EN BANC
 include among the services under said franchise the operation of a cellular

[G.R. No. 88404. October 18, 1990.]
 mobile telephone service.



 

PHILIPPINE LONG DISTANCE TELEPHONE CO. [PLDT],  Petitioner, v. THE In the same Order, ETCI was required to submit the certificate of registration of its
NATIONAL TELECOMMUNICATIONS COMMISSION AND CELLCOM, INC., Articles of Incorporation with the Securities and Exchange Commission, the
(EXPRESS TELECOMMUNICATIONS CO., INC. [ETCI]), Respondents.
 present capital and ownership structure of the company and such other
evidence, oral or documentary, as may be necessary to prove its legal, financial
D E C I S I O N
and technical capabilities as well as the economic justifications to warrant the
MELENCIO-HERRERA, J.:
setting up of cellular mobile telephone and paging systems. The continuance of

 the hearings was also directed.

Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by way 

of  Certiorari  and Prohibition under Rule 65, two (2) Orders of public respondent After evaluating the reconsideration sought by PLDT, the NTC, in October 1988,
National Telecommunications Commission (NTC), namely, the Order of 12 maintained its ruling that liberally construed, applicant’s franchise carries with it
December 1988 granting private respondent Express Telecommunications Co., the privilege to operate and maintain a cellular mobile telephone service.

Inc. (ETCI) provisional authority to install, operate and maintain a Cellular Mobile 

Telephone System in Metro-Manila (Phase A) in accordance with specified On 12 December 1988, NTC issued the first challenged Order. Opining that
conditions, and the Order, dated 8 May 1988, denying reconsideration.
 "public interest, convenience and necessity further demand a second cellular

 mobile telephone service provider and finds PRIMA FACIE evidence showing
On 22 June 1958, Rep. Act No. 2090, was enacted, otherwise known as "An Act applicant’s legal, financial and technical capabilities to provide a cellular mobile
Granting Felix Alberto and Company, Incorporated, a Franchise to Establish service using the AMPS system," NTC granted ETCI provisional authority to
Radio Stations for Domestic and Transoceanic Telecommunications." Felix install, operate and maintain a cellular mobile telephone system initially in Metro
Alberto & Co., Inc. (FACI) was the original corporate name, which was changed to Manila, Phase A only, subject to the terms and conditions set forth in the same
ETCI with the amendment of the Articles of Incorporation in 1964. Much later, Order. One of the conditions prescribed (Condition No. 5) was that, within ninety
"CELLCOM, Inc." was the name sought to be adopted before the Securities and (90) days from date of the acceptance by ETCI of the terms and conditions of the
Exchange Commission, but this was withdrawn and abandoned.
 provisional authority, ETCI and PLDT "shall enter into an interconnection

 agreement for the provision of adequate interconnection facilities between
On 13 May 1987, alleging urgent public need, ETCI filed an application with applicant’s cellular mobile telephone switch and the public switched telephone
public respondent NTC (docketed as NTC Case No. 87-89) for the issuance of a network and shall jointly submit such interconnection agreement to the
Certificate of Public Convenience and Necessity (CPCN) to construct, install, Commission for approval." 

establish, operate and maintain a Cellular Mobile Telephone System and an Alpha 

Numeric Paging System in Metro Manila and in the Southern Luzon regions, with In a "Motion to Set Aside the Order" granting provisional authority, PLDT alleged
a prayer for provisional authority to operate Phase A of its proposal within Metro essentially that the interconnection ordered was in violation of due process and
Manila. 
 that the grant of provisional authority was jurisdictionally and procedurally infirm.

 On 8 May 1989, NTC denied reconsideration and set the date for continuation of
PLDT filed an Opposition with a Motion to Dismiss, based primarily on the the hearings on the main proceedings. This is the second questioned Order.

following grounds: (1) ETCI is not capacitated or qualified under its legislative 

franchise to operate a systemwide telephone or network of telephone service PLDT urges us now to annul the NTC Orders of 12 December 1988 and 8 May
such as the one proposed in its application; (2) ETCI lacks the facilities needed 1989 and to order ETCI to desist from, suspend, and/or discontinue any and all
and indispensable to the successful operation of the proposed cellular mobile acts intended for its implementation.

telephone system; (3) PLDT has itself a pending application with NTC, Case No. 

86-86, to install and operate a Cellular Mobile Telephone System for domestic On 15 June 1989, we resolved to dismiss the petition for its failure to comply fully
and international service not only in Manila but also in the provinces and that with the requirements of Circular No. 188. Upon satisfactory showing, however,
under the "prior operator" or "protection of investment" doctrine, PLDT has the that there was, in fact, such compliance, we reconsidered the order, reinstated
priority or preference in the operation of such service; and (4) the provisional the Petition, and required the respondents NTC and ETCI to submit their
authority, if granted, will result in needless, uneconomical and harmful respective Comments.

duplication, among others.
 


 On 27 February 1990, we issued a Temporary Restraining Order enjoining NTC to
In an Order, dated 12 November 1987, NTC overruled PLDT’s Opposition and "Cease and Desist from all or any of its on-going proceedings and ETCI from
declared that Rep. Act No. 2090 (1958) should be liberally construed as to continuing any and all acts intended or related to or which will amount to the
implementation/execution of its provisional authority." This was upon PLDT’s absence of a motion from an applicant.

urgent manifestation that it had been served an NTC Order, dated 14 February 

1990, directing immediate compliance with its Order of 12 December 1988, "Sec. 3. Provisional Relief . — Upon the filing of an application, complaint or
"otherwise the Commission shall be constrained to take the necessary measures petition or at any stage thereafter, the Board may grant on motion of the pleaders
and bring to bear upon PLDT the full sanctions provided by law." 
 or on its own initiative, the relief prayed for, based on the pleading, together with

 the affidavits and supporting documents attached thereto, without prejudice to a
We required PLDT to post a bond of P5M. It has complied, with the statement final decision after completion of the hearing which shall be called within thirty
that it was "post(ing) the same on its agreement and/or consent to have the same (30) days from grant of authority asked for." (Rule 15, Rules of Practice and
forfeited in favor of Private Respondent ETCI/CELLCOM should the instant Procedure Before the Board of Communications (now NTC).

Petition be dismissed for lack of merit." ETCI took exception to the sufficiency of 

the bond considering its initial investment of approximately P225M, but accepted What the NTC granted was such a provisional authority, with a definite expiry
the forfeiture proferred.
 period of eighteen (18) months unless sooner renewed, and which may be

 revoked, amended or revised by the NTC. It is also limited to Metro Manila only.
ETCI moved to have the TRO lifted, which we denied on 6 March 1990 We What is more, the main proceedings are clearly to continue as stated in the NTC
stated, however, that the inaugural ceremony ETCI had scheduled for that day Order of 8 May 1989.

could proceed, as the same was not covered by the TRO.
 The provisional authority was issued after due hearing, reception of evidence and

 evaluation thereof, with the hearings attended by various oppositors, including
PLDT relies on the following grounds for the issuance of the Writs prayed for: 
 PLDT. It was granted only after a prima facie showing that ETCI hag the

 necessary legal, financial and technical capabilities and that public interest,
"1. Respondent NTC’s subject order effectively licensed and/or authorized a convenience and necessity so demanded.

corporate entity without any franchise to operate a public utility, legislative or 

otherwise, to establish and operate a telecommunications system.
 PLDT argues, however, that a provisional authority is nothing short of a Certificate
"2. The same order validated stock transactions of a public service enterprise of Public Convenience and Necessity (CPCN) and that it is merely a "distinction
contrary to and/or in direct violation of Section 20(h) of the Public Service Act.
 without a difference." That is not so. Basic differences do exist, which need not
"3. Respondent NTC adjudicated in the same order a controverted matter that be elaborated on. What should be borne in mind is that provisional authority
was not heard at all in the proceedings under which it was promulgated." 
 would be meaningless if the grantee were not allowed to operate. Moreover, it is

 clear from the very Order of 12 December 1988 itself that its scope is limited only
As correctly pointed out by respondents, this being a special civil action to the first phase, out of four, of the proposed nationwide telephone system. The
for  Certiorari  and Prohibition, we only need determine if NTC acted without installation and operation of an alpha numeric paging system was not authorized.
jurisdiction or with grave abuse of discretion amounting to lack or excess of The provisional authority is not exclusive. Its lifetime is limited and may be
jurisdiction in granting provisional authority to ETCI under the NTC questioned revoked by the NTC at any time in accordance with law. The initial expenditure of
Orders of 12 December 1988 and 8 May 1989.
 P130M more or less, is rendered necessary even under a provisional authority to

 enable ETCI to prove its capability. And as pointed out by the Solicitor General,
The case was set for oral argument on 21 August 1990 with the parties directed on behalf of the NTC, if what had been granted were a CPCN, it would constitute
to address, but not limited to, the following issues: (1) the status and coverage of a final order or award reviewable only by ordinary appeal to the Court of Appeals
Rep. Act No. 2090 as a franchise; (2) the transfer of shares of stock of a pursuant to Section 9(3) of BP Blg. 129, and not by Certiorari before this Court.

corporation holding a CPCN; and (3) the principle and procedure of 

interconnection. The parties were thereafter required to submit their respective The final outcome of the application rests within the exclusive prerogative of the
Memoranda, with which they have complied.
 NTC. Whether or not a CPCN would eventually issue would depend on the

 evidence to be presented during the hearings still to be conducted, and only after
We find no grave abuse of discretion on the part of NTC, upon the following a full evaluation of the proof thus presented.

considerations: 
 


 2. The Coverage of ETCI’s Franchise

1. NTC Jurisdiction
 


 Rep. Act No. 2090 grants ETCI (formerly FACI) "the right and privilege of
There can be no question that the NTC is the regulatory agency of the national constructing, installing, establishing and operating in the entire Philippines radio
government with jurisdiction over all telecommunications entities. It is legally stations for reception and transmission of messages on radio stations in the
clothed with authority and given ample discretion to grant a provisional permit or foreign and domestic public fixed point-to-point and public base, aeronautical
authority. In fact, NTC may, on its own initiative, grant such relief even in the and land mobile stations, . . . with the corresponding relay stations for the
reception and transmission of wireless messages on radiotelegraphy and/or
radiotelephony . . . ." PLDT maintains that the scope of the franchise is limited to
"radio stations" and excludes telephone services such as the establishment of
the proposed Cellular Mobile Telephone System (CMTS). However, in its Order of
12 November 1987, the NTC construed the technical term "radiotelephony"
liberally as to include the operation of a cellular mobile telephone system. It said: 
 Angeles Ry Co. v. City of Los Angeles (92 Pacific Reporter 490) cited by PLDT,


"In resolving the said issue, the Commission takes into consideration the different
definitions of the term "radiotelephony." As defined by the New International
Webster Dictionary the term "radiotelephony" is defined as a telephony carried on
by aid of radiowaves without connecting wires. The International
Telecommunications Union (ITU) defines a "radiotelephone call" as a "telephone
call, originating in or intended on all or part of its route over the radio
communications channels of the mobile service or of the mobile satellite service."
From the above definitions, while under Republic Act 2090 a system-wide
telephone or network of telephone service by means of connecting wires may not
have been contemplated, it can be construed liberally that the operation of a
cellular mobile telephone service which carries messages, either voice or record,
with the aid of radiowaves or a part of its route carried over radio communication
channels, is one included among the services under said franchise for which a
certificate of public convenience and necessity may be applied for." 

The foregoing is the construction given by an administrative agency possessed of
the necessary special knowledge, expertise and experience and deserves great
weight and respect (Asturias Sugar Central, Inc. v. Commissioner of Customs, Et
Al., L-19337, September 30, 1969, 29 SCRA 617). It can only be set aside on
proof of gross abuse of discretion, fraud, or error of law (Tupas Local Chapter No.
979 v. NLRC, Et Al., L-60532-33, November 5, 1985, 139 SCRA 478). We discern
none of those considerations sufficient to warrant judicial intervention.



3. The Status of ETCI’s Franchise
 the outstanding capital stock sold their holdings to the Orbes. In 1968, the


PLDT alleges that the ETCI franchise had lapsed into non-existence for failure of
the franchise holder to begin and complete construction of the radio system
authorized under the franchise as explicitly required in Section 4 of its franchise,
Rep. Act No. 2090. 1 PLDT also invokes Pres. Decree No. 36, enacted on 2
November 1972, which legislates the mandatory cancellation or invalidation of all
franchises for the operation of communications services, which have not been
availed of or used by the party or parties in whose name they were issued.
 stockholders amount to a transfer of ETCI’s franchise, which needs


However, whether or not ETCI, and before it FACI, in contravention of its
franchise, started the first of its radio telecommunication stations within (2) years
from the grant of its franchise and completed the construction within ten (10)
years from said date; and whether or not its franchise had remained unused from
the time of its issuance, are questions of fact beyond the province of this Court,
besides the well-settled procedural consideration that factual issues are not
subjects of a special civil action for  Certiorari(Central Bank of the Philippines v.
Court of Appeals, G.R. No. 41859, 8 March 1989, 171 SCRA 49; Ygay v.
Escareal, G.R. No. 44189, 8 February 1985, 135 SCRA 78; Filipino Merchant’s
Insurance Co., Inc. v. Intermediate Appellate Court, G.R. No. 71640, 27 June
1988, 162 SCRA 669). Moreover, neither Section 4, Rep. Act No. 2090 nor Pres.
Decree No. 36 should be construed as self-executing in working a forfeiture.
Franchise holders should be given an opportunity to be heard, particularly so,
where, as in this case, ETCI does not admit any breach, in consonance with the
rudiments of fair play. Thus, the factual situation of this case differs from that in
where the grantee therein admitted its failure to complete the conditions of its
franchise and yet insisted on a decree of forfeiture.



More importantly, PLDT’s allegation partakes of a collateral attack on a franchise
(Rep. Act No. 2090), which is not allowed. A franchise is a property right and
cannot be revoked or forfeited without due process of law. The determination of
the right to the exercise of a franchise, or whether the right to enjoy such privilege
has been forfeited by non-user, is more properly the subject of the prerogative
writ of quo warranto, the right to assert which, as a rule, belongs to the State
"upon complaint or otherwise" (Sections 1, 2 and 3, Rule 66, Rules of Court), 2
the reason being that the abuse of a franchise is a public wrong and not a private
injury. A forfeiture of a franchise will have to be declared in a direct proceeding for
the purpose brought by the State because a franchise is granted by law and its
unlawful exercise is primarily a concern of Government.



"A . . . franchise is . . . granted by law, and its . . . unlawful exercise is the concern
primarily of the Government. Hence, the latter as a role is the party called upon to
bring the action for such . . . unlawful exercise of . . . franchise." (IV-B V.
FRANCISCO, 298 [1963 ed.], citing Cruz v. Ramos, 84 Phil. 226).



4. ETCI’s Stock Transactions



ETCI admits that in 1964, the Albertos, as original owners of more than 40% of
Albertos re-acquired the shares they had sold to the Orbes. In 1987, the Albertos
sold more than 40% of their shares to Horacio Yalung. Thereafter, the present
stockholders acquired their ETCI shares. Moreover, in 1964, ETCI had increased
its capital stock from P40,000.00 to P360,000.00; and in 1987, from P360,000.00
to P40M.



PLDT contends that the transfers in 1987 of the shares of stock to the new
Congressional approval pursuant to Rep. Act No. 2090, and since such approval
had not been obtained, ETCI’s franchise had been invalidated. The provision
relied on reads, in part, as follows: 



SECTION 10. The grantee shall not lease, transfer, grant the usufruct of, sell or
assign this franchise nor the rights and privileges acquired thereunder to any
person, firm, company, corporation or other commercial or legal entity nor merge
with any other person, company or corporation organized for the same purpose,
without the approval of the Congress of the Philippines first had. . . . ." 



It should be noted, however, that the foregoing provision is, directed to the
"grantee" of the franchise, which is the corporation itself and refers to a sale, To all appearances, the stock transfers were not just for the purpose of acquiring
lease, or assignment of that franchise. It does not include the transfer or sale of the ETCI franchise, considering that, as heretofore stated, a series of transfers
shares of stock of a corporation by the latter’s stockholders.
 was involved from 1964 to 1987. And, contrary to PLDT’s assertion, the franchise

 was not the only property of ETCI of meaningful value. The "zero" book value of
The sale of shares of stock of a public utility is governed by another law, i.e., ETCI assets, as reflected in its balance sheet, was plausibly explained as due to
Section 20(h) of the Public Service Act (Commonwealth Act No. 146). Pursuant the accumulated depreciation over the years entered for accounting purposes
thereto, the Public Service Commission (now the NTC) is the government agency and was not reflective of the actual value that those assets would command in
vested with the authority to approve the transfer of more than 40% of the the market.

subscribed capital stock of a telecommunications company to a single 

transferee, thus: 
 But again, whether ETCI has offended against a provision of its franchise, or has

 subjected it to misuse or abuse, may more properly be inquired into in quo
SEC. 20. Acts requiring the approval of the Commission. Subject to established warranto proceedings instituted by the State. It is the condition of every franchise
limitations and exceptions and saving provisions to the contrary, it shall be that it is subject to amendment, alteration, or repeal when the common good so
unlawful for any public service or for the owner, lessee or operator thereof, requires (1987 Constitution, Article XII, Section 11).

without the approval and authorization of the Commission previously had —


x       x       x
5. The NTC Interconnection Order


 

(h) To sell or register in its books the transfer or sale of shares of its capital stock, In the provisional authority granted by NTC to ETCI, one of the conditions
if the result of that sale in itself or in connection with another previous sale, shall imposed was that the latter and PLDT were to enter into an interconnection
be to vest in the transferee more than forty per centum of the subscribed capital agreement to be jointly submitted to NTC for approval.

of said public service. Any transfer made in violation of this provision shall be 

void and of no effect and shall not be registered in the books of the public service PLDT vehemently opposes interconnection with its own public switched
corporation. Nothing herein contained shall be construed to prevent the holding telephone network. It contends: that while PLDT welcomes interconnections in
of shares lawfully acquired. (As amended by Com. Act No. 454)." 
 the furtherance of public interest, only parties who can establish that they have

 valid and subsisting legislative franchises are entitled to apply for a CPCN or
In other words, transfers of shares of a public utility corporation need only NTC provisional authority, absent which, NTC has no jurisdiction to grant them the
approval, not Congressional authorization. What transpired in ETCI were a series CPCN or interconnection with PLDT; that the 73 telephone systems operating all
of transfers of shares starting in 1964 until 1987. The approval of the NTC may be over the Philippines have a viability and feasibility independent of any
deemed to have been met when it authorized the issuance of the provisional interconnection with PLDT; that "the NTC is not empowered to compel such a
authority to ETCI. There was full disclosure before the NTC of the transfers. In private raid on PLDT’s legitimate income arising out of its gigantic investment;"
fact, the NTC Order of 12 November 1987 required ETCI to submit its "present that "it is not public interest, but purely a private and selfish interest which will be
capital and ownership structure." Further, ETCI even filed a Motion before the served by an interconnection under ETCI’s terms;" and that "to compel PLDT to
NTC, dated 8 December 1987, or more than a year prior to the grant of interconnect merely to give viability to a prospective competitor, which cannot
provisional authority, seeking approval of the increase in its capital stock from stand on its own feet, cannot be justified in the name of a non-existent public
P960,000.00 to P40M, and the stock transfers made by its stockholders. 
 need" (PLDT Memorandum, pp. 48 and 50).


 

A distinction should be made between shares of stock, which are owned by PLDT cannot justifiably refuse to interconnect.

stockholders, the sale of which requires only NTC approval, and the franchise 

itself which is owned by the corporation as the grantee thereof, the sale or Rep. Act No. 6849, or the Municipal Telephone Act of 1989, approved on 8
transfer of which requires Congressional sanction. Since stockholders own the February 1990, mandates interconnection providing as it does that "all domestic
shares of stock, they may dispose of the same as they see fit. They may not, telecommunications carriers or utilities . . . shall be interconnected to the public
however, transfer or assign the property of a corporation, like its franchise. In switch telephone network." Such regulation of the use and ownership of
other words, even if the original stockholders had transferred their shares to telecommunications systems is in the exercise of the plenary police power of the
another group of shareholders, the franchise granted to the corporation subsists State for the promotion of the general welfare. The 1987 Constitution recognizes
as long as the corporation, as an entity, continues to exist. The franchise is not the existence of that power when it provides: 

thereby invalidated by the transfer of the shares. A corporation has a personality 

separate and distinct from that of each stockholder. It has the right of continuity "SEC. 6. The use of property bears a social function, and all economic agents
or perpetual succession (Corporation Code, Sec. 2).
 shall contribute to the common good. Individuals and private groups, including

 corporations, cooperatives, and similar collective organizations, shall have the
right to own, establish, and operate economic enterprises, subject to the duty of
the State to promote distributive justice and to intervene when the common good
so demands" (Article XII).



The interconnection which has been required of PLDT is a form of "intervention"
with property rights dictated by "the objective of government to promote the
rapid expansion of telecommunications services in all areas of the
Philippines, . . . to maximize the use of telecommunications facilities
have access to all other users of the service wherever they may be within the
Philippines at an acceptable standard of service and at reasonable cost.



"WHEREFORE, xxx the following Department policies on interconnection and
revenue sharing are hereby promulgated: 



1. All facilities offering public telecommunication services shall be interconnected
into the nationwide telecommunications network/s,

available, . . . in recognition of the vital role of communications in nation building . x       x       x

. . and to ensure that all users of the public telecommunications service have 

access to all other users of the service wherever they may be within the 4. The interconnection of networks shall be effected in a fair and non-
Philippines at an acceptable standard of service and at reasonable cost" (DOTC discriminatory manner and within the shortest timeframe practicable.

Circular No. 90-248). Undoubtedly, the encompassing objective is the common 

good. The NTC, as the regulatory agency of the State, merely exercised its 5. The precise points of interface between service operators shall be as defined
delegated authority to regulate the use of telecommunications networks when it by the NTC; and the apportionment of costs and division of revenues resulting
decreed interconnection.
 from interconnection of telecommunications networks shall be as approved and/

 or prescribed by the NTC.

