National Development Company v. CA, August 19, 1998 (G.R. No.

L-49407)

Facts: In accordance with a memorandum agreement entered into between defendants

NDC and MCP, defendant NDC as the first preferred mortgagee of three ocean going
vessels including one with the name 'Dona Nati' appointed defendant MCP as its agent to
manage and operate said vessel for and in its behalf and account. Several companies
loaded their cargoes with the Dona Nati. However, while en route to Manila, the vessel
figured in a collision with a Japanese vessel. As a result thereof, some of the cargoes were
lost, damaged and destroyed. Thus, respondent Development Insurance and Surety
Corporation, had paid as insurer the total amount of P364,915.86 to the consignees or
their successors-in-interest, for the said lost or damaged cargoes. Later on, respondent
filed a complaint to recover said amount from the defendants-NDC and MCP as owner
and ship agent respectively, of the said 'Dofia Nati' vessel. The lower court ruled in their
favor, applying the Article 287 of the Code of Commerce.

On appeal, NDC argued that the Carriage of Goods by Sea Act should apply to the case at
bar and not the Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the
carrier is not responsible for the loss or damage resulting from the "act, neglect or default
of the master, mariner, pilot or the servants of the carrier in the navigation or in the
management of the ship." Thus, NDC insists that based on the findings of the trial court
which were adopted by the Court of Appeals, both pilots of the colliding vessels were at
fault and negligent, NDC would have been relieved of liability under the Carriage of Goods
by Sea Act. Code of Commerce was applied

Issue: which laws govern loss or destruction of goods due to collision of vessels outside
Philippine waters, and the extent of liability as well as the rules of prescription provided
thereunder.

Held:
Ccode of Commerce should be applied.

The law provides that the law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss, destruction or
deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down that for
cargoes transported from Japan to the Philippines, the liability of the carrier is governed
primarily by the Civil Code and in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of commerce and by laws

Under Article 1733 of the Civil Code, common carriers from the nature of their business
and for reasons of public policy are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them
according to all circumstances of each case. Accordingly, under Article 1735 of the same
Code, in all other than those mentioned is Article 1734 thereof, the common carrier shall
be presumed to have been at fault or to have acted negligently, unless it proves that it
has observed the extraordinary diligence required by law. It appears, however, that
collision falls among matters not specifically regulated by the Civil Code, so that no
reversible error can be found in respondent courses application to the case at bar of
Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with
collision of vessels.

More specifically, Article 826 of the Code of Commerce provides that where collision is
imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify
the losses and damages incurred after an expert appraisal. But more in point to the
instant case is Article 827 of the same Code, which provides that if the collision is
imputable to both vessels, each one shall suffer its own damages and both shall be
solidarily responsible for the losses and damages suffered by their cargoes.

Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to
839, the ship owner or carrier, is not exempt from liability for damages arising from
collision due to the fault or negligence of the captain. Primary liability is imposed on the
ship owner or carrier in recognition of the universally accepted doctrine that the
shipmaster or captain is merely the representative of the owner who has the actual or
constructive control over the conduct of the voyage (Y'eung Sheng Exchange and Trading
Co. v. Urrutia & Co., 12 Phil. 751 [1909]).

2. Tatad v. Sec. Garcia, April 16, 1995

Facts: Petitioners Francisco Tatad, John Osmena, and Rodolfo Biazon are members of
the Philippine Senate and are suing in their capacities as Senators and as taxpayers.
Respondent Jesus Garcia was then Secretary of the DOTC, while private respondent
EDSA LRT CORPORATION, Ltd. is a private corporation organized under the laws of
Hongkong. DOTC planned to construct a light railway transit line along EDSA, which shall
traverse the cities of Pasay, Quezon, Mandaluyong, and Makati. Then DOTC Secretary
Oscar Orbos, acting upon a proposal to construct the EDSA LRT III on a Build-Operate-
Transfer (BOT) basis, had invited Elijahu Levin from the Eli Levin Enterprises, Inc to send
a technical team to discuss the project with the DOTC.

Subsequently, RA No. 6957 referred to as the Build-Operate-Transfer (BOT) was signed

by then President Corazon Aquino which Act provides for two schemes for the financing,
construction and operation of government projects through private initiative and
investment: BOT or Build-Transfer (BT). In accordance with the provisions of RA 6957
and to set the EDSA LRT III project underway, the Prequalification Bids and Awards
Committee and the Technical Committee were formed.

Of the 5 applicants, only the EDSA LRT Consortium “met the requirements of garnering
at least 21 points per criteria, except for Legal aspects, and obtaining an overall passing
mark of at least 82 points.” The Legal aspects referred to provided that the BOT/BT
contractor-applicant meet the requirements specified in the Constitution and other
pertinent laws. Sec. Orbos was appointed Executive Secretary to the President of the
Philippines and was replaced by Nicomedes Prado. The latter recommended the award
of the EDSA LRT III project to the sole complying bidder, the EDSA LRT Consortium, and
requested for authority to negotiate with the said firm for the contract pursuant to the
BOT Law. Authority was granted to proceed with the negotiations.

