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G.R. No. L-48747 September 30, 1982 ANGEL JEREOS, petitioner, vs. HON.

COURT OF APPEALS, SOLEDAD RODRIGUEZ, FELICIA R. REYES, JOSE RODRIGUEZ, JESUS RODRIGUEZ, Jr., ROBERTO RODRIGUEZ, FRANCISCO RODRIGUEZ, TERESITA RODRIGUEZ, MANUEL RODRIGUEZ, ANTONIO RODRIGUEZ, DOMINGO PARDORLA, Jr., and NARCISO JARAVILLA, respondents.

CONCEPCION JR., J.: Review on certiorari of the decision rendered by the respondent Court of Appeals in case CA-G.R. & No. 60232-R, entitled: "Soledad Rodriguez, et al., plaintiffsappellants, versus Narciso Jaravilla, et al., defendants; Narciso Jaravilla and Domingo Pardorla, Jr., defendants-appellants; Angel Jereos, defendantappellee." Private respondent, Domingo Pardorla, Jr. is the holder of a certificate of public convenience for the operation of a jeepney line in Iloilo City. On February 23, 1971, one of his jeepneys, driven by Narciso Jaravilla, hit Judge Jesus S. Rodriguez and his wife, Soledad, while they were crossing Bonifacio Drive, Iloilo City, causing injuries to them, which resulted in the death of Judge Rodriguez. Narciso Jaravilla was prosecuted and, on his plea of guilty, was convicted of the crime of Homicide and Physical Injuries through Reckless Imprudence and sentenced accordingly. Thereafter, Soledad Rodriguez and her children filed with the Court of First Instance of Iloilo an action for damages against Narciso Jaravilla, Domingo Pardorla, Jr., and Angel Jereos, the actual owner of the jeepney. 1 Angel Jereos denied ownership of the jeepney in question and claimed that the plaintiffs have no cause of action against him. 2 Domingo Pardorla, Jr., upon the other hand, claimed that he was only the franchise owner and has nothing to do with the actual operation and supervision of the passenger jeepney in question which is under the actual control, operation and supervision of Angel Jereos who operates the same under the "kabit system." 3 After appropriate proceedings, the Court of First Instance of Iloilo rendered judgment on October 24, 1978, ordering Narciso Jaravilla and Doming Pardorla,

Jr. to pay, jointly and severally, damages to the plaintiffs. Angel Jereos was exonerated for the reason that the Court found no credible evidence to support plaintiffs' as well as defendant Pardorla's contention that defendant Jereos was the operator of the passenger jeepney in question at the time of the accident which happened on February 3, 1971, defendant Jereos sold on November 19, 1970 the said passenger jeepney to Flaviana Tanoy as shown in the notarized deed of sale (Exh. 1-Jereos) who later transferred ownership thereof to defendant Pardorla, Jr., whose registration certificate thereof is marked Exh. 3-BJereos was issued by the Land Transportation Commission on November 24, 1970. 4 Both plaintiffs and the defendants Narciso Jaravilla and Domingo Pardorla, Jr., appealed to the Court of Appeals. The plaintiffs contended that the trial court erred in not finding the defendant Angel Jereos jointly and severally liable with the their defendants for the damages incurred by them. The defendants Narciso Jaravilla and Domingo Pardorla, Jr., however, did not file their brief. On July 10, 1978, the Court of Appeals rendered a decision, modifying the decision of the trial court, and holding that Angel Jereos is jointly and severally liable with the other defendants for the damages awarded by the trial court to the plaintiffs, for the reason that the rule stated in the case of Vargas vs. Langcay (6 SCRA 174) that it is the registered owner of a passenger vehicle who is jointly and severally liable with the driver for damages incurred by passengers or third persons as a consequence of injuries or death sustained in the operation of said motor vehicle, which is invoked by Angel Jereos, cannot be applied in this case since the sale of the jeepney by Angel Jereos to his own sister-in-law, Flaviana Panoy, and its registration in the name of Domingo Pardorla, Jr., were simulated, fictitious transactions, parts and parcel of a strategem, to place Angel Jereos beyond the reach of his creditors past or future. 5 Angel Jereos appeals from this decision. He contends that the respondent Court, of Appeals erred in holding that the sale of the jeep to Flaviana Tanoy was simulated and fictitious and hence, it erred in finding him the actual or real owner of the illfated jeepney. The respondents claim, however, that the issue of whether or not the sale of the vehicle in question to Flaviana Tanoy and 'hereafter, to Domingo Pardorla, Jr. is simulated or fictitious, is one of fact and may not be reviewed by this Court on appeal. But, the petitioner counters that the findings of fact of the respondent appellate court is reviewable because the said findings are contrary to those of the trial court which were based upon an evaluation of the credibility of witnesses and

should not have been disturbed by the appellate court, following the rule that trial courts are in a better position to judge and evaluate the evidence presented in the course of the trial. The established rule in this jurisdiction is that findings of fact of the Court of Appeals, when supported by substantial evidence, is not reviewable on appeal by certiorari. Said findings of the appellate court are final and cannot be disturbed by the Supreme Court. However, where the findings of the Court of Appeals are contrary to those of the trial court, a minute scrutiny by the Supreme Court is in order and resort to duly proven evidence becomes necessary. 6 In the instant case, the Court of Appeals found that the trial court, in exempting Angel Jereos from liability, "relied solely on the deed of sale (Exh. 1-Jereos)ignoring altogether the testimony of Flora Jaravilla (wife of the driver) and of appellee Domingo Pardorla, Jr. " Hence, it had reason to exercise its appellate jurisdiction over the lower courts and modify the findings of fact of the trial court. The respondent Domingo Pardorla, Jr., in whose line the jeepney in question was registered under the "kabit system" declared that: ... this jeep was formerly attached to Imelda Mirasol then one of the units of Imelda Mirasol met an accident which cost many lives. Now, Angel Jereos was afraid that later on his jeep might be attached since there is a pending case against Mirasol. Now according to Angel Jereos he went to see Imelda Mirasol and asked her to execute a deed of sale in favor of Angel Jeroes. Now, when Angel Jereos came to me and asked if there is still vacancy in my line I told him there is. He told me that his jeep will be transferred under my line. I told him yes, prepare the papers. Now, after he has prepared the papers and he came back to me he told me he will just put it under the name of Flaviana Tanoy, his sister-in-law but I asked him that cannot be, what is your reason. According to him so that later on it can be hardly traced when something wrong with the case of Imelda Mirasol comes, then I will just put it under the name of Flaviana Tanoy, my sister-in-law but the jeep is still mine that is why I am the one who is paying you. His testimony is corroborated by Adriano Saladero, an employee of Pardorla, Jr., to whom Angel Jereos pays the monthly dues for the registration of his jeepneys under the certificate of public convenience issued to Pardorla, Jr., and by Flora Jaravilla, the wife of the driver of the jeepney, who categorically stated that the jeepney driven by her husband, Narciso Jaravilla, was owned by Angel Jereos to

whom they pay a daily "boundary" of P16.80; and that they park the said jeepney near the house of Angel Jereos after returning it at night. Finally, the petitioner, citing the case of Vargas vs. Langcay, 7 contends that it is the registered owner of the vehicle, rather than the actual owner, who must be jointly and severally liable with the driver of the passenger vehicle for damages incurred by third persons as a consequence of injuries or death sustained in the operation of said vehicle. The contention is devoid of merit. While the Court therein ruled that the registered owner or operator of a passenger vehicle is jointly and severally liable with the driver of the said vehicle for damages incurred by passengers or third persons as a consequence of injuries or death sustained in the operation of the said vehicle, the Court did so to correct the erroneous findings of the Court of Appeals that the liability of the registered owner or operator of a passenger vehicle is merely subsidiary, as contemplated in Art. 103 of the Revised Penal Code. In no case did the Court exempt the actual owner of the passenger vehicle from liability. On the contrary, it adhered to the rule followed in the cases of Erezo vs. Jepte, 8 Tamayo vs. Aquino, 9 and De Peralta vs. Mangusang, 10among others, that the registered owner or operator has the right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused. The right to be indemnified being recognized, recovery by the registered owner or operator may be made in any form-either by a cross-claim, third-party complaint, or an independent action. The result is the same. WHEREFORE, the petition should be, as it is hereby, DENIED. With costs against the petitioner. SO ORDERED. Barredo (Chairman), Aquino, Guerrero, Abad Santos, De Castro and Escolin, JJ., concur.

G.R. No. L-64693 April 27, 1984 LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA, respondents. Manuel A. Concordia for petitioner. Nicasio Ocampo for himself and on behalf of his correspondents.

ESCOLIN, J.:

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"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts. The factual background of this case is undisputed. Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated and maintained the same under the name Acme Taxi, petitioner's trade name. About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for attorney's fees.

This decision having become final, a writ of execution was issued. One of the vehicles of respondent spouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon and sold at public auction for P8,000.00 to a certain Mr. Lopez. Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of Manila. Trial on the merits ensued and on July 22, 1975, the said court rendered a decision, the dispositive portion of which reads:
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WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff of Manila are concerned. Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota cars not levied upon with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in favor of the plaintiff. Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate of convenience from March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars. (Annex A, Record on Appeal, p. 102-103, Rollo) Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by the court a quo on October 27, 1975. (p. 121, Ibid.) On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified the decision by including as part of its dispositive portion another paragraph, to wit:
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In the event the condition of the three Toyota rears will no longer serve the purpose of the deed of conveyance because of their deterioration, or because they are no longer serviceable, or because they are no longer available, then Lita Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of July 22, 1975. (Annex "D", p. 167, Rollo.)

Its first and second motions for reconsideration having been denied, petitioner came to Us, praying that:
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1. ... 2. ... after legal proceedings, decision be rendered or resolution be issued, reversing, annulling or amending the decision of public respondent so that: (a) the additional paragraph added by the public respondent to the DECISION of the lower court (CFI) be deleted; (b) that private respondents be declared liable to petitioner for whatever amount the latter has paid or was declared liable (in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim Florante Galvez, who died as a result ot the gross negligence of private respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.) Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system", whereby a person who has been granted a certificate of convenience allows another person who owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too severely condemned. It constitutes an imposition upon the goo faith of the government. Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides:
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ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed;

(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking. The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to contracts that are null void." The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or damages for its property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other." 3 Although certain exceptions to the rule are provided by law, We see no cogent reason why the full force of the rule should not be applied in the instant case. WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisions rendered therein are hereby annuleled and set aside. No costs. SO ORDERED.
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Feranando, C.J., Teehankee, Makasiar, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Melencio-Herrera, Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur. Aquino, J., took no part.

G.R. No. L-65510 March 9, 1987 TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner, vs. HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents. Cirilo A. Diaz, Jr. for petitioner. Henry V. Briguera for private respondent.

PARAS, J.: "'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129 SCRA 81.) The factual background of this case is undisputed. The same is narrated by the respondent court in its now assailed decision, as follows: On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a sidecar in the total consideration of P8,000.00 as shown by Invoice No. 144 (Exh. "A"). Out of the total purchase price the defendant gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. The defendant, however, failed to comply with his promise and so upon his own request, the period of paying the balance was extended to one year in monthly installments until January 1976 when he stopped paying anymore. The plaintiff made demands but just the same the defendant failed to comply with the same thus forcing the plaintiff to consult a lawyer and file this action for his damage in the amount of P546.21 for attorney's fees and P100.00 for expenses of litigation. The plaintiff also claims that as of February 20, 1978, the total account of the defendant was already P2,731.06 as shown in a statement of account (Exhibit. "B"). This amount includes not only the balance of P1,700.00 but an additional 12% interest per annum on the said balance from January 26, 1976 to February 27, 1978; a 2% service charge; and P 546.21 representing attorney's fees.

In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a security for the payment of the balance of the purchase price. It has been the practice of financing firms that whenever there is a balance of the purchase price the registration papers of the motor vehicle subject of the sale are not given to the buyer. The records of the LTC show that the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the defendant had no franchise of his own and he attached the unit to the plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation Commission. Pursuant to this agreement the defendant on February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for the mortgage fee and the P82.00 for the registration fee of the motorcycle. The plaintiff, however failed to register the motorcycle on that year on the ground that the defendant failed to comply with some requirements such as the payment of the insurance premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was hiding the motorcycle from him. Lastly, the plaintiff explained also that though the ownership of the motorcycle was already transferred to the defendant the vehicle was still mortgaged with the consent of the defendant to the Rural Bank of Camaligan for the reason that all motorcycle purchased from the plaintiff on credit was rediscounted with the bank. On his part the defendant did not dispute the sale and the outstanding balance of P1,700. 00 still payable to the plaintiff. The defendant was persuaded to buy from the plaintiff the motorcycle with the side car because of the condition that the plaintiff would be the one to register every year the motorcycle with the Land Transportation Commission. In 1976, however, the plaintfff failed to register both the chattel mortgage and the motorcycle with the LTC notwithstanding the fact that the defendant gave him P90.00 for mortgage fee and registration fee and had the motorcycle insured with La Perla Compana de Seguros (Exhibit "6") as shown also by the Certificate of cover (Exhibit "3"). Because of this failure of the plaintiff to comply with his obligation to register the motorcycle the defendant suffered damages when he failed to claim any insurance indemnity which would amount to no less than P15,000.00 for the more than two times that the motorcycle figured in accidents aside from the loss of the daily income of P15.00 as boundary fee

beginning October 1976 when the motorcycle was impounded by the LTC for not being registered. The defendant disputed the claim of the plaintiff that he was hiding from the plaintiff the motorcycle resulting in its not being registered. The truth being that the motorcycle was being used for transporting passengers and it kept on travelling from one place to another. The motor vehicle sold to him was mortgaged by the plaintiff with the Rural Bank of Camaligan without his consent and knowledge and the defendant was not even given a copy of the mortgage deed. The defendant claims that it is not true that the motorcycle was mortgaged because of re-discounting for rediscounting is only true with Rural Banks and the Central Bank. The defendant puts the blame on the plaintiff for not registering the motorcycle with the LTC and for not giving him the registration papers inspite of demands made. Finally, the evidence of the defendant shows that because of the filing of this case he was forced to retain the services of a lawyer for a fee on not less than P1,000.00. xxx xxx xxx ... it also appears and the Court so finds that defendant purchased the motorcycle in question, particularly for the purpose of engaging and using the same in the transportation business and for this purpose said trimobile unit was attached to the plaintiffs transportation line who had the franchise, so much so that in the registration certificate, the plaintiff appears to be the owner of the unit.Furthermore, it appears to have been agreed, further between the plaintiff and the defendant, that plaintiff would undertake the yearly registration of the unit in question with the LTC. Thus, for the registration of the unit for the year 1976, per agreement, the defendant gave to the plaintiff the amount of P82.00 for its registration, as well as the insurance coverage of the unit. Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with Damages" against private respondent Pedro N. Nale in the City Court of Naga City. The City Court rendered judgment in favor of petitioner, the dispositive portion of which reads: WHEREFORE, decision is hereby rendered dismissing the counterclaim and ordering the defendant to pay plaintiff the sum of P1,700.00 representing the unpaid balance of the purchase price with legal rate of interest from the date of the filing of the complaint

until the same is fully paid; to pay plaintiff the sum of P546.21 as attorney's fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and to pay the costs. SO ORDERED. On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private respondent filed a petition for review with the Intermediate Appellate Court and on July 18, 1983 the said Court promulgated its decision, the pertinent portion of which reads However, as the purchase of the motorcycle for operation as a trimobile under the franchise of the private respondent Jaucian, pursuant to what is commonly known as the "kabit system", without the prior approval of the Board of Transportation (formerly the Public Service Commission) was an illegal transaction involving the fictitious registration of the motor vehicle in the name of the private respondent so that he may traffic with the privileges of his franchise, or certificate of public convenience, to operate a tricycle service, the parties being in pari delicto, neither of them may bring an action against the other to enforce their illegal contract [Art. 1412 (a), Civil Code]. xxx xxx xxx WHEREFORE, the decision under review is hereby set aside. The complaint of respondent Teja Marketing and/or Angel Jaucian, as well as the counterclaim of petitioner Pedro Nale in Civil Case No. 1153 of the Court of First Instance of Camarines Sur (formerly Civil Case No. 5856 of the City Court of Naga City) are dismissed. No pronouncement as to costs. SO ORDERED. The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel Jaucian presenting a lone assignment of error whether or not respondent court erred in applying the doctrine of "pari delicto." We find the petition devoid of merit. Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system" whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles

to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds then. Upon this premise it would be error to accord the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides: Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: 1. When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of the contract, or demand, the performance of the other's undertaking. The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of time cannot give efficacy to contracts that are null and void. WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs. SO ORDERED. Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortez, JJ., concur. Alampay, J., took no part.

G.R. No. L-31056 August 4, 1988 LUCILA O. MANZANAL, petitioner, vs. MAURO A. AUSEJO and PUBLIC SERVICE COMMISSION, respondents. Pastor C. Bacani and Rogelio E. Subong for petitioner. Mauro A. Ausejo for and in his own behalf. Leonor S. Saplala for public respondent.

MEDIALDEA, J.: This is a petition for review on certiorari of the orders of the Public Service Commission dated June 30, 1967 and September 1, 1969 in PSC Case No. 6620-OC, entitled "Mauro A. Ausejo, Complainant, vs. Lucila O. Manzanal, Respondent," wherein the certificate of public convenience to operate a taxicab service in Manila and suburbs of herein petitioner Lucila O. Manzanal was cancelled and revoked and her third motion for reconsideration was denied. The case stemmed from the affidavit of Mauro A. Ausejo, with the Complaint, Investigation and Enforcement Office (CIEO) of the Public Service Commission narrating a hold up incident on March 13, 1966. In this affidavit, he implicated a taxicab unit whose plate number was said to be "6100" and which was allegedly boarded by three (3) robbers as they escaped from Roxas Boulevard in front of the L & S Building at about 6:00 a.m. of March 13, 1966, after affiant and a companion, Mr. Jose Caballes were accosted and held-up. On the basis of this affidavit, respondent Commission issued a "Show-Cause Order" dated May 25, 1966 upon petitioner, to wit: ... respondent (Petitioner Manzanal) is hereby ordered to appeal before this Commission, on this 24th day of June, 1966, at 9:00 o'clock in the morning to show cause why her certificate of public convenience issued under Case No. 62-4503 should not be cancelled for not rendering safe, adequate and proper service by employing a driver with criminal tendencies, in violation of Section 19 (a) of the Public Service Law and Section 47 of the Revised Order No. 1 of this Commission.

Failure on the part of the respondent to appear at the hearing set will be considered as a waiver of her right to be heard and this Commission will decide the case on its merits. (Page 13, Rollo) From October 10, 1966 to March 20, 1967, trial was conducted by the respondent Public Service Commission. Mr. Ausejo and Mr. Caballes both narrated the alleged hold-up incident as follows: Both were strolling along the seasided embankment of Dewey or Roxas Boulevard at about 6:00 o'clock in the morning of March 13, 1966 towards the direction of Pasay City. As they were in front of the L & S Building, they noticed that the three (3) men alighted from a vehicle behind them. Immediately thereafter, these men accosted and held-up both of them. Since the two offered some resistance, they attracted the attention of other promenaders as well as the attention of about twelve passing motorists who stopped to watch the spectacle, Two of the hold-uppers went after Mr. Caballes and the other one took care of Mr. Ausejo who fought back and succeeded in disarming the hold-uppers of his knife. He then drew his pistol and tried to shoot him but it jammed. As the two other hold-uppers ran towards his direction, presumably to assist their companion, they were warned that Mr. Ausejo had a gun and so they stopped and rushed instead to a waiting taxi bearing Plate No. 6100. At the trial, Mr. Caballes testified that the taxi was red in the entire body while private respondent Ausejo said that the taxi was red and it had parts painted blue. Both however said that the plate color was orange. On the part of petitioner, Manzanal, she submitted documents disputing the possibility that the taxicab in question was hers. She submitted the decision of the PSC in Case No. 65-2149 where it appears that the commercial name of the taxi is Crisman Taxi and that the color is "red top with emerald green body" and two certifications to the effect that the color of the plate in 1965 was white with maroon background. On June 30, 1967, the Public Service Commissioner Enrique Medina issued an order deploring the fact that the respondent did not file a formal answer or explanation. The Commission found that (a) there was no motive on the part of the said witnesses for the complainant to testify against the operator or against the driver of taxi with Plate No. 61 00; (b) the attention of the witnesses was concentrated on the number of the registration plate and it is understandable that they paid little or no attention at all to the colors; and (c) the conduct of the operator gave the impression that instead of applying a strong arm against the erring driver, she has tried to protect and shield him.

Accordingly, respondent Commission considered the charges proven since the hold-up incident was duly established and ordered the certificate of public convenience issued in Case No. 62-4503, for five units revoked and cancelled. Upon denial of her three motions for reconsideration, she filed this petition for review on certiorari assigning these errors: I. The Respondent Commission erred in cancelling and revoking the certificate of petitioner Manzanal on charges of failure to render safe, proper and adequate service under Section. 19 (a) of the Public Service Act as amended and for employing a driver with criminal record under Sec. 47 of the Revised Order No. 1, as there was absolutely no evidence whatever presented to prove such charges. II. The respondent Commission erred when it cancelled and revoked the certificate of petitioner Manzanal simply because one of her taxicab units allegedly got involved in a hold-up incident when some, hold-uppers allegedly boarded the same while escaping since this circumstance is not one of the grounds for cancellation. III. The respondent Commission erred in finding petitioner Manzanal guilty of protecting and shielding the driver of the taxicab unit in question by not letting him testify and not taking disciplinary action against him, in the face of absolute absence of evidence to support such findings. Petitioner included in her petition a prayer for the issuance of a preliminary mandatory injunction to allow petitioner to resume operations during the pendency of this petition and to enjoin respondent Commission from snowing another to appropriate her certificate and/or line. She reiterated this prayer in a motion dated January 9, 1970. On February 16, 1970, this Court issued a writ of preliminary injunction upon petitioner posting a bond of P1,000.00 by allowing her to resume operations and at the same time enjoining the operations of Yolanda Escolin , whose application for "appropriation" was granted in PSC Case No. 68-9712. Upon motion of said Yolanda Escolin, this Court allowed her to intervene and lifted the preliminary injunction issued upon her filing a bond of P5,000.00. However, on June 23, 1970, this Court modified the order lifting the writ so that the first part thereof allowing petitioner to resume operation of her taxicab service is deemed excluded from said order of lifting. Respondent Public Service Commission filed an answer to the petition stating that the cancellation of petitioner's certificate was warranted by the evidence

adduced during the hearing pointing to the fact that the petitioner's driver was conclusively involved in the hold-up. Private respondent Mauro A. Ausejo on the other hand, manifested that he has chosen not to file an answer to the petition. He, however, filed his comment to petitioner's motion reiterating the prayer for the issuance of a writ of preliminary injunction. He affirmed therein the presence of Felicisimo M. Valdez the driver of taxicab No. 6100 during the hearings but stated, that he could not be sure then as to whether he was the driver of the vehicle used by the hold-uppers. He likewise stated that he executed an affidavit dated January 5, 1970 to the effect that the sole purpose of his complaint before the Public Service Commission was merely to verify the driver of the taxi then bearing Plate No. 6100 so said driver could help the police in the apprehension and prosecution of the hold-uppers and that in view of the death of said driver during the pendency of the investigation, he is wining to forget everything. We find the petition impressed with merit and agree with petitioner that the charges lodged against her have not been duly proved. The respondent Public Service Commission anchors the charges against petitioner on the following provisions, to wit: Section 19. Unlawful acts. It shall be unlawful for any public service: (a) to provide or maintain any service that is unsafe, improper, or inadequate, or withhold or refine any service which can reasonably be demanded and furnished, as found and determined by the Commission in a final order which shall be conclusive and shall take effect in accordance with this Act upon appeal or otherwise. (The Public Service Act, as amended) Section 47. Courtesy, character, record, etc. Each operator shag employ only such chauffeurs, conductors, agents, inspectors, auditors, and other employees who are courteous and of good moral character, and in no case shall he employ any person who has been convicted by competent court of homicide and/or serious physical injuries, theft, estafa, robbery, and crimes against chastity. Operators are prohibited from employing as chauffeurs persons who do not have professional drivers" license. (Revised Order No. 1) Section 19 (a) of the Public Service Act contemplates of failure to provide a service that is safe, proper or adequate and refusal to render any service which can reasonably be demanded and furnished. It refers specifically to the

operator's inability to provide reliable vehicles to transport the riding public to their places of destination and to the failure to provide an adequate number of units authorized under his franchise at all times to secure the public of sustained service. While the words "unsafe, inadequate and improper" may be broad enough to cover a lot of things, they must be interpreted in consonance with the purpose of the Public Service Law, which was specifically enacted, among other things, to protect the public against unreasonable charges and poor inefficient service (Luzon Stevedoring Co., Inc. vs. PSC, 93 Phil. 735) and to secure adequate sustained service for the public at the least possible costs. (Batangas Transportation Co. vs. Orlanes, 52 Phil. 455). The facts of the case are bereft and wanting of any evidence to the effect that petitioner rendered a service that is unsafe, inadequate and improper. There was no testimony whatsoever that her vehicles are of such kind which may endanger the lives of the passengers or are not suitable for the peculiar characteristics of the area serviced. There is no proof that petitioner is not in a position to cope with the obligations and responsibilities of the service and to maintain a complete number of units as authorized. While we agree with respondent Commission that said provision does not necessarily require a "passenger-operator" relationship, We disagree that a single hold-up incident which does not clearly link petition's taxicab can be comprehended within its meaning. Section 47 of the Revised Order No. 1, on the other hand, refers to the kind of persons an operator must keep under his employ, namely: courteous, of good moral character and no record of criminal conviction. Contrary to the claim of petitioner, this restriction equally applies to those who are already employed as well as those merely seeking admission to the service. (Pangasinan Transportation Co. vs. CIR, L-9736, May 20, 1957, 101 Phil. 480) The reason behind this requirement of courtesy and good moral character cannot be assailed and is understandable. A public service operator deals directly with the patronizing community and the nature of such undertaking necessarily demands of the company the maintenance of a personnel with unquestionable record of good moral character for the public entrust their lives, properties and interests in said services and deserve utmost courtesy, efficiency and safety in return. (Ibid.) But nowhere in the presentation of the facts of the case was there any proof that petitioner violated this provision. There is no proof that she has hired a driver with criminal record or bad moral character or has kept under her employ, such driver despite knowledge about his moral behavior, discourteous conduct or criminal record. Besides, the show cause order merely speaks of employing a driver with "criminal tendencies" while Section 47 is couched in unmistakable mandatory terms; it forbids the employment of persons "convicted" of offenses enumerated therein.

All that was proved during the investigation was the hold-up incident of March 13, 1966. But proof of the hold-up incident is not proof of the charges under Section 19 (a) of the Public Service Law and Sec. 47 of the Revised Order No. 17. Most importantly, even the precise Identity of the taxicab boarded by the hold-uppers as they escaped had not been established. The only testimony linking the taxicab of petitioner was that of the companion of private respondent Ausejo that he saw the malefactors scamper away and seize a taxi whose plate number was "6100". With respect to the description of the alleged taxi, he said that the taxi was red in the entire body while private respondent Ausejo said that the taxi was red and it had parts painted blue. Both confirmed each other that the plate color was orange. We find that petitioner has successfully refuted the alleged participation of her taxi. The decision dated December 28, 1965 of respondent Commission granting her petition for approval of her color scheme which authorized all her five (5) units to be painted with emerald green; the certification of Mr. Pedro Morales of the Land Transportation Commission, Chief of the Plate Section, to the effect that the plates for taxis for 1965 have a maroon background; and the certification of Mr. Marcelo Vasquez of the Vasquez Bros. & Co., Inc., the makers of vehicle plates for the Land Transportation Commission that the orange colored plates are given to privately owned vehicles and that No. 6100 has been given to both taxis and privately owned vehicles all cast a cloud of doubt on the real Identity of the vehicle used by the malefactors. Even on the assumption that it was petitioner's taxicab that was used by the escaping hold-uppers, there is no evidence that the driver is a co-conspirator in the commission of the offense of robbery. Conspiracy must be proved by clear and convincing evidence. The mere claim that the taxicab was there and probably waiting is not proof of conspiracy in this case as it should be recalled that there were about twelve vehicles that stopped to view the spectacle. Further, it is possible that the driver did not act voluntarily as no person in his right senses would defy the wishes of armed passengers. Even on the assumption that the driver had participated voluntarily in the incident, his culpability should not be made a ground for the cancellation of the certificate of petitioner. While an employer may be subsidiarily liable for the employee's civil liability in a criminal action, subsidiary liability presupposes that there was a criminal action. Besides, in order that an employer may be subsidiarily liable, it should be shown that the employee committed the offense in the discharge of his duties. While it is true also that an employer may be primarily liable under Article 2180 of the Civil Code for the acts or omissions of persons for whom one is responsible, this liability extends only to damages caused by his employees acting within the scope of their assigned tasks. Clearly, the act in question is totally alien to the business of petitioner as an operator and hence, the driver's illicit act is not within the scope

of the functions entrusted to him. Moreover, the action before respondent Commission is neither a criminal prosecution nor an action for quasi-delict. Hence, there is absolutely no ground to hold petitioner liable for the driver's act. Finally, under Section 16 (n) of the Public Service Act, the power of the Commission to suspend or revoke any certificate received under the provisions of the Act may only be exercised whenever the holder thereof has violated or willfully and contumaciously refused to comply with any order, rule or regulation of the Commission or any provision of the Act. In the absence of showing that there is willful and contumacious violation on the part of petitioner, no certificate of public convenience may be validly revoked. The following are some instances where the cancellation of a certificate of public convenience where held valid: (1) where the holder is a mere dummy (Pecson vs. Pecson, 78 Phil. 522); (2) where the operator ceased operation and placed his buses on storage (Parades vs. Public Service Commission, L-7111, May 30, 1955); and (3) where the operator abandons, totally the service (Collector vs. Buan, L-11438, July 31, 1958; Regodon vs. Public Service Commission, L11899, Sept. 23, 1958; Paez vs. Marcelo, L-1530, March 30, 1962). None of the willful acts in patent violation of the Public Service Law can be attributed to petitioner herein. Apropos, We find the respondent Commission's finding that the circumstances surrounding the case, specially the conduct of petitioner, gave the impression that the petitioner instead of applying a strong arm against the erring driver has tried to protect and shield him has no basis in fact. While the rule is that the commission's findings of fact, if supported by substantial evidence, are conclusive upon this Court, We are authorized to modify or ignore them when it clearly appears that there is no evidence to support reasonably such conclusion. (Javellana vs. La Paz Ice Plant & Cold Storage Co., 63 Phil. 621; Philippine Shipowners Association vs. Public Utility Commissioner, 43 Phil. 328; San Miguel Brewery vs. Lapid, 53 Phil. 539; Ice & Cold Storage Industries of the Phil., Inc. vs. Valero, 85 Phil. 7; Halili vs. Daplas, 14 SCRA 14) In the case at bar, it has been duly established that the driver of the taxicab, Felicisimo M. Valdez, was always present during the initial hearings of this case before his death on September 18, 1966. This fact is indicative of his willingness to take the witness stand but death sealed his lips. For her part, petitioner explained that she did not testify because she was candid enough not to pretend to know the exact whereabouts of her taxi at the fateful time. Hence, the conclusion of respondent Commission that she tried to protect or shield her driver by her refusal to refute or deny the claim of respondent Ausejo and Mr. Caballes is not warranted by the facts of the case.

ACCORDINGLY, the instant petition for review is hereby GRANTED and the decision of respondent Public Service Commission (now Land Transportation Franchising and Regulatory Board [LTFRB]) dated June 30, 1967 cancelling and revoking the certificate of public convenience of petitioner to operate a taxicab service in Manila for five (5) units under Case No. 62-4503 as well as the order denying the motion for reconsideration are hereby REVERSED and SET ASIDE. SO ORDERED. Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.

G.R. No. 115381 December 23, 1994 KILUSANG MAYO UNO LABOR CENTER, petitioner, vs. HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL BUS OPERATORS ASSOCIATION OF THE PHILIPPINES, respondents. Potenciano A. Flores for petitioner. Robert Anthony C. Sison, Cesar B. Brillantes and Jose Z. Galsim for private respondent. Jose F. Miravite for movants.

KAPUNAN, J.: Public utilities are privately owned and operated businesses whose service are essential to the general public. They are enterprises which specially cater to the needs of the public and conduce to their comfort and convenience. As such, public utility services are impressed with public interest and concern. The same is true with respect to the business of common carrier which holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation when private properties are affected with public interest, hence, they cease 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 the control by the public for the common good, to the extent of the interest he has thus created. 1 An abdication of the licensing and regulatory government agencies of their functions as the instant petition seeks to show, is indeed lamentable. Not only is it an unsound administrative policy but it is inimical to public trust and public interest as well. The instant petition for certiorari assails the constitutionality and validity of certain memoranda, circulars and/or orders of the Department of Transportation and Communications (DOTC) and the Land Transportation Franchising and Regulatory Board LTFRB) 2 which, among others, (a) authorize provincial bus and jeepney operators to increase or decrease the prescribed transportation fares without application therefor with the LTFRB and without hearing and approval thereof by said agency in violation of Sec. 16(c) of Commonwealth Act

No. 146, as amended, otherwise known as the Public Service Act, and in derogation of LTFRB's duty to fix and determine just and reasonable fares by delegating that function to bus operators, and (b) establish a presumption of public need in favor of applicants for certificates of public convenience (CPC) and place on the oppositor the burden of proving that there is no need for the proposed service, in patent violation not only of Sec. 16(c) of CA 146, as amended, but also of Sec. 20(a) of the same Act mandating that fares should be "just and reasonable." It is, likewise, violative of the Rules of Court which places upon each party the burden to prove his own affirmative allegations. 3 The offending provisions contained in the questioned issuances pointed out by petitioner, have resulted in the introduction into our highways and thoroughfares thousands of old and smoke-belching buses, many of which are right-hand driven, and have exposed our consumers to the burden of spiraling costs of public transportation without hearing and due process. The following memoranda, circulars and/or orders are sought to be nullified by the instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June 26, 1990 relative to the implementation of a fare range scheme for provincial bus services in the country; (b) DOTC Department Order No. 92-587, dated March 30, 1992, defining the policy framework on the regulation of transport services; (c) DOTC Memorandum dated October 8, 1992, laying down rules and procedures to implement Department Order No. 92-587; (d) LTFRB Memorandum Circular No. 92-009, providing implementing guidelines on the DOTC Department Order No. 92-587; and (e) LTFRB Order dated March 24, 1994 in Case No. 94-3112. The relevant antecedents are as follows: On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395 to then LTFRB Chairman, Remedios A.S. Fernando allowing provincial bus operators to charge passengers rates within a range of 15% above and 15% below the LTFRB official rate for a period of one (1) year. The text of the memorandum order reads in full: One of the policy reforms and measures that is in line with the thrusts and the priorities set out in the Medium-Term Philippine Development Plan (MTPDP) 1987 1992) is the liberalization of regulations in the transport sector. Along this line, the Government intends to move away gradually from regulatory policies and make progress towards greater reliance on free market forces. Based on several surveys and observations, bus companies are already charging passenger rates above and below the official fare

declared by LTFRB on many provincial routes. It is in this context that some form of liberalization on public transport fares is to be tested on a pilot basis. In view thereof, the LTFRB is hereby directed to immediately publicize a fare range scheme for all provincial bus routes in country (except those operating within Metro Manila). Transport Operators shall be allowed to charge passengers within a range of fifteen percent (15%) above and fifteen percent (15%) below the LTFRB official rate for a period of one year. Guidelines and procedures for the said scheme shall be prepared by LTFRB in coordination with the DOTC Planning Service. The implementation of the said fare range scheme shall start on 6 August 1990. For compliance. (Emphasis ours.) Finding the implementation of the fare range scheme "not legally feasible," Remedios A.S. Fernando submitted the following memorandum to Oscar M. Orbos on July 24, 1990, to wit: With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990 which the LTFRB received on 19 July 1990, directing the Board "to immediately publicize a fare range scheme for all provincial bus routes in the country (except those operating within Metro Manila)" that will allow operators "to charge passengers within a range of fifteen percent (15%) above and fifteen percent (15%) below the LTFRB official rate for a period of one year" the undersigned is respectfully adverting the Secretary's attention to the following for his consideration: 1. Section 16(c) of the Public Service Act prescribes the following for the fixing and determination of rates (a) the rates to be approved should be proposed by public service operators; (b) there should be a publication and notice to concerned or affected parties in the territory affected; (c) a public hearing should be held for the fixing of the rates; hence, implementation of the proposed fare range scheme on August 6 without complying with the requirements of the Public Service Act may not be legally feasible.

2. To allow bus operators in the country to charge fares fifteen (15%) above the present LTFRB fares in the wake of the devastation, death and suffering caused by the July 16 earthquake will not be socially warranted and will be politically unsound; most likely public criticism against the DOTC and the LTFRB will be triggered by the untimely motu propioimplementation of the proposal by the mere expedient of publicizing the fare range scheme without calling a public hearing, which scheme many as early as during the Secretary's predecessor know through newspaper reports and columnists' comments to be Asian Development Bank and World Bank inspired. 3. More than inducing a reduction in bus fares by fifteen percent (15%) the implementation of the proposal will instead trigger an upward adjustment in bus fares by fifteen percent (15%) at a time when hundreds of thousands of people in Central and Northern Luzon, particularly in Central Pangasinan, La Union, Baguio City, Nueva Ecija, and the Cagayan Valley are suffering from the devastation and havoc caused by the recent earthquake. 4. In lieu of the said proposal, the DOTC with its agencies involved in public transportation can consider measures and reforms in the industry that will be socially uplifting, especially for the people in the areas devastated by the recent earthquake. In view of the foregoing considerations, the undersigned respectfully suggests that the implementation of the proposed fare range scheme this year be further studied and evaluated. On December 5, 1990, private respondent Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application for fare rate increase. An across-the-board increase of eight and a half centavos (P0.085) per kilometer for all types of provincial buses with a minimum-maximum fare range of fifteen (15%) percent over and below the proposed basic per kilometer fare rate, with the said minimum-maximum fare range applying only to ordinary, first class and premium class buses and a fifty-centavo (P0.50) minimum per kilometer fare for aircon buses, was sought.

On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to an across-the-board increase of six and a half (P0.065) centavos per kilometer for ordinary buses. The decrease was due to the drop in the expected price of diesel. The application was opposed by the Philippine Consumers Foundation, Inc. and Perla C. Bautista alleging that the proposed rates were exorbitant and unreasonable and that the application contained no allegation on the rate of return of the proposed increase in rates. On December 14, 1990, public respondent LTFRB rendered a decision granting the fare rate increase in accordance with the following schedule of fares on a straight computation method, viz: AUTHORIZED FARES
LUZON MIN. OF 5 KMS. SUCCEEDING KM.

