Transportation and Public Utility Law

Prof. Nicholas Ty | 1st Sem Ay 2010-2011 Erika Mariz V. Esperas

In regulating rates charged by public utilities, the State protects the public against arbitrary and excessive rates while maintaining the efficiency and quality of services rendered. However, the power to regulate rates does not give the State the right to prescribe rates which are so low as to deprive the public utility of a reasonable return on investment. Thus, the rates prescribed by the State must be one that yields a fair return on the public utility upon the value of the property performing the services rendered. The fixing of just and reasonable rates involves a balancing of the investor and the consumer interests. In determining the just and reasonable rates to be charged by a public utility, 3 major factors are considered by the regulating agency: a) rate of return, b) rate base and c) the return itself or the computed revenue to be earned by the public utility based on the rate of return and rate base. The rate of return is a judgment percentage which, if multiplied with the rate base, provides a fair return on the public utility for the use of its property for service to the public. The rate of return of a public utility is not prescribed by statute but by administrative and judicial pronouncements. The rate base is an evaluation of the property devoted by the utility to the public service of the value of invested capital or property which the utility is entitled to a return. In the case at bar, the ERB correctly ruled that income tax should not be included in the computation of operating expenses of a public utility. Income tax paid by a public utility is inconsistent with the nature of operating expenses. In general, operating expenses are those which are reasonably incurred in connection with business operations to yield revenue or income. They are items of expenses which contribute or attributable to the production of income or revenue. Income tax is imposed on an individual or equity as a form of excise tax or a tax on the privilege of earning income. Clearly, by its nature, income tax payments of a public utility are not expenses which contribute to or are incurred in connection with the production of profit of a public utility. Income tax should be borne by the taxpayer alone as they are payments made in exchange for benefits received by the taxpayer from the State. No benefit is derived by the customers of a public utility for the taxes paid by such entity and no direct contribution

GENERAL CONSIDERATIONS
A. Public Utilities 1. Article 12, 1987 Constitution

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. Section 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately-owned public utility or business affected with public interest. Section 18. The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government. Section 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed. Republic v. Manila Electric Company The regulation of rates to be charged by the public utilities is founded upon the police power of the State and statutes prescribing the rules for the control and regulation of public utilities are a valid exercise thereof.

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is made by the payment of income tax to the operation of a public utility for purposes of generating revenue or profit. Accordingly, the burden of paying income tax should be Meralco's alone and should not be shifted to the consumers by including the same in the computation of its operating expenses. The principle behind the inclusion of operating expenses in the determination of a just and reasonable rate is to allow the public utility to recoup the reasonable amount of expenses it has incurred in connection with the services it provides. It does not give the public utility the license to indiscriminately charge any and all types of expenses incurred without regard to the nature thereof, i.e., whether or not the expense is attributable to the production of services by the public utility. To charge consumers for expenses incurred by a public utility which are not related to the service or benefit derived by the customers from the public utility is unjustified and inequitable. David v. Macapagal-Arroyo Power to take over: Art. 12, Sec. 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately-owned public utility or business affected with public interest. During the existence of the state of national emergency, PP 1017 purports to grant the President, without any authority or delegation from Congress, to take over or direct the operation of any privately-owned public utility or business affected with public interest. A distinction must be drawn between the Presidents authority to declare "a state of national emergency" and to exercise emergency powers. To the first, as elucidated by the Court, Section 18, Article VII grants the President such power, hence, no legitimate constitutional objection can be raised. But to the second, manifold constitutional issues arise. Section 23, Article VI of the Constitution reads: SEC. 23. (1) The Congress, by a vote of twothirds of both Houses in joint session assembled, voting separately, shall have the sole power to declare the existence of a state of war. (2) In times of war or other national emergency, the Congress may, by law, authorize the President, for a limited period and subject to such restrictions as it may prescribe, to exercise powers necessary and proper to carry out a declared national policy. Unless sooner withdrawn by resolution of the Congress, such powers shall cease upon the next adjournment thereof.

It may be pointed out that the second paragraph of the above provision refers not only to war but also to "other national emergency." If the intention of the Framers of our Constitution was to withhold from the President the authority to declare a "state of national emergency" pursuant to Section 18, Article VII (calling-out power) and grant it to Congress (like the declaration of the existence of a state of war), then the Framers could have provided so. Clearly, they did not intend that Congress should first authorize the President before he can declare a "state of national emergency." The logical conclusion then is that President Arroyo could validly declare the existence of a state of national emergency even in the absence of a Congressional enactment. But the exercise of emergency powers, such as the taking over of privately owned public utility or business affected with public interest, is a different matter. This requires a delegation from Congress. Section 17, Article XII must be understood as an aspect of the emergency powers clause. The taking over of private business affected with public interest is just another facet of the emergency powers generally reposed upon Congress. Thus, when Section 17 states that the "the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest," it refers to Congress, not the President. Now, whether or not the President may exercise such power is dependent on whether Congress may delegate it to him pursuant to a law prescribing the reasonable terms thereof. Following our interpretation of Section 17, Article XII, invoked by President Arroyo in issuing PP 1017, this Court rules that such Proclamation does not authorize her during the emergency to temporarily take over or direct the operation of any privately owned public utility or business affected with public interest without authority from Congress. Let it be emphasized that while the President alone can declare a state of national emergency, however, without legislation, he has no power to take over privatelyowned public utility or business affected with public interest. The President cannot decide whether exceptional circumstances exist warranting the takeover of privately-owned public utility or business affected with public interest. Nor can he determine when such exceptional circumstances have ceased. Likewise, without legislation, the President has no power to point out the types of businesses affected with public interest that should be taken over. In short, the President has no absolute authority to exercise all the powers of the State under Section 17, Article VII in the absence of an emergency powers act passed by Congress.

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authorize an entity other than the PPA to operate and manage the MICP becomes unnecessary. In the instant case, the PPA, in the exercise of the option granted it by P.D. No. 857, chose to contract out the operation and management of the MICP to a private corporation. This is clearly within its power to do. Thus, PPA's acts of privatizing the MICT and awarding the MICT contract to ICTSI are wholly within the jurisdiction of the PPA under its Charter which empowers the PPA to "supervise, control, regulate, construct, maintain, operate and provide such facilities or services as are necessary in the ports vested in, or belonging to the PPA." Tatad v. Garcia, Jr. 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. 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 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. The operation of a rail system as a public utility includes the transportation of passengers from one point to another point, their loading and unloading at designated places and the movement of the trains at pre-scheduled times. 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. In the case at bar, while private respondent is the owner of the facilities necessary to operate the EDSA. LRT III, it admits that it is not enfranchised to operate a public utility. In view of this incapacity, private respondent and DOTC agreed that on completion date, private respondent will immediately deliver possession of the LRT system by way of lease for 25 years, during which period DOTC shall operate the same as a common carrier and private respondent shall provide technical

2. CA 146, as amended
Section 13(b) The term public service includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general use business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line , pontines, ferries, and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine railway, marine repair shop, wharf or dock, ice plant, icerefrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power, petroleum, sewerage system, wire or wireless communications system, wire or wireless broadcasting stations and other similar public services: Provided, however, That a person engaged in agriculture, not otherwise a public service, who owns a motor vehicle and uses it personally and/or enters into a special contract whereby said motor vehicle is offered for hire or compensation to a third party or third parties engaged in agriculture, not itself or themselves a public service, for operation by the latter for a limited time and for specific purpose directly connected with the cultivation of his or their farm, the transportation, processing, and marketing of agricultural products of such third party or third parties shall not be considered as operating a public service for the purpose of this Act.

a. What is a public utility? b. What is a public service?

Albano v. Reyes 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 a private entity, a contract entered into by the PPA and such entity constituting substantial compliance with the law. E.O. No. 30 has tasked the PPA with the operation and management of the MICP, in accordance with P.D. 857 and other applicable laws and regulations. However, P.D. 857 itself authorizes the PPA to perform the service by itself, by contracting it out, or through other means. Reading E.O. No. 30 and P.D. No. 857 together, the inescapable conclusion is that the lawmaker has empowered the PPA to undertake by itself the operation and management of the MICP or to authorize its operation and management by another by contract or other means, at its option. The latter power having been delegated to the PPA, a franchise from Congress to

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4 General Considerations
maintenance and repair services to DOTC. Technical maintenance consists of providing (1) repair and maintenance facilities for the depot and rail lines, services for routine clearing and security; and (2) producing and distributing maintenance manuals and drawings for the entire system. PAL v. CAB The Board is expressly authorized by Republic Act 776 to issue a temporary operating permit or Certificate of Public Convenience and Necessity, and nothing contained in the said law negates the power to issue said permit before the completion of the applicant's evidence and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary permit "upon its own initiative" strongly suggests the power to exercise said authority, even before the presentation of said evidence has begun. Assuming arguendo that a legislative franchise is prerequisite to the issuance of a permit, the absence of the same does not affect the jurisdiction of the Board to hear the application, but tolls only upon the ultimate issuance of the requested permit. There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an indispensable requirement for an entity to operate as a domestic air transport operator. Although Section 11 of Article XII recognizes Congress' control over any franchise, certificate or authority to operate a public utility, it does not mean Congress has exclusive authority to issue the same. Franchises issued by Congress are not required before each and every public utility may operate. In many instances, Congress has seen it fit to delegate this function to government agencies, specialized particularly in their respective areas of public service The use of the word "necessity", in conjunction with "public convenience" in a certificate of authorization to a public service entity to operate, does not in any way modify the nature of such certification, or the requirements for the issuance of the same. It is the law which determines the requisites for the issuance of such certification, and not the title indicating the certificate. Congress, by giving the respondent Board the power to issue permits for the operation of domestic transport services, has delegated to the said body the authority to determine the capability and competence of a prospective domestic air transport operator to engage in such venture. This is not an instance of transforming the respondent Board into a mini-legislative body, with unbridled authority to choose who should be given authority to operate domestic air transport services.

B. Transportation 1. Definition 2. Public Nature a. Public Service Act b. CPC and CPCN and the Prior Operator rule
Aquino: A franchise is a grant or privilege from the sovereign power. A CPC is a form of regulation through the administrative agencies. The SC cautioned that although the trend is not to require a legislative franchise, the call to dispense with the requisite legislative franchise must, however, be addressed to Congress as the lawmaker of the land for the Courts function is to interpret and not to rewrite the law. Consequently, even if there was already a delegation of authority to a special administrative agency to issue CPCs, it does not follow that legislative franchise is no longer necessary. It would still depend on the enabling law. The law creating or authorizing the administrative body may still require a legislative franchise. CPC v. CPCN: A CPCN requires prior issuance of municipal franchise while a CPC does not. The rules for the issuance of CPCs are found in Secs. 15 and 16(a) of Public Service Act. The rule for issuance of CPCNs is in Sec. 16(b). Requisites for issuance of a CPC: (1) Applicant must be a citizen of the Philippines, or a corporation or co-partnership, association or joint stock company constituted and organized under the laws of the Philippines, 60% at least of the stock or paid-up capital of which belong entirely to citizens of the Philippines; (2) The applicant must be financially capable of undertaking the proposed service and meeting the responsibilities incident to its operations; (3) The applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. * The overriding principle is public interest, necessity and convenience. Prior Operator Rule: Under this policy, the PSC will not issue a CPC to a 2nd operator if there is a 1st operator who is rendering sufficient, adequate and satisfactory

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service, and who in all things and respects is complying with the rules and regulations of the PSC. Protection of Investment Rule: The law aims not only to protect the public but the operators as well. Hence, it is the duty of the government to protect the investment of the operators of public utilities. It is the duty of government to protect said operators from unfair, unjustified and ruinous competition. Nature of CPC: A CPC may or may not be considered property. A CPC is a mere privilege that is always subject to the regulation of the state. Insofar as the state is concerned, a CPC constitutes neither a franchise nor a contract, confers no property right, and is a mere license or privilege. Transfer of CPC: The law requires the approval of PSC in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee. Registered Owner Rule applies if the transfer of the franchise was not approved by the regulating agency. Thus, where the registered owner is liable for obligations to 3rd parties and vehicles registered under his name are levied upon to satisfy his obligations, the transferee of such vehicles cannot prevent the levy by asserting his ownership because as far as the law is concerned, the one in whose name the vehicle is registered remains to be the owner and the transferee merely holds the vehicles for the registered owner. Raymundo v. Luneta Motor Co. It remains to be determined whether, under the law, certificates of public convenience are liable to attachment and seizure by legal process. The law is silent as to this matter. It cannot be denied that such franchises are valuable. They are subject to being sold for a consideration as much as any other property. They are even more valuable than ordinary properties, taking into consideration than that they are not granted to everyone who applies for them but only to those who undertake to furnish satisfactory and convenient service to the public. It may also be said that dealers in motor vehicles even extend credit to owners of such certificates or franchises. The law permits the seizure by means of a writ of attachment not only of chattels but also for shares and credits. While these franchises may be said to be intangible character, they are however of value and are considered properties which can be seized through legal process. Batangas Transportation Co. v. Orlanes The fact that the Commission has previously granted a license to any person to operate a bus line over a given highway and refuses to grant a similar license to another person over the same highway, does not in the least create a monopoly in the person of the licensee, for the reason that at all times the Public Service Commission has the power to say what is a reasonable compensation to the utility, and to make reasonable rules and regulations for the convenience of the traveling public and to enforce them. In the instant case, the evidence is conclusive that the Batangas Transportation Company operated its line five years before Orlanes ever turned a wheel, yet the legal effect of the decision of the Public Service Commission is to give an irregular operator, who was the last in the field, a preferential right over a regular operator, who was the first in the field. That is not the law, and there is no legal principle upon which it can be sustained. So long as the first licensee keeps and performs the terms and conditions of its license and complies with the reasonable rules and regulations of the Commission and meets the reasonable demands of the public, it should have more or less of a vested and preferential right over a person who seeks to acquire another and a later license over the same route. Otherwise, the first license would not have protection on his investment, and would be subject to ruinous competition and thus defeat the very purpose and intent for which the Public Service Commission was created. It does not appear that the public has ever made any complaint the Batangas Transportation Company, yet on its own volition and to meet the increase of its business, it has applied to the Public Service Commission for authority to increase the number of daily trips to nineteen, thus showing a spirit that ought to be commended. Where an operator is rendering good, sufficient and adequate service to the public, that the convenience does not require and the public interests will not be promoted in a proper and suitable manner by giving another operator a certificate of public convenience to operate a competing line over the same route. San Pablo v. Pantranco South Express Inc. Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a ferry boat service but a coastwise or interisland shipping service. Under no circumstance can the sea between Matnog and Allen be considered a continuation of the highway. While a ferry boat service has been considered as a continuation of the highway when crossing rivers or even lakes, which are small body of waters - separating the land, however, when as in this case the two terminals, Matnog and Allen are separated by an open sea it cannot be considered as a continuation of the highway. Respondent PANTRANCO

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6 General Considerations
should secure a separate CPC for the operation of an interisland or coastwise shipping service in accordance with the provisions of law. Its CPC as a bus transportation cannot be merely amended to include this water service under the guise that it is a mere private ferry service. The contention of private respondent PANTRANCO that its ferry service operation is as a private carrier, not as a common carrier for its exclusive use in the ferrying of its passenger buses and cargo trucks is absurd. PANTRANCO does not deny that it charges its passengers separately from the charges for the bus trips and issues separate tickets whenever they board the MV "Black Double" that crosses Matnog to Allen, PANTRANCO cannot pretend that in issuing tickets to its passengers it did so as a private carrier and not as a common carrier. The Court does not see any reason why inspite of its amended franchise to operate a private ferry boat service it cannot accept walk-in passengers just for the purpose of crossing the sea between Matnog and Allen. Indeed evidence to this effect has been submitted. What is even more difficult to comprehend is that while in one breath respondent PANTRANCO claims that it is a private carrier insofar as the ferryboat service is concerned, in another breath it states that it does not thereby abdicate from its obligation as a common carrier to observe extraordinary diligence and vigilance in the transportation of its passengers and goods. Nevertheless, considering that the authority granted to PANTRANCO is to operate a private ferry, it can still assert that it cannot be held to account as a common carrier towards its passengers and cargo. Such an anomalous situation that will jeopardize the safety and interests of its passengers and the cargo owners cannot be allowed. Teja Marketing v. IAC Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system" whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds then. Upon this premise it would be error to accord the parties relief from their predicament.

