PART | COMMON CARRIERS Long-distance trade is said to be both a symptom and motor of change.' Quijano De Manila commented that: “historians say that human civilization began with the invention of the wheel. And it can be argued that only when we entered wheel culture did Philippine Civilization begin. This does not mean that we were uncivilized before; we had a fine culture but it was a pre-wheel culture, With the introduction of the wheel we took a giant step into tool culture, into technology, into urban civilization.” However, as Historian Benito J. Legarda, Jr. observed, the principal mode of transportation for the most part of the Spanish period was by water.’ For almost the entire period of their colonial rule, Spanish authorities in the Philippines were not able “to develop the insular transportation system beyond the trails, paths and river routes used by the natives.” It was only late in the Spanish period when “balance began to tilt toward land transportation with the inauguration of the Manila-Dagupan railroad.” More than a hundred years after the Spanish colonizers left this country, different means of transportation proliferate, We travel by land, water and air, Long-distance trade, through different means of transportation, is commonplace. But as one of the authors noted in an earlier work, every offering of technology brings about causes of discontent and the development of new or improved means of transportation is inevitably coupled with the bane of hazards. It 1J.M, Roberts, A Short History of the World, 1993 Ed., p, 79. "Quijano de Manila, A Question of Identity: Bringing Out the Invisible Filipino in History, 1996. °Benito J. Legarda, Jr., Expanded Research Horizon in Philippine Economic History, from Encuentro, 2008 Ed, p. 15, Ma. Luisa T. Camagay, editor, “Artura G. Corpus, The Colonial Iron Horse, 1999 Ed., p. 14. *Legarda, Jr, supra,2 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW is precisely for this reason that special rules are provided for in the New Civil Code, The imposition of a higher degree of care on common carriers “was calculated to protect the passengers from the tragic mishaps that frequently occur in connection with rapid modern transportation, This high standard of care is imperatively demanded by the preciousness of human life and by the consideration that every person must in every way be safeguarded against all injury. Part I of this work consists of general concepts and basic rules that apply to all types of transportation. Unless otherwise indicated, these concepts and rules apply to transportation by land, water and air. The New Civil Code provisions on Common Carriers take center-stage so to speak. Special rules that apply to maritime transportation and transportation by air are separately discussed in Parts II and III, respectively. The duties of common carriers are discussed and analyzed and extended discussions on the duty to exercise extraordinary diligence can be found in Chapter 3. The formalities of the contract of carriage, including the Code of Commerce provisions on bills of lading and New il Code provisions on documents of title, were also extensively discussed in Chapter 4. Rules on formalities that apply specifically to transportation by air are discussed in Part III. The last chapter of the first part, Chapter 5, discusses matters relating to causes action, conditions precedent in filing cases, statute of limitations, and damages that may recovered in cases filed against common carriers. "Report of the Code Commission, reproduced in Civil Cade Reader, 2005, Ed., p. 582, Carmelo V. Sison, Editor.CHAPTER 1 GENERAL CONSIDERATIONS 1. DEFINITION OF CONTRACT OF TRANSPORTA- TION. There is a contract of transportation when a person obligates himself to transport persons or property from one place to another for a consideration. The contract may involve carriage of passengers or carriage of goods. The person who obligates himself to transport the goods or passengers may be a common carrier or a private car- rier. 2. PARTIES. The parties to a contract of transportation would depend on whether it is for carriage of passengers or carriage of goods. 2.01, CARRIAGE OF PASSENGERS. The parties in a contract of carriage of passengers are the common carrier and the passenger. A passenger is defined as one who travels in a public conveyance by virtue of contract, express or implied, with the carrier as to the payment of fare or that which is accepted as an equivalent thereof. a. Gratuitous or reduced fare. It should be noted in this connection, however, that a passenger is still considered as such (passenger) even if he is being carried gratuitously or under a reduced fare. This is subject to the rule in Article 1758 of the Civil Code which provides that when a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid! b, In Baliwag Transit Corporation v. Court of Appeal, a complaint for damages against the petitioner bus company was filed by the injured party (a person of legal age) and his ‘Wesusa Vda, De Nueea, et al, v. The Manila Railroad Company, No. 31731-R, January 30, 1968, 13 CARY 49, 53. °See Chapter 3. °G.R, No, 80447, January 31, 1989, 169 SCRA 849, a4 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW parents for the injuries that the said injured party sustained in a vehicular accident when he was a passenger in one of the buses of the petitioner. Later, the injured party received payment from the petitioner's insurer and executed a Release of Claim. In due course, the complaint was dismissed because the trial court believed that the execution of the Release of Claim discharged the petitioner and its insurance. Only the parents of the injured passenger appealed. However, the Supreme Court sustained the dismissal, ruling that since the suit was for breach of contract of carriage, the real party-in-interest was the injured passenger because the latter is the contracting party. Hence, his parents cannot maintain an action because they are not real parties-in-interest in an action for breach of contract of carriage. Every action based on contract must be brought by the person whose contractual right has been invaded. 2.02. CARRIAGE OF GOODS. The parties are the shipper and the carrier when the contract is for carriage of goods. The shipper is the person who delivers the goods to the carrier for transportation. The shipper is the person who pays the consideration or on whose behalf payment is made, a, Consignee. The consignee is the person to whom the goods are to be delivered. The consignee may be the shipper himself as in the case where the goods will be delivered to one of the branch offices of the shipper. However, the consignee may be a third person who is not actually a party to the contract. b, When Consignee is bound by Contract. Never- theless, there are instances when the third-party consignee is bound by the agreement between the shipper and the carrier. For instance, in one case, the Supreme Court ruled that the consignee may be deemed to be bound by the terms and conditions of the bill of lading where it was established that he accepted the same and is trying to enforce the agreement." 3, PERFECTION, The Supreme Court has adopted in one case the view that there are two (2) types of contracts of carriage of passengers.’ The first type is the contract to carry, that is, an ‘Everett Steamship Corporation v. Court of Appeals, ef al., No. 122494, October 8, 1998, 297 SCRA 496, 505, "British Airways v. Court of Appeals, No. 92288, February 9, 1999, 218 SCRA £899, citing Paras, Civil Code Annotated, Vol. V, p. 429.PART I — COMMON PROVISIONS 6 Chapter 1 — General Considerations: agreement to carry the passenger at some future date. This contract is consensual and is therefore perfected by mere consent. The second is the contract of carriage or of common carriage itself which should be considered a real contract for not until the facilities of the carrier are actually used can the carrier be said to have already assumed the obligation of the carrier." a. Perfection of Contract of Carriage of Goods. With respect to carriage of goods, there may be a consensual contract to carry goods whereby the carrier agrees to accept and transport goods. at some future date. However, by the act of delivery of the goods, that is, “when the goods [are] unconditionally placed in the possession and control of the carrier, and upon their receipt by the carrier for transportation, the contract of carriage [is] perfected.” b. In British Airways, Inc. v. The Hon. Court of Appeals* the Supreme Court ruled that an action for damages may be sustained for breach of contract to carry. Even if no tickets were issued, a verbal contract to carry is already a binding consensual contract. In the said case, the petitioner repeatedly failed to transport contract workers bound for Jeddah, Saudi Arabia although the costs of airfare tickets were already paid to the petitioner. Confirmed bookings were cancelled without prior notice. Hence, the petitioner was made liable for its breach of obligation to transport the contract workers. 3.01.AIRCRAFT. There is a perfected contract to carry passengers even if no tickets have been issued to said passengers so long as there was already a meeting of minds with respect to the subject matter and the consideration.* a. On the other hand, there is a perfected contract of carriage between a passenger and an airline if it can be established that the passenger had checked in at the departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of the aircraft and that his baggage had already been loaded in the aircraft to be flown with the passenger to his destination.” "Ibid. "Mauro Ganzon v, Court of Appeals, et al., No. L-48757, May 30, 1988, 161 SCRA 646, 650. °G.R. No. 92288, February 9, 1998. “bid. “Korean Airlines Co. Ltd. v. Court of Appeals, No, 114061, Anguat 3, 1994, 234 SCRA 717, 723.6 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW 3.02. BUSES, JEEPNEYS, AND STREET CARS. With respect to buses, jeepneys, or street cars, the Supreme Court explained in one case" that once a public utility bus (or jeepney) stops, it is in effect making a continuous offer to bus riders. Hence, it is the duty of the drivers to stop their conveyances for a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up of the carrier. Liability of the carrier is already based on contract. It follows that the passenger is deemed to be accepting the offer if he is already attempting to board the conveyances and the contract of carriage is perfected from that. point, 3.03. TRAINS. A person who wants to board a train in a railway station must purchase a ticket and must present himself at the proper place and in a proper manner for transportation. Such person must have a bona fide intention to use the facilities of the carrier, possess sufficient fare with which to pay for his passage, and present himself to the carrier for transportation in the place and manner provided. If he does not do so, he will not be considered a passenger." a. Consequently, there was breach of contract of carriage in Light Rail Transit Authority (LRTA), et al. uv. Marjorie Navidad, et al.“ when a certain Nicanor Navidad died after he fell on the LRT tracks and was struck by a moving train which was coming in at the exact moment that Mr. Navidad fell from the platform. Mr. Navidad was treated as a passenger because he entered the LRT station after having purchased a “token” and he fell while he was on the platform waiting for a train. Thus, Mr. Navidad was in the place designated for boarding the train with the intention of riding the oncoming train. "Dangwa Transportation Co, Inc, v. Court of Appeals, et a/., No. 95582, October 7, 1991, 202 SCRA 574, 580. “Jesusa Vda. de Nueca, ef al. ¥. The Manilar Railroad Company, CA-G.R. No. 31731, January 30, 1968, 13 CAR2s 49, “No. 145804, February 6, 2003.PART I — COMMON PROVISIONS. 7 Chapter 1 — General Considerations PROBLEM: 1. X brought seven (7) sacks of palay to the PNR. He paid its freight charges and was issued Way Bill no, 1. The cargo was loaded on the freight wagon of the train. Without any permission, X boarded the freight wagon and not the passenger coach, Shortly after the train started, it was derailed. The freight wagon fell on its side, killing X. ‘There is no evidence that X brought a ticket or paid his fare at the same time that he paid the freight charges for his cargo. Is X a passenger of PNR? A: No, X was not a “passenger.” X, who was a “stowaway,” was a mere trespasser. Hence, the carrier assumes no duty of care in favor of X. (1989) 2, City Railways, Inc. (CRI) provides train service, for a fee, to commuters from Manila to Calamba, Laguna. Commuters are required to purchase tickets and then proceed to designated loading and unloading facilities to board the train. Ricardo Santos purchased a ticket for Calamba and entered the station. While waiting, he had an altercation with the security guards of CRI leading to a fistfight. Ricardo Santos fell on the railway just as a train was entering the station, Ricardo Santos was ran over by the train, He In the action for damages filed by the heirs of Ricardo Santos, CRI interposed lack of cause of action, contending that the mishap occurred before Ricardo Santos boarded the train and that it was not guilty of negligence. Decide. A: ‘The contention of CRI that the heirs have no cause of action is untenable, There was already a perfected contract to carry Ricardo Santos and the carrier already owed him extraordinary diligence, The obligation of the carrier to carry Ricardo Santos to his destination was breached, hence, CRI is liable for culpa-contractual. (2008) 4. COMMON CARRIER. Article 1732 of the Civil Code provides the definition of common carriers, viz.: ARTICLE 1732. Common carriers are persons, cor- porations, firms or associations engaged in the busi- ness of carrying or transporting passengers or goods: or both, by land, water, or air, for compensation, offering their services to the public.8 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW a. It has also been defined as “one that holds itself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation.” 4.01.PUBLIC SERVICE. The concept of “common carrier” under Article 1732 may be seen to coincide neatly with the notion of “public service,” under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code." Under Section 13, paragraph (b) of the Publie Service Act, “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, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classifica- tion, freight or carrier service of any class, express ser- vice, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wire- less communications systems, wire or wireless broad- casting stations and other similar public services...” 5. TEST. In First Philippine Industrial Corporation v. Court of Appeals," the Supreme Court reiterated that the tests for determining whether a party is a common carrier of goods are: (1) He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; (2) He must undertake to carry goods of the kind to which his business is confined; ‘De Guzman v, Court of Appeals, No, L-47822, December 22, 1988, 168 SCRA 612, 'SDe Guzman y. Court of Appeals, bid, 200 SCRA 66 [1995]; 1996 Bar,PART I — COMMON PROVISIONS: 9 Chapter 1 — General Considerations (3) He must undertake to carry by the method by which his business is conducted and over his established roads; and (4) The transportation must be for hire. a. In National Steel Corporation v. Court of Appeals," the Supreme Court reiterated the ruling that the true test of a common carrier is the carriage of goods or passengers, provided it has space for all who opt to avail themselves of its transportation for a fee. b. In Baseos v. Court of Appeais” the Supreme Court explained that the test to determine a common carrier is whether the given undertaking is part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted. ce. The Supreme Court ruled in Spouses Cruz v. Sun Holidays, Ine." that the operator of a beach resort that accepts clients by virtue of a tour package-contracts that included transportation to and from the Resort and the point of departure in Batangas is considered a common carrier. The Court observed that its ferry services are so intertwined with its main business as to be properly considered ancillary thereto. The constancy of respondent's ferry services in its resort operations is underscored by its having its own boats. And the tour packages it offers, which include the ferry services, may be availed of by anyone who can afford to pay the same. These services are thus available to the public. 6, CHARACTERISTICS. The concept of common carriers contemplated under Article 1732 of the Civil Code and the fact that the said concept corresponds to the concept of “public service” under the Publie Service Act results in the application of the following rules or principles: (1) Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as “a sideline”).* (2) Article 1732 also carefully avoids making any dis- tinction between a person or enterprise offering transportation "No. 112987, December 12, 1987, 283 SCRA 45, 61 "5G. No. 101089, April 7, 1993, 221 SCRA 318 SG.LR. No. 186312, June 29, 2010, “De Guzman ¥. Court of Appeals, supra, at pp. 617-618,10 ESSENTIALS OF TRANSPORTATION AND PUBLIC. UTILITIES LAW service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis." (3) Article 1732 does not distinguish between a carrier offering its services to the “general public,” ie., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. (4) A person or entity is a common carrier and has the obligations of the common carrier under the Civil Code even if he did not secure a Certificate of Public Convenience. (5) The Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. (6) The Civil Code does not provide that the transportation should be by motor vehicle. (7) A person or entity may be a common carrier even if he has no fixed and publicly known route, maintains no terminals, and issues no tickets. (8) A person or entity need not be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them.” 6.01.,BROADER CONCEPT. The above-enumerated characteristics of common carriers derived from case law indi- cate an expanding concept of common carriers. Carriers which are considered common carriers in a number of decisions do not fall neatly into the concept of common carriers contemplated in the test announced in National Stee! Corporation v. Court of Appeals.» 6.02. ANCILLIARY BUSINESS. Article 1732 makes no distinction between one whose principal business activity "De Guzman v. Court af Appeals, Ibid. "De Guzman ¥, Court af Appeals, ibid. =De Guzman v, Court af Appeals, ibid. “First Philippine Industrial Corporation v. Court of Appeals, e¢ al., No. 125848, December 29, 1988, 300 SCRA G61, =First Philippine Industrial Corporation v. Court of Appeals, ibid, ™Asia Lighterage and Shipping, Ine, v, Court of Appeals, G.R. No. 147248, August 19, 2003, "Fabre, Jr. v. Court of Appeals, No. 111127, July 26, 1996, 259 SCRA 426, 435, "Supra.PART I — COMMON PROVISIONS: Lh Chapter 1 — General Considerations is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as “a sideline”). Hence, in De Guzman v. Court of Appeals,” private respondent Cendafia was considered a common carrier although his principal business was as a junk dealer. Said respondent was engaged in buying used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates. Thus, even if the transportation of goods was ancillary to the main business of buying and selling used bottles and scrap metals, the Supreme Court considered the private respondent a common carrier. 