transportation law cases-apilado

8/13/2019 Transportation Law Cases-Apilado

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1.

[2002V1023] REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY BOARD petitioner, vs. MANILA

ELECTRIC COMPANY, respondent.2002 Nov 153rd DivisionG.R. No. 141314D E C I S I O N

PUNO, J.:

In third world countries like the Philippines, equal justice will have a synthetic ring unless the economic rights of the

people, especially the poor, are protected with the same resoluteness as their right to liberty. The cases at bar are of

utmost significance for they concern the right of our people to electricity and to be reasonably charged for their

consumption. In configuring the contours of this economic right to a basic necessity of life, the Court shall define the

limits of the power of respondent MERALCO, a giant public utility and a monopoly, to charge our people for their electric

consumption. The question is: should public interest prevail over private profits?

The facts are brief and undisputed. On December 23, 1993, MERALCO filed with the ERB an application for the revision

of its rate schedules. The application reflected an average increase of 21 centavos per kilowatthour (kwh) in its

distribution charge. The application also included a prayer for provisional approval of the increase pursuant to Section

16(c) of the Public Service Act and Section 8 of Executive Order No. 172.

On January 28, 1994, the ERB issued an Order granting a provisional increase of P0.184 per kwh, subject to the following

condition.

"In the event, however, that the Board finds, after hearing and submission by the Commission on Audit of an audit

report on the books and records of the applicant that the latter is entitled to a lesser increase in rates, all excess

amounts collected from the applicants customers as a result of this Order shall either be refunded to them or

correspondingly credited in their favor for application to electric bills covering future consumptions."[1]

In the same Order, the ERB requested the Commission on Audit (COA) to conduct an "audit and examination of the

books and other records of account of the applicant for such period of time, which in no case shall be less than 12

consecutive months, as it may deem appropriate" and to submit a copy thereof to the ERB immediately upon

completion.[2]

On February 11, 1997, the COA submitted its Audit Report SAO No. 95-07 (the "COA Report") which contained, among

others, the 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.[3]

Subsequently, the ERB rendered its decision adopting the above recommendations and authorized MERALCO to

implement a rate adjustment in the average amount of P0.017 per kwh, effective with respect to MERALCOs billingcycles beginning February 1994. The ERB further ordered that "the provisional relief in the amount of P0.184 per

kilowatthour granted under the Boards Order dated January 28, 1994 is hereby superseded and modified and the

excess average amount of P0.167 per kilowatthour starting with [MERALCOs] billing cycles beginning February 1994

until its billing cycles beginning February 1998, be refunded to [MERALCOs] customers or correspondingly credited in

their favor for future consumption."[4]

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.[5] Further, in applying the net average investment method, the ERB adopted the recommendation


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of COA that in computing the rate base, only the proportionate value of the property should be included, determined in

accordance with the number of months the same was actually used in service during the test year.[6]

On appeal, the Court of Appeals set aside the ERB decision insofar as it directed the reduction of the MERALCO rates by

an average of P0.167 per kwh and the refund of such amount to MERALCOs customers beginning February 1994 and

until its billing cycle beginning February 1998.[7] Separate Motions for Reconsideration filed by the petitioners were

denied by the Court of Appeals.[8]

Petitioners are now before the Court seeking a reversal of the decision of the Court of Appeals by arguing primarily that

the Court of Appeals erred: a) in ruling that 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 and b) in rejecting

the net average investment method used by the COA and the ERB and instead adopted the average investment method

used by MERALCO.

We grant the petition.

The regulation of rates to be charged by public utilities is founded upon the police powers of the State and statutes

prescribing rules for the control and regulation of public utilities are a valid exercise thereof. When private property is

used for a public purpose and is affected with public interest, it ceases to be juris privati only and becomes subject to

regulation. The regulation is to promote the common good. Submission to regulation may be withdrawn by the owner

by discontinuing use; but as long as use of the property is continued, the same is subject to public regulation.[9]

In regulating rates charged by public utilities, the State protects the public against arbitrary and excessive rates whilemaintaining the efficiency and quality of services rendered. However, the power to regulate rates does not give the

State the right to prescribe rates which are so low as to deprive the public utility of a reasonable return on investment.

Thus, the rates prescribed by the State must be one that yields a fair return on the public utility upon the value of the

property performing the service and one that is reasonable to the public for the services rendered.[10] The fixing of just

and reasonable rates involves a balancing of the investor and the consumer interests.[11]

In his famous dissenting opinion in the 1923 case of Southwestern Bell Tel. Co. v. Public Service Commission,[12] Mr.

Justice Brandeis wrote:

"The thing devoted by the investor to the public use is not specific property, tangible and intangible, but capital

embarked in an enterprise. Upon the capital so invested, the Federal Constitution guarantees to the utility the

opportunity to earn a fair return" The Constitution does not guarantee to the utility the opportunity to earn a return on

the value of all items of property used by the utility, or of any of them.

The investor agrees, by embarking capital in a utility, that its charges to the public shall be reasonable. His company is

the substitute for the State in the performance of the public service, thus becoming a public servant. The compensation

which the Constitution guarantees an opportunity to earn is the reasonable cost of conducting the business.

While the power to fix rates is a legislative function, whether exercised by the legislature itself or delegated through an

administrative agency, a determination of whether the rates so fixed are reasonable and just is a purely judicial question

and is subject to the review of the courts.[13]


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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. 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. It has been held that even in the absence of an express requirement as to reasonableness, this

standard may be implied.[14] 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. The requirement of reasonableness

comprehends such rates which must not be so low as to be confiscatory, or too high as to be oppressive. In determining

whether a rate is confiscatory, it is essential also to consider the given situation, requirements and opportunities of theutility.[15]

Settled jurisprudence holds that factual findings of administrative bodies on technical matters within their area of

expertise should be accorded not only respect but even finality if they are supported by substantial evidence even if not

overwhelming or preponderant.[16] In one case, [17] we cautioned that courts should "refrain from substituting their

discretion on the weight of the evidence for the discretion of the Public Service Commission on questions of fact and will

only reverse or modify such orders of the Public Service Commission when it really appears that the evidence is

insufficient to support their conclusions."[18]

In the cases at bar, findings and conclusions of the ERB on the rate that can be charged by MERALCO to the public should

be respected.[19] The function of the court, in exercising its power of judicial review, is to determine whether under the

facts and circumstances, the final order entered by the administrative agency is unlawful or unreasonable.[20] Thus, 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. The principle of separation of powers dictates that courts should

hesitate to review the acts of administrative officers except in clear cases of grave abuse of discretion.[21]

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.[22] The rate of return is a judgment percentage which, if

multiplied with the rate base, provides a fair return on the public utility for the use of its property for service to the

public.[23] The rate of return of a public utility is not prescribed by statute but by administrative and judicial

pronouncements. This Court has consistently adopted a 12% rate of return for public utilities.[24] The rate base, on the

other hand, is an evaluation of the property devoted by the utility to the public service or the value of invested capital or

property which the utility is entitled to a return.[25]

In the cases at bar, the resolution of the issues involved hinges on the determination of the kind and the amount of

operating expenses that should be allowed to a public utility to generate a fair return and the proper valuation of the

rate base or the value of the property entitled to a return.