Lim v. CA The kabit system is an arrangement 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 Art. 1409 of the Civil Code. In Dizon v. Octavio, the SC explained that one of the primary factors considered in the granting of a certificate of public convenience for the business of public transportation is the financial capacity of the holder of the license, so that liabilities arising from accidents may be duly compensated. If a registered owner is allowed to escape liability by proving who the supposed owner of the vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no property with which to respond financially for the damage done. Thus, for the safety of passengers and the public who may have been wronged and deceived through the baneful kabit system, the registered owner of the vehicle is not allowed to prove that another person has become the owner so that he may be thereby relieved of responsibility. The thrust of the law in enjoining the kabit system is not so much as to penalize the parties but to identify the person upon whom responsibility may be fixed in case of an accident with the end view of protecting the riding public. In the case at bar: The evil sough to be prevented in enjoining the kabit system does not exist. 1. Neither of the parties to the pernicious kabit system is being held liable for damages. 2. The case arose from the negligence of another vehicle in using the public road to whom no representation, or misrepresentation, as regards the ownership and operation of the passenger jeepney was made and to whom no such representation, or misrepresentation, was necessary. 3. The riding public was not bothered nor inconvenienced at the very least by the illegal arrangement. On the contrary, it was private respondent himself who had been wronged and was seeking compensation for the damage done to him. Class Notes: Franchise authority given to a public utility to operate or engage in its business Congress has the general power to issue a franchise.

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escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. Registered owner may be held civilly liable with the negligent driver either: (1) subsidiarily, if the aggrieved party seeks relief based on a delict; or (2) solidarily, if the complainant seeks relief based on qusi-delict. In case a separate civil action is filed, the long-standing principle is that the registered owner of a motor vehicle is primarily and directly responsible for the consequences of its operation, including the negligence of the driver, with respect to the public and all third persons. In contemplation of law, the registered owner of a motor vehicle is the employer of its driver, with the actual operator and employer, such as a lessee, being considered as merely the owner's agent. This being the case, even if a sale has been executed before a tortious incident, the sale, if unregistered, has no effect as to the right of the public and third persons to recover from the registered owner. The public has the right to conclusively presume that the registered owner is the real owner, and may sue accordingly. In the case at bar, there is not even a sale of the vehicle involved, but a mere lease, which remained unregistered up to the time of the occurrence of the quasi-delict that gave rise to the case. Since a lease, unlike a sale, does not even involve a transfer of title or ownership, but the mere use or enjoyment of property, there is more reason, therefore, in this instance to uphold the policy behind the law, which is to protect the unwitting public and provide it with a definite person to make accountable for losses or injuries suffered in vehicular accidents. Class Notes: Basis for determining ownership contract of sale Basis for determining liability registration 2 ways to be liable: Delict subsidiary Quasi-delict solidary

Reasons for the Prior Operator rule: to prevent ruinous competition and protect investment. CPC v. CPCN: CPC: no need for legislative franchise CPCN: theres a need for legislative franchise

3. Private Nature; rights and obligations of parties inter se arising from transactions relating to transportation a. Absent a transportation contract b. Arising from a transportation contract
Contract of transportation transport of goods or persons from one place to another for a consideration Are all transport business services public utilities? NO PU if engaged in transportation business open to the general public Not PU if it only caters to a select clientele (discriminates with a particular class)

c. Liability of registered owner

PCI Leasing v. UCPB General Insurance The registered owner of the vehicle driven by a negligent driver may still be held liable under applicable jurisprudence involving laws on compulsory motor vehicle registration and the liabilities of employers for quasi-delicts under the Civil Code. The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is explained in the case of Erexo v. Jepte: Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties, but to permit the use and operation of the vehicle upon any public highway. The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefore can be fixed on a definite individual, the registered owner. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to

C. Regulation Industry 1. DOTC

of

the

Transportation

EO 125 Sec. 4. Mandate. The Ministry shall be the primary policy, planning, programming, coordinating, implementing, regulating and administrative entity of the Executive Branch of the government in the promotion, development and regulation of dependable and coordinated networks of transportation and communication systems as well as in the fast, safe, efficient and reliable postal, transportation and

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communications services. To accomplish such mandate, the Ministry shall have the following objectives: (a) Promote the development of dependable and coordinated networks of transportation and communications systems; (b) Guide government and private investment in the development of the country's intermodal transportation and communications systems in a most practical, expeditious, and orderly fashion for maximum safety, service, and cost effectiveness; (c) Impose appropriate measures to that technical, economic and other conditions for the continuing economic viability of the transportation and communications entities are not jeopardized and do not encourage inefficiency and distortion of traffic patronage; (d) Develop an integrated plan for a nationwide transmission system in accordance with national and international telecommunications service requirements including, among others, radio and television broadcast relaying, leased channel services and data transmission; (e) Guide government and private investments in the establishment, operation and maintenance of an international switching system for incoming and outgoing telecommunications services; (f) Encourage the development of a domestic telecommunications industry in coordination with the concerned entities particularly, the manufacture of communications/electronics equipment and components to complete and support, as much as possible, the expansion, development, operation and maintenance of the nationwide telecommunications network; (g) Provide for a safe, reliable and efficient postal system for the country. EO 125-A Sec. 5. Powers and Functions. To accomplish its mandate, the Department shall have the following powers and functions: (a) Formulate and recommend national policies and guidelines for the preparation and implementation of integrated and comprehensive transportation and communications systems at the national, regional and local levels; (b) Establish and administer comprehensive and integrated programs for transportation and communications, and for this purpose, may call on any agency, corporation, or organization, whether public or private, whose development programs include transportation and communications as an integral part thereof, to participate and assist in the preparation and implementation of such program; (c) Assess, review and provide direction to transportation and communication research and development programs of the government in coordination with other institutions concerned; (d) Administer and enforce all laws, rules and regulations in the field of transportation and communications; (e) Coordinate with the Department of Public Works and Highways in the design, location, development, rehabilitation, improvement, construction, maintenance and repair of all infrastructure projects and facilities of the Department. However, government corporate entities attached to the Department shall be authorized to undertake specialized telecommunications, ports, airports and railways projects and facilities as directed by the President of the Philippines or as provided by law; (f) Establish, operate and maintain a nationwide postal system that shall include mail processing, delivery services, and money order services and promote the art of philately; (g) Issue certificates of public convenience for the operation of public land and rail transportation utilities and services; (h) Accredit foreign aircraft manufacturers and/or international organizations for aircraft certification in accordance with established procedures and standards; (i) Establish and prescribe rules and regulations for identification of routes, zones and/or areas of operations of particular operators of public land services; (j) Establish and prescribe rules and regulations for the establishment, operation and maintenance of such telecommunications facilities in areas not adequately served by the private sector in order to render such domestic and overseas services that are necessary with due consideration for advances in technology; (k) Establish and prescribe rules and regulations for the operation and maintenance of a nationwide postal system that shall include mail processing, delivery services, money order services and promotion of philately; (l) Establish and prescribe rules and regulations for issuance of certificates of public convenience for public land transportation utilities, such as motor vehicles, trimobiles and railways; (m) Establish and prescribe rules and regulations for the inspection and registration of air and land transportation facilities, such as motor vehicles, trimobiles, railways and aircrafts; (n) Establish and prescribe rules and regulations for the issuance of licenses to qualified motor vehicle drivers, conductors, and airmen; (o) Establish and prescribe the corresponding rules and regulations for the enforcement of laws governing land transportation, air transportation and postal services, including the penalties for violations thereof, and for the deputation of appropriate law enforcement agencies in pursuance thereof; (p) Determine, fix and/or prescribe charges and/or rates pertinent to the operation of public air and land transportation utility facilities and services, except such rates and/or charges as may be prescribed by the Civil Aeronautics Board under its charter, and, in cases where charges or rates are established by international bodies or associations of which the Philippines is a participating

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member or by bodies or associations recognized by the Philippine government as the proper arbiter of such charges or rates; (q) Establish and prescribe the rules, regulations, procedures and standards for the accreditation of driving schools; (r) Administer and operate the Civil Aviation Training Center (CATC) and the National Telecommunications Training Institute (NTTI); and (s) Perform such other powers and functions as may be prescribed by law, or as may be necessary, incidental, or proper to its mandate or as may be assigned from time to time by the President of the Republic of the Philippines. of the Philippines; (b) The encouragement and development of an air transportation system properly adapted to the present and future of foreign and domestic commerce of the Philippines; (c) The regulation of air transportation in such manner as to support sound economic condition in such transportation and to improve the relations between air carriers; (d) Ensuring the safety, quality, reliability, and affordability of air transport services for the riding public; and (e) The encouragement and development of a viable and globally competitive Philippine aviation industry. SEC. 24. Powers of the Board. - The Board shall have the following general powers: (a) Provide comprehensive policy guidance for the promotion and development of the Philippine aviation industry, as provided for in this Act; (b) Ensure that the Authority performs its functions in a proper, efficient and effective manner; (c) Decide the objectives, strategies and policies of the Authority in accordance with the provisions of this Act; (d) Determine the organizational structure of the Authority in accordance with the provisions of this Act, establish a human resources management system based on merit and fitness, and adopt a rational compensation and benefits scheme; (e) Exercise appellate powers on any decisions, findings and rulings of the Director General, to issue subpoena ad testificandum or subpoena duces tecum requiring the attendance and testimony of witnesses in any matter or inquiry pending before the Board and require the production of books, papers, contracts, agreements and all other documents submitted for purposes of this section to be under oath and verified by the person in custody thereof as to the truth and correctness of data appearing in such books, papers, tariffs, contracts, agreements and all other documents; (f) Exercise appellate powers to order the taking of depositions in any proceeding, or investigation, pending before the Board at any stage of such proceeding or investigation; (g) Use available services, equipment, personnel and facilities of other agencies of the Philippine Government, on a reimbursable basis when appropriate and, on a similar basis, to co-operate with those agencies in the establishment and use of services, equipment and facilities of the Authority; (h) Use the property of the Authority in such a manner as may appear to the Authority to be requisite, advantageous or convenient with a view to making the best use of any of the property of the Authority in relation to its functions under this Act; (i) Invest such of the Authority's funds that are not immediately required for operating expenses, or other immediate obligations in any business venture the Board

2. Air CAAP and CAB

RA 9497 [CAAP] SEC. 4. Creation of the Authority. - There is hereby created an independent regulatory body with quasijudicial and quasi-legislative powers and possessing corporate attributes to be known as the Civil Aviation Authority of the Philippines (CAAP), hereinafter referred to as the "Authority" attached to the Department of Transportation and Communications (DOTC) for the purpose of policy coordination. For this purpose, the existing Air Transportation Office created under the provisions of Republic Act No. 776, as amended, is hereby abolished. Notwithstanding the foregoing, nothing in this Act shall diminish the powers and functions of the Civil Aeronautics Board (CAB) as provided for under Republic Act. No. 776, also known as "The Civil Aeronautics Act of the Philippines", as amended. (a) Establishment of Authority Headed by a Director General - The Authority shall beheaded by a Director General of Civil Aviation, referred to in this Act as the "Director General," who shall be appointed by the President of the Philippines and shall be responsible for all civil aviation in the Philippines and the administration of this Act. The Director General shall be appointed based on the qualifications herein provided and shall have a tenure of office for a period of four (4) years. His appointment may be extended for another nonextendible term of four (4) years and shall only be removed for cause in accordance with the rules and regulations prescribed by the Civil Service Commission. (b) Responsibility of the Director General - The Director General shall be responsible for the exercise of all powers and the discharge of all duties of the Authority and shall have control over all personnel and activities of the Authority. SEC. 21. Policies. - In the exercise and performance of its powers and duties under this Act, the Authority shall consider the following, among other things, as being in the public interest and in accordance with the public convenience and necessity: (a) The development and utilization of the air potential

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may deem appropriate, or in such secured note, government securities, and other negotiable instruments that satisfy the guidelines prescribed by the Board. Funds of the Authority shall be deposited in such commercial and universal banks as the Board may determine, subject to the requirements of existing laws. The Board shall designate the officials authorized to deposit in or withdraw funds from such depository banks; (j) Promulgate rules and regulations as may be necessary in the interest of safety in air commerce pertaining to the issuance of the airman's certificate including the licensing of operating and mechanical personnel, type certificate for aircraft, aircraft engines, propellers and appliances, airworthiness certificates, air carrier operating certificates, air agency certificates, navigation facility and aerodrome certificates; air traffic routes; radio and aeronautical telecommunications and air navigation aids; aircraft accident inquiries; aerodromes, both public and private-owned; construction of obstructions to aerodromes; height of buildings; antennae and other edifices; registration of aircrafts; search and rescue; facilitation of air transports; operations of aircrafts, both for domestic and international, including scheduled and non-scheduled; meteorology in relation to civil aviation; rules of the air; air traffic services; rules for prevention of collision of aircrafts, identification of aircraft; rules for safe altitudes of flight; and such other rules and regulations, standards, governing other practices, methods and/or procedures as the Director General may find necessary and appropriate to provide adequately for safety regularity and efficiency in air commerce and air navigation; (k) Impose and fix reasonable charges and fees for the use of government aerodromes or air navigation facilities; for services rendered by the Authority in the rating of any aerodrome or air navigation facilities, civil aviation schools and instructors, aircraft repair stations, and aircraft radio and aeronautical telecommunications stations; (l) Fix the reasonable charges to be imposed in the use of privately-owned air navigation facilities and aerodromes; (m) Adopt a system for the registration of aircraft as hereinafter provided; (n) Determine and fix, landing fees, parking space fees, royalties on sales or deliveries, direct or indirect, to any aircraft for its use of aviation gasoline, oil and lubricants, spare parts, accessories and supplies, tools, other royalties, fees or rentals for the use of any of the property under its management and control; (o) Approve the annual and supplementary budget plan and utilization of retained revenue; (p) Exercise the corporate powers granted to the Authority; (q) Upon its own initiative or the recommendation of the Director General or an application of a private person, grant exemption from the requirements of observing rules or regulations issued in accordance with this Act: Provided, That said grant of exemption is not prejudicial to flight safety; (r) Formulate rules and regulations concerning compliance of the carrier and the public for the safe transport of goods and materials by air pursuant to international standards or Annexes to the Chicago Convention; and (s) In coordination with the appropriate government agency tasked to provide airport security, shall: (1) Prescribe reasonable regulation requiring that all passengers and all property intended to be carried in the aircraft cabin in commercial air transport be screened by weapon-detecting procedure or facilities employed or operated by employees or agents of the air operator or foreign air operator prior to boarding the aircraft for such transportation; (2) Prescribe such other reasonable rules and regulations requiring such parties, methods and procedures as the Director General may find necessary to protect persons and property aboard aircraft operating in commercial air transport against acts of criminal violence and aircraft piracy; and (3) To the extent practicable, require uniform procedures for the inspection, detention, and search of persons and property in domestic commercial air transport and international commercial air transport to assure their safety and to assure that they will receive courteous and efficient treatment by air operators and their agents and employees. SEC. 35. Powers and Functions of the Director General. The Director General shall be the chief executive and operating officer of the Authority. He shall have the following powers, duties and responsibilities: (a) To carry out the purposes and policies established in this Act; to enforce the provisions of the rules and regulations issued in pursuance to said Act; and he shall primarily be vested with authority to take charge of the technical and operational phase of civil aviation matters; (b) To designate and establish civil airways, to acquire, control, operate and maintain along such airways, navigation facilities and to chart such airways and arrange for their publication including the aeronautical charts or maps required by the international aeronautical agencies, by utilizing the equipment, supplies or assistance of existing agencies of the government as far as practicable; (c) To issue airman's certificate specifying the capacity in which the holder thereof is authorized to serve as airman in connection with aircraft and shall be issued only upon the finding that the applicant is properly qualified and physically able to perform the duties of the position. The certificate shall contain such terms, conditions and limitations as the Director General may determine to be necessary to assure safety in air commerce: Provided, however, That the airman's license

