Transportation Law Unit Test Reviewer

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Cecille Carmela T. de los Reyes PCU College of Law Transportation Law

Professor: Atty. Marian Ivy Reyes-Fajardo

PART ONE: PUBLIC UTILITIES I. General Discussion

A. What is a public utility?

Case # 1: Munn v. Illinois at the time, there was a pressure from the National Grange to the Illinois legislature, with respect to the corporate rates and agriculture. On the issue as to whether or not the Munn & Scott could change rates prescribed by the legislature for the storage and transport of agricultural products on the ground that they are allegedly a private utility, the Court ruled that: x x x

When one devotes his property to a use which the public has an interest, he in effect, grants to the public the interest in that use, and must submit to the control by the public for the common good, to the extent of the interest he has created. Therefore, because grain/ agriculture storage facilities were devoted to public use, the rates are subject to public regulation. When a private property affects the public interest, it ceases to be juris privati. Public utility, being impressed with public interest, is subject to a greater regulation and monitoring by the State. Case #2: Luzon Stevedoring Co v. Public Service CommissionLuzon Stevedoring are engaged in the stevedoring business, and were charged for being engaged in the transportation of cargo business for hire without authority from the Public Service Commission. On the issue whether they are public utilities and therefore, must be charged per bag of sugar, the Court ruled that: x x x CA 146 or the Public Service Act defines that any enterprise of any kind enumerated is a public service if conducted for hire or compensationeven if the operator deals only with a portion of the public or limited clientele. Public utility, even when the term is not defined by the statute, is not determined by the people actually served. The Court stated that it is not necessary for the organization to be dedicated for public use, rather, what is necessary is that it must be in some way be impressed with public interest.

What is public service? (Commonwealth Act 146 Sec. 13 [b])

The term "public service" includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both with or without fixed route

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and whether may be its classification, freight or carrier service of any class, express service, steamboat or steamship line, pontines, ferries, and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine railways, marine repair shop, [warehouse] wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power water supply and power, petroleum, sewerage system, wire or wireless communications system, wire or wireless broadcasting stations and other similar public services.

B. Legal Basis for Regulation

Case #1: Republic v. MERALCOIn this case, MERALCO was primarily contesting the reduction of the power rates by the Energy Regulatory Board. On the issue whether or not the rates are reasonable, the Court ruled that: x x x Regulation of rates to be charged to public utilities is founded upon the police power of the State and statutes prescribing rules for the control and regulation of public utilities are a valid exercise thereof. When private property is affected with public interest, it ceases to be juris privati only and becomes subject to regulation. In regulating rates charged by public utilities, the State protects the public against arbitrary and excessive rates while maintaining the efficiency and quality of services rendered. However, it does not give the State the right to prescribe rates which are so low as to deprive the public utility of reasonable return of investment. The rates prescribed must be one that yields a fair return on public utility upon the value of the property performing the service and one that is reasonable to the public for the services rendered.

C. Where does the power to regulate public utilities reside?

General Rule: The Congress has the power to regulate public utilities through grant of franchises. Exception: Subordinate legislation through the administrative agencies

Case # 1: Albano v. Reyes In this case, Albano, then Congressman, claims that since Manila International Container Terminal (MICT) is a public utility, it still requires a legislative franchise before it can operate as a public utility. On the issue as to whether or not a franchise is indeed needed for its operation, the Court ruled that: x x x Nothe theory that MICT is a wharf or a dock as provided in the Public Service Act, would not necessarily imply that it needs a franchise from the legislature. The law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of public utilities. It is clear in this case that the legislature has empowered the Philippine Ports Authority to undertake by itself the operation and management of the MICP or to authorize its operation and management by another contract or other means as its option.

