TRANSPORTATION LAW NOTES

SY 2019-2020

I. Preliminary Considerations
1. Public Utilities/Public Service
a. Constitutional Limitation on operation of public utilities
i. Police Power – Article XII, Section 11 and Section 17 of the 1987 Philippine
Constitution.

 The temporary takeover by the government extends only to the operation

of the business and not to the ownership thereof. As such the government
is not required to compensate the private entity-owner of the said business
as there is no transfer of ownership, whether permanent or temporary. The
private entity-owner affected by the temporary takeover cannot, likewise,
claim just compensation for the use of the said business and its properties
as the temporary takeover by the government is in exercise of its police
power and not of its power of eminent domain.
(Agan, Jr. vs. Philippine International Air Terminals Co., Inc., 402 SCRA
612, G.R. No. 155001, G.R. No. 155547, G.R. No. 155661 May 5, 2003)

 Article XII, Section 17 of the 1987 Constitution envisions a situation

wherein the exigencies of the times necessitate the government to
“temporarily take over or direct the operation of any privately owned public
utility or business affected with public interest”; Clearly, the State in
effecting the temporary takeover is exercising its police power and its
exercise therefore must not be unreasonably hampered nor its exercise be
a source of obligation by the government in the absence of damage due to
arbitrariness of its exercise, and requiring the government to pay
reasonable compensation for the reasonable use of the property pursuant
to the operation of the business contravenes the Constitution.
(Agan, Jr. vs. Philippine International Air Terminals Co., Inc., 402 SCRA
612, G.R. No. 155001, G.R. No. 155547, G.R. No. 155661 May 5, 2003 )

 A review of the applicable provisions of law indicates that a franchise specially

granted by Congress is not necessary for the operation of the Manila
International Container Port (MICP) by private entity, a contract entered into
by the PPA and such entity constituting substantial compliance with the law.
(Albano vs Reyes, GR No. 83551, July 11, 1989)

 Even if the MICP be considered a public utility, or a public service on the theory
that it is a “wharf” or a “dock” as contemplated under the Public Service Act,
its operation would not necessarily call for a franchise from the Legislative
Branch.Franchises issued by Congress are not required before each and every
public utility may operate. Thus, the law has granted certain administrative
agencies the power to grant licenses for or to authorize the operation of certain
public utilities. (See E.O. Nos. 172 and 202)
(Albano vs Reyes, GR No. 83551, July 11, 1989)

2. What constitutes a public utility?

a. Article XII, Section 18-19 of the 1987 Philippine Constitution

 The term "public utility," in this jurisdiction, includes every individual,

copartnership, association, corporation, or joint stock company that now or
hereafter may own, operate, manage, or control, within the Philippine Islands, any
ice, refrigeration, cold storage system, plant, or equipment, for public use.
(Iloilo Ice and Cold Storage Company vs Public Utility Board, GR. No. 19857)

 The criterion by which to judge of the character of the use is whether the public may
enjoy it by right or only by permission.
(Iloilo Ice and Cold Storage Company vs Public Utility Board, GR. No. 19857)
  The essential feature of a public use is that it is not. confined to privileged
individuals, but is open to the indefinite public.
(Iloilo Ice and Cold Storage Company vs Public Utility Board, GR. No. 19857)

 The use is public if all persons have the right to the use under the same
circumstances.
(Iloilo Ice and Cold Storage Company vs Public Utility Board, GR. No. 19857)

