LOAN ON BOTTOMRY Loan made by shipowner or ship agent guaranteed by the vessel itself and repayable upon arrival

of vessel at destination. LOAN ON RESPONDENTIA Loan taken on security of cargo laden on a vessel and repayable upon safe arrival of cargo at destination. Common Elements of Loans on Bottomry and Respondentia: 1. The captain may not borrow on bottomry or respondentia except on his own interest or portion thereof, otherwise, the contract is void; 2. These contracts must at least be in writing, otherwise, they cannot be the basis of judicial action. In order to affect third persons and entitle it to preferential credit treatment, the contract should be inscribed in the certificate of registry and seconded in the registry of vessels; 3. Should the goods upon which the money is taken not be the risk, the contract shall be considered a simple loan; 4. More recent loans are preferred than prior loans; 5. The usury laws are inapplicable to these contracts; 6. Exposure of security to marine peril; 7. Obligation of the debtor conditioned only upon safe arrival of the security at the point of destination. Who may Contract 1. Bottomry: the owner; if owner is absent captain. 2. Respondentia: only the owner of he cargo. Bottomry or Respondentia 1. Not subject to Usury Law. 2. Liability of the borrower is contingent on the safe arrival of the vessel or cargo at destination. 3. The last lender is a preferred creditor. Ordinary Loan (Mutuum) 1. Subject to Usury Law 2. Not subject to any contingency (absolute liability).

3. The first lender is a preferred creditor.

When Loan On Bottomry Or Respondentia Regarded As Simple Loan 1. Lender loaned an amount larger than the value of the object due to fraudulent means employed by the borrower. (Art. 726, Code of Commerce) 2. Full amount of the loan is not used for the cargo or given on the goods if all of them could not have been loaded, the balance will be considered a simple loan. (Art.727, Code of Commerce) 3. If the effects on which the money is taken is not subjected to any risk. (Art.729, Code of Commerce)

The parties to a loan, whether ordinary or maritime, may agree on any rate of interest (CB Circular 905); provided the same is not contrary to law, morals, good customs, public order or public policy (Art. 1306, Civil Code)

Obligation on Bottomry Loan is Extinguished when: 1. The loss of the vessel is based on the risk agreed upon; and 2. Risk occurred during the voyage. HYPOTHECARY NATURE OF BOTTOMRY AND RESPONDENTIA General Rule: The obligation of the borrower to pay the loan is extinguished if the goods given as security are absolutely lost by reason of an accident of the sea, during the voyage designated, and if it is proven that the goods were on board. Exceptions: 1. Loss due to inherent defect; 2. Loss due to the barratry on the part of the captain; 3. Loss due to the fault or malice of the borrower; 4. The vessel was engaged in contraband; 5. The cargo loaded on the vessel be different in from that agreed upon. RISKS, DAMAGES AND ACCIDENTS IN MARITIME COMMERCE 1. Averages 2. Arrival Under Stress 3. Collision 4. Shipwreck A. AVERAGE An extraordinary or accidental expense incurred during the voyage in order to preserve the cargo, vessel or both, and all damages or deterioration suffered by the vessel from departure to the port of destination, and to the cargo from the port of loading to the port of consignment. (Art. 806, Code of Commerce) CLASSES OF AVERAGES: 1. Gross or General Average 2. Particular or Simple Average

Where both vessel and cargo are saved, it is general average; where only the vessel or only the cargo is saved, it is particular average. o Expenses incurred to refloat a vessel, which accidentally ran aground, in order to continue its voyage, do not constitute general average. Not only is there absence of a marine peril, common safety factor, and deliberateness. It is the safety of the property, and not the voyage, which constitutes the true foundation of general average. (A. Magsaysay, Inc. vs. Agan, 967 Phil 504 [1955])

Gross or General Average Includes all damages and expenses, which are deliberately caused in order to save the vessel and/or its cargo from real and known risk resulting in a common benefit. These expenses and damages shall be borne ratably among all those having interest in the vessel and cargo at the time of the occurrence of the average. (Art. 806, 808, 811 Code of Commerce)

Requisites of Gross or General Average: 1. Common danger; 2. Deliberate sacrifice; 3. Success; and 4. Proper formalities and legal steps. Particular or Simple Average Damages and expenses that do not inure to the common benefit or are not the result of a deliberate sacrifice. These expenses and damages are borne by those who suffer them. (See Art. 806, 807-810 Code of Commerce) The owner of the goods who gave rise to the expense or suffered the damage shall bear this average. Goods Not Covered By General Average Even If Sacrificed 1. Goods carried on deck. (Art. 855, Code of Commerce) 2. Goods not recorded in the books or records of the vessel. (Art. 855[2], Code of Commerce) 3. Fuel for the vessel if there is more than sufficient fuel for the voyage. Jettison - the act of throwing cargo overboard in order to lighten the vessel. Order of goods to be cast overboard: 1. Those which are on the deck, preferring the heaviest one with the least utility and value; 2. Those which are below the upper deck, beginning with the one with greatest weight and smallest value. Commerce)

(Art. 815, Code of

Jettisoned goods are not res nullius nor deemed abandoned within the meaning of civil law so as to be the object of occupat ion by salvage. In order that the jettisoned goods may be included in the gross or general average, the existence of the cargo on board should be proven by means of the bill of lading. (Art. 816, Code of Commerce) Under the York-Antwerp Rules, deck cargo is permitted in Coastwise Shipping but prohibited in Overseas Shipping. 1. If deck cargo is located with the consent of the shipper on overseas trade, it must always contribute to general average, but should the same be jettisoned, it would not be entitled to reimbursement because there is a violation of the York-Antwerp Rules. 2. If the deck cargo is located with the consent of the shipper on coastwise shipping, it must always contribute to general average and if jettisoned would be entitled to reimbursement. International Deck cargo is not allowed

Domestic Deck cargo is allowed With shippers consent General average Without shippers consent Captain is liable B.

Particular average Captain is liable

ARRIVAL UNDER STRESS The arrival of a vessel at the nearest and most convenient port instead of the port of destination, if during the voyage the vessel cannot continue the trip to the port of destination, due to: 1. Lack of provisioning; 2. Well-founded fear of seizure, of privateers or pirates; or 3. An accident of the sea disabling the vessel to navigate. (Art. 819, Code of Commerce) In such arrival the captain must file a protest which is merely a disclaimer.