REGULAR P1.50 P0.37 STUDENT P1.15 P0.28 VISAYAS/MINDANAO REGULAR P1.60 P0.375 STUDENT P1.20 P0.285 FIRST CLASS (PER KM.) LUZON P0.385 VISAYAS/ MINDANAO P0.395 PREMIERE CLASS (PER KM.) LUZON P0.395 VISAYAS/ MINDANAO P0.405
AIRCON (PER KM.) P0.415.
4

On March 30, 1992, then Secretary of the Department of Transportation and Communications Pete Nicomedes Prado issued Department Order No. 92-587 defining the policy framework on the regulation of transport services. The full text of the said order is reproduced below in view of the importance of the provisions contained therein:

WHEREAS, Executive Order No. 125 as amended, designates the Department of Transportation and Communications (DOTC) as the primary policy, planning, regulating and implementing agency on transportation; WHEREAS, to achieve the objective of a viable, efficient, and dependable transportation system, the transportation regulatory agencies under or attached to the DOTC have to harmonize their decisions and adopt a common philosophy and direction; WHEREAS, the government proposes to build on the successful liberalization measures pursued over the last five years and bring the transport sector nearer to a balanced longer term regulatory framework; NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, the following policies and principles in the economic regulation of land, air, and water transportation services are hereby adopted: 1. Entry into and exit out of the industry. Following the Constitutional dictum against monopoly, no franchise holder shall be permitted to maintain a monopoly on any route. A minimum of two franchise holders shall be permitted to operate on any route. The requirements to grant a certificate to operate, or certificate of public convenience, shall be: proof of Filipino citizenship, financial capability, public need, and sufficient insurance cover to protect the riding public. In determining public need, the presumption of need for a service shall be deemed in favor of the applicant. The burden of proving that there is no need for a proposed service shall be with the oppositor(s). In the interest of providing efficient public transport services, the use of the "prior operator" and the "priority of filing" rules shall be discontinued. The route measured capacity test or other similar tests of demand for vehicle/vessel fleet on any route shall be used only as a guide in weighing the merits of each franchise application and not as a limit to the services offered.

Where there are limitations in facilities, such as congested road space in urban areas, or at airports and ports, the use of demand management measures in conformity with market principles may be considered. The right of an operator to leave the industry is recognized as a business decision, subject only to the filing of appropriate notice and following a phase-out period, to inform the public and to minimize disruption of services. 2. Rate and Fare Setting. Freight rates shall be freed gradually from government controls. Passenger fares shall also be deregulated, except for the lowest class of passenger service (normally third class passenger transport) for which the government will fix indicative or reference fares. Operators of particular services may fix their own fares within a range 15% above and below the indicative or reference rate. Where there is lack of effective competition for services, or on specific routes, or for the transport of particular commodities, maximum mandatory freight rates or passenger fares shall be set temporarily by the government pending actions to increase the level of competition. For unserved or single operator routes, the government shall contract such services in the most advantageous terms to the public and the government, following public bids for the services. The advisability of bidding out the services or using other kinds of incentives on such routes shall be studied by the government. 3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, the government shall not engage in special financing and incentive programs, including direct subsidies for fleet acquisition and expansion. Only when the market situation warrants government intervention shall programs of this type be considered. Existing programs shall be phased out gradually. The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics Board, the Maritime Industry Authority are hereby directed to submit to the Office of the Secretary, within forty-five (45) days of this Order, the detailed rules and procedures for the Implementation of the policies herein set forth. In the formulation of such rules, the concerned agencies shall be guided by the most

recent studies on the subjects, such as the Provincial Road Passenger Transport Study, the Civil Aviation Master Plan, the Presidential Task Force on the Inter-island Shipping Industry, and the Inter-island Liner Shipping Rate Rationalization Study. For the compliance of all concerned. (Emphasis ours) On October 8, 1992, public respondent Secretary of the Department of Transportation and Communications Jesus B. Garcia, Jr. issued a memorandum to the Acting Chairman of the LTFRB suggesting swift action on the adoption of rules and procedures to implement above-quoted Department Order No. 92-587 that laid down deregulation and other liberalization policies for the transport sector. Attached to the said memorandum was a revised draft of the required rules and procedures covering (i) Entry Into and Exit Out of the Industry and (ii) Rate and Fare Setting, with comments and suggestions from the World Bank incorporated therein. Likewise, resplendent from the said memorandum is the statement of the DOTC Secretary that the adoption of the rules and procedures is a pre-requisite to the approval of the Economic Integration Loan from the World Bank. 5 On February 17, 1993, the LTFRB issued Memorandum Circular No. 92-009 promulgating the guidelines for the implementation of DOTC Department Order No. 92-587. The Circular provides, among others, the following challenged portions: xxx xxx xxx IV. Policy Guidelines on the Issuance of Certificate of Public Convenience. The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be deemed in favor of the applicant, while burden of proving that there is no need for the proposed service shall be the oppositor'(s). xxx xxx xxx V. Rate and Fare Setting The control in pricing shall be liberalized to introduce price competition complementary with the quality of service, subject to prior notice and public hearing. Fares shall not be provisionally authorized without public hearing.

A. On the General Structure of Rates 1. The existing authorized fare range system of plus or minus 15 per cent for provincial buses and jeepneys shall be widened to 20% and -25% limit in 1994 with the authorized fare to be replaced by an indicative or reference rate as the basis for the expanded fare range. 2. Fare systems for aircon buses are liberalized to cover first class and premier services. xxx xxx xxx (Emphasis ours). Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus operators to collect plus 20% and minus 25% of the prescribed fare without first having filed a petition for the purpose and without the benefit of a public hearing, announced a fare increase of twenty (20%) percent of the existing fares. Said increased fares were to be made effective on March 16, 1994. On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares. On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition for lack of merit. The dispositive portion reads: PREMISES CONSIDERED, this Board after considering the arguments of the parties, hereby DISMISSES FOR LACK OF MERIT the petition filed in the above-entitled case. This petition in this case was resolved with dispatch at the request of petitioner to enable it to immediately avail of the legal remedies or options it is entitled under existing laws.
SO ORDERED.
6

Hence, the instant petition for certiorari with an urgent prayer for issuance of a temporary restraining order. The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting and preventing respondents from implementing the bus fare rate increase as well as the questioned orders and memorandum circulars. This meant that provincial bus fares were rolled back to the levels duly authorized by

the LTFRB prior to March 16, 1994. A moratorium was likewise enforced on the issuance of franchises for the operation of buses, jeepneys, and taxicabs. Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by respondent LTFRB to provincial bus operators to set a fare range of plus or minus fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (-25%) percent, over and above the existing authorized fare without having to file a petition for the purpose, is unconstitutional, invalid and illegal. Second, the establishment of a presumption of public need in favor of an applicant for a proposed transport service without having to prove public necessity, is illegal for being violative of the Public Service Act and the Rules of Court. In its Comment, private respondent PBOAP, while not actually touching upon the issues raised by the petitioner, questions the wisdom and the manner by which the instant petition was filed. It asserts that the petitioner has no legal standing to sue or has no real interest in the case at bench and in obtaining the reliefs prayed for. In their Comment filed by the Office of the Solicitor General, public respondents DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate that the petitioner does not have the standing to maintain the instant suit. They further claim that it is within DOTC and LTFRB's authority to set a fare range scheme and establish a presumption of public need in applications for certificates of public convenience. We find the instant petition impressed with merit. At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has the standing to sue. The requirement of locus standi inheres from the definition of judicial power. Section 1 of Article VIII of the Constitution provides: xxx xxx xxx Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

In Lamb v. Phipps, 7 we ruled that judicial power is the power to hear and decide causes pending between parties who have the right to sue in the courts of law and equity. Corollary to this provision is the principle of locus standiof a party litigant. One who is directly affected by and whose interest is immediate and substantial in the controversy has the standing to sue. The rule therefore requires that a party must show a personal stake in the outcome of the case or an injury to himself that can be redressed by a favorable decision so as to warrant an invocation of the court's jurisdiction and to justify the exercise of the court's remedial powers in his behalf. 8 In the case at bench, petitioner, whose members had suffered and continue to suffer grave and irreparable injury and damage from the implementation of the questioned memoranda, circulars and/or orders, has shown that it has a clear legal right that was violated and continues to be violated with the enforcement of the challenged memoranda, circulars and/or orders. KMU members, who avail of the use of buses, trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary increase in passenger fares. They are part of the millions of commuters who comprise the riding public. Certainly, their rights must be protected, not neglected nor ignored. Assuming arguendo that petitioner is not possessed of the standing to sue, this court is ready to brush aside this barren procedural infirmity and recognize the legal standing of the petitioner in view of the transcendental importance of the issues raised. And this act of liberality is not without judicial precedent. As early as theEmergency Powers Cases, this Court had exercised its discretion and waived the requirement of proper party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et al., 9 we ruled in the same lines and enumerated some of the cases where the same policy was adopted, viz: . . . A party's standing before this Court is a procedural technicality which it may, in the exercise of its discretion, set aside in view of the importance of the issues raised. In the landmark Emergency Powers Cases, [G.R. No. L-2044 (Araneta v. Dinglasan); G.R. No. L-2756 (Araneta v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No. L-3055 (Guerrero v. Commissioner of Customs); and G.R. No. L-3056 (Barredo v. Commission on Elections), 84 Phil. 368 (1949)], this Court brushed aside this technicality because "the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L2621)." Insofar as taxpayers' suits are concerned, this Court had declared that it "is not devoid of discretion as to whether or not it

should be entertained," (Tan v. Macapagal, 43 SCRA 677, 680 [1972]) or that it "enjoys an open discretion to entertain the same or not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)]. xxx xxx xxx In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association of planters, and non-profit civic organizations were allowed to initiate and prosecute actions before this court to question the constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities. Among such cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar as it allows retirement gratuity and commutation of vacation and sick leave to Senators and Representatives and to elective officials of both Houses of Congress (Philippine Constitution Association, Inc. v. Gimenez, 15 SCRA 479 [1965]); (b) Executive Order No. 284, issued by President Corazon C. Aquino on 25 July 1987, which allowed members of the cabinet, their undersecretaries, and assistant secretaries to hold other government offices or positions (Civil Liberties Union v. Executive Secretary, 194 SCRA 317 [1991]); (c) the automatic appropriation for debt service in the General Appropriations Act (Guingona v. Carague, 196 SCRA 221 [1991]; (d) R.A. No. 7056 on the holding of desynchronized elections (Osmea v. Commission on Elections, 199 SCRA 750 [1991]); (e) P.D. No. 1869 (the charter of the Philippine Amusement and Gaming Corporation) on the ground that it is contrary to morals, public policy, and order (Basco v. Philippine Amusement and Gaming Corp., 197 SCRA 52 [1991]); and (f) R.A. No. 6975, establishing the Philippine National Police. (Carpio v. Executive Secretary, 206 SCRA 290 [1992]). Other cases where we have followed a liberal policy regarding locus standi include those attacking the validity or legality of (a) an order allowing the importation of rice in the light of the prohibition imposed by R.A. No. 3452 (Iloilo Palay and Corn Planters Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and 1033 insofar as they proposed amendments to the Constitution and P.D. No. 1031 insofar as it directed the COMELEC to supervise, control, hold, and conduct the referendum-plebiscite on 16 October 1976 (Sanidad v. Commission on Elections, supra); (c) the bidding for the sale of the 3,179 square meters of land at Roppongi, Minato-ku, Tokyo,

Japan (Laurel v. Garcia, 187 SCRA 797 [1990]); (d) the approval without hearing by the Board of Investments of the amended application of the Bataan Petrochemical Corporation to transfer the site of its plant from Bataan to Batangas and the validity of such transfer and the shift of feedstock from naphtha only to naphtha and/or liquefied petroleum gas (Garcia v. Board of Investments, 177 SCRA 374 [1989]; Garcia v. Board of Investments, 191 SCRA 288 [1990]); (e) the decisions, orders, rulings, and resolutions of the Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of Customs, and the Fiscal Incentives Review Board exempting the National Power Corporation from indirect tax and duties (Maceda v. Macaraig, 197 SCRA 771 [1991]); (f) the orders of the Energy Regulatory Board of 5 and 6 December 1990 on the ground that the hearings conducted on the second provisional increase in oil prices did not allow the petitioner substantial cross-examination; (Maceda v. Energy Regulatory Board, 199 SCRA 454 [1991]); (g) Executive Order No. 478 which levied a special duty of P0.95 per liter of imported oil products (Garcia v. Executive Secretary, 211 SCRA 219 [1992]); (h) resolutions of the Commission on Elections concerning the apportionment, by district, of the number of elective members of Sanggunians (De Guia vs. Commission on Elections, 208 SCRA 420 [1992]); and (i) memorandum orders issued by a Mayor affecting the Chief of Police of Pasay City (Pasay Law and Conscience Union, Inc. v. Cuneta, 101 SCRA 662 [1980]). In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), this Court, despite its unequivocal ruling that the petitioners therein had no personality to file the petition, resolved nevertheless to pass upon the issues raised because of the farreaching implications of the petition. We did no less in De Guia v. COMELEC (Supra) where, although we declared that De Guia "does not appear to have locus standi, a standing in law, a personal or substantial interest," we brushed aside the procedural infirmity "considering the importance of the issue involved, concerning as it does the political exercise of qualified voters affected by the apportionment, and petitioner alleging abuse of discretion and violation of the Constitution by respondent." Now on the merits of the case. On the fare range scheme.

Section 16(c) of the Public Service Act, as amended, reads: Sec. 16. Proceedings of the Commission, upon notice and hearing. The Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary: xxx xxx xxx (c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as commutation, mileage kilometrage, and other special rates which shall be imposed, observed, and followed thereafter by any public service: Provided, That the Commission may, in its discretion, approve rates proposed by public services provisionally and without necessity of any hearing; but it shall call a hearing thereon within thirty days thereafter, upon publication and notice to the concerns operating in the territory affected: Provided, further, That in case the public service equipment of an operator is used principally or secondarily for the promotion of a private business, the net profits of said private business shall be considered in relation with the public service of such operator for the purpose of fixing the rates. (Emphasis ours). xxx xxx xxx Under the foregoing provision, the Legislature delegated to the defunct Public Service Commission the power of fixing the rates of public services. Respondent LTFRB, the existing regulatory body today, is likewise vested with the same under Executive Order No. 202 dated June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB "to determine, prescribe, approve and periodically review and adjust, reasonable fares, rates and other related charges, relative to the operation of public land transportation services provided by motorized vehicles." Such delegation of legislative power to an administrative agency is permitted in order to adapt to the increasing complexity of modern life. As subjects for governmental regulation multiply, so does the difficulty of administering the laws. Hence, specialization even in legislation has become necessary. Given the task of determining sensitive and delicate matters as route-fixing and rate-making for the transport sector, the responsible regulatory body is entrusted with the power of subordinate legislation. With this authority, an

administrative body and in this case, the LTFRB, may implement broad policies laid down in a statute by "filling in" the details which the Legislature may neither have time or competence to provide. However, nowhere under the aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator, or other public service. In the case at bench, the authority given by the LTFRB to the provincial bus operators to set a fare range over and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. Potestas delegata non delegari potest. What has been delegated cannot be delegated. This doctrine is based on the ethical principle that such a delegated power constitutes not only a right but a duty to be performed by the delegate through the instrumentality of his own judgment and not through the intervening mind of another. 10 A further delegation of such power would indeed constitute a negation of the duty in violation of the trust reposed in the delegate mandated to discharge it directly. 11 The policy of allowing the provincial bus operators to change and increase their fares at will would result not only to a chaotic situation but to an anarchic state of affairs. This would leave the riding public at the mercy of transport operators who may increase fares every hour, every day, every month or every year, whenever it pleases them or whenever they deem it "necessary" to do so. In Panay Autobus Co. v. Philippine Railway Co., 12 where respondent Philippine Railway Co. was granted by the Public Service Commission the authority to change its freight rates at will, this Court categorically declared that: In our opinion, the Public Service Commission was not authorized by law to delegate to the Philippine Railway Co. the power of altering its freight rates whenever it should find it necessary to do so in order to meet the competition of road trucks and autobuses, or to change its freight rates at will, or to regard its present rates as maximum rates, and to fix lower rates whenever in the opinion of the Philippine Railway Co. it would be to its advantage to do so. The mere recital of the language of the application of the Philippine Railway Co. is enough to show that it is untenable. The Legislature has delegated to the Public Service Commission the power of fixing the rates of public services, but it has not authorized the Public Service Commission to delegate that power to a common carrier or other public service. The rates of public services like the Philippine Railway Co. have been approved or fixed by the Public Service Commission, and any change in such rates must be authorized or approved by the Public Service Commission after they have been

shown to be just and reasonable. The public service may, of course, propose new rates, as the Philippine Railway Co. did in case No. 31827, but it cannot lawfully make said new rates effective without the approval of the Public Service Commission, and the Public Service Commission itself cannot authorize a public service to enforce new rates without the prior approval of said rates by the commission. The commission must approve new rates when they are submitted to it, if the evidence shows them to be just and reasonable, otherwise it must disapprove them. Clearly, the commission cannot determine in advance whether or not the new rates of the Philippine Railway Co. will be just and reasonable, because it does not know what those rates will be.
In the present case the Philippine Railway Co. in effect asked for permission to change its freight rates at will. It may change them every day or every hour, whenever it deems it necessary to do so in order to meet competition or whenever in its opinion it would be to its advantage. Such a procedure would create a most unsatisfactory state of affairs and 13 largely defeat the purposes of the public service law. (Emphasis ours).

One veritable consequence of the deregulation of transport fares is a compounded fare. If transport operators will be authorized to impose and collect an additional amount equivalent to 20% over and above the authorized fare over a period of time, this will unduly prejudice a commuter who will be made to pay a fare that has been computed in a manner similar to those of compounded bank interest rates. Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus operators to collect a thirty-seven (P0.37) centavo per kilometer fare for ordinary buses. At the same time, they were allowed to impose and collect a fare range of plus or minus 15% over the authorized rate. Thus P0.37 centavo per kilometer authorized fare plus P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to P0.42 centavos, the allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo increase per kilometer in 1994, then, the base or reference for computation would have to be P0.47 centavos (which is P0.42 + P0.05 centavos). If bus operators will exercise their authority to impose an additional 20% over and above the authorized fare, then the fare to be collected shall amount to P0.56 (that is, P0.47 authorized LTFRB rate plus 20% of P0.47 which is P0.29). In effect, commuters will be continuously subjected, not only to a double fare adjustment but to a compounding fare as well. On their part, transport operators shall enjoy a bigger chunk of the pie. Aside from fare increase applied for, they can still collect an additional amount by virtue of the authorized fare range. Mathematically, the situation translates into the following:

Year** LTFRB authorized Fare Range Fare to be rate*** collected per kilometer 1990 P0.37 15% (P0.05) P0.42 1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56 1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73 2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94 Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive government function that requires dexterity of judgment and sound discretion with the settled goal of arriving at a just and reasonable rate acceptable to both the public utility and the public. Several factors, in fact, have to be taken into consideration before a balance could be achieved. A rate should not be confiscatory as would place an operator in a situation where he will continue to operate at a loss. Hence, the rate should enable public utilities to generate revenues sufficient to cover operational costs and provide reasonable return on the investments. On the other hand, a rate which is too high becomes discriminatory. It is contrary to public interest. A rate, therefore, must be reasonable and fair and must be affordable to the end user who will utilize the services. Given the complexity of the nature of the function of rate-fixing and its farreaching effects on millions of commuters, government must not relinquish this important function in favor of those who would benefit and profit from the industry. Neither should the requisite notice and hearing be done away with. The people, represented by reputable oppositors, deserve to be given full opportunity to be heard in their opposition to any fare increase. The present administrative procedure, 14 to our mind, already mirrors an orderly and satisfactory arrangement for all parties involved. To do away with such a procedure and allow just one party, an interested party at that, to determine what the rate should be, will undermine the right of the other parties to due process. The purpose of a hearing is precisely to determine what a just and reasonable rate is. 15 Discarding such procedural and constitutional right is certainly inimical to our fundamental law and to public interest. On the presumption of public need. A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the operation of land transportation services for public use as required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following requirements must be met before a CPC may be granted, to wit: (i) the

applicant must be a citizen of the Philippines, or a corporation or co-partnership, association or joint-stock company constituted and organized under the laws of the Philippines, at least 60 per centum of its stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the applicant must be financially capable of undertaking the proposed service and meeting the responsibilities incident to its operation; and (iii) the applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. It is understood that there must be proper notice and hearing before the PSC can exercise its power to issue a CPC. While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and contradictory policy guideline on the issuance of a CPC. The guidelines states: The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be deemed in favor of the applicant, while the burden of proving that there is no need for the proposed service shall be the oppositor's. (Emphasis ours). The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)(iii) of the Public Service Act which requires that before a CPC will be issued, the applicant must prove by proper notice and hearing that the operation of the public service proposed will promote public interest in a proper and suitable manner. On the contrary, the policy guideline states that the presumption of public need for a public service shall be deemed in favor of the applicant. In case of conflict between a statute and an administrative order, the former must prevail. By its terms, public convenience or necessity generally means something fitting or suited to the public need. 16 As one of the basic requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a reasonable want of the public and supply a need which the existing facilities do not adequately supply. The existence or non-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object and purpose of such procedure, among other things, is to look out for, and protect, the interests of both the public and the existing transport operators. Verily, the power of a regulatory body to issue a CPC is founded on the condition that after full-dress hearing and investigation, it shall find, as a fact, that the

proposed operation is for the convenience of the public. 17 Basic convenience is the primary consideration for which a CPC is issued, and that fact alone must be consistently borne in mind. Also, existing operators in subject routes must be given an opportunity to offer proof and oppose the application. Therefore, an applicant must, at all times, be required to prove his capacity and capability to furnish the service which he has undertaken to render. 18 And all this will be possible only if a public hearing were conducted for that purpose. Otherwise stated, the establishment of public need in favor of an applicant reverses well-settled and institutionalized judicial, quasi-judicial and administrative procedures. It allows the party who initiates the proceedings to prove, by mere application, his affirmative allegations. Moreover, the offending provisions of the LTFRB memorandum circular in question would in effect amend the Rules of Court by adding another disputable presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of the Rules of Court. Such usurpation of this Court's authority cannot be countenanced as only this Court is mandated by law to promulgate rules concerning pleading, practice and procedure. 19 Deregulation, while it may be ideal in certain situations, may not be ideal at all in our country given the present circumstances. Advocacy of liberalized franchising and regulatory process is tantamount to an abdication by the government of its inherent right to exercise police power, that is, the right of government to regulate public utilities for protection of the public and the utilities themselves. While we recognize the authority of the DOTC and the LTFRB to issue administrative orders to regulate the transport sector, we find that they committed grave abuse of discretion in issuing DOTC Department Order No. 92-587 defining the policy framework on the regulation of transport services and LTFRB Memorandum Circular No. 92-009 promulgating the implementing guidelines on DOTC Department Order No. 92-587, the said administrative issuances being amendatory and violative of the Public Service Act and the Rules of Court. Consequently, we rule that the twenty (20%) per centum fare increase imposed by respondent PBOAP on March 16, 1994 without the benefit of a petition and a public hearing is null and void and of no force and effect. No grave abuse of discretion however was committed in the issuance of DOTC Memorandum Order No. 90-395 and DOTC Memorandum dated October 8, 1992, the same being merely internal communications between administrative officers. WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the challenged administrative issuances and orders, namely: DOTC

Department Order No. 92-587, LTFRB Memorandum Circular No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are hereby DECLARED contrary to law and invalid insofar as they affect provisions therein (a) delegating to provincial bus and jeepney operators the authority to increase or decrease the duly prescribed transportation fares; and (b) creating a presumption of public need for a service in favor of the applicant for a certificate of public convenience and placing the burden of proving that there is no need for the proposed service to the oppositor. The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT insofar as it enjoined the bus fare rate increase granted under the provisions of the aforementioned administrative circulars, memoranda and/or orders declared invalid. No pronouncement as to costs. SO ORDERED. Padilla, Davide, Jr., Bellosillo and Quiason, JJ., concur.

G.R. No. L-49112 February 2, 1979 LEOVILLO C. AGUSTIN, petitioner, vs. HON. ROMEO F. EDU, in his capacity as Land Transportation Commissioner; HON. JUAN PONCE ENRILE, in his capacity as Minister of National Defense; HON. ALFREDO L. JUINIO, in his capacity as Minister Of Public Works, Transportation and Communications; and HON: BALTAZAR AQUINO, in his capacity as Minister of Public Highways, respondents. Leovillo C. Agustin Law Office for petitioner. Solicitor General Estelito P. Mendoza, Assistant Solicitor General Ruben E. Agpalo and Solicitor Amado D. Aquino for respondents.

FERNANDO, J.: The validity of a letter of Instruction 1 providing for an early seaming device for motor vehicles is assailed in this prohibition proceeding as being violative of the constitutional guarantee of due process and, insofar as the rules and regulations for its implementation are concerned, for transgressing the fundamental principle of non- delegation of legislative power. The Letter of Instruction is stigmatized by petitioner who is possessed of the requisite standing, as being arbitrary and oppressive. A temporary restraining order as issued and respondents Romeo F. Edu, Land Transportation Commissioner Juan Ponce Enrile, Minister of National Defense; Alfredo L. Juinio, Minister of Public Works, Transportation and Communications; and Baltazar Aquino, Minister of Public Highways; were to answer. That they did in a pleading submitted by Solicitor General Estelito P. Mendoza. 2Impressed with a highly persuasive quality, it makes devoid clear that the imputation of a constitutional infirmity is devoid of justification The Letter of Instruction on is a valid police power measure. Nor could the implementing rules and regulations issued by respondent Edu be considered as amounting to an exercise of legislative power. Accordingly, the petition must be dismissed. The facts are undisputed. The assailed Letter of Instruction No. 229 of President Marcos, issued on December 2, 1974, reads in full: "[Whereas], statistics show that one of the major causes of fatal or serious accidents in land transportation is the presence of disabled, stalled or parked motor vehicles along streets or highways without any appropriate early warning device to signal approaching motorists of their presence; [Whereas], the hazards posed by such obstructions to traffic have been recognized by international bodies concerned with traffic

safety, the 1968 Vienna Convention on Road Signs and Signals and the United Nations Organization (U.N.); [Whereas], the said Vienna Convention which was ratified by the Philippine Government under P.D. No. 207, recommended the enactment of local legislation for the installation of road safety signs and devices; [Now, therefore, I, Ferdinand E. Marcos], President of the Philippines, in the interest of safety on all streets and highways, including expressways or limited access roads, do hereby direct: 1. That all owners, users or drivers of motor vehicles shall have at all times in their motor vehicles at least one (1) pair of early warning device consisting of triangular, collapsible reflectorized plates in red and yellow colors at least 15 cms. at the base and 40 cms. at the sides. 2. Whenever any motor vehicle is stalled or disabled or is parked for thirty (30) minutes or more on any street or highway, including expressways or limited access roads, the owner, user or driver thereof shall cause the warning device mentioned herein to be installed at least four meters away to the front and rear of the motor vehicle staged, disabled or parked. 3. The Land Transportation Commissioner shall cause Reflectorized Triangular Early Warning Devices, as herein described, to be prepared and issued to registered owners of motor vehicles, except motorcycles and trailers, charging for each piece not more than 15 % of the acquisition cost. He shall also promulgate such rules and regulations as are appropriate to effectively implement this order. 4. All hereby concerned shall closely coordinate and take such measures as are necessary or appropriate to carry into effect then instruction. 3 Thereafter, on November 15, 1976, it was amended by Letter of Instruction No. 479 in this wise. "Paragraph 3 of Letter of Instruction No. 229 is hereby amended to read as follows: 3. The Land transportation Commissioner shall require every motor vehicle owner to procure from any and present at the registration of his vehicle, one pair of a reflectorized early warning device, as d bed of any brand or make chosen by mid motor vehicle . The Land Transportation Commissioner shall also promulgate such rule and regulations as are appropriate to effectively implement this order.'" 4 There was issued accordingly, by respondent Edu, the implementing rules and regulations on December 10, 1976. 5 They were not enforced as President Marcos on January 25, 1977, ordered a six-month period of suspension insofar as the installation of early warning device as a pre-registration requirement for motor vehicle was concerned. 6 Then on June 30, 1978, another Letter of Instruction 7 the lifting of such suspension and directed the immediate implementation of Letter of Instruction No. 229 as amended. 8 It was not until August 29, 1978 that respondent Edu issued Memorandum Circular No. 32, worded thus: "In pursuance of Letter of Instruction No. 716, dated June 30, 1978, the implementation of Letter of Instruction No. 229, as amended by Letter of Instructions No. 479, requiring the use of Early Warning Devices (EWD) on motor vehicle, the following rules and regulations are hereby issued: 1. LTC Administrative Order No. 1, dated December 10, 1976; shall now be implemented provided that the device may come from whatever source and that

it shall have substantially complied with the EWD specifications contained in Section 2 of said administrative order; 2. In order to insure that every motor vehicle , except motorcycles, is equipped with the device, a pair of serially numbered stickers, to be issued free of charge by this Commission, shall be attached to each EWD. The EWD. serial number shall be indicated on the registration certificate and official receipt of payment of current registration fees of the motor vehicle concerned. All Orders, Circulars, and Memoranda in conflict herewith are hereby superseded, This Order shall take effect immediately. 9 It was for immediate implementation by respondent Alfredo L. Juinio, as Minister of Public Works, transportation, and Communications.10 Petitioner, after setting forth that he "is the owner of a Volkswagen Beetle Car, Model 13035, already properly equipped when it came out from the assembly lines with blinking lights fore and aft, which could very well serve as an early warning device in case of the emergencies mentioned in Letter of Instructions No. 229, as amended, as well as the implementing rules and regulations in Administrative Order No. 1 issued by the land transportation Commission," 11 alleged that said Letter of Instruction No. 229, as amended, "clearly violates the provisions and delegation of police power, [sic] * * *: " For him they are "oppressive, unreasonable, arbitrary, confiscatory, nay unconstitutional and contrary to the precepts of our compassionate New Society." 12 He contended that they are "infected with arbitrariness because it is harsh, cruel and unconscionable to the motoring public;" 13 are "one-sided, onerous and patently illegal and immoral because [they] will make manufacturers and dealers instant millionaires at the expense of car owners who are compelled to buy a set of the so-called early warning device at the rate of P 56.00 to P72.00 per set." 14 are unlawful and unconstitutional and contrary to the precepts of a compassionate New Society [as being] compulsory and confiscatory on the part of the motorists who could very well provide a practical alternative road safety device, or a better substitute to the specified set of EWD's." 15 He therefore prayed for a judgment both the assailed Letters of Instructions and Memorandum Circular void and unconstitutional and for a restraining order in the meanwhile. A resolution to this effect was handed down by this Court on October 19, 1978: "L-49112 (Leovillo C. Agustin v. Hon. Romeo F. Edu, etc., et al.) Considering the allegations contained, the issues raised and the arguments adduced in the petition for prohibition with writ of p prohibitory and/or mandatory injunction, the Court Resolved to (require) the respondents to file an answer thereto within ton (10) days from notice and not to move to dismiss the petition. The Court further Resolved to [issue] a [temporary restraining order] effective as of this date and continuing until otherwise ordered by this Court. 16

Two motions for extension were filed by the Office of the Solicitor General and granted. Then on November 15, 1978, he Answer for respondents was submitted. After admitting the factual allegations and stating that they lacked knowledge or information sufficient to form a belief as to petitioner owning a Volkswagen Beetle car," they "specifically deny the allegations and stating they lacked knowledge or information sufficient to form a belief as to petitioner owning a Volkswagen Beetle Car, 17 they specifically deny the allegations in paragraphs X and XI (including its subparagraphs 1, 2, 3, 4) of Petition to the effect that Letter of Instruction No. 229 as amended by Letters of Instructions Nos. 479 and 716 as well as Land transportation Commission Administrative Order No. 1 and its Memorandum Circular No. 32 violates the constitutional provisions on due process of law, equal protection of law and undue delegation of police power, and that the same are likewise oppressive, arbitrary, confiscatory, one-sided, onerous, immoral unreasonable and illegal the truth being that said allegations are without legal and factual basis and for the reasons alleged in the Special and Affirmative Defenses of this Answer." 18 Unlike petitioner who contented himself with a rhetorical recital of his litany of grievances and merely invoked the sacramental phrases of constitutional litigation, the Answer, in demonstrating that the assailed Letter of Instruction was a valid exercise of the police power and implementing rules and regulations of respondent Edu not susceptible to the charge that there was unlawful delegation of legislative power, there was in the portion captioned Special and Affirmative Defenses, a citation of what respondents believed to be the authoritative decisions of this Tribunal calling for application. They are Calalang v. Williams, 19 Morfe v. Mutuc, 20 and Edu v. Ericta. 21 Reference was likewise made to the 1968 Vienna Conventions of the United Nations on road traffic, road signs, and signals, of which the Philippines was a signatory and which was duly ratified. 22 Solicitor General Mendoza took pains to refute in detail, in language calm and dispassionate, the vigorous, at times intemperate, accusation of petitioner that the assailed Letter of Instruction and the implementing rules and regulations cannot survive the test of rigorous scrutiny. To repeat, its highly-persuasive quality cannot be denied. This Court thus considered the petition submitted for decision, the issues being clearly joined. As noted at the outset, it is far from meritorious and must be dismissed. 1. The Letter of Instruction in question was issued in the exercise of the police power. That is conceded by petitioner and is the main reliance of respondents. It is the submission of the former, however, that while embraced in such a category, it has offended against the due process and equal protection safeguards of the Constitution, although the latter point was mentioned only in passing. The broad and expansive scope of the police power which was originally Identified by Chief Justice Taney of the American Supreme Court in an

1847 decision as "nothing more or less than the powers of government inherent in every sovereignty" 23 was stressed in the aforementioned case of Edu v. Ericta thus: "Justice Laurel, in the first leading decision after the Constitution came into force,Calalang v. Williams, Identified police power with state authority to enact legislation that may interfere with personal liberty or property in order to promote the general welfare. Persons and property could thus 'be subjected to all kinds of restraints and burdens in order to we the general comfort, health and prosperity of the state.' Shortly after independence in 1948, Primicias v. Fugoso reiterated the doctrine, such a competence being referred to as 'the power to prescribe regulations to promote the health, morals, peace, education, good order or safety, and general welfare of the people. The concept was set forth in negative terms by Justice Malcolm in a pre-Commonwealth decision as 'that inherent and plenary power in the State which enables it to prohibit all things hurtful to the comfort, safety and welfare of society. In that sense it could be hardly distinguishable as noted by this Court in Morfe v. Mutuc with the totality of legislative power. It is in the above sense the greatest and most powerful at. tribute of government. It is, to quote Justice Malcolm anew, 'the most essential, insistent, and at least table powers, I extending as Justice Holmes aptly pointed out 'to all the great public needs.' Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done, provides enough room for an efficient and flexible response to conditions and circumstances thus assuring the greatest benefits. In the language of Justice Cardozo: 'Needs that were narrow or parochial in the past may be interwoven in the present with the well-being of the nation. What is critical or urgent changes with the time.' The police power is thus a dynamic agency, suitably vague and far from precisely defined, rooted in the conception that men in organizing the state and imposing upon its government limitations to safeguard constitutional rights did not intend thereby to enable an individual citizen or a group of citizens to obstruct unreasonably the enactment of such salutary measures calculated to communal peace, safety, good order, and welfare." 24 2. It was thus a heavy burden to be shouldered by petitioner, compounded by the fact that the particular police power measure challenged was clearly intended to promote public safety. It would be a rare occurrence indeed for this Court to invalidate a legislative or executive act of that character. None has been called to our attention, an indication of its being non-existent. The latest decision in point, Edu v. Ericta, sustained the validity of the Reflector Law, 25 an enactment conceived with the same end in view. Calalang v. Williams found nothing objectionable in a statute, the purpose of which was: "To promote safe transit upon, and. avoid obstruction on roads and streets designated as national roads * * *. 26 As a matter of fact, the first law sought to be nullified after the effectivity of the 1935 Constitution, the National Defense Act, 27 with petitioner failing in his quest, was likewise prompted by the imperative demands of public safety.

