Transpo Case Digest: Finals

G.R. No. L-31150 July 22, 1975

KONINKLIJKE LUCHTVAART MAATSHAPPIJ
N.V., otherwise known as KLM ROYAL DUTCH
AIRLINES,petitioner,
vs.
THE HONORABLE COURT OF APPEALS,
CONSUELO T. MENDOZA and RUFINO T.
MENDOZA, respondents.
Facts: Sometime in March 1965 the respondents
approached Tirso Reyes, manager of a branch of the
Philippine Travel Bureau, a travel agency, for
consultations about a world tour which they were
intending to make with their daughter and a niece. Reyes
submitted to them, after preliminary discussions, a
tentative itinerary which prescribed a trip of thirty-five
legs; the respondents would fly on different airlines.
Three segments of the trip, the longest, would be via
KLM. The respondents expressed a desire to visit
Lourdes, France, and discussed with Reyes two alternate
routes, namely, Paris to Lourdes and Barcelona to
Lourdes. The respondents decided on the BarcelonaLourdes route with knowledge that only one airline, Aer
Lingus, serviced it.
After about two weeks, the respondents approved the
itinerary prepared for them, and asked Reyes to make
the necessary plane reservations. Reyes went to the
KLM, for which the respondents had expressed
preference. The KLM thereafter secured seat
reservations for the respondents and their two
companions from the carriers which would ferry them
throughout their trip, with the exception of Aer Lingus.
When the respondents left the Philippines (without their
young wards who had enplaned much earlier), they were
issued KLM tickets for their entire trip. However, their
coupon for the Aer Lingus portion (Flight 861 for June
22, 1965) was marked "RQ" which meant "on request".
After sightseeing in American and European cities (they
were in the meantime joined by their two young
companions), the respondents arrived in Frankfurt,
Germany. They went to a KLM office there and obtained
a confirmation from Aer Lingus of seat reservations on
flight 861. After meandering in London, Paris and
Lisbon, the foursome finally took wing to Barcelona for
their trip to Lourdes, France.

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In the afternoon of June 22, 1965 the respondents with

their wards went to the Barcelona airport to take their
plane which arrived at 4:00 o'clock. At the airport, the
manager of Aer Lingus directed the respondents to check
in. They did so as instructed and were accepted for
passage. However, although their daughter and niece
were allowed to take the plane, the respondents were offloaded on orders of the Aer Lingus manager who
brusquely shoved them aside with the aid of a policeman
and who shouted at them, "Conos! Ignorantes Filipinos!"
Mrs. Mendoza later called up the manager of Aer Lingus
and requested that they provide her and her husband
means to get to Lourdes, but the request was denied.
On March 17, 1966 the respondents, referring to KLM as
the principal of Aer Lingus, filed a complaint for
damages with the Court of First Instance of Manila
arising from breach of contract of carriage and for the
humiliating treatment received by them at the hands of
the Aer Lingus manager in Barcelona.
After due hearing, the trial court awarded damages to
the respondents as follows: $43.35 or its peso equivalent
as actual damages, P10,000 as moral damages, P5,000
as exemplary damages, and P5,000 as attorney's fees,
and expenses of litigation.
Hence, this petition.
Issue: Whether or not KLM should be held liable
for damage
Held: The argument that the KLM should not be held
accountable for the tortious conduct of Aer Lingus
because of the provision printed on the respondents'
tickets expressly limiting the KLM's liability for damages
only to occurrences on its own lines is unacceptable. As
noted by the Court of Appeals that condition was printed
in letters so small that one would have to use a
magnifying glass to read the words. Under the
circumstances, it would be unfair and inequitable to
charge the respondents with automatic knowledge or
notice of the said condition so as to preclude any doubt
that it was fairly and freely agreed upon by the
respondents when they accepted the passage tickets
issued to them by the KLM. As the airline which issued
those tickets with the knowledge that the respondents
would be flown on the various legs of their journey by

Transpo Case Digest: Finals

different air carriers, the KLM was chargeable with the
duty and responsibility of specifically informing the
respondents of conditions prescribed in their tickets or,
in the very least, to ascertain that the respondents read
them before they accepted their passage tickets. A
thorough search of the record, however, inexplicably
fails to show that any effort was exerted by the KLM
officials or employees to discharge in a proper manner
this responsibility to the respondents.
The respondents, under that assurance of the
internationally prestigious KLM, naturally had the right
to expect that their tickets would be honored by Aer
Lingus to which, in the legal sense, the KLM had
indorsed and in effect guaranteed the performance of its
principal engagement to carry out the respondents'
scheduled itinerary previously and mutually agreed upon
between the parties.
The breach of that guarantee was aggravated by the
discourteous and highly arbitrary conduct of an official
of the Aer Lingus which the KLM had engaged to
transport the respondents on the Barcelona-Lourdes
segment of their itinerary. It is but just and in full accord
with the policy expressly embodied in our civil law which
enjoins courts to be more vigilant for the protection of a
contracting party who occupies an inferior position with
respect to the other contracting party, that the KLM
should be held responsible for the abuse, injury and
embarrassment suffered by the respondents at the hands
of a supercilious boor of the Aer Lingus.

G.R. No. 70462 August 11, 1988

PAN AMERICAN WORLD AIRWAYS,
INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT, RENE V.
PANGAN, SOTANG BASTOS PRODUCTIONS and
ARCHER PRODUCTIONS, respondents.
Facts: On April 25, 1978, plaintiff Rene V. Pangan,
president and general manager of the plaintiffs Sotang
Bastos and Archer Production while in San Francisco,
Califonia and Primo Quesada of Prime Films, San
Francisco, California, entered into an agreement
whereby the former, for and in consideration of the