When NOT Lawful 1. Lack of provisions due to negligence to carry according to usage and customs; 2. Risk of enemy not well known or manifest; 3. Defect of vessel due to improper repair; and 4. Malice, negligence, lack of foresight or skill of captain. Who Bears Expenses General Rule: The shipowner bears all the expenses for arrival under stress. Exception: When arrival under stress is unlawful, the ship owner also answers for damages to the owners of the cargo and the passengers. 1. The shipowner or ship agent is liable in case of unlawful arrival under stress. But they shall not be liable for the damages caused by reason of a lawful arrival. 2. The captain shall be liable for damages caused by his delay if after the cause of the arrival under stress has ceased he should not continue the voyage. It is the duty of the captain to continue the voyage without delay after the cause of the arrival under stress has ceased failing in such duty renders him liable. However, in case the cause has been risk of enemies, there must first be an assembly before departure. (Art. 825, Code of Commerce) C. COLLISION The impact of two moving vessels. Zones of Time in the Collision of Vessels: st a. 1 zone all time up to the moment when risk of collision begins; nd b. 2 zone time between moment when risk of collision begins and the moment it becomes a practical certainty; and rd c. 3 zone time when collision has become a practicable certainty to the point of actual impact. Allision - Impact between a moving vessel and a stationary one. Rules on Collision of Vessels 1. The collision may be due to the fault, negligence or lack of skill of the captain, sailing mate, or any other member of the complement of the vessel. The owner of the vessel at fault may be liable for losses or damages. (Art. 826, Code of Commerce)

2. 3. 4. 5. 6.

The collision may be due to the fault of both vessels. Each vessel shall suffer its own losses, but as regards the owner of cargoes both vessels shall be jointly and severally liable. (Art.827, Code of Commerce) If it cannot be determined which vessel is at fault, each vessel shall also suffer its own losses and both shall be solidarily liable for losses or damages on the cargoes. (Art. 828, Code of Commerce) The vessels may collide with each other through fortuitous event or force majeure. In this case, each shall bear its own damage. Two vessels may collide with each other without their fault by reason of a third vessel. The third vessel will be liable for losses and damages. (Art. 831, Code of Commerce) A vessel which is properly anchored and moored may collide with those nearby, by reason of storm or other cause of force majeure. The vessel run into shall suffer its own damage and expense. (Art. 832, Code of Commerce)

Nautical Rules to Determine Negligence 1. When two vessels are about to enter a port, the farther one must allow the nearer to enter first; if they collide, the fault is presumed to be imputable to the one who arrived later, unless it can be proved that there was no fault on its part. 2. When two vessels meet, the smaller should give the right of way to the larger one. 3. A vessel leaving port should leave the way clear for another which may be entering the same port. 4. The vessel which leaves later is presumed to have collided against one which has left earlier. 5. There is a presumption against the vessel which sets sail in the night. 6. There is a presumption against the vessel with spread sails which collides with another which is at anchor and cannot move, even when the crew of the latter has received word to lift anchor, when there was no sufficient time to do so or there was fear of a greater damage or other legitimate reason. 7. There is a presumption against an improperly moored vessel. 8. There is a presumption against a vessel which has no buoys to indicate the location of its anchors to prevent damage to vessels which may approach it. 9. Vessels must have proper look-outs or persons trained as such and who have no other duty aside therefrom. (Smith Bell v. CA 197 SCRA 201) Nautical Rules as to Sailing Vessel and Steamship 1. Where a steamship and a sailing vessel are approaching each other from opposite directions, or on intersecting lines, the steamship from the moment the sailing vessel is seen, shall watch with the highest diligence her course and movements so as to be able to adopt such timely means of precaution as will necessarily prevent the two boats from coming in contact. 2. The sailing vessel is required to keep her course unless the circumstances require otherwise. Error in Extremis Sudden movement made by a faultless vessel during the third zone of collision with another vessel which is at fault during the 2nd zone. Even if such sudden movement is wrong, no responsibility will fall on said faultless vessel. (Urrutia and Co. v. Baco River Plantation Co., 26 Phil. 632) Rules on Liability in Collision and Allision Consequential Damages Covered: 1. Damages caused to vessel 2. Damages caused to the passenger 3. Damages caused to the cargo Rule: 1. One vessel at fault Vessel at fault is liable for damage caused to the vessel, passenger, and cargoes of both vessels. (Art. 826, CoC) 2. Both Vessels At Fault Each vessel must bear its own loss, but as to the other damages, the passenger and cargoes, they shall be both solidarily liable. (Art. 827, CoC) 3. Vessel at fault not known Each vessel must bear its own loss, but both shall be solidarily liable for losses and damages on the cargoes. (Art. 828, CoC) Doctrine of Inscrutable Fault In case of collision where it cannot be determined which between the two vessels was at fault, both vessels bear their respective damage, but both should be solidarily liable for damage to the cargo of both vessels. Third vessel at fault The third vessel will be liable for all the losses and damages. (Art. 831, Code of Commerce) Fortuitous event/force majeure No liability. Each party shall bear its own loss. However, due diligence must be exercised by the carrier to lessen the damages before, during, and after the impact (Art. 830, Code of Commerce). The doctrine of res ipsa loquitur applies in case a moving vessel strikes a stationary object, such as a bridge post, dock, or navigational aid. (Far Eastern Shipping v. CA, 297 SCRA 301; Luzon Stevedoring vs. CA, 156 SCRA 169) Doctrine of Last Clear Chance and Rule on Contributory Negligence cannot be applied in collision cases where both vessels are at fault because under Art. 827 of the Code of Commerce, both vessels shall suffer its own loss, and at the same time shall be solidarily liable for the damages to the passenger and cargoes of both vessels. In case of collision, there must be a maritime protest to recover collision damage; in such a case, the marine protest is a condition sine qua non and not merely a disclaimer unlike in the arrival under stress or shipwreck.

4. 5.

MARITIME PROTEST It is a written statement made under oath by the captain of a vessel after the occurrence of an accident or disaster in which the vessel or cargo is lost or damaged, with respect to the circumstances attending such occurrence, for the purpose of recovering losses and damages.

Excuses for not filing protest: 1) where the interested person is not on board the vessel; and 2) on collision time, need not be protested. (Art. 836, Code of Commerce)

Maritime Protest is applicable in the following cases: 1. Collision (Art. 835, Code of Commerce); 2. Arrival under stress (Art. 612(8), Code of Commerce); 3. Shipwrecks (Arts. 612(15), 843, Code of Commerce); 4. Where the vessel has gone through a hurricane or when the captain believes that the cargo has suffered damages or averages (Art. 624, Code of Commerce).

