Definition and Test of Common Carrier Concept

First Philippine Industrial Corp. vs CA

FACTS:
1. First Philippines Industrial Corporation (FPIC) is a grantee of a pipeline concession
under Republic Act No. 387 to contract, install and operate oil pipelines.
a. Grant was renewed in 1992 by the Energy Regulation Board.
2. In 1995, FPIC applied for a mayors permit with the City of Batangas.
3. However, City Treasure required them to pay a local tax based on its gross receipts for
the fiscal year 1993.
a. It amounted to P956,076.04 payable in four installments
b. FPIC paid the tax under protest in the amount of P239,019.00 for the first quarter
of 1993.
4. Subsequently, FPIC wrote a letter to the City Treasurers office, to wit:
a. FPIC is a pipeline concession grantee engaged in transporting petroleum products
from Batangas refineries via pipeline to Sucat and JTF Pandacan Terminals.
b. Thus, FPIC should be exempt from paying tax on gross receipts under Sec. 133
of LGC
c. Moreover, the authority to impose tax on contractors and other independent
contractors' under Section 143, Paragraph (e) of the LGC does not include the
power to levy on transportation contractors because its not included in the
enumeration of contractors under Sec 131 par (h).
5. City Treasurers office denied the protest ruling that petitioner cannot be considered
engaged in the business of transportation.
6. Thus, FPIC filed a complaint for tax refund with the RTC of Batangas against City of
Batangas and Adoracion Arellano (treasurer).
a. ALLEGATION: the authority of cities to impose and collect a tax on the gross
receipts of "contractors and independent contractors" under Sec. 141 (e) and 151
does not include the authority to collect such taxes on transportation
contractors.
7. City of Batangas argued otherwise:
a. ANSWER: Exemption under 133(j) of the LGC applies only to "transportation
contractors and persons engaged in the transportation by hire through
moving vehicles or vessels either by land, sea or water.
b. Hence, pipelines are not included in the term common carrier which refers only
to ordinary carriers such as trains, ships and the like.
c. Also, under the code, common carrier pertains to the mode or manner by which a
product is delivered to a destination.
8. RTC Batangas: NO EXEMPTION.
a. FPIC is either contractor or other independent contractor. The exemption has
become unclear. Thus, as a rule in taxation that exemptions are to be granted only
by clear terms of the law, the exemption claimed by FPIC cannot be favored.
b. Neither the pipeline award contains any tax exemption.
c. Plaintiff is not a common carrier, but a special carrier extending its services
and facilities to a single specific or "special customer" under a "special
contract."

9. CA affirmed the RTC ruling.

ISSUE: Whether CA wrongly ruled that FPIC is not a common carrier or a transportation
contractor.
HELD: FPIC is a common carrier/transportation contractor. Hence, it is exempted from payment
of local taxes.

RATIO:

1. "Common carrier" is defined as one who holds himself out to the public as engaged in the
business of transporting persons or property from place to place, for compensation,
offering his services to the public generally.

2. The test for determining whether a party is a common carrier of goods is:

a. He must be engaged in the business of carrying goods for others as a public

employment, and must hold himself out as ready to engage in the transportation
of goods for person generally as a business and not as a casual occupation;

b. He must undertake to carry goods of the kind to which his business is

confined;

c. He must undertake to carry by the method by which his business is conducted

and over his established roads; and

d. The transportation must be for hire.

3. FPIC is a common carrier based from the definition.

a. It is engaged in the business of transporting or carrying goods, i.e. petroleum

products, for hire as a public employment.

b. It undertakes to carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by land and for
compensation.

c. The fact that petitioner has a limited clientele does not exclude it from the
definition of a common carrier.

4. Common carrier definition in Art. 1732 makes no distinction as to persons offering

transportation on a regular basis and occasional basis neither does the article distinguish
between a carrier offering its services to the public or to a narrow segment of the society.

5. Also, the definition of "common carriers" in the Civil Code makes no distinction as to
the means of transporting, as long as it is by land, water or air.
a. It does not say that transportation should be by motor vehicle.
b. In fact, in the United States, oil pipe line operators are considered common
carriers.