Transportation Laws Notes – Based on the 4th Year Lectures of Atty.
Melissa Romana Suarez
DAMAGES
6 Kinds of Damages: (Article 2197 of the Civil Code)
1. Actual or compensatory
2. Moral
3. Nominal
4. Temperate or Moderate
5. Liquidated
6. Exemplary
• Most popular ones: actual, moral and exemplary
• Each kind of damage has its own requisites or basis
for awarding it
PROBLEM: A (shipper) sues B (carrier) for the loss of his car
which was shipped from Davao to Manila. The carrier is held
liable for the loss. So, the court says that the carrier should
pay. How much should the carrier pay?
Actual Damages
Features:
1. They pertain to such injuries or losses that are
actually sustained and susceptible of measurement
2. Damages cannot be presumed – to be recoverable,
they must be pleaded and proven in court; in no instance
may a judge award more than those so pleaded and
proven
3. Speculative damages cannot be awarded
4. The award thereof must be based on the evidence
presented, not on the personal knowledge of the court;
and certainly not on flimsy, remote, speculative and non-
substantial proof
Q: If the value of the car is P 1M, can the court order the
carrier to pay P 1M based only on speculation or on the mere
assertion of the plaintiff that the car is worth P 1M?
A: No. These are actual damages and susceptible of
measurement. Even if the car is indeed worth P 1M, for the
court to award P 1M in damages, it must be pleaded. The
plaintiff must ask for it in court and pray for P 1M in actual
damages AND prove it. How does he prove it? By means of
the receipt – it is a brand new car. I just bought it and on the
same day, I shipped it from Davao to Manila, as the case
maybe.
The court cannot say – “I actually bought a new car the
other day. It is exactly the same model but of a different
color. So, I know that it is worth P 1M. So, I will just award P
1M.” That is not allowed because it has to be proven.
In Breach of Contract of Carriage – If the Common
Carrier is in:
1. GOOD Faith – it shall be responsible for:
a. The NATURAL and PROBABLE consequences of the
breach of the obligations; AND
b. Damages which the parties FORESAW or COULD
HAVE FORESEEN
2. BAD Faith – it shall be responsible for ALL damages which
may be REASONABLY ATTRIBUTED to the non-
performance of the obligation (relation of cause and effect
is enough) [Article 2201]
• Damages do not only consist of actual damages but
also of compensatory damages, loss of earning capacity
• 2 types of compensatory damages:
a. Damnum Emergente – actual loss suffered composed
of destruction or loss of the thing, fines and penalties
that have to be paid, medical and hospitalization
expenses in case of injury, rent, agricultural product,
hotel rental (if you are bumped off and you have to
stay in a hotel), food
b. Lucrum Cessans – unrealized profits; profits that
could have been earned had there been no
interruption of the business and evidenced by the
receipts of the enterprise; profits because of a
proposed future resale (?) of the property being
purchased; interest on rentals that were not paid;
loss of earning capacity
Case: FONTANILLA vs. CA
FACTS: A movie reel was sent through PAL to be used in a
town fiesta. It was supposed to be shown in a town fiesta and
charge people who will watch the movie. The plane was
delayed. So, the movie arrived after the fiesta. They were not
Jazzie M. Sarona (4-Manresa 2008-2009)
able to show the movie. They were not able to earn profit
from showing the movie.
ISSUE: Can PAL be held liable for loss of profits caused by
the fact that the movie was not shown during the town fiesta
HELD: If PAL was in good faith and was not told of the
purpose of the movie, then, PAL cannot be held liable for loss
of profits since the damage was not perceived. If a carrier is
in good faith, the carrier can only be held liable for damages
which the parties foresaw or could have perceived. However,
if PAL was told of the purpose, then, it can now be held liable
for loss profits because the damage is within the purview or
could be reasonably perceived.
However, if PAL was in bad faith (any kind of bad faith), it
does not matter whether it knew of the purpose of the movie
reel. It could be held liable in anyway.
• That is the difference between good faith and bad
faith when it comes to actual damages
In Crimes and Quasi-Delicts:
1. The common carrier shall be liable for ALL damages which
are the natural and probable consequences of the act or
omission complained of
2. It is not necessary that such damages have been foreseen
or could have reasonably been foreseen by the common
carrier (Article 2202)
• Similar to bad faith under breach of contract
Moral Damages
Moral damages include:
1. Physical suffering
2. Mental anguish
3. Fright
4. Serious anxiety
5. Besmirched reputation
6. Wounded feelings
7. Moral shock
8. Social humiliation, and
9. Similar injury
• Let us go back to the issue of the car. Let us say that
the ship sank. A, who bought a new car, wanted to send
the car to Manila because he will take the bar exam and
he will use the car there. The car did not arrive because
the ship sank. So, he suffered mental anguish, serious
anxiety, moral shock, social humiliation because she will
take the jeep to the review, besmirched reputation.
Q: Can he ask for moral damages because of the loss of the
car because he suffered all those pain?
In Breach of Contract of Carriage:
1. General Rule – Moral damages are NOT recoverable in
damage actions predicated on a breach of contract of
carriage
2. Exceptions – moral damages may be awarded when:
a. the mishap results in DEATH of the passenger
b. it is proven that the carrier is guilty of FRAUD or BAD
FAITH, even if death does not result (Article 2201)
• By the way, when a passenger dies, not only is he
entitled to the damages but he is also entitled for
indemnity for death. And according to Ferlyn , it is now
P 100,000. That is automatic if there is death.
Case: PAL vs. CA, MEJIA (March 14, 1996)
FACTS: This is the case we already discussed yesterday –
about the microwave oven. She suffered serious anxiety and
sleepless nights because of the damage to her microwave
oven.
ISSUE: Is Mejia entitled to moral damages? Should the court
award moral damages to Mejia?
HELD: The SC said YES. The unexplained cause of damage
to Mejia’s cargo constitutes gross carelessness or negligence
which by itself justifies the present award of damages. The
equally unexplained and inordinate delay in acting on the
claim upon referral thereof to the claims officer is an indication
of bad faith. The unprofessional indifference of PAL’s
personnel despite full and actual knowledge of the damage to
Mejia’s cargo smacks of willful misconduct and insensitivity to
a passenger’s plight tantamount to bad faith and renders
 Transportation Laws Notes – Based on the 4th Year Lectures of Atty. Melissa Romana Suarez
unquestionable PAL’s liability for damages. And not only that.
