By way of example or correction for the public good, in
addition to actual, moral, temperate, or liquidated
damages107;
2. In breach of contract of carriage, if carrier or agent acted
in a wanton, fraudulent, reckless, oppressive or
malevolent manner108.
MECENAS V CA (1989)
EXEMPLARY)DAMAGES)ARE"DESIGNED"BY"OUR"
CIVIL%LAW%TO%PERMIT%THE$COURTS$TO$RESHAPE"
BEHAVIOUR*THAT*IS*SOCIALLY&DELETERIOUS&IN"
ITS$CONSEQUENCE$BY$CREATING'NEGATIVE'
INCENTIVES(OR(DETERRENTS%AGAINST%SUCH%
BEHAVIOUR.!
Rationale for requiring EOD and the creation of
presumption of negligence: The law seeks to
R: compel them to control their employees, to tame
their reckless instincts and to force them to take
adequate care of human beings and their property.
E. NOMINAL, TEMPERATE AND
LIQUIDATED
When are nominal damages awarded?
1. For the vindication/recognition of a violated or invaded
right109;
2. In every obligation arising from any source enumerated
in Article 1157, or in every case where any property right
has been invaded110;
3. Where some injury has been done but the amount of
which the evidence fails to show actual, substantial or
specific damages111, the assessment of damages being
left to the discretion of the court according to the
circumstances of the case112.
When are temperate damages awarded?
More than nominal but less than actual damages, awarded
when the court finds that some pecuniary loss has been
suffered but amount cannot be provided with certainty113 .
When are liquidated damages awarded?
When agreed upon by the parties114 .
107
Art. 2229
108
Art. 2232
109
Art. 2221
110
Art. 2222
111 SAVELLANO V NORTHWEST
112 SALUDO V CA
113
Art. 2224
114
Art. 2226
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
Note:
Nominal and temperate damages cannot be awarded with
actual damages.
ALITALIA V IAC (1990)
THE$PHRASE$"FOR$SUCH!OTHER&AND&FURTHER&
JUST%AND%EQUITABLE%RELIEF%IN%THE%PREMISES,"$
IS#BROAD&ENOUGH&TO&COVER"APPLICATION"FOR"
NOMINAL'DAMAGES.!
SALUDO V CA (1992)
NOMINAL'DAMAGES'ARE'RECOVERABLE)WHERE)
SOME%INJURY%HAS%BEEN!DONE%BUT%THE%AMOUNT%
OF#WHICH#THE#EVIDENCE"FAILS"TO"SHOW,"THE!
ASSESSMENT'OF'DAMAGES"BEING"LEFT"TO"THE"
DISCRETION*OF*THE*COURT&ACCORDING&TO!THE$
CIRCUMSTANCES+OF+THE!CASE.!
F: Remains of mother shipped to Mexico City.
The records reveal that petitioners, particularly
Maria and Saturnino, were agonized for nearly five
hours, over the possibility of losing their mother's
mortal remains, unattended to and without any
assurance from the employees of TWA that they
were doing anything about the situation. This is not
R:
to say that petitioners were to be regaled with extra
special attention. They were, however, entitled to the
understanding and humane consideration called for
by and commensurate with the extraordinary
diligence required of common carriers, and not the
cold insensitivity to their predicament.
SAVELLANO V NORTHWEST (2003)
NOMINAL'DAMAGES'ARE'RECOVERABLE)IF)NO)
ACTUAL,$SUBSTANTIAL$OR$SPECIFIC&DAMAGES&
WERE$SHOWN$TO$HAVE$RESULTED'FROM'THE'
BREACH.(THE(AMOUNT(OF"SUCH"DAMAGES"IS"
ADDRESSED&TO&THE&SOUND#DISCRETION#OF#THE!
COURT,'TAKING'INTO'ACCOUNT&THE&RELEVANT&
CIRCUMSTANCES.!
In the present case, we must consider that
petitioners suffered the inconveniences of having to
wake up early after a bad night and having to miss
breakfast; as well as the fact that they were business
class passengers. They paid more for better service;
thus, rushing them and making them miss their
R: small comforts was not a trivial thing. We also
consider their social and official status. Victorino
Savellano was a former mayor, RTC judge and
chairman of the COMELEC. Virginia B. Savellano
was the president of five rural banks, and Deogracias
Savellano was then the incumbent vice governor of
Ilocos Sur.
35 56
 SUMMARY OF DAMAGES:
WHEN ALLOWED
CODE OF COMMERCE
ACTUAL PROVISIONS ON OVERLAND
1. Proven pecuniary losses115;
a. Loss of earning capacity116;
TRANSPORTATION
b. Loss of support;
c. Medical and funeral expenses117 .
2. For breach of contract of carriage:
I. SCOPE OF OVERLAND
a. Good faith carrier: Natural and probable TRANSPORTATION
consequence of the breach + forseeable or reasonaby
Elements:127
foreseen at the time of constitution of obligation;
b. Bad faith carrier: All damages reasonable attributed 1. Object: Mercandise or any article of commerce; &
to non-performance of obligation; 2. The carrier is a merchant or is habitually engaged in
3. For quasi-delict: Natural and probable consequences of the act;
transportation for the public.
4. P50k for fact of death;
MORAL II. NATURE OF CONTRACT
1. Breach of contract of carriage with bad faith, fraud118, or
malice119 Class notes:
2. Mental anguish by descendants and ascendants of the Contracts within this scope: Commercial contracts
deceased by reason of his/her death120 Other contracts: Civil contracts
3. Death by the passenger121
EXEMPLARY
1. By way of example or correction for the public good, in III. EFFECT OF CIVIL CODE
addition to actual, moral, temperate, or liquidated Class notes:
damages122;
The Civil Code did not expressly repeal the Code of
2. In breach of contract of carriage, if carrier or agent acted
Commerce provisions on overland transportation.
in a wanton, fraudulent, reckless, oppressive or
malevolent manner Code of Commerce provisions are merely suppletory.
NOMINAL - E.g. Bill of lading is still under the Code of Commerce.
1. For the vindication or recognition of a violated or
invaded right123; IV. CONTRACT OF CARRIAGE
2. In every obligation arising from any source enumerated
in Article 1157, or in every case where any property right Class notes:
has been invaded124; In the Civil Code, there is no more distinction between
3. Where some injury has been done but the amount of commercial and civil but private or common carriers.
which the evidence fails to show actual, substantial or
specific damages125, the assessment of damages being
left to the discretion of the court according to the A. BILL OF LADING
circumstances of the case126. 1. DEFINITION, SUBJECT MATTER
TEMPERATE
More than nominal but less than actual damages, awarded What is a bill of lading?
when the court finds that some pecuniary loss has been It may be defined as a written acknowledgment of the
suffered but amount cannot be provided with certainty. receipt of goods and an agreement to transport and to
LIQUIDATED deliver them at a specified place to a person named or on
When agreed upon by the parties. his order. It comprehends all methods of transportation.

2. FORM, CONTENTS 128

The shipper as well as the carrier of merchandise or goods
115
116
Art. 2199 may mutually demand that a bill of lading be made, stating:
Art. 2206
117 CARIAGA V LTBCO
1. The name, surname and residence of the shipper.
118
Art. 2220 2. The name, surname and residence of the carrier.
119 AIR FRANCE V GILLEGO
120
3. The name, surname and residence of the person to
Art. 2206 (3)
121 CATHAY PACIFIC V VASQUEZ
122
Art. 2229
123
Art. 2221
124
Art. 2222
125 SAVELLANO V NORTHWEST 127
Art. 349 (Code of Commerce)
126 SALUDO V CA 128
Art. 350 (Code of Commerce)
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 36 56
 whom or to whose order the goods are to be sent or
whether they are to be delivered to the bearer of said
bill.
4. The description of the goods, with a statement of their
kind, of their weight, and of the external marks or signs
of the packages in which they are contained.
5. The cost of transportation.
6. The date on which shipment is made.
7. The place of delivery to the carrier.
8. The place and the time at which delivery to the
consignee shall be made.
9. The indemnity to be paid by the carrier in case of delay, if
there should be any agreement on this matter.
For railroads or transportation suject to rate and time
schedules, the following are the minimum contents129:
Cost, time and special conditions of the carriage.
Types of bills of lading
DEFINITION
NEGOTIABLE Goods will be delivered to the bearer, or to
the order of any person named in such
document.
NON-NEGO Goods to be delivered to a specified
person.
CLEAN Does not indicate any defect in the goods
FOUL Indicates that the goods covered by it are
in bad condition.
SPENT Covers goods that have already been
delivered by the CC without a surrender of
a signed copy of the B/L.
THROUGH Issued by the CC who is obliged to use the
facilities of other carriers as well as his own
facilities for the purpose of transporting
the goods from the city of the seller to the
city of the buyer, which B/L is honored by
the subsequent interested carriers who do
not issue their own ladings.
ON-BOARD States that the goods have been received
on board the vessels which is to carry the
goods.
RECEIVED States that the goods have been received
FOR for shipment; issued when conditions are
SHIPMENT not normal and there is an insufficiency of
shipping space.
CUSTODY Issued by the CC to whom the goods have
been delivered for shipment but the
steamer indicated in the B/L which is to
carry the goods has not yet reached the
port where the goods are held for
shipment.
PORT issued by the CC when the goods to be
shipped are already in the port where the
goods are held for shipment
129
Art. 351 (Code of Commerce)
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
3. FUNCTION
Functions of a Bill of Lading
Contract
- Form of legal evidence between the shipper and the
carrier130.
Receipt
Symbol (e.g. Document of title)
B. REFUSAL TO TRANSPORT
G.R: Common carrier is duty bound to accept cargo
without discrimination.
E: If discrimination is reasonable and necessary.
Accepted instances for refusal to transport
1. Goods are dangerous objects or substances;
2. Goods are unfit for transportation;
3. Acceptance will result in overloading;
4. Goods are contraband/illegal;
5. Goods are injurious to health;
6. Goods will be exposed to untoward danger;
7. Goods like livestock will be exposed to disease;
8. Strike;
9. Failure to tender goods on time.
Carriers may refuse packages which appear unfit for
transportation; and if the carriage is to be made by railway,
and the shipment is insisted upon, the company shall
transport them, being exempt from all responsibility if its
objections, is made to appear in the bill of lading131.
C. DOUBTFUL DECLARATION OF
CONTENTS
Ability to inspect contents of a doubtful package132
If by reason of well-founded suspicion of falsity in the
declaration as to the contents of a package the carrier
should decide to examine it, he shall proceed with his
investigation in the presence of:
- Witnesses, with the shipper or consignee in attendance;
or
- Before a notary, who shall prepare a memorandum of
the result of the investigation, for such purposes as may
be proper.
D. NO BILL OF LADING
Class note:
The Civil code and other related laws will govern in the
absence of a bill of lading.
130
Art. 353 (Code of Commerce)
131
Art. 356 (Code of Commerce)
132
Art. 357 (Code of Commerce)
37 56
 - Upon receipt (upon general inspection)