3. The futility of petitioner's effort to nullify both the Letter of Instruction and the implementing rules and regulations becomes even more apparent considering his failure to lay the necessary factual foundation to rebut the presumption of validity. So it was held in Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila. 28 The rationale was clearly set forth in an excerpt from a decision of Justice Branders of the American Supreme Court, quoted in the opinion: "The statute here questioned deals with a subject clearly within the scope of the police power. We are asked to declare it void on the ground that the specific method of regulation prescribed is unreasonable and hence deprives the plaintiff of due process of law. As underlying questions of fact may condition the constitutionality of legislation of this character, the presumption of constitutionality must prevail in the absence of some factual foundation of record in overthrowing the statute. 29 4. Nor did the Solicitor General as he very well could, rely solely on such rebutted presumption of validity. As was pointed out in his Answer "The President certainly had in his possession the necessary statistical information and data at the time he issued said letter of instructions, and such factual foundation cannot be defeated by petitioner's naked assertion that early warning devices 'are not too vital to the prevention of nighttime vehicular accidents' because allegedly only 390 or 1.5 per cent of the supposed 26,000 motor vehicle accidents that in 1976 involved rear-end collisions (p. 12 of petition). Petitioner's statistics is not backed up by demonstrable data on record. As aptly stated by this Honorable Court: Further: "It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence to rebut it is unavoidable, unless the statute or ordinance is void on its face, which is not the case here"' * * *. But even as g the verity of petitioner's statistics, is that not reason enough to require the installation of early warning devices to prevent another 390 rear-end collisions that could mean the death of 390 or more Filipinos and the deaths that could likewise result from head-on or frontal collisions with stalled vehicles?" 30 It is quite manifest then that the issuance of such Letter of Instruction is encased in the armor of prior, careful study by the Executive Department. To set it aside for alleged repugnancy to the due process clause is to give sanction to conjectural claims that exceeded even the broadest permissible limits of a pleader's well known penchant for exaggeration. 5. The rather wild and fantastic nature of the charge of oppressiveness of this Letter of Instruction was exposed in the Answer of the Solicitor General thus: "Such early warning device requirement is not an expensive redundancy, nor oppressive, for car owners whose cars are already equipped with 1) blinking lights in the fore and aft of said motor vehicles,' 2) "battery-powered blinking lights inside motor vehicles," 3) "built-in reflectorized tapes on front and rear bumpers of motor vehicles," or 4) "well-lighted two (2) petroleum lamps

(the Kinke) * * * because: Being universal among the signatory countries to the said 1968 Vienna Conventions, and visible even under adverse conditions at a distance of at least 400 meters, any motorist from this country or from any part of the world, who sees a reflectorized rectangular early seaming device installed on the roads, highways or expressways, will conclude, without thinking, that somewhere along the travelled portion of that road, highway, or expressway, there is a motor vehicle which is stationary, stalled or disabled which obstructs or endangers passing traffic. On the other hand, a motorist who sees any of the aforementioned other built in warning devices or the petroleum lamps will not immediately get adequate advance warning because he will still think what that blinking light is all about. Is it an emergency vehicle? Is it a law enforcement car? Is it an ambulance? Such confusion or uncertainty in the mind of the motorist will thus increase, rather than decrease, the danger of collision. 31 6. Nor did the other extravagant assertions of constitutional deficiency go unrefuted in the Answer of the Solicitor General "There is nothing in the questioned Letter of Instruction No. 229, as amended, or in Administrative Order No. 1, which requires or compels motor vehicle owners to purchase the early warning device prescribed thereby. All that is required is for motor vehicle owners concerned like petitioner, to equip their motor vehicles with a pair of this early warning device in question, procuring or obtaining the same from whatever source. In fact, with a little of industry and practical ingenuity, motor vehicle owners can even personally make or produce this early warning device so long as the same substantially conforms with the specifications laid down in said letter of instruction and administrative order. Accordingly the early warning device requirement can neither be oppressive, onerous, immoral, nor confiscatory, much less does it make manufacturers and dealers of said devices 'instant millionaires at the expense of car owners' as petitioner so sweepingly concludes * * *. Petitioner's fear that with the early warning device requirement 'a more subtle racket may be committed by those called upon to enforce it * * * is an unfounded speculation. Besides, that unscrupulous officials may try to enforce said requirement in an unreasonable manner or to an unreasonable degree, does not render the same illegal or immoral where, as in the instant case, the challenged Letter of Instruction No. 229 and implementing order disclose none of the constitutional defects alleged against it. 32 7 It does appear clearly that petitioner's objection to this Letter of Instruction is not premised on lack of power, the justification for a finding of unconstitutionality, but on the pessimistic, not to say negative, view he entertains as to its wisdom. That approach, it put it at its mildest, is distinguished, if that is the appropriate word, by its unorthodoxy. It bears repeating "that this Court, in the language of Justice Laurel, 'does not pass upon questions of wisdom justice or expediency of legislation.' As expressed by Justice Tuason: 'It is not the province of the courts

to supervise legislation and keep it within the bounds of propriety and common sense. That is primarily and exclusively a legislative concern.' There can be no possible objection then to the observation of Justice Montemayor. 'As long as laws do not violate any Constitutional provision, the Courts merely interpret and apply them regardless of whether or not they are wise or salutary. For they, according to Justice Labrador, 'are not supposed to override legitimate policy and * * * never inquire into the wisdom of the law.' It is thus settled, to paraphrase Chief Justice Concepcion in Gonzales v. Commission on Elections, that only congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a statute invalid. This is as it ought to be. The principle of separation of powers has in the main wisely allocated the respective authority of each department and confined its jurisdiction to such a sphere. There would then be intrusion not allowable under the Constitution if on a matter left to the discretion of a coordinate branch, the judiciary would substitute its own. If there be adherence to the rule of law, as there ought to be, the last offender should be courts of justice, to which rightly litigants submit their controversy precisely to maintain unimpaired the supremacy of legal norms and prescriptions. The attack on the validity of the challenged provision likewise insofar as there may be objections, even if valid and cogent on is wisdom cannot be sustained. 33 8. The alleged infringement of the fundamental principle of non-delegation of legislative power is equally without any support well-settled legal doctrines. Had petitioner taken the trouble to acquaint himself with authoritative pronouncements from this Tribunal, he would not have the temerity to make such an assertion. An exempt from the aforecited decision of Edu v. Ericta sheds light on the matter: "To avoid the taint of unlawful delegation, there must be a standard, which implies at the very least that the legislature itself determines matters of principle and lays down fundamental policy. Otherwise, the charge of complete abdication may be hard to repel A standard thus defines legislative policy, marks its maps out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected. It is the criterion by which legislative purpose may be carried out. Thereafter, the executive or administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and regulations. The standard may be either express or implied. If the former, the non-delegation objection is easily met. The standard though does not have to be spelled out specifically. It could be implied from the policy and purpose of the act considered as a whole. In the Reflector Law clearly, the legislative objective is public safety. What is sought to be attained as in Calalang v. Williams is "safe transit upon the roads.' This is to adhere to the recognition given expression by Justice Laurel in a decision announced not too long after the Constitution came into force and effect that the principle of non-delegation "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.' He continued: '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.' Consistency with the conceptual approach requires the reminder that what is delegated is authority non-legislative in character, the completeness of the statute when it leaves the hands of Congress being assumed." 34 9. The conclusion reached by this Court that this petition must be dismissed is reinforced by this consideration. The petition itself quoted these two whereas clauses of the assailed Letter of Instruction: "[Whereas], the hazards posed by such obstructions to traffic have been recognized by international bodies concerned with traffic safety, the 1968 Vienna Convention on Road Signs and Signals and the United Nations Organization (U.N.); [Whereas], the said Vionna Convention, which was ratified by the Philippine Government under P.D. No. 207, recommended the enactment of local legislation for the installation of road safety signs and devices; * * * " 35 It cannot be disputed then that this Declaration of Principle found in the Constitution possesses relevance: "The Philippines * * * adopts the generally accepted principles of international law as part of the law of the land * * *." 36 The 1968 Vienna Convention on Road Signs and Signals is impressed with such a character. It is not for this country to repudiate a commitment to which it had pledged its word. The concept of Pacta sunt servanda stands in the way of such an attitude, which is, moreover, at war with the principle of international morality. 10. That is about all that needs be said. The rather court reference to equal protection did not even elicit any attempt on the Part of Petitioner to substantiate in a manner clear, positive, and categorical why such a casual observation should be taken seriously. In no case is there a more appropriate occasion for insistence on what was referred to as "the general rule" in Santiago v. Far Eastern Broadcasting Co., 37 namely, "that the constitutionality of a law wig not be considered unless the point is specially pleaded, insisted upon, and adequately argued." 38"Equal protection" is not a talismanic formula at the mere invocation of which a party to a lawsuit can rightfully expect that success will crown his efforts. The law is anything but that. WHEREFORE, this petition is dismissed. The restraining order is lifted. This decision is immediately executory. No costs. Castro, C.J., Barredo, Antonio, Santos, Fernandez, Guerrero, Abad Santos, De Castro and Melencio-Herrera, concur.

Makasiar, J, reserves the right to file a separate opinion. Aquino J., took no part. Concepcion J., is on leave. Castro, C.J., certifies that Justice Concepcion concurs in their decision.

Separate Opinions

TEEHANKEE, J., dissenting: I dissent from the majority's peremptory dismissal of the petition and lifting of the restraining order issued on October 19, 1978 against the blanket enforcement of the requirement that all motor vehicles be equipped with the so-called early warning device, without even hearing the parties in oral argument as generally required by the Court in original cases of far-reaching consequence such as the case at bar. Lack of time presents my filing an extended dissent. I only wish to state that the petition advances grave and serious grounds of assailing "the rules and regulations issued by the Land Transportation Commission under Administrative Order No. 1 and Memorandum Circular No. 32 [which] do not reflect the real intent, noble objectives and spirit of Letter of Instructions No. 229, as amended by Letter of Instructions Nos. 479 and 716, because it is oppressive, unreasonable, arbitrary, confiscatory, nay unconstitutional and contrary to the precepts of our compassionate New Society," because of the following considerations, inter alia: 1. It is oppressive, arbitrary and discriminatory to require owners of motor vehicles with built-in and more effective and efficient E.W.D.'S such as "a) blinking lights in the fore and aft of said motor vehicles, 1)) battery-powered blinking lights inside motor vehicles, c) built-in reflectorized tapes on front and rear bumpers of motor vehicles....... to purchase the E.W.D. specified in the challenged administrative order, whose effectivity and utility have yet to be demonstrated.

2. The public necessity for the challenged order has yet to be shown. No valid refutation has been made of petitioner's assertion that the "E.W.D.'s are not too vital to the prevention of nighttime vehicular accidents. Statistics shows that of the 26,000 motor vehicle accidents that occurred in 1976, only 390 or 1.5 per cent involved rear-end collisions," as to require the purchase and installation of the questioned E.W.D. for almost 900,000 vehicles throughout the country; 3. The big financial burden to be imposed on all motorists is staggering, and petitioner's assertion that "as of 1975, there were at least 865,037 motor vehicles all over the country requiring E.W.D.'S and at the minimum price of 1156.00 per set, this would mean a consumer outlay of P 48,451,872.00, or close to P 50 million for the questioned E.W.D.'S "stands unchallenged; 4. No real effort has been made to show that there can be practical and less burdensome alternative road safety devices for stalled vehicles than the prescribed E.W.D., such as the common petroleum lamps "kinke" which can be placed just as effectively in front of stalled vehicles on the highways; and 5. There is no imperative need for imposing such a bet requirement on all vehicles. The respondents have not shown that they have availed of the powers and prerogatives vested in their offices such as ridding the country of dilapidated trucks and vehicles which are the main cause of the deplorable -highway accidents due to stoned vehicles, establishing an honest and foolproof system of examination and licensing of motor vehicle drivers so as to ban the reckless and irresponsible and a sustained education campaign to instill safe driving habits and attitudes that can be carried out for much less than the P 50 million burden that would be imposed by the challenged order. I do feel that a greater "degree of receptivity and sympathy" could be extended to the petitioner for his civic mindedness in having filed the present petition g as capricious and unreasonable the "all pervading police power" of the State instead of throwing the case out of court and leaving the wrong impression that the exercise of police power insofar as it may affect the life, liberty and property of any person is no longer subject to judicial inquiry.

Separate Opinions

TEEHANKEE, J., dissenting:

I dissent from the majority's peremptory dismissal of the petition and lifting of the restraining order issued on October 19, 1978 against the blanket enforcement of the requirement that all motor vehicles be equipped with the so-called early warning device, without even hearing the parties in oral argument as generally required by the Court in original cases of far-reaching consequence such as the case at bar. Lack of time presents my filing an extended dissent. I only wish to state that the petition advances grave and serious grounds of assailing "the rules and regulations issued by the Land Transportation Commission under Administrative Order No. 1 and Memorandum Circular No. 32 [which] do not reflect the real intent, noble objectives and spirit of Letter of Instructions No. 229, as amended by Letter of Instructions Nos. 479 and 716, because it is oppressive, unreasonable, arbitrary, confiscatory, nay unconstitutional and contrary to the precepts of our compassionate New Society," because of the following considerations, inter alia: 1. It is oppressive, arbitrary and discriminatory to require owners of motor vehicles with built-in and more effective and efficient E.W.D.'S such as "a) blinking lights in the fore and aft of said motor vehicles, 1)) battery-powered blinking lights inside motor vehicles, c) built-in reflectorized tapes on front and rear bumpers of motor vehicles....... to purchase the E.W.D. specified in the challenged administrative order, whose effectivity and utility have yet to be demonstrated. 2. The public necessity for the challenged order has yet to be shown. No valid refutation has been made of petitioner's assertion that the "E.W.D.'s are not too vital to the prevention of nighttime vehicular accidents. Statistics shows that of the 26,000 motor vehicle accidents that occurred in 1976, only 390 or 1.5 per cent involved rear-end collisions," as to require the purchase and installation of the questioned E.W.D. for almost 900,000 vehicles throughout the country; 3. The big financial burden to be imposed on all motorists is staggering, and petitioner's assertion that "as of 1975, there were at least 865,037 motor vehicles all over the country requiring E.W.D.'S and at the minimum price of 1156.00 per set, this would mean a consumer outlay of P 48,451,872.00, or close to P 50 million for the questioned E.W.D.'S "stands unchallenged; 4. No real effort has been made to show that there can be practical and less burdensome alternative road safety devices for stalled vehicles than the prescribed E.W.D., such as the common petroleum lamps "kinke" which can be placed just as effectively in front of stalled vehicles on the highways; and

5. There is no imperative need for imposing such a bet requirement on all vehicles. The respondents have not shown that they have availed of the powers and prerogatives vested in their offices such as ridding the country of dilapidated trucks and vehicles which are the main cause of the deplorable -highway accidents due to stoned vehicles, establishing an honest and foolproof system of examination and licensing of motor vehicle drivers so as to ban the reckless and irresponsible and a sustained education campaign to instill safe driving habits and attitudes that can be carried out for much less than the P 50 million burden that would be imposed by the challenged order. I do feel that a greater "degree of receptivity and sympathy" could be extended to the petitioner for his civic mindedness in having filed the present petition g as capricious and unreasonable the "all pervading police power" of the State instead of throwing the case out of court and leaving the wrong impression that the exercise of police power insofar as it may affect the life, liberty and property of any person is no longer subject to judicial inquiry.

G.R. No. L-50908 January 31, 1984 MARY CONCEPCION BAUTISTA and ENRIQUE D. BAUTISTA, petitioners, vs. ALFREDO L. JUINIO, ROMEO F. EDU and FIDEL V. RAMOS, respondents. Mary Concepcion Bautista for and in his own behalf. The Solicitor General for respondents.

FERNANDO, C.J.: The validity of an energy conservation measure, Letter of Instruction No. 869, issued on May 31, 1979 the response to the protracted oil crisis that dates back to 1974 is put in issue in this prohibition proceeding filed by petitioners, spouses Mary Concepcion Bautista and Enrique D. Bautista, for being allegedly violative of the due process and equal protection guarantees 1 of the Constitution. The use of private motor vehicles with H and EH plates on week-ends and holidays was banned from "[12:00] a.m. Saturday morning to 5:00 a.m. Monday morning, or 1:00 a.m. of the holiday to 5:00 a.m. of the day after the holiday." 2 Motor vehicles of the following classifications are exempted: (a) S (Service); (b) T (Truck); (e) DPL (Diplomatic); (d) CC (Consular Corps); (e) TC (Tourist Cars). 3 Pursuant thereto, respondent Alfredo L. Juinio, then Minister of Public Works, Transportation and Communications and respondent Romeo P. Edu, then Commissioner of Land Transportation Commission issued on June 11, 1979, Memorandum Circular No. 39, which imposed "the penalties of fine, confiscation of vehicle and cancellation of registration on owners of the abovespecified vehicles" found violating such Letter of Instruction. 4It was then alleged by petitioners that "while the purpose for the issuance of the LOI 869 is laudable, to wit, energy conservation, the provision banning the use of H and EH [vehicles] is unfair, discriminatory, [amounting to an] arbitrary classification" and thus in contravention of the equal protection clause. 5 Moreover, for them, such Letter of Instruction is a denial of due process, more specifically, "of their right to use and enjoy their private property and of their freedom to travel and hold family gatherings, reunions and outings on week-ends and holidays," inviting attention to the fact that others not included in the ban enjoying "unrestricted freedom." 6 It would follow, so they contend that Memorandum Circular No. 39 imposing penalties of fine, confiscation of the vehicle and cancellation of license is likewise unconstitutional, for being violative of the doctrine of "undue delegation of legislative power." 7 It is to be noted that such Memorandum Circular does not impose the penalty of confiscation but merely that of impounding, fine, and for

the third offense that of cancellation of certificate of registration and for the rest of the year or for ninety days whichever is longer. This Court gave due course to the petition requiring respondent to answer. There was admission of the facts as substantially alleged except, as previously noted, that the ban starts at 12:00 a.m. rather than 1:00 a.m. of a Saturday or of a holiday and as to the mention of a Willy's Kaiser jeep being registered in the name of a certain Teresita Urbina, about which respondents had no knowledge. There was a denial of the allegations that the classification of vehicles into heavy H and extra heavy (EH) on the other hand and light and bantam on the other hand was violative of equal protection and the regulation as to the use of the former cars on the dates specified a transgression of due process. The answer likewise denied that there was an undue delegation of legislative power, reference being made to the Land Transportation and Traffic Code. 8 There was also a procedural objection raised, namely, that what is sought amounts at most to an advisory opinion rather than an ajudication of a case or controversy. Petitioners filed a motion to be allowed to reply to the answer. It was granted. The reply, considering its exhaustive character serving as its memorandum, stressed anew what it emphasized as the arbitrary, unreasonable, and oppressive aspects of the challenged Letter of Instruction and Memorandum Circular No. 39. It disputed what it characterized as an "erroneous and arbitrary presumption that heavy car owners unnecessarily use and therefore waste gasoline whenever they drive their cars on week-ends and holidays;" 9 it stigmatized the ban as defeating its "avowed purpose in the case of the affluent who own not only heavy limousines but also many small cars [as] they may be compelled to use at least two small cars;" 10 referred to the high cost of taxis or other public transports for those "not able to afford expensive small cars [possibly] only one heavy and possible old model;" 11 cited the case of "many eight cylinder vehicles which because of their weight have been registered as light but in fact consume more or as much gasoline as the banned vehicles." 12 Their conclusion is that "the ban imposed, in result and effect is class legislation." 13 The parties were required to submit memoranda. Respondents did so but not petitioners. They relied on their reply to the answer as noted, a rather comprehensive pleading. For reasons to be set forth, this Court holds that the petition cannot prosper. 1. First as to the procedural objection. In the memorandum for respondents, one of the issues raised was whether "the power of judicial review may be invoked considering the inadequacy of the record and the highly abstract and academic questions raised by the petitioners." 14 It is inaccurate to say that the record is

inadequate. It does not admit of doubt that the ban applies to petitioners who are "the registered owners of an eight cylinder 1969 Buick, and the vendees of a six cylinder Willy's kaiser jeep, which are both classified as heavy or H." 15 To that extent, therefore, the enforcement of the assailed Letter of Instruction will amount to a deprivation of what otherwise would be a valid exercise of a property right. Thus they fall squarely within "the unchallenged rule" as to who may raise a constitutional question, namely, to quote the language of Justice Laurel in the leading case of People v. Vera, 16"that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain direct injury as a result of its enforcement. 17 Moreover, that rule has been considerably relaxed. 18 The question then is neither abstract nor academic as contended by respondents. 2. There is, however, this formidable obstacle that confronts petitioners. What they seek is for this Court to hold that a Letter of Instruction, a regulatory measure precisely enacted to cope with the serious and grave problem of energy conservation, is void on its face. Such a task is rendered unusually difficult by what has been referred to by Justice Laurel in the leading case of Angara v. Electoral Commission 19 as the "presumption of constitutionality" and by the same jurist in the case of People v. Vera 20 in slightly different words "a presumption that such an act falls within constitutional limitations." There is need then for a factual foundation of invalidity. In the language ofErmita-Malate Hotel & Motel Operations Association, Inc. v. City Mayor or Manila: "It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence to rebut it is unavoidable, unless the statute or ordinance is void on its face, which is not the case here. The principle has been nowhere better expressed than in the leading case of O'Gorman & Young v. Hartford Fire Insurance Co., where the American Supreme Court through Justice Brandeis tersely and succinctly summed up the matter thus: 'The statute here questioned deals with a subject clearly within the scope of the police power. We are asked to declare it void on the ground that the specific method of regulation prescribed is unreasonable and hence deprives the plaintiff of due process of law. As underlying questions of fact may condition the constitutionality of legislation of this character, the presumption of constitutionality must prevail in the absence of some factual foundation of record for overthrowing the statute.' "21 3. It is true, of course, that there may be instances where a police power measure may, because of its arbitrary, oppressive or unjust character, be held offensive to the due process clause and, therefore, may, when challenged in an appropriate legal proceeding, be declared void on its face. This is not one of them. A recital of the whereas clauses of the Letter of Instruction makes it clear. Thus: "[Whereas], developments in the international petroleum supply situation continue to follow a trend of limited production and spiralling prices thereby

precluding the possibility of immediate relief in supplies within the foreseeable future; [Whereas], the uncertainty of fuel supply availability underscores a compelling need for the adoption of positive measures designed to insure the viability of the country's economy and sustain its developmental growth; [Whereas], to cushion the effect of increasing oil prices and avoid fuel supply disruptions, it is imperative to adopt a program directed towards the judicious use of our energy resources complemented with intensified conservation efforts and efficient utilization thereof; * * *." 22That is undeniable is that the action taken is an appropriate response to a problem that presses urgently for solution. It may not be the only alternative, but its reasonableness is immediately apparent. Thus, to repeat, substantive due process, which is the epitome of reasonableness and fair play, is not ignored, much less infringed. 4. In the interplay between such a fundamental right and police power, especially so where the assailed governmental action deals with the use of one's property, the latter is accorded much leeway. That is settled law. What is more, it is good law. Due process, therefore, cannot be validly invoked. As stressed in the cited Ermita-Malate Hotel decision: "To hold otherwise would be to unduly restrict and narrow the scope of police power which has been properly characterized as the most essential, insistent and the least limitable of powers, extending as it does 'to all the great public needs.' It would be, to paraphrase another leading decision, to destroy the very purpose of the state if it could be deprived or allowed itself to be deprived of its competence to promote public health, public morals, public safety and the general welfare. Negatively put, police power is 'that inherent and plenary power in the State which enables it to prohibit all that is hurtful to the comfort, safety, and welfare of society.' " 23 5. The due process question having been disposed of, there is still the objection based on the equal protection clause to be considered. A governmental act may not be offensive to the due process clause, but may run counter to such a guarantee. Such is the case when there is no rational basis for the classification followed. That is the point raised by petitioners. For them, there is no rational justification for the ban being imposed on vehicles classified as heavy (H) and extra-heavy (EH), for precisely those owned by them fall within such category. Tested by the applicable standard that must be satisfied to avoid the charge of a denial of equal protection, the objection of petitioners is shown to be lacking in merit. Such a classification on its face cannot be characterized as an affront to reason. A legal norm according to J.M. Tuason & Co., Inc. vs. Land Tenure Administration, 24 "whether embodied in a rule, principle, or standard, constitutes a defense against anarchy at one extreme and tyranny at the other. Thereby, people living together in a community with its myriad and complex problems can minimize the friction and reduce the conflicts, to assure, at the very least, a peaceful ordering of existence. The Ideal situation is for the law's benefits to be

available to all, that none be placed outside the sphere of its coverage. Only thus could chance and favor be excluded and the affairs of men governed by that serene and impartial uniformity, which is of the very essence of the Idea of law. The actual, given things as they are and likely to continue to be, cannot approximate the Ideal. Nor is the law susceptible to the reproach that it does not take into account the realties of the situation. * * * To assure that the general welfare be promoted, which is the end of law, a regulatory measure may cut into the rights to liberty and property. Those adversely affected may under such circumstances invoke the equal protection clause only if they can show that the governmental act assailed, far from being inspired by the attainment of the common weal was prompted by the spirit of hostility, or at the very least, discrimination that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances, which if not Identical are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest." 25 6. Nor does it militate against the validity of the Letter of Instruction just because the ban imposed does not go as far as it could have and therefore could be less efficacious in character. That was the solution which for the President expressing a power validly lodged in him, recommended itself. There was a situation that called for a corrective measure. He decided that what was issued by him would do just that or, at the very least, help in easing the situation. That it did not cover other matters which could very well have been regulated does not call for a declaration of nullity. The President, to paraphrase Lutz v. Araneta, 26 "is not required by the Constitution to adhere to the policy of all or none." 27 It is quite obvious then that no equal protection question arises. 7. It may not be amiss to refer to a 1981 American Supreme Court decision, Minnesota v. Clover Leaf Creamery Company. 28 Respondent along with several other business corporations adversely affected involved in the manufacture and utilization of plastic milk containers filed suit in a Minnesota district court seeking to enjoin enforcement of a Minnesota statute banning the retail sale of milk in plastic nonreturnable, nonrefillable containers, but permitting such sale in other nonreturnable, nonrefillable containers, such as paperboard, milk cartons. After conducting extensive evidentiary hearings, the Minnesota court enjoined enforcement of the statute, finding that it violated among others the equal protection clause of the Fourteenth Amendment to the Federal Constitution. The Minnesota Supreme Court affirmed. On certiorari, the United

States Supreme Court reversed, with only Justice Stevens dissenting. The opinion by Justice Brennan noted that "proponents of the legislation argued that it would promote resource conservation, ease solid waste disposal problems, and conserve energy."29 That sufficed for the Court to conclude "that the ban on plastic nonreturnable milk containers bears a rational relation to the State's objectives, and must be sustained under the Equal Protection Clause." 30 It does show that notwithstanding the "new equal protection approach" with its emphasis on "suspect classification" and "fundamental rights and interests standard," a concept so ably expounded by professor Gunther, the "rational relation test" 31 still retains its validity. Not that there could be any objection to the classification here followed as being in any way susceptible to such a pejorative expression as "suspect" or that the assailed Letter of Instruction does not qualify under "the fundamental rights and interests" standard 8. There was set forth in the petition what were referred to as "other reasonable measures which the authorities concerned with energy conservation can take immediately, which are in fact acceptable and obviously called for and should have been done long ago, to wit: 1. require and establish taxi stands equipped with efficient telephone and communication systems; 2. strict implementation and observance of cargo truck hours on main arteries; 3. strict observance of traffic rules; 4. effective solution of traffic problems and decongestion of traffic through rerouting and quick repair of roads and efficient operation of double decker buses; 5. rationing of gasoline to avoid panic buying and give the private car owner the option and responsibility of deciding on the use of his allocation; 6. allow neon and electrically devised advertising signs only from five o'clock p.m. to nine o'clock p.m. 7. prohibit immediately the importation of heavy and luxury cars and seriously re-examine the car manufacturing program." 32 Admittedly, such measures are conducive to energy conservation. The question before us however is limited to whether or not Letter of Instruction 869 as implemented by Memorandum Circular No. 39 is violative of certain constitutional rights. It goes no further than that. The determination of the mode and manner through which the objective of minimizing the consumption of oil products may be attained is left to the discretion of the political branches. 33 Absent therefore the alleged infringement of constitutional rights, more precisely the due process and equal protection guarantees, this Court cannot adjudge Letter of Instruction No. 869 as tainted by unconstitutionality. 9. It was likewise contended that Memorandum Circular No. 39, issued by the then respondent Minister of Public Works, Transportation and Communications, and then respondent Land Transportation Commissioner, imposing the penalties "of fine, confiscation of vehicle and cancellation of license is likewise unconstitutional," petitioners invoking the principle of non-delegation of legislative power. 34 To that extent that a Letter of Instruction may be viewed as an exercise

of the decree-making power of the President, then such an argument is futile. If, however, viewed as a compliance with the duty to take care that the laws be faithfully executed, as a consequence of which subordinate executive officials may in turn issue implementing rules and regulations, then the objection would properly be considered as an ultra vires allegation. There is this relevant excerpt from Teoxon v. Member of the Board of Administrators: 35 "1. The recognition of the power of administrative officials to promulgate rules in the implementation of the statute, necessarily limited to what is provided for in the legislative enactment, may be found in the early case of United States v. Barrias decided in 1908. Then came, in a 1914 decision, United States v. Tupasi Molina, a delineation of the scope of such competence. Thus: 'Of course the regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law, and for the sole purpose of carrying into effect its general provisions. By such regulations, of course, the law itself can not be extended. So long, however, as the regulations relate solely to carrying into effect the provisions of the law, they are valid.' In 1936, in People v. Santos, this Court expressed its disapproval of an administrative order that would amount to an excess of the regulatory power vested in an administrative official. We reaffirmed such a doctrine in a 1951 decision, where we again made clear that where an administrative order betrays inconsistency or repugnancy to the provisions of the Act, 'the mandate of the Act must prevail and must be followed.' Justice Barrera, speaking for the Court in Victorias Milling Company, Inc. v. Social Security Commission, citing Parker as well as Davis did tersely sum up the matter thus: 'A rule is binding on tile courts so long as the procedure fixed for its promulgation is followed and its scope is within the statutory granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom * * *. On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts that finally determine what the law means.' It cannot be otherwise as the Constitution limits the authority of the President, in whom all executive power resides, to take care that the laws be faithfully executed. No lesser administrative executive office or agency then can, contrary to the express language of the Constitution, assert for itself a more extensive prerogative." 36 It was alleged in the Answer of Solicitor General Estelito P. Mendoza that Letter of Instruction 869 and Memorandum Circular No. 39 were adopted pursuant to the Land Transportation and Traffic Code. 37 It contains a specific provision as to penalties. 38 Thus: "For violation of any provisions of this Act or regulations promulgated pursuant hereto, not hereinbefore specifically punished, a fine of not less than ten nor more than fifty pesos shall be imposed." 39 Memorandum Circular No. 39 cannot be held to be ultra vires as long as the fine imposed is not less than ten nor more than fifty pesos. As to suspension of registration, 40 the Code, insofar as applicable, provides: "Whenever it shall appear from the records of the Commission that during any twelve-month period more than three warnings for violations of this

Act have been given to the owner of a motor vehicle, or that the said owner has been convicted by a competent court more than once for violation of such laws, the Commissioner may, in his discretion, suspend the certificate of registration for a period not exceeding ninety days and, thereupon, shall require the immediate surrender of the number plates * * *." 41 It follows that while the imposition of a fine or the suspension of registration under the conditions therein set forth is valid under the Land Transportation and Traffic Code, the impounding of a vehicle finds no statutory justification. To apply that portion of Memorandum Circular No. 39 would be ultra vires. It must likewise be made clear that a penalty even if warranted can only be imposed in accordance with the procedure required by law. 42 WHEREFORE, the petition is dismissed. Aquino, Guerrero, De Castro, Melencio-Herrera, Escolin, Relova and Gutierrez, Jr., JJ., concur. Makasiar and Concepcion J., took no part.

Separate Opinions

ABAD SANTOS, J., dissenting: The power of the State to restrict the use of certain motor vehicles during stated days and hours as a fuel-saving measure is to me indubitable. It is anchored on the police power of the State. For this reason LOI No. 869 cannot be assailed successfully as violative of due process and equal protection guarantees of the Constitution. There is also no question as to the power of the Commissioner of Land Transportation and the Minister of Public Works, Transportation and Communication to issue Memorandum Circular No. 39 on June 11, 1979. The circular was necessary to implement the LOI. But it does not follow that the circular is completely immune from the taint of infirmity. I refer to paragraph 4 of the circular which provides, inter alia, for penalties consisting of fine and suspension or cancellation of the certificate of registration for owners of motor vehicles violating the LOI. This portion of the circular is

clearly illegal for the LOI is absolutely and completely devoid of legal sanctions and consequently the implementing circular cannot prescribe them. It is elementary that only the legislature (or the President in the exercise of his legislative power) can prescribe penalties. Executive officials whose task is to enforce the law can prescribe penalties only if they are authorized to do so within specified limits by the legislature. It is contended by the respondents that the LOI and the implementing circular were adopted pursuant to the Land Transportation and Traffic Code Republic Act No. 4136. This contention is utterly baseless. LOI No. 869 can be compared to a multiple independently targeted ballistic missile. It tasks various agencies of the government as follows: 1. The Ministry of Energy shall during the period of tight supply, limit as necessary, sales of fuel products by oil companies and other outlets to all consumers including the government and the Armed Forces of the Philippines. Initially sales shall be limited to 1978 levels. This may be adjusted upward or downward as required to balance supply with demand and to equitably distribute available supplies. Moreover, the Ministry of Energy is hereby authorized to set supply priorities and to establish supply allocations accordingly. 2. The Ministry of Local Government and Community Development in cooperation with the Ministry of Energy shall formulate energy conservation plans and implement the same through the Bay brigades; moreover, it shall assist in the implementation of other conservation measures to be instituted by other government agencies. 3. The Metro Manila Commission, in coordination with the appropriate government agencies, shall develop, implement and supervise a program for the implementation of the Executive Order on the staggering of office hours of both government and private sectors to achieve optimum use of transportation facilities, as well as to improve traffic flow. 4. All Ministries, agencies and corporations of the government shall discontinue the use of airconditioning facilities in offices whom adequate ventilation is available. Any use of airconditioning facilities by government offices shall be only with prior approval of the respective ministers and, where allowed temperature shall be kept at a minimum of 78 o F.

5. The Ministry of Public Works, Transportation and Communications shall prohibit the use of private motor vehicles under the "H" and "EH" classifications of the LTC on weekends and holidays starting 0001 hours, Saturday morning, (or the day of the holiday) until 0500 hours, Monday morning (or the day after the holiday). Exempted from this prohibition are motor vehicles of the following classifications: (a) S (Service) (b) T (Truck) (c) DPL (Diplomatic) (d) CC (Consular Corps) (e) TC (Tourist Cars) 6. The Metro Manila Traffic Management Authority shall, in coordination with the appropriate ministries, institute traffic flow improvement measures to ensure better traffic flow. These agencies moreover, shall review the traffic citation system in order to simplify the application of sanctions for traffic violations. 7. The Ministry of Public Works, Transportation and Communication shall review the registration requirements of vehicles with a view to weeding out inefficient motor vehicles. 8. The Ministry of National Defense shall prohibit sports activities involving mainly the use of motor vehicles, watercraft and aircraft, including but not limited to car and motorcycle rallies, racing and similar events. 9. All government Ministries, agencies and corporations shall limit the use of government vehicles to essential activities and shall review travel program and schedules to unnecessary trips. 10. The Metro Manila Commission, in coordination with the appropriate agencies, shall study the feasibility of designating pedestrian mails and bicycle lanes. 11. The Ministry of National Defense shall intensify the drive against hoarding or black marketing of fuel especially of kerosene and diesel

and other petroleum products which from time to time may be short of supply. 12. The Ministry of Energy shall monitor and report on the implementation of the foregoing measures. How can it be claimed with a straight face that the LOI was adopted pursuant to R.A. No. 4136 when nowhere in the LOI is the law mentioned aside from the fact that the Ministry of Public Works, Transportation and Communication which is entrusted with the enforcement of R.A. No. 4136 is only one of the many agencies involved in conserving energy resources? It is obvious for any one willing to see that R.A. No. 4136 has no relevance to the LOI. Such being the case, the circular which is merely an accessory to the LOI cannot also be related to R.A. No. 4136. LOI No. 869 is constitutional but its application pursuant to Memorandum Circular No. 39 is not. For this reason, I vote to grant the petition. I close this dissent with the following observation: the prohibition against the use of certain vehicles during certain times has not been uniformly and consistently enforced. We are a nation surrounded by rules but many of which are not enforced or enforced indifferently. This situation breeds contempt instead of respect for the law. A few rules that are consistently enforced are better than many which are violated with impunity. Teehankee, J., concurs. Plana, J., dissent.

Separate Opinions ABAD SANTOS, J., dissenting: The power of the State to restrict the use of certain motor vehicles during stated days and hours as a fuel-saving measure is to me indubitable. It is anchored on the police power of the State. For this reason LOI No. 869 cannot be assailed successfully as violative of due process and equal protection guarantees of the Constitution. There is also no question as to the power of the Commissioner of Land Transportation and the Minister of Public Works, Transportation and Communication to issue Memorandum Circular No. 39 on June 11, 1979. The

circular was necessary to implement the LOI. But it does not follow that the circular is completely immune from the taint of infirmity. I refer to paragraph 4 of the circular which provides, inter alia, for penalties consisting of fine and suspension or cancellation of the certificate of registration for owners of motor vehicles violating the LOI. This portion of the circular is clearly illegal for the LOI is absolutely and completely devoid of legal sanctions and consequently the implementing circular cannot prescribe them. It is elementary that only the legislature (or the President in the exercise of his legislative power) can prescribe penalties. Executive officials whose task is to enforce the law can prescribe penalties only if they are authorized to do so within specified limits by the legislature. It is contended by the respondents that the LOI and the implementing circular were adopted pursuant to the Land Transportation and Traffic Code Republic Act No. 4136. This contention is utterly baseless. LOI No. 869 can be compared to a multiple independently targeted ballistic missile. It tasks various agencies of the government as follows: 1. The Ministry of Energy shall during the period of tight supply, limit as necessary, sales of fuel products by oil companies and other outlets to all consumers including the government and the Armed Forces of the Philippines. Initially sales shall be limited to 1978 levels. This may be adjusted upward or downward as required to balance supply with demand and to equitably distribute available supplies. Moreover, the Ministry of Energy is hereby authorized to set supply priorities and to establish supply allocations accordingly. 2. The Ministry of Local Government and Community Development in cooperation with the Ministry of Energy shall formulate energy conservation plans and implement the same through the Bay brigades; moreover, it shall assist in the implementation of other conservation measures to be instituted by other government agencies. 3. The Metro Manila Commission, in coordination with the appropriate government agencies, shall develop, implement and supervise a program for the implementation of the Executive Order on the staggering of office hours of both government and private sectors to achieve optimum use of transportation facilities, as well as to improve traffic flow.

4. All Ministries, agencies and corporations of the government shall discontinue the use of airconditioning facilities in offices whom adequate ventilation is available. Any use of airconditioning facilities by government offices shall be only with prior approval of the respective ministers and, where allowed temperature shall be kept at a minimum of 78 o F. 5. The Ministry of Public Works, Transportation and Communications shall prohibit the use of private motor vehicles under the "H" and "EH" classifications of the LTC on weekends and holidays starting 0001 hours, Saturday morning, (or the day of the holiday) until 0500 hours, Monday morning (or the day after the holiday). Exempted from this prohibition are motor vehicles of the following classifications: (a) S (Service) (b) T (Truck) (c) DPL (Diplomatic) (d) CC (Consular Corps) (e) TC (Tourist Cars) 6. The Metro Manila Traffic Management Authority shall, in coordination with the appropriate ministries, institute traffic flow improvement measures to ensure better traffic flow. These agencies moreover, shall review the traffic citation system in order to simplify the application of sanctions for traffic violations. 7. The Ministry of Public Works, Transportation and Communication shall review the registration requirements of vehicles with a view to weeding out inefficient motor vehicles. 8. The Ministry of National Defense shall prohibit sports activities involving mainly the use of motor vehicles, watercraft and aircraft, including but not limited to car and motorcycle rallies, racing and similar events. 9. All government Ministries, agencies and corporations shall limit the use of government vehicles to essential activities and shall review travel program and schedules to unnecessary trips.