6.03. LIMITED CLIENTELE. Although the clientele is limited, the regularity of the activities of a carrier may indicate that the same carrier is a common carrier. a. In one case, the petitioner, a customs broker and warehouseman, was declared a common carrier although she does not indiscriminately hold her services out to the public but offers the same to select parties with whom she may contract in the conduct of her business. In the said case, petitioner entered into a contract with SMC to transfer paper and kraft board from the Port Area in Manila to SMC’s warehouse in Ermita, Manila. As a common carrier, she is bound to exercise extraordinary diligence in transporting the goods and is presumed to be negligent when she failed to deliver the same.” b. In Phil. American General Insurance Company, et ai. v. PKS Shipping Company," respondent PKS Shipping Corporation transported the 75,000 bags of cement of peti- tioner DUMC in a barge. The bags of cement sank together with the barge when the latter was being towed by a tug boat. ‘The Supreme Court declared that PKS was a common carrier Supra, ™Virgines Calvo v, UCPB General Insurance Co., G.R. No. 148496, March 19, SG.R. No, 149038, April 9, 2003,12 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW because it was engaged in the business of carrying goods for others for a fee. “The regularity of its activities in the area indicates more than just a casual activity on its part. Neither can the concept of a common carrier change merely because individual contracts are executed or entered into with the patrons of the carrier.” PKS was declared a common carrier although it had a limited clientele. ce. In Asia Lighterage and Shipping, Inc. v, Court of Appeals, the petitioner was also involved in the business of carrying goods through its barges. It has no fixed and publicly known route, maintains no terminals, and issues no tickets. The Supreme Court still ruled that the petitioner is a common carrier pointing out that the principal business of the petitioner is that of lighterage and drayage and it offers its barges to the public for carrying or transporting by water for compensation. Petitioner was considered a common carrier whether its business of carrying of goods is done on an irregular basis rather than scheduled manner and with a limited clientele. A common carrier need not have a fixed and publicly known route nor does it have to maintain terminals or issue tickets. 6.04.MEANS OF TRANSPORATION. The Supreme Court ruled in First Philippine Industrial Corp. v. Court of Appeals that pipeline operators are common carriers that are subject to business taxea on common carriers. Such operators are common carriers even if the oil or petroleum products are being transported not through motor vehicles but through pipelines. The Court used the tests to determine the existence of common carriers enumerated earlier and observed that: “Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, ie., petroleum products, for hire as a public employment, It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that the petitioner has a limited clientele does not exclude it from the definition of a common carrier. XEK "Supra Supra.PART I — COMMON PROVISIONS: 13 Chapter 1 — General Considerations As correctly pointed out by petitioner, the definition of*common carriers” in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. Tn fact, in the United States, oil pipe line operators are considered common carriers. Under the Petroleum Act of the Philippines (Republic Act 987), petitioner is considered a “common carrier,” Thus, Article 86 thereof provides that: ‘Art. 86, Pipe line concessionaire as common carrier. — A pipe line shall have the preferential right to utilize installations for the transportation of petroleum owned by him, but it is obliged to utilize the remaining transporta- tion capacity pro rata for the transportation of such other petroleum as may be offered by others for transport, and ‘to charge without discrimination such rates as may have been approved by the Secretary of Agriculture and Natu- ral Resources.” 7. EFFECT OF CHARTER PARTY. A charter party may transform a common carrier into a private carrier. However, it must be a bareboat or demise charter where the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated." The common carrier is not transformed into a private carrier if the charter party is a contract of affreightment like a voyage charter or a time charter. In a voyage charter, the carrier is answerable to the loss of the goods received for transportation.” The Supreme Court gave this explanation in Planters Products, Inc. vu, Court of Appeals, et al." “A‘charter-party’ is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person far a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her toa merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. “Caltex (Phils.} v. Sulpicio Lines, 315 SCRA 709 [1999]. “Loadstar Shipping Co., Inc. v. Pioneer Asia Insurance Corp., G.R. No. 187481, January 2006, “Caltex (Phils,) v. Sulpicio Lines, ibid.; Coastwise Lighterage Corporation v. Court of Appeals, 245 SCRA 787 (1995); ‘Cebu Salvage Corporation v. Philippine Home Assurance Corp., G.R. No. 160403, Jannary 25, 2007. "G.R. No. 101503, September 15, 1993, 226 SCRA 476, 484-436,ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship. Upon the other hand, the term ‘common or public carrier’ is defined in Art. 1732 of the Civil Code. The definition extends to carriers cither by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a ‘common or public carrier’ and a ‘private or special carrier’ lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier. It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V “Sun Plum,” the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargoPART I — COMMON PROVISIONS 15 Chapter 1 — General Considerations when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. Itis therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a ‘yeasel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes: private, at least insofar as the particular voyage covering the charter-party is concerned, Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer, xxx We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law — ‘As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of ane and of several persons, Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the erew are in each case his servants, the freighter in each case is usually without. any representative ‘on board the ship; the same opportunities for fraud or collusion occur; and the same difficulty in discovering the truth as to what has taken place arises..." a, A case usually relied upon in support of the argument. that a carrier that is chartered is converted into a private carrier is Home Insurance Co. v. American Steamship Agencies, Inc. Although the charter party involved in the said case was a contract of affreightment, the Court still ruled that it was a private carrier, However, the rvling in the said case has no doctrinal foree because it was explained in the above-quoted Planters Products, Inc. case that the carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, is misplaced for the reason that “No. L-25599, April 4, 1968, 2: AZ16 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowner from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. Moreover, it was pointed out that the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not find application in our jurisdiction, for it was observed that the growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers. CASES: 1, AM Trucking, a small company, operates two trucks for hire on selective basis. It caters to only a few customers, and ita trucks do not make regular or scheduled trips. It does not even have a certificate of public convenience. On one occasion, Reynaldo contracted AM to transport, for a fee, 100 sacks of rice from Manila to Tarlac. However, AM failed to deliver the cargo, because its truck was hijacked when the driver stopped in Bulacan to visit his girlfriend. May Reynaldo hold AM as a common carrier? A: Yes. Reynaldo may be held liable as common carrier. Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both and one who does such carrying only as an ancillary activity. Article 1732 does not make any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the general public, ie., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. This is also consistent with the definition of public service under the Public Service Act (De Guzman v. CA, 168 SCRA 612 (1988). 2 On November 12, 1984, Cebu Salvage Corporation (CSC) and Maria Cristina Chemicals Industries, Ine. [MCCII] (as charterer) entered into a voyage charter wherein petitioner was to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Ine. Pursuant to the contract, on December 23,PART I — COMMON PROVISIONS Chapter 1 — General Considerations 1984, petitioner received and loaded 1,100 metric tons of silica quartz on beard the M/T Espiritu Santo which left Ayungon for Tagoloan the next day. The shipment never reached its destination, however, because the M/T Espiritu Santo sank in the afternoon of December 24, 1984 off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo. MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Assurance Corporation. Respondent paid the claim in the amount of P211,500 and was subrogated to the rights of MCCII. Thereafter, it filed a case in the RTC against CSC for reimbursement of the amount it paid MCCII. CSC claims that it is not liable insisting that the agreement was merely a contract of hire wherein MCCIL hired the vessel from its owner, ALS Timber Enterprises (ALS), Not being the owner of the M/T Espiritu Santo, petitioner did not have control and supervision over the vessel, its master and crew. Thus, it could not allegedly be held liable for the loss of the shipment caused by the sinking of a ship it did not own. Will the action prosper? ‘Yes, the action will prosper. There is a contract of carriage of goods between CSC and MCCIT; the cargo was loaded on board the vessel; loss or non-delivery of the cargo was proven; and petitioner failed to prove that it exercised extraordinary diligence to prevent such loss or that. it was due to some casualty or force majeure. The voyage charter here being a contract of affreightment, the carrier was answerable for the loss of the goods received for transportation. ‘CSC was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would use. All throughout its dealings with MCCIL, it represented itself as a common carrier. The fact that it did not own the vessel it decided to use to consummate the contract of carriage did not negate its character and duties as a common carrier. The MCCII (respondent’s subrogor) could not be reasonably expected to inquire about the ownership of the vessels which petitioner carrier offered to utilize, As a practical matter, it is very difficult and often impossible for the general public to enforce its rights of action under a contract of carriage if it should be required to know who the actual owner of the vessel is. In fact, in this case, the voyage charter itself denominated the petitioner as the “owner/operator” of the vessel. The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been received for transportation, It was not signed by MCCI, as in fact18 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW it was simply signed hy the supercargo of ALS. This is consistent with the fact that MCCII did not contract directly with ALS. While it is true that a bill of lading may serve as the contract. of carriage between the parties, it cannot prevail aver the express provision of the voyage charter that MCCII and petitioner executed. Finally, petitioner cannot argue that MCCII should be held liable for its awn loss since the voyage charter stipulated that cargo insurance was for the charterer’s account. This deserves scant consideration. This simply meant that the charterer would take care of having the goods insured. It could not exculpate the carrier from Hability for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary to public policy. The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a carrier that enters into a contract of carriage is not linble to the charterer or shipper if it does not own the vessel it chooses to use, MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for reimbursement for its loss. Certainly, to permit a common carrier to escape its responsibility for the goods it agreed to transport (by the expedient of alleging non-ownership of the vessel it emplayed) would radically derogate from the carrier's duty of extraordinary diligence. It would also open the door to collusion between the carrier and the supposed owner and to the possible shifting of liability from the carrier to one without any financial capability to answer for the resulting damages (Cebu Salvage Corporation v. Philippine Home Assurance Corp., G.R. No. 150403, January 25, 2007). COMMON CARRIER DISTINGUISHED FROM PRI- VATE CARRIER. The distinction between a “common or public carrier” and a “private or special carrier” lies in the character of the business, such that if the undertaking is a single transaction, not a part of a general business or occupation, although involving the carriage of the goods for a fee, the person or corporation offering such service is a private carrier.” For instance, if a person agrees to carry a person to the airport using his privately-owned car that is meant for personal use, he will be considered a private carrier. ™Planters Products, Inc, v, Court of Appeals, step General Insurance Company v. PKS Shipping Company, 2003, 401 SCRA 222, 228, Philippine American ‘No, 149038, April 9,PART 1 — COMMON PROVISIONS 19 Chapter 1 — General Considerations a. In National Steel Corporation v, Court of Appeals” the vessel involved, the MV Vlasons I, rendered tramping services and, as such, does not transport cargo or shipment for the general publie. Its services are available only to specific persons who enter into a special contract of charter party with its owner, Consequently, the carrier was considered a private carrier by the Supreme Court explaining that: “Article 1732 of the Civil Code defines a common carrier as “persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.” It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee. A carrier which does not qualify under the above test is deemed a private carrier. “Generally, private carriage is undertaken by special agreement ond the carrier does not hold himself out to carry goods for the general public. ‘The most typical, although not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages.” In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the Regional Trial Court, it carried passengers or goods only for those it chose under a “special contract of charter party.” As correctly concluded by the Court of Appeals, the MV Viasons I “was not a common but a. private carrier.” Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party. Recently, in Valenzuela Hardwood and Industrial Supply, Ine, v. Court of Appeals and Seven Brothers Shipping Corporation, the Court ruled: .. in a contract of private carriage, the parties may freely stipulate their duties and obligations, which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts invalving common carriers.” “G.R, No. 112287, December 12, 1997, 283 SCRA 46,20 b. ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW It follows that while a common carrier is bound to exercise extraordinary diligence, a private carrier owes only diligence of a good father of a family. Moreover, while a common carrier cannot stipulate that it is exempt from liability for the negligence of its agents or employees, a private carrier may validly enter into such stipulation. The stipulation involving a common carrier is void for being contrary to public policy. There is no presumption on the part of the private carrier. He who alleges negligence must prove such negligence. PROBLEMS: 1. Tirso Molina charters a vessel owned and operated by Star Shipping Co., a common carrier, for the purpose of transporting two tractors to his logging concession. ‘The crane operator of the shipping company somehow negligently puts the tractors in a place where they would tilt each other. During the trip, a strong wind hits the vessel, causing severe damage to the tractors. Tirso ‘Molina sues the shipping company for damages. The latter cites a stipulation in the charter agreement exempting the company from liability for loss or damage arising from the negligence of its agents, Tirso Molina countered by stating that the aforementioned stipulation is against public policy and therefore, null and void. Is the stipulation valid? Would you hold the shipping company liable? ‘Yes, The stipulation is valid if there was bareboat charter. Acommon carrier that undertakes to carry a special cargo or charter to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is valid, being not against public policy. Hence, Star Shipping Company is not liable. During the elections last May, AB, 2 congressional can- didate in Marinduque, chartered the helicopter owned by Lobe Mining Corporation (LMC) for use in the election campaign, AB paid LMC the same rate normally charged hy companies regularly engaged in the plane chartering business. In the charter agreement between LMC and AB, LMC expressly disclaimed any responsibility for the acts or omissions of its pilot or for the defective condition of the plane's engine. The helicopter crashed killing AB. Investigations disclose that the pilot's error was the cause of the accident, LMC now consults you on its possible liability for AB's death in the light of the above findings. ‘How would you reply to LMC’s query?PART | — COMMON PROVISIONS 21 Chapter 1 — General Considerations A: [would reply to LMC that it may not be held liable for the death of AB. A stipulation with private carrier that would disclaim responsibility for simple negligence of the carrier's employees is a valid stipulation, Such stipulation, however, will not hold in case of Liability for gross negligence or bad faith. 3. © Co. shipped 20,000 bags of soy beans through S/S Melon, owned and operated by X Shipping Lines, consigned to the Toyo Factory and insured by the Surety Insurance Co., against all risks. C Co. hired the entire vessel, with the option to go north or south, loading, stowing and discharging at its risks and expense. The owner and the shipper agree on a stipulation exempting the owner from liability for the negligence of its agents. When the cargo as delivered to the consigmee, there were shortages amounting to 10,500.00. The insurance company paid for the damage and sought reimbursement from the X Shipping Lines as carrier. Is the carrier liable? A: X Shipping Lines is not liable if there was bareboat charter. X Shipping Lines agreed to carry a special carga or chartered to a special person only, becomes a private carrier. Hence, the New Civil Code provisions on common carriers cannot be applied where the carrier is not acting as such but as a private carrier. As a private carrier, @ stipulation exempting the ship owner from liability for the negligence of its agents is not against policy and is deemed valid. 9. COMMON CARRIAGE DISTINGUISHED FROM OTHER CONTRACTS, Common carriers that carry or transport goods by sea should be distinguished from those who are engaged in towage and from arrastre operators. 