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A. what is a "Common Carrier"? - Persons, corporations, firms or associations engaged in the business of carrying or transporting passengersor goods or both, by land, water, or air, for compensation, offering their services to the public. (Art. 1732, CivilCode) .

- One that holds itself out as ready to engage in the transportation of goods for hire as a public employmentand not as a casual occupation. (De Guzman vs. Court of Appeals, No. L-47822, December 22, 1988)

B. Characteristics Of A Common Carrier Art. 1732 of the Civil Code avoids any distinction between one whose principal business is the carrying of

persons or goods or both, and one who does such carrying only as an ancillary activity (sideline).

It also avoids a distinction between a person or enterprise offering transportation service on a regular orscheduled basis and one offering such service on an occasional, episodic or unscheduled basis.

Article 1732 does not distinguish between a carrier offering its services to the general public, that is thegeneral community or population, and one who offers services or solicits business only from anarrow segment of the general population.

A person or entity is a common carrier even if he did not secure a Certificate of Public Convenience

The Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air.

The Civil Code does not provide that the transportation should be by motor vehicle.

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

Undertakes to carry for all people indifferently and thus is liable for refusal without sufficient reason(Lastimoso vs. Doliente, 3 SCRA , [1961]);

Cannot lawfully decline to accept a particular class of goods for carriage to the prejudice of thetraffic in these goods;

No monopoly is favored (Batangas Trans. vs. Orlanes, 52 Phil. 455) ;

Provides public convenience.

c. Tests Whether A Party Is A Common Carrier Of Goods:

It must be engaged in the business of carrying goods for others as a public employment and must hold itselfout as ready to engage in the transportation of goods generally as a business and not as a casualoccupation;

It must undertake to carry goods of the kind to which its business is confined; It must undertake to carry by the method by which his business is conducted and over its established roads;

and

The transportation must be for hire. (First Philippine Industrial Corp. v. CA, 300 SCRA 661, [1998)

Test whether a party is a common carrier First Philippine Industrial Corp. vs. Court of Appeals (101 SCRA 661, 1998)

Facts: Petitioner is a grantee of a pipeline concession under R.A. No. 387, as amended, a contract, install andoperate oil pipelines. The original pipeline concession was granted in 1967 and renewed by the EnergyRegulatory Board in 1992.

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor ofBatangas City. However, before the mayor's permit could be issued, the respondent City Treasurer requiredpetitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the LocalGovernment Code. The respondent City Treasure assessed a business tax on the petitioner amounting toP956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for thefiscal year 1993 which amounted to P181,681,151.00. in order not to hamper its operations, petitioner paid thetax under protest in the amount of P239, 019.01 for the first quarter of 1993.

On June 15, 1994, petitioner filed with the RTC of Batangas City a complaint for tax refund withprayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in hercapacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and collectionof the business tax on its gross receipts violates Sec. 133 of the Local Government Code; (2) the authority ofcities to impose and collect a tax on the gross receipts of "contractors and independent contractors" underSec. 141(e) and 151 does not include the authority to collect such taxes on transportation contractors for, asdefined under Sec. 131(h), the term "contractors" excludes transportation contactors; and (3) the CityTreasurer illegally and erroneously imposed and collected the said tax, thus meriting the immediate refund ofthe tax paid.

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes underSec. 133 (J) of the Local Government Code as said exemption applied only to "transportation contractors andpersons engaged in the transportation by hire and common carriers by air land and water." Respondentsassert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers astrucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the said

Code pertains to the mode or manner by which a product is delivered to its destination.

Issue: Whether or not the petitioner is a common carrier so that in the affirmative, he is not liable to pay thecarriers tax under the Local Government Code of 1991?

Held: Petitioner is a common carrier.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as engagedin the business of transporting persons or property from place to place, for compensation, offering his servicesto the public generally.

Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm orassociation engaged in the business of carrying or transporting passengers or goods or both, by land, water, orair, for compensation, offering their services to the public.

The test for determining whether a party is a common carrier of goods is: 1. He must be engaged in the carrying of goods for others as a public employment, and must hold himself outas ready to engage in the transportation of goods or persons generally as a business and not as a casualoccupation. 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.

D. Cases: 1. DE GUZMAN VS. COURT OF APPEALS (168 SCRA 612)

Facts: Cendena was a junk dealer and was engaged in buying used bottles and scrap materials inPangasinan and brought these to Manila for resale. He used two 6-wheeler trucks. On the return trip toPangasinan, he would load his vehicles with cargo which various merchants wanted delivered to Pangasinan.For that service, he charged freight lower than regular rates. General Milk Co. contacted with him for thehauling of 750 cartons of milk. On the way to Pangasinan, one of the trucks was hijacked by armed men whotook with them the truck and its cargo and kidnapped the driver and his helper. Only 150 cartons of milk weredelivered. The Milk Co. sued to claim the value of the lost merchandise based on an alleged contract ofcarriage. Cendena denied that he was a common carrier and contended that he could not be liable for the lossit was due to force majeure. The trial court ruled that he was a common carrier. The CA reversed.

Issue: Whether or not Cendena is a common carrier?

Held: Yes, Cendena is properly characterized as a common carrier even though he merely backhauled goodsfor other merchants, and even if it was done on a periodic basis rather than on a regular basis, and even if hisprincipal occupation was not the carriage of goods.

Article 1732 makes no distinction between one whose principal business activity is the carrying ofpersons or goods or both, and one who does such carrying only as an ancillary activity. It also avoids making adistinction between a person or enterprise offering transportation services on a regular or scheduled basis andone offering service on an occasional, episodic or unscheduled basis. Neither does it make a distinctionbetween a carrier offering its services to the general public and one who offers services or solicits businessonly from a narrow segment of population.

2. Planters Porducts vs. CA (226 SCRA)

Facts: Planters Product Inc. purchased from Mitsubishi international corporation metric tons of Urea fertilizer,which the latter shipped aboard the cargo vessel M/V Sun Plum owned by private respondent Kyosei KisenKabushiki Kaisha. Prior to its voyage, a time charter-party on the vessel respondent entered into betweenMitsubishi as shipper/charterer and KKKK as ship owner, in Tokyo, Japan.

Before loading the fertilizer aboard the vessel, (4) of her holds were presumably inspected by thecharterer's representative and found fit to take a load of urea in bulk. After the Urea fertilizer was loaded in bulkby stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy ironlids. Upon arrival of vessel at port, the petitioner unloaded the cargo pursuant to the terms and conditions ofthe charter-party. The hatches remained open throughout the duration of the discharge.

Upon arrival at petitioner's warehouse a survey conducted over the cargo revealed a shortage andthe most of the fertilizer was contaminated with dirt. As such, Planters filed an action for damages. Thedefendant argued that the public policy governing common carriers do not apply to them because they havebecome private carriers by reason of the provisions of the charter-party.

Issue : Whether or not the charter-party contract between the ship owner and the charterer transforms acommon carrier into a private carrier?

Held: A charter party may either her be time charter wherein the vessel is leased to the charterer, wherein theship is leased to the charterer for a fixed period of time or voyage charter, wherein the ship is leased for asingle voyage. In both cases, thpe charter party provides for the hire of the vessel only, either for a determinatetime or for a single or consecutive voyage.

It is therefor imperative that such common carrier shall remain as such, notwithstanding the charterof the whole or part of the vessel by one or more persons, provided the charter is limited to the ship only, as inthe case of a time-charter or voyage-charter. It is only when the charter includes both ship and its crew as inbareboat or demise that it becomes a private carrier. Undoubtedly, a shipowner in a time or voyage charterretains in possession and control of the ship, although her holds may be the property of the charterer.

3. Calvo v. UCPB General Insurance (G.R. No. 148496 March 19, 2002)

Facts: Petitioner Virgines Calvo, owner of Transorient Container Terminal Services, Inc. (TCTSI) , and acustom broker, entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the port area to the Tabacalera Compound,Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.

On July 14, 1990, contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa Maru". After 24 hours, they were unloaded from vessel to the custody of the arrastre operator, Manila Port Services,Inc. From July 23 to 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from thearrastre operator and delivered it to SMC's warehouse in Manila. On July 25, the goods were inspected byMarine Cargo Surveyors, reported that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and3 reels of kraft liner board were also torn. The damages cost P93,112.00.

