EN BANC

[G.R. No. 83551. July 11, 1989.]

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.
SYLLABUS
1.
ADMINISTRATIVE LAW; PHILIPPINE PORTS AUTHORITY; AUTHORIZED TO CONTRACT WITH PRIVATE
ENTITY TO HANDLE CARGOES AND OTHER PORT RELATED SERVICES. 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. 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).
2.
MERCANTILE LAW; PUBLIC SERVICE ACT; LEGISLATIVE FRANCHISE, NOT ALWAYS NECESSARY IN THE
OPERATION OF PUBLIC UTILITY. 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)
3.
CONSTITUTIONAL LAW; NATIONAL ECONOMY AND PATRIMONY; POWER TO AMEND, ALTER OR
REPEAL AUTHORIZATION BY CONGRESS FOR OPERATION OF PUBLIC UTILITY, NOT AN IMPLICATION THAT
ONLY CONGRESS HAS POWER TO GRANT AUTHORIZATION. 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.
REMEDIAL LAW; ACTIONS; CAPACITY TO SUE; A TAXPAYER AND MEMBER OF CONGRESS, WITH
CAPACITY TO ASSAIL CONTRACT ENTERED INTO BY THE PHILIPPINE PORTS AUTHORITY. 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 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.]
5.
ID.; COURTS; AS A RULE, WILL REFUSE TO INTERFERE WITH ADMINISTRATIVE PROCEEDINGS. 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. (Manuel v. Villena G.R. No. L-28218, February 27, 1971, 37 SCRA 745)
GUTIERREZ, JR., J., concurring:

ADMINISTRATIVE LAW; PHILIPPINE PORTS AUTHORITY; AUTHORITY TO CONTRACT ARRASTRE SERVICES;

QUALIFICATIONS OF BIDDER, LEFT TO THE SOUND DISCRETION. 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.
DECISION
PARAS, J p:
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.
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. Cdpr
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 the House 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.
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)
xxx

The corporate duties of the Authority shall be:

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
b)
xxx

xxx

xxx

The corporate powers of the Authority shall be as follows:

xxx

xxx

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

xxx

xxx

[Emphasis supplied.]
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. In the case at bar, there is no evidence which clearly shows the
constitutional infirmity of the questioned act of government. cdphil
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.
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.

FIRST DIVISION
[G.R. No. 15122. March 10, 1920.]
THE UNITED STATES, plaintiff-appellee, vs. TAN PIACO, VENTURA ESTUYA, PEDRO HOMERES,
MAXIMINO GALSA and EMILIO LEOPANDO, defendants. TAN PIACO, appellant.
SYLLABUS
1.
PUBLIC UTILITY, CONTROL BY PUBLIC UTILITY COMMISSION; CRIMINAL LIABILITY OF OWNER OF
AUTOMOBILE. TRUCK OPERATED UNDER SPECIAL CONTRACT AND NOT FOR GENERAL PUBLIC BUSINESS.
The owner of an automobile truck who operates the same under a special contract for carrying
passengers and freight, in each case, and has not held himself out to carry all passengers and freight for
all persons who might offer, is not a public utility and is not criminally liable for his failure to obtain a
license from the Public Utility Commissioner. If the use is merely optional with the owner, or the public
benefit is merely accidental, it is not a public use, authorizing the exercise of the jurisdiction of the public
utility commission. The true criterion by which to judge of the character of the use is whether the public
may enjoy it by right or only by permission.
DECISION
JOHNSON, J p:
Said defendants were charged with a violation of the Public Utility Law (Act No. 2307 as amended by Acts
Nos. 2362 and 2694), in that they were operating a public utility without permission from the Public Utility
Commissioner.
Upon the complaint presented each of said defendants were arrested and brought to trial. After hearing
the evidence the Honorable Cayetano Lukban, judge, found that the evidence was insufficient to support
the charges against Ventura Estuya, Pedro Homeres, Maximino Galsa and Emilio Leopando, and absolved
them from all liability under the complaint and discharged them from the custody of the law. The lower
court found the defendant Tan Piaco guilty of the crime charged in the complaint and sentence him to pay
a fine of P100, and, in case of insolvency, to suffer subsidiary imprisonment, and to pay one- fifth part of
the costs. :E; rom that sentence Tan Piaco appealed to this court.
The facts proved during the trial of the cause may be stated as follows:

The appellant rented two automobile trucks and was using them upon the highways of the Province of
Leyte for the purpose of carrying some passengers and freight; that he cal ried passengers and freight
under a special contract in each case; that he had not held himself out to carry all passengers and all
freight for all persons who might offer passengers and freight.
The Attorney-General, in a carefully prepared brief, says: "The question is whether the appellant, under
the above facts, was a public utility under the foregoing definitions," and was therefore subject to the
control and regulation of the Public Utility Commission. "We have not found anything in the evidence
showing that the appellant operated the trucks in question for public use. These trucks, so far as indicated
by the evidence and as far as the appellant is concerned, furnished service under special agreements to
carry particular persons and property. . . For all that we can deduce from the evidence, these passengers,
or the owners of the freight, may have controlled the whole vehicles 'both as to contents, direction, and
time of use,' which facts, under all the circumstances of the case, would, in our opinion, take away the
defendant's business from the provisions of the Public Utility Act."
In support of the conclusion of the Attorney-General, he cites the case of Terminal Taxicab Co. vs. Kutz
(241 U. S., 252). In that case the Terminal Taxicab Co. furnished automobiles from its central garage on
special orders and did not hold itself out to accommodate any and all persons. The plaintiff reserved to
itself the right to refuse service. The Supreme Court of the United States, speaking through Mr. Justice
Holmes, said: "The bargains made by the plaintiff are individual, and however much they may tend
towards uniformity in price, probably have not the mechanical fixity of charges that attend the use of
taxicabs from the stations to the hotels. The court is of the opinion that that part of the business is not to
be regarded as a public utility. It is true that all business, and, for the matter of that, every life in all its
details, has a public aspect, some bearing upon the welfare of the country in which it is passed." The
court held that by virtue of the fact that said company did not hold itself out to serve any and all persons,
it was not a public utility and was not subject to the jurisdiction of the public utility commission.
Upon the facts adduced during the trial of the cause, and for the foregoing reasons, the Attorney-General
recommends that the sentence of the lower court be revoked and that the appellant be absolved from all
liability under the complaint.
Section 14 of Act No. 2307, as amended by section 9 of Act No. 2694, provides that: "The Public Utility
Commission or Commissioners shall have general supervision and regulation of, jurisdiction and control
over, all public utilities. . . The term 'public utility' is hereby defined to include every individual,
copartnership, association, corporation or joint stock company, etc., etc., that now or hereafter may own,
operate, manage, or control any common carrier, railroad, street railway, etc., etc., engaged in the
transportation of passengers, cargo, etc., etc., for public use."
Under the provisions of said section, two things are necessary: (a) The individual, copartnership, etc., etc.,
must be a public utility; and (b) the business in which such individual, copartnership, etc., etc., is engaged
must be for public use. So long as the individual or copartnership, etc., etc., is engaged in a purely private
enterprise, without attempting to render service to all who may apply, he can in no sense be considered a
public utility, for public use.
"Public use" means the same as "use by the public." The essential feature of the public use is that it is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted
quality that gives it its public character. In determining whether a use is public, we must look not only to
the character of the business to be done, but also to the proposed mode of doing it. If the use is merely
optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the
exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the
law compels the owner to give to the general public. It is not enough that the general prosperity of the
public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge
of the character of the use is whether the public may enjoy it by right or only by permission.
For all of the foregoing reasons, we agree with the Attorney-General that the appellant was not operating
a public utility, for public use, and was not, therefore, subject to the jurisdiction of the Public Utility
Commission.

Therefore, the sentence of the lower court is hereby revoked, and it is hereby ordered and decreed that
the complaint be dismissed and that the defendant be absolved from all liability under the same, and that
he be discharged from the custody of the law, without any finding as to cost. So ordered.

THIRD DIVISION
[G.R. No. 141314. April 9, 2003.]
REPUBLIC OF THE PHILIPPINES REPRESENTED BY ENERGY REGULATORY BOARD, petitioner, vs.
MANILA ELECTRIC COMPANY, respondent.
[G.R. No. 141369. April 9, 2003.]
LAWYERS AGAINST MONOPOLY AND POVERTY (LAMP) consisting of CEFERINO PADUA,
Chairman, G. FULTON ACOSTA, GALILEO BRION, ANATALIA BUENAVENTURA, PEDRO CASTILLO,
NAPOLEON CORONADO, ROMEO ECHAUZ, FERNANDO GAITE, ALFREDO DE GUZMAN, ROGELIO
KARAGDAG, JR., MA. LUZ ARZAGA-MENDOZA, ANSBERTO PAREDES, AQUILINO PIMENTEL III,
MARIO REYES, EMMANUEL SANTOS, RUDEGELIO TACORDA, members, and ROLANDO ARZAGA,
Secretary-General, JUSTICE ABRAHAM SARMIENTO, SENATOR AQUILINO PIMENTEL, JR. and
COMMISSIONER BARTOLOME FERNANDEZ, JR., Board of Consultants, and Lawyer GENARO
LUALHATI, petitioners, vs. MANILA ELECTRIC COMPANY (MERALCO), respondent.
SYLLABUS
1.
STATUTORY CONSTRUCTION; STATUTES; MUST BE CONSTRUED IN ACCORDANCE WITH THE
INTENTION OF OUR OWN LAWMAKERS; APPLICATION IN CASE AT BAR. American decisions and
authorities are not per se controlling in this jurisdiction. At best, they are persuasive for no court holds a

patent on correct decisions. Our laws must be construed in accordance with the intention of our own
lawmakers and such intent may be deduced from the language of each law and the context of other local
legislation related thereto. More importantly, they must be construed to serve our own public interest
which is the be-all and the end-all of all our laws. And it need not be stressed that our public interest is
distinct and different from others. Rate regulation calls for a careful consideration of the totality of facts
and circumstances material to each application for an upward rate revision. Rate regulators should strain
to strike a balance between the clashing interests of the public utility and the consuming public and the
balance must assure a reasonable rate of return to public utilities without being unreasonable to the
consuming public. What is reasonable or unreasonable depends on a calculus of changing circumstances
that ebb and flow with time. Yesterday cannot govern today, no more than today can determine tomorrow.
2.
POLITICAL LAW; ADMINISTRATIVE LAW; ENERGY REGULATORY COMMISSION (ERC); MANDATED TO
REGULATE AND FACILITATE THE UNBUNDLING OF RATES PRESCRIBED BY SECTION 36 OF THE ELECTRIC
POWER INDUSTRY REFORM ACT OF 2001 (EPIRA); CASE AT BAR. Under Section 36 of the EPIRA, (Electric
Power Industry Reform Act of 2001) the NPC and every distribution facility covered by the law is
mandated to unbundle, segregate or itemize its rates according to the various sectors of the electric
power industry identified in the law, namely: generation, transmission, distribution and supply. The law
further directs the ERC to regulate and facilitate the unbundling of rates prescribed by Section 36. Thus,
on October 30, 2001, the ERC issued guidelines prescribing the uniform rate filing requirements to be
followed by distribution facilities for the purposes of unbundling rates. A proper appreciation of the UFR
shows that it simply specifies a uniform accounting system to be complied with by a distribution facility
when filing an application for revised rates under the EPIRA. As the EPIRA requires the unbundling or
segregation of rates according to the different sectors of the electric power industry, the UFR seeks to
facilitate this process by properly identifying the accounts or information required for proper evaluation by
the ERB. Thus, the introductory statements of the UFR provide: These uniform rate filing requirements are
intended to promote consistency and completeness in the rate filings required by Republic Act No. 9136
(RA 9136), Section 36. To that end, the filing requirements only specify minimum form and content. A rate
application in all its aspects continues to be subject to subsequent Commission review and deliberation.
At the onset, it is clear that the UFR does not seek to determine which accounting method will be used by
the ERC for determination of rate base or the items of expenses that may be recovered by a public utility
from its customers. The UFR only seeks to prescribe a uniform system or format to standardize or
facilitate the process of unbundling of rates mandated by the EPIRA. At best, the UFR prescribes the set of
raw data or figures to be disclosed by a distribution facility that the ERC will need to determine the
authorized rates that a distribution facility may charge. The UFR does not, in any way, determine the
manner by which the set of data or figures indicated in the rate application will be evaluated by the ERC
for rate determination purposes. ACHEaI
3.
ID.; ID.; ID.; FINDINGS OF ADMINISTRATIVE OR REGULATORY AGENCIES ON MATTERS WHICH ARE
WITHIN THEIR TECHNICAL AREA OF EXPERTISE, GENERALLY ACCORDED NOT ONLY RESPECT BUT AT TIMES
EVEN FINALITY; PRESENT IN CASE AT BAR. The rule then as it is now, is that rate regulating authorities
are not hidebound to use any single formula or combination of formulas for property valuation purposes
because the rate-making process involves the balancing of investor and consumer interests which takes
into account various factors that may be unique or peculiar to a particular rate revision application. We
again stress the long established doctrine that findings of administrative or regulatory agencies on
matters which are within their technical area of expertise are generally accorded not only respect but at
times even finality if such findings and conclusions are supported by substantial evidence. Rate fixing
calls for a technical examination and a specialized review of specific details which the courts are illequipped to enter, hence, such matters are primarily entrusted to the administrative or regulating
authority.
4.
ID.; COMMISSION ON AUDIT; ESSENCE OF THE USE OF A "TEST YEAR" FOR AUDITING PURPOSES;
CONSTRUED IN CASE AT BAR. The purpose of the audit procedures conducted in a rate application
proceeding is to determine whether the rate applied for will generate a reasonable return for the public
utility, which, in accordance with settled laws and jurisprudence, is 12% on rate base or the present value
of the assets used in the operations of a public utility. For audit purposes, however, there is a need to
obtain a sample set of data usually derived from figures within a designated period of time to
determine the amount of returns obtained by a public utility during such period. In the cases at bar, the
COA conducted an audit for the test year beginning February 1, 1994 and ending January 31, 1995 or a

12-month period immediately after the order of the ERB granting a provisional increase in the amount of
P0.184 per kwh was issued. Thus, the ultimate issue resolved by the COA when it conducted its audit was
whether the provisional increase granted by the ERB generated an amount of return well within the rates
authorized by law. As stated earlier, based on the findings of the ERB, with the increase of P0.184 per
kwh, MERALCO obtained a rate of return which was 8.15% more than the authorized rate of return of 12%.
Thus, a refund in the amount of P0.167 was determined and ordered by ERB. The essence of the use of a
"test year" for auditing purposes is to obtain a sample or representative set of figures to enable the
examining authority to arrive at a conclusion or finding based on the gathered data. The use of a "test
year" does not mean that the information and conclusions so derived would only be correct for that year
and would be incorrect on the succeeding years. The use of a "test year" assumes that within a
reasonable period after such test year, figures used to determine the amount of return would only vary
slightly from the figures culled during the test year such that the impact on the utility's rate of return
would not be very significant. Thus, in the event that there is a substantial change in circumstances
significantly affecting the variable amounts that would determine the reasonableness of a return, an
event which would normally occur after a certain period of time has elapsed, the public utility may
subsequently apply for a rate revision.
Panganiban, J., separate opinion:
REMEDIAL LAW; APPEAL TO THE SUPREME COURT; WHEN ORAL ARGUMENTS DEEMED PROPER;
RATIONALE. There are still lingering questions that need to be answered or clarified before the Motion
for Reconsideration of Meralco should be resolved. These questions were not fully taken up by the
pleadings of the parties. Thus, it would be pretentious for me to render an opinion on them. On the other
hand, I believe that a decision that does not take up these questions would be incomplete. Hearing the
parties on Oral Argument before the entire Court, or even by just the Third Division, prior to resolving with
finality the motion for reconsideration on a very important matter such as the present case is not unusual.
In fact, with due respect, I believe that this is the proper thing to do. After all, very recently in PLDT v. City
of Davao (GR No. 143863, March 27, 1993), the Court en banc conducted an Oral Argument on the Motion
for Reconsideration challenging the unanimous Decision of the Second Division. That case involved the
legality of whether a local government unit (LGU) like the City of Davao may impose local taxes on the
Philippine Long Distance Telephone Company. The amount involved there was only about P4 million. On
the other hand, the present case involves the refund of about P2.5 billion per year starting 1994, or about
P20 billion up to the year 2003. Apart from the monetary consideration, I believe the issues raised
including the foregoing questions are important enough to merit a hearing also. May I stress that this
case will affect not only Meralco and its customers but all electric utilities and all their customers all over
the Philippines, which means this case will affect all the people of this country. caTESD
RESOLUTION
PUNO, J p:
The business and operations of a public utility are imbued with public interest. In a very real sense, a
public utility is engaged in public service providing basic commodities and services indispensable to the
interest of the general public. For this reason, a public utility submits to the regulation of government
authorities and surrenders certain business prerogatives, including the amount of rates that may be
charged by it. It is the imperative duty of the State to interpose its protective power whenever too much
profits become the priority of public utilities. ECaTDc
For resolution is the Motion for Reconsideration filed by respondent Manila Electric Company (MERALCO)
on December 5, 2002 from the decision of this Court dated November 15, 2002 reducing MERALCO's rate
adjustment in the amount of P0.017 per kilowatthour (kwh) for its billing cycles beginning 1994 and
further directing MERALCO to credit the excess amount of P0.167 per kwh to its customers starting with
MERALCO's billing cycles beginning February 1994. 1
First, we leapfrog through the facts. On December 23, 1993, MERALCO filed with the Energy Regulatory
Board (ERB) an application for revised rates, with an average increase of P0.21 per kwh in its distribution
charge. On January 28, 1994 the ERB granted a provisional increase of P0.184 per kwh subject to the
condition that in the event the ERB determines that MERALCO is entitled to a lesser increase in rates, all
excess amounts collected by MERALCO shall be refunded to its customers or credited in their favor. The
Commission on Audit (COA) conducted an examination of the books of accounts and records of MERALCO

and thereafter recommended, among others, that: (1) income taxes paid by MERALCO should not be
included as part of MERALCO's operating expenses and (2) the "net average investment method" or the
"number of months use method" should be applied in determining the proportionate value of the
properties used by MERALCO during the test year.
In its decision dated February 16, 1998, the ERB adopted the recommendations of the COA and
authorized MERALCO to adopt a rate adjustment of P0.017 per kilowatthour (kwh) for its billing cycles
beginning 1994. The ERB further directed MERALCO to credit the excess average amount of P0.167 per
kwh to its customers starting with MERALCO's billing cycles beginning February 1994. The said ruling of
the ERB was affirmed by this Court in its decision dated November 15, 2002.
In its Motion for Reconsideration, respondent MERALCO contends that: (1) the deduction of income tax
from revenues allowed for rate determination of public utilities is part of its constitutional right to
property; (2) it correctly used the "average investment method" or the "simple average" in computing the
value of its properties entitled to a return instead of the "net average investment method" or the "number
of months use method"; and (3) the decision of the ERB ordering the refund of P0.167 per kwh to its
customers should not be given retroactive effect. 2
The Republic of the Philippines through the ERB, now Energy Regulatory Commission (ERC), represented
by the Office of the Solicitor General, filed its Comment on March 7, 2003. Surprisingly, in its Comment,
the ERC proffered a divergent view from the Office of the Solicitor General. The ERC submits that income
taxes are not operating expenses but are reasonable costs that may be recoverable from the consuming
public. While the ERC admits that "there is still no categorical determination on whether income tax
should indeed be deducted from revenues of a public utility," it agrees with MERALCO that to disallow
public utilities from recovering its income tax payments will effectively lower the return on rate base
enjoyed by a public utility to 8%. The ERC, however, agrees with this Court's ruling that the use of the
"net average investment method" or the "number of months use method" is not unreasonable. 3
The Office of the Solicitor General, under its solemn duty to protect the interests of the people, defended
the thesis that income tax payments by a public utility should not be recovered as costs from consuming
public. It contended that: (1) the foreign jurisprudence cited by MERALCO in support of its position is not
applicable in this jurisdiction; (2) MERALCO was given a fair rate of return; (3) the COA and the ERB
followed the National Accounting and Auditing Manual which expressly disallows the treatment of income
tax as operating expense; (4) Executive Order No. 72 does not grant electric utilities the privilege of
treating income tax as operating expense; (5) the COA and the ERB have been consistent in not allowing
income tax as part of operating expenses; (6) ERB decisions allowing the application of a tax recovery
clause are inapropos; (7) allowing MERALCO to treat income tax as an operating expense would set a
dangerous precedent; (8) assuming that the disallowance of income tax as operating expense would
discourage foreign investors and lenders, the government is not precluded from enacting laws and
instituting measures to lure them back; and (9) the findings and conclusions of the ERB carry great weight
and should be binding on the courts in the absence of grave abuse of discretion. The Solicitor General
agrees with the ERC that the "net average investment method" is a reasonable method for property
valuation. Finally, the Solicitor General argues that the ERB decision may be applied retroactively and the
use of a test period to determine the rate base and allowable rates to be collected by a public utility is an
accepted practice. 4
We shall discuss the main issues in seriatim.
I
MERALCO argues that deduction of all kinds of taxes, including income tax from the gross revenues of a
public utility is firmly entrenched in American jurisprudence. It contends that the Public Service Act
(Commonwealth Act No. 146) was patterned after Act 2306 of the Philippine Commission, which, in turn,
was borrowed from American state public utility laws such as the New Jersey Public Utility Act. Hence, it
maintains that American jurisprudence on the inclusion of income taxes as a lawful charge to operating
expenses should be controlling. It cites the rule on statutory construction that a statute adopted from a
foreign country will be presumed to be adopted with the construction placed upon it by the courts of that
country before its adoption. 5

We are not persuaded. American decisions and authorities are not per se controlling in this jurisdiction. At
best, they are persuasive for no court hold a patent on correct decisions. Our laws must be construed in
accordance with the intention of our own lawmakers and such intent may be deduced from the language
of each law and the context of other local legislation related thereto. More importantly, they must be
construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need
not be stressed that our public interest is distinct and different from others.
Rate regulation calls for a careful consideration of the totality of facts and circumstances material to each
application for an upward rate revision. Rate regulators should strain to strike a balance between the
clashing interests of the public utility and the consuming public and the balance must assure a reasonable
rate of return to public utilities without being unreasonable to the consuming public. What is reasonable
or unreasonable depends on a calculus of changing circumstances that ebb and flow with time. Yesterday
cannot govern today, no more than today can determine tomorrow.
Prescinding from these premises, we reject MERALCO's insistence that the non-inclusion of income tax
payments as a legitimate operating expense will deny public utilities a fair return of their investment. This
stubborn stance is belied by the report submitted by the COA on the audit conducted on MERALCO's
books of accounts and the findings of the ERB. 6
Upon the instructions of the ERB, the COA conducted an audit of the operations of MERALCO covering the
period from February 1, 1994 to January 31, 1995, or the period immediately after the implementation of
the provisional rate increase. 7 Hence, amounts culled by the COA from its examination of the books of
MERALCO already included the provisional rate increase of P0.184 granted by the ERB. SAHIaD
From the figures submitted by the COA, the ERB was able to determine that MERALCO derived excess
revenue during the test year in the amount of P2,448,378,000. 8 This means that during the test year,
and after the rates were increased by P0.184, MERALCO earned P2,448,378,000 or 8.15% more than the
amount it should have earned at a 12% rate of return on rate base. Accordingly, based on this amount of
excess revenue, the ERB determined that the provisional rate granted by it to MERALCO was P0.167 per
kwh more than the amount MERALCO ought to charge its customers to obtain the prescribed 12% rate of
return on rate base. Thus, the ERB correspondingly lowered the provisional increase by P0.167 per kwh
and ordered MERALCO to increase its rates at a reduced amount of P0.017 per kwh, computed as follows:
9
At appraised value
Total Invested Capital Entitled

P30,059,614,000 10

to Return
12% return thereon

3,607,154,000

Add: Total Operating expenses

P38,260,420,000 11

for Rate Determination

Purposes
Computed Revenue P41,867,573,000
Actual Revenue

P44,315,951,000

Excess Revenue

2,448,378,000

Percent of Excess Revenue to

8.15%

Invested Capital
Authorized Rate of Return

12.00%

Actual Rate of Return 20.15%

Total kwh sold 14,640,094,000
Ratio of Excess Revenue to P

0.167

Total kwh Sold

In fact, even if MERALCO's income tax liability would be included as an operating expense, MERALCO
would still enjoy excess revenue of P312,738,000.00 or 1.04% above the authorized rate of return of 12%.
Based on its audit, the COA determined that the provision for income tax liability of MERALCO amounted
to P2,135,639,000.00. 12 Thus, even if such amount of income tax liability would be included as operating
expense, the amount of excess revenue earned by MERALCO during the test year would be more than
sufficient to cover the additional income tax expense. Thus:
At appraised value
Total Invested Capital Entitled

P30,059,614,000

to Return
12% return thereon

3,607,154,000

Add: Total Operating expenses

P40,396,059,000 13

for Rate Determination

Purposes
Computed Revenue P44,033,213,000
Actual Revenue

P44,315,951,000

Excess Revenue

312,738,000

Percent of Excess Revenue to

1.04%

Invested Capital
Authorized Rate of Return

12.00%

Actual Rate of Return 13.04%

It is crystal clear, therefore, that even if income tax is to be included as an operating expense and hence,
recoverable from the consuming public, MERALCO would still enjoy a rate of return that is above the
authorized rate of 12%. Public utilities cannot be allowed to overcharge at the expense of the public and
worse, they cannot complain that they are not overcharging enough.
Be that as it may, MERALCO contends that considering income tax payments of public utilities constitute
one-third of their net income, public utilities will effectively get, not the 12% rate of return on rate base
allowed them, but only about 8%. 14 Again, we are not persuaded.
The foregoing argument assumes that the 12% return allowed to public utilities is equivalent to its taxable
income which will be subject to income tax. The 12% rate of return is computed only for the purpose of
fixing the allowable rates to be charged by a public utility and is in no way determinative of the income
subject to income tax of the public utility. The computation of a corporation's income tax liability is an
altogether different matter, with the corporation's taxable income derived by taking into account the
corporation's gross revenue less allowable deductions. 15
At any rate, even on the assumption that in the test year involved (February 1, 1994 to January 31, 1995),
MERALCO's computed revenue of P41,867,573,000 or the amount that it is allowed to earn based on a
12% rate of return is its taxable income after payment of its income tax liability of P2,135,639,000.00,
MERALCO would still obtain an 11.38% rate of return or a return that is well within the 12% rate allowed to
public utilities. 16
MERALCO also contends that even the successor of the ERB or the ERC created under the Electric Power
Industry Reform Act of 2001 (EPIRA) 17 "adheres to the principle that income tax is part of operating
expenses." 18 To bolster its argument, MERALCO cites Article 36 of the EPIRA which charges the ERC with
the responsibility of unbundling the rates of the National Power Corporation (NPC) and each distribution
utility coming within the coverage of the law. 19 MERALCO alleges that pursuant to said provision, the ERC
issued a set of Uniform Rate Filing Requirements (UFR) containing guidelines to be followed with respect

to rate unbundling applications to be filed. MERALCO asserts that under the UFR, the enumeration of the
expenses which are to be recovered through the rates, and which are to be separated or allocated for the
purpose of unbundling of these rates include income tax expenses.
Under Section 36 of the EPIRA, the NPC and every distribution facility covered by the law is mandated to
unbundle, segregate or itemize its rates according to the various sectors of the electric power industry
identified in the law, namely: generation, transmission, distribution and supply. 20 The law further directs
the ERC to regulate and facilitate the unbundling of rates prescribed by Section 36. Thus, on October 30,
2001, the ERC issued guidelines prescribing the uniform rate filing requirements to be followed by
distribution facilities for the purposes of unbundling rates. 21
A proper appreciation of the UFR shows that it simply specifies a uniform accounting system to be
complied with by a distribution facility when filing an application for revised rates under the EPIRA. As the
EPIRA requires the unbundling or segregation of rates according to the different sectors of the electric
power industry, the UFR seeks to facilitate this process by properly identifying the accounts or information
required for the proper evaluation by the ERB. Thus, the introductory statements of the UFR provide:
These uniform rate filing requirements are intended to promote consistency and completeness in the rate
filings required by Republic Act No. 9136 (RA 9136), Section 36. To that end, the filing requirements only
specify minimum form and content. A rate application in all its aspects continues to be subject to
subsequent Commission review and deliberation. 22
At the onset, it is clear that UFR does not seek to determine which accounting method will be used by the
ERC for determination of rate base or the items of expenses that may be recovered by a public utility from
its customers. The UFR only seeks to prescribe a uniform system or format to standardize or facilitate the
process of unbundling of rates mandated by the EPIRA. At best, the UFR prescribes the set of raw data or
figures to be disclosed by a distribution facility that the ERC will need to determine the authorized rates
that a distribution facility may charge. The UFR does not, in any way, determine the manner by which the
set of data or figures indicated in the rate application will be evaluated by the ERC for rate determination
purposes. SHCaDA
II
MERALCO also challenges the use of the "net average investment method" or the number of months use
method" on the ground that MERALCO and the Public Service Commission (PSC) have been consistently
applying the "average investment method" or "simple average," which it alleged was also affirmed by this
Court in the case of MERALCO v. PSC 23 and Republic v. Medina. 24
It is true that in MERALCO v. PSC, 25 the issue of the proper valuation method to be used in determining
the value of MERALCO's utility plants for rate fixing purposes was brought to fore. In the said case,
MERALCO applied the "average investment method" or "simple average" by obtaining the average value
of the utility plants, using its values at the beginning and at the end of the test year. In contrast, the
General Auditing Office used the "appraisal method" which fixes the value of the utility plants by
ascertaining the cost of production per kilowatt and multiplying the same by the total capacity of said
plants, less the corresponding depreciation. 26 In upholding the "average investment method" used by
MERALCO, this Court adopted the findings of the PSC for being "by and large, supported by the records of
the case." 27 This Court did not make an independent assessment of the validity or applicability of the
average investment method but simply did not disturb the findings of the PSC for being supported by
substantial evidence. To conclude that the said decision "affirmed" the use of the "average investment
method" thereby implying that the said method is the only method to be applied in all instances, is a
strained reading of the decision.
In fact, in the case of Republic v. Medina, 28 also cited by MERALCO to have affirmed the use of the
"average investment method," this Court ruled:
The decided weight of authority, however, is to the effect that property valuation is not to be solved by
formula but depends upon the particular circumstances and relevant facts affecting each utility as to what
constitutes a just rate base and what would be a fair return, just to both the utility and the public. 29
Further, Mr. Justice Castro in his concurring opinion in the same case elucidated:

A regulatory commission's field of inquiry, however, is not confined to the computation of the cost of
service or capital nor to a mere prognostication of the future behavior of the money and capital markets.
It must also balance investor and consumer expectations in such a way that broad requirements of public
interest may be meaningfully realized. It would hence appear in keeping with its public duty if a regulatory
body is allowed wide discretion in the choice of methods rationally related to the achievement of this end.
30
Thus, the rule then as it is now, is that rate regulating authorities are not hidebound to use any single
formula or combination of formulas for property valuation purposes because the rate-making process
involves the balancing of investor and consumer interests which takes into account various factors that
may be unique or peculiar to a particular rate revision application.
We again stress the long established doctrine that findings of administrative or regulatory agencies on
matters which are within their technical area of expertise are generally accorded not only respect but at
times even finality if such findings and conclusions are supported by substantial evidence. 31 Rate fixing
calls for a technical examination and a specialized review of specific details which the courts are illequipped to enter, hence, such matters are primarily entrusted to the administrative or regulating
authority. 32
Thus, this Court finds no reversible error on the part of the COA and the ERB in adopting the "net average
investment method" or the "number of months use method" for property valuation purposes in the cases
at bar.
III
MERALCO also rants against the retroactive application of the rate adjustment ordered by the ERB and
affirmed by this Court. In its decision, the ERB, after authorizing MERALCO to adopt a rate adjustment in
the amount of P0.017 per kwh, directed MERALCO to refund or credit to its customers' future consumption
the excess average amount of P0.167 per kwh from its billing cycles beginning February 1994 33 until its
billing cycles beginning February 1998. 34 In the decision appealed from, this Court likewise ordered that
the refund in the average amount of P0.167 per kwh be made to retroact from MERALCO's billing cycles
beginning February 1994. cAHIaE
MERALCO contends that the refund cannot be given retroactive effect as the figures determined by the
ERB only apply to the test year or the period subject of the COA Audit, i.e., February 1, 1994 to January
31, 1995. It reasoned that the amounts used to determine the proper rates to be charged by MERALCO
would vary from year to year and thus the computation of the excess average charge of P0.167 would
hold true only for the test year. Thus, MERALCO argues that if a refund of P0.167 would be uniformly
applied to its billing cycles beginning 1994, with respect to periods after January 31, 1995, there will be
instances wherein its operating revenues would fall below the 12% authorized rate of return. MERALCO
therefore suggests that the dispositive portion be modified and order that "the refund applicable to the
periods after January 31, 1995 is to be computed on the basis of the excess collection in proportion to the
excess over the 12% return." 35
The purpose of the audit procedures conducted in a rate application proceedings is to determine whether
the rate applied for will generate a reasonable return for the public utility, which, in accordance with
settled laws and jurisprudence, is 12% on rate base or the present value of the assets used in the
operations of a public utility. For audit purposes, however, there is a need to obtain a sample set of data
usually derived from figures within a designated period of time to determine the amount of returns
obtained by a public utility during such period. In the cases at bar, the COA conducted an audit for the
test year beginning February 1, 1994 and ending January 31, 1995 or a 12-month period immediately
after the order of the ERB granting a provisional increase in the amount of P0.184 per kwh was issued.
Thus, the ultimate issue resolved by the COA when it conducted its audit was whether the provisional
increase granted by the ERB generated an amount of return well within the rates authorized by law. As
stated earlier, based on the findings of the ERB, with the increase of P0.184 per kwh, MERALCO obtained a
rate of return which has 8.15% more than the authorized rate of return of 12%. 36 Thus, a refund in the
amount of P0.167 was determined and ordered by ERB.
The essence of the use of a "test year" for auditing purposes is to obtain a sample or representative set of
figures to enable the examining authority to arrive at a conclusion or finding based on the gathered data.

The use of a "test year" does not mean that the information and conclusions so derived would only be
correct for that year and would be incorrect on the succeeding years. The use of a "test year" assumes
that within a reasonable period after such test year, figures used to determine the amount of return would
only vary slightly from the figures culled during the test year such that the impact on the utility's rate of
return would not be very significant. Thus, in the event that there is a substantial change in circumstances
significantly affecting the variable amounts that would determine the reasonableness of a return, an
event which would normally occur after a certain period of time has elapsed, the public utility may
subsequently apply for a rate revision.
We agree with the Solicitor General that following MERALCO's reasoning that the figures culled from a test
year would only be relevant during such year there would be a need for public utilities to apply for a rate
adjustment every year and perform an audit examination on a public utility's books of accounts every
year as the amount of a utility's revenue may fall above or below the authorized rates at any given year.
Needless to say, the trajectory of MERALCO's arguments will lead to an absurdity.
From the time the order granting a provisional increase was issued by the ERB, nowhere in the records
does it appear that the subsequent refund of P0.167 per kwh ordered by the ERB was ever implemented
or executed by MERALCO. 37 Accordingly, from January 28, 1994 MERALCO imposed on its customers
charge that is P0.167 in excess of the proper amount. In fact, any application for rate adjustment that
may have been applied or and/or granted to MERALCO during the intervening period would have to be
reckoned from rates increased by P0.184 per kwh as these were the rates prevailing at the time any
application for rate adjustment was made by MERALCO.
While we agree that the amounts used to determine the utility's rate of return would vary from year to
year, we are unable to subscribe to the view that the refund applicable to the periods after January 31,
1995 should be computed on the basis of the excess collection in proportion to the excess over the 12%
return. MERALCO's contention that the refund for periods after January 31, 1995 should be computed on
the basis of revenue of each year in excess of the 12% authorized rate of return calls for a year-by-year
computation of MERALCO's revenues and assets which would be contrary to the essence of an audit
examination of a public utility based on a test year. To grant MERALCO's prayer would, in effect, allow
MERALCO the benefit of a year-by-year adjustment of rates not normally enjoyed by any other public
utility required to adopt a subsequent rate modification. Indeed, had the ERB ordered an increase in the
provisional rates it previously granted, said increase in rates would apply retroactively and would not have
varied from year to year, depending on the variable amounts used to determine the authorized rates that
may be charged by MERALCO. We find no significant circumstance prevailing in the cases at bar that
would justify the application of a yearly adjustment as requested by MERALCO.
WHEREFORE, in view of the foregoing, the petitioner's Motion for Reconsideration is DENIED WITH
FINALITY. IHDCcT
SO ORDERED.

