Transportation

A.

GOVERNING LAWS
a. New Civil Code
b. Warsaw Convention
c. Code of Commerce
d. Carriage of Food by Sea Act
e. Salvage Law
f. Public Service Act
g. Article XII Sec 11 on operation of public utility

B.

Concept of Public Utility and Public Service (Sect 13 Public Service

Act)

CASES:
JG SUMMIT HOLDINGS VS CA GR 123293 Sept 24, 2003
FACTS:
National Investment and Development Corporation (NIDC) and Kawasaki Heavy
Industries entered into a Joint Venture Agreement in a shipyard business named
PHILSECO, with a shareholding of 60-40 respectively. NIDCs interest was later
transferred to the National Government.

Pursuant to President Aquinos Proclamation No.5, which established the Committee

on Privatization (COP) and Asset Privatization Trust (APT), and allowed for the
disposition of the governments non-performing assets, the latter allowed Kawasaki
Heavy Industries to choose a company to which it has stockholdings, to top the
winning bid of JG Summit Holdings over PHILSECO. JG Summit protested alleging
that such act would effectively increase Kawasakis interest in PHILSECOa
shipyard is a public utility--and thus violative of the Constitution.
ISSUE: Whether or not respondents act is valid.
HELD: No.
A shipyard such as PHILSECO being a public utility as provided by law, the following
provision of the Article XII of the Constitution applies:
Sec. 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 shall be citizens of the Philippines.
xxx
Notably, paragraph 1.4 of the JVA accorded the parties the right of first refusal
under the same terms. This phrase implies that when either party exercises the
right of first refusal under paragraph 1.4, they can only do so to the extent allowed
them by paragraphs 1.2 and 1.3 of the JVA or under the proportion of 60%-40% of
the shares of stock. Thus, should the NIDC opt to sell its shares of stock to a third
party, Kawasaki could only exercise its right of first refusal to the extent that its
total shares of stock would not exceed 40% of the entire shares of stock of SNS or
PHILSECO. The NIDC, on the other hand, may purchase even beyond 60% of the
total shares. As a government corporation and necessarily a 100% Filipino-owned
corporation, there is nothing to prevent its purchase of stocks even beyond 60% of
the capitalization as the Constitution clearly limits only foreign capitalization.
NATIONAL DEVELOPMENT CORP vs CA 164 Scra 563
Facts:
In accordance with a memorandum entered into between defendants National
Development Company (NDC) and Maritime Company of the Philippines (MCP) on
September 13, 1962, defendant NDC as the first preferred mortgagee of three
ocean-going vessels including one the name Doa Nati appointed defendant MCP
as its agent to manage and operate said vessels in its behalf.The E. Phillipp
Corporation of the New York loaded on board the vessel Doa Nati at San
Francisco, California, a total of 1,200 bales of American raw cotton consigned to
Manila Banking Corporation, Manila and the Peoples Bank and Trust Company
acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who
represents Riverside Mills Corporation.The vessel figured in a collision at Ise Bay,
Japan with a japanese vessel as a result of which 550 bales of aforesaid cargo were
lost and/or destroyed The damage and lost cargo was worth P344,977.86 which
amount, the plaintiff Development Insurance and Surety Corporation as insurer,
paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly
endorsed.The insurer filed before the CFI of Manila an action for the recovery of said
amount from NDC and MCP.

Issue:

Whether or not the law of country or port of destination shall apply.