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shall be issued only to qualified persons who are citizens of the Philippines or qualified citizens of countries granting similar rights and privileges to citizens of the Philippines; (d) To issue airworthiness certificate for aircraft which shall prescribe the duration of such certificate, the type of service for which the aircraft may be used, and such other terms and conditions and limitations as are required; (e) To issue air carrier operating certificate in accordance with the minimum safety standards for the operation of the air carrier to whom such certificate is issued. The air carrier operating certificate shall be issued only to aircrafts registered under the provisions of this Act; (f) To issue type certificate for aircraft, aircraft engine, propellers and appliances; (g) To inspect, classify and rate any air navigation facilities and aerodromes available for the use of aircraft as to its suitability for such use and to issue a certificate for such air navigation facility and aerodrome; and to determine the suitability of foreign aerodromes, air navigation facilities as well as air routes to be used prior to the operation of Philippine-registered aircraft in foreign air transportation and from time to time thereafter as may be required in the interest of safety in air commerce; (h) To issue certificates of persons or civil aviation schools giving instruction in flying, repair stations, and other air agencies and provide for the examination and rating thereof; (i) To provide for the enforcement of the rules and regulations issued under the provisions of this Act and to conduct investigation for violations thereto. In undertaking such investigation, to require by subpoena ad testificandum or subpoena duces tecum, the attendance and testimony of witnesses, the production of books, papers, documents, exhibits matter, evidence, or the taking of depositions before any person authorized to administer oath. Refusal to submit the reasonable requirements of the investigation committee shall be punishable in accordance with the provisions of this Act; (j) To collect and disseminate information relative to civil aeronautics and the development of air commerce and the aeronautical industry; to exchange with foreign governments, information pertaining to civil aeronautics; and to provide for direct communication on all matters relating to the technical or operational phase of aeronautics with international aeronautical agencies: (k) To acquire and operate such aircraft as may be necessary to execute the duties and functions of the Authority prescribed in this Act; (l) To plan, design, acquire, establish, construct, operate, improve, maintain, and repair necessary aerodromes and other air navigation facilities; (m) To collect and receive charges and fees for the registration of aircraft and for the issuance and/or renewal of licenses or certificates for aircraft, aircraft engines, propellers and appliances, and airmen as provided in this Act; (n) To impose fines and/or civil penalties in respect thereto; (o) To participate actively with the largest possible degree in the development of international standardization of practices in aviation matters important to safe, expeditious, and easy navigation, and to implement as far as practicable the international standards, recommended practices and policies adopted by appropriate international aeronautical agencies; (p) To exercise and perform its powers and duties under this Act consistent with any obligation assumed by the Republic of the Philippines in any treaty, convention or agreement on civil aviation matters; (q) To cooperate, assist and coordinate with any research and technical agency of the government on matters relating to research and technical studies on design, materials, workmanship, construction, performance, maintenance and operation of aircraft, aircraft engines, propellers, appliances, and air navigation facilities including aircraft fuel and oil: Provided, That nothing in this Act shall be construed to authorize the duplication of the laboratory research, activities or technical studies of any existing governmental agency; (r) To designate such prohibited and danger areas, in consonance with the requirements of the international aeronautical agencies and national security; (s) To issue, deny, suspend, cancel or revoke any certificate, license pertaining to aircraft, airmen and air agencies: Provided, That any order denying, suspending, cancelling, revoking the certificate or license may he appealed to the Board, whose decisions shall he final within fifteen (15) days from the date of notification of such denial, cancellation or revocation; (t) To grant authorization to civil aircraft or persons to carry instruments or photographic devices to be used for aerial photography or taking of pictures by photograph or sketching of any part of the Philippines; and (u) Pursuant to a board resolution, to enter into, make and execute contracts of any kind with any person, firm, or public or private corporation. RA 776 [CAB] SECTION 5. Composition of the Board. - The Civil Aeronautics Board shall be composed of the Secretary of Transportation and Communications or his designated representative as Chairman, the Assistant Secretary for Air Transportation of the Department of Transportation and Communications as Vice-Chairman, the Commanding General of the Philippine Air Force and two (2) members to be appointed by the President of the Philippines. They shall hold office at the pleasure of the President. No member of the Board shall have any pecuniary interest in, or own any stock or bond of, any civil aeronautics enterprise.

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SECTION 10. Powers and duties of the Board. - (A) Except as otherwise provided herein, the Board shall have the power to regulate the economic aspect of air transportation, and shall have the general supervision and regulation of, the jurisdiction and control over, air carriers, general sales agents, cargo sales agents, and airfreight forwarders as well as their property, property rights, equipment, facilities, and franchise, in so far as may be necessary for the purpose of carrying out the provisions of this Act. (C) The Board shall have the following specific powers and duties: (1) In accordance with the provisions of Chapter 4 of this Act, to issue, deny, amend, revise, alter, modify, cancel, suspend, or revoke, in whole or in part, upon petition or complaint, or upon its own initiative, any temporary operating permit or Certificate of Public Convenience and Necessity; Provided, however, That in the case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic of the Philippines. (2) To fix and determine reasonable individual, joint or special rates, charges or fares, which an air carrier may demand, collect or receive for any service in connection with air commerce. The Board may adopt any original, amended, or new individual, joint or special rates, charges or fares proposed by an air carrier if the proposed individual, joint, or special rates, charges for fares are not unduly preferential or unduly discriminatory or unreasonable. The burden of proof to show that the proposed individual, joint or special rates, charges or fares are just and reasonable shall be upon the air carrier proposing the same. In fixing rates, charges, fares under the provisions of this Act, the Board shall take into consideration, among other factors: (a) The effect of such rates upon the movement of traffic; (b) The need in the public interest of adequate and efficient transportation of persons and property by air carriers at the lowest cost consistent with the furnishing of such service. (c) Such standards respecting the character and quality of service to be rendered by air carriers as may be prescribed by or pursuant to law; (d) The inherent advantages of transportation by aircraft; and (e) The need of each air carrier for revenues sufficient to enable such air carrier, under honest, economical, and efficient management, to provide adequate and efficient air carrier service. (3) To authorize any type of charters whether domestic or international and special air services or flight under such terms and conditions as in its judgment public interest requires. Notwithstanding the existence of bilateral air agreement, the CAB is authorized to grant any foreign airline increase in frequencies and/or capacities on international routes when in its judgment the national interest requires it, provided that the utilization of the increase frequencies and capacities is not more than thirty days. All grants of frequencies and/or capacities shall be subject to the approval of the President. (4) To approve or disapprove increase and/or decrease of capital, lease, purchase, sales of aircraft of air carrier engaged in air commerce; consolidation, merger, purchase, lease and acquisition and control of operating contracts between domestic foreign air carriers, or between domestic air carriers or any person engaged in any phase of aeronautics. (5) To inquire into the management of the business of any air carrier and, to the extent reasonably necessary for such inquiry, to obtain from such carrier, and from any person controlling, or controlled by, or under common control with, such air carrier, full and complete reports and other informations. Such reports shall be under oath whenever the Board so requires. (6) To require annual, monthly, periodical, and special reports from any air carrier, to prescribe the manner and form in which such reports shall be made, and to require from any air carrier specific answers to all questions upon which the Board may deem information to be necessary. Such reports shall be under oath whenever the Board so requires. The Board may also require any air carrier to file with it any contract, agreement, understanding or arrangement, or a true copy thereof, between such air carrier and any other carrier or person, in relation to any traffic affected by the provisions of this Act. (7) To prescribe the forms of any and all accounts, records, and memoranda of the movement of traffic, as well as of the receipts and expenditures of money, and the length of times such accounts, records and memoranda shall be preserved: Provided, that any air carrier may keep additional accounts, records, or memoranda if they do not impair the integrity of the accounts, records, or memoranda prescribed or approved by the Board and do not constitute an undue financial burden on such air carrier. (8) To require each officer and director of any air carrier to transmit a report describing the shares of stock with any persons engaged in any phase or other interest held by such air carrier of aeronautics, and the holding of the stock in and control of, other persons engaged in any phase of aeronautics. SECTION 11. Nature, terms and conditions. - Certificate of Public Convenience and Necessity is a permit issued by the Board authorizing a person to engage in air commerce and/or transportation, foreign and/or domestic. No person shall engage in air commerce unless there is in force a permit issued by the Board. No general sales agent, cargo sales agent or airfreight forwarder shall engage in any of the activities mentioned in Section 3 paragraphs (jj), (kk) and (ll) respectively,

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unless there is in force a permit or any other form of authorization issued by the Board. Any permit may be altered, amended, modified, suspended, canceled or revoked by the Board in whole or in part, upon complaints or petition or upon the Board's initiative as hereinafter provided, whenever the Board finds such action to be in the public interest. There shall be attached to the exercise of the privileges granted by the permit, or amendment thereto, such reasonable terms, conditions, or limitations as, in the judgment of the Board, the public interest may require. No permit shall confer any proprietary, property, or exclusive right in the use of any air space, civil airway, landing area of government air navigation facility. The permit shall, among others specify the terminal and intermediate points, if any, between which the air carrier is authorized to operate the service to be rendered, the time of arrival and departure at each point, and the frequency of flights. Provided, that no change in routes, rates, schedules or frequency nor supplemental or additional flights to those covered by an air commerce permit or franchise shall be affected without prior approval of the Civil Aeronautics Board. In so far as the operation is to take place within the Philippines, the permit shall designate the terminal and intermediate points only insofar as the Board shall deem practicable, and otherwise shall designate only the general route or routes to be followed. No carrier shall abandon any route, or part thereof for which a permit has been issued, unless upon findings by the Civil Aeronautics Board that such an abandonment is uneconomical and is in the public interest. SECTION 12. Citizenship requirement. - Except as otherwise provided, in the Constitution and existing treaty or treaties, permit authorizing a person to engage in domestic air commerce and/or transportation shall be issued only to citizens of the Philippines. PAL v. CAB Sec. 10, RA 776(C) explicitly authorizes CAB to issue a "temporary operating permit," and nothing contained, either in said section, or in Chapter IV of Republic Act No. 776, negates the power to issue said "permit", before the completion of the applicant's evidence and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary permit "upon its own initiative," strongly suggests the power to exercise said authority, even before the presentation of said evidence has begun. PAL v. CAB, supra shall respectively be responsible for the following four (4) staff offices composed of eight (8) services and four (4) line offices, and shall report to the respective Undersecretaries assigned by the Secretary, which Undersecretary shall have control and supervision over said respective services and offices: (a) Office of the Assistant Secretary for Administrative and Legal Affairs; 1) Administrative Service, and 2) Legal Service (b) Office of the Assistant Secretary for Finance and Comptrollership; 1) Finance and Management Service, and 2) Comptrollership Service (c) Office of the Assistant Secretary for Planning and Project Development; 1) Planning Service, and 2) Project Development Service (d) Office of the Assistant Secretary for Management Information Service and Project Management; 1) Management Information Service, and 2) Project Management Service e) Office of the Assistant Secretary for Land Transportation; (f) Office of the Assistant Secretary for Postal Services; (g) Office of the Assistant Secretary for Telecommunications; (h) Office of the Assistant Secretary for Air Transportation. Each of the above-named services shall be headed by a service chief appointed by the President upon the recommendation of the Secretary Sec. 11. Department Regional Offices. The Department shall have three (3) Department Regional Offices in each of the administrative regions of the country: the Department Regional Office for land Transportation, the Department Regional Office for Telecommunications and the Department Regional Office for Postal Services. The present Regional Offices of the Land Transportation Commission are hereby abolished and their functions are transferred to the respective Department Regional Offices for Land Transportation. The present Regional Offices of the Bureau of Telecommunications are hereby abolished and their functions are transferred to the respective Department Regional Offices for Telecommunications. The present Regional Offices of the Bureau of Posts are hereby abolished and their functions are transferred to the corresponding Department Regional Offices for Postal Services. Each Department Regional Office shall be headed by a Department Regional Director and assisted by a Department Assistant Regional Director. The present Airport Offices of the Bureau of Air Transportation are hereby abolished and their functions are transferred to the Department Airport Offices. The abolition of the herein Regional Offices and the transfer of their functions shall be governed by the provisions of Section

3. Land LTO and LTFRB

[LTO] EO 125-A Sec. 9. Assistant Secretaries and Service Chiefs. The Secretary shall also be assisted by eight (8) Assistant Secretaries appointed by the President upon the recommendation of the Secretary, each of whom

