TRANSPORTATION AND PUBLIC UTILITY LAW A 2010

First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo REPUBLIC V MERALCO (aida) 391 SCRA 700 PUNO; November 15, 2002 FACTS - December 23, 1993 MERALCO filed with the ERB an application for the revision of its rate schedules. The application reflected an average increase of P0.21 per kwh in its distribution charge. The application also included a prayer for provisional approval of the increase. - January 28, 1994 The ERB granted an increase of P0.184 subject to the condition that if the Board finds (after proper hearing and submission of books to the Commission on Audit) that MERALCO is entitled to a lesser rate increase, all excess amounts collected from MERALCOs consumers should be refunded or be credited in the consumers applications for electric bills covering future consumptions. - This came with an order from the ERB to CoA to conduct an audit and examination of the books of MERALCO. - The CoA submitted its Audit Report a recommendation not to include income taxes paid by MERALCO as part of its operating expenses for purposes of rate determination and the use of the net average investment method for the computation of the proportionate value of the properties used by MERALCO during the test year for the determination of the rate base. - The ERB adopted the CoAs recommendations and authorized MERALCO to implement a rate adjustment in the average amount of P0.017 per kwh effective February 1994. - The ERB further ordered that the provisional relief in the amount of P0.184 per kwh granted under the Boards Order dated January 28, 1994 is hereby superseded and modified and the excess average amount of P0.167 per kwh beginning February 1994 to February 1998 be refunded to customers or correspondingly credited in their favor for future consumption. - The ERB held that income tax should not be treated as operating expense as this should be borne by the stockholders who are recipients of the income or profits realized from the operation of their business hence, should not be passed on to the consumers. - On appeal in the CA, the CA set aside the ERBs decision insofar as it directed the reduction of the rate adjustment by P0.167 per kwh and the refund of such amount to customers. ISSUES WON the rate imposed by the ERB should apply which has its basis on the following sub-issues: the reasonable amount of expenses it has incurred in connection with the services it provides. It does not give the public utility the license to indiscriminately charge any and all types of expenses incurred without regard to the nature thereof. Reasoning - Income tax, it should be stressed, is imposed on an individual or entity as a form of excise tax or a tax on the privilege of earning income. - In general, operating expenses are those which are reasonably incurred in connection with business operations to yield revenue or income. They are items of expenses which contribute or are attributable to the production of income or revenue. - Clearly, by its nature, income tax payments of a public utility are not expenses which contribute to or are incurred in connection with the production of profit of a public utility. Income tax should be borne by the taxpayer alone as they are payments made in exchange for benefits received by the taxpayer from the State. - No benefit is derived by the customers of a public utility for the taxes paid by such entity and no direct contribution is made by the payment of income tax to the operation of a public utility for purposes of generating revenue or profit. - MERALCOs arguments that the rulings of American tax courts be applied in this case are untenable. Public utility taxation in the United States is going through the eye of criticism and some commenatators are of the view that in charging their income tax payments to their customers, public utilities virtually become tax collectors rather than taxpayers. In addition, public utilities in the US carry a heavier tax burden. b. YES Reasoning - Under the net average investment method, properties and equipment used in the operation of a public utility are entitled to a return only on the actual number of months they are in service during the period. In contrast, the average investment method computes the proportionate value of the property by adding the value of the property at the beginning and at the end of the test year with the resulting sum divided by two. - The reasonableness of net average investment method is borne by the records of the case. In its report, the COA explained that the computation of

a.

b. c.

WON the income tax paid by MERALCO should be treated as part of its operating expenses and thus considered in determining the amount of increase in rates imposed by MERALCO WON the net average investment method used by the CoA and the ERB was correct

HELD YES Ratio In the fixing of rates, the only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. What is a just and reasonable rate is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent judgment. Reasoning - The ERB was created under Executive Order No. 172 to regulate, among others, the distribution of energy resources and to fix rates to be charged by public utilities involved in the distribution of electricity. - Settled jurisprudence holds that factual findings of administrative bodies on technical matters within their area of expertise should be accorded both respect and finality if supported by substantial evidence. To the extent that the administrative agency has not been arbitrary or capricious in the exercise of its power, the time-honored principle is that courts should not interfere. - In determining the just and reasonable rates to be charged by a public utility, three major factors are considered by the regulating agency: a) rate of return; b) rate base and c) the return itself or the computed revenue to be earned by the public utility based on the rate of return and rate base. a. NO Ratio The principle behind the inclusion of operating expenses in the determination of a just and reasonable rate is to allow the public utility to recoup

TRANSPORTATION AND PUBLIC UTILITY LAW A 2010

First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo the proportionate value of the property and equipment in accordance with the actual number of months such property or equipment is in service for purposes of determining the rate base is favored, as against the trending method employed by MERALCO. - By using the net average investment method, the ERB and the COA considered for determination of the rate base the value of properties and equipment used by MERALCO in proportion to the period that the same were actually used during the period in question. This treatment is consistent with the settled rule in rate regulation that the determination of the rate base of a public utility entitled to a return must be based on properties and equipment actually being used or are useful to the operations of the public utility. - MERALCO argues that the net average investment method assumes an ideal situation wherein immediate recording occurs. It adopted the average investment method or the trending method which computes the average value of the property at the beginning and at the end of the test year to compensate for the irregular recording in its books. This is because immediate recordal in its books of the property or equipment is not possible as MERALCOs franchise covers a wide area and the amount of paperwork needed to be done also serves to delay such recording. - But MERALCOS stance is belied by the COA Report which states that the verification of the records, as confirmed by the Management Staff, disclosed that properties are recorded in the books as these are actually placed in service. - If we were to sustain the application of the trending method, the public utility may easily manipulate the valuation of its property entitled to a return (rate base) by simply including a highly capitalized asset in the computation of the rate base even if the same was used for a limited period of time during the test year. - MERALCO has also not adequately shown that the rates prescribed by the ERB are unjust or confiscatory as to deprive its stockholders a reasonable return on investment. Disposition Petition granted. members of the Magdalo Group and the National Peoples Army (NPA), a tape recorder, audio cassette cartridges, diskettes, and copies of subversive documents.2[7] Prior to his arrest, Lt. San Juan announced through DZRH that the Magdalos D-Day would be on February 24, 2006, the 20th Anniversary of Edsa I. On February 23, 2006, PNP Chief Arturo Lomibao intercepted information that members of the PNP- Special Action Force were planning to defect. Thus, he immediately ordered SAF Commanding General Marcelino Franco, Jr. to disavow any defection. The latter promptly obeyed and issued a public statement: All SAF units are under the effective control of responsible and trustworthy officers with proven integrity and unquestionable loyalty. On the same day, at the house of former Congressman Peping Cojuangco, President Cory Aquinos brother, businessmen and mid-level government officials plotted moves to bring down the Arroyo administration. Nelly Sindayen of TIME Magazine reported that Pastor Saycon, longtime Arroyo critic, called a U.S. government official about his groups plans if President Arroyo is ousted. Saycon also phoned a man code-named Delta. Saycon identified him as B/Gen. Danilo Lim, Commander of the Armys elite Scout Ranger. Lim said it was all systems go for the planned movement against Arroyo. B/Gen. Danilo Lim and Brigade Commander Col. Ariel Querubin confided to Gen. Generoso Senga, Chief of Staff of the Armed Forces of the Philippines (AFP), that a huge number of soldiers would join the rallies to provide a critical mass and armed component to the Anti-Arroyo protests to be held on February 24, 2005. According to these two (2) officers, there was no way they could possibly stop the soldiers because they too, were breaking the chain of command to join the forces foist to unseat the President. However, Gen. Senga has remained faithful to his Commanderin-Chief and to the chain of command. He immediately took custody of B/Gen. Lim and directed Col. Querubin to return to the Philippine Marines Headquarters in Fort Bonifacio. Earlier, the CPP-NPA called for intensification of political and revolutionary work within the military and the police establishments in order to forge alliances with its members and key officials. NPA spokesman Gregorio Ka Roger Rosal declared: The Communist Party and revolutionary movement and

