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2. Contract of Carriage – real contract; not until the

PART 1: COMMON CARRIERS facilities of the carrier are actually used can the carrier
be said to have assumed the obligation of the carrier;
perfected by actual use.
* AIRCRAFT – perfected if it was established that the
Contract of Transportation – person obligates passenger had checked in at the departure counter, passed
himself to transport persons or property from one place through customs and immigration, boarded the shuttle bus
to another for a consideration. and proceeded to the ramp of the aircraft and baggage
already loaded to the aircraft.
A person who obligates himself to transport goods or
passengers may be a common carrier or a private * Public Utility Bus or Jeepneys or Street Cars – once it
carrier. stops it is in effect making a continuous offer to riders;
perfected when passenger is already attempting to board
the vehicle
1. Carriage of Passengers * TRAINS – perfected when a person:
2. Carriage of Goods a. purchased a ticket/ possess sufficient fare with which to
pay for his passage
1. CARRIAGE OF PASSENGERS b. presented himself at the proper place and in a proper
Parties: common carrier & passenger (carried manner to be transported
gratuitously or not) c. has a bona fide intention to use facilities of the carrier

Passenger – one who travels in a public conveyance Case: British Airways Inc. v. Honorable Court of Appeals
by virtue of contract, express or implied, with the - even if no tickets were issued, a verbal contract to
carrier as to the payment of fare or that which is carry is already a binding consensual contract. In said
accepted as an equivalent thereof. case, petitioner repeatedly failed to transport contract
workers bound for Jeddah. The costs of the tickets were
already paid to petitioners and confirmed bookings were
Time of Perfection:
canceled without prior notice, thus, petitioner was made
2 types of contracts of carriage of PASSENGERS: liable for its breach of obligation to transport the workers.
1. Contract to carry (agreement to carry the
passenger at some future date) – consensual contract Note: a bill of lading/ticket is a documentary proof of the
and perfected by mere consent agreements of both parties, but it is not necessary for the
perfection of the contract to carry.
* AIRCRAFT – perfected even without issuance of ticket
as long as there was already meeting of minds with Continuing Offer Rule:
respect to the subject matter and consideration. - Once a PUB (or Jeepney) stops, it is in effect
making a continuing offer to bus riders. Under this
If a passenger is carried gratuitously or under a reduced rule, it is the duty of the drivers to stop their
fare, he is is still considered as a passenger. However, a
conveyances for a reasonable length of time in order to
stipulation limiting the common carrier’s liability for
afford passengers an opportunity to board and enter,
negligence is valid.
and they are liable for injuries suffered by boarding
Case: Baliwag Transit Corp. v. CA passengers resulting from the sudden starting up of the
-Only the injured person can be considered as a real carrier.
party-in-interest who can instituted a suit. The parents of - the liability is already based on a contract.
the injured party cannot appeal, by themselves, the - it follows that the passengers is deemed to be
dismissal of a case, especially if a release is made by the accepting the offer if he is already attempting to board
party injured. the conveyances and the contract of carriage is
perfected from that point. (Case: Dangwa Traspo. Co.
There may be cases when the party who contacted for a v. CA)
contract of transportation is not the passenger. Such as:
1. An employer who hires the services of a bus to 2. CARRIAGE OF GOODS
ferry its employees to a particular destination. Parties: shipper & carrier
2. School which hire services of a bus to transport
students so that they can attend an event.. Shipper – the person who delivers the goods to the
carrier for transportation; pays the consideration or on
whose behalf payment is made

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carrier is established.
Consignee – person to whom the goods are to be
delivered. May be the shipper himself or a third person CARRIER:
who is not actually a party to the contract Common carriers (CC) (1732)
– persons, corporations, firms or associations
Perfection: engaged in the business of carrying or transporting
> contract to carry goods – consensual passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
(NOT the means of transportation)
> contract of carriage - act of delivery of goods – one that holds itself out as ready to engage in
(goods are unconditionally placed in the possession the transportation of goods for hire as a public
and control of the carrier and upon their receipt by the employment and not as a casual occupation.
carrier for transportation)

Q: When consignee is bound by the contract?

A: A consignee may be bound by the agreement Tests for determining WON a party is a common
between the shipper and the carrier even if the carrier of goods:
consignee is not the contracting party. In one case, SC 1. He must be engaged in the business of
held that consignee is bound by the terms and
carrying goods for others as a public
conditions of the bill of lading especially when it is
employment, and must hold himself out as
established that he accepted the same and is trying to
ready to engage in the transportation of goods
enforce it.
for persons generally as a business and not as
a casual occupation.
In sum, a consignee, although not a signatory to the
2. He must undertake to carry good of the kind to
contract of carriage between the shipper and the
which his business is confined.
carrier, becomes a party to the contract because of:
3. He must undertake to carry by the method by which
1. the relationship of agency between the his business is conducted and over his established
consignee and the shipper. roads.
2. The unequivocal acceptance of the bill of 4. Transportation must be for hire. (Case: First
lading delivered to the consignee, with full Philippine Industrial Corp. vs. CA)
knowledge of its contents.
3. Stipulation pour autrui. True Tests of Common Carrier.
→ Is the carriage of passengers or goods, provided it
Case: Compania Maritima v. Insurance Company of has space, for all who opt to avail themselves of its
North America transportation service for a fee. (Case: National Steel
-For contract of carriage of goods, the carrier can v. CA)
agree to accept and transport goods at a future date. → Is not the quantity or extent of the business actually
However, it is perfected only when: transacted, or the number or the number or character of
1. the goods are placed in the possession and conveyances used in the activity, but whether the
control of the carrier and undertaking is a part of the activity engaged in by the
2. 2. upon its receipt by the carrier for carrier that he has held out to the general public as his
transportation. business or occupation. If the undertaking is a single
transaction, not part of the general business or
Note: the receipt of goods is the foundation of the occupation engaged in , as advertised or held out to the
contract of carriage of goods. Thus, even if the goods general public, he individual or entity is private, not a
are not yet loaded on the ship, the contract already common carrier. (Case: Sps. Perena v. Sps. Nicolas)
exists, especially if the lighters accepted the goods and
signed as agent. Characteristics of Common carriers (CC):
 No distinction between one whose principal
(ACTUAL DELIVERY + ACCEPTANCE=BINDS CARRIER) business is the transportation of persons/goods
and one who does such as an ancillary business
Q: what is the test to determine whether there is a (sideline)
shipper-carrier relationship?  No distinction between regular or scheduled basis
A: when the control and possession of the goods is in and one offering such service on an occasional,
the hands of the carrier and there is nothing else for the episodic or unscheduled business
shipper to do, then the relationship of shipper and  Still a CC even if services offered to a limited

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clientele (between the general public and a narrow goods for another
segment of the general population) - CC = observe extraordinary diligence; in case of
 Still considered a CC even if he did not secure a loss, deterioration or destruction of goods of goods,
Certificate of Public Convenience CCs are presumed to be at fault or have acted
 No distinction as to the means of transporting, as negligently
long as it is by land, water or air
 The Civil Code does not provide that the - 2 types of Affreightment
transportation should be by motor vehicle i. Time charter: vessel is leased to the charterer for a
 Still a CC even if he has no fixed and publicly fixed period of time
know route, maintains no terminals, and issues no ii. Voyage charter: ship is leased for a single voyage
 Pipeline operators are CCs – even if oil or 2. Charter by demise/ Bareboat Charter
petroleum products are transported through - whole vessel is let to the charterer with a
pipelines and not through motor vehicles (Case: transfer to him of its entire command and possession
First Philippine Industrial Corp. vs. CA) and consequent control over its navigation including
the master and the crew who are his servants.
Case: Jose Mendoza v. Philippine Airlines Inc -charter includes both vessel and crew—CC
- The test of whether one is a common carrier by becomes private carrier (PC) insofar as that particular
air is whether he holds out that he will carry for hire, voyage is concerned
so - if it is already a PC- ordinary diligence in the
carriage of goods will suffice
long as he has room, goods of everyone bringing goods - PC = undertaking is a single transaction, not a
to him for carriage, not whether he is carrying as a part of the general business or occupation, although
public employment or whether he carries to a fixed
place. involving the carriage of goods for a fee; NO
presumption of negligence applies – whosoever alleges
Case: De Guzman v. CA damage to or deterioration of the goods carried
- private respondent was considered a common has the burden of proving that the cause was the
carrier although his principal business was a junk negligence of the carrier.
dealer. On his return trips to Pangasinan, (after selling
junk materials in Manila) respondent would load his Distinction between Common Carriers and Private
vehicles with cargo which various merchants wanted
delivered in establishments in Pangasinan. For that Extraordinary diligence Ordinary diligence in the
service, respondent charged freight rates that were in the vigilance over the carriage of goods will suffice
commonly lower than regular commercial rates. Thus, goods they carry
even if the transportation of goods was merely In case of loss, No such presumption applies to
ancillary to the main business of buying and selling destruction, or private carriers, for whosoever
used bottles and scrap metals, the Supreme Court deterioration of goods, alleges damage to or
they are presumed to deterioration n of the goods
considered the respondent a common carrier.
have been at fault or to carried has the onus of proving
have acted negligently; that the cause was the negligence
CHARTER PARTY: A contract by which an entire burden of proving of the carrier
ship or some principal part thereof is let by the owner otherwise rests on them
to another person for a specified time or use. (Note: a Cannot stipulate that it is May validly enter into such
charter party is a written contract/instrument, not a exempt from liability for stipulation
person) the negligence of its
agents or employees
Q: What is the effect of charter party?
A: It may transform a common carrier into a private Factors to be considered whether a carrier is
carrier. However, it must be a bareboat or demise common/private:
charter where the charterer mans the vessel with his Law applicable
own people and becomes, in effect, the owner for the o Common →Civil Code
voyage or service stipulated o Private → Contract
Diligence required
2 types: o Common → extraordinary diligence
1. Contract of Affreightment o Private → diligence of a good father of a family
- involves the use of shipping space on vessels Burden of proof in relation to negligence
leased by the owner in part or as a whole, to carry

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o Common – the carrier piers in the port

o Private – on the party having a claim against the o Record or check all merchandise which may be
carrier delivered to said port ant shipside
o Furnish light, and water services and other
Case: Planters Products, Inc. vs. CA incidental service in order to undertake its arrastre
- It is therefore imperative that a public carrier service
shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, - Such service is in face, no different from those of a
provided the charter is limited to the ship only, as in depositary or warehouseman
the case of a time-charter or voyage-charter. It is only
when the charter includes both the vessel and its crew Stevedoring
that a common carrier becomes private - involves the loading and unloading of coastwise
vessels calling at the port.
Generally, private carriage is undertaken by special
agreement and the carrier does not hold himself out to Travel Agency
carry goods for the general public. - the object of a person who purchases tickets from a
travel agency is only its services of arranging and
Case: Estela Crisostomo vs. CA and Caravan Travel facilitating the booking, ticketing and accomodation in
and Tours International a package tour. The contract is not a contract of
- By definition, a contract of carriage is one carriage but a contract of service.
whereby a certain person or association of persons
obligate themselves to transport person, thing or new →Common carriers are public utilities, impressed with
from one place to another for a fixed price public interest and concern subject to regulation by the
- It is obvious from the above definition that state.
respondent is not an entity engaged in the business of →If the use is merely optional, or the public benefit
merely incidental, it is not public use, authorizing the
transporting either passengers or goods and is
therefore, neither a private nor a common carrier. Its jurisdiction of the public utility commission. There
covenant with its customers is simply to make travel must be in general, a right which the law compels the
arrangements in their behalf. power to
- It is in this sense that the contract between the give to the general public. True criterion: whether the
parties in this case was an ordinary one for services public may enjoy it by right or by permission.(See
and not one of carriage; it is thus not bound under the Part IV for more discussions on public utilities)
law to observe extraordinary diligence in the
performance of its obligation. GOVERNING LAWS
- read summary of rules on page 37 of Aquino(2016)
TOWAGE, ARRASTRE AND STEVEDORING Article 1766 (Civil Code). In all matters not regulated
by this Code, the rights and obligations of common
Towage carriers shall be governed by the Code of Commerce
- A vessel is hired to bring another vessel to another and by special laws.
- e.g. a tugboat may be hired by CC to bring the vessel Article 1753 (Civil Code). The law of the country to
to a port (operator of tugboat not CC) which the goods are to be transported shall govern the
- in maritime law: towing for the mere purpose of liability of the common carrier for their loss,
expediting her voyage without reference to any destruction or deterioration.
circumstances of danger
Summary of Rules:
Arrastre A. Coastwise shipping
- Arrastre operator’s functions has nothing to do with 1. NCC(Art. 1732-1766)- primary law
the trade and business of navigation nor to the use or
2. Code of Commerce- suppletorily in absence
operation of vessels
of NCC provisions.
- Services are not maritime
- Functions of arrastre operator:
o Receive, handle, care for, and deliver all B. Carriage from Foreign Ports to Philippine
merchandise imported and exported, upon or Ports
passing over Government-owned wharves and 1. NCC- primary law

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2. Code of Commerce - in all matters not fixed on a definite individual – the registered owner.
regulated by NCC.
3. COGSA- supletory to NCC KABIT SYSTEM
-The “registered owner” rule is applicable to
people involved on a “kabit system”
C. Carriage from Philippine Ports to Foreign -arrangement whereby a person who has been
Ports granted a certificate of public convenience allows other
1. laws of the country to which the goods are persons who own motor vehicles to operate them under
being trasnported. (Art. 1753, CC) his license, sometimes for a fee or percentage of the
earnings --- contrary to public policy (thus VOID and
D. Overland Transportation INEXISTENT under Art. 1409 of the Civil Code)
1. CC- primary Law - parties to the “kabit system” cannot invoke the
2. Code of Commerce - suppletorily same as against each other either to enforce their
illegal agreement or to invoke the same to escape
E. Air Transportation liability. This is consistent with the time-honored
1. CC-primary law maxim “ex pacto illicito non oritur action” [No action
arises from an illicit bargain]. →pari delicto rule
2. Code of Commerce - having entered into an illegal contract, neither
3. For international carriage- Warsaw can seek relief from the courts and each must bear the
Convention with amendments consequences of his acts

Note: COGSA- primary law under RA 10668 (see Note: the policy against “kabit system” is also
page 970) applicable to aircrafts and vessels – basic rule that no
person can operate a common carrier without securing
NATURE OF BUSINESS a certificate of public convenience and necessity.
- Common Carriers exercise a sort of public office Hence, persons wo do not have such certificate cannot
- Consequently, common carriers are subject to cercumvent the law by using the certificate of another.
regulation by the State -the thrust of the law in enjoining the kabit system
is not so much as to penalize the parties but to identify
REGISTERED OWNER RULE/ REGISTRATION the person upon whom responsibility may be fixed in
LAWS case of an accident with the end view of protecting the
- Governed by the Land Transportation and riding public.
Traffic Code and administered by the Land
Transportation Office Case: Dizon vs. Octavio
- the primary factors considered in the granting of
a certificate of public convenience for the business of
public transportation is the financial capacity of the
- There is a Compulsory registration of motor
vehicles under Sec. 5 of RA 4136 or Land
Transportation and Traffic Code. holder of the license, so that liabilities arising from
- Registered owner rule- registered owner of a accidents may be duly compensated
vehicle is liable for any damage caused by the - Thus, for the safety of passengers and the public
negligent operation of the vehicle although the same who may have been wronged and deceived through the
was already sold or conveyed to another person at the
time of the accident. baneful kabit system, the registered owner of the
- The registered owner is liable to the injured vehicle is not allowed to prove that another person has
party subject to his right of recourse against the become the owner so that he may be thereby relived of
transferee or the buyer responsibility
- Applicable in case of lease
- Registered owner not liable if vehicle was taken BOUNDARY SYSTEM
form him without his knowledge and consent. -system where carriers impose an amount that
such drivers would need to remit/pay to the carrier
Q: what is the purpose of such law? everyday. This amount to be remitted/paid is called the
A: The main aim of motor vehicle registration is to “boundary”. The excess of the amount the drivers earn
identify the owner so that if any accident happens, or daily will be their compensation. It is also considered
that any damage or injury is caused by the vehicle on as a form of lease of the vehicle being used, mostly
the public highways, responsibility therefor can be common in taxi operators.

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-under this system, the carrier cannot escape accept a particular class of goods
liability by claiming that the driver is a lessee. To - EXP: it appears that for some sufficient reason the
tolerate such position would not only abet flagrant discrimination against the traffic in such goods is
violations of the Public Service Law but also place the reasonable and necessary: (DUO-CIELS-F/DUCO-FLIES)
riding public at the mercy of reckless and irresponsible 1. dangerous objects or substances including
drivers-reckless because the amount they earn depends dynamites and other explosives
upon the number of trips they make, hence, the speed 2. goods are unfit for transportation
at which they drive; and irresponsible because most if 3. acceptance would result in overloading
not all of them are in no position to pay for the 4. contrabands or illegal goods
damages they might cause. 5. goods injurious to health
6. goods will be exposed to untoward danger like
CHAPTER 2 flood, capture by enemies and the like
OBLIGATIONS OF THE PARTIES 7. goods like livestock will be exposed to
8. strike
Basic obligations of the common carrier:
9. failure to tender goods on time
1. To accept passengers and goods without
discrimination. Case: Fisher v. Yangco
2. To deliver/seasonable deliver the goods - factors in determining reasonable discrimination
3. To bring the passenger to the proper place or include: (SRN/SNR)
destination. i. suitability of the vessel for the transportation of
4. To deliver the goods to the proper person. such products;
5. To exercise extraordinary diligence in the ii. reasonable possibility of danger or disaster
resulting from their transportation in the form and
performance of its duties.
under the conditions in which they are offered for
carriage; and
I. Obligations of the carrier
iii. the general nature of the business done by the
- A common carrier granted a certificate of public
(1) Hazardous and Dangerous Substances
convenience is duty bound to accept passengers or
- Carrier not properly equipped to transport
cargo without any discrimination.
dangerous chemicals or explosives may validly refuse
- It is illegal for domestic ship operators to refuse to
to accept the same for transport.
accept or carry passengers or cargo without just cause.
- Those which are not authorized by the Maritime
(Section 16, RA 9295)
Industry Authority to carry such goods may also
validly refuse the same for transport.
Note: In air transportation, passengers with
- There must be a Special Permit to Carry from
confirmed tickets who were not allowed to board are
the MARINA. (accept only if the said cargoes are
provided with denied boarding compensation and
covered by the necessary clearance from appropriate
priority boarding rules.
government agencies)

(2) Unfit for Transport

- Carriers may refuse to accept goods that are
No compensation for refusal if it is because of:
unfit for transportation
1. government requisition of the space
2. substitution of equipment of lesser capacity
when required by operational and or safety and/or
other causes beyond the control of the carrier, and - These goods may by nature be unfit for
3. if arrangements have been made for the transportation or are unfit because of improper
passenger to take another flight in a comparable air packaging or defect in their containers.
transportation which will arrive not later than three - However, carriers may accept the goods and
hours after the time of flight on which the confirmed limit its liability by stipulation.
space is held is supposed to arrive. (Civil Aeronautics
Board Economic Regulation) Inspection
-If by reason of well-founded suspicion of falsity
Grounds for Valid Refusal to Accept Goods in the declaration as to the contents of the package
- GR: common carriers cannot lawfully decline to carrier should decide to examine and investigate it in
the presence of witnesses, with the shipper and

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consignee in attendance. If declaration of shipper is 3. The carrier is liable for damages used by the
true, expenses occasioned by the examination and of delay; and
repacking the packages shall be for the account of the 4. The consignee may exercise his right to
carrier abandon under Art. 371 of the Code of Commerce.
-Even if the cause of the loss, destruction or
deterioration of the goods should be caused by the Article 1740 (NCC). If common carrier negligently
character of the goods, or the faulty nature of the delays in transporting the goods, a natural disaster
packing or of the containers, the common carrier must shall not free it from responsibility.
exercise due diligence to forestall or lessen the loss.
-a carrier is entitled to fair representation of the Article 1747 (NCC). If common carrier delays ,
nature and value of the goods to be carried, with the without just cause, in transporting the goods or
concomitant right to rely thereon, and further noting changes the stipulated or usual route, the contract
this juncture that a carrier has no obligation to inquire limiting its liability cannot be availed of in case of the
into the correctness or sufficiency of such information. loss, destruction, or deterioration of the goods.
The consequent duty to conduct inspection thereof
arises in the event that there should be reason to doubt Note: read page 67 of book for other provisions.
the veracity of such representations. (Case: Saludo, Jr.
v. CA) (1) Abandonment
- In case of delay through the fault of the carrier,
B. DUTY TO DELIVER THE GOODS the consignee may refuse to accept the goods or may
 Time of Delivery leave the goods in the hands of the carrier. It must be
- Where a carrier has made an express contract, communicated to the carrier in writing.
the goods must be delivered within a specified time
- This right must be exercised between the time of
otherwise he is liable for any delay (indemnity for
delay and before the arrival of the goods at its
- In the absence of any agreement, goods must be
- The carrier must pay the full value of the goods
delivered at its destination within a reasonable time
as if they had been lost or mislaid.
(depending on the attending circumstances, nature of
the goods; expected date of arrival in the BOL may be
Note: If abandonment is not made, indemnification for
the losses and damages by reason of the delay cannot
- In the absence of a special contract, a carrier is
exceed the current price which the goods would have
NOT an insurer against delay in transportation of
on the day and at the place they are to be delivered.
The value of the goods which the carrier must pay in
-Reasonable time: expected date of arrival may be
case of loss or misplacement shall be that what is
considered in determining. In Mearsk v CA, 2 months
declared in the bill of lading.
was considered as unreasonable. However, it will also
depend on the nature of the goods. (If perishable, it
Consignee must not defer the payment of the expenses
should be delivered with haste or before it is damaged
and transportation charges of the goods otherwise
or becomes rotten.)
carrier may demand the judicial sale of the goods.
Consequences/Effects of Delay
Case: Magellan Mfg. Marketing Corp. vs. CA
- Excusable delays in carriage suspend, but do not
- Abandonment may also be made by virtue of
generally terminate, the contract of carriage; when the
stipulation or agreement between parties
cause is removed, the master must proceed with the
voyage and make delivery.
(2) Rights of Passengers in Case of Delay
- During the detention or delay, vessel continues - As to the rights and duties of the parties strictly
to be liable as a common carrier, not a warehouseman, arising out of delay, the Civil Code is silent. However,
and remains duty bound to exercise extraordinary the Code of Commerce provides for such a situation:
ARTICLE 698. In case a voyage already begun
If delay is legally inexcusable, the following should be interrupted, the passengers shall be obliged
consequences results: to pay the fare in proportion to the distance covered,
1. the carrier is still liable even if natural without right to recover for losses and damages if the
disaster caused the damage; interruption is
2. The stipulation limiting the liability of the
carreir cannot be availed of or is inoperative; due to fortuitous event of force majeure, but with a
right to indemnity if the interruption should have been

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caused by the captain exclusively. If the interruption

should be caused by the disability of the vessel and a Effects of ‘delayed and unfinished voyage’ in inter-
passenger should agree to await the repairs, he may island vessels:
not be required to pay any increased price of passage,  vessel cannot continue or complete her voyage for
but his living expenses during the stay shall be for his any cause – carrier is under obligation to transport
own account. the passenger to his/her destination at the expense
of the carrier including free meals and lodging
Note: the carrier is liable for any loss or damage, before the passenger is transported to his/her
including any pecuniary loss or loss of profit, which destination; the passenger may opt to have his/her
the passenger may have suffered by reason thereof. In ticket refunded in full if the cause of the
case the vessel is not able to depart on time and the unfinished voyage is due to the negligence of the
delay is unreasonable, the passenger may opt to have carrier or to an amount that will suffice to defray
his/her ticket immediately refunded without any refund transportation cost at the shortest possible route if the
service fee from the authorized issuing/ticketing office. cause of the unfinished voyage is fortuitous event.
  vessel is delayed in arrival at the port of
Where and to Whom Delivered destination – free meals during mealtime
a. Place – Goods should be delivered to the  delay in departure at the point of origin due to
consignee in the place agreed upon by the parties.
carrier’s negligence; fortuitous event - free meals
during mealtime; carrier not obliged to serve free
The shipper may change the consignment of the goods
provided that at the time of ordering the change of the
consignee the bill of lading signed by the carrier be  The carrier is not obliged to inform passengers of
returned to him, in exchange for another wherein the sailing schedule of the vessel.
novation of the contract appears. The expenses
occasioned by the change shall be for the account of C. DUTY TO EXERCISE EXTRAORDINARY
the shipper. DELIGENCE
- Goods should be delivered in the same condition
b. Consignee – Delivery must generally be made that they were received and to transport the passengers
to the owner or consignee or to someone lawfully without encountering any harm or loss.
authorized by him to receive the goods for his account - Read pages 75-77 of Aquino for provisions
or to the holder of the negotiable instrument.
Article 1755 (CC). A common carrier is bound to
carry the passengers safely as far as human care and
Art. 369., Code of Commerce. If the consignee
foresight can provide, using the utmost diligence of
cannot be found at the residence indicated in the bill of
very cautious persons, with a due regard for all the
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
- it requires the common carrier to know and
disposal of the shipper, this deposit producing all the
follow the required precaution for avoiding damage to,
effects of delivery without prejudice to third parties
or destruction of the goods entrusted to it for safe
with a better right.
carriage and delivery. It requires common carriers to
render service with the greatest skill and foresight and
c. Delay to Transport Passengers – A carrier is
use all the reasonable means to ascertain the nature and
duty bound to transport the passenger with reasonable
characteristics of goods tendered for shipment, and to
exercise due care in the handling and stowage,
including such methods as their nature requires. (Case:
Interruption of voyage:
Compania Maritima v. CA)
 No right to recover if - force majeure
 W/ right to recover if - caused by captain Presumption of Negligence
exclusively Two conditions for the birth of the presumption of
 If passengers agreed to wait - no additional negligence:
payment for boarding fee but the living expenses 1. there exists a contract between the passenger or
are for their account. (See Art. 698. Code of the shipper and the common carrier
Commerce or page 73 of Aquino, 2016) 2. the loss, deterioration, injury or death took
place during the existence of the contract

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Note: the presumption is operative even if the parties prove that they observed extraordinary diligence.
cannot establish the cause of damage to the goods or
injury to the passenger. EFFECT OF ACQUITTAL.
-The acquittal of the employee of the common
The Civil Code provides: carrier in the criminal case is immaterial to the case for
Article 1735. In all cases other than those mentioned breach of contract.
in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common Article 31 of the NCC provides: “when the
carriers are presumed to have been at fault or to have civil action is based on an obligation not
acted negligently, unless they prove that they observed arising from the act or omission complained
extraordinary diligence as required in article 1733. of as a felony, such civil action may proceed
independently of the criminal proceedings and
Article 1756. In case of death of or injuries to regardless of the result of the latter.”
passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they DURATION OF DUTY IN CARRIAGE OF
prove that they observed extraordinary diligence as GOODS. Due diligence should be exercised the
prescribed in articles 1733 and 1755. moment the goods are delivered to the carrier. [Refer
to Arts. 1736, 1737, and 1738 of the NCC]
Q: Why should common carriers exercise
extraordinary diligence? Q: When the goods are deemed delivered to
A: to protect the passengers from tragic mishaps that the carrier.
frequently occur in connection with modern A: The goods are deemed delivered to the
transportation. this high standard of care is carrier when the goods are ready for and have
imperatively demanded by the preciousness of human been placed in the exclusive possession,
life and by the consideration that every person must in custody and control of the carrier for the
every way be safeguarded against all injury (Report of purpose of their immediate transportation and
Code Commission). the carries has accepted them. When the
carrier has thus accepted such delivery, the
Note: this extraordinary liability lasts from the time the liability of the carrier commences eo instanti.
goods are placed in the possession of the carrier until [As to its termination, it was ruled that the
they are delivered to the consignee, or “to the person obligation of the carrier could also be
who has the right to receive them”, but these considered terminated despite the non-
provisions only when loss, destruction or deterioration surrender of the bill of lading.]
takes place while the goods are in the possession of the
carrier, and not after it has lost control of them. Temporary Unloading or Storage. Art. 1737
of the NCC provides that the common
Note: the statutory presumption may only be overcome carrier’s duty to observe extraordinary
by evidence that the carrier exercised extraordinary diligence over the goods remains in full force
diligence. and effect even when are temporarily
unloaded or stored in transit.
Note: there is no presumption of bad faith even if there
is a presumption of negligence. Bad faith should be Stoppage in Transitu.
established by clear and convincing evidence. The law By way of exception under Art. 1737,
always presumes good faith such that any person who extraordinary diligence need not be exercised
seeks to be awarded with damages due to the acts of over the goods that are unloaded temporarily
another has the burden of proving that the later acted in if the shipper or owner has made use of the
bad faith or with ill motive. (Case: Air France v right of stoppage in transitu.
. Q: What is Stoppage in Transitu?
Doctrine of Proximate Cause – is not applicable, there A: It is the right of an unpaid seller to resume
is a presumption of negligence. possession of the goods at any time while the goods
- if the goods are lost, destroyed or deteriorated, are in transit, and he will become entitled to the same
common carriers are presumed to have acted rights in regard to the goods as he would have had if he
negligently, unless they prove that they observed had never parted with the possession.
extraordinary diligence. In case of death of or injuries The right is available if:
to passengers, common carriers are presumed to have 1. The buyer of goods is or becomes
been at fault or to have acted negligently, unless they insolvent;

Aliman, Capuyan, Castillo, Dadang, Oguis, Pelaez, Ramos, Rulona, Villamor, Waban 9

2. The unpaid seller has parted with

the possession of the goods; and Art. 1763. Common carrier is responsible for
3. The goods are still in transit. injuries suffered by a passenger on account of
[The carrier becomes on ordinary the wilful acts or negligence of other
bailee.] passengers or of strangers, if the common
carrier’s employees through the exercise of
Diligence up to Delivery. the diligence of a good father of a family
The “extraordinary responsibility of the could have prevented or stopped the act or
common carrier lasts until the time the goods omission.
are actually or constructively delivered by the
carrier to the consignee or the person who has DUTY TO THIRD PERSONS.
the right to receive them. The duty to exercise extraordinary diligence is
primarily owed to the passengers and the goods that
Delivery to Customs Authorities. are being transported.
The goods remain to be the
responsibility of the carrier if they are still in Exception: Kapalaran Bus Lines vs. Coronado. The
the hands of customs officials. The solution Court ruled:
for the carrier is to stipulate in the bill of “xxx For if common carriers carefully
lading that the carrier shall not be liable for observed the statutory standard of
any losses while the goods are in the custody extraordinary diligence in respect of their own
of the Bureau of Customs. (Lu Do & Lu Ym passengers, they cannot help but
Corporation v. I.V. Binamira) simultaneously benefit the pedestrians and the
owners and passengers of other vehicles who
COMMENCEMENT OF DUTY IN CARRIAGE are equally entitled to the safe and convenient
OF PASSENGERS use of our roads and highways. Xxx”
* Trains – perfected when a person:
a. purchased a ticket/ possess sufficient fare EFFECT OF STIPULATION ON
with which to pay for his passage EXTRAORDINARY DILIGENCE
b. presented himself at the proper place and A. Goods. The parties cannot stipulate that the
in a proper manner to be transported carrier will not exercise any diligence in the
c. has a bona fide intention to use facilities of custody of goods. However, Art. 1744
the carrier provides: A stipulation between the common
 Carriage by Sea: The duty of the carrier carrier and the shipper or owner limiting the
commences as soon as a person with bona fide liability of the former for the loss, destruction,
intention of taking passage places himself in or deterioration of the goods to a degree less
the care of the carrier or its employees and is than extraordinary diligence shall be valid,
accepted as passenger. provided it be:
 Land Transportation: Public Utility Bus or 1. In writing, signed by the shipper or
Jeepneys or Street Cars – once it stops it is in owner;
effect making a continuous offer to riders; 2. Supported by a valuable consideration
perfected when passenger is already other that the services rendered by the
attempting to board the vehicle. common carrier; and
3. Reasonable, just and not contrary to
No hard and fast rule in the exercise of
extraordinary diligence. The law does not require a B. Passengers. There can be no stipulation
formula. lessening the utmost diligence that is owed to
Statutory Duties to Passengers: Arts 1759 and passengers. (Art. 1757)
1763 Gratuitous Passengers. A stipulation limiting
Art. 1759. Common carriers are liable for the the common carrier’s liability for negligence
death of or injuries to passengers through the is valid, but not for willful acts of gross
negligence or wilful acts of the former’s negligence. The reduction of fare does not
employees, although such employees may justify any limitation.
have acted beyond the scope of their authority
or in violation of the orders of the common Case: Lara vs. Valencia
carrier. Diligence owed to accommodation

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passengers is only ordinary diligence. and accommodate passengers to be

However, this case is not controlling with transported and that it is adequately
respect to common carriers because the equipped and properly manned.
defendant in the said case was not a - Seaworthiness is that strength,
common carrier durability and engineering skill made a
part of a ship’s construction and
Extraordinary diligence also required even if the continued maintenance, together with a
passenger is carried gratuitously. (Read Art. 1758, competent and sufficient crew, which
NCC) would withstand the vicissitudes and
dangers of the elements which might
Note: Reduction of fares does not justify any limitation reasonably be expected or encountered
of the common carrier’s liability. during her voyage without loss or
damage to her particular cargo
BY SEA. Example: The carrier was able to establish that
A. SEAWORTHINESS the ship itself was seaworthy because the
records reveal that the vessel was dry-docked
a. Warranty of Seaworthiness of Ship and inspected by the Phil. Coast Guard before
- This is the first step that should be its first destination.
- Extraordinary diligence requires that A warranty of seaworthiness requires that it be
the ship which will transport the passengers properly laden, and provided with a competent
and goods is seaworthy. master, a sufficient number of competent
- Seaworthiness of the vessel is impliedly officers and seamen, and the requisite
appurtenances and equipment.
- The carrier shall be bound before and
at the beginning of the voyage to exercise The carrier shall be bound before and at the
due diligence to make the ship seaworthy. beginning of the voyage to exercise due diligence to:
1. Make the ship seaworthy;
b. No duty to inquire 2. Properly man, equip, and supply the ship;
- Because of the implied warranty of 3. Make all parts of the ship in which goods
seaworthiness, shippers of goods, when are carried, fit and safe for their reception,
transacting with common carriers, are carriage, and preservation.
not expected to inquire into the vessels
seaworthiness, genuineness of its The carrier shall properly and carefully load,
licenses and compliance with all handle, stow, carry, keep, care for, and
maritime laws. Passengers cannot be discharge the goods carried.
expected to inquire everytime they
board a common carrier, whether the Note: Seaworthiness is relative it its construction and
carrier possesses the necessary papers or its application depends on the facts of a particular
that all the carrier’s employees are case (ex. Length and nature of the voyage)
- It is the carrier that carries such burden Fitness of the Vessel Itself
of proving that the ship is seaworthy. - It is necessary that the vessel can be expected
- Sufficient evidence must be submitted to meet the normal hazards of the journey
and the presentation of certificates of - General Test of Seaworthiness: Whether the
seaworthiness is not sufficient to overcome the ship and its appurtenances are reasonably fit
presumption of negligence. to perform the service undertaken.
The ship must be “cargoworthy”
c. Meaning of Seaworthiness - Even if the vessel was properly maintained
- A vessel must have such degree of and is free from defect, the carrier must not
fitness which an owner who is accept the goods that cannot properly be
exercising extraordinary diligence transported in the ship
would require his vessel to have at the - The ship must be efficiently strong and
commencement of the voyage, having equipped to carry the particular kind of cargo
regard to all the probable circumstances which she has contracted to carry and her
of it. This includes fitness of the vessel cargo must be so loaded that it is safe for her
itself to withstand the rigors of voyage, to proceed on her voyage.
fitness of the vessel to store the cargoes The vessel must be adequately equipped and

Aliman, Capuyan, Castillo, Dadang, Oguis, Pelaez, Ramos, Rulona, Villamor, Waban 11

properly manned. may be deemed negligent.

