PRELIMINARY

CONSIDERATIONS
ON
TRANSPORTATION LAWS
Transportation Laws in the Philippines
 Transportation laws in the Philippines whether by
land, sea or air are generally governed by the
New Civil Code ( Articles 1732-1766).

 In the absence of any provisions of the NCC on

the rights and obligations of common carriers,
the Code of Commerce and other special laws
such as the Carriage of Goods By the Sea Act
(COGSA), Salvage Law and other special laws
insofar as pertinent may be applied(G.R. No
47004, March 8, 1989).
 TRANSPORTATION LAWS and the
CONSTITUTION
 The 1987 Phil. Constitution provides, some restrictions
or limitations in the issuance of franchise to public
utilities which includes transportation industries, to
wit:

Art. XII, Sec 11. No franchise, certificate, or any other

form of authorization for the operation of a public
utility shall be granted except to citizens of the
Philippines or to corporations or associations organized
under the laws of the Philippines, at least sixty per
centum of whose capital is owned by such citizens; nor
shall such franchise, certificate, or authorization be
exclusive in character or for a longer period than fifty
years.
 Neither shall any such franchise or right be
granted except under the condition that it shall
be subject to amendment, alteration, or repeal by
the Congress when the common good so
requires. The State shall encourage equity
participation in public utilities by the general
public. The participation of foreign investors in
the governing body of any public utility
enterprise shall be limited to their proportionate
share in its capital, and all the executive and
managing officers of such corporation or
association must be citizens of the Philippines.
 CASE
 The Court held that the 1987 Constitution
reserves the ownership and operation of public
utilities exclusively to (1) Filipino citizens, or (2)
corporations, or associations at least 60 percent
of whose ‘capital’ is owned by Filipino citizens.
 “In other words, under Section 11, Article XII of
the 1987 Constitution, to own and operate a
public utility a corporation’s capital must at least
be 60 percent owned by Philippine nationals
 Further, the Court noted that the foregoing
interpretation is consistent with the intent of
the framers of the Constitution to place in the
hands of Filipino citizens the control and
management of public utilities; and, as
revealed in the deliberations of the
Constitutional Commission, "capital" refers to
the voting stock or controlling interest of a
corporation .
 RA 7042, like all its predecessor statutes,
clearly defines a “Philippine national” as a
Philippine citizen, or a domestic corporation at
least “60% of the capital stock outstanding
and entitled to vote” is owned by Philippine
citizens, noted the Court.
 ART XVI OF THE CONSTITUTION
 SECTION 11
(1). The ownership and management of mass
media shall be limited to citizens of the
Philippines, or to corporations, cooperatives
or associations, wholly –owned and managed
by such citizens.
 The advertising industry is impressed with
public interest, and shall be regulated by law
for the protection of consumers and the
promotion of the general welfare.
Only Filipino citizens or corporations or
associations at least seventy percent of the
capital of which is owned by such citizens shall
be allowed to engage in the advertising
industry.
MAY A FOREIGHN CORPORATION OWN
A PUBLIC UTILITY?
 In G.R. No. 114222, SC ruled that EDSA LRT
Consortium, under the agreement, does not and
will not become the owner of a public utility
hence, the question of its nationality is
misplaced. It is true that a foreign corporation
cannot own a public utility but in this case what
EDSA LRT Consortium will be owning are the
facilities that it will be building for the EDSA
railway project. There is no prohibition against a
foreign corporation to own facilities used for a
public utility.
 Further, it cannot be said that EDSA LRT
Consortium will be the one operating the