DOTC and EDSA LRT Corporation, Ltd., in substitution of the EDSA LRT Consortium,
entered into an “An Agreement to Build, Lease and Transfer a Light Rail Transit System
for EDSA” under the terms of the BOT Law. Secretary Prado, thereafter, requested
presidential approval of the contract. The request cannot, however, be granted for
failure to comply with the requirements of the BOT Law. In view whereof, Sec. Drilon,
the DOTC, and private respondent re-negotiated the agreement. Thereafter, the parties
entered into a “Revised and Restated Agreement to Build, Lease and Transfer and Light
Rail Transit System for EDSA. DOTC, represented by Sec. Jesus Garcia, Sec. Prado and
private respondent also entered into a Supplemental Agreement to the April Revised
Agreement so as to clarify their respective rights and responsibilities. The two
agreements were approved by President Fidel Ramos. According to the agreements, the
EDSA LRT III will use light rail vehicles from the Czech and Slovak Federal Republics.

Petitioners argued that the agreement, as amended by the Supplemental Agreement, in

so far as it grants EDSA LRT CORPORATION, LTD., a foreign corporation, the ownership
of EDSA LRT III, a public utility, violates the constitution, and hence, is unconstitutional.
They contend that the EDSA LRT III is a public utility, and the ownership and operation
thereof is limited by the Constitution to Filipino citizens and domestic corporations, not
foreign corporations like private respondent.

ISSUE:
Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a
public utility?

RULING:
YES. What private respondent owns are the rail tracks, rolling stocks like the coaches,
rail stations, terminals and the power plant, not a public utility. While a franchise is
needed to operate these facilities to serve the public, they do not by themselves
constitute a public utility. What constitutes a public utility is not their ownership but
their use to serve the public.

The right to operate a public utility may exist independently and separately from the
ownership of the facilities thereof. One can own said facilities without operating them
as a public utility, or conversely, one may operate a public utility without owning the
facilities used to serve the public. The devotion of property to serve the public may be
done by the owner or by the person in control thereof who may not necessarily be the
owner thereof.

While private respondent is the owner of the facilities necessary to operate the EDSA
LRT III, it admits that it is not enfranchised to operate a public utility as per requirement
of Section 11 of Article XII of the Constitution. In view of this incapacity, private
respondent and DOTC agreed that on the completion date, the private respondent will
immediately deliver possession of the LRT system by of lease for 25 years, during which
period DOTC shall operate the same as a common carrier and private respondent shall
provide technical maintenance and repair services to DOTC.

Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and
liabilities of a common carrier. For this purpose, DOTC shall indemnify and hold
harmless private respondent from any losses, damages, injuries or death which may be
claimed in the operation or implementation of the system, except losses, damages,
injury or death due to defects in the EDSA LRT III on account of the defective condition
of equipment or facilities or the defective maintenance of such equipment facilities.

3. Radio Communications of the Phils v. NTC, 150 SCRA 450

Facts: Kayumanggi Radio Network Inc. filed a complaint with NTC alleging that petitioner
RCPI was operating in Mindoro and Catarman without certificate of public convenience
and necessity. RCPI counter-alleged that its telephone services in the areas are covered
by the legislative franchise recognized by NTC and its predecessor Public Service
Commission.

After conducting hearing, NTC ordered RCPI to immediately cease from operating in these
areas, stating that under EO 546, a certificate of public convenience and necessity is
mandatory for the operation of communication utilities and services including radio
communications.

The petitioner contends that its franchise cannot be affected by Executive Order No. 546
on the ground that it has long been in operation since 1957.

Issue: Whether or not petitioner RCPI, a grantee of a legislative franchise to operate a

radio company, is required to secure a certificate of public convenience and necessity
before it can validly operate its radio stations including radio telephone services

Held: Yes. It is clear that the exemption enjoyed by radio companies from the jurisdiction
of the Public Service Commission and the Board of Communications no longer exists
because of the changes effected by the Reorganization Law and implementing executive
orders.
A franchise, being merely a privilege emanating from the sovereign power of the state
and owing its existence to a grant, is subject to regulation by the state itself by virtue of
its police power through its administrative agencies. We ruled in Pangasinan
transportation Co., Inc. v. Public Service Commission (70 Phil. 221) that:

... statutes enacted for the regulation of public utilities, being a proper exercise by the
State of its police power, are applicable not only to those public utilities coming into
existence after its passage, but likewise to those already established and in operation
...

Executive Order No. 546, being an implementing measure of P.D. No. I insofar as it
amends the Public Service Law (CA No. 146, as amended) is applicable to the petitioner
who must be bound by its provisions. The mere fact that the petitioner possesses a
franchise to put up and operate a radio communications system in certain areas is not an
insuperable obstacle to the public respondent's issuing the proper certificate to an
applicant desiring to extend the same services to those areas. The Constitution mandates
that a franchise cannot be exclusive in nature nor can a franchise be granted except that
it must be subject to amendment, alteration, or even repeal by the legislature when the
common good so requires. (Art. XII, sec. 11 of the 1986 Constitution).

Notes:
The Public Service Commission was abolished and its functions were transferred to three
specialized regulatory boards, as follows: the Board of Transportation, the Board of
Communications and the Board of Power and Waterworks. The functions so transferred
were still subject to the limitations provided in sections 14 and 15 of the Public Service Law,
as amended. With the enactment of Executive Order No. 546 on July 23, 1979 implementing
P.D. No.1, the Board of Communications and the Telecommunications Control Bureau were
abolished and their functions were transferred to the National Telecommunications
Commission