EN BANC
[G.R. No. L-6055. June 12, 1953.]
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. WILLIAM H. QUASHA, defendantappellant.
SYLLABUS
1.
CONSTITUTIONAL LAW; CORPORATIONS; PUBLIC UTILITIES; MERE FORMATION OF PUBLIC UTILITY
CORPORATION WITHOUT THE REQUISITE FILIPINO CAPITAL NOT PROHIBITED. The Constitution does not
prohibit the mere formation of a public utility corporation without the required proportion of Filipino
capital. What it does prohibit is the granting of a franchise or other form of authorization for the operation
of a public utility to a corporation already in existence but without the requisite proportion of Filipino
capital (sec. 8, Art. XIV of the Constitution).
2.
ID.; ID.; ID.; DUTY OF REVEALING THE OWNERSHIP OF THE CAPITAL OF A CORPORATION. If the
Constitution does not prohibit the mere formation of a public utility corporation with alien capital, then
how could the accused be charged with having wrongfully intended to circumvent that fundamental law
by not disclosing in the articles of incorporation that one of the incorporators, a Filipino, was a mere
trustee of his American co-incorporators and that for that reason the subscribed capital stock of the
corporation was wholly American? For the mere formation of the corporation such disclosure was not
essential, and the Corporation Law does not require it. The accused was, therefore, under no obligation to
make it. In the absence of such obligation and of the alleged wrongful intent on the part of the accused,
he cannot legally be convicted of the crime of falsification for having allegedly perverted the truth in a
narration of facts.
3.
FALSIFICATION; FALSE NARRATION FOR NOT REVEALING A CERTAIN FACT, NOT PUNISHABLE IF
THERE IS NO LEGAL OBLIGATION TO DISCLOSE THE TRUTH. It is essential to the commission of this
crime that the perversion of truth in a narration of facts must be made with the wrongful intent of injuring

a third person and even if such wrongful intent is proven, still the untruthful statement will not constitute
criminal falsification if there is no legal obligation on the part of the narrator to disclose the truth. (U. S.
vs. Reyes, 1 Phil., 341; U. S. vs. Lopez, 15 Phil., 515.) Wrongful intent to injure a third person and
obligation on the part of the narrator to disclose the truth are thus essential to a conviction for the crime
of falsification under articles 171(4) and 172(1) of the Revised Penal Code.
DECISION
REYES, J p:
William H. Quasha, a member of the Philippine bar, was charged in the Court of First Instance of Manila
with the crime of falsification of a public and commercial document in that, having been entrusted with
the preparation and registration of the articles of incorporation of the Pacific Airways Corporation, a
domestic corporation organized for the purpose of engaging in business as a common carrier, he caused it
to appear in said articles of incorporation that one Arsenio Baylon, a Filipino citizen, had subscribed to and
was the owner of 60.005 per cent of the subscribed capital stock of the corporation when in reality, as the
accused well knew, such was not the ease, the truth being that the owners of the portion of the capital
stock subscribed to by Baylon and the money paid thereon were American citizens whose names did not
appear in the articles of incorporation, and that the purpose for making this false statement was to
circumvent the constitutional mandate that no corporation shall be authorized to operate as a public
utility in the Philippines unless 60 per cent of its capital stock is owned by Filipinos.
Found guilty after trial and sentenced to a term of imprisonment and a fine, the accused has appealed to
this Court.
The essential facts are not in dispute. On November 4, 1946, the Pacific Airways Corporation registered its
articles of incorporation with the Securities and Exchange Commission. The articles were prepared and
the registration was effected by the accused, who was in fact the organizer of the corporation. The
articles stated that the primary purpose of the corporation was to carry on the business of a common
carrier by air, land or water; that its capital stock was P1,000,000, represented by 9,000 preferred and
100,000 common shares, each preferred share being of the par value of P100 and entitled to 1/3 vote and
each common share, of the par value of P1 and entitled to one vote; that the amount of capital stock
actually subscribed was P200,000, and the names of the subscribers were Arsenio Baylon, Eruin E.
Shannahan, Albert W. Onstott, James O'Bannon, Denzel J. Cavin, and William H. Quasha, the first being a
Filipino and the other five all Americans; that Baylon's subscription was for 1,145 preferred shares, of the
total value of P114,500, and for 6,500 common shares, of the total par value of P6,500, while the
aggregate subscriptions of the American subscribers were for 200 preferred shares, of the total par value
of P20,000, and 59,000 common shares, of the total par value of P59,000; and that Baylon and the
American subscribers had already paid 25 per cent of their respective subscriptions. Ostensibly the owner
of, or subscriber to, 60.005 per cent of the subscribed capital stock of the corporation, Baylon
nevertheless did not have the controlling vote because of the difference in voting power between the
preferred shares and the common shares. Still, with the capital structure as it was, the articles of
incorporation were accepted for registration and a certificate of incorporation was issued by the Securities
and Exchange Commission.
There is no question that Baylon actually subscribed to 60.005 per cent of the subscribed capital stock of
the corporation. But it is admitted that the money paid on his subscription did not belong to him but to
the American subscribers to the corporate stock. In explanation, the accused testified, without
contradiction, that in the process of organization Baylon was made a trustee for the American
incorporators, and that the reason for making Baylon such trustee was as follows:
"Q.
According to this articles of incorporation Arsenio Baylon subscribed to 1,135 preferred shares with
a total value of P1,135. Do you know how that came to be?
"A.

Yes.

The people who were desirous of forming the corporation, whose names are listed on page 7 of this
certified copy came to my house, Messrs. Shannahan, Onstott, O'Bannon, Caven, Perry and Anastasakas
one evening. There was considerable difficulty to get them all together at one time because they were
pilots. They had difficulty in deciding what their respective share holdings would be. Onstott had invested
a certain amount of money in airplane surplus property and they had obtained a considerable amount of

money on those planes and as I recall they were desirous of getting a corporation formed right away. And
they wanted to have their respective share holdings resolved at a later date. They stated that they could
get together but they feel that they had no time to settle their respective share holdings. We discussed
the matter and finally it was decided that the best way to handle the thing was not to put the shares in
the name of anyone of the interested parties and to have someone act as trustee for their respective
share holdings. So we looked around for a trustee. And he said 'Is there anybody in particular whom you
trust?' And I said 'There are a lot of people whom I trust.' He said, 'Is there someone around whom we
could get right away?' I said, 'There is Arsenio. He was my boy during the liberation and he cared for me
when I was sick and I said I consider him my friend.' So they said 'Well make him our trustee.' 'You can do
that', I said. They all knew Arsenio. He is a very kind man and that was what was done. That is how it
came about."
Defendant is accused under article 172, paragraph 1, in connection with article 171, paragraph 4, of the
Revised Penal Code, which read:
"ART. 171.
Falsification by public officer, employee or notary or ecclesiastic minister. The penalty of
prision mayor and a fine not to exceed 5,000 pesos shall be imposed upon any public officer, employee,
or notary who, taking advantage of his official position, shall falsify a document by committing any of the
following acts:
xxx
"4.

xxx

xxx

Making untruthful statements in a narration of facts."

"ART. 172.
Falsification by private individuals and use of falsified documents. The penalty of prision
correccional in its medium and maximum periods and a fine of not more than 5,000 pesos shall be
imposed upon:
xxx

xxx

xxx

"1.
Any private individual who shall commit any of the falsifications enumerated in the next preceding
article in any public or official document or letter of exchange or any other kind of commercial document."
Commenting on the above provisions, Justice Albert, in his well- known work on the Revised Penal Code
(new edition, pp. 407-408), observes, on the authority of U. S. vs. Reyes, (1 Phil., 341), that the perversion
of truth in the narration of fact must be made with the wrongful intent of injuring a third person; and on
the authority of U. S. vs. Lopez (15 Phil., 515), the same author further maintains that even if such
wrongful intent is proven, still the untruthful statement will not constitute the crime of falsification if there
is no legal obligation on the part of the narrator to disclose the truth. Wrongful intent to injure a third
person and obligation on the part of the narrator to disclose the truth are thus essential to a conviction for
the crime of falsification under the above articles of the Revised Penal Code.
Now, as we see it, the falsification imputed to the accused in the present case consists in not disclosing in
the articles of incorporation that Baylon was a mere trustee (or dummy as the prosecution chooses to call
him) of his American co-incorporators, thus giving the impression that Baylon was the owner of the shares
subscribed to by him which, as above stated, amount to 60.005 per cent of the subscribed capital stock.
This, in the opinion of the trial court, is a malicious perversion of the truth made with the wrongful intent
of circumventing section 8, Article XIV of the Constitution, which provides that "no franchise, certificate, or
any other form of authorization for the operation of a public utility shall be granted except to citizens of
the Philippines or to corporations or other entities organized under the laws of the Philippines, sixty per
centum of the capital of which is owned by citizens of the Philippines . . . " Plausible though it may appear
at first glance, this opinion loses validity once it is noted that it is predicated on the erroneous assumption
that the constitutional provision just quoted was meant to prohibit the mere formation of a public utility
corporation without 60 per cent of its capital being owned by Filipinos, a mistaken belief which has
induced the lower court to conclude that the accused was under obligation to disclose the whole truth
about the nationality of the subscribed capital stock of the corporation by revealing that Baylon was a
mere trustee or dummy of his American co-incorporators, and that in not making such disclosure
defendant's intention was to circumvent the Constitution to the detriment of the public interests. Contrary
to the lower court's assumption, the Constitution does not prohibit the mere formation of a public utility
corporation without the required proportion of Filipino capital. What it does prohibit is the granting of a
franchise or other form of authorization for the operation of a public utility to a corporation already in

existence but without the requisite proportion of Filipino capital. This is obvious from the context, for the
constitutional provision in question qualifies the terms "franchise", "certificate" or "any other form of
authorization" with the phrase "for the operation of a public utility," thereby making it clear that the
franchise meant is not the "primary franchise" that invests a body of men with corporate existence but
the "secondary franchise" or the privilege to operate as a public utility after the corporation has already
come into being.
If the Constitution does not prohibit the mere formation of a public utility corporation with alien capital,
then how could the accused be charged with having wrongfully intended to circumvent that fundamental
law by not revealing in the articles of incorporation that Baylon was a mere trustee of his American coincorporators and that for that reason the subscribed capital stock of the corporation was wholly
American? For the mere formation of the corporation such revelation was not essential, and the
Corporation Law does not require it. Defendant was, therefore, under no obligation to make it. In the
absence of such obligation and of the alleged wrongful intent, defendant cannot be legally convicted of
the crime with which he is charged.
It is urged, however, that the formation of the corporation with 60 per cent of its subscribed capital stock
appearing in the name of Baylon was an indispensable preparatory step to the subversion of the
constitutional prohibition and the laws implementing the policy expressed therein. This view is not correct.
For a corporation to be entitled to operate a public utility it is not necessary that it be organized with 60
per cent of its capital owned by Filipinos from the start. A corporation formed with capital that is entirely
alien may subsequently change the nationality of its capital through transfer of shares to Filipino citizens.
Conversely, a corporation originally formed with Filipino capital may subsequently change the national
status of said capital thru transfers of shares to foreigners. What need is there then for a corporation that
intends to operate a public utility to have, at the time of its formation, 60 per cent of its capital owned by
Filipinos alone? That condition may at any time be attained thru the necessary transfers of stocks. The
moment for determining whether a corporation is entitled to operate as a public utility is when it applies
for a franchise, certificate, or any other form of authorization for that purpose. And that can only be done
after the corporation has already come into being and not while it is still being formed. And at that
moment, the corporation must show that it has complied not only with the requirement of the Constitution
as to the nationality of its capital, but also with the requirements of the Civil Aviation Law if it is a common
carrier by air, the Revised Administrative Code if it is a common carrier by water, and the Public Service
Law if it is a common carrier by land or other kind of public service.
Equally untenable is the suggestion that defendant should at least be held guilty of an "impossible crime"
under article 59 of the Revised Penal Code. It not being possible to suppose that defendant had intended
to commit a crime for the simple reason that the alleged constitutional prohibition which he is charged
with having tried to circumvent does not exist, conviction under that article is out of the question.
The foregoing considerations can not but lead to the conclusion that the defendant can not be held guilty
of the crime charged. The majority of the court, however, are also of the opinion that, even supposing that
the act imputed to the defendant constituted falsification at the time it was perpetrated, still with the
approval of the Parity Amendment to the Constitution in March, 1947, which placed Americans on the
same footing as Filipino citizens with respect to the right to operate public utilities in the Philippines, thus
doing away with the prohibition in section 8, Article XIV of the Constitution in so far as American citizens
are concerned, the said act has ceased to be an offense within the meaning of the law, so that defendant
can no longer be held criminally liable therefor.
In view of the foregoing, the judgment appealed from is reversed and the defendant William H. Quasha
acquitted, with costs de oficio.

FIRST DIVISION
[G.R. No. 47065. June 26, 1940.]

PANGASINAN TRANSPORTATION CO., INC., petitioner, vs. THE PUBLIC SERVICE COMMISSION,
respondent.
SYLLABUS
1.
PUBLIC SERVICE COMMISSION; COMMONWEALTH ACT NO. 146 AS AMENDED BY COMMONWEALTH
ACT NO. 454; CONSTITUTIONALITY; DELEGATION OF LEGISLATIVE POWER. Section 8 of Article XIII of the
Constitution provides, among other things, that no franchise, certificate, or any other form of
authorization for the operation of a public utility shall be "for a longer period than fifty years," and when it
was ordained. in section 15 of Commonwealth Act No. 146, as amended by Commonwealth Act No. 454,
that the Public Service Commission may prescribe as a condition for the issuance of a certificate that it
"shall be valid only for a definite period of time" and, in section 16 (a) that "no such certificates shall be
issued for a period of more than fifty years," the National Assembly meant to give effect to the aforesaid
constitutional mandate. More than this. it has thereby also declared its will that the period to be fixed by
the Public Service Commission shall not be longer than fifty years. All that has been delegated to the
commission, therefore, is the administrative function, involving the use of discretion, to carry out the will
of the National Assembly having in view, in addition, the promotion of "public interests in a proper and
suitable manner." The fact that the National Assembly may itself exercise the function and authority thus
conferred upon the Public Service Commission does not make the provision in question constitutionally
objectionable.
2.
ID.; ID.; ID.; ID. With the growing complexity of modern life, the multiplication of the subjects of
governmental regulation, and the increased difficulty of administering the laws, there is a constantly
growing tendency toward the delegation of greater powers by the legislature, and toward the approval of
the practice by the courts. In harmony with such growing tendency, this court, since the decision in the
case of Compaia General de Tabacos de Filipinas vs. Board of Public Utility Commissioners (34 Phil., 136),
relied upon by the petitioner, has, in instances, extended its seal of approval to the "delegation of greater
powers by the legislature."
3.
ID; ID.; ID.; APPLICABILITY TO EXISTING CERTIFICATES OF PUBLIC CONVENIENCE. Under the
fourth paragraph of section 15 of Commonwealth Act No. 146, as amended by Commonwealth Act No.
454, the power of the Public Service Commission to prescribe the conditions "that the service can be
acquired by the Commonwealth of the Philippines or by any instrumentality thereof upon payment of the
cost price of its useful equipment, less reasonable depreciation," and "that the certificate shall be valid
only for a definite period of time" is expressly made applicable "to any extension or amendment of
certificates actually in force" and "to authorizations to renew and increase equipment and properties." We
have examined the legislative proceedings on the subject and have found that these conditions were
purposely made applicable to existing certificates of public convenience.
4.
ID.; ID.; ID.; POWER OF NATIONAL ASSEMBLY TO AMEND OR ALTER EXISTING CERTIFICATES OF
PUBLIC CONVENIENCE. The National Assembly, by virtue of the Constitution, logically succeeded to the
Congress of the United States in the power to amend, alter or repeal any franchise or right granted prior
to or after the approval of the Constitution; and when Commonwealth Acts Nos. 146 and 454 were
enacted, the National Assembly, to the extent therein provided, has declared its will and purpose to
amend or alter existing certificates of public convenience.
5.
ID.; ID.; ID.; POLICE POWER. Statutes enacted for the regulation of public utilities, being a proper
exercise by the state of its police power, are applicable not only to those public utilities coming into
existence after its passage, but likewise to those already established and in operation.
6.
ID.; ID.; ID.; ID. Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public
Service Commission but are "a part of the charter of every utility company operating or seeking to
operate a franchise" in the Philippines. (Streator Aqueduct Co. vs. Smith et al., 295 Fed., 385.) The
business of a common carrier holds such a peculiar relation to the public interest that there is
superinduced upon it the right of public regulation. When private property is "affected with a public
interest it ceases to be juris privati only." When, therefore one devotes his property to a use in which the
public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be
controlled by the public for the common good, to the extent of the interest he has thus created. He may
withdraw his grant by discontinuing the use, but so long as he maintains the use he must submit to
control. Indeed, this right of regulation is so far beyond question that it is well settled that the power of

the state to exercise legislative control over public utilities may be exercised through boards of
commissioners.
7.
ID.; ID.; ID.; ID. This right of the state to regulate public utilities is founded upon the police
power, and statutes for the control and regulation of utilities are a legitimate exercise thereof, for the
protection of the public as well as of the utilities themselves. Such statutes are, therefore, not
unconstitutional, either as impairing the obligation of contracts, taking property without due process, or
denying the equal protection of the laws, especially inasmuch as the question whether or not private
property shall be devoted to a public use and the consequent burdens assumed is ordinarily for the owner
to decide; and if he voluntarily places his property in public service he cannot complain that it becomes
subject to the regulatory powers of the state. (51 C. J., sec. 21, pp. 9, 10.) This is the more so in the light
of authorities which hold that a certificate of public convenience constitutes neither a franchise nor a
contract, confers no property right, and is a mere license or privilege.
8.
ID.; ID.; ID.; RIGHT TO BE HEARD AND TO ADDUCE EVIDENCE; CASE REMANDED FOR FURTHER
PROCEEDINGS. Whilst the challenged provisions of Commonwealth Act No. 454 are valid and
constitutional, Held: That the decision of the Public Service Commission should be reversed and the case
remanded thereto for further proceedings for the reason now to be stated. On the matter of limitation to
twenty-five (25) years of the life of its certificates of public convenience, there had been neither notice
nor opportunity given the petitioner to be heard or present evidence. The commission appears to have
taken advantage of the petitioner to augment petitioner's equipment in imposing the limitation of twentyfive (25) years which might as well be twenty or fifteen or any number of years. This is, to say the least,
irregular and should not be sanctioned. There are cardinal primary rights which must be respected even in
proceedings of this character. The first of these rights is the right to a hearing, which includes the right of
the party interested or affected to present his own case and submit evidence in support thereof. In the
language of Chief Justice Hughes, in Morgan vs. U.S. (304 U.S., 1; 58 Sup. Ct., 773, 999; 82 Law. ed.,
1129), 'the liberty and property of the citizen shall be protected by the rudimentary requirements of fair
play." Not only must the party be given an opportunity to present his case and to adduce evidence
tending to establish the rights which he asserts but the tribunal must consider the evidence presented.
DECISION
LAUREL, J p:
The petitioner has been engaged for the past twenty years in the business of transporting passengers in
the Provinces of Pangasinan and Tarlac and, to a certain extent, in the Provinces of Nueva Ecija and
Zambales, by means of motor vehicles commonly known as TPU buses, in accordance with the terms and
conditions of the certificates of public convenience issued in its favor by the former Public Utility
Commission in cases Nos. 24948, 30973, 36831, 32014 and 53090. On August 26, 1939, the petitioner
filed with the Public Service Commission an application for authorization to operate ten additional new
Brockway trucks (case No. 56641), on the ground that they were needed to comply with the terms and
conditions of its existing certificates and as a result of the application of the Eight Hour Labor Law. In the
decision of September 26, 1339, granting the petitioner's application for increase of equipment, the Public
Service Commission ordered:
"Y de acuerdo con lo que se provee por el articulo 15 de la Ley No. 146 del Commonwealth, tal como ha
sido enmendada por el articulo 1 de la Ley No. 454, por la presente se enmienda las condiciones de los
certificados de conveniencia publica expedidos en los expedientes Nos. 24948, 30973, 36831, 32014 y la
autorizacion concedida en el expediente No. 53090, asi que se consideran incorporadas en los mismos las
dos siguientes condiciones:
"Que los certificados de conveniencia publica y autorizacion arriba mencionados seran validos y
subsistentes solamente durante el periodo de veinticinco (25) anos, contados desde la fecha de la
promulgacion de esta decision.
"Que la empresa de la solicitante podra ser adquirida por el Commonwealth de Filipinas o por alguna
dependencia del mismo en cualquier tiempo que lo deseare previo pago del precio de costo de su equipo
util, menos una depreciacion razonable que se ha de fijar por la Comision al tiempo de su adquisicion."
Not being agreeable to the two new conditions thus incorporated in its existing certificates, the petitioner
filed on October 9, 1939 a motion for reconsideration which was denied by the Public Service Commission

on November 14, 1939. Whereupon, on November 20, 1939, the present petition for a writ of certiorari
was instituted in this court praying that an order be issued directing the secretary of the Public Service
Commission to certify forthwith to this court the records of all proceedings in case No. 56641; that this
court, after hearing, render a decision declaring section 1 of Commonwealth Act No. 454 unconstitutional
and void; that, if this court should be of the opinion that section 1 of Commonwealth Act No. 454 is
constitutional, a decision be rendered declaring that the provisions thereof are not applicable to valid and
subsisting certificates issued prior to June 8, 1939. Stated in the language of the petitioner, it is
contended:
"1.
That the legislative powers granted to the Public Service Commission by section 1 of
Commonwealth Act No. 454, without limitation, guide or rule except the unfettered discretion and
judgment of the Commission, constitute a complete and total abdication by the Legislature of its functions
in the premises, and. for that reason, the Act, in so far as those powers are concerned, is unconstitutional
and void.
"2.
That even if it be assumed that section 1 of Commonwealth Act No. 454, is a valid delegation of
legislative powers, the Public Service Commission has exceeded its authority because: (a) The Act applies
only to future certificates and not to valid and subsisting certificates issued prior to June 8, 1939, when
said Act took effect, and (b) the Act, as applied by the Commission, violates constitutional guarantees.
Section 15 of Commonwealth Act No. 146, as amended by section 1 of Commonwealth Act No. 454,
invoked by the respondent Public Service Commission in the decision complained of in the present
proceedings, reads as follows:
"With the exception of those enumerated in the preceding section, no public service shall operate in the
Philippines without possessing a valid and subsisting certificate from the Public Service Commission,
known as 'certificate of public convenience,' or 'certificate of convenience and public necessity,' as the
case may be, to the effect that the operation of said service and the authorization to do business will
promote the public interests in a proper and suitable manner.
"The Commission may prescribe as a condition for the issuance of the certificate provided in the
preceding paragraph that the service can be acquired by the Commonwealth of the Philippines or by any
instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable
depreciation; and likewise, that the certificate shall be valid only for a definite period of time; and that the
violation of any of these conditions shall produce the immediate cancellation of the certificate without the
necessity of any express action on the part of the Commission.
"In estimating the depreciation, the effect of the use of the equipment, its actual condition, the age of the
model, or other circumstances affecting its value in the market shall be taken into consideration.
"The foregoing is likewise applicable to any extension or amendment of certificates actually in force and
to those which may hereafter be issued, to permits to modify itineraries and time schedules of public
services and to authorizations to renew and increase equipment and properties."
Under the first paragraph of the aforequoted section 15 of Act No. 146, as amended, no public service can
operate without a certificate of public convenience or certificate of convenience and public necessity to
the effect that the operation of said service and the authorization to do business will promote "public
interests in a proper and suitable manner." Under the second paragraph, one of the conditions which the
Public Service Commission may prescribe for the issuance of the certificate provided for in the first
paragraph is that "the service can be acquired by the Commonwealth of the Philippines or by any
instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable
depreciation," a condition which is virtually a restatement of the principle already embodied the
Constitution, section 6 of Article XII, which provides at "the State may, in the interest of national welfare
and defense, establish and operate industries and means of transportation and communication, and, upon
payment of just compensation, transfer to public ownership utilities d other private enterprises to be
operated by the Government." Another condition which the Commission may prescribe, and which is
assailed by the petitioner, is that the certificate "shall be valid only for a definite period of time." As there
is a relation between the first and second paragraphs of said section 15, the two provisions must be read
and interpreted together. That is to say, in issuing a certificate, the Commission must necessarily be
satisfied that the operation of the service under said certificate during a definite period fixed therein "will

promote the public interests in a proper and suitable manner." Under section 16 (a) of Commonwealth Act
No. 146 which is a complement of section 15, the Commission is empowered to issue certificates of public
convenience whenever it "finds that the operation of the public service proposed and the authorization to
do business will promote the public interests in a proper and suitable manner." Inasmuch as the period to
be fixed by the Commission under section 15 is inseparable from the certificate itself, said period cannot
be disregarded by the Commission in determining the question whether the issuance of the certificate will
promote the public interests in a proper and suitable manner. Conversely, in determining "a definite
period of time," the Commission will be guided by "public interests," the only limitation to its power being
that said period shall not exceed fifty years (sec. 16 (a), Commonwealth Act No. 146; Constitution, Art.
XIII, sec. 8. ) We have already ruled that "public interest" furnishes a sufficient standard. (People vs.
Fernandez and Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs. Rosenthal and Osmea,
G. R. Nos. 46076 and 46077, promulgated June 12, 1939, citing New York Central Securities Corporation
vs. U. S. A., 287 U. S. 12, 24, 25, 77 Law. ed. 138, 145, 146; Schenchter Poultry Corporation vs. U. S., 295
U. S. 495, 540, 79 Law. ed. 1570,1585; Ferrazzini vs. Gsell, 34 Phil., 697, 711-712.)
Section 8 of Article XIII of the Constitution provides, among other things, that no franchise, certificate, or
any other form of authorization for the operation of a public utility shall be "for a longer period than fifty
years," and when it was ordained, in section 15 of Commonwealth Act No. 146, as amended by
Commonwealth Act No. 454, that the Public Service Commission may prescribe as a condition for the
issuance of a certificate that it "shall be valid only for a definite period of time" and, in section 16 (a) that
"no such certificates shall be issued for a period of more than fifty years," the National Assembly meant to
give effect to the aforesaid constitutional mandate. More than this, it has thereby also declared its will
that the period to be fixed by the Public Service Commission shall not be longer than fifty years. All that
has been delegated to the Commission, therefore, is the administrative function, involving the use of
discretion, to carry out the will of the National Assembly having in view, in addition, the promotion of
"public interests in a proper and suitable manner." The fact that the National Assembly may itself exercise
the function and authority thus conferred upon the Public Service Commission does not make the
provision in question constitutionally objectionable.
The theory of the separation of powers is designed by its originators to secure action and at the same
time to forestall over action which necessarily results from undue concentration of powers, and thereby
obtain efficiency and prevent despotism. Thereby, the "rule of law" was established which narrows the
range of governmental action and makes it subject to control by certain legal devices. As a corollary, we
find the rule prohibiting delegation of legislative authority, and from the earliest time American legal
authorities have proceeded on the theory that legislative power must be exercised by the legislature
alone. It is frankness, however, to confess that as one delves into the mass of judicial pronouncements,
he finds a great deal of confusion. One thing, however, is apparent in the development of the principle of
separation of powers and that is that the maxim of delegatus non potest delegari or delegata potestas
non potest delegari, attributed to Bracton (De Legibus et Consuetudinious Angliae, edited by G.E.
Woodbine, Yale University Press, 1922, vol. 2, p. 167) but which is also recognized in principle in the
Roman Law (D. 17.18.3), has been made to adapt itself to the complexities of modern governments,
giving rise to the adoption, within certain limits, of the principle of "subordinate legislation," not only in
the United States and England but in practically all modern governments. (People vs. Rosenthal and
Osmea, G. R. Nos. 46076 and 46077, promulgated June 12, 1939.) Accordingly, with the growing
complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased
difficulty of administering the laws, there is a constantly growing tendency toward the delegation of
greater powers by the legislature, and toward the approval of the practice by the courts. (Dillon Catfish
Drainage Dist. vs. Bank of Dillon, 141 S. E. 274, 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W. 2d.
973, 976, 165 Tenn. 319.) In harmony with such growing tendency, this Court, since the decision in the
case of Compania General de Tabacos de Filipinas vs. Board of Public Utility Commissioners (34 Phil., 136),
relied upon by the petitioner, has, in instances, extended its seal of approval to the "delegation of greater
powers by the legislature." (Inchausti Steamship Co. vs. Public Utility Commissioner, 44 Phil., 366; Alegre
vs. Collector of Customs, 53 Phil., 394; Cebu Autobus Co. vs. De Jesus, 56 Phil., 446; People vs. Fernandez
& Trinidad, G. R. No, 45655, promulgated June 15, 1938 in People vs. Rosenthal & Osmea, G. R. Nos.
46076, 46077, promulgated June 12, 1939; and Robb and Hilscher vs. People, G.R. No. 45866,
promulgated June 12, 1939.)

Under the fourth paragraph of section 15 of Commonwealth Act No. 146, as amended by Commonwealth
Act No. 454, the power of the Public Service Commission to prescribe the conditions "that the service can
be acquired by the Commonwealth of the Philippines or by any instrumentality thereof upon payment of
the cost price of its useful equipment, less reasonable depreciation," and "that the certificate shall be
valid only for a definite period of time" is expressly made applicable "to any extension or amendment of
certificates actually in force" and "to authorizations to renew and increase equipment and properties." We
have examined the legislative proceedings on the subject and have found that these conditions were
purposely made applicable to existing certificates of public convenience. The history of Commonwealth
Act No. 454 reveals that there was an attempt to suppress, by way of amendment, the sentence "and
likewise, that the certificate shall be valid only for a definite period of time," but the attempt failed:
xxx

xxx

xxx

"Sr. CUENCO. Senor Presidente, para otra enmienda. En la misma pagina, lineas 23 y 24, pido que se
supriman las palabras 'and likewise, that the certificate shall be valid only for a definite period of time.'
Esta disposicion del proyecto autoriza a la Comision de Servicios Publicos a fijar un plazo de vigencia del
certificado de conveniencia publica. Todo el mundo sabe que no se puede determinar cuando los intereses
del servicio publico requieren la explotacion de un servicio publico y como ha de saber la Comision de
Servicios Publicos, si en un tiempo determinado, la explotacion de algunos buses en cierta ruta ya no
tiene razon de ser, sobre todo, si se tiene en cuenta; que la explotacion de los servicios publicos depende
de condiciones fluctuantes, asi como del volumen del trafico y de otras condiciones. Ademas, el servicio
publico se concede por la Comision de Servicios Publicos cuando el interes publico asi lo exige. El interes
publico no tiene duracion fija, no es permanente; es un proceso mas o menos indefinido en cuanto al
tiempo. Se ha acordado eso en el caucus de anoche.
"El PRESIDENTE PRO TEMPORE. Que dice el Comite?
"Sr. ALANO. El Comite siente tener que rechazar esa enmienda, en vista de que esto de los certificados de
conveniencia publica es igual que la franquicia: se puede extender. Si los servicios prestados por la
compania durante el tiempo de su certificado lo requiere, puede pedir la extension y se le extendera; pero
no creo conveniente el que nosotros demos un certificado de conveniencia publica de urla manera que
podria pasar de cincuenta anos, porque seria anticonstitucional."
xxx

xxx

xxx

By a majority vote the proposed amendment was defeated. (Sesion de 17 de mayo de 1939, Asamblea
Nacional.)
The petitioner is mistaken in the suggestion that, simply because its existing certificates had been
granted before June 8, 1939, the date when Commonwealth Act No. 454, amendatory of section 15 of
Commonwealth Act No. 146, was approved, it must be deemed to have the right of holding them in
perpetuity. Section 74 of the Philippine Bill provided that "no franchise, privilege, or concession shall be
granted to any corporation except under the conditions that it shall be subject to amendment, alteration,
or repeal by the Congress of the United States." The Jones Law, incorporating a similar mandate,
provided, in section 28, that "no franchise or right shall be granted to any individual, firm, or corporation
except under the conditions that it shall be subject to amendment, alteration, or repeal by the Congress
of the United States." Lastly, the Constitution of the Philippines provides, in section 8 of Article XIII, that
"no franchise or right shall be granted to any individual, firm, or corporation, except under the condition
that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public
interest so requires." The National Assembly, by virtue of the Constitution, logically succeeded to the
Congress of the United States in the power to amend, alter or repeal any franchise or right granted prior
to or after the approval of the Constitution; and when Commonwealth Acts Nos. 146 and 454 were
enacted, the National Assembly, to the extent therein provided, has declared its will and purpose to
amend or alter existing certificates of public convenience.
Upon the other hand, statutes enacted for the regulation of public utilities, being a proper exercise by the
state of its police power, are applicable not only to those public utilities coming into existence after its
passage, but likewise to those already established and in operation.
"Nor is there any merit in petitioner's contention, that, because of the establishment of petitioner's
operations prior to May 1, 1917, they are not subject to the regulations of the Commission. Statutes for

the regulation of public utilities are a proper exercise by the state of its police power. As soon as the
power is exercised, all phases of operation of established utilities, become at once subject to the police
power thus called into operation. Producers' Transportation Co. v. Railroad Commission, 251 U. S. 228, 40
Sup. Ct. 131, 64 Law. ed. 239, Law vs. Railroad Commission, 184 Cal. 737, 195 Pac. 423, 14 A. L. R. 249.
The statute is applicable not only to those public utilities coming into existence after its passage, but
likewise to those already established and in operation. The 'Auto Stage and Truck Transportation Act'
(Stats. 1917, c. 213) is a statute passed in pursuance of the police power. The only distinction recognized
in the statute between those established before and those established after the passage of the act is in
the method of the creation of their operative rights. A certificate of public convenience and necessity is
required for any new operation, but no such certificate is required of any transportation company for the
operation which was actually carried on in good faith on May 1, 1917. This distinction in the creation of
their operative rights in no way affects the power of the Commission to supervise and regulate them.
Obviously the power of the Commission to hear and dispose of complaints is as effective against
companies securing their operative rights prior to May 1, 1917, as against those subsequently securing
such rights under a certificate of public convenience and necessity. (Motor Transit Co. et al. vs. Railroad
Commission of California et al., 209 Pac. 586.)"
Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public Service
Commission but are "a part of the charter of every utility company operating or seeking to operate a
franchise" in the Philippines. (Streator Aqueduct Co. v. Smith et al., 295 Fed. 385.) The business of a
common carrier holds such a peculiar relation to the public interest that there is superinduced upon it the
right of public regulation. When private property is "affected with a public interest it ceased to be juris
privati only." When, therefore, one devotes his property to a use in which the public has an interest, he, in
effect, grants to the public an interest in that use, and must submit to be controlled by the public for the
common good, to the extent of the interest he has thus created. He may withdraw his grant by
discontinuing the use, but so long as he maintains the use he must submit to control. Indeed, this right of
regulation is so far beyond question that it is well settled that the power of the state to exercise legislative
control over public utilities may be exercised through boards of commissioners. (Fisher vs. Yangco
Steamship Company, 31 Phil., 1, citing Munn vs. Illinois, 94 U. S. 113; Georgia R. & Bkg. Co. vs. Smith, 128
U. S. 174; Budd vs. New York, 143 U. S. 517; New York etc. R. Co. vs. Bristol, 151 U. S. 556, 571;
Connecticut etc. R. Co. vs. Woodruff, 153 U. S. 689; Louisville etc. Ry Co. vs. Kentucky, 161 U. S. 677,
695.) This right of the state to regulate public utilities is founded upon the police power, and statutes for
the control and regulation of utilities are a legitimate exercise thereof, for the protection of the public as
well as of the utilities themselves. Such statutes are, therefore, not unconstitutional, either as impairing
the obligation of contracts, taking property without due process, or denying the equal protection of the
laws, especially inasmuch as the question whether or not private property shall be devoted to a public use
and the consequent burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his
property in public service he cannot complain that it becomes subject to the regulatory powers of the
state. (51 C. J., sec. 21, pp. 9-10.) This is the more so in the light of authorities which hold that a
certificate of public convenience constitutes neither a franchise nor a contract, confers no property right,
and is a mere license or privilege. (Burgess vs. Mayor & Aldermen of Brockton, 235 Mass. 95, 100, 126
N.E. 456; Roberto vs. Commissioners of Department of Public Utilities, 262 Mass. 583, 160 N.E. 321,
Scheible vs. Hogan, 113 Ohio St., 83 148 N.E. 581; Matz vs. Curtis [J.L.] Cartage Co., [1937], 132 Ohio St.
271, 7 N.E. [2d] 220; Manila Yellow Taxicab Co. vs. Sabellano, 59 Phil. 773.)
Whilst the challenge provisions of Commonwealth Act No. 454 are valid and constitutional, we are,
however. of the opinion that the decision of the Public Service Commission should be reversed and the
case remanded thereto for further proceedings for the reason now to be stated. The Public Service
Commission has power, upon proper notice and hearing, "to amend, modify or revoke at any time any
certificate issued under the provisions of this Act, whenever the facts and circumstances of the strength
of which said certificate was issued have been misrepresented or materially changed." (Section 16, par.
[m]. Commonwealth Act No. 146.) The petitioner's application here was for an increase of its equipment to
enable it to comply with the conditions of its certificates of public convenience. On the matter of limitation
of twenty five (25) years of the life of its certificates of public convenience, there had been neither notice
not opportunity given the petitioner to be heard or present evidence. The Commission appears to have
taken advantage of the petitioner to augment petitioner's equipment in imposing the limitation to twentyfive (25) years which might as well be twenty of fifteen or any number of years. This is, to say the least,
irregular and should not be sanctioned. There are cardinal primary rights which must be respected even in

proceedings of this character. The first of these rights is the right of a hearing, which includes the right of
the party interested or affected to present his own case and submit evidence in support thereof. In the
language of Chief Justice Hughes, in Morgan vs. U. S., 304 U. S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129,
"the liberty and property of the citizen shall be protected by the rudimentary requirements of fair play."
Not only must the party be given an opportunity to present his case and to adduce evidence tending to
establish the rights which he asserts but the tribunal must consider the evidence presented. (Chief Justice
Hughes in Morgan vs. U. S., 298 U. S. 468, 56 S. Ct. 906, 80 Law. ed. 1288.) In the language of this Court
in Edwards vs. McCoy (22 Phil., 598), "the right to adduce evidence, without the corresponding duty on
the part of the board to consider it, is vain. Such right is conspicuously futile if the person or persons to
whom the evidence is presented can thrust it aside without notice or consideration." While the duty to
deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be
disregarded, namely, that of having something to support its decision. A decision with absolutely nothing
to support it is a nullity, at least when directly attacked. (Edwards vs. McCoy, supra.) This principle
emanates from the more fundamental principle that the genius of constitutional government is contrary to
the vesting of unlimited power anywhere. Law is both a grant and a limitation upon power.
The decision appealed from is hereby reversed and the case remanded to the Public Service Commission
for further proceedings in accordance with law and this decision, without any pronouncement regarding
costs. So ordered.

