Notes and Cases on the

LAW ON TRANSPORTATION AND PUBLIC UTILITIES

CHAPTER 1
GENERAL CONCEPTS

I. DEFINITION AND CONCEPTS

A. Contract of Transportation

There is a contract of transportation where a person obligates himself to transport persons or

property from one place to another for consideration.

B. Parties
a. Carriage of Passengers
The parties in a contract of carriage of passengers are the common carrier and the passenger.
Passenger is one who travels in a public conveyance by virtue of a contract, express or implied,
with the carrier as to the payment of fare or that which is accepted as an equivalent thereof.
b. Carriage of Goods
When the contract is for the carriage of goods, the parties are the shipper and carrier.
Shipper is the person who delivers the goods to the carrier for transportation. He pays the
consideration or on whose behalf payment is made.
Consignee is the person to whom the goods are to be delivered. He may be the shipper himself
or may be a third person who is not actually a party to the contract.
Nevertheless, there are instances when the third party consignee is bound by the agreement
between the shipper and the carrier.

C. Perfection
There are two types of contracts of carriage of passengers:
1. Contract to Carry an agreement to carry the passenger at some future time. This contract is
consensual and is therefore perfected by mere consent.
2. Contract of Carriage or of Common Carriage Itself considered as the real contract for not
until the facilities of the carrier are actually used can the carrier be said to have already assumed
the obligation of the carriage.
a. Aircraft

There is a perfected contract to carry passengers even if no tickets have been issued to said
passengers so long as there was already a meeting of minds with respect to the subject matter
and the consideration.

There is a perfected contract of carriage between a passenger and an airline if it was established
that the passenger had checked in at the departure counter, passed through customs and
immigration, boarded the shuttle bus and proceeded to the ramp of the aircraft.

b. Buses, Jeepneys, and Street Cars

With respect to buses, jeepneys, or street cars, the Supreme Court explained in one case that
once a public utility bus (or jeepney) stops, it is in effect making a continuous offer to bus riders.
Hence, it is the duty of the drivers to stop their conveyances for a reasonable length of time in
order to afford passengers an opportunity to board and enter, and they are liable for injuries
suffered by boarding passengers resulting from sudden starting up of the carrier. It follows that
the passenger is deemed to be accepting the offer if he is already attempting to board the
conveyances and the contract of carriage is perfected from that point.

c. Trains

A person who wants to board a train in a railway station must purchase a ticket and must present

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himself at the proper place and in a proper manner to be transported. If he does not do so, he
will not be considered a passenger.

II. CARRIER

Article 1732. 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.

The concept of common carrier under 1732 may be seen to coincide neatly with the notion of
public service under the Public Service Act.

a. Tests

1. He must be engaged in the business of carrying goods for others as a public employment xxxx
not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry goods of the kind to kind to which his business is conducted and
over his established roads; and
4. The transportation must be for hire.
b. Characteristics

The concept of common carriers contemplated under the Public Service Act results in the
application of the following rules or principles:

III. DISTINGUISHED FROM PRIVATE CARRIER

The distinction between a common or public carrier and a private or special carrier lies in the
character of the business, such that if the undertaking is a single transaction, not a part of a
general business or occupation, althougn involving the carriage of the goods for a fee, the person
or corporation offering such service is a private carrier.

While a common carrier is bound to exercise extraordinary diligence, a private carrier owes only
diligence of a good father of a father of a family.

Moreover, while a common carrier cannot stipulate that it is exempt from liability for negligence
of its agents or employees, a private carrier may validly enter into such stipulation.

IV. DISTINGUISHED FROM TOWAGE, ARRASTRE AND STEVEDORING

In towage, one vessel is hired to bring another vessel to another place.

On the other hand, the functions of arrastre operator usually include: to receive, handle, care for,
and deliver all merchandise; to record or check all merchandise; and to furnish light, and water
services and other incidental services.

The function of stevedores involve the loading and unloading of coastwise vessels calling at the
port.

V. GOVERNING LAWS

Article 1766 of the Civil Code expresses: In all matters not regulated by this Code, the rights
and obligations of common carriers shall be governed by the Code of Commerce and by special
laws.

Article 1753: The law of the country to which the goods are to be transported shall govern the
liability of the common carrier for their loss, destruction or deterioration.

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IV. NATURE OF BUSINESS

Common carriers are public utilities. As such, they are impressed with public interest and
concern.

V. REGISTERED OWNER RULE AND KABIT SYSTEM

a. Registration Laws

Registration of motor vehicles is now government by Republic Act 4136 otherwise known as The
Land Transportation and Traffic Code

b. Registered Owner Rule

The rule in this jurisdiction is that the person who is the registered owner of a vehicle is liable for
any damage caused by the negligent operation of the vehicle although the same was already sold
or conveyed to another person at the time of the accident.

The registered owner is liable to the injured party subject to his right or recourse against the
transferee or the buyer.

c. Kabit System

The registered owner rule is applicable whenever the persons involved are engaged in what is
known as the kabit system.

The Kabit System is an arrangement whereby a person who has been granted a certificate of
public convenience allows other persons who own motor vehicles to operate them under his
license, sometimes for a fee or percentage of the earnings.

a. Pari Delicto Rule

Both parties are at fault. Having entered into an illegal contract, neither party cannot invoke the
same as against each other either to enforce their illegal agreement or to invoke the same to
escape liability. Both parties cannot seek relief from the courts, and each must bear the
consequences of his acts.

b. Aircraft and Vessels

Kabit System may also be applied to vessels and aircrafts that are covered by the certificates of
convenience and necessity.

CHAPTER 2
OBLIGATIONS OF THE PARTIES

I. OBLIGATIONS OF THE CARRIER

a. Duty to Accept

A common carrier that is granted a certificate of public convenience is duty bound to accept
passengers or cargo without any discrimination.

The instances when the carrier may validly refuse to accept goods include:

When the goods sought to be transported are dangerous objects, or substances including
dynamites and other explosives;
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The goods are unfit for transportation;

Acceptance would result in overloading;

The goods are considered contrabands or illegal goods;

Goods are injurious to health;

Goods will be exposed to untoward danger like flood, capture by enemies and the like;

Goods like livestock will be exposed to diseases;

Strike; and

Failure to tender goods on time.

b. Duty to Deliver the Goods

a. Time of Delivery

Article 358 of the Code of Commerce: If there is no period fixed for the delivery of the goods the
carrier shall be bound to forward them in the first shipment of the same or similar goods which
he may make to the point of delivery; and should he not do so, the damages caused by the delay
should be for his account.

b. Consequences of Delay

Article 1747 of the Civil Code: If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual route, the contract limiting the
common carriers liability cannot be availed of in case of the loss, destruction, or deterioration of
the goods.

In cases of delay on account of the fault of the shipper, the consignee may leave the goods
transported in the hands of the carrier, informing him thereof in writing before the arrival of the
same at the point of destination.

Right of Passengers in Case of Delay is specifically provided in Article 698 of the Code of
Commerce: In case a voyage already begun should be interrupted, the passenger shall be
obliged to pay the fare in proportion to the distance covered, without right to recover for losses
and damages if the interruption is due to fortuitous event or force majeure, but with a right to
indemnity if the interruption should have been caused by the captain exclusively.

Memorandum Circular No. 112 issued by Maritime Industry Authority provides: In case the
vessel is not able to depart on time and the delay is unreasonable, the passenger may opt to
have his/her ticket immediately refunded without any refund service fee.

c. Where and to Whom Delivered

a. Place

The goods should be delivered to the consignee in the place agreed upon by the parties. If the
specific place or warehouse is designated in the bill of lading, the goods must be delivered in such
place.

b. Consignee

The goods should be delivered to the consignee or any other person to whom the bill of lading
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was validly transferred or negotiated.

Article 369 of the Code of Commerce provides: If the consignee cannot be found at the
residence indicated in the bill of lading, or if he refuses to pay the transportation charges and
expenses, or if he refuses to receive the goods, the municipal judge, where there is none of the
first instance, shall provide for their deposit at the disposal of the shipper, this deposit producing
all the effects of delivery without prejudice to third parties with a better right.

c. Delay to Transport Passengers

The basic rule that applies to carriage of goods shall also apply to carriage of passengers.

d. Duty to Exercise Extraordinary Diligence

The goods should be delivered in the same condition that they were received and to transport
passengers without encountering any harm or loss. In the exercise of this obligation, the common
carrier is obligated to exercise extraordinary diligence.

Article 1755 of the Civil Code explains extraordinary diligence: A common carrier is bound to
carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious person, with due regard for all circumstances.

a. Presumption of Negligence

In case of loss of effects or cargo or passengers or death or injuries to passengers, the common
carrier is presumed to be at fault or have acted negligently unless he had observed extraordinary
diligence in the vigilance thereof.

b. Duration of Duty

Article 1736 of the Civil Code provides: The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by the carrier to
the consignee, or to the person who has a right to receive them.

With respect to carriage of passengers by trains, the extraordinary diligence commences the
moment the person who purchases the ticket presents himself at the proper place and in a proper
manner to be transported with a bona fide intent to ride the coach.

With respect to carriage of passengers by sea, the duty of the carrier commences as soon as the
person with bona fide intention of taking passage places himself in the care of the carrier or its
employees and is accepted as passenger.

Motor vehicles like passenger jeepneys and buses are duty bound to stop their conveyances for a
reasonable length of time in order to afford passengers an opportunity to board and enter. The
rule is that once a public utility bus or jeepney stops, it is making a continuous offer to bus riders.

e. Defenses of Common Carriers

The defenses that can be raised by common carriers for the loss, destruction, deterioration of the
goods are:

(1) Flood, storm, earthquake, lightning and other natural disaster and calamity;

(2) Acts of the public enemy at war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

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(4) The character of the packing of the goods in the packing or in the containers;

(5) Order or act of the competent authority;

(6) Exercise of extraordinary diligence.

Fortuitous Event

A fortuitous event is an event that is unforeseen, but if foreseen, is inevitable.

Requisites:

(1) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to
comply with his obligation, must be independent of the human will.

(2) It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be
foreseen, it must be impossible to avoid.

(3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation
in a normal manner.

(4) The obligor (debtor) must be free from any participation in or the aggravation of the injury
resulting to the creditor.