3. Operation vs Ownership of Public Utilities

o The phrasing of the question is erroneous; it is loaded. What private respondent owns are
the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant,
not a public utility. While a franchise is needed to operate these facilities to serve the
public, they do not by themselves constitute a public utility. What constitutes a public
utility is not their ownership but their use to serve the public.
(Tatad vs. Garcia, Jr., 243 SCRA 436, G.R. No. 114222 April 6, 1995)

o The Constitution, in no uncertain terms, requires a franchise for the operation of a public
utility. However, it does not require a franchise before one can own the facilities needed to
operate a public utility so long as it does not operate them to serve the public.
(Tatad vs. Garcia, Jr., 243 SCRA 436, G.R. No. 114222 April 6, 1995)

o In law, there is a clear distinction between the “operation” of a public utility and the
ownership of the facilities and equipment used to serve the public. Ownership is defined
as a relation in law by virtue of which a thing pertaining to one person is completely
subjected to his will in everything not prohibited by law or the concurrence with the rights
of another. The right to operate a public utility may exist independently and separately
from the ownership of the facilities thereof. One can own said facilities without operating
them as a public utility, or conversely, one may operate a public utility without owning the
facilities used to serve the public. The devotion of property to serve the public may be done
by the owner or by the person in control thereof who may not necessarily be the owner
thereof.
(Tatad vs. Garcia, Jr., 243 SCRA 436, G.R. No. 114222 April 6, 1995)

4. License/Franchise to Operate Public Utilities

o Section 8 of Article XIII of the Constitution provides, among other things, that no
franchise, certificate, or any other form of authorization for the operation of a public utility
shall be "for a longer period than fifty years," and when it was ordained, in section 15 of
Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, that the Public
Service Commission may prescribe as a condition for the issuance of a certificate that it
"shall be valid only for a definite period of time" and, in section 16 that "no such certificates
shall be issued for a period of more than fifty years," the National Assembly meant to give
effect to the aforesaid constitutional mandate. More than this, it has thereby also declared
its will that the period to be fixed by the Public Service Commission shall not be longer
than fifty years. All that has been delegated to the commission, therefore, is the
administrative function, involving the use of discretion, to carry out the will of the National
Assembly having in view, in addition, the promotion of "public interests in a proper and
suitable manner." The fact that the National Assembly may itself exercise the function and
authority thus conferred upon the Public Service Commission does not make the provision
in question constitutionally objectionable.
(Pangasinan Trans. Co. vs. Public Service Commission, 70 Phil., 221, No. 47065 )

o Under the fourth paragraph of section 15 of Commonwealth Act No. 146, as amended by
Commonwealth Act No. 454, the power of the Public Service Commission to prescribe the
conditions "that the service can be acquired by the Commonwealth of the Philippines or by
any instrumentality thereof upon payment of the cost price of its useful equipment, less
reasonable depreciation," and "that the certificate shall be valid only for a definite period
of time" is expressly made applicable "to any extension or amendment of certificates
actually in force" and "to authorizations to renew and increase equipment and properties."
(Pangasinan Trans. Co. vs. Public Service Commission, 70 Phil., 221, No. 47065 )

o The National Assembly, by virtue of the Constitution, logically succeeded to the Congress
of the United States in the power to amend, alter or repeal any franchise or right granted
prior to or after the approval of the Constitution; and when Commonwealth Acts Nos. 146
 and 454 were enacted, the National Assembly, to the extent therein provided, has declared
its will and purpose to amend or alter existing certificates of public convenience.
(Pangasinan Trans. Co. vs. Public Service Commission, 70 Phil., 221, No. 47065 )

o Definition of Franchise - Franchise, being merely a privilege emanating from the state's
sovereign power is subject to the regulation by the State itself by virtue of its police power.
(Radio Communications of the Philippines, Inc. vs. NTC, 150 SCRA 450, No. L-68729)

o The petitioner cannot install and operate radio telephone services on the basis of its
legislative franchise alone.
(Radio Communications of the Philippines, Inc. vs. NTC, 150 SCRA 450, No. L-68729)

Under the circumstances of this case, the mere fact that the petitioner possesses a franchise
to put up and operate a radio communications system in certain areas is not an insuperable
obstacle to the public respondent's issuing the proper certificate to an applicant desiring
to extend the same services to those areas. The Constitution mandates that a franchise
cannot be exclusive in nature nor can a franchise be granted except that it must be subject
to amendment, alteration, or even repeal by the legislature when the common good so
requires. (Art. XII, sec. 11 of the 1986 Constitution). There is an express provision in the
petitioner's franchise which provides compliance with the above mandate (RA 2036, sec.
15).
(Radio Communications of the Philippines, Inc. vs. NTC, 150 SCRA 450, No. L-68729)