DAVID VS ARROYO (mel) G.R. No. 171396 Sandoval-Gutierrez; May 3, 2006 NATURE These seven (7) consolidated petitions for certiorari and prohibition FACTS On February 24, 2006, as the nation celebrated the 20th Anniversary of the Edsa People Power I, President Arroyo issued PP 1017 declaring a state of national emergency. She cited the following facts as bases: elements in the political opposition have conspired with authoritarians of the extreme Left represented by the NDF-CPP-NPA and the extreme Right, represented by military adventurists..(whereas clauses) On the same day, the President issued G. O. No. 5 implementing PP 1017. On March 3, 2006, exactly one week after the declaration of a state of national emergency and after all these petitions had been filed, the President lifted PP 1017 (declaring that the state of national emergency has ceased to exist.) - On January 17, 2006, Captain Nathaniel Rabonza and First Lieutenants Sonny Sarmiento, Lawrence San Juan and Patricio Bumidang, members of the Magdalo Group indicted in the Oakwood mutiny, escaped their detention cell in Fort Bonifacio, Taguig City. On February 17, 2006, the authorities got hold of a document entitled Oplan Hackle I which detailed plans for bombings and attacks during the Philippine Military Academy Alumni Homecoming in Baguio City. The plot was to assassinate selected targets including some cabinet members and President Arroyo herself.1[6] Upon the advice of her security, President Arroyo decided not to attend the Alumni Homecoming. The next day, at the height of the celebration, a bomb was found and detonated at the PMA parade ground. On February 21, 2006, Lt. San Juan was recaptured in a communist safehouse in Batangas province. Found in his possession were two (2) flash disks containing minutes of the meetings between

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First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo the entire people look forward to the possibility in the coming year of accomplishing its immediate task of bringing down the Arroyo regime; of rendering it to weaken and unable to rule that it will not take much longer to end it. On the other hand, Cesar Renerio, spokesman for the National Democratic Front (NDF) at North Central Mindanao, publicly announced: Anti-Arroyo groups within the military and police are growing rapidly, hastened by the economic difficulties suffered by the families of AFP officers and enlisted personnel who undertake counter-insurgency operations in the field. He claimed that with the forces of the national democratic movement, the anti-Arroyo conservative political parties, coalitions, plus the groups that have been reinforcing since June 2005, it is probable that the Presidents ouster is nearing its concluding stage in the first half of 2006. Respondents further claimed that the bombing of telecommunication towers and cell sites in Bulacan and Bataan was also considered as additional factual basis for the issuance of PP 1017 and G.O. No. 5. So is the raid of an army outpost in Benguet resulting in the death of three (3) soldiers. And also the directive of the Communist Party of the Philippines ordering its front organizations to join 5,000 Metro Manila radicals and 25,000 more from the provinces in mass protests.3[10] For their part, petitioners cited the events that followed after the issuance of PP 1017 and G.O. No. 5. Immediately, the Office of the President announced the cancellation of all programs and activities related to the 20th anniversary celebration of Edsa People Power I; and revoked the permits to hold rallies issued earlier by the local governments. Justice Secretary Raul Gonzales stated that political rallies, which to the Presidents mind were organized for purposes of destabilization, are cancelled. Presidential Chief of Staff Michael Defensor announced that warrantless arrests and take-over of facilities, including media, can already be implemented.4[11] Undeterred by the announcements that rallies and public assemblies would not be allowed, groups of protesters (members of Kilusang Mayo Uno [KMU] and National Federation of Labor Unions-Kilusang Mayo Uno [NAFLU-KMU]), marched from various parts of Metro Manila with the intention of converging at the EDSA shrine. Those who were already near the EDSA site were violently dispersed by huge clusters of anti-riot police. The well-trained policemen used truncheons, big fiber glass shields, water cannons, and tear gas to stop and break up the marching groups, and scatter the massed participants. The same police action was used against the protesters marching forward to Cubao, Quezon City and to the corner of Santolan Street and EDSA. That same evening, hundreds of riot policemen broke up an EDSA celebration rally held along Ayala Avenue and Paseo de Roxas Street in Makati City.5[12] According to petitioner Kilusang Mayo Uno, the police cited PP 1017 as the ground for the dispersal of their assemblies.During the dispersal of the rallyists along EDSA, police arrested (without warrant) petitioner Randolf S. David, a professor at the University of the Philippines and newspaper columnist. Also arrested was his companion, Ronald Llamas, president of party-list Akbayan. At around 12:20 in the early morning of February 25, 2006, operatives of the Criminal Investigation and Detection Group (CIDG) of the PNP, on the basis of PP 1017 and G.O. No. 5, raided the Daily Tribune offices in Manila. The raiding team confiscated news stories by reporters, documents, pictures, and mock-ups of the Saturday issue. Policemen from Camp Crame in Quezon City were stationed inside the editorial and business offices of the newspaper; while policemen from the Manila Police District were stationed outside the building.6[13] A few minutes after the search and seizure at the Daily Tribune offices, the police surrounded the premises of another pro-opposition paper, Malaya, and its sister publication, the tabloid Abante. The raid, according to Presidential Chief of Staff Michael Defensor, is meant to show a strong presence, to tell media outlets not to connive or do anything that would help the rebels in bringing down this government. The PNP warned that it would take over any media organization that would not follow standards set by the government during the state of national emergency. Director General Lomibao stated that if they do not follow the standards and the standards are - if they would contribute to instability in the government, or if they do not subscribe to what is in General Order No. 5 and Proc. No. 1017 we will recommend a takeover. National Telecommunications Commissioner Ronald Solis urged television and radio networks to cooperate with the government for the duration of the state of national emergency. He asked for balanced reporting from broadcasters when covering the events surrounding the coup attempt foiled by the government. He warned that his agency will not hesitate to recommend the closure of any broadcast outfit that violates rules set out for media coverage when the national security is threatened.7[14] Also, on February 25, 2006, the police arrested Congressman Crispin Beltran, representing the Anakpawis Party and Chairman of Kilusang Mayo Uno (KMU), while leaving his farmhouse in Bulacan. Beltran, however, is not a party in any of these petitions.When members of petitioner KMU went to Camp Crame to visit Beltran, they were told they could not be admitted because of PP 1017 and G.O. No. 5. Two members were arrested and detained, while the rest were dispersed by the police. Bayan Muna Representative Satur Ocampo eluded arrest when the police went after him during a public forum at the Sulo Hotel in Quezon City. But his two drivers, identified as Roel and Art, were taken into custody. Retired Major General Ramon Montao, former head of the Philippine Constabulary, was arrested while with his wife and golfmates at the Orchard Golf and Country Club in Dasmarias, Cavite. Attempts were made to arrest Anakpawis Representative Satur Ocampo, Representative Rafael Mariano, Bayan Muna Representative Teodoro Casio and Gabriela Representative Liza Maza. Bayan Muna Representative Josel Virador was arrested at the PAL Ticket Office in Davao City. Later, he was turned over to the custody of the House of Representatives where the Batasan 5 decided to stay indefinitely. In the interim, these seven (7) petitions challenging the constitutionality of PP 1017 and G.O. No. 5 were filed with this Court against the above-named respondents. Three (3) of these petitions impleaded President Arroyo as respondent. In G.R. No. 171409, petitioners Ninez CachoOlivares and Tribune Publishing Co., Inc. challenged the CIDGs act of raiding the Daily Tribune offices as