The act of the check-in officer in San Francisco in misleading
her and telling her that she does not have to declare a higher
value and pay a higher rate for freight amounts to bad faith.
Therefore, the passenger is entitled to moral damages.
Bad Faith
Breach of a known duty through some motive of interest
or ill will
Case: CATHAY PACIFIC vs. VASQUEZ
FACTS: The passengers were upgraded instead of being
downgraded. They sued Cathay Pacific for breach of contract.
ISSUE: Was there a breach?
HELD: YES, there was a breach because there was no
consent on the part of the passengers when they were
upgraded to first class. Their ticket said business class and
that was the commitment of Cathay Pacific to them.
ISSUE: Are the passengers, spouses Vasquez, entitled to
moral damages?
HELD: NO, they are not entitled to moral damages. The
allegation of the Vasquez spouses that they were treated
shabbily in Hong Kong was not proven. Bad faith does not
simply connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious
doing of a wrong, a breach of a known duty through some
motive or interest or ill will that partakes of the nature of
fraud.
Case: SINGAPORE AIRLINES vs. ANDION
FACTS: Andion Fernandez is a soprano based in Germany and
she was invited to sing before the King and Queen of Malaysia
on February 3 and 4, 1991. she was based in Frankfurt. She
took the flight from Frankfurt to Singapore on January 27. She
had a connecting flight from Singapore to Manila. She was
supposed to go home to Manila before proceeding to Malaysia
to get her costume and to pick up her voice coach. The flight
to Singapore from Frankfurt was delayed. And therefore,
when they arrived in Singapore, the Singapore flight to Manila
has already departed and left earlier. So, she was not able to
get on the flight. And she was informed that there were no
more flights to Manila. She asked that if there was an
alternative route. They said that she could go to Hong Kong
but she has to pay. She did not have any money. What
happened was she was not able to go to back to Manila and
she had to go straight to Malaysia. And her performance
before the King and Queen of Malaysia was below par.
Because of the rude and unkind treatment she received from
the Singapore Airline’s personnel, she was engulfed with fear,
anxiety, humiliation and embarrassment causing her to suffer
mental fatigue and skin rashes. She was compelled to seek
immediate medical attention upon her return to Manila for
“acute urticaria.”
Definitely, there was breach because she was not able to
take the flight from Singapore to Manila.
ISSUE: What is she entitled to? Is she entitled to moral
damages?
HELD: YES, Singapore Airlines acted in bad faith. It did not
accord Fernandez the attention and treatment allegedly
warranted under the circumstances. The staff was unkind and
of no help to her. They were rude to her when they curtly
retorted that they were busy attending to other passengers in
line.
When Moral Damages may be Recovered (Article 2219)
1. A criminal offense resulting in physical injuries
2. Quasi-delicts causing physical injuries
• With respect to other causes of actions however, if
your cause of action is culpa criminal and there is injury,
any kind of injury, then, moral damages may be awarded
under Article 2219
• If the cause of action is culpa aquiliana and there is
injury, then, moral damages may be awarded.
• No need for death
Situation: Passenger on an airplane. Fasten seat belt
sign is on. Your seat belt is not on. There is an air pocket.
Your head hit the ceiling and you are injured. If there is no
Jazzie M. Sarona (4-Manresa 2008-2009)
bad faith on the part of the airline, there is no award of moral
damages.
Nominal Damages
Nominal Damages are adjudicated:
1. In order that a right of the passenger, shipper or
consignee, which has been violated or invaded by the
common carrier, may be vindicated or recognized, and
2. Not for the purpose of indemnifying the passenger,
shipper or consignee for any loss suffered by him (Article
2221)
Note:
1. Nominal Damages stand alone
a. There can be NO longer be an award for nominal
damages IF there already has been an award for
actual, moral, temperate, liquidated and exemplary
damages
b. An award of nominal damages precludes the award of
actual, moral, temperate, liquidated and exemplary
damages
2. When the act of the common carrier did not amount to
fraud, malice or bad faith, moral damages cannot be
awarded. However, if there was an invasion of the
plaintiff’s right, nominal damages may be awarded.
• In the case of the car again, if actual damages are
awarded, then, there is no absolute no way that nominal
damages can be awarded.
• Nominal damages are awarded if there are no other
damages that can be awarded
Case: ALITALIA vs. IAC
FACTS: Dr. Pablo was invited to speak in one of the cities in
Italy. So, she took an Alitalia flight from Manila to Rome and a
connecting flight from Rome to that city in Italy. It was all-
expense paid. But when she arrived in Rome, she realized
that her luggage did not arrive with her. She asked Alitalia for
luggage. She was not able to take the flight to that place
where she was supposed to give a talk because she did not
have her powerpoint, equipment, etc. She just went back to
the Philippines. She did not spend a single centavo from her
own pocket.
ISSUE: Can she be awarded actual damages?
HELD: NO, because she was paid for the cost even if she did
not talk. She cannot be paid for loss of earnings or
compensatory damages.
FACTS: When she got back to Manila, she sued Alitalia. Her
luggage arrived 11 months later, intact. She did not lose
anything since everything was there.
ISSUE: Was it proven that there was bad faith?
HELD: NO, in this case, there was no bad faith. There was
just negligence on the part of the airline.
ISSUE: What could be given to her? What could be awarded
to her? Was there a right violated? Was there a breach?
HELD: YES, there was a right violated. YES, there was a
breach. The SC said that you could not award anything else
but nominal damages.
Case: JAPAN AIRLINES vs. ASUNCION
FACTS: During the explosion of Mt. Pinatubo, there was this
flight that came from US via Narita. They were supposed to fly
to Manila. However, on the day that they were supposed to go
back to Manila, Mt. Pinatubo exploded. And so, they were
accommodated for a few days. But after a few days, Japan
Airlines cannot accommodate them anymore and it was not
there fault because there was a fortuitous event. And when
the airport in Manila opened, these passengers wanted to take
the first flight out but they could not because their status was
changed from booked to wait-listed. They had to stay at
Narita. They sued Japan Airlines for breach of contract.