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15 (b) hereof. The Department Regional Offices shall essentially be line in character and shall be responsible for the delivery of all front line services of the Department. For such purposes, the Department Regional Offices shall have within their respective administrative regions, the following functions: (a) Implement laws, and policies, plans, programs, projects, rules and regulations of the Department; (b) Provide efficient, and effective service to the people; (c) Coordinate with regional offices of other departments, offices and agencies; (d) Coordinate with local government units; (e) Perform such other functions as may be provided by law. Sec. 13. Abolition/Transfer/Consolidation: (a) The Land Transportation Commission is hereby abolished and its staff functions are transferred to the service offices of the Department Proper and its line functions are transferred to the Department Regional Offices for Land Transportation as provided in Section 11 herein. Such transfer of functions is subject to the provisions of Section 15 (b) hereof. The quasi-judicial powers and functions of the Commission are transferred to the Department. The corresponding position structure and staffing pattern shall be approved and prescribed by the Secretary pursuant to Section 16 hereof. [LTFRB] Sec. 2. Composition of the Board. The Board shall be composed of a Chairman and two (2) members with the same rank, salary and privileges of an Assistant Secretary, all of whom shall be appointed by the President of the Philippines upon recommendation of the Secretary of Transportation and Communications. One (1) member of the Board shall be a member of the Bar and shall have engaged in the practice of law in the Philippines for at least five (5) years, another a holder of a degree in civil engineering, and the other a holder of a degree in economics, finance or management both with the same number of years of experience and practice. Sec. 4. Supervision and Control Over the Board. The Secretary of Transportation and Communications, through his duly designated Undersecretary, shall exercise administrative supervision and control over the Land Transportation Franchising and Regulatory Board. Sec. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board. The Board shall have the following powers and functions: a. To prescribe and regulate routes of service, economically viable capacities and zones or areas of operation of public land transportation services provided by motorized vehicles in accordance with the public land transportation development plans and programs approved by the Department of Transportation and Communications; b. To issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation of public land transportation services provided by motorized vehicles, and to prescribe the appropriate terms and conditions therefor; c. To determine, prescribe and approve and periodically review and adjust, reasonable fares, rates and other related charges, relative to the operation of public land transportation services provided by motorized vehicles; d. To issue preliminary or permanent injunction, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the Rules of Court shall apply; e. To punish for contempt of the Board, both direct and indirect, in accordance with the pertinent provisions of, and the penalties prescribed by, the Rules of Court; f. To issue subpoena and subpoena duces tecum and summon witnesses to appear in any proceedings of the Board, to administer oaths and affirmations; g. To conduct investigations and hearings of complaints for violation of the public service laws on land transportation and of the Board's rules and regulations, orders, decisions and/or rulings and to impose fines and/or penalties for such violations; h. To review motu proprio the decisions/actions of the Regional Franchising and Regulatory Office herein created; i. To promulgate rules and regulations governing proceedings before the Board and the Regional Franchising and Regulatory Office: Provided, That except with respect to paragraphs d, e, f and g hereof, the rules of procedure and evidence prevailing in the courts of laws should not be controlling and it is the spirit and intention of said rules that the Board and the Regional Franchising and Regulatory Offices shall use every and all reasonable means to ascertain facts in its case speedily and objectively and without regard to technicalities of law and procedures, all in the interest of due process; j. To fix, impose and collect, and periodically review and adjust, reasonable fees and other related charges for services rendered; k. To formulate, promulgate, administer, implement and enforce rules and regulations on land transportation public utilities, standards of measurements and/or design, and rules and regulations requiring operators of any public land transportation service to equip, install and provide in their utilities and in their stations such devices, equipment facilities and operating procedures and techniques as may promote safety, protection, comfort and convenience to persons and property in their charges as well as the safety of persons and property within their areas of operations; l. To coordinate and cooperate with other government agencies and entities concerned with any aspect involving public land transportation services with the end in view of effecting continuing improvement of such services; and

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m. To perform such other functions and duties as may be provided by law, or as may be necessary, or proper or incidental to the purposes and objectives of this Executive Order. Sec. 6. Decision of the Board; Appeals therefrom and/or Review thereof. The Board, in the exercise of its powers and functions, shall sit and render its decisions en banc. Every such decision, order, or resolution of the Board must bear the concurrence and signature of at least two (2) members thereof. The decision, order or resolution of the Board shall be appealable to the Secretary within thirty (30) days from receipt of the decision: Provided, That the Secretary may motu proprio review any decision or action of the Board before the same becomes final. Sec. 7. Creation of Regional Franchising and Regulatory Offices. There shall be a Regional Franchising and Regulatory Office in each of the administrative regions of the country which shall be headed by a Board Regional Manager having the rank, salary and privileges of a Department Assistant Regional Director. The Regional Franchising and Regulatory Offices shall hear and decide uncontested applications/petitions for routes, within their respective administrative regions: Provided, That applications/petitions for routes extending their respective territorial jurisdictions shall be heard and decided by the Board. KMU Labor Center v. Garcia Sec 16(c) of the Public Service Act states that there should be proper notice and hearing before the PSC may fix and determines rates. Under the provision, the Legislature delegated to the defunct Public Service Commission the power of fixing the rates of public services. Respondent LTFRB, the existing regulatory body today, is likewise vested with the same under Executive Order No. 202 dated June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB "to determine, prescribe, approve and periodically review and adjust, reasonable fares, rates and other related charges, relative to the operation of public land transportation services provided by motorized vehicles." With the authority given to admin agencies, the LTFRB may implement broad policies laid down in a statute by "filling in" the details which the Legislature may neither have time or competence to provide. However, nowhere under the aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator, or other public service. In the case at bar, the authority given by the LTFRB to the provincial bus operators to set a fare range over and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. A further delegation of such power would indeed constitute a negation of the duty in violation of the trust reposed in the delegate mandated to discharge it directly. 11 The policy of allowing the provincial bus operators to change and increase their fares at will would result not only to a chaotic situation but to an anarchic state of affairs. This would leave the riding public at the mercy of transport operators who may increase fares every hour, every day, every month or every year, whenever it pleases them or whenever they deem it "necessary" to do so. One veritable consequence of the deregulation of transport fares is a compounded fare. If transport operators will be authorized to impose and collect an additional amount equivalent to 20% over and above the authorized fare over a period of time, this will unduly prejudice a commuter who will be made to pay a fare that has been computed in a manner similar to those of compounded bank interest rates. As applied in the case at bar, commuters will be continuously subjected, not only to a double fare adjustment but to a compounding fare as well. On their part, transport operators shall enjoy a bigger chunk of the pie. Aside from fare increase applied for, they can still collect an additional amount by virtue of the authorized fare range. There are several factors to be considered in rate fixing. A rate should not be confiscatory as would place an operator in a situation where he will continue to operate at a loss. Hence, the rate should enable public utilities to generate revenues sufficient to cover operational costs and provide reasonable return on the investments. On the other hand, a rate which is too high becomes discriminatory. It is contrary to public interest. A rate, therefore, must be reasonable and fair and must be affordable to the end user who will utilize the services. Given the complexity of the nature of the function of rate-fixing and its far-reaching effects on millions of commuters, government must not relinquish this important function in favor of those who would benefit and profit from the industry. Neither should the requisite notice and hearing be done away with. The people, represented by reputable oppositors, deserve to be given full opportunity to be heard in their opposition to any fare increase.

4. Water MIA
EO 125 Sec. 12. Maritime Industry Authority. The Maritime Industry Authority is hereby retained and shall have the following functions: (a) Develop and formulate plans, policies, programs, projects, standards, specifications and guidelines geared toward the promotion and development of the maritime industry, the growth and effective regulation of shipping enterprises, and for the national security objectives of the country;

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16 General Considerations
(b) Establish, prescribe and regulate routes, zones and/or areas of operation of particular operators of public water services; (c) Issue Certificates of Public Convenience for the operation of domestic and overseas water carriers; (d) Register vessels as well as issue certificates, licenses or documents necessary or incident thereto; (e) Undertake the safety regulatory functions pertaining to vessel construction and operation including the determination of manning levels and issuance of certificates of competency to seamen; (f) Enforce laws, prescribe and enforce rules and regulations, including penalties for violations thereof, governing water transportation and the Philippine merchant marine, and deputize the Philippine Coast Guard and other law enforcement agencies to effectively discharge these functions; (g) Undertake the issuance of licenses to qualified seamen and harbor, bay and river pilots; (h) Determine, fix and/or prescribe charges and/or rates pertinent to the operation of public water transport utilities, facilities and services except in cases where charges or rates are established by international bodies or associations of which the Philippines is a participating member or by bodies or associations recognized by the Philippine Government as the proper arbiter of such charges or rates. (i) Accredit marine surveyors and maritime enterprises engaged in shipbuilding, shiprepair, shipbreaking, domestic and overseas shipping ship management and agency; (j) Issue and register the continuous discharge book of Filipino seamen; (k) Establish and prescribe rules and regulations, standards and procedures for the efficient and effective discharge of the above functions; (l) Perform such other functions as may now or hereafter be provided by law. RA 9295 SEC. 8. Deregulation of the Domestic Shipping Industry. In order to encourage investment in the Domestic Shipping Industry by existing domestic operators and attract new investment from new operators and investors, domestic ship operators are hereby authorized to establish their own domestic shipping rates: Provided, That the effective competition is fostered and public interest is served. The MARINA shall monitor all shipping operations and exercise regulatory intervention where it is established, after due process that public interest needs to be protected and safeguarded. SEC. 10. Jurisdiction; Powers; and Duties of MARINA. The MARINA shall have the power and authority to: 1. Register vessels; 2. Issue certificates of public convenience, or any extensions or amendments thereto, authorizing the operation of all kinds, classes and types of vessels in domestic shipping: Provided, That no such certificate shall be valid for a period of more than twenty-five (25) years; Modify, suspend or revoke at any time, upon notice and hearing, any certificate, license or accreditation it may have issued to any domestic ship operator; Establish and prescribe routes, zones of areas of operations of domestic ship operators; Require any domestic ship operator to provide shipping services to any coastal area, island or region in the country where such services are necessary for the development of the area, to meet emergency sealift requirements, or when public interest so requires; Set safety standards for vessels in accordance with applicable conventions and regulations; Require all domestic ship operators to comply with operational and safety standards for vessels set by applicable conventions and regulations, maintain its vessels in safe and serviceable condition, meet the standards of safety of life at sea and safe manning requirements, and furnish safe, adequate, efficient, reliable and proper service at all times; Inspect all vessels to ensure and enforce compliance with safety standards and other regulations; Ensure that all domestic ship operators shall have the financial capacity to provide and sustain safe, reliable, efficient and economic passenger or cargo service, or both; Determine the impact which any new service shall have to the locality it will serve; Adopt and enforce such rules and regulations which will ensure compliance by every domestic ship operator with required safety standards and other rules and regulations on vessels safety; Adopt such rules and regulations which ensure the reasonable stability of passengers and freight rates and, if necessary, to intervene in order to protect public interest; Hear and adjudicate any compliant made in writing involving any violation of this law or the rules and regulations of the Authority; Impose such fines and penalties on, including the revocation of licenses of, any domestic ship operator who shall fail to maintain its vessels in safe and serviceable condition, or who shall violate or fail to comply with safety regulations; Investigate any complaint made in writing against any domestic ship operator, or any shipper, or any group of shippers regarding any

3.

4. 5.

6. 7.

8.

9.

10. 11.

12.

13.

14.

15.

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matters involving violations of the provisions of this Act; 16. Upon notice and hearing, impose such fines, suspend or revoke certificates of public convenience or other license issued, or otherwise penalize any ship operator, shipper or group of shippers found violating the provisions of this Act; an 17. 17 Issue such rules and regulations necessary to implement the provisions of this Act: Provided, That such rules and regulations cannot change or in any way amend or be contrary to the intent and purposes of this Act. Sec. 11. Rates. Every domestic ship operator shall have the right to fix its own passenger or cargo rates, or both. Class Notes: Attached Agencies lateral; DOTC does not exercise control over them CAB economic aspect (rate fixing) CAAP general authority; covers those entities which do not engage in transportation business * Attached Agencies therefore not controlled by DOTC LTO general authority; covers those entities which do not engage in transportation business LTFRB economic aspect * Not attached therefore DOTC controls them * Not as autonomous as CAAP and CAB MARINA no more rate fixing power * Attached agency

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18 Common Carriers

COMMON CARRIERS
A. In General 1. Definitions and Essential Elements

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. US v. Tan Piaco (a) The individual, copartnership, etc., etc., must be a public utility; and (b) the business in which such individual, copartnership, etc. etc., is engaged must be for public use. So long as the individual or copartnership, etc., etc., is engaged in a purely private enterprise, without attempting to render service to all who may apply, he can in no sense be considered a public utility, for public use. "Public use" means the same as "use by the public." The essential feature of the public use is that it is not confined to privilege individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look not only the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law compels the power to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge of the character of the use is whether the public may enjoy it by right or only by permission. Home Insurance Co. v. American Steamship Agencies, Inc. A perusal of the charter party referred to shows that while the possession and control of the ship were not entirely transferred to the charterer, the vessel was chartered to its full and complete capacity (Exh. 3). Furthermore, the, charter had the option to go north or south or vice-versa, loading, stowing and discharging at its risk and expense. Accordingly, the charter party contract is one of affreightment over the whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation. Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the goods caused by personal want of due diligence on its part or its manager to make the vessel in all respects seaworthy

and to secure that she be properly manned, equipped and supplied or by the personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. De Guzman v. CA Art. 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. It 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 it 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. Private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to

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comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. Bascos v. CA 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. Planters Products Inc. v. CA A charter-party is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessels lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. There are 2 types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. The distinction between a common carrier and a private carrier lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. Fabre, Jr. v CA Petitioners did not have to be engaged in the business of public transportation for the provisions of the CC on common carriers to apply to them. As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good father of a family in the selection and supervision of their employee. First Philippine Industrial Corp. v. CA 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 requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods. It undertakes to carry for all persons indefinitely, 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. The definition in the CC 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. Asia Lighterage and Shipping Inc. v. CA Petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets. Crisostomo v. CA Respondent is not an entity engaged in the business of transporting either passengers or goods and is therefore, neither, a private nor a common carrier. Respondent did not undertake to transport petitioner from one place to another since its covenant with its customers is simply to make travel arrangements in their behalf. Respondents services as a travel agency include procuring tickets and facilitating travel permits or visas as well as booking customers for tours. Class Notes: Is a common carrier a PU? YES (Sec. 13b)

PU

CC

Tranpo business

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20 Common Carriers
* Trend in the cases: more liberal the intersection is getting bigger

2. Nature of Business and Power of the State to Regulate

Article 1765. The Public Service Commission may, on its own motion or on petition of any interested party, after due hearing, cancel the certificate of public convenience granted to any common carrier that repeatedly fails to comply with his or its duty to observe extraordinary diligence as prescribed in this Section. Pantranco v. PSC The business of a common carrier holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation. When private property is affected with a public interest it ceased to be juris private only. When, therefore, one devoted his property to a use in which the public has an interest, he in effect, grants to the public an interest in that use and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. This right of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over public utilities may be exercised through boards of commissioners. This right of the state to regulate public utilities is founded upon the police power and statutes for the control and regulation of utilities are a legitimate exercise thereof, for the protection of the public as well as of the utilities themselves. Such statutes are no unconstitutional either as impairing the obligation of contracts, taking property without dues process, or denying the equal protection of the laws, especially inasmuch as the question w/n private property shall be devoted to a public use and the consequent burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his property in public service he cannot complain that it becomes subject to the regulatory powers of the state. Class Notes: Power to regulate includes: 1. cancellation of CPCs 2. setting of rates and routes Basis: Police power of the state

Cangco v. Manila Railroad Co. The foundation of the legal liability of the defendant is the contract of carriage and that the obligation to respond for damages which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due care in its performance. The liability is direct and immediate, differing essentially, in the legal viewpoint from that presumptive responsibility for the negligence of its servants which can be rebutted by proof of exercise of due care in their selection and supervision. Article 1903 is not applicable to obligations arising ex contractu but only to extra-contractual obligations or culpa aquiliana. For 1903: When an injury is caused by the negligence of a servant or employee there instantly arises a presumption of law that there was negligence on the part of the master or employer either in the selection of supervision of the employee or both. The presumption is juris tantum and may be rebutted. If the employer shows to the satisfaction of the court that in selection and supervision he has exercised the care and diligence of a good father of a family, the presumption is overcome and he is relieved from liability. For contractual obligation: The burden of proof is on the plaintiff to prove negligence. Proof of the contract and its nonperformance is sufficient prima facie to warrant a recovery. The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in safety and to provide safe means of entering and leaving its trains. That duty, being contractual, was direct and immediate, and its non-performance could not be excused by proof that the fault was morally imputable to defendants servants. Isaac v. A.L. Ammen Transportation Co. Inc. Reason for requiring extraordinary diligence: This extraordinary diligence required of common carriers is calculated to protect the passenger from the tragic mishaps that frequently occur in connection with rapid modern transportation. This high standard of care is imperatively demanded by the preciousness of human life and by the consideration that every person must in every way be safeguarded against all injury. Principles governing liability: (1) The liability of a carrier is contractual and arises upon breach of its obligation. There is breach if it fails to exert extraordinary diligence according to all the circumstance of each case; (2) A carrier is obliged to carry its passenger with the utmost diligence of a very cautious person, having due regard for all the circumstances;

3. Nature and Basis of Liability

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.

