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EN BANC International Telecommunications Satellite Organization (INTELSAT) of 115 member

G.R. No. 84818 December 18, 1989 nations, as well as in the Convention and the Operating Agreement of the International
PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION, petitioner, Maritime Satellite Organization (INMARSAT) of 53 member nations, which two global
vs. commercial telecommunications satellite corporations were collectively established by
JOSE LUIS A. ALCUAZ, as NTC Commissioner, and NATIONAL various states in line with the principles set forth in Resolution 1721 (XVI) of the General
TELECOMMUNICATIONS COMMISSION, respondents. Assembly of the United Nations.
Rilloraza, Africa, De Ocampo & Africa for petitioner. Since 1968, the petitioner has been leasing its satellite circuits to:
Victor de la Serna for respondent Alcuaz. 1. Philippine Long Distance Telephone Company;
2. Philippine Global Communications, Inc.;
REGALADO, J.: 3. Eastern Telecommunications Phils., Inc.;
This case is posed as one of first impression in the sense that it involves the public 4. Globe Mackay Cable and Radio Corp. ITT; and
utility services of the petitioner Philippine Communications Satellite Corporation 5. Capitol Wireless, Inc.
(PHILCOMSAT, for short) which is the only one rendering such services in the or their predecessors-in-interest. The satellite services thus provided by petitioner
Philippines. enable said international carriers to serve the public with indispensable communication
The petition before us seeks to annul and set aside an Order 1 issued by respondent services, such as overseas telephone, telex, facsimile, telegrams, high speed data, live
Commissioner Jose Luis Alcuaz of the National Telecommunications Commission television in full color, and television standard conversion from European to American
(hereafter, NTC), dated September 2, 1988, which directs the provisional reduction of or vice versa.
the rates which may be charged by petitioner for certain specified lines of its services Under Section 5 of Republic Act No. 5514, petitioner was exempt from the jurisdiction
by fifteen percent (15%) with the reservation to make further reductions later, for being of the then Public Service Commission, now respondent NTC. However, pursuant to
violative of the constitutional prohibition against undue delegation of legislative power Executive Order No. 196 issued on June 17, 1987, petitioner was placed under the
and a denial of procedural, as well as substantive, due process of law. jurisdiction, control and regulation of respondent NTC, including all its facilities and
The antecedental facts as summarized by petitioner 2 are not in dispute. By virtue of services and the fixing of rates. Implementing said Executive Order No. 196,
Republic Act No. 5514, PHILCOMSAT was granted "a franchise to establish, construct, respondents required petitioner to apply for the requisite certificate of public
maintain and operate in the Philippines, at such places as the grantee may select, convenience and necessity covering its facilities and the services it renders, as well as
station or stations and associated equipment and facilities for international satellite the corresponding authority to charge rates therefor.
communications." Under this franchise, it was likewise granted the authority to Consequently, under date of September 9, 1987, petitioner filed with respondent NTC
"construct and operate such ground facilities as needed to deliver telecommunications an application 4 for authority to continue operating and maintaining the same facilities
services from the communications satellite system and ground terminal or terminals." it has been continuously operating and maintaining since 1967, to continue providing
Pursuant to said franchise, petitioner puts on record that it undertook the following the international satellite communications services it has likewise been providing since
activities and established the following installations: 1967, and to charge the current rates applied for in rendering such services. Pending
1. In 1967, PHILCOMSAT established its provisional earth station in Pinugay, hearing, it also applied for a provisional authority so that it can continue to operate and
Rizal. maintain the above mentioned facilities, provide the services and charge therefor the
2. In 1968, earth station standard "A" antenna (Pinugay I) was established. aforesaid rates therein applied for.
Pinugay I provided direct satellite communication links with the Pacific Ocean On September 16, 1987, petitioner was granted a provisional authority to continue
Region (the United States, Australia, Canada, Hawaii, Guam, Korea, operating its existing facilities, to render the services it was then offering, and to charge
Thailand, China [PROC], New Zealand and Brunei) thru the Pacific Ocean the rates it was then charging. This authority was valid for six (6) months from the date
INTELSAT satellite. of said order. 5 When said provisional authority expired on March 17, 1988, it was
3. In 1971, a second earth station standard "A" antenna(Pinugay III) was extended for another six (6) months, or up to September 16, 1988.
established. Pinugay II provided links with the Indian Ocean Region (major The NTC order now in controversy had further extended the provisional authority of the
cities in Europe, Middle East, Africa, and other Asia Pacific countries operating petitioner for another six (6) months, counted from September 16, 1988, but it directed
within the region) thru the Indian Ocean INTELSAT satellite. the petitioner to charge modified reduced rates through a reduction of fifteen percent
4. In 1983, a third earth station standard "B" antenna (Pinugay III) was (15%) on the present authorized rates. Respondent Commissioner ordered said
established to temporarily assume the functions of Pinugay I and then Pinugay reduction on the following ground:
II while they were being refurbished. Pinugay III now serves as spare or The Commission in its on-going review of present service rates takes note that
reserved antenna for possible contingencies. after an initial evaluation by the Rates Regulation Division of the Common
5. In 1983, PHILCOMSAT constructed and installed a standard "B" antenna Carriers Authorization Department of the financial statements of applicant,
at Clark Air Field, Pampanga as a television receive-only earth station which there is merit in a REDUCTION in some of applicant's rates, subject to further
provides the U.S. Military bases with a 24-hour television service. reductions, should the Commission finds (sic) in its further evaluation that
6. In 1989, petitioner completed the installation of a third standard "A" earth more reduction should be effected either on the basis of a provisional
station (Pinugay IV) to take over the links in Pinugay I due to obsolescence. 3 authorization or in the final consideration of the case. 6
By designation of the Republic of the Philippines, the petitioner is also the sole signatory PHILCOMSAT assails the above-quoted order for the following reasons:
for the Philippines in the Agreement and the Operating Agreement relating to the
1. The enabling act (Executive Order No. 546) of respondent NTC empowering it to fix II. On another tack, petitioner submits that the questioned order violates procedural due
rates for public service communications does not provide the necessary standards process because it was issued motu proprio, without notice to petitioner and without
constitutionally required, hence there is an undue delegation of legislative power, the benefit of a hearing. Petitioner laments that said order was based merely on an
particularly the adjudicatory powers of NTC; "initial evaluation," which is a unilateral evaluation, but had petitioner been given an
2. Assuming arguendo that the rate-fixing power was properly and constitutionally opportunity to present its side before the order in question was issued, the confiscatory
conferred, the same was exercised in an unconstitutional manner, hence it is ultra vires, nature of the rate reduction and the consequent deterioration of the public service could
in that (a) the questioned order violates procedural due process for having been issued have been shown and demonstrated to respondents. Petitioner argues that the function
without prior notice and hearing; and (b) the rate reduction it imposes is unjust, involved in the rate fixing-power of NTC is adjudicatory and hence quasi-judicial, not
unreasonable and confiscatory, thus constitutive of a violation of substantive due quasi- legislative; thus, notice and hearing are necessary and the absence thereof
process. results in a violation of due process.
I. Petitioner asseverates that nowhere in the provisions of Executive Order No. 546, Respondents admit that the application of a policy like the fixing of rates as exercised
providing for the creation of respondent NTC and granting its rate-fixing powers, nor of by administrative bodies is quasi-judicial rather than quasi-legislative: that where the
Executive Order No. 196, placing petitioner under the jurisdiction of respondent NTC, function of the administrative agency is legislative, notice and hearing are not required,
can it be inferred that respondent NTC is guided by any standard in the exercise of its but where an order applies to a named person, as in the instant case, the function
rate-fixing and adjudicatory powers. While petitioner in its petition-in-chief raised the involved is adjudicatory. 8 Nonetheless, they insist that under the facts obtaining the
issue of undue delegation of legislative power, it subsequently clarified its said order in question need not be preceded by a hearing, not because it was issued
submission to mean that the order mandating a reduction of certain rates is undue pursuant to respondent NTC's legislative function but because the assailed order is
delegation not of legislative but of quasi-judicial power to respondent NTC, the exercise merely interlocutory, it being an incident in the ongoing proceedings on petitioner's
of which allegedly requires an express conferment by the legislative body. application for a certificate of public convenience; and that petitioner is not the only
Whichever way it is presented, petitioner is in effect questioning the constitutionality of primary source of data or information since respondent is currently engaged in a
Executive Orders Nos. 546 and 196 on the ground that the same do not fix a standard continuing review of the rates charged.
for the exercise of the power therein conferred. We find merit in petitioner's contention.
We hold otherwise. In Vigan Electric Light Co., Inc. vs. Public Service Commission,9 we made a categorical
Fundamental is the rule that delegation of legislative power may be sustained only upon classification as to when the rate-filing power of administrative bodies is quasi-judicial
the ground that some standard for its exercise is provided and that the legislature in and when it is legislative, thus:
making the delegation has prescribed the manner of the exercise of the delegated Moreover, although the rule-making power and even the power to fix rates-
power. Therefore, when the administrative agency concerned, respondent NTC in this when such rules and/or rates are meant to apply to all enterprises of a given
case, establishes a rate, its act must both be non- confiscatory and must have been kind throughout the Philippines-may partake of a legislative character, such is
established in the manner prescribed by the legislature; otherwise, in the absence of a not the nature of the order complained of. Indeed, the same applies
fixed standard, the delegation of power becomes unconstitutional. In case of a exclusively to petitioner herein. What is more, it is predicated upon the finding
delegation of rate-fixing power, the only standard which the legislature is required to of fact-based upon a report submitted by the General Auditing Office-that
prescribe for the guidance of the administrative authority is that the rate be reasonable petitioner is making a profit of more than 12% of its invested capital, which is
and just. However, it has been held that even in the absence of an express requirement denied by petitioner. Obviously, the latter is entitled to cross-examine the
as to reasonableness, this standard may be implied. 7 maker of said report, and to introduce evidence to disprove the contents
It becomes important then to ascertain the nature of the power delegated to respondent thereof and/or explain or complement the same, as well as to refute the
NTC and the manner required by the statute for the lawful exercise thereof. conclusion drawn therefrom by the respondent. In other words, in making said
Pursuant to Executive Orders Nos. 546 and 196, respondent NTC is empowered, finding of fact, respondent performed a function partaking of a quasi-judicial
among others, to determine and prescribe rates pertinent to the operation of public character, the valid exercise of which demands previous notice and hearing.
service communications which necessarily include the power to promulgate rules and This rule was further explained in the subsequent case of The Central Bank of the
regulations in connection therewith. And, under Section 15(g) of Executive Order No. Philippines vs. Cloribel, et al. 10 to wit:
546, respondent NTC should be guided by the requirements of public safety, public It is also clear from the authorities that where the function of the administrative
interest and reasonable feasibility of maintaining effective competition of private entities body is legislative, notice of hearing is not required by due process of law (See
in communications and broadcasting facilities. Likewise, in Section 6(d) thereof, which Oppenheimer, Administrative Law, 2 Md. L.R. 185, 204, supra, where it is
provides for the creation of the Ministry of Transportation and Communications with said: 'If the nature of the administrative agency is essentially legislative, the
control and supervision over respondent NTC, it is specifically provided that the national requirements of notice and hearing are not necessary. The validity of a rule of
economic viability of the entire network or components of the communications systems future action which affects a group, if vested rights of liberty or property are
contemplated therein should be maintained at reasonable rates. We need not go into not involved, is not determined according to the same rules which apply in the
an in-depth analysis of the pertinent provisions of the law in order to conclude that case of the direct application of a policy to a specific individual) ... It is said in
respondent NTC, in the exercise of its rate-fixing power, is limited by the requirements 73 C.J.S. Public Administrative Bodies and Procedure, sec. 130, pages 452
of public safety, public interest, reasonable feasibility and reasonable rates, which and 453: 'Aside from statute, the necessity of notice and hearing in an
conjointly more than satisfy the requirements of a valid delegation of legislative power. administrative proceeding depends on the character of the proceeding and
the circumstances involved. In so far as generalization is possible in view of
the great variety of administrative proceedings, it may be stated as a general permanent, and it is immaterial whether the same is made upon a complaint, a
rule that notice and hearing are not essential to the validity of administrative summary investigation, or upon the commission's own motion as in the present case.
action where the administrative body acts in the exercise of executive, That such a hearing is required is evident in respondents' order of September 16, 1987
administrative, or legislative functions; but where a public administrative body in NTC Case No. 87-94 which granted PHILCOMSAT a provisional authority "to
acts in a judicial or quasi-judicial matter, and its acts are particular and continue operating its existing facilities, to render the services it presently offers, and
immediate rather than general and prospective, the person whose rights or to charge the rates as reduced by them "under the condition that "(s)ubject to hearing
property may be affected by the action is entitled to notice and hearing. 11 and the final consideration of the merit of this application, the Commission may modify,
The order in question which was issued by respondent Alcuaz no doubt contains all the revise or amend the rates ..." 12
attributes of a quasi-judicial adjudication. Foremost is the fact that said order pertains While it may be true that for purposes of rate-fixing respondents may have other
exclusively to petitioner and to no other. Further, it is premised on a finding of fact, sources of information or data, still, since a hearing is essential, respondent NTC
although patently superficial, that there is merit in a reduction of some of the rates should act solely on the basis of the evidence before it and not on knowledge or
charged- based on an initial evaluation of petitioner's financial statements-without information otherwise acquired by it but which is not offered in evidence or, even if so
affording petitioner the benefit of an explanation as to what particular aspect or aspects adduced, petitioner was given no opportunity to controvert.
of the financial statements warranted a corresponding rate reduction. No rationalization Again, the order requires the new reduced rates to be made effective on a specified
was offered nor were the attending contingencies, if any, discussed, which prompted date. It becomes a final legislative act as to the period during which it has to remain in
respondents to impose as much as a fifteen percent (15%) rate reduction. It is not far- force pending the final determination of the case. 13 An order of respondent NTC
fetched to assume that petitioner could be in a better position to rationalize its rates vis- prescribing reduced rates, even for a temporary period, could be unjust, unreasonable
a-vis the viability of its business requirements. The rates it charges result from an or even confiscatory, especially if the rates are unreasonably low, since the utility
exhaustive and detailed study it conducts of the multi-faceted intricacies attendant to a permanently loses its just revenue during the prescribed period. In fact, such order is
public service undertaking of such nature and magnitude. We are, therefore, inclined in effect final insofar as the revenue during the period covered by the order is
to lend greater credence to petitioner's ratiocination that an immediate reduction in its concerned. Upon a showing, therefore, that the order requiring a reduced rate is
rates would adversely affect its operations and the quality of its service to the public confiscatory, and will unduly deprive petitioner of a reasonable return upon its property,
considering the maintenance requirements, the projects it still has to undertake and the a declaration of its nullity becomes inductible, which brings us to the issue on
financial outlay involved. Notably, petitioner was not even afforded the opportunity to substantive due process.
cross-examine the inspector who issued the report on which respondent NTC based III. Petitioner contends that the rate reduction is confiscatory in that its implementation
its questioned order. would virtually result in a cessation of its operations and eventual closure of business.
At any rate, there remains the categorical admission made by respondent NTC that the On the other hand, respondents assert that since petitioner is operating its
questioned order was issued pursuant to its quasi-judicial functions. It, however, insists communications satellite facilities through a legislative franchise, as such grantee it has
that notice and hearing are not necessary since the assailed order is merely incidental no vested right therein. What it has is merely a privilege or license which may be
to the entire proceedings and, therefore, temporary in nature. This postulate is bereft revoked at will by the State at any time without necessarily violating any vested property
of merit. right of herein petitioner. While petitioner concedes this thesis of respondent, it counters
While respondents may fix a temporary rate pending final determination of the that the withdrawal of such privilege should nevertheless be neither whimsical nor
application of petitioner, such rate-fixing order, temporary though it may be, is not arbitrary, but it must be fair and reasonable.
exempt from the statutory procedural requirements of notice and hearing, as well as There is no question that petitioner is a mere grantee of a legislative franchise which is
the requirement of reasonableness. Assuming that such power is vested in NTC, it may subject to amendment, alteration, or repeal by Congress when the common good so
not exercise the same in an arbitrary and confiscatory manner. Categorizing such an requires. 14 Apparently, therefore, such grant cannot be unilaterally revoked absent a
order as temporary in nature does not perforce entail the applicability of a different rule showing that the termination of the operation of said utility is required by the common
of statutory procedure than would otherwise be applied to any other order on the same good.
matter unless otherwise provided by the applicable law. In the case at bar, the The rule is that the power of the State to regulate the conduct and business of public
applicable statutory provision is Section 16(c) of the Public Service Act which provides: utilities is limited by the consideration that it is not the owner of the property of the utility,
Section 16. Proceedings of the Commission, upon notice and hearing the or clothed with the general power of management incident to ownership, since the
Commission shall have power, upon proper notice and hearing in accordance private right of ownership to such property remains and is not to be destroyed by the
with the rules and provisions of this Act, subject to the limitations and regulatory power. The power to regulate is not the power to destroy useful and harmless
exceptions mentioned and saving provisions to the contrary: enterprises, but is the power to protect, foster, promote, preserve, and control with due
xxx xxx xxx regard for the interest, first and foremost, of the public, then of the utility and of its
(c) To fix and determine individual or joint rates, ... which shall be imposed, patrons. Any regulation, therefore, which operates as an effective confiscation of
observed and followed thereafter by any public service; ... private property or constitutes an arbitrary or unreasonable infringement of property
There is no reason to assume that the aforesaid provision does not apply to respondent rights is void, because it is repugnant to the constitutional guaranties of due process
NTC, there being no limiting, excepting, or saving provisions to the contrary in and equal protection of the laws. 15
Executive Orders Nos. 546 and 196. Hence, the inherent power and authority of the State, or its authorized agent, to regulate
It is thus clear that with regard to rate-fixing, respondent has no authority to make such the rates charged by public utilities should be subject always to the requirement that
order without first giving petitioner a hearing, whether the order be temporary or the rates so fixed shall be reasonable and just. A commission has no power to fix rates
which are unreasonable or to regulate them arbitrarily. This basic requirement of WHEREFORE, the writ prayed for is GRANTED and the order of respondents, dated
reasonableness comprehends such rates which must not be so low as to be September 2, 1988, in NTC Case No. 87-94 is hereby SET ASIDE. The temporary
confiscatory, or too high as to be oppressive. 16 restraining order issued under our resolution of September 13, 1988, as specifically
What is a just and reasonable rate is not a question of formula but of sound business directed against the aforesaid order of respondents on the matter of existing rates on
judgment based upon the evidence 17 it is a question of fact calling for the exercise of petitioner's present authorized services, is hereby made permanent.
discretion, good sense, and a fair, enlightened and independent judgment. 18 In SO ORDERED.
determining whether a rate is confiscatory, it is essential also to consider the given Fernan, (C.J.), Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Bidin,
situation, requirements and opportunities of the utility. A method often employed in Sarmiento, Cortes, Grio-Aquino and Medialdea, JJ., concur.
determining reasonableness is the fair return upon the value of the property to the Padilla, J., took no part.
public utility. Competition is also a very important factor in determining the
reasonableness of rates since a carrier is allowed to make such rates as are necessary Separate Opinions
to meet competition. 19
A cursory perusal of the assailed order reveals that the rate reduction is solely and GUTIERREZ, JR., J., concurring:
primarily based on the initial evaluation made on the financial statements of petitioner, I concur in the ponencia of Justice Regalado and join him in the erudite and thorough
contrary to respondent NTC's allegation that it has several other sources of information discussion of the respondent's authority. However, I have reservations about our
without, however, divulging such sources. Furthermore, it did not as much as make an continuing to abide by the dictum that in the exercise of quasi-legislative power, notice
attempt to elaborate on how it arrived at the prescribed rates. It just perfunctorily and hearing are not required. I believe that this doctrine is ripe for re- examination.
declared that based on the financial statements, there is merit for a rate reduction Senators and Congressmen are directly elected by the people. Administrative officials
without any elucidation on what implications and conclusions were necessarily inferred are not. If the members of an administrative body are, as is so often the case, appointed
by it from said statements. Nor did it deign to explain how the data reflected in the not on the basis of competence and qualifications but out of political or personal
financial statements influenced its decision to impose a rate reduction. considerations, it is not only the sense of personal responsibility to the electorate
On the other hand, petitioner may likely suffer a severe drawback, with the consequent affected by legislation which is missing. The expertise and experience needed for the
detriment to the public service, should the order of respondent NTC turn out to be issuance of sound rules and regulations would also be sorely lacking.
unreasonable and improvident. The business in which petitioner is engaged is unique Congress never passes truly important legislation without holding public hearings. Yet,
in that its machinery and equipment have always to be taken in relation to the administrative officials who are not directly attuned to the public pulse see no need for
equipment on the other end of the transmission arrangement. Any lack, aging, hearings. They issue rules and circulars with far reaching effects on our economy and
acquisition, rehabilitation, or refurbishment of machinery and equipment necessarily our nation's future on the assumption that the head of an agency knows best what is
entails a major adjustment or innovation on the business of petitioner. As pointed out good for the people. I believe that in the exercise of quasi-legislative powers,
by petitioner, any change in the sending end abroad has to be matched with the administrative agencies, much, much more than Congress, should hold hearings and
corresponding change in the receiving end in the Philippines. Conversely, any in the should be given guidelines as to when notices and hearings are essential even in quasi-
receiving end abroad has to be matched with the corresponding change in the sending legislation.
end in the Philippines. An inability on the part of petitioner to meet the variegations
demanded be technology could result in a deterioration or total failure of the service of G.R. No. 141314 April 9, 2003
satellite communications. REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY
At present, petitioner is engaged in several projects aimed at refurbishing, BOARD, petitioner,
rehabilitating, and renewing its machinery and equipment in order to keep up with the vs.
continuing charges of the times and to maintain its facilities at a competitive level with MANILA ELECTRIC COMPANY, respondent.
the technological advances abroad. There projected undertakings were formulated on x-----------------------------x
the premise that rates are maintained at their present or at reasonable levels. Hence, G.R. No. 141369 April 9, 2003
an undue reduction thereof may practically lead to a cessation of its business. While LAWYERS AGAINST MONOPOLY AND POVERTY (LAMP) consisting of
we concede the primacy of the public interest in an adequate and efficient service, the CEFERINO PADUA, Chairman, G. FULTON ACOSTA, GALILEO BRION,
same is not necessarily to be equated with reduced rates. Reasonableness in the rates ANATALIA BUENAVENTURA, PEDRO CASTILLO, NAPOLEON CORONADO,
assumes that the same is fair to both the public utility and the consumer. ROMEO ECHAUZ, FERNANDO GAITE, ALFREDO DE GUZMAN, ROGELIO
Consequently, we hold that the challenged order, particularly on the issue of rates KARAGDAG, JR., MA. LUZ ARZAGA-MENDOZA, ANSBERTO PAREDES,
provided therein, being violative of the due process clause is void and should be AQUILINO PIMENTEL III, MARIO REYES, EMMANUEL SANTOS, RUDEGELIO
nullified. Respondents should now proceed, as they should heretofore have done, with TACORDA, members, and ROLANDO ARZAGA, Secretary-General, JUSTICE
the hearing and determination of petitioner's pending application for a certificate of ABRAHAM SARMIENTO, SENATOR AQUILINO PIMENTEL, JR. and
public convenience and necessity and in which proceeding the subject of rates involved COMMISSIONER BARTOLOME FERNANDEZ, JR., Board of Consultants, and
in the present controversy, as well as other matter involved in said application, be duly Lawyer GENARO LUALHATI, petitioners,
adjudicated with reasonable dispatch and with due observance of our pronouncements vs.
herein. MANILA ELECTRIC COMPANY (MERALCO), respondent.
RESOLUTION
PUNO, J.: recovered as costs from the consuming public. It contended that: (1) the foreign
The business and operations of a public utility are imbued with public interest. In a very jurisprudence cited by MERALCO in support of its position is not applicable in this
real sense, a public utility is engaged in public service-- providing basic commodities jurisdiction; (2) MERALCO was given a fair rate of return; (3) the COA and the ERB
and services indispensable to the interest of the general public. For this reason, a public followed the National Accounting and Auditing Manual which expressly disallows the
utility submits to the regulation of government authorities and surrenders certain treatment of income tax as operating expense; (4) Executive Order No. 72 does not
business prerogatives, including the amount of rates that may be charged by it. It is the grant electric utilities the privilege of treating income tax as operating expense; (5) the
imperative duty of the State to interpose its protective power whenever too much profits COA and the ERB have been consistent in not allowing income tax as part of operating
become the priority of public utilities. expenses; (6) ERB decisions allowing the application of a tax recovery clause are
For resolution is the Motion for Reconsideration filed by respondent Manila Electric inapropos; (7) allowing MERALCO to treat income tax as an operating expense would
Company (MERALCO) on December 5, 2002 from the decision of this Court dated set a dangerous precedent; (8) assuming that the disallowance of income tax as
November 15, 2002 reducing MERALCO's rate adjustment in the amount of P0.017 per operating expense would discourage foreign investors and lenders, the government is
kilowatthour (kwh) for its billing cycles beginning 1994 and further directing MERALCO not precluded from enacting laws and instituting measures to lure them back; and (9)
to credit the excess average amount of P0.167 per kwh to its customers starting with the findings and conclusions of the ERB carry great weight and should be binding on
MERALCO's billing cycles beginning February 1994.1 the courts in the absence of grave abuse of discretion. The Solicitor General agrees
First, we leapfrog through the facts. On December 23, 1993, MERALCO filed with the with the ERC that the "net average investment method" is a reasonable method for
Energy Regulatory Board (ERB) an application for revised rates, with an average property valuation. Finally, the Solicitor General argues that the ERB decision may be
increase of P0.21 per kwh in its distribution charge. On January 28, 1994 the ERB applied retroactively and the use of a test period to determine the rate base and
granted a provisional increase of P0.184 per kwh subject to the condition that in the allowable rates to be collected by a public utility is an accepted practice. 4
event the ERB determines that MERALCO is entitled to a lesser increase in rates, all We shall discuss the main issues in seriatim.
excess amounts collected by MERALCO shall be refunded to its customers or credited I
in their favor. The Commission on Audit (COA) conducted an examination of the books MERALCO argues that deduction of all kinds of taxes, including income tax, from the
of accounts and records of MERALCO and thereafter recommended, among others, gross revenues of a public utility is firmly entrenched in American jurisprudence. It
that: (1) income taxes paid by MERALCO should not be included as part of contends that the Public Service Act (Commonwealth Act No. 146) was patterned after
MERALCO's operating expenses and (2) the "net average investment method" or the Act 2306 of the Philippine Commission, which, in turn, was borrowed from American
"number of months use method" should be applied in determining the proportionate state public utility laws such as the New Jersey Public Utility Act. Hence, it maintains
value of the properties used by MERALCO during the test year. that American jurisprudence on the inclusion of income taxes as a lawful charge to
In its decision dated February 16, 1998, the ERB adopted the recommendations of the operating expenses should be controlling. It cites the rule on statutory construction that
COA and authorized MERALCO to adopt a rate adjustment of P0.017 per kilowatthour a statute adopted from a foreign country will be presumed to be adopted with the
(kwh) for its billing cycles beginning 1994. The ERB further directed MERALCO to credit construction placed upon it by the courts of that country before its adoption.5
the excess average amount of P0.167 per kwh to its customers starting with We are not persuaded. American decisions and authorities are not per se controlling in
MERALCO's billing cycles beginning February 1994. The said ruling of the ERB was this jurisdiction. At best, they are persuasive for no court holds a patent on correct
affirmed by this Court in its decision dated November 15, 2002. decisions. Our laws must be construed in accordance with the intention of our own
In its Motion for Reconsideration, respondent MERALCO contends that: (1) the lawmakers and such intent may be deduced from the language of each law and the
deduction of income tax from revenues allowed for rate determination of public utilities context of other local legislation related thereto. More importantly, they must be
is part of its constitutional right to property; (2) it correctly used the "average investment construed to serve our own public interest which is the be-all and the end-all of all our
method" or the "simple average" in computing the value of its properties entitled to a laws. And it need not be stressed that our public interest is distinct and different from
return instead of the "net average investment method" or the "number of months use others.
method"; and (3) the decision of the ERB ordering the refund of P0.167 per kwh to its Rate regulation calls for a careful consideration of the totality of facts and
customers should not be given retroactive effect.2 circumstances material to each application for an upward rate revision. Rate regulators
The Republic of the Philippines through the ERB, now Energy Regulatory Commission should strain to strike a balance between the clashing interests of the public utility and
(ERC), represented by the Office of the Solicitor General, filed its Comment on March the consuming public and the balance must assure a reasonable rate of return to public
7, 2003. Surprisingly, in its Comment, the ERC proffered a divergent view from the utilities without being unreasonable to the consuming public. What is reasonable or
Office of the Solicitor General. The ERC submits that income taxes are not operating unreasonable depends on a calculus of changing circumstances that ebb and flow with
expenses but are reasonable costs that may be recoverable from the consuming public. time. Yesterday cannot govern today, no more than today can determine tomorrow.
While the ERC admits that "there is still no categorical determination on whether Prescinding from these premises, we reject MERALCO's insistence that the non-
income tax should indeed be deducted from revenues of a public utility," it agrees with inclusion of income tax payments as a legitimate operating expense will deny public
MERALCO that to disallow public utilities from recovering its income tax payments will utilities a fair return of their investment. This stubborn stance is belied by the report
effectively lower the return on rate base enjoyed by a public utility to 8%. The ERC, submitted by the COA on the audit conducted on MERALCO's books of accounts and
however, agrees with this Court's ruling that the use of the "net average investment the findings of the ERB.6
method" or the "number of months use method" is not unreasonable.3 Upon the instructions of the ERB, the COA conducted an audit of the operations of
The Office of the Solicitor General, under its solemn duty to protect the interests of the MERALCO covering the period from February 1, 1994 to January 31, 1995, or the
people, defended the thesis that income tax payments by a public utility should not be period immediately after the implementation of the provisional rate increase.7 Hence,
amounts culled by the COA from its examination of the books of MERALCO already Computed Revenue P 44,003,213,000
included the provisional rate increase of P0.184 granted by the ERB.
From the figures submitted by the COA, the ERB was able to determine that MERALCO Actual Revenue P 44,315,951,000
derived excess revenue during the test year in the amount of P2,448,378,000.8 This Excess Revenue P 312,738,000
means that during the test year, and after the rates were increased by P0.184,
Percent of Excess Revenue to Invested Capital 1.04%
MERALCO earned P2,448,378,000 or 8.15% more than the amount it should have
earned at a 12% rate of return on rate base. Accordingly, based on this amount of Authorized Rate of Return 12.00%
excess revenue, the ERB determined that the provisional rate granted by it to Actual Rate of Return 13.04%
MERALCO was P0.167 per kwh more than the amount MERALCO ought to charge its
customers to obtain the prescribed 12% rate of return on rate base. Thus, the ERB It is crystal clear, therefore, that even if income tax is to be included as an operating
correspondingly lowered the provisional increase by P0.167 per kwh and ordered expense and hence, recoverable from the consuming public, MERALCO would still
MERALCO to increase its rates at a reduced amount of P0.017 per kwh, computed as enjoy a rate of return that is above the authorized rate of 12%. Public utilities cannot be
follows:9 allowed to overcharge at the expense of the public and worse, they cannot complain
that they are not overcharging enough.
At appraised value Be that as it may, MERALCO contends that considering income tax payments of public
Total Invested Capital Entitled P 30,059,614,00010 utilities constitute one-third of their net income, public utilities will effectively get, not the
12% rate of return on rate base allowed them, but only about 8%.14 Again, we are not
to Return
persuaded.
12% return thereon P 3,607,154,000 The foregoing argument assumes that the 12% return allowed to public utilities is
Add: Total Operating expenses P 38,260,420,00011 equivalent to its taxable income which will be subject to income tax. The 12% rate of
return is computed only for the purpose of fixing the allowable rates to be charged by
for Rate Determination a public utility and is in no way determinative of the income subject to income tax of the
Purposes P 41,867,573,000 public utility. The computation of a corporation's income tax liability is an altogether
Computed Revenue different matter, with the corporation's taxable income derived by taking into account
Actual Revenue P 44,315,951,000 the corporation's gross revenues less allowable deductions. 15
At any rate, even on the assumption that in the test year involved (February 1, 1994 to
Excess Revenue P 2,448,378,000 January 31, 1995), MERALCO's computed revenue of P 41,867,573,000 or the amount
Percent of Excess Revenue to 8.15% that it is allowed to earn based on a 12% rate of return is its taxable income, after
payment of its income tax liability of P2,135,639,000.00, MERALCO would still obtain
Invested Capital
an 11.38% rate of return or a return that is well within the 12% rate allowed to public
Authorized Rate of Return 12.00% utilities.16
Actual Rate of Return 20.15% MERALCO also contends that even the successor of the ERB or the ERC created
under the Electric Power Industry Reform Act of 2001 (EPIRA)17 "adheres to the
Total kwh sold 14,640,094,000 principle that income tax is part of operating expense." 18 To bolster its argument,
Ratio of Excess Revenue to MERALCO cites Article 36 of the EPIRA which charges the ERC with the responsibility
of unbundling the rates of the National Power Corporation (NPC) and each distribution
Total kwh Sold P 0.167 utility coming within the coverage of the law.19 MERALCO alleges that pursuant to said
In fact, even if MERALCO's income tax liability would be included as an operating provision, the ERC issued a set of Uniform Rate Filing Requirements (UFR) containing
expense, MERALCO would still enjoy excess revenue of P312,738,000.00 or 1.04% guidelines to be followed with respect to rate unbundling applications to be filed.
above the authorized rate of return of 12%. Based on its audit, the COA determined MERALCO asserts that under the UFR, the enumeration of the expenses which are to
that the provision for income tax liability of MERALCO amounted to be recovered through the rates, and which are to be separated or allocated for the
P2,135,639,000.00.12 Thus, even if such amount of income tax liability would be purpose of unbundling of these rates include income tax expenses.
included as operating expense, the amount of excess revenue earned by MERALCO Under Section 36 of the EPIRA, the NPC and every distribution facility covered by the
during the test year would be more than sufficient to cover the additional income tax law is mandated to unbundle, segregate or itemize its rates according to the various
expense. Thus: sectors of the electric power industry identified in the law, namely: generation,
At appraised value transmission, distribution and supply.20 The law further directs the ERC to regulate and
facilitate the unbundling of rates prescribed by Section 36. Thus, on October 30, 2001,
Total Invested Capital Entitled to Return P 30,059,614,000
the ERC issued guidelines prescribing the uniform rate filing requirements to be
12% return thereon P 3,607,154,000 followed by distribution facilities for the purposes of unbundling rates. 21
A proper appreciation of the UFR shows that it simply specifies a uniform accounting
Add: Total Operating expenses for Rate P 40,396,059,00013
system to be complied with by a distribution facility when filing an application for revised
Determination Purposes
rates under the EPIRA. As the EPIRA requires the unbundling or segregation of rates
according to the different sectors of the electric power industry, the UFR seeks to with its public duty if a regulatory body is allowed wide discretion in the choice
facilitate this process by properly identifying the accounts or information required for of methods rationally related to the achievement of this end.30
proper evaluation by the ERB. Thus, the introductory statements of the UFR provide: Thus, the rule then as it is now, is that rate regulating authorities are not hidebound to
These uniform rate filing requirements are intended to promote consistency use any single formula or combination of formulas for property valuation purposes
and completeness in the rate filings required by Republic Act No. 9136 (RA because the rate-making process involves the balancing of investor and consumer
9136), Section 36. To that end, the filing requirements only specify minimum interests which takes into account various factors that may be unique or peculiar to a
form and content. A rate application in all its aspects continues to be subject particular rate revision application.
to subsequent Commission review and deliberation.22 We again stress the long established doctrine that findings of administrative or
At the onset, it is clear that the UFR does not seek to determine which accounting regulatory agencies on matters which are within their technical area of expertise are
method will be used by the ERC for determination of rate base or the items of expenses generally accorded not only respect but at times even finality if such findings and
that may be recovered by a public utility from its customers. The UFR only seeks to conclusions are supported by substantial evidence.31 Rate fixing calls for a technical
prescribe a uniform system or format to standardize or facilitate the process of examination and a specialized review of specific details which the courts are ill-
unbundling of rates mandated by the EPIRA. At best, the UFR prescribes the set of raw equipped to enter, hence, such matters are primarily entrusted to the administrative or
data or figures to be disclosed by a distribution facility that the ERC will need to regulating authority.32
determine the authorized rates that a distribution facility may charge. The UFR does Thus, this Court finds no reversible error on the part of the COA and the ERB in
not, in any way, determine the manner by which the set of data or figures indicated in adopting the "net average investment method" or the "number of months use method"
the rate application will be evaluated by the ERC for rate determination purposes. for property valuation purposes in the cases at bar.
II III
MERALCO also challenges the use of the "net average investment method" or the MERALCO also rants against the retroactive application of the rate adjustment ordered
"number of months use method" on the ground that MERALCO and the Public Service by the ERB and affirmed by this Court. In its decision, the ERB, after authorizing
Commission (PSC) have been consistently applying the "average investment method" MERALCO to adopt a rate adjustment in the amount of P0.017 per kwh, directed
or "simple average", which it alleged was also affirmed by this Court in the case of MERALCO to refund or credit to its customers' future consumption the excess average
MERALCO v. PSC23 and Republic v. Medina.24 amount of P0.167 per kwh from its billing cycles beginning February 1994 33 until its
It is true that in MERALCO v. PSC,25 the issue of the proper valuation method to be billing cycles beginning February 1998.34 In the decision appealed from, this Court
used in determining the value of MERALCO's utility plants for rate fixing purposes was likewise ordered that the refund in the average amount of P0.167 per kwh be made to
brought to fore. In the said case, MERALCO applied the "average investment method" retroact from MERALCO's billing cycles beginning February 1994.
or "simple average" by obtaining the average value of the utility plants, using its values MERALCO contends that the refund cannot be given retroactive effect as the figures
at the beginning and at the end of the test year. In contrast, the General Auditing Office determined by the ERB only apply to the test year or the period subject of the COA
used the "appraisal method" which fixes the value of the utility plants by ascertaining Audit, i.e., February 1, 1994 to January 31, 1995. It reasoned that the amounts used to
the cost of production per kilowatt and multiplying the same by the total capacity of said determine the proper rates to be charged by MERALCO would vary from year to year
plants, less the corresponding depreciation. 26 In upholding the "average investment and thus the computation of the excess average charge of P0.167 would hold true only
method" used by MERALCO, this Court adopted the findings of the PSC for being "by for the test year. Thus, MERALCO argues that if a refund of P0.167 would be uniformly
and large, supported by the records of the case." 27 This Court did not make an applied to its billing cycles beginning 1994, with respect to periods after January 31,
independent assessment of the validity or applicability of the average investment 1995, there will be instances wherein its operating revenues would fall below the 12%
method but simply did not disturb the findings of the PSC for being supported by authorized rate of return. MERALCO therefore suggests that the dispositive portion be
substantial evidence. To conclude that the said decision "affirmed" the use of the modified and order that "the refund applicable to the periods after January 31, 1995 is
"average investment method" thereby implying that the said method is the only method to be computed on the basis of the excess collection in proportion to the excess over
to be applied in all instances, is a strained reading of the decision. the 12% return."35
In fact, in the case of Republic v. Medina,28 also cited by MERALCO to have affirmed The purpose of the audit procedures conducted in a rate application proceeding is to
the use of the "average investment method", this Court ruled: determine whether the rate applied for will generate a reasonable return for the public
The decided weight of authority, however, is to the effect that property utility, which, in accordance with settled laws and jurisprudence, is 12% on rate base
valuation is not to be solved by formula but depends upon the particular or the present value of the assets used in the operations of a public utility. For audit
circumstances and relevant facts affecting each utility as to what constitutes purposes, however, there is a need to obtain a sample set of data-- usually derived
a just rate base and what would be a fair return, just to both the utility and the from figures within a designated period of time-- to determine the amount of returns
public.29 obtained by a public utility during such period. In the cases at bar, the COA conducted
Further, Mr. Justice Castro in his concurring opinion in the same case elucidated: an audit for the test year beginning February 1, 1994 and ending January 31, 1995 or
A regulatory commission's field of inquiry, however, is not confined to the a 12-month period immediately after the order of the ERB granting a provisional
computation of the cost of service or capital nor to a mere prognostication of increase in the amount of P0.184 per kwh was issued. Thus, the ultimate issue resolved
the future behavior of the money and capital markets. It must also balance by the COA when it conducted its audit was whether the provisional increase granted
investor and consumer expectations in such a way that broad requirements of by the ERB generated an amount of return well within the rates authorized by law. As
public interest may be meaningfully realized. It would hence appear in keeping stated earlier, based on the findings of the ERB, with the increase of P0.184 per kwh,
MERALCO obtained a rate of return which was 8.15% more than the authorized rate
of return of 12%.36 Thus, a refund in the amount of P0.167 was determined and ordered After perusing the respondent's Motion for Reconsideration, the Comment thereon by
by ERB. the Office of the Solicitor General (OSG) and the other pleadings filed by the parties, I
The essence of the use of a "test year" for auditing purposes is to obtain a sample or believe there are still lingering questions that need to be answered or clarified before
representative set of figures to enable the examining authority to arrive at a conclusion the Motion for Reconsideration should be resolved. Some of the more important
or finding based on the gathered data. The use of a "test year" does not mean that the questions are the following:
information and conclusions so derived would only be correct for that year and would Effect of ERC's
be incorrect on the succeeding years. The use of a "test year" assumes that within a Self-Reversal
reasonable period after such test year, figures used to determine the amount of return First, this case reached this Court because the Energy Regulatory Board (ERB), now
would only vary slightly from the figures culled during the test year such that the impact known as the Energy Regulatory Commission (ERC), appealed to us the Decision of
on the utility's rate of return would not be very significant. Thus, in the event that there the Court of Appeals (CA), which upheld Meralco. In its Comment to Meralco's Motion
is a substantial change in circumstances significantly affecting the variable amounts for Reconsideration, however, the OSG as counsel for ERC informed this Court
that would determine the reasonableness of a return, an event which would normally that ERC has reversed its position and now believes that "income taxes . . . are
occur after a certain period of time has elapsed, the public utility may subsequently reasonable costs that may be recoverable from the consuming public." In the words of
apply for a rate revision. the ponencia, ERC "agrees with Meralco that to disallow public utilities from recovering
We agree with the Solicitor General that following MERALCO's reasoning that the its income tax payments will effectively lower the return on rate base enjoyed by a
figures culled from a test year would only be relevant during such year, there would be public utility to 8%."
a need for public utilities to apply for a rate adjustment every year and perform an audit 1. By reversing itself, is the ERC effectively abandoning its appeal before this
examination on a public utility's books of accounts every year as the amount of a utility's Court? If so, is it still proper for this Court to uphold the old ERB Decision? Be
revenue may fall above or below the authorized rates at any given year. Needless to it remembered that our own Decision is anchored on the theory that ERB
say, the trajectory of MERALCO's arguments will lead to an absurdity. should be affirmed, because it is the knowledgeable and specialized
From the time the order granting a provisional increase was issued by the ERB, government agency tasked with electric rate determination, and thus its
nowhere in the records does it appear that the subsequent refund of P0.167 per kwh findings and opinions unless obviously faulty merit full faith and credit.
ordered by the ERB was ever implemented or executed by MERALCO. 37 Accordingly, 2. Is the OSG, as counsel for the ERC and the government, authorized to
from January 28, 1994 MERALCO imposed on its customers a charge that is P0.167 argue against its own clients' position and thereby leave them without any
in excess of the proper amount. In fact, any application for rate adjustment that may lawyer?
have been applied for and/or granted to MERALCO during the intervening period would Effects of New
have to be reckoned from rates increased by P0.184 per kwh as these were the rates EPIRA Law
prevailing at the time any application for rate adjustment was made by MERALCO. Second, in its Comment, OSG informs us that a new law, RA 9136 the Electric Power
While we agree that the amounts used to determine the utility's rate of return would Industry Reform Act (EPIRA) was enacted on June 16, 2002. This law allegedly
vary from year to year, we are unable to subscribe to the view that the refund applicable authorizes ERC to determine rates that will "allow the recovery of a just and reasonable
to the periods after January 31, 1995 should be computed on the basis of the excess return of rate base (RORB) to enable the entity to operate viably." On this basis, ERC
collection in proportion to the excess over the 12% return. MERALCO's contention that opines that actual income taxes paid should now be deemed "reasonable costs" of
the refund for periods after January 31, 1995 should be computed on the basis of operating a public utility.
revenue of each year in excess of the 12% authorized rate of return calls for a year-by- 1. Does this mean that effective June 16, 2002, ERC may allow the deduction
year computation of MERALCO's revenues and assets which would be contrary to the of income taxes from operating expenses? Does this render our Decision
essence of an audit examination of a public utility based on a test year. To grant obsolete?
MERALCO's prayer would, in effect, allow MERALCO the benefit of a year-by-year Our Decision Allegedly
adjustment of rates not normally enjoyed by any other public utility required to adopt a Reduce Earnings to Only 8%
subsequent rate modification. Indeed, had the ERB ordered an increase in the Third, citing the report of the Commission on Audit (COA), the OSG originally opined
provisional rates it previously granted, said increase in rates would apply retroactively that MERALCO after the infusion of the provisional rate increase of 18.4 centavos
and would not have varied from year to year, depending on the variable amounts used would still earn 13% RORB if income taxes are not treated as operating expenses,
to determine the authorized rates that may be charged by MERALCO. We find no and 20% if they are deducted as operating expenses.
significant circumstance prevailing in the cases at bar that would justify the application 1. If this is so, why is Meralco still complaining that the old ERB Decision,
of a yearly adjustment as requested by MERALCO. which this Court is affirming, bars it from earning the maximum allowable profit
WHEREFORE, in view of the foregoing, the petitioner's Motion for Reconsideration is of 12%? How accurate are the OSG and COA computations? Or, is Meralco
DENIED WITH FINALITY. just misleading the Court?
SO ORDERED. 2. In any event, despite the COA figures, the OSG contends that at least
Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur. theoretically Meralco's profit would be reduced by our Decision to a
Panganiban, J., please see separate opinion. maximum of only 8% RORB, instead of the allowable 12%. At the same time,
it justifies the 8% RORB by arguing that the World Bank and the Asian
Separate Opinions Development Bank consider a public utility of 8% RORB still viable (p. 42 of
PANGANIBAN, J.: the OSG Comment). Which is which?
Special Privilege KAPUNAN, J.:
to Meralco Public utilities are privately owned and operated businesses whose service are
Fourth, in its Comment, the OSG argues that other public utilities are not allowed to essential to the general public. They are enterprises which specially cater to the needs
deduct income taxes as operating expenses. Why then should Meralco be given this of the public and conduce to their comfort and convenience. As such, public utility
special privilege, it rhetorically asks? services are impressed with public interest and concern. The same is true with respect
1. Is this true? If so, why has the ERC changed its position? Why is it now to the business of common carrier which holds such a peculiar relation to the public
allowing Meralco to deduct income tax payments as "reasonable costs" of interest that there is superinduced upon it the right of public regulation when private
operation? properties are affected with public interest, hence, they cease to be juris privati only.
Oral Argument When, therefore, one devotes his property to a use in which the public has an interest,
Is the Proper Thing he, in effect grants to the public an interest in that use, and must submit to the control
The foregoing are the more important questions I posed when I asked the Third Division by the public for the common good, to the extent of the interest he has thus created.1
to refer this case to the Court en banc and to conduct oral arguments on the Motion for An abdication of the licensing and regulatory government agencies of their functions as
Reconsideration of Meralco. These questions were not fully taken up by the pleadings the instant petition seeks to show, is indeed lamentable. Not only is it an unsound
of the parties. Thus, it would be pretentious for me to render an opinion on them. On administrative policy but it is inimical to public trust and public interest as well.
the other hand, I believe that a decision that does not take up these questions would The instant petition for certiorari assails the constitutionality and validity of certain
be incomplete. memoranda, circulars and/or orders of the Department of Transportation and
Hearing the parties on Oral Argument before the entire Court or even by just the Third Communications (DOTC) and the Land Transportation Franchising and Regulatory
Division, prior to resolving with finality the motion for reconsideration on a very Board LTFRB)2 which, among others, (a) authorize provincial bus and jeepney
important matter such as the present case is not unusual. In fact, with due respect, I operators to increase or decrease the prescribed transportation fares without
believe that this is the proper thing to do. application therefor with the LTFRB and without hearing and approval thereof by said
After all, very recently in PLDT v. City of Davao (GR No. 143863, March 27, 1993), the agency in violation of Sec. 16(c) of Commonwealth Act No. 146, as amended,
Court en banc conducted an Oral Argument on the Motion for Reconsideration otherwise known as the Public Service Act, and in derogation of LTFRB's duty to fix
challenging the unanimous Decision of the Second Division. That case involved the and determine just and reasonable fares by delegating that function to bus operators,
legality of whether a local government unit (LGU) like the City of Davao may impose and (b) establish a presumption of public need in favor of applicants for certificates of
local taxes on the Philippine Long Distance Telephone Company. The amount involved public convenience (CPC) and place on the oppositor the burden of proving that there
there was only about P4 million. On the other hand, the present case involves the is no need for the proposed service, in patent violation not only of Sec. 16(c) of CA 146,
refund of about P2.5 billion per year starting 1994, or about P20 billion up to the year as amended, but also of Sec. 20(a) of the same Act mandating that fares should be
2003. "just and reasonable." It is, likewise, violative of the Rules of Court which places upon
Apart from the monetary consideration, I believe the issues raised including the each party the burden to prove his own affirmative allegations.3 The offending
foregoing questions are important enough to merit a hearing also. May I stress that provisions contained in the questioned issuances pointed out by petitioner, have
this case will affect not only Meralco and its customers but all electric utilities and all resulted in the introduction into our highways and thoroughfares thousands of old and
their customers all over the Philippines, which means this case will affect all the people smoke-belching buses, many of which are right-hand driven, and have exposed our
of this country. consumers to the burden of spiraling costs of public transportation without hearing and
Finally, it is interesting to note that the unanimous Second Division Decision in the due process.
above cited PLDT case was upheld by the banc with some dissents led by the herein The following memoranda, circulars and/or orders are sought to be nullified by the
ponente, Mr. Justice Reynato S. Puno himself, but only after a full hearing by the full instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June 26, 1990
Court. relative to the implementation of a fare range scheme for provincial bus services in the
WHEREFORE, I regret I cannot cast my vote in favor of (or even against) the ponencia country; (b) DOTC Department Order No.
until and unless an Oral Argument is first called, preferably by the full Court, to clarify 92-587, dated March 30, 1992, defining the policy framework on the regulation of
the above questions. transport services; (c) DOTC Memorandum dated October 8, 1992, laying down rules
and procedures to implement Department Order No. 92-587; (d) LTFRB Memorandum
G.R. No. 115381 December 23, 1994 Circular No. 92-009, providing implementing guidelines on the DOTC Department
KILUSANG MAYO UNO LABOR CENTER, petitioner, Order No. 92-587; and (e) LTFRB Order dated March 24, 1994 in Case No. 94-3112.
vs. The relevant antecedents are as follows:
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum
REGULATORY BOARD, and the PROVINCIAL BUS OPERATORS ASSOCIATION Circular No. 90-395 to then LTFRB Chairman, Remedios A.S. Fernando allowing
OF THE PHILIPPINES, respondents. provincial bus operators to charge passengers rates within a range of 15% above and
Potenciano A. Flores for petitioner. 15% below the LTFRB official rate for a period of one (1) year. The text of the
Robert Anthony C. Sison, Cesar B. Brillantes and Jose Z. Galsim for private memorandum order reads in full:
respondent. One of the policy reforms and measures that is in line with the thrusts and the
Jose F. Miravite for movants. 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 4. In lieu of the said proposal, the DOTC with its agencies involved
policies and make progress towards greater reliance on free market forces. in public transportation can consider measures and reforms in the
Based on several surveys and observations, bus companies are already industry that will be socially uplifting, especially for the people in the
charging passenger rates above and below the official fare declared by areas devastated by the recent earthquake.
LTFRB on many provincial routes. It is in this context that some form of In view of the foregoing considerations, the undersigned respectfully suggests
liberalization on public transport fares is to be tested on a pilot basis. that the implementation of the proposed fare range scheme this year be
In view thereof, the LTFRB is hereby directed to immediately publicize a fare further studied and evaluated.
range scheme for all provincial bus routes in country (except those operating On December 5, 1990, private respondent Provincial Bus Operators Association of the
within Metro Manila). Transport Operators shall be allowed to charge Philippines, Inc. (PBOAP) filed an application for fare rate increase. An across-the-
passengers within a range of fifteen percent (15%) above and fifteen percent board increase of eight and a half centavos (P0.085) per kilometer for all types of
(15%) below the LTFRB official rate for a period of one year. provincial buses with a minimum-maximum fare range of fifteen (15%) percent over
Guidelines and procedures for the said scheme shall be prepared by LTFRB and below the proposed basic per kilometer fare rate, with the said minimum-maximum
in coordination with the DOTC Planning Service. fare range applying only to ordinary, first class and premium class buses and a fifty-
The implementation of the said fare range scheme shall start on 6 August centavo (P0.50) minimum per kilometer fare for aircon buses, was sought.
1990. On December 6, 1990, private respondent PBOAP reduced its applied proposed fare
For compliance. (Emphasis ours.) to an across-the-board increase of six and a half (P0.065) centavos per kilometer for
Finding the implementation of the fare range scheme "not legally feasible," Remedios ordinary buses. The decrease was due to the drop in the expected price of diesel.
A.S. Fernando submitted the following memorandum to Oscar M. Orbos on July 24, The application was opposed by the Philippine Consumers Foundation, Inc. and Perla
1990, to wit: C. Bautista alleging that the proposed rates were exorbitant and unreasonable and that
With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990 the application contained no allegation on the rate of return of the proposed increase
which the LTFRB received on 19 July 1990, directing the Board "to in rates.
immediately publicize a fare range scheme for all provincial bus routes in the On December 14, 1990, public respondent LTFRB rendered a decision granting the
country (except those operating within Metro Manila)" that will allow operators fare rate increase in accordance with the following schedule of fares on a straight
"to charge passengers within a range of fifteen percent (15%) above and computation method, viz:
fifteen percent (15%) below the LTFRB official rate for a period of one year" AUTHORIZED FARES
the undersigned is respectfully adverting the Secretary's attention to the LUZON
following for his consideration: MIN. OF 5 KMS. SUCCEEDING KM.
1. Section 16(c) of the Public Service Act prescribes the following for REGULAR P1.50 P0.37
the fixing and determination of rates (a) the rates to be approved STUDENT P1.15 P0.28
should be proposed by public service operators; (b) there should be VISAYAS/MINDANAO
a publication and notice to concerned or affected parties in the REGULAR P1.60 P0.375
territory affected; (c) a public hearing should be held for the fixing of STUDENT P1.20 P0.285
the rates; hence, implementation of the proposed fare range scheme FIRST CLASS (PER KM.)
on August 6 without complying with the requirements of the Public LUZON P0.385
Service Act may not be legally feasible. VISAYAS/
2. To allow bus operators in the country to charge fares fifteen (15%) MINDANAO P0.395
above the present LTFRB fares in the wake of the devastation, death PREMIERE CLASS (PER KM.)
and suffering caused by the July 16 earthquake will not be socially LUZON P0.395
warranted and will be politically unsound; most likely public criticism VISAYAS/
against the DOTC and the LTFRB will be triggered by the untimely MINDANAO P0.405
motu propio implementation of the proposal by the mere expedient AIRCON (PER KM.) P0.415.4
of publicizing the fare range scheme without calling a public hearing, On March 30, 1992, then Secretary of the Department of Transportation and
which scheme many as early as during the Secretary's predecessor Communications Pete Nicomedes Prado issued Department Order No.
know through newspaper reports and columnists' comments to be 92-587 defining the policy framework on the regulation of transport services. The full
Asian Development Bank and World Bank inspired. text of the said order is reproduced below in view of the importance of the provisions
3. More than inducing a reduction in bus fares by fifteen percent contained therein:
(15%) the implementation of the proposal will instead trigger an WHEREAS, Executive Order No. 125 as amended, designates the
upward adjustment in bus fares by fifteen percent (15%) at a time Department of Transportation and Communications (DOTC) as the primary
when hundreds of thousands of people in Central and Northern policy, planning, regulating and implementing agency on transportation;
Luzon, particularly in Central Pangasinan, La Union, Baguio City, WHEREAS, to achieve the objective of a viable, efficient, and dependable
Nueva Ecija, and the Cagayan Valley are suffering from the transportation system, the transportation regulatory agencies under or
devastation and havoc caused by the recent earthquake.
attached to the DOTC have to harmonize their decisions and adopt a common the detailed rules and procedures for the Implementation of the policies herein
philosophy and direction; set forth. In the formulation of such rules, the concerned agencies shall be
WHEREAS, the government proposes to build on the successful liberalization guided by the most recent studies on the subjects, such as the Provincial
measures pursued over the last five years and bring the transport sector Road Passenger Transport Study, the Civil Aviation Master Plan, the
nearer to a balanced longer term regulatory framework; Presidential Task Force on the Inter-island Shipping Industry, and the Inter-
NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, island Liner Shipping Rate Rationalization Study.
the following policies and principles in the economic regulation of land, air, For the compliance of all concerned. (Emphasis ours)
and water transportation services are hereby adopted: On October 8, 1992, public respondent Secretary of the Department of Transportation
1. Entry into and exit out of the industry. Following the Constitutional dictum and Communications Jesus B. Garcia, Jr. issued a memorandum to the Acting
against monopoly, no franchise holder shall be permitted to maintain a Chairman of the LTFRB suggesting swift action on the adoption of rules and procedures
monopoly on any route. A minimum of two franchise holders shall be permitted to implement above-quoted Department Order No. 92-587 that laid down deregulation
to operate on any route. and other liberalization policies for the transport sector. Attached to the said
The requirements to grant a certificate to operate, or certificate of public memorandum was a revised draft of the required rules and procedures covering (i)
convenience, shall be: proof of Filipino citizenship, financial capability, public Entry Into and Exit Out of the Industry and (ii) Rate and Fare Setting, with comments
need, and sufficient insurance cover to protect the riding public. and suggestions from the World Bank incorporated therein. Likewise, resplendent from
In determining public need, the presumption of need for a service shall be the said memorandum is the statement of the DOTC Secretary that the adoption of the
deemed in favor of the applicant. The burden of proving that there is no need rules and procedures is a pre-requisite to the approval of the Economic Integration
for a proposed service shall be with the oppositor(s). Loan from the World Bank.5
In the interest of providing efficient public transport services, the use of the On February 17, 1993, the LTFRB issued Memorandum Circular
"prior operator" and the "priority of filing" rules shall be discontinued. The route No. 92-009 promulgating the guidelines for the implementation of DOTC Department
measured capacity test or other similar tests of demand for vehicle/vessel fleet Order No. 92-587. The Circular provides, among others, the following challenged
on any route shall be used only as a guide in weighing the merits of each portions:
franchise application and not as a limit to the services offered. xxx xxx xxx
Where there are limitations in facilities, such as congested road space in IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.
urban areas, or at airports and ports, the use of demand management The issuance of a Certificate of Public Convenience is determined by public
measures in conformity with market principles may be considered. need. The presumption of public need for a service shall be deemed in favor
The right of an operator to leave the industry is recognized as a business of the applicant, while burden of proving that there is no need for the proposed
decision, subject only to the filing of appropriate notice and following a phase- service shall be the oppositor'(s).
out period, to inform the public and to minimize disruption of services. xxx xxx xxx
2. Rate and Fare Setting. Freight rates shall be freed gradually from V. Rate and Fare Setting
government controls. Passenger fares shall also be deregulated, except for The control in pricing shall be liberalized to introduce price competition
the lowest class of passenger service (normally third class passenger complementary with the quality of service, subject to prior notice and public
transport) for which the government will fix indicative or reference fares. hearing. Fares shall not be provisionally authorized without public hearing.
Operators of particular services may fix their own fares within a range 15% A. On the General Structure of Rates
above and below the indicative or reference rate. 1. The existing authorized fare range system of plus or minus 15 per cent for
Where there is lack of effective competition for services, or on specific routes, provincial buses and jeepneys shall be widened to 20% and -25% limit in 1994
or for the transport of particular commodities, maximum mandatory freight with the authorized fare to be replaced by an indicative or reference rate as
rates or passenger fares shall be set temporarily by the government pending the basis for the expanded fare range.
actions to increase the level of competition. 2. Fare systems for aircon buses are liberalized to cover first class and premier
For unserved or single operator routes, the government shall contract such services.
services in the most advantageous terms to the public and the government, xxx xxx xxx
following public bids for the services. The advisability of bidding out the (Emphasis ours).
services or using other kinds of incentives on such routes shall be studied by Sometime in March, 1994, private respondent PBOAP, availing itself of the
the government. deregulation policy of the DOTC allowing provincial bus operators to collect plus 20%
3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, and minus 25% of the prescribed fare without first having filed a petition for the purpose
the government shall not engage in special financing and incentive programs, and without the benefit of a public hearing, announced a fare increase of twenty (20%)
including direct subsidies for fleet acquisition and expansion. Only when the percent of the existing fares. Said increased fares were to be made effective on March
market situation warrants government intervention shall programs of this type 16, 1994.
be considered. Existing programs shall be phased out gradually. On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the
The Land Transportation Franchising and Regulatory Board, the Civil upward adjustment of bus fares.
Aeronautics Board, the Maritime Industry Authority are hereby directed to On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the
submit to the Office of the Secretary, within forty-five (45) days of this Order, petition for lack of merit. The dispositive portion reads:
PREMISES CONSIDERED, this Board after considering the In the case at bench, petitioner, whose members had suffered and continue to suffer
arguments of the parties, hereby DISMISSES FOR LACK OF MERIT grave and irreparable injury and damage from the implementation of the questioned
the petition filed in the above-entitled case. This petition in this case memoranda, circulars and/or orders, has shown that it has a clear legal right that was
was resolved with dispatch at the request of petitioner to enable it to violated and continues to be violated with the enforcement of the challenged
immediately avail of the legal remedies or options it is entitled under memoranda, circulars and/or orders. KMU members, who avail of the use of buses,
existing laws. trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary
SO ORDERED.6 increase in passenger fares. They are part of the millions of commuters who comprise
Hence, the instant petition for certiorari with an urgent prayer for issuance of a the riding public. Certainly, their rights must be protected, not neglected nor ignored.
temporary restraining order. Assuming arguendo that petitioner is not possessed of the standing to sue, this court
The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting is ready to brush aside this barren procedural infirmity and recognize the legal standing
and preventing respondents from implementing the bus fare rate increase as well as of the petitioner in view of the transcendental importance of the issues raised. And this
the questioned orders and memorandum circulars. This meant that provincial bus fares act of liberality is not without judicial precedent. As early as the Emergency Powers
were rolled back to the levels duly authorized by the LTFRB prior to March 16, 1994. A Cases, this Court had exercised its discretion and waived the requirement of proper
moratorium was likewise enforced on the issuance of franchises for the operation of party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et al.,9 we
buses, jeepneys, and taxicabs. ruled in the same lines and enumerated some of the cases where the same policy was
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by adopted, viz:
respondent LTFRB to provincial bus operators to set a fare range of plus or minus . . . A party's standing before this Court is a procedural technicality which it
fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (- may, in the exercise of its discretion, set aside in view of the importance of the
25%) percent, over and above the existing authorized fare without having to file a issues raised. In the landmark Emergency Powers Cases, [G.R. No. L-2044
petition for the purpose, is unconstitutional, invalid and illegal. Second, the (Araneta v. Dinglasan); G.R. No. L-2756 (Araneta
establishment of a presumption of public need in favor of an applicant for a proposed v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No.
transport service without having to prove public necessity, is illegal for being violative L-3055 (Guerrero v. Commissioner of Customs); and G.R. No. L-3056
of the Public Service Act and the Rules of Court. (Barredo v. Commission on Elections), 84 Phil. 368 (1949)], this Court
In its Comment, private respondent PBOAP, while not actually touching upon the issues brushed aside this technicality because "the transcendental importance to the
raised by the petitioner, questions the wisdom and the manner by which the instant public of these cases demands that they be settled promptly and definitely,
petition was filed. It asserts that the petitioner has no legal standing to sue or has no brushing aside, if we must, technicalities of procedure. (Avelino vs. Cuenco,
real interest in the case at bench and in obtaining the reliefs prayed for. G.R. No. L-2621)." Insofar as taxpayers' suits are concerned, this Court had
In their Comment filed by the Office of the Solicitor General, public respondents DOTC declared that it "is not devoid of discretion as to whether or not it should be
Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate that the petitioner does not entertained," (Tan v. Macapagal, 43 SCRA 677, 680 [1972]) or that it "enjoys
have the standing to maintain the instant suit. They further claim that it is within DOTC an open discretion to entertain the same or not." [Sanidad v. COMELEC, 73
and LTFRB's authority to set a fare range scheme and establish a presumption of public SCRA 333 (1976)].
need in applications for certificates of public convenience. xxx xxx xxx
We find the instant petition impressed with merit. In line with the liberal policy of this Court on locus standi, ordinary taxpayers,
At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has members of Congress, and even association of planters, and
the standing to sue. non-profit civic organizations were allowed to initiate and prosecute actions
The requirement of locus standi inheres from the definition of judicial power. Section 1 before this court to question the constitutionality or validity of laws, acts,
of Article VIII of the Constitution provides: decisions, rulings, or orders of various government agencies or
xxx xxx xxx instrumentalities. Among such cases were those assailing the constitutionality
Judicial power includes the duty of the courts of justice to settle actual of (a) R.A. No. 3836 insofar as it allows retirement gratuity and commutation
controversies involving rights which are legally demandable and enforceable, of vacation and sick leave to Senators and Representatives and to elective
and to determine whether or not there has been a grave abuse of discretion officials of both Houses of Congress (Philippine Constitution Association, Inc.
amounting to lack or excess of jurisdiction on the part of any branch or v. Gimenez, 15 SCRA 479 [1965]); (b) Executive Order No. 284, issued by
instrumentality of the Government. President Corazon C. Aquino on 25 July 1987, which allowed members of the
In Lamb v. Phipps,7 we ruled that judicial power is the power to hear and decide causes cabinet, their undersecretaries, and assistant secretaries to hold other
pending between parties who have the right to sue in the courts of law and equity. government offices or positions (Civil Liberties Union v. Executive Secretary,
Corollary to this provision is the principle of locus standi of a party litigant. One who is 194 SCRA 317 [1991]); (c) the automatic appropriation for debt service in the
directly affected by and whose interest is immediate and substantial in the controversy General Appropriations Act (Guingona v. Carague, 196 SCRA 221 [1991]; (d)
has the standing to sue. The rule therefore requires that a party must show a personal R.A. No. 7056 on the holding of desynchronized elections (Osmea v.
stake in the outcome of the case or an injury to himself that can be redressed by a Commission on Elections, 199 SCRA 750 [1991]); (e) P.D. No. 1869 (the
favorable decision so as to warrant an invocation of the court's jurisdiction and to justify charter of the Philippine Amusement and Gaming Corporation) on the ground
the exercise of the court's remedial powers in his behalf.8 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, subject to the limitations and exceptions mentioned and saving
206 SCRA 290 [1992]). provisions to the contrary:
Other cases where we have followed a liberal policy regarding locus standi xxx xxx xxx
include those attacking the validity or legality of (a) an order allowing the (c) To fix and determine individual or joint rates, tolls, charges,
importation of rice in the light of the prohibition imposed by R.A. No. 3452 classifications, or schedules thereof, as well as commutation,
(Iloilo Palay and Corn Planters Association, Inc. v. Feliciano, 13 SCRA 377 mileage kilometrage, and other special rates which shall be imposed,
[1965]; (b) P.D. Nos. 991 and 1033 insofar as they proposed amendments to observed, and followed thereafter by any public service: Provided,
the Constitution and P.D. No. 1031 insofar as it directed the COMELEC to That the Commission may, in its discretion, approve rates proposed
supervise, control, hold, and conduct the referendum-plebiscite on 16 October by public services provisionally and without necessity of any hearing;
1976 (Sanidad v. Commission on Elections, supra); (c) the bidding for the sale but it shall call a hearing thereon within thirty days thereafter, upon
of the 3,179 square meters of land at Roppongi, Minato-ku, Tokyo, Japan publication and notice to the concerns operating in the territory
(Laurel v. Garcia, 187 SCRA 797 [1990]); (d) the approval without hearing by affected: Provided, further, That in case the public service equipment
the Board of Investments of the amended application of the Bataan of an operator is used principally or secondarily for the promotion of
Petrochemical Corporation to transfer the site of its plant from Bataan to a private business, the net profits of said private business shall be
Batangas and the validity of such transfer and the shift of feedstock from considered in relation with the public service of such operator for the
naphtha only to naphtha and/or liquefied petroleum gas (Garcia v. Board of purpose of fixing the rates. (Emphasis ours).
Investments, 177 SCRA 374 [1989]; Garcia v. Board of Investments, 191 xxx xxx xxx
SCRA 288 [1990]); (e) the decisions, orders, rulings, and resolutions of the
Executive Secretary, Secretary of Finance, Commissioner of Internal Under the foregoing provision, the Legislature delegated to the defunct Public Service
Revenue, Commissioner of Customs, and the Fiscal Incentives Review Board Commission the power of fixing the rates of public services. Respondent LTFRB, the
exempting the National Power Corporation from indirect tax and duties existing regulatory body today, is likewise vested with the same under Executive Order
(Maceda v. Macaraig, 197 SCRA 771 [1991]); (f) the orders of the Energy No. 202 dated June 19, 1987. Section 5(c) of the said executive order authorizes
Regulatory Board of 5 and 6 December 1990 on the ground that the hearings LTFRB "to determine, prescribe, approve and periodically review and adjust,
conducted on the second provisional increase in oil prices did not allow the reasonable fares, rates and other related charges, relative to the operation of public
petitioner substantial cross-examination; (Maceda v. Energy Regulatory land transportation services provided by motorized vehicles."
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 Such delegation of legislative power to an administrative agency is permitted in order
Secretary, 211 SCRA 219 [1992]); (h) resolutions of the Commission on to adapt to the increasing complexity of modern life. As subjects for governmental
Elections concerning the apportionment, by district, of the number of elective regulation multiply, so does the difficulty of administering the laws. Hence,
members of Sanggunians (De Guia vs. Commission on Elections, 208 SCRA specialization even in legislation has become necessary. Given the task of determining
420 [1992]); and (i) memorandum orders issued by a Mayor affecting the Chief sensitive and delicate matters as
of Police of Pasay City (Pasay Law and Conscience Union, Inc. v. Cuneta, route-fixing and rate-making for the transport sector, the responsible regulatory body is
101 SCRA 662 [1980]). entrusted with the power of subordinate legislation. With this authority, an
In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), administrative body and in this case, the LTFRB, may implement broad policies laid
this Court, despite its unequivocal ruling that the petitioners therein had no down in a statute by "filling in" the details which the Legislature may neither have time
personality to file the petition, resolved nevertheless to pass upon the issues or competence to provide. However, nowhere under the aforesaid provisions of law are
raised because of the far-reaching implications of the petition. We did no less the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to
in De Guia v. COMELEC (Supra) where, although we declared that De Guia a common carrier, a transport operator, or other public service.
"does not appear to have locus standi, a standing in law, a personal or In the case at bench, the authority given by the LTFRB to the provincial bus operators
substantial interest," we brushed aside the procedural infirmity "considering to set a fare range over and above the authorized existing fare, is illegal and invalid as
the importance of the issue involved, concerning as it does the political it is tantamount to an undue delegation of legislative authority. Potestas delegata non
exercise of qualified voters affected by the apportionment, and petitioner delegari potest. What has been delegated cannot be delegated. This doctrine is based
alleging abuse of discretion and violation of the Constitution by respondent." 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
Now on the merits of the case. 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
On the fare range scheme. delegate mandated to discharge it directly.11 The policy of allowing the provincial bus
Section 16(c) of the Public Service Act, as amended, reads: operators to change and increase their fares at will would result not only to a chaotic
Sec. 16. Proceedings of the Commission, upon notice and hearing. situation but to an anarchic state of affairs. This would leave the riding public at the
The Commission shall have power, upon proper notice and mercy of transport operators who may increase fares every hour, every day, every
hearing in accordance with the rules and provisions of this Act, 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 Year** LTFRB authorized Fare Range Fare to be
change its freight rates at will, this Court categorically declared that: rate*** collected per
In our opinion, the Public Service Commission was not authorized by law to kilometer
delegate to the Philippine Railway Co. the power of altering its freight rates 1990 P0.37 15% (P0.05) P0.42
whenever it should find it necessary to do so in order to meet the competition 1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56
of road trucks and autobuses, or to change its freight rates at will, or to regard 1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73
its present rates as maximum rates, and to fix lower rates whenever in the 2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94
opinion of the Philippine Railway Co. it would be to its advantage to do so. Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive
The mere recital of the language of the application of the Philippine Railway government function that requires dexterity of judgment and sound discretion with the
Co. is enough to show that it is untenable. The Legislature has delegated to settled goal of arriving at a just and reasonable rate acceptable to both the public utility
the Public Service Commission the power of fixing the rates of public services, and the public. Several factors, in fact, have to be taken into consideration before a
but it has not authorized the Public Service Commission to delegate that balance could be achieved. A rate should not be confiscatory as would place an
power to a common carrier or other public service. The rates of public services operator in a situation where he will continue to operate at a loss. Hence, the rate
like the Philippine Railway Co. have been approved or fixed by the Public should enable public utilities to generate revenues sufficient to cover operational costs
Service Commission, and any change in such rates must be authorized or and provide reasonable return on the investments. On the other hand, a rate which is
approved by the Public Service Commission after they have been shown to too high becomes discriminatory. It is contrary to public interest. A rate, therefore, must
be just and reasonable. The public service may, of course, propose new rates, be reasonable and fair and must be affordable to the end user who will utilize the
as the Philippine Railway Co. did in case No. 31827, but it cannot lawfully services.
make said new rates effective without the approval of the Public Service Given the complexity of the nature of the function of rate-fixing and its far-reaching
Commission, and the Public Service Commission itself cannot authorize a effects on millions of commuters, government must not relinquish this important
public service to enforce new rates without the prior approval of said rates by function in favor of those who would benefit and profit from the industry. Neither should
the commission. The commission must approve new rates when they are the requisite notice and hearing be done away with. The people, represented by
submitted to it, if the evidence shows them to be just and reasonable, reputable oppositors, deserve to be given full opportunity to be heard in their opposition
otherwise it must disapprove them. Clearly, the commission cannot determine to any fare increase.
in advance whether or not the new rates of the Philippine Railway Co. will be The present administrative procedure, 14 to our mind, already mirrors an orderly and
just and reasonable, because it does not know what those rates will be. satisfactory arrangement for all parties involved. To do away with such a procedure
In the present case the Philippine Railway Co. in effect asked for permission and allow just one party, an interested party at that, to determine what the rate should
to change its freight rates at will. It may change them every day or every hour, be, will undermine the right of the other parties to due process. The purpose of a
whenever it deems it necessary to do so in order to meet competition or hearing is precisely to determine what a just and reasonable rate is.15 Discarding such
whenever in its opinion it would be to its advantage. Such a procedure would procedural and constitutional right is certainly inimical to our fundamental law and to
create a most unsatisfactory state of affairs and largely defeat the purposes public interest.
of the public service law.13 (Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded fare. On the presumption of public need.