HELD: Only nominal damages were awarded to the
passengers, not for the hotel accommodations because of the
fortuitous event but since they were some right violated
 Transportation Laws Notes – Based on the 4th Year Lectures of Atty. Melissa Romana Suarez
because in a sense that their status as booked passengers was
not upheld by the airline. That was the ground for awarding
nominal damages.
Temperate Damages
Temperate or Moderate damages
• which are more than nominal but less than
compensatory damages
• may be recovered when the court finds that some
pecuniary loss has been suffered
• but its amount can not, from the nature of the case,
be provided with certainty (Article 2224)
Example: Loss of business credit, loss of goodwill.
Liquidated Damages
Liquidated damages are those agreed upon by the parties
to a contract, to be paid in case of breach thereof (Article
2226)
• If there is an agreement in the contract that this is
how much you will pay, there is no need to discuss or
prove anything.
• Best example: Bill of Lading (e.g. P 500 per kilo
unless you declare a higher value and payment of a
higher amount).
• The parties are limited to that amount – COGSA and
Warsaw Convention. These laws give the carrier the right
to stipulate how much they are going to pay in case of
breach
• Let us go back to the issue of the car that was lost
because the ship sank because there was a typhoon and
the ship was unseaworthy. It was the fault of the carrier.
The car was proven to be worth P 1M. But in the Bill of
Lading, it was stated that the carrier will only be liable for
P 500 per kilo unless a higher value is declared and there
is payment of a higher amount.
Q: What should the carrier pay? P 1M or P 500 per kilo?
A: P 500 per kilo. There is no need to prove the value of the
car because this is agreed upon already by the parties in case
of breach.
Exemplary Damages
Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages
(Article 2229)
• Unlike nominal damages which stand alone,
exemplary damages cannot stand alone. They have to be
added to moral, temperate, liquidated or compensatory
damages.
Note:
1. Exemplary Damages can ONLY be granted in ADDITION
to:
a. moral damages
b. temperate damages
c. liquidated damages, or
d. actual or compensatory damages
2. If exemplary damages are granted, nominal damages
CANNOT BE awarded
When Exemplary Damages may be Recovered:
1. In Criminal Offenses – if the crime was committed with
one or more aggravating circumstances (Article 2230)
2. In Quasi-Delicts – if the common carrier acted with gross
negligence (Article 2231)
3. In Contracts and Quasi-contracts – if the common carrier
acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner (Article 2232)
• Different causes of actions, different grounds for
awarding exemplary damages
Cases
BAD FAITH
Case: AIR FRANCE vs. CARRASCOSO
Jazzie M. Sarona (4-Manresa 2008-2009)
HELD: The passenger was downgraded and insulted by the
manager of Air France. He was told that another passenger
deserved the seat better than him.
Case: ZULUETA vs. PAN AM
HELD: The aircraft landed in Wake island. The passenger
had to pee and he went to the beach because the toilet was
full. They were waiting for him. The plane was about to leave
and he was nowhere to be found. When he got back, he was
berated by the staff of Pan Am. He was called a monkey. He
was left behind.
There was breach. He is entitled to moral damages
because he suffered serious anxiety, besmirched reputation,
social humiliation.
Case: KOREAN AIRLINES vs. CA
HELD: This guy had a waitlisted ticket to Saudi Arabia to
work there. When he got to the airport, he was issued a
boarding pass. When he was about to go to the stairs,
somebody called him to get down. He was not allowed to
board. He was not able to take the flight. That is another
example of bad faith
BUMP OFF
Q: If a passenger is bumped off because the flight is
overbooked, is there breach?
A: Definitely. The passenger was not able to get on the
flight.
Q: Is the passenger entitled to moral damages?
A: YES, in the old cases of ORTIGAS, JR. vs. LUFTHANSA,
ZALAMEA vs. CA and ALITALIA vs. CA
Case: ALITALIA vs. CA
HELD: Existing jurisprudence state that overbooking
amounts to bad faith, entitling passengers to the award of
moral damages.
In Alitalia vs. CA, it was stated that where passengers with
confirmed booking were refused carriage on the last minute,
this Court held that when an airline issues a ticket to a
passenger confirmed on a particular flight, on a certain date, a
contract of carriage arises, and the passenger has every right
to except that he would fly on that flight and on that date. If
he does not, then the carrier opens itself to a suit for breach of
contract of carriage. Where an airline had deliberately
overbooked, it took the risk of having to deprive some
passengers of their seats in case all of them would show up for
check in. For the indignity and inconvenience of being refused
a confirmed seat on the last minute, said passenger is entitled
to moral damages.
BUT
Case: UNITED AIRLINES vs. CA
HELD: The SC reversed with respect to this issue on moral
damages to be awarded to passengers bumped off on the
ground of overbooking.
In UA vs. CA, Fontanilla case, the SC said when an airline
overbooks, you do not only look at that Civil Code provision
but you also take into account existing laws, particularly
Economic Regulation No. 7 of the Civil Aeronautics Board
(CAB). This Economic Regulation states that overbooking not
exceeding 10% of the seating capacity of an aircraft shall not
be considered a deliberate and willful act of non-
accommodation.
What this Court considers as bad faith is the willful and
deliberate overbooking on the part of the airline carrier. The
above-mentioned law clearly states that if the overbooking
does not exceed 10% it is not considered as deliberate and
therefore, does not amount to bad faith.
In other words, if the passenger is bumped off because
overbooking, there is breach. He is entitled to actual damages
– hotel accommodations, food, etc. He is entitled to moral
damages only if the overbooking is more than 10%. If it is less
than 10%, then, no. This means that airlines are allowed to
overbooked because there are those who will not show up.
What else did the SC say in this case? While there may
have been overbooking in this case, private respondent was
not able to prove that the overbooking of the United Airlines
exceeded 10%.
In other words, the burden proof is on the passenger that
the overbooking exceeded 10%.