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amount of US $2,500.00 per picture, bound himself to

supply the latter with three films. 'Ang Mabait, Masungit
at ang Pangit,' 'Big Happening with Chikiting and Iking,'
and 'Kambal Dragon' for exhibition in the United States.
It was also their agreement that plaintiffs would provide
the necessary promotional and advertising materials for
said films on or before May 30, 1978.
On May 18, 1978, plaintiff Pangan obtained from
defendant Pan Am's Manila Office, through the Your
Travel Guide, an economy class airplane ticket with No.
0269207406324 for passage from Manila to Guam on
defendant's Flight No. 842 of May 27,1978, upon
payment by said plaintiff of the regular fare. On May 27,
1978, two hours before departure time plaintiff Pangan
was at the defendant's ticket counter at the Manila
International Airport and presented his ticket and
checked in his two luggages, for which he was given
baggage claim tickets. The two luggages contained the
promotional and advertising materials, the clutch bags,
barong tagalog and his personal belongings.
Subsequently, Pangan was informed that his name was
not in the manifest and so he could not take Flight No.
842 in the economy class. Since there was no space in
the economy class, plaintiff Pangan took the first class
because he wanted to be on time in Guam to comply with
his commitment, paying an additional sum of $112.00.
When plaintiff Pangan arrived in Guam on the date of
May 27, 1978, his two luggages did not arrive with his
flight; s a consequence of which his agreements with
Slutchnick and Quesada for the exhibition of the films in
Guam and in the United States were cancelled.
Thereafter, he filed a written claim for his missing
luggages.
Upon arrival in the Philippines, Pangan contacted his
lawyer, who made the necessary representations to
protest as to the treatment which he received from the
employees of the defendant and the loss of his two
luggages
Defendant Pan Am assured plaintiff Pangan that his
grievances would be investigated and given its
immediate consideration. Due to the defendant's failure
to communicate with Pangan about the action taken on
his protests, the present complaint was filed by the
plaintiff.

Transpo Case Digest: Finals

CFI held the petitioner liable which was affirmed by the
IAC.
In assailing the decision of the Intermediate Appellate
Court petitioner assigned the following errors:
1. The respondent court erred as a matter of law in
affirming the trial court's award of actual damages
beyond the limitation of liability set forth in the Warsaw
Convention and the contract of carriage.
2. The respondent court erred as a matter of law in
affirming the trial court's award of actual damages
consisting of alleged lost profits in the face of this Court's
ruling concerning special or consequential damages as
set forth in Mendoza v. Philippine Airlines
Issue: Whether or not petitioner should be held
liable for the lost luggage of the defendant
Held: NO.
On the basis of the foregoing stipulations printed at the
back of the ticket, petitioner contends that its liability for
the lost baggage of private respondent Pangan is limited
to $600.00 ($20.00 x 30 kilos) as the latter did not
declare a higher value for his baggage and pay the
corresponding additional charges. In view thereof
petitioner's liability for the lost baggage is limited to
$20.00 per kilo or $600.00, as stipulated at the back of
the ticket.
At this juncture, in order to rectify certain
misconceptions the Court finds it necessary to state that
the Court of Appeal's reliance on a quotation
from Northwest Airlines, Inc. v. Cuenca [G.R. No. L22425, August 31, 1965, 14 SCRA 1063] to sustain the
view that "to apply the Warsaw Convention which limits
a carrier's liability to US$9.07 per pound or US$20.00
per kilo in cases of contractual breach of carriage ** is
against public policy" is utterly misplaced, to say the
least.
Thus, it is quite clear that the Court never intended to,
and in fact never did, rule against the validity of
provisions of the Warsaw Convention. Consequently, by
no stretch of the imagination may said quotation
fromNorthwest be considered as supportive of the

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appellate court's statement that the provisions of the

Warsaw Convention limited a carrier's liability are
against public policy.
The Court finds itself unable to agree with the decision of
the trial court, and affirmed by the Court of Appeals,
awarding private respondents damages as and for lost
profits when their contracts to show the films in Guam
and San Francisco, California were cancelled. In the
absence of a showing that petitioner's attention was
called to the special circumstances requiring prompt
delivery of private respondent Pangan's luggages,
petitioner cannot be held liable for the cancellation of
private respondents' contracts as it could not have
foreseen such an eventuality when it accepted the
luggages for transit.
he evidence reveals that the proximate cause of the
cancellation of the contracts was private respondent
Pangan's failure to deliver the promotional and
advertising materials on the dates agreed upon. For this
petitioner cannot be held liable. Private respondent
Pangan had not declared the value of the two luggages he
had checked in and paid additional charges. Neither was
petitioner privy to respondents' contracts nor was its
attention called to the condition therein requiring
delivery of the promotional and advertising materials on
or before a certain date.
With the Court's holding that petitioner's liability is
limited to the amount stated in the ticket, the award of
attorney's fees, which is grounded on the alleged
unjustified refusal of petitioner to satisfy private
respondent's just and valid claim, loses support and
must be set aside.
[G.R. No. 127768. November 19, 1999]
UNITED AIRLINES, petitioner, vs. WILLIE J.
UY, respondent.
Facts: On October 13, 1989, respondent, a passenger of
United Airlines, checked in together with his luggage one
piece of which was found to be overweight at
the airline counter. To his utter humiliation, an
employee of petitioner rebuked him saying that he
should have known the maximum weight allowance per
bag and that he should have packed his things
accordingly. Then, in a loud voice in front of the milling
crowd, she told respondent to repair his things and
transfer some of them to the light ones. Respondent
acceded but his luggage was still overweight. Petitioner

Transpo Case Digest: Finals

billed him overweight charges but its employee reused to
honor the miscellaneous charges under MCD which he
offered to pay with. Not wanting to leave without his
luggage, he paid with his credit card. Upon arrival in
manila, he discovered that one of his bags had been
slashed and its contents stolen. In a letter dated October
16, 1989, he notified petitioner of his loss and requested
reimbursement. Petitioner paid for his loss based on the
maximum liability per pound. Respondent considered
the amount grossly inadequate. He sent two more letters
to petitionbut to no avail. On June 9, 1992, respondent
filed a complaint for damages against petitioner Airline.
Petitioner moved to dismiss the complaint invoking the
provisions of Article 29 of the Warsaw Convention.
Respondent countered that according to par. 2 of Article
29, the method of calculating the period of limitation
shall be determined by the law of the court to which the
case is submitted.
Issues:
1) Does the Warsaw Convention preclude the operation
of the Civil Code and other pertinent laws?
2) Has the respondents cause of action prescribed?
Held: 1) No. Within our jurisdiction we have held that
the Warsaw Convention can be applied, or ignored,
depending on the peculiar facts presented by each case.
Convention provisions do not regulate or exclude
liabilities for other breaches of contract by the carrier or
misconduct of its officers and employees, or for some
particular or exceptional type of damage. Neither may
the Convention be invoked to justify the disregard of
some extraordinary type of damage. Neither may the
Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger
and preclude recovery therefore3 beyond the limits et by
said convention. Likewise, we have held that the
Convention does not preclude the operation of the Civil
Code and other pertinent laws. It does not regulate,
much less exempt, the carrier from liability for damages
for violating the rights of its passengers under the
contract of carriage, especially if willful misconduct on
the part of the carriersemployees is found or established.
2) No. While his 2nd cause of action (an action for
damages arising from theft or damage to property or
goods) is well within the bounds of the Warsaw
convention, his 1st cause of action (an action for
damages arising from the misconduct of
the airline employees and the violation of respondents
rights as passengers) clearly is not.
The 2-yr limitation incorporated in Art. 29 of the
Warsaw Convention as an absolute bar to suit and not to
be made subject to the various tolling provisions of the