public utility for it will be DOTC that will
operate the railway transit. DOTC will be the
one exacting fees from the people for the use
of the railway and from the proceeds, it shall
be paying the rent due to EDSA LRT
Consortium. All that EDSA LRT Consortium has
to do is to build the facilities and receive rent
from the use thereof by the government for
25 years – it will not operate the railway
transit.
 Although EDSA LRT Consortium is a
corporation formed for the purpose of
building a public utility it does not
automatically mean that it is operating a
public utility. The moment for determining the
requisite Filipino nationality is when the entity
applies for a franchise, certificate or any other
form of authorization for that purpose.
 CONTRACT OF TRANSPORTATION
 There is a contract of transportation when a
person obligates himself to transport persons
or property from one place to another for a
consideration.
 The contract may involve carriage of
passengers or carriage of goods.
 The person who obligates himself to transport
the goods or passengers may be a common
carrier or a private carrier.
 The parties to a contract of transportation
would depend on whether it is for carriage of
goods or carriage of passengers.
 In Carriage of Passengers, the parties are the
common carrier and the passenger.
Passenger is defined as one who travels in
a public conveyance by virtue of a contract,
express or implied, with the carrier as to
the payment of fare or that which is accepted as
an equivalent thereof( Jesus Vda De Nuenca et al
vs. Manila Railroad Company, GR NO. 31731).
 Gratuitous or Reduced Fare
 A passenger is still considered as such (
passenger) even if he is being carried
gratuitously or under reduced fare in relation
to the rule in Article 1758 of the NCC which
provides that when a passenger is carried
gratuitously, a stipulation limiting the common
carrier’s liability for negligence is valid, but not
for willful acts or gross negligence.
 The parties in a CARRIAGE OF GOODS are the
shipper and the carrier.
 The shipper is the person who delivers the
goods to the carrier for transportation.
 The shipper is the person who pays the
consideration or on whose behalf payment is
made.
 Consignee is the person to whom the goods
are to be delivered. The consignee may be be
the shipper himself as in the case where the
 goods will be delivered to one of the branch
offices of the shipper.
 The consignee may also be a third person who
is not actually a party of the contract.
 Nevertheless, there are instances when the
third –party consignee is bound by the
agreement between the shipper and the
carrier i.e. Sc ruled that the consignee may be
deemed to be bound by the terms and the
conditions of the bill of lading when it is
established that he accepted the same and is
trying to enforce the agreement(Everett
Steamship Corp vs CA, et al, GR No. 122494,
Oct. 8, 1998).
 PERFECTION
 With respect to carriage of goods, there may be
consensual contract to carry goods whereby the
carrier agrees to accept and transport goods at
some future date.
 However, by the act of delivery of the goods, that
is “ when the goods( are) unconditionally placed
in the possession and control of the carrier, and
upon their receipt by the carrier for
transportation, the contract of carriage is
perfected(Mauro Ganzon vs. CA, et al, GR NoL-
48757, May 30, 1988).”
 cases
• An action for damages may be sustained for
breach of contract to carry . Even if no tickets
were issued, a verbal contract to carry is
already a binding consensual contract.
• In the case of British Airways, Inc vs. The Hon.
Court of Appeals, the petitioner repeatedly
failed to transport contract workers bound for
Jeddah, Saudi Arabia although the costs of
airfare tickets were already paid to the
petitioner.
 Confirmed bookings were cancelled without
prior notice. Hence, the petitioner was made
liable for its breach of obligation to transport
the contract workers.

