1

STIPULATIONS LIMITING LIABILITY (1757, 1758,1759,1760)

For Both Part VI. And Part VIII.

*Note: the relevant ruling is the same for both since it refers to Article 1759 on the liability of
common carriers re: act of employees.

MARAAN VS. PEREZ

G.R. No. L-22272, June 26, 1967
FACTS:
Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and
operated by Pascual Perez when he was stabbed and killed by the driver, Simeon Valenzuela.
Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas.
Found guilty, he was sentenced to suffer imprisonment and to indemnify the heirs of the
deceased in the sum of P6,000. Appeal from said conviction was taken to the Court of Appeals.
On December 6 1961, while appeal was pending i n the Court of Appeals, Antonia
Maraan, Rogelio's mother, filed an action in the Court of First Instance of Batangas to recover
damages from Perez and Valenzuela.
Maraans claim: Antonia Maraan alleges that Perez and Valenzuela are both liable for the
death of her son. Specificall y for Perez, his liability arises from breach of contract of carriage.
Perezs defense: Perez claimed that the death was a caso fortuito for which the carrier was not
liable. He relies solel y on the ruling enunciated in Gillaco v. Manila Railroad Co., 97 Phil. 884, that
the carrier is under no absolute liability for assaults of its employees upon the passengers.
The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages
against Perez. The claim against Valenzuela was dismissed. From this ruling, both plaintiff and
Perez appealed to this Court, the former asking for more damages and the latter insisting on
non-liability.
Subsequently, the Court of Appeals affirmed the judgment of conviction earlier
mentioned.
ISSUE:
W/N Perez is to be held liable.
RULING:
The attendant facts and controlling law of the Gillaco case case and the one at bar are
very different. In the Gillaco case, the passenger was killed outside the scope and the course of
duty of the guilty employee.
Now here, the killing was perpetrated by the driver of the very cab transporting the
passenger, in whose hands the carrier had entrusted the dut y of executing the contract of
carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place in
the course of dut y of the guilty employee and when the employee was acting within the scope
of his duties.
Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889
which, unlike the present Civil Code, did not impose upon common carriers absolute liability for
the safety of passengers against willful assaults or negligent acts committed by their employees.
The death of the passenger in the Gillaco case was truly a fortuitous event which exempt ed the
carrier from liability.
Unlike the old Civil Code, the new Civil Code of the Philippines expressl y makes the
common carrier liable for intentional assaults committed by its employees upon its passengers,
by the wording of Art. 1759 which categorically states that
Common carriers are liable for the death o f or injuries to passengers through the
negligence or willful acts o f the former's employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.

2
The Civil Code provisions on the subject of Common Carriers are new and were taken
from Anglo-American Law.
There, the basis of the carrier's liability for assaults on passengers committed by its drivers
rests either on:
(1) the doctrine of respondeat superior; or
(2) the principle that it is the carrier's implied duty to transport the passenger safel y.
Under the first, which is the minority view, the carrier is liable only when the act of the
employee is within the scope of his authority and dut y. It is not sufficient that the act be within
the course of emplo yment only.
Under the second view, upheld by the majority and also by the later cases, it is enough
that the assault happens within the course of the employee's duty. It is no defense for the carrier
that the act was done in excess of authority or in disobedience of the carrier's orders. The carrier's
liability here is absolute in the sense that it practically secures the passengers from assaults
committed by its own employees.
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the
rule based on the second view.
At least three very cogent reasons underlie this rule.
(1) the special undertaking of the carri er requires that it furnish its passenger that full
measure of protection afforded by the exercise of the high degree of care prescribed by the
law, inter alia from violence and insults at the hands of strangers and other passengers, but
above all, from the acts of the carrier's own servants charged with the passenger's safety;
(2) said liability of the carrier for the servant's violation of duty to passengers, is the result
of the formers confiding in the servant's hands the performance of his contract to safely
transport the passenger, delegating therewith the duty of protecting the passenger with the
utmost care prescribed by law; and
(3) as between the carrier and the passenger, the former must bear the risk of wrongful
acts or negligence of the carrier's employees against passengers, since it, and not the
passengers, has power to select and remove them.
Accordingl y, it is the carrier's strict obligation to select its drivers and similar employees
with due regard not only to their technical competence and physical ability, but also, no less
important, to their total personality, including their patterns of behavior, moral fibers, and social
attitude.
Applying this stringent norm to the facts in this case, therefore, the lower court rightly
adjudged the defendant carrier liable pursuant to Art. 1759 of the Civil Code.

EFFECT of CONTRIBUTORY NEGLIGENCE OF A PASSENGER (1761,1762)

LARA v. VALENCIA

FACTS: (Davao case)

Lara was an inspector for the Bureau of Forestry. The defendant is engaged in the business
of exporting logs from his lumber concession in Cotabato. Lara went to said concession
upon instructions of his chief to classify the logs of defendant which were about to be
loaded on a ship anchored in the port of Parang. The work of Lara lasted for six d ays during
which he contracted malaria fever. On a later date, Lara who then in a hurry to return to
Davao asked defendant if he could if he could take him in his pick -up as there was then no
other means of transportation, to which defendant agree, and i n that same morning the
pick-up left Parang bound for Davao taking along six passengers, including Lara.

The pi ck-up has a front seat where the driver and two passengers can be accommodated
and the back has a steel flooring enclosed with a steel walling of 16 to 17 inches tall on the
sides and with a 19 inches tall walling at the back. In the middle Lara sat on a bag. Before
leaving, Parang, defendant invited Lara to sit with him on the front seat but Lara declined.
It was their understanding that upon reaching barrio Samoay, Cotabato, the passengers
would alight and take a passenger bus bound for Davao, but when they arrived at that
place, only one alighted and the other passengers requested defendant to allow them to
ride with him up to Davao because there was then no available bus that they could take in
going to that place. Defendant again accommodated the passengers.

When they continued their trip, the sitting arrangement of the passengers remained the
same, Lara being seated on a bag in the middle with his arms on a suitcase and his head
covered by a jacket. Upon reaching Km. 96, barrio Catidtuan, Lara accidentally fell from
the pick-up and as a result he suffered serious injuries. Valencia stopped the pick -up to see
what happened to Lara. He sought the help of the residents of that place and applied
water to Lara but to no avail. They brought Lara to the nearest place where they could find
a doctor and not having found any they took him to St. Josephs clinic of Kidapwan. But
when Lara arrived, he was already dead. From there they proceeded to Davao City and
immediately notified the local authorities.

Lara contented: Valencia is liable for failure to exercise extraordinary diligence.

Valencia argued: what happened is beyond Val encias co ntrol. Lara is asleep when he fell
from the pick-up.

ISSUE: WON Valencia is liable for the death of Lara. NO.

RULING: There is every reason to believe that the unfortunate happening was only due to an
unforeseen accident accused by the fact that at the t ime the deceased was half asleep and
must have fallen from the pick-up when it ran into some stones causing it to jerk considering that
the road was then bumpy, rough and full of stones.
The finding of the trial court that the pick-up was running at more than 40 kilometers per hour is
not supported by the evidence. This is a mere surmise made by the trial court considering the
time the pick-up left barrio Samoay and the time the accident occured in relation to the
distance covered by the pi ck-up. And even if this is correct, still we say that such speed is not
unreasonabl e considering that they were traveling on a national road and the traffic then was
not heavy. We may rather attribute the incident to lack of care on the part of the deceased
considering that the pick-up was open and he was then in a crouching position. Indeed, the law
provides that "A passenger must observe the diligence of a good father of a family to avoid
injury to himself" (Article 1761, new Civil Code), which means that if the injury t o the passenger
has been proximately caused by his own negligence, the carrier cannot be held liable.
All things considered, we are persuaded to conclude that the accident occurred not due to the
negligence of defendant but to circumstances beyond his control and so he should be exempt
from liability.

4
CONTRIBUTORY NEGLIGENCE, EFFECT

CLEMENTE BRINAS V PPL OF THE PHILIPPINES AND CA

G.R. No. L-30309 November 25, 1983
FACTS
On January 6, 1957, 55-year old Martina Bool and her 3 -year-old granddaughter Esmelita
Gesmundo were among the passengers of Train No. 522 operated by Manila Railroad Company
from Tagkawayan, Quezon station bound for Lucasan, Tiaong in Quezon. On the way t o
Lucasan, in Hondagua, the train was taken over by Milan -the engine man, Brinas, the
conductor and Buencamino as assistant conductor.
Upon approaching Barrio Lagalag in Tiaong at about 8:00 p.m. of that same night, the
train slowed down and the conductor shouted 'Lusacan', 'Lusacan'. Thereupon, Martina walked
towards the left door facing Tiaong carrying with her Esmelita on one hand and their baggages
on the other. As they were were near the door, the train suddenly picked up speed. As a result
the old woman and the child stumbled and they were seen no more. It took three minutes more
before the train stopped at the next barrio, Lusacan, and the victims were not among the
passengers who disembarked thereat.
A day after, the corpses of Martina and Esmelita were found along the railroad tracks in
Barrio Lagalag with the head crushed and limbs severed. Autopsy reports revealed that both
died instantaneousl y from shock as a result of being ran over by the wheel of the train and
collision with steel objects.
A criminal case was filed against MRR emplo yees for their failure to provide lamps and
lights; and failure to take necessary precautions to avoid accidents. Brinas, the conductor was
found guilty beyond reasonable doubt for double homicide thru reckless imprudence. The other
accused were acquitted.
During the pendency of the criminal case, the heirs of the deceased filed a separate
civil action against MRR to recover damages resulting from the incident.
The Complaint
As found by the CA, It is undisputed that the victims were on board the second coach
where the Brinas was assigned as conductor and that when the train slackened its speed and
the conductor shouted "Lusacan, Lusacan", they stood up and proceeded to the nearest exit. It
is also undisputed that the train unexpectedl y resumed its regular speed and as a result "the old
woman and the child stumbled and they were seen no more.
It was negligence on the conductor's part to announce the next flag stop when said
stop was still a full three minutes ahead. It was found that Brina's announcement was premature
and erroneous.
Defense of Brinas
Brinas argues that it was negligence per se for Martina Bool to go to the door of the
coach while the train was still in motion and that it was this negl igence that was the proximate
cause of their deaths.
ISSUES
1.
2.