 Transportation Laws Notes – Based on the 4th Year Lectures of Atty. Melissa Romana Suarez
Forget the old ruling of the SC of overbooking entitling the
passenger to moral damages automatically. It is only
tantamount to bad faith if it is more than 10% and the burden
of proof is on the passenger.
Case: CATHAY PACIFIC vs. VASQUEZ
FACTS: According to Vasquez, there was overbooking as to
the business class. And therefore, Vasquez spouses are
entitled to moral damages because that is tantamount to bad
faith.
HELD: The SC cited United Airlines case. The overbooking
must exceed 10% for you to be entitled to moral damages and
you have to prove it. AND the overbooking must result in you
being bumped-off. In this case, the spouses were not
bumped-off. They were upgraded.
FACTS: RTC awarded the Vasquez spouses the following:
Nominal damages – P 100T each, Moral damages – P 2M each,
Exemplary damages – P 5M each, Attorney’s fees and
expenses of litigation – P 1M each.
CA, on appeal, said that the Vasquez spouses are entitled
to: Nominal damages – P 50,000 each, Moral damages – P
250,000 each, Exemplary damages – deleted, Attorney’s fees
and litigation expenses – P 50,000 for both.
HELD: There is something wrong. The RTC is wrong because
it awarded nominal damages because other damages were
also awarded. The CA ruling is still wrong because it still
awarded nominal damages.
The SC said that there was breach. Vasquez spouses did
not lose anything. They are not entitled to moral damages. If
you are not entitled to moral damages, you are not entitled to
exemplary damages. If you are not entitled to exemplary
damages, you are not entitled to attorney’s fees. The SC
awarded the Vasquez spouse with nominal damages of P
5,000.
Case: LRTA vs. NAVIDAD (BQ 2008)
FACTS: Navidad was a drunk passenger. He entered the
EDSA LRT Station after purchasing a token. While he was
standing waiting for the train, the security guard approached
him and they engaged in a fist fight. Nobody knew who
started the fist fight. Navidad fell on the track and he was ran
over by the train and he died.
The train was operated by Rodolfo Roman and owned by
LRT.
There are possible actions here for the heirs of Navidad –
breach of contract against LRT, culpa criminal against the
driver of the train and culpa aquiliana against the security
agency, the employer of the security guard and culpa
aquiliana against the security guard.
The RTC ruled in favor Navidad against the security
agency. It did not hold LRT liable because according to the
RTC, it was between Navidad and the security guard. It
awarded: Actual damages – P 44,830; Compensatory damages
– P 443,520; Indemnity for death – P 50,000; Moral damages –
P 50,000 and Attorney’s fees – P 20,000.
CA ruling: The security agency was not liable and held
LRTA and the driver jointly and severally liable to pay: Actual
damages – P 44,830; Nominal damages – P 50,000; Moral
damages – P 50,000; Indemnity for the death – P 50,000 and
Attorney’s fees P 20,000.
HELD: The SC held that CA should not have awarded
nominal damages. The SC held the carrier liable because
transportation already started. He was already inside. He has
bought the ticket and he was waiting for the train.
Please read that case 
Case: VICTORY LINER vs. GAMMAD (Very important kay
baka lumabas to sa bar niyo. This has not come out yet )
FACTS: Gammad was on board a Victory Liner bus. While the
bus was running at a high speed, it fell on a ravine which
resulted in the death of Gammad. The husband filed a
complaint for damages arising from culpa contractual against
Victory.
(Ma’am: The heirs of the victim can file a complaint for
culpa contractual even though they are not the contracting
parties)
RTC ordered Victory to pay to the husband: Actual
damages – P 122,000; Death indemnity – P 50,000; Exemplary
and Moral damages – P 400,000; Compensatory damages – P
1,500,000; Attorney’s fees – 10% of the total amount granted.
Jazzie M. Sarona (4-Manresa 2008-2009)
Modification by the CA: Actual damages – P 88,270;
Compensatory damages – P 1,135,536.10; Moral and
Exemplary Damages – P 400,000. Attorney’s fees – 10% of the
sum of the actual, compensatory, moral and exemplary
damages.
ISSUE: What is wrong with the decision?
HELD:
1. You cannot lump together moral and exemplary damages.
If you award damages, you give an amount and you give a
reason. (Article 8, Section 14 of the Constitution) The court
must explain and must give a ground for whatever judgment
or ruling it enters.
2. With respect to the compensatory damages, according to
the SC, it is not proper. It should be deleted for lack of basis.
Documentary evidence should be presented to substantiate
the claim for damages for loss of earning capacity. (You know
how to compute the loss of earning capacity? )
By way of exception, damages for loss of earning capacity
may be awarded despite the absence of documentary
evidence when:
a. the deceased is self-employed earning less than the
minimum wage under current labor law, and judicial
notice may be taken of the fact that in the
deceased’s line of work, no documentary evidence is
available; or
b. the deceased is employed as a daily wage worker
earning less than the minimum wage under current
labor laws.
Only under these 2 situations where you do not have to
prove or substantiate to collect compensatory damages.
In this case, there was just an allegation that she was
working with the BIR and had a salary of P83,088 per annum.
This is not enough to prove that the husband is entitled to
compensatory damages.
The SC here awarded temperate damages. The fact of
loss having been established, temperate damages in the
amount of P 500,000 should be awarded to Rosalito, the
husband.
Case: MMTC vs. MUSA
FACTS: This was about a young girl who was crossing
Katipunan Avenue and she was hit by a bus. She died.
ISSUE: Are the parents entitled to moral damages?
HELD: YES, definitely because it is based on culpa aquiliana.
The court awarded indemnity for death and actual damages.
They were able to prove that she was a promising student and
that she wanted to become a teacher. There was a
computation here. Moral damages and exemplary damages
were also awarded. This is by way of example since the driver
was careless. He acted with gross negligence.
Case: KIERULF vs. CA
FACTS: In this case, Priscilla Kierulf was a passenger of a
pick-up that was driven by her driver. The pick-up was hit by a
bus. She was injured. She suffered some kind of deformity in
her person. He was no longer attracted to her. She and her
husband sued the bus company.