5. Certificate of Public Convenience vs Certificate of Public Convenience and

Necessity
o Many and varied are the definitions of certificates of public convenience which courts and
legal writers have drafted. Some statutes use the terms “convenience and necessity” while
others use only the words “public convenience.” The terms “convenience and necessity,” if
used together in a statute, are usually held not to be separable, but are construed together.
Both words modify each other and must be construed together. The word ‘necessity’ is so
connected, not as an additional requirement but to modify and qualify what might
otherwise be taken as the strict significance of the word necessity. Public convenience and
necessity exists when the proposed facility will meet a reasonable want of the public and
supply a need which the existing facilities do not adequately afford. It does not mean or
require an actual physical snecessity or an indispensable thing. “The terms ‘convenience’
and ‘necessity’ are to be construed together, although they are not synonymous, and effect
must be given both. The convenience of the public must not be circumscribed by according
to the word ‘necessity’ its strict meaning or an essential requisites.”
(Philippine Airlines, Inc. vs. Civil Aeronautics Board, 270 SCRA 538, G.R. No. 119528
March 26, 1997)

II. Common Carriers

I. Contract of Carriage, definition
a. Contract of Carriage

 A contract of carriage is defined as one whereby a certain person or association

of persons obligate themselves to transport persons, things, or goods from one
place to another for a fixed price.
(Fernando vs. Northwest Airlines, Inc., 817 SCRA 233, G.R. No. 212038, G.R.
No. 212043 February 8, 2017)

 Under Article 1732 of the Civil Code, this “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” is called a common carrier.
(Fernando vs. Northwest Airlines, Inc., 817 SCRA 233, G.R. No. 212038, G.R.
No. 212043 February 8, 2017)

II. Common Carrier, definition (Article 1732, NCC)

 Article 1732 of the New Civil Code:

 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.

III. Common Carrier and Private Carrier distinguished

a. Common Carrier vs Private Carrier

 A carrier is a person or corporation who undertakes to transport or convey goods or

persons from one place to another, gratuitously or for hire. The carrier is classified
either as a private/special carrier or as a common/public carrier. A private carrier
is one who, without making the activity a vocation, or without holding himself or
itself out to the public as ready to act for all who may desire his or its services,
undertakes, by special agreement in a particular instance only, to transport goods
or persons from one place to another either gratuitously or for hire. The provisions
on ordinary contracts of the Civil Code govern the contract of private carriage. The
diligence required of a private carrier is only ordinary, that is, the diligence of a good
father of the family.
(Pereña vs. Zarate, 679 SCRA 208, G.R. No. 157917 August 29, 2012

 In contrast, a common carrier is a person, corporation, firm or association engaged

in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering such services to the public. Contracts of
common carriage are governed by the provisions on common carriers of the Civil
Code, the Public Service Act, and other special laws relating to transportation. A
common carrier is required to observe extraordinary diligence, and is presumed to
be at fault or to have acted negligently in case of the loss of the effects of passengers,
or the death or injuries to passengers.
(Pereña vs. Zarate, 679 SCRA 208, G.R. No. 157917 August 29, 2012)

 Article 1732 of the Civil Code defines a common carrier as “persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their services to
the public.” It has been held that the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who opt to avail themselves of its
transportation service for a fee. A carrier which does not qualify under the above test
is deemed a private carrier. “Generally, private carriage is undertaken by special
agreement and the carrier does not hold himself out to carry goods for the general
public. The most typical, although not the only form of private carriage, is the charter
party, a maritime contract by which the charterer, a party other than the shipowner,
obtains the use and service of all or some part of a ship for a period of time or a
voyage or voyages.”
(National Steel Corporation vs. Court of Appeals, 283 SCRA 45, G.R. No. 112287,
G.R. No. 112350 December 12, 1997)