Were the deceased passengers contributorily negligent? YES

If yes, will such contributory negligence of victims extinguish liability of an employee
of a common CARRIER? NO

RULING
The Court agrees with CA that the negligence of Brinas in prematurely and erroneousl y
announcing the next flag stop was the proximate cause of the deaths of Martina Bool and
Emelita Gesmundo. This announcem ent prompted the victims to stand and proceed to the

5
nearest exit. Without said announcement, the victims would have been safel y seated in their
respective seats when the train jerked as it picked up speed. The connection between the
premature and erroneous announcem ent of Brinas and the deaths of the victims is direct and
natural, unbroken by any intervening efficient causes. Any negligence of the victims was at most
contributory and does not exculpate the accused from criminal liability .
As this Court held in Tucker v. Milan, CA G.R. No. 7059-R, June 3, 1953: 'The proximate
cause of the injury is not necessarily the immediate cause of, or the cause nearest in time to, the
injury. It is only when the causes are independent of ea ch other that the nearest is to be charged
with the disaster. So long as there is a natural, direct and continuous sequence between the
negligent act the injury (sic) that it can reasonably be said that but for the act the injury could
not have occurred, such negligent act is the proximate cause of the injury, and whoever is
responsible therefore is liable f or damages resulting therefrom.One who negligently creates a
dangerous condition cannot escap e liability for the natural and probable consequences
thereof, although the act of a third person, or an act of God f or which he is not responsible
intervenes to precipitate the loss.
Important to Note: It is a matter of common knowledge and experi ence about common carriers
like trains and buses that before reaching a station or flagstop they slow down and the
conductor announces the name of the place. It is also a matter of common experience that as
the train or bus slackens its speed, some passengers usuall y stand and pro ceed to the nearest
exit, ready to disembark as the train or bus comes to a full stop. This is especially true of a train
because passengers feel that if the train resumes its run before they are abl e to disembark; there
is no way to stop it as a bus may be stopped.
Other Issue: On alleged error of C A to include in the judgment of Brinas criminal case, paym ent
of indemnity with subsidiary imprisonment in case of insolvency after the heirs of victims
commenced a separate civil action against MRR. The source of the obligation sought to be
enforced in the separate civil action is culpa contractual, not an act or omission punishable by
law. We also note from Brinas arguments and from the title of the civil case that the party
defendant is the Manila Railroad Company and not petitioner -appellant Brias Culpa
contractual and an act or omission punishable by law are two distinct sources of oblig ation.

ISAAC VS AMMEN

FACTS:
1. BUS - A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant
2. Plaintiff boarded their bus as a passenger paying the required fare from Ligao, Albay bound
for Pili, Camarines Sur, but before reaching his destination, the bus collided with a motor vehicle
of the pick-up type coming from the opposite direction, as a result of which plaintiff's left arm
was completely severed and the severed portion fell inside the bus.
3. Plaintiff was rushed to a hospital in Iriga, Camarines Sur where he was given blood transfusion
to save his life. After four days, he was transferred to another hospital in Tabaco, Albay, where
he under went treatment for three months. He was moved later to the Orthopedic Hospital
where he was operat ed on and stayed there for another two months. For these services, he
incurred expenses amounting to P623.40, excluding medical fees which were paid by
defendant.
3. His left arm was completely sev ered.
4. Plaintiff chose to hold defendant liable to its contractual obligation.
CARRIER:
5. injury suffered by plaintiff was due entirel y to the fault or negli gence of the driver of the pickup car which collided with the bus driven by its driver and to the contributory negligence of
plaintiff himsel f.
6. Defendant further claims that the accident which resulted in the injury of plaintiff is one which
defendant could not foresee or, though foreseen, was inevitable.
RTC = collision occurred due to the negligence of the driver of the pick -up car and not to that of
the driver of the bus it appearing that the latter did everything he could to avoid the same but
that notwithstanding his efforts, he was not able to avoid it.
ISSUE: WON there is contributory negligence on the part of plaintiff? YES. kay gigawas nia iang
left arm.
HELD:
1. The bus was running at a moderate speed because it had just stopped at the sch ool zone of
Matacong, Polangui, Albay. The pick-up car was at full speed and was running outside of its
proper lane. The driver of the bus, upon seeing the manner in which the pick -up was then
running, swerved the bus to the very extreme right of the road until its front and rear wheels have
gone over the pile of stones or gravel situated on the rampart of the road.
2. Said driver could not move the bus further without endangering the safety of his passengers.
Despite all these efforts, the rear left side w as hit.
3. A circumstances which miliates against the stand of appellant is the fact borne out by the
evidence that when he boarded the bus in question, he seated himself on the left side thereof

7
resting his left arm on the window sill but with his left el bow outside the window, this being his
position in the bus when the collision took place.
4. It is for this reason that the collision resulted in the severance of said left arm from the body of
appellant thus doing him a great damage.
5. It is therefore apparent that appellant is guilty of contributory negligence. Had he not placed
his left arm on the window sill with a portion thereof protruding outside, perhaps the injury would
have been avoided as is the case with the other passenger. It is to be noted that appellant was
the only victim of the collision.
6. Although contributory negligence cannot relieve the carrier but can only reduce its liability
(Article 1762), this circumstance which further militates against plaintiffs position.
7. It is a prevailing rule that it is negligence per se for passengers on a railroad to protrude any
part of his body and that no recovery can be had for injury.
8. NOTE: IF A CERRIERS EMPLOYEE IS CONFRONTED WITH A SUDDEN EMERGENC Y, he is not held
the same degree of care he would otherwise be required in the absence of such em ergency.

PNR v. CA
FACTS: The facts show that on September 10, 1972, at about 9:00 o'clock in the evening,
Winifredo Tupang, husband of plaintiff Rosario Tupang, boarded 'Train No. 516 of appellant at
Libmanan, Camarines Sur, as a paying passenger bound for Manila. Due to some mechani cal
defect, the train stopped at Sipocot, Camarines Sur, for repairs, taking some two hours before
the train could resume its trip to Manila. Unfortunatel y, upon passing Iyam Bridge at Lucena,
Quezon, Winifredo Tupang fell off the train resulting in hi s death.The train did not stop despite the
alarm raised by the other passengers that somebody fell from the train. Instead, the train
conductor Perfecto Abrazado, called the station agent at Candelaria, Quezon, and requested
for verification of the information. Police authorities of Lucena City were dispatched to the Iyam
Bridge where they found the lifeless body of Winifredo Tupang.
Contention of Tupang: PNR did not exercise the utmost diligence required by law as common
carrier.
Argument of PNR: It is not liable invoking the doctrine of state immunity and contributory
negligence, alleging that Tupang chose to sit on the flatform, hence should have tightly hold the
bar.
ISSUE: WON PNR is liable for damages for the death of Winifredo Tupang. YES.
RULING: A passenger is guilty of contributory negligence where he chose to ride on the open
platform of a train and failed to hold tightly on the vertical grab bar. Moral and exemplary
damages is not due in this case.
But while the petitioner failed to exercise extraordinary diligence as required by law, it appears
that the deceased was chargeable with contributory negligence. Since he opted to sit on the
platform between the coaches of the train, he should have held tightly and tenaciously on the
upright metal bar found at the side of the said platform to avoid falling off from the speeding
train. Such contributory negligence, while not exempting the PNR from liability, nevertheless
justified the deletion of the amount adjudicated as moral damages. By the same t oken, the
award of exemplary damages must be set aside. Exemplary damages may be allowed only in
cases where the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent
manner. There being no evidence of fraud, malice or bad faith on t he part of petitioner, the
grant of exemplary damages should be discarded.

LIABILITY OF A CC FOR ACTS OF ITS EMPLOYEES

MARANAN VS PEREZ
(PLEASE REFER SA PINAKA UNA NA DIGEST)

CORNELIA A. DE GILLACO, ET AL., vs. MANILA RAILROAD COMPANY,

FACTS: Tomas Gillaco, the husband of plaintiff, was a passenger in the early morning in the train
of Manila Railroad (MRR) Company from Laguna to Manila at about 7:30 am. When the train
reached the Paco Railroad Station, Emilio Devesa, a train guard of MRR was al so in the station.
He was assigned to guard the Manila-San Fernando (La Union) trains and he was waiting for the
same train to take him to Tutuban Station, to report for duty which was to start from 9am to 7 pm
of the same day.
Devesa, having a long standing personal grudge against Gillaco,shot him with the carbine
furnished to him by MRR for use his use as such train guard upon seeing him inside the train
coach. Gillaco died as a result.
CFI awarded damages to the plaintiff. It held the Railroad company responsible on the ground
that a contract of transportation implies protection of the passengers against acts of personal
violence by the agents or employees of the carri er.
MRRs contention: No liability attached to the employer of Devesa who was convicted by the
CA of homicide. Employer is not responsible for subsidiary ex delicto, under Art. 103 of the RPC,
because the crime was not committed while the slayer was in the actual performance of his
ordinary duties and service;
Nor is it responsible ex contractu, since the complaint did not aver sufficient facts to establish
such liability, and no negligence on appellant's party was shown.
ISSUE: Whether or not MRR should be liable for damages to the plaintiff because of the crime
committed by its employee? No.
HELD: While a passenger is entitled to protection from personal violence by the carrier or its
agents or employees, since the contract of transportation obligates the carrier to transport a
passenger safely to his destination. But under the law of the case, this responsibility extends only
to those that the carrier could foresee or avoid through the exercise of the degree of care and
diligence required of it.
The old Civil Code of 1889 (which was in force in 1946, when Gillaco was shot) did not impose
upon the carriers absolute liability for assaults of their employees upon the passengers.
Here, the act of Devesa in shooting passenger Gillaco was entirel y unforeseeabl e by the MRR.
The latter had no means to ascertain or anticipate that the two would meet, nor could it
reasonabl y foresee every personal rancor that might exist between each one of its many
employees and any one of the thousands of eventual passengers riding in its trains.
The shooting in question was therefore "caso fortuito" within the definition of article 105 of the old
Civil Code, being both unforeseeable and inevitable under the given circumstances; and
pursuant to established doctrine, the resulting breach of appellant's contract of safe carriage
with the late Tomas Gillaco was excused thereby.
When the crime took place, Devesa had no duties to discharge in connection with the
transportation of the deceased from Calamba to Manila. His duty starts at 9 am which was 2
hours after the event. Devesa was therefore under no obligation to safeguard the passenger of
the Calamba-Manila train, where the deceased was riding; and the killing of Gillaco was not
done in line of duty. The position of Devesa at the time was that of another would be passenger,
a stranger also awaiting transportation, and not that of an employee assigned to discharge any
of the duties that the Railroad had assumed by its contract with the deceased.
Therefore, Devesa's assault cannot be deemed in law a breach of Gillaco's contract of
transportation by a servant or employee of the carri er.