V. RESPONSIBILITY OF THE Failure to file a claim within 24 hours bars the filing of the
CARRIER suit.
A. WHEN IT COMMENCES Rationale: Fresh memory of employees; to maintain the
condition of the goods.
From the moment he/she receives the merchandise
personally or through an agent133.
2. AMOUNT OF DAMAGES FOR LOSS
B. ROUTE Similar to the rules in the Civil Code regarding stipulated
G.R.: Carrier must follow the route stipulated (or else shall damages.
be liable for losses + payment of damages)134
E: Force majeure requires the change in route 3. AMOUNT OF DAMAGES FOR DELAY

C. CARE OF GOODS Types of delay:

The Civil Code has clearer definitions on the level of
diligence required of common carriers.
D. DELIVERY
1. CONDITION OF GOODS
G.R.: Same condition when they were received
- Excusable: Suspends the delivery.
- Inexcusable: The following are the consequences:
o Carrier is liable even for fortuitous events;
o Stipulations limiting liability are inoperative;
o Carrier is liable for damages due to delay;
o Consignee may exercise right to abandon.

CODE OF COMMERCE COGSA B. RIGHT TO ABANDON

File claim for apparent loss: upon receipt
File claim within 24 hours File claim within 3 days from When may the consignee abandon the goods?
from delivery delivery 1. In case of partial non-delivery, where the consignee
Filing of the claim is Not mandatory proves that he cannot make use of the goods capable of
mandatory; Condition delivery independently of those not delivered135;
precedent for filing of action 2. Goods are rendered useless for sale and consumption
for damages for the purposes for which they are properly destined136;
Prescriptive period: 10 yrs Prescriptive period: 1 year or
(contract), 6 yrs (no from discharge of goods 3. Delay through carrier’s fault137.
contract) Note:
Jurisprudence is clear that the prescriptive period applies
The right to abandon must be exercised after the
only if the goods were actually delivered.
happening of the cause but before the arrival of the goods.
2. TO WHOM DELIVERY IS MADE
G.R.: To consignee C. RIGHT TO CHANGE CONSIGNMENT
The shipper may exercise this right by delivering a novated
3. AMOUNT OF DAMAGES FOR DELAY bill of lading, without changing the destination138.
G.R.: Stipulated amount or actual damages
D. OBLIGATION TO PAY
VI. RIGHTS AND OBLIGATIONS OF TRANSPORTATION CHARGES
SHIPPER AND/OR CONSIGNEE In case of failure of the shipper, owner or consignee to pay
for such charges, the CC has the power to sell such freight,
A. RIGHT TO DAMAGES goods, or luggage at public auction following the procedure
1. CONDITION IMPOSED ON RIGHT under the law
Consignee must claim against the carrier the damage or
average within 24 hours from:
- Upon opening (if internal damage); or

135
Art. 336 (Code of Commerce)
136
Art. 365 (Code of Commerce)
133 137
Art. 355 (Code of Commerce) Art. 371 (Code of Commerce)
134 138
Art. 359 (Code of Commerce) Art. 360 (Code of Commerce)
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 38 56
 E. OBLIGATION TO RETURN BILL OF ADMIRALTY AND MARITIME
LADING
After the contract of transportation has been complied with,
COMMERCE
the B/L shall be returned to the issuing CC in exchange for I. CONCEPT OF ADMIRALTY;
the goods transported which are delivered to the shipper or
consignee. JURISDICTION OVER ADMIRALTY
Effect: The respective obligations and actions of the parties CASES
against each other shall be considered canceled. Jurisdiction140
RTCs and MeTC (300k/400k) have jurisdiction over
admiralty and maritime cases
VII. APPLICABILITY OF PROVISIONS
Also applicable to contractors or agents contracted to act
for the owner, shipper or consignee139. INTERNATIONAL HARVESTER V ARAGON (1949)
ADMIRALTY)HAS)JURISDICTION&OVER&ALL&
MARITIME'CONTRACTS'IN"WHATEVER"FORM,"OR"
TYPE%OF%PERFORMANCE,!OR#PLACE#OF#
EXECUTION.!

THE$DETERMINATION$WHETHER%OR%NOT%A%
CONTRACT'IS'MARITIME!DEPENDS&ON&THE&
SUBJECT(MATTER(OF(THE"CONTRACT"(I.E."
NATURE'AND'CHARACTER!OF#THE#CONTRACT)#
WHICH%IS%THE%TRUE%CRITERION'OF'A'MARITIME"
SERVICE'OR'A'MARITIME"TRANSACTION.!
Petitioner filed a case against the ship agent for the
F:
payment of the amount of lost cargo in the MTC.
I: WON MTC had jurisdiction
NO. Since the basis of the liability of the petitioner is
the contract of carriage by sea as evidenced by the
Bill of Lading, admiralty has jurisdiction over this
R: case. And as stated in Par. 4 Sec. 56 Act. 136 of the
Philippine Commission and Sec. 44 (d) of RA 296, it
is with the CFI that cases of admiralty shall be
settled.

II. VESSELS
A. MEANING
What is a “vessel”?
For Code of Commerce: Those engaged in maritime
commerce or commerce by sea, whether in foreign or
coastwise trade. (we use this definition)
For registration under Admin Code: Every sort of boat,
craft, or other artificial contrivance used, or capable of being
used, as a means of transportation on water.
The following are examples of vessels:
- Merchant ships
- Launches
- Lorchas
- Those engaged in transport of passengers and freight