SMC collected the said amount from respondent UCPB under its insurance contract. Respondenton the other hand, as a subrogee of SMC, brought a suit against petitioner in RTC, Makati City. On December20, 1995, the RTC rendered judgment finding petition er liable for the damage to the shipment. The decisionwas affirmed by the CA.

Issue: Whether or not Calvo is a common carrier?

Held: In this case the contention of the petitioner, that he is not a common carrier but a private carrier, has nomerit.

Article 1732 makes no distinction between one whose principal business activity is the carrying ofpersons or goods or both, and one who does such carrying only as ancillary activity. Article 1732 also carefull yavoids making any distinction between a person or enterprise offering transportation service on a regular orscheduled basis and one offering such service on an occasional, episodic or unscheduled basis . Neither does

Article 1732 distinguish between a carrier offering its services to the " general public ," i.e., the generalcommunity or population, and one who offers services or solicits business only from a narrow segment of thegeneral population. We think that Article 1733 deliberately refrained from making such distinction. (De Guzmanv. CA, 68 SCRA 612)

Te concept of "common carrier" under Article 1732 coincide with the notion of "public service", underthe Public Service Act which partially supplements the law on common carrier. Under Section 13, paragraph(b) of the Public Service Act, it includes:

" x x x 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, anddone for general business purposes, any common carrier, railroad, street railway, traction railway, subwaymotor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be itsclassification, 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 repairshop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat andpower, water supply and power petroleum, sewerage system, wire or wireless communications systems, wireor wireless broadcasting stations and other similar public services. x x x"

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4. Fabre vs. CA (259 SCRA 426 G.R. No. 111127, July 26, 1996)

Facts: Petitioners Engracio Fabre, Jr. and his wife were owners of a Mazda minibus. They used the busprincipally in connection with a bus service for school children which they operated in Manila. It was driven byPorfirio Cabil.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)arranged with the petitioners for the transportation of 33 members of its Young Adults Ministry from Manila toLa Union and back in consideration of which private respondent paid petitioners the amount of P3,000.00.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge atCarmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to LaUnion), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night,petitioner Cabil came upon a sharp curve on the highway. The road was slippery because it was raining,causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder.The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano,then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus cameto rest off the road. A coconut tree which it had hit fell on it and smashed its front portion. Because of themishap, several passengers were injured particularly Amyline Antonio.

Criminal complaint was filed against the driver and the spouses were also made jointly liable.Spouses Fabre on the other hand contended that they are not liable since they are not a common carrier. TheRTC of Makati ruled in favor of the plaintiff and the defendants were ordered to pay jointly and severally to theplaintiffs. The Court of Appeals affirmed the decision of the trial court.

Issue: Whether the spouses Fabre are common carriers?

Held: Petition was denied. Spouses Fabre are common carriers. The Supreme Court held that this case actually involves a contract of carriage. Petitioners, the

Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Codeon common carriers to apply to them. As this Court has held: 10 Art. 1732, Common carriers are persons,corporations, firms or associations engaged in the business of carrying or transporting passengers or goods orboth, by land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the carryingof persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "asideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offeringtransportation service on a regular or scheduled basis and one offering such service on an occasional,episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services tothe "general public," i.e., the general community or population, and one who offers services or solicits business

only from a narrow segment of the general population. We think that Article 1732 deliberately refrained frommaking such distinctions.

5. Tatad vs. Garcia (241 SCRA 334, GR. No. 114222. April 6, 1995)

Facts: DOTC planned to construct a light railway transit line along Edsa. EDSA LRT Corporation, Ltd., aforeign corporation was awarded the contract to build, lease and transfer the said light railway.

The said award was questioned by the petitioners on the basis that a foreign corporation cannot ownthe EDSA LRT III, a public utility as it violates the Constitution.

Issue: Whether or not an owner and lessor of the facilities used by a public utility constitute a public utility?

Held: EDSA LRT Corporation, Ltd. Is admittedly a foreign corporation "duly incorporated and existing underthe laws of Hong Kong". However, there is no dispute that once the EDSA LRT III is constructed, the privaterespondent, as lessor, will turn it over to DOTC as lessee, for the latter to operate the system and pay rentalsfor the said use.

What private respondent owns are the rail tracks, rolling stocks, rail stations, terminals and thepower plant, not a public utility. While a franchise is needed to operate these facilities to serve the public, theydo not themselves constitute a public utility. What constitutes a public utility in not their ownership but their useto serve the public.

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 itdoes not operate them to serve the public. In law, there is a clear distinction between the "operation" of apublic utility and the ownership of the facilities and the equipment used to serve the public.

6. Fisher vs. Yangco Steamship (31 Phil 1)

Facts : The complained alleges that plaintiff is a stockholder in Yangco Steamship

Company, the owner of the large steam vessels, duly licensed to engage in the coastwise trade ofthe Philippine Island; that on or about June 10, 1912, the directors of the company, adopted a resolution whichwas thereafter ratified and affirmed by the stockholders of the company "expressly declaring and providing thatthe classes of merchandise to be carried by the company in its business as common carrier do not includedynamite, powder or other explosives, and expressly prohibiting the officers, agents an d servants of thecompany from offering to carry, accepting for carriage or carrying said dynamite, powder or other explosives."

Issue: Whether the refusal of the owner and officer of a steam vessel, to accept for carriage dynamite, powderor other explosives for carriage can be held to be a lawful act?

Held: The traffic in dynamite gun powder and other explosive is vitally essential to the material and generalwelfare of the inhabitants of this islands and it these products are to continue in general use throughout thePhilippines they must be transported from water to port to port in various island which make up the

Archipelago.

It follows that a refusal by a particular vessel engage as a common carrier of merchandise incoastwise trade in the Philippine Island to accept such explosives for carriage constitutes a violation.

The prohibition against discrimination penalized under the statute, unless it can be shown that thereis so Real and substantial danger of disaster necessarily involved in the courage of any or all of this article ofmerchandise as to render such refusal a due or unnecessary or a reasonable exercise or prudence anddiscreation on the part of the ship owner.

7. Loadstar Shipping vs. CA (315 SCRA 339, 1999)

Facts: On November 19, 1984, loadstar received on board its M/V "Cherokee" bales of lawanit hardwood,tilewood and Apitong Bolidenized for shipment. The goods, amounting to P6,067, 178. Were insured for thesame amount with the Manila Insurance Company against various risks including "Total Loss by Total Loss ofthe Vessel". On November 20, 1984, on its way to Manila from the port of Nasipit, Agusan Del Norte, thevessel, along with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, theconsignee made a claim with loadstar which, however, ignored the same. As the insurer, MIC paid to theinsured in full settlement of its claim, and the latter executed a subrogation receipt therefor. MIC thereafter fileda complaint against loadstar alleging that the sinking of the vessel was due to fault and negligence of loadstarand its employees.

In its answer, Loadstar denied any liability for the loss of the shipper's goods and claimed that thesinking of its vessel was due to force majeure. The court a quo rendered judgment in favor of MIC., promptingloadstar to elevate the matter to the Court of Appeals, which however, agreed with the trial court and affirmedits decision in toto. On appeal, loadstar maintained that the vessel was a private carrier because it was notissued a Certificate of Public Convenience, it did not have a regular trip or schedule nor a fixed route, andthere was only "one shipper, one consignee for a special crago".

Issue: Whether or not M/V Cherokee was a private carrier so as to exempt it from the provisions coveringCommon Carrier?

Held: Loadstar is a common carrier.

The Court held that LOADSTAR is a common carrier. It is not necessary that the carrier be issued acertificate of public convenience, and this public character is not altered by the fact that the carriage of thegoods in question was periodic, occasional, episodic or unscheduled. Further, the bare fact that the vessel wascarrying a particular type of cargo for one shipper, which appears to be purely co-incidental; it is no reasonenough to convert the vessel from a common to a private carrier, especially where, as in this case, it wasshown that the vessel was also carrying passengers.

Article 1732 also carefully avoids making any distinction between a person or enterprise offeringtransportation service on a regular or scheduled basis and one offering such service on an occasional,episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services tothe "general public," i.e., the general community or population, and one who offers services or solicits businessonly from a narrow segment of the general population.

8. First Philippines Industrial Corp. vs. CA (300 SCRA 661)

Facts: Petitioner is a grantee of a pipeline concession under R.A. No. 387, as amended, a contract, install andoperate oil pipelines. The original pipeline concession was granted in 1967 and renewed by the EnergyRegulatory Board in 1992.