Fortuitous event, to be a valid defense, must be established to be the proximate case of the loss.
(Art. 1739)

Invalid Defenses:
1. Fire
2. Hijacking
3. Mechanical Defects
4. Other Invalid Defenses
a) Explosion
b) Worms and Rats
c) Water Damage
d) Barratry

Public Enemy

The term public enemy, in its general acceptation presupposes the existence of an actual state
of war, and refers to the government of a foreign nation at war with the country to which the
carrier belongs xxxx

Improper Packing

It is also the rule that if the carrier accepts the goods knowing the fact of improper packing of the
goods upon ordinary observation or notwithstanding such condition, it is not relieved of liability
for loss or injury resulting therefrom.

Order of Public Authority

Article 1743: If through the order of public authority the goods are seized or destroyed, the
common carrier is not responsible, provided said public authority had power to issue the order.

f. Defenses in Carriage of Passengers

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The primary defense of the carrier in transporting passengers is exercise of extraordinary
diligence. Thus, even if there is a fortuitous event, the carrier must also present proof of exercise
of extraordinary diligence.

a. Employees

Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the formers employees although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.

b. Other Passengers and Third Persons

Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of
the willful acts or negligence of other passengers or strangers, if the common carriers employees
through the exercise of the diligence of a good father of a family could have prevented or stopped
the act or omission.

g. Passengers Baggages

Baggage that are checked in or delivered to the carrier are governed by the rules discussed
above requiring extraordinary diligence.

II. OBLIGATIONS OF SHIPPER, CONSIGNEE AND PASSENGER

a. Negligence of Shipper or Passenger

Contributory negligence on the part of the passenger is not a defense that will excuse the carrier
from liability. It will only mitigate such liability. However, the negligence of the shipper or the
passenger may be the proximate and only cause of the loss, in which case, the carrier should not
be made liable.

In Article 1761 of Civil Code provides: The passenger must observe the diligence of a good
father of a family to avoid injury to himself.

Thus, the carrier may be able to prove that the only cause of the loss of the goods is any of the
following acts of the shipper:

(1) Failure of the shipper to disclose the nature of the goods;

(2) Improper marking or direction as to destination; and

(3) Improper loading when he assumes that responsibility.

Doctrine of avoidable consequences

Even if the carrier is responsible for the loss or injury, the passenger is also required to lessen the
damage or injury.

Doctrine of Last Clear Chance

A negligent defendant is held liable to a negligent plaintiff, if he, aware of the plaintiffs peril, or
according to some authorities, should have been aware of it in the reasonable exercise of due
care, had in fact an opportunity later than that of the plaintiff to avoid an accident.

The Supreme Court reiterated the rule that passengers must take such risks incident to the mode
of travel.

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b. Freight

When private property is used for public purpose and is affected with public interest, it ceases to
be juris privati only and becomes subject to regulation.

The shipper may pay the necessary freight before or at the time he deliver the goods to the
carrier for shipment. However, the parties may also stipulate that the freight will be paid by the
consignee at the point of the destination.

In the absence of any agreement, the consignee who is supposed to pay must do so within
twenty-four (24) hours from the time of delivery.

With respect to carriage of goods by sea, the tickets are purchased in advance from ticket outlets
or booking offices. Carriers are not supposed to allow passengers without tickets.

The carrier shall collect/inspect passengers ticket within one (1) hour from the vessels departure
so as not to disrupt passengers who are either sleeping or resting.

If the consignor or the consignee failed to pay the consideration for the transportation of the
goods, this special right shall prescribe eight days after the delivery has been made, and once
prescribed, the carrier shall have no other action than that corresponding to him as an ordinary
creditor.

Demurrage

It is the compensation provided for in the contract of affreightment for the detention of the vessel
beyond the time agreed on for loading and unloading.

It is the claim for damages for failure to accept delivery.

CHAPTER 3
EXTRAORDINARY DILIGENCE

I. RATIONALE

Article 1755 of the Civil Code explains extraordinary diligence: A common carrier is bound to
carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious person, with due regard for all circumstances.

The Code Commission explained why extraordinary diligence must be complied with the
performance of the functions of a common carrier: This high standard of care is imperatively
demanded by the preciousness of human life and by the consideration that every person must be
in every way be safeguarded against all injury.

II. HOW DUTY IS COMPLIED WITH

There is no hard and fast rule in the exercise of extraordinary diligence. The law does not
prescribe formula. Thus, the Supreme Court explained in one case that it is sufficient to reiterate
that the source of a common carrier's legal liability is the contract of carriage, and by entering
into said contract, it binds itself to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of a very cautious person, with a due regard for all the
circumstances.

A. Duty to Third Persons

The duty to exercise extraordinary diligence is primarily owed to the passengers and the goods
that are being transported.
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However, it was ruled in one case that the duty even extends to the members of the crew or
complement operating the carrier.

Additionally, there is authority for the view that extraordinary diligence is owed not only to
passengers or shippers but also to third persons as well. Thus, the Supreme Court ruled in
Kapalaran Bus Lines v. Coronado: ... The passengers and owners of cargo carried by common
carrier, they are not only persons that the law seeks to benefit. For if common carriers carefully
observed the statutory standard of extraordinary diligence in respect of their own passengers,
they cannot help but simultaneously benefit pedestrians and the owners and passengers of other
vehicles who are equally entitled to the safe and convenient use of our roads and highways.

III. EFFECT OF STIPULATION

A. Goods

The parties cannot stipulate that the carrier will not exercise any diligence in the custody of
goods. Neither can it be stipulated that the goods are at the shipper's risk. However, the law
allows a stipulation whereby the carrier will exercise a degree of diligence less than extraordinary
with respect to goods.

B. Passenger

There can be no stipulation lessening the utmost diligence that is owed to passengers. The
responsibility to observe extraordinary diligence cannot be dispensed with or lessened through
stipulation or posting of notices Art. 1757 of the Civil Code).

a. Gratuitous passenger

When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for
negligence is valid, but not for willful acts or gross negligence. The reduction of fare does not
justify any limitation of the common carrier's liability (Art. 1758 of the Civil Code).

The provision implies that the same degree of diligence is required even if the passenger is
carried gratuitously.

In Lara v. Valencia however, the view expressed by the Supreme Court is to the effect that the
diligence owed to accommodation passenger is only ordinary diligence. The defendant in the said
case was not a common carrier. It was a private carrier who accommodated the deceased
passenger.

IV. EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA

A. Seaworthiness

a. Warranty of seaworthiness of ship

The first step that must be undertaken by the common carrier in complying with the duty to
exercise extraordinary diligence in transporting goods or passengers by sea or any other body of
water is to make the vessel seaworthy. Seaworthiness of the vessel is a rule found in the carriage
of Goods by Sea Act, Sec.3.(1).

b. No duty to inquire

It follows that because the implied warranty of seaworthiness, shippers of the goods, when
transacting with common carriers, are not expected to inquire into the vessels seaworthiness,
genuineness of its licenses, and compliance with all maritime laws.

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By the same token, passengers cannot be expected to inquire every time they board a common
carrier, whether the carrier possesses the necessary papers or that all the carrier's employees are
qualified. Such a practice would be an absurdity.

c. Meaning of Seaworthiness

The concept of seaworthiness was explained by the Supreme Court: (1) Generally,
seaworthiness is that strength, durability and engineering skill made a part of a ship's
construction and continued maintenance, together with a competent and sufficient crew, which
would withstand the vicissitudes and dangers of the elements which might reasonably be
expected or encountered during her voyage without loss or damage to her particular cargo.

(1) Fitness of the vessel itself

It is necessary that the vessel can be expected to meet the normal hazards of the journey.

(2) The ship must be cargoworthy

Even if vessel was properly maintained and is free from defect, the carrier must not accept goods
that cannot properly be transported in the ship.

(3) The vessel must be adequately equipped and properly manned

The ship must be manned with sufficient number of competent officers and crew.

(4) Adequate equipment

With respect to vessels that carries passengers, the Maritime Industry Authority prescribes rules
which provide for indispensable equipment and facilities.

B. Overloading

Duty to exercise due diligence likewise includes the duty to take passengers or cargoes that are
within the carrying capacity of the vessel.

C. Proper Storage

The vessel may be suitable for the cargo but this is not enough because the cargo must also be
properly stored.

D. Negligence of Captain and Crew

a. Rules on passenger safety

Memorandum Circular No. 12 issued by MARINA provides that have the right to be treated by
the carrier and its employees with kindness, respect, courtesy and due consideration. They
entitled to be protected against personal conduct, injurious language, indignities and abuses from
the said carrier and its employees.

E. Deviation and Transshipment

a. Deviation

Art. 359 of the Code of Commerce:

If there is an agreement between the shipper and the carrier as to the road over which the
conveyance is to be made, the carrier may not change the route, unless it be by reason of force
majeure; and should he do so without this cause, he shall be liable for all losses which the goods
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he transports may suffer from any other cause, beside paying the sum which may have been
stipulated for such case.

When on account of said cause of force majeure, the carrier had to take another route which
produced an increase in transportation charges, he shall be reimbursed for such increase upon
formal proof thereof.

b. Transshipment

Transshipment of freight without legal excuse is a violation of the contract and an infringement of
the right of the shipper, and subjects the carrier to liability if the freight is lost even by a cause
otherwise excepted.

Transshipment, in maritime law, is defined as the act of taking cargo out of one ship and loading
it in another, or the transfer of goods from vessel stipulated in the contract of affreightment to
another vessel before the place of destination named in the contract has been reached.

V. EXTRAORDINARY DILIGENCE IN CARRIAGE BY LAND

A. Condition of vehicle

Common carriers that offer transportation by land are similarly required to make sure that the
vehicles that they are using are in good order or condition.

B. Traffic Rules

The carrier fails to exercise extraordinary diligence if it will not comply with basic traffic rules.

C. Duty to Inspect

There is no unbending duty to inspect each and every package or baggage that is being brought
inside the bus or jeepney. The carrier is duty bound to conduct such inspection depending on the
circumstances.

A carrier is ordinarily not liable for injuries to passengers from fires or explosions caused by
articles brought into its conveyances by other passengers, in the absence of any evidence that
the carrier, through its employees, was aware of the nature of the article or had any reason to
anticipate danger therefrom.

It should be noted that in overland transportation, the common carrier is not bound nor
empowered to make an examination on the contents of packages or bags particularly those
handcarried by passengers.