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laws of the forum, forecloses the application of our own

rules on interruption of prescriptive periods. (Art. 29,
par. 2 was indented only to let local laws determine
whether an action shall be deemed commenced upon the
filing of a complaint.) Since, it is indisputable that
respondent filed the present action beyond the 2-yr time
frame his 2nd cause of action must be barred.
However, it is obvious that respondent was forestalled
from immediately filing an action because petitioner
gave him the runaround, answering his letters but not
giving in to his demands. True, respondent should have
already filed an action at the first instance when
petitioner denied his claims but the same could only be
due to his desire to make an out-of-court settlement for
which he cannot be faulted. Hence, despite the express
mandate of Article 29 of the Warsaw Convention that an
action for damages should be filed within 2 years from
the arrival at the place of destination, such rule shall not
be applied in the instant case because of the delaying
tactics employed by petitioner airlines itself. Thus,
respondents 2nd cause of action cannot be considered
as time barred.

[G.R. No. 151783. July 8, 2003]

VICTORINO SAVELLANO, VIRGINIA B.
SAVELLANO and DEOGRACIAS B.
SAVELLANO, petitioners, vs. NORTHWEST
AIRLINES, respondent
When, as a result of engine malfunction, a commercial
airline is unable to ferry its passengers on the original
contracted route, it nonetheless has the duty of fulfilling
its responsibility of carrying them to their contracted
destination on the most convenient route
possible. Failing in this, it cannot just unilaterally
shuttle them, without their consent, to other routes or
stopping places outside of the contracted
sectors. However, moral damages cannot be awarded
without proof of the carriers bad faith, ill will, malice
or wanton conduct. Neither will actual damages be
granted in the absence of convincing and timely proof
of loss. But nominal damages may be allowed under
the circumstances in the case herein.
Facts:
Petitioners Victorino, Virginia and Deogracias, all
surnamed Savellano, wereon board Northwest
Airlines Flight 27 bound for Manila when the
pilot made anemergency landing in Seattle because of
a fire which has started in one of planesengine. As a
result, they were billeted at a hotel nearby and
instructed that theycan use the same boarding
passes the next day. The family received a call,
thatmidnight, advising them to be at the airport by 7:00
a.m. for their departure,

Transpo Case Digest: Finals

thusm a k i n g t h e m s k i p b r e a k f a s t . W h e n p e t i t
i o n e r s r e a c h e d t h e a i r p o r t , t h e y w e r e belate
dly advised that instead of flying to Manila they
would have to board NWFlight bound to Los Angeles
for a connecting flight to Manila. In Los Angeles,
theyf o u n d o u t t h a t n o f l i g h t w a s p o s t e d
bound for Manila, thus it was only aft
e r complaining that the flight was changed to include
Manila. On arrival at the Manilaairport, Col. Delfin
teased the petitioners for taking the longer and tiresome
route tothe Philippines. Thus, they filed a
complaint for damages because they
sufferedinconvenience, embarrassment, and
humiliation for taking a longer route. The RTCr u l e d i n
favor of and granted moral damages to
petitioners because they
w e r e excluded from the Seattle-Tokyo-Manila
flight to accommodate several Japanesepassenger
s for Japan. On appeal, the CA reversed the ruling of the
lower court andheld that there was no basis for the
award of moral damages finding no bad faith,negligence
or malice in transporting petitioners via the Seattle-Los
Angeles-Seoul-Manila route.
Issue:
Whether or not petitioners are entitled to moral damages
as a consequenceof the breach by respondent airline of
its air-carriage contract?
Ruling:
The Supreme Court was not convinced whe
n p e t i t i o n e r s i m p u t e d i m p u t e oppression,
discrimination, recklessness and malevolence to
respondent. There isno persuasive evidence that they
were maliciously singled out to fly the SeattleLosAngeles-Seoul-Manila route. It appears that the
passengers of the distressed flightwere randomly
divided into two groups. One group was made to
take the Tokyo-Manila flight; and the other, the
Los Angeles-Seoul-Manila flight. The selection of who
was to take which flight was handled via the
computer reservation system, which took
into account only the passengers final destination. The
records show that respondent was impelled by
sincere motives to get petitioners to their final
destination by whatever was the most expeditious course
--i n i t s j u d g m e n t , i f n o t i n t h e i
rs. Though they claim that they
w e r e n o t accommodated on Flight 27 from Seattle
to Tokyo because respondent had takenon Japanese
passengers, petitioners failed to present convincing
evidence to backthis allegation. In the absence of
convincing evidence, respondent could not
befound guilty of bad
faith.P e t i t i o n e r s h a v e f a i l e d t o s h o w c o n v i n c
ingly that they were rerouted byresponden
t to Los Angeles and Seoul because of mali

5 | Page

c e , p r o f i t m o t i v e o r s e l f - interest. Good faith is

presumed, while bad faith is a matter of fact that needs
to beproved by the party alleging it.In the absence of
bad faith, ill will, malice or wanton conduct,
respondentcannot be held liable for moral
damages. Article 2219 of the Civil Code enumeratesthe
instances in which moral damages may be
awarded. In a breach of
contract,s u c h d a m a g e s a r e n o t a w a r d e d
if the defendant is not shown to have
a c t e d fraudulently or with malice or bad faith.
Insufficient to warrant the award of moraldamages is
the fact that complainants suffered economic
hardship, or that they worried and experienced
mental anxiety.

G.R. No. 106664 March 8, 1995

PHILIPPINE AIR LINES, petitioner,
vs.
FLORANTE A. MIANO, respondent.
Facts: On August 31, 1988, private respondent took
petitioner's flight bound for Germany. He had an
immediate onward connecting flight via Lufthansa flight
to Vienna, Austria. At the NAIA, he checked-in one
brown suitcase but did not declare a higher valuation. He
claimed that his suitcase contained money, documents,
one Nikkon camera with zoom lens, etc. Upon private
respondent's arrival at Vienna, his checked-in baggage
was missing. He reported the matter to the authorities
and after three (3) hours of waiting, he proceeded to
Piestany, Czechoslovakia. Eleven (11) days after, his
suitcase was delivered to him in Piestany. Private
respondent instituted an action for damages before the
RTC Makati which rendered a decision awarding private
respondent moral and exemplary damages and attys
fees.
Issue: WON the RTC erred in awarding moral and
exemplary damages to private respondent.
Ruling: Assailed Decision MODIFIED deleting the
award of moral and exemplary damages and attorney's
fees.

