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Ln 8AnC

[C.8. no. L-6317. november 29, 1934.]


L. L. LLSL8, lnC., and A1LAn1lC Mu1uAL lnSu8AnCL CCMAn?, peLlLloners, vs. CCu81 Cl ALALS,
ln1L8nA1lCnAL PA8vLS1L8 CCMAn? Cl 1PL PlLllnLS and lS1PMlAn S1LAMSPl CCMAn?,
respondenLs.
Clbbs & Chuldlan for peLlLloners.
!. A. Wolfson for respondenLs.
S?LLA8uS
1. CA88lL8S, 8CvlSlCnS Cl 8lLL Cl LAulnC CCn18A8? 1C CA88lACL Cl CCCuS 8? SLA AC1 A8L
nuLL Anu vClu. - Clause 18 of Lhe blll of ladlng ln quesLlon provlded LhaL owner should noL be llable
for loss or damage of cargo unless wrlLLen noLlce Lhereof was glven Lo Lhe carrler wlLhln 30 days afLer
recelpL of Lhe goods. Powever, secLlon 3 of Lhe Carrlage of Coods by Sea AcL provldes LhaL even lf a
noLlce of loss or damage ls noL glven as requlred, "LhaL facL shall noL affecL or pre[udlce Lhe rlghL of Lhe
shlpper Lo brlng sulL wlLhln one year afLer Lhe dellvery of Lhe goods." Whlch of Lhese Lwo provlslons
should prevall? Peld: Clause 18 musL of necesslLy yleld Lo Lhe provlslons of Lhe Carrlage of Coods by Sea
AcL ln vlew of Lhe provlso conLalned ln Lhe same AcL whlch says: "Any clause, covenanL, or agreemenL ln
a conLracL of carrlage rellevlng Lhe carrler or Lhe shlp from llablllLy for loss or damage Lo or ln connecLlon
wlLh Lhe goods . . . or lessenlng such llablllLy oLherwlse Lhan as provlded ln Lhls AcL, shall be null and vold
and of no effecL." (SecLlon 3.) 1hls means LhaL a carrler cannoL llmlL lLs llablllLy ln a manner conLrary Lo
whaL ls provlded for ln sald AcL, and so clause 18 of Lhe blll of ladlng musL of necesslLy be null and vold.
2. lu., lu., WPLn CAn CA88lL8 8L ulSCPA8CLu l8CM LlA8lLl1? lC8 LCSS C8 uAMACL. - A
carrler can only be dlscharged from llablllLy ln respecL of loss or damage lf Lhe sulL ls noL broughL wlLhln
one year afLer Lhe dellvery of Lhe goods or Lhe daLe when Lhe goods should have been dellvered.
3. lu., CA88lACL Cl CCCuS 8? SLA AC1, LxCL1lCn CCnCL8nlnC l1S ALlCA8lLl1?, CASL A1
8A8. - CranLlng arguendo LhaL aL Lhe Llme Lhe Carrlage of Coods by Sea AcL of 1936 was accepLed and
adopLed by Lhe hlllpplne CovernmenL, Lhe hlllpplnes was sLlll a LerrlLory or possesslon of Lhe unlLed
SLaLes and Lherefore Lhe Lrade beLween Lhe Lwo counLrles was noL a forelgn Lrade, sLlll sald AcL ls
appllcable Lo Lhe presenL case lL appearlng LhaL Lhe parLles have expressly agreed Lo make and
lncorporaLe Lhe provlslons of sald AcL as an lnLegral parL of Lhelr conLracL of carrlage. 1hls ls an
excepLlon Lo Lhe rule regardlng Lhe appllcablllLy of sald AcL.
u L C l S l C n
8Au1lS1A AnCLLC, ! p:
1hls ls a peLlLlon for revlew of a declslon of Lhe CourL of Appeals whlch afflrms LhaL of Lhe courL of orlgln
dlsmlsslng Lhe complalnL wlLhouL pronouncemenL as Lo cosLs.
1he facLs, as found by Lhe CourL of Appeals, are:
"lL appears LhaL ln Lhe monLh of uecember, 1943 Lhe goods speclfled ln Lhe 8lll of Ladlng marked as
Annex A, were shlpped on Lhe 'S.S. Sea Pydra', of lsLhmlan SLeamshlp Company, from new ?ork Lo
Manlla, and were recelved by Lhe conslgnee 'udharam 8azar & Co.', excepL one case of vanlshlng cream
valued aL 139.78. 1he goods were lnsured agalnsL damage or loss by Lhe 'ALlanLlc MuLual lnsurance Co.'
'udharam 8azar and Co.' successlvely flled clalm for Lhe loss wlLh Lhe Manlla 1ermlnal Co., lnc., who
denled havlng recelved Lhe goods for cusLody, and Lhe 'lnLernaLlonal ParvesLer Co. of Lhe hlllpplnes', as
agenL for Lhe shlpplng company, who answered LhaL Lhe goods were landed and dellvered Lo Lhe
CusLoms auLhorlLles. llnally, 'udharam 8azar & Co.' clalmed for lndemnlLy of Lhe loss from Lhe lnsurer,
'ALlanLlc MuLual lnsurance Co.', and was pald by Lhe laLLer's agenL 'L. L. Llser lns.' Lhe amounL lnvolved,
LhaL ls, 139.78."
As may be noLed, Lhe CourL of Appeals held LhaL peLlLloners have already losL Lhelr rlghL Lo press Lhelr
clalm agalnsL respondenLs because of Lhelr fallure Lo serve noLlce Lhereof upon Lhe carrler wlLhln 30
days afLer recelpL of Lhe noLlce of loss or damage as requlred by clause 18 of Lhe blll of ladlng whlch was
lssued concernlng Lhe shlpmenL of Lhe merchandlse whlch had allegedly dlsappeared. ln Lhls respecL,
Lhe courL sald LhaL, "appellanLs unwlLLlngly admlLLed LhaL Lhey were laLe ln clalmlng Lhe lndemnlLy for
Lhe loss of Lhe case of Lhe vanlshlng cream as Lhelr wrlLLen clalm was made on Aprll 23, 1946, or more
Lhan 30 days afLer Lhey had been fully aware of sald loss," and because of Lhls fallure, Lhe CourL sald, Lhe
acLlon of peLlLloners should, and musL, fall. eLlLloners now conLend LhaL Lhls flndlng ls erroneous ln Lhe
llghL of Lhe provlslons of Lhe Carrlage of Coods by Sea AcL of 1936, whlch apply Lo Lhls case, Lhe same
havlng been made an lnLegral parL of Lhe covenanLs agreed upon ln Lhe blll of ladlng.
1here ls merlL ln Lhls conLenLlon. lf Lhls case were Lo be governed by clause 18 of Lhe blll of ladlng
regardless of Lhe provlslons of Lhe Carrlage of Coods by Sea AcL of 1936, Lhe concluslon reached by Lhe
CourL of Appeals would lndeed be correcL, buL ln our oplnlon Lhls AcL cannoL be lgnored or dlsregarded
ln deLermlnlng Lhe equlLles of Lhe parLles lL appearlng LhaL Lhe same was made an lnLegral parL of Lhe
blll of ladlng by express sLlpulaLlon. lL should be noLed, ln Lhls connecLlon, LhaL Lhe Carrlage of Coods by
Sea AcL of 1936 was accepLed and adopLed by our governmenL by Lhe enacLmenL of CommonwealLh AcL
no. 63 maklng sald AcL "appllcable Lo all conLracLs for Lhe carrlage of goods by sea Lo and from
hlllpplne porLs ln forelgn Lrade." And Lhe perLlnenL provlslons of Lhe Carrlage of Coods by Sea AcL of
1936 are:
"6. unless noLlce of loss or damage and Lhe general naLure of such loss or damage be glven ln
wrlLlng Lo Lhe carrler or hls agenL aL Lhe porL of dlscharge or aL Lhe Llme of Lhe removal of Lhe goods lnLo
Lhe cusLody of Lhe person enLlLled Lo dellvery Lhereof under Lhe conLracL of carrlage, such removal shall
be prlma facle evldence of Lhe dellvery by Lhe carrler of Lhe goods as descrlbed ln Lhe blll of ladlng. lf Lhe
loss or damage ls noL apparenL, Lhe noLlce musL be glven wlLhln Lhree days of Lhe dellvery.

xxx xxx xxx
"ln any evenL Lhe carrler and Lhe shlp shall be dlscharged from all llablllLy ln respecL of loss or damage
unless sulL ls broughL wlLhln one year afLer dellvery of Lhe goods or Lhe daLe when Lhe goods should
have been dellvered: 8CvluLu, 1haL lf a noLlce of loss or damage, elLher apparenL or concealed, ls noL
glven as provlded for ln Lhls secLlon, LhaL facL shall noL affecL or pre[udlce Lhe rlghL of Lhe shlpper Lo
brlng sulL wlLhln one year afLer Lhe dellvery of Lhe goods or Lhe daLe when Lhe goods should have been
dellvered. (SecLlon 3, lLallcs supplled.)
lL would Lherefore appear from Lhe above LhaL a carrler can only be dlscharged from llablllLy ln respecL
of loss or damage lf Lhe sulL ls noL broughL wlLhln one year afLer Lhe dellvery of Lhe goods or Lhe daLe
when Lhe goods should have been dellvered, and LhaL, even lf a noLlce of loss or damage ls noL glven as
requlred, "LhaL facL shall noL affecL or pre[udlce Lhe rlghL of Lhe shlpper Lo brlng sulL wlLhln one year
afLer Lhe dellvery of Lhe goods." ln oLher words, regardless of wheLher Lhe noLlce of loss or damage has
been glven, Lhe shlpper can sLlll brlng an acLlon Lo recover sald loss or damage wlLhln one year afLer Lhe
dellvery of Lhe goods, and, as we have sLaLed above, Lhls ls conLrary Lo Lhe provlslons of clause 18 of Lhe
blll of ladlng. 1he quesLlon LhaL now rlses ls: Whlch of Lhese Lwo provlslons should prevall? ls lL LhaL
conLalned ln clause 18 of Lhe blll of ladlng, or LhaL appearlng ln Lhe Carrlage of Coods by Sea AcL?
1he answer ls noL dlfflculL Lo surmlse. 1haL clause 18 musL of necesslLy ylelds Lo Lhe provlslons of Lhe
Carrlage of Coods by Sea AcL ln vlew of Lhe provlso conLalned ln Lhe same AcL whlch says: "Any clause,
covenanL, or agreemenL ln a conLracL of carrlage rellevlng Lhe carrler or Lhe shlp from llablllLy for loss or
damage Lo or ln connecLlon wlLh Lhe goods . . . or lessenlng such llablllLy oLherwlse Lhan as provlded ln
Lhls AcL, shall be null and vold and of no effecL." (SecLlon 3.) 1hls means LhaL a carrler cannoL llmlL lLs
llablllLy ln a manner conLrary Lo whaL ls provlded for ln sald AcL, and so clause 18 of Lhe blll of ladlng
musL of necesslLy be null and vold. 1hls lnLerpreLaLlon flnds supporL ln a number of cases recenLly
declded by Lhe Amerlcan courLs. 1hus, ln 8alfour, CuLhrle & Co., LLd., eL al. vs. Amerlcan-WesL Afrlcan
Llne, lnc. and Amerlcan-WesL Afrlcan Llne, lnc. vs. 8alfour, CuLhrle & Co., LLd., eL al., 136 l. 2d. 320,
whereln Lhe blll of ladlng provlded LhaL Lhe owner should noL be llable for loss of cargo unless wrlLLen
noLlce Lhereof was glven wlLhln 30 days afLer Lhe goods should have been dellvered and unless wrlLLen
clalm Lherefor was glven wlLhln slx monLhs afLer glvlng such wrlLLen noLlce, Lhe unlLed SLaLes ClrculL
CourL of Appeals, Second ClrculL, ln a declslon promulgaLed on AugusL 2, 1943, made Lhe followlng
rullng:
"8uL Lhe AcL, secLlon 3(6), 43 u. S. A. secLlon 1303 (6) provldes LhaL fallure Lo glve 'noLlce of lose or
damages' shall noL pre[udlce Lhe rlghL of Lhe shlpper Lo brlng sulL wlLhln one year afLer Lhe daLe when
Lhe goods should have been dellvered. 1o enforce a blll of ladlng provlslon condlLlonlng a shlpowner's
llablllLy upon Lhe flllng of wrlLLen clalm of loss, whlch ln Lurn requlres and depends upon Lhe flllng of a
prlor noLlce of loss, cerLalnly would do vlolence Lo secLlon 3(6). 8uL furLher, as a llke provlslon was
apparenLly qulLe cusLomary ln bllls of ladlng prlor Lo Lhe acL, Lhe reasonable lmpllcaLlon of secLlon 3(6) ls
LhaL fallure Lo flle wrlLLen clalm of loss ln no evenL may pre[udlce rlghL of sulL wlLhln a year of Lhe
scheduled daLe for cargo dellvery. 1hls ls also Lo be concluded from secLlon 3(8) 46 u. S. C. A. secLlon
1303(8), LhaL any clause ln a blll of ladlng lessenlng Lhe llablllLy of Lhe carrler oLherwlse Lhan as provlded
ln Lhe AcL shall be null and vold. A slmllar provlslon ln Lhe 8rlLlsh Carrlage of Coods by Sea AcL, 14 & 13
Ceo. v. c. 22, has been lnLerpreLed Lo nulllfy any requlremenL of wrlLLen clalm as a condlLlon Lo sulL aL
any Llme. Cl. AusLrallan unlLed SLeam navlgaLlon Co., LLd., vs. PunL (1921) 2 A. C. 331, CovenLry
Sheppard & Co. vs. Larrlnaga S. S. Co., 73 Ll. L. 8ep. 236." 1
8uL respondenLs conLend LhaL whlle Lhe unlLed SLaLes Carrlage of Coods by Sea AcL of 1936 was
accepLed and adopLed by our governmenL by vlrLue of CommonwealLh AcL no. 63, however, sald AcL
does noL have any appllcaLlon Lo Lhe presenL case because Lhe shlpmenL ln quesLlon was made ln
uecember, 1943, and arrlved ln Manlla ln lebruary, 1946 and aL LhaL Llme Lhe hlllpplnes was sLlll a
LerrlLory or possesslon of Lhe unlLed SLaLes and, Lherefore, lL may be sald LhaL Lhe Lrade Lhen beLween
Lhe hlllpplnes and Lhe unlLed SLaLes was noL a "forelgn Lrade". ln oLher words, lL ls conLended LhaL Lhe
Carrlage of Coods by Sea AcL as adopLed by our governmenL ls only appllcable "Lo all conLracLs for Lhe
carrlage of goods by sea Lo and from hlllpplne porLs ln forelgn Lrade," and, Lherefore, lL does noL apply
Lo Lhe shlpmenL ln quesLlon.
CranLlng arguendo LhaL Lhe hlllpplnes was a LerrlLory or possesslon of Lhe unlLed SLaLes for Lhe
purposes of sald AcL and LhaL Lhe Lrade beLween Lhe hlllpplnes and Lhe unlLed SLaLes before Lhe advenL
of lndependence was noL forelgn Lrade or can only be consldered ln a domesLlc sense, sLlll we are of Lhe
oplnlon LhaL Lhe Carrlage of Coods by Sea AcL of 1936 may have appllcaLlon Lo Lhe presenL case lL
appearlng LhaL Lhe parLles have expressly agreed Lo make and lncorporaLe Lhe provlslons of sald AcL as
lnLegral parL of Lhelr conLracL of carrlage. 1hls ls an excepLlon Lo Lhe rule regardlng Lhe appllcablllLy of
sald AcL. 1hls ls expressly recognlzed by secLlon 13 of sald AcL whlch conLalns Lhe followlng provlso:
"noLhlng ln Lhls AcL shall be held Lo apply Lo conLracLs for carrlage of goods by sea beLween any porL of
Lhe unlLed SLaLes or lLs possesslons, and any oLher porL of Lhe unlLed SLaLes or lLs possesslons: rovlded,
however, 1haL any blll of ladlng or slmllar documenL of LlLle whlch ls evldence of a conLracL for Lhe
carrlage of goods by sea beLween each porLs, conLalnlng an express sLaLemenL LhaL lL shall be sub[ecL Lo
Lhe provlslons of Lhls AcL, shall be sub[ecLed hereLo as fully as lf sub[ecL hereLo by Lhe express provlslons
of Lhls AcL." (lLallcs supplled.)
1hls ls also recognlzed by Lhe very auLhorlLy clLed by counsel for respondenLs, who, on Lhls maLLer, has
made Lhe followlng commenL:
"1he hlllpplne AcL of 1936 llke Lhe u. S. AcL of 1936, applles proplo vlgore only Lo forelgn commerce Lo
all conLracLs for Lhe carrlage of goods by sea Lo and from hlllpplne porLs ln forelgn Lrade.
"rlor Lo hlllpplne lndependence on !uly 4, 1946, Lrade beLween Lhe hlllpplnes and oLher, porLs and
places under Lhe Amerlcan llag, was noL, by any ordlnary deflnlLlon, forelgn commerce. Pence, Lhe u. S.
and hlllpplne AcLs dld noL apply Lo such Lrades, even Lhough conducLed under forelgn boLLoms and
under forelgn flag, unless Lhe carrler expressly exerclsed Lhe opLlon glven by secLlon 13 of Lhe u. S. AcL
Lo carry under Lhe provlslons of LhaL AcL. 1he facL LhaL Lhe u. S. coasLwlse flag monopoly dld noL exLend
Lo Lhe hlllpplne Lrade dld noL alLer Lhe facL LhaL Lhe u. S. 1rade wlLh Lhe lslands ls domesLlc." (knaughL,
Ccean 8llls of Ladlng, 1947 ed. p. 230) (lLallcs supplled.)
Pavlng reached Lhe foregolng concluslon, lL would appear clear LhaL Lhe acLlon of peLlLloners has noL yeL
lapsed or prescrlbed, as erroneously held by Lhe CourL of Appeals, lL appearlng LhaL Lhe presenL acLlon
was broughL wlLhln one year afLer Lhe dellvery of Lhe shlpmenL ln quesLlon.
As regards Lhe conLenLlon of respondenLs LhaL peLlLloners have Lhe burden of showlng LhaL Lhe loss
complalned of dld noL Lake place afLer Lhe goods lefL Lhe possesslon or cusLody of Lhe carrler because
Lhey falled Lo glve noLlce of Lhelr loss or damage as requlred by law, whlch fallure glves rlse Lo Lhe
presumpLlon LhaL Lhe goods were dellvered as descrlbed ln Lhe blll of ladlng, sufflce lL Lo sLaLe LhaL,
accordlng Lo Lhe CourL of Appeals, Lhe requlred noLlce was glven by Lhe peLlLloners Lo Lhe carrler or lLs
agenL on Aprll 23, 1946. 1haL noLlce ls sufflclenL Lo overcome Lhe above presumpLlon wlLhln Lhe
meanlng of Lhe law.
Wherefore, Lhe declslon appealed from ls reversed. 8espondenLs, oLher Lhan Lhe CourL of Appeals, are
hereby senLenced Lo pay Lo Lhe peLlLloners Lhe sum of 139.78, wlLh legal lnLeresL Lhereon from Lhe
daLe of Lhe flllng of Lhe complalnL, plus Lhe cosLs of acLlon.
aras, C. !., ablo, 8engzon, adllla, MonLemayor, 8eyes, A., Concepclon and 8eyes, !. 8. L., !!., concur.
looLnoLes
1. 1hls rullng was relLeraLed ln Mackay, eL al. vs. unlLed SLaLes, eL al., 83 l. Supp. 14, CcLober 29,
1948 and Clvaudan uolawanna vs. 1he 8ll[dendl[k, 91 l. Supp. 663, !une 8, 1930.


SLCCnu ulvlSlCn
[C.8. no. L-30803. uecember 26, 1984.]
uCMlnCC AnC, plalnLlff-appellanL, vs. CCMARlA MA8l1lMA, MA8l1lML CCMAn? Cl 1PL
PlLllnLS and C.L. ulCknC, defendanLs-appellees.
!uan 1 . uavld for plalnLlff-appellanL.
Crlsologo . vlllanueva for defendanLs-appellanLs.
S?LLA8uS
ClvlL LAW, 8LSC8l1lCn, lCu8-?LA8 L8lCu Cl 8LSC8l1lCn lC8 CuASl-uLLlC1S C8 1Ln-?LA8
L8lCu lC8 vlCLA1lCn Cl W8l11Ln CCn18AC1, ALlCA8LL 1C CASL A1 8A8. - ln Lhe Amerlcan
SLeamshlp Agencles cases, lL was held LhaL Lhe acLlon of Ang ls based on mlsdellvery of Lhe cargo whlch
should be dlsLlngulshed from loss Lhereof. 1he one-year perlod provlded for ln SecLlon 3 (6) of Lhe
Carrlage of Coods by Sea AcL refers Lo loss of Lhe cargo. WhaL ls appllcable ls Lhe four-year perlod of
prescrlpLlon for quasl-dellcLs prescrlbed ln ArLlcle 1146 (2) of Lhe Clvll Code or Len years for vlolaLlon of a
wrlLLen conLracL as provlded for ln ArLlcle 1144 (1) of Lhe same Code.
u L C l S l C n
ACulnC, ! p:
1hls case lnvolves Lhe recovery of damages by Lhe conslgnee from Lhe carrler ln case of mlsdellvery of
Lhe cargo whlch acLlon was dlsmlssed by Lhe Lrlal courL on Lhe grounds of lack of cause of acLlon and
prescrlpLlon.
lL should be noLed LhaL LhaL legal polnL ls already res [udlcaLa. ln 1967 lL was declded ln favor of plalnLlff-
appellanL uomlngo Ang ln Ang vs. Amerlcan SLeamshlp Agencles, lnc., 123 hll. 343 and 123 hll. 1040,
Lhree cases. As observed by Ang's counsel, Lhe facLs of Lhose cases and Lhe lnsLanL case are Lhe same
muLaLls muLandls. lL was held LhaL Ang has a cause of acLlon agalnsL Lhe carrler whlch has noL
prescrlbed.
ln Lhe lnsLanL case, Ang on SepLember 26, 1963, as Lhe asslgnee of a blll of ladlng held by ?au ?ue
Commerclal 8ank, LLd. of Pongkong, sued Companla MarlLlma, MarlLlme Company of Lhe hlllpplnes
and C.L. ulokno. Pe prayed LhaL Lhe defendanLs be ordered Lo pay hlm solldarlly Lhe sum of
uS$130,339.68 wlLh lnLeresL from lebruary 9, 1963 plus aLLorney's fees and damages. LL[ur
Ang alleged LhaL ?au ?ue Commerclal 8ank agreed Lo sell Lo Permlnlo C. 1eves under cerLaln condlLlons
339 packages of galvanlzed sLeel, uurzlnc sheeLs. 1he merchandlse was loaded on May 23, 1961 aL
?awaLa, !apan ln Lhe M/S Luzon, a vessel owned and operaLed by Lhe defendanLs, Lo be LransporLed Lo
Manlla and conslgned "Lo order" of Lhe shlpper, 1okyo 8oekl, LLd., whlch lndorsed Lhe blll of ladlng
lssued by Companla MarlLlma Lo Lhe order of ?au ?ue Commerclal 8ank.
Ang furLher alleged LhaL Lhe defendanLs, by means of a permlL Lo dellver lmporLed arLlcles, auLhorlzed
Lhe dellvery of Lhe cargo Lo 1eves who obLalned dellvery from Lhe 8ureau of CusLoms wlLhouL Lhe
surrender of Lhe blll of ladlng and ln vlolaLlon of Lhe Lerms Lhereof. 1eves dlshonored Lhe drafL drawn by
?au ?ue agalnsL hlm.
1he Pongkong and Shanghal 8anklng CorporaLlon made Lhe correspondlng proLesL for Lhe drafL's
dlshonor and reLurned Lhe blll of ladlng Lo ?au ?ue. 1he blll of ladlng was lndorsed Lo Ang.
1he defendanLs flled a moLlon Lo dlsmlss Ang's complalnL on Lhe ground of lack of cause of acLlon. Ang
opposed Lhe moLlon. As already sLaLed, Lhe Lrlal courL on May 22, 1964 dlsmlssed Lhe complalnL on Lhe
grounds of lack of cause of acLlon and prescrlpLlon slnce Lhe acLlon was flled beyond Lhe one-year perlod
provlded ln Lhe Carrlage of Coods by Sea AcL.
ln Lhe Amerlcan SLeamshlp Agencles cases, lL was held LhaL Lhe acLlon of Ang ls based on mlsdellvery of
Lhe cargo whlch should be dlsLlngulshed from loss Lhereof. 1he one-year perlod provlded for ln secLlon 3
(6) of Lhe Carrlage of Coods by Sea AcL refers Lo loss of Lhe cargo. WhaL ls appllcable ls Lhe four-year
perlod of prescrlpLlon for quasl-dellcLs prescrlbed ln arLlcle 1146 (2) of Lhe Clvll Code or Len years for
vlolaLlon of a wrlLLen conLracL as provlded for ln arLlcle 1144 (1) of Lhe same Code. LLpr
As Ang flled Lhe acLlon less Lhan Lhree years from Lhe daLe of Lhe alleged mlsdellvery of Lhe cargo, lL has
noL yeL prescrlbed. Ang, as lndorsee of Lhe blll of ladlng, ls a real parLy ln lnLeresL wlLh a cause of acLlon
for damages.
WPL8LlC8L, Lhe order of dlsmlssal ls reversed and seL aslde. 1he case ls remanded Lo Lhe Lrlal courL for
furLher proceedlngs. CosLs agalnsL Lhe defendanLs.
SC C8uL8Lu.
Makaslar, Concepclon, !r., Lscolln and Cuevas, !! ., concur.
Abad SanLos, ! ., Look no parL.


ll8S1 ulvlSlCn
[C.8. no. 61332. lebruary 27, 1987.]
uCLL PlLllnLS, lnC., plalnLlff-appellanL, vs. MA8l1lML CCMAn? Cl 1PL PlLllnLS, defendanL-
appellee.
uomlngo L. de Lara & AssoclaLes for plalnLlff-appellanL.
8lLo, Mlsa and Lozada Law Cfflce for defendanL-appellee.
S?LLA8uS
1. ML8CAn1lLL LAW, CA88lACL Cl CCCuS 8? SLA AC1, Lx18A!uulClAL uLMAnu ulu nC1 1CLL
CnL ?LA8 8LSC8l1lvL L8lCu, CASL A1 8A8. - 1he plvoLal lssue ls wheLher or noL ArLlcle 1133 of Lhe
Clvll Code provldlng LhaL Lhe prescrlpLlon of acLlons ls lnLerrupLed by Lhe maklng of an exLra-[udlclal
wrlLLen demand by Lhe credlLor ls appllcable Lo acLlons broughL under Lhe Carrlage of Coods by Sea AcL.
1he quesLlon has already recelved a deflnlLlve answer, adverse Lo Lhe poslLlon Laken by uole, ln 1he ?ek
1ong Lln llre & Marlne lnsurance Co., LLd. vs. Amerlcan presldenL Llnes, lnc. 1here, ln a parallel facLual
slLuaLlon, where sulL Lo recover for damage Lo cargo shlpped by vessel from 1okyo Lo Manlla was flled
more Lhan Lwo years afLer Lhe conslgnee's recelpL of Lhe cargo, Lhls CourL re[ecLed Lhe conLenLlon LhaL
an exLra[udlclal demand Lolled Lhe prescrlpLlve perlod provlded for ln Lhe Carrlage of Coods by Sea AcL,
vlz: x x x. "We have already declded LhaL ln a case governed by Lhe Carrlage of Coods by Sea AcL, Lhe
general provlslons of Lhe Code of Clvll rocedure on prescrlpLlon should noL be made Lo apply. (Chua
kuy vs. LvereLL SLeamshlp Corp., C.8. no. L-3334, May 27, 1933.) Slmllarly, we now hold LhaL ln such a
case Lhe general provlslons of Lhe new Clvll Code (ArL. 1133) cannoL be made Lo apply, as such
appllcaLlon would have Lhe effecL of exLendlng Lhe one-year perlod of prescrlpLlon flxed ln Lhe law. lL ls
deslrable LhaL maLLers affecLlng LransporLaLlon of goods by sea be declded ln as shorL a Llme as posslble,
Lhe appllcaLlon of Lhe provlslons of ArLlcle 1133 of Lhe new Clvll Code would unnecessarlly exLend Lhe
perlod and permlL delays ln Lhe seLLlemenL of quesLlons affecLlng LransporLaLlon, conLrary Lo Lhe clear
lnLenL and purpose of Lhe law. x x x."
u L C l S l C n
nA8vASA, ! p:
1hls appeal, whlch was cerLlfled Lo Lhe CourL by Lhe CourL of Appeals as lnvolvlng only quesLlons of law,
1 relaLes Lo a clalm for loss and/or damage Lo a shlpmenL of machlne parLs soughL Lo be enforced by Lhe
conslgnee, appellanL uole hlllpplnes, lnc. (herelnafLer called uole) agalnsL Lhe carrler, MarlLlme
Company of Lhe hlllpplnes (herelnafLer called MarlLlme), under Lhe provlslons of Lhe Carrlage of Coods
by Sea AcL. 2
1he baslc facLs are succlncLly sLaLed ln Lhe order of Lhe 1rlal CourL 3 daLed March 16, 1977, Lhe relevanL
porLlon of whlch read: cdrep
"xxx xxx xxx
8efore Lhe plalnLlff sLarLed presenLlng evldence aL Loday's Lrlal, aL Lhe lnsLance of Lhe CourL Lhe lawyers
enLered lnLo Lhe followlng sLlpulaLlon of facLs:
1. 1he cargo sub[ecL of Lhe lnsLanL case was dlscharged ln uadlangas unLo Lhe cusLody of Lhe
conslgnee on uecember 18, 1971,
2. 1he correspondlng clalm for Lhe damages susLalned by Lhe cargo was flled by Lhe plalnLlff wlLh
Lhe defendanL vessel on May 4, 1972,
3. Cn !une 11, 1973 Lhe plalnLlff flled a complalnL ln Lhe CourL of llrsL lnsLance of Manlla, dockeLed
Lhereln as Clvll Case no. 91043, embodylng Lhree (3) causes of acLlon lnvolvlng Lhree (3) separaLe and
dlfferenL shlpmenLs. 1he Lhlrd cause of acLlon Lhereln lnvolved Lhe cargo now sub[ecL of Lhls presenL
llLlgaLlon,
4. Cn uecember 11, 1974, !udge Serafln Cuevas lssued an Crder ln Clvll Case no. 91043 dlsmlsslng
Lhe flrsL Lwo causes of acLlon ln Lhe aforesald case wlLh pre[udlce and wlLhouL pronouncemenL as Lo
cosLs because Lhe parLles had seLLled or compromlsed Lhe clalms lnvolved Lhereln. 1he Lhlrd cause of
acLlon whlch covered Lhe cargo sub[ecL of Lhls case now was llkewlse dlsmlssed buL wlLhouL pre[udlce as
lL was noL covered by Lhe seLLlemenL. 1he dlsmlssal of LhaL complalnL conLalnlng Lhe Lhree causes of
acLlon was upon a [olnL moLlon Lo dlsmlss flled by Lhe parLles,
3. 8ecause of Lhe dlsmlssal of Lhe (complalnL ln Clvll Case no. 91043 wlLh respecL Lo Lhe Lhlrd cause
of acLlon wlLhouL pre[udlce, plalnLlff lnsLlLuLed Lhls presenL complalnL on !anuary 6, 1973.
xxx xxx xxx" 4
1o Lhe complalnL ln Lhe subsequenL acLlon MarlLlme flled an answer pleadlng lnLer alla Lhe afflrmaLlve
defense of prescrlpLlon under Lhe provlslons of Lhe Carrlage of Coods by Sea AcL, 3 and followlng pre-
Lrlal, moved for a prellmlnary hearlng on sald defense. 6 1he 1rlal CourL granLed Lhe moLlon, schedullng
Lhe prellmlnary hearlng on Aprll 27, 1977. 7 1he record before Lhe CourL does noL show wheLher or noL
LhaL hearlng was held, buL under daLe of May 6, 1977, MarlLlme flled a formal moLlon Lo dlsmlss
lnvoklng once more Lhe ground of prescrlpLlon. 8 1he moLlon was opposed by uole 9 and Lhe 1rlal CourL,
afLer due conslderaLlon, resolved Lhe maLLer ln favor of MarlLlme and dlsmlssed Lhe complalnL. 10 uole
soughL a reconslderaLlon, whlch was denled, 11 and LhereafLer Look Lhe presenL appeal from Lhe order
of dlsmlssal.
1he plvoLal lssue ls wheLher or noL ArLlcle 1133 of Lhe Clvll Code provldlng LhaL Lhe prescrlpLlon of
acLlons ls lnLerrupLed by Lhe maklng of an exLra[udlclal wrlLLen demand by Lhe credlLor ls appllcable Lo
acLlons broughL under Lhe Carrlage of Coods by Sea AcL whlch, ln lLs SecLlon 3, paragraph 6, provldes
LhaL:
". . . Lhe carrler and Lhe shlp shall be dlscharged from all llablllLy ln respecL of loss or damage unless sulL
ls broughL wlLhln one year afLer dellvery of Lhe goods or Lhe daLe when Lhe goods should have been
dellvered, rovlded, 1haL, lf a noLlce of loss or damage, elLher apparenL or conceded, ls noL glven as
provlded for ln Lhls secLlon, LhaL facL shall noL affecL or pre[udlce Lhe rlghL of Lhe shlpper Lo brlng sulL
wlLhln one year afLer Lhe dellvery of Lhe goods or Lhe daLe when Lhe goods should have been dellvered.
xxx xxx xxx."
uole concedes LhaL lLs acLlon ls sub[ecL Lo Lhe one-year perlod of llmlLaLlon prescrlbed ln Lhe above-clLed
provlslon. 12 1he subsLance of lLs argumenL ls LhaL slnce Lhe provlslons of Lhe Clvll Code are, by express
mandaLe of sald Code, suppleLory of deflclencles ln Lhe Code of Commerce and speclal laws ln maLLers
governed by Lhe laLLer, 13 and Lhere belng " . . . a paLenL deflclency . . . wlLh respecL Lo Lhe Lolllng of Lhe
prescrlpLlve perlod . . ." provlded for ln Lhe Carrlage of Coods by Sea AcL, 14 prescrlpLlon under sald AcL
ls sub[ecL Lo Lhe provlslons of ArLlcle 1133 of Lhe Clvll Code on Lolllng, and because uole's clalm for loss
or damage made on May 4, 1972 amounLed Lo a wrlLLen exLra[udlclal demand whlch would Loll or
lnLerrupL prescrlpLlon under ArLlcle 1133, lL operaLed Lo Loll prescrlpLlon also ln acLlons under Lhe
Carrlage of Coods by Sea AcL. 1o much Lhe same effecL ls Lhe furLher argumenL based on ArLlcle 1176 of
Lhe Clvll Code whlch provldes LhaL Lhe rlghLs and obllgaLlons of common carrlers shall be governed by
Lhe Code of Commerce and by speclal laws ln all maLLers noL regulaLed by Lhe Clvll Code.
1hese argumenLs mlghL merlL welghLler conslderaLlon were lL noL for Lhe facL LhaL Lhe quesLlon has
already recelved a deflnlLlve answer, adverse Lo Lhe poslLlon Laken by uole, ln 1he ?ek 1ong Lln llre &
Marlne lnsurance Co., LLd. vs. Amerlcan resldenL Llnes, lnc. 13 1here, ln a parallel facLual slLuaLlon,
where sulL Lo recover for damage Lo cargo shlpped by vessel from 1okyo Lo Manlla was flled more Lhan
Lwo years afLer Lhe conslgnee's recelpL of Lhe cargo, Lhls CourL re[ecLed Lhe conLenLlon LhaL an
exLra[udlclal demand Lolled Lhe prescrlpLlve perlod provlded for ln Lhe Carrlage of Coods by Sea AcL, vlz:
"ln Lhe second asslgnmenL of error plalnLlff-appellanL argues LhaL lL was error for Lhe courL a quo noL Lo
have consldered Lhe acLlon of plalnLlff-appellanL suspended by Lhe exLra[udlclal demand whlch Look
place, accordlng Lo defendanL's own moLlon Lo dlsmlss, on AugusL 22, 1932. We noLlce LhaL whlle
plalnLlff avolds sLaLlng any daLe when Lhe goods arrlved ln Manlla, lL relles upon Lhe allegaLlon made ln
Lhe moLlon Lo dlsmlss LhaL a proLesL was flled on AugusL 22, 1932 - whlch goes Lo show LhaL plalnLlff-
appellanL's counsel has noL been laylng Lhe facLs squarely before Lhe courL for Lhe conslderaLlon of Lhe
merlLs of Lhe case. We have already declded LhaL ln a case governed by Lhe Carrlage of Coods by Sea
AcL, Lhe general provlslons of Lhe Code of Clvll rocedure on prescrlpLlon should noL be made Lo apply.
(Chua kuy vs. LvereLL SLeamshlp Corp., C.8. no. L-3334, May 27, 1933.) Slmllarly, we now hold LhaL ln
such a case Lhe general provlslons of Lhe new Clvll Code (ArL. 1133) cannoL be made Lo apply, as such
appllcaLlon would have Lhe effecL of exLendlng Lhe one-year perlod of prescrlpLlon flxed ln Lhe law. lL ls
deslrable LhaL maLLers affecLlng LransporLaLlon of goods by sea be declded ln as shorL a Llme as posslble,
Lhe appllcaLlon of Lhe provlslons of ArLlcle 1133 of Lhe new Clvll Code would unnecessarlly exLend Lhe
perlod and permlL delays ln Lhe seLLlemenL of quesLlons affecLlng LransporLaLlon, conLrary Lo Lhe clear
lnLenL and purpose of Lhe law. . . ."
Moreover, no dlfferenL resulL would obLaln even lf Lhe CourL were Lo accepL Lhe proposlLlon LhaL a
wrlLLen exLra[udlclal demand does Loll prescrlpLlon under Lhe Carrlage of Coods by Sea AcL. 1he demand
ln Lhls lnsLance would be Lhe clalm for damage flled by uole wlLh MarlLlme on May 4, 1972. 1he effecL of
LhaL demand would have been Lo renew Lhe one-year prescrlpLlve perlod from Lhe daLe of lLs maklng
SLaLed oLherwlse, under uole's Lheory, when lLs clalm was recelved by MarlLlme, Lhe one-year
prescrlpLlve perlod was lnLerrupLed - "Lolled" would be Lhe more preclse Lerm - and began Lo run
anew from May 4, 1972, affordlng uole anoLher perlod of one (1) year counLed from LhaL daLe wlLhln
whlch Lo lnsLlLuLe acLlon on lLs clalm for damage. unforLunaLely, uole leL Lhe new perlod lapse wlLhouL
flllng acLlon. lL lnsLlLuLed Clvll Case no. 91043 only on !une 11, 1973, more Lhan one monLh afLer LhaL
perlod has explred and lLs rlghL of acLlon had prescrlbed. llcd
uole's conLenLlon LhaL Lhe prescrlpLlve perlod ". . . remalned Lolled as of May 4, 1972 . . . (and LhaL) ln
legal conLemplaLlon . . . (Lhe) case (Clvll Case no. 96333) was flled on !anuary 6, 1973 . . . well wlLhln Lhe
one-year prescrlpLlve perlod ln Sec. 3(6) of Lhe Carrlage of Coods by Sea AcL," 16 equaLes Lolllng wlLh
lndeflnlLe suspenslon. lL ls clearly fallaclous and merlLs no conslderaLlon.
WPL8LlC8L, Lhe order of dlsmlssal appealed from ls afflrmed, wlLh CosLs agalnsL Lhe appellanL, uole
hlllpplnes, lnc.
SC C8uL8Lu.
?ap, Melenclo-Perrera, Cruz, lellclano, Cancayco and SarmlenLo, !! ., concur.
looLnoLes
1. 8ollo, pp. 32-34.
2. u.S. ubllc AcL no. 321 whlch was made appllcable Lo all conLracLs for Lhe carrlage of goods by
sea Lo and from hlllpplne porLs ln forelgn Lrade by CommonwealLh AcL no. 63 approved CcLober 22,
1936.
3. ln Clvll Case no. 96333, Cll of Manlla.
4. 8ecord on Appeal, pp. 22-23.
3. ld., pp. 14-16.
6. ld., pp. 24-23.
7. ld., pp. 23-26.
8. ld., pp. 29-33.
9. ld., pp. 34-39.
10. ld., pp. 39-44.
11. ld., pp. 63-66.
12. AppellanL's 8rlef, p. 11.
13. ArL. 18, Clvll Code.
14. AppellanL's 8rlef, p. 12.
13. no. L-11081, Aprll 30, 1938, 103 hll. 1123 (unrep.).
16. AppellanL's 8rlef, p. 18.


ll8S1 ulvlSlCn
[C.8. no. 73118. AugusL 31, 1987.]
SLA-LAnu SL8vlCL, lnC., peLlLloner, vs. ln1L8MLulA1L ALLLA1L CCu81 and AuLlnC CuL, dolng
buslness under Lhe name and sLyle of "SLn PlA PlnC," respondenLs.
u L C l S l C n
nA8vASA, ! p:
1he maln lssue here ls wheLher or noL Lhe conslgnee of seaborne frelghL ls bound by sLlpulaLlons ln Lhe
coverlng blll of ladlng llmlLlng Lo a flxed amounL Lhe llablllLy of Lhe carrler for loss or damage Lo Lhe
cargo where lLs value ls noL declared ln Lhe blll.
1he facLual anLecedenLs, for Lhe mosL parL, are noL ln dlspuLe.
Cn or abouL !anuary 8, 1981, Sea-Land Servlce, lnc. (Sea-Land for brevlLy), a forelgn shlpplng and
forwardlng company llcensed Lo do buslness ln Lhe hlllpplnes, recelved from Seaborne 1radlng
Company ln Cakland, Callfornla a shlpmenL conslgned Lo Sen Plap Plng, Lhe buslness name used by
aullno Cue ln Lhe wholesale and reLall Lrade whlch he operaLed ouL of an esLabllshmenL locaLed on
8orromeo and larldel SLreeLs, Cebu ClLy.
1he shlpper noL havlng declared Lhe value of Lhe shlpmenL, no value was lndlcaLed ln Lhe blll of ladlng.
1he blll descrlbed Lhe shlpmenL only as "8 C1nS on 2 SkluS-llLLS." 1 8ased on volume measuremenLs
Sea-land charged Lhe shlpper Lhe LoLal amounL of uS$209.28 2 for frelghLage and oLher charges. 1he
shlpmenL was loaded on board Lhe MS aLrloL, a vessel owned and operaLed by Sea-Land, for dlscharge
aL Lhe orL of Cebu.
1he shlpmenL arrlved ln Manlla on lebruary 12, 1981, and Lhere dlscharged ln ConLalner no. 310996
lnLo Lhe cusLody of Lhe arrasLre conLracLor and Lhe cusLoms and porL auLhorlLles. 3 SomeLlme beLween
lebruary 13 and 16, 1981, afLer Lhe shlpmenL had been Lransferred, along wlLh oLher cargoes Lo
ConLalner no. 40138 near Warehouse 3 aL ler 3 ln SouLh Parbor, Manlla, awalLlng Lrans-shlpmenL Lo
Cebu, lL was sLolen by pllferers and has never been recovered. 4
Cn March 10, 1981, aullno Cue, Lhe conslgnee, made formal clalm upon Sea-Land for Lhe value of Lhe
losL shlpmenL allegedly amounLlng Lo 179,643.48. 3 Sea-Land offered Lo seLLle for uS$4,000.00, or lLs
Lhen hlllpplne peso equlvalenL of 30,600.00. asserLlng LhaL sald amounL represenLed lLs maxlmum
llablllLy for Lhe loss of Lhe shlpmenL under Lhe package llmlLaLlon clause ln Lhe coverlng blll of ladlng. 6
Cue re[ecLed Lhe offer and LhereafLer broughL sulL for damages agalnsL Sea-Land ln Lhe Lhen CourL of
llrsL lnsLance of Cebu, 8ranch x. 7 Sald CourL, afLer Lrlal, rendered [udgmenL ln favor of Cue, senLenclng
Sea-Land Lo pay hlm 186,048.00 represenLlng Lhe hlllpplne currency value of Lhe losL cargo,
33,814.00 for unreallzed proflL wlLh one (1) percenL monLhly lnLeresL from Lhe flllng of Lhe complalnL
unLll fully pald, 23,000.00 for aLLorney's fees and 2,000.00 as llLlgaLlon expenses. 8
Sea-Land appealed Lo Lhe lnLermedlaLe AppellaLe CourL. 9 1haL CourL however afflrmed Lhe declslon of
Lhe 1rlal CourL ". . . ln all lLs parLs . . . . " 10 Sea-Land Lhereupon flled Lhe presenL peLlLlon for revlew
whlch, as already sLaLed, poses Lhe quesLlon of wheLher, upon Lhe facLs above seL forLh, lL can be held
llable for Lhe loss of Lhe shlpmenL ln any amounL beyond Lhe llmlL of uS$300.00 per package sLlpulaLed
ln Lhe blll of ladlng. prcd
1o begln wlLh, Lhere ls no quesLlon of Lhe rlghL, ln prlnclple, of a conslgnee ln a blll of ladlng Lo recover
from Lhe carrler or shlpper for loss of, or damage Lo, goods belng LransporLed under sald blll, alLhough
LhaL documenL may have been - as ln pracLlce lL ofLenLlmes ls - drawn up only by Lhe conslgnor and
Lhe carrler wlLhouL Lhe lnLervenLlon of Lhe conslgnee. ln Mendoza vs. hlllpplne Alr Llnes, lnc. 11 Lhe
CourL delved aL some lengLh lnLo Lhe reasons behlnd Lhls when, upon a clalm made by Lhe conslgnee of
a moLlon plcLure fllm shlpped by alr LhaL he was never a parLy Lo Lhe conLracL of LransporLaLlon and was
a compleLe sLranger LhereLo, lL sald:
"8uL appellanL now conLends LhaL he ls noL sulng on a breach of conLracL buL on a LorL as provlded for ln
ArL. 1902 of Lhe Clvll Code. We are a llLLle perplexed as Lo Lhls new Lheory of Lhe appellanL. llrsL, he
lnslsLs LhaL Lhe arLlcles of Lhe Code of Commerce should be applled, LhaL he lnvokes Lhe provlslons of
sald Code governlng Lhe obllgaLlons of a common carrler Lo make prompL dellvery of goods glven Lo lL
under a conLracL of LransporLaLlon. LaLer, as already sald, he says LhaL he was never a parLy Lo Lhe
conLracL of LransporLaLlon and was a compleLe sLranger Lo lL, and LhaL he ls now sulng on a LorL or a
vlolaLlon of hls rlghLs as a sLranger (culpa aqulllana). lf he does noL lnvoke Lhe conLracL of carrlage
enLered lnLo wlLh Lhe defendanL company, Lhen he would hardly have any leg Lo sLand on. Pls rlghL Lo
prompL dellvery of Lhe can of fllm aL Lhe hll. Alr orL sLems and ls derlved from Lhe conLracL of carrlage
under whlch conLracL, Lhe AL underLook Lo carry Lhe can of fllm safely and Lo dellver lL Lo hlm prompLly.
1ake away or lgnore LhaL conLracL and Lhe obllgaLlon Lo carry and Lo dellver and rlghL Lo prompL dellvery
dlsappear. Common carrlers are noL obllgaLed by law Lo carry and Lo dellver merchandlse, and persons
are noL vesLed wlLh Lhe rlghL Lo prompL dellvery, unless such common carrlers prevlously assume Lhe
obllgaLlon. Sald rlghLs and obllgaLlons are creaLed by a speclflc conLracL enLered lnLo by Lhe parLles. ln
Lhe presenL case, Lhe flndlngs of Lhe Lrlal courL whlch as already sLaLed, are accepLed by Lhe parLles and
whlch we musL accepL are Lo Lhe effecL LhaL Lhe Lvn lcLures lnc. and !ose Mendoza on one slde, and
Lhe defendanL company on Lhe oLher, enLered lnLo a conLracL of LransporLaLlon (p. 29, 8ec. on Appeal).
Cne lnLerpreLaLlon of sald flndlng ls LhaL Lhe Lvn lcLures lnc. Lhrough prevlous agreemenL wlLh
Mendoza acLed as Lhe laLLer's agenL. When he negoLlaLed wlLh Lhe Lvn lcLures lnc. Lo renL Lhe fllm
'Plmala ng 8lrhen' and show lL durlng Lhe naga Lown flesLa, he mosL probably auLhorlzed and en[olned
Lhe lcLure Company Lo shlp Lhe fllm for hlm on Lhe AL on SepLember 17Lh. AnoLher lnLerpreLaLlon ls
LhaL even lf Lhe Lvn lcLures lnc. as conslgnor of lLs own lnlLlaLlve, and acLlng lndependenLly of Mendoza
for Lhe Llme belng, made Mendoza as conslgnee, a sLranger Lo Lhe conLracL lf LhaL ls posslble,
neverLheless when he, Mendoza appeared aL Lhe hll Alr orL armed wlLh Lhe copy of Lhe Alr Way 8lll
(Lxh. 1) demandlng Lhe dellvery of Lhe shlpmenL Lo hlm, he Lhereby made hlmself a parLy Lo Lhe conLracL
of LransporLaLlon. 1he very clLaLlon made by appellanL ln hls memorandum supporLs Lhls vlew. Speaklng
of Lhe posslblllLy of a confllcL beLween Lhe order of Lhe shlpper on Lhe one hand and Lhe order of Lhe
conslgnee on Lhe oLher, as when Lhe shlpper orders Lhe shlpplng company Lo reLurn or reLaln Lhe goods
shlpped whlle Lhe conslgnee demands Lhelr dellvery, Malagarrlga ln hls book Codlgo de Comerclo
ComenLado, vol. 1, p. 400, clLlng a declslon of Lhe ArgenLlna CourL of Appeals on commerclal maLLers,
clLed by 1olenLlno ln vol. ll of hls book enLlLled 'CommenLarles and !urlsprudence on Lhe Commerclal
Laws of Lhe hlllpplnes' p. 209, says LhaL Lhe rlghL of Lhe shlpper Lo counLermand Lhe shlpmenL
LermlnaLes when Lhe conslgnee or leglLlmaLe holder of Lhe blll of ladlng appears wlLh such blll of ladlng
before Lhe carrler and makes hlmself a parLy Lo Lhe conLracL. rlor Lo LhaL Llme he ls a sLranger Lo Lhe
conLracL.
SLlll anoLher vlew of Lhls phase of Lhe case ls LhaL conLemplaLed ln ArL. 1237, paragraph 2, of Lhe old Clvll
Code (now ArL. 1311, second paragraph) whlch reads Lhus:
Should Lhe conLracL conLaln any sLlpulaLlon ln favor of a Lhlrd person, he may demand lLs fulflllmenL
provlded he has glven noLlce of hls accepLance Lo Lhe person bound before Lhe sLlpulaLlon has been
revoked.'
Pere, Lhe conLracL of carrlage beLween Lhe Lvn lcLures lnc. and Lhe defendanL carrler conLalns Lhe
sLlpulaLlons of dellvery Lo Mendoza as conslgnee. Pls demand for Lhe dellvery of Lhe can of fllm Lo hlm
aL Lhe hll Alr orL may be regarded as a noLlce of hls accepLance of Lhe sLlpulaLlon of Lhe dellvery ln hls
favor conLalned ln Lhe conLracL of carrlage and dellvery. ln Lhls case he also made hlmself a parLy Lo Lhe
conLracL, or aL leasL has come Lo courL Lo enforce lL. Pls cause of acLlon musL necessarlly be founded on
lLs breach."
Slnce Lhe llablllLy of a common carrler for loss of or damage Lo goods LransporLed by lL under a conLracL
of carrlage ls governed by Lhe laws of Lhe counLry of desLlnaLlon 12 and Lhe goods ln quesLlon were
shlpped from Lhe unlLed SLaLes Lo Lhe hlllpplnes, Lhe llablllLy of peLlLloner Sea-Land Lo Lhe respondenL
conslgnee ls governed prlmarlly by Lhe Clvll Code, and as ordalned by Lhe sald Code, suppleLorlly, ln all
maLLers noL deLermlned Lhereby, by Lhe Code of Commerce and speclal laws. 13 Cne of Lhese
suppleLory speclal laws ls Lhe Carrlage of Coods by Sea AcL, u.S. ubllc AcL no. 321 whlch was made
appllcable Lo all conLracLs for Lhe carrlage of goods by sea Lo and from hlllpplne porLs ln forelgn Lrade
by CommonwealLh AcL no. 63, approved on CcLober 22, 1936. Sec. 4(3) of sald AcL ln parL reads: llcd
"(3) nelLher Lhe carrler nor Lhe shlp shall ln any evenL be or become llable for any loss or damage Lo
or ln connecLlon wlLh Lhe LransporLaLlon of goods ln an amounL exceedlng $300 per package lawful
money of Lhe unlLed SLaLes, or ln case of goods noL shlpped ln packages, per cusLomary frelghL unlL, or
Lhe equlvalenL of LhaL sum ln oLher currency, unless Lhe naLure and value of such goods have been
declared by Lhe shlpper before shlpmenL and lnserLed ln Lhe blll of ladlng. 1hls declaraLlon, lf embodled
ln Lhe blll of ladlng, shall be prlma facle evldence, buL shall noL be concluslve on Lhe carrler.
8y agreemenL beLween Lhe carrler, masLer, or agenL of Lhe carrler, and Lhe shlpper anoLher maxlmum
amounL Lhan LhaL menLloned ln Lhls paragraph may be flxed: rovlded, 1haL such maxlmum shall noL be
less Lhan Lhe flgure above named. ln no evenL shall Lhe carrler be llable for more Lhan Lhe amounL of
damage acLually susLalned.
xxx xxx xxx."
Clause 22, flrsL paragraph, of Lhe long-form blll of ladlng cusLomarlly lssued by Sea-Land Lo lLs shlpplng
cllenLs 14 ls a vlrLual copy of Lhe flrsL paragraph of Lhe foregolng provlslon. lL says:
"22. vALuA1lCn. ln Lhe evenL of any loss, damage or delay Lo or ln connecLlon wlLh goods exceedlng
ln acLual value $300 per package, lawful money of Lhe unlLed SLaLes, or ln case of goods noL shlpped ln
packages, per cusLomary frelghL unlL, Lhe value of Lhe goods shall be deemed Lo be $300 per package or
per cusLomary frelghL unlL, as Lhe case may be, and Lhe carrler's llablllLy, lf any, shall be deLermlned on
Lhe basls of a value of $300 per package or cusLomary frelghL unlL, unless Lhe naLure and a hlgher value
shall be declared by Lhe shlpper ln wrlLlng before shlpmenL and lnserLed ln Lhls 8lll of Ladlng."
And ln lLs second paragraph, Lhe blll sLaLes:
"lf a value hlgher Lhan $300 shall have been declared ln wrlLlng by Lhe shlpper upon dellvery Lo Lhe
carrler and lnserLed ln Lhls blll of ladlng and exLra frelghL pald, lf requlred and ln such case lf Lhe acLual
value of Lhe goods per package or per cusLomary frelghL unlL shall exceed such declared value, Lhe value
shall neverLheless be deemed Lo be declared value and Lhe carrler's llablllLy, lf any, shall noL exceed Lhe
declared value and any parLlal loss or damage shall be ad[usLed pro raLa on Lhe basls of such declared
value."
Slnce, as already polnLed ouL, ArLlcle 1766 of Lhe Clvll Code expressly sub[ecLs Lhe rlghLs and obllgaLlons
of common carrlers Lo Lhe provlslons of Lhe Code of Commerce and of speclal laws ln maLLers noL
regulaLed by sald (Clvll) Code, Lhe CourL falls Lo faLhom Lhe reason or [usLlflcaLlon for Lhe AppellaLe
CourL's pronouncemenL ln lLs appealed ueclslon LhaL Lhe Carrlage of Coods by Sea AcL ". . . has no
appllcaLlon whaLsoever ln Lhls case." 13 noL only ls Lhere noLhlng ln Lhe Clvll Code whlch absoluLely
prohlblLs agreemenLs beLween shlpper and carrler llmlLlng Lhe laLLer's llablllLy for loss of or damage Lo
cargo shlpped under conLracLs of carrlage, lL ls also qulLe clear LhaL sald Code ln facL has agreemenLs of
such characLer ln conLemplaLlon ln provldlng, ln lLs ArLlcles 1749 and 1730, LhaL:
"A81. 1749. A sLlpulaLlon LhaL Lhe common carrler's llablllLy ls llmlLed Lo Lhe value of Lhe goods
appearlng ln Lhe blll of ladlng, unless Lhe shlpper or owner declares a greaLer value, ls blndlng."
"A81. 1730. A conLracL flxlng Lhe sum LhaL may be recovered by Lhe owner or shlpper for Lhe loss,
desLrucLlon, or deLerloraLlon of Lhe goods ls valld, lf lL ls reasonable and [usL under Lhe clrcumsLances,
and has been falrly and freely agreed upon."
noLhlng conLalned ln secLlon 4(3) of Lhe Carrlage of Coods by Sea AcL already quoLed ls repugnanL Lo or
lnconslsLenL wlLh any of Lhe [usL-clLed provlslons of Lhe Clvll Code. Sald secLlon merely glves more flesh
and greaLer speclflclLy Lo Lhe raLher general Lerms of ArLlcle 1749 (wlLhouL dolng any vlolence Lo Lhe
plaln lnLenL Lhereof) and of ArLlcle 1730, Lo glve effecL Lo [usL agreemenLs llmlLlng carrlers' llablllLy for
loss or damage whlch are freely and falrly enLered lnLo. prcd
lL seems clear LhaL even lf sald secLlon 4(3) of Lhe Carrlage of Coods by Sea AcL dld noL exlsL, Lhe valldlLy
and blndlng effecL of Lhe llablllLy llmlLaLlon clause ln Lhe blll of ladlng here are neverLheless fully
susLalnable on Lhe basls alone of Lhe clLed Clvll Code provlslons. 1haL sald sLlpulaLlon ls [usL and
reasonable ls arguable from Lhe facL LhaL lL echoes ArL. 1730 lLself ln provldlng a llmlL Lo llablllLy only lf a
greaLer value ls noL declared for Lhe shlpmenL ln Lhe blll of ladlng. 1o hold oLherwlse would amounL Lo
quesLlonlng Lhe [usLlce and falrness of LhaL law lLself, and Lhls Lhe prlvaLe respondenL does noL preLend
Lo do. 8uL over and above LhaL conslderaLlon, Lhe [usL and reasonable characLer of such sLlpulaLlon ls
lmpllclL ln lLs glvlng Lhe shlpper or owner Lhe opLlon of avoldlng accrual of llablllLy llmlLaLlon by Lhe
slmple and surely far from onerous expedlenL of declarlng Lhe naLure and value of Lhe shlpmenL ln Lhe
blll of ladlng. And slnce Lhe shlpper here has noL been heard Lo complaln of havlng been "rushed,"
lmposed upon or decelved ln any slgnlflcanL way lnLo agreelng Lo shlp Lhe cargo under a blll of ladlng
carrylng such a sLlpulaLlon - ln facL, lL does noL appear LhaL sald parLy has been heard from aL all lnsofar
as Lhls dlspuLe ls concerned - Lhere ls slmply no ground for assumlng LhaL lLs agreemenL LhereLo was
noL, as Lhe law would requlre, freely and falrly soughL and glven.
1he prlvaLe respondenL had no dlrecL parL or lnLervenLlon ln Lhe execuLlon of Lhe conLracL of carrlage
beLween Lhe shlpper and Lhe carrler as seL forLh ln Lhe blll of ladlng ln quesLlon. As polnLed ouL ln
Mendoza vs. AL, supra, Lhe rlghL of a parLy ln Lhe same slLuaLlon as respondenL here, Lo recover for loss
of a shlpmenL conslgned Lo hlm under a blll of ladlng drawn up only by and beLween Lhe shlpper and Lhe
carrler, sprlngs from elLher a relaLlon of agency LhaL may exlsL beLween hlm and Lhe shlpper or
conslgnor, or hls sLaLus as a sLranger ln whose favor some sLlpulaLlon ls made ln sald conLracL, and who
becomes a parLy LhereLo when he demands fulflllmenL of LhaL sLlpulaLlon, ln Lhls case Lhe dellvery of Lhe
goods or cargo shlpped. ln nelLher capaclLy can he asserL personally, ln bar Lo any provlslon of Lhe blll of
ladlng, Lhe alleged clrcumsLance LhaL falr and free agreemenL Lo such provlslon was vlLlaLed by lLs belng
ln such flne prlnL as Lo be hardly readable. arenLheLlcally, lL may be observed LhaL ln one comparaLlvely
recenL case 16 where Lhls CourL found LhaL a slmllar package llmlLaLlon clause was "(p)rlnLed ln Lhe
smallesL Lype on Lhe back of Lhe blll of ladlng," lL noneLheless ruled LhaL Lhe conslgnee was bound
Lhereby on Lhe sLrengLh of auLhorlLy holdlng LhaL such provlslons on llablllLy llmlLaLlon are as much a
parL of a blll of ladlng as Lhough physlcally ln lL and as Lhough placed Lhereln by agreemenL of Lhe
parLles.
1here can, Lherefore, be no doubL or equlvocaLlon abouL Lhe valldlLy and enforceablllLy of freely-agreed-
upon sLlpulaLlons ln a conLracL of carrlage or blll of ladlng llmlLlng Lhe llablllLy of Lhe carrler Lo an agreed
valuaLlon unless Lhe shlpper declares a hlgher value and lnserLs lL lnLo sald conLracL or blll. 1hls
proposlLlon, moreover, resLs upon an almosL unlform welghL of auLhorlLy. 17
1he lssue of alleged devlaLlon ls also seLLled by Clause 13 of Lhe blll of ladlng whlch expressly auLhorlzes
LransshlpmenL of Lhe goods aL any polnL ln Lhe voyage ln Lhese Lerms: prcd
"13. 1P8CuCP CA8CC Anu 18AnSSPlMLn1. 1he carrler or masLer, ln Lhe exerclse of lLs or hls
dlscreLlon and alLhough LransshlpmenL or forwardlng of Lhe goods may noL have been conLemplaLed or
provlded for hereln, may aL porL of dlscharge or any oLher place whaLsoever Lransshlp or forward Lhe
goods or any parL Lhereof by any means aL Lhe rlsk and expense of Lhe goods and aL any Llme, wheLher
before or afLer loadlng on Lhe shlp named hereln and by any rouLe, wheLher wlLhln or ouLslde Lhe scope
of Lhe voyage or beyond Lhe porL of dlscharge or desLlnaLlon of Lhe goods and wlLhouL noLlce Lo Lhe
shlpper or conslgnee. 1he carrler or masLer may delay such Lransshlpplng or forwardlng for any reason,
lncludlng buL noL llmlLed Lo awalLlng a vessel or oLher means of LransporLaLlon wheLher by Lhe carrler or
oLhers."
Sald provlslon obvlaLes Lhe necesslLy Lo offer any oLher [usLlflcaLlon for off loadlng Lhe shlpmenL ln
quesLlon ln Manlla for LransshlpmenL Lo Cebu ClLy, Lhe porL of desLlnaLlon sLlpulaLed ln Lhe blll of ladlng.
noneLheless, Lhe CourL Lakes noLe of Sea-Land's explanaLlon LhaL lL only dlrecLly serves Lhe orL of
Manlla from abroad ln Lhe usual course of voyage of lLs carrlers, hence lLs malnLenance of arrangemenLs
wlLh a local forwarder, AbolLlz and Company, for dellvery of lLs lmporLed cargo Lo Lhe agreed flnal polnL
of desLlnaLlon wlLhln Lhe hlllpplnes, such arrangemenLs noL belng prohlblLed, buL ln facL recognlzed, by
law. 18
lurLhermore, Lhls CourL has also ruled 19 LhaL Lhe Carrlage of Coods by Sea AcL ls appllcable up Lo Lhe
flnal porL of desLlnaLlon and LhaL Lhe facL LhaL LransshlpmenL was made on an lnLerlsland vessel dld noL
remove Lhe conLracL of carrlage of goods from Lhe operaLlon of sald AcL.
rlvaLe respondenL also conLends LhaL Lhe aforeclLed Clauses 22 and 13 of Lhe blll of ladlng relled upon
by peLlLloner Sea-Land form no parL of Lhe shorL-form blll of ladlng aLLached Lo hls complalnL before Lhe
1rlal CourL and appear only ln Lhe long form of LhaL documenL whlch, he clalms, Sea-Land offered (as lLs
LxhlblL 2) as an unused blank form wlLh no enLrles or slgnaLures Lhereln. Pe, however, admlLLed ln Lhe
1rlal CourL LhaL several Llmes ln Lhe pasL shlpmenLs had been dellvered Lo hlm Lhrough Sea-Land, 20
from whlch Lhe assumpLlon may falrly follow LhaL by Lhe Llme of Lhe conslgnmenL now ln quesLlon, he
was already reasonably apprlsed of Lhe usual Lerms coverlng conLracLs of carrlage wlLh sald peLlLloner.
AL any raLe, as observed earller, lL has already been held LhaL Lhe provlslons of Lhe Carrlage of Coods by
Sea AcL on package llmlLaLlon [sec. 4(3) of Lhe AcL herelnabove referred Lo] are as much a parL of a blll of
ladlng as Lhough acLually placed Lhereln by agreemenL of Lhe parLles. 21
rlvaLe respondenL, by maklng clalm for loss on Lhe basls of Lhe blll of ladlng, Lo all lnLenLs and purposes
accepLed sald blll. Pavlng done so, he -
". . . becomes bound by all sLlpulaLlons conLalned Lhereln wheLher on Lhe fronL or Lhe back Lhereof.
8espondenL cannoL elude lLs provlslons slmply because Lhey pre[udlce hlm and Lake advanLage of Lhose
LhaL are beneflclal. Secondly, Lhe facL LhaL respondenL shlpped hls goods on board Lhe shlp of peLlLloner
and pald Lhe correspondlng frelghL Lhereon shows LhaL he lmplledly accepLed Lhe blll of ladlng whlch
was lssued ln connecLlon wlLh Lhe shlpmenL ln quesLlon, and so lL may be sald LhaL Lhe same ls blndlng
upon hlm as lf lL had been acLually slgned by hlm or by any oLher person ln hls behalf. . . . . 22
1here ls one flnal conslderaLlon. 1he prlvaLe respondenL admlLs 23 LhaL as early as on Aprll 22, 1981,
Sea-Land had offered Lo seLLle hls clalm for uS$4,000.00, Lhe llmlL of sald carrler's llablllLy for loss of Lhe
shlpmenL under Lhe blll of ladlng. 1hls CourL havlng reached Lhe concluslon LhaL sald sum ls all LhaL ls
[usLly due sald respondenL, lL does noL appear [usL or equlLable LhaL Sea-Land, whlch offered LhaL
amounL ln good falLh as early as slx years ago, should, by belng made Lo pay aL Lhe currenL converslon
raLe of Lhe dollar Lo Lhe peso, bear for lLs own accounL all of Lhe lncrease ln sald raLe slnce Lhe Llme of
Lhe offer of seLLlemenL. 1he declslon of Lhe 8eglonal 1rlal CourL awardlng Lhe prlvaLe respondenL
186,048.00 as Lhe peso value of Lhe losL shlpmenL ls clearly based on a converslon raLe of 8.00 Lo
uS$1.00, sald respondenL havlng clalmed a dollar value of $23,236.00 for sald shlpmenL. 24 All
clrcumsLances consldered, lL ls [usL and falr LhaL Sea-Land's dollar obllgaLlon be converLlble aL Lhe same
raLe. llcd
WPL8LlC8L, Lhe ueclslon of Lhe lnLermedlaLe AppellaLe CourL complalned of ls reversed and seL aslde.
1he sLlpulaLlon ln Lhe quesLloned blll of ladlng llmlLlng Sea-Land's llablllLy for loss of or damage Lo Lhe
shlpmenL covered by sald blll Lo uS$300.00 per package ls held valld and blndlng on prlvaLe respondenL.
1here belng no quesLlon of Lhe facL LhaL sald shlpmenL conslsLed of elghL (8) carLons or packages, for Lhe
loss of whlch Sea-Land ls Lherefore llable ln Lhe aggregaLe amounL of uS$4,000.00, lL ls Lhe [udgmenL of
Lhe CourL LhaL sald peLlLloner dlscharge LhaL obllgaLlon by paylng prlvaLe respondenL Lhe sum of
32,000.00, Lhe equlvalenL ln hlllpplne currency of uS$4,000.00 aL Lhe converslon raLe of 8.00 Lo
$1.00. CosLs agalnsL prlvaLe respondenL.
SC C8uL8Lu.
1eehankee, C.!., Cruz, aras and Cancayco, !!., concur.
looLnoLes
1. LxhlblLs 1, 1-8: 1Sn uec. 14, 1982, pp. 19-20.
2. eLlLlon, p. 2, 8ollo, p. 11.
3. LxhlblLs 6, 6-A: 1Sn !an. 26, 1983, pp. 18-20.
4. LxhlblLs L, 3-A, 4, 8 and 9, 1Sn ld.
3. LxhlblL l.
6. LxhlblLs 2, 2-A.
7. Clvll Case no. 20810.
8. 8ollo, p. 21.
9. AC-C.8. Cv no. 06130.
10. 8ollo, p. 12, 21-32.
11. 90 hll. 836, 843-846, see also Amerlcan Lxpress Co. vs. naLlvldad, 46 hll. 207 and hoenlx
Assurance Co., LLd. vs. unlLed SLaLes Llnes, 22 SC8A 673.
12. ArL. 1733, Clvll Code.
13. ArL. 1766, Clvll Code, Samar Mlnlng Co., lnc. vs. nordeuLscher Lloyd, 132 SC8A 329, LasLern
Shlpplng Llnes, lnc. vs. 1he nlsshln llre & Marlne lnsurance Co., eL al., C.8. nos. 69044 and 71478, May
29, 1987.
14. LxhlblL 2.
13. 8ollo, pp. 26-27.
16. hoenlx Assurance Company vs. Macondray & Co., lnc., 64 SC8A 13, May 13, 1973.
17. lrelxas and Co. vs. aclflc Mall SLeamshlp Co., 42 hll. 198, P.L. Peacock Co. vs. Macondray &
Co., 43 hll. 203, Amerlcan resldenL Llnes vs. klepper, lnfra, hoenlx Assurance Co. vs. Macondray &
Co., supra.
18. ArL. 373, Code of Commerce.
19. Amerlcan lnsurance Company vs. Companla MarlLlma, 21 SC8A 998.
20. 8eply Lo CommenL, p. 11, 8ollo, p. 87, clLlng 1Sn, SepL. 1, 1982.
21. hoenlx Assurance Company vs. Macondray & Company, supra, clLlng Shackman vs. Cunard
WhlLe SLar, u.C.n.?. 1940, see also LasLern Shlpplng Llnes, lnc. vs. lAC, supra, whlch clLes Lhe same
Amerlcan case.
22. Amerlcan resldenL Llnes vs. klepper, supra.
23. Appellee's 8rlef, p. 6, 8ollo, p. 33.
24. Appellee's 8rlef, p. 3, 8ollo, p. 33.