Pre-Requisites for Recovery: 1. Maritime protest should be made within 24 hours before the competent authority at the point of collision or at the first port of arrival, if in the Philippines; and to the Philippine consul, if the collision took place abroad. (Art. 835 Code of Commerce) 2. The lack of protest does not prejudice such action to recover in respect to damages caused to persons or cargo whose owners were not on board the vessel or who were not in a condition to make their wishes known. (Art. 836 CoC) D. SHIPWRECK It is the loss of the vessel at sea as a consequence of its grounding, or running against an object in sea or on the coast. It occurs when the vessel sustains injuries due to a marine peril rendering her incapable of navigation. If the wreck was due to malice, negligence or lack of skill of the captain, or because the vessel put to sea was insufficiently repaired and equipped; the owner of the vessel may demand indemnity from said captain. (Art. 841, Code of Commerce)

The rules on collision or allision, as may be pertinent, can equally apply to shipwrecks

Carriage of Goods by Sea Act (Commonwealth Act. No. 65; Public Act No. 521, 74 US Congress) Domestic Trade: Civil Code and Code of Commerce applies. Foreign Trade: COGSA applies.

th

The Civil Code and the Code of Commerce is suppletory to COGSA in the carriage of goods from foreign ports to the Philippines. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for loss, destruction or deterioration of the goods. (Art 1753, NCC) The Civil Code is the primary law on goods that are being shipped from a foreign port to the Philippines. However, COGSA remains to be a suppletory law for international shipping.

For COGSA TO BE APPLICABLE, the transportation must be: 1. Water/maritime transportation; 2. for the carriage of goods; and 3. overseas/international/foreign (from foreign port to Philippine port).

It can be applied in domestic sea transportation if agreed upon by the parties. (Clause Paramount or Paramount Clause)

Amount of Carriers Liability Under the Sec. 4(5), the liability limit is set at $500 per package or customary freight unit unless the nature and value of such goods is declared by the shipper. This is deemed incorporated in the bill of lading even if not mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA 463) NOTE: Art.1749 of the Civil Code applies to Inter-Island Trade. Notice of Damage a. Patent Damage: shipper should file a claim with the carrier immediately upon delivery b. Latent Damage: shipper should file a claim with the carrier within three days from delivery. The filing of a notice of claim is not a condition precedent. PRESCRIPTIVE PERIOD 1. Coastwise or within the Philippines When to file a claim with carrier condition precedent if goods arrived in damaged condition, claim must be filed by the shipper within the following period otherwise recovery is barred: a. Immediately if damage is apparent; or b. Within 24 hours from delivery if damage is not apparent. When to file a case in court prescriptive period: a. Within 6 years, if no bill of lading has been issued; or b. Within 10 years, if bill of lading has been issued.

2. International carriage from foreign port to the Philippines (Carriage of Goods by Sea Act)
When to file a claim with carrier not condition precedent. a. Upon discharge of goods, if the damage is apparent, claim should be filed immediately; or b. If damage is not apparent, claim should be filed within 3 days from delivery. When To File A Case In Court Within a period of 1 year from discharge.

Under the COGSA, suits for loss or damage to the cargo should be brought within one year after: 1. Delivery of the goods; or 2. The date when goods should have been delivered. The one-year prescriptive period is suspended by: 1. The express agreement of the parties; 2. The filing of an action in court until it is dismissed. The one-year period shall run from delivery of the last package and is not suspended by extrajudicial demand. Reasons: 1. Matters affecting transportation of goods by sea should be decided at the shortest time possible. 2. The Civil Code does not apply to a special law like COGSA. The insurer exercising its right of subrogation is bound by the one-year prescriptive period. However, it does not apply to the claim against

the insurer for the insurance proceeds because the claim against the insurer is based on contract, it expires in 10 years. The period does not apply to conversions or misdeliveries. It contemplates a situation where no delivery at all was made because the goods had perished, gave out of commerce, or disappeared in such a way that their existence is unknown or cannot be recovered. It starts from delivery to the arrastre operator, not consignee. A stipulation reducing the one year period is null and void but a written agreement to suspend it is valid.

The rule applies in cases of collision, but it starts not from the date of collision, but when the goods should have been del ivered had the cargoes been saved.

Section 3(6) of the COGSA provides: Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier of his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of delivery. Said notice of loss or damage may be endorsed on the receipt of the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt, been the subject of joint survey or inspection. The carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered; provided, that, if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or that date when the goods should have been delivered. In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods. (Belgian Overseas Chartering and Shipping N.V. v. Philippine First Insurance Co., Inc. 383 SCRA 23 [2002]) As stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within rd one year. (Vitug, Pandect of Commercial Law and Jurisprudence, 3 ed., 1997, p. 333) This one year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. (Filipino Merchants Insurance Co., Inc. v. Alejandro, 145 SCRA 42) In Loadstar Shipping Co., Inc. v. CA (315 SCRA 339), the SC ruled that a claim is not barred by prescription as long as the one year period has not lapsed. (Belgian Overseas Chartering and Shipping N.V. v. Philippine First Insurance Co., Inc. 383 SCRA 23 [2002]) TACKLE TO TACKLE RULE The shipper shall be responsible for the goods the moment it passes through one side of the ship for the purpose of loading until it passes through the other side for discharging. There are two tackles involved in the operation; one for loading, the other for unloading. Ang vs. American Steamship Agencies (19 SCRA 631) Facts: Yau Yue Commercial Bank of Hongkong agreed to sell 140 packages of galvanized steel durzinc sheets to Herminio Teves for $32,458.26. Said agreement was subject to the following terms: the purchase price should be covered by a bank draft which should be paid by Teves in exchange for the delivery to him of the bill of lading to be deposited with honking and Shanghai Bank of Manila; tha t Teves would present said bill of lading to carriers agent, American Steamship Agencies which would then issue the permit to deliver imported articles to be presented to the Bureau of customs to obtain the release of the articles. Yau Yue shipped the articles aboard S.S. Tensai Maru owned by Nissho Shipping Co., of which the American Shipping is the agent in the Philippines. When the Articles arrived in manila, Honkong Shanghais Bank notified Teves of the arrival of the goods and requested for the payment of the demand draft. Teves, however, failed to pay the demand draft. So, the bank returned the bill of lading and the demand draft to Yau Yue which endorsed the bill of lading to Domingo Ang. Despite his non-payment, Teves was able to obtain a bank guarantee in favor of the American Steamship Agencies, the carriers agent. Thus, Teves succeeded in securing a permit to deliver imported articles from the carriers agent, which he presented to the Bure au of Customs, that released the said articles to him. Subsequently, Domingo Ang claimed the articles from American Steamship, by presenting the indorsed bill of lading, but he was informed that it had delivered the articles to Teves. Ang filed a complaint in the Court of First Instance of Manila against American shipping agencies, for having wrongfully delivered the goods. The American Steamship filed for a motion to dismiss, citing the carriage of Goods by Sea Act, section 3 paragraph 4, which states: in any event, the carrier and the ship shall be discharged from all liability in respect to loss or damage unless suit is brought within one year, after delivery of goods or the date when the goods should have been delivered. Thus, the lower court dismissed the action, on the ground of prescription. Issue: Whether or not the Carriage of Goods by Sea Act Section 3, Paragraph 4, applies to the case at bar? Held: The provision of the law speaks of loss or damage. But there was no damage caused to the goods which were delivered intact to Herminio Teves. As defined by the Civil Code and as applied to section 3, paragraph 4, of the Carriage of Goods by sea Act, loss contemplates a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared that their existence is unknown or they cannot be recovered. It does not include a situation where there was indeed delivery, but delivery to the wrong person. The applicable rule on prescription is that found in the Civil Code, either: ten years for breach of contract or four years for quasi-delict. In either case, the plaintiffs cause of action has not yet prescribed. Thus, the case is remanded to the court a quo for further proce edings.