Held:
In Easter Shipping Lines, Inc., v. IAC, 150 SCRA 469 (1987), we held under
similar circumstances that the law of the country to which the goods are to be
transported governs the liability of the common carrier in case of their loss,
destruction or deterioration. Thus, the rule was specifically laid down that for
cargoes transported from Japan to the Philippines, the liability of the carrier is
governed primarily by the Civil Code and in all matters not regulated by said Code,
the rights and obligations of common carrier shall be governed by the Code of
Commerce and by especial laws (Article 1766, Civil Code). Hence, the carriage of
Goods by Sea Act, a special law, is merely suppletory to the provisions of the Civil
Code. The goods in question were being transported from San Francisco, California
and Tokyo, Japan to the Philippines and that they were lost or damaged due to a
collision which was found to have been caused by negligence or fault of both
captains of the colliding vessels.Under the above ruling, it is evident that laws of the
Philippines will apply, and it is immaterial that the collision actually occurred in
foreign waters, such as Ise Bay, Japan. It appears, however, that collision falls
among matters not specifically regulated by the Civil Code, so that no reversible
error can be found in respondent courts application to the case at bar of
Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively
with collision of vessels. Article 826 of the Code of Commerce provides that where
collision is imputable to the personnel of a vessel, the owner of the vessel at fault
shall indemnify the losses and damages incurred after an expert appraisal. But
more in point to the instant case in is Article 827 of the same Code, which provides
that if the collision is imputable to both vessels, each one shall suffer its own
damages and both shall be solidarily responsible for the losses and damages
suffered by their cargoes.There is, therefore, no room for NDCs interpretation that
the Code of Commerce should apply only to domestic trade and not to foreign
trade.MCP next contends that it cannot be liable solidarily with NDC because it is
merely the manager and operator of the vessel Doa Nati, nor a ship agent. As
the general managing agent, according, to MCP, it can only be liable if it acted in
excess of its authority. The Memorandum Agreement of September 13, 1962 shows
that NDC appointed MCP as agent, a term broad enough to include the concept of
ship agent in Maritime Law. In fact, MCP was even conferred all the powers of the
owner of the vessel, including the power to contract in the name of the NDC.
Consequently, under the circumstances, MCP cannot escape liability. It is wellsettled that both the owner and agent of the offending vessel are liable for the
damage done where both are impleaded.

TATAD VS GARCIA JR 243 SCRA 438

Facts:
EDSA LRT Consortium, a foreign corporation, was awarded with the
construction of Light Rail Transit III (LRT III) as the only bidder who has qualified with
the requirements provided by the PBAC. The said foreign corporation will construct
the LRT III in a Built-Lease-Transfer agreement that such public utility will be
leased by the government through the Department of Transportation and
Communication (DOTC) and then it would be subsequently sold by the corporation
to the government. An objection was raised by the petitioner stating that the
awarding of the bid to the said corporation is against the Constitution. It was
provided in the Constitution that only Filipinos are entitled to operate a public utility
such as the LRT III.

Issue:
Whether or not the awarding of the bid to EDSA LRT Consortium is against the
Constitution.

Held:
The Court held that there is a distinction in the operation of a public utility
and ownership in the facilities and equipment to serve the public. The EDSA LRT
Consortium fall under the latter because the said corporation will not operate the
public utility. The said corporation will only own the facilities and equipment such as
the train carts, the railings and the booths. In addition, such ownership will then be
subsequently transferred to the government under Built-Lease-Transfer
agreement. With that said, the operation of the public utility will fall to the Filipinos
through its government. Therefore, the awarding of the bid to EDSA LRT Consortium
is not against the provisions of the Constitution.
C.

Constitutional limitations on operation of public utilities ( Art XII,

1987 Constitution)

D.

Concept Franchise, Certificate of Public Convenience & Necessity vs

Certificate of Public Convenience

II. GENERAL CONCEPTS

A. CONTRACT OF TRANSPORTATION IN GENERAL

B. PERFECTION
Case: British Airways vs CA
Facts:
On April 6, 1989, Mahtani decided to visit his relative in Bombay, India. In
anticipation of his visit, he obtained the services of a certain Mr. Gemar to prepare
his travel plan. Since british Airways had no ticket flights from Manila to Bombay,
Maktani had to take a connecting flight to Bombay on board British Airways. Prior to
his departure, Maktani checked in the PAL counter in Manila his two pieces of
luggage containing his clothing and personal effects, confident that upon reaching
Hong Kong, the same would be transferred to the BA flight bound for Bombay,
Unfortunately, when Maktani arrived in Bombay, he discovered that his luggage was
missing and that upon inquiry from the BA representatives, he was told that the
same might have been diverted to London. After plaintiff waiting for his luggage for
one week, BA finally advised him to file a claim accomplishing the property.