ll8S1 ulvlSlCn
[C.8. no. 77638. !uly 12, 1990.]
MA8l1lML ACLnClLS & SL8vlCLS, lnC., peLlLloner, vs. CCu81 Cl ALALS and unlCn lnSu8AnCL
SCClL1? Cl CAn1Cn, L1u., respondenLs.
[C.8. no. 77674. !uly 12, 1990.]
unlCn lnSu8AnCL SCClL1? Cl CAn1Cn, L1u., peLlLloner, vs. CCu81 Cl ALALS, PCnCkCnC lSLAnu
CC., L1u., MA8l1lML ACLnClLS & SL8vlCLS, lnC., and or vlvA CuS1CMS 88CkL8ACL, respondenLs.
uel 8osarlo & uel 8osarlo for peLlLloner ln C.8. no. 77638.
Zapa, Agulllardo & AssoclaLes for peLlLloner ln C.8. no. 77674.
8lLo, Mlsa & Lozada for Pongkong lsland Co. LLd. and Macondray & Co., lnc.
u L C l S l C n
C8uZ, ! p:
1ransconLlnenLal lerLlllzer Company of London charLered from Pongkong Lhe moLor vessel named
"Pongkong lsland" for Lhe shlpmenL of 8073.33 M1 (gross) bagged urea from novorosslsk, Cdessa,
uSS8, Lo Lhe hlllpplnes, Lhe parLles slgnlng for Lhls purpose a unlform Ceneral CharLer daLed AugusL 9,
1979. 1
Cf Lhe LoLal shlpmenL, 3,400.04 M1 was for Lhe accounL of ALlas lerLlllzer Company as conslgnee,
3,400.04 Lo be dlscharged ln Manlla and Lhe remalnlng 2,000 M1 ln Cebu. 2 1he goods were lnsured by
Lhe conslgnee wlLh Lhe unlon lnsurance SocleLy of CanLon, LLd. for 6,779,214.00 agalnsL all rlsks. 3
MarlLlme Agencles & Servlces, lnc. was appolnLed as Lhe charLerer's agenL and Macondray Company,
lnc. as Lhe owner's agenL. 4
1he vessel arrlved ln Manlla on CcLober 3, 1979, and unloaded parL of Lhe conslgnee's goods, Lhen
proceeded Lo Cebu on CcLober 19, 1979, Lo dlscharge Lhe resL of Lhe cargo. Cn CcLober 31, 1979, Lhe
conslgnee flled a formal clalm agalnsL MarlLlme, copy furnlshed Macondray, for Lhe amounL of
87,163.34, represenLlng C & l value of Lhe 1,383 shorLlanded bags. 3 Cn !anuary 12, 1980, Lhe
conslgnee flled anoLher formal clalm, Lhls Llme agalnsL vlva CusLoms 8rokerage, for Lhe amounL of
36,030.23, represenLlng Lhe value of 374 bags of neL unrecovered splllage. 6
1hese clalms havlng been re[ecLed, Lhe conslgnee Lhen wenL Lo unlon, whlch on demand pald Lhe LoLal
lndemnlLy of 113,123.86 pursuanL Lo Lhe lnsurance conLracL. As subrogee of Lhe conslgnee, unlon Lhen
flled on SepLember 19, 1980, a complalnL for relmbursemenL of Lhls amounL, wlLh legal lnLeresL and
aLLorney's fees, agalnsL Pongkong lsland Company, LLd., MarlLlme Agencles & Servlces, lnc. and/or vlva
CusLoms 8rokerage. 7 Cn Aprll 20, 1981, Lhe complalnL was amended Lo drop vlva and lmplead
Macondray Company, lnc. as a new defendanL. 8
Cn !anuary 4, 1984, afLer Lrlal, Lhe Lrlal courL rendered [udgmenL holdlng Lhe defendanLs llable as
follows:
(a) defendanLs Pongkong lsland Co., LLd., and lLs local agenL Macondray & Co., lnc. Lo pay Lhe
plalnLlff Lhe sum of 87,163.34 plus 12 lnLeresL from Aprll 20, 1981 unLll Lhe whole amounL ls fully
pald, 1,000.00 as aLLorney's fees and Lo pay one-half (1/2) of Lhe cosLs, and
(b) defendanL MarlLlme Agencles & Servlces, lnc., Lo pay Lhe plalnLlff Lhe sum of 36,030.23, plus
l2 lnLeresL from Aprll 20, 1981 unLll Lhe whole amounL ls fully pald, 600.00 as aLLorney's fees and Lo
pay one-half (1/2) of Lhe cosLs. 9
eLlLloner appealed Lhe declslon Lo Lhe CourL of Appeals, whlch rendered a declslon on november 28,
1986, Lhe dlsposlLlve porLlon of whlch reads:
WPL8LlC8L, Lhe declslon appealed from ls modlfled, flndlng Lhe charLerer 1ransconLlnenLal lerLlllzer
Co., LLd. represenLed by lLs agenL MarlLlme Agencles & Servlces, lnc. llable for Lhe amounL of 87,163.34
plus lnLeresL aL 12 plus aLLorney's fees of 1,000.00. uefendanL Pongkong lsland Cos. LLd. represenLed
by Macondray Co., lnc. are accordlngly exempLed from any llablllLy. 10
MarlLlme and unlon flled separaLe moLlons for reconslderaLlon whlch were boLh denled. 1he movanLs
are now before us Lo quesLlon Lhe declslon of Lhe respondenL courL.
ln C.8. no. 77638, MarlLlme pleads non-llablllLy on Lhe ground LhaL lL was only Lhe charLerer's agenL and
should noL answer for whaLever responslblllLy mlghL have aLLached Lo Lhe prlnclpal. lL also argues LhaL
Lhe respondenL courL erred ln applylng ArLlcles 1734 and 1733 of Lhe Clvll Code ln deLermlnlng Lhe
charLerer's llablllLy.
ln C.8. no. 77674, unlon asks for Lhe modlflcaLlon of Lhe declslon of Lhe respondenL courL so as Lo make
MarlLlme solldarlly and solely llable, lLs prlnclpal noL havlng been lmpleaded and so noL sub[ecL Lo Lhe
[urlsdlcLlon of our courLs.
1hese Lwo cases were consolldaLed and glven due course, Lhe parLles belng requlred Lo submlL
slmulLaneous memoranda. All complled, lncludlng Pongkong lsland Company, LLd., and Macondray
Company, lnc., alLhough Lhey polnLed ouL LhaL Lhey were noL lnvolved ln Lhe peLlLlons.
1here are Lhree general caLegorles of charLers, Lo wlL, Lhe demlse or "bareboaL charLer," Lhe Llme
charLer and Lhe voyage charLer.
A demlse lnvolves Lhe Lransfer of full possesslon and conLrol of Lhe vessel for Lhe perlod covered by Lhe
conLracL, Lhe charLerer obLalnlng Lhe rlghL Lo use Lhe vessel and carry whaLever cargo lL chooses, whlle
mannlng and supplylng Lhe shlp as well. 11
A Llme charLer ls a conLracL Lo use a vessel for a parLlcular perlod of Llme, Lhe charLerer obLalnlng Lhe
rlghL Lo dlrecL Lhe movemenLs of Lhe vessel durlng Lhe charLerlng perlod, alLhough Lhe owner reLalns
possesslon and conLrol. 12
A voyage charLer ls a conLracL for Lhe hlre of a vessel for one or a serles of voyages usually for Lhe
purpose of LransporL ln goods for Lhe charLerer. 1he voyage charLer ls a conLracL of affrelghLmenL and ls
consldered a prlvaLe carrlage. 13
1esLed by Lhose deflnlLlons, Lhe agreemenL enLered lnLo ln Lhe cases aL bar should be consldered. 1hls
brlngs us Lo Lhe baslc quesLlon of who, ln Lhls klnd of charLer, shall be llable for Lhe cargo.
A voyage charLer belng a prlvaLe carrlage, Lhe parLles may freely conLracL respecLlng llablllLy for damage
Lo Lhe goods and oLher maLLers. 1he baslc prlnclple ls LhaL "Lhe responslblllLy for cargo loss falls on Lhe
one who agreed Lo perform Lhe duLy lnvolved" ln accordance wlLh Lhe Lerms of mosL voyage charLers.
14
1hls ls Lrue ln Lhe presenL cases where Lhe charLerer was responslble for loadlng, sLowage and
dlscharglng aL Lhe porLs vlslLed, whlle Lhe owner was responslble for Lhe care of Lhe cargo durlng Lhe
voyage. 1hus, ar. 2 of Lhe unlform Ceneral CharLer read:

2. Cwners are Lo be responslble for loss of or damage Lo Lhe goods or for delay ln dellvery of Lhe
goods only ln case Lhe loss, damage or delay has been caused by Lhe lmproper or negllgenL sLowage of
Lhe goods or by personal wanL of due dlllgence on Lhe parL of Lhe Cwners or Lhelr Manager Lo make Lhe
vessel ln all respecLs seaworLhy and Lo secure LhaL she ls properly manned, equlpped and supplled or by
Lhe personal acL or defaulL of Lhe Cwners or Lhelr Manager.
And Lhe Cwners are responslble for no loss or damage or delay arlslng from any oLher cause
whaLsoever, even from Lhe neglecL or defaulL of Lhe CapLaln or crew or some oLher person employed by
Lhe Cwners onboard or ashore for whose acLs Lhey would, buL for Lhls clause, be responslble, or from
unseaworLhlness of Lhe vessel on loadlng or commencemenL of Lhe voyage or aL any Llme whaLsoever.
uamage caused by conLacL wlLh or leakage, smell or evaporaLlon from oLher goods or by Lhe
lnflammable or exploslve naLure or lnsufflclenL package of oLher goods noL Lo be consldered as caused
by lmproper or negllgenL sLowage, even lf ln facL so caused.
whlle Clause 17 of AddlLlonal Clauses Lo CharLerparLy provlded:
1he cargo shall be loaded, sLowed and dlscharged free of expense Lo Lhe vessel under Lhe MasLer's
supervlslon. Powever, lf requlred aL loadlng and dlscharglng porLs Lhe vessel ls Lo glve free use of
wlnches and power Lo drlve Lhem gear, runners and ropes. Also sllngs, as on board. Shore wlnchmen are
Lo be employed and Lhey are Lo be for CharLerers' or Shlppers' or 8ecelvers' accounL as Lhe case may be.
vessel ls also Lo glve free use of sufflclenL llghL, as on board, lf requlred for nlghL work. 1lme losL Lhrough
breakdown of wlnches or derrlcks ls noL Lo counL as layLlme.
ln Pome lnsurance Co. v. Amerlcan SLeamshlp Agencles, lnc., 13 Lhe Lrlal courL re[ecLed slmllar
sLlpulaLlons as conLrary Lo publlc pollcy and, applylng Lhe provlslons of Lhe Clvll Code on common
carrlers and of Lhe Code of Commerce on Lhe duLles of Lhe shlp capLaln, held Lhe vessel llable ln
damages for loss of parL of Lhe cargo lL was carrylng. 1hls CourL reversed, declarlng as follows: LlbLex
1he provlslons of our Clvll Code on common carrlers were Laken from Anglo-Amerlcan law. under
Amerlcan [urlsprudence, a common carrler underLaklng Lo carry a speclal cargo or charLered Lo a speclal
person only, becomes a prlvaLe carrler. As a prlvaLe carrler, a sLlpulaLlon exempLlng Lhe owner from
llablllLy for Lhe negllgence of lLs agenL ls noL agalnsL publlc pollcy, and ls deemed valld.
Such docLrlne we flnd reasonable. 1he Clvll Code provlslons on common carrlers should noL be applled
where Lhe carrler ls noL acLlng as such buL as a prlvaLe carrler. 1he sLlpulaLlon ln Lhe charLer parLy
absolvlng Lhe owner from llablllLy for loss due Lo Lhe negllgence of lLs agenL would be vold only lf Lhe
sLrlcL publlc pollcy governlng common carrlers ls applled. Such pollcy has no force where Lhe publlc aL
large ls noL lnvolved, as ln Lhe case of a shlp LoLally charLered for Lhe use of a slngle parLy.
neverLheless, Lhls rullng cannoL beneflL Pongkong, because Lhere was no showlng ln LhaL case LhaL Lhe
vessel was aL faulL. ln Lhe cases aL bar, Lhe Lrlal courL found LhaL 1,383 bags were shorLlanded, whlch
could only mean LhaL Lhey were damaged or losL on board Lhe vessel before unloadlng of Lhe shlpmenL.
lL ls noL denled LhaL Lhe enLlre cargo shlpped by Lhe charLerer ln Cdessa was covered by a clean blll of
ladlng. 16 As Lhe bags were ln good order when recelved ln Lhe vessel, Lhe presumpLlon ls LhaL Lhey
were damaged or losL durlng Lhe voyage as a resulL of Lhelr negllgenL lmproper sLowage. lor Lhls Lhe
shlp owner should be held llable.
8uL we do agree LhaL Lhe perlod for flllng Lhe clalm ls one year, ln accordance wlLh Lhe Carrlage of Coods
by Sea AcL. 1hls was adopLed and embodled by our leglslaLure ln Com. AcL no. 63 whlch, as a speclal law,
prevalls over Lhe general provlslons of Lhe Clvll Code on prescrlpLlon of acLlons. SecLlon 3(6) of LhaL AcL
provldes as follows:
ln any evenL, Lhe carrler and Lhe shlp shall be dlscharged from all llablllLy ln respecL of loss or damage
unless sulL ls broughL wlLhln one year afLer dellvery of Lhe goods or Lhe daLe when Lhe goods should
have been dellvered, rovlded, LhaL lf a noLlce of loss for damage, elLher apparenL or concealed, ls noL
glven as provlded for ln Lhls secLlon, LhaL facL shall noL affecL or pre[udlce Lhe rlghL of Lhe shlpper Lo
brlng sulL wlLhln one year afLer Lhe dellvery of Lhe goods or Lhe daLe when Lhe goods should have been
dellvered.
1hls perlod was applled by Lhe CourL ln Lhe case of unlon Carblde, hlllpplnes, lnc. v. Manlla 8allroad
Co., 17 where lL was held:
under Lhe facLs of Lhls case, we held LhaL Lhe one-year perlod was correcLly reckoned by Lhe Lrlal courL
from uecember 19, 1961, when, as agreed upon by Lhe parLles and as shown ln Lhe Lally sheeLs, Lhe
cargo was dlscharged from Lhe carrylng vessel and dellvered Lo Lhe Manlla orL Servlce. 1haL one-year
perlod explred on uecember 19, 1962. lnasmuch as Lhe acLlon was flled on uecember 21, 1962, lL was
barred by Lhe sLaLuLe of llmlLaLlons.
1he one-year perlod ln Lhe cases aL bar should commence on CcLober 20, 1979, when Lhe lasL lLem was
dellvered Lo Lhe conslgnee. 18 unlon's complalnL was flled agalnsL Pongkong on SepLember 19, 1980,
buL Lardlly agalnsL Macondray on Aprll 20, 1981. 1he consequence ls LhaL Lhe acLlon ls consldered
prescrlbed as far as Macondray ls concerned buL noL agalnsL lLs prlnclpal, whlch ls whaL maLLers anyway.
As regards Lhe goods damaged or losL durlng unloadlng, Lhe charLerer ls llable Lherefor, havlng assumed
Lhls acLlvlLy under Lhe charLer parLy "free of expense Lo Lhe vessel." 1he dlfflculLy ls LhaL
1ransconLlnenLal has noL been lmpleaded ln Lhese cases and so ls beyond our [urlsdlcLlon. 1he llablllLy
lmposable upon lL cannoL be borne by MarlLlme whlch, as a mere agenL, ls noL answerable for ln[ury
caused by lLs prlnclpal. lL ls a well-seLLled prlnclple LhaL Lhe agenL shall be llable for Lhe acL or omlsslon
of Lhe prlnclpal only lf Lhe laLLer ls undlsclosed. 19
unlon seeks Lo hold MarlLlme llable as shlp agenL on Lhe basls of Lhe rullng of Lhls CourL ln Lhe case of
SwlLzerland Ceneral lnsurance Co., LLd. v. 8amlrez. 20 Powever, we do noL flnd LhaL case ls appllcable.
ln LhaL case, Lhe charLerer represenLed lLself on Lhe face of Lhe blll of ladlng as Lhe carrler. 1he vessel
owner and Lhe charLerer dld noL sLlpulaLe ln Lhe CharLerparLy on Lhelr separaLe respecLlve llablllLles for
Lhe cargo. 1he loss/damage Lo Lhe cargo was susLalned whlle lL was sLlll on board or under Lhe cusLody
of Lhe vessel. As Lhe charLerer was lLself Lhe carrler, lL was made llable for Lhe acLs of Lhe shlp capLaln
who was responslble for Lhe cargo whlle under Lhe cusLody of Lhe vessel.
As for Lhe charLerer's agenL, Lhe evldence showed LhaL lL represenLed Lhe vessel when lL Look charge of
Lhe unloadlng of Lhe cargo and lssued cargo recelpLs (or Lally sheeLs) ln lLs own name. Clalms agalnsL Lhe
vessel for Lhe losses/damages susLalned by LhaL cargo were also recelved and processed by lL. As a
resulL, Lhe charLerer's agenL was also consldered a shlp agenL and so was held Lo be solldarlly llable wlLh
lLs prlnclpal. LlbLex
1he facLs ln Lhe cases aL bar are dlfferenL. 1he charLerer dld noL represenL lLself as a carrler and lndeed
assumed responslblllLy only for Lhe unloadlng of Lhe cargo, l.e, afLer Lhe goods were already ouLslde Lhe
cusLody of Lhe vessel. ln supervlslng Lhe unloadlng of Lhe cargo and lssulng ually CperaLlons 8eporL and
SLaLemenL of lacLs lndlcaLlng and descrlblng Lhe day-Lo-day dlscharge of Lhe cargo, MarlLlme acLed ln
represenLaLlon of Lhe charLerer and noL of Lhe vessel. lL Lhus cannoL be consldered a shlp agenL. As a
mere charLerer's agenL, lL cannoL be held solldarlly llable wlLh 1ransconLlnenLal for Lhe losses/damages
Lo Lhe cargo ouLslde Lhe cusLody of Lhe vessel. noLably, 1ransconLlnenLal was dlsclosed as Lhe
charLerer's prlnclpal and Lhere ls no quesLlon LhaL MarlLlme acLed wlLhln Lhe scope of lLs auLhorlLy.
Pongkong and Macondray polnL ouL ln Lhelr memorandum LhaL Lhe appealed declslon ls noL assalled
lnsofar as lL favors Lhem and so has become flnal as Lo Lhem. We do noL Lhlnk so. llrsL of all, we noLe
LhaL Lhey were formally lmpleaded as respondenLs ln C.8 no. 77674 and submlLLed Lhelr commenL and
laLer Lhelr memorandum, where Lhey dlscussed aL lengLh Lhelr poslLlon vls-a-vls Lhe clalms of Lhe oLher
parLles. Secondly, we relLeraLe Lhe rule LhaL even lf lssues are noL formally and speclflcally ralsed on
appeal, Lhey may neverLheless be consldered ln Lhe lnLeresL of [usLlce for a proper declslon of Lhe case.
1hus, we have held LhaL:
8esldes, an unasslgned error closely relaLed Lo Lhe error properly asslgned, or upon whlch Lhe
deLermlnaLlon of Lhe quesLlon ralsed by Lhe error properly asslgned ls dependenL, wlll be consldered by
Lhe appellaLe courL noLwlLhsLandlng Lhe fallure Lo asslgn lL as error.
AL any raLe, Lhe CourL ls cloLhed wlLh ample auLhorlLy Lo revlew maLLers, even lf Lhey are noL asslgned as
errors ln Lhelr appeal, lf lL flnds LhaL Lhelr conslderaLlon ls necessary ln arrlvlng aL a [usL declslon of Lhe
case. 21
xxx xxx xxx
lssues, Lhough noL speclflcally ralsed ln Lhe pleadlngs ln Lhe appellaLe courL, may, ln Lhe lnLeresL of
[usLlce, be properly consldered by sald courL ln decldlng a case, lf Lhey are quesLlons ralsed ln Lhe Lrlal
courL and are maLLers of record havlng some bearlng on Lhe lssue submlLLed whlch Lhe parLles falled Lo
ralse or Lhe lower courL lgnore(d). 22
xxx xxx xxx
Whlle an asslgnmenL of error whlch ls requlred by law or rule of courL has been held essenLlal Lo
appellaLe revlew, and only Lhose asslgned wlll be consldered, Lhere are a number of cases whlch appear
Lo accord Lo Lhe appellaLe courL a broad dlscreLlonary power Lo walve Lhls lack of proper asslgnmenL of
errors and conslder errors noL asslgned. 23
ln hls declslon daLed !anuary 4, 1984, !udge ArLemon de Luna of Lhe 8eglonal 1rlal CourL of Manlla held:
1he CourL, on Lhe basls of Lhe evldence, flnds noLhlng Lo dlsprove Lhe flndlng of Lhe marlne and cargo
surveyors LhaL of Lhe 66,390 bags of urea ferLlllzer, 63,347 bags were "dlscharged ex-vessel" and Lhere
were shorLlanded" "1,383 bags," valued aL 87,163.34. 1hls sum should be Lhe prlnclpal and prlmary
llablllLy and responslblllLy of Lhe carrylng vessel. under Lhe conLracL for Lhe LransporLaLlon of goods, Lhe
vessel's responslblllLy commence upon Lhe acLual dellvery Lo, and recelpL by Lhe carrler or lLs auLhorlzed
agenL, unLll lLs flnal dlscharge aL Lhe porL of Manlla. uefendanL Pongkong lsland Co., LLd., as
"shlpowner" and represenLed by Lhe defendanL Macondray & Co., lnc., as lLs local agenL ln Lhe
hlllpplnes, should be responslble for Lhe value of Lhe bags of urea ferLlllzer whlch were shorLlanded.
1he remalnder of Lhe clalm ln Lhe amounL of 36,030.23, represenLlng Lhe value of Lhe 374 bags of
unrecovered splllages havlng occurred afLer Lhe shlpmenL was dlscharged from Lhe vessel unLo Lhe ex-
llghLers as well as durlng Lhe dlscharge from Lhe llghLers Lo Lhe Lruck whlch LransporLed Lhe shlpmenL Lo
Lhe conslgnee's warehouses should be for Lhe accounL of Lhe defendanL MarlLlme Agencles & Servlces,
lnc.
We afflrm Lhe facLual flndlngs buL musL modlfy Lhe legal concluslons. As prevlously dlscussed, Lhe
llablllLy of Macondray can no longer be enforced because Lhe clalm agalnsL lL has prescrlbed, and as for
MarlLlme, lL cannoL be held llable for Lhe acLs of lLs known prlnclpal resulLlng ln ln[ury Lo unlon. 1he
lnLeresL musL also be reduced Lo Lhe legal raLe of 6, conformably Lo our rullng ln 8eformlna v. 1omol
24 and ArLlcle 2209 of Lhe Clvll Code, and should commence, noL on Aprll 20, 1981, buL on SepLember
19, 1980, daLe of Lhe flllng of Lhe orlglnal complalnL.
WPL8LlC8L, Lhe declslon of Lhe respondenL courL ls SL1 ASluL and LhaL of Lhe Lrlal courL ls 8LlnS1A1Lu
as above modlfled. 1he parLles shall bear Lhelr respecLlve cosLs.
SC C8uL8Lu.
narvasa, Cancayco, Crlno-Aqulno and Medlaldea !!., concur.
looLnoLes
1. Crlglnal 8ecords, pp. 24-31.
2. lbld., pp. 63-66.
3. ld., pp. 67-68.
4. ld., p.33.
3. ld., p. 73 .
6. ld., p. 76.
7. 8ollo, C.8. no. 77638, p. 114.
8. Crlglnal 8ecords, pp. 3-6.
9. lbld., pp. 136-163. ueclded by !udge ArLemon u. Luna.
10. 8ollo, C.8. no. 77638, pp. 27-33. enned by Coqula, !., wlLh Luclano and Cul, !!., concurrlng.
11. Schoenbaum, 1homas, !., AdmlralLy and MarlLlme Law, 1987, SLudenL LdlLlon, p. 382.
12. lbld.
13. ld., p. 383.
14. ld., p. 403.
13. 23 SC8A 24.
16. Crlglnal 8ecords, p. 64.
17. 77 SC8A 339.
18. Schoenbaum, AdmlralLy and MarlLlme Law, p. 379.
19. 2 Am. !ur., pp. 247-249, 3 C!S, pp. 119, 133.
20. 96 SC8A 297.
21. vda. de !avellana v. CA, 123 SC8A 799.
22. 8aqulran v. CA, 2 SC8A 873.
23. Pernandez v. Andal, 78 hll. 196.
24. 139 SC8A 260.


SLCCnu ulvlSlCn
[C.8. no. 124030. !une 19, 1997.]
MA?L8 S1LLL lL CC8C8A1lCn and PCnCkCnC CCvL8nMLn1 SuLlLS uLA81MLn1, peLlLloners,
vs. CCu81 Cl ALALS, SCu1P SLA Su8L1? Anu lnSu8AnCL CC., lnC. and Lhe CPA81L8 lnSu8AnCL
CC8C8A1lCn, respondenLs.
ArLuro S. SanLos for peLlLloners.
Conrado 8. Mangahas & AssoclaLes for respondenLs.
S?LLA8uS
1. CCMML8ClAL LAW, CA88lACL Cl CCCuS 8? SLA AC1, SLC. 3(6) 1PL8LCl, Sul1 ACAlnS1
CA88lL8 lC8 LCSS C8 uAMACL 1C CCCuS 8LSC8l8LS Al1L8 CnL ?LA8 l8CM uLLlvL8? Cl CCCuS,
8uLL nC1 ALlCA8LL 1C An lnSu8L8 Cl 1PL CCCuS. - SecLlon 3(6) of Lhe Carrlage of Coods by Sea
AcL sLaLes LhaL Lhe carrler and Lhe shlp shall be dlscharged from all llablllLy for loss or damage Lo Lhe
goods lf no sulL ls flled wlLhln one year afLer dellvery of Lhe goods or Lhe daLe when Lhey should have
been dellvered. under Lhls provlslon, only Lhe carrler's llablllLy ls exLlngulshed lf no sulL ls broughL wlLhln
one year. 8uL Lhe llablllLy of Lhe lnsurer ls noL exLlngulshed because Lhe lnsurer's llablllLy ls based noL on
Lhe conLracL of carrlage buL on Lhe conLracL of lnsurance. A close readlng of Lhe law reveals LhaL Lhe
Carrlage of Coods by Sea AcL governs Lhe relaLlonshlp beLween Lhe carrler on Lhe one hand and Lhe
shlpper, Lhe conslgnee and/or Lhe lnsurer on Lhe oLher hand. lL deflnes Lhe obllgaLlons of Lhe carrler
under Lhe conLracL of carrlage. lL does noL, however, affecL Lhe relaLlonshlp beLween Lhe shlpper and
Lhe lnsurer. 1he laLLer case ls governed by Lhe lnsurance Code.
2. lu., lnSu8AnCL, "ALL 8lSkS" lnSu8AnCL CLlC? CCvL8ACL 1PL8LCl, lnSu8L8'S C8LlCA1lCn
1PL8LunuL8 8LSC8l8LS ln 1Ln ?LA8S, CASL A1 8A8. - 1he rullng ln llllplno MerchanLs should apply
only Lo sulLs agalnsL Lhe carrler flled elLher by Lhe shlpper, Lhe conslgnee or Lhe lnsurer. When Lhe courL
sald ln llllplno MerchanLs LhaL SecLlon 3(6) of Lhe Carrlage of Coods by Sea AcL applles Lo Lhe lnsurer, lL
meanL LhaL Lhe lnsurer, llke Lhe shlpper, may no longer flle a clalm agalnsL Lhe carrler beyond Lhe one-
year perlod provlded ln Lhe law. 8uL lL does noL mean LhaL Lhe shlpper may no longer flle a clalm agalnsL
Lhe lnsurer because Lhe basls of Lhe lnsurer's llablllLy ls Lhe lnsurance conLracL. An lnsurance conLracL ls a
conLracL whereby one parLy, for a conslderaLlon known as Lhe premlum, agrees Lo lndemnlfy anoLher for
loss or damage whlch he may suffer from a speclfled perll. An "all rlsks" lnsurance pollcy covers all klnds
of loss oLher Lhan Lhose due Lo wlllful and fraudulenL acL of Lhe lnsured. 1hus, when prlvaLe respondenLs
lssued Lhe "all rlsks" pollcles Lo peLlLloner Mayer, Lhey bound Lhemselves Lo lndemnlfy Lhe laLLer ln case
of loss or damage Lo Lhe goods lnsured. Such obllgaLlon prescrlbes ln Len years, ln accordance wlLh
ArLlcle 1144 of Lhe new Clvll Code. ACulcS
u L C l S l C n
unC, ! p:
1hls ls a peLlLlon for revlew on cerLlorarl Lo annul and seL aslde Lhe ueclslon of respondenL CourL of
Appeals daLed uecember 14, 1993 1 and lLs 8esoluLlon daLed lebruary 22, 1996 2 ln CA-C.8. Cv no.
43803 enLlLled Mayer SLeel lpe CorporaLlon and Pongkong CovernmenL Supplles ueparLmenL v. SouLh
Sea SureLy lnsurance Co., lnc. and 1he CharLer lnsurance CorporaLlon. 3
ln 1983, peLlLloner Pongkong CovernmenL Supplles ueparLmenL (Pongkong) conLracLed peLlLloner
Mayer SLeel lpe CorporaLlon (Mayer) Lo manufacLure and supply varlous sLeel plpes and flLLlngs. lrom
AugusL Lo CcLober, 1983, Mayer shlpped Lhe plpes and flLLlngs Lo Pongkong as evldenced by lnvolce
nos. MSC-1014, MSC-1013, MSC-1023, MSC-1020, MSC-1017 and MSC-1022. 4
rlor Lo Lhe shlpplng, peLlLloner Mayer lnsured Lhe plpes and flLLlngs agalnsL all rlsks wlLh prlvaLe
respondenLs SouLh Sea SureLy and lnsurance Co., lnc. (SouLh Sea) and CharLer lnsurance Corp. (CharLer).
1he plpes and flLLlngs covered by lnvolce nos. MSC-1014, 1013 and 1023 wlLh a LoLal amounL of
uS$212,772.09 were lnsured wlLh respondenL SouLh Sea, whlle Lhose covered by lnvolce nos. 1020,
1017 and 1022 wlLh a LoLal amounL of uS$149,470.00 were lnsured wlLh respondenL CharLer.
eLlLloners Mayer and Pongkong [olnLly appolnLed lndusLrlal lnspecLlon (lnLernaLlonal) lnc. as Lhlrd-
parLy lnspecLor Lo examlne wheLher Lhe plpes and flLLlngs are manufacLured ln accordance wlLh Lhe
speclflcaLlons ln Lhe conLracL. lndusLrlal lnspecLlon cerLlfled all Lhe plpes and flLLlngs Lo be ln good order
condlLlon before Lhey were loaded ln Lhe vessel. noneLheless, when Lhe goods reached Pongkong, lL
was dlscovered LhaL a subsLanLlal porLlon Lhereof was damaged.
eLlLloners flled a clalm agalnsL prlvaLe respondenLs for lndemnlLy under Lhe lnsurance conLracL.
8espondenL CharLer pald peLlLloner Pongkong Lhe amounL of Pk$64,904.73. eLlLloners demanded
paymenL of Lhe balance of Pk$299,343.30 represenLlng Lhe cosL of repalr of Lhe damaged plpes. rlvaLe
respondenLs refused Lo pay because Lhe lnsurance surveyor's reporL allegedly showed LhaL Lhe damage
ls a facLory defecL.
Cn Aprll 17, 1986, peLlLloners flled an acLlon agalnsL prlvaLe respondenLs Lo recover Lhe sum of
Pk$299,343.30. lor Lhelr defense, prlvaLe respondenLs averred LhaL Lhey have no obllgaLlon Lo pay Lhe
amounL clalmed by peLlLloners because Lhe damage Lo Lhe goods ls due Lo facLory defecLs whlch are noL
covered by Lhe lnsurance pollcles.
1he Lrlal courL ruled ln favor of peLlLloners. lL found LhaL Lhe damage Lo Lhe goods ls noL due Lo
manufacLurlng defecLs. lL also noLed LhaL Lhe lnsurance conLracLs execuLed by peLlLloner Mayer and
prlvaLe respondenLs are "all rlsks" pollcles whlch lnsure agalnsL all causes of concelvable loss or damage.
1he only excepLlons are Lhose excluded ln Lhe pollcy, or Lhose susLalned due Lo fraud or lnLenLlonal
mlsconducL on Lhe parL of Lhe lnsured. 1he dlsposlLlve porLlon of Lhe declslon sLaLes:
WPL8LlC8L, [udgmenL ls hereby rendered orderlng Lhe defendanLs [olnLly and severally, Lo pay Lhe
plalnLlffs Lhe followlng:
1. Lhe sum equlvalenL ln hlllpplne currency of Pk$299,343.30 wlLh legal raLe of lnLeresL as of Lhe
flllng of Lhe complalnL,
2. 100,000.00 as and for aLLorney's fees, and
3. cosLs of sulL.
SC C8uL8Lu. 3
rlvaLe respondenLs elevaLed Lhe case Lo respondenL CourL of Appeals.
8espondenL courL afflrmed Lhe flndlng of Lhe Lrlal courL LhaL Lhe damage ls noL due Lo facLory defecL and
LhaL lL was covered by Lhe "all rlsks" lnsurance pollcles lssued by prlvaLe respondenLs Lo peLlLloner
Mayer. Powever, lL seL aslde Lhe declslon of Lhe Lrlal courL and dlsmlssed Lhe complalnL on Lhe ground
of prescrlpLlon. lL held LhaL Lhe acLlon ls barred under SecLlon 3(6) of Lhe Carrlage of Coods by Sea AcL
slnce lL was flled only on Aprll 17, 1986, more Lhan Lwo years from Lhe Llme Lhe goods were unloaded
from Lhe vessel. SecLlon 3(6) of Lhe Carrlage of Coods by Sea AcL provldes LhaL "Lhe carrler and Lhe shlp
shall be dlscharged from all llablllLy ln respecL of loss or damage unless sulL ls broughL wlLhln one year
afLer dellvery of Lhe goods or Lhe daLe when Lhe goods should have been dellvered." 8espondenL courL
ruled LhaL Lhls provlslon applles noL only Lo Lhe carrler buL also Lo Lhe lnsurer, clLlng llllplno MerchanLs
lnsurance Co., lnc. v. Ale[andro. 6
Pence Lhls peLlLlon wlLh Lhe followlng asslgnmenLs of error:
1. 1he respondenL CourL of Appeals erred ln holdlng LhaL peLlLloners' cause of acLlon had already
prescrlbed on Lhe mlsLaken appllcaLlon of Lhe Carrlage of Coods by Sea AcL and Lhe docLrlne of llllplno
MerchanLs Co., lnc. v. Ale[andro (143 SC8A 42), and
2. 1he respondenL CourL of Appeals commlLLed an error ln dlsmlsslng Lhe complalnL. 7
1he peLlLlon ls lmpressed wlLh merlL. 8espondenL courL erred ln applylng SecLlon 3(6) of Lhe Carrlage of
Coods by Sea AcL.
SecLlon 3(6) of Lhe Carrlage of Coods by Sea AcL sLaLes LhaL Lhe carrler and Lhe shlp shall be dlscharged
from all llablllLy for loss or damage Lo Lhe goods lf no sulL ls flled wlLhln one year afLer dellvery of Lhe
goods or Lhe daLe when Lhey should have been dellvered. under Lhls provlslon, only Lhe carrler's llablllLy
ls exLlngulshed lf no sulL ls broughL wlLhln one year. 8uL Lhe llablllLy of Lhe lnsurer ls noL exLlngulshed
because Lhe lnsurer's llablllLy ls based noL on Lhe conLracL of carrlage buL on Lhe conLracL of lnsurance. A
close readlng of Lhe law reveals LhaL Lhe Carrlage of Coods by Sea AcL governs Lhe relaLlonshlp beLween
Lhe carrler on Lhe one hand and Lhe shlpper, Lhe conslgnee and/or Lhe lnsurer on Lhe oLher hand. lL
deflnes Lhe obllgaLlons of Lhe carrler under Lhe conLracL of carrlage. lL does noL, however, affecL Lhe
relaLlonshlp beLween Lhe shlpper and Lhe lnsurer. 1he laLLer case ls governed by Lhe lnsurance Code.
Cur rullng ln llllplno MerchanLs lnsurance Co., lnc. v. Ale[andro 8 and Lhe oLher cases 9 clLed Lhereln
does noL supporL respondenL courL's vlew LhaL Lhe lnsurer's llablllLy prescrlbes afLer one year lf no acLlon
for lndemnlLy ls flled agalnsL Lhe carrler or Lhe lnsurer. ln LhaL case, Lhe shlpper flled a complalnL agalnsL
Lhe lnsurer for recovery of a sum of money as lndemnlLy for Lhe loss and damage susLalned by Lhe
lnsured goods. 1he lnsurer, ln Lurn, flled a Lhlrd-parLy complalnL agalnsL Lhe carrler for relmbursemenL of
Lhe amounL lL pald Lo Lhe shlpper. 1he lnsurer flled Lhe Lhlrd-parLy complalnL on !anuary 9, 1978, more
Lhan one year afLer dellvery of Lhe goods on uecember 17, 1977. 1he courL held LhaL Lhe lnsurer was
already barred from flllng a clalm agalnsL Lhe carrler because under Lhe Carrlage of Coods by Sea AcL,
Lhe sulL agalnsL Lhe carrler musL be flled wlLhln one year afLer dellvery of Lhe goods or Lhe daLe when
Lhe goods should have been dellvered. 1he courL sald LhaL "Lhe coverage of Lhe AcL lncludes Lhe lnsurer
of Lhe goods." 10
1he llllplno MerchanLs case ls dlfferenL from Lhe case aL bar. ln llllplno MerchanLs, lL was Lhe lnsurer
whlch flled a clalm agalnsL Lhe carrler for relmbursemenL of Lhe amounL lL pald Lo Lhe shlpper. ln Lhe
case aL bar, lL was Lhe shlpper whlch flled a clalm agalnsL Lhe lnsurer. 1he basls of Lhe shlpper's clalm ls
Lhe "all rlsks" lnsurance pollcles lssued by prlvaLe respondenLs Lo peLlLloner Mayer.
1he rullng ln llllplno MerchanLs should apply only Lo sulLs agalnsL Lhe carrler flled elLher by Lhe shlpper,
Lhe conslgnee or Lhe lnsurer. When Lhe courL sald ln llllplno MerchanLs LhaL SecLlon 3(6) of Lhe Carrlage
of Coods by Sea AcL applles Lo Lhe lnsurer, lL meanL LhaL Lhe lnsurer, llke Lhe shlpper, may no longer flle
a clalm agalnsL Lhe carrler beyond Lhe one-year perlod provlded ln Lhe law. 8uL lL does noL mean LhaL
Lhe shlpper may no longer flle a clalm agalnsL Lhe lnsurer because Lhe basls of Lhe lnsurer's llablllLy ls Lhe
lnsurance conLracL. An lnsurance conLracL ls a conLracL whereby one parLy, for a conslderaLlon known as
Lhe premlum, agrees Lo lndemnlfy anoLher for loss or damage whlch he may suffer from a speclfled perll
11 An "all rlsks" lnsurance pollcy covers all klnds of loss oLher Lhan Lhose due Lo wlllful and fraudulenL
acL of Lhe lnsured. 12 1hus, when prlvaLe respondenLs lssued Lhe "all rlsks" pollcles Lo peLlLloner Mayer,
Lhey bound Lhemselves Lo lndemnlfy Lhe laLLer ln case of loss or damage Lo Lhe goods lnsured. Such
obllgaLlon prescrlbes ln Len years, ln accordance wlLh ArLlcle 1144 of Lhe new Clvll Code. 13 cdasla
ln vlLW WPL8LCl, Lhe peLlLlon ls C8An1Lu. 1he ueclslon of respondenL CourL of Appeals daLed
uecember 14, 1993 and lLs 8esoluLlon daLed lebruary 22, 1996 are hereby SL1 ASluL and Lhe ueclslon
of Lhe 8eglonal 1rlal CourL ls hereby 8LlnS1A1Lu. no cosLs.
SC C8uL8Lu.
8egalado, 8omero, Mendoza and 1orres, !r., !! ., concur.
looLnoLes
1. Annex "A" of Lhe eLlLlon, 8ollo, pp. 13-30.
2. Annex "8" of Lhe eLlLlon, 8ollo, pp. 31-32.
3. enned by !usLlce Mlnerva . Conzaga-8eyes wlLh Lhe concurrence of !usLlces 8uenavenLura !.
Cuerrero and 8omeo A. 8rawner.
4. 1he plpes and flLLlngs covered by lnvolce nos. MSC-1014 and MSC-1017 were loaded on
AugusL 24, 1983, Lhose covered by lnvolce no. MSC-1013 were loaded on AugusL 31, 1983, Lhose
covered by lnvolce nos. MSC-1020 and MSC-1022 were loaded on CcLober 10, 1983, and Lhose
covered by lnvolce no. MSC-1023 were loaded on CcLober 21, 1983.
3. 8ollo, pp. 20-21.
6. 143 SC8A 42 (1986).
7. eLlLlon, 8ollo, p. 10.
8. 143 SC8A 42 (1986).
9. See Chua kuy v. LvereLL SLeamshlp CorporaLlon (93 hll. 207) and AeLna lnsurance Co. vs. Luzon
SLevedorlng CorporaLlon (62 SC8A 11).
10. AL p. 47.
11. 43 Amerlcan !urlsprudence 2d 74-73.
12. llllplno MerchanLs lnsurance Co., lnc. v. CourL of Appeals, 179 SC8A 638 (1989).
13. ArL. 1144. 1he followlng acLlons musL be broughL wlLhln Len years from Lhe Llme Lhe rlghL of
acLlon accrues:
(1) upon a wrlLLen conLracL,
(2) upon an obllgaLlon creaLed by law,
(3) upon a [udgmenL.