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First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo a clear case of censorship or prior restraint. They also claimed that the term emergency refers only to tsunami, typhoon, hurricane and similar occurrences, hence, there is absolutely no emergency that warrants the issuance of PP 1017. In G.R. No. 171485, petitioners herein are Representative Francis Joseph G. Escudero, and twenty one (21) other members of the House of Representatives, including Representatives Satur Ocampo, Rafael Mariano, Teodoro Casio, Liza Maza, and Josel Virador. They asserted that PP 1017 and G.O. No. 5 constitute usurpation of legislative powers; violation of freedom of expression and a declaration of martial law. They alleged that President Arroyo gravely abused her discretion in calling out the armed forces without clear and verifiable factual basis of the possibility of lawless violence and a showing that there is necessity to do so. In G.R. No. 171483, petitioners KMU, NAFLU-KMU, and their members averred that PP 1017 and G.O. No. 5 are unconstitutional because (1) they arrogate unto President Arroyo the power to enact laws and decrees; (2) their issuance was without factual basis; and (3) they violate freedom of expression and the right of the people to peaceably assemble to redress their grievances. In G.R. No. 171400, petitioner Alternative Law Groups, Inc. (ALGI) alleged that PP 1017 and G.O. No. 5 are unconstitutional because they violate (a) Section 48[15] of Article II, (b) Sections 1,9[16] 2,10[17] and 411[18] of Article III, (c) Section 2312[19] of Article VI, and (d) Section 1713[20] of Article XII of the Constitution. In G.R. No. 171489, petitioners Jose Anselmo I. Cadiz et al., alleged that PP 1017 is an arbitrary and unlawful exercise by the President of her Martial Law powers. And assuming that PP 1017 is not really a declaration of Martial Law, petitioners argued that it amounts to an exercise by the President of emergency powers without congressional approval. In addition, petitioners asserted that PP 1017 goes beyond the nature and function of a proclamation as defined under the Revised Administrative Code. And lastly, in G.R. No. 171424, petitioner Loren B. Legarda maintained that PP 1017 and G.O. No. 5 are unconstitutional for being violative of the freedom of expression, including its cognate rights such as freedom of the press and the right to access to information on matters of public concern, all guaranteed under Article III, Section 4 of the 1987 Constitution. In this regard, she stated that these issuances prevented her from fully prosecuting her election protest pending before the Presidential Electoral Tribunal. ISSUE: WON the President CAN exercise emergency powers, such as the taking over of privately owned public utility without delegation from Congress HELD: NO RATIO A distinction must be drawn between the Presidents authority to declare a state of national emergency and to exercise emergency powers. To the first, as elucidated by the Court, Section 18, Article VII grants the President such power, hence, no legitimate constitutional objection can be raised. But to the second, manifold constitutional issues arise. Section 23, Article VI of the Constitution reads: SEC. 23. (1) The Congress, by a vote of two-thirds of both Houses in joint session assembled, voting separately, shall have the sole power to declare the existence of a state of war. (2) In times of war or other national emergency, the Congress may, by law, authorize the President, for a limited period and subject to such restrictions as it may prescribe, to exercise powers necessary and proper to carry out a declared national policy. Unless sooner withdrawn by resolution of the Congress, such powers shall cease upon the next adjournment thereof. It may be pointed out that the second paragraph of the above provision refers not only to war but also to other national emergency. If the intention of the Framers of our Constitution was to withhold from the President the authority to declare a state of national emergency pursuant to Section 18, Article VII (calling-out power) and grant it to Congress (like the declaration of the existence of a state of war), then the Framers could have provided so. Clearly, they did not intend that Congress should first authorize the President before he can declare a state of national emergency. The logical conclusion then is that President Arroyo could validly declare the existence of a state of national emergency even in the absence of a Congressional enactment. But the exercise of emergency powers, such as the taking over of privately owned public utility or business affected with public interest, is a different matter. This requires a delegation from Congress. Courts have often said that constitutional provisions in pari materia are to be construed together. Otherwise stated, different clauses, sections, and provisions of a constitution which relate to the same subject matter will be construed together and considered in the light of each other. Considering that Section 17 of Article XII and Section 23 of Article VI, previously quoted, relate to national emergencies, they must be read together to determine the limitation of the exercise of emergency powers. Generally, Congress is the repository of emergency powers. This is evident in the tenor of Section 23 (2), Article VI authorizing it to delegate such powers to the President. Certainly, a body cannot delegate a power not reposed upon it. However, knowing that during grave emergencies, it may not be possible or practicable for Congress to meet and exercise its powers, the Framers of our Constitution deemed it wise to allow Congress to grant emergency powers to the President, subject to certain conditions, thus: (1) There must be a war or other emergency. (2) The delegation must be for a limited period only. (3) The delegation must be subject to such restrictions as the Congress may prescribe. (4) The emergency powers must be exercised to carry out a national policy declared by Congress.14[124]

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First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo Section 17, Article XII must be understood as an aspect of the emergency powers clause. The taking over of private business affected with public interest is just another facet of the emergency powers generally reposed upon Congress. Thus, when Section 17 states that the the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest, it refers to Congress, not the President. Now, whether or not the President may exercise such power is dependent on whether Congress may delegate it to him pursuant to a law prescribing the reasonable terms thereof. Emergency, as a generic term, connotes the existence of conditions suddenly intensifying the degree of existing danger to life or well-being beyond that which is accepted as normal. Implicit in this definitions are the elements of intensity, variety, and perception. Emergencies, as perceived by legislature or executive in the United Sates since 1933, have been occasioned by a wide range of situations, classifiable under three (3) principal heads: a) economic, natural disaster,] and c) national security.15[130] Following our interpretation of Section 17, Article XII, invoked by President Arroyo in issuing PP 1017, this Court rules that such Proclamation does not authorize her during the emergency to temporarily take over or direct the operation of any privately owned public utility or business affected with public interest without authority from Congress. Let it be emphasized that while the President alone can declare a state of national emergency, however, without legislation, he has no power to take over privately-owned public utility or business affected with public interest. The President cannot decide whether exceptional circumstances exist warranting the take over of privately-owned public utility or business affected with public interest. Nor can he determine when such exceptional circumstances have ceased. Likewise, without legislation, the President has no power to point out the types of businesses affected with public interest that should be taken over. In short, the President has no absolute authority to exercise all the powers of the State under Section 17, Article VII in the absence of an emergency powers act passed by Congress. ALBANO v REYES (kooky) 175 SCRA 224 PARAS; July 11, 1989 NATURE: Petition for Prohibition with prayer for Preliminary Injunction or Restraining Order seeking to restrain the Philippine Ports Authority (PPA) and DOTC Secretary Rainerio O. Reyes from awarding to the International Container Terminal Services, Inc. (ICTSI) the contract for the development, management and operation of the Manila International Container Terminal (MICT). FACTS: - On April 20, 1987, the PPA Board adopted Resolution No. 850 directing PPA to prepare the Invitation to Bid and relevant requirements for public bidding of the development, management and operation of the MICT at the Port of Manila, and authorizing the Board Chairman, Secretary Rainerio O. Reyes, to oversee the preparation for the MICT leasing as well as to implement this project. Sec. Reyes, created a "Special MICT Bidding Committee" charged with evaluating all bid proposals, recommending to the Board the best bid, and preparing the contract between the PPA and the winning bidder or contractor. - The PPA published the Invitation to Bid several times in a newspaper of general circulation, which publication included the reservation by the PPA of "the right to reject any or all bids and to waive any informality in the bids or to accept such bids which may be considered most advantageous to the government." - Seven (7) consortia of companies submitted bids. The Bidding Committee recommended the award of the contract to International Container Terminal Services, Inc. (ICTSI) as having offered the best Technical and Financial Proposal. Secretary Reyes declared ICTSI consortium as the winning bidder. - Before the contract could be signed, two successive cases were filed, which assailed the legality or regularity of the MICT bidding. The first was for "Prohibition with Preliminary Injunction" filed by Basilio H. Alo, an alleged "concerned taxpayer", and, the second was for "Prohibition with Prayer for Temporary Restraining Order (TRO)" filed by C.F. Sharp Co., Inc., which had actively participated in the MICT Bidding. Restraining Orders were issued but these were subsequently lifted by the SC. - On May 18, 1988, the Pres Aquino approved the MICT Contract, with directives that "the responsibility for planning, detailed engineering, construction, expansion, rehabilitation and capital dredging of the port, as well as the determination of how the revenues of the port system shall be allocated for future port works, shall remain with the PPA; and the contractor shall not collect taxes and duties except that in the case of wharfage or tonnage dues and harbor and berthing fees, payment to the Government may be made through the contractor who shall issue provisional receipts and turn over the payments to the Government which will issue the official receipts." - Rodolfo A. Albano filed the present petition as citizen and taxpayer and as a member of the House of Representatives, assailing the award of the MICT contract to the ICTSI by the PPA. Albano claims that since the MICT is a public utility, it needs a legislative franchise before it can legally operate as a public utility, pursuant to Article 12, Section 11 of the 1987 Constitution. ISSUE: WON MICT needs a legislative franchise before it can operate as a public utility HELD: NO. - A franchise specially granted by Congress is not necessary for the operation of the Manila International Container Port (MICP) by a private entity, a contract entered into by the PPA and such entity constituting substantial compliance with the law. Under the terms of E.O. No. 30 and P.D. No. 857, the PPA may contract with the International Container Terminal Services, Inc. (ICTSI) for the management, operation and development of the MICP. - Even if the MICP be considered a public utility, or a public service on the theory that it is a "wharf" or a "dock" as contemplated under the Public Service Act,