 The rights and obligations of a private carrier and a shipper, including their
respective liability for damage to the cargo, are determined primarily by stipulations
in their contract of private carriage or charter party.
(National Steel Corporation vs. Court of Appeals, 283 SCRA 45, G.R. No. 112287,
G.R. No. 112350 December 12, 1997)

 In referring to Article 1732 of the Civil Code, it held thus: “The above article makes
no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity
(in local idiom, as a “sideline”). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the “general public,” i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1732 deliberately refrained
from making such distinctions.”
(Bascos vs. Court of Appeals, 221 SCRA 318, G.R. No. 101089 April 7, 1993)

 The above article makes no distinction between one whose principal business activity
is the carrying of persons or goods or both, and one who does such carrying only as
 an ancillary activity (in local idiom, as “a sideline”). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the “general public,” i.e., the general
community or population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article 1733 deliberately
refrained from making such distinctions.
(De Guzman vs. Court of Appeals, 168 SCRA 612, No. L-47822 December 22, 1988)

 The definition of common carriers in Article 1732 of the Civil Code makes no
distinction between one whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as an ancillary activity. We
also did not distinguish between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does
not distinguish between a carrier offering its services to the general public, and one
who offers services or solicits business only from a narrow segment of the general
population.
(Asia Lighterage Shipping vs CA, GR No 147246)

 The test to determine a common carrier is “whether the given undertaking is a part
of the business engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business transacted.”
(Asia Lighterage Shipping vs CA, GR No 147246)

 The Civil Code provisions on common carriers should not apply where the common
carrier is not acting as such but as a private carrier. Under American jurisprudence,
a common carrier undertaking to carry a special cargo or chartered to a special
person only, becomes a private carrier. As a private carrier, a stipulation exempting
the owner from liability for the negligence of its agent is valid.
(Home Insurance Company vs American Steamship Agencies)

 On the first issue, the Court finds the conclusion of the trial court and the Court of
Appeals to be amply justified. GPS, being an exclusive contractor and hauler of
Concepcion Industries, Inc., rendering or offering its services to no other individual
or entity, cannot be considered a common carrier. Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for hire or
compensation, offering their services to the public, whether to the public in general
or to a limited clientele in particular, but never on an exclusive basis. The true test of
a common carrier is the carriage of passengers or goods, providing space for those
who opt to avail themselves of its transportation service for a fee. Given accepted
standards, GPS scarcely falls within the term “common carrier.”
(FGU Insurance vs Sarmiento Trucking Corp.)

 The prevailing doctrine on the question is that enunciated in the leading case of De
Guzman vs. Court of Appeals Applying Article 1732 of the Code, in conjunction with
Section 13(b) of the Public Service Act, this Court has held: “The above article makes
no distinction between one whose principalbusiness activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as ‘a sideline’). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the ‘general public,’ i.e., the general community or population,
and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained from making
such distinctions. “So understood, the concept of ‘common carrier’ under Article
1732 may be seen to coincide neatly with the notion of ‘public service,’ under the
Public Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil Code.”
(Philippine American General Insurance Company vs PKS Shipping)
  Much of the distinction between a “common or public carrier” and a “private or
special carrier” lies in the character of the business, such that if the undertaking is
an isolated transaction, not a part of the business or occupation, and the carrier does
not hold itself out to carry the goods for the general public or to a limited clientele,
although involving the carriage of goods for a fee, the person or corporation
providing such service could very well be just a private carrier. A typical case is that
of a charter party which includes both the vessel and its crew, such as in a bareboat
or demise, where the charterer obtains the use and service of all or some part of a
ship for a period of time or a voyage or voyages and gets the control of the vessel and
its crew. Contrary to the conclusion made by the appellate court, its factual findings
indicate that PKS Shipping has engaged itself in the business of carrying goods for
others, although for a limited clientele, undertaking to carry such goods for a fee. The
regularity of its activities in this area indicates more than just a casual activity on its
part. Neither can the concept of a common carrier change merely because individual
contracts are executed or entered into with patrons of the carrier. Such restrictive
interpretation would make it easy for a common carrier to escape liability by the
simple expedient of entering into those distinct agreements with clients.
(Philippine American General Insurance Company vs PKS Shipping)

