up 2008 commercial law (transportation law)

8/9/2019 UP 2008 Commercial Law (Transportation Law)

1/52

1 U P L AW U P B A R O P S 2 0 0 8 Page 203 of 351

TRANSPORTATION LAW COMMERCIAL LAW

TRANSPORTATION LAW

I. General Considerations

A. Public Utilities

1987 Constitution, Article XII

Section 11

No franchise, certificate, or any other form ofauthorization for the operation of a public utilityshall be granted except to citizens of thePhilippines or to corporations or associationsorganized under the laws of the Philippines, at leastsixty per centum of whose capital is owned by suchcitizens; nor shall such franchise, certificate, orauthorization be exclusive in character or for alonger period than fifty years. Neither shall any

such franchise or right be granted except under thecondition that it shall be subject to amendment,alteration, or repeal by the Congress when thecommon good so requires. The State shallencourage equity participation in public utilities bythe general public. The participation of foreigninvestors in the governing body of any public utilityenterprise shall be limited to their proportionateshare in its capital, and all the executive andmanaging officers of such corporation orassociation must be citizens of the Philippines.

Section 17

In times of national emergency, when the publicinterest so requires, the State may, during theemergency and under reasonable terms prescribedby it, temporarily take over or direct the operationof any privately-owned public utility or businessaffected with public interest.

Agan, Jr. vs. PIATCO, 402 SCRA 612 (2003)

The Constitution envisions a situation wherein theexigencies of the times necessitated thegovernment to temporarily take over or direct theoperation of any privately owned public utility or

business affected with public interest. Since theState, in this case, is merely exercising its policepower, such exercise must not be unreasonablyhampered nor can it be a source of obligation, inthe absence of damage due to arbitrariness. Also,requiring, the government pay reasonablecompensation for the reasonable use of the

property pursuant to the operation of the businesscontravenes the Constitution.

Section 18

The State may, in the interest of national welfareor defense, establish and operate vital industriesand, upon payment of just compensation, transferto public ownership utilities and other privateenterprises to be operated by the Government.

Section 19

The State shall regulate or prohibit monopolieswhen the public interest so requires. Nocombinations in restraint of trade or unfaircompetition shall be allowed.

The Public Service Law, CA 146, as amended

Sec. 13(b)

The term "public service" includes every personthat 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, anddone for general business purposes, any commoncarrier, railroad, street railway, traction railway,sub-way motor vehicle, either for freight orpassenger, or both with or without fixed route andwhether may be its classification, freight or carrierservice of any class, express service, steamboat orsteamship line, pontines, ferries, and water craft,engaged in the transportation of passengers orfreight or both, shipyard, marine railways, marinerepair shop, [warehouse] wharf or dock, ice plant,ice-refrigeration plant, canal, irrigation system,gas, electric light, heat and power water supply and

power, petroleum, sewerage system, wire orwireless communications system, wire or wirelessbroadcasting stations and other similar publicservices: Provided, however, That a personengaged in agriculture, not otherwise a publicservice, who owns a motor vehicle and uses itpersonally and/or enters into a special contractwhereby said motor vehicle is offered for hire orcompensation to a third party or third partiesengaged in agriculture, not itself or themselves apublic service, for operation by the latter for alimited time and for a specific purpose directlyconnected with the cultivation of his or their farm,the transportation, processing, and marketing of

agricultural products of such third party or thirdparties shall not be considered as operating apublic service for the purposes of this Act.

WHAT IS A PUBLIC UTILITY?

Kilusang Mayo Uno Labor Center v. Garcia(1994)

Public utilities are privately owned and operatedbusinesses whose services are essential to the

general public. They are enterprises which speciallycater to the needs of the public and conduce to

their comfort and convenience. As such, publicutility services are impressed with public interestand concern. When, therefore, one devotes hisproperty to a use in which the public has an

interest, he, in effect grants to the public aninterest in that use, and must submit to the controlby the public for the common good, to the extentof the interest he has thus created.

Albano v. Reyes (1989)Franchises issued by Congress are not requiredbefore each and every public utility may operate.A public utility is a business or service engaged inregularly supplying the public with somecommodity or service of public consequence, suchas electricity, gas, water, transportation, telephoneor telegraph services. Apart from statutes whichdefine public utilities that are within the purview ofsuch statutes, it would be difficult to construct adefinition of a public utility which would fit everyconceivable case. As its name indicates, however,the term public utility implies a public use andservice to the public.


2/52



WHEN IS A BUSINESS A PUBLIC UTILITY?When it involves a commodity or service of

public consequence.

2 CONCEPTS OF PUBLIC UTILITY UNDER THE 1987CONSTITUTION:

1. A public utility is a partly nationalized business

endeavor2. It is a business affected with the public interest.(national emergency; general welfare;

common good)

2 TESTS FOR DETERMINING PUBLIC UTILITY:1. Is it engaged in regularly supplying the public

with some commodity or service (per definitionin Albano v. Reyes below)

2. If #1 is uncertain, is it a public service asdefined in the Public Service Law under CA 146Sec 13(b)? If it falls under any one of theexamples given under CA 146 Sec 13(b), then itis a public utility.

WHAT DOES REGULARLY SUPPLYING THE PUBLICMEAN?The utility must hold itself out to the public as apublic utility by demand and as a matter of right,and not by permission. To determine whatconstitutes regularity, look at it from theperspective of the public, and not the operator.It is a service or a readiness to serve an indefiniteportion of the population subject only to the

limitations of the service as given by the grant suchthat [the utility] incurs a liability as a violation ofits duty if it refuses, such that the availment of theservice has become, through time, a matter of

right and not of mere privilege. (also in US v. TanPiaco)

ARE ALL PUBLIC UTILITIES COMMODITIES OR SERVICE OFPUBLIC CONSEQUENCE?Yes. All public utilities have a public consequence.But not all businesses bearing public consequenceare public utilities. This is because almost all typesof business have some form of regulation from theState.

TO WHOM DOES PUBLIC REFER TO? IS THE WORDPUBLIC IN PUBLIC UTILITY THE SAME IN PUBLICSERVICE?

There are three senses of the word public inTransportation Law: a) public utility; b) publicservice; and c) definition of a common carrierunder Art. 1732 of the Civil Code.To determine a public utility, the two tests above &the definition under Albano v. Reyes apply.

WHAT IS A PUBLIC SERVICE?

Kilusang Mayo Uno Labor Center v. Garcia Jr.(1994)

In determining public need, the presumptionof need for a service shall be deemed in favor ofthe applicant. The burden of proving that there is

no need for a proposed service shall be with theoppositor(s).

Public convenience and necessity exists whenthe proposed facility or service meets a reasonablewant of the public and supply a need which theexisting facilities do not adequately supply. Theexistence or nonexistence of public convenienceand necessity is therefore a question of fact thatmust be established by evidence, real and/ortestimonial; empirical data; statistics and suchother means necessary, in a public hearing

conducted for that purpose. The object andpurpose of such procedure, among other things, isto look out for, and protect, the interests of boththe public and the existing transport operators.

Albano v. Reyes (1989)Franchises issued by Congress are not

required before each and every public utility mayoperate.

A public utility is a business or serviceengaged in regularly supplying the public withsome commodity or service of public consequence,such as electricity, gas, water, transportation,telephone or telegraph services. Apart fromstatutes which define public utilities that are withinthe purview of such statutes, it would be difficult toconstruct a definition of a public utility which wouldfit every conceivable case. As its name indicates,however, the term public utility implies a public useand service to the public.

Tatad v Garcia

What constitutes a public utility is not theirownership but their use to serve the public.

PAL v. Civil Aeronautics Board (1997)WON certificates of Public Convenience and

Necessity (franchise required) as used in RA 776to authorize the Board is different from

Certificates of Public Convenience (no franchiserequired)? No

There is no authoritative basis indistinguishing a Certificate of Public Convenienceand Necessity (franchise required) and a Certificateof Public Convenience (no franchise required)based only on the use of the words convenience

and necessity. The use of the word necessity inconjunction with public convenience in acertificate of authorization to a public service entityto operate, does not in any way modify the natureof such certification, or the requirements for theissuance of the same. It is the law whichdetermines the requisites for the issuance of suchcertification, and not the title indicating thecertificate.

WHAT IS THE DIFFERENCE BETWEEN APUBLIC UTILITY AND A PUBLIC SERVICE?

For all intents and purposes, they are the

same and are used interchangeably.However, public utility is a broader conceptthat embraces public service. A public service isnecessarily a public utility, but not all public utilitiesare public services.

WHEN IS A PUBLIC UTILITY NOT A PUBLICSERVICE?