There was culpa aquiliana. What the husband wants is to
increase the moral damages because he said that he was
deprived of consortium because she was deformed by the
accident. They did not have what spouses usually have.
Not only that – the social and financial standing of his
wife. They are rich. So, the award should be higher.
HELD: The SC held that Victor's claim for deprivation of his
right to consortium, although argued before Respondent
Court, is not supported by the evidence on record. His wife
might have been badly disfigured, but he had not testified
that, in consequence thereof, his right to marital consortium
was affected.
The social and financial standing of Lucila cannot be
considered in awarding moral damages. The factual
circumstances prior to the accident show that no "rude and
rough" reception, no "menacing attitude," no "supercilious
manner," no "abusive language and highly scornful reference"
was given her. The social and financial standing of a claimant
of moral damages may be considered in awarding moral
damages only if he or she was subjected to contemptuous
conduct despite the offender's knowledge of his or her social
and financial standing.
In this case, that will not affect the amount of moral
damages.
 Transportation Laws Notes – Based on the 4th Year Lectures of Atty. Melissa Romana Suarez
But of course, it is still proper to award moral damages a. Land – Land Transportation Franchising and
because the cause of action is culpa aquiliana and she was Regulatory Board (LTFRB)
injured. b. Sea – Maritime Industry Authority (MARINA)
c. Air – Civil Aeronautics Board (CAB)

PUBLIC SERVICE ACT (CA 146) Q: Can the state prevent a taxi operator from hiring women
as drivers?
Purpose of the Public Service Act: A: No
1. to secure adequate, sustained service for the public at the
least possible cost; and Q: Can the state prevent putting air conditioner in their
2. to protect and conserve investments which have already taxis?
been made for that purpose A: No, because the regulation is limited to those 3 limitations

Public Service
Meaning of “PUBLIC” in public service – individuals in
general without restriction or selection to the extent that the
capacity of the utility may admit such service or use
• “Public” does not mean everyone or all Filipinos
• As long as these people are not prevented from using
these utilities, then, those individuals that comprise a
group can be considered public
Public Utility
1. Definition – A public utility is a business or service which
is engaged in regularly supplying the public with some
commodity or service of public consequence such as:
a. electricity
b. gas
c. water
d. transportation
e. telephone service
• A common carrier is a public utility
• The public utility is not the bus. It is not the jeep but
the carrier.
Principal Determinative Characteristic of a Public Utility
That of service or readiness to serve an indefinite public
which has the right to demand and receive its services or
commodities
• Anyone who applies for a water line with the DCWD
can do so provided he has a land owner, a lessor. That
person cannot be refused if he has all the documents
• Just like transportation – anyone who wants to get on
a taxi can get on. There should be no discrimination
made by the public utility
• Ma’am thinks that the state can regulate the color of
the taxis
• Under the Public Service Act, the body that was
referred to was the Public Service Commission
• However, the Public Service Commission has been
divided into those 3
Note:
Any reference to the Public Service Commission (which is
now defunct) shall be understood to be the appropriate board,
authority or agency of the government that took over its
functions
Q: What is the requisite for the operation of a public utility?
A: That is Section 15 of the Public Service Act – Certificate of
Public Convenience or Certificate of Public Convenience and
Necessity
Section 15. Certificate of Public Convenience or
Certificate of Public Convenience and Public Necessity
No public service shall operate in the Philippines without
possessing a valid and subsisting certificate from the proper
regulatory body known as “certificate of public convenience”
or “certificate of public convenience and necessity,” as the
case may be, to the effect that the operation of said service
and the authorization to do business will promote the public
interests in a proper and suitable manner.
• If a public utility or a common carrier does not have a
CPC, it cannot raise the defense that it does not have a
CPC so that it will not be held liable as a common carrier.
It can still be held liable as a common carrier even without
a CPC.
• It can be held liable if it operates without a CPC. That
is a requirement under the Public Service Act.

Note: Distinctions between a CPC and CPCN

a. The fact that the service is limited to particular district or CPC CPCN
town does not prevent the business or town does not
prevent the business from being a public utility
 Issued when it is  Issued upon
b. The number of people actually served does not determine found that the operation approval of any
whether a person or company is a public utility of the proposed public franchise or privilege
c. Such person or company which holds himself out to serve service will promote granted by any political
all who wish to avail themselves of the service may be a public interest in a subdivision of the
public utility even though only 1 or 2 people actually proper manner for Philippines, when in the
receive service which a municipal or judgment of the
legislative franchise is regulatory body, such
not necessary franchise or privilege will
• Example: If a particular tricycle association only
(PAL vs. CAB) properly conserve the
serves a particular barangay, it is still considered a public
public interest (approval
utility
does not have to come
• As long as it offers its services to anyone who would
from Congress; it can be
like to use such services
from the mayor or
barangay)
State Regulation of Public Utilities
1. Basis – for the State to regulate public utilities is POLICE
POWER
a. The state may regulate and control public utilities to
• Section 15 of the Public Service Act
protect the public interests to promote the health,
comfort, safety and welfare of the people SECTION 15. With the exception of those enumerated in the
b. The legislature may interfere with the management preceding section, no public service shall operate in the
of public utilities whenever public interest Philippines without possessing a valid and subsisting
demands certificate from the Public Service Commission known as
2. Limitations – The right to regulate public utility under the "certificate of public convenience," or "certificate of public
police power does NOT extend beyond the right to: convenience and necessity," as the case may be, to the effect
a. regulate rates and charges that the operation of said service and the authorization to do
b. prevent discrimination upon the part of the public business will promote the public interests in a proper and
utility against those who employ it; and suitable manner.