I

Income Tax as Operating Expense

Cannot be Allowed For

Rate-Determination Purposes

In determining whether or not a rate yields a fair return to the utility, the operating expenses of the utility must be

considered. The return allowed to a public utility in accordance with the prescribed rate must be sufficient to provide for

the payment of such reasonable operating expenses incurred by the public utility in the provision of its services to the

public. Thus, the public utility is allowed a return on capital over and above operating expenses. However, only such


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expenses and in such amounts as are reasonable for the efficient operation of the utility should be allowed for

determination of the rates to be charged by a public utility.

The ERB correctly ruled that income tax should not be included in the computation of operating expenses of a public

utility. Income tax paid by a public utility is inconsistent with the nature of operating expenses. 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. As correctly

put by the ERB, operating expenses "should be a requisite of or necessary in the operation of a utility, recurring, and that

it redounds to the service or benefit of customers."[26]

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.[27] In exchange for the protection extended by the State to the taxpayer, the government collects taxes

as a source of revenue to finance its activities. 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. Accordingly, the burden of paying income tax should be Meralcos alone and should not be shifted to

the consumers by including the same in the computation of its operating expenses.

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 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, i.e., whether or not the expense is attributable to the production of services bythe public utility. To charge consumers for expenses incurred by a public utility which are not related to the service or

benefit derived by the customers from the public utility is unjustified and inequitable.

While the public utility is entitled to a reasonable return on the fair value of the property being used for the service of

the public, no less than the Federal Supreme Court of the United States emphasized: "[t]he public cannot properly be

subjected to unreasonable rates in order simply that stockholders may earn dividends" If a corporation cannot maintain

such a [facility] and earn dividends for stockholders, it is a misfortune for it and them which the Constitution does not

require to be remedied by imposing unjust burdens on the public."[28]

We are not impressed by the reliance by MERALCO on some American case law allowing the treatment of income tax

paid by a public utility as operating expense for rate-making purposes. Suffice to state that with regard to rate-

determination, the government is not hidebound to apply any particular method or formula.[29] The question of what

constitutes a reasonable return for the public utility is necessarily determined and controlled by its peculiar

environmental milieu. Aside from the financial condition of the public utility, there are other critical factors to consider

for purposes of rate regulation. Among others, they are: particular reasons involved for the request of the rate increase,

the quality of services rendered by the public utility, the existence of competition, the element of risk or hazard involved

in the investment, the capacity of consumers, etc.[30] Rate regulation is the art of reaching a result that is good for thepublic utility and is best for the public.

For these reasons, the Court cannot give in to the importunings of MERALCO that we blindly apply the rulings of

American courts on the treatment of income tax as operating expenses in rate regulation cases. An approach allowing

the indiscriminate inclusion of income tax payments as operating expenses may create an undesirable precedent and

serve as a blanket authority for public utilities to charge their income tax payments to operating expenses and unjustly

shift the tax burden to the customer. To be sure, public utility taxation in the United States is going through the eye of


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criticism. Some commentators are of the view that by allowing the public utility to collect its income tax payment from

its customers, a form of "sales tax" is, in effect, imposed on the public for consumption of public utility services. By

charging their income tax payments to their customers, public utilities virtually become "tax collectors" rather than

taxpayers.[31] In the cases at bar, MERALCO has not justified why its income tax should be treated as an operating

expense to enable it to derive a fair return for its services.

It is also noteworthy that under American laws, public utilities are taxed differently from other types of corporations and

thus carry a heavier tax burden. Moreover, different types of taxes, charges, tolls or fees are assessed on a public utility

depending on the state or locality where it operates. At a federal level, public utilities are subject to corporate income

taxes and Social Security taxes in the same manner as other business corporations. At the state and local levels, public

utilities are subject to a wide variety of taxes, not all of which are imposed on each state. Thus, it is not unusual to find

different taxes or combinations of taxes applicable to respective utility industries within a particular state.[32] A

significant aspect of state and local taxation of public utilities in the United States is that they have been singled out for

special taxation, i.e., they are required to pay one or more taxes that are not levied upon other industries. In contrast, in

this jurisdiction, public utilities are subject to the same tax treatment as any other corporation and local taxes paid by it

to various local government units are substantially the same. The reason for this is that the power to tax resides in our

legislature which may prescribe the limits of both national and local taxation, unlike in the federal system of the United

States where state legislature may prescribe taxes to be levied in their respective jurisdictions.

MERALCO likewise cites decisions of the ERB[33] allowing the application of a tax recovery clause for the imposition of

an additional charge on consumers for taxes paid by the public utility. A close look at these decisions will show they are

inappropos. In the said cases, the ERB approved the adoption of a formula which will allow the public utility to recover

from its customers taxes already paid by it. However, in the cases at bar, the income tax component added to the

operating expenses of a public utility is based on an estimate or approximate figure of income tax to be paid by the

public utility. It is this estimated amount of income tax to be paid by MERALCO which is included in the amount ofoperating expenses and used as basis in determining the reasonable rate to be charged to the customers. Accordingly,

the varying factual circumstances in the said cases prohibit a square application of the rule under the previous ERB

decisions.

II

Use of "Net Average Investment

Method" is Not Unreasonable

In the determination of the rate base, property used in the operation of the public utility must be subject to appraisal

and evaluation to determine the fair value thereof entitled to a fair return. With respect to those properties which have

not been used by the public utility for the entire duration of the test year, i.e., the year subject to audit examination for

rate-making purposes, a valuation method must be adopted to determine the proportionate value of the property.

Petitioners maintain that the net average investment method (also known as "actual number of months use method")

recommended by COA and adopted by the ERB should be used, while MERALCO argues that the average investment

method (also known as the "trending method") to determine the proportionate value of properties should be applied.

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.[34] 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.[35]

The ERB did not abuse its discretion when it applied the net average investment method. 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


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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, "to reflect the real status of the property."[36] 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.[37]

MERALCO does not seriously contest this treatment of actual usage of property but opposes the method of computation

or valuation thereof adopted by the ERB and the COA on the ground that the net average investment method "assumes

an ideal situation where a utility, like MERALCO, is able to record in its books within any given month the value of all the

properties actually placed in service during that month."[38] MERALCO contends that immediate recordal in its books of

the property or equipment is not possible as MERALCOs franchise covers a wide area and that due to the volume of

properties and equipment put into service and the amount of paper work required to be accomplished for recording in

the books of the company, "it takes three to six months (often longer) before an asset placed in service is recorded in

the books" of MERALCO.[39] Hence, MERALCO 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.