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor ofBatangas City. However, before the mayor's permit could be issued, the respondent City Treasurer requiredpetitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the LocalGovernment Code. The respondent City Treasure assessed a business tax on the petitioner amounting toP956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for thefiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its operations, petitioner paid thetax but under protest in the amount of P239, 019.01 for the first quarter of 1993.

On June 15, 1994, petitioner filed with the RTC of Batangas City a complaint for tax refund withprayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in hercapacity as City Treasurer.

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes underSec. 133(J) of the Local Government Code as said exemption applied only to "transportation contractors andpersons engaged in the transportation by hire and common carriers by air land and water." Respondentsassert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers astrucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the saidCode pertains to the mode or manner by which a product is delivered to its destination.

Issue: Whether the petitioner, an oil pipeline operator is a common carrier, and therefore exempted frompaying local taxes?

Held: Yes. Petitioner is a common carrier.

Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm orassociation engaged in the business of carrying or transporting passengers or goods or both, by land, water, orair, for compensation, offering their services to the public.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as engagedin the business of transporting persons or property from place to place, for compensation, offering his servicesto the public generally.

The test for determining whether a party is a common carrier of goods is: 1. He must be engaged inthe carrying of goods for others as a public employment, and must hold himself out as ready to engage in thetransportation of goods or persons generally as a business and not as a casual occupation; 2.He mustundertake to carry goods of the kind to which his business is confined; 3. He must undertake to carry by themethod by which his business is conducted and over his established roads; and 4. The transportation must befor hire.

Based on the above definition and requirements, there is no doubt that the petitioner is a commoncarrier.

9. Home Insurance vs. Amearican Steamship (23 SCRA 24)

Facts: The Consorcio Pesquero del Peru of South America shipped jute bags of Peruvian fishmeal through SSCrowborough, consigned to San Miguel Brewery, Inc. The cargo, which was insured by Home InsuranceCompany, arrived at the port of Manila and was discharged to the lighters of the Luzon StevedoringCorporation. When the same was delivered to the consignee, there were shortages amounting to P 12,033.85, prompting the latter to pay against Luzon Stevedoring Co.

Because the others denied liability, Home Insurance paid San Miguel the insurance value loss. Thiscost was brought by the former to recover indemnity from Luzon Stevedoring and the ship owner. LuzonStevedoring raised the defense that it deliver with due diligence in the same from the carrier. MexicanSteamship Agencies denied liability on the ground that the charter party referred to in the bills of lading, the

charter, not the ship owner, was responsible for any loss or damage of the cargo. Furthermore, it claimed tohave exercised due diligence in stowing the goods and as a mere forwarding agent, it was not responsible forlosses or damages to the cargo.

Issue: Whether or not the stipulation in the charter party to owner's non-liability was valid as to absolve the American Steamship from liability loss?

Held: The Civil Code provision on common carriers should not be applied where the carrier is not acting assuch but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss dueto the negligence of its agent is void only if the strict public policy governing common carriers is applied. Suchpolicy has no force where the public at large is not involved, as in the case of a ship totally chartered for theuse of a single party.

10. San Pablo vs. Pantranco (153 SCRA 199)

Facts: The Pantranco South Express, Inc., hereinafter referred to as PANTRANCO is a domestic corporationengaged in the land transportation business with PUB service for passengers and freight and variouscertificates for public conveniences (CPC) to operate passenger buses from Metro Manila to Bicol Region andEastern Samar. On March 27,1980 PANTRANCO through its counsel wrote to Maritime Industry Authority(MARINA) requesting authority to lease/purchase a vessel named MN "Black Double" "to be used for itsproject to operate a ferryboat service from Matnog, Sorsogon and Allen, Samar that will provide service tocompany buses and freight trucks that have to cross San Bernardo Strait. In a reply of April 29,1981

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PANTRANCO was informed by MARINA that it cannot give due course to the request.

PANTRANCO nevertheless acquired the vessel MN "Black Double" on May 27, 1981 for P3 Millionpesos. It wrote the Chairman of the Board of Transportation (BOT) through its counsel, that it proposes tooperate a ferry service to carry its passenger buses and freight trucks between Allen and Matnog in connectionwith its trips to Tacloban City. PANTRANCO claims that it can operate a ferry service in connection with itsfranchise for bus operation in the highway from Pasay City to Tacloban City "for the purpose of continuing thehighway, which is interrupted by a small body of water, the said proposed ferry operation is merely a necessaryand incidental service to its main service and obligation of transporting its passengers from Pasay City toTacloban City. Such being the case there is no need to obtain a separate certificate for public convenience tooperate a ferry service between Allen and Matnog to cater exclusively to its passenger buses and freighttrucks.

Without awaiting action on its request PANTRANCO started to operate said ferry service. ActingChairman Jose C. Campos, Jr. of BOT ordered PANTRANCO not to operate its vessel until the application forhearing on Oct. 1, 1981. In another order BOT enjoined PANTRANCO from operating the MN "Black Double"otherwise it will be cited to show cause why its CPC should not be suspended or the pending applicationdenied.

Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping Corporation who arefranchise holders of the ferry service in this area interposed their opposition. They claim they adequatelyservice the PANTRANCO by ferrying its buses, trucks and passengers. BOT then asked the legal opinion fromthe Minister of Justice whether or not a bus company with an existing CPC between Pasay City and TaclobanCity may still be required to secure another certificate in order to operate a ferry service between two terminalsof a small body of water. On October 20, 1981 then Minister of Justice Ricardo Puno rendered an opinion tothe effect that there is no need for bus operators to secure a separate CPC to operate a ferryboat service.

Thus on October 23, 1981 the BOT rendered its decision holding that the ferryboat service is part ofits CPC to operate from Pasay to Samar/Leyte by amending PANTRANCO's CPC so as to reflect the same.

Cardinal Shipping Corporation and the heirs of San Pablo filed separate motions for reconsiderationof said decision and San Pablo filed a supplemental motion for reconsideration that were denied by the BOTon July 21, 1981. Hence, San Pablo filed the herein petition for review on certiorari with prayer for preliminaryinjunction seeking the revocation of said decision, and pending consideration of the petition the issuance of arestraining order or preliminary injunction against the operation by PANTRANCO of said ferry service

Issue: Whether or not the ferry boat is a common carrier?

Held: Considering the environmental circumstances of the case, the conveyance of passengers, trucks andcargo from Matnog to Allen is certainly not a ferryboat 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 ferryboat 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 can not be considered as a continuation of the highway.

The contention of private respondent PANTRANCO that its ferry service operation is as a privatecarrier, not as a common carrier for its exclusive use in the ferrying of its passenger buses and cargo trucks isabsurd. PANTRANCO does not deny that it charges its passengers separately from the charges for the bustrips and issues separate tickets whenever they board the MN "Black Double" that crosses Matnog to Allen.Nevertheless, considering that the authority granted to PANTRANCO is to operate a private ferry, it can stillassert that it cannot be held to account as a common carrier towards its passengers and cargo. Such ananomalous situation that will jeopardize the safety and interests of its passengers and the cargo ownerscannot be allowed.

Thus the Court holds that the water transport service between Matnog and Allen is not a ferryboatservice but a coastwise or interisland shipping service. Before private respondent may be issued a franchise orCPC for the operation of the said service as a common carrier, it must comply with the usual requirements offiling an application, payment of the fees, publication, adducing evidence at a hearing and affording theoppositors the opportunity to be heard, among others, as provided by law.

e. Distinctions Between Common Carrier and Private Carrier

Common Carrier Private Carrier

As to passengers

Holds himself out for all people indiscriminately. Contracts with particular individuals or groups only.

As to required diligence

Requires extraordinary diligence. Requires only ordinary diligence.

As to state regulation

Subject to regulation. Not subject to regulation.

As to stipulation on limiting liability Parties may not agree on limiting the carrier's liabilityexcept when provided by law.

Parties may agree on limiting the carrier's liability, provided not contrary to law, morals or goodcustoms.

Presumption as to fault and negligence

Presumption of fault or negligence applies. No fault or negligence is presumed.

As to laws applicable on damages Law on common carriers. Law on obligations and contracts.

f. Governing/ Applicable Law A. Transportation by Sea

Coastwise a.Civil Code (Arts.1732-1766) - primary law Code of Commerce - suppletory law Note: Carriage of Goods by Sea Act - inapplicable even if the parties expressly provide for it.