Ln 8AnC
[C.8. no. L-3438. SepLember 16, 1933.]
LuZCn S1LvLuC8lnC CC., lnC., and vlSA?An S1LvLuC8L 18AnSC81A1lCn CC., peLlLloners, vs. 1PL
u8LlC SL8vlCL CCMMlSSlCn and 1PL PlLllnL SPlCWnL8S ASSCClA1lCn, respondenLs.
erklns, once Lnrlle, ConLreras and Lnrlque 8elo for peLlLloners.
CzaeLa, 8oxas, Llchauco, lcazo, !uan P. aullno and Cerardo M. Alfonso for respondenL hlllpplne
Shlpowners AssoclaLlon.
S?LLA8uS
1. CCn18AC1S Anu C8LlCA1lCnS, AuMl8AL1? LAW, Pl8L Cl vLSSLL, ulS1lnCulSPLu l8CM
LLASL 1PL8LCl. - Where Lhe llghLers and LugboaLs ln quesLlon were noL leased, buL used Lo carry
goods for compensaLlon aL a flxed raLe for a flxed welghL, Lhey musL be deemed Lo have been hlred,
hlred ln Lhe sense LhaL Lhe shlppers dld noL have dlrecLlon, conLrol, and malnLenance Lhereof, whlch ls a
characLerlsLlc feaLure of lease.
2. u8LlC u1lLl1?, uL1L8MlnA1lCn WPL1PL8 A ll8M C8 CCMAn? lS A u8LlC u1lLl1?. -
ubllc uLlllLy, even where Lhe Lerm ls noL deflned by sLaLuLe, ls noL deLermlned by Lhe number of people
acLually served. nor does Lhe mere facL LhaL servlce ls rendered only under conLracL prevenL a company
from belng a publlc uLlllLy. [43 Am. !ur., 373, Luzon 8rokerage Co. vs. ubllc Servlce Commlsslon, 40 Cff.
Caz., Supp. 7, p. 271.] Cn Lhe oLher hand, causal or lncldenLal servlce devold of publlc characLer and
lnLeresL ls noL broughL wlLhln Lhe caLegory of publlc uLlllLy. 1he demarkaLlon llne ls noL suscepLlble of
exacL descrlpLlon or deflnlLlon, each belng governed by lLs clrcumsLance.
3. lu., lu., CASL A1 8A8. - 1he LransporLaLlon servlce whlch was Lhe sub[ecL of complalnL was noL
casual or lncldenLal. lL had been carrled on regularly for years aL almosL unlform raLes of charges.
AlLhough Lhe number of Lhe company's cusLomers was llmlLed, Lhe value of goods, LransporLed was noL
lnconslderable. lL dld noL have Lhe same cusLomers all Lhe Llme embraced ln Lhe complalnL, and Lhere
was no reason Lo belleve LhaL lL would noL accepL, and Lhere was noLhlng Lo prevenL lL from accepLlng,
new cusLomers LhaL mlghL be wllllng Lo avall of lLs servlces Lo Lhe exLenL of lLs capaclLy. Peld: Applylng
Lhe plaln leLLer of CommonwealLh AcL no. 146, lL ls a publlc uLlllLy, and Lo resLraln lL from furLher
operaLlng lLs waLercrafL Lo LransporL goods for hlre or compensaLlon beLween polnLs ln Lhe hlllpplnes
unLll Lhe raLes lL proposes Lo charge are approved by Lhe ubllc Servlce Commlsslon, does noL lnvade
prlvaLe rlghLs of properLy or conLracL. 1he consLlLuLlonallLy of CommonwealLh AcL no. 146 was upheld,
lmpllclLly ln Luzon 8rokerage Co. vs. ubllc Servlce Commlsslon [40 Cff. Caz., Supp. 7, p. 271] and
expllclLly ln angaslnan 1ransporLaLlon Co. vs. ubllc Servlce Commlsslon [70 hll., 221].
4. lu., 8ulnCuS, CCML1l1lCn, l1S 8LvLn1lCn, CnL Cl 1PL u8CSLS Cl 1PL u8LlC SL8vlCL
LAW. - 1he ubllc Servlce Law was enacLed noL only Lo proLecL Lhe publlc agalnsL unreasonable charges
and poor, lnefflclenL servlce, buL also Lo prevenL rulnous compeLlLlon. 1haL ls Lhe maln purpose ln
brlnglng under Lhe [urlsdlcLlon of Lhe ubllc Servlce Commlsslon MoLor vehlcles, oLher means of
LransporLaLlon, lce planLs, eLc., whlch caLer Lo a llmlLed porLlon of Lhe publlc under prlvaLe agreemenLs.
1o Lhe exLenL LhaL such agreemenLs may Lend Lo wreek or lmpalr Lhe flnanclal sLablllLy and efflclency of
publlc uLlllLles who do offer servlce Lo Lhe publlc ln general, Lhey are affecLed wlLh publlc lnLeresL and
come wlLhln Lhe pollce power of Lhe sLaLe Lo regulaLe.
3. u8LlC SL8vlCL CCMMlSSlCn, PLA8lnCS 1PL8Lln, uLSlCnA1lCn Cl CCMMlSSlCn 1C 1AkL
LvluLnCL, WAlvL8 Cl C8!LC1lCn 1C SuCP uLSlCnA1lCn. - lL was Lardy Lo ob[ecL, for Lhe flrsL Llme Lo
Lhe deslgnaLlon of a commlssloner Lo Lake Lhe evldence, afLer declslon was rendered. 1he polnL ls
procedural, noL [urlsdlcLlonal, and may be walved by express consenL or acqulescence [LvereLL
SLeamshlp Corpn. vs. Chua Plong, 90 hll., 64, La az lce lanL vs. Comlslon de uLllldades ubllcas, 89
hll., 109]. Where ln a prolonged hearlng before a commlssloner, a parLy crossexamlned hls adversary's
wlLnesses and presenLed hls own evldence, he has walved ob[ecLlon Lo such deslgnaLlon.
u L C l S l C n
1uASCn, ! p:
eLlLloners apply for revlew of a declslon of Lhe ubllc Servlce Commlsslon resLralnlng Lhem "from
furLher operaLlng Lhelr waLercrafL Lo LransporL goods for hlre or compensaLlon beLween polnLs ln Lhe
hlllpplnes unLll Lhe raLes Lhey propose Lo charge are approved by Lhls Commlsslon."
1he facLs are summarlzed by Lhe Commlsslon as follows:
". . . respondenLs are corporaLlons duly organlzed and exlsLlng under Lhe laws of Lhe hlllpplnes, malnly
engaged ln Lhe sLevedorlng or llghLerage and harbor Lowage buslness. AL Lhe same Llme, Lhey are
engaged ln lnLerlsland servlce whlch conslsLs of haullng cargoes such as sugar, oll, ferLlllzer and oLher
commerclal commodlLles whlch are loaded ln Lhelr barges and Lowed by Lhelr LugboaLs from Manlla Lo
varlous polnLs ln Lhe vlsayan lslands, parLlcularly ln Lhe rovlnces of negros CccldenLal and Caplz, and
from sald places Lo Manlla. lor Lhls servlce respondenLs charge frelghLage on a unlL prlce wlLh raLes
ranglng from 0.30 Lo 0.62 1/2 per bag or plcul of sugar loaded or on a unlL prlce per Lon ln Lhe case of
ferLlllzer or sand. 1here ls no flxed rouLe ln Lhe LransporLaLlon of Lhese cargoes, Lhe same belng lefL aL
Lhe lndlcaLlon of Lhe owner or shlpper of Lhe goods. 1he barge and Lhe LugboaLs are manned by Lhe
crew of respondenLs and, ln case of damage Lo Lhe goods ln LranslL caused by Lhe negllgence of sald
crews, respondenLs are llable Lherefor. 1he servlce for whlch respondenLs charge frelghLage covers Lhe
haullng or carrlage of Lhe goods from Lhe polnL of embarkaLlon Lo Lhe polnL of dlsembarkaLlon elLher ln
Manlla or ln any polnL ln Lhe vlsayan lslands, as Lhe case may be.
"1he evldence also sufflclenLly esLabllshes LhaL respondenLs are regularly engaged ln Lhls haullng
buslness servlng a llmlLed porLlon of Lhe publlc. 8espondenL Luzon SLevedorlng Company, lnc., has
among lLs regular cusLomers Lhe San Mlguel Class lacLory, 8A18A, Shell Co., of .l., LLd., SLandard Cll
Co., of new ?ork and hlllpplne-Pawallan, whlle respondenL vlsayan SLevedore 1ransporLaLlon Co., has
among lLs regular cusLomers Lhe lnsular Lumber, Shell Company, LLd., klm kee Chua ?u & Co., 8A18A
and Luzon Merchandlslng CorporaLlon. uurlng Lhe perlod from !anuary, 1949 and up Lo Lhe presenL,
respondenL Luzon SLevedorlng Co. lnc., has been renderlng Lo 8A18A regularly and on many occaslons
such servlce by carrylng ferLlllzer from Manlla Lo varlous polnLs ln Lhe rovlnces of negros CccldenLal
and Caplz, such as PlnlgaLan, Sllay, labrlca, Marayo, Mambaquld, vlcLorlas and llar, and on Lhe reLurn
Lrlp sugar was loaded from sald provlnces Lo Manlla. lor Lhese servlces, as evldenced by LxhlblLs A, A-1,
A-2, A-3 and A-4, respondenL Luzon SLevedorlng Company, lnc., charged 8A18A aL Lhe raLe of 0.60 per
plcul or bag of sugar and, accordlng Lo Mr. Maurlclo 8odrlguez, chlef of Lhe dlvlslon ln charge of sugar
and ferLlllzer of Lhe 8A18A, for Lhe LransporLaLlon of ferLlllzer, Lhls respondenL charged 12 per meLrlc
Lon. uurlng pracLlcally Lhe same perlod, respondenL vlsayan SLevedore 1ransporLaLlon Company
LransporLed ln lLs barges and Lowed by lLs LugboaLs sugar for klm kee Chua ?u & Company comlng from
vlcLorlas, Marayo and llar Lo Manlla, and for Luzon Merchandlslng CorporaLlon, from Plnlgaran,
8acolod, Marayo and vlcLorlas Lo Manlla. lor such servlce respondenL vlsayan SLevedore 1ransporLaLlon
Company charge klm kee Chua ?u Company for frelghLage 0.60 per plcul or bag as shown ln LxhlblLs C,
C-1, C-2, C-3, C-4, C- 3, C-6, C-7 and C-8, and Luzon Merchandlslng CorporaLlon was also charged for Lhe
same servlce and aL Lhe same raLe as shown ln LxhlblLs 8, 8-1 and 8-2."
lL was upon Lhese flndlngs LhaL Lhe Commlsslon made Lhe order now soughL Lo be revlewed, upon
complalnL of Lhe hlllpplne Shlpowners' AssoclaLlon charglng LhaL Lhe Lhen respondenLs were engaged
ln Lhe LransporLaLlon of cargo ln Lhe hlllpplnes for hlre or compensaLlon wlLhouL auLhorlLy or approval
of Lhe Commlsslon, havlng adopLed, flled and collecLed frelghL charges aL Lhe raLe of 0.60 per bag or
plcul, parLlcularly sugar, loaded and LransporLed ln Lhelr llghLers and Lowed by Lhelr LugboaLs beLween
dlfferenL polnLs ln Lhe rovlnce of negros CccldenLal and Manlla, whlch sald raLes resulLed ln rulnous
compeLlLlon wlLh complalnanL.
SecLlon 13 (b) of Lhe ubllc Servlce Law (CommonwealLh AcL no. 146) deflnes publlc servlce Lhus:
"1he Lerm 'publlc servlce' lncludes every person LhaL now or hereafLer may own, operaLe, manage, or
conLrol ln Lhe hlllpplnes, for hlre or compensaLlon, wlLh general or llmlLed cllenLele, wheLher
permanenL, occaslonal or accldenLal, and done for general buslness purposes any common carrler,
rallroad, sLreeL rallway, LracLlon rallway, subway, moLor vehlcle, elLher for frelghL or passenger, or boLh,
wlLh or wlLhouL flxed rouLe and whaLever may be lLs classlflcaLlon, frelghL or carrler servlce of any class,
express servlce, sLeamboaL, or sLeamshlp llne, ponLlnes, ferrles, and small waLer crafL, engaged ln Lhe
LransporLaLlon of passengers and frelghL, shlpyard, marlne rallway, marlne repalr shop, warehouse,
wharf or dock, lce planL, lce-refrlgeraLlon planL, canal, lrrlgaLlon sysLem, sewerage, gas, elecLrlc llghL,
heaL and power, waLer supply and power, peLroleum, sewerage sysLem, Lelephone, wlre or wlreless
Lelegraph sysLem and broadcasLlng radlo sLaLlons."
lL ls noL necessary, under Lhls deflnlLlon, LhaL one holds hlmself ouL as servlng or wllllng Lo serve Lhe
publlc ln order Lo be consldered publlc servlce.
ln Luzon 8rokerage Company vs. ubllc Servlce Commlsslon (40 Cff. Caz., 7Lh SupplemenL, p. 271), Lhls
courL declared LhaL "AcL 434 ls clear ln lncludlng ln Lhe deflnlLlon of a publlc servlce LhaL whlch ls
rendered for compensaLlon, alLhough llmlLed excluslvely Lo Lhe cusLomers of Lhe peLlLloner."
ln LhaL case, Lhe Luzon 8rokerage Company, a cusLoms broker, had been recelvlng, deposlLlng and
dellverlng goods dlscharged from shlps aL Lhe pler Lo lLs cusLomers. As here, Lhe Luzon 8rokerage was
Lhen renderlng LransporLaLlon servlce for compensaLlon Lo a llmlLed cllenLele, noL Lo Lhe publlc aL large.
ln Lhe unlLed SLaLes where, lL ls sald, Lhere ls no flxed deflnlLlon of whaL consLlLuLes publlc servlce or
publlc uLlllLy, lL ls also held LhaL lL ls noL always necessary, ln order Lo be a publlc servlce, LhaL an
organlzaLlon be dedlcaLed Lo publlc use, l.e., ready and wllllng Lo serve Lhe publlc as a class. lL ls only
necessary LhaL lL musL ln some way be lmpressed wlLh a publlc lnLeresL, and wheLher Lhe operaLlon of a
glven buslness ls a publlc uLlllLy depends upon wheLher or noL Lhe servlce rendered by lL ls of a publlc
characLer and of publlc consequence and concern. (31 C. !. 3.) 1hus, a buslness may be affecLed wlLh
publlc lnLeresL and regulaLed for publlc good alLhough noL under any duLy Lo serve Lhe publlc. (43 Am.
!ur., 372.)
lL can scarcely be denled LhaL Lhe conLracLs beLween Lhe owners of Lhe barges and Lhe owners of Lhe
cargo aL bar were ordlnary conLracLs of LransporLaLlon and noL of lease. eLlLloners' waLercrafL was
manned enLlrely by crews ln Lhelr employ and payroll, and Lhe operaLlon of Lhe sald crafL was under
Lhelr dlrecLlon and conLrol, Lhe cusLomers assumlng no responslblllLy for Lhe goods handled on Lhe
barges. 1he greaL preponderance of Lhe evldence conLradlcLs Lhe asserLlon LhaL Lhere was any physlcal
or symbollc conveyance of Lhe possesslon of Lhe LugboaLs and barges Lo Lhe shlppers. WheLher Lhe
agreemenLs were wrlLLen or verbal, Lhe manner of paymenL of frelghL charges, Lhe quesLlon who loaded
and unloaded Lhe cargo, Lhe proprleLy of Lhe admlsslon of cerLaln recelpLs ln evldence, eLc., Lo all of
whlch Lhe parLles have glven much aLLenLlon - Lhese are maLLers of form whlch do noL alLer Lhe
essenLlal naLure of Lhe relaLlonshlp of Lhe parLles Lo Lhe LransacLlons as revealed by Lhe fundamenLal
facLs of record.
lL ls conLended LhaL "lf Lhe ubllc Servlce AcL were Lo be consLrued ln such manner as Lo lnclude prlvaLe
lease conLracLs, sald law would be unconsLlLuLlonal," seemlngly lmplylng LhaL, Lo prevenL Lhe law from
belng ln conLravenLlon of Lhe ConsLlLuLlon, lL should be so read as Lo embrace only Lhose persons and
companles LhaL are ln facL engaged ln publlc servlce" wlLh lLs correspondlng quallflcaLlon of an offer Lo
serve lndlscrlmlnaLely Lhe publlc."
lL has been already shown LhaL Lhe peLlLloners' llghLers and LugboaLs were noL leased, buL used Lo carry
goods for compensaLlon aL a flxed raLe for a flxed welghL. AL Lhe very leasL, Lhey were hlred, hlred ln Lhe
sense LhaL Lhe shlppers dld noL have dlrecLlon, conLrol, and malnLenance Lhereof, whlch ls a
characLerlsLlc feaLure of lease.
Cn Lhe second proposlLlon, Lhe ubllc Servlce Commlsslon has, ln our [udgmenL, lnLerpreLed Lhe law ln
accordance wlLh leglslaLlve lnLenL. CommonwealLh AcL no. 146 declares ln unequlvocal language LhaL an
enLerprlse of any of Lhe klnds Lhereln enumeraLed ls a publlc servlce lf conducLed for hlre or
compensaLlon even lf Lhe operaLor deals only wlLh a porLlon of Lhe publlc or llmlLed cllenLele.
lL has been seen LhaL publlc uLlllLy, even where Lhe Lerm ls noL deflned by sLaLuLe, ls noL deLermlned by
Lhe number of people acLually served. nor does Lhe mere facL LhaL servlce ls rendered only under
conLracL prevenL a company from belng a publlc uLlllLy. (43 Am. !ur., 373.) Cn Lhe oLher hand, casual or
lncldenLal servlce devold of publlc characLer and lnLeresL, lL musL be admlLLed, ls noL broughL wlLhln Lhe
caLegory of publlc uLlllLy. 1he demarkaLlon llne ls noL suscepLlble of exacL descrlpLlon or deflnlLlons, each
case belng governed by lLs pecullar clrcumsLances.
"lL ls lmposslble Lo lay down any general rule on Lhe sub[ecL wheLher Lhe renderlng of lncldenLal servlce
Lo members of Lhe publlc by an lndlvldual or corporaLlon whose prlnclpal buslness ls of a dlfferenL
naLure consLlLuLe such person a publlc uLlllLy. ln Lhe resulL reached, Lhe cases are ln confllcL, as Lhe
quesLlon lnvolved depends on such facLors as Lhe exLenL of servlce, wheLher such person or company
has held hlmself or lLself ouL as ready Lo serve Lhe publlc or a porLlon of Lhe publlc generally, or ln oLher
ways conducLed hlmself or lLself as a publlc uLlllLy. 1n several cases, lL has been held LhaL Lhe lncldenLal
servlce rendered Lo oLhers consLlLuLed such person or corporaLlon a publlc uLlllLy, buL ln oLher cases, a
conLrary declslon has been reached." (43 Am. !ur., 373.)
1he LransporLaLlon servlce whlch was Lhe sub[ecL of complalnL was noL casual or lncldenLal. lL had been
carrled on regularly for years aL almosL unlform raLes of charges. AlLhough Lhe number of Lhe
peLlLloners' cusLomers was llmlLed, Lhe value of goods LransporLed was noL lnconslderable. eLlLloners
dld noL have Lhe same cusLomers all Lhe Llme embraced ln Lhe complalnL, and Lhere was no reason Lo
belleve LhaL Lhey would noL accepL, and Lhere was noLhlng Lo prevenL Lhem from accepLlng, new
cusLomers LhaL mlghL be wllllng Lo avall of Lhelr servlce Lo Lhe exLenL of Lhelr capaclLy. upon Lhe well-
esLabllshed facLs as applled Lo Lhe plaln leLLer of CommonwealLh AcL no. 146, we are of Lhe oplnlon LhaL
Lhe ubllc Servlce Commlsslon's order does noL lnvade prlvaLe rlghLs of properLy or conLracL.
ln aL leasL one respecL, Lhe buslness complalned of was a maLLer of publlc concern. 1he ubllc Servlce
Law was enacLed noL only Lo proLecL Lhe publlc agalnsL unreasonable charges and poor, lnefflclenL
servlce, buL also Lo prevenL rulnous compeLlLlon. 1haL, we venLure Lo say, ls Lhe maln purpose ln
brlnglng under Lhe [urlsdlcLlon of Lhe ubllc Servlce Commlsslon moLor vehlcles, oLher means of
LransporLaLlon, lce planLs, eLc., whlch caLer Lo a llmlLed porLlon of Lhe publlc under prlvaLe agreemenLs.
1o Lhe exLenL LhaL such agreemenLs may Lend Lo wreck or lmpalr Lhe flnanclal sLablllLy and efflclency of
publlc uLlllLles who do offer servlce Lo Lhe publlc ln general, Lhey are affecLed wlLh publlc lnLeresL and
come wlLhln Lhe pollce power of Lhe sLaLe Lo regulaLe.
!usL as Lhe leglslaLure may noL "declare a company or enLerprlse Lo be a publlc uLlllLy when lL ls noL
lnherenLly such," a publlc uLlllLy may noL evade conLrol and supervlslon of lLs operaLlon by Lhe
governmenL by selecLlng lLs cusLomers under Lhe gulse of prlvaLe LransacLlons.
lor Lhe resL, Lhe consLlLuLlonallLy of CommonwealLh AcL no. 146 was upheld, lmpllclLly ln Luzon
8rokerage Company vs. ubllc Servlce Commlsslon, supra, and expllclLly ln angaslnan 1ransporLaLlon
Company vs. ubllc Servlce Commlsslon (70 hll., 221).
Were Lhere serlous doubLs, Lhe courLs should sLlll be relucLanL Lo lnvalldaLe Lhe ubllc Servlce Law or any
provlslon Lhereof. AlLhough Lhe leglslaLure can noL, by lLs mere declaraLlon, make someLhlng a publlc
uLlllLy whlch ls noL ln facL such, "Lhe publlc pollcy of Lhe sLaLe as announced by Lhe leglslaLure wlll be
glven due welghL, and Lhe deLermlnaLlon of Lhe leglslaLure LhaL a parLlcular buslness ls sub[ecL Lo Lhe
regulaLory power, because Lhe publlc welfare ls dependenL upon lLs proper conducL and regulaLlon, wlll
noL llghLly be dlsregarded by Lhe courLs." (31 C. !. 3.)
1he ob[ecLlon Lo Lhe deslgnaLlon of ALLorney Asplllera as commlssloner Lo Lake Lhe evldence was Lardy.
lL was made for Lhe flrsL Llme afLer declslon was rendered, followlng a prolonged hearlng ln whlch Lhe
peLlLloners crossexamlned Lhe complalnanL's wlLnesses and presenLed Lhelr own evldence.
1he polnL ls procedural, noL [urlsdlcLlonal, and may be walved by express consenL or acqulescence. So lL
was held ln LvereLL SLeamshlp CorporaLlon vs. Chua Plong, 90 hll. 64 and La az lce lanL and Cold
SLorage Company vs. Comlslon de uLllldades ubllcas eL al., 89 hll., 109.
upon Lhe foregolng conslderaLlons, Lhe appealed order of Lhe ubllc Servlce Commlsslon ls afflrmed,
wlLh cosLs agalnsL Lhe peLlLloners.
aras, C.!., ablo, 8engzon, adllla, MonLemayor, 8eyes, !ugo, 8auLlsLa Angelo and Labrador, !!., concur.


ll8S1 ulvlSlCn
[C.8. nos. 61461 & 61301. AugusL 21, 1987.]
Ll1AClC SAn A8LC (subsLlLuLed by Pelrs of L. San ablo), peLlLloners, vs. An18AnCC SCu1P
Lx8LSS, lnC., respondenL.
CA8ulnAL SPllnC CC8C8A1lCn, peLlLloner, vs. PCnC8A8LL 8CA8u Cl 18AnSC81A1lCn and
An18AnCC SCu1P Lx8LSS, lnC., respondenLs.
S?LLA8uS
1. ML8CAn1lLL LAW, u8LlC SL8vlCL AC1, CCMMCn CA88lL8S, lL88? SL8vlCL ulS1lnCulSPLu
l8CM ln1L8lSLAnu SL8vlCL. - ln !avellana case (98 hll. 964) We made clear dlsLlncLlon beLween a
ferry servlce and coasLwlse or lnLerlsland servlce by holdlng LhaL:" . . . We are lncllned Lo belleve LhaL Lhe
LeglslaLure lnLended ferry Lo mean Lhe servlce elLher by barges or rafLs, even by moLor or sLeam vessels,
beLween Lhe banks of a rlver or sLream Lo conLlnue Lhe hlghway whlch ls lnLerrupLed by Lhe body of
waLer, or ln some cases, Lo connecL Lwo polnLs on opposlLe shores of an arm of Lhe sea such as bay or
lake whlch does noL lnvolve Loo greaL a dlsLance or Loo long a Llme Lo navlgaLe. 8uL where Lhe llne or
servlce lnvolves crosslng Lhe open sea llke Lhe body of waLer beLween Lhe provlnce of 8aLangas and Lhe
lsland of Mlndoro whlch Lhe opposlLors descrlbe Lhus "Lhe lnLervenlng waLers beLween Calapan and
8aLangas are wlde and dangerous wlLh blg waves where small boaL, barge or rafL are noL adapLed Lo Lhe
servlce, Lhen lL ls more reasonable Lo regard sald llne or servlce as more properly belonglng Lo
lnLerlsland or coasLwlse Lrade." . . .
2. lu., lu., lu., CCnvL?AnCL Cl ASSLnCL8S, 18uCkS Anu CA8CC 18AvL8SlnC SAn
8L8nA8ulnC S18Al1, An ln1L8lSLAnu SPllnC SL8vlCL, CASL A1 8A8. - 1hls CourL Lakes [udlclal
noLlce of Lhe facL, and as shown by an examlnaLlon of Lhe map of Lhe hlllpplnes, LhaL MaLnog whlch ls
on Lhe souLhern Llp of Lhe lsland of Luzon and wlLhln Lhe provlnce of Sorsogon and Allen whlch ls on Lhe
norLheasLern Llp of Lhe lsland of Samar, ls Lraversed by Lhe San 8ernardlno SLralL whlch leads Lowards
Lhe aclflc Ccean. 1he parLles admlL LhaL Lhe dlsLance beLween MaLnog and Allen ls abouL 23 kllomeLers
whlch may be negoLlaLed by moLorboaL or vessel ln abouL 1-1/2 hours as clalmed by respondenL
An18AnCC Lo 2 hours accordlng Lo peLlLloners. As Lhe San 8ernardlno SLralL whlch separaLes MaLnog
and Allen leads Lo Lhe ocean lL musL aL Llmes be choppy and rough so LhaL lL wlll noL be safe Lo navlgaLe
Lhe same by small boaLs or barges buL only by such sLeamboaLs or vessels as Lhe M/v "8lack uouble."
Conslderlng Lhe envlronmenLal clrcumsLances of Lhe case, Lhe conveyance of passengers, Lrucks and
cargo from MaLnog Lo Allen ls cerLalnly noL a ferryboaL servlce buL a coasLwlse or lnLerlsland shlpplng
servlce.
3. lu., lu., lu., CLn SLA, nC1 A CCn1lnuA1lCn Cl PlCPWA?. - under no clrcumsLance can Lhe
sea beLween MaLnog and Allen be consldered a conLlnuaLlon of Lhe hlghway. Whlle a ferryboaL servlce
has been consldered as a conLlnuaLlon of Lhe hlghway when crosslng rlvers or even lakes, whlch are
small body of waLers separaLlng Lhe land, however, when as ln Lhls case Lhe Lwo Lermlnals, MaLnog and
Allen are separaLed by an open sea lL can noL be consldered as a conLlnuaLlon of Lhe hlghway.
4. lu., lu., lu., lu., SLA8A1L CL81lllCA1L Cl u8LlC CCnvLnlLnCL MuS1 8L SLCu8Lu. -
8espondenL An18AnCC should secure a separaLe CC for Lhe operaLlon of an lnLerlsland or coasLwlse
shlpplng servlce ln accordance wlLh Lhe provlslons of law. lLs CC as a bus LransporLaLlon cannoL be
merely amended Lo lnclude Lhls waLer servlce under Lhe gulse LhaL lL ls a mere prlvaLe ferry servlce. 1hus
Lhe CourL holds LhaL Lhe waLer LransporL servlce beLween MaLnog and Allen ls noL a ferryboaL servlce
buL a coasLwlse or lnLerlsland shlpplng servlce. 8efore prlvaLe respondenL may be lssued a franchlse or
CC for Lhe operaLlon of Lhe sald servlce as a common carrler, lL musL comply wlLh Lhe usual
requlremenLs of flllng an appllcaLlon, paymenL of Lhe fees, publlcaLlon, adduclng evldence aL a hearlng
and affordlng Lhe opposlLors Lhe opporLunlLy Lo be heard, among oLhers, as provlded by law.
u L C l S l C n
CAnCA?CC, ! p:
1he quesLlon LhaL ls posed ln Lhese peLlLlons for revlew ls wheLher Lhe sea can be consldered as a
conLlnuaLlon of Lhe hlghway. 1he corollary lssue ls wheLher a land LransporLaLlon company can be
auLhorlzed Lo operaLe a ferry servlce or coasLwlse or lnLerlsland shlpplng servlce along lLs auLhorlzed
rouLe as an lncldenL Lo lLs franchlse wlLhouL Lhe need of flllng a separaLe appllcaLlon for Lhe same.
1he anLranco SouLh Lxpress, lnc., herelnafLer referred Lo as An18AnCC ls a domesLlc corporaLlon
engaged ln Lhe land LransporLaLlon buslness wlLh u8 servlce for passengers and frelghL and varlous
cerLlflcaLes for publlc convenlences (CC) Lo operaLe passenger buses from MeLro Manlla Lo 8lcol 8eglon
and LasLern Samar. Cn March 27, 1980 An18AnCC Lhrough lLs counsel wroLe Lo MarlLlme lndusLry
AuLhorlLy (MA8lnA) requesLlng auLhorlLy Lo lease/purchase a vessel named M/v "8lack uouble" "Lo be
used for lLs pro[ecL Lo operaLe a ferryboaL servlce from MaLnog, Sorsogon and Allen, Samar LhaL wlll
provlde servlce Lo company buses and frelghL Lrucks LhaL have Lo cross San 8ernardo SLralL. 1 ln a reply
of Aprll 29, 1981 An18AnCC was lnformed by MA8lnA LhaL lL cannoL glve due course Lo Lhe requesL on
Lhe basls of Lhe followlng observaLlons:
"1. 1he MaLnog-Allen run ls adequaLely servlced by Cardlnal Shlpplng Corp. and LplLaclo San ablo,
MA8lnA pollcles on lnLerlsland shlpplng resLrlcL Lhe enLry of new operaLors Lo Llner Lrade rouLes where
Lhese are adequaLely servlced by exlsLlng/auLhorlzed operaLors.
2. MarkeL condlLlons ln Lhe proposed rouLe cannoL supporL Lhe enLry of addlLlonal Lonnage, vessel
acqulslLlons lnLended for operaLlons Lhereln are necessarlly llmlLed Lo Lhose lnLended for replacemenL
purposes only." 2
An18AnCC neverLheless acqulred Lhe vessel M/v "8lack uouble" on May 27, 1981 for 3 Mllllon pesos.
lL wroLe Lhe Chalrman of Lhe 8oard of 1ransporLaLlon (8C1) Lhrough lLs counsel, LhaL lL proposes Lo
operaLe a ferry servlce Lo carry lLs passenger buses and frelghL Lrucks beLween Allen and MaLnog ln
connecLlon wlLh lLs Lrlps Lo 1acloban ClLy lnvoklng Lhe case of !avellana vs. ubllc Servlce Commlsslon. 3
An18AnCC clalms LhaL lL can operaLe a ferry servlce ln connecLlon wlLh lLs franchlse for bus operaLlon
ln Lhe hlghway from asay ClLy Lo 1acloban ClLy "for Lhe purpose of conLlnulng Lhe hlghway, whlch ls
lnLerrupLed by a small body of waLer, Lhe sald proposed ferry operaLlon ls merely a necessary and
lncldenLal servlce Lo lLs maln servlce and obllgaLlon of LransporLlng lLs passengers from asay ClLy Lo
1acloban ClLy. Such belng Lhe case . . . Lhere ls no need . . . Lo obLaln a separaLe cerLlflcaLe for publlc
convenlence Lo operaLe a ferry servlce beLween Allen and MaLnog Lo caLer excluslvely Lo lLs passenger
buses and frelghL Lrucks. 4
WlLhouL awalLlng acLlon on lLs requesL An18AnCC sLarLed Lo operaLe sald ferry servlce. AcLlng
Chalrman !ose C. Campos, !r. of 8C1 ordered An18AnCC noL Lo operaLe lLs vessel unLll Lhe appllcaLlon
for hearlng on CcL. 1, 1981 aL 10:00 A.M. 3 ln anoLher order 8C1 en[olned An18AnCC from operaLlng
Lhe M/v "8lack uouble" oLherwlse lL wlll be clLed Lo show cause why lLs CC should noL be suspended or
Lhe pendlng appllcaLlon denled. 6
LplLaclo San ablo (now represenLed by hls helrs) and Cardlnal Shlpplng CorporaLlon who are franchlse
holders of Lhe ferry servlce ln Lhls area lnLerposed Lhelr opposlLlon. 1hey clalm Lhey adequaLely servlce
Lhe An18AnCC by ferrylng lLs buses, Lrucks and passengers. 8C1 Lhen asked Lhe legal oplnlon from Lhe
MlnlsLer of !usLlce wheLher or noL a bus company wlLh an exlsLlng CC beLween asay ClLy and 1acloban
ClLy may sLlll be requlred Lo secure anoLher cerLlflcaLe ln order Lo operaLe a ferry servlce beLween Lwo
Lermlnals of a small body of waLer. Cn CcLober 20, 1981 Lhen MlnlsLer of !usLlce 8lcardo uno rendered
an oplnlon Lo Lhe effecL LhaL Lhere ls no need for bus operaLors Lo secure a separaLe CC Lo operaLe a
ferryboaL servlce holdlng as follows:
"lurLher, a common carrler whlch has been granLed a cerLlflcaLe of publlc convenlence ls expecLed Lo
provlde efflclenL, convenlenL and adequaLe servlce Lo Lhe rldlng publlc. (Pocklng valley 8allroad Co. vs.
ubllc uLlllLles Commlsslon, 110 nL 321, Loulsevllle and n.8. Co. vs. 8allroad Commlssloners, 38 SC 343)
lL ls Lhe rlghL of Lhe publlc whlch has accepLed Lhe servlce of a publlc uLlllLy operaLor Lo demand LhaL Lhe
servlce should be conducLed wlLh reasonable efflclency. (Almarlo, supra, clLlng 73 C.!.S. 990-991) 1hus,
when Lhe bus company ln Lhe case aL bar proposes Lo add a ferry servlce Lo lLs asay-1acloban rouLe, lL
merely does so ln Lhe dlscharge of lLs duLy under lLs currenL cerLlflcaLe of publlc convenlence Lo provlde
adequaLe and convenlenL servlce Lo lLs rlders. 8equlrlng sald bus company Lo obLaln anoLher cerLlflcaLe
Lo operaLe such ferry servlce when lL merely forms a parL - and consLlLuLes an lmprovemenL - of lLs
exlsLlng LransporLaLlon servlce would slmply be dupllclLous and superfluous." 7
1hus on CcLober 23, 1981 Lhe 8C1 rendered lLs declslon holdlng LhaL Lhe ferryboaL servlce ls parL of lLs
CC Lo operaLe from asay Lo Samar/LeyLe by amendlng An18AnCC's CC so as Lo reflecL Lhe same ln
Lhls wlse:
"LeL Lhe orlglnal CerLlflcaLe of publlc convenlence granLed Lo anLranco SouLh Lxpress Co., lnc. be
amended Lo embody Lhe granL of auLhorlLy Lo operaLe a prlvaLe ferryboaL servlce as one of Lhe
condlLlons for Lhe granL of Lhe cerLlflcaLe sub[ecL Lo Lhe condlLlon LhaL Lhe ferryboaL shall be for Lhe
excluslve use of anLranco buses, lLs passengers and frelghL Lrucks, and should lL offer lLself Lo Lhe publlc
for hlre oLher Lhan lLs own passengers, lL musL apply for a separaLe cerLlflcaLe of publlc convenlence as a
publlc ferryboaL servlce, separaLe and dlsLlncL from lLs land LransporL sysLems." 8
Cardlnal Shlpplng CorporaLlon and Lhe helrs of San ablo flled separaLe moLlons for reconslderaLlon of
sald declslon and San ablo flled a supplemenLal moLlon for reconslderaLlon LhaL were denled by Lhe
8C1 on !uly 21, 1981. 9
Pence, San ablo flled Lhe hereln peLlLlon for revlew on cerLlorarl wlLh prayer for prellmlnary ln[uncLlon
10 seeklng Lhe revocaLlon of sald declslon, and pendlng conslderaLlon of Lhe peLlLlon, Lhe lssuance of a
resLralnlng order or prellmlnary ln[uncLlon agalnsL Lhe operaLlon by An18AnCC of sald ferry servlce.
San ablo ralsed Lhe followlng lssues: Cdpr
"A. ulu 1PL 8LSCnuLn1 8CA8u vlCLA1L L1l1lCnL8S' 8lCP1 1C uuL 8CCLSS, 1PL 8uLLS Cl
8CCLuu8L Anu SLC1lCn 16 (m) Cl 1PL u8LlC SL8vlCL AC1, WPLn l1 lSSuLu ln A CCMLAln1 CASL
1PL uLClSlCn uA1Lu CC1C8L8 23, 1981 WPlCP MC1u 8ClC AMLnuLu 8LSCnuLn1 An18AnCC'S
u8 CL81lllCA1L 1C lnCLuuL Anu Au1PC8lZL CL8A1lCn Cl A SPllnC SL8vlCL Cn 1PL 8Cu1L
MA1nCC, SC8SCCCn - ALLLn, SAMA8 - LvLn AS 1PL8L MuS1 8L A lC8MAL ALlCA1lCn lC8
AMLnuMLn1 Anu SLA8A1L 8CCLLulnCS PLLu 1PL8LlC8, ASSuMlnC AMLnuMLn1 lS 8CL8?
8. ulu 1PL 8LSCnuLn1 8CA8u L88 ln llnulnC ln l1S uLClSlCn Cl CC1C8L8 23, 1981, 1PA1
1PL SLA l8CM 1PL C81 Cl MA1nCC, SC8SCCCn, LuZCn lSLAnu 1C 1PL C81 Cl ALLLn, SAMA8
lSLAnu, C8 l8CM LuZCn lSLAnu 1C SAMA8 lSLAnu lS A ML8L lL88? C8 CCn1lnuA1lCn Cl 1PL
PlCPWA? - l1 8LlnC 23 klLCML1L8S Cl 8CuCP Anu CLn SLA Anu A8Cu1 2 PCu8S 18AvLL 1lML
8LCul8lnC 8lC ln1L8-lSLAnu vLSSLLS, nC1 ML8L 8A8CLS, 8Al1S C8 SMALL 8CA1S u1lLlZLu ln lL88?
SL8vlCL?
C. ulu 1PL 8LSCnuLn1 8CA8u L88 WPLn l1 8uLLu 1PA1 8LSCnuLn1 An18AnCC'S vLSSLL
M/v 8LACk uCu8LL lS ML8LL? A 8lvA1L CA88lL8, nC1 A u8LlC lL88? CL8A1lnC lC8 u8LlC
SL8vlCL (ASSuMlnC 1PA1 1PL MA1nCC-ALLLn SLA 8Cu1L lS A ML8L lL88? C8 CCn1lnuA1lCn Cl
PlCPWA?) LvLn ll SAlu vLSSLL lS lC8 Pl8L Anu CCLLLC1S SLA8A1L lA8LS Anu CA1L8S 1C 1PL
u8LlC LvLn lC8 A LlMl1Lu CLlLn1LLL?
u. ulu 1PL 8LSCnuLn1 8CA8u L88 WPLn l1 C8An1Lu 8LSCnuLn1 An18AnCC Au1PC8l1?
1C CL8A1L A SPllnC SL8vlCL ln 1PL lACL Cl 1PL LA11L8'S CCn1Ln1lCn AS An Al1L81PCuCP1
1PA1 l1 nLLu nC1 AL? 1PL8LlC8, Anu ln Sl1L Cl l1S lAlLu8L 1C SLCu8L 1PL 8L-8LCulSl1L
MA8l1lML lnuuS18? Au1PC8l1? (MA8lnA) A8CvAL 1C ACCul8L A vLSSLL unuL8 l1S
MLMC8AnuuM Cl8CuLA8 nC. 8-A AS WLLL AS l1S 8lC8 lAvC8A8LL LnuC8SLMLn1 8LlC8L An?
SPllnC Au1PC8lZA1lCn MA? 8L C8An1Lu unuL8 8C1 - MA8lnA AC8LLMLn1 Cl AuCuS1 10,
1976 Anu lL88uA8? 26, 1982?
L. ulu 8LSCnuLn1 8CA8u L88 WPLn l1 C8An1Lu 8LSCnuLn1 An18AnCC Au1PC8l1? 1C
CL8A1L A SPllnC SL8vlCL Cn A 8Cu1L AuLCuA1LL? SL8vlCLu ll nC1 AL8LAu? 'SA1u8A1Lu' Wl1P
1PL SL8vlCLS Cl 1WC (2) LxlS1lnC CL8A1C8S (L1l1lCnL8S Anu CA8ulnAL SPllnC CC8.) ln
vlCLA1lCn Cl 1PL 8lnClLL Cl '8lC8 CL8A1C8 8uLL'?" 11
8y Lhe same Loken Cardlnal Shlpplng CorporaLlon flled a separaLe peLlLlon ralslng slmllar lssues, namely:
LlbLex
"a. Lhe declslon dld noL conform Lo Lhe procedures lald down by law for an amendmenL of Lhe
orlglnal cerLlflcaLe of publlc convenlence, and Lhe auLhorlLy Lo operaLe a prlvaLe ferry boaL servlce Lo
An18AnCC was lssued wlLhouL ascerLalnlng Lhe esLabllshed essenLlal requlslLes for such granL, hence,
vlolaLlve of due process requlremenLs,
b. Lhe granL Lo An18AnCC of auLhorlLy Lo operaLe a ferryboaL servlce as a prlvaLe carrler on sald
rouLe conLravenes exlsLlng governmenL pollcles relaLlve Lo Lhe raLlonallzaLlon of operaLlons of all waLer
LransporL uLlllLles,
c. lL conLravenes Lhe memorandum of agreemenL beLween MA8lnA and Lhe 8oard of
1ransporLaLlon,
d. Lhe granL of auLhorlLy Lo operaLe a ferry servlce as a prlvaLe carrler ls noL feaslble, lL lessens
An18AnCC's llablllLy Lo passengers and cargo Lo a degree less Lhan exLraordlnary dlllgence?
e. An18AnCC ls noL a prlvaLe carrler when lL operaLes lLs ferry servlce,
f. lL runs counLer Lo Lhe 'old operaLor' docLrlne, and
g. Lhe operaLlon by An18AnCC of Lhe ferry servlce consLlLuLes undue compeLlLlon.
1he foregolng conslderaLlons consLlLuLes Lhe subsLanLlal errors commlLLed by Lhe respondenL 8oard
whlch would more Lhan amply [usLlfy revlew of Lhe quesLloned declslon by Lhls Ponorable CourL." 12
8oLh cases were consolldaLed and are now admlLLed for declslon.
1he resoluLlon of all sald lssues ralsed revolves on Lhe valldlLy of Lhe quesLloned 8C1 declslon.
1he 8C1 resolved Lhe lssue of wheLher a ferry servlce ls an exLenslon of Lhe hlghway and Lhus ls a parL of
Lhe auLhorlLy orlglnally granLed An18AnCC ln Lhe followlng manner:
"A ferry servlce, ln law, ls LreaLed as a conLlnuaLlon of Lhe hlghway from one slde of Lhe waLer over
whlch passes Lo Lhe oLher slde for LransporLaLlon of passengers or of Lravellers wlLh Lhelr Leams vehlcles
and such oLher properLy as, Lhey may carry or have wlLh Lhem. (u.S. vs. ugeL Sound nev. Co. u.C.
WashlngLon, 24 l. Supp. 431). lL may be sald Lo be a necessary servlce of a speclally consLrucLed boaL Lo
carry passengers and properLy across rlvers or bodles of waLer from a place ln one shore Lo a polnL
convenlenLly opposlLe on Lhe oLher shore and conLlnuaLlon of Lhe hlghway maklng a connecLlon wlLh
Lhe Lhoroughfare aL each Lermlnal (u.S. vs. Canadlan ac, n.?. Co. 4 . Supp. 83). lL comprlses noL merely
Lhe prlvllege of LransporLaLlon buL also Lhe use for LhaL purpose of Lhe respecLlve landlngs wlLh ouLleLs
Lherefrom. (nole vs. 8ecord, 74 CkL. 77, 176 ac. 736). A ferry servlce may be a publlc ferry or a prlvaLe
ferry. A publlc ferry servlce ls one whlch all Lhe publlc have Lhe rlghL Lo resorL Lo and for whlch a regular
fare ls esLabllshed and Lhe ferryman ls a common carrler be lnbound Lo Lake all who apply and bound Lo
keep hls ferry ln operaLlon and good repalr. (PudspeLh v. Pall, 11 Ca. 310, 36 S.8. 770). A ferry (prlvaLe)
servlce ls malnly for Lhe use of Lhe owner and Lhough he may Lake pay for ferrlage, he does noL follow lL
as a buslness. Pls ferry ls noL open Lo Lhe publlc aL lLs demand and he may or may noL keep lL ln
operaLlon (PudspeLh vs. Pall, supra, SL. aul llre and Marlne lns. 696), Parrlson, 140 Ark. 138, 213 S.W.
698).
1he ferryboaL servlce of anLranco ls a conLlnuaLlon of Lhe hlghway Lraversed by lLs buses from asay
ClLy Lo Samar, LeyLe passlng Lhrough MaLnog (Sorsogon) Lhrough San 8ernardlno SLralL Lo Allen (Samar).
lL ls a prlvaLe carrler because lL wlll be used excluslvely Lo LransporL lLs own buses, passengers and
frelghL Lrucks Lraverslng Lhe sald rouLe. lL wlll caLer excluslvely Lo Lhe needs of lLs own cllenLele
(passengers on board - anLranco buses) and wlll noL offer lLself lndlscrlmlnaLely for hlre or for
compensaLlon Lo Lhe general publlc. Legally Lherefore, anLranco has Lhe rlghL Lo operaLe Lhe ferryboaL
M/v 8LACk uCu8LL, along Lhe rouLe from MaLnog (Sorsogon) Lo Allen (Samar) and vlce versa for Lhe
excluslve use of lLs own buses, passengers and frelghL Lrucks wlLhouL Lhe need of applylng for a separaLe
cerLlflcaLe of publlc convenlence or provlslonal auLhorlLy. Slnce lLs operaLlon ls an lnLegral parL of lLs land
LransporL sysLem, lLs orlglnal cerLlflcaLe of publlc convenlence should be amended Lo lnclude Lhe
operaLlon of such ferryboaL for lLs own excluslve use." 13
ln !avellana 14 Lhls CourL reclLed Lhe followlng deflnlLlon of "ferry":
"1he Lerm ' ferry lmplled Lhe conLlnuaLlon by means of boaLs, barges, or rafLs of a hlghway or Lhe
connecLlon of hlghways locaLed on Lhe opposlLe banks of a sLream or oLher body of waLer. 1he Lerm
necessarlly lmplles LransporLaLlon for a shorL dlsLance, almosL lnvarlably beLween Lwo polnLs, whlch ls
unrelaLed Lo oLher LransporLaLlon, (CpposlLors' Lmphasls.)
1he Lerm 'ferry' ls ofLen employed Lo denoLe Lhe rlghL or franchlse granLed by Lhe sLaLe or lLs auLhorlzed
mandaLorles Lo conLlnue by means of boaLs, an lnLerrupLed land hlghway over Lhe lnLerrupLlng waLers
and Lo charge Loll for Lhe use Lhereof by Lhe publlc. ln Lhls sense lL has also been deflned as a prlvllege, a
llberLy, Lo Lake Lolls for LransporLlng passengers and goods across a lake or sLream, or some oLher body
of waLer, wlLh no essenLlal dlfference from a brldge franchlse excepL as Lo Lhe mode of LransporLaLlon
22 Am. !ur. 333.
A 'ferry' has been deflned by many courLs as 'a publlc hlghway or Lhoroughfare across a sLream of waLer
or rlver by boaL lnsLead of a brldge.' (SL. Clalre CounLry v. lnLersLaLe Car and Sand 1ransfer Co., 192 u.S.
464, 48 L. ed. 318, eLc.).
'1he Lerm ferry ls ofLen employed Lo denoLe Lhe rlghL or franchlse granLed by Lhe sLaLe or lLs auLhorlzed
mandaLorles Lo conLlnue by means of boaLs, an lnLerrupLed land hlghway over Lhe lnLerrupLlng waLers
and Lo charge Loll for Lhe use Lhereof by Lhe publlc.' (valle[o lerry Co. vs. Solano AquaLlc Club, 163 Cal.
233, 131 . 864, Ann. Cas. 1914C, 1179, eLc.) (CpposlLors' Lmphasls).
'lerry' ls servlce necesslLy for common good Lo reach polnL across a sLream, lagoon, lake, or bay. (u.S.
vs. Canadlan ac. 8y. Co. u.C. Was., 4 Supp. 831, 833)'
'lerry' properly means a place of LranslL across a rlver or arm of Lhe sea, buL ln law lL ls LreaLed as a
franchlse, and deflned as Lhe excluslve rlghL Lo carry passengers across a rlver, or arm of Lhe sea, from
one vlll Lo anoLher, or Lo connecL a conLlnuous llne of road leadlng from Lownshlp or vlll Lo anoLher.
(Canadlan ac. 8y. Co. vs. C.C.A. Wash., 73 l. 2d. 831, 832)'
'lncludes varlous waLers: (1) 8uL an arm of Lhe sea may lnclude varlous subordlnaLe descrlpLlons of
waLers, where Lhe Llde ebbs and flows. lL may be a rlver, harbor, creek, basln, or bay, and lL ls
someLlmes used Lo deslgnaLe very exLenslve reaches of waLers wlLhln Lhe pro[ecLlng capes or polnLs or a
counLry. (See 8ex. vs. 8ruce, ueach, C.C. 1093). (2) ln an early case Lhe courL sald: '1he dlsLlncLlon
beLween rlvers navlgable and noL navlgable, LhaL ls, where Lhe sea does, or does noL, ebb and flow, ls
very anclenL. 8ex. vs. SmlLh, 2 uougl. 441, 99 8eprlnL 283. 1he former are called arms of Lhe sea, whlle
Lhe laLLer pass under Lhe denomlnaLlon of prlvaLe or lnland rlvers' Adams vs. ease 2 Conn. 481, 484."
(Lmphasls supplled)
ln Lhe cases of Cababa vs. ubllc Servlce Commlsslon, 13 Cababa vs. 8emlglo & Carlllo 16 and
MunlclpallLy of CaLLaran vs. Lllzaga 17 Lhls CourL consldered as ferry servlce such waLer servlce LhaL
crosses rlvers. cdrep
Powever, ln !avellana We made clear dlsLlncLlon beLween a ferry servlce and coasLwlse or lnLerlsland
servlce by holdlng LhaL:
"We are noL unmlndful of Lhe reasons adduced by Lhe Commlsslon ln conslderlng Lhe moLorboaL servlce
beLween Calapan and 8aLangas as ferry, buL from our conslderaLlon of Lhe law as lL sLands, parLlcularly
CommonwealLh AcL no. 146, known as Lhe ubllc Servlce AcL and Lhe provlslons of Lhe 8evlsed
AdmlnlsLraLlve Code regardlng munlclpal ferrles and Lhose regardlng Lhe [urlsdlcLlon of Lhe 8ureau of
CusLoms over documenLaLlon, reglsLraLlon, llcenslng, lnspecLlon, eLc. of sLeamboaLs, moLorboaLs or
moLor vessels, and Lhe deflnlLlon of ferry as above quoLed, we have Lhe lmpresslon and we are lncllned
Lo belleve LhaL Lhe LeglslaLure lnLended ferry Lo mean Lhe servlce elLher by barges or rafLs, even by
moLor or sLeam vessels, beLween Lhe banks of a rlver or sLream Lo conLlnue Lhe hlghway whlch ls
lnLerrupLed by Lhe body of waLer, or ln some cases, Lo connecL Lwo polnLs on opposlLe shores of an arm
of Lhe sea such as bay or lake whlch does noL lnvolve Loo greaL a dlsLance or Loo long a Llme Lo navlgaLe.
8uL where Lhe llne or servlce lnvolves crosslng Lhe open sea llke Lhe body of waLer beLween Lhe provlnce
of 8aLangas and Lhe lsland of Mlndoro whlch Lhe opposlLors descrlbe Lhus "Lhe lnLervenlng waLers
beLween Calapan and 8aLangas are wlde and dangerous wlLh blg waves where small boaL, barge or rafL
are noL adapLed Lo Lhe servlce, Lhen lL ls more reasonable Lo regard sald llne or servlce as more properly
belonglng Lo lnLerlsland or coasLwlse Lrade". Accordlng Lo Lhe flndlng of Lhe Commlsslon lLself Lhe
dlsLance beLween Calapan and 8aLangas ls abouL 24 nauLlcal mlles or abouL 44.3 kllomeLers. We do noL
belleve LhaL Lhls ls Lhe shorL dlsLance conLemplaLed by Lhe LeglslaLure ln referrlng Lo ferrles wheLher
wlLhln Lhe [urlsdlcLlon of a slngle munlclpallLy or ferrles beLween Lwo munlclpallLles or provlnces. lf we
are Lo granL LhaL waLer LransporLaLlon beLween Calapan and 8aLangas ls ferry servlce, Lhen Lhere would
be no reason for noL conslderlng Lhe same servlce beLween Lhe dlfferenL lslands of Lhe hlllpplnes, such
as 8oac, Marlnduque and 8aLangas, 8oxas ClLy of Caplz and 8omblon, Cebu ClLy, Cebu and Crmoc,
LeyLe, Culan, Samar and Surlgao, Surlgao, and uumagueLe, negros CrlenLal and CroquleLa or Cagayan
de Cro.
1he Commlsslon makes Lhe dlsLlncLlon beLween ferry servlce and moLorshlp ln Lhe coasLwlse Lrade,
Lhus: cdll
'A ferry servlce ls dlsLlngulshed from a moLorshlp or moLorboaL servlce engaged ln Lhe coasLwlse Lrade ln
LhaL Lhe laLLer ls lnLended for Lhe LransporLaLlon of passengers and/or frelghL for hlre or compensaLlon
beLween porLs or places ln Lhe hlllpplnes wlLhouL deflnlLe rouLes or llnes of servlce.'
We cannoL agree. 1he deflnlLeness of Lhe rouLe of a boaL ls noL Lhe decldlng facLor. A boaL of say Lhe
Wllllam Llnes, lnc. goes from Manlla Lo uavao ClLy vla Cebu, 1agbllaran, uumagueLe, Zamboanga, every
week. lL has a deflnlLe rouLe, and yeL lL may noL for LhaL reason be regarded as engaged ln ferry servlce.
Agaln, a vessel of Lhe Companla MarlLlma makes Lhe Lrlp from Manlla Lo 1acloban and back, Lwlce a
week. CerLalnly, lL has a deflnlLe rouLe. 8uL LhaL servlce ls noL ferry servlce, buL raLher lnLerlsland or
coasLwlse Lrade.
We belleve LhaL lL wlll be more ln consonance wlLh Lhe splrlL of Lhe law Lo conslder sLeamboaL or
moLorboaL servlce beLween Lhe dlfferenL lslands, lnvolvlng more or less greaL dlsLance and over more or
less LurbulenL and dangerous waLers of Lhe open sea, Lo be coasLwlse or lnLer-lsland servlce. Anyway,
wheLher sald servlce beLween Lhe dlfferenL lslands ls regarded as ferry servlce or coasLwlse Lrade
servlce, as long as Lhe waLer crafL used are sLeamboaLs, moLorboaLs or moLor vessels, Lhe resulL wlll be
Lhe same as far as Lhe Commlsslon ls concerned." 18 (Lmphasls supplled)
1hls CourL Lakes [udlclal noLlce of Lhe facL, and as shown by an examlnaLlon of Lhe map of Lhe
hlllpplnes, LhaL MaLnog whlch ls on Lhe souLhern Llp of Lhe lsland of Luzon and wlLhln Lhe provlnce of
Sorsogon and Allen whlch ls on Lhe norLheasLern Llp of Lhe lsland of Samar, ls Lraversed by Lhe San
8ernardlno SLralL whlch leads Lowards Lhe aclflc Ccean. 1he parLles admlL LhaL Lhe dlsLance beLween
MaLnog and Allen ls abouL 23 kllomeLers whlch may be negoLlaLed by moLorboaL or vessel ln abouL 1-
1/2 hours as clalmed by respondenL An18AnCC Lo 2 hours accordlng Lo peLlLloners. As Lhe San
8ernardlno SLralL whlch separaLes MaLnog and Allen leads Lo Lhe ocean lL musL aL Llmes be choppy and
rough so LhaL lL wlll noL be safe Lo navlgaLe Lhe same by small boaLs or barges buL only by such
sLeamboaLs or vessels as Lhe M/v "8lack uouble." 19
Conslderlng Lhe envlronmenLal clrcumsLances of Lhe case, Lhe conveyance of passengers, Lrucks and
cargo from MaLnog Lo Allen ls cerLalnly noL a ferryboaL servlce buL a coasLwlse or lnLerlsland shlpplng
servlce. under no clrcumsLance can Lhe sea beLween MaLnog and Allen be consldered a conLlnuaLlon of
Lhe hlghway. Whlle a ferryboaL servlce has been consldered as a conLlnuaLlon of Lhe hlghway when
crosslng rlvers or even lakes, whlch are small body of waLers separaLlng Lhe land, however, when as ln
Lhls case Lhe Lwo Lermlnals, MaLnog and Allen are separaLed by an open sea lL can noL be consldered as
a conLlnuaLlon of Lhe hlghway. 8espondenL An18AnCC should secure a separaLe CC for Lhe operaLlon
of an lnLerlsland or coasLwlse shlpplng servlce ln accordance wlLh Lhe provlslons of law. lLs CC as a bus
LransporLaLlon cannoL be merely amended Lo lnclude Lhls waLer servlce under Lhe gulse LhaL lL ls a mere
prlvaLe ferry servlce.
1he conLenLlon of prlvaLe respondenL An18AnCC LhaL lLs ferry servlce operaLlon ls as a prlvaLe carrler,
noL as a common carrler for lLs excluslve use ln Lhe ferrylng of lLs passenger buses and cargo Lrucks ls
absurd. An18AnCC does noL deny LhaL lL charges lLs passengers separaLely from Lhe charges for Lhe
bus Lrlps and lssues separaLe LlckeLs whenever Lhey board Lhe M/v "8lack uouble" LhaL crosses MaLnog
Lo Allen, 20 An18AnCC cannoL preLend LhaL ln lssulng LlckeLs Lo lLs passengers lL dld so as a prlvaLe
carrler and noL as a common carrler. 1he CourL does noL see any reason why lnsplLe of lLs amended
franchlse Lo operaLe a prlvaLe ferryboaL servlce lL cannoL accepL walk-ln passengers [usL for Lhe purpose
of crosslng Lhe sea beLween MaLnog and Allen. lndeed evldence Lo Lhls effecL has been submlLLed. 21
WhaL ls even more dlfflculL Lo comprehend ls LhaL whlle ln one breaLh respondenL An18AnCC clalms
LhaL lL ls a prlvaLe carrler lnsofar as Lhe ferryboaL servlce ls concerned, ln anoLher breaLh lL sLaLes LhaL lL
does noL Lhereby abdlcaLe from lLs obllgaLlon as a common carrler Lo observe exLraordlnary dlllgence
and vlgllance ln Lhe LransporLaLlon of lLs passengers and goods. neverLheless, conslderlng LhaL Lhe
auLhorlLy granLed Lo An18AnCC ls Lo operaLe a prlvaLe ferry, lL can sLlll asserL LhaL lL cannoL be held Lo
accounL as a common carrler Lowards lLs passengers and cargo. Such an anomalous slLuaLlon LhaL wlll
[eopardlze Lhe safeLy and lnLeresLs of lLs passengers and Lhe cargo owners cannoL be allowed. LL[ur

WhaL appears clear from Lhe record ls LhaL aL Lhe beglnnlng An18AnCC planned Lo operaLe such
ferryboaL servlce beLween MaLnog and Allen as a common carrler so lL requesLed auLhorlLy from
MA8lnA Lo purchase Lhe vessel M/v "8lack uouble" 22 ln accordance wlLh Lhe procedure provlded for
by law for such appllcaLlon for a cerLlflcaLe of publlc convenlence. 23 Powever when lLs requesL was
denled as Lhe sald rouLes "are adequaLely servlced by exlsLlng/auLhorlzed operaLors," 24 lL neverLheless
purchased Lhe vessel and sLarLed operaLlng Lhe same. Cbvlously Lo go abouL Lhls obsLacle Lo lLs
operaLlon, lL Lhen conLrlved a novel Lheory LhaL whaL lL proposes Lo operaLe ls a prlvaLe ferryboaL servlce
across a small body of waLer for Lhe excluslve use of lLs buses, Lrucks and passengers as an lncldenL Lo lLs
franchlse Lo convey passengers and cargo on land from asay ClLy Lo 1acloban so LhaL lL belleves lL need
noL secure a separaLe cerLlflcaLe of publlc convenlence. 23 8ased on Lhls represenLaLlon, no less Lhan
Lhe SecreLary of !usLlce was led Lo render an afflrmaLlve oplnlon on CcLober 20, 1981 26 followed a few
days laLer by Lhe quesLloned declslon of publlc respondenL of CcLober 23, 1981. 27 CerLalnly Lhe CourL
cannoL glve lLs lmprlmaLur Lo such a slLuaLlon.
1hus Lhe CourL holds LhaL Lhe waLer LransporL servlce beLween MaLnog and Allen ls noL a ferryboaL
servlce buL a coasLwlse or lnLerlsland shlpplng servlce. 8efore prlvaLe respondenL may be lssued a
franchlse or CC for Lhe operaLlon of Lhe sald servlce as a common carrler, lL musL comply wlLh Lhe usual
requlremenLs of flllng an appllcaLlon, paymenL of Lhe fees, publlcaLlon, adduclng evldence aL a hearlng
and affordlng Lhe opposlLors Lhe opporLunlLy Lo be heard, among oLhers, as provlded by law. 28
WPL8LlC8L, Lhe peLlLlons are hereby C8An1Lu and Lhe ueclslon of Lhe respondenL 8oard of
1ransporLaLlon (8C1) of CcLober 23, 1981 ln 8C1 Case no. 81-348-C and lLs Crder of !uly 21, 1982 ln Lhe
same case denylng Lhe moLlons for reconslderaLlon flled by peLlLloners are hereby 8eversed and seL
aslde and declared null and vold. 8espondenL An18AnCC ls hereby permanenLly en[olned from
operaLlng Lhe ferryboaL servlce and/or coasLwlse/lnLerlsland servlces beLween MaLnog and Allen unLll lL
shall have secured Lhe approprlaLe CerLlflcaLe of ubllc Convenlence (CC) ln accordance wlLh Lhe
requlremenLs of Lhe law, wlLh cosLs agalnsL respondenL An18AnCC.
SC C8uL8Lu.
1eehankee, C.!., narvasa, Cruz and aras, !!., concur.
looLnoLes
1. Annex "C" Lo eLlLlon of San ablo, C.8. no. 61461.
2. Annex "L" Lo eLlLlon, Supra.
3. 98 hlls. 964 (1936).
4. Annex "P" Lo eLlLlon, Supra.
3. Annex "l" Lo eLlLlon, Supra.
6. Annex "1" Lo CommenL of An18AnCC.
7. . 142, 8ollo, Annex "1" Lo CommenL of An18AnCC.
8. ueclslon ln 8C1 Case no. 81-348-C, Annex "k" eLlLlon, Supra.
9. Annex "C" eLlLlon, San ablo.
10. eLlLlon, San ablo, C.8. no. 61461.
11. p. 17-18, 8ollo, eLlLlon, San ablo.
12. p. 20-21, 8ollo, eLlLlon, Cardlnal Shlpplng Corp.
13. ueclslon, p. 83-86.
14. Supra, pp. 969-970.
13. 102 hll. 1013.
16. 118 hll. 36.
17. 91 hll. 440.
18. 98 hll. pp. 970-972.
19. . 22, San ablo, eLlLlon.
20. Annex "n" Lo Lhe eLlLlon, San ablo.
21. Annex "M" Lo Cardlnal Shlpplng eLlLlon.
22. Annex "C", San ablo eLlLlon.
23. Annex "l", Supra.
24. Annex "L", Supra.
23. Annex "P", Supra.
26. . 142, 8ollo, San ablo eLlLlon, Annex "1" Lo anLranco CommenL.
27. Annex "k", Supra.
28. Clongapo !eepney CperaLors AssoclaLlon vs. SC, 13 SC8A 303.


ll8S1 ulvlSlCn
[C.8. no. L-31036. AugusL 4, 1988.]
LuClLA C. MAnZAnAL, peLlLloner, vs. MAu8C A. AuSL!C and u8LlC SL8vlCL CCMMlSSlCn,
respondenLs.
asLor C. 8acanl and 8ogello L. Subong for peLlLloner.
Mauro A. Ause[o for and ln hls own behalf.
Leonor S. Saplala for publlc respondenL.
S?LLA8uS
1. S1A1u1C8? CCnS18uC1lCn, SLC1lCn 19 (A), u8LlC SL8vlCL AC1, WC8uS "unSAlL,
lnAuLCuA1L Anu lM8CL8", 8LlL8 1C CL8A1C8'S lAlLu8L 1C 8CvluL 8LLlA8LL Anu AuLCuA1L
nuM8L8 Cl vLPlCLLS Au1PC8lZLu. - SecLlon 19(a) of Lhe ubllc Servlce AcL conLemplaLes of fallure Lo
provlde a servlce LhaL ls safe, proper or adequaLe and refusal Lo render any servlce whlch can reasonably
be demanded and furnlshed. lL refers speclflcally Lo Lhe operaLor's lnablllLy Lo provlde rellable vehlcles
Lo LransporL Lhe rldlng publlc Lo Lhelr places of desLlnaLlon and Lo Lhe fallure Lo provlde an adequaLe
number of unlLs auLhorlzed under hls franchlse aL all Llmes Lo secure Lhe publlc of susLalned servlce.
Whlle Lhe words "unsafe, lnadequaLe and lmproper" may be broad enough Lo cover a loL of Lhlngs, Lhey
musL be lnLerpreLed ln consonance wlLh Lhe purpose of Lhe ubllc Servlce Law, whlch was speclflcally
enacLed, among oLher Lhlngs, Lo proLecL Lhe publlc agalnsL unreasonable charges and poor lnefflclenL
servlce (Luzon SLevedorlng Co., lnc. vs. SC, 93 hll. 733) and Lo secure adequaLe susLalned servlce for
Lhe publlc aL Lhe leasL posslble cosLs. (8aLangas 1ransporLaLlon Co. vs. Crlanes, 32 hll. 433).
2. S1A1u1LS, u8LlC SL8vlCL LAW, 8LS18lC1lCnS lMCSLu uCn LMLC?LLS Cl CL8A1C8S,
LCuALL? ALlCA8LL 1C 1PCSL AL8LAu? LMLC?Lu Anu 1PCSL SLLklnC AuMlSSlCn. - SecLlon 47 of
Lhe 8evlsed Crder no. 1 refers Lo Lhe klnd of persons an operaLor musL keep under hls employ, namely:
courLeous, of good moral characLer and no record of crlmlnal convlcLlon. ConLrary Lo Lhe clalm of
peLlLloner, Lhls resLrlcLlon equally applles Lo Lhose who are already employed as well as Lhose merely
seeklng admlsslon Lo Lhe servlce. (angaslnan 1ransporLaLlon Co. vs. Cl8, L-9736, May 20, 1937, 101 hll.
480)
3. lu., lu., 8A1lCnALL Cl 1PL LAW. - 1he reason behlnd Lhls requlremenL of courLesy and good
moral characLer cannoL be assalled and ls undersLandable. A publlc servlce operaLor deals dlrecLly wlLh
Lhe paLronlzlng communlLy and Lhe naLure of such underLaklng necessarlly demands of Lhe company Lhe
malnLenance of a personnel wlLh unquesLlonable record of good moral characLer for Lhe publlc enLrusL
Lhelr llves, properLles and lnLeresLs ln sald servlces and deserve uLmosL courLesy, efflclency and safeLy ln
reLurn.
4. 8LMLulAL LAW, LvluLnCL, WLlCP1 Anu SulllClLnC?, CCnSl8AC?, MuS1 8L 8CvLu 8?
CLLA8 Anu CCnvlnClnC LvluLnCL. - Lven on Lhe assumpLlon LhaL lL was peLlLloner's Laxlcab LhaL was
used by Lhe escaplng hold-uppers, Lhere ls no evldence LhaL Lhe drlver ls a co-consplraLor ln Lhe
commlsslon of Lhe offense of robbery. Consplracy musL be proved by clear and convlnclng evldence. 1he
mere clalm LhaL Lhe Laxlcab was Lhere and probably walLlng ls noL proof of consplracy ln Lhls case as lL
should be recalled LhaL Lhere were abouL Lwelve vehlcles LhaL sLopped Lo vlew Lhe specLacle.
3. C8lMlnAL LAW, Su8SlulA8? ClvlL LlA8lLl1? Cl LMLC?L8S, LMLC?LL MuS1 PAvL
CCMMl11Lu 1PL CllLnSL ln 1PL ulSCPA8CL Cl PlS uu1lLS. - Lven on Lhe assumpLlon LhaL Lhe drlver
had parLlclpaLed volunLarlly ln Lhe lncldenL, hls culpablllLy should noL be made a ground for Lhe
cancellaLlon of Lhe cerLlflcaLe of peLlLloner. Whlle an employer may be subsldlarlly llable for Lhe
employee's clvll llablllLy ln a crlmlnal acLlon, subsldlary llablllLy presupposes LhaL Lhere was a crlmlnal
acLlon. 8esldes, ln order LhaL an employer may be subsldlarlly llable, lL should be shown LhaL Lhe
employee commlLLed Lhe offense ln Lhe dlscharge of hls duLles.
6. ClvlL LAW, uAMACLS, LMLC?L8 8lMA8lL? LlA8LL CnL? ll PlS LMLC?LLS AC1Lu Wl1Pln
1PL SCCL Cl 1PLl8 ASSlCnLu 1ASkS. - Whlle lL ls Lrue also LhaL an employer may be prlmarlly llable
under ArLlcle 2180 of Lhe Clvll Code for Lhe acLs or omlsslons of persons for whom one ls responslble,
Lhls llablllLy exLends only Lo damages caused by hls employees acLlng wlLhln Lhe scope of Lhelr asslgned
Lasks. Clearly, Lhe acL ln quesLlon ls LoLally allen Lo Lhe buslness of peLlLloner as an operaLor and hence,
Lhe drlver's llllclL acL ls noL wlLhln Lhe scope of Lhe funcLlons enLrusLed Lo hlm.
7. AuMlnlS18A1lvL LAW, u8LlC SL8vlCL CCMMlSSlCn, CWL8 1C SuSLnu C8 8LvCkL
CL81lllCA1L Cl u8LlC CCnvLnlLnCL, MA? 8L LxL8ClSLu CnL? WPLn 1PL8L lS A vlCLA1lCn C8
WlLLluL C8 CCn1uMAClCuS 8LluSAL Cl 1PL PCLuL8 1C CCML? Wl1P An? C8uL8, 8uLL C8
8LCuLA1lCn. - under SecLlon 16(n) of Lhe ubllc Servlce AcL, Lhe power of Lhe Commlsslon Lo suspend
or revoke any cerLlflcaLe recelved under Lhe provlslons of Lhe AcL may only be exerclsed whenever Lhe
holder Lhereof has vlolaLed or wlllfully and conLumaclously refused Lo comply wlLh any order, rule or
regulaLlon of Lhe Commlsslon or any provlslon of Lhe AcL. ln Lhe absence of showlng LhaL Lhere ls wlllful
and conLumaclous vlolaLlon on Lhe parL of peLlLloner, no cerLlflcaLe of publlc convenlence may be valldly
revoked.