If transport operators will be authorized to impose and collect an additional amount A certificate of public convenience (CPC) is an authorization granted by the LTFRB for
equivalent to 20% over and above the authorized fare over a period of time, this will the operation of land transportation services for public use as required by law. Pursuant
unduly prejudice a commuter who will be made to pay a fare that has been computed to Section 16(a) of the Public Service Act, as amended, the following requirements
in a manner similar to those of compounded bank interest rates. must be met before a CPC may be granted, to wit: (i) the applicant must be a citizen of
Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus the Philippines, or a corporation or co-partnership, association or joint-stock company
operators to collect a thirty-seven (P0.37) centavo per kilometer fare for ordinary buses. constituted and organized under the laws of the Philippines, at least 60 per centum of
At the same time, they were allowed to impose and collect a fare range of plus or minus its stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the
15% over the authorized rate. Thus P0.37 centavo per kilometer authorized fare plus applicant must be financially capable of undertaking the proposed service and meeting
P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to P0.42 centavos, the the responsibilities incident to its operation; and (iii) the applicant must prove that the
allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo operation of the public service proposed and the authorization to do business will
increase per kilometer in 1994, then, the base or reference for computation would have promote the public interest in a proper and suitable manner. It is understood that there
to be P0.47 centavos (which is P0.42 + P0.05 centavos). If bus operators will exercise must be proper notice and hearing before the PSC can exercise its power to issue a
their authority to impose an additional 20% over and above the authorized fare, then CPC.
the fare to be collected shall amount to P0.56 (that is, P0.47 authorized LTFRB rate While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB
plus 20% of P0.47 which is P0.29). In effect, commuters will be continuously subjected, Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and
not only to a double fare adjustment but to a compounding fare as well. On their part, contradictory policy guideline on the issuance of a CPC. The guidelines states:
transport operators shall enjoy a bigger chunk of the pie. Aside from fare increase The issuance of a Certificate of Public Convenience is determined by public
applied for, they can still collect an additional amount by virtue of the authorized fare need. The presumption of public need for a service shall be deemed in favor
range. Mathematically, the situation translates into the following:
of the applicant, while the burden of proving that there is no need for the however was committed in the issuance of DOTC Memorandum Order No. 90-395 and
proposed service shall be the oppositor's. (Emphasis ours). DOTC Memorandum dated October 8, 1992, the same being merely internal
The above-quoted provision is entirely incompatible and inconsistent with Section communications between administrative officers.
16(c)(iii) of the Public Service Act which requires that before a CPC will be issued, the WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and
applicant must prove by proper notice and hearing that the operation of the public the challenged administrative issuances and orders, namely: DOTC Department Order
service proposed will promote public interest in a proper and suitable manner. On the No. 92-587, LTFRB Memorandum Circular
contrary, the policy guideline states that the presumption of public need for a public No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are
service shall be deemed in favor of the applicant. In case of conflict between a statute hereby DECLARED contrary to law and invalid insofar as they affect provisions therein
and an administrative order, the former must prevail. (a) delegating to provincial bus and jeepney operators the authority to increase or
By its terms, public convenience or necessity generally means something fitting or decrease the duly prescribed transportation fares; and (b) creating a presumption of
suited to the public need.16 As one of the basic requirements for the grant of a CPC, public need for a service in favor of the applicant for a certificate of public convenience
public convenience and necessity exists when the proposed facility or service meets a and placing the burden of proving that there is no need for the proposed service to the
reasonable want of the public and supply a need which the existing facilities do not oppositor.
adequately supply. The existence or The Temporary Restraining Order issued on June 20, 1994 is hereby MADE
non-existence of public convenience and necessity is therefore a question of fact that PERMANENT insofar as it enjoined the bus fare rate increase granted under the
must be established by evidence, real and/or testimonial; empirical data; statistics and provisions of the aforementioned administrative circulars, memoranda and/or orders
such other means necessary, in a public hearing conducted for that purpose. The object declared invalid.
and purpose of such procedure, among other things, is to look out for, and protect, the No pronouncement as to costs.
interests of both the public and the existing transport operators. SO ORDERED.
Verily, the power of a regulatory body to issue a CPC is founded on the condition that Padilla, Davide, Jr., Bellosillo and Quiason, JJ., concur.
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 G.R. No. 141949 October 14, 2002
consideration for which a CPC is issued, and that fact alone must be consistently borne CEFERINO PADUA, petitioner,
in mind. Also, existing operators in subject routes must be given an opportunity to offer vs.
proof and oppose the application. Therefore, an applicant must, at all times, be required HON. SANTIAGO RANADA, PRESIDING JUDGE OF MAKATI, RTC, BRANCH 137,
to prove his capacity and capability to furnish the service which he has undertaken to PHILIPPINE NATIONAL CONSTRUCTION CORP.,
render. 18 And all this will be possible only if a public hearing were conducted for that TOLL REGULATORY BOARD,
purpose. DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, and
Otherwise stated, the establishment of public need in favor of an applicant reverses REPUBLIC OF THE PHILIPPINES, respondents.
well-settled and institutionalized judicial, quasi-judicial and administrative procedures. -----------------------------
It allows the party who initiates the proceedings to prove, by mere application, his G.R. No. 151108 October 14, 2002
affirmative allegations. Moreover, the offending provisions of the LTFRB memorandum EDUARDO C. ZIALCITA, petitioner,
circular in question would in effect amend the Rules of Court by adding another vs.
disputable presumption in the enumeration of 37 presumptions under Rule 131, Section TOLL REGULATORY BOARD AND CITRA METRO MANILA TOLLWAYS
5 of the Rules of Court. Such usurpation of this Court's authority cannot be CORPORATION, respondents.
countenanced as only this Court is mandated by law to promulgate rules concerning DECISION
pleading, practice and procedure. 19 SANDOVAL-GUTIERREZ, J.:
Deregulation, while it may be ideal in certain situations, may not be ideal at all in our The focal point upon which these two consolidated cases converge is whether
country given the present circumstances. Advocacy of liberalized franchising and Resolution No. 2001-89 issued by the Toll Regulatory Board (TRB) is valid.
regulatory process is tantamount to an abdication by the government of its inherent A brief narration of the factual backdrop is imperative, thus:
right to exercise police power, that is, the right of government to regulate public utilities On November 9, 2001, the TRB issued Resolution No. 2001-89 authorizing provisional
for protection of the public and the utilities themselves. toll rate adjustments at the Metro Manila Skyway, effective January 1, 2002,[1] thus:
While we recognize the authority of the DOTC and the LTFRB to issue administrative "NOW THEREFORE, it is RESOLVED, as it is hereby RESOLVED:
orders to regulate the transport sector, we find that they committed grave abuse of 1. That in view of urgent public interest, the Board hereby GRANTS to the
discretion in issuing DOTC Department Order Metro Manila Skyway Project, Provisional Relief in accordance with Rule 10,
No. 92-587 defining the policy framework on the regulation of transport services and Section 3 of the Rules of Practice and Procedure Governing Hearing before
LTFRB Memorandum Circular No. 92-009 promulgating the implementing guidelines the Toll Regulatory Board which states, among others "that the Board may
on DOTC Department Order No. 92-587, the said administrative issuances being grant (provisional relief)in its own initiativewithout prejudice to the final
amendatory and violative of the Public Service Act and the Rules of Court. decision after completion of the hearing;"
Consequently, we rule that the twenty (20%) per centum fare increase imposed by 2. That the Provisional Relief shall be in form of an interim toll rate adjustment
respondent PBOAP on March 16, 1994 without the benefit of a petition and a public in accordance with Section 7.04(3) of the Supplemental Toll Operation
hearing is null and void and of no force and effect. No grave abuse of discretion
Agreement, dated November 27, 1995, referring to Interim Adjustments in Toll Tracing back the events that led to the issuance of the said Resolution, it appears that
Rates upon the occurrence of a significant currency devaluation: on February 27, 2001 the Citra Metro Manila Tollways Corporation (CITRA) filed with
"Be APPROVED, as it is hereby APPROVED. the TRB an application for an interim adjustment of the toll rates at the Metro Manila
"RESOLVED FURTHER, as it is hereby RESOLVED: Skyway Project Stage 1.[3] CITRA moored its petition on the provisions of the
"That the ProvisionalToll Rates, which are not to exceed the following: "Supplemental Toll Operation Agreement" (STOA),[4] authorizing it, as the investor, to
apply for and if warranted, to be granted an interim adjustment of toll rates in the event
Unrounded Toll Rates for Implementation
of a "significant currency devaluation." The relevant portions of the STOA read:
Section
Toll Rates CLASS 1 CLASS 2 CLASS 3 a. The Investor and/or the Operator shall be entitled to apply for and if warranted, to be
granted an interim adjustment of Toll Rates upon the occurrence of any of the following
Elevated Portion 75.00 75.00 150.00 225.00 events:
xxx xxx
At-Grade Portion (ii) a significant currency devaluation
xxx xxx
Magallanes to Bicutan 19.35 19.50 38.50 58.00 (i) A currency devaluation shall be deemed "significant" if it results in a depreciation of
the value of the Philippine peso relative to the US dollar by at least 10%. For purposes
Bicutan to Sucat 11.21 11.00 22.50 34.00 hereof the exchange rate between the Philippine peso and the US dollar which shall be
applicable shall be the exchange rate between the above mentioned currencies in
Sucat to Alabang 10.99 11.00 21.00 32.50 effect as of the date of approval of the prevailing preceding Toll Rate.
* includes C5 entry/exit and Merville exit. (ii) The Investors right to apply for an interim Toll Rate adjustment under section 7.04
"For implementation starting January 1, 2002 after its publication once a week for three (3) (a) (ii) shall be effective only while any Financing is outstanding and have not yet
(3) consecutive weeks in a newspaper of general circulation and that said Provisional been paid in full.
Toll Rate Increase shall remain in effect until such time that the TRB Board has xxx xxx
determined otherwise: (iv) An interim adjustment in Toll Rate shall be considered such amount as may be
"Be APPROVED as it is hereby APPROVED. required to provide interim relief to the Investor from a substantial increase in debt-
"RESOLVED FURTHERMORE, as it is hereby RESOLVED that the Provisional Toll service burden resulting from the devaluation."[5]
Rates be implemented in two (2) stages in accordance with the following schedule: Claiming that the peso exchange rate to a U.S. dollar had devaluated from P26.1671
in 1995 to P48.00 in 2000, CITRA alleged that there was a compelling need for the
Unrounded Toll Toll Rates for Implementation For Class 1 as Reference increase of the toll rates to meet the loan obligations of the Project and the substantial
Rates as increase in debt-service burden.
Section
Maximum for JANUARY 1, 2002 to JULY JUNE 30, 2002 to Due to heavy opposition, CITRAs petition remained unresolved. This prompted CITRA
One (1) Year 1, 2002 DECEMBER 31, 2002 to file on October 9, 2001 an "Urgent Motion for Provisional Approval,"[6] this time,
invoking Section 3, Rule 10 of the "Rules of Practice and Procedure Governing Hearing
Elevated Before the Toll Regulatory Board" (TRB Rules of Procedure) which provides:
75.00 65.00 75.00
Portion "SECTION 3. Provisional Relief. Upon the filing of an application or petition for the
approval of the initial toll rate or toll rate adjustment, or at any stage, thereafter, the
At-Grade
Board may grant on motion of the pleader or in its own initiative, the relief prayed for
Portion
without prejudice to a final decision after completion of the hearing should the Board
Magallanes to find that the pleading, together with the affidavits and supporting documents attached
19.35 15.00 20.00 thereto and such additional evidence as may have been requested and presented,
Bicutan
substantially support the provisional order; Provided: That the Board may, motu proprio,
Bicutan to continue to issue orders or grant relief in the exercise of its powers of general
11.21 9.00 11.00 supervision under existing laws. Provided: Finally, that pending finality of the decision,
Sucat
the Board may require the Petitioner to deposit in whole or in part in escrow the
Sucat to provisionally approved adjustment or initial toll rates." (Emphasis supplied)
10.99 9.00 11.00 On October 30, 2001, CITRA moved to withdraw[7] its "Urgent Motion for Provisional
Alabang
Approval" without prejudice to its right to seek or be granted provisional relief under the
"PROVIDED that the recovery of the sum from the interim rate adjustment shall be above-quoted provisions of the TRB Rules of Procedure, obviously, referring to the
applied starting the year 2003. power of the Board to act on its own initiative.
"APPROVED as it is hereby APPROVED." On November 7, 2001, CITRA wrote a letter[8] to TRB expressing its concern over the
On December 17, 24 and 31, 2001, the above Resolution approving provisional toll rate undue delay in the proceeding, stressing that any further setback would bring the
adjustments was published in the newspapers of general circulation.[2] Projects financial condition, as well as the Philippine banking system, to a total
collapse. CITRA recounted that out of the US$354 million funding from creditors, two-
thirds (2/3) thereof came from the Philippine banks and financial institutions, such as Private respondent CITRA, in its comment[18] on Congressman Zialcitas petition,
the Landbank of the Philippines and the Government Service Insurance Services. counters that: (1) the TRB has primary administrative jurisdiction over all matters
Thus, CITRA requested TRB to find a timely solution to its predicament. relating to toll rates; (2) prohibition is an inappropriate remedy because its function is
On November 9, 2001, TRB granted CITRAs motion to withdraw[9] the Urgent Motion to restrain acts about to be done and not acts already accomplished; (3) Resolution No.
for Provisional Approval and, at the same time, issued Resolution No. 2001-89,[10] 2001-89 was issued in accordance with law; (4) Section 3, Rule 10 of the TRB Rules
earlier quoted. is constitutional; and (5) private respondent and the Republic of the Philippines would
Hence, petitioners Ceferino Padua and Eduardo Zialcita assail before this Court the suffer more irreparable damages than petitioner.
validity and legality of TRB Resolution No. 2001-89. The TRB, through the OSG, filed a separate comment[19] reiterating the same
Petitioner Ceferino Padua, as a toll payer, filed an "Urgent Motion for a Temporary arguments raised by private respondent CITRA.
Restraining Order to Stop Arbitrary Toll Fee Increases"[11] in G.R. No. 141949,[12] a On January 11, 2002, this Court resolved to consolidate the instant petitions, G.R. No.
petition for mandamus earlier filed by him. In that petition, Padua seeks to compel 141949 and G.R. No. 151108.[20]
respondent Judge Santiago Ranada of the Regional Trial Court, Branch 137, Makati We rule for the respondents.
City, to issue a writ of execution for the enforcement of the Court of Appeals Decision In assailing Resolution No. 2001-89, petitioners came to us via two unconventional
dated August 4, 1989 in CA-G.R. SP No. 13235. In its Decision, the Court of Appeals remedies one is an urgent motion for a TRO to stop arbitrary toll fee increases; and
ordered the exclusion of certain portions of the expressways (from Villamor Air Base to the other is a petition for prohibition. Unfortunately, both are procedurally impermissible.
Alabang in the South, and from Balintawak to Tabang in the North) from the franchise I
of the PNCC. Petitioner Paduas motion is a leap to a legal contest of different dimension. As
In his urgent motion, petitioner Padua claims that: (1) Resolution No. 2001-89 was previously stated, G.R. No. 141949 is a petition for mandamus seeking to compel
issued without the required publication and in violation of due process; (2) alone, TRB respondent Judge Ranada to issue a writ of execution for the enforcement of the Court
Executive Director Jaime S. Dumlao, Jr., could not authorize the provisional toll rate of Appeals Decision dated August 4, 1989 in CA-G.R. SP No. 13235. The issue therein
adjustments because the TRB is a collegial body; and (3) CITRA has no standing to is whether the application for a writ of execution should be by a mere motion or by an
apply for a toll fee increase since it is an "investor" and not a "franchisee-operator." action for revival of judgment. Thus, for petitioner Padua to suddenly interject in the
On January 4, 2002, petitioner Padua filed a "Supplemental Urgent Motion for a TRO same petition the issue of whether Resolution No. 2001-89 is valid is to drag this Court
against Toll Fee Increases,"[13] arguing further that: (1) Resolution 2001-89 refers to his web of legal convolution. Courts cannot, as a case progresses, resolve the
exclusively to the Metro Manila Skyway Project, hence, there is no legal basis for the intrinsic merit of every issue that comes along its way, particularly those which bear no
imposition of the increased rate at the at-grade portions; (2) Resolution No. 2001-89 relevance to the resolution of the case.
was issued without basis considering that while it was signed by three (3) of the five Certainly, petitioner Paduas recourse in challenging the validity of TRB Resolution No.
members of the TRB, none of them actually attended the hearing; and 3) the 2001-89 should have been to institute an action, separate and independent from G.R.
computation of the rate adjustment under the STOA is inconsistent with the rate No. 141949.
adjustment formula under Presidential Decree No. 1894.[14] II
On January 10, 2002, the Office of the Solicitor General (OSG) filed, in behalf of public The remedy of prohibition initiated by petitioner Zialcita in G.R. No. 151108 also suffers
respondent TRB, Philippine National Construction Corporation (PNCC), Department of several infirmities. Initially, it violates the twin doctrine of primary administrative
Public Works and Highways (DPWH) and Judge Ranada, a "Consolidated jurisdiction and non-exhaustion of administrative remedies.
Comment"[15] contending that: (1) the TRB has the exclusive jurisdiction over all P.D. No. 1112 explicitly provides that "the decisions of the TRB on petitions for the
matters relating to toll rates; (2) Resolution No. 2001-89 covers both the Skyway and increase of toll rate shall be appealable to the Office of the President within ten (10)
the at-grade level of the South Luzon Expressway as provided under the STOA; (3) days from the promulgation thereof."[21] P.D. No. 1894 reiterates this instruction and
that while Resolution No. 2001-89 does not mention any factual basis to justify its further provides:
issuance, however, it does not mean that TRB's finding of facts is not supported by "SECTION 9. The GRANTEE shall have the right and authority to adjust any existing
evidence; and (4) petitioner Padua cannot assail the validity of the STOA because he toll being charged the users of the Expressways under the following guidelines:
is not a party thereto. xxx xxx
Upon the other hand, on January 9, 2002, petitioner Eduardo Zialcita, as a taxpayer c) Any interested Expressways user shall have the right to file, within a period of ninety
and as Congressman of Paraaque City, filed the present petition for prohibition[16] (90) days after the date of publication of the adjusted toll rate (s), a petition with the Toll
with prayer for a temporary restraining order and/or writ of preliminary injunction against Regulatory Board for a review of the adjusted toll rate (s); provided, however, that
TRB and CITRA, docketed as G.R. No. 151108, impugning the same Resolution No. notwithstanding the filing of such petition and the pendency of the resolution thereof,
2001-89. the adjusted toll shall be enforceable and collectible by the GRANTEE effective on the
Petitioner Zialcita asserts that the provisional toll rate adjustments are exorbitant and first day of January in accordance with the immediately preceding paragraph.
that the TRB violated its own Charter, Presidential Decree No. 1112,[17] when it xxx xxx
promulgated Resolution No. 2001-89 without the benefit of any public hearing. He also e) Decisions of the Toll Regulatory Board on petitions for review of adjusted toll shall
maintains that the TRB violated the Constitution when it did not express clearly and be appealable to the Office of the President within ten (10) days from the promulgation
distinctly the facts and the law on which Resolution No. 2001-89 was based. And lastly, thereof."
he claims that Section 3, Rule 10 of the TRB Rules of Procedure is not sanctioned by These same provisions are incorporated in the TRB Rules of Procedure, particularly in
P.D. No. 1112. Section 6, Rule 5 and Section 1, Rule 12 thereof.[22]
Obviously, the laws and the TRB Rules of Procedure have provided the remedies of an discretion provisionally grant. That LOI No. 1334-A has the force and effect of law finds
interested Expressways user.[23] The initial proper recourse is to file a petition for support in a catena of cases decreeing that "all proclamations, orders, decrees,
review of the adjusted toll rates with the TRB. The need for a prior resort to this body instructions, and acts promulgated, issued, or done by the former President (Ferdinand
is with reason. The TRB, as the agency assigned to supervise the collection of toll fees E. Marcos) are part of the law of the land, and shall remain valid, legal, binding, and
and the operation of toll facilities, has the necessary expertise, training and skills to effective, unless modified, revoked or superseded by subsequent proclamations,
judiciously decide matters of this kind. As may be gleaned from the petition, the main orders, decrees, instructions, or other acts of the President."[29] In Association of Small
thrust of petitioner Zialcitas argument is that the provisional toll rate adjustments are Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform,[30] this Court
exorbitant, oppressive, onerous and unconscionable. This is obviously a question of held:
fact requiring knowledge of the formula used and the factors considered in determining "The Court wryly observes that during the past dictatorship, every presidential
the assailed rates. Definitely, this task is within the province of the TRB. issuance, by whatever name it was called, had the force and effect of law because it
We take cognizance of the wealth of jurisprudence on the doctrine of primary came from President Marcos. Such are the ways of despots. Hence, it is futile to argue,
administrative jurisdiction and exhaustion of administrative remedies. In this era of as the petitioners do in G.R. No. 79744, that LOI 474 could not have repealed P.D. No.
clogged court dockets, the need for specialized administrative boards or commissions 27 because the former was only a letter of instruction. The important thing is that it was
with the special knowledge, experience and capability to hear and determine promptly issued by President Marcos, whose word was law during that time." (Emphasis
disputes on technical matters or intricate questions of facts, subject to judicial review in supplied)
case of grave abuse of discretion, is indispensable. Between the power lodged in an For another, it is not true that it was TRB Executive Director Dumlao, Jr. alone who
administrative body and a court, the unmistakable trend is to refer it to the former."[24] issued Resolution No. 2001-89. The Resolution itself contains the signature of the four
In Industrial Enterprises, Inc. vs. Court of Appeals,[25] we ruled: TRB Directors, namely, Simeon A. Datumanong, Emmanuel P. Bonoan, Ruben S.
"x x x, if the case is such that its determination requires the expertise, specialized skills Reinoso, Jr. and Mario K. Espinosa.[31] Petitioner Padua would argue that while these
and knowledge of the proper administrative bodies because technical matters or Directors signed the Resolution, none of them personally attended the hearing. This
intricate questions of facts are involved, then relief must first be obtained in an argument is misplaced. Under our jurisprudence, an administrative agency may employ
administrative proceeding before a remedy will be supplied by the courts even though other persons, such as a hearing officer, examiner or investigator, to receive evidence,
the matter is within the proper jurisdiction of a court." conduct hearing and make reports, on the basis of which the agency shall render its
Moreover, petitioner Zialcitas resort to prohibition is intrinsically inappropriate. It bears decision. Such a procedure is a practical necessity.[32] Thus, in Mollaneda vs.
stressing that the office of this remedy is not to correct errors of judgment but to prevent Umacob,[33] we ruled:
or restrain usurpation of jurisdiction or authority by inferior tribunals and to compel them " x x x At any rate, it cannot be gainsaid that the term "administrative body or agency"
to observe the limitation of their jurisdictions. G.R. No. 151108, while designated as a includes the subordinate officials upon whose hand the body or agency delegates a
petition for prohibition, has for its object the setting aside of Resolution No. 2001-89 on portion of its authority. Included therein are the hearing officers through whose eyes
the ground that it was issued without prior notice, hearing and publication and that the and ears the administrative body or agency observes the demeanor, conduct and
provisional toll rate adjustments are exorbitant. This is not the proper subject of attitude of the witnesses and listens to their testimonies.
prohibition because as long as the inferior court, tribunal or board has jurisdiction over "It must be emphasized that the appointment of competent officers to hear and receive
the person and subject matter of the controversy, the writ will not lie to correct errors evidence is commonly resorted to by administrative bodies or agencies in the interest
and irregularities in procedure, or to prevent an erroneous decision or an enforcement of an orderly and efficient disposition of administrative cases. x x x
of an erroneous judgment. And even in cases of encroachment, usurpation, and "x x x Corollarily, in a catena of cases, this Court laid down the cardinal requirements
improper assumption of jurisdiction, the writ will not issue where an adequate and of due process in administrative proceedings, one of which is that "the tribunal or body
applicable remedy by appeal, writ or error, certiorari, or other prescribed methods of or any of its judges must act on its or his own independent consideration of the law and
review are available.[26] In this case, petitioner Zialcita should have sought a review of facts of the controversy, and not simply accept the views of a subordinate." Thus, it is
the assailed Resolution before the TRB. logical to say that this mandate was rendered precisely to ensure that in cases where
III the hearing or reception of evidence is assigned to a subordinate, the body or agency
Even granting that petitioners recourse to the instant remedies is in order, still, we shall not merely rely on his recommendation but instead shall personally weigh and
cannot rule in their favor. assess the evidence which the said subordinate has gathered."
For one, it is not true that the provisional toll rate adjustments were not published prior Be that as it may, we must stress that the TRBs authority to grant provisional toll rate
to its implementation on January 1, 2002. Records show that they were published on adjustments does not require the conduct of a hearing. Pertinent laws and
December 17, 24 and 31, 2001[27] in three newspapers of general circulation, jurisprudence support this conclusion.
particularly the Philippine Star, Philippine Daily Inquirer and The Manila Bulletin. Surely, It may be recalled that Former President Ferdinand E. Marcos promulgated P.D. No.
such publications sufficiently complied with Section 5 of P.D. No. 1112 which mandates 1112 creating the TRB on March 31, 1977. The end in view was to authorize the
that "no new rates shall be collected unless published in a newspaper of general collection of toll fees for the use of certain public improvements in order to attract private
publication at least once a week for three consecutive weeks." At any rate, it must be sector investment in the government infrastructure projects. The TRB was tasked to
pointed out that under Letter of Instruction No. 1334-A,[28] the TRB may grant and supervise the collection of toll fees and the operation of toll facilities. One of its powers
issue ex-parte to any petitioner, without need of notice, publication or hearing, is to "issue, modify and promulgate from time to time the rates of toll that will be charged
provisional authority to collect, pending hearing and decision on the merits of the the direct users of toll facilities and upon notice and hearing, to approve or disapprove
petition, the increase in rates prayed for or such lesser amount as the TRB may in its petitions for the increase thereof."[34]
To clarify the intent of P.D. No. 1112 as to the extent of the TRBs power,[35] Former In the light of Section 8 quoted above, public respondent Board need not even have
President Marcos further issued LOI No. 1334-A expressly allowing the TRB to grant conducted formal hearings in these cases prior to issuance of its Order of 14 August
ex-parte provisional or temporary increase in toll rates, thus: 1987 granting a provisional increase of prices. The Board, upon its own discretion and
"NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the on the basis of documents and evidence submitted by private respondents, could have
Philippines, by virtue of the powers vested in me by the Constitution, do hereby direct, issued an order granting provisional relief immediately upon filing by private
order and instruct the Toll Regulatory Board to grant and issue ex-parte to any respondents of their respective applications. In this respect, the Court considers the
petitioner, without need of notice, publication or hearing, provisional authority to collect, evidence presented by private respondents in support of their applications -.i.e.,
pending hearing of and decision on the merits of such petition, the increase in rates evidence showing that importation costs of petroleum products had gone up; that the
prayed for or such lesser amount as the Board may in its discretion provisionally grant, peso had depreciated in value; and that the Oil Price Stabilization Fund (OPSF) had
upon (a) a finding that the said petition is sufficient in form and substance, (b) the been depleted as substantial and hence constitutive of at least prima facie basis for
submission of an affidavit by the petitioner showing that the increase in rates issuance by the Board of a provisional relief order granting an increase in the prices of
substantially conforms to the formula, if any stipulated in the franchise or toll operation petroleum products.
agreement/certificate of the petitioner and that failure to immediately impose and collect Anent petitioner Paduas contention that CITRA has no standing to apply for a toll fee
the increase in rates would result in outright delay or stoppage of urgently needed increase, suffice it to say that CITRAs right stems from the STOA which was entered
improvements, expansion or repairs of toll facilities and/or in great irreparable injury to into by no less than the Republic of the Philippines and by the PNCC. Section 7.04 of
the petitioner, and (c) the submission by the petitioner to the Board of a bond, in such the STOA provides that the Investor, CITRA, and/or the Operator, PNCC, shall be
amount and from such surety or sureties and under such terms and conditions as the entitled to apply for and if warranted, to be granted an interim adjustment of toll rates
Board shall fix, to guarantee the refund of the increase in rates to the affected toll payers in case of force majeure and a significant currency valuation.[39] Now, unless set aside
in case it is finally determined, after notice and hearing, that the petitioner is not entitled, through proper action, the STOA has the force and effect of law between the contracting
in whole or in part, to the same. Any provisional toll rate increases shall be effective parties, and is entitled to recognition by this Court. [40] On the same breath, we cannot
immediately upon approval without need of publication." sustain Paduas contention that the term "Metro Manila Skyway" Project excludes the
Thereafter, the TRB promulgated as part of its Rules of Procedure, the following at-grade portions of the South Luzon Expressway considering that under the same
provision: STOA the "Metro Manila Skyway" includes: "(a) the South Metro Manila Skyway,
"RULE 5 coupled with the rehabilitated at-grade portion of the South Luzon Expressway, from
PROCEDURE FOR APPROVAL OF TOLL RATE Alabang to Quirino Avenue; (b) the Central Metro Manila Skyway, from Quirino Avenue
"Section 2. Provisional Relief Upon initial findings of the Board that the Petition for to A. Bonifacio Avenue; x x x."[41]
the approval of initial toll rate or the petition for toll rate adjustment is in accordance Petitioner Zialcita faults the TRB for not stating the facts and the law on which
with Sections 1 and 2 of Rule 2, Section 2 of Rule 3 and Section 1 of Rule 4 hereof, the Resolution No. 2001-89 is based. Petitioner is wrong. Suffice it to state that while
Board within a reasonable time after the filing of the Petition, may in an en banc decision Section 14, Article VIII of the 1987 Constitution provides that "no decision shall be
provisionally approve the initial toll rate or toll rate adjustment, without the necessity of rendered by any court without expressing therein clearly and distinctly the facts and the
any notice and hearing." law on which it is based," this rule applies only to a decision of a court of justice, not
From the foregoing, it is clear that a hearing is not necessary for the grant of provisional TRB.[42]
toll rate adjustment. The language of LOI No. 1334-A is not susceptible of equivocation. At this point, let it be stressed that we are not passing upon the reasonableness of the
It "directs, orders and instructs" the TRB to issue provisional toll rates adjustment ex- provisional toll rate adjustments. As we have earlier mentioned, this matter is best
parte without the need of notice, hearing and publication. All that is necessary is that it addressed to the TRB.
be issued upon (1) a finding that the main petition is sufficient in form and substance; IV
(2) the submission of an affidavit showing that the increase in rates substantially In fine, as what we intimated in Philippine National Construction Corp. vs. Court of
conforms to the formula, if any is stipulated in the franchise or toll operation agreement, Appeals,[43] we commend petitioners for devoting their time and effort on a matter so
and that failure to immediately impose and collect the increase in rates would result in imbued with public interest as in this case. But we can do no better than to brush aside
great irreparable injury to the petitioner; and (3) the submission of a bond. Again, their chief objections to the provisional toll rate adjustments, for a different approach
whether or not CITRA complied with these requirements is an issue that must be would lead this Court astray into the field of factual conflict where its pronouncements
addressed to the TRB. would not rest on solid grounds. Time and again, we have impressed that this Court is
The practice is not something peculiar. We have ruled in a number of cases that an not a trier of facts, more so, in the consideration of an extraordinary remedy of
administrative agency may be empowered to approve provisionally, when demanded prohibition where only questions of lack or excess of jurisdiction or grave abuse of
by urgent public need, rates of public utilities without a hearing. The reason is easily discretion is to be entertained.
discerned from the fact that provisional rates are by their nature temporary and subject And to accord the main petition for mandamus in G.R. No. 141949 the full deliberation
to adjustment in conformity with the definitive rates approved after final hearing.[36] In it deserves, we deem it appropriate to discuss its merit on another occasion. Anyway,
Maceda vs. Energy Regulatory Board,[37] we ruled that while the ERB is not precluded G.R. No. 141949 was consolidated with G.R. No. 151108 only by reason of petitioner
from conducting a hearing on the grant of provisional authority which is of course, the Paduas deviant motion assailing Resolution 2001-89. As we have previously said, the
better procedure however, it can not be stigmatized if it failed to conduct one. Citing main petition in G.R. No. 141949 presents an entirely different issue and is set on a
Citizens Alliance for Consumer Protection vs. Energy Regulatory Board,[38] this Court different factual landscape.
held:
WHEREFORE, petitioner Paduas "Urgent Motion for Temporary Restraining Order to On November 19, 2003, the ERC issued an Order directing MERALCO to submit
Stop Arbitrary Toll Fee Increases" is DENIED and petitioner Zialcitas "Petition for certain documents in connection with the evaluation of its Application.9
Prohibition" is DISMISSED. On November 21, Lualhati filed his Opposition10 to MERALCOs Application.
SO ORDERED. The FDC likewise filed a Motion for Production of Documents on November 27, 2003,
Puno, (Chairman), Corona, and Carpio-Morales, JJ., concur. adopting NASECOREs list in its Motion, and requesting for other documents in addition
Panganiban, J., please see separate opinion. thereto.11
However, on November 27, 2003, the ERC, without first resolving the Motions for
EN BANC Production of Documents of NASECORE and FDC and apparently without considering
G.R. No. 161113 June 15, 2004 Lualhatis Opposition, issued an Order provisionally approving MERALCOs ex parte
FREEDOM FROM DEBT COALITION, ANA MARIA NEMENZO, as President of application for rate increases. The dispositive portion of the Order states:
FREEDOM FROM DEBT COALITION, MA. TERESA I. DIOKNO-PASCUAL, REP. WHEREFORE, considering all the foregoing, this Commission, pursuant to
LORETTA ANN ROSALES (Party-List Akbayan), REP. JOSE VIRGILIO BAUTISTA Section 8 of Executive Order No. 172 and Section 4 (e) of the Implementing
(Party-List Sanlakas), REP. RENATO MAGTUBO (Party-List Partido Rules and Regulations of the EPIRA (R.A. 9136), hereby provisionally
Manggagawa), petitioners, authorizes applicant Manila Electric Company (MERALCO) to adopt and
vs. implement the attached rate schedules embodying a rate adjustment in the
ENERGY REGULATORY COMMISSION, MANILA ELECTRIC COMPANY average amount of TWELVE (12) CENTAVOS per kwh, effective with respect
(MERALCO), respondents. to its billing cycles beginning January 2004. The impact of this approved rate
DECISION adjustment will vary from one customer class to another depending on the
TINGA, J.: load cycles.
The privately-owned public utility "is the substitute for the State in the performance of . The rate adjustment authorized herein shall be subject to refund in the event
. . (a) public service, thus becoming a public servant,"1 so wrote Justice Louis Brandeis that this Commission finds, after completion of the hearings of this case, that
more than eighty years ago. As in the United States, the provision of public utility the same is unjust and unreasonable.
services in the Philippine setting is a combination of private ownership and public The hearing of this case is hereby set on December 22, 2003 at nine o clock
control. Such an amalgam of clashing interests is a formula for inevitable conflicts. At in the morning (9:00 A.M.) at the ERC Hearing Room, 15th Floor, Pacific
bar here is one such conflict, in fact the current high point of a raging controversy where Center Building, San Miguel Avenue, Ortigas Center, Pasig City. In this
the public, on one side, is pitted against the regulatory body and the countrys leading connection, MERALCO is hereby directed to publish, at its own expenses, the
power utility, on the other. attached Notice of Public Hearing at least twice (2) for two (2) successive
Before the Court is a Petition for Certiorari, Prohibition and Injunction with Prayer for weeks in two (2) newspapers of nationwide circulation in the country, the last
the Issuance of a Temporary Restraining Order or a Status Quo Order. The Petition date of publication to be made not later than two (2) weeks before the
assails the Order dated November 27, 2003 of respondent Energy Regulatory scheduled date of initial hearing.
Commission (ERC), provisionally authorizing respondent Manila Electric Company Let copies of this Order and the attached Notice of Public Hearing be furnished
(MERALCO) to increase its rates by an average amount of twelve centavos (P0.12) per all the Municipal/City mayors within the MERALCOs franchise area for
kilowatt hour. appropriate posting thereof on their respective bulletin boards. 12
On October 10, 2003, MERALCO filed with the ERC an Application for an increase in Thereafter, the following were filed with the ERC after its issuance of the November 27,
rates. MERALCO also prayed ex parte for the grant of a provisional authority to 2003 Order:
implement the increase according to the schedule attached to its Application. The case (1) Urgent Motion to Resolve Motion for Production of Documents &
was docketed as ERC Case No. 2003-480.2 Opposition to the Provisional Authority filed by NASECORE on December 8,
On October 14, 2003, the National Association of Electricity Consumers for Reforms, 2003;
Inc. (NASECORE), in a Letter addressed to then ERC Chairman Manuel R. Sanchez (2) Manifestation Joining the National Association of Electricity Consumers for
(Sanchez), informed him of its intention to file an Opposition to MERALCOs Reforms, Inc. in its Opposition to the Provisional Authority and Motion for
Application.3 Production of Documents filed by the Philippine Consumers Watch on
On October 24, 2003, Mr. Genaro Lualhati (Lualhati) sent a Letter to Sanchez seeking December 11, 2003;
the dismissal of MERALCOs Application.4 (3) Opposition filed by the Philippine Consumers Welfare Union (PCWU) on
On October 29, 2003, petitioner Freedom from Debt Coalition (FDC) also expressed its December 15, 2003;
intention to file an opposition to MERALCOs Application.5 (4) Urgent Motion to Suspend Implementation and Motion for Reconsideration
On November 3, 2003, the ERC directed FDC, NASECORE and Lualhati to file their filed by the Napocor Industrial Consumers Association, Inc. (NICAI) on
respective comments on the Application within fifteen (15) days from their receipt December 12, 2003;
thereof.6 (5) Letter requesting for reconsideration of the November 27, 2003 Order of
On November 11, 2003, NASECORE filed a Motion for Production of Documents to the ERC, sent by the National Consumer Affairs Council on December 9,
enable it to evaluate MERALCOs Application.7 2003;
In an Order dated November 13, 2003, the ERC directed MERALCO to file its comment (6) Letter objecting to the November 27, 2003 Order of the ERC, sent by the
on NASECOREs Motion for Production of Documents.8 Federation of Philippine Industries, Inc. on December 11, 2003; and
(7) Motion for Production of Documents and Motion for Production of Bayan Muna, Bayan, KMU, Gabriela, Kadamay, Agham, Gabriela Womens Party and
Documents (Supplemental) filed by Atty. Ruperto J. Estrada on December 15, the Anak Pawis (petitioners-in-intervention) filed their Motion to Intervene, and attached
2003 and December 16, 2003, respectively. thereto their Petition-in-Intervention. The Court granted the Motion and admitted the
On December 19, 2003, MERALCO filed its Comment.13 It refused to produce the Petition-in- Intervention in its R E S O L U T I O N dated January 27, 2004.21
documents requested by the oppositors on the ground that such documents are In their Petition-in-Intervention, petitioners-in-intervention argue that the November 27,
immaterial and irrelevant to its application. 2003 Order is void for having been issued by ERC with manifest bias in favor of
On December 22, 2003, the scheduled date of hearing, the ERC did not revoke the MERALCO and without due regard for the rights of consumers. They assert further that
provisional authority granted to MERALCO per its November 27, 2003 Order. the ERC committed grave abuse of discretion in considering the appraisal of
FDC did not move for reconsideration of the Order but on December 23, 2003, it filed MERALCOs assets as of the year 2002, in violation of Section 43(f)(i) of the EPIRA.
the instant Petition. Lastly, they claim that the assailed Order is void for unjustifiably imposing upon the
FDC argues that the November 27, 2003 Order of the ERC is void for having been consumers increased rates to fund the 42 major capital projects of MERALCO for the
issued without legal or statutory authority. It also contends that Rule 3, Section 4(e) of year 2004.22
the Implementing Rules of the EPIRA is unconstitutional for being an undue delegation During the oral arguments, the Court defined the issues as follows:
of legislative power. FDC further asserts that the November 27, 2003 Order is void for (1) Whether the ERC has legal authority to grant provisional rate adjustments
having been issued by the ERC with grave abuse of discretion and manifest bias. In under Republic Act (R.A.) No. 9136, otherwise known as the "Electric Power
support of its prayer for the issuance of injunctive relief, FDC claims that the Industry Reform Act of 2001" (EPIRA); and
implementation by MERALCO of the provisional rate increase will result in irreparable (2) Assuming that the ERC has the authority to grant provisional orders,
prejudice to FDC and others similarly situated unless the Court restrains such whether the grant by the ERC of the provisional rate adjustment in question
implementation.14 was committed with grave abuse of discretion amounting to lack or excess of
On December 29, 2003, FDC filed with the Court an Urgent Motion to Grant Restraining jurisdiction.23
or Status Quo Order. The Court thereafter required the parties to submit their respective Memoranda within
On January 9, 2004, The ERC issued an Order clarifying that the provisional rate a non-extendible period of twenty days from January 27, 2004. The ERC was likewise
increase granted to MERALCO in its November 27, 2003 Order should be applied ordered to produce certain documents pertinent to the resolution of the case. 24
beginning January 1, 2004. We rule in the affirmative on both issues.
The Court En Banc issued on January 13, 2004, a R E S O L U T I O N ordering ERC Overview of the EPIRA
and MERALCO to file their respective Comments on the Petition. The Court also One of the landmark pieces of legislation enacted by Congress in recent years is the
enjoined ERC and MERALCO to observe the status quo prevailing before the filing of EPIRA.25 It established a new policy, legal structure and regulatory framework for the
the Petition and set the case for oral arguments on January 27, 2004. electric power industry.
On January 26, 2004, ERC, MERALCO and the Office of the Solicitor General (OSG) The new thrust is to tap private capital for the expansion and improvement of the
filed their respective Comments on the Petition. industry as the large government debt and the highly capital-intensive character of the
In its Comment, the ERC concurred with the arguments of the OSG and insists that it industry itself have long been acknowledged as the critical constraints to the program.
is authorized to issue provisional orders under the law. ERC argues that it must not To attract private investment, largely foreign, the jaded structure of the industry had to
have been the intention of Congress to expand the functions of the ERC, as the be addressed. While the generation and transmission sectors were centralized and
successor of the Energy Regulatory Board (ERB), and clip its powers at the same monopolistic, the distribution side was fragmented with over 130 utilities, mostly small
time.15 and uneconomic. The pervasive flaws have caused a low utilization of existing
The ERC further asserts that it is authorized to issue provisional rate increases ex parte, generation capacity; extremely high and uncompetitive power rates; poor quality of
and that it may base its provisional order on the verified application and supporting service to consumers; dismal to forgettable performance of the government power
documents submitted by the application, and it is not required to wait for the comments sector; high system losses; and an inability to develop a clear strategy for overcoming
of consumers or local government units (LGUs) concerned before issuing a provisional these shortcomings.
order.16 Thus, the EPIRA provides a framework for the restructuring of the industry, including
The ERC likewise denies that the November 27, 2003 Order was issued with grave the privatization of the assets of the National Power Corporation (NPC), the transition
abuse of discretion. On the contrary, it claims that the Order is supported by substantial to a competitive structure, and the delineation of the roles of various government
evidence.17 agencies and the private entities.26 The law ordains the division of the industry into four
Finally, ERC asseverates that the filing of the instant Petition is premature because it (4) distinct sectors, namely: generation, transmission, distribution and supply. 27
was denied the opportunity to have a full determination of the Application after trial on Corollarily, the NPC generating plants have to privatized 28 and its transmission
the merits, and is violative of the doctrine of primary jurisdiction. 18 business spun off and privatized thereafter.29
For its part, MERALCO asserts that the November 27, 2003 Order is valid, because it In tandem with the restructuring of the industry is the establishment of "a strong and
was issued by the ERC pursuant to Section 44 of the EPIRA which allows the transfer purely independent regulatory body."30 Thus, the law created the ERC in place of the
of powers (not inconsistent with the EPIRA) of the old ERB to the ERC.19 It also denies Energy Regulatory Board (ERB).31
that the assailed Order was issued by the ERC with grave abuse of discretion, asserting To achieve its aforestated goal, the law has reconfigured the organization of the
that on the contrary, the issuance thereof was based on the Application, affidavits and regulatory body. It requires the Chairman and four (4) members of the ERC to be
other supporting documents which it submitted earlier.20 equipped with "at least three (3) years of active and distinguished experience" in the
fields of energy, law, economics, finance, commerce or engineering, and at least one The ERC is endowed with the statutory authority to approve provisional rate
of them with ten (10) years or more of experience in the active practice of law and adjustments under the aegis of Sections 44 and 80 of the EPIRA. The sections read,
another one with similar experience as a certified public accountant. 32 Their terms of thus:
office were increased to seven (7) years from the four (4) provided in Executive Order SEC. 44. Transfer of Powers and Functions. The powers and functions
No. 172 (E.O. No. 172) and their security of tenure assured. 33 The Chairman and of the Energy Regulatory Board not inconsistent with the provisions of
members were given the same salaries, allowances, benefits and retirement pay as the this Act are hereby transferred to the ERC. The foregoing transfer of
Chief Justice and Associate Justices of the Supreme Court, 34 a lot higher than the powers and functions shall include all applicable funds and appropriations,
salary and benefits accorded the Chairman and members of the ERB which were records, equipment, property and personnel as may be necessary.
equivalent only to those of a Department Undersecretary and the official next in rank, Sec. 80. Applicability and Repealing Clause. The applicability provisions
and those of the Chairman and members of the Commission on Elections, of Commonwealth Act No. 146, as amended, otherwise known as the
respectively.35 "Public Services Act;" Republic Act 6395, as amended, revising the charter
Statutory Authority To of NPC; Presidential Decree 269, as amended, referred to as the National
Grant Provisional Increase Electrification Decree; Republic Act 7638, otherwise known as the
FDC posits that the ERC has no power to issue provisional orders because the EPIRA "Department of Energy Act of 1992;" Executive Order 172, as amended,
repealed Commonwealth Act No. 146 (The Public Service Act) and E.O. No. 172 creating the ERB; Republic 7832 otherwise known as the "Anti-Electricity and
(creating the ERB), which laws expressly conferred upon the precursors of ERC the Electric Transmission Lines/Materials Pilferage Act of 1994;" shall continue to
power to grant provisional orders. It argues further that while Section 44 of the EPIRA have full force and effect except insofar as they are inconsistent with this Act.
provides for the transfer of the powers and functions of the ERB to the ERC, such The provisions with respect to electric power of Section 11(c) of Republic Act
transfer cannot be deemed to include the power to issue provisional orders because 7916, as amended, and Section5(f) of Republic Act 7227 are hereby repealed
such power is inconsistent with the policies ordained in Section 2 of the EPIRA to or modified accordingly.
protect the public interest insofar as it is affected by the rates and services of electric Presidential Decree No. 40 and all laws, decrees, rules and regulations, or
utilities and other providers of electric power and to ensure transparency and full portions thereof, inconsistent with this Act are hereby repealed or modified
accountability in rate-fixing.36 Considering that the EPIRA itself does not confer upon accordingly. (Emphasis supplied)
the ERC the power to issue provisional orders, Section 4(e), Rule 3 of the laws The principal powers of the ERB relative to electric public utilities transferred to the
Implementing Rules, which refers to the grant of provisional authority by the ERC, ERC are the following:
constitutes an undue delegation of legislative power.37 1. To regulate and fix the power rates to be charged by elective companies; 44
The petitioners-in-intervention agree with and adopt the aforementioned arguments of 2. To issue certificates of public convenience for the operation of electric
FDC.38 power utilities;45
MERALCO, on the other hand, claims that the power of the ERB to issue provisional 3. To grant or approve provisional electric rates.46
orders under Section 16(c) of the Public Service Act and Section 8 of E.O. No. 172 was It bears stressing that the conferment upon the ERC of the power to grant provisional
not repealed by the EPIRA. On the contrary, Section 80 of the EPIRA expressly rate adjustments is not inconsistent with any provision of the EPIRA. The powers of the
mentions that the applicable provisions of the Public Service Act and E.O. No. 172 that ERB transferred to the ERC under Section 44 are in addition to the new powers
are not inconsistent therewith shall continue to have full force and effect.39 It adds that conferred upon the ERC under Section 43.
the power of the ERC to approve reasonable rates would be rendered meaningless if Section 80 of the EPIRA complements Section 44, as it mandates the continued
it can only do so after a full hearing, and in the meantime the insufficiency of the efficacy of the applicable provisions of the laws referred to therein. The material
applicants rates would result in its inability to supply quality, reliable and secure electric provisions of the Public Service Act which continue to be in full force and effect are
power.40 contained in Section 16(c), which states thus:
The OSG contends that ERC has statutory authority to issue provisional orders, Section 16. Proceedings of the Commission, upon notice and hearing. The
including provisional rate increases. It points out that the EPIRA expressly states that Commission shall have power, upon proper notice and hearing in accordance
the powers of the Energy Regulatory Board (ERB) under E.O. No. 172 shall be with the rules and provisions of this Act, subject to the limitations and
exercised by the ERC.41 exceptions mentioned and saving provisions to the contrary:
For its part, the ERC maintains that it possesses the authority to grant provisional
orders under Section 16 (c) of the Public Service Act and Section 8 of E.O. No. 172 in (c) To fix and determine individual or joint rates, toll, charges,
relation to Sections 44 and 80 of the EPIRA.42 Thus, it claims that Section 4(e), Rule 3 classifications, or schedules thereof, as well as commutation,
of the Rules and Regulations To Implement Republic Act No. 9031, Entitled "Electric mileage, kilometrage, and other special rates which shall be
Power Industry Reform Act of 2001" (IRR) is valid. It further argues that its duty to imposed, observed, and followed thereafter by any public service:
protect the public interest necessarily requires it to balance the interests of the Provided, That the Commission may, in its discretion, approve rates
consumers and the utilities that is, to maintain reasonable rates while ensuring that proposed by public services provisionally and without necessity of
the utilities will be able to remain financially sound and operationally viable.43 any hearing; but it shall call a hearing thereon within thirty days
The Court agrees with the respondents and the OSG. thereafter, upon publication and notice to the concerned parties
ERC authority is found in operating in the territory affected: Provided, further, That in case the
Secs. 44 and 80 of the EPIRA public service equipment of an operator is used principally or
secondarily for the promotion of a private business, the net profits of Likewise, it may not be asserted with success that the power to grant provisional rate
said private business shall be considered in relation with the public adjustments runs counter to the statutory construction guide provided in Section 75 53
service of such operator for the purposes of fixing the rates. of the law. The section ordains that the EPIRA shall be construed in favor of market
Similarly, Sections 8 and 14 of E.O. No. 172 or the ERB Charter continue to be in full competition and people power empowerment, thereby ensuring the widest participation
force by virtue of Sections 44 and 80 of the EPIRA. Said provisions of the ERB charter of the people.
read: To the Court, the goals of market competition and people empowerment are not
SEC. 8. Authority to Grant Provisional Relief. -- The Board may, upon the filing negated by the ERCs exercise of the authority to approve provisional rate adjustments.
of an application, petition or complaint or at any stage thereafter and without The concerns are taken care of by Section 43 of the EPIRA and its IRR. While Section
prior hearing, on the basis of the supporting papers duly verified or 43 lays down the publication requirement as regards the rate application, Section 4(e),
authenticated, grant provisional relief on motion of a party in the case or on its Rule 3 of the IRR fleshes out the requirement.54
own initiative, without prejudice to a final decision after hearing, should the Neither is the notion of provisional rate adjustment incompatible with the policy to
Board find that the pleadings, together with such affidavits, documents and protect public interest, as enunciated in Section 2(f) 55 of the law. The common weal is
other evidence which may be submitted in support of the motion, substantially not relegated to the back-burner simply by upholding the grant to the ERC of the
support of the provisional order; Provided, That the Board shall immediately authority to approve provisional rate adjustments. Again for one, even if there is a
schedule and conduct a hearing thereon within thirty (30) days thereafter, ground to grant the provisional rate increase, the ERC may do so only after the
upon publication and notice to all affected parties. publication requirement is met and the consumers affected are given the opportunity to
SEC. 14. Applicability Clause. The applicability (applicable) provisions of present their side. For another, the rate increase is provisional in character and
Commonwealth Act No. 146, as amended, otherwise known as the "Public therefore may be modified or even recalled anytime. Still for another, the ERC is
Service Act;" Republic Act No. 6173, as amended, otherwise known as the mandated to prescribe a rate-setting methodology "in the public interest" 56 and "to
"Oil Industry Commission Act;" Republic Act No. 6395, as amended, revising promote efficiency."57
the charter of the National Power Corporation under C.A. 120; Presidential For that matter, there is a plethora of provisions in Section 43 and related sections
Decree No. 269, as amended, also referred to as the "National Electrification which seek to promote public interest, market competition and consumer protection. 58
Administration Decree;" and Presidential Decree No. 1206, as amended, Sec. 43 of the EPIRA, being a list of ERCs new powers, is not inconsistent with Sec.
creating the Department of Energy, shall continue to have full force and effect, 44
except insofar as inconsistent with this Order. (Word in parenthesis supplied) Although the power to grant provisional rate adjustments is not one of the powers
The above-quoted applicability clause is quite clear. It cannot be argued that the clause mentioned in Section 43, this provision itself characterizes the listed powers as the "key
could not have referred to the provisions of the prior laws empowering the Public functions in the restructured industry." They are not the typical or traditional
Service Commission (PSC) and the ERB to grant provisional rate adjustments on the prerogatives or functions of regulatory bodies. Reproducing the initial paragraph of the
premise that the lawmakers deliberately deleted the provisions in the crafting of the section is illuminating, viz:
EPIRA. Such an argument begs the question. What is clear from Sections 80 and 44 The ERC shall promote competition, encourage market development, ensure
is that the legislators saw the superfluity or needlessness of carrying over in the EPIRA customer choice and penalize abuse of market power in the restructured
the same provision found in the previous laws. The power to approve provisional rate electricity industry. In appropriate cases, the ERC is authorized to issue cease
increases is included among the powers transferred to the ERC by virtue of Section 44 and desist order after due notice and hearing. Towards this end, it shall be
since the grant of that authority is not inconsistent with the EPIRA; rather, it is in full responsible for the following key functions in the restructured industry:
harmony with the thrust of the law which is to strengthen the ERC as the new regulatory (Emphasis supplied).
body. .
Furthermore, under Section 80, only three (3) specific laws were expressly repealed or Significantly, the fundamental power to fix rates is also not one of the functions
modified. These are Section 11(c) of Republic Act No. 7916, 47 as amended, Section enumerated under Section 43. Thus, to deny the power to grant provisional rate
5(f) of Republic Act No. 722748 and Presidential Decree No. 40.49 Section 8 of E.O. No. increase to ERC simply because it is not mentioned in Section 43 is also to deny the
172 and Section 16(c) of C.A. No. 146 which both grant the regulatory body concerned power to fix rates to the Commission by the same token. Clearly, the proposition is
the authority to approve provisional rate increases are not among the provisions absurd.
expressly repealed or modified. This clearly indicates the laws intent to transfer the Moreover, as the OSG correctly pointed out, to interpret the EPIRA as not retaining the
power to the ERC. ERCs power to issue provisional orders will wreak havoc on the regulatory
Indeed, nary a hint in the EPIRA intimates that the powers of ERCs predecessors not environment, which has been painstakingly built and enhanced since the enactment of
mentioned therein are revoked or repealed. Be it noted that implied repeals are not the EPIRA.59
favored in our jurisdiction.50 The legislature is presumed to know the existing laws; if it To repeat, the EPIRA grants unto the ERC both old and new powers. The old powers
intended a repeal of the earlier law, it should have so expressed that intention in the are referred to in Section 44 while the new ones are listed in Section 43 of the law.
subsequent statute.51 The powers enumerated in Section 43 have a common thread. Characterized as the
Thus, a statute will not be deemed to have been impliedly repealed by another enacted "key functions," they are the new powers granted to the ERC in relation to the reform
subsequent thereto unless there is a showing that a plain, unavoidable and and modernization of the electric power industry sought to be achieved by the law. They
irreconcilable repugnancy exists between the two.52 are also invariably mentioned with particularity in other provisions of the law. In other
words, Section 43 merely repeats what is found in the other sections. It is a
compendium of powers provided in other provisions of the same law but were not accomplished by the EPIRA. When the legislators decided to broaden the jurisdiction
enjoyed by the previous regulatory bodies. It is a statutory tool to achieve clarity and of the ERC, they did not intend to abolish or reduce the powers already conferred upon
convenience, at least with respect to the new powers. ERCs predecessors. To sustain the view that the ERC possesses only the powers and
The powers provided in Section 43 and the corresponding related provisions in the functions listed under Section 43 of the EPIRA is to frustrate the objectives of the law.
EPIRA are: All the foregoing undeniably lead to the conclusion that the ERC, under Sections 43(u),
1. Section 43(a) on the power to implement the rules and regulations of the 44 and 80 of the EPIRA, in relation to Section 16 (c) of the Public Service Act and
Act, also provided in Section 177; Section 8 of E.O. No. 172, possesses the power to grant provisional rate adjustments
2. Section 43(b) on the power to promulgate and enforce the National Grid subject to the procedure laid down in these laws as well as in the IRR.
Code and Distribution Code, also provided in Sections 9, 11, 19, 20, 21, 22, Legislative history supports ERCs power to grant provisional rate adjustments
23 and 24. A brief review of the legislative history of the regulatory bodies which preceded the ERC
3. Section 43(c) on the power to enforce the rules and regulations on the is instructive.
operation of the electricity spot market and on the participants in the spot The first regulatory body was the Board of Rate Regulation (BRR) which came into
market, also provided in Sections 30 and 31. existence in 1907.61 It had the power, after a full hearing, to fix, revise, regulate,
4. Section 43(d) on the power to determine the level of cross-subsidies in the reduce or increase the rates charged by public service corporations from time to time.62
retail rate until its removal, also provided in Section 74; In 1913, the Board of Public Utility Commissioners (BPUC) was created to take over
5. Section 43(e) on the power to amend or revoke the authority to operate of the functions of the BRR.63 The BPUC was empowered, after conducting a hearing,
any person or entity for failure to comply with the IRR or an order or resolution to fix rates imposed by any public utility.64 In addition, it had the power to hear and
of the ERC, also provided in Sections 6, 7, 20, 22, 26, 28, 29 and 30; determine, upon a written complaint or motu proprio, whether any increase or changes
6. Section 43(g) on the power to ensure that the charges of the TRANSCO in classification of rates proposed by a public utility is just and reasonable. Pending
and distribution utilities do not bear cross-subsidies, also provided in Section such hearing and determination, the BPUC had the power to order the
74; suspension of the increase or change in classification for a period not exceeding
7. Section 43(l) on the power to review and approve changes on the terms three (3) months.65
and conditions of service of the TRANSCO and any distribution utility, also The BPUC was shortly replaced by the PSC. Under its Charter, 66 the PSC was
provided in Sections 9, 22 and 23; authorized to fix rates and approve provisional rate adjustments.67
8. Section 43(h) on the power to allow the TRANSCO to charge user fees, With the advent of Martial Law, on September 24, 1972, then President Marcos through
also provided in Section 9 (b); Presidential Decree No. 1 reorganized the executive branch of the National
9. Section 43(j) on the power to set a lifeline rate for marginalized end-users, Government and implemented the Integrated Reorganization Plan. Under the Plan, the
also provided in Section 73; Board of Power and Waterworks (BOPW) was created in place of the PSC, taking over
10. Section 43(k) on the power to penalize abuse of market power, the "pertinent regulatory and adjudicatory functions" of the latter. 68
cartelization and anti-competitive or discriminatory behavior, also provided in Later, President Marcos created the Board of Energy (BOE) through Presidential
Section 45. Decree No. 1206, transferring to it the powers and functions of the BOPW relative to
11. Section 43(l) on the power to impose fines and penalties, also provided in power utilities.69
Section 46. The Board of Energy had the authority to grant provisional rate adjustments on the
12. Section 43(o) on the power to monitor activities in the generation and basis of the last paragraph of Section 11 of P.D. No. 1206, which reads:
supply of the electric power industry, also provided in Sections 6 and 29; .
13. Section 43(p) on the power to act on application for/or modifications of Likewise, the foregoing transfers of powers and functions of the abolished
certificates of public convenience and/or necessity, etc., also provided in agencies shall be to the extent that they are not modified by any specific
Sections 22 and 23; provision of this Decree.
14. Section 43(r) on the power to act against any participant or player in the This Court, in Bautista v. Board of Energy,70 held that the Board of Energy derived its
energy sector for violations of law, rule or regulation, also provided in Sections prerogative to grant provisional relief not only from Section 11 of P.D. No. 1128,
46 and 74. amending Section 12 of R.A. No. 6173, but also from Section 16(c) of the Public Service
Notably, under Section 43(u) the ERC is granted "original and exclusive jurisdiction Act.71
over all cases contesting rates, fees, fines and penalties" imposed thereby in the The BOE in turn was replaced by the ERB pursuant to E.O. No. 172. Sections 8 72 and
exercise of its functions and responsibilities in Section 43. 1473 of the E.O. empowered the ERB to grant provisional rate adjustments.
In determining the extent of powers possessed by the ERC, the provisions of the EPIRA Historically, therefore, in this jurisdiction, at least beginning with the Public Service Act
must not be read in separate parts. Rather, the law must be read in its entirety, because in 1936, the regulatory bodies concerned have exercised the power to grant provisional
a statute is passed as a whole, and is animated by one general purpose and intent. Its rate adjustments only because there was a statutory grant of such power.
meaning cannot to be extracted from any single part thereof but from a general The foregoing recital establishes the following salient points: (1) Section 16(c) of the
consideration of the statute as a whole.60 Public Service Act authorizing the approval of provisional rate increases has never
Considering the intent of Congress in enacting the EPIRA and reading the statute in its been repealed and as such continues to be in full force and effect up to the present; (2)
entirety, it is plain to see that the law has expanded the jurisdiction of the regulatory The BOPW had the power to grant provisional rate increases on the basis of the
body, the ERC in this case, to enable the latter to implement the reforms sought to be provision of the Integrated Reorganization Plan that the pertinent powers of the PSC
were transferred to it; (3) The applicability clause found in Section 44 of the EPIRA is rates that will allow the recovery of just and reasonable costs and a reasonable return
the same as or similar to the applicability clauses contained in Sections 11 and 21 of on rate base (RORB) to operate viably. MERALCO insists that the ERC had substantial
P.D. No. 1206 and Section 14 of E.O. No. 172; and, (4) The applicability clause or basis for issuing the assailed Order.86
transfer of power provision is sufficient to effect the transfer of powers from a regulatory The Court is convinced of the meritoriousness of FDCs position which is the same
agency to its successor. stance taken by the petitioners-in-intervention and the OSG.
All told, the provisions of the Public Service Act74 and E.O. No. 17275 which relate to Under Section 16(c), C.A. No. 146 and Section 8, E.O. No. 172 in relation to Sections
the power of the regulatory body to approve provisional rates continue to have full force 43 and 80 of the EPIRA, the ERC may grant provisional rate adjustments without first
and effect, and the power was transferred to the ERC by virtue of Section 80 in relation conducting a hearing prior to such grant. However, it is required to conduct a hearing
to Section 44 of the EPIRA. Said provisions are not inconsistent with the EPIRA except on the propriety of the grant of provisional rate adjustments within 30 days from the
the directives therein dispensing with the need for prior hearing. They are deemed issuance of the provisional order.87
modified to the extent that the EPIRA imposes a publication requirement 76 and, through Section 4(e), Rule 3 of the IRR requires the ERC to resolve the motion for issuance of
the IRR, assures the customers affected the opportunity to oppose or comment on the a provisional order within seventy five (75) calendar days from the filing of the
application for provisional rate adjustment before it is acted upon by the ERC.77 application or petition. If, within 30 days from the publication of the application or receipt
Indeed, both the letter and spirit of the law require that the authority of the ERC to grant of a copy thereof, an affected consumer or the Local Government Unit (LGU)
provisional power rate adjustments should be upheld. The law is so clear that it cannot concerned files with the ERC a comment on the prayed for provisional rate adjustment
be misread. and/or the application itself, the ERC is mandated to consider such comment in its
Grave Abuse of Discretion action on the prayer for provisional rate adjustment. Section 4(e), Rule 3 reads in full:
The FDC contends that the issuance of the November 27, 2003 Order provisionally Any application or petition for rate adjustment or for any relief affecting the
approving MERALCOs application for rate increase is void because, among others, consumers must be verified and accompanied with an acknowledgement of
the affected sectors were not afforded the opportunity to be heard. Since the issuance receipt of a copy thereof by the LGU Legislative body of the locality where the
of provisional orders is quasi-judicial in character, the ERC cannot dispense with the applicant or petitioner principally operates together with the certification of
requirements of notice and hearing.78 It likewise claims that the ERC based the the notice of publication thereof in a newspaper of general circulation in
provisional increase only on MERALCOs bare allegation that it was in dire financial the same locality.
straits, as there was no proof of MERALCOs actual financial condition.79 The ERC may grant provisionally or deny the relief prayed for not later
Petitioners-in-intervention, for their part, argue that the ERC issued the assailed Order than seventy five (75) calendar days from the filing of the application or
in haste, thereby virtually ignoring the opposition expressed by the oppositors in their petition, based on the same or supporting documents attached thereto and
pleadings submitted to the Commission. They point out that the issuance by the ERC such comments or pleadings the customers or the LGU concerned may
of the Order notwithstanding the failure of MERALCO to comply with the publication have filed within thirty (30) calendar days from receipt of a copy of the
requirement under Section 4(e), Rule 3 of the IRR manifests the Commissions partiality application or petition or from the publication thereof as the case may
for MERALCO.80 be.
Significantly, the OSG is also of the view that the proceedings before the ERC relative Thereafter, the ERC shall conduct a formal hearing on the application or
to MERALCOs Application is defective. Among the defects, according to the OSG, are petition, giving proper notices to all parties concerned, with at least one public
MERALCOs failure to publish its Application or at least a summary of the reasons for hearing in the affected locality, and shall decide the matter on the merits not
its application, as required by Section 4(e), Rule 3 of the IRR; the ERCs failure to later than twelve (12) months from the issuance of the aforementioned
consider the serious objections raised by the oppositors to the application and the provisional order.
ERCs failure to resolve the motions for production of documents filed by several (Emphasis supplied)
oppositors.81 Two postulates evidently flow from a reading of Section 4(e), Rule 3. First, the
Maintaining that FDC and the petitioners-in-intervention have failed to show any grave publication of the application itself is required, not merely the notice of hearing issued
abuse of discretion on its part, the ERC stresses that it is authorized under the law to by the ERC. Second, in granting a provisional authority, the ERC must consider not
issue provisional rate adjustments without conducting a prior hearing and that such only the evidence submitted by the applicant in support thereof, but also the comments
issuance may be made permanent, modified or denied in the course of the main of the consumers and the Local Government Units (LGUs) concerned.
proceeding.82 It is suggested that the IRR provision in point should be construed as granting the ERC
The ERC also argues that Section 4(e) of the IRR does not require the publication of the power to issue provisional rate adjustments ex parte.88 Such power, partaking as it
the Application itself, citing in support of its contention the ruling of the Court in does the nature of the police power of the State, is conferred on administrative agencies
Beautifont, Inc. v. Court of Appeals83 that Section 7 of the Permissible Investments Law like the ERC to enable them to pursue temporary measures to address problems that
requires the publication of the summary or abstract of the application, not the cannot wait until the completion of formal proceedings. Thus, the ERC may grant
application itself.84 The ERC further asserts that it is premature for the Court to rule on provisional rate adjustments on the basis of the public utilitys application and
the issue of whether it acted with grave abuse of discretion in issuing the November supporting documents, and the pleadings submitted by other parties may have
27, 2003 Order considering that MERALCOs main petition is pending hearing before filed at that time. Thereafter, it is mandated to hold a full-blown hearing to resolve the
it.85 case on the merits.89
In its Memorandum, MERALCO maintains that the ERC acted not with grave abuse of Concededly, like Section 16(c), C.A. No. 146 and Section 8, E.O. No. 172, Section 4(e),
discretion but rather in accordance with its duty under Section 43(f) of the EPIRA to fix Rule 3 of the IRR does not require the conduct of a hearing prior to the issuance of a
provisional order. However, reading the aforementioned provisions of the Public agency is the one so authorized by the law as in the case of the EPIRA. This is so
Service Act, the ERB Charter and the IRR in relation to one another, as they should be because it is impracticable, if not impossible, for the legislature to anticipate and provide
read, the inexorable conclusion is that the provisional order cannot be issued under the for the multifarious and complex situations that may be encountered in enforcing the
circumstances based exclusively on the application and supporting documents law. So long as the rules and regulations are germane to the objects and purposes of
thereof. The IRR explicitly requires, as a prerequisite to such issuance, that the ERC the law and conforms to the standards prescribed thereby, they are deemed to have
consider also the comments of the consumers and the LGUs concerned on the the force and effect of law.94
application which were filed within thirty (30) days from their receipt of a copy of the In Victorias Milling Co., Inc. v. Social Security Commission,95 the Court explained:
application or the publication thereof. When an administrative agency promulgates rules and regulations, it "makes"
In other words, the ERC must wait for thirty (30) days from service of copies of the a new law with the force and effect of a valid law, Rules and regulations
application for rate adjustments on interested parties or from the publication of such when promulgated in pursuance of the procedure or authority conferred upon
application before it can issue a provisional order. If after the 30th day, no comments the administrative agency by law, partake of the nature of a statute This is
are filed by concerned parties, then and only then may the ERC, if it deems proper so because statutes are usually couched in general terms, after expressing
under the circumstances, issue a provisional order on the basis of the application and the policy, purposes, objectives, remedies and sanctions intended by the
its supporting documents. legislature. The details and the manner of carrying out the law are often times
To synthesize, the new order on rate adjustments is as follows: (sic) left to the administrative agency entrusted with its enforcement. In this
(1) The applicant must file with the ERC a verified application/petition for rate sense, it has been said that rules and regulations are the product of a
adjustment. It must indicate that a copy thereof was received by the legislative delegated power to create new or additional legal provisions that have the
body of the LGU concerned. It must also include a certification of the notice of effect of law.96
publication thereof in a newspaper of general circulation in the same locality. The challenged provisional rate increase transgresses Section 4(e), Rule 3 of the IRR
(2) Within 30 days from receipt of the application/petition or the publication in two major respects. The violations involve a couple of new requirements prescribed
thereof, any consumer affected by the proposed rate adjustment or the LGU by the IRR. These are, first, the need to publish the application in a newspaper of
concerned may file its comment on the application/petition, as well as on the general circulation in the locality where the applicant operates; and second, the need
motion for provisional rate adjustment. for ERC to consider the comments or pleadings of the customers and LGU concerned
(3) If such comment is filed, the ERC must consider it in its action on the in its action on the application or motion for provisional rate adjustment.
motion for provisional rate adjustment, together with the documents submitted Obviously, the new requirements are aimed at protecting the consumers and
by the applicant in support of its application/petition. If no such comment is diminishing the disparity or imbalance between the utility and the consumers. The
filed within the 30-day period, then and only then may the ERC resolve the publication requirement gives them enhanced opportunity to consciously weigh the
motion for provisional rate adjustment on the basis of the documents application in terms of the additional financial burden which the proposed rate increase
submitted by the applicant. entails and the basis for the application. With the publication of the application itself,
(4) However, the ERC need not conduct a hearing on the motion for the consumers would right from the start be equipped with the needed information to
provisional rate adjustment. It is sufficient that it consider the written comment, determine for themselves whether to contest the application or not and if they so decide,
if there is any. to take the needed further steps to repulse the application. On the other hand, the
(5) The ERC must resolve the motion for provisional rate adjustment within 75 imposition on the ERC to consider the comments of the customers and the LGUs
days from the filing of the application/petition. concerned extends the comforting assurance that their interest will be taken into
(6) Thereafter, the ERC must conduct a full-blown hearing on the account. Indeed, the requirements address the right of the consuming public to due
application/petition not later than 30 days from the date of issuance of the process and at the same advance the cause of people empowerment which is also a
provisional order and must resolve the application/petition not later than 12 policy goal of the EPIRA along with consumer protection.
months from the issuance of the provisional order.90 Effectively, this provision Corollarily, the requirements seek to temper the lack of fairness implicit in the kind of
limits the lifetime of the provisional order to only 12 months. ex parte modality theretofore followed in regard to applications for provisional rate
Section 4(e), Rule 3 of the IRR, outlining as it does the approval process for an increases. Before the adoption of the IRR provision, to secure a provisional rate
application or petition for provisional rate adjustment, enforces not only Section 43(u) adjustment all that a public utility needed to do was to file the corresponding application
thereof but also Sections 44 and 80 which, as earlier stated, refer to the powers of the with the supporting documents. Without the burden of a hearing and in total disregard
ERB passed on to the ERC and found in other prevailing laws, such as Section 16(c) of the opposition, the applicant could press the regulatory body to grant the application.
of the Public Service Act. With the new protocol under the IRR, the ERC is tasked to pass upon the comments
The validity of the IRR, including Section 4(e) under Rule 3 thereof, is not in dispute. or opposition of the consumers and the LGUs in its resolution of the application for
The IRR was crafted by the Department of Energy (DOE) in consultation with relevant provisional rate adjustment. Consequently, for the ERC to be true to its mission and to
government agencies in accordance with its mandate under the EPIRA.91 It was prevent evisceration of the new requirements, it should mention in the provisional order
promulgated on the same day that it was approved by the Joint Congressional Power the points and arguments of the oppositors which it adopts or give its reasons if it does
Commission on February 27, 2002.92 This Commission is composed of fourteen (14) not uphold them. In other words, the proof of its compliance with the requirements
members of the Senate and the House.93 should appear in the provisional order itself.
It is settled that an administrative agency possesses the power to issue rules and While the system of interim rates cannot be dispensed with since it helps ensure the
regulations to implement the statute which it is tasked to enforce, unless another financial viability of a public utility which it needs to be able to deliver adequate service
to the consumers, the system may be abused to the detriment of the consumers if not No. 5455, where this Court held that the law did not require the publication of the subject
enough safeguards are put in place. It happened many times before that after the application itself with the Board of Investments.104 The case, however, is not apropos.
provisional rate increase had been granted, no action on the main petition was taken, For one thing, despite some imprecision in a segment of the provision involved, other
or if one was taken it was made only after the lapse of a considerable period of time. parts thereof clearly signify that only the notice of the application is meant to be
The ultimate effect of the inaction or delay was virtually to make the provisional rate published. Here, the IRR provision clearly refers to the application itself which is
permanent. Thus, the consumers were made to pay what effectively evolved to be the required to be published. For another, in Beautifont the Court was quite explicit that
permanent rate without the benefit of a hearing. In the meantime, the collections on the under the provision involved not just the notice of application "but an abstract or
provisional rate were spent by the utility. summary thereof, comprehending the items mentioned" 105 had to be published and it
In a recent decision,97 this Court ordered MERALCO to make a refund which remains intimated that the item actually published complied with the law. Here, what was
uncomplied with up to the present, to the prejudice of the consumers. The consumers actually published is a mere notice of the intent to file an application. Nothing more,
will similarly suffer if MERALCO, or any power utility for that matter, is allowed nothing less.
to collect on a provisional rate increase, the application for which they effectively For its part, MERALCO alleges that it relied on the ERCs interpretation that what had
have no knowledge of. to be published "is simply a notice of the intent to file an application"106 So, it "caused
The new requirements address the dismal scenario by ensuring dissemination of the publication of such notice before it filed the application." 107 As it is feeble and self-
information on the application for rate increase and consideration by the ERC of the defeating, the claim is also incongruent with the position actually presented by the ERC
written position taken by consumers in its action on the motion for provisional rate in this case.108
increase. In this regard, the stance taken by the OSG as the Peoples Tribune deserves to be
The publication and comment requirements, like the 30-day period also imposed in quoted, thus:
Section 4(e), Rule 3 of the IRR, are in keeping with some of the avowed policies of the The first paragraph of Section 4(e) of Rule 3 of the EPIRA IRR provides that
EPIRA. These are to protect the public interest vis--vis the rates and services of a "petition for rate adjustment x x x must be x x x accompanied with x x x the
electric utilities and other providers of electric power, 98 to ensure transparent and certification of the notice of publication thereof in a newspaper of general
reasonable prices of electricity in a regime of free and fair competition and full public circulation in the x x x locality." It is very clear from the above-cited rule that
accountability for greater operational and economic efficiency, to enhance the the application for rate adjustment must be published in a newspaper of
competitiveness of Philippine products in the global market, 99 and to balance the general circulation.
interests of the consumers and the public utilities providing electric power through the In the case of MERALCO in ERC Case No. 2003-480, it appears that only a
fair and non-discriminatory treatment of the two sectors.100 notice of hearing has been published. The notice that was published did not
Clearly, therefore, although the new requirements are procedural in character, they cite the essential allegations or contain a summary of the reasons in support
represent significant reforms in public utility regulation as they engender substantial of the application for rate increase.
benefits to the consumers. It is in this light that the new requirements should be The purpose of the publication of the application or the essential allegations
appreciated and their observance enforced. or summary of the reasons given for the relief sought in the application for rate
The record shows that MERALCO failed to comply with the publication requirement adjustment contained in the notice of hearing in a newspaper of general
prescribed by the IRR. What the IRR requires to be published is the application itself. circulation is to inform and enable the consumers in the applicants franchise
In fact, it even requires the applicant to submit the "certification of the notice of area to understand as much as possible the application as well as the reasons
publication" of the "application or petition for rate adjustment" 101 together with the therefore. This is more so because the relief sought will have an immediate
application/petition to the ERC. The Notice, quoted in full hereunder, which MERALCO and great impact on the consumers.109
caused to be published on October 10, 2003 in the Manila Times, does not comply with The November 27, 2003 Order reveals that the ERC did not consider the opposition to
the requirement, thus: MERALCOs Application and other pleadings filed by several concerned parties in
MANILA ELECTRIC COMPANY determining whether the rate increase applied for by MERALCO should be approved
Pasig City provisionally.
