TRANSPORTATION LAW

I. GOVERNING LAWS
TRANSPORTATION LAWS in the Philippines whether by land, sea or air are
generally governed by the New Civil Code more particularly Article 1732 to Article
1766.
Art. 1766 provides:
In all matters not regulated by the Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and by special laws.
Other special laws on transportation which may apply are the following:
1. Carriage of Goods by the Sea Act(COGSA)
2. Salvage Law
3. Warsaw Convention
4. Civil Aviation Authority Law
MORE SPECIFICALLY, different transportation modes are governed by the following
laws:
1. Coastwise Shipping

a. The Civil Code Articles 1732 to 1766

b. Code of Commerce in suppletory character. It applies only in the absence
of provisions under the Civil Code

2. Overland Transportation

a. The Civil Code of the Philippines (primary law applicable)

b. The Code of Commerce, which shall apply in suppletory manner

3. Air Transportation

a. The Civil Code

b. Code of Commerce
c. Warsaw Convention
d. Chicago Convention
e. RA 9497 known as the Civil Aviation Authority Act of 2008 passed on
March 4, 2008
f. RA 776 known as An Act to Reorganize the Civil Aeronautics Board and
the Civil Aeronautics Association, passed on June 20, 1952

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 II. CONSTITUTIONAL PROVISIONS

1. Constitutional Provisions regulation/ limiting or restricting the issuance of

franchise to public utilities.

a. Article XII of the National Economy and Patrimony

Section 11. –

-Franchise , certificate, or any other form of authorization for the

operation of a public utility shall be granted ONLY TO CITIZENS OF
THE PHILIPPINES or to corporations or associations organized under
the laws of the Philippines AT LEAST 60 PERCENT of whose capital is
owned by such citizens.

TATAD ET AL., vs SEC. GARCIA AND EDSA LRT CORP LTD.

GR No. 114222, April 16, 1995

Doctrine: A mere owner and lessor of the facilities used by a public utility is not a public
utility. What constitutes a public utility is not their ownership but their use to serve the
public.

Facts

The DOTC planned to construct a light railway transit (LRT) line along EDSA to alleviate
traffic. Meanwhile, the Build-Operate-Transfer (BOT) Law was passed. To comply with the
BOT law, the DOTC created the Prequalification Bids and Awards Committee (PBAC) and
the Technical Committee for project EDSA LRT III. After evaluating the prequalification
bids, only the EDSA LRT Consortium out of a total of five applicants, met the
requirements. A letter was sent to the president, recommending the award of the project to
the sole complying bidder.

A change in administration led to the non-approval of the contract. The new Executive
Secretary, Franklin Drilon, stated that the president could not approve the project because
of alleged non-compliance of the BOT law among others. In view of these comments, the
agreement was re-negotiated. The parties entered into a Build, Lease and Transfer
agreement. The revised agreement was submitted to and later approved by President
Fidel Ramos.

Senators Francisco Tatad and others filed a petition to prohibit the implementation of the
revised BLT agreement to build the LRT. They questioned the awarding of the LRT
contract to EDSA LRT Consortium, a foreign corporation incorporated in Hong Kong,

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 stating that the EDSA LRT III is a public utility and therefore its ownership and operation is
limited by the Constitution to Filipino citizens and domestic corporations.

Issue: Whether the contract was valid

Ruling

YES. The contract is for the construction of the EDSA LRT III. Once constructed, EDSA
LRT Consortium, as lessor, would turn it over to the DOTC, as lessee, for the DOTC to
operate the system and pay rentals for the usage. EDSA LRT Consortium would own the
rail tracks, rolling stocks, 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.

The Constitution requires a franchise for the operation of a public utility. It does not require
a franchise before one can own the facilities needed to operate a public utility, as long as it
does not operate them to serve the public. The right to operate a public utility may exist
independently and separately from the ownership of the facilities.

a. What constitutes a public utility is not their ownership BUT THEIR USE TO
SERVE THE PUBLIC.

b. The Constitution clearly requires a franchise for the operation(not ownership) of a

public utility.

Section 11 of Article XII of the Constitution provides:

Franchise, certificate, or any other form of authorization for the operation of

public utility shall be granted ONLY TO CITIZENS OF THE PHILIPPINES or to
corporations or associations organized under the laws of the Philippines AT
LEAST 60 PERCENT of whose capital is owned by such citizens.

c. 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 subject to his will in everything not prohibited by law or
the concurrence with the rights of another.

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 d. The exercise of the rights encompassed in ownership is limited by law so that a
property cannot be operated and used to serve the public as a public utility
UNLESS THE OPERATOR HAS A FRANCHISE.

e. The right to operate 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 necessarily owning the
facilities used to serve the public.

f. The devotion of property to serve the public may be done by the owner or by a
person in control thereof who may not be necessary the owner thereof.

g. A mere owner and lessor of the facilities used by a public utility is not a
public utility. Neither are owners of tank, refrigerator, wine poultry and beer cars
who supply cars under contract to railroad companies considered as public
utilities.

h. Even the mere formation of a public utility corporation does not ipso facto
characterize the corporation as one operating a public utility. THE MOMENT
FOR DETERMINING THE REQUISITE FILIPINO NATIONALITY(as required
under the Constitution) IS WHEN THE ENTITY APPLIES FOR A
FRANCHISE, CERTIFICATE OR ANY OTHER FORM OF AUTHORIZATION
FOR THAT PURPOSE.