139 140
Art. 379 (Code of Commerce) Section 19, 33 of BP 129
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 39 56
The following are not vessels:
- Mere accessory by nature to another vessel
- For pleasure only (e.g. yacht)
- Warships, patrol vessels, pontoons, health service,
harbor police vessels, floating storehouses, coast guard
vesels, fishing vessels, towboats.
- Those of minor nature and not engaged in maritime
commerce
LOPEZ V DURUELO (1928)
ART.%835%CODE%OF%COMMERCE%ONLY%APPLIES%TO"
MERCHANT)VESSELS$OR$VESSELS$ENGAGED#IN#
MARITIME'COMMERCE'AND"NOT"TO"SMALL"
BOATS&ENGAGED&IN&RIVER#AND#BAY#TRAFFIC.#
OTHER&VESSELS&OF&A&MINOR%NATURE%ARE%
GOVERNED(BY(THE(CIVIL"CODE"OR"OTHER"
PERTINENT'SPECIAL'LAWS.!
In a case for damages against owner/operator of a
motor boat, defendant filed a demurrer on the
ground that the complaint did not state that plaintiff
F:
observed the condition precedent required under the
Code of Commerce in cases of collision (file a protest
within 24 hours from accident).
WON the Code of Commerce is applicable to small
I:
boats
NO. The court held that the CoC is not applicable in
R: the case at bar because what is involved here is a
boat not within the purview of said provision.
B. NATURE AND ACQUISITION OF
May be acquired through:
- Intellectual creation;
- Donation;
- Succession;
- Consequence of certain contracts, by tradition;
- Prescription
C. REGISTRATION; CERTIFICATES ISSUED;
DISTINCTIONS
Where registered?
With the MARINA141
Registration v. CPC
Former is for ownership purposes, CPC is for regulation.
D. SIGNIFICANCE OF REGISTRATION OF
TRANSACTIONS AFFECTING VESSELS
ARROYO V YU (1930)
MORTGAGES)ON)VESSELS,"ALTHOUGH"NOT"
RECORDED,'ARE'GOOD'AS"BETWEEN"THE"
141
Section 10(1), RA 9295
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
PARTIES.)BUT)AS)AGAINST$CREDITORS$OF$THE!
MORTGAGOR,(AN(UNRECORDED$MORTGAGE$IS$
INVALID.!
The lorchas were mortgaged by Ponzo to Pauco and
then by Pauco to PNB but was only registered with
the customs on 1929. On 1928, a suit filed by Yu
F:
against Pauco attached the lorchas and recorded
with the customs. They are now asserting their rights
over the lorchas.
I: WON PNB has superior right over Yu
YES. See doctrine. This is to protect persons who
deal with a vessel on the strength of the record title.
However, the attendant circumstances of this case
rendered the mortgagee’s title superior to the
judgment creditor’s title, even if the latter’s
execution on the property subject of the mortgage
was registered with customs at an earlier date,
R:
because the reason for the delay in recording the
mortgage with customs was beyond the control of
the mortgagee; thus, his registration of the
mortgage with the register of deeds, recorded way
earlier than the execution’s recording with customs,
gave him superior title to that of the judgment
creditor.
RUBISO V RIVERA (1917)
THE$REQUISITE$OF$REGISTRATION(IN(THE(
REGISTRY,!OF#THE#PURCHASE#OF#A!VESSEL,&IS&
NECESSARY(AND(INDISPENSABLE'IN'ORDER'THAT"
THE$PURCHASER'S$RIGHTS#MAY#BE#MAINTAINED!
AGAINST'A'CLAIM'FILED"BY"A"THIRD"PERSON!
Jan. 4 - Sy sold boat to Rivera;
Jan. 23 - case filed by Rubiso against Sy and boat
was levied upon and bought by Rubiso in public
sale;
F:
Jan. 27 - certificate of sale issued to Rubiso and
recorded in the office of the Collector of Customs;
Mar. 14 – Rubiso’s sale registered;
Mar. 17 - Rivera sale registered.
I: WON Rubiso has better right over the boat.
R: YES. See doctrine
III. PERSONS PARTICIPATING IN
MARITIME COMMERCE
A. SHIPOWNERS AND SHIP AGENTS
Ship agents: A ship agent is the person entrusted with
provisioning/representing the vessel in the port in which it
may be found.
Co-ownership of vessels
If 2 or more persons should be part owners of a merchant
Bessel, a partnership shall be presumed.
STANDARD OIL V CASTELO (1921)
THE$SHIPOWNER$ORDINARILY%HAS%VASTLY%MORE!
40 56
 CAPITAL'EMBARKED'UPON"A"VOYAGE"THAN"HAS"
ANY$INDIVIDUAL$SHIPPER#OF#CARGO.!
Shipper contracted Castelo to deliver cases of
petroleum. They were placed on deck. Storm came
and they needed to jettison such cargo. Now
Standard Oil is suing Castelo for the value of the lost
F:
cargo. Castelo contends that the ship captain must
be liable for his failure to proceed with the
liquidation, in accordance with the Code of
Commerce.
I: WON the shipper can sue the owner directly
YES. The evident intention of the Code is to place
the primary liability upon the person who has actual
control over the conduct of the voyage AND who has
R: most capital embarked in the venture, namely, the
owner of the ship, leaving him to obtain recourse, as
it is very easy to do, from other individuals who have
been drawn into the venture as shippers.
1. RESPONSIBILITIES AND LIABILITIES
Responsibilities of Ship Agents
1. To trade and represent the ownership of the vessel, and
may, in hiw own name and in such capacity, take judicial
and extrajudicial steps in matters relating to commerce;
2. To discharge the duties of captain of the vessel (but
must be qualified to do so);
3. To contract in the name of the owners, who shall be
bound in all that refer to repairs, details of equipment,
armament, provisions of food and fuel, and freight of the
vessel, and, in general, in all that relate to the
requirements of navigation;
4. To order a new voyage, or make contracts for a new
charter, or insure the vessel;
- But needs authorization, otherwise, he shall be
subsidiarily liable.
5. To account for the results of each voyage;
6. To indemnify the captain for expenses incurred;
7. To discharge the captain and memebers of the crew
whose contracts are for an indefinite period.
8. To indemnify the captain in case of voluntary sale of the
vessel.
Liabilities of Shipowners and Ship agents
1. Acts of the captain;
2. Contracts entered into by the captain to repair, equip,
and provision the vessel;
3. Indemnities in favor of 3rd persons which may arise from
the captain’s conduct;
4. Damages to 3rd persons for torts committed by the
captain EXCEPT for collisions;
5. Damages in case of collisions due to fault, negligence, or
want of skill of captain, sailing mate, or any member of
the complement.
YU CON V IPIL (1916)
THE$SHIPOWNER$IS$LIABLE$FOR$THE$ACTS$OF$
THE$CAPTAIN$AND$THE$CREW%BASED%ON%ARTS.%
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
587$AND$618$OF$THE$CODE$OF$COMMERCE.!
Chinaman’s money amounting to P450
F:
“disappeared” in the banca.
I: WON the shipowner is liable.
YES. First, the Court clarified that small boats also
fall under the definition of “vessels”. Then they
applied the doctrine above, citing that the rationale
R: for such is that the Captain/Master is the agent and
subordinate of the shipowner; that the shippers and
passengers placed their trust on the shipowner; and
that the captain/master profits with the shipowner.
MANILA STEAMSHIP V ABDULHAMAN (1956)
SHIPOWNERS*AND*SHIP*AGENTS'ARE'CIVILLY'
LIABLE&FOR&THE&ACTS&OF#THE#CAPTAIN#(ART#
586)%AND%FOR%THE%INDEMNITIES'DUE'THE'THIRD#
PERSONS'(ART'587),'SO"THAT"INJURED"PARTIES#
MAY$BE$IMMEDIATELY$REIMBURSED)BY)THE)
OWNER&OF&THE&SHIP,&IT"BEING"UNIVERSALLY"
RECOGNIZED*THAT$THE$SHIP$MASTER$OR#
CAPTAIN'IS'PRIMARILY!THE$REPRESENTATIVE$OF"
THE$OWNER.!
2 negligent vessels collided at sea, killing 9
F:
pasengers.
I: WON the shipowners are liable
YES. By making the vessels solidarily liable, the law
emphasizes the direct nature of the responsibilities
on account of the collision incurred by the shipowner
under maritime law, as distinguished from civil and
R:
mercantile law in general. This direct responsibility is
recognized in Art 618 of the same code under which
the captain shall be civilly liable to the ship agent,
and the latter is the one liable to third persons.
WING KEE COMPRADORING CO V BARK
“MONONGHAELA” (1923)
EVERY%AGENT%FOR%A%VESSEL$CAN$NOT$AVOID$
RESPONSIBILITY,PURSUANT$TO$ARTICLE$568$OF"
THE$CODE$OF$COMMERCE!BY#GIVING%UP%ITS%
AGENCY'WHEN'THREATENED#WITH#SUIT#TO#
ENFORCE'THE'OBLIGATIONS$OF$THIRD$PARTIES."!
Admiral Line, as agent for Bark, were the addressee
of bills for goods sent to Bark by Wing Kee. Admiral
F: Line placed a notice in Manila Bulletin re: cessation
of agency. Now they assert that since the agency has
expired, then they can no longer be liable.
I: WON Admiral Line is still liable to Wing Kee
YES, BUT ONLY FOR OBLIGATIONS PRIOR TO
CESSATION OF AGENCY. See doctrine. The rule,
R: again stated, is that the seller may pursue either the
ship’s owners or the agent, and the agent may
choose to be reimbursed later by the ship’s owners.
NADECO V CA (1988)
THE$AGENT,$EVEN$THOUGH#HE#MAY#NOT#BE#THE!
OWNER&OF&THE&VESSEL,!IS#LIABLE#TO#THE#
SHIPPERS'AND'OWNERS'OF#THE#CARGO#
TRANSPORTED*BY*IT,*FOR#LOSSES#AND#
41 56
 DAMAGES'OCCASIONED'TO"SUCH"CARGO,"
WITHOUT'PREJUDICE,'HOWEVER,'TO'HIS'RIGHTS"
AGAINST'THE'OWNER'OF!THE$SHIP,$TO$THE$
EXTENT%OF%THE%VALUE%OF#THE#VESSEL,#ITS#
EQUIPMENT)AND)THE)FREIGHT.!
NDC owned the ship (MCP as agent through a MOA)
that collided with a japanese ship en route to
F:
Manila. DISC (insurer) is now claiming damages
against both NDC and MCP.
I: WON MCP, as an agent, is solidarily liable with NDC
YES. First, the court held that the term “agent” is
broad enough to include the concept of Ship-Agent
in Maritime Law. MCP was even conferred all the
powers of the owner of the vessel, including the
R: power to contract in the name of NDC. Then they
extracted the doctrine out of jurisprudence and the
Code of Commerce (that didn’t expressly declare the
liability of agents for loss/destruction of goods due
to collision).
2. THE DOCTRINE OF LIMITED LIABILITY
Concept: Also known as the real and hypothecary nature of
the liability of the shipowner and agent.
General rule142:
The liability of the shipowner and ship agent is limited to
the amount of interest in the said vessel
This includes the following:
1. Value of the vessel itself;
2. Equipments;
3. Freightage;
4. Insurance proceeds.
Exceptions to the DLL
1. Claims under the Workmen’s Compensation Act143;
2. Injury or damage due to shipowner or the concurring
negligence of the shipowner and the captain144;
3. The vessel is insured145;
4. Expenses for repair on vessel completed before loss146;
5. In case there is no total loss and the vessel is not
abandoned147;
6. Collision between 2 negligent vessels.
MANILA STEAMSHIP V ABDULHAMAN
THE$DIRECT$LIABILITY!OF#SHIPOWNERS/AGENTS!
IS#MODERATED#AND#LIMITED%BY%THE%OWNER’S"
RIGHT&OF&ABANDONMENT!OF#THE#VESSEL#AND#
EARNED&FREIGHT&(ARTICLE$587)$AND$HAS$BEEN"
DECLARED'TO'EXIST'NOT"ONLY"IN"CASE"OF"
BREACHED(CONTRACTS,(BUT$ALSO$IN$CASES$OF!
142 YANGCO V LASERNA
143 ABUEG V SAN DIEGO
144 ABOITIZ V GAFLAC
145 CHUA YEK HONG V IAC
146 GOVERNMENT V INSULAR MARITIME
147 YANGCO V LASERNA
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
TORTIOUS'NEGLIGENCE!
The owner was asserting that he should be excused
F: from liability because he exercised diligence in the
selection and supervision of the employees.
I: WON he can be excused from liability
NO. To admit the defense of due diligence of a
bonus pater familias in the selection and vigilance of
the officers and crew as an exemption would render
nugatory the solidary liability established by Art 827.
Shipowners would be able to escape liability in
practically every case, since the qualifications and
R:
licensing of ship masters and officers are
determined by the State. To compel the parties to
look to the crew for indemnity and redress would be
an illusory remedy, for almost always the members
of the crew are mere wage earners. The only
limitation is abandonment of vessel (See doctrine).
YANGCO V LASERNA (1941)
ABANDONMENT)APPLIES'TO'ALL'CASES!WHEREIN'
A"SHIPOWNER"OR"AGENT!MAY$BE$HELD$LIABLE$
FOR$DAMAGES$AS$A$RESULT$OF$THE$NEGLIGENCE"
OR#ILLICIT#BEHAVIOR#OF#THE#CAPTAIN!
!
THE$DOCTRINE$OF$LIMITED$LIABILITY$EXISTS!
FOR$MARINE$COMMON$CARRIERS%BECAUSE%OF%
REAL%AND%HYPOTHECARY!NATURE'OF!MARITIME'
COMMERCE.!
A ship, which was allowed by the captain to be
overbooked, sank. The shipowner then asked the
F:
court to allow it to abandon the vessel and all his
interest therein.
I: WON the shipowner may abandon the vessel
YES. See doctrine. The purpose of the principle of
limited liability is to encourage people to invest in
shipbuilding and maritime commerce despite the
highly precarious nature of each transaction.
Another reason for its existence is that it protects the
shipowner or agent from being ruined by the
R:
negligence or illicit acts of the ship’s captain. The
limited liability of shipowners and agents is in sharp
contrast to the general principles of civil law wherein
the owner is responsible to the whole extent of the
damage caused and not just to his interest in the
vessel or transaction.
ABUEG V SAN DIEGO (1946)
IF#AN#ACCIDENT#IS#COMPENSABLE)UNDER)THE)
WORKMEN'S*COMPENSATION#ACT,#IT#MUST#BE#
COMPENSATED+EVEN+WHEN"THE"WORKMAN'S"
RIGHT&IS&NOT&RECOGNIZED$BY$OR$IS$IN$
CONFLICT(WITH(OTHER(PROVISIONS(OF(THE(
CIVIL%CODE%OR%THE%CODE#OF#COMMERCE#(E.G.!
CONCEPT'OF'ABANDONDENT).!
!
EVEN$IF$THE$SHIPS$WERE#NOT#ENGAGED#IN#
INTERISLAND*TRADE,*THE#WORKMEN'S#
COMPENSATION+ACT+WILL"STILL"APPLY!
F: Two vessels, the M/V San Diego and the M/S/
42 56
 Bartolome sank during a typhoon while they were
engaged in fishing operations. Some of the crew
members died, so their relatives filed for
compensation for the employers.
WON the ship owners may escape liability by
I:
abandoning the vessel.
NO. It is not the liability for the damage or loss of
the cargo or injury to, or death of, a passenger by or
through the misconduct of the captain or master of
the ship; nor the liability for the loss of the ship as
result of collision; nor the responsibility for wages of
the crew, but a liability created by a statute to
compensate employees and laborers in cases of
R:
injury received by or inflicted upon them, while
engaged in the performance of their work or
employment, or the heirs and dependents and
laborers and employees in the event of death caused
by their employment. Such compensation has
nothing to do with the provisions of the Code of
Commerce regarding maritime commerce.
ABOITIZ SHIPPING V GENERAL ACCIDENT FIRE AND
LIFE ASSURANCE CORP (1993)
THE$LIMITED$LIABILITY"RULE%DOES%NOT%APPLY%
WHEN%THERE%IS%AN%ACTUAL$FINDING$OF$
NEGLIGENCE'ON'THE'PART#OF#THE#VESSEL#
OWNER&OR&AGENT.!
Aboitiz owned and operated the ill-fated "M/V P.
ABOITIZ," a common carrier which sank on a voyage
F:
from Hongkong to the Philippines. They are invoking
the limited liability rule.
WON the Limited Liability Rule arising out of the
I: real and hypothecary nature of maritime law is
applicable.
YES. Court held that the cause of the sinking of the
vessel was because of unseaworthiness due to the
R: failure of the crew and the master to exercise
extraordinary diligence, not the shipowner’s
negligence.
3. SPECIFIC RIGHTS AND PREROGATIVES
Under the Code of Commerce:
1. Right to repurchase and redeem the vessel by a co-
owner in case of sales made to strangers (within 90 days
from inscription of sale)
2. Owners have preference for the charter of the vessel.
3. Right of co-owners to elect the manager who will
represent them as ship agent.
4. Right of ship agent to discharge of duties of captain.
5. Right to demand profit from ship agent.
B. CAPTAINS AND MASTER
Captain: Governs vessels navigating the high seas or ships
of large dimensions and importance
Master: Commands smaller ships
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
1. QUALIFICATIONS AND LICENSING
Under the PCG; Must be:
1. Filipino;
2. With legal capacity to contract;
3. With skill, capacity, and qualifications necessary to
command a vessel; and
4. Must not be disqualified to discharge such duties.
2. POWERS AND DUTIES
3 distinct roles of a master/captain148:
1. General agent of the shipowner;
2. Commander and technical director of the vessel;
3. Representative of the country under whose flag he
navigates.
INTER ORIENT V NLRC (1994)
TO#THE#CAPTAIN#IS#COMMITTED&THE&
GOVERNANCE,*CARE,*AND"MANAGEMENT"OF"THE"
VESSEL.!
!
OF#THESE#ROLES,#IT#IS"AS"THE"COMMANDER"OF"
THE$VESSEL$THAT$IS$THE$MOST$IMPORTANT$
(ANALOGOUS)TO)A)CEO)."SUCH"ROLE"HAS"TO"DO"
WITH%THE%OPERATION%AND#PRESERVATION#OF#
THE$VESSEL$DURING$VOYAGE,&AS&WELL&AS&THE!
SAFETY'OF'THE'PASSENGERS%AND%CARGO.!
Capt. Tayong assumed command of a vessel set for
South Africa. The ship he was in command of was
old, and had leaks. On a stopover in Singapore, he
elected to wait for the supplies in order to plug the
F:
leaks. As a result, he got to South Africa behind
schedule, and he was repatriated by his employer
and dismissed. He filed an illegal dismissal
complaint.
I: WON he was illegally dismissed.
YES. See doctrine. Captain Tayong was NOT guilty of
arbitrary, capricious or grossly insubordinate
behavior. He did not perform acts inimical to
petitioners’ interest, and thus his dismissal was
R: unwarranted. A ship captain must be accorded a
reasonable measure of discretionary authority to
decide what the safety of the ship and of its crew
requires on a particular voyage, being in command
of the vessel.
3. PROHIBITED ACTS AND TRANSACTIONS
Prohibited under the Code of Commerce:
1. Must not enter into separate transactions for his
account;
2. Must not fail to perform a voyage after making an
agreement;
3. To not be substituted by another person;
148 INTER ORIENT V NLRC
43 56
 4. Must not contract loans on respondentia secured by the Gross or General
cargo; and Definition
5. Not borrow money on the hull, engine, rigging or tackle Includes all the damages and expenses that are deliberately
of the vessel. caused in order to save the vessel, its cargo, or both at the
same time, from a real and known risk152. Being for the
common benefit, these are borne by the owners of the
C. OTHER OFFICERS AND CREW articles saved153.
1. CONTRACTS AND FORMALITIES
2. DUTIES AND LIABILITIES Essential requisites154:
3. RIGHTS 1. There must be a common danger.
a. This means that both the ship and the cargo are
subject to the same danger, whether during the
D. SUPERCARGOES voyage or the port for loading/unloading.
Supercargo: Representative of the shipper/consignee on b. This danger must arise from accidents of the sea,
board. dispositions of the authority, or faults of men,
provided that the circumstances producing the peril
Sailing mate: Second chief of the vessel; takes care in
should be certain and imminent or may rationally
place of the captain.
be said to be certain and imminent.
c. This means that expenses incurred against a
distant peril are not included.
IV. ACCIDENTS AND DAMAGES IN 2. Part of the vessel or of the cargo are sacrificed
MARITIME COMMERCES deliberately for their common safety.
3. Expenses or damages caused follows the successful
A. AVERAGES saving of the vessel and cargo.
1. NATURE AND KINDS 4. Expenses or damages should have been incurred after
taking proper legal steps and authority.
What constitutes an average?
1. Expenses, which must be:
a. Extraordinary/accidental MAGSAYSAY V AGAN (1955)
b. Incurred during the voyage 4"REQUISITES"TO"HOLD!EXPENSES&TO&BE&A&
c. Incurred in order to preserve the vessel, the cargo, or GENERAL'AVERAGE'(SEE!ABOVE)'!
both Ship ran aground/got stuck in the mouth of the
2. Damages or deteriorations, which must: Cagayan River. Carrier incurred expenses to have the
F:
a. Have been suffered from the time the vessel puts to vessel refloated. It then requested the shippers to
sea from the port of departure until it casts anchor in pay their contribution to the general average.
the port of destination, or I: WON the expenses are considered general average
b. Have been suffered by the merchandise from the NO. See doctrine. The evidence does not disclose
time they are loaded in the port of shipment until that the expenses were incurred to save vessel and
they are unloaded in the port of their consignment cargo from a common danger. The vessel ran
R: aground in fine weather and in a shallow portion of
Simple or Particular the river. This shows that there was no imminent
Definition danger. At the very least, there was a distant peril
Includes all expenses and damages caused to the vessel or which did not need immediate action.
cargo that have not inured to the common benefit of the
persons interested in the cargo149. These averages are borne Effects
by the owner of the property that gave rise to the
All persons having interest in the vessel and cargo shall
expenses150.
contribute155.
The insurers and lenders on bottomry and respondentia
Effects shall likewise contribute.156
Owner of the goods that gave rise to the expense shall bear
the average151.