Carriage from Foreign Ports To Philippine Ports b.

Civil Code - primary law Code of Commerce - all matters not regulated by the Civil Code. Carriage of Goods by Sea Act (COGSA) - suppletory to the Civil Code.

Carriage from Philippine Ports To Foreign Ports- laws of the country towhich the goods are to be transported.

c.

B. Land Transportati on

Common Carriers a.Civil Code (Arts.1732-1766) - primary law Code of Commerce - suppletory law

Private Carriers b.Object merchandise

Code of Commerce - primary law Civil Code - suppletory law

C. Air Transportation Domestic Transportation1.

Civil CodeCode of Commerce

International Transportation - Warsaw Convention 2.While the Warsaw Convention has the force of law in the Philippines, it does not have an exclusive

enumeration of a carrier's liability for contractual breach or absolute limit of liability. It does notpreclude the operation of the Civil Code and other laws.

The liability of the carrier for the loss, destruction or deterioration of goods transported to thePhilippines from a foreign country, is primarily governed by the Civil Code not by the WarsawConvention which applies only to simple loss of baggage.

There Is International Transportation When: The place of departure and the place of destination are within the territories of two high contracting

parties, regardless of whether or not there was a break in the transportation or transshipment. 1.

The place of departure and the place of destination are within the territory of a single contracting party ifthere is an agreed stopping place within a territory subject to the sovereignty, mandate or authorityof another power, even though the power is not a party to the convention. (Mapa v. CA, 275 SCRA[1997])

2.

High Contracting PartiesSignatories to the Warsaw Convention and those which subsequently adhered to it.

In National Development Co. vs. CA (164 SCRA 593). "The law of the country to which the goods are tobe transported governs the liability of the common carrier in case of loss, destruction or deterioration (Art.1753, NCC) XXX The liability of the carrier is governed primarily by the Civil Code and in all matters notregulated by the said Code, the rights and obligations of common carriers shall be governed by the code ofCommence and by special laws (Art. 1766 NCC). Hence, the COGSA /a special law is merely supppletory tothe provisions of the Civil Code". The "place of destinations" whose law shall be deemed to be the governinglaw in so far as the liability of common carrier is concerned refers to the place of "ultimate destination" not anagreed stopping place. This is particularl y true in so far as the warsaw conventio n used the term to determinethe country where the suit against the international carrier should be filled. (Santos III vs. NorthWest Orient

Airlines, 210 SCRA 256

Cases:

Samar Mining Co., Inc. vs. Nordeutscher Lloyd (132 SCRA 529)

Facts: Samar Mining imported 1 crate optima welded wire (amounting to around USD 424 or PhP 1,700) fromGermany, which was shipped on a vessel owned by Nordeutsch er Lloyd (M/S Schwabenstein). The shipmentwas unloaded in Manila into a barge for transshipment to Davao and temporarily stored in a bondedwarehouse owned by AMCYL. The goods never reached Davao and were never delivered to or received bythe consignee, Samar Mining Co.

CFI ruled in favor of Samar Mining holding Nordeutscher Lloyd liable. However, defendants mayrecoup whatever they may pay Samar Mining by enforcing the judgment against third party defendant AMCYL.

Issue: Whether Nordeustscher Lloyd is liable for the loss of the goods as common carrier?

Held: No. At the time of the loss of the goods, the character of possession of Nordeutscher Lloyd shifted fromcommon carrier to agent of Samar Mining Co.

The Bill of Lading is serves both as a receipt of goods and is likewise the contract to transport anddeliver the same as stipulated. It is a contract and is therefore the law between the parties. The Bill of Ladingin question stipulated that Nordeutscher Lloyd only undertook to transport the goods in its vessel only up to theport of discharge from ship, which is Manila. The Bill of Lading further stipulated that the goods were to betransshipped by the carrier from Manila to the port of destination - Davao. By unloading the shipment inManila and delivering the goods to the warehouse of AMCYL, the appellant was acting within the contractualstipulations contained in the Bill of Lading.

Article 1736 of the Civil Code relives the carrier of responsibility over the shipment as soon as thecarrier makes actual or constructive delivery of the goods to the consignee or to the person who has a right toreceive them.

Under the Civil Code provisions governing Agency, an agent can only be held liable in cases wherehis acts are attended by fraud, negligence, deceit or if there is a conflict of interest between him and theprincipal. Under the same law an agent is likewise liable if he appoints a substitute when he was not given thepower to appoint one or otherwise appoints one that is notoriously incompete nt or insolvent. These facts werenot proven in the record.

Eastern Shipping Lines Inc. VS. Intermediate Appellate Court (150 SCRA 463)

Facts: Sometime in or prior to June 1977, the M/S Asiatica, a vessel operated by petitioner Eastern ShippingLines Inc., loaded at Kobe, Japan for transportation to Manila loaded 5,000 pieces of calorized pipes valued atP256,039.00 which was consigned to Philippine Bloomi ng Mills Co, Inc. and 7 cases of spare parts valued atP92, 361.75 consigned to Central Textile Mills. Both sets of goods were inured against marine risk for theirstated value with respondent Development Insurance and Surety Corp.

In the same vessel, 2 containers of garment fabrics were also loaded which was consigned toMariveles Apparel Corp worth $46,583. The said cargoes were consigned to Nisshin Fire and MarineInsurance. Another cargo loaded to the vessel was the surveying instruments consigned to Aman Enterprisesand General Merchandise and insured against respondent Dowa Fire & Marine Insurance for $1,385.00.

On the way to Manila, M/S Asiatica caught fire and sank. This resulted to the loss of the ship and its

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cargoes. The respective Insurers paid the correspondi ng marine insurance values and were thus subrogatedto the rights of the insured.

The insurers filed a suit against the petitioner carrier for recovery of the amounts paid to the insured.However, petitioner contends that it is not liable on the ground that the loss was due to an extraordinaryfortuitous event.

Issue: Whether the Civil Code provisions on Common Carriers or the Carriage of the Goods by Sea Act willgovern the case at bar?

Held: The law of the country to which the goods are to be transported governs the liability of common carrier incase of their loss, destruction or deterioration. The liability of petitioner is governed primarily by the Civil Codehowever, in all matters not regulated by the Civil Code, the Code of Commerce and Special Laws will governwith respect to the rights and obligation s of the carrier. Therefore COGSA is suppletory to the provision s of theCivil Code.

G. Government Regulation

Case/s

KMU Labor Center vs. Garcia (239 SCRA 386)

Facts : On June 26,1990, Secretary of DOTC, Oscar M. Orbos issued memorandum circular No. 90-395 tothen LTFRB, Chairman Remedios A.S. Fernando allowing provincial buses operators to charge passengerswithin a range of 15% above and 15% below, the LTFRB official rate for a period of one (1) year. On December5, 1990 private respondent PBOAP filed an application for fare rate increase to P0.085 and again it wasreduced to P0.065 per kilometer rate. The application was opposed by the Philippine Consumer FoundationInc. that the proposed rate were exorbitant and unreasonable and that the application contained no allegationon the rate o return on December 14, 1990. Public respondent LTFRB granted the fare rate increase on March16, 1994. Petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares, itwas dismissed for lack of merit, hence this petition.

Issue: Whether or not the Provincial Bus Operators has the power to reduce and increase fare rated based onthe circular order issued by the LTFRB?

Held: Supreme Court held that the authority given by the LTFRB to the provincial bus operators to set a farerange over and above the authorized existing fare is illegal and invalid as it is tantamount to an unduedelegation of legislative authority, "Potestas delegata non delegari protest" what has been delegated furtherdelegation of such power would indeed constitute a negation of the duty in violation of the trust reposed in thedelegate inandated to discharged it directly. Furthermore rate fixing or making is a delicate and sensitivegovernment function that requires dexterity of judgment and sound discretion with the settle goal at arriving at

a just and reasonable rate acceptable to both public utility and the public.