The importance and emphasis given to interconnection dates back to Ministry 

Circular No. 82-81, dated 6 December 1982, providing: 
 x       x       x" 


 

"Sec. 1. That the government encourages the provision and operation of public Since then, the NTC, on 12 July 1990, issued Memorandum Circular No. 7-13-90
mobile telephone service within local sub-base stations, particularly, in the highly prescribing the "Rules and Regulations Governing the Interconnection of Local
commercialized areas;
 Telephone Exchanges and Public Calling Offices with the Nationwide

 Telecommunications Network/s, the Sharing of Revenue Derived Therefrom, and
"Sec. 5. That, in the event the authority to operate said service be granted to for Other Purposes." 

other applicants, other than the franchise holder, the franchise operator shall be 

under obligation to enter into an agreement with the domestic telephone network, The NTC order to interconnect allows the parties themselves to discuss and
under an interconnection agreement;" 
 agree upon the specific terms and conditions of the interconnection agreement

 instead of the NTC itself laying down the standards of interconnection which it
Department of Transportation and Communication (DOTC) Circular No. 87-188, can very well impose. Thus it is that PLDT cannot justifiably claim denial of due
issued in 1987, also decrees: 
 process. It has been heard. It will continue to be heard in the main proceedings. It

 will surely be heard in the negotiations concerning the interconnection
"12. All public communications carriers shall interconnect their facilities pursuant agreement.

to comparatively efficient interconnection (CEI) as defined by the NTC in the 

interest of economic efficiency." 
 As disclosed during the hearing, the interconnection sought by ETCI is by no

 means a "parasitic dependence" on PLDT. The ETCI system can operate on its
The sharing of revenue was an additional feature considered in DOTC Circular own even without interconnection, but it will be limited to its own subscribers.
No. 90-248, dated 14 June 1990, laying down the "Policy on Interconnection and What interconnection seeks to accomplish is to enable the system to reach out to
Revenue Sharing by Public Communications Carriers," thus: 
 the greatest 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
"WHEREAS, it is the objective of government to promote the rapid expansion of as attainable. With the broader reach, public interest and convenience will be
telecommunications services in all areas of the Philippines;
 better served. To be sure, ETCI could provide no mean competition (although

 PLDT maintains that it has nothing to fear from the "innocuous interconnection"),
"WHEREAS, there is s need to maximize the use of telecommunications facilities and eat into PLDT’s own toll revenue ("cream PLDT revenue," in its own words),
available and encourage investment in telecommunications infrastructure by but all for the eventual benefit of all that the system can reach.

suitably qualified service providers;
 


 6. Ultimate Considerations

"WHEREAS, in recognition of the vital role of communications in nation building, 

there is a need to ensure that all users of the public telecommunications service The decisive considerations are public need, public interest, and the common
good. Those were the overriding factors which motivated NTC in granting
provisional authority to ETCI. Article II, Section 24 of the 1987 Constitution,
recognizes the vital role of communication and information in nation building. It is
likewise a State policy to provide the environment for the emergence of
communications structures suitable to the balanced flow of information into, out
of, and across the country (Article XVI, Section 10, ibid.). A modern and
dependable communications network rendering efficient and reasonably priced
services is also indispensable for accelerated economic recovery and
development. To these public and national interests, public utility companies
must bow and yield.



Despite the fact that there is a virtual monopoly of the telephone system in the
country at present, service is sadly inadequate. Customer demands are hardly
met, whether fixed or mobile. There is a unanimous cry to hasten the
development of a moder n, efficient, satisfactory and continuous
telecommunications service not only in Metro Manila but throughout the
archipelago. The need therefor was dramatically emphasized by the destructive
earthquake of 16 July 1990. It may be that users of the cellular mobile telephone
would initially be limited to a few and to highly commercialized areas. However, it
is a step in the right direction towards the enhancement of the
telecommunications infrastructure, the expansion of telecommunications services
in, hopefully, all areas of the country, with chances of complete disruption of
communications minimized. It will thus impact on the total development of the
country’s telecommunications systems and redound to the benefit of even those
who may not be able to subscribe to ETCI.
 include in the areas of CEPALCO’s authority of "generating and distributing


Free competition in the industry may also provide the answer to a much-desired
improvement in the quality and delivery of this type of public utility, to improved
technology, fast and handy mobile service, and reduced user dissatisfaction.
After all, neither PLDT nor any other public utility has a constitutional right to a
monopoly position in view of the Constitutional proscription that no franchise
certificate or authorization shall be exclusive in character or shall last longer than
fifty (50) years (ibid., Section 11; Article XIV, Section 5, 1973 Constitution; Article
XIV, Section 8, 1935 Constitution). Additionally, the State is empowered to decide
whether public interest demands that monopolies be regulated or prohibited
(1987 Constitution, Article XII, Section 19).
 PHIVIDEC Industrial Authority (PIA), a subsidiary of PHIVIDEC, to carry out the


WHEREFORE, finding no grave abuse of discretion, tantamount to lack of or
excess of jurisdiction, on the part of the National Telecommunications
Commission in issuing its challenged Orders of 12 December 1988 and 8 May
1989 in NTC Case No. 87-39, this Petition is DISMISSED for lack of merit. The
Temporary Restraining Order heretofore issued is LIFTED. The bond issued as a
condition for the issuance of said restraining Order is declared forfeited in favor of
private responder Express Telecommunications Co., Inc.
 As manager of PIE-MO, PIA granted the Ferrochrome Philippines, Inc. (FPI) and


Costs against petitioner. SO ORDERED.
On July 6, 1979, PIA granted CEPALCO a temporary authority to retail electric
THIRD DIVISION

[G.R. No. 112702. September 26, 1997.]



NATIONAL POWER CORPORATION, Petitioner, v. COURT OF APPEALS and
C A G AYA N E L E C T R I C P O W E R A N D L I G H T C O . , I N C .
(CEPALCO), Respondents.



D E C I S I O N
ROMERO, J.:
Offered for resolution in these consolidated petitions for review on certiorari is the
issue of whether or not the National Power Corporation (NPC) has jurisdiction to
determine whether it may supply electric power directly to the facilities of an
industrial corporation in areas where there is an existing and operating electric
power franchisee. 



On June 17, 1961, the Cagayan Electric and Power Light Company (CEPALCO)
was enfranchised by Republic Act No. 3247 "to construct, maintain and operate
an electric light, heat and power system for the purpose of generating and/or
distributing electric light, heat and/or power for sale within the City of Cagayan de
Oro and its suburbs" for fifty (50) years. Republic Act No. 3570, approved on
June 21, 1963, expanded the area of coverage of the franchise to include the
municipalities of Tagoloan and Opol, both in the Province of Misamis Oriental. On
August 4, 1969, Republic Act No. 6020 further amended the same franchise to
electric light and power for sale," the municipalities of Villanueva and Jasaan,
also of the said province.



Presidential Decree No. 243, issued on July 12, 1973, created a "body corporate
and politic" to be known as the Philippine Veterans Investment Development
Corporation (PHIVIDEC) vested with authority to engage in "commercial,
industrial, mining, agricultural and other enterprises" among other powers 1 and
"to allow the full and continued employment of the productive capabilities of and
investment of the veterans and retirees of the Armed Forces of the Philippines."
On August 13, 1974, Presidential Decree No. 538 was promulgated to create the
government policy "to encourage, promote and sustain the economic and social
growth of the country and that the establishment of professionalized
management of well-planned industrial areas shall further this objective." 2 Under
Sec. 3 of P.D. No. 538, the first area for development shall be located in the
municipalities of Tagoloan and Villanueva. 3 This area forms part of the PHIVIDEC
Industrial Estate Misamis Oriental (PIE-MO).



Metal Alloys Corporation (MAC) authority to operate in its area of development.
power to the industries operating within the PIE-MO. 4 The Agreement executed
by PIA and CEPALCO authorized CEPALCO "to operate, administer, construct
and distribute electric power within the PHIVIDEC Industrial Estate, Misamis
Oriental, such authority to be co-extensive with the territorial jurisdiction of 

PHIVIDEC Industrial Estate, as defined in Sec. 3 of P.D. No. 538 and shall be for a It bears emphasis then that ‘it is only after a hearing (or an opportunity for such a
period of five (5) years, renewable for another five (5) years at the option of hearing) where it is established that the affected private franchise holder is
CEPALCO." The parties provided further that: 
 incapable or unwilling to match the reliability and rates of NPC that a direct

 connection with NPC may be granted.’ Here, petitioner-appellee’s reliability as a
"9. At the end of the fifth year, or at the end of the 10th year, should this power supplier and ability to match the NPC rates were never put in issue.

Agreement be thus renewed, PIA has the option to take over the operation of the 

electric service and acquire by purchase CEPALCO’s assets within PIE-MO. This It is immaterial that petitioner-appellee’s franchise was not exclusive. A privilege
option shall be communicated to CEPALCO in writing at least 24 months before to sell within specified territory, even if not exclusive, is a valuable property right
the date of acquisition of assets and takeover of operation by PIA. Should PIA entitled to protection against unauthorized competition.’’ 10 

exercise its option to purchase the assets of CEPALCO in PIE-MO, PIA shall Notwithstanding said decision, in September 1990, FPI filed a new application for
respect the right of ownership of and maintenance by CEPALCO of those assets the direct supply of electric power from NPC. The Hearing Committee of the NPC
inside PIE-MO not covered by such purchase. . . ." 
 had started hearing the application but CEPALCO filed with the Regional Trial

 Court of Quezon City a petition for contempt against NPC officials led by Ernesto
According to PIA, 5 CEPALCO proved no match to the power demands of the Aboitiz. On August 10, 1992, the trial court found the respondents in direct
industries in PIE-MO that most of these companies operating therein closed contempt of court and accordingly imposed upon them a fine of P500.00 each.

shop. 6 Impelled by a "desire to provide cheap power costs to power-intensive 

industries operating within the Estate," PIA applied with the National Power The respondent NPC officials challenged before this Court the judgment holding
Corporation (NPC) for direct power connection which the latter in due course them in contempt of court through G.R. No. 107809, (Aboitiz v. Regino). 11 In the
approved. 7 One of the companies which entered into an agreement with the Decision of July 5, 1993, the Court upheld the contempt ruling and, after quoting
NPC for a direct sale and supply of power was the Ferrochrome Phils., Inc. (FPI).
 the lower court’s decision of May 2, 1984 which the Court upheld in G.R. No.

 72085, said: 

Contending that the said agreement violated its right as the authorized operator 

of an electric light and power system in the area and the national electrification "These directives show that the lower court (and this Court) intended the
policy, CEPALCO filed Civil Case No. Q-35945, a petition for prohibition, arrangement between FPI and CEPALCO to be permanent and free from
mandamus and injunction before the Regional Trial Court of Quezon City against NAPOCOR’s influence or intervention. Any attempt on the part of NAPOCOR or
the NPC. Notwithstanding NPC’s claim that it was authorized by its Charter to its officers and/or employees to strike a deal with FPI would be a clear and direct
sell electric power "in bulk" to industrial enterprises, the lower court rendered a disobedience to a lawful order and therefore contemptuous.

decision on May 2, 1984, restraining the NPC from supplying power directly to 

FPI upon the ground that such direct sale, supply and delivery of electric power The petitioners call the attention of the Court to the statement of CEPALCO that
by the NPC to FPI was violative of the rights of CEPALCO under its legislative ‘NAPOCOR has already implemented in full’ the May 2, 1984 decision of the
franchise. Hence, the lower court ordered the NPC to "permanently desist" from lower court as affirmed by this Court. They suggest that in view of this, the
effecting direct supply of power to the FPI and "from entering into and/or decision no longer has any binding effect upon the parties, or to put it another
implementing any agreement or arrangement for such direct power connection, way, has become functus officio. Consequently, when they entertained the re-
unless coursed through the power line" of CEPALCO.
 application of FPI for direct power connection to NAPOCOR, they were not

 disobeying the May 2, 1984 order of the trial court and so should not be held in
Eventually, the case reached this Court through G.R. No. 72085. 8 On December contempt.

28, 1989, the Court denied the appeal interposed by NPC on the ground that the 

statutory authority given to the NPC as regards direct supply of power to BOI- This argument must be rejected in view of our finding of the permanence and
registered enterprises "should always be subordinate to the ‘total-electrification- comprehensiveness of the challenged order of the trial court.’Permanent’ is not a
of-the-entire-country-on-an-area-coverage basis policy’ enunciated in P.D. No. difficult word to understand. It means ‘lasting or intended to last indefinitely
40." 9 We held further that: 
 without change.’ As for the scope of the order, NAPOCOR was directed to ‘desist

 from effecting, causing, and continuing the direct supply, sale and delivery of
"Nor should we lose sight of the factual findings of the court a quo that petitioner- electricity from its power line to the plant of Ferrochrome Philippines, Inc., and
appellee CEPALCO had not only been authorized by the Phividec Industrial from entering into and/or implementing any agreement or arrangement for such
Authority to provide electrical power to the Phividec Industrial Estate within which direct power connection, unless coursed through the power line of
the FPI plant is located, but that petitioner-appellee CEPALCO had in fact, petitioner." (Emphasis supplied.)

supplied the latter’s power requirements for the construction of its plant, upon 

FPI’s application therefor as early as October 17, 1980.
 Meanwhile, the NPC Hearing Committee 12 proceeded with its hearings.
CEPALCO was duly notified thereof but it opted to question the committee’s transmission line from Namutulan substation to the receiving and/or substation of
jurisdiction. It did not submit any evidence. Consequently, in its Report and PIA. 17 

Recommendation dated September 27, 1991, the committee gave weight to the 

evidence presented by FPI that CEPALCO charged higher rates than what the As expected, on February 17, 1993, CEPALCO filed in the Regional Trial Court of
NPC would if allowed to supply power directly to FPI. Although the committee Pasig (Branch 68), a petition for certiorari, prohibition, mandamus and injunction
considered as unfounded FPI’s claim of CEPALCO’s unreliability as a power against the NPC and some officials of both the NPC and PIA. 18 Docketed as
supplier, 13 it nonetheless held that: 
 SCA No. 290, the petition specifically sought the issuance of a temporary

 restraining order. However, after hearing, the prayer for the temporary restraining
"Form (sic) the foregoing and on the basis of the decision of the Supreme Court order was denied by the court in its order of March 12, 1993. 19 CEPALCO filed a
in the case of National Power Corporation and Fine Chemicals (Phils.) Inc. v. The motion for the reconsideration of said order while NPC and PIA moved for the
Court of Appeals and the Manila Electric Company, G.R. No. 84695, May 8, 1990, dismissal of the petition. 20 

FPI is entitled to a direct connection to NPC as applied for considering that 

CEPALCO is unwilling to match the rates of NPC for directly serving FPI and that On June 23, 1993, noting the cases filed by CEPALCO all seeking exclusivity in
FPI is a duly registered BOI registered enterprises (sic). The Supreme Court in the the distribution of electric power to areas covered by its franchise, the court 21
aforestated case has ruled as follows: 
 ruled that "the right of petitioner to supply electric power in the aforesaid area to
‘As consistently ruled by the Court pursuant to P.D. No. 380 as amended by P.D. the exclusion of other entities had been settled once and for all by the Regional
No. 395, NPC is statutorily empowered to directly service all the requirements of Trial Court of Quezon City wherein petitioner obtained a favorable judgment."
a BOI registered enterprise provided that, first, any affected private franchise Hence, the petition was dismissed on the ground of res judicata. 22 

holder is afforded an opportunity to be heard on the application therefor and
second, from such a hearing, it is established that said private franchise holder is Forthwith, CEPALCO elevated the case to this Court through a petition
incapable or unwilling to match the reliability and rates of NPC for directly serving for  certiorari, prohibition and injunction with prayer for the issuance of a
the latter (National Power Corporation v. Jacinto; 134 SCRA 435 [1985]. National preliminary injunction or a temporary restraining order. The petition was docketed
Power Corporation v. Court of Appeals, 161 SCRA 103 [1988])." 14 
 as G.R. No. 110686 but on August 18, 1993, the Court referred it to the Court of

 Appeals pursuant to Sec. 9, paragraph 1 of B.P. Blg. 129 conferring upon the
However, considering the "better and priority right" of PIA, the committee appellate court original jurisdiction to issue writs of prohibition and certiorari and
recommended that instead of a direct power connection by the NPC to FPI, the auxiliary writs. 23 In the Court of Appeals, the petition was docketed as CA-G.R.
connection should be made to PIA "as a utility user for its industrial Estate at No. 31935-SP.

Tagoloan, Misamis Oriental." 15 
 


 On September 10, 1993, the Fifteenth Division of the Court of Appeals issued a
For its part, on November 3, 1989, CEPALCO filed with the Energy Regulatory resolution 24 denying the prayer for the issuance of a temporary restraining order
Board (ERB) a petition praying that the ERB "order the discontinuance of all on the strength of Sec. 1 of P.D. No. 1818. It ruled that since the NPC is a public
existing direct supply of power by the NPC within petitioner’s franchise utility, it "enjoys the protective mantle" of said decree prohibiting courts from
area" (ERB Case No. 89-430). On July 17, 1992, the ERB ruled that CEPALCO "is issuing restraining orders or preliminary injunctions in cases involving
relatively efficient and reliable as manifested by its very low system losses (far infrastructure and natural resource development projects of, and operated by, the
from the 14% standard) and very high power factors" and therefore CEPALCO is government. 

technically capable "to distribute power to its consumers within its franchise 

area, particularly the industrial customers." It disposed of the petition as follows: 
 However, on September 17, 1993, upon a motion for reconsideration filed by

 CEPALCO and a re-evaluation of the provisions of P.D. No. 1818, the Court of
"WHEREFORE, in view of the foregoing premises, when the petitioner has been Appeals set aside its resolution of September 10, 1993 and held that: 

proven to be capable of distributing power to its industrial consumers and having 

passed the secondary considerations with a passing mark of 85%, judgment is ". . . the project intended by respondent NPC, which is the construction,
hereby rendered granting the relief prayed for. Accordingly, it is hereby declared completion and operation of the 138-kv line, is not in consonance with the
that all direct connection of industries to NPC within the franchise area of intendment of said Decree which is to protect public utilities and their projects
CEPALCO is no longer necessary. Therefore, all existing NPC direct supply of and activities intended for public convenience and necessity. The project of
power to industrial consumers within the franchise area of CEPALCO is hereby respondent NPC is intended to serve exclusively the needs of private entities,
ordered discontinued. . . ." 16 
 Metal Alloys Corporation and Ferrochrome Philippines in Tagoloan, Misamis

 Oriental." 

However, during the pendency of the Aboitiz case in this Court or on August 3, 

1992, PIA contracted the NPC for the construction of a 138 kilovolt (KV) Accordingly, the Court of Appeals issued a temporary restraining order directing
the private respondents therein "to immediately cease and desist from Consequently, the Court of Appeals affirmed the dismissal of the petition,
proceeding with the construction, completion and operation of the 138-kv line annulled and set aside the decision of the Hearing Committee of the NPC on
subject of the petition." The NPC, PIA and the officers of both were directed to direct connection with PIA, and ordered the NPC "to desist from continuing the
explain why the preliminary injunction prayed for should not issue. 26 
 construction of that NPC-Natumulan-Phividec 138 kv transmission line." 31 


 

In due course, the Court of Appeals rendered the decision 27 of November 15, Without filing a motion for the reconsideration of said Decision, NPC filed in this
1993 assailed herein. After ruling that the lower court gravely abused its Court on December 9, 1993, a motion for an extension of time within which to file
discretion in dismissing the petition below on the grounds of res judicata and litis "the proper petition." The motion which was docketed as G.R. No. 112702, was
pendentia, the Court of Appeals confronted squarely the issue of whether or not granted on December 20, 1993 with warning that no further extension would be
"the NPC itself has the power to determine the propriety of direct power granted. Thereafter, NPC filed a motion praying that it be excused from filing the
connection from its lines to any entity located within the franchise area of another petition on account of the filing by PIA in the Court of Appeals of a motion for the
public utility." 28 
 reconsideration of the Decision of November 15, 1993. In the Resolution of

 February 2, 1994, the Court noted and granted petitioner’s motion and
Elucidating that the ruling of this Court in both G.R. No. 78609 (NPC v. Court of considered the case "closed and terminated." 32 This resolution was withdrawn
Appeals) 29 and G.R. No. 87697 (Del Monte [Philippines], Inc. v. Hon. Felix M. de in the Resolution of February 8, 1995 33 in view of the "inadvertent clerical error"
Guzman, etc., Et. Al.) 30 categorically held that before a direct connection to the terminating the case, after the NPC had mailed its petition for review
NPC may be granted, a proper administrative body must conduct a hearing "to on certiorari on February 21, 1994. 34 

determine which entity, the franchise holder or the NPC, has the right to supply 

electric power to the entity applying for direct connection," the Court of Appeals In the meantime, PIA filed a motion for reconsideration of the appellate court’s
declared:
 Decision of November 15, 1993 arguing in the main that, not being a party to

 previous cases between CEPALCO and NPC, it was not bound by decisions of
"We have no doubt that the ERB, and not the NPC, is the administrative body this Court. The Court of Appeals denied the motion on January 28, 1994 on the
referred to by the Supreme Court where the hearing is to be conducted to basis of stare decisis where once the court has laid down a principle of law as
determine the propriety of direct connection. The charter of the ERB (PD 1206 in applicable to a certain state of facts, it will adhere to and apply the principle to all
relation to EO 172) is clear on this: 
 future cases where the facts are substantially the same. 35 Hence, PIA filed a
"The Board shall, after due notice and hearing, exercise the following powers and petition for review on certiorari which was docketed as G.R. No. 113613.

functions, among others:


x       x       x
G.R. Nos. 112702 and 113613 were consolidated on June 15 1994. 36 


 

e. Issue Certificate of Public Convenience for the operation of electric power In G.R. No. 112702, petitioner NPC contends that private respondent CEPALCO
utilities and services, . . . including the establishment and regulation of areas of is not entitled to relief because it has been forum-shopping. Private respondent
operation of particular operators of public power utilities and services, the fixing had filed Civil Case No. Q-93-14597 in the Regional Trial Court of Quezon City
of standards and specifications in all cases related to the issued Certificate of which had been forwarded to it by the Regional Trial Court of Pasig. Said case
Public Convenience . . ." 
 and the instant case (SCA No. 290) deal with the same issue of restoring

 CEPALCO’s right to supply power to FPI and MAC. Petitioner thus contends that
Moreover, NPC is not an administrative body as jurisprudentially defined, and that because the principle of litis pendentia applies, although other parties are
the NPC cannot usurp a power it has never been conferred by its charter or by involved in the case before the Quezon City court, there is no basis for granting
other law — the power to determine the validity of direct connection agreement it relief to private respondent CEPALCO" (s)ince the dismissal for lack of jurisdiction
enters into in violation of a power distributor’s franchise.
 was affirmed by the respondent court." 37 Corollarily, petitioner asserts that

 because the main case herein was dismissed "without trial," the respondent
Thus, considering that PIA professes to be and intends to engage in the business appellate court should not have accorded private respondent affirmative relief.
of a public power utility, it must first apply for a public convenience and necessity 38 

(conferment of operating authority) with the ERB. This may have been the 

opportune time for ERB to determine whether to allow PIA to directly connect Petitioner NPC’s contention is based on the fact that on October 6, 1992, private
with NPC, with notice and opportunity for CEPALCO considering that, as the respondent CEPALCO filed against the NPC in the Regional Trial Court of Pasig,
latter alleges, this new line which NPC is installing duplicates that existing Civil Case No. 62490, an action for specific performance and damages with
Cepalco 138 kv line which NPC itself turned over to Cepalco and for which it was prayer for preliminary mandatory injunction directing the NPC to immediately
paid in full." 
 restore to CEPALCO the distribution of power pertaining to MAC’s consumption.