8. lu., lu., lu., lnS1AnCLS WPL8L CAnCLLLA1lCn PLLu AS vALlu. - 1he followlng are some
lnsLances where Lhe cancellaLlon of a cerLlflcaLe of publlc convenlence where held valld: (1) where Lhe
holder ls a mere dummy (ecson vs. ecson, 78 hll. 322), (2) where Lhe operaLor ceased operaLlon and
placed hls buses on sLorage (aredes vs. ubllc Servlce Commlsslon, L-7111, May 30, 1933), and (3)
where Lhe operaLor abandons, LoLally Lhe servlce (CollecLor vs. 8uan, L-11438, !uly 31, 1938, 8egodon
vs. ubllc Servlce Commlsslon, L-11899, SepL. 23, 1938, aez vs. Marcelo, L-1330, March 30, 1962). none
of Lhe wlllful acLs ln paLenL vlolaLlon of Lhe ubllc Servlce Law can be aLLrlbuLed Lo peLlLloner hereln.
9. lu., lu., 8uLL 1PA1 llnulnCS Cl lAC1S CCnCLuSlvL uCn 1PL CCu81, nC1 ALlCA8LL ln
CASL A1 8A8. - Whlle Lhe rule ls LhaL Lhe commlsslon's flndlngs of facL, lf supporLed by subsLanLlal
evldence, are concluslve upon Lhls CourL, We are auLhorlzed Lo modlfy or lgnore Lhem when lL clearly
appears LhaL Lhere ls no evldence Lo supporL reasonably such concluslon. (!avellana vs. La az lce lanL
& Cold SLorage Co., 63 hll. 621, hlllpplne Shlpowners AssoclaLlon vs. ubllc uLlllLy Commlssloner, 43
hll. 328, San Mlguel 8rewery vs. Lapld, 33 hll. 339, lce & Cold SLorage lndusLrles of Lhe hll., lnc. vs.
valero, 83 hll. 7, Pallll vs. uaplas, 14 SC8A 14)
u L C l S l C n
MLulALuLA, ! p:
1hls ls a peLlLlon for revlew on cerLlorarl of Lhe orders of Lhe ubllc Servlce Commlsslon daLed !une 30,
1967 and SepLember 1, 1969 ln SC Case no. 66-20-CC, enLlLled "Mauro A. Ause[o, ComplalnanL, vs.
Luclla C. Manzanal, 8espondenL," whereln Lhe cerLlflcaLe of publlc convenlence Lo operaLe a Laxlcab
servlce ln Manlla and suburbs of hereln peLlLloner Luclla C. Manzanal was cancelled and revoked and
her Lhlrd moLlon for reconslderaLlon was denled. cdll
1he case sLemmed from Lhe affldavlL of Mauro A. Ause[o, wlLh Lhe ComplalnL, lnvesLlgaLlon and
LnforcemenL Cfflce (ClLC) of Lhe ubllc Servlce Commlsslon narraLlng a hold up lncldenL on March 13,
1966. ln Lhls affldavlL, he lmpllcaLed a Laxlcab unlL whose plaLe number was sald Lo be "6100" and whlch
was allegedly boarded by Lhree (3) robbers as Lhey escaped from 8oxas 8oulevard ln fronL of Lhe L & S
8ulldlng aL abouL 6:00 a.m. of March 13, 1966, afLer afflanL and a companlon, Mr. !ose Caballes were
accosLed and held-up. Cn Lhe basls of Lhls affldavlL, respondenL Commlsslon lssued a "Show-Cause
Crder" daLed May 23, 1966 upon peLlLloner, Lo wlL:
". . . respondenL (eLlLloner Manzanal) ls hereby ordered Lo appear before Lhls Commlsslon, on Lhls 24Lh
day of !une, 1966, aL 9:00 o'clock ln Lhe mornlng Lo show cause why her cerLlflcaLe of publlc
convenlence lssued under Case no. 62-4303 should noL be cancelled for noL renderlng safe, adequaLe
and proper servlce by employlng a drlver wlLh crlmlnal Lendencles, ln vlolaLlon of SecLlon 19(a) of Lhe
ubllc Servlce Law and SecLlon 47 of Lhe 8evlsed Crder no. 1 of Lhls Commlsslon.
"lallure on Lhe parL of Lhe respondenL Lo appear aL Lhe hearlng seL wlll be consldered as a walver of her
rlghL Lo be heard and Lhls Commlsslon wlll declde Lhe case on lLs merlLs." (age 13, 8ollo)
lrom CcLober 10, 1966 Lo March 20, 1967, Lrlal was conducLed by Lhe respondenL ubllc Servlce
Commlsslon. Mr. Ause[o and Mr. Caballes boLh narraLed Lhe alleged hold-up lncldenL as follows: 8oLh
were sLrolllng along Lhe seaslded embankmenL of uewey or 8oxas 8oulevard aL abouL 6:00 o'clock ln Lhe
mornlng of March 13, 1966 Lowards Lhe dlrecLlon of asay ClLy. As Lhey were ln fronL of Lhe L & S
8ulldlng, Lhey noLlced LhaL Lhe Lhree (3) men allghLed from a vehlcle behlnd Lhem. lmmedlaLely
LhereafLer, Lhese men accosLed and held-up boLh of Lhem. Slnce Lhe Lwo offered some reslsLance, Lhey
aLLracLed Lhe aLLenLlon of oLher promenaders as well as Lhe aLLenLlon of abouL Lwelve passlng moLorlsLs
who sLopped Lo waLch Lhe specLacle. 1wo of Lhe hold-uppers wenL afLer Mr. Caballes and Lhe oLher one
Look care of Mr. Ause[o who foughL back and succeeded ln dlsarmlng Lhe hold-uppers of hls knlfe. Pe
Lhen drew hls plsLol and Lrled Lo shooL hlm buL lL [ammed. As Lhe Lwo oLher hold-uppers ran Lowards hls
dlrecLlon, presumably Lo asslsL Lhelr companlon, Lhey were warned LhaL Mr. Ause[o had a gun and so
Lhey sLopped and rushed lnsLead Lo a walLlng Laxl bearlng laLe no. 6100. LLphll
AL Lhe Lrlal, Mr. Caballes LesLlfled LhaL Lhe Laxl was red ln Lhe enLlre body whlle prlvaLe respondenL
Ause[o sald LhaL Lhe Laxl was red and lL had parLs palnLed blue. 8oLh however sald LhaL Lhe plaLe color
was orange.
Cn Lhe parL of peLlLloner, Manzanal, she submlLLed documenLs dlspuLlng Lhe posslblllLy LhaL Lhe Laxlcab
ln quesLlon was hers. She submlLLed Lhe declslon of Lhe SC ln Case no. 63-2149 where lL appears LhaL
Lhe commerclal name of Lhe Laxl ls Crlsman 1axl and LhaL Lhe color ls "red Lop wlLh emerald green body"
and Lwo cerLlflcaLlons Lo Lhe effecL LhaL Lhe color of Lhe plaLe ln 1963 was whlLe wlLh maroon
background.
Cn !une 30, 1967, Lhe ubllc Servlce Commlssloner Lnrlque Medlna lssued an order deplorlng Lhe facL
LhaL Lhe respondenL dld noL flle a formal answer or explanaLlon. 1he Commlsslon found LhaL (a) Lhere
was no moLlve on Lhe parL of Lhe sald wlLnesses for Lhe complalnanL Lo LesLlfy agalnsL Lhe operaLor or
agalnsL Lhe drlver of Laxl wlLh laLe no. 6100, (b) Lhe aLLenLlon of Lhe wlLnesses was concenLraLed on Lhe
number of Lhe reglsLraLlon plaLe and lL ls undersLandable LhaL Lhey pald llLLle or no aLLenLlon aL all Lo Lhe
colors, and (c) Lhe conducL of Lhe operaLor gave Lhe lmpresslon LhaL lnsLead of applylng a sLrong arm
agalnsL Lhe errlng drlver, she has Lrled Lo proLecL and shleld hlm.
Accordlngly, respondenL Commlsslon consldered Lhe charges proven slnce Lhe hold-up lncldenL was duly
esLabllshed and ordered Lhe cerLlflcaLe of publlc convenlence lssued ln Case no. 62-4303, for flve unlLs
revoked and cancelled. LexLlb
upon denlal of her Lhree moLlons for reconslderaLlon, she flled Lhls peLlLlon for revlew on cerLlorarl
asslgnlng Lhese errors:
l. 1he 8espondenL Commlsslon erred ln cancelllng and revoklng Lhe cerLlflcaLe of peLlLloner
Manzanal on charges of fallure Lo render safe, proper and adequaLe servlce under SecLlon. 19(a) of Lhe
ubllc Servlce AcL as amended and for employlng a drlver wlLh crlmlnal record under Sec. 47 of Lhe
8evlsed Crder no. 1, as Lhere was absoluLely no evldence whaLsoever presenLed Lo prove such charges.
ll. 1he respondenL Commlsslon erred when lL cancelled and revoked Lhe cerLlflcaLe of peLlLloner
Manzanal slmply because one of her Laxlcab unlLs allegedly goL lnvolved ln a hold-up lncldenL when
some, hold-uppers allegedly boarded Lhe same whlle escaplng slnce Lhls clrcumsLance ls noL one of Lhe
grounds for cancellaLlon.
lll. 1he respondenL Commlsslon erred ln flndlng peLlLloner Manzanal gullLy of proLecLlng and
shleldlng Lhe drlver of Lhe Laxlcab unlL ln quesLlon by noL leLLlng hlm LesLlfy and noL Laklng dlsclpllnary
acLlon agalnsL hlm, ln Lhe face of absoluLe absence of evldence Lo supporL such flndlngs.
eLlLloner lncluded ln her peLlLlon a prayer for Lhe lssuance of a prellmlnary mandaLory ln[uncLlon Lo
allow peLlLloner Lo resume operaLlons durlng Lhe pendency of Lhls peLlLlon and Lo en[oln respondenL
Commlsslon from allowlng anoLher Lo approprlaLe her cerLlflcaLe and/or llne. She relLeraLed Lhls prayer
ln a moLlon daLed !anuary 9, 1970. Cn lebruary 16, 1970, Lhls CourL lssued a wrlL of prellmlnary
ln[uncLlon upon peLlLloner posLlng a bond of 1,000.00 by allowlng her Lo resume operaLlons and aL Lhe
same Llme en[olnlng Lhe operaLlons of ?olanda Lscolln, whose appllcaLlon for "approprlaLlon" was
granLed ln SC Case no. 68-9712. upon moLlon of sald ?olanda Lscolln, Lhls CourL allowed her Lo
lnLervene and llfLed Lhe prellmlnary ln[uncLlon lssued upon her flllng a bond of 3,000.00. Powever, on
!une 23, 1970, Lhls CourL modlfled Lhe order llfLlng Lhe wrlL so LhaL Lhe flrsL parL Lhereof allowlng
peLlLloner Lo resume operaLlon of her Laxlcab servlce ls deemed excluded from sald order of llfLlng.
Cdpr
8espondenL ubllc Servlce Commlsslon flled an answer Lo Lhe peLlLlon sLaLlng LhaL Lhe cancellaLlon of
peLlLloner's cerLlflcaLe was warranLed by Lhe evldence adduced durlng Lhe hearlng polnLlng Lo Lhe facL
LhaL Lhe peLlLloner's drlver was concluslvely lnvolved ln Lhe hold-up.
rlvaLe respondenL Mauro A. Ause[o on Lhe oLher hand, manlfesLed LhaL he has chosen noL Lo flle an
answer Lo Lhe peLlLlon. Pe, however, flled hls commenL Lo peLlLloner's moLlon relLeraLlng Lhe prayer for
Lhe lssuance of a wrlL of prellmlnary ln[uncLlon. Pe afflrmed Lhereln Lhe presence of lellclslmo M. valdez
Lhe drlver of Laxlcab no. 6100 durlng Lhe hearlngs buL sLaLed, LhaL he could noL be sure Lhen as Lo
wheLher he was Lhe drlver of Lhe vehlcle used by Lhe hold-uppers. Pe llkewlse sLaLed LhaL he execuLed
an affldavlL daLed !anuary 3, 1970 Lo Lhe effecL LhaL Lhe sole purpose of hls complalnL before Lhe ubllc
Servlce Commlsslon was merely Lo verlfy Lhe drlver of Lhe Laxl Lhen bearlng laLe no. 6100 so sald drlver
could help Lhe pollce ln Lhe apprehenslon and prosecuLlon of Lhe hold-uppers and LhaL ln vlew of Lhe
deaLh of sald drlver durlng Lhe pendency of Lhe lnvesLlgaLlon, he ls wllllng Lo forgeL everyLhlng.
We flnd Lhe peLlLlon lmpressed wlLh merlL and agree wlLh peLlLloner LhaL Lhe charges lodged agalnsL her
have noL been duly proved. 1he respondenL ubllc Servlce Commlsslon anchors Lhe charges agalnsL
peLlLloner on Lhe followlng provlslons, Lo wlL:
"SecLlon 19. unlawful acLs. - lL shall be unlawful for any publlc servlce:
(a) Lo provlde or malnLaln any servlce LhaL ls unsafe, lmproper, or lnadequaLe, or wlLhhold or refuse
any servlce whlch can reasonably be demanded and furnlshed, as found and deLermlned by Lhe
Commlsslon ln a flnal order whlch shall be concluslve and shall Lake effecL ln accordance wlLh Lhls AcL
upon appeal or oLherwlse. (1he ubllc Servlce AcL, as amended)
"SecLlon 47. CourLesy, characLer, record, eLc. Lach operaLor shall employ only such chauffeurs,
conducLors, agenLs, lnspecLors, audlLors, and oLher employees who are courLeous and of good moral
characLer, and ln no case shall he employ any person who has been convlcLed by compeLenL courL of
homlclde and/or serlous physlcal ln[urles, LhefL, esLafa, robbery, and crlmes agalnsL chasLlLy. CperaLors
are prohlblLed from employlng as chauffeurs persons who do noL have professlonal drlvers' llcense."
(8evlsed Crder no. 1)
SecLlon 19(a) of Lhe ubllc Servlce AcL conLemplaLes of fallure Lo provlde a servlce LhaL ls safe, proper or
adequaLe and refusal Lo render any servlce whlch can reasonably be demanded and furnlshed. lL refers
speclflcally Lo Lhe operaLor's lnablllLy Lo provlde rellable vehlcles Lo LransporL Lhe rldlng publlc Lo Lhelr
places of desLlnaLlon and Lo Lhe fallure Lo provlde an adequaLe number of unlLs auLhorlzed under hls
franchlse aL all Llmes Lo secure Lhe publlc of susLalned servlce. Whlle Lhe words "unsafe, lnadequaLe and
lmproper" may be broad enough Lo cover a loL of Lhlngs, Lhey musL be lnLerpreLed ln consonance wlLh
Lhe purpose of Lhe ubllc Servlce Law, whlch was speclflcally enacLed, among oLher Lhlngs, Lo proLecL
Lhe publlc agalnsL unreasonable charges and poor lnefflclenL servlce (Luzon SLevedorlng Co., lnc. vs. SC,
93 hll. 733) and Lo secure adequaLe susLalned servlce for Lhe publlc aL Lhe leasL posslble cosLs.
(8aLangas 1ransporLaLlon Co. vs. Crlanes, 32 hll. 433). 1he facLs of Lhe case are berefL and wanLlng of
any evldence Lo Lhe effecL LhaL peLlLloner rendered a servlce LhaL ls unsafe, lnadequaLe and lmproper.
1here was no LesLlmony whaLsoever LhaL her vehlcles are of such klnd whlch may endanger Lhe llves of
Lhe passengers or are noL sulLable for Lhe pecullar characLerlsLlcs of Lhe area servlced. 1here ls no proof
LhaL peLlLloner ls noL ln a poslLlon Lo cope wlLh Lhe obllgaLlons and responslblllLles of Lhe servlce and Lo
malnLaln a compleLe number of unlLs as auLhorlzed. Whlle we agree wlLh respondenL Commlsslon LhaL
sald provlslon does noL necessarlly requlre a "passenger-operaLor" relaLlonshlp, We dlsagree LhaL a
slngle hold-up lncldenL whlch does noL clearly llnk peLlLloner's Laxlcab can be comprehended wlLhln lLs
meanlng.
SecLlon 47 of Lhe 8evlsed Crder no. 1, on Lhe oLher hand, refers Lo Lhe klnd of persons an operaLor musL
keep under hls employ, namely: courLeous, of good moral characLer and no record of crlmlnal
convlcLlon. ConLrary Lo Lhe clalm of peLlLloner, Lhls resLrlcLlon equally applles Lo Lhose who are already
employed as well as Lhose merely seeklng admlsslon Lo Lhe servlce. (angaslnan 1ransporLaLlon Co. vs.
Cl8, L-9736, May 20, 1937, 101 hll. 480) 1he reason behlnd Lhls requlremenL of courLesy and good
moral characLer cannoL be assalled and ls undersLandable. A publlc servlce operaLor deals dlrecLly wlLh
Lhe paLronlzlng communlLy and Lhe naLure of such underLaklng necessarlly demands of Lhe company Lhe
malnLenance of a personnel wlLh unquesLlonable record of good moral characLer for Lhe publlc enLrusL
Lhelr llves, properLles and lnLeresLs ln sald servlces and deserve uLmosL courLesy, efflclency and safeLy ln
reLurn. (lbld.) 8uL nowhere ln Lhe presenLaLlon of Lhe facLs of Lhe case was Lhere any proof LhaL
peLlLloner vlolaLed Lhls provlslon. 1here ls no proof LhaL she has hlred a drlver wlLh crlmlnal record or
bad moral characLer or has kepL under her employ, such drlver desplLe knowledge abouL hls moral
behavlor, dlscourLeous conducL or crlmlnal record. 8esldes, Lhe show cause order merely speaks of
employlng a drlver wlLh "crlmlnal Lendencles" whlle SecLlon 47 ls couched ln unmlsLakable mandaLory
Lerms, lL forblds Lhe employmenL of persons "convlcLed" of offenses enumeraLed Lhereln.
All LhaL was proved durlng Lhe lnvesLlgaLlon was Lhe hold-up lncldenL of March 13, 1966. 8uL proof of
Lhe hold-up lncldenL ls noL proof of Lhe charges under SecLlon 19(a) of Lhe ubllc Servlce Law and Sec. 47
of Lhe 8evlsed Crder no. 17. MosL lmporLanLly, even Lhe preclse ldenLlLy of Lhe Laxlcab boarded by Lhe
hold-uppers as Lhey escaped had noL been esLabllshed. 1he only LesLlmony llnklng Lhe Laxlcab of
peLlLloner was LhaL of Lhe companlon of prlvaLe respondenL Ause[o LhaL he saw Lhe malefacLors scamper
away and selze a Laxl whose plaLe number was "6100". WlLh respecL Lo Lhe descrlpLlon of Lhe alleged
Laxl, he sald LhaL Lhe Laxl was red ln Lhe enLlre body whlle prlvaLe respondenL Ause[o sald LhaL Lhe Laxl
was red and lL had parLs palnLed blue. 8oLh conflrmed each oLher LhaL Lhe plaLe color was orange. LL[ur
We flnd LhaL peLlLloner has successfully refuLed Lhe alleged parLlclpaLlon of her Laxl. 1he declslon daLed
uecember 28, 1963 of respondenL Commlsslon granLlng her peLlLlon for approval of her color scheme
whlch auLhorlzed all her flve (3) unlLs Lo be palnLed wlLh emerald green, Lhe cerLlflcaLlon of Mr. edro
Morales of Lhe Land 1ransporLaLlon Commlsslon, Chlef of Lhe laLe SecLlon, Lo Lhe effecL LhaL Lhe plaLes
for Laxls for 1963 have a maroon background, and Lhe cerLlflcaLlon of Mr. Marcelo vasquez of Lhe
vasquez 8ros. & Co., lnc., Lhe makers of vehlcle plaLes for Lhe Land 1ransporLaLlon Commlsslon LhaL Lhe
orange colored plaLes are glven Lo prlvaLely owned vehlcles and LhaL no. 6100 has been glven Lo boLh
Laxls and prlvaLely owned vehlcles all casL a cloud of doubL on Lhe real ldenLlLy of Lhe vehlcle used by Lhe
malefacLors.
Lven on Lhe assumpLlon LhaL lL was peLlLloner's Laxlcab LhaL was used by Lhe escaplng hold-uppers,
Lhere ls no evldence LhaL Lhe drlver ls a co-consplraLor ln Lhe commlsslon of Lhe offense of robbery.
Consplracy musL be proved by clear and convlnclng evldence. 1he mere clalm LhaL Lhe Laxlcab was Lhere
and probably walLlng ls noL proof of consplracy ln Lhls case as lL should be recalled LhaL Lhere were
abouL Lwelve vehlcles LhaL sLopped Lo vlew Lhe specLacle. lurLher, lL ls posslble LhaL Lhe drlver dld noL
acL volunLarlly as no person ln hls rlghL senses would defy Lhe wlshes of armed passengers. Lven on Lhe
assumpLlon LhaL Lhe drlver had parLlclpaLed volunLarlly ln Lhe lncldenL, hls culpablllLy should noL be
made a ground for Lhe cancellaLlon of Lhe cerLlflcaLe of peLlLloner. Whlle an employer may be
subsldlarlly llable for Lhe employee's clvll llablllLy ln a crlmlnal acLlon, subsldlary llablllLy presupposes
LhaL Lhere was a crlmlnal acLlon. 8esldes, ln order LhaL an employer may be subsldlarlly llable, lL should
be shown LhaL Lhe employee commlLLed Lhe offense ln Lhe dlscharge of hls duLles. Whlle lL ls Lrue also
LhaL an employer may be prlmarlly llable under ArLlcle 2180 of Lhe Clvll Code for Lhe acLs or omlsslons of
persons for whom one ls responslble, Lhls llablllLy exLends only Lo damages caused by hls employees
acLlng wlLhln Lhe scope of Lhelr asslgned Lasks. Clearly, Lhe acL ln quesLlon ls LoLally allen Lo Lhe buslness
of peLlLloner as an operaLor and hence, Lhe drlver's llllclL acL ls noL wlLhln Lhe scope of Lhe funcLlons
enLrusLed Lo hlm. Moreover, Lhe acLlon before respondenL Commlsslon ls nelLher a crlmlnal prosecuLlon
nor an acLlon for quasl-dellcL. Pence, Lhere ls absoluLely no ground Lo hold peLlLloner llable for Lhe
drlver's acL.
llnally, under SecLlon 16(n) of Lhe ubllc Servlce AcL, Lhe power of Lhe Commlsslon Lo suspend or revoke
any cerLlflcaLe recelved under Lhe provlslons of Lhe AcL may only be exerclsed whenever Lhe holder
Lhereof has vlolaLed or wlllfully and conLumaclously refused Lo comply wlLh any order, rule or regulaLlon
of Lhe Commlsslon or any provlslon of Lhe AcL. ln Lhe absence of showlng LhaL Lhere ls wlllful and
conLumaclous vlolaLlon on Lhe parL of peLlLloner, no cerLlflcaLe of publlc convenlence may be valldly
revoked. LLphll
1he followlng are some lnsLances where Lhe cancellaLlon of a cerLlflcaLe of publlc convenlence where
held valld: (1) where Lhe holder ls a mere dummy (ecson vs. ecson, 78 hll. 322), (2) where Lhe
operaLor ceased operaLlon and placed hls buses on sLorage (aredes vs. ubllc Servlce Commlsslon, L-
7111, May 30, 1933), and (3) where Lhe operaLor abandons, LoLally Lhe servlce (CollecLor vs. 8uan, L-
11438, !uly 31, 1938, 8egodon vs. ubllc Servlce Commlsslon, L-11899, SepL. 23, 1938, aez vs. Marcelo,
L-1330, March 30, 1962). none of Lhe wlllful acLs ln paLenL vlolaLlon of Lhe ubllc Servlce Law can be
aLLrlbuLed Lo peLlLloner hereln.
Apropos, We flnd Lhe respondenL Commlsslon's flndlng LhaL Lhe clrcumsLances surroundlng Lhe case,
speclally Lhe conducL of peLlLloner, gave Lhe lmpresslon LhaL Lhe peLlLloner lnsLead of applylng a sLrong
arm agalnsL Lhe errlng drlver has Lrled Lo proLecL and shleld hlm has no basls ln facL. Whlle Lhe rule ls
LhaL Lhe commlsslon's flndlngs of facL, lf supporLed by subsLanLlal evldence, are concluslve upon Lhls
CourL, We are auLhorlzed Lo modlfy or lgnore Lhem when lL clearly appears LhaL Lhere ls no evldence Lo
supporL reasonably such concluslon. (!avellana vs. La az lce lanL & Cold SLorage Co., 63 hll. 621,
hlllpplne Shlpowners AssoclaLlon vs. ubllc uLlllLy Commlssloner, 43 hll. 328, San Mlguel 8rewery vs.
Lapld, 33 hll. 339, lce & Cold SLorage lndusLrles of Lhe hll., lnc. vs. valero, 83 hll. 7, Pallll vs. uaplas,
14 SC8A 14)
ln Lhe case aL bar, lL has been duly esLabllshed LhaL Lhe drlver of Lhe Laxlcab, lellclslmo M. valdez, was
always presenL durlng Lhe lnlLlal hearlngs of Lhls case before hls deaLh on SepLember 18, 1966. 1hls facL
ls lndlcaLlve of hls wllllngness Lo Lake Lhe wlLness sLand buL deaLh sealed hls llps. lor her parL, peLlLloner
explalned LhaL she dld noL LesLlfy because she was candld enough noL Lo preLend Lo know Lhe exacL
whereabouLs of her Laxl aL Lhe faLeful Llme. Pence, Lhe concluslon of respondenL Commlsslon LhaL she
Lrled Lo proLecL or shleld her drlver by her refusal Lo refuLe or deny Lhe clalm of respondenL Ause[o and
Mr. Caballes ls noL warranLed by Lhe facLs of Lhe case. LexLlb
ACCC8ulnCL?, Lhe lnsLanL peLlLlon for revlew ls hereby C8An1Lu and Lhe declslon of respondenL ubllc
Servlce Commlsslon (now Land 1ransporLaLlon lranchlslng and 8egulaLory 8oard [L1l88]) daLed !une 30,
1967 cancelllng and revoklng Lhe cerLlflcaLe of publlc convenlence of peLlLloner Lo operaLe a Laxlcab
servlce ln Manlla for flve (3) unlLs under Case no. 62-4303 as well as Lhe order denylng Lhe moLlon for
reconslderaLlon are hereby 8LvL8SLu and SL1 ASluL.
SC C8uL8Lu.
narvasa, Cruz, Cancayco and Crlno-Aqulno, !!., concur.


ll8S1 ulvlSlCn
[C.8. no. 100727. March 18, 1992.]
CCCLC-Cu8AC CL8A1C8S Anu u8lvL8S ASSCClA1lCn, peLlLloner, vs. 1PL CCu81 Cl ALALS,
LunCSCu SlLAnCAn 18AnSC81 SL8vlCLS, CC8., lnu., respondenLs.
Mlchael . Moralde for peLlLloner.
8omeo l. Conda for prlvaLe respondenLs.
S?LLA8uS
1. CCMML8ClAL LAW, u8LlC SL8vlCL LAW, CL81lllCA1L Cl u8LlC CCnvLnlLnCL, nA1u8L. -
under Lhe ubllc Servlce Law, a cerLlflcaLe of publlc convenlence ls an auLhorlzaLlon lssued by Lhe ubllc
Servlce Commlsslon for Lhe operaLlon of publlc servlces for whlch no franchlse ls requlred by law. A
cerLlflcaLe of publlc convenlence ls lncluded ln Lhe Lerm "properLy" ln Lhe broad sense of Lhe Lerm.
under Lhe ubllc Servlce Law, a cerLlflcaLe of publlc convenlence can be sold by Lhe holder Lhereof
because lL has conslderable maLerlal value and ls consldered a valuable asseL (8aymundo v. LuneLa
MoLor Co., eL al., 38 hll. 889). AlLhough Lhere ls no doubL LhaL lL ls prlvaLe properLy, lL ls affecLed wlLh a
publlc lnLeresL and musL be submlLLed Lo Lhe conLrol of Lhe governmenL for Lhe common good
(angaslnan 1ransporLaLlon Co. v. SC, 70 hll 221). Pence, lnsofar as Lhe lnLeresL of Lhe SLaLe ls
lnvolved, a cerLlflcaLe of publlc convenlence does noL confer upon Lhe holder any proprleLary rlghL or
lnLeresL or franchlse ln Lhe rouLe covered Lhereby and ln Lhe publlc hlghways (Lugue v. vlllegas, L-22343,
nov. 28, 1969, 30 SC8A 409). Powever, wlLh respecL Lo oLher persons and oLher publlc uLlllLles, a
cerLlflcaLe of publlc convenlence as properLy, whlch represenLs Lhe rlghL and auLhorlLy Lo operaLe lLs
faclllLles for publlc servlce, cannoL be Laken or lnLerfered wlLh wlLhouL due process of law. ApproprlaLe
acLlons may be malnLalned ln courLs by Lhe holder of Lhe cerLlflcaLe agalnsL Lhose who have noL been
auLhorlzed Lo operaLe ln compeLlLlon wlLh Lhe former and Lhose who lnvade Lhe rlghLs whlch Lhe former
has pursuanL Lo Lhe auLhorlLy granLed by Lhe ubllc Servlce Commlsslon (A.L. Ammen 1ransporLaLlon Co.
v. Collngco, 43 hll. 280).
2. 8LMLulAL LAW, LvluLnCL, llnulnCS Cl 18lAL CCu81 LSLClALL? ll Alll8MLu 8? ALLLA1L
CCu81, 8uLL, CASL A1 8A8. - ln Lhe case aL bar, Lhe Lrlal courL found LhaL peLlLloner assoclaLlon
forclbly Look over Lhe operaLlon of Lhe [eepney servlce ln Lhe Cogeo-Cubao rouLe wlLhouL any
auLhorlzaLlon from Lhe ubllc Servlce Commlsslon and ln vlolaLlon of Lhe rlghL of respondenL corporaLlon
Lo operaLe lLs servlces ln Lhe sald rouLe under lLs cerLlflcaLe of publlc convenlence. 1hese were lLs
flndlngs whlch were afflrmed by Lhe appellaLe courL: "1he CourL from Lhe LesLlmony of plalnLlff's
wlLnesses as well as Lhe documenLary evldences presenLed ls convlnced LhaL Lhe acLlons Laken by
defendanL hereln Lhough lL admlLs LhaL lL dld noL have Lhe auLhorlLy Lo LransporL passengers dld ln facL
assume Lhe role as a common carrler engaged ln Lhe LransporL of passengers wlLhln LhaL span of Len
days beglnnlng november 11, 1983 when lL unllaLerally Look upon lLself Lhe operaLlon and dlspaLchlng of
[eepneys aL SL. Mary's SL. 1he presldenL of Lhe defendanL corporaLlon, 8omeo Cllva hlmself ln hls
LesLlmony conflrmed LhaL Lhere was lndeed a Lakeover of Lhe operaLlons aL SL. Mary's SL. . . .." 1he
flndlngs of Lhe Lrlal courL especlally lf afflrmed by Lhe appellaLe courL bear greaL welghL and wlll noL be
dlsLurbed on appeal before Lhls CourL.
3. CCnS1l1u1lCnAL LAW, 8lLL Cl 8lCP1S, 8lCP1 1C 8Lu8LSS C8lLvAnCLS, MAnnL8 Cl LxL8ClSL
Cl 1PL CCnS1l1u1lCnAL 8lCP1, SPCuLu nC1 unuL8MlnL u8LlC LACL Anu C8uL8 L8SCnS, CASL
A1 8A8. - AlLhough Lhere ls no quesLlon LhaL peLlLloner can exerclse Lhelr consLlLuLlonal rlghL Lo redress
Lhelr grlevances wlLh respondenL Lungsod Corp., Lhe manner by whlch Lhls consLlLuLlonal rlghL ls Lo be
exerclsed should noL undermlne publlc peace and order nor should lL vlolaLe Lhe legal rlghLs of oLher
persons. ArLlcle 21 of Lhe Clvll Code provldes LhaL any person who wllfully causes loss or ln[ury Lo
anoLher ln a manner LhaL ls conLrary Lo morals, good cusLoms or publlc pollcy shall compensaLe Lhe
laLLer for Lhe damage. 1he provlslon covers a slLuaLlon where a person has a legal rlghL whlch was
vlolaLed by anoLher ln a manner conLrary Lo morals, good cusLoms or publlc pollcy. lL presupposes loss
or ln[ury, maLerlal or oLherwlse, whlch one may suffer as a resulL of such vlolaLlon. lL ls clear from Lhe
facLs of Lhls case LhaL peLlLloner formed a barrlcade and forclbly Look over Lhe moLor unlLs and
personnel of Lhe respondenL corporaLlon. 1hls paralyzed Lhe usual acLlvlLles and earnlngs of Lhe laLLer
durlng LhaL span of Len days and vlolaLed Lhe rlghL of respondenL Lungsod Corp. Lo conducL lLs
operaLlons Lhru lLs auLhorlzed offlcers.
4. ClvlL LAW, uAMACLS, nCMlnAL uAMACLS, WPLn AvAlLA8LL, 8uLL. - As Lo Lhe proprleLy of
damages ln favor of respondenL Lungsod Corp., Lhe respondenL appellaLe courL sLaLed: ". . . lL does noL
necessarlly follow LhaL plalnLlff-appellee ls enLlLled Lo acLual damages and aLLorney's fees. Whlle Lhere
may have been allegaLlons from plalnLlff-cooperaLlve showlng LhaL lL dld ln facL suffer some form of
ln[ury . . ., lL ls legally unpreclse Lo order Lhe paymenL of 30,000.00 as acLual damages for lack of
concreLe proof Lherefor. 1here ls, however, no denylng of Lhe acL of usurpaLlon by defendanLs-
appellanLs whlch consLlLuLed an lnvaslon of plalnLlffs'-appellees' properLy rlghL. lor Lhls, nomlnal
damages ln Lhe amounL of 10,000.00 may be granLed (ArLlcle 2221, Clvll Code)." no compelllng reason
exlsLs Lo [usLlfy Lhe reversal of Lhe rullng of Lhe respondenL appellaLe courL ln Lhe case aL bar. ArLlcle
2222 of Lhe Clvll Code sLaLes LhaL Lhe courL may award nomlnal damages ln every obllgaLlon arlslng from
any source enumeraLed ln ArLlcle 1137, or ln every case where any properLy rlghL has been lnvaded.
Conslderlng Lhe clrcumsLances of Lhe case, Lhe respondenL corporaLlon ls enLlLled Lo Lhe award of
nomlnal damages.
u L C l S l C n
MLulALuLA, ! p:
1hls ls a peLlLlon for revlew on cerLlorarl of Lhe declslon of Lhe CourL of Appeals whlch afflrmed wlLh
modlflcaLlon Lhe declslon of Lhe 8eglonal 1rlal CourL awardlng damages ln favor of respondenL Lungsod
Sllangan 1ransporL Servlces Corp., lnc. (Lungsod Corp. for brevlLy). cdrep
1he anLecedenLs facLs of Lhls case are as follows:
"lL appears LhaL a cerLlflcaLe of publlc convenlence Lo operaLe a [eepney servlce was ordered Lo be
lssued ln favor of Lungsod Sllangan Lo ply Lhe Cogeo-Cubao rouLe someLlme ln 1983 on Lhe [usLlflcaLlon
LhaL publlc necesslLy and convenlence wlll besL be served, and ln Lhe absence of exlsLlng auLhorlzed
operaLors on Lhe llne applled for . . .. Cn Lhe oLher hand, defendanL-AssoclaLlon was reglsLered as a non-
sLock, non-proflL organlzaLlon wlLh Lhe SecurlLles and Lxchange Commlsslon on CcLober 30, 1983 . . .
wlLh Lhe maln purpose of represenLlng plalnLlff-appellee `for whaLever conLracL and/or agreemenL lL wlll
have regardlng Lhe ownershlp of unlLs, and Lhe llke, of Lhe members of Lhe AssoclaLlon . . ..'
"erLurbed by plalnLlffs' 8oard 8esoluLlon no. 9 . . . adopLlng a 8andera' SysLem under whlch a member
of Lhe cooperaLlve ls permlLLed Lo queue for passengers aL Lhe dlspuLed paLhway ln exchange for a LlckeL
worLh LwenLy pesos, Lhe proceeds of whlch shall be uLlllzed for ChrlsLmas programs of Lhe drlvers and
oLher beneflLs, and on Lhe sLrengLh of defendanLs' reglsLraLlon as a collecLlve body wlLh Lhe SecurlLles
and Lxchange Commlsslon, defendanLs-appellanLs, led by 8omeo Cllva declded Lo form a human
barrlcade on november 11, 1983 and assumed Lhe dlspaLchlng of passenger [eepneys . . . 1hls
developmenL as lnlLlaLed by defendanLs-appellanLs gave rlse Lo Lhe sulL for damages.
"uefendanLs-AssoclaLlon's Answer conLalned vehemenL denlals Lo Lhe lnslnuaLlon of Lake over and aL
Lhe same Llme ralsed as a defense Lhe clrcumsLance LhaL Lhe organlzaLlon was formed noL Lo compeLe
wlLh plalnLlff-cooperaLlve. lL, however, admlLLed LhaL lL ls noL auLhorlzed Lo LransporL passengers . . ."
(pp. 13-16, 8ollo).
Cn !uly 31, 1989, Lhe Lrlal courL rendered a declslon ln favor of respondenL Lungsod Corp., Lhe
dlsposlLlve porLlon of whlch sLaLes:
"WPL8LlC8L l8CM 1PL lC8LCClnC conslderaLlon, Lhe CourL hereby renders [udgmenL ln favor of Lhe
plalnLlff and agalnsL Lhe defendanLs as follows:
"1. Crderlng defendanLs Lo pay plalnLlff Lhe amounL of 30,000.00 as acLual damages,
"2. Crderlng Lhe defendanLs Lo pay Lhe plalnLlffs Lhe amounL of 10,000.00 as aLLorney's fees.
"SC C8uL8Lu." (p. 39, 8ollo)
noL saLlsfled wlLh Lhe declslon, peLlLloner AssoclaLlon appealed wlLh Lhe CourL of Appeals. Cn May 27,
1991, respondenL appellaLe courL rendered lLs declslon afflrmlng Lhe flndlngs of Lhe Lrlal courL excepL
wlLh regard Lo Lhe award of acLual damages ln Lhe amounL of 30,000.00 and aLLorney's fees ln Lhe
amounL of 10,000.00. 1he CourL of Appeals however, awarded nomlnal damages Lo peLlLloner ln Lhe
amounL of 10,000.00.
Pence, Lhe peLlLlon was flled wlLh Lhe peLlLloner asslgnlng Lhe followlng errors of Lhe appellaLe courL:
"l. 1PL 8LSCnuLn1 CCu81 L88Lu ln ML8LL? MCull?lnC 1PL !uuCMLn1 Cl 1PL 18lAL CCu81
"ll. 1PL 8LSCnuLn1 CCu81 L88Lu ln PCLulnC 1PA1 1PL L1l1lCnL8 uSu8Lu 1PL 8CL81?
8lCP1 Cl 1PL 8lvA1L 8LSCnuLn1.
"lll. Anu 1PL 8LSCnuLn1 CCu81 L88Lu ln uLn?lnC 1PL MC1lCn lC8 8LCCnSluL8A1lCn.
Slnce Lhe asslgned errors are lnLerrelaLed, Lhls CourL shall dlscuss Lhem [olnLly. 1he maln lssue ralsed by
Lhe peLlLloner ls wheLher or noL Lhe peLlLloner usurped Lhe properLy rlghL of Lhe respondenL whlch shall
enLlLle Lhe laLLer Lo Lhe award of nomlnal damages.
eLlLloner conLends LhaL Lhe assoclaLlon was formed noL Lo compeLe wlLh Lhe respondenL corporaLlon ln
Lhe laLLer's operaLlon as a common carrler, LhaL Lhe same was organlzed for Lhe common proLecLlon of
drlvers from abuslve Lrafflc offlcers who exLorL money from Lhem, and for Lhe ellmlnaLlon of Lhe pracLlce
of respondenL corporaLlon of requlrlng [eepney owners Lo execuLe deeds of sale ln favor of Lhe
corporaLlon Lo show LhaL Lhe laLLer ls Lhe owner of Lhe [eeps under lLs cerLlflcaLe of publlc convenlence.
eLlLloner also argues LhaL ln organlzlng Lhe assoclaLlon, Lhe members Lhereof are merely exerclslng
Lhelr freedom or rlghL Lo redress Lhelr grlevances. prLL
We flnd Lhe peLlLlon devold of merlL.
under Lhe ubllc Servlce Law, a cerLlflcaLe of publlc convenlence ls an auLhorlzaLlon lssued by Lhe ubllc
Servlce Commlsslon for Lhe operaLlon of publlc servlces for whlch no franchlse ls requlred by law. ln Lhe
lnsLanL case, a cerLlflcaLe of publlc convenlence was lssued Lo respondenL corporaLlon on !anuary 24,
1983 Lo operaLe a publlc uLlllLy [eepney servlce on Lhe Cogeo-Cubao rouLe. As found by Lhe Lrlal courL,
Lhe cerLlflcaLe was lssued pursuanL Lo a declslon passed by Lhe 8oard of 1ransporLaLlon ln 8C1 Case no.
82-363. LLpr
A cerLlflcaLe of publlc convenlence ls lncluded ln Lhe Lerm "properLy" ln Lhe broad sense of Lhe Lerm.
under Lhe ubllc Servlce Law, a cerLlflcaLe of publlc convenlence can be sold by Lhe holder Lhereof
because lL has conslderable maLerlal value and ls consldered a valuable asseL (8aymundo v. LuneLa
MoLor Co., eL al., 38 hll. 889). AlLhough Lhere ls no doubL LhaL lL ls prlvaLe properLy, lL ls affecLed wlLh a
publlc lnLeresL and musL be submlLLed Lo Lhe conLrol of Lhe governmenL for Lhe common good
(angaslnan 1ransporLaLlon Co. v. SC, 70 hll 221). Pence, lnsofar as Lhe lnLeresL of Lhe SLaLe ls
lnvolved, a cerLlflcaLe of publlc convenlence does noL confer upon Lhe holder any proprleLary rlghL or
lnLeresL or franchlse ln Lhe rouLe covered Lhereby and ln Lhe publlc hlghways (Lugue v. vlllegas, L-22343,
nov. 28, 1969, 30 SC8A 409). Powever, wlLh respecL Lo oLher persons and oLher publlc uLlllLles, a
cerLlflcaLe of publlc convenlence as properLy, whlch represenLs Lhe rlghL and auLhorlLy Lo operaLe lLs
faclllLles for publlc servlce, cannoL be Laken or lnLerfered wlLh wlLhouL due process of law. ApproprlaLe
acLlons may be malnLalned ln courLs by Lhe holder of Lhe cerLlflcaLe agalnsL Lhose who have noL been
auLhorlzed Lo operaLe ln compeLlLlon wlLh Lhe former and Lhose who lnvade Lhe rlghLs whlch Lhe former
has pursuanL Lo Lhe auLhorlLy granLed by Lhe ubllc Servlce Commlsslon (A.L. Ammen 1ransporLaLlon Co.
v. Collngco, 43 hll. 280). cdll
ln Lhe case aL bar, Lhe Lrlal courL found LhaL peLlLloner assoclaLlon forclbly Look over Lhe operaLlon of Lhe
[eepney servlce ln Lhe Cogeo-Cubao rouLe wlLhouL any auLhorlzaLlon from Lhe ubllc Servlce
Commlsslon and ln vlolaLlon of Lhe rlghL of respondenL corporaLlon Lo operaLe lLs servlces ln Lhe sald
rouLe under lLs cerLlflcaLe of publlc convenlence. 1hese were lLs flndlngs whlch were afflrmed by Lhe
appellaLe courL:
"1he CourL from Lhe LesLlmony of plalnLlff's wlLnesses as well as Lhe documenLary evldences presenLed
ls convlnced LhaL Lhe acLlons Laken by defendanL hereln Lhough lL admlLs LhaL lL dld noL have Lhe
auLhorlLy Lo LransporL passengers dld ln facL assume Lhe role as a common carrler engaged ln Lhe
LransporL of passengers wlLhln LhaL span of Len days beglnnlng november 11, 1983 when lL unllaLerally
Look upon lLself Lhe operaLlon and dlspaLchlng of [eepneys aL SL. Mary's SL. 1he presldenL of Lhe
defendanL corporaLlon, 8omeo Cllva hlmself ln hls LesLlmony conflrmed LhaL Lhere was lndeed a
Lakeover of Lhe operaLlons aL SL. Mary's SL. . . ." (p. 36, 8ollo).
1he flndlngs of Lhe Lrlal courL especlally lf afflrmed by Lhe appellaLe courL bear greaL welghL and wlll noL
be dlsLurbed on appeal before Lhls CourL. AlLhough Lhere ls no quesLlon LhaL peLlLloner can exerclse
Lhelr consLlLuLlonal rlghL Lo redress Lhelr grlevances wlLh respondenL Lungsod Corp., Lhe manner by
whlch Lhls consLlLuLlonal rlghL ls Lo be exerclsed should noL undermlne publlc peace and order nor
should lL vlolaLe Lhe legal rlghLs of oLher persons. ArLlcle 21 of Lhe Clvll Code provldes LhaL any person
who wllfully causes loss or ln[ury Lo anoLher ln a manner LhaL ls conLrary Lo morals, good cusLoms or
publlc pollcy shall compensaLe Lhe laLLer for Lhe damage. 1he provlslon covers a slLuaLlon where a
person has a legal rlghL whlch was vlolaLed by anoLher ln a manner conLrary Lo morals, good cusLoms or
publlc pollcy. lL presupposes loss or ln[ury, maLerlal or oLherwlse, whlch one may suffer as a resulL of
such vlolaLlon. lL ls clear from Lhe facLs of Lhls case LhaL peLlLloner formed a barrlcade and forclbly Look
over Lhe moLor unlLs and personnel of Lhe respondenL corporaLlon. 1hls paralyzed Lhe usual acLlvlLles
and earnlngs of Lhe laLLer durlng LhaL span of Len days and vlolaLed Lhe rlghL of respondenL Lungsod
Corp. Lo conducL lLs operaLlons Lhru lLs auLhorlzed offlcers. Cdpr
As Lo Lhe proprleLy of damages ln favor of respondenL Lungsod Corp., Lhe respondenL appellaLe courL
sLaLed:
". . . lL does noL necessarlly follow LhaL plalnLlff-appellee ls enLlLled Lo acLual damages and aLLorney's
fees. Whlle Lhere may have been allegaLlons from plalnLlff-cooperaLlve showlng LhaL lL dld ln facL suffer
some form of ln[ury . . ., lL ls legally unpreclse Lo order Lhe paymenL of 30,000.00 as acLual damages for
lack of concreLe proof Lherefor. 1here ls, however, no denylng of Lhe acL of usurpaLlon by defendanLs-
appellanLs whlch consLlLuLed an lnvaslon of plalnLlffs'-appellees' properLy rlghL. lor Lhls, nomlnal
damages ln Lhe amounL of 10,000.00 may be granLed (ArLlcle 2221, Clvll Code)." (p. 18, 8ollo).
no compelllng reason exlsLs Lo [usLlfy Lhe reversal of Lhe rullng of Lhe respondenL appellaLe courL ln Lhe
case aL bar. ArLlcle 2222 of Lhe Clvll Code sLaLes LhaL Lhe courL may award nomlnal damages ln every
obllgaLlon arlslng from any source enumeraLed ln ArLlcle 1137, or ln every case where any properLy rlghL
has been lnvaded. Conslderlng Lhe clrcumsLances of Lhe case, Lhe respondenL corporaLlon ls enLlLled Lo
Lhe award of nomlnal damages.
ACCC8ulnCL?, Lhe peLlLlon ls uLnlLu and Lhe assalled declslon of Lhe respondenL appellaLe courL daLed
May 27, 1991 ls Alll8MLu.
SC C8uL8Lu.
narvasa, C.!., Cruz and Crlno-Aqulno, !!., concur.
8elloslllo, !., Look no parL.