NOTICE OF APPLICATION The ERCs provisional approval of MERALCOs application for rate increase was based
Pursuant to paragraph (e), Section 4, Rule 3 of the Implementing Rules and on MERALCOs say-so alone, including the purported value of its assets as of the year
Regulations of R.A. 9136, notice is hereby given that an Application dated 2002 and its claimed financial difficulties, resulting according to it in its deferral of forty-
October 8, 2003, for the approval of revised rate schedules and provisional two (42) major capital projects and failure to meet its maturing debt obligations. In the
authority, will be filed by the MANILA ELECTRIC COMPANY with address at assailed Order, the Commission held that MERALCOs inability to construct its capital
Meralco Center, Ortigas Avenue, Pasig City, before the Energy Regulatory projects to meet the growing demand of its customers and to ensure the reliability and
Commission. efficiency of its existing system would ultimately be to the prejudice of the
Issued this 9th day of October 2003. consumers.110
(Sgd). GIL S. SAN DIEGO The provisional authority to impose increased rates was approved notwithstanding the
Vice President and Head fact that soon after MERALCO filed its Application on October 10, 2003, FDC and
Legal Services102 (Emphasis supplied) NASECORE expressed their intention to file their respective oppositions to the
ERC invokes the case of Beautifont, Inc. v. Court of Appeals,103 involving the Application,111 and later their respective Motions for Production of Documents.112
deciphering of the publication requirement in the Permissible Investments Law, R.A.
Neither did the ERC consider the Letter dated October 24, 2003 of Lualhati (a relevant motions has such grave due process implications that render the Order void,
consumer), seeking the dismissal of the Application. independently of its breach of its own rules. Thus, should the case be simply remanded
Although on November 13, 2003, the ERC issued an Order requiring MERALCO to to the ERC without further action by the Court, the defects would not be cleansed and
comment on NASECOREs Motion for Production of Documents,113 it failed to resolve they would retain their potency and still serve as solid basis to nullify the challenged
the same, as well as FDCs similar Motion, before issuing its November 27, 2003 Order. Order and all other issuances of the ERC which would be infected by the infirmities.
The motions filed by NASECORE and FDC should have been acted upon by the ERC Indeed, such a denouement would be inescapable once the application is elevated
prior to resolving MERALCOs prayer for provisional rate increase, because again to this Court in connection with the infirm issuances. Clearly then, a remand is
NASECORE and FDC would be able to express their agreement or opposition to not in the best interest of MERALCO and the ERC. Rather, it is to their advantage,
MERALCOs Application only after perusing the documents presented, if their Motions same as with the consumers, that they begin again on a clean slate.
were granted; or in case the Motions were denied, they could at least make known their WHEREFORE, the Petition and the Petition-in- Intervention are GRANTED, and the
respective positions on the Application on the basis of the documents submitted by November 27, 2003 Order of the respondent Energy Regulatory Commission in ERC
MERALCO. Certainly, the spirit if not the language of the IRR provision should have Case No. 2003-480, granting provisional rate increases to the respondent MERALCO,
led ERC to treat the motions which are preludes to active opposition to the application is DECLARED VOID and accordingly SET ASIDE.
in a more favorable light and in a less cavalier fashion. Without even mentioning the Respondent Commission is DIRECTED to comply with Section 4(e), Rule 3 of the
motions in its Order, ERC granted the motion for provisional rate increase. Implementing Rules and Regulations of Republic Act No. 9136, particularly the
The foregoing clearly establish that ERC failed to comply with the requirements of Rule publication and comment requirements therein, in conformity with this D E C I S I O N,
4(e), Rule 3 of the IRR publication and comment requirements of Rule 4(e), Rule 3 of in acting upon and resolving respondent MERALCOs prayer for provisional rate
the IRR. increase in its Application dated October 8, 2003 in ERC Case No. 2003-480.
In Benito v. Commission on Elections,114 we held that: SO ORDERED.
Grave abuse of discretion means "such capricious and whimsical exercise of Davide, Jr., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-
judgment as is equivalent to lack of jurisdiction, or, in other words where the Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., and Azcuna,
power is exercised in an arbitrary or despotic manner by reason of passion or JJ., concur.
personal hostility, and it must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined or CONCURRING AND
to act at all in contemplation of law." It is not sufficient that a tribunal, in the DISSENTING OPINION
exercise of its power, abused its discretion; such abuse must be grave. PUNO, J.:
(Citations omitted)115 The case at bar involves two purely legal issues, one substantive and the other
It is settled that there is grave abuse of discretion when an act is done contrary to the procedural. The substantive issue is whether the Energy Regulatory Commission
Constitution, the law or jurisprudence,116 or when executed whimsically, capriciously or (ERC) has legal authority to grant provisional rate adjustments under the Electric Power
arbitrarily out of malice, ill will or personal bias.117 Industry Reform Act of 2001 (EPIRA); the procedural issue is whether the grant by the
What makes the challenged Order particularly repugnant is that it involves a blatant ERC of the provisional rate adjustment to the Manila Electric Company (Meralco) was
and inexcusable breach of the very rules which the ERC is mandated to observe and done in accord with section 4 (e), Rule 3 of the Implementing Rules and Regulations of
implement. The violated provision which is Section 4(e), Rule 3 of the IRR specifies the EPIRA law. The reasonability of the rate increase applied for by Meralco and
how the ERC should exercise its power to issue provisional orders pursuant to Section provisionally granted by the ERC is not an issue before the Court and should not shade
44 in relation to Section 80 of the EPIRA. Since the IRR was issued pursuant to the our decision. On the substantive issue, I join the majority without any hesitation. On the
EPIRA, Section 4(e) of Rule 3 as part of the IRR has the force and effect of law118 and procedural issue, I beg to dissent.
thus should have been complied with. I. Facts
In view of the infirmities which attended the issuance of the November 27, 2003 Order, First, the facts without the fat.
particularly: (1) the failure of MERALCO to publish its Application or at least a summary On October 10, 2003, Meralco applied for a rate hike with the ERC and sought the ex-
thereof; (2) the failure of the ERC to resolve the Motions for Production of Documents parte grant of provisional authority to increase such rates in accordance with a schedule
filed by the oppositors to MERALCOs Application before acting on the motion for attached to its application.[1] On the same date, Meralco published a notice of the
provisional rate adjustment; and (3) the failure of the ERC to consider the arguments filing of the application for a rate hike in the Manila Times.[2] A day before filing
raised by the oppositors in their respective pleadings prior to the issuance of the its application with the ERC, Meralco furnished the Sangguniang Panglungsod of
assailed Order; the Court declares void the November 27, 2003 Order of the ERC for Pasig City with a copy of the application.[3]
having been issued with grave abuse of discretion. With the public given such notice, the National Association of Electricity Consumers
One final word. The character of the infirmities which taint the challenged Order is such for Reform (NASECORE), on October 14, 2003, manifested its intent with the ERC to
that it precludes the remand of the case to the ERC without invalidating the Order. The file an opposition to Meralcos application.[4]
defect of the notice as published is deemed of so serious a nature as to negate the Other oppositors followed suit. Mr. Genaro Lualhati filed a letter with the ERC on
notice altogether and forestall the ERCs assumption of jurisdiction over MERALCOs October 24, 2003 demanding for the dismissal of Meralcos application.[5]
Application and its prayer On October 29, 2003, no less than petitioner Freedom from Debt Coalition (FDC) filed
for provisional rate increase. Similarly, the ERCs failure to consider the oppositions a letter with the ERC expressing its intent to file an opposition to Meralcos
and motions already on record in issuing the challenged Order and to act upon other
application.[6] The ERC then directed FDC, Mr. Lualhati and NASECORE to file their On December 11, 2003, Mr. Lualhati and the Philippine Consumers Watch (Bantay
comments on the application.[7] Mamamayan) Foundation filed with the ERC a Motion to Resolve Opposition and
On November 11, 2003, NASECORE moved for the production of material documents Manifestation Joining NASECORE in its Opposition and Motion for Production of
by Meralco.[8] On November 13, 2003, ERC ordered Meralco to comment on Documents, respectively.[20] A day later, Napocor Industrial Consumers
NASECOREs motion.[9] On November 19, 2003, it directed Meralco to submit certain Association, Inc. (NICAI) filed an Urgent Motion to Suspend Implementation and
documents.[10] Motion for Reconsideration.[21]
On November 21, 2003, Mr. Lualhati filed his Opposition to Meralcos application.[11] On December 15, 2003, the Philippine Consumers Welfare Union, Atty. Ruperto
On November 25, 2003, NASECORE, manifested that it still could not file its opposition Estrada, Martsa ng Bayan Contra Meralco, Corazon Villa and Daday Tupay filed
until the documents it had requested from Meralco had been produced.[12] On the oppositions asking ERC to reconsider the Questioned Order while Atty. Estrada filed a
same date, petitioner FDC filed a Motion for Production of Documents with the ERC to motion for production of documents.[22]
enable it to submit a comment on Meralcos application and reserved its right to oppose On December 19, 2003, Meralco opposed the motion for production of material
the same.[13] documents on the ground that the documents sought by the petitioners were immaterial
In an Order dated November 27, 2003 (the Questioned Order) issued ex-parte, the and irrelevant to its application.[23]
ERC granted Meralco provisional authority to increase its rates by 12 centavos/kWh On December 21, 2003, Mr. Arnulfo Paca also raised his objections and comments on
effective January 2004,[14] the dispositive portion of which states as follows: the provisional increase via e-mail sent to the ERC .[24]
WHEREFORE, considering all the foregoing, this Commission, pursuant to Section 8 On December 22, 2003, Mr. Lualhati filed a Motion for Reconsideration of the
of Executive Order No. 172 and Section 4 (e) of the Implementing Rules and Questioned Order.[25] On the same date, Bagong Alyansang Makabayan (BAYAN),
Regulations of the EPIRA (R.A. 9136), hereby provisionally authorizes applicant Manila Kilusang Mayo Uno (KMU), Gabriela Womens Partylist (GABRIELA), Anakpawis
Electric Company (MERALCO) to adopt and implement the attached rate schedules Partylist, Kalipunan ng Damayang Mahihirap (KADAMAY), and Samahan ng
embodying a rate adjustment in the average amount of TWELVE (12) CENTAVOS per Nagtataguyod ng Agham at Teknolohiya Para sa Sambayanan (AGHAM) filed an
kWh, effective with respect to its billing cycles beginning January 2004. The impact Opposition with Motion for Reconsideration.[26]
of this approved rate adjustment will vary from one customer class to another In the public hearing held on December 22, 2003, several oppositors, asked the
depending on the load factors. ERC to reconsider its Questioned Order. The ERC refused insisting it has the power to
The rate adjustment authorized herein shall be subject to refund in the event that issue provisional orders.[27] Instead of seeking reconsideration, FDC filed with this
this Commission finds, after completion of the hearings of this case, that the Court on December 23, 2003, a petition for certiorari, prohibition and injunction with
same is unjust and unreasonable. prayer for the issuance of a temporary restraining order or a status quo order. Six days
The hearing of this case is hereby set on December 22, 2003 at nine o clock in the later, FDC reiterated its prayer for a temporary restraining or status quo order.[28]
morning (9:00 A.M.) at the ERC Hearing Room, 15th Floor, Pacific Center Building, San On December 30, 2003, Meralco filed a Consolidated Comment to the various
Miguel Avenue, Ortigas Center, Pasig City. In this connection, MERALCO is hereby oppositions with the ERC.[29]
directed to publish, at its own expense, the attached Notice of Public Hearing at least On January 13, 2004, this Court ordered the ERC and Meralco to comment on FDCs
twice (2) (sic) for two (2) successive weeks in two (2) newspapers of nationwide petition and enjoined them to observe the status quo prevailing before the filing of the
circulation in the country, the last date of publication to be made not later than two (2) petition. The case was set for oral arguments on January 27, 2004.[30]
weeks before the scheduled date of initial hearing. Prior to and shortly after the January 13, 2004 status quo order of this Court, several
Let copies of this Order and the attached Notice of Public Hearing be furnished all the parties had, in the meantime, filed other pleadings with the ERC. The Philippine
Municipal/City Mayors within the MERALCOs franchise area for the appropriate Chamber of Commerce and Industry filed a letter on January 5, 2004 requesting for
posting thereof on their respective bulletin boards. a public hearing before the grant of the provisional increase.[31] On January 6, 2004,
Likewise, let copies of this Order and the attached Notice of Public Hearing be Mr. Lualhati filed a Rejoinder with Motion for Reconsideration, while Mr. Juan Paqueo
furnished the Office of the Solicitor General (OSG), the Commission on Audit III filed a Petition to Suspend the Granting of Electric Power Increase Against Meralco
(COA) and the Committees on Energy of both Houses of Congress who are hereby Company.[32] BAYAN, Bayan Muna Partylist, KMU, GABRIELA, Anakpawis Partylist,
requested to have their respective duly authorized representatives present at the KADAMAY, and AGHAM filed a Manifestation with Motion to Immediately Resolve
aforesaid initial hearing[15] (emphasis supplied) Motion for Reconsideration and to Suspend Provisional Authority on January 9,
On December 2, 2003, Meralco filed a Motion for Extension of Time to submit the 2004.[33] They also filed their Rejoinder to Meralcos Consolidated Comment on
documents indicated in the ERCs Order of November 19, 2003.[16] January 13, 2004.[34] In the meantime, NICAI and Mr. Yeban filed their respective
On December 3, 2003, Mr. Zosimo Yeban, filed a letter with the ERC objecting to the Rejoinders to Meralcos Consolidated Comment on January 12, 2004.[35] On January
rate increase granted to Meralco.[17] 15, 2004, NASECORE filed its Rejoinder.[36] The OSG filed an Urgent Motion to
On December 8, 2003, NASECORE filed with the ERC an Urgent Motion to Resolve Resolve Pending Motions filed by the Oppositors on January 29, 2004.[37] It sent a
Motion for Production of Documents and Opposition to the Provisional Authority, while letter to the Commission on Audit (COA) requesting assistance with regard to Meralcos
the National Consumer Affairs Council filed a letter seeking reconsideration of the application on February 4, 2004[38] and filed a motion with the ERC on February 16,
ERCs Questioned Order. [18] 2004 seeking to direct the COA to conduct a rate audit.[39]
On December 9, 2003, the Federation of Philippine Industries, Inc. likewise filed a Meralco, ERC and the OSG filed their respective comments with this Court on January
letter with the ERC seeking reconsideration of the Questioned Order.[19] 26, 2004.
The petitioners-in-intervention[40] filed a motion to intervene attaching thereto their Under the reorganization plan effected by Presidential Decree No. 1, as amended by
petition-in-intervention which this Court admitted in a Resolution dated January 27, Presidential Decree No. 458 issued on May 16, 1974, jurisdiction, supervision and
2004.[41] control over public services related to electric light, power and waterworks vested in the
During the oral arguments on January 27, 2004, the parties were required to file their PSC were transferred to the Board of Power and Waterworks.
respective memoranda within a non-extendible period of twenty days. Counsel for ERC The Board of Power and Waterworks was abolished under Presidential Decree No.
was ordered in open court to produce certain documents. 1206 enacted on October 6, 1977. Its powers and functions relative to power utilities,
The parties (except for petitioner FDC) submitted their respective Memoranda dated including its authority to grant provisional relief,[58] were transferred to the Board of
February 16, 2004.[42] Energy.[59]
It will be noted that several motions assailing the Questioned Order remain On May 8, 1972, institutional reforms were made in the energy sector under Executive
pending before the ERC for resolution as shown by the OSGs Urgent Motion to Order No. 172 which created the Energy Regulatory Board (ERB). Under the law,
Resolve Pending Motions Filed by the Oppositors filed with the ERC on January 29, the Board of Energy (BOE) was reconstituted into the ERB and the powers and
2004.[43] These pending motions are the following: a letter-complaint of Zosimo functions of the BOE under Republic Act No. 6173, as amended by Presidential Decree
Yeban, Jr. filed on December 3, 2003 objecting to the rate increase granted to No. 1206, were transferred to the ERB.[60] The law expressly authorizes the ERB to
Meralco;[44] an Urgent Motion to Resolve Motion for Production of Documents and grant provisional relief.[61]
Opposition to the Provisional Authority of the NASECORE approved by its President, Most recently, Republic Act No. 9136, known as the Electric Power Industry Reform
Pete L. Ilagan, filed on December 8, 2003;[45] a letter of the National Consumers Affairs Act of 2001 (EPIRA), was enacted on June 8, 2001 to provide a framework for
Council filed on December 8, 2003 seeking reconsideration of the provisional restructuring the electric power industry.[62] One of the purposes of the EPIRA is to
authority;[46] a letter of the Federation of Philippine Industries, Inc. filed on December establish a strong and purely independent regulatory body.[63] The ERB was
9, 2003 asking reconsideration of the ERC Order granting the provisional increase;[47] abolished[64] and its powers and functions not inconsistent with the provisions of the
a Manifestation of the Philippine Consumers Watch (Bantay Mamamayan) Foundation, EPIRA were expressly transferred to the Energy Regulatory Commission (ERC).[65]
represented by its Chairman, Juan Ponce Enrile, filed on December 11, 2003, joining With due respect to the majority, I submit that . . .
the NASECORE in its opposition to the provisional authority and Motion for Production IV. ERC complied with the rules and did not act
of Documents;[48] an Urgent Motion to Suspend Implementation and Motion for with grave abuse of discretion in issuing the
Reconsideration of the Napocor Industrial Consumers Association, Inc. (NICAI) filed on Questioned Order.
December 12, 2003;[49] an Opposition of the Philippine Consumers Welfare Union This is the spearhead of my disagreement with the majority and I wish to address
(PCWU), Martsa ng Bayan Kontra Meralco, Corazon Villa and Daday Tupas filed on it first. I respectfully make the following submissions: (a) there is no violation of the
December 15, 2003 asking the ERC to reconsider its order granting the provisional procedure set forth in the EPIRAs Implementing Rules and Regulations when ERC
increase;[50] an electronic mail message of Michael Paca dated December 21, 2003 issued its Questioned Order; indeed, the oppositors had full opportunity to assail its
(and stamped received by the ERC on January 8, 2004) with an attached write-up legality and propriety in a public hearing before its effectivity; (b) ex-parte orders
containing comments on the rate increase;[51] a Motion for Reconsideration of Mr. issued to protect the interest of the public are universally recognized as legitimate
Genaro C. Lualhati filed on December 22, 2003;[52] a letter of the Philippine Chamber exercise of the police power of the State; and (c) it is premature for the Court to strike
of Commerce and Industry filed on January 5, 2004 asking the ERC to conduct public down the Questioned Order at this time since it is merely provisional and is pending
hearings prior to the grant of provisional increase;[53] a Petition of Juan B. Paqueo III reconsideration before the ERC; in fine, there is an effective and available
filed on January 6, 2004 to suspend the grant of rate increase to Meralco;[54] and a administrative remedy before the ERC which no party should shortcircuit and which this
Manifestation (with motions to immediately resolve motion for reconsideration and to Court should allow to flow unimpeded.
suspend provisional authority) of BAYAN, KMU, GABRIELA, KADAMAY and AGHAM The Questioned Order did not violate
filed on January 9, 2004.[55] the Implementing Rules and
II. Issues Regulations of the EPIRA; there is
The issues are strictly legal. no denial of procedural due process.
First, whether the ERC has legal authority to grant provisional rate adjustments under The majority based its holding that the ERC committed grave abuse of discretion in
the new EPIRA law. issuing the Questioned Order on the following ratiocination:
Second, whether the grant by the ERC of the provisional rate adjustment to Meralco 1. Meralco failed to comply with the publication requirement provided in Section 4
violates the Implementing Rules and Regulations of the EPIRA law and hence (e), Rule 3 of the Implementing Rules and Regulations. It notes that the Notice of
constitutes grave abuse of discretion amounting to lack or excess of jurisdiction. Application, quoted in full below, which was published on October 10, 2003 in the
Let me start with an overview of the . . . Manila Times does not contain the text of Meralcos application, or at least a summary
III. Statutory History of Electric Power thereof:
Regulation in the Philippines MANILA ELECTRIC COMPANY
Commonwealth Act No. 146 or the Public Service Act was passed into law on Pasig City
November 7, 1936 creating the Public Service Commission (PSC) with jurisdiction, NOTICE OF APPLICATION
supervision and control over public services such as those for electric light, heat and Pursuant to paragraph (e), Section 4, Rule 3 of the Implementing Rules and
power.[56] Under the Act, the PSC had authority to fix rates charged by a public service. Regulations of R.A. 9136, notice is hereby given that an Application dated October 8,
By express provision of law, the PSC could approve provisional rates ex-parte.[57] 2003, for the approval of revised rate schedules and provisional authority, will be filed
by the MANILA ELECTRIC COMPANY with address at Meralco Center, Ortigas As postulated by the ERC, the rules should not be given an unreasonable
Avenue, Pasig City, before the Energy Regulatory Commission. construction, viz:
Issued this 9th day of October 2003. Given that rate cases usually entail the filing of applications consisting of hundreds of
(Sgd.) GIL S. SAN DIEGO pages including all the attachments in support thereof, which often enough are made
Vice-President and Head integral parts thereof by reference, it is absurd to expect all the applicants to be able to
Legal Services[66] comply with the publication requirement if it were construed that the entirety of their
2. The Questioned Order failed to consider the pleadings filed by parties who opposed application must be the one published and not just the notice of the filing thereof. With
Meralcos application, as required by Section 4 (e), Rule 3 of the Implementing Rules a one-whole page advertisement in a newspaper of general circulation easily costing
and Regulations, and was based solely on Meralcos application and its supporting hundreds of thousands of pesos, and with one application eating up more than ten
documents. pages of newspaper space even with the smallest of fonts, it is simply too onerous
3. The ERC issued the Questioned Order despite the pendency of several Motions for and inconvenient for the applicants, including the smallest debt-ridden and
Production of Documents filed by various oppositors and despite their manifestation barely surviving electric cooperative, to be required to shell out millions of pesos
that they would oppose Meralcos application. just so that they could apply for some relief with respondent ERC.
These grounds relied upon by the majority cannot stand close scrutiny. Sections 4 (e) This must not have been the intention of those luminaries that drafted and approved
and (r), Rule 3 of the EPIRAs Implementing Rules and Regulations set forth the the EPIRA Implementing Rules. When the legislative intent of informing the public
procedure in rate adjustment cases, viz: of the filing of the application with respondent ERC is duly served by mere notice,
(e) Any application or petition for rate adjustment or for any relief affecting the as this is in fact what due process requires, it must not have entered the minds of
consumers must be verified; and accompanied with an acknowledgment of the drafters of the Implementing Rules to expand such requirement by asking for
receipt of a copy thereof by the LGU Legislative Body of the locality where the something close to impossibility (sic).[67] (emphases supplied)
applicant or petitioner principally operates together with the certification of the The rationale for the first rule on publication is to ensure that the people in the locality
notice of publication thereof in a newspaper of general circulation in the same where the petitioner principally operates is informed of the notice of application.
locality. Once they receive the notice, they can then proceed to obtain copies of the entire
The ERC may grant provisionally or deny the relief prayed for not later than seventy application in order to prepare their opposition or comments thereto. In the case at
five (75) calendar days from the filing of the application or petition, based on the same bar, it is undeniable that Meralco published its Notice of Application for provisional
and the supporting documents attached thereto and such comments or pleadings the rate increase. It is also undeniable that various parties, including the petitioners in the
consumers or the LGU concerned may have filed within thirty (30) calendar days from case at bar, secured copies of Meralcos application after publication of its Notice of
receipt of a copy of the application or petition or from the publication thereof as the case Application. It is also undeniable that various parties were able to oppose Meralcos
may be. application for provisional rate increase. It cannot be gainsaid therefore that the
Thereafter, the ERC shall conduct a formal hearing on the application or petition, giving rationale for the rule has been satisfied.
proper notices to all parties concerned, with at least one public hearing in the affected The majority opines that at least a summary of the application should have been
locality, and shall decide the matter on the merits not later than twelve (12) months published.[68] With due respect, the rules do not require the publication of a summary
from the issuance of the aforementioned provisional order. of the application. The rules require that a certification of the notice of publication should
This Section 4(e) shall not apply to those applications or petitions already filed as of 26 accompany the application. Indeed, a summary would not enable anyone to prepare
December 2001 in compliance with Section 36 of the Act. an intelligent opposition to the application. Rate cases are, by nature, highly
xxx xxx xxx technical and dependent on scientific data which do not easily lend themselves to
(r) All notices of hearings to be conducted by the ERC for the purpose of fixing summarization. Anyone seriously intending to comment or oppose the application
rates or fees shall be published at least twice for two (2) successive weeks in needs to secure a copy of the application and its annexes.
two (2) newspapers of nationwide circulation. I respectfully reject the majority holding that the ERC failed to consider the
There are two publication requirements in the afore-cited rule. The first is the notice pleadings and comments of oppositors as required by the Implementing Rules and
of publication of the petition or application in a newspaper of general circulation Regulations before it issued its Questioned Order. In the first place, there is no showing
in the locality where the petitioner principally operates. The certification to this that the ERC did not consider the oppositions filed by various parties to Meralcos
effect must accompany the petition or application when filed. The second refers application. In the second place, the Rules do not expressly require any person to file
to the publication of all notices of hearing to be conducted by the ERC for the a comment or pleading on an application for provisional rate increase. Section 4 (e),
purpose of fixing rates or fees. The notices shall be published at least twice for Rule 3 of the Implementing Rules and Regulations simply provides that the ERC should
two (2) successive weeks in two (2) newspapers of nationwide circulation. act on the provisional relief (1) not later than seventy-five calendar days from the filing
The majority assails Meralcos failure to comply with the first publication requirement. It of the application; (2) based on the application or petition; (3) based on documents
stresses that Meralco did not cause the publication of its petition or application in its supporting the application or petition; and (4) based on comments or pleadings the
entirety. It merely published a notice of the filing of application. I respectfully submit consumers or the LGU concerned may have filed within thirty (30) calendar days
that the published notice sufficiently complies with the requirements of the rules. The from receipt of a copy of the application or petition or from the publication
application and its 17 annexes are hundreds of pages long and almost an inch thereof as the case may be. In fine, the application for provisional rate increase can
thick. It would be absurd to require Meralco to publish the entirety of its application. be acted upon by the ERC if there are no comments or pleadings filed by the consumers
or LGUs concerned.
We now determine whether the ERC ignored the comments of the consumers or evidence. Consequently, a motion for production of documents need not hinder
the LGUs concerned before it issued its Questioned Order. The records will show that the issuance of an order granting a provisional rate increase.
the comments or pleadings pending before the ERC before it issued the Questioned Under the Rules, the application and its supporting documents, if sufficient, can provide
Order on November 27, 2003 are the following: the basis for the ERC to issue an Order for a provisional rate increase. It should not be
1. NASECOREs letter filed on October 14, 2003 placing it on record that it would overlooked that the ERC is a special agency with a database of reliable information
oppose Meralcos application, its Motion for Production of Documents filed on which it has accumulated thru experience and its expertise. It is free to resort to these
November 11, 2003, and Compliance filed on November 25, 2003 manifesting that it data without offending procedural due process.
could not file its opposition until the documents it requested were made available; I respectfully submit that the administrative process of rate making should not be overly
2. Mr. Genaro Lualhatis letter filed on October 24, 2003 asking for the dismissal of the judicialized, otherwise, its very reason for existing will be subverted. It will not be able
application and his Opposition filed on November 21, 2003; to address the needs for which it was created and for which the judicial process was
3. FDCs letter filed on October 29, 2003 expressing its intent to oppose the application found lacking.
and Motion for Production of Documents filed on November 27, 2003, the day the There is another reason why the majority cannot hold that ERC violated procedural
Questioned Order was issued. due process when it issued its Questioned Order. It is familiar knowledge that due
It will be noted that the only substantive opposition or comment filed with the ERC process only demands opportunity to be heard. The Questioned Order was issued
from the time of the filing of Meralcos petition on October 10 until the issuance on November 27, 2003 but the provisional rate increase was to be effective
of the Questioned Order on November 27, 2003, is that filed by Mr. Genaro beginning January 2004. The public hearing on the provisional rate was set on
Lualhati. I respectfully submit that the ERC correctly gave Mr. Lualhatis Opposition the December 22, 2003. The oppositors were given all the opportunity to assail Meralcos
significance of a cipher. To begin with, his opposition was filed way beyond the 30-day application in the hearing of December 22, 2003. It cannot therefore be maintained that
period for opposing Meralcos application. And as pointed out by Meralco, Mr. Lualhatis the oppositors were denied the opportunity to be heard before the provisional rate
arguments are mere reiterations of his arguments in ERC Case Nos. 2001-900 and increase order became effective in January 2004. The majority cannot close its eyes
2001-646, which the ERC had already rejected.[69] There is therefore nothing to this reality.
tectonic about the arguments of Mr. Lualhati which would defeat the issuance of the Administrative agencies are allowed
Questioned Order. to issue ex-parte orders when
The majority also holds that the ERC failed to consider other pleadings such as required by public interest and as an
Motions for Production of Documents or letters of intent to file oppositions before it exercise of police power.
issued its Questioned Order. I respectfully reiterate that there is nothing in the rules Further, the rationale behind the creation of administrative agencies and the States
requiring the ERC to hold its provisional order in abeyance pending the police power explain the need for allowing them to issue ex- parte orders to protect
resolution of such motions as a Motion for Production of Documents. As public interest.
aforestressed, the ERC is allowed by the Rules to grant or deny the relief prayed for History tells us that the rise of the administrative process, combining legislative and
based on the application and its supporting documents, and such comments or judicial powers, was caused by the following:
pleadings the consumers or the LGU concerned may have filed within thirty (30) 1. the development of an industrialized and complex society requiring
calendar days from receipt of a copy of the application or petition or from the economic regulation;
publication thereof as the case may be.[70] The ERC is mandated to consider only 2. the need for specialization to develop the necessary expertise, flexible
pleadings filed within 30 days counted from the LGU or consumers receipt of the regulation to parallel the changing needs of the regulated field, and
application or publication thereof, as the case may be. That is all. It is not required to continuity of public policy; and
wait until all pleadings are submitted nor is its power to issue provisional orders 3. the evident inability of the judicial process to perform the necessary
stayed by pending matters such as motions for production of documents. To rule adjudication with regard to the vastly expanded scope of governmental
otherwise as the majority did is to hold ERC hostage by the simple expedient of activity.[72]
filing such motions as motions for production of documents or letters of intent With the complexity of modern life, government functions have to multiply as the areas
to file oppositions or comments. subject to regulations increased.[73] Different bodies were created to address these
It is beyond debate that the standard for interim orders is different from those used various needs agencies dealing with public health, transportation, commerce and even
for final orders. The standards for interim orders are less stringent because such the practice of professions were thus established. In the different areas addressed by
temporary orders are determined expeditiously, without such investigation as might be these administrative bodies, subject specialists with expertise in their respective fields
deemed necessary to a determination of permanent cases.[71] If the standards for have to be developed for effective regulation. The demands of modern society likewise
interim orders are as strict as those for final orders, then interim orders could not be exposed the inefficiency of traditional judicial processes to deal with the day-to-day
issued summarily. For this reason, the ERC, under the Implementing Rules and requirements of government. Administrative processes stepped in as a more flexible
Regulations, has only seventy-five days to provide provisional relief. It is in this context, means of speedily and expeditiously dealing with various affairs that the stricter and
that the full ventilation and resolution of a motion for production of documents should more cumbersome judicial processes cannot manage. The advantage of specialized
be viewed. A motion for production of documents is a mode of discovery utilized by administrative bodies is their expertise in regulatory adjudication in a narrowly defined
one in order to be fully apprised of the relevant details of a case. Its use is more area.[74] For all these reasons, the administrative process has evolved into a more
relevant in opposing a final rate increase order which must be based on substantial informal procedure characterized by correspondence, conference and
investigation.[75] As stated by President Roosevelt,
The administrative tribunal or agency has been evolved in order to handle controversies Interfere With the ERCs Ruling at This Time since the Questioned
arising under particular statutes. It is characteristic of these tribunals that simple and Order is Merely Provisional and can
non-technical hearings take the place of court trials, and informal proceedings be Corrected.
supersede rigid and formal pleadings and processes[76] It should be emphasized that the ERC issued merely a provisional order, one that it
Corrollarily, administrative agencies have also been conceded the power to grant could modify or correct at any time. The said Order is the subject of various motions
temporary measures ex-parte which are recognized as essential to take care of for reconsideration. ERC is far from issuing decision on the merits of Meralcos
problems that cannot be allowed to wait for the completion of formal application. It is too early to fear that the Questioned Order will cause irreparable injury
proceedings.[77] As explained by Davis: to the consumers whose interest should be balanced with the interest of MERALCO. In
If the contagion is spreading, or the unfit pilot is about to jeopardize the passengers, or the balancing of interest, it should be the public interest that should prevail. It should
the harmful medicinal preparation is being sold to the public, summary administrative be noted that there are numerous motions opposing the Questioned Order
action in advance of hearing is appropriate.[78] (emphasis supplied) currently pending before the ERC. I respectfully submit that the ERC should first
It is therefore clear that administrative bodies were created to be able to address the be given the chance to consider the arguments raised by the oppositors in these
multifarious concerns of society with speed and efficiency. Thus, if poisoned meat motions. A cursory examination of the pleadings and oppositions to the Questioned
has entered our docks or a disease-carrying traveler has landed on our shores, Order which are still pending resolution by the ERC shows that the expertise and
it cannot be doubted that the proper administrative authorities have sufficient specialized knowledge of the ERC is necessary in order to deal with the various
power to swiftly address these problems. If these administrators were hamstrung grounds that were raised. These grounds include the following:
from taking temporary measures, if they have to conduct hearings before they 1. It is the obligation of Meralcos stockholders, not the consumers, to finance Meralcos
could take measures to protect the public, the result would be tragedy to our expansion projects and pay its financial obligations.[85]
people. The power to enact these interim measures is essential for the daily self- 2. When Meralco was experiencing difficulties in raising funds for capital projects, it
preservation of society. The power is indispensable to administrative bodies if we should have divested its interests in businesses not directly connected to their primary
expect them to deal with unseen emergencies and exigencies with effectiveness. business as an electric power distribution utility.[86]
It bears emphasis that the regulatory power of administrative bodies should not 3. The absence of a public hearing before the issuance of the Questioned Order shows
be niggardly given for it is rooted in the States police power. Police power was lack of transparency in the grant of the provisional authority.[87]
originally limited in scope.[79] It was anchored in the limitations that the courts had 4. Widespread opposition to the rate increase by the consuming public shows that they
imposed upon individual rightsas embodied in the common law maxim, sic utere tuo ut believe that the increase has no legal basis.[88]
alienum non laedas, meaning, use your own property in such a manner as not to injure 5. President Gloria Macapagal-Arroyo, herself, has requested the ERC to reconsider
that of another. [80] Over the years, however, the range of police power was no longer its decision in light of public outrage.[89]
limited to the preservation of public health, safety and morals, which used to be the 6. Any expansion project should be supported by a feasibility study showing the
primary social interests in earlier times.[81] Police power now requires the State to projected additional revenues which would justify the cost of expansion.[90]
assume an affirmative duty to eliminate the excesses and injustices that are the 7. Increased power rates would make industries and businesses located in Meralcos
concomitants of an unrestrained industrial economy.[82] Police power is now exerted franchise area less competitive, resulting in their closure and termination of
to further the public welfare a concept as vast as the good of society itself.[83] Hence, employment for their employees.[91]
police power is but another name for the governmental authority to further the welfare 8. Any capital expenditure by Meralco goes into the computation of its rate base,
of society that is the basic end of all government.[84] When police power is delegated thereafter, the legal return-on-rate-base (RORB) must be determined after proper
to administrative bodies with regulatory functions, its exercise should be given valuation and appraisal. To make its customers advance the needed capital for
a wide latitude. Police power takes on an even broader dimension in developing Meralcos projects would be doubly injurious to its consumers as they are bound to
countries such as ours, where the State must take a more active role in balancing the subsequently pay for the cost of these projects through their monthly billings despite
many conflicting interests in society. The Questioned Order was issued by the ERC, the fact that they financed the same in the first place.[92]
acting as an agent of the State in the exercise of police power. We should have 9. Meralco failed to show proof of the urgent need for the issuance of the provisional
exceptionally good grounds to curtail its exercise. This approach is more authority, viz:
compelling in the field of rate-regulation of electric power rates. Electric power a. With regard to Meralcos pending application before the ERC (Case No. 2003-389)
generation and distribution is a traditional instrument of economic growth that affects to increase capacity in its substations and to redesign/revamp and/or extend its
not only a few but the entire nation. It is an important factor in encouraging investment distribution, it was shown that financial difficulties did not hinder the timely
and promoting business. The engines of progress may come to a screeching halt implementation of such projects. The delay was caused by other factors, such as
if the delivery of electric power is impaired. Billions of pesos would be lost as a coordinating with government agencies in the obtention of construction permits.[93]
result of power outages or unreliable electric power services. The State thru the ERC b. Though Meralcos financial statements as audited for the year 2002 indicated a net
should be able to exercise its police power with great flexibility, when the need loss of P2.015 billion, it was recently granted a rate increase by the ERC in Case Nos.
arises. The power of the ERC to issue rate orders ex-parte, pending the conduct of 2001-646 and 2001-900 resulting in the unbundling of rates. Meralco did not present
full-blown hearings for the issuance of final rates, should not be denied except for the any interim audited financial statements to the ERC showing losses in its utility
strongest reasons. There is none in the case at bar except its imagined perception operations while taking into account the effects of the rate increase as an aftermath of
that the Questioned Order denied oppositors procedural due process. the unbundling of rates. Further, the use of the year 2002 as a test year is questionable
It is Premature for the Court to
as the effects of the most recent rate increase adjustments granted to Meralco are not 20. There is a prejudicial question in Case No. 77559, a petition for review of the ERCs
reflected in the year 2002 audited financial statements.[94] order approving an allegedly excessive increase in Meralcos rates, which is pending
10. The provisional authority was granted by the ERC based on the asset appraisal before the Court of Appeals.[106]
report of Meralco dated September 12, 2003, which has not yet been reviewed and 21. A hearing should be held prior to the issuance of a provisional authority as there
approved on the merits by the ERC. This is a deviation from the accepted practice of are issues which should be resolved, to wit:
evaluating rate increases on the basis of approved asset appraisal reports.[95] a. the audit, verification and approval of the value of Meralcos assets for the year 2002;
11. The Questioned Order granting the provisional authority failed to present any b. the basis of the rate increase, i.e., should this be based on actual operating
computation of Meralcos most recent RORB, which is a basic presentation before any investments or on the value of investments needed for expansion prior to any actual
rate adjustment of a regulated utility is granted.[96] investment (in effect, would consumers be funding the expansion);
12. The provisional authority is based on most of Meralcos rate figures in its Rate c. the implementation of Meralcos renegotiation with its Independent Power Producers
Design 1, which may not be the best rate format to reflect cost. There is no reason to to remove or significantly reduce the P3.50 per kWh generation bill, among which is
believe that transmission charges should differ for customer classes when Meralco is Meralcos application to implement the Generation Rate Adjustment Mechanism or
actually paying for the same charge to Transco for whatever class of customer it GRAM in ERC Case No. 2003-566, which would reduce the generation charge by
serves.[97] P0.1843 per kWh;
13. The ERCs issuance of a provisional authority to Meralco on the basis of the latters d. Meralcos refunds due to the industrial and commercial sectors; and
failure to meet its maturing debt obligations indicated a cash-flow approach which veers e. the review of Meralcos application of a higher rate of systems loss (16.5%) to
away from the RORB methodology for rate adjustments. The ERC should look into the residential users compared to the legally allowed 9.5% to all customers across the
cash flows to and from the books of Meralco and its sister companies to make this board.[107]
approach more objective.[98] It is obvious to the eye that all the possible serious objections to the Questioned
14. Meralco does not have a sincere desire to lower operating costs. In the ERCs order Order have been raised by the consumers. Nobody has raised the argument that
dated May 30, 2003 approving the unbundling of rates in ERC Case Nos. 2001-646 he has been denied the opportunity to oppose MERALCOs application due to its
and 2001-900, the ERC ordered Meralco to exert its best efforts to renegotiate with its non publication in toto. It is therefore purposeless for the majority to annul the
Independent Power Producers in order to mitigate the impact of increase rates. Questioned Order and require the republication of MERALCOs application. The better
However, instead of complying with this directive, Meralco withdrew its application for course of action is to remand the case to the ERC so that it can review its provisional
approval of contract amendments of its Power Purchase Agreement with Quezon order in light of the opposition to it.
Power (Phils.) Ltd. which could have resulted in lower purchase power costs. In fact, I agree, however, with the majority that - - -
Meralco is even now applying for upward adjustments of its power purchase rates with V. The ERC Has Authority To Issue Provisional
DURACOM in ERC Case No. 2003-434.[99] Orders under the new EPIRA Law.
15. If, as Meralco contends, its financial difficulties are due to the devaluation of the The Nature of Rate-Regulation
peso, this can be mitigated by temporary adjustments using the ICERA[100] This Court discussed the nature of rate-regulation in Republic of the Philippines,
mechanism which has been approved by the ERC.[101] represented by the Energy Regulatory Board v. Manila Electric Company, G.R.
16. Meralco is unfit to operate a power utility service due to its inability to meets its Nos. 141314 and 141369, promulgated on November 15, 2002, viz:
financial obligations to its creditors; gross mismanagement of the utility despite its The regulation of rates to be charged by public utilities is founded upon the police
having a monopoly in the power distribution industry for around 50 years and providing powers of the State and statutes prescribing rules for the control and regulation of public
services to 70% of the country; losses due to pilferages for failure to have adequate utilities are a valid exercise thereof. When private property is used for a public purpose
support services; failure to maintain its infrastructure; and having poor customer and is affected with public interest, it ceases to be juris privati only and becomes subject
relations.[102] to regulation. The regulation is to promote the common good. Submission to regulation
17. Visayas Electric Company (VECO) charges its customers significantly less than may be withdrawn by the owner by discontinuing use; but as long as use of the property
Meralco despite the inherent advantages of the Napocor-Transco-Meralco system with is continued, the same is subject to public regulation.
its technologically more cost-effective power generation process. VECO sources its In regulating rates charged by public utilities, the State protects the public
power mainly from thermal generating plants which generate more expensive electricity against arbitrary and excessive rates while maintaining the efficiency and quality
compared to Meralco which sources cheaper electricity from hydroelectric and of services rendered. However, the power to regulate rates does not give the State
geothermal plants. It is possible that Meralco-serviced customers are being the right to prescribe rates which are so low as to deprive the public utility of a
overcharged or that within the generation/transmission/distribution system of Napocor, reasonable return on investment. Thus, the rates prescribed by the State must be one
Transco and Meralco there is wastage, inefficiency or unnecessary overheads which that yields a fair return on the public utility upon the value of the property performing
are being passed on to customers.[103] the service and one that is reasonable to the public for the services rendered. The
18. Despite Meralcos claim that it has not had a rate increase since 1994, its billings fixing of just and reasonable rates involves a balancing of the investor and the
have increased after the unbundling of its rates.[104] consumer interests. (emphases supplied and footnotes omitted)
19. Even without any increase, the current rates as approved on May 30, 2003 already It is evident that rate-regulation is one of the more important aspects of public utility
exceed Meralcos adjusted revenue requirement for the year 2002 of P27,474,325,672 regulation. It allows the regulator sufficient power to protect consumers from
by no less than P13,941,541,193 even using the lower sales volume of unreasonable charges while ensuring that the utility is able to maintain a viable
P21,880,741,000 kWh for the year 2002.[105] business. As explained in Potomac Electric Power Company v. Public Service
Commission of the District of Columbia, (t)his zone is bounded on the one side by In the 1977 case of Public Utility Commission of Texas et al. v. City of Corpus
the interests of utility customers in not paying exorbitant rates On the other side are the Christi, a public utility commission and a power company appealed the decision of a
interests of utility investors in achieving a rate of return sufficient to maintain the utilitys lower court enjoining the commission from enforcing an interim rate order and enjoining
financial integrity, to permit the utility to attract necessary capital at a reasonable cost, the power company from imposing the rates arising from such order.[121] The appellate
and fairly to compensate themselves for the risks they have assumed.[108] court ruled in favor of the commission and the power company, holding that the power
Interim Rate-Regulation of the commission to set interim rates is a power necessarily inferred from or
Interim rate-regulation is a well-entrenched concept in utility regulation. Interim rates incidental to the express power to fix a permanent rate.[122] The court stressed
are defined as rates charged by the utility for services or products pending the that this position has been consistently upheld in other states.[123]
establishment of a permanent rate, in emergency situations, or where a bond is In the case of State ex rel. Laclede Gas Co. v. Public Service Commission of
posted that guarantees a refund to consumers for any excess paid by them prior Missouri, the issue before the Missouri Court of Appeals was whether the Laclede Gas
to the Commissions final determination.[109] It should be emphasized that interim Company should have been granted an interim rate increase by the Public Service
rates are not limited to emergency situations. In one case, interim rates were allowed Commission of Missouri pending the latters determination of whether a permanent rate
pending the imposition of final rates when the previous rates were considered so low increase should be allowed. The Court noted that the question presented was a
as to be confiscatory.[110] It has also been allowed to alleviate financial problems recurring one of great public concern requiring its consideration even though the
whose correction cannot safely await a decision on the proper level of permanent Commission subsequently granted a permanent increase. The Court explained the
rates.[111] well-established doctrine of implied interim rate-making powers, viz:
Interim rate-regulation has also been viewed as a solution to the so-called regulatory The very real necessity of recognizing such a power in the regulatory agency has
lag associated with full-blown hearings.[112] Regulatory lag is defined as the loss of long been recognized by courts throughout the country. Not a single case has
proper earnings claimed by a utility between the time a petition for rate increase been cited by Jackson County nor found by independent research which has ever
is filed and the rate relief actually becomes effective by administrative or judicial denied such a power to a regulatory agency such as the Missouri Public Service
determination.[113] Commission. On the other hand, numerous cases from diverse jurisdictions have
In the United States, numerous state public utilities commissions have generally recognized and given effect to such an implied power even in the absence of
recognized and sanctioned temporary rates to meet emergencies or determine by specific statutory authority: Omaha & C.B. St. Ry. Co. v. Nebraska State Railway
experiment or trial what rates would be just.[114] This has been applied to various types Commission, 103 Neb. 695, 173 N.W. 690 (1919) (decided prior to the present
of utilities such as those providing services for sanitation,[115] telephone,[116] and Nebraska statute expressly authorizing temporary increases in an emergency);
electric power.[117] Muskogee Gas & Electric Co. v. State, 81 Okl. 176, 186 P. 730 (1920), City of
To emphasize the importance of a regulators power to grant interim relief, many states Bartlesville v. Corporation Commission, 82 Okl. 160, 199 P. 396 (1921), and Oklahoma
have even taken the position that interim rate-regulation is implied from the power Gas & Electric Co. v. State Corporation Commission, 83 Okl. 281, 201 P. 505 (1921)
to fix final rates even in the absence of specific statutory authority.[118] (decided in the absence of any statute granting express power to make interim
In the case of Far North Sanitation, Inc. v. Alaska Public Utilities, Inc.,[119] a increases); State ex rel. Puget Sound Navigation Co. v. Department of Transportation
company engaged in garbage collection challenged the interim order of the Public of Washington, 33 Wash.2d 448, 206 P.2d 456 (banc 1949) (without reliance upon
Utilities Commission declaring a rate refund. The Supreme Court of Alaska held that any specific statutory power); Chesapeake & Potomac Tel. Co. v. Public Service
the broad powers of the Public Utilities Commission to establish fair and just rates Commission, 330 A.2d 236 (D.C.App.1974) (authority found solely by implication);
implied its authority to declare rates interim and refundable so long as the Commission City of New York v. New York Telephone Co., 115 Misc. 262, 189 N.Y.S. 701 (1921)
provided protection for the interests of both the utility and public. While the Alaska (decided before the adoption of the present New York statute specifically authorizing
Supreme Court acknowledged the existence of conflicting case law on this question temporary increases); State ex rel. Utilities Commission v. Morgan, 16 N.C.App. 445,
citing Electric Dist. No. 1 which held that the plain language of the relevant law 192 S.E.2d 842 (1972) and State ex rel. Utilities Commission v. Edmisten, 26 N.C.App.
requiring the commission to fix rates meant that it could only fix final rates, it was 662, 217 S.E.2d 201 (1975) (decided under a file and suspend statute substantially
persuaded by the weight of jurisprudence upholding the implied power of regulators similar to that of Missouri and with no provision expressly permitting temporary rates);
to exercise interim rate-regulation: Southern Bell Telephone & Telegraph Co. v. Bevis, 279 So.2d 285 (Fla.1973) (decided
We think the better view is that the APUC has implied authority to set interim before adoption of the present Florida statute specifically authorizing interim increases);
rates. See Pueblo Del Sol Water Co. v. Arizona Corp. Comm'n, 160 Ariz. 285, 772 Federal Power Commission v. Tennessee Gas Transmission Co., 371 U.S. 145, 150,
P.2d 1138, 1140 (App.1988) (although no express authority exists, it is only 83 S.Ct. 211, 9 L.Ed.2d 199 (1962). [124] (emphases supplied)
"logical" that commission can impose interim rates subject to a decrease); United The rationale for this position is best explained in the case of Muskogee Gas and
Tel. Co. of Florida v. Mann, 403 So.2d 962 (Fla.1981); Grindstone Butte Mut. Canal Electric Company v. State, viz:
Co. v. Idaho Power Co., 98 Idaho 860, 574 P.2d 902, 906 (1978) (implied in an on- The power lodged in the commission to promulgate rates is a legislative
going investigation is the power to set temporary rates); see also Potomac Elec. power, and its exercise by the commission involves legislative discretion and
Power Co. v. Public Serv. Comm'n of Dist. of Columbia, 457 A.2d 776, 780 n. 1 policy. Any rule that would require the commission, before it
(D.C.App.1983) (Commission's power to grant interim rate increases is "implied promulgates any order fixing a rate, to have before it evidence that
from Commission's specifically granted statutory powers"). AS would establish to a mathematical certainty the reasonableness of the
42.05.141(a)(1)[120] (emphases supplied) proposed rate, would greatly hinder, if not almost entirely prevent, the
commission from exercising that power.[125] (emphases supplied)
In Muskogee, the temporary rate schedules for electric service for Muskogee and Ft. rate base (RORB) to enable the entity to operate viably. The ERC may adopt
Gibson issued by the Corporation Commission was challenged as it was temporary alternative forms of internationally-accepted rate-setting methodology as it may deem
and experimental and was put into effect only until such time as the commission could appropriate. The rate-setting methodology so adopted and applied must ensure a
secure data upon which to make a valuation of the property of the company and reasonable price of electricity. The rates prescribed shall be non-discriminatory. To
prescribe a permanent rate schedule. In ruling for the public utility, the Court described achieve this objective and to ensure the complete removal of cross subsidies, the cap
the danger arising from a situation where a defanged regulator has no power to on the recoverable rate of system losses prescribed in Section 10 of Republic Act No.
grant provisional relief: 7832, is hereby amended and shall be replaced by caps which shall be determined by
The first contention strikes at the very foundation of the fundamental law creating the the ERC based on load density, sales mix, cost of service, delivery voltage and other
commission and defining its duties, and, if sustained, must work a result quite as technical considerations it may promulgate. The ERC shall determine such form of rate-
surprising and disastrous to the appellant as to the patrons of the company and the setting methodology, which shall promote efficiency
general public, for, if the commission were limited to prescribing rates to instances xxx xxx xxx
where it had made a complete inventory and valuation, there could be little or no (u) The ERC shall have the original and exclusive jurisdiction over all cases
relief from rapidly fluctuating prices brought about by war conditions and incident to contesting rates, fees, fines and penalties imposed by the ERC in the exercise of the
the reconstruction period. abovementioned powers, functions and responsibilities and over all cases involving
This contention of the appellant fails to take into consideration the purpose for disputes between and among participants or players in the energy sector.
which the commission was created and the powers conferred upon it through All notices of hearings to be conducted by the ERC for the purpose of fixing rates or
the Constitution and the laws enacted by the Legislature. [126] (emphases fees shall be published at least twice for two successive weeks in two (2) newspapers
supplied) of nationwide circulation. (emphases supplied)
In the Philippines, interim rate-regulation has been consistently recognized. The In fact, Section 25, supra, does not even distinguish between final and temporary
statutory history of Philippine electric power regulation discussed earlier shows that rates. Hence, this provision can be read as a broad grant of power to the ERC to
public utility regulators have always had statutory authority to grant provisional relief. fix final and interim rates.
As early as 1926, in the case of Madrigal y Compania et al. v. Cui, G.R. No. 19829, But even granting arguendo that the above-cited provisions of the EPIRA only
November 28, 1922, the Court recognized the power of the Public Utility Commission contemplate the fixing of permanent rates, the unbending doctrine set forth in the cases
to grant temporary rate increases to ship owners transporting freight and passengers. discussed earlier (Far North Sanitation, Inc. v. Alaska Public Utilities,[134] Public
The power of public utility regulators to grant interim rate increases has also been Utility Commission of Texas v. City of Corpus Christi,[135] State ex. Rel. Laclede
shown in various regulated industries such as those relating to electric power Gas Co. v. Public Service Commission of Missouri and AFC Industries, Inc.,[136]
distribution,[127] petroleum products,[128] telecommunication services,[129] and toll and Muskogee Gas and Elec. Co. v. State[137]) holds that a Commissions authority
rates.[130] In terms of provisional relief not related to rate-setting, the Court has upheld to grant interim rates is necessarily implied from the express authority to regulate
the power of the public utility regulators to grant temporary permits in favor of ice plant rates and supervise public utilities.[138]
operators,[131] auto-truck operators,[132] and public utility vehicle operations.[133] There is no reason to move away from the principle that when the legislature delegates
As shown by the foregoing discussions, the power to fix interim rates is necessarily express powers to an administrative body, all incidental powers necessary to
implied from the power to fix permanent rates, hence, the absence of an express implement such express powers are also deemed delegated. As well stated in
statutory provision in the EPIRA does not negate the ERCs power to fix interim Matienzo v. Abellera, viz:
rates. It is a settled principle of law that in determining whether a board or commission
It is given that the ERC has the power to fix rates of distribution utilities, such as has a certain power, the authority given should be liberally construed in the light
Meralco, under the EPIRA by virtue of the following provisions: of the purposes for which it was created, and that which is incidentally necessary
Sec. 25. Retail Rate. The retail rates charged by distribution utilities for the supply to a full implementation of the legislative intent should be upheld as being
of electricity in their captive market shall be subject to regulation by the ERC germane to the law. Necessarily, too, where the end is required, the appropriate
based on the principle of full recovery of prudent and reasonable economic costs means are deemed given[139] (emphasis supplied)
incurred, or such other principles that will promote efficiency as may be determined by Effective utility regulation requires that a responsive regulator should be able to swiftly
the ERC(emphasis supplied) and flexibly respond to the exigencies of the times. As explained in Ft. S. & W. Ry.
Sec. 43. Functions of the ERC. The ERC shall promote competition, encourage market Co. v. State:
development, ensure customer choice and penalize abuse of market power in the Any rule that would require the commission, before it promulgates any order fixing a
restructured electricity industry. In appropriate cases, the ERC is authorized to issue rate, to have before it evidence that would establish to a mathematical certainty the
cease and desist order after due notice and hearing. Towards this end, it shall be reasonableness of the proposed rate, would greatly hinder, if not almost entirely
responsible for the following key functions in the restructured industry: prevent, the commission from exercising that power. [140] (emphasis supplied)
xxx xxx xxx The dangers emanating from a regulatory environment with a toothless regulator is
(f) In the public interest, establish and enforce a methodology for setting illustrated by the Court of Appeals of Missouri in State ex. rel. Laclede Gas Co. v.
transmission and distribution wheeling rates and retail rates for the captive Public Service Commission of Missouri and AFC Industries, Inc., to wit:
market of a distribution utility, taking into account all relevant considerations, The ravaging inflation of the past few years has demonstrated the practical need for
including the efficiency or inefficiency of the regulated entities. The rate must be such this power.[141] A striking example of the necessity for granting this type of emergency
as to allow the recovery of just and reasonable costs and a reasonable return on relief to a utility was demonstrated in Sho-Me Power Corp., Case No. 17,381 (1972), in
which the Commission allowed an interim rate increase where the applicant was proper public utility regulation, this power is meant to allow the regulator sufficient
operating at a loss of over $70,000 per month and where it had paid no dividends for a leeway to act under exigent circumstances.
period of five years. So also in the Missouri Power & Light Co. case, No. 17,815 (1973), Further, an examination of the intent of the law supports the thesis that the legislators
the Commission found it appropriate to grant an interim rate increase to halt a did not intend to clip the powers of the ERC. One of the EPIRAs policies is to establish
deteriorating financial situation which constituted a threat to the company's ability to a strong and purely independent regulatory body and system to ensure consumer
render adequate service. [142] (footnote supplied) protection.[147] Hence it is illogical to deny the ERCs power to conduct interim rate-
These clear dangers also stare at us in our own regulatory environment. Our economic regulation because the inability of the ERC to respond to the needs of public utility
history teaches us that the Philippines is vulnerable to the rapid fluctuations in the services would subvert the policy of the law to protect public interest under any
exchange rate. In recent years, we saw how numerous industries failed to survive the and all circumstances.
Asian financial crisis fueled by the uncertainties of exchange rates. All these have had Accordingly, since the ERC has authority to grant interim rates under EPIRA, then
adverse financial impact on public utilities such as Meralco in terms of skyrocketing Section 4 (e), Rule 3 of the EPIRAs Implementing Rules and Regulations on the ERCs
costs of debt servicing, and maintenance and operating expenses. A regulator such as power to provisionally grant applications for rate adjustment is valid. This provision in
the ERC should have sufficient power to respond in real time to changes wrought the Implementing Rules and Regulations is pursuant to the Department of Energys
by the multifarious factors affecting public utilities. mandate to formulate such rules and regulations as may be necessary to implement
This is not all. The transferability clause of the EPIRA can lead to no other conclusion the objectives of the EPIRA.[148] This is also consistent with the doctrine of
that the powers of the ERB, the predecessor of the ERC, have been transferred to the subordinate legislation as explained in the case of Free Telephone Workers Union
ERC. v. Minister of Labor:
SECTION 44. Transfer of Powers and Functions. - The powers and functions of the Accordingly, with the growing complexity of modern life, the multiplication of the
Energy Regulatory Board not inconsistent with the provisions of this Act are subjects of governmental regulation, and the increased difficulty of administering the
hereby transferred to the ERC. The foregoing transfer of powers and functions shall laws, there is a constantly growing tendency toward the delegation of greater powers
include all applicable funds and appropriations, records, equipment, property and by the legislature and toward the approval of the practice by the courts. Consistency
personnel as may be necessary. [143] (emphasis supplied) with the conceptual approach requires the reminder that what is delegated is authority
It is undisputed that the ERB had the power to grant provisional relief: non-legislative in character, the completeness of the statute when it leaves the hands
SECTION 8. Authority to Grant Provisional Relief. - The Board may, upon the filing of of Congress being assumedThus from Justice J.B.L. Reyes in People v. Exconde: It is
an application, petition or complaint or at any stage thereafter and without prior hearing, well established in this jurisdiction that, while the making of laws is a non-delegable
on the basis of supporting papers duly verified or authenticated, grant provisional relief activity that corresponds exclusively to Congress, nevertheless the latter may
on motion of a party in the case or on its own initiative, without prejudice to a final constitutionally delegate authority to promulgate rules and regulations to implement a
decision after hearing, should the Board find that the pleadings, together with such given legislation and effectuate its policies, for the reason that the legislature often
affidavits, documents and other evidence which may be submitted in support of the finds it impracticable (if not impossible) to anticipate and provide for the multifarious
motion, substantially support the provisional order: Provided, That the Board shall and complex situations that may be met in carrying the law into effect. All that is
immediately schedule and conduct a hearing thereon within thirty (30) days thereafter, required is that the regulation should be germane to the objects and purposes of the
upon publication and notice to all affected parties.[144] law; that the regulation be not in contradiction with it; but conform to the standards that
The next question is whether such power to grant provisional relief is inconsistent with the law prescribes. [149] (emphasis supplied)
the other provisions of the EPIRA. The petitioners argue that the power to grant VI. Summation
provisional rate adjustments is inconsistent with the EPIRA.[145] They contend that the On the issue of whether the ERC has legal authority to grant provisional rate
inconsistency lies in the declaration of policy of the EPIRA to protect the public interest adjustments under the EPIRA law, I concur with the majority. The ERC has authority
as it is affected by the rates and services of electric and other providers of electric to grant provisional adjustments by virtue of the express transfer from the ERB to
power and Section 75 of the law requiring a statutory construction in favor of people the ERC of the formers power to grant provisional relief, the doctrine that interim rate-
empowerment so that the widest participation of the people, whether directly or regulation is implied from or incidental to the express power to fix a permanent rate, the
indirectly, is ensured vis--vis an interpretation to the effect that the powers transferred broad provisions of the EPIRA which make no distinction between interim or permanent
to the ERC include the power to issue provisional orders.[146] They submit that the rate-regulation, and the intent of the EPIRA and rate-regulation. Further, the
power to issue provisional orders would defeat the policy of the law to protect and provisional relief may be granted even prior to a full hearing without violating the
empower the public as such power would limit the publics right to due process and requirements of due process.
would be in derogation of the ERCs responsibility of protecting public interest regarding On the issue of whether the grant by the ERC of the provisional rate adjustment to
utility rates. This reveals an unjustified mindset against interim rate-making. It would Meralco was done with grave abuse of discretion amounting to lack or excess of
appear that interim rate-making is viewed as undesirable per se. I respectfully jurisdiction, I respectfully dissent from the majority. First, there was no violation of
submit, however, that the protection of public interest in utility rate-regulation and the the procedure set forth in the EPIRAs Implementing Rules and Regulation when ERC
publics right to due process are not mutually exclusive with the regulatory bodys power issued its Questioned Order. The public was duly notified of Meralcos application and
to grant interim rates. Exercised properly, interim rate-making can ensure that the was able to assail its legality and propriety in a public hearing before the effectivity of
public utility remains viable yet its service to the consuming public is unimpaired. Interim the Questioned Order. Second, the issuance of ex-parte orders is universally
rate-making is no hobgoblin which will gobble up unwary consumers. In the context of recognized as a legitimate exercise of the police power of the State and should not be
niggardly construed. Third, it is premature for the Court to strike down the Questioned
Order since it is merely provisional and pending reconsideration before the ERC. The The ERC has legal and statutory
Court should allow the unimpeded flow of the effective and available administrative authority to issue a provisional
remedy before the ERC. Hence, the case at bar should be remanded to the ERC, which order of rate adjustment.
should be allowed to resolve the pending motions assailing the propriety of the ____________________________
provisional rate increase in favor of Meralco, especially its factual bases. Historically, the Energy Regulatory Board (ERB) was created under Executive Order
No. 172 to regulate, among others, the distribution of energy resources and to fix rates
SEPARATE OPINION to be charged by public utilities involved in the distribution of electricity.[3] Among the
SANDOVAL-GUTIERREZ, J.: key powers of this regulatory body is provisional rate-fixing, thus:
Electricity as the purest form of energy is now the most pervasive energy source SECTION 8. Authority to Grant Provisional Relief. The Board may, upon the filing of an
propelling the engines of growth in both developed and developing economies, such application, petition or complaint or at any stage thereafter and without prior hearing,
as ours. Its role has been increasingly important as major technology development in on the basis of supporting papers duly verified or authenticated, grant provincial relief
all sectors of the economy has its basis on electric power. on motion of a party in the case or on its own initiative, without prejudice to a final
Towards this end, past and present administrations have been exerting efforts to reform decision after hearing, should the Board find that the pleadings, together with such
the economy and the power sector is a priority area. The Philippine government, given affidavits, documents and other evidence which may be submitted in support of the
the limited resources and the economys growth and development objectives, has been motion, substantially support the provisional order: Provided, That the Board shall
paving the way for greater private sector capital investment and participation in the immediately schedule and conduct a hearing thereon within thirty (30) days thereafter,
power sector. upon publication and notice to all affected parties.
Initially, the enactment of the Build-Operate-Transfer (BOT) Law in 1987 marked the Later, Republic Act No. 9136 or the EPIRA amended Executive Order No. 172 and
beginning of the private sectors participation in major power projects, thus, resulting to gave impetus to the creation of the Energy Regulatory Commission (ERC). Thus,
a substantial amount of independent power producers (IPPs) power capacity coming Section 38 of the same law provides:
on-stream. This was followed by the enactment of the Foreign Investment Act allowing SECTION 38. Creation of the Energy Regulatory Commission. There is hereby created
100% foreign ownership in power generation projects. an independent, quasi-judicial regulatory body to be named the Energy Regulatory
In fact, government encouragement of immediate entry of IPPs in the early 1990s to Commission (ERC). For this purpose, the existing Energy Regulatory Board (ERB)
end the severe power shortages, has resulted in higher tariffs composed of demand created under Executive Order No. 172, as amended, is hereby abolished.
and energy charges as well as foreign currency adjustments. Despite ERBs abolition, its powers and functions were transferred to the ERC under
Now, with the ratification of Republic Act No. 9136, otherwise known as The Electric Section 44, thus:
Power Industry Reform Act (EPIRA) of 2001, the most impressive economic reform in SECTION 44. Transfer of Powers and Functions. The powers and functions of the
the Philippine energy sector, foreign investors and foreign governments are guardedly Energy Regulatory Board not inconsistent with the provisions of this Act are hereby
optimistic.[1] Their concern, and so should ours is, if such structural reform fails, then transferred to the ERC. The foregoing transfer of powers and functions shall include
electricity prices would not start to moderate through the pressure of market forces, all applicable funds and appropriations, records, equipment, property and personnel as
and most importantly, the country would not have a reliable, good supply of electricity, may be necessary.
thus, once more the re-surfacing of severe power shortages or blackouts. Although the EPIRA does not contain an express provision empowering the ERC to
Verily, the essential nature of the service that electricity provides to all sectors of the grant provisional orders of rate adjustments, such silence of the law should not ipso
economy requires that electricity prices are set prudently and efficiently. facto be interpreted as an amendment by deletion of such a key function.
While this Court concedes the primacy of the public interest in an adequate and efficient To begin with, pursuant to the rules on statutory construction, the general rule on
service, the same is not necessarily to be equated with non-compensatory electricity amendment by deletion is not applicable when the intent of the legislature to make such
rates or prices. Reasonableness in the rates assumes that the same is fair to both the change in the meaning of the previous law is not clear.[4]
public utility and the consumer. In In Re: R. McCulloch Dick,[5] we held that: where the question is whether a statute
Indeed, we held in Philippine Communications Satellite Corporation vs. Alcuaz[2] that: should be interpreted as having impliedly created a power not given in express words,
The power of the State to regulate the conduct and the preamble may be consulted for the purpose of ascertaining the legislative intent.
business of public utilities is limited by the consideration that it is not The legislative intent for the ERC to retain the authority to issue provisional rate
the owner of the property of the utility, or clothed with the general adjustments is gleaned from the express reasons for enacting the law which, under
power of management incident to ownership, since the private right Section 2 of Republic Act No. 9136, are the following:
of ownership to such property remains and is not to be destroyed by SECTION 2. Declaration of Policy. It is hereby declared the policy of the State:
the regulatory power. The power to regulate is not the power to (a) To ensure and accelerate the total electrification of the country;
destroy useful and harmless enterprises, but is the power to (b) To ensure the quality, reliability, security and affordability of the supply of
protect, preserve, and control with due regard for the interest, electric power;
first and foremost, of the public then of the utility and of its (c) To ensure transparent and reasonable prices of electricity in a regime of free
patrons. and fair competition and full public accountability to achieve greater operational and
But how do we strike a balance between ensuring consumer protection, on the one economic efficiency and enhance the competitiveness of Philippine products in the
hand, and enhancing the competitive operation of the electricity market, on the other? global market;
This is the underlying issue raised in the instant petition.
(d) To enhance the inflow of private capital and broaden the ownership base of the decision after hearing, should the Board find that the pleadings together with such
power generation, transmission and distribution sectors; affidavits, documents and other evidence which may be submitted in support of the
(e) To ensure fair and non-discriminatory treatment of public and private sector motion. Adopting this is provided for by Section 80 of RA 9136, which stipulates
entities in the process of restructuring the electric power industry; that the EO 172 shall continue to have full force and effect except insofar as it is
(f) To protect the public interest as it is affected by the rates and services of inconsistent with the Act.
electric utilities and other providers of electric power; xxx
(g) To assure socially and environmentally compatible energy sources and REP. CONSTANTINO G. JARAULA. Mr. Chairman. I think the first concern refers to
infrastructure; the provisional grant vested on the ERC. I am interested in this as this was the subject
(h) To promote the utilization of indigenous and new and renewable energy resources that we went into yesterday.
in power generation in order to reduce dependence on imported energy; xxx
(i) To provide for an orderly and transparent privatization of the assets and liabilities of MR. FRANCISCO. x x x.
the National Power Corporation (NPC); We never used to be worried that the granting of a provisional authority would be as
(j) To establish a strong and purely independent regulatory body and system to ensure delayed as we are now currently experiencing and, therefore, we are very happy that
consumer protection and enhance the competitive operation of the electricity market; Congressman Jaraula seems to agree with us that there should be a time limit as to
and the response of the regulatory body to a petition. Because if there were a time limit,
(k) To encourage the efficient use of energy and other modalities of demand side then the need for a provisional relief will not be as big, but we still think that it would tie
management. the hands of the regulatory commission if its authority to grant provisional relief in the
To exclude such key function would certainly emasculate the law itself. A law instances where it is really very urgent that they would be tied by the requirement to
should not be so interpreted as to afford an opportunity to defeat compliance with its conduct public hearings. x x x.
terms. xxx
Thus, considering the reasons behind the establishment of the ERC, there is every REP. JARAULA. x x x.
indication that the legislative intent is for the ERC to retain its authority to issue The other thing is that, I would agree with you also that it would tie up or it would hamper
provisional rate adjustments in order to accomplish its role. your operations if it is delayed in the public hearing. May only interest is that, when
The records of the deliberation of the Committee on Energy (House Panel of the Power ERC appreciates and evaluates the petition, the side of the consumers should already
Commission) support this position. As early as the deliberation stage in the Power be available, if they prefer to have. In other words, by the process of discussion in the
Commission, the intention to retain the ERCs power to issue provisional rate local level knowing that a petition will be filed, they can already draft their position in
adjustments was discussed, thus: effect without having to go through a public hearing.
THE CHAIRMAN. Thank you and good morning to all. The meeting of the Members of And so, as you file, they can also immediately comment without being asked to
the House contingent of the Power Commission is resumed. comment. They can also say, you are going to file today, they will learn of that, they will
xxx also immediately file, so that, in the appreciation, it is not one-sided. We give the
MR. FRANCISCO. Chairman Badelles, Honorable Members of the House Panel of the authority to ERC, but ERC will have the opportunity now to see both sides before
Joint Congressional Power Commission, friends and colleagues from the power conducting a public hearing so that they can determine which is really.
industry, good morning. My point here is that rates, I am primarily interested in rates. It is not on management
xxx level although I am not an expert in management. On management level, it is only very
The EPIRA is the product of a long, and sometimes impassioned debate on countless seldom that 1973 oil crisis would happen, so that management should be able to
contentious issues. The result law, therefore, embodies a careful balancing of interests, already forecast what is to come and, therefore, there is not shocking incident that may
with the end view of providing all Filipinos, from the smallest household to the largest trigger an immediate petition. These are things that are studied through the months or
industrial user, the benefits of quality power at a competitive price. through the years and, therefore, a petition for a rate increase is not something that is
xxx sudden unless there are, as I said, like 73 oil crisis, there are unusual incidents.
First is the ERCs Power to Grant Provisional Approvals and Fix Rates. x x x.[6]
At first glance, we find that Rule 4, Section 4 (e) of the new draft finally gives the The clear intent and design of the legislature to confer to the ERC the authority to issue
ERC the power to provisionally approve urgent petitions, without prejudicing the provisional orders is manifest. The cardinal rule in the interpretation of all laws is to
promulgation of a final order following the usual hearings and arguments ascertain and give effect to the intent of the law.[7] In Philippine National Bank vs. Office
xxx of the President,[8] we ruled:
This provision was largely taken from Section 8 of Executive Order 172, creating The intent of a statute is the law. If a statute is valid it is to have effect according to the
the ERB, the now defunct ERB. However, we find that certain phrases and purpose and intent of the lawmaker. The intent is the vital part, the essence of the law,
requirements were added that defeat the purpose of giving ERC the power to act and the primary rule of construction is to ascertain and give effect to the intent. The
on urgent petitions. We would recommend that the language found on Section 8 intention of the legislature in enacting a law is the law itself, and must be enforced when
of EO 172 be retained, as follows: ascertained, although it may not be consistent with the strict letter of the statute. Courts
The ERC may, upon the filing of an application, petition or complaint or at any stage will not follow the letter of a statute when it leads away from the true intent and purpose
thereafter and without prior hearing on the basis of supporting papers duly verified or of the legislature and to conclusions inconsistent with the general purpose of the act.
authenticated, grant provisional relief on motion of a party without prejudice to a final Intent is the spirit which gives life to a legislative enactment. In construing statutes, the
proper course is to start out and follow the true intent of the legislature and to adopt MERALCO is in dire economic straits. Definitely, this intricate question of fact requires
that sense which harmonizes best with the context and promotes in the fullest manner technical and specialized knowledge that is within the province of the ERC alone.
the apparent policy and objects of the legislature." On this score, the Solicitor General correctly observed and recommended that:
Furthermore, a cardinal rule in statutory construction is that legislative intent must be The oppositors raised serious grounds in opposition to the application for rate case.
ascertained from a consideration of the statute as a whole and not merely of a The same grounds were interposed as reasons for the reconsideration of the
particular provision.[9] provisional authority. Considering the gravity of these grounds, they should be
Courts must give effect to the general legislative intent that can be discovered from the considered by the ERC not only in the main case but also on the issue of the provisional
four corners of the statute, and in order to ascertain such intent, the whole statute, increase. x x x:
and not only a particular provision thereof, should be considered. xxx
In resolving the instant case, it is necessary that we consider not only Section 43 of The Office of the Solicitor General, however, hastens to add that these grounds raise
Republic Act No. 9136 but also its other provisions, particularly Section 44 on Transfers factual issues which the ERC should be allowed to resolve. x x x.
of Powers and Functions (earlier quoted) and Section 80[10] on Applicability and xxx
Repealing Clause, in order to unravel the legislative intent. All these provisions should There were several oppositors who filed motions for production of certain documents.
be harmonized with each other. Although the ERC directed MERALCO to comment on these motions, the ERC has yet
In Gordon vs. Veridiano,[11] we emphasized the courts duty to reconcile and harmonize to rule on said motions. These motions should be resolved as it is intimately related to
laws: the issue of the propriety of the provisional increase.
Courts of justice, when confronted with apparently conflicting statutes, should endeavor xxx
to reconcile the same instead of declaring outright the invalidity of one as against the The motions for reconsideration of the provisional increase are properly addressed to
other. Such alacrity should be avoided. The wise policy is for the judge to harmonize the ERC which should be allowed to issue the proper resolution discussing the grounds
them if this is possible, bearing in mind that they are equally the handiwork of the same in support of and in opposition of the provisional increase x x x based on the
legislature, and so give effect to both while at the same time also according due respect [application] and supporting documents attached thereto and such comments or
to a coordinate department of the government. pleadings the consumers or the LGU concerned may have filed within thirty (30)
In fine, the pertinent provisions of the EPIRA can well go together with full and calendar days from receipt of a copy of the application or petition or from publication
unhampered effect to the other provisions, without doing violence to the law, thereby thereof as the case may be.
giving spirit to the maxim, interpretare et concordare legibus est optimus interpretandi xxx
or every statute must be so construed and harmonized with other statutes as to form a RECOMMENDATION
uniform system of jurisprudence. WHEREFORE, it is respectfully prayed that the petition be denied. It is further prayed
Petitioner failed to resort to the that the ERC be allowed to expeditiously proceed and hear MERALCO and the
primary administrative jurisdiction oppositors a quo on their arguments and counterarguments on the ERC Order dated
and to exhaust administrative November 27, 2003 and to resolve the issue on the propriety of the provisional increase
remedies before the ERC. as well as the application on the merits.