In breach of contract of carriage by air, moral damages

are awarded only if the defendant acted fraudulently or
in bad faith. The trial court erred in awarding moral

Transpo Case Digest: Finals

damages to private respondent. The established facts
evince that petitioner's late delivery of the baggage for
eleven (11) days was not motivated by ill will or bad faith.
The SC neither sustained the award of exemplary
damages. The prerequisite for the award of exemplary
damages in cases of contract or quasi-contract is that the
defendant acted in wanton, fraudulent, reckless,
oppressive, or malevolent manner. The undisputed facts
do not so warrant the characterization of the action of
petitioner.

The award of attorney's fees must also be disallowed for

lack of legal leg to stand on. Needless to say, award of
attorneys fees must be deleted where the award of moral
and exemplary damages are eliminated.

G.R. No. L-47447-47449

October 29, 1941

73 Phil 330

TEODORO R. YANGCO, ETC., petitioner,

vs.
MANUEL LASERNA, ET AL., respondents.
Facts: At about one o'clock in the afternoon of May 26,
1927, thesteamer S.S. Negros, belonging to petitioner
here, Teodoro R. Yangco, left the port of Romblon on its
return trip to Manila. Typhoon signal No. 2 was then up,
of which fact the captain was duly advised and his
attention thereto called by the passengers themselves
before the vessel set sail. The boat was overloaded as
indicated by the load line which was 6 to 7 inches below
the surface of the water. The
passengers, numbering about 180, were overcrowded,
the vessel's capacity being limited to only 123
passengers. As the sea became increasingly violent, the
captain ordered the vessel to turn left, evidently to
return to port, but in the maneuver, the vessel was
caught sidewise by a big wave which caused it to capsize
and sink. Many of the passengers died in the mishap.
Separate civil actions were filed against petitioner to
recover damages for the death of the passengers.
Issue: May the shipowner or agent, notwithstanding the
total loss of the vessel as a result of the negligence of its
captain, be properly held liable in damages for the
consequent death of its passengers?
Held: No. This question is controlled by the provisions
of article 587 of the Code of Commerce. Said article
reads:

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The agent shall also be civilly liable for the indemnities

in favor of third persons which arise from the conduct of
the captain in the care of the goods which the vessel
carried; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the
freight he may have earned during the voyage.
The provisions accords a shipowner or agent the right of
abandonment; and by necessary implication, his liability
is confined to that which he is entitled as of right to
abandon "the vessel with all her equipment and the
freight it may have earned during the voyage."
Lawful acts and obligations of the captain beneficial to
the vessel may be enforced as against the agent for the
reason that such obligations arise from the contract of
agency while as to any liability incurred by the captain
through his unlawful acts, the ship agent is simply
subsidiarily civilly liable. This liability of the agent is
limited to the vessel and it does not extend further. For
this reason the Code of Commerce makes the agent liable
to the extent of the value of the vessel, as the codes of the
principal maritime nations provide with the vessel, and
not individually.
If the shipowner or agent may in any way be held civilly
liable at all for injury to or death of passengers arising
from the negligence of the captain in cases of collisions
or shipwrecks, his liability is merely co-extensive with
his interest in the vessel such that a total loss thereof
results in its extinction.
Assuming that petitioner is liable for a breach of contract
of carriage, the exclusively "real and hypothecary nature"
of maritime law operates to limit such liability to the
value of the vessel, or to theinsurance thereon, if any. In
the instant case it does not appear that the vessel was
insured. Whether the abandonment of the vessel sought
by the petitioner in the instant case was in accordance
withlaw of not, is immaterial. The vessel having totally
perished, any act of abandonment would be an idle
ceremony.
Yangco is therefore absolved from the complaints.
G.R. No. 89757 August 6, 1990
ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
COURT OF APPEALS AND GENERAL ACCIDENT
FIRE AND LIFE ASSURANCE CORPORATION,
LTD.,respondents.
Facts:
On October 28, 1980, M/V P/ Aboitiz took on board in

Transpo Case Digest: Finals

Hong Kong for shipment to Manila one twenty-footer
container holding 281 rolls of goods and one twentyfooter container holding 447 rolls, 10 bulk and 95
carbons of goods for apparel covered by bill of lading No.
575-M. Both shipment were consigned to the Philippines
Apparel, Inc an insured with the general Accident Fire
and Life Assurance Corporation, Ltd (GAFLAC). The
vessel is owned aned operated to manila, the vessel sank
and it was declared lost wit all its cargoes. CAFLAC was
subrogated to all the rights, interests of action of the
consignee against Aboitiz, it filed an action for damages
against Abiotiz in the RTC of Manila alleging that the
loss was due to the fault or negligence of Aboitiz and the
master and crew of its vessel in that they did not observe
extraordinary diligence required by law as regards to
common carrier.
Issue:
Whether or not the loss was due to fortuitous event.
Held:
The trial court and the appellee court found that the
sinking of M/V P.Aboitiz was not due to waves caused by
tropical storm Yooning but due to the fault and
negligence of petitioner, its master and crew.
In accordance with Article 1732 of the Civil Code, the
defendant common carrier, from the nature of its
business and for reasons of public policy, is bound to
observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by
it according to all the circumstances of each case. While
the goods are in the possession of the carrier, it is but
fair that it exercise extra ordinary diligence in protecting
them from loss or damage, and if its occurs the law
presumes that it was due to the carrier's fault or
negligence; that is necessary to protect the interest of the
shipper which is at the mercy of the carrier (Article 1756,
Civil Code; Anuran vs. Puno, 17 SCRA 224; Nocum vs.
Laguna Tayabas Bus Co., 30 SCRA 69; Landigan vs.
Pangasinan Transportation Company, 88 SCRA 284). In
the case at bar, the defendant failed to prove that the loss
of the subject cargo was not due to its fault or negligence.
Petition dismissed.
G..R. No. 156978