 39 However, no summons was served and the ex-parte writ prayed for was not
issued. Nevertheless, the case was forwarded to the Regional Trial Court of The principal and common question raised in these consolidated cases is:
Quezon City where it was docketed as Civil Case No. 93-14597. That case was whether or not the NPC may supply power directly to PIA in the PIE-MO area
pending when SCA No. 290 was filed before the Regional Trial Court of Pasig.
 where CEPALCO has a franchise. Petitioner PIA in G.R. No. 113613 asserts that it

 may receive power directly from the NPC because it is a public utility. It avers that
The Court of Appeals affirmed the lower court’s dismissal of the case neither on P.D. No. 538, as amended, empowers PIA "as and to be a public utility to operate
the grounds of res judicata nor litis pendentia but on the "only one unresolved and serve the power needs within PIE-MO, i.e., a specific area constituting a
issue, which is whether the NPC itself has the power to determine the propriety small portion of petitioner’s franchise coverage," without, however, specifying the
of direct power connection from its lines to any entity located within the franchise particular provision which so empowers PIA. 44 

area of another public utility." 40 The Court of Appeals opined that the effects of 

litis pendentia could not have resulted in the dismissal of SCA No. 290 because A "public utility" is a business or service engaged in regularly supplying the public
Civil Case No. O-35945 which became G.R. No. 72085 was based on facts totally with some commodity or service of public consequence such as electricity, gas,
different from that of SCA No. 290.
 water, transportation, telephone or telegraph service. 45 The term implies public

 use and service. 

In invoking litis pendentia, however, petitioner NPC refers to this case, SCA No. 

290, and Civil Case No. 93-14597. SCA No. 290 and Civil Case No. 93-14597 Petitioner PIA is a subsidiary of the PHIVIDEC with "governmental and proprietary
may both have the same objective, the restoration of CEPALCO’s right to functions." 47 Sec. 4 of P.D. No. 538 specifically confers upon it the following
distribute power to PIE-MO areas under its franchise aside from the fact that the powers: 

cases involve practically the same parties. However, litis pendentia may not be 

successfully invoked to cause the dismissal of SCA No. 290.
 "a. To operate, administer and manage the PHIVIDEC Industrial Areas and other

 areas which shall hereafter be proclaimed, designated and specified in
In order to constitute a ground for the abatement or dismissal of an action, litis subsequent Presidential Proclamation; to construct acquire, own, lease, operate
pendentia must exhibit the concurrence of the following requisites: (a) identity of and maintain infrastructure facilities, factory buildings, warehouses, dams,
parties, or at least such as representing the same interest in both actions; (b) reservoirs, water distribution, electric light and power systems,
identity of rights asserted and relief prayed for, the relief being founded on the telecommunications and transportation networks, or such other facilities and
same facts, and (c) identity in the two (2) cases should be such that the judgment services necessary or useful in the conduct of industry and commerce or in the
that may be rendered in the pending case would, regardless of which party is attainment of the purposes and objectives of this Decree;" (Emphasis supplied.)

successful, amount to res judicata in the other. 41 As a rule, the second case filed 

should be abated under the maxim qui prior est tempore, potior est jure. Clearly then, the PIA is authorized to render indirect service to the public by its
However, this rule is not a hard and fast one. The "priority-in-time rule" may give administration of the PHIVIDEC industrial areas like the PIE-MO and may,
way to the criterion of "more appropriate action." More recently, the criterion therefore, be considered a public utility. As it is expressly authorized by law to
used was the "interest of justice rule." 42 
 perform the functions of a public utility, a certificate of public convenience, as

 suggested by the Court of Appeals, is not necessary for it to avail of a direct
We hold that the last criterion should be the basis for resolving this case, power connection from the NPC. However, such authority to be a public utility
although it was filed later than Civil Case No. 62490 which, upon its transfer, may not be exercised in such a manner as to prejudice the rights of existing
became Civil Case No. 93-14795. In so doing, we shall avoid multiplicity of suits franchisees. In fact, by its actions, PIA recognized the rights of the franchisees in
which is the matrix upon which litis pendentia is anchored and eventually bring the area.

about the final settlement of the recurring issue of whether or not the NPC may 

supply power directly to the industries within PIE-MO, notwithstanding the Accordingly, in pursuit of its powers "to grant such franchise for and to operate
operation of franchisee CEPALCO in the same area.
 and maintain within the areas electric light, heat or power systems," etc. under

 Sec. 4 (i) of P.D. No. 538 and its rule-making power under Sec. 4 (l) of the same
It should be noted that there is yet pending another case, namely, Civil Case No. law, on July 20, 1979, the PIA Board of Directors promulgated the "Rules and
91-383, instituted by PIA against CEPALCO in the Regional Trial Court of Misamis Regulations To Implement the Intent and Provisions of Presidential Decree No.
Oriental which apparently deals with a related issue — PIA’s franchise or authority 538." 48 Rule XI thereof on "Utilities and Services" provides as follows: 

to provide power to enterprises within the PIE-MO. 43 Hence, the principle of litis 

pendentia which ordinarily demands the dismissal of an action filed later than "SECTION 1. Utilities — It is the responsibility of the Authority to provide all
another, should be considered under the primordial concept of "interest of required utilities and services inside the Estate:

justice," in order that a recurrent issue common to all cases may be definitively x       x       x

resolved.
 


 a) Contracts for the purchase of public utilities and/or services shall be subject to
the prior approval of the Authority; Provided, however, that similar contract(s) 

existing prior to the effectivity of this Rules and Regulations shall continue to be "SEC. 3. Jurisdiction, Powers and Functions of the Board. — When warranted
in full force and effect.
and only when public necessity requires, the Board may regulate the business of
x       x       x
importing, exporting, re-exporting, shipping, transporting, processing, refining,

 marketing and distributing energy resources. . . .

It should be noted that the Rules and Regulations took effect thirty (30) days after 

its publication in the Official Gazette on September 24, 1979 or more than three The Board shall, upon prior notice and hearing, exercise the following, among
(3) months after the July 6, 1979 contract between PIA and CEPALCO was other powers and functions: 

entered into. As such, the Rules and Regulations itself allowed the continuance of 

the supply of electric power to PIE-MO by CEPALCO.
 (a) Fix and regulate the prices of petroleum products;


 

That the contract of July 6, 1979 was not renewed by the parties after the (b) Fix and regulate the rate schedule or prices of piped gas to be charged by
expiration of the five-year period stipulated therein did not change the fact that duly franchised gas companies which distribute gas by means of underground
within that five-year period, in violation of both the contract and its Rules and pipe system;

Regulations, PIA applied with the NPC for direct power connection. The matter 

was aggravated by NPC’s favorable action on the application, totally unmindful of (c) Fix and regulate the rates of pipeline concessionaires under the provisions of
the extent of its powers under the law which, in National Power Corporation v. Republic Act No. 387, as amended, otherwise known as the ‘Petroleum Act of
Court of Appeals, 49 the Court delimits as follows: 
 1949,’ as amended by Presidential Decree No. 1700;


 

". . . It is immaterial whether the direct connection is merely an improvement or (d) Regulate the capacities of new refineries or additional capacities of existing
an increase in existing voltage, as alleged by petitioner, or a totally new and refineries and license refineries that may be organized after the issuance of this
separate electric service as claimed by private Respondent. The law on the Executive Order, under such terms and conditions as are consistent with the
matter is clear. PD 40 promulgated on 7 November 1972 expressly provides that national interest;

the generation of electric power shall be undertaken solely by the NPC. However, 

Section 3 of the same decree also provides that the distribution of electric power (e) Whenever the Board has determined that there is a shortage of any petroleum
shall be undertaken by cooperatives, private utilities (such as the CEPALCO), product, or when public interest so requires, it may take such steps as it may
local governments and other entities duly authorized, subject to state regulation. consider necessary, including the temporary adjustment of the levels of prices of
(Emphasis supplied.)
 petroleum products and the payment to the Oil Price Stabilization Fund created

 under Presidential Decree No. 1956 by persons or entities engaged in the
The same case ruled that" (i)t is only after a hearing (or an opportunity for such a petroleum industry of such amounts as may be determined by the Board, which
hearing) where it is established that the affected private franchise holder is will enable the importer to recover its cost of importation." 

incapable or unwilling to match the reliability and rates of NPC that a direct 

connection with NPC may be granted." 50 As earlier stated, the Court arrived at As may be gleaned from said provisions, the ERB is basically a price or rate-
the same ruling in the later cases of G.R. Nos. 72085, 84695 and 87697.
 fixing agency. Apparently recognizing this basic function, Republic Act No. 7638

 (An Act Creating the Department of Energy, Rationalizing the Organization and
Petitioner NPC attempted to abide by these rulings when it conducted a hearing Functions of Government Agencies Related to Energy, and for Other Purposes),
to determine whether it may supply power directly to PIA. While it notified 51 which was approved on December 9, 1992 and which took effect fifteen days
CEPALCO of the hearing, the NPC is not the proper authority referred to by this after its complete publication in at least two (2) national newspapers of general
Court in the aforementioned earlier decisions, not only because the subject of the circulation, specifically provides as follows: 

hearing is a matter involving the NPC itself, but also because the law has created 

the proper administrative body vested with authority to conduct a hearing.
 "SEC. 18. Rationalization or Transfer of Functions of Attached or Related

 Agencies. — The non-price regulatory jurisdiction, powers, and functions of the
CEPALCO shares the view of the Court of Appeals that the Energy Regulatory Energy Regulatory Board as provided for in Section 3 of Executive Order No. 172
Board (ERB) is the proper administrative body for such hearings. However, a are hereby transferred to the Department.

recent legislative development has overtaken said view.
 


 The foregoing transfer of powers and functions shall include all applicable funds
The ERB, which used to be the Board of Energy, is tasked with the following and appropriations, records, equipment, property, and such personnel as may be
powers and functions by Executive Order No. 172 which took effect immediately necessary. Provided, That only such amount of funds and appropriations of the
after its issuance on May 8, 1987: 
 Board as well as only the personnel thereof which are completely or primarily
involved in the exercise by said Board of its non-price regulatory powers and
functions shall be affected by such transfer.
 legislature is presumed to know the existing laws so that, if repeal of particular or


The power of the NPC to determine, fix, and prescribe the rates being charged to
its customers under Section 4 of Republic Act No. 6395, as amended, as well as
the power of electric cooperatives to fix rates under Section 16 (o), Chapter II of
Presidential Decree No. 269, as amended, are hereby transferred to the Energy
Regulatory Board. The Board shall exercise its new powers only after due notice
and hearing and under the same procedure provided for in Executive Order No.
172." 



Upon the effectivity of Republic Act No. 7638, then Acting Chairman of the
Energy Coordinating Council Delfin Lazaro transmitted to the Department of
Justice the query of whether or not the "non-power rate powers and functions" of
the ERB are included in the "jurisdiction, powers and functions transferred to the
Department of Energy." Answering the query in the affirmative, the Department of
Justice rendered Opinion No. 22 dated February 12, 1993 the pertinent portion of
which states:
power to an area which is within the coverage of both is certainly not a rate-fixing


". . . we believe that since the provision of Section 18 on the transfer of certain
powers and functions from ERB to DOE is clear and unequivocal, and devoid of
any ambiguity, in the sense that it categorically refers to ‘non-price jurisdiction,
powers and functions’ of ERB under Section 3 of E.O. No. 172, there is no room
for interpretation, but only for application, of the law. This is a cardinal rule of
statutory construction.



Clearly, the parameters of the transfer of functions from ERB to DOE pursuant to
Section 18, are circumscribed by the provision of Section 3 of E.O. No. 172
alone, so that, if there are other ‘related’ functions of ERB under other provisions
of E.O. No. 172 or other energy laws, these ‘related’ functions, which may
conceivably refer to what you call ‘non-power rate powers and functions’ of ERB,
are clearly not contemplated by Section 18 and are, therefore, not to be deemed
included in the transfer of functions from ERB to DOE under the said provision.
 upon the Department of Energy and to hear and eventually grant itself the right to


It may be argued that Section 26 of R.A. No. 7638 contains a repealing clause
which provides that: 
 On the other hand, ventilating the issue in a public hearing would not unduly


‘All laws, presidential decrees, executive orders, rules and regulations or parts
thereof, inconsistent with the provisions of this Act, are hereby repealed or
modified accordingly. . .’
 interpretation of rights, privileges or franchises is taken against the grantee. Thus


and, therefore, all provisions of E.O. No. 172 and related laws which are
inconsistent with the policy, purpose and intent of R.A. No. 7638 are deemed
repealed. It has been said, however, that a general repealing clause of such
nature does not operate as an express repeal because it fails to identify or
designate the act or acts that are intended to be repealed. Rather, it is a clause
which predicates the intended repeal upon the condition that a substantial
conflict must be found on existing and prior acts of the same subject matter.
Such being the case, the presumption against implied repeals and the rule on
strict construction regarding implied repeals shall apply ex propio vigore. For the
specific laws is intended, the proper step is to so express it. The failure to add a
specific repealing clause particularly mentioning the statute to be repealed
indicates that the intent was not to repeal any existing law on the matter, unless
an irreconcilable inconsistency and repugnancy exists in the terms of the new
and the old laws (Iloilo Palay and Corn Planters Association, Inc. v. Feliciano, 13
SCRA 377; City of Naga v. Agna, 71 SCRA 176, cited in Agpalo, Statutory
Construction, 1990 Edition, pp. 191-192).



In view of the foregoing, it is our opinion that only the non-price regulatory
functions of ERB under Section 3 of E.O. 172 are transferred to the DOE. All other
powers of ERB which are not within the purview of its ‘non-price regulatory
jurisdiction, powers and functions’ as defined in Section 3 are not so transferred
to DOE and accordingly remain vested in ERB." 



The determination of which of two public utilities has the right to supply electric
function which should remain with the ERB. It deals with the regulation of the
distribution of energy resources which, under Executive Order No. 172, was
expressly a function of ERB. However, with the enactment of Republic Act No.
7638, the Department of Energy took over such function. Hence, it is this
Department which shall then determine whether CEPALCO or PIA should supply
power to PIE-MO.



Clearly, petitioner NPC’s assertion that its "authority to entertain and hear direct
connection applications is a necessary incident of its express authority to sell
electric power in bulk" is now baseless. 52 Even without the new legislation
affecting its power to conduct hearings, it is certainly irregular, if not downright
anomalous for the NPC itself to determine whether it should supply power
directly to the PIA or the industries within the PIE-MO. It simply cannot arrogate
unto itself the authority to exercise non-rate fixing powers which now devolves
supply power in bulk. 53 



prejudice CEPALCO although it was enfranchised by law earlier than the PIA.
Exclusivity of any public franchise has not been favored by this Court such that in
most, if not all, grants by the government to private corporations, the
in Alger Electric, Inc. v. Court of Appeals, 54 the Court said: 



". . . Exclusivity is given by law with the understanding that the company enjoying
it is self-sufficient and capable of supplying the needed service or product at
moderate or reasonable prices. It would be against public interest where the firm
granted a monopoly is merely an unnecessary conduit of electric power, jacking
up prices as a superfluous middleman or an inefficient producer which cannot
supply cheap electricity to power intensive industries. It is in the public interest
when industries dependent on heavy use of electricity are given reliable and
direct power at the lower costs thus enabling the sale of nationally marketed Postponement and of Hearing on August 17, 1970, with the respondent
products at prices within the reach of the masses. . . ." 
 Commission on the around that their counsel made the mistake of noting down in

 his calendar the hearing on August 6, 1970, a Sunday and that it was already too
WHEREFORE, both petitions in G.R. No. 112702 and 113613 are hereby DENIED. late when he discovered the said mistake. 2 On August 18, 1970, the petitioners
The Department of Energy is directed to conduct a hearing with utmost dispatch filed a motion for reopening of the case and allowance to present evidence but
to determine whether it is the Cagayan Electric Power and Light Co., Inc. or the unfortunately, on the same date respondent Commission issued an Order
National Power Corporation, through the PHIVIDEC Industrial Authority, which granting the private respondent provisional authority to operate the ice plant for
should supply electric power to the industries in the PHIVIDEC Industrial Estate- six (6) months. This was based on the findings of the Commission that there was
Misamis Oriental. 
 indeed an urgent need for an ice plant in Davao City as its population has

 increased tremendously. Petitioners then filed a motion for reconsideration but
This Decision is immediately executory. SO ORDERED.
this was denied in a Resolution signed by all the members of the respondent
Commission, said motion having been heard by the Commission en banc. 3 



[G.R. No. L-34978. February 26, 1988.]
 The above-mentioned provisional authority granted to the private respondent was

 extended twice. The first extension was given on February 12, 1971 and the
ANGELES C. VDA. DE LAT, CAROLINA LAT PEREZ DE TAGLE, and PEDRO C. second, on December 10, 1971. Finally on February 24, 1972, the respondent
LAT, JR., Petitioners, v. THE PUBLIC SERVICE COMMISSION and ROBERTO Commission handed down a Decision approving the Application of the private
C. DIAZ, Respondents.
respondent and granting him a Certificate of Public Convenience to operate a 2-
ton ice plant in Davao City.

D E C I S I O N
 

In this petition for review, the petitioners are asking that the Decision rendered by
GANCAYCO, J.:
the respondent Commission on February 24, 1972 be set aside and declared null

 and void, as it has been rendered without due process. Their claim is that they
This is a petition for the review of a Decision of the Public Service Commission, were deprived of their day in court when they were not allowed to cross-examine
dated February 24, 1972, granting the application of the herein private the witnesses of the private respondent and to present their evidence in support
respondent, Roberto C. Diaz, for a Certificate of Public Convenience.
 of their Opposition. 4 Furthermore, they submit that the decision awarding the

 Certificate of Public Convenience to the private respondent was based merely on
The facts of the case are as follows: 
 the latter’s uncorroborated testimony and would amount to competition that

 would damage their business. 5 

On May 11, 1970, the herein private respondent Roberto C. Diaz filed an 

application with the respondent Public Service Commission for a Certificate of Two issues are raised in this petition. The first is whether or not the petitioners
Public Convenience and Necessity to operate and maintain an ice plant service in were deprived of their day in Court to make the proceeding in the respondent
Davao City alleging among others that he is financially capable to operate and Public Service Commission null and void. And the other is whether or not the
maintain the proposed service, and that public necessity and convenience will be private respondent was validly awarded the questioned Certificate of Public
promoted in a proper and suitable manner with the approval of his application. 1 Convenience to operate an ice plant in Davao City.

Said application was published in two newspapers of general circulation namely: 

El Debate and The Philippine Herald, and copies thereof were sent to affected As regards the first issue, We reject the petitioners’ assertion that their right to
operators including the herein petitioners Angeles C. Vda. de Lat, Carolina Lat due process was violated. It is very clear from the records that the petitioners
Perez de Tagle and Pedro C. Lat, Jr. Only the petitioners filed an Opposition to were given notice and opportunity to be heard negating the petitioners’
the Application and the same was submitted on July 3, 1970.
 declaration that they were deprived of their day in court.


 

By agreement of the parties, the hearing of the Application and the Opposition Going back to the facts of this Case, We find, as the respondent Commission did,
was set by the respondent Commission for August 17, 1970 at 9 o’clock in the 6 that the private respondent duly complied with the required notice of hearing.
morning. However, when the case was called for hearing as late as 10 o’clock in There was publication. 7 The petitioners could not have been denied the right to
the morning on the said date, neither the oppositors nor their counsel was be heard because as their counsel even admits, he agreed to the setting of the
present. Hence, the respondent Commission declared the case uncontested and hearing of the case for August 19, 1970 at 9 o’clock in the morning. 8 

received the evidence of the private Respondent.
 