READ:
Tawang Multi-Purpose Cooperative vs. La Trinidad Water District
GR No.166471

FACTS:

On 9 October 2000, Tawang Multi-Purpose Cooperative (TMPC) filed with the National Water

Resources Board (NWRB) an application for a certificate of public convenience (CPC) to operate
and maintain a waterworks system in Barangay Tawang. La Trinidad Water District (LTWD), a local
water utility, opposed TMPC's application. LTWD claimed that, under Section 47 of PD No. 198, as
amended, its franchise is exclusive.

The NWRB approved TMPC's application for a CPC. In its 15 August 2002 Decision, the NWRB
held that LTWD's franchise cannot be exclusive since exclusive franchises are unconstitutional and
found that TMPC is legally and financially qualified to operate and maintain a waterworks system.
The RTC set aside the NWRB's decision and cancelled TMPC's CPC, stating that "the Constitution
does not necessarily prohibit a franchise that is exclusive on its face, meaning, that the grantee
shall be allowed to exercise this present right or privilege to the exclusion of all others.
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 Nonetheless, the grantee cannot set up its exclusive franchise against the ultimate authority of the
State."

ISSUE: Whether an exclusive franchise is allowed

HELD:
a. The president, the congress, and the court cannot create directly franchises
for the operation of a public utility that is exclusive in character. The
Constitution expressly and prohibits the creation of franchises that are
exclusive in character. The Constitution prohibition on exclusive franchises
admits of no exception.

b. Any franchise or right maybe granted under the condition that it shall BE
SUBJECT TO AMENDMENT, ALTERATION, OR REPEAL by congress when
the common good so requires.

Section 17 Art. XII Constitution

In times of emergency, when the public interest so requires, the state may
during the emergency and under reasonable terms prescribe by it,
TEMPORARILY TAKE OVER THE DIRECT OPERATION OF ANY
PRIVATELY OWNED PUBLIC UTILITY or business affected with public
interest.
Section 8 Art. XII

The state may, in the interest of national welfare or defense, establish and
operate vital industries and upon payment of just compensation, transfer to
public ownership UTITLITIES and OTHER PRIVATE ENTERPRISES to be
operated by the government.

c. A FRANCHISE is NOT in the strict sense a simple contract but rather it

is, more importantly, a mere PRIVILEGE especially to matters which are
within the government`s power to regulate and even prohibit through the
exercise of police power.(Lim vs. Pacquing GR No. 115044, Jan. 27, 1995)

III. CONTRACT OF CARRIAGE OR TRANSPORTATION

A. Contract of Transportation Defined:

A contract whereby a person, natural or juridical, obligates to transport persons, goods, or
both, from one place to another, by land, air or water, for a price or compensation. 

Contract of carriage may be either of the following:

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 a. Common or private
b. Goods or passengers
c. For a fee/for hire or for free/gratuitous
d. Over land/ water/ air
e. Domestic(Inter-island/coastwise) or international/foreign

B. Parties to a Contract of Transportation

The parties to a contract of transportation depends on whether the contract is

one for transportation of goods or of persons.

1. The parties in a contract for transportation of passengers

The parties in a contract of carriage of passengers are the common carrier and the
passenger.

Who is a passenger?

A passenger is defined as one who travels in a public conveyance by virtue of a contract,

express or implied, with the carrier as to the payment of fare, or that which is accepted as
an equivalent thereof.

Jesus Vda De Nuesca vs. The Manila Railroad GR No. 31731 Jan. 30,
1960

Facts

On December 22, 1958, at about three in the afternoon, Fermin Nueca brought seven
sacks of palay to the station in Barrio del Rosario, Lupi, Camarines Sur of the Manila
Railroad Company, known in the present time as Philippine National Railways. He brought
the said sacks for shipment to the municipality of Libmanan of said province. He paid
P0.70 as freight charges and was issued Way Bill No. 56515.

The cargo was loaded on the freight wagon, which arrived at the station at about 5:30 of
that same afternoon. After the passengers had boarded the train, shunting operations were
started to hook a wagon thereto. However, before the train reached the turnoff switch, its
passenger coach and the freight wagon were derailed and fell on its side 40 meters from
the station. The freight wagon pinned Fermin Nueca, killing him instantaneously. Hence,
Nueca’s widow and children instituted an action for damages, alleging that the deceased
was the common carrier’s passenger and that his death was due to the negligence of the
common carrier.

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 The contentions of the respondent are as follows: (1) it had exercised due care in
safeguarding the passengers during the shunting operation; (2) the deceased was not a
passenger but a mere trespasser; (3) assuming he was a passenger, he illegally and
without permission boarded the freight wagon to avoid payment of transportation fare; (4)
the mishap did not occur by reason of any defect in the carrier’s equipment; and (5) the
accident happened without fault of the company or its employees but was due to force
majeure.

The court a quo ruled that the deceased was not a passenger because there was no proof
or even an averment that the deceased bought a ticket or paid his fare at the same time
that he paid the freight charges for his cargo or at any time thereafter, and it can be
inferred from the site of the accident that the deceased was not in the proper place for
passengers. Further, the court a quo held that since there was no evidence that the
accident was the result of the carrier’s fault or negligence, the railroad company cannot be
held responsible for any damage arising therefrom. Hence, the court a quo dismissed the
case.

Issues

(1) Whether Fermin Nueca was a passenger

(2) Whether negligence on the part of the common carrier shall be duly proven
(3) Whether the common carrier, the Manila Railroad Company, is liable for damages
arising from the death of Fermin Nueca

Ruling

1. No. A passenger is defined as one who travels in a public conveyance by virtue of a

contract, express or implied, with the carrier as to the payment of fare, or that which is
accepted as an equivalent thereof. The relation of carrier and passenger commences
when one puts himself in the care of the carrier, or directly under its control, with the bona
fide intention of becoming a passenger, and is accepted as such by the carrier—as where
he makes a contract for transportation at the proper place and in a proper manner to be
transported; but not where he does not present himself in a proper way to become a
passenger.

