Professional Documents
Culture Documents
1
A PUBLIC UTILITY IS A PARTLY NATIONALIZED BUSINESS
GENERAL CONSIDERATIONS
ENDEAVOR
The issuance of a franchise, certificate or any other form of
the governing body of any public utility enterprise shall be limited to their
authorization is needed for the operation of a public utility
proportionate share in its capital, and all the executive and managing officers
decision of the same agency. ERB allowed the provisional increase and
2
its operating expenses. Likewise, the COA recommended that net average
Clearly, by its nature, income tax payments of a public utility are not
investment method should be used by the company in the valuation of its
expenses which contribute to or are incurred in connection with the
properties. The ERB adopted this recommendation, ordered MERALCO to a
production of profit of a public utility. Income tax should be borne by the
lower increase than applied for, and ordered as well for the company to
taxpayer alone as they are payments made in exchange for benefits
adopt the net average investment method. This was however overturned by
received by the taxpayer from the State. No benefit is derived by the
the CA.
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
HELD:
public utility for purposes of generating revenue or profit. Accordingly, the
The regulation of rates to be charged by public utilities is founded upon the
burden of paying income tax should be Meralco's alone and should not be
police powers of the State and statutes prescribing rules for the control and
shifted to the consumers by including the same in the computation of its
regulation of public utilities are a valid exercise thereof. When private
operating expenses.
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
The usage of net average investment method is not unreasonable
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withdrawn by the owner by discontinuing use; but as long as use of the
The ERB did not abuse its discretion when it applied the net average
property is continued, the same is subject to public regulation.
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
In regulating rates charged by public utilities, the State protects the public
computation of the proportionate value of the property and equipment in
against arbitrary and excessive rates while maintaining the efficiency and
accordance with the actual number of months such property or equipment is
quality of services rendered. However, the power to regulate rates does not
in service for purposes of determining the rate base is favored, as against
give the State the right to prescribe rates which are so low as to deprive the
the trending method employed by MERALCO, "to reflect the real status of
public utility of a reasonable return on investment. Thus, the rates prescribed
the property."36 By using the net average investment method, the ERB and
by the State must be one that yields a fair return on the public utility upon the
the COA considered for determination of the rate base the value of
value of the property performing the service and one that is reasonable to
properties and equipment used by MERALCO in proportion to the period that
the public for the services rendered.
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
Income tax as operating expense cannot be allowed in rate-determination
rate base of a public utility entitled to a return must be based on properties
process
and equipment actually being used or are useful to the operations of the
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
2
DAVID, ET. AL. V. GLORIA ARROYO, ET. AL.
public utility is inconsistent with the nature of operating expenses. In general,
GR 171396, 3 MAY 2006
operating expenses are those which are reasonably incurred in connection
3
rally permits. This notwithstanding, rallies were still staged. This led to the
warrantless arrests of many as well as the take-over of two pro-opposition
SECTION 13.
newspaper companiesDaily Tribune and Malaya. Together with other
petitions assailing the constitutionality of PP 1017 and GO5, it was averred
xxx
that the take-over the newspaper companies constituted censorship and
prior restraint.
(b) The term "public service" includes every person that now or hereafter
may own, operate, manage, or control in the Philippines, for hire or
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compensation, with general or limited clientele, whether permanent,
Generally, Congress is the repository of emergency powers, such as the
occasional or accidental, and done for general business purposes, any
taking over of public utilities. This is evident in the tenor of Section 23 (2),
common carrier, railroad, street railway, traction railway, sub-way motor
Article VI authorizing it to delegate such powers to the President. Certainly, a
vehicle, either for freight or passenger, or both with or without fixed route and
body cannot delegate a power not reposed upon it. However, knowing that
whether may be its classification, freight or carrier service of any class,
during grave emergencies, it may not be possible or practicable for
express service, steamboat or steamship line, pontines, ferries, and water
Congress to meet and exercise its powers, the Framers of our Constitution
craft, engaged in the transportation of passengers or freight or both,
deemed it wise to allow Congress to grant emergency powers to the
shipyard, marine railways, marine repair shop, [warehouse] wharf or dock,
President, subject to certain conditions, thus:
ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power water supply and power, petroleum, sewerage system, wire
(1) There must be a war or other emergency.
or wireless communications system, wire or wireless broadcasting stations
and other similar public services: Provided, however, That a person engaged
(2) The delegation must be for a limited period only.
in agriculture, not otherwise a public service, who owns a motor vehicle and
uses it personally and/or enters into a special contract whereby said motor
(3) The delegation must be subject to such restrictions as the Congress may
vehicle is offered for hire or compensation to a third party or third parties
prescribe.
engaged in agriculture, not itself or themselves a public service, for operation
by the latter for a limited time and for a specific purpose directly connected
(4) The emergency powers must be exercised to carry out a national policy
with the cultivation of his or their farm, the transportation, processing, and
declared by Congress.
marketing of agricultural products of such third party or third parties shall not
be considered as operating a public service for the purposes of this Act.
Section 17, Article XII must be understood as an aspect of the emergency
powers clause. The taking over of private business affected with public
3
ALBANO V. REYES
interest is just another facet of the emergency powers generally reposed
175 SCRA 224
upon Congress. Thus, when Section 17 states that the "the State may,
4
In the instant case, the PPA, in the exercise of the option granted it by P.D.