ll8S1 ulvlSlCn
[C.8. no. 113381. uecember 23, 1994.]
klLuSAnC MA?C unC LA8C8 CLn1L8, peLlLloner, vs. PCn. !LSuS 8. CA8ClA, !8., Lhe LAnu
18AnSC81A1lCn l8AnCPlSlnC Anu 8LCuLA1C8? 8CA8u, and Lhe 8CvlnClAL 8uSLS CL8A1C8S
ASSCClA1lCn Cl 1PL PlLllnLS, respondenLs.
u L C l S l C n
kAunAn, ! p:
ubllc uLlllLles are prlvaLely owned and operaLed buslnesses whose servlce are essenLlal Lo Lhe general
publlc. 1hey are enLerprlses whlch speclally caLer Lo Lhe needs of Lhe publlc and conduce Lo Lhelr
comforL and convenlence. As such, publlc uLlllLy servlces are lmpressed wlLh publlc lnLeresL and concern.
1he same ls Lrue wlLh respecL Lo Lhe buslness of common carrler whlch holds such a pecullar relaLlon Lo
Lhe publlc lnLeresL LhaL Lhere ls superlnduced upon lL Lhe rlghL of publlc regulaLlon when prlvaLe
properLles are affecLed wlLh publlc lnLeresL, hence, Lhey cease Lo be [urls prlvaLl only. When, Lherefore,
one devoLes hls properLy Lo a use ln whlch Lhe publlc has an lnLeresL, he, ln effecL granLs Lo Lhe publlc an
lnLeresL ln LhaL use, and musL submlL Lo Lhe conLrol by Lhe publlc for Lhe common good, Lo Lhe exLenL of
Lhe lnLeresL he has Lhus creaLed. 1
An abdlcaLlon of Lhe llcenslng and regulaLory governmenL agencles of Lhelr funcLlons as Lhe lnsLanL
peLlLlon seeks Lo show, ls lndeed lamenLable. noL only ls lL an unsound admlnlsLraLlve pollcy buL lL ls
lnlmlcal Lo publlc LrusL and publlc lnLeresL as well.
1he lnsLanL peLlLlon for cerLlorarl assalls Lhe consLlLuLlonallLy and valldlLy of cerLaln memoranda,
clrculars and/or orders of Lhe ueparLmenL of 1ransporLaLlon and CommunlcaLlons (uC1C) and Lhe Land
1ransporLaLlon lranchlslng and 8egulaLory 8oard L1l88) 2 whlch, among oLhers, (a) auLhorlze provlnclal
bus and [eepney operaLors Lo lncrease or decrease Lhe prescrlbed LransporLaLlon fares wlLhouL
appllcaLlon Lherefor wlLh Lhe L1l88 and wlLhouL hearlng and approval Lhereof by sald agency ln
vlolaLlon of Sec. 16(c) of CommonwealLh AcL no. 146, as amended, oLherwlse known as Lhe ubllc
Servlce AcL, and ln derogaLlon of L1l88's duLy Lo flx and deLermlne [usL and reasonable fares by
delegaLlng LhaL funcLlon Lo bus operaLors, and (b) esLabllsh a presumpLlon of publlc need ln favor of
appllcanLs for cerLlflcaLes of publlc convenlence (CC) and place on Lhe opposlLor Lhe burden of provlng
LhaL Lhere ls no need for Lhe proposed servlce, ln paLenL vlolaLlon noL only of Sec. 16(c) of CA 146, as
amended, buL also of Sec. 20(a) of Lhe same AcL mandaLlng LhaL fares should be "[usL and reasonable." lL
ls, llkewlse, vlolaLlve of Lhe 8ules of CourL whlch places upon each parLy Lhe burden Lo prove hls own
afflrmaLlve allegaLlons. 3 1he offendlng provlslons conLalned ln Lhe quesLloned lssuances polnLed ouL by
peLlLloner, have resulLed ln Lhe lnLroducLlon lnLo our hlghways and Lhoroughfares Lhousands of old and
smoke-belchlng buses, many of whlch are rlghL-hand drlven, and have exposed our consumers Lo Lhe
burden of splrallng cosLs of publlc LransporLaLlon wlLhouL hearlng and due process. cdrep
1he followlng memoranda, clrculars and/or orders are soughL Lo be nulllfled by Lhe lnsLanL peLlLlon, vlz:
(a) uC1C Memorandum Crder 90-393, daLed !une 26, 1990 relaLlve Lo Lhe lmplemenLaLlon of a fare
range scheme for provlnclal bus servlces ln Lhe counLry, (b) uC1C ueparLmenL Crder no. 92-387, daLed
March 30, 1992, deflnlng Lhe pollcy framework on Lhe regulaLlon of LransporL servlces, (c) uC1C
Memorandum daLed CcLober 8, 1992, laylng down rules and procedures Lo lmplemenL ueparLmenL
Crder no. 92-387, (d) L1l88 Memorandum Clrcular no. 92-009, provldlng lmplemenLlng guldellnes on
Lhe uC1C ueparLmenL Crder no. 92-387, and (e) L1l88 Crder daLed March 24, 1994 ln Case no. 94-
3112.
1he relevanL anLecedenLs are as follows:
Cn !une 26, 1990, Lhen SecreLary of uC1C, Cscar M. Crbos, lssued Memorandum Clrcular no. 90-393 Lo
Lhen L1l88 Chalrman, 8emedlos A.S. lernando allowlng provlnclal bus operaLors Lo charge passengers
raLes wlLhln a range of 13 above and 13 below Lhe L1l88 offlclal raLe for a perlod of one (1) year. 1he
LexL of Lhe memorandum order reads ln full:
Cne of Lhe pollcy reforms and measures LhaL ls ln llne wlLh Lhe LhrusLs and Lhe prlorlLles seL ouL ln Lhe
Medlum-1erm hlllpplne uevelopmenL lan (M1u) 1987 - 1992) ls Lhe llberallzaLlon of regulaLlons ln
Lhe LransporL secLor. Along Lhls llne, Lhe CovernmenL lnLends Lo move away gradually from regulaLory
pollcles and make progress Lowards greaLer rellance on free markeL forces.
8ased on several surveys and observaLlons, bus companles are already charglng passenger raLes above
and below Lhe offlclal fare declared by L1l88 on many provlnclal rouLes. lL ls ln Lhls conLexL LhaL some
form of llberallzaLlon on publlc LransporL fares ls Lo be LesLed on a plloL basls.
ln vlew Lhereof, Lhe L1l88 ls hereby dlrecLed Lo lmmedlaLely publlclze a fare range scheme for all
provlnclal bus rouLes ln counLry (excepL Lhose operaLlng wlLhln MeLro Manlla). 1ransporL operaLors shall
be allowed Lo charge passengers wlLhln a range of flfLeen percenL (13) above and flfLeen percenL (13)
below Lhe L1l88 offlclal raLe for a perlod of one year.
Culdellnes and procedures for Lhe sald scheme shall be prepared by L1l88 ln coordlnaLlon wlLh Lhe
uC1C lannlng Servlce.
1he lmplemenLaLlon of Lhe sald fare range scheme shall sLarL on 6 AugusL 1990.
lor compllance. (Lmphasls ours.)
llndlng Lhe lmplemenLaLlon of Lhe fare range scheme "noL legally feaslble," 8emedlos A.S. lernando
submlLLed Lhe followlng memorandum Lo Cscar M. Crbos on !uly 24, 1990, Lo wlL:
WlLh reference Lo uC1C Memorandum Crder no. 90-393 daLed 26 !une 1990 whlch Lhe L1l88 recelved
on 19 !uly 1990, dlrecLlng Lhe 8oard "Lo lmmedlaLely publlclze a fare range scheme for all provlnclal bus
rouLes ln Lhe counLry (excepL Lhose operaLlng wlLhln MeLro Manlla)" LhaL wlll allow operaLors "Lo charge
passengers wlLhln a range of flfLeen percenL (13) above and flfLeen percenL (13) below Lhe L1l88
offlclal raLe for a perlod of one year" Lhe underslgned ls respecLfully adverLlng Lhe SecreLary's aLLenLlon
Lo Lhe followlng for hls conslderaLlon:
1. SecLlon 16 (c) of Lhe ubllc Servlce AcL prescrlbes Lhe followlng for Lhe flxlng and deLermlnaLlon
of raLes -- (a) Lhe raLes Lo be approved should be proposed by publlc servlce operaLors, (b) Lhere should
be a publlcaLlon and noLlce Lo concerned or affecLed parLles ln Lhe LerrlLory affecLed, (c) a publlc hearlng
should be held for Lhe flxlng of Lhe raLes, hence, lmplemenLaLlon of Lhe proposed fare range scheme on
AugusL 6 wlLhouL complylng wlLh Lhe requlremenLs of Lhe ubllc Servlce AcL may noL be legally feaslble.
2. 1o allow bus operaLors ln Lhe counLry Lo charge fares flfLeen (13) above Lhe presenL L1l88
fares ln Lhe wake of Lhe devasLaLlon, deaLh and sufferlng caused by Lhe !uly 16 earLhquake wlll noL be
soclally warranLed and wlll be pollLlcally unsound, mosL llkely publlc crlLlclsm agalnsL Lhe uC1C and Lhe
L1l88 wlll be Lrlggered by Lhe unLlmely moLu proplo lmplemenLaLlon of Lhe proposal by Lhe mere
expedlenL of publlclzlng Lhe fare range scheme wlLhouL calllng a publlc hearlng, whlch scheme many as
early as durlng Lhe SecreLary's predecessor know Lhrough newspaper reporLs and columnlsLs' commenLs
Lo be Aslan uevelopmenL 8ank and World 8ank lnsplred.
3. More Lhan lnduclng a reducLlon ln bus fares by flfLeen percenL (13) Lhe lmplemenLaLlon of Lhe
proposal wlll lnsLead Lrlgger an upward ad[usLmenL ln bus fares by flfLeen percenL (13) aL a Llme when
hundreds of Lhousands of people ln CenLral and norLhern Luzon, parLlcularly ln CenLral angaslnan, La
unlon, 8agulo ClLy, nueva Lcl[a, and Lhe Cagayan valley are sufferlng from Lhe devasLaLlon and havoc
caused by Lhe recenL earLhquake.
4. ln lleu of Lhe sald proposal, Lhe uC1C wlLh lLs agencles lnvolved ln publlc LransporLaLlon can
conslder measures and reforms ln Lhe lndusLry LhaL wlll be soclally upllfLlng, especlally for Lhe people ln
Lhe areas devasLaLed by Lhe recenL earLhquake.
ln vlew of Lhe foregolng conslderaLlons, Lhe underslgned respecLfully suggesLs LhaL Lhe lmplemenLaLlon
of Lhe proposed fare range scheme Lhls year be furLher sLudled and evaluaLed.
Cn uecember 3, 1990, prlvaLe respondenL rovlnclal 8us CperaLors AssoclaLlon of Lhe hlllpplnes, lnc.
(8CA) flled an appllcaLlon for fare raLe lncrease. An across-Lhe-board lncrease of elghL and a half
cenLavos (0.083) per kllomeLer for all Lypes of provlnclal buses wlLh a mlnlmum-maxlmum fare range of
flfLeen (13) percenL over and below Lhe proposed baslc per kllomeLer fare raLe, wlLh Lhe sald
mlnlmum-maxlmum fare range applylng only Lo ordlnary, flrsL class and premlum class buses and a flfLy-
cenLavo (0.30) mlnlmum per kllomeLer fare for alrcon buses, was soughL.
Cn uecember 6, 1990, prlvaLe respondenL 8CA reduced lLs applled proposed fare Lo an across-Lhe-
board lncrease of slx and a half (0.063) cenLavos per kllomeLer for ordlnary buses. 1he decrease was
due Lo Lhe drop ln Lhe expecLed prlce of dlesel. llcd
1he appllcaLlon was opposed by Lhe hlllpplne Consumers loundaLlon, lnc. and erla C. 8auLlsLa alleglng
LhaL Lhe proposed raLes were exorblLanL and unreasonable and LhaL Lhe appllcaLlon conLalned no
allegaLlon on Lhe raLe of reLurn of Lhe proposed lncrease ln raLes.
Cn uecember 14, 1990, publlc respondenL L1l88 rendered a declslon granLlng Lhe fare raLe lncrease ln
accordance wlLh Lhe followlng schedule of fares on a sLralghL compuLaLlon meLhod, vlz:
Au1PC8lZLu lA8LS
LuZCn
Mln. Cl 3 kMS. SuCCLLulnC kM.
8LCuLA8 1.30 0.37
S1uuLn1 1.13 0.28

vlSA?AS/MlnuAnAC
8LCuLA8 1.60 0.373
S1uuLn1 1.20 0.283
ll8S1 CLASS (L8 kM.)
LuZCn 0.383
vlSA?AS/MlnuAnAC 0.393
8LMlL8L CLASS (L8 kM.)
LuZCn 0.393
vlSA?AS/ MlnuAnAC 0.403
Al8CCn (L8 kM.) 0.413. 4
Cn March 30, 1992, Lhen SecreLary of Lhe ueparLmenL of 1ransporLaLlon and CommunlcaLlons eLe
nlcomedes rado lssued ueparLmenL Crder no. 92-387 deflnlng Lhe pollcy framework on Lhe regulaLlon
of LransporL servlces. 1he full LexL of Lhe sald order ls reproduced below ln vlew of Lhe lmporLance of Lhe
provlslons conLalned Lhereln:
WPL8LAS, LxecuLlve Crder no. 123 as amended, deslgnaLes Lhe ueparLmenL of 1ransporLaLlon and
CommunlcaLlons (uC1C) as Lhe prlmary pollcy, plannlng, regulaLlng and lmplemenLlng agency on
LransporLaLlon,
WPL8LAS, Lo achleve Lhe ob[ecLlve of a vlable, efflclenL, and dependable LransporLaLlon sysLem, Lhe
LransporLaLlon regulaLory agencles under or aLLached Lo Lhe uC1C have Lo harmonlze Lhelr declslons
and adopL a common phllosophy and dlrecLlon,
WPL8LAS, Lhe governmenL proposes Lo bulld on Lhe successful llberallzaLlon measures pursued over Lhe
lasL flve years and brlng Lhe LransporL secLor nearer Lo a balanced longer Lerm regulaLory framework,
nCW, 1PL8LlC8L, pursuanL Lo Lhe powers granLed by laws Lo Lhe uC1C, Lhe followlng pollcles and
prlnclples ln Lhe economlc regulaLlon of land, alr, and waLer LransporLaLlon servlces are hereby adopLed:
1. LnLry lnLo and exlL ouL of Lhe lndusLry. lollowlng Lhe ConsLlLuLlonal dlcLum agalnsL monopoly,
no franchlse holder shall be permlLLed Lo malnLaln a monopoly on any rouLe. A mlnlmum of Lwo
franchlse holders shall be permlLLed Lo operaLe on any rouLe.
1he requlremenLs Lo granL a cerLlflcaLe Lo operaLe, or cerLlflcaLe of publlc convenlence, shall be: proof of
llllplno clLlzenshlp, flnanclal capablllLy, publlc need, and sufflclenL lnsurance cover Lo proLecL Lhe rldlng
publlc.
ln deLermlnlng publlc need, Lhe presumpLlon of need for a servlce shall be deemed ln favor of Lhe
appllcanL. 1he burden of provlng LhaL Lhere ls no need for a proposed servlce shall be wlLh Lhe
opposlLor(s).
ln Lhe lnLeresL of provldlng efflclenL publlc LransporL servlces, Lhe use of Lhe 'prlor operaLor' and Lhe
'prlorlLy of flllng' rules shall be dlsconLlnued. 1he rouLe measured capaclLy LesL or oLher slmllar LesLs of
demand for vehlcle/vessel fleeL on any rouLe shall be used only as a gulde ln welghlng Lhe merlLs of each
franchlse appllcaLlon and noL as a llmlL Lo Lhe servlces offered.
Where Lhere are llmlLaLlons ln faclllLles, such as congesLed road space ln urban areas, or aL alrporLs and
porLs, Lhe use of demand managemenL measures ln conformlLy wlLh markeL prlnclples may be
consldered.
1he rlghL of an operaLor Lo leave Lhe lndusLry ls recognlzed as a buslness declslon, sub[ecL only Lo Lhe
flllng of approprlaLe noLlce and followlng a phase-ouL perlod, Lo lnform Lhe publlc and Lo mlnlmlze
dlsrupLlon of servlces.
2. 8aLe and lare SeLLlng. lrelghL raLes shall be freed gradually from governmenL conLrols.
assenger fares shall also be deregulaLed, excepL for Lhe lowesL class of passenger servlce (normally
Lhlrd class passenger LransporL) for whlch Lhe governmenL wlll flx lndlcaLlve or reference fares.
CperaLors of parLlcular servlces may flx Lhelr own fares wlLhln a range 13 above and below Lhe
lndlcaLlve or reference raLe.
Where Lhere ls lack of effecLlve compeLlLlon for servlces, or on speclflc rouLes, or for Lhe LransporL of
parLlcular commodlLles, maxlmum mandaLory frelghL raLes or passenger fares shall be seL Lemporarlly
by Lhe governmenL pendlng acLlons Lo lncrease Lhe level of compeLlLlon.
lor unserved or slngle operaLor rouLes, Lhe governmenL shall conLracL such servlces ln Lhe mosL
advanLageous Lerms Lo Lhe publlc and Lhe governmenL, followlng publlc blds for Lhe servlces. 1he
advlsablllLy of blddlng ouL Lhe servlces or uslng oLher klnds of lncenLlves on such rouLes shall be sLudled
by Lhe governmenL.
3. Speclal lncenLlves and llnanclng for lleeL AcqulslLlon. As a maLLer of pollcy, Lhe governmenL
shall noL engage ln speclal flnanclng and lncenLlve programs, lncludlng dlrecL subsldles for fleeL
acqulslLlon and expanslon. Cnly when Lhe markeL slLuaLlon warranLs governmenL lnLervenLlon shall
programs of Lhls Lype be consldered. LxlsLlng programs shall be phased ouL gradually.
1he Land 1ransporLaLlon lranchlslng and 8egulaLory 8oard, Lhe Clvll AeronauLlcs 8oard, Lhe MarlLlme
lndusLry AuLhorlLy are hereby dlrecLed Lo submlL Lo Lhe offlce of Lhe SecreLary, wlLhln forLy-flve (43)
days of Lhls Crder, Lhe deLalled rules and procedures for Lhe lmplemenLaLlon of Lhe pollcles hereln seL
forLh. ln Lhe formulaLlon of such rules, Lhe concerned agencles shall be gulded by Lhe mosL recenL
sLudles on Lhe sub[ecLs, such as Lhe rovlnclal 8oad assenger 1ransporL SLudy, Lhe Clvll AvlaLlon MasLer
lan, Lhe resldenLlal 1ask lorce on Lhe lnLer-lsland Shlpplng lndusLry, and Lhe lnLer-lsland Llner
Shlpplng 8aLe 8aLlonallzaLlon SLudy.
lor Lhe compllance of all concerned. (Lmphasls ours)
Cn CcLober 8, 1992, publlc respondenL SecreLary of Lhe ueparLmenL of 1ransporLaLlon and
CommunlcaLlons !esus 8. Carcla, !r. lssued a memorandum Lo Lhe AcLlng Chalrman of Lhe L1l88
suggesLlng swlfL acLlon on Lhe adopLlon of rules and procedures Lo lmplemenL above-quoLed
ueparLmenL Crder no. 92-387 LhaL lald down deregulaLlon and oLher llberallzaLlon pollcles for Lhe
LransporL secLor. ALLached Lo Lhe sald memorandum was a revlsed drafL of Lhe requlred rules and
procedures coverlng (l) LnLry lnLo and LxlL CuL of Lhe lndusLry and (ll) 8aLe and lare SeLLlng, wlLh
commenLs and suggesLlons from Lhe World 8ank lncorporaLed Lhereln. Llkewlse, resplendenL from Lhe
sald memorandum ls Lhe sLaLemenL of Lhe uC1C SecreLary LhaL Lhe adopLlon of Lhe rules and
procedures ls a pre-requlslLe Lo Lhe approval of Lhe Lconomlc lnLegraLlon Loan from Lhe World 8ank. 3
Cn lebruary 17, 1993, Lhe L1l88 lssued Memorandum Clrcular no. 92-009 promulgaLlng Lhe guldellnes
for Lhe lmplemenLaLlon of uC1C ueparLmenL Crder no. 92-387. 1he Clrcular provldes, among oLhers,
Lhe followlng challenged porLlons:
xxx xxx xxx
lv. ollcy Culdellnes on Lhe lssuance of CerLlflcaLe of ubllc Convenlence:
1he lssuance of a CerLlflcaLe of ubllc Convenlence ls deLermlned by publlc need. 1he presumpLlon of
publlc need for a servlce shall be deemed ln favor of Lhe appllcanL, whlle burden of provlng LhaL Lhere ls
no need for Lhe proposed servlce shall be Lhe opposlLor's.
xxx xxx xxx
v. 8aLe and lare SeLLlng
1he conLrol ln prlclng shall be llberallzed Lo lnLroduce prlce compeLlLlon complemenLary wlLh Lhe quallLy
of servlce, sub[ecL Lo prlor noLlce and publlc hearlng. lares shall noL be provlslonally auLhorlzed wlLhouL
publlc hearlng.
A. Cn Lhe Ceneral SLrucLure of 8aLes
1. 1he exlsLlng auLhorlzed fare range sysLem of plus or mlnus 13 per cenL for provlnclal buses and
[eepneys shall be wldened Lo 20 and -23 llmlL ln 1994 wlLh Lhe auLhorlzed fare Lo be replaced by an
lndlcaLlve or reference raLe as Lhe basls for Lhe expanded fare range.
2. lare sysLems for alrcon buses are llberallzed Lo cover flrsL class and premler servlces.
xxx xxx xxx
(Lmphasls ours).
SomeLlme ln March, 1994, prlvaLe respondenL 8CA, avalllng lLself of Lhe deregulaLlon pollcy of Lhe
uC1C allowlng provlnclal bus operaLors Lo collecL plus 20 and mlnus 23 of Lhe prescrlbed fare
wlLhouL flrsL havlng flled a peLlLlon for Lhe purpose and wlLhouL Lhe beneflL of a publlc hearlng,
announced a fare lncrease of LwenLy (20) percenL of Lhe exlsLlng fares. Sald lncreased fares were Lo be
made effecLlve on March 16, 1994.
Cn March 16, 1994, peLlLloner kMu flled a peLlLlon before Lhe L1l88 opposlng Lhe upward ad[usLmenL
of bus fares.
Cn March 24, 1994, Lhe L1l88 lssued one of Lhe assalled orders dlsmlsslng Lhe peLlLlon for lack of merlL.
1he dlsposlLlve porLlon reads:
8LMlSLS CCnSluL8Lu, Lhls 8oard afLer conslderlng Lhe argumenLs of Lhe parLles, hereby ulSMlSSLS
lC8 LACk Cl ML8l1 Lhe peLlLlon flled ln Lhe above-enLlLled case. 1hls peLlLlon ln Lhls case was resolved
wlLh dlspaLch aL Lhe requesL of peLlLloner Lo enable lL Lo lmmedlaLely avall of Lhe legal remedles or
opLlons lL ls enLlLled under exlsLlng laws.
SC C8uL8Lu. 6
Pence, Lhe lnsLanL peLlLlon for cerLlorarl wlLh an urgenL prayer for lssuance of a Lemporary resLralnlng
order.
1he CourL, on !une 20, 1994, lssued a Lemporary resLralnlng order en[olnlng, prohlblLlng and prevenLlng
respondenLs from lmplemenLlng Lhe bus fare raLe lncrease as well as Lhe quesLloned orders and
memorandum clrculars. 1hls meanL LhaL provlnclal bus fares were rolled back Lo Lhe levels duly
auLhorlzed by Lhe L1l88 prlor Lo March 16, 1994. A moraLorlum was llkewlse enforced on Lhe lssuance
of franchlses for Lhe operaLlon of buses, [eepneys, and Laxlcabs.
eLlLloner kMu anchors lLs clalm on Lwo (2) grounds. llrsL, Lhe auLhorlLy glven by respondenL L1l88 Lo
provlnclal bus operaLors Lo seL a fare range of plus or mlnus flfLeen (13) percenL, laLer lncreased Lo plus
LwenLy (20) and mlnus LwenLy-flve (-23) percenL, over and above Lhe exlsLlng auLhorlzed fare
wlLhouL havlng Lo flle a peLlLlon for Lhe purpose, ls unconsLlLuLlonal, lnvalld and lllegal. Second, Lhe
esLabllshmenL of a presumpLlon of publlc need ln favor of an appllcanL for a proposed LransporL servlce
wlLhouL havlng Lo prove publlc necesslLy, ls lllegal for belng vlolaLlve of Lhe ubllc Servlce AcL and Lhe
8ules of CourL.
ln lLs CommenL, prlvaLe respondenL 8CA, whlle noL acLually Louchlng upon Lhe lssues ralsed by Lhe
peLlLloner, quesLlons Lhe wlsdom and Lhe manner by whlch Lhe lnsLanL peLlLlon was flled. lL asserLs LhaL
Lhe peLlLloner has no legal sLandlng Lo sue or has no real lnLeresL ln Lhe case aL bench and ln obLalnlng
Lhe rellefs prayed for.
ln Lhelr CommenL flled by Lhe Cfflce of Lhe SollclLor Ceneral, publlc respondenLs uC1C SecreLary !esus 8.
Carcla, !r. and Lhe L1l88 asseveraLe LhaL Lhe peLlLloner does noL have Lhe sLandlng Lo malnLaln Lhe
lnsLanL sulL. 1hey furLher clalm LhaL lL ls wlLhln uC1C and L1l88's auLhorlLy Lo seL a fare range scheme
and esLabllsh a presumpLlon of publlc need ln appllcaLlons for cerLlflcaLes of publlc convenlence.
We flnd Lhe lnsLanL peLlLlon lmpressed wlLh merlL.
AL Lhe ouLseL, Lhe Lhreshold lssue of locus sLandl musL be sLruck. eLlLloner kMu has Lhe sLandlng Lo sue.
1he requlremenL of locus sLandl lnheres from Lhe deflnlLlon of [udlclal power. SecLlon 1 of ArLlcle vlll of
Lhe ConsLlLuLlon provldes:
xxx xxx xxx
!udlclal power lncludes Lhe duLy of Lhe courLs of [usLlce Lo seLLle acLual conLroversles lnvolvlng rlghLs
whlch are legally demandable and enforceable, and Lo deLermlne wheLher or noL Lhere has been a grave
abuse of dlscreLlon amounLlng Lo lack or excess of [urlsdlcLlon on Lhe parL of any branch or
lnsLrumenLallLy of Lhe CovernmenL.
ln Lamb v. hlpps, 7 we ruled LhaL [udlclal power ls Lhe power Lo hear and declde causes pendlng
beLween parLles who have Lhe rlghL Lo sue ln Lhe courLs of law and equlLy. Corollary Lo Lhls provlslon ls
Lhe prlnclple of locus sLandl of a parLy llLlganL. Cne who ls dlrecLly affecLed by and whose lnLeresL ls
lmmedlaLe and subsLanLlal ln Lhe conLroversy has Lhe sLandlng Lo sue. 1he rule Lherefore requlres LhaL a
parLy musL show a personal sLake ln Lhe ouLcome of Lhe case or an ln[ury Lo hlmself LhaL can be
redressed by a favorable declslon so as Lo warranL an lnvocaLlon of Lhe courL's [urlsdlcLlon and Lo [usLlfy
Lhe exerclse of Lhe courL's remedlal powers ln hls behalf. 8
ln Lhe case aL bench, peLlLloner, whose members had suffered and conLlnue Lo suffer grave and
lrreparable ln[ury and damage from Lhe lmplemenLaLlon of Lhe quesLloned memoranda, clrculars and/or
orders, has shown LhaL lL has a clear legal rlghL LhaL was vlolaLed and conLlnues Lo be vlolaLed wlLh Lhe
enforcemenL of Lhe challenged memoranda, clrculars and/or orders. kMu members, who avall of Lhe
use of buses, Lralns and [eepneys everyday, are dlrecLly affecLed by Lhe burdensome cosL of arblLrary
lncrease ln passenger fares. 1hey are parL of Lhe mllllons of commuLers who comprlse Lhe rldlng publlc.
CerLalnly, Lhelr rlghLs musL be proLecLed, noL neglecLed nor lgnored. cdll
Assumlng arguendo LhaL peLlLloner ls noL possessed of Lhe sLandlng Lo sue, Lhls courL ls ready Lo brush
aslde Lhls barren procedural lnflrmlLy and recognlze Lhe legal sLandlng of Lhe peLlLloner ln vlew of Lhe
LranscendenLal lmporLance of Lhe lssues ralsed. And Lhls acL of llberallLy ls noL wlLhouL [udlclal
precedenL. As early as Lhe Lmergency owers Cases, Lhls CourL had exerclsed lLs dlscreLlon and walved
Lhe requlremenL of proper parLy. ln Lhe recenL case of kllosbayan, lnc., eL al. v. 1eoflsLo Culngona, !r., eL
al., 9 we ruled ln Lhe same llnes and enumeraLed some of Lhe cases where Lhe same pollcy was adopLed,
vlz:
. . . A parLy's sLandlng before Lhls CourL ls a procedural LechnlcallLy whlch lL may, ln Lhe exerclse of lLs
dlscreLlon, seL aslde ln vlew of Lhe lmporLance of Lhe lssues ralsed. ln Lhe landmark Lmergency owers
Cases, [C.8. no. L-2044 (AraneLa v. ulnglasan), C.8. no. L-2736 (AraneLa v. Angeles), C.8. no. L-3034
(8odrlguez v. 1esorero de llllplnas), C.8. no. L-3033 (Cuerrero v. Commlssloner of CusLoms), and C.8.
no. L-3036 (8arredo v. Commlsslon on LlecLlons), 84 hll. 368 (1949)], Lhls CourL brushed aslde Lhls
LechnlcallLy because 'Lhe LranscendenLal lmporLance Lo Lhe publlc of Lhese cases demands LhaL Lhey be
seLLled prompLly and deflnlLely, brushlng aslde, lf we musL, LechnlcallLles of procedure. (Avellno vs.
Cuenco, C.8. no. L-2621).' lnsofar as Laxpayers' sulLs are concerned, Lhls CourL had declared LhaL lL 'ls
noL devold of dlscreLlon as Lo wheLher or noL lL should be enLerLalned,' (1an v. Macapagal, 43 SC8A 677,
680 [1972]) or LhaL lL 'en[oys an open dlscreLlon Lo enLerLaln Lhe same or noL.' [Sanldad v. CCMLLLC, 73
SC8A 333 (1976)].
xxx xxx xxx
ln llne wlLh Lhe llberal pollcy of Lhls CourL on locus sLandl, ordlnary Laxpayers, members of Congress, and
even assoclaLlon of planLers, and non-proflL clvlc organlzaLlons were allowed Lo lnlLlaLe and prosecuLe
acLlons before Lhls courL Lo quesLlon Lhe consLlLuLlonallLy or valldlLy of laws, acLs, declslons, rullngs, or
orders of varlous governmenL agencles or lnsLrumenLallLles. Among such cases were Lhose assalllng Lhe
consLlLuLlonallLy of (a) 8.A. no. 3836 lnsofar as lL allows reLlremenL graLulLy and commuLaLlon of
vacaLlon and slck leave Lo SenaLors and 8epresenLaLlves and Lo elecLlve offlclals of boLh Pouses of
Congress (hlllpplne ConsLlLuLlon AssoclaLlon, lnc. v. Clmenez, 13 SC8A 479 [1963]), (b) LxecuLlve Crder
no. 284, lssued by resldenL Corazon C. Aqulno on 23 !uly 1987, whlch allowed members of Lhe cablneL,
Lhelr undersecreLarles, and asslsLanL secreLarles Lo hold oLher governmenL offlces or poslLlons (Clvll
LlberLles unlon v. LxecuLlve SecreLary, 194 SC8A 317 [1991]), (c) Lhe auLomaLlc approprlaLlon for debL
servlce ln Lhe Ceneral ApproprlaLlons AcL (Culngona v. Carague, 196 SC8A 221 [1991], (d) 8.A. no. 7036
on Lhe holdlng of desynchronlzed elecLlons (Csmena v. Commlsslon on LlecLlons, 199 SC8A 730 [1991],
(e) .u. no. 1869 (Lhe charLer of Lhe hlllpplne AmusemenL and Camlng CorporaLlon) on Lhe ground LhaL
lL ls conLrary Lo morals, publlc pollcy, and order (8asco v. hlllpplne Camlng and AmusemenL Corp., 197
SC8A 32 [1991]), and (f) 8.A. no. 6973, esLabllshlng Lhe hlllpplne naLlonal ollce. (Carplo v. LxecuLlve
SecreLary, 206 SC8A 290 [1992]).
CLher cases where we have followed a llberal pollcy regardlng locus sLandl lnclude Lhose aLLacklng Lhe
valldlLy or legallLy of (a) an order allowlng Lhe lmporLaLlon of rlce ln Lhe llghL of Lhe prohlblLlon lmposed
by 8.A. no. 3432 (llollo alay and Corn lanLers AssoclaLlon, lnc. v. lellclano, 13 SC8A 377 [1963], (b)
.u. nos. 991 and 1033 lnsofar as Lhey proposed amendmenLs Lo Lhe ConsLlLuLlon and .u. no. 1031
lnsofar as lL dlrecLed Lhe CCMLLLC Lo supervlse, conLrol, hold, and conducL Lhe referendum-pleblsclLe
on 16 CcLober 1976 (Sanldad v. Commlsslon on LlecLlons, supra), (c) Lhe blddlng for Lhe sale of Lhe 3,179
square meLers of land aL 8oppongl, MlnaLo-ku, 1okyo, !apan (Laurel v. Carcla, 187 SC8A 797 [1990]), (d)
Lhe approval wlLhouL hearlng by Lhe 8oard of lnvesLmenLs of Lhe amended appllcaLlon of Lhe 8aLaan
eLrochemlcal CorporaLlon Lo Lransfer Lhe slLe of lLs planL from 8aLaan Lo 8aLangas and Lhe valldlLy of
such Lransfer and Lhe shlfL of feedsLock from naphLha only Lo naphLha and/or llquefled peLroleum gas
(Carcla v. 8oard of lnvesLmenLs, 177 SC8A 374 [1989], Carcla v. 8oard of lnvesLmenLs, 191 SC8A 288
[1990]), (e) Lhe declslons, orders, rullngs, and resoluLlons of Lhe LxecuLlve SecreLary, SecreLary of
llnance, Commlssloner of lnLernal 8evenue, Commlssloner of CusLoms, and Lhe llscal lncenLlves 8evlew
8oard exempLlng Lhe naLlonal ower CorporaLlon from lndlrecL Lax and duLles (Maceda v. Macaralg, 197
SC8A 771 [1991]), (f) Lhe orders of Lhe Lnergy 8egulaLory 8oard of 3 and 6 uecember 1990 on Lhe
ground LhaL Lhe hearlngs conducLed on Lhe second provlslonal lncrease ln oll prlces dld noL allow Lhe
peLlLloner subsLanLlal cross-examlnaLlon, (Maceda v. Lnergy 8egulaLory 8oard, 199 SC8A 434 [1991]), (g)
LxecuLlve Crder no. 478 whlch levled a speclal duLy of 0.93 per llLer of lmporLed oll producLs (Carcla v.
LxecuLlve SecreLary, 211 SC8A 219 [1992]), (h) resoluLlons of Lhe Commlsslon on LlecLlons concernlng
Lhe apporLlonmenL, by dlsLrlcL, of Lhe number of elecLlve members of Sanggunlans (ue Cula vs.
Commlsslon on LlecLlons, 208 SC8A 420 [1992]), and (l) memorandum orders lssued by a Mayor
affecLlng Lhe Chlef of ollce of asay ClLy (asay Law and Consclence unlon, lnc. v. CuneLa, 101 SC8A 662
[1980]).
ln Lhe 1973 case of Aqulno v. Commlsslon on LlecLlons (62 SC8A 273 [1973]), Lhls CourL, desplLe lLs
unequlvocal rullng LhaL Lhe peLlLloners Lhereln had no personallLy Lo flle Lhe peLlLlon, resolved
neverLheless Lo pass upon Lhe lssues ralsed because of Lhe far-reachlng lmpllcaLlons of Lhe peLlLlon. We
dld no less ln ue Cula v. CCMLLLC (Supra) where, alLhough we declared LhaL ue Cula 'does noL appear
Lo have locus sLandl, a sLandlng ln law, a personal or subsLanLlal lnLeresL,' we brushed aslde Lhe
procedural lnflrmlLy 'conslderlng Lhe lmporLance of Lhe lssue lnvolved, concernlng as lL does Lhe pollLlcal
exerclse of quallfled voLers affecLed by Lhe apporLlonmenL, and peLlLloner alleglng abuse of dlscreLlon
and vlolaLlon of Lhe ConsLlLuLlon by respondenL.'
now on Lhe merlLs of Lhe case.
Cn Lhe fare range scheme.
SecLlon 16 (c) of Lhe ubllc Servlce AcL, as amended, reads:
Sec. 16. roceedlngs of Lhe Commlsslon, upon noLlce and hearlng. - 1he Commlsslon shall have power,
upon proper noLlce and hearlng ln accordance wlLh Lhe rules and provlslons of Lhls AcL, sub[ecL Lo Lhe
llmlLaLlons and excepLlons menLloned and savlng provlslons Lo Lhe conLrary:
xxx xxx xxx
(c) 1o flx and deLermlne lndlvldual or [olnL raLes, Lolls, charges, classlflcaLlons, or schedules Lhereof,
as well as commuLaLlon, mlleage kllomeLrage, and oLher speclal raLes whlch shall be lmposed, observed,
and followed LhereafLer by any publlc servlce: rovlded, 1haL Lhe Commlsslon may, ln lLs dlscreLlon,
approve raLes proposed by publlc servlces provlslonally and wlLhouL necesslLy of any hearlng, buL lL shall
call a hearlng Lhereon wlLhln LhlrLy days LhereafLer, upon publlcaLlon and noLlce Lo Lhe concerns
operaLlng ln Lhe LerrlLory affecLed: rovlded, furLher, 1haL ln case Lhe publlc servlce equlpmenL of an
operaLor ls used prlnclpally or secondarlly for Lhe promoLlon of a prlvaLe buslness, Lhe neL proflLs of sald
prlvaLe buslness shall be consldered ln relaLlon wlLh Lhe publlc servlce of such operaLor for Lhe purpose
of flxlng Lhe raLes. (Lmphasls ours).
xxx xxx xxx
under Lhe foregolng provlslon, Lhe LeglslaLure delegaLed Lo Lhe defuncL ubllc Servlce Commlsslon Lhe
power of flxlng Lhe raLes of publlc servlces. 8espondenL L1l88, Lhe exlsLlng regulaLory body Loday, ls
llkewlse vesLed wlLh Lhe same under LxecuLlve Crder no. 202 daLed !une 19, 1987. SecLlon 3 (c) of Lhe
sald execuLlve order auLhorlzes L1l88 "Lo deLermlne, prescrlbe, approve and perlodlcally revlew and
ad[usL, reasonable fares, raLes and oLher relaLed charges, relaLlve Lo Lhe operaLlon of publlc land
LransporLaLlon servlces provlded by moLorlzed vehlcles."
Such delegaLlon of leglslaLlve power Lo an admlnlsLraLlve agency ls permlLLed ln order Lo adapL Lo Lhe
lncreaslng complexlLy of modern llfe. As sub[ecLs for governmenLal regulaLlon mulLlply, so does Lhe
dlfflculLy of admlnlsLerlng Lhe laws. Pence, speclallzaLlon even ln leglslaLlon has become necessary.
Clven Lhe Lask of deLermlnlng senslLlve and dellcaLe maLLers as rouLe-flxlng and raLe-maklng for Lhe
LransporL secLor, Lhe responslble regulaLory body ls enLrusLed wlLh Lhe power of subordlnaLe leglslaLlon.
WlLh Lhls auLhorlLy, an admlnlsLraLlve body and ln Lhls case, Lhe L1l88, may lmplemenL broad pollcles
lald down ln a sLaLuLe by "fllllng ln" Lhe deLalls whlch Lhe LeglslaLure may nelLher have Llme or
compeLence Lo provlde. Powever, nowhere under Lhe aforesald provlslons of law are Lhe regulaLory
bodles, Lhe SC and L1l88 allke, auLhorlzed Lo delegaLe LhaL power Lo a common carrler, a LransporL
operaLor, or oLher publlc servlce.
ln Lhe case aL bench, Lhe auLhorlLy glven by Lhe L1l88 Lo Lhe provlnclal bus operaLors Lo seL a fare range
over and above Lhe auLhorlzed exlsLlng fare, ls lllegal and lnvalld as lL ls LanLamounL Lo an undue
delegaLlon of leglslaLlve auLhorlLy. oLesLas delegaLa non delegarl poLesL. WhaL has been delegaLed
cannoL be delegaLed. 1hls docLrlne ls based on Lhe eLhlcal prlnclple LhaL such as delegaLed power
consLlLuLes noL only a rlghL buL a duLy Lo be performed by Lhe delegaLe Lhrough Lhe lnsLrumenLallLy of
hls own [udgmenL and noL Lhrough Lhe lnLervenlng mlnd of anoLher. 10 A furLher delegaLlon of such
power would lndeed consLlLuLe a negaLlon of Lhe duLy ln vlolaLlon of Lhe LrusL reposed ln Lhe delegaLe
mandaLed Lo dlscharge lL dlrecLly. 11 1he pollcy of allowlng Lhe provlnclal bus operaLors Lo change and
lncrease Lhelr fares aL wlll would resulL noL only Lo a chaoLlc slLuaLlon buL Lo an anarchlc sLaLe of affalrs.
1hls would leave Lhe rldlng publlc aL Lhe mercy of LransporL operaLors who may lncrease fares every
hour, every day, every monLh or every year, whenever lL pleases Lhem or whenever Lhey deem lL
"necessary" Lo do so. ln anay AuLobus Co. v. hlllpplne 8allway Co., 12 where respondenL hlllpplne
8allway Co. was granLed by Lhe ubllc Servlce Commlsslon Lhe auLhorlLy Lo change lLs frelghL raLes aL
wlll, Lhls CourL caLegorlcally declared LhaL:
ln our oplnlon, Lhe ubllc Servlce Commlsslon was noL auLhorlzed by law Lo delegaLe Lo Lhe hlllpplne
8allway Co. Lhe power of alLerlng lLs frelghL raLes whenever lL should flnd lL necessary Lo do so ln order
Lo meeL Lhe compeLlLlon of road Lrucks and auLobuses, or Lo change lLs frelghL raLes aL wlll, or Lo regard
lLs presenL raLes as maxlmum raLes, and Lo flx lower raLes whenever ln Lhe oplnlon of Lhe hlllpplne
8allway Co. lL would be Lo lLs advanLage Lo do so.
1he mere reclLal of Lhe language of Lhe appllcaLlon of Lhe hlllpplne 8allway Co. ls enough Lo show LhaL
lL ls unLenable. 1he LeglslaLure has delegaLed Lo Lhe ubllc Servlce Commlsslon Lhe power of flxlng Lhe
raLes of publlc servlces, buL lL has noL auLhorlzed Lhe ubllc Servlce Commlsslon Lo delegaLe LhaL power
Lo a common carrler or oLher publlc servlce. 1he raLes of publlc servlces llke Lhe hlllpplne 8allway Co.
have been approved or flxed by Lhe ubllc Servlce Commlsslon, and any change ln such raLes musL be
auLhorlzed or approved by Lhe ubllc Servlce Commlsslon afLer Lhey have been shown Lo be [usL and
reasonable. 1he publlc servlce may, of course, propose new raLes, as Lhe hlllpplne 8allway Co. dld ln
case no. 31827, buL lL cannoL lawfully make sald new raLes effecLlve wlLhouL Lhe approval of Lhe ubllc
Servlce Commlsslon, and Lhe ubllc Servlce Commlsslon lLself cannoL auLhorlze a publlc servlce Lo
enforce new raLes wlLhouL Lhe prlor approval of sald raLes by Lhe commlsslon. 1he commlsslon musL
approve new raLes when Lhey are submlLLed Lo lL, lf Lhe evldence shows Lhem Lo be [usL and reasonable,
oLherwlse lL musL dlsapprove Lhem. Clearly, Lhe commlsslon cannoL deLermlne ln advance wheLher or
noL Lhe new raLes of Lhe hlllpplne 8allway Co. wlll be [usL and reasonable, because lL does noL know
whaL Lhose raLes wlll be.
ln Lhe presenL case Lhe hlllpplne 8allway Co. ln effecL asked for permlsslon Lo change lLs frelghL raLes aL
wlll. lL may change Lhem every day or every hour, whenever lL deems lL necessary Lo do so ln order Lo
meeL compeLlLlon or whenever ln lLs oplnlon lL would be Lo lLs advanLage. Such a procedure would
creaLe a mosL unsaLlsfacLory sLaLe of affalrs and largely defeaL Lhe purposes of Lhe publlc servlce law. 13
(Lmphasls ours).
Cne verlLable consequence of Lhe deregulaLlon of LransporL fares ls a compounded fare. lf LransporL
operaLors wlll be auLhorlzed Lo lmpose and collecL an addlLlonal amounL equlvalenL Lo 20 over and
above Lhe auLhorlzed fare over a perlod of Llme, Lhls wlll unduly pre[udlce a commuLer who wlll be made
Lo pay a fare LhaL has been compuLed ln a manner slmllar Lo Lhose of compounded bank lnLeresL raLes.
lcLure Lhls slLuaLlon. Cn uecember 14, 1990, Lhe L1l88 auLhorlzed provlnclal bus operaLors Lo collecL a
LhlrLy-seven (0.37) cenLavo per kllomeLer fare for ordlnary buses. AL Lhe same Llme, Lhey were allowed
Lo lmpose and collecL a fare range of plus or mlnus 13 over Lhe auLhorlzed raLe. 1hus 0.37 cenLavo
per kllomeLer auLhorlzed fare plus 0.03 cenLavos (whlch ls 13 of 0.37 cenLavo) ls equlvalenL Lo 0.42
cenLavos, Lhe allowed raLe ln 1990. Supposlng Lhe L1l88 granLs anoLher flve (0.03) cenLavo lncrease
per kllomeLer ln 1994, Lhen, Lhe base or reference for compuLaLlon would have Lo be 0.47 cenLavos
(whlch ls 0.42 + 0.03 cenLavos). lf bus operaLors wlll exerclse Lhelr auLhorlLy Lo lmpose an addlLlonal
20 over and above Lhe auLhorlzed fare, Lhen Lhe fare Lo be collecLed shall amounL Lo 0.36 (LhaL ls,
0.47 auLhorlzed L1l88 raLe plus 20 of 0.47 whlch ls 0.29). ln effecL, commuLers wlll be conLlnuously
sub[ecL, noL only Lo a double fare ad[usLmenL buL Lo a compoundlng fare as well. Cn Lhelr parL, LransporL
operaLors shall en[oy a blgger chunk of Lhe ple. Aslde from fare lncrease applled for, Lhey can sLlll collecL
an addlLlonal amounL by vlrLue of Lhe auLhorlzed fare range. MaLhemaLlcally, Lhe slLuaLlon LranslaLes
lnLo Lhe followlng:
?ear * L1l88 lare 8ange lare Lo be
auLhorlzed collecLed
raLe ** per kllomeLer
1990 0.37 13 (0.03) 0.42
1994 0.42 + 0.03 = 0.47 20 (0.09) 0.36
1998 0.36 + 0.03 = 0.61 20 (0.12) 0.73
2002 0.73 + 0.03 = 0.78 20 (0.16) 0.94
Moreover, raLe maklng or raLe flxlng ls noL an easy Lask. lL ls a dellcaLe and senslLlve governmenL
funcLlon LhaL requlres dexLerlLy of [udgmenL and sound dlscreLlon wlLh Lhe seLLled goal of arrlvlng aL a
[usL and reasonable raLe accepLable Lo boLh Lhe publlc uLlllLy and Lhe publlc. Several facLors, ln facL, have
Lo be Laken lnLo conslderaLlon before a balance could be achleved. A raLe should noL be conflscaLory as
would place an operaLor ln a slLuaLlon where he wlll conLlnue Lo operaLe aL a loss. Pence, Lhe raLe
should enable publlc uLlllLles Lo generaLe revenues sufflclenL Lo cover operaLlonal cosLs and provlde
reasonable reLurn on Lhe lnvesLmenLs. Cn Lhe oLher hand, a raLe whlch ls Loo hlgh becomes
dlscrlmlnaLory. lL ls conLrary Lo publlc lnLeresL. A raLe, Lherefore, musL be reasonable and falr and musL
be affordable Lo Lhe end user who wlll uLlllze Lhe servlces.
Clven Lhe complexlLy of Lhe naLure of Lhe funcLlon of raLe-flxlng and lLs far-reachlng effecLs on mllllons
of commuLers, governmenL musL noL rellnqulsh Lhls lmporLanL funcLlon ln favor of Lhose who would
beneflL and proflL from Lhe lndusLry. nelLher should Lhe requlslLe noLlce and hearlng be done away wlLh.
1he people, represenLed by repuLable opposlLors, deserve Lo be glven full opporLunlLy Lo be heard ln
Lhelr opposlLlon Lo any fare lncrease.
1he presenL admlnlsLraLlve procedure, 14 Lo our mlnd, already mlrrors an orderly and saLlsfacLory
arrangemenL for all parLles lnvolved. 1o do away wlLh such a procedure and allow [usL one parLy, an
lnLeresLed parLy aL LhaL, Lo deLermlne whaL Lhe raLe should be wlll undermlne Lhe rlghL of Lhe oLher
parLles Lo due process. 1he purpose of a hearlng ls preclsely Lo deLermlne whaL a [usL and reasonable
raLe ls. 13 ulscardlng such procedural and consLlLuLlonal rlghL ls cerLalnly lnlmlcal Lo our fundamenLal
law and Lo publlc lnLeresL.
Cn Lhe presumpLlon of publlc need.
A cerLlflcaLe of publlc convenlence (CC) ls an auLhorlzaLlon granLed by Lhe L1l88 for Lhe operaLlon of
land LransporLaLlon servlces for publlc use as requlred by law. ursuanL Lo SecLlon 16(a) of Lhe ubllc
Servlce AcL, as amended, Lhe followlng requlremenLs musL be meL before a CC may be granLed, Lo wlL:
(l) Lhe appllcanL musL be a clLlzen of Lhe hlllpplnes, or a corporaLlon or co-parLnershlp, assoclaLlon or
[olnL-sLock company consLlLuLed and organlzed under Lhe laws of Lhe hlllpplnes, aL leasL 60 per cenLum
of lLs sLock or pald-up caplLal musL belong enLlrely Lo clLlzens of Lhe hlllpplnes, (ll) Lhe appllcanL musL
be flnanclally capable of underLaklng Lhe proposed servlce and meeLlng Lhe responslblllLles lncldenL Lo
lLs operaLlon, and (lll) Lhe appllcanL musL prove LhaL Lhe operaLlon of Lhe publlc servlce proposed and
Lhe auLhorlzaLlon Lo do buslness wlll promoLe Lhe publlc lnLeresL ln a proper and sulLable manner. lL ls
undersLood LhaL Lhere musL be proper noLlce and hearlng before Lhe SC can exerclse lLs power Lo lssue
a CC.
Whlle adopLlng ln LoLo Lhe foregolng requlslLes for Lhe lssuance of a CC, L1l88 Memorandum Clrcular
no. 92-009, arL lv, provldes for yeL lncongruous and conLradlcLory pollcy guldellne on Lhe lssuance of a
CC. 1he guldellnes sLaLes:
1he lssuance of a CerLlflcaLe of ubllc Convenlence ls deLermlned by publlc need. 1he presumpLlon of
publlc need for a servlce shall be deemed ln favor of Lhe appllcanL, whlle Lhe burden of provlng LhaL
Lhere ls no need for Lhe proposed servlce shall be Lhe opposlLor's. (Lmphasls ours).
1he above-quoLed provlslon ls enLlrely lncompaLlble and lnconslsLenL wlLh SecLlon 16(c)(lll) of Lhe ubllc
Servlce AcL whlch requlres LhaL before a CC wlll be lssued, Lhe appllcanL musL prove by proper noLlce
and hearlng LhaL Lhe operaLlon of Lhe publlc servlce proposed wlll promoLe publlc lnLeresL ln a proper
and sulLable manner. Cn Lhe conLrary, Lhe pollcy guldellne sLaLes LhaL Lhe presumpLlon of publlc need
for a publlc servlce shall be deemed ln favor of Lhe appllcanL. ln case of confllcL beLween a sLaLuLe and
an admlnlsLraLlve order, Lhe former musL prevall.
8y lLs Lerms, publlc convenlence or necesslLy generally means someLhlng flLLlng or sulLed Lo Lhe publlc
need. 16 As one of Lhe baslc requlremenLs for Lhe granL of a CC, publlc convenlence and necesslLy
exlsLs when Lhe proposed faclllLy or servlce meeLs a reasonable wanL of Lhe publlc and supply a need
whlch Lhe exlsLlng faclllLles do noL adequaLely supply. 1he exlsLence or non-exlsLence of publlc
convenlence and necesslLy ls Lherefore a quesLlon of facL LhaL musL be esLabllshed by evldence, real
and/or LesLlmonlal, emplrlcal daLa, sLaLlsLlcs and such oLher means necessary, ln a publlc hearlng
conducLed for LhaL purpose. 1he ob[ecL and purpose of such procedure, among oLher Lhlngs, ls Lo look
ouL for, and proLecL, Lhe lnLeresLs of boLh Lhe publlc and Lhe exlsLlng LransporL operaLors.
verlly, Lhe power of a regulaLory body Lo lssue a CC ls founded on Lhe condlLlon LhaL afLer full-dress
hearlng and lnvesLlgaLlon, lL shall flnd, as a facL, LhaL Lhe proposed operaLlon ls for Lhe convenlence of
Lhe publlc. 17 8aslc convenlence ls Lhe prlmary conslderaLlon for whlch a CC ls lssued, and LhaL facL
alone musL be conslsLenLly borne ln mlnd. Also, exlsLlng operaLors ls sub[ecL rouLes musL be glven an
opporLunlLy Lo offer proof and oppose Lhe appllcaLlon. 1herefore, an appllcanL musL, aL all Llmes, be
requlred Lo prove hls capaclLy and capablllLy Lo furnlsh Lhe servlce whlch he has underLaken Lo render.
18 And all Lhls wlll be posslble only lf a publlc hearlng were conducLed for LhaL purpose. LL[ur
CLherwlse sLaLed, Lhe esLabllshmenL of publlc need ln favor of an appllcanL reverses well-seLLled and
lnsLlLuLlonallzed [udlclal, quasl-[udlclal and admlnlsLraLlve procedures. lL allows Lhe parLy who lnlLlaLes
Lhe proceedlngs Lo prove, by mere appllcaLlon, hls afflrmaLlve allegaLlons. Moreover, Lhe offendlng
provlslons of Lhe L1l88 memorandum clrcular ln quesLlon would ln effecL amend Lhe 8ules of CourL by
addlng anoLher dlspuLable presumpLlon ln Lhe enumeraLlon of 37 presumpLlons under 8ule 131, SecLlon
3 of Lhe 8ules of CourL. Such usurpaLlon of Lhls CourL's auLhorlLy cannoL be counLenanced as only Lhls
CourL ls mandaLed by law Lo promulgaLe rules concernlng pleadlng, pracLlce and procedure. 19
ueregulaLlon, whlle lL may be ldeal ln cerLaln slLuaLlons, may noL be ldeal aL all ln our counLry glven Lhe
presenL clrcumsLances. Advocacy of llberallzed franchlslng and regulaLory process ls LanLamounL Lo an
abdlcaLlon by Lhe governmenL of lLs lnherenL rlghL Lo exerclse pollce power, LhaL ls, Lhe rlghL of
governmenL Lo regulaLe publlc uLlllLles for proLecLlon of Lhe publlc and Lhe uLlllLles Lhemselves.
Whlle we recognlze Lhe auLhorlLy of Lhe uC1C and Lhe L1l88 Lo lssue admlnlsLraLlve orders Lo regulaLe
Lhe LransporL secLor, we flnd LhaL Lhey commlLLed grave abuse of dlscreLlon ln lssulng uC1C ueparLmenL
Crder no. 92-387 deflnlng Lhe pollcy framework on Lhe regulaLlon of LransporL servlces and L1l88
Memorandum Clrcular no. 92-009 promulgaLlng Lhe lmplemenLlng guldellnes on uC1C ueparLmenL
Crder no. 92-387, Lhe sald admlnlsLraLlve lssuances belng amendaLory and vlolaLlve of Lhe ubllc Servlce
AcL and Lhe 8ules of CourL. ConsequenLly, we rule LhaL Lhe LwenLy (20) per cenLum fare lncrease
lmposed by respondenL 8CA on March 16, 1994 wlLhouL Lhe beneflL of a peLlLlon and a publlc hearlng
ls null and vold and of no force and effecL. no grave abuse of dlscreLlon however was commlLLed ln Lhe
lssuance of uC1C Memorandum Crder no. 90-393 and uC1C Memorandum daLed CcLober 8, 1992, Lhe
same belng merely lnLernal communlcaLlons beLween admlnlsLraLlve offlcers.
WPL8LlC8L, ln vlew of Lhe foregolng, Lhe lnsLanL peLlLlon ls hereby C8An1Lu and Lhe challenged
admlnlsLraLlve lssuances and orders, namely: uC1C ueparLmenL Crder no. 92-387, L1l88 Memorandum
Clrcular no. 92-009, and Lhe order daLed March 24, 1994 lssued by respondenL L1l88 are hereby
uLCLA8Lu conLrary Lo law and lnvalld lnsofar as Lhey affecL provlslons Lhereln (a) delegaLlng Lo
provlnclal bus and [eepney operaLors Lhe auLhorlLy Lo lncrease or decrease Lhe duly prescrlbed
LransporLaLlon fares, and (b) creaLlng a presumpLlon of publlc need for a servlce ln favor of Lhe appllcanL
for a cerLlflcaLe of publlc convenlence and placlng Lhe burden of provlng LhaL Lhere ls no need for Lhe
proposed servlce Lo Lhe opposlLor. LexLlb
1he 1emporary 8esLralnlng Crder lssued on !une 20, 1994 ls hereby MAuL L8MAnLn1 lnsofar as lL
en[olned Lhe bus fare raLe lncrease granLed under Lhe provlslons of Lhe aforemenLloned admlnlsLraLlve
clrculars, memoranda and/or orders declared lnvalld.
no pronouncemenL as Lo cosLs.
SC C8uL8Lu.
adllla, uavlde, !r., 8elloslllo and Culason, !!., concur.
looLnoLes
1. anLranco v. ubllc Servlce Commlsslon, 70 hll. 221.
2. 1he 20Lh cenLury ushered ln Lhe blrLh and growLh of publlc uLlllLy regulaLlon ln Lhe counLry.
AfLer Lhe Amerlcans lnLroduced publlc uLlllLy regulaLlon aL Lhe Lurn of Lhe cenLury, varlous regulaLory
bodles were creaLed. 1hey were Lhe CoasLwlse 8aLe Commlsslon under AcL no. 320 passed by Lhe
hlllpplne Commlsslon on november 17, 1902, Lhe 8oard of 8aLe 8egulaLlon under AcL no. 1779 daLed
CcLober 12, 1907, Lhe 8oard of ubllc uLlllLy Commlsslon under AcL no. 2307 daLed uecember 19, 1913,
and Lhe ubllc uLlllLy Commlsslon under AcL no. 3108 daLed March 19, 1923.
uurlng Lhe CommonwealLh perlod, Lhe naLlonal Assembly passed a more
comprehenslve publlc uLlllLy law. 1hls was CommonwealLh AcL no. 146, as amended or Lhe ubllc
Servlce AcL, as amended. Sald law creaLed a regulaLory and franchlslng body known as Lhe ubllc Servlce
Commlsslon (SC). 1he Commlsslon (SC) exlsLed for LhlrLy-slx (36) years from 1936 up Lo 1972.
Cn SepLember 24, 1972, resldenLlal uecree no. 1 was lssued and declared "parL of Lhe
law of Lhe land." 1he same effecLed a ma[or revamp of Lhe execuLlve deparLmenL. under ArLlcle lll, arL
x of .u. no. 1, Lhe ubllc Servlce Commlsslon (SC) was abollshed and replaced by Lhree (3) speclallzed
regulaLory boards. 1hese were Lhe 8oard of 1ransporLaLlon, Lhe 8oard of CommunlcaLlons, and Lhe
8oard of ower and WaLerworks.
1he 8oard of 1ransporLaLlon (8C1) lasLed for LhlrLeen (13) years. Cn March 20, 1983,
LxecuLlve Crder no. 1011 was lssued abollshlng Lhe 8oard of 1ransporLaLlon and Lhe 8ureau of Land
1ransporLaLlon. 1helr powers and funcLlons were merged lnLo Lhe Land 1ransporLaLlon Commlsslon
(L1C).
1wo (2) years laLer, L1C was abollshed by LxecuLlve Crder nos. 123 daLed !anuary 30,
1987 and 123-A daLed Aprll 13, 1987 whlch reorganlzed Lhe ueparLmenL of 1ransporLaLlon and
CommunlcaLlons. Cn !une 19, 1987, Lhe Land 1ransporLaLlon lranchlslng and 8egulaLory 8oard (L1l88)
was creaLed by LxecuLlve Crder no. 202. 1he L1l88, successor of L1C, ls Lhe exlsLlng franchlslng and
regulaLory body for overland LransporLaLlon Loday.
3. Sec. 1, 8ule 131, 8ules of CourL.
4. ueclslon of L1l88 ln Case no. 90-4794, p. 4, 8ollo, p. 39.
3. 8ollo, p. 42.
6. Crder of L1l88, p. 4, 8ollo, p. 33.
7. 22 hll. 436 [1912].
8. WarLh v. Seldln, 422 u.S. 490, 498-499, 43 L. Ld. 2d 343, 93 S. CL. 2197 [1973], Cuzman v.
Marrero, 180 u.S. 81, 43 L. Ld. 436, 21 S.CL. 293 [1901], McMlcken v. unlLed SLaLes, 97 u.S. 204, 24 L.Ld.
947 [1978], Sllver SLar ClLlzens' CommlLLee v. Crlando lla. 194 So. 2d 681 [1967], ln 8e kenlson's
Cuardlanshlp, 72 S.u. 180, 31 n.W. 2d 326 [1948].
9. C.8. no. 113373, May 3, 1994.
10. unlLed SLaLes v. 8arrlas, 11 hll. 327, 330 [1908], eople v. vera, 63 hll. 36, 113 [1937].
11. Cruz, hlllpplne ollLlcal Law, 1991 LdlLlon, p. 84.
12. 37 hll. 872 [1933].
13. ld., aL pp. 878-879.
* Assume a four-year lnLerval ln fare ad[usLmenL as a consLanL.
** Assume furLher a consLanL 0.03 cenLavo lncrease ln fare every four (4) years.
14. SLeps ln Lhe llllng of eLlLlon for 8aLe lncrease:
A eLlLlon lor Ad[usLmenL of 8aLe (elLher for lncrease or reducLlon) may be flled only by
a granLee of a CC. 1herefore, when franchlse/CC granLees or exlsLlng publlc uLlllLy operaLors foresee
LhaL Lhe new oll prlce lncrease, wage hlkes or slmllar facLors would LhreaLen Lhe survlval and vlablllLy of
Lhelr operaLlons, Lhey may Lhen lnsLlLuLe a peLlLlon for lncrease of raLes. 1hus ln Lhe case of publlc
uLlllLles engaged ln LransporLaLlon, LelecommunlcaLlons, energy supply (elecLrlclLy) and oLhers, Lhe
followlng sLeps are usually underLaken ln seeklng, parLlcularly upwards ad[usLmenLs of raLes:
1. llllng of formal eLlLlon for 8aLe lncrease. - 1hls peLlLlon alleges Lhereln among
oLhers, Lhe presenL schedule of raLes, Lhe reasons why Lhe same ls no longer economlcally vlable and
Lhe revlsed schedule of raLes lL proposes Lo charge. ALLached Lo sald eLlLlon for flnanclal sLaLemenLs,
pro[ecLlons/sLudles showlng posslble losses from oll prlce or wage hlkes under Lhe old or exlsLlng raLes
and Lhe posslble margln of proflL (whlch should be wlLhln Lhe 12 allowable llmlL) under Lhe new or
revlsed raLes,
2. AfLer Lhe peLlLlon ls dockeLed, a daLe ls seL for hearlng for whlch a noLlce of
Pearlng ls lssued, Lhe same Lo be publlshed ln a newspaper of general clrculaLlon ln Lhe area,
3. 1he parLles affecLed by Lhe appllcaLlon are requlred Lo be furnlshed coples of
Lhe peLlLlon and Lhe noLlce of Pearlng usually by reglsLered mall wlLh reLurn card. 1he SollclLor Ceneral
ls also separaLely noLlfled slnce he ls Lhe counsel for Lhe CovernmenL,
4. 1he 1echnlcal SLaff of Lhe regulaLory body concerned evaluaLes Lhe
documenLary evldence aLLached Lo Lhe peLlLlon Lo deLermlne wheLher Lhere ls warranL Lo Lhe requesL
for raLe revlslon,
3. 1he Commlsslon on AudlL (CCA) ls requesLed by Lhe regulaLory body Lo conducL
an audlL and examlnaLlon of Lhe books of accounLs and oLher perLlnenL flnanclal records of Lhe publlc
uLlllLy operaLor seeklng Lhe raLe revlslon lf Lhe appllcanLs/peLlLloners are numerous, a represenLaLlve
number for examlnaLlon purposes would do, and Lhe perlod of operaLlon covered usually ranges from
slx (6) monLhs Lo one (1) year,
CCA audlL reporL ls compared wlLh LhaL of Lhe regulaLory body. Coples of Lhese audlL
reporLs are furnlshed Lhe peLlLloners and opposlLors may submlL Lhelr excepLlons or ob[ecLlons LhereLo.
6. 1hen hearlngs are conducLed. 1he peLlLloners may presenL accounLanLs or such
raLe experLs Lo explaln Lhelr plea for raLe revlslon. CpposlLors are also allowed Lo rebuL such evldence-
ln-chlef wlLh Lhelr own wlLnesses and documenLs. AfLer Lhe hearlngs, Lhe correspondlng resoluLlon ls
lssued.
1o obvlaLe proLracLed hearlngs, Lhe parLles may agree Lo submlL Lhelr respecLlve
oslLlon apers ln lleu of oral LesLlmonles.
13. ?nchausLl SLeamshlp Co. v. ubllc uLlllLy Commlssloner, 42 hll. 621, 631 [1922]).
16. 8lack's Law ulcLlonary, 3Lh LdlLlon, p. 1103.
17. 8aLangas 1ransporLaLlon Co. v. Crlanes, 32 hll. 433 [1928]).
18. Manlla LlecLrlc Co. v. asay 1ransporLaLlon Co., 37 hll. 823 [1932], lease see also 8aymundo
1ransporLaLlon v. erez, 36 hll. 274 [1931], ampanga 8us Co. v. Lnrlquez, 38 C.C. 374, uela 8osa v.
Corpus, 38 C.C. 2069.
19. ArLlcle vlll, SecLlon 6, 1987 ConsLlLuLlon.