- On top of regular maintenance and
inspection, Captains, masters or patrons of Rules on passenger safety
vessels must prove the skill, capacity, and - Negligence on the part of the captain and
qualifications necessary to command and crew as well as the operator includes failure
direct the vessel. to comply with the regulation issued by the
- If the owner of a vessel desires to be the Maritime Industry Authority (MARINA) on
captain without having the legal the safety of the passengers
qualifications, he shall limit himself to the - Memorandum Circular No. 112 :
financial administration of the vessel and passengers do not merely contract for
shall entrust the navigation to a qualified transportation because they have the right to
person. be treated by the carrier and its employees
with kindness, respect, courtesy and due
Note: It is not an excuse that the carrier cannot consideration. They are entitled to be
afford the salaries of competent and licensed crew protected against personal conduct, injurious
or that latter is unavailable. language, indignities and abuses from the
said carrier and its employees
Adequate Equipment - Read Memorandum Circular No. 114: p. 123
- With respect to vessels that carries
passengers, the Maritime Industry Authority
Case: Planters Products Inc. vs. CA
prescribes rules which provide for
- The period during which private
indispensable equipment and facilities
respondent was to observe the degree of
ex. Exit doors, life boats, live vests
diligence required of it as a public carrier
began from the time the cargo was
unconditionally placed in its charge after the
vessel’s holds were duly inspected and
passed scrutiny by the shipper, up to and
-Duty to exercise due diligence likewise
until the vessel reached its destination and
includes the duty to take passengers or cargoes
its hull was re-examined by the consignee,
that are within the carrying capacity of the
but prior to unloading
- A ship owner is liable for damage to the
cargo resulting from improper stowage
C. PROPER STORAGE ONLY when the stowing si done by
stevedores employed by him, and therefore
- The vessel itself may be suitable for the under his control and supervision, not when
cargo but this is not enough because the the same is done by the consignee or
cargo must also be properly stored. stevedores under the employ of the latter.
Cargo must generally not be placed on deck. The
carrying of deck cargo raises the presumption of
unseaworthiness unless it can be shown that the deck 1. Deviation
cargo will not interfere with the proper management - If there is an agreement between the shipper
of the ship. and the carrier as to the road over which the
conveyance is to be made (subject to the
D. NEGLIGENCE OF CAPTAIN AND CREW approval by the Maritime Industry Authority),
the carrier may not change the route, unless it
- Failure on the part of the carrier to provide be by reason of force majeure. Without this
competent captain and crew should be cause, he shall be liable for all the losses
distinguished from the negligence of the which the goods may suffer, aside from
said captain and crew, because the latter is paying the sum stipulated for that case.
covered by the Limited Liability Rule - When on account of the force majeure, the
(liability of the shipowner may be limited to carrier had to take another route which
the value of the vessel). resulted to an increase in transportation
- If the negligence of the captain and crew charges, he shall be reimbursed upon formal
can be traced to the fact that they are really proof.
incompetent, the Limited Liability Rule
cannot be invoked because the shipowner Note: With respect to carriers by sea, the routes are

Aliman, Capuyan, Castillo, Dadang, Oguis, Pelaez, Ramos, Rulona, Villamor, Waban 12

subject to approval by MARINA and the same proper lane for the purpose of overtaking
cannot generally be changed without the another vehicle in an ordinary situation has the
authorization from said administrative agency duty to see to it that the road is clear and not
to proceed if he cannot do so in safety.
2. Transshipment
- The act of taking cargo out of one ship and C. DILIGENCE IN THE SELECTION AND
loading it into another; to transfer goods from SUPERVISION
the vessel stipulated in the contract of In quasi-delict cases Under 2176 in relation to
affreightment to another vessel before the Article 2180 of the NCC, the employer can
place of destination named in the contract has invoke the defense of due diligence in the
been reached. selection and supervision of the employee in
- Transshipment of freight without legal excuse order to escape liability. Such a defense is not
is a violation of the contract and subjects the available if the case against the carrier is
carrier to liability if the freight is lost even by based on contract – culpa contractual.
a cause otherwise excepted. Art. 1759. Common carriers are liable for the
death of or injuries to passengers through the
Note: There is transshipment whether or not the same negligence or willful acts of the former’s
person, firm or entity owns the vessels (what matters employees, although such employees may
is the actual physical transfer of cargo from one have acted beyond the scope of their authority
vessel to another) or in violation of the orders of the common
EXTRAORDINARY DILIGENCE IN This liability of the common carriers does not
CARRIAGE BY LAND cease upon proof that they exercised all the
diligence of a good father of a family in the
A. CONDITION OF VEHICLE selection and supervision of their employees.
- Common carriers that offer transportation by
land are similarly required to make sure that D. DUTY TO INSPECT
the vehicles that they are using are in good - There is no unbending duty to inspect each
order and condition. and every package or baggage that is being
brought inside the bus or jeepney. The carrier
Rule on Mechanical Defects – If the carriers will is duty bound to conduct such inspection
replace certain parts of the motor vehicle, they are depending on the circumstances.
duty bound to make sure that the parts that they are
purchasing are not defective. Hence, it is a long- Case: Nocum vs. Laguna Tayabas Bus Company
standing rule that a carrier cannot escape liability by - While it is true the passengers of appellant’s
claiming that the accident that resulted because of a bus should not be made to suffer for
defective break or tire is due to a fortuitous event. something over which they had no control,
This is true even if it can be established that the tire fairness
that was subject of a blow-out is brand new. The duty demands that in measuring a common
to exercise extraordinary diligence requires the carrier’s duty towards its passengers,
carrier to purchase and use vehicle parts that are not allowance must be given to the reliance
defective. that should be reposed on the sense of
responsibility of all the passengers in
B. TRAFFIC RULES regard to their common safety.
- The carrier fails to exercise extraordinary - It is to be presumed that a passenger will not
diligence if it will not comply with basic take with him anything dangerous to the
traffic rules. The Civil Code provides for a lives and limbs of his co-passengers not to
presumption of negligence in case the accident speak of his own.
occurs while the operator of the motor vehicle - Not to be lightly considered is the right to
is violating traffic rules. privacy to which each passenger is entitled
- In other words, inquiry may be verbally
In cases involving breach of contract of carriage, made as to the nature of a passenger’s
proof of violation of traffic rules confirms that the baggage when such is not outwardly
carrier failed to exercise extraordinary diligence. perceptible, but beyond this, constitutional
boundaries are already in danger of being
Case: Mallari Sr and Jr vs. CA transgressed
- The rule is settled that a driver abandoning his - SC held that carrier has succeeded in

Aliman, Capuyan, Castillo, Dadang, Oguis, Pelaez, Ramos, Rulona, Villamor, Waban 13

rebutting the presumption of negligence by  Passenger’s Baggages

showing that it has exercised extraordinary - Article 1754 of the NCC states the rules on
diligence for the safety of its passenger, hand carried baggage and checked-in baggage:
according to the circumstances of each case “The provisions of Article 173 to
1753 shall apply to the passenger’s
Note: although overland transportation are not baggage which is not in his
bound nor empowered to make an examination personal custody or in that of his
on the contents of packages or bags employee. As to other baggage, the
particularly those hand carried by passengers, rules in Articles 1998 and 2000 to
such is different with regards to an airline 2003 concerning the responsibility
company. of hotel-keepers shall be
E. INSURANCE  Baggage Defined
The Insurance Code as amended requires all - The term baggage has been defined to include
motor vehicles to be covered by compulsory whatever articles a passenger usually takes with him
motor vehicle liability insurance that for his own personal use, comfort, and convenience
compensates, among others, passengers who according to the habits or wants of the particular
died or who suffered bodily injuries as a of class to which he belongs, either with reference to
the operation of the motor vehicle. his immediate necessaries or to the ultimate purpose
of his journey.
A. Competent Employees LTFRB Rules. In land transportation, the conditions
- The carrier must hire competent engineers and for the issuance of a Certificate of Public
employees. Convenience for Public Utility Vehicles (PUV)
- The train operator is liable for breach of imposed by the Land Transportation Franchising
contract if the negligence of the employee caused Regulatory Board (LTFRB) include the following
damage to passengers. (Art. 1759, NCC) rules:
B. The Platform Must be Safe 1. Every passenger is entitled to a free carriage of
Light Rail Transit Authority (LRTA) et. al v. 10 kilograms of baggage and shall pay the
Marjorie Navidad, et al.: The train operator corresponding freightage for excess weight;
was made liable although the death of the 2. When the PUV operator’s unit/s carry both
victim was sustained while the victim was passengers and freight, the freight shall be placed in
still waiting for a coach on the platform of a separate compartment, except packages or bundles
the LRT station. the size of which will allow placement under the
C. Maintenance of Train and Tracks seats without causing inconvenience to, and
- Duty to make sure that the vehicle or the means compromising the safety of, the other passengers;
of transportation is in good and safe working 3. In case freight is carried on top of Public Utility
condition. Buses, it shall not exceed 20 kls per square meter of
D. Embarking and Disembarking Passengers roof area, distributed so that it will not endanger the
- The Court said: “It is a matter of common lives of passengers or stability of the bus unit;
knowledge and experience about common carriers 4. The PUV operator shall not load animals of any
like trains and buses that before reaching a station or kind, except fowls. In the carriage of such fowls and
flagstop they slow down and the conductor other animals, the inconvenience, comfort and safety
announces the name of the place.” of the passengers shall not in any way be sacrificed.
- Reasonable opportunity to enter or disembark
E. Persons and Properties Ran Over by Trains  Checked-in Baggage – baggages that are
- It is not the duty of the engine driver or “checked-in” or delivered to the carrier are governed
engineer to stop the train every time that he sees a by the rules regarding carriage of goods. Articles
person on or near the tracks. If the engine drivers 1733, 1734 and 1736 of the NCC were applied to
were required to slow down or stop their trains every hold the carrier liable.
time they see a pedestrian on or near the track of the
railroad it might well become impossible for them to  Hand Carried Luggage
maintain a reasonable rate. As a result, the general - The rules under Articles 1998, 2000 to 2003 of
traveling public would be exposed to great the NCC on Necessary Deposit apply.
inconvenience and delay. Indeed, a person who is - The passenger are duty bound to:
walking on the tracks must exercise due care in 1. To give notice to the common carrier or the
avoiding his own death or injury. carrier’s employees, of the effects brought by the

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passenger; and the payment of the freight charges whether or not he is

2. To take the precautions which the common the owner of the goods.
carrier or their substitutes advised relative to the care - passengers are contractually bound to pay the fare
and vigilance of their effects. within such time as prescribed by regulations or by the
CHAPTER 3 Time to pay the freight
OBLIGATIONS OF THE PASSENGER AND - The new civil code does not provide for the
SHIPPER within which payment of the freight charges should be
made to the carrier for the carriage of goods. However
1. Duty to exercise due diligence with the implication of the code of commerce provided
- The shipper or passenger is bound by his that in the absence of any agreement, the consignee
contractual obligation. They are bound to exercise due who is supposed to pay must do so within 24 hours
diligence in avoiding damage or injury. from the time of delivery.

Negligence of Shipper or Passenger Carriage of passengers by sea

- The shipper is obliged to exercise due diligence - The tickets are purchased in advance from ticket
in avoiding damage to the goods that are being shipped outlets or booking offices that are required to be set up
or injury to his person. In Sps. Fabre v CA, it was held in every parts of the vessel. Carriers are not supposed
that the carrier cannot impute negligence of its own to allow passengers without tickets.
employee (like its driver) to the person or entity that
hired the carrier. Carrier’s Lien
- If the consignor or the consignee failed to pay
Duties of the Shipper the consideration for the transportation of the goods,
1. Duty to Disclose the carrier may exercise his lien in accordance with
- Due diligence includes the duty to disclose Article 375 of the Code of Commerce but the 8-day
information relating to the cargo. Proper information limitation is modified to 30 days.
will help the carrier exercise proper care and caution in
relation and not only to the subject cargo but also to Article 375. The goods transported shall be especially
the cargo of other shippers and passengers. bound to answer for the cost of transportation and for
- the shipper must also make the proper markings the expenses and fees incurred for them during their
on the cargoes. conveyance and until the moment of their delivery.
This special right shall prescribe eight days after the
Damage caused by Cargoes delivery has been made, and once prescribed, the
- The duty to disclose the nature of the cargo is carrier shall have no other action than that
important in order that the carrier can exercise due corresponding to him as an ordinary creditor.
diligence in preventing damage to the cargoes to be
transported Thus, the shipper may be held liable for Duty to Timely Load and Unload
any damage that may have been caused solely by the - The shipper must make sure that the goods are
dangerous nature of the cargoes or the defect in the delivered to the carrier on the date, time and place
packaging of the cargoes. agreed upon. The consignee must likewise timely
obtain delivery from the carrier.
2. Duty to Pay Freight
- Common carriers are subject to heavy regulation  Demurrage - is the compensation provided for in
with respect to rates that they are charging the public. the contract of affreightment for the detention of
In regulating the rates charged by the public utilities, the vessel beyond the time agreed on for loading
the State protects the public against arbitrary and and unloading. Liability for demurrage exists only
excessive rates while maintaining the efficiency and when expressly stipulated in the contract.
quality of services rendered.  Lay Days - the period within which the cargoes
are to be loaded and unloaded.
Q: Who will pay the freight?
A: The shipper may pay the necessary freight before or Duty to secure permits
at the time he delivers the goods to the carrier for - The passenger or shipper may also be required
shipment. The parties may also stipulate that the to secure the necessary permits for the transportation
consignee will pay the freight at the point of of certain goods.
destination. Nevertheless, the consignor with whom
the contract of carriage is made is primarily liable for Shipper’s load and count

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- The shipper, as may be stipulated in the Bill of

Lading, has the sole responsibility for the quantity, I. DEFENSES IN CARRIAGE OF GOODS
description and condition of the cargoes shipped in
container vans. The carrier cannot be held liable for Article 1734 (No other defense may be raised:
any discrepancy if the description in the bill of lading exclusive or closed list)
is different from the actual contents of the container. 1. Flood, storm, earthquake, lightning, or other
natural disaster or calamity
2. Act of the public enemy in war, whether
international or civil
3. Act or omission of the shipper or owner of the
Duties of the Passenger goods
 The passenger must present himself in the proper 4. The character of the goods or defects in the
place. packing or in the containers
 The passenger must also present himself at the 5. Order or act of competent public authority
proper time. 6. Exercise of extraordinary diligence
 The passenger is not obligated to bring such
luggage that is in excess of the weight and size A. FORTUITOUS EVENT
prescribed by regulations or contract. – to be a valid defense must be established to
 The passenger is also obligated to secure the be the proximate cause of the loss
appropriate travel documents.
Note: Since common carrier is presumed is to be
Air transportation of Passengers negligent, it has been observed that the DOCTRINE of
1. No person on board may interfere with the contract of carriage. The injured passenger or owner of
crew member in the performance of his or her goods need not prove causation to establish his case.
duties. The absence of causal connection is only a matter of
2. Each passenger shall fasten his or her seat defense.
belt and keep it fastened while the seat belt sign is
lighted. Requisites of Fortuitous Event:
3. No person on board an aircraft shall 1. The cause of the unforeseen and the unexpected
recklessly or negligently act or omit to act in such occurrence, or of the failure of the debtor to
a manner as to endanger the aircraft or persons comply with his obligation, must be independent
and property therein. of the human will
4. No person may secrete himself or herself no 2. It must be impossible to foresee the event which
secrete the cargo on board an aircraft. constitutes the caso fortuito, or if it can be
5. No person may smoke while the no-smoking foreseen, it must be impossible to avoid
3. The occurrence must be such as to render it
sign is lighted.
impossible for the debtor to fulfill his obligation
6. No person may smoke in any airplane in a normal manner
lavatory. 4. The obligor (debtor) must be free from any
7. No person may tamper with, disable or participation in or the aggravation of the injury
destroy any smoke detector installed in any resulting to the creditor
airplane lavatory.
Note: In order for the common carrier to be exempted
CHAPTER 4 from responsibility, the natural disaster must have been
the proximate and only cause of the loss. However, the
common carrier must exercise due diligence to prevent
or minimize loss before, during and after the
-The carrier is not an insurer of the passengers’
occurrence of flood, storm or other natural disaster in
safety or the safety of the goods that it is transporting.
order that the common carrier may be exempted from
- Defenses may either totally bar recovery from
liability for the loss, destruction, or deterioration of the
the carrier or may mitigate and/or limit the liability.
-The common carrier is presumed negligent the
moment he fails to deliver the goods to its destination
*Fire – not considered as a natural calamity or
or the moment the passenger did not reach his
destination while riding the carrier. Nevertheless, it is
not correct to say that proximate causation is not
*Fire caused by lightning – a natural calamity
important in cases involving common carriers.

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the only cause of the loss. Especially when the

*Hijacking – does not fall under the categories of facts indicate that the typhoon was foreseeable
exempting causes; the common carrier is and could have been detected through the
presumed to be at fault or to have acted exercise of reasonable care. Cargoes should have
negligently unless there is a proof of been secured while the bus was being repaired
extraordinary diligence on its part for 2 days.

*Mechanical defects – damage or injury 2. Problem: A passenger told the driver that he
resulting from mechanical defects is not a has valuable items in his bag which was placed
damage or injury that was caused by fortuitous under his feet and he asked the driver (to which
event; carrier is liable to its passengers for he is seated near) to watch for the bag while he is
damages caused by mechanical defects of the asleep.
conveyance (breakage of a faulty drag-link
spring, fracture of the vehicle’s right steering (a) There have been incidents of throwing
knuckle, defective breaks) of stones at passing vehicles in the North
Express Way. While the bus was traversing
- One of the reason why carrier is made liable despite the super highway, a stone hurled from the
the presence of mechanical defect is the absence of overpass and hit the passenger resulting to
privity between the passenger and the manufacturer injuries. Can the passenger hold the bus
liable for damages?
Case: Juntilla v. Fontanar
- “Tire-blowouts” was not considered as fortuitous Answer: Yes. The incident was foreseeable due
event although it was alleged that the tires were the prior incidents of stone hurling. The bus
in good condition; no evidence was presented to should have exercised utmost diligence and
show that the evidence were due to adverse road employed adequate precautionary measures to
conditions – the carrier must prove all angles. secure safety of passengers since the incident
- The explosion could have been caused by too was foreseeable. .
much air pressure injected into the tires and the
fact that the jeepney was overloaded and HOWEVER, if the stone throwing was entirely
speeding at the time of the accident. unforeseeable and the carrier exercised the
utmost diligence, then, the bus can’t be held
OTHER INVALID DEFENSES liable. Nonetheless, the burden of proof is on the
1. Damage to cargo due to EXPLOSION of another carrier to prove such exercise of diligence. It is
cargo – not attributable to peril of the seas or up to the carrier to overthrow the presumption of
accidents of navigation. negligence. If the passenger decides to file a
2. Damage by WORMS and RATS resulting to case, all the passenger has to do is to prove that
damage to cargoes – can’t be cited as an excuse she was a passenger of the bus and that she
by the carrier. suffered injuries while on board the bus.
3. Damage by WATER through a port which had
been left open or insufficiently fastened on (b) Supposing that there were armed men
sailing. who staged a hold-up while the bus was
4. Carrier cannot escape liabilities to third persons if speeding along the highway. One of them
damage was caused by BARRATRY – where stole the passenger’s bag and wallet while
the master or crew of the ship committed pointing a gun him. Is the bus liable?
unlawful acts contrary to their duties – includes
theft and fraudulently running the ship ashore. Answer: No. Hand-carried luggages are
governed by necessary deposit. Besides, theft
Cases: with use of arms or through irresistible force is a
force majeure which exempts carriers from
1. Problem: A carrier bus on its way to its liability.
destination encountered an engine failure, thus, it 3. Hi-jacking cannot exculpate the carrier from
has to be repaired for 2 days. And while in the liability if it is shown that the employees of the
repair shop, a typhoon came resulting to the carrier were not overwhelmed by the hijackers
spoilage of cargoes. and that there was no showing of irresistible
force. Since, there were 4 employers while there
Answer: A typhoon although a natural disaster, is were only 2 hijackers and only one of them was
not a valid defense if it is shown that it was not armed with bladed weapon.

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to which the carrier belongs, though not necessarily

ON THE OTHER HAND, a hijacking by 3 with that to which the owner of the gods owes
armed men is an event which is considered to be allegiance.
beyond the control of the carrier. Thus, the
carrier may be adjudged from liability if it can be - Thieves, rioter, and insurrectionists are not included.
proven that the hijacking was unforeseeable. They are merely private depredators for whose acts a
carrier is answerable.
Case: Philippine American General Insurance Co. vs.
MCG - Rebels in insurrection against their own government
-Even in cases where a natural disaster is the are generally not embraced in the definition of public
proximate and only cause of the loss, a common carrier enemy. However, if the rebels hold a portion of
is still required to exercise due diligence to prevent or territory, they have declared their impendence, cast off
minimize loss before, during and after the occurrence their allegiance and has organized armed hostility to
of the natural disaster, for it to be exempt from liability the government, and the authority of the latter is at the
under the law for the loss of the goods time overthrown, such an uprising may take on the
dignity of a civil war, and so matured and magnified,
Case: Pilapil vs. CA the parties are belligerent and are entitled to belligerent
Facts: a bystander alongside national highway hurled a rights.
stone at the left side of the bus, hitting petition
above his left eye which resulted to partial loss of - Depredation by pirates (which are enemy of all
the left eye’s vision civilized nation) excuses the carrier from liability.
SC: A common carrier does not give its consent to
become an insurer of any and all risks to - Common carriers may be exempted from
passengers and goods. It merely undertakes to responsibility only if the act of the public enemy has
perform certain duties to the public as the law been the proximate and only cause of the loss.
imposes, and holds itself liable for any breach Moreover, due diligence must be exercised to prevent
thereof. or at least minimize the loss before, during and after
- The law does not make the carrier an insurer of the performance of the act of the public enemy in
the absolute safety of its passengers order that the carrier may be exempted from liability
- Article 1763: A common carrier is responsible for for the loss, destruction, or deterioration of the goods.
injuries suffered by a passenger on account of
the willful acts or negligence of other passengers C. IMPROPER PACKING
or of strangers, if the common carrier’s Character of the goods and defects in the
employees through the exercise of the diligence packaging or in the containers are defenses available to
of a good father of a family could have prevented the common carrier. Similarly, the Carriage of Good by
or stopped the act or omission Sea Act provides that carrier shall not liable for:
o Clearly, a tort committed by a stranger
which causes injury to a passenger does not 1. Wastage in bulk or weight or any damages arising
accord the latter a cause of action against form the inherent defect, quality or vice of
the carrier. The negligence for which a goods;
common carrier is held responsible is the 2. Insufficiency of packing;
negligent omission by the carrier’s 3. Insufficiency or inadequacy of the marks, or
employees to prevent the tort from being 4. Latent defects no discoverable by due diligence.
committed when the same could have been
foreseen and prevented by them However, NCC likewise provides:

Case: Franklin Gacal vs. PAL Art. 1742. Even if the loss, destruction, or
-It is therefore not enough that the event should deterioration of the goods should be caused by the
not have been foreseen or anticipated, as is commonly character of the goods, or the faulty nature of the
believed, but it must be one impossible to foresee or to packing or the containers, the common carrier must
avoid. exercise due diligence to forestall or lessen the loss.
-The mere difficulty to foresee the happening is
not the impossibility to foresee the same Thus, if the carrier accepted the goods knowing the
fact of improper packing or even if the carrier does
B. PUBLIC ENEMY not know but the defect was nonetheless apparent
-Presupposes a state of war and refers to the upon ordinary observation, it is not relived from
government of a foreign nation at war with the country liability for loss or injury to goods resulting therefrom.

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their employees.
1. Problem: A carrier knowing that some of a Art. 1763. Carrier is responsible for injuries suffered
cargo of sacks of rice had big holes and others by a passenger on account of the willful acts or
had openings just loosely tied with strings negligence of other passengers or of strangers, if the
resulting to the spillage of rice during the trip. common carrier’s employees through the exercise of
Thus, there was shortage in the delivery of the the diligence of a good father of a family could have
cargoes. When sued due to the shortage, the prevented or stopped the act or omission.
carrier interposed a defense that it was not liable
since the shortage was due to the defective a. Employees
condition of the sacks. Decide. - Carrier is liable for the acts of its employees. It can’t
escape liability by claiming that it exercised due
Answer: Carrier must still exercise extraordinary diligence in supervision and selection of its employees
diligence if the fact of improper packing is (unlike in quasi-delicts).
known to the carrier or its servants, or apparent
upon ordinary observation. If the carrier accepted Reasons for the rule:
the cargo without protests or exception 1. Undertaking of the carrier requires that its
notwithstanding such condition, he is not relived passenger that full measure of protection
of liability for damage resulting therefrom. afforded by the exercise of high degree of care
Apply Article 1742. prescribed by law, inter alia from violence and
insults at the hands of strangers and other
D. ORDER OF PUBLIC AUTHORITY passengers, but above all, from the acts of the
carrier’s own servants.
Art. 1743. If through the order of public authority the
goods are seized or destroyed, the common carrier is 2. The liability of the carrier for the servant’s
not responsible, provided said public authority had violation of duty to performance of his contract
power to issue order. to safely transport the passenger, delegating
therewith the duty of protecting the passenger
Cases: with utmost care prescribed by law.
1. Carrier was not excused from liability since the
order of an acting mayor was not considered as a 3. As between the carrier and the passenger, the
valid order of a public authority. It is required former must bear the risk of wrongful acts or
that public authority who issued the order must negligence of the carrier’s employees against
be duly authorized to issue the order. passenger, since it, and not the passenger, has the
power to select and remove them.
2. Carriage of Goods by Sea Act – provides that
carrier shall not responsible for loss or damage Rationale: On the other hand, if the ship owner
resulting from “arrest or restraint of princes, derives profits from the results of the choice of the
rulers, or people, or seizure under legal process” captain and the crew, when the choice turns out
and from “quarantine restrictions”. successful, it is also just that he should suffer the
consequences of an unsuccessful appointment, by
II. DEFENSES IN CARRIAGE OF PASSENGERS application of the rule of natural law contained in the
partidas --- that he who enjoys the benefits derived
- Primary defense of carrier is exercise of from a thing must likewise suffer the losses that ensue
extraordinary diligence in transporting passengers. therefrom
Even if there is a fortuitous event, the carriers must Note: Willful acts of the employees include theft
also present proof of exercise of extraordinary
diligence. b. Other Passengers and Third Persons

Art. 1759. Common carriers are liable for the death of - With respect to acts of strangers and other passengers
or injuries to passengers through the negligence or resulting in injury to a passenger, the availability of
willful acts of the carrier’s employees, although such such defense is also subject to the exercise of a carrier
employees may have acted beyond the scope of their of due diligence to prevent or stop the act or omission.
authority or in violation of the orders of the common
carriers. - Negligence of the carrier need not be the sole cause
The liability does not cease even upon proof that they of the damage or injury to the passenger or the goods.
exercised diligence in the selection and supervision of The carrier would still be liable even if the contractual

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breach concurs with the negligent act or omission of his family, servants or visitors, or if the loss arises
another person. from the character of the things brought into the hotel.
Remember: the negligence of the other driver in a
collision is NOT a prejudicial question to an action Art. 2003. The hotel-keeper cannot free himself from
against the carrier’s company. responsibility by posting notices to the effect that he is
not liable for the articles brought by the guest. Any
Article 1759. Common carriers are liable for the stipulation between the hotel-keeper and the guest
death of or injuries to passenger through the whereby the responsibility of the former as set forth in
negligence or willful acts of the former’s employees, articles 1998 to 2001 is suppressed or diminished shall
although such employees may have acted beyond the be void. (n)
scope of their authority or in violation of the orders of
the common carriers. Cases:
1. Despite the fact that the carrier gave notice that it
PASSENGER’S BAGGAGES shall not be liable for baggage brought in by
- The term baggage has been defined to include passengers, the carrier is still liable for lost hand-
whatever articles a passenger usually takes with him carried luggage since it is governed by rules on
for his own personal use, comfort and convenience necessary deposits. Under Art. 20000, the
- Rules that are applicable to goods that are being responsibility of the depositary includes the loss
shipped are also applicable to baggage delivered to the of property of the guest caused by strangers but
custody of the carrier. Arts. 1733. 1734 and 1736 of not that which may proceed from force majeure.
Civil Code are applicable. Moreover, article 2001 considers theft as force
- However, if the luggage was hand-carried, Arts. majeure if it is done with use of arms or through
1998, 2000-2003 shall apply. irresistible force.