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."[40]

Moreover, while the case was pending trial before the ERB, the ERB conducted an ocular inspection to examine the

assets in service, records and books of accounts of MERALCO to ascertain the physical existence, ownership, valuation

and usefulness of the assets contained in the COA Report.[41] Thus, MERALCOs contention that the date of recordal inthe books does not reflect the date when the asset is placed in service is baseless.

Further, computing the proportionate value of assets used in service in accordance with the actual number of months

the same is used during the test year is a more accurate method of determining the value of the properties of a public

utility entitled to a return. If, as determined by COA, the date of recordal in the books of MERALCO reflects the actual

date the equipment or property is used in service, there is no reason for the ERB to adopt the trending method applied

by MERALCO if a more precise method is available for determining the proportionate value of the assets 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. With the inexactness of the trending

method and the possibility that the valuation of certain properties may be subject to the control of and abuse by the

public utility, the Court finds no reasonable basis to overturn the recommendation of COA and the decision of the ERB.

MERALCO further insists that the Court should sustain the "trending method" in view of previous decisions by the Public

Service Commission and of this Court which "upheld" the use of this method. By refusing to adopt the trending method,

MERALCO argues that the ERB violated the rule on stare decisis.

Again, we are not impressed. It is a settled rule that the goal of rate-making is to arrive at a just and reasonable rate for

both the public utility and the public which avails of the formers products and services.[42] However, what is a just and

reasonable rate cannot be fixed by any immutable method or formula. Hence, it has been held that no public utility has

a vested right to any particular method of valuation.[43] Accordingly, with respect to a determination of the proper

method to be used in the valuation of property and equipment used by a public utility for rate-making purposes, the


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administrative agency is not bound to apply any one particular formula or method simply because the same method has

been previously used and applied. In fact, nowhere in the previous decisions cited by MERALCO which applied the

trending method did the Court rule that the same should be the only method to be applied in all instances.

At any rate, MERALCO has not adequately shown that the rates prescribed by the ERB are unjust or confiscatory as to

deprive its stockholders a reasonable return on investment. In the early case of Ynchausti S.S. Co. v. Public Utility

Commissioner, this Court held: "there is a legal presumption that the rates fixed by an administrative agency are

reasonable, and it must be conceded that the fixing of rates by the Government, through its authorized agents, involves

the exercise of reasonable discretion and, unless there is an abuse of that discretion, the courts will not interfere."[44]

Thus, the burden is upon the oppositor, MERALCO, to prove that the rates fixed by the ERB are unreasonable or

otherwise confiscatory as to merit the reversal of the ERB. In the instant cases, MERALCO was unable to discharge this

burden.

WHEREFORE, in view of the foregoing, the instant petitions are GRANTED and the decision of the Court of Appeals in

C.A. G.R. SP No. 46888 is REVERSED. Respondent MERALCO is authorized to adopt a rate adjustment in the amount of

P0.017 per kilowatthour, effective with respect to MERALCOs billing cycles beginning February 1994. Further, in

accordance with the decision of the ERB dated February 16, 1998, the excess average amount of P0.167 per kilwatthour

starting with the applicants billing cycles beginning February 1998 is ordered to be refunded to MERALCOs customers

or correspondingly credited in their favor for future consumption.

SO ORDERED.

Panganiban, Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

2.

[1989V549] RODOLFO B. ALBANO, petitioner, vs. HON. RAINERIO O. REYES, PHILIPPINE PORTS AUTHORITY,

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., E. RAZON, INC., ANSCOR CONTAINER CORPORATION, and

SEALAND SERVICES. LTD., respondents.1989 July 11En BancG.R. No. 83551D E C I S I O N

PARAS, J.:

This is a Petition for Prohibition with prayer for Preliminary Injunction or Restraining Order seeking to restrain the

respondents Philippine Ports Authority (PPA) and the Secretary of the Department of Transportation and

Communications 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).

On April 20, 1987, the PPA Board adopted its Resolution No. 850 directing PPA management to prepare the Invitation to

Bid and all relevant bidding documents and technical requirements necessary for the 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 of the technical and the documentation requirements for the MICT leasing as well

as to implement this project.


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Accordingly, respondent Secretary Reyes, by DOTC Special Order 87-346, created a seven (7) man "Special MICT Bidding

Committee" charged with evaluating all bid proposals, recommending to the Board the best bid, and preparing the

corresponding contract between the PPA and the winning bidder or contractor. The Bidding Committee consisted of

three (3) PPA representatives, two (2) Department of Transportation and Communications (DOTC) representatives, one

(1) Department of Trade and Industry (DTI) representative and one (1) private sector representative. The PPA

management prepared the terms of reference, bid documents and draft contract which materials were approved by the

PPA Board.

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 actually submitted bids, which bids were opened on July 17, 1987 at the PPA Head

Office. After evaluation of the several bids, the Bidding Committee recommended the award of the contract to develop,

manage and operate the MICT to respondent International Container Terminal Services, Inc. (ICTSI) as having offered the

best Technical and Financial Proposal. Accordingly, respondent Secretary declared the ICTSI consortium as the winning

bidder.

Before the corresponding MICT contract could be signed, two successive cases were filed against the respondents which

assailed the legality or regularity of the MICT bidding. The first was Special Civil Action 55489 for "Prohibition with

Preliminary Injunction" filed with the RTC of Pasig by Basilio H. Alo, an alleged "concerned taxpayer", and, the second

was Civil Case 88-43616 for "Prohibition with Prayer for Temporary Restraining Order (TRO)" filed with the RTC of Manila

by C.F. Sharp Co., Inc., a member of the nine (9) firm consortium ---- "Manila Container Terminals, Inc." which had

actively participated in the MICT Bidding.

Restraining Orders were issued in Civil Case 88-43616 but these were subsequently lifted by this Court in Resolutions

dated March 17, 1988 (in G.R. No. 82218 captioned "Hon. Rainerio O. Reyes etc., et al. vs. Hon. Doroteo N. Caneba, etc.,

et al.) and April 14, 1988 (in G.R. No. 81947 captioned "Hon. Rainerio O. Reyes etc., et al. vs. Court of Appeals, et al.")

On May 18, 1988, the President of the Philippines approved the proposed 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." (Annex "I").

The next day, the PPA and the ICTSI perfected the MICT Contract (Annex "3") incorporating therein by "clarificatory

guidelines" the aforementioned presidential directives. (Annex "4").

Meanwhile, the petitioner, Rodolfo A. Albano filed the present petition as citizen and taxpayer and as a member of theHouse of Representatives, assailing the award of the MICT contract to the ICTSI by the PPA. The petitioner 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.

The petition is devoid of merit.


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A review of the applicable provisions of law indicates that 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.