Ln 8AnC
[C.8. no. 114222. Aprll 6, 1993.]
l8AnClSCC S. 1A1Au, !CPn P. CSMLRA and 8CuCLlC C. 8lAZCn, peLlLloners, vs. PCn. !LSuS 8.
CA8ClA, !8., ln hls capaclLy as Lhe SecreLary of Lhe ueparLmenL of 1ransporLaLlon and CommunlcaLlons,
and LuSA L81 CC8C8A1lCn, L1u., respondenLs.
8rlllanLes (nachura) navarro !umamll Arcllla & 8ello Law Cfflces for peLlLloners.
1he SollclLor Ceneral for respondenLs.
S?LLA8uS
1. 8LMLulAL LAW, ClvlL 8CCLuu8L, 1AxA?L8'S Sul1S, 8LvAlLlnC uCC18lnL. - 1he prevalllng
docLrlnes ln Laxpayer's sulLs are Lo allow Laxpayers Lo quesLlon conLracLs enLered lnLo by Lhe naLlonal
governmenL or governmenL-owned or conLrolled corporaLlons allegedly ln conLravenLlon of Lhe law
(kllosbayan, lnc. v. Culngona, 232 SC8A 110 [1994]) and Lo dlsallow Lhe same when only munlclpal
conLracLs are lnvolved (8ugnay ConsLrucLlon and uevelopmenL CorporaLlon v. Laron, 176 SC8A 240
[1989]). lor as long as Lhe rullng ln kllosbayan on locus sLandl ls noL reversed, we have no cholce buL Lo
follow lL and uphold Lhe legal sLandlng of peLlLloners as Laxpayers Lo lnsLlLuLe Lhe presenL acLlon.
2. CLl1lCAL LAW, nA1lCnAL LCCnCM? Anu A18lMCn?, u8LlC u1lLl1?, lAClLl1lLS 1C
CL8A1L A u8LlC u1lLl1? uC nC1 nLLu A l8AnCPlSL. - rlvaLe respondenL LuSA L81 CorporaLlon,
LLd. Lo whom Lhe conLracL Lo consLrucL Lhe LuSA L81 lll was awarded by publlc respondenL SecreLary of
uC1C, ls admlLLedly a forelgn corporaLlon "duly lncorporaLed and exlsLlng under Lhe laws of Pongkong."
Powever, Lhere ls also no dlspuLe LhaL once Lhe LuSA L81 lll ls consLrucLed, prlvaLe respondenL, as
lessor, wlll Lurn lL over Lo uC1C, as lessee, for Lhe laLLer Lo operaLe Lhe sysLem and pay renLals for sald
use. WhaL prlvaLe respondenL owns are Lhe rall Lracks, rolllng sLocks llke Lhe coaches, rall sLaLlons,
Lermlnals and Lhe power planL, noL a publlc uLlllLy. Whlle a franchlse ls needed Lo operaLe Lhese faclllLles
Lo serve Lhe publlc, Lhey do noL by Lhemselves consLlLuLe a publlc uLlllLy. WhaL consLlLuLes a publlc uLlllLy
ls noL Lhelr ownershlp buL Lhelr use Lo serve Lhe publlc (llollo lce & Cold SLorage Co. v. ubllc Servlce
8oard, 44 hll. 331, 337-338 [1923]). 1he ConsLlLuLlon, ln no uncerLaln Lerms, requlres a franchlse for
Lhe operaLlon of a publlc uLlllLy. Powever, lL does noL requlre a franchlse before one can own Lhe
faclllLles needed Lo operaLe a publlc uLlllLy so long as lL does noL operaLe Lhem Lo serve Lhe publlc.
3. lu., lu., lu., lu., CL8A1lCn Cl u8LlC u1lLl1? Anu CWnL8SPl Cl lAClLl1lLS,
ulS1lnCulSPLu. - ln law, Lhere ls a clear dlsLlncLlon beLween Lhe "operaLlon" of a publlc uLlllLy and Lhe
ownershlp of Lhe faclllLles and equlpmenL used Lo serve Lhe publlc. Cwnershlp ls deflned as a relaLlon ln
law by vlrLue of whlch a Lhlng perLalnlng Lo one person ls compleLely sub[ecLed Lo hls wlll ln everyLhlng
noL prohlblLed by law or Lhe concurrence wlLh Lhe rlghLs of anoLher (1olenLlno, ll CommenLarles and
!urlsprudence on Lhe Clvll Code of Lhe hlllpplnes 43 [1992]). 1he exerclse of Lhe rlghLs encompassed ln
ownershlp ls llmlLed by law so LhaL a properLy cannoL be operaLed and used Lo serve Lhe publlc as a
publlc uLlllLy unless Lhe operaLor has a franchlse. 1he operaLlon of a rall sysLem as a publlc uLlllLy
lncludes Lhe LransporLaLlon of passengers from one polnL Lo anoLher polnL, Lhelr loadlng and unloadlng
aL deslgnaLed places and Lhe movemenL of Lhe Lralns aL pre-scheduled Llmes. 1he rlghL Lo operaLe a
publlc uLlllLy may exlsL lndependenLly and separaLely from Lhe ownershlp of Lhe faclllLles Lhereof. Cne
can own sald faclllLles wlLhouL operaLlng Lhem as a publlc uLlllLy, or conversely, one may operaLe a
publlc uLlllLy wlLhouL ownlng Lhe faclllLles used Lo serve Lhe publlc. 1he devoLlon of properLy Lo serve Lhe
publlc may be done by Lhe owner or by Lhe person ln conLrol Lhereof who may noL necessarlly be Lhe
owner Lhereof. 1hls dlchoLomy beLween Lhe operaLlon of a publlc uLlllLy and Lhe ownershlp of Lhe
faclllLles used Lo serve Lhe publlc can be very well appreclaLed when we conslder Lhe LransporLaLlon
lndusLry. Lnfranchlsed alrllne and shlpplng companles may lease Lhelr alrcrafL and vessels lnsLead of
ownlng Lhem Lhemselves.
4. lu., lu., lu., lu., 8LCulSl1L llLllnC nA1lCnALl1? uL1L8MlnLu WPLn Ln1l1? ALlLS lC8
l8AnCPlSL. - rlvaLe respondenL wlll noL run Lhe llghL rall vehlcles and collecL fees from Lhe rldlng
publlc. lL wlll have no deallngs wlLh Lhe publlc and Lhe publlc wlll have no rlghL Lo demand any servlces
from lL. lndeed, a mere owner and lessor of Lhe faclllLles used by a publlc uLlllLy ls noL a publlc uLlllLy.
nelLher are owners of Lank, refrlgeraLor, wlne, poulLry and beer cars who supply cars under conLracL Lo
rallroad companles consldered as publlc uLlllLles. Lven Lhe mere formaLlon of a publlc uLlllLy corporaLlon
does noL lpso facLo characLerlze Lhe corporaLlon as one operaLlng a publlc uLlllLy. 1he momenL for
deLermlnlng Lhe requlslLe llllplno naLlonallLy ls when Lhe enLlLy applles for a franchlse, cerLlflcaLe or any
oLher form of auLhorlzaLlon for LhaL purpose.
3. lu., lu., lu., 8ulLu-CL8A1L-Anu-18AnSlL8 (8C1) SCPLML, 8ulLu-Anu-18AnSlL8 (81)
SCPLML, uLllnLu Anu ulS1lnCulSPLu. - 1he 8C1 scheme ls expressly deflned as one where Lhe
conLracLor underLakes Lhe consLrucLlon and flnanclng of an lnfrasLrucLure faclllLy, and operaLes and
malnLalns Lhe same. 1he conLracLor operaLes Lhe faclllLy for a flxed perlod durlng whlch lL may recover
lLs expenses and lnvesLmenL ln Lhe pro[ecL plus a reasonable raLe of reLurn Lhereon. AfLer Lhe explraLlon
of Lhe agreed Lerm, Lhe conLracLor Lransfers Lhe ownershlp and operaLlon of Lhe pro[ecL Lo Lhe
governmenL. ln Lhe 81 scheme, Lhe conLracLor underLakes Lhe consLrucLlon and flnanclng of Lhe faclllLy,
buL afLer compleLlon, Lhe ownershlp and operaLlon Lhereof are Lurned over Lo Lhe governmenL. 1he
governmenL, ln Lurn, shall pay Lhe conLracLor lLs LoLal lnvesLmenL on Lhe pro[ecL ln addlLlon Lo a
reasonable raLe of reLurn. lf paymenL ls Lo be effecLed Lhrough amorLlzaLlon paymenLs by Lhe
governmenL lnfrasLrucLure agency or local governmenL unlL concerned, Lhls shall be made ln accordance
wlLh a scheme proposed ln Lhe bld and lncorporaLed ln Lhe conLracL (8.A. no. 6937, Sec. 6). Lmphasls
musL be made LhaL under Lhe 8C1 scheme, Lhe owner of Lhe lnfrasLrucLure faclllLy musL comply wlLh Lhe
clLlzenshlp requlremenL of Lhe ConsLlLuLlon on Lhe operaLlon of a publlc uLlllLy. no such a requlremenL ls
lmposed ln Lhe 81 scheme.
6. lu., lu., lu., 8ulLu-LLASL-Anu-18AnSlL8 (8L1) SCPLML Anu 8LLA1Lu AC8LLMLn1S, nC1
8A88Lu ln 1PL 8C1 LAW (8A 6937). - 1here ls no menLlon ln Lhe 8C1 Law LhaL Lhe 8C1 and 81
schemes bar any oLher arrangemenL for Lhe paymenL by Lhe governmenL of Lhe pro[ecL cosL. 1he law
musL noL be read ln such a way as Lo rule ouL or unduly resLrlcL any varlaLlon wlLhln Lhe conLexL of Lhe
Lwo schemes. lndeed, no sLaLuLe can be enacLed Lo anLlclpaLe and provlde all Lhe flne polnLs and deLalls
for Lhe mulLlfarlous and complex slLuaLlons LhaL may be encounLered ln enforclng Lhe law. 1he 8L1
scheme ln Lhe challenged agreemenLs ls buL a varlaLlon of Lhe 81 scheme under Lhe law. As a maLLer of
facL, Lhe burden on Lhe governmenL ln ralslng funds Lo pay for Lhe pro[ecL ls made llghLer by allowlng lL
Lo amorLlze paymenLs ouL of Lhe lncome from Lhe operaLlon of Lhe L81 SysLem. ln form and subsLance,
Lhe challenged agreemenLs provlde LhaL renLals are Lo be pald on a monLhly basls accordlng Lo a
schedule of raLes Lhrough and under Lhe Lerms of a conflrmed lrrevocable 8evolvlng LeLLer of CredlL. AL
Lhe end of 23 years and when full paymenL shall have been made Lo and recelved by prlvaLe respondenL,
lL shall Lransfer Lo uC1C, free from any llen or encumbrances, all lLs LlLle Lo, rlghLs and lnLeresL ln, Lhe
pro[ecL for only u.S. $1.00 (8evlsed and 8esLaLed AgreemenL). A lease ls a conLracL where one of Lhe
parLles blnds hlmself Lo glve Lo anoLher Lhe en[oymenL or use of a Lhlng for cerLaln prlce and for a perlod
whlch may be deflnlLe or lndeflnlLe buL noL longer Lhan 99 years (Clvll Code of Lhe hlllpplnes, ArL.
1643). 1here ls no Lransfer of ownershlp aL Lhe end of Lhe lease perlod. 8uL lf Lhe parLles sLlpulaLe LhaL
LlLle Lo Lhe leased premlses shall be Lransferred Lo Lhe lessee aL Lhe end of Lhe lease perlod upon Lhe
paymenL of an agreed sum, Lhe lease becomes a lease-purchase agreemenL. lurLhermore, lL ls of no
slgnlflcance LhaL Lhe renLs shall be pald ln unlLed SLaLes currency, noL hlllpplne pesos. 1he LuSA L81 lll
ro[ecL ls a hlgh prlorlLy pro[ecL cerLlfled by Congress and Lhe naLlonal Lconomlc and uevelopmenL
AuLhorlLy as falllng under Lhe lnvesLmenL rlorlLles lan of CovernmenL. lL ls, Lherefore, ouLslde Lhe
appllcaLlon of Lhe unlform Currency AcL (8.A. no. 329).
7. lu., lu., lu., AWA8u Cl CCnS18uC1lCn MA? 8L MAuL 8? nLCC1lA1lCn. - 1he facL LhaL Lhe
conLracL for Lhe consLrucLlon of Lhe LuSA L81 lll was awarded Lhrough negoLlaLlon and before
congresslonal approval on !anuary 22 and 23, 1992 of Lhe LlsL of naLlonal ro[ecLs Lo be underLaken by
Lhe prlvaLe secLor pursuanL Lo Lhe 8C1 Law does noL sufflce Lo lnvalldaLe Lhe award. SubsequenL
congresslonal approval of Lhe llsL lncludlng "rall-based pro[ecLs packaged wlLh commerclal developmenL
opporLunlLles" under whlch Lhe LuSA L81 lll pro[ecL falls, amounLs Lo a raLlflcaLlon of Lhe prlor award of
Lhe LuSA L81 lll conLracL under Lhe 8C1 Law. lndeed, where Lhere ls a lack of quallfled bldders or
conLracLors, Lhe award of governmenL lnfrasLrucLure conLracLs may be made by negoLlaLlon. resldenLlal
uecree no. 1394 ls Lhe general law on governmenL lnfrasLrucLure conLracLs whlle Lhe 8C1 Law governs
parLlcular arrangemenLs or schemes almed aL encouraglng prlvaLe secLor parLlclpaLlon ln governmenL
lnfrasLrucLure pro[ecLs. 1he Lwo laws are noL lnconslsLenL wlLh each oLher buL are ln parl maLerla and
should be read LogeLher accordlngly.
8. lu., lu., 8A 7718, CuALlllLu ALlCAn1 MA? Ln1L8 ln1C An? SCPLML lnCLuulnC A 8L1
A88AnCLMLn1. - 8epubllc AcL no. 7718 recognlzes and deflnes a 8L1 scheme ln SecLlon 2 Lhereof.
SecLlon 3-A of Lhe law, expressly allows dlrecL negoLlaLlon of conLracLs. lrom Lhe law lLself, once an
appllcanL has prequallfled, lL can enLer lnLo any of Lhe schemes enumeraLed ln SecLlon 2, 8A 7718,
lncludlng a 8L1 arrangemenL, enumeraLed and deflned Lhereln (Sec. 3). 8epubllc AcL no. 7718 ls a
curaLlve sLaLuLe. lL ls lnLended Lo provlde flnanclal lncenLlves and "a cllmaLe of mlnlmum governmenL
regulaLlons and procedures and speclflc governmenL underLaklngs ln supporL of Lhe prlvaLe secLor" (Sec.
1). A curaLlve sLaLuLe makes valld LhaL whlch before enacLmenL of Lhe sLaLuLe was lnvalld. 1hus,
whaLever doubLs and alleged procedural lapses prlvaLe respondenL and uC1C may have engendered and
commlLLed ln enLerlng lnLo Lhe quesLloned conLracLs, Lhese have now been cured by 8.A. no. 7718.
9. lu., lu., lu., AC8LLMLn1S 8L1WLLn 8lvA1L 8LSCnuLn1 Anu uC1C, 8LSuMLu WLLL-
1AkLn Anu 1C 1PL AuvAn1ACL Cl 8C1P A81lLS, CCvL8nMLn1 ClllClALS CCnCL8nLu, 8LSuMLu
1C PAvL L8lC8MLu 1PLl8 lunC1lCnS 8LCuLA8L?. - 1he deLermlnaLlon by Lhe proper
admlnlsLraLlve agencles and offlclals who have acqulred experLlse, speclallzed skllls and knowledge ln
Lhe performance of Lhelr funcLlons should be accorded respecL, absenL any showlng of grave abuse of
dlscreLlon. CovernmenL offlclals are presumed Lo perform Lhelr funcLlons wlLh regularlLy and sLrong
evldence ls necessary Lo rebuL Lhls presumpLlon. eLlLloners have noL presenLed evldence on Lhe
reasonable renLals Lo be pald by Lhe parLles Lo each oLher. 1he maLLer of valuaLlon ls an esoLerlc fleld
whlch ls beLLer lefL Lo Lhe experLs and whlch Lhls CourL ls noL eager Lo underLake. 1haL Lhe granLee of a
governmenL conLracL wlll proflL Lherefrom and Lo LhaL exLenL Lhe governmenL ls deprlved of Lhe proflLs lf
lL engages ln Lhe buslness lLself, ls noL worLhy of belng ralsed as an lssue. ln all cases where a parLy
enLers lnLo a conLracL wlLh Lhe governmenL, he does so, noL ouL of charlLy and noL Lo lose money, buL Lo
galn pecunlarlly. ueflnlLely, Lhe agreemenLs ln quesLlon have been enLered lnLo by uC1C ln Lhe exerclse
of lLs governmenLal funcLlon. uC1C ls Lhe prlmary pollcy, plannlng, programmlng, regulaLlng and
admlnlsLraLlve enLlLy of Lhe LxecuLlve branch of governmenL ln Lhe promoLlon, developmenL and
regulaLlon of dependable and coordlnaLed neLworks of LransporLaLlon and communlcaLlons sysLems as
well as ln Lhe fasL, safe, efflclenL and rellable posLal, LransporLaLlon and communlcaLlons servlces
(AdmlnlsLraLlve Code of 1987, 8ook lv, 1lLle xv, Sec. 2). lL ls Lhe LxecuLlve deparLmenL, uC1C ln
parLlcular, LhaL has Lhe power, auLhorlLy and Lechnlcal experLlse Lo deLermlne wheLher or noL a speclflc
LransporLaLlon or communlcaLlons pro[ecL ls necessary, vlable and beneflclal Lo Lhe people. 1he
dlscreLlon Lo award a conLracL ls vesLed ln Lhe governmenL agencles enLrusLed wlLh LhaL funcLlon.
MLnuCZA, !., concurrlng:
1. 8LMLulAL LAW, ClvlL 8CCLuu8L, A81lLS, MLM8L8S Cl CCnC8LSS, nC LLCAL S1AnulnC 1C
SuL ll 1PL? ALLLCL nC lnl8lnCLMLn1 Cl 8L8CCA1lvLS AS LLClSLA1C8S. - !. Mendoza holds LhaL
peLlLloners do noL have sLandlng Lo sue. Pe [olns Lo dlsmlss Lhe peLlLlon ln Lhls case. eLlLloners do noL
have Lhe rlghL Lo sue, wheLher as leglslaLors, Laxpayers or clLlzens. As members of Congress, because
Lhey allege no lnfrlngemenL of prerogaLlves as leglslaLors. As Laxpayers because peLlLloners allege
nelLher an unconsLlLuLlonal exerclse of Lhe Laxlng or spendlng powers of Congress (ArL. vl, 24-23 and 29)
nor an lllegal dlsbursemenL of publlc money. As Lhls CourL polnLed ouL ln 8ugnay ConsL. and uev. Corp.
v. Laron, 176 SC8A 240, 231-2-(1989) a parLy sulng as Laxpayer "musL speclflcally prove LhaL he has
sufflclenL lnLeresL ln prevenLlng Lhe lllegal expendlLure of money ralsed by LaxaLlon and LhaL he wlll
susLaln a dlrecL ln[ury as a resulL of Lhe enforcemenL of Lhe quesLloned sLaLuLe or conLracL. lL ls noL
sufflclenL LhaL he has merely a general lnLeresL common Lo all members of Lhe publlc." ln LhaL case, lL
was held LhaL a conLracL, whereby a local governmenL leased properLy Lo a prlvaLe parLy wlLh Lhe
undersLandlng LhaL Lhe laLLer would bulld a markeL bulldlng and aL Lhe end of Lhe lease would Lransfer
Lhe bulldlng Lo Lhe lessor, dld noL lnvolve a dlsbursemenL of publlc funds so as Lo glve a Laxpayer
sLandlng Lo quesLlon Lhe legallLy of Lhe conLracL. Pe sees no subsLanLlal dlfference, as far as Lhe sLandlng
of Laxpayers Lo quesLlon publlc conLracLs ls concerned, beLween Lhe conLracL Lhere and Lhe bulld-lease-
Lransfer (8L1) conLracL belng quesLloned by peLlLloners ln Lhls case. nor do peLlLloners have sLandlng Lo
brlng Lhls sulL as clLlzens. ln Lhe cases ln whlch clLlzens were auLhorlzed Lo sue, Lhls CourL found sLandlng
because lL LhoughL Lhe consLlLuLlonal clalms pressed for declslon Lo be of "LranscendenLal lmporLance,"
as ln facL lL subsequenLly granLed rellef Lo peLlLloners by lnvalldaLlng Lhe challenged sLaLuLes or
governmenLal acLlons. 8uL ln Lhe case aL bar, Lhe CourL preclsely flnds Lhe opposlLe by flndlng
peLlLloners' subsLanLlve conLenLlons Lo be wlLhouL merlL. 1o Lhe exLenL Lherefore LhaL a parLy's sLandlng
ls affecLed by a deLermlnaLlon of Lhe subsLanLlve merlL of Lhe case or a prellmlnary esLlmaLe Lhereof,
peLlLloners ln Lhe case aL bar musL be held Lo be wlLhouL sLandlng. 1hls ls ln llne wlLh our rullng ln
Lawyers League for a 8eLLer hlllpplnes v. Aqulno (C.8. nos. 73748, 73972, 73990, May 22, 1986) and ln
re 8ermudez (143 SC8A 160, 1986) where we dlsmlssed clLlzens' acLlons on Lhe ground LhaL peLlLloners
had no personallLy Lo sue and Lhelr peLlLlons dld noL sLaLe a cause of acLlon. 1he holdlng LhaL peLlLloners
dld noL have sLandlng followed from Lhe flndlng LhaL Lhey dld noL have a cause of acLlon. ln order LhaL
clLlzens' acLlons may be allowed a parLy musL show LhaL he personally has suffered some acLual or
LhreaLened ln[ury as a resulL of Lhe allegedly lllegal conducL of Lhe governmenL, Lhe ln[ury ls falrly
Lraceable Lo Lhe challenged acLlon, and Lhe ln[ury ls llkely Lo be redressed by a favorable acLlon. 1odays's
holdlng LhaL a clLlzen, qua clLlzen, has sLandlng Lo quesLlon a governmenL conLracL unduly expands Lhe
scope of publlc acLlons and sweeps away Lhe case and conLroversy requlremenL so carefully embodled
ln ArL. vlll, 3 ln deflnlng Lhe [urlsdlcLlon of Lhls CourL. 1he resulL ls Lo converL Lhe CourL lnLo an offlce of
ombudsman for Lhe venLllaLlon of generallzed grlevances.
lLLlClAnC, !., dlssenLlng:
1. CLl1lCAL LAW, nA1lCnAL LCCnCM? Anu A18lMCn?, u8LlC u1lLl1? (LuSA L81 lll), u 1394
Cn 8luulnC Anu 8LLA1Lu 8CvlSlCnS, nC1 ALlCA8LL 1C 8A 6937 Anu 8A 7718. - resldenLlal
uecree no. 1394 daLed 11 !une 1978 enLlLled: "rescrlblng ollcles, Culdellnes, 8ules and 8egulaLlons
for CovernmenL lnfrasLrucLure ConLracLs." More speclflcally, Lhe ma[orlLy oplnlon lnvokes paragraph 1
of SecLlon 4 of Lhls uegree whlch refers Lo 8lddlng. l undersLand Lhe unspoken Lheory ln Lhe ma[orlLy
oplnlon Lo be LhaL above SecLlon 4 and presumably Lhe resL of resldenLlal uecree no. 1394 conLlnue Lo
exlsL and Lo run parallel Lo Lhe provlslons of 8epubllc AcL no. 6937, wheLher ln lLs orlglnal form or as
amended by 8epubllc AcL no. 7718. A prlnclpal dlfflculLy wlLh Lhls approach ls LhaL resldenLlal uecree
no. 1394 purporLs Lo apply Lo all "governmenL conLracLs for lnfrasLrucLure and oLher consLrucLlon
pro[ecLs." 8uL 8epubllc AcL no. 6937 as amended by 8epubllc AcL no. 7718, relaLes only Lo
"lnfrasLrucLure pro[ecLs" whlch are flnanced, consLrucLed, operaLed and malnLalned "by Lhe prlvaLe
secLor" "Lhrough Lhe bulld/operaLe-and-Lransfer or bulld-and-Lransfer scheme" under 8epubllc AcL no.
6397 and under a serles of oLher comparable schemes under 8epubllc AcL no. 7718. ln oLher words,
8epubllc AcL no. 6937 and 8epubllc AcL no. 7718 musL be held, ln my vlew, Lo be speclal sLaLuLes
appllcable Lo a more llmlLed fleld of "lnfrasLrucLure pro[ecLs" Lhan Lhe wlde-ranglng scope of appllcaLlon
of Lhe general sLaLuLe, l.e., resldenLlal uecree no. 1394. 1hus, Lhe hlgh relevance of Lhe polnL made by
Mr. !usLlce uavlde LhaL 8epubllc AcL no. 6937 ln speclflc connecLlon wlLh 8C1- and 8L1-Lype of conLracLs
lmposed an unquallfled requlremenL of publlc blddlng seL ouL ln SecLlon 3 Lhereof. lL should also be
polnLed ouL LhaL under resldenLlal uecree no. 1394, pro[ecLs may be underLaken "by admlnlsLraLlon or
force accounL or by negoLlaLed conLracL only" (1) "ln excepLlonal cases where Llme ls of Lhe essence", or
(2) "where Lhere ls lack of bldders or conLracLors", or (3) "where Lhere ls a concluslve evldence LhaL
greaLer economy and efflclency would be achleved Lhrough Lhese arrangemenLs, and ln accordance wlLh
provlslon[s] of laws and acLs of Lhe maLLer." lL musL, upon Lhe one hand, be noLed LhaL Lhe speclal law
8epubllc AcL no. 6937 made absoluLely no menLlon of negoLlaLed conLracLs belng permlLLed Lo dlsplace
Lhe requlremenL of publlc blddlng. upon Lhe oLher hand, SecLlon 3-a, lnserLed ln 8epubllc AcL no. 6937
by Lhe amendlng sLaLuLe 8epubllc AcL no. 7718, does noL purporL Lo auLhorlze dlrecL negoLlaLlon of
conLracLs excepL ln four (4) slLuaLlons where Lhere ls a lack of pre-quallfled conLracLors or complylng
bldders. 1hus, even under Lhe amended speclal sLaLuLe, enLerlng lnLo conLracLs by negoLlaLlon ls noL
permlsslble ln Lhe oLher Lwo (2) caLegorles of cases referred Lo ln SecLlon 4 of resldenLlal uecree no.
1394, l.e., "ln excepLlonal cases where Llme ls of Lhe essence" and "when Lhere ls concluslve evldence
LhaL greaLer economy and efflclency would be achleved Lhrough Lhese arrangemenLs, eLc." 1he resulL l
reach ls LhaL lnsofar as 8C1, eLc. - Lypes of conLracLs are concerned, Lhe appllcable publlc blddlng
requlremenL ls LhaL seL ouL ln 8epubllc AcL no. 6937 and, wlLh respecL Lo such Lype of conLracLs opened
for pre-quallflcaLlon and blddlng afLer Lhe daLe of effecLlvlLy of republlc AcL no. 7718, Lhe provlslons of
8epubllc AcL no. 7718. 1he assalled conLracL was enLered lnLo before 8epubllc AcL no. 7718 was
enacLed. 1he dlfflculLles of applylng Lhe provlslons of resldenLlal uecree no. 1394 Lo Lhe Ldsa L81-Lype
of conLracLs are aggravaLed when one conslders Lhe deLalled "lmplemenLlng 8ules and 8egulaLlons as
amended Aprll 1988" lssued under LhaL resldenLlal uecree. 1here ls no reference aL all ln Lhese
resldenLlal uecree no. 1394 lmplemenLlng 8ules and 8egulaLlons Lo absence of pre-quallfled appllcanLs
and bldders as [usLlfylng negoLlaLlon of conLracLs as dlsLlngulshed from requlrlng publlc blddlng or a
second publlc blddlng. noLe also Lhe followlng provlslon of Lhe same lmplemenLlng 8ules and
8egulaLlons: "l8 1 requallflcaLlon. 1he followlng may become conLracLors for governmenL pro[ecLs: 1.
llllplno a. ClLlzens (slngle proprleLorshlp) b. arLnershlp or corporaLlon duly organlzed under Lhe laws of
Lhe hlllpplnes, and aL leasL sevenLy flve percenL (73) of Lhe caplLal sLock of whlch belongs Lo llllplno
clLlzens. 2. ConLracLors formlng Lhemselves lnLo a [olnL venLure, l.e., a group of Lwo or more conLracLors
LhaL lnLend Lo be [olnLly and severally responslble for a parLlcular conLracL, shall for purposes of
blddlng/Lenderlng comply wlLh LCl 630, and, aslde from belng currenLly and properly accredlLed by Lhe
hlllpplne ConLracLors AccredlLaLlon 8oard, shall comply wlLh Lhe provlslons of 8.A. 4366, provlded LhaL
[olnL venLures ln whlch llllplno ownershlp ls less Lhan sevenLy flve percenL (73) may be prequallfled
where Lhe sLrucLures Lo be bullL requlre Lhe appllcaLlon of Lechnlques and/or Lechnologles whlch are noL
adequaLely possessed by a llllplno enLlLy as deflned above. 1he record of Lhls case ls enLlrely sllenL on
Lhe exLenL of hlllpplne equlLy ln Lhe Ldsa L81 CorporaLlon, Lhere ls no suggesLlon LhaL Lhls corporaLlon
ls organlzed under hlllpplne law and ls aL leasL sevenLy-flve (73) percenL owned by hlllpplne clLlzens.
2. lu., lu., lu., u8LlC 8luulnC, An lMC81An1 8LCul8LMLn1. - ubllc blddlng ls Lhe normal
meLhod by whlch a governmenL keeps conLracLors honesL and ls able Lo assure lLself LhaL lL would be
geLLlng Lhe besL posslble value for lLs money ln any consLrucLlon or slmllar pro[ecL. lL ls noL for noLhlng
LhaL mulLllaLeral flnanclal organlzaLlons llke Lhe World 8ank and Lhe Aslan uevelopmenL 8ank unlformly
requlre pro[ecLs flnanced by Lhem Lo be lmplemenLed and carrled ouL by publlc blddlng. ubllc blddlng ls
much Loo lmporLanL a requlremenL casually Lo loosen by a laLlLudlnarlan exerclse ln sLaLuLory
consLrucLlon.
uAvluL, !8., !., dlssenLlng oplnlon:
1. CLl1lCAL LAW, nA1lCnAL LCCnCM? Anu A18lMCn?, u8LlC u1lLl1? (LuSA L81 lll), 8A 6937
(8C1 LAW), 8ulLu-LLASL-Anu-18AnSlL8 (8L1) SCPLML, nC1 lnCLuuLu 1PL8Lln. - 8espondenLs
admlL LhaL Lhe assalled conLracL was enLered lnLo under 8.A. 6937. 1hls law, flLLlngly enLlLled "An AcL
AuLhorlzlng Lhe llnanclng, ConsLrucLlon, CperaLlon and MalnLenance of lnfrasLrucLure ro[ecLs by Lhe
rlvaLe SecLor, and lor CLher urposes," recognlzes only Lwo (2) klnds of conLracLual arrangemenLs
beLween Lhe prlvaLe secLor and governmenL lnfrasLrucLure agencles: (a) Lhe 8ulld-CperaLe-and-1ransfer
(8C1) scheme and (b) Lhe 8ulld-and-1ransfer (81) scheme. 1hls concluslon flnds supporL ln SecLlon 2
Lhereof whlch deflnes only Lhe 8C1 and 81 schemes, ln SecLlon 3 whlch expllclLly provldes for sald
schemes and ln SecLlon 3 whlch requlres publlc blddlng of pro[ecLs under boLh schemes. All prlor acLs
and negoLlaLlons leadlng Lo Lhe perfecLlon of Lhe challenged conLracL were clearly lnLended and pursued
for such schemes. A 8ulld-Lease-and-1ransfer (8L1) scheme ls noL auLhorlzed under Lhe sald law, and
none of Lhe aforesald prlor acLs and negoLlaLlons were deslgned for such unauLhorlzed scheme. Pence,
Lhe uC1C ls wlLhouL any power or auLhorlLy Lo enLer lnLo Lhe 8L1 conLracL ln quesLlon. lf lL ls lnLended Lo
lnclude a 8L1 scheme ln 8A 6937, Lhen lL should have so sLaLed, for conLracLs of lease are noL unknown
ln our [urlsdlcLlon, and Congress has enacLed several laws relaLlng Lo leases. 1haL Lhe 8L1 scheme was
never lnLended as a permlsslble varlaLlon "wlLhln Lhe conLexL" of Lhe 8C1 and 81 schemes ls concluslvely
esLabllshed by Lhe passage of 8.A. no. 7718 whlch amends: a) SecLlon 2 by addlng Lo Lhe orlglnal 8C1
and 81 schemes Lhe followlng schemes: (1) 8ulld-own-and operaLe (8CC) (2) 8ulld-Lease-and-Lransfer
(8L1) (3) 8ulld-Lransfer-and-operaLe (81C) (4) ConLracL-add-and-operaLe (CAC) (3) uevelop-operaLe-and-
Lransfer (uC1) (6) 8ehablllLaLe-operaLe-and-Lransfer (8C1) (7) 8ehablllLaLe-own-and-operaLe (8CC) b)
SecLlon 3 of 8.A. no. 6937 by deleLlng Lherefrom Lhe phrase "Lhrough Lhe bulld-operaLe-and-Lransfer or
bulld-and-Lransfer scheme."
2. lu., lu., lu., u8LlC 8luulnC 1PL8Lln, MAnuA1C8? , 8A 7718 lC8LCClnC 1PL SAML uCLS
nC1 8CvluL lC8 8L18CAC1lvL ALlCA1lCn. - ubllc blddlng ls mandaLory ln 8.A. no. 6937 under
SecLlon 3 Lhereof. 1he requlremenL of publlc blddlng ls noL an ldle ceremony. lL has been apLly sald LhaL
ln our [urlsdlcLlon "publlc blddlng ls Lhe pollcy and medlum adhered Lo ln CovernmenL procuremenL and
consLrucLlon conLracLs under exlsLlng laws and regulaLlons. lL ls Lhe accepLed meLhod for arrlvlng aL a
falr and reasonable prlce and ensures LhaL overprlclng, favorlLlsm and oLher anomalous pracLlces are
ellmlnaLed or mlnlmlzed. And any CovernmenL conLracL enLered lnLo wlLhouL Lhe requlred blddlng ls null
and vold and cannoL adversely affecL Lhe rlghLs of Lhlrd parLles." (8arLolome C. lernandez, !r., A
18LA1lSL Cn CCvL8nMLn1 CCn18AC1S unuL8 PlLllnL LAW 23 [rev. ed. 1991], clLlng CalLex vs.
uelgado 8ros., 96 hll. 368 [1934]). 1he Cfflce of Lhe resldenL, Lhrough Lhen LxecuLlve SecreLary
lranklln urllon correcLly dlsapproved Lhe conLracL because no publlc blddlng ln sLrlcL compllance wlLh
SecLlon 3 of 8.A. no. 6937 was conducLed. SecreLary urllon furLher blunLly sLaLed LhaL Lhe provlslon of
Lhe lmplemenLlng 8ules of sald law auLhorlzlng negoLlaLed conLracLs was of doubLful legallLy. lndeed, lL
ls null and vold because Lhe law lLself does noL recognlze or allow negoLlaLed conLracLs. 1he mandaLory
requlremenL of publlc blddlng cannoL be legally dlspensed wlLh slmply because only one was quallfled Lo
bld durlng Lhe prequallflcaLlon proceedlngs. SecLlon 3 mandaLes LhaL Lhe 8C1 or 81 conLracL should be
awarded "Lo Lhe lowesL complylng bldder," whlch loglcally means LhaL Lhere musL aL leasL be Lwo (2)
bldders. lf Lhls mlnlmum requlremenL ls noL meL, Lhen Lhe proposed blddlng should be deferred and a
new prequallflcaLlon proceedlng be scheduled. Lven Lhose who were earller dlsquallfled may by Lhen
have quallfled because Lhey may have, ln Lhe meanLlme, exerLed efforLs Lo meeL all Lhe quallflcaLlons.
1hls vlew of Lhe ma[orlLy would open Lhe floodgaLes Lo Lhe rlgglng of prequallflcaLlon proceedlngs or Lo
unholy consplracles among prospecLlve bldders, whlch would even lnclude dlshonesL governmenL
offlclals. 1hey could [usL agree, for a cerLaln conslderaLlon, LhaL only one of Lhem would quallfy ln order
LhaL Lhe laLLer would auLomaLlcally corner Lhe conLracL and obLaln Lhe award. 1haL SecLlon 3 admlLs of
no excepLlon and LhaL no blddlng could be valldly had wlLh only one bldder ls llkewlse concluslvely
shown by Lhe amendmenLs lnLroduced by 8.A. no. 7718. er SecLlon 7 Lhereof, a new secLlon
denomlnaLed as SecLlon 3-A was lnLroduced ln 8.A. no. 6937 Lo allow dlrecL negoLlaLlon of conLracLs.
Can Lhls amendmenL be glven reLroacLlve effecL Lo Lhe challenged conLracL so LhaL lL may now be
consldered a permlsslble negoLlaLed conLracL? l submlL LhaL lL cannoL be. 8.A. no. 7718 does noL provlde
LhaL lL should be glven reLroacLlve effecL Lo pre-exlsLlng conLracLs. SecLlon 18 Lhereof says LhaL lL "shall
Lake effecL flfLeen (13) days afLer lLs publlcaLlon ln aL leasL Lwo (2) newspapers of general clrculaLlon." lf
lL were Lhe lnLenLlon of Congress Lo glve sald acL reLroacLlve effecL Lhen lL would have so expressly
provlded. ArLlcle 4 of Lhe Clvll Code provldes LhaL "[l]aws shall have no reLroacLlve effecL, unless Lhe
conLrary ls provlded." 1he presumpLlon ls LhaL all laws operaLe prospecLlvely, unless Lhe conLrary clearly
appears or ls clearly, plalnly, and unequlvocally expressed or necessarlly lmplled. ln every case of doubL,
Lhe doubL wlll be resolved agalnsL Lhe reLroacLlve appllcaLlon of laws. (8uben L. Agpalo, S1A1u1C8?
CCnS18uC1lCn 223 [2d ed. 1990]). As Lo amendaLory acLs, or acLs whlch change an exlsLlng sLaLuLe,
SuLherland sLaLes: ln accordance wlLh Lhe rule appllcable Lo orlglnal acLs, lL ls presumed LhaL provlslons
added by Lhe amendmenL affecLlng subsLanLlve rlghLs are lnLended Lo operaLe prospecLlvely. rovlslons
added by Lhe amendmenL LhaL affecL subsLanLlve rlghLs wlll noL be consLrued Lo apply Lo LransacLlons
and evenLs compleLed prlor Lo lLs enacLmenL unless Lhe leglslaLure has expressed lLs lnLenL Lo LhaL effecL
or such lnLenL ls clearly lmplled by Lhe language of Lhe amendmenL or by Lhe clrcumsLances surroundlng
lLs enacLmenL. (1 lrank L. Porack, !r., Su1PL8LAnu'S S1A1u1LS Anu S1A1u1C8? CCnS18uC1lCn 434-
436 [1943 ed.]).
u L C l S l C n
CulASCn, ! p:
1hls ls a peLlLlon under 8ule 63 of Lhe 8evlsed 8ules of CourL Lo prohlblL respondenLs from furLher
lmplemenLlng and enforclng Lhe "8evlsed and 8esLaLed AgreemenL Lo 8ulld, Lease and 1ransfer a LlghL
8all 1ranslL SysLem for LuSA" daLed Aprll 22, 1992, and Lhe "SupplemenLal AgreemenL Lo Lhe 22 Aprll
1992 8evlsed and 8esLaLed AgreemenL 1o 8ulld, Lease and 1ransfer a LlghL 8all 1ranslL SysLem for LuSA"
daLed May 6, 1993.
eLlLloners lranclsco S. 1aLad, !ohn P. Csmena and 8odolfo C. 8lazon are members of Lhe hlllpplne
SenaLe and are sulng ln Lhelr capaclLles as SenaLors and as Laxpayers. 8espondenL !esus 8. Carcla, !r. ls
Lhe lncumbenL SecreLary of Lhe ueparLmenL of 1ransporLaLlon and CommunlcaLlons (uC1C), whlle
prlvaLe respondenL LuSA L81 CorporaLlon, LLd. ls a prlvaLe corporaLlon organlzed under Lhe laws of
Pongkong. cdll
l
ln 1989, uC1C planned Lo consLrucL a llghL rallway LranslL llne along LuSA, a ma[or Lhoroughfare ln
MeLropollLan Manlla, whlch shall Lraverse Lhe clLles of asay, Cuezon, Mandaluyong and MakaLl. 1he
plan, referred Lo as LuSA LlghL 8all 1ranslL lll (LuSA L81 lll), was lnLended Lo provlde a mass LranslL
sysLem along LuSA and allevlaLe Lhe congesLlon and growlng LransporLaLlon problem ln Lhe meLropolls.
Cn March 3, 1990, a leLLer of lnLenL was senL by Lhe Lll Levln LnLerprlses, lnc., represenLed by Lll[ahu
Levln, Lo uC1C SecreLary Cscar Crbos, proposlng Lo consLrucL Lhe LuSA L81 lll on a 8ulld-CperaLe-
1ransfer (8C1) basls.
Cn March 13, 1990, SecreLary Crbos lnvlLed Levln Lo send a Lechnlcal Leam Lo dlscuss Lhe pro[ecL wlLh
uC1C.
Cn !uly 9, 1990, 8epubllc AcL no. 6937 enLlLled "An AcL AuLhorlzlng Lhe llnanclng, ConsLrucLlon,
CperaLlon and MalnLenance of lnfrasLrucLure ro[ecLs by Lhe rlvaLe SecLor, and lor CLher urposes,"
was slgned by resldenL Corazon C. Aqulno. 8eferred Lo as Lhe 8ulld-CperaLe-1ransfer (8C1) Law, lL Look
effecL on CcLober 9, 1990.
8epubllc AcL no. 6937 provldes for Lwo schemes for Lhe flnanclng, consLrucLlon and operaLlon of
governmenL pro[ecLs Lhrough prlvaLe lnlLlaLlve and lnvesLmenL: 8ulld-CperaLe-1ransfer (8C1) or 8ulld-
1ransfer (81).
ln accordance wlLh Lhe provlslons of 8.A. no. 6937 and Lo seL Lhe LuSA L81 lll pro[ecL underway, uC1C,
on !anuary 22, 1991 and March 14, 1991, lssued ueparLmenL Crders nos. 91-494 and 91-496,
respecLlvely creaLlng Lhe requallflcaLlon 8lds and Awards CommlLLee (8AC) and Lhe 1echnlcal
CommlLLee.
AfLer lLs consLlLuLlon, Lhe 8AC lssued guldellnes for Lhe prequallflcaLlon of conLracLors for Lhe flnanclng
and lmplemenLaLlon of Lhe pro[ecL. 1he noLlce, adverLlslng Lhe prequallflcaLlon of bldders, was
publlshed ln Lhree newspapers of general clrculaLlon once a week for Lhree consecuLlve weeks sLarLlng
lebruary 21, 1991.
1he deadllne seL for submlsslon of prequallflcaLlon documenLs was March 21, 1991, laLer exLended Lo
Aprll 1, 1991. llve groups responded Lo Lhe lnvlLaLlon: namely, A88 1razlone of lLaly, Popewell Poldlngs,
LLd. of Pongkong, MansLeel lnLernaLlonal of Mandaue, Cebu, MlLsul & Co., LLd. of !apan, and LuSA L81
ConsorLlum, composed of Len forelgn and domesLlc corporaLlons: namely, kalser Lnglneers
lnLernaLlonal, lnc., ACL8 ConsulLanLs (lar LasL) LLd., lreeman lox, 1radelnvesL/Cku 1aLra of Lhe Czech
and Slovak lederal 8epubllcs, 1CCl Lnglneerlng, All Asla CaplLal and Leaslng CorporaLlon, 1he Sallm
Croup of !akarLa, L.L. LnLerprlses, lnc., A.M. CreLa & Co., lnc., CaplLol lndusLrlal ConsLrucLlon Croup, lnc.
and l.l. Cruz & Co., lnc. cdrep
Cn Lhe lasL day for submlsslon of prequallflcaLlon documenLs, Lhe prequallflcaLlon crlLerla proposed by
Lhe 1echnlcal CommlLLee were adopLed by Lhe 8AC. 1he crlLerla, LoLalllng 100 percenL, are as follows:
(a) Legal aspecLs - 10 percenL, (b) ManagemenL/CrganlzaLlonal capablllLy - 30 percenL, (c) llnanclal
capablllLy - 30 percenL, and (d) 1echnlcal capablllLy - 30 percenL (8ollo, p. 122).
Cn Aprll 3, 1991, Lhe CommlLLee, charged under Lhe 8C1 Law wlLh Lhe formulaLlon of Lhe lmplemenLlng
8ules and 8egulaLlons Lhereof, approved Lhe same.
AfLer evaluaLlng Lhe prequallflcaLlon blds, Lhe 8AC lssued a 8esoluLlon on May 9, 1991 declarlng LhaL of
Lhe flve appllcanLs, only Lhe LuSA L81 ConsorLlum "meL Lhe requlremenLs of garnerlng aL leasL 21 polnLs
per crlLerla [slc], excepL for Legal AspecLs, and obLalnlng an over-all passlng mark of aL leasL 82 polnLs"
(8ollo, p. 146). 1he Legal AspecLs referred Lo provlded LhaL Lhe 8C1/81 conLracLor-appllcanL meeL Lhe
requlremenLs speclfled ln Lhe ConsLlLuLlon and oLher perLlnenL laws (8ollo, p. 114).
SubsequenLly, SecreLary Crbos was appolnLed LxecuLlve SecreLary Lo Lhe resldenL of Lhe hlllpplnes
and was replaced by SecreLary eLe nlcomedes rado. 1he laLLer senL Lo resldenL Aqulno Lwo leLLers
daLed May 31, 1991 and !une 14, 1991, respecLlvely recommendlng Lhe award of Lhe LuSA L81 lll
pro[ecL Lo Lhe sole complylng bldder, Lhe LuSA L81 ConsorLlum, and requesLlng for auLhorlLy Lo
negoLlaLe wlLh Lhe sald flrm for Lhe conLracL pursuanL Lo paragraph 14(b) of Lhe lmplemenLlng 8ules and
8egulaLlons of Lhe 8C1 Law (8ollo, pp. 298-302).
ln !uly 1991, LxecuLlve SecreLary Crbos, acLlng on lnsLrucLlons of Lhe resldenL, lssued a dlrecLlve Lo Lhe
uC1C Lo proceed wlLh Lhe negoLlaLlons. Cn !uly 16, 1991, Lhe LuSA L81 ConsorLlum submlLLed lLs bld
proposal Lo uC1C.
llndlng Lhls proposal Lo be ln compllance wlLh Lhe bld requlremenLs, uC1C and respondenL LuSA L81
CorporaLlon, LLd., ln subsLlLuLlon of Lhe LuSA L81 ConsorLlum, enLered lnLo an "AgreemenL Lo 8ulld,
Lease and 1ransfer a LlghL 8all 1ranslL SysLem for LuSA" under Lhe Lerms of Lhe 8C1 Law (8ollo, pp. 147-
177).
SecreLary rado, LhereafLer, requesLed presldenLlal approval of Lhe conLracL. LlbLex
ln a leLLer daLed March 13, 1992, LxecuLlve SecreLary lranklln urllon, who replaced LxecuLlve SecreLary
Crbos, lnformed SecreLary rado LhaL Lhe resldenL could noL granL Lhe requesLed approval for Lhe
followlng reasons: (1) LhaL uC1C falled Lo conducL acLual publlc blddlng ln compllance wlLh SecLlon 3 of
Lhe 8C1 Law, (2) LhaL Lhe law auLhorlzed publlc blddlng as Lhe only mode Lo award 8C1 pro[ecLs, and Lhe
prequallflcaLlon proceedlngs was noL Lhe publlc blddlng conLemplaLed under Lhe law, (3) LhaL lLem 14 of
Lhe lmplemenLlng 8ules and 8egulaLlons of Lhe 8C1 Law whlch auLhorlzed negoLlaLed award of conLracL
ln addlLlon Lo publlc blddlng was of doubLful legallLy, and (4) LhaL congresslonal approval of Lhe llsL of
prlorlLy pro[ecLs under Lhe 8C1 or 81 Scheme provlded ln Lhe law had noL yeL been granLed aL Lhe Llme
Lhe conLracL was awarded (8ollo, pp. 178-179).
ln vlew of Lhe commenLs of LxecuLlve SecreLary urllon, Lhe uC1C and prlvaLe respondenLs re-negoLlaLed
Lhe agreemenL. Cn Aprll 22, 1992, Lhe parLles enLered lnLo a "8evlsed and 8esLaLed AgreemenL Lo 8ulld,
Lease and 1ransfer a LlghL 8all 1ranslL SysLem for LuSA" (8ollo, pp. 47-78) lnasmuch as "Lhe parLles [are]
cognlzanL of Lhe facL Lhe uC1C has full auLhorlLy Lo slgn Lhe AgreemenL wlLhouL need of approval by Lhe
resldenL pursuanL Lo Lhe provlslons of LxecuLlve Crder no. 380 and LhaL cerLaln evenLs [had]
supervened slnce november 7, 1991 whlch necesslLaLe[d] Lhe revlslon of Lhe AgreemenL" (8ollo, p. 31).
Cn May 6, 1992, uC1C, represenLed by SecreLary !esus Carcla vlce SecreLary rado, and prlvaLe
respondenL enLered lnLo a "SupplemenLal AgreemenL Lo Lhe 22 Aprll 1992 8evlsed and 8esLaLed
AgreemenL Lo 8ulld, Lease and 1ransfer a LlghL 8all 1ranslL SysLem for LuSA" so as Lo "clarlfy Lhelr
respecLlve rlghLs and responslblllLles" and Lo "submlL [Lhe] SupplemenLal AgreemenL Lo Lhe resldenL of
Lhe hlllpplnes for hls approval" (8ollo, pp. 79-80).
SecreLary Carcla submlLLed Lhe Lwo AgreemenLs Lo resldenL lldel v. 8amos for hls conslderaLlon and
approval. ln a Memorandum Lo SecreLary Carcla on May 6, 1993, resldenL 8amos approved Lhe sald
AgreemenLs (8ollo, p. 194).
Accordlng Lo Lhe agreemenLs, Lhe LuSA-L81 lll wlll use llghL rall vehlcles from Lhe Czech and Slovak
lederal 8epubllcs and wlll have a maxlmum carrylng capaclLy of 430,000 passengers a day, or 130
mllllon a year Lo be achleved Lhrough 34 such vehlcles operaLlng slmulLaneously. 1he LuSA L81 lll wlll
run aL grade, or sLreeL level, on Lhe mld-secLlon of LuSA for a dlsLance of 17.8 kllomeLers from l.8.
Parrlson, asay ClLy Lo norLh Avenue, Cuezon ClLy. 1he sysLem wlll have lLs own power faclllLy (8evlsed
and 8esLaLed AgreemenL, Sec. 2.3 (ll), 8ollo, p. 33). lL wlll also have LhlrLeen (13) passenger sLaLlons and
one depoL ln Lhe 16-hecLare governmenL properLy aL norLh Avenue (SupplemenLal AgreemenL, Sec. 11,
8ollo, pp. 91-92).
rlvaLe respondenL shall underLake and flnance Lhe enLlre pro[ecL requlred for a compleLe operaLlonal
llghL rall LranslL sysLem (8evlsed and 8esLaLed AgreemenL, Sec. 4.1, 8ollo, p. 38). 1argeL compleLlon daLe
ls 1,080 days or approxlmaLely Lhree years from Lhe lmplemenLaLlon daLe of Lhe conLracL lncluslve of
moblllzaLlon, slLe works, lnlLlal and flnal LesLlng of Lhe sysLem (SupplemenLal AgreemenL, Sec. 3, 8ollo, p.
83). upon full or parLlal compleLlon and vlablllLy Lhereof, prlvaLe respondenL shall dellver Lhe use and
possesslon of Lhe compleLed porLlon Lo uC1C whlch shall operaLe Lhe same (SupplemenLal AgreemenL,
Sec. 3, 8evlsed and 8esLaLed AgreemenL, Sec. 3.1, 8ollo, pp. 61-62, 84). uC1C shall pay prlvaLe
respondenL renLals on a monLhly basls Lhrough an lrrevocable LeLLer of CredlL. 1he renLals shall be
deLermlned by an lndependenL and lnLernaLlonally accredlLed lnspecLlon flrm Lo be appolnLed by Lhe
parLles (SupplemenLal AgreemenL, Sec. 6, 8ollo, pp. 83-86). As agreed upon, prlvaLe respondenL's caplLal
shall be recovered from Lhe renLals Lo be pald by Lhe uC1C whlch, ln Lurn, shall come from Lhe earnlngs
of Lhe LuSA L81 lll (8evlsed and 8esLaLed AgreemenL, Sec. 1, p. 3, 8ollo, p. 34). AfLer 23 years and uC1C
shall have compleLed paymenL of Lhe renLals, ownershlp of Lhe pro[ecL shall be Lransferred Lo Lhe laLLer
for a conslderaLlon of only u.S.$1.00 (8evlsed and 8esLaLed AgreemenL, Sec. 11.1, 8ollo, p. 67). LlbLex
Cn May 3, 1994, 8.A. no. 7718, an "AcL Amendlng CerLaln SecLlons of 8epubllc AcL no. 6937, LnLlLled 'An
AcL AuLhorlzlng Lhe llnanclng, ConsLrucLlon, CperaLlon and MalnLenance of lnfrasLrucLure ro[ecLs by
Lhe rlvaLe SecLor, and for CLher urposes'" was slgned lnLo law by Lhe resldenL. 1he law was publlshed
ln Lwo newspapers of general clrculaLlon on May 12, 1994, and Look effecL 13 days LhereafLer or on May
28, 1994. 1he law expressly recognlzes a 8L1 scheme and allows dlrecL negoLlaLlon of 8L1 conLracLs.
ll
ln Lhelr peLlLlon, peLlLloners argued LhaL:
"(1) 1PL AC8LLMLn1 Cl A8lL 22, 1992, AS AMLnuLu 8? 1PL SuLLMLn1AL AC8LLMLn1 Cl
MA? 6, 1993, lnSClA8 AS l1 C8An1S LuSA L81 CC8C8A1lCn, L1u., A lC8LlCn CC8C8A1lCn, 1PL
CWnL8SPl Cl LuSA L81 lll, A u8LlC u1lLl1?, vlCLA1LS 1PL CCnS1l1u1lCn Anu, PLnCL, lS
unCCnS1l1u1lCnAL,
"(2) 1PL 8ulLu-LLASL-18AnSlL8 SCPLML 8CvluLu ln 1PL AC8LLMLn1S lS nC1 uLllnLu nC8
8LCCCnlZLu ln 8.A. nC. 6937 C8 l1S lMLLMLn1lnC 8uLLS Anu 8LCuLA1lCnS Anu, PLnCL, lS
lLLLCAL,
"(3) 1PL AWA8u Cl 1PL CCn18AC1 Cn A nLCC1lA1Lu 8ASlS vlCLA1LS 8.A. nC. 6937 Anu, PLnCL,
lS unLAWluL,
"(4) 1PL AWA8u Cl 1PL CCn18AC1 ln lAvC8 Cl 8LSCnuLn1 LuSA L81 CC8C8A1lCn, L1u.
vlCLA1LS 1PL 8LCul8LMLn1S 8CvluLu ln 1PL lMLLMLn1lnC 8uLLS Anu 8LCuLA1lCnS Cl 1PL
8C1 LAW Anu, PLnCL, lS lLLLCAL,
"(3) 1PL AC8LLMLn1S vlCLA1L LxLCu1lvL C8uL8 nC. 380 lC8 1PLl8 lAlLu8L 1C 8LA8
8LSluLn1lAL A8CvAL Anu, PLnCL, A8L lLLLCAL Anu lnLllLC1lvL, Anu
"(6) 1PL AC8LLMLn1S A8L C8CSSL? ulSAuvAn1ACLCuS 1C 1PL CCvL8nMLn1" (8ollo, pp. 13-16).
SecreLary Carcla and prlvaLe respondenL flled Lhelr commenLs separaLely and clalmed LhaL:
(1) eLlLloners are noL Lhe real parLles-ln-lnLeresL and have no legal sLandlng Lo lnsLlLuLe Lhe presenL
peLlLlon,
(2) 1he wrlL of prohlblLlon ls noL Lhe proper remedy and Lhe peLlLlon requlres ascerLalnmenL of
facLs,
(3) 1he scheme adopLed ln Lhe AgreemenLs ls acLually a bulld-Lransfer scheme allowed by Lhe 8C1
Law,
(4) 1he naLlonallLy requlremenL for publlc uLlllLles mandaLed by Lhe ConsLlLuLlon does noL apply Lo
prlvaLe respondenL,
(3) 1he AgreemenLs execuLed by and beLween respondenLs have been approved by resldenL
8amos and are noL dlsadvanLageous Lo Lhe governmenL,
(6) 1he award of Lhe conLracL Lo prlvaLe respondenL Lhrough negoLlaLlon and noL publlc blddlng ls
allowed by Lhe 8C1 Law, and
(7) CranLlng LhaL Lhe 8C1 Law requlres publlc blddlng, Lhls has been amended by 8.A. no. 7718
passed by Lhe LeglslaLure on May 12, 1994, whlch provldes for dlrecL negoLlaLlon as a mode of award of
lnfrasLrucLure pro[ecLs. LexLlb
lll
8espondenLs clalmed LhaL peLlLloners had no legal sLandlng Lo lnlLlaLe Lhe lnsLanL acLlon. eLlLloners,
however, counLered LhaL Lhe acLlon was flled by Lhem ln Lhelr capaclLy as SenaLors and as Laxpayers.
1he prevalllng docLrlnes ln Laxpayer's sulLs are Lo allow Laxpayers Lo quesLlon conLracLs enLered lnLo by
Lhe naLlonal governmenL or governmenL-owned or conLrolled corporaLlons allegedly ln conLravenLlon of
Lhe law (kllosbayan, lnc. v. Culngona, 232 SC8A 110 [1994]) and Lo dlsallow Lhe same when only
munlclpal conLracLs are lnvolved (8ugnay ConsLrucLlon and uevelopmenL CorporaLlon v. Laron, 176
SC8A 240 [1989]).
lor as long as Lhe rullng ln kllosbayan on locus sLandl ls noL reversed, we have no cholce buL Lo follow lL
and uphold Lhe legal sLandlng of peLlLloners as Laxpayers Lo lnsLlLuLe Lhe presenL acLlon.
lv
ln Lhe maln, peLlLloners asserLed LhaL Lhe 8evlsed and 8esLaLed AgreemenL of Aprll 22, 1992 and Lhe
SupplemenLal AgreemenL of May 6, 1993 are unconsLlLuLlonal and lnvalld for Lhe followlng reasons:
(1) Lhe LuSA L81 lll ls a publlc uLlllLy, and Lhe ownershlp and operaLlon Lhereof ls llmlLed by Lhe
ConsLlLuLlon Lo llllplno clLlzens and domesLlc corporaLlons, noL forelgn corporaLlons llke prlvaLe
respondenL,
(2) Lhe 8ulld-Lease-1ransfer (8L1) scheme provlded ln Lhe agreemenLs ls noL Lhe 8C1 or 81 scheme
under Lhe law,
(3) Lhe conLracL Lo consLrucL Lhe LuSA L81 lll was awarded Lo prlvaLe respondenL noL Lhrough publlc
blddlng whlch ls Lhe only mode of awardlng lnfrasLrucLure pro[ecLs under Lhe 8C1 law, and
(4) Lhe agreemenLs are grossly dlsadvanLageous Lo Lhe governmenL.
1. rlvaLe respondenL LuSA L81 CorporaLlon, LLd. Lo whom Lhe conLracL Lo consLrucL Lhe LuSA L81
lll was awarded by publlc respondenL, ls admlLLedly a forelgn corporaLlon "duly lncorporaLed and
exlsLlng under Lhe laws of Pongkong" (8ollo, pp. 30, 79). 1here ls also no dlspuLe LhaL once Lhe LuSA L81
lll ls consLrucLed, prlvaLe respondenL, as lessor, wlll Lurn lL over Lo uC1C, as lessee, for Lhe laLLer Lo
operaLe Lhe sysLem and pay renLals for sald use.
1he quesLlon posed by peLlLloners ls:
"Can respondenL LuSA L81 CorporaLlon, LLd., a forelgn corporaLlon own LuSA L81 lll, a publlc uLlllLy?"
(8ollo, p. 17).
1he phraslng of Lhe quesLlon ls erroneous, lL ls loaded. WhaL prlvaLe respondenL owns are Lhe rall Lracks,
rolllng sLocks llke Lhe coaches, rall sLaLlons, Lermlnals and Lhe power planL, noL a publlc uLlllLy. Whlle a
franchlse ls needed Lo operaLe Lhese faclllLles Lo serve Lhe publlc, Lhey do noL by Lhemselves consLlLuLe a
publlc uLlllLy. WhaL consLlLuLes a publlc uLlllLy ls noL Lhelr ownershlp buL Lhelr use Lo serve Lhe publlc
(llollo lce & Cold SLorage Co. v. ubllc Servlce 8oard, 44 hll. 331, 337-338 [1923]). LexLlb
1he ConsLlLuLlon, ln no uncerLaln Lerms, requlres a franchlse for Lhe operaLlon of a publlc uLlllLy.
Powever, lL does noL requlre a franchlse before one can own Lhe faclllLles needed Lo operaLe a publlc
uLlllLy so long as lL does noL operaLe Lhem Lo serve Lhe publlc.
SecLlon 11 of ArLlcle xll of Lhe ConsLlLuLlon provldes:
"no franchlse, cerLlflcaLe or any oLher form of auLhorlzaLlon for Lhe operaLlon of a publlc uLlllLy shall be
granLed excepL Lo clLlzens of Lhe hlllpplnes or Lo corporaLlons or assoclaLlons organlzed under Lhe laws
of Lhe hlllpplnes aL leasL slxLy per cenLum of whose caplLal ls owned by such clLlzens, nor shall such
franchlse, cerLlflcaLe or auLhorlzaLlon be excluslve ln characLer or for a longer perlod Lhan flfLy years . . ."
(lLallcs supplled).
ln law, Lhere ls a clear dlsLlncLlon beLween Lhe "operaLlon" of a publlc uLlllLy and Lhe ownershlp of Lhe
faclllLles and equlpmenL used Lo serve Lhe publlc.
Cwnershlp ls deflned as a relaLlon ln law by vlrLue of whlch a Lhlng perLalnlng Lo one person ls
compleLely sub[ecLed Lo hls wlll ln everyLhlng noL prohlblLed by law or Lhe concurrence wlLh Lhe rlghLs of
anoLher (1olenLlno, ll CommenLarles and !urlsprudence on Lhe Clvll Code of Lhe hlllpplnes 43 [1992]).
1he exerclse of Lhe rlghLs encompassed ln ownershlp ls llmlLed by law so LhaL a properLy cannoL be
operaLed and used Lo serve Lhe publlc as a publlc uLlllLy unless Lhe operaLor has a franchlse. 1he
operaLlon of a rall sysLem as a publlc uLlllLy lncludes Lhe LransporLaLlon of passengers from one polnL Lo
anoLher polnL, Lhelr loadlng and unloadlng aL deslgnaLed places and Lhe movemenL of Lhe Lralns aL pre-
scheduled Llmes (cf. Arlzona LasLern 8.8. Co. v. !.A. MaLLhews, 20 Arlz 282, 180 . 139, 7 A.L.8. 1149
[1919], unlLed SLaLes llre lns. Co. v. norLhern .8. Co., 30 Wash 2d. 722, 193 . 2d 868, 2 A.L.8. 2d 1063
[1948]). cdphll
1he rlghL Lo operaLe a publlc uLlllLy may exlsL lndependenLly and separaLely from Lhe ownershlp of Lhe
faclllLles Lhereof. Cne can own sald faclllLles wlLhouL operaLlng Lhem as a publlc uLlllLy, or conversely,
one may operaLe a publlc uLlllLy wlLhouL ownlng Lhe faclllLles used Lo serve Lhe publlc. 1he devoLlon of
properLy Lo serve Lhe publlc may be done by Lhe owner or by Lhe person ln conLrol Lhereof who may noL
necessarlly be Lhe owner Lhereof.
1hls dlchoLomy beLween Lhe operaLlon of a publlc uLlllLy and Lhe ownershlp of Lhe faclllLles used Lo
serve Lhe publlc can be very well appreclaLed when we conslder Lhe LransporLaLlon lndusLry.
Lnfranchlsed alrllne and shlpplng companles may lease Lhelr alrcrafL and vessels lnsLead of ownlng Lhem
Lhemselves.
Whlle prlvaLe respondenL ls Lhe owner of Lhe faclllLles necessary Lo operaLe Lhe LuSA L81 lll, lL admlLs
LhaL lL ls noL enfranchlsed Lo operaLe a publlc uLlllLy. (8evlsed and 8esLaLed AgreemenL, Sec. 3.2, 8ollo,
p. 37). ln vlew of Lhls lncapaclLy, prlvaLe respondenL and uC1C agreed LhaL on compleLlon daLe, prlvaLe
respondenL wlll lmmedlaLely dellver possesslon of Lhe L81 sysLem by way of lease for 23 years, durlng
whlch perlod uC1C shall operaLe Lhe same as a common carrler and prlvaLe respondenL shall provlde
Lechnlcal malnLenance and repalr servlces Lo uC1C (8evlsed and 8esLaLed AgreemenL, Secs. 3.2, 3.1 and
3.2, 8ollo, pp. 37-38, 61-62). 1echnlcal malnLenance conslsLs of provldlng (1) repalr and malnLenance
faclllLles for Lhe depoL and rall llnes, servlces for rouLlne clearlng and securlLy, and (2) produclng and
dlsLrlbuLlng malnLenance manuals and drawlngs for Lhe enLlre sysLem (8evlsed and 8esLaLed
AgreemenL, Annex l).
rlvaLe respondenL shall also Lraln uC1C personnel for famlllarlzaLlon wlLh Lhe operaLlon, use,
malnLenance and repalr of Lhe rolllng sLock, power planL, subsLaLlons, elecLrlcal, slgnalllng,
communlcaLlons and all oLher equlpmenL as supplled ln Lhe agreemenL (8evlsed and 8esLaLed
AgreemenL, Sec. 10, 8ollo, pp. 66-67). 1ralnlng conslsLs of LheoreLlcal and llve Lralnlng of uC1C
operaLlonal personnel whlch lncludes acLual drlvlng of llghL rall vehlcles under slmulaLed operaLlng
condlLlons, conLrol of operaLlons, deallng wlLh emergencles, collecLlon, counLlng and securlng cash from
Lhe fare collecLlon sysLem (8evlsed and 8esLaLed AgreemenL, Annex L, Secs. 2-3). ersonnel of uC1C wlll
work under Lhe dlrecLlon and conLrol of prlvaLe respondenL only durlng Lralnlng (8evlsed and 8esLaLed
AgreemenL, Annex L, Sec. 3.1). 1he Lralnlng ob[ecLlves, however, shall be such LhaL upon compleLlon of
Lhe LuSA L81 lll and upon openlng of normal revenue operaLlon, uC1C shall have ln Lhelr employ
personnel capable of underLaklng Lralnlng of all new and replacemenL personnel (8evlsed and 8esLaLed
AgreemenL, Annex L, Sec. 3.1). ln oLher words, by Lhe end of Lhe Lhree-year consLrucLlon perlod and
upon commencemenL of normal revenue operaLlon, uC1C shall be able Lo operaLe Lhe LuSA L81 lll on
lLs own and Lraln all new personnel by lLself. Cdpr
lees for prlvaLe respondenL's servlces shall be lncluded ln Lhe renL, whlch llkewlse lncludes Lhe pro[ecL