FIRST DIVISION
[G.R. No. 147096. January 15, 2002.]
REPUBLIC OF THE PHILIPPINES, represented by NATIONAL TELECOMMUNICATIONS
COMMISSION, petitioner, vs. EXPRESS TELECOMMUNICATION CO., INC. and BAYAN
TELECOMMUNICATIONS CO., INC., respondents.
[G.R. No. 147210. January 15, 2002.]

BAYAN TELECOMMUNICATIONS (Bayantel), INC., petitioner, vs. EXPRESS TELECOMMUNICATION

CO., INC. (Extelcom), respondent.
SYLLABUS
1.
COMMERCIAL LAW; PUBLIC UTILITIES; NATIONAL TELECOMMUNICATIONS COMMISSION (NTC);
POWER THEREOF INCLUDES AUTHORITY TO DETERMINE AREAS OF OPERATIONS OF APPLICANTS FOR
TELECOMMUNICATIONS SERVICES; CASE AT BAR. In the regulatory telecommunications industry, the
NTC has the sole authority to issue Certificates of Public Convenience and Necessity (CPCN) for the
installation, operation, and maintenance of communications facilities and services, radio communications
systems, telephone and telegraph systems. Such power includes the authority to determine the areas of
operations of applicants for telecommunications services. Specifically, Sections 16 of the Public Service
Act authorizes the then PSC, upon notice and hearing, to issue Certificates of Public Convenience for the
operation of public services within the Philippines "whenever the Commission finds that the operation of
the public service proposed and the authorization to do business will promote the public interests in a
proper and suitable manner." The procedure governing the issuance of such authorizations is set forth in
Section 29 of the said Act. . . . The NTC is clothed with sufficient discretion to act on matters solely within
its competence. Clearly, the need for a healthy competitive environment in telecommunications is
sufficient impetus for the NTC to consider all those applicants who are willing to offer competition,
develop the market and provide the environment necessary for greater public service. This was the
intention that came to light with the issuance of Memorandum Circular 9-3-2000, allocating new
frequency bands for use of CMTS. Clearly spelled out is the need to provide enhanced competition and the
requirement for more landlines and telecommunications facilities in unserved areas in the country. On
both scores, therefore, there was sufficient showing that the NTC acted well within its jurisdiction and in
pursuance of its avowed duties when it allowed the revival of Bayantel's application.
2.
CIVIL LAW; EFFECT AND APPLICATION OF LAWS; ADMINISTRATIVE CODE OF 1987; FILING OF THE
RULES THEREOF WITH THE UNIVERSITY OF THE PHILIPPINES LAW CENTER IS NOT THE OPERATIVE ACT
WHICH GIVES FORCE AND EFFECT; RATIONALE. The absence of publication, coupled with the
certification by the Commissioner of the NTC stating that the NTC was still governed by the 1978 Rules,
clearly indicate that the 1993 Revised Rules have not taken effect at the time of the grant of the
provisional authority to Bayantel. The fact that the 1993 Revised Rules were filed with the UP Law Center
on February 3, 1993 is of no moment. There is nothing in the Administrative Code of 1987 which implies
that the filing of the rules with the UP Law Center is the operative act that gives the rules force and effect.
. . . The National Administrative Register is merely a bulletin of codified rules and it is furnished only to the
Office of the President, Congress, all appellate courts, the National Library, other public offices or agencies
as the Congress may select, and to other persons at a price sufficient to cover publication and mailing or
distribution costs. Thus, publication in the Official Gazette or a newspaper of general circulation is a
condition sine qua non before statutes, rules or regulations can take effect. This is explicit from Executive
Order No. 200, which repealed Article 2 of the Civil Code, and which states that: Laws shall take effect
after fifteen days following the completion of their publication either in the Official Gazette or in a
newspaper of general circulation in the Philippines, unless it is otherwise provided.
3.
REMEDIAL LAW; ACTIONS; ARCHIVING OF CASES; PURPOSE THEREOF. The archiving of cases is a
widely accepted measure designed to shelve cases in which no immediate action is expected but where
no grounds exist for their outright dismissal, albeit without prejudice. It saves the petitioner or applicant
from the added trouble and expense of re-filing a dismissed case. Under this scheme, an inactive case is
kept alive but held in abeyance until the situation obtains wherein action thereon can be taken.
4.
ID.; ID.; EX-PARTE MOTIONS; WHEN ADMISSION THEREOF IS NOT A VIOLATION OF THE
FUNDAMENTAL RIGHT TO DUE PROCESS; CASE AT BAR. Thus, in cases which do not involve either an
application for rate increase or an application for a provisional authority, the NTC may entertain ex-parte
motions only where there is an urgent necessity to do so and no rights of the opposing parties are
impaired. The Court of Appeals ruled that there was a violation of the fundamental right of Extelcom to
due process when it was not afforded the opportunity to question the motion for the revival of the
application. However, it must be noted that said Order referred to a simple revival of the archived
application of Bayantel in NTC Case No. 92-426. At this stage, it cannot be said that Extelcom's right to
procedural due process was prejudiced. It will still have the opportunity to be heard during the full-blown
adversarial hearings that will follow. In fact, the records show that the NTC has scheduled several hearing

dates for this purpose, at which all interested parties shall be allowed to register their opposition. We have
ruled that there is no denial of due process where full-blown adversarial proceedings are conducted before
an administrative body. With Extelcom having fully participated in the proceedings, and indeed, given the
opportunity to file its opposition to the application, there was clearly no denial of its right to due process.
TaHDAS
5.
ID.; SPECIAL CIVIL ACTIONS; CERTIORARI; PRIOR FILING OF MOTION FOR RECONSIDERATION
REQUIRED. It is well-settled that the filing of a motion for reconsideration is a prerequisite to the filing
of a special civil action for certiorari. The general rule is that, in order to give the lower court the
opportunity to correct itself, a motion for reconsideration is a prerequisite to certiorari. It is also basic that
petitioner must exhaust all other available remedies before resorting to certiorari. This rule, however, is
subject to certain exceptions such as any of the following: (1) the issues raised are purely legal in nature,
(2) public interest is involved, (3) extreme urgency is obvious or (4) special circumstances warrant
immediate or more direct action. This case does not fall under any of the recognized exceptions to this
rule. Although the Order of the NTC dated May 3, 2000 granting provisional authority to Bayantel was
immediately executory, it did not preclude the filing of a motion for reconsideration. Under the NTC Rules,
a party adversely affected by a decision, order, ruling or resolution may within fifteen (15) days file a
motion for reconsideration. That the Order of the NTC became immediately executory does not mean that
the remedy of filing a motion for reconsideration is foreclosed to the petitioner.
6.
POLITICAL LAW; ADMINISTRATIVE LAW; EXHAUSTION OF ADMINISTRATIVE REMEDIES; PURPOSE
THEREOF. The rule is well-entrenched that a party must exhaust all administrative remedies before
resorting to the courts. The premature invocation of the intervention of the court is fatal to one's cause of
action. This rule would not only give the administrative agency an opportunity to decide the matter by
itself correctly, but would also prevent the unnecessary and premature resort to courts. In the case of
Lopez v. City of Manila, we held: As a general rule, where the law provides for the remedies against the
action of an administrative board, body or officer, relief to courts can be sought only after exhausting all
remedies provided. The reason rests upon the presumption that the administrative body, if given the
chance to correct its mistake or error, may amend its decision on a given matter and decide it properly.
Therefore, where a remedy is available within the administrative machinery, this should be resorted to
before resort can be made to the courts, not only to give the administrative agency the opportunity to
decide the matter by itself correctly, but also to prevent unnecessary and premature resort to courts.
7.
ID.; ID.; PURELY ADMINISTRATIVE FUNCTION MAY NOT BE INTERFERED WITH BY THE COURTS;
RATIONALE; EXCEPTION. The general rule is that purely administrative and discretionary functions may
not be interfered with by the courts. Thus, in Lacuesta v. Herrera, it was held: . . . (T)he powers granted to
the Secretary of Agriculture and Commerce (natural resources) by law regarding the disposition of public
lands such as granting of licenses, permits, leases and contracts, or approving, rejecting, reinstating, or
canceling applications, are all executive and administrative in nature. It is a well recognized principle that
purely administrative and discretionary functions may not be interfered with by the courts. (Coloso vs.
Board of Accountancy, G.R. No. L-5750, April 20, 1953) In general, courts have no supervising power over
the proceedings and actions of the administrative departments of the government. This is generally true
with respect to acts involving the exercise of judgment or discretion and findings of fact. (54 Am. Jur. 558559) . . .. The established exception to the rule is where the issuing authority has gone beyond its
statutory authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to his
duty or with grave abuse of discretion. This Court has consistently held that the courts will not interfere in
matters which are addressed to the sound discretion of the government agency entrusted with the
regulation of activities coming under the special and technical training and knowledge of such agency. It
has also been held that the exercise of administrative discretion is a policy decision and a matter that can
best be discharged by the government agency concerned, and not by the courts. In Villanueva v. Court of
Appeals, it was held that findings of fact which are supported by evidence and the conclusion of experts
should not be disturbed. This was reiterated in Metro Transit Organization, Inc. v. National Labor Relations
Commission wherein it was ruled that factual findings of quasi-judicial bodies which have acquired
expertise because their jurisdiction is confined to specific matters are generally accorded not only respect
but even finality and are binding even upon the Supreme Court if they are supported by substantial
evidence. Administrative agencies are given a wide latitude in the evaluation of evidence and in the
exercise of its adjudicative functions. This latitude includes the authority to take judicial notice of facts
within its special competence.

8.
CONSTITUTIONAL LAW; PUBLIC UTILITY; OPERATION THEREOF SHALL NOT BE EXCLUSIVE;
RATIONALE. The Constitution is quite emphatic that the operation of a public utility shall not be
exclusive. Thus: No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted to citizens of the Philippines or to corporations organized under the laws of the
Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise,
certificate or authorization be exclusive in character or for a longer period than fifty years. Neither shall
any such franchise or right be granted except under the condition that it shall be subject to amendment,
alteration, or repeal by the Congress when the common good so requires. . . .. In Radio Communications
of the Phils., Inc. v. National Telecommunications Commission, we held: It is well within the powers of the
public respondent to authorize the installation by the private respondent network of radio
communications systems in Catarman, Samar, and San Jose, Mindoro. Under the circumstances, the mere
fact that the petitioner possesses a franchise to put up and operate a radio communications system in
certain areas is not an insuperable obstacle to the public respondent's issuing the proper certificate to an
applicant desiring to extend the same services to those areas. The Constitution mandates that a franchise
cannot be exclusive in nature nor can a franchise be granted except that it must be subject to
amendment, alteration, or even repeal by the legislature when the common good so requires. (Art. XII,
Sec. 11 of the 1986 Constitution). There is an express provision in the petitioner's franchise which
provides compliance with the above mandate (RA 2036, Sec. 15). cDTHIE
9.
ID.; JUDICIAL DEPARTMENT; SUPREME COURT; DIVISIONS THEREOF ARE NOT TO BE CONSIDERED
AS SEPARATE AND DISTINCT COURTS; FORUM SHOPPING NOT APPLICABLE. The divisions of the
Supreme Court are not to be considered as separate and distinct courts. The Supreme Court remains a
unit notwithstanding that it works in divisions. Although it may have three divisions, it is but a single
court. Actions considered in any of these divisions and decisions rendered therein are, in effect, by the
same Tribunal. The divisions of this Court are not to be considered as separate and distinct courts but as
divisions of one and the same court. Moreover, the rules on forum shopping should not be literally
interpreted. We have stated thus: It is scarcely necessary to add that Circular No. 28-91 must be so
interpreted and applied as to achieve the purposes projected by the Supreme Court when it promulgated
that circular. Circular No. 28-91 was designed to serve as an instrument to promote and facilitate the
orderly administration of justice and should not be interpreted with such absolute literalness as to subvert
its own ultimate and legitimate objection or the goal of all rules of procedure which is to achieve
substantial justice as expeditiously as possible. Even assuming that separate actions have been filed by
two different parties involving essentially the same subject matter, no forum shopping was committed as
the parties did not resort to multiple judicial remedies. The Court, therefore, directed the consolidation of
the two cases because they involve essentially the same issues. It would also prevent the absurd situation
wherein two different divisions of the same court would render altogether different rulings in the cases at
bar.
DECISION
YNARES-SANTIAGO, J p:
On December 29, 1992, International Communications Corporation (now Bayan Telecommunications, Inc.
or Bayantel) filed an application with the National Telecommunications Commission (NTC) for a Certificate
of Public Convenience or Necessity (CPCN) to install, operate and maintain a digital Cellular Mobile
Telephone System/Service (CMTS) with prayer for a Provisional Authority (PA). The application was
docketed as NTC Case No. 92-486. 1
Shortly thereafter, or on January 22, 1993, the NTC issued Memorandum Circular No. 4-1-93 directing all
interested applicants for nationwide or regional CMTS to file their respective applications before the
Commission on or before February 15, 1993, and deferring the acceptance of any application filed after
said date until further orders. 2
On May 6, 1993, and prior to the issuance of any notice of hearing by the NTC with respect to Bayantel's
original application, Bayantel filed an urgent ex-parte motion to admit an amended application. 3 On May
17, 1993, the notice of hearing issued by the NTC with respect to this amended application was published
in the Manila Chronicle. Copies of the application as well as the notice of hearing were mailed to all
affected parties. Subsequently, hearings were conducted on the amended application. But before

Bayantel could complete the presentation of its evidence, the NTC issued an Order dated December 19,
1993 stating:
In view of the recent grant of two (2) separate Provisional Authorities in favor of ISLACOM and GMCR, Inc.,
which resulted in the closing out of all available frequencies for the service being applied for by herein
applicant, and in order that this case may not remain pending for an indefinite period of time, AS PRAYED
FOR, let this case be, as it is, hereby ordered ARCHIVED without prejudice to its reinstatement if and when
the requisite frequency becomes available.
SO ORDERED. 4
On June 18, 1998, the NTC issued Memorandum Circular No. 5-6-98 re-allocating five (5) megahertz (MHz)
of the radio frequency spectrum for the expansion of CMTS networks. The re-allocated 5 MHz were taken
from the following bands: 1730-1732.5/1825-1827.5 MHz and 1732.5-1735/1827.5-1830 MHz. 5
Likewise, on March 23, 1999, Memorandum Circular No. 3-3-99 was issued by the NTC re-allocating an
additional five (5) MHz frequencies for CMTS service, namely: 1735-1737.5 / 1830-1832.5 MHz; 1737.51740 / 1832.5-1835 MHz; 1740-1742.5 / 1835-1837.5 MHz; and 1742.5-1745 / 1837.5-1840 MHz. 6
On May 17, 1999, Bayantel filed an Ex-Parte Motion to Revive Case, 7 citing the availability of new
frequency bands for CMTS operators, as provided for under Memorandum Circular No. 3-3-99. acEHCD
On February 1, 2000, the NTC granted BayanTel's motion to revive the latter's application and set the case
for hearings on February 9, 10, 15, 17 and 22, 2000. 8 The NTC noted that the application was ordered
archived without prejudice to its reinstatement if and when the requisite frequency shall become
available.
Respondent Express Telecommunication Co., Inc. (Extelcom) filed in NTC Case No. 92-486 an Opposition
(With Motion to Dismiss) praying for the dismissal of Bayantel's application. 9 Extelcom argued that
Bayantel's motion sought the revival of an archived application filed almost eight (8) years ago. Thus, the
documentary evidence and the allegations of respondent Bayantel in this application are all outdated and
should no longer be used as basis of the necessity for the proposed CMTS service. Moreover, Extelcom
alleged that there was no public need for the service applied for by Bayantel as the present five CMTS
operators Extelcom, Globe Telecom, Inc., Smart Communication, Inc., Pilipino Telephone Corporation,
and Isla Communication Corporation, Inc. more than adequately addressed the market demand, and all
are in the process of enhancing and expanding their respective networks based on recent technological
developments.
Extelcom likewise contended that there were no available radio frequencies that could accommodate a
new CMTS operator as the frequency bands allocated in NTC Memorandum Circular No. 3-3-99 were
intended for and had in fact been applied for by the existing CMTS operators. The NTC, in its
Memorandum Circular No. 4-1-93, declared it its policy to defer the acceptance of any application for
CMTS. All the frequency bands allocated for CMTS use under the NTC's Memorandum Circular No. 5-11-88
and Memorandum Circular No. 2-12-92 had already been allocated to the existing CMTS operators. Finally,
Extelcom pointed out that Bayantel is its substantial stockholder to the extent of about 46% of its
outstanding capital stock, and Bayantel's application undermines the very operations of Extelcom.
On March 13, 2000, Bayantel filed a Consolidated Reply/Comment, 10 stating that the opposition was
actually a motion seeking a reconsideration of the NTC Order reviving the instant application, and thus
cannot dwell on the material allegations or the merits of the case. Furthermore, Extelcom cannot claim
that frequencies were not available inasmuch as the allocation and assignment thereof rest solely on the
discretion of the NTC.
In the meantime, the NTC issued on March 9, 2000 Memorandum Circular No. 9-3-2000, re-allocating the
following radio frequency bands for assignment to existing CMTS operators and to public
telecommunication entities which shall be authorized to install, operate and maintain CMTS networks,
namely: 1745-1750MHz / 1840-1845MHz; 1750-1775MHz / 1845-1850MHz; 1765-1770MHz / 18601865MHz; and 1770-1775MHz / 1865-1870MHz. 11
On May 3, 2000, the NTC issued an Order granting in favor of Bayantel a provisional authority to operate
CMTS service. 12 The Order stated in pertinent part:

On the issue of legal capacity on the part of Bayantel, this Commission has already taken notice of the
change in name of International Communications Corporation to Bayan Telecommunications, Inc. Thus, in
the Decision entered in NTC Case No. 93-284/94-200 dated 19 July 1999, it was recognized that Bayan
Telecommunications, Inc., was formerly named International Communications Corp. Bayantel and ICC
Telecoms, Inc. are one and the same entity, and it necessarily follows that what legal capacity ICC
Telecoms has or has acquired is also the legal capacity that Bayantel possesses. llcd
On the allegation that the Commission has committed an error in allowing the revival of the instant
application, it appears that the Order dated 14 December 1993 archiving the same was anchored on the
non-availability of frequencies for CMTS. In the same Order, it was expressly stated that the archival
hereof, shall be without prejudice to its reinstatement "if and when the requisite frequency becomes
available." Inherent in the said Order is the prerogative of the Commission in reviving the same, subject to
prevailing conditions. The Order of 1 February 2001, cited the availability of frequencies for CMTS, and
based thereon, the Commission, exercising its prerogative, revived and reinstated the instant application.
The fact that the motion for revival hereof was made ex-parte by the applicant is of no moment, so long
as the oppositors are given the opportunity to be later heard and present the merits of their respective
oppositions in the proceedings.
On the allegation that the instant application is already obsolete and overtaken by developments, the
issue is whether applicant has the legal, financial and technical capacity to undertake the proposed
project. The determination of such capacity lies solely within the discretion of the Commission, through its
applicable rules and regulations. At any rate, the oppositors are not precluded from showing evidence
disputing such capacity in the proceedings at hand. On the alleged non-availability of frequencies for the
proposed service in view of the pending applications for the same, the Commission takes note that it has
issued Memorandum Circular 9-3-2000, allocating additional frequencies for CMTS. The eligibility of
existing operators who applied for additional frequencies shall be treated and resolved in their respective
applications, and are not in issue in the case at hand.
Accordingly, the Motions for Reconsideration filed by SMARTCOM and GLOBE TELECOMS/ISLACOM and the
Motion to Dismiss filed by EXTELCOM are hereby DENIED for lack of merit. 13
The grant of the provisional authority was anchored on the following findings:
COMMENTS:
1.
Due to the operational mergers between Smart Communications, Inc. and Pilipino Telephone
Corporation (Piltel) and between Globe Telecom, Inc. (Globe) and Isla Communications, Inc. (Islacom), free
and effective competition in the CMTS market is threatened. The fifth operator, Extelcom, cannot provide
good competition in as much as it provides service using the analog AMPS. The GSM system dominates
the market.
2.
There are at present two applicants for the assignment of the frequencies in the 1.7 Ghz and 1.8
Ghz allocated to CMTS, namely Globe and Extelcom. Based on the number of subscribers Extelcom has,
there appears to be no congestion in its network a condition that is necessary for an applicant to be
assigned additional frequencies. Globe has yet to prove that there is congestion in its network considering
its operational merger with Islacom.
3.
Based on the reports submitted to the Commission, 48% of the total number of cities and
municipalities are still without telephone service despite the more than 3 million installed lines waiting to
be subscribed.
CONCLUSIONS:
1.
To ensure effective competition in the CMTS market considering the operational merger of some of
the CMTS operators, new CMTS operators must be allowed to provide the service.
2.
The re-allocated frequencies for CMTS of 3 blocks of 5 Mhz x 2 is sufficient for the number of
applicants should the applicants be qualified.
3.
There is a need to provide service to some or all of the remaining cities and municipalities without
telephone service.

4.
The submitted documents are sufficient to determine compliance to the technical requirements.
The applicant can be directed to submit details such as channeling plans, exact locations of cell sites, etc.
as the project implementation progresses, actual area coverage ascertained and traffic data are made
available. Applicant appears to be technically qualified to undertake the proposed project and offer the
proposed service.
IN VIEW OF THE FOREGOING and considering that there is prima facie evidence to show that Applicant is
legally, technically and financially qualified and that the proposed service is technically feasible and
economically viable, in the interest of public service, and in order to facilitate the development of
telecommunications services in all areas of the country, as well as to ensure healthy competition among
authorized CMTS providers, let a PROVISIONAL AUTHORITY (P.A.) be issued to Applicant BAYAN
TELECOMMUNICATIONS, INC. authorizing it to construct, install, operate and maintain a Nationwide
Cellular Mobile Telephone Systems (CMTS), subject to the following terms and conditions without prejudice
to a final decision after completion of the hearing which shall be called within thirty (30) days from grant
of authority, in accordance with Section 3, Rule 15, Part IV of the Commission's Rules of Practice and
Procedure. . . .. 14
Extelcom filed with the Court of Appeals a petition for certiorari and prohibition, 15 docketed as CA-G.R.
SP No. 58893, seeking the annulment of the Order reviving the application of Bayantel, the Order granting
Bayantel a provisional authority to construct, install, operate and maintain a nationwide CMTS, and
Memorandum Circular No. 9-3-2000 allocating frequency bands to new public telecommunication entities
which are authorized to install, operate and maintain CMTS. aSATHE
On September 13, 2000, the Court of Appeals rendered the assailed Decision, 16 the dispositive portion of
which reads:
WHEREFORE, the writs of certiorari and prohibition prayed for are GRANTED. The Orders of public
respondent dated February 1, 2000 and May 3, 2000 in NTC Case No. 92-486 are hereby ANNULLED and
SET ASIDE and the Amended Application of respondent Bayantel is DISMISSED without prejudice to the
filing of a new CMTS application. The writ of preliminary injunction issued under our Resolution dated
August 15, 2000, restraining and enjoining the respondents from enforcing the Orders dated February 1,
2000 and May 3, 2000 in the said NTC case is hereby made permanent. The Motion for Reconsideration of
respondent Bayantel dated August 28, 2000 is denied for lack of merit.
SO ORDERED. 17
Bayantel filed a motion for reconsideration of the above decision. 18 The NTC, represented by the Office
of the Solicitor General (OSG), also filed its own motion for reconsideration. 19 On the other hand,
Extelcom filed a Motion for Partial Reconsideration, praying that NTC Memorandum Circular No. 9-3-2000
be also declared null and void. 20
On February 9, 2001, the Court of Appeals issued the assailed Resolution denying all of the motions for
reconsideration of the parties for lack of merit. 21
Hence, the NTC filed the instant petition for review on certiorari, docketed as G.R. No. 147096, raising the
following issues for resolution of this Court:
A.
Whether or not the Order dated February 1, 2000 of the petitioner which revived the application of
respondent Bayantel in NTC Case No. 92-486 violated respondent Extelcom's right to procedural due
process of law;
B.
Whether or not the Order dated May 3, 2000 of the petitioner granting respondent Bayantel a
provisional authority to operate a CMTS is in substantial compliance with NTC Rules of Practice and
Procedure and Memorandum Circular No. 9-14-90 dated September 4, 1990. 22
Subsequently, Bayantel also filed its petition for review, docketed as G.R. No. 147210, assigning the
following errors:
I.
THE COURT OF APPEALS SERIOUSLY ERRED IN ITS INTERPRETATION OF THE PRINCIPLE OF
"EXHAUSTION OF ADMINISTRATIVE REMEDIES" WHEN IT FAILED TO DISMISS HEREIN RESPONDENT'S
PETITION FOR CERTIORARI DESPITE ITS FAILURE TO FILE A MOTION FOR RECONSIDERATION.

II.
THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE REVIVAL OF NTC CASE NO.
92-486 ANCHORED ON A EX-PARTE MOTION TO REVIVE CASE WAS TANTAMOUNT TO GRAVE ABUSE OF
DISCRETION ON THE PART OF THE NTC.
III.
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT DENIED THE MANDATE OF THE NTC AS THE
AGENCY OF GOVERNMENT WITH THE SOLE DISCRETION REGARDING ALLOCATION OF FREQUENCY BAND
TO TELECOMMUNICATIONS ENTITIES.
IV.
THE COURT OF APPEALS SERIOUSLY ERRED IN ITS INTERPRETATION OF THE LEGAL PRINCIPLE THAT
JURISDICTION ONCE ACQUIRED CANNOT BE LOST WHEN IT DECLARED THAT THE ARCHIVED APPLICATION
SHOULD BE DEEMED AS A NEW APPLICATION IN VIEW OF THE SUBSTANTIAL CHANGE IN THE
CIRCUMSTANCES ALLEGED IN ITS AMENDMENT APPLICATION.
V.
CONTRARY TO THE FINDING OF THE COURT OF APPEALS, THE ARCHIVING OF THE BAYANTEL
APPLICATION WAS A VALID ACT ON THE PART OF THE NTC EVEN IN THE ABSENCE OF A SPECIFIC RULE ON
ARCHIVING OF CASES SINCE RULES OF PROCEDURE ARE, AS A MATTER OF COURSE, LIBERALLY
CONSTRUED IN PROCEEDINGS BEFORE ADMINISTRATIVE BODIES AND SHOULD GIVE WAY TO THE
GREATER HIERARCHY OF PUBLIC WELFARE AND PUBLIC INTEREST.
VI.
CONTRARY TO THE FINDING OF THE COURT OF APPEALS, THE ARCHIVING OF BAYANTEL'S
APPLICATION WAS NOT VIOLATIVE OF THE SUMMARY NATURE OF THE PROCEEDINGS IN THE NTC UNDER
SEC. 3, RULE 1 OF THE NTC REVISED RULES OF PROCEDURE.
VII.
THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE ARCHIVING OF BAYANTEL'S
APPLICATION WAS VIOLATIVE OF THE ALLEGED DECLARED POLICY OF THE GOVERNMENT ON THE
TRANSPARENCY AND FAIRNESS OF ADMINISTRATIVE PROCESS IN THE NTC AS LAID DOWN IN SEC. 4(1) OF
R.A. NO. 7925.
VIII.
THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE NTC VIOLATED THE
PROVISIONS OF THE CONSTITUTION PERTAINING TO DUE PROCESS OF LAW.
IX.
THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT THE MAY 3, 2000 ORDER
GRANTING BAYANTEL A PROVISIONAL AUTHORITY SHOULD BE SET ASIDE AND REVERSED.
i.
Contrary to the finding of the Court of Appeals, there was no violation of the NTC Rule that the
legal, technical, financial and economic documentations in support of the prayer for provisional authority
should first be submitted.
ii.
Contrary to the finding of the Court of Appeals, there was no violation of Sec. 3, Rule 15 of the NTC
Rules of Practice and Procedure that a motion must first be filed before a provisional authority could be
issued.
iii.
Contrary to the finding of the Court of Appeals that a plea for provisional authority necessitates a
notice and hearing, the very rule cited by the petitioner (Section 5, Rule 4 of the NTC Rules of Practice and
Procedure) provides otherwise.
iv.
Contrary to the finding of the Court of Appeals, urgent public need is not the only basis for the
grant of a provisional authority to an applicant;
v.
Contrary to the finding of the Court of Appeals, there was no violation of the constitutional
provision on the right of the public to information when the Common Carrier Authorization Department
(CCAD) prepared its evaluation report. 23
Considering the identity of the matters involved, this Court resolved to consolidate the two petitions. 24
At the outset, it is well to discuss the nature and functions of the NTC, and analyze its powers and
authority as well as the laws, rules and regulations that govern its existence and operations. DHIcET
The NTC was created pursuant to Executive Order No. 546, promulgated on July 23, 1979. It assumed the
functions formerly assigned to the Board of Communications and the Telecommunications Control Bureau,
which were both abolished under the said Executive Order. Previously, the NTC's functions were merely
those of the defunct Public Service Commission (PSC), created under Commonwealth Act No. 146, as
amended, otherwise known as the Public Service Act, considering that the Board of Communications was

the successor-in-interest of the PSC. Under Executive Order No. 125-A, issued in April 1987, the NTC
became an attached agency of the Department of Transportation and Communications.
In the regulatory telecommunications industry, the NTC has the sole authority to issue Certificates of
Public Convenience and Necessity (CPCN) for the installation, operation, and maintenance of
communications facilities and services, radio communications systems, telephone and telegraph systems.
Such power includes the authority to determine the areas of operations of applicants for
telecommunications services. Specifically, Section 16 of the Public Service Act authorizes the then PSC,
upon notice and hearing, to issue Certificates of Public Convenience for the operation of public services
within the Philippines "whenever the Commission finds that the operation of the public service proposed
and the authorization to do business will promote the public interests in a proper and suitable manner." 25
The procedure governing the issuance of such authorizations is set forth in Section 29 of the said Act, the
pertinent portion of which states:
All hearings and investigations before the Commission shall be governed by rules adopted by the
Commission, and in the conduct thereof, the Commission shall not be bound by the technical rules of legal
evidence. . . ..
In granting Bayantel the provisional authority to operate a CMTS, the NTC applied Rule 15, Section 3 of its
1978 Rules of Practice and Procedure, which provides:
Sec. 3. Provisional Relief. Upon the filing of an application, complaint or petition or at any stage
thereafter, the Board may grant on motion of the pleader or on its own initiative, the relief prayed for,
based on the pleading, together with the affidavits and supporting documents attached thereto, without
prejudice to a final decision after completion of the hearing which shall be called within thirty (30) days
from grant of authority asked for. (italics supplied)
Respondent Extelcom, however, contends that the NTC should have applied the Revised Rules which were
filed with the Office of the National Administrative Register on February 3, 1993. These Revised Rules
deleted the phrase "on its own initiative"; accordingly, a provisional authority may be issued only upon
filing of the proper motion before the Commission.
In answer to this argument, the NTC, through the Secretary of the Commission, issued a certification to
the effect that inasmuch as the 1993 Revised Rules have not been published in a newspaper of general
circulation, the NTC has been applying the 1978 Rules.
The absence of publication, coupled with the certification by the Commissioner of the NTC stating that the
NTC was still governed by the 1978 Rules, clearly indicate that the 1993 Revised Rules have not taken
effect at the time of the grant of the provisional authority to Bayantel. The fact that the 1993 Revised
Rules were filed with the UP Law Center on February 3, 1993 is of no moment. There is nothing in the
Administrative Code of 1987 which implies that the filing of the rules with the UP Law Center is the
operative act that gives the rules force and effect. Book VII, Chapter 2, Section 3 thereof merely states:
ESDcIA
Filing. (1) Every agency shall file with the University of the Philippines Law Center three (3) certified
copies of every rule adopted by it. Rules in force on the date of effectivity of this Code which are not filed
within three (3) months from the date shall not thereafter be the basis of any sanction against any party
or persons.
(2)
The records officer of the agency, or his equivalent functionary, shall carry out the requirements of
this section under pain of disciplinary action.
(3)
A permanent register of all rules shall be kept by the issuing agency and shall be open to public
inspection.
The National Administrative Register is merely a bulletin of codified rules and it is furnished only to the
Office of the President, Congress, all appellate courts, the National Library, other public offices or agencies
as the Congress may select, and to other persons at a price sufficient to cover publication and mailing or
distribution costs. 26 In a similar case, we held:
This does not imply however, that the subject Administrative Order is a valid exercise of such quasilegislative power. The original Administrative Order issued on August 30, 1989, under which the

respondents filed their applications for importations, was not published in the Official Gazette or in a
newspaper of general circulation. The questioned Administrative Order, legally, until it is published, is
invalid within the context of Article 2 of Civil Code, which reads:
"Article 2.
Laws shall take effect after fifteen days following the completion of their publication in the
Official Gazette (or in a newspaper of general circulation in the Philippines), unless it is otherwise
provided. . . ."
The fact that the amendments to Administrative Order No. SOCPEC 89-08-01 were filed with, and
published by the UP Law Center in the National Administrative Register, does not cure the defect related
to the effectivity of the Administrative Order.
This Court, in Taada vs. Tuvera (G.R. No. L-63915, December 29, 1986, 146 SCRA 446) stated, thus:
"We hold therefore that all statutes, including those of local application and private laws, shall be
published as a condition for their effectivity, which shall begin fifteen days after publication unless a
different effectivity is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders promulgated by the President in the
exercise of legislative power or, at present, directly conferred by the Constitution. Administrative Rules
and Regulations must also be published if their purpose is to enforce or implement existing law pursuant
also to a valid delegation.
Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the
administrative agency and not the public, need not be published. Neither is publication required of the socalled letters of instructions issued by administrative superiors concerning the rules or guidelines to be
followed by their subordinates in the performance of their duties.
xxx

xxx

xxx

We agree that the publication must be in full or it is no publication at all since its purpose is to inform the
public of the contents of the laws."
The Administrative Order under consideration is one of those issuances which should be published for its
effectivity, since its purpose is to enforce and implement an existing law pursuant to a valid delegation,
i.e., P.D. 1071, in relation to LOI 444 and EO 133. 27
Thus, publication in the Official Gazette or a newspaper of general circulation is a condition sine qua non
before statutes, rules or regulations can take effect. This is explicit from Executive Order No. 200, which
repealed Article 2 of the Civil Code, and which states that:
Laws shall take effect after fifteen days following the completion of their publication either in the Official
Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided. 28
The Rules of Practice and Procedure of the NTC, which implements Section 29 of the Public Service Act
(C.A. 146, as amended), fall squarely within the scope of these laws, as explicitly mentioned in the case
Taada v. Tuvera. 29
Our pronouncement in Taada vs. Tuvera is clear and categorical. Administrative rules and regulations
must be published if their purpose is to enforce or implement existing law pursuant to a valid delegation.
The only exceptions are interpretative regulations, those merely internal in nature, or those so-called
letters of instructions issued by administrative superiors concerning the rules and guidelines to be
followed by their subordinates in the performance of their duties. 30
Hence, the 1993 Revised Rules should be published in the Official Gazette or in a newspaper of general
circulation before it can take effect. Even the 1993 Revised Rules itself mandates that said Rules shall
take effect only after their publication in a newspaper of general circulation. 31 In the absence of such
publication, therefore, it is the 1978 Rules that governs.
In any event, regardless of whether the 1978 Rules or the 1993 Revised Rules should apply, the records
show that the amended application filed by Bayantel in fact included a motion for the issuance of a
provisional authority. Hence, it cannot be said that the NTC granted the provisional authority motu proprio.