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Case # 2: KMU Labor Center v. GarciaIn this case, the LTFRB granted the provincial bus operators the authority set a fare range over and above the existing authorized fare without having to file a petition for the purpose. On the issue as to whether or not the LTFRB may grant the provincial bus operators to set fare rates, the Court ruled that--- x x x NO! LTFRB does not have the power to do that!!! Under Sec. 16 of the Public Service Act, the Legislature delegated to the defunct Public Service Commission the power of fixing rates of public services. LTFRB, the existing regulatory board today, is likewise vested with the same under an Executive Order (EO 202). However, nowhere in the said laws authorizes the LTFRB and the PSC to delegate that power to a common carrier, a transport operator or other public service. Case # 3: Batangas CATV v. Court of AppealsIn this case, the local government enacted an ordinance which allows Batangas CATV to install and operate cable systems in Batangas City, and even authorized them to charge its subscribers the maximum rates, subject to the approval of the local government. When the mayor threatened to cancel Batangas CATVs permit, the issue was raised as to whether or not the local government may indeed issue permit on CATV operations. The Court said x x x LGUs must recognize the technical matters concerning CATV operation, which are within the exclusive regulatory powers of the NTC. In the absence of any constitutional or legislative authorization, municipal authorities have no power to grant franchises. Relate to: Public Service Act (CA 146 Sec. 13 a) The Commission shall have jurisdiction, supervision, control over public services and their franchises, equipment and other properties and in the exercise of its authority, it shall have the necessary powers and the aid of public force, provided that public services owned or operated by government entities or GOCCs shall be regulated by the commission in the same way as privately-owned public services, but CPCs and CPCNs shall not be required of such entities and corporations x x x

What happened to Public Service Commission?

CA 146 or the Public Service Act, created the Public Service Commission (PSC), which existed for 36 years. Eventually on 1972, PD 1 issued which replaced PSC with Board of Transportation, Board of Communications and Board of Power and Waterworks. Eventually, BOT was abolished and replaced by Land Transportation Commission (LTC). LTC was then abolished in 1987 and Department of Transportation and Communication (DOTC) was organized. In the same year, the Land

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Transportation, Franchising and Regulatory Board (LTFRB) is the existing franchise and regulatory body for land transportation today.

D. Not a public utility

Case # 1: Nebbia v. New York during the time, there was scarcity of milk following World War I and The Great Depression. In this case, Leo Nebbia, a grocery store owner, sold two quartz of milk and a 5 cent loaf of bread for 18 cents. He was found guilty of violating the price regulations. He then challenged the law affirming his conviction. However, the US Supreme Court ruled that: In the absence of other constitutional restrictions, a state may adopt an economic policy that can reasonably be said to promote public welfare and enforce such policy by appropriate legislation. In this case, selling of milk cannot be classified as a public utility BUT in case of necessity it can be subject to regulation by government and be classified as public utility because of the public interest. Case # 2: Tatad v. Garciathere was an agreement between DOTC and EDSA LRT Consortium in which the Consortium shall build the facilities, railways, supply the train cabs, etc. Every phase shall be turned over to the DOTC and the DOTC shall pay rent for 25 years. Senators Tatad et al opposed based on the fact that the Consortium is a foreign corporation and thus cannot own a public utility such as EDSA railway transit. On the issue as to whether or not the Consortium (a foreign corporation) will be owning the railway transit, the Court said: x x x There is a clear distinction between operation of a public utility and ownership of the facilities used to serve the public. One can own the facilities without operating them as public utilities and conversely, one may operate a public utility without owning the facilities used to serve the public. Case # 3: Iloilo Ice Cold and Storage v. Public Utility Commissionin this case, there was an investigation of ice plants in Iloilo. The main issue in this case is whether or not Iloilo Ice Cold & Storage Co. is a public utility. The Court ruled: x x x No! It is not a public utility, for how can it be when it operates mainly thru private contracts?!?! The criterion within which to judge of the character of the use is whether or not the public may enjoy it by right or by permission. The essential feature of a public use is that it is not confined to privileged individuals, but is open to the indefinite public. Case # 4: Teresa Electric & Power Co. v. Public Service CommissionIn this case, the issue lies on whether the Filipinas (another electric plant) may be granted a CPCN to operate an electric plant despite the existence of another electric plant in the same locality? The Court said that

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x x x Of course!!! While it is true that operators of public convenience and service deserve protection from unlawful and unnecessary competition, yet the rule is that nobody has an exclusive right to secure a franchise or a certificate of public convenience. Public service and interest are taken into account in granting franchises and CPC/ CPCNs. Case # 5: JG Summit Holdings v. CAone of the issues raised in this case relevant to the subject is that whether PHILSECO, a shipyard, is or is not a public utility. The Court ruled that x x x Yes, it is still a public utility. PD 666 which expressly states that shipyards are not public utilities, is repealed by BP 391. Therefore, by law, a shipyard is still a public utility. Therefore, as public utility, PHILSECO must comply with the 60-40% Filipino-foreign capitalization rule.