9.01. DISTINGUISHED FROM TOWAGE. In towage, ‘one vessel is hired to bring another vessel to another place. Thus, a tugboat may be hired by a common carrier to bring a barge to a port. In this case, the operator of the tugboat cannot be considered a common carrier. In maritime law, it refers to a service rendered to a vessel by towing for the mere purpose of expediting her voyage without reference to any circumstances of danger. It is usually confined to vessels that have received no injury or damage.” “Black's Law Dictionary, 6th Bd., p, 1837.22 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW a. The party that provides the service in a contract of towage is required to observe the due diligence of a good father ofthe family. The negligence of the obligor in the performance of the obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care and prudence in the performance of the obligation as the nature of the obligation so demands.“ b. For instance, the exercise of ordinary prudence by the operator includes the duty to ensure that its tugboat is free of mechanical problems. While adverse weather has always been a real threat to maritime commerce, the least that the operator of a tug boat should do is to ensure that the tugboat would be able to secure the vessel being towed at all times during the engagement.* 9.02. DISTINGUISHED FROM ARRASTRE. Arrastre, a Spanish word which refers to hauling of cargo, comprehends the handling of cargo on the wharf or between the establish- ment of the consignee or shipper and the ship's tackle. The responsibility of the arrastre operator lasts until the delivery of the cargo to the consignee. The service is usually performed by longshoremen.« a. ‘The functions of an arrastre operator usually include the following: (1) to receive, handle, care for, and deliver all merchandise imported and exported, upon or passing over Government-owned wharves and piers in the port; (2) to record or check all merchandise which may be delivered to said port at shipside, and in general and; (3) to furnish light, and water services and other incidental services in order to undertake its arrastre service." b. Hence, the functions of an arrastre operator have nothing to do with the trade and business of navigation, nor to the use or operation of vessels.“ Both as to the nature of the Cargolift Shipping, Ine. v. L, Actuaria Marketing Corp. and Skyland Brokerage, Inc., G.R, No, 146426, June 27, 2006, Cargolift Shipping, Inc. v. L. Actuaria Marketing Corp. and Skyland Brokerage, Inc., Ibid. “Mindanao Terminal and Brokerage Service, Inc. v. Phoenix Assurance Company of New York/Mcgee & Co., Inc., G.R. No. 162467, May 4, 2009. “Delgada Brothers, Ine. ¥. Home Insuranee, Tne., No. 1-16567, March 27, 1961, 1 SCRA 854. “Ibid., citing 1 Am Jur 664, 668.PART I — COMMON PROVISIONS 2a Chapter 1 — General Considerations functions and the place of their performance (upon wharves and piers shipside), the arrastre operator's services are clearly not maritime. They are, in fact, no different from those of a depositary or warehouseman. Even if the arrastre service depends on, assists, or furthers maritime transportation, itmay be deemed merely incidental to its aforementioned functions as arrastre operator and does not, thereby, make the service maritime in character.” The operation of an arrastre operator starts on and its responsibility for the merchandise and goods begins from the time they are placed upon the wharves or piers or delivered along sides of ships. c. In Summa Insurance Corporation v, CA and Part Service Inc.,“ the Supreme Court imposed a higher degree of diligence on the arrastre operator explaining that: “x x x The relationship therefore between the can- signee and the arrastre operator must be examined. This relationship is much akin to that existing between the consignee ar owner of shipped goods and the common car- rier, or that between a depositor and a warehouseman. In the performance of its obligations, an arrastre operator should observe the same degree of diligence as that required of a common carrier and a warehouseman as enunciated under Article 1739 of the Civil Code and Section 3(b) of the Warehouse Receipts Law, respectively. Being the custodian of the goods discharged fram a vessel, an arrastre operator's duty is to take good care of the goods and to turn them over to the party entitled to their possession. (Emphasis supplied)"" 9.03. DISTINGUISHED FROM STEVEDORING. Note further that the common carriers and arrastre operators should be distinguished from persons or entities engaged in stevedoring. The function of stevedores involves the loading and unloading of coastwise vessels calling at the port.” a. The word stevedoring originated from the Latin word ‘stipare,” meaning “to stuff.”" Stevedoring was derived Tid. 324 Phil. 214 [1996]. “Ibid, citing Malayan Insurance Co., Inc. y. Manila Port Services, 138 Phil. 69 (1968), “Cebu Arrastre Service v. Collector of Internal Revenue, G.I. No. L-7444, May 30, 1956. J. Thannapan, Marine Law, 2007 Edition, p. 185, hereinafter cited as “Than- an.”ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW directly from Spain and Portugal. It started as a phonetic spelling of Spanish escribador or Portugese estivador which literally means a man who stuffs in the sense of a man who loads ships. Stevedoring refers to the handling of the cargo in the holds of the vessel or between the ship's tackle and the holds of the vessel. The responsibility of the stevedore ends upon the loading and stowing of the cargo in the vessel." b. The diligence required of a stevedore is the diligence ofa good father of a family,” A stevedore is not a common carrier for it does not transport goods or passengers; it is not akin to a warehouseman for it does not store goods for profit. The loading and stowing of cargoes would not have a far reaching public ramification as that of a common carrier and a warehouseman; the public is adequately protected by our laws on contract and on quasi-delict. The public policy considerations in legally imposing upon a common carrier or a warehouseman a higher degree of diligence is not present in a stevedoring outfit which may provides labor in loading and stowing of cargoes for its clients. 9.04. DISTINGUISHED FROM TRAVEL AGENCY. A travel agency is not a common carrier. In many cases, the object of contractual relation of a person who purchases a ticket through a travel agency is only the agency's service of arranging and facilitating the booking, ticketing and accommodation in a package tour. In contrast, the object of the contract with a common carrier is transportation. The contract between the travel agency is a contract of service and not a contract of carriage.” The diligence required of a travel agency is not extraordinary diligence but that of a good father of a family,” “Thannapan, p. 185. “Mindanao Terminal and Brokerage Service, Ine. y. Phoenix Assurance Company of New York/Megee & Co., Inc., supra. “Mindanao Terminal and Brokerage Service, Inc. vy. Phoenix Assurance Company af New York/Megee & Co,, Inc., supra “Mindanao Terminal and Brokerage Service, Inc. v. Phoenix Assurance Company of New York/Megee & Co., Inc., supra “Crisostomo v. The Court of Appeals, et a/., G.R. No, 138334, August 25, 2003, 409 SCRA 528, 534. "Ibid.PART I — COMMON PROVISIONS 25 Chapter 1 — General Considerations 10. TRAMP SERVICE AND LINE SERVICE. Cargo operation may be classified into two types, namely, line service and tramp service. a. Republic Act (RA) No. 9515 defines “Line service” as the operation of a common carrier which publicly offers services without discrimination to any user, has regular ports of call/destination, fixed sailing schedules and frequencies and published freight rates and attendant charges and usually carries multiple consignments.” Liners carry “general cargoes,” meaning whatever is offered is accepted for shipment." b. On the other hand, RA No. 9515 defines “Tramp service” as the operation of a contract carrier which has no regular and fixed routes and schedules but accepts cargo wherever and whenever the shipper desires, is hired on a contractual basis, or chartered by any one or few shippers under mutually agreed terms and usually carries bulk or break bulk cargoes. Tramps “offer their capacity for the carriage of bulk cargoes as desired by the shipper, who ordinarily engages the whole of the ship; each voyage is thus a matter of special arrangement between the shipowner and shipper."“ The tramp seeks and usually gets a full cargo loaded by a single shipper and such cargoes are most often in bulk or in standard packages and typically consist of raw materials, fuels and unprocessed foods so vital to the world economy." e. Noticeably, while RA No. 9515 refers to an entity engage in “Line Service" as a common carrier, an entity that provides “Tramp Service” is only referred to as a “contract carrier.” Nevertheless, those engaged in “Tramp Service” may also be considered common carriers depending on the circumstances. 11. GOVERNING LAWS. Article 1766 of the Civil Code expresses the primacy of the said Code over the laws that were in force prior to its enactment, Article 1766 provides: ARTICLE 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. “Section 1 [e), R.A. Act No, 9516. "Grant Gilmore and Charles L. Black, Jr., The Law of Admiralty, 2nd Edition, 1975 Edition, p. 19, hereinafter referred to as “Gilmore and Black.” “Gilmore and Black, p. 13. Gilmore and Black, p. 19726 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW a. However, Article 1753 of the Civil Code is also explicit that with respect to cases involving loss, destruction or deterioration of goods, the law of the country of destination shall apply. Thus, Philippine Laws shall apply if the goods are to be transported from Japan to the Philippines. ARTICLE 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration. b. The Supreme Court explained the rules on the applicable laws regarding international carriage in one case in this wise: “The law of the country to which the goods are to be transported governs the liability of the common carriers in case of their loss, destruction or deterioration. As the cargoes in question were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code."= e. Consistently, Philippine law was applied in a collision ease where it was established that the goods in question were transported from San Francisco, California and Tokyo, Japan to the Philippines. It was explained that the laws of the Philippines will apply in case of loss of goods due to collision. It is immaterial that the collision occurred in foreign waters.“ However, it was explained that collision falls among matters not specifically regulated by the Civil Code, so Articles 826 to 839 of Book Three of the Code of Commeree shall apply exclusively.” “Eastern Shipping Lines, Inc. v, The Nisshin Fire and Marine Insurance Co,, et al., No. L-71478, May 29, 1987, 150 SCRA 485, 469. ®Thid., citing Samar Mining Co., Ine. v. Nordeutecher Lloyd, 192 SCRA 529 (1984) & American President Lines v. Klepper, 110 Phil. 243, 248 [1960}, see also Sea-Land Service, Ine. v, Intermediate Appellate Court, et al., No. L-76118, August 1, 1987, 153 SCRA 552, 557, “National Development Company v. The Court of Appeals, et al., Nos. L-49407 and L-49469, August 19, 1988, 164 SCRA 593, 603, "Thid,PART [ — COMMON PROVISIONS: 27 Chapter 1 — General Considerations d. Similarly, Philippines laws were applied in a situation where the good were being transported from Hong Kong to the Philippines, The goods fell overboard and were lost during the course of the voyage.” e. Treaties are also part of the law of the land. Hence, trea- ties can also be applied in this jurisdiction. Thus, in international air transportation, the Convention for the Unification of Certain Rules Relating to the International Carriage by Air or “Warsaw Convention” with its amendments should be applied." International air transportation means: (1) The place of departure and the place of destination are within the territories of two contracting countries regardless of whether or not there was a break in the transportation or transshipment; (2) The place of departure and the place of destination are within the territory of a single contracting country if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though the power is not a party to the Convention.” 11.01. SUMMARY OF RULES. The rules with respect to applicable laws were summarized, thus:” *a) Coastwise Shipping. (1) New Civil Code (Art, 1732-1766) — primary law. (2) Code of Commerce — governs suppletorily in absence of Civil Code provisions. b) Carriage from Foreign Ports to Philippine Ports (1) New Civil Code — primary law (2) Cade of Commerce — ali matters not regulated by the Civil Code (National Development Co. v. CA, 164 SCRA 593). Philippine Charter Insurance Corp, v, Neptune Orient Lines/Overseas Agency Services, Inc., G.R. No, 145044, June 12, 2008, Alitalia v. Intermediate Appellate Court, 192 SCRA 9 [1997] Mapa v. Court of Appeals, 275 SCRA [1997] Sundiang and Aquine, Reviewer on Commercial Law, 2009 Ed.28 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW (3) Carriage of Goods by Sea Act — suppletorily to the Civil Code (Thid.) c) Carriage from Philippine Ports to Foreign Ports (1) The laws of the country to which the goods are to be transported. (Art. 1753, Civil Code; National Development Co. v. CA, 164 SCRA 593). d) Overland Transportation. (1) Civil Code — primary law. (2) Code of Commerce — suppletorily. e) Air Transportation. (1) Civil Cade (2) Code of Commerce (3) For International Carriage — Convention for the Unification of Certain Rules Relating to the International Carriage by Air or “Warsaw Convention” with its amendments (Alitalia v. Intermediate Appellate Court, 192 SCRA 9). xx x" 12. NATURE OF BUSINESS. Common carriers exercise a sort of public office, and have duties to perform in which the public is interested.» Common carriers are public utilities; they are enterprises that specially cater to the needs of the public and conduce to their comfort and convenience. As such, common carriers are impressed with public interest and concern.” Consequently, common carriers are subject to regulation by the State.” a. Moreover, the business of common carriers impinges directly and intimately upon the safety, well being and property of the members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their “Fisher v. Yangeo Steamship Company, et al., No, 8005, November 5, 1914 and March 31, 1915, 31 Phil. 1, 18. "Kilusang Maya Uno Lebor Center v. Hon. Jesus B. Garcia, Jr, ef al., No. 115381, December 23, 1994, 239 SCRA 386, 391, Pisher v. Yangco Steamship Company, et al., supra.PART | — COMMON PROVISIONS 29 Chapter 1 — General Considerations services.” That is the reason why common carriers are required under the Civil Code to exercise extraordinary diligence in the performance of their obligation to carry goods and/or passengers. 13. REGISTERED OWNER RULE AND KABIT SYSTEM. In certain cases, it is not only the operator of the vehicle who may be held liable even if the cause of actions is culpa contractual. Ordinarily, the person who can be sued for breach of contract is the contracting party. However, in certain cases, by reason of public policy, the law allows victims of accidents to sue those who, strictly speaking, are third parties, This obtains in the cases covered by the registered owner rule. 13.01. REGISTRATION LAWS. Registration of motor vehicles is now governed by Republic Act No. 4136 otherwise known as “The Land Transportation and Traffic Code.” The law on registration is now being administered by the Land Transportation Office, The pertinent provisions of the Code provide: Sec. 5. Compulsory registration of motor vehicles. — (a) All motor vehicles and trailer of any type used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation for the current year in accordance with the provisions of this Act. (b) The dates of annual registration of motor vehicles shall be based on a registration scheme to be prepared by the Bureau of Land Transportation subject to approval of the Minister of Transportation and Communications. The scheme shall provide for a system that will distribute the registration of motor vehicles equitably over different months in a calendar year. Said scheme and rates shall not be changed more often than once every three (3) years, and only upon due notice given to the public at least ninety (90) calendar days before the effectivity of such registration scheme. Any registration of motor vehicles not renewed or before the date fixed by the Bureau of Land Transporta- tion shall become delinquent and invalid. De Guzman v. Court of Appeals, supra.; Loadstar Shipping, Co., Inc, v, Court of Appeals, et al., No. 131621, September 28, 1999, 315 SCRA 349, 448,30 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW (c) Dealer's Report. — Dealers shall submit to the Director of Land Transportation a report concerning the sale or transfer of or any other transaction involv- ing motor vehicles, including such information as importation, manufacturing data, and number of stocks remaining, as the Director may require for the effective enforcement of the provision of this Act within five (5) working days from such sale, transfer or transaction. ‘Such dealers shall furnish also the buyer with a duplicate copy thereof, duly authenticated by the Director of Land Transportation. (d) Unauthorized repair of change of engine serial number. — Unless satisfactorily explained to and approved by the Director of Land Transportation, no repair involving the restoration of the original or registered serial number as stamped on the engine shall be allowed. No change involving an alteration of or tampering with the original or registered engine serial number of a motor vehicle shall ever be allowed, and any motor vehicle with a trace of having its engine serial number altered or tampered with shall be refused registration or re-registration. (e) Encumbrances of motor vehicles. — Mort- gages, attachments, and other encumbrances of motor vehicles, in order to be valid against third parties must be recorded in the Bureau. Voluntary transactions or voluntary encumbrances shall likewise be properly recorded on the face of all outstanding copies of the certificates of registration of the vehicle concerned. Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be recorded, and in the absence of such cancellation, no certificate of registration shall be issued without the corresponding notation of mortgage, attachment and/or other encumbrances. Records of encumbrances of motor vehicles shall be kept by the Bureau of Land Transportation in chronological and/or alpha-numerical and/or any other sequence and shall contain, among other things, the time, date, number of the entry, and other cross-indexing entries for immediate data retrieval, in a “Book of MotorPART | — COMMON PROVISIONS. Chapter 1 — General Considerations Vehicle Encumbrances” referring to the creation, can- cellation or foreclosure of the aforesaid mortgages, attachments or to other encumbrances. The Bureau of Land Transportation shall collect a fee of Fifty Pesos (P50.00) for every annotation of a mortgage, attachment and/or other encumbrances or cancellation thereof. (As amended by B.P. Big. 74). SECTION 14. Issuance of certificates of registration. — A properly numbered certificate of registration shall be issued for each separate motor vehicle after due inspection and payment of corresponding registration fees. SECTION 15. Use and authority of certificate of registration. —(a) The said certificate shall be preserved and carried in the car by the owner as evidence of the registration of the motor vehicle described therein, and shall be presented with subsequent applications for re-registration, transfer of ownership, or recording of encumbrances: Provided, That in lieu of the certificate of registration a true copy or photostat thereof may be carried in the motor vehicle. (b) The certificate of registration issued under the provisions of this Act for any motor vehicle shall, while the same is valid and effective and has not been suspended or revoked, be the authority for the operation of such motor vehicle. (c) No motor vehicle shall be operated on the public highways in a manner which would place it under a classification requiring the payment of a larger registration fee than that stated in the certificate of registration. SECTION 16. Suspension of registration certificate. — If on inspection, as provided in paragraph (6) of Section four hereof, any motor vehicle is found to be unsightly, unsafe, overloaded, improperly marked or equipped, or otherwise unfit to be operated, or capable of causing excessive damage to the highways, or not conforming to minimum standards and specifications, the Commissioner may refuse to register the said motor vehicle, or if already registered, may require the number32 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW plates thereof to be surrendered to him, and upon seventy-two hours notice to the owner of the motor vehicle, suspend such registration until the defects of the vehicle are corrected and/or the minimum standards: and specifications fully complied with. Whenever it shall appear from the records of the Commission that during any twelve-month period more than three warnings for violations of this Act have been given to the owner of a motor vehicle, or that the said owner has been convicted by a competent court more than once for violation of such laws, the Commissioner may, in his discretion, suspend the certificate of registration for a period not exceeding ninety days and, thereupon, shall require the immediate surrender of the number plates. Whenever a motor vehicle is found to be under- weighed the owner thereof shall pay the difference in the registration fees corresponding to the shortage in weight plus a fifty percent surcharge, and until such payment is made, the certificate of registration of the motor vehicle concerned shall be suspended by the ‘Commissioner. After two such suspensions, re-registration of the vehicle concerned for one year may be denied. The Commissioner shall notify the owner of the motor vehicle of any action taken by him under this section. Sec. 17. Number plates, preparation and issuance of. — The Bureau of Land Transportation shall cause reflective number plates to be prepared and issued to owners of motor vehicles and trailers registered and recorded in the Bureau of Land Transportation under ‘this Act, as amended, for a reasonable fee: Provided, That the fee shall be subject to the approval of the Minister of Transportation and Communications in ‘consultation with the Minister of Finance, and, Provided, further, That the identification, numbers and letters of any motor vehicle number plate shall be permanently assigned to such motor vehicle during its lifetime. No motor vehicles shall be exempted from payment of registration fees. Motor vehicles for hire and privately owned motor vehicles shall bear plates of reflectivePART | — COMMON PROVISIONS 93 Chapter 1 — General Considerations materials so designed and painted with different colors to distinguish one class from another. The transfer of motor vehicle plates whether tem- porary or regular, validating tags and/or stickers from ‘one motor vehicle to another without permit from the Bureau of Land Transportation, except security number plates on authorized vehicles, shall be punishable with a fine of not less than Five Thousand Pesos (P5,000.00) and/or imprisonment of six months at the discretion of the Court. For purposes of renewal of registration of motor vehicles, the Director or his Deputies shall issue valid- ating tags and stickers indicating the year of registry, charging a reasonable fee: Provided, That the fee shall be subject to the approval of the Minister of Transportation and Communications in consultation with the Minister of Finance, (As amended by B.P, Blg. 43) SECTION 18. Use of number plates. — At all times, every motor vehicle shall display in conspicuous places, ‘one in front and one in the rear thereof, the said number plates. The number plates shall be kept clean and cared for, and shall be firmly affixed to the motor vehicle In such a manner as will make it entirely visible and always legible. Except in the case of dealer's number plates which may be used successively on various motor vehicles in stock, no person shall transfer number plates from motor vehicle to another, No dealer's number plate shall be used on any motor vehicle after said vehicle has been sold and delivered to a purchaser, and no dealer shall allow such dealer's number plates to be used on any motor vehicle after its sale and delivery to a purchaser. 14.02. REGISTERED OWNER RULE. The rule in this jurisdiction is that the person who is the registered owner of a vehicle is liable for any damage caused by the negligent operation of the vehicle although the same was already sold or conveyed to another person at the time of the accident. The registered owner is34 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW liable to the injured party subject to his right of recourse against the transferee or the buyer. The Supreme Court explained in Erezo v. Jepte:™ The Revised Motor Vehicles Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon any public highway unless the same is properly registered, It has been stated that the system of licensing and the requirement that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury to pedestrians and other travelers from the careless management of automobiles, and to furnish a means ef ascertaining the identity of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways (2 R. C. L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered for the current year, but that dealers in motor vehicles shall furnish the Motor Vehicles Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer's serial number and motor number, (Section 5[c], Act No. 3992, as amended.) Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties (Chinchilla v. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway (Section 5{a], Act No. 3992, as amended). The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle ‘on the public highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these cireumstances, 80 inconvenient or prejudicial to the public, that. the motor vehicle registration is primarily ordained, in the interest of the *“Gaudioso Erero, et al, v. Aguedo Jepte, GR. No. L-9605, September 30, 1957; Equitable Leasing Corporation v, Lucita Suyon, et al., G.R. No. 143360, September 5, 2002; Aguilar v. Commercial Savings Banks, 112 Phil. 834, 841 (2001); Spouses Hernandez v. ‘Spouses Dolor, $79 Phil. 696, 605 (2004), “hid.PART | — COMMON PROVISIONS: Chapter 1 — General Considerations determination of persons responsible for damages or injuries caused on public highways, “One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and another is that the knowledge that means: of detection are always available may act as.a deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of means to discaver him."The purpose of the statute is thwarted, and the displayed number becomes a ‘snare and delusion,’ if courts would entertain such defenses as that put forward by appellee in this case. No responsible person or corporation could be held liable for the most outrageous acts of negligence, if they should be allowed to place a ‘middleman’ between them and the public, and escape Liability by the manner in which they recompense their servants." (King v. Brenham Automobile Co., 145 8. W. 278, 279.) With the above policy in mind, the question that defendant-appellant poses is: should not the registered owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility and lay the same on the person actually owning the vehicle? ‘We hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places. upon him as an incident or consequence af registration, Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would he easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who ‘possesses no property with which to respand finaneially for the damage or injury done. A victim of recklessness on the public highways is usually without means to diseaver or identify the person actually causing the injury or damage. He has no means other than by recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prave the contrary to the prejudice of the person injured, that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured person.36 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW The ahove policy and application of the law may appear quite harsh and would seem to confliet with truth and justice. ‘We da not think it is sa. A registered owner wha has already sold or transferred a vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to comply with the registration that the law demands and requires. a. The registered owner is not liable if the vehicle was taken from his garage without his knowledge and consent. To hold the registered owner liable would be absurd as it would be like holding liable the owner of a stolen vehicle for an accident caused by the person who stole such vehicle.” b. ‘The registered owner rule applies even if the registered owner leased the vehicle to another who is the actual operator.” The registered owner is directly liable. In order to be free from liability, the lessor-owner should register the lease contract with the Land Transportation Office." In other words, the lease should be annotated in the certificate of registration in order that there will be notice to third parties that the lessee and not the registered owner who is in possession and operating the vehicle. As expressed by the Supreme Court in one case: “a sale, lease, or financial lease, for that matter, that is not registered with the Land Transportation Office, still does not bind third persona who are aggrieved in tortious incidents, for the latter need only to rely on the public registration of a motor vehicle as conclusive evidence of ownership. A lease such as the one involved in the instant case is an encumbrance in contemplation of law, which needs to be registered in order for it to bind third parties. Under this policy, the evil sought to be avoided is the exacerbation of the suffering of victims of tragic vehicular accidents in not being able to identify a guilty party. A contrary ruling will not serve the ends of justice. The failure to register a lease, sale, transfer or encumbrance, should not benefit the parties responsible, to the prejudice of innocent victims.”” ™Duawit v, Court of Appeals, 173 SCRA 490, 496 (1989). “BA Finance Corporation v, Court of Appeals, 215 SCRA 715. PCI Leasing and Finance, Inc, v. UCPB Genural Insurance, Inc., G.R, No. 162267, July 4, 2008, PCI Leasing and Financo, Inc. v. UCPB General Insurance, Ine., ibidPART I — COMMON PROVISIONS 7 Chapter 1 — General Considerations. c. The registered owner rule applies in a financial lease. A financial lease is a “mode of extending credit through a non- cancellable lease contract under which the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and office machines, and other movable or immovable property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two (2) years during which the lessee has the right to hold and use the leased property, x x x but with no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract."” It should be noted that Section 12 of Republic Act (R.A.) No. 8556 provides “financing companies shall not be liable for loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person or entity except when the motor vehicle, aircraft, vessel, equipment or other property is operated by the financing company, its employees or agents at the time of the loss, damage or injury.” However, the Supreme Court clarified in PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc." that Section 12 of RA 8556 did not repeal Section 5 of the RA 4236. The non-registration of the financial lease precludes enjoyment of the benefits of Section 12 of R.A. 8556. d. Ifthe registered owner is made liable despite the transfer of the vehicle, the transferee is liable to the registered owner for the damages caused to the passenger.” He has the right to be reimbursed by the transferee. Hence, a third party complaint against the transferee may be appropriate in a case filed by the injured passenger against the registered owner. 13.03. KABIT SYSTEM. The “registered owner” rule is applicable whenever the persons involved are engaged in what is known as the “kabif system.” The “kabit system” is an arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings. Although the parties “Republic Act No, 5980 as amended by Republic Act No. 8556, Section 3 [d]. "Supra. "Peres v, Gutierrez, 63 SCRA 149.ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW to such an agreement are not outrightly penalized by law, the habit system is invariably recognized as being contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code.” a, The Supreme Court explained in Abelardo Lim, et al. v. Court of Appeals: Petitioners’ attempt to illustrate that an affirmance of the appealed decision could be supportive of the pernicious kadit system does not persuade. Their labored efforts to demonstrate how the questioned rulings of the courts a quo are diametrically opposed to the policy of the law requiring operators of public utility vehicles to secure a certificate of public convenience for their operation is quite unavailing. The Aabit system is an arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles ‘to operate them under his license, sometimes for a fee or percentage of the earnings, Although the parties to such fan agreement are not outrightly penalized by law, the habit system is invariably recognized as being contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code. In the early case of Dizon v. Octavio, the Court explained that one of the primary factors considered in the granting of a certificate of public convenience for the business of public transportation is the ancial capacity of the holder of the license, so that li 8 arising from accidents may be duly compensated. The kabit system renders illusory such purpose and, worse, may still be availed of by the grantee to escape civil liability caused by Anegligent use of a vehicle owned by another and operated under his license, If a registered owner is allowed to escape liability by proving who the supposed owner of the vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no property with which to respond financially for the damage done. Thus, for the safety of passengers and the public who may have been wronged and deceived through the baneful Aabit system, ®Aberlardo Lim, et af. v. Court of Appeals, et al., No. 125817, January 16, 2002; Baliwag Transit, Ine, v. Court of Appeals, 147 SCRA 2 [1987], “Ibid.PART | — COMMON PROVISIONS: 39 Chapter 1 — General Considerations the registered owner of the vehicle is not allowed to prove that another person has become the owner so that he may be thereby relieved of responsibility. Subsequent cases affirm such basic doctrine. b. It would seem then that the thrust of the law in enjoining the habit system is not so much as to penalize the parties but to identify the person upon whom responsibility may be fixed in ease of an accident with the end view of protecting the riding public. The policy therefore loses its force if the public at large is not deceived, much less involved. c. The Supreme Court explained in the Abelardo Lim case that it is at once apparent that the evil sought to be prevented in enjoining the kabit system does not exist in the said case. “First, neither of the parties to the pernicious kabit system is being held liable for damages. Second, the case arose from the negligence of another vehicle in using the public road to whom no representation, or misrepresentation, as regards the ownership and operation of the passenger jeepney was made and to whom no such representation, or misrepresentation, was necessary. Thus, it cannot. be said that private respondent Gonzales and the registered owner of the jeepney were in estoppel for leading the public to believe that the jeepney belonged to the registered owner. Third, the riding publie was neither bothered nor inconvenienced at the very least by the illegal arrangement. On the contrary, it was private respondent himself who had been wronged and was seeking compensation for the damage done to him. Certainly, it would be the height of inequity to deny him his right.” The Supreme Court therefore concluded that that private respondent (one of the alleged parties to the kabit system) has the right to proceed against petitioners for the damage caused to his passenger jeepney as well as on his business. Any effort to frustrate his claim of damages by the ingenuity with which petitioners framed the issue should be discouraged, if not repelled. 13.04, PART DELICTO RULE. Persons who are parties to the “kabit” system cannot invoke the same as against each other either to enforce their illegal agreement or to invoke the same to escape liability. This is consistent with the time- honored maxim “ex paeto illicito non oritur action” [No action arises out of an illicit bargain]. “Having entered into an illegal40 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW contract, neither can seek relief from the courts, and each must bear the consequences of his acts." a. Thus, in Teja Marketing v, Intermediate Appellate Court™ the petitioner filed a case against the private respondent. alleging that the latter purchased from said petitioner a motorcycle with sidecar. The petitioner was constrained to file an action for damages because the private respondent allegedly failed to pay the balance of the purchase price. However, the Supreme Court sustained the dismissal of the case because the parties were in pari delicto. Although the motorcycle was allegedly purchased from the petitioner, the same remained to be registered in the name of the petitioner and was operated under the latter's franchise pursuant to what is commonly known as “kabit system” without prior approval of the appropriate government agency (which was then the Board of Transportation). The Court ruled that it will not aid either party to enforce an illegal contract. b. In Lita Enterprises, Inc. v. Intermediate Appellate Court" the private respondents purchased five cars on installment. Since they had no franchise, they contracted with the petitioner corporation for the use of the latter's franchise so that they can use the cars as taxi units. Possession was retained by the private respondents. Later, one of the cars collided with a motorcycle resulting in death. A case was filed against the petitioner corporation and in due course, judgment. was rendered against it. Later, the decision was executed and one of the cars of the private respondent and another belonging to the petitioner were levied upon. The private respondents decided to register their ownership and demanded that the petitioner turn over the certificates of registration. The Court ruled that the same demand cannot prosper. The in pari delicto rule was applied because the parties were definitely engaged in a “kabit system.” c. However, in Baliwag Transit, Inc. v. The Hon, Court of Appeals the private respondent Roman Martinez unsuc- “Lita Enterprises v, Intermediate Appellate Court, No. 64693, April 27, 1984, 129 SCRA 79; Teja Marketing v. Intermediate Appellate Court, No, 65510, March 9, 1987, 148 SCRA 347. “Ibid, "Supra. “GR, No. L-57493, January 7, 1987, 147 SCRA 82,PART I — COMMON PROVISIONS a Chapter 1 — General Considerations cessfully tried to compel the petitioner to remit Social Security System contributions because it was established the private respondent worked for and took orders from Pascual Tuazon, the person who allegedly using the franchise of the petitioner in a Kabit System. The employment of the private respondent by Pascual Tuazon was long before the incorporation of the pe- titioner, The Court ruled that the remittance was the respon- sibility of the employer, Pascual Tuazon, regardless of the ex- istence or non-existence of Kabit System, The focal issue in the case was the existence of employer-employee relationship. 