c. to make orders governing the conduct of the public The Commission may prescribe as a condition for the
utility to the ends: issuance of the certificate provided in the preceding
- that its efficiency may be built up and paragraph that the service can be acquired by the Republic of
maintained and the Philippines or any instrumentality thereof upon payment of
- that the public and its employees may be the cost price of its useful equipment, less reasonable
accorded depreciation; and likewise, that the certificate shall be valid
desirable safeguards and conveniences only for a definite period of time; and that the violation of any
3. The state may delegate to the public service commissions of these conditions shall produce the immediate cancellation
the power to regulate public utilities:
Jazzie M. Sarona (4-Manresa 2008-2009)
 Transportation Laws Notes – Based on the 4th Year Lectures of Atty. Melissa Romana Suarez
of the certificate without the necessity of any express action One of the purposes of the Public Service Law is to protect
on the part of the Commission. and conserve investments which have already been made for
In estimating the depreciation, the effect of the use of the that purpose by public service operators
equipment, its actual condition, the age of the model, or other
circumstances affecting its value in the market shall be taken • There is an applicant for a CPC. There are other
into consideration. entities who will oppose if the applicant will be competing
The foregoing is likewise applicable to any extension or with their route or their business
amendment of certificates actually in force and to those which • Those who have invested a lot (new taxis, new buses,
may hereafter be issued, to permit to modify itineraries and etc) – their investments will be protected under the
time schedules of public services, and to authorizations to Protection of Investment Rule
renew and increase equipment and properties.
When Prior Operator Rule not applicable:
1. Where public interest would be better served by the new
Where to Obtain the CPC or CPCNs operator (Guico vs. Estate of Buan, Aug. 30, 1957)
2. Where the prior operator has failed to make an offer to
Body Kind of Public Utility meet the increase traffic (Manila Yellow Taxicab vs.
LTFRB Those engaged in public Castelo, May 30, 1960)
LAND transportation services 3. Where the CPC granted to the new operator is a maiden
by motorized vehicles CPC, which does not overlap with the entire route of the
MARINA Those engaged in operation old operator but only a short portion thereof as a
of domestic and overseas convergence point (Mandbusco vs. Francisco, 32 SCRA
WATER carriers 405)
CAB Those engaged in AIR
commerce and/or Protection of Investment Rule not applicable
transportation, foreign or 1. If the application of the rule would be conducive to
domestic monopoly of service and contrary to the principle that
City or Municipal Council Those engaged in providing promotes healthy competition (Villa Rey vs.
land transportation by the Pangasinan, 5 SCRA 234)
use of TRICYCLES (not
trisikad) Grounds for Suspension or Revocation of CPC
1. Section 16 (m) – The facts and circumstances on the
strength on which CPC was issued have been
Requisites for the Grant of a CPC or CPCN: (BQ 1995)
misrepresented or materially changed
1. Applicant must be:
a. citizen of the Republic of the Philippines OR  Example: In your application, you placed there that
b. corporation or association organized under the laws you will operate 100 taxis. In truth and in fact, you
of the Philippines at least 60% of its only operated 50 second-hand taxis. Then, there is
capital is owned by such citizens misrepresentation of the fact. That is a ground for
2. The applicant must be financially capable of undertaking suspension or revocation
the proposed service and meeting the responsibilities 2. Section 16 (n) – The holder thereof has violated or willfully
incident to its operation and contumaciously refused to comply with any order, rule or
3. The applicant must prove that the operation of the public regulation of the regulatory bodies or any provision of the
service proposed and the authorization to do business will Public Service Act
promote the public interest in a proper and suitable 3. Article 1765, Civil Code – The common carrier repeatedly
manner fails to comply with his duty to observe extraordinary
diligence as prescribed by law
• The applicant must show that this particular service is
Q: Can a CPC be revoked or cancelled motu propio?
needed in this particular area
A: No
Q: What is the primordial consideration in granting CPC or
Due Process in Revocation or Cancellation of CPC: (BQ
CPCNs?
1992)
A: Public Interest
1. There must be notice and hearing
2. But according to the SC in the case of CIR vs. Buan (July
Situation: X wants to apply for a CPC to operate a
31, 1958), a formal charge is not necessary for as long as the
jeepney with route from Maa to Buhangin. You apply with the
holder of CPC is given his day in court
LTFRB.

Prior Operator Rule • Court – it could be before the body

Before permitting a new operator to invade the territory of
another already established with a CPC, the prior operator Section 16 (n) – Suspension of CPC:
must first be given the opportunity to extend its service in 1. May be done PRIOR to a hearing BUT cannot exceed 30
order to meet the public needs in the matter of transportation days
2. Ground – to avoid serious and irreparable damage or
inconvenience to the public or private interests
• That is a factor when an application is made with the
LTFRB
• In the case, is there a prior operator from Maa to
• Example: If all the buses of a particular bus company
are defective, then, the CPC can be suspended before a
Buhangin route? Parang wala. So, that rule is not a factor
hearing is conducted to avoid serious and irreparable
• But if you want to operate a jeepney service –
damage or inconvenience
Buhangin to Dakudao – may jeepney na dyan, the prior
operator rule is a factor for the LTFRB to award a CPC to
Operators of Public Services
the applicant
Section 19 (a) – Unlawful Service
Situation: X wants to apply for a CPC to operate a
It shall be unlawful for any public service to;
jeepney with route from Buhangin to end of Dakudao. What if
1. Provide or maintain any service that is unsafe, improper
there is another applicant? There are 2 applicants – X and Y.
or inadequate or
2. Withhold or refuse any service which can reasonably be
Prior Applicant Rule
demanded and furnished
Where there are various applicants for a public utility over
as found and determined by the Commission in a final
the same territory, ALL CONDITIONS BEING EQUAL (the
order which shall be conclusive and shall take effect in
amount of money, the number of jeepneys to operate, the
accordance with this Act. Upon appeal or otherwise
conditions of the jeepney, etc.) priority in filing of the
application for a CPC becomes an important factor in granting
• If a carrier provides or maintains taxicabs that are
or refusal of the CPC
unsafe, improper or inadequate, that is a ground already
for the suspension or cancellation of CPC
• This rule is not saying that the prior applicant will be
granted the CPC. • If a jeepney operator or the driver of the jeepney
• It is just saying that it is an important factor if all refuse to allow passengers to board where they choose
conditions are equal passenger, that is already a ground for revocation or
cancellation of CPC because this is part of the Public
Protection of Investment Rule
Jazzie M. Sarona (4-Manresa 2008-2009)
 Transportation Laws Notes – Based on the 4th Year Lectures of Atty. Melissa Romana Suarez
Service Act – refusal to comply with any rule or regulation
or provision of the Act is a ground (Section 16 (n))
• These are unlawful per se. It is really unlawful to do
so
Let us go to unlawful, not per se, but without approval of the
Commission
Section 20. Acts Which are UNLAWFUL Without
Approval of the Commission
1. Section 20 (a) – To increase its rates
2. Section 20 (b) – To operate new units (Ammen
Transportation vs. Francisco, Nov. 29, 1957)
3. Section 20 (g) – Sell, mortgage or lease its CPC, property,
franchise or rights (Cogeo-Cubao vs. CA 207 SCRA 346)
Q: Is it unlawful to decrease your rates?