VI. EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR

Like vessels, aircrafts that are used by common carriers must also be fit to transport goods and
passengers. The aircraft must be in such a condition that it must be able to withstand the rigors
of the flight. The law that governs the Civil Aeronautic Board calls this airworthiness.

Republic Act 779 defines airworthiness means that an aircraft, its engines, propellers, and other
components and accessories, are of proper design and construction, and are safe for air
navigation purposes, such design and construction being consistent with accepted engineering
practice and in accordance with aerodynamic laws and aircraft science.

Extraordinary diligence likewise requires the carrier provide competent and well trained crew.

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The carrier is likewise deemed to have failed to exercise extraordinary diligence if the plane did
not take the designated route and the tragic crash could have been avoided had it taken said
designated route.

It is the duty of airlines to strictly require their personnel to be more accommodating towards
customers, passengers and the general public.

A. Inspection

An airline company is duty bound to inspect each and every cargo that is brought into the aircraft
(Sec. 8 of RA 6235).

CHAPTER 4
BILL OF LADING AND OTHER FORMALITIES

I. CONCEPTS

A bill of lading or a ticket is not necessary for the perfection of a contract of carriage. Thus, the
obligation of the carrier to exercise extraordinary diligence in transporting the goods or
passengers is present even if no bill of lading or ticket was issued by the carrier.
Additionally, Sections 25 and 26 of the Electronic Commerce Act (RA No. 8792) allow data
messages or electronic documents to be used in lieu of transport documents in writing or paper
documents.

A. Definition
Bill of Lading is a written acknowledgment, signed by the master of a vessel or other authorized
agent of the carrier, that he has received the described goods from the shipper, to be transported
on the expressed terms to the described place of destination, and to be delivered there to the
designated consignee or parties.

B. B. Kinds
A bill of lading may be either: (1) negotiable or non-negotiable, (2) clean bill of lading or foul bill
of lading, (3) on board bill or received for shipment bill, (4) spent bill of lading, (5) through
bill of lading, (6) custody bill of lading, or (7) port bill of lading.

C. a. Clean bill of lading and foul bill of lading

A clean bill of lading is one which does not contain any notation indicating any defect in the
goods. A foul bill of lading is one that contains such notation.

b. Spent bill of lading

Where the goods are already delivered by the carrier, the carrier is supposed to have retrieved
the covering bill of lading that he issued for the goods. If the goods were already delivered but
the bill of lading was not returned, the bill of lading is called spent bill of lading.

c. Through bill of lading

A through bill of lading is one issued by a carrier who is obliged to use the facilities of other
carriers as well as his own facilities for the purpose of transporting the goods from the city of the
seller to the city of the buyer, which bill of lading is honored by the second and other interested
carriers who do not issue their own bill of lading.

d. On board bill v. received for shipment bill

An on board bill of lading is one in which it is stated that the goods have been received on board
the vessel which is to carry the goods, whereas a received for shipment bill of lading is one in
which it is stated that the goods have been received with or without specifying the vessel by
which the goods are to be shipped.

e. Custody bill of lading

In this type of bill of lading, the goods are already received by the carrier but the vessel indicated
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therein has not yet arrived in the port.

f. Port bill of lading

In a port bill of lading, the vessel indicated in the bill of lading that will transport the goods is
already in the port.

II. NATURE OF BILL OF LADING

It is a long standing jurisprudential rule that a bill of lading operates both: (1) as a receipt and
(2) as a contract. A third characteristic may be added (3) it is a document of title.
It is a receipt for the goods shipped and a contract to transport and deliver the same as therein
stipulated.

As a contract, it stipulates the rights and obligations assumed by the parties. Being a contract, it
is the law between the parties who are bound by its terms and conditions provided that these are
not contrary to law, morals, good customs, public order, and public policy.

III. WHEN EFFECTIVE

A bill of lading usually becomes effective upon its delivery to and acceptance by the shipper. It is
presumed that the stipulations of the bill were, in the absence of fraud, concealment or improper
conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the
bill or not.

The holding in most jurisdictions has been that a shipper who receives a bill of lading without
objection after an opportunity to inspect it is presumed to have accepted it as correctly stating
the contract and to have assented to its terms.

IV. BILL OF LADING AS CONTRACT

The three-fold nature of a bill of lading is obviously applicable only to carriage of goods. However,
the nature of bill of lading as a contract applies to tickets issued to passengers.

A. Contract of Adhesion
Bills of lading, as well as tickets, constitute a class of contracts of adhesion. Hence, they are
normally construed liberally in favor of the passenger or shipper who adhered to such bill of
lading or ticket.
Contracts of adhesion are contracts wherein almost all the provisions of which have been drafted
only by one party. The only participation of the other party is the signing of his signature or his
'adhesion' thereto. Examples are: insurance contracts, bills of lading, contracts of make of lots on
the installment plan.

B. Under which contracts, the passenger/shippers cannot change terms and they are thus made
to adhere thereto on the take it or leave it basis. Thus, certain guidelines in the determination
of their validity and enforceability have been formulated in order that justice and fair play
characterize the relationship of the contracting parties.

C. Consequently, the parties, whether the carrier or shipper, cannot escape liability by adverting
to the bill of lading as a contract of adhesion, if the bill of lading has no ambiguities or
obscurities.

B. Parol Evidence Rule

A bill of lading is covered by the parol evidence rule. Under the parol evidence rule, the terms of
a contract are rendered conclusive upon the parties, and evidence aliunde is not admissible to
vary or contradict a complete and enforceable agreement embodied in a document, subject to
well defined exceptions.

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As an exception to the parol evidence rule is one which is a mistake of fact mutual to the parties.
However, in order that parol evidence may be admitted, said mistake must be put in issue by the
pleadings, such that if not raised inceptively in the complaint or in the answer, as the case may
be, a party cannot later on be permitted to introduce parol evidence thereon.

Parol evidence cannot be admitted where the mistake adverted to was supposedly committed by
one party only and was raised by the former rather belatedly.

C. Bill of Lading as Evidence

Bill of lading is the legal evidence of the contract.
All the essential elements of a valid contract are present in a bill of lading or ticket, i.e. consent,
cause or consideration and object.

D. Bill of Lading as Actionable Document

When a shipper enforces contractual obligation under the contract of carriage as stated in the bill
of lading, such bill of lading can be categorized as an actionable document under the Rules of
Court. Hence, the bill of lading must be properly pleaded either as causes of action or defenses;
the genuineness and due execution of which are deemed admitted unless specifically denied
under oath by the adverse party.

E. Basic Stipulations
The stipulations that must be stated in the bill of lading are provided for in the Code of
Commerce.

F. Prohibited and Limiting Stipulations

a. Civil Code
Three kinds of limiting stipulations have often been made in bill of lading:
1. exempting the carrier from any and all liability for loss or damage occasioned by its own
negligence
2. providing for an unqualified limitation of such liability of the carrier to an agreed valuation
3. limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher
value and pays a higher rate of freight

The first and second kinds of stipulations are invalid. The third is valid and enforceable.

(1) Purpose
The purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such
stipulation obliges the shipper/consignee to notify the common carrier of the amount that the
latter may be liable for in case of loss of the goods. The common carrier can then take
appropriate measures--- getting insurance, if needed, to cover or protect itself.

(2) Stipulation reducing diligence

The parties cannot stipulate so as to totally exempt the carrier from exercising any degree of
diligence; and the parties cannot stipulate that the common carrier shall exercise diligence less
than the diligence of a good father of a family. However, the parties may stipulate that diligence
to be exercised by the common carrier in the carriage of goods be less than the extraordinary
diligence provided that the following requisites are complied with:
1. that the stipulation be in writing signed by both parties
2. that the stipulation be supported by a valuable consideration other than the service rendered
by the common carrier, and

3. that the stipulation be reasonable, just and not contrary to law

However, no such stipulation is allowed for carriage of passengers. The responsibility of a
common carrier to exercise utmost diligence for the safety of the passengers cannot be dispensed
with or lessened by stipulation or statement on tickets or otherwise (Art. 1757 of the Civil Code).

4. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the
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circumstances, and has been fairly and freely agreed upon (Art. 1750 of the Civil Code).

5. Moreover, Art. 1749 of the Civil Code provides that a stipulation that the common carrier's
liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater, is binding.

b. Carriage of Goods by Sea Act (COGSA)

COGSA applies suppletorily to the Civil Code if the goods are to be shipped from a foreign port to
the Philippines. Under COGSA, the liability of the carrier is US$500 per package in the absence of
a shipper's declaration of a higher value in the bill of lading.
Each carton is considered a package, or that would be considered package shipped in a container
supplied by the carrier.

V. BILL OF LADING AS RECEIPT

The issuance of a bill of lading carries the presumption that the goods were delivered to the
carrier issuing the bill, for immediate shipment.

VI. BILL OF LADING AS DOCUMENT OF TITLE

The Bill of Lading, until complete delivery of the cargo has been made on someone rightfully
claiming under it, remains in force as a symbol, and carries with it not only the full ownership of
the goods, but also all rights created by the contract of carriage between the shipper and the ship
owner.

Art. 1507 of the Civil Code states: A document of title in which it is stated that the goods
referred to therein will be delivered to the bearer, or to the order of any person named in such
document is negotiable document of title.

How negotiated? (a) bearer document; (b) order document a document which states that the
goods are to be delivered to the order of a person name therein.

Effect of Negotiation: Art. 1513 of the Civil Code provides:

A person to whom a negotiable document of title has been duly negotiated acquires thereby:
(1) Such title to the goods xxx;
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for
him xxx

CHAPTER 5
ACTIONS AND DAMAGES IN CASE OF BREACH

I. DISTINCTIONS
Passengers and shippers who suffered damages because of the breach of the contractual
obligation of the carrier may sue the latter for damages. The source of obligation is culpa
contractual. This source of obligation is separate and distinct from quasi-delict under Art. 2176 of
the Civil Code.

II. CONCURRENT CAUSES OF ACTION

The same act that breaches the contract may also be tort. Hence, a negligent act that breaches
the contract may give rise to a liability based on contract and quasi-delict under Art. 2176 of the
Civil Code. In fact, with respect to the employee of the carrier, civil liability may be based on
quasi-delict as well as on criminal liability under Art. 100 of the Revised Penal Code.

Hence, the cause of action of a passenger or shipper against the common carrier can be culpa
contractual or culpa aquiliana while the basis on the part of the driver is either culpa delictual or
culpa aquiliana.