ANG VS. AMERICAN STEAMSHIP AGENCIES (19 SCRA 631) Facts: Yau Yue Commercial Bank of Hongkong agreed to sell 140 packages of galvanized steel durzinc sheets to Herminio Teves for $32,458.26. Said agreement was subject to the following terms: the purchase price should be covered by a bank draft which should be paid by Teves in exchange for the delivery to him of the bill of lading to be deposited with honking and Shanghai Bank of Manila; that Teves would present said bill of lading to carriers agent, American Steamship Agencies which would then issue the permit to deliver imported articles to be presented to the Bureau of customs to obtain the release of the articles. Yau Yue shipped the articles aboard S.S. Tensai Maru owned by Nissho Shipping Co., of which the American Shipping is the agent in the Philippines. When the Articles arrived in manila, Honkong Shanghais Bank notified Teves of the arrival of the goods and requested for the payment of the demand draft. Teves, however, failed to pay the demand draft. So, the bank returned the bill of lading and the demand draft to Yau Yue which endorsed the bill of lading to Domingo Ang. Despite his non-payment, Teves was able to obtain a bank guarantee in favor of the American Steamship Agencies, the carriers agent. Thus, Teves succeeded in securing a permit to deliver imported articles from the carriers agent, which he presented to the Bureau of Customs, that released the said articles to him. Subsequently, Domingo Ang claimed the articles from American Steamship, by presenting the indorsed bill of lading, but he was informed that it had delivered the articles to Teves. Ang filed a complaint in the Court of First Instance of Manila against American shipping agencies, for having wrongfully delivered the goods. The American Steamship filed for a motion to dismiss, citing the carriage of Goods by Sea Act, section 3 paragraph 4, which states: in any event, the carrier and the ship shall be discharged from all liability in respect to loss or damage unless suit is brought within one year, after delivery of goods or the date when the goods should have been delivered. Thus, the lower court dismissed the action, on the ground of prescription. Issue: Whether or not the Carriage of Goods by Sea Act Section 3, Paragraph 4, applies to the case at bar? Held: The provision of the law speaks of loss or damage. But there was no damage caused to the goods which were delivered intact to Herminio Teves. As defined by the Civil Code and as applied to section 3, paragraph 4, of the Carriage of Goods by sea Act, loss contemplates a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared that their existence is unknown or they cannot be recovered. It does not include a situation where there was indeed delivery, but delivery to the wrong person. The applicable rule on prescription is that found in the Civil Code, either: ten years for breach of contract or four years for quasi-delict. In either case, the plaintiffs cause of action has not yet prescribed. Thus, the case is remanded to the court a quo for fur ther proceedings. MERCHANTS INSURANCE COMPANY VS. ALEJANDRO (145 SCRA 42) Facts: Plaintiff Choa Tiek Seng filed a complaint against the petitioner before the then Court of First Instance of Manila for recovery of a sum of money under the marine insurance policy on cargo. Mr. Choa alleged that the goods he insured with the petitioner sustained loss and damage in the amount of P35, 987.26. The said goods were delivered to the arrastre operator E. Razon, Inc., on December 17, 1976 and on the same date were received by the consignee-plaintiff. Petitioner disclaims liability and imputes against plaintiff the commission of fraud. A similar complaint was filed by Joseph Benzon Chua against the petitioner for recovery under the marine insurance policy for cargo alleging that the goods insured with the petitioner sustained loss and damage in the sum of P55,996.49. The goods were delivered to the plaintiff-consignee on or about January 25-28, 1977. Petitioner filed third-party complaints against private respondents for indemnity, subrogation, or reimbursement in the event that it is held liable to the plaintiff. The private respondents, carriers Frota Oceanica Brasiliera and Australia-West Pacific Line alleged in their separate answers that the petitioner is already barred from filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed within one year after delivery of the goods or the date when the goods should have been delivered Petitioner contended that provision relied upon by the respondents applies only to the shipper and not to the insurer of the goods. Respondent judge dismissed both third-party complaints. Issue: Whether or not the one-year period within which to file a suit against the carrier and the ship, in case of damage or loss as provided for in the Carriage of Goods by Sea Act applies to the insurer of the goods. Held: The coverage of the Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the one-year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of one year. This would be the result if we follow the petitioner's argument that the insurer can, at any time, proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one-year limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the protection of the carrier and the ship from fraudulent claims by having "matters affecting transportation of goods by sea be decided in as short a time as possible" and by avoiding incidents which would "unnecessarily extend the period and permit delays in the settlement of questions affecting the transportation." In the case at bar, the petitioner's action has prescribed under the provisions of the Carriage of Goods by Sea Act. Hence, whether it files a third-party complaint or chooses to maintain an independent action against herein respondents is of no moment. MAYER STEEL PIPE CORP. VS. CA (19 KIME 1997) Facts: Hongkong Government Supplies Department henceforth, Hong Kong contracted petitioner Mayer Steel Pipe Corp to manufacture and supply various steel pipes and fittings from August to October 1983, Mayer shipped the said items to Hong Kong. Prior to shipment the items