10

CARLOS SINGSON vs. COURT OF APPEALS and CATHAY PACIFIC AIRWAY, INC.,
FACTS: On 24 May 1988 CARLOS SINGSON and his cousin Crescentino Tiongson bought from
Cathay Pacifi c Airways, Ltd. (CATHAY), at its Metro Manila ticket outlet 2 o pen-dated, identically
routed, round trip plane tickets for the purpose of spending their vacation in the United States.
Each ticket consisted of six (6) flight coupons ((FC) corresponding to this itinerary:
FC 1 MNL Hong Kong (HK)
FC 2 HK San Francisco

FC 3 San Francisco LA
FC 4 LA San Francisco

FC 5 San Francisco HK
FC 6 HK - MNL

The pro cedure was that at the start of each leg of the trip a flight coupon per travel would be
removed from the ticket booklet so that at the end of the trip no more coupon would be left in
the ticket booklet.
On 6 June 1988 they left Manila on board CATHAY's and arrived safely in Los Angeles. After
staying there for about 3 weeks they decided to return to the Philippines. On 30 June 1988 they
arranged for their return flight at CATHAY's LA Offi ce and chose 1 Jul y 1988, a Friday, for their
departure. While Tiongson easil y got a booking for the flight, SINGSON was not as luck y. It was
discovered that his ticket booklet did not have FC No. 5. Instead, what was in his ticket was FC 3
which was supposed to have been used and removed from the ticket booklet. There was a 5
day delay in the verification process. It was not until 6 July 1988 that CATHAY was finally able to
arrange for his return flight to Manila. On 26 August 1988 SINGSON commenced an action for
damages against CATHAY.
Singsons contentions: He remonstrated that it was the airline's agent/representative who must
have committed the mistake of tearing o ff the wrong flight coupon; that he did not have
enough money to buy new tickets; He was told to go to San Franciso and conduct investigations
when CATHAY could conclude the investigation in a matter of minutes because of its facilities..
Thus he and his cousin Tiongson, who deferred his own flight to accompany him, were forced to
leave for San Francisco on the night of 1 July 1988 to verify the missing ticket.
Cathays contention: Since petitioner was holding an "open-dated" ticket, which meant that he
was not booked on a specific flight on a particular date, there was no contract of carriage yet
existing such that CATHAY's refusal to immediately book him could not be construed as breach
of contract of carriage. It argues that it is only when passenger is confirmed on a particular flight
and on a particular date specifically stated in his ticket that its refusal to board the passenger
will result in a breach of contract. That they need to verify the status of the ticket therefore it
needs to send a request by telex to its HK headquarters to retrieve the information. The delay in
verification was due to the time difference between HK and LA and the coinciding non -working
days in the United States.
RTC: Favored Singson, holding that CATHAY was guilty of gross negligence amounting to malice
and bad faith and adjudged to pay damages.
CA: Reversed RTCs. No breach of contract of carriage for what they have are only open dated
tickets, not confirmed. As a "chance passenger," the latter had no automatic right to fly on that
flight and on that date.
ISSUE: Whether a breach of contract was committed by CATHAY that may be attributed to the
fault of its employees on account of the missing flight coupon? YES.
HELD: CATHAY undoubtedl y committed a breach of contract when it refused to confirm
petitioner's flight reservation back to the Philippines on account of his missing flight coupon. The
round trip ticket issued by the carri er to the passenger was in itself a complete written contract
by and between the carrier and the passenger. It has all the elements of a complete written
contract (C-O-C). Singson was not a mere "chance passenger with no superior right to be
boarded on a specific flight.
CATHAY was responsible for the loss of the ticket. One of two (2) things may be surmised:

11
1.
2.

US Air (CATHAY's agent) had mistakenly detached the San Francisco -Hongkong flight
coupon thinking that it was the San Francisco-Los Angeles portion; or,
Petitioner's booklet of tickets did not from issuance include a San Francisco -Hongkong
flight coupon.

In either case, the loss of the coupon was attributed to the negligence o f CATHAY's agents and
was the proximate cause of the non-confirmation of petitioner's return flight on 1 July 1988. Had
CATHAY's agents been diligent in double checking the coupons they were supposed to detach
from the passengers' tickets, there would have been no reason for CATHAY not to confirm
petitioner's booking. To hold that no contractual breach was committed by CATHAY and totally
absolve it from any liability would in effect put a premium on the negligence of its agent,
contrary to the policy of the law requiring common carriers to exercise extraordinary diligence.
The following circumstances attended the breach of contract by C ATHAY, to wit:
a. the coupon corresponding to the SF- HK flight was missing due to the negligence of
CATHAY's agents (as shown above)
b. Both passengers presented their ticket booklets bearing identical itineraries to prove
that there had been a mistake in removing the coupons of petitioner.
c. CATHAY's Timothy Remedios testified that he was able to ascertain from his flight
reservations computer that petitioner indeed had reservations booked for travel on
their return flight, but CATHAY apparently ignored this and peremptorily refused to
confirm petitioner's flight while ready to confirm his traveling companion's
identically routed plane ticket on the lame and flimsy excuse that the existence
and validity of the missing ticket must first be verified;
d. petitioner was directed by C ATHAY to go to its SF office and make the verification
concerning the lost coupon himself. This, notwithstanding the fact that CATHAY was
responsible for the loss of the ticket and had all the necessary equipment, which
could facilitate the verification right there at its Los Angeles Offi ce.
e. CATHAYs HK personnel never acted promptly and timely on the request for
verification. It strangely took them more than twenty-four (24) hours to complete the
verification process and to sent their reply to LA.
Taken together, they indubitably signify more than ordinary inadvertence or inattention and thus
constitute a radical departure from the extraordinary standard of care required of common
carriers. These circumstances reflect the carrier's utter lack of care and sensitivity to the needs of
its passengers, clearl y constitutive of gross negligence, recklessness and wanton disregard of the
rights of the latter, acts evidently indistinguishable or no different from fraud, malice and bad
faith.
Therefore, CATHAY is liable to Singson for the negligence made by its employees.

12

LIGHT RAIL TRANSIT AUTHORITY and RODOLFO ROMAN

VS.
MARJORIE NAVIDAD and PRUDENT SECURITY AGENCY
Facts:
On October 14, 1993, Nicanor Navidad, then drunk, entered the EDSA LRT Station. While
standing on the platform near the LRT Tracks, Junelito Escartin, the security guard assigned to the
area approached Navidad. A misunderstanding or altercation between the two apparently
ensued which led to a fist fight. At the exact moment that Navidad fell, an LRT Train, operated
by Rodolfo Roman, was coming in. Navidad was struck by the moving train and he was killed
instantaneously.
The wife of Navidad brought an action against LRTA, Roman, Escartin and Prudent.
For LRTA and Roman:
LRTA and Roman would ensist that Escartins assault on Navidad, which caused the latter to fall
on the tracks, was an act of a stranger that could not have been foreseen or prevented. The
LRTA also contended that there exists no employer-emplo yee relarionship between Roman and
LRTA as Roman himself testified that he is an employee of Metro Transit and not LRTA.
RTC ruled in favor of the respondents. CA affirmed with modifications.
For Respondents:
Respondent contended that a contract of carriage was deemed created from the moment
Navidad paid the LRT fare and ent ered the premises of the LRTA, entitling Navidad to all rights
and protection under a contractual relation. And that the CA had correctly held LRTA and
Roman liable for the death of Navidad.
Issues:
1.
2.
3.

WON LRTA is liable.

WON Roman, as the driver of the train, is also liable.
Is Prudent Security as the employer of Escartin liable?

Ruling:
1.

YES.

"Article 1755. A common carrier is bound to carry the passengers safely as far as hum an care and foresight
can provide, using the utm ost diligence of very cautious persons, with a due regard for all the
circumstances.
"Article 1756. In case of death of or injuries to passengers, common carriers are presum ed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
prescribed in articles 1733 and 1755."
"Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence
or willful acts of the form ers em ployees, alt hough such em ployees m ay have acted beyond the scope of
their authority or in violation of the orders of the common carriers.
"This liability of the comm on carriers does not cease upon proof that they exercised all the diligence of a
good father of a fam ily in the selection and supervision of their em ployees."
"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful
acts or negligence of other passengers or of strangers, if the common carriers em ployees through the
exercise of the diligence of a good father of a family could have prevented or stopped the act or
om ission."

The law renders a common carrier liable for the death of or injury to passengers:
1. Through the negligence or willful acts of its employess;

13

2. On account of willful acts or negligence of other passengers or of

strangers if the common carriers employees through the exercise of due
diligence could have prevented or stopped the act or omission.
In case of such death or injury, a carrier is presumed to have been at fault or been negligent,
andby simple proof of injury, the passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts upon the carri er to prove that
the injury is due to an unforeseen event or to force majeure.
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the
safet y of passengers, a carrier may choose to hire its own employees or avail itself of the services
of an outsider or an independent firm to undertak e the task. In either case, the common carrier
is NOT relieved of its responsibilities under the contract of carriage.

2. NO.
There is no showing that Roman himself is guilty of any culpable act or omission,
therefore, he must also be absolved from liability. Needless to say, the
contractual tie between LRTA and Navidad is not itself a juridical relation
between the latter and Roman; thus, Roman can be made liable only for his
own fault or negligence. But again, it was not proven that he was negligent.
3. NO.
If at all, that liability could only be for tort. The premise, however, for the employers liability is
negligence or fault on the part of the employee. Once such fault is established, the emplo yer
can then be made liable on the basis of the presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection and supervision of its employe es.
However, There is nothing to link Prudent to the death of Navidad, for the reason that the
negligence of its employee, has not been dul y proven.

14

CATHAY PACIFIC AIRWAYS, LTD., vs. SPOUSES DANIEL VAZQUEZ and MARIA LUISA
MADRIGAL VAZQUEZ
FACTS: Spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez with two friends
went to Hongkong for pleasure and business. For their return flight to Manila, they were booked
on Cathays Flight CX-905. Upon boarding, Dr. Vazquez presented his boarding pass to the
ground stewardess, who in turn inserted it into a computer at the gate.
The ground stewardess was assisted by a ground attendant by the nam e of Clara Chiu. When
Ms. Chiu glanced at the computer monitor, she saw a message that there w as a seat change
from Business Class to First Class for the Vazquez. Ms. Chiu approached Dr. Vazquez and told him
that
the
Vazquezs
accommodations
were
upgraded
to
First
Class.