cosL, cosL of replacemenL of planL equlpmenL and spare parLs, lnvesLmenL and flnanclng cosL, plus a
reasonable raLe of reLurn Lhereon (8evlsed and 8esLaLed AgreemenL, Sec. 1, 8ollo, p. 34).
Slnce, uC1C shall operaLe Lhe LuSA L81 lll, lL shall assume all Lhe obllgaLlons and llablllLles of a common
carrler. lor Lhls purpose, uC1C shall lndemnlfy and hold harmless prlvaLe respondenL from any losses,
damages, ln[urles or deaLh whlch may be clalmed ln Lhe operaLlon or lmplemenLaLlon of Lhe sysLem,
excepL losses, damages, ln[ury or deaLh due Lo defecLs ln Lhe LuSA L81 lll on accounL of Lhe defecLlve
condlLlon of equlpmenL or faclllLles or Lhe defecLlve malnLenance of such equlpmenL or faclllLles
(8evlsed and 8esLaLed AgreemenL, Secs. 12.1 and 12.2, 8ollo, p. 68).
ln sum, prlvaLe respondenL wlll noL run Lhe llghL rall vehlcles and collecL fees from Lhe rldlng publlc. lL
wlll have no deallngs wlLh Lhe publlc and Lhe publlc wlll have no rlghL Lo demand any servlces from lL.
lL ls well Lo polnL ouL LhaL Lhe role of prlvaLe respondenL as lessor durlng Lhe lease perlod musL be
dlsLlngulshed from Lhe role of Lhe hlllpplne Camlng ManagemenL CorporaLlon (CMC) ln Lhe case of
kllosbayan, lnc. v. Culngona, 232-SC8A 110 (1994). 1hereln, Lhe ConLracL of Lease beLween CMC and
Lhe hlllpplne CharlLy SweepsLakes Cfflce (CSC) was acLually a collaboraLlon or [olnL venLure
agreemenL prescrlbed under Lhe charLer of Lhe CSC. ln Lhe ConLracL of Lease, CMC, Lhe lessor
obllgaLed lLself Lo bulld, aL lLs own expense, all Lhe faclllLles necessary Lo operaLe and malnLaln a
naLlonwlde on-llne loLLery sysLem from whom CSC was Lo lease Lhe faclllLles and operaLe Lhe same.
upon due examlnaLlon of Lhe conLracL, Lhe CourL found LhaL CMC's parLlclpaLlon was noL conflned Lo
Lhe consLrucLlon and seLLlng up of Lhe on-llne loLLery sysLem. lL spllled over Lo Lhe acLual operaLlon
Lhereof, becomlng lndlspensable Lo Lhe pursulL, conducL, admlnlsLraLlon and conLrol of Lhe hlghly
Lechnlcal and sophlsLlcaLed loLLery sysLem. ln effecL, Lhe CSC leased ouL lLs franchlse Lo CMC whlch
acLually operaLed and managed Lhe same. LLphll
lndeed, a mere owner and lessor of Lhe faclllLles used by a publlc uLlllLy ls noL a publlc uLlllLy (rovldence
and W.8. Co. v. unlLed SLaLes, 46 l. 2d 149, 132 [1930], Chlppewa ower Co. v. 8allroad Commlsslon of
Wlsconsln, 203 n.W. 900, 903, 188 Wls. 246 [1923], Lllls v. lnLersLaLe Commerce Commlsslon, lll. 33 S.
CL. 643, 646, 237 u.S. 434, 39 L. Ld. 1036 [1914]). nelLher are owners of Lank, refrlgeraLor, wlne, poulLry
and beer cars who supply cars under conLracL Lo rallroad companles consldered as publlc uLlllLles
(CrysLal Car Llne v. SLaLe 1ax Commlsslon, 174 . 2d 984, 987 [1946]).
Lven Lhe mere formaLlon of a publlc uLlllLy corporaLlon does noL lpso facLo characLerlze Lhe corporaLlon
as one operaLlng a publlc uLlllLy. 1he momenL for deLermlnlng Lhe requlslLe llllplno naLlonallLy ls when
Lhe enLlLy applles for a franchlse, cerLlflcaLe or any oLher form of auLhorlzaLlon for LhaL purpose (eople
v. Cuasha, 93 hll. 333 (1933]).
2. eLlLloners furLher asserL LhaL Lhe 8L1 scheme under Lhe AgreemenLs ln quesLlon ls noL
recognlzed ln Lhe 8C1 Law and lLs lmplemenLlng 8ules and 8egulaLlons.
SecLlon 2 of Lhe 8C1 Law deflnes Lhe 8C1 and 81 schemes as follows:
"(a) 8ulld-operaLe-and-Lransfer scheme - A conLracLual arrangemenL whereby Lhe conLracLor
underLakes Lhe consLrucLlon, lncludlng flnanclng, of a glven lnfrasLrucLure faclllLy, and Lhe operaLlon and
malnLenance Lhereof. 1he conLracLor operaLes Lhe faclllLy over a flxed Lerm durlng whlch lL ls allowed Lo
charge faclllLy users approprlaLe Lolls, fees, renLals, and charges sufflclenL Lo enable Lhe conLracLor Lo
recover lLs operaLlng and malnLenance expenses and lLs lnvesLmenL ln Lhe pro[ecL plus a reasonable raLe
of reLurn Lhereon. 1he conLracLor Lransfers Lhe faclllLy Lo Lhe governmenL agency or local governmenL
unlL concerned aL Lhe end of Lhe flxed Lerm whlch shall noL exceed flfLy (30) years. lor Lhe consLrucLlon
sLage, Lhe conLracLor may obLaln flnanclng from forelgn and/or domesLlc sources and/or engage Lhe
servlces of a forelgn and/or llllplno consLrucLor [slc]: rovlded, 1haL Lhe ownershlp sLrucLure of Lhe
conLracLor of an lnfrasLrucLure faclllLy whose operaLlon requlres a publlc uLlllLy franchlse musL be ln
accordance wlLh Lhe ConsLlLuLlon: rovlded, however, 1haL ln Lhe case of corporaLe lnvesLors ln Lhe
bulld-operaLe-and-Lransfer corporaLlon, Lhe clLlzenshlp of each sLockholder ln Lhe corporaLe lnvesLors
shall be Lhe basls for Lhe compuLaLlon of llllplno equlLy ln Lhe sald corporaLlon: rovlded, furLher, 1haL,
ln Lhe case of forelgn consLrucLors [slc], llllplno labor shall be employed or hlred ln Lhe dlfferenL phases
of Lhe consLrucLlon where llllplno skllls are avallable: rovlded, furLhermore, LhaL Lhe flnanclng of a
forelgn or forelgn-conLrolled conLracLor from hlllpplne governmenL flnanclng lnsLlLuLlons shall noL
exceed LwenLy percenL (20) of Lhe LoLal cosL of Lhe lnfrasLrucLure faclllLy or pro[ecL: rovlded, flnally,
1haL flnanclng from forelgn sources shall noL requlre a guaranLee by Lhe CovernmenL or by governmenL-
owned or conLrolled corporaLlons. 1he bulld-operaLe-and-Lransfer scheme shall lnclude a supply-and-
operaLe slLuaLlon whlch ls a conLracLual arrangemenL whereby Lhe suppller of equlpmenL and machlnery
for a glven lnfrasLrucLure faclllLy, lf Lhe lnLeresL of Lhe CovernmenL so requlres, operaLes Lhe faclllLy
provldlng ln Lhe process Lechnology Lransfer and Lralnlng Lo llllplno naLlonals. cdphll
(b) 8ulld-and-Lransfer scheme - A conLracLual arrangemenL whereby Lhe conLracLor underLakes
Lhe consLrucLlon lncludlng flnanclng, of a glven lnfrasLrucLure faclllLy, and lLs Lurnover afLer compleLlon
Lo Lhe governmenL agency or local governmenL unlL concerned whlch shall pay Lhe conLracLor lLs LoLal
lnvesLmenL expended on Lhe pro[ecL, plus a reasonable raLe of reLurn Lhereon. 1hls arrangemenL may be
employed ln Lhe consLrucLlon of any lnfrasLrucLure pro[ecL lncludlng crlLlcal faclllLles whlch for securlLy
or sLraLeglc reasons, musL be operaLed dlrecLly by Lhe governmenL" (lLallcs supplled).
1he 8C1 scheme ls expressly deflned as one where Lhe conLracLor underLakes Lhe consLrucLlon and
flnanclng of an lnfrasLrucLure faclllLy, and operaLes and malnLalns Lhe same. 1he conLracLor operaLes Lhe
faclllLy for a flxed perlod durlng whlch lL may recover lLs expenses and lnvesLmenL ln Lhe pro[ecL plus a
reasonable raLe of reLurn Lhereon. AfLer Lhe explraLlon of Lhe agreed Lerm, Lhe conLracLor Lransfers Lhe
ownershlp and operaLlon of Lhe pro[ecL Lo Lhe governmenL.
ln Lhe 81 scheme, Lhe conLracLor underLakes Lhe consLrucLlon and flnanclng of Lhe faclllLy, buL afLer
compleLlon, Lhe ownershlp and operaLlon Lhereof are Lurned over Lo Lhe governmenL. 1he governmenL,
ln Lurn, shall pay Lhe conLracLor lLs LoLal lnvesLmenL on Lhe pro[ecL ln addlLlon Lo a reasonable raLe of
reLurn. lf paymenL ls Lo be effecLed Lhrough amorLlzaLlon paymenLs by Lhe governmenL lnfrasLrucLure
agency or local governmenL unlL concerned, Lhls shall be made ln accordance wlLh a scheme proposed ln
Lhe bld and lncorporaLed ln Lhe conLracL (8.A. no. 6937, Sec. 6).
Lmphasls musL be made LhaL under Lhe 8C1 scheme, Lhe owner of Lhe lnfrasLrucLure faclllLy musL
comply wlLh Lhe clLlzenshlp requlremenL of Lhe ConsLlLuLlon on Lhe operaLlon of a publlc uLlllLy. no such
a requlremenL ls lmposed ln Lhe 81 scheme.
1here ls no menLlon ln Lhe 8C1 Law LhaL Lhe 8C1 and 81 schemes bar any oLher arrangemenL for Lhe
paymenL by Lhe governmenL of Lhe pro[ecL cosL. 1he law musL noL be read ln such a way as Lo rule ouL or
unduly resLrlcL any varlaLlon wlLhln Lhe conLexL of Lhe Lwo schemes. lndeed, no sLaLuLe can be enacLed
Lo anLlclpaLe and provlde all Lhe flne polnLs and deLalls for Lhe mulLlfarlous and complex slLuaLlons LhaL
may be encounLered ln enforclng Lhe law (ulrecLor of loresLry v. Munoz, 23 SC8A 1183 [1968], eople v.
Lxconde, 101 hll. 1123 [1937], unlLed SLaLes v. 1upasl Mollna, 29 hll. 119 [1914]).
1he 8L1 scheme ln Lhe challenged agreemenLs ls buL a varlaLlon of Lhe 81 scheme under Lhe law.
As a maLLer of facL, Lhe burden on Lhe governmenL ln ralslng funds Lo pay for Lhe pro[ecL ls made llghLer
by allowlng lL Lo amorLlze paymenLs ouL of Lhe lncome from Lhe operaLlon of Lhe L81 SysLem. LlbLex
ln form and subsLance, Lhe challenged agreemenLs provlde LhaL renLals are Lo be pald on a monLhly
basls accordlng Lo a schedule of raLes Lhrough and under Lhe Lerms of a conflrmed lrrevocable 8evolvlng
LeLLer of CredlL (SupplemenLal AgreemenL, Sec. 6, 8ollo, p. 83). AL Lhe end of 23 years and when full
paymenL shall have been made Lo and recelved by prlvaLe respondenL, lL shall Lransfer Lo uC1C, free
from any llen or encumbrances, all lLs LlLle Lo, rlghLs and lnLeresL ln, Lhe pro[ecL for only u.S. $1.00
(8evlsed and 8esLaLed AgreemenL, Sec. 11.1, SupplemenLal AgreemenL, Sec. 7, 8ollo, pp. 67, 87).
A lease ls a conLracL where one of Lhe parLles blnds hlmself Lo glve Lo anoLher Lhe en[oymenL or use of a
Lhlng for a cerLaln prlce and for a perlod whlch may be deflnlLe or lndeflnlLe buL noL longer Lhan 99 years
(Clvll Code of Lhe hlllpplnes, ArL. 1643). 1here ls no Lransfer of ownershlp aL Lhe end of Lhe lease
perlod. 8uL lf Lhe parLles sLlpulaLe LhaL LlLle Lo Lhe leased premlses shall be Lransferred Lo Lhe lessee aL
Lhe end of Lhe lease perlod upon Lhe paymenL of an agreed sum, Lhe lease becomes a lease-purchase
agreemenL. LL[ur
lurLhermore, lL ls of no slgnlflcance LhaL Lhe renLs shall be pald ln unlLed SLaLes currency, noL hlllpplne
pesos. 1he LuSA L81 lll ro[ecL ls a hlgh prlorlLy pro[ecL cerLlfled by Congress and Lhe naLlonal Lconomlc
and uevelopmenL AuLhorlLy as falllng under Lhe lnvesLmenL rlorlLles lan of CovernmenL (8ollo, pp.
310-311). lL ls, Lherefore, ouLslde Lhe appllcaLlon of Lhe unlform Currency AcL (8.A. no. 329), whlch
reads as follows:
"Sec. 1. Lvery provlslon conLalned ln, or made wlLh respecL Lo, any domesLlc obllgaLlon Lo wlL, any
obllgaLlon conLracLed ln Lhe hlllpplnes whlch provlslons purporLs Lo glve Lhe obllgee Lhe rlghL Lo requlre
paymenL ln gold or ln a parLlcular klnd of coln or currency oLher Lhan hlllpplne currency or ln an
amounL of money of Lhe hlllpplnes measured Lhereby, be as lL ls hereby declared agalnsL publlc pollcy,
and null, vold, and of no effecL, and no such provlslon shall be conLalned ln, or made wlLh respecL Lo, any
obllgaLlon hereafLer lncurred. 1he above prohlblLlon shall noL apply Lo (a) . . ., (b) LransacLlons affecLlng
hlgh-prlorlLy economlc pro[ecLs for agrlculLural, lndusLrlal and power developmenL as may be
deLermlned by Lhe naLlonal Lconomlc Councll whlch are flnanced by or Lhrough forelgn funds, . . . ."
3. 1he facL LhaL Lhe conLracL for Lhe consLrucLlon of Lhe LuSA L81 lll was awarded Lhrough
negoLlaLlon and before congresslonal approval on !anuary 22 and 23, 1992 of Lhe LlsL of naLlonal
ro[ecLs Lo be underLaken by Lhe prlvaLe secLor pursuanL Lo Lhe 8C1 Law (8ollo, pp. 309-312) does noL
sufflce Lo lnvalldaLe Lhe award.
SubsequenL congresslonal approval of Lhe llsL lncludlng "rall-based pro[ecLs packaged wlLh commerclal
developmenL opporLunlLles" (8ollo, p. 310) under whlch Lhe LuSA L81 lll pro[ecL falls, amounLs Lo a
raLlflcaLlon of Lhe prlor award of Lhe LuSA L81 lll conLracL under Lhe 8C1 Law.
eLlLloners lnslsL LhaL Lhe prequallflcaLlon process whlch led Lo Lhe negoLlaLed award of Lhe conLracL
appears Lo have been rlgged from Lhe very beglnnlng Lo do away wlLh Lhe usual open lnLernaLlonal
publlc blddlng where quallfled lnLernaLlonally known appllcanLs could falrly parLlclpaLe.
1he records show LhaL only one appllcanL passed Lhe prequallflcaLlon process. Slnce only one was lefL, Lo
conducL a publlc blddlng ln accordance wlLh SecLlon 3 of Lhe 8C1 Law for LhaL lone parLlclpanL wlll be an
absurd and polnLless exerclse (cf. ueloso v. Sandlganbayan, 217 SC8A 49, 61 [1993]).
ConLrary Lo Lhe commenLs of Lhen LxecuLlve SecreLary urllon, SecLlon 3 of Lhe 8C1 Law ln relaLlon Lo
resldenLlal uecree no. 1394 allows Lhe negoLlaLed award of governmenL lnfrasLrucLure pro[ecLs.
resldenLlal uecree no. 1394, "rescrlblng ollcles, Culdellnes, 8ules and 8egulaLlons for CovernmenL
lnfrasLrucLure ConLracLs," allows Lhe negoLlaLed award of governmenL pro[ecLs ln excepLlonal cases.
SecLlon 4 of Lhe sald law reads as follows:
"8lddlng. - ConsLrucLlon pro[ecLs shall generally be underLaken by conLracL afLer compeLlLlve publlc
blddlng. ro[ecLs may be underLaken by admlnlsLraLlon or force accounL or by negoLlaLed conLracL only
ln excepLlonal cases where Llme ls of Lhe essence, or where Lhere ls lack of quallfled bldders or
conLracLors, or where Lhere ls concluslve evldence LhaL greaLer economy and efflclency would be
achleved Lhrough Lhls arrangemenL, and ln accordance wlLh provlslon of laws and acLs on Lhe maLLer,
sub[ecL Lo Lhe approval of Lhe MlnlsLer of ubllc Works and 1ransporLaLlon and CommunlcaLlons, Lhe
MlnlsLer of ubllc Plghways, or Lhe MlnlsLer of Lnergy, as Lhe case may be, lf Lhe pro[ecL cosL ls less Lhan
1 Mllllon, and Lhe resldenL of Lhe hlllpplnes, upon recommendaLlon of Lhe MlnlsLer, lf Lhe pro[ecL
cosL ls 1 Mllllon or more (lLallcs supplled).
xxx xxx xxx
lndeed, where Lhere ls a lack of quallfled bldders or conLracLors, Lhe award of governmenL lnfrasLrucLure
conLracLs may be made by negoLlaLlon. resldenLlal uecree no. 1394 ls Lhe general law on governmenL
lnfrasLrucLure conLracLs whlle Lhe 8C1 Law governs parLlcular arrangemenLs or schemes almed aL
encouraglng prlvaLe secLor parLlclpaLlon ln governmenL lnfrasLrucLure pro[ecLs. 1he Lwo laws are noL
lnconslsLenL wlLh each oLher buL are ln parl maLerla and should be read LogeLher accordlngly. LlbLex
ln Lhe lnsLanL case, lf Lhe prequallflcaLlon process was acLually LalnLed by foul play, one wonders why
none of Lhe compeLlng flrms ever broughL Lhe maLLer before Lhe 8AC, or lnLervened ln Lhls case before
us (cf. Malayan lnLegraLed lndusLrles Corp. v. CourL of Appeals, 213 SC8A 640 [1992], 8ureau verlLas v.
Cfflce of Lhe resldenL, 203 SC8A 703 [1992]). 1he challenged agreemenLs have been approved by
resldenL 8amos hlmself. AlLhough Lhen LxecuLlve SecreLary urllon may have dlsapproved Lhe
"AgreemenL Lo 8ulld, Lease and 1ransfer a LlghL 8all 1ranslL SysLem for LuSA," Lhere ls noLhlng ln our
laws LhaL prohlblLs parLles Lo a conLracL from renegoLlaLlng and modlfylng ln good falLh Lhe Lerms and
condlLlons Lhereof so as Lo meeL legal, sLaLuLory and consLlLuLlonal requlremenLs. under Lhe
clrcumsLances, Lo requlre Lhe parLles Lo go back Lo sLep one of Lhe prequallflcaLlon process would [usL be
an ldle ceremony. useless bureaucraLlc "red Lape" should be eschewed because lL dlscourages prlvaLe
secLor parLlclpaLlon, Lhe "maln englne" for naLlonal growLh and developmenL (8.A. no. 6937, Sec. 1), and
renders Lhe 8C1 Law nugaLory.
8epubllc AcL no. 7718 recognlzes and deflnes a 8L1 scheme ln SecLlon 2 Lhereof as:
"(e) 8ulld-lease-and-Lransfer - A conLracLual arrangemenL whereby a pro[ecL proponenL ls
auLhorlzed Lo flnance and consLrucL an lnfrasLrucLure or developmenL faclllLy and upon lLs compleLlon
Lurns lL over Lo Lhe governmenL agency or local governmenL unlL concerned on a lease arrangemenL for
a flxed perlod afLer whlch ownershlp of Lhe faclllLy ls auLomaLlcally Lransferred Lo Lhe governmenL
agency or local governmenL unlL concerned."
SecLlon 3-A of Lhe law, whlch expressly allows dlrecL negoLlaLlon of conLracLs, provldes:
"ulrecL negoLlaLlon of ConLracLs. - ulrecL negoLlaLlon shall be resorLed Lo when Lhere ls only one
complylng bldder lefL as deflned hereunder.
"(a) lf, afLer adverLlsemenL, only one conLracLor applles for prequallflcaLlon and lL meeLs Lhe
prequallflcaLlon requlremenLs, afLer whlch lL ls requlred Lo submlL a bld proposal whlch ls subsequenLly
found by Lhe agency/local governmenL unlL (LCu) Lo be complylng.
"(b) lf, afLer adverLlsemenL, more Lhan one conLracLor applled for prequallflcaLlon buL only one
meeLs Lhe prequallflcaLlon requlremenLs, afLer whlch lL submlLs bld/proposal whlch ls found by Lhe
agency/local governmenL unlL (LCu) Lo be complylng.
"(c) lf, afLer prequallflcaLlon of more Lhan one conLracLor, only one submlLs a bld whlch ls found by
Lhe agency/LCu Lo be complylng.
"(d) lf, afLer prequallflcaLlon, more Lhan one conLracLor submlL blds buL only one ls found by Lhe
agency/LCu Lo be complylng. rovlded, 1haL, any of Lhe dlsquallfled prospecLlve bldder [slc] may appeal
Lhe declslon of Lhe lmplemenLlng agency/LCus prequallflcaLlon blds and awards commlLLee wlLhln
flfLeen (13) worklng days Lo Lhe head of Lhe agency, ln case of naLlonal pro[ecLs or Lo Lhe ueparLmenL of
Lhe lnLerlor and Local CovernmenL, ln case of local pro[ecLs from Lhe daLe Lhe dlsquallflcaLlon was made
known Lo Lhe dlsquallfled bldder: rovlded, furLhermore, 1haL Lhe lmplemenLlng agency/LCus
concerned should acL on Lhe appeal wlLhln forLy-flve (43) worklng days from recelpL Lhereof." cdrep
eLlLloners' clalm LhaL Lhe 8L1 scheme and dlrecL negoLlaLlon of conLracLs are noL conLemplaLed by Lhe
8C1 Law has now been rendered mooL and academlc by 8.A. no. 7718. Sec. 3 of Lhls law auLhorlzes all
governmenL lnfrasLrucLure agencles, governmenL-owned and conLrolled corporaLlons and local
governmenL unlLs Lo enLer lnLo conLracL wlLh any duly prequallfled proponenL for Lhe flnanclng,
consLrucLlon, operaLlon and malnLenance of any flnanclally vlable lnfrasLrucLure or developmenL faclllLy
Lhrough a 8C1, 81, 8L1, 8CC (8ulld-own-and-operaLe), 81C (8ulld-Lransfer-and-operaLe), CAC (ConLracL-
add-operaLe), uC1 (uevelop-operaLe-and-Lransfer), 8C1 (8ehablllLaLe-operaLe-and-Lransfer), and 8CC
(8ehablllLaLe-own-operaLe) (8.A. no. 7718, Sec. 2 [b-[]).
lrom Lhe law lLself, once an appllcanL has prequallfled, lL can enLer lnLo any of Lhe schemes ln SecLlon 2
Lhereof, lncludlng a 8L1 arrangemenL, enumeraLed and deflned Lhereln (Sec. 3).
8epubllc AcL no. 7718 ls a curaLlve sLaLuLe. lL ls lnLended Lo provlde flnanclal lncenLlves and "a cllmaLe of
mlnlmum governmenL regulaLlons and procedures and speclflc governmenL underLaklngs ln supporL of
Lhe prlvaLe secLor" (Sec. 1). A curaLlve sLaLuLe makes valld LhaL whlch before enacLmenL of Lhe sLaLuLe
was lnvalld. 1hus, whaLever doubLs and alleged procedural lapses prlvaLe respondenL and uC1C may
have engendered and commlLLed ln enLerlng lnLo Lhe quesLloned conLracLs, Lhese have now been cured
by 8.A. no. 7718 (cf. uevelopmenL 8ank of Lhe hlllpplnes v. CourL of Appeals, 96 SC8A 342 [1980],
SanLos v. uuaLa, 14 SC8A 1041 [1963], Adong v. Cheong Seng Cee, 43 hll. 43 [1922]).
4. LasLly, peLlLloners clalm LhaL Lhe agreemenLs are grossly dlsadvanLageous Lo Lhe governmenL
because Lhe renLal raLes are excesslve and prlvaLe respondenL's developmenL rlghLs over Lhe 13 sLaLlons
and Lhe depoL wlll rob uC1C of Lhe besL Lerms durlng Lhe mosL producLlve years of Lhe pro[ecL.
lL musL be noLed LhaL as parL of Lhe LuSA L81 lll pro[ecL, prlvaLe respondenL has been granLed, for a
perlod of 23 years, excluslve rlghLs over Lhe depoL and Lhe alr space above Lhe sLaLlons for developmenL
lnLo commerclal premlses for lease, sublease, Lransfer, or adverLlslng (SupplemenLal AgreemenL, Sec.
11, 8ollo, pp. 91-92). lor and ln conslderaLlon of Lhese developmenL rlghLs, prlvaLe respondenL shall pay
uC1C ln hlllpplne currency guaranLeed revenues generaLed Lherefrom ln Lhe amounLs seL forLh ln Lhe
SupplemenLal AgreemenL (Sec. 11, 8ollo, p. 93). ln Lhe evenL LhaL uC1C shall be unable Lo collecL Lhe
guaranLeed revenues, uC1C shall be allowed Lo deducL any shorLfalls from Lhe monLhly renL due prlvaLe
respondenL for Lhe consLrucLlon of Lhe LuSA L81 lll. (SupplemenLal AgreemenL, Sec. 11, 8ollo, pp. 93-
94). All rlghLs, LlLles, lnLeresLs and lncome over all conLracLs on Lhe commerclal spaces shall reverL Lo
uC1C upon explraLlon of Lhe 23-year perlod (SupplemenLal AgreemenL, Sec. 11, 8ollo, pp. 91-92).
1he Lerms of Lhe agreemenLs were arrlved aL afLer a palnsLaklng sLudy by uC1C. 1he deLermlnaLlon by
Lhe proper admlnlsLraLlve agencles and offlclals who have acqulred experLlse, speclallzed skllls and
knowledge ln Lhe performance of Lhelr funcLlons should be accorded respecL, absenL any showlng of
grave abuse of dlscreLlon (lellpe ?smael, !r. & Co. v uepuLy LxecuLlve SecreLary, 190 SC8A 673 [1990],
8oard of Medlcal LducaLlon v. Alfonso, 176 SC8A 304 [1989]).
CovernmenL offlclals are presumed Lo perform Lhelr funcLlons wlLh regularlLy and sLrong evldence ls
necessary Lo rebuL Lhls presumpLlon. eLlLloners have noL presenLed evldence on Lhe reasonable renLals
Lo be pald by Lhe parLles Lo each oLher. 1he maLLer of valuaLlon ls an esoLerlc fleld whlch ls beLLer lefL Lo
Lhe experLs and whlch Lhls CourL ls noL eager Lo underLake.
1haL Lhe granLee of a governmenL conLracL wlll proflL Lherefrom and Lo LhaL exLenL Lhe governmenL ls
deprlved of Lhe proflLs lf lL engages ln Lhe buslness lLself, ls noL worLhy of belng ralsed as an lssue. ln all
cases where a parLy enLers lnLo a conLracL wlLh Lhe governmenL, he does so, noL ouL of charlLy and noL
Lo lose money, buL Lo galn pecunlarlly. cdrep
3. ueflnlLely, Lhe agreemenLs ln quesLlon have been enLered lnLo by uC1C ln Lhe exerclse of lLs
governmenLal funcLlon. uC1C ls Lhe prlmary pollcy, plannlng, programmlng, regulaLlng and
admlnlsLraLlve enLlLy of Lhe LxecuLlve branch of governmenL ln Lhe promoLlon, developmenL and
regulaLlon of dependable and coordlnaLed neLworks of LransporLaLlon and communlcaLlons sysLems as
well as ln Lhe fasL, safe, efflclenL and rellable posLal, LransporLaLlon and communlcaLlons servlces
(AdmlnlsLraLlve Code of 1987, 8ook lv, 1lLle xv, Sec. 2). lL ls Lhe LxecuLlve deparLmenL, uC1C ln
parLlcular, LhaL has Lhe power, auLhorlLy and Lechnlcal experLlse Lo deLermlne wheLher or noL a speclflc
LransporLaLlon or communlcaLlons pro[ecL ls necessary, vlable and beneflclal Lo Lhe people. 1he
dlscreLlon Lo award a conLracL ls vesLed ln Lhe governmenL agencles enLrusLed wlLh LhaL funcLlon
(8ureau verlLas v. Cfflce of Lhe resldenL, 203 SC8A 703 [1992]).
WPL8LlC8L, Lhe peLlLlon ls ulSMlSSLu.
SC C8uL8Lu.
8elloslllo and kapunan, !!., concur.
narvasa, C.!., 8ldln, Melo, uno, vlLug, and lranclsco, !!., [oln !usLlce Mendoza's concurrlng oplnlon.
lellclano and uavlde, !r., !!., see dlssenLlng oplnlon.
adllla and 8egalado, !!., concur ln Lhe resulL.
8omero, !., ls on leave.
Mendoza, !., see concurrlng oplnlon.
SeparaLe Cplnlons
uAvluL, !8., !., dlssenLlng:
AfLer wadlng Lhrough Lhe record of Lhe vlclsslLudes of Lhe challenged conLracL and evaluaLlng Lhe lssues
ralsed and Lhe argumenLs adduced by Lhe parLles, l flnd myself unable Lo [oln Lhe ma[orlLy ln Lhe well-
wrlLLen ponencla of Mr. !usLlce Camllo . Culason. cdll
l mosL respecLfully submlL LhaL Lhe challenged conLracL ls vold for aL leasL Lwo reasons: (a) lL ls an ulLra-
vlres acL of Lhe ueparLmenL of 1ransporLaLlon and CommunlcaLlons (uC1C) slnce under 8.A. 6937 Lhe
uC1C has no auLhorlLy Lo enLer lnLo a 8ulld-Lease-and-1ransfer (8L1) conLracL, and (b) even assumlng
arguendo LhaL lL has, Lhe conLracL was enLered lnLo wlLhouL complylng wlLh Lhe mandaLory requlremenL
of publlc blddlng.
l
8espondenLs admlL LhaL Lhe assalled conLracL was enLered lnLo under 8.A. 6937. 1hls law, flLLlngly
enLlLled "An AcL AuLhorlzlng Lhe llnanclng, ConsLrucLlon, CperaLlon and MalnLenance of lnfrasLrucLure
ro[ecLs by Lhe rlvaLe SecLor, and lor CLher urposes," recognlzes only Lwo (2) klnds of conLracLual
arrangemenLs beLween Lhe prlvaLe secLor and governmenL lnfrasLrucLure agencles: (a) Lhe 8ulld-
CperaLe-and-1ransfer (8C1) scheme and (b) Lhe 8ulld-and-1ransfer (81) scheme. 1hls concluslon flnds
supporL ln SecLlon 2 Lhereof whlch deflnes only Lhe 8C1 and 81 schemes, ln SecLlon 3 whlch expllclLly
provldes for sald schemes Lhus:
SLC. 3. rlvaLe lnlLlaLlve ln lnfrasLrucLure. - All governmenL lnfrasLrucLure agencles, lncludlng
governmenL-owned and conLrolled corporaLlons and local governmenL unlLs, are hereby auLhorlzed Lo
enLer lnLo conLracL wlLh any duly prequallfled prlvaLe conLracLor for Lhe flnanclng, consLrucLlon,
operaLlon and malnLenance of any flnanclally vlable lnfrasLrucLure faclllLles Lhrough Lhe bulld-operaLe-
and-Lransfer or bulld-and-Lransfer scheme, sub[ecL Lo Lhe Lerms and condlLlons herelnafLer seL forLh.
(lLallcs supplled).
and ln SecLlon 3 whlch requlres publlc blddlng of pro[ecLs under boLh schemes.
All prlor acLs and negoLlaLlons leadlng Lo Lhe perfecLlon of Lhe challenged conLracL were clearly lnLended
and pursued for such schemes.
A 8ulld-Lease-and-1ransfer (8L1) scheme ls noL auLhorlzed under Lhe sald law, and none of Lhe aforesald
prlor acLs and negoLlaLlons were deslgned for such unauLhorlzed scheme. Pence, Lhe uC1C ls wlLhouL
any power or auLhorlLy Lo enLer lnLo Lhe 8L1 conLracL ln quesLlon.
1he ma[orlLy oplnlon malnLalns, however, LhaL slnce "[L]here ls no menLlon ln Lhe 8C1 Law and LhaL Lhe
8C1 and Lhe 81 schemes bar any oLher arrangemenL for Lhe paymenL by Lhe governmenL of Lhe pro[ecL
cosL," Lhen "[L]he law musL noL be read ln such a way as Lo rule ouL or unduly resLrlcL any varlaLlon
wlLhln Lhe conLexL of Lhe Lwo schemes." 1hls lnLerpreLaLlon would be correcL lf Lhe law lLself provldes
room for flexlblllLy. We flnd no such provlslon ln 8.A. no. 6937. lf lL lnLended Lo lnclude a 8L1 scheme,
Lhen lL should have so sLaLed, for conLracLs of lease are noL unknown ln our [urlsdlcLlon, and Congress
has enacLed several laws relaLlng Lo leases. 1haL Lhe 8L1 scheme was never lnLended as a permlsslble
varlaLlon "wlLhln Lhe conLexL" of Lhe 8C1 and 81 schemes ls concluslvely esLabllshed by Lhe passage of
8.A. no. 7718 whlch amends:
a) SecLlon 2 by addlng Lo Lhe orlglnal 8C1 and 81 schemes Lhe followlng schemes:
(1) 8ulld-own-and operaLe (8CC)
(2) 8ulld-lease-and Lransfer (8L1)
(3) 8ulld-Lransfer-and-operaLe (81C)
(4) ConLracL-add-and-operaLe (CAC)
(3) uevelop-operaLe-and-Lransfer (uC1)
(6) 8ehablllLaLe-operaLe-and-Lransfer (8C1)
(7) 8ehablllLaLe-own-and-operaLe (8CC)
b) SecLlon 3 of 8.A. no. 6937 by deleLlng Lherefrom Lhe phrase "Lhrough Lhe bulld-operaLe-and-
Lransfer or bulld-and-Lransfer scheme". LLphll
ll
ubllc blddlng ls mandaLory ln 8.A. no. 6937. SecLlon 3 Lhereof reads as follows:
SLC. 3. ubllc 8lddlng of ro[ecLs. - upon approval of Lhe pro[ecLs menLloned ln SecLlon 4 of Lhls AcL,
Lhe concerned head of Lhe lnfrasLrucLure agency or local governmenL unlL shall forLhwlLh cause Lo be
publlshed, once every week for Lhree (3) consecuLlve weeks, ln aL leasL Lwo (2) newspapers of general
clrculaLlon and ln aL leasL one (1) local newspaper whlch ls clrculaLed ln Lhe reglon, provlnce, clLy or
munlclpallLy ln whlch Lhe pro[ecL ls Lo be consLrucLed a noLlce lnvlLlng all duly prequallfled lnfrasLrucLure
conLracLors Lo parLlclpaLe ln Lhe publlc blddlng for Lhe pro[ecLs so approved. ln Lhe case of a bulld-
operaLe-and-Lransfer arrangemenL, Lhe conLracL shall be awarded Lo Lhe lowesL complylng bldder based
on Lhe presenL value of lLs proposed Lolls, fees, renLals, and charges over a flxed Lerm for Lhe faclllLy Lo
be consLrucLed, operaLed, and malnLalned accordlng Lo Lhe prescrlbed mlnlmum deslgn and
performance sLandards, plans, and speclflcaLlons. lor Lhls purpose, Lhe wlnnlng conLracLor shall be
auLomaLlcally granLed by Lhe lnfrasLrucLure agency or local governmenL unlL Lhe franchlse Lo operaLe
and malnLaln Lhe faclllLy, lncludlng Lhe collecLlon of Lolls, fees, renLals, and charges ln accordance wlLh
SecLlon 6 hereof.
ln Lhe case of a bulld-and-Lransfer arrangemenL, Lhe conLracL shall be awarded Lo Lhe lowesL complylng
bldder based on Lhe presenL value of lLs proposed, schedule of amorLlzaLlon paymenLs for Lhe faclllLy Lo
be consLrucLed accordlng Lo Lhe prescrlbed mlnlmum deslgn and performance sLandards, plans and
speclflcaLlons: rovlded, however, 1haL a llllplno consLrucLor who submlLs an equally advanLageous bld
shall be glven preference.
A copy of each bulld-operaLe-and-Lransfer or bulld-and-Lransfer conLracL shall forLhwlLh be submlLLed Lo
Congress for lLs lnformaLlon.
1he requlremenL of publlc blddlng ls noL an ldle ceremony. lL has been apLly sald LhaL ln our [urlsdlcLlon
"publlc blddlng ls Lhe pollcy and medlum adhered Lo ln CovernmenL procuremenL and consLrucLlon
conLracLs under exlsLlng laws and regulaLlons. lL ls Lhe accepLed meLhod for arrlvlng aL a falr and
reasonable prlce and ensures LhaL overprlclng, favorlLlsm and oLher anomalous pracLlces are ellmlnaLed
or mlnlmlzed. And any CovernmenL conLracL enLered lnLo wlLhouL Lhe requlred blddlng ls null and vold
and cannoL adversely affecL Lhe rlghLs of Lhlrd parLles." (8arLolome C. lernandez, !r., A 18LA1lSL Cn
CCvL8nMLn1 CCn18AC1S unuL8 PlLllnL LAW 23 [rev. ed. 1991], clLlng CalLex vs. uelgado 8ros.,
96 hll. 368 [1934]).
1he Cfflce of Lhe resldenL, Lhrough Lhen LxecuLlve SecreLary lranklln urllon correcLly dlsapproved Lhe
conLracL because no publlc blddlng ln sLrlcL compllance wlLh SecLlon 3 of 8.A. no. 6937 was conducLed.
SecreLary urllon furLher blunLly sLaLed LhaL Lhe provlslon of Lhe lmplemenLlng 8ules of sald law
auLhorlzlng negoLlaLed conLracLs was of doubLful legallLy. lndeed, lL ls null and vold because Lhe law
lLself does noL recognlze or allow negoLlaLed conLracLs.
Powever, Lhe ma[orlLy oplnlon poslLs Lhe vlew LhaL slnce only prlvaLe respondenL LuSA L81 was
prequallfled, Lhen a publlc blddlng would be "an absurd and polnLless exerclse." l submlL LhaL Lhe
mandaLory requlremenL of publlc blddlng cannoL be legally dlspensed wlLh slmply because only one was
quallfled Lo bld durlng Lhe prequallflcaLlon proceedlngs. SecLlon 3 mandaLes LhaL Lhe 8C1 or 81 conLracL
should be awarded "Lo Lhe lowesL complylng bldder," whlch loglcally means LhaL Lhere musL aL leasL be
Lwo (2) bldders. lf Lhls mlnlmum requlremenL ls noL meL, Lhen Lhe proposed blddlng should be deferred
and a new prequallflcaLlon proceedlng be scheduled. Lven Lhose who were earller dlsquallfled may by
Lhen have quallfled because Lhey may have, ln Lhe meanLlme, exerLed efforLs Lo meeL all Lhe
quallflcaLlons.
1hls vlew of Lhe ma[orlLy would open Lhe floodgaLes Lo Lhe rlgglng of prequallflcaLlon proceedlngs or Lo
unholy consplracles among prospecLlve bldders, whlch would even lnclude dlshonesL governmenL
offlclals. 1hey could [usL agree, for a cerLaln conslderaLlon, LhaL only one of Lhem would quallfy ln order
LhaL Lhe laLLer would auLomaLlcally corner Lhe conLracL and obLaln Lhe award.
1haL SecLlon 3 admlLs of no excepLlon and LhaL no blddlng could be valldly had wlLh only one bldder ls
llkewlse concluslvely shown by Lhe amendmenLs lnLroduced by 8.A. no. 7718. er SecLlon 7 Lhereof, a
new secLlon denomlnaLed as SecLlon 3-A was lnLroduced ln 8.A. no. 6937 Lo allow dlrecL negoLlaLlon of
conLracLs. 1hls new secLlon reads:
SLC. 3-A. ulrecL negoLlaLlon of ConLracLs. - ulrecL negoLlaLlon shall be resorLed Lo when Lhere ls
only one complylng bldder lefL as deflned hereunder. LLpr
(a) lf, afLer adverLlsemenL, only one conLracLor applles for prequallflcaLlon requlremenLs, afLer
whlch lL ls requlred Lo submlL a bld/proposal whlch ls subsequenLly found by Lhe agency/local
governmenL unlL (LCu) Lo be complylng.
(b) lf, afLer adverLlsemenL, more Lhan one conLracLor applled for prequallflcaLlon buL only one
meeLs Lhe prequallflcaLlon requlremenLs, afLer whlch lL submlLs bld/proposal whlch ls found by Lhe
agency/local governmenL unlL (LCu) Lo be complylng.
(c) lf, afLer prequallflcaLlon of more Lhan one conLracLor, only one submlLs a bld whlch ls found by
Lhe agency/LCu Lo be complylng.
(d) lf, afLer prequallflcaLlon, more Lhan one conLracLor submlL blds buL only one ls found by Lhe
agency/LCu Lo be complylng: rovlded, 1haL, any of Lhe dlsquallfled prospecLlve bldder may appeal Lhe
declslon of Lhe lmplemenLlng agency/LCus prequallflcaLlon blds and awards commlLLee wlLhln flfLeen
(13) worklng days Lo Lhe head of Lhe agency, ln case of naLlonal pro[ecLs or Lo Lhe ueparLmenL of Lhe
lnLerlor and Local CovernmenL, ln case of local pro[ecLs from Lhe daLe Lhe dlsquallflcaLlon was made
known Lo Lhe dlsquallfled bldder: rovlded, furLhermore, 1haL Lhe lmplemenLlng agency/LCus
concerned should acL on Lhe appeal wlLhln forLy-flve (43) worklng days from recelpL Lhereof.
Can Lhls amendmenL be glven reLroacLlve effecL Lo Lhe challenged conLracL so LhaL lL may now be
consldered a permlsslble negoLlaLed conLracL? l submlL LhaL lL cannoL be 8.A. no. 7718 does noL provlde
LhaL lL should be glven reLroacLlve effecL Lo pre-exlsLlng conLracLs. SecLlon 18 Lhereof says LhaL lL "shall
Lake effecL flfLeen (13) days afLer lLs publlcaLlon ln aL leasL Lwo (2) newspapers of general clrculaLlon." lf
lL were Lhe lnLenLlon of Congress Lo glve sald acL reLroacLlve effecL Lhen lL would have so expressly
provlded. ArLlcle 4 of Lhe Clvll Code provldes LhaL "[l]aws shall have no reLroacLlve effecL, unless Lhe
conLrary ls provlded."
1he presumpLlon ls LhaL all laws operaLe prospecLlvely, unless Lhe conLrary clearly appears or ls clearly,
plalnly, and unequlvocally expressed or necessarlly lmplled. ln every case of doubL, Lhe doubL wlll be
resolved agalnsL Lhe reLroacLlve appllcaLlon of laws. (8uben L. Agpalo, S1A1u1C8? CCnS18uC1lCn 223
[2u. ed, 1990]). As Lo amendaLory acLs, or acLs whlch change an exlsLlng sLaLuLe, SuLherland sLaLes:
ln accordance wlLh Lhe rule appllcable Lo orlglnal acLs, lL ls presumed LhaL provlslons added by Lhe
amendmenL LhaL affecLlng subsLanLlve rlghLs wlll noL be consLrued Lo apply Lo LransacLlons and evenLs
compleLed prlor Lo lLs enacLmenL unless Lhe leglslaLure has expressed lLs lnLenL Lo LhaL effecL or such
lnLenL ls clearly lmplled by Lhe language of Lhe amendmenL or by Lhe clrcumsLances surroundlng lLs
enacLmenL. (1 lrank L. Porack, !r., Su1PL8LAnu'S S1A1u1LS Anu S1A1u1C8? CCnS18uC1lCn 434-436
[1943 ed.])
l voLe Lhen Lo granL Lhe lnsLanL peLlLlon and Lo declare vold Lhe challenged conLracL and lLs supplemenL.
cdrep
lLLlClAnC, ! ., dlssenLlng:
AfLer conslderable sLudy and efforL, and wlLh much relucLance, l flnd l musL dlssenL ln Lhe lnsLanL case. l
agree wlLh many of Lhe Lhlngs seL ouL ln Lhe ma[orlLy oplnlon wrlLLen by my dlsLlngulshed broLher ln Lhe
CourL Culason, !. AL Lhe end of Lhe day, however, l flnd myself unable Lo [oln ln Lhe resulL reached by Lhe
ma[orlLy.
l [oln ln Lhe dlssenLlng oplnlon wrlLLen by Mr. !usLlce uavlde, !r. whlch ls approprlaLely drawn on falrly
narrow grounds. AL Lhe same Llme, l wlsh Lo address brlefly one of Lhe polnLs made by Mr. !usLlce
Culason ln Lhe ma[orlLy oplnlon ln hls efforL Lo meeL Lhe dlfflculLles posed by uavlde, !r., !.
l refer Lo Lhe lnvocaLlon of Lhe provlslons of resldenLlal uecree no. 1394 daLed 11 !une 1978 enLlLled:
"rescrlblng ollcles, Culdellnes, 8ules and 8egulaLlons for CovernmenL lnfrasLrucLure ConLracLs." More
speclflcally, Lhe ma[orlLy oplnlon lnvokes paragraph 1 of SecLlon 4 of Lhls uecree whlch reads as follows:
"Sec. 4. 8lddlng. - ConsLrucLlon pro[ecLs shall generally be underLaken by conLracL afLer compeLlLlve
publlc blddlng. ro[ecLs may be underLaken by admlnlsLraLlon or force accounL or by negoLlaLed conLracL
only ln excepLlonal cases where Llme ls of Lhe essence, or where Lhere ls lack of quallfled bldders or
conLracLors, or where Lhere ls a concluslve evldence LhaL greaLer economy and efflclency would be
achleved Lhrough Lhls arrangemenL, and ln accordance wlLh provlslons of laws and acLs on Lhe maLLer,
sub[ecL Lo Lhe approval of Lhe MlnlsLry of ubllc Works, 1ransporLaLlon and CommunlcaLlons, Lhe
MlnlsLer of ubllc Plghways, or Lhe MlnlsLer of Lnergy, as Lhe case may be, lf Lhe pro[ecL cosL ls less Lhan
1 Mllllon, and of Lhe resldenL of Lhe hlllpplnes, upon Lhe recommendaLlon of Lhe MlnlsLer, lf Lhe
pro[ecL cosL ls 1 Mllllon or more.
xxx xxx xxx
l undersLand Lhe unspoken Lheory ln Lhe ma[orlLy oplnlon Lo be LhaL above SecLlon 4 and presumably
Lhe resL of resldenLlal uecree no. 1394 conLlnue Lo exlsL and Lo run parallel Lo Lhe provlslons of
8epubllc AcL no. 6937, wheLher ln lLs orlglnal form or as amended by 8epubllc AcL no. 7718.
A prlnclpal dlfflculLy wlLh Lhls approach ls LhaL resldenLlal uecree no. 1394 purporLs Lo apply Lo all
"governmenL conLracLs for lnfrasLrucLure and oLher consLrucLlon pro[ecLs." 8uL 8epubllc AcL no. 6937 as
amended by 8epubllc AcL no. 7718, relaLes only Lo "lnfrasLrucLure pro[ecLs" whlch are flnanced,
consLrucLed, operaLed and malnLalned "by Lhe prlvaLe secLor" "Lhrough Lhe bulld/operaLe-and-Lransfer
or bulld-and-Lransfer scheme" under 8epubllc AcL no. 6397 and under a serles of oLher comparable
schemes under 8epubllc AcL no. 7718. ln oLher words, 8epubllc AcL no. 6937 and 8epubllc AcL no. 7718
musL be held, ln my vlew, Lo be speclal sLaLuLes appllcable Lo a more llmlLed fleld of "lnfrasLrucLure
pro[ecLs" Lhan Lhe wlde-ranglng scope of appllcaLlon of Lhe general sLaLuLe, l.e., resldenLlal uecree no.
1394. 1hus, Lhe hlgh relevance of Lhe polnL made by Mr. !usLlce uavlde LhaL 8epubllc AcL no. 6937 ln
speclflc connecLlon wlLh 8C1- and 8L1-Lype of conLracLs lmposed an unquallfled requlremenL of publlc
blddlng seL ouL ln SecLlon 3 Lhereof. prLL
lL should also be polnLed ouL LhaL under resldenLlal uecree no. 1394, pro[ecLs may be underLaken "by
admlnlsLraLlon or force accounL or by negoLlaLed conLracL only"
(1) "ln excepLlonal cases where Llme ls of Lhe essence", or
(2) "where Lhere ls lack of bldders or conLracLors", or
(3) "where Lhere ls a concluslve evldence LhaL greaLer economy and efflclency would be achleved
Lhrough Lhese arrangemenLs, and ln accordance wlLh provlslon[s] of laws and acLs on Lhe maLLer."
lL musL, upon Lhe one hand, be noLed LhaL Lhe speclal law 8epubllc AcL no. 6937 made absoluLely no
menLlon of negoLlaLed conLracLs belng permlLLed Lo dlsplace Lhe requlremenL of publlc blddlng. upon
Lhe oLher hand, SecLlon 3-a, lnserLed ln 8epubllc AcL no. 6937 by Lhe amendlng sLaLuLe 8epubllc AcL no.
7718, does noL purporL Lo auLhorlze dlrecL negoLlaLlon of conLracLs excepL ln four (4) slLuaLlons where
Lhere ls a lack of pre-quallfled conLracLors or complylng bldders. 1hus, even under Lhe amended speclal
sLaLuLe, enLerlng lnLo conLracLs by negoLlaLlon ls noL permlsslble ln Lhe oLher Lwo (2) caLegorles of cases
referred Lo ln SecLlon 4 of resldenLlal uecree no. 1394, l.e., "ln excepLlonal cases where Llme ls of Lhe
essence" and "when Lhere ls concluslve evldence LhaL greaLer economy and efflclency would be
achleved Lhrough Lhese arrangemenLs, eLc."
1he resulL l reach ls LhaL lnsofar as 8C1, eLc.-Lypes of conLracLs are concerned, Lhe appllcable publlc
blddlng requlremenL ls LhaL seL ouL ln 8epubllc AcL no. 6937 and, wlLh respecL Lo such Lype of conLracLs
opened for pre-quallflcaLlon and blddlng afLer Lhe daLe of effecLlvlLy of 8epubllc AcL no. 7718, Lhe
provlslons of 8epubllc AcL no. 7718. 1he assalled conLracL was enLered lnLo before 8epubllc AcL no.
7718 was enacLed.
1he dlfflculLles of applylng Lhe provlslons of resldenLlal uecree no. 1394 Lo Lhe Ldsa L81-Lype of
conLracLs are aggravaLed when one conslders Lhe deLalled "lmplemenLlng 8ules and 8egulaLlons as
amended Aprll 1988" lssued under LhaL resldenLlal uecree. 1 lor lnsLance:
"l8 [2.3.2] 2.4.2 8y negoLlaLed ConLracL
xxx xxx xxx'
a. ln Llmes of emergencles arlslng from naLural calamlLles where lmmedlaLe acLlon ls necessary Lo
prevenL lmmlnenL loss of llfe and/or properLy.
b. lallure Lo award Lhe conLracL afLer compeLlLlve publlc blddlng for valld cause or causes [such as
where Lhe prlces obLalned Lhrough publlc blddlng are all above Lhe AAL and Lhe bldders refuse Lo reduce
Lhelr prlces Lo Lhe AAL].
ln Lhese cases, blddlng may be underLaken Lhrough sealed canvass of aL leasL Lhree (3) quallfled
conLracLors. AuLhorlLy Lo negoLlaLe conLracLs for pro[ecLs under Lhese excepLlonal cases shall be sub[ecL
Lo prlor approval by heads of agencles wlLhln Lhelr llmlLs of approvlng auLhorlLy.
c. Where Lhe sub[ecL pro[ecL ls ad[acenL or conLlguous Lo an on-golng pro[ecL and lL could be
economlcally prosecuLed by Lhe same conLracLor provlded LhaL he has no negaLlve sllppage and has
demonsLraLed a saLlsfacLory performance." (Lmphasls supplled)
noLe LhaL Lhere ls no reference aL all ln Lhese resldenLlal uecree no. 1394 lmplemenLlng 8ules and
8egulaLlons Lo absence of pre-quallfled appllcanLs and bldders as [usLlfylng negoLlaLlon of conLracLs as
dlsLlngulshed from requlrlng publlc blddlng or a second publlc blddlng. prcd
noLe also Lhe followlng provlslon of Lhe same lmplemenLlng 8ules and 8egulaLlons:
"l8 1. requallflcaLlon
1he followlng may become conLracLors for governmenL pro[ecLs:
1. llllplno
a. ClLlzens (slngle proprleLorshlp)
b. arLnershlp or corporaLlon duly organlzed under Lhe laws of Lhe hlllpplnes, and aL leasL sevenLy
flve percenL (73) of Lhe caplLal sLock of whlch belongs Lo llllplno clLlzens.
2. ConLracLors formlng Lhemselves lnLo a [olnL venLure, l.e., a group of Lwo or more conLracLors
LhaL lnLend Lo be [olnLly and severally responslble for a parLlcular conLracL, shall for purposes of
blddlng/Lenderlng comply wlLh LCl 630, and, aslde from belng currenLly and properly accredlLed by Lhe
hlllpplne ConLracLors AccredlLaLlon 8oard, shall comply wlLh Lhe provlslons of 8.A. 4366, provlded LhaL
[olnL venLures ln whlch llllplno ownershlp ls less Lhan sevenLy flve percenL (73) may be prequallfled
where Lhe sLrucLures Lo be bullL requlre Lhe appllcaLlon of Lechnlques and/or Lechnologles whlch are noL
adequaLely possessed by a llllplno enLlLy as deflned above.
[1he foregolng shall noL negaLe any exlsLlng and fuLure commlLmenLs wlLh respecL Lo Lhe blddlng and
aware of conLracLs flnanced parLly or wholly wlLh funds from lnLernaLlonal lendlng lnsLlLuLlons llke Lhe
Aslan uevelopmenL 8ank and Lhe World 8ank as well as from bllaLeral and oLher slmllar sources.]"
(lLallcs supplled)
1he record of Lhls case ls enLlrely sllenL on Lhe exLenL of hlllpplne equlLy ln Lhe Ldsa L81 CorporaLlon,
Lhere ls no suggesLlon LhaL Lhls corporaLlon ls organlzed under hlllpplne law and ls aL leasL sevenLy-flve
(73) percenL owned by hlllpplne clLlzens.
ubllc blddlng ls Lhe normal meLhod by whlch a governmenL keeps conLracLors honesL and ls able Lo
assure lLself LhaL lL would be geLLlng Lhe besL posslble value for lLs money ln any consLrucLlon or slmllar
pro[ecL. lL ls noL for noLhlng LhaL mulLllaLeral flnanclal organlzaLlons llke Lhe World 8ank and Lhe Aslan
uevelopmenL 8ank unlformly requlre pro[ecLs flnanced by Lhem Lo be lmplemenLed and carrled ouL by
publlc blddlng. ubllc blddlng ls much Loo lmporLanL a requlremenL casually Lo loosen by a laLlLudlnarlan
exerclse ln sLaLuLory consLrucLlon. LL[ur
1he lnsLanL eLlLlon should be granLed and Lhe challenged conLracL and lLs supplemenL should be
nulllfled and seL aslde. A Lrue publlc blddlng, compleLe wlLh a new prequallflcaLlon proceedlng, should
be requlred for Lhe Ldsa L81 ro[ecL.
MLnuCZA, ! ., concurrlng:
l concur ln all buL arL lll of Lhe ma[orlLy oplnlon. 8ecause l hold LhaL peLlLloners do noL have sLandlng Lo
sue, l [oln Lo dlsmlss Lhe peLlLlon ln Lhls case. l wrlLe only Lo seL forLh whaL l undersLand Lhe grounds for
our declslons on Lhe docLrlne of sLandlng are and, why ln accordance wlLh Lhese declslons, peLlLloners
do noL have Lhe rlghL Lo sue, wheLher as leglslaLors, Laxpayers or clLlzens. As members of Congress,
because Lhey allege no lnfrlngemenL of prerogaLlves as leglslaLors. 1 As Laxpayers because peLlLloners
allege nelLher an unconsLlLuLlonal exerclse of Lhe Laxlng or spendlng powers of Congress (ArL. vl, 24-23
and 29) 2 nor an lllegal dlsbursemenL of publlc money. 3 As Lhls CourL polnLed ouL ln 8ugnay ConsL. and
uev. Corp. v. Laron, 4 a parLy sulng as Laxpayer "musL speclflcally prove LhaL he has sufflclenL lnLeresL ln
prevenLlng Lhe lllegal expendlLure of money ralsed by LaxaLlon and LhaL he wlll susLaln a dlrecL ln[ury as
a resulL of Lhe enforcemenL of Lhe quesLloned sLaLuLe or conLracL. lL ls noL sufflclenL LhaL he has merely a
general lnLeresL common Lo all members of Lhe publlc." ln LhaL case, lL was held LhaL a conLracL,
whereby a local governmenL leased properLy Lo a prlvaLe parLy wlLh Lhe undersLandlng LhaL Lhe laLLer
would bulld a markeL bulldlng and aL Lhe end of Lhe lease would Lransfer Lhe bulldlng Lo Lhe lessor, dld
noL lnvolve a dlsbursemenL of publlc funds so as Lo glve a Laxpayer sLandlng Lo quesLlon Lhe legallLy of
Lhe conLracL. l see no subsLanLlal dlfference, as far as Lhe sLandlng of Laxpayers Lo quesLlon publlc
conLracLs ls concerned, beLween Lhe conLracL Lhere and Lhe bulld-lease-Lransfer (8L1) conLracL belng
quesLloned by peLlLloners ln Lhls case.
nor do peLlLloners have sLandlng Lo brlng Lhls sulL as clLlzens. ln Lhe cases 3 ln whlch clLlzens were
auLhorlzed Lo sue, Lhls CourL found sLandlng because lL LhoughL Lhe consLlLuLlonal clalms pressed for
declslon Lo be of "LranscendenLal lmporLance," as ln facL lL subsequenLly granLed rellef Lo peLlLloners by
lnvalldaLlng Lhe challenged sLaLuLes or governmenLal acLlons. 1hus ln Lhe LoLLo case 6 relled upon by Lhe
ma[orlLy for upholdlng peLlLloners' sLandlng, Lhls CourL Look lnLo accounL Lhe "paramounL publlc
lnLeresL" lnvolved whlch "lmmeasurably affecL[ed] Lhe soclal, economlc, and moral well-belng of Lhe
people . . . and Lhe counLer-producLlve and reLrogresslve effecLs of Lhe envlsloned on-llne loLLery
sysLem." 7 Accordlngly, Lhe CourL lnvalldaLed Lhe conLracL for Lhe operaLlon of loLLery. cdrep
8uL ln Lhe case aL bar, Lhe CourL preclsely flnds Lhe opposlLe by flndlng peLlLloners' subsLanLlve
conLenLlons Lo be wlLhouL merlL. 1o Lhe exLenL Lherefore LhaL a parLy's sLandlng ls affecLed by a
deLermlnaLlon of Lhe subsLanLlve merlL of Lhe case or a prellmlnary esLlmaLe Lhereof, peLlLloners ln Lhe
case aL bar musL be held Lo be wlLhouL sLandlng. 1hls ls ln llne wlLh our rullng ln Lawyers League for a
8eLLer hlllpplnes v. Aqulno 8 and ln re 8ermudez 9 where we dlsmlssed clLlzens' acLlons on Lhe ground
LhaL peLlLloners had no personallLy Lo sue and Lhelr peLlLlons dld noL sLaLe a cause of acLlon. 1he holdlng
LhaL peLlLloners dld noL have sLandlng followed from Lhe flndlng LhaL Lhey dld noL have a cause of acLlon.
ln order LhaL clLlzens' acLlons may be allowed a parLy musL show LhaL he personally has suffered some
acLual or LhreaLened ln[ury as a resulL of Lhe allegedly lllegal conducL of Lhe governmenL, Lhe ln[ury ls
falrly Lraceable Lo Lhe challenged acLlon, and Lhe ln[ury ls llkely Lo be redressed by a favorable acLlon. 10
As Lhe u.S. Supreme CourL has held:
1yplcally, . . . Lhe sLandlng lnqulry requlres careful [udlclal examlnaLlon of a complalnL's allegaLlon Lo
ascerLaln wheLher Lhe parLlcular plalnLlff ls enLlLled Lo an ad[udlcaLlon of Lhe parLlcular clalms asserLed.
ls Lhe ln[ury Loo absLracL, or oLherwlse noL approprlaLe, Lo be consldered [udlclally cognlzable? ls Lhe llne
of causaLlon beLween Lhe lllegal conducL and ln[ury Loo aLLenuaLed? ls Lhe prospecL of obLalnlng rellef
from Lhe ln[ury as a resulL of a favorable rullng Loo speculaLlve? 1hese quesLlons and any oLhers relevanL
Lo Lhe sLandlng lnqulry musL be answered by reference Lo Lhe ArL lll noLlon LhaL federal courLs may
exerclse power only "ln Lhe lasL resorL, and as a necesslLy," Chlcago & Crand 1runk 8. Co. v. Wellman,
143 uS 339, 343, 36 L Ld 176, 12 S CL 400 (1892), and only when ad[udlcaLlon ls "conslsLenL wlLh a
sysLem of separaLed powers and Lhe [dlspuLe ls one] LradlLlonally LhoughL Lo be capable of resoluLlon
Lhrough Lhe [udlclal process," llasL v. Cohen, 392 uS 83, 97, 20 L. Ld 2d, 88 S CL 1942 (1968). See valley
lorge, 434 uS, aL 472-473, 70 L Ld 2d 700, 102 S CL 732. 11
1oday's holdlng LhaL a clLlzen, qua clLlzen, has sLandlng Lo quesLlon a governmenL conLracL unduly
expands Lhe scope of publlc acLlons and sweeps away Lhe case and conLroversy requlremenL so carefully
embodled ln ArL. vlll, Sec. 3 ln deflnlng Lhe [urlsdlcLlon of Lhls CourL. 1he resulL ls Lo converL Lhe CourL
lnLo an offlce of Cmbudsman for Lhe venLllaLlon of generallzed grlevances. ConslsLenL wlLh Lhe vlew LhaL
Lhls case has no merlL l submlL wlLh respecL LhaL peLlLloners, as represenLaLlves of Lhe publlc lnLeresL,
have no sLandlng. prLL
looLnoLes
lLLlClAnC, !., dlssenLlng:
1. 1exL ln 84 Cfflclal CazeLLe, no. 23, pp. 33-37, eL seq. (6 !une 1988).
MLnuCZA, !., concurrlng:
1. hllconsa v. Lnrlquez, 233 SC8A 308 (1994), Conzales v. Macaralg, 191 SC8A 432 (1990),
1olenLlno v. Comelec, 41 SC8A 702 (1971).
2. llasL v. Cohen, 392 u.S. 83, 20 L. Ld. 2d 947 (1968), clLed ln lgoL v. Comelec, 93 SC8A 392 (1980).
3. ascual v. SecreLary of ubllc Works, 110 hll. 331 (1960), Sanldad v. Comelec, 73 SC8A 333
(1976).
4. 176 SC8A 240, 231-2 (1989).
3. Lmergency owers Cases [AraneLa v. ulnglasan], 84 hll. 368 (1949), llollo alay and Corn
lanLers Ass'n. v. lellclano, 121 hll. 338 (1963), hllconsa v. Clmenez, 122 hll. 894 (1963), CLu v.
LxecuLlve SecreLary, 194 SC8A 317 (1991)
6. kllosbayan, lnc. v. Culngona, 232 SC8A 110 (1994).
7. ld. aL 139.
8. C.8. nos. 73748, 73972, and 73990, May 22, 1986. (CuesLlonlng Lhe leglLlmacy of Lhe rovlslonal
CovernmenL of resldenL Aqulno).
9. 143 SC8A 160 (1986). (CuesLlonlng wheLher resldenL Aqulno and vlce resldenL Laurel were
Lhe "resldenL and vlce-resldenL elecLed ln Lhe lebruary 7, 1986 elecLlon" wlLhln Lhe meanlng of ArL.
xvlll, 3 of Lhe ConsLlLuLlon).
10. valley lorge College v. Amerlcans unlLed, 434 u.S. 464, 70 L. Ld. 2d 700 (1982), 8ugnay ConsL.
and uev. Corp. v. Laron, supra, noLe 4.
11. Allen v. WrlghL, 468 u.S. 737, 732, 82 l. ed. 2d 336, 170 (1984).