Nature of concession agreement

Freedom from Debt Coalition v. MWSSIn this case, the government embarked on a privatization of waterworks and sewerage system of MWSS. It chose to enter into concession agreement with two private entitiesManila Water and Maynilad. On the issue as to whether or not the concessionaires (Manila Water and Maynilad) are public utilities, the Court ruled that: x x x The determination whether concessionaires are public utilities or mere agents of MWSS entails an examination of the intent of the MWSS and concessionaires at the time of the bidding process, negotiation and execution of concession agreementsa factual issue requiring the presentation and evaluation of evidence such as bidding documents, memoranda and the testimonies of the participants of the bidding and contract negotiations.

II. Constitutional Provisions

Article XII, Sec. 6 = The use of properties bear a social function and all economic agents shall contribute to the common good.

Article XII, Sec. 11 = The term capital refers only to shares of stock entitled to vote in the election of directors and thus present only to common shares, and not to the total outstanding capital stock comprising both common and non-voting preferred shares. x x x This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of the Filipino citizens the control and management of public utilities.

Sec. 17 = In times of national emergency when the public interest so

requires, the State may, during the emergency and under reasonable terms prescribed by it, may temporarily take over

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or direct the operation of any privately-owned public utility or business affected with public interest.

Sec. 18 = The State may, in the interest of national welfare or

defense, establish and operate vital industries and upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government.

Sec. 19 = The State may regulate or prohibit monopolies when

the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.

Ownership (Ownership of public utilities must comply with the 60-40 share of stocks which has the voting rights)

Case # 1: Gamboa v. Tevesthe issue started when Gamboa questioned the indirect sale of shares of PLDT to First Pacific, which increased the total common shareholdings of foreigners in PLDT to about 81%. On the question as to whether or not the court made an erroneous interpretation of the term capital in its previous decision, the Court ruled that x x x Capital refers to shares of voting rights, hence the Courts interpretation is not erroneous. Article XII of the Constitution refers only to shares of stock that can vote in the election of directors. Case # 2: In the Matter of Corporate Rehabilitation of BAYANTELIn this case, the Bank of New York filed a creditor-initiated petition to rehabilitate BAYANTEL therefore, converting part of the companys debt into equity. However, the rehabilitation receiver opposed, contending that the resulting equity ownership of foreign creditors should not exceed 40% foreign ownership limit under the Constitution. On the issue whether the equity ownership complies with the 60-40 ownership, the Court ruled that: x x x Capital refers only to shares of stock (whether common or preferred) that are entitled to vote in the election of directors. The Court further held that two steps must be taken to determine whether the conversion of debt to equity violates the constitutional limit of foreign ownership of a public utility. First: Identify which class of shares the debt will be converted into, Second: Determine the number of shares with voting rights held by foreign entities prior to conversion. If, upon conversion, the total number of shares held by foreign entities exceeds 40% of the capital stock with voting rights, the constitutional limit on foreign ownership is violated.

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Exclusivity (No franchise must be exclusive in character)

Case #1: Metro Water Cebu v. AdalaAdala filed before the National Water Resources Board (NWRB) for the issuance of a CPC to operate and maintain waterworks system in Cebu City. However, Metro Water Cebu, a GOCC, opposed the application due to unfair competition. On the issue whether or not Metro Water Cebus opposition should be granted, the Court ruled that: x x x No franchise or certificate or authorization must be exclusive in character for a longer period than fifty years, neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Batasang Pambansa when the public interest so requires. Case # 2: Tawang Multi-Purpose Cooperative v. La Trinidad Water DistrictTawang filed before the NWRB for the issuance of CPC to operate and maintain waterworks system in La Trinidad, Benguet. La Trinidad Water opposed the application contending that their franchise is exclusive. In this case, the Court ruled that: x x x The President, the Congress and the Court cannot create direct franchises for the operation of a public utility that are exclusive in character. The Constitutions (1935, 1973 and 1987) clearly prohibit the creation of franchises that are exclusive in character.