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(3) A carrier is presumed to be at fault or to have acted negligently in case of death of, or injury to, passengers, it being its duty to prove that it exercised extraordinary diligence; and (4) The carrier is not an insurer against all risks of travel. In the case at bar, there was no negligence on the part of the bus driver. One who is placed in such a predicament cannot exercise such coolness or accuracy of judgment as is required of him under ordinary circumstances and he cannot therefore be expected to observe the same judgment, care and precaution as in the latter. Fores v. Miranda See discussion under Damages Phil. Rabbit Bus Lines v. IAC In culpa contractual, the moment a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently, and this disputable presumption may only be overcome by evidence that he had observed extraordinary diligence as prescribed in the CC or that the death or injury of the passenger was due to a fortuitous event. The driver cannot be held jointly and severally liable with the carrier in case of breach of contract. Firstly, the contract of carriage is between the carrier and passenger, and in the event of contractual liability, the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his driver. The carrier can neither shift his liability on the contract to his driver nor share it with him. for his drivers negligence is his. Secondly, if We make the driver jointly and severally liable with the carrier, that would make the carriers liability personal instead of merely vicarious and consequently, entitled to recover only the share which corresponds to the driver, contrary to the explicit provision in 2181. LRTA v. Navidad The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage. A contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract. Stated differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply. Class Notes: 2 types of action: (1) culpa contractual theres a presumption of failure to exercise extraordinary diligence (2) culpa aquiliana no presumption Phil Rabbit: liability is personal to the parties of the contract of carriage LRTA v Navidad: an act which constitutes a breach of contract may also constitute quasi-delict

4. Classes of common Carriers

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. 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. Article 1755. 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 cautious persons, with a due regard for all the circumstances. 2 types: (1) Carrier of goods (2) Carrier of passengers

5. Laws Applicable
Article 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration. Article 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws.

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Primary governing law: Civil Code Secondary (suppletory): Code of Commerce Mirasol v. Robert Dollar Co. The defendant having received the 2 boxes in good condition, its legal duty was to deliver them to the plaintiff in the same condition in which it received them. From the time of their delivery to the defendant in New York until they were delivered to the plaintiff in Manila, the boxes were under the control and supervision of the defendant and beyond the control of the plaintiff. The defendant having admitted that the boxes were damaged while in transit and in its possession, the burden of proof then shifted, and it devolved upon the defendant to both allege and prove that the damage was caused by reason of some fact which exempted it from liability. As to how the boxes were damaged, when or where, was a matter peculiarly and exclusively within the knowledge of the defendant and in the very nature of things could not be in the knowledge of the plaintiff. To require the plaintiff to prove as to when and how the damage was caused would force him to call and rely upon the employees of the defendants ship, which in legal effect would be to say that he could not recover any damage for any reason. The defendant has not even attempted to prove that the 2 cases were wet with sea water by fortuitous event, force majeure or nature and defect of the things themselves. Consequently, it must be presumed that it was by causes entirely distinct and in no manner imputable to the plaintiff and of which the steamer or any of its crew could not have been entirely unaware. Class Notes: The CC is presumed to have been at fault or to have acted negligently. (1) goods were received by CC in good order (2) received by consignee in bad order Defenses: (1) Exercise of extraordinary diligence CC has burden of proof (2) 1734 plaintiff/shipper has burden; no presumption that CC was negligent Mirasol v Dexter: expanded Ynchausti ruling shipper is not required to prove negligence of CC or how the loss of the goods arose; to require shipper to prove how loss occurred would not enable him to recover

B. Common Carriage of Goods 1. Liability and Negligence Presumption of

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. 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 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. Ynchausti Steamship Co. v. Dexter and Unson As the petitioner admits that the oil was received by it for carriage and inasmuch as the fact of loss is proved in the manner just stated, it results that there is a presumption that the petitioner was to blame for the loss; and it was incumbent upon the petitioner in order to entitle it to relief in this case to rebut that presumption by proving, as is alleged in the petition, that the loss was not due to any fault or negligence of the petitioner. The mere proof of delivery of goods in good order to a carrier and of their arrival at the place of destination in bad order, makes a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstance inconsistent with its liability.

2. Exemption from Liability a. Natural Disaster

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; Article 1739. In order that the common carrier may be

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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 361 Code of Commerce Merchandise shall be transported at the risk and venture of the shipper, unless the contrary was expressly stipulated. Therefore, all damages and impairment suffered by the goods in transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper. The proof of these accidents in incumbent on the carrier. Tan Chiong Sian v. Inchausti & Co. The general rule is that the loss of the vessel and of its cargo, as the result of shipwreck, shall fall upon the respective owners thereof, save for the exceptions specified in the second of the said articles. But the carrier shall be liable for the loss or the damage arising from the causes aforementioned, if it shall have been proven that they occurred through his own fault or negligence or by his failure to take the same precautions usually adopted by diligent and careful persons. The defendant party is not liable for the damage occasioned as a result of the wreck or stranding of the lorcha Pilar because of the hurricane that overtook this craft while it was anchored in the port of Gubat, on December 5, 1908, ready to be conveyed to that of Catarman. The record bears no proof that the said loss or damage caused by the stranding or wreck of the lorcha Pilar as a result of the storm mentioned, occurred through carelessness or negligence on the part of the defendant company, its agents or the patron of the said lorcha, or because they did not take the precautions usually adopted by careful and diligent persons, as required by article 362 of the Code of Commerce; the defendant company, as well as its agents and the patron of the lorcha, had a natural interest in preserving the craft and its own goods laden therein an interest equal to that of the Chinese shipper in preserving his own which were on board the ship lorcha and, in fact, the defendant, his agents and the patron did take the measures which they deemed necessary and proper in order to save the lorcha and its cargo from the impending danger; accordingly, the patron, as soon as he was informed that a storm was approaching, proceeded to clear the boat of all gear which might offer resistance to the wind, dropped the four anchors he had, and even procured an extra anchor from the land, together with a new cable, and cast it into the water, thereby adding, in so far as possible, to the stability and security of the craft, in anticipation of what might occur, as presaged by the violence of the wind and the heavy sea; and Inchausti & Company's agent furnished the articles requested by the patron of the lorcha for the purpose of preventing the loss of the boat; thus did they all display all the diligence and care such as might have been employed by anyone in similar circumstances, especially the patron who was responsible for the lorcha under his charge; nor is it possible to believe that the latter failed to adopt all the measures that were necessary to save his own life and those of the crew and to free himself from the imminent peril of shipwreck. The stranding and wreck of the lorcha Pilar was due to a fortuitous event or to force majeure and not to the fault and negligence of the defendant company and its agents or of the patron, Mariano Gadvilao, inasmuch as the record discloses it to have been duly proved that the latter, in difficult situation in which unfortunately the boat under his charge was placed, took all the precautions that any diligent man should have taken whose duty it was to save the boat and its cargo, and, by the instinct of self-preservation, his own life and those of the crew of the lorcha; therefore, considering the conduct of the patron of the lorcha and that of the defendant's agent in Gubat, during the time of the occurrence of the disaster, the defendant company has not incurred any liability whatever for the loss of the goods, the value of which is demanded by the plaintiff; it must, besides, be taken into account that the defendant itself also lost goods of its own and the lorcha too. Martini v. Macondray & Co. Where the loading on deck has taken place with the consent of the merchant, it is obvious that no remedy against the ship owner or master for a wrongful loading of the goods on deck can exist. In the present case, it is indisputable that the goods were injured during the voyage solely as a consequence of their being on deck instead of in the ships hold. The loss must therefore fall on the owner. The ship owner might be held liable for any damage directly resulting from a negligent failure to exercise the care properly incident to the carriage of the merchandise on deck. So, if it shown, notwithstanding the stowage of these goods on deck, the damage could have been prevented, by the exercise of proper skill and diligence in the discharge of the duties incumbent on the ship, the owner might still be held. It is incumbent upon plaintiff if

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his cause of action is based on negligence of this character to allege and prove that the damage suffered was due to failure of the persons in charge to use the diligence properly incident to carriage under these conditions. In Clark vs. Barnwell (12 How. [U.S.], 272; 13 L. ed., 985), the Supreme Court distinguishes with great precision between the situation where the burden of proof is upon the shipowner to prove that the loss resulted from an excepted peril and that where the burden of proof is upon the owner of the cargo to prove that the loss was caused by negligence on the part of the persons employed in the conveyance of the goods. The first two syllabi in Clark vs. Barnwell read as follows: Where goods are shipped and the usual bill of lading given, promising to deliver them in good order, the dangers of the seas excepted, and they are found to be damaged the onus probandi is upon the owners of the vessel, to show that the injury was occasioned by one of the excepted causes. But, although the injury may have been occasioned by one of the excepted causes, yet still the owners of the vessel are responsible if the injury might have been avoided, by the exercise of reasonable skill and attention on the part of the persons employed in the conveyance of the goods. But the onus probandi then becomes shifted upon the shipper, to show the negligence. The damage here was caused by rain and sea water the risk of which is inherently incident to carriage on deck the Defendant cannot be held liable. It is not permissible for the court, in the absence of any allegation or proof of negligence, to attribute negligence to the ships employees in the matter of protecting the goods from rains and storms. The complaint on the contrary clearly indicates that the damage done was due to the mere fact of carriage on deck, no other fault or delinquency on the part of anybody being alleged. Eastern Shipping Lines v. IAC Fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by lightning or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier. Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law adopts a protection policy towards agriculture.

As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary deligence required by law. In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary diligence required by law. The evidence of the defendant did not show that extraordinary vigilance was observed by the vessel to prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount of diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. Consequently, the crew could not have even explain what could have caused the fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary vigilance and care had been made by the crew to prevent the occurrence of the fire. And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily. Asia Lighterage and Shipping Inc. v. CA Petitioner failed to exercise extraordinary diligence in its care and custody of the consignees goods. In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize the loss.30 The evidence show that, even before the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object while docked at the Engineering Island. It

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even suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage. Also, petitioner still headed to the consignees wharf despite knowledge of an incoming typhoon. Petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short of due diligence required from a common carrier. The typhoon is not the proximate cause of the loss; a human factor, i.e. negligence had intervened. Class Notes: The mere fact of occurrence of natural disasters is not enough to exempt CC from liability. The ff. requisites must be met: (1) the natural disaster must be the proximate and only cause of the loss; and (2) exercise of due diligence to prevent or minimize loss before and after the occurrence of the disaster Martini v. Macondray: Old rule in Code of Commerce was applied therefore shipper bears the risk; If the new rule is applied, CC is liable because there was no natural calamity. the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced.

d. Character of Goods
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: (4) The character of the goods or defects in the packing or in the containers; 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. Government v. Ynchausti & Co. The defendant proved and the plaintiff did not attempt to dispute that the tiles were of a brittle and fragile nature and that they were delivered by plaintiff to the defendant without any packing or protective covering. The defendant also offered proof to show that there was no negligence on its part, by showing that the tiles were loaded, stowed and discharged in a careful and diligent manner. Southern Lines v. CA Petitioner claims exemption from liability by contending that the shortage in the shipment of rice was due to such factors as the shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it received the same and the negligence of the agents of respondent City of Iloilo in receiving the shipment. The contention is untenable, for, if the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting thereform. Furthermore, according to the Court of Appeals, "appellant (petitioner) itself frankly admitted that the strings that tied the bags of rice were broken; some bags were with holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the boat collected no less than 26 sacks of rice which they had distributed among themselves." This finding, which is binding upon this Court, shows that the shortage resulted from the negligence of petitioner.

b. Act of Public Enemy

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

c. Act or Omission of Shipper

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: (3) Act or omission of the shipper or owner of the goods; Article 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods,

e. Order of Competent Authority

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: (5) Order or act of competent public authority. 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

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power to issue the order. Ganzon v. CA In any case, the intervention of the municipal officials was not In any case, of a character that would render impossible the fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the petitioner's employees. The mere difficulty in the fullfilment of the obligation is not considered force majeure. We agree with the private respondent that the scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage. Melencio-Herrera dissenting: Petitioner cannot be held liable in damages for the loss and destruction of the scrap iron. The loss of said cargo was due to an excepted cause an 'order or act of competent public authority" (Article 1734[5], Civil Code). The loading of the scrap iron on the lighter had to be suspended because of Municipal Mayor Jose Advincula's intervention, who was a "competent public authority." Petitioner had no control over the situation as, in fact, Tumambing himself, the owner of the cargo, was impotent to stop the "act' of said official and even suffered a gunshot wound on the occasion. Through the "order" or "act" of "competent public authority," therefore, the performance of a contractual obligation was rendered impossible. The scrap iron that was dumped into the sea was "destroyed" while the rest of the cargo was "seized." The seizure is evidenced by the receipt issues by Acting Mayor Rub stating that the Municipality of Mariveles had taken custody of the scrap iron. Apparently, therefore, the seizure and destruction of the goods was done under legal process or authority so that petitioner should be freed from responsibility. 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. Compania Maritima v. Insurance Company of North America The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the hemp delivered to the carrier's employees, the rights and obligations of the parties attached thereby subjecting them to the principles and usages of the maritime law. In other words, here we have a complete contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage. The liability and responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods as soon as they are placed on the lighters. The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the cotton been completely surrendered by the shipper to the railroad company? Whenever the control and possession of goods passes to the carrier and nothing remains to be done by the shipper, then