HELD:
No. 857, chose to contract out the operation and management of the MICP
A review of the applicable provisions of law indicates that a franchise
to a private corporation. This is clearly within its power to do. Thus, PPA's
specially granted by Congress is not necessary for the operation of the
acts of privatizing the MICT and awarding the MICT contract to ICTSI are
Manila International Container Port (MICP) by a private entity, a contract
wholly within the jurisdiction of the PPA under its Charter which empowers
entered into by the PPA and such entity constituting substantial compliance
the PPA to "supervise, control, regulate, construct, maintain, operate and
with the law.
provide such facilities or services as are necessary in the ports vested in, or
laws and regulations. However, P.D. 857 itself authorizes the PPA to
process contemplated by the BOT law. in light of this, amendments were
perform the service by itself, by contracting it out, or through other means.
made to the agreement with the consortium, which proposed a BLT
Reading E.O. No. 30 and P.D. No. 857 together, the inescapable conclusion
arrangement. Later on, amendments were made to the BOT law.
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
The petition mainly rests on the question of whether a foreign corporation
management by another by contract or other means, at its option. The latter
can own a public utility.
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
HELD:
becomes unnecessary.
What private respondent owns are the rail tracks, rolling stocks like the
coaches, rail stations, terminals and the power plant, not a public utility.
MA. ANGELA AGUINALDO
5
While a franchise is needed to operate these facilities to serve the public,
vehicles under simulated operating conditions, control of operations, dealing
they do not by themselves constitute a public utility. What constitutes a
with emergencies, collection, counting and securing cash from the fare
public utility is not their ownership but their use to serve the public.
collection system. Personnel of DOTC will work under the direction and
control of private respondent only during training. The training objectives,
The Constitution, in no uncertain terms, requires a franchise for the
however, shall be such that upon completion of the EDSA LRT III and upon
6
legislative franchise is anymore needed with respect to air transportation
before a CPCN be issued.
Section 13. (a) The Commission shall have jurisdiction, supervision, and
control over all public services and their franchises, equipment, and other
HELD:
properties, and in the exercise of its authority, it shall have the necessary
Many and varied are the definitions of certificates of public convenience
powers and the aid of the public force: Provided, That public services owned
which courts and legal writers have drafted. Some statutes use the terms
or operated by government entities or government-owned or controlled
"convenience and necessity" while others use only the words "public
corporations shall be regulated by the Commission in the same way as
convenience." The terms "convenience and necessity", if used together in a
privately-owned public services, but certificates of public convenience or
statute, are usually held not to be separable, but are construed together.
certificates of public convenience and necessity shall not be required of such
Both words modify each other and must be construed together. The word
entities or corporations: And provided, further, That it shall have no authority
'necessity' is so connected, not as an additional requirement but to modify
to require steamboats, motor ships and steamship lines, whether privatelyand qualify what might otherwise be taken as the strict significance of the
owned, or owned or operated by any Government controlled corporation or
word necessity. Public convenience and necessity exists when the proposed
instrumentality to obtain certificate of public convenience or to prescribe their
facility will meet a reasonable want of the public and supply a need which the
definite routes or lines of service.
existing facilities do not adequately afford. It does not mean or require an
actual physical necessity or an indispensable thing.
(b) The term "public service" includes every person that now or hereafter
may own, operate, manage, or control in the Philippines, for hire or
The use of the word "necessity", in conjunction with "public convenience" in
compensation, with general or limited clientele, whether permanent,
a certificate of authorization to a public service entity to operate, does not in
occasional or accidental, and done for general business purposes, any
any way modify the nature of such certification, or the requirements for the
common carrier, railroad, street railway, traction railway, sub-way motor
issuance of the same. It is the law which determines the requisites for the
vehicle, either for freight or passenger, or both with or without fixed route and
issuance of such certification, and not the title indicating the certificate.
whether may be its classification, freight or carrier service of any class,
express service, steamboat or steamship line, pontines, ferries, and water
Congress, by giving the respondent Board the power to issue permits for the
craft, engaged in the transportation of passengers or freight or both,
operation of domestic transport services, has delegated to the said body the
shipyard, marine railways, marine repair shop, [warehouse] wharf or dock,
authority to determine the capability and competence of a prospective
ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light,
domestic air transport operator to engage in such venture. This is not an
heat and power water supply and power, petroleum, sewerage system, wire
instance of transforming the respondent Board into a mini-legislative body,
or wireless communications system, wire or wireless broadcasting stations
with unbridled authority to choose who should be given authority to operate
and other similar public services: Provided, however, That a person engaged
domestic air transport services.
in agriculture, not otherwise a public service, who owns a motor vehicle and
uses it personally and/or enters into a special contract whereby said motor
vehicle is offered for hire or compensation to a third party or third parties
TRANSPORTATION
engaged in agriculture, not itself or themselves a public service, for operation
by the latter for a limited time and for a specific purpose directly connected
TRANSPORTATION, DEFINED.
with the cultivation of his or their farm, the transportation, processing, and
7
(c) The word "person" includes every individual, co-partnership, joint-stock
the immediate cancellation of the certificate without the necessity of any
company or corporation, whether domestic or foreign, their lessees, trustees,
express action on the part of the Commission.
or receivers, as well as any municipality, province, city, government-owned
8
convenience may reasonably require, and to issue certificates of public
maintenance of the same and when the financial condition of the said public
convenience and necessity when such is required or provided by any law or
the Commission be necessary for the protection of the public are passing
of such product or service and for the measurement thereof.
grade crossing of (1) public highways and railroads, (2) public highways and
streets railway, or (3) railways and street railways.