Dr. Vazquez refused the upgrade, reasoning that it would not look nice for them as hosts to
travel in First Class and their guests, in the Business Class. Moreover, they were going to discuss
business matters during the flight. He also told Ms. Chiu that she could have other passengers
instead transferred to the First Class Section.
Ms. Chiu consulted her supervisor, who told her to handle the situation and to convince the
Vazquez to accept the upgrading. Ms. Chiu informed the latter that the Business Class was fully
booked, and that since they were Marco Polo Club members they h ad the priority to be
upgraded to the First Class. Dr. Vazquez continued to refuse, so Ms. Chiu told them that if they
would not avail themselves of the privilege, they would not be allowed to take the flight.
Eventually, after talking to his two friends, Dr. Vazquez gave in and proceeded to the First Class
Cabin.
Upon their return in Manila, the Vasquezes sent a letter to Cathay demanding that they be
indemnified in the amount of 1 million for the humiliation and embarrassment caused by its
employees. However, for failure of Cathay to give a feedback, Vazquezes instituted an action
for damages.
Vazquezes: 1. when they informed Ms. Chiu that they preferred to stay in Business Class, Ms.
Chiu obstinately, uncompromisingly and in a loud, discourteous and harsh voice threatened
that they could not board and leave with the flight unless they go to First Class, since the
Business Class was overbooked. Ms. Chius loud and stringent shouting annoyed, embarrassed,
and humiliated them because the incident was witnessed by all the other passengers waiting
for boarding.
2. A flight stewardess instructed Dr. Vazquez to put his roll -on luggage in the
overhead storage compartment. Because he was not assisted by any of the crew in putting up
his luggage, his bilateral carpal tunnel syndrome was aggravated, causing him extreme pain
on his arm and wrist.
Cathay:
1. It is a practice among commercial airlines to upgrade passengers to the next
better class of accommodation, whenever an opportunity arises, such as when a certain s ection
is fully booked. Priority in upgrading is given to its frequent fl yers, who are considered favored
passengers like the Vazquez es. When Ms. Chiu informed the Vazquezes that they were
upgraded to First Class, Dr. Vazquez refused. He then stood at the entrance of the boarding
apron, blocking the queue of passengers from boarding the plane, which inconvenienced other
passengers. He shouted that it was impossible for him and his wife to be upgraded without his
two friends who were traveling with them. Because of Dr. Vazquezs outburst, Ms. Chiu thought of
upgrading the traveling companions of the Vazquezes. But when she check ed the computer,
she learned that the Vazquezes companions did not have priority for upgrading. She then tried
to book the Vazquezes again to their original seats but the business class was fully booked.
2. Its employees at the Hong Kong airport acted in good faith in dealing with the
Vazquezes; none of them shouted, humiliated, embarrassed, or committed any act of
disrespect against the Vazquezes
ISSUES: 1. Whether or not by upgrading the seat accommodation of the Vazquez from Business
Class to First Class Cathay breached its contract of carriage with the Vazquez.

15
2. Whether or not the Vazquez are entitled to damages.
RULING: In previous cases, the breach of contract of carriage consisted in either the bumping off
of a passenger with confirmed reservation or the downgrading of a passengers seat
accommodation from one class to a lower class. In this case, what happened was the reverse.
The Vazquez never denied that they were members of Cathays Marco Polo Club. They knew
that as members of the Club, they had priority for upgrading of their seat accommodation at no
extra cost when an opportunity arises. But, just like other privileges, such priority could be
waived.

The Vazquez should have been consulted first whether they wanted to avail themselves of the
privilege or would consent to a change of seat accommodation before their seat assignments
were given to other passengers. Normally, one would appreciate and accept an upgrading, for
it would mean a better accommodation. But, whatever their reason was and however odd it
might be, the Vazquez had every right to decline the upgrade and insist on the Business Class
accommodation they had booked for and which was designated in their boarding passes. They
clearl y waived their priority or preference when they asked that other passengers be given the
upgrade. It should not have been imposed on them over their vehement objection. By insisting
on the upgrade, Cathay breached its contract of carriage with the Vazquez.

The Court, however, is not convinced that the upgrading or the breach of contract was
attended by fraud or bad faith. Bad faith and fraud are allegations of fact that demand clear
and convincing proof. It is not persuaded by the Vazquezs argument that the overbooking of
the Business Class Section constituted bad faith on the part of Cathay.
Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board, as amended,
provides that an overbooking that does not exceed ten percent is not considered deliberate
and therefore do es not amount to bad faith. The Court of Appeals awarded each of the
Vazquez moral damages in the amount of P250, 000. In this case, SC ruled that the breach of
contract of carriage was not attended by fraud or bad faith. The Cou rt of Appeals award of
moral damages has, therefore, no leg to stand on. The most that can be adjudged in favor of
the Vazquez for Cathays breach of contract is an award for nominal damages under Article
2221 of the New Civil Code.

16

JAPAN AIRLINES
VS.
JESUS SIMANGAN
(Pasensya na po kung merong mga side comments but this will allow the reader a better
understanding o f the case...)
Facts:
In 1991, SImangan is set to go to Los Angeles, USA. (HE WILL BE DONATING HIS KIDNEY) Having
obtained an emergency visa (importante ito kasi ito ang dahilan ng lahat), Simangan
purchased a round trip ticket from JAL and he was issued the corresponding boarding pass. He
was scheduled to a particular flight bound for LA, USA via Narita, Jap an.
On Jul y 29, 1992 Simangan went to NAIA. He was allowed to check -in at JALs counter. His plane
ticket, boarding pass, travel authority and personal articles were subj ect ed to rigid immigration
and security routines. After passing through said immigration and security pro cedures he was
allowed by JAL to enter the plane.
While inside the plane he was suspected of carrying falsified travel documents (mag -TNT lang
daw kasi siya saJapan, parang pretense lang daw na pupunta siyang States yun pala bababa
siya sa Narita tapos hell work in Japan.) After showing his documents including his EMERGENCY
VISA (apparently this was the first time na nakakita ang crew ng PAROLE/EMERGENC Y VISA
issued by the US GOVERN MEN T) Shortly aft er, the stewardess HAUGHTILY ordered him to stand up
and leave the plane. He even pl eaded with JAL to just closel y monitor his movements when the
plane stops over in Narita (imagine!!! bantayan na lang daw siya sa Narita just to show na hindi
nga siya mag-TNT). His pleas were ignored. He was then constrained to go out of the plane. In
short, he was bumped off the flight.
Simangan went to JALs ground office. The plane took off. Only to find out that his travel
documents were, indeed, IN ORDER.
Simangan sued JAL for damages.
For JAL:
JAL denied the material allegations of the complaint. It argued, among others, that its failure to
allow respondent to fly on his scheduled departure was due to "a need for his travel documents
to be authenticated by the United States Embassy because no one from JAL's airport staff had
encount ered a parole visa before.
Issues:
WON JAL is liable.
Ruling:
YES.
JAL is liable for it is guilty of breach of contract of carriage. Simangan bought a plane ticket from
JAL. His ticket, boarding pass, travel authority and personal articles were subj ected to rigid
immigration and security procedures and after passing through immigration and security
procedure he was allowed by JAL to enter the plane. Concisel y, there is now a contract of
carriage between the two. Nevertheless, he was bumped off the flight thus JAL failed to comply
with its obligations under the contract of carriage.
JAL justifies its action by arguing that there was a need to verify the authenticity of Simangans
travel documents. It alleged that no one from its airport staff had encountered a parole visa
before. It further contended that Simangan agreed to fly the next day hence there was a
novation. JAL, accordingly, is not guilty of breach as Simangan was not able to travel to the US
due to his voluntary desistance. The contention is untenable. JAL admitted and definitely
declared that it cannot wait for Mr. Simangan, it gave him no choice but to be left behind. He
was unceremoniously bumped off despite his protests and valid documents.
Considering that he was forced to get out of the plane and l eft behind against his will, he could
not have freely consent ed to be rebooked the next day. In short, he did not agree to the

17
novation. Novations implies a waiver and such waiver must be express.
Apart from the fact that Mr. Simangan passed all the immigration procedures JAL should have
known that he is indeed carrying valid travel documents. Besides, the power to admit an alien
into the country of destination is a sovereign act which cannot be interfered by JA L. (Kung ayaw
ng States ev entually na papasukin sa kanilang bansa si Simangan then sila dapat ang
magdecide hindi ang JAL)
In an action for breach of contract of carriage there are two requisites:
1. The existence of a contract of carriage;
2. Its non-performance by the common carrier through the carriers failure to carry the
passenger safel y to his destination.
The two requisites are present in this case.
JAL is liable for moral damages because the acts committed by it amount to bad faith. It is firmly
settled thatmoral damages are recoverabl e in suits predicated on breach of a contract of
carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this case.
Inattention to and lack of care for the interests of its passengers who are entitled to its utmost
consideration, particularly as to their convenience, amount to bad faith which entitles the
passenger to an award of moral damages.
Neglect or malfeasance of the carrier's employees could give ground for an action for damages.
Passengers have a right to be treated by the carrier's employees with kindness, respect,
courtesy and due consideration and are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. (PAK!)

18

NORTHWEST AIRLINES, INC., vsSPOUSES EDWARD J. HESHAN AND NELIA L. HESHAN

AND DARA GANESSA L. HESHAN, REPRESENTED BY HER PARENTS EDWARD AND
NELIA HESHAN,
FACTS: Edward Heshan purchased 3 roundtrip tickets from him, his wife and daughter Dara for
their trip from Manila to Missouri to attend an ice skating competition where Dara was to
participate. After the event, they went back to the airport to take their connecting flight from
Memphis to Los Angeles. They arrived 3 hours early. When the check-in counter opened, they
were 2nd in queue. However, when his turn came and they presented their tickets to Ken Carns,
Northwests customer service agent, Edward was asked to step aside and wait to be called
again.
After all the other departing passengers were given their boarding passes, the Heshans were told
to board the plane without any boarding pass given to them. Inside the plane, the Heshans
noticed that only one vacant passenger seat was available, which was offered to Dara, while
Edward and Nelia were directed to occupy two "folding seats" which were crew seats intended
for the stewardesses.
Upset that there were not enough passenger seats for them, the Heshans complained to the
cabin crew about the matter but were told that if they did not like to occupy the seats, they
were free to disembark from the plane. And disembark they did, complaining thereafter to
Carns about their situation. Petitioners plane then departed for Memphis without respondents
onboard.
Respondents sent a letter to petitioner to demand indemnification for the breach of contract of
carriage. Petitioner replied that respondents were prohibited to board Flight No. 972M for
"verbally abus[ing] [the] flight crew." As their demand remained unheeded, respondents filed a
complaint for breach of contract with damages with the RTC.
Petitioner: denied that the Heshans were told to occupy "folding seats" or crew seats since
"[Federal Aviation Authority] regulations say no passengers are to sit there." As for respondents
not having been given boarding passes, petitioner asserted that that does not in itself mean that
the flight was overbooked, for [t]his is done on last minute boarding when flights are full and in
order to get passengers on their way and to get the plane out on time. This is acceptable
procedure. Furthermore, it did not violate the contract of carriage since respondents were
eventually transported from Memphis to Los Angeles, albeit via another airline, and that
respondents made no claim of having sustained injury during the carriage
Respondents: If indeed crew seats were offered to them, its crew would have had nowhere to sit
and the plane would not have been able to depart and that in reality, they voluntarily
disembarked from the aircraft because they were not willing to wait to be seated together.
Petitioner was guilty of breach of contract. They cite Singapore Airlines v. Fernandez, which
ruled:
[W]hen an airline issues a ticket to a passenger, confirmed for a particular flight on a
certain date, a contract of carriage arises. The passenger then has every right to expect
that he be transported on that flight and on that date. If he does not, then the carrier
opens itself to a suit for a breach of contract of carriage
RTC: rendered decision in favor of the Heshans. The TC found that Edward was second in the
queue for boarding passes. Yet, Edward was unceremoniously sidelined and curtly told to wait
without
any
explanations why. His
concerned
seeking
for
explanations
was
repeatedl y rebuffed by the airline employees. When, at last, they were told to board the aircraft
although they had not yet been issued boarding passes, which they thought to be highly
unusual, they soon discovered, to their dismay, that the plane was fully booked, with only one
seat left for the 3 of them. Edward and Nelia rejected the offer [to take] the crew
seats. [Respondents] were thus forced to disembark.
CA: sustained the trial courts findings but reduced the award of moral and exemplary
damages. The appeallate court held that it becomes a highly irregular situation that despite the
fact that the [respondents] showed up on time at the boarding area[,] they were made to go in
last and sans any boarding passes. Thus, Ca held that it can be logically inferred that the reason