10. The Metro Manila Commission, in coordination with the appropriate agencies, shall study the feasibility of designating pedestrian mails and bicycle lanes. 11. The Ministry of National Defense shall intensify the drive against hoarding or black marketing of fuel especially of kerosene and diesel and other petroleum products which from time to time may be short of supply. 12. The Ministry of Energy shall monitor and report on the implementation of the foregoing measures. How can it be claimed with a straight face that the LOI was adopted pursuant to R.A. No. 4136 when nowhere in the LOI is the law mentioned aside from the fact that the Ministry of Public Works, Transportation and Communication which is entrusted with the enforcement of R.A. No. 4136 is only one of the many agencies involved in conserving energy resources? It is obvious for any one willing to see that R.A. No. 4136 has no relevance to the LOI. Such being the case, the circular which is merely an accessory to the LOI cannot also be related to R.A. No. 4136. LOI No. 869 is constitutional but its application pursuant to Memorandum Circular No. 39 is not. For this reason, I vote to grant the petition. I close this dissent with the following observation: the prohibition against the use of certain vehicles during certain times has not been uniformly and consistently enforced. We are a nation surrounded by rules but many of which are not enforced or enforced indifferently. This situation breeds contempt instead of respect for the law. A few rules that are consistently enforced are better than many which are violated with impunity. Teehankee, J., concur Plana, J., dissent.

G.R. No. L-33397 June 22, 1984 ROMEO F. EDU, in his capacity as Commissioner of Land Transportation, EDUARDO DOMINGO, CARLOS RODRIGUEZ and PATRICIO YAMBAO in their capacity as ANCAR Agents, petitioners, vs. HONORABLE AMADOR E. GOMEZ, in his capacity as Judge of the Court of First Instance of Manila, Branch 1, THE SHERIFF of Quezon City, and LUCILA ABELLO, respondents. Coronel Law Office for petitioners. The Solicitor General for respondents.

RELOVA, J.: Subject matter of this case is a 1968 model Volkswagen, bantam car, Engine No. H5254416, Chassis No. 118673654, allegedly owned by Lt. Walter A. Bala of Clark Airbase, Angeles City, under whose name the car was allegedly registered on May 19, 1970 at the Angeles City Land Transportation Commission Agency, under File No. 2B7281. The Office of the Commission on Land Transportation received a report on August 25, 1970 from the Manila Adjustment Company that the abovementioned car was stolen on June 29, 1970 from the residence of Lt. Bala, at 63 Makiling Street, Plaridel Subdivision, Angeles City. Petitioners Eduardo Domingo, Carlos Rodriguez, and Patricio Yambao, agents of Anti-Carnapping Unit (ANCAR) of the Philippine Constabulary, on detail with the Land Transportation Commission, on February 2, 1971, recognized subject car in the possession of herein private respondent Lucila Abello and immediately seized and impounded the car as stolen property. Likewise, herein petitioner Romeo F. Edu, then Commissioner of Land Transportation, seized the car pursuant to Section 60 of Republic Act 4136 which empowers him to seize the motor vehicle for delinquent registration aside from his implicit power deducible from Sec. 4(5), Sec. 5 and 31 of said Code, "to seize motor vehicles fraudulently or otherwise not properly registered." On February 15, 1971, herein private respondent Lucila Abello filed a complaint for replevin with damages in respondent court, docketed as Civil Case No. 82215, impleading herein petitioners, praying for judgment, among others, to order the sheriff or other proper officer of the court to take the said property (motor vehicle) into his custody and to dispose of it in accordance with law. On February 18, 1971, respondent judge of the then Court of First Instance of Manila issued the order for the seizure of the personal property. Solicitor Vicente Torres, appearing for the herein petitioners, submits that the car in question legally belongs to

Lt. Walter A. Bala under whose name it is originally registered at Angeles City Land Transportation Commission Agency; that it was stolen from him and, upon receipt by the Land Transportation Commissioner of the report on the theft case and that the car upon being recognized by the agents of the ANCAR in the possession of private respondent Lucila Abello, said agents seized the car and impounded it as stolen vehicle. With respect to the replevin filed by private respondent Lucila Abello, respondent Court of First Instance Judge found that the car in question was acquired by Lucila Abello by purchase from its registered owner, Marcelino Guansing, for the valuable consideration of P9,000.00, under the notarial deed of absolute sale, dated August 11, 1970; that she has been in possession thereof since then until February 3, 1971 when the car was seized from her by the petitioners who acted in the belief that it is the car which was originally registered in the name of Lt. Walter A. Bala and from whom it was allegedly stolen sometime in June 1970. Finding for the private respondent, respondent judge held that
The complaint at bar is for replevin, or for the delivery of personal property, based on the provisions of Rule 60, Sections 1 and 2 of the Rules of Court. All the requirements of the law are present in the verified averments in the complaint, viz: 1. That plaintiff is the owner of the automobile in question.- petition. 2. That the aforesaid property was seized from her against her will not for a tax assessment or fine pursuant to law, not under a writ of execution or attachment against her properties; 3. That the property is wrongfully detained by the defendants, who allegedly seized it from her on February 3, 1971, "allegedly for the purpose of verifying the same" (see par. 3, Complaint), but have refused since then until now to return the same to the plaintiff. 4. That plaintiff was ready to put up a bond in double the value of the car, and has in fact already put up an P18,000.00 bond to the defendants for the return thereof to the latter, if that shall be the ultimate judgment of the court, and to pay defendants damages that they may incur. The issuance therefore, by this Court of the order of seizure of the said chattel by the sheriff and for the latter to take it into his custody, is precisely pursuant to the existing law, governing the subject. If defendants object to the seizure, the remedy provided for by law is set out in Section 5 of Rule 60 and that is for them to put up a counter-bond for the same amount of P18,000.00, which is double the value of the car in question. Defendants may not ignore the law under the claim that, on complaint of a certain party, the Manila Adjustment Company, they have a right to seize the same as it appears to be the property that was stolen from Lt. Walter A. Bala several months ago. (p. 19, Rollo)

There is no merit in the petition considering that the acquirer or the purchaser in good faith of a chattel of movable property is entitled to be respected and protected in his possession as if he were the true owner thereof until a competent court rules otherwise. In the meantime, as the true owner, the possessor in good faith cannot be compelled to

surrender possession nor to be required to institute an action for the recovery of the chattel, whether or not an indemnity bond is issued in his favor. The filing of an information charging that the chattel was illegally obtained through estafa from its true owner by the transferor of the bona fide possessor does not warrant disturbing the possession of the chattel against the will of the possessor. Finally, the claim of petitioners that the Commission has the right to seize and impound the car under Section 60 of Republic Act 4136 which reads:
Sec. 60. The lien upon motor vehicles. Any balance of fees for registration, re-registration or delinquent registration of a motor vehicle, remaining unpaid and all fines imposed upon any vehicle owner, shall constitute a first lien upon the motor vehicle concerned.

is untenable. it is clear from the provision of said Section 60 of Republic Act 4136 that the Commissioner's right to seize and impound subject property is only good for the proper enforcement of lien upon motor vehicles. The Land Transportation Commission may issue a warrant of constructive or actual distraint against motor vehicle for collection of unpaid fees for registration, re-registration or delinquent registration of vehicles. ACCORDINGLY, the petition is hereby DENIED. SO ORDERED. Teehankee (Chairman), Melencio-Herrera, Plana and De la Fuente, JJ., concur.

Separate Opinions

GUTIERREZ, Jr., J., concurring: It is not clear that the car really belongs to Lt. Walter Bala who has not intervened to assert his supposed ownership.

Separate Opinions GUTIERREZ, Jr., J., concurring: It is not clear that the car really belongs to Lt. Walter Bala who has not intervened to assert his supposed ownership.

G.R. No. L- 41383 August 15, 1988 PHILIPPINE AIRLINES, INC., plaintiff-appellant, vs. ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his capacity as National Treasurer, defendantsappellants. Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.

GUTIERREZ, JR., J.: What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees? This question has been brought before this Court in the past. The parties are, in effect, asking for a re-examination of the latest decision on this issue. This appeal was certified to us as one involving a pure question of law by the Court of Appeals in a case where the then Court of First Instance of Rizal dismissed the portion-about complaint for refund of registration fees paid under protest. The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Elevate pursuant to Section 8, Republic Act No. 4136, otherwise known as the Land Transportation and Traffic Code. The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and engaged in the air transportation business under a legislative franchise, Act No. 42739, as amended by Republic Act Nos. 25). and 269.1 Under its franchise, PAL is exempt from the payment of taxes. The pertinent provision of the franchise provides as follows: Section 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the National Government during the life of this franchise a tax of two per cent of the gross revenue or gross earning derived by the grantee from its operations under this franchise. Such tax shall be due and payable quarterly and shall be in lieu of all taxes of any kind, nature or description, levied, established or collected by any municipal, provincial or national automobiles, Provided, that if, after the audit of the accounts of the

grantee by the Commissioner of Internal Revenue, a deficiency tax is shown to be due, the deficiency tax shall be payable within the ten days from the receipt of the assessment. The grantee shall pay the tax on its real property in conformity with existing law. On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has, since 1956, not been paying motor vehicle registration fees. Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. The appellant thus paid, under protest, the amount of P19,529.75 as registration fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Commissioner Edu demanding a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its legislative franchise. Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees are regulatory exceptional. and not revenue measures and, therefore, do not come within the exemption granted to PAL? under its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and National Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal, Branch 18 where it was docketed as Civil Case No. Q-15862. Appellee Romeo F. Elevate in his capacity as LTC Commissioner, and LOI Carbonell in his capacity as National Treasurer, filed a motion to dismiss alleging that the complaint states no cause of action. In support of the motion to dismiss, defendants repatriation the ruling in Republic v. Philippine Rabbit Bus Lines, Inc., (supra) that registration fees of motor vehicles are not taxes, but regulatory fees imposed as an incident of the exercise of the police power of the state. They contended that while Act 4271 exempts PAL from the payment of any tax except two per cent on its gross revenue or earnings, it does not exempt the plaintiff from paying regulatory fees, such as motor vehicle registration fees. The resolution of the motion to dismiss was deferred by the Court until after trial on the merits.

On April 24, 1973, the trial court rendered a decision dismissing the appellant's complaint "moved by the later ruling laid down by the Supreme Court in the case or Republic v. Philippine Rabbit Bus Lines, Inc., (supra)." From this judgment, PAL appealed to the Court of Appeals which certified the case to us. Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL and Commissioner Romeo F. Edu respectively, discuss the main points of contention in the case at bar. Resolving the issue in the Philippine Rabbit case, this Court held: "The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised Motor Vehicle Law (Republic Act No. 587 [1950]). Its heading speaks of "registration fees." The term is repeated four times in the body thereof. Equally so, mention is made of the "fee for registration." (Ibid., Subsection G) A subsection starts with a categorical statement "No fees shall be charged." (lbid., Subsection H) The conclusion is difficult to resist therefore that the Motor Vehicle Act requires the payment not of a tax but of a registration fee under the police power. Hence the incipient, of the section relied upon by defendant-appellee under the Back Pay Law, It is not held liable for a tax but for a registration fee. It therefore cannot make use of a backpay certificate to meet such an obligation. Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by Republic Act No. 5448. ([1968]. Section 3 thereof as to the imposition of additional tax on privatelyowned passenger automobiles, motorcycles and scooters was amended by Republic Act No. 5470 which is (sic) approved on May 30, 1969.) A special science fund was thereby created and its title expressly sets forth that a tax on privately-owned passenger automobiles, motorcycles and scooters was imposed. The rates thereof were provided for in its Section 3 which clearly specifies the" Philippine tax."(Cooley to be paid as distinguished from the registration fee under the Motor Vehicle Act. There cannot be any clearer expression therefore of the legislative will, even on the assumption that the earlier legislation could by subdivision the point be susceptible of the interpretation that a tax rather than a fee was levied. What is thus most apparent is that where the legislative body relies on its authority to tax it expressly so states, and where it is enacting a regulatory measure, it is equally exploded (at p. 22,1969

In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the other hand, held: The charges prescribed by the Revised Motor Vehicle Law for the registration of motor vehicles are in section 8 of that law called "fees". But the appellation is no impediment to their being considered taxes if taxes they really are. For not the name but the object of the charge determines whether it is a tax or a fee. Geveia speaking, taxes are for revenue, whereas fees are exceptional. for purposes of regulation and inspection and are for that reason limited in amount to what is necessary to cover the cost of the services rendered in that connection. Hence, a charge fixed by statute for the service to be person,-When by an officer, where the charge has no relation to the value of the services performed and where the amount collected eventually finds its way into the treasury of the branch of the government whose officer or officers collected the chauffeur, is not a fee but a tax."(Cooley on Taxation, Vol. 1, 4th ed., p. 110.) From the data submitted in the court below, it appears that the expenditures of the Motor Vehicle Office are but a small portion about 5 per centumof the total collections from motor vehicle registration fees. And as proof that the money collected is not intended for the expenditures of that office, the law itself provides that all such money shall accrue to the funds for the construction and maintenance of public roads, streets and bridges. It is thus obvious that the fees are not collected for regulatory purposes, that is to say, as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways, for their express object is to provide revenue with which the Government is to discharge one of its principal functionsthe construction and maintenance of public highways for everybody's use. They are veritable taxes, not merely fees. As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as taxes, for it provides that "no other taxes or fees than those prescribed in this Act shall be imposed," thus implying that the charges therein imposedthough called feesare of the category of taxes. The provision is contained in section 70, of subsection (b), of the law, as amended by section 17 of Republic Act 587, which reads:

Sec. 70(b) No other taxes or fees than those prescribed in this Act shall be imposed for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur, by any municipal corporation, the provisions of any city charter to the contrary notwithstanding: Provided, however, That any provincial board, city or municipal council or board, or other competent authority may exact and collect such reasonable and equitable toll fees for the use of such bridges and ferries, within their respective jurisdiction, as may be authorized and approved by the Secretary of Public Works and Communications, and also for the use of such public roads, as may be authorized by the President of the Philippines upon the recommendation of the Secretary of Public Works and Communications, but in none of these cases, shall any toll fee." be charged or collected until and unless the approved schedule of tolls shall have been posted levied, in a conspicuous place at such toll station. (at pp. 213-214) Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law (Act 3992 [19511) as amended by Commonwealth Act 123 and Republic Acts Nos. 587 and 1621. Today, the matter is governed by Rep. Act 4136 [1968]), otherwise known as the Land Transportation Code, (as amended by Rep. Acts Nos. 5715 and 64-67, P.D. Nos. 382, 843, 896, 110.) and BP Blg. 43, 74 and 398). Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and remained unsegregated, by Rep. Act Nos. 587 and 1603) states: Section 73. Disposal of moneys collected.Twenty per centum of the money collected under the provisions of this Act shall accrue to the road and bridge funds of the different provinces and chartered cities in proportion to the centum shall during the next previous year and the remaining eighty per centum shall be deposited in the Philippine Treasury to create a special fund for the construction and maintenance of national and provincial roads and bridges. as well as the streets and bridges in the chartered cities to be alloted by the Secretary of Public Works and Communications for projects recommended by the Director of Public Works in the different provinces and chartered cities. ....

Presently, Sec. 61 of the Land Transportation and Traffic Code provides: Sec. 61. Disposal of Mortgage. CollectedMonies collected under the provisions of this Act shall be deposited in a special trust account in the National Treasury to constitute the Highway Special Fund, which shall be apportioned and expended in accordance with the provisions of the" Philippine Highway Act of 1935. "Provided, however, That the amount necessary to maintain and equip the Land Transportation Commission but not to exceed twenty per cent of the total collection during one year, shall be set aside for the purpose. (As amended by RA 64-67, approved August 6, 1971). It appears clear from the above provisions that the legislative intent and purpose behind the law requiring owners of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of highways and to a much lesser degree, pay for the operating expenses of the administering agency. On the other hand, thePhilippine Rabbit case mentions a presumption arising from the use of the term "fees," which appears to have been favored by the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of Rep. Act 4136 which reads: Sec. 13. Payment of taxes upon registration.No original registration of motor vehicles subject to payment of taxes, customs s duties or other charges shall be accepted unless proof of payment of the taxes due thereon has been presented to the Commission. referring to taxes other than those imposed on the registration, operation or ownership of a motor vehicle (Sec. 59, b, Rep. Act 4136, as amended). Fees may be properly regarded as taxes even though they also serve as an instrument of regulation, As stated by a former presiding judge of the Court of Tax Appeals and writer on various aspects of taxpayers It is possible for an exaction to be both tax arose. regulation. License fees are changes. looked to as a source of revenue as well as a means of regulation (Sonzinky v. U.S., 300 U.S. 506) This is true, for example, of automobile license fees. Isabela such case, the fees may properly be regarded as taxes even though they also serve as an instrument of regulation. If the purpose is primarily revenue, or if revenue is at least one of the real and substantial purposes, then the exaction is properly called a tax. (1955 CCH Fed. tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo. 97 Phil. 213-214) Lutz v. Araneta 98 Phil. 198.) These

exactions are sometimes called regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.) (Umali, Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593). Indeed, taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil. 148). If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax (Umali, Id.) Such is the case of motor vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same provision appears as Section 591-593). in the Land Transportation code. It is patent therefrom that the legislators had in mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 591-593). speaks of "taxes." or fees ... for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional" tax," where the law could have referred to an original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act 41383. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees," such as the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 591-593). of the Code as taxes like the motor vehicle registration fee and chauffers' license fee. Such fees are to go into the expenditures of the Land Transportation Commission as provided for in the last proviso of see. 61, aforequoted. It is quite apparent that vehicle registration fees were originally simple exceptional. intended only for rigidly purposes in the exercise of the State's police powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles became absolute necessities without which modem life as we know it would stand still, Congress found the registration of vehicles a very convenient way of raising much needed revenues. Without changing the earlier deputy. of registration payments as "fees," their nature has become that of "taxes."

In view of the foregoing, we rule that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code are actually taxes intended for additional revenues. of government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program. May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL? The answer is NO. The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5448 dated June 27, 1968, repealed all earlier tax exemptions Of corporate taxpayers found in legislative franchises similar to that invoked by PAL in this case. In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals, et al. (G.R. No. 615)." July 11, 1985), this Court ruled: Under its original franchise, Republic Act No. 21); enacted in 1957, petitioner Radio Communications of the Philippines, Inc., was subject to both the franchise tax and income tax. In 1964, however, petitioner's franchise was amended by Republic Act No. 41-42). to the effect that its franchise tax of one and one-half percentum (11/2%) of all gross receipts was provided as "in lieu of any and all taxes of any kind, nature, or description levied, established, or collected by any authority whatsoever, municipal, provincial, or national from which taxes the grantee is hereby expressly exempted." The issue raised to this Court now is the validity of the respondent court's decision which ruled that the exemption under Republic Act No. 41-42). was repealed by Section 24 of Republic Act No. 5448 dated June 27, 1968 which reads: "(d) The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers not specifically exempt under Sections 24 (c) (1) of this Code shall pay the rates provided in this section. All corporations, agencies, or instrumentalities owned or controlled by the government, including the Government Service Insurance System and the Social Security System but excluding educational institutions, shall pay such rate of tax upon their taxable net income as are

imposed by this section upon associations or corporations engaged in a similar business or industry. " An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all corporate taxpayers to pay income tax as provided by the statute. There can be no doubt as to the power of Congress to repeal the earlier exemption it granted. Article XIV, Section 8 of the 1935 Constitution and Article XIV, Section 5 of the Constitution as amended in 1973 expressly provide that no franchise 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 legislature when the public interest so requires. There is no question as to the public interest involved. The country needs increased revenues. The repealing clause is clear and unambiguous. There is a listing of entities entitled to tax exemption. The petitioner is not covered by the provision. Considering the foregoing, the Court Resolved to DENY the petition for lack of merit. The decision of the respondent court is affirmed. Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly imposed because the tax exemption in the franchise of PAL was repealed during the period. However, an amended franchise was given to PAL in 1979. Section 13 of Presidential Decree No. 1590, now provides: In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine Government during the lifetime of this franchise whichever of subsections (a) and (b) hereunder will result in a lower taxes.) (a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the provisions of the Internal Revenue Code; or (b) A franchise tax of two per cent (2%) of the gross revenues. derived by the grantees from all specific. without distinction as to transport or nontransport corporations; provided that with respect to international airtransport service, only the gross passengers, mail, and freight revenues. from its outgoing flights shall be subject to this law.

The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license and other fees and charges of any kind, nature or description imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national authority or government, agency, now or in the future, including but not limited to the following: xxx xxx xxx (5) All taxes, fees and other charges on the registration, license, acquisition, and transfer of airtransport equipment, motor vehicles, and all other personal or real property of the gravitates (Pres. Decree 1590, 75 OG No. 15, 3259, April 9, 1979). PAL's current franchise is clear and specific. It has removed the ambiguity found in the earlier law. PAL is now exempt from the payment of any tax, fee, or other charge on the registration and licensing of motor vehicles. Such payments are already included in the basic tax or franchise tax provided in Subsections (a) and (b) of Section 13, P.D. 1590, and may no longer be exacted. WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of registration fees paid in 1971 is DENIED. The Land Transportation Franchising and Regulatory Board (LTFRB) is enjoined functions-the collecting any tax, fee, or other charge on the registration and licensing of the petitioner's motor vehicles from April 9, 1979 as provided in Presidential Decree No. 1590. SO ORDERED. Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes, Grio Aquino and Medialdea, JJ., concur

G.R. No. 109444 March 31, 1995 DELANO T. PADILLA, petitioner, vs. HON. PATRICIA STO. TOMAS in her capacity as Chairman of the CIVIL SERVICE COMMISSION, HON. THELMA GAMINDE in her capacity as Board Chairman II of the MERIT SYSTEM PROTECTION BOARD, and the ADMINISTRATIVE ACTION BOARD of the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, respondents.

KAPUNAN, J.: In this special civil action for certiorari, petitioner Delano Padilla seeks to set aside the resolution 1 of public respondent Civil Service Commission (CSC) which confirmed the decision of respondent Merit System Protection Board (MSPB) dismissing petitioner from the service after finding him guilty of the charges in the administrative complaint filed by the Land Transportation Office (LTO) of the Department of Transportation and Communications (DOTC). Resolution No. 921849 dated November 17, 1992 denying petitioner's motion for reconsideration is likewise assailed here. The relevant antecedents of the instant petition are as follows: On November 2, 1988, an administrative complaint 2 for gross dishonesty, gross neglect of duty, inefficiency and incompetence in the performance of official duties and gross violation of the law, rules and reasonable office regulations was filed against petitioner Delano Padilla, former officer-in-charge of the Land Transportation Office (LTO) of Bacolod City. It was alleged that petitioner succeeded in having caused and approved the registration and/or transfer of ownership of twelve (12) carnapped and stolen vehicles despite prior knowledge that existing laws, rules and regulations were violated in the registration and transfer thereof. As contended by complainant LTO, petitioner failed to require confirmation of the Certificate of Registration and Official Receipts corresponding to the subject vehicles from the LTO district offices which issued the same. Had he done so, no registration and/or transfer of the vehicles would have been possible because all the supporting documents pertinent to them were spurious. Petitioner was given five (5) days from receipt thereof to answer the charges filed against him.

Accordingly, petitioner filed his answer 3 dated December 26, 1988 vehemently denying the charges against him. He contended that the twelve (12) motor vehicles were covered by proper clearances, certificates and similar documents issued by the Constabulary Highway Patrol Group (CHPG). He claimed that the charges were baseless and were filed only to maliciously taint his good name and reputation. The matter was set for hearing on April 20, 1989. However, only prosecutor Ramon Cuyco and his witness, Alfonso Alianza, were present. Petitioner and his counsel failed to appear despite due notice. Consequently, the case was heard ex-parte and was considered submitted for decision. After considering the evidence on record, respondent Administrative Action Board (AAB) of the Department of Transportation and Communications (DOTC) through then DOTC Secretary Rainerio Reyes rendered a decision,4 the disposition portion of which reads: WHEREFORE, in view of the foregoing respondent Delano T. Padilla is hereby found guilty of the charges filed against him, and accordingly sentenced as follows: (a) That he is hereby dismissed from the service; (b) That he is disqualified for reemployment in the government service; (c) That his leave credits and retirement benefits are hereby declared forfeited; and (d) That his civil service eligibility is hereby recommended to be cancelled.
SO ORDERED.
5

Petitioner filed a motion for reconsideration of the above-mentioned decision. However, instead of ruling on the merits of the motion, the AAB-DOTC deferred action thereon and scheduled the case for hearing on June 30, 1989. The said hearing was reset for July 25, 1989, then September 4 and 5, 1989. On September 14, 1989, petitioner formally offered his evidence in writing. On October, 1989, an opposition to the said formal offer of evidence was filed by prosecutor Cuyco. On November 20, 1989, petitioners motion for reconsideration was denied.

Thereafter, petitioner appealed to the Merit System Protection Board (MSPB) seeking reversal of the AAB-DOTC's decision. On March 25, 1991, the MSPB rendered a decision affirming the decision of the AAB-DOTC. Petitioner's appeal was therefore ordered dismissed. 6 A motion for reconsideration of the same was denied on February 17, 1992. Aggrieved by the foregoing rulings, petitioner elevated the case to respondent Civil Service Commission (CSC) invoking the following grounds, to wit: 1.) The decision of the MSPB is not supported by any substantial or competent evidence. 2.) Gross errors of law and irregularities were committed in the promulgation of the questioned decision. 3.) Respondent Padilla was not afforded his constitutional right of due process.
4.) Lone witness of Complainant DOTC admitted that Respondent Padilla is not guilty of 7 the charge filed against him.

On July 16, 1992, respondent CSC issued Resolution No. 92-888, the deterred portion of which reads:
WHEREFORE foregoing premises considered, this Commission hereby rules that Delano T. Padilla is guilty of Gross Dishonesty, Gross Neglect of Duty, Inefficiency and Incompetence in the Performance of Official Duties and Gross Violation of Law, Rules and Reasonable Office Regulations and is meted out the penalty of dismissal. 8 Accordingly, the MSPB decision is hereby confirmed.

A motion for reconsideration of the same decision was denied in Resolution No. 92-1849 dated November 17, 1992. Subsequently, petitioner filed a Motion for New Trial seeking the reversal of Resolution Nos. 92-888 and 92-1849. Said motion was considered a second motion for reconsideration, hence, was accordingly denied on February 16, 1993 in Resolution No. 93-511-A by respondent CSC. On April 6, 1993, petitioner came to this Court on a Petition for certiorari and raised the following grounds for allowance of his petition, viz.: I

THE QUESTIONED UNDATED DECISION AND THE RESOLUTION DATED NOVEMBER 20, 1989 OF DOTC WHICH THE PENALTY OUTRIGHT DISMISSAL UPON HEREIN PETITIONER-APPELLANT AS WELL AS THE DECISIONS OF THE MERIT SYSTEM PROTECTION BOARD DATED MARCH 25, 1991 AND FEBRUARY 17 1992 AND THE DECISION OF THE RESPONDENT-APPELLEE CIVIL SERVICE COMMISSION, DATED JULY 16, 1992 WHICH AFFIRMED THE DISMISSAL OF THE PETITIONER-APPELLANT IS NOT SUPPORTED BY ANY SUBSTANTIAL OR COMPETENT EVIDENCE AS BORNE OUT BY THE RECORDS; II GROSS ERRORS OF LAW AND IRREGULARITIES WERE COMMITTED IN THE DECISION AND RESOLUTION PROMULGATED BY DOTC AS WELL AS IN THE QUESTIONED DECISIONS OF THE MERIT SYSTEM PROTECTION BOARD OF THE CIVIL SERVICE COMMISSION AND THE RESOLUTIONS OF THE RESPONDENT-APPELLEE HEREIN; III THE QUESTIONED UNDATED DECISION AND THE RESOLUTION DATED NOVEMBER 20, 1989 OF DOTC AS WELL AS THE DECISIONS OF THE MERIT SYSTEM PROTECTION BOARD DATED MARCH 25, 1991 AND FEBRUARY 17, 1992 AND RESOLUTIONS NOS. 92-888, 92-1849 AND 93-511-A DATED JULY 16, 1992, NOVEMBER 17, 1992 AND FEBRUARY 16, 1993 OF HEREIN RESPONDENT-APPELLEE RESPECTIVELY VIOLATED THE CONSTITUTIONAL AND DUE PROCESS RIGHTS OF HEREIN PETITIONER-APPELLANT BECAUSE HE WAS NOT GIVEN SUFFICIENT OPPORTUNITY TO DEFEND HIMSELF, HENCE, THE QUESTIONED DECISIONS AND RESOLUTIONS ARE NULL AND VOID AB INITIO; IV
THE EVIDENCE ON RECORD CLEARLY SHOW THAT THE CHARGES AGAINST THE HEREIN PETITIONER-APPELLANT RELIED UPON BY DOTC IN ITS UNDATED DECISION AND RESOLUTION DATED NOVEMBER 20, 1989 AS WELL AS THE DECISIONS OF THE MERIT SYSTEM PROTECTION BOARD OF THE CIVIL SERVICE COMMISSION DATED MARCH 25, 1991 AND FEBRUARY 21, 1992 AND THE RESOLUTIONS OF THE CIVIL SERVICE COMMISSION DATED JULY 16, 1992

PROVED THAT THE PETITIONER-APPELLANT IS NOT GUILTY OF THE CHARGED 9 FILED AGAINST HIM.

The petition is not impressed with merit. Petitioner contends that his constitutional right to due process was violated when on April 20, 1989 the scheduled hearing proceeded despite his, and his counsel's absence. He claims that nobody testified during the hearing and that the supporting documents were not presented or marked in evidence. Petitioner's position cannot be sustained. The essence of due process is that a party be afforded reasonable opportunity to be heard and to submit any evidence he may have in support of his defense. 10 In administrative proceedings such as the one at bench, due process simply means the opportunity to explain one's side or the opportunity to seek a reconsideration of the action or ruling complained of. 11 In the instant case, petitioner does not deny the fact that he was furnished a copy of the charges against him wherein he was required to file an answer and to state whether he wanted a formal investigation. Petitioner did file his answer. As to the scheduled hearing on April 20, 1989, petitioner admits that he was notified. The fact that he filed a motion for postponement did not necessarily mean that his motion was granted, hence, the scheduled hearing proceeded ex-parte. Consequently, a decision was rendered by the AAB-DOTC. From said decision, petitioner filed a motion for reconsideration. Thereafter, on account of the liberality of the AAB-DOTC, he was heard and was allowed to present his evidence. His motion for reconsideration having been denied, he filed an appeal with the MSPB and, later on, a motion for reconsideration. Not satisfied, he again filed an appeal with respondent CSC and, later on a motion for reconsideration. Clearly therefore, petitioner was given ample opportunity to present his case. He was not denied his right to due process. One may be heard, not only by verbal presentation but also, sometimes more eloquently, through pleadings. 12 "Due process is notsemper et ubique judicial process." 13 Hence, a formal or trial-type hearing is not, at all times, necessary. So long as a party is afforded fair and reasonable opportunity to explain his side, the requirement of due process is complied with. Petitioner further maintains that he is not guilty of the charges hurled against him and that the DOTC decision is not supported by evidence on record. This contention is belied by the evidence on record. For the purpose of determining the authenticity and genuineness of the Certificate of Registration attached to an application for registration of a transferred motor vehicle, the Department of Transportation and

Communications issued Memorandum Circular No. 123 on December 27, 1989 with the following pertinent provision on the mandatory requirement of a Certificate of Clearance from the previous agency of registration, thus: 2. In the case where the transferred motor vehicle is being registered in any Agency other than the Agency where the vehicle has been originally registered, a Certificate of Clearance shall first be obtained from such Agency of previous registration; provided, however, that such clearance shall state, among others, the description of the motor vehicle, name the registrant/owner, file number of the Registration Certificate, date registration, Official receipt number of payment and the amount of payment. From the foregoing, a Certificate of Clearance or confirmation is mandatory for all transfers of ownership of motor vehicles when done in an agency, or district office as the case may be other than the issuing agency of such certificate of registration. When the requirement is dispensed with, the evil sought to be avoided and eliminated, that is, the concealment of the true status and identity of the motor vehicle, remains unabated. In the case at bench, it was clearly established from the records that petitioner did not require the submission of Certificates of Clearance from the agencies of previous registration affecting the twelve (12) motor vehicles in question. For had he done so, he would have discovered that the documents submitted to him were spurious per verification from the alleged agencies of previous registration. This amply demonstrates petitioner's obvious disregard of the law, rules and regulations, gross neglect of duty, dishonesty and incompetence in the performance of official functions. To our mind, the evidence is clear and substantial to support the conclusion that petitioner indeed failed to discharge an essential official function reposed on him. In administrative proceedings where evidence submitted is substantial, meaning, evidence that a reasonable mind might accept as adequate to support conclusion, 14 the proper penalty must be imposed on that erring official. In a vain attempt to escape culpability, petitioner vigorously maintains that the documents submitted to him, i.e., the deed of sale, the certificate of registration and the PC Clearance of the CHPG, may properly approximate the legal requirement of a Certificate of Clearance or confirmation from the previous agency. This is untenable. DOTC rules and regulations unequivocably outline the petitioner's duties and obligations as head of an agency. He has to require a Certificate of Clearance from the previous LTO issuing agency, in addition to a clearance from CHPG. Anything short of that is an abdication of his duties as head of an LTO office.

On this point, we quote with favor the following findings and conclusions of respondent AAB-DOTC: The absence of such "confirmation" or "clearance" required by Memorandum Circular No. 123, supra, was the main and sole cause for the registration and transfer of ownership of the eleven (11) (sic) motor vehicles hereabove mentioned. Such criminal violation, which are also administrative offenses, as now prosecuted in these administrative proceedings, are, therefore, traceable to only one cause the complete absence of lawfully issued "confirmation" or "clearance". Accordingly, the following rule, shall apply: "El que es causa de la causa es causa del mal causado." He, who is the cause of the cause is the cause of the evil caused. (1 Cuello Calon, Codigo Penal, 12th ed. 1968, pp. 335-336) The utility, therefore, of the "spurious documents" to support the registration and transfer of ownership of the eleven (11) (sic) motor vehicles, and his citation and use of "number plates" which do not properly and legally pertain to the said eleven (11) (sic) motor vehicles were supportive actions to the absence of such "confirmation" or "clearance" in order to make possible the registration and transfers of such vehicles clearly portrayed. In fact respondent did succeed in so registering said motor vehicles and in transferring the ownership thereof, until found through an operational audit conducted by complainant Land Transportation Office's investigator, witness, Mr. Alfonso Alianza. The facts established by testimonial and documentary evidence disclosed most clearly and positively that respondent Delano T. Padilla, has been proved by substantial evidence (Ang Tibay v. Court of Industrial Relations, 69 Phil. 635, 642), to have been guilty of "gross dishonesty, gross neglect of duty, and of willful violation of law, and reasonable office rules and regulations." The magnitude of the acts committed compels us, while the massive evidence marshalled by the prosecution dictate that a finding of guilt against respondent be a matter of duty. Among those in the service of the government, it has been a policy declared that: Sec. 2. Declaration of Policy. It is the policy of the state to promote a high standard of ethics in public Service. Public officials and employees shall at all times be accountable to the people and shall discharge their

duties with utmost responsibility, integrity, competence, and loyalty, act with patriotism and justice, lead modest lives, and uphold public interest over personal interest. (REP ACT NO. 6713)
The foregoing policy should always be the polestar of official performance. Without such guiding star, the public service shall fail. Respondent Padilla's actions in the eleven (11) (sic) motor vehicles did not only run afoul of the pertinent laws, and rules connected 15 therewith, but also did violence the foregoing basic policy of the state.

Well-settled is the rule that where findings of an administrative body which has acquired expertise because its jurisdiction is confined to specific matters are amply supported by substantial evidence, such findings are accorded not only respect but also finality. 16 WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of merit. SO ORDERED. Narvasa, C.J., Feliciano, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Mendoza and Francisco, JJ., concur. Padilla, J., took no part.

G.R. No. 91023 July 13, 1990 METROPOLITAN TRAFFIC COMMAND WEST TRAFFIC DISTRICT, petitioner, vs. HON. ARSENIO M. GONONG, in his capacity as Presiding Judge of the Regional Trial Court, Branch 8 at Manila, and DANTE S. DAVID, respondents. Dante S. David for and in his own behalf as private respondent.

CRUZ, J.: We deal here with a practice known to many motorists in Metro Manila: the removal of the license plates of illegally parked vehicles. This was challenged by the private respondent in the regional trial court of Manila, which held the practice unlawful. The petitioner is now before us, urging reversal of the decision for grave abuse of discretion. The original complaint was filed with the said court on August 10, 1989, by Dante S. David, a lawyer, who claimed that the rear license plate, of his car was removed by the Metropolitan Traffic Command while the vehicle was parked on Escolta. He questioned the petitioner's act on the ground not only that the car was not illegally parked but, more importantly, that there was no ordinance or law authorizing such removal. He asked that the practice be permanently enjoined and that in the meantime a temporary restraining order or a writ of preliminary injunction be issued. Judge Arsenio M. Gonong issued a temporary restraining order on August 14, 1989, and hearings on the writ of preliminary injunction were held on August 18, 23, and 25, 1989. The writ was granted on this last date. The parties also agreed to submit the case for resolution on the sole issue of whether there was a law or ordinance authorizing the removal of the license plates of illegally parked vehicles. The parties then submitted simultaneous memoranda in support of their respective positions, following which the respondent judge rendered the assailed decision. In ruling for the complainant, Judge Gonong held that LOI 43, which the defendant had invoked, did not empower it "to detach, remove and confiscate vehicle plates of motor vehicles illegally parked and unattended as in the case at bar. It merely authorizes the removal of said vehicles when they are obstacles to free passage or continued flow of traffic on streets and highways." At any rate, he said, the LOI had been repealed by PD 1605. Moreover, the defendant had not been able to point to any MMC rule or regulation or to any city ordinance to justify the questioned act. On the allegation that the practice was "the root cause of graft and corruption or at the very least the equivalent of street racket among defendant's deployed agents," His Honor made the following pointed observations:

At this juncture, it may not be amiss to say, that if the arbitrary and capricious detachment and confiscation of vehicles plates illegally parked and unattended as in the act complained of in the instant case, the image of the man clothed in a traffic or police uniform will be greatly impaired if not cursed with disrespect on the part of those who have suffered at his hands. Worse, he will cease (if he had not already ceased) to be the law-abiding, courageous and valiant protector of a citizen of the Republic that he is meant to be, and instead his real oppressor and enemy, thereby fortifying the contemporaneous 1 public perception that he is a dyed-in-the-wool extortionist if not an unmitigated chiseler.