 For aircraft, there is a perfected contract to

carry passengers even if no tickets have been
issued to said passengers so long as there was
already a meeting of minds with respect to
the subject matter and the consideration( GR
No. 92288)
 On the other hand, there is a perfected
contract of carriage between a passenger and
an airline if it can be established that the
passenger had checked in at the departure
counter, passed through customs and
immigration, boarded the shuttle bus and
proceeded to the ramp of the aircraft and that
his baggage had already ben loaded in the
aircraft to be flown with the passenger to his
destination ( Korean Airlines,Co Ltd vs. CA, GR
NO.114061).
 With respect to buses, jeepneys or street
cars, the Supreme Court ruled that once a
public utility bus ( or jeepney) stops, it is in
effect making a continuous offer to bus riders.
Hence it is the duty of the drivers to stop
their conveyances for a reasonable length of
time, in order to afford passengers an
opportunity to board and enter, and they are
liable for injuries suffered by boarding
passengers resulting from the sudden starting
up of the carrier.
Liability of the carrier is already based on
contract. It follows that the passenger is
deemed to be accepting the offer if he is
already attempting to board the conveyances
and the contract of carriage is perfected from
that point( Dangwa Transportation Co, Inc. vs
CA)
 With respect to TRAINS, a person who wants
to board a train in a railway station must
purchase a ticket and must present himself at
the proper place and in a proper manner for
transportation. Such person must have a bon
fide intention to use the facilities of the
carrier, possess sufficient fare with which to
pay for his passage, and present himself to the
carrier for transportation in the place and
manner provided. If he does not do so, he will
not be considered a passenger. (Jesusa Vda de
Nuenca vs The Manila Railroad Company).
 There was a breach of contract of carriage in
Light Rail Transit Authority (LRTA) et,al vs.
Marjorie Natividad, et al, when a certain
Nicanor Natividad died after he fell on the LRT
tracks and was struck by a moving train which
was coming in at the exact moment that Mr.
Natividad fell from the flatform.
Mr. Natividad was treated as a passenger
because he entered the LRT station after
having purchased a token and he fell while he
was on the flatform waiting for a train. Thus,
Mr. Natividad was in the place designated for
boarding the train with the intention of riding
the oncoming train.
 COMMON CARRIERS
Article 1732 of the CC provides the definition
of common carrier, viz.:
Article 1732: Common carriers are persons,
corporations, firms or associations engaged in
the business of carrying or transporting
passengers or goods or both, by land, water,
or air, for compensation, offering their
services to the public.
 CONCEPT
Common carriers are:
(1) Persons, corporations, firms or associations;
(2)Engaged in the business of carrying or
transporting;
(3) Passengers or goods or both;
(4) By land, water, or air;
(5) For compensation;
(6) Offering their services to the public .
 PUBLIC SERVICE
 The concept of “common carrier” under
Article 1732 may be seen to coincide neatly
with the notion of “public service” under the
Public Service Act as amended which at least
partially supplements the law on common
carrier set forth in the CC.
 Public service includes every persons that now
or hereafter may own, operate, manage or
control in the Philippines, for hire or
compensation, with general or limited
clientele whether permanent, occasional or
accidental, and done for the general business,
purposes, any common carrier, railroad, street
railway, traction railway, subway motor
vehicle, either for freight or passenger, or
both, with or without fixed route and
whatever may be its classification, freight,
traction railway, subway motor vehicle, either
for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any
class, express service, steamboat, or
steamship line, pontines, ferries and water
craft, engaged in the transportation of
passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water
supply and power petroleum, sewerage
system, wire or wireless communication s
systems, wire or wireless broadcasting stations
and other similar public services…”
Travel Agent Not a Common Carrier
A travel agent is not a common carrier since he
does not undertake to transport a person from
one place to another, but simply to make travel
arrangements in their behalf, which includes the
procuring of tickets and facilitating travel permits
or visas as well as booking for to. A travel agent
is bound to observe the due diligence of a good
father of a family and not the extraordinary
diligence imposed on common carriers.
(Crisostomo vs CA, 409 SCRA 528 (2003))
 TEST
( First Phil Industrial vs CA, 300 SCRA 661, 1998)

The test for determining whether a party is a

common carrier of goods is that:
1. He must be engaged in the business of
carrying goods for others as a public
employment, and must hold himself out as
ready to engage in transportation of goods for
person generally as a business and not as a
casual occupation;
2. He must undertake to carry goods of the kind
to which his business is confined;
3. He must undertake to carry by the method by
which his business is conducted and over his
established roads; and
4. The transportation must be for hire.
 CASE
Hence, one engaged in the business of
transporting petroleum products from
refineries via pipeline is a common carrier. It is
engaged in the business of transporting or
carrying goods, i.e., petroleum products, for
hire as a public employment.
It undertakes to carry for all persons
indifferently, that is, to all persons who choose
to employ its services, and transports the
goods by land and for compensation.
The fact that it has a limited clientele does
not exclude it from the definition of a
common carrier [First Phil. Industrial v. CA
(1998)]
 case
In Sps Cruz v Sun Holidays Inc. , SC ruled that
the operator of a beach resort that accepts
clients by virtue of a tour package contracts
that included transportation to and from the
Resort and the point of departure is
considered as common carrier.
SC observed that its ferry services are so
intertwined with its main business as to be
properly considered ancillary thereto.
 ANCILLARY BUSINESS
Article 1732 makes no distinction between
whose principal business activity is the
carrying of persons or goods or both, and one
who does such carrying only as an ancillary (
sideline) activity( De Guzman v Court of
Appeals)
Article 1732 makes no distinction:

(1) Between one whose principal business

activity is the carrying of persons or goods or
both, and one who does such carrying only as
an ancillary activity [Fabre v. CA (1996)];
(2). Between a person or enterprise offering
transportation service on a regular or
scheduled basis and one offering such service
on an occasional, episodic, or unscheduled
basis [Loadstar Shipping Co., Inc. v. CA (1999)];