19
why no boarding passes were immediately issued to the [respondents] is because Flight 972
from St. Louis to Memphis is full and the [respondents] were bump ed off from their flight.
ISSUE: Whether Northwest Airlines is liable for breach of contract of carriage. YES
RULING: The SC agreed with the factual findings of the lower court. Petitioner failed to
satisfactorily explain why it did not issue boarding passes to respondents who were confirmed
passengers, even after they had checked -in their luggage three hours earlier. That respondents
did not reserve seats prior to checking-in did not excuse the non -issuance of boarding passes.
Petitioners assertion that respondents disembarked from the plane when their request to be
seated together was ignored does not impress. The SC agr eed with the finding of the CA that
the fact that the Heshans still boarded the plane ten (10) minutes prior to the departure time,
despite knowing that they would be seated apart, is a clear manifestation of the Appellees
willingness to abandon their request and just board the plane in order to catch their flight . But as
it turns out, there were not enough seats for the three of them.
Nonetheless, there is a need to substantially reduce the moral damages awarded by the
appellate court. Moral damages are neither intended to impose a penalty to the wrongdoer,
nor to enrich the claimant. Taking into consideration the facts and circumstances attendant to
the case, an award to respondents of P500,000, instead of P2,000,000, as moral damages is to
the Court reasonable.

20

VALLACAR TRANSIT VS CATUBIG (on liability of a CC for acts of its employees)

FACTS:
Vallacar Transit is engaged in the business of transportation and is the franchise owner of a
Ceres Bulilit bus. Quirio Cabnilla is employed as a regular bus driver of Vallacar Transit.
Quintin Catubig Jr., husband of respondent, was on his way home riding in tandem on a
motorcycle with his employee, Teddy Emperado. Catubig was one driving the motorcycle. While
approaching a curve at kilometers 59 and 60, Catubig tried to overtake a slow moving ten wheeler cargo truck by crossing over to the opposite lane , which was being traversed by the
Ceres Bulilit bs, headed to the opposite direction. When the 2 vehicles collided, Catu big and
Emperado were thrown from the motorcycle. Both of them died.
A complaint for reckless imprudence resulting to double homicide was filed but was
subsequentl y dismissed as the MCTC found that Cabanilla was not criminally liable because
there was no negligence, not even contributory.
Thereaft er, respondent filed before the RTC a Complaint for Damages against petitioner,
seeking actual, moral and exemplary damages for the death of her husband based on Article
2180 in relation to 2176 of the Civil Code.
Contention of Petitioner (Common Carrier): The proximate cause of the vehicular collision was
the sole negligence of Catubig when he imprudently overtook another vehicle at a curve and
traversed the opposite lane of the road.
RTC ruled in favor of petitioner, that is, the proximate cause of the collision was Catubigs
overtaking of the slow -moving truck and not the Ceres bus running very fast. Basis of RTC:
1.) Sketch showing that the point of impact occurred beyond the canter lane near a curve
within the lane of the Ceres bus
2.) Testimonies that it was the motorcycle that recklessl y tried to overtake a truck and
encroaching the other side of the road
3.) Testimony of Nunally Maypa (Administrative and Personnel Manager) who was
responsible for the hiring of personnel including drivers and conductors. She explained
that in order to be hired as driver: (1) 35 to 45 years old; (2) at least 5 years experience in
driving big trucks; (3) submit police, court and police clearances; and possess all
necessary requirements for friving a motor vehicle more than 4,500 kilograms i.e. drivers
license with restriction code of 3; (4) initial interview, skills test, psychological exam
involving defensive driving techniques; (5) upon passing the test, he must go through a
150day familiarization of the bus and road conditions. However, she admitted that
Cabanilla was already an emplo yee driver prior to her appointment to her position.
CA ruled that both Catubig and Cabanilla were negligent, the latter having failed to observe
the hazards of overtaking and the former for running his vehicle at 100 km/hr.
ISSUE: WON Common Carrier has no liability under Article 2180, in relation to 2176, since the
lower courts have found that there was no fault or negligence on the part of the empl oyee
driver
HELD: Yes, Common Carrier is not liable.
Article 2180 in relation to 2176imputing fault or negligence on the part of the employer for the
fault or negligence of it employee--does not apply in this case because fault or negligence on
the part of the employee driver which would have made the employer liable for quasi -delict
under 2176, has never been established.
Art 2176: Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi -delict and is governed by the
provisions of this Chapter.
Art 2180: The obligation imposed by Articl e 2176 is demandable not only for o nes own acts or
omissions, but also for those persons for whom one is responsible.

21
XXXX
Employers shall be liable for damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.
XXXX
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.
It having been established that the immediate and proximate cause of the death of Catubig
was his own negligence, it is no longer necessary to delve into the Common Carriers defense
that it exercised due diligence in the selection and supervision of its employee driver.
Note: This case also cited Sec 41(b),RA 4136, as amended, which provides that overtaking is not
allowed while approaching a curve in the highway; and Sec 41(a) of the same law which
provides that passing another vehicle proceeding on the same direction should only be resorted
to by a driver if the highway is free from incoming vehicle to permit such overtaking to be made
in safety. Violation of these is punished under the same law and under Art 365 of the RPC.
POLICY: The presumption that employers are negligent under Article 2180 flows from the
negligence of their employees. The presumption of fault or negligence on the part of the
common carrier does not arise where it is found that the immediate and proximate cause of
death or injury was the negligence of a party other than the common carriers employee.

22

LIABILITY FOR ACTS OF STRANGERS/PASSENGERS (1763)

MANILA RAILROAD COMPANY, vs. MACARIA BALLESTEROS, TIMOTEO CAMAYO,

JOSE REYES and JULIAN MAIMBAN, JR.,

G.R. No. L-19161

Facts
Private respondents are passengers of MRRs bus driven by Jose Anastacio. While the bus
was in Bayombong, Nueva Vizcaya, Anastacio stopped the bus and got off to replace a
defective spark plug. While he was thus engaged, one Dionisio Abello, an auditor assigned to
MRR by the General Auditing Office, took the wheel and told the driver to sit somewhere else.
With Abello driving, the bus proceeded on its way, from time to time stopping to pick up
passengers. Anastacio tried twice to take the wheel back but Abello would not relinquish it.
While the bus was travelling Kms 328 and 329 in Isabela, a freight truck bound for Manila
and driven by Marcial Nocum was also travelling the same road. When these two vehicles were
about to meet at the bend of the road Marcial Nocum, in trying to evade several holes on the
right lane, where his truck was running, swerved his truck towards the middle part of the road
and in so doing, the left front fender and l eft side of the freight truck smashed the l eft side of the
bus resulting in extensive damages to the body of the bus and injuries to sev enteen of its
passengers, ... including the respondents herein.
The Complaint
The respondents herein thus filed a complaint for damages against MRR.
Defense/s by Common Carrier MRR
1.
2.

The accident was caused by the negligence of the driver of the freight truck, Nocum.
MRR should not be held liable for Abellos acts who is not their employee

Issue: Whether or not a common carrier may be held liable on account of negligence of a
stranger YES
Ruling
Trial court found Abello was likewise reckless when he was driving the bus at the rate of
from 40 to 50 kilometers per hour on a bumpy road at the moment of the collision.
As opined by the Government Corporate Counsel: the acts of the bus personnel,
particularly "in allowing Mr. Abello to drive despite two occasions when the bus stopped and the
regular driver could have taken over, constitute reckless imprudence and wanton injurious
conduct on the part of the MRR employees."
Furthermore, the defenses set up by MRR will not lie because of the following the
provisions of Article 1763 of the Civil Code and section 48 (b) of the Motor Vehicl e Law, which
respectively provide as follows:
Art. 1763.A common carrier is responsible for injuries suffered by a passenger on account of the
wilfull acts or negligence of other passengers or of strangers, if the common carrier's employees
through the exercise o f the diligence o f a good father o f a family could have prevented or
stopped the act or omission.
Sec. 48(b).No professional chauffeur shall permit any unlicensed person to drive the motor
vehicl e under his control, or permit a person, sitting beside him or in any other part o f the car, to
interfere with him in the operation of the motor vehicle, by allowing said person to take hold of
the steering wheel, or in any other manner take part in the manipulation or control of the car .

23

PILAPIL VS CA (on liability for acts of strangers/passengers)

FACTS:
Plaintiff Jose Pilapil, a paying passenger, boarded Defendants bus. While said bus was
negotiating the distance between Iriga City and Naga City, upon reaching the vicinity of the
cemet ery of the Municipality of Baao, Camarines Sur, on the way to Naga C ity, an unidentified
man, a bystander along said national highway, hurled a stone at the left side of the bus, which
hit petitioner above his left eye.
Defendants personnel lost no time in bringing plaintiff to the provincial hospital in Naga City,
where he was confined and treated. However, despite treatment, plaintiff lost his left eyes vision
and sustained permanent scar above his left eye.
Plaintiff passenger brought suit for damages alleging the following:
1.) The nature of the business of a transport ation company requires assumption of risks and
the stoning of the bus by a stranger resulting in injury is one such risk from which the
common carrier may not exempt himself from liability.
2.) Defendant common carrier should have put something like mesh-work grills to cover the
windows of the bus.
3.) It is to the greater interest of the State If a carrier were made liable for stone-throwing
incidents rather than have the bus riding public lose-confidence in the transportation
system.
RTC ruled in favor of plaintiff. CA reversed.
ISSUE: What is the degree of diligence required to be exercised by a common carrier for the
protection of its passengers from willful acts of strangers?
HELD: Only that of a good father of the family
Article 1763: A common carrier is responsible for injuries suffered by a passenger on account
of willful acts or negligence of other passengers or of stranger s, if the common carriers
employees through the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission.
The presumption of fault or negligence against the carrier is only a disputabl e presumption. It
gives in where contrary facts are established proving either that the carrier had exercised the
degree of diligence required by law, or the injury was due to a fortuitous event.
With the injury arising wholly from causes creat ed by strangers over which the carri er had no
control or even knowledge or could not have prevented, the presumption is rebutted and the
carrier is not and ought not to be held liable.
A common carrier is not an insurer of the absolute safety of the passengers. Where the
carrier uses cars of the most approved type, in general use by others engaged in the same
occupation, and exercises a high degree of care in maintaining them in suitable condition, the
carrier cannot be charged with negligence in this respect.
POLICY: While as a general rule, common carriers are bound to exercise extraordinary diligence
in the safe transport of their passengers, when the violation of the contract is due to the willful
acts of strangers, as in the instant case, the degree of care essential to be exercised by the
common carrier for the protection of its passenger is only that of a good father of a family.