Distinction: W/N the baggage is in the personal 2. Even if the passenger did not declare his baggage
custody of the passenger. nor pay its charges contrary to the regulations of
 if yes, hand carried baggage the bus company, the carrier is still liable in case
 if no, checked-in baggage of loss of the baggage. Since, it has the duty to
exercise extraordinary diligence over the
Art. 1998. The deposit of effects made by the baggage that was turned over to the carrier or
travellers in hotels or inns shall also be regarded as placed in the baggage compartment of the bus.
necessary. The keepers of hotels or inns shall be The non-payment of the charges is immaterial as
responsible for them as depositaries, provided that long as the baggage was received by the carrier
notice was given to them, or to their employees, of the for transportation.
effects brought by the guests and that, on the part of
the latter, they take the precautions which said hotel-
keepers or their substitutes advised relative to the care ACTS OF THE SHIPPER OR THE PASSENGER
and vigilance of their effects. (1783) - if the act or omission of the shipper or owner of
the goods or the passenger is the proximate and only
Art. 2000. The responsibility referred to in the two cause of the damage, then the common carrier is not
preceding articles shall include the loss of, or injury to liable.
the personal property of the guests caused by the - Nevertheless, contributory negligence on the
servants or employees of the keepers of hotels or inns part of the shipper/ passenger would only mitigate the
as well as strangers; but not that which may proceed carrier’s liability; it is not a total excuse.
from any force majeure. The fact that travellers are - However, if the negligence of the shipper/
constrained to rely on the vigilance of the keeper of the passenger is the proximate and only cause of the loss,
hotels or inns shall be considered in determining the then, the carrier shall not be liable. The carrier may
degree of care required of him. (1784a) overcome the presumption of negligence and may be
able to prove that it exercised extraordinary diligence
Art. 2001. The act of a thief or robber, who has in handling the goods or in transporting the passenger.
entered the hotel is not deemed force majeure, unless it
is done with the use of arms or through an irresistible The carrier may be able to prove that the only cause of
force. (n) the loss of the goods is any of the following:

Art. 2002. The hotel-keeper is not liable for 1. Failure of the shipper to disclose the nature of
compensation if the loss is due to the acts of the guest, the goods;

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2. Improper marking or direction as to the Note: there is also no assumption of risk by the mere
destination; fact that the carrier posted notices against such liability
3. Improper loading when he assumes such
responsibility. Case:
Problem: Although, there is a sign in the bus that
The shipper must likewise see to it that the goods says: “do not talk to the driver while the bus is in
are properly packed; otherwise, liability of the carrier motion, otherwise, the company would not
may either be mitigated or barred depending on the assume responsibility for any accident:.
circumstances. Nonetheless, the passengers dared the driver to
race with another bus, as the bus speeds up in the
Art. 1741. If the shipper or owner merely contributed attempt to overtake the other bus, it failed to slow
to the loss, destruction or deterioration of the goods, down. As a result, the bus turns turtle causing the
the proximate cause thereof being the negligence of the death and injuries to passengers. Is the bus
common carrier, the latter shall be liable in damages, company liable?
which however, shall be equitably reduced.
Answer: Yes. The bus company is obligated to
Art. 1761. The passenger must observe the diligence exercise utmost diligence in carrying passengers.
of a good father of a family to avoid injury to himself. This liability cannot be eliminated or limited by
simply posting notices. The passenger cannot be
Art. 1762. The contributory negligence of the said to have assumed the risk of being injured
passenger does not bar recovery of damages for his when he urged the driver to accept the dare. At
death or injuries, if the proximate cause thereof is the most, the passengers can only be said to be guilty
negligence of the common carrier, but the amount of of contributory negligence which would mitigate
damages shall be equitably reduced. the liability of the driver, since the proximate
cause of the accident was the driver’s willful and
a. Last Clear Chance reckless act in running the race with the other
A negligent carrier is liable to a negligent
passenger in placing himself in peril, if the carrier was Case: Cesar Isaac vs. A.L. Ammen Transportation Co,
aware of the passenger’s peril, or should have been Inc.
aware of it in the reasonable exercise of due care, had - Where a carrier’s employee is confronted with a
in fact an opportunity later than that of the passenger to sudden emergency, the fact that he is obliged to act
avoid an accident. quickly and without a chance for deliberation must be
taken into account, and he is not led to the same degree
Last clear chance applies in a suit between the of care that he would otherwise be required to exercise
owners and drivers of colliding vehicles. It does not in the absence of such emergency but must exercise
arise where a passenger demands responsibility from only such care as any ordinary prudent person would
the carrier to enforce its contractual obligations. For it exercise under like circumstances and conditions, and
would be inequitable to exempt the negligent driver of the failure on his part to exercise the best judgment the
the carrier and its owner on the ground that the other case renders possible does no establish lack of care and
driver was likewise guilty of negligence. skill on his part which renders the company liable.

b. Assumption of Risk Case: Compania Maritima vs. CA and Vicente

Passengers must take such risks incident to the - While the act of private respondent in furnishing
mode of travel. Carriers are not insurers of the lives of petitioner with an inaccurate with of the payloader
their passengers. Thus, in air travel, adverse weather cannot successfully be used as an excuse by petitioner
conditions or extreme climatic changes are some of the to avoid liability to the damage thus caused, said act
perils involved in air travel, the consequence of which constitutes a CONTRIBUTORY CIRCUMSTANCE to
the passenger must assume or expect. the damage caused on the payloader, which mitigates
the liability for damages of petitioner in accordance
However, there is no assumption of risk in a case with Article 1741.
wherein a passenger boarded a carrier that was filled to
capacity. The act of the passenger in taking the Case: Philippine National Railways vs. CA
extension chair does not amount to implied assumption - While petitioner failed to exercise extraordinary
of risk. diligence as required by law, it appears that the
deceased was chargeable with contributory negligence.

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- Since he opted to sit on the open platform - six (6) years if there is no written contract (bill of
between the coaches of the train, he should have held lading)
tightly and tenaciously on the upright metal bar found - ten (10) years if there is written contract
at the side of said platform to avoid falling off from the
speeding train  This rule likewise applies to carriage of passengers
for domestic transportation.

NOTICE OF CLAIM AND PRESCRIPTIVE B. International Carriage of Goods by Sea

 A claim must be filed with the carrier within the
A. Overland Transportation of Goods and Coastwise following period:
Shipping 1. if the damage is apparent, the claim should
be filed immediately upon discharge of the
a) When to file a claim with carrier goods; or
- Art. 366 constitutes a condition precedent to the 2. within 3 days from delivery, if damage is
accrual of a right of action against a carrier for not apparent.
damage caused to the merchandise.
*Filing of claim is not condition precedent. Thus,
 Under Art. 366 of the Code of Commerce, an action regardless of whether the notice of loss or damage has
for damages is barred if the goods arrived in damaged been given, the shipper can still bring an action to
condition and no claim is filed by the shipper within recover said loss or damage within one year after the
the following period: delivery of the goods or the date when the goods
1. Immediately if damage is apparent; should have been delivered
2. within twenty four (24) hours from
delivery if damage is not apparent.
a) Prescription
- The period does not begin to run until the *Action for damages must be filed within a period of
consignee has received possession of the one (1) year from discharge of the goods.
merchandise that he may exercise over it the ordinary  *The period is not suspended by an extra-judicial
control pertinent to ownership. demand. (Why? Transportation of goods by sea should
be decided in as short a time as possible)
- This provision applies even to transportation by o Case: Dole Philippines Inc. vs. Maritime
sea within the Phils. or coastwise shipping. Company of the Philippines - the
prescriptive period is not tolled or interrupted
- Does NOT apply to misdelivery of goods. by a written extra-judicial demand. Article
1155 is NOT applicable.
Q: Why does it not apply to misdelivery of goods?
A: In such cases (misdelivery), there can be no  *The period does not apply to conversion or
question of claim for damages suffered by the goods misdelivery.
while in transport, since the claim for damages arises  *The one (1) year period refers to loss of goods and
exclusively out of the failure to make delivery. not to misdelivery.

Case: Monica Roldan vs. Lim Ponzo and Co. - Damages arising from delay or late delivery are not
- Article 366 of the Commercial Code is limited to the damage or loss contemplated under the COGSA.
cases of claims for damage to goods actually turned The goods are not actually lost or damaged. The
over by the carrier and received by the consignee. applicable period is ten (10) years.

*But the period prescribed in Art. 366 may be subject Case: Domingo Ang vs. American Steamship Agencies
to modification by agreement of the parties. What is to be resolved – in order to determine the
applicability of the prescriptive period of one year – is
*The validity of a contractual limitation of time for whether or not there was loss of the goods subject
filing the suit itself against a carrier shorter than the matter of the complaint.
statutory period thereof has generally been upheld as Loss contemplates merely a situation where no
such stipulation merely affects the shipper’s remedy delivery at all was made by the shipper of the goods
and does not affect the liability of the carrier. because the same had perished, gone out of commerce,
or disappeared in such a way that their existence is
b) Extinctive Prescription unknown or they cannot be recovered. (Note: It is not

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loss due to misdelivery or delivery to the wrong carrier, that he has received the described goods from
person.) the shipper, to be transported on the expressed terms,
to the described place of destination, and to be
* This rule applies in collision cases. The one (1) year delivered there to the designated consignee or parties.
period starts not from the date of the collision but - A bill of lading or a ticket is not necessary for
when the goods should have been delivered, had the the perfection of a contract of carriage.
cargoes been saved.
Case: Maritime Agencies and Services Inc. vs. CA
- When there is two destination of delivery, the 1. Negotiable or non-negotiable
one year period should commence when the last item 2. Clean bill of lading or foul bill of lading
was delivered to the consignee. ♦ Clean bill of lading – one that does not
contain any notation indicating any defect
*Insurance in the goods.
 The insurer who is exercising its right of ♦ Foul bill of lading – one that contains
subrogation is also bound by the one (1) year such notation.
prescriptive period.
 However, it does not apply to the claim against
3. On board bill or received for shipment bill
the insurer for the insurance proceeds. The claim ♦ On board bill of lading - one in which it
against the insurer is based on contract that expires is stated that the goods have been
in ten (10) years. received on board the vessel which is to
carry the goods.
C. Air Transportation - is issued when the goods have been
actually placed aboard the ship with
- The applicable rule on international air transportation every reasonable expectation that the
can be found in the Warsaw Convention shipment is as good as on its way.
♦ Received for shipment bill of lading –
Warsaw Convention: The complaint or claim with the one in which it is stated that the goods
carrier must be filed within 3 days from the receipt of have been received for shipment with or
the baggage and seven days in case of goods. In case without specifying the vessel by which the
of delay, 14 days after the baggage was placed at the goods are to be shipped.
disposal of the passenger. - is issued whenever conditions are not
normal and there is insufficiency of
a) Prescriptive Period shipping space.
2 years from the date of arrival at the 4. Spent bill of lading
destination or from the date the aircraft ought to - If the goods were already delivered but the
have arrived or from the date on which the bill of lading was not returned.
transportation stopped. 5. Through bill of lading
- One issued by a carrier who is obliged to use
Limiting Stipulations the facilities of other carriers as well as his
- The carrier can also, in proper cases, invoke partial own facilities for the purpose of transporting
defense in the form of a limiting stipulation. the goods from the city of the seller to the city
of the buyer, which bill of lading is honored
Requisites: by the second and other interested carriers
1. It is reasonable and just under the who do not issue their own lading.
circumstances 6. Custody bill of lading
2. It is fairly and freely agreed upon . 7. Port bill of lading


CHAPTER 5 1. As a Receipt
BILL OF LADING AND OTHER FORMALITIES - The bill of lading recites the date and place
of shipment, describes the goods as to
bill of lading quantity, weight, dimensions, identification
- is a written acknowledgment, signed by the marks and condition, quality, and value.
master of a vessel or other authorized agent of the 2. As a Contract

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- It stipulates the rights and obligations

assumed by the parties. SHIPMENT TERMS
3. As a Document of Title These shipment terms serve the following
Note: The three-fold nature of a bill of lading is 1. They determine the point at which the risk of
applicable only to carriage of goods. loss passes from seller to buyer;
2. They determine what performance by the
Q: When will a BOL take effect? seller amounts to a tender which will put the
A: A bill of lading usually becomes effective upon its buyer, if he thereafter refuses to accept
delivery to and acceptance by the shipper. delivery, in breach; and
3. They are used for quoting the price.
1. Shipper 1. F.O.B. (Free on Board)
2. Carrier - The risk passes to the buyer at the FOB
Note: However, a consignee, although not a signatory - It means that the seller still assumes the
to the contract of carriage becomes a party to the Bill risk until the goods reach the point of
of Lading by reason of either: destination.
1. The relationship of agency between the - i.e. “FOB Surigao”, the place of delivery
consignee and the shipper/consignor; is Surigao – the point of destination.
2. The unequivocal acceptance of the bill of - FOB Vessel means the seller must see to it
lading delivered to the consignee, with full that the goods are loaded and his
knowledge of its contents; responsibility does not cease until the
3. Availment of the stipulation pour autrui. loading is complete.

CONTRACT OF ADHESION 2. F.A.S. (Free Alongside)

-As a contract of adhesion, bills of lading - is a variant of FOB and is used for
have to be construed liberally in favor of the carriage by water.
passenger or shipper who adhered to such bill - FAS Vessel means that the seller
of lading or ticket. relinquishes the risk the moment the
goods are delivered alongside the vessel.
PAROL EVIDENCE RULE The seller is under no obligation to see to
-A bill of lading is covered by the parole evidence the loading and all that is required is
rule. delivery to the wharf.
-Under the parole evidence rule, the terms of a
contract are rendered conclusive upon the parties, and 3. C. I. F. (Cost, Insurance, Freight)
evidence aliunde is not admissible to vary or contradict - Indicated that the price quoted by the
a complete and enforceable agreement embodied in a seller includes the invoice price plus
document, subject to well-defined exceptions. insurance and freight.
-The mistake contemplated as an exception to the
parole evidence rule is one that is a mistake of fact BASIC STIPULATIONS
mutual to the parties. -The stipulations that must be stated in the bill of
- The rules on evidence require that in order that lading are provided for in the Code of Commerce.
parole evidence may be admitted, said mistake must
be put in issue by the pleadings, such that if not Electronic Documents -RA 8792 otherwise known as
raised inceptively in the complaint or in the answer, as the Electronic Commerce Act of 2000 now allows the
the case may be, a party cannot later on be permitted to issuance of tickets in the form of electronic documents.
introduce parole evidence thereon.
BILL OF LADING AS ACTIONABLE 1. Exempting the carrier from any and all
DOCUMENT liability for loss or damage occasioned by its
-In a contractual obligation, the bill of lading can own negligence. (Exculpatory contracts;
be categorized as an actionable document under the invalid as being contrary to public policy)
Rules of Court. Hence, the bill of lading must be
2. Providing for an unqualified limitation of such
properly pleaded either as causes of action or defenses.

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liability to an agreed valuation. (invalid as

being contrary to public policy) Article 1748. An agreement limiting the common
3. Limiting the liability of the carrier to an carrier’s liability for delay on account of strikes or
agreed valuation unless the shipper declares a riots is valid.
higher value and pays a higher rate of freight.
Article 1749. A stipulation that the common carrier’s
In addition, Art. 1745 provides for additional liability is limited to the value of the goods appearing
invalid stipulations in carriage of goods: in the bill of lading, unless the shipper or owner
declares a greater value, is binding.
Article 1745. Any of the following or similar
stipulations shall be considered unreasonable, Article 1750. A contract fixing the sum that may be
unjust, and contrary to public policy: recovered by the owner or shipper for the loss,
1. That the goods are transported at the risk destruction, or deterioration of the goods is valid, if it
of owner or shipper; is reasonable and just under the circumstances, and
has been fairly and freely agreed upon.
2. That the common carrier will not be
liable for any loss, destruction, or PURPOSE OF LIMITING STIPULATIONS
deterioration of the goods; The purpose of the limiting stipulation in the Bill
3. That the common carrier need not of Lading is to protect the common carrier.
observe any diligence in the custody of
the goods; Note: The presence of a limiting stipulation does not
4. That the common carrier shall exercise a remove the duty to exercise extraordinary diligence in
degree of diligence less than that of a the transportation of goods.
good father of a family, or of a man of
ordinary prudence in the vigilance over STIPULATION REDUCING DILIGENCE
the movables transported; -The parties cannot stipulate so as to totally
5. That the common carrier shall not be exempt the carrier from exercising any degree of
responsible for the acts or omission of his diligence.
or its employees; -The parties cannot stipulate that the common
6. That the common carrier’s liability for carrier shall exercise diligence less than the diligence
of a good father of a family.
acts committed by thieves, or of robbers
♦ However, the parties may stipulate that the
who do not act with grave or irresistible
diligence to be exercised by the common carrier in the
threat, violence or force, is dispensed with
carriage of goods be less than the extraordinary
or diminished;
diligence provided that the following requisites are
7. That the common carrier is not complied with:
responsible for the loss, destruction, or
1. The stipulation is in writing and signed by
deterioration of goods on account of the
both parties;
defective condition of the car, vehicle,
ship, airplane or other equipment used in 2. The stipulation is supported by a valuable
the contract of carriage. consideration other than the service rendered
by the common carrier; and
LIMITING STIPULATIONS 3. The stipulation is just, reasonable and not
The other provisions on limiting stipulations contrary to law.
under the New Civil Code are as follows:
Note: No such stipulation reducing the degree of
Article 1746. An agreement limiting the common diligence to be observed by the carrier is allowed for
carrier’s liability may be annulled by the shipper or carriage of passengers.
owner if the common carrier refused to carry the
goods unless the former agreed to such stipulation. A stipulation fixing the amount that may be
recovered only requires the following:
Article 1747. If the common carrier, without just 1. It is reasonable and just under the
cause, delays the transportation of the goods or circumstances;
changes the stipulated or usual route, the contract 2. It is fairly and freely agreed upon.
limiting the common carrier’s liability cannot be
availed of in case of the loss, destruction, or CARRIAGE OF GOODS BY SEA ACT
deterioration of the goods. -The Carriage of Goods by Sea Act (COGSA)

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applies suppletorily to the Civil Code if the goods are document has the effect of manual delivery so as to
to be shipped from a foreign port to the Philippines. constitute the transferee the owner of the goods.
-Under COGSA, the liability of the carrier is
US$500 per package in the absence of a shipper’s
declaration of a higher value in the bill of lading.
- If the goods are shipped in cartons, each carton
is considered a package even if they are stored in
container vans.
- When what would ordinarily be considered
packages are shipped in a container supplied by the CHAPTER 6
carrier and the number of such units is disclosed in the ACTIONS AND DAMAGES IN CASE OF
shipping documents, each of those units and not the BREACH
container constitutes the package referred to in
Q: When the limiting stipulation cannot be a) against common carrier – based on
invoked? culpa contractual or culpa aquiliana
A: Under the following circumstances: b) on the part of the driver – based on
1. When the agreement limiting the common either culpa delictual or culpa aquiliana
carrier’s liability is annulled by the shipper or
owner if the common carrier refused to carry DISTINCTION BETWEEN CULPA
the goods unless the former agreed to such CONTRACTUAL AND CULPA AQUILIANA
stipulation; and
2. If the carrier delays in the transportation of the
3. If the carrier changes the stipulated o usual N AL A
route. Source of Contract Quasi-Delict
BILL OF LADING AS A RECEIPT Liability of No liability there Solidarily
-A bill of lading is a prima facie evidence of the Employee being no privity liable with
receipt of the goods by the carrier. of contract the employer
Availability of Due diligence in Due
SAID WEIGHT CLAUSE Defense the selection and diligence in
- It means nobody knows the actual weight of the supervision of the selection
cargo; the weight written on the bill and on the the employee is and
manifest is based only on the declaration of the not a defense. supervision
shipper. of the
-This is material when the presumption of employee is
negligence is invoked because before the presumption a defense
can operate, the shipper must prove the alleged loss. under Art.
NEGOTIABILITY In what Liable as a Liable as an
capacity liable contracting party. employer.
-The presence of words of negotiability makes the
document of title negotiable. CONCURRENT CAUSES OF ACTION
-If the document of title contains the
required words of negotiability to make the ♠ There is one action but several causes of action - The
instrument negotiable under Article 1507 of same act that breaches the contract may also be tort
the NCC, the document remains to be
negotiable even if the words “not negotiable” ♠ The cause of action of a passenger or shipper against
or non-negotiable are placed thereon. the common carrier can be culpa contractual or culpa
♦ Bearer document - negotiated by delivery aquiliana while the basis of liability on the part of the
♦Order document - negotiated by indorsement of driver is either culpa delictual or culpa aquiliana. The
the specified person so named driver of the carrier is not liable based on contract
because there is NO PRIVITY of contract between him
Note: Effects of negotiation: Negotiation of the and the passenger or shipper.

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in cases of temporary or permanent personal injury;

♠ If the negligence of third persons concurs with the 2) For injury to the plaintiff’s business
breach, the liability of the third person who was standing or commercial credit.
driving the vehicle and/or his employer may be based
on quasi delict. The driver alone may be held ♠ Damages cannot be presumed. The burden of proof
criminally liable and civil liability may be imposed rests on the plaintiff who is claiming actual damages
upon him based on delict. In the latter case, the against the carrier.
employer is subsidiarily liable.
♦ In case of goods – the plaintiff is entitled to
♠ It does not make any difference that the liability of their value at the time of destruction. The award is the
one springs from the contract while that of the other sum of money which plaintiff would have to pay in the
arises from quasi-delict. If the owner and driver of the market for identical or essentially similar goods.
other vehicle are not impleaded, the carrier may ♦ For personal injury and even death – the
implead them by filing a third party complaint. claimant is entitled to all medical expenses as well as
other reasonable expenses that he incurred to treat his
♠ Solidary liability - In case the negligence of the or her relative’s injuries.
carrier’s driver and a third person concurs, the liability ♦ In case of death – the plaintiff is entitled to
of the parties – carrier and his driver, third person – is the amount that he spent during the wake and funeral
joint and several. of the deceased. But, expenses after the burial are not
♠ The shipowner or the operator, as employer, may be
held primarily liable under Art. 2180 of the New Civil ART. 2206 (CIVIL CODE):
Code or subsidiarily liable under the Revised Penal ♠ Death caused by a crime or quasi-delict shall
Code. be at least P3,000; [The amount of fixed damages is
now P50,000.00]
ELEMENTS OF CAUSE OF ACTION AGAINST ♠ The defendant shall be liable for the loss of
THE CARRIER the earning capacity of the deceased;
♠ If deceased is obliged to give support,
Culpa Contractual: recipient may demand support from the person causing
1. Allege the presence of the contract the death for a period not exceeding five years.
2. Damage or injury to the plaintiff ♠ Spouse, legitimate and illegitimate
descendant and descendants may demand moral
CARRIER’S RIGHT OF RECOURSE damages for mental anguish by reason of the death of
the deceased
♠ The carrier may be compelled to pay damages for the
loss or damage to the goods or passengers has the right 1) Loss of earning capacity
of recourse against the employee who committed the
negligent, intentional, or fraudulent act. ♠ Net Earning Capacity = Life Expectancy x [Gross
Annual Income less Necessary Living Expenses]
♠ Life expectancy – (2/3 x 80 – age at death)
1. Actual or Compensatory ♠ Net earnings – based on the gross income of the
- It shall comprehend not only the value of victim minus the necessary incidental living expenses
the loss suffered, but also that of profits which the victim would have incurred if he were alive.
the obligee failed to obtain.
♠ Amount of living expenses must be established. In
KINDS OF ACTUAL DAMAGES: the absence of proof, it is fixed at fifty (50%) of the
1. The loss of what a person already gross income.
possesses (daño emergente);
2. The failure to receive as a benefit that ♠ Rules on loss of earning apply when the breach of
would have pertained to him (lucro the carrier resulted in the plaintiff’s permanent
cesante). incapacity.

DAMAGES RECOVERED UNDER ART. 2205 2) Attorney’s fees - refer to Art. 2208 of the Civil
(CIVIL CODE) Code - attorney’s fees may be awarded in an action for
1) For loss or impairment of earning capacity breach of contract of carriage under par. 1,2,4,5,10 and

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11 of Art. 2208. - If awarded exemplary, one is entitled - Requisites:

to attorney’s fees - 2 kinds: ordinary (compensation to 1. There must be an injury,
the lawyer); extraordinary (indemnity as a form of whether physical, mental or
damages suffered due to the breach of contract) - You psychological, clearly
can be awarded if you show that you were forced to sustained by the claimant.
litigate and when you are entitled to exemplary
2. There must be a culpable act
damage. - But this award is subject to the discretion of
or omission factually
the court (you cannot dictate – usually 10%-15%)
3) Interests 3. The wrongful act or omission
of the defendant is the
♠ 12% per annum – if it constitutes a loan or proximate cause of the injury
forbearance of money sustained by the claimant.
4. The award of damages is
♠ 6% per annum – if it does not constitute loan or predicated on any of the
forbearance of money cases stated in Art. 2219.

♠ 12% - for final judgment - Factors to consider that could affect the
amount to be recovered:
Note: No interest, however, shall be adjudged on 1. The extent of humiliation may also
unliquidated claims for damages except when or until determine the amount of moral
the demand can be established with reasonable damages that can be awarded.
certainty, the interest shall begin to run form the time
2. The extent of pain and suffering
the claim is made judicially or extrajudicially.
likewise determines the award.
2. Moral Damages - Includes physical suffering, 3. Official, political, social and financial
standing of the offended party and the
mental anguish, fright, serious anxiety, besmirched
business and financial position of the
reputation, wounded feelings, moral shock, social
offender affect the amount of
humiliation and similar injury.
- Though incapable of pecuniary
computation, moral damages may be
4. The age of the claimant.
recovered if they were the proximate
result of the defendant’s wrongful act or 3. Nominal Damages
omission. - Refer to Art. 2221-2223 (Civil
- Moral damages are not awarded to punish Code)
the defendant but to compensate the - It is adjudicated in order that the
victim. right of plaintiff may be vindicated or
- May be recovered when there is death or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered
there is malice or bad faith. (in
by him.
transportation of passengers)
- The assessment of nominal damages
- Refer to Art. 2219 and 2220 (enumerates is left to the discretion of the court according
cases when moral damages may be to the circumstances of the case.
awarded) - The award of nominal damages is
- Generally, no moral damages may be also justified in the absence of competent
awarded where the breach of contract is proof of the specific amounts of actual
not malicious. damages suffered.
- Moral damages may be awarded if the - Cannot co-exist with actual
contractual negligence is considered gross damages.
negligence. - There is no loss in nominal
- Subject to three conditions in damages, unlike in actual and temperate
transportation law: damages, loss is present which is proven and
♦ Death not proven but rather ascertained by the court,
♦ Malice or bad faith (must be done respectively.
in the performance of the contract of
carriage) Case: Japan Airlines vs. CA
♦ Physical Injuries - The award of moral damages was justified because

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JAL failed to make necessary arrangement to the provisions under Art. 2232-2235 of
transport the plaintiffs on the first available the Civil Code.
connecting flight to Manila.
- Only Nominal damages were awarded in the absence Case: Air France vs. Rafael Carrascoso and CA - The
of proof of actual damages inference of bad faith is there; it may be drawn from
the facts and circumstances set forth therein. The
4. Temperate or Moderate Damages contract was averred to establish the relation between
- More than nominal but less than the parties.
compensatory damages. - Deficiency in the complaint in stating that there was
- Art. 2224 provides: bad faith, if any, was cured by the evidence.
- may be recovered when the court
finds that some pecuniary loss has been
suffered but its amount cannot, from the Case: Philippine Airlines Inc. vs. CA
nature of the case, be provided with certainty. - Moral damages are recoverable in a breach of
- cannot co-exist with actual damages. contract of carriage where the air carrier thought its
- definite proof of pecuniary loss agents acted fraudulently or in bad faith.
cannot be offered, although the court is - The contract of air carriage generates a relation
convinced that there has been such loss. attended with a public duty. Neglect or malfeasance of
the carrier’s employees naturally could give ground
5. Liquidated Damages for an action for damages.
- Those agreed by the parties to a contract,
to be paid in case of breach thereof.
- Ordinarily, the court cannot change the PART II: AVIATION LAW
amount of liquidated damages agreed
upon by the parties. However, Art. 2227 CHAPTER 7
of the Civil Code provides that liquidated THE AIRCRAFT AND CIVIL AVIATION
damages, whether intended as an
indemnity or a penalty, shall be equitably Applicable Laws:
reduced if they were iniquitous or 1. The New Civil Code provisions on Common
unconscionable. Carriers
2. RA 9497 – Civil Aviation Authority Act of 2008
6. Exemplary or Corrective Damages 3. Civil Aviation Regulations (issued by CAAP)
- Requisites for the award of exemplary 4. Treaties and Conventions (Warsaw Convention)
1. They may be imposed by way of CIVIL AVIATION
example in addition to compensatory
damages, and only after the claimant’s Aeronautics or aviation
right to them has been established. -science and art of flight
2. They cannot be recovered as a
matter of right, their determination Civil Aviation
depending upon the amount of -refers to the operation of any civil aircraft for the
compensatory damages that may be purpose of general aviation operations, aerial work or
awarded to the claimant. commercial air transport operations
3. The act must be accompanied by
bad faith or done in wanton, fraudulent, Aircraft
oppressive or malevolent manner. -any machine that can derive support in the
atmosphere from the reactions of the air other than the
Note: If gross negligence warrants the award of reactions of the air against the earth’s surface
exemplary damages, with more reason is its imposition -shall refer to civil aircraft only, not State or
justified when the act performed is deliberate, public aircraft when used om Civil Aviation Act of
malicious and tainted with bad faith. The rationale 2008
behind exemplary or corrective damage is to provide
an example or correction from public good. REGISTRATION OF AIRCRAFT

- The award of exemplary damages in Philippine Aircraft

breach of contract of carriage is subject to -aircraft registered in the Philippines in

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accordance with the requirements of the Civil Aviation any portion thereof shall be registered with the CAAP.
Authority Act of 2008
SEC. 49. Conveyance to be Recorded. - No
Art. 17, Chap III, of the Chicago Convention conveyance made or executed, which affects the title
-“aircraft have the nationality of the State in to, or interest in, any aircraft of Philippine registry, or
which they are registered” any portion thereof shall be valid in respect to such
aircraft or portion thereof against any person other than
Note: An aircraft cannot be registered in more than one the person by whom the conveyance is made or
State, but registration may be changed from one State executed, his heirs, assignees, executors,
to another administrators, devisees, or successors in interest, and
any person having actual notice thereof, until such
Registration is made in accordance with Civil Aviation conveyance is recorded in the Authority. Every such
Authority Act of 2008 (see pages 335-337, Aquino) conveyance so recorded shall be valid as against all
persons. Any instrument, recording of which is
Sec. 45. Application for Aircraft Registration – required by the provisions of this Act, shall take effect
Applications for certificate of registration shall be from the date of its record in the books of the
made in writing, signed and sworn to by the owner or Authority, and not from the date of its execution.
lessee of any aircraft or aircrafts engine eligible for
registration. The application shall also state: a) the date SEC. 50. Form of Conveyance. - No conveyance may
and place of filing; b) the specification, construction be recorded under the provisions of this Act unless it
and technical description of the aircraft or aircraft complies with the requirements for the registration of
engine; and c) such other information as may be documents similar to the land registration process. The
required by the Authority in such manner and form as conveyance to be recorded shall also state: (a) the
the Authority may prescribe by regulation. interest in the aircraft of the person by whom such
conveyance is made or executed or, in the case of a
State of Registry contract of conditional sale, the interest of the vendor;
-State on whose register the aircraft is entered and (b) the interest transferred by the conveyance.

Requirements for an aircraft to be eligible for SEC. 51. Establishment of System of Recording. -
registration: The Authority shall establish a national system for
1. Aircraft is owned by or leased to citizen or recording documents that affect the title to or any
citizens of the Phil or corporations or associations interest in any aircraft registered in accordance with
organized under the laws of the Phil at least 60% of this Act and in any aircraft engine, propeller, appliance
whose capital is owned by Filipino citizens; and or spare parts intended for use on any such aircraft.
2. Aircraft is not registered under the laws of any
country SEC. 52. Method of Recording. - The Authority shall
record conveyances delivered to it in the order of their
Exceptionally, foreign-owned or registered receipt, in files kept for that purpose, indexed to show:
aircraft may be registered if utilized by members of (a) The identifying description of the aircraft;
aero clubs organized for recreation, sport, or the (b) The names of the parties to the conveyance;
development of flying skills as prerequisite to any (c) The date of the instrument and the date and time it
aeronautical activities of such clubs w/in Phil airspace is recorded;
(d) The interest in the aircraft transferred by the
No aircraft can be operated in the Philippines conveyance;
unless it displays nationality and registration marks. (e) If such conveyance is made as security for
Permanent marking of aircraft nationality and indebtedness, the amount and date of maturity of such
registration shall be painted on the aircraft or affixed indebtedness; and
by other means ensuring a similar degree of (f) All particular estates, mortgages, liens, leases,
permanence orders and other encumbrances and all decrees,
instruments, attachments or entries affecting aircraft
Certificate of registration is conclusive evidence and other matters properly determined under this Act.
of ownership, except in a proceeding where such
ownership is, or may be, at issue. The validity of the registration of voluntary
dealings concerning aircrafts with the CAAP is
Recording of Conveyances subject to the ff rules:
-All conveyances made or executed, which affects 1. Registration is valid only with respect to the
title to, or interest in, any aircraft of Phil registry, or parties and their heirs, assignees, executors,

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administrators, devisees, or successors in interest, and operator, which undertakes, whether directly or
any person having actual notice thereof. indirectly or by lease or any other arrangement, to
2. Registration is valid as against all persons and engage in commercial air transport operations within
instrument, recording of which is required shall take borders or airspace of the Philippines, whether on a
effect from date of its record in the books of Authority, scheduled or chartered basis.
and not from the date of its execution.
4. Airman
AIR TRANSPORTATION -refers to any individual who engages, as the
person in command or as pilot, mechanic, aeronautical
Air commerce or commercial air transport engineer, flight radio operator or member of the crew,
operation in the navigation of aircraft while under way and any
-Scheduled or unscheduled air transport services individual who is directly in charge of inspection,
for pay or hire, the navigation of aircraft in furtherance maintenance, overhauling, or repair of aircraft, aircraft
of a business, the navigation of aircraft from one place engine, propellers, or appliances and individual who
to another for operation in the conduct of a business, or serves in the capacity of aircraft dispatcher or air
an aircraft operation involving the transport of traffic control operator.
passengers, cargo or mail for remuneration or hire.
CAB regulates persons and entities that are
Domestic air commerce involved in the economic aspects of air
-Air commerce within the limits of Phil territory. transportations and entities such as:
1. General Sales Agent
Domestic air transport -means a person, who, pursuant to an authority
-Air transportation within the limits of the Phil. from an airline, by itself or through an agent, sells or
territory. offers for sale any air transportation, or negotiates for,
or holds himself by solicitation, advertisement or
Foreign air transport otherwise as one who sells, provides, furnishes,
-Air transportation between the Phil and any place contracts or arranges for, such air transportation.
outside it or wholly outside the Phil 2. Cargo Sales Agent
-means any person who does not directly operate
International commercial air transport an aircraft for the purpose of engaging in air
-Carriage by aircraft of persons or property for transportation or air commerce and who, as principal
remuneration or hire or the carriage of mail between or agent, sells, or offers for sale any air transportation
any two or more countries. of cargo, or negotiates for, or holds himself out by 1
solicitation, advertisement or otherwise as one who
PERSONS INVOLVED IN AIR provides, sells, furnishes, contracts, or arranges for,
TRANSPORTATION. such air transportation of cargo.
-Persons and entities involved in air transportation 3. Air Freight Forwarders
that are regulated by CAAP principally include the air -means any indirect air carrier which, in the
carrier or operator. ordinary and usual course of its undertaking, assembles
and consolidates or provides for assembling and
Air operators may either be a Philippine Air Carrier or consolidating such property or performs or provides
Foreign Air Carrier. for the performance of break-bulking and distributing
operations with respect to consolidated shipments, and
1. Air carrier or operator is responsible for the transportation of property from
-refers to a person who undertakes, whether the point of receipt to point of destination and utilizes
directly or indirectly, or by a lease or any other for the whole or any part of such transportation the
arrangements, to engage in air transportation services services of a direct air carrier.
or air commerce. The term may likewise refer to either 4. Off-line Carrier
a "Philippine air carrier" or a "foreign air carrier" as -means, for purposes of this Regulation, any
indicated by the context. foreign air carrier not certificated by the Board, but
who maintains office or who has designated or
2. Philippine air carrier appointed agents or employees in the Philippines, who
-means an air carrier who is a citizen of the sells or offers for sale any air transportation in behalf
Philippines. of said foreign air carrier and/or others, or negotiate
for, or holds itself out by solicitation, advertisement, or
3. Foreign air carrier or foreign air operator otherwise sells, provides, furnishes, contracts, or
-means any operator, not being a Philippine air arranges for such transportation.