13.05, AIRCRAFTS AND VESSELS. It is believed that the policy which prohibits the “Aabit system” may also be applied to vessels and aircrafts that are covered by certificates of public convenience and necessity. It is a basie rule that ho person can operate a common carrier without securing a certificate of public convenience and necessity. Hence, persons who do not have such certificate cannot circumvent the law by using the certificate of another. No permits or certificates can be transferred without the permission of the government agency concerned.” a, With respect to aircrafts, Section 44 of Republic Act No, 9497 otherwise known as the Civil Aviation Authority Act of 2008 provides that the certificate of registration of an aircraft is conclusive evidence of ownership except when ownership itself is at issue. Hence, in action for damages, the name of the carrier appearing in the certificate of registration is conclusive. No proof to the contrary can be established. PROBLEMS: 1. Ais the registered owner of a truck for hire. He sold the truck to B and possession was immediately delivered to B who operated the same. The truck however, remained registered in the name of A. While operating the truck, B’s driver ran over a child who died thereafter, The heirs of the child sued A for damages. A’s defense is that he cannat be held liable as he had already sold the truck to B and it was B's driver who was responsible for the accident, Decide with reasons. “See Section 23, Republic Act No. 776 as. amended; Public Service Act,42 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW Ais liable to the heirs of the victim. Under the registered owner rule, the registered owner remains to be liable to third persons without knowledge of the transfer. As to third persons, the registered owner of a motor vehicle is its true owner regardless of any unregistered sale of the vehicle. A was driving a jeepney registered in the name of B. The jeepney, while being driven negligently hy A, hit and injured X, so X sued B for damages. The defense of B was that he sold the jeepney to C and that X should sue. Rule on B's defense, with reasons. The defense of B is untenable and he is liable to X. Under the registered owner rule, the registered owner remains to be liable to third persons without knowledge of the transfer, Asto third persons, the registered owner ofa motor vehicle is its true owner regardless of any unregistered sale of the vehicle. Hence, B, being the registered owner, continues to be the owner of the vehicle as regards the public and third persons, (1979) Mr. Villa, a franchise holder and registered owner of a truck for hire, entered into a lease contract with Mrs, Santos for the lease by the latter of said truck. The lease contract was not brought to the knowledge of the LFTRB and was therefore not approved by the Land LFTRB. One stormy night, the said truck was speeding along EDSA, skidded and ran over X who died on the spot. The parents of X brought an action for damages against Mr. Villa for the death of their son. a) Will the action against Mr. Villa prosper? Reasons. b) What recourse, if any, does X have? a) Yes, the action against Mr. Villa will prosper. Under the registered owner rule, the registered owner remains to be liable to third persons without knowledge of the transfer. As to third persons, the registered owner of a motor vehicle is its true owner regardless of any unregistered sale of the vehicle. This is especially true in cases involving holders of franchises, The holders of franchises are liable to the public even if their vehicles are leased to another without prior approval of the appropriate government agency. (MYC Agro-Industrial v. Caldo, 132 SCRA 10; Jereos v. CA, 117 SCRA 795). b) An action for quasi-delict can also be maintained by the heirs of X against Mrs. Santos and/or the driverPART | — COMMON PROVISIONS 43 Chapter 1 — General Considerations of the vehicle. The driver may also be charged criminally liable for reckless imprudence resulting in homicide. 4, Johnny owns a Saran jeepney. He asked his neighbor Van if he could operate the said jeep under Van's certificate of public convenience. Van agreed and, accordingly, Johnny registered his jeep in Van's name. On June 10, 1990, one of the passenger jeepneys operated by Van bumped Tomas. Tomas was injured and in due time, he filed a complaint for damages against Van and his driver for the injuries he suffered, The court, rendered judgment in favor of Tomas and ordered Van and his driver, jointly and severally liable, to pay Tomas actual and moral damages, attorney's fees and costs. The sheriff levied on the jeepney belonging to Johnny but registered in the name of Van. Johnny filed a third-party claim with the sheriff alleging ownership of the jeepney levied upon and stating that the jeepney was registered in the name of Van merely to enable Johnny to make use of Van's certificate of public convenience. May the sheriff proceed with the public auction of Johnny's jeepney? A: Yes, the sheriff may proceed with the auction sale of the jeepney. The vehicle remains to be the property of the registered owner despite the alleged tranafer to another. As regards the public and third persons, the vehicle is considered the property of the registered operator (Santos v. Sibug, 104 SCRA 520 (1990) 14, BOUNDARY SYSTEM. In land transportation where the boundary system may be implemented by the common carrier, the carrier cannot escape liability by claiming that the driver is a lessee. The carrier cannot exempt himself on the ground he is a lessor because to tolerate such position would not only abet flagrant violations of the Public Service Law but also to place the riding public at the mercy of reckless and irresponsible drivers — reckless because the measure of their earnings depends largely upon the number of trips they make and, hence, the speed at which they drive; and irresponsible because most if not all of them are in no position to pay the damages they might cause.” “Hernandex v. Dolor, G.R. No, 160286, July 30, 2004; Erezo v. Jepte, 102 Phil. 103 .(19573,CHAPTER 2 OBLIGATIONS OF THE PARTIES This chapter deals with the obligation of the parties in a contract of carriage. It aims to explain the respective duties of the carrier and the passenger or shipper before, during and after the actual transportation of the goods and passenger. However, other rules that specifically apply to carriage by air are discussed in Chapters 17 and 18 of this work. 1. OBLIGATIONS OF THE CARRIER, The most basic obligation of the common carrier is to transport the goods or passenger safely to the agreed destination. This section deals with the following duties of the common carrier: (1) to accept passengers and goods without discrimination; (2) to seasonably deliver the goods or bring the passenger to the destination; (3) to deliver the goods to the proper person; and (4) to exercise extraordinary diligence in the performance of its duties. 1.01.DUTY¥Y TO ACCEPT. A common carrier that is granted a certificate of public convenience is duty bound to accept passengers or cargo without any discrimination. As early as 1915, the Supreme Court already explained the basic principles with respect to goods in FC Fisher v. Yangco Steamship Company, et al.' where it ruled: “The power of the Philippine legislator to prohibit and to penalize all and any unnecessary or unreasonable discriminations by common carriers may be maintained upon the same reasoning which justified the enactment by the Parliament of England and the Congress of the United States of the above mentioned statutes prohibiting and penalizing the granting of certain preferences and 4G.R. No, 8095, November 5, 1914, 31 Phil, 1 44PART I — COMMON PROVISIONS 45 Chapter 2 — Obligations of the Parties discriminations in those countries. As we have said before, we find nothing confiscatory or unreasonable in the conditions imposed in the Philippine statute upon the business of common carriers, Correctly construed they do not force him to engage in any business against his will or to make use of his facilities ina manner or for a purpose for which they are not reasonably adapted. It is only when he offers his facilities as a common carrier to the public for hire, that the statute steps in and preseribes that he must treat all alike, that he may not pick and choose which customer he will serve, and, specifically, that he shall not make any undue or unreasonable preferences or discriminations whatsoever to the prejudice not only of any person or locality but also of any particular kind of traffic. The legislator having enacted a regulation prohibiting common carriers from giving unnecessary or unreasonable preferences or advantages to any particular kind of traffic or subjecting any particular kind of traffic to any undue or unreasonable prejudice or discrimination whatsoever, it is clear that whatever may have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods for carriage, to the prejudice of the traffic in those goods, unless it appears that for some sufficient yeason the discrimination against the traffic in such goods. is reasonable and necessary. Mere whim or prejudice will not suffice. The grounds for the discrimination must be substantial ones, such as will justify the courts in helding ‘the discrimination to have been reasonable and necessary under all circumstances of the case,” a. Present Rule. The ruling of the Supreme Court is valid now as it was then. Present laws likewise disallow discrimination. The present laws forbid failures or refusals to receive persons or property for carriage which have the effect of giving an unreasonable or unnecessary preference or advantage to any person, locality or particular kind of traffic, or of subjecting any person, locality or particular kind of traffic to any undue or unreasonable prejudice or discrimination." For example, Section 16 of Republic Act No, 9295 passed in May 2004 makes it illegal for domestic ship operators to refuse to accept or carry passengers or cargo without just cause. "bid, at p. 16,46 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW b. Passengers. With respect to passengers, it has been explained that a vessel generally engaged as a common carrier of passengers is bound to receive for carriage, without discrimination all proper persons who desire it and properly offer to become passengers unless some sufficient excuse exists for refusing them. 1.02. VALID GROUNDS FOR NON-ACCEPTANCE. ‘The rule prohibiting carriers engaged in publie transportation. from selecting its passengers or cargoes is obviously not. absolute. There are instances when the carrier can validly refuse to accept passengers or goods. The Supreme Court explained in Fisher v. Yangeo Steamship Company et al.“ “Tt would be going too far to say that a refusal by a steam vessel engaged in the business of transporting general merchandise as a common carrier to accept for carriage u shipment of matches, solely on the ground of the dangers incident to the explosive quality of this class of merchandise, would not subject the traffic in matches to an unnecessary, undue oF unreasonable prejudice and discrimination without proof that far come special reason the particular vessel is not fitted to carry articles of that nature. There may be and doubtless are some vessels engaged in business as common carriers of merchandise, which for lack of suitable deck space or storage rooms might be justified in declining to carry kerosene oil, gasoline, and similar products, even when offered for carriage securely packed in cases; and few vessels are equipped to transport those products in bulk. But in any case of a refusal to carry such products which would subject any person, locality or the traffic in such products would be necessary to hear evidence before making an affirmative finding that such prejudice or discrimination was or was not unnecessary, undue or unreasonable. The making of such a finding would involve a consideration of the suitability of the vessel for the transportation of such. products; the reasonable possibility of danger or disaster resulting from their transportation in the form and under ‘the conditions in which they are offered for carringe; the general nature of the business done by the carrier and, in a word, all the attendant circumstances which might 80 C18, 1085, ‘Whid., at p. 23,PARTI — COMMON PROVISIONS a7 Chapter 2 — Obligations of the Parties affect the question of the reasonable necessity for the refusal by the carrier to undertake the transportation of this class of merchandise.” a. Grounds. Indeed, common carriers cannot lawfully decline to accept a particular class of goods unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere whim or prejudice will not suffice.' The instances when the carrier may validly refuse to accept goods include the following: (1) When the goods sought to be transported are dangerous objects, or substances including dynamites and other explosives;* (2) The goods are unfit for transportation;* (3) Acceptance would result in overloading; (4) ‘The goods are considered contrabands or illegal goods; (5) Goods are injurious to health; (6) Goods will be exposed to untoward danger like flood, capture by enemies and the like;* (7) Goods like livestock will be exposed to diseases," (8) Strike; and (9) Failure to tender goods on time." b. Hazardous and Dangerous Substances. Carriers may be granted the authority to carry goods that are by nature dangerous or hazardous. For instance, it is clear that a general refusal for all carriers to accept explosives would involve many persons, firms and enterprises in utter ruin, and would disastrously affect the interests of the publicand general welfare Mbid., at p. 22 “bid. ‘See Article 356, Code of Commerce *Franciseo, The Law on Transportat "Abie. “Thiel. Pbk “Thid. L951 Ed., pp. 40-41ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW of the community." Hence, the certificate of public convenience granted to a carrier may, in fact, include the authority to transport explosives or dangerous chemicals. For example, a earrier may be specially designed to carry dangerous chemicals that are necessary for certain manufacturing businesses and may secure the appropriate authorization for such purpose. (1) Needless to state, a carrier which is not pro- perly equipped to transport dangerous chemicals or explosives may validly refuse to accept the same for transport. In addition, those which are not authorized by the appropriate government agency like the Maritime Industry Authority (MARINA) to carry such goods may also validly refuse the same for transport. (2) In the carriage of goods by sea, the pertinent regulations issued by the MARINA include Memorandum Circular (MC) 101" and Memorandum Circular No. 147." (3) Memorandum Circular No. 101 dated April 6, 1995 disallows the carriage of hazardous goods if there is no Special Permit to Carry from the MARINA. The circular classifies dangerous/hazardous goods and provides for the requirements for the issuance of the permit. (4) On the other hand, Memorandum Circular No. 147 provides for rules on compliance with clearance requirements for the carriage of vehicles, animals, forest products, fish and aquatic products, minerals and mineral products and toxic and hazardous materials to be loaded on board inter-island vessels. The shipowners and master are mandated to accept the said cargoes only if they are covered by the necessary clearance from appropriate government agencies. Non-compliance with the requirement will subject the shipowner and the master to administrative penalties without prejudice to the institution of criminal and/or civil action with the regular courts against these who are responsible. For example, toxic and hazardous materials cannot be transported on v. Yangco Steamship Co., supra. at p. 24. ufra., MARINA MC No. 101 “Published on April 21, 1995, Submitted to UP Law Center on April 25, 1995, “Published on June 17, 1999, Submitted to UP Law Center on June 23, 1999,PART | — COMMON PROVISIONS: 49 Chapter 2 — Obligations of the Parties board domestic vessels if there is no clearance from the Environmental Management Bureau, b. Unfit for Transport Carriers may refuse to accept goods that are unfit for transportation.” These goods may by nature be unfit for transportation or are unfit because of improper packaging or defect in their containers. However, the carrier may choose to transport such goods and limit its liability by stipulation. The Code of Commerce" provides: ARTICLE 356. Carriers may refuse packages which appear unfit for transportation; and if the carriage is to be made by railway, and the shipment is insisted upon, the company shall transport them, being exempt from all responsibility if its objections, is made to appear in the bill of lading. ARTICLE 357. If by reason of well-founded sus- picion of falsity in the declaration as to the contents of a package the carrier should decide to examine it, he shall proceed with his investigation in the presence of witnesses, with the shipper or consignee in attendance. If the shipper or consignee who has to be cited does not attend, the examination shall be made before a notary, who shall prepare a memorandum of the result of the investigation, for such purposes as may be proper. If the declaration of the shipper should be true, the expense occasioned by the examination and that of carefully repacking the packages shall be for the account of the carrier and in a contrary case for the account of the shipper. c, Lessening Loss. Article 1742 of the Civil Code provides that even if the loss, destruction, or deterioration of the goods should be caused by the character of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence to forestall or lessen the loss. “Article 356, Code of Commerce. These provisions on overland transportation apply to maritime transportation and domestic air transportation subject to the rules promulgated by the MARINA, CAB and CAAP.50 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW 1.03. DUTY TO DELIVER THE GOODS. The carrier is duty bound to deliver the goods within the time agreed upon to the designated consignee. a. Agreement as to time. The goods must be deliv- ered within the stipulated time. Where a carrier has made an express contract to transport and deliver property within a specified time, he is bound to fulfill the contract and is liable for any delay, no matter from what cause it may have arisen, (1) This result logically follows from the well- settled rule that where the law creates a duty or charge, and the party is disabled from performing it without any default in himself (and has no remedy over) then the law will excuse him, but where the party by his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might have provided against it by contract, Whether or not there has been such an undertaking on the part of the carrier is to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts." (2) The Code of Commerce provisions on Overland ‘Transportation likewise provides: ARTICLE 