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May 2, 2006

ABOITIZ SHIPPING CORPORATION, Petitioner,

vs.
NEW INDIA ASSURANCE COMPANY,
LTD., Respondent.
FACTS:
Societe Francaise Des Colloides loaded a cargo of textiles
and auxiliary chemicals from France on board a vessel
owned by Franco-Belgian Services, Inc. The cargo was
consigned to General Textile, Inc., in Manila and insured
by respondent New India Assurance Company, Ltd.
While in Hong Kong, the cargo was transferred to M/V
P. Aboitiz for transshipment to Manila.
Before departing, the vessel was advised by the Japanese
Meteorological Center that it was safe to travel to its
destination. But while at sea, the vessel received a report
of a typhoon moving within its general path. To avoid the
typhoon, the vessel changed its course. However, it was
still at the fringe of the typhoon when its hull leaked. On
October 31, 1980, the vessel sank, but the captain and his
crew were saved.
Both the trial and the appellate courts found that the
sinking was not due to the typhoon but to its
unseaworthiness.
ISSUE:
Whether the limited liability doctrine, which limits
respondents award of damages to its pro-rata share in
the insurance proceeds, applies in this case.
HELD:
No. x x x An exception to the limited liability doctrine is
when the damage is due to the fault of the shipowner or
to the concurrent negligence of the shipowner and the
captain. In which case, the shipowner shall be liable to
the full-extent of the damage.
xxx
In the present case, petitioner has the burden of showing
that it exercised extraordinary diligence in the transport
of the goods it had on board in order to invoke the
limited liability doctrine. Differently put, to limit its
liability to the amount of the insurance proceeds,
petitioner has the burden of proving that the
unseaworthiness of its vessel was not due to its fault or
negligence. Considering the evidence presented and the
circumstances obtaining in this case, we find that

Transpo Case Digest: Finals

petitioner failed to discharge this burden. It initially
attributed the sinking to the typhoon and relied on the
BMI findings that it was not at fault. However, both the
trial and the appellate courts, in this case, found that the
sinking was not due to the typhoon but to its
unseaworthiness. Evidence on record showed that the
weather was moderate when the vessel sank. These
factual findings of the Court of Appeals, affirming those
of the trial court are not to be disturbed on appeal, but
must be accorded great weight. These findings are
conclusive not only on the parties but on this Court as
well.
[G.R. No. 128661. August 8, 2000]
PHILIPPINE NATIONAL BANK/NATIONAL
INVESTMENT DEVELOPMENT
CORPORATION, petitioners, vs. THE COURT OF
APPEALS, CHINA BANKING
CORPORATION, respondents.
Facts: To finance the acquisition of 7 shipping vessels,
the Philippine International Shipping Corporation
(PISC) applied for and was granted by National
Investment Development Corporation (NIDC) guaranty
accomodations. As security for these guaranty
accomodations, PISC executed chattel mortgages on the
vessels to be acquired by it. Meanwhile, PISC entered
into a contract with Hong Kong United Dockyards, Ltd.
for the repair and conversion of one of the vessels, M/V
Asean Liberty. The Central Bank of the Phils. authorized
PISC to open with China Banking Corporation (CBC) a
standby letter of credit for US$545,000 in favor of
Citibank, N.A. to cover the repair and partial conversion
of the vessel M/V Asean Liberty.
PISC executed an Application and Agreement for
Commercial Letter of Credit for US$545,000 with CBC
in favor of Citibank. CBC then issued its Irrevocable
Standby Letter of Credit for US$545,000 in favor of
Citibank for the account of PISC. PISC executed a
promissory note for US$545,000 in favor of Citibank
pursuant to the Loan Agreement between PISC and
Citibank. Upon failure of PISC to fulfill its obligations,
Citibank sent CBC a letter drawing on the Letter of
Credit. CBC then instructed its correspondent Irving
Trust Co. to pay to Citibank the amount of US$242,225.
Subsequently, for failure of PISC to settle its obligations
under the guaranty accommodations, the Philippine
National Bank (PNB) conducted an auction sale of the
mortgaged vessels. NIDC emerged as the highest bidder
in these auctions. PISC, claiming that the foreclosure
sale of its mortgaged vessels was illegal and irregular,
instituted a civil case for the annulment of the
foreclosure and auction sale. CBC filed a complaint in

8 | Page

intervention for recovery upon a maritime lien against

the proceeds of the sale of the foreclosed vessels.
Issue: Whether or not CBCs claim as evidenced by its
Irrevocable Letter of Credit is in the nature of a maritime
lien under the provisions of P.D. No. 1521; and if so,
whether or not said maritime lien is preferred over the
mortgage lien of PNB/NIDC on the foreclosed vessel
M/V Asean Liberty
Held: Under the provisions of P.D. No. 1521, any person
furnishing repairs, supplies, or other necessities to a
vessel on credit will have a maritime lien. Such maritime
lien, if it arose prior to the recording of a preferred
mortgage lien, shall have priority over the said mortgage
lien. In this case, it was Hongkong United Dockyards,
Ltd. which originally possessed a maritime lien over the
vessel M/V Asean Liberty by virtue of its repair of the
said vessel on credit. CBC, however, stands as guarantor
of the loan extended by Citibank to PISC. It was
Citibank which advanced the money to PISC. It was only
upon the failure of PISC to fulfill its obligations under its
promissory note to Citibank that CBC was called upon by
Citibank to exercise its duties under the Standby Letter
of Credit. The applicable law, which is the Shipping
Mortgage Decree of 1978, was patterned closely after the
U.S. Ship Mortgage Act of 1920. Being of foreign origin,
the provisions of the Ship Mortgage Decree of 1978 may
thus be construed with the aid of foreign jurisprudence.
Under American jurisprudence, furnishing money to a
master in good faith to obtain repairs or supplies or to
remove liens, in order to forward the voyage of the
vessel, raises a lien just as though the things for which
money was obtained to pay for had been furnished by the
lender. This is in accord with Art5. 1302 of the Civil
Code which provides that there is legal subrogation
when a third person, not interested in the fulfillment of
the obligation, pays with the express or tacit approval of
the debtor. In this case, the amount for the repair of
vessel M/V Asean Liberty was advanced by Citibank and
was used for the purpose of paying off the original
maritime lienor, Hongkong United Dockyards, Ltd. As a
person not interested in the fulfillment of the obligation
between PISC and Hongkong United Dockyards, Ltd.,
Citibank was subrogated to the rights of Hongkong
United Dockyards, Ltd. as maritime lienor over the
vessel. CBC, as guarantor, was itself subrogated to all
the rights of Citibank as against PISC, the latters
debtor. Art. 2067 of the civil Code provides that the
guarantor who pays is subrogated by virtue thereof to all
the rights which the creditor had against the debtor.
When CBC honored its contract of guaranty with
Citibank on March 30, 1983, it also acquired by
subrogation the maritime lien over the vessel which
attached to it on March 12, 1979 in favor of Hongkong
United Drydocks, Ltd. The maritime lien of CBC thus
arose prior to the recording of PNB/NIDCs mortgage on
September 25, 1979. As such, the said maritime lien has
priority over the said mortgage lien.