---------------------------------------------------- x x x.
At the outset, it bears stressing that only petitioner FDC failed to file a motion for We take cognizance of the wealth of jurisprudence on the doctrine of primary
reconsideration with the ERC.[12] administrative jurisdiction and exhaustion of administrative remedies. In this era of
Section 43 (u) of Republic Act No. 9136 explicitly provides: clogged court dockets, the need for specialized administrative boards or commissions
(u) The ERC shall have the original and exclusive jurisdiction over all cases with the special knowledge, experience and capability to hear and determine promptly
contesting rates, fees, fines and penalties imposed by the ERC in the exercise of the disputes on technical matters or intricate questions of facts, subject to judicial review in
abovementioned powers, functions and responsibilities and over all cases involving case of grave abuse of discretion, is indispensable. Between the power lodged in an
disputes between and among participants or players in the energy sector. administrative body and a court, the unmistakable trend is to refer it to the former.[15]
A similar provision is also incorporated in the Implementing Rules and Regulations of In Padua vs. Ranada,[16] this Court held:
Republic Act No. 9136, particularly in Section 4 (n)[13] thereof. x x x, if the case is such that its determination requires the expertise, specialized skills
Obviously, the authority conferred upon the ERC is intended to be full, clear and and knowledge of the proper administrative bodies because technical matters or
complete. In fact, the use of the word original and exclusive is synonymous to sole that intricate questions of facts are involved, then relief must first be obtained in an
emphasizes the unimpaired character of the jurisdiction reposed. administrative proceeding before a remedy will be supplied by the courts even
The rationale behind the need for a prior resort to the ERC is highlighted in Lawyers though the matter is within the proper jurisdiction of a court.
against Monopoly and Poverty (LAMP) vs. MERALCO,[14] thus: The ERC committed no grave abuse
Rate fixing call for a technical examination and a specialized review of specific details of discretion in granting the
which the courts are ill-equipped to enter, hence, such matters are primarily entrusted provisional rate of increase
to the administrative or regulating authority. ------------------------------------------------------
A careful perusal of the petition reveals that the main thrust of petitioners argument is Even granting that petitioners recourse to the instant remedies is in order, still, we
that the provisional rate adjustment of 12 centavos per kwh was granted by the ERC cannot rule in its favor.
with palpable and manifest bias considering that the only basis is that respondent
Although this Court, under Section 4 (p) of the Implementing Rules and Regulations of other evidence must substantially support the provisional order and that a formal
R.A. No. 9136, has been given jurisdiction, so to speak, to review all actions taken by hearing must forthwith conducted within thirty days from issuance of the order.
the ERC, yet, in the exercise thereof, the Court is to merely check whether or not the Indeed, after the filing of MERALCOs verified application on October 10, 2003, the
ERC has gone beyond the limits of its jurisdiction, not that it erred or has a different ERC, in its Order dated November 3, 2003, directed the oppositors NASECORE,
view. In the absence of a showing that the ERC has committed grave abuse of Genario Lualhati, and FDC to file their comments thereon. However, only Lualhati filed
discretion amounting to lack of jurisdiction, there is no occasion for the court to exercise his comment on November 21, 2003 or barely one month after manifesting in a letter
its corrective power. Indeed, we should not decide a matter which by its nature is dated October 24, 2003 his intent to file an opposition to the application. On November
for the ERC alone to decide. 27, 2003 or after forty-eight (48) days from the filing of the application and six (6) days
In the case at bar, we find no improvident use of power on the part of the ERC which from receipt of Lualhatis comment, the ERC issued the assailed provisional order. This
will necessitate the exercise of the courts power of judicial review. provisional order was issued well-within the reglementary seventy-five (75) day period.
First, the provisional order issued by the ERC did not violate its own Implementing Second, petitioner argues that the ERC has effectively granted MERALCOs application
Rules and Regulations, particularly Section 4 (e), Rule 3 thereof. on the merits without full-blown hearings on the matter, in violation of substantive and
To be closer to the truth, Section 4(e), Rule 3 of the Implementing Rules and procedural due process. This argument is totally misplaced.
Regulations is reproduced hereunder: It bears stressing that the issue raised by petitioner is not novel. We have ruled in a
(e) Any application or petition for rate adjustment or for any relief affecting the catena of cases that an administrative agency may be empowered to approve
consumers must be verified, and accompanied with an acknowledgement of receipt of provisionally, when demanded by urgent public need, rates of public utilities
a copy thereof by the LGU Legislative Body of the locality where the applicant or without a hearing. The reason is easily discerned form the fact that provisional rates
petitioner principally operates together with the certification of the notice of publication are by their nature temporary and subject to adjustment in conformity with the definitive
thereof in a newspaper of general circulation in the same locality. rates approved after final hearing.[18]
The ERC may grant provisionally or deny the relief prayed for not later than It may be recalled that Section 16 (c) of the Public Service Law authorizes the Public
seventy-five (75) calendar days from the filing of the application or petition, Service Commission to approve rates proposed by public services provisionally
based on the same and the supporting documents attached thereto and such and without necessity of any hearing, x x x.
comments or pleadings the consumers or the LGU concerned may have filed To clarify the intent as well as the extent of the Commissions power, our ruling in
within thirty (30) calendar days from receipt of a copy of the application or Republic vs. Medina[19] is in point, thus:
petition or from the publication thereof as the case may be. x x x. The Public Service Commission practice, moreover, is to hear and approve
Thereafter, the ERC shall conduct a formal hearing on the application or petition, giving revised rates without published notices or hearing. The reason is easily discerned: The
proper notices to all parties concerned, with at least one public hearing in the affected provisional rates are by their nature temporary and subject to adjustment in
locality, and shall decide the matter on the merits not later than twelve (12) months conformity with the definitive rates approved, and in the case at bar, the Public
from the issuance of the aforementioned provisional order. Service Commission order of 20 May 1970 expressly so provided.
x x x. Subsequently, in Padua vs. Ranada,[20] citing Maceda vs. Energy Regulatory Board,
Records show that the Sangguniang Panlungsod of Pasig City was furnished a copy of we ruled that while the ERB is not precluded from conducting a hearing on the grant of
the verified application of MERALCO on October 9, 2003 and then, prior to its filing with provisional authority which is of course, the better procedure however, it can not be
the ERC, a notice (of its filing) was published on October 10, 2003 in a newspaper of stigmatized if it failed to conduct one.
general circulation, particularly the Manila Times. In Citizens Alliance for Consumer Protection vs. Energy Regulatory Board,[21] we also
Petitioner however insists that a provisional order may only be issued after comments held:
submitted by any oppositor within thirty (30) days from notice. Petitioners interpretation In the light of Section 8 quoted above, public respondent Board need not even have
is far from persuasive. conducted formal hearings in these cases prior to issuance of its Order of 14 August
On this score, we find the following discussion of the ERC in its Comment[17] 1987 granting a provisional increase of prices. The Board, upon its own discretion
impressed with merit, thus: and on the basis of documents and evidence submitted by private respondents,
The procedure in Section 4(e), Rule 3 of the Implementing Rules for the issuance of could have issued an order granting provisional relief immediately upon filing by
provisional orders does not require the filing of any comments or pleadings by the private respondents of their respective applications. In this respect, the Court
consumers or the LGU concerned before respondent ERC may grant provisionally or considers the evidence presented by private respondents in support of their
deny the relief prayed for. x x x. In arriving at a decision to provisionally grant or deny applications -.i.e., evidence showing that importation costs of petroleum products had
the relief prayed for, respondent ERC is authorized to base its decision on the verified gone up; that the peso had depreciated in value; and that the Oil Price Stabilization
application and the supporting documents attached thereto. Within thirty (30) calendar Fund (OPSF) had been depleted as substantial and hence constitutive of at least prima
days from receipt of a copy of the application or petition or from the publication thereof facie basis for issuance by the Board of a provisional relief order granting an increase
as the case may be, the consumers or the LGU concerned may file their comments on in the prices of petroleum products.
the application or petition. Should they do so before the issuance of any provisional Later, the ERC promulgated, as part of its Implementing Rules, the following provision:
order, respondent ERC may likewise base its decision thereof. x x x. xxx
The foregoing provision, x x x, merely echoes what is expressly provided for in Section The ERC may grant provisionally or deny the relief prayed for not later than
8 of E.O. No. 172 that provisional orders may be issued ex parte. Under said provision, seventy-five (75) calendar days from the filing of the application or petition,
the only requirements for its issuance are that the pleadings, affidavits, documents and based on the same and the supporting documents attached thereto and such
comments or pleadings the consumers or the LGU concerned may have filed of powers of administrative agencies lies in statutes, and administrative agencies must
within thirty (30) calendar days from receipt of a copy of the application or find within statutes warrant for the exercise of any authority which they claim. Absent a
petition or from the publication thereof as the case may be. constitutional provision, administrative agencies derive their authority from (1) the
Thereafter, the ERC shall conduct a formal hearing on the application or petition, giving enabling legislation that mandates the particular agencys function and grants powers,
proper notices to all parties concerned, with at least one public hearing in the affected and (2) from general laws affecting administrative bodies.[1] (Emphasis supplied)
locality, and shall decide the matter on the merits not later than twelve (12) months In the same wise, it is said that:
from the issuance of the aforementioned provisional order. Public Service Commissions are administrative agencies generally empowered to
x x x. regulate public utilities, which are business organizations which regularly supply the
At this point, it bears reiterating that the reasonableness of the provisional rate public with some commodity or service, such as electricity, water, gas, and telephone
adjustment is best addressed to the ERC. service. Public Service Commissions have no inherent power; all of their power
Petitioner claims that the ERCs unilateral issuance of a provisional rate adjustment is and jurisdiction must be found within the statutory or constitutional provisions
repugnant to the policy declaration set forth in the EPIRA to protect the public interest creating them. The essence of the power of Public Service Commissions is regulatory.
as it is affected by the rates and services of the electric utilities and other providers of Among the typical powers are setting rates, promulgating regulations, collecting
electric power. information, and processing complaints.[2] (Emphasis supplied)
We however note that respondent may likely suffer a severe drawback, with the The ERC has no life except as life is given by the Legislature.[3]
consequent detriment to the public service, should the assailed Order of the ERC turn The EPIRA lays down the multifaceted role of the ERC in the regulation of the electric
out to be improvident. power industry. Particularly, Section 43 thereof, which exhaustively enumerates the
At present, respondent claims that it is engaged in 42 major capital projects aimed at functions of the ERC, is explicit in setting forth the various key functions of the ERC in
addressing its system overloads. These projects were undertaken on the premise that relation to its administrative, regulatory and quasi-judicial responsibilities. It is the
its provisional application for rate adjustment would be approved. Consequently, a legislatures unequivocal expression of its intent to limit the powers of the ERC to those
declaration of nullity of the assailed provisional Order of the ERC would definitely deter specified in said section. With regard to its ratemaking power, the last paragraph of
such projects and ultimately impair respondents ability to provide safe, adequate and Section 43 demonstrates the legislatures intent for the ERC to exercise its delegated
reliable service to the consuming public, thus, depriving its patrons and the consumers power of setting just and reasonable rates, provided it conforms with the procedural
of a vital and essential service. mandates of publication, notice and hearing. There is no proviso, or even a whisper, in
WHEREFORE, I join Mr. Senior Justice Reynato S. Puno in his Dissenting Opinion that Section 43 or in any other provisions of the EPIRA which indicates the legislatures
the Energy Regulatory Commission (ERC) has the authority to grant provisional rate intent to endow the ERC with authority to issue provisional orders for rate adjustments.
adjustments ex-parte and vote to DISMISS the petition. Expressio unius est exclusio alterius, the express inclusion of one implies the exclusion
of all others.[4]
CONCURRING AND DISSENTING OPINION The rule of expressio unius est exclusio alterius is formulated in a number of ways. One
AUSTRIA-MARTINEZ, J.: variation of the rule is the principle that what is expressed puts an end to that which is
I concur with the majority opinion insofar as it rules that the petition should be granted, implied. Expressium facit cessare tacitum. Thus, where a statute, by its terms, is
as the provisional order of November 27, 2003 was issued by the ERC with grave abuse expressly limited to certain matters, it may not, by interpretation or construction, be
of discretion. I do not agree, however, with its position that the ERC has the inherent extended to other matters.
power to provisionally grant an application for rate adjustment. ...
First Issue The rule of expressio unius est exclusio alterius and its variations are canons of
Whether or not the ERC has the legal authority to grant provisional rate adjustments restrictive interpretation. They are based on the rules of logic and the natural workings
under the EPIRA of the human mind. They are predicated upon ones own voluntary act and not upon
The ERCs authority to fix rates is a non-issue in this case. The power to fix temporary that of others. They proceed from the premise that the legislature would not have
rates, however, is. made specified enumeration in a statute had the intention been not to restrict its
The thrust of the majority opinion is that the provisional ratemaking power of the ERC meaning and confine its terms to those expressly mentioned.[5] (Emphasis
is necessarily implied from its power to fix permanent rates, hence the absence of an supplied)
express provision in the EPIRA does not negate the existence of such power. In South Central Bell Telephone Company vs. Tennessee Public Service
With all due respect, however, I believe that whatever provisional ratemaking power Commission,[6] the Tennessee appellate court used the same principle of statutory
the ERC possess must emanate from the law that created it, the EPIRA. construction when it reversed the Tennessee Public Service Commissions order
The Energy Regulatory Commission (ERC), the Public Service Commission (PSC), the requiring the plaintiff telephone company to refund to its customers certain sums
Energy Regulatory Board (ERB), and all other regulatory bodies for that matter, are collected by them pursuant to the commissions prior order granting a temporary
mere creatures of the legislature. As such, the nature and extent of their powers are increase of rates conditioned on a refund. The Tennessee court ruled:
derived from the respective statutes that created them. Thus, it is stated: Upon a study of the applicable statutes, especially TCA 65-5-203, this Court concludes
Being creatures of the legislature, administrative agencies have no general, that the Legislature never intended to extend retroactive rate-making power (ordering
inherent or common-law powers, but only those powers conferred upon them by refunds) beyond that expressly
the legislature. Apart from the instances in which an administrative agency is created stated in 65-5-203. This is supported by the maxim of Inclusio Unius est Exclusio
and empowered by a provision of a state constitution or an executive order, the source Alterius. The express inclusion of one (person or thing) (implies) the exclusion of all
others. The cited statute provides for a narrowly circumscribed power to grant tentative the authority to grant provisional rates, it follows then that to insist that the ERC has
rates under bond for a limited time under emergency circumstances which were not such authority, would be to grant ERC an authority that would be inconsistent with the
found by the Commission and are not shown in this case. It must therefore be presumed EPIRA. As clearly discussed earlier, administrative agencies, like the ERC, have no
that: general or inherent powers except those expressly granted to them by law.
(1) the Legislature considered that the Commission had no general or Moreover, under Section 2 (f) of the EPIRA, one of the declared policies of the law is
inherent power to set tentative rates subject to refund, else the special to protect the public interest as it is affected by the rates and services of electric and
grant of power would have been unnecessary; other providers of electric power. Another significant provision of the EPIRA is Section
(2) if the Legislature had intended that the Commission have broader 75, which circumscribes a statutory interpretation in favor of people empowerment and
powers than those conferred, the statute would have been composed participation.
in broader terms. (Emphasis supplied) In light of the rule that statutes in the derogation of common or general rights are strictly
Clearly, therefore, the authority to issue provisional orders of rate adjustments cannot construed and rigidly confined to cases clearly within their scope and purpose,[14] an
be considered as one of the powers that the legislature intended the ERC to possess, interpretation to the effect that the powers transferred to the ERC include the power to
for if it were intention of the lawmakers, there would not have been a black hole in the issue provisional orders inevitably defeats the policy of the law to protect and empower
law, so to speak. the public. Any grant of authority to the ERC to issue provisional orders of rate
Corollary to this is the doctrine of casus omisus pro omisso habendus est, or that a adjustments is a limitation on the publics right to due process and in derogation of the
person, object or thing omitted from an enumeration must be held to have been omitted ERCs general responsibility of protecting the public interest regarding utility rates.
intentionally.[7] Simply put, the absence of such statutory power shows that the Hence, it must be strictly construed against the grant of such authority. This is bolstered
legislature undeniably intended the withdrawal of such authority from the ERC. To by the fact that the statutes governing ERCs forebears the PSC, the BOE and the ERB
declare otherwise would be supplanting what the legislature intentionally omitted. The all contain a specific provision on the authority of the regulatory body to grant
Court should not tread the perilous waters of judicial legislation and arrogate provisional rates, in addition to the transfer of powers to the successor while the EPIRA
unto itself the duty of supplying what has been omitted by the legislature.[8] does not contain a provision authorizing the ERC to grant provisional rates.
The ERCs predecessors -- the Public Service Commission (PSC), the Board of Energy In stark contrast, there is nothing in EPIRA that confers upon the ERC any authority to
(BOE) and the Energy Regulatory Board (ERB), and the laws that created them -- C.A. grant provisional rate adjustments although it provides for the transfer of powers of the
No. 146, P.D. No. 1206 and E.O. No. 172, explicitly provided for the regulatory bodys ERB to the ERC.
provisional ratemaking authority. If the provisional ratemaking authority of the ERC is so crucial for the accomplishment
Thus, Section 16 (c) of C.A. No. 146 expressly vested the PSC with the power to fix of the goals of utility regulation and supervision, then the question that begs to be
rates and issue provisional orders. When, by virtue of P.D. No. 1206, the BOE replaced answered is: why did the legislature omit such allegedly indispensable provisional
the PSC and the Oil Industry Commission (OIC) in the regulation of the power and ratemaking authority? The legislature could have easily crafted the EPIRA to include
energy industry, it was likewise expressly given the same provisional authority. The last that authority, but it did not do so; and neither did they include any other provision or
paragraph of Section 9 of P.D. No. 1206, provided that Sections 11 and 12 of R.A. No. section to express the granting of said authority, as were conspicuously done in C.A.
6173,[9] as amended by P.D. No. 1128, shall govern the proceedings before the board, No. 146, P.D. No. 1206 and E.O. No. 172.
including the authority to grant provisional relief.[10] While Section 11 expressly In enacting a statute, the legislature is presumed to have been aware of, and have
provided for the transfer of powers of the abolished agencies to the Board of taken into account, prior laws on the subject of legislation.[15] This being so, the
Energy,[11] yet the legislature in Section 12 still provided for a specific authority to grant 11th Congress is presumed to be aware of the existence of the expressed provisional
provisional relief items. ratemaking power as well as the specific enumeration of other powers of the regulatory
In like manner, when the ERB replaced the BOE, the authority to grant provisional relief bodies under the previous laws. The marked difference in which the legislature treated
by the ERB was again specifically stated in Section 8 of E.O. No. 172, notwithstanding the rate-making authority of the PSC under C.A. No. 146, the BOE under P.D. No.
the fact that E.O. No. 172 also expressly provided for the transfer of powers of the BOE 1206, the ERB under E.O. No. 172, on the one hand and the ERC under the EPIRA,
to the ERB.[12] on the other, in that the latter law does not expressly provide for such authority in favor
On the other hand, the EPIRA is devoid of any indication, express or otherwise, of the of the ERC, demonstrates with absolute certainty that, indeed, the legislature did not
legislatures intent to endow the ERC with authority to issue provisional orders for rate intend to give such power, nor did it intend that it should be automatically covered by
adjustments. We cannot simply ignore this omission and assume that such provisional the powers that are transferred from the ERB to the ERC.
ratemaking power is inherent in the ERCs functions. The power to fix prices and make MERALCOs illation on the cases of Citizens Alliance for Consumer Protection vs. ERB,
rates cannot be conferred by implication, but must be conferred under statutory or et al., Valmonte vs. ERB, KMU Labor Center vs. ERB, et al., Maceda vs. ERB, et al.,
constitutional language that is free from doubt, and admits of no other reasonable and Lozano vs. ERB, et al., where the Court upheld the power of the ERB to
construction.[13] provisionally grant rate adjustments, is misplaced. In all these cases, the Court
Neither could it be implied that Section 44 of the EPIRA, which provides for the transfer recognized the power of the ERC to grant provisional relief because it is so expressly
of powers of the former ERB to the ERC, includes the power to issue provisional orders. provided in Section 8 of E.O. No. 172. Said cases are not applicable to the case at bar
Said section is not enough to provide sufficient basis by way of implication that the ERC for the simple reason that the decisions therein were rendered by the Court at the time
has a provisional rate-making power. As clearly provided by Section 44 itself, the when the applicable laws had expressly authorized the ERB to grant provisional rate
powers and functions of the ERB that are transferred to the ERC are only those that adjustments. At pain of being repetitious, there is nothing in the EPIRA that bestows
conform with the provisions of the EPIRA. Considering that the EPIRA does not contain upon the ERC any express statutory authority to grant provisional rate adjustments.
Moreover, the EPIRA created a new regulatory body, the ERC, with an entirely new set whatever is embraced in the new statute shall prevail, and whatever is excluded
of powers and functions necessary to accomplish the regulatory scheme of the law. therefrom is discarded.[23] (Emphasis supplied)
The EPIRA was enacted by the legislature as a framework for the restructuring of the Even Section 80 (Applicability and Repealing Clause) of the EPIRA do not indicate that
electric power industry.[16] It divided the electric industry into four sectors, mainly: the provisions of C.A. No. 146 and E.O. No. 172 continue to have full force and effect
generation, transmission, distribution and supply.[17] Hence, the EPIRA had the effect insofar as they are not inconsistent with the EPIRA.
of revising the whole statutory system on the electric power industry and substituted a As provided by Section 80 itself, the provisions of the pertinent laws that are not
new one in its place. Consequently, except for those that may not be inconsistent with inconsistent with the EPIRA shall continue to have full force and effect. It does not
the EPIRA, the previous laws had been considered repealed, and the EPIRA, from then necessarily follow that the power to grant provisional rate adjustments is included in
on governs the industry. such catch-all proviso. These applicability provisions could not have referred to the
The discourse of Agpalo in his book, Statutory Construction, is noteworthy, viz.: particular provisions giving the PSC and the ERB the statutory authority to grant
The legislative intent to repeal a prior law is also shown by the enactment of a statute provisional rate adjustments considering that the lawmakers deliberately deleted said
revising or codifiying the former laws on the whole subject matter. The revised statute provision in the enactment of the EPIRA. There exists no valid justification why the
or code is in effect a legislative declaration that whatever is embraced in the new legislature should make a general reference to what is not inconsistent with EPIRA
statute shall prevail and whatever is excluded therefrom shall be discarded. The when the legislature could have provided for the authority to grant provisional rates as
revised statute or code, as disclosed by its framework and substance, must be intended what has been done in previous laws creating the predecessors of ERC.
to cover the whole subject to be a complete and perfect system in itself in order that There is no doubt as to the prerogative of the legislature to delegate and confer on
the prior statutes or parts thereof which are not repeated in the new statute will be administrative bodies particular quasi-judicial powers, as an incident to the
deemed impliedly repealed. Thus, where a statute is revised, or a series of performance of regulatory functions. But in so doing, the legislature must state its
legislative acts on the same subject are revised and consolidated into one, intention in express terms that is free from ambiguity and leaves no room for
covering the entire field of subject matter, all parts and provisions of the former interpretation.
act or acts that are omitted from the revised act are deemed repealed. The fact P.D. No. 1206, as amended, and E.O. No. 172 likewise contain applicability clauses
that the revised statute or code is all-comprehensive and covers the whole field of a similar to Section 80 of the EPIRA. But these laws, unlike the EPIRA also expressly
particular subject matter, specially if it provides that all acts inconsistent therewith are provided for the authority of the regulatory bodies to grant provisional rate adjustments.
repealed, reveals the intent to establish a uniform system of rules and to nullify existing The legislature knew that the ERCs predecessors all possess provisional ratemaking
laws on the subject. powers. The existence of these provisions is certainly not lost on the framers of the
It has also been held that where a new statute is intended to furnish the exclusive rule EPIRA. The fact that P.D. No. 1206 and E.O. No. 172 both expressly granted the BOE
on a certain subject, it repeals by implication the old law on the same subject, or where and the ERB, respectively, a provisional ratemaking authority, yet not reproduced in
a new statute covers the whole subject matter of an old law and adds new provisions the EPIRA is an evident manifestation of the intention of the legislature to limit the ERCs
and make changes, and where such law, whether it be in the form of an amendment or powers to those enumerated in Section 43 of the EPIRA to the exclusion of all others.
otherwise, is evidently intended to be a revision of the old act, it repeals the old act To construe Section 80 as including such provisional authority would be extending an
by implication. The complete enactment on a subject matter, intended as a authority beyond the ERCs powers, which the Court does not have the liberty to do as
substitute for the old statute, may be regarded as the expression of the whole it is evidently not the legislatures intent.
law thereon, and operates as a repeal of the prior statute, although the two If the EPIRA is clear in its terms in clothing the ERC with specific administrative,
statutes are not repugnant.[18] (Emphasis supplied) regulatory and quasi-judicial functions, then certainly a conferment of its provisional
In People vs. Almuete,[19] aptly cited by petitioner FDC, the Court ruled that a ratemaking power can not be implied from a mere applicability clause stated in general
subsequent statute, revising the whole subject matter of a former statute, and evidently terms.
intended as a substitute for it, operates to repeal the former statute.[20] The revising Hence, absent an express provision in the EPIRA stating that the ERC has the authority
statute is in effect a legislative declaration that whatever is embraced in the new to grant provisional rate adjustments, I believe that the Court cannot uphold the
statute shall prevail, and whatever is excluded therefrom shall be discarded.[21] questioned grant of provisional rate adjustment by the ERC. A legislative lacuna
Such doctrine was adopted by the Court in Alunan III vs. Asuncion,[22] when it ruled cannot be filled by judicial fiat.[24]
that R.A. No. 6975, creating the Philippine National Police (PNP) superseded R.A. No. Even if we assume that the ERC, indeed, possesses such provisional ratemaking
5750, the law governing CIS agents. It was held therein: authority, how provisional is provisional? Attention must be brought to the case of
Urged by the Constitutional mandate for the establishment and maintenance of one Republic vs. Manila Electric Company.[25] In this case, MERALCOs application for the
police force, R.A. No. 6975 was promulgated creating the Philippine National Police. revision of rate schedules was provisionally granted by the then ERB on January 28,
The new police force absorbed the members of the former National Police Commission, 1994. On February 16, 1998, or more than four (4) years after the provisional grant of
Philippine Constabulary and Integrated National Police, all three of which were the revised rate schedules, the ERB rendered its decision modifying its order of January
accordingly abolished. 28, 1994. The decision of the ERC was brought to the Court of Appeals, and eventually
R.A. No. 6975, therefore, had the effect of revising the whole police force system and to this Court, which affirmed the ERBs decision on November 15, 2002. By then, eight
substituting a new unified one in its place. This, alone, proves that R.A. No. 5750 has years had already elapsed from the time the rate schedule was provisionally granted
already been repealed because a subsequent statute revising the whole subject matter by the ERB. It need not be belabored that MERALCO is now facing a tight situation
of a former statute, and evidently intended as a substitute for it, operates to repeal the wherein it cannot fully implement the order of the Court to refund to the public the
earlier statute. The revising statute is in effect a legislative declaration that billions of pesos it has already collected under such provisional order.
Second Issue obtain relevant evidence and present their oppositions or comments on the application,
WHETHER THE GRANT BY THE ERC OF THE PROVISIONAL RATE ADJUSTMENT clearly denied them due process of law.[30]
WAS COMMITTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK The requirement of due process is not some favor or grace that the ERC may dole out
OR EXCESS OF JURISDICTION on a bout of whim or on occasion of charity. Rather, it is a statutory right to which the
Even if we assume for the sake of argument, that the ERC has such legal authority, consuming public is entitled.
nevertheless, I concur with the position of the majority that the issuance by the ERC of The ERC should have ruled on petitioner FDCs motion for production of documents,
the questioned Order dated November 27, 2003 is tainted with grave abuse of and if it found that the documents to be produced were not material for the filing of an
discretion such that it should be annulled and set aside just the same. Said Order was opposition, then ERC should have declared it to be so categorically. The parties should
issued by the ERC in disregard of the due process requirements laid down in the not have been left in the dark and determine for themselves by inference whether the
second paragraph, Section 4 (e), Rule 3, of the EPIRAs Implementing Rules and contentions have been disposed of or not. Considering further the time constraint in the
Regulations (IRR). filing of the comments and pleadings, a prompt disposition of the motion for production
Since the fixing of rates is essentially legislative in nature, due process of law does not of documents would have given FDC enough period within which to file its comment or
require that interested parties be given notice or an opportunity for a hearing, unless it opposition for the ERC to consider in resolving MERALCOs application for a provisional
is expressly so provided by law.[26] But where the fixing of rates is delegated to officers rate adjustment.
or commissions, the persons or entities affected must be afforded procedural due It is conceded that the ERC is confronted with the difficult task of balancing the interest
process appropriate to the nature of the case and consistent with statutory of the affected parties. On one hand, it has to promote and encourage market
requirements, including, ordinarily, a notice which is adequate and timely under the development, and maintain MERALCOs financial integrity, and on the other, it also has
circumstances, and a hearing which is fair and open, and which comports with due to protect public interests. As in the procedure provided by the second paragraph of
process safeguards.[27] Rule 3, Section 4 (e) of the IRR, the filing of comments and oppositions to the
Section 4 (e), Rule 3 of the IRR provides for the procedure how the ERC may grant application are deemed sufficient. In no event is due process to be sacrificed.[31]
provisionally rate adjustment or deny the relief prayed for not later then seventy-five Moreover, respondent ERC, through its counsel, admitted during the oral arguments
calendar days from the filing of the application, based on the application and the that MERALCO failed to fully comply with the publication requirement of Rule 3, Section
supporting documents attached thereto and such comments or pleadings the 4 (e) of the IRR.[32] It only caused the publication of a mere notice that an application
consumers or the LGU concerned may have filed within thirty calendar days from has been filed, and not of the application itself, contrary to the express provisions of
receipt of a copy of the application or petition or from the publication thereof as said rule.
the case may be. The requirement of publication in applications for rate adjustments is not without reason
Section 4 (e), Rule 3 of the IRR plainly states that: (1) the ERC has the discretion to or purpose. It is ancillary to the due process requirement of notice and hearing. Its
provisionally deny or grant the relief prayed for; (2) in assessing the merits of an purpose is not merely to inform the consumers that an application for rate adjustment
application for provisional rate adjustment, the ERC is required to consider the has been filed by the public utility. It is to adequately inform them that an application
application and its supporting documents and such comments or pleadings the has been made for the adjustment of the rates being implemented by the public utility
consumers or the LGU concerned may have filed; (3) the comments or pleadings must in order to afford them the opportunity to be heard and submit their stand as to the
be filed by the interested parties or the LGU concerned within thirty calendar days from propriety and reasonableness of the rates within the period allowed by the Rule.
receipt of a copy of the application or petition, or from publication of the application or Without the publication of the application, the consumers are left to second-guess the
petition, as the case may be; and (4) the ERC has seventy-five days from the filing of substance and merits of the application.
the application within which to decide the provisional relief prayed for. The publication by respondent MERALCO of a notice that an application for the
When a statute is clear, it must be taken to mean exactly what it says, and courts have approval of revised rate schedules and provisional authority will be filed by it falls short
no choice but to see to it that the mandate is obeyed.[28] The rule precludes the ERC of the requirement. The Rule requires the publication of the application or petition for
from resolving a prayer for a provisional rate adjustment in any other manner than that rate adjustment itself. The publication made by MERALCO, obviously, does not
provided in the implementing rules. This is not an issue of discretion but of duty. sufficiently inform the public of the nature and substance of the application, as intended
The ERCs discussion in the assailed Order dated November 27, 2003, shows that it by the law. If the application or petition were too long and expensive to be published,
solely relied on respondent MERALCOs claims and failed to take into account the then, as suggested by the OSG, the material allegations or reasons for the proposed
oppositors respective contentions. In fact, as admitted by the ERC during the oral increase and the proposed effective date of increase would have sufficed which
arguments, it did not wait for the comments of the oppositors since it was of the MERALCO likewise failed to do.
impression that it had the authority to act on MERALCOs application ex parte, and there The ruling in the case of Beautifont, Inc. vs. Court of Appeals,[33] cited by the ERC is
was already a prima facie showing that MERALCO was entitled to the relief prayed not applicable in the case at bar. In said case, the questioned provision of R.A. No.
for.[29] The ERC had seventy-five days from October 10, 2003, or until December 24, 5455 reads:
2003, within which to resolve the prayer for provisional relief. It had more than ample SEC. 7. Publication and Posting of Notices. Immediately after the filing of any
time to resolve FDCs motion for production of documents, and await the parties application under this Act, the Secretary of the Board of Investments shall publish the
respective comments on MERALCOs application. The undue haste in which it granted same at the expense of the applicant once a week for three consecutive weeks in the
MERALCOs prayer for provisional relief does not speak well of the procedure followed Official Gazette and in one of the newspapers of general circulation in the province or
by the ERC. The ERCs failure to accord the oppositors a reasonable opportunity to city where the applicant has its principal office and post copies of said application in
conspicuous places, in the office of the Board of Investments or in the building were
said office is located, setting forth in such copies the name of the applicant, the On June 23, 2003, BF Homes and PWCC filed a Petition [With Prayer for the Issuance
business in which it is engaged or proposes to engage or invest, and such other data of Writ of Preliminary Injunction and for the Immediate Issuance of Restraining Order]
and information as may be required by the Board of Investments. No approval or against MERALCO before the RTC, docketed as Civil Case No. 03-0151.
certificate shall be valid without the publication and posting of notices as herein In their Petition before the RTC, BF Homes and PWCC invoked their right to refund
provided. based on the ruling of this Court in Republic v. Manila Electric Company4:
In interpreting this provision, the Court ruled that what must be published and posted 7. It is of judicial notice that on November 15, 2002, in G.R. No. 141314,
by the applicant is an abstract or summary of the application and not the application entitled Republic of the Philippines vs. Manila Electric Company, and G.R. No.
itself. The Court concluded that other parts of the provision shows that it is the notice 141369, entitled Lawyers Against Monopoly and Poverty (LAMP) et al. vs.
of application that is meant to be published and posted, and in fact, the provision itself Manila Electric Compnay (MERALCO), (both cases shall hereafter be referred
prescribes the matters to be published, i.e., the name of the applicant, the business in to as "MERALCO Refund cases," for brevity), the Supreme Court ordered
which it is engaged or proposes to engage or invest, and such other data and MERALCO to refund its customers, which shall be credited against the
information as may be required by the Board of Investments. There would be no need customers future consumption, the excess average amount of 0.167 per
to itemize these few particulars if it were the application itself that was meant to be kilowatt hour starting with the customers billing cycles beginning February
published and posted,[34] the Court stressed. 1998. The dispositive portion of the Supreme Court Decision in the MERALCO
In contrast, there is no ambiguity in the first paragraph of Rule 3, Section 4 (e) of the Refund cases reads:
EPIRAs IRR. It clearly states that: (A)ny application or petition for rate adjustment or WHEREFORE, in view of the foregoing, the instant petitions are GRANTED
for any relief affecting the consumers must be accompanied with an acknowledgment and the decision of the Court of Appeals in C.A. G.R. SP No. 46888 is
of receipt of a copy thereof together with the certification of the notice of publication REVERSED. Respondent MERALCO is authorized to adopt a rate adjustment
thereof in a newspaper of general circulation in the same locality. What the Rule in the amount of 0.017 kilowatthour, effective with respect to MERALCOs
requires is a certification of the notice of publication of the application or petition and billing cycles beginning February 1994. Further, in accordance with the
not a certification of the publication of notice, as employed in the Beautifont case. The decision of the ERB dated February 16, 1998, the excess average amount of
term thereof as used in the phrase notice of publication thereof refers to the application 0.167 per kilowatt hour starting with the applicants billing cycles beginning
or petition itself for rate adjustment or for any relief, and unlike in the Beautifont case, February 1998 is ordered to be refunded to MERALCOs customers or
there is nothing in the provision that shows that publication is restricted to a notice that correspondingly credited in their favor for future consumption.
an application has been filed. If the Court were to adopt the ERCs conclusion, then the x x x x.
purpose of the IRR to adequately inform the consumers would be defeated. 8. The Motion for Reconsideration filed by MERALCO in the MERALCO
Having failed to conform to the IRR on the publication requirement, the proceedings Refund cases was DENIED WITH FINALITY (the uppercase letters were used
before the ERC is ultra vires. Hence, for this reason, I agree with the majority that the by the Supreme Court) in the Resolution of the Supreme Court dated April 9,
provisional order of rate adjustment is null and void. 2003.
9. The amount that MERALCO was mandated to refund to [BF Homes and
G.R. No. 171624 December 6, 2010 PWCC] pursuant to the MERALCO Refund cases is in the amount of
BF HOMES, INC. and the PHILIPPINE WATERWORKS AND CONSTRUCTION 11,834,570.91.5
CORP., Petitioners, BF Homes and PWCC then alleged in their RTC Petition that:
vs. 10. On May 20, 2003, without giving any notice whatsoever, MERALCO
MANILA ELECTRIC COMPANY, Respondent. disconnected electric supply to [BF Homes and PWCCs] sixteen (16) water
DECISION pumps located in BF Homes in Paraaque, Caloocan, and Quezon City, which
LEONARDO-DE CASTRO, J.: thus disrupted water supply in those areas.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the 11. On June 4, 2003, [BF Homes and PWCC] received by facsimile
Decision1 dated October 27, 2005 of the Court of Appeals in CA-G.R. SP No. 82826, transmission a letter from MERALCO, x x x, in which MERALCO demanded
nullifying and setting aside (1) the Order 2 dated November 21, 2003 of the Regional to [BF Homes and PWCC] the payment of electric bills amounting to
Trial Court (RTC), Branch 202 of Las Pias City, in Civil Case No. 03-0151, thereby 4,717,768.15.
dissolving the writ of injunction against respondent Manila Electric Company 12. [MERALCO] replied in a letter dated June 11, 2003, x x x, requesting
(MERALCO); and (2) the Resolution3 dated February 7, 2006 of the Court of Appeals MERALCO to apply the 4,717,768.15 electric bill against the
denying the Motion for Reconsideration of petitioners BF Homes, Inc. (BF Homes) and 11,834,570.91 that MERALCO was ordered to refund to [BF Homes and
Philippine Waterworks and Construction Corporation (PWCC). PWCC] pursuant to the MERALCO Refund cases. x x x
MERALCO is a corporation duly organized and existing under Philippine laws engaged 13. Displaying the arrogance that has become its distinction, MERALCO, in
in the distribution and sale of electric power in Metro Manila. On the other hand, BF its letter dated June 16, 2003, x x x, denied [BF Homes and PWCCs] request
Homes and PWCC are owners and operators of waterworks systems delivering water alleging that it has not yet come up with the schedule for the refund of large
to over 12,000 households and commercial buildings in BF Homes subdivisions in amounts, such as those of [BF Homes and PWCC].
Paraaque City, Las Pias City, Caloocan City, and Quezon City. The water distributed 14. Even while MERALCO was serving its reply-letter to [BF Homes and
in the waterworks systems owned and operated by BF Homes and PWCC is drawn PWCC], MERALCO, again, without giving any notice, cut off power supply to
from deep wells using pumps run by electricity supplied by MERALCO.
[BF Homes and PWCCs] five (5) water pumps located in BF Homes According to MERALCO:
Paraaque and BF Resort Village, in Pamplona, Las Pias City. 2.2. Both petitioners BF Homes, Incorporated and Philippine Waterworks
15. In its letter dated June 4, 2003 (Annex A), MERALCO threatened to cut Corporation are admittedly the registered customers of [MERALCO] by virtue
off electric power connections to all of [BF Homes and PWCCs] water pumps of the service contracts executed between them under which the latter
if [BF Homes and PWCC] failed to pay their bills demanded by MERALCO by undertook to supply electric energy to the former for a fee. The following
June 20, 2003.6 twenty-three (23) Service Identification Nos. (SINs) are registered under the
BF Homes and PWCC thus cited the following causes of action for their RTC name of BF Homes, Incorporated: x x x. While the following twenty-one (21)
Petition: Service Identification Nos. (SINs) are registered under the name of Philippine
16. In refusing to apply [MERALCOs] electric bills against the amounts that it Waterworks Construction Corporation: x x x
was ordered to refund to [BF Homes and PWCC] pursuant to the MERALCO xxxx
Refund cases and in making the implementation of the refund ordered by the 2.4. The service contracts as well as the terms and conditions of
Supreme Court dependent upon its own will and caprice, MERALCO acted [MERALCOs] service as approved by BOE [Board of Energy], now ERC
with utmost bad faith. [Energy Regulatory Commission], provide in relevant parts, that [BF Homes
17. [BF Homes and PWCC] are clearly entitled to the remedies under the law and PWCC] agree as follows:
to compel MERALCO to consider [BF Homes and PWCCs] electric bills fully DISCONTINUANCE OF SERVICE:
paid by the amounts which MERALCO was ordered to refund to [BF Homes The Company reserves the right to discontinue service in case the customer is in
and PWCC] pursuant to the MERALCO Refund cases, to enjoin MERALCO arrears in the payment of bills or for failure to pay the adjusted bills in those cases
to reconnect electric power to all of [BF Homes and PWCCs] water pumps, where the meter stopped or failed to register the correct amount of energy consumed,
and to order MERALCO to desist from further cutting off power connection to or for failure to comply with any of these terms and conditions, or in case of or to prevent
[BF Homes and PWCCs] water pumps. fraud upon the Company. Before disconnection is made in the case of, or to prevent
18. MERALCOs unjust and oppressive acts have cast dishonor upon [BF fraud, the Company may adjust the bill of said customer accordingly and if the adjusted
Homes and PWCCs] good name and besmirched their reputation for which bill is not paid, the Company may disconnect the same." (Emphasis supplied)
[BF Homes and PWCC] should be indemnified by way of moral damages in 2.5. This contractual right of [MERALCO] to discontinue electric service for
the amount of not less than 1,000,000.00. default in the payment of its regular bills is sanctioned and approved by the
19. As an example for the public good, to dissuade others from emulating rules and regulations of ERB (now the ERC). This right is necessary and
MERALCOs unjust, oppressive and mercenary conduct, MERALCO should reasonable means to properly protect and enable [MERALCO] to perform and
be directed to pay [BF Homes and PWCC] exemplary damages of at least discharge its legal and contractual obligation under its legislative franchise
1,000,000.00. and the law. Cutting off service for non-payment by the customers of the
20. MERALCOs oppressive and inequitable conduct forced [BF Homes and regular monthly electric bills is the only practical way a public utility, such as
PWCC] to engage the services of counsel to defend their rights and thereby [MERALCO], can ensure and maintain efficient service in accordance with the
incur litigation expenses in the amount of at least 500,000.00 for which [BF terms and conditions of its legislative franchise and the law.
Homes and PWCC] should be indemnified.7 xxxx
BF Homes and PWCC additionally prayed that the RTC issue a writ of 2.14. Instead of paying their unpaid electric bills and before [MERALCO] could
preliminary injunction and restraining order considering that: effect its legal and contractual right to disconnect [BF Homes and PWCCs]
21. As indicated in its letter dated June 4, 2003 (Annex A), unless seasonably electric services, [BF Homes and PWCC] filed the instant petition to avoid
restrained, MERALCO will cut off electric power connections to all of [BF payment of [MERALCOs] valid and legal claim for regular monthly electric
Homes and PWCCs] water pumps on June 20, 2003. bills.
22. Part of the reliefs herein prayed for is to restrain MERALCO from cutting 2.15. [BF Homes and PWCCs] unpaid regular bills totaled P6,551,969.55
off electric power connections to [BF Homes and PWCCs] water pumps. covering the May and June 2003 electric bills. x x x
23. Unless MERALCOS announced intention to cut off electric power xxxx
connections to [BF Homes and PWCCs] water pumps is restrained, [BF 2.17. [BF Homes and PWCC] knew that [MERALCO] is already in the process
Homes and PWCC] will suffer great and irreparable injury because they would of implementing the decision of the Supreme Court as to the refund case. But
not [be] able to supply water to their customers. this refund has to be implemented in accordance with the guidelines and
24. [BF Homes and PWCC] therefore pray that a writ for preliminary injunction schedule to be approved by the ERC. Thus [BF Homes and PWCCs] filing of
be issued upon posting of a bond in an amount as will be determined by this the instant petition is merely to evade payment of their unpaid electric bills to
Honorable Court. [MERALCO].10
25. [BF Homes and PWCC] further pray that, in the meantime and immediately Hence, MERALCO sought the dismissal of the RTC Petition of BF Homes and PWCC
upon the filing of the above captioned Petition, a restraining order be issued on the following grounds:
before the matter of preliminary injunction can be heard. 8 3.1 The Honorable Court has no jurisdiction to award the relief prayed for by [BF Homes
On August 15, 2003, MERALCO filed before the RTC its Answer with Counterclaims and PWCC] because:
and Opposition to the Application for Writ of Preliminary Injunction 9 of BF Homes and a) The petition is in effect preempting or defeating the power of the ERC to
PWCC. implement the decision of the Supreme Court.
b) [MERALCO] is a utility company whose business activity is wholly regulated unless otherwise ordered by this Court. Further, [BF Homes and PWCC] are hereby
by the ERC. The latter, being the regulatory agency of the government having ordered to post a bond in the amount of 500,000 to answer for whatever injury or
the authority over the respondent, is the one tasked to approve the guidelines, damage that may be caused by reason of the preliminary injunction. 14
schedules and details of the refund. The Motion for Reconsideration of MERALCO of the aforementioned Order was denied
c) The decision of the Supreme Court, dated November 15, 2002, clearly by the RTC in another Order issued on January 9, 2004.15 The RTC reiterated its earlier
states that respondent is directed to make the refund to its customers in finding that all the requisites for the proper issuance of an injunction had been fully
accordance with the decision of the ERC (formerly ERB) dated February 16, complied with by BF Homes and PWCC, thus:
1998. Hence, [MERALCO] has to wait for the schedule and details of the Records indubitably show that all the requisites for the proper issuance of an injunction
refund to be approved by the ERC before it can comply with the Supreme have been fully complied with in the instant case.
Court decision. It should be noted that a disconnection of power supply would obviously cause
3.2. [MERALCO] has the right to disconnect the electric service to [BF Homes and irreparable injury because the pumps that supply water to the BF community will be
PWCC] in that: without electricity, thereby rendering said community without water. Water is a basic
a) The service contracts between [MERALCO] and [BF Homes and PWCC] and endemic necessity of life. This is why its enjoyment and use has been
expressly authorize the former to discontinue and disconnect electric services constitutionally safeguarded and protected. Likewise, a community without water might
of the latter for their failure to pay the regular electric bills rendered. create social unrest, which situation this Court has the mandate to prevent. There is an
b) It is [MERALCOs] legal duty as a public utility to furnish its service to the urgent and paramount necessity for the issuance of the injunctive writ to prevent
general public without arbitrary discrimination and, consequently, [MERALCO] serious damage to the guaranteed rights of [BF Homes and PWCC] and the residents
is obligated to discontinue and disconnect electric services to [BF Homes and of the community to use and enjoy water.16
PWCC] for their refusal or failure to pay the electric energy actually used by The RTC resolved the issue on jurisdiction raised by MERALCO, as follows:
them.11 As to the jurisdictional issue raised by respondent MERALCO, it can be gleaned from
For its compulsory counterclaims, MERALCO prayed that the RTC orders BF Homes a re-evaluation and re-assessment of the records that this Court has jurisdiction to
and PWCC to pay MERALCO 6,551,969.55 as actual damages (representing the delve into the case. This Court gave both parties the opportunity to be heard as they
unpaid electric bills of BF Homes and PWCC for May and June 2003), 1,500,000.00 introduced evidence on the propriety of the issuance of the injunctive writ. It is well-
as exemplary damages, 1,500,000.00 as moral damages, and 1,000,000.00 as settled that no grave abuse of discretion could be attributed to its issuance where a
attorneys fees. party was not deprived of its day in court as it was heard and had exhaustively
Lastly, MERALCO opposed the application for writ of preliminary injunction of BF presented all its arguments and defenses. (National Mines and Allied Workers Union
Homes and PWCC because: vs. Valero, 132 SCRA 578, 1984.)17
I Aggrieved, MERALCO filed with the Court of Appeals a Petition for Certiorari under
[MERALCO] HAS THE LEGAL AND CONTRACTUAL RIGHT TO DEMAND Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 82826. MERALCO sought
PAYMENT OF THE ELECTRIC BILLS AND, IN CASE OF NON-PAYMENT, the reversal of the RTC Orders dated November 21, 2003 and January 9, 2004 granting
TO DISCONTINUE THE ELECTRIC SERVICES OF [BF HOMES and PWCC] a writ of preliminary injunction in favor of BF Homes and PWCC. MERALCO asserted
II that the RTC had no jurisdiction over the application of BF Homes and PWCC for
[BF HOMES and PWCC] HAVE NO CLEAR RIGHT WHICH WARRANTS issuance of such a writ.
PROTECTION BY INJUNCTIVE PROCESS In its Decision dated October 27, 2005, the Court of Appeals agreed with MERALCO
After hearing,12 the RTC issued an Order on November 21, 2003 granting the that the RTC had no jurisdiction to issue a writ of preliminary injunction in Civil Case
application of BF Homes and PWCC for the issuance of a writ of preliminary injunction. No. 03-0151, as said trial court had no jurisdiction over the subject matter of the case
The RTC found that the records showed that all requisites for the issuance of said writ to begin with. It ratiocinated in this wise:
were sufficiently satisfied by BF Homes and PWCC. The RTC stated in its Order: For one, it cannot be gainsaid that the ERC has original and exclusive jurisdiction over
Albeit, this Court respects the right of a public utility company like MERALCO, being a the case. Explicitly, Section 43(u) of Republic Act No. 9136, otherwise known as the
grantee of a legislative franchise under Republic Act No. 9029, to collect overdue "Electric Power Industry Reform Act," (RA 9136), states that the ERC shall have the
payments from its subscribers or customers for their respective consumption of electric original and exclusive jurisdiction over all cases contesting rates, fees, fines and
energy, such right must, however, succumb to the paramount substantial and penalties imposed by the ERC in the exercise of its powers, functions and
constitutional rights of the public to the usage and enjoyment of waters in their responsibilities and over all cases involving disputes between and among participants
community. Thus, there is an urgent need for the issuance of a writ of preliminary or players in the energy sector. Section 4(o) of Rule 3 of the Implementing Rules and
injunction in order to prevent social unrest in the community for having been deprived Regulations of RA 9136 likewise provides that the ERC shall also be empowered to
of the use and enjoyment of waters flowing through [BF Homes and PWCCs] water issue such other rules that are essential in the discharge of its functions as an
pumps.13 independent quasi-judicial body.
The RTC decreed in the end: For another, the respondent judge, instead of presiding over the case, should have
WHEREFORE, in the light of the foregoing, [BF Homes and PWCCs] prayer for the dismissed the same and yielded jurisdiction to the ERC pursuant to the doctrine of
issuance of a writ of preliminary injunction is hereby GRANTED. Respondent Manila primary jurisdiction. It is plain error on the part of the respondent judge to determine,
Electric Company is permanently restrained from proceeding with its announced preliminary or otherwise, a controversy involving a question which is within the
intention to cut-off electric power connection to [BF Homes and PWCCs] water pumps
jurisdiction of an administrative tribunal, especially so where the question demands the 3. The Court of Appeals ERRED in NOT SAYING that the ERC as a quasi-
exercise of sound administrative discretion. judicial body under RA 9136 has no power to issue any injunctive relief or
Needless to state, the doctrine of primary jurisdiction applies where the administrative remedy to prevent disconnection.
agency, as in the case of ERC, exercises its quasi-judicial and adjudicatory function. 4. The Court of Appeals ERRED in not resolving the issue as to the violation
Thus, in cases involving specialized disputes, the practice has been to refer the same of MERALCO of a standing injunction order while the case remains
to an administrative agency of special competence pursuant to the doctrine of primary undecided.20
jurisdiction. The courts will not determine a controversy involving a question which is At the core of the Petition is the issue of whether jurisdiction over the subject matter of
within the jurisdiction of the administrative tribunal prior to the resolution of that question Civil Case No. 03-0151 lies with the RTC or the Energy Regulatory Commission (ERC).
by the administrative tribunal, where the question demands the exercise of sound If it is with the RTC, then the said trial court also has jurisdiction to issue the writ of
administrative discretion requiring the special knowledge, experience and services of preliminary injunction against MERALCO. If it is with the ERC, then the RTC also has
the administrative tribunal to determine technical and intricate matters of fact, and a no jurisdiction to act on any incidents in Civil Case No. 03-0151, including the
uniformity of ruling is essential to comply with the premises of the regulatory statute application for issuance of a writ of preliminary injunction of BF Homes and PWCC
administered. therein.
Verily, the cause of action of [BF Homes and PWCC] against [MERALCO] originates BF Homes and PWCC argued that due to the threat of MERALCO to disconnect electric
from the Meralco Refund Decision as it involves the perceived right of the former to services, BF Homes and PWCC had no other recourse but to seek an injunctive remedy
compel the latter to set-off or apply their refund to their present electric bill. The issue from the RTC under its general jurisdiction. The merits of Civil Case No. 03-0151 was
delves into the right of the private respondents to collect their refund without submitting not yet in issue, only the propriety of issuing a writ of preliminary injunction to prevent
to the approved schedule of the ERC, and in effect give unto themselves preferential an irreparable injury. Even granting that the RTC has no jurisdiction over the subject
right over other equally situated consumers of [MERALCO]. Perforce, the ERC, as can matter of Civil Case No. 03-0151, the ERC by enabling law has no injunctive power to
be gleaned from the afore-stated legal provisions, has primary, original and exclusive prevent the disconnection by MERALCO of electric services to BF Homes and PWCC.
jurisdiction over the said controversy. The Petition has no merit.
Indeed, the respondent judge glaringly erred in enjoining the right of [MERALCO] to Settled is the rule that jurisdiction is conferred only by the Constitution or the law. 21
disconnect its services to [BF Homes and PWCC] on the premise that the court has Republic v. Court of Appeals22 also enunciated that only a statute can confer jurisdiction
jurisdiction to apply the provisions on compensation or set-off in this case. Although on courts and administrative agencies.
[MERALCO] recognizes the right of [BF Homes and PWCC] to the refund as provided Related to the foregoing and equally well-settled is the rule that the nature of an action
in the Meralco Refund Decision, it is the ERC which has the authority to implement the and the subject matter thereof, as well as which court or agency of the government has
same according to its approved schedule, it being a dispute arising from the exercise jurisdiction over the same, are determined by the material allegations of the complaint
of its jurisdiction. in relation to the law involved and the character of the reliefs prayed for, whether or not
Moreover, it bears to stress that the Meralco Refund Decision was brought into fore by the complainant/plaintiff is entitled to any or all of such reliefs. A prayer or demand for
the Decision dated 16 February 1998 of the ERC (then Energy Regulatory Board) relief is not part of the petition of the cause of action; nor does it enlarge the cause of
granting refund to [MERALCOs] consumers. Being the agency of origin, the ERC has action stated or change the legal effect of what is alleged. In determining which body
the jurisdiction to execute the same. Besides, as stated, it is empowered to promulgate has jurisdiction over a case, the better policy is to consider not only the status or
rules that are essential in the discharge of its functions as an independent quasi-judicial relationship of the parties but also the nature of the action that is the subject of their
body.18 controversy.23
The dispositive portion of the judgment of the appellate court reads: In Manila Electric Company v. Energy Regulatory Board,24 the Court traced the
WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and legislative history of the regulatory agencies which preceded the ERC, presenting a
the assailed Orders REVERSED and SET ASIDE. Accordingly, the writ of injunction summary of these agencies, the statutes or issuances that created them, and the extent
against [MERALCO] is hereby DISSOLVED. No costs.19 of the jurisdiction conferred upon them, viz:
In a Resolution dated February 7, 2006, the Court of Appeals denied the Motion for 1. The first regulatory body, the Board of Rate Regulation (BRR), was created
Reconsideration of BF Homes and PWCC for failing to raise new and persuasive and by virtue of Act No. 1779. Its regulatory mandate under Section 5 of the law
meritorious arguments. was limited to fixing or regulating rates of every public service corporation.
Now, BF Homes and PWCC come before this Court via the instant Petition, raising the 2. In 1913, Act No. 2307 created the Board of Public Utility Commissioners
following assignment of errors: (BPUC) to take over the functions of the BRR. By express provision of Act No.
1. The Court of Appeals ERRED in saying that the respondent judge 2307, the BPUC was vested with jurisdiction, supervision and control over all
committed grave abuse of discretion by issuing the disputed writ of injunction public utilities and their properties and franchises.
pending the merits of the case including the issue of subject matter 3. On November 7, 1936, Commonwealth Act (C.A.) No. 146, or the Public
jurisdiction. Service Act (PSA), was passed creating the Public Service Commission
2. The Court of Appeals ERRED in saying that the ERC under the doctrine of (PSC) to replace the BPUC. Like the BPUC, the PSC was expressly granted
primary jurisdiction has the original and EXCLUSIVE jurisdiction to take jurisdiction, supervision and control over public services, with the concomitant
cognizance of a petition for injunction to prevent electrical disconnection to a authority of calling on the public force to exercise its power, to wit:
customer entitled to a refund. "SEC. 13. Except as otherwise provided herein, the Commission shall have general
supervision and regulation of, jurisdiction and control over, all public utilities, and also
over their property, property rights, equipment, facilities and franchises so far as may and Electric Transmission Lines/Materials Pilferage Act of 1994"; shall continue to have
be necessary for the purpose of carrying out the provisions of this Act, and in the full force and effect except insofar as they are inconsistent with this Act.
exercise of its authority it shall have the necessary powers and the aid of the public The provisions with respect to electric power of Section 11(c) of Republic Act 7916, as
force x x x." amended, and Section 5(f) of Republic Act 7227, are hereby repealed or modified
Section 14 of C.A. No. 146 defines the term "public service" or "public utility" as accordingly.
including "every individual, copartnership, association, corporation or joint-stock Presidential Decree No. 40 and all laws, decrees, rules and regulations, or portions
company, . . . that now or hereafter may own, operate, manage or control within the thereof, inconsistent with this Act are hereby repealed or modified accordingly.
Philippines, for hire or compensation, any common carrier, x x x, electric light, heat, In addition to the foregoing, the EPIRA also conferred new powers upon the ERC under
power, x x x, when owned, operated and managed for public use or service within the Section 43, among which are:
Philippines x x x." Under the succeeding Section 17(a), the PSC has the power even SEC. 43. Functions of the ERC. The ERC shall promote competition, encourage
without prior hearing market development, ensure customer choice and penalize abuse of market power in
(a) To investigate, upon its own initiative, or upon complaint in writing, any matter the restructured electricity industry. In appropriate cases, the ERC is authorized to
concerning any public service as regards matters under its jurisdiction; to require any issue cease and desist order after due notice and hearing. Towards this end, it shall be
public service to furnish safe, adequate and proper service as the public interest may responsible for the following key functions in the restructured industry:
require and warrant, to enforce compliance with any standard, rule, regulation, order or xxxx
other requirement of this Act or of the Commission, x x x. (f) In the public interest, establish and enforce a methodology for setting transmission
4. Then came Presidential Decree (P.D.) No. 1, reorganizing the national government and distribution wheeling rates and retail rates for the captive market of a distribution
and implementing the Integrated Reorganization Plan. Under the reorganization plan, utility, taking into account all relevant considerations, including the efficiency or
jurisdiction, supervision and control over public services related to electric light, and inefficiency of the regulated entities. The rates must be such as to allow the recovery
power heretofore vested in the PSC were transferred to the Board of Power and of just and reasonable costs and a reasonable return on rate base (RORB) to enable
Waterworks (BOPW). the entity to operate viably. The ERC may adopt alternative forms of internationally-
Later, P.D. No. 1206 abolished the BOPW. Its powers and function relative to power accepted rate-setting methodology as it may deem appropriate. The rate-setting
utilities, including its authority to grant provisional relief, were transferred to the newly- methodology so adopted and applied must ensure a reasonable price of electricity. The
created Board of Energy (BOE). rates prescribed shall be non-discriminatory. To achieve this objective and to ensure
5. On May 8, 1987, then President Corazon C. Aquino issued E.O. No. 172 the complete removal of cross subsidies, the cap on the recoverable rate of system
reconstituting the BOE into the ERB, transferring the formers functions and powers losses prescribed in Section 10 of Republic Act No. 7832, is hereby amended and shall
under P.D. No. 1206 to the latter and consolidating in and entrusting on the ERB "all be replaced by caps which shall be determined by the ERC based on load density,
the regulatory and adjudicatory functions covering the energy sector." Section 14 of sales mix, cost of service, delivery voltage and other technical considerations it may
E.O. No. 172 states that "(T)he applicable provisions of [C.A.] No. 146, as amended, promulgate. The ERC shall determine such form of rate-setting methodology, which
otherwise known as the Public Service Act; x x x and [P.D.] No. 1206, as amended, shall promote efficiency. x x x.
creating the Department of Energy, shall continue to have full force and effect, except xxxx
insofar as inconsistent with this Order."25 (u) The ERC shall have the original and exclusive jurisdiction over all cases contesting
Thereafter, on June 8, 2001, Republic Act No. 9136, known as the Electric Power rates, fees, fines and penalties imposed by the ERC in the exercise of the
Industry Reform Act of 2001 (EPIRA), was enacted, providing a framework for abovementioned powers, functions and responsibilities and over all cases involving
restructuring the electric power industry. One of the avowed purposes of the EPIRA is disputes between and among participants or players in the energy sector.
to establish a strong and purely independent regulatory body. The Energy Regulatory All notices of hearings to be conducted by the ERC for the purpose of fixing rates or
Board (ERB) was abolished and its powers and functions not inconsistent with the fees shall be published at least twice for two successive weeks in two (2) newspapers
provision of the EPIRA were expressly transferred to the ERC. 26 of nationwide circulation.
The powers and functions of the ERB not inconsistent with the EPIRA were transferred A careful review of the material allegations of BF Homes and PWCC in their Petition
to the ERC by virtue of Sections 44 and 80 of the EPIRA, which read: before the RTC reveals that the very subject matter thereof is the off-setting of the
Sec. 44. Transfer of Powers and Functions. The powers and functions of the Energy amount of refund they are supposed to receive from MERALCO against the electric
Regulatory Board not inconsistent with the provisions of this Act are hereby transferred bills they are to pay to the same company. This is squarely within the primary
to the ERC. The foregoing transfer of powers and functions shall include all applicable jurisdiction of the ERC.
funds and appropriations, records, equipment, property and personnel as may be The right of BF Homes and PWCC to refund, on which their claim for off-setting
necessary. depends, originated from the MERALCO Refund cases. In said cases, the Court (1)
Sec. 80. Applicability and Repealing Clause. The applicability provisions of authorized MERALCO to adopt a rate adjustment in the amount of 0.017 per
Commonwealth Act No. 146, as amended, otherwise known as the "Public Service kilowatthour, effective with respect to its billing cycles beginning February 1994; and
Act." Republic Act 6395, as amended, revising the charter of NPC; Presidential Decree (2) ordered MERALCO to refund to its customers or credit in said customers favor for
269, as amended, referred to as the National Electrification Decree; Republic Act 7638, future consumption 0.167 per kilowatthour, starting with the customers billing cycles
otherwise known as the "Department of Energy Act of 1992"; Executive Order 172, as that begin February 1998, in accordance with the ERB Decision dated February 16,
amended, creating the ERB; Republic Act 7832 otherwise known as the "Anti-Electricity 1998.
It bears to stress that in the MERALCO Refund cases, this Court only affirmed the Lastly, the Court herein already declared that the RTC not only lacked the jurisdiction
February 16, 1998 Decision of the ERB (predecessor of the ERC) fixing the just and to issue the writ of preliminary injunction against MERALCO, but that the RTC actually
reasonable rate for the electric services of MERALCO and granting refund to had no jurisdiction at all over the subject matter of the Petition of BF Homes and PWCC
MERALCO consumers of the amount they overpaid. Said Decision was rendered by in Civil Case No. 03-0151. Therefore, in addition to the dissolution of the writ of
the ERB in the exercise of its jurisdiction to determine and fix the just and reasonable preliminary injunction issued by the RTC, the Court also deems it appropriate to already
rate of power utilities such as MERALCO. order the dismissal of the Petition of BF Homes and PWCC in Civil Case No. 03-0151
Presently, the ERC has original and exclusive jurisdiction under Rule 43(u) of the for lack of jurisdiction of the RTC over the subject matter of the same. Although only
EPIRA over all cases contesting rates, fees, fines, and penalties imposed by the ERC the matter of the writ of preliminary injunction was brought before this Court in the
in the exercise of its powers, functions and responsibilities, and over all cases involving instant Petition, the Court is already taking cognizance of the issue on the jurisdiction
disputes between and among participants or players in the energy sector. Section 4(o) of the RTC over the subject matter of the Petition. The Court may motu proprio consider
of the EPIRA Implementing Rules and Regulation provides that the ERC "shall also be the issue of jurisdiction. The Court has discretion to determine whether the RTC validly
empowered to issue such other rules that are essential in the discharge of its functions acquired jurisdiction over Civil Case No. 03-0151 since, to reiterate, jurisdiction over
as in independent quasi-judicial body." the subject matter is conferred only by law. Jurisdiction over the subject matter cannot
Indubitably, the ERC is the regulatory agency of the government having the authority be acquired through, or waived by, any act or omission of the parties. Neither would
and supervision over MERALCO. Thus, the task to approve the guidelines, schedules, the active participation of the parties nor estoppel operate to confer jurisdiction on the
and details of the refund by MERALCO to its consumers, to implement the judgment of RTC where the latter has none over a cause of action.29 Indeed, when a court has no
this Court in the MERALCO Refund cases, also falls upon the ERC. By filing their jurisdiction over the subject matter, the only power it has is to dismiss the action. 30
Petition before the RTC, BF Homes and PWCC intend to collect their refund without WHEREFORE, the instant Petition for Review is DENIED. The Decision dated October
submitting to the approved schedule of the ERC, and in effect, enjoy preferential right 27, 2005 of the Court of Appeals in CA-G.R. SP No. 82826 is AFFIRMED with the
over the other equally situated MERALCO consumers. MODIFICATION that the Regional Trial Court, Branch 202 of Las Pias City, is
Administrative agencies, like the ERC, are tribunals of limited jurisdiction and, as such, ORDERED to dismiss the Petition [With Prayer for the Issuance of Writ of Preliminary
could wield only such as are specifically granted to them by the enabling statutes. In Injunction and for the Immediate Issuance of Restraining Order] of BF Homes, Inc. and
relation thereto is the doctrine of primary jurisdiction involving matters that demand the Philippine Waterworks and Construction Corporation in Civil Case No. 03-0151. Costs
special competence of administrative agencies even if the question involved is also against BF Homes, Inc. and Philippine Waterworks and Construction Corporation.
judicial in nature. Courts cannot and will not resolve a controversy involving a question SO ORDERED.
within the jurisdiction of an administrative tribunal, especially when the question
demands the sound exercise of administrative discretion requiring special knowledge, EN BANC
experience and services of the administrative tribunal to determine technical and G.R. No. 166910 October 19, 2010
intricate matters of fact. The court cannot arrogate into itself the authority to resolve a ERNESTO B. FRANCISCO, JR. and JOSE MA. O. HIZON, Petitioners,
controversy, the jurisdiction of which is initially lodged with the administrative body of vs.
special competence.27 TOLL REGULATORY BOARD, PHILIPPINE NATIONAL CONSTRUCTION
Since the RTC had no jurisdiction over the Petition of BF Homes and PWCC in Civil CORPORATION, MANILA NORTH TOLLWAYS CORPORATION, BENPRES
Case No. 03-0151, then it was also devoid of any authority to act on the application of HOLDINGS CORPORATION, FIRST PHILIPPINE INFRASTRUCTURE
BF Homes and PWCC for the issuance of a writ of preliminary injunction contained in DEVELOPMENT CORPORATION, TOLLWAY MANAGEMENT CORPORATION,
the same Petition. The ancillary and provisional remedy of preliminary injunction cannot PNCC SKYWAY CORPORATION, CITRA METRO MANILA TOLLWAYS
exist except only as an incident of an independent action or proceeding.28 CORPORATION and HOPEWELL CROWN INFRASTRUCTURE, INC.,
Incidentally, BF Homes and PWCC seemed to have lost sight of Section 8 of Executive Respondents.
Order No. 172 which explicitly vested on the ERB, as an incident of its principal function, x - - - - - - - - - - - - - - - - - - - - - - -x
the authority to grant provisional relief, thus: G.R. No. 169917
Section 8. Authority to Grant Provisional Relief. The Board may, upon the filing of HON. IMEE R. MARCOS, RONALDO B. ZAMORA, CONSUMERS UNION OF THE
an application, petition or complaint or at any stage thereafter and without prior hearing, PHILIPPINES, INC., QUIRINO A. MARQUINEZ, HON. LUIS A. ASISTIO, HON.
on the basis of supporting papers duly verified or authenticated, grant provisional relief ERICO BASILIO A. FABIAN, HON. RENATO "KA RENE" B. MAGTUBO, HON.
on motion of a party in the case or on its own initiative, without prejudice to a final RODOLFO G. PLAZA, HON. ANTONIO M. SERAPIO, HON. EMMANUEL JOEL J.
decision after hearing, should the Board find that the pleadings, together with such VILLANUEVA, HON. ANIBAN NG MGA MANGGAGAWA SA AGRIKULTURA
affidavits, documents and other evidence which may be submitted in support of the (AMA), INC., ANIBAN NG MGA MAGSASAKA, MANGINGISDA AT MANGGAGAWA
motion, substantially support the provisional order: Provided, That the Board shall SA AGRIKULTURA-KATIPUNAN, INC., KAISAHAN NG MGA MAGSASAKA SA
immediately schedule and conduct a hearing thereon within thirty (30) days thereafter, AGRIKULTURA, INC., KILUSAN NG MANGAGAWANG MAKABAYAN, Petitioners,
upon publication and notice to all affected parties. vs.
The aforequoted provision is still applicable to the ERC as it succeeded the ERB, by The REPUBLIC OF THE PHILIPPINES, acting by and through the TOLL
virtue of Section 80 of the EPIRA. A writ of preliminary injunction is one such provisional REGULATORY BOARD, MANILA NORTH TOLLWAYS CORPORATION,
relief which a party in a case before the ERC may move for. PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, and FIRST
PHILIPPINE INFRASTRUCTURE DEVELOPMENT CORP., Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x or up to May 2007 a franchise to construct, maintain and operate toll facilities in the
G.R. No. 173630 North Luzon and South Luzon Expressways, with the right to collect toll fees at such
GISING KABATAAN MOVEMENT, INC., BARANGAY COUNCIL OF SAN ANTONIO, rates as the TRB may fix and/or authorize. Particularly, Section 1 of P.D. 1113
MUNICIPALITY OF SAN PEDRO, LAGUNA [as Represented by COUNCILOR delineates the coverage of the expressways from Balintawak, Caloocan City to
CARLON G. AMBAYEC], and YOUNG PROFESSIONALS AND ENTREPRENEURS Carmen, Rosales, Pangasinan and from Nichols, Pasay City to Lucena, Quezon. And
OF SAN PEDRO, LAGUNA Petitioners, because the franchise is not self-executing, as it was in fact made subject, under
vs. Section 3 of P.D. 1113, to "such conditions as may be imposed by the Board in an
THE REPUBLIC OF THE PHILIPPINES, acting through the TOLL REGULATORY appropriate contract to be executed for such purpose," TRB and PNCC signed in
BOARD (TRB), PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (PNCC), October 1977, a Toll Operation Agreement ("TOA") on the North Luzon and South
Respondents. Luzon Tollways, providing for the detailed terms and conditions for the construction,
x - - - - - - - - - - - - - - - - - - - - - - -x maintenance and operation of the expressway.2
G.R. No. 183599 On December 22, 1983, P.D. 1894 was issued therein further granting PNCC a
THE REPUBLIC OF THE PHILIPPINES, represented by the TOLL REGULATORY franchise over the Metro Manila Expressway ("MMEX"), and the expanded and
BOARD, Petitioner, delineated NLEX and SLEX. Particularly, PNCC was granted the "right, privilege and
vs. authority to construct, maintain and operate any and all such extensions, linkages or
YOUNG PROFESSIONALS AND ENTREPRENEURS OF SAN PEDRO, LAGUNA, stretches, together with the toll facilities appurtenant thereto, from any part of the North
Respondent. Luzon Expressway, South Luzon Expressway and/or Metro Manila Expressway and/or
DECISION to divert the original route and change the original end-points of the North Luzon
VELASCO, JR., J.: Expressway and/or South Luzon Expressway as may be approved by the [TRB]."3
Before us are four petitions; the first three are special civil actions under Rule 65, Under Section 2 of P.D. 1894, "the franchise granted the [MMEX] and all extensions,
assailing and seeking to nullify certain statutory provisions, presidential actions and linkages, stretches and diversions after the approval of the decree that may be
implementing orders, toll operation-related contracts and issuances on the constructed after the approval of this decree [on December 22, 1983] shall likewise
construction, maintenance and operation of the major tollway systems in Luzon. The have a term of thirty (30) years, commencing from the date of completion of the project."
petitions likewise seek to restrain and permanently prohibit the implementation of the As expressly set out in P.D. 1113 and reiterated in P.D. 1894, PNCC may sell or assign
allegedly illegal toll fee rate hikes for the use of the North Luzon Expressway ("NLEX"), its franchise thereunder granted or cede the usufruct 4 thereof upon the Presidents
South Luzon Expressway ("SLEX") and the South Metro Manila Skyway ("SMMS"). approval.5 This same provision on franchise transfer and cession of usufruct is likewise
The fourth, a petition for review under Rule 45, seeks to annul and set aside the found in P.D. 1112.6
decision dated June 23, 2008 of the Regional Trial Court ("RTC") of Pasig, in SCA No. Then came the 1987 Constitution with its franchise provision.7
3138-PSG, enjoining the original toll operating franchisee from collecting toll fees in the In 1993, the Government Corporate Counsel ("GCC"), acting on PNCCs request,
SLEX. issued Opinion No. 224, s. 1993,8 later affirmed by the Secretary of Justice,9 holding
By Resolution of March 20, 2007, the Court ordered the consolidation of the first three that PNCC may, subject to certain clearance and approval requirements, enter into a
petitions, docketed as G.R. Nos. 166910, 169917 and 173630, respectively. The fourth joint venture ("JV") agreement ("JVA") with private entities without going into public
petition, G.R. No. 183599, would later be ordered consolidated with the earlier three bidding in the selection of its JV partners. PNCCs query was evidently prompted by
petitions. the need to seek out alternative sources of financing for expanding and improving
The Facts existing expressways, and to link them to economic zones in the north and to the
The antecedent facts are as follows CALABARZON area in the south.