If it is not included in the enumeration in thePublic Service Act (CA 146 Sec. 13(b)) and Albanov. Reyes.

HOW DO THEY DIFFER IN CONSTITUTIONAL

RESTRICTIONS AND REQUIREMENTS?

If a business is a public utility, then it issubject to the limitations and restrictions providedfor in the 1987 Constitution (Art 12 Secs.11,17,18,19) Since a public service is necessarily apublic utility, therefore public services are subject

to the same Constitutional limitations andrestrictions.


3/52



If a public utility is not a public service, it isstill subject to the same Constitutional limitationsand restrictions.

Therefore, public utility = Constitutionpublic service = Constitution + Public

Service Act

B. Transportation

DEFINITIONThe movement of goods or persons from one

place to another, by a carrier. (Blacks LawDictionary)

A contract of transportation is one whereby acertain person or association of persons obligatethemselves to transport persons, things, news fromone place to another for a fixed price. It is theremoval of goods or persons from one place toanother.

NOTE:

Art. 1766 In all matters not regulated by thisCode, the rights and obligations of common carriersshall be governed by the Code of Commerce and by

special laws.

PUBLIC NATUREIt is for public use, which means that the

use is not confined to privileged individuals, but isinstead open to an indefinite public. It is thisindefinite or unrestricted quality that gives it itspublic character. The true criterion by which to

judge the character of the use is whether the publicmay enjoy it by right or by permission. There mustbe, in general, a right under the law which compels

the owner to give the service for the general public.

PUBLIC SERVICE ACT

THE PUBLIC SERVICE LAW (CA 146)

(As amended, and as modified particularly by PDNo. 1, Integrated Reorganization Plan and EO 546)

CHAPTER IORGANIZATION

SECTION 1

This Act shall be known as the "Public Service Act."

SECTION 2

There is created under the Department of Justice acommission which shall be designated and knownas the Public Service Commission, composed of one

Public Service Commissioner and five AssociateCommissioners, and which shall be vested with thepowers and duties hereafter specified. Wheneverthe word "Commission" is used in this Act, it shallbe held to mean the Public Service Commission,

and whenever the word "Commissioner" is used inthis Act it shall be held to mean the Public Service

Commissioner or anyone of the AssociateCommissioners. The Public Service Commissionerand the Associate Public Service Commissionersshall be natural born citizens and residents of thePhilippines, not under thirty years of age; membersof the Bar of the Philippines, with at least five yearsof law practice or five years of employment in thegovernment service requiring a lawyer's diploma;

and shall be appointed by the President of thePhilippines, with the consent of the Commission onAppointments of the Congress of the Philippines:Provided, however, That the present Commissionerand the personnel of the Commission shall continuein office without the necessity of re-appointment.The Commissioners shall have the rank andprivilege of retirement of Judges of the Courts ofFirst Instance. (As amended by Republic Act Nos.178 and 2677)

SECTION 3

The Commissioner and Associate Commissionersshall hold office until they reach the age of seventyyears, or until removed in accordance with theprocedures prescribed in section one hundred andseventy-three of Act Numbered Twenty-sevenhundred and eleven, known as the RevisedAdministrative Code: Provided, however, That uponretirement any Commissioner of Associate

Commissioner shall be entitled to all retirementbenefits and privileges for Judges of the Courts ofFirst Instance or under the retirement law to whichhe may be entitled on the date of his retirement. Incase of the absence, for any reason, of the PublicService Commissioner, the Associate Commissionerwith seniority of appointment shall act asCommissioner. If on account of absence, illness, orincapacity of any of three Commissioners, orwhenever by reason of temporary disability of anyCommissioner or of a vacancy occurring therein,the requisite number of Commissioners necessaryto render a decision or issue an order in any case isnot present, or in the event of a tie vote among the

Commissioners, the Secretary of Justice maydesignate such number of Judges of the Courts ofFirst Instance, or such number of attorneys of thelegal division of the Commission, as may benecessary to sit temporarily as Commissioners inthe Public Service Commission.

The Public Service Commission shall sit individuallyor as a body en banc or in two divisions of threeCommissioners each. The Public ServiceCommissioner shall preside when the Commission

sits en banc and in one division. In the otherdivision, the Associate Commissioner with seniorityof appointment in that division shall preside. FiveCommissioners shall constitute a quorum forsessions en banc and two Commissioners shallconstitute a quorum for the sessions of a division.In the absence of a quorum, the session shall beadjourned until the requisite number is present.

All the powers herein vested upon the Commissionshall be considered vested upon any of theCommissioners, acting either individually or jointlyas hereinafter provided. The Commissioners shallequitably divide among themselves all pendingcases and those that may hereafter be submittedto the Commissioner, in such manner and form as

they may determine, and shall proceed to hear anddetermine the case assigned to each or to theirrespective divisions, or to the Commission en bancas follows: uncontested cases, except thosepertaining to the fixing of rates, shall be decided byone Commissioner; contested cases and all casesinvolving the fixing of rates shall be decided by theCommission in division and the concurrence of atleast two Commissioners in the division shall benecessary for the promulgation of a decision ornon-interlocutory order in these cases: Provided,


4/52



however, That any motion for reconsideration of adecision or non-interlocutory order of anyCommissioner or division shall be heard directly bythe Commission en banc and the concurrence of atleast four Commissioners shall be necessary for thepromulgation of a final decision or order resolvingsuch motion for reconsideration. (As amended byRepublic Act Nos. 723 and 2677)

SECTION 4

The Public Service Commissioner shall receive anannual compensation of thirteen thousand pesos;and each of the Associate Commissioners an annualcompensation of twelve thousand pesos. TheCommissioners shall be assisted by one chiefattorney, one finance and rate regulation officer,one chief utilities regulation engineer, one chiefaccountant, one transportation regulation chief,one secretary of the Public Service Commission,and three public utilities advisers who shall receive

an annual compensation of not less than tenthousand eight hundred pesos each; five assistantchiefs of division who shall receive an annualcompensation of not less than nine thousand sixhundred pesos each; twelve attorneys who shallreceive an annual compensation of not less thannine thousand pesos each; and a technical andconfidential staff to be composed of two certifiedpublic accounts, two electrical engineers, twomechanical or communication engineers, and twospecial assistants who shall receive an annualcompensation of not less than seven thousand twohundred pesos each. (As amended by Republic ActNos. 723, 2677 and 3792)

SECTION 5

The Public Service Commissioner, the AssociatePublic Service Commissioners, and all other officersand employees of the Public Service Commissionshall enjoy the same privileges and rights as theofficer and employees of the classified civil serviceof the Government of the Philippines. They shallalso be entitled to receive from the Government ofthe Philippines their necessary travelling expenseswhile travelling on the business of the Commission,which shall be paid on proper voucher therefor,

approved by the Secretary of Justice, out of fundsappropriated for the contingent expenses of theCommission.

When the exigency of the service so requires andwith the approval of the Secretary of Justice, andsubject to the provisions of Commonwealth ActNumbered Two hundred forty-six, as amended,funds may be set aside from the appropriationsprovided for the Commission and/or from the feescollected under Section forty of this Act to defray

the expenses to be incurred by the Public ServiceCommissioner or any of the AssociateCommissioners, officers or employees of the

Commission to be designated by the Commissioner,with the approval of the Secretary of Justice, in thestudy of modern trends in supervision andregulation of public services. (As amended byRepublic Act No. 3792)

SECTION 6

The Secretary of Justice, upon recommendation ofthe Public Service Commissioner, shall appoint allsubordinate officers and employees of theCommission as may be provided in theAppropriation Act. The Public Service Commissioner

shall have general executive control, direction, andsupervision over the work of the Commission andof its members, body and personnel, and over alladministrative business. (As amended by RepublicAct Nos. 178 and 3792)

SECTION 7

The Secretary of the Commission, under thedirection of the Commissioner, shall have charge ofthe administrative business of the Commission andshall perform such other duties as may be requiredof him. He shall be the recorder and officialreporter of the proceedings of the Commission andshall have authority to administer oaths in allmatters coming under the jurisdiction of theCommission. He shall be the custodian of therecords, maps, profiles, tariffs, itineraries, reports,and any other documents and papers filed with the

Commission or entrusted to his care and shall beresponsible therefor to the Commission. He shallhave authority to designate from time to time anyof his delegates to perform the duties of DeputySecretary with any of the Commissioners.