were insured against all risks with respondent South Sea Surety and Insurance Co. and Charter Insurance Corp for $212,772.09 with South Sea and $149,470 with Charter. Petitioners jointly appointed Industrial Inspection Inc as 3 party inspector to examine the items to see if they were in accordance with the contract. They certified it as such prior to shipment. However, when they reached Hong Kong it was revealed that a substantial portion was damaged. Petitioners now claim for damages against the respondents for indemnity under the insurance contract. Respondents paid part of the petitioners demand but declined the rest claiming that the insurance surveyors report allegedl y showed that the damage was a factory defect and hence not covered by the insurance policies. The lower court ruled in favor of the petitioner finding the damage not caused by manufacturing defects. It also noted that the insurance contract insured against all risks or all causes of conceivable loss or damage save those caused by fraud or intentional misconduct. At the court of appeals the CA found the all risks provision covered the damage endured but set aside the decision because the complaint had been bared by prescription. Sec 3(6) of the COGSA specifically bared it because it had been more than 1 year since the damage had been done before the demand was made. Held: The cause of action had not yet prescribed. Ratio: Sec 3(6) of the COGSA covers only the liability of the carrier which is extinguished if no suit is brought within a period of one year. However, the liability of the insurer is not extinguished because the COGSA governs the relationship between carrier and shipper, and consignee and insurer. It defines a contract of carriage. The relat ionship at bar is properly governed by the Insurance code. Thus the CAs finding of prescription as per the COGSA is overturned. SHEWARAM VS, PAL (17 SCRA 606, (1966) Facts: A PAL ticket, on the reverse side, stated in fine print that if the value of baggage is not stated, and the baggage is lost, the maximum liability of PAL is P100.00 if value in excess of P100.00 is stated, PAL will charge extra because PAL is being held liable for an amount exceeding P100.00. Shewaram, a Hindu from Davao, boarded a PAL plane for Manila. Among his baggage was a camera with P800.00 and it was lost. PAL offered to pay P100.00. Shewaram wanted full payment of P800.00. Issue: Whether the limited liability rule shall apply in the case at bar? Held: The limited liability rule shall not apply. Since this is a stipulation on qualified liability, which operates to reduce the liability of the carrier, the carrier and the shipper must agree thereupon. Otherwise, the carrier will be liable for full. PAL is fully liable (for full) because Shewaran did not agree to the stipulation on the ticket, as manifested by the fact that Shewaram did not sign the ticket. Ticket should have been signed. ONG YUI VS. CA (91 SCRA 223) Facts: On august 26, 1967, Ong Yiu was a fare paying passenger of respondent PAL from Mactan, Cebu to Butuan City wherein he was scheduled to attend a trial. As a passenger, he checked in one piece of luggae, blue maleta for which he was issued a claim ticket. Upon arrival at Butuan City, petitioner claimed his luggage but it could not be found. PAL Butuan sent a message to PAL Cebu which in turn sent a message to PAL Manila that same afternoon. PAL Manila advised PAL Cebu that the luggage has been overcarried to Manila and that it would be forwarded to PAL Cebu that same day. PAL Cebu then advised PAL Butuan that the luggage will be forwarded the following day, on scheduled morning flight. This message was not received by PAL Butuan as all the personnel had already gone for the day. Meanwhile, Ong Yiu was worried about the missing luggage because it contained vital documents needed for the trial the next day so he wired PAL Cebu demanding delivery of his luggage before noon that next day or he would hold PAL liable for damages based on gross negligence. Early morning, petitioner went to the Butuan Airport to inquire about the luggage but did not wait for the arrival of the morning flight at 10:00am. which carried his luggage. A certain Dagorro, a driver of a colorum car, who also used to drive the petitioner volunteered to take the luggage to the petitioner. He revelaed that the documents were lost. Ong Yiu demanded from PAL Cebu actual and compensatory damages as an incident of breach of contract of carriage. Issue: Whether or not PAL is guilty of only simple negligence and not gross negligence? Whether the doctrine of limited liability doctrine applies in the instant case? Held: PAL had not acted in bad faith. It exercised due diligence in looking for petitioners luggage which had been mis carried. Had petitioner waited or caused someone to wait at the airport for the arrival of the morning flight which carried his luggage, he would have been able to retrieve his luggage sooner. In the absence of a wrongful act or omission or fraud, the petitioner is not entitled to moral damages. Neither is he entitled to exemplary damages absent any proof that the defendant acted in a wanton, fraudulent, reckless manner. The limited liability applies in this case. On the presumed negligence of PAL, its liability for the loss however, is limited on the stipulation written on the back of the plane Ticket which is P100 per baggage. The petitioner not having declared a greater value and not having called the attention of PAL on its true value and paid the tariff therefore. The stipulation is printed in reasonably and fairly big letters and is easily readable. Moreso, petitioner had been a frequent passenger of PAL from Cebu to Butuan City and back and he being a lawyer and a businessman, must be fully aware of these conditions. V. PUBLIC SERVICE ACT (COMMONWEALTH ACT NO. 146) 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 or public utility, ice plants, power and water supplies, communication and similar public services. (Sec. 13b, CA 146) The Public Service Commission created under the Public Service Law has already been abolished under P.D. No. 1 and other issuances. It has been replaced by the following government agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and Marina. Three-Fold Purpose: 1. To protect the public against unreasonable charges and poor, inefficient service; 2. To protect and secure investments in public services; 3. To prevent ruinous competition. AUTHORITY TO OPERATE PUBLIC SERVICES General Rule: No public service shall operate without having been issued a certificate of public convenience or a certificate of public convenience and necessity. Exceptions: 1. Warehouses;
rd

2. 3. 4. 5. 6. 7.

Animal drawn vehicles and bancas moved by oar or sail; Airships, except for the fixing of maximum rates for fare and freight; Radio companies, except for rates fixing; Public services owned or operated by the government, except as to rates fixing; Ice plants; and Public markets.