(f) To establish reasonable rules, regulations, instructions, specifications,
and standards, to secure the accuracy of all meters and appliances for
(l) To fix and determine proper and adequate rates of depreciation of the
measurements.
property of any public service which will be observed in a proper and
adequate depreciation account to be carried for the protection of
(g) To compel any public service to furnish safe, adequate, and proper
stockholders, bondholders or creditors in accordance with such rules,
service as regards the manner of furnishing the same as well as the
regulations, and form of account as the Commission may prescribe. Said
maintenance of the necessary material and equipment.
rates shall be sufficient to provide the amounts required over and above the
expense of maintenance to keep such property in a state of efficiency
(h) To require any public service to establish, construct, maintain, and
corresponding to the progress of the industry. Each public service shall
operate any reasonable extension of its existing facilities, where in the
conform its depreciation accounts to the rates so determined and fixed, and
judgment of said Commission, such extension is reasonable and practicable
shall set aside the moneys so provided for out of its earnings and carry the
and will furnish sufficient business to justify the construction and
same in a depreciation fund. The income from investments of money in such
MA. ANGELA AGUINALDO
9
fund shall likewise be carried in such fund. This fund shall not be expended
Provided, That said fees shall be smaller than more those charged for auto(c) To refuse or neglect, when requested by the Director of Posts or his
busses, trucks, and motor trucks of types not made regulation under the
authorized representative, to carry public mail on the regular trips of any
subsection.
public land transportation service maintained or operated by any such public
service; upon such terms and conditions and for a consideration in such
xxx
amount as may be agreed upon between the Director of Posts and the public
service carrier of fixed by the Commission in the absence of an agreement
Section 18. It shall be unlawful for any individual, co-partnership,
between the Director of Posts and the carrier. In case the Director of Posts
association, corporation or joint-stock company, their lessees, trustees or
and public service carrier are unable to agree on the amount of the
receivers appointed by any court whatsoever, or any municipality, province,
compensation to be paid for the carriage of the mail, the Director of Posts
or other department of the Government of the Philippines to engage in any
shall forthwith request the Commission to fix a just and reasonable
public service business without having first secured from the Commission a
compensation for such carriage and the same shall be promptly fixed by the
certificate of public convenience or certificate of public convenience and
Commission in accordance with Section sixteen of this Act.
necessity as provided for in this Act, except grantees of legislative franchises
expressly exempting such grantees from the requirement of securing a
Section 20. Acts requiring the approval of the Commission. - Subject to
certificate from this Commission as well as concerns at present existing
established limitations and exceptions and saving provisions to the contrary,
MA. ANGELA AGUINALDO
10
it shall be unlawful for any public service or for the owner, lessee or operator
any other public service. The approval herein required shall be given, after
thereof, without the approval and authorization of the Commission previously
notice to the public and hearing the persons interested at a public hearing, if
had it be shown that there are just and reasonable grounds for making the
mortgaged or encumbrance, for liabilities of more than one year maturity, or
(a) To adopt, establish, fix, impose, maintain, collect or carry into effect any
the sale, alienation, lease, merger, or consolidation to be approved, and that
individual or joint rates, commutation, mileage or other special rate, toll, fare,
the same are not detrimental to the public interest, and in case of a sale, the
charge, classification or itinerary. The Commission shall approve only those
date on which the same is to be consummated shall be fixed in the order of
that are just and reasonable and not any that are unjustly discriminatory or
approval: Provided, however, that nothing herein contained shall be
unduly preferential, only upon reasonable notice to the public services and
construed to prevent the transaction from being negotiated or completed
other parties concerned, giving them a reasonable opportunity to be heard
before its approval or to prevent the sale, alienation, or lease by any public
and the burden of the proof to show that the proposed rates or regulations
service of any of its property in the ordinary course of its business.
are just and reasonable shall be upon the public service proposing the same.
(h) To sell or register in its books the transfer or sale of shares of its capital
(b) To establish, construct, maintain, or operate new units or extend existing
stock, if the result of that sale in itself or in connection with another previous
facilities or make any other addition to or general extension of the service.
sale, shall be to vest in the transferee more than forty per centum of the
subscribed capital of said public service. Any transfer made in violation of
xxx
this provision shall be void and of no effect and shall not be registered in the
books of the public service corporation. Nothing herein contained shall be
(e) Hereafter to issue any stock or stock certificates representing an increase
construed to prevent the holding of shares lawfully acquired. (As amended
of capital; or issue any share of stock without par value; or issue any bonds
by Com. Act No. 454.)
or other evidence of indebtedness payable in more than one year from the
issuance thereof, provided that it shall be the duty of the Commission, after
(i) To sell, alienate or in any manner transfer shares of its capital stock to
hearing, to approve any such issue maturing in more than one year from the
11
BOT approval was not sought. The private respondents were sustained. In
The first licensee will be protected in his investment and will not be
contemplation of law, the grantee continues to be responsible under the
subjected to a ruinous competition
franchise in relation to the Commission and to the public.
It is not the laws policy for the PSC to issue a CPC to a second
operator to cover the same field and in competition with a first
There being no prior BOT approval in the transfer of property from Yujuico
operator who is rendering sufficient, adequate, and satisfactory
Transit Co., Inc. to Jesus Yujuico, it only follows that as far as the BOT and
service, and who in all things and respects is complying with the
third parties are concerned, Yujuico Transit Co., Inc. still owned the
rules and regulations of the Commission
properties. and Yujuico, and later, "Y" Transit Co., Inc. only held the same as
May represent property rights to the extent that if the rights which
which it promised to pay through promissory notes with chattel mortgage.
any public utility is exercising pursuant to lawful orders of the Public
Upon failure to pay, action was filed Guzco and attaching therein the buses
Utility Commissioner has been invaded by another public utility, in
in question. The notice of garnishment was served as well to the PSC. In
appropriate cases actions may be maintained by the complainant
the meantime, the certificates of public convenience and necessity were sold
public utility
by Guzco to Raymundo but still, the same were subject to attachment.
CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY
HELD:
12
The Public Service Law, Act No. 3108, as amended, authorizes certificates
In the instant case, the evidence is conclusive that the Batangas
of public convenience to be secured by public service operators from the
Transportation Company operated its line five years before Orlanes ever
Public Service Commission. (Sec. 15 [i].) A certificate of public convenience
turned a wheel, yet the legal effect of the decision of the Public Service
granted to the owner or operator of public service motor vehicles, it has been
Commission is to give an irregular operator, who was the last in the field, a
held, grants a right in the nature of a limited franchise.
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.
The rule tested the liability of property to execution by determining if the
interest of the judgment debtor in the case can be sold or conveyed to
So long as the first licensee keeps and performs the terms and conditions of
another in any way. Now the Public Service Law permits the Public Service
its license and complies with the reasonable rules and regulations of the
Commission to approved the sale, alienation, mortgaging, encumbering, or
Commission and meets the reasonable demands of the public, it should
leasing of property, franchises, privileges, or rights or any part thereof (sec.
have more or less of a vested and preferential right over a person who seeks
16 [h]), and in practice the purchase and sale of certificates of public
to acquire another and a later license over the same route. Otherwise, the
convenience has been permitted by the Public Service Commission. If the
first license would not have protection on his investment, and would be
holder of a certificate of public convenience can sell it voluntarily, there is no
subject to ruinous competition and thus defeat the very purpose and intent
valid reason why the same certificate cannot be taken and sold involuntarily
for which the Public Service Commission was created.
pursuant to process.
It does not appear that the public has ever made any complaint the
Certificates of public convenience secured by public service operators are
Batangas Transportation Company, yet on its own volition and to meet the
liable to execution, and the Public Service Commission is authorized to
increase of its business, it has applied to the Public Service Commission for
approve the transfer of the certificates of public convenience to the execution
authority to increase the number of daily trips to nineteen, thus showing a
creditor. As a consequence, the decision brought on review will be affirmed,
spirit that ought to be commended.
with costs against the appellant.
9
SAN PABLO V. PANTRANCO
8
BATANGAS TRANSPORTATION V. ORLANES
153 SCRA 199
52 PHIL 455
FACTS:
FACTS:
PANTRANCO is a domestic corporation engaged in the land transportation
Batangas Transportation has been for five years operating its bus line in the
business with PUB service for passengers and freight and various
province of Batangas as well as in the province of Tayabas, prior to Orlanes.
certificates for public conveniences CPC to operate passenger buses from
Orlanes filed an application for the issuance of the certificate of public
Metro Manila to Bicol Region and Eastern Samar. On March 27,1980
convenience, and requested for the operation in a fixed schedule. The
PANTRANCO through its counsel wrote to Maritime Industry Authority
company filed an application to this petition by Orlanes, averring therein that
(MARINA) requesting authority to lease/purchase a vessel named M/V
it had been operating for five years in the Province of Batangas, and likewise
"Black Double" "to be used for its project to operate a ferryboat service from
alleged that its operations is sufficient to cater to public convenience.
Matnog, Sorsogon and Allen, Samar that will provide service to company
Nevertheless, the Commission issued the permit and certificate to Orlanes
buses and freight trucks that have to cross San Bernardo Strait. In a reply of
notwithstanding the existence of a prior operator.
April 29,1981 PANTRANCO was informed by MARINA that it cannot give
due course to the request on the basis that the run was already adequately
HELD:
serviced and that additional tonnage cannot be accomodated. This
notwithstanding, the company still pushed through with the purchase of the
MA. ANGELA AGUINALDO
13
vessel and wrote a letter to the BOT applying to approve its operations. Not
Bernardino Strait which separates Matnog and Allen leads to the ocean it
being able to wait however for BOT to reply, it started operations and was
must at times be choppy and rough so that it will not be safe to navigate the
reprimanded to stop until the scheduled hearing. San Pablo and Cardinal
same by small boats or barges but only by such steamboats or vessels as
Transportation entered their respective opposition, alleging that they have
the MV "Black Double.
adequately serviced PANTRANCO with the ferry off their buses. However,
in the end, the Commission ruled that the operation o the ferry boat was part
Considering the environmental circumstances of the case, the conveyance
of the CPC of PANTRANCO.
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
HELD:
circumstance can the sea between Matnog and Allen be considered a
We are not unmindful of the reasons adduced by the Commission in
continuation of the highway. While a ferry boat service has been considered
considering the motorboat service between Calapan and Batangas as ferry;
as a continuation of the highway when crossing rivers or even lakes, which
but from our consideration of the law as it stands, particularly
are small body of waters - separating the land, however, when as in this
Commonwealth Act No. 146, known as the Public Service Act and the
case the two terminals, Matnog and Allen are separated by an open sea it
provisions of the Revised Administrative Code regarding municipal ferries
can not be considered as a continuation of the highway. Respondent
and those regarding the jurisdiction of the Bureau of Customs over
PANTRANCO should secure a separate CPC for the operation of an
documentation, registration, licensing, inspection, etc. of steamboats,
interisland or coastwise shipping service in accordance with the provisions of
motorboats or motor vessels, and the definition of ferry as above quoted we
law. Its CPC as a bus transportation cannot be merely amended to include
have the impression and we are inclined to believe that the Legislature
this water service under the guise that it is a mere private ferry service.