SECTION 8

The Commission shall furnish the Secretary such ofits findings and decisions as in its judgment may beof general public interest; the Secretary shallcompile the same for the purpose of publication ina series of volumes to be designated "Reports of

the Public Service Commission of the Philippines,"which shall be published in such form and manneras may be best adapted for public information anduse, and such authorized publications shall becompetent evidence of the reports and decisions ofthe Commission therein contained without anyfurther proof or authentication thereof.

SECTION 9

No member or employee of the Commission shallhave any official or professional relation with anypublic service as herein defined, or hold any office

of profit or trust with the Government of thePhilippines.

SECTION 10

The Commission shall have its office in the City ofManila or at such other place as may bedesignated, and may hold hearings on anyproceedings at such times and places, within the

Philippines, as it may provide by order in writing:Provided, That during the months of April and Mayof each year, at least three Commissioners shall beon vacation in such manner that once every two

years at least three of them shall be on duty duringApril and May: Provided, however, That in theinterest of public service, the Secretary of Justicemay require any or all the Commissioners not onduty to render services and perform their duties


5/52



during the vacation months. (As amended byRepublic Act Nos. 176 and 3792)

SECTION 11

The Commission shall have the power to makeneedful rules for its Government and other

proceedings not inconsistent with this Act and shalladopt a common seal, and judicial notice shall betaken for such seal. True copies of said rules andother amendments shall be promptly furnished tothe Bureau of Printing and shall be forthwithpublished in the Official Gazette.

SECTION 13

(a) The Commission shall have jurisdiction,supervision, and control over all public services andtheir franchises, equipment, and other properties,and in the exercise of its authority, it shall have the

necessary powers and the aid of the public force:Provided, That public services owned or operatedby government entities or government-owned orcontrolled corporations shall be regulated by theCommission in the same way as privately-owned

public services, but certificates of publicconvenience or certificates of public convenienceand necessity shall not be required of such entitiesor corporations: And provided, further, That it shallhave no authority to require steamboats, motorships and steamship lines, whether privately-owned, or owned or operated by any Governmentcontrolled corporation or instrumentality to obtaincertificate of public convenience or to prescribe

their definite routes or lines of service.

(b) The term "public service" includes every personthat 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, anddone for general business purposes, any commoncarrier, railroad, street railway, traction railway,sub-way motor vehicle, either for freight or

passenger, or both with or without fixed route andwhether may be its classification, freight or carrierservice of any class, express service, steamboat orsteamship line, pontines, ferries, and water craft,

engaged in the transportation of passengers orfreight or both, shipyard, marine railways, marinerepair shop, [warehouse] wharf or dock, ice plant,ice-refrigeration plant, canal, irrigation system,gas, electric light, heat and power water supply and

power, petroleum, sewerage system, wire orwireless communications system, wire or wirelessbroadcasting stations and other similar publicservices: Provided, however, That a personengaged in agriculture, not otherwise a publicservice, who owns a motor vehicle and uses it

personally and/or enters into a special contractwhereby said motor vehicle is offered for hire orcompensation to a third party or third parties

engaged in agriculture, not itself or themselves apublic service, for operation by the latter for alimited time and for a specific purpose directlyconnected with the cultivation of his or their farm,the transportation, processing, and marketing ofagricultural products of such third party or third

parties shall not be considered as operating apublic service for the purposes of this Act.

(c) The word "person" includes every individual,co-partnership, joint-stock company or corporation,whether domestic or foreign, their lessees,trustees, or receivers, as well as any municipality,

province, city, government-owned or controlledcorporation, or agency of the Government of thePhilippines, and whatever other persons or entitiesthat may own or possess or operate publicservices. (As amended by Com. Act 454 and RA No.2677)

SECTION 14

The following are exempted from the provisions ofthe preceding section:

(a) Warehouses;

(b) Vehicles drawn by animals and bancas movedby oar or sail, and tugboats and lighters;

(c) Airships within the Philippines except asregards the fixing of their maximum rates onfreight and passengers;

(d) Radio companies except with respect to thefixing of rates;

(e) Public services owned or operated by anyinstrumentality of the National Government or byany government-owned or controlled corporation,except with respect to the fixing of rates. (Asamended by Com. Act 454, RA No. 2031, and RA

No. 2677)

SECTION 15

With the exception of those enumerated in thepreceding section, no public service shall operate inthe Philippines without possessing a valid andsubsisting certificate from the Public ServiceCommission known as "certificate of publicconvenience," or "certificate of public convenienceand necessity," as the case may be, to the effectthat the operation of said service and theauthorization to do business will promote the publicinterests in a proper and suitable manner.

The Commission may prescribe as a condition forthe issuance of the certificate provided in the

preceding paragraph that the service can beacquired by the Republic of the Philippines or anyinstrumentality thereof upon payment of the cost

price of its useful equipment, less reasonabledepreciation; and likewise, that the certificate shall

be valid only for a definite period of time; and thatthe violation of any of these conditions shall

produce the immediate cancellation of thecertificate without the necessity of any expressaction on the part of the Commission.

In estimating the depreciation, the effect of the useof the equipment, its actual condition, the age ofthe model, or other circumstances affecting itsvalue in the market shall be taken intoconsideration.

The foregoing is likewise applicable to any

extension or amendment of certificates actually inforce and to those which may hereafter be issued,to permit to modify itineraries and time schedules


6/52



of public services, and to authorizations to renewand increase equipment and properties.

SECTION 1620

Proceedings of the Commission, upon notice andhearing. - The Commission shall have power, upon

proper notice and hearing in accordance with therules and provisions of this Act, subject to thelimitations and exceptions mentioned and saving

provisions to the contrary:

(a) To issue certificates which shall be known ascertificates of public convenience, authorizing theoperation of public service within the Philippineswhenever the Commission finds that the operationof the public service proposed and theauthorization to do business will promote the publicinterest in a proper and suitable manner. Provided,

That thereafter, certificates of public convenienceand certificates of public convenience and necessitywill be granted only to citizens of the Philippines orof the United States or to corporations, co-

partnerships, associations or joint-stock companiesconstituted and organized under the laws of thePhilippines; Provided, That sixty per centum of thestock or paid-up capital of any such corporations,co-partnership, association or joint-stock companymust belong entirely to citizens of the Philippines orof the United States: Provided, further, That nosuch certificates shall be issued for a period ofmore than fifty years.

(b) To approve, subject to constitutional limitations

any franchise or privilege granted under theprovisions of Act No. Six Hundred and Sixty-seven,

as amended by Act No. One Thousand and twenty-two, by any political subdivision of the Philippineswhen, in the judgment of the Commission, suchfranchise or privilege will properly conserve the

public interests, and the Commission shall in soapproving impose such conditions as toconstruction, equipment, maintenance, service, oroperation as the public interests and conveniencemay reasonably require, and to issue certificates of

public convenience and necessity when such isrequired or provided by any law or franchise.

(c) To fix and determine individual or joint rates,tolls, charges, classifications, or schedules thereof,as well as commutation, mileage, kilometrage, andother special rates which shall be imposedobserved and followed thereafter by any publicservice: Provided, That the Commission may, in itsdiscretion, approve rates proposed by publicservices provisionally and without necessity of anyhearing; but it shall call a hearing thereon withinthirty days, thereafter, upon publication and noticeto the concerns operating in the territory affected:Provided, further, That in case the public serviceequipment of an operator is used principally orsecondarily for the promotion of a private business,

the net profits of said private business shall beconsidered in relation with the public service ofsuch operator for the purpose of fixing the rates.

(d) To fix just and reasonable standards,classifications, regulations, practices,measurement, or service to be furnished, imposed,

20The powers of the Public Service Commission

were asked in 1993.

observed, and followed thereafter by any publicservice.

(e) To ascertain and fix adequate and serviceablestandards for the measurement of quantity,quality, pressure, initial voltage, or other condition

pertaining to the supply of the product or service

rendered by any public service, and to prescribereasonable regulations for the examination and testof such product or service and for themeasurement thereof.

(f) To establish reasonable rules, regulations,instructions, specifications, and standards, tosecure the accuracy of all meters and appliancesfor measurements.

(g) To compel any public service to furnish safe,adequate, and proper service as regards the

manner of furnishing the same as well as themaintenance of the necessary material andequipment.

(h) To require any public service to establish,construct, maintain, and operate any reasonableextension of its existing facilities, where in the

judgment of said Commission, such extension isreasonable and practicable and will furnishsufficient business to justify the construction andmaintenance of the same and when the financialcondition of the said public service reasonablywarrants the original expenditure required inmaking and operating such extension.