The Court of Appeals, therefore, erred when it found that the NTC issued its Order of May 3, 2000 on its
own initiative. This much is acknowledged in the Decision of the Court of Appeals: HECTaA
As prayer, ICC asked for the immediate grant of provisional authority to construct, install, maintain and
operate the subject service and to charge the proposed rates and after due notice and hearing, approve
the instant application and grant the corresponding certificate of public convenience and necessity. 32
The Court of Appeals also erred when it declared that the NTC's Order archiving Bayantel's application
was null and void. The archiving of cases is a widely accepted measure designed to shelve cases in which
no immediate action is expected but where no grounds exist for their outright dismissal, albeit without
prejudice. It saves the petitioner or applicant from the added trouble and expense of re-filing a dismissed
case. Under this scheme, an inactive case is kept alive but held in abeyance until the situation obtains
wherein action thereon can be taken.
In the case at bar, the said application was ordered archived because of lack of available frequencies at
the time, and made subject to reinstatement upon availability of the requisite frequency. To be sure, there
was nothing irregular in the revival of the application after the condition therefor was fulfilled.
While, as held by the Court of Appeals, there are no clear provisions in the Rules of the NTC which
expressly allow the archiving of any application, this recourse may be justified under Rule 1, Section 2 of
the 1978 Rules, which states:
Sec. 2. Scope. These rules govern pleadings, practice and procedure before the Board of
Communications (now NTC) in all matters of hearing, investigation and proceedings within the jurisdiction
of the Board. However, in the broader interest of justice and in order to best serve the public interest, the
Board may, in any particular matter, except it from these rules and apply such suitable procedure to
improve the service in the transaction of the public business. (italics supplied)
The Court of Appeals ruled that the NTC committed grave abuse of discretion when it revived Bayantel's
application based on an ex-parte motion. In this regard, the pertinent provisions of the NTC Rules:
Sec. 5. Ex-parte Motions. Except for motions for provisional authorization of proposed services and
increase of rates, ex-parte motions shall be acted upon by the Board only upon showing of urgent
necessity therefor and the right of the opposing party is not substantially impaired. 33
Thus, in cases which do not involve either an application for rate increase or an application for a
provisional authority, the NTC may entertain ex-parte motions only where there is an urgent necessity to
do so and no rights of the opposing parties are impaired.
The Court of Appeals ruled that there was a violation of the fundamental right of Extelcom to due process
when it was not afforded the opportunity to question the motion for the revival of the application.
However, it must be noted that said Order referred to a simple revival of the archived application of
Bayantel in NTC Case No. 92-426. At this stage, it cannot be said that Extelcom's right to procedural due
process was prejudiced. It will still have the opportunity to be heard during the full-blown adversarial
hearings that will follow. In fact, the records show that the NTC has scheduled several hearing dates for
this purpose, at which all interested parties shall be allowed to register their opposition. We have ruled
that there is no denial of due process where full-blown adversarial proceedings are conducted before an
administrative body. 34 With Extelcom having fully participated in the proceedings, and indeed, given the
opportunity to file its opposition to the application, there was clearly no denial of its right to due process.
HAIaEc
In Zaldivar vs. Sandiganbayan (166 SCRA 316 [1988]), we held that the right to be heard does not only
refer to the right to present verbal arguments in court. A party may also be heard through his pleadings
where opportunity to be heard is accorded either through oral arguments or pleadings, there is no denial
of procedural due process. As reiterated in National Semiconductor (HK) Distribution, Ltd. vs. NLRC (G.R.
No. 123520, June 26, 1998), the essence of due process is simply an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain one's side. Hence, in Navarro III vs.
Damaso (246 SCRA 260 [1995]), we held that a formal or trial-type hearing is not at all times and not in all
instances essential. Plainly, petitioner was not denied due process. 35

Extelcom had already entered its appearance as a party and filed its opposition to the application. It was
neither precluded nor barred from participating in the hearings thereon. Indeed, nothing, not even the
Order reviving the application, bars or prevents Extelcom and the other oppositors from participating in
the hearings and adducing evidence in support of their respective oppositions. The motion to revive could
not have possibly caused prejudice to Extelcom since the motion only sought the revival of the
application. It was merely a preliminary step towards the resumption of the hearings on the application of
Bayantel. The latter will still have to prove its capability to undertake the proposed CMTS. Indeed, in its
Order dated February 1, 2000, the NTC set several hearing dates precisely intended for the presentation
of evidence on Bayantel's capability and qualification. Notice of these hearings were sent to all parties
concerned, including Extelcom.
As regards the changes in the personal circumstances of Bayantel, the same may be ventilated at the
hearings during Bayantel's presentation of evidence. In fact, Extelcom was able to raise its arguments on
this matter in the Opposition (With Motion to Dismiss) anent the re-opening and re-instatement of the
application of Bayantel. Extelcom was thus heard on this particular point.
Likewise, the requirements of notice and publication of the application is no longer necessary inasmuch as
the application is a mere revival of an application which has already been published earlier. At any rate,
the records show that all of the five (5) CMTS operators in the country were duly notified and were
allowed to raise their respective oppositions to Bayantel's application through the NTC's Order dated
February 1, 2000.
It should be borne in mind that among the declared national policies under Republic Act No. 7925,
otherwise known as the Public Telecommunications Policy Act of the Philippines, is the healthy competition
among telecommunications carriers, to wit:
A healthy competitive environment shall be fostered, one in which telecommunications carriers are free to
make business decisions and to interact with one another in providing telecommunications services, with
the end in view of encouraging their financial viability while maintaining affordable rates. 36
The NTC is clothed with sufficient discretion to act on matters solely within its competence. Clearly, the
need for a healthy competitive environment in telecommunications is sufficient impetus for the NTC to
consider all those applicants who are willing to offer competition, develop the market and provide the
environment necessary for greater public service. This was the intention that came to light with the
issuance of Memorandum Circular 9-3-2000, allocating new frequency bands for use of CMTS. This
memorandum circular enumerated the conditions prevailing and the reasons which necessitated its
issuance as follows:
the international accounting rates are rapidly declining, threatening the subsidy to the local
exchange service as mandated in EO 109 and RA 7925;
the public telecommunications entities which were obligated to install, operate and maintain local
exchange network have performed their obligations in varying degrees;
after more than three (3) years from the performance of the obligations only 52% of the total
number of cities and municipalities are provided with local telephone service.
there are mergers and consolidations among the existing cellular mobile telephone service (CMTS)
providers threatening the efficiency of competition;
-

there is a need to hasten the installation of local exchange lines in unserved areas;

there are existing CMTS operators which are experiencing congestion in the network resulting to
low grade of service;
the consumers/customers shall be given the freedom to choose CMTS operators from which they
could get the service. 37
Clearly spelled out is the need to provide enhanced competition and the requirement for more landlines
and telecommunications facilities in unserved areas in the country. On both scores, therefore, there was
sufficient showing that the NTC acted well within its jurisdiction and in pursuance of its avowed duties
when it allowed the revival of Bayantel's application.

We now come to the issue of exhaustion of administrative remedies. The rule is well-entrenched that a
party must exhaust all administrative remedies before resorting to the courts. The premature invocation
of the intervention of the court is fatal to one's cause of action. This rule would not only give the
administrative agency an opportunity to decide the matter by itself correctly, but would also prevent the
unnecessary and premature resort to courts. 38 In the case of Lopez v. City of Manila, 39 we held:
As a general rule, where the law provides for the remedies against the action of an administrative board,
body or officer, relief to courts can be sought only after exhausting all remedies provided. The reason
rests upon the presumption that the administrative body, if given the chance to correct its mistake or
error, may amend its decision on a given matter and decide it properly. Therefore, where a remedy is
available within the administrative machinery, this should be resorted to before resort can be made to the
courts, not only to give the administrative agency the opportunity to decide the matter by itself correctly,
but also to prevent unnecessary and premature resort to courts. TcHCDI
Clearly, Extelcom violated the rule on exhaustion of administrative remedies when it went directly to the
Court of Appeals on a petition for certiorari and prohibition from the Order of the NTC dated May 3, 2000,
without first filing a motion for reconsideration. It is well-settled that the filing of a motion for
reconsideration is a prerequisite to the failing of a special civil action for certiorari.
The general rule is that, in order to give the lower court the opportunity to correct itself, a motion for
reconsideration is a prerequisite to certiorari. It is also basic that petitioner must exhaust all other
available remedies before resorting to certiorari. This rule, however, is subject to certain exceptions such
as any of the following: (1) the issues raised are purely legal in nature, (2) public interest is involved, (3)
extreme urgency is obvious or (4) special circumstances warrant immediate or more direct action. 40
This case does not fall under any of the recognized exceptions to the rule. Although the Order of the NTC
dated May 3, 2000 granting provisional authority to Bayantel was immediately executory, it did not
preclude the filing of a motion for reconsideration. Under the NTC Rules, a party adversely affected by a
decision, order, ruling or resolution may within fifteen (15) days file a motion for reconsideration. That the
Order of the NTC became immediately executory does not mean that the remedy of filing a motion for
reconsideration is foreclosed to the petitioner. 41
Furthermore, Extelcom does not enjoy the grant of any vested interest on the right to render a public
service. The Constitution is quite emphatic that the operation of a public utility shall not be exclusive.
Thus:
No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted to citizens of the Philippines or to corporations organized under the laws of the Philippines at
least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate or
authorization be exclusive in character or for a longer period than fifty years. Neither shall any such
franchise or right be granted except under the condition that it shall be subject to amendment, alteration,
or repeal by the Congress when the common good so requires. . . . . . . . . .. 42
In Radio Communications of the Phils., Inc. v. National Telecommunications Commission, 43 we held:
It is well within the powers of the public respondent to authorize the installation by the private respondent
network of radio communications systems in Catarman, Samar and San Jose, Mindoro. Under the
circumstances, the mere fact that the petitioner possesses a franchise to put up and operate a radio
communications system in certain areas is not an insuperable obstacle to the public respondent's issuing
the proper certificate to an applicant desiring to extend the same services to those areas. The
Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be granted
except that it must be subject to amendment, alteration, or even repeal by the legislature when the
common good so requires. (Art. XII, Sec. 11 of the 1986 Constitution). There is an express provision in the
petitioner's franchise which provides compliance with the above mandate (RA 2036, Sec. 15).
Even in the provisional authority granted to Extelcom, it is expressly stated that such authority is not
exclusive. Thus, the Court of Appeals erred when it gave due course to Extelcom's petition and ruled that
it constitutes an exception to the rule on exhaustion of administrative remedies.
Also, the Court of Appeals erred in annulling the Order of the NTC dated May 3, 2000, granting Bayantel a
provisional authority to install, operate and maintain CMTS. The general rule is that purely administrative

and discretionary functions may not be interfered with by the courts. Thus, in Lacuesta v. Herrera, 44 it
was held:
. . . (T)he powers granted to the Secretary of Agriculture and Commerce (natural resources) by law
regarding the disposition of public lands such as granting of licenses, permits, leases and contracts, or
approving, rejecting, reinstating, or canceling applications, are all executive and administrative in nature.
It is a well recognized principle that purely administrative and discretionary functions may not be
interfered with by the courts. (Coloso vs. Board of Accountancy, G.R. No. L-5750, April 20, 1953) In
general, courts have no supervising power over the proceedings and actions of the administrative
departments of the government. This is generally true with respect to acts involving the exercise of
judgment or discretion and findings of fact. (54 Am. Jur. 558-559) . . ..
The established exception to the rule is where the issuing authority has gone beyond its statutory
authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty or
with grave abuse of discretion. 45 None of these obtains in the case at bar.
Moreover, in petitions for certiorari, evidentiary matters or matters of fact raised in the court below are
not proper grounds nor may such be ruled upon in the proceedings. As held in National Federation of
Labor v. NLRC: 46
At the outset, it should be noted that a petition for certiorari under Rule 65 of the Rules of Court will
prosper only if there is a showing of grave abuse of discretion or an act without or in excess of jurisdiction
on the part of the National Labor Relations Commission. It does not include an inquiry as to the
correctness of the evaluation of evidence which was the basis of the labor official or officer in determining
his conclusion. It is not for this Court to re-examine conflicting evidence, re-evaluate the credibility of
witnesses nor substitute the findings of fact of an administrative tribunal which has gained expertise in its
special field. Considering that the findings of fact of the labor arbiter and the NLRC are supported by
evidence on record, the same must be accorded due respect and finality. EacHCD
This Court has consistently held that the courts will not interfere in matters which are addressed to the
sound discretion of the government agency entrusted with the regulation of activities coming under the
special and technical training and knowledge of such agency. 47 It has also been held that the exercise of
administrative discretion is a policy decision and a matter that can best be discharged by the government
agency concerned, and not by the courts. 48 In Villanueva v. Court of Appeals, 49 it was held that findings
of fact which are supported by evidence and the conclusion of experts should not be disturbed. This was
reiterated in Metro Transit Organization, Inc. v. National Labor Relations Commission, 50 wherein it was
ruled that factual findings of quasi-judicial bodies which have acquired expertise because their jurisdiction
is confined to specific matters are generally accorded not only respect but even finality and are binding
even upon the Supreme Court if they are supported by substantial evidence.
Administrative agencies are given a wide latitude in the evaluation of evidence and in the exercise of its
adjudicative functions. This latitude includes the authority to take judicial notice of facts within its special
competence.
In the case at bar, we find no reason to disturb the factual findings of the NTC which formed the basis for
awarding the provisional authority to Bayantel. As found by the NTC, Bayantel has been granted several
provisional and permanent authorities before to operate various telecommunications services. 51 Indeed,
it was established that Bayantel was the first company to comply with its obligation to install local
exchange lines pursuant to E.O. 109 and R.A. 7925. In recognition of the same, the provisional authority
awarded in favor of Bayantel to operate Local Exchange Services in Quezon City, Malabon, Valenzuela and
the entire Bicol region was made permanent and a CPCN for the said service was granted in its favor.
Prima facie evidence was likewise found showing Bayantel's legal, financial and technical capacity to
undertake the proposed cellular mobile telephone service.
Likewise, the May 3, 2000 Order did not violate NTC Memorandum Circular No. 9-14-90 dated September
4, 1990, contrary to the ruling of the Court of Appeals. The memorandum circular sets forth the procedure
for the issuance of provisional authority thus:
EFFECTIVE THIS DATE, and as part of the Commission's drive to streamline and fast track action on
applications/petitions for CPCN other forms of authorizations, the Commission shall be evaluating

applications/petitions for immediate issuance of provisional authorizations, pending hearing and final
authorization of an application on its merit.
For this purpose, it is hereby directed that all applicants/petitioners seeking for provisional authorizations,
shall submit immediately to the Commission, either together with their application or in a Motion all their
legal, technical, financial, economic documentations in support of their prayer for provisional
authorizations for evaluation. On the basis of their completeness and their having complied with
requirements, the Commission shall be issuing provisional authorizations.
Clearly, a provisional authority may be issued even pending hearing and final determination of an
application on its merits.
Finally, this Court finds that the Manifestations of Extelcom alleging forum shopping on the part of the NTC
and Bayantel are not impressed with merit. The divisions of the Supreme Court are not to be considered
as separate and distinct courts. The Supreme Court remains a unit notwithstanding that it works in
divisions. Although it may have three divisions, it is but a single court. Actions considered in any of these
divisions and decisions rendered therein are, in effect, by the same Tribunal. The divisions of this Court
are not to be considered as separate and distinct courts but as divisions of one and the same court. 52
Moreover, the rules on forum shopping should not be literally interpreted. We have stated thus:
It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and applied as to achieve
the purposes projected by the Supreme Court when it promulgated that circular. Circular No. 28-91 was
designed to serve as an instrument to promote and facilitate the orderly administration of justice and
should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate
objection or the goal of all rules of procedure which is to achieve substantial justice as expeditiously as
possible. 53
Even assuming that separate actions have been filed by two different parties involving essentially the
same subject matter, no forum shopping was committed as the parties did not resort to multiple judicial
remedies. The Court, therefore, directed the consolidation of the two cases because they involve
essentially the same issues. It would also prevent the absurd situation wherein two different divisions of
the same court would render altogether different rulings in the cases at bar. DAHEaT
We rule, likewise, that the NTC has legal standing to file and initiate legal action in cases where it is clear
that its inaction would result in an impairment of its ability to execute and perform its functions. Similarly,
we have previously held in Civil Service Commission v. Dacoycoy 54 that the Civil Service Commission, as
an aggrieved party, may appeal the decision of the Court of Appeals to this Court.
As correctly stated by the NTC, the rule invoked by Extelcom is Rule 65 of the Rules of Civil Procedure,
which provides that public respondents shall not appear in or file an answer or comment to the petition or
any pleading therein. 55 The instant petition, on the other hand, was filed under Rule 45 where no similar
proscription exists.
WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The Court of Appeals'
Decision dated September 13, 2000 and Resolution dated February 9, 2001 are REVERSED and SET
ASIDE. The permanent injunction issued by the Court of Appeals is LIFTED. The Orders of the NTC dated
February 1, 2000 and May 3, 2000 are REINSTATED. No pronouncement as to costs.
THIRD DIVISION
[G.R. No. 112702. September 26, 1997.]
NATIONAL POWER CORPORATION, petitioner, vs. COURT OF APPEALS and CAGAYAN ELECTRIC
POWER AND LIGHT CO., INC. (CEPALCO), respondents.
[G.R. No. 113613. September 26, 1997.]
PHIVIDEC INDUSTRIAL AUTHORITY, petitioner, vs. COURT OF APPEALS and CAGAYAN ELECTRIC
POWER AND LIGHT CO., INC. (CEPALCO), respondents.
SYLLABUS

1.
ADMINISTRATIVE LAW; REPUBLIC ACT NO. 7638; THE NON-PRICE REGULATORY FUNCTIONS OF THE
ENERGY REGULATORY BOARD UNDER SECTION 3 OF EXECUTIVE ORDER 172 ARE TRANSFERRED TO THE
DEPARTMENT OF ENERGY; CASE AT BAR. The determination of which of two public utilities has the right
to supply electric power to an area which is within the coverage of both is certainly not a rate-fixing
function which should remain with the ERB. It deals with the regulation of the distribution of energy
resources which, under Executive Order No. 172, was expressly a function of ERB. However, with the
enactment of Republic Act No. 7638, the Department of Energy look over such function. Hence, it is this
Department which shall then determine whether CEPALCO or PIA should supply power to PIE-MO. Clearly,
petitioner NPC'S assertion that its "authority to entertain and hear direct connection applications is a
necessary incident of its express authority to sell electric power in bulk" is now baseless. Even without the
new legislation affecting its power to conduct hearings, it is certainly irregular, if not downright anomalous
for the NPC itself to determine whether it should supply power directly to the PLA or the industries within
the PIE-MO. It simply cannot arrogate unto itself the authority to exercise non-rate fixing powers which
now devolves upon the Department of Energy and to hear and eventually grant itself the right to supply
power in bulk.
2.
ID.; PHIVIDEC INDUSTRIAL AUTHORITY; HAS THE AUTHORITY TO DIRECTLY CONNECT FROM THE
NATIONAL POWER CORPORATION, BEING A PUBLIC UTILITY, BUT SUCH AUTHORITY MAY NOT BE
EXERCISED IN SUCH A MANNER AS TO PREJUDICE THE RIGHTS OF EXISTING FRANCHISEES. Petitioner
PIA is a subsidiary of the PHIVIDEC with "governmental and proprietary functions." The PIA is authorized to
render indirect service to the public by its administration of the PHIVIDEC industrial areas like the PIE-MO
and may, therefore, be considered a public utility. As it is expressly authorized by law to perform the
functions of a public utility, a certificate of public convenience, as suggested by the Court of Appeals, is
not necessary for it to avail of a direct power connection from the NPC. However, such authority to be a
public utility may not be exercised in such a manner as to prejudice the rights of existing franchisees. In
fact, by its actions, PIA recognized the rights of the franchisees in the area.
3.
COMMERCIAL LAW; PUBLIC SERVICE ACT; PUBLIC UTILITY; CONSTRUED. 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. The term
implies public use and service.
4.
ID.; ID.; ID.; EXCLUSIVITY OF ANY PUBLIC FRANCHISE HAS NOT BEEN FAVORED BY THIS COURT TO
PRIVATE CORPORATIONS; THE INTERPRETATION OF RIGHTS, PRIVILEGES OR FRANCHISES IS TAKEN
AGAINST THE GRANTEE. Ventilating the issue in a public hearing would not unduly prejudice CEPALCO
although it was enfranchised by law earlier than the PIA. Exclusivity of any public franchise has not been
favored by this Court such that in most, if not all, grants by the government to private corporations, the
interpretation of rights, privileges or franchises is taken against the grantee. Thus in Alger Electric, Inc.,
vs. Court of Appeals, the Court said: ". . . Exclusivity is given by law with the understanding that the
company enjoying it is self-sufficient and capable of supplying the needed service or product at moderate
or reasonable prices. It would be against public interest where the firm granted a monopoly is merely an
unnecessary conduit of electric power, jacking up prices as a superfluous middleman or an inefficient
producer which cannot supply cheap electricity to power intensive industries. It is in the public interest
when industries dependent on heavy use of electricity are given reliable and direct power at the lower
costs thus enabling the sale of nationally marketed products at prices within the reach of the masses. . . ."
HCaEAT
DECISION
ROMERO, J p:
Offered for resolution in these consolidated petitions for review on certiorari is the issue of whether or not
the National Power Corporation (NPC) has jurisdiction to determine whether it may supply electric power
directly to the facilities of an industrial corporation in areas where there is an existing and operating
electric power franchisee. cdtai
On June 17, 1961, the Cagayan Electric and Power Light Company (CEPALCO) was enfranchised by
Republic Act No. 3247 "to construct, maintain and operate an electric light, heat and power system for the
purpose of generating and/or distributing electric light, heat and/or power for sale within the City of
Cagayan de Oro and its suburbs" for fifty (50) years. Republic Act No. 3570, approved on June 21, 1963,

expanded the area of coverage of the franchise to include the municipalities of Tagoloan and Opol, both in
the Province of Misamis Oriental. On August 4, 1969, Republic Act No. 6020 further amended the same
franchise to include in the areas of CEPALCO's authority of "generating and distributing electric light and
power for sale," the municipalities of Villanueva and Jasaan, also of the said province.
Presidential Decree No. 243, issued on July 12, 1973, created a "body corporate and politic" to be known
as the Philippine Veterans Investment Development Corporation (PHIVIDEC) vested with authority to
engage in "commercial, industrial, mining, agricultural and other enterprises" among other powers 1 and
"to allow the full and continued employment of the productive capabilities of and investment of the
veterans and retirees of the Armed Forces of the Philippines." On August 13, 1974, Presidential Decree No.
538 was promulgated to create the PHIVIDEC Industrial Authority (PIA), a subsidiary of PHIVIDEC, to carry
out the government policy "to encourage, promote and sustain the economic and social growth of the
country and that the establishment of professionalized management of well-planned industrial areas shall
further this objective." 2 Under Sec. 3 of P.D. No. 538, the first area for development shall be located in
the municipalities of Tagoloan and Villanueva. 3 This area forms part of the PHIVIDEC Industrial Estate
Misamis Oriental (PIE-MO).
As manager of PIE-MO, PIA granted the Ferrochrome Philippines, Inc. (FPI) and Metal Alloys Corporation
(MAC) authority to operate in its area of development. On July 6, 1979, PIA granted CEPALCO a temporary
authority to retail electric power to the industries operating within the PIE-MO. 4 The Agreement executed
by PIA and CEPALCO authorized CEPALCO "to operate, administer, construct and distribute electric power
within the PHIVIDEC Industrial Estate, Misamis Oriental, such authority to be co-extensive with the
territorial jurisdiction of PHIVIDEC Industrial Estate, as defined in Sec. 3 of P.D. No. 538 and shall be for a
period of five (5) years, renewable for another five (5) years at the option of CEPALCO." The parties
provided further that:
"9.
At the end of the fifth year, or at the end of the 10th year, should this Agreement be thus renewed,
PIA has the option to take over the operation of the electric service and acquire by purchase CEPALCO's
assets within PIE-MO. This option shall be communicated to CEPALCO in writing at least 24 months before
the date of acquisition of assets and takeover of operation by PIA. Should PIA exercise its option to
purchase the assets of CEPALCO in PIE-MO, PIA shall respect the right of ownership of and maintenance by
CEPALCO of those assets inside PIE-MO not covered by such purchase. . . ."
According to PIA, 5 CEPALCO proved no match to the power demands of the industries in PIE-MO that
most of these companies operating therein closed shop. 6 Impelled by a "desire to provide cheap power
costs to power-intensive industries operating within the Estate," PIA applied with the National Power
Corporation (NPC) for direct power connection which the latter in due course approved. 7 One of the
companies which entered into an agreement with the NPC for a direct sale and supply of power was the
Ferrochrome Phils., Inc. (FPI).
Contending that the said agreement violated its right as the authorized operator of an electric light and
power system in the area and the national electrification policy, CEPALCO filed Civil Case No. Q-35945, a
petition for prohibition, mandamus and injunction before the Regional Trial Court of Quezon City against
the NPC. Notwithstanding NPC's claim that it was authorized by its Charter to sell electric power "in bulk"
to industrial enterprises, the lower court rendered a decision on May 2, 1984, restraining the NPC from
supplying power directly to FPI upon the ground that such direct sale, supply and delivery of electric
power by the NPC to FPI was violative of the rights of CEPALCO under its legislative franchise. Hence, the
lower court ordered the NPC to "permanently desist" from effecting direct supply of power to the FPI and
"from entering into and/or implementing any agreement or arrangement for such direct power
connection, unless coursed through the power line" of CEPALCO.
Eventually, the case reached this Court through G.R. No. 72085. 8 On December 28, 1989, the Court
denied the appeal interposed by NPC on the ground that the statutory authority given to the NPC as
regards direct supply of power to BOI-registered enterprises "should always be subordinate to the 'totalelectrification-of-the-entire-country-on-an-area-coverage basis policy' enunciated in P.D. No. 40." 9 We
held further that:
"Nor should we lose sight of the factual findings of the court a quo that petitioner-appellee CEPALCO had
not only been authorized by the Phividec Industrial Authority to provide electrical power to the Phividec
Industrial Estate within which the FPI plant is located, but that petitioner-appellee CEPALCO had in fact,

supplied the latter's power requirements for the construction of its plant, upon FPI's application therefor
as early as October 17, 1980.
It bears emphasis then that 'it is only after a hearing (or an opportunity for such a hearing) where it is
established that the affected private franchise holder is incapable or unwilling to match the reliability and
rates of NPC that a direct connection with NPC may be granted.' Here, petitioner-appellee's reliability as a
power supplier and ability to match the NPC rates were never put in issue.
It is immaterial that petitioner-appellee's franchise was not exclusive. A privilege to sell within specified
territory, even if not exclusive, is a valuable property right entitled to protection against unauthorized
competition.'' 10
Notwithstanding said decision, in September 1990, FPI filed a new application for the direct supply of
electric power from NPC. The Hearing Committee of the NPC had started hearing the application but
CEPALCO filed with the Regional Trial Court of Quezon City a petition for contempt against NPC officials led
by Ernesto Aboitiz. On August 10, 1992, the trial court found the respondents in direct contempt of court
and accordingly imposed upon them a fine of P500.00 each.
The respondent NPC officials challenged before this Court the judgment holding them in contempt of court
through G.R. No. 107809, (Aboitiz v. Regino). 11 In the Decision of July 5, 1993, the Court upheld the
contempt ruling and, after quoting the lower court's decision of May 2, 1984 which the Court upheld in
G.R. No. 72085, said:
"These directives show that the lower court (and this Court) intended the arrangement between FPI and
CEPALCO to be permanent and free from NAPOCOR's influence or intervention. Any attempt on the part of
NAPOCOR or its officers and/or employees to strike a deal with FPI would be a clear and direct
disobedience to a lawful order and therefore contemptuous.
The petitioners call the attention of the Court to the statement of CEPALCO that 'NAPOCOR has already
implemented in full' the May 2, 1984 decision of the lower court as affirmed by this Court. They suggest
that in view of this, the decision no longer has any binding effect upon the parties, or to put it another
way, has become functus officio. Consequently, when they entertained the re-application of FPI for direct
power connection to NAPOCOR, they were not disobeying the May 2, 1984 order of the trial court and so
should not be held in contempt.
This argument must be rejected in view of our finding of the permanence and comprehensiveness of the
challenged order of the trial court. 'Permanent' is not a difficult word to understand. It means 'lasting or
intended to last indefinitely without change.' As for the scope of the order, NAPOCOR was directed to
'desist from effecting, causing, and continuing the direct supply, sale and delivery of electricity from its
power line to the plant of Ferrochrome Philippines, Inc., and from entering into and/or implementing any
agreement or arrangement for such direct power connection, unless coursed through the power line of
petitioner." (emphasis supplied.)
Meanwhile, the NPC Hearing Committee 12 proceeded with its hearings. CEPALCO was duly notified
thereof but it opted to question the committee's jurisdiction. It did not submit any evidence.
Consequently, in its Report and Recommendation dated September 27, 1991, the committee gave weight
to the evidence presented by FPI that CEPALCO charged higher rates than what the NPC would if allowed
to supply power directly to FPI. Although the committee considered as unfounded FPI's claim of CEPALCO's
unreliability as a power supplier, 13 it nonetheless held that:
"Form (sic) the foregoing and on the basis of the decision of the Supreme Court in the case of National
Power Corporation and Fine Chemicals (Phils.) Inc. v. The Court of Appeals and the Manila Electric
Company, G.R. No. 84695, May 8, 1990, FPI is entitled to a direct connection to NPC as applied for
considering that CEPALCO is unwilling to match the rates of NPC for directly serving FPI and that FPI is a
duly registered BOI registered enterprises (sic). The Supreme Court in the aforestated case has ruled as
follows:
'As consistently ruled by the Court pursuant to P.D. No. 380 as amended by P.D. No. 395, NPC is statutorily
empowered to directly service all the requirements of a BOI registered enterprise provided that, first, any
affected private franchise holder is afforded an opportunity to be heard on the application therefor and
second, from such a hearing, it is established that said private franchise holder is incapable or unwilling to

match the reliability and rates of NPC for directly serving the latter (National Power Corporation v. Jacinto;
134 SCRA 435 [1985]. National Power Corporation v. Court of Appeals, 161 SCRA 103 [1988])." 14
However, considering the "better and priority right" of PIA, the committee recommended that instead of a
direct power connection by the NPC to FPI, the connection should be made to PIA "as a utility user for its
industrial Estate at Tagoloan, Misamis Oriental." 15
For its part, on November 3, 1989, CEPALCO filed with the Energy Regulatory Board (ERB) a petition
praying that the ERB "order the discontinuance of all existing direct supply of power by the NPC within
petitioner's franchise area" (ERB Case No. 89-430). On July 17, 1992, the ERB ruled that CEPALCO "is
relatively efficient and reliable as manifested by its very low system losses (far from the 14% standard)
and very high power factors" and therefore CEPALCO is technically capable "to distribute power to its
consumers within its franchise area, particularly the industrial customers." It disposed of the petition as
follows:
"WHEREFORE, in view of the foregoing premises, when the petitioner has been proven to be capable of
distributing power to its industrial consumers and having passed the secondary considerations with a
passing mark of 85%, judgment is hereby rendered granting the relief prayed for. Accordingly, it is hereby
declared that all direct connection of industries to NPC within the franchise area of CEPALCO is no longer
necessary. Therefore, all existing NPC direct supply of power to industrial consumers within the franchise
area of CEPALCO is hereby ordered discontinued. . . ." 16
However, during the pendency of the Aboitiz case in this Court or on August 3, 1992, PIA contracted the
NPC for the construction of a 138 kilovolt (KV) transmission line from Namutulan substation to the
receiving and/or substation of PIA. 17
As expected, on February 17, 1993, CEPALCO filed in the Regional Trial Court of Pasig (Branch 68), a
petition for certiorari, prohibition, mandamus and injunction against the NPC and some officials of both
the NPC and PIA. 18 Docketed as SCA No. 290, the petition specifically sought the issuance of a temporary
restraining order. However, after hearing, the prayer for the temporary restraining order was denied by
the court in its order of March 12, 1993. 19 CEPALCO filed a motion for the reconsideration of said order
while NPC and PIA moved for the dismissal of the petition. 20
On June 23, 1993, noting the cases filed by CEPALCO all seeking exclusivity in the distribution of electric
power to areas covered by its franchise, the court 21 ruled that "the right of petitioner to supply electric
power in the aforesaid area to the exclusion of other entities had been settled once and for all by the
Regional Trial Court of Quezon City wherein petitioner obtained a favorable judgment." Hence, the petition
was dismissed on the ground of res judicata. 22
Forthwith, CEPALCO elevated the case to this Court through a petition for certiorari, prohibition and
injunction with prayer for the issuance of a preliminary injunction or a temporary restraining order. The
petition was docketed as G.R. No. 110686 but on August 18, 1993, the Court referred it to the Court of
Appeals pursuant to Sec. 9, paragraph 1 of B.P. Blg. 129 conferring upon the appellate court original
jurisdiction to issue writs of prohibition and certiorari and auxiliary writs. 23 In the Court of Appeals, the
petition was docketed as CA-G.R. No. 31935-SP.
On September 10, 1993, the Fifteenth Division of the Court of Appeals issued a resolution 24 denying the
prayer for the issuance of a temporary restraining order on the strength of Sec. 1 of P.D. No. 1818. It ruled
that since the NPC is a public utility, it "enjoys the protective mantle" of said decree prohibiting courts
from issuing restraining orders or preliminary injunctions in cases involving infrastructure and natural
resource development projects of, and operated by, the government. 25
However, on September 17, 1993, upon a motion for reconsideration filed by CEPALCO and a reevaluation of the provisions of P.D. No. 1818, the Court of Appeals set aside its resolution of September
10, 1993 and held that:
". . . the project intended by respondent NPC, which is the construction, completion and operation of the
138-kv line, is not in consonance with the intendment of said Decree which is to protect public utilities
and their projects and activities intended for public convenience and necessity. The project of respondent
NPC is intended to serve exclusively the needs of private entities, Metal Alloys Corporation and
Ferrochrome Philippines in Tagoloan, Misamis Oriental."

Accordingly, the Court of Appeals issued a temporary restraining order directing the private respondents
therein "to immediately cease and desist from proceeding with the construction, completion and
operation of the 138-kv line subject of the petition." The NPC, PIA and the officers of both were directed to
explain why the preliminary injunction prayed for should not issue. 26
In due course, the Court of Appeals rendered the decision 27 of November 15, 1993 assailed herein. After
ruling that the lower court gravely abused its discretion in dismissing the petition below on the grounds of
res judicata and litis pendentia, the Court of Appeals confronted squarely the issue of whether or not "the
NPC itself has the power to determine the propriety of direct power connection from its lines to any entity
located within the franchise area of another public utility." 28
Elucidating that the ruling of this Court in both G.R. No. 78609 (NPC v. Court of Appeals) 29 and G.R. No.
87697 (Del Monte [Philippines], Inc. v. Hon. Felix M. de Guzman, etc., et al.) 30 categorically held that
before a direct connection to the NPC may be granted, a proper administrative body must conduct a
hearing "to determine which entity, the franchise holder or the NPC, has the right to supply electric power
to the entity applying for direct connection," the Court of Appeals declared: cdasia
"We have no doubt that the ERB, and not the NPC, is the administrative body referred to by the Supreme
Court where the hearing is to be conducted to determine the propriety of direct connection. The charter of
the ERB (PD 1206 in relation to EO 172) is clear on this:
"The Board shall, after due notice and hearing, exercise the following powers and functions, among
others:
xxx

xxx

xxx

e.
Issue Certificate of Public Convenience for the operation of electric power utilities and services, . . .
including the establishment and regulation of areas of operation of particular operators of public power
utilities and services, the fixing of standards and specifications in all cases related to the issued
Certificate of Public Convenience . . ."
Moreover, NPC is not an administrative body as jurisprudentially defined, and that the NPC cannot usurp a
power it has never been conferred by its charter or by other law the power to determine the validity of
direct connection agreement it enters into in violation of a power distributor's franchise.
Thus, considering that PIA professes to be and intends to engage in the business of a public power utility,
it must first apply for a public convenience and necessity (conferment of operating authority) with the
ERB. This may have been the opportune time for ERB to determine whether to allow PIA to directly
connect with NPC, with notice and opportunity for CEPALCO considering that, as the latter alleges, this
new line which NPC is installing duplicates that existing Cepalco 138 kv line which NPC itself turned over
to Cepalco and for which it was paid in full."
Consequently, the Court of Appeals affirmed the dismissal of the petition, annulled and set aside the
decision of the Hearing Committee of the NPC on direct connection with PIA, and ordered the NPC "to
desist from continuing the construction of that NPC-Natumulan-Phividec 138 kv transmission line." 31
Without filing a motion for the reconsideration of said Decision, NPC filed in this Court on December 9,
1993, a motion for an extension of time within which to file "the proper petition." The motion which was
docketed as G.R. No. 112702, was granted on December 20, 1993 with warning that no further extension
would be granted. Thereafter, NPC filed a motion praying that it be excused from filing the petition on
account of the filing by PIA in the Court of Appeals of a motion for the reconsideration of the Decision of
November 15, 1993. In the Resolution of February 2, 1994, the Court noted and granted petitioner's
motion and considered the case "closed and terminated." 32 This resolution was withdrawn in the
Resolution of February 8, 1995 33 in view of the "inadvertent clerical error" terminating the case, after the
NPC had mailed its petition for review on certiorari on February 21, 1994. 34
In the meantime, PIA filed a motion for reconsideration of the appellate court's Decision of November 15,
1993 arguing in the main that, not being a party to previous cases between CEPALCO and NPC, it was not
bound by decisions of this Court. The Court of Appeals denied the motion on January 28, 1994 on the
basis of stare decisis where once the court has laid down a principle of law as applicable to a certain state

of facts, it will adhere to and apply the principle to all future cases where the facts are substantially the
same. 35 Hence, PIA filed a petition for review on certiorari which was docketed as G.R. No. 113613.
G.R. Nos. 112702 and 113613 were consolidated on June 15 1994. 36
In G.R. No. 112702, petitioner NPC contends that private respondent CEPALCO is not entitled to relief
because it has been forum-shopping. Private respondent had filed Civil Case No. Q-93-14597 in the
Regional Trial Court of Quezon City which had been forwarded to it by the Regional Trial Court of Pasig.
Said case and the instant case (SCA No. 290) deal with the same issue of restoring CEPALCO's right to
supply power to FPI and MAC. Petitioner thus contends that because the principle of litis pendentia
applies, although other parties are involved in the case before the Quezon City court, there is no basis for
granting relief to private respondent CEPALCO "(s)ince the dismissal for lack of jurisdiction was affirmed
by the respondent court." 37 Corollarily, petitioner asserts that because the main case herein was
dismissed "without trial," the respondent appellate court should not have accorded private respondent
affirmative relief. 38
Petitioner NPC's contention is based on the fact that on October 6, 1992, private respondent CEPALCO
filed against the NPC in the Regional Trial Court of Pasig, Civil Case No. 62490, an action for specific
performance and damages with prayer for preliminary mandatory injunction directing the NPC to
immediately restore to CEPALCO the distribution of power pertaining to MAC's consumption. 39 However,
no summons was served and the ex-parte writ prayed for was not issued. Nevertheless, the case was
forwarded to the Regional Trial Court of Quezon City where it was docketed as Civil Case No. 93-14597.
That case was pending when SCA No. 290 was filed before the Regional Trial Court of Pasig.
The Court of Appeals affirmed the lower court's dismissal of the case neither on the grounds of res
judicata nor litis pendentia but on the "only one unresolved issue, which is whether the NPC itself has the
power to determine the propriety of direct power connection from its lines to any entity located within the
franchise area of another public utility." 40 The Court of Appeals opined that the effects of litis pendentia
could not have resulted in the dismissal of SCA No. 290 because Civil Case No. O-35945 which became
G.R. No. 72085 was based on facts totally different from that of SCA No. 290.
In invoking litis pendentia, however, petitioner NPC refers to this case, SCA No. 290, and Civil Case No. 9314597. SCA No. 290 and Civil Case No. 93-14597 may both have the same objective, the restoration of
CEPALCO's right to distribute power to PIE-MO areas under its franchise aside from the fact that the cases
involve practically the same parties. However, litis pendentia may not be successfully invoked to cause
the dismissal of SCA No. 290.
In order to constitute a ground for the abatement or dismissal of an action, litis pendentia must exhibit
the concurrence of the following requisites: (a) identity of parties, or at least such as representing the
same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded
on the same facts, and (c) identity in the two (2) cases should be such that the judgment that may be
rendered in the pending case would, regardless of which party is successful, amount to res judicata in the
other. 41 As a rule, the second case filed should be abated under the maxim qui prior est tempore, potior
est jure. However, this rule is not a hard and fast one. The "priority-in-time rule" may give way to the
criterion of "more appropriate action." More recently, the criterion used was the "interest of justice rule."
42
We hold that the last criterion should be the basis for resolving this case, although it was filed later than
Civil Case No. 62490 which, upon its transfer, became Civil Case No. 93-14795. In so doing, we shall avoid
multiplicity of suits which is the matrix upon which litis pendentia is anchored and eventually bring about
the final settlement of the recurring issue of whether or not the NPC may supply power directly to the
industries within PIE-MO, notwithstanding the operation of franchisee CEPALCO in the same area.
It should be noted that there is yet pending another case, namely, Civil Case No. 91-383, instituted by PIA
against CEPALCO in the Regional Trial Court of Misamis Oriental which apparently deals with a related
issue PIA's franchise or authority to provide power to enterprises within the PIE-MO. 43 Hence, the
principle of litis pendentia which ordinarily demands the dismissal of an action filed later than another,
should be considered under the primordial concept of "interest of justice," in order that a recurrent issue
common to all cases may be definitively resolved.