 Under Article 1732 of the Civil Code, common carriers are persons, corporations,
firms, or associations engaged in the business of carrying or transporting passenger
or goods, or both by land, water or air for compensation, offering their services to
the public. On the other hand, a private carrier is one wherein the carriage is
generally undertaken by special agreement and it does not hold itself out to carry
goods for the general public. A common carrier becomes a private carrier
when it undertakes to carry a special cargo or chartered to a special
person only. For all intents and purposes, therefore, Reputable operated as a
private/special carrier with regard to its contract of carriage with Wyeth.
(Malayan Insurance Co. Vs. Philippine First Insurance Company)

 The extent of a private carrier’s obligation is dictated by the stipulations of a contract

it entered into, provided its stipulations, clauses, terms and conditions are not
contrary to law, morals, good customs, public order, or public policy. “The Civil Code
provisions on common carriers should not be applied where the carrier is not acting
as such but as a private carrier. Public policy governing common carriers has no force
where the public at large is not involved.
(Malayan Insurance Co. Vs. Philippine First Insurance Company)

IV. Distinguished from towage, arrastre and stevedoring

a. Distinguish from towage
 An agreement by virtue of which a party binds itself to tow another vessel by
means of a steamer, and for a certain consideration, from one port to another, is
not a charter party but a contract for the hire of services, and is subject to the
provisions of the Civil Code.

b. Distinguish from arrastre

 The operation of receiving, conveying, and loading or unloading merchandise on
piers or wharves.

c. Distinguish from stevedoring

 A person employed, or a contractor engaged, at a dock to load and unload cargo
from ships.

 It is not disputed that Mindanao Terminal was performing purely stevedoring

function while the private respondent in the Summa case was performing arrastre
function. In the present case, Mindanao Terminal, as a stevedore, was only charged
with the loading and stowing of the cargoes from the pier to the ship’s cargo hold; it
was never the custodian of the shipment of Del Monte Produce. A stevedore is not a
common carrier for it does not transport goods or passengers; it is not akin to a
warehouseman for it does not store goods for profit. The loading and stowing of
cargoes would not have a far reaching public ramification as that of a common carrier
and a warehouseman; the public is adequately protected by our laws on contract and
on quasi-delict. The public policy considerations in legally imposing upon a common
 carrier or a warehouseman a higher degree of diligence is not present in a
stevedoring outfit which mainly provides labor in loading and stowing of cargoes for
its clients.
(Mindanao Terminal and Brokerage Services Inc vs Phoenix Assurance Company)

d. Distinguish from travel agency

 A travel agency include procuring tickets and facilitating travel permits
or visas as well as booking customers for tours. (Crisostomo vs Caravan
Travel)

V. Tests to determine Common Carrier (Carriage of goods)

a. Test to determine common carrier

 The test for determining whether a party is a common carrier of goods is: 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.
(First Philippine Industrial Corporation vs CA)

b. What constitute common carrier

 Based on the above definitions and requirements, there is no doubt that petitioner is
a common carrier. It is engaged in the business of transporting or carrying goods,
i.e.petroleum products, for hire as a public employment. It undertakes to carry for
all persons indifferently, that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation. The fact that petitioner has a
limited clientele does not exclude it from the definition of a common carrier.
(First Philippine Industrial Corporation vs CA)

 As correctly pointed out by petitioner, the definition of “common carriers” in the