(3). Between a carrier offering its services to

the general public and who offers services or
solicits business only from a narrow segment
of the general population [De Guzman v. CA
(1988)]
 LIMITED CLIENTELE
Although the clientele is limited, the regularity
of the activities of a carrier may indicate that
the same is a common carrier.
Hence:
1. In one case, a customs broker and a
warehouseman, was declared a common
carrier although she does indiscriminately
hold her services out to the public but offers
the same to selected parties with whom she
may contract in the conduct of her business.
 CASE
[Teodoro v. Nicolas (2012)].
The true test for a common carrier is not the
quantity or extent of the business actually
transacted, or the number and character of
the conveyances used in the activity, but
whether the undertaking is a part of the
activity engaged in by the carrier that he has
held out to the general public as his business
or occupation.
• If the undertaking is a single transaction, not a
part of the general business or occupation
engaged in, as advertised and held out to the
general public, the individual or the entity
rendering such service is a private, not a common
carrier.
• The question must be determined by the
character of the business actually carried on by
the carrier, not by any secret intention or mental
reservation it may entertain or assert when
charged with the duties and obligations that the
law imposes.
2. In Phil Am. Gen. Insurance Company et al vs.
PKS Shipping Company, respondent PKS
transported the 75,000 bags of cement of
petitioner DUMC in a barge. The bags of
cement sank together with the barge when
the latter was being towed by a tug boat. SC
declared that PKS was a common carrier
because it was engaged in the business of
carrying goods for others for a fee.
The irregularity of its activities in the area
indicates more than just a casual activity on its
part. Neither can the concept of a common
carrier change merely because individual
contracts are executed or entered into with
the patrons of the carrier. PKS was declared a
common carrier although it had a limited
clientele.
 Case
A customs broker whose services were
engaged for the release and withdrawal of the
cargoes from the pier and their subsequent
delivery to the consignee’s warehouse and the
owner of the delivery truck whom the
customs broker contracted to transport the
cargoes to the warehouse are both common
carriers. The latter is considered a common
carrier in the absence of indication that it
solely and exclusively rendered services to the
customs broker. Thus, when the truck failed to
deliver one of the cargoes, both the broker and
owner of the truck are liable. Being both common
carriers, they are mandated from the nature of their
business and for reasons of public policy, to observe
the extraordinary diligence in the vigilance over the
goods transported by them according to all the
circumstances of such case. Thus, in case of loss of
the goods, the common carrier is presumed to have
been at fault or to have acted negligently.
(Loadmasters Customs Services, Inc. vs. Glodel
Brokerage Corporation, GR No. 179446, January 10,
2011)
 Persons engaged in the business of transporting
students from their respective residences to their
school and back are considered common carrier.
Despite catering to a limited clientele, they operated
as a common carrier because they held themselves
out as a ready transportation indiscriminately to the
students of a particular school living within or near
where they operated the service and for a fee.
(Spouses Perena vs Spouses Nicolas, GR No. 157917,
August 29, 2012 )
COMMON CARRIER DISTINGUISHED FROM
PRIVATE CARRIER
COMMON CARRIER PRIVATE CARRIER
As to availability
Holds himself out in common, that Agrees in some special case with
is, to all persons who choose to some private individual to carry for
employ him, as ready to carry for hire
hire
Binding effect
Bound to carry all who offer and Not bound to carry for any reason,
tender reasonable compensation such goods as it is accustomed to
for carrying them carry, unless it enters into a special
agreement to do so
Diligence required
Extraordinary diligence Ordinary diligence
COMMON CARRIER PRIVATE CARRIER
Governing law
Civil Code; Code of Commerce and Law on obligations and contracts
special laws, if not regulated by the
Civil Code (Article 1766); law of the
country to which the goods are to be
transported, if regarding liability for
loss, destruction, or deterioration of
goods