1. Registered Owner Rule Gelisan vs. Alday (154 SCRA 388 )

Facts: Bienvenido Gelisan and Roberto Espiritu entered into a contract where the former hired the truck ofGelisan for the purpose of transporting goods at the price of P18.00. It is also agreed that Espiritu shall bearand pay all losses and damages attending the carriage of the goods to be hauled by him. Benito Alday, atrucking operator, had a contract to haul the fertilizers of the Atlas Fertilizer Corporation from Pier 4, NorthHarbor, to its Warehouse in Mandaluyong. Alday met Espiritu at the gate of Pier 4 and the latter offered the useof his truck with the driver and helper at 9 centavos per bag of fertilizer. The offer was accepted by plaintiff

Alday and he instructed his checker Celso Henson to let Roberto Espiritu haul the fertilizer. Espiritu made twohauls of 200 bags of fertilizer per trip. The fertilizer was delivered to the driver and helper of Espiritu with thenecessary way bill receipts, Exhibits A and B. Espiritu, however, did not deliver the fertilizer to the AtlasFertilizer bodega at Mandaluyong.

Subsequently, plaintiff Alday saw the truck in question on Sto. Cristo St. and he notified the ManilaPolice Department, and it was impounded by the police. It was claimed by Bienvenido Gelisan. As a result ofthe impounding of the truck according to Gelisan and that for the release of the truck he paid the premium ofP300 to the surety company.

Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in the amount of

P5,397.33, to Atlas Fertilizer Corporation so that, on 12 February 1962, he (Alday) filed a complaint againstRoberto Espiritu and Bienvenido Gelisan with the CFI Manila

Bienvenido Gelisan, upon the other hand, claimed that he had no contractual relations with theplaintiff Benito Alday.

Issue: Whether Gelisan being a registered owner is responsible for damages?

Held: The Court has invariably held in several decisions that the registered owner of a public service vehicle isresponsible for damages that may arise from consequences incident to its operation or that may be caused toany of the passengers therein. The claim of the petitioner that he is not able in view of the lease contractexecuted by and between him and Roberto Espiritu which exempts him from liability to third persons, cannotbe sustained because it appears that the lease contract, adverted to, had not been approved by the PublicService Commission. It is settled in our jurisprudence that if the property covered by a franchise is transferredor leased to another without obtaining the requisite approval, the transfer is not binding upon the public andthird persons.

Bienvenido Gelisan, the registered owner, is not however without recourse. He has a right to beindemnified by Roberto Espiritu for the amount that he may be required to pay as damages for the injurycaused to Benito Alday, since the lease contract in question, although not effective against the public for nothaving been approved by the Public Service Commission, is valid and binding between the contracting parties.

Benedicto vs.CA (187 SCRA 547)

Facts: Private respondent Greenhills Wood Industries Company, Inc. a lumber manufacturing firm in DagupanCity, operates a sawmill in Maddela, Quirino.

In May 1980, private respondent bound himself to sell and deliver to Bluestar Mahogony, Inc.100,000 board feet of sawn lumber with the understanding that the initial delivery would be made on 15 May1980. To effect its first delivery, private respondent's resident manager in Maddela, Dominador Cruz,contracted Virgilio Licuden, the driver of a cargo truck to transport its sawn lumber to the consignee Blue Starin Valenzuela, Bulacan. This cargo truck was registered in the name of petitioner Ma. Luis Benedicto, theproprietor of Macoven Trucking, business enterprise engaged in hauling freight, with the main office in B.F.Homes, Paraaque.

On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, supervised the loadingof 7,690 board feet of sawn lumber with invoice value of P16, 918.00 aboard the cargo truck. The cargo neverreached Blue Star.

Issue: Whether the registered owner is liable even though the vehicle have been transferred to anotherperson?

Held: Supreme Court held that the prevailing rule on common carrier makes the registered owner liable forconsequences flowing from the operations of the common carrier, even though the specific vehicle involve mayalready have been transferred to another person. This doctrine rest upon the principle that in dealing with the

vehicles registered under the Public Service Law, the public has the right to assume that the registered owneris the actual or lawful owner thereof.

The prevailing doctrine on common carriers makes the registered owner liable for consequencesflowing from the operations of the carrier, even though the specific vehicle involved may already have beentransferred to another person. This doctrine rests upon the principle that in dealing with vehicles registeredunder the Public Service Law, the public has the right to assume that the registered owner is the actual orlawful owner thereof. It would be very difficult and often impossible as a practical matter, for members of thegeneral public to enforce the rights of action that they may have for injuries inflicted by the vehicles beingnegligently operated if they should be required to prove who the actual owner is. The registered owner is notallowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's claim,private respondent is not required to go beyond the vehicle's certificate of registration to ascertain the owner ofthe carrier.

Clearly, to permit a common carrier to escape its responsibility for the passengers or goods transportedby its proving a prior sale of the vehicle or means of transportation to an alleged vendee would be to attenuatedrastically the carrier's duty of extraordinary diligence.

2. Kabit SystemCase/s:

Santos vs. SIBUg (104 SCRA 520)

Facts: Petitioner Adolfo Santos was the owner of a passenger jeep, but he had no certificate of publicconveyance for the operation of the vehicle as a public passenger jeep. Santos then transferred his jeep to thename of Vidad so that it could be operated under the latter's certificate of public convenience. In other words,Santos became what is known as kabit operator. Vidad executed a re-transfer document presumably to beregistered it and when it was decided that the passenger jeep of Santos was to be withdrawn from kabitarrangement.

On the accident date, Abraham Sibug was bumped by the said passenger jeep.

Issue: Whether the Vidad is liable being the registered owner of the jeepney?

Held: As the jeep in question was registered in the name of Vidad, the government or any person affected bythe representation that said vehicle is registered under the name of the particular person had the right to relyon his declaration of his ownership and registration. And the registered owner or any other person for thatmatter cannot be permitted to repudiate said declaration with the objective of proving that the said registeredvehicle is owned by another person and not by the registered owner.

Santos, as the kabit, should not be allowed to defeat the levy in his vehicle and to avoid hisresponsibility as a kabit owner for he had led the public to believe that the vehicle belongs to Vidad. This is oneway of curbing the pernicious kabit system that facilitates the commissions of fraud against the traveling public.

Lita Enterprises vs. IAC (129 SCRA 464)

Facts: Spouses Nicasio Ocampo and Francisca Garcia (private respondents) purchased in installment fromthe Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxi. Since they had nofranchise to operate taxicabs, they contracted with petitioner Lita Enterprise, Inc., through its representativeManuel Concordia, for the use of the latter's certificate of public convenience for a consideration of P1, 000.00and a monthly rental of P200.00/taxicab unit. For the agreement to take effect, the cars were registered in thename of Lita Enterprises , Inc. The possession, however, remains with spouses Ocampo and Garcia whooperated and maintained the same under Acme Taxi, petitioner's trade name.

A year later, one of the taxicabs, driven by their employee, Emeterio Martin, collided with amotorcycle. Unfortunately the driver of the motorcycle, Florante Galvez died from the injuries it sustained.

Criminal case was filed against Emeterio Martin, while a civil case was filed by the heir of the victimagainst Lita Enterprises. In the decision of the lower court Lita Enterprises was held liable for damages for theamount of P25, 000.00 and P7, 000.00 for attorney's fees.

A writ of execution for the decision followed, 2 of the cars of the respondent's spouses were leviedand were sold to a public auction.

On March 1973, respondent Ocampo decided to register his taxicabs in his own name. Themanager of petitioner refused to give him the registration papers. Thus, making spouses file a complaintagainst petitioner. In the decision, Lita Enterprise was ordered to return the three certificate of registration notlevied in the prior case.

Petitioner now prays that private respondent be held liable to pay the amount they have given to theheir of Galvez.

Issue: Whether or not petitioner can recover from private respondent, knowing they are in an arrangementknown as "kabit system".

Held: "Kabit system" is defined as, when a person who has been granted a certificate of convenience allowsanother person who owns a motor vehicle to operate under such franchise for a fee. This system is notpenalized as a criminal offense but is recognized as one that is against public policy; therefore it is void andinexistent.

It is fundamental that the court will not aid either of the party to enforce an illegal contract, but willleave them both where it finds them. Upon this premise, it was flagrant error on the part of both trial andappellate courts to have accorded the parties relief from their predicament. Specifically Article 1412 statesthat:

"If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense,the following rules shall be observed: "when the fault, is on the part of both contracting parties, neither mayrecover what he has given by virtue of the contract, or demand the performance of the other's undertaking."

The principle of in pari delicto is evident in this case. "the proposition is universal that no actionarises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or torecover the property agreed to sold or delivered, or damages for its property agreed to be sold or delivered, ordamages for its violation." The parties in this case are in pari delicto, therefore no affirmative relief can begranted to them.