Subject to Amendment (Franchises are subject to amendment, alteration or repeal by the legislature, when the common good so requires.

Case # 1: RCPI v. NTCRCPI has been operating a radio communications system under a legislative franchise. Later, it established radio telegraph and radio telephone services. Kayumanggi however filed a complaint before the NTC alleging that RCPI does not have a CPCN. RCPI alleged that its legislative franchise is considered a license already. On the issue as to whether or not RCPI is exempt with the requirement of a CPCN, the Court ruled: x x x NO! A franchise cannot be exclusive in nature nor can a franchise be granted except that it must be subject to amendment, alteration or even repeal by the legislature, when the common good so requires. In this case, the mere fact that petitioner RCPI possesses a franchise to put up and operate a radio communications system in certain areas is not an insuperable obstacle to the public respondents issuing of proper certificate to an applicant desiring to extend the same services to those areas.

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Relate to Public Service Act Sec. 16 (m) and (n)

[m] To amend, modify or revoke at any time the certificate issued under the provision of this Act, whenever the facts and circumstances on the strength of which certificate was issued has been misinterpreted or materially changed. [n] To suspend, or revoke any certificate issued under the provisions of this Act whenever the holder thereof has violated or wilfully and contumaciously refused to comply with any order rule or regulation of the Commission or any provision of this Act: provided, that the Commission, for good cause, may prior to the hearing suspend for a period not to exceed thirty days any certificate or the exercise of any right or authority issued or granted under this Act by order of the Commission, whenever such step shall in the judgment of the Commission be necessary to avoid serious and irreparable damage or inconvenience to the public or to private interests.

Franchises (shall be in fixed term of 50 years only)

Case # 1: Francisco v. Toll Regulatory Boardin this case, the Court stressed that while the Toll Regulatory Board is vested with the power to extend the administrative franchise or authority that it granted, however, it cannot do so for an accumulated period exceeding fifty years. Otherwise, it would violate the proscription under Article XII, Section 11 of the Constitution. Under the applicable laws, the TRB may very well amend, modify, alter or revoke any authority or franchise, whenever the public interest so requires. In a word, the power to determine whether or not to continue or extend the authority granted to a concessionaire to operate and maintain a tollway is vested to the TRB by the applicable laws.

Take-Over Power (of private businesses affected with public interest)

Case # 1: David v. Macapagal-Arroyoin this case, in celebration of the People Power, Pres. Arroyo declared a state of national emergency due to the conspiracy among some military officers, leftists, and political opposition to unseat the President. The office of the Daily Tribune perceived to be anti-Arroyo was seized without warrant. On the issue whether or not the law enforces may validly seize the newspaper office, the Court ruled that x x x NOthe President may not exercise such power without a go signal from the Congress. Article XII, Section 17 which says that the State may, during the emergency and any other reasonable terms prescribed by it, may temporarily take over or direct the operation of any privately-owned public utility or business affected with public interestis intended to be referred to the Congress, not the President.

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However, you get the gist: public utilities may be subject to the take-over power of the StateBUT! Through a valid law enacted by the Congress :-) Case # 2: Agan v. PiatcoGovernment and PIATCO signed a concession agreement for the build-operate-and-transfer of NAIA Passenger Terminal III. The govt granted PIATCO the franchise to operate during the concession period. Meanwhile MIAA is charged with the maintenance of Terminals I and II. Fearing they will lose their job, they filed for the prohibition of the said agreement. On the issue of the government demanded by PIATCO to pay, the Court ruled that: PIATCO, cannot, by mere contractual stipulation, contravene the Constitutional provision on temporary government takeover and obligate the government to pay reasonable cost for the use of the Terminal and/or Terminal Complex. x x x Article XII Section 17 of the Constitution envisions a situation where the exigencies of the times necessitate the government to temporarily take over or direct the operation of any privately-owned public utility or business affected with public interest. x x x It is the welfare and interest of the public which is the paramount consideration in determining whether or not to temporarily take over a particular business. Clearly, the State, in effecting the temporary takeover is exercising its police power.