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5. Air Taxi Operator Art 1 of Chap I of Chicago Convention. The

-means an air carrier utilizing small aircraft for contracting States recognize that every State has
charter trip and/or individual service transportation complete and exclusive sovereignty over the airspace
within the territory of the Republic of the Philippines, above its territory.
with proper certification or permit from the Board.
Note: Consent is necessary for other States to operate
CHARTER OF AIRCRAFT within the territory of another.

Charter flight or charter trip Bilateral system of air traffic negotiations

-means air transportation performed by an air -Before airlines of treaty partners are able to
carrier where the entire capacity of one or more launch air services to, through and from another
aircraft, or less than the entire capacity of an aircraft, partner’s territory, the convention requires that the two
has been engaged for the movement of persons and governments shall have negotiated a bilateral treaty
their personal baggage or for the movement of between them that will define the air traffic rights each
property on a time, mileage or trip basis: grants to the other during the life of the treaty.
1. By a person for his own use (including a direct Resulting agreement is known as the Air Services
air carrier when such aircraft is engaged solely for Agreement.
the transportation of company personnel or
commercial traffic in cases of emergency); FREEDOMS OF THE AIR
2. By a representative (or representatives acting -the air traffic rights that may be agreed in the Air
jointly) of a group for the use of such group Services Agreement upon are referred to as the
(provided no such representative is professionally freedom of the air
engaged in the formation of groups for
transportation or in the solicitation or sale of The right or privilege, in respect of scheduled
transportation services); or international air services,
3. By an airfreight forwarder holding a currently
effective permit. First Freedom of the Air/First Freedom Right –
granted by one state to another state or states to fly
Charter of aircraft may be classified into: across its territory without landing
-shall refer to service performed by an air carrier Second Freedom of the Air/Second Freedom Right
between points between which said carrier is – granted by one state to another state or states to land
authorized to provide service pursuant to its certificate in its territory for non-traffic purposes
of public convenience and necessity or foreign air
carrier permit; Provided, however, that passenger Third Freedom of the Air/Third Freedom Right –
charter trips by any all-cargo carrier are not considered granted by one state to another state to put down, in the
to be on-route whether or not performed between territory of the first state, traffic coming from the home
points designed to receive service by such carrier in its state of the carrier
certificate or permit. d. “Off-route” shall refer to any
charter which is not on-route. Fourth Freedom of the Air/Fourth Freedom Right –
granted by one state to another state to take on, in the
Pro-rata charter territory of the first state, traffic destined for the home
-means a charter the cost of which is divided state of the carrier
among the passengers transported.
Fifth Freedom of the Air/Fifth Freedom Right –
Single entity charter granted by one state to another state to put down and to
-means a charter the cost of which is borne by the take on, in the territory of the first state, traffic coming
charterer and not by individual passengers, directly or from or destined to a third state
Sixth Freedom of the Air/Sixth Freedom Right –
Mixed charter the right or privilege of transporting, via the home state
-means a charter the cost of which is borne, or of the carrier, traffic moving between two other states
pursuant to contract may be borne, partly by the
charter participants and partly by the charterer. Seventh Freedom of the Air/Seventh Freedom Right
– granted by one state to another state, of transporting
SOVEREIGNTY AND AIR FREEDOMS traffic between the territory of the granting state and
any third state with no requirement to include on such

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operation any point in the territory of the recipient state Note: Failed to exercise extraordinary diligence if the
plane did not take the designated route and the tragic
Eight Freedom of the Air/Eight Freedom Right – crash could have been avoided had it taken said
the right or privilege of transporting cabotage traffic designated route.
between to point in the territory of the granting state on
a service which originates or terminates in the home Airworthiness
country of the foreign carrier or outside the territory of -Important requirement in transportation by air.
the granting state -Fit to transport goods and passengers.
-Able to withstand the rigors of the flight.
Ninth Freedom of the Air/Ninth Freedom Right – -Means that an aircraft, its engines, propellers,
the right or privilege of transporting cabotage traffic of and other components and accessories, are of proper
the granting state on a service performed entirely design and construction, and are safe for air navigation
within the territory of the granting state purposes, such design and construction being
consistent with accepted engineering practice and in
Note: only the first five “freedoms” have been accordance with aerodynamic laws and aircraft
officially recognized by international treaty. science.
-Under Civil Aviation Regulation, the registered
CANCELLATION OF COMMERCIAL owner or operator of an aircraft is responsible for
AGREEMENT maintaining aircraft in an airworthy condition.
The CAB has ample power under its organizing charter
to compel an airline to terminate whatever commercial Rules prescribed by CAAP:
agreements the carrier may have. 1. Certification of aircraft and aeronautical
The CAB have been granted the general supervision components;
and regulation of, and jurisdiction and control over, air 2. Issuance of Certificate of Airworthiness and other
carriers as well as their property, property rights, certifications for aeronautical products;
equipment, facilities and franchise 3. Continued airworthiness of aircraft and
aeronautical components;
Types of Cabotage:
1. Consecutive Cabotage
4. Rebuilding and modifications of aircraft and
-right or privilege, in respect of scheduled aeronautical components;
international air services, of transporting cabotage 5. Maintenance and preventive maintenance of
traffic between two points in the territory of the aircraft and aeronautical components;
granting State on a service which originates or 6. Aircraft inspection requirements;
terminates in the home country of the foreign carrier or 7. Air operator aircraft maintenance and
(in connection with the so-called Seventh Freedom of inspection requirements.
the Air) outside the territory of the granting
Tariff System; Tariff
2. State Stand Alone Cabotage - a rule or condition of air travel that regulates and
-the right or privilege of transporting cabotage binds the airline and passengers.
traffic of the granting State on a service performed - binding although they are in the nature of
entirely within the territory of the granting State contracts of adhesion.

Note: The Philippines has not granted the right of Care of Baggage
cabotage in this jurisdiction. Air carriers are liable in the ff cases:
1. Baggage of their passengers were either
Chapter 8 damaged or its contents were lost or stolen;
OBLIGATIONS OF CARRIER IN AIR 2. Baggage were transported or diverted to
TRANSPORTATION another place;
3. In case of off-loading baggage;
Extraordinary Diligence in Air Transportation 4. When there was delay in the delivery of the
Due diligence in air transportation includes the
obligation to make sure that the aircraft is airworthy,
that the vessel has a competent captain and crew, and 5. If the baggage is lost altogether.
that the captain and his crew exercised extraordinary
diligence in operating the aircraft. Duty to Passenger
-Airline companies has the duty not only to
cursorily instruct but to strictly require their personnel

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to be more accommodating towards customers,

passengers, and the general public. Delay and Diversion of Flight.
-They are in the business of rendering public -Airline passengers must take such risks incident
service, which is the primary reason for their to the mode of travel. Adverse weather conditions or
enfranchisement and recognition in our law. extreme climatic changes are some of the perils
-Passengers do not contract merely for involved in air travel, the consequences of which the
transportation, they have a right to be treated with passenger must assume or expect. The fact that the
kindness, respect, courtesy, and consideration. flight was cancelled due to fortuitous event does not
-It is a business affected with public interest and mean that the carrier’s duty already ended. The carries
must be directed to serve the comfort and convenience is still obligated to make the necessary arrangements to
of passengers. transport the passenger on the first available flight.
(Japan Airlines v. Court of Appeals)
Breach of contract -Delay or diversion of flight due to fortuitous
- failure without legal reason to comply with the event does not terminate the contract of carriage. The
terms of a contract. carrier is still duty-bound to safeguard the comfort,
- failure, without legal excuse, to perform any convenience, and safety of its stranded passengers.
promise which forms the whole or part of the contract. (Singapore Airlines, Ltd. v. Fernandez)

Cases where there is breach of contract and entitles Rude Treatment

the passenger to moral damages: -The carrier may be held liable for the rude and
1. Inattention to and lack of care for the interest discourteous treatment of its passengers not only by
of the passenger and inordinate delay kn the crew inside the vessel but also the staff in the
addressing complaints or claims; airport and in the branch offices of the carrier.
2. Rude and discourteous treatment by (Northwest Airlines v. Catapang)
Cancellation due to engine malfunction
3. Failure to provide accommodations and -When as a result of engine malfunction, a
assistance to stranded passengers; commercial airline is unable to ferry its passengers on
4. Cancellation of confirmed reservation and the original contracted route, it still has the duty of
transfer or downgrading to another class; fulfilling its responsibility of carrying them to their
5. Forcibly ejecting a passenger from a seat and contracted destination on the most convenient route
transferring him to another; possible. (Savellano v. Northwest Airlines)
6. Off-loading of passenger before the final
destination; Denied Boarding Passengers
7. Bumping-off of or refusal to accept the -General rule: The air carrier is duty bound to
accept and board a passenger with confirmed tickets if
passenger with confirmed tickets because of
the passenger presents himself on time in the airline
erroneous entries in the tickets or lack of
counter in the airport. The passenger has every right to
indorsement or because of undue preference
expect that he be transported on that flight and on that
given to other passengers;
date. Otherwise, the carrier will be liable for breach of
8. In case of cancellation of flight due to contract of carriage. The burden of proving that the
typhoon, the passenger was harangued and passenger is a “no-show” passenger rests with the
prevented from boarding the replacement carrier.
9. After cancellation of a distressed flight, An operator may deny transportation if a
shuttling passengers to different places and passenger:
changing the stopping places without prior 1) refuses to comply with the instructions
notice. regarding exit seating restriction or
2) has handicap that can be physically accommodated
Downgrading and Upgrading of Passengers only by an exit row seat.
-There is breach of contract of carriage when an
airline company bumped off a passenger with Under the Civil Aviation Regulations, an
confirmed reservation or downgraded the passenger’s operator may deny transportation if a passenger:
seat accommodation from one class to a lower class. (1) refuses to comply with the instructions
-There is also a breach of contract of carriage regarding exit seating restrictions prescribed by the
if an airline company upgraded the seat CAAP;
accommodation of a passenger. (2) has handicap that can be physically

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accommodated only by an exit row seat. 3. transportation from the airport to the hotel;
4. free communication;
What the Court considers as bad faith is the 5. first aid medicine.
willful and deliberate overbooking on the part of the Rights of Passengers in case of Delay
airline carrier. Economic Regulation No. 7, as (A) Delay for more than 2 hrs:
amended was designed to cover only honest mistakes 1. refreshments or meals;
on the part of carriers and excludes deliberate and 2. free communication;
willful acts of non-accommodation 3. first aid medicine
(B) Flights deferred until the next day:
Economic Regulation No. 7 shall apply to every 1. refreshments or meals;
Philippine and foreign carrier with respect to the 2. hotel accommodation;
following: 3. free communication
(a) flights or portion of flights within the territory 4. reimbursement of the value of any fare
of the Phils;
(b) flights or portion of flights from the territory Bill of Rights for Air Passengers
of the Phils operated by a domestic or foreign carrier; -DTOC-DTI Joint Administrative Order No. 1
(c) denied boarding for reasons other than no- states in its perambulatory clause that an “air carrier
show or cancellation of booking voluntarily made by ticket constitutes a contract of carriage between an air
passengers; carrier and a passenger, whereby the air carrier, for
(d) delayed flights; and consideration, obligates itself to transport a passenger
(e) cancelled flights by air safely, efficiently, and conveniently along a
stipulated route at a given date and time, subject to
Honest Mistakes certain conditions and restrictions.” Such a contract of
-The Economic Regulation is designed to cover carriage creates an assymetrical relationship between
only honest mistakes on the part of carriers and an air carrier and a passenger.
excludes deliberate and willful acts of non-
accommodation Economic Regulation No. 9 provides for the Bill of
Rights of passengers and specifying certain
Overbooking obligations of the air carrier.
-there can be oversold flight, provided the
overbooking does not exceed 10% of the seating Right to be provided with accurate information
capacity of the aircraft. Otherwise, it would amount before purchase
into bad faith which would entitle the passenger to an (a) Right to full, fair, and clear disclosure of the
award of moral damages, among others. service offered and all the terms and conditions of the
Contract of Carriage.
Priority Rules (b) Right to clear and non-misleading
-The ff. priorities shall be observed by every advertisements of, and important reminders regarding
carrier for the purpose of determining which passenger fares.
holding confirmed reserved space shall be denied (c) Right against misleading and fraudulent sales
boarding on an oversold flight: promotion practices.
(a) Thru Passengers over Originating passengers - first
priority; Right to receive the full value of the service
(b) Connecting Confirmed Passengers - 2nd priority; purchased
(c) Originating Confirmed Passengers - 3rd priority; (e) Right to transportation and baggage
(d) Passengers with Conditional Reservation Tickets - conveyance.
4th priority; (f) Right to be processed for check-in.
(e) Chance Passengers - accommodated on a first (g) Right to sufficient processing time.
come, first served basis. (h) Right to board aircraft for the purpose of
Rights of Passengers in case of Cancellation
Right to compensation
In case of cancellation for causes attributable (i) Right to compensation and amenities in case of
to the carrier, the passenger shall have the ff. cancellation of flight.
rights: (j) Right to compensation and amenities in case of
(A) The air carrier shall provide the ff: flight delay.
1. refreshments or meals; (k) Right to compensation for delayed, lost, and
2. hotel accommodation; damaged baggage.

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(l) Right to compensation in case of death or discriminated) is not a valid reason to refuse
bodily injury of a passenger inspection.
(m) Right to immediate payment of
compensation. The carrier is deemed to have not exercised
extraordinary diligence if it did not exercise its duty to
Check-in period- is the time when the air carrier’s inspect as mandated by RA 6235. Unlike buses or
check-in counters are open for accepting and jeepneys, passengers and goods in aircrafts are subject
processing passengers checking in for their flight, to rigorous inspection
which starts at least 2 hours before the ETD in
international airports and in other airports designated 9 classes of dangerous goods:
by the DOTC. In other airports, the check-in period 1) Explosives
shall start at least 1 hour before the ETD. 2) Gases
Inspection of Aircrafts and Cargo
3) Flammable liquids
 Aircraft companies (those considered public 4) Flammable solids
utilities / for hire) are authorized to open and 5) Oxidizing substances and organic peroxides
investigate suspicious packages and cargoes in 6) Toxic and infectious substances
the presence of the owner or shipper, or his 7) Radioactive
authorized representatives if present; 8) Corrosive substances
 If the owner, shipper or his representative 9) Miscellaneous Dangerous substances and
refuses to have it opened and inspected, the
airline is authorized to refuse its loading.
 Every ticket issued to a passenger shall Applicable Law: RA 6235
contain among others: "Holder hereof and his -It shall be unlawful to compel a change in the
hand-carried luggage(s) are subject to search course or destination of an aircraft of Philippine
for, and seizure of, prohibited materials or registry, or to seize or usurp [CSU] the control while it
substances. Holder refusing to be searched is in flight. It shall likewise be unlawful to [CSU] an
shall not be allowed to board the aircraft”. aircraft of foreign registry to land in Philippine
territory while in the Phil.
Case: Northwest Airlines v Laya:
-thorough inspection of the briefcase of the Q: When is an aircraft considered in flight?
plaintiff was deemed justified. Protection of passengers A: From the moment all its external doors are closed
must take precedence over convenience. Nevertheless, following embarkation until any of such doors is
the implementation of security measures must be opened for disembarkation.
attended by the basic courtesies.
Q: What are other acts that are prohibited?
The Director General is authorized to Prevent A: 1. to assassinate the pilot, member of the crew or
where: passenger of the aircraft;
(1) The aircraft may not be airworthy; or 2. to explode or attempted to explode any bomb or
(2) The airman may not be qualified or physically or explosive to destroy the aircraft; or
mentally capable for the flight; or 3. Whenever the crime is accompanied by murder,
(3) The operation would cause imminent danger to homicide, serious physical injuries or rape.
persons or property on the ground. 4. It shall be unlawful to ship, load or carry in any
passenger aircraft operating as a public utility within
The carrier has the duty (not right) to inspect cargoes the Philippines, and explosive, flammable, corrosive or
and baggage. poisonous substance or material.
 The carrier has the duty to inquire as to the (1) "Explosive"
general nature of the articles; (2) "Flammable"
 And is entitled to fair representation of its (3)"Corrosive" is any substance or material, either
nature and value. liquid, solid or gaseous, which through chemical
 However, when the CC has reasonable ground reaction wears away, impairs or consumes any object.
to suspect that such are dangerous or illegal in (4) "Poisonous" is any substance or materials,
character that would justify the exhaustive which through chemical reactions kills, injuries or
inspection or refusal to carry the same. impairs a living organism or person.
 Inconvenience to the passenger due to
inspection (when he is not singled-out nor CHAPTER 9

Aliman, Capuyan, Castillo, Dadang, Oguis, Pelaez, Ramos, Rulona, Villamor, Waban 36

THE WARSAW CONVENTION have been the result of an event which took place
during the carriage by air.
The Warsaw Convention has the force and effect of the
law in the Philippines, as the Philippines is a signatory Q: What is international transportation?
and applies to all international transportation of A: It is…
persons, baggage, good in an aircraft. (1) The place of departure and place of
destination are within the territories of two
Q: Is the WARSAW Convention constitutional? contracting countries regardless of WON there
A: There is a presumption of constitutionality as it is was a break in the transportation;
adopted by the legislative and executive department (2) The place of departure and place of
which are presumed to have studied it carefully. destination are within the territories of single
contracting countries regardless of WON there
Q: What is covered by the WARSAW Convention? was a stoppage.
A: It applies to international air carriage.
Note: Transportation to be performed by several
successive air carriers shall be deemed to be one
Q: When not applicable: undivided transportation, if it has been regarded by the
A: when: practice as a single operation, whether it has been
1) If there is willful misconduct on the part of the agreed upon under the form of a single contract or a
carrier’s employees. The Convention does not series of contracts, and it shall not lose its international
regulate, much less exempt, carrier from character merely because one contract or a series of
liability for damages for violating the rights of contracts is to be performed entirely within a territory
its passengers under the contract of carriage. subject to the sovereignty, mandate, or authority of the
(PAL v CA, 257 SCRA 33) same high contracting party.
2) When it contradicts public policy
3) If the requirements under the Convention are Note: Warsaw prevails over the Civil Code, Rules of
not complied with Court and all laws in the Philippines since an
International law prevails over general law.
Q: What are the liability of the carrier under the
WARSAW Convention? Q: What is the period covered by international
A: transportation?
A: During the period which or goods are in the charge
 for damage in case of death or wounding of a
of the carrier in the airport, or on board the aircrafts or
passenger, if the accident which caused the
in case of landing outside airport. It does not cover
damage so sustained took place on board the
landing through land, sea or river outside the airport.
aircraft or in the course of any of the
operations of embarking or disembarking;
If a damage to the goods was sustained during the
transportation it is presumed to be resulted or took
 for damage sustained in in case of destruction, place during the transportation by air.
loss or damage to any registered luggage or
any goods, if its cause took place during the Q: When International Carrier Liable?
carriage by air; A: when:
(1) On board the aircraft;
 for damage occasioned by delay in the (2) in the course of embarking;
carriage by air of passengers, luggage or
goods; g (3) or in disembarking;
(4) or when there was delay.
Q: What is carriage by air?
A: It comprises the period during which the luggage or LIMIT OF LIABILITY
goods are in charge of the carrier, whether in an  Under the WARSAW Convention liability for
aerodrome or on board an aircraft, or, in the case of a injuries to passengers, shall be limited to
landing outside an aerodrome, in any place whatsoever. 250,000 francs, unless agreed otherwise;
 for damages with respect to registered
But does not extend to any carriage by land, by baggage or cargoes, it shall be limited to 250
sea or by river performed outside an aerodrome. francs per kg;
Unless such a carriage is for the purpose of loading,
delivery or transshipment, any damage is presumed, to
 As to objects that the passenger takes charge

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himself, it shall be limited to 5,000 francs. -Nevertheless, if the carrier accepts baggage
without a baggage check having been delivered, or
if the baggage check does not contain particulars
Montreal agreement and CAB rules on limit of set out, the carrier shall not be entitled to avail
liabilities: himself of those provisions of the Convention
 1965, for bodily injuries a limit of 75,000 which exclude or limit his liability.
dollars independent of negligence if carriers;
 Which was raised by IATA or International Air (5) Waiver
transport Assoc. -When the carrier fails to timely raise
objections during the trial when question and
Tariff Limitations answers regarding the actual claims and damages
An air carrier is not liable for the loss of the sustained by the passenger were asked.
baggage in an amount in excess of the limits specified
in the tariffs filed in the proper authorities. (6) Estoppel
-When the carrier is estopped by its or its
(1) Willful misconduct;
(2) Gross negligence; Tort liability
-The Convention does not provide for an
(3) Absence of baggage check; exclusive enumeration of instances when the carrier is
(4) If there was a waiver on the part of the carrier; liable. Hence, a complaint for quasi-delict can still be
(5) If the carrier is estopped from invoking the filed even if the filing period is beyond the prescriptive
provision on limit of liability period provided under the Convention so long as it is
within the prescriptive period of the four years under
(1) Willful Misconduct the Civil Code.
When the damages resulted from the act or -The Convention’s provisions do not regulate or
omission of the carrier. Its servants or agents, done exclude liability for other breaches of contract by the
with the intent to cause damage or recklessly and with carrier or misconduct of its officers and employees, or
knowledge that it would probably result to damage. for some particular or exceptional type of damage.
Neither may the Convention be invoked to justify the
Elements: disregard of some extraordinary sort of damage
a. intentional act or omission resulting to a passenger and preclude recovering
b. awareness of probable consequence therefor beyond the limits set by said Convention.
c. causal relationship bet act or omission to injury Nevertheless, it is settled that allegations of
tortious conduct committed against an airline
passenger during the course of the international
(2) Gross Negligence
carriage do not bring the case outside the ambit of the
It speaks of wanton negligence and lack of
Warsaw Convention.
care on part of the carrier.
The Court distinguished between:
(3) Absence of Ticket Damage to passenger’s Humiliation he suffered at
-Carrier must deliver the ticket to passenger baggage; delay despite the hands of airline’s
confirmed reservation ticket employees.; unjust
which contains the stipulations limiting liabilities. discrimination, undue or
-However, mere defective compliance (in unreasonable preference or
contrast to total absence out ticket) does not disadvantage
eliminate the liability limitation. covered by Warsaw covered by Civil Code,
Convention, prescription: 2 prescription: 4 years.
(4) Absence of baggage check years.
(United Airlines v. Uy; Mahaney v Air France)
-The absence of baggage check will deprive
the carrier of its right to invoke the limited liability
provisions of the Warsaw Convention. “For the Also, Warsaw convention would cover cases of
transportation of baggage, other than small personal heated exchange which included insults and profanity,
objects of which the passenger takes charge confrontation between passenger and flight attendant
himself, the carrier must delivered a baggage who acted with international misconduct during a
check. The absence, irregularity or loss of the flight.
baggage checks shall not affect the existence or the
validity of the contract of transportation. Venue of Action

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Under the Art 28(1) Convention, the plaintiff Ticket, Baggage Check and Air Way Bill (pages 415-
must bring the action for damages before the Court: 419, Aquino)
1. where carrier is domiciled;
2. where the carrier has his principal place of Effect of Non-Compliance.
business; -Non-compliance with the mandatory provisions
3. where the carrier has an establishment by on formality may result in the non-application of the
which the contract has been made; or limit of liability.
4. place of destination. Ex. The absence of baggage check is a defense against
the limit of liability.
Note: However, SC held this to be a jurisdiction and
not a venue provision. (see page 406, Aquino)
Notice of Claim: A Condition Precedent MARITIME LAW
Complaint must be filed within the following period:
Maritime Law – is the system of laws which
1. 3 days from receipt of the baggage; or
particularly relates to the affairs and business
2. 7 days from receipt of goods; or of the sea, to ships, their crews and navigation
3. 14 days, in case of delay, counted from the and to marine conveyance of persons and
time the baggage was placed at the disposal of the property
Governing Laws:
Note: the fundamental reasons for such stipulation are 1. New Civil Code – primary law on maritime
(1) to inform the carrier that the cargo has been commerce
damaged, and that it is being charged with liability 2. Book III Code of Commerce – applied suppletorily
therefore; and (2) to give it an opportunity to examine 3. Special Laws
the nature and extent of injury. a. Salvage Law (Act No. 2616)
b. Carriage of Goods by Sea Act (CA No. 65)
Note: Exception to requirement of notice of claim is c. Ship Mortgage Decree of 1978 (PD 1521)
when there is fraud on the part of the carrier or if the
delay can be attributed to the acts or omission of the REAL AND HYPOTHECARY NATURE OF

2 year prescription is reckoned from: Case: Philippine Shipping Company, et al. vs.
1. Date of arrival at the destination Francisco Garcia Vergara
2. Date aircraft ought to have arrived -That which distinguishes the maritime from the
civil law and even from the mercantile law in general
3. Date which the carriage stopped is the real and hypothecary nature of the former.
Note: the 2-year prescriptive period does not apply if Evidence of this “real “ nature of maritime
the cause of action is based on quasi-delict. law:
 The limitation of the liability of the agents
Successive Carriers
to the actual value of the vessel and the
-transportation to be performed by several
freight money
successive carriers shall be deemed, for the purposes of
this convention, to be one undivided transportation.  The right to retain the cargo and the
-if regarded as single operation, whether agreed embargo and detention of the vessel even
under a single or series of contracts, and it shall not cases where the ordinary civil law would
lose its international character merely because one or not allow more than a personal action
series of contracts are to be performed entirely within against the debtor or person liable
the sovereignty or mandate of same high contracting
state. Note: This repeals the civil law to such extent
that, in certain cases where the mortgaged
Note: the fact that a successive carrier is considered as property is lost no personal action lies against
an agent does not excuse the agent from liability who the owner or agent of the vessel
shall be liable for his own negligent acts or omission in
the performance of his duties. Two reasons why it is impossible to do away
with these privileges:
(See book for provisions on formality: Passenger  The risk to which the thing is exposed

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 The real nature of maritime law, salvage, so far as they go, on the remainder of the
exclusively real, according to which the vessel as well on the amount of the freightage of the
liability of the parties is limited to a thing cargo saved; but sailors who are engaged on shares
to which is at mercy of the waves shall not have any right whatsoever on the salvage of
the hull, but only the portion of the freightage saved. If
Case: Aboitiz Shipping Corporation vs. General they should have worded to recover the remainder of
Accident Fire and Life Assurance Corporation, Ltd. the shipwrecked vessel they shall be given from the
-The real and hypothecary nature of amount of the salvage an award in proportion of the
maritime law simply means that the liability of efforts made and to the risks encountered in order to
the carrier in connection with losses related to accomplish the salvage
maritime contracts is confined to the vessel,
which is hypothecated for such obligations or Art. 837: civil liability incurred by the ship owner:
which stands as the guaranty for their liability limited to value of the vessel + appurtenances
settlement + freightage earned during voyage
-Purpose: It was designed to offset such
adverse conditions and to encourage people Art. 590: The co-owners of the vessel shall be civilly
and entities to venture into maritime liable in the proportion of their contribution to the
commerce despite the risks and prohibitive common fund for the results of the acts of the captain,
cost of shipbuilding referred in Article 587. Each co-owner may exempt
himself from this liability by the abandonment, before
Thus, the liability of the vessel owner and a notary, of that part of the vessel belonging to him.
agent arising from the operation of such vessel COVERAGE OF LIMITED LIABILITY
were confined to the (1) vessel itself, Article 837 - applies the principle of limited liability in
(2) its equipment, cases of collision.
(3) freight, and Articles 587 and 590 - embody the universal principle
(4) insurance if any, of limited liability in all cases.
which limitation served to induce
capitalists into effectively wagering their Note: Based on the Aboitiz case, these articles cover
resources against the consideration of the large only: 1) liability to third persons, 2) acts of the captain,
profits attainable in trade and 3) collisions

Real – similar to transactions over real property where Limited liability rule – means that the liability of a
to effect against third persons, registration is necessary shipowner for damages in case of loss is limited to the
Hypothecary – the liability of the owner of the value value of his vessel.
of the vessel is limited to the vessel itself  No vessel, no liability.
 The civil liability for collision is merely co-
STATUTORY PROVISIONS existent with the interest in the vessel; if there
Article 837, 587, 590 and 643 of the Code of was total loss, liability is also extinguished.
Commerce – provides for limited liability of  If the vessel is co-owned, the limited liability
shipowner. to third persons shall be satisfied by the co-
owners (Art. 590 CC)
Art. 587 (liability to third persons).
The ship agent shall also be civilly liable for the Case: Monarch Insurance Co., Inc. vs. Court of
indemnities in favor of third persons which may arise Appeals
from the conduct of the captain in the care of the -The ship owner’s or agent’s liability is
goods which he loaded on the vessel; but he may merely co-extensive with his interest in the
exempt himself therefrom by abandoning the vessel vessel such that a total loss thereof results in
with all her equipment and the freight it may have its extinction.
earned during the voyage. -Total destruction of the vessel
extinguishes maritime liens because there are
Art. 643: vessel and cargo lost by reason of capture or no longer any res to which it can attach. . This
wreck: all rights shall be extinguished, both as regards doctrine is based on the real and hypothecary
the crew to demand any wages whatsoever, and as nature of maritime law.
regards the ship agent to recover the advances made
If a portion of the vessel or of the cargo, or both, GR: If the ship is totally lost, liability is
should be saved, the crew engaged on wages, extinguished. If the ship or part thereof still exists,
including the captain, shall retain their rights on the he can escape liability by abandoning the vessel, its

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appurtenances and its freight. extinguish the liability of the carrier’s insurer.
-Despite the loss of the vessel, therefore,
Note: Since the Civil Code contains no provision its insurance answers for the damages that a
regulating liability of shipowners or agents in the event shipowner or agent, may be held liable for by
of total loss or destruction of the vessel, Article 587 of reason of the death of its passengers.
the Code of Commerce governs. -However, the limited liability rule
applies to the paying insurer when it exercises
Q: Who is entitled to limited liability? its right of subrogation against the shipowner.
A: It is the shipowner who is entitled to the benefit of The cause of action of the shipper, hence, the
limited liability. The shipowner is the very person for insurer is subject to the defenses available to
whom the Limited Liability Rule has been conceived the shipowner as if it were the shipper who
to protect. directly sued the same insurer.