Teja Marketing v. IAC (148 SCRA 347)

Facts: Pedro Nale bought from Teja Marketing a motorcycle with complete accessories and a sidecar. Achattel mortgage was constituted as a security for the payment of the balance of the purchase price. Therecords of the Land Transportation Commission show that the motorcycle sold to the defendant was firstmortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one andthe same, because it was made to appear that way only as the defendant had no franchise of his own and heattached the unit to the plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff toundertake the yearly registration of the motorcycle with the Land Transportation Commission. The plaintiff,however failed to register the motorcycle on that year on the ground that the defendant failed to comply withsome requirements such as the payment of the insurance premiums and the bringing of the motorcycle to theLTC for stenciling, the plaintiff said that the defendant was hiding the motorcycle from him. Lastly, the plaintiff

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also explained that though the ownership of the motorcycle was already transferred to the defendant, thevehicle was still mortgaged with the consent of the defendant to the Rural Bank of Camaligan for the reasonthat all motorcycle purchased from the plaintiff on credit was rediscounted with the bank.

Teja Marketing made demands for the payment of the motorcycle but just the same Nale failed tocomply, thus forcing Teja Marketing to consult a lawyer and file an action for damage before the City Court ofNaga in the amount of P546.21 for attorney's fees and P100.00 for expenses of litigation. Teja Marketing alsoclaimed that as of 20 February 1978, the total account of Nale was already P2, 731, 05 as shown in astatement of account; includes not only the balance of P1, 700.00 but an additional 12% interest per annum onthe said balance from 26 January 1976 to 27 February 1978; a 2% service charge; and P546.21 representingattorney's fees. On his part, Nale did not dispute the sale and the outstanding balance of P1,700.00 stillpayable to Teja Marketing; but contends that because of this failure of Teja Marketing to comply with hisobligation to register the motorcycle, Nale suffered damages when he failed to claim any insurance indemnitywhich would amount to no less than P15,000.00 for the more than 2 times that the motorcycle figured inaccidents aside from the loss of the daily income of P15.00 as boundary fee beginning October 1976 when themotorcycle was impounded by the LTC for not being registered. The City Court rendered judgment in favor ofTeja Marketing, dismissing the counterclaim, and ordered Nale to pay Teja Marketing On appeal to the Court ofFirst Instance of Camarines Sur, the decision was affirmed in toto. Nale filed a petition for review with theIntermediate Appellate Court. On 18 July 1983, the appellate court set aside the decision under review on thebasis of doctrine of "pari delicto," and accordingly, dismissed the complaint of Teja Marketing, as well as thecounterclaim of Nale; without pronouncements as to costs. Hence, the petition for review was filed by TejaMarketing and/or Angel Jaucian.

Issue: Whether the defendant can recover damages against the plaintiff?

Held: Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabitsystem" whereby a person who has been granted a certificate of public convenience allows another personwho owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is aspecial privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot becountenanced.

The "kabit system" has been identified as one of the root causes of the prevalence of graft andcorruption in the government transportation offices. Although not out rightly penalized as a criminal offense, thekabit system is invariably recognized as being contrary to public policy and, therefore, void and in existentunder Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party toenforce an illegal contract, but will leave both where it finds then. Upon this premise it would be error to accordthe parties relief from their predicament.

3. Boundary System

Case/s:

Magboo v. Bernardo 7 SCRA 952

Facts: Urbano and Emilia Magboo are the parents of Cesar Magboo, a child of 8 years old, who lived withthem and was under their custody until his death on 24 October 1956 when he was killed in a motor vehicleaccident, the fatal vehicle being a passenger jeepney owned by Delfin Bernardo. At the time of the accident,said passenger jeepney was driven by Conrado Roque. The contract between Roque and Bernardo was thatRoque was to pay to Bernardo the sum of P8.00, which he paid to Bernardo, for privilege of driving the

jeepney, it being their agreement that whatever earnings Roque could make out of the use of the jeepney intransporting passengers from one point to another in the City of Manila would belong entirely to Roque. As aconsequence of the accident and as a result of the death of Cesar Magboo in said accident, Roque wasprosecuted for homicide thru reckless imprudence before the CFI Manila. Roque was sentenced to 6 monthsof arresto mayor, with the accessory penalties of the law; to indemnify the heirs of the deceased in, withsubsidiary imprisonment in case of insolvency, and to pay the costs. Pursuant to said judgment Roque servedhis sentence but he was not able to pay the indemnity because he was insolvent. An action was filed by thespouses Magboo against Bernardo is for enforcement of his subsidiary liability. The trial court orderedBernardo to pay the. Bernardo appealed to the Court of Appeals, which certified the case to the SupremeCourt on the ground that only questions of law are involved.

Issue: Whether or not an employer-employee relationship between the jeepney operator and the driver?

Held: An employer-employee relationship exists between a jeepney owner and a driver under a boundarysystem arrangement. The features which characterize the boundary system - namely the fact that the driverdoes not receive a fixed wage but gets only the excess of the amount of fares collected by him over theamount he pays to the jeep-owner, and the gasoline consumed by the jeep is for the amount of the driver - arenot sufficient to withdraw the relationship between them from that of employee and employer. Consequently,the jeepney owner is subsidiary liable as employer in accordance with Art.103, Revised Penal Code.

II. Contractual Effects A. Cause of Action

1. Fabre vs. CA 259 SCRA 426 (G.R. No. 111127, July 26, 1996)

Facts: Petitioner and his wife were owners of a minibus. They used the bus principally in connection with abus service for school children which they operated in Manila and was driven by Porfirio Cabil. His job was totake school children to and from the school. Sometime during November private respondent WWCF arrangedwith petitioners for the transportation of 33 members of its ministry form Manila to La Union and back inconsideration of which private respondent shall pay petitioners the stipulated amount. On the day of the trip,several members of the ministry came in late, hence, the departure was delayed. On the may to La Union, theminibus caught an accident causing damages and injury to several passengers particularly Amyline Antonio.

Apparently, the driver was unable to see a sharp curve ahead of time for him to be able to avoid the mishap. Acriminal complaint was them filed against the driver, while defendant spouses were also made jointly liable.

Issue: Whether or not defendant spouses failed to exercise diligence of a good father of the family?

Held: Court ruled that defendant spouses were negligent in the exercise of their duties as owners of theminibus for it was clearly established by evidence that said vehicle was not properly check if it was fit for thelong trip. Moreover, defendants were also negligent in the selection and supervision of their employee,particularly, the driver, who was only used to driving short distances.

2. Air France vs Carrascoso (18 SCRA 155)

Facts: Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes onMarch 30, 1958.

On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines,Inc., issued to plaintiff a "first class" round trip airplane ticket from Manila to Rome. From Manila to Bangkok,plaintiff traveled in "first class", but at Bangkok, the Manager of the defendant airline forced plaintiff to vacatethe "first class" seat that he was occupying because, in the words of the witness Ernesto G. Cuento, there wasa "white man", who, the Manager alleged, had a "better right" to the seat. When asked to vacate his "firstclass" seat, the plaintiff, as was to be expected, refused, and told defendant's Manager that his seat would betaken over his dead body; a commotion ensued, and, according to said Ernesto G. Cuento, "many of theFilipino passengers got nervous in the tourist class; when they found out that Mr. Carrascoso was having a hotdiscussion with the white man [manager], they came all across to Mr. Carrascoso and pacified Mr. Carrascosoto give his seat to the white man" and plaintiff reluctantly gave his "first class" seat in the plane after beingthreatened that he will be thrown out of the plane if he does not oblige. The captain of the plane, when askedto intervene, refused to do so.

Issue: Whether or not there was bad faith on the part of Air France, petitioner, entitling Rafael Carrascoso,

respondent for moral and exemplary damages as against the petitioner?

Held: The court held in favor of the respondent, Carrascoso.

The responsibility of an employer for the tortious act of its employees need not be essayed. It is wellsettled in law. For the willful malevolent act of petitioner's manager, petitioner, his employer, must answer.

A contract to transport passengers is quite different in kind and degree from any other contractualrelation. And this, because of the relation which an air-carrier sustains with the public. Its business is mainlywith the traveling public. It invites people to avail of the comforts and advantages it offers. The contract of aircarriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier'semployees, naturally, could give ground for an action for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier'semployees with kindness, respect, courtesy and due consideration. They are entitled to be protected againstpersonal misconduct, injurious language, indignities and abuses from such employees. So it is that any rule or

discourteous conduct on the part of employees towards a passenger gives the latter an action for damagesagainst the carrier.