The mere purchase of the ticket is an element in the inception of the relation, and, when
taken with other facts indicating an intention to become a passenger, may be sufficient for
such purpose. The purchase of a ticket is not essential. Although it is unnecessary that the
person shall have purchased a ticket, such person must have a bona fide intention to use

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 the facilities of the carrier, possess sufficient fare with which to pay for his passage, and
present himself to the carrier for transportation in the place and manner provided.

It is apparent that Fermin Nueca was not a passenger of the appellee. Assuming
that the deceased intended to become a passenger, he was never accepted by the
appellee as he did not present himself at the proper place and in a proper manner to be
transported. He was beside the baggage car and that place was not being used for
conveying passengers. Assuming again that the deceased intended to accompany his
cargo inside the freight wagon, he was not authorized by the shipper to do so; nor was he
given any special arrangement by the carrier or its agents to ride in the freight wagon.

2. No. The doctrine of ‘res ipsa loquitur’ (the transaction speaks for itself) found its
application in the instant case. It is a rule of evidence peculiar to the law of negligence
which recognizes that prima facie negligence may be established without direct proof and
furnishes a substitute for specific proof of negligence. Where the circumstances of the
occurrence that has caused the injury are of a character to give ground for a reasonable
inference that if due care had been employed by the party charged with care in the
premises, the thing that happened amiss would not have happened, negligence may fairly
be inferred in the absence of any explanation.
In the instant case, there was presumption of negligence since the movement of
the trains past a railroad station does not in ordinary course result in cars leaving the track
and piling up on station grounds when ordinary and reasonable care has been used, in the
inspection of the means and in the operation. The train was under the complete control of
the railroad company at the time of the mishap, the baggage car would not have been
derailed if the train had been properly operated, and there was no explanation as to why or
how the baggage car was derailed other than the company’s presented evidence that
there were no mechanical defects in the equipment at the time of the accident.

3. Yes. Railroad companies, while not bound to the same degree of care in regard to
strangers who are unlawfully upon its premises that it owes to passengers, is liable to such
strangers for injuries resulting from its negligent or tortious acts. It must conduct its affairs
and operate its business as not to injure the rights of others, in accordance with the legal
maxim ‘sic utere tuo ut alienum non laedas’(use your own property in such a manner as
not to injure that of another).

Whether the person who was killed was or was not a trespasser or a bare licensee upon
the track of the railway company, the company is bound to exercise special care and
watchfulness at any point upon its track where people may be expected upon the track in
considerable numbers, as where the roadbed is constantly used by pedestrians. The
company is bound to anticipate the presence of persons on the track or right of way at any
place where the public in any considerable number has openly, notoriously, constantly,

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 and habitually crossed over or travelled along a portion of the tracks or right of way other
than in a highway or at a highway crossing, with the knowledge or acquiescence of the
railroad company. Hence, the element of greatest significance in determining the liability of
a railroad company to a person injured upon its premises other than a passenger or
employee is whether the presence of the injured person was to have been anticipated.

In the instant case, Fermin Nueca’s location at the time of the accident was not
conclusively determined. There being two probabilities involved—that he was unlawfully
inside the baggage car, or that he was an innocent bystander beside the track—the
probability which is compatible with presumption of innocence should be considered. In
addition to this, the appellee’s premises were not enclosed, hence, it can be concluded
that the station was open and accessible to the general public. An invitation to stay in the
premises of a railroad company is implied from the lack of prohibition to outsiders to keep
off the premises, hence, a stranger who is injured by a derailed train while staying beside a
railroad track belonging to the negligent railroad company is not guilty of contributory
negligence.

Read : Article 1758 Civil Code

Article 1758. When a passenger is carried gratuitously, a stipulation limiting the common
carrier’s liability for negligence is valid, but not for willful acts or gross negligence.

The reduction of fare does not justify any limitation of the common carrier’s liability.

Who is the real party-in-interest in a suit for breach of contract of

transportation?

Baliwag Transit Corp. vs. CA

169 SCRA 849 Jan. 31, 1989

Facts

On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was
filed by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and
their son George, of legal age, against petitioner Baliwag Transit.

It was alleged that George, who was a paying passenger on a Baliwag bus on 17
December 1984, suffered multiple serious physical injuries when he was thrown off said
bus driven in a careless and negligent manner by Leonardo Cruz along Barangay Patubig,
Marilao, Bulacan. As a result, he was confined in the hospital for treatment, incurring

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 medical expenses, which were borne by his parents, the respondent Spouses, in the sum
of about P200,000.00 plus other incidental expenses of about P10,000.00.

On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries
sustained by George was solely attributable to his own voluntary act when without warning
and provocation, he suddenly stood up from his seat and headed for the door of the bus as
if in a daze, opened it and jumped off while said bus was in motion, in spite of the
protestations by the driver and without the knowledge of the conductor.

On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and

Baliwag each filed Motions to Dismiss on the ground that George, in consideration of the
sum of P8,020.50 had executed a "Release of Claims" dated 16 May 1985. These
Motions were denied by the Trial Court in an Order dated 13 January 1986 as they were
filed beyond the time for pleading and after the Answers were already filed.

During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived
the presentation of testimonial evidence and instead offered the "Release of Claims"
signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed engineer.

