Introduction #1

The subject will cover the civil code provisions on Transportation Law Articles 1732-
1766.

We will tackle per provision and related cases, for week 1, we will relate the
constitutional provisions with this subject, and the first three applicable cases. (check
your syllabus)

At this point i hope you have digested the cases and read the provisions both NCC and
Art. XII sections 11/16/17/18 and 19 and have an idea in what way the 3 cases are
applicable.

You need to understand the following:

●
o In Art. 1766. "In all matters not regulated by this Code, the rights an obligations
of common carriers shall be governed by A A the
Code of commerce and by Special laws. (Thus, by virtue of this, transportation
law Became part of Commercial or Mercantile Law in the bar.)
o Basic is the rule that, when the Constitution clashes with special or general law,
the Constitution prevails and controlling.
● Art. XII. Section 11. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the Philippines or to
corporations or associations organized under the laws of the Philippines, at least sixty per
centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period t han fifty years. Neither shall
any such franchise or right be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the common good so requires. The
State shall encourage equity participation in public utilities by the general public. The
participation of foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive and managing
officers of such corporation or association must be citizens of the Philippines.

o Art. XII sec 11 - Franchise to operate a public utility is exclusively granted only
to Filipino Citizen. (no distinction weather natural or naturalized) it can be
granted to Corporation or association (organized under our laws) at least 60%
owned by Filipino citizens and ALL executive and managing officers must be
Filipino.
- XPN: Foreign investors may participate in the GOVERNING BODY
in proportion to their share in the capital max of 40%
- If grantee is a natural person, he must be PH citizen, natural-born
or naturalized, and not an alien
o Take Note: Art. XVI - Sec. 11 Mass media restricted Full Filipino control both in
operation and ownership, prohibit monopoly . In Advertising companies 70%
Filipino ownership is allowed, participation in management will be pro-rata to
their share.
- If owner/grantee is individual – he must be PH citizen
- If owner/grantee is co/corp/assoc organized under PH laws:
a. Public utility – 60/40
b. Mass media – 100
c. Advertising – 70/30
● Art. XII. Section 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-owned or
controlled corporations may be created or established by special charters in the interest of
the common good and subject to the test of economic viability.

o Sec. 16 GOCC - can be created by a law or charter to operate for common

good.
- General law: Revised Corp Code; private corp proprietary
- Special law: GOCC always for common good cannot be solely
proprietary
● Art. XII. Section 17. In times of national emergency, when the public interest so requires,
the State may, during the emergency and under reasonable terms prescribed by it,
temporarily take over or direct the operation of any privately-owned public utility or business
affected with public interest.

o Sec, 17 when there is a National Emergency, when public interest requires it,
the state DURING the emergency can take over or directly operate ANY
privately owned public utility or business.
- National emergency
- Public interest so requires
- Take over co-terminus with emergency
- Terms prescribed are reasonable
- Take over is merely temporary
● Art. XII. Section 18. The State may, in the interest of national welfare or defense, establish
and operate vital industries and, upon payment of just compensation, transfer to public
ownership utilities and other private enterprises to be operated by the Government.

o Sec. 18 In the interest of national welfare or defense, the state can establish or
operate vital industries and, upon payment of just compensation (expropriate)
transfer to public ownership utilities and private enterprises can be operated by
the government.
- If take-over is permanent and not temporary, there must be
payment of just compensation
● Art. XII. Section 19. The State shall regulate or prohibit monopolies when the public interest
so requires. No combinations in restraint of trade or unfair competition shall be allowed.
 o Sec. 19 government would not allow monopoly or unfair competition to exist.

Cases:

1. Doctrine - Ownership in the creation of a corporation is different from ownership in

the application for a franchise for public utility. What is mandated in the
constitution the requisite ownership before congress grant a franchise of public
utility.
2. Doctrine -If a corporation or a person owns the installations and equipment for the
operation of a public utility is different from the one who will operate it. So there can
be a separation of ownership of the physical facilities and the ownership of a
franchise to operate it, to put it in another way, " one can own facilities for public
utility use without operating them, and thus, one can operate them under a
franchise without owning them. (the owner can lease it to the operator with a
franchise)
3. Doctrine - Issuance or creation of an exclusive franchise equates monopolistic
character and repugnant to the constitution, thus any law or Presidential Degree
allowing it must be declared void from the beginning. (Sec. 5, Art. XIV 1973
constitution vs. PD 198 Sec. 47.