 The Petitioners should have known about the date of the hearing. Yet, when the
In this petition, the petitioners contend that they filed an Urgent Motion for case was called, neither they nor their counsel showed up. There was not even
any word from them. Their lame excuse that their lawyer made the mistake of
noting down the hearing on a Sunday instead of a Monday is unacceptable.
There were three of them who presented themselves as oppositors. It is
unbelievable that no one of them found out about the mistake of their counsel
had they shown any slight interest in the case. Their negligence cannot now be
passed on to the respondent Commission which only did the right thing of
proceeding with the case, which had become uncontested.
 amounting to damage of their business 12 is unconvincing. The grant is for the


Nor can it be said that the Decision of the respondent Commission is arbitrary.
The application was not outrightly approved upon reception of the evidence of
the private Respondent. On the contrary, the respondent Commission took time
to consider and weigh such evidence as can be seen from the fact that the
private respondent was granted only a provisional authority on August 18, 1970,
which was twice extended, before the case was finally determined on February
24, 1972.
 prove ruinous competition. It must be shown that the business would not have


We are convinced that the private respondent deserves to be awarded the
Certificate of Public Convenience. He was able to fully satisfy the requisites
before such a certificate may be granted, namely: (1) the applicant must be a
citizen of the Philippines, or a corporation or co-partnership, association or joint-
stock company constituted and organized under the laws of the Philippines, 60
per centum at least of the stock or paid-up capital of which belong entirely to
citizens of the Philippines; (2) the applicant must be financially capable of
undertaking the proposed service and meeting the responsibilities incident to its
operations; and (3) the applicant must prove that the operation of the public
service proposed and the authorization to do business will promote the public
interest in a proper and suitable manner. 9 
 INC., Respondents.
There is no question that the private respondent is a Filipino Citizen. Regarding
his financial capacity and public necessity for the ice plant, the finding of the
Public Service Commission on these are relevant, to wit: 



"It appears from the evidence adduced by the applicant, that he is a co-owner of
a parcel of land situated at Barrio Magugpo, Tagum, Davao (Exhibit "F" & "F-1")
with an area of 15,738 square meters and having a present market value of
P25,000.00 (Exhibits "G" & "G-1") with the Bank of the Philippine Islands; and
that, he is engaged in the fishing business with an investment of P10,000.00 to
P15,000.00 and from which he earns a monthly income of P2,000.00 to
P3,000.00. As regards the necessity for the service applied for, applicant testified
that the only oppositors here are serving almost 1/3 of the population of Davao;
that Davao City is a tourist belt and the population has increased from 225.7 in
1960 to 389.3 in 1970, as evidenced by Exhibit "1" ; that there are two (2) or (3)
three barrios in said city; that being a fishing ground, there are plenty of fish
wherein ice is very much needed in order to preserve them; that he received a
request from the Barrio Captain of Bo. Buhangin, Davao City (Exhibit "J")
clamoring for ice in behalf of its 9,431 inhabitants; and that there is an urgent
need for an ice plant in Davao City, to serve the requirements for ice in the said
city" 10 
 enacted on 27 May 1992, extended CBS's previous legislative franchise1  to


Before We end, it is apt to stress the principle that nobody has the exclusive right
to secure a franchise or a Certificate of Public Convenience. The paramount
consideration should always be the public interest and public convenience. 11 



Furthermore, the allegation of the petitioners that the grant of Certificate of Public
Convenience to the private respondent would result in ruinous competition
operation of a mere 2-ton ice plant and only in Davao City whereas the
petitioners are big operators producing no less than 63 tons of ice daily and who
are authorized to operate ice plants not only in the City of Davao but also in the
three Davao provinces. And We have held before, in order that the opposition
based on ruinous competition may prosper, it must be shown that the opponent
would be deprived of their profits on the capital invested in its business. The
mere possibility of reduction in the earnings of a business is not sufficient to
sufficient gains to pay a fair rate of interest on its capital investments. 13 



WHEREFORE, the decision of the Public Service Commission appealed from is
hereby AFFIRMED, with costs against the petitioners. SO ORDERED.
[G.R. NO. 162272 : April 7, 2009]
S A N T I A G O C . D I V I N A G R A C I A ,  P e t i t i o n e r ,  v.  C O N S O L I D AT E D
BROADCASTING SYSTEM, INC. and PEOPLE'S BROADCASTING SERVICE,
D E C I S I O N
TINGA, J.:
Does the National Telecommunications Commission (NTC) have jurisdiction over
complaints seeking the cancellation of certificates of public convenience (CPCs)
and other licenses it had issued to the holders of duly-issued legislative
franchises on the ground that the franchisees had violated the terms of their
franchises? The Court, in resolving that question, takes the opportunity to
elaborate on the dynamic behind the regulation of broast media in the
Philippines, particularly the interrelationship between the twin franchise and
licensing requirements.
I.
Respondents Consolidated Broasting System, Inc. (CBS) and People's Broasting
Service, Inc. (PBS) were incorporated in 1961 and 1965, respectively. Both are
involved in the operation of radio broasting services in the Philippines, they being
the grantees of legislative franchises by virtue of two laws, Republic Act (R.A.)
No. 7477 and R.A. No. 7582. R.A. No. 7477, enacted on 5 May 1992, granted
PBS a legislative franchise to construct, install, maintain and operate radio and
television stations within the Philippines for a period of 25 years. R.A. No. 7582,
operate radio stations for another 25 years. The CBS and PBS radio networks are
two of the three networks that comprise the well-known "Bombo Radyo After the NTC had denied Divinagracia's motion for reconsideration,15  he filed a
Philippines."2
Petition for Review under Rule 43 of the Rules of Court with the Court of Appeals.
16  On 18 February 2004, the Court of Appeals rendered a decision17  upholding

Section 9 of R.A. No. 7477 and Section 3 of R.A. No. 7582 contain a common the NTC. The appellate court agreed with the earlier conclusion that the
provision predicated on the "constitutional mandate to democratize ownership of complaints were indeed a collateral attack on the legislative franchises of CBS
public utilities."3 The common provision states:
and PBS and that a quo warranto action was the proper mode to thresh out the
issues raised in the complaints.

SEC. 9. Democratization of ownership.― In compliance with the constitutional

mandate to democratize ownership of public utilities, the herein grantee shall
make public offering through the stock exchanges of at least thirty percent (30%)
of its common stocks within a period of three (3) years from the date of effectivity
of this Act: Provided, That no single person or entity shall be allowed to own
more than five percent (5%) of the stock offerings.4
hinge on the authority of the NTC to cancel the very Provisional Authorities and
It further appears that following the enactment of these franchise laws, the NTC
issued four (4) Provisional Authorities to PBS and six (6) Provisional Authorities to
CBS, allowing them to install, operate and maintain various AM and FM broast
Hence this petition, which submits as the principal issue, whether the NTC, with
its retinue of regulatory powers, is powerless to cancel Provisional Authorities
and Certificates of Public Convenience it issued to legislative franchise-holders.
That central issue devolves into several narrower arguments, some of which
CPCs which it is empowered to issue, as distinguished from the legislative
franchise itself, the cancellation of which Divinagracia points out was not the
relief he had sought from the NTC. Questions are raised as to whether the
complaints did actually constitute a collateral attack on the legislative franchises.

stations in various locations throughout the nation.5 These Provisional Authorities

were issued between 1993 to 1998, or after the enactment of R.A. No. 7477 and
R.A. No. 7582.
case rotates on the singular thesis that the NTC has the power to cancel
Petitioner Santiago C. Divinagracia6  filed two complaints both dated 1 March
1999 with the NTC, respectively lodged against PBS7 and CBS.8 He alleged that
he was "the actual and beneficial owner of Twelve percent (12%) of the shares of
stock" of PBS and CBS separately,9 and that despite the provisions in R.A. No.
7477 and R.A. No. 7582 mandating the public offering of at least 30% of the
common stocks of PBS and CBS, both entities had failed to make such offering.
Thus, Divinagracia commonly argued in his complaints that the failure on the part
Yet this case ultimately rests to a large degree on fundamentals. Divinagracia's
Provisional Authorities and CPCs, or in effect, the power to cancel the licenses
that allow broast stations to operate. The NTC, in its assailed Decision, expressly
admits that it has such power even as it refrained from exercising the same.18 The
Court has yet to engage in a deep inquiry into the question of whether the NTC
has the power to cancel the operating licenses of entities to whom Congress has
issued franchises to operate broast stations, especially on account of an alleged
violation of the terms of their franchises. This is the opportune time to examine
the issue.

of PBS and CBS "to comply with the mandate of their legislative franchise is a
misuse of the franchise conferred upon it by law and it continues to exercise its II.

franchise in contravention of the law to the detriment of the general public and of To fully understand the scope and dimensions of the regulatory realm of the NTC,
complainant who are unable to enjoy the benefits being offered by a publicly it is essential to review the legal background of the regulation process. As
listed company."10  He thus prayed for the cancellation of all the Provisional operative fact, any person or enterprise which wishes to operate a broast radio or
Authorities or CPCs of PBS and CBS on account of the alleged violation of the television station in the Philippines has to secure a legislative franchise in the
conditions set therein, as well as in its legislative franchises.11
form of a law passed by Congress, and thereafter a license to operate from the
NTC.

On 1 August 2000, the NTC issued a consolidated decision dismissing both

complaints.12  While the NTC posited that it had full jurisdiction to revoke or
cancel a Provisional Authority or CPC for violations or infractions of the terms
and conditions embodied therein,13  it held that the complaints actually
constituted collateral attacks on the legislative franchises of PBS and CBS since
the sole issue for determination was whether the franchisees had violated the
mandate to democratize ownership in their respective legislative franchises. The
NTC ruled that it was not competent to render a ruling on that issue, the same
being more properly the subject of an action for quo warranto to be commenced
by the Solicitor General in the name of the Republic of the Philippines, pursuant
to Rule 66 of the Rules of Court.14
regulate the establishment, use, and operation of all radio stations and of all
The franchise requirement traces its genesis to Act No. 3846, otherwise known as
the Radio Control Act, enacted in 1931.19  Section 1 thereof provided that "[n]o
person, firm, company, association or corporation shall construct, install,
establish, or operate x x x a radio broasting station, without having first obtained
a franchise therefor from the National Assembly x x x"20  Section 2 of the law
prohibited the construction or installation of any station without a permit granted
by the Secretary of Public Works and Communication, and the operation of such
station without a license issued by the same Department Secretary.21  The law
likewise empowered the Secretary of Public Works and Communication "to
forms of radio communications and transmissions within the Philippine Islands
and to issue such rules and regulations as may be necessary."22