By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr.

testified that he is the father of George, who at the time of the incident was a student, living
with his parents and totally dependent on them for their support; that the expenses for his
hospitalization were shouldered by his parents; and that they had not signed the "Release
of Claims."

Issue

Whether Fortune Insurance and Baliwag Transit is discharged from liability by reason of
the Release of Claims executed by George during the pendency of the case.

Ruling

Yes. Since the suit is one for breach of contract of carriage, the Release of Claims
executed by him, as the injured party, discharging Fortune Insurance and Baliwag from
any and all liability is valid.

He was then of legal age, a graduating student of Agricultural Engineering, and had the
capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus,
he could sue and be sued even without the assistance of his parents.

Significantly, the contract of carriage was actually between George, as the paying
passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound to
carry its passengers safely as far as human care and foresight could provide, and is liable

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 for injuries to them through the negligence or wilful acts of its employees (Articles 1755
and 1759, Civil Code). Thus, George had the right to be safely brought to his destination
and Baliwag had the correlative obligation to do so. Since a contract may be violated only
by the parties thereto, as against each other, in an action upon that contract, the real
parties in interest, either as plaintiff or as defendant, must be parties to said contract . A
real party-in-interest -plaintiff is one who has a legal right while a real
party-in-interest-defendant is one who has a correlative legal obligation
whose act or omission violates the legal right of the former. In the absence
of any contract of carriage between Baliwag and George's parents, the
latter are not real parties-in-interest in an action for breach of that contract.

There is no question regarding the genuineness and due execution of the Release of
Claims. It is a duly notarized public document.

If the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code). The
phraseology "any and all claims or causes of action" is broad enough to include all
damages that may accrue to the injured party arising from the unfortunate accident.

The Release of Claims had the effect of a compromise agreement since it was entered into
for the purpose of making a full and final compromise adjustment and settlement of the
cause of action involved. A compromise is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced (Article
2028, Civil Code). The Release of Claims executed by the injured party himself wrote
finish to this litigation.

Sps. Fabre vs. CA

July 26, 1996 GR No. 111127

Facts

Spouses Fabre were owners of a Mazda minibus which they operate as a school service.
It was driven by their long time driver Porfilio Cabil. On November 2, 1984, private
respondent Word of the World Christian Fellowship (WWCF) engaged the spouses for the
spouses for a trip to Caba, La Union, to which the spouses agreed for a consideration of
3000php.

On the way to Caba, Cabil, the driver, used an alternate route due to a detour in the usual
route. They passed by Lingayen instead of Carmen. Cabil was unfamiliar with the route
because it is his first time to drive to La Union. At 11:30 at night Cabil was driving at the
speed of 50kph came upon a sharp curve. The road was slippery because it was raining.
The minibus hit a steel brace and turned over. A criminal complaint was filed against the
spouses.

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 Petitioners argue that they are not liable because (1) an earlier departure (made
impossible by the congregation's delayed meeting) could have a averted the mishap and
(2) under the contract, the WWCF was directly responsible for the conduct of the trip. T hey
also alleged that they were not a common carrier.

Issue
Whether Sps. Fabre is liable.

Ruling

Yes, the spouses are liable. Neither of these contentions hold water. The hour of departure had
not been fixed. Even if it had been, the delay did not bear directly on the cause of the accident.
With respect to the second contention, it was held in an early case that:
A person who hires a public automobile and gives the driver directions as to the
place to which he wishes to be conveyed, but exercises no other control over the conduct
of the driver, is not responsible for acts of negligence of the latter or prevented from
recovering for injuries suffered from a collision between the automobile and a train, caused
by the negligence or the automobile driver. 

The Spouses operate a common carrier. Despite the fact that they operate the
minibus as a school service, they are considered common carriers. Common carriers are
person, corporation, firm or associations engaged in the business of carrying or
transportation passengers or goods or both, by land, water or air, for compensation,
offering their services to the public.

A common carrier need not to be principally engaged in public transportation

because the above article does not make a distinction between one whose principal
business is public transportation and one who does such carrying and transporting as an
ancillary activity.

Therefore, Spouses Fabre is a common carrier, and is obliged to practice extra ordinary
diligence in the performance of the contract of transportation.

2. The parties in a contract for transportation of goods

SHIPPER- person who delivers the goods to the carrier for transportation. The person
who pays the consideration or on whose behalf payment is made.
CARRIER- person who transport the goods.

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 CONSIGNEE- the person to whom the goods are to be delivered. The consignee may
be the shipper himself as in the case where the goods will be delivered to one of the
branch offices of the shipper. However, the consignee may be a third person who is not
actually a party to the contract of carriage.
Q. May the CONSIGNEE, who is not the shipper, be bound by the
contract of carriage of goods?
A consignee, although not a signatory to the contract of carriage between the shipper and
the carrier, becomes a party to the contract by reason of either a) the relationship of
agency between the consignee and the shipper/ consignor; b) the unequivocal acceptance
of the bill of lading delivered to the consignee, with full knowledge of its contents or c)
availment of the stipulation pour autrui, i.e., when the consignee, a third person, demands
before the carrier the fulfillment of the stipulation made by the consignor/shipper in the
consignee's favor, specifically the delivery of the goods/cargoes shipped. (MOF Co. Inc.,
vs. Shin Yang Brokerage Corp)