(i) To direct any railroad, street railway or tractioncompany to establish and maintain at any junctionor point of connection or intersection with anyother line of said road or track, or with any otherline of any other railroad, street railway or tractionto promote, such just and reasonable connection asshall be necessary to promote the convenience ofshippers of property, or of passengers, and in likemanner direct any railroad, street railway, ortraction company engaged in carryingmerchandise, to construct, maintain and operate,upon reasonable terms, a switch connection withany private sidetrack which may be constructed byany shipper to connect with the railroad, street

railway or traction company line where, in thejudgment of the Commission, such connection isreasonable and practicable and can be out in withsafety and will furnish sufficient business to justifythe construction and maintenance of the same.

(j) To authorize, in its discretion, any railroad,street railway or traction company to lay its tracks

across the tracks of any other railroad, streetrailway or traction company or across any publichighway.

(k) To direct any railroad or street railway

company to install such safety devices or aboutsuch other reasonable measures as may in thejudgment of the Commission be necessary for theprotection of the public are passing grade crossingof (1) public highways and railroads, (2) publichighways and streets railway, or (3) railways andstreet railways.

(l) To fix and determine proper and adequate ratesof depreciation of the property of any public servicewhich will be observed in a proper and adequate


7/52



depreciation account to be carried for theprotection of stockholders, bondholders or creditorsin accordance with such rules, regulations, andform of account as the Commission may prescribe.Said rates shall be sufficient to provide theamounts required over and above the expense ofmaintenance to keep such property in a state ofefficiency corresponding to the progress of theindustry. Each public service shall conform itsdepreciation accounts to the rates so determined

and fixed, and shall set aside the moneys soprovided for out of its earnings and carry the samein a depreciation fund. The income frominvestments of money in such fund shall likewisebe carried in such fund. This fund shall not beexpended otherwise than for depreciation,improvements, new construction, extensions orconditions to the properly of such public service.

(m) To amend, modify or revoke at any timecertificate issued under the provisions of this Act,

whenever the facts and circumstances on thestrength of which said certificate was issued havebeen misrepresented or materially changed.

(n) To suspend or revoke any certificate issuedunder the provisions of this Act whenever theholder thereof has violated or willfully andcontumaciously refused to comply with any orderrule or regulation of the Commission or any

provision of this Act: Provided, That theCommission, for good cause, may prior to thehearing suspend for a period not to exceed thirtydays any certificate or the exercise of any right orauthority issued or granted under this Act by order

of the Commission, whenever such step shall in thejudgment of the Commission be necessary to avoidserious and irreparable damage or inconvenience tothe public or to private interests.

(o) To fix, determine, and regulate, as theconvenience of the state may require, a specialtype for auto-busses, trucks, and motor trucks tobe hereafter constructed, purchased, and operatedby operators after the approval of this Act; to fixand determine a special registration fee for auto-buses, trucks, and motor trucks so constructed,

purchased and operated: Provided, That said feesshall be smaller than more those charged for auto-busses, trucks, and motor trucks of types not maderegulation under the subsection.

SECTION 18

It shall be unlawful for any individual, co-partnership, association, corporation or joint-stockcompany, their lessees, trustees or receiversappointed by any court whatsoever, or anymunicipality, province, or other department of theGovernment of the Philippines to engage in any

public service business without having first securedfrom the Commission a certificate of public

convenience or certificate of public convenienceand necessity as provided for in this Act, exceptgrantees of legislative franchises expresslyexempting such grantees from the requirement ofsecuring a certificate from this Commission as wellas concerns at present existing expressly exemptedfrom the jurisdiction of the Commission, eithertotally or in part, by the provisions of sectionthirteen of this Act.

SECTION 19

Unlawful Acts. - It shall be unlawful for any publicservice:

(a) To provide or maintain any service that isunsafe, improper, or inadequate or withhold or

refuse any service which can reasonably bedemanded and furnished, as found and determinedby the Commission in a final order which shall beconclusive and shall take effect in accordance withthis Act, upon appeal of otherwise.

(b) To make or give, directly or indirectly, by itselfor through its agents, attorneys or brokers, or anyof them, discounts or rebates on authorized rates,or grant credit for the payment of freight charges,or any undue or unreasonable preference oradvantage to any person of corporation or to any

locality or to any particular description of traffic orservice, or subject any particular person orcorporation or locality or any particular descriptionof traffic to any prejudice or disadvantage in anyrespect whatsoever; to adopt, maintain, or enforceany regulation, practice or measurement whichshall be found or determined by the Commission tobe unjust, unreasonable, unduly preferential orunjustly discriminatory in a final order which shallbe conclusive and shall take effect in accordancewith the provisions of this Act, upon repeal orotherwise.

(g) To sell, alienate, mortgage, encumber or leaseits property, franchises, certificates, privileges, or

rights or any part thereof; or merge or consolidateits property, franchises privileges or rights, or any

part thereof, with those of any other public service.The approval herein required shall be given, afternotice to the public and hearing the personsinterested at a public hearing, if it be shown thatthere are just and reasonable grounds for makingthe mortgaged or encumbrance, for liabilities ofmore than one year maturity, or the sale,alienation, lease, merger, or consolidation to beapproved, and that the same are not detrimental tothe public interest, and in case of a sale, the dateon which the same is to be consummated shall befixed in the order of approval: Provided, however,

that nothing herein contained shall be construed toprevent the transaction from being negotiated orcompleted before its approval or to prevent thesale, alienation, or lease by any public service ofany of its property in the ordinary course of itsbusiness.

(h) To sell or register in its books the transfer orsale of shares of its capital stock, if the result ofthat sale in itself or in connection with another

previous sale, shall be to vest in the transfereemore than forty per centum of the subscribedcapital of said public service. Any transfer made inviolation of this provision shall be void and of no

effect and shall not be registered in the books ofthe public service corporation. Nothing hereincontained shall be construed to prevent the holdingof shares lawfully acquired. (As amended by Com.

Act No. 454.)

(i ) To sell, alienate or in any manner transfershares of its capital stock to any alien if the resultof that sale, alienation, or transfer in itself or inconnection with another previous sale shall be the


8/52



reduction to less than sixty per centum of thecapital stock belonging to Philippine citizens. Suchsale, alienation or transfer shall be void and of noeffect and shall be sufficient cause for ordering thecancellation of the certificate.

Y Transit v. NLRCThe sale, alienation or other encumbrance of a

public service operators properties requires theprevious approval and authorization of theCommission.

NOTE: The Public Service Commission does notexist anymore. It is now the Department ofTransportation and Communications.

THECERTIFICATE OF PUBLICCONVENIENCE (CPC); THECERTIFICATE OF PUBLIC CONVENIENCE & NECESSITY(CPCN) AND THE PRIOR OPERATORRULE

Does the sale of a CPC, CPCN or other properties ofthe public utility have to be approved before it is

sold to a third person?No. The approval of the sale of CPCs, CPCNs orother properties does not affect the validity(perfection) of the sale between the parties as longas all the elements of a contract are met. This onlyaffectes the relation of the parties to the DOTC orto 3rd parties. If there is no approval, then the sale

does not bind the DOTC or 3rd parties. Thecontrolling factor therefore is the registration.

If a stockholder of a public utility transfers hisstock to the 3rd person, is there a need to obtainthe approval of the DOTC?

It depends. If the transfer results in the transfereeowning more than 40% of the stock of the publicutility, then the approval of the DOTC is needed.

When must the approval of the DOTC be secured?

Before or after the execution of the contract.

What if the transferree is an alien?

VOID. An alien cannot own more than 40% ofthe stock of a public utility.

What is a Certificate of Public Convenience? (CPC)

The Public Service Law, Sec. 15

With the exception of those enumerated in thepreceding section, no public service shall operate inthe Philippines without possessing a valid andsubsisting certificate from the Public ServiceCommission known as "certificate of publicconvenience," or "certificate of public convenienceand necessity," as the case may be, to the effectthat the operation of said service and theauthorization to do business will promote the public

interests in a proper and suitable manner.

The Commission may prescribe as a condition for

the issuance of the certificate provided in thepreceding paragraph that the service can beacquired by the Republic of the Philippines or anyinstrumentality thereof upon payment of the cost

price of its useful equipment, less reasonabledepreciation; and likewise, that the certificate shallbe valid only for a definite period of time; and that

the violation of any of these conditions shall

produce the immediate cancellation of thecertificate without the necessity of any expressaction on the part of the Commission.

A CPC is any authorization to operate a publicservice issued by the PSC (now DOTC).