On March 31, 1977, then President Ferdinand E. Marcos issued Presidential Decree MOU for the construction, rehabilitation
No. ("P.D.") 1112, authorizing the establishment of toll facilities on public and expansion of expressways
improvements.1 This issuance, in its preamble, explicitly acknowledged "the huge On February 8, 1994, the Department of Public Works and Highways ("DPWH"), TRB,
financial requirements" and the necessity of tapping "the resources of the private PNCC, Benpres Holdings Corporation ("Benpres") and First Philippine Holdings
sector" to implement the governments infrastructure programs. In order to attract Corporation ("FPHC"), among other private and government entities/agencies,
private sector involvement, P.D. 1112 allowed "the collection of toll fees for the use of executed a Memorandum of Understanding ("MOU") envisaged to open the door for
certain public improvements that would allow a reasonable rate of return on the entry of private capital in the rehabilitation, expansion (to Subic and Clark) and
investments." The same decree created the Toll Regulatory Board ("TRB") and extension, as flagship projects, of the expressways north of Manila, over which PNCC
invested it under Section 3 (a) (d) and (e) with the power to enter, for the Republic, into has a franchise. To carry out their undertakings under the MOU, Benpres and FPHC
contracts for the construction, maintenance and operation of tollways, grant authority formed, as their infrastructure holding arm, the First Philippine Infrastructure and
to operate a toll facility, issue therefor the necessary Toll Operation Certificate ("TOC") Development Corporation ("FPIDC").
and fix initial toll rates, and, from time to time, adjust the same after due notice and Consequent to the MOU execution, PNCC entered into financial and/or technical JVAs
hearing. with private entities/investors for the toll operation of its franchised areas following what
On the same date, P.D. 1113 was issued, granting to the Philippine National may be considered as a standard pattern, viz.: (a) after a JVA is concluded and the
Construction Corporation ("PNCC"), then known as the Construction and Development usual government approval of the assignment by PNCC of the usufruct in the franchise
Corporation of the Philippines ("CDCP"), for a period of thirty years from May 1977 under P.D. 1113, as amended, secured, a new JV company is specifically formed to
undertake a defined toll road project; (b) the Republic of the Philippines, through the On January 27, 2005, the TRB issued Resolution No. 2005-04 approving the initial
TRB, as grantor, PNCC, as operator, and the new corporation, as authorized toll rates for the closed and flat toll systems applicable to the new NLEX.
investor/concessionaire, with its lender, as the case may be, then execute a The South Luzon Expressway Project (Nichols to Lucena City)
Supplemental Toll Operation Agreement ("STOA") to implement the TOA previously For the SLEX expansion project, PNCC and Hopewell Holdings Limited ("HHL"), as JV
issued; and (c) once the requisite STOA approval is given, project prosecution starts partners, executed a Memorandum of Agreement ("MOA"), 12 which eventually led to
and upon the completion of the toll road project or of a divisible phase thereof, the TRB the formation of a JV company Hopewell Crown Infrastructure, Inc. ("HCII"), now MTD
fixes or approves the initial toll rate after which, it passes a board resolution prescribing Manila Expressways, Inc., ("MTDME"). And pursuant to the PNCC-MTDME JVA, the
the periodic toll rate adjustment. South Luzon Tollway Corporation ("SLTC") and the Manila Toll Expressway Systems,
The STOA defines the scope of the road project coverage, the terminal date of the Inc. ("MATES") were incorporated to undertake the financing, construction, operation
concession, and includes provisions on initial toll rate and a built-in formula for and maintenance of the resulting Project Toll Roads forming part of the SLEX. The toll
adjustment of toll rates, investment recovery clauses and contract termination in the road projects are divisible toll sections or segments, each segment defined as to its
event of the concessionaires, PNCCs or TRBs default, as the case may be. starting and end points and each with the corresponding distance coverage. The
The following events or transactions, involving the personalities as indicated, transpired proposed JVA, as later amended, between PNCC and MTDME was approved by the
with respect to the following projects: OP on June 30, 2000.
The South Metro Manila Skyway (SMMS) Eventually, or on February 1, 2006, a STOA13 for the financing, design, construction,
(Buendia Bicutan elevated stretch) Project lane expansion and maintenance of the Project Toll Roads (PTR) of the rehabilitated
PNCC entered into a JV partnership arrangement with P.T. Citra, an Indonesian and improved SLEX was executed by and among the Republic, PNCC, SLTC, as
company, and created, for the SMMS project, the Citra Metro Manila Tollways investor, and MATES, as operator. To be precise, the PTRs, under the STOA, comprise
Corporation ("CMMTC"). and contemplated the full rehabilitation and/or roadway widening of the following
On November 27, 1995, TRB, PNCC and CMMTC executed a STOA for the SMMS existing toll roads or facilities: PTR 1 that portion of the tollway commencing at the
project ("CITRA STOA"). And on April 7, 1996, then President Fidel V. Ramos approved end of South MM Skyway to the Filinvest exit at Alabang (1-242 km); PTR 2 the
the CITRA STOA. tollway from Alabang to Calamba, Laguna (27.28 km); PTR 3 the tollway from
Phase I of the SMMS project the Bicutan to Buendia elevated expressway stretch Calamba to Sto. Tomas, Batangas (7.6 km) and PTR 4 the tollway from Sto. Tomas
was completed in December 1998, and the consequent initial toll rates for its use to Lucena City (54.27 km).14
implemented a month after. On November 26, 2004, the TRB passed Resolution No. Under Clause 6.03 of the STOA, the Operator, after substantially completing a TPR,
2004-53, approving the periodic toll rate adjustment for the SMMS. shall file an application for a Toll Operation Permit over the relevant completed TPR or
The NLEX Expansion Project (Rehabilitated and Widened NLEX, Subic segment, which shall include a request for a review and approval by the TRB of the
Expressway, Circumferential Road C-5) calculation of the new current authorized toll rate.
In reply to the query of the then TRB Chairman, the Department of Justice ("DOJ") G.R. No. 166910
issued DOJ Opinion No. 79, s. of 1994, echoing an earlier opinion of the GCC, that the Petitioners Francisco and Hizon, as taxpayers and expressway users, seek to nullify
TRB can implement the NLEX expansion project through a JV scheme with private the various STOAs adverted to above and the corresponding TRB resolutions, i.e. Res.
investors possessing the requisite technical and financial capabilities. Nos. 2004-53 and 2005-04, fixing initial rates and/or approving periodic toll rate
On May 16, 1995, then President Ramos approved the assignment of PNCCs adjustments therefor. To the petitioners, the STOAs and the toll rate-fixing resolutions
usufructuary rights as franchise holder to a JV company to be formed by PNCC and violate the Constitution in that they veritably impose on the public the burden of
FPIDC. PNCC and FPIDC would later ink a JVA for the rehabilitation and modernization financing tollways by way of exorbitant fees and thus depriving the public of property
of the NLEX referred in certain pleadings as the North Luzon Tollway project. 10 The without due process. These STOAs are also alleged to be infirm as they effectively
Manila North Tollways Corporation ("MNTC") was formed for the purpose. awarded purported "build-operate-transfer" ("BOT") projects without public bidding in
On April 30, 1998, the Republic, through the TRB, PNCC and MNTC, executed a STOA violation of the BOT Law (R.A. 6957, as amended by R.A. 7718).
for the North Luzon Tollway project ("MNTC STOA") in which MNTC was authorized, Petitioners likewise assail the constitutionality of Sections 3 (a) and (d) of P.D. 1112 in
inter alia, to subcontract the operation and maintenance of the project, provided that relation to Section 8 (b) of P.D. 1894 insofar as they vested the TRB, on one hand, toll
the majority of the outstanding shares of the contractor shall be owned by MNTC. The operation awarding power while, on the other hand, granting it also the power to issue,
MNTC STOA covers three phases comprising of ten segments, including the modify and promulgate toll rate charges. The TRB, so petitioners bemoan, cannot be
rehabilitated and widened NLEX, the Subic Expressway and the circumferential Road an awarding party of a TOA and, at the same time, be the regulator of the tollway
C-5.11 The STOA is to be effective for thirty years, reckoned from the issuance of the industry and an adjudicator of rate exactions disputes.
toll operation permit for the last completed phase or until December 31, 2030, Additionally, petitioners also seek to nullify certain provisions of P.D. 1113 and P.D.
whichever is earlier. The Office of the President ("OP") approved the STOA on June 1894, which uniformly grant the President the power to approve the transfer or
15, 1998. assignment of usufruct or the rights and privileges thereunder by the tollway operator
On August 2, 2000, pursuant to the MNTC STOA, the Tollways Management to third parties, particularly the transfer effected by PNCC to MNTC. As argued, the
Corporation ("TMC")formerly known as the Manila North Tollways Operation and authority to approve partakes of an exercise of legislative power under Article VI,
Maintenance Corporationwas created to undertake the operation and maintenance Section 1 of the Constitution.15
of the NLEX tollway facilities, interchanges and related works. In the meantime, or on April 8, 2010, the TRB issued a Certificate of Substantial
Completion16 with respect to PTR 1 (Alabang-Filinvest stretch) and PTR 2 (Alabang-
Calamba segments) of SLEX, signifying the completion of the full argued, only the Congress can extend the term of PNCCs franchise which expired on
rehabilitation/expansion of both segments and the linkages/interchanges in between May 1, 2007.
pursuant to the requirements of the corresponding STOA. TRB on even date issued a Ruling of the RTC in SCA No. 3138-PSG
Toll Operation Permit in favor of MATES over said PTRs 1 and 2. 17 Accordingly, upon By Decision19 dated June 23, 2008, the RTC, for the main stated reason that the
due application, the TRB approved the publication of the toll rate matrix for PTRs 1 and authority to grant or renew franchises belongs only to Congress, granted YPES
2, the rate to take effect on June 30, 2010.18 The implementation of the published rate petition, disposing as follows:
would, however, be postponed to August 2010. ACCORDINGLY, the instant Petition for Certiorari, Prohibition and Mandamus is
On July 5, 2010, petitioner Francisco filed a Supplemental Petition with prayer for the hereby GRANTED and the questioned Toll Operation Certificate (TOC) covering the
issuance of a temporary restraining order ("TRO") and/or status quo order focused on [SLEX] issued by respondent TRB in April, 2007, is hereby ordered ANNULLED and
the impending collection of what was perceived to be toll rate increases in the SLEX. SET ASIDE.
The assailed adjustments were made public in a TRB notice of toll rate increases for FURTHER, respondent PNCC is hereby immediately PROHIBITED from collecting toll
the SLEX from Alabang to Calamba on June 6, 2010, and were supposed to have been fess along the SLEX facilities as it no longer has the power and authority to do so.
implemented on June 30, 2010. On August 13, 2010, the Court granted the desired FINALLY, as mandated under Section 9 of PD No. 1113, respondent PNCC is hereby
TRO, enjoining the respondents in the consolidated cases from implementing the toll COMMANDED to turn over without further delay the physical assets and facilities of the
rate increases in the SLEX. SLEX including improvements thereon, together with the equipment and
In their Consolidated Comment/Opposition to the Supplemental Petition, respondents appurtenances directly related to their operations, without any cost, to the Government
SLTC et al., aver that the disputed rates are actually initial and opening rates, not an through the Toll Regulatory Board x x x.20
increase or adjustment of the prevailing rate, for the new expanded and rehabilitated Thus, the instant petition for review on certiorari under Rule 45, filed by the TRB on
SLEX. In fine, the new toll rates are, per SLTC, for a new and upgraded facility, i.e. the pure questions of law, docketed as G.R. No. 183599.
aforementioned Project Toll Roads 1 and 2 put up pursuant to the 2006 Republic- In their separate comments, public and private respondents uniformly seek the
PNCC-SLTC-MATES STOA adverted to. dismissal of the three special civil actions on the threshold issue of the absence of a
G.R. No. 169917 justiciable case and lack of locus standi on the part of the petitioners therein. Other
While they raise, for the most part, the same issues articulated in G.R. No. 166910, grounds raised range from the impropriety of certiorari to nullify toll operation
such as the public bidding requirement, the power of the President to approve the agreements; the inapplicability of the public bidding rules in the selection by PNCC of
assignment of PNCCs usufructuary rights to cover (as petitioners Imee R. Marcos, et its JV partners and the authority of the President to approve TOAs and the transfer of
al., would stress) even the assignment of the expressway from Balintawak to Tabang, usufructuary rights. PNCC argues, in esse, that its continuous toll operations did not
the virtual amendment and extension of a statutory franchise by way of administrative constitute an extension of its franchise, its authority to operate after the expiry date
action (e.g., the execution of a STOA or issuance of a TOC), petitioners in G.R. No. thereof in May 2007 being based on the valid authority of TRB to issue TOC.
169917 some of them then and still are members of the House of Representatives The Issues
have, as their main focus, the North Luzon Tollway project and the agreements and The principal consolidated but interrelated issues tendered before the Court, most of
devices entered in relation therewith. which with constitutional undertones, may be reduced into six (6) and formulated in the
Petitioners also assail the MNTC STOA on the ground that it granted the lenders (Asian following wise: first, whether or not an actual case or controversy exists and, relevantly,
Development Bank/World Bank) of MNTC, as project concessionaire, the unrestricted whether petitioners in the first three petitions have locus standi; second, whether the
rights to appoint a substitute entity to replace MNTC in case of an MNTC Default before TRB is vested with the power and authority to grant what amounts to a franchise over
prepayment of the loans, while also granting said lenders, in appropriate cases, the tollway facilities; third, corollary to the second, whether the TRB can enter into TOAs
option to extend the "concession or franchise" for a period not exceeding fifty years and, at the same time, promulgate toll rates and rule on petitions for toll rate
coinciding with the full payment of the loans. adjustments; fourth, whether the President is duly authorized to approve contracts,
G.R. No. 173630 inclusive of assignment of contracts, entered into by the TRB relative to tollway
Apart from those taken up in the other petitions for certiorari and prohibition, petitioners, operations; fifth, whether the subject STOAs covering the NLEX, SLEX and SMMS and
in G.R. No. 173630, whose members and constituents allegedly traverse SLEX daily, their respective extensions, linkages, etc. are valid; sixth, whether a public bidding is
aver that TRB ought to have applied the provisions of R.A. 6957 [BOT Law] and R.A. required or mandatory for these tollway projects.
9184 [Government Procurement Reform Act], which require public bidding for the Expressly prayed, if not subsumed, in the first three petitions, is to prohibit TRB and its
prosecution of the SLEX project. concessionaires from collecting toll fees along the Skyway and Luzon Tollways.
G.R. No. 183599 Preliminary Issues
Civil Case SCA No. 3138-PSG before the RTC Existence of an Actual Controversy, its Ripeness and
On September 14, 2007, the Young Professionals and Entrepreneurs of San Pedro, the Locus Standi to Sue
Laguna ("YPES"), one of the petitioners in G.R. No. 173630, filed before the RTC, The power of judicial review can only be exercised in connection with a bona fide
Branch 155, in Pasig City, a special civil action for certiorari, etc., against the TRB, controversy involving a statute, its implementation or a government action. 21 Withal,
docketed as SCA No. 3138-PSG, containing practically identical issues raised in G.R. courts will decline to pass upon constitutional issues through advisory opinions, bereft
No. 173630. Like its petition in G.R. No. 173630, YPES, before the RTC, assailed and as they are of authority to resolve hypothetical or moot questions. 22 The limitation on
sought to nullify the April 27, 2007 TOC, which TRB issued to PNCC inasmuch as the the power of judicial review to actual cases and controversies defines the role assigned
TOC worked to extend PNCCs tollway operation franchise for the SLEX. As YPES
to the judiciary in a tripartite allocation of power, to assure that the courts will not intrude non-traditional plaintiffs, like ordinary citizens, when the public interest so requires. 31
into areas committed to the other branches of government.23 There is no doubt that individual petitioners, Marcos, et al., in G.R. No. 169917, as then
In The Province of North Cotabato v. The Government of the Republic of the Philippines members of the House of Representatives, possess the requisite legal standing since
Peace Panel on Ancestral Domain (GRP), the Court has expounded anew on the they assail acts of the executive they perceive to injure the institution of Congress. On
concept of actual case or controversy and the requirement of ripeness for judicial the other hand, petitioners Francisco, Hizon, and the other petitioning associations, as
review, thus: taxpayers and/or mere users of the tollways or representatives of such users, would
An actual case or controversy involves a conflict of legal rights, an assertion of opposite ordinarily not be clothed with the requisite standing. While this is so, the Court is wont
legal claims, susceptible of judicial resolution as distinguished from a hypothetical or to presently relax the rule on locus standi owing primarily to the transcendental
abstract difference or dispute. There must be a contrariety of legal rights x x x. The importance and the paramount public interest involved in the implementation of the
Court can decide the constitutionality of an act x x x only when a proper case between laws on the Luzon tollways, a roadway complex used daily by hundreds of thousands
opposing parties is submitted for judicial determination. of motorists. What we said a century ago in Severino v. Governor General is just as
Related to the requirement of an actual case or controversy is the requirement of apropos today:
ripeness. A question is ripe for adjudication when the act being challenged has had a When the relief is sought merely for the protection of private rights, x x x [the relators]
direct adverse effect on the individual challenging it. x x x [I]t is a prerequisite that right must clearly appear. On the other hand, when the question is one of public
something had then been accomplished or performed by either branch before a court right and the object of the mandamus is to procure the enforcement of a public
may come into the picture, and the petitioner must allege the existence of an immediate duty, the people are regarded as the real party in interest, and the relator at
or threatened injury to itself as a result of the challenged action. He must show that he whose instigation the proceedings are instituted need not show that he has any
has sustained or is immediately in danger of sustaining some direct injury as a result legal or special interest in the result, it being sufficient to show that he is a citizen
of the act complained of.24 and as such interested in the execution of the laws.32 (Words in bracket and emphasis
But even with the presence of an actual case or controversy, the Court may refuse added.)
judicial review unless the constitutional question or the assailed illegal government act Accordingly, We take cognizance of the present case on account of its transcendental
is brought before it by a party who possesses what in Latin is technically called locus importance to the public.
standi or the standing to challenge it.25 To have standing, one must establish that he Second Issue: TRB Empowered to Grant Authority to Operate
has a "personal and substantial interest in the case such that he has sustained, or will Toll Facility /System
sustain, direct injury as a result of its enforcement." 26 Particularly, he must show that It is abundantly clear that Sections 3 (a) and (e) of P.D. 1112 in relation to Section 4 of
(1) he has suffered some actual or threatened injury as a result of the allegedly illegal P.D. 1894 have invested the TRB with sufficient power to grant a qualified person or
conduct of the government; (2) the injury is fairly traceable to the challenged action; entity with authority to construct, maintain, and operate a toll facility and to issue the
and (3) the injury is likely to be redressed by a favorable action. 27 corresponding toll operating permit or TOC.
Petitions for certiorari and prohibition are, as here, appropriate remedies to raise Sections 3 (a) and (e) of P.D. 1112 and Section 4 of P.D. 1894 amply provide the power
constitutional issues and to review and/or prohibit or nullify, when proper, acts of to grant authority to operate toll facilities:
legislative and executive officials.28 The present petitions allege that then President Section 3. Powers and Duties of the Board. The Board shall have in addition to its
Ramos had exercised vis--vis an assignment of franchise, a function legislative in general powers of administration the following powers and duties:
character. As alleged, too, the TRB, in the guise of entering into contracts or (a) Subject to the approval of the President of the Philippines, to enter into contracts in
agreements with PNCC and other juridical entities, virtually enlarged, modified to the behalf of the Republic of the Philippines with persons, natural or juridical, for the
core and/or extended the statutory franchise of PNCC, thereby usurping a legislative construction, operation and maintenance of toll facilities such as but not limited to
prerogative. The usurpation came in the form of executing the assailed STOAs and the national highways, roads, bridges, and public thoroughfares. Said contract shall be
issuance of TOCs. Grave abuse of discretion is also laid on the doorstep of the TRB open to citizens of the Philippines and/or to corporations or associations qualified under
for its act of entering into these same contracts or agreements without the required the Constitution and authorized by law to engage in toll operations;
public bidding mandated by law, specifically the BOT Law (R.A. 6957, as amended) xxxx
and the Government Procurement Reform Act (R.A. 9184). (e) To grant authority to operate a toll facility and to issue therefore the necessary "Toll
In fine, the certiorari petitions impute on then President Ramos and the TRB, the Operation Certificate" subject to such conditions as shall be imposed by the Board
commission of acts that translate inter alia into usurpation of the congressional authority including inter alia the following:
to grant franchises and violation of extant statutes. The petitions make a prima facie (1) That the Operator shall desist from collecting toll upon the expiration of the
case for certiorari and prohibition; an actual case or controversy ripe for judicial review Toll Operation Certificate.
exists. Verily, when an act of a branch of government is seriously alleged to have (2) That the entire facility operated as a toll system including all operation and
infringed the Constitution, it becomes not only the right but in fact the duty of the maintenance equipment directly related thereto shall be turned over to the
judiciary to settle the dispute. In doing so, the judiciary merely defends the sanctity of government immediately upon the expiration of the Toll Operation Certificate.
its duties and powers under the Constitution.29 (3) That the toll operator shall not lease, transfer, grant the usufruct of, sell or
In any case, the rule on standing is a matter of procedural technicality, which may be assign the rights or privileges acquired under the Toll Operation Certificate to
relaxed when the subject in issue or the legal question to be resolved is of any person, firm, company, corporation or other commercial or legal entity,
transcendental importance to the public.30 Hence, even absent any direct injury to the nor merge with any other company or corporation organized for the same
suitor, the Court can relax the application of legal standing or altogether set it aside for purpose, without the prior approval of the President of the Philippines. In the
event of any valid transfer of the Toll Operation Certificate, the Transferee authorize and control a public utility is admittedly a prerogative that stems from the
shall be subject to all the conditions, terms, restrictions and limitations of this Legislature. Any suggestion, however, that only Congress has the authority to grant a
Decree as fully and completely and to the same extent as if the Toll Operation public utility franchise is less than accurate. As stressed in Albano v. Reyesa case
Certificate has been granted to the same person, firm, company, corporation decided under the aegis of the 1987 Constitutionthere is nothing in the Constitution
or other commercial or legal entity. remotely indicating the necessity of a congressional franchise before "each and every
(4) That in time of war, rebellion, public peril, emergency, calamity, disaster or public utility may operate," thus:
disturbance of peace and order, the President of the Philippines may cause That the Constitution provides x x x that the issuance of a franchise, certificate or other
the total or partial closing of the toll facility or order to take over thereof by the form of authorization for the operation of a public utility shall be subject to amendment,
Government without prejudice to the payment of just compensation. alteration or repeal by Congress does not necessarily imply x x x that only Congress
(5) That no guarantee, Certificate of Indebtedness, collateral, securities, or has the power to grant such authorization. Our statute books are replete with laws
bonds shall be issued by any government agency or government-owned or granting specified agencies in the Executive Branch the power to issue such
controlled corporation on any financing program of the toll operator in authorization for certain classes of public utilities.35 (Emphasis ours.)
connection with his undertaking under the Toll Operation Certificate. In such a case, therefore, a special franchise directly emanating from Congress is not
(6) The Toll Operation Certificate may be amended, modified or revoked necessary if the law already specifically authorizes an administrative body to grant a
whenever the public interest so requires. franchise or to award a contract.36 This is the same view espoused by the Secretary of
(a) The Board shall promulgate rules and regulations governing the Justice in his opinion dated January 9, 2006, when he stated:
procedures for the grant of Toll Certificates. The rights and privileges That the administrative agencies may be vested with the authority to grant
of a grantee under a Toll Operation Certificate shall be defined by administrative franchises or concessions over the operation of public utilities under their
the Board. respective jurisdiction and regulation, without need of the grant of a separate legislative
(b) To issue rules and regulations to carry out the purposes of this franchise, has been upheld by the Supreme Court x x x. 37
Decree. Under the 1987 Constitution, Congress has an explicit authority to grant a public utility
SECTION 4. The Toll Regulatory Board is hereby given jurisdiction and supervision franchise. However, it may validly delegate its legislative authority, under the power of
over the GRANTEE with respect to the Expressways, the toll facilities necessarily subordinate legislation,38 to issue franchises of certain public utilities to some
appurtenant thereto and, subject to the provisions of Section 8 and 9 hereof, the toll administrative agencies. In Kilusang Mayo Uno Labor Center v. Garcia, Jr., We
that the GRANTEE will charge the users thereof. explained the reason for the validity of subordinate legislation, thus:
By explicit provision of law, the TRB was given the power to grant administrative Such delegation of legislative power to an administrative agency is permitted in order
franchise for toll facility projects. to adapt to the increasing complexity of modern life. As subjects for governmental
The concerned petitioners would argue, however, that PNCCs [then CDCPs] regulation multiply, so does the difficulty of administering the laws. Hence,
franchise, as toll operator, was granted via P.D. 1113, on the same day P.D. 1112, specialization even in legislation has become necessary. 39 (Emphasis ours.)
creating the TRB, was issued. It is thus pointed out that P.D. 1112 could not have As aptly pointed out by the TRB and other private respondents, the Land Transportation
plausibly granted the TRB with the power and jurisdiction to issue a similar franchise. Franchising and Regulatory Board ("LTFRB"), the Civil Aeronautics Board ("CAB"), the
Pushing the point, they maintain that only Congress has, under the 1987 Constitution, National Telecommunications Commission ("NTC"), and the Philippine Ports Authority
the exclusive prerogative to grant franchise to operate public utilities. ("PPA"), to name a few, have been such delegates. The TRB may very well be added
We are unable to agree with petitioners stance and their undue reliance on Article XII, to the growing list, having been statutorily endowed, as earlier indicated, the power to
Section 11 of the Constitution, which states that: grant to qualified persons, authority to construct road projects and operate thereon toll
SEC. 11. No franchise, certificate, or any other form of authorization for the operation facilities. Such grant, as evidenced by the corresponding TOC or set out in a TOA, "may
of a public utility shall be granted except to citizens of the Philippines or to corporations be amended, modified, or revoked [by the TRB] whenever the public interest so
or associations organized under the laws of the Philippines at least sixty per centum of requires."40
whose capital is owned by such citizens, nor shall such franchise, certificate, or In Philippine Airlines, Inc. v. Civil Aeronautics Board,41 the Court reiterated its holding
authorization be exclusive in character or for a longer period than fifty years. Neither in Albano that the CAB, like the PPA, has sufficient statutory powers under R.A. 776 to
shall any such franchise or right be granted except under the condition that it shall be issue a Certificate of Public Convenience and Necessity, or Temporary Operating
subject to amendment, alteration, or repeal by the Congress when the common good Permit to a domestic air transport operator who, although not possessing a legislative
so requires x x x. franchise, meets all the other requirements prescribed by law. We held therein that
The limiting thrust of the foregoing constitutional provision on the grant of franchise or "there is nothing in the law nor in the Constitution which indicates that a legislative
other forms of authorization to operate public utilities may, in context, be stated as franchise is an indispensable requirement for an entity to operate as a domestic air
follows: (a) the grant shall be made only in favor of qualified Filipino citizens or transport operator."42 We further explicated:
corporations; (b) Congress can impair the obligation of franchises, as contracts; and Congress has granted certain administrative agencies the power to grant licenses for,
(c) no such authorization shall be exclusive or exceed fifty years. or to authorize the operation of certain public utilities. With the growing complexity of
A franchise is basically a legislative grant of a special privilege to a person. 33 modern life, the multiplication of the subjects of governmental regulation, and the
Particularly, the term, franchise, "includes not only authorizations issuing directly from increased difficulty of administering the laws, there is a constantly growing tendency
Congress in the form of statute, but also those granted by administrative agencies to towards the delegation of greater powers by the legislature, and towards the approval
which the power to grant franchise has been delegated by Congress." 34 The power to of the practice by the courts. It is generally recognized that a franchise may be derived
indirectly from the state through a duly designated agency, and to this extent, even the and specifically conferred upon the TRB the power to impose conditions in an
power to grant franchises has frequently been delegated, even to agencies other than appropriate contract.52 And to reiterate, Section 3 of P.D. 1113 provides that "[t]his
those of a legislative nature. In pursuance of this, it has been held that privileges [PNCC] franchise is granted subject to such conditions as may be imposed by the [TRB]
conferred by grant by local authorities as agents for the state constitute as much a in an appropriate contract to be executed for this purpose, and with the understanding
legislative franchise as though the grant had been made by an act of the Legislature. 43 and upon the condition that it shall be subject to amendment, alteration or repeal when
(Emphasis ours.) public interest so requires."53 A similarly worded proviso is found in Section 6 of P.D.
The validity of the delegation by Congress of its franchising prerogative is beyond cavil. 1894. It is in this light that the TRB entered into the subject STOAs in order to allow the
So it was that in Tatad v. Secretary of the Department of Energy,44 We again ruled that infusion of additional investments in the subject infrastructure projects. Prior to the
the delegation of legislative power to administrative agencies is valid. In the instant expiration of PNCCs franchise on May 1, 2007, the STOAs merely imposed additional
case, the certiorari petitioners assume and harp on the lack of authority of PNCC to conditionalities, or as aptly pointed out by SLTC et al., obviously having in mind par.
continue with its NLEX, SLEX, MMEX operations, in joint venture with private investors, 16.06 of its STOA with TRB,54 served as supplement, to the existing TOA of PNCC with
after the lapse of its P.D. 1113 franchise. None of these petitioners seemed to have TRB. We have carefully gone over the different STOAs and discovered that the tollway
taken due stock of and appreciated the valid delegation of the appropriate power to projects covered thereby were all undertaken under the P.D. 1113 franchise of PNCC.
TRB under P.D. 1112, as enlarged in P.D. 1894. To be sure, a franchise may be derived And it cannot be over-emphasized that the respective STOAs of MNTC and SLTC each
indirectly from the state through a duly designated agency, and to this extent, the power contain provisions addressing the eventual expiration of PNCCs P.D. 1113 franchise
to grant franchises has frequently been delegated, even to agencies other than those and authorizing, thru the issuance by the TRB of a TOC, the implementation of a given
of a legislative nature.45 Consequently, it has been held that privileges conferred by toll project even after May 1, 2007. Thus:
grant by administrative agencies as agents for the state constitute as much a legislative MNTC STOA
franchise as though the grant had been made by an act of the Legislature. 46 2.6 CONCESSION PERIOD. In order to sustain the financial viability and integrity of
While it may be, as held in Strategic Alliance Development Corporation v. Radstock the Project, GRANTOR [TRB] hereby grants MNTC the CONCESSION for the
Securities Limited,47 that PNCCs P.D. 1113 franchise had already expired effective PROJECT ROADS for a period commencing upon the date that this [STOA] comes into
May 1, 2007, this fact of expiration did not, however, carry with it the cancellation of effect under Clause 4.1 until 31 December 2030 or thirty years after the issuance of the
PNCCs authority and that of its JV partners granted under P.D. 1112 in relation to corresponding TOLL OPERATION PERMIT for the last completed phase.
Section 1 of P.D. 1894 to construct, operate and maintain "any and all such extensions, Accordingly, unless the PNCC FRANCHISE is further extended beyond its expiry on
linkages or stretches, together with the toll facilities appurtenant thereto, from any part 01 May 2007, GRANTOR undertakes to issue the necessary [TOC] for the rehabilitated
of the North Luzon Expressway, South Luzon Expressway and/or Metro Manila and refurbished [NLEX] six months prior to the expiry of the PNCC FRANCHISE on 01
Expressway and/or to divert the original route and change the original end-points of the May 2007.
[NLEX]and/or [SLEX] as may be approved by the [TRB]. And to highlight the point, the SLTC STOA
succeeding Section 2 of P.D. 1894 specifically provides that the franchise for the 2.03 Authority of Investor and Operator to Undertake the Project
extension and toll road projects constructed after the approval of P.D. 1894 shall be (1) The GRANTOR [TRB] has determined that the Project Toll Roads are
thirty years, counted from project completion. Indeed, prior to the expiration of PNCCs within the existing SLEX and are thus covered by the PNCC Franchise that is
original franchise in May 2007, the TRB, in the exercise of its special powers under due to expire on May 1, 2007. PNCC has committed to exert its best efforts to
P.D. 1112, signed supplemental TOAs with PNCC and its JV partners. These STOAs obtain an extension x x x It is understood and agreed that in the event the
covered the expansion and rehabilitation of NLEX and SLEX, as the case may be, PNCC Franchise is not renewed beyond the said expiry date, this [STOA] and
and/or the construction, operation and maintenance of toll road projects contemplated the Concession granted x x x will stand in place of the PNCC Franchise and
in P.D.1894. And there can be no denying that the corresponding toll operation permits serve as a new concession, or authority, pursuant to Section 3 (a) of the TRB
have been issued. Charter, for the Investor to undertake the Project and for the Operator to
In fine, the STOAs48 TRB entered with PNCC and its JV partners had the effect of Operate and Maintain the Project Toll Roads immediately upon the expiration
granting authorities to construct, operate and maintain toll facilities, but with the of the PNCC Franchise, without need of the execution x x x of any other
injection of additional private sector investments consistent with the intent of P.D. Nos. document to effect the same.
1112, 1113 and 1894.49 The execution of these STOAs came in 1995, 1998 and 2006, (2) x x x in the event it is subsequently decreed by competent authority that
or before the expiration of PNCCs original franchise on May 1, 2007. In accordance the issuance by the Grantor of a [TOC] is necessary x x x the Grantor shall x
with applicable laws, these transactions have actually been authorized and approved x x cause the TRB x x x to issue such [TOC] in favor of the Operator,
by the President of the Philippines.50 And as a measure to ensure the legality of the embodying the terms and conditions of this Agreement.
said transactions and in line with due diligence requirements, a review thereof was The foregoing notwithstanding, there are to be sure certain aspects in PNCCs
secured from the GCC and the DOJ, prior to their execution. legislative franchise beyond the altering reach of TRB. We refer to the coverage area
Inasmuch as its charter empowered the TRB to authorize the PNCC and like entities to of the tollways and the expiry date of PNCCs original franchise, which is May 1, 2007,
maintain and operate toll facilities, it may be stated as a corollary that the TRB, subject as expressly stated under Sections 1 and 2 of P.D. 1894, respectively. The fact that
to certain qualifications, infra, can alter the conditions of such authorization. Well settled these two items were specifically and expressly defined by law, i.e. P.D. 1113, indicates
is the rule that a legislative franchise cannot be modified or amended by an an intention that any alteration, modification or repeal thereof should only be done
administrative body with general delegated powers to grant authorities or franchises. through the same medium. We said as much in Radstock, thus: "[T]he term of the x x
However, in the instant case, the law granting a direct franchise to PNCC 51 evidently x franchise, which is 30 years from 1 May 1977, shall remain the same, as expressly
provided in the first sentence of x x x Section 2 of P.D. 1894." 55 It is likewise worth and the TRB of the STOA, the right to the Concession will emanate from the STOA
noting what We further held in that case: itself and from the authority of the TRB under Section 3 (a) of the TRB Charter. Such
The TRB does not have the power to give back to PNCC the toll assets and facilities being the case, the expiration of the Franchise on 1 May 2007, since such Concession
which were automatically turned over to the Government, by operation of law, upon the is an entirely new and distinct concession from the Franchise and is, as stated, granted
expiration of the franchise of the PNCC on 1 May 2007. Whatever power the TRB may to entities other than PNCC.
have to grant authority to operate a toll facility or to issue a "[TOC]," such power does Finally, with regards (sic) the authority of the TRB this Office in Secretary of Justice
not obviously include the authority to transfer back to PNCC ownership of National Opinion No. 92, s. 2000, stated that:
Government assets, like the toll assets and facilities, which have become National "Suffice it to say that official acts of the President enjoy full faith and confidence of the
Government property upon the expiry of PNCCs franchise x x x. 56 (Emphasis in the Government of the Republic of the Philippines which he represents. Furthermore,
original.) considering that the queries raised herein relates to the exercise by the TRB of its
Verily, upon the expiration of PNCCs legislative franchise on May 1, 2007, the new regulatory powers over toll road project, the same falls squarely within the exclusive
authorities to construct, maintain and operate the subject tollways and toll facilities jurisdiction of TRB pursuant to P.D. No. 1112. Consequently, it is, therefore, solely
granted by the TRB pursuant to the validly executed STOAs and TOCs, shall begin to within TRBs prerogative and determination as to what rule shall govern and is made
operate and be treated as administrative franchises or authorities. Pursuant to Section applicable to a specific toll road project proposal."
3 (e) P.D. 1112, TRB possesses the power and duty, inter alia to: The STOA is an explicit grant of the Concession by the Republic of the Philippines,
x x x grant authority to operate a toll facility and to issue therefore the necessary "Toll through the TRB pursuant to P.D. (No.) 1112 and as approved by the President xxx.
Operation Certificate" subject to such conditions as shall be imposed by the [TRB] The foregoing grant is in full accord with the provisions of P.D. (No.) 1112 which
including inter alia x x x. authorizes TRB to enter into contracts on behalf of the Republic of the Philippines for
This is likewise consistent with the position of the Secretary of Justice in Opinion No. the construction, operation and maintenance of toll facilities. Such being the case, we
122 on November 24, 1995,57 thus: opine that no other legal requirement is necessary to make the STOA effective of to
TRB has no authority to extend the legislative franchise of PNCC over the existing confirm MNTCs (In this case, SLTC and the OMCO) rights and privileges granted
NSLE (North and South Luzon Expressways). However, TRB is not precluded under therein." (Emphasis in the original.)
Section 3 (e) of P.D. No. 1112 (TRB Charter) to grant PNCC and its joint venture partner Considering, however, that all toll assets and facilities pertaining to PNCC pursuant to
the authority to operate the existing toll facility of the NSLE and to issue therefore the its P.D. 1113 franchise are deemed to have already been turned over to the National
necessary "Toll Operation Certificate x x x. Government on May 1, 2007,59 whatever participation that PNCC may have in the new
It should be noted that the existing franchise of PNCC over the NSLE, which will expire authorities to construct, maintain and operate the subject tollways, shall be limited to
on May 1, 2007, gives it the "right, privilege and authority to construct, maintain and doing the same in trust for the National Government. In Radstock, the Court held that
operate" the NSLE. The Toll Operation Certificate which TRB may issue to the PNCC "[w]ith the expiration of PNCCs franchise, [its] assets and facilities were
and its joint venture partner after the expiration of its franchise on May 1, 2007 is an automatically turned over, by operation of law, to the government at no cost." 60 The
entirely new authorization, this time for the operation and maintenance of the NSLE x Court went on further to state that the Governments ownership of PNCCs toll assets
x x. In other words, the right of PNCC and its joint venture partner, after May 7, 2007 inevitably resulted in its owning too of the toll fees and the net income derived, after
[sic] to operate and maintain the existing NSLE will no longer be founded on its May 1, 2007, from the toll assets and facilities.61 But as We have earlier discussed, the
legislative franchise which is not thereby extended, but on the new authorization to be tollways and toll facilities should remain functioning in accordance with the validly
granted by the TRB pursuant to Section 3 (e), above quoted, of P.D. No. 1112. executed STOAs and TOCs. However, PNCCs assets and facilities, or, in short, its
(Emphasis ours.) very share/participation in the JVAs and the STOAs, inclusive of its percentage share
The same opinion was thereafter made by the Secretary of Justice on January 9, 2006, in the toll fees collected by the JV companies currently operating the tollways shall
in Opinion No. 1,58 stating that: likewise automatically accrue to the Government.
The existing franchise of PNCC over the NSLE, which will expire on May 1, 2007, gives In fine, petitioners claim about PNCCs franchise being amenable to an amendment
it the "right, privilege and authority to construct, maintain and operate the NSLE." The only by an act of Congress, or, what practically amounts to the same thing, that the
Toll Operation Certificate which the TRB may issue to the PNCC and its joint venture TRB is without authority at all to modify the terms and conditions of PNCCs franchise,
partner after the expiration of its franchise on May 1, 2007 is an entirely new i.e. by amending its TOA/TOC, has to be rejected. Their lament then that the TRB,
authorization, this time for the operation and maintenance of the NSLE. [T]he right of through the instrumentality of mere contracts and an administrative operating
PNCC and its joint venture partner, after May 1, 2007, to operate and maintain the certificate, or STOAs and TOC, to be precise, effectively, but invalidly amended PNCC
existing NSLE will no longer be founded on its legislative franchise which is not thereby legislative franchise, are untenable. For, the bottom line is, the TRB has, through the
extended, but on the new authorization to be granted by the TRB pursuant to Section interplay of the pertinent provisions of P.D. Nos. 1112, 1113 and 1894, the power to
3 (e) of PD No. 1112. grant the authority to construct and operate toll road projects and toll facilities by way
It appears therefore, that the effect of the STOA is not to extend the Franchise of PNCC, of a TOA and the corresponding TOC. What is otherwise a legislative power to grant or
but rather, to grant a new Concession over the SLEX Project and the OMCo., entities renew a franchise is not usurped by the issuance by the TRB of a TOC. But to
which are separate and distinct from PNCC. While initially, the authority of SLTC and emphasize, the case of the TRB is quite peculiarly unique as the special law conferring
OMCo. to enter into the STOA with the TRB and thereby become grantees of the the legislative franchise likewise vested the TRB with the power to impose conditions
Concession, will stem from and be based on the JVA and the assignment by PNCC to on the franchise, albeit in a limited sense, by excluding from the investiture the power
the OMCo. of the Usufruct in the Franchise, we submit that upon the execution by SLTC
to amend or modify the stated lifetime of the franchise, its coverage and the ownership operation of the said tollway facility, and to ensure the want of any delay and
arrangement of the toll assets following the expiration of the legislative franchise. 62 inconvenience to the motoring public.
At this juncture, the Court wishes to express the observation that P.D. Nos. 1112, 1113 All given, the cited CA holding is not a binding precedent. The time limitation on PNCCs
and 1894, as couched and considered as a package, very well endowed the TRB with franchise under either P.D. 1113 or P.D. 1894 does not detract from or diminish the
extraordinary powers. For, subject to well-defined limitations and approval TRBs delegated authority under P.D. 1112 to enter into separate toll concessions apart
requirements, the TRB can, by way of STOAs, allow and authorize, as it has allowed and distinct from PNCCs original legislative franchise.
and authorized, a legislative franchisee, PNCC, to share its concession with another Third Issue: TRBs Power to Enter into Contracts; Issue,
entity or JV partners, the authorization effectively covering periods beyond May 2007. Modify And Promulgate Toll Rates; and to Rule on Petitions
However, this unpalatable reality, a leftover of the martial law regime, presents issues Relative to Toll Rates Level and Increases Valid
on the merits and the wisdom of the economic programs, which properly belong to the The petitioners in the special civil actions cases would have the Court declare as invalid
legislature or the executive to address. The TRB is not precluded from granting PNCC (a) Section 3 (a) and (d) of P.D. 1112 (which accord the TRB, on one hand, the power
and its joint venture partners authority, through a TOC for a period following the term to enter into contracts for the construction, and operation of toll facilities, while, on the
of the proposed SMMS, with the said TOC serving as an entirely new authorization other hand, granting it the power to issue and promulgate toll rates) and (b) Section 8
upon the expiration of PNCCs franchise on May 1, 2007. In short, after May 1, 2007, (b) of P.D. 1894 (granting TRB adjudicatory jurisdiction over matters involving toll rate
the operation and maintenance of the NLEX and the other subject tollways will no movements). As submitted, granting the TRB the power to award toll contracts is
longer be founded on P.D. 1113 or portions of P.D. 1894 (PNCCs original franchise) inconsistent with its quasi-judicial function of adjudicating petitions for initial toll and
but on an entirely new authorization, i.e. a TOC, granted by the TRB pursuant to its periodic toll rate adjustments. There cannot, so petitioners would postulate, be
statutory authority under Sections 3 (a) and (e) of P.D. 1112. impartiality in such a situation.
Likewise needing no extended belaboring, in the light of the foregoing dispositions, is The assailed provisions of P.D. 1112 and P.D. 1894 read:
the untenable holding of the RTC in SCA No. 3138-PSG that the TRB is without power P.D. 1112
to issue a TOC to PNCC, amend or renew its authority over the SLEX tollways without Section 3. Powers and Duties of the Board. The Board shall have in addition to its
separate legislative enactment. And lest it be overlooked, the TRB may validly issue an general powers of administration the following powers and duties:
entirely new authorization to a JV company after the lapse of PNCCs franchise under (a) Subject to the approval of the President of the Philippines, to enter into
P.D. 1113. Its thirty-year concession under P.D. 1894, however, does not have the contracts in behalf of the Republic of the Philippines with persons, natural or
quality of definiteness as to its start, as by the terms of the issuance, it commences and juridical, for the construction, operation and maintenance of toll facilities such
is to be counted "from the date of approval of the project," the term project obviously as but not limited to national highways, roads, bridges, and public
referring to "Metro Manila Expressways and all extensions, linkages, stretches and thoroughfares. Said contract shall be open to citizens of the Philippines and/or
diversions refurbishing and rehabilitation of the existing NLEX and SLEX constructed to corporations or associations qualified under the Constitution and authorized
after the approval of the decree in December 1983." The suggestion, therefore, of the by law to engage in toll operations;
petitioners in G.R. No. 169917, citing a 1989 Court of Appeals ("CA") decision in CA- (d) Issue, modify and promulgate from time to time the rates of toll that will be
G.R. 13235 (Republic v. Guerrero, et al.), that the Balintawak to Tabang portion of the charged the direct users of toll facilities and upon notice and hearing, to
expressway no longer forms part of PNCCs franchise and, therefore, PNCC is without approve or disapprove petitions for the increase thereof. Decisions of the
any right to assign the same to MNTC via a JVA, is specious. Firstly, in its Decision63 Board on petitions for the increase of toll rate shall be appealable to the Office
in G.R. No. 89557, a certiorari proceeding commenced by PNCC to nullify the CA of the President within ten (10) days from the promulgation thereof. Such
decision adverted to, the Court approved a compromise agreement, which referred to appeal shall not suspend the imposition of the new rates, provided however,
(1) the PNCCs authority to collect toll and maintenance fees; and (2) the supervision, that pending the resolution of the appeal, the petitioner for increased rates in
approval and control by the DPWH64 of the construction of additional facilities, on the such case shall deposit in a trust fund such amounts as may be necessary to
questioned portion of the NLEX.65 And still in another Decision,66 the Court ruled that reimburse toll payers affected in case a reversal of the decision. (Emphasis
the Balintawak to Tabang stretch was recognized as "part of the franchise of, or ours.)
otherwise restored as toll facilities to be operated by x x x PNCC." 67 Once stamped with P.D. 1894
judicial imprimatur, and unless amended, modified or revoked by the parties, a SECTION 8. x x x
compromise agreement becomes more than a mere binding contract; as thus (b) For the Metro Manila Expressway and such extensions, linkages, stretches and
sanctioned, the agreement constitutes the courts determination of the controversy, diversions of the Expressways which may henceforth be constructed, maintained and
enjoining the parties to faithfully comply thereto.68 Verily, like any other judgment, it has operated by the GRANTEE, the GRANTEE shall collect toll at such rates as shall
the effect and authority of res judicata.69 initially be approved by the Toll Regulatory Board. The Toll Regulatory Board shall have
At any rate, the PNCC was likewise granted temporary or interim authority by the TRB the authority to approve such initial toll rates without the necessity of any notice and
to operate the SLEX,70 to ensure the continued development, operations and progress hearing, except as provided in the immediately succeeding paragraph of this Section.
of the projects. We have ruled in Oroport Cargohandling Services, Inc. v. Phividec For such purpose, the GRANTEE shall submit for the approval of the Toll Regulatory
Industrial Authority that an administrative agency vested by law with the power to grant Board the toll proposed to be charged the users. After approval of the toll rate(s) by the
franchises or authority to operate can validly grant the same in the interim when it is Toll Regulatory Board and publication thereof by the GRANTEE once in a newspaper
necessary, temporary and beneficial to the public.71 The grant by the TRB to PNCC as of general circulation, the toll shall immediately be enforceable and collectible upon
interim operator of the SLEX was certainly intended to guarantee the continued opening of the expressway to traffic use.
Any interested Expressways users shall have the right to file, within a period of ninety tariffs of transmission, and distribution retail wheeling charges and tariffs of franchise
(90) days after the date of publication of the initial toll rate, a petition with the Toll electric utilities and all electric power rates including that which is charged to end-
Regulatory Board for a review of the initial toll rate; provided, however, that the filing of users.77 In Chamber of Real Estate and Builders Association, Inc. v. ERC, We even
such petition and the pendency of the resolution thereof shall not suspend the categorically stated that the ERC is a "quasi-judicial and quasi-legislative regulatory
enforceability and collection of the toll in question. The Toll Regulatory Board, at a body created under Section 38 of the EPIRA, [and] x x x an administrative agency
public hearing called for the purpose after due notice, shall then conduct a review of vested with broad regulatory and monitoring functions over the Philippine electric
the initial toll shall be appealable (sic) to the Office of the President within ten (10) days industry to ensure its successful restructuring and modernization x x x." 78
from the promulgation thereof. The GRANTEE may be required to post a bond in such To summarize, the fact that an administrative agency is exercising its administrative or
amount and from such surety or sureties and under such terms and conditions as the executive functions (such as the granting of franchises or awarding of contracts) and
Toll Regulatory Board shall fix in case of any petition for review of, or appeal from, at the same time exercising its quasi-legislative (e.g. rule-making) and/or quasi-judicial
decisions of the Toll Regulatory Board. functions (e.g. rate-fixing), does not support a finding of a violation of due process or
In case it is finally determined, after a review by the Toll Regulatory Board or appeal the Constitution. In C.T. Torres Enterprises, Inc. v. Hibionada, 79 We explained the
therefrom, that the GRANTEE is not entitled, in whole or in part, to the initial toll, the rationale, thus:
GRANTEE shall deposit in the escrow account the amount collected under the It is by now commonplace learning that many administrative agencies exercise and
approved initial toll fee and such amount shall be refunded to Expressways users who perform adjudicatory powers and functions, though to a limited extent only. Limited
had paid said toll in accordance with the procedure as may be prescribed or delegation of judicial or quasi-judicial authority to administrative agencies (e.g. the
promulgated by the Toll Regulatory Board. (Emphasis ours.) Securities and Exchange Commission and the National Labor Relations Commission)
The petitioners are indulging in gratuitous, if not unfair, conclusion as to the capacity of is well recognized in our jurisdiction, basically because the need for special
the TRB to act as a fair and objective tribunal on matters of toll fee fixing. competence and experience has been recognized as essential in the resolution of
Administrative bodies have expertise in specific matters within the purview of their questions of complex or specialized character and because of a companion recognition
respective jurisdictions. Accordingly, the law concedes to them the power to promulgate that the dockets of our regular courts have remained crowded and clogged.
implementing rules and regulations ("IRR") to carry out declared statutory policies xxxx
provided that the IRR conforms to the terms and standards prescribed by that statute. 72 As a result of the growing complexity of the modern society, it has become necessary
The Court does not perceive an irreconcilable clash in the enumerated TRBs statutory to create more and more administrative bodies to help in the regulation of its ramified
powers, such that the exercise of one negates another. The ascription of impartiality on activities. Specialized in the particular fields assigned to them, they can deal with the
the part of the TRB cannot, under the premises, be accorded cogency. Petitioners have problems thereof with more expertise and dispatch than can be expected from the
not shown that the TRB lacks the expertise, competence and capacity to implement its legislature or the courts of justice. This is the reason for the increasing vesture of quasi-
mandate of balancing the interests of the toll-paying motoring public and the imperative legislative and quasi-judicial powers in what is now not unquestionably called the fourth
of allowing the concessionaires to recoup their investment with reasonable profits. As department of the government.
it were, Section 9 of P.D. 1894 provides a parametric formula for adjustment of toll rates xxxx
that takes into account the Peso-US Dollar exchange rate, interest rate and There is no question that a statute may vest exclusive original jurisdiction in an
construction materials price index, among other verifiable and quantifiable variables. administrative agency over certain disputes and controversies falling within the
While not determinative of the issue immediately at hand, the grant to and the exercise agency's special expertise. The very definition of an administrative agency includes its
by an administrative agency of regulating and allowing the operation of public utilities being vested with quasi-judicial powers. The ever increasing variety of powers and
and, at the same time, fixing the fees that they may charge their customers is now functions given to administrative agencies recognizes the need for the active
commonplace. It must be presumed that the Congress, in creating said agencies and intervention of administrative agencies in matters calling for technical knowledge and
clothing them with both adjudicative powers and contract-making prerogatives, must speed in countless controversies which cannot possibly be handled by regular courts.
have carefully studied such dual authority and found the same not breaching any (Emphasis ours.)
constitutional principle or concept.73 So must it be for P.D. Nos. 1112 and 1894. Fourth Issue: President Amply Vested With Statutory
The Court can take judicial cognizance of the exercise by the LTFRB and NTC both Power To Approve TRB Contracts
spin-off agencies of the now defunct Public Service Commission of similar concurrent Just like their parallel stance on the grant to TRB of the power to enter into toll
powers. The LTFRB, under Executive Order No. ("E.O.") 202,74 series of 1987, is agreements, e.g., TOAs or STOAs, the petitioners in the first three petitions would
empowered,75 among others, to regulate the operation of public utilities or "for hire" assert that the grant to the President of the power to peremptorily authorize the
vehicles and to grant franchises or certificates of public convenience ("CPC"); and to assignment by PNCC, as franchise holder, of its franchise or the usufruct in its franchise
fix rates or fares, to approve petitions for fare rate increases and to resolve oppositions is unconstitutional. It is unconstitutional, so petitioners would claim, for being an
to such petitions. encroachment of legislative power.
The NTC, on the other hand, has been granted similar powers of granting franchises, As earlier indicated, Section 3 (a) of P.D. 1112 requires approval by the President of
allocating areas of operations, rate-fixing and to rule on petitions for rate increases any contract TRB may have entered into or effected for the construction and operation
under E.O. 546,76 s. of 1979. of toll facilities. Complementing Section 3 (a) is 3 (e) (3) of P.D. 1112 enjoining the
The Energy Regulatory Commission ("ERC") likewise enjoys on the one hand, the transfer of the usufruct of PNCCs franchise without the Presidents prior approval. For
power (a) to grant, modify or revoke an authority to operate facilities used in the perspective, Section 3 (e) (3) of P.D. 1112 provides:
generation of electricity, and on the other, (b) to determine, fix and approve rates and
That the toll operator shall not lease, transfer, grant the usufruct of, sell or assign the reiterate, We discussed in Albano that our statute books are replete with laws granting
rights or privileges acquired under the [TOC] to any person x x x or legal entity nor administrative agencies the power to issue authorizations. 89 This delegation of
merge with any other company or corporation organized for the same purpose without legislative power to administrative agencies is allowed "in order to adapt to the
the prior approval of the President of the Philippines. In the event of any valid transfer increasing complexity of modern life."90 Consequently, We have held that the
of the TOC, the Transferee shall be subject to all the conditions, terms, restrictions and "privileges conferred by grant by local authorities as agents for the state constitute as
limitations of this Decree x x x. 80 much a legislative franchise as though the grant had been made by an act of the
The Presidents approving authority is of statutory origin. To us, there is nothing illegal, Legislature."91
let alone unconstitutional, with the delegation to the President of the authority to In this case, the TRBs charter itself, or Section 3 (e) of P.D. 1112, specifically
approve the assignment by PNCC of its rights and interest in its franchise, the empowers it to "grant authority to operate a toll facility and to issue therefore the
assignment and delegation being circumscribed by restrictions in the delegating law necessary Toll Operation Certificate subject to such conditions as shall be imposed
itself. As the Court stressed in Kilosbayan v. Guingona, Jr.,81 the rights and privileges by the [TRB]x x x."92 Section 3 (a) of the same law permits the TRB to enter into
conferred under a franchise may be assigned if authorized by a statute, subject to such contracts for the construction, operation and maintenance of toll facilities. Clearly, there
restrictions as may be provided by law, such as the prior approval of the grantor or a is no question that the TRB is vested by the Legislature, through P.D. 1112, with the
government agency.82 power not only to grant an authority to operate a toll facility, but also to enter into
There can, therefore, be no serious challenge to this presidential- approving contracts for the construction, operation and maintenance thereof.
prerogative. Should grave abuse of discretion in some way infect the exercise of the Petitioners also contend that substituting MNTC as the grantee in case of its default
prerogative, then the approval action may be nullified for that reason, but not on the with respect to its loans is tantamount to an amendment of PNCCs original franchise
ground that the underlying authority is constitutionally doubtful. If the TRB may validly and is hence, unconstitutional. We also find this assertion to be without merit. Besides
be empowered to grant private entities the authority to operate toll facilities, would a holding that the Legislature may properly empower administrative agencies to grant
delegation of a lesser authority to approve the grant to the head of the administrative franchises pursuant to a law, We have also earlier explained in this case that P.D. 1113
machinery of the government be objectionable? and the amendatory P.D. 1894 both vested the TRB with the power to impose
The fact that P.D. 1112 partakes of a martial law issuance does not per se provide an conditions on PNCCs franchise in an appropriate contract and may therefore amend
objectionable feature to the decree, albeit it may be argued with some plausibility that or alter the same when public interest so requires; 93 save for the conditions stated in
then President Marcos intended to have the final say as to who shall act as the toll Sections 1 and 2 of P.D. 1894, which relates to the coverage area of the tollways and
operators of the Luzon expressways. Be that as it may, "all proclamations, orders, the expiration of PNCCs original franchise.94 P.D. 1112 provided further that the TRB
decrees, instructions, and acts promulgated, issued, or done by the former President has the power to amend or modify a Toll Operation Certificate that it issued when public
(Ferdinand E. Marcos) are part of the law of the land, and shall remain valid, legal, interest so requires.95 Accordingly, to Our mind, there is nothing infirm much less
binding, and effective, unless modified, revoked or superseded by subsequent questionable about the provision in the STOA, allowing the substitution of MNTC in
proclamations, orders, decrees, instructions, or other acts of the President." 83 To case it defaults in its loans.
emphasize, Padua v. Ranada cited Association of Small Landowners in the Philippines, Furthermore, in the subject provision (Clause 17.4.1 96), the "unrestricted right" of the
Inc. v. Secretary of Agrarian Reform, quoting that: lender to appoint a substituted entity is never intended to afford such lender a plenary
The Court wryly observes that during the past dictatorship, every presidential issuance, power to do so. The subject clause states:
by whatever name it was called, had the force and effect of law because it came from 17.4.1 The PARTIES acknowledge that following a Notice of Substitution under clauses
President Marcos. Such are the ways of despots. Hence, it is futile to argue that LOI 17.2 or 17.3 the LENDERS have, subject to the provisions of Clause 17.4.3, the
474 could not have repealed P.D. No. 27 because the former was only a letter of unrestricted right to appoint a SUBSTITUTED ENTITY in place of MNTC following the
instruction. The important thing is that it was issued by President Marcos, whose word declaration of the occurrence of a MNTC DEFAULT prior to full repayment of the
was law during that time.84 LOANS or of an event of default in respect of the LOANS. GRANTOR shall extend all
Fifth Issue: Assailed STOAs Validly Entered reasonable assistance to the AGENT to put in place a SUBSTITUTED ENTITY. MNTC
This brings us to the issue of the validity of certain provisions of the STOAs and related shall make available all necessary information to potential SUBSTITUTED ENTITY to
agreements entered into by the TRB, as duly approved by the President. enable such entity to evaluate the Project. (Emphasis ours.)
Relying on Clause 17.4.185 of the MNTC STOA that the lenders have the unrestricted It is clear from the above-quoted provision that Clause 17.4.1 should always be
right to appoint a substitute entity in case of default of MNTC or of the occurrence of an construed and read in conjunction with Clauses 17.2, 17.3, 17.4.2, 17.4.3 and 20.12.
event of default in respect of the loans, petitioners argue that since MNTC is the Clauses 17.2 and 17.3 discuss the procedures that must be followed and undertaken
assignee or transferee of PNCCs franchise, then it steps into the shoes of PNCC. They in case of MNTCs default prior to the full repayment of the loans, and before the
contend that the act of replacing MNTC as grantee is tantamount to an amendment or substitution under Clause 17.4.1 could take place. These clauses provide the following
alteration of the PNCCs original franchise and hence unconstitutional, considering that process:
the constitutional power to appoint a new franchise holder is reserved to Congress.86 Prior to Full Repayment of the LOANS:
This contention is bereft of merit. 17.2 Upon occurrence of an MNTC DEFAULT under Clause 17.1(a) and (e) prior to full
Petitioners presupposition that only Congress has the power to directly grant repayment of the LOANS, GRANTOR shall serve a written Notice of Default to MNTC
franchises is misplaced. Time and again, We have held that administrative agencies with copy to the AGENT giving a reasonable period of time to cure the MNTC
may be empowered by the Legislature by means of a law to grant franchises or similar DEFAULT, such period being three (3) months from receipt of the notice or such longer
authorizations.87 And this, We have sufficiently addressed in the present case. 88 To period as may be approved by GRANTOR, taking due consideration of the nature of
the default and of the repair works required. If MNTC fails to remedy such default during (b) assumption by the SUBSTITUTED ENTITY of all of the rights and
such three (3) month or [sic] curing period, GRANTOR may issue a Notice of obligations of MNTC under this AGREEMENT, including the payment of
Substitution on MNTC, copy furnished to the AGENT, which shall take effect upon the PNCCs Gross Toll Revenue Share under the JOINT VENTURE
assumption and take over by the SUBSTITUTED ENTITY pursuant to the provisions of AGREEMENT dated 29 August 1995 and all other agreements in connection
Clause 17.4 hereof; Provided, However, that prior to such assumption and take over with this agreement signed and executed by and between PNCC and MNTC.
by the SUBSTITUTED ENTITY, MNTC shall continue to operate and maintain the The afore-quoted Section (a) of Clause 17.4.4 reiterates the necessity of compliance
project roads and shall place in an escrow account the toll revenues, save such by the substituted entity with all the conditions provided under Clause 17.4.
amounts as may be needed to primarily cover the operating costs and as may be owing Furthermore, following the above-quoted conditions veritably protects the interests of
and due to the lenders under the loans and, secondarily, to cover the PNCC Gross Toll the Government. As previously discussed supra, PNCCs assets with respect to its
Revenue Share, Provided, Further, that upon the assumption and take over by the legislative franchise under P.D. 1113, as amended, has already been automatically
SUBSTITUTED ENTITY, such assumption and take over shall have the effect of turned over to the Government. And whatever share PNCC has in relation to the
revoking the rights, privileges and obligations of MNTC under this AGREEMENT in currently implemented administrative authority granted by the TRB is merely being held
favor of the SUBSTITUTED ENTITY and MNTC shall cease to be a PARTY to this in trust by it in favor of the Government. Accordingly, the fact that Section "b" of Clause
AGREEMENT. 17.4.4 ensures that the obligation to pay PNCCs Gross Toll Revenue Share is
17.3 If prior to full repayment of the LOANS MNTC fails to remedy MNTC DEFAULT assumed by the substituted entity, necessarily means that the Governments Gross Toll
under Clause 17.1 (b) or an MNTC DEFAULT occurs under Clause 17.1 (c), (d) or (f) Revenue Share is safeguarded and kept intact.
prior to full repayment of the LOANS, GRANTOR shall serve a Notice of Substitution The MNTC STOA also states that only in case no substituted entity is established in
on MNTC, copy furnished to the AGENT, as provided under Clause 17.4. 97 (Emphasis accordance with Clause 17.4 that Clause 17.5 shall be applied. Clause 17.5 grants the
ours) lenders the power to extend the concession in case the Grantor (Republic of the
It is apparent from the above-quoted provision that it is the TRB representing the Philippines) takes over the same, for a period not exceeding fifty years, until full
Republic of the Philippines as Grantor which has control over the situation before payment of the loans.99 Petitioners contend that the option to extend the concession
Clause 17.4.1 could come into place. To stress, following the condition under Clause for that stated period is, however, unconstitutional.
17.4.1, it is only when Clauses 17.2 and 17.3 have been complied with that the entire This assertion is impressed with merit. At the outset, Clause 17.5 does not actually
Clause 17.4 could begin to materialize. grant the lenders of the defaulting concessionaire, the power to unilaterally extend the
Clauses 17.4.2 and 17.4.3 also provide for certain parameters as to when a substituted concession for a period not exceeding fifty years. For reference, the pertinent provision
entity could be considered acceptable, and enumerate the conditions that should be states:
undertaken and complied with.98 Particularly, the subject provisions state: 17.5 Only if no SUBSTITUTE ENTITY is established shall the GRANTOR [TRB] be
17.4.2 The SUBSTITUTED ENTITY shall be required to provide evidence to entitled to take-over the CONCESSION with no commitment on the LOANS in which
GRANTOR that at the time of substitution: case the OPERATION AND MAINTENANCE CONTRACT shall be assigned to any
(i) it is legally and validly nominated by the AGENT as MNTCs substitute to entity that the AGENT100 may designate provided such entity has a sufficient legal and
continue the implementation of the PROJECT. technical capacity to perform and assume the obligations of the OPERATION AND
(ii) it is legally and validly constituted and has the capability to enter into such MAINTENANCE CONTRACT under this AGREEMENT. The LENDERS shall receive
agreement as may be required to give effect to the substitution; all TOLL, excepting PNCCs revenue share provided for under the JOINT
17.4.3 The AGENT shall have one (1) year to effect a substitution under Clause 17.4; INVESTMENT PROPOSAL (vide: Annex "C" hereof), for as long as required until full
Provided, However, that during this time the AGENT shall not take any action which repayment of the LOANS including if necessary an extension of the CONCESSION
may jeopardize the continuity of the service and shall take the necessary action to PERIOD which in no case shall exceed fifty (50) years; Provided that the LENDERS
ensure its continuation. To effect such substitution, the AGENT shall notify its intention support all amounts payable under the OPERATION AND MAINTENANCE
to GRANTOR and shall, at the same time, give all necessary information to GRANTOR. CONTRACT. For avoidance of doubt, the GRANTOR will have no obligation in relation
GRANTOR shall, within one (1) month following such notification, inform the AGENT to liabilities incurred by MNTC prior to such take-over.101 (Emphasis supplied)
of its acceptance of the substitution, if the conditions set forth in Clause 17.4.2 have The afore-quoted provision should be read in conjunction with Clause 20.12, which
been satisfied. The SUBSTITUTED ENTITY shall be permitted a reasonable period to expressly provides that the MNTC STOA is "made under and shall be governed by and
cure any MNTC DEFAULT under Clause 17.1 (a), (b) or (e). construed in accordance with" the laws of the Philippines, and particularly, by the
From the foregoing, it is clear that the lenders do not actually have an absolute or provisions of P.D. Nos. 1112, 1113 and 1894. Under the applicable laws, the TRB may
"unrestricted" right to appoint the SUBSTITUTED ENTITY in view of TRBs right to very well amend, modify, alter or revoke the authority/franchise "whenever the public
accept or reject the substitution within one (1) month from notice and such right to interest so requires."102 In a word, the power to determine whether or not to continue
appoint comes into force only if and when the TRB decides to effectuate the substitution or extend the authority granted to a concessionaire to operate and maintain a tollway
of MNTC as allowed in Clause 17.2 of the MNTC STOA. is vested to the TRB by the applicable laws. The necessity of whether or not to extend
At the same time, Clause 17.4.4 particularizes the conditions upon which the the concession or the authority to construct, operate and maintain a tollway rests, by
substitution shall become effective, to wit: operation of law, with the TRB. As such, the lenders cannot unilaterally extend the
17.4.4 The Substitution shall be effective upon: concession period, or, with like effect, impose upon or demand that the TRB agree to
(a) the appointment of a SUBSTITUTED ENTITY in accordance with the extend such concession.
provisions of this Clause 17.4; and,
Be that as it may, it must be noted, however, that while the TRB is vested by law with As set out in the preamble of P.D. 1112, the need to encourage the infusion of private
the power to extend the administrative franchise or authority that it granted, capital in tollway projects is the underlying rationale behind the enactment of said
nevertheless, it cannot do so for an accumulated period exceeding fifty years. decree. Owing to the scarce capital available to bankroll a huge capital-intensive
Otherwise, it would violate the proscription under Article XII, Section 11 of the 1987 project, such as the North Luzon Tollway project, it is well-nigh inevitable that the
Constitution, which states that:103 financing of these types of projects is sourced from private investors. Quite naturally,
Sec. 11. No franchise, certificate, or any other form of authorization for the operation of the investors expect the regularity of the cash flow. It is perhaps in this broad context
a public utility shall be granted except to citizens of the Philippines or to corporations that the obligation of the Grantor under Clause 11.7 of the MNTC STOA was included
or associations organized under the laws of the Philippines at least sixty per centum of in the STOA. To Us, Clause 11.7 is not only grossly disadvantageous to the
whose capital is owned by such citizens, nor shall such franchise, certificate, or Government but a manifest violation of the Constitution.
authorization be exclusive in character or for a longer period than fifty years. Neither Section 3 (e) (5) of P.D. 1112 explicitly states:
shall any such franchise or right be granted except under the condition that it shall be [t]hat no guarantee, Certificate of Indebtedness, collateral securities, or bonds shall be
subject to amendment, alteration or repeal by the Congress when the common good issued by any government agency or government-owned or controlled corporation on
so requires. The State shall encourage equity participation in public utilities by the any financing program of the toll operator in connection with his undertaking under the
general public. The participation of foreign investors in the governing body of any public Toll Operation Certificate.
utility enterprise shall be limited to their proportionate share in its capital, and all the What the law seeks to prevent in this situation is the eventuality that the Government,
executive and managing officers of such corporation or associations must be citizens through any of its agencies, could be obligated to pay or secure, whether directly or
of the Philippines. (Emphasis Ours) indirectly, the financing by the private investor of the project. In this case, under Clause
In this case, the MNTC STOA already has an original stipulated period of thirty years.104 11.7 of the MNTC STOA, the Republic of the Philippines (through the TRB) guaranteed
Clause 17.5 allows the extension of this period if necessary to fully repay the loans the security of the project against revenue losses that could result, in case the TRB,
made by MNTC to the lenders, thus: based on its determination of a just and reasonable toll fee, decides not to effect a toll
x x x The LENDERS shall receive all TOLL, excepting PNCCs revenue share provided fee adjustment under the STOAs periodic/interim adjustment formula. The OSG, in its
for under the JOINT INVESTMENT PROPOSAL (vide: Annex "C" hereof), for as long Comment, admitted that "the amounts the government undertook to pay in case of
as required until full repayment of the LOANS including if necessary an extension of Clause 11.7 violation is an undertaking to pay compensatory damage for
the CONCESSION PERIOD which in no case shall exceed a maximum period of fifty something akin to a breach of contract."106 As P.D. 1112 itself expressly prohibits the
(50) years; x x x (Emphasis ours.) guarantee of a security in the financing of the toll operator pursuant to its tollway project,
If the maximum extension as provided for in Clause 17.5, i.e. fifty years, shall be Clause 11.7 cannot be a valid stipulation in the STOA.
utilized, the accumulated concession period that would be granted in this case would This is more so for being in violation of the Constitution. Article VI, Section 29 (1) of the
effectively be eighty years. To Us, this is a clear violation of the fifty-year franchise Constitution mandates that "[n]o money shall be paid out of the Treasury except in
threshold set by the Constitution. It is in this regard that we strike down the above- pursuance of an appropriation made by law." 107 We have held in Radstock that
quoted clause, "including if necessary an extension of the CONCESSION PERIOD "government funds or property shall be spent or used solely for public purposes, as
which in no case shall exceed a maximum period of fifty (50) years" in Clause 17.5 as expressly mandated by Section 4 (2) of PD 1445 or the Government Auditing Code." 108
void for being violative of the Constitution.105 It must be made abundantly clear, Particularly, We held in Radstock case that:
however, that the nullity shall be limited to such extension beyond the 50-year [t]he power to appropriate money from the General Funds of the Government belongs
constitutional limit. exclusively to the Legislature. Any act in violation of this iron-clad rule is
All told, petitioners allegations that the TRB acted with grave abuse of discretion and unconstitutional.
with gross disadvantage to the Government with respect to Clauses 17.4.1 and 17.5 of Reinforcing this Constitutional mandate, Sections 84 and 85 of PD 1445 require that
the MNTC STOA are unfounded and speculative. before a government agency can enter into a contract involving the expenditure of
Petitioners also allege that the MNTC STOA is grossly disadvantageous to the government funds, there must be an appropriation law for such expenditure, thus:
Government since under Clause 11.7 thereof, the Government, through the TRB, Section 84. Disbursement of government funds.
guarantees the viability of the financing program of a toll operator. Under Clause 11.7 1. Revenue funds shall not be paid out of any public treasury or depository except in
of the MNTC STOA, the TRB agreed to pay monthly, the difference in the toll fees pursuance of an appropriation law or other specific statutory authority.
actually collected by MNTC and that which it could have realized under the STOA. The xxxx
pertinent provisions states: Section 85. Appropriation before entering into contract.
11.7 To insure the viability and integrity of the Project, the Parties recognize the No contract involving the expenditure of public funds shall be entered into unless there
necessity for adjustments of the AUTHORIZED TOLL RATE . In the event that said is an appropriation therefor, the unexpended balance of which, free of other obligations,
adjustment are not effected as provided under this Agreement for reasons not is sufficient to cover the proposed expenditure.
attributable to MNTC, the GRANTOR [TRB] warrants and so undertakes to xxxx
compensate, on a monthly basis, the resulting loss of revenue due to the difference Section 86 of PD 1445, on the other hand, requires that the proper accounting official
between the AUTHORIZED TOLL RATE actually collected and the AUTHORIZED must certify that funds have been appropriated for the purpose. Section 87 of PD 1445
TOLL RATE which MNTC would have been able to collect had the adjustments provides that any contract entered into contrary to the requirements of Sections 85 and
been implemented. (Emphasis ours) 86 shall be void.109 (Emphasis ours.)
In the instant case, the TRB, by warranting to compensate MNTC with the loss of and hearing for the approval or denial of petitions for toll rate adjustments or the
revenue resulting from the non-implementation of the periodic and interim toll fee subsequent toll rates, not to the fixing of initial toll rates. By express legal provision, the
adjustments, violates the very constitutionally guaranteed power of the Legislature, to TRB is authorized to approve the initial toll rates without the necessity of a hearing. It
exclusively appropriate money for public purpose from the General Funds of the is only when a challenge on the initial toll rates fixed ensues that public hearings are
Government. The TRB veritably accorded unto itself the exclusive authority granted to required. Section 8 of P.D. 1894 says so:
Congress to appropriate money that comes from the General Funds, by making a x x x the GRANTEE shall collect toll at such rates as shall initially be approved by the
warranty to compensate a revenue loss under Clause 11.7 of the MNTC STOA. There [TRB]. The [TRB] shall have the authority to approve such initial toll rates without
is not even a badge of indication that the aforementioned requisites under the the necessity of any notice and hearing, except as provided in the immediately
Constitution and P.D. 1445 in respect of appropriation of money from the General succeeding paragraph of this Section. For such purpose, the GRANTEE shall
Funds of the Government have been properly complied with. Worse, P.D. 1112 submit for the approval of the [TRB] the toll proposed to be charged the users. After
expressly prohibits the guarantee of security of the financing of a toll operator in approval of the toll rate(s) by the [TRB] and publication thereof by the GRANTEE once
connection with his undertaking under the Toll Operation Certificate. Accordingly, in a newspaper of general circulation, the toll shall immediately be enforceable and
Clause 11.7 of the MNTC STOA, under which the TRB warrants and undertakes to collectible upon opening of the expressway to traffic use.
compensate MNTCs loss of revenue resulting from the non-implementation of the Any interested Expressways users shall have the right to file, within x x x (90) days
periodic and interim toll fee adjustments, is illegal, unconstitutional and hence void. after the date of publication of the initial toll rate, a petition with the [TRB] for a
Parenthetically, We also find a similar provision in the SLTC STOA under Clause 8.08 review of the initial toll rate; provided, however, that the filing of such petition and the
thereof, which states that:110 pendency of the resolution thereof shall not suspend the enforceability and collection
(2) In the event the Authorized Toll Rate and adjustments thereto are not of the toll in question. The [TRB], at a public hearing called for the purpose shall then
implemented or made effective in accordance with the provisions of this conduct a review of the initial toll (sic) shall be appealable to the [OP] within ten (10)
Agreement, for reasons not attributable to the fault of the Investor and/or the days from the promulgation thereof. (Emphasis ours.)
Operator, including the reversal by the TRB or by any competent court or Of the same tenor is Section 3 (d) of P.D. 1112 stating that the TRB has the power and
authority of any such adjustment in the Authorized Toll Rate previously duty to:
approved by the TRB, except where such reversal is by reason of a [i]ssue, modify and promulgate from time to time the rates of toll that will be charged
determination of the misapplication of the Authorized Toll Rates, the Grantor the direct users of toll facilities and upon notice and hearing, to approve or disapprove
shall compensate the Operator, on a monthly basis and within thirty (30) days petitions for the increase thereof. Decisions of the [TRB] on petitions for the increase
of submission by the Operator of a notice thereof, without interest, for the of toll rate shall be appealable to the [OP] within ten (10) days from the promulgation
resulting loss of revenue computed as the difference between: thereof. Such appeal shall not suspend the imposition of the new rates, provided
(a) the actual traffic volume for the month in question multiplied by however, that pending the resolution of the appeal, the petitioner for increased rates in
the Current Authorized Toll Rate as escalated and/or adjusted, that such case shall deposit in a trust fund such amounts as may be necessary to reimburse
should be in effect; and toll payers affected in case a (sic) reversal of the decision.112 (Emphasis Ours.)