Read: MOF Co. Inc., vs. Shin Yang Brokerage Corp GR No. 172822,
Dec. 18, 2009
DOCTRINE:
As a general rule, a consignee is not privy to the Bill of Lading unless any of the following
instances occur: a) There is an agency relationship between the shipper and the
consignee b) When the consignee demands the fulfillment of the stipulation of the
bill drawn up in its favor c) Unequivocal acceptance of the bill of lading delivered to the
consignee with full knowledge of its contents
FACTS:
Shin Yang is named the consignee of secondhand cars to be shipped in Manila
through Hanjin Busan’s Vessel. The goods then arrived in Manila.
MOF Company, being Hanjin’s exclusive general agent in Manila, demanded from Shin
Yang the payment of ocean freight, documentation fee, and terminal handling charges.
Shin Yang refused payment saying that it was not privy to the contract of afreightment. It
argued being merely a consolidator and not the ultimate consignee. Also forwarded by
Shin Yang is that the bill of lading named under it was prepared without its consent. If any,
the freight charges are born by the shipper and not the consignee.
Hence a complaint for collection of sum of money.
MeTC favored MOF.
RTC affirmed.

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 CA reversed and dismissed MOF’s case because no other evidence were presented but
the Bill of Lading. Only when the bill of lading is accepted can the contract between parties
be perfected. In this case, Shin Yang did not accept the Bill of Lading and disowned the
shipment.
ISSUE:
Whether a consignee who is not a signatory to the bill of lading is bound by the stipulations
thereof.
HELD:
No, because MOF was unable to prove the instances where Shin Yang may be bound.
Bill of lading is drawn up by the shipper/consignor and the carrier without
intervention of consignee. However, it does not necessarily mean that the consignee
could not be bound thereof.
In this case, Shin Yang denied in all its pleadings that it is the consignee of the
goods and the instances mentioned were not present. Therefore, the burden to prove that
Shin Yang is bound by the Bill of Lading is upon MOF. However, MOF failed to prove the
same. Hence, Shin Yang could not be ordered to pay the obligation of a consignee as
required in the Bill.

Bill of Lading
PhilAm Insurance Company, Inc., vs Heung-A shipping Corp. GR No.
187812 July 23, 2014

C. Perfection of Contract of Transportation

1. Two types of contract of carriage

a. Contract to carry- an agreement to carry the passenger at some future date.

This contract is consensual and is therefore perfected by mere consent
b. Contract of carriage or contract of common carriage- that should be
considered a real contract for not until the facilities of the carrier are actually used
can the carrier be said to have already assumed the obligation of the carrier.
READ:

Operative fact for the perfection of a contract of carriage of goods

Test to determine when the relationship of carrier and shipper has
been established.

Compania Maritima vs. Insurance Co. of North America Oct. 10, 1964

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 GR no. L-18965

Doctrines

Whenever the control and possession of goods passes to the carrier and nothing
remains to be done by the shipper, then it can be said with certainty that the relation of
shipper and carrier has been established.

Actual delivery and acceptance are sufficient to bind the carrier, even if a statue
provides that liability commences with the issuance of a bill of lading (a bill of lading it
not necessary to complete delivery and acceptance).

Facts

The shipper, Compania Maritima, obliged the carrier (Macelod) to transport the cargo
from Davao to Manila. The cargo is to be loaded in the Bowline Knot owned by
Compania, but Macelod has sent its two lighters to take the cargo free of charge.
However, the lighter sank resulting in the damage of the cargo loaded therein.

Issue

Whether a contract of carriage is perfected between the carrier (Macelod) and the
shipper (Compania Maritima) considering that the loss occurred the cargo was loaded
on a lighter owned by the carrier.

Ruling

Yes. Whenever the control and possession of goods passes to the carrier and nothing
remains to be done by the shipper, then it can be said with certainty that the relation of
shipper and carrier has been established. Hence, Compania Maritima is liable.

2. Perfection of the contract of carriage of passengers

Nature of the contract-

consensual and is perfected by the mere consent of the parties.

Contract to carry vs. Contract of carriage-

a. Air Transport of Passengers- perfected contract to carry passengers

even if no tickets have been issued to said passengers so long as there was

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 already a meeting of the minds with respect to the subject matter and the
consideration.

Korean Airlines Co. vs. CA

b. Land Transportation(Bus, Jeepneys, etc.)

Who is a passenger-

The “continuing offer rule”-

Dangwa vs. CA

c. Land Transportation (TRAINS)

Jesusa Vd. vs The Manila Railroad (same case above)

LRTA, et al, vs. Marjorie Natividad

Doctrine

In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and by simple proof of injury, the passenger is relieved of the duty to still
establish the fault or negligence of the carrier or of its employees and the burden
shifts upon the carrier to prove that the injury is due to an unforeseen event or to
force majeure.

Facts:

Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a
token representing payment of the fare. A misunderstanding or an altercation
between Navidad and the security guard assigned to the area ensued that led to a
fist fight. Navidad later fell on the LRT tracks at the exact moment that an LRT
train was coming in. Navidad was struck by the moving train, and he was killed
instantaneously.

The widow of Nicanor, Marjorie Navidad, along with her children, filed a complaint
for damages against the security guard, the operator to the train, the Light Rail
Transit Authority (LRTA), the Metro Transit Organization, Inc. (Metro Transit), and
Prudent Security Agency for the death of her husband.

Issue

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 Whether or not the petitioners are liable for the death of Nicanor Navidad, Jr.

Ruling

LRTA liable for the death of Navidad. Being a common carrier, LRTA is burdened
with the duty of exercising utmost diligence in ensuring the safety of passengers.
Its obligation to indemnify the victim arises from the breach of that contract
because of its failure to exercise the high diligence required of the common carrier.