Civil Code makes no distinction as to the means of transporting, as long as it is by
land, water or air. It does not provide that the transportation of the passengers or
goods should be by motor vehicle. In fact, in the United States, oil pipe line operators
are considered common carriers.
(First Philippine Industrial Corporation vs CA)

 Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs
broker and warehouseman, she does not indiscriminately hold her services out to the
public but only offers the same to select parties with whom she may contract in the
conduct of her business. The contention has no merit. In De Guzman v. Court of
Appeals, the Court dismissed a similar contention and held the party to be a common
carrier, thus—The Civil Code defines “common carriers” in the following terms:
“Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.” The above
article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity . . . Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basisand one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering
its services to the “general public,” i.e., the general community or population, and
one who offers services or solicits business only from a narrow segmentof the general
population. We think that Article 1732 deliberately refrained from making such
distinctions. So understood, the concept of “common carrier” under Article 1732 may
be seen to coincide neatly with the notion of “public service,” under the Public Service
Act (Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code.
 (Calvo vs UCPB General Insurance)

 It is settled that under a given set of facts, a customs broker may be regarded as a
common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable
Court of Appeals, held: The appellate court did not err in finding petitioner, a
customs broker, to be also a common carrier, as defined under Article 1732 of the
Civil Code, to wit, Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public.
x x x Article 1732 does not distinguish between one whose principal business activity
is the carrying of goods and one who does such carrying only as an ancillary activity.
The contention, therefore, of petitioner that it is not a common carrier but a customs
broker whose principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It suffices that
petitioner undertakes to deliver the goods for pecuniary consideration. And in Calvo
v. UCPB General Insurance Co., Inc., this Court held that as the transportation of
goods is an integral part of a customs broker, the customs broker is also a common
carrier. For to declare otherwise “would be to deprive those with whom [it] contracts
the protection which the law affords them notwithstanding the fact that the
obligation to carry goods for [its] customers, is part and parcel of petitioner’s
business.”
(Schimtz Transport and Brokerage Corp. vs Transport Venture)

 As De Guzman instructs, Article 1732 of the Civil Code defining “common carriers”
has deliberately refrained from making distinctions on whether the carrying of
persons or goods is the carrier’s principal business, whether it is offered on a regular
basis, or whether it is offered to the general public. The intent of the law is thus to
not consider such distinctions. Otherwise, there is no telling how many other
distinctions may be concocted by unscrupulous businessmen engaged in the carrying
of persons or goods in order to avoid the legal obligations and liabilities of common
carriers.
(Cruz vs Sun Holiday)

VI. Parties to the contract of carriage

VII. Diligence required of a Common Carrier (Article 1733)
a. Extraordinary diligence and the underlying reason

i. Article 1733. Common carriers, from the nature of their business for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them, according to
all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed
in Article 1734, 1735, and 1745, Nos. 5, 6, and 7, while extraordinary diligence for
the safety of the passengers is further set forth in Articles 1755 and 1756.

ii. What is extraordinary diligence?

 A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautions
persons, with due regard for all circumstances. (Report of the Code
Commission)

iii. What is the underlying reason for the observance of extraordinary reason?
 This extraordinary diligence required of common carriers is calculated to
protect the passengers from the tragic mishaps that frequently occur in
connection with rapid modern transportation. This high standard of care is
imperatively demanded by the precariousness of human life and by the
consideration that every person must in every way be safeguarded against
all injury. (Report of the Code Commission)

b. Requirements of extraordinary diligence in carriage by sea

i. Warranty of seaworthiness of the vessel (Section 3(1) and 3(2) COGSA; Article
609 of the Code of Commerce)
 1. Section 3(1) and 3(2) of the Carriage of Goods by Sea Act:

Section 3. (1) The carrier shall be bound, before and at the beginning
of the voyage, to exercise due diligence to —

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

(c) Make the holds, refrigerating and cooling chambers, and all
other parts of the ship in which goods are carried, fit and safe
for their reception carriage and preservation.