1. Executive Order No. 30, dated July 16, 1986, provides:

WHEREFORE, I, CORAZON C. AQUINO, President of the Republic of the Philippines, by virtue of the powers vested in me

by the Constitution and the law, do hereby order the immediate recall of the franchise granted to the Manila

International Port Terminals, Inc. (MIPTI) and authorize the Philippine Ports Authority (PPA) to take over, manage and

operate the Manila International Port Complex at North Harbor, Manila and undertake the provision of cargo handling

and port related services thereat, in accordance with P.D. 857 and other applicable laws and regulations.

Section 6 of Presidential Decree No. 857 (the Revised Charter of the Philippine Ports Authority) states:

a) The corporate duties of the Authority shall be:

xxx xxx xxx

(ii) 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 Authority.

xxx xxx xxx

(v) To provide services (whether on its own, by contract, or otherwise) within the Port Districts and the approaches

thereof, including but not limited to

berthing, towing, mooring, moving, slipping, or docking of any vessel;

loading or discharging any vessel;

sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.

xxx xxx xxx

b) The corporate powers of the Authority shall be as follows:

xxx xxx xxx

(vi) To make or enter into contracts of any kind or nature to enable it to discharge its functions under this Decree.


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xxx xxx xxx

Thus, while the PPA has been tasked, under E.O. No. 30, with the management and operation of the Manila

International Port Complex and to undertake the providing of cargo handling and port related services thereat, the law

provides that such shall be "in accordance with P.D. 857 and other applicable laws and regulations." On the other hand,P.D. No. 857 expressly empowers the PPA to provide services within Port Districts "whether on its own, by contract, or

otherwise" [Sec. 6(a) (v)]. Therefore, 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.

2. Even if the MICP be considered a public utility, 1 or a public service 2 on the theory that it is a "wharf" or a "dock" 3

as contemplated under the Public Service Act, its operation would not necessarily call for a franchise from the Legislative

Branch. 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 and 202)

That the Constitution provides in Art. XII, Sec. 11 that the issuance of a franchise, certificate or other form of

authorization for the operation of a public utility shall be subject to amendment, alteration or repeal by Congress does

not necessarily imply, as petitioner posits, that only Congress has the power to grant such authorization. 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. 4

As stated earlier, E.O. No. 30 has tasked the PPA with the operation and management of the MICP, in accordance with

P.D. 857 and other applicable laws and regulations. However, P.D. 857 itself authorizes the PPA to perform the service

by itself, by contracting it out, or through other means. Reading E.O. No. 30 and P.D. No. 857 together, the inescapable

conclusion is that the lawmaker has empowered the PPA to undertake by itself the operation and management of the

MICP or to authorize its operation and management by another by contract or other means, at its option. The latter

power having been delegated to the PPA, a franchise from Congress to authorize an entity other than the PPA to

operate and manage the MICP becomes unnecessary.

In the instant case, 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. Inthe case at bar, there is no evidence which clearly shows the constitutional infirmity of the questioned act of

government.

For these reasons the contention that the contract between the PPA and ICTSI is illegal in the absence of a franchise

from Congress appears bereft of any legal basis.


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3. On the peripheral issues raised by the party, the following observations may be made:

A. That petitioner herein is suing as a citizen and taxpayer and as a Member of the House of Representatives,

sufficiently clothes him with the standing to institute the instant suit questioning the validity of the assailed contract.

While the expenditure of public funds may not be involved under the contract, public interest is definitely involved

considering the important role of the MICP in the economic development of the country and the magnitude of the

financial consideration involved. Consequently, the disclosure provision in the Constitution 5 would constitute sufficient

authority for upholding petitioner's standing. [Cf. Taada v. Tuvera, G.R. No. 63915, April 24, 1985, 136 SCRA 27, citing

Severino v. Governor General, 16 Phil. 366 (1910), where the Court considered the petitioners with sufficient standing to

institute an action where a public right is sought to be enforced.]

B. That certain committees in the Senate and the House of Representatives have, in their respective reports, and the

latter in a resolution as well, declared their opinion that a franchise from Congress is necessary for the operation of the

MICP by a private individual or entity, does not necessarily create a conflict between the Executive and the Legislative

Branches needing the intervention of the Judicial Branch. The court is not faced with a situation where the Executive

Branch has contravened an enactment of Congress. As discussed earlier, neither is the Court confronted with a case of

one branch usurping a power pertaining to another.

C. Petitioner's contention that what was bid out, i.e., the development, management and operation of the MICP, was

not what was subsequently contracted, considering the conditions imposed by the President in her letter of approval,

thus rendering the bids and projections immaterial and the procedure taken ineffectual, is not supported by the

established facts. The conditions imposed by the President did not materially alter the substance of the contract, but

merely dealt on the details of its implementation.

D. 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 PPA. The PPA, having been tasked with the formulation of a plan for the development

of port facilities and its implementation [Sec. 6(a) (i)], is the agency in the best position to evaluate the feasibility of the

projections of the bidders and to decide which bid is compatible with the development plan. Neither the Court, nor

Congress, has the time and the technical expertise to look into this matter.

Thus, the Court in Manuel v. Villena (G.R. No. L-28218, February 27, 1971, 37 SCRA 745] stated:

[C]ourts, as a rule, refuse to interfere with proceedings undertaken by administrative bodies or officials in the exercise of

administrative functions. This is so because such bodies are generally better equipped technically to decide

administrative questions and that non-legal factors, such as government policy on the matter, are usually involved in the

decisions. rat p. 750.]

In conclusion, it is evident that petitioner has failed to show a clear case of grave abuse of discretion amounting to lack

or excess of jurisdiction as to warrant the issuance of the writ of prohibition.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.


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Fernan (C.J.), Narvasa, Melencio-Herrera, Cruz, Gancayco, Bidin, Cortes, Grio-Aquino, Medialdea and Regalado, JJ.,

concur.

Feliciano, J., In the result.

Padilla, J., No part in the deliberations.

Sarmiento, J., No part. One of the respondents was my client.

Separate Opinions

GUTIERREZ, JR., J., concurring:

I concur in the Court's decision that 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). I agree that 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.

However, I would feel more comfortable in the thought that the above rulings are not only grounded on firm legal

foundations but are also factually accurate if the PPA shows greater consistency in its submissions to this Court.

I recall that in E. Razon, Inc. v. Philippine Ports Authority (151 SCRA 233 [1977]), this Court decided the case in favor of

the PPA because, among others, of its submissions that: (1) the petitioner therein committed violations as to outside

stevedoring services, inadequate equipment, delayed submission of reports, and non-compliance with certain port

regulations; (2) respondent Marina Port Services and not the petitioner was better qualified to handle arrastre services;

(3) the petitioner being controlled by Alfredo Romualdez could not enter into a management contract with PPA and any

such contract would be null and void; and (4) even if the petitioner may not have shared in the illegal intention behind

the transfer of majority shares, it shared in the benefits of the violation of law.