Noticeably, our Radio Control Act was enacted a few years after the United
States Congress had passed the Radio Act of 1927. American broasters
themselves had asked their Congress to step in and regulate the radio industry,
which was then in its infancy. The absence of government regulation in that
market had led to the emergence of hundreds of radio broasting stations, each
using frequencies of their choice and changing frequencies at will, leading to
literal chaos on the airwaves. It was the Radio Act of 1927 which introduced a
licensing requirement for American broast stations, to be overseen eventually by
the Federal Communications Commission (FCC).23
claimants to permit use of the whole with an even smaller allocation to broast
This pre-regulation history of radio broast stations illustrates the continuing
necessity of a government role in overseeing the broast media industry, as
opposed to other industries such as print media and the Internet.24  Without
regulation, the result would be a free-for-all market with rival broasters able with
impunity to sabotage the use by others of the airwaves.25 Moreover, the airwaves
themselves the very medium utilized by broast―are by their very nature not
susceptible to appropriation, much less be the object of any claim of private or
exclusive ownership. No private individual or enterprise has the physical means,
acting alone to actualize exclusive ownership and use of a particular frequency.
That end, desirable as it is among broasters, can only be accomplished if the
industry itself is subjected to a regime of government regulation whereby
broasters receive entitlement to exclusive use of their respective or particular
frequencies, with the State correspondingly able by force of law to confine all
broasters to the use of the frequencies assigned to them.
Government from making radio communication possible by requiring licenses to
Still, the dominant jurisprudential rationale for state regulation of broast media is
more sophisticated than a mere recognition of a need for the orderly
administration of the airwaves. After all, a united broast industry can theoretically
achieve that goal through determined self-regulation. The key basis for regulation
is rooted in empiricism - "that broast frequencies are a scarce resource whose
use could be regulated and rationalized only by the Government." This concept
was first introduced in jurisprudence in the U.S. case of  Red Lion v. Federal
Communications Commission.26
speech."
Red Lion enunciated the most comprehensive statement of the necessity of
government oversight over broast media. The U.S. Supreme Court observed that
within years from the introduction of radio broasting in the United States, "it
became apparent that broast frequencies constituted a scarce resource whose
use could be regulated and rationalized only by the Government' without
government control, the medium would be of little use because of the cacophony
of competing voices, none of which could be clearly and predictably heard." The
difficulties posed by spectrum scarcity was concretized by the U.S. High Court in
this manner:
necessity, be barred from the airwaves.28
Scarcity is not entirely a thing of the past. Advances in technology, such as
microwave transmission, have led to more efficient utilization of the frequency
spectrum, but uses for that spectrum have also grown apace. Portions of the
spectrum must be reserved for vital uses unconnected with human
communication, such as radio-navigational aids used by aircraft and vessels.
Conflicts have even emerged between such vital functions as defense
preparedness and experimentation in methods of averting midair collisions
through radio warning devices. "Land mobile services" such as police,
ambulance, fire department, public utility, and other communications systems
have been occupying an increasingly crowded portion of the frequency spectrum
and there are, apart from licensed amateur radio operators' equipment, 5,000,000
transmitters operated on the "citizens' band" which is also increasingly
congested. Among the various uses for radio frequency space, including marine,
aviation, amateur, military, and common carrier users, there are easily enough
radio and television uses than now exists.(citations omitted)27
After interrelating the premise of scarcity of resources with the First Amendment
rights of broasters,  Red Lion  concluded that government regulation of broast
media was a necessity:
Where there are substantially more individuals who want to broast than there are
frequencies to allocate, it is idle to posit an unabridgeable First Amendment right
to broast comparable to the right of every individual to speak, write, or publish. If
100 persons want broast [395 U.S. 367, 389] licenses but there are only 10
frequencies to allocate, all of them may have the same "right" to a license; but if
there is to be any effective communication by radio, only a few can be licensed
and the rest must be barred from the airwaves. It would be strange if the First
Amendment, aimed at protecting and furthering communications, prevented the
broast and by limiting the number of licenses so as not to overcrowd the
spectrum.
This has been the consistent view of the Court. Congress unquestionably has the
power to grant and deny licenses and to eliminate existing stations. No one has a
First Amendment right to a license or to monopolize a radio frequency; to deny a
station license because "the public interest" requires it "is not a denial of free
By the same token, as far as the First Amendment is concerned those who are
licensed stand no better than those to whom licenses are refused. A license
permits broasting, but the licensee has no constitutional right to be the one who
holds the license or to monopolize a radio frequency to the exclusion of his fellow
citizens. There is nothing in the First Amendment which prevents the Government
from requiring a licensee to share his frequency with others and to conduct
himself as a proxy or fiduciary with obligations to present those views and voices
which are representative of his community and which would otherwise, by
x x x
Rather than confer frequency monopolies on a relatively small number of
licensees, in a Nation of 200,000,000, the Government could surely have decreed
that each frequency should be shared among all or some of those who wish to
use it, each being assigned a portion of the broast day or the broast week. The
ruling and regulations at issue here do not go quite so far. They assert that under
specified circumstances, a licensee must offer to make available a reasonable
amount of broast time to those who have a view different from that which has
already been expressed on his station. The expression of a political endorsement,
or of a personal attack while dealing with a controversial public issue, simply
triggers this time sharing. As we have said, the First Amendment confers no right
on licensees to prevent others from broasting on "their" frequencies and no right
to an unconditional monopoly of a scarce resource which the Government has
denied others the right to use.
In the allocation of limited resources, relevant conditions may validly be imposed
In terms of constitutional principle, and as enforced sharing of a scarce resource,
the personal attack and political editorial rules are indistinguishable from the
equal-time provision of '315, a specific enactment of Congress requiring stations
to set aside reply time under specified circumstances and to which the fairness
doctrine and these constituent regulations are important complements. That
provision, which has been part of the law since 1927, Radio Act of 1927, '18, 44
Stat. 1170, has been held valid by this Court as an obligation of the licensee
relieving him of any power in any way to prevent or censor the broast, and thus
insulating him from liability for defamation. The constitutionality of the statute
under the First Amendment was unquestioned.(citations omitted)29
libertarian ideal of the free expression clause may be tempered and balanced by
As made clear in Red Lion, the scarcity of radio frequencies made it necessary
for the government to step in and allocate frequencies to competing broasters. In
undertaking that function, the government is impelled to adjudge which of the
competing applicants are worthy of frequency allocation. It is through that role
that it becomes legally viable for the government to impose its own values and
goals through a regulatory regime that extends beyond the assignation of
frequencies, notwithstanding the free expression guarantees enjoyed by
broasters. As the government is put in a position to determine who should be
worthy to be accorded the privilege to broast from a finite and limited spectrum,
it may impose regulations to see to it that broasters promote the public good
deemed important by the State, and to withdraw that privilege from those who
fall short of the standards set in favor of other worthy applicants.
III.
Such conditions are peculiar to broast media because of the scarcity of the
airwaves. Indeed, any attempt to impose such a regulatory regime on a medium
that is not belabored under similar physical conditions, such as print media, will
be clearly antithetical to democratic values and the free expression clause. This
Court, which has adopted the "scarcity of resources" doctrine in cases such as
Telecom. & Broast Attys. of the Phils., Inc. v. COMELEC,30  emphasized the
distinction citing Red Lion:
regulation of "radio companies" remained with the Secretary of Public Works and
Petitioners complain that B.P. Blg. 881, '92 singles out radio and television
stations to provide free air time. They contend that newspapers and magazines
are not similarly required as, in fact, in Philippine Press Institute v. COMELEC we
upheld their right to the payment of just compensation for the print space they
may provide under '90.
Presidential Decree (P.D.) No. 1, which allocated to the Board of Communications
The argument will not bear analysis. It rests on the fallacy that broast media are
entitled to the same treatment under the free speech guarantee of the
Constitution as the print media. There are important differences in the
characteristics of the two media, however, which justify their differential treatment
for free speech purposes. Because of the physical limitations of the broast
spectrum, the government must, of necessity, allocate broast frequencies to
those wishing to use them. There is no similar justification for government
allocation and regulation of the print media.
on the grantees or licensees. The reason for this is that, as already noted, the
government spends public funds for the allocation and regulation of the broast
industry, which it does not do in the case of the print media. To require the radio
and television broast industry to provide free air time for the COMELEC Time is a
fair exchange for what the industry gets.31
Other rationales may have emerged as well validating state regulation of broast
media,32 but the reality of scarce airwaves remains the primary, indisputable and
indispensable justification for the government regulatory role. The integration of
the scarcity doctrine into the jurisprudence on broast media illustrates how the
actualities in the real world while preserving the core essence of the constitutional
guarantee. Indeed, without government regulation of the broast spectrum, the
ability of broasters to clearly express their views would be inhibited by the
anarchy of competition. Since the airwaves themselves are not susceptible to
physical appropriation and private ownership, it is but indispensable that the
government step in as the guardian of the spectrum.
Reference to the scarcity doctrine is necessary to gain a full understanding of the
paradigm that governs the state regulation of broast media. That paradigm, as it
exists in the United States, is contextually similar to our own, except in one very
crucial regard - the dual franchise/license requirements we impose.
Recall that the Radio Control Act specifically required the obtention of a
legislative franchise for the operation of a radio station in the Philippines. When
the Public Service Act was enacted in 1936, the Public Service Commission
(PSC) was vested with jurisdiction over "public services," including over "wire or
wireless broasting stations."33 However, among those specifically exempted from
the regulatory reach of the PSC were "radio companies, except with respect to
the fixing of rates."34  Thus, following the Radio Control Act, the administrative
Communications. It appears that despite the advent of commercial television in
the 1950s, no corresponding amendment to either the Radio Control Act or the
Public Service Act was passed to reflect that new technology then.
Shortly after the 1972 declaration of martial law, President Marcos issued
the authority to issue CPCs for the operation of radio and television broasting
systems and to grant permits for the use of radio frequencies for such broasting
systems. In 1974, President Marcos promulgated Presidential Decree No. 576-A,
entitled "Regulating the Ownership and Operation of Radio and Television
Stations and for other Purposes." Section 6 of that law reads:
concerned with any aspect involving communications with a view to continuously
Section 6. All franchises, grants, licenses, permits, certificates or other forms of
authority to operate radio or television broasting systems shall terminate on
December 31, 1981. Thereafter, irrespective of any franchise, grants, license,
permit, certificate or other forms of authority to operate granted by any office,
agency or person, no radio or television station shall be authorized to operated
without the authority of the Board of Communications and the Secretary of Public
Works and Communications or their successors who have the right and authority
to assign to qualified parties frequencies, channels or other means of identifying
broasting systems;  Provided,  however, that any conflict over, or disagreement
with a decision of the aforementioned authorities may be appealed finally to the
Office of the President within fifteen days from the date the decision is received
by the party in interest.
A few years later, President Marcos promulgated Executive Order (E.O.) No. 546,
establishing among others the National Telecommunications Commission.
Section 15 thereof enumerates the various functions of the NTC.
k. Perform such other functions as may be prescribed by law.
Section 15.  Functions of the Commission.― The Commission shall exercise the
following functions:
that the operation of a radio or television station does require a congressional
A. Issue Certificate of Public Convenience for the operation of communications
utilities and services, radio communications systems, wire or wireless telephone
or telegraph systems, radio and television broasting system and other similar
public utilities;
Notably, neither law had specifically required legislative franchises for the
b. Establish, prescribe and regulate areas of operation of particular operators of
public service communications; and determine and prescribe charges or rates
pertinent to the operation of such public utility facilities and services except in
cases where charges or rates are established by international bodies or
associations of which the Philippines is a participating member or by bodies
recognized by the Philippine Government as the proper arbiter of such charges or
rates;
c. Grant permits for the use of radio frequencies for wireless telephone and
telegraph systems and radio communication systems including amateur radio
stations and radio and television broasting systems;
ruling in Albano v. Reyes, to the effect that "franchises issued by Congress are
d. Sub-allocate series of frequencies of bands allocated by the International
Telecommunications Union to the specific services;
e. Establish and prescribe rules, regulations, standards, specifications in all cases
related to the issued Certificate of Public Convenience and administer and
enforce the same;
of radio and television stations, that law must be followed until subsequently
f. Coordinate and cooperate with government agencies and other entities
improve the communications service in the country;
g. Promulgate such rules and regulations, as public safety and interest may
require, to encourage a larger and more effective use of communications, radio
and television broasting facilities, and to maintain effective competition among
private entities in these activities whenever the Commission finds it reasonably
feasible;
h. Supervise and inspect the operation of radio stations and telecommunications
facilities;
i. Undertake the examination and licensing of radio operators;
j. Undertake, whenever necessary, the registration of radio transmitters and
transceivers; and
These enactments were considered when in 2003 the Court definitively resolved
franchise. In Associated Communications & Wireless Services v. NTC,35 the Court
took note of the confusion then within the broast industry as to whether the
franchise requirement first ordained in the 1931 Radio Control Act remained
extant given the enactment of P.D. No. 576-A in 1974 and E.O. No. 546 in 1979.
operation of broast stations. Nonetheless, the Court noted that Section 1 of P.D.
No. 576-A had expressly referred to the franchise requirement in stating that "[n]o
radio station or television channel may obtain a franchise unless it has sufficient
capital on the basis of equity for its operation for at least one year'. "36 Section 6
of that law made a similar reference to the franchise requirement.37  From those
references, the Court concluded that the franchise requirement under the Radio
Control Act was not repealed by P.D. No. 576-A.38
Turning to E.O. No. 546, the Court arrived at a similar conclusion, despite a
Department of Justice Opinion stating that the 1979 enactment had dispensed
with the congressional franchise requirement. The Court clarified that the 1989
not required before each and every public utility may operate" did not dispense
with the franchise requirement insofar as broast stations are concerned.
Our ruling in Albano that a congressional franchise is not required before "each
and every public utility may operate" should be viewed in its proper light. Where
there is a law such as P.D. No. 576-A which requires a franchise for the operation
repealed. As we have earlier shown, however, there is nothing in the subsequent
E.O. No. 546 which evinces an intent to dispense with the franchise requirement.
In contradistinction with the case at bar, the law applicable in Albano,  i.e., E.O.
No. 30, did not require a franchise for the Philippine Ports Authority to take over,
manage and operate the Manila International Port Complex and undertake the
providing of cargo handling and port related services thereat. Similarly, in
Philippine Airlines, Inc. v. Civil Aeronautics Board, et al., we ruled that a legislative
franchise is not necessary for the operation of domestic air transport because
"there is nothing in the law nor in the Constitution which indicates that a
legislative franchise is an indispensable requirement for an entity to operate as a
domestic air transport operator." Thus, while it is correct to say that specified
agencies in the Executive Branch have the power to issue authorization for
certain classes of public utilities, this does not mean that the authorization or
CPC issued by the NTC dispenses with the requirement of a franchise as this is
clearly required under P.D. No. 576-A.39
The Court further observed that Congress itself had accepted it as a given that a
legislative franchise is still required to operate a broasting station in the
Philippines.
the regime which was characterized by the need for CPC or CPCN. However,
That the legislative intent is to continue requiring a franchise for the operation of
radio and television broasting stations is clear from the franchises granted by
Congress after the effectivity of E.O. No. 546 in 1979 for the operation of radio
and television stations. Among these are: (1) R.A. No. 9131 dated April 24, 2001,
entitled "An Act Granting the Iddes Broast Group, Inc., a Franchise to Construct,
Install, Establish, Operate and Maintain Radio and Television Broasting Stations
in the Philippines"; (2) R.A. No. 9148 dated July 31, 2001, entitled "An Act
Granting the Hypersonic Broasting Center, Inc., a Franchise to Construct, Install,
Establish, Operate and Maintain Radio Broasting Stations in the Philippines;" and
(3) R.A. No. 7678 dated February 17, 1994, entitled "An Act Granting the Digital
Telecommunication Philippines, Incorporated, a Franchise to Install, Operate and
Maintain Telecommunications Systems Throughout the Philippines." All three
franchises require the grantees to secure a CPCN/license/permit to construct and
operate their stations/systems. Likewise, the Tax Reform Act of 1997 provides in
Section 119 for tax on franchise of radio and/or television broasting companies x
x x 40
franchises, stations are required to obtain CPCs from the NTC before they can
Associated Communications makes clear that presently broast stations are still
required to obtain a legislative franchise, as they have been so since the passage
of the Radio Control Act in 1931. By virtue of this requirement, the broast industry
falls within the ambit of Section 11, Article XII of the 1987 Constitution, the one
constitutional provision
the NTC has the power to cancel the CPCs it has issued to legislative
concerned with the grant of franchises in the Philippines.41 The requirement of a
legislative franchise likewise differentiates the Philippine broast industry from that
in America, where there is no need to secure a franchise from the U.S. Congress.
IV.
It is thus clear that the operators of broast stations in the Philippines must secure
a legislative franchise, a requirement imposed by the Radio Control Act of 1931
and accommodated under the 1987 Constitution. At the same time, the Court in
Associated Communications referred to another form of "permission" required of
broast stations, that is the CPC issued by the NTC. What is the source of such
requirement?
the implementation of the law. In broad theory, the legal obligation of the NTC
The Radio Control Act had also obliged radio broast stations to secure a permit
from the Secretary of Commerce and Industry42  prior to the construction or
installation of any station.43  Said Department Secretary was also empowered to
regulate "the establishment, use and operation of all radio stations and of all
forms of radio communications and
transmission within the Philippines."44 Among the specific powers granted to the
Secretary over radio stations are the approval or disapproval of any application
for the construction, installation, establishment or operation of a radio
station45 and the approval or disapproval of any application for renewal of station
or operation license.46
As earlier noted, radio broasting companies were exempted from the jurisdiction
of the defunct Public Service Commission except with respect to their rates;
thus, they did not fall within the same regulatory regime as other public services,
following the Radio Control Act, it became clear that radio broast companies
need to obtain a similar license from the government in order to operate, at that
time from the Department of Public Works and Communications.
Then, as earlier noted, in 1972, President Marcos through P.D. No. 1, transferred
to the Board of Communications the function of issuing CPCs for the operation of
radio and television broasting systems, as well as the granting of permits for the
use of radio frequencies for such broasting systems. With the creation of the
NTC, through E.O. No. 546 in 1979, that agency was vested with the power to
"[i]ssue certificate[s] of public convenience for the operation of' radio and
television broasting system[s]."47  That power remains extant and undisputed to
date.
This much thus is clear. Broast and television stations are required to obtain a
legislative franchise, a requirement imposed by the Radio Control Act and
affirmed by our ruling in Associated Broasting. After securing their legislative
operate their radio or television broasting systems. Such requirement while
traceable also to the Radio Control Act, currently finds its basis in E.O. No. 546,
the law establishing the NTC.
From these same legal premises, the next and most critical question is whether
franchisees.
The complexities of our dual franchise/license regime for broast media should be
understood within the context of separation of powers. The right of a particular
entity to broast over the airwaves is established by law 'i.e., the legislative
franchise - and determined by Congress, the branch of government tasked with
the creation of rights and obligations. As with all other laws passed by Congress,
the function of the executive branch of government, to which the NTC belongs, is
once Congress has established a legislative franchise for a broast media station
is to facilitate the operation by the franchisee of its broast stations. However,
since the public administration of the airwaves is a requisite for the operation of a
franchise and is moreover a highly technical function, Congress has delegated to
the NTC the task of administration over the broast spectrum, including the
determination of available bandwidths and the allocation of such available
bandwidths among the various legislative franchisees. The licensing power of the
NTC thus arises from the necessary delegation by Congress of legislative power
geared towards the orderly exercise by franchisees of the rights granted them by
Congress.
Congress may very well in its wisdom impose additional obligations on the
various franchisees and accordingly delegate to the NTC the power to ensure
that the broast stations comply with their obligations under the law. Because
broast media enjoys a lesser degree of free expression protection as compared
to their counterparts in print, these legislative restrictions are generally
permissible under the Constitution. Yet no enactment of Congress may
contravene the Constitution and its Bill of Rights; hence, whatever restrictions are
imposed by Congress on broast media franchisees remain susceptible to judicial
review and analysis under the jurisprudential framework for scrutiny of free
expression cases involving the broast media.
Board of Communications by virtue of P. D. No. 1, which adopted, approved, and
The restrictions enacted by Congress on broast media franchisees have to pass
the mettle of constitutionality. On the other hand, the restrictions imposed by an
administrative agency such as the NTC on broast media franchisees will have to
pass not only the test of constitutionality, but also the test of authority and
legitimacy,  i.e., whether such restrictions have been imposed in the exercise of
duly delegated legislative powers from Congress. If the restriction or sanction
imposed by the administrative agency cannot trace its origin from legislative
delegation, whether it is by virtue of a specific grant or from valid delegation of
rule-making power to the administrative agency, then the action of such
administrative agency cannot be sustained. The life and authority of an
administrative agency emanates solely from an Act of Congress, and its faculties
confined within the parameters set by the legislative branch of government.
vested the power to issue the same. That same pattern held true in 1976, when
We earlier replicated the various functions of the NTC, as established by E.O. No.
546. One can readily notice that even as the NTC is vested with the power to
issue CPCs to broast stations, it is not expressly vested with the power to cancel
such CPCs, or otherwise empowered to prevent broast stations with duly issued
franchises and CPCs from operating radio or television stations.
recognize any intent to allocate to the Commission such regulatory functions
In contrast, when the Radio Control Act of 1931 maintained a similar requirement
for radio stations to obtain a license from a government official (the Secretary of
Commerce and Industry), it similarly empowered the government, through the
Secretary of Public Works and Communications, to suspend or revoke such
license, as indicated in Section 3(m):
Radio Control Act, even if Section 3(m) of the latter law provides at least, the
Section 3. The Secretary of Public Works and Communications is hereby
empowered, to regulate the construction or manufacture, possession, control,
sale and transfer of radio transmitters or transceivers (combination transmitter-
receiver) and the establishment, use, the operation of all radio stations and of all
form of radio communications and transmissions within the Philippines. In
addition to the above he shall have the following specific powers and duties:
(m) He may, at his direction bring criminal action against violators of the radio
laws or the regulations and confiscate the radio apparatus in case of illegal
operation; or simply suspend or revoke the offender's station or operator licenses
or refuse to renew such licenses; or just reprimand and warn the offenders;48
Section 3(m) begets the question - did the NTC retain the power granted in 1931
to the Secretary of Public Works and Communications to "x x x suspend or
revoke the offender's station or operator licenses or refuse to renew such
licenses"? We earlier adverted to the statutory history. The enactment of the
Public Service Act in 1936 did not deprive the Secretary of regulatory jurisdiction
over radio stations, which included the power to impose fines. In fact, the Public
Service Commission was precluded from exercising such jurisdiction, except with
respect to the fixing of rates.
Then, in 1972, the regulatory authority over broast media was transferred to the
made as part of the law of the land the Integrated Reorganization Plan which was
prepared by the Commission on Reorganization. 49 Among the cabinet
departments affected by the plan was the Department of Public Works and
Communications, which was now renamed the Department of Public Works,
Transportation and Communication.50  New regulatory boards under the
administrative supervision of the Department were created, including the Board
of Communications.51
The functions of the Board of Communications were enumerated in Part X,
Chapter I, Article III, Sec. 5 of the Integrated Reorganization Plan.52  What is
noticeably missing from these enumerated functions of the Board of
Communications is the power to revoke or cancel CPCs, even as the Board was
the Board of Communications was abolished by E.O. No. 546.53  Said executive
order, promulgated by then President Marcos in the exercise of his legislative
powers, created the NTC but likewise withheld from it the authority to cancel
licenses and CPCs, even as it was empowered to issue CPCs. Given the very
specific functions allocated by law to the NTC, it would be very difficult to
previously granted to the Secretary of Public Works and Communications, but
not included in the exhaustive list of functions enumerated in Section 15.
Certainly, petitioner fails to point to any provision of E.O. No. 546 authorizing the
NTC to cancel licenses. Neither does he cite any provision under P.D. No. 1 or the
starting point of a fair argument. Instead, petitioner relies on the power granted to
the Public Service Commission to revoke CPCs or CPCNs under Section 16(m) of
the Public Service Act.54 That argument has been irrefragably refuted by Section
14 of the Public Service Act, and by jurisprudence, most especially RCPI v. NTC.
55  As earlier noted, at no time did radio companies fall under the jurisdiction of
the Public Service Commission as they were expressly excluded from its
mandate under Section 14. In addition, the Court ruled in RCPI that since radio
companies, including broast stations and telegraphic agencies, were never under
the jurisdiction of the Public Service Commission except as to rate-fixing, that
Commission's authority to impose fines did not carry over to the NTC even while
the other regulatory agencies that emanated from the Commission did retain the
previous authority their predecessor had exercised.56  No provision in the Public
Service Act thus can be relied upon by the petitioner to claim that the NTC has
the authority to cancel CPCs or licenses.
licenses it has issued to broast stations although they are in the first place
It is still evident that E.O. No. 546 provides no explicit basis to assert that the
NTC has the power to cancel the licenses or CPCs it has duly issued, even as the
government office previously tasked with the regulation of radio stations, the
Secretary of Public Works and Communications, previously possessed such
power by express mandate of law. In order to sustain petitioner's premise, the
Court will be unable to rely on an unequivocally current and extant provision of
law that justifies the NTC's power to cancel CPCs. Petitioner suggests that since
the NTC has the power to issue CPCs, it necessarily has the power to revoke the
same. One might also argue that through the general rule-making power of the
NTC, we can discern a right of the NTC to cancel CPCs.
framework necessarily creates inhibitions on its practitioners as they operate on a
We must be mindful that the issue for resolution is not a run-of-the-mill matter
which would be settled with ease with the application of the principles of
statutory construction. It is at this juncture that the constitutional implications of
this case must ascend to preeminence.
notwithstanding the constitutional right to free expression. However, the
A.
that possibility, is essentially a death sentence, the most drastic means to inhibit
It is beyond question that respondents, as with all other radio and television
broast stations, find shelter in the Bill of Rights, particularly Section 3, Article III of
the Constitution. At the same time, as we have labored earlier to point out, broast
media stands, by reason of the conditions of scarcity, within a different tier of
protection from print media, which unlike broast, does not have any regulatory
interaction with the government during its operation.
confronted with laws dealing with freedom of the mind or restricting the political
Still, the fact that state regulation of broast media is constitutionally justified does
not mean that its practitioners are precluded from invoking Section 3, Article III of
the Constitution in their behalf. Far from it. Our democratic way of life is
actualized by the existence of a free press, whether print media or broast media.
As with print media, free expression through broast media is protected from prior
restraint or subsequent punishment. The franchise and licensing requirements are
mainly impositions of the laws of physics which would stand to periodic
reassessment as technology advances. The science of today renders state
regulation as a necessity, yet this should not encumber the courts from
accommodating greater freedoms to broast media when doing so would not
interfere with the existing legitimate state interests in regulating the industry.
compelling state or government interest, that such law or policy must be narrowly
In FCC v. League of Women Voters of California,57  the U.S. Supreme Court
reviewed a law prohibiting noncommercial broast stations that received funding
from a public corporation from "engaging in editorializing." The U.S. Supreme
Court acknowledged the differentiated First Amendment standard of review that
applied to broast media. Still, it struck down the restriction, holding that "[the]
regulation impermissibly sweeps within its prohibition a wide range of speech by
wholly private stations on topics that do not take a directly partisan stand or that
have nothing whatever to do with federal, state, or local government."58  We are
similarly able to maintain fidelity to the fundamental rights of broasters even while
upholding the rationale behind the regulatory regime governing them.
Should petitioner's position that the NTC has the power to cancel CPCs or
empowered by their respective franchise to exercise their rights to free
expression and as members of a free press, be adopted broast media would be
encumbered by another layer of state restrictions. As things stand, they are
already required to secure a franchise from Congress and a CPC from the NTC in
order to operate. Upon operation, they are obliged to comply with the various
regulatory issuances of the NTC, which has the power to impose fees and fines
and other mandates it may deem fit to prescribe in the exercise of its rule-making
power.
The fact that broast media already labors under this concededly valid regulatory
daily basis. Newspapers are able to print out their daily editions without fear that
a government agency such as the NTC will be able to suspend their publication
or fine them based on their content. Broast stations do already operate with that
possibility in mind, and that circumstance ineluctably restrains its content,
cancellation of a CPC or license to operate of a broast station, if we recognize
a broast media practitioner from exercising the constitutional right to free speech,
expression and of the press.
This judicial philosophy aligns well with the preferred mode of scrutiny in the
analysis of cases with dimensions of the right to free expression. When
process, of laws dealing with the regulation of speech, gender, or race as well as
other fundamental rights as expansion from its earlier applications to equal
protection, the Court has deemed it appropriate to apply "strict scrutiny" when
assessing the laws involved or the legal arguments pursued that would diminish
the efficacy of such constitutional right. The assumed authority of the NTC to
cancel CPCs or licenses, if sustained, will create a permanent atmosphere of a
less free right to express on the part of broast media. So that argument could be
sustained, it will have to withstand the strict scrutiny from this Court.
Strict scrutiny entails that the presumed law or policy must be justified by a
tailored to achieve that goal or interest, and that the law or policy must be the
least restrictive means for achieving that interest. It is through that lens that we
examine petitioner's premise that the NTC has the authority to cancel licenses of
broast franchisees.
under reasonable terms prescribed by it, temporarily take over or direct the
B.
interest." We do not doubt that the President or the State can exercise such
In analyzing the compelling government interest that may justify the investiture of
authority on the NTC advocated by petitioner, we cannot ignore the interest of the
State as expressed in the respective legislative franchises of the petitioner, R.A.
No. 7477 and R. A. Act No. 7582. Since legislative franchises are extended
through statutes, they should receive recognition as the ultimate expression of
State policy. What the legislative franchises of respondents express is that the
Congress, after due debate and deliberation, declares it as State policy that
respondents should have the right to operate broast stations. The President of
the Philippines, by affixing his signature to the law, concurs in such State policy.
restrictions to the operation of such franchises, and when these restrictions are
Allowing the NTC to countermand State policy by revoking respondent's vested
legal right to operate broast stations unduly gives to a mere administrative
agency veto power over the implementation of the law and the enforcement of
especially vested legal rights. That concern would not arise if Congress had
similarly empowered the NTC with the power to revoke a franchisee's right to
operate broast stations. But as earlier stated, there is no such expression in the
law, and by presuming such right the Court will be acting contrary to the stated
State interest as expressed in respondents' legislative franchises.
temporary nature of the takeover or closure of the station is emphasized in the
If we examine the particular franchises of respondents, it is readily apparent that
Congress has especially invested the NTC with certain powers with respect to
their broast operations. Both R.A. No. 747759  and R.A. No. 758260  require the
grantee "to secure from the [NTC] the appropriate permits and licenses for its
stations," barring the private respondents from "using any frequency in the radio
spectrum without having been authorized by the [NTC]." At the same time, both
laws provided that "[the NTC], however, shall not unreasonably withhold or delay
the grant of any such authority."
An important proviso is stipulated in the legislative franchises, particularly under
Section 5 of R.A. No. 7477 and Section 3 of R.A. No. 7582, in relation to Section
11 of R.A. No. 3902.
State goal or interest, and whether such a law or policy is the least restrictive
Section 5. Right of Government. ― A special right is hereby reserved to the
President of the Philippines, in times of rebellion, public peril, calamity,
emergency, disaster or disturbance of peace and order, to temporarily take over
and operate the stations of the grantee, temporarily suspend the operation of any
stations in the interest of public safety, security and public welfare, or authorize
the temporary use and operation thereof by any agency of the Government, upon
due compensation to the grantee, for the use of said stations during the period
when they shall be so operated.
There is in fact a more appropriate, more narrowly-tailored and least restrictive
The provision authorizes the President of the Philippines to exercise considerable
infringements on the right of the franchisees to operate their enterprises and the
right to free expression. Such authority finds corollary constitutional justification
as well under Section 17, Article XII, which allows the State "in times of national
emergency, when the public interest so requires x x x during the emergency and
operation of any privately-owned public utility or business affected with public
authority through the NTC, which remains an agency within the executive branch
of government, but such can be exercised only under limited and rather drastic
circumstances. They still do not vest in the NTC the broad authority to cancel
licenses and permits.
These provisions granting special rights to the President in times of emergency
are incorporated in our understanding of the legislated state policy with respect
to the operation by private respondents of their legislative franchises. There are
indeed exercised there still may be cause for the courts to review whether said
limitations are justified despite Section 3, Article I of the Constitution. At the same
time, the state policy as embodied in these franchises is to restrict the
government's ability to impair the freedom to broast of the stations only upon the
occurrence of national emergencies or events that compromise the national
security.
It should be further noted that even the aforequoted provision does not authorize
the President or the government to cancel the licenses of the respondents. The
provision. That fact further disengages the provision from any sense that such
delegated authority can be the source of a broad ruling affirming the right of the
NTC to cancel the licenses of franchisees.
With the legislated state policy strongly favoring the unimpeded operation of the
franchisee's stations, it becomes even more difficult to discern what compelling
State interest may be fulfilled in ceding to the NTC the general power to cancel
the franchisee's CPC's or licenses absent explicit statutory authorization. This
absence of a compelling state interest strongly disfavors petitioner's cause.
C.
Now, we shall tackle jointly whether a law or policy allowing the NTC to cancel
CPCs or licenses is to be narrowly tailored to achieve that requisite compelling
means for achieving that interest. We addressed earlier the difficulty of
envisioning the compelling State interest in granting the NTC such authority. But
let us assume for argument's sake, that relieving the injury complained off by
petitioner - the failure of private respondents to open up ownership through the
initial public offering mandated by law - is a compelling enough State interest to
allow the NTC to extend consequences by canceling the licenses or CPCs of the
erring franchisee.
remedy that is afforded by the law. Such remedy is that adverted to by the NTC
and the Court of Appeals - the resort to quo warranto proceedings under Rule 66
of the Rules of Court.
Under Section 1 of Rule 66, "an action for the usurpation of a public office,
position or franchise may be brought in the name of the Republic of the
Philippines against a person who usurps, intrudes into, or unlawfully holds or
exercises public office, position or franchise."61  Even while the action is
maintained in the name of the Republic62, the Solicitor General or a public
prosecutor is obliged to commence such action upon complaint, and upon good
reason to believe that any case specified under Section 1 of Rule 66 can be
established by proof.63
And the role of the courts, through  quo warranto  proceedings, neatly
The special civil action of  quo warranto  is a prerogative writ by which the
Government can call upon any person to show by what warrant he holds a public
office or exercises a public franchise.64 It is settled that "[t]he determination of the
right to the exercise of a franchise, or whether the right to enjoy such privilege
has been forfeited by non-user, is more properly the subject of the prerogative
writ of  quo warranto, the right to assert which, as a rule, belongs to the State
'upon complaint or otherwise,' the reason being that the abuse of a franchise is a
public wrong and not a private injury."65 A forfeiture of a franchise will have to be
declared in a direct proceeding for the purpose brought by the State because a
franchise is granted by law and its unlawful exercise is primarily a concern of
Government.66 Quo warranto is specifically available as a remedy if it is thought
that a government corporation has offended against its corporate charter or
misused its franchise.67
Evidently, the suggested theory of petitioner to address his plaints simply
The Court of Appeals correctly noted that in PLDT v. NTC,68  the Court had
cited  quo warranto  as the appropriate recourse with respect to an allegation by
petitioner therein that a rival telecommunications competitor had failed to
construct its radio system within the ten (10) years from approval of its franchise,
as mandated by its legislative franchise.69  It is beyond dispute that  quo
warranto  exists as an available and appropriate remedy against the wrong
imputed on private respondents.
to cancel licenses and CPCs issued to due holders of legislative franchise to
Petitioners argue that since their prayer involves the cancellation of the
provisional authority and CPCs, and not the legislative franchise, then quo
warranto fails as a remedy. The argument is artificial. The authority of the
franchisee to engage in broast operations is derived in the legislative mandate. To
cancel the provisional authority or the CPC is, in effect, to cancel the franchise or
otherwise prevent its exercise. By law, the NTC is incapacitated to frustrate such
mandate by unduly withholding or canceling the provisional authority or the CPC
for reasons other than the orderly administration of the frequencies in the radio
spectrum.
statutory language of E.O. No. 546 or the respective stipulations in private
What should occur instead is the converse. If the courts conclude that private
respondents have violated the terms of their franchise and thus issue the writs
of  quo warranto  against them, then the NTC is obliged to cancel any existing
licenses and CPCs since these permits draw strength from the possession of a
valid franchise. If the point has not already been made clear, then licenses issued
by the NTC such as CPCs and provisional authorities are junior to the legislative
franchise enacted by Congress. The licensing authority of the NTC is not on
equal footing with the franchising authority of the State through Congress. The
issuance of licenses by the NTC implements the legislative franchises established
by Congress, in the same manner that the executive branch implements the laws
of Congress rather than creates its own laws. And similar to the inability of the
executive branch to prevent the implementation of laws by Congress, the NTC
cannot, without clear and proper delegation by Congress, prevent the exercise of
a legislative franchise by withholding or canceling the licenses of the franchisee.
complements the traditional separation of powers that come to bear in our
analysis. The courts are entrusted with the adjudication of the legal status of
persons, the final arbiter of their rights and obligations under law. The question of
whether a franchisee is in breach of the franchise specially enacted for it by
Congress is one inherently suited to a court of law, and not for an administrative
agency, much less one to which no such function has been delegated by
Congress. In the same way that availability of judicial review over laws does not
preclude Congress from undertaking its own remedial measures by appropriately
amending laws, the viability of quo warranto in the instant cases does not
preclude Congress from enforcing its own prerogative by abrogating the
legislative franchises of respondents should it be distressed enough by the
franchisees' violation of the franchises extended to them.
overpowers the delicate balance of separation of powers, and unduly grants
superlative prerogatives to the NTC to frustrate the exercise of the constitutional
freedom speech, expression, and of the press. A more narrowly-tailored relief that
is responsive to the cause of petitioner not only exists, but is in fact tailor-fitted to
the constitutional framework of our government and the adjudication of legal and
constitutional rights. Given the current status of the law, there is utterly no reason
for this Court to subscribe to the theory that the NTC has the presumed authority
engage in broast operations.
V.
An entire subset of questions may arise following this decision, involving issues
or situations not presently before us. We wish to make clear that the only aspect
of the regulatory jurisdiction of the NTC that we are ruling upon is its presumed
power to cancel provisional authorities, CPCs or CPCNs and other such licenses
required of franchisees before they can engage in broast operations. Moreover,
our conclusion that the NTC has no such power is borne not simply from the
respondents' franchises, but moreso, from the application of the strict scrutiny
standard which, despite its weight towards free speech, still involves the analysis
of the competing interests of the regulator and the regulated.
In resolving the present questions, it was of marked impact to the Court that the
presumed power to cancel would lead to utterly fatal consequences to the
constitutional right to expression, as well as the legislated right of these
franchisees to broast. Other regulatory measures of less drastic impact will have
to be assessed on their own terms in the proper cases, and our decision today
should not be accepted or cited as a blanket shearing of the NTC's regulatory
jurisdiction. In addition, considering our own present recognition of legislative
authority to regulate broast media on terms more cumbersome than print media,
it should not be discounted that Congress may enact amendments to the organic
law of the NTC that would alter the legal milieu from which we adjudicated today.
Still, the Court sees all benefit and no detriment in striking this blow in favor of
free expression and of the press. While the ability of the State to broadly regulate
broast media is ultimately dictated by physics, regulation with a light touch
evokes a democracy mature enough to withstand competing viewpoints and
tastes. Perhaps unwittingly, the position advocated by petitioner curdles a most
vital sector of the press - broast media - within the heavy hand of the State. The
argument is not warranted by law, and it betrays the constitutional expectations
on this Court to assert lines not drawn and connect the dots around throats that
are free to speak.
application for a Certificate of Public Convenience and Necessity on December
WHEREFORE, the instant petition is DENIED. No pronouncement as to costs. SO
ORDERED.
"A. The CAB has no jurisdiction to hear the petitioner’s application until the latter
[G.R. No. 119528. March 26, 1997.]