152
Art. 811 (Code of Commerce)
153
Art. 812 (Code of Commerce)
149 154 MAGSAYSAY V AGAN CITING TOLENTINO’S COMMENTARIES
Art. 809 (Code of Commerce)
150 155
Art. 810 (Code of Commerce) Art. 812 (Code of Commerce)
151 156
Art. 810 (Code of Commerce) Art. 859 and 732 (Code of Commerce)
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 44 56
Jettison Rules:
Casting overboard of cargo. 1. Those on deck (those interfering with the navigation;
heaviest with least value)
2. Those on hold (greatest weight and smallest value)

Jason clauses
The right to contribution in the general average shall not be
affected though the event that gave rise to the sacrifice or
expenditure may have been due to the fault of one of the
parties.

PARTICULAR GROSS AVERAGE

AVERAGE
DEFINITION Damages or Damages or expenses
expenses caused to deliberately caused in
the vessel or cargo order to save the
that did not inure to vessel, its cargo or
the common both from real and
benefit and borne known risks.
by the respective
owners.
LIABILITY Owner of the goods All persons having an
which gave rise to interest in the vessel
the expense shall and the cargo therein
bear this average. at the time of the
occurrence of the
average shall
contribute to satisfy
this average.

The insurers and

lenders on bottomry
and respondentia
shall likewise
contribute.
INTERESTS Only 1 interest Several interests
INVOLVED
SHARE IN 100% share In proportion to the
DAMAGE value of the owner’s
property saved.
RIGHT TO No reimbursement There may be
RECOVERY reimbursements.