PUBLIC UTILITIES - Privately owned and operated business whose services are essential to the general public. A foreigner can own a public utility. The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own facilities without operating them as utility, or conversely, one may operate a public utility without owning the facilities used to serve the public. The Constitution requires a franchise for the operation of public utility but it does not require a franchise before one can own the facilities needed to operate a public utility. (Tatad vs. Garcia, 243 SCRA 436)

FRANCHISE AND CERTIFICATE OF PUBLIC CONVENIENCE The trend is not to require a legislative franchise. However, even if there was already a delegation of authority to a specific administrative agency to issue certificates of public convenience, it does not follow that a legislative franchise is no longer necessary. It would still depend on the enabling law creating or authorizing the administrative body, which may still require a legislative franchise. A certificate of public convenience is not necessary for the issuance of a legislative franchise. Certificate of Public Convenience: An authorization issued by the appropriate government agency for the operation of public services for which no franchise, either municipal or legislative, is required by law, e.g., common carriers. Certificate of Public Convenience And Necessity: An authorization issued by the appropriate government agency for the operation of public service for which a prior franchise is required by law; e.g. telephone and other services. A Certificate of Public Convenience or a Certificate of Public Convenience and Necessity constitutes neither a franchise nor a contract, confers no property right, and is a mere license or a privilege. The holder of said certificate does not acquire a property right in the route covered thereby. Nor does it confer upon the holder any proprietary right or interest or franchise in the public highways. Revocation of this certificate deprives him of no vested right. New and additional burdens, alteration of the certificate, or even revocation or annulment thereof is reserved to the State. (Luque vs. Villegas, 30 SCRA 408). FRANCHISE Is a special privilege and its terms and conditions are specifically prescribed by Congress. Thus, the manner of granting the franchise, to whom it may be granted, the mode of conducting the business, the character and quality of the service to be rendered and t he duty of the grantee to the public in exercising the franchise are defined in clear and unequivocal language by the legislature. These conditionalities are made more stringent when the franchise involves the operation of a game played for bets, such as jai-alai, which is conceded as a menace to morality. Franchises are granted in accord with this universal principle. (Del Mar v. PAGCOR 358 SCRA 775) An authority or permit is a license or provisional authority granted to a public utility to operate as an implementation of a legislative enactment. In fine, an authority or permit is a detailed implementation of a legislative franchise. (U.S. v. Almond 6 Phil. 309) Conditions that Must Concur in the Grant of Certificate of Public Convenience and Certificate of Public Convenience and Necessity: Applicant must be a citizen of the Philippines or a corporation or entity 60% of the stock or paid-up capital of which is owned by such citizens; Applicant must prove public necessity; Applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest on a proper and suitable manner; Applicant must have sufficient financial capability to undertake the proposed services and meeting the responsibilities incident to its operation. Primordial considerations are public interest, necessity and convenience.

Grounds for Revocation/Cancellation of the Certificate of Public Convenience: Where the holder is a mere dummy; Where the operator ceased operation and placed his buses on storage; Where the operator abandons totally the service. clear Under section 16 (n) of Public Service Act, the power of the Commission to suspend or revoke any certificate may only be exercised whenever the holder thereof has violated or willfully and contumaciously refused to comply with any order, rule or regulation of the Commission or any provision of the Act. General Rule: Prior notice and hearing. Exception: When it is necessary to avoid serious and irreparable damage or inconvenience to the public or private interest, in which case, a suspension not more than 30 days may be ordered, prior to the hearing. Powers Requiring Notice and Hearing Issuance of Certificate of Public Convenience or Certificate of Public Convenience and Necessity; Fixing of rates, tolls, and charges; Setting up of standards and classifications; Establishment of rules to secure accuracy of all meters and all measuring appliances; Issuance of orders requiring establishment or maintenance of extension of facilities; Revocation, or modification of Certificate of Public Convenience or Certificate of Public Convenience and Necessity; Suspension of Certificate of Public Convenience or Certificate of Public Convenience and Necessity, except when it is necessary to avoid serious and irreparable damage or inconvenience to the public or private interest, in which case, a suspension not more than 30 days may be ordered, prior to the hearing. Powers Exercisable Without Prior Notice and Hearing Investigation of any matter concerning public service;

Requiring operators to furnish safe, adequate, and proper service; Requiring public services to pay expenses of investigation; Valuation of properties of public utilities; Examination and test of measuring appliances; Grant of special permits to make extra or special trips in territories specified in the certificate; Uniform accounting system and furnishing of annual reports; Compelling compliance with the laws and regulations.

ACTS REQUIRING PRIOR APPROVAL Establish and maintain individual or joint rates; Establish and operate new units; Issue free tickets; Issue any stock or stock certificates representing an increase of capital; Capitalize any franchise in excess of the amount actually paid to the Government; Sell, alienate, mortgage or lease property, certificates or franchise UNLAWFUL ACTS OF PUBLIC UTILITY COMPANIES Engagement in public service business without first securing the proper certificate; Providing or maintaining unsafe, improper or inadequate service as determined by the proper authority; Committing any act of unreasonable and unjust preferential treatment to any particular person, corporation or entity as determined by the proper authority; Refusing or neglecting to carry public mail upon request. PRIOR OPERATOR RULE - The rule allowing an existing franchised operator to invoke a preferential right as against a second operator within the authorized territory as long as he renders adequate and economical service. Purpose: To prevent ruinous and wasteful competition in order that the interests of the public would be conserved and preserved. The policy is not to issue a certificate to a second operator to cover the same field and in competition with a first operator who is rendering sufficient, adequate and satisfactory service. The prior operator must first be given an opportunity to improve its service, if inadequate or deficient. The granting of preference to an old operator applies only when said operator has made as offer to meet the increase in traffic or demand for service and not when another operator, even a new one, has made the offer to serve the new line or increase the service on said line. The rule of preference protects only those who are vigilant, in meeting the needs of the traveling public. PROTECTION OF INVESTMENT RULE The Law aims to protect not only the public, but the operations as well. It is the governments duty to protect the investme nt of the operators of public utilities from unfair, unjustified and ruinous competition. PRIOR APPLICANT RULE Presupposes a situation when two interested persons apply for a certificate to operate a public utility in the same community over which no person has as yet granted any certificate. If it turns out, after the hearing, that the circumstances between the two applicants are more or less equal, then the applicant who applied ahead of the other, will be granted the certificate. REGISTERED OWNER RULE The registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by third persons caused by the operation of said vehicle, even though the same had been transferred to a third person. The registered owner is not allowed to escape responsibility by proving that a third person is the actual and real owner Reason: It would be easy for him, by collusion with others or otherwise, to transfer the responsibility to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. (Erezo, et al. vs. Jepte 102 Phil 103] A registered owner is the lawful operator insofar as the public and third persons are concerned; consequently, it is directly and primarily responsible for the consequences of its operation. In contemplation of law, the owner/operator of record is the employer of the driver, the actual operator and employer being considered as merely its agent. The same principle applies even if the registered owner of any vehicle does not use it for public service, (Equitable Leasing Corp vs. Suyom, 388 SCRA 445 [2002]], or otherwise stated, to privately-owned vehicles. RATE-FIXING POWER The rate to be fixed must be just, founded upon conditions which are fair and reasonable to both the owner and the public. A rate is just and reasonable if it conforms to the following requirements: One which yields to the carrier a fair return upon the value of the property employed in performing the service; and One which is fair to the public for the service rendered.