The court held that the judgment of the Court of Appeals does not suffer from reversible error. CAdecision affirmed.

3. Tiu vs. Arriesgado G.R. No. 138060, September 1, 2004

Facts: At about 10:00 p.m. of March 15, 1987, the cargo truck marked "Condor Hollow Blocks and GeneralMerchandise" bearing plate number GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu City.Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck passed over a bridge, one of itsrear tires exploded. The driver, Sergio Pedrano, then parked along the right side of the national highway andremoved the damaged tire to have it vulcanized at a nearby shop, about 700 meters away. Pedrano left hishelper, Jose Mitante, Jr. to keep watch over the stalled vehicle, and instructed the latter to place a spare tiresix fathoms away behind the stalled truck to serve as a warning for oncoming vehicles. The trucks tail lightswere also left on. It was about 12:00 a.m., March 16, 1987.

At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724 driven by Virgilio TeLaspias was cruising along the national highway of Sitio Aggies, Poblacion, Compostela, Cebu. Thepassenger bus was also bound for Cebu City, and had come from Maya, Daanbantayan, Cebu. Among itspassengers were the Spouses Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the rightside of the bus, about three (3) or four (4) places from the front seat.

As the bus was approaching the bridge, Laspias saw the stalled truck, which was then about 25 metersaway. He applied the breaks and tried to swerve to the left to avoid hitting the truck. But it was too late; the busrammed into the trucks left rear. The impact damaged the right side of the bus and left several passengersinjured. Pedro Arriesgado lost consciousness and suffered a fracture in his right colles. His wife, Felisa, wasbrought to the Danao City Hospital. She was later transferred to the Southern Island Medical Center where shedied shortly thereafter.

Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage, damages andattorneys fees before the Regional Trial Court of Cebu City, Branch 20, against the petitioners, D RoughRiders bus operator William Tiu and his driver, Virgilio Te Laspias on May 27, 1987. The respondent allegedthat the passenger bus in question was cruising at a fast and high speed along the national road, and thatpetitioner Laspias did not take precautionary measures to avoid the accident.

The petitioners, for their part, filed a Third-Party Complaint against the following: respondent PhilippinePhoenix Surety and Insurance, Inc. (PPSII), petitioner Tiu's insurer; respondent Benjamin Condor, theregistered owner of the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They alleged thatpetitioner Laspias was negotiating the uphill climb along the national highway of Sitio Aggies, Poblacion,Compostela, in a moderate and normal speed. It was further alleged that the truck was parked in a slantedmanner, its rear portion almost in the middle of the highway, and that no early warning device was displayed.Petitioner Laspias promptly applied the brakes and swerved to the left to avoid hitting the truck head-on, butdespite his efforts to avoid damage to property and physical injuries on the passengers, the right side portionof the bus hit the cargo truck's left rear.

HELD: The rules which common carriers should observe as to the safety of their passengers are set forth inthe Civil Code, Articles 1733, 1755and 1756. It is undisputed that the respondent and his wife were not safelytransported to the destination agreed upon. In actions for breach of contract, only the existence of suchcontract, and the fact that the obligor, in this case the common carrier, failed to transport his passenger safelyto his destination are the matters that need to be proved. This is because under the said contract of carriage,the petitioners assumed the express obligation to transport the respondent and his wife to their destinationsafely and to observe extraordinary diligence with due regard for all circumstances. Any injury suffered by thepassengers in the course thereof is immediately attributable to the negligence of the carrier. Upon thehappening of the accident, the presumption of negligence at once arises, and it becomes the duty of acommon carrier to prove that he observed extraordinary diligence in the care of his passengers. It must bestressed that in requiring the highest possible degree of diligence from common carriers and in creating apresumption of negligence against them, the law compels them to curb the recklessness of their drivers. Whileevidence may be submitted to overcome such presumption of negligence, it must be shown that the carrierobserved the required extraordinary diligence, which means that the carrier must show the utmost diligence ofvery cautious persons as far as human care and foresight can provide, or that the accident was caused byfortuitous event. As correctly found by the trial court, petitioner Tiu failed to conclusively rebut suchpresumption. The negligence of petitioner Laspias as driver of the passenger bus is, thus, binding againstpetitioner Tiu, as the owner of the passenger bus engaged as a common carrier.

b. Extraordinary Diligence1. REQUIREMENT OF EXTRAORDINARY DILIGENCE 2.

Common Carriers, from the nature of their business and for reasons of public policy, are bound toobserve extraordinary diligence on the vigilance over goods and for the safety of the passengers transportedby them according to all the circumstances of each case. (Art. 1733, Civil Code)

Coverage Vigilance over goods (Arts. 1734-1754) a.Safety of passengers (Arts. 1755-1763) b.

Passenger - A person who has entered into a contract of carriage, express or implied, with the carrier. Theyare entitled to extraordinary diligence from the common carrier.

Persons Not Considered As Passengers One who has not yet boarded any part of a vehicle regardless of whether or not he has

purchased a ticket; a.

One who remains on a carrier for an unreasonable length of time after he has been affordedevery safe opportunity to alight;

b.

One who has boarded by fraud, stealth, or deceit; c.One who attempts to board a moving vehicle, although he has a ticket, unless the attempt be

with the knowledge and consent of the carrier; d.

One who boarded a wrong vehicle, has been properly informed of such fact, and on alighting, isinjured by the carrier; or

e.

One who rides any part of the vehicle which is unsuitable or dangerous or which he knows isnot designed or intended for passengers.

f.

RULES ON PRESUMPTION OF NEGLIGENCE:

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A. In the Carriage of Goods: In case of loss, destruction and deterioration of goods, common carriers are presumed to be at fault or

have acted negligently, unless they prove that they exercise extraordinary diligence. In the transport of goods, mere proof of delivery of goods in good order to a carrier and the subsequent

arrival of the same goods at the place of destination in bad order makes for a prima facie case againstthe carrier.

B. In the Carriage of Passengers: In case of death or injury to passengers, common carriers are presumed to be at fault or have acted

negligently, unless they prove that they exercise extraordinary diligence. .(Art. 1755,NCC) The court need not make an express finding of fault or negligence of common carriers. The law imposes

upon common carriers strict liability, as long as it is shown that there exists a relationship between thepassenger and the common carrier and that injury or death took place during the existence of thecontract.

The common carrier is not an absolute insurer against all possible risks of transportation or travel. (Pilapilvs. CA et al, 180 SCRA 546)

Doctrine of Proximate Cause - is NOT applicable to contract of carriage The injured passenger or owner of goods need not prove causation to establish his case. The

presumption arises upon the happening of the accident. (Calalas v. CA, 383 SCRA, [2002]) DEFENSES OF COMMON CARRIERS (i)General Rule: Common carriers are responsible for the loss, destruction or deterioration of the goods. Exceptions: The same is due to any of the following causes only:

Flood, storm, earthquake, lightning or other natural disaster or calamity; 1. Act of public enemy in war, whether international or civil; 2. Act or omission of the shipper or the owner of the goods; 3.The character of the goods or defects in the packing or in the containers; 4.Order or act of competent authority. (Art.1734, Civil Code) 5.

The above enumeration is exclusive . If not one of those enumerated is present, the carrier is liable.

(Belgian Chartering and Shipping, N.V. v. Phil. First Insurance Co.,Inc., 383 SCRA, 2002) The exceptions in Art 1734 must be proven whether the presumption of negligence applies. Common carriersare bound to observe extraordinary diligence in the vigilance over the goods transported by them. They arepresumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. Toovercome the presumption of negligence in case of loss, destruction or deterioration of the goods, the commoncarrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article1734 of the Civil Code enumerates the instance when the presumption of negligence does not attach. (Delsanv. Trans. American Home Insurance, August 15, 2006)

Caso Fortuito / Force Majeure a.Requisites:

Must be the proximate and only cause of the loss;1.Event independent of human will; 2.Occurrence makes it impossible for debtor to fulfill the obligation in a normal manner; 3.Obligor must be free of participation in, or aggravation of, the injury to the debtor; and 4.Impossible to foresee or impossible to avoid. 5.