B. ARRIVAL UNDER STRESS

1. CAUSES 157
1. Lack of provisions;
2. Well-founded fear of seizure, privateers or pirates; or
3. By reason of any accident in the sea disabling it to
navigate.
The following are unlawful arrivals:
1. If the lack of provisions should arise from the failure to
take the necessary provisions for the voyage according to

157
Article 819 (Code of Commerce)
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 45 56
 usage and customs, or if they should have been
rendered useless or lost through bad stowage or
negligence in their care.
2. If the risk of enemies, privateers, or pirates should not
have been well known, manifest, and based on positive
and provable facts.
3. If the defect of the vessel should have arisen from the
fact that it was not repaired, rigged, equipped, and
prepared in a manner suitable for the voyage, or from
some erroneous order of the captain.
4. When malice, negligence, want of foresight, or lack of
skill on the part of the captain exists in the act causing
the damage.
2. FORMALITIES
Role of the captain during arrivals under stress
- The captain shall assemble the officers and shall
summon the persons interested in the cargo who may
be present, and who may attend the meeting without
the right to vote;
- If, after examining the circumstances of the case, the
reason should be considered well-founded, the arrival
at the nearest and most convenient port shall be
agreed upon, drafting and entering the proper minutes,
which shall be signed by all, in the log book.
- The captain shall have the deciding vote, and the
persons interested in the cargo, may make the
objections and protests they may deem proper, which
shall be entered in the minutes in order that they may
make use thereof in the manner they may consider
advisable.
Rules on repairs of vessel
If it should be necessary to unload cargo to effect repairs,
the captain must:
- Request authorization from the competent judge or
court (Philippine consul for foreign ports) for the
removal; and
- Carry it out with the knowledge of the person interested
in the cargo, or his representative, should there be any.
3. EXPENSES
Arrival under stress:
- Shall always be for the account of the shipowner or
agent
o But they shall not be liable for the damages which
may be caused the shippers by reason of the arrival
provided the latter is legitimate. Otherwise, the ship
agent and the captain shall be jointly liable.
Repair of vessel:
- If the repair was for the vessel alone, the expenses shall
be for the account of the ship agent or owner.
- If the repair was to avoid damage to cargo, epenses
shall be chargeable against the owners of the
merchandise for whose benefit the act was performed.
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
- If the unloading should take place for both reasons, the
expenses shall be divided proportionately between the
value of the vessel and that of the cargo.
4. RESPONSIBILITY OF CAPTAIN
General responsibilities
Custody and preservation of the cargo which has been
unloaded, except in cases of force majeure.
- If the entire cargo or part thereof should appear to be
damaged, or there should be imminent danger of its
being damaged, the captain may request the
competent judge/court/consul the sale of all or of part
of the former
o The judge/court/consul shall authorize it, after an
examination and declaration of experts,
advertisements, and other formalities required by the
case, and an entry in the book, in accordance with the
provisions of Article 624.
To justify the legality of his conduct, under the penalty of
answering to the shipper for the price the merchandise
would have brought if they had arrived in good condition at
the port of destination.
Special responsibilities
The captain shall be responsible for the damages caused by
his delay, if after the cause of the arrival under stress has
ceased, he should not continue the voyage.
- If the cause of arrival should have been the fear of
enemies, privateers, or pirates, a deliberation and
resolution in a meeting of the officers of the vessel and
persons interested in the cargo who may be present, in
accordance with the provisions contained in Article 819,
shall precede the departure
C. COLLISIONS
Collision: The impact of 2 moving vessels
Allision: The striking of a moving vessel against one that
is stationary, or a vessel and other floating,
though non-navigable objects
Class Note:
Both instances are contemplated under the code.
1. CLASSES AND EFFECTS
CLASSES EFFECTS
FORTUITOUS Each vessel and its cargo shall bear its
own damages.
The injury shall be classifed as a
particular average.
CULPABLE If due to fault, negligence or lack of skill
of ship officers:
• The owner of the vessel at fault
shall indemnify the losses and
damages suffered
If collision is imputable to both:
• Each shall bear its own damage
46 56
 If collision to another was caused by a 3rd RESPONSIBILITY,EXCLUSIVELY'ONTO'THE'OTHER"
vessel: VESSEL%WHICH%HAD%OBSERVED%CAREFULLY%THE%
• the owner of the third vessel MANDATE'OF'RULE'18'(A).!
shall indemnify the losses and Collision between “Don Carlos” and “Yotai Maru”.
damages caused, the captain F: Insurance companies wanted to recover the amount
thereof being civilly liable to said they paid to the consignees of the cargo.
owner. I: Who is liable for the damage?
INSCRUTABLE If the cause cannot be determined, use “DON CARLOS”. Court held “Don Carlos” is liable
FAULT the provisions on culpable causes for the following reasons: (1) there was already a
previous decision holding them liable hence, res
R:
judicata applies; (2) it was negligent considering
three important factors: (a) failure to turn right, (b)
A. URRUTIA & CO V BACO RIVER PLANTATION no proper look-out, and (c) no captain.
(1913)
SUBJECT(TO(THE(GENERAL#RULES#OF#EVIDENCE!
IN#COLLISION#CASES#AS"TO"THE"BURDEN"OF"
RULES ON COLLISION
PROOF,&IN&THE&CASE&OF"A"COLLISION"BETWEEN" ONE VESSEL AT Vessel at fault is liable for damages158.
A!STEAM&VESSEL&AND&A&SAIL$VESSEL,$THE$ FAULT
PRESUMPTION+IS+AGAINST#THE#STEAM#VESSEL,! BOTH VESSELS
AND$SHE$MUST$SHOW$THAT#SHE#TOOK#THE# AT FAULT Each to bear his own loss. Shippers
PROPER%MEASURE%TO%AVOID$A$COLLISION.!
VESSEL AT may go after either
!
THIS%RULE%THAT%VESSELS#MAY#ASSUME#THAT# FAULT NOT shipowners/agents159.
THE$OTHER$WILL$OBEY$THE$LAW$IS$ONE$OF$THE" KNOWN
MOST%IMPT%IN%THE%LAW!OF!COLLISION! THIRD VESSEL IN Third vessel is liable for losses and
FAULT damages160.
A steamer which was sailing erratically collided with
a sailing vessel (schooner). The latter didn’t avoid FORTUITOUS No liability.
the steamer until just before actual contact, EVENT
F: VESSEL STRIKES Doctrine of res ipsa loquitur.
resulting to the sinking of the steamer and the
deaths of 8 persons. The steamer’s owner sued the STATIONARY
schooner owner. OBJECT
I: WON the steamer is at fault
YES. See doctrine. The Court upheld the TC’s
findings that the Steamer had been handled in a D. SHIPWRECKS
R:
grossly negligent manner. It was sailing erratically
and didn’t even have a proper watch on board. Notes:
Shipwreck: A ship that has received injuries rendering her
incapable of navigation; or
GOVERNMENT V PHILIPPINE STEAMSHIP (1923)
Loss of a vessel at sea, either by being swallowed up by the
ALTHOUGH(THE(NEGLIGENCE$ON$THE$PART$OF$
THE$MATE$OF$THE$INCOMING%VESSEL%PRECEDED!
waves, by running against another vessel or
THE$NEGLIGENCE$ON$THE"PART"OF"THE"MATE"OF" thing at sea, or on the coast.
THE$OUTGOING$VESSEL$BY#AN#APPRECIABLE# Salvage161: The service which one person renders to the
INTERVAL)OF)TIME,)THE"FIRST"VESSEL"CANNOT" owner of a ship or goods, by his own labor,
ON#THAT#ACCOUNT%BE%ABSOLVED%FROM" preserving the goods or the ship which the
RESPONSIBILITY.! owner or those entrusted with the care of
2 vessels collided, the first vessel being negligent for them have either abandoned in distress at sea,
F: or are unable to protect and secure.
not veering to the proper direction.
I: WON both vessels are liable for the damage. May also mean the compensation given from
the act of salvaging.
R: YES. See doctrine.

SMITH, BELL AND CO V CA (1991)

BY#IMPOSING#AN#EXCLUSIVE%OBLIGATION%UPON!
ONE$OF$THE$VESSELS$TO"AVOID"THE"COLLISION,#
THE$CA$NOT$ONLY$CHOSE"TO"OVERLOOK"ALL"THE"
FACTS&CONSTITUTIVE&OF"NEGLIGENCE"ON"THE"
OTHER&VESSEL;&IT&ALSO"IN"EFFECT"USED"ITS! 158
Art. 826 (Code of Commerce)
VERY%NEGLIGENCE%TO%ABSOLVE'IT'FROM' 159
Art. 827 (Code of Commerce)
RESPONSIBILITY!AND$TO$SHIFT$THAT$ 160
Art. 831 (Code of Commerce)
161 ERLANGER V SWEDISH EAST ASIATIC