The principal and common question raised in these consolidated cases is: whether or not the NPC may
supply power directly to PIA in the PIE-MO area where CEPALCO has a franchise. Petitioner PIA in G.R. No.
113613 asserts that it may receive power directly from the NPC because it is a public utility. It avers that
P.D. No. 538, as amended, empowers PIA "as and to be a public utility to operate and serve the power
needs within PIE-MO, i.e., a specific area constituting a small portion of petitioner's franchise coverage,"
without, however, specifying the particular provision which so empowers PIA. 44
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. 45 The term implies public use and service. 46
Petitioner PIA is a subsidiary of the PHIVIDEC with "governmental and proprietary functions." 47 Sec. 4 of
P.D. No. 538 specifically confers upon it the following powers:
"a.
To operate, administer and manage the PHIVIDEC Industrial Areas and other areas which shall
hereafter be proclaimed, designated and specified in subsequent Presidential Proclamation; to construct
acquire, own, lease, operate and maintain infrastructure facilities, factory buildings, warehouses, dams,
reservoirs, water distribution, electric light and power systems, telecommunications and transportation
networks, or such other facilities and services necessary or useful in the conduct of industry and
commerce or in the attainment of the purposes and objectives of this Decree;" (emphasis supplied.)
Clearly then, the PIA is authorized to render indirect service to the public by its administration of the
PHIVIDEC industrial areas like the PIE-MO and may, therefore, be considered a public utility. As it is
expressly authorized by law to perform the functions of a public utility, a certificate of public convenience,
as suggested by the Court of Appeals, is not necessary for it to avail of a direct power connection from the
NPC. However, such authority to be a public utility may not be exercised in such a manner as to prejudice
the rights of existing franchisees. In fact, by its actions, PIA recognized the rights of the franchisees in the
area.
Accordingly, in pursuit of its powers "to grant such franchise for and to operate and maintain within the
areas electric light, heat or power systems," etc. under Sec. 4 (i) of P.D. No. 538 and its rule-making power
under Sec. 4 (l) of the same law, on July 20, 1979, the PIA Board of Directors promulgated the "Rules and
Regulations To Implement the Intent and Provisions of Presidential Decree No. 538." 48 Rule XI thereof on
"Utilities and Services" provides as follows:
"SECTION 1. Utilities It is the responsibility of the Authority to provide all required utilities and services
inside the Estate:
xxx

xxx

xxx

a)
Contracts for the purchase of public utilities and/or services shall be subject to the prior approval
of the Authority; Provided, however, that similar contract(s) existing prior to the effectivity of this Rules
and Regulations shall continue to be in full force and effect.
xxx

xxx

xxx

(Emphasis supplied.)
It should be noted that the Rules and Regulations took effect thirty (30) days after its publication in the
Official Gazette on September 24, 1979 or more than three (3) months after the July 6, 1979 contract
between PIA and CEPALCO was entered into. As such, the Rules and Regulations itself allowed the
continuance of the supply of electric power to PIE-MO by CEPALCO.
That the contract of July 6, 1979 was not renewed by the parties after the expiration of the five-year
period stipulated therein did not change the fact that within that five-year period, in violation of both the
contract and its Rules and Regulations, PIA applied with the NPC for direct power connection. The matter
was aggravated by NPC's favorable action on the application, totally unmindful of the extent of its powers
under the law which, in National Power Corporation v. Court of Appeals, 49 the Court delimits as follows:
". . . It is immaterial whether the direct connection is merely an improvement or an increase in existing
voltage, as alleged by petitioner, or a totally new and separate electric service as claimed by private
respondent. The law on the matter is clear. PD 40 promulgated on 7 November 1972 expressly provides

that the generation of electric power shall be undertaken solely by the NPC. However, Section 3 of the
same decree also provides that the distribution of electric power shall be undertaken by cooperatives,
private utilities (such as the CEPALCO), local governments and other entities duly authorized, subject to
state regulation. (emphasis supplied.)
The same case ruled that "(i)t is only after a hearing (or an opportunity for such a hearing) where it is
established that the affected private franchise holder is incapable or unwilling to match the reliability and
rates of NPC that a direct connection with NPC may be granted." 50 As earlier stated, the Court arrived at
the same ruling in the later cases of G.R. Nos. 72085, 84695 and 87697.
Petitioner NPC attempted to abide by these rulings when it conducted a hearing to determine whether it
may supply power directly to PIA. While it notified CEPALCO of the hearing, the NPC is not the proper
authority referred to by this Court in the aforementioned earlier decisions, not only because the subject of
the hearing is a matter involving the NPC itself, but also because the law has created the proper
administrative body vested with authority to conduct a hearing.
CEPALCO shares the view of the Court of Appeals that the Energy Regulatory Board (ERB) is the proper
administrative body for such hearings. However, a recent legislative development has overtaken said
view.
The ERB, which used to be the Board of Energy, is tasked with the following powers and functions by
Executive Order No. 172 which took effect immediately after its issuance on May 8, 1987:
"SEC. 3.
Jurisdiction, Powers and Functions of the Board. When warranted and only when public
necessity requires, the Board may regulate the business of importing, exporting, re-exporting, shipping,
transporting, processing, refining, marketing and distributing energy resources. . . .
The Board shall, upon prior notice and hearing, exercise the following, among other powers and functions:
(a)

Fix and regulate the prices of petroleum products;

(b)
Fix and regulate the rate schedule or prices of piped gas to be charged by duly franchised gas
companies which distribute gas by means of underground pipe system;
(c)
Fix and regulate the rates of pipeline concessionaires under the provisions of Republic Act No. 387,
as amended, otherwise known as the 'Petroleum Act of 1949,' as amended by Presidential Decree No.
1700;
(d)
Regulate the capacities of new refineries or additional capacities of existing refineries and license
refineries that may be organized after the issuance of this Executive Order, under such terms and
conditions as are consistent with the national interest;
(e)
Whenever the Board has determined that there is a shortage of any petroleum product, or when
public interest so requires, it may take such steps as it may consider necessary, including the temporary
adjustment of the levels of prices of petroleum products and the payment to the Oil Price Stabilization
Fund created under Presidential Decree No. 1956 by persons or entities engaged in the petroleum
industry of such amounts as may be determined by the Board, which will enable the importer to recover
its cost of importation."
As may be gleaned from said provisions, the ERB is basically a price or rate-fixing agency. Apparently
recognizing this basic function, Republic Act No. 7638 (An Act Creating the Department of Energy,
Rationalizing the Organization and Functions of Government Agencies Related to Energy, and for Other
Purposes), 51 which was approved on December 9, 1992 and which took effect fifteen days after its
complete publication in at least two (2) national newspapers of general circulation, specifically provides as
follows:
"SEC. 18.
Rationalization or Transfer of Functions of Attached or Related Agencies. The non-price
regulatory jurisdiction, powers, and functions of the Energy Regulatory Board as provided for in Section 3
of Executive Order No. 172 are hereby transferred to the Department.
The foregoing transfer of powers and functions shall include all applicable funds and appropriations,
records, equipment, property, and such personnel as may be necessary. Provided, That only such amount

of funds and appropriations of the Board as well as only the personnel thereof which are completely or
primarily involved in the exercise by said Board of its non-price regulatory powers and functions shall be
affected by such transfer.
The power of the NPC to determine, fix, and prescribe the rates being charged to its customers under
Section 4 of Republic Act No. 6395, as amended, as well as the power of electric cooperatives to fix rates
under Section 16 (o), Chapter II of Presidential Decree No. 269, as amended, are hereby transferred to the
Energy Regulatory Board. The Board shall exercise its new powers only after due notice and hearing and
under the same procedure provided for in Executive Order No. 172."
Upon the effectivity of Republic Act No. 7638, then Acting Chairman of the Energy Coordinating Council
Delfin Lazaro transmitted to the Department of Justice the query of whether or not the "non-power rate
powers and functions" of the ERB are included in the "jurisdiction, powers and functions transferred to the
Department of Energy." Answering the query in the affirmative, the Department of Justice rendered
Opinion No. 22 dated February 12, 1993 the pertinent portion of which states:
". . . we believe that since the provision of Section 18 on the transfer of certain powers and functions from
ERB to DOE is clear and unequivocal, and devoid of any ambiguity, in the sense that it categorically refers
to 'non-price jurisdiction, powers and functions' of ERB under Section 3 of E.O. No. 172, there is no room
for interpretation, but only for application, of the law. This is a cardinal rule of statutory construction.
Clearly, the parameters of the transfer of functions from ERB to DOE pursuant to Section 18, are
circumscribed by the provision of Section 3 of E.O. No. 172 alone, so that, if there are other 'related'
functions of ERB under other provisions of E.O. No. 172 or other energy laws, these 'related' functions,
which may conceivably refer to what you call 'non-power rate powers and functions' of ERB, are clearly
not contemplated by Section 18 and are, therefore, not to be deemed included in the transfer of functions
from ERB to DOE under the said provision.
It may be argued that Section 26 of R.A. No. 7638 contains a repealing clause which provides that:
'All laws, presidential decrees, executive orders, rules and regulations or parts thereof, inconsistent with
the provisions of this Act, are hereby repealed or modified accordingly. . . .'
and, therefore, all provisions of E.O. No. 172 and related laws which are inconsistent with the policy,
purpose and intent of R.A. No. 7638 are deemed repealed. It has been said, however, that a general
repealing clause of such nature does not operate as an express repeal because it fails to identify or
designate the act or acts that are intended to be repealed. Rather, it is a clause which predicates the
intended repeal upon the condition that a substantial conflict must be found on existing and prior acts of
the same subject matter. Such being the case, the presumption against implied repeals and the rule on
strict construction regarding implied repeals shall apply ex propio vigore. For the legislature is presumed
to know the existing laws so that, if repeal of particular or specific laws is intended, the proper step is to
so express it. The failure to add a specific repealing clause particularly mentioning the statute to be
repealed indicates that the intent was not to repeal any existing law on the matter, unless an
irreconcilable inconsistency and repugnancy exists in the terms of the new and the old laws (Iloilo Palay
and Corn Planters Association, Inc. vs. Feliciano, 13 SCRA 377; City of Naga vs. Agna, 71 SCRA 176, cited
in Agpalo, Statutory Construction, 1990 Edition, pp. 191-192).
In view of the foregoing, it is our opinion that only the non-price regulatory functions of ERB under Section
3 of E.O. 172 are transferred to the DOE. All other powers of ERB which are not within the purview of its
'non-price regulatory jurisdiction, powers and functions' as defined in Section 3 are not so transferred to
DOE and accordingly remain vested in ERB."
The determination of which of two public utilities has the right to supply electric power to an area which is
within the coverage of both is certainly not a rate-fixing function which should remain with the ERB. It
deals with the regulation of the distribution of energy resources which, under Executive Order No. 172,
was expressly a function of ERB. However, with the enactment of Republic Act No. 7638, the Department
of Energy took over such function. Hence, it is this Department which shall then determine whether
CEPALCO or PIA should supply power to PIE-MO.
Clearly, petitioner NPC's assertion that its "authority to entertain and hear direct connection applications
is a necessary incident of its express authority to sell electric power in bulk" is now baseless. 52 Even

without the new legislation affecting its power to conduct hearings, it is certainly irregular, if not
downright anomalous for the NPC itself to determine whether it should supply power directly to the PIA or
the industries within the PIE-MO. It simply cannot arrogate unto itself the authority to exercise non-rate
fixing powers which now devolves upon the Department of Energy and to hear and eventually grant itself
the right to supply power in bulk. 53
On the other hand, ventilating the issue in a public hearing would not unduly prejudice CEPALCO although
it was enfranchised by law earlier than the PIA. Exclusivity of any public franchise has not been favored by
this Court such that in most, if not all, grants by the government to private corporations, the
interpretation of rights, privileges or franchises is taken against the grantee. Thus in Alger Electric, Inc. v.
Court of Appeals, 54 the Court said:
". . . Exclusivity is given by law with the understanding that the company enjoying it is self-sufficient and
capable of supplying the needed service or product at moderate or reasonable prices. It would be against
public interest where the firm granted a monopoly is merely an unnecessary conduit of electric power,
jacking up prices as a superfluous middleman or an inefficient producer which cannot supply cheap
electricity to power intensive industries. It is in the public interest when industries dependent on heavy
use of electricity are given reliable and direct power at the lower costs thus enabling the sale of nationally
marketed products at prices within the reach of the masses. . . ."
WHEREFORE, both petitions in G.R. No. 112702 and 113613 are hereby DENIED. The Department of
Energy is directed to conduct a hearing with utmost dispatch to determine whether it is the Cagayan
Electric Power and Light Co., Inc. or the National Power Corporation, through the PHIVIDEC Industrial
Authority, which should supply electric power to the industries in the PHIVIDEC Industrial Estate-Misamis
Oriental. LLjur
This Decision is immediately executory.
SO ORDERED.

SECOND DIVISION

[G.R. No. 68729. May 29, 1987.]

RADIO
COMMUNICATIONS
OF
THE
PHILIPPINES,
INC.,
petitioner,
vs.
NATIONAL
TELECOMMUNICATIONS COMMISSION and KAYUMANGGI RADIO NETWORK INCORPORATED,
respondents.
SYLLABUS
1.
ADMINISTRATIVE LAW; PUBLIC SERVICE COMMISSION; FUNCTIONS THEREOF TRANSFERRED TO THE
NATIONAL TELECOMMUNICATIONS. Pursuant to Presidential Decree No. 1 dated September 23, 1972,
reorganizing the executive branch of the National Government, the Public Service Commission was
abolished and its functions were transferred to three specialized regulatory boards, as follows: the Board
of Transportation, the Board of Communications and the Board of Power and Waterworks. The functions so
transferred were still subject to the limitations provided in sections 14 and 15 of the Public Service Law, as
amended. With the enactment of Executive Order No. 546 on July 23, 1979 implementing P.D. No. 1, the
Board of Communications and the Telecommunications Control Bureau were abolished and their functions
were transferred to the National Telecommunications Commission (Sec. 19(d), Executive Order No. 546).
2.
ID.; ID.; ID.; EXEMPTION ENJOYED BY RADIO COMPANIES NO LONGER EXISTS. It is clear from the
provision that the exemption enjoyed by radio companies from the jurisdiction of the Public Service
Commission and the Board of Communications no longer exists because of the changes effected by the
Reorganization Law and implementing executive orders. The petitioner's claim that its franchise cannot be
affected by Executive Order No. 546 on the ground that it has long been in operation since 1957 cannot
be sustained.
3.
ID.; FRANCHISE; SUBJECT TO REGULATION BY THE STATE THROUGH ITS ADMINISTRATIVE
AGENCIES. A franchise, being merely a privilege emanating from the sovereign power of the state and
owing its existence to a grant, is subject to regulation by the state itself by virtue of its police power
through its administrative agencies. We ruled in Pangasinan Transportation Co., Inc. v. Public Service
Commission (70 Phil. 221) that: ". . . statutes enacted for the regulation of public utilities, being a proper
exercise by the State of its police power, are applicable not only to those public utilities coming into
existence after its passage, but likewise to those already established and in operation . . ."
4.
ID.; APPROVAL OF SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS; A PRECONDITION
BEFORE RADIO STATIONS CAN BE PUT UP. In the words of R.A. No. 2036 itself, approval of the then
Secretary of Public Works and Communications was a precondition before the petitioner could put up
radio stations in areas where it desires to operate. It has been repeated time and again that where the
statutory norm speaks unequivocally, there is nothing for the courts to do except to apply it. The law,
leaving no doubt as to the scope of its operation, must be obeyed. (Gonzaga v. Court of Appeals, 51 SCRA
381).
5.
ID.; NATIONAL TELECOMMUNICATIONS COMMISSION; FINDINGS OF FACTS THEREOF, CONCLUSIVE
UPON THE COURT. We find no reason to disturb the public respondent's findings of fact, and conclusions
of law insofar as the private respondent was authorized to operate in Catarman, Samar and San Jose,
Mindoro. As a rule, the Commission's findings of fact, if supported by substantial evidence, are conclusive
upon this Court. We may modify or ignore them only when it clearly appears that there is no evidence to
support reasonably such a conclusion. (Halili v. Daplas, 14 SCRA 14).
DECISION
GUTIERREZ, JR., J p:
This petition seeks the reversal of the decision of the National Telecommunications Commission (NTC)
which ordered petitioner Radio Communications of the Philippines, Incorporated (RCPI) to desist from
operating its radio telephone services in Catarman, Northern Samar; San Jose, Occidental Mindoro; and
Sorsogon, Sorsogon.
Petitioner has been operating a radio communications system since 1957 under its legislative franchise
granted by Republic Act No. 2036 which was enacted on June 23, 1957.
In 1968, the petitioner established a radio telegraph service in Sorsogon, Sorsogon. In 1971, another radio
telegraph service was put up in San Jose, Mindoro followed by another in Catarman, Samar in 1976. The

installation of radio telephone services started in 1971 in San Jose, Mindoro; then in Sorsogon, Sorsogon
and Catarman, Samar in 1983.
In a decision dated June 24, 1980 in NTC Case No. 80-08, private respondent Kayumanggi Radio Network
Incorporated was authorized by the public respondent to operate radio communications systems in
Catarman, Samar and in San Jose, Mindoro.
On December 14, 1983, the private respondent filed a complaint with the NTC alleging that the petitioner
was operating in Catarman, Samar and in San Jose, Mindoro without a certificate of public convenience
and necessity. The petitioner, on the other hand, counter-alleged that its telephone services in the places
subject of the complaint are covered by the legislative franchise recognized by both the public respondent
and its predecessor, the Public Service Commission. In its supplemental reply, the petitioner further
stated that it has been in operation in the questioned places long before private respondent Kayumanggi
filed its application to operate in the same places. LLpr
After conducting a hearing, NTC, in its decision dated August 22, 1984 ordered petitioner RCPI to
immediately cease or desist from the operation of its radio telephone services in Catarman, Northern
Samar; San Jose, Occidental Mindoro; and Sorsogon, Sorsogon stating that under Executive Order No. 546,
a certificate of public convenience and necessity is mandatory for the operation of communication utilities
and services including radio communications.
On September 4, 1984, the petitioner filed a motion for reconsideration which was denied in an order
dated September 12, 1984.
On October 1, 1984, the present petition was filed raising the issue of whether or not petitioner RCPI, a
grantee of a legislative franchise to operate a radio company, is required to secure a certificate of public
convenience and necessity before it can validly operate its radio stations including radio telephone
services in Catarman, Northern Samar; San Jose, Occidental Mindoro; and Sorsogon, Sorsogon.
The petitioner's main argument states that the abolition of the Public Service Commission under
Presidential Decree No. 1 and the creation of the National Telecommunications Commission under
Executive Order No. 546 to replace the defunct Public Service Commission did not affect sections 14 and
15 of the Public Service Law (Commonwealth Act No. 146, as amended).
The provisions of the Public Service Law pertinent to the petitioner's allegation are as follows:
"Section 13. (a) The Commission shall have jurisdiction, supervision, and control over all public services
and their franchises, equipment and other properties, and in the exercise of its authority, it shall have the
necessary powers and the aid of public force: . . .
"Section 14.
xxx
"(d)
xxx

The following are exempted from the provisions of the preceding section:
xxx

xxx

Radio companies except with respect to the fixing of rates;

xxx

xxx

"Section 15. With the exception of those enumerated in the preceding section, no public service shall
operate in the Philippines without possessing a valid and subsisting certificate from the Public Service
Commission, known as 'certificate of public convenience,' or 'certificate of convenience and public
necessity,' as the case may be, to the effect that the operation of said service and the authorization to do
business will promote the public interests in a proper and suitable manner. . . ."
We find no merit in the petitioner's contention.
Pursuant to Presidential Decree No. 1 dated September 23, 1972, reorganizing the executive branch of the
National Government, the Public Service Commission was abolished and its functions were transferred to
three specialized regulatory boards, as follows: the Board of Transportation, the Board of Communications
and the Board of Power and Waterworks. The functions so transferred were still subject to the limitations
provided in sections 14 and 15 of the Public Service Law, as amended. With the enactment of Executive
Order No. 546 on July 23, 1979 implementing P.D. No. 1, the Board of Communications and the
Telecommunications Control Bureau were abolished and their functions were transferred to the National

Telecommunications Commission (Sec. 19(d), Executive Order No. 546). Section 15 of said Executive
Order spells out the functions of the National Telecommunications Commission as follows: prcd
"Sec. 15.

Functions of the Commission. The Commission shall exercise the following functions:

"a.
Issue Certificate of Public Convenience for the operation of communications utilities and services,
radio communications systems, wire or wireless telephone or telegraph system, radio and television
broadcasting system and other similar public utilities;
"b.
Establish, prescribe and regulate areas of operation of particular operators of public service
communications; and determine and prescribe charges or rates pertinent to the operation of such public
utility facilities and services except in cases where charges or rates are established by international
bodies or associations of which the Philippines is a participating member or by bodies recognized by the
Philippine Government as the proper arbiter of such charges or rates;
"c.
Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and
radio communication systems including amateur radio stations and radio and television broadcasting
systems;
"d.
Sub-allocate series of frequencies of bands allocated by the International Telecommunications
Union to the specific services;
"e.
Establish and prescribe rules, regulations, standards, specifications in all cases related to the
issued Certificate of Public Convenience and administer and enforce the same;
"f.
Coordinate and cooperate with government agencies and other entities concerned with any aspect
involving communications with a view to continuously improve the communications service in the
country;
"g.
Promulgate such rules and regulations, as public safety and interest may require, to encourage a
larger and more effective use of communications, radio and television broadcasting facilities, and to
maintain effective competition among private entities in these activities whenever the Commission finds it
reasonably feasible;
"h.

Supervise and inspect the operation of radio stations and telecommunications facilities;

"i.

Undertake the examination and licensing of radio operators;

"j.

Undertake, whenever necessary, the registration of radio transmitters and transceivers; and

"k.

Perform such other functions as may be prescribed by law.

It is clear from the aforequoted provision that the exemption enjoyed by radio companies from the
jurisdiction of the Public Service Commission and the Board of Communications no longer exists because
of the changes effected by the Reorganization Law and implementing executive orders. The petitioner's
claim that its franchise cannot be affected by Executive Order No. 546 on the ground that it has long been
in operation since 1957 cannot be sustained. prcd
A franchise started out as a "royal privilege or (a) branch of the King's prerogative, subsisting in the hands
of a subject." This definition was given by Finch, adopted by Blackstone, and accepted by every authority
since (State v. Twin Village Water Co., 98 Me 214, 56 A 763 (1903)). Today, a franchise, being merely a
privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to
regulation by the state itself by virtue of its police power through its administrative agencies. We ruled in
Pangasinan Transportation Co., Inc. v. Public Service Commission (70 Phil. 221) that:
". . . statutes enacted for the regulation of public utilities, being a proper exercise by the State of its police
power, are applicable not only to those public utilities coming into existence after its passage, but likewise
to those already established and in operation . . ."
Executive Order No. 546, being an implementing measure of P.D. No. 1 insofar as it amends the Public
Service Law (CA No. 146, as amended) is applicable to the petitioner who must be bound by its provisions.
The petitioner cannot install and operate radio telephone services on the basis of its legislative franchise
alone.

The position of the petitioner that by the mere grant of its franchise under RA No. 2036 it can operate a
radio communications system anywhere within the Philippines is erroneous. Section 1 of said statute
reads:
"Section 1.
Subject to the provisions of the Constitution, and to the provisions, not inconsistent
herewith, of Act Numbered Three thousand eight hundred and forty-six, entitled 'An Act providing for the
regulation of radio stations and radio communications in the Philippine Islands, and for other purposes;'
Commonwealth Act Numbered One hundred forty-six, known as the Public Service Act, and their
amendments, and other applicable laws, there is hereby granted to the Radio Communications of the
Philippines, its successors or assigns, the right and privilege of constructing, installing, establishing and
operating in the Philippines, at such places as the said corporation may select and the Secretary of Public
Works and Communications may approve, radio stations for the reception and transmission of wireless
messages on radiotelegraphy and/or radiotelephony, including both coastal and marine
telecommunications, each station to consist of two radio apparatus comprising of a receiving and sending
radio apparatus." (Emphasis ours).
Section 4(a) of the same Act further provides that:
"Sec. 4(a).
This franchise shall not take effect nor shall any powers thereunder be exercised by the
grantee until the Secretary of Public Works and Communications shall have allotted to the grantee the
frequencies and wave lengths to be used, and issued to the grantee a license for such case." (Emphasis
ours.)
Thus, in the words of R.A. No. 2036 itself, approval of the then Secretary of Public Works and
Communications was a precondition before the petitioner could put up radio stations in areas where it
desires to operate. It has been repeated time and again that where the statutory norm speaks
unequivocally, there is nothing for the courts to do except to apply it. The law, leaving no doubt as to the
scope of its operation, must be obeyed. (Gonzaga v. Court of Appeals, 51 SCRA 381). cdrep
The records of the case do not show any grant of authority from the then Secretary of Public Works and
Communications before the petitioner installed the questioned radio telephone services in San Jose,
Mindoro in 1971. The same is true as regards the radio telephone services opened in Sorsogon, Sorsogon
and Catarman, Samar in 1983. No certificate of public convenience and necessity appears to have been
secured by the petitioner from the public respondent when such certificate was required by the applicable
public utility regulations. (See Executive Order No. 546, sec. 15, supra; Philippine Long Distance Telephone
Co. v. City of Davao, 15 SCRA 75; Olongapo Electric Light and Power Corp. v. National Power Corporation,
et al., G.R. No. L-24912, promulgated April 9, 1987.)
It was well within the powers of the public respondent to authorize the installation by the private
respondent network of radio communications systems in Catarman, Samar and San Jose, Mindoro. Under
the circumstances of this case, the mere fact that the petitioner possesses a franchise to put up and
operate a radio communications system in certain areas is not an insuperable obstacle to the public
respondent's issuing the proper certificate to an applicant desiring to extend the same services to those
areas. The Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be
granted except that it must be subject to amendment, alteration, or even repeal by the legislature when
the common good so requires. (Art. XII, sec. 11 of the 1986 Constitution). There is an express provision in
the petitioner's franchise which provides compliance with the above mandate (RA 2036, sec. 15).
In view of the foregoing, we find no reason to disturb the public respondent's findings of fact, and
conclusions of law insofar as the private respondent was authorized to operate in Catarman, Samar and
San Jose, Mindoro. As a rule, the Commission's findings of fact, if supported by substantial evidence, are
conclusive upon this Court. We may modify or ignore them only when it clearly appears that there is no
evidence to support reasonably such a conclusion. (Halili v. Daplas, 14 SCRA 14). The petitioner has not
shown why the private respondent should be denied the authority to operate its services in Samar and
Mindoro. It has not overcome the presumption that when the public respondent disturbed the petitioner's
monopoly in certain areas, it was doing so pursuant to public interest and the common good.
WHEREFORE, the challenged order of the public respondent dated August 22, 1984 is hereby AFFIRMED.
The petition is dismissed for lack of merit.
SO ORDERED.

SECOND DIVISION
[G.R. No. L-49407. August 19, 1988.]
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant, vs. THE COURT OF APPEALS and
DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-appellees.
[G.R. No. L-49469. August 19, 1988.]
MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant, vs. THE COURT OF APPEALS
and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-appellees.
SYLLABUS
1.
CIVIL LAW; COMMON CARRIERS; LIABILITY FOR GOODS; GOVERNING LAW; CASE OF EASTERN
SHIPPING LINES INC. V. INTERMEDIATE APPELLATE COURT CITED. This issue has already been laid to
rest by this Court of Eastern Shipping Lines Inc. v. IAC (150 SCRA 469-470 [1987]) where it was held under
similar circumstances that "the law of the country to which the goods are to be transported governs the
liability of the common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil Code).
Thus, the rule was specifically laid down that for cargoes transported from Japan to the Philippines, the
liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code,
the rights and obligations of common carrier shall be governed by the Code of Commerce and by special
laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely
suppletory to the provisions of the Civil Code.
2.
ID.; ID.; ID.; ID.; ID.; CASE AT BAR. In the case at bar, it has been established that the goods in
question are transported from San Francisco, California and Tokyo, Japan to the Philippines and that they
were lost or damaged due to a collision which was found to have been caused by the negligence or fault
of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the
Philippines will apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise
Bay, Japan.
3.
ID.; ID.; DUTY; EXTRAORDINARY DILIGENCE IN HANDLING GOODS; DEFENSE IN OVERCOMING
PRESUMPTION OF NEGLIGENCE. Under Article 1733 of the Civil Code, common carriers from the nature
of their business and for reasons of public policy are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them according to all
circumstances of each case. Accordingly, under Article 1735 of the same Code, in all cases other than
those mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the extraordinary diligence required by law.