It is an authorization issued by theCommission for the operation of public services forwhich no franchise, either municipal orlegislative, is required by law) e.g. motorvehicles

It constitutes neither a franchise nor acontract, it does not confer property rights, and is amere license or privilege. (Pantranco v. PSC) Suchprivilege is forfeited when the grantee fails tocomply with his commitments to serve the publicand public necessity. However, these certificatesrepresent property rights to the extent that if therights which any public utility is exercising pursuantto the lawful orders of the PSC (now DOTC) hasbeen invaded by another public utility, inappropriate cases, actions may be maintained bythe complainant public utility.

Which public utilities are exempted from getting aCPC?

The Public Service Law, Sec. 14

The following are exempted from the provisions ofthe preceding section:

(a) Warehouses;

(b) Vehicles drawn by animals and bancas movedby oar or sail, and tugboats and lighters;

(c) Airships within the Philippines except asregards the fixing of their maximum rates onfreight and passengers;

(d) Radio companies except with respect to thefixing of rates;

(e) Public services owned or operated by anyinstrumentality of the National Government or byany government-owned or controlled corporation,except with respect to the fixing of rates. (Asamended by Com. Act 454, RA No. 2031, and RANo. 2677)

What is a Certificate of Public Convenience &Necessity? (CPCN)

It is a certificate issued by the PSC to a publicservice to which any political subdivision has

granted a franchise under RA 667 after thePSC has approved the same under Sec. 16(b).

It is an authorization issued by the PSC for theoperation of public services for which a franchiseis required by law. (e.g. electric, telephone)

What is the difference between a CPC & a CPCN?

A CPCN requires a franchise from Congress.The public utility cannot be issued a CPCN andcannot operate, therefore, without a franchise fromCongress


9/52



A CPC does not.

What is a franchise?

It is a legislative grant from Congress or alocal legislative body. If it is of nationwideapplication (e.g. Philippine Air Lines), then it must

take the form of a Republic Act.

How does one get a franchise?

It is the same procedure for any law (file a bill,3 readings in Congress, etc) The applicant musta)prove that he or she is a Filipino citizen; b)demonstrate financial capacity, and c) must showthat he or she is applying for a business of publicconvenience, that the public shall benefit from thegrant of the franchise.

Is a franchise enough in order to operate?

No. All public utilities require either a CPC orCPCN to operate. Those public utilities for whichfranchises have been granted still require a CPCNin order to operate. Those public utilities that didnot require a franchise for there creation stillrequire a CPC in order to operate.

Raymundo v. Luneta Motor Corporation(1933)

The Public Service Law, Act No. 3108, asamended, authorizes certificates of public

convenience to be secured by public service

operators from the PSC. A CPC granted to theowner or operator of public service motor vehiclesgrants a right in the nature of a limited franchise.

The Code of Civil Procedure establishes thegeneral rule that "property, both real and personal,or any interest therein of the judgment debtor, not

exempt by law, and all property and rights ofproperty seized and held under attachment in theaction, shall be liable to execution." The statutoryexemptions do not include franchises orcertificates; of public convenience. The word"property" as used in section 450 of the Code ofCivil Procedure comprehends every species of title,inchoate or complete, legal or equitable. The TEST

to determine whether or not property can beattached and sold upon execution is whether thejudgment debtor has such a beneficial interesttherein that he can sell or otherwise dispose of itfor value.

Now the Public Service Law permits the PSC toapprove the sale, alienation, mortgaging,encumbering, or leasing of property, franchises,privileges, or rights or any part thereof (sec. 16[h]), and in practice the purchase and sale ofcertificates of public convenience has beenpermitted by the PSC. If the holder of a CPC cansell it voluntarily, there is no valid reason why thesame certificate cannot be taken and sold

involuntarily pursuant to court process.CPCs secured by public service operators are liableto execution, and the Public Service Commission isauthorized to approve the transfer of the

certificates of public convenience to the executioncreditor.

What is the prior operator rule?

The prior operator rule works to protect theprior operator if it maintains an adequate serviceand is able to meet the demands of the public. Hisor her investment is protected by not allowing asubsequent operator to be granted a license for the

same route. The rationale for this rule is for thepreservation of public convenience and to preventruinous competition.

What are some of the instances where the prioroperator rule does NOT apply?

The prior operator rule does not apply whenthe CPC or CPCN granted to the applicant is amaiden franchise that covers a new route, even if itoverlaps with the route of the prior operator.

The prior operator rule is inapplicable where

the corporate existence of the prior operator hasexpired.

Regular operators are preferred over irregularoperators.

The Commission cannot grant a CPC or CPCNthat comprises a larger territory than that appliedfor.

How do you know whether there is ruinouscompetition enough for the prior operator rule totake effect?

Ruinous competition means that there isactual ruin of the business of the operator; that theexisting operator will not gain enough profits ifanother person is allowed to enter the business;that which will result in the deprivation of sufficientgain in respect of reasonable return of investment,therefore the oppositor, alleging this, must showthat he will be deprived of a reasonable return onhis investment.

The mere possibility of reduction in the

earnings of the business or the deterioration in theincome of his business is not sufficient to prove

ruinous competition. It must be shown that thebusiness would not have sufficient gains to pay afair rate of interest on his capital investments.

Does the prior operator rule create a monopoly?

Legally speaking, there cannot be a monopolywhen a property is operated as a public utility. Theprior operator rule does not encourage a monopolybecause the theory is that one operator keeps theprices low.

Batangas Transportation Co. v. Cayetano

Orlanes (1928)

So long as the 1st licensee keeps and performsthe terms and conditions of its license and complieswith the reasonable rules and regulations of theCommission and meets the demands of the public,it should have more or less of a bested andpreferential right over a person who seeks toacquire another and a later license over sameroute. Otherwise, the first licensee would not haveprotection on his investment and would be subject


10/52



to ruinous competition and this defeat the verypurpose and intent for the PSC was created.

San Pablo v. Pantranco (1987)

Before private respondent may be issued afranchise or CPC for the operation of the said

service as a common carrier, it must comply withthe usual requirements of filing an application,payment of the fees, publication, adducingevidence at a hearing and affording the oppositorsthe opportunity to be heard, among others, asprovided by law. Considering the environmentalcircumstances of the case, the conveyance ofpassengers, trucks and cargo from Matnog to Allenis certainly not a ferry boat service but a coastwiseor interisland shipping service. Under nocircumstance can the sea between Matnog andAllen be considered a continuation of the highway,Matnog and Allen are separated by an open sea. ItsCPC as a bus transportation cannot be merely

amended to include this water service under theguise that it is a mere private ferry service.

What is an example of the kabit system?21

A, a grantee of a CPC from the LTFRB, is giventhe authority to operate 10 units of taxis. B, a non-grantee, wishes to operate as a common carriedand kabits with the CPC of A who will obtainapproval from the LTFRB to operate another taxi.The taxi will be registered in the name of A, whowill be paid by B.

Assume that A executed a deed of sale infavor of B in case B decides not to go on with thearrangement, in order to safeguard the rights of B.However, in case of injury to a passenger of thetaxi actually operated by B (and previously sold toB as well) it is still A who will be liable. The illegal

contract of sale between A & B cannot be put up asa defense.

A does not have a cause of action against Beither. They are in pari delicto.

Teja Marketing v. IAC (1987)Parties operated under an arrangement, commonly

known as the "kabit system" whereby a person whohas been granted a certificate of publicconvenience allows another person who ownsmotor vehicles to operate under such franchise fora fee. A certificate of public convenience is aspecial privilege conferred by the government.Although not outrightly penalized as a criminaloffense, the kabit system is invariably recognizedas being contrary to public policy and, therefore,void and in existent under Article 1409 of the CivilCode.

PRIVATE NATURE; RIGHTS AND OBLIGATIONSOF PARTIES ARISING FROM TRANSACTIONSRELATING TO TRANSPORTATION

ABSENT A TRANSPORTATION CONTRACT

Lara v. Valencia (1958)The owner and driver of a vehicle owes toaccommodation passengers or invited guestsmerely the duty to exercise reasonable care so thatthey may be transported safely to their destination.

21This was asked in 2005. Know the definition of the

Kabit System and the liability of the party.

Thus, The rule is established by the weight ofauthority that the owner or operator of anautomobile owes the duty to an invited guest toexercise reasonable care in its operation, and notunreasonably to expose him to danger and injuryby increasing the hazard of travel. Valenciatherefore is only required to observe ordinary care,and is not in duty bound to exercise extraordinarydiligence as required of a common carrier by ourlaw (Art. 1755 & 1756, new CC)

ARISING FROM A TRANSPORTATION CONTRACT

Contract of transportation, defined;A contract of transportation is one whereby

a certain person or association of persons obligatethemselves to transport persons, things, or newsfrom one to another for a fixed price.