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
The contention of private respondent PANTRANCO that its ferry service
highway which is interrupted by the body of water, or in some cases to
operation is as a private carrier, not as a common carrier for its exclusive
connect two points on opposite shores of an arm of the sea such as bay or
use in the ferrying of its passenger buses and cargo trucks is absurd.
lake which does not involve too great a distance or too long a time to
PANTRANCO does not deny that it charges its passengers separately from
navigate But where the line or service involves crossing the open sea like
the charges for the bus trips and issues separate tickets whenever they
the body of water between the province of Batangas and the island of
board the MV "Black Double" that crosses Matnog to Allen, PANTRANCO
Mindoro which the oppositors describe thus "the intervening waters between
cannot pretend that in issuing tickets to its passengers it did so as a private
Calapan and Batangas are wide and dangerous with big waves where small
carrier and not as a common carrier. The Court does not see any reason
boat barge, or raft are not adapted to the service," then it is more reasonable
why inspite of its amended franchise to operate a private ferry boat service it
to regard said line or service as more properly belonging to interisland or
cannot accept walk-in passengers just for the purpose of crossing the sea
coastwise trade.
between Matnog and Allen. Indeed evidence to this effect has been
submitted. What is even more difficult to comprehend is that while in one
This Court takes judicial notice of the fact, and as shown by an examination
breath respondent PANTRANCO claims that it is a private carrier insofar as
of the map of the Philippines, that Matnog which is on the southern tip of the
the ferryboat service is concerned, in another breath it states that it does not
island of Luzon and within the province of Sorsogon and Allen which is on
thereby abdicate from its obligation as a common carrier to observe
the northeastern tip of the island of Samar, is traversed by the San
extraordinary diligence and vigilance in the transportation of its passengers
Bernardino Strait which leads towards the Pacific Ocean. The parties admit
14
Such an anomalous situation that will jeopardize the safety and interests of
and in existent under Article 1409 of the Civil Code. It is a fundamental
its passengers and the cargo owners cannot be allowed.
principle that the court will not aid either party to enforce an illegal contract,
but will leave both where it finds then. Upon this premise it would be error to
10
PAL V. CAB
accord the parties relief from their predicament
Supra
PRIVATE NATURE; RIGHTS AND OBLIGATIONS OF PARTIES INTER SE
Caveat of the decision this decision brings to a blur the question on when it
ARISING FROM TRANSACTIONS RELATING TO TRANSPORTATION
is needed to secure a franchise from Congress. Before, when it is a CPCN,
a legislative franchise is a mandatory requirement. However, with this case,
ABSENT A TRANSPORTATION CONTRACT
it imports that no franchise is anymore needed.
12
LARA V. VALENCIA
11
TEJA V. IAC
104 PHIL 65
148 SCRA 347
FACTS:
FACTS:
Lara was an inspector of the Bureau of Forestry. The defendant is engaged
Nale purchased from Teja Marketing a motorbike with a side car. He
in the business of exporting logs from his lumber concession in Cotabato.
accordingly gave a downpayment and promised to pay the balance in 60
Lara went to said concession upon instructions of his chief to classify the
days. However, he failed to pay the balance and asked for an extension of
logs of defendant which were about to be loaded on a ship anchored in the
one year. Still, he was not able to pay. An action for sum of money and
port of Parang. The work Lara of lasted for six days during which he
damages was filed and though Nale didn't deny that he owed Teja Marketing
contracted malaria fever. On a later date, Lara who then in a hurry to return
money, he alleged that the latter failed to register the chattel mortgage and
to Davao asked defendant if he could take him in his pick-up as there was
motor vehicle yearly with the LTC. The trial courts sustained Teja Marketing
then no other means of transportation, to which defendant agreed, and in
and dismissed the counterclaim, ordering Nale top pay the balance of the
that same morning the pick-up left Parang bound for Davao taking along six
purchase price. However, this was reversed by the Court of Appeals on the
passengers, including Lara.
ground that there was a illegal transaction involved. The transaction that
transpired was that of a kabit system, prohibited by law.
The pick-up has a front seat where the driver and two passengers can be
accommodated and the back has a steel flooring enclosed with a steel
HELD:
walling of 16 to 17 inches tall on the sides and with a 19 inches tall walling at
Unquestionably, the parties herein operated under an arrangement,
the back. In the middle Lara sat on a bag. Before leaving Parang, defendant
commonly known as the "kabit system" whereby a person who has been
invited Lara to sit with him on the front seat but Lara declined. It was their
granted a certificate of public convenience allows another person who owns
understanding that upon reaching barrio Samoay, Cotabato, the passengers
motor vehicles to operate under such franchise for a fee. A certificate of
were to alight and take a bus bound for Davao, but when they arrived at that
15
on a suitcase and his head cove red by a jacket. Upon reaching Km. 96,
administrative entity of the Executive Branch of the government in the
barrio Catidtuan, Lara accidentally fell from the pick-up and as a result he
promotion, development and regulation of dependable and coordinated
suffered serious injuries. Valencia stopped the pick-up to see what
networks of transportation and communication system, as well as in the fast,
happened to Lara. He sought the help of the residents of that place and
sale, efficient and reliable postal, transportation and communication
applied water to Lara but to no avail. They brought Lara to the nearest place
services.
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.
To accomplish such mandate, the Ministry shall have the following
From there they proceeded to Davao City and immediately notified the local
objectives:
authorities.