PHILIPPINE AIRLINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD and
GRAND INTERNATIONAL AIRWAYS, INC., Respondents.
 be maintained at a monthly level at least 5% and 20% of the ASK offered into
D E C I S I O N
TORRES, JR., J.:
2. It does not contain a project/feasibility study, projected profit and loss


This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules
of Court seeks to prohibit respondent Civil Aeronautics Board from exercising
jurisdiction over private respondent’s Application for the issuance of a Certificate
of Public Convenience and Necessity, and to annul and set aside a temporary
operating permit issued by the Civil Aeronautics Board in favor of Grand
International Airways (GrandAir, for brevity) allowing the same to engage in
scheduled domestic air transportation services, particularly the Manila-Cebu,
Manila-Davao, and converse routes.



The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support
its petition is the fact that GrandAir does not possess a legislative franchise
authorizing it to engage in air transportation service within the Philippines or
elsewhere. Such franchise is, allegedly, a requisite for the issuance of a
Certificate of Public Convenience or Necessity by the respondent Board, as
mandated under Section 11, Article XII of the Constitution.



Respondent GrandAir, on the other hand, posits that a legislative franchise is no
longer a requirement for the issuance of a Certificate of Public Convenience and
Necessity or a Temporary Operating Permit, following the Court’s
pronouncements in the case of Albano v. Reyes, 1 as restated by the Court of
Appeals in Avia Filipinas International v. Civil Aeronautics Board 2 and Silangan
Airways, Inc. v. Grand International Airways, Inc., and the Hon. Civil Aeronautics
Board. 3 

On November 24, 1994, private respondent GrandAir applied for a Certificate of
Public Convenience and Necessity with the Board, which application was
docketed as CAB Case No. EP-12711. 4 Accordingly, the Chief Hearing Officer of
the CAB issued a Notice of Hearing setting the application for initial hearing on
December 16, 1994, and directing GrandAir to serve a copy of the application
and corresponding notice to all scheduled Philippine Domestic operators. On
December 14, 1994, GrandAir filed its Compliance, and requested for the
issuance of a Temporary Operating Permit. Petitioner, itself the holder of a
legislative franchise to operate air transport services, filed an Opposition to the
16, 1995 on the following grounds: 



has first obtained a franchise to operate from Congress.

B. The petitioner’s application is deficient in form and substance in that: 



1. The application does not indicate a route structure including a computation of
trunkline, secondary and rural available seat kilometers (ASK) which shall always
and out of the proposed base of operations for rural and secondary, respectively.

statements, projected balance sheet, insurance coverage, list of personnel, list of
spare parts inventory, tariff structure, documents supportive of financial capacity,
route flight schedule, contracts on facilities (hangars, maintenance, lot) etc.



C. Approval of petitioner’s application would violate the equal protection clause
of the constitution.



D. There is no urgent need and demand for the services applied for.



E. To grant petitioner’s application would only result in ruinous competition
contrary to Section 4(d) of R.A. 776." 5 



At the initial hearing for the application, petitioner raised the issue of lack of
jurisdiction of the Board to hear the application because GrandAir did not
possess a legislative franchise. 



On December 20, 1994, the Chief Hearing Officer of CAB issued an Order
denying petitioner’s Opposition. Pertinent portions of the Order read: 



"PAL alleges that the CAB has no jurisdiction to hear the petitioner’s application
until the latter has first obtained a franchise to operate from Congress.


 a) Franchises by Congress are not required before each and every public utility
The Civil Aeronautics Board has jurisdiction to hear and resolve the application. may operate when the law has granted certain administrative agencies the power
In Avia Filipina v. CAB, CA G.R. No. 23365, it has been ruled that under Section to grant licenses for or to authorize the operation of certain public utilities;

10 (c) (I) of R.A. 776, the Board possesses this specific power and duty.
 


 b) The Constitutional provision in Article XII, Section 11 that the issuance of a
In view thereof, the opposition of PAL on this ground is hereby denied.
 franchise, certificate or other form of authorization for the operation of a public

 utility does not necessarily imply that only Congress has the power to grant such
SO ORDERED." 
 authorization since our statute books are replete with laws granting specified

 agencies in the Executive Branch the power to issue such authorization for
Meantime, on December 22, 1994, petitioner this time, opposed private certain classes of public utilities.

respondent’s application for a temporary permit maintaining that: 
 


 WHEREAS, Executive Order No. 219 which took effect on 22 January 1995,
"1. The applicant does not possess the required fitness and capability of provides in Section 2.1 that a minimum of two (2) operators in each route/link
operating the services applied for under RA 776; and,
 shall be encouraged and that routes/links presently serviced by only one (1)

 operator shall be open for entry to additional operators.

2. Applicant has failed to prove that there is clear and urgent public need for the 

services applied for." 6 
 RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by

 Philippine Airlines on January 05, 1995 on the Grant by this Board of a Temporary
On December 23, 1994, the Board promulgated Resolution No. 119(92) Operating Permit (TOP) to Grand International Airways, Inc. alleging among
approving the issuance of a Temporary Operating Permit in favor of GrandAir 7 others that the CAB has no such jurisdiction, is hereby DENIED, as it hereby
for a period of three months, i.e., from December 22, 1994 to March 22, 1994. denied, in view of the foregoing and considering that the grounds relied upon by
Petitioner moved for the reconsideration of the issuance of the Temporary the movant are not indubitable." 

Operating Permit on January 11, 1995, but the same was denied in CAB 

Resolution No. 02 (95) on February 2, 1995. 8 In the said Resolution, the Board On March 21, 1995, upon motion by private respondent, the temporary permit
justified its assumption of jurisdiction over GrandAir’s application.
 was extended for a period of six (6) months or up to September 22, 1995.


 

"WHEREAS, the CAB is specifically authorized under Section 10-C (1) of Hence this petition, filed on April 3, 1995.

Republic Act No. 776 as follows: 
 


 Petitioners argue that the respondent Board acted beyond its powers and
‘(c) The Board shall have the following specific powers and duties: 
 jurisdiction in taking cognizance of GrandAir’s application for the issuance of a

 Certificate of Public Convenience and Necessity, and in issuing a temporary
(1) In accordance with the provision of Chapter IV of this Act, to issue, deny, operating permit in the meantime, since GrandAir has not been granted and does
amend, revise, alter, modify, cancel, suspend or revoke, in whole or in part, upon not possess a legislative franchise to engage in scheduled domestic air
petitioner-complaint, or upon its own initiative, any temporary operating permit or transportation. A legislative franchise is necessary before anyone may engage in
Certificate of Public Convenience and Necessity; Provided, however; that in the air transport services, and a franchise may only be granted by Congress. This is
case of foreign air carriers, the permit shall be issued with the approval of the the meaning given by the petitioner upon a reading of Section 11, Article XII, 9
President of the Republic of the Philippines." 
 and Section 1, Article VI, 10 of the Constitution.


 

WHEREAS, such authority was affirmed in PAL v. CAB, (23 SCRA 992), wherein To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of
the Supreme Court held that the CAB can even on its own initiative, grant a TOP Justice, which reads: 

even before the presentation of evidence;
 


 "Dr. Arturo C. Corona

WHEREAS, more recently, Avia Filipinas v. CAB, (CA-GR No. 23365), Executive Director

promulgated on October 30, 1991, held that in accordance with its mandate, the Civil Aeronautics Board

CAB can issue not only a TOP but also a Certificate of Public Convenience and PPL Building, 1000 U.N. Avenue

Necessity (CPCN) to a qualified applicant therefor in the absence of a legislative Ermita, Manila

franchise, citing therein as basis the decision of Albano v. Reyes (175 SCRA 264) 

which provides (inter alia) that: 
 Sir: 


 

This has reference to your request for opinion on the necessity of a legislative 

franchise before the Civil Aeronautics Board ("CAB") may issue a Certificate of Respondent GrandAir, on the other hand, relies on its interpretation of the
Public Convenience and Necessity and/or permit to engage in air commerce or provisions of Republic Act 776, which follows the pronouncements of the Court
air transportation to an individual or entity.
 of Appeals in the cases of Avia Filipinas v. Civil Aeronautics Board, and Silangan

 Airways, Inc. v. Grand International Airways (supra).

You state that during the hearing on the application of Cebu Air for a 

congressional franchise, the House Committee on Corporations and Franchises In both cases, the issue resolved was whether or not the Civil Aeronautics Board
contended that under the present Constitution, the CAB may not issue the can issue the Certificate of Public Convenience and Necessity or Temporary
abovestated certificate or permit, unless the individual or entity concerned Operating Permit to a prospective domestic air transport operator who does not
possesses a legislative franchise. You believe otherwise, however, for the reason possess a legislative franchise to operate as such. Relying on the Court’s
that under R.A. No. 776, as amended, the CAB is explicitly empowered to issue pronouncement in Albano v. Reyes (supra), the Court of Appeals upheld the
operating permits or certificates of public convenience and necessity and that authority of the Board to issue such authority, even in the absence of a legislative
this statutory provision is not inconsistent with the current charter.
 franchise, which authority is derived from Section 10 of Republic Act 776, as

 amended by P.D. 1462. 11 

We concur with the view expressed by the House Committee on Corporations 

and Franchises. In an opinion rendered in favor of your predecessor-in-office, this The Civil Aeronautics Board has jurisdiction over GrandAir’s Application for a
Department observed that, —
 Temporary Operating Permit. This rule has been established in the case of

 Philippine Air Lines Inc., v. Civil Aeronautics Board, promulgated on June 13,
". . . it is useful to note the distinction between the franchise to operate and a 1968. 12 The Board is expressly authorized by Republic Act 776 to issue a
permit to commence operation. The former is sovereign and legislative in nature; temporary operating permit or Certificate of Public Convenience and Necessity,
it can be conferred only by the lawmaking authority (17 W and P, pp. 691-697). and nothing contained in the said law negates the power to issue said permit
The latter is administrative and regulatory in character (In re Application of Fort before the completion of the applicant’s evidence and that of the oppositor
Crook-Bellevue Boulevard Line, 283 NW 223); it is granted by an administrative thereto on the main petition. Indeed, the CAB’s authority to grant a temporary
agency, such as the Public Service Commission [now Board of Transportation], in permit "upon its own initiative" strongly suggests the power to exercise said
the case of land transportation, and the Civil Aeronautics Board, in case of air authority, even before the presentation of said evidence has begun. Assuming
services. While a legislative franchise is a pre-requisite to a grant of a certificate arguendo that a legislative franchise is prerequisite to the issuance of a permit,
of public convenience and necessity to an airline company, such franchise alone the absence of the same does not affect the jurisdiction of the Board to hear the
cannot constitute the authority to commence operations, inasmuch as there are application, but tolls only upon the ultimate issuance of the requested permit.

still matters relevant to such operations which are not determined in the 

franchise, like rates, schedules and routes, and which matters are resolved in the The power to authorize and control the operation of a public utility is admittedly a
process of issuance of permit by the administrative. (Secretary of Justice Opn. prerogative of the legislature, since Congress is that branch of government
No. 45, s. 1981)
 vested with plenary powers of legislation.


 

Indeed, authorities are agreed that a certificate of public convenience and "The franchise is a legislative grant, whether made directly by the legislature
necessity is an authorization issued by the appropriate governmental agency for itself, or by any one of its properly constituted instrumentalities. The grant, when
the operation of public services for which a franchise is required by law (Almario, made, binds the public, and is, directly or indirectly, the act of the state." 13 

Transportation and Public Service Law, 1977 Ed., p. 293; Agbayani, Commercial 

Law of the Phil., Vol. 4, 1979 Ed., pp. 380-381).
 The issue in this petition is whether or not Congress, in enacting Republic Act

 776, has delegated the authority to authorize the operation of domestic air
Based on the foregoing, it is clear that a franchise is the legislative authorization transport services to the respondent Board, such that Congressional mandate for
to engage in a business activity or enterprise of a public nature, whereas a the approval of such authority is no longer necessary.

certificate of public convenience and necessity is a regulatory measure which 

constitutes the franchise’s authority to commence operations. It is thus logical Congress has granted certain administrative agencies the power to grant licenses
that the grant of the former should precede the latter.
 for, or to authorize the operation of certain public utilities. With the growing

 complexity of modern life, the multiplication of the subjects of governmental
Please be guided accordingly.
 regulation, and the increased difficulty of administering the laws, there is a

 constantly growing tendency towards the delegation of greater powers by the
(SGD.) SEDFREY A. ORDOÑEZ
 legislature, and towards the approval of the practice by the courts. 14 It is
Secretary of Justice" 
 generally recognized that a franchise may be derived indirectly from the state
through a duly designated agency, and to this extent, the power to grant provision of this Act.

franchises has frequently been delegated, even to agencies other than those of a 

legislative nature. 15 In pursuance of this, it has been held that privileges In support of the Board’s authority as stated above, it is given the following
conferred by grant by local authorities as agents for the state constitute as much specific powers and duties: 

a legislative franchise as though the grant had been made by an act of the 

Legislature. 16 
 (C) The Board shall have the following specific powers and duties: 


 

The trend of modern legislation is to vest the Public Service Commissioner with (1) In accordance with the provisions of Chapter IV of this Act, to issue, deny,
the power to regulate and control the operation of public services under amend, revise, alter, modify, cancel, suspend or revoke in whole or in part upon
reasonable rules and regulations, and as a general rule, courts will not interfere petition or complaint or upon its own initiative any Temporary Operating Permit or
with the exercise of that discretion when it is just and reasonable and founded Certificate of Public Convenience and Necessity: Provided however, That in the
upon a legal right. 17 
 case of foreign air carriers, the permit shall be issued with the approval of the

 President of the Republic of the Philippines.

It is this policy which was pursued by the Court in Albano v. Reyes. Thus, a 

reading of the pertinent issuances governing the Philippine Ports Authority, 18 Petitioner argues that since R.A. 776 gives the Board the authority to issue
proves that the PPA is empowered to undertake by itself the operation and "Certificates of Public Convenience and Necessity", this, according to petitioner,
management of the Manila International Container Terminal, or to authorize its means that a legislative franchise is an absolute requirement. It cites a number of
operation and management by another by contract or other means, at its option. authorities supporting the view that a Certificate of Public Convenience and
The latter power having been delegated to the PPA, a franchise from Congress to Necessity is issued to a public service for which a franchise is required by law, as
authorize an entity other than the PPA to operate and manage the MICP distinguished from a "Certificate of Public Convenience" which is an authorization
becomes unnecessary.
 issued for the operation of public services for which no franchise, either

 municipal or legislative, is required by law. 20 

Given the foregoing postulates, we find that the Civil Aeronautics Board has the 

authority to issue a Certificate of Public Convenience and Necessity, or This submission relies on the premise that the authority to issue a certificate of
Temporary Operating Permit to a domestic air transport operator, who, though public convenience and necessity is a regulatory measure separate and distinct
not possessing a legislative franchise, meets all the other requirements from the authority to grant a franchise for the operation of the public utility
prescribed by the law. Such requirements were enumerated in Section 21 of R.A. subject of this particular case, which is exclusively lodged by petitioner in
776.
 Congress.


 

There is nothing in the law nor in the Constitution, which indicates that a We do not agree with the petitioner.

legislative franchise is an indispensable requirement for an entity to operate as a 

domestic air transport operator. Although Section 11 of Article XII recognizes Many and varied are the definitions of certificates of public convenience which
Congress’ control over any franchise, certificate or authority to operate a public courts and legal writers have drafted. Some statutes use the terms "convenience
utility, it does not mean Congress has exclusive authority to issue the same. and necessity" while others use only the words "public convenience." The terms
Franchises issued by Congress are not required before each and every public "convenience and necessity", if used together in a statute, are usually held not to
utility may operate. 19 In many instances, Congress has seen it fit to delegate be separable, but are construed together. Both words modify each other and
this function to government agencies, specialized particularly in their respective must be construed together. The word ‘necessity’ is so connected, not as an
areas of public service.
 additional requirement but to modify and qualify what might otherwise be taken

 as the strict significance of the word necessity. Public convenience and necessity
A reading of Section 10 of the same reveals the clear intent of Congress to exists when the proposed facility will meet a reasonable want of the public and
delegate the authority to regulate the issuance of a license to operate domestic supply a need which the existing facilities do not adequately afford. It does not
air transport services: 
 mean or require an actual physical necessity or an indispensable thing. 21 


 

SEC. 10. Powers and Duties of the Board. (A) Except as otherwise provided "The terms ‘convenience’ and ‘necessity’ are to be construed together, although
herein, the Board shall have the power to regulate the economic aspect of air they are not synonymous, and effect must be given both. The convenience of the
transportation, and shall have general supervision and regulation of, the public must not be circumscribed by according to the word ‘necessity’ its strict
jurisdiction and control over air carriers, general sales agents, cargo sales agents, meaning or an essential requisites." 22 

and air freight forwarders as well as their property rights, equipment, facilities and 

franchise, insofar as may be necessary for the purpose of carrying out the The use of the word "necessity", in conjunction with "public convenience" in a
certificate of authorization to a public service entity to operate, does not in any foreign and domestic commerce of the Philippines, of the Postal Service, and of
way modify the nature of such certification, or the requirements for the issuance the National Defense;

of the same. It is the law which determines the requisites for the issuance of such 

certification, and not the title indicating the certificate.
 (f) To promote safety of flight in air commerce in the Philippines; and,


 

Congress, by giving the respondent Board the power to issue permits for the (g) The encouragement and development of civil aeronautics.

operation of domestic transport services, has delegated to the said body the 

authority to determine the capability and competence of a prospective domestic More importantly, the said law has enumerated the requirements to determine the
air transport operator to engage in such venture. This is not an instance of competency of a prospective operator to engage in the public service of air
transforming the respondent Board into a mini-legislative body, with unbridled transportation.

authority to choose who should be given authority to operate domestic air 

transport services.
 SEC. 12. Citizenship requirement. Except as otherwise provided in the

 Constitution and existing treaty or treaties, a permit authorizing a person to
"To be valid, the delegation itself must be circumscribed by legislative engage in domestic air commerce and/or air transportation shall be issued only
restrictions, not a "roving commission" that will give the delegate unlimited to citizens of the Philippines. 24 

legislative authority. It must not be a delegation "running riot" and "not canalized 

with banks that keep it from overflowing." Otherwise, the delegation is in legal SEC. 21. Issuance of permit. The Board shall issue a permit authorizing the whole
effect an abdication of legislative authority, a total surrender by the legislature of or any part of the service covered by the application, if it finds: (1) that the
its prerogatives in favor of the delegate." 23 
 applicant is fit, willing and able to perform such service properly in conformity

 with the provisions of this Act and the rules, regulations, and requirements issued
Congress, in this instance, has set specific limitations on how such authority thereunder; and (2) that such service is required by the public convenience and
should be exercised.
 necessity; otherwise the application shall be denied.