Contract of transportation, elements;Parties to the contract:

Shipper - one who gives rise to the contract oftransportation by agreeing to deliver the things ornews to be transported, or to present his ownperson or those of other or others in the case oftransportation of passengersCarrier or conductor - one who binds himself totransport person, things, or news, as the case maybe, or one employed in or engaged in the businessof carrying good for others for hire

Consignee - the party to whom the carrier is todeliver the things being transported; to whom thecarrier may lawfulyy make delivery in accordancewith its contract of carriage. The shipper and theconsignee may be the same person.


11/52



III. Code of Commerce Provisions on

Overland Transportation

(unless otherwise indicated, reference is to Code ofCommerce)

What does the Code of Commerce cover?It governs over overland transporation andmaritime admiralty. It governs only commercialcontracts.

Commercial contracts involving common carriers refer first to the Civil Code, then to the Code ofCommerce

Private carriers involved in commercial contracts

refer first to the Code of Commerce, then to theCivil Code, but excluding the Civil Code provisionson common carriers

A. Scope of Overland Transportation

What is overland transport?Overland transport applies to transport on land andon small bodies of water, waterways, both naturaland artificial, including transport on rivers whichare not very large. (If it is transport at sea, then itis admiralty)

B. Nature of Contract

ARTICLE 349A contract for all kinds of transportation over landor river shall be considered commercial:1. When it involves merchandise or anycommercial goods.2. When, no matter what its object may be,the carrier is a merchant or is customarily engagedin making transportation for the public.

C. Effect of Civil Code

Art 1766In all matters not regulated by this Code, the rights

and obligations of common carriers shall begoverned by the Code of Commerce and by speciallaws.

Art. 2270

The following laws and regulations are herebyrepealed:(1) Those parts and provisions of the Civil Code of1889 which are in force on the date when this newCivil Code becomes effective:

(2) The provisions of the Code of Commercegoverning sales, partnership, agency, loan, depositand guaranty;

(3) The provisions of the Code of Civil Procedure onprescription as far as inconsistent with this Code;and

(4) All laws, Acts, parts of Acts, rules of court,executive orders, and administrative regulationswhich are inconsistent with this Code. (n)

D. Contract of Carriage

1. BILL OF LADING

DEFINITION, SUBJECT MATTER

ARTICLE 352Bills of lading or tickets in the case of transportation of passengers may be different, onefor persons and another for baggage, but all ofthem shall contain the name of the carrier, thedate of shipment, the points of departure andarrival, the price, and with regard to baggage, thenumber and weight of the packages, with any otherindications which may be considered necessary inorder to easily identify them.

What is a bill of lading?

It may be defined as a written acknowledgment ofthe receipt of goods and an agreement to transport

and to deliver them at a specified place to a personnamed or on his order. It comprehends all methodsof transportation.

Each bill of lading is a contract in itself and theparties are bound by its terms. A bill of lading isalso a receipt, and it is likewise a symbol of thegoods covered by it. It is also a document of title.

Who are the parties to a bill of lading?

1. shipper

2. consignee

3. carrier

FORM, CONTENTS

ARTICLE 350The shipper as well as the carrier of merchandiseand goods may mutually demand of each other theissue of a bill of lading in which there shall bestated:1. The name, surname, and domicile of theshipper.

2. The name, surname, and domicile of thecarrier.3. The name, surname and domicile of theperson to whom or to whose order the goods areaddressed, or whether they are to be delivered tothe bearer of the said bill.4. A description of the goods, stating theirgeneric character, their weight, and the externalmarks or signs of the packages containing thesame.5. The cost of the transportation.6. The date on which the shipment is made.7. The place of the delivery to the carrier.8. The place and time at which the delivery isto be made to the consignee.9. The damages to be paid by the carrier incase of delay, if any agreement is made on thispoint.

ARTICLE 351

In shipments made over railroads or by otherenterprises which are subject to schedules or thetime fixed by regulations, it shall be sufficient thatthe bills of lading or declarations of shipmentfurnished by the shipper refer, with regard to therate, terms, and special conditions of the


12/52



transportation, to the schedules and regulations,the application of which is requested; and shouldno schedule be determined the carrier must applythe rate of the merchandise paying the lowest, withthe condition inherent thereto, always includingsuch statement or reference in the bill of ladingdelivered to the shipper.

Is the form material?

No. As long as it contains an acknowledgment bythe carrier of the receipt of goods for transporation,it is in legal effect, a bill of lading.

FUNCTION

ARTICLE 353The legal basis of the contract between the shipperand the carrier shall be the bills of lading, by thecontents of which all disputes which may arise with

regard to their execution and fulfillment shall bedecided without admission of other exceptions thanforgery or material errors in the drafting thereof.After the contract has been complied with the bill oflading issued by the carrier shall be returned tohim, and by virtue of the exchange of thiscertificate for the article transported, the respectiveobligations and actions shall be considered ascanceled, unless in the same act the claims whichthe contracting parties desired to reserve arereduced to writing, exception being made of theprovisions of Article 366.If in case of loss or for any other reasonwhatsoever, the consignee can not return upon

receiving the merchandise the bill of ladingsubscribed by the carrier, he shall give said carriera receipt for the goods delivered, this receiptproducing the same effects as the return of the billof lading.

2. REFUSAL TO TRANSPORTARTICLE 356Carrier may refuse to accept packages whichappear unfit for transportation; and if saidtransportation is to be made by railway and theshipment is insisted on, the company shall carrythem, being exempt from all liability if its

objections are so stated in the bill of lading.

3. DOUBTFUL DECLARATION OFCONTENTSARTICLE 357If the carrier by reason of well-founded suspicionsas to the correctness of the declaration of thecontents of a package should determine to examineit, he shall do so before witnesses, in the presenceof the shipper or of the consignee.Should the shipper or consignee to be cited notappear, the examination shall be made before anotary, who shall draft a certificate of the result ofthe examination, for the proper purposes.

If the declaration of the shipper should be correct,the expenses caused by the examination and thoseof carefully repacking the packages shall bedefrayed by the carrier, and in a contrary case bythe shipper.

4. NO BILL OF LADINGARTICLE 354In the absence of a bill of lading the respectiveclaims of the parties shall be decided by the legalproofs that each one may submit in support of hisclaims, in accordance with the general provisionsestablished in this Code for commercial contracts.

ARTICLE 351In transporation made by railroads or otherenterprises which are subject to schedules or thetime fixed by regulations, it shall be sufficient thatthe bills of lading or the declarations of shipmentfurnished by the shipper refer, with respect to therate, terms, and special conditions of thetransportation, to the schedules and regulations,the application of which he requests, and should noschedule by determined, the carrier must apply therate of the merchandise paying the lowest, with theconditions inherent therein, always including suchstatement or reference to them in the bill of lading

which he delivers to the shipper.

Is a bill of lading essential to a contract oftransportation?No. While under Art. 350 the shipper and thecommon carrier may mutually demand that a bill oflading be made, it is not obligatory. The fact that abill of lading is not issued does not preclude theexistence of a contract of transportation.Where no bill of lading is issued, the disputesbetween the parties shall be decided according tothe rules laid down in Art. 354.

E. Responsibility of the carrier

1. WHEN IT COMMENCESARTICLE 355

The liability of the carrier shall begin from themoment he receives the merchandise, in person orthrough a person intrusted thereto in the placeindicated for their reception.

2. ROUTEARTICLE 359

If there should be an agreement between theshipper and the carrier with regard to the road overwhich the transportation is to be made, the carriercan not change the route, unless obliged to do soby force majeure; and should he do so without

being forced to, he shall be liable for any damagewhich may be suffered by the goods transportedfor any other cause whatsoever, besides beingrequired to pay the amount which may have beenstipulated for such a case.When on account of the said force majeure thecarrier is obliged to take another route, causing anincrease in the transportation charges, he shall be

reimbursed for said increase after presenting theformal proof thereof.

3. CARE OF GOODSARTICLE 361Merchandise shall be transported at the risk and

venture of the shipper, if the contrary was notexpressly stipulated.Therefore, all damages and impairment suffered bythe goods during the transportation, by reason ofaccident, force majeure, or by virtue of the natureor defect of the articles, shall be for the accountand risk of the shipper. cdtaThe proof of these accidents is incumbent on thecarrier.