24

JAPAN AIRLINES VS ASUNCION

FACTS:
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan
Airlines (JAL) Flight 742 bound for Los Angeles. Their itinerary included a stop -over in Narita. Upon
arrival at Narita, Mrs. Noriko Etou-Higuchi of JAL endorsed their applications for shore pass and
directed them to the Japanese immigration official.
A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the
neighborhood of the port of call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared shorter
than his height as indicated in his passport. Because of this inconsistency, respondents were
denied shore pass entries and were brought instead to the Narita Airport Rest House where they
were billeted overnight.
The immigration official also handed Mrs. Higuchi a Notice where it was stated that respondents
were to be watched so as not to escape.
Mr. Atsushi Takemoto of the International Service Center (ISC ), the agency tasked by Japans
Immigration Department to handle passengers who were denied shore pass entries, brought
respondents to the Narita Airport Rest House where they stayed overnight until their departure
the following day for Los Angeles.
Respondents were charged US$400.00 each for their accommodation, security service and
meals.
On December 12, 1992, respondents filed a complaint for damages claiming that JAL did not
fully apprise them of their travel requirements and that they were rudel y and forcibly detained at
Narita Airport.
JALs contention: The refusal of the Japanese immigration authorities to issue shore passes to
respondents is an act of state which JAL cannot interfere with or prevail upon.
ISSUE: WON JAL is guilty of breach of contract and is liable for the detention of the respondents
at Narita Airport. NO
RTC ruled in favor of respondents. CA affirmed.
RULING: JAL did not breach its contract of carriage with respondents.
1) It may be true that JAL has the duty to inspect whether its passengers have the necessary
travel documents, however, such duty does not ext end to checking the veracity o f every
entry in these documents.
JAL could not vouch for the authenticity of a passport and the correctne ss of the entries therein.
The power to admit or not an alien into the country is a sovereign act which cannot be
interfered with even by JAL. This is not within the ambit of the contract of carriage entered into
by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents
shore pass applications.
2)Prior to their departure, respondents were aware that upon arrival in Narita, they must secure
shore pass entries for their overnight stay.
3)Respondents claimed that petitioner breached its contract of carriage when it failed to
explain to the immigration authorities that they had overnight vouchers at the Hotel Nikko Narita.
They imputed that JAL did not exhaust all means to prevent the denial of their shore pass entry
applications.
To reiterate, JAL or any of its representatives have no authority to interfere with or influence the
immigration authorities. The most that could be expected of JAL is to endorse respondents
applications, which they did.
4)Upon being notified of the denial of respondents applications, Mrs. Higuchi immediately made
reservations for respondents at the Narita Airport Rest House which is really more a hotel than a
detention house as claimed by respondents.

25
Nowhere in respondent Michaels testimony did he state categorically that Mrs. Higuchi or any
other employee of JAL treated them rudely or exhibited improper behavior throughout their
stay.
We therefore find JAL not remiss in its obligations as a common carrier.
Accordingl y, there being no breach of contract on the part of petitioner, the award of actual,
moral and exemplary damages, as well as attorneys fees and costs of the suit in favor of
respondents Mi chael and Jeanette Asuncion, is DELETED for lack of basis.

26

PUBLIC SERVICE ACT

I. DEFINITION
ALBANO VS. REYES
Note: Discussion as to the definition of a public utility was not emphasized in this case. I copied it
from the book of Chavez.
FACTS:
On 1987, The Philippine Ports Authority (PPA) board, by virtue of Res. No. 850, directed the PPA
management to prepare for the public bidding of the development, management and
operation of the Manila International Container Terminal (MICT) at the Port of Manila. A Bidding
Committee was formed by the DOTC Secretary Reyes for the public bidding.
After evaluation of several bids, the Bidding Committee recommended the award of the
contract to respondent International Container Terminal Services, Inc. (ICTSI). Accordingl y, DOTC
secretary, declared the IC TSI consortium as the winning bidder.
On 1988, the President of the Philippines approved the same with directives that PPA shall still
have the responsibility for planning, detailed engineering, construction, expansion, rehabilitation
and capital dredging of the port, as well as the determination of how the revenues of the port
system shall be allocated for future works; and the contractor shall not collect taxes and duties
except that in the case of wharfage or tonnage dues.
Petitioner Albano, as taxpayer and Congr essman, assailed the legality of the award and
claimed that since the MICT is a public utility, it needs a legislative franchise before it can l egally
operate as a public utility.
ISSUE:

Whether the MICT requires a legislative franchise because it is a public utility? No.

HELD:
While the PPA has been tasked under E.O. No. 30 with the management and
operation of the MICT and to undertake the provision of cargo handling and port related
services thereat, the law provides that such shall be in accordance with P.D. 857 and other
applicable laws and regulations. P.D. 857 expressl y empowers the PPA to provide services within
Port Districts whether on its own, by contract, or otherwise.
A public utility is a business or service engaged in regularly sup plying the public with some
commodity or service of public consequence such as electricity, gas, water, transportation,
telephone, or telegraph service. Apart from statues which define the public utilities that are
within the purview of such statutes, it would be difficult to construct a definition of a public utility
which would fit every conceivable case. As its name indicates, however, the term public utility
implies public use and service to the public.
In this case, even if the MICT be considered a p ublic utility, its operation would not necessarily
need a franchise from the legislature because the law has granted certain administrative
agencies the power to grant licenses for or to authorize the operation of public utilities. Reading
E.O. 30 and P.D. 857 together, it is clear that the lawmaker has empowered the PPA to
undertake by itself the operation and management of the MICP or to authorize its operation
and management by another by contract or other means, at its option.
That the Constitution provides in Art. XII, Sec. 11 that the issuance of a franchise, certificate or
other form of authorization for the operation of a public utility shall be subj ect to amendment,
alteration or repeal by Congress does not necessarily, imply, as petitioner posits that only
Congress has the power to grant such authorization. Our statute books are replete with laws
granting specified agenci es in the Executive Branch the power to issue such authorization for
certain classes of public utilities.
The Public Service Act (C A No. 146) provides "public service" includes every person that now or
hereafter may own, operate, manage, or control in the Philippines, for hire or compensation,
with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, sub way motor vehicle, either for freight or passenger, or both with or without fixed route and
whether may be its classification, freight or carrier service of any class, express service,

27
steamboat or steamship line, pontines, ferries, and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine railways, marine repair shop, [warehouse] wharf
or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
power water supply and power, petroleum, sewerage syst em, wire or wireless communications
system, wire or wireless broadcasting stations and other similar public services (Sec. 13b)
In holding that the contract is valid, the Court stated that franchises issued by Congress are not
required before each and every public utility may operate. The law has granted certain
administrative agencies the power to grant licenses or to authorize th e operation of certain
public utilities

28

II.

Certificate of Public Convenience

Kilusang Mayo Uno Labor Center v. Jesus Garcia, Jr., LTFRB, Provincial
BusOperators Association of the Philippines (PBOAP)

Facts:
On June 26 1990, then Secretary of DOTC, Oscar Orbos, issued Memorandum Circular No. 90 -395
to then LTFRB Chairman, Remedios A.S. Fernando allowing provincial bus operators to charge
passengers rat es within a range of 15% above and 15% below the LT FRB offi cial rate for a period
of one (1) year.
On December 5, 1990, private respondent Provincial Bus Operators Association of the Philippines,
Inc. (PBOAP) filed an application for fare rate increase. An across -the-board increase of eight
and a half centavos (P.0085) per kilometre for all types of provincial buses with a minimum maximum fare range of 15% over and below the proposed basic per kilometre fare rate, with
the said minimum-maximum fare range appl ying only to ordinary, first class and premium class
buses and a fift y-centavo (P0.50) per kilometre fare for aircon buses were sought.
Later on, PBOAP reduced its applied proposed fare to an across-the-board increase of six and a
half (P0.065) centavos per kilometre for ordinary buses. Although oppo sed, the LTRFB rendered a
decision granting the fare rate increase.
On March 30, 1992, then Secretary of the Department of Transportation and Communications
Pete Nicomedes Prado issued Department Order No. 92-587 defining the policy framework on
the regulation of transport services.
Relevant portions to this case are:
1. In determining public need, the presumption of need for a service shall be deemed
in favor of the applicant. The burden of proving that there is no need for a proposed
service shall be with the oppositor(s).
2. Passenger fares shall also be deregulated, except for the lowest class of passenger
service (normally third class passenger transport) for which the government will fix
indicative or reference fares. Operators of particular services may fix their own fares
within a range 15% above and below the indicat ive or reference rate.
Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation
policy of the D OTC allowing provincial bus operators to collect plus 20% and minus 25% of the
prescribed fare without first having filed a petit ion for the purpose and without the benefit of a
public hearing, announced a fare increase of twenty (20%) percent of the existing fares. Said
increased fares were to be made effective on March 16, 1994.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward
adjustment of bus fares. On March 24, 1994, the LTFRB issued one of the assailed orders dismissing
the petition for lack of merit.
ISSUE: W/N establishment of a presumption of public need in favor of an applicant for a
proposed transport service without having to prove public necessity is illegal for being violative
of the Public Service Act and the Rules of Court? YES
HELD: The Court ruled that the LTFRB exceeded its mandate by imposing a rate range thereby
resulting in an improper delegation of its rate fixing powers. Also the Court defined what public
convenience is, stating that it generally means something fitted or suited to the public need and
its existence or non -existence is a question of fact that must b e established by evidence, real
and/or testimonial, empirical data, statistics and such other means necessary, in a public
hearing conducted for the purpose. The Court, in the beginning of the case, also stated that
public utilities are privately owned and operated businesses whose services are essential to the
general public
A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the
operation of land transportation services for public use as required by law.
Pursuant to Section 16(a) of the Public Service Act, the following requisites must be met before a
CPC can be granted:

29
1.

2.
3.

The applicant must be a citizen of the Philippines or a corporation or co -partnership,

association or joint-stock company constituted and organized under the law of the
Philippines, at least 60% of its stock or paid up capital must belong entirely to citizens
of the Philippines
The applicant must be financially capable of undertaking the proposed service and
meeting the responsibilities incident to its operation
The applicant must prove that the operation of the public service proposed and the
authorization to do business will promote the public interest in a proper and suitable
manner. It is understood that there must be proper notice and hearing before the
PSC can exercise its power to issue a CPC.