1. Promote the development of dependable and coordinated networks of
transportation and communication systems;
HELD:
2. Guide government and private investment in the development of the
It therefore appears that the deceased, as well his companions who rode in
country's inter- model transportation and communication systems in a
the pick-up of defendant, were merely accommodation passengers who paid
most practical, expeditious, and orderly fashion for maximum safety,
nothing for the service and so they can be considered as invited guests
service, and cost effectiveness;
within the meaning of the law. As accommodation passengers or invited
3. Impose appropriate measure so that technical, economic and other
guests, defendant as owner and driver of the pick-up owes to them merely
condition for the continuing economic viability of the transportation and
the duty to exercise reasonable care so that they may be transported safely
communication entities are not jeopardized and do not encourage
to their destination. Thus, "The rule is established by the weight of authority
inefficiency and distortion of traffic patronage;
that the owner or operator of an automobile owes the duty to an invited guest
4. Develop an integrated plan for a nationwide transmission system in
to exercise reasonable care in its operation, and not unreasonably to expose
accordance with the national and international telecommunication
him to danger and injury by increasing the hazard of travel. This rule, as
service requirement including, among others,radio and television
frequently stated by the courts, is that an owner of an automobile owes a
broadcast relaying, leased channel services and data transmission;
guest the duty to exercise ordinary or reasonable care to avoid injuring him.
5. Guide government and private investment in the establishment,
Since one riding in an automobile is no less a guest because he asked for
operation and maintenance of an international switching system for
the privilege of doing so, the same obligation of care is imposed upon the
incoming and outgoing telecommunication services;
driver as in the case of one expressly invited to ride" (5 Am. Jur., 626-627).
6. Encourage the development of a domestic telecommunication industry
Defendant, therefore, is only required to observe ordinary care, and is not in
in coordination with the concern entities particularly, the manufacture of
duty bound to exercise extraordinary diligence as required of a common
communications/ electronics equipment and components to complement
carrier by our law (Articles 1755 and 1756, new Civil Code).
and support as much as possible, the expansion, development,
operation and maintenance of the nationwide telecommunications
ARISING FROM A TRANSPORTATION CONTRACT
network;
7. Provide for a safe, reliable and efficient postal system for the country.
AIR
REGULATION OF THE TRANSPORTATION INDUSTRY
AIR TRANSPORTATION OFFICE
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS
EO 125. SECTION 12. Bureau of Air Transportation. The Bureau of Air
EO 125. SECTION 4. Mandate. The Ministry shall be the primary policy,
Transportation, as reorganized herein, shall have the function of developing,
planning, programming, coordinating, implementing, regulating, and
MA. ANGELA AGUINALDO
16
formulating and recommending plans, policies, program, projects, standards,
SECTION 10. Powers and duties of the Board.
specification and guidelines related to Air Transportation including air space
(A) Except as otherwise provided herein, the Board shall have the power to
utilization, air traffic control and aeronautics communication and information
regulate the economic aspect of air transportation, and shall have the
services, aircraft and air navigational facilities, services, maintenance and
general supervision and regulation of, the jurisdiction and control over, air
operations. For such purposes, it shall, with the approval of the Minister:
carriers, general sales agents, cargo sales agents, and airfreight forwarders
1. Establish and prescribe rules and regulations for the inspection and
as well as their property, property rights, equipment, facilities, and franchise,
registration of aircraft's;
in so far as may be necessary for the purpose of carrying out the provisions
In fixing rates, charges, fares under the provisions of this Act, the Board
SECTION 5. Composition of the Board. - The Civil Aeronautics Board shall
shall take into consideration, among other factors:
be composed of the Secretary of Transportation and Communications or his
(a) The effect of such rates upon the movement of traffic;
designated representative as Chairman, the Assistant Secretary for Air
(b) The need in the public interest of adequate and efficient
Transportation of the Department of Transportation and Communications as
transportation of persons and property by air carriers at the lowest
Vice-Chairman, the Commanding General of the Philippine Air Force* and
cost consistent with the furnishing of such service.
two (2) members to be appointed by the President of the Philippines. They
(c) Such standards respecting the character and quality of service
shall hold office at the pleasure of the President.
to be rendered by air carriers as may be prescribed by or pursuant
to law;
MA. ANGELA AGUINALDO
17
(d) The inherent advantages of transportation by aircraft; and
money, and the length of times such accounts, records and memoranda
(e) The need of each air carrier for revenues sufficient to enable
shall be preserved: Provided, that any air carrier may keep additional
such air carrier, under honest, economical, and efficient
accounts, records, or memoranda if they do not impair the integrity of the
management, to provide adequate and efficient air carrier service.
accounts, records, or memoranda prescribed or approved by the Board and
do not constitute an undue financial burden on such air carrier.
(3) To authorize any type of charters whether domestic or international and
special air services or flight under such terms and conditions as in its
(8) To require each officer and director of any air carrier to transmit a report
judgment public interest requires. Notwithstanding the existence of bilateral
describing the shares of stock with any persons engaged in any phase or
air agreement, the CAB is authorized to grant any foreign airline increase in
other interest held by such air carrier of aeronautics, and the holding of the
frequencies and/or capacities on international routes when in its judgment
stock in and control of, other persons engaged in any phase of aeronautics.
the national interest requires it, provided that the utilization of the increase
frequencies and capacities is not more than thirty days. All grants of
SECTION 11. Nature, terms and conditions. - Certificate of Public
frequencies and/or capacities shall be subject to the approval of the
Convenience and Necessity is a permit issued by the Board authorizing a
President.
person to engage in air commerce and/or transportation, foreign and/or
domestic. No person shall engage in air commerce unless there is in force a
(4) To approve or disapprove increase and/or decrease of capital, lease,
permit issued by the Board.
purchase, sales of aircraft of air carrier engaged in air commerce;
consolidation, merger, purchase, lease and acquisition and control of
No general sales agent, cargo sales agent or airfreight forwarder shall
operating contracts between domestic foreign air carriers, or between
engage in any of the activities mentioned in Section 3 paragraphs (jj), (kk)
domestic air carriers or any person engaged in any phase of aeronautics.
and (ll) respectively, unless there is in force a permit or any other form of
authorization issued by the Board.