Exceptions to Kabit system: When neither of the parties to the pernicious kabit system is being held liable for damages. When the case arose from the negligence of another vehicle in using the public road to whom no representation or misrepresentation as regards the ownership and operation of passenger jeepney was made When the riding public was not bothered or inconvenienced at the very least by the illegal arrangement. (Lim vs. CA, 373 SCRA 394) The policy, which prohibits the Kabit System, may also be applied to vessels and aircrafts that are covered by certificates of public convenience and necessity. Persons who do not have such certificates cannot circumvent the law by using the certificate of another. (Sec. 23, Public Service Act) BOUNDARY SYSTEM Features: The driver does not receive a fixed wage but gets only the excess of the receipt of the fares collected by him over the amount he pays to the jeep owner. The gasoline consumed by the jeep is for the account of the driver.

These two features are not sufficient to withdraw the relationship between the owner and the driver from that of employer and employee. The jeepney owner is subsidiarily liable as employer in accordance with Art.103 of RPC (Magboo vs. Bernardo, 7 SCRA 952) KILUSANG MAYO UNO LABOR CENTER VS GARCIA 239 SCRA 538 (1994) Facts: The Kilusang Mayo Uno Labor Center (KMU) assails the constitutionality and validity of a memorandum which, among others, authorize provincial bus and jeepney operators to increase or decrease the prescribed transportation fares without application therefore with the LTFRB, and without hearing and approval thereof by said agency. Issue: Whether or not the absence of notice and hearing and the delegation of authority in the increase or decrease of transportation fares to provincial bus and jeepney operators is illegal? Held: Under Section 16 (c) of the Public Service Act, as amended, the legislature delegated to the defunct Public Service Commission the power of fixing the rates of public services. LTFRB, the existing regulatory body today, is likewise vested with the same under Executive Order 202. The authority given by the LTFRB to the bus operators to set fares over and above the authorized existing fare is illegal and invalid, as it is tantamount to undue delegation of legislative authority. Under the maxim potestas delegate non delegari potest what has been delegated cannot be delegated. The policy allowing provincial bus operators to change and increase their fares would result not only to a chaotic situation but to an anarchic state of affairs. This would leave the riding public at the mercy of transport operators who may increase fares, every hour, every day, every month or every year, whenever it pleases them or whenever they deem it necessary to do so. Furthermore, under the Section 16 (a) of Public Service Act, there must be proper notice and hearing in the fixing of rates, to arrive at a just and reasonable rate acceptable to both the public utility and the public. PHILIPPINE AIRLINES, INC. VS. CIBIL AERONAUTICS BOARD (270 SCRA 538) Facts: Grand Air applied for a Certificate of Public Convenience and Necessity with the Civil Aeronautics Board (CAB). The Chief Hearing Officer issued a notice of hearing directing Grand Air to serve a copy of the application and notice to all scheduled Philippine Domestic operators. Grand Air filed its compliance and requested for a Temporary Operating Permit (TOP). PAL filed an opposition to the application on the ground that the CAB had no jurisdiction to hear the application until Grand Air first obtains a franchise to operate from Congress. The Chief Hearing Officer denied the opposition and the CAB approved the issuance of the TOP for a period of 3 months. The opposition for the TOP was likewise denied. The CAB justified its assumption of jurisdiction over Grand Airs application on the basis of Repub lic Act 776 which gives it the specific power to issue any TOP or Certificate of Public Convenience and Necessity. Issue: Whether or not the CAB can issue a Certificate of Public Convenience and Necessity or TOP even though the prospective operator does not have a legislative franchise? Held: Yes, as mentioned by the CAB, it is duly authorized to do so under Republic Act 776 and a legislative franchise is not necessary before it may do so, since Congress has delegated the authority to authorize the operation of domestic air transport services to the CAB, an administrative agency. The delegation of such authority is not without limits since Congress had set specific standard and limitations on how such authority should be exercised. Public convenience and necessity exists when the proposed facility will meet a reasonable want of the public and supply a need which the existing facilities do not adequately afford. Thus, the Board should be allowed to continue hearing the application, since it has jurisdiction over it provided that the applicant meets all the requirements of the law. TATAD VS. GARCIA (243 SCRA 436, GR. NO. 114222. APRIL 6, 1995) Facts: DOTC planned to construct a light railway transit line along Edsa. EDSA LRT Corporation, Ltd., a foreign corporation was awarded the contract to build, lease and transfer the said light railway. The said award was questioned by the petitioners on the basis that a foreign corporation cannot own the EDSA LRT III, a public utility as it violates the Constitution. Issue: Whether or not an owner and lessor of the facilities used by a public utility constitute a public utility? Held: EDSA LRT Corporation, Ltd. Is admittedly a foreign corporation duly incorporated and existing under the laws of Hong Kong. However, there is no dispute that once the EDSA LRT III is constructed, the private respondent, as lessor, will turn it over to DOTC as lessee, for the latter to operate the system and pay rentals for the said use. What private respondent owns are the rail tracks, rolling stocks, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities to serve the public, they do not themselves constitute a public utility. What constitutes a public utility in not their ownership but their use to serve the public. The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not require a franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the public. In law, there is a clear distinction between the operation of a public utility and the ownership of the facilities and the equipment used to serve the public. ALBANO VS. REYES (175 SCRA 264) Facts: On April 20, 1987, the PPA ( Philippine Ports Authority ) Board adopted its Resolution No. 850 directing PPA management to prepare the Invitation to Bid and all relevant documents and technical requirements necessary for the public bidding of the development, management and operation for the MICT ( leasing as well as to implement this project. Re spondent Secretary Reyes created a 7 man Special MICT Bidding Committee charged with all bid proposals. After evaluation of the seven companies that submitted bids, the committee recommended the award of the contract to ICTSI for having offered the best technical and financial proposal. However, before the MICT contract could be signed, 2 cases were filed against