_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 47 56
Rules on losses and detoriartion
G.R: In shipwreck, each owner (vessel/cargo) shall bear
his own losses, such as those arising from force
majeure
E: Captain shall be liable to the ship agent/shippers in
case the wreck or stranding is due to the (1) malice,
negligence, or slack of skill of the captain, or (2)
because the vessel put to sea was insufficiently
repaired and equipped.
Rules on payment of expenses of salvage
Goods saved from the wreck shall be specially bound for the
payment of the expenses of the respective salvage
- The amount thereof must be paid by the owners of the
former before they are delivered to them,
- Such payment has preference over any other obligation
if the merchandise should be sold.
Rules on salvaging during convoys
- If any of them should be wrecked, the cargo saved shall
be distributed among the rest in proportion to the
amount which each one is able to take.
- If any captain should refuse, without sufficient cause, to
receive what may correspond to him, the captain of the
wrecked vessel shall enter a protest against him, before
two sea officials, of the losses and damages resulting
therefrom, ratifying the protest within twenty-four
hours after arrival at the first port, and including it in
the proceedings he must institute in accordance with
the provisions contained in Article 612.
- If it is not possible to transfer to the other vessels the
entire cargo of the vessel wrecked, the goods of the
highest value and smallest volume shall be saved first,
the designation thereof to be made by the captain with
the concurrence of the officers of his vessel
1. SALVAGE LAW
Rules on salvaging cargo
Beyond control of crew/captain
- Any person saving such cargo or assisting in saving a
vessel shall be rewarded.
Within control of crew/captain
- No person without the consent of the captain shall take
from the sea any cargo.
Responsibility of salvagers
To convey and deliver such vessel or merchandise, as soon
as possible, to the Collector of Customs, if the port has a
collector, and otherwise to the provincial treasurer or
municipal mayor.
Right of owner of the salvaged cargo
The right to the delivery of the vessel or things saved shall
accrue only upon payment/giving of a bond to secure the
expenses and the proper reward.
The amount and sufficiency of the bond, in the absence of
agreement, shall be determined by the Collector of
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
Customs or by the Judge of the Court of First Instance of the
province in which the things saved may be found.
Role of Collecter of Customs/Prov. Treasurer/Mayor
To order:
a. That the things saved be safeguard and inventoried.
b. The sale at public auction of the things saved which
may be in danger of immediate loss or of those
whose conservation is evidently prejudicial to the
interests of the owner, when no objection is made to
such sale.
c. The advertisement within the thirty days subsequent
to the salvage, in one of the local newspapers or in
the nearest newspaper published, of all the details of
the disaster, with a statement of the mark and
number of the effects requesting all interested
persons to make their claims.
Upon claiming by the owners, such authorities shall order
their delivery to such owner or his representative, provided
that there is no controversy over their value, and a bond is
given by the owner or his representative to secure the
payment of the expenses and the proper reward. Otherwise,
the delivery shall nor be made until the matter is decided by
the CFI of the province.
If no claim is presented in the 3 months subsequent to the
publication of the advertisement prescribed in sub-section
(c) of Section 5, the things save shall be sold at public
auction, and their proceeds, after deducting the expenses
and the proper reward shall be deposited in the insular
treasury. If 3 years shall pass without anyone claiming it, ½
of the deposit shall be adjudged to him who saved the
things, and the other half to the insular government.
Who has no right to a reward
a. The crew of the vessel shipwrecked or which was is
danger of shipwreck;
b. He who shall have commenced the salvage in spite of
opposition of the captain or his representative; and
c. He who shall have failed to comply with the provisions of
Section three.
Agreements as to value of salvage
- If, during the danger, an agreement is entered into
concerning the amount of the reward for salvage or
assistance, its validity may be impugned because it is
excessive, and it may be required to be reduced to an
amount proportionate to the circumstances.
- In a case coming under the last preceding section, as
well as in the absence of an agreement, the reward for
salvage or assistance shall be fixed by the Court of First
Instance of the province where the things salvaged are
found, taking into account principally the expenditures
made to recover or save the vessel or the cargo or both,
the zeal demonstrated, the time employed, the services
rendered, the excessive express occasioned the number
of persons who aided, the danger to which they and
their vessels were exposed as well as that which
menaced the things recovered or salvaged, and the
value of such things after deducting the expenses.
48 56
Other rules
- From the proceeds of the sale of the things saved shall
be deducted, first, the expenses of their custody,
conservation, advertisement, and auction, as well as
whatever taxes or duties they should pay for their
entrance; then there shall be deducted the expenses of
salvage; and from the net amount remaining shall be
taken the reward for the salvage or assistance which
shall not exceed fifty per cent of such amount
remaining.
- If in the salvage or in the rendering of assistance
different persons shall have intervened the reward shall
be divided between them in proportion to the services
which each one may have rendered, and, in case of
doubt, in equal parts. Those who, in order to save
persons, shall have been exposed to the same dangers
shall also have a right to participation in the reward.
- If a vessel or its cargo shall have been assisted or saved,
entirely or partially, by another vessel, the reward for
salvage or for assistance shall be divided between the
owner, the captain, and the remainder of the crew of
the latter vessel, so as to give the owner a half, the
captain a fourth, and all the remainder of the crew the
other fourth of the reward, in proportion to their
respective salaries, in the absence of an agreement to
the contrary. The express of salvage, as well as the
reward for salvage or assistance, shall be a charge on
the things salvaged on their value.
Elements for a valid salvage claim162:
1. There was a marine peril;
2. The service voluntarily rendered when not required as an
existing duty or from a special contract; and
3. Success, in whole or in part, or that the service rendered
contributed to such success.
Elements of a derelict vessel163:
1. Abandonment of the vessel by its captain and crew; and
2. Lack of intention to return.
G. URRUTIA V PASIG STEAMER AND LIGHTER (1912)
STRICT&JUSTICE&DEMANDS#THAT#WHOEVER#DOES!
SALVAGE'SERVICE'SHOULD#RECEIVE#ADEQUATE#
REMUNERATION*DUE*TO*THE$FF:$(1)$ACT$OF$
SALVAGE'PERFORMED'IN!BEHALF'OF'THE'
SHIPOWNER'AND'THE'CREW,!(2)$THE$DANGER$
RUN$BY$THE$VESSEL$WHICH$MADE$THE$SALVAGE,"
AND$(3)$TO$SERVE$AS$AN#INCENTIVE#TO#RENDER#
PROMPT&AND&EFFICIENT!AID.!
While a storm was raging, a merchant vessel helped
a distressed steamship. Merchant vessel then asked
F:
for remuneration, which the steamship refused to
pay.
I: WON remuneration was proper.
162
Id. citing The Mayflower v The Sabine
163 BARRIOS V GO THONG
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
R: YES. See doctrine.
ERLANGER & GALINGER V SWEDISH EAST ASIATIC
(1916)
THE$QUESTION$WHETHER!OR#NOT#A#PARTICULAR#
SHIP%AND%ITS%CARGO%IS"A"FIT"OBJECT"OF"
SALVAGE'DEPENDS'UPON%ITS%CONDITION%AT"THE"
TIME%THE%SALVAGE%SERVICES&ARE&PERFORMED.!
!
COMPENSATION+AS+IS+NOT#VIEWED#BY#THE#
COURTS'MERELY'AS'PAY!ON#THE#PRINCIPLE#OF#
QUANTUM'MERUIT!OR#AS#A#REMUNERATION!PRO$
OPERA&ET&LABORE,"BUT"AS"A"REWARD"GIVEN$
FOR$PERILOUS$SERVICES,#VOLUNTARILY$
RENDERED,&AND&AS&AN&INDUCEMENT)TO)
MARINERS(TO(EMBARK(IN"SUCH"DANGEROUS"
ENTERPRISES(TO(SAVE(LIFE%AND%PROPERTY.!
WHILE&THE&AWARD&SHOULD#BE#LIBERAL#ENOUGH!
TO#COVER#THE#EXPENSES"AND"GIVE"AN"EXTRA"
AMOUNT'AS'A'REWARD'FOR#SERVICES#
RENDERED,&THE&EXPENSES#USED#IS#NOT#A#BASIS#
FOR$THE$REWARD.!
Ship was abandoned in the middle of the sea. E&G
F: went to the rescue. Upon salvaging the ship and
goods, E&G and the owner agreed on the valuation.
I: WON remuneration was proper
YES. Court held that there was indeed
abandonment on the part of Nippon crewmembers,
which served as the basis that the Salvage Law
applies. The Court also had to take into account the
R: meritorious service of E&G, along with equity and
justice in placing a value on how much they can
recover since jurisprudence allows for the flexibility
on how much can be recovered after a successful
salvage.
ATLANTIC GULF V UCHIDA KISEN KAISHA (1921)
ACT$NO.$2616$IS$VALID"UNTIL"EXPRESSLY"
DISAPPROVED*BY*CONGRESS!
Defendant’s ship sank, they asked Plaintiff to
salvage their ship. Due to disagreements on how
F:
much should be paid to Plaintiff as salvage price,
Plaintiff went to the CFI.
I: WON Plaintiff should be given a higher amount
YES. Section 10 of Act No. 2616 prescribes the rule
for determining the reward for salvage as follows:
In a case coming under the last preceding section as
well as in the absence of an agreement, the reward
for salvage or assistance shall be fixed by the Court
of First Instance of the province where the things
R: salvage are found, taking into account principally
the expenditures made to recover or save the vessel
or the cargo or both, the zeal demonstrated, the
time employed, the services rendered, the excessive
expenses occasioned, the number of persons who
aided, the danger to which they and their vessels
were exposed, as well as that which menaced the
49 56
 things recovered or salvaged, and the value of such
things after deducting the expenses.
BARRIOS V GO THONG (1963)
THE$TOWING$VESSEL,$IN"THE"ABSENCE"OF"A"
WRITTEN'AGREEMENT,'IS"ENTITLED'TO'
COMPENSATION+FOR+TOWAGE$BUT$NOT$
SALVAGE.!
!
IN#A#QUASI$CONTRACT'OF'TOWAGE,'ONLY%THE%
OWNER&OF&THE&TOWING&VESSEL,&TO&THE&
EXCLUSION*OF*THE*CREW"MAY"BE"ENTITLED"TO!
THE$COMPENSATION.!
MV Henry towed MV Don Alfredo after intercepting
its SOS signal. The captain is now demanding
F: compensation because according to him, he
engaged in the salvage of the vessel and is therefore
entitled to more than P100,000.
WON the captain of MV Henry deserves
I:
remuneration
R: NO. See both doctrines.
V. SPECIAL CONTRACTS OF
MARITIME COMMERCE
A. CHARTER PARTIES
1. DEFINITION
Charter party is a contract by virtue of which the owner or
the agent of the vessel binds himself to transport
merchandise or persons for a fixed price. It is also a lease of
the whole or a portion of the vessel for the transportation of
goods or person from one port to another164.
2. KINDS 165
As to extent of vessel hired:
Total: Whole vessel is chartered, including the command,
possession and control over navigation.
Partial: Only a part of the vessel is chartered
As to control:
Demise/Bareboat: The charterer mans the vessel with his
own people and becomes the owner pro
hac vice. The owner of the vessel
completely and exclusively relinquishes
possession, command and navigation
to the charterer.
Affreightment: The owner of the vessel leases part or
all of its space to haul goods for others.
The owner retains possession,
command and navigation of the ship.
164 PPI V CA
165
ID.
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
Types of affreightment as to time
Time charter: Determined no. of days/month
Voyage charter: Either outgoing or return, or round trip
As to freightage
For a fixed amount for the whole cargo
For a fixed rate per ton
For so much per month
COASTWISE LIGHTERAGE V CA (1995)
DEMISE&OR&BAREBOAT&CHARTER!–CHARTERER'
MANS%THE%VESSEL%WITH!HIS$OWN$PEOPLE$AND$
BECOMES'THE'OWNER'PRO"HAC"VICE."OWNER"OF!
VESSEL%COMPLETELY%AND"EXCLUSIVELY"
RELINQUISHES*POSSESSION,%COMMAND%AND%
NAVIGATION(TO(THE(CHARTERER.!
!
CONTRACT'OF'AFFREIGHTMENT!–!ONE$WHICH$
OWNER&OF&THE&VESSEL&LEASES%PART%OR%ALL%OF"
ITS$SPACE$TO$HAUL$GOODS$FOR$OTHERS."
POSSESSION,(COMMAND(AND$NAVIGATION$OF$
THE$SHIP$ARE$RETAINED"BY"THE"OWNER.!
Insurer sought to recover the amount it paid to the
consignee due to the total loss of cargo (molasses)
F:
of the latter from Coastwise (shipowner). Coastwise
denies liability claiming that it was turned into a
private carrier by the contract of affreightment it had
with Pag-asa.
I: WON the vessel was a common carrier.
YES. The Court held that Coastwise remained a
common carrier because a contract of affreightment
R:
does not convert a common carrier to a private
carrier (unlike a demise/bareboat charter).
CALTEX PHILIPPINES V SULPICIO LINES (1999)
IF#THE#CHARTER#IS#A#CONTRACT'OF'
AFFREIGHTMENT,,WHICH!LEAVES&THE&
SHIPOWNER*IN*POSSESSION$OF$THE$SHIP$AS$
OWNER&FOR&THE&VOYAGE,"THE"RIGHTS'AND'
RESPONSIBILITIES+OF+OWNERSHIP*REST*ON*THE"
SHIPOWNER.+THE+CHARTERER#IS#FREE#FROM#
LIABILITY'TO'THIRD'PERSONS&IN&RESPECT&OF!
THE$SHIP.!
Caltex shipped its fuel cargo aboard MT Vector via a
voyage charter party. Said vessel collided with MV
Doña Paz, resulting to the death of almost all its
crews and passengers. Sulpicio, owner of the
F:
passenger ship, wants to hold Caltex liable for the
accident as well, for the latter’s alleged negligence
in choosing to ship its cargo through an
unseaworthy ship.
I: WON the vessel was acting as a common carrier.
YES. Court held that Caltex was under no obligation
to ensure the seaworthiness of the vessel because
their contract was a mere voyage charter, which did
R: not transform the vessel from a common to a private
carrier; as such, it was incumbent upon the vessel to
impliedly warrant its seaworthiness, and Caltex had
all the right to rely on this.
50 56
B. LOANS ON BOTTOMRY AND 3. CHARACTER OF LOAN