It bears noting that this petition should have been filed first with the Court of Appeals, which has concurrent jurisdiction with this Court on decisions of the regional trial courts involving questions of law. However, in view of the importance of the issue raised, we have decided to take cognizance thereof under Rule 65 of the Rules of Court so we can address and resolve the question directly. Upon the filing of this petition, we issued a temporary restraining order dated February 6, 1990, to prevent enforcement of the said decision until further orders from this Court. Thereafter, we required a comment from the private respondent, to which the petitioner filed a reply as also directed. The petitioner reiterates and reinforces its argument in the court below and insists that LOI 43 remains in force despite the issuance of PD 1605. It contends that there is no inconsistency between the two measures because the former deals with illegally parked vehicles anywhere in the Philippines whereas the latter deals with the regulation of the flow of traffic in the Metro Manila area only. The two measures may be enforced together because implied repeals are not favored and, furthermore, to look at them another way, LOI 43 is the special law dealing only with illegal parking while PD 1605 is the general law dealing with all other kinds of traffic violations. The special law must of course prevail over the general law. The petitioner also deplores the above-quoted remarks of the trial judge, pointing out that the parties had agreed to limit the issue to whether there was a statutory basis for the act complained of. And even assuming that abuses have been committed in the enforcement of LOI 43, the remedy is not to disregard it or consider it revoked but to prosecute the guilty parties. In his comment, the private respondent argues that LOI 43 has been repealed by PD 1605, which specifies all the sanctions available against the various traffic violations, including illegal parking. He stresses that removal and confiscation of the license plates of illegally parked vehicles is not one of them, the penalties being limited in the decree to imposition of fine and suspension or revocation of driver's licenses or certificates of public convenience, etc. Expressio unius est exclusio alterius. He agrees that the special law prevails over the general law but maintains it is PD 1605 that is the special law because it is applicable only on Metro Manila and LOI 43 that is the general law because it was intended to operate throughout the country. As for his allegation that the challenged practice is a source of graft, he maintains that it was not improper to discuss it in his memorandum because it was pertinent to the central issue under consideration. Finally, he claims that removal and confiscation of the license plate without notice and hearing violates due process because such license plate is a form of property protected by the Bill of Rights against unlawful deprivation.

In its reply, the petitioner faults the private respondent for belatedly raising the constitutionality of LOI 43, suggesting faintly that this should not be permitted. In any case, it maintains, the license plate is not property in the constitutional sense, being merely the identification of the vehicle, and its "temporary confiscation" does not deprive the owner of the use of the vehicle itself. Hence, there is no unlawful taking under the due process clause. The petitioner also takes issue with the contention that it is PD 1605 that should be considered the special law because of its limited territorial application. Repeal of LOI 43 on that ground would run counter to the legislative intention as it is in fact in Metro Manila that the problem of illegal parking is most acute. LOI 43, entitled Measures to Effect a Continuing Flow of Transportation on Streets and Highways, was issued on November 28, 1972, with the following pertinent provisions:
Motor vehicles that stall on the streets and highways, streets and sidewalks, shall immediately be removed by their owners/users; otherwise said vehicles shall be dealt with and disposed in the manner stated hereunder; 1. For the first offense the stalled or illegally parked vehicle shall be removed, towed and impounded at the expense of the owner, user or claimant; 2. For the second and subsequent offenses, the registry plates of the vehicles shall be confiscated and the owner's certificate of registration cancelled. (Emphasis supplied).

PD 1605 (Granting the Metropolitan Manila Commission Central Powers Related to Traffic Management, Providing Penalties, and for Other Purposes) was issued, also by President Marcos, on November 21, 1978, and pertinently provides:
Section 1. The Metropolitan Manila Commission shall have the power to impose fines and otherwise discipline drivers and operators of motor vehicles for violations of traffic laws, ordinances, rules and regulations in Metropolitan Manila in such amounts and under such penalties as are herein prescribed. For his purpose, the powers of the Land Transportation Commission and the Board of Transportation under existing laws over such violations and punishment thereof are hereby transferred to the Metropolitan Manila Commission. When the proper penalty to be imposed is suspension or revocation of driver's license or certificate of public convenience, the Metropolitan Manila Commission or its representatives shall suspend or revoke such license or certificate. The suspended or revoked driver's license or the report of suspension or revocation of the certificate of public convenience shall be sent to the Land Transportation Commission or the Board of Transportation, as the case may be, for their records update. xxx xxx xxx Section 3. Violations of traffic laws, ordinances, rules and regulations, committed within a twelve-month period, reckoned from the date of birth of the licensee, shall subject the violator to graduated fines as follows: P10.00 for the first offense, P20.00 for the second offense, P50.00 for the third offense, a one-year suspension of driver's license for the fourth offense, and a revocation of the driver' license for the fifth offense: Provided, That the Metropolitan Manila Commission may impose higher penalties as it may deem proper for violations of its ordinances prohibiting or regulating the use of certain public roads, streets or thoroughfares in Metropolitan Manila.

xxx xxx xxx Section 5. In case of traffic violations, the driver's license shall not be confiscated but the erring driver shall be immediately issued a traffic citation ticket prescribed by the Metropolitan Manila Commission which shall state the violation committed, the amount of fine imposed for the violation and an advice that he can make payment to the city or municipal treasurer where the violation was committed or to the Philippine National Bank or Philippine Veterans Bank or their branches within seven days from the date of issuance of the citation ticket. If the offender fails to pay the fine imposed within the period herein prescribed, the Metropolitan Manila Commission or the law enforcement agency concerned shall endorse the case to the proper fiscal for appropriate proceedings preparatory to the filing of the case with the competent traffic court, city or municipal court. If at the time a driver renews his driver's license and records show that he has an unpaid fine, his driver's license shall not be renewed until he has paid the fine and corresponding surcharges. xxx xxx xxx Section 8. Insofar as the Metropolitan Manila area is concerned, all laws, decrees, orders, ordinances, rules and regulations, or parts thereof inconsistent herewith are hereby repealed or modified accordingly. (Emphasis supplied).

A careful reading of the above decree will show that removal and confiscation of the license plate of any illegally parked vehicle is not among the specified penalties. Moreover, although the Metropolitan Manila Commission is authorized by the decree to "otherwise discipline" and "impose higher penalties" on traffic violators, whatever sanctions it may impose must be "in such amounts and under such penalties as are herein prescribed." The petitioner has not pointed to any such additional sanctions, relying instead on its argument that the applicable authority for the questioned act is LOI 43. The petitioner stresses that under the decree, "the powers of the Land Transportation Commission and the Board of Transportation over such violations and punishment thereof are (hereby) transferred to the Metropolitan Manila Commission," and one of such laws is LOI 43. The penalties prescribed by the LOI are therefore deemed incorporated in PD 1605 as additional to the other penalties therein specified. It would appear that what the LOI punishes is not a traffic violation but a traffic obstruction, which is an altogether different offense. A violation imports an intentional breach or disregard of a rule, as where a driver leaves his vehicle in a no-parking area against a known and usually visible prohibition. Contrary to the common impression, LOI 43 does not punish illegal parking per se but parking of stalled vehicles, i.e., those that involuntarily stop on the road due to some unexpected trouble such as engine defect, lack of gasoline, punctured tires, or other similar cause. The vehicle is deemed illegally parked because it obstructs the flow of traffic, but only because it has stalled. The obstruction is not deliberate. In fact, even the petitioner recognizes that "there is a world of difference between a stalled vehicle and an illegally parked and unattended

one" and suggests a different treatment for either. "The first means one which stopped unnecessarily or broke down while the second means one which stopped to accomplish something, including temporary rest. 2 LOI 43 deals with motor vehicles "that stall on the streets and highways' and not those that are intentionally parked in a public place in violation of a traffic law or regulation. The purpose of the LOI evidently is to discipline the motorist into keeping his vehicle in good condition before going out into the streets so as not to cause inconvenience to the public when the car breaks down and blocks other vehicles. That is why, for the first offense, the stalled vehicle is immediately towed at the owner's expense to clear the street of the traffic obstruction. Where it appears that the owner has not learned from his first experience because the vehicle has stalled again, presumably due to his failure to repair it, the penalty shall be confiscation of the license plate and cancellation of the certificate of registration petition. It is worth noting that it is not the driver's license that is confiscated and canceled when the vehicle stalls on a public street. The LOI goes against the vehicle itself. The object of the measure is to ensure that only motor vehicles in good condition may use the public streets, and this is effected by confiscating the license plates and canceling the certificates of registration of those vehicles that are not roadworthy. In the case of the private respondent, it is not alleged or shown that his vehicle stalled on a public thoroughfare and obstructed the flow of traffic. The charge against him is that he purposely parked his vehicle in a no parking area (although this is disputed by him).itc-asl The act, if true, is a traffic violation that may not be punished under LOI 43. The applicable law is PD 1605, which does not include removal and confiscation of the license plate of the vehicle among the imposable penalties. Indeed, even if LOI 43 were applicable, the penalty of confiscation would still not be justified as it has not been alleged, much less shown, that the illegal parking was a second or subsequent offense. That circumstance must be established at a trial before a court of justice where the vehicle owner shall have a right to be heard in his defense. The second or subsequent offense cannot be simply pronounced by the traffic authorities without hearing and without proof. Confiscation of the registry plate without a judicial finding that the offense charge is a second or subsequent one would, unless the owner concedes this point, be invalid. While it is true that the license plate is strictly speaking not a property right, it does not follow that it may be removed or confiscated without lawful cause. Due process is a guaranty against all forms of official arbitrariness. Under the principle that ours is a government of laws and not of men, every official must act by and within the authority of a valid law and cannot justify the lack of it on the pretext alone of good intentions. It is recalled that more than seventy years ago, the mayor of Manila deported one hundred seventy prostitutes to Davao for the protection of the morals and health of the city. This Court acknowledged his praiseworthy purpose but just the same annulled his

unauthorized act, holding that no one could take the law into his own hands. 3 We can rule no less in the case before us. We find that there is no inconsistency between LOI 43 and PD 1605, whichever is considered the special law either because of its subject or its territorial application. The former deals with motor vehicles that have stalled on a public road while the latter deals with motor vehicles that have been deliberately parked in a no-parking area; and while both cover illegal parking of motor vehicles, the offense is accidental under the first measure and intentional under the second. This explains why the sanctions are different. The purpose of the LOI is to discourage the use of the public streets by motor vehicles that are likely to break down while that of the decree is to penalize the driver for his defiance of the traffic laws. As it has not been shown that the private respondent's motor vehicle had stalled because of an engine defect or some other accidental cause and, no less importantly, that it had stalled on the road for a second or subsequent time, confiscation of the license plate cannot be justified under LOI 43. And neither can that sanction be sustained under PD 1605, which clearly provides that "in case of traffic violations, (even) the driver's license shall not be confiscated," let alone the license plate of the motor vehicle. If at all, the private respondent may be held liable for illegal parking only and subjected to any of the specific penalties mentioned in Section 3 of the decree. We recognize the problem of the traffic policeman who comes upon an illegally parked and unattended vehicle and is unable to serve a citation on the offending driver who is nowhere in sight. But that problem is not addressed to the courts; it is for the legislative and administrative authorities to solve. What is clear to the Court is that the difficulty cannot be avoided by the removal of the license plate of the offending vehicle because the petitioner has not shown that this penalty is authorized by a valid law or ordinance. The petitioner complains that the respondent judge did not confine himself to the issue agreed upon by the parties and made gratuitous accusations that were not only irrelevant but virtually condemned the whole traffic force as corrupt. Assuming that this issue was indeed not properly raised at the trial, the Court is nevertheless not inhibited from considering it in this proceeding, on the basis of its own impressions on the matter. This Court is not isolated from the mainstream of society and secluded in a world of its own, unconcerned with the daily lives of the rest of the nation. On the contrary, the members of this Court mix with the people and know their problems and complaints. And among these are the alleged abuses of the police in connection with the issue now before us. It is claimed that the removal of the license plates of illegally parked motor vehicles in Metro Manila has become a veritable gold mine for some police officers. To be sure, we do not have hard, provable facts at hand but only vague and unsubstantiated rumors that could be no more than malicious and invented charges. Nevertheless, these

accusations have become too prevalent and apparently too persuasive that they cannot be simply swept under the rug. The widespread report is that civilian "agents," mostly street urchins under the control and direction of certain policemen, remove these license plates from illegally parked vehicles and later discreetly suggest to the owners that these may be retrieved for an unofficial fee. This ranges from P50.00 to P200.00, depending on the type of vehicle. If the owner agrees, payment is usually made and the license plate returned at a private rendezvous. No official receipt is issued. Everything is done quietly. The owners, it is said, prefer this kind of fast settlement to the inconvenience of an official proceeding that may entail not only the payment of a higher fine but also other administrative impositions, like attendance at a traffic seminar. The Court is not saying that these reports are true nor is it stigmatizing the entire police force on the basis of these unsubstantiated charges. But it does believe and stress that the proper authorities should take official notice of these reports instead of blandly dismissing them as mere canards that do not deserve their attention and concern. An inquiry is in our view indicated. The old adage that where there's smoke there's fire is not necessarily true and can hardly be the rationale of a judicial conclusion; but the Court feels just the same that serious steps should be taken, especially because of the persistence of these charges, to determine the source of the smoke. We realize the seriousness of our traffic problems, particularly in Metro Manila, and commend the earnest efforts of the police to effect a smoother flow of vehicles in the public thoroughfares for the comfort and convenience of the people. But we must add, as a reminder that must be made, that such efforts must be authorized by a valid law, which must clearly define the offenses proscribed and as clearly specify the penalties prescribed. WHEREFORE, the petition is DISMISSED. The Court holds that LOI 43 is valid but may be applied only against motor vehicles that have stalled in the public streets due to some involuntary cause and not those that have been intentionally parked in violation of the traffic laws. The challenged decision of the trial court is AFFIRMED in so far as it enjoins confiscation of the private respondent's license plate for alleged deliberate illegal parking, which is subject to a different penalty. The temporary restraining order dated February 6, 1990, is LIFTED. SO ORDERED.

G.R. No. L-59234 September 30, 1982 TAXICAB OPERATORS OF METRO MANILA, INC., FELICISIMO CABIGAO and ACE TRANSPORTATION CORPORATION, petitioners, vs. THE BOARD OF TRANSPORTATION and THE DIRECTOR OF THE BUREAU OF LAND TRANSPORTATION,respondents.

MELENCIO-HERRERA, J.: This Petition for "Certiorari, Prohibition and mandamus with Preliminary Injunction and Temporary Restraining Order" filed by the Taxicab Operators of Metro Manila, Inc., Felicisimo Cabigao and Ace Transportation, seeks to declare the nullity of Memorandum Circular No. 77-42, dated October 10, 1977, of the Board of Transportation, and Memorandum Circular No. 52, dated August 15, 1980, of the Bureau of Land Transportation. Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a domestic corporation composed of taxicab operators, who are grantees of Certificates of Public Convenience to operate taxicabs within the City of Manila and to any other place in Luzon accessible to vehicular traffic. Petitioners Ace Transportation Corporation and Felicisimo Cabigao are two of the members of TOMMI, each being an operator and grantee of such certificate of public convenience. On October 10, 1977, respondent Board of Transportation (BOT) issued Memorandum Circular No. 77-42 which reads: SUBJECT: Phasing out and Replacement of Old and Dilapidated Taxis WHEREAS, it is the policy of the government to insure that only safe and comfortable units are used as public conveyances; WHEREAS, the riding public, particularly in Metro-Manila, has, time and again, complained against, and condemned, the continued operation of old and dilapidated taxis; WHEREAS, in order that the commuting public may be assured of comfort, convenience, and safety, a program of phasing out of old and dilapidated taxis should be adopted;

WHEREAS, after studies and inquiries made by the Board of Transportation, the latter believes that in six years of operation, a taxi operator has not only covered the cost of his taxis, but has made reasonable profit for his investments; NOW, THEREFORE, pursuant to this policy, the Board hereby declares that no car beyond six years shall be operated as taxi, and in implementation of the same hereby promulgates the following rules and regulations: 1. As of December 31, 1977, all taxis of Model 1971 and earlier are ordered withdrawn from public service and thereafter may no longer be registered and operated as taxis. In the registration of cards for 1978, only taxis of Model 1972 and later shall be accepted for registration and allowed for operation; 2. As of December 31, 1978, all taxis of Model 1972 are ordered withdrawn from public service and thereafter may no longer be registered and operated as taxis. In the registration of cars for 1979, only taxis of Model 1973 and later shall be accepted for registration and allowed for operation; and every year thereafter, there shall be a six-year lifetime of taxi, to wit: 1980 Model 1974 1981 Model 1975, etc. All taxis of earlier models than those provided above are hereby ordered withdrawn from public service as of the last day of registration of each particular year and their respective plates shall be surrendered directly to the Board of Transportation for subsequent turnover to the Land Transportation Commission.
For an orderly implementation of this Memorandum Circular, the rules herein shall immediately be effective in Metro-Manila. Its implementation outside Metro- Manila shall be carried out only after the project has been implemented in Metro-Manila and only after 1 the date has been determined by the Board.

Pursuant to the above BOT circular, respondent Director of the Bureau of Land Transportation (BLT) issued Implementing Circular No. 52, dated August 15, 1980, instructing the Regional Director, the MV Registrars and other personnel of BLT, all within the National Capitol Region, to implement said Circular, and formulating a schedule of phase-out of vehicles to be allowed and accepted for registration as public conveyances. To quote said Circular:

Pursuant to BOT Memo-Circular No. 77-42, taxi units with year models over six (6) years old are now banned from operating as public utilities in Metro Manila. As such the units involved should be considered as automatically dropped as public utilities and, therefore, do not require any further dropping order from the BOT. Henceforth, taxi units within the National Capitol Region having year models over 6 years old shall be refused registration. The following schedule of phase-out is herewith prescribed for the guidance of all concerned:
Year Model

Automatic PhaseOut Year 1980

1974 1975 1976 1977 etc.


Strict compliance here is desired.

1981 1982 1983

etc.
2

In accordance therewith, cabs of model 1971 were phase-out in registration year 1978; those of model 1972, in 1979; those of model 1973, in 1980; and those of model 1974, in 1981. On January 27, 1981, petitioners filed a Petition with the BOT, docketed as Case No. 80-7553, seeking to nullify MC No. 77-42 or to stop its implementation; to allow the registration and operation in 1981 and subsequent years of taxicabs of model 1974, as well as those of earlier models which were phased-out, provided that, at the time of registration, they are roadworthy and fit for operation. On February 16, 1981, petitioners filed before the BOT a "Manifestation and Urgent Motion", praying for an early hearing of their petition. The case was heard on February 20, 1981. Petitioners presented testimonial and documentary evidence, offered the same, and manifested that they would submit additional documentary proofs. Said proofs were submitted on March 27, 1981 attached to

petitioners' pleading entitled, "Manifestation, Presentation of Additional Evidence and Submission of the Case for Resolution." 3 On November 28, 1981, petitioners filed before the same Board a "Manifestation and Urgent Motion to Resolve or Decide Main Petition" praying that the case be resolved or decided not later than December 10, 1981 to enable them, in case of denial, to avail of whatever remedy they may have under the law for the protection of their interests before their 1975 model cabs are phased-out on January 1, 1982. Petitioners, through its President, allegedly made personal follow-ups of the case, but was later informed that the records of the case could not be located. On December 29, 1981, the present Petition was instituted wherein the following queries were posed for consideration by this Court: A. Did BOT and BLT promulgate the questioned memorandum circulars in accord with the manner required by Presidential Decree No. 101, thereby safeguarding the petitioners' constitutional right to procedural due process? B. Granting, arguendo, that respondents did comply with the procedural requirements imposed by Presidential Decree No. 101, would the implementation and enforcement of the assailed memorandum circulars violate the petitioners' constitutional rights to. (1) Equal protection of the law; (2) Substantive due process; and (3) Protection against arbitrary and unreasonable classification and standard? On Procedural and Substantive Due Process: Presidential Decree No. 101 grants to the Board of Transportation the power 4. To fix just and reasonable standards, classification, regulations, practices, measurements, or service to be furnished, imposed, observed, and followed by operators of public utility motor vehicles. Section 2 of said Decree provides procedural guidelines for said agency to follow in the exercise of its powers:

Sec. 2. Exercise of powers. In the exercise of the powers granted in the preceding section, the Board shag proceed promptly along the method of legislative inquiry. Apart from its own investigation and studies, the Board, in its discretion, may require the cooperation and assistance of the Bureau of Transportation, the Philippine Constabulary, particularly the Highway Patrol Group, the support agencies within the Department of Public Works, Transportation and Communications, or any other government office or agency that may be able to furnish useful information or data in the formulation of the Board of any policy, plan or program in the implementation of this Decree. The Board may also can conferences, require the submission of position papers or other documents, information, or data by operators or other persons that may be affected by the implementation of this Decree, or employ any other suitable means of inquiry. In support of their submission that they were denied procedural due process, petitioners contend that they were not caged upon to submit their position papers, nor were they ever summoned to attend any conference prior to the issuance of the questioned BOT Circular. It is clear from the provision aforequoted, however, that the leeway accorded the Board gives it a wide range of choice in gathering necessary information or data in the formulation of any policy, plan or program. It is not mandatory that it should first call a conference or require the submission of position papers or other documents from operators or persons who may be affected, this being only one of the options open to the Board, which is given wide discretionary authority. Petitioners cannot justifiably claim, therefore, that they were deprived of procedural due process. Neither can they state with certainty that public respondents had not availed of other sources of inquiry prior to issuing the challenged Circulars. operators of public conveyances are not the only primary sources of the data and information that may be desired by the BOT. Dispensing with a public hearing prior to the issuance of the Circulars is neither violative of procedural due process. As held in Central Bank vs. Hon. Cloribel and Banco Filipino, 44 SCRA 307 (1972): Pevious notice and hearing as elements of due process, are constitutionally required for the protection of life or vested property rights, as well as of liberty, when its limitation or loss takes place in

consequence of a judicial or quasi-judicial proceeding, generally dependent upon a past act or event which has to be established or ascertained. It is not essential to the validity of general rules or regulations promulgated to govern future conduct of a class or persons or enterprises, unless the law provides otherwise. (Emphasis supplied) Petitioners further take the position that fixing the ceiling at six (6) years is arbitrary and oppressive because the roadworthiness of taxicabs depends upon their kind of maintenance and the use to which they are subjected, and, therefore, their actual physical condition should be taken into consideration at the time of registration. As public contend, however, it is impractical to subject every taxicab to constant and recurring evaluation, not to speak of the fact that it can open the door to the adoption of multiple standards, possible collusion, and even graft and corruption. A reasonable standard must be adopted to apply to an vehicles affected uniformly, fairly, and justly. The span of six years supplies that reasonable standard. The product of experience shows that by that time taxis have fully depreciated, their cost recovered, and a fair return on investment obtained. They are also generally dilapidated and no longer fit for safe and comfortable service to the public specially considering that they are in continuous operation practically 24 hours everyday in three shifts of eight hours per shift. With that standard of reasonableness and absence of arbitrariness, the requirement of due process has been met. On Equal Protection of the Law: Petitioners alleged that the Circular in question violates their right to equal protection of the law because the same is being enforced in Metro Manila only and is directed solely towards the taxi industry. At the outset it should be pointed out that implementation outside Metro Manila is also envisioned in Memorandum Circular No. 77-42. To repeat the pertinent portion:
For an orderly implementation of this Memorandum Circular, the rules herein shall immediately be effective in Metro Manila. Its implementation outside Metro Manila shall be carried out only after the project has been implemented in Metro Manila and only after 4 the date has been determined by the Board.

In fact, it is the understanding of the Court that implementation of the Circulars in Cebu City is already being effected, with the BOT in the process of conducting studies regarding the operation of taxicabs in other cities. The Board's reason for enforcing the Circular initially in Metro Manila is that taxicabs in this city, compared to those of other places, are subjected to heavier traffic pressure and more constant use. This is of common knowledge.

Considering that traffic conditions are not the same in every city, a substantial distinction exists so that infringement of the equal protection clause can hardly be successfully claimed. As enunciated in the preambular clauses of the challenged BOT Circular, the overriding consideration is the safety and comfort of the riding public from the dangers posed by old and dilapidated taxis. The State, in the exercise, of its police power, can prescribe regulations to promote the health, morals, peace, good order, safety and general welfare of the people. It can prohibit all things hurtful to comfort, safety and welfare of society. 5 It may also regulate property rights. 6 In the language of Chief Justice Enrique M. Fernando "the necessities imposed by public welfare may justify the exercise of governmental authority to regulate even if thereby certain groups may plausibly assert that their interests are disregarded". 7 In so far as the non-application of the assailed Circulars to other transportation services is concerned, it need only be recalled that the equal protection clause does not imply that the same treatment be accorded all and sundry. It applies to things or persons Identically or similarly situated. It permits of classification of the object or subject of the law provided classification is reasonable or based on substantial distinction, which make for real differences, and that it must apply equally to each member of the class. 8 What is required under the equal protection clause is the uniform operation by legal means so that all persons under Identical or similar circumstance would be accorded the same treatment both in privilege conferred and the liabilities imposed. 9 The challenged Circulars satisfy the foregoing criteria. Evident then is the conclusion that the questioned Circulars do not suffer from any constitutional infirmity. To declare a law unconstitutional, the infringement of constitutional right must be clear, categorical and undeniable.10 WHEREFORE, the Writs prayed for are denied and this Petition is hereby dismissed. No costs. SO ORDERED. Fernando, CJ., Barredo, Makasiar, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Plana, Escolin, Vasquez, Relova and Gutierrez, Jr., JJ., concur. Teehankee and Aquino, JJ., concur in the result.

G.R. No. 83542 August 20, 1990 ANTONIO S. COHON, petitioner, vs. COURT OF APPEALS, HON. REYNALDO MARQUEZ, IN HIS CAPACITY AS DEPUTY ADMINISTRATOR AND HEARING OFFICER OF THE MARITIME INDUSTRY AUTHORITY (MARINA); ENRIQUE Y. TAN, JR., AND VICENTE ATILANO, respondents. Joseph T. Cohon and Pedro N. Tanchuling for petitioner. Pastor C. Bacani for private respondents.

PARAS, J.: Before Us for review is the Decision * dated March 3, 1988 of respondent Court of appeals denying due course to the petition filed by petitioner Antonio S. Cohon and dismissing the same for lack of merit. Petitioner also presents for review the Resolution of May 31, 1988 of said appellate court denying his motion for reconsideration of the subject decision. The prefatory facts, as found by respondent Court of appeals, are not disputed. Thus: Respondent Enrique Tan, Jr. applied for and was granted a certificate of public convenience to operate inter-island shipping service for transportation of passengers and freight on the line Cebu-Cataingan-Placer-Kawayan-Masbate and vice versa with the use of one motor vessel named "M/V Young Lady", in a decision of the Board of Transportation (BOT) dated August 26, 1981 in BOT Case No. 78-26975. Tan's operation was stopped sometime in December 1983, due to engine breakdown of his vessel "M/V Young Lady" and thereafter he completely abandoned the service of the route. In April, 1985, to provide a much needed service caused by Tan's abandonment of operations, petitioner herein, Antonio Cohon, doing business under the name and style of "Lapu-Lapu Shipping Lines" applied with the BOT, and was granted a Certificate of Public Convenience CPC, for the Cebu-Kataingan route.

Around May or June, 1985 petitioner discovered that FGR Shipping Lines, an alleged interloper, was operating illegally on his route under Tan's CPC which he allegedly leased, for which reason he filed a complaint with MARINA (MARINA Case No. 85-003C) charging FGR with illegal operations. Claiming to have purchased Tan's CPC, co-respondent Vicente Atilano, together with Tan, filed with MARINA on May 29, 1985 an "Application for Approval of Sale and Transfer with substitution of that respondent Atilano proposing to use the "M/V Yellow Rose" instead of the "M/V Young Lady" which was then unfit for public service, docketed as MARINA Case No. 85-079. Petitioner opposed the joint petition on the following grounds: 1. He has been granted a CPC by the former BOT in a decision dated April 26, 1985 (BOT Case No. 84-7228), one of the approved routes of which is Cebu-Katingan route; 2. His service on this route with the use of the motor vehicle "M/V Honey" has been regular and uninterrupted, adequate and efficient; 3. Vendor Tan's franchise had already expired in May, 1985 and his vessel "M/V Young Lady" which he sold to Atilano has been unseaworthy and has not been in operation since 1983; 4. Vendor Tan, having ceased to serve the Cebu-Cataingan route since late 1983, is guilty of non-user of franchise that had since expired; 5. Approval of the joint petition will prove detrimental to petitioner and the interest of the riding public and will result in destructive competition. FGR filed an application for a CPC in its name, which was opposed by herein petitioner, docketed as MARINA Case No. 85-226. This application was finally dismissed by MARINA on January 19, 1987. After MARINA Case No. 85-079 was reset for hearing on March 11, 1987, the same was dismissed for failure to prosecute because of the non-appearance of both private respondents and their counsel.

On a motion to set aside order of dismissal and to reset case for hearing, apparently with the notice to petitioner, the case was reinstated and a hearing was conducted on an amended application filed by respondents who then finished presenting their evidence. On July 14, 1987 petitioner filed an urgent motion to set aside all proceedings after March 11, 1987, which was denied but petitioner was merely given the right to recall the sole witness of respondents for cross-examination. In the course of the hearing of September 16, 1987, petitioner sought to prove the invalidity of Tan's CPC by showing that it was signed by only one BOT Member instead of at least two board members as allegedly required by law. Respondent Marquez blocked petitioner's efforts saying that the CPC is not subject to collateral attack and that petitioner should file a separate action directly impugning the CPC's validity. Accordingly, petitioner on October 7, 1987 filed MARINA Case No. 87-029-C entitled "Petition for declaration of Nullity of Certificate of Public Convenience and/or Cancellation of CPC," praying that Tan's CPC be declared void ab initio, or in the alternative that the same be cancelled by reason of abandonment. On the same date petitioner filed his "Motion to Suspend Proceedings" in Case No. 85-079 on the ground that MARINA Case No. 87-029-C for declaration of nullity raises a prejudicial question the resolution of which is determinative of the merits of MARINA Case No. 85-079 for approval of the sale and transfer of Tan's CPC to Atilano. Respondent Marquez orally denied the motion for suspension in the hearing of October 7, 1987, which was confirmed by written order dated October 27, 1987. Reconsideration was sought but subsequently denied. (pp. 30-32, Rollo) Petitioner submits these allegations: 1. Respondent Court of Appeals committed an error in declaring that private respondent's Certificate of Public Convenience is valid on the basis of its argument that the original BOT case wherein said Certificate had been granted was principally a case of rate fixing which should have required the approval of at

least two members of the defunct BOT board. The Certificate definitely spelled out the freight and passenger rates. The law provides that all cases involving the fixing of rates must have concurrence and signatures of at least two board members. The law referred to are the Rules of Practice and Procedure then enforced by the defunct BOT, specifically Sec. 2 of Rule 14 of said Rules. Considering that the CPC which involved the fixing of rates was issued against the mandatory requirements of the aforecited law, it follows that the decision allowing the grant of the CPC and the CPC itself are void and ineffective and, therefore, the Certificate did not confer any right or privilege to respondentawardee. For being invalid from the beginning, the same cannot be ratified nor validated. It further follows that the Maritime Industry Authority (the agency which took over the powers and functions of the Board of Transportation) has no jurisdiction to proceed with MARINA Case No. 85-079 which allegedly involved the approval and sale of the invalid CPC. 2. Respondent Court of Appeals failed to perceive or appreciate the real nature of the main issue raised by petitioner-the invalidity of private respondent's CPC which is a jurisdictional and threshold issue since it is only proper and logical to determine first if the Certificate subject of purported sale is valid and actually exists before resolving whether or not to approve the sale and transfer thereof. The question of the CPC's invalidity is a jurisdictional issue since the very premise of MARINA Case No. 85-079 (for approval of the sale of the CPC) is the existence of a valid CPC. A finding as to the nullity and non-existence of the subject CPC would render the aforecited case legally baseless and would thus deprive MARINA of its jurisdiction to act on or proceed with the case. The ruling of the Court of Appeals stating that the proceedings in MARINA Case No. 85-079 can continue without first resolving the issue of the invalidity of the CPC would result in a major absurdity and would cause serious damage to petitioner. For, the consequence of such a ruling is that respondent Atilano as transferee of the void CPC and successor-in-interest of private respondent would automatically be allowed to operate the route covered by the CPC and compete with petitioner to his prejudice. Private respondent, on the other hand, contends: 1. The CPC under question was validly granted to him because his application was for the issuance of a certificate of public convenience and not for the fixing of rates in which case, the grant thereof of one BOT member was sufficient. The fact that rates were indicated did not make the application a case for the fixing of rates. The rates are merely incidental to the grant of the certificate in order to

make the grantee aware of what rates to charge and which rates are the usual standard rates. Under the BOT Rules and Procedure, the signature or approval of two board members is required only in cases which are contested or specifically involving the fixing of rates. 2. If the application for a CPC were treated as one concerning the fixing of rates, such action would result in absurdity because every application would then be an application for rate fixing, which should not be the case. The resolution of this case hinges on the basic issue of whether or not a certificate of public convenience embodying a schedule of rates for passengers, freight and cargo, which was granted on the basis of an application for the issuance of said certificate to operate an interisland shipping service, should be considered as a certificate primarily involving a fixing of rates. The other questions of whether or not the award of the certificate of public convenience was legal and regular with only one BOT member approving the same, and whether or not the determination of the validity of the Certificate is a jurisdictional issue, would depend on the resolution of the aforestated pivotal issue. We find merit in private respondent's submission. The application of private respondent was filed specifically for the issuance of a certificate of public convenience and not for the fixing of rates. The decision itself of the defunct Board of Transportation supports the above finding when it explicitly declares that the applicant private respondent requests for the issuance of a CPC to operate an inter-island shipping service for the transportation of passengers and freight. Thus, the dispositive portion of the BOT decision, in squarely responding to the request, states as follows: Wherefore, it is ordered that pursuant to the provisions of Section 16 (a) of Commonwealth Act 146, as amended, let a certificate of public convenience be issued to herein applicant, Enrique Tan, Jr. (Grace Shipping Lines) authorizing him to operate an inter-island shipping service on the line: Cebu-Cataingan-Placer-Kawayan-Masbate and vice versa with the use of one (1) motor vessel, subject to the following, (Emphasis supplied) (p. 53, Rollo)

Notably, the fixing of the rates is an essential precondition to the approval of the application for the certificate of public convenience and the award of the same. It is not merely incidental as private respondent claims; it is more of a mandatory condition that comes with the grant of the certificate. The CPC embodies certain conditions imposable upon its approval and certain conditions which should be complied with in order to sustain the validity of the certificate. As per verification with the Franchise Department of the Maritime Industry Authority, a CPC normally includes the standard rates for passengers, cargo, and freight. Thus, it appears that the CPC was granted on the basis of private respondent's application for the issuance thereof and clearly, not for the fixing of rates. This finding is sufficiently supported by the dispositive portion of the BOT decision as aforequoted. Since the application was not contested at the time of its consideration and since the same was definitely not for the fixing of rates, the requisite approval of two (2) Board members does not apply as contended by private respondent. The approval of one member was enough to grant a valid certificate. In this regard, therefore, private respondent's CPC was legally granted and valid. But what started as a valid CPC assumed a different status by reason of a subsequent violation of two (2) mandatory conditions embodied in the decision. We are speaking of No. 11 of the "Conditio ns" which provides: 11. That the authority herein granted shall be good only for the applicants motor vessel named "M/V Young Lady" while the license issued to him by the Philippine Coast Guard is still subsisting and in effect. (p. 56, Rollo) The aforestated condition mandates that the CPC was granted exclusively for the operation of "M/V Young Lady" and not for any other vessel. This simply means that the moment such particular vessel became unseaworthy as when it was abandoned due to engine trouble, then it follows that the object covered by the license and CPC became inexistent. Correspondingly, the CPC became ineffective. It should be noted that the CPC covered the "M/V Young Lady" only. Said certificate was awarded exclusively for the operation of the vessel. Hence, when the said ship became unseaworthy due to engine trouble in December, 1983, private respondent had to abandon completely the service of the route covered

by the CPC. At that very moment, private respondent already committed a violation of No. 2 of the "Conditions" imposed under the Certificate. Condition No. 2 reads thus: Applicant shall not operate his motor vessels unless they are fit for public service and that before operating his motor vessel, applicant shall renew his Coastwise License within thirty (30) days from receipt of this decision and furnish copy thereof to the Board within thirty (30) days after renewal and every year thereafter. Failure of applicant to renew said license will be sufficient cause for the cancellation of the authority herein granted. (Rollo, p. 55) It becomes evident that private respondent could not have renewed his Coastwise License in 1983 because the vessel "M/V Young Lady" was already grounded and hence, there was no more ship over which a license should be secured. This was a sufficient cause for the cancellation of the CPC. It appears clearly from the Conditions aforementioned that the original vessel covered by the License and Certificate could not be substituted with another vessel, Such being the case, private respondent could not legally sell and transfer his CPC in 1985 to Atilano when at that time, the "M/V Young Lady" subject of the Certificate was no longer operational. Without the original and basic motor vessel, the CPC became unenforceable and incapable of being the subject matter of a sale and transfer. This alone had the effect of invalidating the CPC and private respondent therefore, had no valid CPC to sell and transfer to Atilano. Consequently, MARINA Case No. 85-079 had no legal basis to proceed. Better still, it should not have been instituted for lack of right of action. Considering the foregoing, the appealed decision is hereby REVERSED and public respondent Reynaldo Marquez, Deputy Administrator of MARINA is hereby directed to DISMISS MARINA Case No. 85-079. SO ORDERED. Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur. Sarmiento, J., took no part.