(b) the Gross Toll Revenue for the month in question. Similarly in Padua v. Ranada, the fixing of provisional toll rates by the TRB without a
(3) The obligation of the Grantor to compensate the Operator shall continue public hearing was held to be valid, such procedure being expressly provided by law. 113
until the applicable Current Authorized Toll Rate is implemented. To be very clear, it is only the fixing of the initial and the provisional toll rates where a
Akin to what is contemplated in Clause 11.7 of the MNTC STOA, Clauses 8.08 (2) and public hearing is not a vitiating requirement. Accordingly, subsequent toll rate
(3) of the SLTC STOA, under which the TRB warrants or is obligated to compensate adjustments are mandated by law to undergo both the requirements of public hearing
the Operator for its loss of revenue resulting from the non-implementation of the and publication.
calculation/formula of authorized toll price and toll rate adjustments found in Clause 8 In Manila International Airport Authority ("MIAA") v. Blancaflor, the Court expounded on
thereof, are illegal, unconstitutional and, hence, void. This ruling is consistent with the the necessity of a public hearing in rate fixing/increases scenario. There, the Court
TRBs power to determine, without any influence or compulsion direct or indirect as ruled that the MIAA, being an agency attached to the Department of Transportation and
to whether a change in the toll fee rates is warranted. We will discuss the same below. Communications ("DOTC"), is governed by Administrative Code of 1987,114 Book VII,
Petitioners argue that the CITRA, SLTC and MNTC STOAs tie the hands of the TRB Section 9 of which specifically mandates the conduct of a public hearing. 115
as it is bound by the stipulated periodic and interim toll rate adjustments provided Accordingly, the MIAAs resolutions, which increased the rates and charges for the use
therein. Petitioners contend that the SMMS (CITRA STOA), the SLTC and the MNTC of its facilities without the required hearing, were struck down as void. 116 Similarly, as
STOAs provisions on initial toll rates and periodic/interim toll rate adjustments, by using We do concede, the TRB, being likewise an agency attached to the DOTC, 117 is
a built-in automatic toll rate adjustment formula,111 allegedly guaranteed fixed returns governed by the same Code and consequently requires public hearing in appropriate
for the investors and negated the public hearing requirement. cases. It is, therefore, imperative that in implementing and imposing new, i.e.
This contention is erroneous. The requisite public hearings under Section 3 (d) of P.D. subsequent toll rates arrived at using the toll rate adjustment formula, the subject
1112 and Section 8 (b) of P.D. 1894 are not negated by the fixing of the initial toll rates tollway operators and the TRB must necessarily comply not only with the requirement
and the periodic adjustments under the STOA. of publication but also with the equally important public hearing. Accordingly, any fixing
Prefatorily, a clear distinction must be made between the statutory prescription on the of the toll rate, which did not or does not comply with the twin requirements of public
fixing of initial toll rates, on the one hand, and of periodic/interim or subsequent toll hearing and publication, must therefore be struck down as void. In such case, the
rates, on the other. First, the hearing required under the said provisos refers to notice
previously valid toll rate shall consequently apply, pending compliance with the twin reasonableness comprehends such rates which must not be so low as to be
requirements for the new toll rate. confiscatory, or too high as to be oppressive.
In the instant consolidated cases, the fixing of the initial toll rates may have indeed What is a just and reasonable rate is not a question of formula but of sound business
come to pass without any public hearing.118 Unfortunately for petitioners, and judgment based upon the evidence it is a question of fact calling for the exercise of
notwithstanding its presumptive validity, they did not assail the initial toll rates within discretion, good sense, and a fair, enlightened and independent judgment. In
the timeframe provided in P.D. 1112 and P.D. 1894. 119 Besides, as earlier explicated, determining whether a rate is confiscatory, it is essential also to consider the given
the STOA provisions on periodic rate adjustments are not a bar to a public hearing as situation, requirements and opportunities of the utility. A method often employed in
the formula set forth therein remains constant, serving only as a guide in the determining reasonableness is the fair return upon the value of the property to the
determination of the level of toll rates that may be allowed. public utility x x x. (Emphasis ours.)
It is apropos to state at this juncture that, in determining the reasonableness of the If in case the TRB finds the change in the rates to be reasonable and therefore merited,
subsequent toll rate increases, it behooves the TRB to seek out the Commission on the increase shall then be implemented after the formalities of public hearing and
Audit ("COA") for assistance in examining and auditing the financial books of the public publication are complied with. In this case, it is clear that the change in the toll fees is
utilities concerned. Section 22, Chapter 4, Subtitle B, Title 1, Book V of the immediately effective and implementable. This is notwithstanding that, in case of an
Administrative Code of 1987 expressly authorizes the COA to examine the increase in the toll fees, an appeal thereon is filed. The law is clear. Thus:
aforementioned documents in connection with the fixing of rates of every nature, x x x Decisions of the [TRB] on petitions for the increase of toll rate shall be appealable
including as in this case, the fixing of toll fees.120 We have on certain occasions applied to the Office of the President within ten (10) days from the promulgation thereof. Such
this provision. Manila Electric Company, Inc. v. Lualhati easily comes to mind where appeal shall not suspend the imposition of the new rates, provided however, that
this Court tasked the Energy Regulatory Commission to seek the assistance of the pending the resolution of the appeal, the petitioner for increased rates in such case
COA in determining the reasonableness of the rate increases that MERALCO intended shall deposit in a trust fund such amounts as may be necessary to reimburse toll payers
to implement.121 We have consistently held that "the law is deemed written into every affected in case a reversal of the decision.129 (Emphasis ours.)
contract."122 Being a provision of law, this authority of the COA under the Administrative Besides the settled rule under Section 3 (d) of P.D. 1112 that the power to issue, modify
Code should therefore be deemed written in the subject contracts i.e. the STOAs. and promulgate toll fees rests with the TRB, it must also be underscored that the
In this regard, during the examination and audit, the public utilities concerned are periodic and the interim adjustments found in Clauses 11.4 to 11.6 of the MNTC STOA
mandated to "produce all the reports, records, books of accounts and such other papers do not necessarily guarantee an increase in the toll fees. To stress, the formula is based
as may be required," and the COA is empowered to "examine under oath any official on many variable factors that could mean either an increase or a decrease in the toll
or employee of the said public utilit[ies]."123 Any public utility unreasonably denying fees, depending, inter alia, on how well certain economies are doing; and on the
COA access to the aforementioned documents, unnecessarily obstructs the projections and figures published by the Bangko Sentral ng Pilipinas ("BSP").130 It is
examination and audit and may be adjudged liable "of concealing any material therefore arduous to contemplate a grossness in a disadvantage that could only
information concerning its financial status, shall be subject to the penalties provided by possibly arise in case of a non-implementation of a change particularly, an increase
law."124 Finally, the TRB is further obliged to take the appropriate action on the COA in the toll rates.
Report with respect to its finding of reasonableness of the proposed rate increases. 125 Petitioners have not incidentally shown that it is the traveling public, the users of the
Furthermore, while the periodic, interim and other toll rate adjustment formulas are expressways, who shouldered or will shoulder the completion of the projects by way of
indicated in the STOAs,126 it does not necessarily mean that the TRB should accept a exorbitant fees payment, with the investors ending up with a "killing" therefrom. This
rate adjustment predicated on the economic data, references or assumptions adopted conclusion, for all its factual dimension, is too simplistic for acceptance. And it does not
by the toll operator. At the end of the day, the final figures should be those of the TRB consider the reality that the Court is not a trier of facts. Neither does it take stock of the
based on its appreciation of the relevant rate-influencing data. In fine, the TRB should nature and function of toll roads and toll fees paid by motorists, as aptly elucidated in
exercise its rate-fixing powers vested to it by law within the context of the agreed North Negros Sugar Co., Inc. v. Hidalgo,131 thus:
formula, but always having in mind that the rates should be just and reasonable. "Toll" is the price of the privilege to travel over that particular highway, and it is a quid
Conversely, it is very well within the power of the TRB under the law to approve the pro quo. It rests on the principle that he who, receives the toll does or has done
change in the current toll fees.127 Section 3 (d) of P.D. 1112 grants the TRB the power something as an equivalent to him who pays it. Every traveler has the right to use the
to "[i]ssue, modify and promulgate from time to time the rates of toll that will be charged turnpike as any other highway, but he must pay the toll. 132
the direct users of toll facilities." But the reasonableness of a possible increase in the A toll road is a public highway, differing from the ordinary public highways chiefly in
fees must first be clearly and convincingly established by the petitioning entities, i.e. this: that the cost of its construction in the first instance is borne by individuals, or by a
the toll operators. Otherwise, the same should not be granted by the approving corporation, having authority from the state to build it, and, further, in the right of the
authority concerned. In Philippine Communications Satellite Corporation v. Alcuaz,128 public to use the road after completion, subject only to the payment of toll. 133
the Court had the opportunity to explain what is meant by a just and reasonable fixing Toll roads are in a limited sense public roads, and are highways for travel, but we do
of rates, thus: not regard them as public roads in a just sense, since there is in them a private
Hence, the inherent power and authority of the State, or its authorized agent, to regulate proprietary right x x x.134 (Emphasis ours.)
the rates charged by public utilities should be subject always to the requirement that Parenthetically, our review of Section 7 of the SMMS STOA readily yields the
the rates so fixed shall be reasonable and just. A commission has no power to fix rates information that the level of the initial toll rates hinges on a mix of factors. Tax holidays
which are unreasonable or to regulate them arbitrarily. This basic requirement of that may be granted and the tax treatment of dividends may be mentioned. On the other
hand, the subsequent periodic adjustments are provided to address factors that usually
weigh on the financial condition of any business endeavor, such as currency The allegation is far from correct. A perusal of the pertinent minutes of the TRB
devaluation, inflation and the usual increases in maintenance and operational costs meetings, particularly that held on August 17, 1995, 136 in fact would disclose a picture
incorporated into the formula provided therefor. Even with the existence of an automatic different from that depicted by said petitioners. Nothing in the minutes of said meeting
toll rate adjustment formula, compliance by the TRB and the other respondents with tends to indicate that the TRB resolved to dispense with public hearings. We, therefore,
the twin requirements of public hearing and publication is still mandatory. To reiterate, find petitioners Francisco and Hizons attempt to mislead the Court by falsely citing
laws always occupy a plane higher than mere contract provisions. In case the minimum supposed portions137 of the August 17, 1995 TRB meeting very unfortunate. They
statutory requirements are stiffer than that of a contract, or when the contract does not quoted a correction on the minutes of the Special Board Meeting No. 95-05 held on
expressly stipulate the minimum requirements of the law, then We rule that compliance July 26, 1995, which was taken up in the August 17, 1995 meeting for the approval of
with such minimum legal requirements should be done. To summarize, any toll fee the minutes of the previous meeting. In said special meeting of July 26, 1995, 138 the
increase should comply with the legal twin requirements of publication and public Board deliberated on the recommendation of ADG Santos for the conduct of a public
hearing, the absence of which will nullify the imposition and collection of the new toll hearing or soliciting the endorsement of the Metro Manila Development Authority
fees. ("MMDA").139 But the TRB did not resolve to omit a public hearing with respect to the
In all, the initial toll rates and periodic adjustments appear to Us as simply predicated toll rates. In fact, the deliberations used the words "in the event the Board decides" and
on the basic rationale for investing in a toll project, which to repeat is: a reasonable rate "if the Board conducts," clearly conveying the notion that the TRB had not decided or
of return for the investment. Section 2 (o) of the BOT Law, as amended, provides for a resolved the issue of public hearings. Be that as it may, We rule that the TRB is
definition for a reasonable rate of return on investments and operating and mandated to comply with the twin requirements of public hearing and publication.
maintenance cost.135 Running through the gamut of our statutes providing for and Petitioners Francisco and Hizons lament about the TRB merely relying on, if not
encouraging partnership of the public and private sector is the paramount common yielding to, the recommendation and findings of the Technical Working Group ("TWG")
good for infrastructure projects and the equally important factor of giving a reasonable of the DPWH on matters relative to STOA stipulations and toll-rate fixing cannot be
rate of return to private sectors investments. The viability of any infrastructure project accorded cogency. In the area involving big finance and complex project planning,
depends on the returns which should be reasonable of the investment coming from banking on the data supplied by technicians and experts is at once practical as it is
the private sector. inevitable. The Court cannot see its way clear to understand why petitioners would
While the interests of the public are ideally to be accorded primacy in considering begrudge the TRB for tapping the technical know-how of others. And it cannot be
government contracts, the reality on the ground is that the tollway projects may not at overemphasized that a recommendation is no more than an exhortation or an urging
all be possible or would be difficult to realize without the involvement of the investing as to what is advisable or expedient, not binding on the person to which it is being
private sector, which expects its usual share of profit. Thus, the Court is at a loss to made.140 To recommend involves the idea that another has the final decision. 141 The
understand how the level of the initial toll rates, which depended on several factors ultimate decision still rests with the TRB whether or not to accept the findings of the
indicated above, and the subsequent adjustments resulted in the charging of exorbitant TWG. The minutes of the TRB meetings show that its members went through the
toll fees that, to petitioners, enabled the investors to shift the burden of financing the tedious process of deliberating on the formula to be used in computing the toll rates.
completion of the projects on the motoring public. The fact that the TRB might have adopted the TWGs recommendation would not, on
Neither does the alleged drasticif we may characterize it as suchsteep increase in that ground alone, vitiate the bona fides of the formers decision nor stain the
the level of toll rates for NLEX constitute a "killing" for PNCC and its partner MNTC. proceedings leading to such decision. In any case, as earlier held, the toll rate
Petitioners make much of the amount of the toll fees vis--vis the then prevailing adjustment formula does not and cannot contravene the legal twin requirements of
minimum wage. These plays of figures detract from the essential concern on the public hearing and publication.
propriety of the level of the toll rates vis--vis the investments sunk in the NLEX project In another bid to nullify the STOAs in question, petitioners would foist on the Court the
with a view, on the part of private investors, to a reasonable return on their investment. arguments that, firstly, President Ramos twisted the arms of the TRB towards entering
Where no substantial figures were provided on the investments, the projected operating into the agreements in question and, secondly, that the CITRA STOA contained
and maintenance costs vis--vis the projected revenue from the toll fees, no substantial restrictive confidentiality provisions barring the public from knowing their contents and
conclusions may reasonably be deduced therefrom. Besides, to be taken into account the details of the negotiations related thereto.
in relation to the costs of the construction and rehabilitation of the NLEX is the length We are not persuaded by the first ground, not necessarily because the pressure
of the tollway and for which motorists have to pay the corresponding toll. Certainly, the brought to bear on TRB rendered the STOAs infirm, but because the allegations on
allegations and conclusions of petitioners as to the unreasonable increase of the toll pressure-tactics allegedly employed by President Ramos are too speculative for
rates are without adequate factual mooring. acceptance.
The use of a tollway is a privilege that comes at a cost. The toll is a price paid for the On the second ground, We fail to see how the insertion of the alleged confidentiality
use of a privilege. There are to be sure alternative roads and routes, which motorists clause in the CITRA STOA translates into grave abuse of discretion or a violation of the
may fall back on if they are unwilling to pay the toll. The toll, as might be expected, is Constitution, particularly Article III, Section 7142 thereof. First off, the Court can take
pegged at a level that makes the developmental projects and their maintenance viable; judicial notice that most commercial contracts, including finance-related project
otherwise, no investment can be expected for the furtherance of the projects. agreements carry the standard confidentiality clause to protect proprietary data and/or
Petitioners Francisco and Hizon alleged that, per the minutes of the TRB meetings, the intellectual property rights. This protection angle appears to be the intent of Clause
Board deliberately refrained, particularly with respect to the Skyway project, from 14.04(l)143 of the CITRA STOA. And as may be noted, the succeeding Clause 14.04
conducting public hearings for the grant of the initial toll rates and on the rate (2)144 removes from the ambit of the confidentiality restriction the following: disclosure
adjustment formula to be used in order to accelerate the implementation of the projects. of any information: (a) not otherwise done by the parties; (b) which is required by law
to be disclosed to any person who is authorized by law to receive the same; (c) construct, operate and maintain the tollways through an automatic grant of a franchise
to a tribunal hearing pertinent proceedings relative to the contract or agreement; and or TOC, in which case, public bidding is required under the law.
(d) to confidential entities and persons relative to the disclosing party like its banks, Where, in the instant case, a franchisee undertakes the tollway projects of construction,
consultants, financiers and advisors. The second (item b) exception provides a rehabilitation and expansion of the tollways under its franchise, there is no need for a
reasonable dimension to the assailed confidentiality clause. public bidding. In pursuing the projects with the vast resource requirements, the
Needless to stress, the obligation of the government to make information available franchisee can partner with other investors, which it may choose in the exercise of its
cannot be exaggerated.145 The constitutional right to information does not mean that management prerogatives. In this case, no public bidding is required upon the
every day and every hour is open house in government offices having custody of the franchisee in choosing its partners as such process was done in the exercise of
desired documents.146 Petitioners have not sufficiently shown, thus cannot really be management prerogatives and in pursuit of its right of delectus personae.151 Thus, the
heard to complain, that they had been unreasonably denied access to information with subject tollway projects were undertaken by companies, which are the product of the
regard to the MNTC or SMMS STOA. Besides, the remedy for unreasonable denial of joint ventures between PNCC and its chosen partners.
information that is a matter of public concern is by way of mandamus.147 Petitioners Francisco and Hizons assertions about the TRB awarding the tollway
Finally, as to petitioners catch-all claim that the STOAs are disadvantageous to the projects to favored companies, unsubstantiated as they are, need no belaboring.
government, as therein represented by the TRB, suffice it to state for the nonce that Suffice it to state that the discretion to choose who shall stand as critical JV partners
behind these agreements are the Boards expertise and policy determination on remained all along with PNCC, at least theoretically. Needless to say, the records do
technical, financial and operational matters involving expressways and tollways. It is not show that the TRB committed an oversight as an administrative body over any
not for courts to look into the wisdom and practicalities behind the exercise by the TRB aspect of tollway operations with regard to PNCCs selection of partners.
of its contract-making prerogatives under P.D. Nos. 1112, 1113 and 1894, absent proof The foregoing disquisitions considered, there is no more point in passing upon the
of grave abuse of discretion which would justify judicial review. In this regard, the Court propriety of prohibiting or enjoining, on the ground of unconstitutionality or grave abuse
recalls what it wrote in G & S Transport Corporation v. Court of Appeals,148 to wit: of discretion, the implementation of the initial toll rates and/or the adjusted toll rates for
x x x courts, as a rule, refuse to interfere with proceedings undertaken by administrative the SMSS, expanded NLEX and SLEX, as authorized by the separate TRB resolutions,
bodies or officials in the exercise of administrative functions. This is because such subject of and originally challenged in these proceedings.
bodies are generally better equipped technically to decide administrative questions and These TRB resolutions and the STOAs upon which they are predicated have long been
that non-legal factors, such as government policy on the matter are usually involved in in effect. The parties have acted on these issuances and contracts whose existence,
the decision. as an operative fact, cannot be ignored, let alone erased, even if the charge of
Sixth Issue: Public Bidding Not Required unconstitutionality is given currency.
Private petitioners would finally maintain that public bidding is required for the SMMS While not exactly of governing applicability in this case, what the Court wrote in De
and the North Luzon/South Luzon Tollways, partaking as these projects allegedly do of Agbayani v. Philippine National Bank,152 on the operative fact doctrine is apropos:
the nature of a BOT infrastructure undertaking under the BOT Law. Prescinding from x x x When the courts declare a law to be inconsistent with the Constitution, the former
this premise, they would conclude that the STOAs in question and related preliminary shall be void and the latter shall govern. Administrative or executive acts, orders and
and post-STOA agreements are null and void for want of the necessary public bidding regulations shall be valid only when they are not contrary to the laws of the
required for government infrastructure projects. Constitution." .
The contention is patently flawed. Such a view has support in logic and possesses the merit of simplicity. It may not
The BOT Law does not squarely apply to the peculiar case of PNCC, which exercised however be sufficiently realistic. It does not admit of doubt that prior to the
its prerogatives and obligations under its franchise to pursue the construction, declaration of nullity such challenged legislative or executive act must have been
rehabilitation and expansion of the tollways with chosen partners. The tollway projects in force and had to be complied with. This is so as until after the judiciary, in an
may very well qualify as a build-operate-transfer undertaking. However, given that the appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties
projects in the instant case have been undertaken by PNCC in the exercise of its may have acted under it and may have changed their positions. What could be more
franchise under P.D. Nos. 1113 and 1894, in joint partnership with its chosen partners fitting than that in a subsequent litigation regard be had to what has been done while
at the time when it was held valid to do so by the OGCC and the DOJ, the public bidding such legislative or executive act was in operation and presumed to be valid in all
provisions under the BOT Law do not strictly apply. For, as aptly noted by the OSG, the respects. It is now accepted as a doctrine that prior to its being nullified, its existence
subject STOAs are not ordinary contracts for the construction of government as a fact must be reckoned with. This is merely to reflect awareness that precisely
infrastructure projects, which requires under the Government Procurement Reform Act because the judiciary is the governmental organ which has the final say on whether or
or the now-repealed P.D. 1594,149 public bidding as the preferred mode of contract not a legislative or executive measure is valid, a period of time may have elapsed before
award. Neither are they contracts where financing or financial guarantees for the project it can exercise the power of judicial review that may lead to a declaration of nullity. It
are obtained from the government. Rather, the STOAs actually constitute a statutorily- would be to deprive the law of its quality of fairness and justice then, if there be no
authorized transfer or assignment of usufruct of PNCCs existing franchise to construct, recognition of what had transpired prior to such adjudication.
maintain and operate expressways.150 In the language of an American Supreme Court decision: "The actual existence of a
The conclusion would perhaps be different if the tollway projects were to be prosecuted statute, prior to such a determination [of constitutionality], is an operative fact
by an outfit completely different from, and not related to, PNCC. In such a scenario, the and may have consequences which cannot justly be ignored. The past cannot
entity awarded the winning bid in a BOT-scheme infrastructure project will have to always be erased by a new judicial declaration x x x." (Emphasis in the original.)
The petitioners in the first three (3) petitions and the respondent in the fourth have not 4. Section 3, paragraph (a) of Presidential Decree No. 1112, otherwise known
so said explicitly, but their brief is against the issuance of P.D. Nos. 1112, 1113 and as the "Toll Operation Decree," in relation to Section 3, paragraph (d) thereof
1894, which conferred a package of express and implied powers and discretion to the and Section 8, paragraph (b) of Presidential Decree No. 1894; and
TRB and the President resulting in the execution of what is perceived to be offending 5. Section 3, paragraph (e) 3 of P.D. No. 1112 and Section 13 of P.D. No.
STOAs and the runaway collection of illegal toll fees. And they have come to the Court 1894.
to strike down all these issuances, agreements and exactions. While the Court is not We however declare Clause 11.7 of the Supplemental Toll Operation Agreement
insensitive to their concerns, the rule is that all reasonable doubts should be resolved between the Republic of the Philippines, represented by respondent TRB, as grantor,
in favor of the constitutionality of a statute, 153 and the validity of the acts taken in the Philippine National Construction Corporation, as franchisee, and the Manila North
pursuant thereof. It follows, therefore, that the Court will not set aside a law as violative Tollways Corporation ("MNTC") dated April 30, 1998; and the clause "including if
of the Constitution except in a clear case of breach154 and only as a last resort.155 And necessary an extension of the CONCESSION PERIOD which in no case shall exceed
as the theory of separation of powers prescribes, the Court does not pass upon a maximum period of fifty (50) years" in Clause 17.5 of the same STOA, as VOID and
questions of wisdom, expediency and justice of legislation. To Us, petitioners and UNCONSTITUTIONAL for being contrary to Section 2, Article XII of the 1987
respondent YPES in the fourth petition have not discharged the heavy burden of Constitution. We likewise declare Clauses 8.08 (2) & (3) of the Supplemental Toll
demonstrating in a clear and convincing manner the unconstitutionality of the decrees Operation Agreement between the Republic of the Philippines, represented by
challenged or the invalidity of assailed acts of the President and the TRB. Because they respondent TRB, as grantor, the Philippine National Construction Corporation as
failed to do so, the Court must uphold the presumptive constitutionality and validity of franchisee, the South Luzon Tollway Corporation as investor, and the Manila Toll
the provisions of the three decrees in question, and the subject contracts and TOCs. Expressway Systems, Inc. as operator, dated February 1, 2006, as VOID and
Regarding petitioner Franciscos Supplemental Petition, the toll rates, the collection of UNCONSTITUTIONAL.
which in the amount based on the formula and assumptions set forth in the law, and The petition in G.R. No. 169917 is likewise hereby DENIED for lack of merit. We declare
the adverted STOA dated February 1, 2006 and subject of the TRO issued on August as VALID and CONSTITUTIONAL the following:
13, 2010, has been duly published156 and approved by the TRB, as required by Section 1. Notice of Approval dated May 16, 1995 by former President Fidel V. Ramos
5 of P.D. 1112.157 And the party-concessionaires have adequately demonstrated, and on the assignment of PNCCs usufructuary rights;
the TRB has virtually acknowledged158 that the said rates subject of the TRO partake 2. the Joint Venture Agreement dated August 29, 1995;
of the nature of opening or initial toll rates, which have not yet been implemented since 3. the Joint Investment Proposal, etc. dated June 16, 1996;
the time the SLTC STOA took effect.159 To note, the toll rates subject of the TRO were 4. the Supplemental Toll Operation Agreement ("STOA") dated April 30, 1998
approved and are to be implemented in connection with the new facility, such as Project and the Notice of Approval of said STOA dated June 15, 1998 by former
Toll Roads 1 and 2 pursuant to the new SLTC STOA and the expanded and President Fidel V. Ramos; and
rehabilitated SLEX.160 As earlier discussed, public hearing is not required in the fixing 5. the provisional toll rate increases published February 9, 2005, granted by
and implementation of initial toll rates. But an interested party aggrieved by the initial the TRB.
rates imposed is not without any resource as he may, within the time frame provided The petition in G.R. No. 183599 is GRANTED. Accordingly, the Decision dated June
by Section 8 (b) of P.D. 1894, repair to the TRB for review and thereafter to the OP. 161 23, 2008 of the Regional Trial Court, Branch 155 in Pasig City, docketed as SCA No.
As expressly provided in the same section, however, the pendency of the petition for 3138-PSG, annulling the TOC covering the SLEX, enjoining the original toll operating
review, if there be any, shall not suspend the enforceability and collection of the toll in franchisee from collecting toll fees in the SLEX, and ordering the turnover of related
question. In net effect, the challenge before the Court of the SLEX toll rate imposition assets to the Government, is hereby REVERSED and SET ASIDE, and the petition
is premature. However, the Court treats this Supplemental Petition assailing the toll filed therein by the Young Professionals and Entrepreneurs of San Pedro, Laguna with
rates covered by the TRB Notice of Toll Rates published on June 6, 2010 as a petition the RTC of Pasig is DISMISSED for lack of merit.
for review filed under P.D. 1894, and hereby remands the same to the TRB for a review In view of the foregoing dispositions in the petitions at bar, the TRO issued by the Court
of the questioned rates to determine the propriety thereof. on August 13, 2010 is hereby ordered lifted, with respect to the petitions in G.R. Nos.
WHEREFORE, the petitions in G.R. Nos. 166910 and 173630 are hereby DENIED for 166910, 169917, 173630 and 183599.
lack of merit. Accordingly, We declare as VALID AND CONSTITUTIONAL the following: The challenge contained in the Supplemental Petition in G.R. No. 166910 against the
1. the Supplemental Toll Operation Agreement dated April 30, 1998 covering toll rates subject of the TRB Notice of Toll Rates published on June 6, 2010, for the
the North Luzon Tollway Project and the TRB Board Resolution No. 2005-4 SLEX projects, Toll Road Projects 1 and 2 of the new SLTC STOA, and the expanded
issued pursuant thereto; and rehabilitated SLEX, is remanded to the TRB for a review of the assailed toll rates
2. the Supplemental Toll Operation Agreement dated November 27, 1995 to determine whether SLTC and MATES are entitled to the toll fees.
covering the South Metro Manila Skyway and the TRB Board Resolution No. No Cost.
2004-53 and previous TRB resolutions issued pursuant thereto; SO ORDERED.
3. the Supplemental Toll Operation Agreement covering the South Luzon
Tollway Project or South Luzon Expressway and the TRB Board resolutions G.R. Nos. 103442-45 May 21, 1993
issued pursuant to the said agreement, particularly the TRB Board resolutions NATIONAL POWER CORPORATION, ET AL., petitioners,
allowing the toll rate increases that are supposed to have been implemented vs.
on June 30, 2010; THE COURT OF APPEALS, GAUDENCIO C. RAYO, ET AL., respondents.
The Solicitor General for plaintiff-appellee.
Ponciano G. Hernandez for private respondents. In its joint decision promulgated on 19 August 1991, the Court of Appeals reversed the
appealed decision and awarded damages in favor of the private respondents. The
DAVIDE, JR., J.: dispositive portion of the decision reads:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court CONFORMABLY TO THE FOREGOING, the joint decision appealed from is
urging this Court to set aside the 19 August 1991 consolidated Decision of the Court of hereby REVERSED and SET ASIDE, and a new one is hereby rendered:
Appeals in CA.-G.R. CV Nos. 27290-931 which reversed the Decision of Branch 5 of 1. In Civil Case No. SM-950, ordering defendants-appellees to pay, jointly and
the then Court of First Instance (now Regional Trial Court) of Bulacan, and held severally, plaintiffs-appellants, with legal interest from the date when this
petitioners National Power Corporation (NPC) and Benjamin Chavez jointly and decision shall become final and executory, the following:
severally liable to the private respondents for actual and moral damages, litigation A. Actual damages, to wit:
expenses and attorney's fees. 1) Gaudencio C. Rayo, Two Hundred Thirty One Thousand
This present controversy traces its beginnings to four (4) separate complaints2 for Two Hundred Sixty Pesos (P231,260.00);
damages filed against the NPC and Benjamin Chavez before the trial court. The 2) Bienvenido P. Pascual, Two Hundred Four Thousand
plaintiffs therein, now private respondents, sought to recover actual and other damages Five Hundred Pesos (P204.500.00);
for the loss of lives and the destruction to property caused by the inundation of the town 3) Tomas Manuel, One Hundred Fifty Five Thousand Pesos
of Norzagaray, Bulacan on 26-27 October 1978. The flooding was purportedly caused (P155,000.00);
by the negligent release by the defendants of water through the spillways of the Angat 4) Pedro C. Bartolome, One Hundred Forty Seven
Dam (Hydroelectric Plant). In said complaints, the plaintiffs alleged, inter alia, that: 1) Thousand Pesos (P147,000.00);.
defendant NPC operated and maintained a multi-purpose hydroelectric plant in the 5) Bernardino Cruz, One Hundred Forty Three Thousand
Angat River at Hilltop, Norzagaray, Bulacan; 2) defendant Benjamin Chavez was the Five Hundred Fifty Two Pesos and Fifty Centavos
plant supervisor at the time of the incident in question; 3) despite the defendants' (P143,552.50);
knowledge, as early as 24 October 1978, of the impending entry of typhoon "Kading," 6) Jose Palad, Fifty Seven Thousand Five Hundred Pesos
they failed to exercise due diligence in monitoring the water level at the dam; 4) when (P57,500.00);
the said water level went beyond the maximum allowable limit at the height of the 7) Mariano S. Cruz, Forty Thousand Pesos (P40,000.00);
typhoon, the defendants suddenly, negligently and recklessly opened three (3) of the 8) Lucio Fajardo, Twenty nine Thousand Eighty Pesos
dam's spillways, thereby releasing a large amount of water which inundated the banks (P29,080.00); and
of the Angat River; and 5) as a consequence, members of the household of the B. Litigation expenses of Ten Thousand Pesos (P10,000.00);
plaintiffs, together with their animals, drowned, and their properties were washed away 2. In Civil case No. SM-951, ordering defendants-appellees to pay jointly and
in the evening of 26 October and the early hours of 27 October 1978.3 severally, plaintiff-appellant, with legal interest from the date when this
In their Answers, the defendants, now petitioners, alleged that: 1) the NPC exercised decision shall have become final and executory, the following :
due care, diligence and prudence in the operation and maintenance of the hydroelectric A. Actual damages of Five Hundred Twenty Thousand
plant; 2) the NPC exercised the diligence of a good father in the selection of its Pesos (P520,000.00);.
employees; 3) written notices were sent to the different municipalities of Bulacan B. Moral damages of five hundred Thousand Pesos
warning the residents therein about the impending release of a large volume of water (P500,000.00); and.
with the onset of typhoon "Kading" and advise them to take the necessary precautions; C. Litigation expenses of Ten Thousand Pesos
4) the water released during the typhoon was needed to prevent the collapse of the (P10,000.00);.
dam and avoid greater damage to people and property; 5) in spite of the precautions 3. In Civil Case No. SM-953, ordering defendants-appellees to pay, jointly and
undertaken and the diligence exercised, they could still not contain or control the flood severally, with legal interest from the date when this decision shall have
that resulted and; 6) the damages incurred by the private respondents were caused by become final and executory;
a fortuitous event or force majeure and are in the nature and character of damnum A. Plaintiff-appellant Angel C. Torres:
absque injuria. By way of special affirmative defense, the defendants averred that the 1) Actual damages of One Hundred Ninety Nine Thousand One Hundred
NPC cannot be sued because it performs a purely governmental function.4 Twenty Pesos (P199,120.00);
Upon motion of the defendants, a preliminary hearing on the special defense was 2) Moral Damages of One Hundred Fifty Thousand Pesos (P150,000.00);
conducted. As a result thereof, the trial court dismissed the complaints as against the B. Plaintiff-appellant Norberto Torres:
NPC on the ground that the provision of its charter allowing it to sue and be sued does 1) Actual damages of Fifty Thousand Pesos (P50,000.00);
not contemplate actions based on tort. The parties do not, however, dispute the fact 2) Moral damages of Fifty Thousand Pesos (P50,000.00);
that this Court overruled the trial court and ordered the reinstatement of the complaints C. Plaintiff-appellant Rodelio Joaquin:
as against the NPC.5 1) Actual damages of One Hundred Thousand Pesos
Being closely interrelated, the cases were consolidated and trial thereafter ensued. (P100,000.00);
The lower court rendered its decision on 30 April 1990 dismissing the complaints "for 2) Moral damages of One Hundred Thousand Pesos
lack of sufficient and credible evidence."6 Consequently, the private respondents (P100,000.00); and
seasonably appealed therefrom to the respondent Court which then docketed the cases D. Plaintifsf-appellants litigation expenses of Ten Thousand Pesos
as CA-G.R. CV Nos. 27290-93. (P10,000.00);
4. In Civil case No. SM-1247, ordering defendants-appellees to pay, jointly opening of the spillways, ranging from 1/2 to 1 meter. On October 25, 1978,
and severally, with legal interest from the date when this decision shall have when typhoon "Kading" entered the Philippine area of responsibility, and
become final and executory : public storm signal number one was hoisted over Bulacan at 10:45 a.m., later
A. Plaintiffs-appellants Presentacion Lorenzo and Clodualdo Lorenzo: raised to number two at 4:45 p.m., and then to number three at 10:45 p.m.,
1) Actual damages of Two Hundred Fifty Six Thousand Six water elevation ranged from 217.47 to 217.57, with very little opening of the
Hundred Pesos (P256,600.00); spillways, ranging from 1/2 to 1 meter. On October 26, 1978, when public
2) Moral damages of Fifty Thousand Pesos (P50,000.00); storm signal number three remained hoisted over Bulacan, the water elevation
B. Plaintiff-appellant Consolacion Guzman : still remained at its maximum level of 217.00 to 218.00 with very little opening
1) Actual damages of One Hundred forty Thousand Pesos of the spillways ranging from 1/2 to 2 meters, until at or about midnight, the
(P140,000.00); spillways were suddenly opened at 5 meters, then increasing swiftly to 8, 10,
2) Moral damages of Fifty Thousand Pesos (P50,000.00); 12, 12.5, 13, 13.5, 14, 14.5 in the early morning hours of October 27, 1978,
C. Plaintiff-appellant Virginia Guzman : releasing water at the rate of 4,500 cubic meters per second, more or less.
1) Actual damages of Two Hundred Five Hundred Twenty On October 27, 1978, water elevation remained at a range of 218.30 to 217.05
Pesos (205,520.00); and (Civil Case No. SM-950, Exhibits "D" and series, "L", "M", "N", and "O" and
D. Plaintiffs-appellants litigation expenses of Ten Thousand Pesos Exhibits "3" and "4"; Civil Case No. SM-951, Exhibits "H" and "H-1"; Civil Case
(10,000.00). No. SM-953, Exhibits "I" and "I-1"; Civil Case No. SM 1247, Exhibits "F" and
In addition, in all the four (4) instant cases, ordering defendants-appellees to "F-1").
pay, jointly and severally, plaintiffs-appellants attorney fees in an amount xxx xxx xxx
equivalent to 15% of the total amount awarded. From the mass of evidence extant in the record, We are convinced, and so
No pronouncement as to costs.7 hold that the flash flood on October 27, 1978, was caused not by rain waters
The foregoing judgment is based on the public respondent's conclusion that the (sic), but by stored waters (sic) suddenly and simultaneously released from
petitioners were guilty of: the Angat Dam by defendants-appellees, particularly from midnight of October
. . . a patent gross and evident lack of foresight, imprudence and negligence . 26, 1978 up to the morning hours of October 27,
. . in the management and operation of Angat Dam. The unholiness of the 1978.9
hour, the extent of the opening of the spillways, And the magnitude of the The appellate court rejected the petitioners' defense that they had sent "early warning
water released, are all but products of defendants-appellees' headlessness, written notices" to the towns of Norzagaray, Angat, Bustos, Plaridel, Baliwag and
slovenliness, and carelessness. The resulting flash flood and inundation of Calumpit dated 24 October 1978 which read:
even areas (sic) one (1) kilometer away from the Angat River bank would have TO ALL CONCERN (sic):
been avoided had defendants-appellees prepared the Angat Dam by Please be informed that at present our reservoir (dam) is full and that we have
maintaining in the first place, a water elevation which would allow room for the been releasing water intermittently for the past several days.
expected torrential rains.8 With the coming of typhoon "Rita" (Kading) we expect to release greater (sic)
This conclusion, in turn, is anchored on its findings of fact, to wit: volume of water, if it pass (sic) over our place.
As early as October 21, 1978, defendants-appellees knew of the impending In view of this kindly advise people residing along Angat River to keep alert
onslaught of and imminent danger posed by typhoon "Kading". For as alleged and stay in safe places.
by defendants-appellees themselves, the coming of said super typhoon was
bannered by Bulletin Today, a newspaper of national circulation, on October BENJAMIN L. CHAVEZ
25, 1978, as "Super Howler to hit R.P." The next day, October 26, 1978, said Power Plant Superintendent10
typhoon once again merited a headline in said newspaper as "Kading's Big
Blow expected this afternoon" (Appellee's Brief, p. 6). Apart from the because:
newspapers, defendants-appellees learned of typhoon "Kading' through radio Said notice was delivered to the "towns of Bulacan" on October 26, 1978 by
announcements (Civil Case No. SM-950, TSN, Benjamin Chavez, December defendants-appellees driver, Leonardo Nepomuceno (Civil Case No. SM-950,
4, 1984, pp. 7-9). TSN, Benjamin Chavez, December 4, 1984, pp. 7-11 and TSN, Leonardo
Defendants-appellees doubly knew that the Angat Dam can safely hold a Nepomuceno, March 7, 1985, pp. 10-12).
normal maximum headwater elevation of 217 meters (Appellee's brief, p. 12; Said notice is ineffectual, insufficient and inadequate for purposes of the
Civil Case No. SM-951, Exhibit "I-6"; Civil Case No. SM-953, Exhibit "J-6"; opening of the spillway gates at midnight of October 26, 1978 and on October
Civil Case No. SM-1247, Exhibit "G-6"). 27, 1978. It did not prepare or warn the persons so served, for the volume of
Yet, despite such knowledge, defendants-appellees maintained a reservoir water to be released, which turned out to be of such magnitude, that residents
water elevation even beyond its maximum and safe level, thereby giving no near or along the Angat River, even those one (1) kilometer away, should have
sufficient allowance for the reservoir to contain the rain water that will been advised to evacuate. Said notice, addressed "TO ALL CONCERN (sic),"
inevitably be brought by the coming typhoon. was delivered to a policeman (Civil Case No. SM-950, pp. 10-12 and Exhibit
On October 24, 1978, before typhoon "Kading" entered the Philippine area of "2-A") for the municipality of Norzagaray. Said notice was not thus addressed
responsibility, water elevation ranged from 217.61 to 217.53, with very little and delivered to the proper and responsible officials who could have
disseminated the warning to the residents directly affected. As for the is still good law as far as the concurrent liability of an obligor in the case of force majeure
municipality of Sta. Maria, where plaintiffs-appellants in Civil Case No. SM- is concerned. In the Nakpil case, We held:
1246 reside, said notice does not appear to have been served.11 To exempt the obligor from liability under Article 1174 of the Civil Code, for a
Relying on Juan F. Nakpil & Sons vs. Court of Appeals,12 public respondent rejected breach of an obligation due to an "act of God," the following must concur: (a)
the petitioners' plea that the incident in question was caused by force majeure and that the cause of the breach of the obligation must be independent of the will of
they are, therefore, not liable to the private respondents for any kind of damage such the debtor; (b) the event must be either unforseeable or unavoidable; (c) the
damage being in the nature of damnum absque injuria. event must be such as to render it impossible for the debtor to fulfill his
The motion for reconsideration filed by the petitioners, as well as the motion to modify obligation in a moral manner; and (d) the debtor must be free from any
judgment filed by the public respondents,13 were denied by the public respondent in participation in, or aggravation of the injury to the creditor. (Vasquez v. Court
its Resolution of 27 December 1991.14 of Appeals, 138 SCRA 553; Estrada v. Consolacion, 71 SCRA 423; Austria v.
Petitioners thus filed the instant petition on 21 February 1992. Court of Appeals, 39 SCRA 527; Republic of the Phil. v. Luzon Stevedoring
After the Comment to the petition was filed by the private respondents and the Reply Corp., 21 SCRA 279; Lasam v. Smith, 45 Phil. 657).
thereto was filed by the petitioners, We gave due course to the petition on 17 June Thus, if upon the happening of a fortuitous event or an act of God, there
1992 and directed the parties to submit their respective Memoranda,15 which they concurs a corresponding fraud, negligence, delay or violation or contravention
subsequently complied with. in any manner of the tenor of the obligation as provided for in Article 1170 of
The petitioners raised the following errors allegedly committed by the respondent Court the Civil Code, which results in loss or damage, the obligor cannot escape
: liability.
I. THE COURT OF APPEALS ERRED IN APPLYING THE RULING OF The principle embodied in the act of God doctrine strictly requires that the act
NAKPIL & SONS V. COURT OF APPEALS AND HOLDING THAT must be one occasioned exclusively by the violence of nature and all human
PETITIONERS WERE GUILTY OF NEGLIGENCE. agencies are to be excluded from creating or entering into the cause of the
II. THE COURT OF APPEALS ERRED IN HOLDING THAT THE WRITTEN mischief. When the effect, the cause of which is to be considered, is found to
NOTICES OF WARNING ISSUED BY PETITIONERS WERE be in part the result of the participation of man, whether it be from active
INSUFFICIENT. intervention or neglect, or failure to act, the whole occurrence is thereby
III. THE COURT OF APPEALS ERRED IN HOLDING THAT THE DAMAGE humanized, as it were, and removed from the rules applicable to the acts of
SUFFERED BY PRIVATE RESPONDENTS WAS NOT DAMNUM ABSQUE God. (1 Corpus Juris, pp. 1174-1175).
INJURIA. Thus it has been held that when the negligence of a person concurs with an
IV. THE COURT OF APPEALS ERRED IN NOT AWARDING THE act of God in producing a loss, such person is not exempt from liability by
COUNTERCLAIM OF PETITIONERS FOR ATTORNEY'S FEES AND showing that the immediate cause of the damage was the act of God. To be
EXPENSES OF LITIGATION.16 exempt from liability for loss because of an act of God, he must be free from
These same errors were raised by herein petitioners in G.R. No. 96410, entitled any previous negligence or misconduct by which that loss or damage may
National Power Corporation, et al., vs. Court of Appeals, et al.,17 which this Court have been occasioned. (Fish & Elective Co. v. Phil. Motors, 55 Phil. 129;
decided on 3 July 1992. The said case involved the very same incident subject of the Tucker v. Milan, 49 O.G. 4379; Limpangco & Sons v. Yangco Steamship Co.,
instant petition. In no uncertain terms, We declared therein that the proximate cause of 34 Phil. 594, 604; Lasam v. Smith, 45 Phil. 657). 21
the loss and damage sustained by the plaintiffs therein who were similarly situated Accordingly, petitioners cannot be heard to invoke the act of God or force majeure to
as the private respondents herein was the negligence of the petitioners, and that the escape liability for the loss or damage sustained by private respondents since they, the
24 October 1978 "early warning notice" supposedly sent to the affected municipalities, petitioners, were guilty of negligence. The event then was not occasioned exclusively
the same notice involved in the case at bar, was insufficient. We thus cannot now rule by an act of God or force majeure; a human factor negligence or imprudence had
otherwise not only because such a decision binds this Court with respect to the cause intervened. The effect then of the force majeure in question may be deemed to have,
of the inundation of the town of Norzagaray, Bulacan on 26-27 October 1978 which even if only partly, resulted from the participation of man. Thus, the whole occurrence
resulted in the loss of lives and the destruction to property in both cases, but also was thereby humanized, as it were, and removed from the laws applicable to acts of
because of the fact that on the basis of its meticulous analysis and evaluation of the God.
evidence adduced by the parties in the cases subject of CA-G.R. CV Nos. 27290-93, WHEREFORE, for want of merit, the instant petition is hereby DISMISSED and the
public respondent found as conclusively established that indeed, the petitioners were Consolidated Decision of the Court of Appeals in CA-G.R. CV Nos. 27290-93 is
guilty of "patent gross and evident lack of foresight, imprudence and negligence in the AFFIRMED, with costs against the petitioners.
management and operation of Angat Dam," and that "the extent of the opening of the SO ORDERED.
spillways, and the magnitude of the water released, are all but products of defendants- Feliciano, Bidin, Romero and Melo, JJ., concur.
appellees' headlessness, slovenliness, and carelessness."18 Its findings and
conclusions are biding upon Us, there being no showing of the existence of any of the [G.R. No. L-5868. December 29, 1953.]
exceptions to the general rule that findings of fact of the Court of Appeals are conclusive
upon this Court.19 Elsewise stated, the challenged decision can stand on its own merits SANCHO MONTOYA, in his own behalf and as guardian ad litem of the minors
independently of Our decision in G.R. No. 96410. In any event, We reiterate here in ISMAEL, FELICITAS, DIVINA and NAPOLEON, all surnamed MONTOYA,
Our pronouncement in the latter case that Juan F. Nakpil & Sons vs. Court of Appeals20 Petitioners, v. MARCELINO IGNACIO, Respondent.
the investigation was that the one at fault was the driver of the bus and, as a
Tereso Ma. Montoya, for Petitioners. consequence, said driver was charged with triple homicide thru reckless imprudence in
the Court of First Instance of Cavite (Criminal Case No. 10771). Defendants claim that
Luis M. Buenaventura, for Respondent. inasmuch as the present case involves the same issues as those in the case filed
against the driver of the bus, the same should be held in abeyance until after the final
SYLLABUS termination of the criminal case. Defendant Cayetano Tahimik further claims that he is
not and has never been the owner of the jeepney and cannot therefore be held
1. PUBLIC SERVICE LAW; APPROVAL OF TRANSFERS OR LEASE OF responsible for the damages caused by it.
FRANCHISES, NECESSARY. The law requires the approval of the Public
Service Commission in order that a franchise, or any privileges pertaining After the parties had presented their evidence, the lower court rendered decision
thereto, may be sold or leased without infringing the certificate issued to the dismissing the case holding that defendants are not liable because it was not proven
grantee. The reason is obvious. Since a franchise is personal in nature any that the collision which resulted in the death of Tomasita Arca was due to the
transfer or lease thereof should be notified to the Public Service Commission negligence of the driver of the jeepney whose ownership is attributed to defendants.
so that the latter may take proper safeguards to protect the interest of the From this decision plaintiffs have appealed.
public. In fact, the law requires that, before the approval is granted, there
should be a public hearing, with notice to all interested parties, in order that The Court of Appeals affirmed the decision appealed from, but in so doing it predicated
the Commission may determine if there are good and reasonable grounds its affirmance not on plaintiffs failure to prove that the collision was due to the
justifying the transfer or lease of the property covered by the franchise, or if negligence of the driver but on the fact that Marcelino Ignacio was not the one operating
the sale or lease is detrimental to public interest. If the property covered by the jeepney but one Leoncio Tahimik who had leased the jeepney by virtue of a
the franchise is transferred or leased to another without obtaining the requisite document duly executed by the parties. And not agreeable to this finding, plaintiffs filed
approval, the transfer is not binding against the Public Service Commission the present petition for review.
and in contemplation of law the grantee continues to be responsible under the
franchise in relation to the Commission and to the public. In their first assignment of errors, petitioners claim that the lower court erred in ruling
that to maintain an action for damages caused by the breach of a carriers obligation to
2. ID.; ID.; EFFECT OF LEASE WITHOUT SUCH APPROVAL. Where the carry a passenger safely to his destination it is necessary to prove that the damages
jeepney in question was leased without such approval, the grantee still were caused by the negligence of the driver of said carrier in order that liability may
continues to be its operator in contemplation of law, and as such is responsible attach which, they claim, is contrary to the ruling of this court in the case of Castro v.
for the consequences incident to its operation. Acro Taxicab Co., 46 Off. Gaz., pp. 2028-2029. But we notice that while such is the
ruling entertained by the lower court it was not concurred in by the Court of Appeals so
3. ID.; ID.; ID.; Section 16, paragraph h, of the Public Service Law means that much so that it made an express manifestation that it fully agreed with the theory of
even if the approval has not been obtained the transfer or lease is valid and petitioners. The ruling of the court below having been overruled, we see no reason why
binding between parties, but not effective against the public and the Public the same issue should now be reiterated in this instance.
Service Commission. That approval is necessary to protect public interest.
The second error refers to the person who was actually operating the jeepney at the
DECISION time of collision. It is claimed that while Marcelino Ignacio, owner of the jeepney, has
leased the same to one Leoncio Tahimik on June 8, 1948, and that at the time of
BAUTISTA ANGELO, J.: collision it was the latter who was actually operating it, the contract of lease was null
and void because it was not approved by the Public Service Commission as required
In the afternoon of January 5, 1949, Tomasita Arca boarded the jeepney driven by by section 16, paragraph h, of the Public Service Law.
Leonardo de Guzman at Tanza, Cavite in order to go to Cavite City. She paid the usual
fare for the trip. While the jeepney was on its way to its destination, and at a point There is merit in this contention. The law really requires the approval of the Public
between Tanza and Cavite City, somewhere in barrio Ligton, municipality of Rosario, it Service Commission in order that a franchise, or any privilege pertaining thereto, may
collided with a bus of the Luzon Bus Line causing as a result the death of Tomasita. be sold or leased without infringing the certificate issued to the grantee. The reason is
Tomasita was then a school teacher of Tanza Elementary School with an annual obvious. Since a franchise is personal in nature any transfer or lease thereof should be
Compensation of P1,320. Her death left a widower and four minor children. Because notified to the Public Service Commission so that the latter may take proper safeguards
of the jeepneys failure to transport Tomasita safely to her destination and her resultant to protect the interest of the public. In fact, the law requires that, before the approval is
death, her widower and children instituted the present action praying that the granted, there should be a public hearing, with notice to all interested parties, in order
defendants, owners of the jeepney, be ordered to pay them an indemnity in the amount that the Commission may determine if there are good and reasonable grounds justifying
of P31,000. the transfer or lease of the property covered by the franchise, or if the sale or lease is
detrimental to public interest. Such being the reason and philosophy behind this
Defendants set up as a special defense that the collision between the jeepney and the requirement, it follows that if the property covered by the franchise is transferred, or
bus was investigated by the Office of the Provincial Fiscal of Cavite and the result of leased to another without obtaining the requisite approval, the transfer is not binding
against the Public Service Commission and in contemplation of law the grantee responsibility therefor should devolve on one Panfilo Alajar, the actual owner, by
continues to be responsible under the franchise in relation to the Commission and to purchase, of the said passenger jeepney when the accident occurred and against
the public. Since the lease of the jeepney in question was made without such approval, whom she has filed a third-party complaint.
the only conclusion that can be drawn is that Marcelino Ignacio still continues to be its The deed of sale attached to the third-party complaint recites, inter alia,
operator in contemplation of law, and as such is responsible for the consequences That it is mutually agreed by the herein vendor and vendee that the TITLE to
incident to its operation, one of them being the collision under consideration. the aforementioned vehicle shall remain with the VENDOR, pending approval
of the herein SALE by the Public Service Commission, said motor vehicle
It may be argued that section 16, paragraph (h) provides in its last part that "nothing being registered as a public utility auto-calesa under "AC" denomination; ...
herein contained shall be construed to prevent the sale, alienation, or lease by any That the vendee herein, by these presents, do [sic] hereby binds himself and
public utility of any of its property in the ordinary course of business", which gives the do [sic] hereby assume, [sic] responsibility for all actions, claims, demands,
impression that the approval of the Public Service Commission is but a mere formality and rights of action, and whatever kind and nature, that may hereafter develop
which does not affect the effectivity of the transfer or lease of the property belonging to as a consequence of or in the course of operation of the aforementioned
a public utility. But such provision only means that even if the approval has not been vehicle; ...
obtained the transfer or lease is valid and binding between parties although not In his answer to the third-party complaint, Panfilo Alajar disclaimed responsibility for
effective against the public and the Public Service Commission. The approval is only the accident, alleging that (a) the mentioned deed of sale is null and void because it
necessary to protect public interest. has not been registered with the Public Service Commission despite repeated demands
on the 3rd-party complainant to do so; (b) the said passenger jeepney remained in the
Wherefore, the decision appealed from is reversed. Judgment is hereby rendered control of the 3rd-party complainant who, together with her lawyer-husband, had been
ordering the defendant Marcelino Ignacio to pay the plaintiffs the sum of P31,000 as collecting rentals from him for the use of the said vehicle; and (c) by express agreement,
damages, with costs. title to the said vehicle remained with the 3rd-party complainant pending approval of
the sale by the Public Service Commission.
Paras, C.J., Pablo, Bengzon, Padilla and Jugo, JJ., concur. The defendant Leopoldo Cordero was declared in default and did not appeal.
On June 9, 1967, after trial on the merits, the court a quo rendered its decision, in the
REYES, J., concurring and dissenting:chanrob1es virtual 1aw library main finding Leopoldo Cordero guilty of reckless imprudence, and finding that Panfilo
Alajar owned and operated the auto calesa in question and, in fact, after the accident,
I concur in the result, but must express my disconformity to that part of the majority even assumed responsibility for the payment of the hospital bills due to the Brokenshire
opinion which holds that the sale by a public utility of any of its property without the Memorial Hospital for treatment of the injuries suffered by Fe Perez. Based on these
approval of the Public Service Commission is binding between the parties though not findings as well as the proof of the damages suffered by Fe Perez, the court adjudged
effective against the public. This, I believe, is a misconstruction of section 16, as follows:
paragraph, of the Public Service Law. WHEREFORE, premises considered, judgment is hereby rendered ordering
third-party defendant Panfilo Alajar to pay plaintiff the amount of P1,552.20
G.R. No. L-30115 September 28, 1973 hospital expenses; P2,000.00, actual damages; P5,000.00 moral damages;
FE PEREZ, plaintiff-appellant, P500.00 incidental expenses; and P2,000.00 attorney's fees.
vs. Ordering likewise Panfilo Alajar to pay defendant third-party plaintiff Josefina
JOSEFINA GUTIERREZ, defendant third-party plaintiff-appellee, PANFILO ALAJAR, Gutierrez P500.00 moral damages; and P1,000.00 attorney's fees, and to pay
third-party defendant-appellee. the costs of the proceedings on both cases.
Julian C. Gonzales, Jr. for plaintiff-appellant. The present appeal questions the correctness of the dispositive portion of the decision
Gerardo E. Angeles for defendant-third-party plaintiff-appellee. a quo which adjudged Panfilo Alajar, instead of Josefina Gutierrez, as the party liable
Apostadera, Palabrica and Muyco for third-party defendant-appellee. to her for the payment of the damages adjudicated in her favor. Specifically, Fe Perez
argues that the registered owner of a motor vehicle should be the one held liable for
CASTRO, J.: damages resulting from breach of contract of carriage by a common carrier.
This appeal from the decision dated June 9, 1967 of the Court of First Instance of Davao We find the appeal meritorious and in accord with settled law on the matter.
in its civil case 3163 poses objections to the manner the trial court adjudicated the claim In Peralta vs. Mangusang1 this Court, in approbation of a similar argument, said:
for damages filed by the plaintiff-appellant Fe Perez against the defendant-third-party The law (Sec. 20 [g], Public Service Act) really requires the approval of the
plaintiff-appellee Josefina Gutierrez. Public Service Commission in order that a franchise, or any privileges
The complaint (later amended) filed on October 29, 1959 by Fe Perez with the Court of pertaining thereto, may be sold or leased without infringing the certificate
First Instance of Davao against Josefina Gutierrez, for breach of contract of carriage, issued to the grantee. The reason is obvious. Since a franchise is personal in
alleges that on September 6, 1959 while she, together with nine co-teachers, was a nature any transfer or lease thereof should be submitted for approval of the
passenger of an AC jeepney registered under the name of the defendant Gutierrez, the Public Service Commission, so that the latter may take proper safeguards to
said vehicle, due to the reckless negligence of its driver Leopoldo Cordero, met with an protect the interest of the public. It follows that if the property covered by the
accident, resulting in injuries to herself which required her hospitalization. In her franchise is transferred or leased to another without obtaining the requisite
answer, Josefina Gutierrez averred that if the claim of Fe Perez is at all justified, approval, the transfer is not binding on the Public Service Commission and, in
contemplation of law, the grantee continues to be responsible under the from. Costs against both the defendant-third party plaintiff-appellee Josefina Gutierrez
franchise in relation to the Commission and to the public for the consequences and the third party defendant-appellee Panfilo Alajar.
incident to the operation of the vehicle, one of them being the collision under Makalintal, Actg.. C.J., Zaldivar, Fernando, Teehankee, Barredo, Makasiar, Antonio
consideration. (Montoya v. Ignacio, 50 O.G. No. 1. 108; Vda. de Medina, et al. and Esguerra, JJ., concur.
v. Cresencia, et al., 52 O.G. No. 10, 4604; Erezo v. Jepte, et al., G.R. No. L-
9605, Sept. 30, 1957; Tamayo v. Aquino, 56 O.G. No. 36,5617). G.R. No. L-26327 April 1, 1927
In the earlier case of Erezo vs. Jepte,2 which is cited in the foregoing opinion, this Court ZAMBOANGA TRANSPORTATION CO., INC., petitioner,
held that the doctrine making the registered owner of a common carrier answerable to vs.
the public for negligence injuries to its passengers or third persons, even though the THE PUBLIC UTILITY COMMISSION, respondent.
vehicle had already been transferred to another, is based upon the principle Jose Erquiaga for petitioner.
... that in dealing with vehicles registered under the Public Service Law, the Attorney-General Jaranilla and Solicitor-General Reyes for respondent.
public has the right to assume or presume that the registered owner is the Gibbs and McDonough and Roman Ozaeta for Bachrach Motor Co.
actual owner thereof, for it would be difficult for the public to enforce the VILLA-REAL, J.:
actions that they may have for injuries caused to them by the vehicles being This is a proceeding instituted by the Zamboanga Transportation Co., Inc., against the
negligently operated if the public should be required to prove who the actual Public Utility Commission in which, for the reasons stated therein, it prays for the
owner is. How would the public or third persons know against whom to enforce reversal of the decision of the Auxiliary Commissioner of Public Utilities, Hon. Manuel
their rights in case of subsequent transfers of the vehicles? We do not imply V. del Rosario, approving a chattel mortgage executed by the petitioner in favor of the
by this doctrine, however, that the registered owner may not recover whatever Bachrach Motor Co., Inc., and the sale to the latter of said property by virtue of the
amount he had paid by virtue of his liability to third persons from the person foreclosure of said mortgage, as well as the ruling of said Auxiliary Commissioner of
to whom he had actually sold, assigned or conveyed the vehicle. July 17, 1926, denying the motion for a new trial.
In Tamayo vs. Aquino,3 also cited in Mangusang, supra, this Court, reiterating what In support of its petition the petitioner makes eleven assignments of error in its brief
was stated en passant in Jepte, supra, described the nature of the liability of the actual alleged to have been committed by the said Auxiliary Commissioner of Public Utilities
transferee of a vehicle the negligent operation of which gives rise to injuries to its in his decision and ruling.
passengers: The only question to be decided in the present proceeding is whether or not the Public
The question that is posed, therefore, is how should the holder of the Utility Commission had the power to approve the chattel mortgage in question and the
certificate of public convenience Tamayo participate with his transferee sale, by virtue of its foreclosure, of the mortgaged property.
operator Rayos, in the damages recoverable by the heirs of the deceased That part of section 16 of Act No. 3108 which is pertinent to the point in question, reads
passenger, if their liability is not that of joint tortfeasors in accordance with as follows:
Article 2194 of the Civil Code. The following considerations must be borne in SEC. 16. No public utility as herein defined shall:
mind in determining this question. As Tamayo is the registered owner of the xxx xxx xxx
truck, his responsibility to the public or to any passenger riding in the vehicle (h) Without the approval of the Public Utility Commission first had, sell,
or truck must be direct, for the reasons given in our decision in the case of alienate, mortgage, encumber, or lease its property franchises, privileges or
Erezo vs. Jepte, supra, as quoted above. But as the transferee, who operated rights, or any part thereof; nor merge or consolidate its property, franchises,
the vehicle when the passenger died, is the one directly responsible for the privileges or rights, or any part thereof, with that of any other public utility as
accident and death, he should in turn be made responsible to the registered herein defined. The approval herein required shall be given, after notice to the
owner for what the latter may have been adjudged to pay. In operating the public and after hearing the persons interested at a public hearing, if it be
truck without transfer thereof having been approved by the Public Service shown that there are just and reasonable grounds for making the sale,
Commission, the transferee acted merely as agent of the registered owner alienation, mortgage, or encumbrance for liabilities of more than one year
and should be responsible to him (the registered owner), for any damages that maturity, lease, merger, or consolidation to be approved, and that the same
he may cause the latter by his negligence." are not detrimental to the public interest, and in case of a sale, the date on
Upon the foregoing, it is quite clear that the court below erred in holding Panfilo Alajar, which the same is to be consummated shall be fixed in the order of approval:
rather than Josefina Gutierrez, as the one directly liable to Fe Perez for the latter's Provided, however, That the sale, alienation, mortgage or encumbrance, and
injuries and the corresponding damages incurred. This Court notes moreover, that the lease of the property of public utilities which, on account of the nature and
court below inexplicably failed to hold the driver (Leopoldo Cordero), whom it found conditions of their business, are, in the judgment of the Commission, of little
guilty of reckless imprudence, jointly and solidarily liable with Josefina Gutierrez to Fe importance to the public interest, shall be exempt from the requisite of the
Perez in accordance with the provisions of article 2184 in relation to article 2180 of the approval of the Commission; but the public utilities shall in every case give
new Civil Code.4 notice of these transactions to the Commission. Any sale, alienation,
ACCORDINGLY, the judgment below is hereby modified in the sense that Josefina mortgage or encumbrance, lease, fusion or consolidation made without the
Gutierrez and Leopoldo Cordero are hereby adjudged directly and jointly and solidarily approval herein required shall be null and void: Provided, further, That nothing
liable to Fe Perez for the sums adjudicated in the judgment below in her (Fe Perez') herein contained shall be construed to prevent the sale, alienation, or lease
favor, while Panfilo Alajar is, in turn, hereby held answerable to Josefina Gutierrez for by any public utility of any of its property in the ordinary course of its business.
such amount as the latter may pay to Fe Perez in satisfaction of the judgment appealed
It will be seen that the legal provision above quoted prohibits a public utility, as defined
by said law, from mortgaging its properties, franchises or rights, or any part thereof, G.R. No. 88195-96 January 27, 1994
without first obtaining the approval of the Public Utility Commission and provides that "Y" TRANSIT CO, INC., petitioner,
any mortgage or lien created without said approval, shall be null and void. vs.
Inasmuch as a public utility has for its object public service in general, the law, in order THE NATIONAL LABOR RELATIONS COMMISSION AND YUJUICO TRANSIT
to prevent the public from being unjustly exploited, requires that every enterprise of EMPLOYEES UNION (ASSOCIATED LABOR UNION), MANUEL VILLARTA,
such nature, before commencing operations, shall obtain a certificate of public respondents.
convenience from the Public Utility Commission. After the public utility has obtained Cruz, Durian, Agabin, Atienza, Alday & Tuason for petitioner.
said certificate and commenced operations, the Public Utility Commission is under Evaristo S. Orosa for private respondents.
obligation to see that said public utility complies with its duty to the public and is not
prejudicial to it. As a mortgage or a lien on the property of a public utility may prejudice ROMERO, J.:
the public interests, the law also requires that before public utilities mortgage their This is a special civil action for certiorari filed by "Y" Transit Co., Inc. for the annulment
properties they must obtain the necessary approval of the Public Utility Commission for of the decision of the National labor Relations Commission, the dispositive portion of
the purpose of determining if the mortgage is injurious or beneficial to the public which reads as follows:
interests. If this is the purpose of the law the approval may be given before or after the WHEREFORE, the appealed Order should be as it is hereby REVERSED
creation of the lien, since without said approval said lien cannot have the desired effect, reinstating the levy made by the Sheriff on July 13 and 16, 1982. Accordingly,
being null and void. the sale of the levied properties may proceed pursuant to existing laws.
In view of the state of the commercial relations then existing between the Zamboanga SO ORDERED.1
Transportation Co., Inc., and the Bachrach Motor Co., Inc., due to the difficulties which The antecedent facts of the case are as follows:
the former encountered in complying with the promises made to the latter in the In March 1960 and sometime thereafter, Yujuico Transit Co., Inc., mortgaged ten (10)
payment of the price of the trucks which it had purchased from the former on credit and of its buses to the Development Bank of the Philippines (DBP) to secure a loan in the
which the Zamboanga Transportation Co., Inc., had mortgaged to the Bachrach Motor amount of P2,795,129.36. Thereafter, the Board of Directors of Yujuico Transit Co.,
Co., Inc., to secure said payment, it was more convenient and beneficial to the public Inc. passed a resolution authorizing its President, Jesus Yujuico to enter into a dacion
interests for the Zamboanga Transportation Co., Inc., to execute the chattel mortgage en pago arrangement with the DBP, whereby Jesus Yujuico would transfer to the DBP
here in question in favor of the Bachrach Motor Co., Inc., to prevent the foreclosure of the Saint Martin Technical Institute in consideration of the full settlement of the
the original mortgage. Inasmuch as the Zamboanga Transportation Co., Inc., upon obligations of three companies, one of which was Yujuico Transit Co, Inc. Accordingly,
which it was incumbent to petition the Public Utility Commission to authorize said on or about October 24, 1978, the transfer of the property was made and DBP released
mortgage, or, if already executed to secure its approval, failed to do so, the Bachrach the mortgages constituted on the buses of Yujuico Transit Co., Inc. Consequently, the
Motor Co., Inc., in order to protect its interest, requested said approval. The fact that company transferred the ownership of its mortgaged properties, including the buses, to
the law imposes upon the Zamboanga Transportation Co., Inc., the duty to request Jesus Yujuico.
such approval, does not deprive the Bachrach Motor Co., Inc., as mortgagee, of the Meanwhile, sometime in June and July 1979, the Yujuico Transit Employees Union
right to request such approval when the mortgagor has been negligent in complying (Associated labor Union) filed two (2) consolidated complaints against Yujuico Transit
with its duty or did not want to comply with it for reasons prejudicial to the good name Co., Inc. for Unfair Labor Practice and violations of Presidential Decrees Nos. 525,
of the company and its directors. 1123, 1614 and 851 (non-payment of living allowances).
The approval of the Public Utility Commission required by law before the execution of On May 21, 1980, Jesus Yujuico sold the subject buses to herein petitioner "Y" Transit
a mortgage on the property of a public utility or the sale thereof, has no more effect Co., Inc. for P3,485,400.00.
than an authorization to mortgage or sell and does not affect the essential formalities On July 23, 1981, the Labor Arbiter rendered a decision dismissing the complaint for
of a contract, but its efficacy. The Public Utility Commission's approval gives effect of unfair labor practice but holding Yujuico Transit Co., Inc. liable under the
the mortgage or sale of the properties of a public utility which complies with all of the aforementioned Presidential Decrees in the amount of P142,790.49. On February 9,
essential requisites prescribed by law, but cannot give validity or efficacy to a contract 1982, a writ of execution for the said amount was issued by the Labor Arbiter. On June
of that nature which is not executed with all the intrinsic and extrinsic formalities 14, 1982, an alias writ of execution was issued and levy was made upon the ten (10)
required by law. buses. Thereafter, "Y" Transit Co., Inc. filed Affidavits of Third Party Claim.
The public utility auxiliary commissioner, Hon. Manuel V. del Rosario, therefore, did not Private respondents herein opposed the Third party claim on the ground that the
commit an error in approving the mortgage referred to herein, believing it to be transactions leading to the transfer of the buses to "Y" Transit Co., Inc. were void
convenient and not prejudicial to the public interests. because they lacked the approval of the BOT as required by the Public Service Act.
In regard to the approval of the sale of the mortgaged property by virtue of the They also argued that the buses were still registered in the name of Yujuico Transit Co.
foreclosure of the mortgage, it may be considered superfluous and not prejudicial, which was, therefore, still the lawful owner thereof.
because the validity of said sale depends upon the intrinsic contractual validity of the The Labor Arbiter found that "Y" Transit Co., Inc. had valid title to the buses and that
mortgage, the approval or disapproval of which is not important. the BOT, by its subsequent acts had approved the transfer. The decision stated further,
By virtue of the foregoing and finding no error in the decision and ruling appealed from, thus:
the same are affirmed in their entirety, with the costs against the appellant. The fact that the registration certificates of most of the vehicles in question are
Street, Malcolm, Villamor, Ostrand and Romualdez, JJ., concur. still in the name of Yujuico Transit Co., Inc. at the time of the levy on execution
does not militate against the claimant. Registration of a motor vehicle is not the pendency of the action; and that until the time of the execution, the buses were still
the operative act that transfers ownership, unlike in land registration cases. registered in the name of Yujuico Transit Co., Inc.
Furthermore, the evidence shows that the claimant cannot be faulted for its In Montoya v. Ignacio,5 we held:
failure to have the certificates of registration transferred in its own name. Prior . . . The law really requires the approval of the Public Service Commission in
to the levy, claimant had already paid for the transfer fee, the fee for the order that a franchise, or any privilege pertaining thereto, may be sold or
cancellation of mortgage and other fees required by the BLT. Moreover, the leased without infringing the certificate issued to the grantee. The reason is
registration fees of the vehicles whose last digit of their plate numbers made obvious. Since a franchise is personal in nature any transfer or lease thereof
the vehicles due for registration were already paid for by the claimant (Exhibits should be notified to the Public Service Commission so that the latter may
"N" to "N-7"). Therefore, there was already a constructive registration made take proper safeguards to protect the interest of the public. In fact, the law
by the claimant (Mariano B. Arroyo vs. Maria Corazon Yu de Sane, et al., 54 requires that, before approval is granted, there should be a public hearing with
Phil. 511, 518), sufficient notice to affect the rights of third-parties. It is now notice to all interested parties in order that the commission may determine if
ministerial on the part of the BLT to issue the Registration Certificates in the there are good and reasonable grounds justifying the transfer or lease of the
name of the claimant, but the same was held in abeyance pending the property covered by the franchise, or if the sale or lease is detrimental to public
computerization of the records of BOT on public utility vehicles. On all fours is interest. Such being the reason and philosophy behind this requirement, it
the ruling of the Supreme Court in Mariano B. Arroyo vs. Ma. Corazon Yu de follows that if the property covered by the franchise is transferred, or leased
Sane, 54 Phil. 511, which upheld the right of PNB as mortgagee over to another without obtaining the requisite approval, the transfer is not binding
motorized water vessels as superior over the rights of a judgment creditor who against Public Service Commission and in contemplation of law, the grantee
had already secured a writ of attachment and execution over the vessels, it continues to be responsible under the franchise in relation to the Commission
appearing that the delay was caused by the Collector of Custom's uncertainty and to the public. . . .
as to the necessity of the registration of the vessels. 2 It may be argued that Section 16, paragraph (h) provides in its last part that
Accordingly, the Third-Party Claim was granted and the release of all the buses levied "nothing herein contained shall be construed to prevent the sale, alienation,
for execution was ordered. or lease by any public utility of any of its property in the ordinary course of
On appeal, the NLRC reversed the labor arbiter's decision on the ground that the business," which gives the impression that the approval of Public Service
transfer of the buses lacked the BOT approval. It ordered the reinstatement of the levy Commission is but a mere formality which does not affect the effectivity of the
and the auction of properties. transfer or lease of the property belonging to a public utility. But such provision
"Y" Transit Co., Inc. thereafter filed this special civil action for certiorari under Rule 65 only means that even if the approval has not been obtained the transfer or
of the Rules of Court praying for the issuance of a Restraining Order and/or a Writ of lease is valid and binding between the parties although not effective against
Preliminary Injunction and for the annulment of the NLRC decision as it was issued with the public and the Public Service Commission. The approval is only necessary
grave abuse of discretion amounting to lack of jurisdiction. to protect public interest. (Emphasis ours)
In this petition, "Y" Transit Co., Inc. raised the following issue, to writ: There being no prior BOT approval in the transfer of property from Yujuico Transit Co.,
I Inc. to Jesus Yujuico, it only follows that as far as the BOT and third parties are
The public respondent NLRC committed palpable legal error and grave abuse concerned, Yujuico Transit Co., Inc. still owned the properties. and Yujuico, and later,
of discretion amounting to lack of jurisdiction when it held that there was no "Y" Transit Co., Inc. only held the same as agents of the former. In Tamayo v. Aquino,6
valid transfer of ownership in favor of the petitioner, completely disregarding the Supreme Court stated, thus:
the preponderance of evidence and existing jurisprudence which support the . . . In operating the truck without transfer thereof having been approved by
validity of the transfer of ownership to the petitioner.3 the Public Service Commission, the transferee acted merely as agent of the
On July 6, 1989, petitioner filed a motion to cite Labor Arbiter Benigno C. Villarente, Jr. registered owner and should be responsible to him
for contempt of court and for the issuance of an order for the immediate release of the (the registered owner) for any damages that he may cause the latter by his
property. Petitioner argues that the Labor Arbiter refused to release the vehicles levied negligence.
on June 5, 1989 despite notice that a TRO has been issued by the Supreme Court; that Conversely, where the registered owner is liable for obligations to third parties and
there was no reason to hold on to the levy as petitioner had already posted a bond to vehicles registered under his name are levied upon to satisfy his obligations, the
answer for the damages and award in the above-entitled case; that the labor arbiter transferee of such vehicles cannot prevent the levy by asserting his ownership because
wrongly required the payment of storage charges and sheriff's fees before releasing as far as the law is concerned, the one in whose name the vehicle is registered remains
the levied buses. to be the owner and the transferee merely holds the vehicles for the registered owner.
Did public respondent commit grave abuse of discretion in reinstating the levy on the Thus, "Y" Transit Co., Inc. cannot now argue that the buses could not be levied upon
buses which have been allegedly transferred to a third party, herein petitioner "Y" to satisfy the money judgment in favor of herein respondents. However, this does not
Transit Co., Inc.? deprive the transferee of the right to recover from the registered owner any damages
We rule in the negative. which may have been incurred by the former since the . . . transfer or lease is valid and
The following facts have been established before the NLRC: that the transfer of binding between the parties. . . . 7 Thus, had there been any real contract between "Y"
ownership from Yujuico Transit Co., Inc. to Jesus Yujuico, and from Jesus Yujuico to Transit Co., Inc. and Yujuico Transit Co., Inc. of "Y" Transit Co., Inc. and Jesus Yujuico
"Y" Transit Co., Inc. lacked the prior approval of the BOT as required by Section 20 of regarding the sale or transfer of the buses, the former may avail of its remedies to
the Public Service Act;4 that the buses were transferred to "Y" Transit Co., Inc. during recover damages.