There is nothing to link Prudent to the death of Navidad, for the reason that the
negligence of its employee, Escartin, has not been duly proven. There being,
similarly, no showing that Roman himself is guilty of any culpable act or omission,
he is also absolved from liability.

3. Common Carrier

a. DEFINITION AND ELEMENTS

Art. 1732 Civil Code

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.

PEDRO DE GUZMAN v. COURT OF APPEALS and ERNESTO

CENDANA
G.R. No L-47822

Facts

De Guzman, an authorized dealer of General Milk Company, contracted Cendana for

the hauling of 750 cartons of Liberty filled milk from Makati, Rizal to his establishment
in Urdaneta, Pangasinan. However, only 150 boxes were delivered to De Guzman.
The truck carrying the other 600 boxes were hijacked somewhere along the MacArthur
Highway in Tarlac. The armed men took the truck, its driver, his helper and the cargo.

De Guzman filed an action against Cendana with the Court of First Instance of
Pangasinan. He demands the payment of the lost merchandise, plus damages and
attorney’s fees. De Guzman claimed that Cendana is a common carrier and have
failed to exercise extraordinary diligence. However, Cendana denied that he is a
common carrier and that he should not be liable to the loss of goods as the loss was

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 due to force majeure. The Court of First Instance rendered a decision in favor of De
Guzman. Upon appeal, the Court of Appeals reversed the decision of the lower court.
De Guzman filed a Petition for Review with the Supreme Court.

Issue

Whether Cendana is a common carrier and should be liable for the loss of the
merchandise.

Ruling

Cendana is a common carrier even if it merely “back-hauled” goods for other

merchants from Manila to Pangasinan. Article 1732 does not distinguish between a
carrier offering its service to the general public and one who offers services or solicits
business only from a narrow segment of the general population. The law imposes
duties and liabilities upon common carriers for the safety and protection of those who
utilize their services.

However, the court agreed with the decision of the appellate court that Cendana is not
liable. The duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by
Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
(5) that the common carrier shall not be responsible for the acts or omissions of his or
its employees;
(6) that the common carrier's liability for acts committed by thieves, or of r obbers who
do not act with grave or irresistible threat, violence or force, is dispensed with or
diminished;
Under Article 1745 (6), the common carrier is still liable for the acts committed by
thieves, except if these thieves acted with grave or irresistible threat. In this case,
armed men held up the second truck carrying the 600 cartons of milk. A case was filed
against them in the Court of First Instance in Zambales. They were convicted with
robbery.

In these circumstances, the court hold that the occurrence of the loss must reasonably
be regarded as quite beyond the control of the common carrier and properly regarded
as a fortuitous event. It is necessary to recall that even common carriers are not made
absolute insurers against all risks of travel and of transport of goods, and are not held
liable for acts or events which cannot be foreseen or are inevitable, provided that they
shall have complied with the rigorous standard of extraordinary diligence.

The elements of common carrier

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 a. persons' corporations, firms or associations
b. engaged  in the business of carrying or transporting passengers, goods or both
c. means of carriage is by land, water or air
d. the carrying of passengers , goods or both is for compensation
e. the service is offered to the public without distinction.

b. TEST IN DETERMINING WHETHER ONE IS A COMMON CARRIER

READ:

First Philippines Industrial Corporation vs. CA

GR no. 125948

Facts

FIRST PHILIPPINE INDUSTRIAL CORPORATION (FPIC) is a grantee of a pipeline

concession under Republic Act No. 387, as amended, to contract, install and operate
oil pipelines. On January 1995 FPIC applied for a mayor’s permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the City
Treasurer required petitioner to pay a local tax amounting to P956,076.04, based on
its gross receipts for the fiscal year 1993 pursuant to the Local Government Code.

On January 20, 1994, petitioner filed a letter-protest addressed to the City Treasurer.
In their letter they contended that they are engaged in the business of transporting
petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF
Pandacan Terminals. As such, our Company is exempt from paying tax on gross
receipts under Section 133 of the Local Government Code of 1991 and that
Transportation contractors are not included in the enumeration of contractors under
Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to
impose tax "on contractors and other independent contractors" under Section 143,
Paragraph (e) of the Local Government Code does not include the power to levy on
transportation contractors. However, this was denied by the City Treasurer contending
that petitioner cannot be considered engaged in transportation business, thus it cannot
claim exemption under Section 133 (j) of the Local Government Code.

Issue

Whether FPIC is a common carrier or a transportation contractor thus exempt for

taxation by the local government.

Ruling

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 YES. Art. 1732 of the Civil Code defines a "common carrier" as "any 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 their
services to the public."

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.

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.
Also, 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.

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered
a "common carrier." Thus, Article 86 thereof provides that:

Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by
him, but is obligated to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by others for transport,
and to charge without discrimination such rates as may have been approved by
the Secretary of Agriculture and Natural Resources

Spouses Teodoro and Nanette Pereña v. Spouses Nicolas and

Teresita L. Zarate, et al.
G.R. No. 157917. August 29, 2012

Facts

The Spouses Pereña operated a Kia Ceres school bus picking up students from their
subdivision in Parañaque to Don Bosco in Magallanes, Makati. Aaron, the son of the

20 | P a g e
 Spouses Zarate, was among the students being transported by the school bus, which
was driven by Clemente Alfaro. One day, the driver took an alternate route from
Parañaque to Makati by passing through the Philippine National Railway Station. He
engaged in a race with a passenger bus near the railway. While the bus was able to
fully pass through the railway, the Kia Ceres Van’s rear end was left along the railway.
Though the train driver was honking, it could not be heard by Alfaro because of the
loud music that was playing in the van.