3. Duration of Responsibility

Extraordinary

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

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it can be said with certainty that the relation of shipper and carrier has been established. Lu Do v. Binamira Issue: Is the carrier responsible for the loss considering that the same occurred after the shipment was discharged from the ship and placed in the possession and custody of the customs authorities? As a rule, a common carrier is responsible for the loss, destruction or deterioration of the goods it assumes to carry from one place to another unless the same is due to any to any of the causes mentioned in Article 1734 on the new Civil Code, and that, if the goods are lost, destroyed or deteriorated, for causes other that those mentioned, the common carrier is presumed to have been at fault or to have acted negligently, unless it proves that it has observed extraordinary diligence in their care (Article 1735, Idem.), and that this extraordinary liability lasts from the time the goods are placed in the possession of the carrier until they are delivered to the consignee, or "to the person who has the right to receive them" (Article 1736, Idem.), but these provisions only apply when the loss, destruction or deterioration takes place while the goods are in the possession of the carrier, and not after it has lost control of them. The reason is obvious. While the goods are in its possession, it is but fair that it exercise extraordinary diligence in protecting them from damage, and if loss occurs, the law presumes that it was due to its fault or negligence. This is necessary to protect the interest the interest of the owner who is at its mercy. The situation changes after the goods are delivered to the consignee. While we agree with the Court of Appeals that while delivery of the cargo to the consignee, or to the person who has a right to receive them", contemplated in Article 1736, because in such case the goods are still in the hands of the Government and the owner cannot exercise dominion over them, we believe however that the parties may agree to limit the liability of the carrier considering that the goods have still to through the inspection of the customs authorities before they are actually turned over to the consignee. This is a situation where we may say that the carrier losses control of the goods because of a custom regulation and it is unfair that it be made responsible for what may happen during the interregnum. And this is precisely what was done by the parties herein. In the bill of lading that was issued covering the shipment in question, both the carrier and the consignee have stipulated to limit the responsibility of the carrier for the loss or damage that may because to the goods before they are actually delivered. The carrier does not assume liability for any loss or damage to the goods once they have been "taken into the custody of customs or other authorities", or when they have been delivered at ship's tackle. These stipulations are clear. They have been adopted precisely to mitigate the responsibility of the carrier considering the present law on the matter, and we find nothing therein that is contrary to morals or public policy that may justify their nullification. We are therefore persuaded to conclude that the carrier is not responsible for the loss in question, it appearing that the same happened after the shipment had been delivered to the customs authorities. American President Lines v. Klepper Regardless of its negligence, the shipping companys liability would attach because being a common carrier, its responsibility is extraordinary and lasts from the time the goods are placed in its possession until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them. Eastern Shipping Lines v. CA The common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled to receive them. When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable. There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 of the Civil Code, are exclusive, not one of which can be applied to this case. Class Notes: Duration of responsibility: (1) Begins when goods are delivered to CC (2) Terminates upon delivery (constructive or actual) to consignee In transit: responsibility does not terminate EXCEPT when shipper has made use of the right of stoppage in transit (ex: when buyer becomes insolvent) Stored in warehouse: does not terminate responsibility until consignee has been advised of the arrival of goods and has reasonable opportunity to remove them

4. Agreement Limiting Liability a. As to Diligence Required

Article 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be:

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(1) In writing, signed by the shipper or owner; (2) Supported by a valuable consideration other than the service rendered by the common carrier; and (3) Reasonable, just and not contrary to public policy. Article 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omission of his or its employees; (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. Requirements for stipulation limiting liability: (1) Writing signed by shipper (2) valuable consideration (3) reasonable, just, not contrary to public policy contrary to public policy, but the third is valid and enforceable. A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that the present case falls within the third stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier to a certain amount unless the shipper declares a higher value and pays a higher rate of freight, is valid and enforceable. It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in case of loss on the basis of not exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis of the net invoice price plus freight and insurance less all charges saved. "Any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis," clause 9 expressly provides. It seems to us that there is an irreconcilable conflict between the two clauses with regard to the measure of defendant's liability. It is difficult to reconcile them without doing violence to the language used and reading exceptions and conditions into the undertaking contained in clause 9 that are not there. This being the case, the bill of lading in question should be interpreted against the defendant carrier, which drew said contract. "A written contract should, in case of doubt, be interpreted against the party who has drawn the contract." Shewaram v. PAL The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. In the case before us We believe that the requirements of said article have not been met. It cannot be said that the appellee had actually entered into a contract with the appellant, embodying the conditions as printed at the back of the ticket stub that was issued by the appellant to the appellee. The fact that those conditions are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that the appellee was aware of those conditions such that he had "fairly and freely agreed" to those conditions. The trial court has categorically stated in its decision that the "Defendant admits that passengers do not sign the ticket, much less did plaintiff herein sign his ticket when he made the flight on November 23, 1959." We hold, therefore, that the appellee is not, and cannot be, bound by the conditions of carriage found at the back of the ticket stub issued to him when he made the flight on appellant's plane on November 23, 1959. Ong yiu v. CA While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the

b. As to Amount of Liability
Article 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Article 1750. A contract fixing the sum that may be recovered. by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. Heacock v. Macondray & Co. Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being

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provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation". It is what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a readymade form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00.Besides, passengers are advised not to place valuable items inside their baggage but "to avail of our V-cargo service " It is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by petitioner. Pan American World Airways v. IAC Ruling in Ong yiu applies to this case. On the other hand, the ruling in Shewaram does not apply, as the ruling in that case was premised on the finding that the conditions printed at the back of the ticket were so small and hard to read that they would not warrant the presumption that the passenger was aware of the conditions and that he had freely and fairly agreed thereto. In the instant case, similar facts would make the case fall under the exception have not been alleged, much less shown to exist. Cathay Pacific Airways v. CA Petitioner breached its contract of carriage with private respondent when it failed to deliver his luggage at the designated place and time, it being the obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not to delay their transportation, 3 and the evidence shows that petitioner acted fraudulently or in bad faith. The employees of Cathay acted in bad faith. The language and conduct of etitioner's representative towards respondent Alcantara was discourteous or arbitrary to justify the grant of moral damages. The CATHAY representative was not only indifferent and impatient; he was also rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that was not sincere because the representative knew that the passenger was limited only to $20.00 which, certainly, was not enough to purchase comfortable clothings appropriate for an executive conference. Considering that Alcantara was not only a revenue passenger but even paid for a first class airline accommodation and accompanied at the time by the Commercial Attache of the Philippine Embassy who was assisting him in his problem, petitioner or its agents should have been more courteous and accommodating to private respondent, instead of giving him a curt reply, "What can we do, the baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific." CATHAY's employees should have been more solicitous to a passenger in distress and assuaged his anxieties and apprehensions. To compound matters, CATHAY refused to have the luggage of Alcantara delivered to him at his hotel; instead, he was required to pick it up himself and an official of the Philippine Embassy. Under the circumstances, it is evident that petitioner was remiss in its duty to provide proper and adequate assistance to a paying passenger, more so one with first class accommodation. Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary damages. 8 Conversely, if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper. The Warsaw convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carrier's employees is found or established, which is clearly the case before Us. Class Notes: 1749: CC limits/lays down the amount unless the shipper declares a higher value 1750: amount is agreed upon by the parties

c. Factors Affecting Agreement

Article 1746. An agreement limiting the common carrier's liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed to such stipulation. Article 1747. If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in case of the loss, destruction, or deterioration of the goods. Article 1748. An agreement limiting the common carrier's liability for delay on account of strikes or riots is valid. Article 1751. The fact that the common carrier has no

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competitor along the line or route, or a part thereof, to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carrier's liability is reasonable, just and in consonance with public policy. Article 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration. stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is suppressed or diminished shall be void. (1) Custody of passengers or employees of passengers necessary deposit (2) Custody of CC

C. Common Carriage of Passengers 1. Nature and Extent of Responsibility

5. Applicable Law in Foreign Trade

Article 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.

6. Rules on Passenger Baggage

Article 1754. The provisions of articles 1733 to 1753 shall apply to the passenger's baggage which is not in his personal custody or in that of his employee. As to other baggage, the rules in articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable. Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. Article 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care required of him. Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force. Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel. Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any

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. Article 1755. 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 cautious persons, with a due regard for all the circumstances. Isaac v. A.L. Ammen Transportation Co. Inc. The evidence would appear to support the above finding. Thus, it appears that Bus No. 31, immediately prior to the collision, was running at a moderate speed because it had just stopped at the school zone of Matacong, Polangui, Albay. The pick-up car was at full speed and was running outside of its proper lane. The driver of the bus, upon seeing the manner in which the pick-up was then running, swerved the bus to the very extreme right of the road until its front and rear wheels have gone over the pile of stones or gravel situated on the rampart of the road. Said driver could not move the bus farther right and run over a greater portion of the pile, the peak of which was about 3 feet high, without endangering the safety of his passengers. And notwithstanding all these efforts, the rear left side of the bus was hit by the pick-up car. While the position taken by appellant appeals more to the sense of caution that one should observe in a given situation to avoid an accident or mishap, such however cannot always be expected from one who is placed suddenly in a predicament where he is not given enough time to take the course of action as he should under ordinary circumstances. One who is placed in such a predicament cannot exercise such coolness or accuracy of judgment as is required of him under ordinary circumstances and he cannot therefore be expected to observe the same judgment, care and precaution as in

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the latter. For this reason, authorities abound where failure to observe the same degree of care that as ordinary prudent man would exercise under ordinary circumstances when confronted with a sadden emergency was held to be warranted and a justification to exempt the carrier from liability. Thus, it was held that "where a carrier's employee is confronted with a sudden emergency, the fact that he is obliged to act quickly and without a chance for deliberation must be taken into account, and he is held to the some degree of care that he would otherwise be required to exercise in the absence of such emergency but must exercise only such care as any ordinary prudent person would exercise under like circumstances and conditions, and the failure on his part to exercise the best judgement the case renders possible does not establish lack of care and skill on his part which renders the company, liable. Considering all the circumstances, we are persuaded to conclude that the driver of the bus has done what a prudent man could have done to avoid the collision and in our opinion this relieves appellee from legibility under our law. Landingin v. Pantranco An accident caused by defects in automobile is not a caso fortuito. The rationale of the carriers liability is the fact that the passenger has neither the choice nor the control over the carrier in the selection and use of the equipment and appliances in use by the carrier. When a passenger dies or is injured, the presumption is that the common carrier is at fault or that it acted negligently (Article 1756). This presumption is only rebutted by proof on the carrier's part that it observed the "extraordinary diligence" required in Article 1733 and the "utmost diligence of very cautious persons" required in Article 1755 (Article 1756). In the instant case it appears that the court below considered the presumption rebutted on the strength of defendantsappellants' evidence that only the day before the incident, the crossjoint in question was duly inspected and found to be in order. It does not appear, however, that the carrier gave due regard for all the circumstances in connection with the said inspection. The bus in which the deceased were riding was heavily laden with passengers, and it would be traversing mountainous, circuitous and ascending roads. Thus the entire bus, including its mechanical parts, would naturally be taxed more heavily than it would be under ordinary circumstances. The mere fact that the bus was inspected only recently and found to be in order would not exempt the carrier from liability unless it is shown that the particular circumstances under which the bus would travel were also considered. Necesito v . Paras Issue: W/N the carrier is liable for the manufacturing defect of the steering knuckle

It is clear that the carrier is not an insurer of the passengers' safety. His liability rests upon negligence, his failure to exercise the "utmost" degree of diligence that the law requires, and by Art. 1756, in case of a passenger's death or injury the carrier bears the burden of satisfying the court that he has duly discharged the duty of prudence required. In the American law, where the carrier is held to the same degree of diligence as under the new Civil Code, the rule on the liability of carriers for defects of equipment is thus expressed: "The preponderance of authority is in favor of the doctrine that a passenger is entitled to recover damages from a carrier for an injury resulting from a defect in an appliance purchased from a manufacturer, whenever it appears that the defect would have been discovered by the carrier if it had exercised the degree of care which under the circumstances was incumbent upon it, with regard to inspection and application of the necessary tests. For the purposes of this doctrine, the manufacturer is considered as being in law the agent or servant of the carrier, as far as regards the work of constructing the appliance. The rationale of the carrier's liability is the fact that the passenger has neither choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier. Having no privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while not in insurer of the safety of his passengers, should nevertheless be held to answer for the flaws of his equipment if such flaws were at all discoverable. In the ordinary course of things, the passenger does not know whether the carrier has himself manufactured the means of carriage, or contracted with someone else for its manufacture. If the carrier has contracted with someone else the passenger does not usually know who that person is, and in no case has he any share in the selection. The liability of the manufacturer must depend on the terms of the contract between him and the carrier, of which the passenger has no knowledge, and over which he can have no control, while the carrier can introduce what stipulations and take what securities he may think proper. For injury resulting to the carrier himself by the manufacturer's want of care, the carrier has a remedy against the manufacturer; but the passenger has no remedy against the manufacturer for damage arising from a mere breach of contract with the carrier . . . . Unless, therefore, the presumed intention of the parties be that the passenger should, in the event of his being injured by the breach of the manufacturer's contract, of which he has no knowledge, be without remedy, the only way in

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which effect can be given to a different intention is by supposing that the carrier is to be responsible to the passenger, and to look for his indemnity to the person whom he selected and whose breach of contract has caused the mischief. The manufacturer should be deemed the agent of the carrier as respects its duty to select the material out of which its cars and locomotive are built, as well as in inspecting each step of their construction. If there be tests known to the crafts of car builders, or iron moulders, by which such defects might be discovered before the part was incorporated into the car, then the failure of the manufacturer to make the test will be deemed a failure by the carrier to make it. This is not a vicarious responsibility. It extends, as the necessity of this business demands, the rule of respondeat superior to a situation which falls clearly within its scope and spirit. Where an injury is inflicted upon a passenger by the breaking or wrecking of a part of the train on which he is riding, it is presumably the result of negligence at some point by the carrier. In the case now before us, the record is to the effect that the only test applied to the steering knuckle in question was a purely visual inspection every thirty days, to see if any cracks developed. It nowhere appears that either the manufacturer or the carrier at any time tested the steering knuckle to ascertain whether its strength was up to standard, or that it had no hidden flaws would impair that strength. And yet the carrier must have been aware of the critical importance of the knuckle's resistance; that its failure or breakage would result in loss of balance and steering control of the bus, with disastrous effects upon the passengers. Nor has it been shown that the weakening of the knuckle was impossible to detect by any known test; on the contrary, there is testimony that it could be detected. We are satisfied that the periodical visual inspection of the steering knuckle as practiced by the carrier's agents did not measure up to the required legal standard of "utmost diligence of very cautious persons" "as far as human care and foresight can provide", and therefore that the knuckle's failure cannot be considered a fortuitous event that exempts the carrier from responsibility. PAL v. CA PAL was grossly negligent for having allowed Capt. Bustamante to fly on that fateful day of the accident. The duty to exercise utmost diligence is for the safety of passengers as well as for the members of the crew or the complement operating the carrier. And this must be so for any omission, lapse or neglect thereof will certainly result to the damage, prejudice, injuries and even death to all aboard the plane, passengers and crew members alike. Sulpicio v. CA ALC had a contract of carriage with petitioner. The presence of the stevedores sent by ALC on board the barge was called for by the contract of carriage. For how else would its lumber be transported unless it is placed on board? Petitioner could not expect the shipper itself to load the lumber without the aid of the stevedores. Petitioner knew of the presence and role of the stevedores in its barge and thus consented to their presence. Hence, petitioner was responsible for their safety while on board the barge. It is not enough that petitioners employees have warned the laborers not to enter the barge after the hatch was opened. Petitioners employees should have been sufficiently instructed to see to it that the hatch of the barge is not opened by any unauthorized person and that the hatch is not easily opened by anyone. At the very least, precautionary measures should have been observed by petitioners employees to see to it that no one could enter the bodega of the barge until after they have made sure that it is safe for anyone to enter the same. JAL v. Asuncion We find that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents shore pass applications. JAL or any of its representatives have no authority to interfere with or influence the immigration authorities. The most that could be expected of JAL is to endorse respondents applications, which Mrs. Higuchi did immediately upon their arrival in Narita. Mrs. Higuchi did all she could to assist the respondents. Upon being notified of the denial of respondents applications, Mrs. Higuchi immediately made reservations for respondents at the Narita Airport Rest House which is really more a hotel than a detention house as claimed by respondents. More importantly, nowhere in respondent Michaels testimony did he state categorically that Mrs. Higuchi or