Fire is not considered a natural disaster or calamity as it arises almost invariably from some act of

man or by human means unless caused by lightning or by natural disaster or calamity. It mayeven be caused by the actual fault or privity of the common carrier. (Eastern Shipping LinesInc. vs. IAC, 150 SCRA 469, [1987])

Mechanical defects are not force majeure if the same was discoverable by regular and adequateinspections. (Aquino T. & Hernando, Notes and Cases on the Law on Transportation and PublicUtilities, , R.P. 2004 ed. p.120-122)

Act of Godb.Requisites:

The common carrier must have exercised extraordinary diligence before, during and after the time of theaccident;

1.

The event must be unforeseen or even if it can be foreseen, it cannot be avoided; 2.There must have been no undue delay on the part of the common carrier; 3.The proximate cause must not be committed by the common carrier. 4.

Fortuitous event must be established to be the proximate cause of the loss. (Asia Lighterageand Shipping, Inc. v. CA, et al., 409 SCRA, [2003])

Exemption to Liability From Natural Disasters or Calamities: e natural disaster must have been the proximate cause of the loss. must have been the cause of the loss. e common carrier must have exercised due diligence to prevent or minimize the damage or loss before, during and

after the natural disaster. e common carrier has not negligently incurred delay in transporting the goods.

Acts of Public Enemy In War c.

Requisites: The act of the public enemy must have been the proximate and only cause of the loss; and 1.The common carrier must have exercised due diligence to prevent or minimize the loss before, during or

after the act causing the loss, deterioration or destruction of the goods (Art. 1739, Civil Code) 2.

Act or Omission of the Shipper or Owner of Goods d.

The act or omission of the shipper/owner must have been the sole and proximatecause of the loss. Thi s is an absolute defense.

(i)

Contributory Negligence: partial defense. (Art. 1741, Civil Code ) (ii)

Doctrine of Contributory Negligence

Failure of a person who has been exposed to injury by the fault or negligence of another, to usesuch degree of care for his safety and protection as ordinarily prudent men would useunder the circumstances. (Rakes v. Atlantic, Gulf and Pacific Co., 7 Phil. 359 [1907])

The common carrier shall be liable even if the shipper or owner merely contributed to the loss,destruction or deterioration of the goods, the proximate cause thereof being thenegligence of the common carrier, the latter shall be liable in damages, which, however,shall be equitably reduced. (Art. 1741, Civil Code)

Character of the Goods or Defects in the Packing or in the Container 5.That the loss, destruction or deterioration was caused by the character of the goods or the

faulty packing or containers. Even if the damage should be caused by the inherent defect/character of the goods, the

common carrier must exercise due diligence to forestall or lessen the loss. (Art. 1742, CivilCode)

The rule is that if the improper packing is known to the carrier or his employee or is apparentupon ordinary observation, but he nevertheless accepts the same without protest orexception notwithstanding such condition, he is not relieved of liability for the resultingdamage. (A.F. Sanchez Brokerage Inc. vs. C.A., 447 SCRA 427, [2004])

E. Order or Act of Public Authority

The common carrier is not ipso facto relieved from liability due to the loss,destruction or deterioration of goods caused by public authority.

Requisites: The common carrier must prove that the public authority has the power to issue the order for the seizure

or destruction of the goods. The common carrier must exercise extraordinary diligence to prevent or minimize the loss, destruction or

deterioration of he goods at the time of the accident.

Said public authority must have the power to issue the order (Article 1743, Civil Code) . Consequently,where the officer acts without legal process, the common carrier will be held liable. (Ganzon v. CA161, SCRA 646 [1988])

Cases:

Republic vs. Lorenzo Shipping Lines (7 February 2005)

Facts: The Republic of the Philippines signed an agreement through the Department of Health and theCooperative for American Relief Everywhere, Inc. (CARE) wherein it would acquire from the US governmentdonations of Non-Fat Dried Milk and other food products. In turn, the Philippines will transport and distributethe donated to the intended beneficiaries of the country. As a result, it entered into a contract of carriage ofgoods with the herein respondent. The latter shipped 4,868 bags of non-fat dried milk from Sept-Dec 1988.The consignee named in the bills was Abdurahman Jama, petitioner's branch supervisor in Zamboanga City.Upon reaching the port of Zamboanga, respondent's agent, Efren Ruste Shipping Agency unloaded the saidmilks. Before each delivery, Rogelio Rizada and Ismael Zamora both delivery checkers of Efren Rusterequested Abdurahman to surrender the originals of the Bill of Lading. However, the petitioner alleged that theydid not receive anything and they filed a claim against the herein respondent. The petitioner contended that therespondents failed to exercise extraordinary diligence.

Issue: Whether the respondents failed to exercise extraordinary diligence required by law?

Held The surrender of the Bill of Lading is not a condition precedent for a common carrier to be discharged ofits contractual obligation. If the surrender is not possible, acknowledgment of the delivery by signing the receiptsuffices. The herein respondent did not even bother to prevent the resignation of abdurhaman Jama to beutilized as a witness.

Central Shipping Co. vs. Insurance Co. (September 20, 200, 121 SCRA 769)

Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel, the M/V

Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against total lost under respondentsMarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts 10degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing the captain and thecrew to abandon ship. The ship sank.

Respondent alleged that the loss is due to the negligence and fault of the captain. While petitionercontends that the happening is due to monsoons which is unforeseen or casa fortuito.

Issue : Whether or not petitioner is liable for the loss of cargo?

Held: From the nature of their business and for reasons of public policy, common carriers are bound toobserve extraordinary diligence over the goods they transport, according to all the circumstances of eachcase. In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible;that is, unless they can prove that such loss, destruction or deterioration was brought about -- among others --by "flood, storm, earthquake, lightning or other natural disaster or calamity." In all other cases not specifiedunder Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have actednegligently, unless they prove that they observed extraordinary diligence.

The contention of the petitioner that the loss is due to casa fortuito exempting them from liability isuntenable. Petitioner failed to show that such natural disaster or calamity was the proximate and only cause of

the loss. Human agency must be entirely excluded from the cause of injury or loss. In other words, thedamaging effects blamed on the event or phenomenon must not have been caused, contributed to, orworsened by the presence of human participation. The defense of fortuitous event or natural disaster cannotbe successfully made when the injury could have been avoided by human precaution.

The monsoon is not the proximate cause of the sinking but is due to the improper stowage of logs.The logs were not secured by cable wires, causing the logs to shift and later on the sinking the ship. Thisshows that they did not exercise extraordinary diligence, making them liable for such loss.

Sweet Lines Inc, vs. CA (121 SCRA 769)

Facts: Herein private respondents purchased first-class tickets from petitioner at the latter's office in CebuCity. They were to board M/V Sweet Grace bound for Catbalogan, Western Samar. Instead of departing at thescheduled hour of about midnight on July 8, 1972, the vessel set sail at 3:00 am of July 9, 1972 only to betowed back to Cebu due to engine trouble, arriving there on the same day at about 4:00 pm. The vessel liftedanchor again on July 10, 1972 at around 8:00 am. Instead of docking at Catbalogan (the first port of call), thevessel proceeded direct to Tacloban. Private respondents had no recourse but to disembark and board a ferryboat to Catbalogan. Hence, the suit for breach of contract of carriage.

Issue: Whether or not the mechanical defect constitutes a fortuitous event which would exempt the carrierfrom liability.

Held: No. As found by the trial court and the Court of Appeals, there was no fortuitous event or force majeure

which prevented the vessel from fulfilling its undertaking of taking the private respondents to Catbalogan. Inthe first place, mechanical defects in the carrier are not considered a caso fortuito that exempts the carrierfrom responsibility. In the second place, even granting arguendo that the engine failure was a fortuitous event,it accounted on for the delay of departure. When the vessel finally left the port, there was no longer any forcemajeure that justified by-passing a port of call.

Eastern Shipping Lines vs. CA 234 SCRA 7

Facts: On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for deliveryvessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under a bill of lading. Theshipment was insured under plaintiff's Marine Insurance Policy. Upon arrival of the shipment in Manila onDecember 12, 1981, it was discharged unto the custody of defendant Metro Port Service, Inc. The latterexcepted to one drum, said to be in bad order, which damage was unknown to plaintiff.

On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from defendantMetro Port Service, Inc., one drum opened and without seal. On January 8 and 14, 1982, defendant AlliedBrokerage Corporation made deliveries of the shipment to the consignee's warehouse. The latter excepted toone drum which contained spillages, while the rest of the contents was adulterated/fake.

Plaintiff contended that due to the losses/damage sustained by said drum, the consignee sufferedlosses totaling P19, 032.95, due to the fault and negligen