The presumption of a public need for a service provision is entirely incompatible and
inconsistent with Section 16(c)(iii) of the Public Service Act which requires that before a CPC will
be issued, the applicant must prove by proper notice and hearing that the operation of the
public service proposed will promote public interest in a proper and suitable manner
The power of a regulatory body to issue a CPC is founded on the condition that after full -dress
hearing and investigation, it shall find, as a fact that the proposed operation is for the
convenience of the public. Basic conveni ence is the primary consideration for which a CPC is
issued, and that fact alone must be consistently borne in mind. Also, existing operators in subject
routes must be given an opportunity to offer proof and oppose the application.
Therefore, an applicant must, at all times, be required to prove his capacity and capability to
furnish the service which he has undertaken to render. And all this will be possible only if a public
hearing were conducted for that purpose.

30

PHILIPPINE AIRLINES, INC., petitioner, vs. CIVIL AERONAUTICS BOARD and GRAND
INTERNATIONAL AIRWAYS, INC., respondents.
FACTS:
On November 24, 1994 GrandAir applied for a Certificate of Public Convenience and
Necessit y with the Civil Aeronautics Board, which application was docketed as CAB Case No.
EP-12711. GrandAir complied with the corresponding notice to all scheduled Philippine Domestic
operators and requested for the issuance of a Temporary Operating Permit. Philippine Airlines
INC (PAL) filed its Opposition to GrandAirs application:
PAL argued that CAB has no jurisdiction to hear the application until GrandAir first obtained
a franchise to operate from Congress. It alleges that GrandAir does not possess a legislative
franchise authorizing it to engage in air transportation service within the Philippines or elsewhere.
Such franchise is, as argued, a requisite for the issuance of a Certificate of Public Convenience
or Necessit y by the respondent Board, as mandated under Section 11, Article XII of the
Constitution.
GrandAir, on the other hand, relies on its interpretation of the provisions of Republic Act 776
and posits that a legislative franchise is no longer a requirement for the issuance of a Certificate
of Public Convenience and N ecessit y or a Temporary Operating Permit, following the Court's
pronouncements in the cases of Avia Filipinas vs. Civil Aeronautics Board, and Silangan Airways,
Inc. vs. Grand International Airways.
CAB denied PAL's Opposition and promulgated Resolution No. 119 approving the issuance
of a Temporary Operating Permit in favor of Grand Air to engage in scheduled domestic air
transportation services, particularly the Manila-C ebu, Manila-Davao, and converse routes for a
period of three months, i.e., from December 22, 1994 to March 22, 1994. And upon motion by
private respondent, the temporary permit was extended for a period of six (6) month s or up to
Sept ember 22, 1995.
ISSUE 1:
WHETHER OR NOT CONGRESS, IN ENACTIN G REPUBLIC AC T 776, HAS DELEGATED THE
AUTHORITY TO AUTHORIZE THE OPERATION OF DOMESTIC AIR TRANSPORT SERVICES TO THE
RESPONDEN T BOARD, SUCH THAT CONGRESSION AL MANDATE FOR THE APP ROVAL OF SUCH
AUTHORITY IS NO LONGER NECESSARY.
HELD 1:
The Civil Aeronautics Board has the authority to issue a Certificate of Public Convenience
and Necessit y, or Temporary Operating Permit to a domestic air transport operator, who, though
not possessing a legislative franchise, meets all the other requirements prescribed by the law.
Such requirem ents were enumerated in Section 21 of R.A. 776. There is nothing in the law nor in
the Constitution, which indicates that a legislative franchise is an indispensabl e requirement for
an entity to operate as a domestic air transport operator. Although Section 11 of Article XII
recognizes Congress' control over any franchise, certificate or authority to operate a public
utility, it does not mean Congress has exclusive authority to issue the same. Franchises issued by
Congress are not required before each and every public utility may operate. In many instances,
Congress has seen it fit to delegate this function to government agenci es, specialized
particularly in their respective areas of public service.
ISSUE 2:
WON THERE IS A DISTINCTION BETWEEN CERTIFICATE OF PUBLIC CON VENIENCE AND
CERTIFIC ATE OF CONVENIENCE AND PUBLIC NECESSITY
HELD 2:
Many and varied are the definitions of certificates of public convenience which courts and
legal writers have drafted. Some statutes use the terms "convenience and necessity" while others
use only the words "public convenience." The terms "convenience and necessity", if used
together in a statute, are usually held not to be separable, but are construed together. Both
words modify each other and must be construed together. The word 'necessity' is so connected,
not as an additional requirement but to modify and qualify what might otherwise be taken as
the strict significance of the word necessit y. Public conveni ence and necessity exists when the
proposed facility will meet a reasonable want of the public and supply a need which the

31
existing facilities do not adequatel y afford. It does not mean or require an actual physi c al
necessit y or an indispensable thing.
"The terms 'convenience' and 'necessit y' are to be construed together, although they are
not synonymous, and effect must be given both. The convenience of the public must not be
circumscribed by according to the word 'necessity' its strict meaning or an essential requisites." [22]
The use of the word "necessit y", in conjunction with "public convenience" in a certificate of
authorization to a public service entity to operate, does not in any way modify the nature of
such certification, or the requirements for the issuance of the same. It is the law which
determines the requisites for the issuance of such certification, and not the title indicating the
certificate.
According to the book: In view of this case, there is no more distinction between certificate
of public convenience and certificate of convenience and public necessity.
In sum, respondent Board should now be allowed to continue hearing the application of
GrandAir for the issuance of a Certificate of Public Convenience and Necessity, there being no
legal obstacle to the exercise of its jurisdiction.

32

RIZAL VS MUNICIPALITY OF MORONG

FACTS:(Note: this decision is a consolidation of 2 cases)
Rizal Light & Ice Co. was granted by the Commission a certificate of public convenience
and necessit y for the installation, operation and maintenance of an electric light, heat and
power service in the municipality of Morong, Rizal
The Public Service Commission required the petitioner to appear before it to show cause why
it should not be penalized for violation of the conditions of its certificate of public convenience
and the regulations of the Commission, and for failure to comply with the directives to raise its
service voltage and maintain them within the limits prescribed in the Revised Order No. 1 of the
Commission, and to acquire and install a kilowattmeter to indicate the load in kilowatts at any
particular time of the generating unit.
The motion was then set for hearing. In a petition filed in the same case, the municipality of
Morong formally asked the Commission to revoke petitioner's certificate of public convenience
and to forfeit its franchise on the ground, among other things, that it failed to comply with the
conditions of said certificate and franchise. Meanwhile, inspections had been made of
petitioner's electric plant and installations
When the case was called for hearing, petitioner failed to appear again so municipality
was then allowed to present its documentary evidence, and thereaft er the case was submitted
for decision
In its decision on the basis of the inspection reports, Commission found that the petitioner
"cannot render the efficient, adequate and satisfactory electric service required by its
certificate and that it is against public interest to allow it to continue its operation." Accordingl y,
it ordered the cancellation and revocation of petitioner's cert ificate of public convenience and
the forfeiture of its franchise.
Petitioner moved for reconsideration of the decision but before said motion for
reconsideration was filed, having been granted a municipal franchise by respondent
municipality to install, operate and maintain an electric heat, light and power service in said
municipality - Morong Electric filed with the Commission an application for a certificate of public
convenience and necessity for said service
Petitioner opposed in writing the application of Morong Electric, alleging among other
things, that it is a holder of a certificate of public convenience to operate an electric light, heat
and power service in the same municipality of Morong, Rizal, and that the approval of said
application would not promote public convenience, but would only cause ruinous and wasteful
competition.
On the basis of the evidence adduced, the Commission ruled that the certificate of th e
petitioner was already declared revoked and cancelled; the Commission approved the
application of Morong Electric and ordered the issuance in its favor of the corresponding
certificate of public conveni ence and necessit y.
Hence these two cases; petitioner contends that (1) the cancellation of petitioner's
certificate of public conveni ence was unwarranted because no sufficient evidence was
adduced against the petitioner and that petitioner was not able to present evidence in its
defense, (2) the Commission erred when it did not give to petitioner protection to its investment
and (3) that the Commission erred in imposing the extrem e penalty of revocation of the
certificate.
ISSUE 1:
WON the cancellation of petitioner's certificate of public convenience wa s unwarranted
because no suffici ent evidence was adduced against the petitioner and that petitioner was not
able to present evidence in its defense
HELD 1:
No. Settled is the rule that in reviewing the decision of the Public Service Commission this
Court is not required to examine the proof de novo and determine for itself whether or not the
preponderance of evidence reall y justifies the decision. The onl y fu nction of this Court is to

33
determine whether or not there is evidence before the Commission upon which its decision
might reasonably be based. This Court will not substitute its discretion for that of the Commission
on questions of fact and will not interfere in the latter's decision unless it clearly appears that
there is no evidence to support it. Inasmuch as the only function of this Court in reviewing the
decision of the Commission is to determine whether there is suffici ent evidence before the
Commission upon which its decision can reasonabl y be based, as it is not required to examine
the proof de novo, the evidence that should be made the basis of this Court's determination
should be only those presented in this case before the Commission.
The Commission based its decision on the inspection reports submitted by its engineers
who conducted the inspection of petitioner's electric service upon orders of the
Commission.Said inspection reports specify in detail the defi ciencies incurred, and violations
committed, by the petitioner resulting in the inadequacy of its service. SC considers that said
reports are sufficient to serve reasonabl y as bases of the decision in question. It should be
emphasized, in this connection that said reports, are not mere documentary proofs presented
for the consideration of the Commission, but are the results of the Commission's own
observations and investigations which it can rightfully take into consideration, particularly in this
case where the petitioner had not presented an y evidence in its defense, and speaking of
petitioner's failure to present evidence, as well as its failure to cross-examine the authors of the
inspection reports, petitioner should not complain because it had waived not only its right to
cross-examine but also its right to present evidence.
According to the book: The present case, wherein the operator is not of good standing - is
one of the exceptions to prior operator rule.
ISSUE 2:
WON the "protection-of-investment rule" apply in the present case
HELD 2:
No. Petitioner invokes the "protection-of-investment rule" enunciated by this Court
inBatangas Transportation Co. vs. Orlanes in this wise:
The Government having taken over the control and supervision of all public utilities, so
long as an operator under a prior license complies with the terms and conditions of his
license and reasonable rules and regulations for its operation and meets the reasonable
demands of the public, it is the duty of the Commission to protect rather than to destroy
his investment by the granting of the second license to another person for the same thing
over the same route of travel. The granting of such a license does not serve its
convenience or promote the interests of the public.
The court ruled however, that the rule is not absolute, for nobody has exclusive right to
secure a franchise or a certificate of public conveni ence. In the present case, it has been shown
by ample evidence that the petitioner, despite ample time and opportunity given to it by the
Commission, had failed to render adequate, suffici ent and satisfactory service and had violated
the important conditions of its certificate as well as the directives and the rules and regulations
of the Commission, the rule cannot apply.
To apply that rule unqualifiedly is to encourage violation or disregard of the terms and
conditions of the certificate and the Commission's directives and regulations, and would close
the door to other applicants who could establish, operate and provide adequate, efficient and
satisfactory service for the benefit and conveni ence of the inhabitants. It should be emphasized
that the paramount consideration should always be the public interest and public convenience.
The dut y of the Commission to protect investment of a public utili ty operator refers only to
operators of good standing those who comply with the laws, rules and regulations and not
to operators who are unconcerned with the public interest and whose investments have failed
or deteriorated because of their own fault.
ISSUE 3:
WON the penalty imposed by the Commission on the petitioner that is, the revocation
of the certificate and the forfeiture of the franchise were proper
HELD 3:
Yes. It should be observed that Section 16(n) of Commonwealth Act No. 146, as
amended, confers upon the Commission ample power and discretion to order the cancellation
and revocation of any certificate of public convenience issued to an operator who has