358. If there is no period fixed for the delivery of the goods the carrier shall be bound to forward them in the first shipment of the same or similar goods which he may make to the point of delivery; and should he not do so, the damages caused by the delay should be for his account. b. Reasonable Time. The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in the transportation of goods, When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence, of any agreement as to the time of delivery.” "Salado, dr. v. Hon, Court of Appeals, supra. ™Saludo, Jr. v, Hon, Court of Appeals, G.R. No. 95536, March 23, 1992, 207 SCRA 499, 526,PART | — COMMON PROVISIONS 61 Chapter 2 — Obligations of the Parties (1) In determining if the delivery is made within a reasonable time, the expected date of arrival reflected in the bill of lading may be considered. Thus, if the estimated date of arrival is April 3 of a given year, delay in the delivery of goods spanning a period of more than two (2) months is considered unreasonable.” (2) What is considered reasonable time may also depend upon the nature of the goods. For example “where perishable property, such as potatoes, is received by a common carrier at a season when a very low temperature may be reasonably apprehended, great diligence should be used in forwarding such property with dispatch and haste; and where, by a delay of two or three days, the property is damaged by freezing, the carrier may be held liable for the damage.”"" PROBLEM: ai ‘A, in Manila, shipped on board a vessel of B, chairs to be used in the movie house of consignee C in Cebu. No date for delivery or indemnity for delay was stipulated, The chairs, however, were not claimed promptly by C and were shipped by mistake back to Manila, where it was discovered and re-shipped to Cebu. By the the chairs arrived, the date of inauguration of the movie house passed by and it had to be postponed. C brings an action for damages against B claiming loss of profits during the Christmas season when he expected the movie house to be opened. Decide the case with reasons. C may sue B for the loss of his profits provided that ample proof thereof are presented in court, The carrier is obligated to transport the goods without delay, The carrier is liable if he is guilty of delay in the shipment of cargo, causing damages to the consignee. (L979) 1.04. CONSEQUENCES OF DELAY. Excusable delays in carriage suspend, but do not generally terminate, the contract of carriage, and when the cause is removed, the master must proceed with the voyage and make delivery. During “Maersk Line v. Court of Appeals, May 17, 1993, 222 SCRA 108, "Ybid. "See dissenting opinion in Tan Chiong Sian v. Inchausti, No. 6092, March 8, 1912, 22 Phil. 152, 170,a2 ESSENTIALS OF TRANSPORTATION AND PUBLIC ‘UTILITIES LAW the detention or delay, the vessel continues to be liable as a common carrier, not a warehouseman, and remains duty bound to exercise extraordinary diligence If the delay is legally inexcusable, the following consequences results: (1) the carrier is still liable even if natural disaster cause the damage; (2) the stipulation limiting the liability of the carrier is inoperative; (3) the carrier is liable for the damages caused by the delay; and the consignee may exercise his right to abandon under Article 371 of the Code of Commerce. a. Deviation. The carrier is obligated to follow the usual reasonable commercial or customary route. The carrier will be liable if there is damage because of delay or because of improper deviation. If there is no evidence of the usual route, the route is presumed to be the direct geographical route. However, this may be modified in many cases for navigational or other reasons. (1) There will be no improper deviation if the voyage is customarily in stages to replenish the ship's fuel. It may be reasonable that a voyage may be in stages to enable a shipowner to start with fuel sufficient fora stage and necessarily involves calling at a port for refueling to keep the ship seaworthy.” b. New Civil Code Provisions on Delay. The provi- sions of the Civil Code on Common Carriers expressly provide for certain effects of delay in transporting goods. Articles 1740 and 1747 provide; ARTICLE 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility. ARTICLE 1747. If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in case of the loss, destruction, or deterioration of the goods. 70 Am. Jur. 24.939 *Reardon Smith Line Ltd, v, Black Sea and Baltic Insurance Co., AC 562 (HL} (1939) “Reardon Smith Line Ltd, v, Black Sea and Baltic Insurance Co, ibid,PART | — COMMON PROVISIONS 53 Chapter 2 — Obligations of the Parties c. Code Of Commerce Provisions on Delay, The Code of Commerce provisions on Overland Transportation likewise deal with delay on the part of the carrier. Articles 370 to 374 of the Code of Commerce provide: ARTICLE 370. if a period has been fixed for the delivery of the goods, it must be made within such time, and, for failure to do so, the carrier shall pay the indemnity stipulated in the bill of lading, neither the shipper nor the consignee being entitled to anything else. If no indemnity has been stipulated and the delay exceeds the time fixed in the bill of lading, the carrier Shall be liable for the damages which the delay may have caused. ARTICLE 371. In case of delay through the fault of the carrier, referred to in the preceding articles, the censignee may leave the goods transported in the hands of the former, advising him thereof in writing before their arrival at the point of destination. When this abandonment takes place, the carrier shall pay the full value of the goods as if they had been lost or mistaid. Ifthe abandonment is not made, the indemnification for losses and damages by reason of the delay cannot exceed the current price which the goods transported would have had on the day and at the place in which they should have been delivered; this same rule is to be observed in all other cases in which this indemnity may be due. ARTICLE 372. The value of the goods which the carrier must pay in cases of loss or misplacement shall be determined in accordance with that declared in the bill of lading, the shipper not being allowed to present proof that among the goods declared therein there were articles of greater value and money. Horses, vehicles, vessels, equipment and all other principal and accessory means of transportation shall be especially bound in favor of the shipper, although with respect to railroads said liability shall be subordinated toi ESSENTIALS OF TRANSPORTATION AND PUBI UTILITIES LAW the provisions of the laws of concession with respect to the property, and to what this Code established as to the manner and form of effecting seizures and attachments against said companies, ARTICLE 373. The carrier who makes the delivery of the merchandise to the consignee by virtue of combined agreements or services with other carriers shall assume the obligations of those who preceded him in the conveyance, reserving his right to proceed against the latter if he was not the party directly responsible for the fault which gave rise to the claim of the shipper or consignee. The carrier who makes the delivery shall likewise acquire all the actions and rights of those who preceded him in the conveyance. The shipper and the consignee shall have an im- mediate right of action against the carrier who executed the transportation contract, or against the other carriers who may have received the goods transported without reservation. However, the reservation made by the latter shall not relieve them from the responsibilities which they may have incurred by their own acts. ARTICLE 374. The consignees to whom the ship- ment was made may not defer the payment of the expenses and transportation charges of the goods they receive after the lapse of twenty-four hours following their delivery; and in case of delay in this payment, the carrier may demand the judicial sale of the goods transported in an amount necessary to cover the cost of transportation and the expenses incurred. c. Right to Abandon. The first paragraph of Article 371 of the Code of Commerce provides that in cases of delay on account of the fault of the carrier, the consignee may leave the goods transported in the hands of the carrier, informing him thereof in writing before the arrival of the same at the point of destination. The carrier shall be liable for the total value of such goods. The foregoing provision “confers upon the consignee an exceptional but limited right to abandon thePART 1 — COMMON PROVISIONS 55 Chapter 2 — Obligations of the Parties: goods transported during the period intervening between the moment when the fault of the carrier produces a delay which is the generative cause of action, until the moment just before the arrival of the goods at the place of delivery, by communicating such abandonment to the carrier in writing; and when these conditions do not concur, the refusal to accept cannot be effective." 1921 (1) The Supreme Court observed in one case that such rule in Article 371 of the Code of Commerce that the shipper can abandon the goods in ease of unreasonable delay in delivery in overland transportation, can also be made to apply to marine transportation even if the provision is in the Chapter of the Code of Commerce dealing with overland transportation.” (2) Moreover, the Supreme Court ruled that abandonment may also be made by virtue of stipulation or agreement between the parties. The Supreme Court explained in Magellan Mf. Marketing Corp. v. Court of Appeals “Now, there is no dispute that private respondents expressly and on their own volition granted petitioner an option with respect to the satisfaction of freightage and demurrage charges. Having given such option, especially since it was accepted by petitioner, private respondents are estopped from reneging thereon, Petitioner, on its part, was well within its right to exercise said option. Private respondents, in giving the option, and petitioner, in exercising that option, are concluded by their respective actions. To allow either of them to unilaterally back out on the offer and on the exercise of the option would be to countenance abuse of rights as an order of the day, doing violence to the long entrenched principle of mutuality of contracts. It will be remembered that in overland transparta- tion, an unreasonable delay in the delivery of transported goods is sufficient ground for the abandonment of goods. isco, supra., p. 119, citing Decision of Sup. Ct. of Spain dated Nav. 15, Magellan Marketing Mfg. Corp v. Court of Appeals, No, 95529, August 22, 1991, 201 SCRA 102, 123. Myhid.ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW By analogy, this can also apply to maritime transporta- tion. Further, with much more reason can petitioner in the instant case properly abandon the goods, nat only because of the unreasonable delay in its delivery but because of the option which was categorically granted to and exercised by it as a means of settling its liability for the cost and expenses of reshipment, And, said choice having been duly communicated, the same is binding upon the parties on legal and equitable considerations of estoppel. [Emphasis supplied]” 1.05.RIGHTS OF PASSENGERS IN CASE OF DELAY. The Supreme Court explained in Trans-Asia Shipping Lines, Inc. v, Court of Appeals, et al. that “as to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent.” However, Article 698 of the Code of Commerce specifically provides for such a situation, It reads: ARTICLE 698. In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. If the inter- ruption should be caused by the disability of the vessel and a passenger should agree to await the repairs, he may not be required to pay any increased price of pas- sage, but his living expenses during the stay shall be for his own account. a. Suppletory Application. Article 698 of the Code of Commerce applies suppletorily pursuant to Article 1766 of the Civil Code. In addition, Article 698 must be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. Consequently, the carrier is liable for any loss or damage, ineluding any pecuniary loss or loss of profit, which the passenger may have suffered by reason thereof." "G. R. No, 118126, March 4, 1986. “Ibid,PART | — COMMON PROVISIONS. 57 Chapter 2 — Obligations of the Parties b. Effect of Decision of Passenger. [n Trans-Asia Shipping Lines, Inc. v. Court of Appeals, et al.," the passenger was not able to recover lost profits which resulted because of his own decision to disembark. In said case, the plaintiff, a public attorney, boarded a vessel for its voyage from Cebu City to Cagayan de Oro City. The vessel departed at around 11:00 in the evening with only one (1) engine running, After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage to Cagayan de Oro City. The captain acceded to their request and thus the vessel headed back to Cebu City. At Cebu City, the plaintiff together with the other passengers who requested to be brought back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant. The Supreme Court explained that the carrier would have been liable for loss of income if the plaintiff was unable to report to his office on the day he was supposed to arrive were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not, Consequently, any further delay then in the plaintiffs arrival at the port of destination was caused by his decision to disembark. Had he remained on the first vessel, he would have reached his destination at noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore, would have lost only the salary for half of a day.’ c. MARINA Regulation, It should be noted in this connection that Memorandum Circular No, 112 issued by the Maritime Industry Authority provides that “in case the vessel is not able to depart on time and the delay is unreasonable, the passenger may opt to have his/her ticket immediately refunded without any refund service fee from the authorized issuing/ ticketing Office.”* Ibid. This half-day salary was not even awarded because there was no proof that it ‘was not received by the plaintiff. Section 1.3,ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW 1.06.PLACE OF DELIVERY, The goods should be delivered to the consignee in the place agreed upon by the parties. If the specific place or warehouse is designated in the bill of lading, the goods must be delivered in such place even if it is not the usual place of delivery in the place of destination.” The Code of Commerce provisions on Overland Transportation likewise provide: ARTICLE 360. The shipper, without changing the place where the delivery is to be made, may change the consignment of the goods which he delivered to the carrier, provided that at the time of ordering the change of consignee the bill of lading signed by the carrier, if one has been Issued, be returned to him, in exchange for another wherein the novation of the contract appears. The expenses which this change of consignment occasions shall be for the account of the shipper. PROBLEM: 1. If a shipper, without changing the place of delivery changes the consignment of consignee of the goods (after said goods had been delivered to the carrier), under what condition will the carrier be required to comply with the new orders of the ehipper? A: — Article 360 provides that if the shipper should change the consignee of the goods without changing their destination, the carrier shall comply with the new order provided the shipper returns to the carrier the bill of lading and @ new one is issued showing the novation of the contract. However, all expenses for the change must be paid by the shipper, (1975) 1.07.TO WHOM DELIVERED. The goods should be delivered to the consignee or any other person to whom the bill of lading was validly transferred or negotiated. “Delivery must generally be made to the owner or consignee or to someone lawfully authorized by him to receive the goods for his account. By issuing a bill of lading, by stipulating delivery to order, the ship becomes bound to deliver only to one who has the order of the shipper; and it is no excuse for delivery to the wrong person “Francisco, p. 119.PART I — Chapter 2 — MMON PROVISIONS 59 bligations of the Parties that the endorsee of the bill is unknown or that he delayed presenting the bill when such delivery is not instrumental in causing the wrong delivery or misleading the ship.“ The Code of Commerce provides in this connection: ARTICLE 368, The carrier must deliver to the con- signee, without any delay or obstruction, the goods which he may have received, by the mere fact of being named in the bill of lading to receive them; and if he does not do so, he shall be liable for the damages which may be caused thereby. ARTICLE 369. If the consignee cannot be found at the residence indicated in the bill of lading, or if he refuses to pay the transportation charges and expenses, or if he refuses to receive the goods, the municipal Judge, where there is none of the first instance, shall provide for their deposit at the disposal of the shipper, this deposit producing all the effects of delivery without prejudice to third parties with a better right. a. Effect of Negotiable Bill of Lading. It should also be recalled that a negotiable bill of lading is a document of title that may be transferred to a holder for value. In case of such transfer, the carrier is obligated to deliver the goods to the transferee or holder, The transferee to whom the bill of lading has been negotiated acquires the direct obligation of the carrier from the time of such negotiation. There is even no need to notify the carrier that there was such a transfer. The pertinent provision of the Civil Code states: Art. 1513. A person to whom a negotiable document of title has been duly negotiated acquires thereby: (1) Such title to the goods as the person negoti- ating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith for value; and 70 Am dur, 2d 946-947,ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW (2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if such bailee had contracted directly with him. (n) 1.08. DELAY TO TRANSPORT PASSENGERS. The basic rule that applies ta carriage of goods shall also apply to carriage of passengers, that is, the carrier must commence its trip within a reasonable time. A carrier is duty bound to transport the passenger with reasonable dispatch. The carrier shall be made liable when the vessel or vehicle is unreasonably delayed." a. Inter-Island Vessels. With respect to inter-island vessels, the Maritime Industry Authority issued Memorandum Circular No. 112 on December 15, 1995" which provides for the following effects of “delayed and unfinished voyage:” “3.1. Incase the vessel can not continue or complete her voyage for any cause, the carrier is under obligation to transport the passenger to his/her destination at the expense of the carrier including free meals and lodging before the said passenger is transported to his/her destination. A passenger may opt to have his/her ticket refunded in full if the cause of the unfinished voyage is due to the negligence of the carrier, or, to an amount that will suffice to defray transportation cost at the shortest possible route towards his/her destination if the cause of the unfinished voyage is a fortuitous event. 3.2. The carrier shall provide meals, free of charge, during mealtime in case the vessel is delayed in the arrival at the port of destination. 