respondents which assailed the legality and regularity of the bidding. But on May 18, 1988, the President of the Philippines approved the proposed MICT Contract with specific directives on the part of the PPA and the contractor ICTSI. Meanwhile, Rodolfo Albano, the petitioner filed a petition assailing the award of the MICT contract to ICTSI claiming that the former is a public utility and therefore needs a legislative franchise before it can legally operate as a public utility, pursuant to Article 12, Sec 11 of the 1987 Constitution. Issue: Whether or not the MICT needs a legislative franchise from Congress to legally operate as a public utility? Held: NO. EO No. 30 dated July16, 1986 provides for the immediate recall of the franchise granted to the Manila International Port Terminals Inc., and authorize the PPA to take over, manage and operate the Manila International Port Complex at North Harbor, Manila and undertake the provision of cargo handling and port related services thereat, in accordance with PD 857 and other applicable laws and regulations. Sec. 6 of PD 857 otherwise known as the Revised Charter of the PPA provides as one of the corporate duties of the PPA is to provide services ( whether on its own, by contract, or otherwise ) within the Port Districts and the approaches thereof including but not limited to As stated above, PPA has been tasked under EO No. 30, with the management and operation of the Manila International Port Complex in accordance with PD 857 and other applicable laws and regulations. However, PD 857 itself authorizes the PPA to perform the service by itself, by contracting it out, or through other means. Reading EO No. 30 and PD 857 together, the inescapable conclusion is that the lawmaker has empowered the PPA to undertake by itself the operation and management of the MICP or to authorize its operation and management by another by contract or other means at its option. The latter power having been delegated to the PPA, a franchise from Congress to authorize an entity other than the PPA to operate and manage the MICP becomes unnecessary. Therefore, PPAs act of privatizing the MICT and awarding the Co ntract to ICTSI are wholly within its jurisdiction under its Charter which empowers the PPA to supervise, control, regulate, construct, maintain, operate and provide such facilities necessary i n the ports vested. LITIMCO VS. LA MALLORCA (18 MAY 1962) Fact: Tomas Litimco filed a petition with the Public Service Commission praying for the authority to operate a bus service between Manila and Malolos via Sta. Isabel using 10 buses. Several operators filed their opposition however none of them submitted their evidence to support their opposition. The petition was then submitted for decision. However, La Mallorca, another bus operator, moved for the re-opening of the case claiming that if the petition of Litimco was to be granted it would work to its prejudice. The motion was granted but when requested to present evidence to support its opposition, La Mallorca moved for postponement only to file its own application to operate the same line. The PSC approved the application of La Mallorca from which Litimco appealed. Issue: Whether the award of the franchise in favor of La Mallorca was proper? Held: No. The Supreme Court held that since there was no doubt that Litimco was the first to apply for the service in the territory in question and its financial capability was proven, its application should be granted. The Court pointed out that if an applicant is qualified financially, and is able to undertake the service, he should be given the preference as a matter of fairness and justice. The priority in the filing of the application for a certificate of public convenience is, other conditions being equal, an important factor in determining the rights of the public service companies. It is only in cases when the incapacity or incapability of the first applicant is established may the other applicants be considered. HALILI VS. CRUZ (27 JUNE 1968) Facts: Herein respondent filed, on September 19, 1961, with the Public Service Commission an application, praying for the grant of a certificate of public convenience to operate, under PUB denomination, ten buses between Norzagaray (Bulacan) and Piers (Manila). Petitioner, in his opposition alleged, substantially, that he was an operator of a bus service on the line applied for, enumerating at the same time the other lines he operated which were traversed by the route mentioned in respondent's application; that his service, as well as that of other bus operators on the route, was more than adequate to meet the demands of the traveling public; that the grant of the application would merely result in wasteful and ruinous competition, and that the respondent was not financially capable of operating and maintaining the service proposed by him. The Public Service Commission rendered a decision on February 13, 1963, granting a certificate of public convenience to respondent Ruperto Cruz to operate ten buses under PUB denomination of the line Norzagaray (Bulacan) - Piers (Manila) passing through the routes for. It is the above-mentioned decision of the Public Service Commission that is now sought to be reviewed by this Court. Petitioner contends that: 1. "The finding of the Public Service Commission that there was a public need for the operation by respondent of ten buses on the line Norzagaray (Bulacan) - Piers (Manila) is not supported by the evidence; 2. "The Public Service Commission erred when it did not recognize the fact that petitioner-appellant was rendering sufficient and adequate service on the line in question; and 3. "The Public Service Commission erred in failing to give petitioner-appellant the right of protection to investment to which petitioner-appellant is entitled." In support of his first two contentions petitioner argues that the 500 passengers found by the Commission as commuting daily from Norzagaray to Manila could easily be accommodated in the buses of existing operators; that the existing operators were authorized to operate 31 buses which made around 100 round trips a day; that since a bus could accommodate about 50 passengers, the existing authorized services could easily accommodate not only the 500 but even 5000 passengers a day. Petitioner also asserted that the Commission failed to consider that 200 of the 500 commuters worked in the Republic Cement Factory located at Norzagaray and so there were really only 300 commuters daily traveling on the Norzagaray - Manila line. Petitioner further claimed that the new terminal proposed in the application was not based on actual need, because there were no importing firms, or business establishments, or manufacturing concerns, in Norzagaray, whose employees had to make trips to the piers at the south harbor in Manila. On the question of public necessity, petitioner pointed out that the evidence presented by the respondent consisted only of the testimony of two witnesses who did not make any formal or systematic study of the movement and frequency of public utility buses, so that their testimonies were based only on casual observations. On the other hand, as petitioner pointed out, the oppositors presented five witnesses, two of whom made meticulous, systematic and daily observations on the line applied for.

Petitioner likewise asserted that public necessity did not require the operation of the ten buses applied for by the respondent because of the fact that on December 20, 1961, the Public Service Commission granted to herein petitioner, in Case No. 61-5807, authority to operate only 10 buses on the line Norzagaray - Manila, even if he had applied for 20 buses; and that out of the many applications to operate buses from Paradise Farms (Bulacan) to Manila, only 10 buses were authorized. Issue: Whether or not preference over common carriers interest will prevail over public convenience? Held: The decision of the Public Service Commission is affirmed. "While it is the duty of the government as far as possible to protect public utility operators against unfair and unjustified competition, it is nevertheless obvious that public convenience must have the first consideration. . . ." The public convenience is properly served if passengers who take buses at points in one part of a line are able to proceed beyond those points without having to change buses. On this point this Court said: "It is the convenience of the public that must be taken into account, other things being equal, and that convenience would be effectuated by passengers who take buses at points in one part of a line being able to proceed beyond those points without having to change buses and to wait the arrival of buses of a competitive operator. We can perceive how under such conditions one public utility could gain business at the expense of a rival." Certainly the Public Service Commission has power to grant a certificate of public convenience to a new operator, and the old operator cannot with reason complain that it had not been given opportunity to improve its equipment and service, if it is shown that the old operator has not placed in the service all the units of equipment that it had been authorized to operate, and also when the old operator has violated, or has not complied with, important conditions in its certificate. 13 In the instant case, it has been shown that petitioner had not operated all the units that it was authorized to operate.