I was surprised during the oral arguments of the present petition to hear the counsel for PPA submit diametrically

different statements regarding the capabilities and worth of E. Razon, Inc., as an arrastre operator. It now turns out that

the Manila International Container Terminal will depend a great deal on the expertise, reliability and competence of E.

Razon, Inc., for its successful operations. The time difference between the two petitions is insubstantial. After going over

the pleadings of the present petition, I am now convinced that it is the submissions of PPA in this case and not its

contentions in G.R. No. 75197 which are accurate and meritorious. There is the distinct possibility that we may have

been unfair in the earlier petition because of assertions made therein which are contradictory to the submissions in the

instant petition. No such doubts would exist if the Government is more consistent in its pleadings on such important

factual matters as those raised in these two petitions.

---------------

Footnotes

1. 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


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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).

2. 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).].

3. 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).].

4. Examples of such agencies are:

1. The Land Transportation Franchising and Regulatory Board created under E.O. No. 202, which is empowered to

"issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation of

public land transportation services provided by motorized vehicles, and to prescribe the appropriate terms and

conditions therefor." [Sec. 5(b).].

2. The Board of Energy, reconstituted into the Energy Regulatory Board created under E.O. No. 172, is empowered

to license refineries and regulate their capacities and to issue certificates of public convenience for the operation of

electric power utilities and services, except electric cooperatives [Sec. 9 (d) and (e), P.D. No. 1206.].

5. Art. II, Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full

disclosure of all its transactions involving public interest.

3.DOMINADOR RAYMUNDO, petitioner-appellant, vs. LUNETA MOTOR CO., ET AL., respondent-appellees.1933

November 29En BancG.R. Nos. 399902, 39903D E C I S I O N

MALCOLM, J:

The question squarely raised in these two cases concerns the forced sales of certificates of public convenience held by

public service operators and the liability to execution of such certificates.

Breaking into the narration of the facts at the proper point, we find Nicanor de Guzman, signing as Guzco Transit,

purchasing trucks from the Luneta Motor Co. and to pay for them 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


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covering the bus transportation lines between Manila and Cardona, Rizal, and between Manila and Pililla, Rizal. These

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. The approval of the sheriff's sale was

prayed for before the Public Service Commission, and is one of the cases under review.

Going back a moment, it is necessary to insert in the statement of facts that on July 6, 1932, or 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. The approval of this sale was

sought from the Public Service Commission, and is the other case now under review. On the two cases being heard

together, 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.

Sweeping incidental matters to one side, the prime question need not be complicated by determining if a sale of a

certificate of public convenience without any equipment may be the object of execution and garnishment sale, for this is

a matter of policy to be determined by the Public Service Commission, and it appears that sales of certificates of public

convenience without equipment have been approved by the commission. Also it is evident that the articles of

incorporation of the Luneta Motor Co. are broad enough in scope to authorize the company, if it so desires, to engage in

the autotruck business, and if not, there would be nothing to preclude the company from transferring the certificates to

a third party with the approval of the Public Service Commission. Further, the nature of the partnership which may have

been entered into by Nicanor de Guzman and Agapito C. Correa cannot now be discussed, considering that the

promissory notes were signed Guzco Transit, by Nicanor de Guzman, and considering that the judgment against Guzco

Transit in the Court of First Instance of Manila has become final. Finally, the dismissal in case No. 33033 pertaining to

certificate No. 25951 was without prejudice, and the appellees disclaim any interest in this certificate. Therefore, thequestion to be decided on this appeal is, which of the two sales, the one at public auction by virtue of an attachment, or

the voluntary sale made after the property had been levied upon, should prevail and a decision on this question is

dependent on a decision relative to the liability to execution of certificates of public convenience.

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 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. Should the legislative intention thus evidenced be taken as meaning that the generality of the language used by


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the Code of Civil Procedure was too vague to permit of forced sales of franchises and certificates of public convenience,

or notwithstanding the provisions to be found in these special laws, is the language of the Code of Civil Procedure broad

enough to include certificates of public convenience? We lean to the latter proposition, and will now proceed to

elucidate our viewpoint.

The test to be applied was announced by our Supreme Court in Reyes vs. Grey, supra, and there is nothing in Tufexis vs.

Olaguera and Municipal Council of Guinobatan ([1915], 32 Phil., 654), cited by appellant, which sanctions a contrary test.

That rule it will be recalled tested the liability of property to execution by determining if the interest of the judgment

debtor in the same can be sold or conveyed to another in any way. Now 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.

If this was all that there was to the case, we might hesitate to approve attachments of certificates of public convenience.

But there is more. 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 builded 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 asa species of property, would be liable to execution. (Willis vs. Buck [1928], 81 Mont., 472.)

As has been intimated herein before, a practice has grown up in the Public Service Commission of permitting the

alienation of certificates of public convenience and in so doing approval has been given to the sale through foreclosure

proceedings of the certificates of public convenience to third parties. The very decision in the two cases before us is an

illustration of this practice. The same tendency is to be noted in the lower courts. As an example in the instant record,

there is a previous foreclosure of a mortgage apparently uncontested. Not only this, but tacit approval to the

attachment of certificates of public convenience either through chattel mortgages or court writs has been given by this

court. (Orlanes & Banaag Transportation Co. vs. Public Service Commission [1932], 57 Phil., 634; Manila Electric

Company vs. Orlanes & Banaag Transportation Co. [1933], 57 Phil., 805; Nos 39525 and 39531, Red Line Transportation

Co. vs. Rural Transit Co. and Bachrach Motor Co., November 17, 1933. 1 )

When the motion of the plaintiff praying that the certificates of public convenience granted by the Public Service

Commission which were attached be sold at public auction and the answer opposing the granting of the motion on the

ground that franchises can not be the subject of attachment and sale by garnishhment came before the Court of First

Instance of Manila, the presiding Judge, Anacleto Diaz, promulgated an order which sustained the right of the plaintiff to

attachment and garnishment. That order gains particular force because a later judgment by consent was taken and no

appeal was attempted to this court. It is true that the sale further required the approval of the Public Service

Commission, but the Public Service Commission respected the decision of the court and so we have the concurrence of

the court and the commission on this question. In the order in first instance appears the following well considered

language:

"It remains to be determined whether, under the law, certificates of public convenience are liable to attachment and

seizure by legal process. The law is silent as to this matter. It can not be denied that such franchises are valuable. They


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are subject to being sold for a consideration as much as any other property. They are even more valuable than ordinary

properties, taking into consideration that they are not granted to every one who applies for them but only to those who

undertake to furnish satisfactory and convenient service to the public. It may also be said that dealers in motor vehicles

even extend credit to owners of such certificates or franchises. The law permits the seizure by means of a writ of

attachment not only of chattels but also of shares and credits. While these franchises may be said to be of intangible

character, they are however of value and are considered properties which can be seized through legal process.