 

Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines Furthermore, the procedure for the processing of the application of a Certificate
or policies: 
 of Public Convenience and Necessity had been established to ensure the

 weeding out of those entities that are not deserving of public service.
"SEC. 4. Declaration of policies. In the exercise and performance of its powers 25cralaw:red

and duties under this Act, the Civil Aeronautics Board and the Civil Aeronautics 

Administrator shall consider the following, among other things, as being in the In sum, respondent Board should now be allowed to continue hearing the
public interest, and in accordance with the public convenience and application of GrandAir for the issuance of a Certificate of Public Convenience
necessity:chanrob1es virtual 1aw library
 and Necessity, there being no legal obstacle to the exercise of its jurisdiction. 


 

(a) The development and utilization of the air potential of the Philippines;
 ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to

 DISMISS the instant petition for lack of merit. The respondent Civil Aeronautics
(b) The encouragement and development of an air transportation system properly Board is hereby DIRECTED to CONTINUE hearing the application of respondent
adapted to the present and future of foreign and domestic commerce of the Grand International Airways, Inc. for the issuance of a Certificate of Public
Philippines, of the Postal Service and of the National Defense;
 Convenience and Necessity.


 

(c) The regulation of air transportation in such manner as to recognize and SO ORDERED.

preserve the inherent advantages of, assure the highest degree of safety in, and
foster sound economic condition in, such transportation, and to improve the
relations between, and coordinate transportation by, air carriers;



(d) The promotion of adequate, economical and efficient service by air carriers at
reasonable charges, without unjust discriminations, undue preferences or
advantages, or unfair or destructive competitive practices;



(e) Competition between air carriers to the extent necessary to assure the sound
development of an air transportation system properly adapted to the need of the
REPUBLIC ACT NO. 9183 January 09, 2003
Section 3.  Responsibility to the Public.  - Excepting cases of force majeure and
whenever weather conditions permit, the grantee shall maintain scheduled and/or
AN ACT GRANTING THE ASIAN SPIRIT, INC. A FRANCHISE TO ESTABLISH, non scheduled and/or chartered air transport services to any and all points and
OPERATE AND MAINTAIN DOMESTIC AND INTERNATIONAL AIR places throughout the Philippines and between the Philippines and other
TRANSPORT SERVICES
countries at such frequencies as traffic needs may require: Provided, however,
That at least twenty-five percent (25%) of all its frequencies shall be for domestic
Be it enacted by the Senate and House of Representative of the Philippines in market.

Congress assembled:
Section 4. Rates for Services. - The grantee shall fix just and reasonable rates for
the transportation of passengers, mail, goods and freight, subject to the
Section 1.  Nature and Scope of Franchise.  - Subject to the provisions of the regulations and approval of the Civil Aeronautics Board and other proper
Constitution and applicable laws, rules and regulations, there is hereby granted to regulatory agencies of the government.

Asian Spirits, Inc., hereunder referred to as the grantee, its successors or

assigns, a franchise to establish, operate and maintain transport services for the Section 5. Terms of Franchise. - This franchise shall be for a term of twenty-five
carriage of passengers, mail, goods and property by air, both domestic and (25) years from the date of effectivity of this Act, unless sooner revoked or
international.
cancelled. This franchise shall be deemed ipso facto revoked in the event the
grantee fails to comply with any of the following conditions:

Air transport services shall include the maintenance and operation of hangars
and aircraft service stations and facilities and other services of similar nature (a)Commence operation within one (1) year from the approval of its
which may be necessary, convenient or useful as an auxiliary to aircraft permit by the Civil Aeronautics Board;

transportation.
(b)Operate continuously for two (2) years and;

(c)Commence operations within two (2) years from the effectivity of this
The Grantee shall have the rights at its terminal and landing fields, as well as in Act.

its aircraft, to construct, operate and maintain stations or transmitting sets for
wireless telegraphy and direction findings, and other radio aids to air navigation,
using wavelengths in accordance with the rules and regulations made from time
to time by the proper agencies of the government. The wireless communication
facilities shall be used solely for receiving and transmitting weather forecasts and
Section 6. Acceptance and Compliance. - Acceptance of this franchise shall be
given in writing within sixty (60) days after the effectivity of this Act. Upon giving
such acceptance, the grantee shall exercise the privileges granted under this Act.
Nonacceptance shall render the franchise void.

other matters in connection with the grantee’s services.

Section 7.  Bond.  - The grantee shall file a bond issued in favor of the Civil
Section 2.  Civil Aeronautics Board/Air Transportation Office.- The grantee shall Aeronautics Board, which shall determine the amount, to guarantee the
secure from the Civil Aeronautics Board the appropriate permits and licenses for compliance with the fulfillment of the conditions under which this franchise is
its operations.
granted. If, after three (3) years from the date of the approval of its permit by the
Board. Otherwise, the bond shall be forfeited in favor of the government and the
All aircraft used by the grantee including their accessories and equipment shall at franchise ipso facto revoked.

all times be air worthy and the new crew members shall be licensed by the
Government of the Philippines. They shall be equipped with radio Section 8. Landing Facilities. - The grantee may use the landing and other airport
communication, safety and other equipment and shall be operated and facilities on land and water as may be maintained or owned by the government
maintained in accordance with the regulations and technical requirements of the within the Philippines on the grantee’s line subject to such terms and conditions,
Air Transportation Office or such other regulatory bodies the government may restrictions and national policy considerations as the Philippine Government shall
prescribe for this purpose.
have the right to use the landing and other airport facilities as may be maintained
and owned by the grantee in the Philippines.

The grantee’s equipment and the operation of such equipment shall at all times
be subject to inspection and regulation by the Air Transportation Office.
Section 9.  Contracts.  - The grantee is authorized to enter into transportation
contracts with the Philippine Government, including the carrying of mail, upon
The grantees shall comply with the provisions of Republic Act Numbered Seven such terms and conditions as may be mutually agreed upon. The grantee shall
hundred and seventy-six (R.A. No. 776), and the regulation promulgated give preferential consideration to contracts with the Philippine Government. The
thereunder from time to time.
grantee may likewise enter into transportation maintenance and/or servicing
contracts, and such other contracts relating to air transport with other foreign-
owned airlines particularly with those which have international routes.

Section 10.  Right of Government.  - A special right is hereby reserved to the
President of the Philippines, in time of war, rebellion, public peril, calamity,
emergency, disaster or disturbance of peace and order, to temporarily take over
and operate the facilities or equipment of the grantee, to temporarily suspend the
operation of any facility or equipment of the grantee, to temporarily suspend the
operation of any facility or equipment in the interest of public safety, security and
public welfare, or to authorize the temporary use and operation thereof by any
agency of the government, upon due compensation to the grantee for the use of
said facilities or equipment during period when they shall be so operated.
Section 11.  Warranty Favor of the National and Local Governments.  - The
grantee shall hold the national, provincial, city and municipal governments of the
Philippines harmless from all claims, account, demands or actions arising out of
accidents or injuries, whether to property or to persons, caused by the operation
of the services under the franchise hereby granted.
AN ACT GRANTING SOUTHEAST ASIAN AIRLINES (SEAir), INC. A
Section 12.  Sale, Lease, Transfer, Usufruct, Etc.  - The grantee shall not lease,
transfer, grant the usufruct of, sell nor assign this franchise or the rights and
privilege acquired thereunder to any person, firm, company, corporation or other
commercial or legal entity, nor merge with any other corporation or entity, nor
shall the controlling interest of the grantee be transferred, whether as a whole or
in parts and whether simultaneously or contemporaneously, to any such person ,
firm company, corporation or entity without the prior approval of the Congress of
the Philippines. Any person or entity to which this franchise is sold, transferred or
assigned, shall be subject to the same conditions, terms, restrictions and
limitations of this Act.
successors or assigns, a franchise to establish, operate and maintain transport
Section 13.  Dispersal of Ownership.  - In accordance with the constitutional
provision to encourage public participation in public utilities, the grantee shall
offer at least thirty percent (30%) of its outstanding capital stock or a higher
percentage that may hereafter be provided by law in any securities exchange in
the Philippines within five (5) years from the commencement of its operations.
Noncompliance therewith shall render the franchise ipso facto revoked.
transportation.
Section 14. Interpretation of Franchise. - This franchise shall not be interpreted to
mean as an exclusive grant of the privileges herein provided for . However, in the
event that any competing individual, partnership or corporation shall receive a
similar permit or franchise with terms and/or provisions more favorable than
those herein granted or which tend to place the herein grantee at any
disadvantage, then such terms and/or provisions shall be deemed part hereof
and shall operate equally in favor of the herein grantee.
Section 15. Separability Clause. - If any of the sections or provisions of this Act is
held invalid, all other provisions not affected thereby shall remain valid.
Section 16.  Repealabilty and Nonexclusivity Clause.  - This franchise shall be
subject to amendment, alteration or repeal by the Congress of the Philippines
when the public interest so requires and shall not be interpreted as an exclusive
grant of the privileges herein provided for.
Section 17. Reportorial Requirement. - The grantee shall submit an annual report
to the Congress of the Philippines on its compliance with the terms and
conditions of the franchise and on its operations within sixty (60) days from the
end of every year.
Section 18.  Effectivity Clause.  - This Act shall take effect fifteen (15) days from
the date of its publication, upon the initiative of the grantee, in at least two (2)
newspapers of general circulation in the Philippines.
Republic Act No. 9517
FRANCHISE TO ESTABLISH, OPERATE AND MAINTAIN DOMESTIC AND
INTERNATIONAL AIR TRANSPORT SERVICES, WITH CLARKFIELD,
PAMPANGA AS ITS BASE
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled.
Section 1.  Nature and Scope of Franchise.  - Subject to the provisions of the
Constitution and applicable laws, rules and regulations, there is hereby granted to
Southeast Asian Airlines (SEAir),Inc., hereunder referred to as the grantee, its
services for the carriage of passengers, mail, goods and property by air, both
domestic and international.
Air transport services shall include the maintenance and operation of hangars
and aircraft service stations and facilities and other services of similar nature
which may be necessary, convenient or useful as an auxiliary to aircraft
The grantee shall have the right at its terminal and landing fields, as well as in its
aircraft, to construct, operate and maintain stations or transmitting sets for
wireless telegraphy and direction findings, and other radio aids to air navigation,
using wavelengths in accordance with the rules and regulations made from time
to time by the proper agencies of the government. The wireless communication
facilities shall be used solely for receiving and transmitting weather forecasts and
other matters in connection with the grantee's services.
Section 2.  Civil Aeronautics Board (CAB).  - The grantee shall secure from the
CAB the appropriate permits and licenses for its operations.
All aircraft used by the grantee including their accessories and equipment shall at
all times be air worthy and the crew members shall be licensed by the
Government of the Philippines. They shall be equipped with radio
communications, safety and other equipment and shall be operated and

maintained in accordance with the regulations and technical requirements of the restrictions and national policy considerations as the Philippine Government may
Civil Aviation Authority of the Philippines or such other regulatory bodies the impose: Provided,That the Philippine Government shall have the right to use the
government may prescribe for this purpose.lawph!1
landing and other airport facilities as may be maintained and owned by the
grantee in the Philippines.

The grantee's equipment and the operation of such equipment shall at all times
be subject to inspection and regulation by the Civil Aviation Authority of the Section 9.  Contracts.  - The grantee is authorized to enter into transportation
Philippines. The grantee shall comply with the provisions of Republic Act contracts with the Philippine Government, including the carrying of mail, upon
Numbered Seven hundred and seventy - six (R.A. No. 776), otherwise known as such terms and conditions a may be mutually agreed upon. The grantee shall
the "Civil Aeronautics Act of the Philippines", and the regulation promulgated give preferential consideration to contracts with the Philippine Government. The
there under from time to time.
grantee may 'likewise enter into transportation maintenance and/or servicing
contracts, and such other contracts relating to air transport with other foreign -
Section 3.  Responsibility to the Public.  - Excepting cases of force majeure and owned airlines particularly with those which have international routes.

whenever weather conditions permit, the grantee shall maintain scheduled and/or
non - scheduled and/or chartered air transport services to any and all points and
places throughout the Philippines and between the Philippines and other
countries at such frequencies as traffic needs may require:  Provided,
however,  That at least twenty - five percent (25%) of all its frequencies shall be
for domestic market.
operation of any facility or equipment in the interest of public safety, security and
Section 4. Rates for Services. - The grantee shall fix just and reasonable rates for
the transportation of passengers, mail, goods and freight, subject to the
regulations and approval of the CAB and other proper regulatory agencies of the
Section 10.  Right of Government.  - A special right is hereby reserved to the
President of the Philippines, in times of war, rebellion, public peril, calamity,
emergency, disaster or disturbance of peace and order, to temporarily take over
and operate the facilities or equipment of the grantee, to temporarily suspend the
public welfare, or to authorize the temporary use and operation thereof by any
agency of the government, upon due compensation to the grantee, for the use of
said facilities or equipment during the period when they shall be so operated.

government.
Section 11.  Warranty in Favor of the National and Local Governrnents.  - The
grantee shall hold the national, provincial, city and municipal governments of the
Section 5. Term of Franchise. - This franchise shall be for a term of twenty - five Philippines harmless from all claims, accounts, demands or actions arising out of
(25) years from the date of effectivity of this Act, unless sooner revoked or accidents or injuries, whether to property or to persons, caused by the operation
cancelled. This franchise shall be deemed ipso facto revoked in the event the of the services under the franchise hereby granted.

grantee fails to comply with any of the following conditions:

Section 12.  Nontransferability of Franchise.  - The grantee shall not lease,

(a) Commence operations within one (1) year from the approval of its transfer, grant the usufruct of, sell nor assign this franchise or the rights and
permit by the CAB;
privileges acquired thereunder to any person, firm, company, corporation or other
(b) Operate continuously for two (2) years; and
commercial or legal entity, nor merge with any other corporation or entity, nor
(c) Commence operations within two (2) years from the effectivity of this shall the controlling interest of the grantee be transferred, whether as a whole or
Act.
in parts and whether simultaneously or contemporaneously, to any such person,
firm, company, corporation or entity without the prior approval of the Congress of
Section 6. Acceptance and Compliance. - Acceptance of this franchise shall be the Philippines. Any person or entity to which this franchise is sold, transferred or
given in writing within sixty (60) days after the effectivity of this Act. Upon giving assigned, shall be subject to the same conditions, terms, restrictions and
such acceptance, the grantee shall exercise the privileges granted under this Act. limitations of this Act.

Nonacceptance shall render the franchise void.

Section 13.  Dispersal of Ownership.  - In accordance with the constitutional

Section 7. Bond. - The grantee shall file a bond issued in favor of the CAB, which
shall determine the amount, to guarantee the compliance with and fulfillment of
the conditions under which this franchise is granted. If, after three (3) years from
the date of the approval of its permit by the Board, the grantee shall have fulfilled
the same, the bond shall be cancelled by the Board. Otherwise, the bond shall be
provision to encourage public participation in public utilities, the grantee shall
offer at least thirty percent (30%) of its outstanding capital stock or a higher
percentage that may hereafter be provided by law in any securities exchange in
the Philippines within five (5) years from the commencement of its operations.
Noncompliance therewith shall render the franchise ipso facto revoked.

forfeited in favor of the government and the franchise ipso facto revoked.

Section 14. Reportorial Requirement. - The grantee shall submit an annual report

Section 8. Landing Facilities. - The grantee may use the landing and other airport to Congress of the Philippines on its compliance with the terms and conditions of
facilities on land and water as may be maintained or owned by the government the franchise and on its operations within sixty (60) days from the end of every
within the Philippines on the grantee's line subject to such terms and conditions, year.

 (1) Publish a quarterly bulletin setting forth the text of rules filed with it during the
Section 15.  Equality Clause.  - In the event that any competing individual, preceding quarter; and

partnership or corporation receives or enjoys or shall receive similar permit or

franchise with terms, provisions and/or privileges more favorable than those (2) Keep an up-to-date codification of all rules thus published and remaining in
herein granted or which tend tu place the herein grantee at any disadvantage, effect, together with a complete index and appropriate tables.

then such terms and/or provisions shall be deemed part hereof and shall operate
equally in favor of the herein grantee.
SECTION 6.  Omission of Some Rules. — (1) The University of the Philippines
Section 16. Separability Clause. - If any of the sections or provisions of this Act is Law Center may omit from the bulletin or the codification any rule if its
held invalid, all other provisions not affected thereby shall remain valid.
publication would be unduly cumbersome, expensive or otherwise inexpedient,
but copies of that rule shall be made available on application to the agency which
Section 17.  Repealability and Nonexclusivity Clause.  - This franchise shall be adopted it, and the bulletin shall contain a notice stating the general subject
subject to amendment, alteration or repeal by the Congress of the Philippines matter of the omitted rule and new copies thereof may be obtained.

when the public interest so requires and shall not be interpreted as an exclusive
grant of the privileges herein provided for.
(2) Every rule establishing an offense or defining an act which, pursuant to law is
punishable as a crime or subject to a penalty shall in all cases be published in full
Section 18.  Effectivity Clause.  - This Act shall take effect fifteen (15) days from text.

the date of its publication, upon the initiative of the grantee, in at least two(2)
newspapers of general circulation in the Philippines.
SECTION 7.  Distribution of Bulletin and Codified Rules. — The University of
the Philippines Law Center shall furnish one (1) free copy each of every issue of
the bulletin and of the codified rules or supplements to the Office of the
President, Congress, all appellate courts and the National Library. The bulletin
ADMINISTRATIVE CODE OF 1987, BOOK VII, CHAPTER 2, SECTION 9 and the codified rules shall be made available free of charge to such public
officers or agencies as the Congress may select, and to other persons at a price
CHAPTER 2
sufficient to cover publication and mailing or distribution costs.

Rules and Regulations SECTION 8.  Judicial Notice. — The court shall take judicial notice of the
certified copy of each rule duly filed or as published in the bulletin or the codified
SECTION 3.  Filing. — (1) Every agency shall file with the University of the rules.

Philippines Law Center three (3) certified copies of every rule adopted by it. Rules
in force on the date of effectivity of this Code which are not filed within three (3) SECTION 9.  Public Participation. — (1) If not otherwise required by law, an
months from that date shall not thereafter be the basis of any sanction against agency shall, as far as practicable, publish or circulate notices of proposed rules
any party or persons.
and afford interested parties the opportunity to submit their views prior to the
adoption of any rule.

(2) The records officer of the agency, or his equivalent functionary, shall carry out
the requirements of this section under pain of disciplinary action.
(2) In the fixing of rates, no rule or final order shall be valid unless the proposed
rates shall have been published in a newspaper of general circulation at least two
(3) A permanent register of all rules shall be kept by the issuing agency and shall (2) weeks before the first hearing thereon.

be open to public inspection.

(3) In case of opposition, the rules on contested cases shall be observed.

SECTION 4.  Effectivity. — In addition to other rule-making requirements

provided by law not inconsistent with this Book, each rule shall become effective
fifteen (15) days from the date of filing as above provided unless a different date
is fixed by law, or specified in the rule in cases of imminent danger to public
health, safety and welfare, the existence of which must be expressed in a
statement accompanying the rule. The agency shall take appropriate measures to
make emergency rules known to persons who may be affected by them.

SECTION 5.  Publication and Recording. — The University of the Philippines

Law Center shall:

[G.R. No. 84818. December 18, 1989.]
 



 4. In 1983, a third earth station standard "B" antenna (Pinugay III) was
PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION,  Petitioner, v. established to temporarily assume the functions of Pinugay I and then Pinugay II
JOSE LUIS A. ALCUAZ, as NTC Commissioner, and NATIONAL while they were being refurbished. Pinugay III now serves as spare or reserved
TELECOMMUNICATIONS COMMISSION,Respondents.
antenna for possible contingencies.



D E C I S I O N
5. In 1983, PHILCOMSAT constructed and installed a standard "B" antenna at
REGALADO, J.:
Clark Air Field, Pampanga as a television receive-only earth station which
provides the U.S. Military bases with a 24-hour television service.

This case is posed as one of first impression in the sense that it involves the 

public utility services of the petitioner Philippine Communications Satellite 6. In 1989, petitioner completed the installation of a third standard "A" earth
Corporation (PHILCOMSAT, for short) which is the only one rendering such station (Pinugay IV)to take over the links in Pinugay I due to obsolescence. 3 

services in the Philippines. 
 


 By designation of the Republic of the Philippines, the petitioner is also the sole
The petition before us seeks to annul and set aside an Order 1 issued by signatory for the Philippines in the Agreement and the Operating Agreement
respondent Commissioner Jose Luis Alcuaz of the National Telecommunications relating to the International Telecommunications Satellite Organization (INTELSAT)
Commission (hereafter, NTC), dated September 2, 1988, which directs the of 115 member nations, as well as in the Convention and the Operating
provisional reduction of the rates which may be charged by petitioner for certain Agreement of the International Maritime Satellite Organization (INMARSAT) of 53
specified lines of its services by fifteen percent (15%) with the reservation to member nations, which two global commercial telecommunications satellite
make further reductions later, for being violative of the constitutional prohibition corporations were collectively established by various states in line with the
against undue delegation of legislative power and a denial of procedural, as well principles set forth in Resolution 1721 (XVI) of the General Assembly of the United
as substantive, due process of law. 
 Nations. 


 

The antecedental facts as summarized by petitioner 2 are not in dispute. By Since 1968, the petitioner has been leasing its satellite circuits to:chanrob1es
virtue of Republic Act No. 5514, PHILCOMSAT was granted "a franchise to virtual 1aw library

establish, construct, maintain and operate in the Philippines, at such places as 

the grantee may select, station or stations and associated equipment and 1. Philippine Long Distance Telephone Company;

facilities for international satellite communications." Under this franchise, it was 2. Philippine Global Communications, Inc.;

likewise granted the authority to "construct and operate such ground facilities as 3. Eastern Telecommunications Phils., Inc.;

needed to deliver telecommunications services from the communications satellite 4. Globe Mackay Cable and Radio Corp. ITT; and

system and ground terminal or terminals." 
 5. Capitol Wireless, Inc.


 

Pursuant to said franchise, petitioner puts on record that it undertook the or their predecessors-in-interest. The satellite services thus provided by
following activities and established the following installations:chanrob1es virtual petitioner enable said international carriers to serve the public with indispensable
1aw library
 communication services, such as overseas telephone, telex, facsimile, telegrams,

 high speed data, live television in full color, and television standard conversion
1. In 1967, PHILCOMSAT established its provisional earth station in Pinugay, from European to American or vice versa.

Rizal.
 