RESPONDENTIA A loan in which under any condition whatever, the

repayment of the sum loaned and of the premium
1. LOAN ON BOTTOMRY stipulated depends upon the safe arrival in port of the
A contract in the nature of a mortgage, by which the goods on which it is made, or of the price they may receive
shipowner borrows money for the use, equipment or repair in case of accident, shall be considered a loan on bottomry
of the vessel, and for a definite term, pledges the ship (or its or respondentia.
keel and bottom) as a security for its repayment. Loan on bottomry or respondentia is a real, unilateral,
If the ship is lost in the course of a voyage, or during the aleatory contract where:
limited time, by any of the perils enumerated in the - Delivery of the amount loaned is necessary for the
contract, then the lender shall also lose his money. perfection of the contract;
- Although there are reciprocal benefits, the contract
2. LOAN ON RESPONDENTIA produces obligations only for 1 party, the borrower, who
A loan made on the goods laden on board the ship, and must return the amount borrowed plus premium; and
which are to be sold or exchanged in the course of the - The lender really runs known risks
voyage the borrower’s personal responsibility being deemed Loan on bottomry or respondentia, unlike ordinary loan, is
the principal security for the performance of the contract. not subject to the provisions of the Usury Law
Even though the ship perishes, the lender must be paid his - There is no limit as to the rate of the intrest in view of
principal and interest, provided that the goods are saved. the fact that there are different classes and various
accidents to which maritime voyages are exposed.
BOTTOMRY RESPONDENTIA
DEFINITION Loan made by Loan taken on VI. BILL OF LADING
shipowner or ship security of the cargo
agent guaranteed laden on a vessel A. CONTENTS
by vessel itself and and repayable upon
What is written in a bill of lading166
repayable upon safe arrival of cargo
arrival of vessel at at destination. 1. The name, registry, and tonnage of the vessel.
destination 2. The name of the captain and his domicile.
WHO MAY Shipowner or agent. Only the owner of 3. The port of loading and that of unloading.
CONTRACT Captain, if outside the cargo. 4. The name of the shipper.
the residence of 5. The name of the consignee, if the bill of lading is issued
former. in the name of a specified person.
NATURE OF 1. Delivery is necessary for the perfection 6. The quantity, quality, number of packages and marks of
THE of the contract. the merchandise.
CONTRACTS 2. Contract only produces obligation on 7. The freightage and the primage stipulated.
the borrower. How the bill of lading is created167
3. The lender runs known risks. 4 true copies of the original bill of lading shall be made
COMMON 1. Exposure of security to marine peril. - All of them shall be signed by the captain and the
ELEMENTS 2. Obligation of the debtor conditioned shipper.
upon safe arrival of the security. - The shipper shall keep one and send another to the
FORMS 1. Public instrument consignee; the captain shall take two, one for himself
2. Policy signed by the contracting parties and another for the ship agent.
and the broker taking part therein There may also be drawn up as many copies of the bill of
3. Private instrument lading as may be considered necessary by the person
interested; but when they are issued to order or to bearer,
BOT / RES MUTUUM they shall be stated in all the copies, be they the first four or
Last lender has preference First lender has right of the subsequent ones, the destination of each one, stating
over first ones preference whether it is for the agent, for the captain, for the shipper, or
Required to be paid only Must be paid absolutely for the consignee.
upon safe arrival If the copy sent to the latter should have a duplicate, this
No limit on interest Subject to usury law circumstance and the fact that it is not valid except in
Security is limited to May be any real/personal default of the first one must be stated therein.
vessel/goods property
Purpose: For repair, use of For any purpose.
purchase of equipment
166
Art. 706 (Code of Commerce)
167
Art. 707 (Code of Commerce)
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 51 56
Other rules
Article 713. If before the delivery of the cargo a new bill of
lading should be demanded of the captain, on the
allegation that the failure to present the previous ones is
due to their loss or to any other just cause, he shall be
obliged to issue it, provided that security for the value of the
cargo is given to his satisfaction, but without changing the
consignment, and stating therein the circumstances
prescribed in the last paragraph of Article 707, under
penalty, should he not so state, of being held liable for said
cargo if improperly delivered through his fault.
Article 714. If before the vessel puts to sea the captain
should die or should cease to hold his position through any
cause, the shippers shall have the right to demand of the
new captain the ratification of the first bills of lading, and
the latter must do so, provided that all the copies previously
issued be presented or returned to him, and it should
appear from all examination of the cargo that they are
correct.
Form of bill of lading168
The bill must be in writing and signed within 24 hours after
the cargo has been received on board. Otherwise, the
shipper may demand (1) the unloading of the goods at the
captain’s expense and (2) the payment of the losses and
damages suffered by the captain’s refusal to sign the bill.
B. PROBATIVE VALUE
Article 709. A bill of lading drawn up in accordance with the
provisions of this title shall be proof as between all those
interested in the cargo and between the latter and the
insurers, proof to the contrary being reserved for the latter.
Article 710. If the bills of lading do not agree, and no
change or erasure can be observed in any of them, those
possessed by the shipper or consignee signed by the
captain shall be proof against the captain or ship agent in
favor of the consignee or shipper; and those possessed by
the captain or ship agent signed by the shipper shall be
proof against the shipper or consignee in favor of the
captain or ship agent.
Notes:
Under Art 709, the bill of lading properly drawn shall be
proof between the parties of their agreements. Art 710
governs the case where the bill of lading does not agree,
and no change or erasure can be observed in any of them. In
case of conflict in the provisions of the charter party and the
bill of lading, even when both appear unaltered, the
contents of the bill of lading prevail. Issuance of bill of
lading is not proof of loading of goods.
168
Art. 706 (Code of Commerce)
_______________________________________________________________
TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty
MAGELLAN MFG V CA (1991)
IT#IS#PRESUMED#THAT$THE$STIPULATIONS"OF"
THE$BILL$WERE,$IN$THE"ABSENCE"OF"FRAUD,"
CONCEALMENT)OR)IMPROPER$CONDUCT,$KNOWN$
TO#THE#SHIPPER,#AND#HE#IS#GENERALLY#BOUND"
BY#HIS#ACCEPTANCE#WHETHER%HE%READS%THE%
BILL$OR$NOT.!
CCL purchased anahaw fans from MMMC and
issued a letter of credit that they should procure an
on-board BOL and there should be no
transshipment. CCL refused the anahaw delivery
because MMMC violated the 2 conditions. The
shipper they contracted changed vessels in HK
before going to Japan. But this was stated in the
BOL and MMMC knows about it. In effect, they
F:
consented to its transshipment even if the letter of
credit specifically said not to transship.
The BOL they received was only a received for
shipment BOL. Buyers want an on- board BOL
because it signifies that cargo is on the ship and is
good to go. Rather than ask for an on-board BOL
MMMC just got a certification that the cargo is
already on board.
I: WON
R: YES. Ratio
VII. PASSENGER ON SEA VOYAGE
A. NATURE OF CONTRACTS
B. OBLIGATIONS OF PASSENGERS
C. RIGHTS OF PASSENGERS
Suspension
Right to refund fare and to recover losses and damages
- If it is suspended due to exclusive fault of captain and
ship agent
Right to return of fare
- If suspension is ude to FM or other cause independent
of captain and ship agent
Interruption
Passengers shall pay fare only in proportion to distance
covered (without recovery of losses)
- If interruption of voyage is due to FM
Proprotional fare with a right to indemnity
- If interruption caused by captain only
No duty to pay increase in fare
- If interruption was due to disability of vessel and
passenger agrees to await repairs
- His living expense is for his own account
Delay
Right to remain on board and furnished with food by the
vessel
If the delay is more than 10 days: Right for return of fare.
52 56
 If delay due to fault of captain/ship agent: Return of fare
and indemnity for damages. F.H. STEVENS V NORDEUTSCHER (1962)
THE$FILING$OF$THE$ACTION%BEFORE%THE%
SWEET LINES V CA (1983) MUNICIPAL)COURT)INTERRUPTED'THE'ONE"YEAR%
PERIOD,(AND(ONLY(RESUMED%UPON%THE%
Ship by-passed Catbalogan, going directly to
DISMISSAL'OF'THAT'ACTION.!
F : Tacloban. Distressed passengers ha to take a ferry
from TAC to CAT. They sued for breach of contract.
WON Sweet lines may be relieved from liabiliy due
I:
to force majeure / limitation of liability.
NO. Court held that there was no force majeure that
could have prevented them of going to CAT. Also,
the fine print at the back did not relieve them of any
R : responsibility. If at most, it gave them an opportunity
to make bawi by either finding another way to
transport them to the destination or by refunding
the ticket.