Regarding the Motion for Contempt filed by petitioner, we are constrained to deny the On 13 May 1987, alleging urgent public need, ETCI filed an application with public
same since the Order to levy upon petitioner's alleged properties was issued even respondent NTC (docketed as NTC Case No. 87-89) for the issuance of a Certificate
before the issuance by the Court of a temporary restraining order. From the records, it of Public Convenience and Necessity (CPCN) to construct, install, establish, operate
appeared that Labor Arbiter Villarente ordered the public auction of the subject and maintain a Cellular Mobile Telephone System and an Alpha Numeric Paging
properties on May 12, 1989. The sheriff levied on the properties on June 5, 1989. The System in Metro Manila and in the Southern Luzon regions, with a prayer for provisional
Supreme Court issued the Temporary Restraining Order on June 19, 1989 and this authority to operate Phase A of its proposal within Metro Manila.
was received by the Labor Arbiter on June 22, 1989. On June 28, 1989, the Labor PLDT filed an Opposition with a Motion to Dismiss, based primarily on the following
Arbiter directed the sheriff to release the two buses already levied upon by him. grounds: (1) ETCI is not capacitated or qualified under its legislative franchise to
Likewise, we find no error in requiring petitioner to pay the storage fees prior to the operate a systemwide telephone or network of telephone service such as the one
release of the properties. Storage costs are imposed in accordance with the provisions proposed in its application; (2) ETCI lacks the facilities needed and indispensable to
of Rule IX of the NLRC Manuel of Instructions for Sheriffs, to wit: the successful operation of the proposed cellular mobile telephone system; (3) PLDT
Sec. 3. Storing of Levied Property. To avoid pilferage of or damage to levied has itself a pending application with NTC, Case No. 86-86, to install and operate a
property, the same shall be inventoried and stored in a bonded warehouse, Cellular Mobile Telephone System for domestic and international service not only in
wherever available, or in a secured place as may be determined by the sheriff Manila but also in the provinces and that under the "prior operator" or "protection of
with notice to and conformity of the losing party or third party claimant. In case investment" doctrine, PLDT has the priority or preference in the operation of such
of disagreement, the same shall be referred to the Labor Arbiter or proper service; and (4) the provisional authority, if granted, will result in needless,
officer who issued the writ of execution for proper disposition. For this uneconomical and harmful duplication, among others.
purpose, sheriffs should inform the Labor Arbiter or proper officer issuing the In an Order, dated 12 November 1987, NTC overruled PLDT's Opposition and declared
writ of corresponding storage fees, furnishing him as well as the parties with that Rep. Act No. 2090 (1958) should be liberally construed as to include among the
a copy of the inventory. The storage fees shall be shouldered by the losing services under said franchise the operation of a cellular mobile telephone service.
party. In the same Order, ETCI was required to submit the certificate of registration of its
WHEREFORE, in view of the foregoing, this petition is hereby DISMISSED. Articles of Incorporation with the Securities and Exchange Commission, the present
The Motion to Cite Labor Arbiter Benigno Villarente, Jr. is DENIED and petitioner is capital and ownership structure of the company and such other evidence, oral or
ordered to PAY storage costs and sheriff's fees. documentary, as may be necessary to prove its legal, financial and technical
This decision is immediately executory. capabilities as well as the economic justifications to warrant the setting up of cellular
SO ORDERED. mobile telephone and paging systems. The continuance of the hearings was also
Feliciano, Bidin and Melo, Vitug, JJ., concur. directed.
After evaluating the reconsideration sought by PLDT, the NTC, in October 1988,
G.R. No. 88404 October 18, 1990 maintained its ruling that liberally construed, applicant's franchise carries with it the
PHILIPPINE LONG DISTANCE TELEPHONE CO. [PLDT], petitioner, privilege to operate and maintain a cellular mobile telephone service.
vs. On 12 December 1988, NTC issued the first challenged Order. Opining that "public
THE NATIONAL TELECOMMUNICATIONS COMMISSION AND CELLCOM, INC., interest, convenience and necessity further demand a second cellular mobile telephone
(EXPRESS TELECOMMUNICATIONS CO., INC. [ETCI]), respondents. service provider and finds PRIMA FACIE evidence showing applicant's legal, financial
Alampan & Manhit Law Offices for petitioner. and technical capabilities to provide a cellular mobile service using the AMPS system,"
Gozon, Fernandez, Defensor & Parel for private respondent. NTC granted ETCI provisional authority to install, operate and maintain a cellular
mobile telephone system initially in Metro Manila, Phase A only, subject to the terms
MELENCIO-HERRERA, J.: and conditions set forth in the same Order. One of the conditions prescribed (Condition
Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by way of No. 5) was that, within ninety (90) days from date of the acceptance by ETCI of the
certiorari and Prohibition under Rule 65, two (2) Orders of public respondent National terms and conditions of the provisional authority, ETCI and PLDT "shall enter into an
Telecommunications Commission (NTC), namely, the Order of 12 December 1988 interconnection agreement for the provision of adequate interconnection facilities
granting private respondent Express Telecommunications Co., Inc. (ETCI) provisional between applicant's cellular mobile telephone switch and the public switched telephone
authority to install, operate and maintain a Cellular Mobile Telephone System in Metro- network and shall jointly submit such interconnection agreement to the Commission for
Manila (Phase A) in accordance with specified conditions, and the Order, dated 8 May approval."
1988, denying reconsideration. In a "Motion to Set Aside the Order" granting provisional authority, PLDT alleged
On 22 June 1958, Rep. Act No. 2090, was enacted, otherwise known as "An Act essentially that the interconnection ordered was in violation of due process and that the
Granting Felix Alberto and Company, Incorporated, a Franchise to Establish Radio grant of provisional authority was jurisdictionally and procedurally infirm. On 8 May
Stations for Domestic and Transoceanic Telecommunications." Felix Alberto & Co., Inc. 1989, NTC denied reconsideration and set the date for continuation of the hearings on
(FACI) was the original corporate name, which was changed to ETCI with the the main proceedings. This is the second questioned Order.
amendment of the Articles of Incorporation in 1964. Much later, "CELLCOM, Inc." was PLDT urges us now to annul the NTC Orders of 12 December 1988 and 8 May 1989
the name sought to be adopted before the Securities and Exchange Commission, but and to order ETCI to desist from, suspend, and/or discontinue any and all acts intended
this was withdrawn and abandoned. for its implementation.
On 15 June 1989, we resolved to dismiss the petition for its failure to comply fully with be called within thirty (30) days from grant of authority asked for. (Rule 15,
the requirements of Circular No. 1-88. Upon satisfactory showing, however, that there Rules of Practice and Procedure Before the Board of Communications (now
was, in fact, such compliance, we reconsidered the order, reinstated the Petition, and NTC).
required the respondents NTC and ETCI to submit their respective Comments. What the NTC granted was such a provisional authority, with a definite expiry period of
On 27 February 1990, we issued a Temporary Restraining Order enjoining NTC to eighteen (18) months unless sooner renewed, and which may be revoked, amended or
"Cease and Desist from all or any of its on-going proceedings and ETCI from continuing revised by the NTC. It is also limited to Metro Manila only. What is more, the main
any and all acts intended or related to or which will amount to the proceedings are clearly to continue as stated in the NTC Order of 8 May 1989.
implementation/execution of its provisional authority." This was upon PLDT's urgent The provisional authority was issued after due hearing, reception of evidence and
manifestation that it had been served an NTC Order, dated 14 February 1990, directing evaluation thereof, with the hearings attended by various oppositors, including PLDT.
immediate compliance with its Order of 12 December 1988, "otherwise the Commission It was granted only after a prima facie showing that ETCI has the necessary legal,
shall be constrained to take the necessary measures and bring to bear upon PLDT the financial and technical capabilities and that public interest, convenience and necessity
full sanctions provided by law." so demanded.
We required PLDT to post a bond of P 5M. It has complied, with the statement that it PLDT argues, however, that a provisional authority is nothing short of a Certificate of
was "post(ing) the same on its agreement and/or consent to have the same forfeited in Public Convenience and Necessity (CPCN) and that it is merely a "distinction without
favor of Private Respondent ETCI/CELLCOM should the instant Petition be dismissed a difference." That is not so. Basic differences do exist, which need not be elaborated
for lack of merit." ETCI took exception to the sufficiency of the bond considering its on. What should be borne in mind is that provisional authority would be meaningless if
initial investment of approximately P 225M, but accepted the forfeiture proferred. the grantee were not allowed to operate. Moreover, it is clear from the very Order of 12
ETCI moved to have the TRO lifted, which we denied on 6 March 1990. We stated, December 1988 itself that its scope is limited only to the first phase, out of four, of the
however, that the inaugural ceremony ETCI had scheduled for that day could proceed, proposed nationwide telephone system. The installation and operation of an alpha
as the same was not covered by the TRO. numeric paging system was not authorized. The provisional authority is not exclusive.
PLDT relies on the following grounds for the issuance of the Writs prayed for: Its lifetime is limited and may be revoked by the NTC at any time in accordance with
1. Respondent NTC's subject order effectively licensed and/or authorized a law. The initial expenditure of P130M more or less, is rendered necessary even under
corporate entity without any franchise to operate a public utility, legislative or a provisional authority to enable ETCI to prove its capability. And as pointed out by the
otherwise, to establish and operate a telecommunications system. Solicitor General, on behalf of the NTC, if what had been granted were a CPCN, it
2. The same order validated stock transactions of a public service enterprise would constitute a final order or award reviewable only by ordinary appeal to the Court
contrary to and/or in direct violation of Section 20(h) of the Public Service Act. of Appeals pursuant to Section 9(3) of BP Blg. 129, and not by certiorari before this
3. Respondent NTC adjudicated in the same order a controverted matter that Court.
was not heard at all in the proceedings under which it was promulgated. The final outcome of the application rests within the exclusive prerogative of the NTC.
As correctly pointed out by respondents, this being a special civil action for certiorari Whether or not a CPCN would eventually issue would depend on the evidence to be
and Prohibition, we only need determine if NTC acted without jurisdiction or with grave presented during the hearings still to be conducted, and only after a full evaluation of
abuse of discretion amounting to lack or excess of jurisdiction in granting provisional the proof thus presented.
authority to ETCI under the NTC questioned Orders of 12 December 1988 and 8 May 2. The Coverage of ETCI's Franchise
1989. Rep. Act No. 2090 grants ETCI (formerly FACI) "the right and privilege of constructing,
The case was set for oral argument on 21 August 1990 with the parties directed to installing, establishing and operating in the entire Philippines radio stations for
address, but not limited to, the following issues: (1) the status and coverage of Rep. reception and transmission of messages on radio stations in the foreign and domestic
Act No. 2090 as a franchise; (2) the transfer of shares of stock of a corporation holding public fixed point-to-point and public base, aeronautical and land mobile stations, ...
a CPCN; and (3) the principle and procedure of interconnection. The parties were with the corresponding relay stations for the reception and transmission of wireless
thereafter required to submit their respective Memoranda, with which they have messages on radiotelegraphy and/or radiotelephony ...." PLDT maintains that the
complied. scope of the franchise is limited to "radio stations" and excludes telephone services
We find no grave abuse of discretion on the part of NTC, upon the following such as the establishment of the proposed Cellular Mobile Telephone System (CMTS).
considerations: However, in its Order of 12 November 1987, the NTC construed the technical term
1. NTC Jurisdiction "radiotelephony" liberally as to include the operation of a cellular mobile telephone
There can be no question that the NTC is the regulatory agency of the national system. It said:
government with jurisdiction over all telecommunications entities. It is legally clothed In resolving the said issue, the Commission takes into consideration the
with authority and given ample discretion to grant a provisional permit or authority. In different definitions of the term "radiotelephony." As defined by the New
fact, NTC may, on its own initiative, grant such relief even in the absence of a motion International Webster Dictionary the term "radiotelephony" is defined as a
from an applicant. telephone carried on by aid of radiowaves without connecting wires. The
Sec. 3. Provisional Relief. Upon the filing of an application, complaint or International Telecommunications Union (ITU) defines a "radiotelephone call"
petition or at any stage thereafter, the Board may grant on motion of the as a "telephone call, originating in or intended on all or part of its route over
pleaders or on its own initiative, the relief prayed for, based on the pleading, the radio communications channels of the mobile service or of the mobile
together with the affidavits and supporting documents attached thereto, satellite service." From the above definitions, while under Republic Act 2090
without prejudice to a final decision after completion of the hearing which shall a system-wide telephone or network of telephone service by means of
connecting wires may not have been contemplated, it can be construed upon to bring the action for such ... unlawful exercise of franchise. (IV-B V.
liberally that the operation of a cellular mobile telephone service which carries FRANCISCO, 298 [1963 ed.], citing Cruz vs. Ramos, 84 Phil. 226).
messages, either voice or record, with the aid of radiowaves or a part of its 4. ETCI's Stock Transactions
route carried over radio communication channels, is one included among the ETCI admits that in 1964, the Albertos, as original owners of more than 40% of the
services under said franchise for which a certificate of public convenience and outstanding capital stock sold their holdings to the Orbes. In 1968, the Albertos re-
necessity may be applied for. acquired the shares they had sold to the Orbes. In 1987, the Albertos sold more than
The foregoing is the construction given by an administrative agency possessed of the 40% of their shares to Horacio Yalung. Thereafter, the present stockholders acquired
necessary special knowledge, expertise and experience and deserves great weight and their ETCI shares. Moreover, in 1964, ETCI had increased its capital stock from
respect (Asturias Sugar Central, Inc. v. Commissioner of Customs, et al., L-19337, P40,000.00 to P360,000.00; and in 1987, from P360,000.00 to P40M.
September 30, 1969, 29 SCRA 617). It can only be set aside on proof of gross abuse PLDT contends that the transfers in 1987 of the shares of stock to the new
of discretion, fraud, or error of law (Tupas Local Chapter No. 979 v. NLRC, et al., L- stockholders amount to a transfer of ETCI's franchise, which needs
60532-33, November 5, 1985, 139 SCRA 478). We discern none of those Congressional approval pursuant to Rep. Act No. 2090, and since such
considerations sufficient to warrant judicial intervention. approval had not been obtained, ETCI's franchise had been invalidated. The
3. The Status of ETCI Franchise provision relied on reads, in part, as follows:
PLDT alleges that the ETCI franchise had lapsed into nonexistence for failure of the SECTION 10. The grantee shall not lease, transfer, grant the usufruct of, sell
franchise holder to begin and complete construction of the radio system authorized or assign this franchise nor the rights and privileges acquired thereunder to
under the franchise as explicitly required in Section 4 of its franchise, Rep. Act No. any person, firm, company, corporation or other commercial or legal entity nor
2090. 1 PLDT also invokes Pres. Decree No. 36, enacted on 2 November 1972, which merge with any other person, company or corporation organized for the same
legislates the mandatory cancellation or invalidation of all franchises for the operation purpose, without the approval of the Congress of the Philippines first had. ...
of communications services, which have not been availed of or used by the party or It should be noted, however, that the foregoing provision is, directed to the "grantee" of
parties in whose name they were issued. the franchise, which is the corporation itself and refers to a sale, lease, or assignment
However, whether or not ETCI, and before it FACI, in contravention of its franchise, of that franchise. It does not include the transfer or sale of shares of stock of a
started the first of its radio telecommunication stations within (2) years from the grant corporation by the latter's stockholders.
of its franchise and completed the construction within ten (10) years from said date; The sale of shares of stock of a public utility is governed by another law, i.e., Section
and whether or not its franchise had remained unused from the time of its issuance, 20(h) of the Public Service Act (Commonwealth Act No. 146). Pursuant thereto, the
are questions of fact beyond the province of this Court, besides the well-settled Public Service Commission (now the NTC) is the government agency vested with the
procedural consideration that factual issues are not subjects of a special civil action for authority to approve the transfer of more than 40% of the subscribed capital stock of a
certiorari (Central Bank of the Philippines vs. Court of Appeals, G.R. No. 41859, 8 telecommunications company to a single transferee, thus:
March 1989, 171 SCRA 49; Ygay vs. Escareal, G.R. No. 44189, 8 February 1985, 135 SEC. 20. Acts requiring the approval of the Commission. Subject to
SCRA 78; Filipino Merchant's Insurance Co., Inc. vs. Intermediate Appellate Court, established stations and exceptions and saving provisions to the contrary, it
G.R. No. 71640, 27 June 1988, 162 SCRA 669). Moreover, neither Section 4, Rep. Act shall be unlawful for any public service or for the owner, lessee or operator
No. 2090 nor Pres. Decree No. 36 should be construed as self-executing in working a thereof, without the approval and authorization of the Commission previously
forfeiture. Franchise holders should be given an opportunity to be heard, particularly had
so, where, as in this case, ETCI does not admit any breach, in consonance with the xxx xxx xxx
rudiments of fair play. Thus, the factual situation of this case differs from that in Angeles (h) To sell or register in its books the transfer or sale of shares of its capital
Ry Co. vs. City of Los Angeles (92 Pacific Reporter 490) cited by PLDT, where the stock, if the result of that sale in itself or in connection with another previous
grantee therein admitted its failure to complete the conditions of its franchise and yet sale, shall be to vest in the transferee more than forty per centum of the
insisted on a decree of forfeiture. subscribed capital of said public service. Any transfer made in violation of this
More importantly, PLDT's allegation partakes of a Collateral attack on a franchise Rep. provision shall be void and of no effect and shall not be registered in the books
Act No. 2090), which is not allowed. A franchise is a property right and cannot be of the public service corporation. Nothing herein contained shall be construed
revoked or forfeited without due process of law. The determination of the right to the to prevent the holding of shares lawfully acquired. (As amended by Com. Act
exercise of a franchise, or whether the right to enjoy such privilege has been forfeited No. 454).
by non-user, is more properly the subject of the prerogative writ of quo warranto, the In other words, transfers of shares of a public utility corporation need only NTC
right to assert which, as a rule, belongs to the State "upon complaint or otherwise" approval, not Congressional authorization. What transpired in ETCI were a series of
(Sections 1, 2 and 3, Rule 66, Rules of Court), 2 the reason being that the abuse of a transfers of shares starting in 1964 until 1987. The approval of the NTC may be deemed
franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to have been met when it authorized the issuance of the provisional authority to ETCI.
to be declared in a direct proceeding for the purpose brought by the State because a There was full disclosure before the NTC of the transfers. In fact, the NTC Order of 12
franchise is granted by law and its unlawful exercise is primarily a concern of November 1987 required ETCI to submit its "present capital and ownership structure."
Government. Further, ETCI even filed a Motion before the NTC, dated 8 December 1987, or more
A ... franchise is ... granted by law, and its ... unlawful exercise is the concern than a year prior to the grant of provisional authority, seeking approval of the increase
primarily of the Government. Hence, the latter as a rule is the party called in its capital stock from P360,000.00 to P40M, and the stock transfers made by its
stockholders.
A distinction should be made between shares of stock, which are owned by of the State to promote distributive justice and to intervene when the common
stockholders, the sale of which requires only NTC approval, and the franchise itself good so demands (Article XII).
which is owned by the corporation as the grantee thereof, the sale or transfer of which The interconnection which has been required of PLDT is a form of "intervention" with
requires Congressional sanction. Since stockholders own the shares of stock, they may property rights dictated by "the objective of government to promote the rapid expansion
dispose of the same as they see fit. They may not, however, transfer or assign the of telecommunications services in all areas of the Philippines, ... to maximize the use
property of a corporation, like its franchise. In other words, even if the original of telecommunications facilities available, ... in recognition of the vital role of
stockholders had transferred their shares to another group of shareholders, the communications in nation building ... and to ensure that all users of the public
franchise granted to the corporation subsists as long as the corporation, as an entity, telecommunications service have access to all other users of the service wherever they
continues to exist The franchise is not thereby invalidated by the transfer of the shares. may be within the Philippines at an acceptable standard of service and at reasonable
A corporation has a personality separate and distinct from that of each stockholder. It cost" (DOTC Circular No. 90-248). Undoubtedly, the encompassing objective is the
has the right of continuity or perpetual succession (Corporation Code, Sec. 2). common good. The NTC, as the regulatory agency of the State, merely exercised its
To all appearances, the stock transfers were not just for the purpose of acquiring the delegated authority to regulate the use of telecommunications networks when it
ETCI franchise, considering that, as heretofore stated, a series of transfers was decreed interconnection.
involved from 1964 to 1987. And, contrary to PLDT's assertion, the franchise was not The importance and emphasis given to interconnection dates back to Ministry Circular
the only property of ETCI of meaningful value. The "zero" book value of ETCI assets, No. 82-81, dated 6 December 1982, providing:
as reflected in its balance sheet, was plausibly explained as due to the accumulated Sec. 1. That the government encourages the provision and operation of public
depreciation over the years entered for accounting purposes and was not reflective of mobile telephone service within local sub-base stations, particularly, in the
the actual value that those assets would command in the market. highly commercialized areas;
But again, whether ETCI has offended against a provision of its franchise, or has Sec. 5. That, in the event the authority to operate said service be granted to
subjected it to misuse or abuse, may more properly be inquired into in quo warranto other applicants, other than the franchise holder, the franchise operator shall
proceedings instituted by the State. It is the condition of every franchise that it is subject be under obligation to enter into an agreement with the domestic telephone
to amendment, alteration, or repeal when the common good so requires (1987 network, under an interconnection agreement;
Constitution, Article XII, Section 11). Department of Transportation and Communication (DOTC) Circular No. 87-188, issued
5. The NTC Interconnection Order in 1987, also decrees:
In the provisional authority granted by NTC to ETCI, one of the conditions imposed was 12. All public communications carriers shall interconnect their facilities
that the latter and PLDT were to enter into an interconnection agreement to be jointly pursuant to comparatively efficient interconnection (CEI) as defined by the
submitted to NTC for approval. NTC in the interest of economic efficiency.
PLDT vehemently opposes interconnection with its own public switched telephone The sharing of revenue was an additional feature considered in DOTC Circular No. 90-
network. It contends: that while PLDT welcomes interconnections in the furtherance of 248, dated 14 June 1990, laying down the "Policy on Interconnection and Revenue
public interest, only parties who can establish that they have valid and subsisting Sharing by Public Communications Carriers," thus:
legislative franchises are entitled to apply for a CPCN or provisional authority, absent WHEREAS, it is the objective of government to promote the rapid expansion
which, NTC has no jurisdiction to grant them the CPCN or interconnection with PLDT; of telecommunications services in all areas of the Philippines;
that the 73 telephone systems operating all over the Philippines have a viability and WHEREAS, there is a need to maximize the use of telecommunications
feasibility independent of any interconnection with PLDT; that "the NTC is not facilities available and encourage investment in telecommunications
empowered to compel such a private raid on PLDT's legitimate income arising out of infrastructure by suitably qualified service providers;
its gigantic investment;" that "it is not public interest, but purely a private and selfish WHEREAS, in recognition of the vital role of communications in nation
interest which will be served by an interconnection under ETCI's terms;" and that "to building, there is a need to ensure that all users of the public
compel PLDT to interconnect merely to give viability to a prospective competitor, which telecommunications service have access to all other users of the service
cannot stand on its own feet, cannot be justified in the name of a non-existent public wherever they may be within the Philippines at an acceptable standard of
need" (PLDT Memorandum, pp. 48 and 50). service and at reasonable cost.
PLDT cannot justifiably refuse to interconnect. WHEREFORE, ... the following Department policies on interconnection and
Rep. Act No. 6849, or the Municipal Telephone Act of 1989, approved on 8 February revenue sharing are hereby promulgated:
1990, mandates interconnection providing as it does that "all domestic 1. All facilities offering public telecommunication services
telecommunications carriers or utilities ... shall be interconnected to the public switch shall be interconnected into the nationwide
telephone network." Such regulation of the use and ownership of telecommunications telecommunications network/s.
systems is in the exercise of the plenary police power of the State for the promotion of xxx xxx xxx
the general welfare. The 1987 Constitution recognizes the existence of that power 4. The interconnection of networks shall be effected in a fair
when it provides. and non-discriminatory manner and within the shortest
SEC. 6. The use of property bears a social function, and all economic agents time-frame practicable.
shall contribute to the common good. Individuals and private groups, including 5. The precise points of interface between service operators
corporations, cooperatives, and similar collective organizations, shall have the shall be as defined by the NTC; and the apportionment of
right to own, establish, and operate economic enterprises, subject to the duty costs and division of revenues resulting from
interconnection of telecommunications networks shall be as neither PLDT nor any other public utility has a constitutional right to a monopoly position
approved and/or prescribed by the NTC. in view of the Constitutional proscription that no franchise certificate or authorization
xxx xxx xxx shall be exclusive in character or shall last longer than fifty (50) years (ibid., Section 11;
Since then, the NTC, on 12 July 1990, issued Memorandum Circular No. 7-13-90 Article XIV Section 5, 1973 Constitution; Article XIV, Section 8, 1935 Constitution).
prescribing the "Rules and Regulations Governing the Interconnection of Local Additionally, the State is empowered to decide whether public interest demands that
Telephone Exchanges and Public Calling Offices with the Nationwide monopolies be regulated or prohibited (1987 Constitution. Article XII, Section 19).
Telecommunications Network/s, the Sharing of Revenue Derived Therefrom, and for WHEREFORE, finding no grave abuse of discretion, tantamount to lack of or excess of
Other Purposes." jurisdiction, on the part of the National Telecommunications Commission in issuing its
The NTC order to interconnect allows the parties themselves to discuss and agree upon challenged Orders of 12 December 1988 and 8 May 1989 in NTC Case No. 87-39, this
the specific terms and conditions of the interconnection agreement instead of the NTC Petition is DISMISSED for lack of merit. The Temporary Restraining Order heretofore
itself laying down the standards of interconnection which it can very well impose. Thus issued is LIFTED. The bond issued as a condition for the issuance of said restraining
it is that PLDT cannot justifiably claim denial of clue process. It has been heard. It will Order is declared forfeited in favor of private respondent Express Telecommunications
continue to be heard in the main proceedings. It will surely heard in the negotiations Co., Inc. Costs against petitioner.
concerning the interconnection agreement. SO ORDERED.
As disclosed during the hearing, the interconnection sought by ETCI is by no means a Paras, Feliciano, Padilla, Sarmiento, Cortes, Grio-Aquino and Regalado, JJ., concur.
"parasitic dependence" on PLDT. The ETCI system can operate on its own even
without interconnection, but it will be limited to its own subscribers. What
interconnection seeks to accomplish is to enable the system to reach out to the greatest Separate Opinions
number of people possible in line with governmental policies laid down. Cellular phones
can access PLDT units and vice versa in as wide an area as attainable. With the GUTIERREZ, JR., J., dissenting:
broader reach, public interest and convenience will be better served. To be sure, ETCI I share with the rest of the Court the desire to have a "modern, efficient, satisfactory,
could provide no mean competition (although PLDT maintains that it has nothing to fear and continuous telecommunications service" in the Philippines. I register this dissent,
from the "innocuous interconnection"), and eat into PLDT's own toll revenue cream however, because I believe that any frustrations over the present state of telephone
PLDT revenue," in its own words), but all for the eventual benefit of all that the system services do not justify our affirming an illegal and inequitable order of the National
can reach. Telecommunications Commission (NTC). More so when it appears that the questioned
6. Ultimate Considerations order is not really a solution to the problems bugging our telephone industry.
The decisive consideration are public need, public interest, and the common good. My dissent is based on three primary considerations, namely:
Those were the overriding factors which motivated NTC in granting provisional authority (1) The Court has sustained nothing less than the desire of respondent ETCI to set-up
to ETCI. Article II, Section 24 of the 1987 Constitution, recognizes the vital role of a profitable business catering to an affluent clientele through the use of billions of pesos
communication and information in nation building. It is likewise a State policy to provide worth of another company's properties. No issues of public welfare, breaking up of
the environment for the emergence of communications structures suitable to the monopolies, or other high sounding principles are involved. The core question is purely
balanced flow of information into, out of, and across the country (Article XVI, Section and simply whether or not to grant ETCI's desire for economic gains through riding on
10, Ibid.). A modern and dependable communications network rendering efficient and another firm's investments.
reasonably priced services is also indispensable for accelerated economic recovery (2) The Court has permitted respondent ETCI to operate a telephone system without a
and development. To these public and national interests, public utility companies must valid legislative franchise. It strains the imagination too much to interpret a legislative
bow and yield. franchise authorizing "radio stations" as including the provisional permit for a
Despite the fact that there is a virtual monopoly of the telephone system in the country sophisticated telephone system which has absolutely nothing to do with radio
at present. service is sadly inadequate. Customer demands are hardly met, whether broadcasts and transmissions. The Court subverts the legislative will when it validates
fixed or mobile. There is a unanimous cry to hasten the development of a modern, a provisional permit on the basis of authority which never envisioned much less
efficient, satisfactory and continuous telecommunications service not only in Metro intended its use for a regular telephone system catering to thousands of individual
Manila but throughout the archipelago. The need therefor was dramatically emphasized receiver units. There is nothing in Rep. Act No. 2090 which remotely suggests a cellular
by the destructive earthquake of 16 July 1990. It may be that users of the cellular mobile mobile telephone system.
telephone would initially be limited to a few and to highly commercialized areas. (3) The authority given by Rep. Act No. 2090 has expired. ETCI is not only riding on
However, it is a step in the right direction towards the enhancement of the another company's investments and using legislative authority for a purpose never
telecommunications infrastructure, the expansion of telecommunications services in, dreamed of by the legislators but is also trying to extract life from and resurrect an
hopefully, all areas of the country, with chances of complete disruption of unused and dead franchise.
communications minimized. It will thus impact on, the total development of the country's My principal objection to the disputed NTC order arises from the fact that respondent
telecommunications systems and redound to the benefit of even those who may not be Express Telecommunications Co. Inc. (ETCI) cannot exist without using the facilities of
able to subscribe to ETCI. Philippine Long Distance Telephone Co. (PLDT). Practically all of its business will be
Free competition in the industry may also provide the answer to a much-desired conducted through another company's property.
improvement in the quality and delivery of this type of public utility, to improved While pretending to set up a separate phone company, ETCI's cellular phones would
technology, fast and handy mobile service, and reduced user dissatisfaction. After all, be useless most of the time, if not all the time, unless they use PLDT lines. It would be
different if ETCI phone owners would primarily communicate with one another and tap installations, the requirements as to maintenance and operation, and other conditions
into PLDT lines only rarely or occasionally. found in the NTC order are anything but provisional.
To compare ETCI with the Government Telephone System (GTS) or with an The authority given to ETCI is entirely different from the provisional authority given to
independent phone company serving a province or city is misleading. The defunct GTS MERALCO or oil companies to increase the price of oil or electricity or to bus and
was set up to connect government offices and personnel with one another. It could exist jeepney operators to raise fares a few centavos. In these cases the need for increases
independently and was not primarily or wholly dependent on PLDT connections. A is not only urgent but is usually a foregone conclusion dictated by pressing
provincial or city system serves the residents of a province or city. It primarily relies on circumstances. Further hearings are needed only to fix the amount which will be finally
its own investments and infrastructure. It asks for PLDT services only when long authorized. The NTC orders can also be easily revoked. Increased prices of oil or rates
distance calls to another country, city, or province have to be made. of transportation services can be lowered or struck down if the preliminary
I can, therefore, understand PLDT's reluctance Since it has its own franchise to operate determinations are wrong. In the instant case, NTC has authorized a new company to
exactly the same services which ETCI is endeavoring to establish. PLDT would be start operations even if the issues have not been thoroughly threshed out. There is no
using its own existing lines. Under the Court's decision, it would be compelled to allow urgent need which warrants operations before a final permit is granted. Once in
another company to use those same lines in direct competition with the lines owner. operation, there can be no cancelling or revocation of the authority to operate, no
The cellular system is actually only an adjunct to a regular telephone system, not a dismantling of thousands of cellular phones and throwing to waste of over P100 million
separate and independent system. As an adjunct and component unit or as a parasite worth of investments in fixed facilities. Theoretically, it can be done but it is clear from
(if a foreign body) it must be fed by the mother organism or unit if it is to survive. the records that what was granted is really a CPCN.
Under the disputed order, ETCI will be completely dependent upon its use of the P16 There is no dispute that a legislative franchise is necessary for the operation of a
billions worth of infrastructure which PLDT has built over several decades. The vaunted telephone system. The NTC has no jurisdiction to grant the authority. The fact that ETCI
payment of compensation everytime an ETCI phone taps into a PLDT line is illusory. has to rely on a 1958 legislative franchise shows that only Congress can give the
There can be no adequate payment for the use of billions of pesos of investments built franchise which will empower NTC to issue the certificate or CPCN.
up over 60 years. Moreover, it is actually the phone owner or consumer who pays the Rep. Act No. 2090 is a franchise for the construction and operation of radio stations.
fee. The rate will be fixed by Government and will be based on the consumer's best Felix Alberto and Co. Inc. (FACI) was authorized in the operation of those radio stations
interests and capacity, ignoring or subordinating the petitioner's investments. Payment to acquire and handle transmitters, receivers, electrical machinery and other related
will depend on how much the phone user should be charged for making a single phone devises. The use of radio telephone was never intended or envisioned for a regular
call and will disregard the millions of pesos that ETCI will earn through its use of billions telephone company. "Radio telephony" is governed and circumscribed by the basic
of pesos worth of another company's investments and properties. purpose of operating radio stations. Telephony may be used only to enable
The "hated monopoly" and "improved services" arguments are not only misleading but communications between the stations, to transmit a radio message to a station where
also illusory. it would be transcribed into a form suitable for delivery to the intended recipient. FACI
To sustain the questioned NTC order will not in any way improve telephone services was authorized to communicate to, between, and among its radio stations. There is no
nor would any monopoly be dismantled. The answer to inadequate telephone facilities authority for thousands of customers to be talking to PLDT subscribers directly. FACI
is better administrative supervision. The NTC should pay attention to its work and was never given authority by Rep. Act 2090 to operate switching facilities, wire-line
compel PLDT to improve its services instead of saddling with the burden of carrying transmissions, and telecommunication stations of a telephone company. The entire
another company's system. records can be scrutinized and they will show that ETCI has all but ignored and kept
For better services, what the country needs is to improve the existing system and silent about the purpose of its alleged franchise-which is for the real operation of radio
provide enough telephone lines for all who really need them. The proposed ETCI stations. There can be no equating of "radio stations" with a complete cellular mobile
cellular phones will serve mostly those who can afford to tide in expensive cars and telephone system. The two are poles apart.
who already have two or three telephones in their offices and residences. Cellular The most liberal interpretation can not possibly read in a 1958 franchise for radio
phones should legally and fairly be provided by PLDT as just another facet of its stations, the authority for a mobile cellular system vintage 1990. No amount of liberal
expansion program. interpretation can supply the missing requirement. And besides, we are not interpreting
The mass of applicants for new telephones will not benefit from cellular phones. In fact, a Constitution which is intended to cover changing situations and must be read liberally.
if PLDT is required by NTC to open up new exchanges or interconnections for the rich Legislative franchises are always construed strictly against the franchise.
ETCI consumers, this will mean an equivalent number of low income or middle income The remedy is for ETCI to go to Congress. I regret that in dismissing this petition, we
applicants who will have to wait longer for their own PLDT lines. The Court's resolution may be withholding from Congress the courtesy we owe to it as a co-equal body and
favors the conveniences of the rich at the expense of the necessities of the poor. * denigrating its power to examine whether or not ETCI really deserves a legislative
I agree with the petitioner that what NTC granted is not merely provisional authority but franchise.
what is in effect a regular certificate of public convenience and necessity or "CPCN". My third point has to do with the sudden resurrection of a dead franchise and its coming
Starting with seven cell sites for 3,000 subscribers in Metro Manila, the cellular mobile to life in an entirely different form-no longer a radio station but a modern telephone
system will establish 67 cell sites beginning October 1991. The initial expenses alone company.
will amount to P130 million. At page 8 of its Comment, ETCI admits that that "the I have searched the records in vain for any plan of ETCI to operate radio stations. It
provisional authority to operate will be useless to ETCI if it does not put up the system has not operated and does not plan to operate radio stations. Its sole objective is to set
and interconnnect said system with the existing PLDT network."(Emphasis supplied) up a telephone company. For that purpose, it should go to Congress and get a franchise
The completion of interconnection arrangements, the setting up of expensive for a telephone company. NTC cannot give it such a franchise.
Section 10 of Rep. Act No. 2090 prohibits the transfer of the franchise and the rights None of the animals in the farm was willing and neither did they help in watering,
and privileges under that franchise without the express approval of Congress. No harvesting and finally cooking it. But when she asked, "Who will help me eat the rice?"
amount of legal niceties can cloak the fact that ETCI is not FACI, that the franchise was everyone wanted to join in. The little red hen is like PLDT.
sold by FACI to ETCI, and that the permit given by NTC to ETCI is based on a If ETCI wants to operate its own telephone system, it should rely on its own resources
purchased franchise. instead of riding piggy-back on PLDT. It seems to me rather unfair for the Government
When the owners of FACI sold out their stocks, the 3,900 shares were on paper worth to require PLDT to share with a newcomer and potential rival what it took PLDT
only 35 centavos each. The company had no assets and physical properties. All it had tremendous effort and long years and billions of pesos to build .
was the franchise, for whatever it was worth. The buyers paid P4,618,185.00 for the The case of Republic of the Philippines v. PLDT, 26 SCRA 620, is not applicable
company's stocks, almost all of the amount intended for the franchise. It was, therefore, because it was the Government itself that was there seeking interconnection of its own
a sale or transfer of the franchise in violation of the express terms of Rep. Act No. 2090 telephone system, with PLDT. The Court recognized the obvious public purpose that
which call for approval by Congress. justified the special exercise (by the Government of the power of eminent domain. But
ETCI tried to show a series of transactions involving the sales of almost all of its stocks. in the case before us, the intended beneficiary is a private enterprise primarily
Not only are the circumstances surrounding the transfers quite suspicious, but they organized for profit and, indeed, to compete with PLDT. In effect, the Government is
were effected without the approval and authorization of the Commission as required by forcing PLDT to surrender its competitive advantage and share its resources with ETCI,
law. which may not only supplement but, possibly, even ultimately supplant PLDT. I do not
Sec. 4 of Rep. Act No. 2090 also provides that the franchise shall be void unless the think government authority extends that far.
construction of radio stations is begun within two years or June 22, 1960 and completed The majority disposes of the question of due process by simply saying that PLDT will
within ten years or June 22, 1968. have frill opportunity to be heard in the ascertainment of the just compensation ETCI
As of April 14, 1987, ETCI formally admitted that it was still in the pre-operating stage. will have to pay for the interconnection. That is not the issue. What PLDT is objecting
Almost 30 years later, it had not even started the business authorized by the franchise. to is not the amount of the just compensation but the interconnection itself that is being
It is only now that it proposes to construct, not radio stations, but a telephone system. forced upon it.
During the oral arguments and in its memorandum, ETCI presented proof of several I feel there is no due process where private property is taken by the Government from
radio station construction permits. A construction permit authorizes a construction but one private person and given to another private person for the latter's direct benefit.
does not prove it. There is no proof that the entire construction of all stations was The fact that compensation is paid is immaterial; the flaw lies in the taking itself
completed within ten years. In fact, there is not the slightest intimation that ETCI, today, (Davidson v. New Orleans, 90 U.S. 97). The circumstance that PLDT is a public utility
is operating radio stations. What it wants is to set up a telephone system. is no warrant for taking undue liberties with its property, which is protected by the Bill
In addition to the franchise being void under its own charter, P.D. 36 on November 2, of Rights. "Public need" cannot be a blanket justification for favoring one investor
1972, cancelled all unused or dormant legislative franchises. Rep. Act No. 2090, having against another in contravention of the system of free enterprise. If PLDT has misused
been voided by its own Section 4, suffered a second death if that is at all possible. its franchise, I should think the solution is to revoke its authority, not to force it to share
The violations of law-(1) the giving of life to an already dead franchise, (2) the transfer its resources with its private competitors.
of ownership against an express statutory provision, and (3) the use of a franchise for The rule is that where it is the legislature itself that directly calls for the expropriation of
radio stations to justify the setting up of a cellular mobile telephone system are too private property, its determination of the thing to be condemned and the purpose of the
glaring for us to ignore on the basis of "respect" for a questionable NTC order and other taking is conclusive on the courts (City of Manila v. Chinese Community, 40 Phil. 349).
purely technical considerations. We should not force PLDT to open its lines to enable But where the power of eminent domain is exercised only by a delegate of the
a competitor to operate a system which cannot survive unless it uses PLDT properties. legislature, like ETCI, the courts may inquire into the necessity or propriety of the
The NTC bases its order on alleged grounds of public need, public interest, and the expropriation and, when warranted, pronounce its invalidity (Republic of the Philippines
common good. There is no showing that these considerations will be satisfied, at least v. La Orden de PO Benedictinos de Filipinas, 1 SCRA 649). I think this is what the
sufficient to warrant a strained interpretation of legal provisions. Any slight improvement Court should do in the case at bar.
which the expensive ETCI project will accomplish cannot offset its violation of law and A final point. It is argued that requiring ETCI to start from scratch (as PLDT did) and
fair dealing. import its own equipment would entail a tremendous outflow of foreign currency we can
I, THEREFORE, VOTE to GRANT the petition. ill afford at this time. Perhaps so. But we must remember that the Bill of Rights is not a
Fernan, C.J., Narvasa, Gancayco, Bidin and Medialdea, JJ., concur. marketable commodity, like a piece of machinery. Due process is an indispensable
requirement that cannot be assessed in dollar and cents.
CRUZ, J., concurring and dissenting: Fernan, C.J., and Narvasa, J., concur.
As one of the many dissatisfied customers of PLDT, I should have no objection to the
grant of the provisional authority to ETCI. I have none. Its admission will improve SECOND DIVISION
communication facilities in the country conformably to the constitutional objective. It will G.R. No. 141667 July 17, 2006
also keep PLDT on its toes and encourage it to correct its deficient service in view of REPUBLIC OF THE PHILIPPINES, represented by NATIONAL
the competition. ELECOMMUNICATIONS COMMISSION (NTC), petitioner,
I fully agree with all the rulings in the ponencia except the approval of the requirement vs.
for PLDT to interconnect with ETCI. I think it violates due process. It reminds me of the INTERNATIONAL COMMUNICATIONS CORPORATION (ICC), respondent.
story of the little red hen who found some rice and asked who would help her plant it. DECISION
GARCIA, J.: of a provisional authority to operate an International Leased Circuit Service.
In this petition for review under Rule 45 of the Rules of Court, petitioner Republic, No costs.
through the National Telecommunications Commission (NTC), seeks the annulment SO ORDERED. (Word in bracket added).
and setting aside of the Amended Decision1 dated September 30, 1999 of the Court Petitioner NTC filed a motion for reconsideration, but its motion was denied by the CA
of Appeals (CA), setting aside the orders dated June 4, 1996 and June 25, 1997 of the in its equally challenged Resolution dated January 24, 2000. Hence, NTC's present
NTC insofar as said orders required respondent International Communications recourse claiming that the CA erred in ruling that:
Corporation (ICC) to pay the amount of P1,190,750.50 by way of permit fee as a 1. NTC has arrogated upon itself the power to tax an entity;
condition for the grant of a provisional authority to operate an international 2. Section 40(g) of the Public Service Act has been amended by Section 5(g)
telecommunications leased circuit service, and the Resolution 2 dated January 24, of R.A. 7925;6
2000, denying NTC's motion for reconsideration. 3. The imposition of permit fees is no longer authorized by R.A. 7925; and
There is no dispute as to the facts: 4. The imposed permit fee in the amount of P1,190,750.50 for respondent's
On April 4, 1995, respondent ICC, holder of a legislative franchise under Republic Act provisional authority is exorbitant.
(RA) No. 7633 to operate domestic telecommunications, filed with the NTC an Before addressing the issues raised, we shall first dwell on the procedural matter raised
application for a Certificate of Public Convenience and Necessity to install, operate, by respondent ICC, namely, that the present petition should be dismissed outright for
and maintain an international telecommunications leased circuit service between the having been filed out of time. It is respondent's posture that petitioner's motion for
Philippines and other countries, and to charge rates therefor, with provisional authority reconsideration filed with the CA vis-a-vis the latter's Amended Decision is a pro forma
for the purpose. motion and, therefore, did not toll the running of the reglementary period to come to this
In an Order3 dated June 4, 1996, the NTC approved the application for a provisional Court via this petition for review.
authority subject, among others, to the condition: Under Section 2 of Rule 45 of the Rules of Court, a recourse to this Court by way of a
2. That applicant [ICC] shall pay a permit fee in the amount of P1,190,750.00, petition for review must be filed within fifteen (15) days from notice of the judgment or
in accordance with section 40(g) of the Public Service Act, 4 as amended; final order or resolution appealed from, or of the denial of the petitioner's motion for
Respondent ICC filed a motion for partial reconsideration of the Order insofar as the new trial or reconsideration filed in due time after notice of the judgment. While a motion
same required the payment of a permit fee. In a subsequent Order dated June 25, for reconsideration ordinarily tolls the period for appeal, one that fails to point out the
1997, the NTC denied the motion. findings or conclusions which were supposedly contrary to law or the evidence does
Therefrom, ICC went to the CA on a petition for certiorari with prayer for a temporary not have such an effect on the reglementary period as it is merely a pro forma motion. 7
restraining order and/or writ of preliminary injunction, questioning the NTC's imposition In arguing for the outright dismissal of this petition, respondent ICC claims that the
against it of a permit fee of P1,190,750.50 as a condition for the grant of the provisional motion for reconsideration filed by petitioner NTC in connection with the CAs Amended
authority applied for. Decision failed to point out specifically the findings or conclusions of the CA which were
In its original decision5 dated January 29, 1999, the CA ruled in favor of the NTC whose supposedly contrary to law. Respondent contends that the issues raised by the
challenged orders were sustained, and accordingly denied ICC's certiorari petition, petitioner in its motion for reconsideration were mere reiterations of the same issues
thus: which had already been considered and passed upon by the CA when it promulgated
WHEREFORE, the instant petition is hereby DENIED. In view thereof, the its Amended Decision. On this premise, respondent maintains that petitioners
assailed orders dated 4 June 1996 and 25 June 1997, requiring the payment aforementioned motion for reconsideration is a mere pro forma motion that did not toll
of permit fees in the amount of One Million One Hundred Ninety Thousand the period for filing the present petition.
Seven Hundred Fifty and 50/100 Pesos (P1,190,750.50) as a condition for the Under established jurisprudence, the mere fact that a motion for reconsideration
grant of a Provisional Authority to operate an International Circuit service, are reiterates issues already passed upon by the court does not, by itself, make it a pro
hereby AFFIRMED. ACCORDINGLY, the International Communications forma motion.8 Among the ends to which a motion for reconsideration is addressed is
Corporation is hereby ordered to pay the amount of One Million One Hundred precisely to convince the court that its ruling is erroneous and improper, contrary to the
Ninety Thousand Seven Hundred Fifty and 50/100 Pesos (P1,190,750.50) to law or evidence; and in so doing, the movant has to dwell of necessity on issues already
the National Telecommunications Commission. passed upon. If a motion for reconsideration may not discuss those issues, the
SO ORDERED. consequence would be that after a decision is rendered, the losing party would be
In time, ICC moved for a reconsideration. This time, the CA, in its Amended Decision confined to filing only motions for reopening and new trial. 9
dated September 30, 1999, reversed itself, to wit: Where there is no apparent intent to employ dilatory tactics, courts should be slow in
WHEREFORE, the instant Motion for Reconsideration is hereby GRANTED. declaring outright a motion for reconsideration as pro forma. The doctrine relating to
Accordingly, the Decision dated 29 January 1999 including the imposition by pro forma motions has a direct bearing upon the movant's valuable right to appeal.
the public respondent of permit fees with respect to [ICCs] international Hence, if petitioner's motion for reconsideration was indeed pro forma, it would still be
leased circuit service is hereby REVERSED. Judgment is hereby rendered, in the interest of justice to review the Amended Decision a quo on the merits, rather
setting aside the questioned orders dated 04 June 1996 and 25 June 1997, than to abort the appeal due to a technicality, especially where, as here, the industry
insofar as they impose upon petitioner ICC the payment of the amount of One involved (telecommunications) is vested with public interest. All the more so given that
Million One Hundred Ninety Thousand Seven Hundred Fifty and Fifty the instant petition raises some arguments that are well-worth resolving for future
Centavos (P1,190,750.50) by way of permit fees as a condition for the grant reference.
This brings us to the substantive merits of the petition.
In its Amended Decision, the CA ruled that petitioner NTC had arrogated upon itself the as against the other. Such alacrity should be avoided. The wise policy is for the judge
power to tax an entity, which it is not authorized to do. Petitioner disagreed, contending to harmonize such statutes or provisions if this is possible, bearing in mind that they
the fee in question is not in the nature of a tax, but is merely a regulatory measure. are equally the handiwork of the same legislature, and so give effect to both while at
Section 40(g) of the Public Service Act provides: the same time also according due respect to a coordinate department of the
Sec. 40. The Commission is authorized and ordered to charge and collect government. It is this policy the Court will apply in arriving at the interpretation of the
from any public service or applicant, as the case may be, the following fees laws and the conclusions that should follow therefrom.13
as reimbursement of its expenses in the authorization, supervision It is a rule of statutory construction that repeals by implication are not favored. An
and/or regulation of the public services: implied repeal will not be allowed unless it is convincingly and unambiguously
xxx xxx xxx demonstrated that the two laws are so clearly repugnant and patently inconsistent with
g) For each permit, authorizing the increase in equipment, the installation of each other that they cannot co-exist. This is based on the rationale that the will of the
new units or authorizing the increase of capacity, or the extension of means legislature cannot be overturned by the judicial function of construction and
or general extensions in the services, twenty centavos for each one hundred interpretation. Courts cannot take the place of Congress in repealing statutes. Their
pesos or fraction of the additional capital necessary to carry out the permit. function is to try to harmonize, as much as possible, seeming conflicts in the laws and
(Emphasis supplied) resolve doubts in favor of their validity and co-existence.14
Clearly, Section 40(g) of the Public Service Act is not a tax measure but a simple Here, there does not even appear to be a conflict between Section 40(g) of the Public
regulatory provision for the collection of fees imposed pursuant to the exercise of the Service Act, as amended, and Section 5(g) of R.A. 7925. In fact, the latter provision
States police power. A tax is imposed under the taxing power of government principally directs petitioner NTC to "continue to impose such fees and charges as may be
for the purpose of raising revenues. The law in question, however, merely authorizes necessary to cover reasonable costs and expenses for the regulation and supervision
and requires the collection of fees for the reimbursement of the Commission's expenses of telecommunications entities." The absence alone of the word "authorization" in
in the authorization, supervision and/or regulation of public services. There can be no Section 5(g) of R.A. No. 7921 cannot be construed to mean that petitioner NTC had
doubt then that petitioner NTC is authorized to collect such fees. However, the amount thus been deprived of the power to collect such fees. As pointed out by the petitioner,
thereof must be reasonably related to the cost of such supervision and/or regulation.10 the words "authorization, supervision and/or regulation" used in Section 40(g) of the
Petitioner NTC also assails the CA's ruling that Section 40(g) of the Public Service Act Public Service Act are not distinct and completely separable concepts which may be
had been amended by Section 5(g) of R.A. No. 7925, which reads: taken singly or piecemeal. Taken in their entirety, they are the quintessence of the
Sec. 5. Responsibilities of the National Telecommunications Commission. - Commission's regulatory functions, and must go hand-in-hand with one another. In
The National Telecommunications Commission (Commission) shall be the petitioner's own words, "[t]he Commission authorizes, supervises and regulates
principal administrator of this Act and as such shall take the necessary telecommunications entities and these functions... cannot be considered singly without
measures to implement the policies and objectives set forth in this Act. destroying the whole concept of the Commission's regulatory functions." 15 Hence,
Accordingly, in addition to its existing functions, the Commission shall be petitioner NTC is correct in asserting that the passage of R.A. 7925 did not bring with
responsible for the following: it the abolition of permit fees.
xxx xxx xxx However, while petitioner had made some valid points of argument, its position must,
g) In the exercise of its regulatory powers, continue to impose such fees of necessity, crumble on the fourth issue raised in its petition. Petitioner itself admits
and charges as may be necessary to cover reasonable costs and that the fees imposed are precisely regulatory and supervision fees, and not taxes. This
expenses for the regulation and supervision of the operations of necessarily implies, however, that such fees must be commensurate to the costs and
telecommunications entities. (Emphasis supplied) expenses involved in discharging its supervisory and regulatory functions. In the words
The CA ratiocinated that while Section 40(g) of the Public Service Act (CA 146, as of Section 40(g) of the Public Service Act itself, the fees and charges which petitioner
amended), supra, allowed NTC to impose fees as reimbursement of its expenses NTC is authorized to collect from any public service or applicant are limited to the
related to, among other things, the "authorization" of public services, Section 5(g), "reimbursement of its expenses in the authorization, supervision and/or regulation of
above, of R.A. No. 7921 no longer speaks of "authorization" but only of "regulation" and public services." It is difficult to comprehend how the cost of licensing, regulating, and
"supervision." To the CA, the omission by Section 5(g) of R.A. No. 7921 of the word surveillance could amount to P1,190,750.50. The CA was correct in finding the amount
"authorization" found in Section 40(g) of the Public Service Act, as amended, meant imposed as permit fee exorbitant and in complete disregard of the basic limitation that
that the fees which NTC may impose are only for reimbursement of its expenses for the fee should be at least approximately commensurate to the expense. Petitioner itself
regulation and supervision but no longer for authorization purposes. admits that it had imposed the maximum amount possible under the Public Service Act,
We find, however, that NTC is correct in saying that there is no showing of legislative as amended. That is hardly taking into consideration the actual costs of fulfilling its
intent to repeal, even impliedly, Section 40(g), supra, of the Public Service Act, as regulatory and supervisory functions.
amended. An implied repeal is predicated on a substantial conflict between the new Independent of the above, there is one basic consideration for the dismissal of this
and prior laws. In the absence of an express repeal, a subsequent law cannot be petition, about which petitioner NTC did not bother to comment at all. We refer to the
construed as repealing a prior one unless an irreconcilable inconsistency and fact that, as respondent ICC aptly observed, the principal ground given by the CA in
repugnancy exist in the terms of the new and old laws.11 The two laws must be striking down the imposition of the P1,190,750.50 fee is that respondent ICC is entitled
absolutely incompatible such that they cannot be made to stand together. 12 to the benefits of the so-called "parity clause" embodied in Section 23 of R.A. No. 7925,
Courts of justice, when confronted with apparently conflicting statutes or provisions, to wit:
should endeavor to reconcile the same instead of declaring outright the validity of one
Section 23. Equality of Treatment in the Telecommunications Industry. - Any DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC),
advantage, favor, privilege, exemption, or immunity granted under existing NATIONAL POWER CORPORATION (NPC), POWER SECTOR ASSETS AND
franchises, or may hereafter be granted, shall ipso facto become part of LIABILITIES MANAGEMENT GROUP (PSALM Corp.), STRATEGIC POWER
previously granted telecommunications franchises and shall be accorded UTILITIES GROUP (SPUG), and PANAY ELECTRIC COMPANY INC. (PECO),
immediately and unconditionally to the grantees of such franchises x x x. Respondents.
In this connection, it is significant to note that the subsequent congressional franchise DECISION
granted to the Domestic Satellite Corporation under Presidential Decree No. 947, NACHURA, J.:
states: Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist
Section 6. In consideration of the franchise and rights hereby granted, the Consumers Network, Inc. (ECN) (petitioners), come before this Court in this original
grantee shall pay to the Republic of the Philippines during the life of this action praying that Section 34 of Republic Act (RA) 9136, otherwise known as the
franchise a tax of one-half percent of gross earnings derived by the grantee "Electric Power Industry Reform Act of 2001" (EPIRA), imposing the Universal Charge,1
from its operation under this franchise and which originate from the and Rule 18 of the Rules and Regulations (IRR)2 which seeks to implement the said
Philippines. Such tax shall be due and payable annually within ten days after imposition, be declared unconstitutional. Petitioners also pray that the Universal
the audit and approval of the accounts by the Commission on Audit as Charge imposed upon the consumers be refunded and that a preliminary injunction
prescribed in Section 11 hereof and shall be in lieu of all taxes, and/or temporary restraining order (TRO) be issued directing the respondents to refrain
assessments, charges, fees, or levies of any kind, nature, or description from implementing, charging, and collecting the said charge. 3 The assailed provision of
levied, established or collected by any municipal, provincial, or national law reads:
authority x x x (Emphasis supplied) SECTION 34. Universal Charge. Within one (1) year from the effectivity of this Act,
The CA was correct in ruling that the above-quoted provision is, by law, considered as a universal charge to be determined, fixed and approved by the ERC, shall be imposed
ipso facto part of ICC's franchise due to the "parity clause" embodied in Section 23 of on all electricity end-users for the following purposes:
R.A. No. 7925. Accordingly, respondent ICC cannot be made subject to the payment (a) Payment for the stranded debts4 in excess of the amount assumed by the
of the subject fees because its payment of the franchise tax is "in lieu" of all other taxes National Government and stranded contract costs of NPC 5 and as well as
and fees. qualified stranded contract costs of distribution utilities resulting from the
WHEREFORE, the petition is hereby DENIED and the assailed Amended Decision and restructuring of the industry;
Resolution of the CA are AFFIRMED. (b) Missionary electrification;6
SO ORDERED. (c) The equalization of the taxes and royalties applied to indigenous or
Puno, Chairperson, Sandoval-Gutierrez, Corona, Azcuna, J.J., concur. renewable sources of energy vis--vis imported energy fuels;
(d) An environmental charge equivalent to one-fourth of one centavo per
[G.R. No. 159796.February 15, 2005] kilowatt-hour (0.0025/kWh), which shall accrue to an environmental fund to
GEROCHI vs. DEPT. OF ENERGY be used solely for watershed rehabilitation and management. Said fund shall
EN BANC be managed by NPC under existing arrangements; and
Gentlemen: (e) A charge to account for all forms of cross-subsidies for a period not
Quoted hereunder, for your information, is a resolution of this Court dated FEB 15 2005. exceeding three (3) years.
G.R. No. 159796 (Romeo P. Gerochi, et al. vs. Department of Energy, et al.) The universal charge shall be a non-bypassable charge which shall be passed on and
The Court Resolved to NOTE the Interrogatories dated 14 December 2004 filed by collected from all end-users on a monthly basis by the distribution utilities. Collections
counsel for petitioners, manifesting that they are availing of the discovery provided for by the distribution utilities and the TRANSCO in any given month shall be remitted to
under Rule 25 of the Rules of Court as follows: the PSALM Corp. on or before the fifteenth (15th) of the succeeding month, net of any
1. How much is the total amount of universal charge for missionary electrification has amount due to the distribution utility. Any end-user or self-generating entity not
so far been collected? connected to a distribution utility shall remit its corresponding universal charge directly
2. How much is the universal charge for environmental charge has so far been collected to the TRANSCO. The PSALM Corp., as administrator of the fund, shall create a
as of this date since implementation? Special Trust Fund which shall be disbursed only for the purposes specified herein in
3. Where are the funds presently deposited and who has the custody thereof? an open and transparent manner. All amount collected for the universal charge shall
4. What portion of the collected universal charge has so far been disbursed for any be distributed to the respective beneficiaries within a reasonable period to be provided
specific purpose or projects and what are the specific purpose or projects to which they by the ERC.
were spent? The Facts
Very truly yours, Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it took effect. 7
LUZVIMINDA D. PUNO On April 5, 2002, respondent National Power Corporation-Strategic Power Utilities
Group8 (NPC-SPUG) filed with respondent Energy Regulatory Commission (ERC) a
G.R. No. 159796 July 17, 2007 petition for the availment from the Universal Charge of its share for Missionary
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and ENVIRONMENTALIST Electrification, docketed as ERC Case No. 2002-165.9
CONSUMERS NETWORK, INC. (ECN), Petitioners, On May 7, 2002, NPC filed another petition with ERC, docketed as ERC Case No.
vs. 2002-194, praying that the proposed share from the Universal Charge for the
Environmental charge of 0.0025 per kilowatt-hour (/kWh), or a total of On the basis of the said ERC decisions, respondent Panay Electric Company, Inc.
119,488,847.59, be approved for withdrawal from the Special Trust Fund (STF) (PECO) charged petitioner Romeo P. Gerochi and all other end-users with the
managed by respondent Power Sector Assets and Universal Charge as reflected in their respective electric bills starting from the month
Liabilities Management Group (PSALM)10 for the rehabilitation and management of of July 2003.17
watershed areas.11 Hence, this original action.
On December 20, 2002, the ERC issued an Order 12 in ERC Case No. 2002-165 Petitioners submit that the assailed provision of law and its IRR which sought to
provisionally approving the computed amount of 0.0168/kWh as the share of the NPC- implement the same are unconstitutional on the following grounds:
SPUG from the Universal Charge for Missionary Electrification and authorizing the 1) The universal charge provided for under Sec. 34 of the EPIRA and sought
National Transmission Corporation (TRANSCO) and Distribution Utilities to collect the to be implemented under Sec. 2, Rule 18 of the IRR of the said law is a tax
same from its end-users on a monthly basis. which is to be collected from all electric end-users and self-generating entities.
On June 26, 2003, the ERC rendered its Decision 13 (for ERC Case No. 2002-165) The power to tax is strictly a legislative function and as such, the delegation
modifying its Order of December 20, 2002, thus: of said power to any executive or administrative agency like the ERC is
WHEREFORE, the foregoing premises considered, the provisional authority granted to unconstitutional, giving the same unlimited authority. The assailed provision
petitioner National Power Corporation-Strategic Power Utilities Group (NPC-SPUG) in clearly provides that the Universal Charge is to be determined, fixed and
the Order dated December 20, 2002 is hereby modified to the effect that an additional approved by the ERC, hence leaving to the latter complete discretionary
amount of 0.0205 per kilowatt-hour should be added to the 0.0168 per kilowatt-hour legislative authority.
provisionally authorized by the Commission in the said Order. Accordingly, a total 2) The ERC is also empowered to approve and determine where the funds
amount of 0.0373 per kilowatt-hour is hereby APPROVED for withdrawal from the collected should be used.
Special Trust Fund managed by PSALM as its share from the Universal Charge for 3) The imposition of the Universal Charge on all end-users is oppressive and
Missionary Electrification (UC-ME) effective on the following billing cycles: confiscatory and amounts to taxation without representation as the consumers
(a) June 26-July 25, 2003 for National Transmission Corporation (TRANSCO); were not given a chance to be heard and represented. 18
and Petitioners contend that the Universal Charge has the characteristics of a tax and is
(b) July 2003 for Distribution Utilities (Dus). collected to fund the operations of the NPC. They argue that the cases 19 invoked by
Relative thereto, TRANSCO and Dus are directed to collect the UC-ME in the amount the respondents clearly show the regulatory purpose of the charges imposed therein,
of 0.0373 per kilowatt-hour and remit the same to PSALM on or before the 15th day which is not so in the case at bench. In said cases, the respective funds 20 were created
of the succeeding month. in order to balance and stabilize the prices of oil and sugar, and to act as buffer to
In the meantime, NPC-SPUG is directed to submit, not later than April 30, 2004, a counteract the changes and adjustments in prices, peso devaluation, and other
detailed report to include Audited Financial Statements and physical status (percentage variables which cannot be adequately and timely monitored by the legislature. Thus,
of completion) of the projects using the prescribed format.1avvphi1 there was a need to delegate powers to administrative bodies. 21 Petitioners posit that
Let copies of this Order be furnished petitioner NPC-SPUG and all distribution utilities the Universal Charge is imposed not for a similar purpose.
(Dus). On the other hand, respondent PSALM through the Office of the Government Corporate
SO ORDERED. Counsel (OGCC) contends that unlike a tax which is imposed to provide income for
On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration asking the ERC, public purposes, such as support of the government, administration of the law, or
among others,14 to set aside the above-mentioned Decision, which the ERC granted in payment of public expenses, the assailed Universal Charge is levied for a specific
its Order dated October 7, 2003, disposing: regulatory purpose, which is to ensure the viability of the country's electric power
WHEREFORE, the foregoing premises considered, the "Motion for Reconsideration" industry. Thus, it is exacted by the State in the exercise of its inherent police power. On
filed by petitioner National Power Corporation-Small Power Utilities Group (NPC- this premise, PSALM submits that there is no undue delegation of legislative power to
SPUG) is hereby GRANTED. Accordingly, the Decision dated June 26, 2003 is hereby the ERC since the latter merely exercises a limited authority or discretion as to the
modified accordingly. execution and implementation of the provisions of the EPIRA.22
Relative thereto, NPC-SPUG is directed to submit a quarterly report on the following: Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the
1. Projects for CY 2002 undertaken; Solicitor General (OSG), share the same view that the Universal Charge is not a tax
2. Location because it is levied for a specific regulatory purpose, which is to ensure the viability of
3. Actual amount utilized to complete the project; the country's electric power industry, and is, therefore, an exaction in the exercise of
4. Period of completion; the State's police power. Respondents further contend that said Universal Charge does
5. Start of Operation; and not possess the essential characteristics of a tax, that its imposition would redound to
6. Explanation of the reallocation of UC-ME funds, if any. the benefit of the electric power industry and not to the public, and that its rate is
SO ORDERED.15 uniformly levied on electricity end-users, unlike a tax which is imposed based on the
Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-194, authorizing the individual taxpayer's ability to pay. Moreover, respondents deny that there is undue
NPC to draw up to 70,000,000.00 from PSALM for its 2003 Watershed Rehabilitation delegation of legislative power to the ERC since the EPIRA sets forth sufficient
Budget subject to the availability of funds for the Environmental Fund component of the determinable standards which would guide the ERC in the exercise of the powers
Universal Charge.16 granted to it. Lastly, respondents argue that the imposition of the Universal Charge is
not oppressive and confiscatory since it is an exercise of the police power of the State To resolve the first issue, it is necessary to distinguish the States power of taxation
and it complies with the requirements of due process.23 from the police power.
On its part, respondent PECO argues that it is duty-bound to collect and remit the The power to tax is an incident of sovereignty and is unlimited in its range,
amount pertaining to the Missionary Electrification and Environmental Fund acknowledging in its very nature no limits, so that security against its abuse is to be
components of the Universal Charge, pursuant to Sec. 34 of the EPIRA and the found only in the responsibility of the legislature which imposes the tax on the
Decisions in ERC Case Nos. 2002-194 and 2002-165. Otherwise, PECO could be held constituency that is to pay it.30 It is based on the principle that taxes are the lifeblood of
liable under Sec. 4624 of the EPIRA, which imposes fines and penalties for any violation the government, and their prompt and certain availability is an imperious need.31 Thus,
of its provisions or its IRR.25 the theory behind the exercise of the power to tax emanates from necessity; without
The Issues taxes, government cannot fulfill its mandate of promoting the general welfare and well-
The ultimate issues in the case at bar are: being of the people.32
1) Whether or not, the Universal Charge imposed under Sec. 34 of the EPIRA On the other hand, police power is the power of the state to promote public welfare by
is a tax; and restraining and regulating the use of liberty and property.33 It is the most pervasive, the
2) Whether or not there is undue delegation of legislative power to tax on the least limitable, and the most demanding of the three fundamental powers of the State.
part of the ERC.26 The justification is found in the Latin maxims salus populi est suprema lex (the welfare
Before we discuss the issues, the Court shall first deal with an obvious procedural of the people is the supreme law) and sic utere tuo ut alienum non laedas (so use your
lapse. property as not to injure the property of others). As an inherent attribute of sovereignty
Petitioners filed before us an original action particularly denominated as a Complaint which virtually extends to all public needs, police power grants a wide panoply of
assailing the constitutionality of Sec. 34 of the EPIRA imposing the Universal Charge instruments through which the State, as parens patriae, gives effect to a host of its
and Rule 18 of the EPIRA's IRR. No doubt, petitioners have locus standi. They impugn regulatory powers.34 We have held that the power to "regulate" means the power to
the constitutionality of Sec. 34 of the EPIRA because they sustained a direct injury as protect, foster, promote, preserve, and control, with due regard for the interests, first
a result of the imposition of the Universal Charge as reflected in their electric bills. and foremost, of the public, then of the utility and of its patrons. 35
However, petitioners violated the doctrine of hierarchy of courts when they filed this The conservative and pivotal distinction between these two powers rests in the purpose
"Complaint" directly with us. Furthermore, the Complaint is bereft of any allegation of for which the charge is made. If generation of revenue is the primary purpose and
grave abuse of discretion on the part of the ERC or any of the public respondents, in regulation is merely incidental, the imposition is a tax; but if regulation is the primary
order for the Court to consider it as a petition for certiorari or prohibition. purpose, the fact that revenue is incidentally raised does not make the imposition a
Article VIII, Section 5(1) and (2) of the 1987 Constitution 27 categorically provides that: tax.36
SECTION 5. The Supreme Court shall have the following powers: In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's
1. Exercise original jurisdiction over cases affecting ambassadors, other police power, particularly its regulatory dimension, is invoked. Such can be deduced
public ministers and consuls, and over petitions for certiorari, prohibition, from Sec. 34 which enumerates the purposes for which the Universal Charge is
mandamus, quo warranto, and habeas corpus. imposed37 and which can be amply discerned as regulatory in character. The EPIRA
2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law resonates such regulatory purposes, thus:
or the rules of court may provide, final judgments and orders of lower courts SECTION 2. Declaration of Policy. It is hereby declared the policy of the State:
in: (a) To ensure and accelerate the total electrification of the country;
(a) All cases in which the constitutionality or validity of any treaty, international or (b) To ensure the quality, reliability, security and affordability of the supply of
executive agreement, law, presidential decree, proclamation, order, instruction, electric power;
ordinance, or regulation is in question. (c) To ensure transparent and reasonable prices of electricity in a regime of
But this Court's jurisdiction to issue writs of certiorari, prohibition, mandamus, quo free and fair competition and full public accountability to achieve greater
warranto, and habeas corpus, while concurrent with that of the regional trial courts and operational and economic efficiency and enhance the competitiveness of
the Court of Appeals, does not give litigants unrestrained freedom of choice of forum Philippine products in the global market;
from which to seek such relief.28 It has long been established that this Court will not (d) To enhance the inflow of private capital and broaden the ownership base
entertain direct resort to it unless the redress desired cannot be obtained in the of the power generation, transmission and distribution sectors;
appropriate courts, or where exceptional and compelling circumstances justify (e) To ensure fair and non-discriminatory treatment of public and private
availment of a remedy within and call for the exercise of our primary jurisdiction.29 This sector entities in the process of restructuring the electric power industry;
circumstance alone warrants the outright dismissal of the present action. (f) To protect the public interest as it is affected by the rates and services of
This procedural infirmity notwithstanding, we opt to resolve the constitutional issue electric utilities and other providers of electric power;
raised herein. We are aware that if the constitutionality of Sec. 34 of the EPIRA is not (g) To assure socially and environmentally compatible energy sources and
resolved now, the issue will certainly resurface in the near future, resulting in a repeat infrastructure;
of this litigation, and probably involving the same parties. In the public interest and to (h) To promote the utilization of indigenous and new and renewable energy
avoid unnecessary delay, this Court renders its ruling now. resources in power generation in order to reduce dependence on imported
The instant complaint is bereft of merit. energy;
The First Issue (i) To provide for an orderly and transparent privatization of the assets and
liabilities of the National Power Corporation (NPC);
(j) To establish a strong and purely independent regulatory body and system In the face of the increasing complexity of modern life, delegation of legislative power
to ensure consumer protection and enhance the competitive operation of the to various specialized administrative agencies is allowed as an exception to this
electricity market; and principle.48 Given the volume and variety of interactions in today's society, it is doubtful
(k) To encourage the efficient use of energy and other modalities of demand if the legislature can promulgate laws that will deal adequately with and respond
side management. promptly to the minutiae of everyday life. Hence, the need to delegate to administrative
From the aforementioned purposes, it can be gleaned that the assailed Universal bodies - the principal agencies tasked to execute laws in their specialized fields - the
Charge is not a tax, but an exaction in the exercise of the State's police power. Public authority to promulgate rules and regulations to implement a given statute and
welfare is surely promoted. effectuate its policies. All that is required for the valid exercise of this power of
Moreover, it is a well-established doctrine that the taxing power may be used as an subordinate legislation is that the regulation be germane to the objects and purposes
implement of police power.38 In Valmonte v. Energy Regulatory Board, et al. 39 and in of the law and that the regulation be not in contradiction to, but in conformity with, the
Gaston v. Republic Planters Bank,40 this Court held that the Oil Price Stabilization Fund standards prescribed by the law. These requirements are denominated as the
(OPSF) and the Sugar Stabilization Fund (SSF) were exactions made in the exercise completeness test and the sufficient standard test.
of the police power. The doctrine was reiterated in Osmea v. Orbos41 with respect to Under the first test, the law must be complete in all its terms and conditions when it
the OPSF. Thus, we disagree with petitioners that the instant case is different from the leaves the legislature such that when it reaches the delegate, the only thing he will have
aforementioned cases. With the Universal Charge, a Special Trust Fund (STF) is also to do is to enforce it. The second test mandates adequate guidelines or limitations in
created under the administration of PSALM.42 The STF has some notable the law to determine the boundaries of the delegate's authority and prevent the
characteristics similar to the OPSF and the SSF, viz.: delegation from running riot.49
1) In the implementation of stranded cost recovery, the ERC shall conduct a The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec.
review to determine whether there is under-recovery or over recovery and 34 thereof, is complete in all its essential terms and conditions, and that it contains
adjust (true-up) the level of the stranded cost recovery charge. In case of an sufficient standards.
over-recovery, the ERC shall ensure that any excess amount shall be remitted Although Sec. 34 of the EPIRA merely provides that "within one (1) year from the
to the STF. A separate account shall be created for these amounts which shall effectivity thereof, a Universal Charge to be determined, fixed and approved by the
be held in trust for any future claims of distribution utilities for stranded cost ERC, shall be imposed on all electricity end-users," and therefore, does not state the
recovery. At the end of the stranded cost recovery period, any remaining specific amount to be paid as Universal Charge, the amount nevertheless is made
amount in this account shall be used to reduce the electricity rates to the end- certain by the legislative parameters provided in the law itself. For one, Sec. 43(b)(ii) of
users.43 the EPIRA provides:
2) With respect to the assailed Universal Charge, if the total amount collected SECTION 43. Functions of the ERC. The ERC shall promote competition, encourage
for the same is greater than the actual availments against it, the PSALM shall market development, ensure customer choice and penalize abuse of market power in
retain the balance within the STF to pay for periods where a shortfall occurs. 44 the restructured electricity industry. In appropriate cases, the ERC is authorized to
3) Upon expiration of the term of PSALM, the administration of the STF shall issue cease and desist order after due notice and hearing. Towards this end, it shall be
be transferred to the DOF or any of the DOF attached agencies as designated responsible for the following key functions in the restructured industry:
by the DOF Secretary.45 xxxx
The OSG is in point when it asseverates: (b) Within six (6) months from the effectivity of this Act, promulgate and enforce, in
Evidently, the establishment and maintenance of the Special Trust Fund, under the last accordance with law, a National Grid Code and a Distribution Code which shall include,
paragraph of Section 34, R.A. No. 9136, is well within the pervasive and non-waivable but not limited to the following:
power and responsibility of the government to secure the physical and economic xxxx
survival and well-being of the community, that comprehensive sovereign authority we (ii) Financial capability standards for the generating companies, the TRANSCO,
designate as the police power of the State.46 distribution utilities and suppliers: Provided, That in the formulation of the financial
This feature of the Universal Charge further boosts the position that the same is an capability standards, the nature and function of the entity shall be considered: Provided,
exaction imposed primarily in pursuit of the State's police objectives. The STF further, That such standards are set to ensure that the electric power industry
reasonably serves and assures the attainment and perpetuity of the purposes for which participants meet the minimum financial standards to protect the public interest.
the Universal Charge is imposed, i.e., to ensure the viability of the country's electric Determine, fix, and approve, after due notice and public hearings the universal charge,
power industry. to be imposed on all electricity end-users pursuant to Section 34 hereof;
The Second Issue Moreover, contrary to the petitioners contention, the ERC does not enjoy a wide
The principle of separation of powers ordains that each of the three branches of latitude of discretion in the determination of the Universal Charge. Sec. 51(d) and (e)
government has exclusive cognizance of and is supreme in matters falling within its of the EPIRA50 clearly provides:
own constitutionally allocated sphere. A logical corollary to the doctrine of separation SECTION 51. Powers. The PSALM Corp. shall, in the performance of its functions
of powers is the principle of non-delegation of powers, as expressed in the Latin maxim and for the attainment of its objective, have the following powers:
potestas delegata non delegari potest (what has been delegated cannot be delegated). xxxx
This is based on the ethical principle that such delegated power constitutes not only a (d) To calculate the amount of the stranded debts and stranded contract costs
right but a duty to be performed by the delegate through the instrumentality of his own of NPC which shall form the basis for ERC in the determination of the
judgment and not through the intervening mind of another. 47 universal charge;
(e) To liquidate the NPC stranded contract costs, utilizing the proceeds from pesos would be lost as a result of power outages or unreliable electric power services.
sales and other property contributed to it, including the proceeds from the The State thru the ERC should be able to exercise its police power with great flexibility,
universal charge. when the need arises.