Transpo Case Digest: Finals

GR No. 163156, December 10, 2008

NEGROS NAVIGATION CO. vs. CA
Facts: Private respondent Ramon Miranda purchased
from the Negros Navigation Co., Inc. four special cabin
tickets for his wife, daughter, son and niece who were
going to Bacolod City to attend a family reunion
boarding the Don Juan. Don Juan collided off the Tablas
Strait in Mindoro, with the M/T Tacloban City, an oil
tanker owned by the Philippine National Oil Company
(PNOC) and the PNOC Shipping and Transport
Corporation (PNOC/STC). As a result, the M/V Don
Juan sank. Several of her passengers perished in the sea
tragedy. The bodies of some of the victims were found
and brought to shore, but the four members of private
respondents' families were never found.
Issue: Whether or not the petitioners exercised the
extraordinary diligence required?
Held: No. As with the Mecenas case, this Court found
petitioner guilty of negligence in (1) allowing or
tolerating the ship captain and crew members in playing
mahjong during the voyage, (2) in failing to maintain the
vessel seaworthy and (3) in allowing the ship to carry
more passengers than it was allowed to carry.
Also, the duty to exercise due diligence includes the duty
to take passengers or cargoes that are within the carrying
capacity of the vessel.
G.R. No. L-22545

November 28, 1969

BALDOMERO S. LUQUE AND OTHER

PASSENGERS FROM THE PROVINCE OF
CAVITE AND BATANGAS; AND PUBLIC
SERVICE OPERATORS FILOMENA ABALOS,
AND OTHERS, petitioners,
vs.
HON. ANTONIO J. VILLEGAS, MAYOR OF
MANILA; MUNICIPAL BOARD OF MANILA;
MANILA POLICE DEPARTMENT; HON.
ENRIQUE MEDINA, PSC COMMISSIONER;
PUBLIC SERVICE COMMISSION; SAULOG
TRANSIT, INC.; AND BATANGAS
TRANSPORTATION CO., INC., respondents.
Challenged as unconstitutional, illegal and unjust in
these original proceedings for certiorari and mandamus

9 | Page

are two substantially identical bus ban measures: (1)

Ordinance No. 4986 of the City of Manila approved on
July 13, 1964, entitled "An Ordinance Rerouting Traffic
on Roads and Streets in the City of Manila, and for Other
Purposes," and (2) Administrative Order No. 1, series of
1964, dated February 7, 1964, and Administrative Order
No. 3, series of 1964, dated April 21, 1964, both issued by
Commissioner Enrique Medina (hereinafter referred to
as the Commissioner) of the Public Service Commission.
Facts: Original petitioners are passengers from the
provinces of Cavite and Batangas who ride on buses
plying along the routes between the said provinces and
Manila. Other petitioners are public service operators
operating PUB and PUJ public service vehicles from the
provinces with terminals in Manila, while the rest are
those allegedly operating PUB, PUJ or AC motor vehicles
operating within Manila and suburbs.
Ordinance 4986, amongst others, provides that:
RULE II. ENTRY POINTS AND ROUTES OF
PROVINCIAL PASSENGER BUSES AND
JEEPNEYS
1. Provincial passenger buses and jeepneys (PUB
and PUJ) shall be allowed to enter Manila, but
only through the following entry points and
routes, from 6:30 A.M. to 8:30 P.M. every day
except Sundays and holidays:
xxx

xxx

xxx

(m) Those coming from the south

through F. B. Harrison shall proceed to
Mabini; turn right to Harrison
Boulevard; turn right to Taft Avenue and
proceed towards Pasay City;
(n) Those coming from the south
through Taft Avenue shall turn left at
Vito Cruz; turn right to Dakota; turn
right to Harrison Boulevard; turn right
to Taft Avenue; thence proceed towards
Pasay City;
Loading and unloading shall be allowed
only at Harrison Boulevard, between A.
Mabini and Taft Avenue;

Transpo Case Digest: Finals

xxx

xxx

xxx

RULE III. FLEXIBLE SHUTTLE BUS SERVICE

1. In order that provincial commuters shall not
be unduly inconvenienced as a result of the
implementation of these essential traffic control
regulations, operators of provincial passenger
buses shall be allowed to provide buses to
shuttle their passengers from their respective
entry control points, under the following
conditions:
(a) Each provincial bus company or firm
shall be allowed such number of shuttle
buses proportionate to the number of
units authorized it, the ratio to be
determined by the Chief, Traffic Control
Bureau, based on his observations as to
the actual needs of commuters and
traffic volume; in no case shall the
allocation be more than one shuttle bus
for every 10 authorized units, or fraction
thereof.
(b) No shuttle bus shall enter Manila
unless the same shall have been
provided with identification stickers as
required under Rule IV hereof, which
shall be furnished and allocated by the
Chief, Traffic Control Bureau to each
provincial bus company or firm.
(c) All such shuttle buses are not
permitted to load or unload or to pick
and/or drop passengers along the way
but must do so only in the following
places:
xxx

xxx

xxx

xxx

xxx

All such public utility vehicles authorized by this

Order to enter the City of Manila and to carry
their passengers thru the boundary line, are not
permitted to load or unload or to pick and/or
drop passengers along the way, but must do so
only in the following places:
xxx

xxx

xxx

c. Vehicles coming from the SOUTH may load or

unload at the San Andres-Taft Rotonda; at Plaza
Lawton or at the Corner of Harrison and Mabini
Streets near the Manila Zoo.

xxx

(3) South
(a) Harrison Boulevard, between Dakota
and Taft Avenue.
Administrative Order No. 1, series of 1964, issued by the
Commissioner, in part, provides:

10 | P a g e

2. All public utilities including jeepneys

heretofore authorized to operate from the City of
Manila to any point in Luzon, beyond the
perimeter of Greater Manila, shall carry the
words "For Provincial Operation" in bold and
clear types on both sides or on one side and at
the back of the vehicle and must not be less than
12 inches in dimension. All such vehicles marked
"For Provincial Operation" are authorized to
operate outside the perimeter of Greater Manila
in accordance with their respective certificates of
public convenience, and are not authorized to
enter or to operate beyond the boundary line
fixed in our order of March 12, 1963 and July 22,
1963, with the exception of those vehicles
authorized to carry their provincial passengers
thru the boundary line up to their Manila
terminal which shall be identified by a sticker
signed and furnished by the PSC and by the
Mayors of the affected Cities and municipalities,
and which shall be carried on a prominent place
of the vehicle about the upper middle part of the
windshield.