Privatization of State-Operated Public Utilities

Case # 1: Kuwait Airways v. PALthere was an agreement between Kuwait and the Philippines which impaired the contractual obligations between Kuwait Airways and PAL. On the issue whether or not a valid agreement between states may impair the contract between Kuwait Airways and PAL, the Court ruled that: Legislative regulation of public utilities must not have the effect of depriving an owner of his property without due process of law, nor of confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or a franchise. The power to regulate is subject to these constitutional limits.

III. Regulation of Public Utilities A. Authority to Operate

Case # 1: Albano v. ReyesThe law has granted certain administrative agencies the power to grant licenses for or to authorize operation of public utilities Case # 2: PLDT v. NTCThe provisional authority to operate was issued after due hearing, reception of evidence and evaluation thereof. x x x The decisive consideration are public need, public interest and common good. Those were the overriding factors which motivated NTC in granting provisional authority to ETCI.

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Case # 3: OROPORT v. PIAAs long as the standards are set in determining the contractor and such standards are reasonable and related for the purpose for which they are used, courts should not inquire as to the wisdom of PPAs choice. PD 538 gives the PPA the legal authority to construct, operate and maintain port facilities including stevedoring and port terminal services even without PPAs authority.

General Qualifications (Everyone can operate a public utility, provided they satisfy these conditions)

Case # 1: Vda de Lat v. PSCThe Court is convinced that the private respondent deserves to be awarded the Certificate of Public Convenience (CPC). He was able to fully satisfy the requisites before such certification may be granted, namely:

1. FILIPINO CITIZENSHIP = The applicant must be a citizen of the Philippines, a corporation or co-partnership, association or joint stock company constituted and organized under the laws of the Philippines, 60% at least of the stock or paid-up capital of which belong entirely to citizens of the PH

2. FINANCIAL CAPACITY = The applicant must be financially capable of undertaking the proposed service and meeting responsibilities incident to its operations

3. PUBLIC NEED = The applicant must prove that the operation of the

public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner.

Note that: nobody has the right to secure an exclusive right to secure a franchise or a CPC. The paramount consideration should always be public interest and public convenience.

Revocation or Cancellation (File a quo warranto proceeding) Case # 1: Divinagracia v. Consolidated Banking System = The NTC cannot, without clear and proper delegation by the Congress, prevent the exercise of a legislative franchise by withholding or cancelling the licenses of the franchisee.

Case # 2: PLDT v. NTC = The determination of the right to exercise a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert which as a rule, belongs to the State upon complaint or otherwise. The reason being is that abuse of a franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of government.

Rate-fixing

Padua v. Ranada = A hearing is not necessary for the grant of provisional toll rate adjustments. (Ex-parte, without the need of notice, hearing and publication. All that is necessary is that it be issued upon: [a] A finding that the main petition is sufficient in form and substance

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[b] The submission of an affidavit showing that the increase in rates substantially conforms to the formula [c] The submission of a bond An administrative agency may be empowered to approve provisionally, when demanded by urgent public need, rates of public utilities without a hearing. The reason is easily discerned from the fact that provisional rates are by their nature temporary and subject to adjustment in conformity with the definitive rates approved after final hearing.

Republic of the PH v. MERALCO = The ERC is the regulatory agency of the

government having the authority and supervision over MERALCO. The task to approve the guidelines, schedules and details of the refund by MERALCO to its consumers, to implement the judgment of this Court in the MERALCO refund cases, also falls upon the ERC.

Approval of sale and mortgage of public utility assets or equity

Montoya v. Ignacio = The law requires the approval of the Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee. x x x since a franchise is personal in nature, any transfer or lease thereof should be notified to the Public Service Commission so that the latter may take proper safeguards to protect the interest of the public. In fact, the law requires that before an approval is granted, there should be a public hearing, with notice to all interested parties; in order that the Commission may determine if there are good and reasonable grounds justifying the transfer or lease of the property covered by franchise, or if the sale or lease is detrimental to public interest.

Perez v. Gutierrez = citing Erezo v. Jepte, in dealing with vehicles

registered under the Public Service Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who the actual owner is. Hence, any sale of a public utility vehicle will and must be registered under the Public Utility Commission.