SLCCnu ulvlSlCn
[C.8. no. 119328. March 26, 1997.]
PlLllnL Al8LlnLS, lnC., peLlLloner, vs. ClvlL AL8CnAu1lCS 8CA8u and C8Anu ln1L8nA1lCnAL
Al8WA?S, lnC., respondenLs.
LsLellLo . Mendoza and AlberLo L. valenzuela, !r. for peLlLloner.
8elo Cozon Llma arez Asunclon & Luclla for Crand Alr.
S?LLA8uS
1. AuMlnlS18A1lvL LAW, ClvlL AL8CnAu1lCS 8CA8u, !u8lSulC1lCn Cn ALlCA1lCn lC8
1LMC8A8? CL8A1lnC L8Ml1. - 1he Clvll AeronauLlcs 8oard has [urlsdlcLlon over CrandAlr's
AppllcaLlon for a 1emporary CperaLlng ermlL. 1hls rule has been esLabllshed ln Lhe case of hlllpplne
Alr Llnes lnc., vs. Clvll AeronauLlcs 8oard, promulgaLed on !une 13, 1968. 1he 8oard ls expressly
auLhorlzed by 8epubllc AcL 776 Lo lssue a Lemporary operaLlng permlL or CerLlflcaLe of ubllc
Convenlence and necesslLy, and noLhlng conLalned ln Lhe sald law negaLes Lhe power Lo lssue sald
permlL before Lhe compleLlon of Lhe appllcanL's evldence and LhaL of Lhe opposlLor LhereLo on Lhe maln
peLlLlon. lndeed, Lhe CA8's auLhorlLy Lo granL a Lemporary permlL "upon lLs own lnlLlaLlve" sLrongly
suggesLs Lhe power Lo exerclse sald auLhorlLy, even before Lhe presenLaLlon of sald evldence has begun.
Assumlng arguendo LhaL a leglslaLlve franchlse ls prerequlslLe Lo Lhe lssuance of a permlL, Lhe absence of
Lhe same does noL affecL Lhe [urlsdlcLlon of Lhe 8oard Lo hear Lhe appllcaLlon, buL Lolls only upon Lhe
ulLlmaLe lssuance of Lhe requesLed permlL. 1here ls noLhlng ln Lhe law nor ln Lhe ConsLlLuLlon, whlch
lndlcaLes LhaL a LeglslaLlve franchlse ls an lndlspensable requlremenL for an enLlLy Lo operaLe as a
domesLlc alr LransporL operaLor. AlLhough SecLlon 11 of ArLlcle xll recognlzes Congress' conLrol over any
franchlse, cerLlflcaLe or auLhorlLy Lo operaLe a publlc uLlllLy, lL does noL mean Congress has excluslve
auLhorlLy Lo lssue Lhe same. lranchlse lssued by Congress are noL requlred before each and every publlc
uLlllLy may operaLe. ln many lnsLances, Congress has seen lL flL Lo delegaLe Lhls funcLlon Lo governmenL
agencles, speclallzed parLlcularly ln Lhelr respecLlve areas of publlc servlce. A readlng of SecLlon 10 of 8A
776, as amended by u 1462 reveals Lhe clear lnLenL of Congress Lo delegaLe Lhe auLhorlLy Lo regulaLe
Lhe lssuance of a llcense Lo operaLe domesLlc alr LransporL servlces.
2. lu, uLLLCA1lCn Cl CWL8S, CWL8 1C C8An1 LlCLnSL lC8 CL8A1lCn Cl u8LlC u1lLl1lLS.
- Congress has granLed cerLaln admlnlsLraLlve agencles Lhe power Lo granL llcenses for, or Lo auLhorlze
Lhe operaLlon of cerLaln publlc uLlllLles. WlLh Lhe growlng complexlLy of modern llfe, Lhe mulLlpllcaLlon
of Lhe sub[ecLs of governmenLal regulaLlon, and Lhe lncreased dlfflculLy of admlnlsLerlng Lhe laws, Lhere
ls a consLanLly growlng Lendency Lowards Lhe delegaLlon of greaLer powers by Lhe leglslaLure, and
Lowards Lhe approval of Lhe pracLlce by Lhe courLs. lL ls generally recognlzed LhaL a franchlse may be
derlved lndlrecLly from Lhe sLaLe Lhrough a duly deslgnaLed agency, and Lo Lhls exLenL, Lhe power Lo
granL franchlses has frequenLly been delegaLed, even Lo agencles oLher Lhan Lhose of a leglslaLlve
naLure. ln pursuance of Lhls, lL has been held LhaL prlvlleges conferred by granL by local auLhorlLles as
agenLs for Lhe sLaLe consLlLuLe as much a leglslaLlve franchlse as Lhough Lhe granL had been made by an
acL of Lhe LeglslaLure. 1he Lrend of modern leglslaLlon ls Lo vesL Lhe ubllc Servlce Commlssloner wlLh
Lhe power Lo regulaLe and conLrol Lhe operaLlon of publlc servlces under reasonable rules and
regulaLlons, and as a general rule, courLs wlll noL lnLerfere wlLh Lhe exerclse of LhaL dlscreLlon when lL ls
[usL and reasonable and founded upon a legal rlghL. Congress, by glvlng Lhe respondenL 8oard Lhe power
Lo lssue permlLs for Lhe operaLlon of domesLlc LransporL servlces, has delegaLed Lo Lhe sald body Lhe
auLhorlLy Lo deLermlne Lhe capablllLy and compeLence of a prospecLlve domesLlc alr LransporL operaLor
Lo engage ln such venLure. 1hls ls noL an lnsLance of Lransformlng Lhe respondenL 8oard lnLo a mlnl-
leglslaLlve body, wlLh unbrldled auLhorlLy Lo choose who should be glven auLhorlLy Lo operaLe domesLlc
alr LransporL servlces. Congress, ln Lhls lnsLance, has seL speclflc llmlLaLlons on how such auLhorlLy
should be exerclsed, SecLlon 4 of 8.A. no. 776, as amended, seLs ouL guldellnes or pollcles. SecLlon 12
and 21 of Lhe same enumeraLed Lhe requlremenLs Lo deLermlne Lhe compeLency of a prospecLlve
operaLor Lo engage ln Lhe publlc servlce of alr LransporLaLlon. lurLhermore, Lhe procedure for Lhe
processlng of Lhe appllcaLlon of a CerLlflcaLe of ubllc Convenlence and necesslLy had been esLabllshed
Lo ensure Lhe weedlng ouL of Lhose enLlLles LhaL are noL deservlng of publlc servlce.
3. lu, CL81lllCA1LS Cl u8LlC CCnvLnlLnCL, LLuCluA1Lu. - Many and varled are Lhe
deflnlLlons of cerLlflcaLes of publlc convenlence whlch courLs and legal wrlLers have drafLed. Some
sLaLuLes use Lhe Lerms "convenlence and necesslLy" whlle oLhers use only Lhe words "publlc
convenlence." 1he Lerms "convenlence and necesslLy", lf used LogeLher ln a sLaLuLe, are usually held noL
Lo be separable, buL are consLrued LogeLher. 8oLh words modlfy each oLher and musL be consLrued
LogeLher. 1he word 'necesslLy' ls so connecLed, noL as an addlLlonal requlremenL buL Lo modlfy and
quallfy whaL mlghL oLherwlse be Laken as Lhe sLrlcL slgnlflcance of Lhe word necesslLy. ubllc
convenlence and necesslLy exlsLs when Lhe proposed faclllLy wlll meeL a reasonable wanL of Lhe publlc
and supply a need whlch Lhe exlsLlng faclllLles do noL adequaLely afford. lL does noL mean or requlre an
acLual physlcal necesslLy or an lndlspensable Lhlng. 1he use of Lhe word "necesslLy", ln con[uncLlon wlLh
"publlc convenlence" ln a cerLlflcaLe of auLhorlzaLlon Lo a publlc servlce enLlLy Lo operaLe, does noL ln
any way modlfy Lhe naLure of such cerLlflcaLlon, or Lhe requlremenLs for Lhe lssuance of Lhe same. lL ls
Lhe law whlch deLermlnes Lhe requlslLes for Lhe lssuance of such cerLlflcaLlon, and noL Lhe LlLled
lndlcaLlng Lhe cerLlflcaLe.
u L C l S l C n
1C88LS, !8., ! p:
1hls Speclal Clvll AcLlon for CerLlorarl and rohlblLlon under 8ule 63 of Lhe 8ules of CourL seeks Lo
prohlblL respondenL Clvll AeronauLlcs 8oard from exerclslng [urlsdlcLlon over prlvaLe respondenL's
AppllcaLlon for Lhe lssuance of a CerLlflcaLe of ubllc Convenlence and necesslLy, and Lo annul and seL
aslde a Lemporary operaLlng permlL lssued by Lhe Clvll AeronauLlcs 8oard ln favor of Crand lnLernaLlonal
Alrways (CrandAlr, for brevlLy) allowlng Lhe same Lo engage ln scheduled domesLlc alr LransporLaLlon
servlces, parLlcularly Lhe Manlla-Cebu, Manlla-uavao, and converse rouLes.
1he maln reason submlLLed by peLlLloner hlllpplne Alrllnes, lnc. (AL) Lo supporL lLs peLlLlon ls Lhe facL
LhaL CrandAlr does noL possess a leglslaLlve franchlse auLhorlzlng lL Lo engage ln alr LransporLaLlon
servlce wlLhln Lhe hlllpplnes or elsewhere. Such franchlse ls, allegedly, a requlslLe for Lhe lssuance of a
CerLlflcaLe of ubllc Convenlence or necesslLy by Lhe respondenL 8oard, as mandaLed under SecLlon 11,
ArLlcle xll of Lhe ConsLlLuLlon.
8espondenL CrandAlr, on Lhe oLher hand, poslLs LhaL a leglslaLlve franchlse ls no longer a requlremenL
for Lhe lssuance of a CerLlflcaLe of ubllc Convenlence and necesslLy or a 1emporary CperaLlng ermlL,
followlng Lhe CourL's pronouncemenLs ln Lhe case of Albano vs. 8eyes, 1 as resLaLed by Lhe CourL of
Appeals ln Avla llllplnas lnLernaLlonal vs. Clvll AeronauLlcs 8oard 2 and Sllangan Alrways, lnc. vs. Crand
lnLernaLlonal Alrways, lnc., and Lhe Pon. Clvll AeronauLlcs 8oard. 3
Cn november 24, 1994, prlvaLe respondenL CrandAlr applled for a CerLlflcaLe of ubllc Convenlence and
necesslLy wlLh Lhe 8oard, whlch appllcaLlon was dockeLed as CA8 Case no. L-12711. 4 Accordlngly, Lhe
Chlef Pearlng Cfflcer of Lhe CA8 lssued a noLlce of Pearlng seLLlng Lhe appllcaLlon for lnlLlal hearlng on
uecember 16, 1994, and dlrecLlng CrandAlr Lo serve a copy of Lhe appllcaLlon and correspondlng noLlce
Lo all scheduled hlllpplne uomesLlc operaLors. Cn uecember 14, 1994, CrandAlr flled lLs Compllance,
and requesLed for Lhe lssuance of a 1emporary CperaLlng ermlL. eLlLloner, lLself Lhe holder of a
leglslaLlve franchlse Lo operaLe alr LransporL servlces, flled an CpposlLlon Lo Lhe appllcaLlon for a
CerLlflcaLe of ubllc Convenlence and necesslLy on uecember 16, 1993 on Lhe followlng grounds:
"A. 1he CA8 has no [urlsdlcLlon Lo hear Lhe peLlLloner's appllcaLlon unLll Lhe laLLer has flrsL obLalned
a franchlse Lo operaLe from Congress.
8. 1he peLlLloner's appllcaLlon ls deflclenL ln form and subsLance ln LhaL:
1. 1he appllcaLlon does noL lndlcaLe a rouLe sLrucLure lncludlng a compuLaLlon of Lrunkllne,
secondary and rural avallable seaL kllomeLers (ASk) whlch shall always be malnLalned aL a monLhly level
aL leasL 3 and 20 of Lhe ASk offered lnLo and ouL of Lhe proposed base of operaLlons for rural and
secondary, respecLlvely.
2. lL does noL conLaln a pro[ecL/feaslblllLy sLudy, pro[ecLed proflL and loss sLaLemenLs, pro[ecLed
balance sheeL, lnsurance coverage, llsL of personnel, llsL of spare parLs lnvenLory, Larlff sLrucLure,
documenLs supporLlve of flnanclal capaclLy, rouLe fllghL schedule, conLracLs on faclllLles (hangars,
malnLenance, loL) eLc.
C. Approval of peLlLloner's appllcaLlon would vlolaLe Lhe equal proLecLlon clause of Lhe
consLlLuLlon.
u. 1here ls no urgenL need and demand for Lhe servlces applled for.
L. 1o granL peLlLloner's appllcaLlon would only resulL ln rulnous compeLlLlon conLrary Lo SecLlon
4(d) of 8.A. 776." 3
AL Lhe lnlLlal hearlng for Lhe appllcaLlon, peLlLloner ralsed Lhe lssue of lack of [urlsdlcLlon of Lhe 8oard Lo
hear Lhe appllcaLlon because CrandAlr dld noL possess a leglslaLlve franchlse. cdasla
Cn uecember 20, 1994, Lhe Chlef Pearlng Cfflcer of CA8 lssued an Crder denylng peLlLloner's
CpposlLlon. erLlnenL porLlons of Lhe Crder read:
"AL alleges LhaL Lhe CA8 has no [urlsdlcLlon Lo hear Lhe peLlLloner's appllcaLlon unLll Lhe laLLer has flrsL
obLalned a franchlse Lo operaLe from Congress.
1he Clvll AeronauLlcs 8oard has [urlsdlcLlon Lo hear and resolve Lhe appllcaLlon. ln Avla llllplna vs. CA8,
CA C.8. no. 23363, lL has been ruled LhaL under SecLlon 10 (c) (l) of 8.A. 776, Lhe 8oard possesses Lhls
speclflc power and duLy.
ln vlew Lhereof, Lhe opposlLlon of AL on Lhls ground ls hereby denled.
SC C8uL8Lu."
MeanLlme, on uecember 22, 1994, peLlLloner Lhls Llme, opposed prlvaLe respondenL's appllcaLlon for a
Lemporary permlL malnLalnlng LhaL:
"1. 1he appllcanL does noL possess Lhe requlred flLness and capablllLy of operaLlng Lhe servlces
applled for under 8A 776, and,
2. AppllcanL has falled Lo prove LhaL Lhere ls clear and urgenL publlc need for Lhe servlces applled
for." 6
Cn uecember 23, 1994, Lhe 8oard promulgaLed 8esoluLlon no. 119(92) approvlng Lhe lssuance of a
1emporary CperaLlng ermlL ln favor of CrandAlr 7 for a perlod of Lhree monLhs, l.e., from uecember
22, 1994 Lo March 22, 1994. eLlLloner moved for Lhe reconslderaLlon of Lhe lssuance of Lhe 1emporary
CperaLlng ermlL on !anuary 11, 1993, buL Lhe same was denled ln CA8 8esoluLlon no. 02 (93) on
lebruary 2, 1993. 8 ln Lhe sald 8esoluLlon, Lhe 8oard [usLlfled lLs assumpLlon of [urlsdlcLlon over
CrandAlr's appllcaLlon.
"WPL8LAS, Lhe CA8 ls speclflcally auLhorlzed under SecLlon 10-C (1) of 8epubllc AcL no. 776 as follows:
'(c) 1he 8oard shall have Lhe followlng speclflc powers and duLles:
(1) ln accordance wlLh Lhe provlslon of ChapLer lv of Lhls AcL, Lo lssue, deny, amend, revlse, alLer,
modlfy, cancel, suspend or revoke, ln whole or ln parL, upon peLlLloner-complalnL, or upon lLs own
lnlLlaLlve, any Lemporary operaLlng permlL or CerLlflcaLe of ubllc Convenlence and necesslLy, rovlded,
however, LhaL ln Lhe case of forelgn alr carrlers, Lhe permlL shall be lssued wlLh Lhe approval of Lhe
resldenL of Lhe 8epubllc of Lhe hlllpplnes."
WPL8LAS, such auLhorlLy was afflrmed ln AL vs. CA8, (23 SC8A 992), whereln Lhe Supreme CourL held
LhaL Lhe CA8 can even on lLs own lnlLlaLlve, granL a 1C even before Lhe presenLaLlon of evldence,
WPL8LAS, more recenLly, Avla llllplnas vs. CA8, (CA-C8 no. 23363), promulgaLed on CcLober 30, 1991,
held LhaL ln accordance wlLh lLs mandaLe, Lhe CA8 can lssue noL only a 1C buL also a CerLlflcaLe of
ubllc Convenlence and necesslLy (CCn) Lo a quallfled appllcanL Lherefor ln Lhe absence of a leglslaLlve
franchlse, clLlng Lhereln as basls Lhe declslon of Albano vs. 8eyes (173 SC8A 264) whlch provldes (lnLer
alla) LhaL:
a) lranchlses by Congress are noL requlred before each and every publlc uLlllLy may operaLe when
Lhe law has granLed cerLaln admlnlsLraLlve agencles Lhe power Lo granL llcenses for or Lo auLhorlze Lhe
operaLlon of cerLaln publlc uLlllLles,
b) 1he ConsLlLuLlonal provlslon ln ArLlcle xll, SecLlon 11 LhaL Lhe lssuance of a franchlse, cerLlflcaLe
or oLher form of auLhorlzaLlon for Lhe operaLlon of a publlc uLlllLy does noL necessarlly lmply LhaL only
Congress has Lhe power Lo granL such auLhorlzaLlon slnce our sLaLuLe books are repleLe wlLh laws
granLlng speclfled agencles ln Lhe LxecuLlve 8ranch Lhe power Lo lssue such auLhorlzaLlon for cerLaln
classes of publlc uLlllLles.
WPL8LAS, LxecuLlve Crder no. 219 whlch Look effecL on 22 !anuary 1993, provldes ln SecLlon 2.1 LhaL a
mlnlmum of Lwo (2) operaLors ln each rouLe/llnk shall be encouraged and LhaL rouLes/llnks presenLly
servlced by only one (1) operaLor shall be open for enLry Lo addlLlonal operaLors.
8LSCLvLu, (1)PL8LlC8L, LhaL Lhe MoLlon for 8econslderaLlon flled by hlllpplne Alrllnes on !anuary 03,
1993 on Lhe CranL by Lhls 8oard of a 1emporary CperaLlng ermlL (1C) Lo Crand lnLernaLlonal Alrways,
lnc. alleglng among oLhers LhaL Lhe CA8 has no such [urlsdlcLlon, ls hereby uLnlLu, as lL hereby denled,
ln vlew of Lhe foregolng and conslderlng LhaL Lhe grounds relled upon by Lhe movanL are noL
lndublLable."
Cn March 21, 1993, upon moLlon by prlvaLe respondenL, Lhe Lemporary permlL was exLended for a
perlod of slx (6) monLhs or up Lo SepLember 22, 1993.
Pence Lhls peLlLlon, flled on Aprll 3, 1993.
eLlLloners argue LhaL Lhe respondenL 8oard acLed beyond lLs powers and [urlsdlcLlon ln Laklng
cognlzance of CrandAlr's appllcaLlon for Lhe lssuance of a CerLlflcaLe of ubllc Convenlence and
necesslLy, and ln lssulng a Lemporary operaLlng permlL ln Lhe meanLlme, slnce CrandAlr has noL been
granLed and does noL possess a leglslaLlve franchlse Lo engage ln scheduled domesLlc alr LransporLaLlon.
A leglslaLlve franchlse ls necessary before anyone may engage ln alr LransporL servlces, and a franchlse
may only be granLed by Congress. 1hls ls Lhe meanlng glven by Lhe peLlLloner upon a readlng of SecLlon
11, ArLlcle xll, 9 and SecLlon 1, ArLlcle vl, 10 of Lhe ConsLlLuLlon.
1o supporL lLs Lheory, AL submlLs Cplnlon no. 163, S. 1989 of Lhe ueparLmenL of !usLlce, whlch reads:
"ur. ArLuro C. Corona
LxecuLlve ulrecLor
Clvll AeronauLlcs 8oard
L 8ulldlng, 1000 u.n. Avenue
LrmlLa, Manlla
Slr:
1hls has reference Lo your requesL for oplnlon on Lhe necesslLy of a leglslaLlve franchlse before Lhe Clvll
AeronauLlcs 8oard ("CA8") may lssue a CerLlflcaLe of ubllc Convenlence and necesslLy and/or permlL Lo
engage ln alr commerce or alr LransporLaLlon Lo an lndlvldual or enLlLy.
?ou sLaLe LhaL durlng Lhe hearlng on Lhe appllcaLlon of Cebu Alr for a congresslonal franchlse, Lhe Pouse
CommlLLee on CorporaLlons and lranchlses conLended LhaL under Lhe presenL ConsLlLuLlon, Lhe CA8
may noL lssue Lhe abovesLaLed cerLlflcaLe or permlL, unless Lhe lndlvldual or enLlLy concerned possesses
a leglslaLlve franchlse. ?ou belleve oLherwlse, however, for Lhe reason LhaL under 8.A. no. 776, as
amended, Lhe CA8 ls expllclLly empowered Lo lssue operaLlng permlLs or cerLlflcaLes of publlc
convenlence and necesslLy and LhaL Lhls sLaLuLory provlslon ls noL lnconslsLenL wlLh Lhe currenL charLer.
We concur wlLh Lhe vlew expressed by Lhe Pouse CommlLLee on CorporaLlons and lranchlses. ln an
oplnlon rendered ln favor of your predecessor-ln-offlce, Lhls ueparLmenL observed LhaL, -
". . . lL ls useful Lo noLe Lhe dlsLlncLlon beLween Lhe franchlse Lo operaLe and a permlL Lo commence
operaLlon. 1he former ls soverelgn and leglslaLlve ln naLure, lL can be conferred only by Lhe lawmaklng
auLhorlLy (17 W and , pp. 691-697). 1he laLLer ls admlnlsLraLlve and regulaLory ln characLer (ln re
AppllcaLlon of lorL Crook-8ellevue 8oulevard Llne, 283 nW 223), lL ls granLed by an admlnlsLraLlve
agency, such as Lhe ubllc Servlce Commlsslon [now 8oard of 1ransporLaLlon], ln Lhe case of land
LransporLaLlon, and Lhe Clvll AeronauLlcs 8oard, ln case of alr servlces. Whlle a leglslaLlve franchlse ls a
pre-requlslLe Lo a granL of a cerLlflcaLe of publlc convenlence and necesslLy Lo an alrllne company, such
franchlse alone cannoL consLlLuLe Lhe auLhorlLy Lo commence operaLlons, lnasmuch as Lhere are sLlll
maLLers relevanL Lo such operaLlons whlch are noL deLermlned ln Lhe franchlse, llke raLes, schedules and
rouLes, and whlch maLLers are resolved ln Lhe process of lssuance of permlL by Lhe admlnlsLraLlve.
(SecreLary of !usLlce Cpn. no. 43, s. 1981)
lndeed, auLhorlLles are agreed LhaL a cerLlflcaLe of publlc convenlence and necesslLy ls an auLhorlzaLlon
lssued by Lhe approprlaLe governmenLal agency for Lhe operaLlon of publlc servlces for whlch a franchlse
ls requlred by law (Almarlo, 1ransporLaLlon and ubllc Servlce Law, 1977 Ld., p. 293, Agbayanl,
Commerclal Law of Lhe hll., vol. 4, 1979 Ld., pp. 380-381).
8ased on Lhe foregolng, lL ls clear LhaL a franchlse ls Lhe leglslaLlve auLhorlzaLlon Lo engage ln a buslness
acLlvlLy or enLerprlse of a publlc naLure, whereas a cerLlflcaLe of publlc convenlence and necesslLy ls a
regulaLory measure whlch consLlLuLes Lhe franchlse's auLhorlLy Lo commence operaLlons. lL ls Lhus
loglcal LhaL Lhe granL of Lhe former should precede Lhe laLLer.
lease be gulded accordlngly.
(SCu.) SLul8L? A. C8uCRLZ
SecreLary of !usLlce"
8espondenL CrandAlr, on Lhe oLher hand, relles on lLs lnLerpreLaLlon of Lhe provlslons of 8epubllc AcL
776, whlch follows Lhe pronouncemenLs of Lhe CourL of Appeals ln Lhe cases of Avla llllplnas vs. Clvll
AeronauLlcs 8oard, and Sllangan Alrways, lnc. vs. Crand lnLernaLlonal Alrways (supra).
ln boLh cases, Lhe lssue resolved was wheLher or noL Lhe Clvll AeronauLlcs 8oard can lssue Lhe CerLlflcaLe
of ubllc Convenlence and necesslLy or 1emporary CperaLlng ermlL Lo a prospecLlve domesLlc alr
LransporL operaLor who does noL possess a leglslaLlve franchlse Lo operaLe as such. 8elylng on Lhe
CourL's pronouncemenL ln Albano vs. 8eyes (supra), Lhe CourL of Appeals upheld Lhe auLhorlLy of Lhe
8oard Lo lssue such auLhorlLy, even ln Lhe absence of a leglslaLlve franchlse, whlch auLhorlLy ls derlved
from SecLlon 10 of 8epubllc AcL 776, as amended by .u. 1462. 11
1he Clvll AeronauLlcs 8oard has [urlsdlcLlon over CrandAlr's AppllcaLlon for a 1emporary CperaLlng
ermlL. 1hls rule has been esLabllshed ln Lhe case of hlllpplne Alr Llnes lnc., vs. Clvll AeronauLlcs 8oard,
promulgaLed on !une 13, 1968. 12 1he 8oard ls expressly auLhorlzed by 8epubllc AcL 776 Lo lssue a
Lemporary operaLlng permlL or CerLlflcaLe of ubllc Convenlence and necesslLy, and noLhlng conLalned
ln Lhe sald law negaLes Lhe power Lo lssue sald permlL before Lhe compleLlon of Lhe appllcanL's evldence
and LhaL of Lhe opposlLor LhereLo on Lhe maln peLlLlon. lndeed, Lhe CA8's auLhorlLy Lo granL a Lemporary
permlL "upon lLs own lnlLlaLlve" sLrongly suggesLs Lhe power Lo exerclse sald auLhorlLy, even before Lhe
presenLaLlon of sald evldence has begun. Assumlng arguendo LhaL a leglslaLlve franchlse ls prerequlslLe
Lo Lhe lssuance of a permlL, Lhe absence of Lhe same does noL affecL Lhe [urlsdlcLlon of Lhe 8oard Lo hear
Lhe appllcaLlon, buL Lolls only upon Lhe ulLlmaLe lssuance of Lhe requesLed permlL.
1he power Lo auLhorlze and conLrol Lhe operaLlon of a publlc uLlllLy ls admlLLedly a prerogaLlve of Lhe
leglslaLure, slnce Congress ls LhaL branch of governmenL vesLed wlLh plenary powers of leglslaLlon.
"1he franchlse ls a leglslaLlve granL, wheLher made dlrecLly by Lhe leglslaLure lLself, or by any one of lLs
properly consLlLuLed lnsLrumenLallLles. 1he granL, when made, blnds Lhe publlc, and ls, dlrecLly or
lndlrecLly, Lhe acL of Lhe sLaLe." 13
1he lssue ln Lhls peLlLlon ls wheLher or noL Congress, ln enacLlng 8epubllc AcL 776, has delegaLed Lhe
auLhorlLy Lo auLhorlze Lhe operaLlon of domesLlc alr LransporL servlces Lo Lhe respondenL 8oard, such
LhaL Congresslonal mandaLe for Lhe approval of such auLhorlLy ls no longer necessary.
Congress has granLed cerLaln admlnlsLraLlve agencles Lhe power Lo granL llcenses for, or Lo auLhorlze Lhe
operaLlon of cerLaln publlc uLlllLles. WlLh Lhe growlng complexlLy of modern llfe, Lhe mulLlpllcaLlon of
Lhe sub[ecLs of governmenLal regulaLlon, and Lhe lncreased dlfflculLy of admlnlsLerlng Lhe laws, Lhere ls a
consLanLly growlng Lendency Lowards Lhe delegaLlon of greaLer powers by Lhe leglslaLure, and Lowards
Lhe approval of Lhe pracLlce by Lhe courLs. 14 lL ls generally recognlzed LhaL a franchlse may be derlved
lndlrecLly from Lhe sLaLe Lhrough a duly deslgnaLed agency, and Lo Lhls exLenL, Lhe power Lo granL
franchlses has frequenLly been delegaLed, even Lo agencles oLher Lhan Lhose of a leglslaLlve naLure. 13
ln pursuance of Lhls, lL has been held LhaL prlvlleges conferred by granL by local auLhorlLles as agenLs for
Lhe sLaLe consLlLuLe as much a leglslaLlve franchlse as Lhough Lhe granL had been made by an acL of Lhe
LeglslaLure. 16
1he Lrend of modern leglslaLlon ls Lo vesL Lhe ubllc Servlce Commlssloner wlLh Lhe power Lo regulaLe
and conLrol Lhe operaLlon of publlc servlces under reasonable rules and regulaLlons, and as a general
rule, courLs wlll noL lnLerfere wlLh Lhe exerclse of LhaL dlscreLlon when lL ls [usL and reasonable and
founded upon a legal rlghL. 17
lL ls Lhls pollcy whlch was pursued by Lhe CourL ln Albano vs. 8eyes. 1hus, a readlng of Lhe perLlnenL
lssuances governlng Lhe hlllpplne orLs AuLhorlLy, 18 proves LhaL Lhe A ls empowered Lo underLake
by lLself Lhe operaLlon and managemenL of Lhe Manlla lnLernaLlonal ConLalner 1ermlnal, or Lo auLhorlze
lLs operaLlon and managemenL by anoLher by conLracL or oLher means, aL lLs opLlon. 1he laLLer power
havlng been delegaLed Lo Lhe A, a franchlse from Congress Lo auLhorlze an enLlLy oLher Lhan Lhe A
Lo operaLe and manage Lhe MlC becomes unnecessary.
Clven Lhe foregolng posLulaLes, we flnd LhaL Lhe Clvll AeronauLlcs 8oard has Lhe auLhorlLy Lo lssue a
CerLlflcaLe of ubllc Convenlence and necesslLy, or 1emporary CperaLlng ermlL Lo a domesLlc alr
LransporL operaLor, who, Lhough noL possesslng a leglslaLlve franchlse, meeLs all Lhe oLher requlremenLs
prescrlbed by Lhe law. Such requlremenLs were enumeraLed ln SecLlon 21 of 8.A. 776.
1here ls noLhlng ln Lhe law nor ln Lhe ConsLlLuLlon, whlch lndlcaLes LhaL a leglslaLlve franchlse ls an
lndlspensable requlremenL for an enLlLy Lo operaLe as a domesLlc alr LransporL operaLor. AlLhough
SecLlon 11 of ArLlcle xll recognlzes Congress' conLrol over any franchlse, cerLlflcaLe or auLhorlLy Lo
operaLe a publlc uLlllLy, lL does noL mean Congress has excluslve auLhorlLy Lo lssue Lhe same. lranchlses
lssued by Congress are noL requlred before each and every publlc uLlllLy may operaLe. 19 ln many
lnsLances, Congress has seen lL flL Lo delegaLe Lhls funcLlon Lo governmenL agencles, speclallzed
parLlcularly ln Lhelr respecLlve areas of publlc servlce.
A readlng of SecLlon 10 of Lhe same reveals Lhe clear lnLenL of Congress Lo delegaLe Lhe auLhorlLy Lo
regulaLe Lhe lssuance of a llcense Lo operaLe domesLlc alr LransporL servlces:
SLC. 10. owers and uuLles of Lhe 8oard. (A) LxcepL as oLherwlse provlded hereln, Lhe 8oard shall have
Lhe power Lo regulaLe Lhe economlc aspecL of alr LransporLaLlon, and shall have general supervlslon and
regulaLlon of, Lhe [urlsdlcLlon and conLrol over alr carrlers, general sales agenLs, cargo sales agenLs, and
alr frelghL forwarders as well as Lhelr properLy rlghLs, equlpmenL, faclllLles and franchlse, lnsofar as may
be necessary for Lhe purpose of carrylng ouL Lhe provlslon of Lhls AcL.
ln supporL of Lhe 8oard's auLhorlLy as sLaLed above, lL ls glven Lhe followlng speclflc powers and duLles:
(C) 1he 8oard shall have Lhe followlng speclflc powers and duLles:
(1) ln accordance wlLh Lhe provlslons of ChapLer lv of Lhls AcL, Lo lssue, deny, amend, revlse, alLer,
modlfy, cancel, suspend or revoke ln whole or ln parL upon peLlLlon or complalnL or upon lLs own
lnlLlaLlve any 1emporary CperaLlng ermlL or CerLlflcaLe of ubllc Convenlence and necesslLy: rovlded
however, 1haL ln Lhe case of forelgn alr carrlers, Lhe permlL shall be lssued wlLh Lhe approval of Lhe
resldenL of Lhe 8epubllc of Lhe hlllpplnes.
eLlLloner argues LhaL slnce 8.A. 776 glves Lhe 8oard Lhe auLhorlLy Lo lssue "CerLlflcaLes of ubllc
Convenlence and necesslLy", Lhls, accordlng Lo peLlLloner, means LhaL a leglslaLlve franchlse ls an
absoluLe requlremenL. lL clLes a number of auLhorlLles supporLlng Lhe vlew LhaL a CerLlflcaLe of ubllc
Convenlence and necesslLy ls lssued Lo a publlc servlce for whlch a franchlse ls requlred by law, as
dlsLlngulshed from a "CerLlflcaLe of ubllc Convenlence" whlch ls an auLhorlzaLlon lssued for Lhe
operaLlon of publlc servlces for whlch no franchlse, elLher munlclpal or leglslaLlve, ls requlred by law. 20
1hls submlsslon relles on Lhe premlse LhaL Lhe auLhorlLy Lo lssue a cerLlflcaLe of publlc convenlence and
necesslLy ls a regulaLory measure separaLe and dlsLlncL from Lhe auLhorlLy Lo granL a franchlse for Lhe
operaLlon of Lhe publlc uLlllLy sub[ecL of Lhls parLlcular case, whlch ls excluslvely lodged by peLlLloner ln
Congress.
We do noL agree wlLh Lhe peLlLloner.
Many and varled are Lhe deflnlLlons of cerLlflcaLes of publlc convenlence whlch courLs and legal wrlLers
have drafLed. Some sLaLuLes use Lhe Lerms "convenlence and necesslLy" whlle oLhers use only Lhe words
"publlc convenlence." 1he Lerms "convenlence and necesslLy", lf used LogeLher ln a sLaLuLe, are usually
held noL Lo be separable, buL are consLrued LogeLher. 8oLh words modlfy each oLher and musL be
consLrued LogeLher. 1he word 'necesslLy' ls so connecLed, noL as an addlLlonal requlremenL buL Lo
modlfy and quallfy whaL mlghL oLherwlse be Laken as Lhe sLrlcL slgnlflcance of Lhe word necesslLy. ubllc
convenlence and necesslLy exlsLs when Lhe proposed faclllLy wlll meeL a reasonable wanL of Lhe publlc
and supply a need whlch Lhe exlsLlng faclllLles do noL adequaLely afford. lL does noL mean or requlre an
acLual physlcal necesslLy or an lndlspensable Lhlng. 21
"1he Lerms 'convenlence' and 'necesslLy' are Lo be consLrued LogeLher, alLhough Lhey are noL
synonymous, and effecL musL be glven boLh. 1he convenlence of Lhe publlc musL noL be clrcumscrlbed
by accordlng Lo Lhe word 'necesslLy' lLs sLrlcL meanlng or an essenLlal requlslLes." 22
1he use of Lhe word "necesslLy", ln con[uncLlon wlLh "publlc convenlence" ln a cerLlflcaLe of
auLhorlzaLlon Lo a publlc servlce enLlLy Lo operaLe, does noL ln any way modlfy Lhe naLure of such
cerLlflcaLlon, or Lhe requlremenLs for Lhe lssuance of Lhe same. lL ls Lhe law whlch deLermlnes Lhe
requlslLes for Lhe lssuance of such cerLlflcaLlon, and noL Lhe LlLle lndlcaLlng Lhe cerLlflcaLe.
Congress, by glvlng Lhe respondenL 8oard Lhe power Lo lssue permlLs for Lhe operaLlon of domesLlc
LransporL servlces, has delegaLed Lo Lhe sald body Lhe auLhorlLy Lo deLermlne Lhe capablllLy and
compeLence of a prospecLlve domesLlc alr LransporL operaLor Lo engage ln such venLure. 1hls ls noL an
lnsLance of Lransformlng Lhe respondenL 8oard lnLo a mlnl-leglslaLlve body, wlLh unbrldled auLhorlLy Lo
choose who should be glven auLhorlLy Lo operaLe domesLlc alr LransporL servlces.
"1o be valld, Lhe delegaLlon lLself musL be clrcumscrlbed by leglslaLlve resLrlcLlons, noL a "rovlng
commlsslon" LhaL wlll glve Lhe delegaLe unllmlLed leglslaLlve auLhorlLy. lL musL noL be a delegaLlon
"runnlng rloL" and "noL canallzed wlLh banks LhaL keep lL from overflowlng." CLherwlse, Lhe delegaLlon ls
ln legal effecL an abdlcaLlon of leglslaLlve auLhorlLy, a LoLal surrender by Lhe leglslaLure of lLs
prerogaLlves ln favor of Lhe delegaLe." 23
Congress, ln Lhls lnsLance, has seL speclflc llmlLaLlons on how such auLhorlLy should be exerclsed.
llrsLly, SecLlon 4 of 8.A. no. 776, as amended, seLs ouL Lhe followlng guldellnes or pollcles:
"SLC. 4. ueclaraLlon of pollcles. ln Lhe exerclse and performance of lLs powers and duLles under Lhls AcL,
Lhe Clvll AeronauLlcs 8oard and Lhe Clvll AeronauLlcs AdmlnlsLraLor shall conslder Lhe followlng, among
oLher Lhlngs, as belng ln Lhe publlc lnLeresL, and ln accordance wlLh Lhe publlc convenlence and
necesslLy:
(a) 1he developmenL and uLlllzaLlon of Lhe alr poLenLlal of Lhe hlllpplnes,
(b) 1he encouragemenL and developmenL of an alr LransporLaLlon sysLem properly adapLed Lo Lhe
presenL and fuLure of forelgn and domesLlc commerce of Lhe hlllpplnes, of Lhe osLal Servlce and of Lhe
naLlonal uefense,
(c) 1he regulaLlon of alr LransporLaLlon ln such manner as Lo recognlze and preserve Lhe lnherenL
advanLages of, assure Lhe hlghesL degree of safeLy ln, and fosLer sound economlc condlLlon ln, such
LransporLaLlon, and Lo lmprove Lhe relaLlons beLween, and coordlnaLe LransporLaLlon by, alr carrlers,
(d) 1he promoLlon of adequaLe, economlcal and efflclenL servlce by alr carrlers aL reasonable
charges, wlLhouL un[usL dlscrlmlnaLlons, undue preferences or advanLages, or unfalr or desLrucLlve
compeLlLlve pracLlces,
(e) CompeLlLlon beLween alr carrlers Lo Lhe exLenL necessary Lo assure Lhe sound developmenL of
an alr LransporLaLlon sysLem properly adapLed Lo Lhe need of Lhe forelgn and domesLlc commerce of Lhe
hlllpplnes, of Lhe osLal Servlce, and of Lhe naLlonal uefense,
(f) 1o promoLe safeLy of fllghL ln alr commerce ln Lhe hlllpplnes, and,
(g) 1he encouragemenL and developmenL of clvll aeronauLlcs.
More lmporLanLly, Lhe sald law has enumeraLed Lhe requlremenLs Lo deLermlne Lhe compeLency of a
prospecLlve operaLor Lo engage ln Lhe publlc servlce of alr LransporLaLlon.
SLC. 12. ClLlzenshlp requlremenL. LxcepL as oLherwlse provlded ln Lhe ConsLlLuLlon and exlsLlng LreaLy or
LreaLles, a permlL auLhorlzlng a person Lo engage ln domesLlc alr commerce and/or alr LransporLaLlon
shall be lssued only Lo clLlzens of Lhe hlllpplnes. 24
SLC. 21. lssuance of permlL. 1he 8oard shall lssue a permlL auLhorlzlng Lhe whole or any parL of Lhe
servlce covered by Lhe appllcaLlon, lf lL flnds: (1) LhaL Lhe appllcanL ls flL, wllllng and able Lo perform such
servlce properly ln conformlLy wlLh Lhe provlslons of Lhls AcL and Lhe rules, regulaLlons, and
requlremenLs lssued Lhereunder, and (2) LhaL such servlce ls requlred by Lhe publlc convenlence and
necesslLy, oLherwlse Lhe appllcaLlon shall be denled.
lurLhermore, Lhe procedure for Lhe processlng of Lhe appllcaLlon of a CerLlflcaLe of ubllc Convenlence
and necesslLy had been esLabllshed Lo ensure Lhe weedlng ouL of Lhose enLlLles LhaL are noL deservlng
of publlc servlce. 23
ln sum, respondenL 8oard should now be allowed Lo conLlnue hearlng Lhe appllcaLlon of CrandAlr for
Lhe lssuance of a CerLlflcaLe of ubllc Convenlence and necesslLy, Lhere belng no legal obsLacle Lo Lhe
exerclse of lLs [urlsdlcLlon. cdLal
ACCC8ulnCL?, ln vlew of Lhe foregolng conslderaLlons, Lhe CourL 8LSCLvLu Lo ulSMlSS Lhe lnsLanL
peLlLlon for lack of merlL. 1he respondenL Clvll AeronauLlcs 8oard ls hereby ul8LC1Lu Lo CCn1lnuL
hearlng Lhe appllcaLlon of respondenL Crand lnLernaLlonal Alrways, lnc. for Lhe lssuance of a CerLlflcaLe
of ubllc Convenlence and necesslLy.
SC C8uL8Lu.
8egalado and uno, !! ., concur.
8omero and Mendoza, !! ., Look no parL.
looLnoLes
1. C.8. no. 83331, !uly 11, 1989, 173 SC8A 264.
2. CA C.8. S no. 23363, CcLober 30, 1991.
3. CA C.8. S no. 36787, !uly 19, 1993.
4. Annex "A" eLlLlon, p. 31, 8ollo.
3. Annex "u", eLlLlon, 8ollo, pp. 43-44.
6. Annex "l", eLlLlon, 8ollo, pp. 34-63.
7. Annex "P", eLlLlon, 8ollo, p. 79.
8. Annex "l", eLlLlon, 8ollo, pp. 80-81.
9. SecLlon 11. no franchlse, cerLlflcaLe, or any oLher form of auLhorlzaLlon for Lhe operaLlon of a
publlc uLlllLy shall be granLed excepL Lo clLlzens of Lhe hlllpplnes or Lo corporaLlons or assoclaLlons
organlzed under Lhe laws of Lhe hlllpplnes aL leasL slxLy per cenLum of whose caplLal ls owned by such
clLlzens, nor shall such franchlse, cerLlflcaLe, or auLhorlzaLlon be excluslve ln characLer or for a longer
perlod Lhan flfLy years. nelLher shall any franchlse or rlghL be granLed excepL under Lhe condlLlon LhaL lL
shall be sub[ecL Lo amendmenL, alLeraLlon, or repeal by Lhe Congress when Lhe common good so
requlres. 1he sLaLe shall encourage equlLy parLlclpaLlon ln publlc uLlllLles by Lhe general publlc. 1he
parLlclpaLlon of forelgn lnvesLors ln Lhe governlng body of any publlc uLlllLy enLerprlse shall be llmlLed Lo
Lhelr proporLlonaLe share ln lLs caplLal, and all Lhe execuLlve and managlng offlcers of such corporaLlon
or assoclaLlon musL be clLlzens of Lhe hlllpplnes.
10. SecLlon 1. 1he leglslaLlve power shall be vesLed ln Lhe Congress of Lhe hlllpplnes, whlch shall
conslsL of a SenaLe and a Pouse of 8epresenLaLlves, excepL Lo Lhe exLenL reserved Lo Lhe people by Lhe
provlslon on lnlLlaLlve and referendum.
11. SLC. 10. owers and uuLles of Lhe 8oard. (A) LxcepL as oLherwlse provlded hereln, Lhe 8oard
shall have Lhe power Lo regulaLe Lhe economlc aspecL of alr LransporLaLlon, and shall have general
supervlslon and regulaLlon of, Lhe [urlsdlcLlon and conLrol over alr carrlers, general sales agenLs, cargo
sales agenLs, and alr frelghL forwarders as well as Lhelr properLy rlghLs, equlpmenL, faclllLles and
franchlse, lnsofar as may be necessary for Lhe purpose of carrylng ouL Lhe provlslon of Lhls AcL.
(8) 1he 8oard may perform such acLs, conducL such lnvesLlgaLlon, lssue and amend
such orders, and make and amend such general or speclal rules, regulaLlons, and procedures as lL shall
deem necessary Lo carry ouL Lhe provlslons of Lhls AcL.
(C) 1he 8oard shall have Lhe followlng speclflc powers and duLles:
(1) ln accordance wlLh Lhe provlslons of ChapLer lv of Lhls AcL, Lo lssue, deny,
amend, revlse, alLer, modlfy, cancel, suspend or revoke ln whole or ln parL upon peLlLlon or complalnL or
upon lLs own lnlLlaLlve any 1emporary CperaLlng ermlL or CerLlflcaLe of ubllc Convenlence and
necesslLy: rovlded however, 1haL ln Lhe case of forelgn alr carrlers, Lhe permlL shall be lssued wlLh Lhe
approval of Lhe resldenL of Lhe 8epubllc of Lhe hlllpplnes. . . .
12. C.8. no. L-24219, 23 SC8A 992.
13. Walla Walla v. Walla Walla WaLer Co., 172 uS 1, 36 Am !ur 2d 734.
14. angaslnan 1ransporLaLlon Co., lnc. vs. 1he ubllc Servlce Commlsslon, C.8. no. 47063, !une 26,
1940, 70 hll 221.
13. uyer vs. 1uskaloosa 8rldge Co., 2 orL. 296, 27 Am. u. 633, ChrlsLlan-1odd 1el. Co. vs.
CommonwealLh, 161 S.W. 343, 136 ky. 337, 37 C.!.S. 138.
16. Superlor WaLer, LlghL and ower Co. vs. ClLy of Superlor, 181 n.W. 113, 174 Wls. 237, afflrmed
183 n.W. 234, 37 C.!.S. 138.
17. ?nchausLl SLeamshlp Co. vs. uC, 42 hll 642.
18. .u. 837 and LxecuLlve Crder no. 30.
19. Albano vs. 8eyes, supra.
20. Memorandum of eLlLloner, 8ollo, pp. 417-418.
21. Almarlo, 1ransporLaLlon and Lhe ubllc Servlce Law, 1966 ed., p. 288.
22. Wlsconsln 1el. Co. vs. 8allroad Commlsslon, 136 n.W. 614, 162 n.W. 383, 73 C.!.S. 1099.
23. Cruz, l., hlllpplne ollLlcal Law, 1996. p. 97.
24. See SecLlon 11, ArLlcle xll, ConsLlLuLlon, supra.
23. See SecLlons 12, 13, 14, 13, 16, 17, 18, 19, 20, 22, 23, and 24, 8A 776.

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