On April 21, 1964, the Commissioner issued

Administrative Order No. 3 which resolved motions for
reconsideration (of the first administrative order
Administrative Order No. 1, series of 1964) filed by
several affected operators. This order (No. 3), amongst
others, states that only 10% of the provincial buses and
jeepneys shall be allowed to enter Manila; however,
provincial buses and jeepneys "operating within a radius
of 50 kms. from Manila City Hall and whose business is
more on the Manila end than on the provincial end are

Transpo Case Digest: Finals

given fifteen per cent to prevent a dislocation of their
business; provided that operators having less than five
units are not permitted to cross the boundary and shall
operate exclusively on the provincial end." This order
also allocated the number of units each provincial bus
operator is allowed to operate within the City of Manila.
Petitioners' other gripe against Ordinance 4986 is that it
destroys vested rights of petitioning public services to
operate inside Manila and to proceed to their respective
terminals located in the City. They would want likewise
to nullify said ordinance upon the averment that it
impairs the vested rights of petitioning bus passengers to
be transported directly to downtown Manila.
Issue: Whether or not the ordinances are
unconstitutional
It has been said that a vested right is one which is "fixed,
unalterable, or irrevocable." Another definition would
give vested right the connotation that it is "absolute,
complete, and unconditional, to the exercise of which no
obstacle exists . . . ."4 Petitioners' citation from 16 C.J.S.,
pp. 642-643 correctly expresses the view that when the
"right to enjoyment, present or prospective, has become
the property of some particular person or persons as a
present interest," that right is a vested right. Along the
same lines is our jurisprudential concept. The right must
be absolute, complete, and unconditional, independent
of a contingency, and a mere expectancy of future
benefit, or a contingent interest in property founded on
anticipated continuance of existing laws, does not
constitute a vested right. So, inchoate rights which have
not been acted on are not vested."
Of course, whether a right is vested or not, much
depends upon the environmental facts
Contending that they possess valid and subsisting
certificates of public convenience, the petitioning public
services aver that they acquired a vested right to operate
their public utility vehicles to and from Manila as
appearing in their said respective certificates of public
convenience.
Petitioner's argument pales on the face of the fact that
the very nature of a certificate of public convenience is at
cross purposes with the concept of vested rights. To this
day, the accepted view, at least insofar as the State is
concerned, is that "a certificate of public convenience

11 | P a g e

constitutes neither a franchise nor a contract, confers

no property right, and is a mere license or
privilege." The holder of such certificate does not
acquire a property right in the route covered thereby.
Nor does it confer upon the holder any proprietary right
or interest of franchise in the public
highways.Revocation of this certificate deprives him of
no vested right. Little reflection is necessary to show that
the certificate of public convenience is granted with so
many strings attached. New and additional burdens,
alteration of the certificate, and even revocation or
annulment thereof is reserved to the State.
And more. Public services must also reckon with
provincial resolutions and municipal ordinances relating
to the operation of public utilities within the province or
municipality concerned. The Commission can require
compliance with these provincial resolutions or
municipal ordinances.1
Very little need be added to show that neither do bus
passengers have a vested right to be transported directly
into the City of Manila. It would suffice if a statement be
here made that the alleged right of bus passengers, to a
great extent, is dependent upon the manner public
services are allowed to operate within a given area.
Because, regulations imposed upon public services
directly affect the bus passengers. It is quite obvious that
if buses were allowed to load or unload solely at specific
or designated places, a passenger cannot legally demand
or insist that the operator load or unload him at a place
other than those specified or designated.
It is no argument to support the vested rights theory that
petitioning passengers have enjoyed the privilege of
having been continuously transported even before the
outbreak of the war directly without transfer from the
provinces to places inside Manila up to the respective
bus terminals in said City. Times have changed. Vehicles
have increased in number. Traffic congestion has moved
from bad to worse, from tolerable to critical. The number
of people who use the thoroughfares has multiplied.
It is because of all of these that it has become necessary
for the police power of the State to step in, not for the
benefit of the few, but for the benefit of the many.
Reasonable restrictions have to be provided for the use
of the thoroughfares.1The operation of public services
may be subjected to restraints and burdens, in order to
secure the general comfort.No franchise or right can be

Transpo Case Digest: Finals

availed of to defeat the proper exercise of police power
the authority "to enact rules and regulations for the
promotion of the general welfare."
Both Ordinance 4986 and the Commissioner's
administrative orders fit into the concept of promotion
of the general welfare.
FOR THE REASONS GIVEN, the petition herein is
denied.
Costs against petitioners. So ordered.

Kilusang Mayo Uno Labor Center v. Jesus

Garcia, Jr., LTFRB, Provincial BusOperators
Association of the Philippines (PBOAP)
G.R. No. 115381 December 23, 1994
Kapunan, J.
FACTS:

public utilities privately owned and operated

businesses whose service are essential
tot h e g e n e r a l p u b l i c ; e n t e r p r i s e s w h i c h
specially cater to the needs of the publi
c a n d conducive to their comfort and convenience

DOT C Sec. issu ed M emorandu m C ircu l ar N o.

9 0- 39 5 t o t hen LT FRB Chair man
al l ow ing provincial bus operators to charge passengers
rates within a range of 15% above and 15%below the
LTFRB official rate for a period of 1 year

PBOAP pursuant to Memo. Cir. it filed an application

for fare rate increase. An across-the-b o a r d i n c r e a s e
of eight and a half centavos (P0.085) p
e r k i l o m e t e r f o r a l l t y p e s o f provincial
buses with a minimum-maximum fare range of fifteen
(15%) percent over andbelow the proposed basic per
kilometer fare rate, with the said minimum-maximum
farerange applying only to ordinary, first class and
premium class buses and a fifty-centavo(P0.50)
minimum per kilometer fare for aircon buses, was
sought

respondent LTFRB rendered a decision granting the fare

rate increase in accordance with aspecified schedule of
fares on a straight computation method

DOT C Sec. issu ed Depart ment Or der N o. 9 2 5 8 7 def in ing t he pol icy fram ew ork on

12 | P a g e

t heregulation of transport services. It provides inter alia

that Passenger fares shall also
bed e r e g u l a t e d , e x c e p t f o r t h e l o w e s t c l a
ss of passenger service (normally third
c l a s s pa sseng er t ransport ) for w hic h t he gov er
nment w il l
f ix indi cat iv e or ref erenc e f ares. Oper ators of
part i cul ar serv ic es ma y f ix their ow n f ares
w it hin a range 15% abov e and below the indicative or
reference rate.