Issue:
Whether or not defendant BA is liable for compulsory damages and attorneys fee,
as well as the dismissal of its third party complaint against PAL

Held:
The contract of transportation was exclusively between Maktani and BA. The latter
merely endorsing the Manila to Hong Kong log of the formers journey to PAL, as its
subcontractor or agent.
Conditions of contacts was one of continuous air
transportation from Manila to Bombay. The Court of Appeals should have been
cognizant of the well-settled rule that an agent is also responsible for any
negligence in the performance of its function and is liable for damages which the
principal may suffer by reason of its negligent act. Since the instant petition was
based on breach of contract of carriage, Maktani can only sue BA and not PAL, since
the latter was not a party in the contract.

C. COMMON CARRIER
a. STATUTORY DEFINITION (Art 1732 NCC)
b. DISTINGUISHED FROM PRIVATE CARRIER
c. DISTINGUISED FROM TOWAGE, ARRESTRE, STEVEDORING
d. TESTS TO DETERMINE COMMON CARRIER
e. PARTIES TO A CONTRACT OF CARRIAGE

DE GUZMAN VS CA 168 SCRA 612

Facts:
Herein respondent Ernesto Cendana was engaged in buying up used bottles and scrap
metal in Pangasinan. Normally, after collection respondent would bring such material to Manila
for resale. He utilized (2) two six-wheelers trucks which he owned for the purpose. Upon
returning to Pangasinan, he would load his vehicle with cargo belonging to different merchants
to different establishments in Pangasisnan which respondents charged a freight fee for.
Sometime in November 1970, herein petitioner Pedro de Guzman, a merchant and
dealer of General Milk Company Inc. in Pangasinan contracted with respondent for hauling 750
cartons of milk. Unfortunately, only 150 cartons made it, as the other 600 cartons were
intercepted by hijackers along Marcos Highway. Hence, petitioners commenced an action
against private respondent.
In his defense, respondent argued that he cannot be held liable due to force majuere,
and that he is not a common carrier and hence is not required to exercise extraordinary
diligence.
Issues:
1. Whether or not respondent can be held liable for loss of the cartons of milk due to force
majeure.
2. Whether or not respondent is a common carrier.
Held:
1. The court ruled the affirmative. The circumstances do not fall under the exemption from
liability as enumerated in Article 1734 of the Civil Code. The general rule is established
by the article that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, unless the same is due to any of the
following causes only:
a. Flood, storm, earthquake, lightning or other natural disasters;
b. Act of the public enemy, whether international or civil;
c. Act or omission of the shipper or owner of the goods;
d. Character of the goods or defects in the packing;
e. Order or act of competent public authority.
2. The court ruled the affirmative. Article 1732 of the New Civil Code avoids any 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 avoids a
distinction between a person or enterprise offering transportation services on a regular
or scheduled basis and one offering such services on an occasional, episodic, and
unscheduled basis.
FIRST PHILIPINE INDUSTRAIL CORP. VS CA
Facts:

Herein petitioner applied for a mayors permit to operate its pipeline concession. Before
such permit was issued, the City treasurer required petitioner to pay local tax. In order not to
hamper its operations, petitioner paid the tax under protest.
Then the petitioner filed a letter protest addressed to the treasurer claiming exemption
from payment of the tax because according to the Local Government Code of 1991,
transportation contractors are not included in the enumeration of contractors which are liable to
pay taxes. The city treasurer denied the protest. The petitioner filed a case before the trial court
for tax refund, however it was subsequently dismissed. Hence, this petition.
Issue:
Whether or not the petitioner is a common carrier as contemplated to be exempted
under the law.
Held:
The court rules the affirmative. The court enunciated the (4) tests in determining whether
the carrier is that of a common carrier:
a. must be engaged int eh business of carrying goods for other as a public employment
and must hold itself out as ready to engage in the transportation of goods generally
as a business and not a casual occupation
b. it must undertake to carry goods of the kind which its business is confined;
c. it must undertake the method by which his business is conducted and over its
established roads;
d. the transportation must be for hire.
In the case at bar, the court categorically ruled that the transporting of oil through
pipelines is still considered to be an activity of a common carrier. The petitioner is a common
carrier because it is engaged in the business of transporting passengers or goods; like
petroleum. It undertakes to carry for all persons indifferently. The fact that the petitioner has
limited clientele does not exclude it from the definition of common carrier. Under the petroleum
act of the Philippines, the petitioner is considered a common carrier even if it is a pipeline
concessionaire.
And even as regards the petroleum operation, it is of public utility. Specifically, the
Bureau of Internal Revenue considers petitioners as common carrier not subject to withholding
tax.
FGU INSURANCE CORP VS GP SARMIENTO TRUCKING GR 141910 August 6,
2002
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on June 18, 1994, 30
units of Condura S.D. white refrigerators aboard its Isuzu truck driven by Lambert
Eroles, to the Central Luzon Appliances in Dagupan City. While traversing the North
Diversion Road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it
collided with an unidentified truck, causing it to fall into a deep canal, resulting in
damage to the cargoes.