Regulation

A public service, therefore subject to Not subject to regulation as a

regulation common carrier
 Rules with respect to applicable laws:
(a). Coastwise Shipping
1. NCC( Articles 1732-1766)-primary law
2. Code of Commerce – governs suppletorily
in the absence of CC provisions.
(b) Carriage from Foreign Ports to Phil Ports
1. NCC-primary law
2. Code of Commerce- all matters not regulated
by the CC
3. Carriage of Goods by Sea Act- suppletory to the
CC.
 (c) Carriage from Phil Ports to Foreign Ports
The laws of the country to which the goods are to
be transported.( Art 1753, CC).
(d) Overland Transportation
1. Civil Code-primary law
2. Code of Commerce- suppletorily
(e) Air Transportation- 1. CC ; 2. Code of Commerce
and 3. for International Carriage- Convention for
the Unification of Certain Rules Relating to the
International Carriage by Air or “WARSAW
CONVENTION”
 cases
It is not necessary that the carrier be issued a
certificate of public convenience [Loadstar
Shipping Co., Inc. v. CA (1999)].
• With respect to the issuance of a certificate of
public convenience, the issue of kabit system
arises.
KABIT SYSTEM It is an arrangement whereby a
person who has been granted a certificate of
convenience allows another person who owns
motor vehicles to operate under such franchise
for a fee (Lita Enterprises, Inc. v. IAC ( 1984)]
The kabit system is invariably recognized as
being contrary to public policy and therefore
void and inexistent under Article 1409. Thus,
for the safety of passengers and the public,
the registered owner of the vehicle is not
allowed to prove that another person has
become the owner so that he may be thereby
relieved of responsibility [Lim v. CA (2002)].
Ratio: One of the primary factors considered in
the granting of a certificate of public
convenience for the business of public
transportation is the financial capacity of the
holder of the license, so that liabilities arising
from accidents may be duly compensated. The
kabit system renders illusory such purpose
and, worse, may still be availed of by the
grantee to escape civil liability caused by a
negligent use of
a vehicle owned by another and operated
under his license. If a registered owner is
allowed to escape liability by proving who the
supposed owner of the vehicle is, it would be
easy for him to transfer the subject vehicle to
another who possesses no property with
which to respond financially for the damage
done [Dizon v. Octavio (1955)].
 CASE
Certificate of public convenience is not a
requisite for the incurring of liability under the
CC provisions governing common carriers,
which liability arises from the moment a
person or firm acts as a common carrier,
without regard to whether or not such carrier
has also complied with the requirements of
the applicable regulatory statute and
implementing regulations and has been
granted certificate of public convenience or
other franchise( Loadstar Shipping vs CA).
 REGISTRATIONS LAWS
Read Sections 5, 14, 15, 16, 17, and 18 of RA
No. 4136 or “The land Transportation and
Traffic Code.”
 REGISTERED OWNER RULE
“A person who is the registered owner of a
vehicle is liable for any damage caused by the
negligent operation of the vehicle although
the same was already sold or conveyed to
another person at the time of the accident.”
Liability of the Registered Owner of Motor
Vehicle[ Villanueva v Domingo, 438 SCRA
485(2004)]
Registered owner of any vehicle is directly and
primarily responsible to the public and third
persons while it is being operated; and
whether the driver is authorized or not by the
actual owner is irrelevant to determining the
liability of the registered owner whom the law
holds primarily and directly responsible for
any accident, injury or death caused by the
operation of the vehicle in the streets and
highways. The main purpose of vehicle
registration is the easy identification of the
owner who can be held responsible for any
accident, damage or injury caused by the
vehicle.
 Pari delicto rule
 Persons who are parties to the “kabit” system
cannot invoke the same as against each other
either to enforce their illegal agreement or to
invoke the same to escape liability.
 No action arises out of an illicit bargain.
 BOUNDARY SYSTEM
An arrangement in which the drivers( and
their conductors) of jeepneys or busses, for
the use thereof, within a specified number of
hours, with the gasoline burned for their
account, give to the owner-operator a fixed
amount of the daily earnings derived from
their operation, their day’s earnings being the
excess over the amount paid for the gasoline
and the use of the vehicles.
 The jeepney owner/operator-driver
relationship under the boundary system is
that of ER-EE and not lessor-lessee. ( National
Labor Union vs. Dinglasan, 98 Phil 649).
 Under this system, the owner/operator
exercises control and supervision over the
driver. The management of the business is
still in the hands of the owner/operator, who,
being the holder of the certificate of public
convenience, must see to it that the driver
follows the route prescribed by the franchising
and regulatory authority, and the rules
promulgated with regard to the business
operations( Oscar Villamaria Jr vs. CA and
Jerry Bustamante, GR No. 165881, April 19,
2006).