LTFRB issued Memorandum Circular No

. 92-009 promulgating the guidelines
f o r t h e impl ement at ion of DOT C Depart ment
Or der No. 9 2 -5 8 7, w hich prov i des, among
ot hers, that:T he issu anc e of a Cert if i cat e of
Pu bl i c Conv eni enc e is det ermin ed by pu bl i c
ne ed. T he presumption of public need for a service
shall be deemed in favor of the applicant, whileburden of
proving that there is no need for the proposed service
shall be the oppositors.T he e xist ing au t horiz ed
f are range sy st em of pl u s or minu s 15 per cent
f or prov inci al buses and jeepneys shall be widened to
20% and -25% limit in 1994 with the authorizedfare to
be replaced by an indicative or reference rate as the basis
for the expanded farerange

PB OAP - av ail ing it s elf of the

d eregul at ion pol i cy of the DOT C al l ow ing
prov inc ial bu soperat ors to col l ect plu s 2 0%
an d minu s 25 % of the prescr ibed f are w it hout
f irst hav ing filed a petition for the purpose and without
the benefit of a public hearing, announced afare increase
of twenty (20%) percent of the existing fares

KMU filed a petition before the LTFRB opposing the

upward adjustment of bus fares.
ISSUE:
W ON t he abov e memorand a, c ircu l ars an d/ or
order s of the DOT C an d t he
LT FRBw h ich, among ot hers, ( a)
au t horize prov inci al bu s and jeepn ey
oper at ors to in crea se or decrease the prescribed
transportation fares without application therefor
with the LTFRB andwithout hearing and approval
thereof by said agency is in violation of Sec. 16(c) of CA
146,a n d i n d e r o g a t i o n o f L T F R B s d u t y t o
fix and determine just and reasonable
f a r e s b y delegating that function to bus operators, and
(b) establish a presumption of public need inf av or of
ap pl icant s for cert if i cat es of pu bl i c
conv en ienc e an d pl ac e on t he opposit or
t heburden of proving that there is no need for
the proposed service, in patent violation not onlyof Sec.
16(c) of CA 146, as amended, but also of Sec. 20(a) of the
same Act mandating thatfares should be just and reasonable

Transpo Case Digest: Finals

HELD:
Yes.

Section 16(c) of the Public Service Act, as amended,

reads:Sec. 16. Proceedings of the Commission, upon
notice and hearing. The Commission shallhave power,
upon proper notice and hearing in accordance with
the rules and provisions of this Act, subject to the
limitations and exceptions mentioned and saving
provisions to thecontrary:xxx xxx
xxx( c ) T o f i x a n d d e t e r m i n e i n d i v i d u a l o
r joint rates, tolls, charges, classificati
o n s , o r schedules thereof, as well as commutation,
mileage kilometrage, and other special rateswhich shall
be imposed, observed, and followed thereafter by any
public service: Provided, T hat t he Comm ission
ma y, in it s dis cret ion, ap prov e rat es proposed
by pu bl ic serv ic es provisionally and without necessity
of any hearing; but it shall call a hearing thereon
withint h i r t y d a y s t h e r e a f t e r , u p o n p u b l i c
ation and notice to the concerns operat
i n g i n t h e t errit ory af f ect ed: Prov i ded,
f urt her, T hat in cas e t he
pu bl ic serv i ce equ ipment of an operator is used
principally or secondarily for the promotion of a private
business, the netprof it s of said priv at e bu sin ess
sh all be consi dere d in rel at ion w it h t he pu bl i c
serv i ce of such operator for the purpose of fixing the
rates.

LTFRB is authorized under EO 202

, s. 1987 to determine, prescribe,
a p p r o v e a n d periodically review and adjust,
reasonable fares, rates and other related charges,
relativeto the operation of public land transportation
services provided by motorized vehicles

LTFRB not authorized to delegate that power to a

common carrier, a transport operator,or other
public service

authority given by the LTFRB to the provincial bus

operators to set a fare range over andabov e the
au t horize d e xist ing f are, is il l egal an d inv al i d
as it is t ant amou nt t o an u ndu e delegation of
legislative authority

rat e shou l d not be conf i scat ory as w oul d pl a ce

an operat or in a sit u at ion w here he
w il l cont inu e to oper at e at a l oss; rat e shou l d
en abl e pu bl i c u t il it ies to gener at e
rev enu es sufficient to cover operational costs and
provide reasonable return on the investments

CPC - authorization granted by the LTFRB for the

operation of land transportation servicesfor public use as

13 | P a g e

required by law. Pursuant to Section 16(a) of the Public

Service Act, asamended, the following requirements
must be met before a CPC may be granted, to wit: (i)t he
ap pl icant mu st be a cit iz en of the
Phil ip pine s, or a corpor at ion or copart ner ship, a s s o c i a t i o n o r j o i n t - s t o c k
company constituted and organized und
e r t h e l a w s o f t h e Philippines, at least 60 per
centum of its stock or paid-up capital must belong
entirely tocitizens of the Philippines; (ii) the applicant
must be financially capable of undertaking
thepropos ed serv ice and meet ing the
res ponsibil it i es in cid ent to it s operat ion; and
( iii)
t hea p p l i c a n t m u s t p r o v e t h a t t h e o
peration of the public service pro
p o s e d a n d t h e au t horizat ion
t o do bu sine ss w il l promot e the pu bl ic int erest
in a proper and su it abl e manner; there must be
proper notice and hearing before the PSC can exercise its
power toissue a CPC

LT FRB M emoran du m Circu l ar N o. 92 - 009 ,

Part IV is incomp at ibl e and incon sist ent
w it h Section 16(c)(iii) of the Public Service Act which
requires that before a CPC will be issued,the appl ic ant
mu st prov e by proper not i ce and hearing t hat
t he oper at ion of the pu bl ics erv ic e propose d
w il l promot e pu bl ic int erest in a proper and
su it abl e mann er. On t hecont rary,
t he pol icy gu id el ine st at e s t hat
t he pre su mpt ion of pu bl ic ne ed
f or a pu bl ic service shall be deemed in favor of the
applicant
GR No. 168914 July 4, 2007
Metropolitan Cebu Water District (MCWD) vs.
Adala
Case Doctrine:

The term franchise has been construed broadly so

as to include, not only authorizations issuing
directly from Congress in the form of a statue, but
also those granted by administrative agencies to
which the power to grant franchises has been
delegated by Congress.
It has been held that privileges conferred by grand
by local a3uthorities as agents for the state
constitute as much a legislative franchise as though
the grant had been made by an act of the legislature.
Water districts fall under the term public utility
a business or service engaged in regularly supplying
the public with some commodity such as electricity,

Transpo Case Digest: Finals

gas, water, transportation. Telephone or telegraph
service.

14 | P a g e