13/52



ARTICLE 362The carrier, however, shall be liable for the lossesand damages arising from the causes mentioned inthe foregoing article if it is proved that theyoccurred on account of his negligence or becausehe did not take the precautions usually adopted bycareful persons, unless the shipper committedfraud in the bill of lading, making him believe thatthe goods were of a class or quality different fromwhat they really were.If, notwithstanding the precaution referred to inthis article, the goods transported run the risk ofbeing lost on account of the nature or by reason ofan unavoidable accident, without there being timefor the owners of the same to dispose thereof, thecarrier shall proceed to their sale, placing them forthis purpose at the disposal, of the judicialauthority or the officials determined by specialprovisions.

Art 1734

Common carriers are responsible for the loss,destruction, or deterioration of the goods, unlessthe same is due to any of the following causesonly:(1) Flood, storm, earthquake, lightning, or othernatural disaster or calamity;(2) Act of the public enemy in war, whetherinternational or civil;(3) Act of omission of the shipper or owner of thegoods;(4) The character of the goods or defects in thepacking or in the containers;(5) Order or act of competent public authority.

Art. 1735. In all cases other than those mentionedin Nos. 1, 2, 3, 4, and 5 of the preceding article, ifthe goods are lost, destroyed or deteriorated,common carriers are presumed to have been atfault or to have acted negligently, unless theyprove that they observed extraordinary diligence asrequired in Article 1733.

4. DELIVERY

CONDITION OF GOODS

ARTICLE 363

With the exception of the cases prescribed in thesecond paragraph of Article 361, the carrier shallbe obliged to deliver the goods transported in thesame condition in which, according to the bill oflading, they were at the time of their receipt,without any detriment or impairment, and shouldhe not do so, he shall be obliged to pay the valueof the goods not delivered at the point where theyshould have been and at the time the deliveryshould have taken place.If part of the goods transported should be deliveredthe consignee may refuse to receive them, when heproves that he can not make use thereof withoutthe others.

ARTICLE 364If the effect of the damage referred to in Article361 should be only a reduction in the value of thegoods, the obligation of the carrier shall be reducedto the payment of the amount of said reduction invalue, after appraisal by experts.

ARTICLE 365If, on account of the damage, the goods arerendered useless for purposes of sale orconsumption in the use for which they are properlydestined the consignee shall not be bound toreceive them, and may leave them on the hands ofthe carrier, demanding payment therefor at currentmarket prices.If among the goods damaged there should be somein good condition and without any defectwhatsoever, the foregoing provision shall beapplicable with regard to the damaged ones, andthe consignee shall receive those which are sound,this separation being made by distinct and separatearticles, no object being divided for the purpose,unless the consignee proves the impossibility ofconveniently making use thereof in this form.The same provision shall be applied to merchandisein bales or packages, with distinction of thepackages which appear sound.

ARTICLE 366Within the twenty-four hours following the receiptof the merchandise a claim may be brought againstthe carrier on account of damage or average foundtherein on opening the packages, provided that theindications of the damage or average giving rise tothe claim can not be ascertained from the exteriorof said packages, in which case said claim wouldonly be admitted on the receipt of the packages.After the periods mentioned have elapsed, or afterthe transportation charges have been paid, noclaim whatsoever shall be admitted against thecarrier with regard to the condition in which thegoods transported were delivered.

ARTICLE 367If there should occur doubts and disputes betweenthe consignee and the carrier with regard to thecondition of goods transported at the time of theirdelivery to the former, the said goods shall beexamined by experts appointed by the parties, anda third one, in case of disagreement, appointed bythe judicial authority, the result of the examinationbeing reduced to writing; and if the personsinterested should not agree to the report of theexperts and could not settle their disputes, said

judicial authority shall order the deposits of themerchandise in a safe warehouse, and the parties

interested shall make use of their rights in theproper manner.

TO WHOM DELIVERY MADE

ARTICLE 368The carrier must deliver to the consignee withoutany delay or difficulty the merchandise received byhim, by reason of the mere fact of beingdesignated in the bill of lading to receive it; andshould said carrier not do so he shall be liable forthe damages which may arise therefrom.

JUDICIAL DEPOSIT

ARTICLE 369Should the consignee be not found at the domicileindicated in the bill of lading, or should refuse topay the transportation charges and expenses, or toreceive the goods, the deposit of said goods shallbe ordered by the municipal judge, where there isno judge of first instance, to be placed at thedisposal of the shipper or sender, without prejudice


14/52



to a person having a better right, this deposithaving all the effects of a delivery.

Art. 1752

Even when there is an agreement limiting theliability of the common carrier in the vigilance over

the goods, the common carrier is disputablypresumed to have been negligent in case of theirloss, destruction or deterioration.

WHEN TO BE MADE

ARTICLE 370If a period has been fixed for the delivery of thegoods, it must be made within the same, andotherwise the carrier shall pay the indemnityagreed upon in the bill of lading, neither theshipper nor consignee being entitled to anythingelse.

Should no indemnity have been agreed upon andthe delay exceeds the time fixed in the bill oflading, the carrier shall be liable for the damageswhich may have been caused by the delay.

ARTICLE 358Should no period within which goods are to bedelivered be previously fixed, the carrier shall beunder the obligation to forward them in the firstshipment of the same or similar merchandise whichhe may make to the point of delivery; and shouldhe not do so, the damages occasioned by the delayshall be suffered by him.

TWO OR MORE CARRIERS

ARTICLE 373A carrier who delivers merchandise to a consigneeby virtue of agreements or combined services withother carriers shall assume the obligations of thecarriers who preceded him, reserving his right toproceed against the latter if he should not bedirectly responsible for the fault which gives rise tothe claim of the shipper or of the consignee.The carrier making the delivery shall also assumeall the actions and rights of those who may havepreceded him in the transportation.The sender and the consignee shall have an

immediate right of action against the carrier whoexecuted the transportation contract, or against theother carriers who received the goods transportedwithout reserve.The reservations made by the latter shall notexempt them, however, from the liabilities theymay have incurred by reason of their own acts.

OBLIGATION TO KEEP REGISTRY

ARTICLE 378Transportation agents shall be obliged to keep aspecial registry, with the formalities required by

Article 36, in which there shall be entered, inprogressive order of numbers and dates, all thegoods the transportation of which is undertaken,stating the circumstances required by Articles 350et seq. for the responsive bills of lading.

COMPLIANCE WITH ADMINISTRATIVE REGULATIONS

ARTICLE 377The carrier shall be liable for all the consequencesarising from noncompliance on his part with theformalities prescribed by the laws and regulationsof the public administration during the entire

course of the trip and on the arrival at the point ofdestination, except when his omission arises fromhis having been induced into error by falsestatements of the shipper in the declaration of themerchandise.If the carrier has acted in accordance with a formal

order received from the shipper or consignee of themerchandise both shall incur liability.

F. Rights and Obligations of Shipper and/orConsignee

1. RIGHTS TO DAMAGES

CONDITION IMPOSED ON RIGHT

ARTICLE 366Within the twenty-four hours following the receiptof the merchandise a claim may be brought against

the carrier on account of damage or average foundtherein on opening the packages, provided that theindications of the damage or average giving rise tothe claim can not be ascertained from the exteriorof said packages, in which case said claim wouldonly be admitted on the receipt of the packages.

After the periods mentioned have elapsed, or afterthe transportation charges have been paid, noclaim whatsoever shall be admitted against thecarrier with regard to the condition in which thegoods transported were delivered.

ARTICLE 357

If the carrier by reason of well-founded suspicionsas to the correctness of the declaration of thecontents of a package should determine to examineit, he shall do so before witnesses, in the presenceof the shipper or of the consignee.Should the shipper or consignee to be cited notappear, the examination shall be made before a

notary, who shall draft a certificate of the result ofthe examination, for the proper purposes.If the declaration of the shipper should be correct,the expenses caused by the examination and thoseof carefully repacking the packages shall bedefrayed by the carrier, and in a contrary case bythe shipper.

ARTICLE 353The legal basis of the contract between the shipperand the carrier shall be the bills of lading, by thecontents of which all disputes which may arise withregard to their execution and fulfillment shall be

decided without admission of other exceptions than

forgery or material errors in the drafting thereof.After the contract has been complied with the bill oflading issued by the carrier shall be returned tohim, and by virtue of the exchange of thiscertificate for the article transported, the respectiveobligations and actions shall be considered as

canceled, unless in the same act the claims whichthe contracting parties desired to reserve arereduced to writing, exception being made of theprovisions of Article 366.


15/52



If in case of loss or for any other reasonwhatsoever, the consignee can not return uponreceiving the merchandise the bill of ladingsubscribed by the carrier, he shall give said carriera receipt for the goods delivered, this receiptproducing the same effects as the return of the billof lading.