(2) The carrier shall properly and carefully load, handle, stow, carry,
keep, care for, and discharge the goods carried.

2. Article 609, Code of Commerce:

Article 609. Captains and masters of vessels must be Spaniards *

having legal capacity to bind themselves in accordance with this Code,
and must prove that they have the skill, capacity, and qualifications
required to command and direct the vessel, as established by marine
laws, ordinances, or regulations, or by those of navigation, and that
they are not disqualified according to the same for the discharge of
the duties of that position.

If the owner of a vessel desires to be the captain thereof and does not
have the legal qualifications therefor, he shall limit himself to the
financial administration of the vessel, and shall intrust her navigation
to a person possessing the qualifications required by said ordinances
and regulations

ii. No overloading;
iii. Proper storage;
iv. Obligation of captain and crew;
v. Rule on deviation and transshipment (Article 359 Code of Commerce)

Article 359. If there should be an agreement between the shipper and the
carrier with regard to the road over which the transportation is to be made,
the carrier can not change the route, unless obliged to do so by force
majeure; and should he do so without being forced to, he shall be liable for
any damage which may be suffered by the goods transported for any other
cause whatsoever, besides being required to pay the amount which may
have been stipulated for such a case.

When on account of the said force majeure the carrier is obliged to take
another route, causing an increase in the transportation charges, he shall
be reimbursed for said increase after presenting the formal proof thereof.

c. Requirements of extraordinary diligence in carriage by land

i. Good conditions of the vehicle
ii. Compliance with traffic rules; (RA 4136)
iii. Obligation to inspect;

d. Requirements of extra ordinary diligence in carriage by air

VIII. Liabilities of Common Carriers in case of breach of contract of carriage

a. Culpa contractual, culpa aquiliana, culpa criminal (Three causes of action available
to the injured party)

i. Culpa contractual: negligence based on contract;

  In the contract of carriage of passengers, it is the obligation of carrier to
convey the passengers safely to the point of destination. In case a passenger
is not brought safely thereto, there will be a breach of contract. Any case
brought based on culpa contractual will be captioned "Passenger Z vs X,
Inc" because the contract is between them. The driver is not included as a
party to the action, because he is not a party to the contract, there is no
privity as to him.

ii. Culpa aquiliana: negligence based on tort; or

 Damage caused to another due to negligence. The case will be entitled
"Passenger Z vs X, Inc. and Driver Y," an the defendants will be solidarily
liable as joint tort-feasors. In case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the driver
of another vehicle, both drivers as well as the owners of the two vehicles are
jointly and severally liable. (Tiu vs Arriesgado)

iii. Culpa Criminal: negligence based on a crime

 The driver's act may amount to a crime: reckless imprudence resulting in
physical injuries. The case will be entitled "People vs Driver Y," and if the
latter is convicted but is insolvent, an action can be pursued by Passenger
Z against X, Inc. to enforce the latter's subsidiary liability.

iv. What is the weakest cause of action out of the three?

 Culpa Aquiliana because the employer may raise the defense of due
diligence in the selection and supervision of the driver.

v. What is the strongest cause of action?

 Culpa criminal because of the company's subsidiary liability the latter's
defense are limited but quantum of evidence requires guilt beyond
reasonable doubt.

vi. What is the cause of action in Transportation Law?

 Culpa contractual. In a contract of carriage of passengers, it is the
obligation of the common carrier to bring the passengers safely to the point
of destination. If injured, or death occurs, the presumption of negligence
automatically arises, and the common carrier can be held liable if he fails
to prove the extraordinary diligence for the duration of the carriage.

b. Prescriptive period
i. Overland transportation of goods and coastwise shipping (Article 366 Code of
Commerce):

Article 366. Within the twenty-four hours following the receipt of the
merchandise a claim may be brought against the carrier on account of
damage or average found therein on opening the packages, provided that
the indications of the damage or average giving rise to the claim can not be
ascertained from the exterior of said packages, in which case said claim
would only be admitted on the receipt of the packages.