G.R. No. 125684

June 8, 2006

ALEJO ARANDA, SIMEONA JOSON-ARANDA, BONIFACIA ARANDA, PELAGIA ARANDA, DOMINADOR ARANDA, VIVENCIO ARANDA, LOLITA ARANDA, JEFFREY ARANDA, and FELICIANO ARANDA, Petitioners, vs. FORTUNE SAVINGS & LOAN ASSOCIATION, INC., THE PROVINCIAL SHERIFF OF CAVITE, SABRINO C. ARANDA, VERONICA ARANDA, THE REGISTER OF DEEDS OF THE PROVINCE OF CAVITE and THE HONORABLE COURT OF APPEALS, Respondents. DECISION CALLEJO, SR., J.: Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 36111 dismissing the petition for the annulment of the Decision2 of the Regional Trial Court (RTC) of Bacoor, Cavite, Branch 19, in Civil Case No. BCV-82-16, as well as the Resolution denying the motion for reconsideration thereof. The Antecedents On January 5, 1979, Alejo Aranda purchased from the then Ministry of Agrarian Reform (Ministry) a parcel of land consisting of 20,890 square meters identified as Lot No. 1260-B, Subdivision Plan SWO-40076 of the Yaptinchay Estate in Carmona, Cavite, for which he was issued Transfer Certificate of Title (TCT) No. 102248.3 The transfer was covered by a Deed of Sale4 where Aranda was prohibited from encumbering or selling the property within five years from said date without the Ministrys written consent. On June 19, 1980, the Ministry issued a Permit to Mortgage5 in favor of Aranda, with the condition that, in case the mortgagee is a private banking institution or private person, the following clause should be incorporated in the deed of mortgage: "In the event of foreclosure, only persons who are qualified to purchase land under Commonwealth Act No. 539, Republic Act No. 1162, as amended[,] Republic Act No. 3844, as amended, or government banking institution or agencies, or any private banking institution may participate in the public auction sale thereof." It was also required that the mortgage contract be submitted to the Ministry for verification and final approval. Arandas pending loan application with Fortune Savings and Loan Association, Inc. (FSLAI) was approved. Thus, on June 24, 1980, Aranda, with the consent of

his wife, Simeona Joson, executed a Mortgage Contract6 in favor of FSLAI. The loan (for P95,000.00) was evidenced by a Promissory Note,7 whereby the spouses Aranda, jointly and severally, obliged themselves to pay their obligation on or before July 21, 1983.8 The Ministry approved the loan as well as the contract. The spouses Aranda, however, failed to pay the loan, upon which FSLAI filed a petition for the extrajudicial foreclosure of the mortgage. When Alejo Aranda received the Notice of Sheriffs Sale, he filed a Complaint9against the FSLAI and the Provincial Sheriff for the nullification of the mortgage and the extrajudicial foreclosure in the RTC of Cavite. The case was docketed as Civil Case No. BCV82-16. On December 22, 1983, Alejo Aranda, assisted by counsel, Atty. Franco L. Loyola, and the FSLAI, assisted by Atty. Julio S. Francisco, executed a compromise agreement10 which was submitted to the court for approval. The RTC approved the agreement in its Decision11 dated January 5, 1984, to wit: 1. That plaintiff hereby waives all his claims embodied in the complaint; 2. That plaintiff admits that his total obligation is ONE HUNDRED SIXTY-TWO THOUSAND FOUR HUNDRED SEVENTY-FOUR PESOS & 44/100 (P162,474.44) as of today; 3. That plaintiff agreed and promised to pay the defendant Fortune Savings & Loan Association, Inc., the said amount of P162,474.44 on installment basis as follows: a) P10,000.00 upon the execution of this compromise agreement which amount shall be applied in the foreclosure sale expenses and penalty charges; b) P5,000.00 every month beginning January 22, 1983 until the full payment of the plaintiffs obligation; 4. That plaintiff agreed to pay the stipulated interest of 22.5% per annum and a penalty charge of 3% per annum on the diminishing unpaid balance; 5. That the aforementioned obligation of the plaintiff shall still be secured by the Real Estate Mortgage executed by plaintiff on June 10, 1980 and entered in the Notarial Register of the Notary Public of

Rizal, Atty. Julio Francisco as Doc. No. 181; Page No. 38; Book No. XIV; Series of 1980 wherein the plaintiff mortgaged his 20,840 square meters [of] land covered by Transfer Certificate of Title No. T-102248; 6. That, should the plaintiff fail to pay any of the aforementioned monthly installment, then the whole unpaid indebtedness shall become due and payable, and in case of such an event, the plaintiff/mortgagor agreed to pay the stipulated interest and penalty charge on the unpaid balance from date of default as agreed in paragraph 4 hereof; 7. That, as stated in the aforesaid Deed of Real Estate Mortgage, should the plaintiff/mortgagor fail to pay any of the foregoing installment, the defendant/mortgagee/bank shall have the right to foreclose the said mortgage either judicially or extra-judicially; the defendant/mortgagee/bank is hereby appointed by the plaintiff/mortgagor as attorney-in-fact to conduct the extra-judicial foreclosure sale; 8. That should the defendant/mortgagee/bank choose to foreclose the said mortgage either judicially or extra-judicially, the plaintiff/mortgagor is agreeable to pay attorneys fees of 25% of the unpaid balance and the expenses of the foreclosure sale. WHEREFORE, plaintiff and defendants respectfully pray that this Honorable Court approve the foregoing compromise agreement by making a judgment based on the same. Makati, Metro Manila, 22nd day of December 1983. FORTUNE SAVINGS & LOAN ASSOCIATION, INC. Defendant-Mortgagee By: (Sgd.) DOLORES G. VILLENA Accountant

(Sgd.) ALEJO ARANDA Plaintiff-Mortgagor

Assisted by: (Sgd.) ATTY. FRANCO L. LOYOLA Counsel for Plaintiff

Assisted by: (Sgd.) ATTY. JULIO S. FRANCISCO Counsel for Defendants

WHEREFORE, finding the foregoing Compromise Agreement to be the term and voluntary will of parties, and the same not being contrary to law, morals, and public policy, judgment is hereby (sic) in accordance with the terms and conditions therein set forth, without any pronouncement as to costs. SO ORDERED.12 However, Alejo failed to pay his account as provided in the decision. Thus, on motion of the FSLAI, the RTC issued an Order13 dated July 25, 1985 allowing the corporation to foreclose the real estate mortgage extrajudicially. In due time, the FSLAI filed a petition for extrajudicial foreclosure of real estate mortgage with the Ex-Officio Provincial Sheriff of Cavite. The sale of the property at public auction was set on August 26, 1985. Alejo Aranda did not oppose the petition. The FSLAI was declared the winning bidder during the public auction and the Deputy Sheriff executed a Certificate of Sale14 over the property on the same day. Alejo Aranda failed to redeem the property. On September 4, 1992, the Register of Deeds issued TCT No. 358872 in favor of the FSLAI over the parcel of land.15 On December 30, 1992, it sold a portion of the property, Lot No. 1260-B-1 with an area of 7,500 square meters to Sabrino C. Aranda (Alejo Arandas brother) for P150,000.00.16 On December 21, 1991, Geodetic Engineer Bienvenido Corpuz conducted a subdivision survey of Lot No. 1260-B-1. He prepared a subdivision plan17 where the property was subdivided into four lots: Lot Nos. 1260-B-1-A, 1260-B-1-B, 1260-B-1-C, and 1260-B-1-D. Sabrino Aranda later sold Lot No. 1260-B-1-B to the Nishin Netsuken Philippines Corporation (NNPC). The Register of Deeds thereafter issued the following titles: to Sabrino Aranda, TCT No. T-36321118 covering Lot No. 1260-B-1-A (1,955 square meters), TCT No. T-36321319 covering Lot No. 1260-B-1-C (3,933 square meters), and TCT No. T-36321420 covering Lot No. 1260-B-1-D (258 square meters); to NNPC, TCT No. T-36321221covering Lot No. 1260-B-1-B (1,356 square meters).

On March 8, 1993, Alejo Aranda, as plaintiff, through counsel Atty. Dennis Angeles, filed a Complaint22 in the RTC of Cavite for the cancellation of the titles covering the said lots with prayer for damages. He alleged that his brother, through machination, borrowed the owners duplicate of TCT No. 102248, used the same as collateral for a loan which he secured from the FSLAI, and falsified his (Alejos) signature on the mortgage contract. Since he was unaware of the mortgage, the monthly amortizations were not paid, and the property was foreclosed by the FSLAI as a consequence. Alejo Aranda further alleged that, as shown in the title covering the property, it could "not be sold or transferred except by hereditary succession or to the government;" thus, the mortgage of the property to the FSLAI, the foreclosure of the real estate mortgage, the sale at public auction to the FSLAI and to the other defendants, as well as the torrens title issued under their names, are null and void. Alejo prayed that, after due hearing, judgment be rendered in his favor as follows: WHEREFORE, it is most respectfully prayed that this Honorable Court render judgment in favor of plaintiff and against defendants, ordering: ON THE PRAYER FOR TEMPORARY RESTRAINING ORDER/PRELIMINARY INJUNCTION 1. Issuing a Temporary Restraining Order ex-parts (sic) and after due hearing, a Writ of Preliminary Injunction enjoining herein defendants or anyone claiming rights under them from further performing any act which would work injustice to herein plaintiff; ON THE MAIN CAUSE OF ACTION 1. Ordering the cancellation of Transfer Certificate of Title Nos. T-363211, T-363213, [and] T-363214 in the name of defendant Sabrino C. Aranda; Transfer Certificate of Title No. T-363212 in the name of defendant Nishin Netsuken Philippines Corporation; and Transfer Certificate of Title No. T358872 in the name of defendant Fortune Savings Loan Association, Inc.; 2. Declaring plaintiff to be the owner of the real estate covered by Transfer Certificate of Title No. T-102248 reinstating the same to be valid and subsisting; 3. Ordering defendants to jointly and severally pay plaintiff: a) Moral damages in the amount of P100,000.00

b) Exemplary damages in the sum of P100,000.00 c) The sum of P100,000.00 as and for attorneys fees. Plaintiff prays for other reliefs just and equitable in the premises.23 The case was docketed as Civil Case No. BCV-93-26. NNPC filed a motion to dismiss the complaint on the ground that the complaint did not allege that the property was purchased in bad faith and without value. In his Answer24 to the complaint, Sabrino alleged the following by way of special and affirmative defenses: 6. That when herein defendant who was then abroad and/or away from home returned, came to know of what happened, he pleaded with defendant Fortune Savings & Loan Association, Inc., explaining to the latter that he was a part owner of the property, as a result of which herein defendant was allowed to buy a portion of 7,500 square meters at the price demanded by defendant Fortune Savings & Loan Association, Inc., which was P150,000.00 as evidenced by a deed of sale dated December 30, 1991, a xerox copy of which is hereto attached and marked as ANNEXES "1" and "1-A" hereof; 7. That herein defendant later on sold a portion of 1,356 sq. meters, known as Lot 1260-B-1-B, to his co-defendant Nishin Netsuken Philippine Corporation for a valuable consideration and in good faith, which act, was, and still within the right of herein defendant to do, as he was already the absolute owner thereof; 8. That plaintiff has therefore no cause of action against the herein defendant, but even assuming without admitting that plaintiff might have some right before to redeem said property or any portion thereof, the said right was already deemed waived or abandoned; 9. That plaintiff is, therefore, in estoppel to exercise whatever right, if any, he might have in the premises.25 On July 22, 1993, the RTC issued an Order26 denying the motion to dismiss filed by NNPC.
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Subsequently, the FSLAI filed a motion to dismiss the complaint on the ground, inter alia, of res judicata. It alleged that the action of plaintiff was barred by the decision of the RTC in Civil Case No. BCV-82-16 which was based on the

compromise agreement entered into by the parties. For his part, plaintiff filed a manifestation and motion praying that his complaint be dismissed without prejudice. During the December 15, 1993 hearing in Civil Case No. BCV-93-26, plaintiffs counsel, Atty. Dennis Angeles, presented the former counsel of plaintiff, Atty. Franco Loyola, as witness. The latter admitted the genuineness of his and plaintiffs signatures on the complaint in Civil Case No. BCV-82-16, and on the compromise agreement which the parties and their counsel submitted to the court for approval. He likewise admitted the due execution of the Compromise Agreement. On March 25, 1994, the RTC issued an Order27 granting the motion of the FSLAI to dismiss the complaint on the ground that the action of plaintiff was barred by the decision of the RTC in Civil Case No. BCV-82-16. Plaintiff did not appeal the order. On January 6, 1995, Alejo, his wife Simeona, and their children, filed a Complaint for annulment of the decision of the RTC in Civil Case No. BCV-82-16 before the Court of Appeals. The complaint reiterated the material allegations of the complaint in Civil Case No. BCV-93-26 relative to the nullity of the real estate mortgage in favor of FSLAI, the extrajudicial foreclosure thereof, the sale of the properties covered by the deed, and the torrens titles thereafter issued by the Register of Deeds. It was further alleged that Sabrino Aranda and his wife conspired with FSLAI to forge Alejos signature on the complaint in Civil Case No. BCV-82-16; Alejo never authorized Atty. Franco Loyola to file the complaint in said case; the signature in the compromise agreement purporting to be his is a forgery; Alejo never appeared nor participated in said case, hence, the proceedings and judgment therein are null and void; and, the complaint in Civil Case No. BCV-93-26 was dismissed without prejudice. It was likewise prayed that judgment be rendered as follows: WHEREFORE, it is most respectfully prayed that, pending final determination of the present case, it is most respectfully prayed that: a. A temporary restraining order immediately be issued restraining the defendants from committing the acts complained of; b. After hearing on the petition for preliminary injunction, a writ of preliminary injunction be issued restraining all the defendants from committing the acts complained of; and after hearing on the merits, judgment be rendered in favor of the plaintiffs and against the defendants in the following tenor: 1. Making the writ of injunction permanent;

2. Declaring the mortgage in favor of defendant Bank, and all supporting papers thereto, null and void ab initio; 3. Declaring the Decision dated January 5, 1984, Annex D, in Civil Case No. BCV-82-16 and all proceedings before and after rendition of said Decision, null and void ab initio for lack of jurisdiction; 4. Declaring the Order dated March 25, 1994 in Civil Case No. BCV93-26 null and void, or at least without prejudice; 5. Declaring the Extrajudicial Foreclosure proceedings and the Certificate of Sale executed by the defendant Provincial Sheriff against the property of plaintiffs null and void ab initio; 6. Declaring Transfer Certificate of Title Nos. T-213097, T-363212, T-363211, T-363213, T-363214, and T-358872 null and void ab initio, and ordering the defendant Register of Deeds to cancel said titles; 7. Ordering the defendants to return and reconvey the property subject of this case to the plaintiffs free from all liens and encumbrances, and the Register of Deeds of the Province of Cavite to issue new title in the names of plaintiffs Alejo Aranda and Simeona Joson-Aranda over the property; 8. In any event, ordering the defendants to pay to plaintiffs the following amounts: a. P50,000.00 as actual damages; b. P300,000.00 as moral damages; c. P300,000.00 as exemplary damages; d. P50,000.00 as attorneys fees. Plaintiffs [pray] for such other reliefs to which they may be entitled under the law and premises. FSLAI alleged, by way of defense, that (1) the complaint was barred by the decision of the RTC in Civil Case No. BCV-82-16 and by the Order of the RTC in Civil Case No. BCV-93-26 dismissing plaintiffs second complaint on the ground of res judicata; (2) the children of the spouses Alejo Aranda and Simeona JosonAranda, as plaintiffs, have no cause of action against it; (3) they are estopped

from assailing the compromise agreement of the parties in Civil Case No. BCV82-16 and the decision of the RTC based thereon; and (4) they were guilty of forum shopping. On February 22, 1996, the CA rendered judgment dismissing the complaint for lack of merit.28 The appellate court averred that the testimony of Atty. Franco Loyola in Civil Case No. BCV-93-26 taken on December 15, 1993, belied plaintiffs factual allegations. It also ruled that the action was barred by prescription. The Alejo Aranda spouses filed a motion for reconsideration, which the appellate court denied.29 The Alejo Aranda spouses, through their new counsel, Atty. Jose Alvarez, forthwith filed the instant Petition for Review on Certiorari, alleging that the CA erred in ruling as follows: (1) that the RTC had jurisdiction in Civil Case No. BCV82-16; (2) that their action for the nullification of the decision of the RTC in Civil Case No. BCV-82-16 had prescribed; and (3) that the dismissal of their complaint in Civil Case No. BCV-93-26 was with prejudice. Petitioners maintain that they never authorized Atty. Franco Loyola to sign the compromise agreement in Civil Case No. BCV-82-16; in any event, their complaint in Civil Case No. BCV-93-26 was dismissed without any answer having been filed by defendant therein. Considering that the dismissal of the complaint was not on the merits of the case, it was not a bar to their complaint in the CA. They aver that the appellate court should have ordered an investigation on their claim that their counsels, Atty. Franco Loyola and Atty. Dennis Angeles, took advantage of their ignorance and illiteracy, and abandoned their cause. In any event, petitioners point out, the trial court dismissed their complaint in Civil Case No. BCV-93-26 on their motion, before any answer was filed; hence, the dismissal of their complaint was without prejudice. The petition has no merit. First. Petitioners Bonifacia Aranda, Pelagia Aranda, Dominador Aranda, Vivencio Aranda, Lolita Aranda, Jeffrey Aranda, and Feliciano Aranda contend that they are the real parties-in-interest in the CA and in this Court, and thus had a cause of action for the nullification of the decision of the RTC in Civil Case No. BCV-8216 and for the reversal of the CA decision. They joined their parents, spouses Alejo Aranda and Simeona Joson-Aranda as plaintiffs in the CA, on their claim that they are the "compulsory heirs" of said spouses. However, under the law on succession, "the rights to the succession are transmitted from the moment of

death of the decedent,"30 and that "compulsory heirs are called to succeed by operation of law;"31 as such, petitioners will only become compulsory heirs of their parents upon the death of the latter. Second. Petitioners claim that petitioner Alejo Aranda did not secure the services of Atty. Loyola as his counsel in Civil Case No. BCV-82-16 and that said counsel forged his (Alejos) signature in the complaint in Civil Case No. BCV-82-16, as well as the one above his typewritten name on page three of the compromise agreement. However, such allegation has been proved to be a complete prevarication by no less than petitioner Alejo Aranda himself, through his former counsel, Atty. Loyola, when the latter testified on December 15, 1993, during the hearing of the motion to withdraw the complaint. The lawyer categorically declared that the signatures in the complaint in Civil Case No. BCV-82-16 and the compromise agreement in said case were genuine. Moreover, the CA dismissed the petition for the annulment of the decision of the RTC in Civil Case No. BCV-82-16 based on the testimony of petitioner Alejo Arandas own witness, Atty. Franco Loyola: However, the allegations in the petition are not deserving of credence. The petitioners claim that they never filed nor authorized Atty. Loyola to file the complaint subject of Civil Case No. 82-16, much less the compromise agreement is not believable considering the following circumstances: First, the transcript of stenographic notes taken during the hearing held on December 15, 1993 in Civil Case No. 93-26 (a case admittedly filed by petitioner Alejo Aranda) reveals that petitioner Alejo Aranda himself, through his own counsel, Atty. Dennis Angeles, presented as witness, Atty. Franco Loyola who testified in this wise: ATTY. ANGELES: Your Honor, we are offering the testimony of Atty. Franco Loyola to testify and prove that he was the counsel on record of the plaintiff in Civil Case No. 82-16 entitled Alejo Aranda versus Fortune Savings & Loan Association, Inc. and Provincial Sheriff of Cavite and such lawyer was responsible for the execution of the compromise agreement signed by the parties particularly by his client Alejo Aranda. With the kind permission of this Honorable Court. COURT: Proceed. Q: What was the purpose in coming to you? A: The purpose in coming to me is that they can (sic) recover the property subject matter of the sheriff sale under extrajudicial foreclosure pursuing. Q: After your conversation, what happened?

A: I prepared a complaint signed by Mr. Aranda against Fortune Savings & Loan Association, Inc., and the Provincial Sheriff of Cavite before [the] then Court of First Instance of Bacoor, Branch 5, docketed as Civil Case No. 82-16. xxx Q: On page no. 8 of the complaint, at the last page, there is a signature of Alejo Aranda. Will you kindly go over the same and tell the Honorable Court whose signature is that? A: That is the signature of Alejo Aranda, Sir. xxx Q: Why do you know that that is the signature of Alejo Aranda? A: I was present, Sir, when that was signed in the presence of the Clerk of Court, Adriano Vista, before we filed our complaint before the Court of First Instance of Bacoor, Cavite. Q: Now, will you kindly inform this Court whether that was already terminated? A: That case was terminated by compromise agreement/settlement, Sir. xxx Q: I am showing to you again the compromise agreement and calling your attention to the signature of one Alejo Aranda appearing on page 11 of the compromise agreement, do you know whose signature is this? A: This (sic) were all signed by Alejo Aranda, Sir. Q: And why do you know that these are the signatures of Alejo Aranda? A: It was signed in my presence. If I remember correctly, it was signed right in the office of Fortune Savings where the representatives of Fortune Savings, Dolores Villena and Atty. Julio Francisco were also present. I can distinctly remember Alejo Aranda. xxx Q: Now, prior to the time Alejo Aranda affixed his signature on pages 2 and 3 of the compromise agreement, will you kindly inform this Honorable Court

whether Alejo Aranda was duly advised of the contents of the compromise agreement? A: Yes, Sir. I have already explained the contents of the compromise agreement to him because it involved monetary obligation it is incumbent for me to explain to him the meaning of the compromise agreement that has to be approved by the court. xxx Q: On the basis of this compromise agreement, what happened? A: It was approved, Sir, by the court and the decision was made by Judge Ildefonso Nobleza dated January 5, 1984. [Underscoring ours; Tsn, December 15, 1993, pp. 4-19] The foregoing quoted portions of the transcript of stenographic notes of the hearing held on December 15, 1993, in Civil Case No. 93-26, clearly belies Alejo Arandas claim that he did not sign nor authorize the filing of the complaint in Civil Case No. 82-16, and participated therein through his former counsel, Atty. Loyola. It is to be noted that Atty. Loyola was presented as witness by herein petitioner Alejo Aranda himself through his counsel, Atty. Dennis Angeles, in Civil Case No. 93-26. Petitioners did not file any Reply to refute the copy of the transcript attached to the Comment of respondent bank; hence, it is deemed admitted by the petitioners. Secondly, the assailed judgment upon compromise was rendered on January 5, 1984. Writ of execution was issued on July 25, 1985 and writ of possession on November 20, 1989. Assuming [that] petitioners did not receive copies of the decision and the writ of execution, certainly, they would be aware of the writ of possession as the same would have involved a physical transfer of the subject property by the sheriff to respondent bank. The present petition for annulment of judgment was filed only on January 6, 1995. The inordinate delay in questioning the judgment and seeking its annulment puts in serious doubt the veracity of the allegation of fraud.32 Third. Petitioners contention that the CA should have ordered the investigation of Atty. Loyola and Atty. Angeles is anchored on an erroneous factual premise, namely, that the CA found said counsels to have committed acts of misconduct to the prejudice of the rights of their client, petitioner Alejo Aranda. However, a careful study of the CA decision shows that no such findings were made. The appellate court merely declared that even assuming the truth of the allegations in the petition, they merely constitute extrinsic fraud, a ground for the annulment of the RTC Decision in Civil Case No. BCV-82-16:

"A judgment can be annulled on the following grounds: that the judgment is void for want of jurisdiction; that the judgment is void for lack of due process; or that it has been obtained by fraud." (Regidor v. Court of Appeals, 219 SCRA 530; Ruiz v. Court of Appeals, 201 SCRA 577). The allegations in the petition that petitioner Alejo Aranda never filed nor authorized Atty. Franco Loyola to file the complaint for annulment of real estate mortgage which was docketed as Civil Case No. 8216; that the signature in said complaint was forged, that petitioner Alejo Aranda never appeared nor participated in the proceedings of said Civil Case No. 82-16; that Alejo Aranda never authorized the compromise agreement, and that the signature appearing in said compromise agreement dated December 22, 1983 which was wrongfully made the basis of the herein assailed judgment upon compromise dated January 5, 1984, was a forgery, could legally constitute extrinsic fraud that would be a ground for annulment of judgment. Among the instances of extrinsic or collateral fraud are: keeping the unsuccessful party away from court by a false promise of compromise, or purposely keeping him in ignorance of the suit; or where an attorney fraudulently pretends to represent a party, and connives at his defeat, or being regularly employed, corruptly sells out his clients interest (Magno v. Court of Appeals, 107 SCRA 285, at page 292).33 Indeed, there is no declaration that Atty. Franco Loyola ever committed any act of misconduct as counsel of petitioner Alejo Aranda in Civil Case No. BCV-82-16. In fact, the CA declared that as gleaned from the evidence of petitioner Alejo Aranda in the RTC in Civil Case No. BCV-93-26, the signature of Atty. Loyola and petitioner Alejo Aranda in the complaint in Civil Case No. BCV-82-16 and in the compromise agreement were genuine. Moreover, petitioner spouses never bothered to file any administrative complaint against Atty. Loyola or Atty. Angeles to assert their claim. Fourth. We are convinced that the complaint of petitioners in the CA assailing the decision of the RTC in Civil Case No. BCV-82-16 based on the compromise agreement of the parties is merely an afterthought. The records show that the RTC rendered judgment in Civil Case No. BCV-82-16 as early as January 5, 1984. Based on the decision of the RTC, the extrajudicial foreclosure of the real estate mortgage in favor of respondent FSLAI was aborted. In his complaint in Civil Case No. BCV-93-26 filed on March 8, 1993, petitioner Alejo Aranda claimed that the torrens titles to the property were issued to and under the names of private respondents. He must have likewise discovered that the torrens titles were so issued following the decision of the RTC in Civil Case No. BCV-82-16, the extrajudicial foreclosure of the real estate mortgage executed by petitioner spouses Alejo Aranda with private respondents as buyers therein. However, petitioner Alejo Aranda failed to file a petition for the annulment of the decision of the RTC in Civil Case No. BCV-82-16 on the ground of extrinsic fraud; instead, he filed a complaint for the nullification of said titles against private respondents

herein in the RTC. It was only on January 6, 1995 that petitioners filed their complaint in the CA for the nullification of the decision of the RTC in Civil Case No. BCV-82-16, following the dismissal of the complaint in Civil Case No. BCV93-26. Fifth. Petitioners claim that the complaint in Civil Case No. BCV-93-26 was dismissed without prejudice is belied by the records of the case. The Order of the RTC in Civil Case No. BCV-93-26 shows that the complaint was dismissed based on res judicata: Considering that the plaintiff himself seeks the dismissal of this case and considering further defendant Fortune Savings and Loan Association, Inc.s grounds for seeking the dismissal of this case, particularly that of res judicata, to be well-founded, this Court has no alternative but to dismiss this case. WHEREFORE, let this case be dismissed. SO ORDERED.34 An order of the court dismissing the complaint on the ground of res judicata is an adjudication of the case on the merits although no trial has been held. Such an order is thus an absolute bar to the filing of a subsequent action for the same cause between the same parties.35 The decision referred to in the Order of the RTC which barred the complaint of petitioner Alejo Aranda in Civil Case No. BCV-93-26 was the Decision of the RTC in Civil Case No. BCV-82-16. The aforementioned Order of the trial court thus affirmed the validity of the RTC decision in Civil Case No. BCV-82-16. Therein plaintiff Alejo Aranda (now petitioner) did not appeal the Order. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against petitioners. SO ORDERED.

G.R. No. L-28245 May 22, 1982 PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY Petitioner, vs. THE COURT OF APPEALS and DAVE HARVEY, INC., Respondents.

GUERRERO, J.: This is a petition for review on certiorari of the decision of respondent Court of Appeals 1 in CA-G.R. No. 31179-R entitled "The Philippine American General Insurance Company, Inc., plaintiff-appellant, versus Dave Harvey, Incorporated, defendant-appellee" promulgated September 18, 1967. The antecedent facts of this case may be briefly narrated as follows: On February 21, 1958, herein private respondent Dave Harvey, Inc. entered into a written contract with Caltex (Phil.) Inc. (hereinafter referred to as Caltex), whereby for a consideration, the former undertook the painting of one (1) welded cone roof tank belonging to Caltex and located at the Philippine Wallboard Corporation in Nasipit, Agusan. Captioned "PAINTING CONTRACT", the agreement provided, inter alia, that the work was to be performed in accordance with the provisions of the "SPECIFICATIONS FOR TANK PAINTING" attached to the contract as its Annex "A" and made a part thereof. 2 The relevant provisions of the "PAINTING CONTRACT" are reproduced hereunder: 9. Should any defects, shrinkage or other faults appear, or be found by (Caltex) within ninety (90) days from the acceptance of the work due to defective or improper materials or workmanship, (private respondent) shall amend or make good such defect at his own expense and, in case of default, (Caltex) shall cause it to be done for the account of (private respondent) for which (Caltex's) bond shall be liable. 12. (Private respondent) shall furnish(Caltex) surety bond in the amount of P1,500.00 given by a surety company acceptable to (Caltex) and conditioned upon (private respondent's) faithful performance of the terms and conditions of this contract, including the payment of all labor. It shall also be liable for any defect arising out of defective materials or workmanship which may appear or be found by (Caltex) within ninety (90) days from date of completion and acceptance of the work. 3 The last clause of the "SPECIFICATIONS FOR TANK PAINTING", Annex "A", on the other hand, provides thus: Any defects in workmanship that may be discovered within the period of One year - - will be corrected by (private respondent) without any additional charge to Caltex. 4 To secure the full and faithful performance by private respondent of its obligation as provided in the painting contract, herein petitioner Philippine American General Insurance Company, Inc. issued a surety bond in the sum of P1,500.00 in favor of Caltex. 5 In turn, private respondent executed a written undertaking to indemnify petitioner for whatever damages, losses or expenses which the latter may sustain or incur in consequence of having become a surety. 6 Private respondent proceeded with the painting job, completed the same, and turned it over to Mr. George Mears of the Philippine Wallboard corporation sometime in March, 1958. In the same month, Mr. Mears certified that the painting job undertaken by private respondent for Caltex was satisfactory. 7

On September 16, 1958, Caltex wrote a letter to private respondent informing the latter of alleged defects in the work performed. four months later, Caltex demanded of petitioner the payment of P1,500.00, the amount secured by the surety bond, alleging that private respondent failed to accomplish the work in accordance with the specifications agreed upon, making it necessary for Caltex to engage another painting contractor to repeat the painting job in accordance with the specifications at a cost of P2,850.00. 8 Petitioner and private respondent exchanged communications and, ultimately, petitioner paid Caltex under the surety bond. To recover what it had paid to Caltex, and on the strength of the indemnity agreement heretofore mentioned, petitioner on August 20, 1959 filed a complaint against private respondent in the City Court of Manila. After the case was submitted for decision upon the pleadings filed and on a partial stipulation of facts submitted by the parties, the City court dismissed the complaint reasoning that the "liability of (private respondent) upon the painting and contract basis of the indemnity bond had prescribed and ... (petitioner), therefore, had no basis paying (Caltex) on the said bond." 9 Petitioner brought the case on appeal to the court of first Instance of Manila. The parties presented anew the partial stipulation of facts submitted in the City Court and likewise adduced evidence. The case was again dismissed. According to the Court, by virtue of the express terms of the painting contract and the partial stipulation of facts, private respondent cannot be held liable for any defect, shrinkage or other faults discovered after a period of 90 days from acceptance of the work performed by private respondent. Since the alleged defects in the painting job were noted only after more than three (3) months from March, 1958 when Mr. Mears of Philippine Wallboard Corporation certified the painting job to be satisfactory, private respondent could no longer be held liable for such defects, and consequently, petitioner should not have paid Caltex under the surety bond. The Court added that private respondent could not be held in estoppel for failure to answer petitioner's demand letter and to inform the latter of any defense which said private respondent had in its behalf because petitioner was fully aware of or should have known the terms of the painting contract and would have found out that private respondent was not liable for any defect found in the painting job after three (3) months from the date of the delivery of the job. 10 On appeal to the respondent Court of Appeals, the judgment of dismissal was affirmed with the following observations: The work referred to above was turned over in March, 1958, to one George Mears of the Philippine Wallboard Corporation, who "certified that the painting undertaken by the (private respondent) for Caltex (Phil.) Inc. was satisfactory." (Pars. 3 & 4 of Partial Stipulation of Facts, Exh. A). And since the alleged defects were noted only on September 16, 1958, it is plainly obvious that such discovery is very much beyond the 90-day period that the painting contractor ... may be held for any defect, shrinkage or other faults that may be found in the painting job. Such being the case, we do not see our way clear to hold the defendant liable for the alleged defects discovered after 90 days that the painting job was completed and delivered. True enough that the ultimate paragraph of Annex A of the "Painting Contract" (p.5, Folder of Exhs.) say that "any defects in workmanship that may be discovered within the period of one year - will be corrected by the contractor without any additional charge to Caltex." However, we have significantly noted that (1) said Annex A of the Painting Contract is entitled "Specifications For Tank Painting" and that (2) the surety bond of P1,500.00 put up by the (petitioner) for (private respondent) in favor of Caltex (Phil.) Inc. was to answer for any defects arising out of defective materials for workmanship which may appear or be found by the Company Caltex (Phil.) Inc. within 90 days from the date of completion and acceptance of work. It is thus readily seen that only defects arising from defective materials or workmanship and

discovered within 90 days from completion and acceptance of work are covered by the surety bond. Stated in another way, defects in the painting job discovered beyond 90 days are not covered by said bond. The liability of the surety bond is clearly stated in paragraph 12 of the "Painting Contract" (pp. 5 & 6, Folder of Exhs.) so that the payment by the (petitioner) of the bond to Caltex (Phil.) Inc. does not fall within the purview of the indemnity agreement entered into by said (petitioner) and (private respondent) in connection with the surety bond. Consequently, we cannot order the (private respondent) to reimburse the (petitioner) for the payment the latter.11 Petitioner now comes to this court with the following assignment of errors: I. The respondent Court of Appeals committed an error of law in not holding that, under the applicable provisions of law on the interpretation of contracts, the contractual stipulation providing for a warranty period of one year, is controlling insofar as the duration of such warranty period is concerned. II. The respondent Court of Appeals committed an error of law in setting aside the contractual stipulation providing for a one year warranty period, manifestly for the reason that this stipulation is contained in the specifications annexed to the painting contract. III. The respondent Court of Appeals committed an error of law in holding that the surety bond was not answerable for defects in the painting job discovered beyond ninety days although within the warranty period of one year. IV. The respondent Court of Appeals committed an error of law in its appreciation of paragraph 5 of the "Partial Stipulation of Facts". Reduced to its barest essentials, the issue to be resolved is whether or not, upon the undisputed facts of this case, petitioner is entitled to reimbursement from private respondent for paying Caltex on the surety bond, the alleged defects having been discovered after ninety (90) days but within one (1) year from the date the painting job was turned over to and pronounced satisfactory by one Mr. George Mears, the latter unquestionably acting on behalf and with authority of Caltex. The controversy between the parties is readily imputable to the different warranty periods provided for in Section 9 and 12 of the "PAINTING CONTRACT" on the one hand, and the last clause or sentence of the contract's Annex "A" on the other. It is also quite understandable why the parties herein had assumed an would insist on their respective postures - for private respondent, that the 90-day warranty period is controlling, and for petitioner, that the 1-year warranty period should prevail. After due consideration of the facts and circumstances of this case, We hold and so rule that the 90-day warranty provisions in the "PAINTING CONTRACT" should be applied and, therefore, We affirm the decision of the Court of Appeals. To begin with, the inclusion in a written contract for a piece of work such as the one in question, of a provision defining a warranty period against defects, is not uncommon. This kind of a stipulation is of particular importance to the contractor, for as a general rule, after the lapse of the period agreed upon therein, he may no longer be held accountable for whatever defects, deficiencies or imperfections that may be discovered in the work executed by him. A warranty provision against defects is generally found in the body of the main contract itself. It governs the relations between the parties subsequent to the consummation of the agreement, but calls for application only if and when defects are discovered in the work performed. Therefore, it is unusual to find

such a warranty provision merely in an annex to the main contract, more so, as in the case at bar, where the main agreement is a painting contract and its Annex "AP{ refers to painting specifications. Such specifications would necessarily consist of details on what type and color, and even brand, of paint to be used, how many coatings of paint to be applied, the cleaning of the surface to be painted before application of paint, the manner of application of the paint, i,e., by spraying or brushing, and such other particulars connected with the actual painting job. A warranty clause would normally not be included among the painting specifications. Since the 1-year warranty stipulation is found in Annex "A" of the contract in question, whereas the 90day warranty provision is in the main contract itself, then the cardinal rules in the interpretation of contracts laid down Art. 1374 of the New Civil Code and Rule 130, Sec. 9, Rules of Court, govern, and they provide as follows: Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. Section 9, Rule 130, Rules of Court, also provides that "In the construction of an instrument where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all." Further, jurisprudence laid down the rules that: ... (c)ontracts should be so construed as to harmonize and give effect to the different provisions thereof. (Reparations Commission vs. Northern Lines, Inc., 34 SCRA 203, 211) Where there is an apparent repugnancy between two clauses or provisions of a contract, it is the province and duty of the court to find harmony between them and to reconcile them if possible. In other words, and as a corollary of the rule that the entire contract, and each and all of its parts and provisions, must be given effect if that can consistently and reasonably be done, all clauses and provisions of a contract should, if possible, be so construed as to harmonize with one another." (Am. Jur. 2d, Vol. 17, p. 673). Examining more closely the seemingly inconsistent stipulations at bar, it will be noted that the 90-day warranty provisions in the main painting contract (Sections 9 and 12, supra) refer to the liability of the surety bond which private respondent, as the contractor, was required to furnish. The evident purpose of these provisions is to make the surety bond liable for defects found within the 90-day period defined. On the other hand, the 1-year warranty clause in the contract's Annex "A" not only fails to mention the surety bond, but explicitly makes private respondent directly and personally liable for the defects therein contemplated. Moreover, it is noted that the 90-day warranty provisions specifically refer to "defects arising out of defective materials or workmanship, while the 1-year warranty clause is limited to "defects in workmanship". The provisions in question may, therefore, be reasonably reconciled with each other and construed together to mean that the contracting parties, private respondent and Caltex, intended for the surety bond to be chargeable for "defects arising out of defective materials or workmanship" found 90 days from the date of completion and acceptance of the painting job, but for private respondent itself to be directly liable for "defects in workmanship" discovered beyond said period of 90 days and until nine more months thereafter, to complete the one-year period. On the basis of the foregoing interpretation of the contract at bar, Caltex could no longer enforce the surety bond for the alleged defects discovered in the painting job, said defects having been noted after the 90-day period specified in the agreement. It follows as a necessary consequence that petitioner should not have paid Caltex on the bond. Correspondingly, private respondent may not be required to reimburse petitioner under the indemnity agreement.

Parenthetically, had this been a suit between Caltex and private respondent, and the alleged defects in workmanship are duly proved, the latter might have been directly and personally made to correct such defects, on the basis of the last clause of the contract's Annex "A" . However, this being an action between petitioner and private respondent to enforce the indemnity agreement on the ground of payment made under the surety bond, the lapse of the 90-day period before the discovery of the alleged defects forecloses the right of petitioner to reimbursement. WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby AFFIRMED. Costs against petitioner. SO ORDERED. Barredo (Chairman), Abad Santos, De Castro and Escolin, JJ., concur. Aquino, J., concur in the result. Concepcion, Jr., is on leave.

G.R. No. 114714 April 21, 1995 THE CONFERENCE OF MARITIME MANNING AGENCIES, INC., ALSTER INTERNATIONAL SHIPPING, INC., CREAMSHIP MANAGEMENT INC., EL GRANDE SHIPPING CORP., EASTGATE (INT'L.) MARITIME AGENCIES, INC., FILIPINAS KALAYAAN OVERSEAS SHIPPING CORP., INTERWORLD SHIPPING CORP., JZEL COMPANY, INC. , LAINE SHIPPING AGENCY CORP., MARINERS SERVICES, CORP., MARITIME SERVICES & MGT., INC., MID OCEAN (PHILS.) MARINE AGENCY, OCEAN EAST AGENCY CORP., PASIA-PHIL. GROUP, INC., PHIL. MARINE CONSULTANT INC., SEASTAR MARINE SERVICES, INC., TSM SHIPPING (PHILS.) INC., TRANS-MED (MANILA) CORPORATION, petitioners, vs. PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, HON. NIEVES CONFESSOR AND THE HON. FELICISIMO JOSON, respondent.