4.
ID.; ID.; COLLISION OF VESSELS; GOVERNED BY THE CODE OF COMMERCE. It appears, however,
that collision falls among matters not specifically regulated by the Civil Code, so that no reversible error
can be found in respondent court's application to the case at bar of Articles 826 to 839, Book Three of the
Code of Commerce, which deal exclusively with collision of vessels.
5.
MERCANTILE LAW; CODE OF COMMERCE; COLLISION OF VESSELS; LIABILITY FOR DAMAGES
SUFFERED. More specifically, Article 826 of the Code of Commerce provides that where collision is
imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and
damages incurred after an expert appraisal. But more in point to the instant case is Article 827 of the
same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own
damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes.
6.
ID.; ID.; ID.; ID.; PRIMARY LIABILITY OF SHIPOWNER OF CARRIER. Significantly, under the
provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not
exempt from liability for damages arising from collision due to the fault or negligence of the captain.
Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine
that the shipmaster or captain is merely the representative of the owner who has the actual or
constructive control over the conduct of the voyage (Yeung Sheng Exchange and Trading Co. v. Urrutia &
Co., 12 Phil. 751 [1909]).
7.
ID.; ID.; APPLICABILITY OF THE CODE OF COMMERCE; NOT REPEALED NOR LIMITED BY THE
CARRIAGE OF GOODS BY SEA ACT. There is, therefore, no room for NDC's interpretation that the Code
of Commerce should apply only to domestic trade and not to foreign trade. Aside from the fact that the
Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically provide for the subject of collision,
said Act in no uncertain terms, restricts its application "to all contracts for the carriage of goods by sea to
and from Philippine ports in foreign trade." Under Section 1 thereof, it is explicitly provided that "nothing
in this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in
force, or as limiting its application." By such incorporation, it is obvious that said law not only recognizes
the existence of the Code of Commerce, but more importantly does not repeal nor limit its application.
8.
CIVIL LAW; COMMON CARRIERS; LIABILITY FOR LOSS OF GOODS; SOLIDARY LIABILITY OF THE
OWNER AND AGENT OF THE OFFENDING VESSEL. It is well settled that both the owner and agent of the
offending vessel are liable for the damage done where both are impleaded; that in case of collision, both
the owner and the agent are civilly responsible for the acts of the captain; that while it is true that the
liability of the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the
Code of Commerce, it is clearly deducible from the general doctrine of jurisprudence under the Civil Code
but more specially as regards contractual obligations in Article 586 of the Code of Commerce. Moreover,
the Court held that both the owner and agent (Naviero) should be declared jointly and severally liable,
since the obligation which is the subject of the action had its origin in a tortious act and did not arise from
contract. Consequently, the agent, even though he may not be the owner of the vessel, is liable to the
shippers and owners of the cargo transported by it, for losses and damages occasioned to such cargo,
without prejudice, however, to his rights against the owner of the ship, to the extent of the value of the
vessel, its equipment, and the freight.
9.
ID.; ID.; ID.; WHERE LIABILITY FOR LOSS OF GOODS CANNOT BE LIMITED. MCP's contention is
devoid of merit. The declared value of the goods was stated in the bills of lading and corroborated no less
by invoices offered as evidence during the trial. Besides, common carriers, in the language of the court in
Juan Ysmael & Co., Inc. v. Barretto et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a less of
goods where such injury or loss was caused by its own negligence." Negligence of the captains of the
colliding vessel being the cause of the collision, and the cargoes not being jettisoned to save some of the
cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the law on
averages (Articles 806 to 818, Code of Commerce).
DECISION
PARAS, J p:
These are appeals by certiorari from the decision ** of the Court of Appeals in CA G.R. No. L-46513-R
entitled "Development Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company of the
Philippines and National Development Company defendant-appellants," affirming in toto the decision ***

in Civil Case No. 60641 of the then Court of First Instance of Manila, Sixth Judicial District, the dispositive
portion of which reads:
"WHEREFORE, judgment is hereby rendered ordering the defendants National Development Company and
Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff Development Insurance
and Surety Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED FIFTEEN
PESOS AND EIGHTY SIX CENTAVOS (364, 915.86) with the legal interest thereon from the filing of plaintiffs
complaint on April 22, 1965 until fully paid, plus TEN THOUSAND PESOS (P10,000.00) by way of damages
as and for attorney's fee.
"On defendant Maritime Company of the Philippines' cross-claim against the defendant National
Development Company, judgment is hereby rendered, ordering the National Development Company to
pay the cross-claimant Maritime Company of the Philippines may voluntarily or by compliance to a writ of
execution pay to the plaintiff pursuant to the judgment rendered in this case.
"With costs against the defendant Maritime Company of the Philippines."
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of Appeals, are as follows:
"The evidence before us shows that in accordance with a memorandum agreement entered into between
defendants NDC and MCP on September 13, 1962, defendant NDC as the first preferred mortgagee of
three ocean going vessels including one with the name 'Doa Nati' appointed defendant MCP as its agent
to manage and operate said vessel for and in its behalf and account (Exh. A). Thus, on February 28, 1964
the E. Philipp Corporation of New York loaded on board the vessel 'Doa Nati' at San Francisco, California,
a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking Corporation,
Manila and the People's Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial
Company, Inc., who represents Riverside Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). Also loaded
on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order
of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of
aluminum foil (Exhs. M&M-1). En route to Manila the vessel Doa Nati figured in a collision at 6:04 a.m. on
April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a result of which 550 bales
of aforesaid cargo of American raw cotton were lost and/or destroyed, of which 535 bales as damaged
were landed and sold on the authority of the General Average Surveyor for Yen 6,045,-500 and 15 bales
were not landed and deemed lost (Exh. G). The damaged and lost cargoes was worth P344,977.86 which
amount, the plaintiff as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of
lading duly endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A-2, N-3 and R-3). Also considered
totally lost were the aforesaid shipment of Kyokuto, Boekui, Kaisa Ltd., consigned to the order of Manila
Banking Corporation, Manila, acting for Guilcon, Manila. The total loss was P19,938.00 which the plaintiff
as insurer paid to Guilcon as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, the
plaintiff had paid as insurer the total amount of P364,915.86 to the consignees or their successors-ininterest, for the said lost or damaged cargoes. Hence, plaintiff filed this complaint to recover said amount
from the defendants-NDC and MCP as owner and ship agent respectively, of the said 'Doa Nati' vessel."
(Rollo, L-49469, p. 38).
On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of First
Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney's fees of P10,000.00
against NDC and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause of action and even if it does, the action has
prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 714). DISC filed an
Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965 (Record on Appeal, pp. 14-24). On
June 29, 1965, the trial court deferred the resolution of the motion to dismiss till after the trial on the
merits (Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and cross-claim
against NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-24). It
also filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40). However, on
October 16, 1965, NDC's answer to DISC's complaint was stricken off from the record for its failure to
answer DISC's written interrogatories and to comply with the trial court's order dated August 14, 1965

allowing the inspection or photographing of the memorandum of agreement it executed with MCP. Said
order of October 16, 1965 likewise declared NDC in default (Record on Appeal, p. 44). On August 31,
1966, NDC filed a motion to set aside the order of October 16, 1965, but the trial court denied it in its
order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court rendered
a decision ordering the defendants MCP and NDC to pay jointly and solidarily to DISC the sum of
P364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on April 22,
1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said decision, the trial court granted
MCP's cross-claim against NDC.
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after
its motion to set aside the decision was denied by the trial court in its order dated February 13, 1970.
On November 17, 1978, the Court of Appeals promulgated its decision affirming in toto the decision of the
trial court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. 49469. On July
25, 1979, this Court ordered the consolidation of the above cases (Rollo, p. 103). On August 27, 1979,
these consolidated cases were given due course (Rollo, p. 108) and submitted for decision on February
29, 1980 (Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND NOT
SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE OF GOODS BY
SEA ACT IN DETERMINING THE LIABILITY FOR LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS
VESSEL "DOA NATI" WITH THE "YASUSHIMA MARU" OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE
TERRITORIAL JURISDICTION OF THE PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE COMPLAINT FOR REIMBURSEMENT FILED BY THE
INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER, HEREIN PETITIONERAPPELLANT. (pp. 1-2, Brief for Petitioner-Appellant National Development Company; p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS AGAINST PETITIONER MARITIME
COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION OF
RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS AGAINST HEREIN
PETITIONER MARITIME COMPANY OF THE PHILIPPINES IS BARRED BY THE STATUTE OF LIMITATION AND HAS
ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE RESPONDENT'S
EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE COLLISION OF THE SS DOA NATI AND
THE YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH VESSELS INSTEAD OF FINDING THAT THE
COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE COMPLEMENTS OF THE
YASUSHIMA MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF THE SS DOA NATI.
IV

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF COMMERCE
PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A SHIP AGENT OR NAVIERO OF SS
DOA NATI OWNED BY CO-PETITIONER APPELLANT NATIONAL DEVELOPMENT COMPANY AND THAT SAID
PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH SAID CO-PETITIONER FOR LOSS OF OR DAMAGES TO
CARGO RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE JAPANESE YASUSHIMA MARU.
V
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES TO THE
CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE AMOUNT OF
P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER BALE AS ESTABLISHED IN THE BILLS OF LADING
AND ALSO IN HOLDING THAT PARAGRAPH 10 OF THE BILLS OF LADING HAS NO APPLICATION IN THE
INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL DEVELOPMENT
COMPANY AND MARITIME COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND SEVERALLY TO HEREIN
RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION THE SUM OF P364,915.86 WITH
LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS AND FOR
ATTORNEY'S FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN PETITIONERS ITS
COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES AND THE COSTS.
(pp. 1-4, Brief for the Maritime Company of the Philippines; p. 121, Rollo).
The pivotal issue in these consolidated cases is the determination of which laws govern loss or destruction
of goods due to collision of vessels outside Philippine waters, and the extent of liability as well as the rules
of prescription provided thereunder.
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should apply to
the case at bar and not the Civil Code or the Code of Commence. Under Section 4 (2) of said Act, the
carrier is not responsible for the loss or damage resulting from the "act, neglect or default of the master,
mariner, pilot or the servants of the carrier in the navigation or in the management of the ship." Thus,
NDC insists that based on the findings of the trial court which were adopted by the Court of Appeals, both
pilots of the colliding vessels were at fault and negligent, NDC would have been relieved of liability under
the Carriage of Goods by Sea Act. Instead, Article 287 of the Code of Commerce was applied and both
NDC and MCP were ordered to reimburse the insurance company for the amount the latter paid to the
consignee as earlier stated.
This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (150 SCRA 469470 [1987]) where it was held under similar circumstances that "the law of the country to which the goods
are to be transported governs the liability of the common carrier in case of their loss, destruction or
deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes
transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code
and in all matters not regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special laws (Article 1766, Civil Code). Hence, the Carriage of
Goods by Sea Act, a special law, is merely suppletory to the provisions of the Civil Code.
In the case at bar, it has been established that the goods in question are transported from San Francisco,
California and Tokyo, Japan to the Philippines and that they were lost or damaged due to a collision which
was found to have been caused by the negligence or fault of both captains of the colliding vessels. Under
the above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial that the
collision actually occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons of
public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them according to all circumstances of each case. Accordingly,
under Article 1735 of the same Code, in all cases other than those mentioned is Article 1734 thereof, the
common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves
that it has observed the extraordinary diligence required by law.

It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that
no reversible error can be found in respondent court's application to the case at bar of Articles 826 to 839,
Book Three of the Code of Commerce, which deal exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the
personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred
after an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which
provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both
shall be solidarily responsible for the losses and damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the
shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or
negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the
universally accepted doctrine that the shipmaster or captain is merely the representative of the owner
who has the actual or constructive control over the conduct of the voyage (Yeung Sheng Exchange and
Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to
domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com.
Act No. 65) does not specifically provide for the subject of collision, said Act in no uncertain terms,
restricts its application "to all contracts for the carriage of goods by sea to and from Philippine ports in
foreign trade." Under Section 1 thereof, it is explicitly provided that "nothing in this Act shall be construed
as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its
application." By such incorporation, it is obvious that said law not only recognizes the existence of the
Code of Commerce, but more importantly does not repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims that Development Insurance and Surety
Corporation, has no cause of action against it because the latter did not prove that its alleged subrogers
have either the ownership or special property right or beneficial interest in the cargo in question; neither
was it proved that the bills of lading were transferred or assigned to the alleged subrogers; thus, they
could not possibly have transferred any right of action to said plaintiff-appellee in this case. (Brief for the
Maritime Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the duly
endorsed bills of lading covering the shipments in question and an examination of the invoices in
particular, shows that the actual consignees of the said goods are the aforementioned companies.
Moreover, no less than MCP itself issued a certification attesting to this fact. Accordingly, as it is
undisputed that the insurer, plaintiff-appellee paid the total amount of P364,915.86 to said consignees for
the loss or damage of the insured cargo, it is evident that said plaintiff-appellee has a cause of action to
recover (what it has paid) from defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p.
43).
MCP next contends that it can not be liable solidarily with NDC because it is merely the manager and
operator of the vessel Doa Nati, not a ship agent. As the general managing agent, according to MCP, it
can only be liable if it acted in excess of its authority.
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September 13,
1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term broad enough to include the
concept of Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of the
vessel, including the power to contract in the name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo,
p. 40). Consequently, under the circumstances, MCP cannot escape liability.
It is well settled that both the owner and agent of the offending vessel are liable for the damage done
where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of
collision, both the owner and the agent are civilly responsible for the acts of the captain (Yueng Sheng
Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard Oil
Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of the
naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of
Commerce, it is clearly deducible from the general doctrine of jurisprudence under the Civil Code but
more specially as regards contractual obligations in Article 586 of the Code of Commerce. Moreover, the

Court held that both the owner and agent (Naviero) should be declared jointly and severally liable, since
the obligation which is the subject of the action had its origin in a tortious act and did not arise from
contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even
though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo
transported by it, for losses and damages occasioned to such cargo, without prejudice, however, to his
rights against the owner of the ship, to the extent of the value of the vessel, its equipment, and the
freight (Behn, Meyer Y Co. v. McMicking et al., 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package
or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the law
on averages should be applied in determining their liability.
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and
corroborated no less by invoices offered as evidence during the trial. Besides, common carriers, in the
language of the court in Juan Ysmael & Co., Inc. v. Barretto et al., (51 Phil. 90 [1927]) "cannot limit its
liability for injury to a less of goods where such injury or loss was caused by its own negligence."
Negligence of the captains of the colliding vessel being the cause of the collision, and the cargoes not
being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals
acted correctly in not applying the law on averages (Articles 806 to 818, Code of Commerce).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima
Maru and not to the Japanese Coast pilot navigating the vessel Doa Nati, need not be discussed lengthily
as said claim is not only at variance with NDC's posture, but also contrary to the factual findings of the
trial court affirmed no less by the Court of Appeals, that both pilots were at fault for not changing their
excessive speed despite the thick fog obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow transshipment of the cargo, which simply means that the date of arrival of the ship Doa Nati on April 18, 1964
was merely tentative to give allowances for such contingencies that said vessel might not arrive on
schedule at Manila and therefore, would necessitate the trans-shipment of cargo, resulting in consequent
delay of their arrival. In fact, because of the collision, the cargo which was supposed to arrive in Manila on
April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in
question been saved, they could have arrived in Manila on the above-mentioned dates. Accordingly, the
complaint in the instant case was filed on April 22, 1965, that is, long before the lapse of one (1) year
from the date the lost or damaged cargo "should have been delivered" in the light of Section 3, subparagraph (6) of the Carriage of Goods by Sea Act.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision of the
respondent Appellate Court is AFFIRMED.
SO ORDERED.

EN BANC
[G.R. No. 114222. April 6, 1995.]
FRANCISCO S. TATAD, JOHN H. OSMEA and RODOLFO G. BIAZON, petitioners, vs. HON. JESUS
B. GARCIA, JR., in his capacity as the Secretary of the Department of Transportation and
Communications, and EDSA LRT CORPORATION, LTD., respondents.

SYLLABUS
1.
REMEDIAL LAW; CIVIL PROCEDURE; TAXPAYER'S SUITS; PREVAILING DOCTRINE. The prevailing
doctrines in taxpayer's suits are to allow taxpayers to question contracts entered into by the national
government or government-owned or controlled corporations allegedly in contravention of the law
(Kilosbayan, Inc. v. Guingona, 232 SCRA 110 [1994]) and to disallow the same when only municipal
contracts are involved (Bugnay Construction and Development Corporation v. Laron, 176 SCRA 240
[1989]). For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no choice but to
follow it and uphold the legal standing of petitioners as taxpayers to institute the present action.
2.
POLITICAL LAW; NATIONAL ECONOMY AND PATRIMONY; PUBLIC UTILITY; FACILITIES TO OPERATE A
PUBLIC UTILITY DO NOT NEED A FRANCHISE. Private respondent EDSA LRT Corporation, Ltd. to whom
the contract to construct the EDSA LRT III was awarded by public respondent Secretary of DOTC, is
admittedly a foreign corporation "duly incorporated and existing under the laws of Hongkong." However,
there is also no dispute that once the EDSA LRT III is constructed, private respondent, as lessor, will turn it
over to DOTC, as lessee, for the latter to operate the system and pay rentals for said use. What private
respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power
plant, not a public utility. While a franchise is needed to operate these facilities to serve the public, they
do not by themselves constitute a public utility. What constitutes a public utility is not their ownership but
their use to serve the public (Iloilo Ice & Cold Storage Co. v. Public Service Board, 44 Phil. 551, 557558
[1923]). The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility.
However, it does not require a franchise before one can own the facilities needed to operate a public
utility so long as it does not operate them to serve the public.
3.
ID.; ID.; ID.; ID.; OPERATION OF PUBLIC UTILITY AND OWNERSHIP OF FACILITIES, DISTINGUISHED.
In law, there is a clear distinction between the "operation" of a public utility and the ownership of the
facilities and equipment used to serve the public. Ownership is defined as a relation in law by virtue of
which a thing pertaining to one person is completely subjected to his will in everything not prohibited by
law or the concurrence with the rights of another (Tolentino, II Commentaries and Jurisprudence on the
Civil Code of the Philippines 45 [1992]). The exercise of the rights encompassed in ownership is limited by
law so that a property cannot be operated and used to serve the public as a public utility unless the
operator has a franchise. The operation of a rail system as a public utility includes the transportation of
passengers from one point to another point, their loading and unloading at designated places and the
movement of the trains at pre-scheduled times. The right to operate a public utility may exist
independently and separately from the ownership of the facilities thereof. One can own said facilities
without operating them as a public utility, or conversely, one may operate a public utility without owning
the facilities used to serve the public. The devotion of property to serve the public may be done by the
owner or by the person in control thereof who may not necessarily be the owner thereof. This dichotomy
between the operation of a public utility and the ownership of the facilities used to serve the public can be
very well appreciated when we consider the transportation industry. Enfranchised airline and shipping
companies may lease their aircraft and vessels instead of owning them themselves.
4.
ID.; ID.; ID.; ID.; REQUISITE FILIPINO NATIONALITY DETERMINED WHEN ENTITY APPLIES FOR
FRANCHISE. Private respondent will not run the light rail vehicles and collect fees from the riding public.
It will have no dealings with the public and the public will have no right to demand any services from it.

Indeed, a mere owner and lessor of the facilities used by a public utility is not a public utility. Neither are
owners of tank, refrigerator, wine, poultry and beer cars who supply cars under contract to railroad
companies considered as public utilities. Even the mere formation of a public utility corporation does not
ipso facto characterize the corporation as one operating a public utility. The moment for determining the
requisite Filipino nationality is when the entity applies for a franchise, certificate or any other form of
authorization for that purpose.
5.
ID.; ID.; ID.; BUILD-OPERATE-AND-TRANSFER (BOT) SCHEME; BUILD-AND-TRANSFER (BT) SCHEME;
DEFINED AND DISTINGUISHED. The BOT scheme is expressly defined as one where the contractor
undertakes the construction and financing of an infrastructure facility, and operates and maintains the
same. The contractor operates the facility for a fixed period during which it may recover its expenses and
investment in the project plus a reasonable rate of return thereon. After the expiration of the agreed term,
the contractor transfers the ownership and operation of the project to the government. In the BT scheme,
the contractor undertakes the construction and financing of the facility, but after completion, the
ownership and operation thereof are turned over to the government. The government, in turn, shall pay
the contractor its total investment on the project in addition to a reasonable rate of return. If payment is
to be effected through amortization payments by the government infrastructure agency or local
government unit concerned, this shall be made in accordance with a scheme proposed in the bid and
incorporated in the contract (R.A. No. 6957, Sec. 6). Emphasis must be made that under the BOT scheme,
the owner of the infrastructure facility must comply with the citizenship requirement of the Constitution
on the operation of a public utility. No such a requirement is imposed in the BT scheme.
6.
ID.; ID.; ID.; BUILD-LEASE-AND-TRANSFER (BLT) SCHEME AND RELATED AGREEMENTS; NOT BARRED
IN THE BOT LAW (RA 6957). There is no mention in the BOT Law that the BOT and BT schemes bar any
other arrangement for the payment by the government of the project cost. The law must not be read in
such a way as to rule out or unduly restrict any variation within the context of the two schemes. Indeed,
no statute can be enacted to anticipate and provide all the fine points and details for the multifarious and
complex situations that may be encountered in enforcing the law. The BLT scheme in the challenged
agreements is but a variation of the BT scheme under the law. As a matter of fact, the burden on the
government in raising funds to pay for the project is made lighter by allowing it to amortize payments out
of the income from the operation of the LRT System. In form and substance, the challenged agreements
provide that rentals are to be paid on a monthly basis according to a schedule of rates through and under
the terms of a confirmed Irrevocable Revolving Letter of Credit. At the end of 25 years and when full
payment shall have been made to and received by private respondent, it shall transfer to DOTC, free from
any lien or encumbrances, all its title to, rights and interest in, the project for only U.S. $1.00 (Revised and
Restated Agreement). A lease is a contract where one of the parties binds himself to give to another the
enjoyment or use of a thing for certain price and for a period which may be definite or indefinite but not
longer than 99 years (Civil Code of the Philippines, Art. 1643). There is no transfer of ownership at the end
of the lease period. But if the parties stipulate that title to the leased premises shall be transferred to the
lessee at the end of the lease period upon the payment of an agreed sum, the lease becomes a leasepurchase agreement. Furthermore, it is of no significance that the rents shall be paid in United States
currency, not Philippine pesos. The EDSA LRT III Project is a high priority project certified by Congress and
the National Economic and Development Authority as falling under the Investment Priorities Plan of
Government. It is, therefore, outside the application of the Uniform Currency Act (R.A. No. 529).
7.
ID.; ID.; ID.; AWARD OF CONSTRUCTION MAY BE MADE BY NEGOTIATION. The fact that the
contract for the construction of the EDSA LRT III was awarded through negotiation and before
congressional approval on January 22 and 23, 1992 of the List of National Projects to be undertaken by
the private sector pursuant to the BOT Law does not suffice to invalidate the award. Subsequent
congressional approval of the list including "rail-based projects packaged with commercial development
opportunities" under which the EDSA LRT III project falls, amounts to a ratification of the prior award of
the EDSA LRT III contract under the BOT Law. Indeed, where there is a lack of qualified bidders or
contractors, the award of government infrastructure contracts may be made by negotiation. Presidential
Decree No. 1594 is the general law on government infrastructure contracts while the BOT Law governs
particular arrangements or schemes aimed at encouraging private sector participation in government
infrastructure projects. The two laws are not inconsistent with each other but are in pari materia and
should be read together accordingly.

8.
ID.; ID.; RA 7718; QUALIFIED APPLICANT MAY ENTER INTO ANY SCHEME INCLUDING A BLT
ARRANGEMENT. Republic Act No. 7718 recognizes and defines a BLT scheme in Section 2 thereof.
Section 5-A of the law, expressly allows direct negotiation of contracts. From the law itself, once an
applicant has prequalified, it can enter into any of the schemes enumerated in Section 2, RA 7718,
including a BLT arrangement, enumerated and defined therein (Sec. 3). Republic Act No. 7718 is a
curative statute. It is intended to provide financial incentives and "a climate of minimum government
regulations and procedures and specific government undertakings in support of the private sector" (Sec.
1). A curative statute makes valid that which before enactment of the statute was invalid. Thus, whatever
doubts and alleged procedural lapses private respondent and DOTC may have engendered and committed
in entering into the questioned contracts, these have now been cured by R.A. No. 7718.
9.
ID.; ID.; ID.; AGREEMENTS BETWEEN PRIVATE RESPONDENT AND DOTC, PRESUMED WELL-TAKEN
AND TO THE ADVANTAGE OF BOTH PARTIES; GOVERNMENT OFFICIALS CONCERNED, PRESUMED TO HAVE
PERFORMED THEIR FUNCTIONS REGULARLY. The determination by the proper administrative agencies
and officials who have acquired expertise, specialized skills and knowledge in the performance of their
functions should be accorded respect, absent any showing of grave abuse of discretion. Government
officials are presumed to perform their functions with regularity and strong evidence is necessary to rebut
this presumption. Petitioners have not presented evidence on the reasonable rentals to be paid by the
parties to each other. The matter of valuation is an esoteric field which is better left to the experts and
which this Court is not eager to undertake. That the grantee of a government contract will profit therefrom
and to that extent the government is deprived of the profits if it engages in the business itself, is not
worthy of being raised as an issue. In all cases where a party enters into a contract with the government,
he does so, not out of charity and not to lose money, but to gain pecuniarily. Definitely, the agreements in
question have been entered into by DOTC in the exercise of its governmental function. DOTC is the
primary policy, planning, programming, regulating and administrative entity of the Executive branch of
government in the promotion, development and regulation of dependable and coordinated networks of
transportation and communications systems as well as in the fast, safe, efficient and reliable postal,
transportation and communications services (Administrative Code of 1987, Book IV, Title XV, Sec. 2). It is
the Executive department, DOTC in particular, that has the power, authority and technical expertise to
determine whether or not a specific transportation or communications project is necessary, viable and
beneficial to the people. The discretion to award a contract is vested in the government agencies
entrusted with that function.
MENDOZA, J., concurring:
1.
REMEDIAL LAW; CIVIL PROCEDURE; PARTIES; MEMBERS OF CONGRESS, NO LEGAL STANDING TO
SUE IF THEY ALLEGE NO INFRINGEMENT OF PREROGATIVES AS LEGISLATORS. J. Mendoza holds that
petitioners do not have standing to sue. He joins to dismiss the petition in this case. Petitioners do not
have the right to sue, whether as legislators, taxpayers or citizens. As members of Congress, because
they allege no infringement of prerogatives as legislators. As taxpayers because petitioners allege neither
an unconstitutional exercise of the taxing or spending powers of Congress (Art. VI, 24-25 and 29) nor an
illegal disbursement of public money. As this Court pointed out in Bugnay Const. and Dev. Corp. v. Laron,
176 SCRA 240, 251-2-(1989) a party suing as taxpayer "must specifically prove that he has sufficient
interest in preventing the illegal expenditure of money raised by taxation and that he will sustain a direct
injury as a result of the enforcement of the questioned statute or contract. It is not sufficient that he has
merely a general interest common to all members of the public." In that case, it was held that a contract,
whereby a local government leased property to a private party with the understanding that the latter
would build a market building and at the end of the lease would transfer the building to the lessor, did not
involve a disbursement of public funds so as to give a taxpayer standing to question the legality of the
contract. He sees no substantial difference, as far as the standing of taxpayers to question public
contracts is concerned, between the contract there and the build-lease-transfer (BLT) contract being
questioned by petitioners in this case. Nor do petitioners have standing to bring this suit as citizens. In the
cases in which citizens were authorized to sue, this Court found standing because it thought the
constitutional claims pressed for decision to be of "transcendental importance," as in fact it subsequently
granted relief to petitioners by invalidating the challenged statutes or governmental actions. But in the
case at bar, the Court precisely finds the opposite by finding petitioners' substantive contentions to be
without merit. To the extent therefore that a party's standing is affected by a determination of the
substantive merit of the case or a preliminary estimate thereof, petitioners in the case at bar must be

held to be without standing. This is in line with our ruling in Lawyers League for a Better Philippines v.
Aquino (G.R. Nos. 73748, 73972, 73990, May 22, 1986) and In re Bermudez (145 SCRA 160, 1986) where
we dismissed citizens' actions on the ground that petitioners had no personality to sue and their petitions
did not state a cause of action. The holding that petitioners did not have standing followed from the
finding that they did not have a cause of action. In order that citizens' actions may be allowed a party
must show that he personally has suffered some actual or threatened injury as a result of the allegedly
illegal conduct of the government; the injury is fairly traceable to the challenged action; and the injury is
likely to be redressed by a favorable action. Todays's holding that a citizen, qua citizen, has standing to
question a government contract unduly expands the scope of public actions and sweeps away the case
and controversy requirement so carefully embodied in Art. VIII, 5 in defining the jurisdiction of this Court.
The result is to convert the Court into an office of ombudsman for the ventilation of generalized
grievances.
FELICIANO, J., dissenting:
1.
POLITICAL LAW; NATIONAL ECONOMY AND PATRIMONY; PUBLIC UTILITY (EDSA LRT III); PD 1594 ON
BIDDING AND RELATED PROVISIONS; NOT APPLICABLE TO RA 6957 AND RA 7718. Presidential Decree
No. 1594 dated 11 June 1978 entitled: "Prescribing Policies, Guidelines, Rules and Regulations for
Government Infrastructure Contracts." More specifically, the majority opinion invokes paragraph 1 of
Section 4 of this Degree which refers to Bidding. I understand the unspoken theory in the majority opinion
to be that above Section 4 and presumably the rest of Presidential Decree No. 1594 continue to exist and
to run parallel to the provisions of Republic Act No. 6957, whether in its original form or as amended by
Republic Act No. 7718. A principal difficulty with this approach is that Presidential Decree No. 1594
purports to apply to all "government contracts for infrastructure and other construction projects." But
Republic Act No. 6957 as amended by Republic Act No. 7718, relates only to "infrastructure projects"
which are financed, constructed, operated and maintained "by the private sector" "through the
build/operate-and-transfer or build-and-transfer scheme" under Republic Act No. 6597 and under a series
of other comparable schemes under Republic Act No. 7718. In other words, Republic Act No. 6957 and
Republic Act No. 7718 must be held, in my view, to be special statutes applicable to a more limited field of
"infrastructure projects" than the wide-ranging scope of application of the general statute, i.e.,
Presidential Decree No. 1594. Thus, the high relevance of the point made by Mr. Justice Davide that
Republic Act No. 6957 in specific connection with BOT- and BLT-type of contracts imposed an unqualified
requirement of public bidding set out in Section 5 thereof. It should also be pointed out that under
Presidential Decree No. 1594, projects may be undertaken "by administration or force account or by
negotiated contract only" (1) "in exceptional cases where time is of the essence"; or (2) "where there is
lack of bidders or contractors"; or (3) "where there is a conclusive evidence that greater economy and
efficiency would be achieved through these arrangements, and in accordance with provision[s] of laws
and acts of the matter." It must, upon the one hand, be noted that the special law Republic Act No. 6957
made absolutely no mention of negotiated contracts being permitted to displace the requirement of public
bidding. Upon the other hand, Section 5-a, inserted in Republic Act No. 6957 by the amending statute
Republic Act No. 7718, does not purport to authorize direct negotiation of contracts except in four (4)
situations where there is a lack of pre-qualified contractors or complying bidders. Thus, even under the
amended special statute, entering into contracts by negotiation is not permissible in the other two (2)
categories of cases referred to in Section 4 of Presidential Decree No. 1594, i.e., "in exceptional cases
where time is of the essence" and "when there is conclusive evidence that greater economy and
efficiency would be achieved through these arrangements, etc." The result I reach is that insofar as BOT,
etc. types of contracts are concerned, the applicable public bidding requirement is that set out in
Republic Act No. 6957 and, with respect to such type of contracts opened for pre-qualification and bidding
after the date of effectivity of republic Act No. 7718, the provisions of Republic Act No. 7718. The assailed
contract was entered into before Republic Act No. 7718 was enacted. The difficulties of applying the
provisions of Presidential Decree No. 1594 to the Edsa LRT-type of contracts are aggravated when one
considers the detailed "Implementing Rules and Regulations as amended April 1988" issued under that
Presidential Decree. There is no reference at all in these Presidential Decree No. 1594 Implementing Rules
and Regulations to absence of pre-qualified applicants and bidders as justifying negotiation of contracts
as distinguished from requiring public bidding or a second public bidding. Note also the following provision
of the same Implementing Rules and Regulations: "IB 1 Prequalification. The following may become
contractors for government projects: 1. Filipino a. Citizens (single proprietorship) b. Partnership or
corporation duly organized under the laws of the Philippines, and at least seventy five percent (75%) of

the capital stock of which belongs to Filipino citizens. 2. Contractors forming themselves into a joint
venture, i.e., a group of two or more contractors that intend to be jointly and severally responsible for a
particular contract, shall for purposes of bidding/tendering comply with LOI 630, and, aside from being
currently and properly accredited by the Philippine Contractors Accreditation Board, shall comply with the
provisions of R.A. 4566, provided that joint ventures in which Filipino ownership is less than seventy five
percent (75%) may be prequalified where the structures to be built require the application of techniques
and/or technologies which are not adequately possessed by a Filipino entity as defined above. The record
of this case is entirely silent on the extent of Philippine equity in the Edsa LRT Corporation; there is no
suggestion that this corporation is organized under Philippine law and is at least seventy-five (75%)
percent owned by Philippine citizens.
2.
ID.; ID.; ID.; PUBLIC BIDDING, AN IMPORTANT REQUIREMENT. Public bidding is the normal
method by which a government keeps contractors honest and is able to assure itself that it would be
getting the best possible value for its money in any construction or similar project. It is not for nothing
that multilateral financial organizations like the World Bank and the Asian Development Bank uniformly
require projects financed by them to be implemented and carried out by public bidding. Public bidding is
much too important a requirement casually to loosen by a latitudinarian exercise in statutory
construction.
DAVIDE, JR., J., dissenting opinion:
1.
POLITICAL LAW; NATIONAL ECONOMY AND PATRIMONY; PUBLIC UTILITY (EDSA LRT III); RA 6957
(BOT LAW); BUILD-LEASE-AND-TRANSFER (BLT) SCHEME, NOT INCLUDED THEREIN. Respondents admit
that the assailed contract was entered into under R.A. 6957. This law, fittingly entitled "An Act Authorizing
the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector,
and For Other Purposes," recognizes only two (2) kinds of contractual arrangements between the private
sector and government infrastructure agencies: (a) the Build-Operate-and-Transfer (BOT) scheme and (b)
the Build-and-Transfer (BT) scheme. This conclusion finds support in Section 2 thereof which defines only
the BOT and BT schemes, in Section 3 which explicitly provides for said schemes and in Section 5 which
requires public bidding of projects under both schemes. All prior acts and negotiations leading to the
perfection of the challenged contract were clearly intended and pursued for such schemes. A Build-Leaseand-Transfer (BLT) scheme is not authorized under the said law, and none of the aforesaid prior acts and
negotiations were designed for such unauthorized scheme. Hence, the DOTC is without any power or
authority to enter into the BLT contract in question. If it is intended to include a BLT scheme in RA 6957,
then it should have so stated, for contracts of lease are not unknown in our jurisdiction, and Congress has
enacted several laws relating to leases. That the BLT scheme was never intended as a permissible
variation "within the context" of the BOT and BT schemes is conclusively established by the passage of
R.A. No. 7718 which amends: a) Section 2 by adding to the original BOT and BT schemes the following
schemes: (1) Build-own-and operate (BOO) (2) Build-Lease-and-transfer (BLT) (3) Build-transfer-andoperate (BTO) (4) Contract-add-and-operate (CAO) (5) Develop-operate-and-transfer (DOT) (6)
Rehabilitate-operate-and-transfer (ROT) (7) Rehabilitate-own-and-operate (ROO) b) Section 3 of R.A. No.
6957 by deleting therefrom the phrase "through the build-operate-and-transfer or build-and-transfer
scheme."
2.
ID.; ID.; ID.; PUBLIC BIDDING THEREIN, MANDATORY ; RA 7718 FOREGOING THE SAME DOES NOT
PROVIDE FOR RETROACTIVE APPLICATION. Public bidding is mandatory in R.A. No. 6957 under Section 5
thereof. The requirement of public bidding is not an idle ceremony. It has been aptly said that in our
jurisdiction "public bidding is the policy and medium adhered to in Government procurement and
construction contracts under existing laws and regulations. It is the accepted method for arriving at a fair
and reasonable price and ensures that overpricing, favoritism and other anomalous practices are
eliminated or minimized. And any Government contract entered into without the required bidding is null
and void and cannot adversely affect the rights of third parties." (Bartolome C. Fernandez, Jr., A TREATISE
ON GOVERNMENT CONTRACTS UNDER PHILIPPINE LAW 25 [rev. ed. 1991], citing Caltex vs. Delgado Bros.,
96 Phil. 368 [1954]). The Office of the President, through then Executive Secretary Franklin Drilon
correctly disapproved the contract because no public bidding in strict compliance with Section 5 of R.A.
No. 6957 was conducted. Secretary Drilon further bluntly stated that the provision of the Implementing
Rules of said law authorizing negotiated contracts was of doubtful legality. Indeed, it is null and void
because the law itself does not recognize or allow negotiated contracts. The mandatory requirement of
public bidding cannot be legally dispensed with simply because only one was qualified to bid during the

prequalification proceedings. Section 5 mandates that the BOT or BT contract should be awarded "to the
lowest complying bidder," which logically means that there must at least be two (2) bidders. If this
minimum requirement is not met, then the proposed bidding should be deferred and a new
prequalification proceeding be scheduled. Even those who were earlier disqualified may by then have
qualified because they may have, in the meantime, exerted efforts to meet all the qualifications. This view
of the majority would open the floodgates to the rigging of prequalification proceedings or to unholy
conspiracies among prospective bidders, which would even include dishonest government officials. They
could just agree, for a certain consideration, that only one of them would qualify in order that the latter
would automatically corner the contract and obtain the award. That Section 5 admits of no exception and
that no bidding could be validly had with only one bidder is likewise conclusively shown by the
amendments introduced by R.A. No. 7718. Per Section 7 thereof, a new section denominated as Section 5A was introduced in R.A. No. 6957 to allow direct negotiation of contracts. Can this amendment be given
retroactive effect to the challenged contract so that it may now be considered a permissible negotiated
contract? I submit that it cannot be. R.A. No. 7718 does not provide that it should be given retroactive
effect to pre-existing contracts. Section 18 thereof says that it "shall take effect fifteen (15) days after its
publication in at least two (2) newspapers of general circulation." If it were the intention of Congress to
give said act retroactive effect then it would have so expressly provided. Article 4 of the Civil Code
provides that "[l]aws shall have no retroactive effect, unless the contrary is provided." The presumption is
that all laws operate prospectively, unless the contrary clearly appears or is clearly, plainly, and
unequivocally expressed or necessarily implied. In every case of doubt, the doubt will be resolved against
the retroactive application of laws. (Ruben E. Agpalo, STATUTORY CONSTRUCTION 225 [2d ed. 1990]). As
to amendatory acts, or acts which change an existing statute, Sutherland states: In accordance with the
rule applicable to original acts, it is presumed that provisions added by the amendment affecting
substantive rights are intended to operate prospectively. Provisions added by the amendment that affect
substantive rights will not be construed to apply to transactions and events completed prior to its
enactment unless the legislature has expressed its intent to that effect or such intent is clearly implied by
the language of the amendment or by the circumstances surrounding its enactment. (1 Frank E. Horack,
Jr., SUTHERLAND'S STATUTES AND STATUTORY CONSTRUCTION 434-436 [1943 ed.]).
DECISION
QUIASON, J p:
This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents from further
implementing and enforcing the "Revised and Restated Agreement to Build, Lease and Transfer a Light
Rail Transit System for EDSA" dated April 22, 1992, and the "Supplemental Agreement to the 22 April
1992 Revised and Restated Agreement To Build, Lease and Transfer a Light Rail Transit System for EDSA"
dated May 6, 1993.
Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are members of the Philippine
Senate and are suing in their capacities as Senators and as taxpayers. Respondent Jesus B. Garcia, Jr. is
the incumbent Secretary of the Department of Transportation and Communications (DOTC), while private
respondent EDSA LRT Corporation, Ltd. is a private corporation organized under the laws of Hongkong.
cdll
I
In 1989, DOTC planned to construct a light railway transit line along EDSA, a major thoroughfare in
Metropolitan Manila, which shall traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The plan,
referred to as EDSA Light Rail Transit III (EDSA LRT III), was intended to provide a mass transit system
along EDSA and alleviate the congestion and growing transportation problem in the metropolis.
On March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises, Inc., represented by Elijahu
Levin, to DOTC Secretary Oscar Orbos, proposing to construct the EDSA LRT III on a Build-Operate-Transfer
(BOT) basis.
On March 15, 1990, Secretary Orbos invited Levin to send a technical team to discuss the project with
DOTC.
On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the Financing, Construction, Operation
and Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes," was signed by