EXCEPTIONS TO THE LIMITED LIABILITY 3. In the workmen’s compensation claims

1. Where the injury or death to a passenger is due  The provisions of the Code of Commerce have
either to the fault of the shipowner, or to the no room in the application of the Workmen’s
concurring negligence of the shipowner and the Compensation Act which seeks to improve,
captain (NEGLIGENCE) and aims at the amelioration of, the condition
 The limited liability rule applies if the captain of laborers and employees.
or the crew caused the damage or injury.  If an accident is compensable under the
 The shipowner’s or ship agent’s liability is Workmen’s Compensation Act, it must be
limited to the value of the vessel if the damage compensated even when the workman’s right
was caused by the unseaworthiness of the is not recognized by or is in conflict with other
vessel caused by the negligence of the captain provisions of the Civil Code or of the Code of
or crew during the voyage Commerce
 However, if the failure to maintain the  Liability under the Workmen’s compensation
seaworthiness of the vessel can be ascribed to Act, even if the vessel was lost, is still
the shipowner alone or the shipowner enforceable against the employer or
concurrently with the captain, then the limited shipowner.
liability principle cannot be invoked ---
LIABILITY FOR THE DAMAGES IS TO 4. Total Destruction of the vessel (Case: Government
THE FULL EXTENT (ex. Overloading, of the Philippines vs Maritime added the 4th exception)
unseaworthiness even at the time of departure)  The total destruction of the vessel does not
 The carrier is liable for the damages to the full affect the liability of the owner for repairs of
extent and not up to the value of the vessel if it the vessel completed before its loss.
was established that the carrier was guilty of
negligence. ABANDONMENT
 Shipowners and ship agents are civilly liable -Abandonment of the vessel, its
for the acts of the captain and for the appurtenances and the freightage is an
indemnities due the third persons. indispensable requirement before the
 BURDEN OF PROOF: The carrier or shipowner or ship agent can enjoy the benefits
shipowner has the burden of showing that it of the limited liability principle. If the carrier
exercised extraordinary diligence in the does not want to abandon the vessel, he is still
transport of the goods it had on board in order liable even beyond the value of the vessel.
to invoke the limited liability doctrine.
 Where the shipowner fails to overcome the Case: Philippine Shipping Company vs.
presumption of negligence, the doctrine of Garcia
limited liability cannot be applied. -provides in case of collision,
abandonment of the vessel is necessary in
2. Where the vessel is insured (INSURANCE) order to limit the liability of the shipowner or
 Limited liability rule does not apply to the agent tot eh value of the vessel, its
insurance claims appurtenances and freightage earned in
voyage in accordance with Article 837 of CC.
Case: Vasquez vs. CA -The only instance where abandonment is
-The total loss of the vessel did not dispensed with is when the vessel was entirely
lost. In such case, the obligation is

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extinguished. 1. real and hypothecary --- the supreme court did not
-Only shipowner and ship agent can explain the literal meaning of it.
make an abandonment  real: refers to the risk in maritime that’s why
there are privileges for the shipowner. Risks
PROCEDURE FOR ENFORCEMENT are certain to happen
 hypothecary: remember guaranty and
Case: Aboitiz Shipping Corporation vs. General collateral which is the vessel. For the
Accident Fire and Life Assurance Corporation, Ltd. particular voyage, the guaranty is the vessel
-Rights of a vessel owner or agent under wherein if the vessel is lost, the shipowner no
the limited liability rule are akin to those of longer has the liability
the rights of shareholders to limited liability 2. limited liabililty rule --- no literal explanation
under our corporation laws.  limited: it means that the liability is limited to
-Rights of the parties to claim against an the value of the vessel
agent or owner of vessel may be compared to  liability: assumption that the shipowner is
those of creditors against an insolvent liable for the losses. There are no valid
corporation whose assets are not enough to defenses that shipowner can invoke to escape
satisfy the totality of claims as against it. liability. Same concept with 1479. Difference
-Creditors must limit their recovery to is that there is a fixed amount and there is
what is left in the name of the corporation qualification
-In the sinking of a vessel, the claimants
 under the limited liability – no fixed amount
or creditors are limited in their recovery to the
but amount is confined on the vessel
remaining value of accessible assets. In the
case of lost vessel, these assets are the
Q: is this a right to limit the liability?
insurance proceeds and pending freightage for
A: admittedly it is a right that only shipowner can
the particular voyage.
Q; how to exercise?
-Protest is the written statement by the
A: by way of pleading. But do not follow the way it
master of a vessel or any authorized officer,
was filed in Yangco. Here it was after judgment that
attested by proper officer or a notary, to the
the shipowner sought to abandon the ship to abandon
effect that damages has been suffered by the
But right now, it is a matter of procedure. To limit
Required under the following cases:
liability by abandoning the vessel; IF it is a matter of
1. When the vessel makes an arrival under stress
procedure, you check the rules of civil procedure
2. Where the vessel is shipwrecked
3. Where the vessel has gone through a hurricane or
Q: so when does shipowner inform the
the captain believe that the cargo has suffered damages
court the right to limit liability?
or averages
A: in a pleading and normally in an answer. IT will be
4. Maritime collisions
raised as a defense. If shipownver cannot allege, then
that defense is deemed waiver. Therefore you cannot
Q: when is it not required?
seek abandonment after judgment was been rendered.
A: 1. when it does not fall under the four cases
mentioned above
The more critical issue is on the
2. when what is not involve is not a vessel
EXCEPTIONS in the LL Rule:
1. Workmen’s compensation (Abueg case: the repairs
constitute maritime lien)
Section 19 (3) of BP 129 as amended by RA
7691 2. Insurance coverage
In all actions in admiralty and maritime - if the vessel is lost in the course of voyage and it
jurisdiction where the demand or claim exceeds 300, is insured, is it automatic that the limited liability rule
000 or in Metro manila, where such demand or claim does not apply?
exceeds 400,000. A: No. the basis of supreme court (Vasquez vs. CA ---
 if less: MTC court mentioned very little about insurance: if the
vessel is insured, the insurance proceeds shall answer
the credit).
3 concepts:

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-If the plaintiff was injured or heirs will file action in monarch, this was not applied--- all the negligence
from insurance company, and since shipowner cannot was related to the absence of exercising extraordinary
avail of limited liability, this is not advisable to the diligence)
plaintiff because it has no privity of contract with the
insurance company Note: that in the subsequent cases,
Consolidated of Aboitiz case: there were
Q: when does insurance argument come in? findings of facts of the negligence of Aboitiz.
A: only when the shipowner will bring the insurance The point is when it comes to LLR, the Code
company to the case filed by the plaintiff—by way of of Commerce apply. You cannot invoke
third party complaint. Once insurance company is presumption of negligence. In order to refute,
impleaded then this can be used: that the owner cannot petitioner should prove negligence.
avail of limited liability.
-But no shipowner will ever implead the REMEMBER: PROVE THE FACTS OF
insurance. Because they will be the one who will claim NEGLIGENCE. Not presumption.
the insurance without telling the plaintiffs. In the case,
there is no proof that the vessel is insured. Even if we Case: Loadstar
know outside court, it is insured because in the court, - the shipowner is aware of the typhoon
there is no proof that the vessel is insured. Court will - insufficient manning – negligent
not identify evidence not properly identified and - Captain playing mahjong – there was
recorded in court. negligence. But SC said that it was negligent because
the shipowner did not prove that it was the first.
Q: is it really an exception in its strict Supposedly facts are established in court proceedings
sense? and not on presumption.
A: Not really (CAPANAS). What is the implication if  no vessel, no liability
you properly invoke the LLRule – the plaintiff cannot  they all mean one and the same such that the
avail beyond the value of the vessel. liability of the shipowner for the losses is
confined to the value of the vessel and the
If not apply – plaintiff will recover more than the value freight, if any
of vessel subject to rules on claiming of damages.
But question, if vessel if covered with insurance, does REQUIRED (LOOK AT CODE OF COMMERCE and
this mean that plaintiff can recover to the amount above notes)
applied? No, they can only recover until the coverage
of the insurance proceeds. INSTANCES WHEN IT DOES NOT APPLY:
- common carrier is presumed negligent if PROTEST
common carrier. However, this does not apply when 2. when what was is involve is not a vessel
there is an invocation on limited liability. (in all cases
except MONARCH vs. CA) --- the rest of the case, the Case: Lopez vs. Duruel
court has found negligence based on the facts -the motor boat is not a vessel under maritime
presented. You cannot invoke presumption of law, it is only engaged in bay traffic. A vessel in
negligence so that limited liability rule will not apply. maritime law, should be engaged in transporting goods,
persons, or both from one port to another
Monarch Case-- SC: since there is a presumption of
negligence then LLR will not apply. But SC also said Note: Since a vessel is a personal property, it can be
that if LLR is invoked, the initial burden to invoke mortgaged. Same concept with mortgage but different
negligence shifts to the shipowner. They should prove rule- PD 1521:
that there is no privity or knowledge on the negligence
of the ship captain. Q: what about process of extra judicial foreclosure
of vessel?
Q: what is the relationship of Civil Code A: chattel mortgage law should govern
and LLR?
A: There is none. Under 1766 in all matters not Q: what to remember under PD 1521?
provided by Civil Code, Code of Commerce or Special A: Section 4
law will apply. There is no rule in Civil Code in limited registration, non waiver
liability rule thus Code of Commerce will apply. (but Section17: priority of claims…

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Government for its Military Purposes

Q: are there claims in maritime law over and above 2. Bancas, sailboat and other waterbone
preferred mortgage? contrivance of less than three tons capacity and not
A: yes. Look at section 17. motorized.

Case: Poliand Industrial Case: Yu Con vs. Ipil

- facts shows that the proceeds debted from -The word vessel serves to designate
hardwood was for the modification of the vessel every kind of craft by whatever particular or
(extended for vessels benefit), for crews wage technical name it may not be known or which
nautical advancements may give it in the
Characteristics of maritime lien: future
1. maritime property -The court held that a small vessel used
2. travels with the property--- it cannot be extinguished for the transportation of merchandise by sea
3. enforceable in an action in rem--- action directed to and for the making of voyages from one port
the property (Crescent case: what was taken was the to another of these Islands, equipped and
vessel) victualed for this purpose by its owner, is a
vessel, within the purview of the Code of
Under section 22: persons authorize to procure Commerce, for the determination of the
repairs (presumed): character and effect of the relations created
1. managing agent between the owners of the merchandise laden
2. ship’s husband --- agent of the vessel on it and its owner

If mortgagor does not pay: Note: When the mercantile code speaks of
1. judicial foreclosure – file actual case and implead vessels, they refer solely and exclusively to
the vessel as party defendant (served to captain or mercantile ships, as they do not include
authorized person); you can ask the court order to warships, and furthermore, they almost always
arrest the vessel. refer to craft which are not accessory to
2. extrajudicial another as in the case of launches, lifeboats
- the problem if vessel is not in possession of the and etc.
mortgagee, it is with the mortgagor, you cannot sell the -Further, they refer exclusively to those
property not in your possession. which are engaged in the transportation of
passengers and freight from one port to
In PD 1521—the order of arrest can be asked another or from one place to another
- They refer to merchant vessels and in
Grounds to discharge NO WAY can they or should they be
1. irregularly issued (mortgagee na ilad. Wala pa diay understood as referring to pleasure craft,
due obligation yachts, pontoons, health service and harbor
2. posting of a bond to discharge..the bond to be posted police vessels, etc.
is double the value of the claim. -Ships ought to be understood in the
sense of vessel serving the purpose of
maritime navigation or seagoing vessel, and
CHAPTER 11 not in the sense of vessel devoted to the
VESSELS navigation of rivers

General Rule: The third book of the code of commerce,

A vessel or watercraft is defined under PD No. dealing with maritime commerce, was
447 as any barge, lighter, bulk carrier, passenger ship evidently intended to define laws relative to
freighter, tanker, container ship, fishing boats, or other merchant vessels and maritime shipping; and
artificial contrivance utilizing any source of motive as appears from said code, the vessel intended
power, designed use or capable of being used as a in that book are such run by masters having
means of transportation operating either as a common special training with elaborate apparatus of
carrier, including fishing vessels covered under PD No. crew and equipment indicated in the code.
43, -Only vessels engaged in what is
ordinarily known as maritime commerce are
Exceptions: within the provision of law conferring limited
1. Those owned and/or operated by the Armed liability on the owner in case of maritime
Forces of the Philippines and by the Foreign disaster.

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-Other vessel of minor nature not interests. Ship owners and seamen shall be subject to
engaged in maritime commerce, such as river what the laws and regulations of the public
boats and those carrying passengers from ship administration on navigation, customs, health, safety
to shore, must be governed, as to their liability of vessels, and other similar matters.
to passenger, by the provision of the civil code
or other appropriate special provisions of law.  Gross tonnage means the measure of the
overall size of the ship.
Case: Augusto Lopez vs. Juan Duruelo, et. al  Net tonnage means the measure of the useful
-The code of commerce are not capacity of a ship.
applicable to small craft which are only
subject to administrative (customs) regulations VESSEL AS PERSONAL PROPERTY
in the matter of port service and in the fishing -Vessels are considered personal property under
industry Art. 416 of the New Civil Code. The Code of
-Only vessels engaged in what is Commerce likewise expressly acknowledges the
ordinarily known as maritime commerce are special nature of a vessel as personal property in
within the provisions of law conferring limited Article 585 which provides:
liability on the owner in case of maritime Article 585. For all purposes of law not modified or
disaster restricted by the provisions of this Code, vessels shall
-It is therefore clear that a passenger on a continue to be considered as personal property.
boat like the Jison, in the case before use, is
not required to make protest as a condition Case: Philippine Refining Company vs. Jargue
precedent to his right of action for the injury -Vessels are personal property although
suffered by him in the collision described in occasionally referred to as a peculiar kind of
the complaint – article 835 of the Code of personal property
Commerce does not apply -They are subject to mortgage agreeably
to the provisions of the Chattel Mortgage Law
KINDS OF VESSELS: -The only difference between a chattel
1) A passenger ship is a ship which carries more mortgage of a vessel and a chattel mortgage of
than twelve passengers. other personality is that it is not now
2) A cargo ship is any ship which is not a necessary for a chattel mortgage of a vessel to
passenger ship. be noted in the registry of the register of
3) A tanker is a cargo ship constructed or adapted deeds, but it is essential that a record of
for the carriage in bulk of liquid cargoes of an documents affecting the title to a vessel be
inflammable nature. entered in the record of the Collector of
4) A fishing vessel is a vessel used for catching Customs at the port of entry.
fish, whales, seals, walrus or other living
resources of the sea. Case: Rubiso and Calixto vs. Rivera
-Ships or vessels, whether moved by
5) A nuclear ship is a ship provided with a steam or by sail, partake, to a certain extent, of
nuclear power plant. the nature and conditions of real property, on
6) “New ship” means a ship the keel of which is account of their value and importance in the
laid or which is at a similar stage of world of commerce
construction on or after the date of coming -Transfer of vessels should be in writing
into force of the SOLAS 1974. and must be recorded in the appropriate
7) “Existing ship” means a ship which is not a registry
new ship.
CONSTRUCTION, EQUIPMENT AND -Vessel may be acquired or transferred by
MANNING any means recognized by laws. Thus, vessel
The Construction, equipment and manning of may be sold, donated and may even be
vessel are subject to the rules issued by the Maritime acquired through prescription.
Industry Authority (MARINA) and consistent with
Article 574 of the Code of Commerce: Note: Under the present laws, vessels that are
under the jurisdiction of MARINA can be
Article 574. Builders of vessels may employ the transferred only with notice to said
materials and follow, with respect to their construction administrative agency.
and rigging, the systems most suitable to their

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A. Prescription (Code of Commerce) earns from the time it receives its last cargo shall
Acquisition of vessels through pertain entirely to the purchaser, and the payment of
prescription. the crew and other persons who make up its
complement for the same voyage shall be for his
Article 573. Merchant vessels constitute account.
property which may be acquired and
transferred by any of the means recognized by If the sale is made after the vessel has arrived at
law. The acquisition of a vessel must appear the port of its destination, the freightage shall pertain
in a written instrument, which shall not to the vendor, and the payment of the crew and other
produce any effect with respect to third individuals who make up its complement shall be for
persons if not inscribed in the registry of his account, unless the contrary is stipulated in either
vessels. case.
The ownership of a vessel shall likewise be
acquired by possession in good faith, continued for Article 578. If the vessel being on a voyage or
three years, with a just title duly recorded. in a foreign port, its owner or owners should
In the absence of any of these requisites, voluntarily alienate it, either to Filipinos or to
continuous possession for ten years shall be necessary foreigners domiciled in the capital or in a port
in order to acquire ownership. of another country, the bill of sale shall be
A captain may not acquire by prescription the executed before the consul of the Republic of
vessel of which he is in command. the Philippines at the port where it terminates
its voyage and said instrument shall produce
The provision contemplates two types of no effect with respect to third persons if it is
acquisitive prescription: 1) ordinary and 2) not inscribed in the registry of the consulate.
extraordinary prescription The consul shall immediately forward a true
copy of the instrument of purchase and sale of
The following requisites must be present for the vessel to the registry of vessels of the port
a person to acquire ownership through where said vessel is inscribed and registered.
ordinary prescription:
1) The person who claims ownership In every case the alienation of the vessel must be
must be in continuous possession; made to appear with a statement of whether the vendor
2) Possession must be for a period of receives its price in whole or in part, or whether he
three years, and preserves in whole or in part any claim on said vessel.
3)Possession must be in good faith. In case the sale is made to a Filipino, this fact shall be
stated in the certificate of navigation.
Note: If the possessor is in bad faith, the
acquisitive prescription is extraordinary and When a vessel, being on a voyage, shall be
the prescriptive period is 10 years. rendered useless for navigation, the captain shall
apply to the competent judge on court of the port of
B. Sale (Code of Commerce) arrival, should it be in the Philippines; and should it
The sale must be registered with the be in a foreign country, to the consul of the Republic of
MARINA to affect third persons. the Philippines, should there be one, or, where there is
none, to the judge or court or to the local authority;
Article 576. In the sale of a vessel it shall and the consul, or the judge or court, shall order an
always be understood as included the rigging, examination of the vessel to be made.
masts, stores and engine of a streamer If the consignee or the insurer should reside at
appurtenant thereto, which at the time belongs said port, or should have representatives there, they
to the vendor. must be cited in order that they may take part in the
proceedings on behalf of whoever may be concerned.
The arms, munitions of war, provisions and
fuel shall not be considered as included in the Article 579. After the damage to the vessel
sale. and the impossibility of her being repaired, in
The vendor shall be under the obligation to deliver to order to continue the voyage had been shown,
the purchaser a certified copy of the record sheet of its sale at public auction shall be ordered,
the vessel in the registry up to the date of the sale. subject to the following rules:

Article 577. If the alienation of the vessel should be 1) The hull of the vessel, its rigging, engines, stores,
made while it is on a voyage, the freightage which it and other articles shall be appraised, after making

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an inventory, said proceedings to be brought to the Philippine Registry: A certificate of Philippines

notice of the persons who may wish to take part in registry confers upon the vessel the right to engage,
the auction. consistently with law, in the Philippine coastwise trade
2) The order or decree ordering the auction to be held and entitles it to the protection of the authorities and
shall be posted in the usual places, an the flag of the Philippines in all ports and on the high
announcement thereof to be inserted in the Official seas, and at the same time secures to it the same
Gazette and in two of the newspapers of the largest privileges and subjects it to the same disabilities as,
circulation of the port where the auction is to be under the laws of the Philippines, pertain to foreign-
held, should there be any. The period which may be built vessels transferred abroad to citizens of the
fixed for the auction shall not be less than twenty Philippines.
3) These announcements shall be repeated every ten FLAG OF CONVENIENCE
days, and their publication shall be made to appear -UNCLOS provides that there must be a
in the records. genuine link between the State and the ship in order to
confer nationality over the ship.
4) The auction shall be held on the day fixed, with the
formalities prescribed in the common law for Note: PH is not a flag of convenience country.
judicial sales.
5) If the sale should take place while the vessel is in a REGISTRATION
foreign country, the special provisions governing -Vessels are now registered through
such cases shall be observed. MARINA. It is a long standing rule that the
person who is the registered owner of the
CO-OWNER’S RIGHTS vessel is presumed to be the owner of the
If the vessel is sold to third persons, the vessel.
co-owner is given the right of redemption. -It is a settled rule that the sale or transfer
of the vessel is not binding on the third person
ARTICLE 575. Co-owners of vessels shall unless the same is registered.
have the right of repurchase and redemption -Applicable to all types of ships
in sales made to strangers, but they may operating in the Philippine waters regardless
exercise the same only within the nine days of size and utilization, whether with power or
following the inscription of the sale in the without power, including those ships below
registry, and by depositing the price at the three gross tonnage (GT), motorize or non-
same time. motorized.
NATIONALITY OF VESSELS o Warships and naval ships
-Vessels that are duly registered in the o Ships of the Philippine Coast Guard
Philippines are considered Philippine Flag o All ships of foreign registry
vessels. These ships are deemed to possess
temporarily used in the Philippine
Philippine nationality within the
contemplation of UNCLOS
-Ships shall sail under the flag of one
o Inflatable Boats used for rescue
State only. made of either a single or more
-A ship may not change its flag during a rubber tubing.
voyage or while in a port of call, save in the
case of a real transfer of ownership or change SHIP'S MANIFEST
of registry. -Vessels are required to carry manifest
-A ship which sails under the flags of two coast-wise trade.
or more States, using them according to -A manifest is a declaration of the entire
convenience, may not claim any of the cargo. The object of a manifest is to furnish
nationalities in question with respect to any custom officers with list of check against, to
other State, and may be assimilated to a ship inform the revenue officers what goods are
without nationality. being brought into a port of the country on a
RIGHTS UNDER THE TARIFF AND CUSTOMS -The requirement that a vessel must carry
CODE a manifest is not complied with even if a bill
of lading can be presented. A bill of lading is
SEC. 810 Privileges Conferred by Certificate of just a declaration of a specific cargo rather
than the entire cargo. It is issued as a matter of

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convenience by virtue of a contract. % of the capital of which is owned by citizens of the

Philippines may, for the purpose of financing the
Sec 906 of the Tariff and Custom Code construction, acquisition, purchase of vessels or initial
provides that “manifest shall be required for operation of vessels, freely constitute a mortgage or
cargo and passengers transported from one any other lien or encumbrance on his or its vessels and
place to another only when one or both of its equipment with any bank or other financial
such place is a port of entry.” institutions, domestic or foreign.

MORTGAGE No vessel of domestic ownership shall be

-Since the term personal property mortgaged, nor, any rights under said
includes vessel, they are subject to mortgage mortgage shall be assigned, to any person not
agreeably to the provisions of the Chattel a citizen of the Philippines without the
Mortgage Law. approval of the MARINA.
-Mortgage and other encumbrances over -A preferred mortgage is a lien upon the
vessels are governed by the provisions of mortgaged vessel in the amount of the
presidential decree 1521 (Ship Mortgage outstanding mortgage indebtedness secured by
Decree of 1978) such vessel.


The provisions of the Code of Commerce 1) Mortgage is recorded;
reproduced hereunder are deemed modified 2) An Affidavit of Good Faith is filed with
not only by the Civil Code but also by special the record of such mortgage to the effect
laws that the mortgage is made in good faith
and without any design to hinder, delay,
SAFETY REGULATIONS or defraud any existing or future creditor
On February 23, 2000, the Maritime of the mortgagor or any lien or of the
Industry Authority directed all domestic mortgaged vessel;
shipowners and operators under Memorandum
Circular No. 154 to strictly comply with
3) The mortgage does not stipulate that the
existing Safety-Related Policies, Guidelines, mortgagee waives the preferred status
Rules and Regulations thereof.
-Monitoring of compliances shall be
undertaken by the Authority and its Maritime ADDITIONAL REQUIREMENTS:
Regional Offices, together with the needed 1) Mortgage should cover the whole of the
coordination with the Philippine Coast Guard vessel
-The MARINA shall have the power to 2) The vessel must be of domestic
inspect vessels and all equipment on board to ownership
ensure compliance with safety standards
Maritime lien - is a privileged or claim on a
CABOTAGE - The right of cabotage is the right of vessel for some service rendered to it to
foreign vessels to engage in coast-wise shipping, that facilitate its use in navigation. It is a special
is, to provide service from one place within the property right in a ship given to a creditor by
Philippines to another place in the Philippines. law as a security for a debt or claim subsisting
from the moment the debt arises with right to
have the ship sold and debt paid out of the
CHAPTER 12 proceeds.
SHIP MORTGAGE AND MARITIME LIENS -In the Philippines, a maritime lien is
akin to a mortgage lien in that in spite of the
APPLCIABLE LAWS AND RULES: transfer of ownership, the lien is not
PD 1521 prevail over the Civil Code extinguished. The maritime lien is inseparable
provisions on mortgage as well as the from the vessel and until discharged, it follows
provisions of the Code of Commerce. the vessel.
-The enforcement of a maritime lien is in
Q: Who may constitute a ship mortgage? the nature and character of a proceeding quasi
A: Sec. 2 of PD 1521 provides any citizen of the in rem.
Philippines, or any association or corporation
organized under the laws of the Philippines, at least 60 PREFERRED CLAIMS

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-Preferred mortgage lien should have PRESCRIPTION AND LACHES

priority over all claims against the vessel, -An action upon an obligation created by
except the following claims in the order stated law must be brought within 10 years from the
(Sec. 17 od the Ship Mortgage Decree of time the right of action accrues.
1978, PD 1521): -Laches may also lie if there was
1) Expenses and fees allowed and costs unreasonable delay on the part of claimant in
taxed by the court and taxes due to the asserting its rights.
-The maritime liens that are superior to
3) General average; the preferred mortgage includes maritime lien
4) Salvage; including contract salvage; for necessaries.
5) Maritime liens arising prior in time to
the recording of the preferred mortgage; The following requirements for a maritime
6) Damages arising out of tort; lien for necessaries which is enforceable by
7) Preferred mortgaged registered prior in suit in rem:
time. 1) The “necessaries” must have been
furnished to and for the benefit of the
The above enumerated claims are therefore vessel;
maritime liens that attaches to the vessel. Notice of 2) The “necessaries” must have been
their existence is not necessary. necessary for the continuation of the
voyage of the vessel;
Note: These maritime liens do not arise from 3) The credit must have been extended to the
specific agreement. Although they may arise vessel;
out of contract or in the absence of contract, 4) There must be necessity for the extension
they are imposed even in the absence of of the credit; and
contract; they are imposed even in the absence
5) The necessaries must be ordered by
of specific contractual provision providing for
a lien. persons authorized to contract on behalf
-Claims are not likewise based on of the vessel.
possession. Possession of the vessel is not
necessary for the maritime liens under Sec. 17 The following persons shall be presumed to
to attach to the vessel. In other words, the have authority from the owner to procure
nature of the claims does not presuppose nor repairs, supplies, towage, use of dry dock or
originate in possession. marine railway, and other necessaries for
-Statute of frauds is inapplicable since the vessel:
the claim of maritime lien is based on law, PD 1) Managing owner
1521 and not on any contract or agreement. 2) Ship’s husband
3) Master; or
EXECUTORY CONTRACT DOCTRINE 4) Any person to whom the management of
-A lien does not attach for breach of an the vessel at the port of supply is
executory contract even though the contract is entrusted.
the type which normally gives rise to a lien.
Liability arises in admiralty for breach of Note: No person tortuously or unlawfully in
contract but if the parties have performed his possession or charge of a vessel shall have
obligation, his remedy against the other is authority to bind the vessel.
only for breach in an action in personam.
MARITIME TORT - Defined as civil wrongs
WAIVER OF LIEN committed on navigable waters.
-Furnishers of repairs, supplies, towage, -As a general principle, any conduct
use of dry dock or marine railway, or other which is tortuous under general law and which
necessaries, or the mortgagee, are not is connected with the ship or its uses creates a
prevented from waiving their right to a lien, or maritime lien. It includes collision claims and
in the case of a preferred mortgage lien, to the personal injury claims.
preferred status of such lien, at any time by
agreement or otherwise. SALVAGE LIEN

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-Salvage claims may either be one arising ex business of the parties.

contractu or or that imposed by Act. No. 2616. Salvage  The initial choice of law
is given preference because of the benefit conferred in determination is
preserving the value of the vessel and the cargo. significantly affected by the
statutory policies
SUBROGATION surrounding a maritime lien.
- a third person who satisfies the obligation to an MORTGAGE?
original maritime lienor may claim from the debtor A:
because the third person is subrogated to the rights of  Any citizen of the Philippines
the maritime lienor over the vessel.  Any association or corporation organized
under the Philippine Laws of at least 60% of
Q: What if PROCEEDS NOT SUFFICIENT? the capital is owned by citizens of the
A: If the proceeds of the sale should not be sufficient Philippines may freely constitute a mortgage
to pay all creditors included in one number or grade, or any other lien or encumbrance on his or its
the residue shall be divided among them pro rata. All vessels and its equipment with any bank or
credits not paid, whether fully or partially shall subsist other financial institutions, domestic or
as ordinary credits enforceable by personal action foreign.
against the debtor.
PURPOSE: the loan secured by the ship
TEST TO DETERMINE THE PRESENCE OF mortgage must be for purpose of financing the
LIEN construction, acquisition, purchase of vessels
or initial operation of vessels.
Various tests used in the US to determine whether a
maritime lien exists are the following: FORMAL REQUIREMENTS:
 In a suit to establish and enforce a -The ship mortgage must be recorded or
maritime lien for supplies furnished to a registered, otherwise the same is void except as to the
vessel in a foreign port, whether such lien parties or their heir and assigns or persons with actual
exists, or whether the court has or will notice.
exercise jurisdiction, depends on the law
of the country where the supplies were -The ship mortgage shall be considered a
furnished which must be pleaded and “preferred mortgage” or shall have a preferred status
proved. only if the following requirements are complied with:
 Lauritzen v. Larsen Case: Multiple- 1) Mortgage is recorded
contact test to determine, in the absence
2) Affidavit of Good faith
of a specific Congressional directive as to
the statute’s reach, which jurisdiction’s 3) The mortgage dos not stipulate that
law should be applied. The following the mortgagee waives the preferred
factors are considered: 1) Place of the status thereof.
wrongful act, 2) law of the flag, 3)
allegiance or domicile of the injured, 4) MARINA rules or administers the annotation
allegiance of the defendant shipowner, 5) and/or cancellation of any mortgage over
place of contract, 6) inaccessibility of vessels (MARINA Memorandum Circular No.
foreign forum, and 7) law of the forum. 100 dated April 6, 1995).
 Factors provided in Restatement
In the absence of an effective choice PROPERTY
of law by the parties, the forum In the case of a mortgage which includes property
contracts to be considered include: other than a vessel, the mortgage shall not be held
preferred mortgaged unless the mortgage provides for
a) the place of contracting; b) the the separate discharge of such property by the payment
place of negotiation of the of a specified portion of the mortgage indebtedness.
contract; c) the place of The separate discharge must be provided for in the
performance; d) the location of non-maritime property.
the subject matter of the
contract; and e) the domicile, FLEET MORTGAGE
residence, nationality, place of There may be mortgage on two or more vessels.
incorporation and place of

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The mortgage may provide separate discharge of each such as tort. The ship agent, even though he is not the
vessel by the payment of a portion of mortgage owner, is liable in every way to the creditor for losses
indebtedness. The amount of such portion of such
and damages without prejudice to his right against the
payment shall be endorsed upon the documents of the
vessel. owner, the vessel and its equipment and freight. But
In such mortgage does not provide for the his liability, however is subject to the LIMITED
separate discharge of a vessel, the mortgage may LIABILITY RULE. The ship agent can enter into
nonetheless be a preferred mortgage. contracts to provision the ship.

ARREST AND FORECLOSURE The shipowner and the ship agent are liable in certain
Upon default of the obligor, the preferred ship
mortgaged may be foreclosed in a suit in admiralty. cases even if the captain has exceeded his authority if
Upon filing of a petition for foreclosure, the Court may the proceeds of an obligation redounded to the benefit
order the arrest of the vessel upon ex parte application of the vessel.
duly supported by an affidavit of a person who knows
the facts and upon filing of a bond. Liability for extra-contractual obligations
Foreclosure is only an alternative remedy. The -The shipowner and the ship agent can make the
mortgagee may likewise avail of the alternative
captain liable for his negligence. This obligation is one
remedy of specific performance in a suit in personam
in admiralty. based on the contract of carriage. If the cause of action
is quasi-delict, there is vicarous liability on the part of
the shipowner.
In sum, the following are persons who take part in For purposes of Maritime Commerce:
Maritime Commerce: The words “captain” and “master” have the same
• SHIPOWNERS and SHIP AGENTS; meaning; both being chiefs or commanders of ships.
Thus, the terms “captain” and “master” are used
synonymously in the Code of Commerce.
MARINA regulations:
SHIPOWNER v. SHIP AGENT MASTER – the person having command of the ship.
The same term is being used both for domestic trade
SHIPOWNER – the person who is primarily liable for and international trade.
damages sustained in the operation of vessel.
BOAT CAPTAIN – a person authorized by the
Code of Commerce – places the primary responsibility MARINA to act as officer and/or in command of a
on the owner of the vessel. boat/ship or has the qualification/license to act as such.
(Uses the term naviero which has been construed to
include shipowner, ship agent and even the charterer Powers and Functions —The captain of a vessel is a
who is considered as owner pro hac vice.) confidential and managerial employee.

Note: The captain is primarily the representative of the 3 Distinct Roles a captain commonly performs:
owner. The naviero must be understood to be the (Inter-Orient Maritime case)
person undertaking the voyage. 1. He is a GENERAL AGENT OF THE
SHIP AGENT (Code of Commerce) – the person 2. He is a COMMANDER and TECHNICAL
entrusted with provisioning of the vessel, or who DIRECTOR of the vessel (most important role for
represents her in the port in which she happens to be. this has something to do with the operation and
There is also the intention under the Code of preservation of the vessel during its voyage and the
Commerce to make the ship agent solidarily liable with protection of the passengers, if any, and crew and
the owner. The solidary liability applies both for cargo);
breach of contract and extra-contractual obligations

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3. He is a REPRESENTATIVE OF THE Basic Principle in Admiralty Law.