A. Solidary Liability
In case the negligence of the carrier's driver and a third person concurs, the liabilities of the
RO Malipol 15
parties carrier and his driver, third person is joint and several.
e.g. While docking the vessel, Taurus, the master, through negligence, damaged the wharf and
the merchandise loaded on the deck. The owner of the wharf and the owner of the merchandise
sued the owner of the vessel and master of the vessel for the damage.
a) What is the basis of the liability of the owner of the vessel with respect to the damage of the
wharf?
b) With respect to the damage to the merchandise?
Ans: a) The shipowner may be made liable based on quasi-delict under Art. 2176 of the Civil
Code with respect to the damage of the wharf. The master of the vessel caused damage to the
wharf through negligence without any preexisting contractual relations between the parties.
b) The shipowner may be liable for breach of contract for the damage to the merchandise. The
carrier has an obligation safely to their destination. The carrier failed to do so because of the
negligence of his employees.

III. NOTICE OF CLAIM AND PRESCRIPTIVE PERIOD

A. Overland Transportation of Goods and Coastwise Shipping
a. When to file a claim with carrier
A condition precedent for an action against the carrier in overland transportation is the filing of
claim with the carrier within the period prescribed under Art. 366 of the Code of Commerce. Non-
filing of the claim bars recovery. Before an action can properly be commenced all the essential
elements of the cause of action must be in existence, that is, the cause of action must be
complete.
Under Art. 366 of the Code of Commerce, an action for damages is barred if the goods arrived in
damaged condition and no claim is filed by the shipper within the following period: (1)
immediately if damage is apparent; or (2) within twenty four (24) hours from delivery if damage
is not apparent.
The period does not begin to run until the consignee has received possession of the merchandise
that he may exercise over it the ordinary control pertinent to ownership.
1) Effect of stipulation
The period prescribed in Art. 366 of the Code of Commerce may be subject to modification by
agreement of the parties. The parties may stipulate in the bill of lading a period that is different
from the period provided by Art. 366.
b. Extinctive Prescription
There being no special rules with respect to the contract of carriage, the general rule under the
Civil Code, the extinctive period is six (6) years if there is no written contract and ten (10) years
if there is a written contract.

B. International Carriage of Goods by Sea

A claim must be filed with the carrier within the following period: (1) if the damage is apparent
the claim should be filed immediately upon discharge of the goods; or (2) within three (3) days
from delivery if damage is not apparent. Nevertheless, it has been settled that the filing of claim
is not condition precedent. Sec. 3 of the Carriage of Goods by Sea Act provides that such fact
shall not affect or prejudice the right of the shipper to bring suit. The shipper can still bring an
action to recover said loss or damage within one (1) year after the delivery of goods.
a. Prescription
The action for damages under COGSA must be filed within a period of one (1) year from
discharge of the goods. In other words, the prescriptive period of one (1) year commences from
discharge.
The period is not suspended by an extra-judicial demand. Art. 1155 of the Civil Code cannot be
applied because matters affecting transportation of goods by sea should be decided in as short a
time as possible.
If the damage sustained by the cargo is not apparent, notice should be given within three (3)
days to the carrier, and action for damages should be filed within one (1) year from date of
delivery.
The period does not apply to misdelivery. The applicable rule is the Civil Code provisions on
prescriptive period, including Art. 1155 thereof. The goods are not actually lost or damaged. The
applicable period is 10 years.
The rule applies in collision cases. However, the one (1) year period starts not from the date of
RO Malipol 16
collision but when the goods should have been delivered, had the cargoes been saved.
1) Insurance
The insurer who is exercising its right of subrogation is also bound by the one (1) year
prescriptive period. However, it does not apply to the claim against the insurer for the insurance
proceeds. The claim against the insurer is based on contract that expires in ten (10) years.

IV. RECOVERABLE DAMAGES

Damages is the pecuniary compensation, recompense, or satisfaction for injury sustained.
Other definition: Damages is pecuniary consequences which the law imposes for the breach of
some duty or violation of some rights.
The Code Commission saw that the old civil code had but few general principles on the measure
of damages.

A. Extent of Recovery
The extent of recovery in case of contractual breach is expressly provided for in Art. 2201 of the
New Civil Code. Applying the provisions to a contract of carriage, the carrier in good faith is liable
only to pay for the damages that are the natural and probable consequence of the breach of
obligation, and which the parties have foreseen or could have reasonably foreseen at the time the
obligation was constituted. However, if the carrier is in bad faith or gross negligence, the carrier
is liable for all damages, whether the same can be foreseen or not.
It should be noted, however that the carrier who may be compelled to pay damages for the loss
or damage to the goods or passengers has the right of recourse against the employee who
committed the negligent, willful or fraudulent act.

B. Kinds of Damages
a. Actual or compensatory damages
Art. 2199 of the Civil Code provides thatexcept as provided by law or by stipulation, one is
entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly
proved.
Two kinds of actual or compensatory damages:
(a) the loss of what the person already possesses (dano emergente)
(b) the failure to receive as a benefit that would have pertained to him (lucro cesante)
In case of a person's death caused by a crime or quasi-delict, under Art.2206 of the Civil Code,
the plaintiff is entitled to at least three thousand pesos (P3,000.00). In addition:
(a) loss of the earning capacity of the deceased
(b) support to the recipient whom the deceased was obliged to giveaccording to the provisions of
Art. 291 of the Civil Code
(c) moral damages for mental anguish of the spouse, legitimate and illegitimate descendants and
ascendants of the deceased by reason of the death of the deceased
1) Loss of earning capacity
The amount of loss of earning capacity that should be awarded is:
Net Earning Capacity = Life Expectancy x (Gross Annual Income less Necessary Living expenses)
Life expectancy is computed by applying the formula: 2/3 x 80 age at death (adopted in the
American Expectancy Table of Mortality)
2) Attorney's Fees
3)Interests

b. Moral damages
The Civil Code provides that moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury.
Moral damages may be recovered if they are the proximate result of the defendant's wrongful act
or ommission.
Generally, no moral damages where the breach of contract is not malicious.

c. Nominal damages
It is adjudicated to vindicate the right of the plaintiff.

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d. Temperate or moderate damages
It may be recovered when the court finds that some pecuniary loss has been suffered but its
amount cannot be provided with certainty.

e. Liquidated damages
It is that is agreed upon by the parties to a contract, to be paid in case of breach thereof.

f. exemplary or corrective damages

It may be imposed by way of example in addition to compensatory damages.

PART II
MARITIME LAW

CHAPTER 6
GENERAL CONCEPTS

I. MARITIME LAW: DEFINED

It is the system of laws which particularly relates to the affairs and business of the sea, to ships,
their crews and navigation, and to marine conveyance of persons and property.
This system of laws includes Book III of the Code of Commerce entitled Maritime Commerce Act,
Act No. 2616 otherwise known as the Salvage Law, Commonwealth Act No. 65 otherwise known
as the Carriage of Goods by Sea Act, Presidential Decree No. 1521 known as the Ship
Mortgage Decree of 19978 and other special laws relating to maritime commerce.
However, the primary law on maritime commerce is still the New Civil Code provisions on
common carriers.

II. REAL AND HYPOTHECARY NATURE

A. Naturale and Rationale
The real and hypothecary nature of maritime laws means that the liability of the carrier in
connection with losses related to maritime contracts is confined to the vessel, which is
hypothecated for such obligations or which stands as the guaranty for their settlement. The
liability of the vessel owner and agent arising from the operation of such vessel were confined to
the vessel itself, its equipment, freight, and insurance.
Philippine maritime law is of Anglo-American extraction, and is governed by adherence to both
international maritime conventions. This is highlighted by the following excerpts on the limited
liability of vessel owners and/or agents:
Section 183. The liability of the owner of any vessel xxx for any embezzlement, loss or
destruction by any person or any property xxx or for any loss, damage xxx without the privity or
knowledge of such owner or owners shall not exceed the amount or value of the interest of such
owner in such vessel xxx. (US federal Limitation of Liability Act).

B. Statutory Provisions
The statutory provisions that provide for the limited liability rule are Arts. 587, 590, 643 and 837
of the Code of Commerce
Art. 587: The ship agent shall also be civilly liable for the indemnities in favor of third persons
xxx but he may exempt himself therefrom by abandoning the vessel with all her equipments
xxx.
Art. 590: The co-owners of the vessel shall be civilly liable in the proportion of their
contributions xxx for the results of the acts of the captain xxx.
Each co-owner may exempt himself from this liability by the abandonment xxx.
Art. 643: If the vessel and her cargo should be totally lost by reason of capture or wreck, all
rights shall be extinguished xxx
Art. 837: The civil liability incurred by the shipowners in the case prescribed in this section,
shall be understood as limited to the value of the vessel with all her appurtenances and freight

RO Malipol 18
earned during the voyage.

C. Coverage
Art. 837 applies the principle of limited liability in cases of collision. While Arts. 587 and 590
embody the universal principle of limited liability in all cases. However, taken together, Arts. 837,
587, and 590 cover only: (1) liability to third persons, (2) acts of the captain, and (3) collisions.

D. Exceptions
Exceptions to the limited liability rule:
(a) where the injury or death to a passenger is due either to the fault of the shipowner, or to the
concurring negligence of the shipowner and the captain
(b) where the vessel is insured
(c) in workmen's compensation claim

a. Negligence
The limited liability rule applies if the captain or the crew caused the damage or injury.

However, if the failure to maintain in the seaworthiness of the vessel can be ascribed to the
shipowner alone or the shipowner concurrently with the captain, then the limited liability principle
cannot be invoked.

b. Insurance
The limited liability rule does not apply to insurance claims. The Supreme Court explained that
the total loss of a vessel does not extinguish the liability of the carrier's insurer. Its insurance
answers for the damages that a shipowner or agent, may be held liable for by reason of the death
of its passengers.

c. Worker's compensation
The Supreme Court held that the limited liability rule have no room in the application of the
Worker's Compensation Act which seeks to improve, and aims at the amelioration of, the
condition of laborers and employees. Such compensation has nothing to do with the provisions of
the Code of Commerce. It is an item in the cost of production which must be included in the
budget of any well-managed industry.

E. Abandonment
Abandonment of the vessel, its appurtenances and the freightage is an indispensable requirement
before the shipowner or shipagent can enjoy the benefits of the limited liability principle. If the
carrier does not want to abandon the vessel, then he is still liable even beyond the value of the
vessel.
The only instance where such abandonment is dispensed with is when the vessel was entirely
lost. In such case, the obligation is thereby extinguished.