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any other employee of JAL treated them rudely or exhibited improper behavior throughout their stay. We therefore find JAL not remiss in its obligations as a common carrier. Petitioner is liable for the death of the child Raquel. As to the father: It may be pointed out that although it is true that respondent Mariano Beltran, his wife, and their children (including the deceased child) had alighted from the bus at a place designated for disembarking or unloading of passengers, it was also established that the father had to return to the vehicle (which was still at a stop) to get one of his bags or bayong that was left under one of the seats of the bus. There can be no controversy that as far as the father is concerned, when he returned to the bus for his bayong which was not unloaded, the relation of passenger and carrier between him and the petitioner remained subsisting. For, the relation of carrier and passenger does not necessarily cease where the latter, after alighting from the car, aids the carrier's servant or employee in removing his baggage from the car. As to the child: It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the bus. Raquel, the child that she was, must have followed the father. However, although the father was still on the running board of the bus awaiting for the conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier's agent had exercised the "utmost diligence" of a "very cautions person" required by Article 1755. In the first place, the driver, although stopping the bus, nevertheless did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to go and while the latter was still unloading part of the baggages of the passengers Mariano Beltran and family. The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage. Bataclan v. Medina We agree with the trial court that the case involves a breach of contract of transportation for hire, the Medina Transportation having undertaken to carry Bataclan safely to his destination, Pasay City. We also agree with

2. Duration of Responsibility
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 17 Warsaw Convention The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking. Del Prado v. Manila Electric Co. There is no obligation on the part of a street railway company to stop its cars to let on intending passengers at other points than those appointed for stoppage. In fact it would be impossible to operate a system of street cars if a company engaged in this business were required to stop any and everywhere to take on people who were too indolent, or who imagine themselves to be in too great a hurry, to go to the proper places for boarding the cars. Nevertheless, although the motorman of this car was not bound to stop to let the plaintiff on, it was his duty to do act that would have the effect of increasing the plaintiff's peril while he was attempting to board the car. The premature acceleration of the car was, in our opinion, a breach of this duty. The relation between a carrier of passengers for hire and its patrons is of a contractual nature; and in failure on the part of the carrier to use due care in carrying its passengers safely is a breach of duty. Furthermore, the duty that the carrier of passengers owes to its patrons extends to persons boarding the cars as well as to those alighting therefrom. The distiction between these two sorts of negligence is important in this jurisdiction, for the reason that where liability arises from a mere tort (culpa aquiliana), not involving a breach of positive obligation, an employer, or master, may exculpate himself, under the last paragraph of article 1903 of the Civil Code, by providing that he had exercised due degligence to prevent the damage; whereas this defense is not available if the liability of the master arises from a breach of contrauctual duty (culpa contractual). La Mallorca v. CA

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the trial court that there was negligence on the part of the defendant, through his agent, the driver Saylon. There is evidence to show that at the time of the blow out, the bus was speeding, as testified to by one of the passengers, and as shown by the fact that according to the testimony of the witnesses, including that of the defense, from the point where one of the front tires burst up to the canal where the bus overturned after zigzaging, there was a distance of about 150 meters. The chauffeur, after the blow-out, must have applied the brakes in order to stop the bus, but because of the velocity at which the bus must have been running, its momentum carried it over a distance of 150 meters before it fell into the canal and turned turtle. The proximate cause was the overturning of the bus, this for the reason that when the vehicle turned not only on its side but completely on its back, the leaking of the gasoline from the tank was not unnatural or unexpected; that the coming of the men with a lighted torch was in response to the call for help, made not only by the passengers, but most probably, by the driver and the conductor themselves, and that because it was dark (about 2:30 in the morning), the rescuers had to carry a light with them, and coming as they did from a rural area where lanterns and flashlights were not available; and what was more natural than that said rescuers should innocently approach the vehicle to extend the aid and effect the rescue requested from them. In other words, the coming of the men with a torch was to be expected and was a natural sequence of the overturning of the bus, the trapping of some of its passengers and the call for outside help. Aboitiz Shipping v. CA The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owners dock or premises. Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the passenger's reasonable presence within the carrier's premises. That reasonableness of time should be made to depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such other factors. It is thus of no moment whether in the cited case of La Mallorca there was no appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had elapsed before the victim met the accident. The primary factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel. We believe there exists such a justifiable cause. It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically claim, through the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their baggage. It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the vessel. Petitioner failed to prove this. What is clear to us is that at the time the victim was taking his cargoes, the vessel had already docked an hour earlier. In consonance with common shipping procedure as to the minimum time of one (1) hour allowed for the passengers to disembark, it may be presumed that the victim had just gotten off the vessel when he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in petitioner's premises was not without cause. The victim had to claim his baggage which was possible only one (1) hour after the vessel arrived since it was admittedly standard procedure in the case of petitioner's vessels that the unloading operations shall start only after that time. Consequently,

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under the foregoing circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death. PAL v. CA Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier's premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination. On this score, PAL grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a stranger to the place. While we find PAL remiss in its duty of extending utmost care to private respondent while being stranded in Cotabato City, there is no sufficient basis to conclude that PAL failed to inform him about his nonaccommodation on Flight 560, or that it was inattentive to his queries relative thereto. Admittedly, private respondent's insistence on being given priority in accommodation was unreasonable considering the fortuitous event and that there was a sequence to be observed in the booking, i.e., in the order the passengers checked-in at their port of origin. His intransigence in fact was the main cause for his having to stay at the airport longer than was necessary. normal manner. And (4) the obligor (debtor) must be free from any participation in the aggravation of the injury resulting to the creditor. The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among the passengers such that the passengers started running to the sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed another passenger in the bus is within the context of force majeure. However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries resulting from such accident.

5. Limitations of Liability and Validity of Stipulations

Article 1757. The responsibility of a common carrier for the safety of passengers as required in articles 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise. Article 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid, but not for wilful acts or gross negligence. The reduction of fare does not justify any limitation of the common carrier's liability.

6. Responsibility Employees

for

Acts

of

3. Presumption of Negligence
Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.

4. Force Majeure
Bachelor Express v. CA 'In a legal sense and, consequently, also in relation to contracts, a caso fortuito presents the following essential characteristics: (1) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will. (2) It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid. (3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a

Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. Article 1760. The common carrier's responsibility prescribed in the preceding article cannot be eliminated or limited by stipulation, by the posting of notices, by statements on the tickets or otherwise. Bataclan v. Medina What is more, the burning of the bus can also in part be attributed to the negligence of the carrier, through is driver and its conductor. According to the witness, the driver and the conductor were on the road walking back

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and forth. They, or at least, the driver should and must have known that in the position in which the overturned bus was, gasoline could and must have leaked from the gasoline tank and soaked the area in and around the bus, this aside from the fact that gasoline when spilled, specially over a large area, can be smelt and directed even from a distance, and yet neither the driver nor the conductor would appear to have cautioned or taken steps to warn the rescuers not to bring the lighted torch too near the bus. Said negligence on the part of the agents of the carrier come under the codal provisions above-reproduced, particularly, Articles 1733, 1759 and 1763. De Gillaco v. MRR Co. There can be no quarrel with the principle that a passenger is entitled to protection from personal violence by the carrier or its agents or employees, since the contract of transportation obligates the carrier to transport a passenger safely to his destination. But under the law of the case, this responsibility extends only to those that the carrier could foresee or avoid through the exercise of the degree of car and diligence required of it. The act of guard Devesa in shooting passenger Gillaco (because of a personal grudge nurtured against the latter since the Japanese occupation) was entirely unforeseeable by the Manila Railroad Co. The latter had no means to ascertain or anticipate that the two would meet, nor could it reasonably foresee every personal rancor that might exist between each one of its many employees and any one of the thousands of eventual passengers riding in its trains. The shooting in question was therefore "caso fortuito" within the definition of article 105 of the old Civil Code, being both unforeseeable and inevitable under the given circumstances; and pursuant to established doctrine, the resulting breach of appellant's contract of safe carriage with the late Tomas Gillaco was excused thereby. No doubt that a common carrier is held to a very high degree of care and diligence in the protection of its passengers; but, considering the vast and complex activities of modern rail transportation, to require of appellant that it should guard against all possible misunderstanding between each and every one of its employees and every passenger that might chance to ride in its conveyances at any time, strikes us as demanding diligence beyond what human care and foresight can provide. Another very important consideration that must be borne in mind is that, when the crime took place, the guard Devesa had no duties to discharge in connection with the transportation of the deceased from Calamba to Manila. The stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa was assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco Station awaiting transportation to Tutuban, the starting point of the train that he was engaged to guard. In fact, his tour of duty was to start at 9:00 a.m., two hours after the commission of the crime. Devesa was therefore under no obligation to safeguard the passenger of the Calamba-Manila train, where the deceased was riding; and the killing of Gillaco was not done in line of duty. The position of Devesa at the time was that of another would be passenger, a stranger also awaiting transportation, and not that of an employee assigned to discharge any of the duties that the Railroad had assumed by its contract with the deceased. As a result, Devesa's assault cannot be deemed in law a breach of Gillaco's contract of transportation by a servant or employee of the carrier. Maranan v. Perez Compared with Gillaco case: Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the carrier had entrusted the duty of executing the contract of carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place in the course of duty of the guilty employee and when the employee was acting within the scope of his duties. Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts committed by their employees. The death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly remove from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force majeure. And herein significantly lies the statutory difference between the old and present Civil Codes, in the backdrop of the factual situation before Us, which further accounts for a different result in the Gillaco case. Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the common carrier liable for intentional assaults committed by its employees upon its passengers. The basis of the carrier's liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondeat superior or (2) the principle that it is the carrier's implied duty to transport the passenger safely.3 Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the

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scope of his authority and duty. It is not sufficient that the act be within the course of employment only. Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders. The carrier's liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees. Art. 1759 follows the 2nd view: (1) the special undertaking of the carrier requires that it furnish its passenger that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier for the servant's violation of duty to passengers, is the result of the formers confiding in the servant's hands the performance of his contract to safely transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since it, and not the passengers, has power to select and remove them. Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude. LRTA v. Navidad There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must also be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence. their passengers, it would seem that this is not the standard by which its liability is to be determined when intervening acts of strangers is to be determined directly cause the injury, while the contract of carriage exists. The negligence for which a common carrier is held responsible is the negligent omission by the carrier's employees to prevent the tort from being committed when the same could have been foreseen and prevented by them. Further, under the same provision, it is to be noted that when the violation of the contract is due to the willful acts of strangers, as in the instant case, the degree of care essential to be exercised by the common carrier for the protection of its passenger is only that of a good father of a family. Although the suggested precaution could have prevented the injury complained of, the rule of ordinary care and prudence is not so exacting as to require one charged with its exercise to take doubtful or unreasonable precautions to guard against unlawful acts of strangers. The carrier is not charged with the duty of providing or maintaining vehicles as to absolutely prevent any and all injuries to passengers. Where the carrier uses cars of the most approved type, in general use by others engaged in the same occupation, and exercises a high degree of care in maintaining them in suitable condition, the carrier cannot be charged with negligence in this respect. Bachelor Express v. CA These circumstances show that the petitioner common carrier was negligent in the provision of safety precautions so that its passengers may be transported safely to their destinations. The appellate court states: A critical eye must be accorded the lower court's conclusions of fact in its tersely written ratio decidendi. The lower court concluded that the door of the bus was closed; secondly, the passengers, specifically the two deceased, jumped out of the window. The lower court therefore concluded that the defendant common carrier is not liable for the death of the said passengers which it implicitly attributed to the unforeseen acts of the unidentified passenger who went amuck. There is nothing in the record to support the conclusion that the solitary door of the bus was locked as to prevent the passengers from passing through. Leonila Cullano, testifying for the defense, clearly stated that the conductor opened the door when the passengers were shouting that the bus stop while they were in a state of panic. Sergia Beter categorically stated that she actually saw her son fall from the bus as the door was forced open by the force of the onrushing passengers.

7. Responsibility for Acts of Strangers and Co-passengers

Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission. Pilapil v. CA while as a general rule, common carriers are bound to exercise extraordinary diligence in the safe transport of

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Pedro Collango, on the other hand, testified that he shut the door after the last passenger had boarded the bus. But he had quite conveniently neglected to say that when the passengers had panicked, he himself panicked and had gone to open the door. Considering the factual findings of the Court of Appealsthe bus driver did not immediately stop the bus at the height of the commotion; the bus was speeding from a full stop; the victims fell from the bus door when it was opened or gave way while the bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law-it is clear that the petitioners have failed to overcome the presumption of fault and negligence found in the law governing common carriers. was, as we find, ignorant of the fact that the obstruction which was caused by the sacks of melons piled on the platform existed; and as the defendant was bound by reason of its duty as a public carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in the absence of some circumstance to warn him to the contrary, that the platform was clear. The place, as we have already stated, was dark, or dimly lighted, and this also is proof of a failure upon the part of the defendant in the performance of a duty owing by it to the plaintiff; for if it were by any possibility concede that it had right to pile these sacks in the path of alighting passengers, the placing of them adequately so that their presence would be revealed. As pertinent to the question of contributory negligence on the part of the plaintiff in this case the following circumstances are to be noted: The company's platform was constructed upon a level higher than that of the roadbed and the surrounding ground. The distance from the steps of the car to the spot where the alighting passenger would place his feet on the platform was thus reduced, thereby decreasing the risk incident to stepping off. The nature of the platform, constructed as it was of cement material, also assured to the passenger a stable and even surface on which to alight. Furthermore, the plaintiff was possessed of the vigor and agility of young manhood, and it was by no means so risky for him to get off while the train was yet moving as the same act would have been in an aged or feeble person. In determining the question of contributory negligence in performing such act that is to say, whether the passenger acted prudently or recklessly the age, sex, and physical condition of the passenger are circumstances necessarily affecting the safety of the passenger, and should be considered. Women, it has been observed, as a general rule are less capable than men of alighting with safety under such conditions, as the nature of their wearing apparel obstructs the free movement of the limbs. Again, it may be noted that the place was perfectly familiar to the plaintiff as it was his daily custom to get on and of the train at this station. There could, therefore, be no uncertainty in his mind with regard either to the length of the step which he was required to take or the character of the platform where he was alighting. Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet slightly under way was not characterized by imprudence and that therefore he was not guilty of contributory negligence. Isaac v. A.L. Ammen A circumstances which miliates against the stand of appellant is the fact borne out by the evidence that when he boarded the bus in question, he seated himself on the left side thereof resting his left arm on the window sill but with his left elbow outside the window,