(5) To inquire into the management of the business of any air carrier and, to
the extent reasonably necessary for such inquiry, to obtain from such carrier,
Any permit may be altered, amended, modified, suspended, canceled or
and from any person controlling, or controlled by, or under common control
revoked by the Board in whole or in part, upon complaints or petition or upon
with, such air carrier, full and complete reports and othe informations. Such
the Boards initiative as hereinafter provided, whenever the Board finds such
reports shall be under oath whenever the Board so requires.
action to be in the public interest.
(6) To require annual, monthly, periodical, and special reports from any air
There shall be attached to the exercise of the privileges granted by the
carrier, to prescribe the manner and form in which such reports shall be
permit, or amendment thereto, such reasonable terms, conditions, or
made, and to require from any air carrier specific answers to all questions
limitations as, in the judgment of the Board, the public interest may require.
upon which the Board may deem information to be necessary. Such reports
No permit shall confer any proprietary, property, or exclusive right in the use
shall be under oath whenever the Board so requires. The Board may also
of any air space, civil airway, landing area of government air navigation
require any air carrier to file with it any contract, agreement, understanding
facility.
or arrangement, or a true copy thereof, between such air carrier and any
other carrier or person, in relation to any traffic affected by the provisions of
The permit shall, among others specify the terminal and intermediate points,
this Act.
if any, between which the air carrier is authorized to operate the service to
be rendered, the time of arrival and departure at each point, and the
(7) To prescribe the forms of any and all accounts, records, and memoranda
frequency of flights. Provided, that no change in routes, rates, schedules or
of the movement of traffic, as well as of the receipts and expenditures of
frequency nor supplemental or additional flights to those covered by an air
MA. ANGELA AGUINALDO
18
commerce permit or franchise shall be affected without prior approval of the
explicitly authorizes CAB to issue a "temporary operating permit," and
Civil Aeronautics Board. In so far as the operation is to take place within the
nothing contained, either in said section, or in Chapter IV of Republic Act No.
Philippines, the permit shall designate the terminal and intermediate points
776, negates the power to issue said "permit", before the completion of the
only insofar as the Board shall deem practicable, and otherwise shall
applicant's evidence and that of the oppositor thereto on the main petition.
designate only the general route or routes to be followed.
Indeed, the CAB's authority to grant a temporary permit "upon its own
The first ground is devoid of merit. Section 10-C(1) of Republic Act No. 776,
legislative franchise to operate. PAL also alleged that the CBA had illegally
reading:
exercised jurisdiction over the matter due to the same reason.
(C) The Board shall have the following specific powers and duties:
HELD:
(1) In accordance with the provisions of Chapter IV of this Act, to issue,
There The Civil Aeronautics Board has jurisdiction over GrandAir's
deny, amend, revise, alter, modify, cancel suspend or revoke, in whole or in
Application for a Temporary Operating Permit. This rule has been
part, upon petitioner complaint, or upon its own initiative, any temporary
established in the case of Philippine Air Lines Inc., vs. Civil Aeronautics
operating permit or Certificate of Public Convenience and Necessity;
Board, promulgated on June 13, 1968.[12] The Board is expressly
Provided, however, That in the case of foreign air carriers, the permit shall
authorized by Republic Act 776 to issue a temporary operating permit or
be issued with the approval of the President of the Republic of the
Certificate of Public Convenience and Necessity, and nothing contained in
Philippines....
the said law negates the power to issue said permit before the completion of
the applicant's evidence and that of the oppositor thereto on the main
petition. Indeed, the CAB's authority to grant a temporary permit "upon its
MA. ANGELA AGUINALDO
19
own initiative" strongly suggests the power to exercise said authority, even
Given the foregoing postulates, we find that the Civil Aeronautics Board has
before the presentation of said evidence has begun. Assuming arguendo
the authority to issue a Certificate of Public Convenience and Necessity, or
that a legislative franchise is prerequisite to the issuance of a permit, the
20
5. Establish and prescribe the corresponding rules and regulation for the
The Board shall be supported by the Technical Evaluation Division, Legal
enforcement of laws governing land transportation, including the
Division, Management Information Division, Administrative Division and
penalties for violation thereof, and for the deputation of appropriate law
Finance Division.