After the periods mentioned have elapsed, or after the transportation

charges have been paid, no claim whatsoever shall be admitted against the
carrier with regard to the condition in which the goods transported were
delivered.

ii. International carriage of goods by sea (Article 3(6) of Code of Commerce)

The legal presumption of a customary engagement in commerce exists

from the time the person who desires to trade gives notice through
circulars, newspapers, handbills, posters exhibited to the public, or in any
other manner whatsoever, of an establishment, the purpose of which is to
conduct any commercial transaction.
VI. Registered Owner Rule and Kabit System
a. Registered Owner Rule: We have consistently ruled that the registered owner of any
vehicle is directly and primarily responsible to the public and third persons while it is
being operated. Whether the driver is authorized or not by the actual owner is
irrelevant to determining the liability of the registered owner who the law holds
primarily and directly responsible for any accident, injury or death caused by the
operation of the vehicle in the streets and highways. The main purpose of vehicle
registration is the easy identification of the owner who can be held responsible for any
accident, damage or injury caused by the vehicle.
(Villanueva vs Domingo)

b. Kabit System: is an arrangement whereby whereby a person who has been granted
a certificate of public convenience allows other persons who own motor vehicles to
operate them under his license, sometimes for a fee or percentage of the earnings.
Although the parties to such an agreement are not outrightly penalized by law, the
kabit system is invariably recognized as being contrary to public policy and therefore
void and inexistent under Article 1409 of the Civil Code.

II. Obligations of Common Carriers in the Carriage of Goods

A. Vigilance over goods

a. Exercise of extraordinary diligence (Article 1733)
 Article 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them, according to all
the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in
articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for
the safety of the passengers is further set forth in articles 1755 and 1756.

b. Presumption of negligence (Article 1735)

 Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in article 1733.

c. Duration of liability (Articles 1736-1738)

i. Delivery of goods to common carrier
ii. Actual or constructive delivery
iii. Temporary unloading or storage

 Article 1736. 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 article 1738.

 Article 1737. The common carrier's duty to observe extraordinary diligence

over the goods remains in full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or owner has made use of the
right of stoppage in transitu.

 Article 1738. The extraordinary liability of the common carrier continues to

be operative even during the time the goods are stored in a warehouse of the
carrier at the place of destination, until the consignee has been advised of the
arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them.

d. Exempting causes (Articles 1734, 1739-1740, 1742-1743)

i. Requirement of absence of negligence
ii. Absence of delay
iii. Due diligence to prevent or lessen the loss
  Article 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:

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

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

 Article 1739. In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate and only
cause of the loss. However, the common carrier must exercise due diligence to
prevent or minimize loss before, during and after the occurrence of flood,
storm or other natural disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or deterioration of the goods.
The same duty is incumbent upon the common carrier in case of an act of the
public enemy referred to in article 1734, No. 2.

 Article 1740. If the common carrier negligently incurs in delay in

transporting the goods, a natural disaster shall not free such carrier from
responsibility.

 Article 1742. Even if the loss, destruction, or deterioration of the goods

should be caused by the character of the goods, or the faulty nature of the
packing or of the containers, the common carrier must exercise due diligence
to forestall or lessen the loss.

 Article 1743. If through the order of public authority the goods are seized or
destroyed, the common carrier is not responsible, provided said public
authority had power to issue the order.

e. Contributory negligence (Article 1741, 2179 NCC)

 Article 1741. If the shipper or owner merely contributed to the loss, destruction or
deterioration of the goods, the proximate cause thereof being the negligence of the
common carrier, the latter shall be liable in damages, which however, shall be
equitably reduced.

 Article 2179. When the plaintiff's own negligence was the immediate and
proximate cause of his injury, he cannot recover damages. But if his negligence was
only contributory, the immediate and proximate cause of the injury being the
defendant's lack of due care, the plaintiff may recover damages, but the courts shall
mitigate the damages to be awarded. (n)