3.3. In case of delay in the departure at the port of origin due to the carrier's negligence, the carrier is also under the obligation to provide meals, free of charge, during meal time to ticketed passengers for the particular voyage. If the cause of the delay is a fortuitous event, the carrier is under no obligation to serve free meals to the passengers. "70 Am Jur 2d 874 “Published in a newspaper of general circulation on December 16, 1995 and submitted to the U.P. Law Center on December 20, 1995,PART I — COMMON PROVISIONS 61 Chapter 2 — Obligations of the Parties 3.4. The carrier is under obligation to duly inform the passengers of the change in sailing schedule of the vessel(s). 2. DUTY TO EXERCISE EXTRAORDINARY DILI- GENCE. A common carrier is required to faithfully comply with his obligation to deliver the goods and to ferry the passenger to the point of destination. Compliance with this obligation must be with the element of integrity in the sense that the goods should be deliv- ered in the same condition that they were received and to transport passengers without encountering any harm or loss. In the exercise of this obligation, the common carrier is obligated to exercise ex- traordinary diligence by Articles 1733 and 1755 of the Civil Code which provide: ARTICLE 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756. ARTICLE 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. a. The manner of exercising extraordinary diligence is discussed extensively in the next chapter, Chapter 3. This section will just focus on basic rules concerning the duty of care imposed on the carrier. 2.01. CODE OF COMMERCE PROVISIONS. Related provisions of the Code of Commerce" as modified by the above- quoted Civil Code provisions are as follows: “For Overland Transporation.62, ESSENTIALS OF TRANSPORTATION AND PUBLIC UTIL LAW ARTICLE 363. Outside of the cases mentioned in the second paragraph of Article 361, the carrier shall be obliged to deliver the goods shipped in the same condition in which, according to the bill of lading, they were found at the time they were received, without any damage or impairment, and failing to do so, to pay the value which those not delivered may have at the point and at the time at which their delivery should have been made. lf those not delivered form part of the goods transported, the consignee may refuse to receive the Jatter, when he proves that he cannot make use of them independently of the others. ARTICLE 364. If the effect of the damage referred to in Article 361 is merely a diminution in the value of the goods, the obligation of the carrier shall be reduced to the payment of the amount which, in the judgment of experts, constitutes such difference in value. ARTICLE 365. If, in consequence of the damage, the goods are rendered useless for sale and consumption for the purposes for which they are properly destined, the consignee shall not be bound to receive them, and he may have them in the hands of the carrier, demanding of the latter their value at the current price on that day. if among the damaged goods there should be some pieces in good condition and without any defect, the foregoing provision shall be applicable with respect to those damaged and the consignee shall receive those which are sound, this segregation to be made by distinct and separate pieces and without dividing a single object, unless the consignee proves the impossibility of conveniently making use of them in this form. The same rule shall be applied to merchandise in bales or packages, separating those parcels which appear sound. PROBLEMS: 1. Maria boarded a passenger truck owned by Metro Transit and driven by Juan, While the truck was proceeding to its destination, it fell into a ravine and several passengers,PART | — COMMON PROVISIONS 63 Chapter 2 — Obligations of the Parties including Maria were killed. The truck was insured under a Common Carrier's policy with Isiand Insurance Company. State the liabilities, if any, of Metro Transit to the heirs of Maria. A: Metro Transit is liable to the heirs of Maria for breach of contract of carriage. It is clear that there was breach of contract of carriage because the passenger died while riding the carrier. The fact that death or injury was caused gives rise to the presumption of negligence. (1968) 2 A shipped 100 pieces of plywood from Davao City to Manila. He took a marine insurance policy to insure the shipment against loss or damage due to “perils of the sea, barratry, fire, jettison, pirates and other such perils. When the ship left the port of Davao, the shipman in charge forgot to secure one of the portholes, thru which sea water seeped during the voyage, damaging the plywood, A filed a claim against the insurance company which refused to pay on the ground that the loss or damage was due to a peril of the sea or any of the risks covered by the policy. It was admitted that the sea was reasonably calm during the voyage and that no strong winds or waves were encountered by the vessel, How would you decide the ease? Explain. A: The insurer validly refused to pay because the proximate cause of the damage to the plywood was not the perils or risks insured against but rather the negligence of the shipman in charge in forgetting to secure one of the portholes of the ship. However, A can recover his damages from the shipowner or ship agent of snid vessel, for not having exercised extraordinary diligence on vigilance over goods. (1983) 2.02. PRESUMPTION OF NEGLIGENCE. In case of loss of effects or cargo or passengers or death or injuries to passengers, the common carrier is presumed to be at fault or have acted negligently unless he had observed extraordinary diligence in the vigilance thereof." The court need not make an express finding of fault or negligence of common carriers, the law imposes liability upon common carriers, as long as it “Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co, (Philippines), Inc.,G-R. No. 168151, September 4, 2004; Mariano, Jr. v. Callejas, GR. No. 166640, July 31, 2009; Aboitiz Shipping Co. vy. New Indin Assurance Company, Ltd., G.R. No. 156978, May 2, 2006,64 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW is shown that; (1) there exist a contract between the passenger or the shipper and the common carrier; and (2) that the loss, deterioration, injury or death took place during the existence of the contract. The Civil Code provides: ARTICLE 1735. In all cases other than those men- tioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. ARTICLE 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as pre- scribed in Articles 1733 and 1755. a. Mere proof of delivery of the goods in good order to a common carrier and their arrival in bad order at their destina- tion (or failure to transport the passenger safely) constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, loss, or destruction of the goods happened, the transporter shall be held responsible." b, Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised ex- traordinary diligence. c. The presumption of negligence was rebutted by the common carrier in Mariano Jr. v. Calleia® when it was estab- lished that the accident was solely caused by the negligence of ‘the other vehicle that was involved in the collision. The evi- dence in the case shows that before the collision, the passenger bus was cruising on its rightful lane along the Aguinaldo High- way when the trailer truck coming from the opposite direction, on full speed, suddenly swerved and encroached on its lane, “Belgian Overseas Chartering and Shipping, N.V. v. Phil. First Ins. Co., No. 143133, June 5, 2002, “Victory Liner, Inc. v, Gammad, G.R. No, 159636, November 25, 2004, “G.R. No. 166640, July 31, 2009.and bumped the passenger bus on its left middle portion. The driver of the bus had every right to expect that the trailer truck coming from the opposite direction would stay on its proper lane. He was not expected to know that the trailer truck had lost its brakes. The swerving of the trailer truck was abrupt and it was running on a fast speed as it was found 500 meters away from the point of collision. Any doubt as to the culpabil- ity of the driver of the trailer truck likewise vanished when he pleaded guilty to the charge of reckless imprudence resulting to multiple slight physical injuries and damage to property in PART I — COMMON PROVISIONS Chapter 2 — Obligations of the Parties acriminal case involving the same incident. PROBLEMS: 1 Peter hailed a taxicab owned and operated by Jimmy Cheng and driven by Hemie Cortez, Peter asked Cortez to take him to his office in Malate. On the way to Malate, the taxicab collided with a passenger jeepney, as a result of which Peter was injured, ie., he fractured his left leg. Peter sued Jimmy for damages, based upon a contract of carriage, and Peter won, Jimmy wanted to challenge the decision before the Supreme Court on the ground that the trial court erred in not making an express finding as to whether or not Jimmy was responsible for the collision and, hence, civilly liable to Peter. He went to see you for advice. What will you tell him? Explain your answer. I will counsel Jimmy to desist from challenging the decision. The cause of action of Peter is culpa contractual, hence, the carrier's negligence is presumed. The pre- sumption arises because there is no question that there was a contract of carriage between Peter and the carrier and Peter was injured while under the care of the said carrier. Consequently, the burden of proof rests on Jimmy to establish that despite an exercise of utmost diligence the collision could not have been avoided. (1990) In an action grounded on the contract af carriage, is there a need for the court to make an express finding of fault or negligence on the part of the carrier in order to hold it liable for claims in behalf of the injured or deceased passengers? Explain. No, common carriers are presumed to have been at fault or to have acted negligently in the case of death or injuries to passengers. The burden is upon the carrier to prove that he observed the utmost diligence of a very cautious person, with due regard for all circumstances. (1982)ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW In a court ease involving claims for damages arising from death and injury of bus passengers, counsel for the bus operator files a demurrer to evidence arguing that the complaint should be dismissed because the plaintiffs did not submit any evidence that the operator or its employees, were negligent. [f you were the judge, would you dismiss the complaint? No, I will not dismiss the complaint provided that there was proof af the death of and/or injury to passengers. Negligence on the part of the carrier is presumed the moment the passenger with whom the carrier had a contract is injured. The burden is on the common carrier to prove that he has a valid defense. (1997) Plaintiff alleges that he is the owner and consignee of two eases of books, shipped in good order and condition at New York, U.S.A., on board the defendant's steamship President Garfield, for transport and delivery to the plaintiff in the City of Manila, all freight charges paid. ‘The two cases arrived in Manila on September 1, 1927, in bad order and damaged condition, resulting in the total loss of one case and a partial loss of the other. The loss in one case is P1,630, and the other P700, for which he filed his claims, and defendant has refused and neglected to pay, giving as its reason that the damage in question “was caused by sea water.” Is the defendant liable to the plaintiff? Yes, the defendant is liable. The defendant having received the two boxes in good condition, its legal duty was to deliver them to the plaintiff in the same condition in which it received them. From the time of their delivery to the defendant in New York until they are delivered to the plaintiff in Manila, the boxes were under the control and supervision of the defendant and beyond the control of the plaintiff. The defendant having admitted that the boxes were damaged while in transit and in its possession, the burden of proof then shifted, and it devolved upon the defendant to both allege and prove that the damage was caused by reason of some faet which exempted it from liability, As to how the boxes were damaged, when or where, was a matter peculiarly and exclusively within the knowledge of the defendant and in the very nature of things could not be in the knowledge of the plaintiff. To require the plaintiff to prove as to when and how the damage was caused would force him to call and rely uponPART I — COMMON PROVISIONS 67 Chapter 2 — Obligations of the Parties the employees of the defendant's ship, which in legal effect would be to say that he could not recover any damage for any reason. ‘That is not the law. Shippers who are forced to ship goods on an ocean liner or any other ship have some legal rights, and when goods are delivered on board ship in good order and condition, and the shipawner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by the reason of some fact which legally exempts him from liability; otherwise, the shipper would be left without any redress, no matter what may have caused the damage. And the evidence for the defendant shows that the damage was largely caused by “sea water,” from which it contends that it is exempt under the provisions af its bill of lading and the provisions of the Article 361 of the Code of Commerce. In the final analysis, the cases were received by the defendant in New York in good order and condition, and when they arrived in Manila, they were in bad condition, and one was a total loss. The fact that the cases were damaged by “sea water,” standing alone and within itself, is not evidence that they were damaged by force majeure or for a cause beyond the defendant's control, The words “perils of the sea,” as stated in defendant's brief apply to “all kinds of marine casualties, such as shipwreck, foundering, stranding,” and among other things, it is said: “Tempest, rocks, shoals, icebergs and other obstacles are within the expression,” and “where the peril is the proximate cause of the loss, the shipowner is excused.” “Something fortuitous and out of the ordinary course is involved in both words ‘peril’ or ‘accident.’ (Amada Mirasol v. The Robert Dollar Ca., G.R. No. L-29721, March 27, 1929) 2.03.DURATION OF DUTY IN CARRIAGE OF GOODS. The New Civil Code is explicit when it comes to the duration of extraordinary responsibility with respect to goods. Due diligence should be exercised the moment the goods are delivered to the carrier. Articles 1736, 1737 and 1738 of the Civil Code provide: ARTICLE 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and68 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of Article 1738. ARTICLE 1737. The common carrier's duty to observe extraordinary diligence over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in fransitu. ARTICLE 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them. a. When the goods are deemed delivered. The goods are deemed delivered to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. When such delivery has thus been accepted by the carrier, the liability of the carrier commences eo instant. b. In Ganzon v. Court of Appeals* the petitioner insisted that the scrap iron had not been unconditionally placed under his custody and control to make him liable. The Court disagreed pointing out that the goods were delivered for loading in the lighter, There was no showing of any condition, qualification, or restriction accompanying the delivery by the shipper of the goods or the receipt of the same by the carrier. Soon after the scraps were delivered to, and received by the petitioner-common carrier, loading was commenced. By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of “Sshudo, Jr. v. Court of Appeals, supra., citing 13 Am. Jur. 2d, Carriers, 763- 764. SG.R. No. L-48757, 30 May 1988,PART I — COMMON PROVISIONS 6 Chapter 2 — Obligations of the Parties carriage was deemed perfected. Consequently, the carrier’s extraordinary responsibility for the loss, destruction, or determination of the goods commenced. The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the carrier, albeit still unloaded. c. In Republic of the Philippines v. Lorenzo Shipping Corp.,* the representatives of the consignee signed the delivery receipt but did not surrender the bill of lading covering the goods, It was ruled that the obligation of the carrier can also be considered terminated despite the non-surrender of the bill of lading. The surrender of the bill of lading is not necessary for the discharge of the obligations of the carrier.” Article 353 of the Code of Commerce provides that after the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him but the bill of lading cannot be returned, the consignee must give a receipt for the goods delivered, d. In Regional Container Lines v. Netherlands Insur- ance Co.,” the Supreme Court reiterated the settled rule in maritime law jurisprudence that cargoes while being unloaded. generally remain under the custody of the carrier. PROBLEM: 1. S shipped goods from Australia on beard a foreign vessel owned and operated by X shipping company, based in Australia and represented in the Philippines by R. The goods were consigned to T of Manila and insured by U against all risks, Upon arrival in Manila Bay, the goods were discharged from the vessel to a lighter owned by the Bay Brokerage Co. When delivered to and received by T, the goods were found to have sustained losses or damages. Evidence disclosed that the damage oceurred while the goods were in the custody of the carrier. The insurance company paid the amount of the loss but sought reimbursement from X and /or R. R disclaimed any “February 7, 2005, 450 SCRA 551. “Republic of the Philippines v. Lorenzo Shipping Corp., ibid “G.R. No. 168151, September 4, 2009; Philippines First Insurance Co., Inc. wv, Wallem Phils. Shipping, Inc.,G.R, No, 165647, March 26, 2009.70 AG 2. Ar CASE: ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW liability alleging that he is a mere agent of X, and having acted as agent of a disclosed principal is, therefore, not liable. What is the liability, if any, of Bay Brokerage Co.” Bay Brokerage Co. has no liability. ‘The facts indicate that the goods were not yet delivered to the brokerage company when they were damaged. Even if the said company can be considered a common carrier, its duty starts only upon delivery of the goods. Star Shipping Lines accepted 100 cartons of sardines from Master to be delivered to 555 Company in Manila. Only ‘88 cartons were delivered, however, these were in bad condition. 555 Company claimed from Star Shipping Lines the value of the missing goods, as well as the damaged goods, Star Shipping Lines refused because the former failed to present a bill of lading. Resolve with reasons the claim of 555 Company. ‘The claim of 555 Company must prosper. The carrier breached its obligation ta safely transport the goods to its destination. The fact that the shipper was not able to present the bill of lading is not a bar to recovery. The contract of carriage was already perfected and effective despite the absence of the bill of lading. (2005) ‘On 4 April 1989, BM shipped on board the vessel Nen Jiang, owned and operated by CO Shipping Co, represented by its agent WALLEM. 