President Corazon C. Aquino. Referred to as the Build-Operate-Transfer (BOT) Law, it took effect on
October 9, 1990.
Republic Act No. 6957 provides for two schemes for the financing, construction and operation of
government projects through private initiative and investment: Build-Operate-Transfer (BOT) or BuildTransfer (BT).
In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT III project underway, DOTC, on
January 22, 1991 and March 14, 1991, issued Department Orders Nos. 91-494 and 91-496, respectively
creating the Prequalification Bids and Awards Committee (PBAC) and the Technical Committee.
After its constitution, the PBAC issued guidelines for the prequalification of contractors for the financing
and implementation of the project. The notice, advertising the prequalification of bidders, was published
in three newspapers of general circulation once a week for three consecutive weeks starting February 21,
1991.
The deadline set for submission of prequalification documents was March 21, 1991, later extended to April
1, 1991. Five groups responded to the invitation: namely, ABB Trazione of Italy, Hopewell Holdings, Ltd. of
Hongkong, Mansteel International of Mandaue, Cebu, Mitsui & Co., Ltd. of Japan, and EDSA LRT
Consortium, composed of ten foreign and domestic corporations: namely, Kaiser Engineers International,
Inc., ACER Consultants (Far East) Ltd., Freeman Fox, Tradeinvest/CKD Tatra of the Czech and Slovak
Federal Republics, TCGI Engineering, All Asia Capital and Leasing Corporation, The Salim Group of Jakarta,
E.L. Enterprises, Inc., A.M. Oreta & Co., Inc., Capitol Industrial Construction Group, Inc. and F.F. Cruz & Co.,
Inc. cdrep
On the last day for submission of prequalification documents, the prequalification criteria proposed by the
Technical Committee were adopted by the PBAC. The criteria, totalling 100 percent, are as follows: (a)
Legal aspects 10 percent; (b) Management/Organizational capability 30 percent; (c) Financial
capability 30 percent; and (d) Technical capability 30 percent (Rollo, p. 122).
On April 3, 1991, the Committee, charged under the BOT Law with the formulation of the Implementing
Rules and Regulations thereof, approved the same.
After evaluating the prequalification bids, the PBAC issued a Resolution on May 9, 1991 declaring that of
the five applicants, only the EDSA LRT Consortium "met the requirements of garnering at least 21 points
per criteria [sic], except for Legal Aspects, and obtaining an over-all passing mark of at least 82 points"
(Rollo, p. 146). The Legal Aspects referred to provided that the BOT/BT contractor-applicant meet the
requirements specified in the Constitution and other pertinent laws (Rollo, p. 114).
Subsequently, Secretary Orbos was appointed Executive Secretary to the President of the Philippines and
was replaced by Secretary Pete Nicomedes Prado. The latter sent to President Aquino two letters dated
May 31, 1991 and June 14, 1991, respectively recommending the award of the EDSA LRT III project to the
sole complying bidder, the EDSA LRT Consortium, and requesting for authority to negotiate with the said
firm for the contract pursuant to paragraph 14(b) of the Implementing Rules and Regulations of the BOT
Law (Rollo, pp. 298-302).
In July 1991, Executive Secretary Orbos, acting on instructions of the President, issued a directive to the
DOTC to proceed with the negotiations. On July 16, 1991, the EDSA LRT Consortium submitted its bid
proposal to DOTC.
Finding this proposal to be in compliance with the bid requirements, DOTC and respondent EDSA LRT
Corporation, Ltd., in substitution of the EDSA LRT Consortium, entered into an "Agreement to Build, Lease
and Transfer a Light Rail Transit System for EDSA" under the terms of the BOT Law (Rollo, pp. 147-177).
Secretary Prado, thereafter, requested presidential approval of the contract. LibLex
In a letter dated March 13, 1992, Executive Secretary Franklin Drilon, who replaced Executive Secretary
Orbos, informed Secretary Prado that the President could not grant the requested approval for the
following reasons: (1) that DOTC failed to conduct actual public bidding in compliance with Section 5 of
the BOT Law; (2) that the law authorized public bidding as the only mode to award BOT projects, and the
prequalification proceedings was not the public bidding contemplated under the law; (3) that Item 14 of
the Implementing Rules and Regulations of the BOT Law which authorized negotiated award of contract in

addition to public bidding was of doubtful legality; and (4) that congressional approval of the list of priority
projects under the BOT or BT Scheme provided in the law had not yet been granted at the time the
contract was awarded (Rollo, pp. 178-179).
In view of the comments of Executive Secretary Drilon, the DOTC and private respondents re-negotiated
the agreement. On April 22, 1992, the parties entered into a "Revised and Restated Agreement to Build,
Lease and Transfer a Light Rail Transit System for EDSA" (Rollo, pp. 47-78) inasmuch as "the parties [are]
cognizant of the fact the DOTC has full authority to sign the Agreement without need of approval by the
President pursuant to the provisions of Executive Order No. 380 and that certain events [had] supervened
since November 7, 1991 which necessitate[d] the revision of the Agreement" (Rollo, p. 51). On May 6,
1992, DOTC, represented by Secretary Jesus Garcia vice Secretary Prado, and private respondent entered
into a "Supplemental Agreement to the 22 April 1992 Revised and Restated Agreement to Build, Lease
and Transfer a Light Rail Transit System for EDSA" so as to "clarify their respective rights and
responsibilities" and to "submit [the] Supplemental Agreement to the President of the Philippines for his
approval" (Rollo, pp. 79-80).
Secretary Garcia submitted the two Agreements to President Fidel V. Ramos for his consideration and
approval. In a Memorandum to Secretary Garcia on May 6, 1993, President Ramos approved the said
Agreements (Rollo, p. 194).
According to the agreements, the EDSA-LRT III will use light rail vehicles from the Czech and Slovak
Federal Republics and will have a maximum carrying capacity of 450,000 passengers a day, or 150 million
a year to be achieved through 54 such vehicles operating simultaneously. The EDSA LRT III will run at
grade, or street level, on the mid-section of EDSA for a distance of 17.8 kilometers from F.B. Harrison,
Pasay City to North Avenue, Quezon City. The system will have its own power facility (Revised and
Restated Agreement, Sec. 2.3 (ii); Rollo, p. 55). It will also have thirteen (13) passenger stations and one
depot in the 16-hectare government property at North Avenue (Supplemental Agreement, Sec. 11; Rollo,
pp. 91-92).
Private respondent shall undertake and finance the entire project required for a complete operational light
rail transit system (Revised and Restated Agreement, Sec. 4.1; Rollo, p. 58). Target completion date is
1,080 days or approximately three years from the implementation date of the contract inclusive of
mobilization, site works, initial and final testing of the system (Supplemental Agreement, Sec. 5; Rollo, p.
83). Upon full or partial completion and viability thereof, private respondent shall deliver the use and
possession of the completed portion to DOTC which shall operate the same (Supplemental Agreement,
Sec. 5; Revised and Restated Agreement, Sec. 5.1; Rollo, pp. 61-62, 84). DOTC shall pay private
respondent rentals on a monthly basis through an Irrevocable Letter of Credit. The rentals shall be
determined by an independent and internationally accredited inspection firm to be appointed by the
parties (Supplemental Agreement, Sec. 6; Rollo, pp. 85-86). As agreed upon, private respondent's capital
shall be recovered from the rentals to be paid by the DOTC which, in turn, shall come from the earnings of
the EDSA LRT III (Revised and Restated Agreement, Sec. 1, p. 5; Rollo, p. 54). After 25 years and DOTC
shall have completed payment of the rentals, ownership of the project shall be transferred to the latter for
a consideration of only U.S.$1.00 (Revised and Restated Agreement, Sec. 11.1; Rollo, p. 67). LibLex
On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of Republic Act No. 6957, Entitled 'An
Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the
Private Sector, and for Other Purposes'" was signed into law by the President. The law was published in
two newspapers of general circulation on May 12, 1994, and took effect 15 days thereafter or on May 28,
1994. The law expressly recognizes a BLT scheme and allows direct negotiation of BLT contracts.
II
In their petition, petitioners argued that:
"(1)
THE AGREEMENT OF APRIL 22, 1992, AS AMENDED BY THE SUPPLEMENTAL AGREEMENT OF MAY 6,
1993, INSOFAR AS IT GRANTS EDSA LRT CORPORATION, LTD., A FOREIGN CORPORATION, THE OWNERSHIP
OF EDSA LRT III, A PUBLIC UTILITY, VIOLATES THE CONSTITUTION AND, HENCE, IS UNCONSTITUTIONAL;
"(2)
THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE AGREEMENTS IS NOT DEFINED NOR
RECOGNIZED IN R.A. NO. 6957 OR ITS IMPLEMENTING RULES AND REGULATIONS AND, HENCE, IS ILLEGAL;

"(3)
THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS VIOLATES R.A. NO. 6957 AND, HENCE, IS
UNLAWFUL;
"(4)
THE AWARD OF THE CONTRACT IN FAVOR OF RESPONDENT EDSA LRT CORPORATION, LTD.
VIOLATES THE REQUIREMENTS PROVIDED IN THE IMPLEMENTING RULES AND REGULATIONS OF THE BOT
LAW AND, HENCE, IS ILLEGAL;
"(5)
THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO. 380 FOR THEIR FAILURE TO BEAR
PRESIDENTIAL APPROVAL AND, HENCE, ARE ILLEGAL AND INEFFECTIVE; AND
"(6)

THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT" (Rollo, pp. 15-16).

Secretary Garcia and private respondent filed their comments separately and claimed that:
(1)
Petitioners are not the real parties-in-interest and have no legal standing to institute the present
petition;
(2)

The writ of prohibition is not the proper remedy and the petition requires ascertainment of facts;

(3)
Law;

The scheme adopted in the Agreements is actually a build-transfer scheme allowed by the BOT

(4)
The nationality requirement for public utilities mandated by the Constitution does not apply to
private respondent;
(5)
The Agreements executed by and between respondents have been approved by President Ramos
and are not disadvantageous to the government;
(6)
The award of the contract to private respondent through negotiation and not public bidding is
allowed by the BOT Law; and
(7)
Granting that the BOT Law requires public bidding, this has been amended by R.A. No. 7718
passed by the Legislature on May 12, 1994, which provides for direct negotiation as a mode of award of
infrastructure projects. LexLib
III
Respondents claimed that petitioners had no legal standing to initiate the instant action. Petitioners,
however, countered that the action was filed by them in their capacity as Senators and as taxpayers.
The prevailing doctrines in taxpayer's suits are to allow taxpayers to question contracts entered into by
the national government or government-owned or controlled corporations allegedly in contravention of
the law (Kilosbayan, Inc. v. Guingona, 232 SCRA 110 [1994]) and to disallow the same when only
municipal contracts are involved (Bugnay Construction and Development Corporation v. Laron, 176 SCRA
240 [1989]).
For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no choice but to follow it
and uphold the legal standing of petitioners as taxpayers to institute the present action.
IV
In the main, petitioners asserted that the Revised and Restated Agreement of April 22, 1992 and the
Supplemental Agreement of May 6, 1993 are unconstitutional and invalid for the following reasons:
(1)
the EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the
Constitution to Filipino citizens and domestic corporations, not foreign corporations like private
respondent;
(2)
the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the BOT or BT scheme
under the law;
(3)
the contract to construct the EDSA LRT III was awarded to private respondent not through public
bidding which is the only mode of awarding infrastructure projects under the BOT law; and
(4)

the agreements are grossly disadvantageous to the government.

1.
Private respondent EDSA LRT Corporation, Ltd. to whom the contract to construct the EDSA LRT III
was awarded by public respondent, is admittedly a foreign corporation "duly incorporated and existing
under the laws of Hongkong" (Rollo, pp. 50, 79). There is also no dispute that once the EDSA LRT III is
constructed, private respondent, as lessor, will turn it over to DOTC, as lessee, for the latter to operate the
system and pay rentals for said use.
The question posed by petitioners is:
"Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III, a public utility?"
(Rollo, p. 17).
The phrasing of the question is erroneous; it is loaded. What private respondent owns are the rail tracks,
rolling stocks like the coaches, rail stations, terminals and the power plant, not a public utility. While a
franchise is needed to operate these facilities to serve the public, they do not by themselves constitute a
public utility. What constitutes a public utility is not their ownership but their use to serve the public (Iloilo
Ice & Cold Storage Co. v. Public Service Board, 44 Phil. 551, 557-558 [1923]). LexLib
The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However,
it does not require a franchise before one can own the facilities needed to operate a public utility so long
as it does not operate them to serve the public.
Section 11 of Article XII of the Constitution provides:
"No franchise, certificate or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the laws of
the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such
franchise, certificate or authorization be exclusive in character or for a longer period than fifty years . . ."
(Italics supplied).
In law, there is a clear distinction between the "operation" of a public utility and the ownership of the
facilities and equipment used to serve the public.
Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely
subjected to his will in everything not prohibited by law or the concurrence with the rights of another
(Tolentino, II Commentaries and Jurisprudence on the Civil Code of the Philippines 45 [1992]).
The exercise of the rights encompassed in ownership is limited by law so that a property cannot be
operated and used to serve the public as a public utility unless the operator has a franchise. The
operation of a rail system as a public utility includes the transportation of passengers from one point to
another point, their loading and unloading at designated places and the movement of the trains at prescheduled times (cf. Arizona Eastern R.R. Co. v. J.A. Matthews, 20 Ariz 282, 180 P. 159, 7 A.L.R. 1149
[1919]; United States Fire Ins. Co. v. Northern P.R. Co., 30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065
[1948]). cdphil
The right to operate a public utility may exist independently and separately from the ownership of the
facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one
may operate a public utility without owning the facilities used to serve the public. The devotion of
property to serve the public may be done by the owner or by the person in control thereof who may not
necessarily be the owner thereof.
This dichotomy between the operation of a public utility and the ownership of the facilities used to serve
the public can be very well appreciated when we consider the transportation industry. Enfranchised airline
and shipping companies may lease their aircraft and vessels instead of owning them themselves.
While private respondent is the owner of the facilities necessary to operate the EDSA LRT III, it admits that
it is not enfranchised to operate a public utility. (Revised and Restated Agreement, Sec. 3.2; Rollo, p. 57).
In view of this incapacity, private respondent and DOTC agreed that on completion date, private
respondent will immediately deliver possession of the LRT system by way of lease for 25 years, during
which period DOTC shall operate the same as a common carrier and private respondent shall provide
technical maintenance and repair services to DOTC (Revised and Restated Agreement, Secs. 3.2, 5.1 and
5.2; Rollo, pp. 57-58, 61-62). Technical maintenance consists of providing (1) repair and maintenance
facilities for the depot and rail lines, services for routine clearing and security; and (2) producing and

distributing maintenance manuals and drawings for the entire system (Revised and Restated Agreement,
Annex F).
Private respondent shall also train DOTC personnel for familiarization with the operation, use,
maintenance and repair of the rolling stock, power plant, substations, electrical, signalling,
communications and all other equipment as supplied in the agreement (Revised and Restated Agreement,
Sec. 10; Rollo, pp. 66-67). Training consists of theoretical and live training of DOTC operational personnel
which includes actual driving of light rail vehicles under simulated operating conditions, control of
operations, dealing with emergencies, collection, counting and securing cash from the fare collection
system (Revised and Restated Agreement, Annex E, Secs. 2-3). Personnel of DOTC will work under the
direction and control of private respondent only during training (Revised and Restated Agreement, Annex
E, Sec. 3.1). The training objectives, however, shall be such that upon completion of the EDSA LRT III and
upon opening of normal revenue operation, DOTC shall have in their employ personnel capable of
undertaking training of all new and replacement personnel (Revised and Restated Agreement, Annex E,
Sec. 5.1). In other words, by the end of the three-year construction period and upon commencement of
normal revenue operation, DOTC shall be able to operate the EDSA LRT III on its own and train all new
personnel by itself. Cdpr
Fees for private respondent's services shall be included in the rent, which likewise includes the project
cost, cost of replacement of plant equipment and spare parts, investment and financing cost, plus a
reasonable rate of return thereon (Revised and Restated Agreement, Sec. 1; Rollo, p. 54).
Since, DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common
carrier. For this purpose, DOTC shall indemnify and hold harmless private respondent from any losses,
damages, injuries or death which may be claimed in the operation or implementation of the system,
except losses, damages, injury or death due to defects in the EDSA LRT III on account of the defective
condition of equipment or facilities or the defective maintenance of such equipment or facilities (Revised
and Restated Agreement, Secs. 12.1 and 12.2; Rollo, p. 68).
In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will
have no dealings with the public and the public will have no right to demand any services from it.
It is well to point out that the role of private respondent as lessor during the lease period must be
distinguished from the role of the Philippine Gaming Management Corporation (PGMC) in the case of
Kilosbayan, Inc. v. Guingona, 232-SCRA 110 (1994). Therein, the Contract of Lease between PGMC and the
Philippine Charity Sweepstakes Office (PCSO) was actually a collaboration or joint venture agreement
prescribed under the charter of the PCSO. In the Contract of Lease, PGMC, the lessor obligated itself to
build, at its own expense, all the facilities necessary to operate and maintain a nationwide on-line lottery
system from whom PCSO was to lease the facilities and operate the same. Upon due examination of the
contract, the Court found that PGMC's participation was not confined to the construction and setting up of
the on-line lottery system. It spilled over to the actual operation thereof, becoming indispensable to the
pursuit, conduct, administration and control of the highly technical and sophisticated lottery system. In
effect, the PCSO leased out its franchise to PGMC which actually operated and managed the same. LLphil
Indeed, a mere owner and lessor of the facilities used by a public utility is not a public utility (Providence
and W.R. Co. v. United States, 46 F. 2d 149, 152 [1930]; Chippewa Power Co. v. Railroad Commission of
Wisconsin, 205 N.W. 900, 903, 188 Wis. 246 [1925]; Ellis v. Interstate Commerce Commission, Ill. 35 S. Ct.
645, 646, 237 U.S. 434, 59 L. Ed. 1036 [1914]). Neither are owners of tank, refrigerator, wine, poultry and
beer cars who supply cars under contract to railroad companies considered as public utilities (Crystal Car
Line v. State Tax Commission, 174 P. 2d 984, 987 [1946]).
Even the mere formation of a public utility corporation does not ipso facto characterize the corporation as
one operating a public utility. The moment for determining the requisite Filipino nationality is when the
entity applies for a franchise, certificate or any other form of authorization for that purpose (People v.
Quasha, 93 Phil. 333 (1953]).
2.
Petitioners further assert that the BLT scheme under the Agreements in question is not recognized
in the BOT Law and its implementing Rules and Regulations.
Section 2 of the BOT Law defines the BOT and BT schemes as follows:

"(a)
Build-operate-and-transfer scheme A contractual arrangement whereby the contractor
undertakes the construction, including financing, of a given infrastructure facility, and the operation and
maintenance thereof. The contractor operates the facility over a fixed term during which it is allowed to
charge facility users appropriate tolls, fees, rentals, and charges sufficient to enable the contractor to
recover its operating and maintenance expenses and its investment in the project plus a reasonable rate
of return thereon. The contractor transfers the facility to the government agency or local government unit
concerned at the end of the fixed term which shall not exceed fifty (50) years. For the construction stage,
the contractor may obtain financing from foreign and/or domestic sources and/or engage the services of a
foreign and/or Filipino constructor [sic]: Provided, That the ownership structure of the contractor of an
infrastructure facility whose operation requires a public utility franchise must be in accordance with the
Constitution: Provided, however, That in the case of corporate investors in the build-operate-and-transfer
corporation, the citizenship of each stockholder in the corporate investors shall be the basis for the
computation of Filipino equity in the said corporation: Provided, further, That, in the case of foreign
constructors [sic], Filipino labor shall be employed or hired in the different phases of the construction
where Filipino skills are available: Provided, furthermore, that the financing of a foreign or foreigncontrolled contractor from Philippine government financing institutions shall not exceed twenty percent
(20%) of the total cost of the infrastructure facility or project: Provided, finally, That financing from foreign
sources shall not require a guarantee by the Government or by government-owned or controlled
corporations. The build-operate-and-transfer scheme shall include a supply-and-operate situation which is
a contractual arrangement whereby the supplier of equipment and machinery for a given infrastructure
facility, if the interest of the Government so requires, operates the facility providing in the process
technology transfer and training to Filipino nationals. cdphil
(b)
Build-and-transfer scheme A contractual arrangement whereby the contractor undertakes the
construction including financing, of a given infrastructure facility, and its turnover after completion to the
government agency or local government unit concerned which shall pay the contractor its total
investment expended on the project, plus a reasonable rate of return thereon. This arrangement may be
employed in the construction of any infrastructure project including critical facilities which for security or
strategic reasons, must be operated directly by the government" (Italics supplied).
The BOT scheme is expressly defined as one where the contractor undertakes the construction and
financing of an infrastructure facility, and operates and maintains the same. The contractor operates the
facility for a fixed period during which it may recover its expenses and investment in the project plus a
reasonable rate of return thereon. After the expiration of the agreed term, the contractor transfers the
ownership and operation of the project to the government.
In the BT scheme, the contractor undertakes the construction and financing of the facility, but after
completion, the ownership and operation thereof are turned over to the government. The government, in
turn, shall pay the contractor its total investment on the project in addition to a reasonable rate of return.
If payment is to be effected through amortization payments by the government infrastructure agency or
local government unit concerned, this shall be made in accordance with a scheme proposed in the bid and
incorporated in the contract (R.A. No. 6957, Sec. 6).
Emphasis must be made that under the BOT scheme, the owner of the infrastructure facility must comply
with the citizenship requirement of the Constitution on the operation of a public utility. No such a
requirement is imposed in the BT scheme.
There is no mention in the BOT Law that the BOT and BT schemes bar any other arrangement for the
payment by the government of the project cost. The law must not be read in such a way as to rule out or
unduly restrict any variation within the context of the two schemes. Indeed, no statute can be enacted to
anticipate and provide all the fine points and details for the multifarious and complex situations that may
be encountered in enforcing the law (Director of Forestry v. Muoz, 23 SCRA 1183 [1968]; People v.
Exconde, 101 Phil. 1125 [1957]; United States v. Tupasi Molina, 29 Phil. 119 [1914]).
The BLT scheme in the challenged agreements is but a variation of the BT scheme under the law.
As a matter of fact, the burden on the government in raising funds to pay for the project is made lighter
by allowing it to amortize payments out of the income from the operation of the LRT System. LibLex

In form and substance, the challenged agreements provide that rentals are to be paid on a monthly basis
according to a schedule of rates through and under the terms of a confirmed Irrevocable Revolving Letter
of Credit (Supplemental Agreement, Sec. 6; Rollo, p. 85). At the end of 25 years and when full payment
shall have been made to and received by private respondent, it shall transfer to DOTC, free from any lien
or encumbrances, all its title to, rights and interest in, the project for only U.S. $1.00 (Revised and
Restated Agreement, Sec. 11.1; Supplemental Agreement, Sec. 7; Rollo, pp. 67, 87).
A lease is a contract where one of the parties binds himself to give to another the enjoyment or use of a
thing for a certain price and for a period which may be definite or indefinite but not longer than 99 years
(Civil Code of the Philippines, Art. 1643). There is no transfer of ownership at the end of the lease period.
But if the parties stipulate that title to the leased premises shall be transferred to the lessee at the end of
the lease period upon the payment of an agreed sum, the lease becomes a lease-purchase agreement.
LLjur
Furthermore, it is of no significance that the rents shall be paid in United States currency, not Philippine
pesos. The EDSA LRT III Project is a high priority project certified by Congress and the National Economic
and Development Authority as falling under the Investment Priorities Plan of Government (Rollo, pp. 310311). It is, therefore, outside the application of the Uniform Currency Act (R.A. No. 529), which reads as
follows:
"Sec. 1.
Every provision contained in, or made with respect to, any domestic obligation to wit, any
obligation contracted in the Philippines which provisions purports to give the obligee the right to require
payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount
of money of the Philippines measured thereby, be as it is hereby declared against public policy, and null,
void, and of no effect, and no such provision shall be contained in, or made with respect to, any obligation
hereafter incurred. The above prohibition shall not apply to (a) . . .; (b) transactions affecting high-priority
economic projects for agricultural, industrial and power development as may be determined by the
National Economic Council which are financed by or through foreign funds; . . . ."
3.
The fact that the contract for the construction of the EDSA LRT III was awarded through negotiation
and before congressional approval on January 22 and 23, 1992 of the List of National Projects to be
undertaken by the private sector pursuant to the BOT Law (Rollo, pp. 309-312) does not suffice to
invalidate the award.
Subsequent congressional approval of the list including "rail-based projects packaged with commercial
development opportunities" (Rollo, p. 310) under which the EDSA LRT III project falls, amounts to a
ratification of the prior award of the EDSA LRT III contract under the BOT Law.
Petitioners insist that the prequalification process which led to the negotiated award of the contract
appears to have been rigged from the very beginning to do away with the usual open international public
bidding where qualified internationally known applicants could fairly participate.
The records show that only one applicant passed the prequalification process. Since only one was left, to
conduct a public bidding in accordance with Section 5 of the BOT Law for that lone participant will be an
absurd and pointless exercise (cf. Deloso v. Sandiganbayan, 217 SCRA 49, 61 [1993]).
Contrary to the comments of then Executive Secretary Drilon, Section 5 of the BOT Law in relation to
Presidential Decree No. 1594 allows the negotiated award of government infrastructure projects.
Presidential Decree No. 1594, "Prescribing Policies, Guidelines, Rules and Regulations for Government
Infrastructure Contracts," allows the negotiated award of government projects in exceptional cases.
Section 4 of the said law reads as follows:
"Bidding. Construction projects shall generally be undertaken by contract after competitive public
bidding. Projects may be undertaken by administration or force account or by negotiated contract only in
exceptional cases where time is of the essence, or where there is lack of qualified bidders or contractors,
or where there is conclusive evidence that greater economy and efficiency would be achieved through
this arrangement, and in accordance with provision of laws and acts on the matter, subject to the
approval of the Minister of Public Works and Transportation and Communications, the Minister of Public
Highways, or the Minister of Energy, as the case may be, if the project cost is less than P1 Million, and the
President of the Philippines, upon recommendation of the Minister, if the project cost is P1 Million or more
(Italics supplied).

xxx

xxx

xxx

Indeed, where there is a lack of qualified bidders or contractors, the award of government infrastructure
contracts may be made by negotiation. Presidential Decree No. 1594 is the general law on government
infrastructure contracts while the BOT Law governs particular arrangements or schemes aimed at
encouraging private sector participation in government infrastructure projects. The two laws are not
inconsistent with each other but are in pari materia and should be read together accordingly. LibLex
In the instant case, if the prequalification process was actually tainted by foul play, one wonders why
none of the competing firms ever brought the matter before the PBAC, or intervened in this case before us
(cf. Malayan Integrated Industries Corp. v. Court of Appeals, 213 SCRA 640 [1992]; Bureau Veritas v. Office
of the President, 205 SCRA 705 [1992]). The challenged agreements have been approved by President
Ramos himself. Although then Executive Secretary Drilon may have disapproved the "Agreement to Build,
Lease and Transfer a Light Rail Transit System for EDSA," there is nothing in our laws that prohibits parties
to a contract from renegotiating and modifying in good faith the terms and conditions thereof so as to
meet legal, statutory and constitutional requirements. Under the circumstances, to require the parties to
go back to step one of the prequalification process would just be an idle ceremony. Useless bureaucratic
"red tape" should be eschewed because it discourages private sector participation, the "main engine" for
national growth and development (R.A. No. 6957, Sec. 1), and renders the BOT Law nugatory.
Republic Act No. 7718 recognizes and defines a BLT scheme in Section 2 thereof as:
"(e)
Build-lease-and-transfer A contractual arrangement whereby a project proponent is authorized
to finance and construct an infrastructure or development facility and upon its completion turns it over to
the government agency or local government unit concerned on a lease arrangement for a fixed period
after which ownership of the facility is automatically transferred to the government agency or local
government unit concerned."
Section 5-A of the law, which expressly allows direct negotiation of contracts, provides:
"Direct Negotiation of Contracts. Direct negotiation shall be resorted to when there is only one
complying bidder left as defined hereunder.
"(a)
If, after advertisement, only one contractor applies for prequalification and it meets the
prequalification requirements, after which it is required to submit a bid proposal which is subsequently
found by the agency/local government unit (LGU) to be complying.
"(b)
If, after advertisement, more than one contractor applied for prequalification but only one meets
the prequalification requirements, after which it submits bid/proposal which is found by the agency/local
government unit (LGU) to be complying.
"(c)
If, after prequalification of more than one contractor, only one submits a bid which is found by the
agency/LGU to be complying.
"(d)
If, after prequalification, more than one contractor submit bids but only one is found by the
agency/LGU to be complying. Provided, That, any of the disqualified prospective bidder [sic] may appeal
the decision of the implementing agency/LGUs prequalification bids and awards committee within fifteen
(15) working days to the head of the agency, in case of national projects or to the Department of the
Interior and Local Government, in case of local projects from the date the disqualification was made
known to the disqualified bidder: Provided, furthermore, That the implementing agency/LGUs concerned
should act on the appeal within forty-five (45) working days from receipt thereof." cdrep
Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated by the
BOT Law has now been rendered moot and academic by R.A. No. 7718. Sec. 3 of this law authorizes all
government infrastructure agencies, government-owned and controlled corporations and local
government units to enter into contract with any duly prequalified proponent for the financing,
construction, operation and maintenance of any financially viable infrastructure or development facility
through a BOT, BT, BLT, BOO (Build-own-and-operate), BTO (Build-transfer-and-operate), CAO (Contractadd-operate), DOT (Develop-operate-and-transfer), ROT (Rehabilitate-operate-and-transfer), and ROO
(Rehabilitate-own-operate) (R.A. No. 7718, Sec. 2 [b-j]).

From the law itself, once an applicant has prequalified, it can enter into any of the schemes in Section 2
thereof, including a BLT arrangement, enumerated and defined therein (Sec. 3).
Republic Act No. 7718 is a curative statute. It is intended to provide financial incentives and "a climate of
minimum government regulations and procedures and specific government undertakings in support of the
private sector" (Sec. 1). A curative statute makes valid that which before enactment of the statute was
invalid. Thus, whatever doubts and alleged procedural lapses private respondent and DOTC may have
engendered and committed in entering into the questioned contracts, these have now been cured by R.A.
No. 7718 (cf. Development Bank of the Philippines v. Court of Appeals, 96 SCRA 342 [1980]; Santos v.
Duata, 14 SCRA 1041 [1965]; Adong v. Cheong Seng Gee, 43 Phil. 43 [1922]).
4.
Lastly, petitioners claim that the agreements are grossly disadvantageous to the government
because the rental rates are excessive and private respondent's development rights over the 13 stations
and the depot will rob DOTC of the best terms during the most productive years of the project.
It must be noted that as part of the EDSA LRT III project, private respondent has been granted, for a
period of 25 years, exclusive rights over the depot and the air space above the stations for development
into commercial premises for lease, sublease, transfer, or advertising (Supplemental Agreement, Sec. 11;
Rollo, pp. 91-92). For and in consideration of these development rights, private respondent shall pay
DOTC in Philippine currency guaranteed revenues generated therefrom in the amounts set forth in the
Supplemental Agreement (Sec. 11; Rollo, p. 93). In the event that DOTC shall be unable to collect the
guaranteed revenues, DOTC shall be allowed to deduct any shortfalls from the monthly rent due private
respondent for the construction of the EDSA LRT III. (Supplemental Agreement, Sec. 11; Rollo, pp. 93-94).
All rights, titles, interests and income over all contracts on the commercial spaces shall revert to DOTC
upon expiration of the 25-year period (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).
The terms of the agreements were arrived at after a painstaking study by DOTC. The determination by the
proper administrative agencies and officials who have acquired expertise, specialized skills and
knowledge in the performance of their functions should be accorded respect, absent any showing of grave
abuse of discretion (Felipe Ysmael, Jr. & Co. v Deputy Executive Secretary, 190 SCRA 673 [1990]; Board of
Medical Education v. Alfonso, 176 SCRA 304 [1989]).
Government officials are presumed to perform their functions with regularity and strong evidence is
necessary to rebut this presumption. Petitioners have not presented evidence on the reasonable rentals to
be paid by the parties to each other. The matter of valuation is an esoteric field which is better left to the
experts and which this Court is not eager to undertake.
That the grantee of a government contract will profit therefrom and to that extent the government is
deprived of the profits if it engages in the business itself, is not worthy of being raised as an issue. In all
cases where a party enters into a contract with the government, he does so, not out of charity and not to
lose money, but to gain pecuniarily. cdrep
5.
Definitely, the agreements in question have been entered into by DOTC in the exercise of its
governmental function. DOTC is the primary policy, planning, programming, regulating and administrative
entity of the Executive branch of government in the promotion, development and regulation of
dependable and coordinated networks of transportation and communications systems as well as in the
fast, safe, efficient and reliable postal, transportation and communications services (Administrative Code
of 1987, Book IV, Title XV, Sec. 2). It is the Executive department, DOTC in particular, that has the power,
authority and technical expertise to determine whether or not a specific transportation or communications
project is necessary, viable and beneficial to the people. The discretion to award a contract is vested in
the government agencies entrusted with that function (Bureau Veritas v. Office of the President, 205 SCRA
705 [1992]).
WHEREFORE, the petition is DISMISSED.

SECOND DIVISION
[G.R. No. 68729. May 29, 1987.]
RADIO
COMMUNICATIONS
OF
THE
PHILIPPINES,
INC.,
petitioner,
vs.
NATIONAL
TELECOMMUNICATIONS COMMISSION and KAYUMANGGI RADIO NETWORK INCORPORATED,
respondents.
SYLLABUS
1.
ADMINISTRATIVE LAW; PUBLIC SERVICE COMMISSION; FUNCTIONS THEREOF TRANSFERRED TO THE
NATIONAL TELECOMMUNICATIONS. Pursuant to Presidential Decree No. 1 dated September 23, 1972,
reorganizing the executive branch of the National Government, the Public Service Commission was
abolished and its functions were transferred to three specialized regulatory boards, as follows: the Board
of Transportation, the Board of Communications and the Board of Power and Waterworks. The functions so
transferred were still subject to the limitations provided in sections 14 and 15 of the Public Service Law, as
amended. With the enactment of Executive Order No. 546 on July 23, 1979 implementing P.D. No. 1, the
Board of Communications and the Telecommunications Control Bureau were abolished and their functions
were transferred to the National Telecommunications Commission (Sec. 19(d), Executive Order No. 546).
2.
ID.; ID.; ID.; EXEMPTION ENJOYED BY RADIO COMPANIES NO LONGER EXISTS. It is clear from the
provision that the exemption enjoyed by radio companies from the jurisdiction of the Public Service
Commission and the Board of Communications no longer exists because of the changes effected by the
Reorganization Law and implementing executive orders. The petitioner's claim that its franchise cannot be
affected by Executive Order No. 546 on the ground that it has long been in operation since 1957 cannot
be sustained.
3.
ID.; FRANCHISE; SUBJECT TO REGULATION BY THE STATE THROUGH ITS ADMINISTRATIVE
AGENCIES. A franchise, being merely a privilege emanating from the sovereign power of the state and
owing its existence to a grant, is subject to regulation by the state itself by virtue of its police power
through its administrative agencies. We ruled in Pangasinan Transportation Co., Inc. v. Public Service
Commission (70 Phil. 221) that: ". . . statutes enacted for the regulation of public utilities, being a proper
exercise by the State of its police power, are applicable not only to those public utilities coming into
existence after its passage, but likewise to those already established and in operation . . ."
4.
ID.; APPROVAL OF SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS; A PRECONDITION
BEFORE RADIO STATIONS CAN BE PUT UP. In the words of R.A. No. 2036 itself, approval of the then
Secretary of Public Works and Communications was a precondition before the petitioner could put up
radio stations in areas where it desires to operate. It has been repeated time and again that where the
statutory norm speaks unequivocally, there is nothing for the courts to do except to apply it. The law,
leaving no doubt as to the scope of its operation, must be obeyed. (Gonzaga v. Court of Appeals, 51 SCRA
381).
5.
ID.; NATIONAL TELECOMMUNICATIONS COMMISSION; FINDINGS OF FACTS THEREOF, CONCLUSIVE
UPON THE COURT. We find no reason to disturb the public respondent's findings of fact, and conclusions
of law insofar as the private respondent was authorized to operate in Catarman, Samar and San Jose,
Mindoro. As a rule, the Commission's findings of fact, if supported by substantial evidence, are conclusive
upon this Court. We may modify or ignore them only when it clearly appears that there is no evidence to
support reasonably such a conclusion. (Halili v. Daplas, 14 SCRA 14).
DECISION
GUTIERREZ, JR., J p:
This petition seeks the reversal of the decision of the National Telecommunications Commission (NTC)
which ordered petitioner Radio Communications of the Philippines, Incorporated (RCPI) to desist from
operating its radio telephone services in Catarman, Northern Samar; San Jose, Occidental Mindoro; and
Sorsogon, Sorsogon.

Petitioner has been operating a radio communications system since 1957 under its legislative franchise
granted by Republic Act No. 2036 which was enacted on June 23, 1957.
In 1968, the petitioner established a radio telegraph service in Sorsogon, Sorsogon. In 1971, another radio
telegraph service was put up in San Jose, Mindoro followed by another in Catarman, Samar in 1976. The
installation of radio telephone services started in 1971 in San Jose, Mindoro; then in Sorsogon, Sorsogon
and Catarman, Samar in 1983.
In a decision dated June 24, 1980 in NTC Case No. 80-08, private respondent Kayumanggi Radio Network
Incorporated was authorized by the public respondent to operate radio communications systems in
Catarman, Samar and in San Jose, Mindoro.
On December 14, 1983, the private respondent filed a complaint with the NTC alleging that the petitioner
was operating in Catarman, Samar and in San Jose, Mindoro without a certificate of public convenience
and necessity. The petitioner, on the other hand, counter-alleged that its telephone services in the places
subject of the complaint are covered by the legislative franchise recognized by both the public respondent
and its predecessor, the Public Service Commission. In its supplemental reply, the petitioner further
stated that it has been in operation in the questioned places long before private respondent Kayumanggi
filed its application to operate in the same places. LLpr
After conducting a hearing, NTC, in its decision dated August 22, 1984 ordered petitioner RCPI to
immediately cease or desist from the operation of its radio telephone services in Catarman, Northern
Samar; San Jose, Occidental Mindoro; and Sorsogon, Sorsogon stating that under Executive Order No. 546,
a certificate of public convenience and necessity is mandatory for the operation of communication utilities
and services including radio communications.
On September 4, 1984, the petitioner filed a motion for reconsideration which was denied in an order
dated September 12, 1984.
On October 1, 1984, the present petition was filed raising the issue of whether or not petitioner RCPI, a
grantee of a legislative franchise to operate a radio company, is required to secure a certificate of public
convenience and necessity before it can validly operate its radio stations including radio telephone
services in Catarman, Northern Samar; San Jose, Occidental Mindoro; and Sorsogon, Sorsogon.
The petitioner's main argument states that the abolition of the Public Service Commission under
Presidential Decree No. 1 and the creation of the National Telecommunications Commission under
Executive Order No. 546 to replace the defunct Public Service Commission did not affect sections 14 and
15 of the Public Service Law (Commonwealth Act No. 146, as amended).
The provisions of the Public Service Law pertinent to the petitioner's allegation are as follows:
"Section 13. (a) The Commission shall have jurisdiction, supervision, and control over all public services
and their franchises, equipment and other properties, and in the exercise of its authority, it shall have the
necessary powers and the aid of public force: . . .
"Section 14.
xxx
"(d)
xxx

The following are exempted from the provisions of the preceding section:
xxx

xxx

Radio companies except with respect to the fixing of rates;

xxx

xxx

"Section 15. With the exception of those enumerated in the preceding section, no public service shall
operate in the Philippines without possessing a valid and subsisting certificate from the Public Service
Commission, known as 'certificate of public convenience,' or 'certificate of convenience and public
necessity,' as the case may be, to the effect that the operation of said service and the authorization to do
business will promote the public interests in a proper and suitable manner. . . ."
We find no merit in the petitioner's contention.
Pursuant to Presidential Decree No. 1 dated September 23, 1972, reorganizing the executive branch of the
National Government, the Public Service Commission was abolished and its functions were transferred to

three specialized regulatory boards, as follows: the Board of Transportation, the Board of Communications
and the Board of Power and Waterworks. The functions so transferred were still subject to the limitations
provided in sections 14 and 15 of the Public Service Law, as amended. With the enactment of Executive
Order No. 546 on July 23, 1979 implementing P.D. No. 1, the Board of Communications and the
Telecommunications Control Bureau were abolished and their functions were transferred to the National
Telecommunications Commission (Sec. 19(d), Executive Order No. 546). Section 15 of said Executive
Order spells out the functions of the National Telecommunications Commission as follows: prcd
"Sec. 15.