Wowo: No, because it is favorable to the public
Lyndon: I disagree Ma’am. With LTFRB, where if they
undercharge they will also be held liable. There is this LTFRB
regulation where the moment you undercharge or overcharge,
in both instances, you will be held liable for not complying with
the issuance of the LTFRB.
Raymond: I think it can lower Ma’am. I think it is
discretionary.
• It is not in the Public Service Act. Under the Public
Service Act, the unlawful act is to increase the approval.
If it is in the regulation of the LTFRB, then, perhaps. That
is a regulation that is to be followed.
• Example: Cebu Pacific – zero fare. They often
change. Ma’am does not know if they get the approval of
CAB everytime 
• But under the Public Service Act, it is unlawful to
increase without the approval of the regulatory body.
• If your application says 100 units, then, you can
operate only 100 units. If you want to increase, you have
to get the approval of the regulatory body concerned.
Case: AMMEN TRANSPORTATION vs. FRANCISCO
HELD: He must show that there is a public need for it.
There are the requirements to entitle a common carrier to
increase his units:
a. He had regularly undertaken all his authorized trips
b. His buses were sufficiently loaded with passengers
c. Many travelers could not be conveniently accommodated
Q: Can a taxi operator sell one unit to another person?
A: Yes, as long as he has the approval of the regulatory body
(LTFRB)
Q: Can a taxi operator sell his CPC?
A: Yes, provided there is approval. Without the approval,
that is a unlawful and a violation of the Public Service Act
Effect of Sale or Lease of CPC Without Prior Approval of
Regulatory Body:
1. The sale or lease is valid and binding between the parties
2. BUT it is not effective against the regulatory body
concerned
3. The approval is only necessary to protect the public
interest
4. The registered owner is liable for damages sustained by a
third person
• If the registered owner sells a taxi to X and the taxi
figured in an accident and the passenger sues, the
registered owner is still the previous owner since he sold
without the approval of the regulatory body.
• The registered owner is held liable to third persons
for damages, regardless of who the actual owner is
Case: BENEDICTO vs. IAC
FACTS: Benedicto, a common carrier, sold her truck to Tee.
The truck was used to transport lumber by Greenhills Woods.
The lumber never arrived. An action was filed by Greenhills
against Benedicto, who denies liability on the ground that she
has already sold the truck to Tee. Despite the sale, Benedicto
remained the registered owner of the truck because she has
not been paid for the full amount of the truck by Tee.
ISSUE: May Benedicto be held liable for the undelivered
lumber?
Jazzie M. Sarona (4-Manresa 2008-2009)
HELD: YES, third persons can sue the registered owner who
did not get the prior consent or approval of the regulatory
body.
Case: ROQUE vs. MALIBAY
FACTS: Juan is a registered owner of a jeepney. He sold the
jeepney to Pedro without the approval of the regulatory body.
Later, judgment was rendered against Juan. Juan had a
creditor who filed a case against him and judgment was
rendered against him. And the jeepney, which was still in the
name of Juan, was attached to satisfy the judgment against
Juan.
ISSUE: Was the attachment valid?
HELD: YES, the attachment was valid because the sale in
favor of Pedro was not approved by the Public Service
Commission. Therefore, the transfer was not binding against
public.
Prescriptive Period for filing a case (Section 28)
1. 60 days – violations of orders, decisions and regulations of
the regulatory bodies
2. 180 days – violations of the provisions of the Public
Service Act
Kabit System
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
Kabit System – Legal or Not?
1. Not penalized outright as a criminal offense
2. But invariably recognized as contrary to public policy and
therefore VOID and INEXISTENT b under Article 1409 of
the Civil Code
3. One of the root causes of the prevalence of graft and
corruption in the government transportation offices
4. It is an abuse of the CPC which is a special privilege
granted by the government
• If you are caught engaging the kabit system, you will
not be assisted by the court.
Case: SANTOS vs. SIBUG (BQ 1990)
FACTS: Vidad had a CPC while Santos owns a jeepney which
has no CPC. Santos made it appear that he transferred the
jeepney to Vidad, the CPC holder, so that he could operate
under the latter’s CPC, under the kabit system. For the
protection of Santos, Vidad executed a re-transfer document
on the jeepney to Santos but not registered.
ISSUE: May the jeepney be attached to satisfy a judgment
against Vidad
HELD: YES, where a jeepney is registered in the name of an
authorized public utility operator when it is actually owned by
another, that other person is the kabit operator, such jeepney
can be sold at a public auction to satisfy the court’s award. It
cannot be considered as a stranger’s property.
Case: JEROES vs. CA
FACTS: A jeepney was being operated under the kabit
system. The jeepney was operating in a reckless manner
resulting to the death and injury to third persons. In the
criminal case for homicide and physical injuries through
reckless imprudence, the driver was convicted. The family of
the third party sued the driver, operator and the real owner of
the jeepney.
ISSUE: Can they be made liable for damages?
HELD: They are all jointly and severally liable for damages if
they engaged in the kabit system.
Case: LISA ENTERPRISES vs. CA
FACTS: Lisa Enterprises, without a franchise to operate a
taxicab business, bought 5 cars and entered into an
arrangement with X for the use of X’ certificate of public
convenience in consideration of P 1,000 plus P 200 per
taxicab. The taxicabs of Lisa were registered in the name of
X. But the possession remained with the plaintiff. On paper, X
owns the taxicabs. Later, Lisa was able to acquire its own CPC
and wants to get back the taxicabs from X. X did not want to
return the taxicabs. So, Lisa filed a case in court for
reconveyance of the taxi
 Transportation Laws Notes – Based on the 4th Year Lectures of Atty. Melissa Romana Suarez
HELD: The SC held that you engaged in kabit system. You
are in pari delicto. No affirmative relief will be given of any
kind will be given to one against the other. You are both at
fault.