F. Procedure for Enforcement

The Supreme Court stated that more to the point, the rights of parties to claim against an agent
or owner of a vessel may be compared to those of creditors against an insolvent corporation
whose assets are not enough to satisfy the totality of claims as against it... Creditors must limit
their recovery to what is left in the name of the corporation.

III. PROTESTS
Protest is the written statement by the master of a vessel or any authorized officer, attested by
proper officer or a notary, to the effect that damages has been suffered by the ship.
Protest is required under the Code of Commerce in the following cases:
(a) when the vessel makes an arrival under stress
(b) where the vessel is shipwrecked
(c) where the vessel has gone through a huricane or the captain believes that the cargo has
suffered damages or averages
(d) maritime collisions
(di)

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IV. ADMIRALTY JURISDICTION
The Regional Trail Court has jurisdiction in all actions in admiralty and maritime jurisdiction where
the demand or claim exceeds P300,000 or, in Metro Manila, where such demand or claim exceeds
P400,000. (Sec. 19(3) of BP Blg. 129.
It means that all other cases where the amount of the demand or claim is less than the
jurisdictional amount in the Regional Trail Court, the jurisdiction are with the metropolitan Trial
Court, Municipal Trial Court or Municipal Circuit Trial Court as the case may be.

CHAPTER 7
VESSELS

I. GENERAL CONCEPTS
A. Definitions
A Vessel or watercraft is defined under Presidential Decree No. 474 as any barge, lighter, bulk
carrier, passenger ship freighter, tanker, container ship, fishing boats, or other artificial
contrivance utilizing any source of motive power, designed, used or capable of being used as a
means of transportation operating either as a common contract carrier, including fishing vessels
covered under Presidential decree No. 43, except: (i) those owned and/or operated by the Armed
Forces of the Philippines and by foreign governments for military purposes, and (ii) bancas,
sailboats and other waterbone contrivance of less than three gross tons capacity and not
motorized.

B. Construction, Equipment and Manning

The construction, equipment and manning of vessels are subject to the rules issued by the
Maritime Industry Authority. This rule is consistent with the provisions of Code of Commerce
particularly Art. 574.

C. Personal Property
Vessels are personal property under Art. 416 of the Civil Code. The same rule can be found in Art.
585 of the Code of Commerce.

II. OWNERSHIP
A. Acquisition
Vessels may be acquired or transferred by any means recognized by law. Thus, vessels may be
sold, donated, and may even be acquired through prescription.

B. Registration
Vessels are now registered through the Maritime Industry Authority.
It is a long standing rule that the person who is the registered owner of the vessel is presumed to
be the owner of the vessel. Moreover, it is likewise a settled rule that the sale or transfer of the
vessel is not binding on third persons unless the same is registered.

III. SHIP'S MANIFEST

Vessels are required to carry manifests in coastwise trade as provided in Section 906 of the Tariff
and Customs Code. This requirement is likewise imposed on every vessel from foreign port under
Section 1005 of the same Code.
A manifest is a declaration of the entire cargo. Hence, the requirement is not complied even if a
bill of lading can be presented. A bill of lading is just a declaration of a specific cargo rather than
the entire cargo.

IV. MORTGAGE

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Mortgage and other encumbrances over vessels are governed by the provisions of presidential
Decree 1521, otherwise known as the Ship mortgage Decree of 1978. The same law as well as
Section 12 of Executive Order 125 as amended is being implemented with respect to
annotation/cancellation of mortgages and transfer of rights and other encumbrances of vessels by
Memorandum Circular No. 100 which was issued by MARINA in April 1995.

V. OTHER CODE OF COMMERCE PROVISIONS

The provisions of the Code of Commerce are deemed modified not only by the Civil Code but also
by special laws.

VI. SAFETY REGULATIONS

On February 23, 2000, MARINA under Memorandum Circular No. 154 reiterated the rules in line
with the continuing thrust of government to foster maritime safety.

CHAPTER 8
PERSONS WHO TAKE PART IN MARITIME COMMERCE

I. SHIPOWNERS AND SHIP AGENTS

The Code of Commerce at times uses the term naviero to indicate the person who is liable. The
naviero has been construed to include: the shipowner, ship agent and even the charterer who is
considered as owner pro hac vice.

Shipowner is the person who is primarily liable for damages sustained in the operation of the
vessel.
Ship agent is the person entrusted with provisioning of the vessel, or who represents her in the
port in which she happens to be.

The Code of Commerce makes the ship agent jointly and severally liable with the owner. The joint
and several liability applies both breach of contract and extra-contractual obligation such as tort.
The ship agent, eventhough he is not the owner, is liable in every way to the creditor for losses
and damages, without prejudice to his right against the owner, the vessel and its equipment and
freight.

A. Part Owners
Art. 586 of the Code of Commerce states that if two or more persons should be part owners of a
merchant vessel, a partnership shall be presumed as established by the co-owners.
Art. 590 of the Code of Commerce states further that the co-owners of vessel shall be civilly
liable in the proportion of their interests in the common fund....

B. B. Ship Agent
a. Powers.
The ship agent may discharge the duties of captain of the vessel.
b. Limitation on Power,
The ship agent may not order a new voyage, or make contracts for a new charter, or insure the
vessel, without the authorization of its owner.
c. Duty to Account.
The ship agent managing for an association shall render to his associates an account of the
results of each voyage of the vessel.
d. Reimbursement and Liabilities
The co-owners shall pay the expenses in proportion to their interest. In order to enforce the
payment, the managing agent shall be entitled to an executory action (accion ejecutiva), which
shall be instituted by virtue of a resolution of the majority.
The ship agent shall indemniify the captain for all the expenses he may have incurred with funds
of his own or of others, for the benefit of the vessel.
e. Discharge of Captain and Crew

The provisions of the Code of Commerce on discharge of the captain of the crew is subject to the

RO Malipol 21
provisions of the Labor Code of the Philippines for those who are employed for domestic
transportation or commerce as well as rules promulgated the Philippine Overseas Employment
Administration (POEA) for seamen who are hired for overseas employment.

II. CAPTAINS AND MASTERS OF VESSELS

A. Concept
The name of captain or master is given according to the kind of vessel the person is in charge of.
Captain - as a denomination is applied to those who govern vessels that navigate the high seas or
ships of large dimensions and importance, although they be engaged in the coastwise trade.
Master are those who command smaller ships engaged exclusively in the coastwise trade.
Nevertheless, for the purposes of maritime commerce, the words captain and master have the
same meaning; both being the chiefs or commanders of ships.

B. Qualifications
Art.609 of the Code of Commerce states that Captains, amsters or patrons of vessels must be
Filipinos, have legal capacity to contract in accordance with this code, and prove the skill, and
qualifications necessary to command and direct the vessel, as established by marine and
navigation laws, ordinances, or regulations...

C. Powers and Functions

A captain commonly performs three (3) distinct roles:
(1) he is a general agent of the shipowner;
(2) he is also commander and technical director of the vessel; and
(3) he is a representative of the country under whose flag he navigates

Of these roles, the most important role is being the commander of the vessel--- operation and
preservation of the vessel during its voyage and the protection of passengers, crew and cargo.
In his role as general agent of the shipowner, the captain has authority to sign bills of lading,
carry goods aboard and deals with the freight earned, agree upon rates and decide whether to
take cargo. He has legal authority to enter into contracts with respect to the vessel subject to
applicable limitations by statute, contract, or instructions and regulations of shipowner.

D. Discretion of Captain or Master

A ship's captainmust be accorded a reasonable measure of discretionary authority to decide what
the safety of the ship and of its crew and cargo. The captain is held responsible for such safety,
presumed to be knowledgeable as to the specific requirements of seaworthiness and the
particular risks and perils of the voyage he is to embark on.
Indeed, if the ship captain is convinced that the ship owner's or ship agent's instructions will
result in imposing unacceptable risks or loss or serious danger to ship or crew, he cannot casually
seek absolution from his responsibility, if a marine casualty occurs, in following such instructions.

E. Pilotage
Pilot - in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of
ports, or in certain waters.

States possessing harbors have enacted laws or promulgated rules requiring vessels approaching
their ports to take on board pilots licensed under the local law. This is known as compulsory
pilotage.
In this juridiction, compulsory pilotage is being implemented in the Port of Manila.

A pilot shall be held responsible for the direction of a vessel from the time he assumes his work
as a pilot thereof until he leaves it anchored or berthed safely. However, his responsibility shall
cease at the moment the Master neglects or refuses to carry out his order.
a. Master and Pilot
Generally, the pilot supersedes the master for the time being in the command and navigation of
the ship, and his orders must be obeyed in all matters connected with her navigation. He
becomes the master pro hac vice and should give all directions as to speed, course, stopping and
reversing, anchooring, towing and the like.

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b. Shipowner and Pilot
In general, a pilot is personally liable for damages caused by his own negligence or default to the
owners of the vessel, and to third parties for damages sustained in collision. Such negligence of
the pilot in the performance of duty constitutes a maritime tort.
The owners of the vessel are responsible to the injured party for the acts of the pilot.
c. Pilot and His Association
The fact that the pilot is a member of an association does not make the association jointly and
severally liable. It is because there is no employer-employee relationship.

F. Code of Commerce Provisions on Captains

A shipowner would only be liable for contracts made by the captain (a) when duly authorized or
(b) even when authorized, for ship repairs, or for equipping or provisioning the vessel when the
proceeds are invested therein.

III. OFFICERS AND CREW OF VESSELS

Art. 648 of the Code of Commerce provides that the complement of a vessel shall be understood
all the persons on board, from the captain to the cabin boy, necessary for the management,
maneuvers, and service....

The officers who are named in the regulation issued by MARINA in connection with safe manning
for international trade are: Master, Deck Officer, Chief Engineer, Engineer Officer, Radio Officer,
Ratings Man.

Memorandum Circular No. 148 issued by MARINA for domestic trade specifies the following
officers: Officer, Master, Chief Mate, Deck Officer, Chief Engineer Officer, Second Engineer
Officer, Engineer Officer, Medical Practitioner, Radio Officer, Paramedic, Major Patron, Minor
Patron, Boat Captain, Marine Diesel Mechanic,Electrician, Ratings Man.