Zamboanga Transportation v. Public Utility Commission = As a

mortgage or a lien on the property of a public utility may prejudice public interests, the law also requires that before public utilities mortgage their properties, they must obtain the necessary approval of the PUC for the purpose of determining if the mortgage is injurious or beneficial to the public interests.

Y. Transit Co, Inc. v. NLRC = franchise is still personal property, hence it can be sold, leased, etc. BUT will still require the approval of the PSC.

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Other Means of Regulation

Henaras v. LTFRB = It is settled that mandamus is employed to compel the performance, when refused, of a ministerial duty, this being its main objective. On the part of the petitioner, it is essential to the issuance of writ of mandamus that he should have a clear legal right to the thing demanded and it must be the imperative duty of the respondent to perform the act required. The writ neither confers powers nor imposes duties. It is simply a command to exercise a power already possessed and to perform a duty already imposed.

MERALCO v. Wilcon= The Ridjo doctrine simply states that the public utility has the imperative duty to make a reasonable and proper inspection of its apparatus and equipment to ensure that they do not malfunction. Its failure to discover the defect, if any, considering the length of time, amounts to inexcusable negligence; its failure to make the necessary repairs and replace the defective electric meter installed within the consumers premises limits the latters liability.

BF Homes v. MERALCO= The ERC has original and exclusive jurisdiction

over all cases contesting rates, fees, fines and penalties imposed by the ERC in the exercise of its powers, functions and responsibilities; and over all cases involving disputes between and among participants or players in the energy sector.

Taxicab Operators of Metro Manila v. Board of Transportation= In

fixing the lifetime of taxicab to 6 years in Metro Manila due to heavier traffic, safety and comfort of riding public; the Boards reason for enforcing the circular initially in Metro Manila is that taxicabs in the city, compared to those of other places are subjected to heavier traffic pressure and more constant use. The State, in the exercise of its police power, may prescribe regulations to promote health, morals, peace, good order, safety and general welfare of the people. It can prohibit all things hurtful to comfort, safety and welfare of society.

Due process requirements

Pantranco v. PSC = In this case, PANTRANCO seeks to apply for a franchise for their 10 new buses. However, the PSC granted it on the condition that the new franchises must also be applied to their old buses. On the issue whether or not PSC has the right to amend a franchise, the Court ruled that: YES, they have such right, as administrative agencies have the power to amend franchises for the benefit of public interest. On the due process requirement, the Court ruled that: there are cardinal primary rights which must be respected even in proceedings of this character. The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented.

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II. PART TWO: TRANSPORTATION LAW

I. GENERAL DISCUSSION 1. Definition = contract of transportation: a contract whereby a person,

natural or juridical, obligates to transport persons, goods or both; from one place to another, by land, by air or waterfor a price or compensation. Transportation law deals with contracts of carriage, regulation of operators, vehicles and infrastructure.

2. Relationship to a public utility = Contract of carriages, like public utilities, are imbued with public interest.

3. Nature of a franchise =

Raymundo v. Luneta Motor = The Public Service Law authorizes

certificates of public convenience (CPC) to be secured by public service operators from the PSC. A CPC grants a right in the nature of a limited franchise. x x x CPCs have considerable material value. They have valuable assets. They are subject to being sold for consideration as much as any other property. They are even more valuable than ordinary properties, taking into consideration that they are not granted to everyone who applies for them but only to those who undertake to furnish satisfactory and convenient service to the public. Though intangible, they are of value and are considered properties which can be seized through legal process. Note: CPC v. CPCN (CPC does not require a franchise, while CPCN requires a franchise) [1] CPC = Any authorization to operate a public service issued by the PSC, for which no franchise, either municipal or legislative is required by law. [2] CPCN = An authorization issued by the PSC for the operation of public services for which a franchise is required by law.

Cogeo-Cubao Operator & Driver Association v. Court of Appeals= A certificate of public convenience is included in the term property in the broad sense of the term. Under the Public Service Law, a CPC can be sold by the holder because it has considerable material value and is considered a valuable asset. Although there is no doubt that it is a property, it is affected with public interest and must be submitted to the government for the common good. Public utility cannot be interfered with without the due process of the law.