AMOUNT OF DAMAGES FOR LOSS

ARTICLE 372The appraisement of the goods which the carriermust pay in case of their being lost or mislaid shallbe fixed in accordance with what is stated in the billof lading, no proofs being allowed on the part ofthe shipper that there were among the goodsdeclared therein articles of greater value, andmoney.Horses, vehicles, vessels, equipment, and all theother principal and accessory means of transportation, shall be especially obligated in favor

of the shipper, although with relation to railroadssaid obligation shall be subordinated to theprovisions of the laws of concession with regard toproperty and to those of this Code with regard tothe manner and form of making attachments andretentions against the said companies.

Art. 1744

A stipulation between the common carrier and theshipper or owner limiting the liability of the formerfor the loss, destruction, or deterioration of thegoods to a degree less than extraordinary diligence

shall be valid, provided it be:

(1) In writing, signed by the shipper or owner;

(2) Supported by a valuable consideration otherthan the service rendered by the common carrier;and

(3) Reasonable, just and not contrary to publicpolicy.

AMOUNT OF DAMAGES FOR DELAY

ARTICLE 371(3).Should the abandonment not occur the indemnityfor loss and damages on account of the delays cannot exceed the current price of the goodstransported on the day and at the place where the

delivery was to have been made. The sameprovision shall be observed in all cases where thisindemnity is due.

2. RIGHT TO ABANDONARTICLE 371In cases of delay on account of the fault of thecarrier, referred to in the foregoing articles, the

consignee may leave the goods transported on thehands of the carrier, informing him thereof inwriting before the arrival of the same at the pointof destination.

When this abandonment occurs, the carrier shallsatisfy the total value of the goods, as if they hadbeen lost or mislaid. aisadcShould the abandonment not occur the indemnityfor loss and damages on account of the delays cannot exceed the current price of the goods

transported on the day and at the place where thedelivery was to have been made. The sameprovision shall be observed in all cases where thisindemnity is due.

ARTICLE 360The shipper may, without changing the place wherethe delivery is to be made, change theconsignment of the goods delivered to the carrier,and the latter shall comply with his orders,provided that at the time of making the change ofthe consignee the bill of lading subscribed by thecarrier be returned to him, if one were issued,exchanging it for another containing the novationof the contract.The expenses arising from the change of consignment shall be defrayed by the shipper.

ARTICLE 363With the exception of the cases prescribed in thesecond paragraph of Article 361, the carrier shall

be obliged to deliver the goods transported in thesame condition in which, according to the bill oflading, they were at the time of their receipt,without any detriment or impairment, and shouldhe not do so, he shall be obliged to pay the valueof the goods not delivered at the point where theyshould have been and at the time the deliveryshould have taken place.If part of the goods transported should be deliveredthe consignee may refuse to receive them, when heproves that he can not make use thereof withoutthe others.

ARTICLE 365

If, on account of the damage, the goods arerendered useless for purposes of sale orconsumption in the use for which they are properlydestined the consignee shall not be bound toreceive them, and may leave them on the hands ofthe carrier, demanding payment therefor at currentmarket prices.If among the goods damaged there should be somein good condition and without any defectwhatsoever, the foregoing provision shall beapplicable with regard to the damaged ones, andthe consignee shall receive those which are sound,this separation being made by distinct and separatearticles, no object being divided for the purpose,

unless the consignee proves the impossibility ofconveniently making use thereof in this form.The same provision shall be applied to merchandisein bales or packages, with distinction of thepackages which appear sound.

3. RIGHT TO CHANGE CONSIGNMENTARTICLE 360The shipper may, without changing the place wherethe delivery is to be made, change theconsignment of the goods delivered to the carrier,and the latter shall comply with his orders,provided that at the time of making the change of

the consignee the bill of lading subscribed by thecarrier be returned to him, if one were issued,exchanging it for another containing the novationof the contract.The expenses arising from the change of consignment shall be defrayed by the shipper.


16/52



4. OBLIGATION TO PAYTRANSPORTATION CHARGES

ARTICLE 374The consignees to whom the remittance may havebeen made can not defer the payment of theexpenses and transportation charges on the goodsthat they received after twenty-four hours haveelapsed from the time of the delivery; and in caseof delay in making this payment, the carrier mayrequest the judicial sale of the goods hetransported to a sufficient amount to cover thetransportation charges and the expenses incurred.

ARTICLE 375The goods transported shall be specificallyobligated to answer for the transportation chargesand for the expenses and fees caused by the sameduring their transportations, or until the time oftheir delivery.This special right shall be limited to eight days

after the delivery has been made, and after saidprescription the carrier shall have no further rightof action than that corresponding to an ordinarycreditor.

ARTICLE 376The preference of the carrier to the payment ofwhat is due him for the transportation andexpenses of the goods delivered to the consigneeshall not be affected by the bankruptcy of thelatter, provided the action is brought within theeight days mentioned in the foregoing article.

Art. 2241

With reference to specific movable property of thedebtor, the following claims or liens shall bepreferred:

(9) Credits for transportation, upon the goodscarried, for the price of the contract and incidentalexpenses, until their delivery and for thirty daysthereafter;

5. OBLIGATION TO RETURN BILL OFLADINGARTICLE 353. (2) (3)After the contract has been complied with the bill of

lading issued by the carrier shall be returned tohim, and by virtue of the exchange of thiscertificate for the article transported, the respectiveobligations and actions shall be considered ascanceled, unless in the same act the claims whichthe contracting parties desired to reserve arereduced to writing, exception being made of the

provisions of Article 366.If in case of loss or for any other reasonwhatsoever, the consignee can not return upon

receiving the merchandise the bill of ladingsubscribed by the carrier, he shall give said carriera receipt for the goods delivered, this receiptproducing the same effects as the return of the billof lading.

G. Applicability of Provisions

ARTICLE 379The provisions contained in Articles 349 et seq.shall also be understood as relating to persons

who, although they do not personally effect thetransportation of commercial goods, contract to doso through others, either as contractors for aspecial and fixed transaction or as freight andtransportation agents.In either case they shall be subrogated to the placeof the carriers with regard to the obligations andliability of the latter, as well as with regard to theirright.

IV. Admiralty and Maritime Commerce

A. Sources of Maritime/Admiralty Laws in thePhilippines

Main source of law: Code of Commerce

If common carrier, apply Civil Code first,

then Code of Commerce and special laws.

Maritime law includes coastwise, oceanwiseand commercial laws.

B. Concept of Admiralty; jurisdiction overadmiralty cases

Admiralty is distinguished from overlandtransportation on the size of the vessel and size

of the body of water over which a vesseltraverses. However, it is now the amount of the

claim that is relevant, and not whether it is

an admiralty or maritime claim.

BP 129 Sec 19

Jurisdiction in civil cases. Regional Trial Courtsshall exercise exclusive original jurisdiction:

(3) In all actions in admiralty and maritimejurisdiction where he demand or claim exceeds Onehundred thousand pesos (P100,000.00) or , in

Metro Manila, where such demand or claim exceeds

Two hundred thousand pesos (200,000.00);

Section 33. Jurisdiction of Metropolitan Trial Courts,Municipal Trial Courts and Municipal Circuit TrialCourts in civil cases. Metropolitan Trial Courts,Municipal Trial Courts, and Municipal Circuit TrialCourts shall exercise:

(1) Exclusive original jurisdiction over civil actionsand probate proceedings, testate and intestate,including the grant of provisional remedies inproper cases, where the value of the personal

property, estate, or amount of the demand does

not exceed One hundred thousand pesos(P100,000.00) or, in Metro Manila where suchpersonal property, estate, or amount of thedemand does not exceed Two hundred thousandpesos (P200,000.00) exclusive of interest damagesof whatever kind, attorney's fees, litigationexpenses, and costs, the amount of which must bespecifically alleged: Provided, That where there areseveral claims or causes of action between thesame or different parties, embodied in the samecomplaint, the amount of the demand shall be the


17/52



totality of the claims in all the causes of action,irrespective of whether the causes of action aroseout of the same or different transactions;

C. Vessels

1. MEANINGVessels are those engaged in navigation,

whether coastwide or on the high seas, includingfloating docks, pontoons, dredges, scows, and anyother floating apparatus destined for the services ofthe industry or maritime commerce.

Vessels engaged in the business of carryingor transporting passengers or goods forcompensation, offering their services to the public,are common carriers, and are governed primarilyby the Civil Code and suppletorily by the Code ofCommerce and special laws.

2. NATURE AND ACQUISITION OF

Lopez v. DurueloThe word vessel used in the section was notintended to include all ships, craft or floatingstructures of ever

up 2008 commercial law (transportation law)

Documents