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First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo its operation would not necessarily call for a franchise. Franchises issued by Congress are not required before each and every public utility may operate. Thus, the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities. (See E.O. Nos. 172 [ERB] and 202 [LTFRB]) Art. XII, Sec. 11 of the Constitution does not necessarily imply that only Congress has the power to grant such authorization. - The PPA, in the exercise of the option granted it by P.D. No. 857, chose to contract out the operation and management of the MICP to a private corporation. This is clearly within its power to do. Thus, PPA's acts of privatizing the MICT and awarding the MICT contract to ICTSI are wholly within the jurisdiction of the PPA under its Charter which empowers the PPA to "supervise, control, regulate, construct, maintain, operate and provide such facilities or services as are necessary in the ports vested in, or belonging to the PPA." (Section 6(a) ii, P.D. 857). - The contract between the PPA and ICTSI, coupled with the President's written approval, constitute the necessary authorization for ICTSI's operation and management of the MICP. The award of the MICT contract approved by no less than the President of the Philippines herself enjoys the legal presumption of validity and regularity of official action. - Disposition Petition dismissed - NOTE: The importance of the case to the topic in the outline may be found in the footnotes, the relevant parts of which are herein provided: - A "public utility" is a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service. Apart from statutes which define the public utilities that are within the purview of such statutes, it would be difficult to construct a definition of a public utility which would fit every conceivable case. As its name indicates, however, the term public utility implies a public use and service to the public. (Am. Jur. 2d V. 64, p. 549). - The Public Service Act (C.A. No. 146, as amended) provides that the term public service "includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries, and water craft, engaged in the transportation of passengers and freight or both, shipyard, marine railway, refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power, petroleum, sewerage system, wire or wireless communications system, wire or wireless broadcasting stations and other similar public services.." [Sec. 13 (b).]. - Under P.D. 857 the term dock "includes locks, cuts entrances, graving docks, inclined planes, slipways, quays, and other works and things appertaining to any dock", while wharf "means a continuous structure built parallel to along the margin of the sea or alongside riverbanks, canals, or waterways where vessels may lie alongside to receive or discharge cargo, embark or disembark passengers, or lie at rest." [Sec. 3(j) and (o).]. Separate Opinion GUTIERREZ, JR., concurring: The determination of whether or not the winning bidder is qualified to undertake the contracted service should be left to the sound judgment of the Philippine Ports Authority (PPA). The PPA is the agency which can best evaluate the comparative qualifications of the various bidding contractors and that in making such evaluation it has the technical expertise which neither this Court nor Congress possesses. TATAD VS GARCIA (jat) PAL VS CAB(GRANDAIR) (eva) 270 SCRA 538 TORRES; March 26, 1997 NATURE A Special Civil Action for Certiorari and Prohibition seeking to prohibit respondent Civil Aeronautics Board (CAB) from exercising jurisdiction over private respondent's Application for the issuance of a Certificate of Public Convenience and Necessity (CPCN), and to annul and set aside a temporary operating permit issued by CAB in favor of Grand International Airways (GrandAir) allowing the same to engage in scheduled domestic air transportation services, particularly the Manila-Cebu, Manila-Davao, and converse routes. FACTS - GrandAir applied for a CPCN with CAB and requested for the issuance of a Temporary Operating Permit. - PAL, itself the holder of a legislative franchise to operate air transport services, filed an Opposition to the application for a CPCN on the following grounds: A. The CAB has no jurisdiction to hear the petitioner's application until the latter has first obtained a franchise to operate from Congress. B. The petitioner's application is deficient in form and substance in that: 1. The application does not indicate a route structure 2. It does not contain a project/feasibility study, projected profit and loss statements, projected balance sheet, insurance coverage, etc. C. Approval of petitioner's application would violate the equal protection clause. D. There is no urgent need and demand for the services applied for. E. To grant petitioner's application would only result in ruinous competition contrary to Section 4(d) of R.A. 776. - CAB denied Opposition saying that The CAB has jurisdiction to hear and resolve the application. In Avia Filipina vs. CAB, it has

been ruled that under Section 10 RA 776, CAB possesses this specific power and duty. - Meantime, PAL this time, opposed GrandAirs application for a temporary permit maintaining that: 1. The applicant does not possess the required fitness and capability of operating the services applied for under RA 776; and 2. Applicant has failed to prove that there is clear and urgent public need for the services applied for. - CAB approved the issuance of a Temporary Operating Permit for a period of three months, holding that the CAB is specifically authorized under Section 10-C (1) of RA 776, that such authority was affirmed in PAL vs. CAB and more recently, Avia Filipinas vs. CAB citing therein as basis the decision of Albano vs. Reyes which provides that:

