TRANSPO LAW - I. GEN. DISCUSSION Flashcards
What is a transportation contracct?
Contract of Transportation
A contract of transportation is one whereby a certain person or association of persons obligate themselves to transport persons, things, or news from one to another for a fixed price. [Crisostomo v CA, G.R. No. 138334 (2003)]
What are the two kinds of transportation contracts?
Two Kinds:
1. Carriage of Passengers
Parties:
* Carrier: Party who binds himself to transport persons, goods, or both. It may be a common carrier or a private carrier.
* Passenger: One who travels in a public conveyance by virtue of an express or
2. Carriage of Goods
Parties:
* Shipper - one who gives rise to the contract of transportation by agreeing to deliver the things or news to be transported, or to present his own person or those of other or others in the case of transportation of passengers
* Carrier (may sometimes be referred to as conductor) - one who binds himself to transport persons, things, or news, as the case may be, or one employed in or engaged in the business of carrying goods for others for hire
* Consignee - the party to whom the carrier is to deliver the things being transported, or to whom the carrier may lawfully make delivery in accordance with its contract of carriage; the shipper and the consignee may be the same person
Who is a carrier?
Carriers are persons or corporations who undertake to transport or convey goods, property, or persons, from one place to another, gratuitously or for hire, and are classified as:
a. Private or special carriers, who transport or undertake to transport in a particular instance for hire or reward [AGBAYANI, Commercial Laws of the Philippines (1987)]; and
b. Common or public carriers [Art. 1732, NCC]
What is a contract of carriage?
Contract of Carriage
- REAL contract; not until the facilities of the carrier are actually used can the carrier be said to have assumed the obligation of the carrier; perfected by actual use. [Aquino]
Important: There is delivery
What is the relationship of transportation law to the law on public utilities?
Under Section 13(b) of the Public Service Act, various modes of transportation are within the coverage of the
term “public service” if used by certain persons for hire or compensation, with general or limited clientele.
Recall:
A public utility is a 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 [National Power Corporation v. Court of Appeals, G.R. No. 112702 (1997)].
Elements of a public utility:
1. There must be public interest or consequence;
2. Private property devoted to public use;
3. Offers to the public indiscriminately;
4. For hire/compensation
What is the nature of a franchise under transportation law?
The franchise… pertains to the privilege to engage in the business of transportation… [1-United Transport Koalisyon v. COMELEC (2015)]
A certification of public convenience is included in the term “property” in the broad sense of the term. Under the Public Service Law, a certificate of public convenience can be sold by the holder thereof because it has considerable material value and is considered as valuable asset (Raymundo v. Luneta Motor Co., et al., 58 Phil. 889).
Insofar as the interest of the State is involved, a certificate of public convenience does not confer upon the holder any proprietary right or interest or franchise in the route covered thereby and in the public highways (Lugue v. Villegas, L-22545, Nov. 28, 1969, 30 SCRA 409).
However, with respect to other persons and other public utilities, a certificate of public convenience as property, which represents the right and authority to operate its facilities for public service, cannot be taken or interfered with without due process of law. (A.L. Ammen Transportation Co. v. Golingco. 43 Phil. 280). [As cited in Cogeo-Cubao Operators v. CA (1992)]
A franchise is personal in nature. Any transfer or lease thereof should be notified to the PSC so that the latter may take proper safeguards to protect the interest of the public. [Montoya v. Ignacio, G.R. No. L-5868 (1953)].
What is the scope of the franchise under transportation law?
What is the prior operator rule?
The Prior Operator Rule provides that a public utility operator should be afforded with an opportunity to improve its equipment and service before allowing a new operator to serve in the same territory it covers. (Mandbusco, Inc. v. Francisco, 143 Phil 372)
Prior operator rule
The first licensee should have more or less of a vested and preferential right over a person who seeks to acquire another and a later license over the same route, so long as the first licensee:
* Keeps and performs the terms and conditions of its license; and
* Complies with the reasonable rules and regulations of the Commission; and
* Meets the reasonable demands of the public.
What is the reason for the prior operator rule?
Rationale: Without such preferential right, the first licensee would not have protection on his investment, and would be subject to ruinous competition and thus defeat the very purpose and intent for which the Public Service Commission was created [Batangas Transportation Co., G.R. No. L-28865 (1928)].
What are the exceptions to the prior operator rule?
Exceptions to the prior operator rule
1. The CPC granted is a maiden franchise
2. Failure to meet the increase in demand
3. Failure to meet requirements of franchise
4. Would not result in ruinous competition
5. When public interest requires
What is ruinous competition?
Ruinous competition
There is ruinous competition if:
a. The operator would be deprived of their profits on the capital invested in its business;
b. The business would not have sufficient gains to pay a fair rate of interest on its capital investments.
In order that the opposition based on ruinous competition may prosper, it must be shown that the opponent would be deprived of their profits on the capital invested in its business.
* The mere possibility of reduction in the earnings of a business is not sufficient to prove ruinous competition.
* It must be shown that the business would not have sufficient gains to pay a fair rate of interest on its capital investments [Vda. De Lat v. Public Service Commission, G.R. No. L-34978 (1988)].
What is the kabit system?
Definition
The kabit system is an arrangement “whereby a person, who has been granted a CPC allows another person, who owns motor vehicles. To operate under such franchise for a fee” [Teja Marketing v. Intermediate Appellate Court, G.R. No. L-65510 (1987)].
Why is the kabit system prohibited?
Rationale against the kabit system
1. It is an abuse of the certificate of public convenience, a special privilege conferred by the government;
2. It is one of the root causes of the prevalence of graft and corruption in the government transportation offices;
3. It is contrary to public policy, and is therefore void and inexistent [Teja Marketing v. Intermediate Appellate Court, G.R. No. L-65510 (1987)].
The purpose of the law in enjoining the Kabit System is to identify the person upon whom the responsibility may be fixed in cases of accidents, with the end view of protecting the riding public. The policy then loses its application if the public, at large is not deceived or involved; e.g. when the participants of a Kabit System arrangement are not being held liable for damages by the public arising from the operation of the public vehicle. (Lim v. CA, 424 Phil. 457)
What is the effect of the kabit system?
Effect of the kabit system
* Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and in existent [Art. 1409, NCC].
o It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds them [Art. 1412, NCC];
o Courts will not grant affirmative relief to parties in cases where they set up a Kabit system. They are in pari delicto and the Court will simply leave them where it found them [Lita Enterprises, Inc. v. IAC, G.R. No. 64693 (1984)].
* The operator of record is considered the operator of the vehicle in contemplation of law as regards the public and third persons, even if the vehicle involved in the accident had been sold to another [Santos v Sibug, G.R. No. L-26815 (1981)].
o Where such sale had not been approved by the then Public Service Commission (PSC).
May a relief be granted to a party for any breach emanating from a contract under the kabit system?
o It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds them [Art. 1412, NCC];
o Courts will not grant affirmative relief to parties in cases where they set up a Kabit system. They are in pari delicto and the Court will simply leave them where it found them [Lita Enterprises, Inc. v. IAC, G.R. No. 64693 (1984)].