4. Scope of a franchise

San Pablo v. Pantranco = Matnog and Allen are separated by an open sea that it cannot be considered as a continuation of a highway. Considering the environmental circumstance of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly NOT a ferryboat service but a coastwise or interisland shipping service. Under no circumstance can the sea between Matnog and Allen be considered a continuation of a highway.

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PANTRANCO should secure a separate CPC for the operation of the interisland or coastwise shipping service in accordance with the provisions of the law. Its CPC as a bus transportation cannot be merely amended to include this water service under the guise that it is a mere private ferry service.

5. Prior operator rule = where a prior operator must be given the opportunity

to extend its transportation services before permitting a new operator to operate in the territory of said prior operator.

Batangas Transportation v. Orlanes= It is not the policy of the law for the PSC to issue a CPC to a second operator to cover the same field and in competition with a first operator who is rendering sufficient, adequate and satisfactory service, and who in all things and respects is complying with the rules of PSC. The power of the PSC to issue a CPC is founded on the condition precedent that after a full hearing and investigation, it shall find as a fact that the proposed operation is for the convenience of the public. Purpose: to secure adequate, sustained service for the public at the least possible cost and to protect and conserve investments which have already been made for that purpose.

6. Kabit system

Teja v. IAC = Kabit system, where a person who has been granted a

certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A CPC is a special privilege conferred by the government. Abuse of this privilege by grantees thereof cannot be countenanced. The kabit system has been identified as one of the root causes of the prevalence of graft and corruption in the government of transportation offices.

Santos v. Sibug = Where a jeepney is registered in the name of an authorized public utility operator but is actually owned by another (a so called kabit operator) and the same bumped somebody thru the negligence of its driver, such a jeepney can be sold at public auction to satisfy the courts award. Although Santos, as the kabit was the true owner as against VIDAD, the latter as the registered owner is directly and primarily responsible and liable for damages caused to SIBUG. x x x The ruling is based on principle that the operator of record is considered the operator of the vehicle in contemplation with the law as regards the public and third persons even if the vehicle involved in the accident had been sold to another where such sale had not been approved by the Public Service Commission.

Lita Enterprises, Inc. v. Second Civil Cases Division = Although not

outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy, and therefore void and inexistent. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them. x x x Parties who entered into illegal contract cannot seek relief from the courts and each must bear the consequences of his act. (In pari delicto) x x x

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Baliwag Transit Inc. v. Court of Appeals = A common carrier is bound to

carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all circumstances.

7. Private nature, rights and obligations of parties inter se arising from

transactions relating to transportation a. Absent a transportation contract =

Lara v. Valencia The rule is established by weight of authority that the owner or operator of an automobile owes the duty to an invited guest to exercise reasonable care in its operation, and not unreasonably expose him to danger and injury by increasing the hazard of travel. The owner of the vehicle is not only required to observe ordinary care and is not in duty bound to exercise extraordinary diligence as required by law. (Art. 1755 and 1756, Civil Code)

b. Liability of registered owner =

PCI Leasing v. UCPB The registered owner of a vehicle is primarily and directly responsible for the consequences of its operation, including the negligence of the driver, with respect to the public and all third persons. x x x also, the failure to register a sale, lease, transfer or encumbrance of a vehicle should NOT benefit the parties responsible, to the prejudice of innocent victims.

II. Regulation of the Transportation Industry Mirasol v. DPWH= It is the DOTC (not the DPWH) who has the authority to

regulate, restrict or prohibit access to limited access facilities. One of its powers is to regulate, whenever necessary, activities relative to transportation and communications and prescribe and collect fees in the exercise of such power.

PAL v. CAB= Provisional authority to operate may be granted despite pending application for CPCN x x x citing Ang Tibay v. Court of Appeals, interlocutory orders may be issued ex parte without violating the due process.

Air = Civil Aeronautics Board / Land = Land Transportation and Franchise

Regulatory Board / Water = Maritime Industrial Authority III. Common Carriers

Art. 1732 (Meaning) Common carriers are persons, corporations, firms or

associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.