TRANSPORTATION AND PUBLIC UTILITY LAW A 2010

First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo a) Franchises by Congress are not required before each and every public utility may operate when the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities; b) The Constitutional provision in Article XII, Section 11 that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility does not necessarily imply that only Congress has the power to grant such authorization since our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such authorization for certain classes of public utilities. - The main reason submitted by PAL to support its petition is the fact that GrandAir does not possess a legislative franchise authorizing it to engage in air transpo service within the Philippines or elsewhere. Such franchise is, allegedly, a requisite for the issuance of a CPCN by CAB, as mandated under Sec.11, Art. XII of the Constitution. - To support its theory, PAL submits Opinion No. 163, S. 1989 of the DOJ: . . . it is useful to note the distinction between the franchise to operate and a permit to commence operation. The former is sovereign and legislative in nature; it can be conferred only by the lawmaking authority. The latter is administrative and regulatory in character; it is granted by an administrative agency... While a legislative franchise is a prerequisite to a grant of a certificate of public convenience and necessity to an airline company, such franchise alone cannot constitute the authority to commence operations, inasmuch as there are still matters relevant to such operations which are not determined in the franchise, like rates, schedules and routes, and which matters are resolved in the process of issuance of permit by the administrative. Indeed, authorities are agreed that a CPCN is an authorization issued by the appropriate governmental agency for the operation of public services for which a franchise is required by law... Based on the foregoing, it is clear that a franchise is the legislative authorization to engage in a business activity or enterprise of a public nature, whereas a CPCN is a regulatory measure which constitutes the franchise's authority to commence operations. It is thus logical that the grant of the former should precede the latter. - GrandAir, on the other hand, posits that a legislative franchise is no longer a requirement for the issuance of a CPCN or a Temporary Operating Permit, following the Court's pronouncements in the case of Albano vs. Reyes. ISSUES 1. WON Congress, in enacting RA 776, has delegated the authority to authorize the operation of domestic air transport services to the respondent Board, such that Congressional mandate for the approval of such authority is no longer necessary. 2. WON the use of the word "necessity", in conjunction with "public convenience" in a certificate of authorization to a public service entity to operate, modifies the nature of such certification, or the requirements for the issuance of the same. HELD 1. YES. Ratio The CAB has the authority to issue a CPCN, or Temporary Operating Permit to a domestic air transport operator, who, though not possessing a legislative franchise, meets all the other requirements prescribed by the law. Such requirements were enumerated in Section 21 of R.A. 776. There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an indispensable requirement for an entity to operate as a domestic air transport operator. Although Section 11 of Article XII recognizes Congress' control over any franchise, certificate or authority to operate a public utility, it does not mean Congress has exclusive authority to issue the same. Franchises issued by Congress are not required before each and every public utility may operate. In many instances, Congress has seen it fit to delegate this function to government agencies, specialized particularly in their respective areas of public service. Reasoning - Congress has granted certain administrative agencies the power to grant licenses for, or to authorize the operation of certain public utilities. With the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency towards the delegation of greater powers by the legislature, and towards the approval of the practice by the courts. It has been held that privileges conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature. - The trend of modern legislation is to vest the Public Service Commissioner with the power to regulate and control the operation of public services under reasonable rules and regulations, and as a general rule, courts will not interfere with the exercise of that discretion when it is just and reasonable and founded upon a legal right. - A reading of RA 776 Sec.10 reveals the clear intent of Congress to delegate the authority to regulate the issuance of a license to operate domestic air transport services16 - This is not an instance of transforming the respondent Board into a mini-legislative body, with unbridled authority to choose who should be given authority to operate domestic air transport services. Congress has set specific limitations on how such authority should be exercised- guidelines and policies under Sec.4; the requirements to determine the competency of a prospective operator to engage in the public service of air transportation under Sec. 12 and Sec. 21; the procedure for the processing of the application of a CPCN 2. NO.

16 Sec. 10. Powers and Duties of the Board.

(A) Except as otherwise provided herein, the Board shall have the power to regulate the economic aspect of air transportation, and shall have general supervision and regulation of, the jurisdiction and control over air carriers, general sales agents, cargo sales agents, and air freight forwarders as well as their property rights, equipment, facilities and franchise, insofar as may be necessary for the purpose of carrying out the provision of this Act. (C) The Board shall have the following specific powers and duties: (1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend, revise, alter, modify, cancel, suspend or revoke in whole or in part upon petition or complaint or upon its own initiative any Temporary Operating Permit or Certificate of Public Convenience and Necessity: Provided however, That in the case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic of the Philippines.

TRANSPORTATION AND PUBLIC UTILITY LAW A 2010

First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo Ratio The use of the word "necessity", in conjunction with "public convenience" in a certificate of authorization to a public service entity to operate, does not in any way modify the nature of such certification, or the requirements for the issuance of the same. It is the law which determines the requisites for the issuance of such certification, and not the title indicating the certificate. Reasoning - PAL argues that since R.A. 776 gives the Board the authority to issue "CPCN", this, according to petitioner, means that a legislative franchise is an absolute requirement. It cites a number of authorities supporting the view that a CPCN is issued to a public service for which a franchise is required by law, as distinguished from a "Certificate of Public Convenience" which is an authorization issued for the operation of public services for which no franchise, either municipal or legislative, is required by law. This submission relies on the premise that the authority to issue a certificate of public convenience and necessity is a regulatory measure separate and distinct from the authority to grant a franchise for the operation of the public utility subject of this particular case, which is exclusively lodged by petitioner in Congress. - The terms "convenience and necessity", if used together in a statute, are usually held not to be separable, but are construed together. Both words modify each other and must be construed together. The word 'necessity' is so connected, not as an additional requirement but to modify and qualify what might otherwise be taken as the strict significance of the word necessity. Public convenience and necessity exists when the proposed facility will meet a reasonable want of the public and supply a need which the existing facilities do not adequately afford. It does not mean or require an actual physical necessity or an indispensable thing. DISPOSITIVE CAB should now be allowed to continue hearing the application of GrandAir for the issuance of a CPCN, there being no legal obstacle to the exercise of its jurisdiction. ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to DISMISS the instant petition for lack of merit. The CAB is hereby DIRECTED to CONTINUE hearing the application of respondent Grand International Airways, Inc. for the issuance of a CPCN. Y TRANSIT VS NLRC (mel) G.R. No. 88195-96 Romero; January 27, 1994 NATURE Special civil action for certiorari filed by "Y" Transit Co., Inc. for the annulment of the decision of the National labor Relations Commission FACTS Yujuico Transit Co., Inc., mortgaged ten of its buses to the Development Bank of the Philippines (DBP) to secure a loan in the amount of P2,795,129.36. Thereafter, the Board of Directors of Yujuico Transit Co., Inc. passed a resolution authorizing its President, Jesus Yujuico to enter into a dacion en pago arrangement with the DBP, whereby Jesus Yujuico would transfer to the DBP the Saint Martin Technical Institute in consideration of the full settlement of the obligations of three companies, one of which was Yujuico Transit Co, Inc. The transfer of the property was made and DBP released the mortgages constituted on the buses of Yujuico Transit Co., Inc. Consequently, the company transferred the ownership of its mortgaged properties, including the buses, to Jesus Yujuico. Meanwhile, the Yujuico Transit Employees Union (Associated labor Union) filed two (2) consolidated complaints against Yujuico Transit Co., Inc. for Unfair Labor Practice and violations of Presidential Decrees Nos. 525, 1123, 1614 and 851 (non-payment of living allowances). More than a year after, Jesus Yujuico sold the subject buses to herein petitioner "Y" Transit Co., Inc. for P3,485,400. The Labor Arbiter rendered a decision dismissing the complaint for unfair labor practice but holding Yujuico Transit Co., Inc. liable under the aforementioned Presidential Decrees in the amount of P142,790.49. On June 14, 1982, an alias writ of execution was issued and levy was made upon the ten (10) buses. Thereafter, "Y" Transit Co., Inc. filed Affidavits of Third Party Claim. Private respondents herein opposed the Third party claim on the ground that the transactions leading to the transfer of the buses to "Y" Transit Co., Inc. were void because they lacked the approval of the BOT as required by the Public Service Act. They also argued that the buses were still registered in the name of Yujuico Transit Co. which was, therefore, still the lawful owner thereof. The Labor Arbiter found that "Y" Transit Co., Inc. had valid title to the buses and that the BOT, by its subsequent acts had approved the transfer (It stated that eegistration of a motor vehicle is not the operative act that transfers ownership, unlike in land registration cases.) Accordingly, the Third-Party Claim was granted and the release of all the buses levied for execution was ordered. On appeal, the NLRC reversed the labor arbiter's decision on the ground that the transfer of the buses lacked the BOT approval. It ordered the reinstatement of the levy and the auction of properties. ISSUE WON The public respondent NLRC committed palpable legal error and grave abuse of discretion amounting to lack of jurisdiction when it held that there was no valid transfer of ownership in favor of the petitioner HELD : NO RATIO The Court held in Montoya v. Ignacio, 5 we held: . . . The law really requires the approval of the Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee. The reason is obvious. Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service Commission so that the latter may take proper safeguards to protect the interest of the public. In fact, the law requires that, before approval is granted, there should be a public hearing with notice to all interested parties in order that the commission may determine if there are good and reasonable grounds justifying the transfer or lease of the property covered by the franchise, or if the sale or lease is detrimental to public interest. Such being the reason and philosophy behind this requirement, it follows that if the property covered by the franchise is transferred, or leased to another without obtaining the requisite approval, the transfer is not binding against Public Service Commission and in contemplation of law, the grantee continues to be responsible under the franchise in relation to the Commission and to the public. . . .