COUNTRY under whose flag he navigates. In navigating the vessel, the master must be left
free to exercise his own best judgment.
Based on the first aforementioned role, the captain
is regarded as the GENERAL AGENT of the Requirements of Safe Navigation.
shipowner and as such, he: The judgment and discretion of the captain of a
a. Has authority to sign bills of lading; vessel may be confined within a straitjacket, even in
b. Carry goods aboard and deal with the freight this age of electronic communications.
c. Agree upon rates and decide whether to take The master is entitled to delay for such a period as
cargo; may be reasonable under the circumstances, before
d. Has legal authority to enter into contracts with deciding on the course he will adopt. A shipowner or
respect to the vessel and the trading of the vessel, shipmaster will be allowed a reasonable time in which
subject to applicable limitations established by statute, to decide what course he will adopt in such cases as
contract or instructions and regulations of the those under discussion; time must be allowed to him to
shipowner. ascertain the facts, and to balance the conflicting
interests involved, of shipowner, cargo owner, under
-All aforementioned functions verily commits to writer on ship and freight. If he delays and owing to
the captain the governance, care, and management of that delay a perishable cargo suffers damage, the
the vessel. Clearly then, the captain is vested with both shipowner will be liable for that damage.
THE CAPTAIN AND THE MASTER: (See Arts. Q: Who is a pilot?
610-612 of the Code of Commerce) A: Maritime Law: a person duly qualified, and
licensed, to conduct a vessel into or out of ports, or in
A ship’s captain must be accorded a
REASONABLE MEASURE OF DISCRETIONARY Broad sense: includes both (1) those whose duty it is to
AUTHORITY to decide what the safety of the ship and guide vessels into or out of ports, or in particular
of its crew and cargo specifically requires on a waters; and (2) those entrusted with the navigation of
stipulated ocean voyage. vessels on the high seas.

Presumption: A captain is knowledgeable as to the General understanding: a person taken on board at a

specific requirements of seaworthiness and the particular place for the purpose of conducting a ship
particular risks and perils of the voyage he is to through a river, road or channel, or from a port.
embark upon.
Applicable Principle: The captain has control of ALL -In compulsory pilotage, states possessing harbors
departments of service in the vessel, and reasonable enacted laws or promulgated rules requiring vessels
discretion as to its navigation. approaching their ports to take on board pilots licensed
under local law. In the Philippines, compulsory
Note: It is the right and duty of a captain, in the pilotage is being implemented in the Port of Manila,
exercise of sound discretion and in good faith, to do all the latter being within the Manila Pilotage District.
things with respect to the vessel and its equipment and
conduct of the voyage which are reasonably necessary -On compulsory pilotage grounds, the Harbor
for the protection and preservation of the interests pilot providing the service to a vessel shall be
under his charge. responsible for the damage caused to a vessel or to life
and property at ports due to his negligence or fault.

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The master shall retain overall command of the vessel also not liable for negligently assuring the competence
even on pilotage grounds whereby he can countermand of their members because as PROFESSIONAL
or overrule the order or command of the Harbor Pilot ASSOCIATIONS, they made no guarantee of the
on board. professional conduct of their members to the general
a. Master and Pilot. (See Far Eastern Shipping
case on page 525 of the Aquino book for the SC CODE OF COMMERCE PROVISIONS ON
discussion on the duties of a pilot in relation to the CAPTAINS (See page 530 of the Aquino book)
The Pilot supersedes the master for the time OFFICERS AND CREW OF VESSELS
being in the command and navigation of the ship, and COMPLEMENT OF A VESSEL. (Art. 648, Code of
his orders must be obeyed in all matters connected Commerce) —all the persons on board from the
with her navigation. He becomes the master pro hac captain to the cabin boy, necessary for the
vice. management, maneuvers, and service, and therefore, it
includes the CREW, the SAILING MATES,
GENERAL RULE: the pilot is PERSONALLY ON BOARD not having specific designations; but it
LIABLE for damages caused by his own negligence or SHALL NOT INCLUDE the passengers or the persons
default to the OWNERS of the vessel, and to THIRD whom the vessel is transporting.
PARTIES for damages sustained in a collision. Such
negligence of the pilot in the performance of duty REGULATION OF MERCHANT MARINE
-In cases of COLLISION: the COLLIDING The practice of marine profession is now governed by
VESSEL is prima facie responsible, hence, the burden special laws and pertinent rules issued by the:
of proof is upon the party claiming benefit of the - MARINA;
exemption from liability. Thus, it must be shown - BOARD OF MARINE DECK OFFICERS;
affirmatively that the pilot was at fault, and that there - BOARD OF MARINE ENGINEER OFFICERS
was no fault on the part of the officers or crew, which
might have been conducive to the damage. The fact MINIMUM SAFE MANNING.
that the law compelled the master to take the pilot does -It is not enough that the officers manning the
not exonerate the vessel from liability. The injured merchant vessel have all the qualifications imposed by
party shall seek redress from the vessel. The owners of the Philippine Merchant Marine Officers Act and other
the vessel are responsible to the injured party for the special laws or regulations. It is also required that there
acts of the pilot, and they must be left to recover the is sufficient number of officers and crew that are
amount as well as they can against him. serving in the vessel. (Quality and Quantity)

c. Pilot and his Association. SECURITY OF TENURE.

The fact that the pilot is a member of an association -The Labor Code provisions apply to OFFICERS
does not make the association jointly and severally and CREW of merchant vessels in DOMESTIC Trade
liable. Article 2180 of the Civil Code does not apply or COASTWISE Shipping. Hence, matters concerning
because there is NO EMPLOYER-EMPLOYEE their dismissal or disciplinary action must be in
Relationship. accordance with provisions of the Labor Code. For
Well-established is the rule that pilot associations are officers and crew who are working in foreign vessels
immune to vicarious liability for the tort of their who are involved in overseas shipping, there must be
members. They are not the employer of their members compliance with the applicable laws on overseas
and exercise no control over them once they take the employment as well as regulations issued by the
helm of the vessel. They are also not partnerships Philippine Overseas Employment Administration
because the members do not function as agents for the (POEA).
association or for each other. Pilots’ associations are

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CODE OF COMMERCE PROVISIONS on Sailing the passengers to disembark in tacloban. This time, this
Mates, Second Mate and Marine Engineer, Crew, and is the act of captain. The SC concluded that the
Supercargoes (See pages 548-560 of the Aquino book). damages sustained by passengers bound for catbalogan
are to shouldered by the shiponwer
Parties. —those provided above plus seamen, other rd
Indemnities in Favor of 3 person: OTTA devt case
members of the complement including the stokers sited in walter smith case
(incharge of boilers) and supercargo (agent of the
shippers who has authority to sell goods while on
- In OTTA the owner of the pier was at the same time
the owner of the goods. SC, because there was a
relationship of owner of vessel and goods, then there is
4 maritime contracts:
presumption of negligence new civil code
1. charter parties
2. Botomry
3. Repondentia
Case: Walter smith case
4. Marine insurance (incorporated in the subject
- There was no relationship. Owner of port and
owner of goods are different. What was applied by
court was the law on torts. No presumption of
negligence. There should be proof of negligence. The
owner of vessel proved that he exercised ordinary
- He has the privilege to invoke limited liability rule.
diligence (required in ports). What was presented was
- What if with a charter party with charterer, who can
the competence of shipcaptain. The shipowner proved
invoke the LLR?
ordinary diligence in choosing the ship captain.
No jurisprudence. Personal opinion of sir:
distinguish on the type of charter party. If
Contracts entered into by shipcaptain or master
affreightment, shipowner retains possession, command
-Inter orient case: one role is they are the general
and navigation of the vessel. If bareboat it is vested
agent of the shipowener. But if the obligation
upon the charterer.
contracted by the captain does not enure to the benefit
of the vessel, then the shipowner has no liability. There
- Jurisprudence: except for registration, the
is no conflict bec. 586 obligations contracted by the
charterer is the temporary owner of the vessel. With shipper while 1759 death or injury of passenger as
this, the charterer can invoke LLR (this part no juris). result of contract of carriage.
-The case in point with the contracts entered into
Note: There is not distinction of liability of shipowner was the case Wing Kee. There were supplies delivered.
and ship agent. They are civilly liable. Shipagent was said to be liable. SC said at the time you
There is a situation in maritime law that shipowner and were still an agent you were liable but at the time
agent they are held liable for the act or omission of a agency was terminated you are no longer liable.
third person which is the ship captain or master. -If both SO and SA are sued, being solidarily liable,
the SA has right of recourse over SO.
Case: Yucon case Shipcaptain or master
- money was entrusted to the captain and the money - The difference is with regard to the tonnage of the
was lost. SC concluded that shipowner was liable for vessel (higher: captain; lower: master; major patron
the lost because the captain failed to put up measures and minor patron)
while in custody of the money. It may not technically
to an act but may refer to admission but would fall - The question on the shipcaptain or master is the
under the term acts exercise of discretion

Case: Sweetlines case - Inter orient case: captain tayong did not want to
-bound for catbalogan but the captain chose to allow proceed with the voyage from Singapore to Africa bec.

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Of lack of oxygen and acetylene. But because of order (labor code) abroad (POEA).. there is a standard
of management he proceeded. He was then ordered to contract (poea prepared and drafted it and every
repatriated and then another captain took his place. He seaman shall comply with this —this is to protect
filed for illegal dismissal. The issue was the discretion filipino seaman working abroad) that will be signed by
exercised by the captain. WON he has the discretion every seaman stipulating the security of tenure,
not to proceed bec. of lack of supply. SC said you repatriation, benefits, etc.
should emphasize reasonable discretion —it is the
captain’s duty . - Difference for abroad: bigger income but
contractual (after contract go home).. DOMEstic, you
- Inter Orient: triple roles of the captain —general can be a regular employee in accordance with the labor
agent, commander and technical manager, code
representative of country
- JumpShip scenario: it is a valid ground to
Shipcaptain and harbor pilot terminate a seaman

- Harbor pilot: distinguish if voluntary or compulsory Note: Shipcaptain should conduct preliminary
investigation for crimes conducted on board.
- Case cited by SC on proper relationship of captain
and pilot. In far eastern shipping case 521 3 par — CHAPTER 14
there are occasion when the master may and should CHARTER PARTIES
interfere and even displace the pilot when
he is obviously incapacitate and intoxicated. Charter Parties
—a contract whereby the entire ship, or some of
- In this case, there is relevance on when the the principal part, is let by the owner to a merchant or
other person for a specified time or use for the
captain should interfere. If it is voluntary (pilot
conveyance of goods, consideration of payment of
engaged by shipowner) —damages caused by pilot,
shipowner is liable. If compulsory, shipowner can
-It is a form of “mercantile lease”. It is a contract,
escape liability
hence, parties are free to stipulate upon such terms and
conditions that would suit their purposes subject to the
- If compulsory distinguish whether there was
caveat that these should not be contrary to law or
circumstances that would require the shipcaptain to
public policy.
interfere with the ship pilot. If there are circumstances
but captain did not interfere then shipowner is liable. If
there are circumstances and captain interfere but still
1. Charterer/Charter Party —merchant or a person
there is damage, the shipowner will not be liable.
who desires to lease ship or vessel owned by another
by transport of his or her goods for commercial
- Cebu Port Authority —covered by compulsory
purposes or persons from one port to another
pilotage 2. Shipowner (SO)

Chiefmate or sailing mate (then there are engineers) KINDS:

- 2008 case, citing the article the code of 1. Bareboat or Demise Charter – shipowner leases to
commerce specifying the functions of chiefmate being the charterer the whole vessel, transferring to the
second in command of the vessel. Chiefmate is a charterer the entire command, possession and
managerial employee (as provided in labor code —loss consequent control over the vessel’s navigation,
of trust and confidence including the master and the crew, who becomes the
charterer’s “servants”
Seaman. The charterer becomes an owner “pro hac vice”.
-On security of tenure: distinguish DOMESTIN

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2. Contract of Affreightment – charterer hires the said captain or master acts in accordance with the
vessel only, either for a determinate period of time or instructions of the agent or owner and protects the
for a single or consecutive voyage, with the SO latter’s interests.
providing for the provision of the ship, wages of the
master and crew, and expenses for maintenance of the REQUISITES OF A VALID CHARTER PARTY:
vessel 1. consent of the contracting parties;
a. Time Charter – vessel is leased to a charterer for 2. an existing vessel which should be placed at the
a fixed period of time disposition of the shipper;
3. the freight;
b. Voyage Charter – vessel is leased for a single or 4. compliance with requirements of Art. 652 of
particular voyage Code of commerce.

Effect of Charter on character of Carrier. (Aticle 652 of the Code of Commerce provides that the
-Generally, the character of the common carrier as charter party shall contain, among others, the name,
such is not affected by the charter party if the same is a surname, and domicile of the charterer, and if he states
contract of affreightment. that he is acting by commission, that of the person for
whose account he makes the contract.)
Persons who may make charter.
-The owner or owners of the vessel, either in Cases:
whole or majority part, who have legal control and Caltex v. Sulpicio Lines
possession of the vessel, may valdly enter into charter Facts-There was a voyage charter; collision between
parties with the charterer. MT Vector (tanker) and Doña Paz (owned by
Sulpicio); breach of contract filed by the passengers’s
Charterer. heirs against Sulpicio; 3d party complaint against
The charterer, by himself, may subcharter the entire registered owner of the tanker including Caltex ( that
vessel to a third person but only in the event that there they were negligent and in bad faith by not seeing to it
is no prohibition in the original charter regarding any that the tanker was seaworthy)
subcharter. The subcharter is an independent contract
by itself involving only the charterer and the Issue: WON charterer shall be liable under Maritime
subcharterer and therefore does not give rise to any Law?
contractual relation between the general owner and the
subcharterer. Ruling: Liability cannot be attached to Caltex; the
charter did not affect the business of Sulpicio as a
Part owners. —Part owners of the vessel are not common carrier; rights and responsibilities of
precluded from chartering the same for their own ownership still rested on the owner
commercial purposes.
Planters Product v CA
Ship Agent. —In the Code of Commerce, the ship Facts: time charter; Planters purchased fertilizers from
agent is not allowed to make contracts for a new the US; voyage to the Philippines; upon arrival,
charter unless he is properly or duly authorized by the shortage in the cargo was discovered; filed actions
owner, or by virtue of an authority given by a against carrier for damages (breach of Contract); RTC
resolution of the majority of the co-owners. He may, ruled in favor of the Planters; Ca reversed & absolved
however, may such charter if the same has been carrier as it was converted from common carrier to
extended to him in his certificate of appointment. private;

Captain or Master. —It is one of the inherent powers Ruling: It cannot become a private carrier; bareboat
of the captain or master of the vessel to enter into charter can become a private carrier but in contract of
valid and binding charter parties, but only in the event affreightment remains as common carrier (action based
of absence of the ship agent or consignee, and only if on contract of carriage; presumption of negligence);

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carrier was able to rebut the presumption of negligence

(result the inherent character of the fertilizers) LAY DAYS —period of time stipulated from loading
and unloading (provided for in charter party); if no lay
Coastwise Lighterage v. CA days provided for in the charter party, it is understood
WON private carrier would convert to a common that the charterer will unload and discharge cargoes
carrier; contract of affreightment within a reasonable time or with reasonable diligence

Ruling: reiterated Planters ruling; but was not able to Demurrage —a sum of money due by express
rebut presumption of negligence; did not exercise EO contract for detention of the vessel in loading, beyond
diligence ( hired unlicensed patron) time allowed for that purpose in that charter party; sum
of which is usually fixed by the parties in the charter
Home Insurance v. American Steamship party; liability for this exists only when expressly
-case mostly used by the common carrier as defense; stipulated
Home Insurance is subrogee; paid SMC of loss cargo
shipped thru American Steamship; no reference as to Deadfreight —where the charterer failed to occupy
what contract but there was a mention that it was in the leased portion of the vessel, he may thereby be
affreightment liable by the shipowner for the deadfreight that
Ruling: Common Carrier undertaking to carry special
cargo (chartered to special person only) become a
private carrier and stipulation exempting owner from STIPULATION IN CHARTER PARTIES
liability for loss due to the negligence of its agents is GR: parties are free to stipulate subject to Art 1744 to
valid; 1754 0f NCC

Shipowner can appoint senior officers for the vessel Art. 1744. A stipulation between the common carrier
even if bareboat contract. But technically it is an and the shipper or owner limiting the liability of the
affreightment. Most conflicts will occur if these former for the loss, destruction, or deterioration of the
various principles will have to be mixed. goods to a degree less than extraordinary diligence
shall be valid, provided it be:
The whereabouts of the vessel is important to know the (1) In writing, signed by the shipper or owner;
time for loading and unloading. (2) Supported by a valuable consideration other than
the service rendered by the common carrier; and
Policy – marina (3) Reasonable, just and not contrary to public policy.
Implementing or enforcement —Coastguard
Art. 1745. Any of the following or similar stipulations
FRIEGHT OR FREIGHTAGE shall be considered unreasonable, unjust and contrary
-price of carriage to public policy:
-shall accrue according to what is stipulated in (1) That the goods are transported at the risk of the
the contract owner or shipper;
-should there be no stipulation or if it is (2) That the common carrier will not be liable for any
ambiguous , rules shall be loss, destruction, or deterioration of the goods;
a. freight shall begin to run from the day (3) That the common carrier need not observe any
of loading on the vessel; diligence in the custody of the goods;
b. in charters with fixed period, the freight (4) That the common carrier shall exercise a degree of
shall begin to run upon that very day; diligence less than that of a good father of a family, or
of a man of ordinary prudence in the vigilance over
c. If freight is charged according o weight, the movables transported;
payment shall be made according to gross (5) That the common carrier shall not be responsible
weight, including the weight of the containers. for the acts or omission of his or its employees;

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(6) That the common carrier's liability for acts Art. 1753. The law of the country to which the goods
committed by thieves, or of robbers who do not act are to be transported shall govern the liability of the
with grave or irresistible threat, violence or force, is common carrier for their loss, destruction or
dispensed with or diminished; deterioration.
(7) That the common carrier is not responsible for the
loss, destruction, or deterioration of goods on account Art. 1754. The provisions of Articles 1733 to 1753
of the defective condition of the car, vehicle, ship, shall apply to the passenger's baggage which is not in
airplane or other equipment used in the contract of his personal custody or in that of his employee. As to
carriage. other baggage, the rules in Articles 1998 and 2000 to
2003 concerning the responsibility of hotel-keepers
Art. 1746. An agreement limiting the common shall be applicable.
carrier's liability may be annulled by the shipper or
owner if the common carrier refused to carry the ART. 653. if the cargo should be received without the
goods unless the former agreed to such stipulation. charter party having been signed, the contract shall be
understood as executed In accordance with what
Art. 1747. If the common carrier, without just cause, appears in the bill of lading, the sole evidence of title
delays the transportation of the goods or changes the with regard to the cargo for determining the rights and
stipulated or usual route, the contract limiting the obligations of the ship agent, captain and charterer.
common carrier's liability cannot be availed of in case
of the loss, destruction, or deterioration of the goods. CHAPTER 15
Art. 1748. An agreement limiting the common
carrier's liability for delay on account of strikes or  May be executed by means of:
riots is valid. 1. public instrument
2. policy signed by the contracting parties and the
broker taking part therein
Art. 1749. A stipulation that the common carrier's 3. private instrument (Art. 720)
liability is limited to the value of the goods appearing
in the bill of lading, unless the shipper or owner GR: The captain cannot contract loans on
declares a greater value, is binding. respondentia secured by the cargo, and should he
do so, the contract shall be void. Neither can he
Art. 1750. A contract fixing the sum that may be borrow money or Bottomry for his own
recovered. by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it 1. On the portion of the vessel he owns, provided no
is reasonable and just under the circumstances, and money has been previously borrowed on the whole
has been fairly and freely agreed upon. vessel, nor exists any other kind of lien or obligation
chargeable against her.
Art. 1751. The fact that the common carrier has no 2. When he is permitted to do so, he must
necessarily state what interest he has in the vessel.
competitor along the line or route, or a part thereof, to
which the contract refers shall be taken into 1. kind, name and registry of the vessel;
consideration on the question of whether or not a 2. name, surname and domicile of the captain;
stipulation limiting the common carrier's liability is 3. names, surnames and domiciles of the borrower and
reasonable, just and in consonance with public policy. the lender;
4. amount of the loan and the premium stipulated;
Art. 1752. Even when there is an agreement limiting 5. time for repayment;
6. goods pledged to secure repayment;
the liability of the common carrier in the vigilance
7. voyage during which the risk is run (Art.721)
over the goods, the common carrier is disputably
presumed to have been negligent in case of their loss, WHO MAY CONTRACT:
destruction or deterioration. 1. Bottomry – by the ship owner or ship agent; outside
of the residence of the owners, the captain.

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2. Respondentia – only the owner of the cargo the loan of Bottomry or respondentia and maritime
insurance, the value of what may be saved in case of
DISTINCTIONS: ORDINARY LOAN shipwreck shall be divided between the lender and the
BOTTOMRY/ insurer, in proportion to the legitimate interest of each
RESPONDENTIA one, taking in consideration, for this purpose only, the
1. Not subject to Usury Law 1. Subject to Usury Law principal with respect to the
2. Liability of the borrower 2. Not subject to any Maritime contracts include charter parties… and loans
is contingent on the safe contingency on bottomry and respondentia are considered maritime
arrival of the vessel or cargo contracts
at destination Q: why do we have to study this topic? Are these
3. The last lender is a 3. The first lender is a relevant?
preferred creditor preferred creditor
A: they are hardly used at present. However, we have
4. Must have a collateral 4. May or may not have
to study this just in case this will be asked in the bar.
5. Collateral is the vessel or 5. Maybe property, real or
Especially in the unique terms used in this topic..
cargo subject to maritime personal General provisions in contracts will govern
risk Basic provision you should not forget:
6. Must be in writing 6. Need not be in writing 1. there should be a marine risk
but interest shall not be due 2. the condition that the vessel or the goods has
unless expressly stipulated perished then the right of the lender to collect
in writing everything as well as stipulated interest is extinguished
7. To be binding on third 7. Need not be registered (not sure if there are other more.. basin ala ko kaapas)
person must be recorded in
the registry of vessels of BOTTOMRY
port of registry of the vessel - It may refer to the vessel
8. Loss of collateral 8. Does not extinguished if - The bottom or the hull or the kill of the vessel can be
extinguishes the same there is a loss of the pledged in this case
collateral (if any) - The whole vessel can be a subject of a security or
1. Effects of loans be lost due to accident of the sea - PD. 1521: (is this different) --- loan is the principal,
during the time, and on the occasion of the voyage mortgage is the accessory.
which has been designated in the contract and proven - The contract of bottomry is principal, the mortgage
that the cargo was on board under pd 1521 is merely a security
- lender losses the right to institute the action which - In pd 1521 under section 4 it is a requirement that the
would pertain to him whole of the vessel must be mortgaged (no
Except: when the loss was jurisprudence on this matter whether a part of the
1. caused by inherent defect of the thing vessel can be mortgaged)
2. through fault or malice of the borrower - In bottomry the whole or the part of the vessel can be
3. through barratry on the part of the captain the subject
4. caused by damages suffered by the vessel as a - IF the part of the vessel can be pledged, is it
consequence of being engaged in a contraband necessary that there should be goods? No. no need for
5. loaded the goods on a vessel different from that goods.
designated in the contract unless the change was
caused by force majeure RESPONDENTIA
- The vessel should have goods. The goods must be
2. The lenders on bottomry or respondentia shall suffer laden in the vessel
in proportion to their respective interest, the general - Is it necessary that the boat is on voyage? The vessel
average which may take place in the things upon which must be in the actual course of voyage because this is
the loans were made. the objective of the law. Because if the vessel is
3. In case of shipwreck, the amount for payment of the docked in the port the owner can simply obtain loans.
loan shall be deduced to the proceeds of the effects And besides there is no risk when the vessel is docked
which have been saved but only after deducting the (but no jurisprudence)
costs of the salvage.
4. If the loan should be on the vessel or any of her Distinction of this two types of loan vs. SIMPLE
parts, the freight earned during the voyage for which LOAN (for purposes of the bar) --- 5 differences
the loan was contracted shall also be liable for its 1. with respect to form --- can you validly execute a
payment, as far as it may reach. bottomry or respondentia verbally? You cannot. Bec
5. If the same vessel or cargo should be the object of under the code of commerce no judicial action can

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arise when the contract is not reduced in writing. But - Damage or expenses deliberately caused
this is not the case in simple loan. But in simple loan in order to save the vessel, its cargo or
you take note the statute of frauds… if not in writing B both from real and known risk
and R, you can dismiss case due to failure to state - All the persons having an interest in the
cause of action. vessel and the cargo therein at the time of
Q: why hardly used at present? the occurrence of the average shall
A: because of sophistication. Captains can just call up contribute to satisfy this average.
any agent the shipowner to deliver anything for the use
of the vessel to deliver. … This contract was  Requisites of General Average:
recognized in medieval times.
1. common danger;
2. that for the common safety part of
CHAPTER 16 the vessel or of the cargo or both is
AVERAGES sacrificed deliberately;
3. that from the expenses or damages
Article 806 of the Code of Commerce provides that caused follows the successful saving
the following shall be considered averages: of the vessel and cargo; and
1. An extra-ordinary or accidental expense 4. that the expenses or damages
incurred during the voyage in order to should have been incurred or inflicted
preserve the vessel, cargo, or both; after taking proper legal steps and
2. Any damages or deterioration which the authority.
vessel may suffer from the time it puts to sea
from the port of departure until it casts anchor Common danger
in the port of destination, and those suffered -means both the ship and the cargo, after
by the merchandise from the time they are has been loaded, are subject to the same
loaded in the port of shipment until they are danger, whether during the voyage, or in the
unloaded in the port of their consignment. port of loading or unloading, that the danger
arises from the accidents of the sea,
CLASSES OF AVERAGES: disposition of authority, or faults of men,
A. Simple or Particular Average provided that circumstances producing the
- Damage or expenses caused to the vessel peril should be ascertained and imminent or
or to her cargo that did not inure to the may rationally be said to be certain and
common benefit and profit of all persons imminent.
interested in the vessel and her cargo. -When the measure of precaution adopted
- The owner of the goods that suffered the solely and exclusively for the preservation of
damage bears the loss the vessel from the danger of seizure or
capture and not for the common safety is not
- res perit domino applies
considered as common danger.
- if the vessel or goods are hypothecated by
loan on bottomry and respondentia, the Deliberate Sacrifice
lender shall bear the loss in proportion to -voluntary sacrifice of a part for the
his interest benefit of the whole in order to justify
theaverage contribution.
1. Averages is defined as damage deliberately Voluntary Jettison
caused or an expense deliberately incurred due to a -the casting away of some portion of the
marine peril and which has resulted in saving both associated interests for the purpose of
vessel and cargo or only the vessel or cargo. avoiding the common peril from the whole to
2. Where both vessel and cargo are saved, it is a particular portion of those interests
general average; where only the vessel or only the -the goods on board refer to in jettison
cargo is saved, it is particular average. should be proven by means of bill of lading
3. The person whose property has been saved must and with regards to those belonging to vessel
contribute to reimburse the damage caused or by means of inventory prepared before the
expense incurred if the situation constitutes general departure
2 cases where there can also be general averages
B. General or Gross Average even if the sacrifice was not made during the

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voyage: hearing. In the second case, by the captain and

a. where the sinking of the vessel is necessary to all the officers of the vessel.
extinguish a fire in aport, roadstead, creek or 3. The minutes must also contain a detail of all
bay the goods jettisoned and those injuries caused to
b. where cargo is transferred to lighten the ship those on board.
on account of a storm to facilitate entry into a 4. The captain shall deliver it to the maritime
port judicial authority of the first port he may make,
within 24 hours after his arrival, and to ratify it
Art. 816: In order that the goods jettisoned may be immediately under oath.
included in the gross average and the owners entitled
to indemnity – it is necessary that the cargo’s existence ORDER OF GOODS TO BE CAST OVERBOARD
on board be proven by a bill of lading; and with IN CASE OF JETTISON:
regard to those belonging to the vessel, by means of an 1. Those which are on the deck, beginning with
inventory prepared before departure. those which embarrass the maneuver or damage
of the vessel, preferring, if possible, the heaviest
Art. 817: If in lightening of a vessel on account of a one with the least utility and value;
storm to facilitate its entry to a port or roadstead, part 2. Those which are below the upper deck,
of the cargo should be transferred to barges or lighters beginning with those with greatest weight and
and be lost, the owner of the said part is entitled to smallest value, to the amount and number
indemnity as if the loss originated from a gross absolutely indispensable. (Art. 815)
average, the amount being distributed between the
vessel and cargo from which it came. Q: Who bears general average?
If, on the contrary, the merchandise transferred should A: borne by those who benefited from the
be saved and the vessel should be lost, no liability may sacrifice; the shipowner and the owner of the
be demanded of the salvage. cargoes that were saved
Art. 818: If, as a necessary measure to extinguish a Contribution may be imposed to;
fire in a port, roadstead, creek, or bay, it should be
decided to sink any vessel, this loss shall be considered
a. Insurers ( Insurance Code of the
gross average, to which the vessels saved should Philippines)
contribute. - they are obliged to pay for the indemnification of the
gross average provided that the liability shall be
Sacrifice must be Successful limited to the proportion of contribution attaching to
-no general contribution can be his policy value where this is less than the contributing
demanded if the vessel and other cargo that value of the thing insured
are sought to be saved were in fact not saved b. Lenders of Bottomry and Respondentia
-owners of the goods saved shall not be (Code of Commerce)
liable for the indemnification of those -obliged to pay in proportion to their respective
jettisoned, lost or damaged interest, the general average
-hence when the sacrifice was not which may take place in the goods which the loan is
successful in saving the ship, there will be no made
general contribution
Q: Who is entitled to indemnity?
COMPLIANCE WITH LEGAL STEPS A: owner of the goods which were sacrificed
Procedure for recovery: (Art. 813-814) is entitled to receive the general contribution
1. There must be a resolution of the captain, Except:
adopted after a deliberation with the other a) goods carried on desk unless the rule
officers of the vessel and after hearing all special law or customs of the place allow
persons interested in the cargoes. If the latter the same
disagree, the decision of the captain should b) goods that are not recorded in the books or
prevail but they shall register their objections. records of the vessel
2. The resolution must be entered in the c) fuel of the vessel if there is more than
logbook, stating the reasons and motives for the sufficient fuel for the voyage
dissent, and the irresistible and urgent causes if
he acted in his own accord. It must be signed, in Case: American Home Insurance v. CA
the first case, by all persons present in the -Art 848 states that claims shall not be admitted if

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they do not exceed 5% of the interest which the the goods.

claimant may have in the vessels or cargo if it is - these two are different
general average, and 1% of the goods damaged if
particular average… deducting in both cases the
expenses of appraisal, unless there is an agreement to CHAPTER 17
the contrary. COLLISIONS
-It is clear that the damage of the cargo is
particular average since the loss is less than 1% to the Collisions
value of the cargo and there appears to be no -impact or sudden contact of a moving
allegations as to any agreement defendants and body with an obstruction in its line of motion,
consignee of the goods to the contrary, by express whether both bodies are in motion or one
provision of law, plaintiff is barred from suing for stationary and the other, no matter which, in
recovery. motion.

Law on averages does not apply if the CC is Allision

negligent. -if one vessel is moving while the other is
LIABILITY FOR CONTRIBUTION ON 3 Zones of Time in the Collision of vessels:
AVERAGES 1. First zone – all time up to the moment
Under the rule, deck cargo is permitted in coastwise when risk of collision begins;
shipping but prohibited in overseas shipping. 2. Second zone – time between moment
1. If deck cargo is located with the consent when risk of collision begins and moment it
of the shipper on overseas trade, it must becomes a practical certainty;
always contribute to general average, but 3. Third zone – time when collision is
should the same be jettisoned, it would not be certain and time of impact.
entitled to reimbursement because there is
violation of the Y-A Rules. Error in Extremis
2. If deck cargo is loaded with the consent - In the first zone, no rule applies.
of the shipper on coastwise shipping, it must - In the second, burden is on the vessel
always contribute to general average and if required to keep away and avoid danger.
jettisoned would be entitled to - The third zone covers the period in
reimbursement. which error in extremis occurs.
-may also be used to solve controversies
- Vessel which has forced the privileged
where no provision of the code of commerce vessel into danger is responsible even if
is in point because the said rules embody the privileged vessel has committed an error
custom of maritime states within that zone.