enforcement agencies in pursuance thereof;
6. Determine, fix and/or prescribe charges and/or rates pertinent to the
Sec. 5. Powers and Functions of the Land Transportation Franchising and
operation of public and land utility facilities and services except in cases
Regulatory Board. The Board shall have the following powers and functions:
where charges or rates are established by international bodies or
a. To prescribe and regulate routes of service, economically viable
association of which the Philippines is a participating member or by
capacities and zones or areas of operation of public land transportation
bodies or association recognized by the Philippine Government as the
services provided by motorized vehicles in accordance with the public land
proper arbiter of such charges or rates;
transportation development plans and programs approved by the
7. Establish and prescribe the rules, regulations, procedures and
Department of Transportation and Communications;
standards for the accreditation of driving schools;
b. To issue, amend, revise, suspend or cancel Certificates of Public
8. Performs such other functions as may be provided by law.
Convenience or permits authorizing the operation of public land
transportation services provided by motorized vehicles, and to prescribe the
LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD
appropriate terms and conditions therefor;
(LTFRB)
c. To determine, prescribe and approve and periodically review and adjust,
reasonable fares, rates and other related charges, relative to the operation of
EO 202. Sec. 1. Creation of the Land Transportation Franchising and
public land transportation services provided by motorized vehicles;
Regulatory Board. There is hereby created in the Department of
d. To issue preliminary or permanent injunction, whether prohibitory or
Transportation and Communications, the Land Transportation Franchising
mandatory, in all cases in which it has jurisdiction, and in which cases the
and Regulatory Board hereinafter referred to as the "Board".
pertinent provisions of the Rules of Court shall apply;
e. To punish for contempt of the Board, both direct and indirect, in
Sec. 2. Composition of the Board. The Board shall be composed of a
accordance with the pertinent provisions of, and the penalties prescribed by,
Chairman and two (2) members with the same rank, salary and privileges of
the Rules of Court;
an Assistant Secretary, all of whom shall be appointed by the President of
f. To issue subpoena and subpoena duces tecum and summon witnesses to
21
means to ascertain facts in its case speedily and objectively and without
applications/petitions for routes extending their respective territorial
must bear the concurrence and signature of at least two (2) members
petitioner, have resulted in the introduction into our highways and
thereof.
thoroughfares thousands of old and smoke-belching buses, many of which
are right-hand driven, and have exposed our consumers to the burden of
The decision, order or resolution of the Board shall be appealable to the
spiraling costs of public transportation without hearing and due process.
Secretary within thirty (30) days from receipt of the decision: Provided, That
the Secretary may motu proprio review any decision or action of the Board
HELD:
before the same becomes final.
On the fare-ranging scheme
Sec. 7. Creation of Regional Franchising and Regulatory Offices. There shall
Legislature delegated to the defunct Public Service Commission the power of
be a Regional Franchising and Regulatory Office in each of the
fixing the rates of public services. Respondent LTFRB, the existing
administrative regions of the country which shall be headed by a Board
regulatory body today, is likewise vested with the same under Executive
Regional Manager having the rank, salary and privileges of a Department
Order No. 202 dated June 19, 1987. Section 5(c) of the said executive order
Assistant Regional Director. The Regional Franchising and Regulatory
authorizes LTFRB "to determine, prescribe, approve and periodically review
Offices shall hear and decide uncontested applications/petitions for routes,
and adjust, reasonable fares, rates and other related charges, relative to the
within
their
respective
administrative
regions:
Provided,
That
operation of public land transportation services provided by motorized
vehicles."
MA. ANGELA AGUINALDO
22
By its terms, public convenience or necessity generally means something
In the case at bench, the authority given by the LTFRB to the provincial bus
fitting or suited to the public need. 16 As one of the basic requirements for the
operators to set a fare range over and above the authorized existing fare, is
grant of a CPC, public convenience and necessity exists when the proposed
illegal and invalid as it is tantamount to an undue delegation of legislative
facility or service meets a reasonable want of the public and supply a need
authority. Potestas delegata non delegari potest. What has been delegated
which the existing facilities do not adequately supply. The existence or
cannot be delegated. This doctrine is based on the ethical principle that such
non-existence of public convenience and necessity is therefore a question of
a delegated power constitutes not only a right but a duty to be performed by
fact that must be established by evidence, real and/or testimonial; empirical
the delegate through the instrumentality of his own judgment and not through
data; statistics and such other means necessary, in a public hearing
the intervening mind of another. A further delegation of such power would
conducted for that purpose. The object and purpose of such procedure,
indeed constitute a negation of the duty in violation of the trust reposed in
among other things, is to look out for, and protect, the interests of both the
the delegate mandated to discharge it directly. The policy of allowing the
public and the existing transport operators.
provincial bus operators to change and increase their fares at will would
result not only to a chaotic situation but to an anarchic state of affairs. This
Verily, the power of a regulatory body to issue a CPC is founded on the
would leave the riding public at the mercy of transport operators who may
condition that after full-dress hearing and investigation, it shall find, as a fact,
increase fares every hour, every day, every month or every year, whenever it
that the proposed operation is for the convenience of the public.
pleases them or whenever they deem it "necessary" to do so.
WATER
On the presumption of public need
SECTION 14. Maritime Industry Authority. The Maritime Industry Authority is
While adopting in toto the foregoing requisites for the issuance of a CPC,
TRANSPORTATION NOTES
23
7. Undertake the issuance of licenses to qualified seamen and harbor, bay
PERSONS, CORPORATIONS, ASSOCIATIONS, OR FIRMS, WHAT DOES
and river pilots;
IT ENTAIL?
8. Determine, fix and/or prescribe charges and/or rates pertinent to the
24
40 PHIL 853
authorizing the exercise of the jurisdiction of the public utility commission.
There must be, in general, a right which the law compels the power to give to
FACTS:
the general public. It is not enough that the general prosperity of the public is
The appellant rented two automobile trucks and was using them upon the
promoted. Public use is not synonymous with public interest. The true
highways of the Province of Leyte for the purpose of carrying some
criterion by which to judge of the character of the use is whether the
passengers and freight; that he carried passengers and freight under a