TRANSPORTATION AND PUBLIC UTILITY LAW A 2010

First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo It may be argued that Section 16, paragraph (h) provides in its last part that "nothing herein contained shall be construed to prevent the sale, alienation, or lease by any public utility of any of its property in the ordinary course of business," which gives the impression that the approval of Public Service Commission is but a mere formality which does not affect the effectivity of the transfer or lease of the property belonging to a public utility. But such provision only means that even if the approval has not been obtained the transfer or lease is valid and binding between the parties although not effective against the public and the Public Service Commission. The approval is only necessary to protect public interest. REASONING There being no prior BOT approval in the transfer of property from Yujuico Transit Co., Inc. to Jesus Yujuico, it only follows that as far as the BOT and third parties are concerned, Yujuico Transit Co., Inc. still owned the properties. and Yujuico, and later, "Y" Transit Co., Inc. only held the same as agents of the former. In Tamayo v. Aquino, 6 the Supreme Court stated, thus: . . . In operating the truck without transfer thereof having been approved by the Public Service Commission, the transferee acted merely as agent of the registered owner and should be responsible to him (the registered owner) for any damages that he may cause the latter by his negligence. RAYMUNDO VS. LUNETA MOTOR CO. (bryan sj) 58 PHIL 389 J. Malcolm, November 29, 1933 NATURE Petition for Review on Certiorari FACTS Nicanor de Guzman, on behalf of Guzco Transit, purchased trucks from the Luneta Motor Co. executing a series of promissory notes guaranteed by a chattel mortgage on several trucks. On failure of De Guzman or Guzco Transit to pay the promissory notes, suit was brought in the Court of First Instance of Manila for the collection of the amount outstanding and unpaid. When the complaint was presented, a writ of attachment was obtained against the properties of the Guzco Transit, and as a consequence garnishment was served on the Secretary of the Public Service Commission attaching the right, title, and participation of the Guzco Transit in the certificates of public convenience issued in cases Nos. 25635, 23914, and 24255 covering the bus transportation lines between Manila and Cardona, Rizal, and between Manila and Pililla, Rizal. Nine days after the certificates were attached by the Luneta Motor Co., the same certificates, together with certificate No. 25951 and several trucks, were sold by De Guzman for the Guzco Transit to Dominador Raymundo. De Guzman lost in the collection suit against him. The certificates were ordered sold by the Court of First Instance of Manila, and in fact the certificates of public convenience Nos. 25635 and 23914 were sold to the Luneta Motor Co. as the highest bidder. In both instances of sale, there was a request for approval of the sale before the Public Service Commission. The commission in its decision approved the sale at public auction in favor of the Luneta Motor Co., and disapproved the sale made to Dominador Raymundo, reserving to Raymundo the right to present another petition for the approval of the sale of certificate of public convenience No. 25951 which was not included in the sale in favor of the Luneta Motor Co. Raymundo apparently, contends that certificates of public convenience may not be attached pointing out the obscurity of the law with respect to the matter. ISSUE Whether or not the certificates of public convenience held by public service operators may be the object of execution and garnishment sale. RULING YES RATIO The Public Service Law permits the Public Service Commission to approve the sale, alienation, mortgaging, encumbering, or leasing of property, franchises, privileges, or rights or any part thereof (sec. 16 [h]), and in practice the purchase and sale of certificates of public convenience has been permitted by the Public Service Commission. If the holder of a certificate of public convenience can sell it voluntarily, there is no valid reason why the same certificate cannot be taken and sold involuntarily pursuant to court process. REASONING The Public Service Law, Act No. 3108, as amended, authorizes certificates of public convenience to be secured by public service operators from the Public Service Commission. (Sec. 15 [i].) A certificate of public convenience granted to the owner or operator of public service motor vehicles, it has been held, grants a right in the nature of a limited franchise. (Public Utilities Commission vs. Garviloch [1919], 54 Utah, 406.) The Code of Civil Procedure establishes the general rule that "property, both real and personal, or any interest therein of the judgment debtor, not exempt by law, and all property and rights of property seized and held under attachment in the action, shall be liable to execution." (Sec. 450.) The statutory exemptions do not include franchises or certificates of public convenience. (Sec. 452.) The word "property" as used in section 450 of the Code of Civil Procedure comprehends every species of title, inchoate or complete, legal or equitable. The test by which to determine whether or not property can be attached and sold upon execution is whether the judgment debtor has such a beneficial interest therein that he can sell or otherwise dispose of it for value. (Reyes vs. Grey [1911], 21 Phil., 73.) It will be noted that the Public Service Law and the Code of Civil Procedure are silent on the question at issue, that is, silent in the sense of not containing specific provisions on the right to attach certificates of public convenience. The same attitude was not assumed in the enactment of Act No. 667, section