34
violated, or has willfully and contumaciousl y refused to comply with, any order, ru le or regulation
of the Commission or any provision of law.
What matters is that there is evidence to support the action of the Commission. In the instant
case, as shown by the evidence, the contumacious refusal of the petitioner since 1954 to
comply with the directives, rules and regulations of the Commission, its violation of the conditions
of its certificate and its incapability to comply with its commitment as shown by its inadequate
service, were the circumstances that warranted the action of the Com mission in not merely
imposing a fine but in revoking altogether petitioner's certificate. To allow petitioner to continue
its operation would be to sacrifice public interest and convenience in favor of private interest.
A grant of a certificate of public conveni ence confers no property rights but is a m ere
license or privilege, and such privilege is forfeited when the grantee fails to comply with
his commitments behind which lies the paramount interest of the public, for public
necessit y cannot be made to wait, nor sacrificed for private convenience. (Collector of
Internal Revenue v. Estate of F. P. Buan, et al., L-11438 and Santiago Sambrano, et al. v.
PSC, et al., L-11439 & L-11542-46, Jul y 31, 1958)
(T)he Public Service Commission, ... has the power to specify and define the terms and
conditions upon which the public utility shall be operated, and to make reasonabl e rules
and regulations for its operation and the compensation which the utility shall receive for
its services to the public, and for any failure to comply with such rules and regulations or
the violation of any of the terms and conditions for which the license was granted, the
Commission has ample power to enforce the provisions of the license or even to revoke
it, for any failure or neglect to comply with any of its terms and provisions. (Batangas
Trans. Co. v. Orlanes, 52 Phil. 455, 460; emphasis supplied)
Presumably, the petitioner has in mind Section 21 of Commonwealth Act No. 146, as
amended, which provides that a public utility operator v iolating or failing to comply with the
terms and conditions of any certificate, or any orders, decisions or regulations of the
Commission, shall be subject to a fine and that the Commission is authorized and empowered to
impose such fine, after due notice and hearing. It should be noted, however, that the last
sentence of said section states that the remedy provided therein "shall not be a bar to, or affect
any other remedy provided in this Act but shall be cumulative and additional to such remedy or
remedies." In other words, the imposition of a fine may only be one of the rem edies which the
Commission may resort to, in its discretion. But that remedy is not exclusive of, or has preference
over, the other remedies. And this Court will not substitute its discretion for that of the
Commission, as long as there is evidence to support the exercise of that discretion by the
Commission.

35

BATANGAS TRANSPORTATION CO. VS. CAYETANO ORLANES

FACTS
Orlanes is holder of a certificate of public convenience to operate an autobus line from Taal to
Lucena,
passing
through
Batangas,
Bolbok
and
Bantilan
(in
Batangas Province) and Candelaria and Sariaya (Tayabas Province) without any fixed schedule
and is prohibited to accept passengers or cargo from Taal to any point before Balbok, and vice
versa. He filed an application for a permit before the Public Service Commission wherein he
seeks to have a certificate of public convenience to operate with fixed times of departure
between Taal and Bantilan and to nullify the prohibition against him by granting him the right to
receive passengers and and cargo at points between Taal and Bantilan.
Batangas Transportation Company (BTC ) operates a regular service of auto t rucks between the
principal municipalities of the Province of Batangas and some of those of the Province of
Tayabas; Since 1918, it has been operating a regular service between Taal and Rosario, and that
in 1920, its service was extended to the municipalit y of San Juan de Bolbok, with a certificate of
public convenience issued by the Public Service Commission. BTC applied to the Commission
for a permit to increase the number of trip hours at and between the same places from
Batangas to Rosario, and/or for an order that all irregular operators be prohibited from operating
their respective licenses, unl ess they should observ e the interval of two hours before, or one hour
after, the regular hours of the Batangas Transportation Company.
The Commission granted the petition of Orlanes. BTC filed a motion for a rehearing which was
denied. Hence this petition before the SC.
ISSUE: Whether or not a certificate of public convenience should be issued to Orlanes, a second
operator, to operate a public utility in competition with BTC, a first operator, that is already
operating, adequate and satisfactory service?

HELD: NO.
An autobus line is a public utility, and, as such, is a common carrier and an important factor in
the business affairs of the country.
The Public Service Commission, as provided in Act No. 3108, as amended by Act No. 3316, has
the power to specify and define the terms and conditions upon which the public utility shall be
operated, and to make reasonabl e rules and regulations for its operation, and t o fix the
compensation which it shall receive for its services to the public, and for good cause may
suspend or even revoke a license when once granted.
The power of the Commission to issue a certificate of public convenience depends on the
condition precedent that, after a full hearing and investigation, the Commission shall have
found as a fact that the operation of the proposed public service and its authority to do business
must be based upon the finding that it is for the convenience of the public.
There is no claim or pretense that BTC has violated any of the terms and conditions of its license.
Neither does the Public Service Commission find as a fact that the granting of a license to
Orlanes as a regular operator between the points in question is required or necessary for the
convenience of the traveling public, or that there is any complaint or criticism by the public of
the services rendered by the Batangas Transportation Company over the route in question.
Evidence is conclusive that BTC operated its line five years before Orlanes ever turned a wheel,
yet the legal effect of the decision of the Commission is to give an irregular operator, who was
the last in the field, a preferential right over a regular operator, who was the first in the field. Th at
is not the law, and there is no legal principle upon which it can be sustained.
The fact that the Commission has previously granted a license to any person to operate a bus
line over a given highway and refuses to grant a similar license to another pers on over the same
highway, does not in the least create a monopoly in the person of the licensee, for the reason
that at all times the Public Service Commission has the power to say what is a reasonable
compensation to the utility, and to make reasonable rules and regulations for the convenience

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of the traveling public and to enforce them.
So long as the first licensee keeps and performs the terms and conditions of its license and
complies with the reasonable rules and regulations of the Commission and meets the
reasonable demands of the public, it should have more or less of a vested and preferential right
over a person who seeks to acquire another and a later license over the same route. Otherwise,
the first license would not have protection on his investment, and would be subject to ruinous
competition and thus defeat the very purpose and intent for which the Public Service
Commission was created.
It does not appear that the public has ever made any complaint the Batangas Transportation
Company, yet on its own volition and to meet the increase of its business, it has applied to the
Public Service Commission for authority to increase the number of daily trips to nineteen, thus
showing a spirit that ought to be commended.
The rule has been laid down, without dissent in numerous decisions (SC cites US cases), that
where an operator is rendering good, sufficient and adequate service to the public, that the
convenience do es not require and the public interests will not be promoted in a proper and
suitable manner by giving another operator a certificate of public convenience to operate a
competing line over the same route.
The Government having taken over the control and supervision of all public utilities, so long as
an operator under a prior license complies with the terms and conditions of his license and
reasonable rules and regulation for its operation and meets the reasonabl e demands of the
public, it is the duty of the Commission to protect rather than to destroy his investment by the
granting of a subsequent license to another for the same thing over the same route of travel.
The granting of such a license does not serve its convenience or promote the interests of the
public.
The decision of the Public Service Commission, granting to Orlanes the license in que stion, is
revoked and set aside for being in direct conflict with the underl ying and fundamental principles
for which the Commission was created. The case is remanded to the Commission.

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RAYMUNDO TRANSPORTATION CO., INC. VS. VICTORINO CERVO

FACTS:
Immediately after the liberation of the Philippines, Victorino Cervo secured an emergency
certificate of public convenience to operate one -auto truck from Pililla to Manila from the Public
Service Commission. Such certificate expired on D ecember 31, 1948 and was extended for an
indefinite period in line with the policy of the Commission.
Cervo filed a petition for the conversion of his emergency certificate into a permanent one. The
application was first heard before Chief Atty. Aspillera who was authorized by the Commission to
receive the evidence. Onl y petitioner filed its opposition to the application on the following
grounds: (1) that appellee should not have being allowed to invade Pililla -Manila line because
petitioner has been operating on it even before the war; (2) to allow Cervo to operate on the
same line would result in a ruinous competition with petitioner; (3) that public necessity do es not
require the service proposed by Cervo; and if it so requires, petitioner should had been given the
preference to put up such additional service; and (4) it is unwise to grant a permanent
certificate of public convenience to Cervo after petitioner had completed its pre-war
equipment of 51 units pursuant to their requirement of the Commission.
The Commission granted the permanent certificate applied for by Cervo. Its MR denied,
petitioner filed a petition for review before the SC.
ISSUE: Whether or not a permanent certificate of public convenience should be granted to
Cervo?
HELD: YES
(1) The fact that petitioner has been operating on the Pililla-Manila line for a long time does not
preclude the Public Service Commission from granting an additional permit to operate on the
same line if public necessit y so demands. This is a matter for the Commission to determine. In it
many factors are involved, and as long as they are met by the applicant the granting of a new
permit is justified. Public necessit y and convenience are of paramount importance.
(2) The claim to allow Cervo to operate on the same line would only result in a ruinous
competition is a question which depends upon the requirements of the travelling public. When
public necessity requires that a new operator may be allowed to put up an additional service,
that cannot be considered a ruinous competition, for it is to be presumed that the demand of
the passengers in that line is such as to justify the requirem ents of all those who are in the service.
Competition if wholesome a constructive should be allows because it tend to promote
satisfaction and efficiency in the management and operation of the public service. This is what
the Public Service Commission did: to allow wholesome completion. There is no showing that the
competition is ruinous or prejudicial to the petitioner.
(3) to (4) Whether public necessit y of convenience warrant the putting up of additional service
on the part of Cervo is a question of fact which the Public Service Commission has found in the
affirmative. This finding, being supported by sufficient evidence should not be disturbed. The
plea that if public necessity requires the putting up of additional service such privilege should be
given to the petitioner which is old in the service is tenable, but there are cases where this
cannot be done without causing injustice to emergency operators who were forced to enter
the field due to the inability of old operators to rehabilitate and resume their former service in
keeping with the demand of the travelling public.
And one of this operators is the petitioner which only recentl y acquire d the needed equipment
to put its service on a pre-war level. To deprive Cervo of the privilege already enjo yed by him
after investing money and effort for the sole purpose of giving preference to the peitioner would
be most unfair and unjust and cannot in equity be sanctioned by this Court. Such a ruling would
lead to a monopoly and this should be avoided.

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