"For all the foregoing, the court is of the opinion that the plaintiff is entitled to the remedy it prays for in its motion

which is hereby granted."

The ruling of the Supreme Court on the question raised by the record and the assignments of error is this: Certificates of

public convenience secured by public service operators are liable to execution, and the Public Service Commission is

authorized to approve the transfer of the certificates of public convenience to the execution creditor. As a consequence,

the decision brought on review will be affirmed, with costs against the appellant.

Avancea, C.J., Villa-Real, Hull and Imperial, JJ., concur.

4. RAMON J. GUICO, petitioner, vs. ESTATE OF FLORENCIO P. BUAN, oppositor-respondent.1957 August 30En BancG.R.

No. L-9769D E C I S I O N

REYES, A., J.:

On December 6, 1954, Ramon J. Guico applied for a certificate of public convenience for the operation of a bus service

on the following lines:

Bangued (Abra) - Manila and vice versa;

Laoag (Ilocos Norte) - Manila and vice versa;

Vigan (Ilocos Sur) - Manila and vice versa;

Aparri (Cagayan) - Manila via Claveria and vice versa.

At the hearing, however, the last, i.e., the Aparri-Manila line was dropped from the application.

On the 17 of the same month, the Estate of Florencio P. Buan, which was already operating on the lines applied for, on

its part asked for authority to run additional trips on those lines and later filed its opposition to Guico's application.

Equally opposed by the other transportation companies affected - among them the Manila Railroad Company and the

Pangasinan Transportation Company - the two applications were, by agreement of the parties, heard in joint trial. And

the Commission having found after hearing that there really was need for more trips on the lines covered by the

applications, albeit the need was not such as to warrant the operation of all the trips proposed by the two applicants, it


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authorized an additional 11 round trips a day, being of the opinion after going over the evidence and its own records

that those 11 trips, distributed as follows: 4 on the line Laoag-Manila, 5 on the line Vigan-Manila and 2 on the line

Bangued-Manila, would provide the additional service needed by the public.

In choosing, however, the operator that was to run the additional trips, the Commission expressed preference for the

Estate of Buan as the one with the means and the requisite capacity and experience to maintain the same and also

because, as the authorized operator on the lines, it should under the doctrine of protection, be given opportunity to

provide the additional service that had been found to be needed. All of the additional trips authorized were therefore,

adjudged to the said Estate.

Not satisfied with the decision, the applicant Guico brought the case here for review.

As stated, the Commission recognizes the need for more service on the lines in question but after going over the

evidence and its own records concludes that 11 round trips a day should suffice. Petitioner disputes this conclusion andclaims that, on the basis of the evidence presented, more trips should have been authorized. We consider the question

thus raised factual and find no justification for revising the Commission's estimate, the same not being without support

in evidence. In this connection we have to give recognition to the fact that the number of trips that would be required to

endow a bus line with adequate service is something that cannot be determined or estimated with precision. It is subject

to many variables and, too often, parties base their estimates on the observation and testimony of more or less

interested witnesses. On the other hand, the Commission, which exercises supervision over these public utilities and

has, besides, ready access to information contained in its own records, of which it may take judicial notice, is peculiarly

in a position to appraise the needs of any given line and form a fair estimate as to the number of trips necessary to meet

those needs. In the circumstances, we should do well to defer to the judgment of the Commission in that regard and

refrain from interfering with the exercise of its discretion except where it clearly appears that such discretion has beengravely abused. After going over the record we do not feel that the present case calls for such interference.

It is contended, however, that it was not right for the Commission to adjudge all of the authorized additional trips to

respondent, it being claimed that the latter has no certificate of public convenience for the line Vigan-Manila; that

petitioner should have been given the preference because his application was filed ahead of that of the respondent; and

that it was petitioner's evidence rather than respondent's that proved the need for additional service.

It may be true, as claimed, that respondent has no certificate of public convenience exclusively for the line Vigan-Manila

alone. However, there is no disputing the fact that respondent has a certificate for the line Aparri-Manila via Claveria

and Vigan, and protection of this line should extend to all of its parts, including the portion Vigan-Manila on which,

according to the Commission, respondent is authorized (presumably under the same certificate) to run three round trips

daily, an arrangement which virtually makes Vigan an intermediate station or terminal for the authorized line Aparri-

Manila.

Respondent's right to protection as an established operator on the lines applied for is not to be defeated by mere

priority in the filing of the application of the newcomer. Note must especially be taken of the fact that the lines - Laoag-

Manila, Vigan-Manila and Bangued-Manila are hundreds of kilometers long and, according to the Commission, require

new and well-built trucks and an operator with ample means, such as the respondent, if a regular and continuous

service is to be maintained. The Commission has also observed that the small operators on these lines have not been

operating regularly so that their services have been unreliable. On the other hand, the Commission has found that the

respondent has been operating since 1952 and has maintained service regularly and in accordance with the terms of its

certificate. It says:


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". . . It appears that applicant Estate of Buan has been operating on these lines since 1952 and that it has maintained its

service regularly and in accordance with the terms of its certificate, and such being the case it should be given the

opportunity to provide the necessary additional service in preference to another who has no authority or certificate to

operate on the lines involved. Furthermore, applicant Estate of Buan, according to the evidence, has the experience,

trained personnel and capital necessary to undertake a bus service of this nature which will require not only a big

investment to start the service but the financial capacity to maintain the service regularly, to replace worn-out

equipment and to answer for obligations to the public."

The charge that respondent has abandoned its trips on parts of the line Vigan-Aparri does not necessarily speak ill of

respondent's service considering the explanation given that the abandonment was due to the bad condition of the road

to Aparri, and, moreover, the alleged abandonment is on the line excluded by applicant from his application.

Petitioner is not necessarily entitled to preference just because, as he alleges, it was his evidence, rather than

respondent's, that established the fact that there was still need for additional service. Whose evidence it was that

proved such need is not important. What is important is whose operation would best subserve the public interests. On

that score we find no sufficient justification for not respecting the opinion of the Commission that the additional service

in this case could best be operated by the respondent.

In view of the foregoing, the decision under review is affirmed, with costs against the petitioner.

Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia and Felix, JJ.,

concur.

5. MANILA YELLOW TAXI-CAB, INC., petitioner, vs. EDMUNDO L. CASTELO, respondent.1960 May 301st DivisionG.R.

No. L-13910D E C I S I O N

BAUTISTA ANGELO, J.:

On March 7, 1957, Edmundo L. Castelo filed an application with the Public Service Commission for a certificate of public

convenience to operate ten (10) units of taxicab service in the City of Cabanatuan, and to all points, barrios and

municipalities in the Island of Luzon. The Manila Yellow Taxi-Cab Co., Inc., a grantee of a certificate of public

convenience operating ten taxicab units in the same territory, opposed the application alleging, among others, that the

taxicab service now rendered by it is more than sufficient to meet the needs of the riding public so that to approve the

application would only create a ruinuous competition, and that, in the event the Commission finds that there is need for

the proposed service, preferential right should be given to said oppositor it being an old operator.