TRANS-ASIA SHIPPING V CA (1996)

1 of vessel’s engine conked out in the open sea so
passenger requested to return to their point of
F : origin. After 1 day, he boarded another vessel of the
defendant. Consequently, he arrived 1 date late from
his expected arrival and now suing for damages.
I: WON the carrier is liable for damages
YES FOR MORAL. SC held that there was no delay
in the commencement of the contracted voyage. If
any delay was incurred, it was after the
R:
commencement of such voyage, and the reason why
passenger arrived late was due to his decision to
disembark and board another vessel.

VIII. CARRIAGE OF GOODS BY SEA

ACT
When applicable?
Art. 1766 provides for the hierarchy:
- Civil Code
- Code of Commerce
- COGSA as a special law
In cases of invokation of immunities due to force majeure,
stipulations limiting liability, prescriptive periods.
Pertinent provisions
- Prima facie evidence of receipt
- Procedure in case of loss/damage
- Limitation on liability ($500/package)
- Notice requirements
- Prescriptive period

ANG V AMERICAN STEAMSHIP (1967)

“LOSS”&CONTEMPLATES&A"SITUATION"WHERE"NO!
DELIVERY(AT(ALL(WAS(MADE%BY%THE%SHIPPER%
FOR$THE$REASONS$ENUMERATED&IN&THE&
ARTICLE.)IT)DOES)NOT!INCLUDE(A(SITUATION(
WHERE%THERE%WAS%INDEED#DELIVERY—BUT$
DELIVERY(TO(THE(WRONG"PERSON,"OR"A"
MISDELIVERY.!

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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 53 56
 registered luggage or any goods during air carraige171 .
AIR TRANSPORTATION a. “During air carriage” = While goods are in charge of the
carrier.
I. INTERNATIONAL AIR 3. Carrier is liable for damage occasioned by delay in
TRANSPORTATION carriage172.
Warsaw Convention
Convention on the unification of certain rules relating to NORTHWEST V CUENCA (1965)
international carriage by air. THE$WARSAW$CONVENTION"DO"NOT"CONSTITUTE"
AN#EXCLUSIVE#LIST#OF#INSTANCES#WHEREIN!AN#
Purpose: To protect emerging air transportation industry
AIR$CARRIER$MAY$BE$HELD$LIABLE$FOR$
and to secure the uniformity of recovery by passengers. DAMAGES.!

A. CONSTITUTIONALITY ALITALIA V IAC (1990)

SANTOS V NORTHWEST (1992)
THE$DOCTRINE$OF$REBUS"SIC"STANTIBUS"DOES!
NOT$OPERATE$AUTOMATICALLY%TO%RENDER%THE%
TREATY&INOPERATIVE.&THERE%IS%A%NECESSITY!
FOR$A$FORMAL$ACT$OR$REJECTION,*USUALLY*BY"
HEAD%OF%STATE,%WITH%A"STATEMENT"OF"
REASONS'WHY'COMPLIANCE#CANNOT#BE#DONE.!
! EQUIVALENT*TO*WILFUL!MISCONDUCT,",OR,"IF,
THE$PLACE$OF$DESTINATION%REFERRED%TO%IN%
THE$WARSAW$CONVENTION"IN"A"TRIP"
CONSISTING(OF(SEVERAL&PARTS&IS&THE&
ULTIMATE(DESTINATION!THAT$IS$ACCORDED$
TREATY&JURISDICTION.!THIS%IS%BECAUSE%THE%
CARRIER&IS&LEGALLY&BOUND%TO%TRANSPORT%THE"
PASSENGER(BACK(TO(THE"PLACE"OF"ORIGIN!
THE$WARSAW$CONVENTION"HOWEVER"DENIES"TO"
THE$CARRIER$AVAILMENT""OF"THE"PROVISIONS!
WHICH%EXCLUDE%OR%LIMIT#HIS#LIABILITY,#IF!THE$
DAMAGE&IS&CAUSED&BY&HIS$WILFUL$MISCONDUCT*
OR#BY#SUCH#DEFAULT#ON"HIS"PART"AS,"IN"
ACCORDANCE(WITH(THE(LAW$OF$THE$COURT$
SEIZED&OF&THE&CASE,&IS#CONSIDERED#TO#BE#
THE$DAMAGE$IS$(SIMILARLY)&CAUSED&...&BY&ANY$
AGENT&OF&THE&CARRIER!ACTING'WITHIN'THE'
SCOPE&OF#HIS#EMPLOYMENT."!
Class notes:
Overbooking and downgrading are not mentioned but may
also be grounds for liability.

B. WHEN APPLICABLE169 D. LIMITATIONS ON LIABILITY173

Only when both parties are signatories to the Convention
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or goods.
When is there international transportation:
- When situated within the territories of 2 High
Contracting parties, regardless of whether or not there
is a break in the transportation;
- When situated within the territory of a High Contracting
party, if there is an agreed stopping place within a
territory subject to the sovereignty of another power,
though not a signatory. (roundtrip)
C. LIABILITIES UNDER THE CONVENTION
1. Carrier is liable for damage sustained in the even of the
death or injury of a passenger, if it happens on boarding,
while inside the plane or disembarkation170.
2. Carrier is liable for any loss, damage or destruction of
1. Limitation per passenger: $100,000
2. Limitation per KG of checked-in luggage: $20
a. Unless special declaration + payment of
supplementary sum
3. Hand-carried baggage per passenger: $1,000
4. Goods to be shipped per KG: $20
Note:
The carrier need not stipulate the limitations in the
convention.
E. WHEN LIMITATIONS UNAVAILABLE
1. Any stipulation relieving the carrier from liability or fixing
a lower limit shall be null and void174.
2. Damage caused by willful misconduct or default on the
carrier’s part175.
3. Damage caused by any agent of the carrir acting within
the scope of employment176.
4. When carrier allowed the passenger to board without a

171
Article 18 WARSAW
172
Article 19 WARSAW
173
Article 22 WARAW
174
Article 23 WARSAW
169 175
Article 1 WARSAW Article 25(1) WARSAW
170 176
Article 17 WARSAW Article 25(2) WARSAW
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 54 56
 ticket177. Prescriptive periods179
2 years from:
F. CONDITIONS ON IMPOSITION OF
- Date of arrival at the destination;
LIABILITY - Date of expected arrival; or
- Date on which the transportation stopped.
SANTOS V NORTHWEST Jurisdiction180
ANY$ACTION$REGARDLESS"OF"THE"TYPE"OF"THE! 1. Carrier’s residence
ACTION'ON'WHICH'RELIEF#IS#FOUNDED,#CAN#BE"
2. Carrier’s principal place of business.
BROUGHT(SUBJECT(TO(THE#CONDITIONS#AND#
3. Carrier has an establishment where contract was made
LIMITATIONS)ESTABLISHED$BY$THE$WARSAW$
CONVENTION.!
4. At the place of destination

LUNA V CA (1992) II. PASSENGER RIGHTS

THE$WARSAW$CONVENTION"IS"NOT"AN"
EXCLUSIVE)ENUMERATION"OF"WHAT"
CONSTITUTES)A)BREACH!
LHUILLIER V BRITISH AIRWAYS (2010)
JURISDICTION!
PAL V SAVILLO (2008)
THE$DAMAGES$SIMPLICIO"WAS"CLAIMING"WAS"A!
“SPECIAL)SPECIES)OF)INJURY”(–!HURT%FEELINGS%
WHICH!AROSE&FROM&THE&FACT&THAT$HE$WAS$
NOT$ALLOWED$TO$BOARD,"AND"LATER"ON"COULD!
NOT$JOIN$THE$TOURNAMENT$AS$HE$FELL$ILL$
(TORT/QUASI$DELICT,(CIVIL(CODE).!THESE%ARE%
TO#BE#DISTINGUISHED#FROM%THE%ACTUAL%
DAMAGES'THAT'ONE'CLAIMS$OFF$OF$AIRLINE$
DELAY.'(WARSAW'CONVENTION)!
Summary of Rights
1. Right to be provided with accurate information before
purchase
a. Full, fair, and clear disclosure of services offered
b. Clear and non-misleading ads
c. No fraudulent sales promotion practices
2. Right to receive full value of service purchased
a. Right to transportation and baggage conveyance
b. Right to be processed for check-in
c. Right to board aircraft for the purpose of flight
3. Right to compensation
a. In case of cancellation
b. In case of flight delay
c. In case of delayed, lost and damaged baggage
d. In case of death or injury
e. Immediate payment of compensation

UNITED AIRLINES V UY (1999)

THE$COURT$DISTINGUISHED$BETWEEN$(1)$
DAMAGE&TO&A&PASSENGER’S$BAGGAGE$AND!
(2)$THE$HUMILIATION$SUFFERED'FROM'THE'
EMPLOYEES.)#1)IS)COVERED$BY$THE$WARSAW$
CONVENTION,)WHICH!
PRESCRIBES(IN(TWO(YEARS.%#2%IS%COVERED%BY"
THE$CIVIL$CODE$(TORTS),(AND(IT(PRESCRIBES'IN'
FOUR%YEARS.!

Notice of Claim
Complaint is a condition precedent for an action against the

References and
carrier, otherwise, barred EXCEPT in case of fraud on the
part of the carrier178.
WHEN COMPLAINT MUST BE

DAMAGE TO LUGGAGE
MADE
3 days from receipt Special thanks
DAMAGE TO GOODS 7 days from receipt
DELAY OF 14 days from receipt Special thanks to:
LUGGAGE/GOODS A2015 Reviewers

177 179
Article 3 WARSAW Article 29 WARSAW
178
Article 26 WARSAW 180 LHUILLIER V BRITISH AIRWAYS
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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 55 56
A2016 Digests
Mike de Castro and Dudday Yang for additional notes,
digests and proofreading.

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TRANSPORTATION AND PUBLIC UTILITIES LAW Reviewer || Prof. Nicky Ty 56 56