FGU, an insurer of the shipment, paid the value of the covered cargoes
(P204,450.00) to Concepcion Industries, Inc.,. Being subrogee of CIIs rights &
interests, FGU, in turn, sought reimbursement from GPS. Since GPS failed to heed
the claim, FGU filed a complaint for damages & breach of contract of carriage
against GPS and Eroles with the RTC. In its answer, respondents asserted that GPS
was only the exclusive hauler of CII since 1988, and it was not so engaged in
business as a common carrier. Respondents further claimed that the cause of
damage was purely accidental.
GPS filed a motion to dismiss the complaint by way of demurrer to evidence on the
ground that petitioner had failed to prove that it was a common carrier.
The RTC granted the motion to dismiss on April 30, 1996. It subsequently dismissed
the complaint holding that GPS was not a common carrier defined under the law &
existing jurisprudence. The subsequent motion for reconsideration having been
denied, FGU interposed an appeal to the CA. The CA rejected the FGUs appeal &
ruled in favor of GPS. It also denied petitioners motion for reconsideration.
ISSUES:
1. WON GPS may be considered a common carrier as defined under the law &
existing jurisprudence.
2. WON GPS, either as a common carrier or a private carrier, may be presumed to
have been negligent when the goods it undertook to transport safely were
subsequently damaged while in its protective custody & possession.
3. Whether the doctrine of Res ipsa loquitur is applicable in the instant case.
HELD:
1. The SC finds the conclusion of the RTC and the CA to be amply justified. GPS,
being an exclusive contractor & hauler of Concepcion Industries, Inc.,
rendering/offering its services to no other individual or entity, cannot be considered
a common carrier. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for hire or compensation, offering their services to the public,
whether to the public in general or to a limited clientele in particular, but never on
an exclusive basis. The true test of a common carrier is the carriage of
passengers/goods, providing space for those who opt to avail themselves of its
transportation service for a fee. Given accepted standards, GPS scarcely falls within
the term common carrier.

2. GPS cannot escape from liability. In culpa contractual, the mere proof of the
existence of the contract & the failure of its compliance justify, prima facie, a
corresponding right of relief. The law will not permit a party to be set free from
liability for any kind of misperformance of the contractual undertaking or a
contravention of the tenor thereof. A breach upon the contract confers upon the
injured party a valid cause for recovering that which may have been lost/suffered.
The remedy serves to preserve the interests of the promisee that may include his:
1. Expectation interest interest in having the benefit of his bargain by being put in
as good a position as he would have been in had the contract been performed;
2. Reliance interest interest in being reimbursed for loss caused by reliance on the
contract by being put in as good a position as he would have been in had the
contract not been made;
3. Restitution interest interest in having restored to him any benefit that he has
conferred on the other party.
Agreements can accomplish little unless they are made the basis for action. The
effect of every infraction is to create a new duty, or to make recompense to the one
who has been injured by the failure of another to observe his contractual obligation
unless he can show extenuating circumstances, like proof of his exercise of due
diligence (normally that of the diligence of a good father of a family or,
exceptionally by stipulation or by law such as in the case of common carriers, that
of extraordinary diligence) or of the attendance of fortuitous event, to excuse him
from his ensuing liability.
A default on, or failure of compliance with, the obligation gives rise to a
presumption of lack of care & corresponding liability on the part of the contractual
obligor the burden being on him to establish otherwise. GPS has failed to do so.
Eroles, on the other hand, may not be ordered to pay petitioner without concrete
proof of his negligence/fault. The driver, not being a party to the contract of
carriage between petitioners principal and defendant, may not be held liable under
the agreement. A contract can only bind the parties who have entered into it or
their successors who have assumed their personality/juridical position. Consonantly
with the axiom res inter alios acta aliis neque nocet prodest, such contract can
neither favor nor prejudice a third person. Petitioners civil action against the driver
can only be based on culpa aquiliana, which would require the claimant for
damages to prove the defendants negligence/fault.
3. Res ipsa loquitur holds a defendant liable where the thing which caused the injury
complained of is shown to be under the latters management and the accident is
such that, in the ordinary course of things, cannot be expected to happen if those