After trial, the Commission, by a two to one vote, found for Castelo and rendered decision granting him a certificate tooperate six (6) units of taxicab service in said territory. Not satisfied with the decision, the oppositor elevated this case

to this Court contending that the Commission "ERRED IN HOLDING THAT THERE IS NEED FOR MORE TAXICAB FACILITIES

IN THE CITY OF CABANATUAN AND THAT THE SERVICE NOW EXISTING IS NOT SUFFICIENT FOR THE NEEDS OF THE

PUBLIC."

To support its claim, oppositor submitted testimonial as well as documentary evidence consisting in the testimonies of

six witnesses, namely: Pedro C. Ladignon, Arturo Pineda, Vicenta de Jesus, Mario Santos, Romeo A. Punzal, and Pedrito

C. Arguelles. The documentary evidence consists of Exhibits 1, 2 and 3, which show that oppositor is operating its taxicab

business in Cabanatuan City at a loss.


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Pedro C. Ladignon, a lawyer of Sta. Rosa, Nueva Ecija, testified that he goes to Cabanatuan City three to four times a

week; that the means of transportation in the city are calesas, jitneys, big buses and the ten taxicabs of oppositor; that

he frequently sees empty taxicabs of oppositor; that the riding public patronizes calesas, jitneys, auto-calesas and big

buses because the fare is cheaper than the taxicabs. On cross-examination, he stated that he was a former classmate of

Mr. Punzal, the branch manager of oppositor; that he does not know of any jitney or calesa which carries passengers

from one point of the poblacion to another within the City of Cabanatuan, and that the jitneys and big buses carry

passengers from the city to places outside of its limits.

Arturo Pineda, Vicente de Jesus and Mario Santos corroborated the testimony of Ladignon, while Romeo A. Punzal,

branch manager of oppositor, testified that he is operating ten units in the city the latest models being Studebaker 1952;

that during daytime the available passengers are mostly emergency cases from hospitals and merchants; that there are

about 900 to 1,000 calesas and about 500 to 500 jitneys in Cabanatuan City which are used as means of transportation

there and other towns; that the taxicab business of oppositor in the city is losing because the average earning during the

lean months is from P6.00 to P7.00 per day per cab and it is only during carnival season in Cabanatuan City that the

taxicab averaged from P20.00 to P25.00 a day. However, on cross-examination, he stated that of the 10 units operated

by oppositor, actually 7 are in operation, for the other three are undergoing repairs for around one month already; that

there are flag-up cases involving drivers for which some had been discharged, and that some of those discharged

reported daily earnings of P6.00 to P7.00.

Applicant, on the other hand, also presented testimonial and documentary evidence, the latter consisting of resolutions

of Cabanatuan Jaycees and of Cabanatuan City Council endorsing the move of applicant to operate additional taxi units

for the benefit and convenience of the public. Testifying in his own behalf, he stated that there are seven colleges in

Cabanatuan City with an average enrollment of 2,000 students each, most of whom attend night schools; that there are

many government offices in the city such as the PC Headquarters, Provincial Jail, Nursery, SEATO Camp, FACOMA, etc.;

that the students as well as the government employees are forced to use calesas because of lack of available taxis; that

oppositor operates old units of 1952 model; that plenty of dust get into the cars because the floors have holes; that

patients of hospitals cannot use the same because of this inconvenience, and there is only one ambulance service

offered by the provincial hospital whose charge is higher than that of taxicabs; that there are many organizations which

have their offices in Cabanatuan City such as the Rotary, Jaycee Club and the Lions Club; that the units of oppositor are

inadequate especially during rainy season when most of the cocheros devote their time to planting palay; and that the

resolutions of the Jaycees and the City Council of Cabanatuan were passed without his intervention.

Enrique Ortiz, a member of Cabanatuan City Council, corroborated applicant's testimony as to the inadequacy of the

service rendered by oppositor. He stated that the passengers are rendered uncomfortable due to the dust coming from

holes of the floors of its cars, and that at the regular meeting of the city council composed of five Nacionalistas and

three Liberals, the councilors unanimously agreed to seek approval of oppositor's application. On cross-examination, he

stated that it is hard to get transportation in going to the barrios at night; that during daytime the cocheros first ask the

passenger how far he was going and if the place is about three kilometers away they refuse to render service. He further

stated that there are five theaters in the city and the people who go out at 11:00 o'clock at night have to walk for lack of

transportation facilities.

Another witness of applicant, Francisco San Vicente, testified as follows: that he is an executive officer of the Philippine

Statesman College and as such he had occasion to study the existing conditions regarding the transportation need of his

students; that during dismissal hours large number of students mill around the waiting shed and the entrance of the

school premises waiting for buses, calesas and jeeps up to 10:00 o'clock at night; that in May of 1957, at a meeting held

by the Rotary Club, of which he is secretary, the board of directors petitioned the Public Service Commission to grant

more taxicab units in Cabanatuan City, a copy of which was furnished the Mayor of Cabanatuan; and that many

passengers from Manila walk home when they arrive in Cabanatuan at 11:00 o'clock at night because there are no

calesas, jitneys, or taxis available.

Upon the foregoing evidence submitted by both parties, the Public Service Commission made the following comment:

"After a careful examination of the entire record, we find merit in the claim of the applicant that there is a need for

more taxicab facilities in that City of Cabanatuan and that the service now existing is not sufficient for the needs of the

public. It appears that Cabanatuan is a large city that is well populated with many business and commercial

establishments located in different places as well as schools and colleges, both public and private, and that the people

travel from their homes to those places continuously. There is a showing that there are many horse-drawn vehicles and

auto-calesas operating within the City, but it is a fact that the service of those vehicles is totally different from that of a


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taxicab. There are circumstances under which an auto-calesa or a horse-drawn vehicle would not serve the purpose of a

passenger who needs a conveyance for his own use up to the place where he desires to go, to wait for him there, and

bring to another place, which service can only be furnished by a taxicab. . . . We find from the evidence that this is the

situation in Cabanatuan City where although there are auto-calesas plying within the city there is a class of passengers

who need taxicab facilities for their business or social trips. We are inclined to believe the evidence of the applicant that

although the oppositor is authorized to operate 10 units in Cabanatuan City, most of the time less than 10 units are in

operation because frequently units break down due to their defective condition and this is also a reason why the

vehicles are not patronized even by those who need taxicabs. Oppositor's claim that it has not made any profit in theoperation of its taxicabs cannot be attributed to the fact that there is no demand for taxicab service but probably to the

circumstance that because of the physical condition of its vehicles, the taxicab-using public does not patronize them. We

are satisfied from the evidence that the authorization to the applicant of six (6) taxicab units to supplement the service

now rendered by oppositor, will promote public interests and convenience in a proper and suitable manner."