DAVIDE, JR., J.: Petitioner Conference of Maritime Manning Agencies, Inc., an incorporated association of licensed Filipino manning agencies, and its co-petitioners, all licensed manning agencies which hire and recruit Filipino seamen for and in behalf of their respective foreign shipowner-principals, urge us to annul Resolution No. 01, series of 1994, of the Governing Board" of the Philippine Overseas Employment Administration (POEA) and POEA Memorandum Circular No. 05, series of 1994, on the grounds that: (1) The POEA does not have the power and authority to fix and promulgate rates affecting death and workmen's compensation of Filipino seamen working in oceangoing vessels; only Congress can. (2) Even granting that the POEA has that power, it, nevertheless, violated the standards for its exercise. (3) The resolution and the memorandum circular are unconstitutional because they violate the equal protection and non-impairment of obligation of contracts clauses of the Constitution. (4) The resolution and the memorandum circular are not, valid acts of the Governing Board because the

private sector representative mandated by law has not been appointed by the President since the creation of the POEA. Governing Board Resolution No. 01, issued on 14 January 1994, 1 read as follows: GOVERNING RESOLUTION NO. 01 SERIES OF 1994. WHEREAS, it is the policy of the Administration to afford protection to Filipino overseas contract workers, including seafarers and their families, promote their interest and safeguard their welfare; WHEREAS, the Administration under its mandate has the power and function to secure the best terms and conditions of employment of Filipino contract workers land ensure compliance therewith; WHEREAS, the minimum compensation and other benefits in cases of death, disability and loss or damage to crew's effects provided under the POEA Standard Employment Contract for seafarers which was revised in 1989 are now becoming very much lesser than the prevailing international standards and those given to unionized seafarers as provided by their collective bargaining agreements; WHEREAS, the Tripartite Technical Working Group convened for the purpose of deliberating the compensation and benefits provided under the POEA Standard Employment Contract for seafarers has recommended for the upgrading of the said compensation and benefits; WHEREAS, for the interest of Filipino seafarers and their families, there is an urgent need to improve and realign the minimum compensation and other benefits provided under the POEA Standard Employment Contract for seafarers in order to keep them at par with prevailing international standards and those provided under collective bargaining agreements. NOW, THEREFORE, the POEA Governing Board, in a meeting duly convened, hereby resolves to amend and increase the compensation and other benefits as specified under Part II, Section. C, paragraph 1 and Section L, paragraphs 1 and 2 of the POEA Standard Employment Contract for Seafarers which shall henceforth read as follows:

I. Section C. COMPENSATION AND BENEFITS 1. In case of death of the seaman during the term of his Contract, the employer shall pay his beneficiaries the Philippine Currency equivalent to the amount of US$50,000 and an additional amount of US$7,000 to each child under the age of twenty-one (21) but not exceeding four children at the exchange rate prevailing during the time of payment. Where the death is caused by warlike activity while sailing within a declared warzone or war risk area, the compensation payable shall be doubled. The employer shall undertake appropriate warzone insurance coverage for this purpose. xxx xxx xxx III. The maximum rate provided under Appendix I-A shall likewise be adjusted to US$50,000 regardless of rank and position of the seafarer. IV. Upon effectivity, the new compensation and other benefits herein provided shall apply to any Filipino seafarer on board any vessel, provided, that the cause of action occurs after this Resolation takes effect. V. This Resolution shall take effect after sixty (60) days from publication in a newspaper of general circulation. Memorandum Circular No. 05, issued on 19 January 1994 2 by POEA Administrator Felicisimo Joson and addressed to all Filipino seafarers, manning agencies, shipownersl managers and principals hiring Filipino seafarers, informed them .that Governing Board Resolution No. 01 adjusted the rates of compensation and other benefits in Part II, Section C. paragraph 1; Section L, paragraphs 1 and 2; and Appendix 1-A of the POEA Standard Employment Contracts for Seafarers, which adjustments took effect on 20 March 1994, and that: VI. Upon effectivity, the new compensation and other benefits shall apply to any Filipino seafarer already onboard any vessel provided, that the case of action

occurs after the said compensation and benefits take effect; The Tripartite Technical Working Group mentioned in the Resolution, which convened on 7 January 1994, was composed of the following:
1. DA Crescencio M. Siddayao, POEA 2. Dir. Angeles T. Wong, POEA 3. Dir. Jaime P. Jimenez; POEA 4. Dir. Lorna O. Fajardo, POEA 5. OIC Salome Mendoza, POEA 6. Capt. Gregorio Oca, AMOSUP 7. Atty, Romeo Occena, PSU-ALUI-TUCP 8. Mr. Vicente Aldanese, FAME 9. Capt. Emmanuel L. Regio, PAMSS 10. Atty. Rexlito Bermudez, COMMA 11. Atty. Alexandro W. Cruje, POEA 12 Hr. Jay Rosauro Baluyot, POEA 13. Ms. Magdalena Sarcos, POEA 3 14. Atty. Augusto Arreza, FSA

In their, comment. the public respondents contend that the petition is without merit and should de dismissed because (a) the issuance of the challenged resolution and memorandum circular was a valid exercise of the POEA's rulemaking authority or power of subordinate legislation which this Court had sustained in Eastern Shipping Lines, Inc. vs. POEA; 4 (b) the "non-appointment" of the third member of the Governing Board bees not necessarily invalidate the acts of the Board, for it has been functioning "under the advisement of t the Tripartite Technical Working Group which group is incidentally constituted by the private sector, i.e., seafarer employers and/or associations of manning agencies including herein petitioner," for which reason "the third member complement . . . has been substantially represented by said technical working group"; 5 and(d) the consensus on the increase in the rates of compensation and other benefits was arrived at after appropriate consultations with the shipowners and the private sector; the Board therefore soundly exercised its discretion. In view of the importance of the issues raised, we gave due course to the petition and required the parties to submit their respective memoranda. The petitioners while the public respondents opted to adopt their comment as their memorandum. The constitutional challenge of the rule-making power of the POEA-based on impermissible delegation of legislative power had been, as correctly contented by the public respondents, brushed aside by this Court inEastern Shipping Lines, Inc. vs. POEA. 6 The petitioner in that , case assailed the constitutionality of Memorandum Circular No. 02 of the POEA (effective February 1984) which

prescribed a standard contract to be adopted by both foreign and domestic shipping companies in the hiring of Filipino seamen for overseas. The challenged resolution and memorandum overseas employment circular here merely further amended Memorandum Circular No. 02, which was earlier amended in 1989 per Memorandum Circular No. 41, 7 series of 1989. In sustaining the rule-making authority of the POEA and in holding against the claimed infirmity of delegation of legislative power, Eastern first considered the history of the charter of the POEA and then discussed separately the above constitutional issues thus: [T]he petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the principle of non-delegation of legislative power. It contends that no authority had been given the POEA to promulgate the said regulation; and even with such authorization, the regulation represents an exercise of legislative discretion which, under the principle, is not subject to delegation. The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No. 797, reading as follows: . . . The governing Board of the Administration (POEA), as hereunder provided, shall promulgate the necessary rules and regulations to govern the exercise of the adjudicatory functions of the Administration (POEA). Similar authorization had been granted the National Seamen Board, which, as earlier observed, had itself prescribed a standard shipping contract substantially the same as the format adopted by the POEA. The second challenge is more serious as it is true that legislative discretion as to the substantive contents of the law cannot be delegated. What can be delegated is the discretion to determine how the law may been forced, not what the law shall be. The ascertainment of the latter subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the legislature to the delegate. . . . ... The principle, of non-delegation of powers is applicable to all the three major powers of the Government but is especially important in

the case of the legislative power because of the many instances when delegation is permitted. The occasions are rare when executive or judicial powers have to be delegated by the authorities to which they legally pertain. In the case of legislative power, however, such occasions have become more and more frequent, if not necessary. This had led to the observation that the delegation of legislative power has become the rule and its non-delegation the exception. The reason is the increasing complexity of the task of government and the growing inability of the legislature to cope directly with the myriad problems demanding its attention. The growth of society has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected reasonably to comprehend. Specialization even in legislation has become necessary. To many of the problems attendant upon present-day undertakings, the legislature may not have the competence to provide the required direct and efficacious not to say, specific solutions. These solutions may, however, be expected from its delegates, who are supposed to be experts in the particular fields assigned to them. The reasons given above for the delegation of legislative powers in general are particularly applicable to administrative bodies. With the proliferation of specialized activities and their attendant peculiar problems, the national legislature has found it more and more necessary to entrust to administrative agencies the authority to issue rules to carry out the general provisions of the statute. This is called the "power of subordinate legislation." With this power, administrative bodies may implement the broad policies laid down in a statute by "filling in" the details which the Congress may not have the opportunity or competence to provide. This is effected by their promulgation of what are known as supplementary regulations, such as the implementing rules issued by the Department of Labor on the new Labor Code. These regulations have the force and effect of law. ...
Memorandum Circular No. 2 is one such administrative regulation. The podel contract prescribed thereby has been applied in a significant number of the cases without challenge by the employer. The power of the POEA, (and before it the National Seamen Board) in requiring the model contract is not unlimited as there is a sufficient standard

guiding the delegate in the exercise of the said authority. That standard is discoverable in the executive order itself which, in creating the Philippine Overseas Employment Administration, mandated it to protect the rights of overseas Filipino workers to "fair and equitable employment practices.8

The POEA mandate referred to as providing the reasonable standard for the exercise of the POEA's rule-making authority is found in the statement of powers and functions of the said office in paragraph (a), Section 4 of E.O. 797, to wit: (a) The Administration shall formulate and undertake in coordination where necessary with the appropriate entities concerned, a systematic program for promoting and monitoring the overseas employment of Filipino workers taking into consideration domestic manpower requirements, and to protect their rights to fair and equitable employment practices. It shall have original and exclusive jurisdiction over all cases, including money claims, involving employer-employee relations arising out of or by virtue of any law or contract involving Filipino workers for overseas employment, including seamen. This adjudicatory function shall be, undertaken in appropriate circumstances in consultation with the Construction Industry Authority of the Philippines. The governing Board of the Administration, as hereinunder provided, shall promulgate the necessary rules and regulations to govern the exercise of the adjudicatory functions of the Administration. It is, of course, well established in our jurisdiction that, while the making of laws is a non-delegable power that pertains exclusively to Congress, nevertheless, the latter may constitutionally delegate the authority to promulgate rules and regulations to implement a given legislation and effectuate its policies, for the reason that the legislature finds it impracticable, if not impossible, to anticipate situations that may be met in carrying the law into effect. All that is required is that the regulation should be germane to the objects and purposes of the law; that the regulation be not in contradiction to but in conformity with the standards prescribed by the law. 9 This is the principle of subordinate legislation which was discussed by this Court in People vs. Rosenthal 10 and inPangasinan Transportation vs. Public Service Commission. 11 Thus in Calalang vs. Williams, 12 this Court stated: In the case of People vs. Rosenthal and Osmea, G.R. Nos. 46076 and 46077, promulgated June 12, 1939, and in Pangasinan Transportation vs. The Public Service Commission, G.R. No. 47065, promulgated June 26, 1940, this Court had occasion to observe that the principle of separation of powers 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. Accordingly, with the growing complexity of modern life, the multiplication of the subjects of governmental regulations, and the increased difficulty of administering the laws, the rigidity of the theory of separation of governmental powers has, to a large extent, been relaxed by permitting the delegation of greater powers by the legislative and vesting a larger amount of discretion in administrative and executive officials, not only in the execution of the laws, but also in the promulgation of certain rules and regulations calculated to promote public interest. That the challenged resolution and memorandum circular, which merely further amended the previous Memorandum Circular No. 02, strictly conform to the sufficient and valid standard of "fair and equitable employment practices" prescribed in E.O. No. 797 can no longer be disputed. 13 There is, as well, no merit to the claim that the assailed resolution and memorandum circular violate the equal protection and contract clauses of the Constitution. To support its contention of in equality, the petitioners claim discrimination against foreign shipowners and principals employing Filipino seamen and in favor of foreign employers employing overseas Filipinos who are not seamen. It is an established principle of constitutional law that the guaranty of equal protection of the laws is not violated by legislation based on reasonable classification. And for the classification to be reasonable, it (1) must rest on substantial distinctions; (2) must be germane to the purpose of the law; (3) must not be limited to existing conditions only; and (4) must apply equally to all members of the same class. 14 There can be no dispute about the dissimilarities between land-based and sea-based Filipino overseas workers in terms of, among other things, work environment, safety, dangers and risks to life and limb, and accessibility to social, civic, and spiritual activities. Nor is there-merit; in the claim that the resolution and memorandum circular violate the contract clause of the Bill of Rights. The executive order creating the POEA was enacted to further implement the social justice provisions of the 1973. Constitution, which have been greatly enhanced and expanded in the 1987 Constitution by placing them under a separate Article. 15 The Article on Social Justice was aptly described as the "heart of the new Charter" by the President of the 1986 Constitution Commission, retired Justice-Cecilia Muoz-Palma. 16 Social justice is identified with the broad scope of the police power of the state and requires the extensive use of such

power. 17 In Calalang vs. Williams, 18 this. Court, speaking through Justice Jose P. Laurel, expounded on social justice thus: Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the Humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the adoption by the Government of measures calculated to insure economic stability of all the competent elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures legally justifiable, or extraconstitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex. Social justice, therefore, must be founded on the recognition of the necessity of interdependence among divers and diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to the greatest number." The constitutional prohibition against impairing contractual obligations is not absolute and is not to be read with literal exactness . It is restricted to contracts with respect to property or some object of value and which confer rights that maybe asserted in a court of justice; it has no application to statutes relating to public subjects within the domain of the general legislative powers of the State and involving the public rights and public welfare of the entire community affected by it. It does not prevent a proper exercise by the State of its police power by enacting regulations reasonably necessary to secure the health, safety, morals; comfort, or general welfare of the community, even though contracts may thereby be affected, for such matters cannot be placed by contract beyond the power of the State to regulate and control them. 19 Verily, the freedom to contract is not absolute; all contracts and all rights are subject to the police power of the State and not only may regulations which affect them be established by the State, but all such regulations must be subject to change from time to time, as the general, well-being of the community may require, or as the circumstances may change, or as experience may demonstrate

the necessity. 20 And under the Civil Code, contracts of labor are explicitly subject to the police power of the State because they are not ordinary contracts but are impresses with public interest. Article 1700 thereof expressly provides: Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts lust yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects. The challenged resolution and memorandum circular being valid implementations of E.O. No. 797, which was enacted under the police power of the State, they cannot be struck down on the ground that they violate the contract clause. To hold otherwise is to alter long-established constitutional doctrine and to subordinate the police power to the contract clause. The last issue concerns the contention that without the appointment by the President of the third member of the governing board, the POEA cannot legally function and exercise its powers. This contention merits scant consideration. Section 4 of E.O. No. 797 indubitably declares the immediate creation of the POEA. Thus upon the effectivity of E.O. No. 797, the POEA attained its juridical personality. The appointment of the third member "who shall be well versed, in the field of overseas employment," provided for in paragraph (b) of the said Section, was not meant to be a sine gua non to the birth of the POEA, much less to the validity of the acts of the Board. As a matter of fact, in the same paragraph the President is given the "discretion [to] designate a Deputy Administrator as the third member of the Board." WHEREFORE, for lack of merit, the instant petition is DISMISSED with costs against the petitioners. SO ORDERED. Padilla, Bellosillo, Quiason and Kapunan, JJ., concur.

G.R. No. L-53492 December 29, 1986 PERNITO ARRASTRE SERVICES, INC., APOLONIO BACALLA, doing business under the style "Bacalla Arrastre Services," ARISTON AGUILAR, doing business under the style "Aguilar Arrastre Services," ROMEO CABRAS, doing business under the style "Cabras Arrastre Services;" GUERRERO DAJAO, doing business under the style "Dajao Arrastre Services," NI;O TAMARRA, doing business under the style "Tamarra Arrastre Services," JESUS GARCIA, doing business under the style "Garcia Arrastre Services," FRANCISCO AGUIRRE, doing business under the style "Sto. Rosario Arrastre Services," TEOFILO ESTOCE, doing business under the style "E & C Arrastre Services," RAMON P. TECSON, doing business under the style "Tecson Arrastre Services," MARCELO A. CANSANCIO, doing business under the style "Tabunec Arrastre Service," SIMEON M. PACA, SR., doing business under the style "A. O. Paca Arrastre Service," ANDRES ROMARIZ, doing business under the style "F. Figueroa Arrastre Service," NILO SERVILA, doing business under the style "Servila Arrastre Services," RHODA F. BANCOY, doing business under the style "Tan Arrastre Services," FILOMENO PEPITO, doing business under the style "F. Pepito & Villacruses Arrastre Services," VICTORINO SY, doing business under the style "E. V. Sy Arrastre Services," and ROMEO GADIANO doing business under the style "Gadiano Arrastre Service,"petitioners, vs. HON. RAFAEL T. MENDOZA, as Presiding Judge of the Court of First Instance of Cebu, Branch II, PHILIPPINE PORTS AUTHORITY, and the UNITED SOUTH DOCKHANDLERS, INC., respondents. G.R. No. L-54265 December 29, 1986 THE EASTERN LEYTE ARRASTRE SERVICE, represented by its Manager ANACORITO AURELIA, petitioner, vs. HON. JUDGE AUXENCIO C. DACUYCUY, Presiding Judge of the Court of First Instance of Leyte, Branch IV; THE PHILIPPINE PORT AUTHORITY (TACLOBAN PORT SERVICE), represented by its Port Manager BENIGNO V. MAGPALE, JR.; and THE INTERNATIONAL COPRA EXPORT CORPORATION (TACLOBAN BR.), represented by its Branch Manager CELEDONIO MUTIA, respondents. G.R. NO. L-54394 December 29, 1986 FROILAN BASIO, BERNARDO SIPACO, BONIFACIO MARTINEZ, GLICERIO VALLE, FORTUNATO BASIO, GENARO ROSALES, REMARICO MENDIOLA,

CAMILO COBILLA, ALIPIO REPOLLO, MANUEL SOLAJES, ANTONIO ROSALES, VICENTE BASIO, REYNALDO BETUIN, HERMINIO JACA, GERARDO DEMESA, CARLITO LACBAYO, GREGORIO MARTIN and REGINO BALLAIS, petitioners, vs. HONORABLE JOSE P. ARRO, Presiding Judge of the Court of First Instance of Leyte, Branch I; and BENIGNO MAGPALE, JR., in his official capacity as both Manager of the Philippine Ports Authority, Tacloban Port, and Manager, Philippine Ports Authority Tacloban Arrastre Port Service, Inc.,respondents. No. L-54565 December 29, 1989 LEYTE INTEGRATED PORT SERVICES, INC., petitioner, vs. PHILIPPINE PORTS AUTHORITY, Metro Manila; PHILIPPINE PORTS AUTHORITY, PMU Tacloban; and PHILIPPINE PORTS AUTHORITY, Tacloban Arrastre Ports Services, respondents.

GUTIERREZ, JR., J.: These petitions which are resolved in a consolidated decision seek to permanently restrain the Philippine Ports Authority from taking over the arrastre and stevedoring operations in the port of Tacloban, Leyte. The petitioners invoke the constitutional right to due process of law and to non-impairment of contract. The background of these cases is as follows: In November, 1972, an Ad Hoc Committee on Waterfront Services was created by the Government to study the problems of arrastre and stevedoring operations in various ports in the Philippines. Among the problems pinpointed were the proliferation of the oppressive "cabo system" and the increase in the incidence of violence and thefts in the ports. There was also recognized a need to streamline port operations, ensure the smooth flow of water borne commerce in international and domestic trade, and promote regional development through improved port facilities. On April 23, 1973, the Committee recommended the integration of arrastre and stevedoring operations in each port so that ultimately only one contractor would be authorized to service that port. On May 8, 1975, the Bureau of Customs

issued Memorandum Order No. 28-75, providing for the merger of all existing cargo-handling contractors in each port. To effect the gradual integration of the several arrastre and stevedoring labor contractors then operating in the Port of Tacloban, the Bureau of Customs decided to require the merger of the thirty-six (36) existing labor contractors into four corporations, and then to just one. Accordingly, four organizations were formed, namely: (1) Tacloban Waterfront Labor and Arrastre Service Cooperative, Inc., or TWALSCI which absorbed herein petitioner Eastern Leyte Arrastre Service; (2) San Juanico Pumpboats and Motor Launches Stevedoring and Delivery Service, Inc., (3) Sealand, Inc., and (4) Tacloban Port Services, Inc. On December 23, 1975, Presidential Decree No. 857 took effect as a result of which the powers, duties, and jurisdiction of the Bureau of Customs with regard to arrastre and stevedoring operations were transferred to and vested in the respondent Philippine Ports Authority (PPA). Pursuant to said decree, PPA was authorized among others, to "regulate the rates or charges for port services or port related services so that, taking one year with another, such rates or charges furnish adequate working capital and produce an adequate return on the assets of the Authority" (PPA) [Sec. 20 (b) ] and "to levy dues, rates, or charges for the use of the premises, works, appliances, facilities, or for services provided by or belonging to the authority or any other organization concerned with port operations." [Sec. 6(b) (ix)]. Pursuant to said decree, respondent PPA imposed a ten percent (10%) charge on the monthly gross earnings of the operators of arrastre and stevedoring services. Through its memorandum Order No. 21, series of 1977, PPA also adopted as its own, the Bureau of Customs' policy of integrating the operation of arrastre and stevedoring services in each port. This policy was applied to the port of Tacloban where the four arrastre/stevedoring operators, mentioned earlier, agreed to merge and form one of the petitioners herein, the Leyte Integrated Port Services, Inc. (LIPSI). On January 31, 1978, PPA issued a temporary permit to petitioner LIPSI, subject to several conditions, one of which 7. That this temporary permit is non-transferrable and shall remain valid until a special permit shall be issued by PPA Manila, provided, however, that the same may be revoked for violation of any of the conditions herein set or justifiable cause(s) at the discretion of this Authority.

Meanwhile on February 27, 1978, petitioner Pernito Arrastre Services, Inc. and other arrastre operators filed with the then Court of First Instance of Cebu an action for declaratory relief and mandamus against the PPA, assailing the validity of the integration policy which would, in effect, authorize only one arrastre operator in each port in the Philippines and the authority of PPA to collect ten percent (10%) of the gross arrastre and stevedoring charges paid to operators. On March 31, 1978, the trial court issued a writ of injunction, prohibiting the PPPA, pendente lite, from enforcing its policy of integration in the Cebu City port and directing it to allow the petitioners to operate individually and independently as arrastre and stevedoring contractors. However, with respect to the collection of the ten percent (10%) charge by PPA, the court ruled that it was going to presume its reasonableness in the meantime since PPA was merely following the rate fixed by the Bureau of Customs. Not satisfied with the court's order, respondent PPA filed a petition for certiorari before this Court as a result of which a temporary restraining order was issued enjoining the trial court from enforcing its order. We, however, subsequently allowed the trial court to proceed with the case. consequently, the petitioners filed a supplemental application for preliminary injunction seeking to stop respondent PPA from collecting the aforestated ten percent (10%) charge. The trial court denied the petitioners' supplemental application on the ground that the reason relied upon does not appear to be indubitable. Hence, petitioners filed the present petition for certiorari, G.R. No. 53492, with this Court. Only July 22, 1980, this Court issued a temporary restraining order enjoining the PPA from collecting from petitioners the ten percent (10%) of their gross income from arrastre operations. On June 14, 1983, the Nasipit Integrated Arrastre & Stevedoring, Inc. filed a motion for intervention asking that in view of the restraining order issued by this Court, it should not be required to pay ten percent (10%) of its gross earnings to PPA. In the meantime, according to respondent PPA, in the course of the operation of arrastre services by the petitioner LIPSI, it noted a number of violations of the temporary permit. The violations consisted of inefficiency in providing services due to failure to acquire the needed cargo-handling equipment; inability to render night work; permitting illegal operations by unlicenses individual labor contractors or cabos whom petitioner was supposed to have absorbed by the process of merger; employment of child labor; and non-remittance of the government share of arrastre charges.

As a result, the respondent gave the petitioner several written and verbal warnings to carry out the needed reforms in its operations. Meanwhile, on April 14, 1978, Jose M. Asturias, the Executive Vice-President and General Manager of petitioner wrote respondent PPA admitting petitioner's failure to comply with the conditions of its temporary permit. A portion of said letter reads: While there has been an integration on paper, the conditions existing at the Tacloban pier before the supposed integration remain the same. Labor contractors still cling to their over-powering position as lords of the lowly pier workers, getting a lion's share of the fees they collect and paying their workers measly sums which provide the laborers a sub-human level of existence at most. Moreover, the amounts they turn over to the supposedly integrated corporation are so miniscule and barely enough to pass the SSS, and ECC, the BIR and other governmental creditors, including the PPA which gets 10% of the gross receipts. While they verbally agree to integrate, they decline and refuse to relinquish control of their respective contracts with the pertinent shipping companies. On April 26, 1979, respondent PPA issued Special Order No. 114-79 creating the Philippine Ports Authority-Tacloban Arrastre Ports Services (PPA-TAPS) within its worn Tacloban port unit and ordering a take-over by PPA-TAPS of the entire arrastre and stevedoring services in the Port of Tacloban, effective not later than June 1, 1979, petitioner LIPSI, as well all port users were duly informed of the take-over by PPA-TAPS. On June 1, 1979, PPA-TAPS tooks over the actual management and operations of arrastre and stevedoring services in the port of Tacloban. For this purpose, PPA-TAPS utilized the same dock labor force that existed at the time of the cancellation of the permit of petitioner LIPSI. According to respondent PPA, after such take-over, the dockworkers where placed on regular payrolls; their social security premiums were promptly paid and all illegal exactions from their pay were stopped; they were issued free uniforms and hard hats for safety and protection; and they organized a genuine labor organization, the Tacloban Port Service Labor Union (TAPSLU) for the protection of their rights. As result of the take-over, respondent PPA sent a notice to respondent International Copra Export Corporation (INTER-CO), a corporation with a stevedoring contract with petitioner Eastern Leyte Arrastre Service (Eastern Leyte) reiterating the fact that effective June 1, 1979, PPA has taken over the cargo-handling operations in the port of Tacloban and therefore, all transactions and payments relevant to said cargo-handling operations should be coursed

through the management of the PPA at Tacloban. Consequently, INTERCO, in turn, sent a formal letter to petitioner Eastern Leyte demanding a refund of the payments it made for the services rendered by said petitioner on June 2 and 16, 1979. On July 5, 1979, petitioner Eastern Leyte filed an action with the then Court of First Instance of Leyte for injunction with preliminary injunction, prohibition and damages seeking to restrain respondent INTERCO from making any payment to respondent PPA-TAPS and to prevent the latter from taking over the operations of petitioner, alleging that the same was illegal, against public policy and an impairment of the contract executed by and between petitioner and INTERCO. On August 16, 1979, the respondent judge issued a writ or preliminary injunction against respondent PPA. A motion for reconsideration was filed by the latter alleging amount others, that under Presidential Decree No. 857, it has the authority to take over the operation of arrestre and stevedoring services to the exclusion of all private contractors, including the petitioner. On January 28, 1980, the respondent judge granted respondent PPA's motion, stating that since there is no showing that P.D. No. 857 is unconstitutional and in view of the well known presumption of validity that every statute has in its favor, there is no reason for not yielding to the motion of PPA to dissolve the writ of preliminary injunction. Petitioner Eastern Leyte filed a motion for reconsideration but the same was denied. Hence, it filed this petition in G.R. No. 54265. On July 17, 1980, we issued a temporary restraining order enjoining the trial court from further proceeding with the trial of the case and the respondent PPA from taking over the arrastre operations of petitioner in the port of Tacloban. On February 18, 1980, a similar petition was filed by Froilan Basio and other labor contractors with the Court of First Instance of Leyte, questioning the PPATAPS' take-over of the port of Tacloban and alleging that the same constituted an impairment of the contract between petitioners and the owners of motor launches and between petitioners and respondent PPA. As evidence of the latter allegation, the petitioners attached to their petition a copy of the "Memorandum" of the Leyte-Samar Labor Union and Benigno Magpale, Inc., the manager of the PPA-PMU of Tacloban whereby the latter agreed to remit ten percent (10%) of the gross income derived from the port users serviced by the Leyte-Samar Labor Union for the period July 1 to 31, 1979 to the petitioners as labor contractors.

Initially, the trial court issued a temporary restraining order. However, instead of deciding the petition on the merits, it called the parties to a series of conferences to find means and ways whereby the petitioners as labor contractors and the workers under them could be absorbed under the new set-up. The respondent PPA submitted its "Compliance," binding itself to absorb the aforementioned labor contractors and workers. It assured them that whoever would be the winning bidder of the arrastre service, he must utilize the services of the labor force who are all members of the waterfront union. In view of this "Compliance" submitted by PPA, the trial court dismissed the petition and lifted the restraining order. Petitioners filed a motion for reconsideration alleging that the decision of the trial court had no evidence to support itself and that trial should have been conducted because there were allegations raised by both sides which needed conducted because there were allegations raised by both sides which needed to be clarified and settled. They also sought the issuance of a restraining order against the PPA. The motion, however, was denied by said court. Thus, instead of waiting for the trial court on the ground that the same violated the petitioners' right to due process of law. On August 5, 1980, LIPSI filed a petition for certiorari with preliminary mandatory injunction, G.R. No. 54565, questioning the validity and constitutionality of portions of P.D. 505 and P.D. 857 (Sec. 6(a) (v) on the ground that said provisions from which the PPA derives its authority to take-over the port of Leyte violate the petitioner's right to due process of the port of Leyte violate the petitioners right to due process of law. In the alternative, it asked that we define and clarify the extent of PPA's authority to take-over the port services of all ports in the country as well as to grant the same to an exclusive contractor, firm, or corporation. On August 26, 1980, we issued a resolution consolidating the four petitions. On September 30, 1980, TAPSLU filed a motion to intervene in the case of LIPSI v. PPA, et al., alleging that it has a legal interest in the matters in issue as it constitutes the entire labor force of the stevedoring and arrastre services turned over by this Court to petitioner LIPSI. The main thrust of the issues raised in these consolidated petitions is whether or not the respondent PPA's take-over through PPA-TAPS of arrastre operations in the port of Tacloban, Leyte is a valid exercise of police power and does not violate the constitutional right of the petitioners to non-impairment of contracts.

Petitioner Eastern Leyte contends that PPA's take over constitutes an impairment of the contract executed by and between itself and respondent INTERCO, which cannot be justified because a valid impairment of contract is only be justified because a valid impairment of contract is only applicable to franchises issued by the government to operators of public utilities which involved public interest, public welfare, public health, and public safety. Petitioners Froilan Basio, et al., while assailing the procedural aspect of the proceedings in the trial court, also content the PPA's take over constitutes an impairment o f contract and a deprivation of property without due process of law. Petitioner LIPSI goes further and challenges the constitutionality of the repealed portion of P.D. 505 1 and Section 6(a) (v) of P.D. 857 2 as being violative not only of the due process and non-impairment clauses of the Constitution but also of the right to free enterprise by creating the dangerous blanket of a monopoly in restraint of trade, which creation is subject to the respondent PP's whims and caprices. Petitioner Pernito Arrastre questions the validity of the ten percent (10%) charge imposed by PPA. In the case of Anglo-Fil Trading Corporation v. Lazaro (124 SCRA 494, 512, 513 and 519), we have already underscored the fact that the arrastre operations in the various ports in the Philippines are affected with public interest. We ruled: The streamlining of the stevedoring activities in the various ports of the Philippines was undertaken by PPA to implement LOI No. 1005-A. The public interest, public welfare, and public policy sought to be subserved by said LOI are clearly set forth in its whereas clauses ... xxx xxx xxx Clearly, there is reasonable relation between the undeniable existence of an undesirable situation and the statutory attempt to avoid it. "Public welfare, then, lies at the bottom of the enactment of said law, and the state in order to promote the general welfare may interfere with personal liberty, with property, and with business and occupations." (See Alalayan v. National Power Corporation, 24 SCRA 172; and Ermita-Malate Hotel and Motel Owners Association v. City Mayor, 20 SCRA 849). These considerations were considered by the respondent judge when he issued his questioned order dated September 1, 1980... xxx xxx xxx

The Manila South Harbor is public property owned by the State. The operations of the premiere port of the country, including stavedoring work,

are affected iwth public interest. Stevedoring services are subject to regulation and control for the public good and in the interest of general welfare. Undoubtedly, therefore, the State in the exercise of its police power through its agency, the PPA, has the power to revoke the temporary permits of petitioners, assuming the existence of valid temporary permits, and take over the operations of the port of Tacloban whenever the need to promote the public interest and welfare both if the stevedoring industry and the workers therein justifies such take over. This Court has already ruled that the statute which gives PPA the authority to implement the take over cannot be assailed on the constitutional grounds raised by the petitioners may have acquired on the basis of the temporary permits earlier given them must yield to the State's valid exercised of police power. As we have ruled in Bautista v. Juinio (127 SCRA 329, 338): 4. In the interplay between such a fundamental right and police power, especially so where the assailed governmental action deals with the use of one's property, the latter is accorded much leeway. That is settled law. what is more, it is good law. Due process, therefore, cannot validly be invoked. As stressed in the cited Ermita-Malate Hotel decision (127 Phil. 306, 315), "To hold otherwise would be to unduly restrict and narrow the scope of police power which has been properly characterized as the most essential, insistent and the least limitable of powers, extending, as its goes "to all the great public needs ... Neither can petitioners argue that their right to non-impairment of contract had been violated. In the same case ofAnglo-Fil Trading Corporation v. Lazaro (supra, p. 519), we held that the subvservience of the contract clause to the police power enacting public regulations intended for the general welfare of the community has been settled by this Court. Furthermore, the records will bear out the fact that only petitioner LIPSI has a temporary permit issued by PPA. The rest of the petitioners where either merely allowed or tolerated to operate in the port of Tacloban. However, even on the assumption that tall of them were able to secure temporary permits from PPA, still, this does not vest any property right on them and hence, petitioners cannot allege a violation of their right to non-deprivation of property without due process of law. In the case of Anglo-Fil Trading Corporation v. Lazaro, (supra, pp. 520-521), we ruled:

The contention of petitioners Anglo-Fil, et al., that due process was violated resulting to a confiscatory effect on private property is likewise without merit. In the first place, the petitioners were operating merely on "hold-over" permits ... Clearly, all hold-over permits were by nature temporary and subject to subsequent policy guidelines as may be implemented by PPA. Such should have served as sufficient notice to petitioners that, at any time, their authorities may be terminated. Whether or not the petitioner would be issued a PTO depended on the sound discretion of PPA and on the policies, rules and regulations that the latter may implement in accordance with the statutory grant of power. Petitioners. therefore, cannot be said to have been deprived of property without due process of law because, it this respect, what they should have taken cognizance of the fact that since they have no vested right to operate in the South Harbor, their permits can be withdrawn anytime the public welfare deems it best to do so. As to the contention of petitioner Pernito Arrastre that ten percent (10%) is execessive for regulatory purposes and that the power to regulate does not include the power to impose fees for revenue purposes, we likewise find the same unmeritorious. It is within the sound discretion of the PPA to impose a reasonable charge or rate on arrastre and stevedoring operators which it deems to above most appropriate and advantageous to the government under the circumstances In the case of Anglo-Fil trading Corporation v. Lazaro, supra (pp. 522-523), we held that the award of PPA to Ocean Terminal Services, Inc. (OTSI) of the stevedoring contract is not violate of the Anti-Graft Law since said contract, for one, embodied sufficient consideration which is the payment by OTSI to the government of ten percent (10%) of its gross income. We ruled: Neither is the management contract violative of the Anti-Graft Law. It is a contract executed in pursuance to law and the instructions of the President to carry out government objectives to promote public interest. The act did not cause "undue injury" to the petitioners who as explained earlier had no vested property rights entitled to protection. There is no undue injury to the government nor any unwarranted benefit to OTSI considering that the contract carried sufficient consideration for PPA which is the payment by OTSI of ten percent (10%) of its gross income, something which petitioner

OTSI is loathe to pay. the rationalization and effective utilization of port facilities is to the advantage of the Government. Furthermore, the discretion in choosing the stevedoring contractor for the South Harbor, Port of Manila, belongs to the PPA. As long as standards are set in determining the contractor and such standards are reasonable and related to the purpose for which they are used, the courts should not inquire into the wisdom of PPA's choice ... We have found the ten percent (10%) share of the government in the earnings from stevedoring and arrastre service as reasonable consideration for the use of government premises, works, facilities, and services, not to mention the supervision inherent in the upgrading and improvement of port operations, of which said services are an integral part. Finally, in the matter of whether the take over by the PPA violates the prohibition against monopolies in restraint of trade, we hold that in industries affected with public interest, a regulated monopoly is not necessarily proscribed, if such is deemed necessary in order to protect and promote public interest. In the case of Philippine Ports Authority v. Mendoza, (138 SCRA 496, 509-510), we ruled: Private monopolies are not necessarily prohibited. The use of the word "regulate " in the constitution indicates that some monopolies, properly regulated, are allowed ... " Competition can best regulate a free economy. Like all basis beliefs, however, that principle must accommodate hare practical experience. There are areas where for special reasons the force of competition, when left wholly free, might operate too destructively to safeguard the public interest. Public utilities are an instance of that consideration." (Oleck, Modern Corporation Law, Vol. IV, p. 197). By their very nature, certain public services or public utilities such as those which supply water, electricity, transportation, telegraph, etc. must be given exclusive franchises if public interest is to be served. Such exclusive franchises are not violative of the law against monopolies (Anglo-Fil Trading Corporation v. Lazaro, supra).
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In there case at bar, the area affected is maritime transportation in the port of Cebu/ The operations there, particularly arrastre and stevedoring, affect not only the City of Cebu, the principal port in the South, but also the economy of the whole country as well. Any prolonged disjunction of the services being rendered there will prejudice not only inter-island and international trade and commerce. Operations in said port are therefore imbvued with public interest and are subject to regulation and control for the public good and welfare. PPA's policy of integration through compulsory merger may not even be in this instance considered as

promoting a monopoly because the fact of the matter is that while the sole operator permitted by PPA to engage in the arrastre and stevedoring operations in the port of Cebu is only USDI, actually USDI is comprised of the eleven (11) port services contractors that previously used said ports but decided to merge and ultimately constituted themselves as USDI, In these present cases, as stated by respondent PPA, when PPA-TAPS took over arrastre operations, it also absorbed the entire labor force that existed at the time of the cancellation of LIPSI's permit. Hence, it can be safely said that PPATAPS is also composed of all the labor contractors and the workers under them which have been integrated t develop and improve the planning, growth, financing, construction, maintenance and operation of ports throughout the country and make them responsive to the needs of their individual localities. WHEREFORE, IN VIEW OF THE FOREGOING, the petitioner in G.R. Nos. 53492, 54265, 54394 and 54565 are hereby DISMISSED for lack of merit. The temporary restraining orders dated July 17, 1980, July 22, 1980, August 5, 1980 and August 21, 1980 are DISSOLVED. SO ORDERED. Feria, Yap, Narvasa, Melencio-Herrera, Alampay, Cruz, Paras and Feliciano, JJ., concur. Fernan, J., took no part. Teehankee, C.J., reserves his vote.