The train hit the rear end of the van where passenger Aaron was riding. The boy was
dragged by the train causing Aaron’s head to separate from his body. Thus, Spouses
Zarate instituted an action for breach of contract of carriage impleading the PNR.

The Spouses Pereña defended that they exercised the diligence of a good father of a
family considering that the school bus is a private carrier under prevailing
jurisprudence. The RTC ruled in favor of the Spouses Zarate. The PNR was afforded
no liability by the RTC. The Spouses Pereña appealed to CA, which upheld the
decision.

Issue

Whether Spouses Pereña is a private carrier

Ruling

No. Spouses Pereña is considered as a common carrier and not a private carrier.

The SC ruled that the school bus is a common carrier. Despite catering to a limited
clientèle, the Pereñas operated as a common carrier because they held themselves
out as a ready transportation indiscriminately to the students of a particular school
living within or near where they operated the service and for a fee.

The common carrier’s standard of care and vigilance as to the safety of the
passengers is defined by law. Given the nature of the business and for reasons of
public policy, the common carrier is 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."

The Pereñas, acting as a common carrier, were already presumed to be negligent at

the time of the accident because death had occurred to their passenger. The
presumption of negligence, being a presumption of law, laid the burden of evidence on
their shoulders to establish that they had not been negligent. It was the law no less
that required them to prove their observance of extraordinary diligence in seeing to the
safe and secure carriage of the passengers to their destination.

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 c. CHARACTERISTIC OF A COMMON CARRIER

De Guzman vs. CA
GR no. L-4782 (same case as above)
Article 1732 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(“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.

Article 1732 does not 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.

A person or entity is a common carrier and has the obligations of the common carrier
under the Civil Code even if he did not secure a Certificate of Public Convenience.

Engracio Fabre vs CA
GR No. 111127 (same case as above)
A person or entity need not be engaged in the business of public transportation for the
provisions of the Civil Code on common carriers to apply to them.

Asian Lighterage and shipping Inc. vs. CA

GR no. 147246

A person or entity may be a common carrier even if he has no fixed and publicly
known route, maintains no terminals, and issues no tickets.

Bascos vs CA
GR no. 101089

FACTS:
 Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short)
entered into a hauling contract with Jibfair Shipping Agency Corp whereby the former
bound itself to haul the latter’s 2,000 m/tons of soya bean meal to the warehouse in
Calamba, Laguna. To carry out its obligation, CIPTRADE, through Cipriano,
subcontracted with Bascos to transport and to deliver 400 sacks of soya bean meal

22 | P a g e
 from the Manila Port Area to Calamba, Laguna. Petitioner failed to deliver the said
cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the
amount of the lost goods in accordance with their contract.
Cipriano demanded reimbursement from petitioner but the latter refused to pay.
Eventually, Cipriano filed a complaint for a sum of money and damages with writ of
preliminary attachment for breach of a contract of carriage. The trial court granted the
writ of preliminary attachment.
In her answer, petitioner interposed the defense that there was no contract of carriage
since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to
Laguna and that the truck carrying the cargo was hijacked and being a force majeure,
exculpated petitioner from any liability
After trial, the trial court rendered a decision in favor of Cipriano and against Bascos
ordering the latter to pay the former for actual damages for attorney’s fees and cost of
suit.
Hence this petition for review on certiorari
ISSUE:
(1) Whether petitioner a common carrier
(2) Whether the hijacking referred to a force majeure

HELD: 
1. YES
In disputing the conclusion of the trial and appellate courts that petitioner was a
common carrier, she alleged in this petition that the contract between her and Cipriano
was lease of the truck. She also stated that: she was not catering to the general public.
Thus, in her answer to the amended complaint, she said that she does business under
the same style of A.M. Bascos Trucking, offering her trucks for lease to those who
have cargo to move, not to the general public but to a few customers only in view of
the fact that it is only a small business.
Article 1732 of the Civil Code defines a common carrier as “(a) person, corporation or
firm, or association 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 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.”
12 In this case, petitioner herself has made the admission that she was in the trucking
business, offering her trucks to those with cargo to move. Judicial admissions are
conclusive and no evidence is required to prove the same.
But petitioner argues that there was only a contract of lease because they offer their
services only to a select group of people. Regarding the first contention, the holding of
the Court in De Guzman vs. Court of Appeals is instructive. 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

23 | P a g e
 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. Article 1732 deliberately refrained from making such distinctions.”

2. NO.
Common carriers are obliged to observe extraordinary diligence in the vigilance over
the goods transported by them. Accordingly, they are presumed to have been at fault
or to have acted negligently if the goods are lost, destroyed or deteriorated. There are
very few instances when the presumption of negligence does not attach and these
instances are enumerated in Article 1734. In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in
order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which
exculpated her from liability for the loss of the cargo. In De Guzman vs. Court of
Appeals, the Court held that hijacking, not being included in the provisions of Article
1734, must be dealt with under the provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or negligent. To exculpate the carrier from
liability arising from hijacking, he must prove that the robbers or the hijackers acted
with grave or irresistible threat, violence, or force. This is in accordance with Article
1745 of the Civil Code which provides:
“Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy; xx
(6) That the common carrier’s liability for acts committed by thieves, or of robbers who
do not act with grave or irresistible threat, violences or force, is dispensed with or
diminished;” xx

d. CASES WHERE THE SC CONSIDERED A PERSON, PATNERSHIP,

FIRM OR CORPORATION AS A COMMON CARRIER:

Sps. Cruz vs. Sun Holidays GR no. 186312

De Guzman vs. CA (same as above)

First Philippines Industrial Corporation vs. CA

GR no. 125948 (same as above)

NOTE: RA 367 The Petroleum Act of the Philippines consider OIL

PIPELINE OPERATORS AS COMMON CARRIERS.