TRANSPORTATION AND PUBLIC UTILITY LAW A 2010

First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo 10, as amended, which gave authority for the mortgage and sale under foreclosure proceedings of franchises granted by provincial and municipal governments. A similar tendency was evident in the Corporation Law, for in section 56 and following thereof express provisions were made for the sale on execution of franchises of the designated classes and of the property used in connection with them. Certificates of public convenience have come to have considerable material value. They are valuable assets. In many cases the certificates are the cornerstones on which are built the business of bus transportation. The United States Supreme Court considers a franchise granted in consideration of the performance of public service as constituting property within the protection of the Fourteenth Amendment to the United States Constitution. (Frost vs. Corporation Commission of Oklahoma [1929], 278 U. S., 515.) If the holder of the certificate of public, convenience can thus be protected in his constitutional rights, we see no reason why the certificate of public convenience should not assume corresponding responsibilities and be susceptible as property or an interest therein of being liable to execution. In at least one State, the certificate of the railroad commission permitting the operation of a bus line has been held to be included in the term "property" in the broad sense of the term. If this is true, the certificate under our law, considered as a species of property, would be liable to execution. (Willis vs. Buck [1928], 81 Mont., 472.) BATANGAS TRANSPORTATION Co. V ORLANES (da) 52 PHIL 455 JOHNS: Dec 1921 FACTS: Orlanes seeks to have a certificate of public convenience to operate a line of auto trucks with fixed times of departure between Taal and Bantilan, in the municipality of Bolbok, Batangas, with the right to receive passengers and freight from intermediate points. At the time of his application, Orlanes was what is known as an irregular operator between Bantilan and Taal, and that the Batangas Transportation Company was what is known as a regular operator between Batangas and Rosario. Orlanes now seeks to have his irregular operation changed into a regular one, with fixed hours of departure and arrival between Bantilan and Taal, and to set aside and nullify the prohibition against him in his certificate of public convenience that he shall not have or receive any passengers or freight at any of the points served by the Batangas Transportation Company for which that company holds a prior license from the Commission. Batangas Transportation Company, in case No. 10301, applied to the Commission for a permit to increase the number of trip hours at and between the same places from Batangas to Rosario, and for an order that all irregular operators be prohibited from operating their respective licenses, unless they should observe the interval of two hours before, or one hour after, the regular hours of the Batangas Transportation Company. In his petition Orlanes sought to be relieved from his prohibition to become a regular operator, and for a license to become a regular operator with a permission to make three round trips daily between Bantilan and Taal, the granting of which would make him a regular operator between those points and bring him in direct conflict and competition over the same points with the Batangas Transportation Company under its prior license, and in legal effect that was the order which the Commission made, of which the Batangas Transportation Company now complains. ISSUE: WON a certificate of public convenience may be issued to a second operator to operate a public utility in a field where, and in competition with, a first operator who is already operating a sufficient, adequate and satisfactory service HELD: NO. In the instant case, the evidence is conclusive that the Batangas Transportation Company operated its line five years before Orlanes ever turned a wheel, yet the legal effect of the decision of the Public Service Commission is to give an irregular operator, who was the last in the field, a preferential right over a regular operator, who was the first in the field. That is not the law, and there is no legal principle upon which it can be sustained. So long as the first licensee keeps and performs the terms and conditions of its license and complies with the reasonable rules and regulations of the Commission and meets the reasonable demands of the public, it should have more or less of a vested and preferential right over a person who seeks to acquire another and a later license over the same route. Otherwise, the first licensee would not have any protection on his investment, and would be subject to ruinous competition and thus defeat the very purpose and intent for which the Public Service Commission was created. It does not appear that the public has ever made any complaint against the Batangas Transportation Company, yet on its own volition and to meet the increase of its business, it has applied to the Public Service Commission for authority to increase the number of daily trips to nineteen, thus showing a spirit that ought to be commended. Such is the rule laid down in the case of Re B. F. Davis Motor Lines, cited by the Public Service Commission of Indiana (P. U. R., 1927-B, page 729), in which it was held: "A motor vehicle operator having received a certificate with a voluntary stipulation not to make stops (that is, not to carry passengers) on a part of a route served by other carriers, and having contracted with such carriers not to make the stops, will not subsequently be authorized to make such stops where the other carriers are able to carry all passengers who present themselves for transportation within the restricted district." And in Re Mount Bake development Co., the Public Service Commission of Washington (P. U. R., 1925D, 7053, held: "A certificate authorizing through motor carrier service should not authorize local service between points served by the holders of a certificate, without first giving the certificate holders an opportunity to render additional service desired." In the National Coal Company case (47 Phil., 356), this court said: "When there is no monopoly. There is no such thing as a monopoly where a property is operated as a public utility under the rules and regulations of the Public Utility Commission and the terms and provisions of the Public Utility Act." The rule has been laid down, without dissent in numerous decisions, that where an operator is rendering good, sufficient and adequate service to the public, that the convenience does not require and the public interests will not be promoted in a proper and suitable manner by giving another operator a certificate of public convenience to operate a competing line over the same route. EPITACIO SAN PABLO vs.PANTRANCO SOUTH EXPRESS, INC.

10

TRANSPORTATION AND PUBLIC UTILITY LAW A 2010

First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo CARDINAL SHIPPING CORPORATION vs. BOT AND PANTRANCO (kitik) GANCAYCO, J.: August 21, 1987 NATURE Consolidated case. Petition for review on certiorari with prayer for preliminary injunction seeking the revocation BOTs decision, and pending consideration of the petition, the issuance of a restraining order or preliminary injunction against the operation by PANTRANCO of ferry service between Matnog Sorsogon and Allen Samar. FACTS - PANTRANCO is a domestic corporation engaged in the land transportation business with PUB service for passengers and freight and various certificates for public conveniences CPC to operate passenger buses from Metro Manila to Bicol Region and Eastern Samar. On March 27,1980 PANTRANCO through its counsel wrote to MARINA requesting authority to lease/purchase a vessel named M/V "Black Double" "to be used for its project to operate a ferryboat service from Matnog, Sorsogon and Allen, Samar that will provide service to company buses and freight trucks that have to cross San Bernardo Strait. In a reply of April 29,1981 PANTRANCO was informed by MARINA that it cannot give due course to the request on the basis of: The Matnog-Allen run is adequately serviced by Cardinal Shipping Corp. and Epitacio San Pablo; MARINA policies on interisland shipping restrict the entry of new operators to Liner trade routes where these are adequately serviced by existing/authorized operators among other reasons. - PANTRANCO nevertheless acquired the vessel MV "Black Double" on May 27, 1981. Failing to obtain an affirmative answer from MARINA it wrote the Chairman of the Board of Transportation (BOT) through its counsel, that it proposes to operate a ferry service to carry its passenger buses and freight trucks between Allen and Matnog in connection with its trips to Tacloban City invoking the case of Javellana vs. Public Service Commission. PANTRANCO claims that it can operate a ferry service in connection with its franchise for bus operation in the highway from Pasay City to Tacloban City "for the purpose of continuing the highway, which is interrupted by a small body of water, the said proposed ferry operation is merely a necessary and incidental service to its main service and obligation of transporting its passengers from Pasay City to Tacloban City. Such being the case ... there is no need ... to obtain a separate certificate for public convenience to operate a ferry service between Allen and Matnog to cater exclusively to its passenger buses and freight trucks. - Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping Corporation who are franchise holders of the ferry service in this area interposed their opposition. They claim they adequately service the PANTRANCO by ferrying its buses, trucks and passengers. - October 23, 1981 the BOT rendered its decision holding that the ferry boat service is part of its CPC to operate from Pasay to Samar/Leyte by amending PANTRANCO's CPC, including the grant of authority to operate a private ferry boat service. Petitioners opposition and motion for reconsideration of the BOTs decision being denied they filed this present action before the Court. ISSUE WON PANTRANCO should obtain a separate Certificate of Public Convenience for its proposed ferry service. HELD Yes. The Court held that the water transport service between Matnog and Allen is not a ferry boat service but a coastwise or interisland shipping service. Before private respondent may be issued a franchise or CPC for the operation of the said service as a common carrier, it must comply with the usual requirements of filing an application, payment of the fees, publication, adducing evidence at a hearing and affording the oppositors the opportunity to be heard, among others, as provided by law. RATIO - In Javellana the term "ferry" implied the continuation by means of boats, barges, or rafts, of a highway or the connection of highways located on the opposite banks of a stream or other body of water. The term necessarily implies transportation for a short distance, almost invariably between two points, which is unrelated to other transportation. Clearly this case doesnt fit the said description. - Furthermore in Javellana the Court defined the difference between ferry and coastwise service in this wise: we are inclined to believe that the Legislature intended ferry to mean the service either by barges or rafts, even by motor or steam vessels, between the banks of a river or stream to continue the highway which is interrupted by the body of water, or in some cases to connect two points on opposite shores of an arm of the sea such as bay or lake which does not involve too great a distance or too long a time to navigate But where the line or service involves crossing the open sea like the body of water between the province of Batangas and the island of Mindoro which the oppositors describe thus "the intervening waters between Calapan and Batangas are wide and dangerous with big waves where small boat barge, or raft are not adapted to the service," then it is more reasonable to regard said line or service as more properly belonging to interisland or coastwise trade. - This Court takes judicial notice of the fact, and as shown by an examination of the map of the Philippines, that Matnog which is on the southern tip of the island of Luzon and within the province of Sorsogon and Allen which is on the northeastern tip of the island of Samar, is traversed by the San Bernardino Strait which leads towards the Pacific Ocean. The parties admit that the distance between Matnog and Allen is about 23 kilometers which maybe negotiated by motorboat or vessel in about 11/2 hours as claimed by respondent PANTRANCO to 2 hours according to petitioners. As the San Bernardino Strait which separates Matnog and Allen leads to the ocean it must at times be choppy and rough so that it will not be safe to navigate the same by small boats or barges but only by such steamboats or vessels as the MV "Black Double. - Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a ferry boat service but a coastwise or interisland shipping service. Under no circumstance can the sea between Matnog and Allen be considered a continuation of the highway. While a ferry boat service has been considered as a continuation of the highway when crossing rivers or even lakes, which are small body of waters - separating the land, however, when as in this case the two terminals, Matnog and Allen are separated by an open sea it can not be considered as a continuation of the highway. Respondent PANTRANCO should secure a separate CPC for the operation of an interisland or coastwise