AVERAGES Rules on Liability

- the same concept that was existing in medieval  although not governed by quasi-delict, still
times can be applied at present negligence based

Relevance of averages (take note these ex. Cases covered by collision and allision:
Connected to expenses under 806) under 806 --- 1. One vessel at fault – such vessel is liable for
averages are: damage caused to innocent vessel as well as
o Extraordinary expenses – ex. If machine does damages suffered by the owners of cargo of both
not work, you have to ask help of a tugboat… vessels.
the expenses on the use of tugboat is a 2. Both vessels at fault – each vessel must bear
question of averages. This is extraordinary its own loss, but the shippers of both vessels
because it is not foreseen. --- assuming the may go against the ship owners who will be
engine of the vessel was defective, can that be solidarily liable.
considered an average? YES. (question now if 3. Vessel at fault not known – same as rule as
it is particular or general) (2). (Doctrine of Inscrutable Fault)
o Damages or deterioration suffered 4. Third vessel at fault – same rule as (1).
- refer to the physical feature or attribute of 5. Fortuitous event – no liability. Each bears its

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own loss. right to vote

d) the officers shall determine and
Prerequisite to recovery:
agree if there is well founded reason
 Protest should be made within 24 hours before
the competent authority at the point of
after examining the circumstances;
collision or at the first port of arrival, if in the Captain shall have the deciding vote
Philippines and to the Philippine consul, if the e) agreement shall be drafter and the
collision took place abroad. (Art. 835) proper minutes shall be signed and
 Injuries to persons and damage to cargo of entered into the log book
owners not on board on collision time need f) objections and protests shall
not be protested. (Art. 836) likewise be entered in the minutes
APPLICABLE. A: when due to:
DOCTRINE OF “INSCRUTABLE FAULT” a. lack of provisions due to
 In case of collision where it cannot be negligence to carry according to usage
determined which between the two vessels and customs;
was at fault, both vessels bear their respective b. risk of enemy not well known or
damage, but both should be solidarily liable
for damage to the cargo of both vessels.
c. defect of vessel due to improper
Note: The Doctrine of Limited Liability applies in case repair; and
of collisions, but it shall be limited only to the value of d. malice, negligence, want of
the vessel with all its appurtenances and freightage foresight or lack of skill of captain.
earned during the voyage. When the latter is not (Art. 820)
sufficient to cover all the liabilities, the indemnity due
by reason of the death or injury of persons shall have
Q: Who bears expenses?
preference. (Arts. 837 and 838) A: distinguish:
o if arrival under stress is proper -
CHAPTER 18 shipowner or ship agent will only be
ARRIVAL UNDER STRESS AND liable for the expenses of the arrival
SHIPWRRECKS o if arrival under stress is improper-
shipowner and ship agent will be liable
Arrival under stress for the same expenses and, in addition,
-arrival of a vessel at the nearest and they shall be solidarily liable for
most convenient port which was decided damages caused to the cargoes by such
upon after determining that there is well arrival under stress (Art. 821)
founded fear of seizure, privateers,
pirates, or accidents of sea disabling Note: After cessation of the cause of the arrival
navigation. (Art. 819) under stress, captain should continue voyage or
else he shall be liable.
Steps to be taken in the determination of the
propriety of arrival under stress Unloading of cargoes to make repairs:
a) captain should determine during  in order to make repairs to the vessel or
the voyage if there is a well-founded because there is danger that cargo may
fear of seizure, privateers of other valid suffer damage - necessary to unload;
grounds captain must request authorization from
b) captain shall then assemble the competent judge or court for removal,
officers and carry it out w/ knowledge of the
c) captain shall summon the persons person interested in the cargo
interested in the cargo who may be  in a foreign port - Philippine Consul
present and who may attend but without  in case of the vessel - expenses shall be

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for the account of the shipowner or CHAPTER 19

 in case of the cargo - chargeable against
the owners of the merchandise for Salvage
whose benefit the act was performed -services one person renders to the
 if both - expenses to be divided owner of a ship or goods, by his own
proportionately between the value of the labor, preserving the goods or the ship
vessel and cargo(Art. 822) which the owner or those entrusted with
the care of them have either abandoned
Custody of cargo: in distress at sea, or are unable to protect
 intrusted to the captain (except in cases of or secure.
force majeure)(Art. 823)
 if entire cargo or part thereof should appear Note: Is it a compensation or a service? It was
to be damaged, or there should be defined as both a form of compensation and
imminent danger of its being damaged service. (Castanos discussion)
 captain may request judge of competent
court / consul, the sale of all or part of Kinds of Salvage:
the cargo d.A. Voluntary – compensation is
 person taking cognizance shall dependent on the success.
authorize it (after examination and d.B. Under contract for a per diem or
declaration) per horam wage – payable at all events.
 captain shall justify the legality of his d.C. Under contract for compensation –
conduct, answering to the shipper for payable only in case of success.
the price of the merchandise would
have brought if they had arrived in good Three elements which must be established in
condition(Art. 824) order for a salvage claim to be valid:
1. Object must have been exposed to
Liability of captain: marine peril (fire, acts of pirate,
 captain responsible for the damages thieves)
caused by his delay 2. Salvage services rendered voluntarily
 if cause of arrival under stress ceases -
and is not required as an existing duty
he should not continue the voyage
or a form of contract (See Sec. 8)
 if cause of arrival should have been the
3. Salvage services are successful in
fear of enemies - deliberation and
whole or in part
resolution (in a meeting of officers of
4. Valid vessel which is shipwrecked
the vessel and persons interested in the
cargo) shall precede the departure(Art. beyond the control of the crew or
825) shall have been abandoned (not
-the demolition or shattering of a Persons not entitled to salvage compensation:
vessel caused by her driving ashore or 1. Crew of the vessel shipwrecked or
on rocks and shoals in the midseas, or by which was in danger of shipwreck
the violence of winds or waves in 2. He who shall have commenced the
tempests salvage in spite of opposition of the
-loss of the vessel at sea as a captain or of his representatives\
consequence of its grounding, or 3. He who shall have failed to comply with
running against an object in sea or on the provisions of Section 3
the coast (Section 3. the salvor who saves or picks
up a vessel or merchandise at sea, in the

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absence of the ship captain, ship owner - On the other hand, the owner does
or a representative of either of them, not denounce his right to the
they being unknown, shall convey and property. There is no presumption of
deliver the vessel or merchandise ASAP an intention to abandon such
to the collector of customs if the port has property rights.
a collector and otherwise to the
provincial treasurer or municipal Maritime Lien
mayor.) - A salvor, in maritime law, has an
interest in the property; called a lien,
Derelict but it never goes, in the absence of a
-a ship or cargo which is abandoned contract expressly made, upon the
and deserted at sea by those who were in idea of debt due from the owner to
charge of it, without any hope of the salvor but upon the principle that
recovering it (sine spe recuperandi) or the service creates a property in the
without any intention of returning to it thing saved.
(sine animo revertendi)
 Jetsam – goods that were thrown
off a ship which was in danger Carriage of goods by sea act
 Flotsam – goods that floated off -was originally passed by the Congress of the United
the ship while ship was in danger or States on April 16, 1936 as Public Act No. 521
when it sank -the law was later adopted by the Philippine
 Ligan – goods left as sea on the Commonwealth on October 22, 1936 through
wreck or tied to a buoy so that they can Commonwealth Act No. 65
be recovered later
The new civil code is the primary law on goods
that are being transported from a foreign port to
Basis of entitlement to salvage reward the Philippines
(Circumstances to consider): -COGSA remains to be a suppletory law
a.i.a) The labor expended by the salvors -but goods that are transported internationally, it is
in rendering the salvage service the law of the country to which the goods are to be
a.i.b) The promptitude, skill and energy transported which shall govern the liability of the
displayed in rendering the service and common carrier for their loss, destruction or
saving the property deterioration.
a.i.c) The value of the property
employed by the salvors in rendering the -carrier and the shipper
service, and danger to which such -the carrier is not limited to the shipowner. Carrier
property was exposed includes the charterer.
a.i.d) The risk incurred by the salvors in
rescuing the property from the Duties of the carrier
impending peril -Civil Code requires international carriers to
a.i.e) The value of the property salved exercise extraordinary diligence
a.i.f) The degree of danger which the -two overriding obligations: 1.) the obligation to use
due care with respect to the cargo. 2.) the obligation
property was rescued to provide a seaworthy vessel at the beginning of the
Rights and obligations of salvors and owners:
- Salvor is entitled to compensation Contracts of carriage of goods covered by
for services rendered. He has, under COGSA are evidenced by Bills of Lading
the Salvage Law, a lien upon the -after the goods are loaded, the bill of lading is to be
property salvaged. issued by the carrier, master or agent of the carrier to

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the shipper if the shipper so demands. in which it operates.

-the bill of lading shall be prima facie evidence of
the receipt by the carrier of the goods as therein Public use.
described -same as use by the public; not confined to
privileged individuals but is open for use to the
Notice of claim indefinite public, which gives it a public character. If
-notice of claim must be made within three days the use is merely optional with the owners or the
from delivery if damage is not apparent. public benefit is merely incidental, it is not public
-the same period is not mandatory use, authorizing the jurisdiction of the utility
-however, a prescriptive period of one year from commission. There must be a right which the law
delivery for the filing of the case is a condition compels to give to the general public.
precedent or mandatory - True criterion: whether the public can enjoy it
-the one year prescriptive period does not apply to by right or by permission.
cases of misdelivery or conversion
[Note: The business and operations of public utility
The defenses and immunities of the common is imbued with public interest and is engaged in
carrier enumerated in COGSA that are public service- providing basic commodities and
inconsistent with Article 1734 of the NCC cannot services indispensable to the interest to the general
be used as a defense or immunity. public. For this reason, public utilities submits to the
-the new civil code provisions on common carriers regulation of the government authorities and
are legally controlling surrenders certain business prerogatives such as
rates that may be charged. (Republic v.
Ex. COGS distinguished if the los was due to MERALCO)]
unseaworthiness or if it was the result of oerror of
navigation. No such distinction is called for under Chapter 21: Public Service Regulations
the NCC because part of the duty to exercise due
diligence is to exercise care and caution in Concept: A “public utility” is a business or services
navigation. engaged in regularly supplying the public with some
commodity or service of public consequence. Ex.
Waiver Electricity, gas, water, transportation,
-the shipowner and the ship agent mat waive the telephone/telegraph service. The term implies
benefit of any of the defenses in its favor provided “public use” or “public service.”
not only under COGS but also under other laws.
Section 13 (b) of Commonwealth Act No. 146
Limiting provision provides the definition of public service
-COGSA contains a provision that allows the (b) The term “public service” includes every
shipper to recover only 500 dollars per package person that now or hereafter may own, operate,
unless there is a special declaration providing the manage, or control in the Philippines, for hire or
real value of the goods compensation, with general or limited clientele,
whether permanent, occasional or accidental, and
Right to discharge dangerous cargo done for general use business purposes, any
-COGS allows the carrier to discharge the good if common carrier, railroad, street railway, traction
the carrier discovers that the goods are dangerous, railway, sub-way motor vehicle, either for freight
inflammable or are explosives. This is subject to the or passenger, or both with or without fixed route
condition that the carrier did not give its consent to and whatever may be its classification, freight or
the carriage of goods of such nature. carrier service of any class, express service,
steamboat, or steamship line , pontines, ferries,
and water craft, engaged in the transportation of
PART V: PUBLIC UTILITIES passengers or freight or both, shipyard, marine
railway, marine repair shop, wharf or dock, ice
plant, ice-refrigeration plant, canal, irrigation
Two aspects: system, gas, electric light, heat and power, water
1. Public- touches its patrons and employees supply and power, petroleum, sewerage system,
2. Private- touches members of the community wire or wireless communications system, wire or
wireless broadcasting stations and other similar

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public services: Provided, however, That a person in telephone service for “general business
engaged in agriculture, not otherwise a public purposes”, its rates are much lower than other
service, who owns a motor vehicle and uses it telephone companies, and although 20% to 30% of
personally and/or enters into a special contract their telephone subscribers are private subscribers,
whereby said motor vehicle is offered for hire or services rendered to them are merely incidental. In
compensation to a third party or third parties fact, BOT is not even authorized to use their income
engaged in agriculture, not itself or themselves a and their expenses are met through annual
public service, for operation by the latter for a appropriations made by the Congress.
limited time and for specific purpose directly
connected with the cultivation of his or their [Note: Water districts fall under the term ”public
farm, the transportation, processing, and utility” because its primary function is to construct,
marketing of agricultural products of such third maintain and operate water reservoirs and
party or third parties shall not be considered as waterworks for the purpose of supplying water to
operating a public service for the purpose of this the inhabitants, as well as consolidate and centralize
Act. all water supplies and drainage systems in the
Elements for a person the be considered a public
1. The person must own, operate, manage or  Laws may expressly acknowledge that a
control in the Philippines public services which particular activity is not a public utility.
may include distribution of goods or rendering Ex. Power generators such as independent
of services to the public. power producers are not considered public
2. The ownership, operation, management or utility.
control must be for hire or compensation  The re-classification of a business that is
3. The ownership, operation, management or originally regarded as public utility into an
control must be done for general business entity that is not a public utility through a
purposes. concession agreement or any contract with a
governmental instrumentality is not binding
Characteristics of public service: on the Courts and may be declared
1. The business may be permanent, unconstitutional. Besides, the mere fact that
occasional or accidental. service is rendered only under contract does
2. The business may be with general or not prevent a company from being
considered a public utility. The mere fact
limited clientele.
that the concessionaire operates under a
contract does not remove it from the
Carriers; considered public service if:
concept of public utility if it is inherently so.
1. They transport freight or passenger or It is up to the Court to decide based on the
both; evidence if the concessioner is inherently
2. Their service is with or without fixed such a public utility.
route;  In an obiter in Luzon Stevedoring Co., Inc v
3. May be freight or carrier service of any Public Service Commision, the legislature
class, express service, steamboat or steamship may not declare a company or enterprise to
line, pontines, ferries, and water craft. be a public utility when it is not inherently
Public service under Public Service Act requires
that the entity must me engaged in the activity CONSTITUTIONAL LIMITATIONS
for a general business purpose. Based on Article XII sec. 1, 6, 11, 17, 18, 19, and 22
-Business as the means by which a party habitually of the 1987 Phil. Constitution provisions, the
or regularly earns a livelihood of some gain; where limitations imposed by the Constitution on public
profit is the purpose, or livelihood is the motive. utilities include the following:
1) No franchise, certificate, or any other form
Thus, the Supreme Court ruled that although the of authorization for the operation of a public
Bureau of Telecommunications operated a telephone utility shall be granted except to citizens of
system, it is neither a “public service” nor engaged the Philippines or to corporations or

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associations organized under the laws of the 3) LTO (registration of drivers and motor
Philippines at least 60% per centum of vehicles)
whose capital is owned by such citizens; 4) MARINA (water transportation)
2) No franchise, certificate, or authorization 5) Philippine Coast Guard (concerned with
shall be exclusive in character; safety in water transportation)
3) No franchise, certificate, or authorization 6) National Telecommunications Commission
shall be for a longer period than fifty years; (communication utilities and services, radio
4) A franchise or right shall be granted only communications systems, wire or wireless
under the condition that it shall be subject to telephone and telegraph systems, radio and
amendment, alteration, or repeal by the television broadcasting systems and other
Congress when the common good so similar public utilities)
requires; 7) Energy Regulatory Commission
5) The State shall encourage equity 8) National Water Resources Council
participation in public utilities by the 9) Civil Aeronautics Board
general public;
10) Civil Aviation Authority of the Philippines
6) The participation of the foreign investors in
the governing body of any public utility 11) Philippine Ports Authority
enterprise shall be limited to their 12) Local Water Utilities Administration
proportionate share in its capital; 13) Toll Regulatory Board
7) All the executive and managing officers of
such corporation or association must be BASES OF REGULATION OF PUBLIC
citizens of the Philippines; UTILITIES
8) In times of national emergency, when the The police power of the State justifies the
public interest so requires, the State may, regulation of public utilities. In other words,
during the emergency and under reasonable regulation of public utilities is founded upon the
terms prescribed by it, temporarily take over police powers of the State and statutes prescribing
or direct the operation of any privately rules for the control and regulation of public utilities
owned public utility or business affected are considered valid exercise thereof.
with public interest.
9) The State may, in the interest of national
Ownership of public utilities is subject to
welfare or defense, upon payment of just
regulation by the State. Concerned government
compensation, transfer to public ownership
agencies may impose certain requirements to
utilities and other private enterprises to be
persons or entities who wish to operate as public
operated by the Government;
utilities. This may include capitalization requirement
10) The State shall regulate or prohibit and other similar impositions.
monopolies when the public so requires;
11) Combinations in restraint of trade or unfair TIME WHEN OWNERSHIP MUST
competition are not allowed. COMMERCE
In Tatad vs. Garcia, Jr., even the mere
Constitutionality of the Public Service Act was formalization of a public utility corporation does not
upheld in Pangasinan Transportation Company v ipso facto characterize the corporation as one
Public Service Commission. operating public utility. The moment for determining
the requisite Filipino nationality is when the entitiy
REGULATORY AGENCIES applies for a franchise, certificate, or any other form
The powers of the Public Service Commission of authorization for that purpose.
(PSC) are now distributed among the different
1) Department of Transportation and OWNERHIP TEST applied to determine
Communications (It is the agency that issues whether the corporation is a ‘Philippine
certificates of public convenience for National”(Gamboa vs Teves)
operation of national railroad carriers) In other words, full beneficial ownership of the
2) LTFRB (land transportation) stocks, coupled with voting rights is essential.
Ownership of at least 60% of the shares with voting

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rights must pertain to Filipinos. If the requirement affected with public interest.
will not be imposed, the corporation will not be
“effectively controlled” by Filipinos in accordance MONOPOLIES AND UNFAIR COMPETITION
with the mandate of Sec. 11 of Art. XII of the The Constitution provides that State shall
Constitution. regulate or prohibit monopolies when the public
interest so requires. In addition, combinations in
OWNERSHIP OF FACILITIES restraint of trade or unfair competition are not
In Tatad v. Garcia, Jr., the limit imposed by the allowed under the Constitution.
Constitution on foreign equity applies only to the
operations of a public utility and not to the REGULATION OF RATES:
ownership of the facilities. - includes the regulation of the rates that they
are charging the public. This is in line with the
A corporation is not subject to the 60% Filipino policy of the State to protect the public against
equity requirement under Sec. 11 of the Article XII arbitrary and excessive rates while maintaining the
if it will just own the equipment or properties that efficiency and quality of services rendered.
will be used by another entity which shall operate as
public utility. Public Interest vs. Return of Investment
-The power to regulate rates does not give the
DEFINITE TERM State the right to prescribe rates that are so low as to
The term of the franchise to be given to public deprive the public utility of a reasonable return on
utilities is fifty (50) years at any given time. investment.
However, the appropriate government body may Thus, the rates prescribed by the State must be:
extend the franchise.  one that yields a fair return on the public utility
upon the value of the property performing the
NON-EXCLUSIVITY service (return of investment);
The franchise cannot be exclusive. By doing so,  one that is reasonable to the public for the
it is repugnant to the Constitution. services rendered (public interest)


AMENDMENT -The regulation of rates to be charged by public
The Constitution provides that a franchise or utilities is founded upon the police powers of the
right be granted only under the condition that it shall State.
be subject to amendment, alteration, or repeal by the
Congress when the common good so requires. Non-delegation.
A franchise is a mere privilege that may be -The power to fix the rates of public utilities is
reasonably burdened with some form of public a power that has been delegated to the regulatory
service (Telecom. & Broadcast Attys. of the Phils., administrative agencies. As such, it cannot be
Inc. vs. Comelec) further delegated by the said administrative
agencies. Potestas delegata non delegari potest
TAKE-OVER OF PUBLIC UTILITIES which means “what has been delegated cannot be
The take-over of public utilities by the State delegated.” Thus, administrative body cannot or is
may be temporary or permanent. not authorized to delegate the power to a common
Permanent take-over involves cases when the carrier, transport operator or other public utilities.
public utilities are expropriated subject to payment
of just compensation. Temporary take-over happens Prohibition against Discrimination.
in times of national emergency. -Discrimination in the charging of rates is not
The Constitution provides that the State may, in allowed under existing law and rules. The law
the interest of national welfare or defense, upon prohibits any common carrier from making or
payment of just compensation, transfer to public giving any unnecessary or unreasonable preference
ownership utilities and other private enterprises to or advantage to any particular person, company,
be operated by the Government. In such cases, when firm, corporation or locality to any undue or
the public so requires, the State may, during the unreasonable prejudice or discrimination
emergency and under reasonable terms prescribed whatsoever. The difference in the charge to different
by it, temporarily take over or direct the operation of merchants or shippers must be based upon the actual
any privately owned public utility or business

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cost of handling and transporting. merely the notice of hearing issued by the ERC, in a
newspaper of general circulation in the locality
Reasonable and Just Standard in Fixing Rates. where the applicant operates; and
-The rate must be reasonable and just – the only 2. The need for the ERC to consider the
standard which the legislature is required to comments or pleadings of the customers and LGU
prescribe for the guidance of the administrative concerned.
authority. What is a just and reasonable rate is a Collection
question of fact calling for the exercise of discretion, -the public utility is obligated to collect only rates
good sense, and a fair, enlightened and independent agreed upon. Overcharging is prohibited.
Provisional Rate Increase under EPIRA:
Operating Expenses. With respect to the application for provisional
-This is included in the determination of a just rate adjustments of electric distributors, among the
and reasonable rate. Why? To allow the public important requirements are:
utility to recoup the reasonable amount of expenses 1. Publication of the application itself, not
it has incurred in connection with the services it merely the notice of hearing issued by the ERC, in a
provides. [Note: Income tax is not included.] newspaper of general circulation in the locality
where the applicant operates; and
Fixing Rates for Electric Companies. 2. The need for the ERC to consider the
In an electric company, three major factors comments or pleadings of the customers and LGU
must be considered by the regulating agency in concerned.
determining just and reasonable rates: COLLECTION
1. Rate of return; After the proper regulatory body approves the
2. Rate base; rate of the public utility, the latter is obligated to
3. The return itself or the computed revenue to collect ONLY the rates agreed upon.
be earned by the public utility based on the PUV operators shall post a copy of the fare
rate of return and rate base. matrix in its office, terminal, waiting stations and
interior of the vehicle.
[Note: ERC has original and exclusive jurisdiction
under Rule 4(u) of the EPIRA over all cases AUTHORITY TO OPERATE AS PUBLIC
contesting rates, fees, fines, and penalties imposed UTILITY
by the ERC in the exercise of its power.] The power to authorize the operation of a
public utility is admittedly a
Methods in rate determination. prerogative of the legislature. A
1. Add-on method – adding the established franchise is a legislative grant or a
minimum fare (0.75) to the fare per succeeding through its instrumentalities
kilometre multiplied by the distance travelled in (administrative agencies) when such
excess of 4 km and 5 km respectively. power to authorize operation is
2. Straight Computation Method – the process by delegated.
which the actual distance travelled is multiplied
by the authorized fare per succeeding kilometre Franchise vs. Certificate of Public Convenience
of 0.25 centavos. (CPC):

Provisional Increase.
-An administrative agency may be empowered Franchise CPC
by law to approve provisionally, when demanded by Granted Grant or privilege Form of regulation
urgent public need, rates of public utilities without a by: from a sovereign through the
hearing. But provisional rates are by their nature power (generally, administrative
temporary and subject to adjustment in conformity from the congress) agencies.
There is a trend now
with the definitive rates approved after final hearing.
that the power to
Provisional Rate Increase under EPIRA: grant franchise is
With respect to the application for provisional delegated to
rate adjustments of electric distributors, among the administrative
important requirements are: agencies.
1. Publication of the application itself, not

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Nature: An authorization An authorization primarily a concern of the government.

granted for the issued for the
operation of public operation of public Certificate of Public Convenience (CPC) vs
services for which Certificate of Public Convenience and Necessity
services for which
no franchise, either (CPCN)
franchise is municipal or
necessary CPCN requires prior issuance of municipal franchise
legislative, is
required by law, while CPC does not require such.
such as a common However, the law on issuance of CPCN is now
carrier. obsolete. Hence, cities and municipalities no longer
issue CPCNs as contemplated under the public
Public Service service act.
Law: a certificate
of public Delegation to local government units
convenience can be Cities and municipalities are likewise given
sold by the holder delegated authorities to grant franchise to certain
thereof because it public utilizes including franchises of tricycle
has considerable
operators, ferrie and wharves, public markets within
material value and
is considered a their territorial jurisdiction.
valuable asset Approval of the majority of the Sangguniang
(Raymundo v. Bayan/Panlungsod is required to grant franchise.
Luneta Motor Co.,
G.R. No. 39902, Basic rules on issuance of CPC under the PSA
Nov. 29, 1933). a public utility has for its object public service in
general in order to prevent the public from being
unjustly exploited, which is why they shall obtain a
When legislative franchise is necessary CPC.
-Even if there was already a delegation of authority Sec. 15 of PSA: no public service shall operate in
to a specific administrative agency to issue the Philippines without possessing a valid and
certificates of public convenience, it does not follow subsisting certificate of public convenience or
that a legislative franchise is no longer necessary. It certificate of public convenience and necessity as
would still depend on the enabling law. the case may be.
a. The law requiring or authorizing the The certificate shall be valid only for a definite
administrative body may still require a legislative period, and that violation of any of the conditions
franchise. However, a certificate of public prescribed by the commission shall produce the
convenience is not necessary for the issuance of a immediate cancellation of the certificate without the
legislative franchise. necessity of any express action on the part of the
b. In other cases, the requirement is not only a commission.
legislative franchise but also a license or a certificate Sec. 16 provides that the proceeding of the
of public convenience from a government agency. commission must be with notice and hearing.
ex. There is a dual franchise/license requirement
with respect to broadcast stations. In the case of Basic requirements in the issuance of a CPC
Divinagracia v Consolidated Broadcasting system, 1. The applicant must be a citizen of
broadcast stations are required to obtain a legislative Philippines or a corporation or a co-
franchise, a requirement imposed by the Radion partnership, association, or joint stock
Control Act. After securing their legislative
franchise, stations are required to obtain CPCs from company constituted and organized under
the NTC before they can operate their radio or the laws of the Philippines, 60 percentum at
television broadcasting systems. least of the stock or paid-up capital of which
belong entirely to citizens of the
Collateral attack on a legislative franchise is not Philippines.
allowed. 2. The applicant must be financially capable of
a franchise is a property right and it cannot be
revoked or forfeited without due process of law. understating the proposed service and
a forfeiture of a franchise will have to be declared in meeting the responsibilities incident to its
a direct proceeding because its unlawful exercise is operations.

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3. The applicant must prove that the operation

of the public service proposed and the D. Prior applicant rule
-provides priority in the filing of the application for
authorization to do business will promote
a certificate of public convenience
the public interest in a proper and suitable Q: Is the prior operator rule absolute?
manner. A: No. In the case of Rizal Light & Ice Co., Inc v
Municipality of Morong, Rizal, the prior operator
rule is not absolute for nobody has exclusive right to
Q: Should a company be fully organized first secure a franchise or a CPC.
before it can be granted a franchise? -to apply the rule unqualifiedly is to encourage
A: In a case, the court ruled that the fact that the violation or disregard of the terms and conditions of
application-operator had no corporate existence on the certificate.
the day of the franchise was granted in its name did -paramount consideration should always be the
not render the franchise invalid, because later, the public interest and public convenience
applicant obtained its certificate of incorporation
and then accepted the franchise in accordance with Free competition
the terms and condition thereof (Rizal Light & Ice -free competition in the industry may also provide
Co., Inc v Municipality of Morong, Rizal). the answer to a much-desired improvement in the
The above rule is just the general and is subject to quality and delivery of this type of public utility.
the specific requirement of the applicable special After all, no public utility has a constitutional right
law or regulation. to a monopoly position in view of the Constitutional
proscription that no franchise certificate or
Public interest, necessity and convenience is the authorization shall be exclusive in character or shall
overriding principle last longer than 50 years.
The terms “convenience and necessity,” if used
together in a statute, are usually held not to be Nature of CPC
separable, but are construed together. -it may or may not be considered property
-the word “necessity” is so connected not as an depending on the perspective or viewpoint.
additional requirement but to modify and qualify -a certificate is a mere privilege that is always
what might otherwise be taken as the strict subject to regulation of the State.
significance of the word necessity. -in so far as the state is concerned, it constitutes
-public convenience or necessity generally means neither a franchise nor a contract, confers no
something fitting or suited to the public need. property right, and is a mere license or privilege.
A. Prior operator rule A common carrier that holds such certificate does
-the regulating agency like the then Public Service not acquire a property right in the route covered
Commission protects the first licensee’s investment thereby
and will not be subjected to ruinous competition. -the CPC does not confer upon the holder any
-the PSC will not issue a CPC to a second operator proprietary right or interest or franchise in the public
if there is a first operator who is rendering sufficient, highways.
adequate and satisfactory service. -revocation of this certificate deprives him of no
vested right.
B. Third operator rule
-just a variation of the prior operator rule However, in broad sense, a CPC may also be
-instead of one prior operator, there are two prior considered property
operators who are rendering sufficient service -a CPC can be sold the holder thereof because it has
-where tow operators are more than serving the considerable material value and is considered as
public, there is no reason to permit a third operator valuable asset
to engage in competition with them -although it is private property, it is affected with
public interest and must be submitted to control of
C. Protection of investment rule the government for the common good
-it is the duty of the government to protect the -a CPC cannot be taken or interfered with without
investment of the operators of a public utility from due process of law
unfair, unjustified and ruinous competition.
but insofar as the interest of the state is involved, a

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CPC does not confer upon the holder any should be an effective PA before a TP is issued.
proprietary right or interest or franchise in the route
covered thereby. Instances when CPC is not required (WAbARG)
Section 14. The following are exempted from the
Q: Which agency who has the power to specify provisions of the preceding section
and define the terms and conditions upon which a. Warehouses
the public utility shall be operated? b. Vehicles drawn by animals and bancas
A: PSC. It shall also make reasonable rules and
regulations for the operation and compensation of moved by oar or sail, and tugboats and
public utilities. lighters
c. Airships within the Philippines except as
Provisional Authority (PA) regards the fixing of the maximum rates on
-refers to an authority given to an entity qualified to freight and passengers
operate a public utility for a limited period during
the pendency of its application for, or before the d. Radio companies except with respect to the
issuance of its CPC. fixing of rates
-certain public utilities may be allowed to operate e. Public services owned or operated by any
pending the issuance of a CPC by acquiring a instrumentality of the National Government
Provisional Authority. or by any government-owned or controlled
-necessarily, a public utility that is granted a PA is
corporation, except with respect to the
already allowed to operate.
-However, the lifetime of a PA is limited and may be fixing of rates.
revoked by the agency at any time in according with
law and subject to final action on the main
application for a CPC. Transfer of Certificate
-the final outcome of the application rests within the -the applicable statute may deny or grant to the
exclusive prerogative of the concerned operator the right to transfer a franchise
administrative agency. -the PSC has the power and authority to approve a
Ex. One that is being issued by the MARINA in sale or transfer of a CPC if:
domestic shipping 1. there are just and reasonable grounds for making
the transfer
Issuance of PA by MARINA may be warranted 2. the sale or transfer is not detrimental to the public
under any of the following instances: interest
(As stated in Dagdag Jr. v The Public Service
a. operation in unserved or underserved route
b. operation of ships complying with -since a franchise is personal in nature, any transfer
international standards or lease thereof should be notified to the PSC so that
c. operations of ships under EO 909 and its the latter may take proper safeguards
IRR and other similar laws/rules and -the law requires that before approval is granted,
there should be a public hearing with notice to all
regulations interested parties in order that the commission may
d. other analogous circumstance as may be determine if there are good and reasonable ground
determined by the MARINA justifying the transfer or lease of the property, or if
the sale or lease is detrimental to public interest.
-if the approval has not been obtained, the transfer
PA v Temporary Permit (TP) or lease is valid and binding between the parties
-a temporary permit is a document containing the although not effective against the public and the
call sign, authorized power, frequency/channel, class PSC. The approval is only necessary to protect the
station, hours of operation, points of communication public interest.
and equipment particulars granted to an authorized
public utility Q. What if transfer of the franchise was not
-a TP is more specific than a PA because a TP approved by the regulating agency?
contains details and specifications A: The registered owner rule applies. Thus, the
-the operational validity of a TP flows from only registered owner is liable for obligations to third
from a previously updated PA. This means, there parties and vehicles registered under his name.

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The one in whose name the vehicle is registered However, in Flash Taxicab v. Cruz, the Court
remains to be the owner and the transferee merely ruled that the absence of notice or hearing required
holds the vehicles for the registered owner. by the Public Service Act before the suspension,
revocation, or cancellation of any certificate of
The transfer of the franchise is prohibited if the public convenience, is a defect that can be cured by
transfer is for an illegal purpose the hearing held on the motion to reconsider filed by
-the CPC may even be cancelled if the transfer is the operator.
pursuant to the illegal practice called trafficking

OTHER TRANSACTIONS (SMMEL) Notice and hearing is required in the following

Section 20 (g) of the Public Service Act covers the 1. Issuance of certificate of public convenience
following transactions: and certificate of public convenience and
1. Sale or any alienation necessity;
2. Mortgage 2. Fixing of standards and qualifications;
3. Encumbrance 3. Fixing of standards for measuring quantity;
4. Lease 4. Establishment of rules to secure accuracy of
5. Merger or consolidation all meters and all measuring appliances;
5. Order to compel operators to furnish proper
6. Allowing extension of facilities.
In Collector v. Buan, the SC sustained the
cancellation of the certificate of public convenience NO HEARING IS REQUIRED
on the following grounds: (DAC)
1. Where the holder is a mere dummy; Sec. 17 of the PSA enumerates the actions of the
Commission that can be done even without a
2. Where the operator ceased operations and previous hearing.
placed his vehicles on storage;
3. Where the operator totally abandoned the (a) To investigate, upon its own initiative, or
service. upon complaint in writing, any matter
concerning any public service as regards
➢ A grant of certificate of public convenience matters under its jurisdiction; to require any
confers no property rights but is a mere license or public service to furnish safe, adequate, and
privilege, and such privilege is forfeited when the proper service as the public interest may
grantee fails to comply with his commitments. require and warrant; to enforce compliance
with any standard, rule, regulation, order or
➢ Mere failure to operate temporarily should other requirement of this Act or of the
likewise not be a ground for cancellation, Commission, and to prohibit or prevent any
especially as when the suspension of the service public service as herein defined from
was directly caused by circumstances beyond the operating without having first secured a
operator’s control. certificate of public convenience or public
necessity and convenience, as the case may
DUE PROCESS be and require existing public services to
pay the fees provided for in this Act for the
In Danan v. Aspillera, the Supreme Court held that
the regulatory agency like the PSC cannot make an issuance of the proper certificate of public
ex parte revocation of certificate without giving the convenience or certificate of public
operators a previous notice and opportunity to necessity and convenience, as the case may
explain their side. be, under the penalty, in the discretion by

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the Commission, of the revocation and consumer or user by the public service
cancellation of any acquired rights. concerned.