Functions of the Commission. The Commission shall exercise the following functions:

"a.
Issue Certificate of Public Convenience for the operation of communications utilities and services,
radio communications systems, wire or wireless telephone or telegraph system, radio and television
broadcasting system and other similar public utilities;
"b.
Establish, prescribe and regulate areas of operation of particular operators of public service
communications; and determine and prescribe charges or rates pertinent to the operation of such public
utility facilities and services except in cases where charges or rates are established by international
bodies or associations of which the Philippines is a participating member or by bodies recognized by the
Philippine Government as the proper arbiter of such charges or rates;
"c.
Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and
radio communication systems including amateur radio stations and radio and television broadcasting
systems;
"d.
Sub-allocate series of frequencies of bands allocated by the International Telecommunications
Union to the specific services;
"e.
Establish and prescribe rules, regulations, standards, specifications in all cases related to the
issued Certificate of Public Convenience and administer and enforce the same;
"f.
Coordinate and cooperate with government agencies and other entities concerned with any aspect
involving communications with a view to continuously improve the communications service in the
country;
"g.
Promulgate such rules and regulations, as public safety and interest may require, to encourage a
larger and more effective use of communications, radio and television broadcasting facilities, and to
maintain effective competition among private entities in these activities whenever the Commission finds it
reasonably feasible;
"h.

Supervise and inspect the operation of radio stations and telecommunications facilities;

"i.

Undertake the examination and licensing of radio operators;

"j.

Undertake, whenever necessary, the registration of radio transmitters and transceivers; and

"k.

Perform such other functions as may be prescribed by law.

It is clear from the aforequoted provision that the exemption enjoyed by radio companies from the
jurisdiction of the Public Service Commission and the Board of Communications no longer exists because
of the changes effected by the Reorganization Law and implementing executive orders. The petitioner's
claim that its franchise cannot be affected by Executive Order No. 546 on the ground that it has long been
in operation since 1957 cannot be sustained. prcd
A franchise started out as a "royal privilege or (a) branch of the King's prerogative, subsisting in the hands
of a subject." This definition was given by Finch, adopted by Blackstone, and accepted by every authority
since (State v. Twin Village Water Co., 98 Me 214, 56 A 763 (1903)). Today, a franchise, being merely a
privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to
regulation by the state itself by virtue of its police power through its administrative agencies. We ruled in
Pangasinan Transportation Co., Inc. v. Public Service Commission (70 Phil. 221) that:
". . . statutes enacted for the regulation of public utilities, being a proper exercise by the State of its police
power, are applicable not only to those public utilities coming into existence after its passage, but likewise
to those already established and in operation . . ."

Executive Order No. 546, being an implementing measure of P.D. No. 1 insofar as it amends the Public
Service Law (CA No. 146, as amended) is applicable to the petitioner who must be bound by its provisions.
The petitioner cannot install and operate radio telephone services on the basis of its legislative franchise
alone.
The position of the petitioner that by the mere grant of its franchise under RA No. 2036 it can operate a
radio communications system anywhere within the Philippines is erroneous. Section 1 of said statute
reads:
"Section 1.
Subject to the provisions of the Constitution, and to the provisions, not inconsistent
herewith, of Act Numbered Three thousand eight hundred and forty-six, entitled 'An Act providing for the
regulation of radio stations and radio communications in the Philippine Islands, and for other purposes;'
Commonwealth Act Numbered One hundred forty-six, known as the Public Service Act, and their
amendments, and other applicable laws, there is hereby granted to the Radio Communications of the
Philippines, its successors or assigns, the right and privilege of constructing, installing, establishing and
operating in the Philippines, at such places as the said corporation may select and the Secretary of Public
Works and Communications may approve, radio stations for the reception and transmission of wireless
messages on radiotelegraphy and/or radiotelephony, including both coastal and marine
telecommunications, each station to consist of two radio apparatus comprising of a receiving and sending
radio apparatus." (Emphasis ours).
Section 4(a) of the same Act further provides that:
"Sec. 4(a).
This franchise shall not take effect nor shall any powers thereunder be exercised by the
grantee until the Secretary of Public Works and Communications shall have allotted to the grantee the
frequencies and wave lengths to be used, and issued to the grantee a license for such case." (Emphasis
ours.)
Thus, in the words of R.A. No. 2036 itself, approval of the then Secretary of Public Works and
Communications was a precondition before the petitioner could put up radio stations in areas where it
desires to operate. It has been repeated time and again that where the statutory norm speaks
unequivocally, there is nothing for the courts to do except to apply it. The law, leaving no doubt as to the
scope of its operation, must be obeyed. (Gonzaga v. Court of Appeals, 51 SCRA 381). cdrep
The records of the case do not show any grant of authority from the then Secretary of Public Works and
Communications before the petitioner installed the questioned radio telephone services in San Jose,
Mindoro in 1971. The same is true as regards the radio telephone services opened in Sorsogon, Sorsogon
and Catarman, Samar in 1983. No certificate of public convenience and necessity appears to have been
secured by the petitioner from the public respondent when such certificate was required by the applicable
public utility regulations. (See Executive Order No. 546, sec. 15, supra; Philippine Long Distance Telephone
Co. v. City of Davao, 15 SCRA 75; Olongapo Electric Light and Power Corp. v. National Power Corporation,
et al., G.R. No. L-24912, promulgated April 9, 1987.)
It was well within the powers of the public respondent to authorize the installation by the private
respondent network of radio communications systems in Catarman, Samar and San Jose, Mindoro. Under
the circumstances of this case, the mere fact that the petitioner possesses a franchise to put up and
operate a radio communications system in certain areas is not an insuperable obstacle to the public
respondent's issuing the proper certificate to an applicant desiring to extend the same services to those
areas. The Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be
granted except that it must be subject to amendment, alteration, or even repeal by the legislature when
the common good so requires. (Art. XII, sec. 11 of the 1986 Constitution). There is an express provision in
the petitioner's franchise which provides compliance with the above mandate (RA 2036, sec. 15).
In view of the foregoing, we find no reason to disturb the public respondent's findings of fact, and
conclusions of law insofar as the private respondent was authorized to operate in Catarman, Samar and
San Jose, Mindoro. As a rule, the Commission's findings of fact, if supported by substantial evidence, are
conclusive upon this Court. We may modify or ignore them only when it clearly appears that there is no
evidence to support reasonably such a conclusion. (Halili v. Daplas, 14 SCRA 14). The petitioner has not
shown why the private respondent should be denied the authority to operate its services in Samar and

Mindoro. It has not overcome the presumption that when the public respondent disturbed the petitioner's
monopoly in certain areas, it was doing so pursuant to public interest and the common good.
WHEREFORE, the challenged order of the public respondent dated August 22, 1984 is hereby AFFIRMED.
The petition is dismissed for lack of merit.
SO ORDERED.

FIRST DIVISION
[G.R. No. 138295. August 28, 2003.]
PILIPINO TELEPHONE CORPORATION, petitioner, vs. NATIONAL TELECOMMUNICATIONS
COMMISSION and INTERNATIONAL COMMUNICATIONS CORPORATION, respondents.
SYNOPSIS
Petitioner Pilipino Telephone Corporation filed a petition for certiorari before the Court of Appeals seeking
the nullification of the Order of respondent National Telecommunications Commission (NTC) which granted
respondent International Communications Corporation (ICC) Provisional Authority (PA) to construct,
operate and maintain local exchange services in some of the areas already covered by petitioner's
Provisional Authority. Among other things, petitioner contended that the Order of the respondent is
tantamount to confiscation of property without due process of law. The Court of Appeals, however,
dismissed the petition. Hence, this petition.
The law expressly vests in the NTC the power and discretion to grant a provisional permit or authority. The
NTC Order explicitly provides for the basis of the issuance of the PA. The Court will not disturb the factual
findings of the respondent NTC on the technical and financial capability of the respondent ICC to
undertake the proposed project. It generally accords great weight and even finality to factual findings of
the administrative bodies, such as the NTC, if substantial evidence supports the findings, as in this case.
The exception to this rule is when the administrative agency arbitrarily disregarded evidence before it or
misapprehended evidence to such an extent as to compel a contrary conclusion had it properly
appreciated the evidence. Petitioner gravely failed to show that this exception applies to the instant case.
Moreover, the exercise of administrative discretion, such as the issuance of a PA, is a policy decision and a
matter that the NTC can best discharge, not the courts. Furthermore, under the Constitution, no
franchisee can demand or acquire exclusivity in the operation of a public utility. Thus, a franchisee of a
public authority cannot complain of seizure or taking of property because of the issuance of another
franchise to a competitor. Petitioner, therefore, cannot complain of a taking of an exclusive right that it
does not own and which no franchisee can ever own. Accordingly, the Court affirmed the dismissal of
petitioner's petition not only because it failed to exhaust available administrative remedies but also
because the respondent NTC acted within its jurisdiction in issuing the questioned Order.

SYLLABUS
1.
REMEDIAL LAW; SPECIAL CIVIL ACTIONS; PETITION FOR CERTIORARI; MOTION FOR
RECONSIDERATION A PREREQUISITE FOR THE FILING THEREOF; REVIEW OF FACTUAL FINDINGS AND
EVALUATION OF EVIDENCE NOT PROPER SUBJECTS OF CERTIORARI. The settled rule is a motion for
reconsideration is a prerequisite for the filing of a petition for certiorari. A petitioner must exhaust all
other available remedies before resorting to certiorari. An exception to this rule arises if the petitioner
raises purely legal issues. However, contrary to PILTEL's view, the issues raised in its petition for certiorari
before the Court of Appeals were mainly factual in nature. Since PILTEL disputes NTC's factual findings and
seeks a re-evaluation of the facts and evidence on record, the issues PILTEL raised are not proper subjects
for certiorari. Evidentiary matters or matters of fact raised in the NTC are not proper grounds in the
proceedings for certiorari before the Court of Appeals. The sole office of a writ of certiorari is the
correction of errors of jurisdiction and does not include a review of the NTC's evaluation of the evidence
and factual findings.
2.
ID.; ID.; ID.; FAILURE TO FILE MOTION FOR RECONSIDERATION RENDERS PETITION DISMISSIBLE FOR
NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES. Even if the NTC Order was immediately executory, it
did not excuse PILTEL from filing a motion for reconsideration. Contrary to PILTEL's view, a motion for
reconsideration is the plain, speedy and adequate remedy to the adverse NTC Order. Had PILTEL filed a
motion for reconsideration of the NTC Order, the NTC would have had the opportunity to correct the
alleged errors. In addition, PILTEL's failure to file a motion for reconsideration rendered its petition for
certiorari dismissible because of failure to exhaust administrative remedies. aCITEH
3.
ID.; ID.; ID.; GRAVE ABUSE OF DISCRETION; EXPLAINED; THE NATIONAL TELECOMMUNICATIONS
COMMISSION DID NOT COMMIT GRAVE ABUSE OF DISCRETION WHEN IT ISSUED THE QUESTIONED ORDER
IN CASE AT BAR. In Benito v. Commission on Elections, the Court defined grave abuse of discretion as
follows: Grave abuse of discretion means such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, or, in other words where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to
amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law. It is not sufficient that a tribunal, in the exercise of its power, abused its discretion,
such abuse must be grave. Assuming that PILTEL's petition for certiorari was proper, PILTEL nevertheless
miserably failed to show that the NTC gravely abused its discretion amounting to lack or excess of
jurisdiction in issuing the NTC Order. The NTC is the regulatory agency of the national government with
jurisdiction over all telecommunications entities. The law expressly vests in the NTC the power and
discretion to grant a provisional permit or authority. In this case, the NTC did not commit grave abuse of
discretion when it issued the questioned Order.
4.
ID.; EVIDENCE; FACTUAL FINDINGS OF ADMINISTRATIVE BODIES GENERALLY ACCORDED GREAT
WEIGHT AND EVEN FINALITY IF SUPPORTED BY SUBSTANTIAL EVIDENCE; EXCEPTION; NOT APPLICABLE TO
CASE AT BAR. We will not disturb the factual findings of the NTC on the technical and financial
capability of the ICC to undertake the proposed project. We generally accord great weight and even
finality to factual findings of administrative bodies such as the NTC, if substantial evidence supports the
findings as in this case. The exception to this rule is when the administrative agency arbitrarily
disregarded evidence before it or misapprehended evidence to such an extent as to compel a contrary
conclusion had it properly appreciated the evidence. PILTEL gravely failed to show that this exception
applies to the instant case. Moreover, the exercise of administrative discretion, such as the issuance of a
PA, is a policy decision and a matter that the NTC can best discharge, not the courts.
5.
CONSTITUTIONAL LAW; NATIONAL ECONOMY AND PATRIMONY; OPERATION OF A PUBLIC UTILITY
SHALL NOT BE EXCLUSIVE. Section 23 of EO 109 does not categorically state that the issuance of a PA
is exclusive to any telecommunications company. Neither Congress nor the NTC can grant an exclusive
"franchise, certificate, of any other form of authorization" to operate a public utility. In Republic v. Express
Telecommunications Co., the Court held that "the Constitution is quite emphatic that the operation of a
public utility shall not be exclusive." Section 11, Article XII of the Constitution provides: . . . . Thus, in
Radio Communications of the Philippines, Inc. v. National Telecommunications Commission, the Court
ruled that the "Constitution mandates that a franchise cannot be exclusive in nature."

6.
ID.; ID.; ID.; PETITIONER'S RIGHT TO PROVIDE TELECOMMUNICATIONS IS NOT EXCLUSIVE. Even
PILTEL's franchise, Republic Act No. 6030 ("RA 6030"), expressly declares that PILTEL's right to provide
telecommunications services is not exclusive. Section 13 of RA 6030 states: SECTION 13. The rights herein
granted shall not be exclusive, and the right and power to grant to any corporation, association or person
other than the grantee franchise for the telephone or electrical transmission of messages and signals
shall not be impaired or affected by the granting of this franchise: . . . ." Moreover, Section 1 of RA 6030
expressly states that the grant of a franchise to PILTEL is "[s]ubject to the conditions established . . . in the
Constitution." Consequently, PILTEL does not enjoy any exclusive right to operate telecommunications
services in the areas covered by its PA.
7.
ID.; ID.; FRANCHISE TO OPERATE A PUBLIC UTILITY NOT AN EXCLUSIVE PRIVATE PROPERTY OF
FRANCHISEE. PILTEL's contention that the NTC Order amounts to a confiscation of property without due
process of law is untenable. "Confiscation" means the seizure of private property by the government
without compensation to the owner. A franchise to operate a public utility is not an exclusive private
property of the franchisee. Under the Constitution, no franchisee can demand or acquire exclusivity in the
operation of a public utility. Thus, a franchisee of a public utility cannot complain of seizure or taking of
property because of the issuance of another franchise to a competitor. Every franchise, certificate or
authority to operate a public utility is, by constitutional mandate, non-exclusive. PILTEL cannot complain
of a taking of an exclusive right that it does not own and which no franchisee can ever own. HcaATE
8.
ID.; ID.; ID.; FRANCHISE TO OPERATE PUBLIC UTILITY DOES NOT VEST UPON FRANCHISEE
EXCLUSIVE RIGHT AS PRIOR OPERATOR. Likewise, PILTEL's argument that the NTC Order violates
PILTEL's rights as a prior operator has no merit. The Court resolved a similar question in Republic v.
Republic Telephone Company, Inc. In striking down Retelco's claim that it had a right to be protected in its
investment as a franchise-holder and prior operator of a telephone service in Malolos, Bulacan, the Court
held: RETELCO's foremost argument is that "such operations and maintenance of the telephone system
and solicitation of subscribers by [petitioners] constituted an unfair and ruinous competition to the
detriment of [RETELCO which] is a grantee of both municipal and legislative franchises for the purpose."
In effect, RETELCO pleads for protection from the courts on the assumption that its franchises vested in it
an exclusive right as prior operator. There is no clear showing by RETELCO, however, that its franchises
are of an exclusive character. . . . At any rate, it may very well be pointed out as well that neither did the
franchise of PLDT at the time of the controversy confer exclusive rights upon PLDT in the operation of a
telephone system. In fact, we have made it a matter of judicial notice that all legislative franchises for the
operation of a telephone system contain the following provision: "It is expressly provided that in the event
the Philippine Government should desire to maintain and operate for itself the system and enterprise
herein authorized, the grantee shall surrender his franchise and will turn over to the Government said
system and all serviceable equipment therein, at cost, less reasonable depreciation."
DECISION
CARPIO, J p:
The Case
This petition for review on certiorari 1 seeks to reverse the Joint Decision 2 of the Court of Appeals in CAG.R. SP No. 47752 3 and CA-G.R. SP No. 47972 4 dated 15 April 1999 denying due course to the petition
for certiorari 5 filed by Pilipino Telephone Corporation ("PILTEL"), and dismissing the same. TaCSAD
The Facts
On 20 March 1995, the National Telecommunications Commission ("NTC") issued PILTEL a Provisional
Authority ("PA") to install, operate and maintain telephone exchanges and public calling offices. The areas
covered by PILTEL's PA included Sulu, Zamboanga del Norte, Zamboanga del Sur, Tawi-Tawi, Misamis
Occidental, Davao del Sur, South Cotabato, Saranggani and Davao City.
On 21 June 1996, while PILTEL's PA was still valid and subsisting, the International Communications
Corporation ("ICC") applied with the NTC for a PA to construct, operate and maintain local exchange
services in some of the areas covered by PILTEL's PA. Among the areas included in ICC's application were
Misamis Occidental, Zamboanga del Sur, Davao del Sur, South Cotabato and Saranggani.
On 11 November 1996, PILTEL filed its Opposition to ICC's PA application.

On 9 March 1998, the NTC issued an Order ("NTC Order") granting ICC a PA to establish local exchange
services in areas that included Misamis Occidental, Zamboanga del Sur, Davao del Sur, South Cotabato
and Saranggani.
PILTEL filed a petition for certiorari with prayer for the issuance of a temporary restraining order or writ of
preliminary injunction with the Court of Appeals on 5 June 1998 to nullify the NTC Order. On 28 July 1998,
ICC filed its Comment to PILTEL's Petition, while PILTEL filed its Reply on 28 August 1998.
On 21 September 1998, PILTEL filed an Urgent Motion to Resolve its application for the issuance of a
temporary restraining order. PILTEL alleged, among others, that it had yet to receive ICC's Comment
despite the lapse of a considerable time from the Court of Appeals' Resolution requiring ICC to file its
Comment.
On 15 April 1999, the Court of Appeals issued a Joint Decision, the dispositive portion of which reads:
WHEREFORE, for finding no grave abuse of discretion, tantamount to lack . . . or excess of jurisdiction, on
the part of the National Telecommunications Commission in issuing its challenged Order dated March 9,
1998 in NTC Case No. 96-194 which granted a provisional authority to International Communications
Corporation, the two (2) consolidated cases of CA-G.R. SP No. 47752 and CA-G.R. SP No. 47972 are both
hereby DENIED DUE COURSE and accordingly DISMISSED.
Costs against the petitioners.
SO ORDERED. 6
Hence, this petition.
The Ruling of the Court of Appeals
In its petition for certiorari, PILTEL claimed that the NTC acted with grave abuse of discretion amounting to
lack of jurisdiction in granting ICC a PA to operate local exchange service in areas previously assigned to
PILTEL. PILTEL alleged that the NTC Order violates Department of Transportation and Communications
Circular No. 91-260, Executive Order No. 109 and NTC Memorandum Circular No. 11-9-93. PILTEL also
claimed that the NTC Order is tantamount to an unwarranted taking of property without due process of
law and violates the equal protection clause of the Constitution. Lastly, PILTEL alleged that the
implementation of the NTC Order would foster ruinous competition.
In denying due course to the petition for certiorari, the Court of Appeals gave the following reasons:
First. Petitioner has not sufficiently shown us that other than this special civil action under Rule 65, they
have no plain, speedy, and adequate remedy in the ordinary course of law against their perceived
grievance. . . .
Second. Assuming arguendo that the propriety of the present recourse is not infirm, it is settled, however,
that before certiorari may be availed of, petitioner must have filed a motion for reconsideration of the
order or act complained of to enable the tribunal, board or office concerned to pass upon and correct its
mistakes without the intervention of the higher courts. . . .
Third. Further assuming arguendo that certiorari [was] the proper remedy, petitioner still failed to show
that the order complained of was tainted with grave abuse of discretion, so much so that after a careful
deliberation of the arguments and grounds in support thereof, it undoubtedly appears that the disputed
order was issued based on meritorious grounds. 7
The Issues
In assailing the decision of the Court of Appeals, PILTEL contends that:
A.
THE PETITIONER PROPERLY AVAILED OF THE REMEDY OF CERTIORARI UNDER RULE 65 OF THE 1997
RULES OF CIVIL PROCEDURE CONSIDERING THAT:
1.
THERE IS NO APPEAL OR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE
OF LAW AVAILABLE TO PETITIONER.

2.
THE ISSUES RAISED BY PETITIONER ARE PURELY OF LAW, HENCE, THE FILING OF A MOTION FOR
RECONSIDERATION OF THE QUESTIONED ORDER IS NOT A CONDITION SINE QUA NON.
B.
THE NATIONAL TELECOMMUNICATIONS COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION CONSIDERING THAT:
1.
THE GRANT OF THE PROVISIONAL AUTHORITY TO ICC TO OPERATE LOCAL EXCHANGE SERVICE IN
AREAS PREVIOUSLY ASSIGNED TO PILTEL UNDER ITS OWN PROVISIONAL AUTHORITY IS VIOLATIVE OF NTC
MEMORANDUM CIRCULAR NO. 11-9-93.
2.
THE GRANT OF THE PROVISIONAL AUTHORITY TO ICC TO OPERATE LOCAL EXCHANGE SERVICE IN
AREAS PREVIOUSLY ASSIGNED TO PILTEL IS TANTAMOUNT TO CONFISCATION OF PROPERTY WITHOUT DUE
PROCESS OF LAW. HCEaDI
3.
THE GRANT OF THE PROVISIONAL AUTHORITY TO ICC TO OPERATE LOCAL EXCHANGE SERVICE IN
AREAS PREVIOUSLY ASSIGNED TO PILTEL WOULD VIOLATE THE LATTER'S RIGHTS AS A PRIOR OPERATOR
AND ITS RIGHT TO BE PROTECTED IN ITS INVESTMENT. 8
The Court's Ruling
The petition lacks merit.
Whether PILTEL properly availed of the remedy of certiorari
PILTEL insists that the NTC Order is not a proper subject of an appeal since it is interlocutory which did not
resolve ICC's pending application for a Certificate of Public Convenience and Necessity. Even assuming
that appeal is an available remedy, PILTEL contends that it is not adequate to relieve promptly PILTEL from
the injurious effect 9 of the NTC Order which was immediately executory under the NTC Rules of Practice
and Procedure. 10 PILTEL also insists that a motion for reconsideration is dispensable since the issues
raised in the NTC were the same issues presented in the Court of Appeals and these are purely questions
of law. Thus, PILTEL argues, a motion for reconsideration before the NTC would have served no purpose.
11
The settled rule is a motion for reconsideration is a prerequisite for the filing of a petition for certiorari. 12
A petitioner must exhaust all other available remedies before resorting to certiorari. An exception to this
rule arises if the petitioner raises purely legal issues. However, contrary to PILTEL's view, the issues raised
in its petition for certiorari before the Court of Appeals were mainly factual in nature. Since PILTEL
disputes NTC's factual findings and seeks a re-evaluation of the facts and evidence on record, the issues
PILTEL raised are not proper subjects for certiorari. Evidentiary matters or matters of fact raised in the
NTC are not proper grounds in the proceedings for certiorari before the Court of Appeals. 13 The sole
office of a writ of certiorari is the correction of errors of jurisdiction and does not include a review of the
NTC's evaluation of the evidence and factual findings. 14
Even if the NTC Order was immediately executory, it did not excuse PILTEL from filing a motion for
reconsideration. Contrary to PILTEL's view, a motion for reconsideration is the plain, speedy and adequate
remedy to the adverse NTC Order. 15 Had PILTEL filed a motion for reconsideration of the NTC Order, the
NTC would have had the opportunity to correct the alleged errors. 16 In addition, PILTEL's failure to file a
motion for reconsideration rendered its petition for certiorari dismissible because of failure to exhaust
administrative remedies.
In Republic v. Express Telecommunication Co., Inc., 17 the Court ruled that Extelcom failed to exhaust
available administrative remedies when it filed with the Court of Appeals a petition for certiorari and
prohibition without a motion for reconsideration, thus:
Clearly, Extelcom violated the rule on exhaustion of administrative remedies when it went directly to the
Court of Appeals on a petition for certiorari and prohibition from the Order of the NTC dated May 3, 2000,
without first filing a motion for reconsideration. It is well-settled that the filing of a motion for
reconsideration is a prerequisite to the filing of a special civil action for certiorari.
xxx

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This case does not fall under any of the recognized exceptions to this rule. Although the Order of the NTC
dated May 3, 2000 granting provisional authority to Bayantel was immediately executory, it did not
preclude the filing of a motion for reconsideration. Under the NTC Rules, a party adversely affected by a
decision, order, ruling or resolution may within fifteen (15) days file a motion for reconsideration. That the
Order of the NTC became immediately executory does not mean that the remedy of filing a motion for
reconsideration is foreclosed to the petitioner. (Italics supplied)
In fine, the Court of Appeals correctly dismissed PILTEL's petition for certiorari for PILTEL's failure to file a
motion for reconsideration of the NTC Order.
Whether NTC committed grave abuse of discretion
In Benito v. Commission on Elections, 18 the Court defined grave abuse of discretion as follows:
Grave abuse of discretion means such capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction, or, in other words where the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. It
is not sufficient that a tribunal, in the exercise of its power, abused its discretion, such abuse must be
grave. (Italics supplied)
Assuming that PILTEL's petition for certiorari was proper, PILTEL nevertheless miserably failed to show that
the NTC gravely abused its discretion amounting to lack or excess of jurisdiction in issuing the NTC Order.
The NTC is the regulatory agency of the national government with jurisdiction over all telecommunications
entities. 19 The law expressly vests in the NTC the power and discretion to grant a provisional permit or
authority. 20 In this case, the NTC did not commit grave abuse of discretion when it issued the questioned
Order. The NTC Order explicitly provides for the basis of the issuance of the PA, as follows:
The technical feasibility study submitted and offered in evidence by the applicant contains technical
designs which consist of two main components, to wit:
(a)
The rural network component consisting of a number of dispersed switching centers throughout
Regions 6, 7, 9, 10, 11 and 12 interconnected by a digital microwave transmission system.
(b)
The transit (Inter-exchange carrier) network consisting of transit switching centers of Manila and
Cebu for the interconnection of the ICC LEC Networks with the network of other LEC operators, IGF
operators (as well as ICC IGF), CMTS operators and operators of PCO Networks.
Its network design is based on conservative projections and value based engineering assumptions to
ensure than an effective and efficient network is provided.
The structure of ICC's LEC has two (2) layer hierarchical network: the transit layer which provides the
classic trunk (tool) switching and inter-carrier interconnect functions; and the local exchange carrier.
Applicant will be using Northern Telecom DMS 100/200 and DMS 300 (Toll Exchange) digital switching
equipment for its LEC Network/Service in the twenty-two (22) provinces in Visayas and Mindanao areas.
Applicant's proposed LEC project in the Visayas and Mindanao areas will be implemented within [a] three
(3) year period with a total number of 250,000 lines as mentioned in the submitted Feasibility Study. The
distribution of ICC's committed lines for its proposed LEC project in the cities and municipalities of the
twenty-two (22) provinces in the Visayas and Mindanao areas are enumerated in Annex "B" of the
amended application.
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As regards the capital costs for the present proposed project, applicant's financial documents show the
following figures:
Year 1 P1.796 Billion
Year 2 1.434 Billion
Year 3 2.319 Billion

TOTAL P5.549 Billion

Applicant's projected revenues and expenses (in thousand pesos) are as follows:
Year

Net Income/Loss

(549,178.00)

(489,243.00)

(425,208.00)

6,796.00

276,434.00

456,457.00

649,782.00

910,524.00

1,226,510.00

10

1,563,005.00

Applicant submitted its amended Articles of Incorporation approved by the Securities and Exchange
Commission on July 31, 1996 as shown by the attached Certificate of Increase of Capital Stock wherein
applicants Authorized Capital Stock was increased from P1,500,000, . . . (illegible) Million shares with par
value of P100 each.
Of the increase of P3,500,000,000.00 in the authorized capital stock, the amount of P2,185,000,000.00
has been subscribed and fully paid by Bayan Telecommunications Holdings Corporation.
Per 1996 Annual Report submitted by the applicant, the following figures reflected their financial position:
Total assets

P11,369,996,565

Total liabilities =

6,779,971,249

Total stockholder's equity

4,590,025,316

with a debt-to-equity ratio of 60% to 40%.

Applicant has an outstanding balance for permit fee amounting to P88,988,089.00 for the following . . .
(illegible) previously authorized, to wit:
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The Commission has noted that the present application received favorable endorsements/resolutions from
twenty-three (23) Local Government Units (LGU) and non-Government Organizations (NGOs) in the
Visayas and Mindanao Regions manifesting support for the applicant's proposed projects. aTSEcA
In determining the service areas to be assigned to herein applicant with a view to rationalizing the
distribution thereof to qualified applicants, the Commission took into consideration the other pending
applications for LEC services, the existing number of authorized LEC applicants, the need to provide LEC
service to all areas of the country the soonest time possible, as well as the fact that earlier on, this
Commission had occasion to commend in another case herein applicant ICC for being the first to have
completed, nay exceeded, its compliance with its commitments under Executive Order 109 and NTC
Memorandum Circular No. 11-9-93.
WHEREFORE, it appearing that a prima facie evidence exists that applicant is financially and technically
capable of undertaking the proposed project, and in order to fast-track the development of
telecommunication services through the provisioning of telephone services to all areas of the country, and
to foster as well healthy competition among authorized service providers, the Commission hereby grants
applicant International Communications Corporation a Provisional Authority (P.A.), predicated upon its

legislative franchise, R.A. No. 3259, as amended by R.A. No. 4905, and R.A. No. 7633, to install, operate
and maintain local telephone exchanges in the following provinces, . . . 21 (Italics supplied)
We will not disturb the factual findings of the NTC on the technical and financial capability of the ICC to
undertake the proposed project. We generally accord great weight and even finality to factual findings of
administrative bodies such as the NTC, if substantial evidence supports the findings as in this case. 22
The exception to this rule is when the administrative agency arbitrarily disregarded evidence before it or
misapprehended evidence to such an extent as to compel a contrary conclusion had it properly
appreciated the evidence. 23 PILTEL gravely failed to show that this exception applies to the instant case.
Moreover, the exercise of administrative discretion, such as the issuance of a PA, is a policy decision and a
matter that the NTC can best discharge, not the courts. 24
PILTEL contends that the NTC violated Section 23 of NTC Memorandum Circular No. 11-9-93, otherwise
known as the "Implementing Guidelines on the Provisions of EO 109," which states:
Section 23.
No other company or entity shall be authorized to provide local exchange service in areas
where the LECs comply with the relevant provisions of NTC MC No. 10-17-90 and NTC MC No. 10-16-90
and that the local exchange service area is not underserved. (Emphasis supplied)
Section 23 of EO 109 does not categorically state that the issuance of a PA is exclusive to any
telecommunications company. Neither Congress nor the NTC can grant an exclusive "franchise, certificate,
of any other form of authorization" to operate a public utility. In Republic v. Express Telecommunications
Co., 25 the Court held that "the Constitution is quite emphatic that the operation of a public utility shall
not be exclusive." 26 Section 11, Article XII of the Constitution provides:
Sec. 11.
No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted to citizens of the Philippines or to corporations or associations organized under the
laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such
franchise, certificate or authorization be exclusive in character or for a longer period than fifty years.
Neither shall any such franchise or right be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the common good so requires . . . 27 (Italics
supplied)
Thus, in Radio Communications of the Philippines, Inc. v. National Telecommunications Commission, 28
the Court ruled that the "Constitution mandates that a franchise cannot be exclusive in nature."
Even PILTEL's franchise, Republic Act No. 6030 ("RA 6030"), expressly declares that PILTEL's right to
provide telecommunications services is not exclusive. Section 13 of RA 6030 states:
SECTION 13. The rights herein granted shall not be exclusive, and the right and power to grant to any
corporation, association or person other than the grantee franchise for the telephone or electrical
transmission of messages and signals shall not be impaired or affected by the granting of this
franchise: . . . ." (Emphasis supplied)
Moreover, Section 1 of RA 6030 29 expressly states that the grant of a franchise to PILTEL is "[s]ubject to
the conditions established . . . in the Constitution." Consequently, PILTEL does not enjoy any exclusive
right to operate telecommunications services in the areas covered by its PA.
Among the declared national policies in Republic Act No. 7925, otherwise known as the "Public
Telecommunications Policy Act of the Philippines," is the healthy competition among telecommunications
carriers, to wit: 30
A healthy competitive environment shall be fostered, one in which telecommunications carriers are free to
make business decisions and to interact with one another in providing telecommunications services, with
the end in view of encouraging their financial viability while maintaining affordable rates.
Obviously, "the need for a healthy competitive environment in telecommunications is sufficient impetus
for the NTC to consider all those applicants, who are willing to offer competition, develop the market and
provide the environment necessary for greater public service." 31

Furthermore, "free competition in the industry may also provide the answer to a much-desired
improvement in the quality and delivery of this type of public utility, to improved technology, fast and
handy mobil[e] service, and reduced user dissatisfaction." 32
PILTEL's contention that the NTC Order amounts to a confiscation of property without due process of law is
untenable. "Confiscation" means the seizure of private property by the government without compensation
to the owner. 33 A franchise to operate a public utility is not an exclusive private property of the
franchisee. Under the Constitution, no franchisee can demand or acquire exclusivity in the operation of a
public utility. Thus, a franchisee of a public utility cannot complain of seizure or taking of property because
of the issuance of another franchise to a competitor. Every franchise, certificate or authority to operate a
public utility is, by constitutional mandate, non-exclusive. PILTEL cannot complain of a taking of an
exclusive right that it does not own and which no franchisee can ever own.
Likewise, PILTEL's argument that the NTC Order violates PILTEL's rights as a prior operator has no merit.
The Court resolved a similar question in Republic v. Republic Telephone Company, Inc. 34 In striking down
Retelco's claim that it had a right to be protected in its investment as a franchise-holder and prior
operator of a telephone service in Malolos, Bulacan, the Court held:
RETELCO's foremost argument is that "such operations and maintenance of the telephone system and
solicitation of subscribers by [petitioners] constituted an unfair and ruinous competition to the detriment
of [RETELCO which] is a grantee of both municipal and legislative franchises for the purpose." In effect,
RETELCO pleads for protection from the courts on the assumption that its franchises vested in it an
exclusive right as prior operator. There is no clear showing by RETELCO, however, that its franchises are
of an exclusive character. . . . At any rate, it may very well be pointed out as well that neither did the
franchise of PLDT at the time of the controversy confer exclusive rights upon PLDT in the operation of a
telephone system. In fact, we have made it a matter of judicial notice that all legislative franchises for the
operation of a telephone system contain the following provision:
"It is expressly provided that in the event the Philippine Government should desire to maintain and
operate for itself the system and enterprise herein authorized, the grantee shall surrender his franchise
and will turn over to the Government said system and all serviceable equipment therein, at cost, less
reasonable depreciation."
In sum, the Court of Appeals correctly dismissed PILTEL's petition for certiorari not only because PILTEL
failed to exhaust the available administrative remedies but also because NTC acted within its jurisdiction
in issuing the NTC Order.
WHEREFORE, we DENY the petition. The Decision of the Court of Appeals dated 15 April 1999 in CA-G.R.
SP No. 47752 and CA-G.R. SP No. 47972 is AFFIRMED. Costs against petitioner.
SO ORDERED.