A. Regulation of Merchant Marine Profession

The practice of marine profession is now governed by special laws and pertinent rules issued by
MARINA and the Board of Marine Deck Officers and Board of Marine Engineer Officers. In
particular, the Philippine Merchant Marine Officers Act of 1998 was passed in order to regulate
Merchant Marine Profession in the Philippines.
The law declares that it is the policy of the State to promote and insure the safety of life and
property at sea, protect and serve the marine environment and ecology...

B. Minimum Safe Manning

It is not enough that the officers manning the merchant vessel have all the qualifications imposed
by the Philippine Merchant Marine Officers Act and other special laws or regulations. It is also
required that there is sufficient number of officers and crew that are serving in the vessel.
No foreign officers shall be allowed on board unless approved by the administration.

C. Security of Tenure
Every worker in the Philippines has a constitutionally protected right to security of tenure.
Consequently, an employee cannot be dismissed without just or lawful cause and without
affording the employee with due process.
The Labor Code provisions apply to officers and crew of merchant vessels engaged in domestic
trade or coastwise shipping.

CHAPTER 9
CHARTER PARTIES

I. DEFINITION AND CONCEPT

Charter Party a contract whereby an entire ship, or some principal part of the said ship, is let
by the owner thereof to a merchant or other person for a specified time or use for the
conveyance of goods, inconsideration of the payment of freight.
The charter contract is often to as a form of mercantile lease for it involves a charterer who

RO Malipol 23
desires to lease a ship or vessel owned by another for transport of his or her goods for
commercial purposes.

II. DIFFERENT KINDS OF CHARTER PARTIES

(1) The Bareboat or Demise Charter; and
(2) Contract of Affreightment

A. Bareboat Charter
In a bareboat or demise charter, the shipowner leases to the charterer the whole vessel. The
charterer becomes the owner pro hac vice of the vessel since he mans the vessel with his own
set of master and crew, effectively becoming the owner for the voyage or service stipulated,
subject however to any liability for damages arising from negligence.
Moreover, the bareboat charterer assumes the customary rights and liabilities of the shipowner in
relation to third persons who may have dealt with him or with the vessel.

B. Contract of Affreightment
The contract of Affreightment is subdivided into:
(1) Time Charter, and
(2) Voyage Charter
Time Charter the vessel is leased to the charterer for a fixed period of time.
Voyage Charter the vessel is leased for a single or particular voyage.
In the contract of affreightment, the charterer hires the vessel only, either for a determinate
period of a time or for a single or consecutive voyage, with the shipowner providing for the
provisions of the ship, the wages of the master and crew, and the expenses and maintenance of
the vessel.

III. EFFECT OF CHARTER ON CHARACTER OF CARRIER

Generally, the character of the common carrier as such is not affected by the charter party if the
same is a contract of affreightment. The rights and responsibilities of ownership still rested on the
owner, and the charterer was thereby freed from any liabiltiy to third persons in respect of the
vessel.

IV. PERSONS WHO MAY MAKE CHARTER

The owner or owners of the vessel, either in whole or in majoority part, who have legal control
and possession of the vessel, may validly enter into charter parties with a charterer.
A third person called a broker may, however, intervene in the execution of the charter between
the principals.
The charterer, by himself, may subcharter the entire vessel to a third person but only in the
event that there is no prohibition in the original charter. The subcharter, where entered into, is an
independent contract by itself involving only the charterer and the subcharterer and therefore
does not give rise to any contractual relation between the general owner and the subcharterer.

V. REQUISITES OF A VALID CHARTER PARTY

As the charter party is a contract, it is therefore to be governed by the general principles
governing ordinary contracts. Hence, the aprties therein are free to stipulate upon such terms
and conditions that would suit their purposes, subject to the caveat that these should not be
contrary to law or public policy.
The requisites of a charter may be enumerated thus:
(1) consent of the contracting parties;
(2) an existing vessel which should be placed at the disposition of the shipper;
(3) the freight; and,
(4) compliance with the requirements of Art. 652 of the Code of Commerce

VI. FREIGHT
The parties themselves may fix the manner or form in which the charter price or money shall be
satisfied.
If there should be no stipulation, the rules should be that: (1) the freight shall begin to run from
the day of loading of the vessel; (2) in charters with a fixed period, the freight shall begin upon
RO Malipol 24
that very day; and (3) if the freight is charged according to weight, the payment thereof shall be
made according to the gross weight, including the weight of the containers.

VII. DEMURRAGE AND DEADFREIGHT

Art. 652 of the Code of Commerce (par. 10) provides that the time for loading and unloading
shall be provided for in the Charter Party. The period so stipulated is what is known as the lay
days.
Demurrage a sum of money due by express contract for the detention of the vessel in loading
or unloading, beyond the time allowed for that purpose in the charter party.
Deadfreight the charterer may be made liable by the shipowner where the charterer failed to
occupy the leased portion of the vessel.

In connection with demurrage, it has been observed that unless the contrary intention appears in
the charter party, the stipulate dlay days do not begin to run against the consignee until the
vessel has arrived at berth or other usual and customary place for loading or unloading, and is in
actual readiness to discharge its cargo in accordance with its legal obligation.

VIII. RIGHTS AND OBLIGATIONS OF THE CHARTER PARTIES

A. Shipowner or Captain
The evident failure or refusal on the part of the shipowner or of his agents to receive cargo which
had been contracted to be transported under the charter party constituted a sure breach of the
charter party, as to warrant a suit for damages by the charterer for such breach.
Some of the primary rights and obligations of shipowners or captain:
(a) the shipowner is bound to observe the capacity of the vessel...;
(b) generally, any loss incurred by the shipper whose cargo is refused on account of the receipt
by the shipowner of a greater amount of cargo belonging to other persons shall be for the
account of the shipowner in the form of indemmnity;
(c) if there should be several charter parties, and due to lack of space, preference shall be given
to the person who is first in loading his cargo;
(d) the shipowner may effect a substitution in respect of the vessel so long as the substitute
vessel had been duly inspected and seaworthy;
(e) after three-fifths of the vessel is loaded, the shipowner may not substitute the chartered
vessel, unless he procures the consent of the charterers;
(f) the captain may not, if the vessel has been chartered in whole, accept cargo from any other
persons unless the consent of the charterer is obtained;
(g) the shipowner may also be generally held liable for damages incurred by the charterer due to
the voluntary delay of the captain in putting to sea.

A shipowner may ask for rescission of the charter party in the case the owner sold the vessel
before the charter has begun to load the vessel. However, the charterer may recover damages to
the extent of its losses.

B. Charterer
The rights and obligations of the charterer may be summarized as follows:
(a) the charterer shall have the right to subcharter the vessel to a third person only if he is
authorized by the owner;
(b) a charterer who loads goods different from that contracted upon, without the knowledge of
the shipowner or captain, or which results to damage shall be liable to indemnify the parties
injured thereby;
(c) should illicit cargo be shipped by the charterer with the knowledge of the shipowner or
captain, the said charterer shall be jointly liable with the shipowner for all damages caused to
other shippers;
(d) the charterers and shippers may not abandon the goods damaged due to inherent defects or
fortuitous events.

IX. EFFECT OF BILL OF LADING

If a bill of lading was issued by the shipowner to the charterer, the charter party still governs
their rights and the bill of lading may be used as proof of receipt of the goods.
RO Malipol 25
CHAPTER 10
LOANS ON BOTTOMRY AND RESPONDENTIA

I. DEFINITIONS AND CONCEPT

Bottomry is a contract whereby the owner of a ship borrows for the use, equipment or repair of
the vessel, for a definite term, and pledges the ship as security, with the stipulation that if the
ship is lost during the voyage or during the limited time on account of perils enumerated, the
lender shall lose his money.
Where the goods, or some part thereof, are hypothecated as security for a loan, the payment of
which is dependent upon maritime risks, what ensues is a loan on respondentia.
Loan on Respondentia it is the borrower's personal responsibility which is deemed to be the
principal security for the performance of the contract.

II. DISTINGUISHED FROM SIMPLE LOAN

(a) in bottomry or respondentia, the rate of interest is not subject to the Usury Law on account of
extraordinary risks involved whereas in simple loan, the rate of interest must not exceed the
ceiling fixed by the Usury Law;
(b) in bottomry or respondentia, there must be a marine risk, whereas in simple loan, there need
not be risks involved;
(c) the loan on bottomry or respondentia must be executed in accordance with form and manner
required in the Code of Commerce, whereas in a simple loan, the formal requisites regarding
contracts in general would apply;
(d) the loan on bottomry or respondentia must be recorded in the registry of vessels, whereas in
simple loan, no such registration is required;
(e) in the loan on bottomry or respondentia, preference is extended to the last lender, whereas in
simple loan, the first lender, as a general rule, enjoys preference.
There may be events where the loan on bottomry or respondentia may be regarded as simple
loan only.

III. PARTIES TO THE LOANS

The shipowner may secure a loan on bottomry upon his ship.
In the case where the shipowner is only a part owner, any bottomry that he may contract shall be
limited only to the extent of his interest in the vessel.
There are instances when the captain, although he has no interest in the ship, may enter into a
loan on bottomry on account of extreme necessity under Arts. 583 and 611 of the Code of
Commerce.
The cargo owner on the other hand shall have the right to enter into loan on respondentia
involving his cargo.

IV. CONSEQUENCES OF LOSS EFFECTS OF THE LOANS

If the effects of the loans be lost due to an accident of the sea during the time, and on the
occasion of the voyage which has been designated in the contract and it is proven that the cargo
was on board, then the lender loses the right to institute the action which would pertain to him as
such.
The lender, however, retains such right of action if the loss was caused by the inherent defect of
the thing, or through the fault or malice of the borrower, or through barratry on the part of the
captain, or if it was caused by the damages suffered by the vessel.
If what transpires is a shipwreck, the amount fot the payment of the loan shall be reduced to the
proceeds of the effects which have been saved but only after deducting the costs of the salvage.
If the loan should be on vessel or any of her parts, the freight earned during the voyage for which
the loan was contracted shall also be liable for its payment, as far as it may reach.

CHAPTER 11
AVERAGES

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I. AVERAGES IN GENERAL
Art. 806 of the Code of Commerce considered averages as:
(a) all extraordinary or accidental expenses which may be incurred during the voyage in order to
preserve the vessel, the cargo, or both;
(b) any damages or deteriorations which the vessel may suffer from the time it ppputs to sea
from the port of departure until it casts anchor in the port of destination, and those suffered by
the merchandise from the time they loaded in the port of shipment until they are unloaded in the
port of their consignment.
Petty or ordinary expenses incident to navigation shall be considered ordinary expenses to be
defrayed by the shipowner, unless there is an express agreement to the contrary.