who have its management/control use proper care. In the absence of the
defendants explanation, it affords reasonable evidence that the accident arose
from want of care. It is not a rule of substantive law and does not create an
independent ground of liability. Instead, it is regarded as a mode of proof, or a mere
procedural convenience since it furnishes a substitute for, and relieves the plaintiff
of, the burden of producing specific proof of negligence. The maxim simply places
the burden of going forward with the proof on the defendant.
However, resort to the doctrine may only be allowed when:
(a) the event is of a kind which does not ordinarily occur in the absence of
negligence;
(b) other responsible causes are sufficiently eliminated by the evidence (includes
the conduct of the plaintiff and third persons); and
(c) the indicated negligence is within the scope of the defendants duty to the
plaintiff.
Thus, it is not applicable when an unexplained accident may be attributable to one
of several causes, for some of which the defendant could not be responsible.
Res ipsa loquitur generally finds relevance whether or not a contractual relationship
exists between the plaintiff and the defendant, for the inference of negligence
arises from the circumstances and nature of the occurrence and not from the nature
of the relation of the parties. Nevertheless,for the doctrine to apply, the requirement
that responsible causes (other than those due to defendants conduct) must first be
eliminated should be understood as being confined only to cases of pure (noncontractual) tort since obviously the presumption of negligence in culpa contractual
immediately attaches by a failure of the covenant or its tenor.
On the other hand, while the truck driver, whose civil liability is predicated on culpa
acquiliana, can be said to have been in control & management of the vehicle, it is
not equally shown that the accident has been exclusively due to his negligence. If it
were so, the negligence could allow res ipsa loquitur to properly work against him.
However, clearly this is not the case.
EVERETT STEARNSHIP VS CA CA 297 SCRA 496
Facts:
Hernandez Trading Co., respondent herein, imported 3 crates of bus spare parts
from its supplier, Maruman Trading Company, Ltd., a foreign corporation based in
Japan. The crates were shipped from Japan to Manila on board "ADELFAEVERETTE,"

a vessel owned by the principal of the petitioner herein, Everett Orient Lines. The
said crates were covered by Bill of Lading No. NGO53MN. The vessel arrived in
Manila and it was discovered that the one crate was missing. This was confirmed
and admitted by petitioner in its letter of January 13, 1992 addressed to private
respondent, which thereafter made a formal claim upon petitioner for the value of
the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five
Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated
November 14, 1991. However, petitioner offered to pay only One Hundred Thousand
(Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the
covering bill of lading which limits the liability of petitioner. Respondent rejected the
offer and filed a case to collect payment for the loss against the petitioner.

Issue:
Whether or not the petitioner is liable for the actual value and not the maximum
value recoverable under the bill of lading.

Held:
A stipulation in the bill of lading limiting the liability of the common carrier for the
loss, damages of cargo to a certain sum, unless the shipper declares or a higher
value is sanctioned by law, particularly Articles 1749 and 1780 of the Civil Code.
The stipulations in the bill of lading are reasonable and just. In the bill of lading, the
carrier made it clear that its liability would only be up to Y100,000.00 (Yen).
However, the shipper, Maruman Trading, had the option to declare a higher
valuation if the value of its cargo was higher than the limited liability of the carrier.
Considering that the shipper did not declare a higher valuation, it had itself to
blame for not complying with the stipulations. The trial courts decision that private
respondent could not have fairly agreed to the limited liability clause in the bill of
lading because the said condition were printed in small letters does not make the
bill of lading invalid.

SPOUSES CRUZ VS SUN HOLIDAYS INC. GR NO. 186312 JUNE 29, 2010