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 Art. 86 and 87 of Act No. 387 provides:
ARTICLE 86. Pipe line concessionaire as common carrier. – A pipe line
concessionaire shall have the preferential right to utilize his installations for the
transportation of petroleum owned by him, but is obligated to utilize any remaining
transportation capacity pro rata for the transportation of such other petroleum as may
be offered by others for transport, and to charge without discrimination such rates as
may have been approved by the Secretary of Agriculture and Natural Resources.

When the pipe line concessionaire is also an exploitation concessionaire, the

Secretary of Agriculture and Natural Resources may require that the royalty in kind of
the Government received from the same concessionaire, be transported, pro rata, with
that owned by the concessionaire from the same concession; and in all cases the
petroleum of the Government shall have priority over all other petroleum in the
utilization of the excess capacity of the pipe line over that required to transport
petroleum owned by the pipe line concessionaire.

Procedure for the determination of pipe line transportation rates and the conditions
governing the transportation of petroleum other than that owned by the concessionaire
shall conform to the Regulations.

ARTICLE 87. Term of Pipe Line Concession. – The term of a Pipe Line Concession
shall not exceed twenty-five years counted from the date of its issuance, renewable for
another twenty-five years, upon application of the concessionaire filed prior to the
expiration of the original term.

Fabre vs CA (same as above)

Asian Lighterage and shipping Inc. vs. CA

GR no. 147246

e. PRIVATE CARRIER VERSUS COMMON CARRIER

READ:

PLANTERS PRODUCTS, INC. v. COURT OF APPEALS

G.R. No. 101503 September 15, 1993

Facts

Planters Products, Inc. purchased from Mitsubishi International Corporation

9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk

25 | P a g e
 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen
Kabushiki Kaisha from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union,
Philippines. Prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" was
entered into between Mitsubishi as shipper/charterer and KKKK as shipowner. The
hatches containing the cargo remained closed and tightly sealed throughout the entire
voyage.

It took 11 days for PPI to unload the cargo because of the difficulty brought by the
rainy weather during the discharge period. After the discharge of the cargo, PPI found
out that there was a shortage in the cargo of 94.839 M/T and about 23 M/T was
rendered unfit for commerce, being polluted with sand, rust and dirt. PPI the filed an
action for damages with the Court of First Instance of Manila against Soriamont
Steamship Agencies (SSA), the resident agent of the carrier, KKKK. The defendant
carrier argued that the strict public policy governing common carriers does not apply to
them because they have become private carriers by reason of the provisions of the
charter-party.

Issue

Whether a common carrier becomes a private carrier by reason of a charter-party.

Ruling

NO. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers
and compliment were under the employ of the shipowner and therefore continued to
be under its direct supervision and control. Considering that the steering of the ship,
the manning of the decks, the determination of the course of the voyage and other
technical incidents of maritime navigation were all consigned to the officers and crew
who were screened, chosen and hired by the shipowner. It is therefore imperative that
a public carrier shall remain as such, notwithstanding the charter of the whole or
portion of a vessel by one or more persons, provided the charter is limited to the ship
only, as in the case of a time-charter or voyage-charter. It is only when the charter
includes both the vessel and its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the particular voyage covering the charter-
party is concerned. Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the
property of the charterer.

Hence, as a common carrier, respondent was required to exercise and observe

extraordinary diligence from the time the cargo was unconditionally placed in its
charge, after vessel’s holds were duly inspected and passed scrutiny by the shipper,
up to and until the vessel reached its destination and its hull was re-examined by the
consignee but prior to unloading.

26 | P a g e
 Vlasons shipping , Inc. vs. CA
GR no. L-112350

Common Carrier versus Other Contract

Common Carrier versus Stevedoring

Q: Is a stevedore a common carrier?

Mindanao Terminal and Brokerage Service, Inc. vs. Pheonix

Assurance Company of New York
GR No. 162467

Common Carrier versus Arrastre

Mindanao Terminal and Brokerage Service, Inc. vs. Pheonix

Assurance Company of New York
GR No. 162467 (same as above)

Q: what are the functions of an arrastre?

Asian Terminals, Inc. vs Allied Guarantee, Inc. GR no. 182208

Delgado Brothers Insurance vs. Home Insurance Inc. GR no L-16567

Summa Insurance Corporation v. CA 323 Phil 214

Q: when does the liability of the carrier end and the liability of the
arrestre operator begin?

The Regional Container Lines (RCL) of Singapore vs. The Netherlands

Insurance Co. GR no. 168151

Asian Terminals vs. Philam Life Insurance Inc.

Eastern Shipping Lines Inc. vs CA GR no. 97412

Common Carrier vs Towage

Towage Defined-
Tug boat-
Barge-

27 | P a g e
 Q: What is the diligence required of the person who provides towage
service?

Cargolift Shipping Inc. vs L. Actuario Marketing Corp, GR No. 146426

Standard Vacuum Oil Company vs Luzon Stevedoring Co. Inc. GR no.

L-5203

Common Carrier vs. Travel Agency

Travel Agency-

Q: Is a travel agency a common carrier?

Q: what is the degree of care required of a common carrier?

Common Carrier vs. Tramp Service and Line Service

Note: Republic Act No. 9515 December 19, 2008

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