(b) To require any public service to pay the (e) To permit any street railway or traction
actual expenses incurred by the Commission company to change its existing gauge to
in any investigation if it shall be found in standard steam railroad gauge, upon such
the same that any rate, tool, charge, terms and conditions as the Commission
schedule, regulation, practice, act or service shall prescribe.
thereof is in violation of any provision of
this Act or any certificate, order, rule, (f) To grant to any public service special
regulation or requirement issued or permits to make extra or special trips within
established by the Commission. The the territory covered by its certificates of
Commission may also assess against any public convenience, and to make special
public service costs not to exceed twenty- excursion trips outside of its own territory if
five pesos with reference to such the public interest or special circumstances
investigation. required it: Provided, however, that in case a
public service cannot render such extra
(c) From time to time appraise and value the service on its own line or in its own
property of any public service, whenever in territory, a special permit for such extra
the judgment of the Commission it shall be service may be granted to any other public
necessary so to do, for the purpose of service.
carrying out any of the provisions of this
Act, and in making such valuation the (g) To require any public service to keep its
Commission may have access to and use books, records, and accounts so as to afford
any books, documents, or records in the an intelligent understanding of the conduct
possession of any department, bureau, of its business and to that end to require
office, or board of the government of the every such public service of the same class
Philippines or any political subdivision to adopt a uniform system of accounting.
thereof. Such system conform to any system
approved and confirmed by the Auditor
(d) To provide, on motion by or at the request General.
of any consumer or user of a public service,
for the examination and test of any (h) To require any public service to furnish
appliance used for the measuring of any annual reports of finances and operations.
product or service of a public service, and Such reports shall set forth in detail the
for that purpose, by its agents, experts, or capital stock issued, the amounts of said
examiners to enter upon any premises where capital stock paid up and the form of
said appliances may be, and other premises payment thereof; the dividends paid, the
of the public service, for the purpose of surplus, if any and the number of
setting up and using on said premises any stockholders, the consolidated and pending
apparatus necessary therefor. and to fix the obligations and the interest paid thereon; the
fees to be paid by any consumer or user who cost and value of the property of the
may apply to the Commission for such operator; concessions or franchises and
examination or test to be made, and if the equipment; the number of employees and
appliance be found defective or incorrect to salaries paid to each class; the accidents to
the disadvantage of the consumer or user to passengers, employees, and other person,
require the fees paid to be refunded to the and the causes thereof; the annual

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expenditures on improvements; the manner (j) To require any public service to comply
of their investment and nature of such with the laws of the Philippines and with
improvements; the receipts and profits in any provincial resolution or municipal
each of the branches of the business and of ordinance relating thereto and to conform to
whatever source; the operating and other the duties imposed upon it thereby or by the
expenses; the balance of profits and losses; provisions of its own character, whether
and a complete statement of the annual obtained under any general or special law of
financial operations of the operator, the Philippines.
including an annual balance sheet. Such
reports shall also contain any information (k) To investigate any or all accidents that may
which the Commission may require occur on the property of any public service
concerning freight and passenger rates, or or directly or indirectly arising from or
agreements, compromises or contracts connected with its maintenance or operation
affecting the same. Said reports shall cover in the Philippines; to require any public
a period of twelve months, ending on service to give the Commission immediate
December thirty-first of each year, and shall and effective notice of all any such
be sworn to by the officer or functionary of accidents, and to make such order or
the public service authorized therefor. The recommendation with respect thereto as the
Commission shall also have power to public interest may warrant or require.
require from time to time special reports
containing such information as above (l) To require every public service s herein
provided for or on other matters as the
defined to file within complete schedules of
Commission may deem necessary or
every classification employed and of every
individual or joint rate, toll fare or charge
made, charged or exacted by it for any
(i) To require every public service to file with product supplied or service rendered within
the Commission a statement in writing, the Philippines and, in the case of public
verified by the oaths of the owner or the carriers, to file with it a statement showing
president and the secretary thereof, if a the itineraries or routes served as specified
corporation, setting forth the name, title of in such requirement.
office or portion, and post-office address,
and the authority, power and duties of every ALTERNATIVE PENALTY
officer, member of the board of directors,
trustees executive committee, The alternative penalty is a fine under Sec. 21 of the
superintendent, chief or head of construction PSA.
and operation thereof, in such form as to
disclose the source and origin of each FRANCHISE
administrative act, rule, decision, order or
other action of the operator of such public The NTC has no power to cancel certificates of
service; and, within ten days after any public convenience that it issued to the holders of
change is made in the title of, or authority, duly issued legislative franchises in the broadcast
powers or duties appertaining to any such industry.
office or position, or the person holding the
same, filed with the Commission a like
statement, verified in like manner, setting The Public Service Commission is the government
forth such change. agency vested with the authority to approve the
transfer of more than 40% of the subscribed capital
stock of a telecommunications company to a single

Aliman, Capuyan, Castillo, Dadang, Oguis, Pelaez, Ramos, Rulona, Villamor, Waban 76

transferee. In other words, transfer of share of Administrative agencies has executive or

stocks need only appropriate regulatory agency, not administrative functions such as issuing franchise and
congressional authorization. certificates, and quasi legislative functions such as
enacting rules and regulations and quasi judical
Parties has the right to administrative due process. powers such as rate-fixing.
Primary Jurisdiction
Administrative Fines It is basic rule in Administrative Law that there should
GMA vs. NTC, NTC has the power to impose fines be fidelity to the basic concept of exhausting
as contemplated in Sec. 21 of the Public Service Act administrative remedies. However, there are cases
when the jurisdiction of regulators of public service
for the failure of the public utility to comply with
cannot be invoked.
the terms and conditions of any certificate issued by
virtue of the Public Service Act.
If the scope and coverage of the franchise of public
utility is not clear, a legal question arises which is
Sec 21. Is not a penal sanction (administrative) but more appropriate for the judiciary than for an
ensures faithful compliance of the issuances. administrative agency to resolve.

Distinguished from criminal cases The doctrine of primary jurisdiction calls for
application when there is such competence to act on
Sec. 21 contemplates administrative sanction unlike the part of an administrative body. Otherwise, it is
Sec. 23-28 of Public Service Act which are penal in more appropriate to seek judicial remedy as to enable
nature, the latter speaks of fines imposed in the the administrative agency to act on the matter.
discretion of the court. The 60-day prescriptive
period of section 23-28 does not apply to sec. 21. Persons covered by regulation
General Rule: PSC had jurisdiction only over persons
engaged in public utilities, or over a public utility that
CHAPTER 22 holds a certificate of public convenience, and not over
persons who are not engaged in public utilities.
Exception: Those who may violate any valid regulation
RULE-MAKING AND QUASI-JUDICIAL it may promulgate under the law.
Prosecuting and Investigating functions
➢ Quasi-legislative or rule-making power is the PSC has the power:
power to make rules and regulations which results *to investigate, upon its own initiative or upon
complaint in writing, any matter concerning any public
in delegated legislation that is within the confines
service as regards matters under its jurisdiction
of granting statute ad the doctrine of non- *to require any public service to furnish safe,
delegability and separability of powers. adequate, and proper service as the public interest may
require and warrant
➢ Quasi-Judicial or administrative adjudicatory power *to enforce compliance with any standard, rule,
is the power to hear and determine question of fact regulation, order or other requirement of this Act or of
the Commission. (Sec 17, CA no 146)
to which the legislative policy is to apply and to
decide in accordance with the standards laid down SC has held that the power of the Commission to
by the law itself in enforcing and administering the cancel and revoke a certificate of public convenience
same law. and necessity may be exercised by it even without a
formal charge filed by any interested party, with the
In carrying out their quasi-judicial functions, only limitation that the holder of the certificate should
the administrative officers or bodies are be given his day in court.
required to investigate facts or ascertain the
existence of facts, hold hearings, weigh Philippine Coast Guard- RA 9993
evidence, and draw conclusions from them as - It is described in the law as an armed and
basis for their official action and exercise of uniformed service attached to the Department
discretion in a judicial nature. of Transportation and Communication.
- In times of war, PCG is attached to the
Multiple functions Department of National Defense

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- However, the DTC issued an order to from time to time.

delineate the functions of the MARINA and 4. to prescribe rules and regulations, procedures and
PCG. guidelines governing the establishment, construction,
“ in the exigency of the service, and in order maintenance, and operation of all other ports, including
to further promote the safety of life and private ports in the country.
property at sea, MARINA shall be the policy-
making agency on maritime safety and PCG” 5. to make or enter of any kind or nature to enable it to
discharge its functions under this decree.
Powers and Functions
1. To enforce regulations in accordance with National Telecommunications Commission- EO 546
all relevant maritime international - Government agency with regulatory and
conventions, treaties or instruments and quasi-judicial functions
national laws for the promotion of safety of - NTC is the sole body that exercises
life property at sea within the maritime supervision, adjudication and control over all
jurisdiction of the PH and conduct port state telecommunications service throughout the
control implementation. country.
2. to inspections on all merchants ships and
vessels, including but shall not be limited to
- It also adopts and promulgates such
inspections prior to departure, to ensure and guidelines, rules and regulations relative to the
enforce compliance with safety standards, establishment, operation and maintenance of
rules and regulations. various telecommunications facilities and
services nationwide.
3. To detain, stop or prevent a ship or vessel
- NTC remains under the administrative
which does not comply with safety standards, supervision of the DTC as an attached agency.
rules and regulations from sailing or leaving - NTC’s decisions are appealable only and
port. directly to the SC.
4. To conduct emergency readiness evaluation Definition: Telecommunications
on merchant marine vessels. - Any process which enables a
5. To board and inspect all types of merchant telecommunications entity to relay and receive
ships and watercrafts in the performance of voice, data, electronic messages, written or
this functions. printed matter, fixed or moving pictures,
words, music or visible or audible signals or
Philippine Ports Authority- PD 857 any control signals of any design and for any
- The law recognized the need to integrate and purpose by wire, radio or other
coordinate port planning, development, electromagnetic, spectral, optical or
control and operations at the national level, technological means.
and at the same time promote the growth of Broadcasting
regional port bodies responsive to the needs of - An undertaking the object of which is to
their individual localities. transmit over-the-air commercial radio or
- Attached to the Department of Public Works television messages for reception of a broad
Transportation and Communications audience in a geographic area.
- PPA has been tasked, the corporate duties to Franchise
supervise, control, regulate, construct, - A privilege conferred upon a
maintain, operate, and provide such facilities telecommunications entity by congress,
or services as are necessary in the ports vested authorizing that entity to engage in a certain
in, or belonging to the Authority. type of telecommunications service.

Powers - The broadcast industry such as the operators

1. to supervise, control , regulate, construct, maintain , of television network and radio stations, is
operate, and provide such facilities or services as are also being regulated by the NTC.
necessary in the ports vested in, or belonging to the
Authority. Batangas CATV v. CA
2. to license, control, regulate , supervise any - NTC’s regulatory power over the broadcasting
construction or structure within any Port District. and cable television industry extends to
3. To exercise control of or administer any foreshore matters which are peculiarly within its
rights or leases which may be vested in the Authority competence.

Aliman, Capuyan, Castillo, Dadang, Oguis, Pelaez, Ramos, Rulona, Villamor, Waban 78

1. determination of rates 2. determine the level of cross subsidies in the

2. issuance of certificates of authority existing retail rate until the same is removed
3. establishment of areas of operation pursuant to Section 73 thereof
4. examination and assessment of the legal, 3. set a lifeline rate for the marginalized end users
technical and financial qualifications of 4. review and approve any changes on the terms
applicant operators and conditions of service of the TRANSCO or any
5. granting of permits for the use of distribution utility.
frequencies 5. take any other action delegated to it pursuant to
6. regulation of ownership and operation this act.
7. adjudication of issues arising from its
functions Local Water Utilities Administration
8. other similar matters (Provincial Water Utilities Act of 193)
- with respect to the foregoing, NTC exercises - Formation of local water districts which are
exclusive, original and primary jurisdiction to controlled locally
the exclusion of the regular courts. - Local water districts are regulated by the
Local Water Utilities Administration (LWUA)
Powers: Metropolitan Waterworks and Sewerage System -
1. Grant licenses to install, operate and RA 6243
maintain radio stations
2. conduct radio communication examination
- Exercises jurisdiction over the waterworks and
and issue radio operators certificate sewerage systems in Metro Manila, the
3. prepare, plan and conduct studies for policy province of Rizal and a portion of the
and regulatory purposes. Province of Cavite.
4. monitor the operation of all
telecommunication and broadcast activities. ---------------------------------------------------------------
5. allocate/ suballocate and assign the use of ---
Powers of DOTC (EO 125 - A)
Energy Regulatory Commission
- Sec. 27 of the EPIRA LAW a. Formulate and recommend national policies and
The power to grant franchises to persons guidelines for the preparation and
engaged in the transmission and distribution implementation of integrated and comprehensive
of electricity shall be vested exclusively in the transportation and communications systems at
the national, regional and local levels;
Congress of the PH.
-All existing franchises shall be allowed to
b. Establish and administer comprehensive and integrated
their full term. programs for transportation and communications, and for
Generation company this purpose, may call on any agency, corporation, or
- Refers to any person or entity authorized by organization, whether public or private, whose
the ERC to operate facilities in the generation development programs include transportation and
of electricity. communications as an integral part thereof, to participate
Generation of electricity and assist in the preparation and implementation of such
- Refers to the production of electricity by a program;
generation company or a co-generation
facility. c. Assess, review and provide direction to transportation
and communication research and development programs
of the government in coordination with other institutions
Power generation shall not be considered a public
utility operation.
d. Administer and enforce all laws, rules and regulations
Powers: in the field of transportation and communications;
1.enforce the rules and regulations governing the
operations of the electricity spot market and the e. Coordinate with the Department of Public Works and
activities of the spot market operator and other Highways in the design, location, development,
participants in the spot market, for the purpose of rehabilitation, improvement, construction, maintenance
ensuring a greater supply and rational pricing of and repair of all infrastructure projects and facilities of
electricity. the Department. However, government corporate entities

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attached to the Department shall be authorized to member or by bodies or associations recognized by the
undertake specialized telecommunications, ports, airports Philippine government as the proper arbiter of such
and railways projects and facilities as directed by the charges or rates;
President of the Philippines or as provided by law;
q. Establish and prescribe the rules, regulations,
f. Establish, operate and maintain a nationwide postal procedures and standards for the accreditation of driving
system that shall include mail processing, delivery schools;
services, and money order services and promote the art of
philately; r. Administer and operate the Civil Aviation Training
g. Issue certificates of public convenience for the Center (CATC) and the National Telecommunications
operation of public land and rail transportation utilities Training Institute (NTTI); and
and services;
s. Perform such other powers and functions as may be
h. Accredit foreign aircraft manufacturers and/or prescribed by law, or as may be necessary, incidental, or
international organizations for aircraft certification in proper to its mandate or as may be assigned from time to
accordance with established procedures and standards; time by the President of the Republic of the Philippines .

i. Establish and prescribe rules and regulations for ---------------------------------------------------------------------

identification of routes, zones and/or areas of operations ----
of particular operators of public land services; LTFRB
Powers of the LTFRB (Sec. 5, EO 202)
j. Establish and prescribe rules and regulations for the a. To prescribe and regulate routes of service,
establishment, operation and maintenance of such economically viable capacities and zones or areas of
telecommunications facilities in areas not adequately operation of public land transportation services provided
served by the private sector in order to render such by motorized vehicles in accordance with the public land
domestic and overseas services that are necessary with transportation development plans and programs approved
due consideration for advances in technology; by the Department of Transportation and
k. Establish and prescribe rules and regulations for the
operation and maintenance of a nationwide postal system b. To issue, amend, revise, suspend or cancel Certificates
that shall include mail processing, delivery services, of Public Convenience or permits authorizing the
money order services and promotion of philately; operation of public land transportation services provided
by motorized vehicles, and to prescribe the appropriate
l. Establish and prescribe rules and regulations for terms and conditions therefor;
issuance of certificates of public convenience for public c. To determine, prescribe and approve and periodically
land transportation utilities, such as motor vehicles, review and adjust, reasonable fares, rates and other
trimobiles and railways; related charges, relative to the operation of public land
transportation services provided by motorized vehicles;
m. Establish and prescribe rules and regulations for the
inspection and registration of air and land transportation d. To issue preliminary or permanent injunction, whether
facilities, such as motor vehicles, trimobiles, railways and prohibitory or mandatory, in all cases in which it has
aircrafts; jurisdiction, and in which cases the pertinent provisions
of the Rules of Court shall apply;
n. Establish and prescribe rules and regulations for the e. To punish for contempt of the Board, both direct and
issuance of licenses to qualified motor vehicle drivers, indirect, in accordance with the pertinent provisions of,
conductors, and airmen; and the penalties prescribed by, the Rules of Court;

o. Establish and prescribe the corresponding rules and f. To issue subpoena and subpoena duces tecum and
regulations for the enforcement of laws governing land summon witnesses to appear in any proceedings of the
transportation, air transportation and postal services, Board, to administer oaths and affirmations;
including the penalties for violations thereof, and for the g. To conduct investigations and hearings of complaints
deputation of appropriate law enforcement agencies in for violation of the public service laws on land
pursuance thereof; transportation and of the Board's rules and regulations,
p. Determine, fix and/or prescribe charges and/or rates orders, decisions and/or rulings and to impose fines
pertinent to the operation of public air and land and/or penalties for such violations;
transportation utility facilities and services, except such
h. To review motu proprio the decisions/actions of the
rates and/or charges as may be prescribed by the Civil
Regional Franchising and Regulatory Office herein
Aeronautics Board under its charter, and, in cases where
charges or rates are established by international bodies or
associations of which the Philippines is a participating

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i. To promulgate rules and regulations governing ------------------------------------------------------------------

proceedings before the Board and the Regional ----
Franchising and Regulatory Office: Provided, That except
with respect to paragraphs d, e, f and g hereof, the rules CIVIL AERONAUTICS BOARD
of procedure and evidence prevailing in the courts of laws >The CAB is the agency charged with the power to
should not be controlling and it is the spirit and intention regulate the economic aspects of air transportation in
of said rules that the Board and the Regional Franchising the Philippines. It shall have the general supervision
and Regulatory Offices shall use every and all reasonable and jurisdiction over air carriers as well as their
means to ascertain facts in its case speedily and properties, property rights, equipment and franchise.
objectively and without regard to technicalities of law and
procedures, all in the interest of due process;
>The CAB is mandated to regulate, promote and
j. To fix, impose and collect, and periodically review and develop the economic aspect of air transportation in
adjust, reasonable fees and other related charges for the Philippines and ensure that existing CAB policies
services rendered; are adapted to the present and future air commerce of
k. To formulate, promulgate, administer, implement and the Philippines.
enforce rules and regulations on land transportation
public utilities, standards of measurements and/or design, >CAB has supervision, jurisdiction and control over
and rules and regulations requiring operators of any air carrier, general sales agents, cargo sales agents, and
public land transportation service to equip, install and airfreight forwarders, as well as their property,
provide in their utilities and in their stations such devices, property rights, equipment, facilities and franchises.
equipment facilities and operating procedures and
techniques as may promote safety, protection, comfort >CAB and the Civil Aeronautics Administrator
and convenience to persons and property in their charges shall consider the following in the exercise and
as well as the safety of persons and property within their performance of its powers:
areas of operations; *The development and utilization of the air
l. To coordinate and cooperate with other government potential of the Philippines
agencies and entities concerned with any aspect involving *The encouragement and development of an air
public land transportation services with the end in view of transport system
effecting continuing improvement of such services; and *The regulation of air transportation and to
m. To perform such other functions and duties as may be improve the relations between air carriers
provided by law, or as may be necessary, or proper or *The promotion of adequate, economical and
incidental to the purposes and objectives of this Executive efficient service by air carriers
Order. *Competition between air carriers
*To promote safety of flight in air commerce in
the Philippines
*The encouragement and development of civil
>The law that governs the registration of motor
vehicles is RA 4136, otherwise known as “Land >Powers and Duties of CAB
Transportation and Traffic Code”. 1. Licensing of domestics and international
* The Code provides that the Land Transportation airlines, the latter with the approval of the President
Commission shall control as far as they apply, the
2. Regulation of fares and rates for the carriage
registration and operation of motor vehicles and
of persons and property
licensing of owners, dealers, conductors, drivers, and
similar matters. 3. Enforcement of the economic provision of
RA 776
> EOs 125 and 125-A abolished the Land 4. Authorization of navigation of foreign
Transportation Commission and two offices were aircraft in the Philippines
created, namely: LTO and LTFRB. 5. Participation in the negotiation of air
agreements in covering exchange of air rights
>Main functions of LTO: 6. Approval or disapproval of mergers,
* Inspection and Registration of Motor Vehicles consolidations, interlocking relationship and inter-
*Issuance of Licenses and Permits airline agreements
*Enforcement of Land Transportation Rules and
7. Regulation of air accounting practices and
*Adjudication of Traffic Cases development of air carrier reporting system
8. Maintenance of public record of tariffs,

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schedules and other materials required to be filled by (b) Ensure that the Authority performs its functions in
air carriers a proper, efficient and effective manner;
9. Assure protection of the public by requiring (c) Decide the objectives, strategies and policies of the
the performance of safe and adequate air service, Authority in accordance with the provisions of this
eliminating rate discrimination, unfair competition and Act;
deceptive practices in air transportation
(d) Determine the organizational structure of the
10. Suggest corrective measures to improve Authority in accordance with the provisions of this
safety in air commerce Act, establish a human resources management system
11. Review, reverse, modify or affirm on appeal based on merit and fitness, and adopt a rational
the administrative decision or order of the Assistant compensation and benefits scheme;
Secretary for Air Transportation on matters pertaining
to: (e) Exercise appellate powers on any decisions,
findings and rulings of the Director General, to
a.i. Grounding of Airmen and Aircraft issue subpoena ad testificandum or subpoena duces
a.ii. Revocation of any certificate or denial tecum requiring the attendance and testimony of
by the Assistant Secretary in connection witnesses in any matter or inquiry pending before the
with the violation of any provision of Board and require the production of books, papers,
RA 776 contracts, agreements and all other documents
a.iii. Imposition of civil penalty or fine by submitted for purposes of this section to be under oath
the Assistant Secretary in connection and verified by the person in custody thereof as to the
with the violation of any provision of truth and correctness of data appearing in such books,
RA 776 papers, tariffs, contracts, agreements and all other
12. Determine (even on its own initiative) documents;
whether to impose, remit, mitigate, increase or (f) Exercise appellate powers to order the taking of
compromise the civil penalties imposed by the depositions in any proceeding, or investigation,
Assistant Secretary for Air Transportation. pending before the Board at any stage of such
proceeding or investigation;
----- (g) Use available services, equipment, personnel and
facilities of other agencies of the Philippine
CIVIL AVIATION AUTHORITY OF THE Government, on a reimbursable basis when appropriate
PHILIPPINES (CAAP) and, on a similar basis, to co-operate with those
>Declared Policy: agencies in the establishment and use of services,
equipment and facilities of the Authority;
a. To establish and prescribe rules and
regulations for inspection and registration of all aircraft (h) Use the property of the Authority in such a manner
owned and operated in the Philippines and all air as may appear to the Authority to be requisite,
facilities advantageous or convenient with a view to making the
b. To establish and prescribe the corresponding best use of any of the property of the Authority in
the corresponding rules and regulations for the relation to its functions under this Act;
enforcement of laws governing air transportation (i) Invest such of the Authority's funds that are not
c. To determine, fix, and/or prescribe charges immediately required for operating expenses, or other
and/or rates pertinent to the operation of public air immediate obligations in any business venture the
utility facilities and services Board may deem appropriate, or in such secured note,
d. To administer and operate the Civil Aviation government securities, and other negotiable
Training Center instruments that satisfy the guidelines prescribed by
the Board. Funds of the Authority shall be deposited in
e. To operate and maintain national airports, air such commercial and universal banks as the Board
navigation and other similar facilities in compliance to may determine, subject to the requirements of existing
ICAO laws. The Board shall designate the officials authorized
f. To perform such other powers and functions to deposit in or withdraw funds from such depository
as may be prescribed by law banks;
(j) Promulgate rules and regulations as may be
Powers of the CAAP Board
necessary in the interest of safety in air commerce
(a) Provide comprehensive policy guidance for the pertaining to the issuance of the airman's certificate
promotion and development of the Philippine aviation including the licensing of operating and mechanical
industry, as provided for in this Act; personnel, type certificate for aircraft, aircraft engines,

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propellers and appliances, airworthiness certificates, (s) In coordination with the appropriate government
air carrier operating certificates, air agency certificates, agency tasked to provide airport security, shall:
navigation facility and aerodrome certificates; air (1) Prescribe reasonable regulation requiring that
traffic routes; radio and aeronautical all passengers and all property intended to be carried in
telecommunications and air navigation aids; aircraft the aircraft cabin in commercial air transport be
accident inquiries; aerodromes, both public and screened by weapon-detecting procedure or facilities
private-owned; construction of obstructions to employed or operated by employees or agents of the
aerodromes; height of buildings; antennae and other air operator or foreign air operator prior to boarding
edifices; registration of aircrafts; search and rescue; the aircraft for such transportation;
facilitation of air transports; operations of aircrafts,
both for domestic and international, including (2) Prescribe such other reasonable rules and
scheduled and non-scheduled; meteorology in relation regulations requiring such parties, methods and
to civil aviation; rules of the air; air traffic services; procedures as the Director General may find necessary
rules for prevention of collision of aircrafts, to protect persons and property aboard aircraft
identification of aircraft; rules for safe altitudes of operating in commercial air transport against acts of
flight; and such other rules and regulations, standards, criminal violence and aircraft piracy; and
governing other practices, methods and/or procedures (3) To the extent practicable, require uniform
as the Director General may find necessary and procedures for the inspection, detention, and search of
appropriate to provide adequately for safety regularity persons and property in domestic commercial air
and efficiency in air commerce and air navigation; transport and international commercial air transport to
(k) Impose and fix reasonable charges and fees for the assure their safety and to assure that they will receive
use of government aerodromes or air navigation courteous and efficient treatment by air operators and
facilities; for services rendered by the Authority in the their agents and employees.
rating of any aerodrome or air navigation facilities, ------------------------------------------------------------------
civil aviation schools and instructors, aircraft repair ----
stations, and aircraft radio and aeronautical
telecommunications stations; MARITIME INDUSTRY AUTHORITY
(l) Fix the reasonable charges to be imposed in the use >Powers (Sec. 12, EO 125/125-A):
of privately-owned air navigation facilities and
aerodromes; 1. Develop and formulate plans, policies, programs
projects, standards, specifications and guidelines
(m) Adopt a system for the registration of aircraft as geared toward the promotion and development of
hereinafter provided; the maritime industry, the growth and effective
(n) Determine and fix, landing fees, parking space fees, regulation of shipping enterprises and for the
royalties on sales or deliveries, direct or indirect, to national security objectives of the country;
any aircraft for its use of aviation gasoline, oil and 2. Establish, prescribe and regulate routes, zones
lubricants, spare parts, accessories and supplies, tools, and/or areas of operation of particular operators of
other royalties, fees or rentals for the use of any of the public water services;
property under its management and control; (Basically
determine and fix fees) 3. Issue Certificates of Public Convenience for the
operation of domestic and overseas water carriers;
(o) Approve the annual and supplementary budget plan
and utilization of retained revenue; 4. Register vessels as well as issue certificates,
licenses or document necessary or incident thereto;
(p) Exercise the corporate powers granted to the
Authority; 5. Undertake the safety regulatory functions
pertaining to vessel construction and operation
(q) Upon its own initiative or the recommendation of including the determination or manning levels and
the Director General or an application of a private issuance of certificates of competency to seamen;
person, grant exemption from the requirements of
observing rules or regulations issued in accordance 6. Enforce laws, prescribe and enforce rules and
with this Act: Provided, That said grant of exemption regulations, including penalties for violations
is not prejudicial to flight safety; thereof, governing water transportation and the
Philippine merchant marine, and deputize the
(r) Formulate rules and regulations concerning Philippine Coast Guard (PCG) and other law
compliance of the carrier and the public for the safe enforcement agencies to effectively discharge
transport of goods and materials by air pursuant to these functions;
international standards or Annexes to the Chicago
Convention; and

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7. Undertake the issuance of license to qualified facilities or services as are necessary in the
seamen and harbor, bay and river pilots; ports vested in, or belonging to the
8. Determine, fix and/or prescribe charges and/or Authority.
rates pertinent to the operation of public water
transport utilities, facilities and services except in National Telecommunications Commission- EO 546
cases where charges or rates are established by - Government agency with regulatory and
international bodies or associations of which the quasi-judicial functions
Philippines is a participating member or by bodies - NTC is the sole body that exercises
or associations recognized by the Philippine supervision, adjudication and control over
Government as the proper arbiter of such charges all telecommunications service throughout
or rates; the country.
9. Accredit marine surveyors and maritime - It also adopts and promulgates such
enterprises engaged in shipbuilding, ship repair, guidelines, rules and regulations relative to
ship breaking, domestic and overseas shipping, the establishment, operation and
ship management and agency; maintenance of various telecommunications
10. Issue and register the continuous discharge book facilities and services nationwide.
of Filipino seamen; - NTC remains under the administrative
11. Establish and prescribe rules and regulations, supervision of the DTC as an attached
standards and procedures for the efficient and agency.
effective discharge of the above functions; and - NTC’s decisions are appealable only and
12. Perform such other functions as may now or directly to the SC.
hereafter be provided by law. Definition: Telecommunications
- Any process which enables a
>The powers of MARINA with respect to domestic
shipping are enumerated in Section 10 of RA 9295. telecommunications entity to relay and
receive voice, data, electronic messages,
Philippine Coast Guard- RA 9993 written or printed matter, fixed or moving
- It is described in the law as an armed and pictures, words, music or visible or audible
uniformed service attached to the signals or any control signals of any design
Department of Transportation and and for any purpose by wire, radio or other
Communication. electromagnetic, spectral, optical or
- In times of war, PCG is attached to the technological means.
Department of National Defense Broadcasting
- However, the DTC issued an order to - An undertaking the object of which is to
delineate the functions of the MARINA and transmit over-the-air commercial radio or
PCG. television messages for reception of a broad
“ in the exigency of the service, and in order audience in a geographic area.
to further promote the safety of life and Franchise
property at sea, MARINA shall be the - A privilege conferred upon a
policy-making agency on maritime safety telecommunications entity by congress,
and PCG” authorizing that entity to engage in a certain
type of telecommunications service.
Philippine Ports Authority- PD 857
- The law recognized the need to integrate - The broadcast industry such as the operators
and coordinate port planning, development, of television network and radio stations, is
control and operations at the national level, also being regulated by the NTC.
and at the same time promote the growth of
regional port bodies responsive to the needs Batangas CATV v. CA
of their individual localities. - NTC’s regulatory power over the
- Attached to the Department of Public Works broadcasting and cable television industry
Transportation and Communications extends to matters which are peculiarly
- PPA has been tasked, the corporate duties to within its competence.
supervise, control, regulate, construct, 1. determination of rates
maintain, operate, and provide such 2. issuance of certificates of authority

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3. establishment of areas of operation

4. examination and assessment of the legal,
technical and financial qualifications of
applicant operators
5. granting of permits for the use of
6. regulation of ownership and operation
7. adjudication of issues arising from its
8. other similar matters
- with respect to the foregoing, NTC
exercises exclusive, original and primary
jurisdiction to the exclusion of the regular

Energy Regulatory Commission

- Sec. 27 of the EPIRA LAW
The power to grant franchises to persons
engaged in the transmission and distribution
of electricity shall be vested exclusively in
the Congress of the PH.
-All existing franchises shall be allowed to
their full term.
Generation company
- Refers to any person or entity authorized by
the ERC to operate facilities in the
generation of electricity.
Generation of electricity
- Refers to the production of electricity by a
generation company or a co-generation

Power generation shall not be considered a

public utility operation.

Local Water Utilities Administration

(Provincial Water Utilities Act of 193)
- Formation of local water districts which are
controlled locally
- Local water districts are regulated by the
Local Water Utilities Administration
Metropolitan Waterworks and Sewerage System
- RA 6243
- Exercises jurisdiction over the waterworks
and sewerage systems in Metro Manila, the
province of Rizal and a portion of the
Province of Cavite.

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