8. Duty of Passenger and Effect of Contributory Negligence

Article 1761. The passenger must observe the diligence of a good father of a family to avoid injury to himself. Article 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced. Cangco v. MRR The test by which to determine whether the passenger has been guilty of negligence in attempting to alight from a moving railway train, is that of ordinary or reasonable care. It is to be considered whether an ordinarily prudent person, of the age, sex and condition of the passenger, would have acted as the passenger acted under the circumstances disclosed by the evidence. This care has been defined to be, not the care which may or should be used by the prudent man generally, but the care which a man of ordinary prudence would use under similar circumstances, to avoid injury. Was there anything in the circumstances surrounding the plaintiff at the time he alighted from the train which would have admonished a person of average prudence that to get off the train under the conditions then existing was dangerous? If so, the plaintiff should have desisted from alighting; and his failure so to desist was contributory negligence.1awph!l.net As the case now before us presents itself, the only fact from which a conclusion can be drawn to the effect that plaintiff was guilty of contributory negligence is that he stepped off the car without being able to discern clearly the condition of the platform and while the train was yet slowly moving. In considering the situation thus presented, it should not be overlooked that the plaintiff

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this being his position in the bus when the collision took place. It is for this reason that the collision resulted in the severance of said left arm from the body of appellant thus doing him a great damage. It is therefore apparent that appellant is guilty of contributory negligence. Had he not placed his left arm on the window sill with a portion thereof protruding outside, perhaps the injury would have been avoided as is the case with the other passenger. It is to be noted that appellant was the only victim of the collision. Class Notes: Passenger should exercise due diligence to avoid injury to himself. Contributory negligence: reduce amount of damages recoverable If the proximate and only cause is passengers negligence, passenger cannot recover. pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death; (2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court; (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased. Cariaga v. LTBCo. As a result of the injuries suffered by Edgardo, his right forehead was fractured necessitating the removal of practically all of the right frontal lobe of his brain. Because of the physical injuries he suffered, his mentality has been so reduced that he can no longer finish his studies as a medical student; that he has become completely misfit for any kind of work; that he can hardly walk around without someone helping him, and he has to use a brace on his left leg and feet. He became virtually an invalid, both physically and mentally. The income that Edgardo could earn if he should finish the medical course and pass the board exams must be deemed to be within the same category because they could have reasonably been foreseen by the parties at the time he boarded the bus. Pan American v. IAC The Court finds itself unable to agree with the decision of the trial court, and affirmed by the Court of Appeals, awarding private respondents damages as and for lost profits when their contracts to show the films in Guam and San Francisco, California were cancelled. In the absence of a showing that petitioner's attention was called to the special circumstances requiring prompt delivery of private respondent Pangan's luggages, petitioner cannot be held liable for the cancellation of private respondents' contracts as it could not have foreseen such an eventuality when it accepted the luggages for transit. The evidence reveals that the proximate cause of the cancellation of the contracts was private respondent Pangan's failure to deliver the promotional and advertising materials on the dates agreed upon. For this

D. Damages Recoverable from Common Carriers 1. In General

2. Actual or Compensatory
Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier. Article 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. Article 2203. The party suffering loss or injury must exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand

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petitioner cannot be held liable. Private respondent Pangan had not declared the value of the two luggages he had checked in and paid additional charges. Neither was petitioner privy to respondents' contracts nor was its attention called to the condition therein requiring delivery of the promotional and advertising materials on or before a certain date. Villarey Transit v. CA The amount of damages recoverable depends on 2 factors: (1) the number of years on the basis of which the damages shall be computed and (2) the rate at which the losses sustained by said respondents should be fixed. The first factor was based by the trial court the view of which was concurred in by the Court of Appeals upon the life expectancy of Policronio Quintos, Jr., which was placed at 33-1/3 years he being over 29 years of age (or around 30 years for purposes of computation) at the time of his demise by applying the formula (2/3 x [80-301 = life expectancy) adopted in the American Expectancy Table of Mortality or the actuarial of Combined Experience Table of Mortality. Thus, life expectancy is, not only relevant, but, also, an important element in fixing the amount recoverable by private respondents herein. Although it is not the sole element determinative of said amount, no cogent reason has been given to warrant its disregard and the adoption, in the case at bar, of a purely arbitrary standard, such as a four-year rule. We are mainly concerned with the determination of the losses or damages sustained by the private respondents, as dependents and intestate heirs of the deceased, and that said damages consist, not of the full amount of his earnings, but of the support, they received or would have received from him had he not died in consequence of the negligence of petitioner's agent. In fixing the amount of that support, We must reckon with the "necessary expenses of his own living", which should be deducted from his earnings. Thus, it has been consistently held that earning capacity, as an element of damages to one's estate for his death by wrongful act is necessarily his net earning capacity or his capacity to acquire money, "less the necessary expense for his own living. Stated otherwise, the amount recoverable is not loss of the entire earning, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earning, are to be considered that is, the total of the earnings less expenses necessary in the creation of such earnings or income and less living and other incidental expenses. PAL v. CA Under Article 1764 and Article 2206(1) of the Civil Code, the award of damages for death is computed on the basis of the life expectancy of the deceased, not of his beneficiary. Class Notes: 2 types of actual damages: (1) Death indemnity (2) Loss of earning capacity 2 components: (1) life expectancy (2) net earnings For contracts and quasi-contracts: (1) natural and probable consequences of breach which could be foreseen (2) fraud, bad faith, malice or wanton attitude Pan Am v. IAC: not entitled to damages because airline could not foresee Villarey v. CA: How to compute [2/3 * (80-age)] = life expectancy Gross earnings necessary living expenses = net earnings Actual damages = life expectancy * net earnings

3. Moral
Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased. Article 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages, may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case. Article 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act for omission. Article 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; (3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage; (5) Illegal or arbitrary detention or arrest;

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(6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in article 309; (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages. The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this article, in the order named. Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Fores v. Miranda Moral damages are not recoverable in damage actions predicated on a breach of contract of carriage. (a) In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or deliberately injurious conduct, is essential to justify an award of moral damages; and (b) That a breach of contract can not be considered included in the descriptive term "analogous cases" used in Art. 2219; not only because Art. 2220 specifically provides for the damages that are caused by contractual breach, but because the definition of quasi-delict in Art. 2176 of the Code expressly excludes the cases where there is a "preexisting contractual relation between the parties." The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the deceased passenger to "demand moral damages for mental anguish by reason of the death of the deceased" (Necesito vs. Paras, 104 Phil., 84, Resolution on motion to reconsider, September 11, 1958). But the exceptional rule of Art. 1764 makes it all the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. We think it is clear that the mere carelessness of the carrier's driver does not per se constitute of justify an inference of malice or bad faith on the part of the carrier; and in the case at bar there is no other evidence of such malice to support the award of moral damages by the Court of Appeals. To award moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by Art. 220, would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation.

Air France v. Carrascoso First, That there was a contract to furnish plaintiff a first class passage covering, amongst others, the BangkokTeheran leg; Second, That said contract was breached when petitioner failed to furnish first class transportation at Bangkok; and Third, that there was bad faith when petitioner's employee compelled Carrascoso to leave his first class accommodation berth "after he was already, seated" and to take a seat in the tourist class, by reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing him mental anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral damages. It is true that there is no specific mention of the term bad faith in the complaint. But, the inference of bad faith is there, it may be drawn from the facts and circumstances set forth therein. The manager not only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment - just to give way to another passenger whose right thereto has not been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different from what is understood in law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive design or with some motive of self-interest or will or for ulterior purpose. Lopez v. Pan Am At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs believe that their reservation had not been cancelled. An additional indication of this is the fact that upon the face of the two tickets of record, namely, the ticket issued to Alfredo Montelibano, Jr. on May 21, 1960 (Exh. 22) and that issued to Mrs. Alfredo Montelibano, Jr., on May 23, 1960 (Exh. 23), the reservation status is stated as "OK". Such willful-non-disclosure of the cancellation or pretense that the reservations for plaintiffs stood and not simply the erroneous cancellation itself is the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in this respect defendant clearly acted in bad faith. As if to further emphasize its bad faith on the matter, defendant subsequently promoted the employee who cancelled plaintiffs' reservations and told them nothing about it. The record shows that said employee Mariano Herranz was not subjected to investigation and suspension by defendant but instead was given a reward in the form of an increase of salary in June of the following year.

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As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling with first class tickets issued by defendant and yet they were given only the tourist class. At stop-overs, they were expected to be among the first-class passengers by those awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. Ortigas v. Lufthansa What seems to have happened was that somehow the first class accommodations for that flight were overboard and Lufthansa tried to solve the problem by downgrading Ortigas to the economy class in favor of a Belgian, as Ortigas was told by the Lufthansa employee who paged him over the public address system for the purpose just as he was about to go to the departure area, with his luggage already checked and his overweight fees duly paid, so much so that they were already loaded in the plane. Verily, such treatment given to plaintiff was completely wrong and absolutely unjustifiable. Nobody, much less a common carrier who is under constant special obligation to give utmost consideration to the convenience of its customers, may be permitted to relieve itself from any difficulty situation created by its own lack of diligence in the conduct of its affairs in a manner prejudicial to such customers. It is Our considered view that when it comes to contracts of common carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passenger to the award of moral damages in accordance with Article 2220 of the Civil Code. But in the instant case, the breach appears to be of graver nature, since the preference given to the Belgian passenger over plaintiff was done willfully and in wanton disregard of plaintiff's rights and his dignity as a human being and as a Filipino, who may not be discriminated against with impunity. Such preference given to a European surely aggravated the damage or injury suffered by plaintiff, but the very act alone of deliberately downgrading him despite his confirmed reservation for first class accommodation is sufficient ground for relief. What worsened the situation of Ortigas was that Lufthansa succeeded in keeping him as its passenger by assuring him that he would be given first class accommodation at Cairo, the next station, the proper arrangements therefor having been made already, when in truth such was not the case. Thus, instead of complying with the request of Ortigas that other airlines be contacted to find out it they had first class space for him, the Lufthansa employee who had indifferently told him about his downgrading paid very little attention if ever to said request. And to keep him from giving the business to another company, he was made to believe that he would be given first class accommodation at Cairo. Although molested and embarrassed to the point that he had to take nitroglycerine pills to ward off a possible heart attack, Ortigas hardly had any choice, since his luggage was already in the plane. To his disappointment, when the plane reached Cairo, he was told by the Lufthansa office there that no word at all had been received from Rome and they had no space for him in first class. Worse, similar false representations were made to him at Dharham and Calcutta. It was only at Bangkok where for the first time, Ortigas was at last informed that he could have a first class seat in that leg of the flight, from Bangkok to Hongkong. This Ortigas rejected, if only to make patent his displeasure and indignation at being so inconsiderately treated in the earlier part of his journey. PAL v. Miano In breach of contract of carriage by air, moral damages are awarded only if the defendant acted fraudulently or in bad faith. 6 Bad faith means a breach of a known duty through same motive of interest or ill will. 7 The trial court erred in awarding moral damages to private respondent. The established facts evince that petitioner's late delivery of the baggage for eleven (11) days was not motivated by ill will or bad faith. In fact, it immediately coordinated with its Central Baggage Services to trace private respondent's suitcase and succeeded in finding it. Worthy to stress, the trial court made an unequivocal conclusion that petitioner did not act in bad faith or with malice. Cathay Pacific v. Vasquez Bad faith and fraud are allegations of fact that demand clear and convincing proof. They are serious accusations that can be so conveniently and casually invoked, and that is why they are never presumed. They amount to mere slogans or mudslinging unless convincingly substantiated by whoever is alleging them. Fraud has been defined to include an inducement through insidious machination. Insidious machination refers to a deceitful scheme or plot with an evil or devious purpose. Deceit exists where the party, with intent to deceive, conceals or omits to state material facts and, by reason of such omission or concealment, the other party was induced to give consent that would not otherwise have been given.7 Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some

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moral obliquity and conscious doing of a wrong, a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud.8 We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were not induced to agree to the upgrading through insidious words or deceitful machination or through willful concealment of material facts. Upon boarding, Ms. Chiu told the Vazquezes that their accommodations were upgraded to First Class in view of their being Gold Card members of Cathays Marco Polo Club. She was honest in telling them that their seats were already given to other passengers and the Business Class Section was fully booked. Ms. Chiu might have failed to consider the remedy of offering the First Class seats to other passengers. But, we find no bad faith in her failure to do so, even if that amounted to an exercise of poor judgment. Neither was the transfer of the Vazquezes effected for some evil or devious purpose. As testified to by Mr. Robson, the First Class Section is better than the Business Class Section in terms of comfort, quality of food, and service from the cabin crew; thus, the difference in fare between the First Class and Business Class at that time was $250.9 Needless to state, an upgrading is for the better condition and, definitely, for the benefit of the passenger. We are not persuaded by the Vazquezes argument that the overbooking of the Business Class Section constituted bad faith on the part of Cathay. It is clear from Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board that an overbooking that does not exceed ten percent is not considered deliberate and therefore does not amount to bad faith.10 Here, while there was admittedly an overbooking of the Business Class, there was no evidence of overbooking of the plane beyond ten percent, and no passenger was ever bumped off or was refused to board the aircraft. Class Notes: General rule: Not awarded in breach of contract of carriage not among those enumerated Exceptions: (1) death (2) bad faith or malice

Article 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated.

Mecenas v. CA We believe that the behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up to the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or "onduty" at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence. While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision itself " There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry. Thus, the total number of persons on board the "Don Juan" on that ill-starred night of 22 April 1 980 was 1,004, or 140 persons more than the maximum lumber that could be safely carried by the "Don Juan," per its own Certificate of Inspection. We note in addition, that only 750 passengers had been listed in its manifest for its final voyage; in other words, at least 128 passengers on board had not even been entered into the "Don Juan's" manifest. The "Don Juan's" Certificate of Inspection showed that she carried life boat and life raft accommodations for only 864 persons, the maximum number of persons she was permitted to carry.

4. Exemplary
Article 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. Article 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

5. Nominal, Liquidated

Temperate

and

Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.

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Article 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty. Article 2226. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof. Alitalia v. IAC The compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage. She is entitled to nominal damages which is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered. Saludo v. CA The facts show that petitioners' right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated of invaded. They are recoverable where some injury has been done but the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case. JAL v. CA We are not persuaded to completely absolve petitioner from any liability. It must be noted that private respondents bought tickets from the US with Manila as their final destination. While JAL was no longer required to defray private respondents living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport private respondents on the first available connecting flight to Manila. JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private respondents from transit passengers to new passengers as a result of which private respondents were obliged to make the necessary arrangements themselves for the next flight to Manila. Savellano v. Northwest Airlines Nominal damages are recoverable if no actual, substantial or specific damages were shown to have resulted from the breach. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances. In the present case, we must consider that petitioners suffered the inconveniences of having to wake up early after a bad night and having miss breakfast; as well as the fact that they were business class passengers. They paid more for better services; thus rushing them and making them miss their small comforts was not a trivial thing. We also consider their social and official status.

6. Attorneys Fees and Interest

Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded; (2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen's compensation and employer's liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. In all cases, the attorney's fees and expenses of litigation must be reasonable. Article 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract.

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