G.R. No. L-14088

September 30, 1961

CONCEPCION PELLOSA VDA. DE IMPERIAL, in her own behalf and as Guardian Ad Litem of her minor child, REX IMPERIAL, JR., plaintiffs-appellants, vs. HEALD LUMBER COMPANY, defendant-appellee. -------------------------------G.R. No. L-14089 September 30, 1961

LOURDES FERRER VDA. DE HERNANDEZ, in her own behalf and as Guardian Ad Litem of her minor children, JULIO HERNANDEZ, GABRIEL HERNANDEZ, JR., and ROSARIO HERNANDEZ, plaintiffs-appellants, vs. HEALD LUMBER COMPANY, defendant-appellee. -------------------------------G.R. No. L-14112 September 30, 1961

PHILIPPINE AIR LINES, INC., plaintiff-appellant, vs. HEALD LUMBER COMPANY, defendant-appellee. Ponce Enrile, Siguion Reyna, Montecillo and Belo for plaintiffs-appellants. Ross, Selph and Carrascoso for defendant-appellee.

CONCEPCION, J.: Appeal from a decision of the Court of First Instance of Baguio dismissing the complaints in the above entitled three (3) cases, with costs against the plaintiffs. On June 4, 1954, at about 6:50 a.m., a helicopter (PIC361) of the Philippine Air Lines, Inc. (PAL), which had been chartered by the Lepanto Consolidated Mining Co., took off from Nichols Fields, in Makati, Rizal, headed for Mankayan, Mt. Province, via Rosales, Pangasinan. On board the helicopter were Capt. Gabriel Hernandez and Lt. Rex Imperial. The helicopter reached

Rosales at 8:22 a.m., and, fifty-three (53) minutes later, or at 9:15 a.m., it undertook the last leg of its flight to Mankayan. However, the helicopter did not reach this place for it crashed on the way. A search party composed of, among others, Capts. Willis Rohlings and Jaime Manzano, both of the PAL organized to track down the missing helicopter, found it in a ravine located in the barrio of Ampusungan, Benguet, Mt. Province within the lumber concession of defendant-appellee, Heald Lumber Co. which is several kilometers before reaching Mankayan. The helicopter was a total wreck and both Capt. Hernandez and Lt. Imperial were dead. The body of the former was strapped to his seat, but that of the latter was several feet away from the wreckage. At the time of the flight, Capt. Hernandez was a duly licensed helicopter pilot, whereas Lt. Imperial, although a licensed plane pilot, was then under training as helicopter pilot. Owing to this accident, three (3) actions were instituted in the court aforementioned, against said defendant, namely: (1) case No. 580 (G.R. No. L14112), filed by PAL on March 2, 1956; (2) case No. 591 (G.R. No. L-14088), filed by Concepcion Pellosa de Imperial, widow of the deceased Lt. Imperial, on April 13, 1956; and 3) case No. 592 (G.R. No. L-14089), filed by Lourdes Ferrer de Hernandez, widow of Capt. Hernandez, on the date last mentioned. In the first case, the PAL sought to recover the following: Value of the helicopter Compensation for the death of Capt. Hernandez & Lt. Imperial at P20,000 each Consequential damages due to the loss of the helicopter Funeral expenses for Capt. Hernandez and Lt. Imperial Expenses incurred in the training of Capt. Hernandez in the U.S. and Lt. Imperial for operation of helicopter Moral damages resulting from harmful publicity of the crash TOTAL P80,000.00 40,000.00

53,400.00 2,542.00 17,405.82

30,000.00

P223,347.82

upon the ground that the mishap was due to the fact that the helicopter had collided "with defendant's tramway steel cables strung in parallel of approximately 3,000 yards in length between two mountains approximately 3,000

to 5,000 feet high in the vicinity of defendant's logging area in Ampusungan, Mountain Province." In each of the other cases, the respective plaintiffs therein prayed for judgment as follows: Actual and compensatory damages Exemplary damages Moral damages Expenses of litigation Attorney's fees TOTAL P150,000.00 50,000.00 50,000.00 10,000.00 20,000.00 P280,000.00

upon the theory that the death of Lt. Imperial and Capt. Hernandez was due to defendant's alleged "gross negligence" and "flagrant violation of applicable laws and regulations." Being interrelated, the three (3) cases were jointly heard, and, in due course, thereafter, the lower court, presided by Hon. Jesus de Veyra, rendered the decision appealed from, finding that plaintiffs had "failed to make out a case of negligence on the part of the defendant" and, accordingly, dismissing the three (3) complaints. Hence, this appeal by the plaintiffs. The three (3) cases are before us the amount of the demand in each being in excess of P200,000, exclusive of costs and interest. Appellants maintain that the accident is imputable to the defendant, because the helicopter, particularly its main rotor blades, had hit or collided with defendant's aforementioned steel cables. In this connection, Capt. Rohlings, who, at the time of the occurrence, was Assistant Superintendent of the Flight Control of the PAL, testified that, during the investigation conducted by him at the site of the crash, he found on the rotor blades of the helicopter. several long marks which contained small indentations which were parallel to each other, parallel lines, if you would put it that way, these marks were covered by blackish substance of some kind which I took to be of grease of some kind. (t.s.n, p. 95.) Capt. Manzano, the Superintendent of Helicopter Operations of the PAL, tried to corroborate this testimony of Capt. Rohlings. Both opined that the marks

were due to the contact of said rotor blades with the steel cables of defendant herein. Photographs (Exhibits E-21, E-22 and E-24) allegedly taken by Capt. Rohlings of the rotor blades, purporting to show the aforementioned markings, were introduced in evidence in lieu of said rotor blades. It is admitted, however, that the helicopter had hit a tree before falling into a ravine. Moreover, commenting on appellants' evidence, His Honor, the trial Judge, had the following to say: The evidence for the plaintiffs as to the cause of the crash is not conclusive. The main rotor blade was not preserved, so this Court was not able to satisfy itself as to the nature of the two long seriated streaks on the main rotor blade. The composition of these streaks was not determined whether they were grease from the steel cable or marks from hitting a pine tree for it can be equally argued that these seriated streaks could have been caused by the strands of a greasy steel cable or the rough bark of a pine tree. (Decision, Record on Appeal, pp. 19-20.) Upon the other hand, defendant endeavored to prove that the mishap had been due to two (2) causes, namely: (1) exhaustion of the fuel; and (2) negligence of the pilot. The record shows that the helicopter had a main tank and an auxiliary tank with a capacity of twenty-seven (27) and fifteen (15) gallons of fuel, respectively. The main tank was connected to the engine, but the auxiliary tank was not. In order to transfer gasoline from the latter to the former, it was necessary to land the helicopter, as the process could not be undertaken during flight. This was, in all probability, the reason why the aircraft had to land in Rosales, Pangasinan, before proceeding to Mankayan. Having left Rosales at 9:15 a.m., after its flight from Nichols Field, of one (1) hour and thirty-two (32) minutes (from 6:50 to 8:22), the helicopter was supposed to reach Mankayan at 10:44 a.m., the estimated flying time between Rosales and Mankayan being one (1) hour and twenty-nine (29) minutes. Upon the other hand, the time of the crash was placed at around 11:30 a.m., or between 11:00 and 11:30 a.m. By that time the helicopter had already flown from one (1) hour and forty-five (45) minutes to two (2) hours and fifteen (15) minutes, since it took off from Rosales, thus exceeding by sixteen (16) to forty-six (46) minutes the aforementioned estimated flying time. Considering that, with twentyseven (27) gallons of gasoline, the helicopter had to refuel after a flight of one (1) hour and thirty-two (32) minutes (from Nichols Field to Rosales), it is apparent that, after flying for a longer period of one (1) hour and forty-five (45) minutes to two (2) hours and fifteen (15) minutes, with a little over fifteen (15) gallons or

at most twenty-seven (27) gallons of gasoline, the provision of fuel must have already been exhausted. Col. Arnaiz, aircraft dispatcher of PAL, testified that the "maximum flight endurance" of the helicopter was "two hours and fifty minutes including the auxiliary tank." The Flight Plan (Exhibit B-1), as explained by Col. Arnaiz, shows that the estimated flying time from Nichols Field to Rosales was one (1) hour and forty-two (42) minutes, and from Rosales to Mankayan, one (1) hour and twentynine (29) minutes, or an aggregate estimated flying time of three (3) hours and eleven (11) minutes, or twenty-one (21) minutes longer than the estimated "maximum flight endurance" of the helicopter. Even if we deduct from said total estimated flying time, from Nichols Field to Mankayan, the ten (10) minutes saved in the flight from Nichols Field to Rosales, Pangasinan, the result would still be eleven (11) minutes beyond the said "maximum flight endurance" of the helicopter. In fact, the crash site (Ampusungan) is only about sixteen (16) kilometers, or ten (10) minutes flying time, to Mankayan. In other words, the accident took place in the area in which the helicopter was to have fully consumed its entire supply of gasoline, thus justifying the belief that it was forced to land in Ampusungan due to lack of gasoline, and that, as the engine ceased to function, its maneuverability must have become impaired, in view of which it crashed, thus causing it to fall into a ravine in defendant's concession.
1awphl.nt

Several factors indicate strongly that this was in all likelihood what happened for: (1) the site of the crash was more than a mile (over three [3] miles, according to the defendant) off the plotted course, altho, under normal conditions, no reasonably prudent pilot according to appellants witness, Capt. Manzano would have attempted to land in the vicinity of the scene of the occurrence; (2) the wrecked helicopter emitted no smell of gasoline and there was no sign of fire resulting from the crash, despite the fact that the helicopter was using high octane gasoline, which, admittedly, is highly inflammable and would have probably set the craft aflame upon hitting the pine tree above referred to, had there been some gasoline in the tank at that time; and (3) the helicopter was a total wreck, thus showing that the impact must have been strong. The foregoing considerations suggest, also, that Capt. Hernandez and Lt. Imperial had acted recklessly in undertaking the flight with a supply of fuel hardly sufficient to enable them to reach their destination. Besides, the landing report (Exhibit 9) shows that the portions thereof pertaining to the pilot were accomplished or filled in by Lt. Imperial upon landing at the Rosales airport. In fact, he signed said report as pilot of the helicopter. Again, it appears that during the flight from Rosales to Mankayan, the helicopter had deviated from one to three miles from the course plotted by Capt. Hernandez, in which Col. Arnaiz

concurred "because that was the most logical route to follow." Had Capt. Hernandez been piloting the machine from Rosales to Mankayan, he would have had no reason to deviate from the course planned by him, for the "visibility and ceiling were unlimited in the area and vicinity where the helicopter fell." All indications are, therefore, to the effect that, at the time of the accident, the helicopter was being piloted, not by Capt. Hernandez but by Lt. Imperial, in violation of Aeronautics Bulletin No. 1, Civil Aviation Regulations, of the Bureau of Aeronautics (CAA)1 as well as of Republic Act No. 776, Section 42 (H),2 for Lt. Imperial was not a lincesed helicopter pilot and was merely in the initial stage of his training as such pilot. It is next urged that defendant was negligent in failing to give notice to the Civil Aeronautics Administration of the presence of the aforementioned tram cables, which, appellants maintain, constituted a hazard to aerial navigation. However, this pretense is not borne out by the record. Appellants' witness, Capt. Manzano, testified that although, in searching for the missing helicopter, his plane flew so low that there was danger of collision with the mountains, he did not notice said cables. The same were not, therefore, within the navigable air space. Similarly, Capt. Rohlings described the area over which the cables were strung as "a congested area full of pine trees" and a "mountainous terrain slopping valley," thereby implying that the space from the cables down was not suitable for air navigation. In short, it has not been satisfactorily shown that the cables were a hazard to aerial navigation, or that the defendant should have or could have reasonably foreseen that aircrafts would fly so low over the place as to get entangled with said cables, for the area is dangerous to navigation owing to its mountainous terrain "full of pine trees." In short plaintiffs-appellants have failed to establish their pretense by a preponderance of evidence, in view of which the decision appealed from must be, as it is hereby affirmed, with costs against them. It is so ordered. Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Paredes and De Leon, JJ., concur. Bautista Angelo, J., is on leave.

Footnotes
1

"CHAPTER VII OPERATIONS OF LICENSED AIRCRAFT. xxx xxx xxx

"Sec. 5. Aircraft to be Flown by Appropriately Licensed Pilot. "The registered owner or the operator of a licensed aircraft shall not permit it to be flown by any person other than one possessed with a pilot's license valid for the type of aircraft and operation involved, and shall not allow such aircraft to engage in air commerce in a schedule or nonschedule operation unless such aircraft is operating on their permit in accordance with the provisions of Section 6(h) of Commonwealth Act No. 168, as amended by Section 2, paragraph (h) of Commonwealth Act No. 529. xxx xxx xxx

"CHAPTER IX LICENSED PILOTS "Sec. 1. Licensing Pilots, Regulations of. "It shall be unlawful for any person to operate any aircraft in the Philippines, unless such person is the holder of an appropriate effective pilot's license issued by the Bureau of Aeronautics. Provided, however, that this restriction shall not apply to licensed pilots of the United States or to foreign pilots operating aircraft of foreign countries with which the United States or the Philippines has a reciprocal or other agreement covering commercial pilot privileges in the Philippines. "The term 'airman' shall be taken to mean and include any individual (including the person in command, and any pilot, mechanic, or member of the crew) who engages or assists in the navigation or operation of aircraft while on their way, and any individual who is in charge of the inspection, overhauling, or repairing of aircraft or of parachutes." (Emphasis supplied.)
2

"Any person serving in any capacity as an airman in connection with any civil aircraft without an airman's certificate, or in violation of the terms of any such certificate or in excess of the rating of such certificate shall be punished by a fine not exceeding five thousand pesos. The repetition of this offense shall be sufficient cause for the revocation of the airman's certificate."

G.R. No. L-24219

June 13, 1968

PHILIPPINE AIR LINES, INC., petitioner, vs. CIVIL AERONAUTICS BOARD, and FILIPINAS ORIENT AIRWAYS, INC., respondents. Crispin D. Baizas, Edgardo Diaz de Rivera and Cenon S. Cervantes, Jr. for petitioner. Office of the Solicitor General for respondent Civil Aeronautics Board. Honorio Poblador and Ramon A. Pedrosa for respondent Filipinas Orient Airways, Inc. CONCEPCION, C.J.: Original petition for certiorari, to set aside and annul a resolution of the Civil Aeronautics Board hereinafter referred to as CAB granting respondent Filipinas Orient Airways Inc. hereinafter referred to as Fairways "provisional authority to operate scheduled and non-scheduled domestic air services with the use of DC-3 aircrafts", subject to specified conditions. Pursuant to Republic Act No. 4147, granting thereto "a franchise to establish, operate and maintain transport services for the carriage of passengers, mail, industrial flights and cargo by air in and between any and all points and places throughout the Philippines and other countries", on September 16, 1964, Fairways filed with CAB the corresponding application for a "certificate of public convenience and necessity", which was Docketed as economic proceedings (EP) No. 625, and was objected to by herein petitioner, Philippine Air Lines, Inc., hereinafter referred to as PAL. Subsequently, a CAB hearing officer began to receive evidence on said application. After several hearings before said officer, or on December 14, 1964, Fairways filed an "urgent petition for provisional authority to operate" under a detailed "program of implementation" attached to said petition, and for the approval of its bond therefor, as well as the provisional approval of its "tariff regulations and the conditions of carriage to be printed at the back of the passenger tickets." Despite PAL's opposition thereto, in a resolution issued on January 5, 1965, CAB granted said urgent petition of Fairways. The pertinent part of said resolution provides: Filipinas Orient Airways, Inc., (FAIRWAYS) having presented to the Board evidence showing prima facie its fitness, willingness and ability to operate the services applied for and the public need for more air transportation service, and to encourage and develop commercial air transportation, RESOLVED, to grant, as the Board hereby grants, the said Filipinas Orient

Airways, Inc., provisional authority to operate scheduled and nonscheduled domestic air services with the use of DC-3 aircraft, subject to the following conditions; 1. The term of the provisional authority herein granted shall be until such time as the main application for a certificate of public convenience and necessity is finally decided or for such period as the Board may at any time determine; xxx xxx xxx

A reconsideration of this resolution having been denied, PAL filed the present civil action alleging that, in issuing said resolution, CAB had acted illegally and in excess of its jurisdiction or with grave abuse of discretion, because: (1) CAB is not empowered to grant any provisional authority to operate, prior to the submission for decision of the main application for a certificate of public convenience and necessity; (2) CAB had no evidence before it that could have justified the granting of the provisional authority complained of; (3) PAL was denied due process when CAB granted said authority before the presentation of its evidence on Fairway's main application; and (4) In granting said provisional authority, the CAB had prejudged the merits of said application. The first ground is devoid of merit. Section 10-C(1) of Republic Act No. 776, reading: (C) The Board shall have the following specific powers and duties: (1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend, revise, alter, modify, cancel suspend or revoke, in whole or in part, upon petitioner complaint, or upon its own initiative, any temporary operating permit or Certificate of Public Convenience and Necessity; Provided, however, That in the case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic of the Philippines.... explicitly authorizes CAB to issue a "temporary operating permit," and nothing contained, either in said section, or in Chapter IV of Republic Act No. 776, negates the power to issue said "permit", before the completion of the applicant's

evidence and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary permit "upon its own initiative," strongly suggests the power to exercise said authority, even before the presentation of said evidence has begun. Moreover, we perceive no cogent reason to depart, in connection with the commercial air transport service, from the policy of our public service law, which sanctions the issuance of temporary or provisional permits or certificates of public convenience and necessity, before the submission of a case for decision on the merits.1 The overriding considerations in both instances are the same, namely, that the service be required by public convenience and necessity, and, that the applicant is fit, as well as willing and able to render such service properly, in conformity with law and the pertinent rules, regulations and requirements.2 As regards PAL's second contention, we have no more than PAL's assertion and conclusion regarding the absence of substantial evidence in support of the finding, in the order complained of, to the effect that Fairways' evidence had established " prima facie its fitness, willingness and ability to operate the services applied for and the public need for more transportation service ...". Apart from PAL's assertion being contradicted by the tenor of said order, there is the legal presumption that official duty has been duly performed. Such presumption is particularly strong as regards administrative agencies, like the CAB, vested with powers said to be quasi-judicial in nature, in connection with the enforcement of laws affecting particular fields of activity, the proper regulation and/or promotion of which requires a technical or special training, aside from a good knowledge and grasp of the overall conditions, relevant to said field, obtaining in the nation.3 The consequent policy and practice underlying our Administrative Law is that courts of justice should respect the findings of fact of said administrative agencies, unless there is absolutely no evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial.4 This, in turn, is but a recognition of the necessity of permitting the executive department to adjust law enforcement to changing conditions, without being unduly hampered by the rigidity and the delays often attending ordinary court proceedings or the enactment of new or amendatory legislations. In the case at bar, petitioner has not satisfactorily shown that the aforementioned findings of the CAB are lacking in the necessary evidentiary support. Needless to say, the case of Ang Tibay vs. C.I.R.5 on which petitioner relies, is not in point. Said case refers to the conditions essential to a valid decision on the merits, from the viewpoint of due process, whereas, in the case at bar, we are concerned with an interlocutory order prior to the rendition of said decision. In

fact, interlocutory orders may sometimes be issued ex parte, particularly, in administrative proceedings, without previous notice and hearing, consistently with due process.6 Again, the constitutional provision to the effect that "no decision shall be rendered by any court of record without expressing therein clearly and distinctly the facts and the law on which it is based",7 applies, not to such interlocutory orders, but to the determination of the case on the merits.8 Lastly, the provisional nature of the permit granted to Fairways refutes the assertion that it prejudges the merits of Fairways' application and PAL's opposition thereto. As stated in the questioned order, CAB's findings therein made reflect its view merely on the prima facie effect of the evidence so far introduced and do not connote a pronouncement or an advanced expression of opinion on the merits of the case. WHEREFORE, the petition herein should be, as it is hereby, dismissed, and the writ prayed for, denied, with costs against petitioner Philippine Air Lines, Inc. It is so ordered. Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Angeles, JJ., concur. Fernando, J., took no part.

G.R. No. L-29064 April 29, 1971 AIR MANILA, INC., petitioner, vs. HON. MARCELO S. BALATBAT, DIRECTOR NILO DE GUIA, DR. GREGORIO Y. ZARA, and COL. JUAN B. GUEVARRA as members of the CIVIL AERONAUTICS BOARD and PHILIPPINE AIR LINES, INC., respondents. Bautista Angelo, Antonio, Lopez and Associates and Santos, Buted and Associates for petitioner. Crispin D. Baizas and Cenon Cervantes, Jr. for respondent Philippine Air Lines, Inc. Office of the Solicitor General Antonio P. Barredo and Solicitor Bernardo P. Pardo for respondent Civil Aeronautics Board.

REYES, J.B.L., J.: This is a petition for certiorari filed by Air Manila, Inc., to determine the validity of Resolution No. 139 (68) of the Civil Aeronautics Board in CAB Case No. 1414, allegedly issued without or in excess of jurisdiction. There is no dispute as to the facts of this case. On 1 April 1968, the Philippine Air Lines, hereafter referred to as PAL, petitioned the Civil Aeronautics Board, referred to hereafter as the Board, for approval of a proposed schedule introducing seven nights - F515/516, F555/556, F561/562, F531/532, F591/338, F527/528, and F211/212 - and the adjustment of the flight schedule that may thus be affected (CAB Case No. 1414). On 15 April 1968, action on the petition was deferred for further study. On 22 April 1968, the Board passed Resolution No. 109 (68), referring PAL's petition to a hearing examiner for economic justification. Accordingly, the designated hearing officer set the initial hearing thereof for 30 April 1968. On 29 April 1968, PAL moved for reconsideration of Resolution No. 109 (68). By resolution of 6 May 1968, the Board deferred action on this later motion, until PAL shall have resumed its DC-3 services in certain airports named therein. On 9 May 1968, PAL filed another motion, this time for reconsideration of the Board resolution of 6 May 1968, on the ground that the new flights which it was

proposing to operate in Case No. EP-1414 will be serviced by jet-prop or pure jet equipment only, thus, the order for resumption of DC-3 services in said resolution was improper and should be deleted. In its Resolution No. 131 (68) of 20 May 1968, the Board deferred action on this motion for reconsideration. It appears, however, that on 15 May 1968, PAL filed an Urgent Petition for approval of a consolidated schedule of jet and jet prop flights, with an interim DC3 schedule to different secondary and feeder points (DTS-35). On 28 May 1968, the Board issued its Resolution No. 139 (68), approving DTS-35 for a period of 30 days, effective 1 June 1968, subject to the conditions that (a) the flight between Manila and San Fernando, La Union, F210/211 of the same timetable, be operated daily instead of twice a week as proposed and (b) that all schedules under DTS-35, for which no previous approval has been granted by the Board, are to be referred to a hearing examiner for reception of evidence on its economic justification. After the examiner's report, several of the proposed flights were approved for 30 days from 31 July 1968. On 31 May 1968, Air Manila, Inc., filed the instant petition claiming that the respondent Board acted without or in excess of jurisdiction and/or with abuse of discretion in issuing its Resolution No. 139 (68). It is petitioner's allegation that the proposed new schedule, involving an increase of frequencies, would not only saturate the routes served also by petitioner, but would also affect its schedule; that the Board's approval of said Domestic Traffic Schedule without receiving the evidence of the parties constituted a deprivation of petitioner's right to be heard; and that such authorization to PAL to operate the proposed schedule without economic justification amounted to a capricious and whimsical exercise by the Board of its power amounting to lack of jurisdiction. There is no merit to the contention of petitioner. It has been correctly said that administrative proceedings are not exempt from the operation of certain basic and fundamental procedural principles, such as the due process requirements in investigations and trials. 1 And this administrative due process is recognized to include (a) the right to notice, be it actual or constructive, of the institution of the proceedings that may affect a person's legal rights; (b) reasonable opportunity to appear and defend his rights, introduce witnesses and relevant evidence in his favor, (c) a tribunal so constituted as to give him reasonable assurance of honesty and impartiality, and one of competent Jurisdiction; and (4) a finding or decision by that tribunal supported by substantial evidence presented at the hearing, or at least contained in the records or disclosed to the parties affected. 2 In the present case, it can not truthfully be said that the provisional approval by the Board of PAL's proposed DTS-35 violates the requisites of administrative due process. Admittedly, after PAL's proposal to introduce new Mercury night flights

(in CAB Case No. EP-1414) had been referred to a hearing examiner for economic justification, PAL submitted a so-called consolidated schedule of flights, DTS-35, that included the same Mercury night flights involved in Case EP-1414, and this was allowed by Board Resolution No. 139 (68). According to respondents, however, the Board's action was impelled by the circumstance that at the time, the authorizations of certain flight schedules previously allowed but were incorporated in DTS-35 were about to expire; thus, the consolidated schedule had to be approved temporarily if the operations of the flights referred to were not to be suspended. In short, the temporary y permit was issued to prevent the stoppage or cessation of services in the affected areas. This point petitioner has failed to refute. Neither can the provisional authorization of DTS-35 be said to have done away with the requisite hearing and investigation of the new flight schedules and, consequently, to have deprived the petitioner of its right to be heard. Note that in allowing the operation or effectivity of PAL's consolidated flight schedule, it was precisely prescribed that "all schedules under the DTS-35 for which no previous approval has been granted by the Board, are hereby referred to a hearing examiner for reception of evidence on its economic justification." 3 It has not been denied that such hearings were actually conducted by the hearing examiner and a report on the result thereof was submitted to the Board. And the Board, considering the report of the hearing examiner, passed Resolution No. 190 (68) 4 approving, for a period of 30 days starting 31 July 1968, only three or four frequencies of the seven proposed new flights (F338, F591, F531/532, F555/556, F527/528, F561/562, and F515/516). There is no proof, not even allegation, that in all those bearings petitioner was not notified or given opportunity to adduce evidence in support of its opposition. It may be true that the temporary approval of DTS-35 resulted in the immediate operation of the opposed flights before the existence of economic justification therefor has been finally determined. But this fact alone would not work against the validity of the provisional authorization thus issued. For, under the law, the Civil Aeronautics Board is not only empowered to grant certificates of public convenience and necessity; it can also issue, deny, revise, alter, modify, cancel, suspend or revoke, in whole or in part, any temporary operating permit, upon petition or complaint of another or even at its own initiative. 5 The exercise of the power, of course, is supposed to be conditioned upon the paramount consideration of public convenience and necessity, and nothing has been presented in this case to prove that the disputed action by the Board has been prompted by a cause other than the good of the service. It may be also pointed out that the new schedule objected to by petitioner will affect its services in six routes in the following manner:

(a) Route MANILA-MACTAN-MANILA F515/516 Seven (7) additional flights a week and vice-versa; schedule is timed just ahead of Air Manila's schedule. (b) Route MANILA-DAVAO-MANILA F555/556 Seven (7) additional flights a week and vice-versa; schedule is timed just ahead of Air Manilas schedule. (c) Route MANILA-BACOLOD-MANILA F531/532 Seven (7) additional flights a week and vice-versa; timed just ahead of Air Manila's schedule. (d) Route MACTAN-TACLOBAN-MACTAN F527/528 Seven (7) additional flights a week and vice-versa. (e) Route TACLOBAN-MACTAN-TACLOBAN F391/392 Flight schedule revised as to make it just ahead of Air Manila's schedule. (f) Route MACTAN-DAVAO-MACTAN F579/580 PAL's old schedule revised to adversely affect Air Manila's schedule in this route. Respondents disclosed, however, and this has not been denied by petitioner, that the schedule of flights provisionally approved in Resolution No. 139(68) was subsequently readjusted by the Board in order to conform with its established policy on separation time between flights. 6 While the aforementioned readjustment of the schedule was secured by the Filipinas Orient Airways and, therefore, may not particularly improve petitioner's situation, the resolution indicated that relief can still be obtained from the Board, thus precluding resort at once to the relief afforded by a certiorari proceeding in this Tribunal. 7 Likewise, the records show that by Resolution No. 190 (68) in the same Case No. EP-1414, the Board allowed only three or four frequencies of the proposed seven new flights, such authorization terminating after 30 days from 31 July 1968. It is evident from the foregoing facts that not only has the resolution subject of the present petition been modified, but its effectivity had been fixed up to 30

September 1968. There being no proof that the situation existing when Resolution No. 139 (68) was issued still persists, the issue herein presented apparently has become moot and academic. FOR THE FOREGOING CONSIDERATIONS, the petition in this case is hereby dismissed, with costs against the petitioner. Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., concur.

G.R. No. L-32979-81 NAPOLEON LECHOCO, petitioner, vs. CIVIL AERONAUTIC BOARD, PHILIPPINE AIR LINES, INC., FILIPINAS ORIENT AIRWAYS, INC., AND AIR MANILA, INC., respondents. Crispin T. Reyes, Manuel Imbong and Napoleon Lechoco for petitioner. Office of the Solicitor General Felix Q. Antonio for respondent Civil Aeronautics Board. , J.: p Original petition for certiorari with preliminary injunction to annul and set aside Civil Aeronautics Board resolutions Nos. 165 (70), 321 (70) and 330 (70), fixing temporary and permanent rate or fare adjustments of three domestic air carriers, Philippine Air Lines (PAL), Filipinas Orient Airways (FOA) and Air Manila, and dismissing petitioner's objections thereto, based on alleged lack of jurisdiction. The issue submitted for Our decision is whether authority to fix air carrier's rates is vested in the Civil Aeronautics Board (CAB) or in the Public Service Commission (PSC). Petitioner Lechoco contends that by the enactment of Republic Act No. 2677 (on 18 June 1960) amending sections 13 (a) and 14 of Commonwealth Act No. 146 (the original PSC Act), jurisdiction to control rates of airships was taken away from the Civil Aeronautics Board and revested in the PSC, since Republic Act 2677 impliedly repealed section 10(c) (2) of Republic Act No. 776, passed on 20 June 1952, conferring control over air rates fares on the CAB. Respondents aver, on the other hand, that, at the least, jurisdiction over air fares and rates was, under statutes, exercisable concurrently by the CAB and the PSC, and that following the rule on concurrent jurisdictions of judicial bodies, the first to exercise or take jurisdiction (CAB in this case) should retain it to the exclusion of the other body. In resolving the issue posed, it is apposite to review various laws enacted on the matter. In 1932, the Philippine (pre Commonwealth) Legislature provided by Public Law No. 3996, in its section 15, that any ? Person or persons engaged in air commerce shall submit for approval to the Public Service Commission or its authorized representative uniform charges applied to merchandise and passengers per kilometer or over specified distances ... . In consonance with said law, the legislative franchise granted in November of 1935 to the Philippine

Aerial Taxi Company, Inc. (Act No. 4271) specified that (section 3) ? The grantee shall fix just, reasonable and uniform rates for the transportation of passengers and freight, subject to the supervision and approval of the Public Service Commission ... . The following year the PSC was reorganized by Commonwealth Act No. 146, enacted 7 November 1936. Section 13 thereof granted PSC "general supervision and regulation of, jurisdiction and control over, all public services..." except as otherwise provided. The same section, however contained the following reservation: ... Provided further, That the Commission shall not exercise any control or supervision over aircraft in the Philippines, except with regard to the fixing of maximum passenger and freight rates ... . In the aftermath of World War II the Legislature of independent Republic of the Philippines passed Republic Act No. 51, on 4 October 1946, authorizing the Chief Executive to reorganize within one year the different executive departments, bureaus, offices agencies and other instrumentalities of the government, including corporations owned or controlled by it. In the exercise of the broad powers thus conferred, the President of the Philippines, by Executive Order No. 94, of 4 October 1947, in its section 149, abolished the Civil Aeronautics Commission and transferred its functions and duties to the Civil Aeronautics Board created by said Order No. 94, with the following provision: The ... functions provided in section 13 of Commonwealth Act No. 146, pertaining to the power of the Public Service Commission to fix the maximum passenger and freight rates that may be charged by airlines ... are hereby transferred to and consolidated in the Civil Aeronautics Administration and/or Civil Aeronautics Board. The foregoing transfer of functions was virtually ratified by Republic Act No. 776, effective on 20 June 1952, entitled "An Act to Reorganize the Civil Aeronautics Board and the Civil Aeronautics Administration, to provide for the regulation of civil aeronautics in the Philippines ..." that delimited the powers of the Board. Section 10 of Act 776 prescribed, inter alia, the following: SEC. 10. Powers and duties of the Board. ? (A) Except as otherwise provided herein, the Board shall have the power to regulate the economic aspect of air transportation, and shall have the general supervision and regulation of, and jurisdiction and control over, air carriers as well as their property, property rights, equipment, facilities, and franchise, in so far as may be necessary for the purpose of carrying out the provisions of this Act E9Ed. xxx xxx xxx (C) The Board shall have the following specific powers and duties: (2) To fix and determine reasonable individual, joint, or special rates, charges or fares which an air

carrier may demand, collect or receive for any service in connection with air commerce. The Board may adopt any original, amended, or new individual, joint or special rates, charges or fares proposed by an air carrier if the proposed individual, joint, or special rates, charges or fares are not unduly preferential or unduly discriminatory or unreasonable. The burden of proof to show that the proposed individual, joint or special rates, charges or fares are just and reasonable shall be upon the air carrier proposing the same hIEO. Latest enactment of the series was Republic Act No. 2677, in effect on 18 June 1960, that amended various sections of Commonwealth Act No. 146, the basic Public Service Act. Among those amended was section 14, which was made to read: SEC. 14. ? The following are exempted from the provision of the preceding section: 1 xxx xxx xxx (c) Airships within the Philippines except as regards the fixing of their maximum rates on freight and passengers. (Emphasis supplied) Contrary to the views of petitioner Lechoco, there is nothing in Republic Act 2677 that expressly repeals Republic Act No. 776. While section 3 of Republic Act 2677 provides that "All Acts or parts of Acts inconsistent with the provisions of this Act are hereby repealed", the fact is that the derogation was thereby made dependent upon actual inconsistency with previous laws. This is the very foundation of the rule of implied repeal. However, there is nothing in Act 2677 that evidences an intent on the part of the Legislature to set aside the carefully detailed regulation of civil air transport as set forth in Act 776. Said Act in itself constitutes a recognition of the need of entrusting regulation, supervision and control of civil aviation to a specialized body. We find no irreconcilable inconsistency between section 14 of the Public Service Act, as amended by Republic Act 2677, and section 10(c) (2) of the prior Republic Act 776, above quoted, except for the fact that power over rates to be charged by air carriers on passengers and freight are vested in different entities, the CAB and the PSC. Even that will result in no more than a concurrent jurisdiction in both supervisory entities, and not in the divesting of the power of one in favor of the other. The absence of intent to repeal Republic Act No. 776 by the enactment of Act 2677 is also evidenced by the explanatory note to House Bill 4030 (that later became Act 2677). It expressly stated the desire to broaden the jurisdiction of the PSC "by vesting it with the power to supervise and control maritime transportation ... except air transportation and warehouses which are now subject to regulation and supervision by the Civil Aeronautics Board and the Bureau of Commerce respectively." 2 The same legislative intent to maintain the jurisdiction and powers of the CAB appears from a consideration of the legislation subsequent to the enactment of Republic Act 2677. Thus, Republic Act No. 4147, enacted 20 June 1964 (granting an air transportation franchise to Filipinas Orient Airways),

and Republic Act No. 4501, passed in 19 June 1965 (granting a similar franchise to Air Manila, Inc.), both uniformly require (in their section 3) that the franchise grantee ? shall fix just and reasonable and uniform rates for the transportation of passengers and freight, subject to the regulations and approval of the Civil Aeronautics Board or such other regulatory agencies as the Government may designate for this purpose. (Emphasis supplied) Such references to the Civil Aeronautics Board after the enactment of Republic Act No. 2677 would be difficult to explain if said law had already repealed the power of the CAB over fares or rates, as contended by petitioner Lechoco. Be that as it may, the well-established principle is that implied repeals are not favored and consequently statutes must be so construed as to harmonize all apparent conflicts and give effect to all the provisions whenever possible. 3 This rule makes it imperative to reconcile both section 14 of the Public Service Act as amended by Republic Act No. 2677, and section 10(c) (2) of Republic Act No. 776, recognizing the power of the Civil Aeronautics Board "fix and determine reasonable individual, joint or special rates, charges or fares" for air carriers (under Republic Act 776) but subject to the "maximum rates on freight and passengers" that may be set by the Public Service Commission (as per Republic Act 2677); so that the rates, charges or fares allowed or fixed by CAB may in no case exceed the maxima prescribed now or to be prescribed in the future by the PSC. The respondents have suggested that the retention in Republic Act 2677 of the power of the PSC to fix maximum rates on air freight and passengers was the result of legislative inadvertence, considering that in House Bill No. 4030 the phrase conferring such power on the PSC appeared in brackets, indicating that said passage was to be eliminated. But however plausible the suggestion should be, this Court is powerless to ignore the express grant of the authority in question in the wording of Republic Act 2677 as finally approved. The elimination of the words "except as regards the fixing of their maximum rates on freight and passengers" from section 14(c) of the Public Service Act, as amended by Republic Act 2677, in order to avoid conflict with Republic Act 776, and to unify jurisdiction and control over civil aviation in the Philippines, can only be obtained from the Legislature itself. PREMISES CONSIDERED, the questioned order of the Civil Aeronautics Board, asserting its jurisdiction to fix the reasonable fares that air carriers may demand, are in accord with law, there being no showing that the Public Service Commission has fixed any maximum rates therefor. WHEREFORE, the writ of certiorari with preliminary injunction applied for is hereby denied. Costs against petitioner Napoleon Lechoco ZG8OW. Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., concur.