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Art. 1733 (Extra-ordinary diligence) Common carriers, by nature of their

business and for reasons of public policy are bound to observe extra-ordinary diligence in the vigilance over the goods and for the safety of passengers transported by them according to the circumstances in each case.

Art. 1734 establishes the general rule that common carriers are

responsible for loss, destruction or deterioration of goods they carry, unless due to the following causes only:

[a] Flood, storm, earthquake, lightning and any other natural disaster or activity [b] Act of public enemy in war, whether international or civil [c] Act or omission of the shipper or owner of the goods [d] The character of goods or defects in the packing or in the containers [e] Order or act of competent authority (which must be lawful)

Art. 1735 = with respect to goods, common carriers are presumed at

fault

Art. 1745 p. 5, 6, 7 = provisions against public policy:

[5] CC are not liable for acts of its employees [6] CCs liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force; is dispensed with or diminished [7] CC not liable for defective condition of a vehicle

Under Art. 1745 (6), a common carrier is held responsibleand will not be allowed to divest or to diminish such responsibility, even for acts of strangers like thieves or robbers, except where thieves or robbers acted with grave or irresistible threat, violence or force.

Cases on Common Carriers

US v. Tan Piaco = Public use means the same as use by the public. The essential feature of the public use is that it is not confined to privilege individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether the use is public, we must look not only on the character of the business to be done, but to the proposed mode of doing it. The true criterion by which to judge the character of the use is whether the public may enjoy it by right or by permission.

Home Insurance v. American Steamship = A common carrier

undertaking a special cargo or chartered to a special person only, becomes a private carrier. As private carrier, a stipulation exempting the owner from liability for the negligence of its agents is not against public policy.

De Guzman v. CA = Article 1732, which defines common carriers, hardly makes any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, regular or episodic or unscheduled basis. It

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also do not distinguish between a carrier offering its services to the general public, the general community or population and one who offers services or solicits business only from a narrow segment of the general population.

Common carriers, by the nature of their business and for reasons of public policy, are held to a very high degree of care and diligence in the carriage of goods as well as passengers. They are held responsible for acts of third party except if such person acted with grave threat. (1745)

Bascos v. CA = Common carriers are obliged to observe extraordinary

diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in 1734. In cases where presumption is applied, the common carrier must prove that it exercised extraordinary diligence to overcome the presumption.

Fabre v. CA = Cabils negligence gives rise to the presumption that his employers were themselves negligent in the selection and supervision of their employee.

Asia Lighterage and Shipping v. Court of Appeals = In this case, petitioner failed to prove that the typhoon is the proximate and only cause of loss of the goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize the loss. Thus, when the carriage decided to proceed with the voyage, it recklessly exposed the cargo to further damage.

First Philippine Industrial Corporation v. CA = The test for determining whether a party is a common carrier of goods is:

[1] He must be engaged in the business of carrying goods for others as public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation [2] He must undertake to carry goods of the kind to which the business is confined [3] He must undertake to carry by the method by which the business is conducted and over his established roads, and [4] The transportation must be for hire.

Loadstar Shipping Co. v. CA = The law imposes duties and liabilities

among common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. A CPC is not a requisite for incurring liability, for the liability arises the moment it acts as a common carrier regardless as to whether or not it has complied with the procedural

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requirements of obtaining a CPC or other franchise. x x x doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or agent.

Cruz v. Holidays The elements of fortuitous events are: 1. Unforeseen or unexpected occurrence 2. The failure of the debtors to comply with their obligations must have

been independent of human will 3. Occurrence must have been such as to render it impossible for the

debtors to fulfill their obligation in a normal manner 4. The obligor must have been free from any participation in the

aggravation of the resulting injury to the creditor.

Crisostomo v. Court of Appeals

The standard of care required of respondent is that of a good father of a family under Article 1173 of the Civil Code. This connotes reasonable care consistent with that which an ordinarily prudent person would have observed when confronted with a similar situation. It is clear that respondent performed its pre station under the contract as well as everything else that was essential to book petitioner for the tour.

Planters Products v. CA = Upon the other hand, the term common or public carrier is defined in Art. 1732 of the Civil Code. The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a common or public carrier and a private or special carrier lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier.

Documents

Transportation Law Unit Test Reviewer