Boundary System
An arrangement between:
1. The owner of a motor vehicle who holds a CPC, and
2. The driver who uses the motor vehicle for a fixed number
of hours and pays to the owner a fixed amount and shoulders
the gasoline used
3. Share of the driver in lieu of a fixed compensation – the
excess of the total amount of fares earned or collected
over and above the amount paid to the owner
4. It is a contract of employment between:
a. the owner of the public utility, and
b. the driver
• Under your Labor Laws, the driver is considered as an
employee of the operator
• If their take home does not reach the minimum wage,
the operator is liable for the difference if the driver sues
the operator for underpayment of wages
BAR QUESTIONS
2003 # 9
Bayan Bus Lines had been operating satisfactorily a bus
service over the route Manila to Tarlac and vice versa via the
McArthur Highway. With the upgrading of the new North
Expressway, Bayan Bus Lines service became seemingly
inadequate despite its efforts of improving the same. Pasok
Transportation, Inc., now applies for the issuance to it by the
Land Transportation Franchising and Regulatory Board of a
certificate of public convenience for the same Manila-Tarlac-
Manila route. Could Bayan Bus Lines, Inc., invoke the “prior
operator” rules against Pasok Transportation, Inc.? Why? (6%)
A: Bayan Bus Lines cannot invoke the prior operator rule.
This falls under the exceptions of the prior operator rule. As
stated in the case of Manila Taxicab, the SC held that the prior
operator rule does not apply when the prior operator has failed
to make an offer to meet the increase in traffic. In this case,
the service of the prior operator was inadequate despite
efforts. In other words, it cannot meet the needs of the
traveling public.
1998 # IV
The Batong Bakal Corporation filed with the Board of
Energy an application for a Certificate of Public Convenience
for the purpose of supplying electric power and lights to the
factory and its employees living within the compound. The
application was opposed by the Bulacan Electric Corporation
contending that the Batong Bakal Corporation has not secured
a franchise to operate and maintain an electric plant. Is the
opposition’s contention correct?
A: You can cite the case of PAL vs. CAB.
A franchise is not required for an applicant to be issued a
CPC. A legislative franchise is required for a CPCN.
1995 # 1
What requirements must be met before a certificate of
public convenience may be granted under the Public Service
Act?
A: We already discussed that 
1993 # XIII
1) Robert is a holder of a certificate of public convenience to
operate a taxicab service in Manila and suburbs. One evening,
one of his taxicab units was boarded by three robbers as they
escaped after staging a hold-up. Because of said incident, the
LTFRB revoked the certificate of public convenience of Robert
on the ground that said operator failed to render safe, proper
and adequate service as required under Sec 19a of the Public
Service Act.
a) Was the revocation of the certificate of public convenience
of Robert justified? Explain.
A: It was not justified.
Grounds for revocation are not present. This can even be
considered a fortuitous event.
If you look at your Constitution, there is substantive and
procedural due process. Procedurally, there was no notice and
hearing. As to the grounds, the grounds for revocation do not
exist.
Jazzie M. Sarona (4-Manresa 2008-2009)
b) When can the Commission (Board) exercise its power to
suspend or revoke certificate of public convenience?
A: You state the grounds. And then, you have to add after
due notice and hearing.
1993 # XIII
Pepay, a holder of a certificate of public convenience,
failed to register to the complete number of units required by
her certificate. However, she tried to justify such failure by the
accidents that allegedly befell her, claiming that she was so
shocked and burdened by the successive accidents and
misfortunes that she did not know what she was doing, she
was confused and thrown off tangent momentarily, although
she always had the money and financial ability to buy new
trucks and repair the destroyed one. Are the reasons given by
Pepay sufficient grounds to excuse her from completing units?
Explain.
A: No, she is not justified. A ground for suspension under
Section 16 (m) is present - the facts and circumstances on the
strength on which CPC was issued have been misrepresented
or materially changed.
Those are shallow reasons. She has the money or
financial ability to buy a new truck and to comply with her
CPC.
1992 # VI
Antonio was granted a Certificate of Public Convenience
(CPC) in 1986 to operate a ferry between Mindoro and
Batangas using the motor vessel “MV Lotus.” He stopped
operations in 1988 due to unserviceability of the vessel. In
1989, Basilio was granted a CPC for the same route. After a
few months, he discovered that Carlos was operating on his
route under Antonio’s CPC. Because Basilio filed a complaint
for illegal operations with the Maritime Industry Authority,
Antonio and Carlos jointly filed an application for sale and
transfer of Antonio’s CPC and substitution of the vessel “MV
Lotus” with another owned by Carlos. Should Antonio’s and
Carlos’ joint application be approved? Giver your reasons.
A: NO, because kabit system is present. Once you engage in
a kabit system, you cannot do anything anymore, as what the
SC said in the case of Lisa Enterprises.
1990 # XI
Johnny owns a Sarao jeepney. He asked his neighbor Van
if he could operate the said jeepney under Van’s certificate of
public convenience. Van agreed and, accordingly, Johnny
registered his jeepney under Van name. On June 10, 1990, one
of the passenger jeepneys operated by Van bumped Tomas.
Tomas was injured and in due time, he filed a complaint for
damages against Van and his driver for the injuries he
suffered. The court rendered judgment in favor of Tomas and
ordered Van and his driver, jointly and severally, to pay Tomas
actual and moral damages, attorney’s fees, and costs.
The Sheriff levied on the jeepney belonging to Johnny but
registered in the name of Van. Johnny filed a 3rd party claim
with the Sheriff alleging ownership of the jeepney levied upon
and stating that the jeepney was registered in the name of
Van merely to enable Johnny to make use of Van’s certificate
of public convenience. May the Sheriff proceed with the public
auction of Johnny’s jeepney. Discuss with reasons.
A: YES, because they engaged in a kabit system.
- END -