3,500 boxes of watermelona valued at US$5,950.00 covered by Bill of Lading No. HKG 99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30 also issued by PAKISTAN BANK. ‘The Bills of Lading contained the following pertinent provision: “One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order. The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon, Hong Kong (hereinafter GPC) as natify party.” The goods were delivered to GPC without the bills of lading. a) Can carrier validly deliver the goods to GPC? b) Did the common carrier validly deliver the goods without the bill of lading or bank guarantee?PART I — COMMON PROVISIONS: 7 Chapter 2 — Obligations of the Parties A: a) Yes, the goods can be validly delivered to GPC. The extraordinary responsibility of the commen carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/ importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them was proper. b) Yes. The carrier submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank guarantee. ‘The telex instructed delivery of various shipments to the respective consignees without need of presenting the bill of lading and bank guarantee per the respective shipper’s request since “far prepaid shipt ofrt charges already fully paid.” Petitioner was named therein as shipper and GPC ‘as consignee with respect to Bill of Lading Nos. HKG 99012 and HKG 99013. To implement the said telex instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to- he strictly delivered, it will no longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate delivery thereof to the buyer! importer is essentially a factor to reckon with, Besides, GPC is listed as one among the several consignees in the telex (Exhibit 5-B) and the instruction in the telex was to arrange delivery of A/M shipment (not any party) to respective consignees without presentation of OB/L and bank guarantee. (Benito Macam v. Court of Appeals, et al., GR. No. 125524, August 25, 1999.) 2.04. COMMENCEMENT OF DUTY IN CARRIAGE OF PASSENGERS. With respect to carriage of passengers by trains, the extraordinary responsibility of common carriers commences the moment the person who purchases the ticket (or a “token” or “card”) from the carrier presents himself at the72 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW proper place and in a proper manner to be transported with a bona fide intent to ride the coach.“ This matter was explained by the Court of Appeals in this wise: “A passenger is defined as one who travels in a public conveyance by virtue of a contract, express or implied, with the carrier as to the payment of fare, or that which is accepted as an equivalent thereof (10 Am, Jur. 26), The relation of carrier and passenger commences when one puts himself in the care of the carrier, or directly under its control, with the bona fide intention of becoming a passenger, and is accepted as such by the carrier (13 C.J.S. 1060) — as where he makes a contract for transportation and presents himself at the proper place and in a proper manner to be transported (Ibid.; Cf, Sweigart v. Shriener, 14 Pa, Dist, & Co, 435); but not where he does not present himself in a proper way to become a passenger (Ibid.; Cf. Southern R. Co. v, Smith, Ga., 86 F, 292, 30 C.C_A. ee 40 L.R.A, 746). One does not become a passenger until ‘has put himself in the charge of the carrier and has es expressly or impliedly received as such by the carrier (10 Am, Jur, 27; Cf. Todd v, L.R.A. 1916F 543), (Italies ours.) ‘The mere purchase of a ticket does not of itself create the relation of carrier and passenger, but it is an element in the inception of the relation, and, when taken with other facts indicating an intention to become a passenger, may be sufficient for such purpose (13 C.J.S. 1067). While ‘the purchase of a ticket before entering the train is not essential to constitute the relation, particularly where he has been given no opportunity to purchase a ticket (Ubid.: Cf. St, Louis, ete., R, Co. v. Green, 161 §.W. 148, 110 Ark, 232), the person must come under the charge of the carrier and be accepted for carriage by virtue of the ticket (10 Am. Jur, 28). Therefore, although it is unnecessary that the person claiming the privileges of a passenger shall have purchased a ticket, such person must have a bona fide intention to use the facilities of the carrier, possess sufficient fare with which to pay for his passage, and present himself to the carrier for transportation in the place and manner provided (Ibid.; Cf. Minois C.R. Co. v. Laloge, 113 Ky. 896, 69 S.W. 795, 62 L.R.A. 405; Italies ours). “Jesusa Vda de Nueca, ef al, v. The Manila Railread Company, CA-G.R. No, 31731, January 30, 1968, 13 CAR2s 49, “Did.PART I — COMMON PROVISIONS 73 Chapter 2 — Obligations of the Parties Awaiting transportation on carrier's premises. — A proper person whom the carrier would be bound to accept who enters upon the carrier's premises such as a station, ticket office, or waiting room, with the intention of becoming a passenger, will ordinarily be viewed as assuming the status of a passenger (10 Am. Jur. 30). However, one who goes to a railroad station to inquire as to the possibility of securing passage on a freight train, which he knots, by the rules of the company, is not allowed to carry passengers, and ta secure passage thereon if possible, is not entitled to the rights of a passenger, but is a mere trespasser (Ibid; Cf. Neice v. Chicago & A.R, Co., 254 Ill. 598, 98 NLE. 989, 41 L.R.A, 162; Italies ours). One who rides upon any part of the vehicle or con- veyance which is unsuitable or dangerous, or which he knows is not intended for passengers, is not presumed to be a passenger (10 Am. Jur. 45), and mere knowledge by the carrier agents that a person is riding in a part of the train which is unsuitable or exposed, or which he knows is not designed for carrying passengers, does not make the person a passenger or charge the carrier with that high degree of care toward him which it owes to one whom it has accepted and agreed to transport as a passenger (10 Am. Jur. 46; Cf. Radley v. Columbia R. Co., 44 0. 332, 75 P.212, 1 Ann, Cas. 447); and one who secures free passage by fraud or stealth is precluded from recovery for injuries sustained through the negligence of the carrier, for he has not assumed the status of a passenger (10 Am. Jur, 49-45; Cf. Condran v. Chicago, M. & St, PR, Co. {C.C.A. 8th], 67 F, 522, 28 L.R.A. 749), Similarly, a person on a conveyance of the carrier, not ordinarily used for conveying passengers, without the knowledge or consent of the earrier and without a ticket or pass, is not entitled to the rights of a passenger (ibid.: Cf, Gardner v, New Haven & N. Co., 57 Conn. 143, 50 Am, Rep. 12), (Italics ours.) A person riding on a freight train, on a driver's pass ora similar arrangement, to look after livestock being transported and as incident to such transportation is, generally regarded as a passenger for hire (13 C.J.S. 1054). However, he must have accompanied the shipment with the agreement of the carrier, otherwise he is not a passenger (13 CJS, 1055; Cf. Chicago, etc., ®. Co. v. Hostetter, 84 N.E. 534, 171 Ind. 465).” a. Trains. Consistently, the petitioner carrier was supposed to exercise extraordinary diligence in Light Rail74 La Mallarea v. November 6, 1989, 179 “Supra, ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW Transit Authority (LRTA), et al. v. Marjorie Navidad, et al. although the injury to the victim was sustained while the victim was still waiting for a coach on the platform of the LRT station. However, the Supreme Court reminded in one case: “With respect to the legal aspects of the case we may observe at the outset that there is no obligation on the part of a street railway company to stop its cars to let on intending passengers at other points than those appointed for stoppage, In fact it would be impossible to operate a system of street cars if a company engaged in this business were required to stop any and everywhere to take on people who are toa indolent, or who imagine themselves to be in too great a hurry, to go te the proper places for boarding the cars. Nevertheless, although the motorman of this car was not bound to stop to let the plaintiff on, it was his duty to do no act that would have the effect of increasing the plaintiff's peril while he was attempting to board the car, The premature acceleration of the ear was, in our opinion, a breach of this duty.” (1) For instance, a person, who after alighting a train, walks along the station platform is considered still a passenger. Similarly, a person who is still retrieving his baggage is still within the responsibility of the carrier.” (2) In Vde de Nueca, et al. v. The Manila Railroad Company," Fermin Nueca was not considered a passenger of the Manila Railroad Company (MRC). Assuming that the deceased was an intending passenger, such a relation was never accepted by MRC as he did not present himself at the proper place and in a proper manner to be transported. He should have stayed at the station, ticket office, waiting room, or even inside the passenger coach; but not beside the baggage car or inside it, the latter place nat being used for conveying passengers. Assuming again that the deceased intended to accompany his cargo inside the baggage car, nowhere in the bill of lading is the deceased-shipper authorized to accompany the shipment. ‘A, 17 SCRA 7a CRA D5 (1989),PART I — COMMON PROVISIONS: 75 Chapter 2 — Obligations of the Parties ‘The deceased was also not given any special arrangement by the carrier or its agents to ride in the freight wagon. MRC, then, did not owe to the deceased the extraordinary diligence that is required of carriers regarding their passengers, b. Carriage by Sea. Similarly, with respect to carriage of passengers by sea, the duty of the carrier commences as soon as a person with bona fide intention of taking passage places himself in the care of the carrier or its employees and is aecepted as passenger.” ec. Land transportation. On the other hand, motor vehicles like passenger jeepneys and buses are duty bound to stop their conveyances for a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they do so. The rule is that once a public utility bus or jeepney stops, it is making a continuous offer to bus riders. (1) The duty to exercise utmost diligence with respect to passengers will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises within a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes reasonable time to see after his baggage and prepare for his departure. PROBLEMS: 1. X, an 80-year old epileptic, boarded the $/S Tamaraw in Manila going to Mindoro. To disembark, the passengers have to walk thru a gangplank, While negotiating the gangplank, X slipped and fell into the waters, X was saved from drowning and was brought to a hospital but after a "80 C.J.S. 1085, “Dangwa Transportation Co,, Ine, v, Court of Appeals, 202 SCRA 575, 580 fag92}.16 ‘CASE: ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW month died from pneumonia, Except for X, all passengers were able to walk thru the gangplank, What is the liability of the owner of S/S Tamaraw? The owner of S/S Tamaraw is liable for the death of X_ Failure to exercise utmost diligence in the safety of passengers is presumed the moment the passenger did not reach his destination. In the present case, X was still a passenger when he fell into the waters because he was only disembarking from the vessel. Hence, the presumption against the carrier is operative. It is up to the carrier to prove its exercise of utmost diligence. Moreaver, it is well settled that if, in the use of a gangplank, a passenger falls off and is injured, the carrier is liable for the injuries sustained irrespective of the cause of the fall if. sufficient gangplank would have prevented the injury (80 CJS 1119 citing Borrows v. Lownsdale Wash., 133 F. 250), (1989) A bus of GL Transit on its way to Davao stopped to enable a passenger to alight. At that moment, Santiago, who had been waiting for a ride, boarded the bus, However, the bus. driver failed to notice Santiago who was still standing on the bus platform, and stepped on the accelerator. Because of the sudden motion, Santingo slipped and fell down, suffering serious injuries. May Santiago hold GL Transmit liable for breach of contract of carriage? Yes. Santiago may hold GL Transit liable for breach of contract. It is well-settled that, motor vehicles like passenger jeepneys and buses are duty bound to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they da so (Dangwa Transportation Co., Ine. v. CA, et. al., G.R. No. 95582, October 7, 1991, 202 SCRA 574). Obviously, the driver of the bus did not exercise utmost diligence in affording Santiago reasonable opportunity to board the bus, (1996) On 14 Getober 1993, about half an hour past seven o'clock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT station (operated by LRTA) after purchasing a “token” (representing payment of the fare), While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assignedPART I — COMMON PROVISIONS. Chapter 2 — Obligations of the Parties to the area (who was an employee of Prudent Security Agency) approached Navidad. A misunderstanding or an altercation between the twe apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in, Navidad was struek by the moving train, and he was killed instantaneously. Are LRTA and Prudent liable? Yes, LRTA is liable but Prudent is NOT liable. The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all cireumstances. Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage, In the absence of satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault, an exception from the general rule that: negligence must be proved. The foundation of LRTA’s 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 safety 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 undertake the taak. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage. With respect to Prudent, if.at all, that liability could only be for tort under the provisions of Article 2176 and related provisions, in conjunction with Article 2180, of the Civil Code. The premise, however, for the emplayer's liability is negligence or fault on the part of the employee. Once such fault is established, the employer 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 employees. The liability is primary and can only be negated by showing due diligence in the selection and supervision of the employee. Unfortunately, there is nothing to link Prudent to the death of Nicanor (Navidad), for the reason 778 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW that the negligence of its employee, Escartin, has not been. duly proven. Hence, Prudent cannot be made liable. (Light Railway Transit Authority v. Marjorie Navidad, G.R. No. 4145804, February 6, 2003.) On May 14, 1985, private respondents filed a complaint for damages against petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which occurred on at Marivic, Sapid, Mankayan, Benguet. It was alleged that on March 25, 1985, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest hospital, the said driver. in utter bad faith and without regard to the welfare of the victim, first brought his other passengers and cargo to their respective destinations before bringing said victim tothe Lepanto Hospital where he expired. ‘The place of the accident and the place where one of the passengers alighted were beth between Bunkhouses 53 and 54, hence the bus was at full stop when the vietim boarded the same. The vietim fell from the platform of the bus when ic suddenly accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the lus when it stopped. The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had supposedly not manifested his intention te board the same. Is the argument tenable? Is the carrier liable? The carrier is liable. The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had supposedly not manifested his intention to board the same is not tenable. When the bus ie not in motion there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Henee, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same. The premature acceleration of the bus in this ease was a breach of such duty.PART I — COMMON PROVISIONS. Chapter 2 — Obligations of the Parties It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length af time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the circumstances. In this case, the bus had “just started” and “was still in slow motion” at the point where the vietim had boarded and was on its platform. It is not negligence per se, or as a matter of law, for one to attempt to board a train or streetcar which is moving slowly. An ordinarily prudent person would have made the attempt to board the moving conveyance under the same or similar circumstances. The fact that passengers board and alight from a slowly moving vehicle is a matter of common experience and both the driver and. conductor in this case could not have been unaware of such an ordinary practice. The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled to all the rights and protection pertaining to such a contractual relation. Hence, it has been held ‘that the duty which the carrier of passengers owes to its patrons extends to persons boarding the cars as well as to those alighting therefrom. Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous indifference. (Dangwa Transportation Co. v. Court of Appeais, G.R. No. 95582, 07 October 1991). ‘On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with their minor daughters, namely, Milagros, 13 years old, Raquel, about 4 years old, and Fe, over 2 years old, boarded the Pambusco Bus No, 352, bearing plate TPU No. 757 (1953 Pampanga), owned and operated by the defendant, at San Fernando, Pampanga, bound for Ano, Mexico, Pampanga. At the time, they were carrying with them four pieces of baggage50 ESSENTIALS OF TRANSPORTATION AND PUBLIC UTILITIES LAW containing their personal belonging. The conductor of the bus, who happened to be a half-brother of plaintiff Mariano Beltran, issued three tickets covering the full fares of the plaintiff and their eldest child, Milagros. No fare was charged on Raquel and Fe, since both were below the height at which fare is charged in accordance with the appellant's rules and regulations, After about an hour's trip, the bus reached Anao whereat it stopped to allow the passengers bound therefor, among whom were the plaintiffs and their children to get off. With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of their baggage, was the first to get down the bus, followed by his wife and his children, Mariano led his companions to a shaded spot on the left pedestrian side of the road about four or five meters away from the vehicle. Afterwards, he returned to the bus in controversy to get his other bayong, which he had left behind, but in so doing, his daughter Raquel followed him, unnoticed by her father. While said Mariano Beltran was on the running board of the bus waiting for the conductor to hand him his bayong which he left under one of its seats near the door, the bus, whose motor was not shut off while unloading, suddenly started moving forward, evidently to resume its trip, notwithstanding the fact that the conductor has net given the driver the customary signal to start, since said conductor was still attending to the baggage left behind by Mariano Beltran, Incidentally, when the bus was again placed into a complete stop, it had travelled about ten meters from the point where the plaintiffs had gotten off, Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the running board without getting his bayong from the conductor, He landed on the side of the road almost in front of the shaded place where he left his wife and children, At that precise time, he saw people beginning to gather around the body of a child lying prostrate on the ground, her skull crushed, and without life. The child was none other than his daughter Raquel, who was run aver by the bus in which she rode earlier together with her parents. Is the carrier liable? Yes, the carrier is liable for damages for the death of the child, Raquel Beltran. It may be pointed out that although it is true that respondent Mariano Beltran, his wife, and their children (including the deceased child) had alighted