11

TRANSPORTATION AND PUBLIC UTILITY LAW A 2010

First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo shipping service in accordance with the provisions of law. Its CPC as a bus transportation cannot be merely amended to include this water service under the guise that it is a mere private ferry service. DISPOSITION The petitions were GRANTED and the Decision of the respondent BOT were reversed and set aside and declared null and void. Respondent PANTRANCO was permanently enjoined from operating the ferryboat service and/or coastwise/interisland services between Matnog and Allen until it shall have secured the appropriate Certificate of Public Convenience (CPC) in accordance with the requirements of the law. PAL VS CAB (SUPRA) TEJA MARKETING and/or Jaucian V IAC (NALE) (maya) 148 SCRA 347 PARAS; March 9, 1987 NATURE Petition for Review from decision of IAC FACTS - in 1975, Nale bought from Teja a tricycle for P8,000. Of this amount, Nale gave P1,700 as downpayment, and promised to pay the balance within 60days. Nale failed to pay on time and they decided to extend the payment period to one year in monthly installments. Still Nale did not pay, prompting Teja to file this collection suit for the unpaid balance of P1,700 plus interest, damages, and attorneys fees. -it appears to the court that Nale purchased the tricycle particularly for the purpose of engaging and using the same in the transportation business and for this purpose said trimobile unit was attached to Tejas transportation line who had the franchise, so much so that in the registration certificate, Teja appears to be the owner of the unit. Furthermore, it appears to have been agreed, further, that Teja would undertake the yearly registration of the unit with the LTC. Thus, for such registration, Nale gave Teja the amount of P82.00 for its registration, as well as the insurance coverage of the unit. - City Court (MTC?) dismissed counterclaim and ordered Nale to pay. CFI affirmed. IAC set aside decision of lower court. it said: However, as the purchase of the motorcycle for operation as a trimobile under the franchise of Teja/Jaucian, pursuant to what is commonly known as the "kabit system", without the prior approval of the Board of Transportation (formerly the Public Service Commission) was an illegal transaction involving the fictitious registration of the motor vehicle in the name of Teja/ Jaucian so that he may traffic with the privileges of his franchise, or certificate of public convenience, to operate a tricycle service, the parties being in pari delicto, neither of them may bring an action against the other to enforce their illegal contract [Art. 1412 (a), CC ISSUE 1. WON the doctrine of in pari delicto was applicable HELD 1. YES Ratio Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) Reasoning Unquestionably, the parties operated under an arrangement, commonly known as the "kabit system" whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. -Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and in existent under Art.1409,CC. The court will not aid either party to enforce an illegal contract, but will leave both where it finds them. It would be error to accord the parties relief from their predicament. Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: 1. When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of the contract, or demand, the performance of the other's undertaking. -The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of time cannot give efficacy to contracts that are null and void. Disposition Petition is denied. Decision affirmed LARA V VALENCIA (owen) 104 PHIL 65 BAUTISTA ANGELO; June 30, 1958 NATURE Appeal from CFI Davao decision FACTS - Lara, an inspector of the Bureau of Forestry stationed in Davao, went to the lumber concession of Valencia in Cotabato upon instructions of his chief to classify the logs which were about to be shipped. The work lasted for 6 days during which he contracted malaria fever. In January 9, 1954, Lara who then in a hurry to return to Davao asked Valencia if he could take him in his pick-up as there was then no other means of transportation. Valencia agreed and in that same morning the pick-up left Parang bound for Davao taking along 6 passengers, including Lara. - The pick-up has a front seat where the driver and 2 passengers can be accommodated and the back has a steel flooring enclosed with a steel walling. Before leaving Parang, Lara sat on a bag in the middle of the steel flooring area. Valencia invited Lara to sit with him on the front seat but Lara declined. Upon reaching Barrio Samoay, Cotabato, the passengers were to alight and take a bus bound for Davao, but when they arrived at that place, the passengers, including Lara requested Valencia to allow them to ride with him up to Davao because there was then no available bus. Valencia again accommodated the passengers. - When they continued their trip, the sitting arrangement of the passengers remained the same, Lara being seated on a bag in the middle with his arms on a suitcase and his head covered by a jacket. Upon reaching Barrio Catidtuan, Lara accidentally fell from the pick-up and as a result he suffered serious injuries. Valencia stopped the pick-up to see what happened to Lara. He sought the help of the residents of that place and applied water to Lara but to no avail. They brought Lara to the nearest place where they could find a doctor and not having found any they took him to St. Joseph's Clinic of Kidapawan. But when Lara arrived he was already dead.

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TRANSPORTATION AND PUBLIC UTILITY LAW A 2010

First Semester, SY 2008-2009 Prof. Rodrigo Lope Quimbo - CFI Davao: action for damages for death of Demetrio Lara, Sr. allegedly caused by the negligent act of Valencia who denied the charge of negligence. CFI ordered Valencia to pay the Lara P14,000 for damages. Both parties appealed to SC because damages claimed in the complaint exceed P50,000. - Plaintiffs claim: CFI erred in disregarding their claim of P41,400 as actual or compensatory damages and in awarding as attorneys' fees only the sum of P1,000 instead of P3,000 as agreed upon between plaintiffs and their counsel. - Defendant claims: that the death of Demetrio Lara, Sr. was NOT due to the negligence of defendant and should have declared that the death of Lara as due to unavoidable accident. ISSUE WON Valencia exercised the degree of diligence required HELD YES Ratio The deceased, as well as his companions who rode in the pick-up of Valencia, were merely accommodation passengers who paid nothing for the service and so they can be considered as invited guests within the meaning of the law. As accommodation passengers or invited guests, Valencia as owner and driver of the pick-up owes to them merely the duty to exercise reasonable care so that they may be transported safely to their destination. Thus, "The rule is established by the weight of authority that the owner or operator of an automobile owes the duty to an invited guest to exercise reasonable care in its operation, and not unreasonably to expose him to danger and injury by increasing the hazard of travel. This rule, as frequently stated by the courts, is that an owner of an automobile owes a guest the duty to exercise ordinary or reasonable care to avoid injuring him. Since one riding in an automobile is no less a guest because he asked for the privilege of doing so, the same obligation of care is imposed upon the driver as in the case of one expressly invited to ride" (5 Am. Jur., 626-627). Defendant, therefore, is only required to observe ordinary care, and is not in duty bound to exercise extraordinary diligence as required of a common carrier by our law (A1755 and 1756CC). Reasoning - Valencia was not duty bound to take the deceased in his own pick-up to Davao because from Parang to Cotabato there was a line of transportation that regularly makes trips for the public, and if Valencia agreed to take the deceased in his own car, it was only to accommodate him considering his feverish condition and his request that he be so accommodated. It should also be noted that the passengers who rode in the pick-up of Valencia took their respective seats at their own choice and not upon indication of Valencia with the particularity that Valencia invited the deceased to sit with him in the front seat but which invitation the deceased declined. The reason for this can only be attributed to his desire to be at the back so that he could sit on a bag and travel in a reclining position because such was more convenient for him due to his feverish condition. All the circumstances thereof clearly indicate that defendant had done what a reasonable prudent man would have done under the circumstances. - There is every reason to believe that the unfortunate happening was only due to an unforeseen accident caused by the fact at the time the deceased was half asleep and must have fallen from the pick-up when it ran into some stones causing it to jerk considering that the road was then bumpy, rough and full of stones. - "A passenger must observe the diligence of a good father of a family to avoid injury to himself" (A1761 CC), which means that if the injury to the passenger has been proximately caused by his own negligence, the carrier cannot be held liable. Disposition Decision appealed from is reversed

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