II. SIMPLE AVERAGE

Simple average include all the expenses and damages caused to the vessel or to her cargo whci
have not inured to the common benefit and profit of all the persons interested in the vessel and
her cargo.
Since simple or particular averages do not inure to the common benefit, the owner of of the
goods that suffered the damage bears the loss.
e.g. losses suffered by the cargo either on account of inherent defect of the goods or by reason of
an accident of the sea or force majeure.

III. GENERAL AVERAGE

General or gross average include all damages and expenses which are deliberately caused in
order to save the vessel, its cargo or both at the same time, from real and known risk.
The Supreme Court adopted the following requisites of general averages:
(a) there must be a common danger
(b) that for the common safety, part of of the vessel or of the cargo or both is sacrificed
deliberately
(c) that from the expenses or damages caused follows the successful saving of the vessel and
cargo
(d) that the expenses or damages should have been incurred or inflicted after taking proper legal
steps and authority
a. Common danger
It means that both the ship and the cargo are subject to the same danger, whether during the
voyage, or in the port of loading or unloading.
b. Deliberate sacrifice
There must be a voluntary sacrifice of a part for the benefit of the whole in order to justify
general average contribution.
c. Sacrifice must be successful
No general contribution can be demanded if the vessel and other cargo that are sought to be
saved were in fact not saved.
d. Compliance with legal steps
The expenses or damages should have been incurred or inflicted after taking proper legal steps
and authority as prescribed in Arts. from 813 to 815 of the Code of Commerce:
Art. 813 there must be resolution of the captain
Art. 814 the resolution must be entered in the log book
Art. 815 the captain shall direct the jettison, and shall order the goods cast overboard
The Code of Commerce expressly provides that gross or general average shall be borne by those
who benefited from the sacrifice: the shipowners and the owners of the cargoes that were saved.
Contribution may also be imposed on the insurers of the vessel or cargoes that were saved as
well as lenders on bottomry or respondentia.
The owner of the goods which were sacrificed is entitled to receive the general average
contribution. However, the following goods even if sacrificed are not covered: 1) goods carried on
deck; 2) goods that are not recorded in the books or records of the vessel; and 3) fuel for the
vessel if there is more than sufficient fuel for the voyage.

IV. YORK ANTWERP RULES

Although the Code of Commerce provisions on averages are still in force, the parties may, by
stipulation in the charter party or any written agreement, agree that the York-Antwerp Rules shall
RO Malipol 27
be applied.
The York-Antwerp Rules may also be used to solve controversies where no provision in the Code
of Commerce is in point because the said rules embody the custom of maritime states.

CHAPTER 12
COLLISIONS

I. CONCEPT
Collision as applied to Maritime Commerce, is an impact or sudden contact of a vessel with
another whether both are in motion or one stationary.
Zones of collision:
(a) all the time up to the moment when the risk of collision may be said to have begun. Within
this zone, no rule is applicable because none is necessary
(b) the time between the moment when risk of collision begins and the moment when it has
become a practical certainty. The burden is on the vessel required to keep away and avoid the
danger
(c) the time between the moment of actual contact. The rule is that the vessel which has forced
the privileged vessel into danger is responsible even if the privileged vessel has committed an
error within that zone

II. APPLICABLE LAW

Liabilities of shipowners and ship agents as well as the captain or crew in collision cases is
governed by the provisions of the Code of Commerce on Collision.

III. RULES ON LIABILITY

Although the liability with respect to collision is not governed by quasi-delict, liability in collision
cases are still negligence based.
In the determination of negligence, the same test of reasonable man in the position of an expert
that applies in quasi-delict. In some respect, however, the rules that apply to quasi-delict cannot
be applied in collision cases. For example, the view is that the doctrine of last clear chance and
the rule on contributory negligence cannot be applied in collision cases.
If two vessels collided each other due to fault imputable to both, each vessel must bear its own
damages, and both shall be solidarily responsible for the losses and damages occasioned to their
cargoes (Art. 827 of the Code of Commerce).
If it cannot be determined which of the two vessels was at fault resulting in collision, each of the
vessels should bear their respective damages under the doctrine of inscrutable fault. Neither of
the carrier may go after the other. The shipper may claim damages against the ship owners and
the captains of both vessels, having been both negligent. Their liability is solidary.
The shipowners have the right to recover damages from the masters of the vessels who were
both guilty of negligence.

Art. 835 of the Code of Commerce states that the action for recovery of damages and losses
arising from collisions cannot be admitted without a previous protest or declaration presented by
the captain within 24 hours before the competent authority of the point where the collision took
place, or of the first port of arrival. A maritime protest is required to be made by the master of
the vessel not by the passenger or shipper.

IV. LIMITED LIABILITY RULE

In collision cases, the law limits the liability of the shipowner and ship agent:
Art. 837 of the Code of Commerce states that the civil liability incurred by the ship owners...
shall be understood as limited to the value of the vessel with all its appurtenances and freightage
earned during the voyage.

CHAPTER 13
ARRIVAL UNDER STRESS AND SHIPWRECKS

RO Malipol 28
I. ARRIVAL UNDER STRESS
Arrival Under Stress under Art. 819, is the arrival of the vessel at the nearest and most
convenient port which was decided upon after determining that there is a well-founded fear of
seizure, privateers, or pirates or reason of any accident of the sea disabling it to navigate.
Steps to be taken in the determination of the propriety of an arrival under stress:
(a) the captain should determine during the voyage if there is well-founded fear of seizure,
privateers and other valid grounds;
(b) the captain shall then assemble the officers;
(c) the captain shall summon the persons interested in the cargo who may be present and who
may attend but without right to vote;
(d) the officers shall determine and agree if there is well-founded reason after examining the
circumstances. The captain shall have the deciding vote;
(e) the agreement shall be drafted and proper minutes shall be signed and entered into the log
book;
(f) objections and protests shall likewise be entered in the minutes.

II. SHIPWRECKS
Shipwreck the demolition or shattering of the vessel caused by her driving ashore or on rocks
and shoals in the midseas, or by the violence of winds and waves in tempest.
If several vessels sail under convoy, and any of them should be wrecked, the cargo saved shall
be distributed among the rest in proportion to the amount which each one is able to take. If any
captain should refuse, without sufficient cause, the captain of the wrecked vessel shall enter a
protest against him before two sea officials of the losses and damages resulting therefrom,
ratifying the protest within 24 hours after arrival at the first port.

CHAPTER 14
SALVAGE

I. GOVERNING LAW
The law that governs salvage in this jurisdiction is Act No. 2616, otherwise known as the
Salvage Law.

II. DEFINITION AND CONCEPT OF SALVAGE

Salvage a service which one person renders to the owner of a ship or goods, by his own labor,
preserving the goods or the ship which the owner or those entrusted with the care of them have
either abandoned in distress at sea, or are unable to protect and secure.
Salvage is founded on equity of remunerating private and individual services performed in saving,
whole or in part, a ship or its cargo from impending peril, or recovering them after actual loss.
Kinds of salvage services:
(a) voluntary, wherein the compensation is dependent upon success
(b) rendered under a contract for a per diemor per horam wage payable at all events
(c) under a contract for compensation payable only in case of success

III. CLAIM FOR VALID SALVAGE AND ITS ELEMENTS

(a) there must be a marine peril
(b) the service is voluntarily rendered and is not required as an existing duty or from special
contract
(c) and, there must be success in whole or in part or that the service rendered contributed to
such success
Additionally, Section 1 of the Salvage Law makes clear of requirement that
(d) the vessel is shipwrecked beyond the control of the crew or shall have been abandoned
Under Section 8 of the law, the following persons shall have no right to a reward:
(a) the crew of the vessel shipwrecked or which was in danger of shipwreck
(b) he who shall have commenced the salvage in spite of opposition of the captain of of his
representatives
RO Malipol 29
(c) he who shall have failed to comply with the provisions of Sec. 3 of the Salvage Law.
A. Abandonment
The requirement of section 1 of the salvage Law that the vessel sought to be salvaged is
shipwrecked beyond the control of the crew or abandoned, is present when the vessel is
considered a derelict.

IV. BASIS FOR ENTITLEMENT TO SALVAGE REWARD

A salvage reward should neither be too liberal nor too stingy. It should constitute a sufficient
compensation for the outlay and effort of the salvors.

V. RIGHTS AND OBLIGATIONS OF SALVORS AND OWNERS

The salvor is of course entitled of compensation for services rendered, and in the enforcement of
that right, he has, under the Salvage Law, a lien upon the property salvaged whereby he is not
bound to part with the possession of the vessel salvaged or of the cargo saved until he is paid his
due compensation.

When a vessel is found at sea, deserted, and has been abandoned by the master and crew
without the intention of returning and resuming possession, she is, in the sense of the law,
derelict, abandoned, and the finder who takes possession with the intention of saving her gains a
right of possession which he can maintain against the true owner.
On the other hand, the owner of the vessel which is a derelict, does not renounce his right to the
property. There is no presumption of an intention to abandon such property rights. What the
owner abandons temporarily is his right of possession, which is thereby transferred to the salvor
who becomes bound to preserve the property with good faith and bring it to a place of safety for
the owner's use.

In Sec. 3 of the Salvage Law, the salvor shall convey and deliver the vessel or merchandise as
soon as possible to the collector of customs, if the port has a collector, and otherwise to the
provincial treasurer or municipal mayor.

If the owner does not make any claim within 3 months after the publication by the authorities of
a salvage report, the thing saved shall be sold at a public auction, the proceeds shall be deposited
in the National Treasury after deducting the expenses and the proper reward to which the salvor
is entitled.

CHAPTER 15
CARRIAGE OF GOODS BY SEA

I. HISTORY
COGSA was originally passed by the Congress of the United States on April 16, 1936 as Public
Act. No. 521. It was later adopted on October 22, 1936 through Commonwealth Act No. 65.

II. EXTENT OF APPLICATION

When the New Civil Code took effect on August 30, 1950, the said Code became the primary law
on carriage of goods by sea.
Nevertheless, the COGSA remains to be a suppletory law for such type of transportation
international shipping.