We are inclined to uphold the above finding of the Commission. As we have held in one case, whether public necessity

and convenience warrant the putting up of additional service is a question of fact and the finding of the Public Service

Commission being "supported by sufficient evidence . . . the same should be left undisturbed" (Raymundo

Transportation Co. vs. Cervo, 91 Phil., 313). And we even went to the extent of holding that this Court "will not

substitute its discretion for that of the Commission on question of fact and will not interfere in the later's decision unless

it clearly appears that there is no evidence to support it" (Santiago Ice Plant Co. vs. Lahoz, 87 Phil., 221; 47 Off. Gaz. [12]

403). Here, a cursory examination of the record will show that the finding of the Commission is supported by ample

evidence for, as found by it, Cabanatuan is a large and well populated city where many schools, colleges, business and

commercial establishments are operating, and where people travel from their homes continuously, so that even if the

10 units of oppositor are actually put in operation they cannot cope with the demand of the traveling public.

Oppositor claims, however, that even if it be found that there is still need for additional taxi service the authority to fill it

should be given to oppositor by virtue of its preferential right as an old operator. To meet this contention, suffice it to

quote hereunder what we said in the case of Isidro vs. Ocampo, 105 Phil., 911; 56 Off. Gaz. (41) 6341:

". . . Moreover, even assuming for a moment that petitioner were an old operator on the line in question, neverthelesshe has not applied for an increase in his service but allowed another to do so; and according to a line of decisions, it has

been ruled that the granting of preference to an old operator applies only when said old operator has made an offer to

meet the increase in traffic and not when another operator even a new one, like respondent . . . , has made the offer to

serve the new line or increased the service on said line." (See also cases cited therein)

Wherefore, the decision of the Public Service Commission is affirmed, with costs against oppositor.

Pars, C. J., Bengzon, Padilla, Montemayor, Labrador, Concepcin, Barrera and Gutirrez David, JJ., concur.

6. G.R. No. L-23688 April 30, 1970

MANDBUSCO, INC., MANDALUYONG BUS CO., INC., PRESCILO CAMAGANACAN, BLAS REYES and ANASTACIO ESMAO,petitioners,vs.PABLO FRANSCISCO, respondent.

Clemente and Clemente for petitioners.

Baldomero S. Luque for respondent.

CASTRO, J.:

The respondent Pablo Francisco applied for a certificate of public convenience covering the operation of five (5) PUJ jitneys from barrioPinagbuhatan, Pasig, Rizal to the intersection of Highway 54 and Shaw Boulevard, Mandaluyong, Rizal (otherwise known as the"Crossing") and vice-versa. Hearing was conducted, after due notice and publication, enabling both the respondent applicant and theoppositors Mandbusco, Inc., et al., to adduce their respective evidence. On June 15, 1964 a decision was rendered by the PublicService Commission granting the respondent's application, it appearing to a division of three commissioners that:

After [a] careful study of the evidence presented by the parties, the Commission finds that the proposed service willbenefit the people of Bo. Pinagbuhatan considering that there is no direct service from that place to the crossing ofHighway 54 and Shaw Blvd. It can be noted also that the provincial capitol, provincial hospital and other big


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establishments are located past the Poblacion of Pasig and nearer to the other proposed terminal at Highway 54 andShaw Blvd. and that residents from Pinagbuhatan have to take 2 rides to reach these places.

The dispositive portion of the decision reads:

Finding further from the evidence adduced by the applicant that he is [a] Filipino citizen, legally and financiallycapable [of operating and maintaining] the same, the oppositions filed in this case are hereby overruled and thecertificate of public convenience applied for, may be, as it is hereby GRANTED to the applicant ....

It is mainly at the findings above-quoted that the petitioners, all bus operators, have aimed their present petition for review, following the

rejection of their motion for reconsideration by the Commission en banc.

The petitioners want to make capital of the declarations of their two witnesses, Federico Dantayana and Arturo Clemente. Let usappraise these declarations.

Dantayana, an official inspector of the Commission, testified that he posted himself somewhere along the route covered by therespondent's application, and conducted a survey of the number of passenger vehicles availing themselves of the use of the ShawBoulevard in going to and coming from Pasig, Rizal. The inspection sheets offered in evidence show that buses with a usual loadingcapacity of from 65 to 75 passengers each were barely half-filled on the whole, while "jitneys" with a usual loading capacity of 13passengers each actually carried an average of only 6 passengers each for every trip. These facts, the petitioners argue, illustrate anexcess of available passenger vehicles over the actual needs of the riding public. They negate the advisability of allowing theapplicant's "jitneys" to serve the route between barrio Pinagbuhatan and the crossing of Highway 54 and Shaw Boulevard inMandaluyong.

Closely scrutinizing Dantayana's testimony, we cannot acquiesce in the petitioners' conclusions. The length of the route which therespondent applied for is divided into two parts. The first starts at barrio Pinagbuhatan and ends at the poblacion of the town of Pasig.The second begins at thepoblacion and winds up at the crossing of Highway 54 and Shaw Boulevard in Mandaluyong. Dantayana'ssurvey covered passenger vehicles passing through the second part of the route applied for. It appears, however, that the second partis actually only a converging point for passenger vehicles coming from towns east of Pasig, not to mention other passenger vehicles,equally numerous, destined for Manila coming from their terminals located in the Pasigpoblacion itself. In short, Dantayana's surveydoes not at all indicate the volume of the traffic of passenger vehicles corning all the way from barrio Pinagbuhatan. After all, theprimary objective of the grant of the certificate of public convenience in question was the welfare of the inhabitants of bar rioPinagbuhatan and other inhabitants along the first part of the route applied for.

The petitioners' only other witness, Arturo Clemente, the president of both the Mandbusco, Inc. and of the Pasig-Manila Bus OperatorsAssociation, testified that a total of 125 buses are operating between Pasig, Rizal and Quiapo, Manila, all taking the Shaw Boulevard,which thoroughfare is part of the route applied for by the respondent. Likewise, a total of 51 "jitneys" serve that same portion of ShawBoulevard to and from the various points in Pasig. In addition, a total of 171 buses coming from towns east of Pasig pass daily through

the latter town, proceed to Shaw Boulevard, and then to Manila. All these public conveyances, the witness pointed out, are more thanadequate to meet the transportation needs of the riding public in the areas served. The petitioners, the witness added, have madesubstantial investments in their business and, therefore, the allowance of additional public transportation vehicles, clearly unneeded,would result in ruinous competition and threaten the stability of their financial positions.

This argument suffers, however, from the same basic oversight afflicting the testimony of Dantayana. All the vehicles mentioned byClemente, except possibly for two buses a matter which we will shortly discuss do not run the full course of the route applied forby the respondent. The overlapping of service exists only with regard to the second part of that route, and this is clearly unavoidablesince the stretch of road from the Pasigpoblacion to the

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