Thus, the law is complete and passes the first test for valid delegation of legislative This was reiterated in National Association of Electricity Consumers for Reforms v.
power. Energy Regulatory Commission63 where the Court held that the ERC, as regulator,
As to the second test, this Court had, in the past, accepted as sufficient standards the should have sufficient power to respond in real time to changes wrought by multifarious
following: "interest of law and order;"51 "adequate and efficient instruction;"52 "public factors affecting public utilities.
interest;"53 "justice and equity;"54 "public convenience and welfare;" 55 "simplicity, From the foregoing disquisitions, we therefore hold that there is no undue delegation
economy and efficiency;"56 "standardization and regulation of medical education;" 57 of legislative power to the ERC.
and "fair and equitable employment practices."58 Provisions of the EPIRA such as, Petitioners failed to pursue in their Memorandum the contention in the Complaint that
among others, "to ensure the total electrification of the country and the quality, the imposition of the Universal Charge on all end-users is oppressive and confiscatory,
reliability, security and affordability of the supply of electric power" 59 and "watershed and amounts to taxation without representation. Hence, such contention is deemed
rehabilitation and management"60 meet the requirements for valid delegation, as they waived or abandoned per Resolution64 of August 3, 2004.65 Moreover, the
provide the limitations on the ERCs power to formulate the IRR. These are sufficient determination of whether or not a tax is excessive, oppressive or confiscatory is an
standards. issue which essentially involves questions of fact, and thus, this Court is precluded from
It may be noted that this is not the first time that the ERC's conferred powers were reviewing the same.66
challenged. In Freedom from Debt Coalition v. Energy Regulatory Commission,61 the As a penultimate statement, it may be well to recall what this Court said of EPIRA:
Court had occasion to say: One of the landmark pieces of legislation enacted by Congress in recent years is the
In determining the extent of powers possessed by the ERC, the provisions of the EPIRA EPIRA. It established a new policy, legal structure and regulatory framework for the
must not be read in separate parts. Rather, the law must be read in its entirety, because electric power industry. The new thrust is to tap private capital for the expansion and
a statute is passed as a whole, and is animated by one general purpose and intent. Its improvement of the industry as the large government debt and the highly capital-
meaning cannot to be extracted from any single part thereof but from a general intensive character of the industry itself have long been acknowledged as the critical
consideration of the statute as a whole. Considering the intent of Congress in enacting constraints to the program. To attract private investment, largely foreign, the jaded
the EPIRA and reading the statute in its entirety, it is plain to see that the law has structure of the industry had to be addressed. While the generation and transmission
expanded the jurisdiction of the regulatory body, the ERC in this case, to enable the sectors were centralized and monopolistic, the distribution side was fragmented with
latter to implement the reforms sought to be accomplished by the EPIRA. When the over 130 utilities, mostly small and uneconomic. The pervasive flaws have caused a
legislators decided to broaden the jurisdiction of the ERC, they did not intend to abolish low utilization of existing generation capacity; extremely high and uncompetitive power
or reduce the powers already conferred upon ERC's predecessors. To sustain the view rates; poor quality of service to consumers; dismal to forgettable performance of the
that the ERC possesses only the powers and functions listed under Section 43 of the government power sector; high system losses; and an inability to develop a clear
EPIRA is to frustrate the objectives of the law. strategy for overcoming these shortcomings.
In his Concurring and Dissenting Opinion62 in the same case, then Associate Justice, Thus, the EPIRA provides a framework for the restructuring of the industry, including
now Chief Justice, Reynato S. Puno described the immensity of police power in relation the privatization of the assets of the National Power Corporation (NPC), the transition
to the delegation of powers to the ERC and its regulatory functions over electric power to a competitive structure, and the delineation of the roles of various government
as a vital public utility, to wit: agencies and the private entities. The law ordains the division of the industry into four
Over the years, however, the range of police power was no longer limited to the (4) distinct sectors, namely: generation, transmission, distribution and supply.
preservation of public health, safety and morals, which used to be the primary social Corollarily, the NPC generating plants have to privatized and its transmission business
interests in earlier times. Police power now requires the State to "assume an affirmative spun off and privatized thereafter.67
duty to eliminate the excesses and injustices that are the concomitants of an Finally, every law has in its favor the presumption of constitutionality, and to justify its
unrestrained industrial economy." Police power is now exerted "to further the public nullification, there must be a clear and unequivocal breach of the Constitution and not
welfare a concept as vast as the good of society itself." Hence, "police power is but one that is doubtful, speculative, or argumentative. 68 Indubitably, petitioners failed to
another name for the governmental authority to further the welfare of society that is the overcome this presumption in favor of the EPIRA. We find no clear violation of the
basic end of all government." When police power is delegated to administrative bodies Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA and Rule
with regulatory functions, its exercise should be given a wide latitude. Police power 18 of its IRR are unconstitutional and void.
takes on an even broader dimension in developing countries such as ours, where the WHEREFORE, the instant case is hereby DISMISSED for lack of merit.
State must take a more active role in balancing the many conflicting interests in society. SO ORDERED.
The Questioned Order was issued by the ERC, acting as an agent of the State in the
exercise of police power. We should have exceptionally good grounds to curtail its G.R. No. 158290 October 23, 2006
exercise. This approach is more compelling in the field of rate-regulation of electric HILARION M. HENARES, JR., VICTOR C. AGUSTIN, ALFREDO L. HENARES,
power rates. Electric power generation and distribution is a traditional instrument of DANIEL L. HENARES, ENRIQUE BELO HENARES, and CRISTINA BELO
economic growth that affects not only a few but the entire nation. It is an important HENARES, petitioners,
factor in encouraging investment and promoting business. The engines of progress vs.
may come to a screeching halt if the delivery of electric power is impaired. Billions of
LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD and highest among jeepney drivers; and there is a 4.8 to 27.5 percent prevalence of
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, respondents. respiratory symptoms among school children and 15.8 to 40.6 percent among child
vendors. The studies also revealed that the children in Metro Manila showed more
RESOLUTION compromised pulmonary function than their rural counterparts. Petitioners infer that
these are mostly due to the emissions of PUVs.
QUISUMBING, J.: To counter the aforementioned detrimental effects of emissions from PUVs, petitioners
Petitioners challenge this Court to issue a writ of mandamus commanding respondents propose the use of CNG. According to petitioners, CNG is a natural gas comprised
Land Transportation Franchising and Regulatory Board (LTFRB) and the Department mostly of methane which although containing small amounts of propane and butane, 10
of Transportation and Communications (DOTC) to require public utility vehicles (PUVs) is colorless and odorless and considered the cleanest fossil fuel because it produces
to use compressed natural gas (CNG) as alternative fuel. much less pollutants than coal and petroleum; produces up to 90 percent less CO
Citing statistics from the Metro Manila Transportation and Traffic Situation Study of compared to gasoline and diesel fuel; reduces NOx emissions by 50 percent and cuts
1996,1 the Environmental Management Bureau (EMB) of the National Capital Region,2 hydrocarbon emissions by half; emits 60 percent less PMs; and releases virtually no
a study of the Asian Development Bank,3 the Manila Observatory4 and the Department sulfur dioxide. Although, according to petitioners, the only drawback of CNG is that it
of Environment and Natural Resources5 (DENR) on the high growth and low turnover produces more methane, one of the gases blamed for global warming. 11
in vehicle ownership in the Philippines, including diesel-powered vehicles, two-stroke Asserting their right to clean air, petitioners contend that the bases for their petition for
engine powered motorcycles and their concomitant emission of air pollutants, a writ of mandamus to order the LTFRB to require PUVs to use CNG as an alternative
petitioners attempt to present a compelling case for judicial action against the bane of fuel, lie in Section 16,12 Article II of the 1987 Constitution, our ruling in Oposa v.
air pollution and related environmental hazards. Factoran, Jr.,13 and Section 414 of Republic Act No. 8749 otherwise known as the
Petitioners allege that the particulate matters (PM) complex mixtures of dust, dirt, "Philippine Clean Air Act of 1999."
smoke, and liquid droplets, varying in sizes and compositions emitted into the air from Meantime, following a subsequent motion, the Court granted petitioners' motion to
various engine combustions have caused detrimental effects on health, productivity, implead the Department of Transportation and Communications (DOTC) as additional
infrastructure and the overall quality of life. Petitioners particularly cite the effects of respondent.
certain fuel emissions from engine combustion when these react to other pollutants. In his Comment for respondents LTFRB and DOTC, the Solicitor General, cites Section
For instance, petitioners aver, with hydrocarbons, oxide of nitrogen (NO x) creates 3, Rule 65 of the Revised Rules of Court and explains that the writ of mandamus is not
smog; with sulfur dioxide, it creates acid rain; and with ammonia, moisture and other the correct remedy since the writ may be issued only to command a tribunal,
compounds, it reacts to form nitric acid and harmful nitrates. Fuel emissions also cause corporation, board or person to do an act that is required to be done, when he or it
retardation and leaf bleaching in plants. According to petitioner, another emission, unlawfully neglects the performance of an act which the law specifically enjoins as a
carbon monoxide (CO), when not completely burned but emitted into the atmosphere duty resulting from an office, trust or station, or unlawfully excludes another from the
and then inhaled can disrupt the necessary oxygen in blood. With prolonged exposure, use and enjoyment of a right or office to which such other is entitled, there being no
CO affects the nervous system and can be lethal to people with weak hearts. 6 other plain, speedy and adequate remedy in the ordinary course of law. 15 Further citing
Petitioners add that although much of the new power generated in the country will use existing jurisprudence, the Solicitor General explains that in contrast to a discretionary
natural gas while a number of oil and coal-fired fuel stations are being phased-out, still act, a ministerial act, which a mandamus is, is one in which an officer or tribunal
with the projected doubling of power generation over the next 10 years, and with the performs in a given state of facts, in a prescribed manner, in obedience to a mandate
continuing high demand for motor vehicles, the energy and transport sectors are likely of legal authority, without regard to or the exercise of his own judgment upon the
to remain the major sources of harmful emissions. Petitioners refer us to the study of propriety or impropriety of an act done.
the Philippine Environment Monitor 20027, stating that in four of the country's major The Solicitor General also notes that nothing in Rep. Act No. 8749 that petitioners
cities, Metro Manila, Davao, Cebu and Baguio, the exposure to PM10, a finer PM which invoke, prohibits the use of gasoline and diesel by owners of motor vehicles. Sadly too,
can penetrate deep into the lungs causing serious health problems, is estimated at over according to the Solicitor General, Rep. Act No. 8749 does not even mention the
US$430 million.8 The study also reports that the emissions of PMs have caused the existence of CNG as alternative fuel and avers that unless this law is amended to
following: provide CNG as alternative fuel for PUVs, the respondents cannot propose that PUVs
Over 2,000 people die prematurely. This loss is valued at about US$140 use CNG as alternative fuel.
million. The Solicitor General also adds that it is the DENR that is tasked to implement Rep.
Over 9,000 people suffer from chronic bronchitis, which is valued at about Act No. 8749 and not the LTFRB nor the DOTC. Moreover, he says, it is the Department
US$120 million. of Energy (DOE), under Section 2616 of Rep. Act No. 8749, that is required to set the
Nearly 51 million cases of respiratory symptom days in Metro Manila specifications for all types of fuel and fuel-related products to improve fuel compositions
(averaging twice a year in Davao and Cebu, and five to six times in Metro for improved efficiency and reduced emissions. He adds that under Section 21 17 of the
Manila and Baguio), costs about US$170 million. This is a 70 percent cited Republic Act, the DOTC is limited to implementing the emission standards for
increase, over a decade, when compared with the findings of a similar study motor vehicles, and the herein respondents cannot alter, change or modify the emission
done in 1992 for Metro Manila, which reported 33 million cases.9 standards. The Solicitor General opines that the Court should declare the instant
Petitioners likewise cite the University of the Philippines' studies in 1990-91 and 1994 petition for mandamus without merit.
showing that vehicular emissions in Metro Manila have resulted to the prevalence of Petitioners, in their Reply, insist that the respondents possess the administrative and
chronic obstructive pulmonary diseases (COPD); that pulmonary tuberculosis is regulatory powers to implement measures in accordance with the policies and
principles mandated by Rep. Act No. 8749, specifically Section 2 18 and Section 21.19 Now, as to petitioners' standing. There is no dispute that petitioners have standing to
Petitioners state that under these laws and with all the available information provided bring their case before this Court. Even respondents do not question their standing.
by the DOE on the benefits of CNG, respondents cannot ignore the existence of CNG, This petition focuses on one fundamental legal right of petitioners, their right to clean
and their failure to recognize CNG and compel its use by PUVs as alternative fuel while air. Moreover, as held previously, a party's standing before this Court is a procedural
air pollution brought about by the emissions of gasoline and diesel endanger the technicality which may, in the exercise of the Court's discretion, be set aside in view of
environment and the people, is tantamount to neglect in the performance of a duty the importance of the issue raised. We brush aside this issue of technicality under the
which the law enjoins. principle of the transcendental importance to the public, especially so if these cases
Lastly, petitioners aver that other than the writ applied for, they have no other plain, demand that they be settled promptly.
speedy and adequate remedy in the ordinary course of law. Petitioners insist that the Undeniably, the right to clean air not only is an issue of paramount importance to
writ in fact should be issued pursuant to the very same Section 3, Rule 65 of the petitioners for it concerns the air they breathe, but it is also impressed with public
Revised Rules of Court that the Solicitor General invokes. interest. The consequences of the counter-productive and retrogressive effects of a
In their Memorandum, petitioners phrase the issues before us as follows: neglected environment due to emissions of motor vehicles immeasurably affect the
I. WHETHER OR NOT THE PETITIONERS HAVE THE PERSONALITY TO well-being of petitioners. On these considerations, the legal standing of the petitioners
BRING THE PRESENT ACTION deserves recognition.
II. WHETHER OR NOT THE PRESENT ACTION IS SUPPORTED BY LAW Our next concern is whether the writ of mandamus is the proper remedy, and if the writ
III. WHETHER OR NOT THE RESPONDENT IS THE AGENCY could issue against respondents.
RESPONSIBLE TO IMPLEMENT THE SUGGESTED ALTERNATIVE OF Under Section 3, Rule 65 of the Rules of Court, mandamus lies under any of the
REQUIRING PUBLIC UTILITY VEHICLES TO USE COMPRESSED following cases: (1) against any tribunal which unlawfully neglects the performance of
NATURAL GAS (CNG) an act which the law specifically enjoins as a duty; (2) in case any corporation, board
IV. WHETHER OR NOT THE RESPONDENT CAN BE COMPELLED TO or person unlawfully neglects the performance of an act which the law enjoins as a duty
REQUIRE PUBLIC UTILITY VEHICLES TO USE COMPRESSED NATURAL resulting from an office, trust, or station; and (3) in case any tribunal, corporation, board
GAS THROUGH A WRIT OF MANDAMUS20 or person unlawfully excludes another from the use and enjoyment of a right or office
Briefly put, the issues are two-fold. First, Do petitioners have legal personality to bring to which such other is legally entitled; and there is no other plain, speedy, and adequate
this petition before us? Second, Should mandamus issue against respondents to remedy in the ordinary course of law.
compel PUVs to use CNG as alternative fuel? In University of San Agustin, Inc. v. Court of Appeals,25 we said,
According to petitioners, Section 16,21 Article II of the 1987 Constitution is the policy It is settled that mandamus is employed to compel the performance, when
statement that bestows on the people the right to breathe clean air in a healthy refused, of a ministerial duty, this being its main objective. It does not lie to
environment. This policy is enunciated in Oposa.22 The implementation of this policy is require anyone to fulfill contractual obligations or to compel a course of
articulated in Rep. Act No. 8749. These, according to petitioners, are the bases for their conduct, nor to control or review the exercise of discretion. On the part of the
standing to file the instant petition. They aver that when there is an omission by the petitioner, it is essential to the issuance of a writ of mandamus that he should
government to safeguard a right, in this case their right to clean air, then, the citizens have a clear legal right to the thing demanded and it must be the imperative
can resort to and exhaust all remedies to challenge this omission by the government. duty of the respondent to perform the act required. It never issues in doubtful
This, they say, is embodied in Section 423 of Rep. Act No. 8749. cases. While it may not be necessary that the duty be absolutely expressed,
Petitioners insist that since it is the LTFRB and the DOTC that are the government it must however, be clear. The writ will not issue to compel an official to do
agencies clothed with power to regulate and control motor vehicles, particularly PUVs, anything which is not his duty to do or which is his duty not to do, or give to
and with the same agencies' awareness and knowledge that the PUVs emit dangerous the applicant anything to which he is not entitled by law. The writ neither
levels of air pollutants, then, the responsibility to see that these are curbed falls under confers powers nor imposes duties. It is simply a command to exercise a
respondents' functions and a writ of mandamus should issue against them. power already possessed and to perform a duty already imposed. (Emphasis
The Solicitor General, for his part, reiterates his position that the respondent supplied.)
government agencies, the DOTC and the LTFRB, are not in a position to compel the In this petition the legal right which is sought to be recognized and enforced hinges on
PUVs to use CNG as alternative fuel. The Solicitor General explains that the function a constitutional and a statutory policy already articulated in operational terms, e.g. in
of the DOTC is limited to implementing the emission standards set forth in Rep. Act No. Rep. Act No. 8749, the Philippine Clean Air Act of 1999. Paragraph (a), Section 21 of
8749 and the said law only goes as far as setting the maximum limit for the emission the Act specifically provides that when PUVs are concerned, the responsibility of
of vehicles, but it does not recognize CNG as alternative engine fuel. The Solicitor implementing the policy falls on respondent DOTC. It provides as follows:
General avers that the petition should be addressed to Congress for it to come up with SEC 21. Pollution from Motor Vehicles. - a) The DOTC shall implement the
a policy that would compel the use of CNG as alternative fuel. emission standards for motor vehicles set pursuant to and as provided in this
Patently, this Court is being asked to resolve issues that are not only procedural. Act. To further improve the emission standards, the Department [DENR] shall
Petitioners challenge this Court to decide if what petitioners propose could be done review, revise and publish the standards every two (2) years, or as the need
through a less circuitous, speedy and unchartered course in an issue that Chief Justice arises. It shall consider the maximum limits for all major pollutants to ensure
Hilario G. Davide, Jr. in his ponencia in the Oposa case,24 describes as "inter- substantial improvement in air quality for the health, safety and welfare of the
generational responsibility" and "inter-generational justice." general public.
Paragraph (b) states:
b) The Department [DENR] in collaboration with the DOTC, DTI and LGUs, In the same manner that we have associated the fundamental right to a balanced and
shall develop an action plan for the control and management of air healthful ecology with the twin concepts of "inter-generational responsibility" and "inter-
pollution from motor vehicles consistent with the Integrated Air Quality generational justice" in Oposa,28 where we upheld the right of future Filipinos to prevent
Framework . . . . (Emphasis supplied.) the destruction of the rainforests, so do we recognize, in this petition, the right of
There is no dispute that under the Clean Air Act it is the DENR that is tasked to set the petitioners and the future generation to clean air. In Oposa we said that if the right to a
emission standards for fuel use and the task of developing an action plan. As far as balanced and healthful ecology is now explicitly found in the Constitution even if the
motor vehicles are concerned, it devolves upon the DOTC and the line agency whose right is "assumed to exist from the inception of humankind, it is because of the well-
mandate is to oversee that motor vehicles prepare an action plan and implement the founded fear of its framers [of the Constitution] that unless the rights to a balanced and
emission standards for motor vehicles, namely the LTFRB. healthful ecology and to health are mandated as state policies by the Constitution itself,
In Oposa26 we said, the right to a balanced and healthful ecology carries with it the thereby highlighting their continuing importance and imposing upon the state a solemn
correlative duty to refrain from impairing the environment. We also said, it is clearly the obligation to preserve the first and protect and advance the second, the day would not
duty of the responsible government agencies to advance the said right. be too far when all else would be lost not only for the present generation, but also for
Petitioners invoke the provisions of the Constitution and the Clean Air Act in their prayer those to come. . ."29
for issuance of a writ of mandamus commanding the respondents to require PUVs to It is the firm belief of this Court that in this case, it is timely to reaffirm the premium we
use CNG as an alternative fuel. Although both are general mandates that do not have placed on the protection of the environment in the landmark case of Oposa. Yet,
specifically enjoin the use of any kind of fuel, particularly the use of CNG, there is an as serious as the statistics are on air pollution, with the present fuels deemed toxic as
executive order implementing a program on the use of CNG by public vehicles. they are to the environment, as fatal as these pollutants are to the health of the citizens,
Executive Order No. 290, entitled Implementing the Natural Gas Vehicle Program for and urgently requiring resort to drastic measures to reduce air pollutants emitted by
Public Transport (NGVPPT), took effect on February 24, 2004. The program motor vehicles, we must admit in particular that petitioners are unable to pinpoint the
recognized, among others, natural gas as a clean burning alternative fuel for vehicle law that imposes an indubitable legal duty on respondents that will justify a grant of the
which has the potential to produce substantially lower pollutants; and the Malampaya writ of mandamus compelling the use of CNG for public utility vehicles. It appears to us
Gas-to-Power Project as representing the beginning of the natural gas industry of the that more properly, the legislature should provide first the specific statutory remedy to
Philippines. Paragraph 1.2, Section 1 of E.O. No. 290 cites as one of its objectives, the the complex environmental problems bared by herein petitioners before any judicial
use of CNG as a clean alternative fuel for transport. Furthermore, one of the recourse by mandamus is taken.
components of the program is the development of CNG refueling stations and all WHEREFORE, the petition for the issuance of a writ of mandamus is DISMISSED for
related facilities in strategic locations in the country to serve the needs of CNG-powered lack of merit.
PUVs. Section 3 of E.O. No. 290, consistent with E.O. No. 66, series of 2002, SO ORDERED.
designated the DOE as the lead agency (a) in developing the natural gas industry of Carpio, Morales, Tinga, and Velasco, Jr., JJ., concur.
the country with the DENR, through the EMB and (b) in formulating emission standards
for CNG. Most significantly, par. 4.5, Section 4 tasks the DOTC, working with the DOE, G.R. No. L-59234 September 30, 1982
to develop an implementation plan for "a gradual shift to CNG fuel utilization in PUVs TAXICAB OPERATORS OF METRO MANILA, INC., FELICISIMO CABIGAO and
and promote NGVs [natural gas vehicles] in Metro Manila and Luzon through the ACE TRANSPORTATION CORPORATION, petitioners,
issuance of directives/orders providing preferential franchises in present day major vs.
routes and exclusive franchises to NGVs in newly opened routes" A thorough reading THE BOARD OF TRANSPORTATION and THE DIRECTOR OF THE BUREAU OF
of the executive order assures us that implementation for a cleaner environment is LAND TRANSPORTATION, respondents.
being addressed. To a certain extent, the instant petition had been mooted by the
issuance of E.O. No. 290. MELENCIO-HERRERA, J.:
Regrettably, however, the plain, speedy and adequate remedy herein sought by This Petition for "Certiorari, Prohibition and mandamus with Preliminary Injunction and
petitioners, i.e., a writ of mandamus commanding the respondents to require PUVs to Temporary Restraining Order" filed by the Taxicab Operators of Metro Manila, Inc.,
use CNG, is unavailing. Mandamus is available only to compel the doing of an act Felicisimo Cabigao and Ace Transportation, seeks to declare the nullity of
specifically enjoined by law as a duty. Here, there is no law that mandates the Memorandum Circular No. 77-42, dated October 10, 1977, of the Board of
respondents LTFRB and the DOTC to order owners of motor vehicles to use CNG. At Transportation, and Memorandum Circular No. 52, dated August 15, 1980, of the
most the LTFRB has been tasked by E.O. No. 290 in par. 4.5 (ii), Section 4 "to grant Bureau of Land Transportation.
preferential and exclusive Certificates of Public Convenience (CPC) or franchises to Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a domestic corporation
operators of NGVs based on the results of the DOTC surveys." composed of taxicab operators, who are grantees of Certificates of Public Convenience
Further, mandamus will not generally lie from one branch of government to a coordinate to operate taxicabs within the City of Manila and to any other place in Luzon accessible
branch, for the obvious reason that neither is inferior to the other. 27 The need for future to vehicular traffic. Petitioners Ace Transportation Corporation and Felicisimo Cabigao
changes in both legislation and its implementation cannot be preempted by orders from are two of the members of TOMMI, each being an operator and grantee of such
this Court, especially when what is prayed for is procedurally infirm. Besides, comity certificate of public convenience.
with and courtesy to a coequal branch dictate that we give sufficient time and leeway On October 10, 1977, respondent Board of Transportation (BOT) issued Memorandum
for the coequal branches to address by themselves the environmental problems raised Circular No. 77-42 which reads:
in this petition. SUBJECT: Phasing out and Replacement of
Old and Dilapidated Taxis
Year Model Automatic
WHEREAS, it is the policy of the government to insure that only safe and
Phase-Out
comfortable units are used as public conveyances;
Year
WHEREAS, the riding public, particularly in Metro-Manila, has, time and
again, complained against, and condemned, the continued operation of old
1980
and dilapidated taxis;
WHEREAS, in order that the commuting public may be assured of comfort,
1974 1981
convenience, and safety, a program of phasing out of old and dilapidated taxis
should be adopted;
1975 1982
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
1976 1983
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 1977
no car beyond six years shall be operated as taxi, and in implementation of
the same hereby promulgates the following rules and regulations: etc. etc.
1. As of December 31, 1977, all taxis of Model 1971 and earlier are ordered Strict compliance here is desired.2

withdrawn from public service and thereafter may no longer be registered and In accordance therewith, cabs of model 1971 were phase-out in registration year 1978;
operated as taxis. In the registration of cards for 1978, only taxis of Model those of model 1972, in 1979; those of model 1973, in 1980; and those of model 1974,
1972 and later shall be accepted for registration and allowed for operation; in 1981.
2. As of December 31, 1978, all taxis of Model 1972 are ordered withdrawn On January 27, 1981, petitioners filed a Petition with the BOT, docketed as Case No.
from public service and thereafter may no longer be registered and operated 80-7553, seeking to nullify MC No. 77-42 or to stop its implementation; to allow the
as taxis. In the registration of cars for 1979, only taxis of Model 1973 and later registration and operation in 1981 and subsequent years of taxicabs of model 1974, as
shall be accepted for registration and allowed for operation; and every year well as those of earlier models which were phased-out, provided that, at the time of
thereafter, there shall be a six-year lifetime of taxi, to wit: registration, they are roadworthy and fit for operation.
1980 Model 1974 On February 16, 1981, petitioners filed before the BOT a "Manifestation and Urgent
1981 Model 1975, etc. Motion", praying for an early hearing of their petition. The case was heard on February
All taxis of earlier models than those provided above are hereby ordered 20, 1981. Petitioners presented testimonial and documentary evidence, offered the
withdrawn from public service as of the last day of registration of each same, and manifested that they would submit additional documentary proofs. Said
particular year and their respective plates shall be surrendered directly to the proofs were submitted on March 27, 1981 attached to petitioners' pleading entitled,
Board of Transportation for subsequent turnover to the Land Transportation "Manifestation, Presentation of Additional Evidence and Submission of the Case for
Commission. Resolution." 3
For an orderly implementation of this Memorandum Circular, the rules herein On November 28, 1981, petitioners filed before the same Board a "Manifestation and
shall immediately be effective in Metro-Manila. Its implementation outside Urgent Motion to Resolve or Decide Main Petition" praying that the case be resolved
Metro- Manila shall be carried out only after the project has been implemented or decided not later than December 10, 1981 to enable them, in case of denial, to avail
in Metro-Manila and only after the date has been determined by the Board. 1 of whatever remedy they may have under the law for the protection of their interests
Pursuant to the above BOT circular, respondent Director of the Bureau of Land before their 1975 model cabs are phased-out on January 1, 1982.
Transportation (BLT) issued Implementing Circular No. 52, dated August 15, 1980, Petitioners, through its President, allegedly made personal follow-ups of the case, but
instructing the Regional Director, the MV Registrars and other personnel of BLT, all was later informed that the records of the case could not be located.
within the National Capitol Region, to implement said Circular, and formulating a On December 29, 1981, the present Petition was instituted wherein the following
schedule of phase-out of vehicles to be allowed and accepted for registration as public queries were posed for consideration by this Court:
conveyances. To quote said Circular: A. Did BOT and BLT promulgate the questioned memorandum circulars in
Pursuant to BOT Memo-Circular No. 77-42, taxi units with year models over accord with the manner required by Presidential Decree No. 101, thereby
six (6) years old are now banned from operating as public utilities in Metro safeguarding the petitioners' constitutional right to procedural due process?
Manila. As such the units involved should be considered as automatically B. Granting, arguendo, that respondents did comply with the procedural
dropped as public utilities and, therefore, do not require any further dropping requirements imposed by Presidential Decree No. 101, would the
order from the BOT. implementation and enforcement of the assailed memorandum circulars
Henceforth, taxi units within the National Capitol Region having year models violate the petitioners' constitutional rights to.
over 6 years old shall be refused registration. The following schedule of (1) Equal protection of the law;
phase-out is herewith prescribed for the guidance of all concerned: (2) Substantive due process; and
(3) Protection against arbitrary and unreasonable
classification and standard?
On Procedural and Substantive Due Process: 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
Presidential Decree No. 101 grants to the Board of Transportation the power standard must be adopted to apply to an vehicles affected uniformly, fairly, and justly.
4. To fix just and reasonable standards, classification, regulations, practices, The span of six years supplies that reasonable standard. The product of experience
measurements, or service to be furnished, imposed, observed, and followed shows that by that time taxis have fully depreciated, their cost recovered, and a fair
by operators of public utility motor vehicles. return on investment obtained. They are also generally dilapidated and no longer fit for
Section 2 of said Decree provides procedural guidelines for said agency to follow in the safe and comfortable service to the public specially considering that they are in
exercise of its powers: continuous operation practically 24 hours everyday in three shifts of eight hours per
Sec. 2. Exercise of powers. In the exercise of the powers granted in the shift. With that standard of reasonableness and absence of arbitrariness, the
preceding section, the Board shag proceed promptly along the method of requirement of due process has been met.
legislative inquiry.
Apart from its own investigation and studies, the Board, in its discretion, may On Equal Protection of the Law:
require the cooperation and assistance of the Bureau of Transportation, the Petitioners alleged that the Circular in question violates their right to equal protection
Philippine Constabulary, particularly the Highway Patrol Group, the support of the law because the same is being enforced in Metro Manila only and is directed
agencies within the Department of Public Works, Transportation and solely towards the taxi industry. At the outset it should be pointed out that
Communications, or any other government office or agency that may be able implementation outside Metro Manila is also envisioned in Memorandum Circular No.
to furnish useful information or data in the formulation of the Board of any 77-42. To repeat the pertinent portion:
policy, plan or program in the implementation of this Decree. For an orderly implementation of this Memorandum Circular, the rules herein
The Board may also can conferences, require the submission of position shall immediately be effective in Metro Manila. Its implementation outside
papers or other documents, information, or data by operators or other persons Metro Manila shall be carried out only after the project has been implemented
that may be affected by the implementation of this Decree, or employ any in Metro Manila and only after the date has been determined by the Board. 4
other suitable means of inquiry. In fact, it is the understanding of the Court that implementation of the Circulars in Cebu
In support of their submission that they were denied procedural due process, petitioners City is already being effected, with the BOT in the process of conducting studies
contend that they were not caged upon to submit their position papers, nor were they regarding the operation of taxicabs in other cities.
ever summoned to attend any conference prior to the issuance of the questioned BOT The Board's reason for enforcing the Circular initially in Metro Manila is that taxicabs in
Circular. this city, compared to those of other places, are subjected to heavier traffic pressure
It is clear from the provision aforequoted, however, that the leeway accorded the Board and more constant use. This is of common knowledge. Considering that traffic
gives it a wide range of choice in gathering necessary information or data in the conditions are not the same in every city, a substantial distinction exists so that
formulation of any policy, plan or program. It is not mandatory that it should first call a infringement of the equal protection clause can hardly be successfully claimed.
conference or require the submission of position papers or other documents from As enunciated in the preambular clauses of the challenged BOT Circular, the overriding
operators or persons who may be affected, this being only one of the options open to consideration is the safety and comfort of the riding public from the dangers posed by
the Board, which is given wide discretionary authority. Petitioners cannot justifiably old and dilapidated taxis. The State, in the exercise, of its police power, can prescribe
claim, therefore, that they were deprived of procedural due process. Neither can they regulations to promote the health, morals, peace, good order, safety and general
state with certainty that public respondents had not availed of other sources of inquiry welfare of the people. It can prohibit all things hurtful to comfort, safety and welfare of
prior to issuing the challenged Circulars. operators of public conveyances are not the society. 5 It may also regulate property rights. 6 In the language of Chief Justice Enrique
only primary sources of the data and information that may be desired by the BOT. M. Fernando "the necessities imposed by public welfare may justify the exercise of
Dispensing with a public hearing prior to the issuance of the Circulars is neither violative governmental authority to regulate even if thereby certain groups may plausibly assert
of procedural due process. As held in Central Bank vs. Hon. Cloribel and Banco Filipino, that their interests are disregarded". 7
44 SCRA 307 (1972): In so far as the non-application of the assailed Circulars to other transportation services
Pevious notice and hearing as elements of due process, are constitutionally is concerned, it need only be recalled that the equal protection clause does not imply
required for the protection of life or vested property rights, as well as of liberty, that the same treatment be accorded all and sundry. It applies to things or persons
when its limitation or loss takes place in consequence of a judicial or quasi- Identically or similarly situated. It permits of classification of the object or subject of the
judicial proceeding, generally dependent upon a past act or event which has law provided classification is reasonable or based on substantial distinction, which
to be established or ascertained. It is not essential to the validity of general 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
rules or regulations promulgated to govern future conduct of a class or
persons or enterprises, unless the law provides otherwise. (Emphasis means so that all persons under Identical or similar circumstance would be accorded
supplied) the same treatment both in privilege conferred and the liabilities imposed. 9 The
Petitioners further take the position that fixing the ceiling at six (6) years is arbitrary and challenged Circulars satisfy the foregoing criteria.
oppressive because the roadworthiness of taxicabs depends upon their kind of Evident then is the conclusion that the questioned Circulars do not suffer from any
maintenance and the use to which they are subjected, and, therefore, their actual constitutional infirmity. To declare a law unconstitutional, the infringement of
physical condition should be taken into consideration at the time of registration. As constitutional right must be clear, categorical and undeniable. 10
public contend, however, it is impractical to subject every taxicab to constant and
WHEREFORE, the Writs prayed for are denied and this Petition is hereby dismissed. On November 11, 1999, MERALCO filed its comment7 to Tis complaint in ERB Case
No costs. No. 99-67 and there moved for the dismissal thereof on the ground of lack of
SO ORDERED. jurisdiction.
Fernando, CJ., Barredo, Makasiar, Concepcion, Jr., Guerrero, Abad Santos, De On December 27, 1999, the ERB issued an Order8 denying MERALCOs motion for
Castro, Plana, Escolin, Vasquez, Relova and Gutierrez, Jr., JJ., concur. reconsideration, thereby virtually reiterating the reconnection directive contained in its
Teehankee and Aquino, JJ., concur in the result. earlier Order of October 22, 1999.9 Partly wrote the ERB in its December 27, 1999
Order:
G.R. No. 145399 March 17, 2006 [Petitioner MERALCOs] contention that this Board has no jurisdiction over the subject
MANILA ELECTRIC COMPANY (MERALCO), Petitioner, matter of the instant complaint, which is the restoration of the partial shutdown of the
vs. electric service to complainants building, cannot be upheld. The law gives consumers
ENERGY REGULATORY BOARD (ERB), and EDGAR L. TI, doing business under who have a cause of grievance against any public utility, such as herein [petitioner]
the name and style of ELT ENTERPRISE, Respondents. MERALCO, a complete, speedy and adequate remedy. That is the purpose of
DECISION Commonwealth Act No. 146, as amended, creating the Public Service Commission,
GARCIA, J.: this Boards predecessor office, and prescribing its duties and powers, and the reason
Before us is this petition for review on certiorari to annul and set aside the decision 1 why it was enacted .10 (Words in bracket added.)
dated September 22, 2000 of the Court of Appeals (CA) in CA G.R. SP No. 56946, Dissatisfied, MERALCO went to the CA on a petition for certiorari, thereat docketed as
which effectively affirmed the Orders of the Energy Regulatory Board 2 (ERB) dated CA-G.R. SP No. 56946, assailing as having been issued without jurisdiction or with
October 22, 1999 and December 27, 1999 in ERB Case No. 99-67. grave abuse of discretion, the ERBs orders dated October 22, 1999 and December 27,
The assailed CA decision upheld public respondent ERBs exercise of jurisdiction over 1999.
cases involving complaints for reconnection of electric service cut-off for alleged Eventually, the CA, in a Decision dated September 22, 2000, 11 veritably rejected
violation of Republic Act (R.A.) No. 7832, otherwise known as the "Anti-electricity and MERALCOs imputation of lack of jurisdiction or grave abuse of discretion on the part
Electric Transmission Lines/Materials Pilferage Act of 1994," as well as ERBs authority of the ERB and, accordingly, affirmed the latters twin assailed orders and dismissed
to issue a provisional order of reconnection. MERALCOs recourse thereto. Partly says the CA in its decision:
The factual background: The agency charged with regulatory and adjudicatory functions covering the energy
On October 18, 1999, herein private respondent Edgar L. Ti, doing business under the sector is the Energy Regulatory Board created under E.O. No. 172 dated May 8, 1987.
name and style ELT Enterprise, filed a verified complaint3 before the ERB against The nucleus of the ERB was the Board of Energy established by P.D. No. 1206 dated
petitioner Manila Electric Company (MERALCO). In it, Ti alleged inter alia that October 6, 1977, which had the power to regulate and fix power rates to be charged by
MERALCO unlawfully disconnected partially the electric service in his business electric companies and to issue certificates of public convenience for the operation of
establishment located at Little Baguio, San Juan, Metro Manila and seized three (3) of electric power utilities and services. 12
his electric meters on mere suspicion of meter tampering. Aggravating the situation, Ti xxx xxx xxx
adds, was the fact that the notice of disconnection was served at night, while the actual xxx. E.O. No. 172, dated June 5, 1987, saw the further need to create an independent
disconnection was not done in the presence of the owner of ELT Enterprise or his body which gave birth to the present ERB. The aim of course is to achieve a more
representative. The unauthorized disconnection, Ti claimed, has caused him great coherent and effective policy formulation, coordination, implementation and monitoring
damage which, if not immediately addressed, would result to irreparable injury. He thus within the energy sector, and to consolidate in one body all the regulatory and
prayed that pending hearing of his complaint, docketed as ERB Case No. 99-67, adjudicatory functions covering the energy sector.13
electric service be restored in his establishment. xxx xxx xxx
In an Order dated October 22, 1999,4 the ERB, by way of provisional relief, ordered the There should be no debate then about ERBs possessing jurisdiction to regulate and
desired reconnection of electric service and, at the same, directed MERALCO to submit adjudicate matters relating to its functions as highlighted above. The law clearly affords
its comment on the complaint. any customer, like private respondent, a plain, complete and adequate remedy for any
On October 29, 1999, MERALCO moved for a reconsideration of the aforementioned grievance against a public utility, and the ERB not only has the right, but the duty as
provisional reconnection order, alleging that an inspection conducted by its service well, to grant relief in proper cases. Relevant provisions of the Public Service Act have
inspectors accompanied by elements of the Philippine National Police found Ti to have been substantially carried over in statutes creating independent specialized agencies,
tampered three (3) electric meters installed in his business premises by manipulating like ERB, with regulatory and adjudicatory powers.14
the dial pointers thereof. The fraudulent act of Ti, according to MERALCO, constituted Hence, petitioner MERALCOs present recourse, on the following grounds:
a violation of R.A. No. 7832 legally warranting the immediate disconnection of the A.
electric supply on his establishment, as provided under Section 4 5 in relation to Section THE CONCLUSION OF THE [CA] THAT THE PUBLIC RESPONDENT HAS
66 thereof. MERALCO further argued that the ERB is without jurisdiction to issue a JURISDICTION TO HEAR CONTROVERSIES BETWEEN PRIVATE RESPONDENT
provisional relief and order the restoration of electric service, that authority being vested AND PETITIONER ARISING FROM VIOLATION OF THE SERVICE CONTRACT AND
only on regular courts. CASES FALLING UNDER R.A. 7832 IS CONTRARY TO EXISTING LAW.
On the same day, MERALCO instituted a criminal complaint against Ti for violation of B.
R. A. No. 7832 before the Prosecutors Office of Rizal. The criminal complaint appears THE [CA] ERRONEOUSLY CONCLUDED THAT PUBLIC RESPONDENT HAS
to be still pending resolution. AUTHORITY TO ISSUE PROVISIONAL REMEDY IN THE NATURE OF WRIT OF
PRELIMINARY MANDATORY INJUNCTION. ASSUMING ARGUENDO THAT IT HAS power heretofore vested in the PSC were transferred to the Board of Power and
THE POWER, IT VIOLATED R.A. 7832 WHEN IT ORDERED THE RECONNECTION Waterworks (BOPW).
OF SERVICE WITHOUT THE REQUISITE BOND.15 Later, P.D. No. 120621 abolished the BOPW. Its powers and function relative to power
The pivotal issue before the Court turns on whether or not public respondent ERB has utilities, including its authority to grant provisional relief, 22 were transferred to the newly-
jurisdiction to order the reconnection of electric service in cases arising from alleged created Board of Energy (BOE).
violation of R. A. No. 7832. 5. On May 8, 1987, then President Corazon C. Aquino issued E.O. No. 172
Petitioner MERALCO urges the resolution of the issue in the negative on the rationale reconstituting the BOE into the ERB, transferring the formers functions and powers
that there is no provision in Executive Order (E.O.) No. 172, series of 1987, the ERB under P.D. No. 1206 to the latter23 and consolidating in and entrusting on the ERB "all
charter, granting that agency adjudicative jurisdiction over violations of R. A. No. 7832, the regulatory and adjudicatory functions covering the energy sector." 24 Section 14 of
let alone order the restoration of a disconnected electric service. Such jurisdiction, as E.O. No. 172 states that "(T)he applicable provisions of [C.A.] No. 146, as amended,
petitioner insisted all along, is vested with the regular courts. otherwise known as the Public Service Act; xxx and [P.D.] No. 1206, as amended,
The Court disagrees. creating the Department of Energy, shall continue to have full force and effect, except
Jurisdiction is conferred by law.16 Corollary to this basic postulate is the general rule insofar as inconsistent with this Order."25
that the jurisdiction of a court or tribunal over the subject matter is determined by the Given the foregoing consideration, it is valid to say that certain provisions of the PSA
allegations in the complaint17 or petition and not in those of the defendants answer or (C.A. No. 146, as amended) have been carried over in the executive order, i.e., E.O.
similar responsive pleading. No. 172, creating the ERB. Foremost of these relate to the transfer to the ERB of the
To determine the ERBs jurisdiction, a look at the legislative history of the regulatory jurisdiction and control heretofore pertaining to and exercised by the PSC over electric,
agencies preceding it is apropos. These agencies and the corresponding statute or light and power corporations owned, operated and/or managed for public use or
issuance creating each are as indicated below: service. And as Section 17(a) of C.A. No. 146, as amended, supra, provides, this
1. The first regulatory body, the Board of Rate Regulation (BRR), was created jurisdiction and control includes the power to investigate any matter concerning any
by virtue of Act No. 1779.18 Its regulatory mandate under Section 5 of the law public service and to require any public utility or public service corporation to furnish
was limited to fixing or regulating rates of every public service corporation. adequate and proper service. Any suggestion that the transfer of PSCs functions and
2. In 1913, Act No. 230719 created the Board of Public Utility Commissioners powers to the ERB is inconsistent with E.O. No. 172 must be rejected, the principal
(BPUC) to take over the functions of the BRR. By express provision of Act No. objective of the said issuance being precisely to reinforce the powers of the ERB as the
2307, the BPUC was vested with jurisdiction, supervision and control over all sole regulatory body over the energy sector.26
public utilities and their properties and franchises. Needless to stress, petitioner MERALCO, being an electric service provider, is under
3. On November 7, 1936, Commonwealth Act (C.A.) No. 146, or the Public the regulatory jurisdiction and supervision of the ERB.
Service Act (PSA), was passed creating the Public Service Commission What remains to be determined then is whether or not, based on the allegations in
(PSC) to replace the BPUC. Like the BPUC, the PSC was expressly granted private respondent Tis complaint in ERB Case No. 99-67, the ERBs jurisdiction,
jurisdiction, supervision and control over public services, with the concomitant supervision and/or control over petitioner MERALCO is/are duly invoked.
authority of calling on the public force to exercise its power, to wit: The pertinent allegations in the complaint are, as follows:
SEC. 13. Except as otherwise provided herein, the Commission shall have general 3. [Respondent Ti] is the owner of ELT Center a consumer of electric light and power
supervision and regulation of, jurisdiction and control over, all public utilities, and also for its 8-storey building supplied by [Meralco] since his operation in October 1998 to
over their property, property rights, equipment, facilities and franchises so far as may the present.
be necessary for the purpose of carrying out the provisions of this Act, and in the 4. That [Meralco] through its authorized inspectors, agents or representatives
exercise of its authority it shall have the necessary powers and the aid of the public swooped down on the ELT Building and proceeded by force, to disconnect the
force xxx xxx xxx. (Emphasis supplied) electric service of [respondent Ti] and in the process seized three (3) electric meters
Section 14 of C.A. No. 146 defines the term "public service" or "public utility" as . The claim of the raiding team that the tampering on the electric meters confiscated
including "every individual, copartnership, association, corporation or joint-stock was done "in flagrante delicto" is a pure fabrication . without any factual basis. This
company, . . . that now or hereafter may own, operate, manage or control within the unfortunate incident occurred on October 13 and 14, 1999 between the unholy hours
Philippines, for hire or compensation, any common carrier, xxx xxx, electric light, heat, of 11:30 pm 1:30 am .
power, xxx xxx, when owned, operated and managed for public use or service within 5. That the Notices of Disconnection dated October 13, 1999 were served at the unholy
the Philippines xxx xxx." Under the succeeding Section 17(a), the PSC has the power hours of the night when there was nobody in the premises to acknowledge receipt
even without prior hearing of the same. The three (3) disconnection notices dated October 13, 1999 were served
(a) To investigate, upon its own initiative, or upon complaint in writing, any matter only on the security guard on duty . xxx
concerning any public service as regards matters under its jurisdiction; to require any xxx xxx xxx
public service to furnish safe, adequate and proper service as the public interest may 11. A public service corporation like [Meralco] should not resort to unlawful acts in
require and warrant, to enforce compliance with any standard, rule, regulation, order or ferreting out electric pilferers like what was done in the instant case .
other requirement of this Act or of the Commission, xxx. 12. [Meralco] should be reminded of its responsibility as a public service corporation
4. Then came Presidential Decree (P.D.) No. 1,20 reorganizing the national government which is clothed with public interest not to resort to oppression and abuse of authority
and implementing the Integrated Reorganization Plan. Under the reorganization plan, which do not speak well of a giant corporation .27
jurisdiction, supervision and control over public services related to electric light, and
It is fairly clear from the foregoing that the ERB can properly take cognizance of order, whether from the court or from the former, in order to effect a disconnection. Had
respondent Tis complaint for reconnection of electric service in ERB Case No. 99-67, the intention of Congress been to vest exclusively on the regular courts cases involving
touching as it does on the obligation of a public utility to supply adequate electricity and violation of R. A. No. 7832, there is simply no sense for it to include the term
proper service to the consuming public. It bears to reiterate that the ERB, by force of "administrative order" in Section 6.
the aforecited Sections 13 and 17(a) of C.A. No 146, as amended, in relation to Section The above conclusion is no more than being faithful to the rule that every part of a
14 of E.O. No. 172, has jurisdiction, control and supervision over all public services, statute should be given effect, a statute being enacted as an integrated measure and
their franchises and properties, with power to investigate any matter respecting its not as a hodgepodge of conflicting provisions.30 In line with this rule, it behooves courts
jurisdiction and to require any public service to furnish safe, adequate and proper to adopt a construction that will give effect to every part of the statute, its every word, if
service as the public interest may require. To us, the power of control and supervision at all possible.31
over public utilities would otherwise be a meaningless delegation were the ERB is The criminal aspect of the alleged violation of R. A. No. 7832 is of course a different
precluded from requiring a public utility to reconnect pending the determination of matter. A circumspect look at E.O. No. 172 yields no indication that the ERBs
propriety of the disconnection. For sure, respondent Tis complaint prayed for no other jurisdiction extends to adjudication of criminal complaints for infringement of R. A. No.
relief than the immediate restoration in his business establishment of electric light and 7832.
power service, to wit: While a complaint for reconnection of a customers electric service is inter-related to
WHEREFORE premises considered, it is respectfully prayed of this Honorable Board the criminal action for violation of R. A. No. 7832, the determination of the propriety of
to order respondent Meralco to restore the partial shutdown of electric light and power the reconnection remains distinct and independent from the criminal action. The
service that it unlawfully cut-off from the business establishment of herein complainant, dominant and primordial objective of a criminal prosecution is the punishment of the
pending notice and hearing, and that the order granting provisional relief should be offender, while a complaint for reconnection is intended merely to address a
issued immediately upon the filing of this complaint to prevent any further serious consumers grievance against an electric service provider with respect to the
and irreparable damage and injury to herein complainant. generation, transmission and supply of electric service. In fact, any determination or
That after, notice and hearing, the provisional relief herein Granted should be made ruling in the reconnection case is without prejudice to the criminal liability which may
PERMANENT.28 be imposed in the criminal action. There is absolutely no conflict between the exercise
There can be no quibbling that the ERB may investigate and ascertain the propriety of by the ERB of its power to entertain a complaint for reconnection of electric service and
the disconnection due to an alleged violation of R. A. No. 7832. Necessarily, in the the regular courts jurisdiction to entertain and act on a criminal action against private
course of such investigation, the ERB may, if factually and legally justified, order the respondent Ti for violation of R. A. No. 7832. The reason therefor is not hard to discern:
electric service provider, petitioner MERALCO in this instance, to reconnect the a criminal action affects the social order while an action for reconnection of electric
consumers, private respondents in this case, power supply and resume service. service pertains to the public utilitys obligation to provide public service which partakes
Compelling the complaining consumer to still go to court to secure, if proper, a of the nature of a civil action and affects private rights. 32
reconnection order, as petitioners line of argument urges, would be reading into R. A. It is petitioners posture that it is not within the ERBs power to grant a provisional relief.
No. 7832 something not written therein. Hence, its argument that the ERB gravely abused its discretion when it ordered
In any event, Section 929 of R. A. No. 7832 speaks of restraining orders or writs of MERALCO to immediately reconnect Tis electric service pending hearing of the main
injunction against the exercise by an electric provider of its right and authority "to action in ERB Case No. 99-67.
disconnect" electric service. Here, the provisional relief granted by the ERB in its Again, the Court disagrees.
challenged Order of October 22, 1999 is for reconnection precisely because petitioner Petitioner has evidently lost sight of Section 8 of E.O. No. 172 which explicitly vests on
MERALCO had already disconnected the power supply to Tis premises. the ERB, as an incident to its principal functions, the authority to grant provisional relief,
In this connection, it is significant to note that under Section 6 itself of R. A. No. 7832, thus:
the right and authority of a private electric utility to immediately disconnect an electric SEC. 8. Authority to Grant Provisional Relief. The [Energy Regulatory] Board may,
service upon written notice or warning to a customer may be done "without the need of upon the filing of an application, petition or complaint or at any stage thereafter and
a court or administrative order." We quote the pertinent provision of Section 6: without prior hearing, on the basis of supporting papers duly verified or authenticated,
SEC. 6. Disconnection of Electric Service. The private electric utility or rural electric grant provisional relief on motion of a party in the case or on its own initiative, without
cooperative concerned shall have the right and authority to disconnect immediately the prejudice to a final decision after hearing, should the Board find that the pleadings,
electric service after serving a written notice or warning to that effect, without the need together with such affidavits, documents and other evidence which may be submitted
of a court or administrative order, and deny restoration of the same, when the owner of in support of the motion, substantially support the provisional order: . (Emphasis and
the house or establishment concerned or someone acting in his behalf shall have been words in bracket supplied.)
caught in flagrante delicto doing any of the acts enumerated in Section 4(a) hereof, or Furthermore, Section 2, Rule 13 of the Rules of Practice and Procedure Governing
when any of the circumstances so enumerated shall have been discovered for the Hearings Before the ERB,33 provides as follows:
second time: xxx (Emphasis supplied). Section 2. Provisional relief. Upon the filing of an application, petition or complaint, or
Inferentially, the express mention of an "administrative order" under the aforequoted at any stage thereafter, the Board may grant on motion of the pleader or on its own
provision negates MERALCOs principal submission that only the regular courts may initiative, the relief prayed for without prejudice to a final decision after completion of
issue orders in matters involving violations of R. A. No. 7832. And more specifically in the hearing should the Board find that the pleading, together with the affidavits and
the subject of disconnection, the legislature thereby implicitly recognized the supporting documents attached thereto and such additional evidence as may have
participation of an administrative body although a public utility need not secure a prior been presented, substantially support the provisional order; Provided: That the Board
may, motu proprio, continue to issue orders or grant relief in the exercise of its powers commonly known as TPU buses, in accordance with the terms and conditions of the
of general supervision under existing laws. (Emphasis supplied.) certificates of public convenience issued in its favor by the former Public Utility
As hereinabove explained, the ERB is endowed with the authority to hear and Commission in cases Nos. 24948, 30973, 36830, 32014 and 53090. On August 26,
adjudicate complaints for reconnection of electric service and to grant provisional or 1939, the petitioner filed with the Public Service Commission an application for
ancillary relief during the pendency of the main action. At bottom then, the ERB did no authorization to operate ten additional new Brockway trucks (case No. 56641), on the
more than to exercise its legal mandate when it ordered petitioner MERALCO to ground that they were needed to comply with the terms and conditions of its existing
immediately restore the electric service at respondent Tis business establishment certificates and as a result of the application of the Eight Hour Labor Law. In the
pending hearing of the main case. The Court finds the ERBs provisional action to be decision of September 26, 1939, granting the petitioner's application for increase of
both factually and legally justified. Hence, the imputation of grave abuse of discretion equipment, the Public Service Commission ordered:
on its part is without leg to stand on. Y de acuerdo con que se provee por el articulo 15 de la ley No. 146 del
Lastly, petitioner contends that the ERBs Order of October 22, 1999, directing the Commonwealth, tal como ha sido enmendada por el articulo 1 de la Ley No.
reconnection of electric service at the business premises of respondent Ti is in the 454, por la presente se enmienda las condiciones de los certificados de
nature of a writ of preliminary mandatory injunction which the ERB has no legal basis convenciencia publica expedidos en los expedientes Nos. 24948, 30973,
to issue. Petitioner cites in this regard Section 9 of R. A. No. 7832 which reads: 36831, 32014 y la authorizacion el el expediente No. 53090, asi que se
SEC. 9. Restriction on the Issuance of Restraining Orders or Writs of Injunction. No consideran incorporadas en los mismos las dos siguientes condiciones:
writ of injunction or restraining order shall be issued by any court against any private Que los certificados de conveniencia publica y authorizacion arriba
electric utility or rural electric cooperative exercising the right and authority to mencionados seran validos y subsistentes solamente durante de veinticinco
disconnect electric service as provided in this Act, unless there is prima facie evidence (25) anos, contados desde la fecha de la promulgacion de esta decision.
that the disconnection was made with evident bad faith or grave abuse of authority. Que la empresa de la solicitante porda ser adquirida por el Commonwealth
(Emphasis supplied) de Filipinas o por alguna dependencia del mismo en cualquier tiempo que lo
The Court remains unconvinced. deseare previo pago del precio d costo de su equipo util, menos una
Administrative agencies, such as the ERB, are not considered courts; they are neither depreciacion razonable que se ha fijar por la Comision al tiempo de su
part of the judicial system nor are they deemed judicial tribunals. 34 The prohibition adquisicion.
against the issuance of restraining order or writs of injunction does not thus apply to Not being agreeable to the two new conditions thus incorporated in its existing
ERB as the term "court" contemplated in the aforequoted provision refers to a regular certificates, the petitioner filed on October 9, 1939 a motion for reconsideration which
court belonging to the judicial department. was denied by the Public Service Commission on November 14, 1939. Whereupon, on
Parenthetically, Section 14 of R. A. No. 7832 authorizes the ERB to issue the necessary November 20, 1939, the present petition for a writ of certiorari was instituted in this
implementing rules and regulations to ensure the efficient and effective implementation court praying that an order be issued directing the secretary of the Public Service
of its provisions. Pursuant to such authority, the ERB, as aptly observed by the CA, has Commission to certify forthwith to this court the records of all proceedings in case No.
approved, upon MERALCOs behest, the "Terms and Conditions of Service" which 56641; that this court, after hearing, render a decision declaring section 1 of
apply to and govern all service connections in all places within its franchise area. Commonwealth Act No. 454 unconstitutional and void; that, if this court should be of
Specifically, the "Terms and Conditions of Service" provides the customer an the opinion that section 1 of Commonwealth Act No. 454 is constitutional, a decision
understanding of the limitations attendant to his use of the electric service by be rendered declaring that the provisions thereof are not applicable to valid and
MERALCO and further sets forth the rights and responsibilities of both the customer subsisting certificates issued prior to June 8, 1939. Stated in the language of the
and MERALCO under the electric service. These rules, to borrow from the assailed petitioner, it is contended:
decision of the CA, clearly afford any customer, like private respondent Ti, a plain and 1. That the legislative powers granted to the Public Service Commission by
adequate remedy for any grievance against a public utility. section 1 of Commonwealth Act No. 454, without limitation, guide or rule
WHEREFORE, the instant petition is DENIED and the assailed decision of the Court of except the unfettered discretion and judgment of the Commission, constitute
Appeals dated September 22, 2000 is AFFIRMED. a complete and total abdication by the Legislature of its functions in the
Costs against petitioner. premises, and for that reason, the Act, in so far as those powers are
SO ORDERED. concerned, is unconstitutional and void.
2. That even if it be assumed that section 1 of Commonwealth Act No. 454, is
G.R. No. 47065 June 26, 1940 valid delegation of legislative powers, the Public Service Commission has
PANGASINAN TRANSPORTATION CO., INC., petitioner, exceeded its authority because: (a) The Act applies only to future certificates
vs. and not to valid and subsisting certificates issued prior to June 8, 1939, when
THE PUBLIC SERVICE COMMISSION, respondent. said Act took effect, and (b) the Act, as applied by the Commission, violates
C. de G. Alvear for petitioner. constitutional guarantees.
Evaristo R. Sandoval for respondent. Section 15 of Commonwealth Act No. 146, as amended by section 1 of Commonwealth
LAUREL, J.: Act No. 454, invoked by the respondent Public Service Commission in the decision
The petitioner has been engaged for the past twenty years in the business of complained of in the present proceedings, reads as follows:
transporting passengers in the Province of Pangasinan and Tarlac and, to a certain With the exception to those enumerated in the preceding section, no public
extent, in the Province of Nueva Ecija and Zambales, by means of motor vehicles service shall operate in the Philippines without possessing a valid and
subsisting certificate from the Public Service Commission, known as Fernandez and Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs.
"certificate of public convenience," or "certificate of convenience and public Rosenthal and Osmea, G. R. Nos. 46076 and 46077, promulgated June 12, 1939,
necessity," as the case may be, to the effect that the operation of said service citing New York Central Securities Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77 Law.
and the authorization to do business will promote the public interests in a ed. 138, 145, 146; Schenchter Poultry Corporation vs. I.S., 295, 540, 79 Law. ed. 1570,
proper and suitable manner. 1585; Ferrazzini vs. Gsell, 34 Phil., 697, 711-712.)
The Commission may prescribed as a condition for the issuance of the Section 8 of Article XIII of the Constitution provides, among other things, that no
certificate provided in the preceding paragraph that the service can be franchise, certificate, or any other form of authorization for the operation of a public
acquired by the Commonwealth of the Philippines or by any instrumentality utility shall be "for a longer period than fifty years," and when it was ordained, in section
thereof upon payment of the cost price of its useful equipment, less 15 of Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, that
reasonable depreciation; and likewise, that the certificate shall valid only for a the Public Service Commission may prescribed as a condition for the issuance of a
definite period of time; and that the violation of any of these conditions shall certificate that it "shall be valid only for a definite period of time" and, in section 16 (a)
produce the immediate cancellation of the certificate without the necessity of that "no such certificates shall be issued for a period of more than fifty years," the
any express action on the part of the Commission. National Assembly meant to give effect to the aforesaid constitutional mandate. More
In estimating the depreciation, the effect of the use of the equipment, its actual than this, it has thereby also declared its will that the period to be fixed by the Public
condition, the age of the model, or other circumstances affecting its value in Service Commission shall not be longer than fifty years. All that has been delegated to
the market shall be taken into consideration. the Commission, therefore, is the administrative function, involving the use discretion,
The foregoing is likewise applicable to any extension or amendment of to carry out the will of the National Assembly having in view, in addition, the promotion
certificates actually force and to those which may hereafter be issued, to of "public interests in a proper and suitable manner." The fact that the National
permits to modify itineraries and time schedules of public services and to Assembly may itself exercise the function and authority thus conferred upon the Public
authorization to renew and increase equipment and properties. Service Commission does not make the provision in question constitutionally
Under the first paragraph of the aforequoted section 15 of Act No. 146, as amended, objectionable.
no public service can operate without a certificate of public convenience or certificate The theory of the separation of powers is designed by its originators to secure action
of convenience and public necessity to the effect that the operation of said service and and at the same time to forestall overaction which necessarily results from undue
the authorization to do business will "public interests in a proper and suitable manner." concentration of powers, and thereby obtain efficiency and prevent deposition.
Under the second paragraph, one of the conditions which the Public Service Thereby, the "rule of law" was established which narrows the range of governmental
Commission may prescribed the issuance of the certificate provided for in the first action and makes it subject to control by certain devices. As a corollary, we find the
paragraph is that "the service can be acquired by the Commonwealth of the Philippines rule prohibiting delegation of legislative authority, and from the earliest time American
or by any instrumental thereof upon payment of the cost price of its useful equipment, legal authorities have proceeded on the theory that legislative power must be exercised
less reasonable depreciation," a condition which is virtually a restatement of the by the legislature alone. It is frankness, however, to confess that as one delves into the
principle already embodied in the Constitution, section 6 of Article XII, which provides mass of judicial pronouncement, he finds a great deal of confusion. One thing, however,
that "the State may, in the interest of national welfare and defense, establish and is apparent in the development of the principle of separation of powers and that is that
operate industries and means of transportation and communication, and, upon the maxim of delegatus non potest delegari or delegata potestas non potest delegari,
payment of just compensation, transfer to public ownership utilities and other private attributed to Bracton (De Legius et Consuetedinious Angliae, edited by G. E. Woodbine,
enterprises to be operated by the Government. "Another condition which the Yale University Press, 1922, vol. 2, p. 167) but which is also recognized in principle in
Commission may prescribed, and which is assailed by the petitioner, is that the the Roman Law (D. 17.18.3), has been made to adapt itself to the complexities of
certificate "shall be valid only for a definite period of time." As there is a relation between modern governments, giving rise to the adoption, within certain limits, of the principle
the first and second paragraphs of said section 15, the two provisions must be read of "subordinate legislation," not only in the United States and England but in practically
and interpreted together. That is to say, in issuing a certificate, the Commission must all modern governments. (People vs. Rosenthal and Osmea, G. R. Nos. 46076 and
necessarily be satisfied that the operation of the service under said certificate during a 46077, promulgated June 12, 1939.) Accordingly, with the growing complexity of
definite period fixed therein "will promote the public interests in a proper and suitable modern life, the multiplication of the subjects of governmental regulation, and the
manner." Under section 16 (a) of Commonwealth Act. No. 146 which is a complement increased difficulty of administering the laws, there is a constantly growing tendency
of section 15, the Commission is empowered to issue certificates of public convenience toward the delegation of greater powers by the legislature, and toward the approval of
whenever it "finds that the operation of the public service proposed and the the practice by the court. (Dillon Catfish Drainage Dist, v. Bank of Dillon, 141 S. E. 274,
authorization to do business will promote the public interests in a proper and suitable 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W. 2d. 973, 976, 165 Tenn. 319.) In
manner." Inasmuch as the period to be fixed by the Commission under section 15 is harmony with such growing tendency, this Court, since the decision in the case of
inseparable from the certificate itself, said period cannot be disregarded by the Compaia General de Tabacos de Filipinas vs. Board of Public Utility Commissioner
Commission in determining the question whether the issuance of the certificate will (34 Phil., 136), relied upon by the petitioner, has, in instances, extended its seal of
promote the public interests in a proper and suitable manner. Conversely, in approval to the "delegation of greater powers by the legislature." (Inchausti Steamship
determining "a definite period of time," the Commission will be guided by "public Co. vs. Public Utility Commissioner, 44 Phil., Autobus Co. vs. De Jesus, 56 Phil., 446;
interests," the only limitation to its power being that said period shall not exceed fifty People vs. Fernandez & Trinidad, G. R. No. 45655, promulgated June 15, 1938; People
years (sec. 16 (a), Commonwealth Act No. 146; Constitution, Art. XIII, sec. 8.) We have vs. Rosenthal & Osmea, G. R. Nos. 46076, 46077, promulgated June 12, 1939; and
already ruled that "public interest" furnishes a sufficient standard. (People vs. Robb and Hilscher vs. People, G. R. No. 45866, promulgated June 12, 1939.).
Under the fourth paragraph of section 15 of Commonwealth Act No. 146, as amended logically succeeded to the Congress of the United States in the power to amend, alter
by Commonwealth Act No. 454, the power of the Public Service Commission to or repeal any franchise or right granted prior to or after the approval of the Constitution;
prescribed the conditions "that the service can be acquired by the Commonwealth of and when Commonwealth Acts Nos. 146 and 454 were enacted, the National
the Philippines or by any instrumentality thereof upon payment of the cost price of its Assembly, to the extent therein provided, has declared its will and purpose to amend
useful equipment, less reasonable," and "that the certificate shall be valid only for a or alter existing certificates of public convenience.
definite period of time" is expressly made applicable "to any extension or amendment Upon the other hand, statutes enacted for the regulation of public utilities, being a
of certificates actually in force" and "to authorizations to renew and increase equipment proper exercise by the state of its police power, are applicable not only to those public
and properties." We have examined the legislative proceedings on the subject and have utilities coming into existence after its passage, but likewise to those already
found that these conditions were purposely made applicable to existing certificates of established and in operation.
public convenience. The history of Commonwealth Act No. 454 reveals that there was Nor is there any merit in petitioner's contention, that, because of the
an attempt to suppress, by way of amendment, the sentence "and likewise, that the establishment of petitioner's operations prior to May 1, 1917, they are not
certificate shall be valid only for a definite period of time," but the attempt failed: subject to the regulations of the Commission. Statutes for the regulation of
xxx xxx xxx public utilities are a proper exercise by the state of its police power. As soon
Sr. CUENCO. Seor Presidente, para otra enmienda. En la misma pagina, as the power is exercised, all phases of operation of established utilities,
lineas 23 y 24, pido que se supriman las palabras 'and likewise, that the become at once subject to the police power thus called into operation.
certificate shall be valid only for a definite period time.' Esta disposicion del Procedures' Transportation Co. v. Railroad Commission, 251 U. S. 228, 40
proyecto autoriza a la Comision de Servicios Publicos a fijar un plazo de Sup. Ct. 131, 64 Law. ed. 239, Law v. Railroad Commission, 184 Cal. 737,
vigencia certificado de conveniencia publica. Todo el mundo sabe que bo se 195 Pac. 423, 14 A. L. R. 249. The statute is applicable not only to those public
puede determinar cuando los intereses del servicio publico requiren la utilities coming into existence after its passage, but likewise to those already
explotacion de un servicio publico y ha de saber la Comision de Servisios, si established and in operation. The 'Auto Stage and Truck Transportation Act'
en un tiempo determinado, la explotacion de algunos buses en cierta ruta ya (Stats. 1917, c. 213) is a statute passed in pursuance of the police power. The
no tiene de ser, sobre todo, si tiene en cuenta; que la explotacion de los only distinction recognized in the statute between those established before
servicios publicos depende de condiciones flutuantes, asi como del volumen and those established after the passage of the act is in the method of the
como trafico y de otras condiciones. Ademas, el servicio publico se concede creation of their operative rights. A certificate of public convenience and
por la Comision de Servicios Publicos el interes publico asi lo exige. El interes necessity it required for any new operation, but no such certificate is required
publico no tiene duracion fija, no es permanente; es un proceso mas o menos of any transportation company for the operation which was actually carried on
indefinido en cuanto al tiempo. Se ha acordado eso en el caucus de anoche. in good faith on May 1, 1917, This distinction in the creation of their operative
EL PRESIDENTE PRO TEMPORE. Que dice el Comite? rights in no way affects the power of the Commission to supervise and
Sr. ALANO. El Comite siente tener que rechazar esa enmienda, en vista de regulate them. Obviously the power of the Commission to hear and dispose
que esto certificados de conveniencia publica es igual que la franquicia: of complaints is as effective against companies securing their operative rights
sepuede extender. Si los servicios presentados por la compaia durante el prior to May 1, 1917, as against those subsequently securing such right under
tiempo de su certificado lo require, puede pedir la extension y se le extendera; a certificate of public convenience and necessity. (Motor Transit Co. et al. v.
pero no creo conveniente el que nosotros demos un certificado de Railroad Commission of California et al., 209 Pac. 586.)
conveniencia publica de una manera que podria pasar de cincuenta anos, Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the
porque seria anticonstitucional. Public Service Commission but are "a part of the charter of every utility company
xxx xxx xxx operating or seeking to operate a franchise" in the Philippines. (Streator Aqueduct Co.
By a majority vote the proposed amendment was defeated. (Sesion de 17 de mayo de v. et al., 295 Fed. 385.) The business of a common carrier holds such a peculiar relation
1939, Asamblea Nacional.) to the public interest that there is superinduced upon it the right of public regulation.
The petitioner is mistaken in the suggestion that, simply because its existing certificates When private property is "affected with a public interest it ceased to be juris privati only."
had been granted before June 8, 1939, the date when Commonwealth Act No. 454, When, therefore, one devotes his property to a use in which the public has an interest,
amendatory of section 15 of Commonwealth Act No. 146, was approved, it must be he, in effect, grants to the public an interest in that use, and must submit to be controlled
deemed to have the right of holding them in perpetuity. Section 74 of the Philippine Bill by the public for the common good, to the extent of the interest he has thus created.
provided that "no franchise, privilege, or concession shall be granted to any corporation He may withdraw his grant by discounting the use, but so long as he maintains the use
except under the conditions that it shall be subject to amendment, alteration, or repeal he must submit to control. Indeed, this right of regulation is so far beyond question that
by the Congress of the United States." The Jones Law, incorporating a similar mandate, it is well settled that the power of the state to exercise legislative control over public
provided, in section 28, that "no franchise or right shall be granted to any individual, utilities may be exercised through boards of commissioners. (Fisher vs. Yangco
firm, or corporation except under the conditions that it shall be subject to amendment, Steamship Company, 31 Phil., 1, citing Munn vs. Illinois, 94 U.S. 113; Georgia R. &
alteration, or repeal by the Congress of the United States." Lastly, the Constitution of Bkg. Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143 U.S. 517; New York etc. R.
the Philippines provided, in section 8 of Article XIII, that "no franchise or right shall be Co. vs. Bristol 151 U.S. 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S. 689;
granted to any individual, firm, or corporation, except under the condition that it shall Louisville etc. Ry Co. vs. Kentucky, 161 U.S. 677, 695.) This right of the state to
be subject to amendment, alteration, or repeal by the National Assembly when the regulate public utilities is founded upon the police power, and statutes for the control
public interest so requires." The National Assembly, by virtue of the Constitution, and regulation of utilities are a legitimate exercise thereof, for the protection of the
public as well as of the utilities themselves. Such statutes are, therefore, not
unconstitutional, either impairing the obligation of contracts, taking property without due
process, or denying the equal protection of the laws, especially inasmuch as the
question whether or not private property shall be devoted to a public and the
consequent burdens assumed is ordinarily for the owner to decide; and if he voluntarily
places his property in public service he cannot complain that it becomes subject to the
regulatory powers of the state. (51 C. J., sec. 21, pp. 9-10.) in the light of authorities
which hold that a certificate of public convenience constitutes neither a franchise nor
contract, confers no property right, and is mere license or privilege. (Burgess vs. Mayor
& Alderman of Brockton, 235 Mass. 95, 100, 126 N. E. 456; Roberto vs. Commisioners
of Department of Public Utilities, 262 Mass. 583, 160 N. E. 321; Scheible vs. Hogan,
113 Ohio St. 83, 148 N. E. 581; Martz vs. Curtis [J. L.] Cartage Co. [1937], 132 Ohio
St. 271, 7 N. E. [d] 220; Manila Yellow Taxicab Co. vs. Sabellano, 59 Phil., 773.)
Whilst the challenged provisions of Commonwealth Act No. 454 are valid and
constitutional, we are, however, of the opinion that the decision of the Public Service
Commission should be reversed and the case remanded thereto for further
proceedings for the reason now to be stated. The Public Service Commission has
power, upon proper notice and hearing, "to amend, modify or revoke at any time any
certificate issued under the provisions of this Act, whenever the facts and
circumstances on the strength of which said certificate was issued have been
misrepresented or materially changed." (Section 16, par. [m], Commonwealth Act No.
146.) The petitioner's application here was for an increase of its equipment to enable it
to comply with the conditions of its certificates of public convenience. On the matter of
limitation to twenty five (25) years of the life of its certificates of public convenience,
there had been neither notice nor opportunity given the petitioner to be heard or present
evidence. The Commission appears to have taken advantage of the petitioner to
augment petitioner's equipment in imposing the limitation of twenty-five (25) years
which might as well be twenty or fifteen or any number of years. This is, to say the least,
irregular and should not be sanctioned. There are cardinal primary rights which must
be respected even in proceedings of this character. The first of these rights is the right
to a hearing, which includes the right of the party interested or affected to present his
own case and submit evidence in support thereof. In the language of Chief Justice
Hughes, in Morgan v. U.S., (304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129), "the
liberty and property of the citizen shall be protected by the rudimentary requirements
of fair play." Not only must the party be given an opportunity to present his case and to
adduce evidence tending to establish the rights which he asserts but the tribunal must
consider the evidence presented. (Chief Justice Hughes in Morgan vs. U.S., 298 U.S.
468, 56 S. Ct. 906, 80 :Law. ed. 1288.) In the language of this Court in Edwards vs.
McCoy (22 Phil., 598), "the right to adduce evidence, without the corresponding duty
on the part of the board to consider it, is vain. Such right is conspicuously futile if the
person or persons to whom the evidence is presented can thrust it aside without or
consideration." While the duty to deliberate does not impose the obligation to decide
right, it does imply a necessity which cannot be disregarded, namely, that of having
something to support its decision. A decision with absolutely nothing to support it is a
nullity, at least when directly attacked. (Edwards vs. McCoy, supra.) This principle
emanates from the more fundamental principle that the genius of constitutional
government is contrary to the vesting of unlimited power anywhere. Law is both a grant
and a limitation upon power.
The decision appealed from is hereby reversed and the case remanded to the Public
Service Commission for further proceedings in accordance with law and this decision,
without any pronouncement regarding costs. So ordered.
Avancea, C.J., Imperial, Diaz, Concepcion and Moran, JJ., concur.

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