III. THE LAW

The most important provisions of COGSA were already discussed and cited in the earlier chapters.
The term goods includes goods, wares, merchandise, and articles of every kind whatsoever,
except live animals cargo being carried on deck.

PART III
PUBLIC UTILITIES

RO Malipol 30
CHAPTER 16
PUBLIC SERVICE REGULATIONS

I. CONCEPT
Public Utility business or service engaged in regularly supplying the public with some
commodity or service of public consequence such as electricity, gas, water, transportation,
telephone or telegraph service.
As such, public utility services are impressed with public interest and concern, hence they cease
to juris privati only.
The term public service is therefore included in the broad concept of public utilities.
Section 13 of the Public Service Act provides the definition of public service as the term which
includes every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation xxx and done for general business purpose any common
carrier xxx.

II. REGULATORY AGENCIES

(a) Dept. of Transportation and Communication for operation of national railroad carriers
(b) Land Transportation Franchising Regulatory Board (LTFRB) land transportation
(c) The Land Transportation Office (LTO) registration of drivers and motor vehicles
(d) Maritime Industry Authority (MARINA) water transportation
(e) Philippine Coast Guard safety in water transportation
(f) National Telecommunications Commission communication utilities and services
(g) Energy Regulatory Board electric or power companies
(h) National Water and Resource Council water resources
(i) Civil Aeronautics Board air transportation
(j) The Air Transportation Office maintenance and operation of airports; registers aircrafts;
provides safety regulations in air transportation
(k) Philippine Ports Authority wharves and ports

III. BASES OF REGULATION OF PUBLIC UTILITIES

The police power of the State justifies the regulation of public utilities. Whenever private property
is used for a public purpose and is affected with public interest, it ceases to be juris privati only
and becomes subject to regulation.

IV. OWNERSHIP OF PUBLIC UTILITIES

Ownership of public utilities is subject regulation by the State.
Under Sec. 11 of Art. XII of the Constitution states that no franchise, certificate or any other
form of authorization for the operation of public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of the Philippines at least
sixty per centum (60%) of whose capital is owned by such citizens xxx.
The Supreme Court clarified that the limit imposed by the Constitution on foreign equity applies
only to the operation of a public utility and not to ownership of the facilities.

V. REGULATIONS OF RATES
The regulation of public utilities include the regulation of rates that they are charging to the
public. This aspect of regulation is in line with the policy of the State to protect the public against
arbitrary and excessive rates while maintaining the efficiency and quality of services rendered.

A. Non-Delegation
The power to fix the rates of public utilities is a power that has been delegated to the regulatory
administrative agencies. As such, it cannot be further delegated by the said administrative
agencies.
It should be noted, however, that EO no. 213 issued by the President of the Republic of the
Philippines on Nov. 28, 1994, instituted the deregulation of domestic shipping rates.

B. Discrimination
Discrimination in the charging of rates is not allowed under existing law and rules.

RO Malipol 31
C. Standard in Fixing Rates
The only standard which the legislature is required to prescribe for the guidance of the
administrative authority is that the rate be reasonable and just.
a. Factors to Consider
The Supreme Court ruled three major factors in determining the just and reasonable rates to be
charged by a public utility:
(a) rate of return
(b) rate base
(c) the rate itself or the computed revenue to be earned based on the rate of return and rate
base

VI. AUTHORITY TO OPERATE AS PUBLIC UTILITY

The power to authorize and control the operation of a public utility is admittedly a prerogative of
the legislature, since Congress is that branch of government vested with plenary powers of
legislation.

A. Issuance of Certificate of Public Convenience

A certificate of public convenience is different from a certificate of public convenience and
necessity in that the former requires prior issuance of municipal franchise while the latter does
not.
Basic requirements in the issuance of certificate of public convenience:
(a) the applicant must be a citizen of the Philippines, or corporations or associations organized
under the laws of the Philippines at least sixty per centum (60%) of whose capital is owned by
such citizens
(b) the applicant must be financially capable of undertaking the proposed service and meeting the
responsibilities incident to its operations
(c) 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
Policies that may be used by the administrative body concerned in determining who among the
number of applicants is entitled to a certificate, aside from public interest, convenience and
necessity as controlling factor:
(a) Prior operator rule protection of the first licensee's investment not to be subjected to
ruinous competition.
(b) Prior applicant rule provides priority in the filing of application.
(c) Third operator rule just a variation of the prior operator rule; instead of one prior
operator, there are two prior operators who are rendering sufficient service.
(d) Protection of investment rule related to prior operator rule, the law aims not only to protect
the public but the operators as well.

B. Nature and Certificate of Public Convenience

Insofar as the State is concerned a certificate of public convenience constitutes neither a
franchise nor a contract, confers no property right, and is a mere license or privilege.

C. Instances When Certificate of Public Convenience is not Required:

(a) warehouses
(b) vehicles drawn by animals and bancas moved by oar, and tugboats and lighters
(c) airships within the Philippines
(d) radio companies
(e) public services owned or operated by any instrumentality of the National Government or by
any government-owned or controlled corporations
Note, however, that airlines and radio companies are now under the Civil Aeronautics Board and
the National Telecommunications Commission.

D. Transfer of Certificate
The law really 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.

RO Malipol 32
The Registered Owner Rule applies if the transfer of the franchise was not approved by the
regulating agency.
The Supreme Court sustained the cancellation of the certificate of public convenience:
(1) where the holder is a mere dummy;
(2) where the operator ceased operations and placed his vehicles on storage; and,
(3) where the operator totally abandoned the service.

VII. DUE PROCESS

The Public Service Commission and its successor regulatory agencies are acquired to accord
parties before them their right to administrative due process. This includes the right to give the
parties concerned notice and hearing.

CHAPTER 17
POWERS OF THE ADMINISTRATIVE AGENCIES

I. DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS

The Department of Transportation and Communications has the following powers under EO No.
125-A:
formulate and recommend national policies and guidelines for the preparation and
implementation of integrated and comprehensive transportation and communication systems at
national, regional and local levels.
Establish and administer comprehensive and integrated programs for transportation and
communication.
Assess and review and provide direction to transportation and communications research and
development programs.
Administer and enforce all laws, rules and regulations in the field of transportation and
communications
etc.

II. LAND TRSNPORTATION FRANCHISING AND REGULATORY BOARD

The powers of the LTFRB as provided for in EO No. 202 are:
prescribe and regulate routes of service provided by motorized vehicles in accordance with the
public land transportation development plans and programs approved by the department of
Transportation and Communications.
issue, amend, revise, suspend or cancel Certificates of Public Convenience
determine, prescribe and approve and periodically review and adjust, reasonable fares, rates
and other related charges.
etc.

III. LAND TRANSPORTATION OFFICE

The law that governs registration of motor vehicles in the Philippines is republic Act No. 4136,
otherwise known as the Land Transportation and Traffic Code (as amended) which was enacted
on June 20, 1964. The Code provides that the Land Transportation Commission shall control as
far as they apply, the registration and operation of motor vehicles and the licensing of owners,
dealers, conductors, drivers, and similar matters.
The main functions of LTO are:
1. inspection and registration of motor vehicles
2. Issuance of licenses and permits
3. enforcement of Land Transportation Rules and Regulations
4. adjudication of traffic cases

IV. CIVIL AERONAUTICS BOARD

The CAB as mandated under republic Act No. 776 and amended by PD No. 1462 is the agency
charged with the power to regulate the economic aspects of air transportation in the Philippines.
It shall have the general supervision and jurisdiction over air carriers as well as their properties,
property rights, equipment, and franchise.

RO Malipol 33
V. AIR TRANSPORTATION OFFICE
The Air Transportation Office through its Air Safety Division has the following main functions:
1. establishes minimum safety standards on the operating methods, flight operations and
maintenance activities of foreign and domestic carrier;
2. issues certificate of registration and airworthiness of aircraft; air carrier operating certificate,
air agency certificates, and certificate of airmen licenses.
There are two(2) services in the Air Transportation Office:
1. Airways Navigation Service
2. Air Traffic Service

VI. MARITIME INDUSTRY AUTHORITY

The powers of the MARINA as defined under EO No. 125 as amended by EO No. 125-A are:
develop and formulate plans, policies, programs, projects, standards, promotions and
development of the maritime industry
establish, prescribe and regulate routes, zones and/or areas of operations of particular
operators of public water services
issue certificate of public convenience for the operation of domestic and overseas water carriers
register vessels as well as issue certificates, licenses or document necessary or incident thereto
undertake the safety regulatory functions pertaining to vessel construction and operation
enforce laws, prescribe and enforce rules and regulations, including penalties for violations
thereof, governing water transportation and the Philippine merchant marine
undertake the issuance of license to qualified seamen and harbor bay river pilots
etc.

VII. PHILIPPINE COAST GUARD

PD No. 601 issued on Dec. 09, 1974 otherwise known as the Revised Coast Guard Law of 1974
provides the objectives and basic functions of the Philippine Coast Guard. However, this is subject
to the changes brought about by EO No. 125 and EO No. 125-A and other special laws.
The objectives and powers of the Coast Guard are found in Sec. 2 and 5 of PD No. 601 which
provide as follows:
enforce or assist in the enforcement of all applicable laws upon the high seas and territorial
waters of the Philippines
enforce laws, promulgate and administer regulations for the promotion of safety of life and
property within the maritime jurisdiction of the Philippines
develop, establish, maintain and operate with due regard to the requirements of national
defense aids to maritime navigation for the promotion of safety on and over high seas and
territorial waters of the Philippines
etc.

VIII. PHILIPPINE PORTS AUTHORITY

PD No. 857 issued in Dec. 1975 organized the Philippine Ports Authority. The law recognized the
need to integrate and coordinate port planning, development, control and operations at the
national level, and at the same time promote the growth of regional port bodies responsive to the
needs of their individual localities.

IX. NATIONAL TELECOMMUNICATIONS COMMISSION

The NTC is the government agency created under EO No. 546 and conferred with regulatory and
quasi-judicial functions.
Primarily, the NTC is the sole body that exercises supervision, adjudication and control over
telecommunications services. It adopts and promulgates guidelines, rules, and regulations
relative to the establishment, operation and maintenance of various telecommunications facilities
and services nationwide.
NTC remains under the administartive supervision of the Department of Transportation and
Communication as an attached agency. However, with respect to its quasi-judicial functions,
NTC's decisions are appealable only and directly to the Supreme Court.

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