 Under Section 5 of Republic Act No. 5514, petitioner was exempt from the
2. In 1968, earth station standard "A" antenna (Pinugay I) was established. jurisdiction of the then Public Service Commission, now respondent NTC.
Pinugay I provided direct satellite communication links with the Pacific Ocean However, pursuant to Executive Order No. 196 issued on June 17, 1987,
Region (the United States, Australia, Canada, Hawaii, Guam, Korea, Thailand, petitioner was placed under the jurisdiction, control and regulation of respondent
China [PROC], New Zealand and Brunei) thru the Pacific Ocean INTELSAT NTC, including all its facilities and services and the fixing of rates. Implementing
satellite.
 said Executive Order No. 196, respondents required petitioner to apply for the

 requisite certificate of public convenience and necessity covering its facilities and
3. In 1971, a second earth station standard "A" antenna (Pinugay II) was the services it renders, as well as the corresponding authority to charge rates
established. Pinugay II provided links with the Indian Ocean Region (major cities therefor.chanrobles.com : virtual law library

in Europe, Middle East, Africa, and other Asia Pacific countries operating within 

the region) thru the Indian Ocean INTELSAT satellite.
 Consequently, under date of September 9, 1987, petitioner filed with respondent
NTC an application 4 for authority to continue operating and maintaining the petitioner in its petition-in-chief raised the issue of undue delegation of legislative
same facilities it has been continuously operating and maintaining since 1967, to power, it subsequently clarified its said submission to mean that the order
continue providing the international satellite communications services it has mandating a reduction of certain rates is undue delegation not of legislative but
likewise been providing since 1967, and to charge the current rates applied for in of quasi-judicial power to respondent NTC, the exercise of which allegedly
rendering such services. Pending hearing, it also applied for a provisional requires an express conferment by the legislative body.

authority so that it can continue to operate and maintain the above mentioned 

facilities, provide the services and charge therefor the aforesaid rates therein Whichever way it is presented, petitioner is in effect questioning the
applied for.
 constitutionality of Executive Orders Nos. 546 and 196 on the ground that the

 same do not fix a standard for the exercise of the power therein conferred.

On September 16, 1987, petitioner was granted a provisional authority to 

continue operating its existing facilities, to render the services it was then We hold otherwise.

offering, and to charge the rates it was then charging. This authority was valid for 

six (6) months from the date of said order. 5 When said provisional authority Fundamental is the rule that delegation of legislative power may be sustained
expired on March 17, 1988, it was extended for another six (6) months, or up to only upon the ground that some standard for its exercise is provided and that the
September 16, 1988.
 legislature in making the delegation has prescribed the manner of the exercise of

 the delegated power. Therefore, when the administrative agency concerned,
The NTC order now in controversy had further extended the provisional authority respondent NTC in this case, establishes a rate, its act must both be non-
of the petitioner for another six (6) months, counted from September 16, 1988, confiscatory and must have been established in the manner prescribed by the
but it directed the petitioner to charge modified reduced rates through a legislature; otherwise, in the absence of a fixed standard, the delegation of power
reduction of fifteen percent (15%) on the present authorized rates. Respondent becomes unconstitutional. In case of a delegation of rate-fixing power, the only
Commissioner ordered said reduction on the following ground: 
 standard which the legislature is required to prescribe for the guidance of the

 administrative authority is that the rate be reasonable and just. However, it has
"The Commission in its on-going review of present service rates takes note that been held that even in the absence of an express requirement as to
after an initial evaluation by the Rates Regulation Division of the Common reasonableness, this standard may be implied. 7 

Carriers Authorization Department of the financial statements of applicant, there 

is merit in a REDUCTION in some of applicant’s rates, subject to further It becomes important then to ascertain the nature of the power delegated to
reductions, should the Commission finds (sic) in its further evaluation that more respondent NTC and the manner required by the statute for the lawful exercise
reduction should be effected either on the basis of a provisional authorization or thereof.

in the final consideration of the case." 6 
 


 Pursuant to Executive Orders Nos. 546 and 196, respondent NTC is empowered,
PHILCOMSAT assails the above-quoted order for the following reasons: 
 among others, to determine and prescribe rates pertinent to the operation of

 public service communications which necessarily include the power to
1. The enabling act (Executive Order No. 546) of respondent NTC empowering it promulgate rules and regulations in connection therewith. And, under Section
to fix rates for public service communications does not provide the necessary 15(g) of Executive Order No. 546, respondent NTC should be guided by the
standards constitutionally required, hence there is an undue delegation of requirements of public safety, public interest and reasonable feasibility of
legislative power, particularly the adjudicatory powers of NTC;
 maintaining effective competition of private entities in communications and

 broadcasting facilities. Likewise, in Section 6(d) thereof, which provides for the
2. Assuming arguendo that the rate-fixing power was properly and creation of the Ministry of Transportation and Communications with control and
constitutionally conferred, the same was exercised in an unconstitutional manner, supervision over respondent NTC, it is specifically provided that the national
hence it is ultra vires, in that (a) the questioned order violates procedural due economic viability of the entire network or components of the communications
process for having been issued without prior notice and hearing; and (b) the rate systems contemplated therein should be maintained at reasonable rates. We
reduction it imposes is unjust, unreasonable and confiscatory, thus constitutive of need not go into an in-depth analysis of the pertinent provisions of the law in
a violation of substantive due process.
 order to conclude that respondent NTC, in the exercise of its rate-fixing power, is

 limited by the requirements of public safety, public interest, reasonable feasibility
I. Petitioner asseverates that nowhere in the provisions of Executive Order No. and reasonable rates, which conjointly more than satisfy the requirements of a
546, providing for the creation of respondent NTC and granting its rate-fixing valid delegation of legislative power.

powers, nor of Executive Order No. 196, placing petitioner under the jurisdiction 

of respondent NTC, can it be inferred that respondent NTC is guided by any II. On another tack, petitioner submits that the questioned order violates
standard in the exercise of its rate-fixing and adjudicatory powers. While procedural due process because it was issued motu proprio, without notice to
petitioner and without the benefit of a hearing. Petitioner laments that said order the nature of the administrative agency is essentially legislative, the requirements
was based merely on an "initial evaluation," which is a unilateral evaluation, but of notice and hearing are not necessary. The validity of a rule of future action
had petitioner been given an opportunity to present its side before the order in which affects a group, if vested rights of liberty or property are not involved, is
question was issued, the confiscatory nature of the rate reduction and the not determined according to the same rules which apply in the case of the direct
consequent deterioration of the public service could have been shown and application of a policy to a specific individual’) . . . It is said in 73 C.J.S. Public
demonstrated to respondents. Petitioner argues that the function involved in the Administrative Bodies and Procedure, sec. 130, pages 452 and 453: ‘Aside from
rate fixing-power of NTC is adjudicatory and hence quasi-judicial, not quasi- statute, the necessity of notice and hearing in an administrative proceeding
legislative; thus, notice and hearing are necessary and the absence thereof depends on the character of the proceeding and the circumstances involved. In
results in a violation of due process.
 so far as generalization is possible in view of the great variety of administrative

 proceedings, it may be stated as a general rule that notice and hearing are not
Respondents admit that the application of a policy like the fixing of rates as essential to the validity of administrative action where the administrative body
exercised by administrative bodies is quasi-judicial rather than quasi-legislative: acts in the exercise of executive, administrative, or legislative functions; but
that where the function of the administrative agency is legislative, notice and where a public administrative body acts in a judicial or quasi-judicial matter, and
hearing are not required, but where an order applies to a named person, as in the its acts are particular and immediate rather than general and prospective, the
instant case, the function involved is adjudicatory. 8 Nonetheless, they insist that person whose rights or property may be affected by the action is entitled to
under the facts obtaining the order in question need not be preceded by a notice and hearing." 11 

hearing, not because it was issued pursuant to respondent NTC’s legislative 

function but because the assailed order is merely interlocutory, it being an The order in question which was issued by respondent Alcuaz no doubt contains
incident in the ongoing proceedings on petitioner’s application for a certificate of all the attributes of a quasi-judicial adjudication. Foremost is the fact that said
public convenience; and that petitioner is not the only primary source of data or order pertains exclusively to petitioner and to no other. Further, it is premised on
information since respondent is currently engaged in a continuing review of the a finding of fact, although patently superficial, that there is merit in a reduction of
rates charged.
 some of the rates charged — based on an initial evaluation of petitioner’s

 financial statements — without affording petitioner the benefit of an explanation
We find merit in petitioner’s contention.
 as to what particular aspect or aspects of the financial statements warranted a

 corresponding rate reduction. No rationalization was offered nor were the
In Vigan Electric Light Co., Inc. v. Public Service Commission, 9 we made a attending contingencies, if any, discussed, which prompted respondents to
categorical classification as to when the rate-fixing power of administrative impose as much as a fifteen percent (15%) rate reduction. It is not far-fetched to
bodies is quasi-judicial and when it is legislative, thus: 
 assume that petitioner could be in a better position to rationalize its rates vis-a-

 vis the viability of its business requirements. The rates it charges result from an
"Moreover, although the rule-making power end even the power to fix rates — exhaustive and detailed study it conducts of the multi-faceted intricacies
when such rules and/or rates are meant to apply to all enterprises of a given kind attendant to a public service undertaking of such nature and magnitude. We are,
throughout the Philippines — may partake of a legislative character, such is not therefore, inclined to lend greater credence to petitioner’s ratiocination that an
the nature of the order complained of. Indeed, the same applies exclusively to immediate reduction in its rates would adversely affect its operations and the
petitioner herein. What is more, it is predicated upon the finding of fact — based quality of its service to the public considering the maintenance requirements, the
upon a report submitted by the General Auditing Office — that petitioner is projects it still has to undertake and the financial outlay involved. Notably,
making a profit of more than 12% of its invested capital, which is denied by petitioner was not even afforded the opportunity to cross-examine the inspector
petitioner. Obviously, the latter is entitled to cross-examine the maker of said who issued the report on which respondent NTC based its questioned order. 

report, and to introduce evidence to disprove the contents thereof and/or explain 

or complement the same, as well as to refute the conclusion drawn therefrom by At any rate, there remains the categorical admission made by respondent NTC
the  Respondent. In other words, in making said finding of fact, respondent that the questioned order was issued pursuant to its quasi-judicial functions. It,
performed a function partaking of a quasi-judicial character, the valid exercise of however, insists that notice and hearing are not necessary since the assailed
which demands previous notice and hearing." 
 order is merely incidental to the entire proceedings and, therefore, temporary in

 nature. This postulate is bereft of merit.

This rule was further explained in the subsequent case of The Central Bank of the 

Philippines v. Cloribel, Et. Al. 10 to wit: 
 While respondents may fix a temporary rate pending final determination of the

 application of petitioner, such rate-fixing order, temporary though it may be, is not
"It is also clear from the authorities that where the function of the administrative exempt from the statutory procedural requirements of notice and hearing, as well
body is legislative, notice of hearing is not required by due process of law (See as the requirement of reasonableness. Assuming that such power is vested in
Oppenheimer, Administrative Law, 2 Md. L.R. 185, 204, supra, where it is said: ‘If NTC, it may not exercise the same in an arbitrary and confiscatory manner.
Categorizing such an order as temporary in nature does not perforce entail the III. Petitioner contends that the rate reduction is confiscatory in that its
applicability of a different rule of statutory procedure than would otherwise be implementation would virtually result in a cessation of its operations and eventual
applied to any other order on the same matter unless otherwise provided by the closure of business. On the other hand, respondents assert that since petitioner
applicable law. In the case at bar, the applicable statutory provision is Section is operating its communications satellite facilities through a legislative franchise,
16(c) of the Public Service Act which provides: 
 as such grantee it has no vested right therein. What it has is merely a privilege or

 license which may be revoked at will by the State at any time without necessarily
"Section 16. Proceedings of the Commission, upon notice and hearing. — The violating any vested property right of herein petitioner. While petitioner concedes
Commission shall have power, upon proper notice and hearing in accordance this thesis of respondent, it counters that the withdrawal of such privilege should
with the rules and provisions of this Act, subject to the limitations and exceptions nevertheless be neither whimsical nor arbitrary, but it must be fair and
mentioned and saving provisions to the contrary:
reasonable.

x       x       x



 There is no question that petitioner is a mere grantee of a legislative franchise

 which is subject to amendment, alteration, or repeal by Congress when the
(c) To fix and determine individual or joint rates, . . . which shall be imposed, common good so requires. 14 Apparently, therefore, such grant cannot be
observed and followed thereafter by any public service; . . . ." 
 unilaterally revoked absent a showing that the termination of the operation of said

 utility is required by the common good.

There is no reason to assume that the aforesaid provision does not apply to 

respondent NTC, there being no limiting, excepting, or saving provisions to the The rule is that the power of the State to regulate the conduct and business of
contrary in Executive Orders Nos. 546 and 196.
 public utilities is limited by the consideration that it is not the owner of the

 property of the utility, or clothed with the general power of management incident
It is thus clear that with regard to rate-fixing, respondent has no authority to make to ownership, since the private right of ownership to such property remains and is
such order without first giving petitioner a hearing, whether the order be not to be destroyed by the regulatory power. The power to regulate is not the
temporary or permanent, and it is immaterial whether the same is made upon a power to destroy useful and harmless enterprises, but is the power to protect,
complaint, a summary investigation, or upon the commission’s own motion as in foster, promote, preserve, and control with due regard for the interest, first and
the present case. That such a hearing is required is evident in respondents’ order foremost, of the public, then of the utility and of its patrons. Any regulation,
of September 16, 1987 in NTC Case No. 8794 which granted PHILCOMSAT a therefore, which operates as an effective confiscation of private property or
provisional authority "to continue operating its existing facilities, to render the constitutes an arbitrary or unreasonable infringement of property rights is void,
services it presently offers, and to charge the rates as reduced by them" under because it is repugnant to the constitutional guaranties of due process and equal
the condition that" (s)ubject to hearing and the final consideration of the merit of protection of the laws. 15 

this application, the Commission may modify, revise or amend the rates . . .." 12 
 


 Hence, the inherent power and authority of the State, or its authorized agent, to
While it may be true that for purposes of rate-fixing respondents may have other regulate the rates charged by public utilities should be subject always to the
sources of information or data, still, since a hearing is essential, respondent NTC requirement that the rates so fixed shall be reasonable and just. A commission
should act solely on the basis of the evidence before it and not on knowledge or has no power to fix rates which are unreasonable or to regulate them arbitrarily.
information otherwise acquired by it but which is not offered in evidence or, even This basic requirement of reasonableness comprehends such rates which must
if so adduced, petitioner was given no opportunity to controvert.
 not be so low as to be confiscatory, or too high as to be oppressive. 16 


 

Again, the order requires the new reduced rates to be made effective on a What is a just and reasonable rate is not a question of formula but of sound
specified date. It becomes a final legislative act as to the period during which it business judgment based upon the evidence; 17 it is a question of fact calling for
has to remain in force pending the final determination of the case. 13 An order of the exercise of discretion, good sense, and a fair, enlightened and independent
respondent NTC prescribing reduced rates, even for a temporary period, could judgment 18 In determining whether a rate is confiscatory, it is essential also to
be unjust, unreasonable or even confiscatory, especially if the rates are consider the given situation, requirements and opportunities of the utility. A
unreasonably low, since the utility permanently loses its just revenue during the method often employed in determining reasonableness is the fair return upon the
prescribed period. In fact, such order is in effect final insofar as the revenue value of the property to the public utility. Competition is also a very important
during the period covered by the order is concerned. Upon a showing, therefore, factor in determining the reasonableness of rates since a carrier is allowed to
that the order requiring a reduced rate is confiscatory, and will unduly deprive make such rates as are necessary to meet competition. 19 

petitioner of a reasonable return upon its property, a declaration of its nullity 

becomes inductible, which brings us to the issue on substantive due process.
 A cursory perusal of the assailed order reveals that the rate reduction is solely

 and primarily based on the initial evaluation made on the financial statements of
petitioner, contrary to respondent NTC’s allegation that it has several other
sources of information without, however, divulging such sources. Furthermore, it
did not as much as make an attempt to elaborate on how it arrived at the
prescribed rates. It just perfunctorily declared that based on the financial
statements, there is merit for a rate reduction without any elucidation on what
implications and conclusions were necessarily inferred by it from said statements.
Nor did it deign to explain how the data reflected in the financial statements
influenced its decision to impose a rate reduction.
 JUDGE OF MAKATI, RTC, BRANCH 137, PHILIPPINE NATIONAL


On the other hand, petitioner may likely suffer a severe drawback, with the
consequent detriment to the public service, should the order of respondent NTC
turn out to be unreasonable and improvident. The business in which petitioner is
engaged is unique in that its machinery and equipment have always to be taken
in relation to the equipment on the other end of the transmission arrangement.
Any lack, aging, acquisition, rehabilitation, or refurbishment of machinery and
equipment necessarily entails a major adjustment or innovation on the business
of petitioner. As pointed out by petitioner, any change in the sending end abroad
has to be matched with the corresponding change in the receiving end in the
Philippines. conversely, any change in the receiving end abroad has to be
matched with the corresponding change in the sending end in the Philippines. An
inability on the part of petitioner to meet the variegations demanded by
technology could result in a deterioration or total failure of the service of satellite
communications. 
 2002, 1 thus:
At present, petitioner is engaged in several projects aimed at refurbishing,
rehabilitating, and renewing its machinery and equipment in order to keep up with
the continuing changes of the times and to maintain its facilities at a competitive
level with the technological advances abroad. These projected undertakings were
formulated on the premise that rates are maintained at their present or at
reasonable levels. Hence, an undue reduction thereof may practically lead to a
cessation of its business. While we concede the primacy of the public interest in
an adequate and efficient service, the same is not necessarily to be equated with
reduced rates. Reasonableness in the rates assumes that the same is fair to both
the public utility and the consumer.
 2. That the Provisional Relief shall be in form of an interim toll rate adjustment in


Consequently, we hold that the challenged order, particularly on the issue of rates
provided therein, being violative of the due process clause is void and should be
nullified. Respondents should now proceed, as they should heretofore have
done, with the hearing and determination of petitioner’s pending application for a
certificate of public convenience and necessity and in which proceeding the
subject of rates involved in the present controversy, as well as other matters
involved in said application, may be duly adjudicated with reasonable dispatch
and with due observance or our pronouncements herein.
 "That the Provisional Toll Rates, which are not to exceed the following:
WHEREFORE, the writ prayed for is GRANTED and the order of respondents,
dated September 2, 1988, in NTC Case No. 87-94 is hereby SET ASIDE. The
temporary restraining order issued under our resolution of September 13, 1988,
as specifically directed against the aforesaid order of respondents on the matter
of existing rates on petitioner’s present authorized services, is hereby made
permanent. SO ORDERED.
[G.R. No. 141949. October 14, 2002.]



CEFERINO PADUA,  Petitioner, v. HON. SANTIAGO RANADA, PRESIDING
CONSTRUCTION CORP., TOLL REGULATORY BOARD, DEPARTMENT OF
P U B L I C W O R K S A N D H I G H W AY S , a n d R E P U B L I C O F T H E
PHILIPPINES,Respondents.



D E C I S I O N
SANDOVAL-GUTIERREZ, J.:


The focal point upon which these two consolidated cases converge is whether
Resolution No. 2001-89 issued by the Toll Regulatory Board (TRB) is valid.



A brief narration of the factual backdrop is imperative, thus: 



On November 9, 2001, the TRB issued Resolution No. 2001-89 authorizing
provisional toll rate adjustments at the Metro Manila Skyway, effective January 1,


"NOW THEREFORE, it is RESOLVED, as it is hereby RESOLVED: 



1. That in view of urgent public interest, the Board hereby GRANTS to the Metro
Manila Skyway Project, Provisional Relief in accordance with Rule 10, Section 3
of the Rules of Practice and Procedure Governing Hearing before the Toll
Regulatory Board which states, among others "that the Board may grant
(provisional relief) . . . in its own initiative . . . without prejudice to the final
decision after completion of the hearing. . .;" 



accordance with Section 7.04(3) of the Supplemental Toll Operation Agreement,
dated November 27, 1995, referring to Interim Adjustments in Toll Rates upon the
occurrence of a significant currency devaluation: 



"Be APPROVED, as it is hereby APPROVED.



"RESOLVED FURTHER, as it is hereby RESOLVED: 





Section Unrounded Toll Rates for Implementation

Toll Rates CLASS 1 CLASS 2 CLASS 3

Elevated Portion 75.00 75.00 150.00 225.00

At-Grade Portion 


 

Magallanes to 19.35 19.50 38.50 58.00
 a. The Investor and/or the Operator shall be entitled to apply for and if warranted,
Bicutan
 to be granted an interim adjustment of Toll Rates upon the occurrence of any of
Bicutan to Sucat 11.21 11.00 22.50 34.00
 the following events:

Sucat to Alabang 10.99 11.00 21.00 32.50
 x       x       x


 

* includes C5 entry/exit and Merville exit.
 (ii) a significant currency devaluation

"For implementation starting January 1, 2002 after its publication once a week for x       x       x

three (3) consecutive weeks in a newspaper of general circulation and that said (i) A currency devaluation shall be deemed "significant" if it results in a
Provisional Toll Rate Increase shall remain in effect until such time that the TRB depreciation of the value of the Philippine peso relative to the US dollar by at
Board has determined otherwise: 
 least 10%. For purposes hereof the exchange rate between the Philippine peso

 and the US dollar which shall be applicable shall be the exchange rate between
"Be APPROVED as it is hereby APPROVED.
 the above mentioned currencies in effect as of the date of approval of the

 prevailing preceding Toll Rate.

"RESOLVED FURTHERMORE, as it is hereby RESOLVED that the Provisional Toll 

Rates be implemented in two (2) stages in accordance with the following (ii) The Investor’s right to apply for an interim Toll Rate adjustment under section
schedule: 
 7.04 (3) (a) (ii) shall be effective only while any Financing is outstanding and have

 not yet been paid in full.

Section Unrounded Toll Toll Rates for Implementation
 x       x       x

Rates as For Class 1 as Reference
 


Maximum for JANUARY 1, JULY 1, 2002,
 (iv) An interim adjustment in Toll Rate shall be considered such amount as may be
One (1) Year 2002 to to DECEMBER
 required to provide interim relief to the Investor from a substantial increase in

 debt-service burden resulting from the devaluation." 5 

JUNE 30, 2002 31 2002
 

Elevated Portion 75.00 65.00 75.00
 Claiming that the peso exchange rate to a U.S. dollar had devaluated from
At-Grade Portion
 P26.1671 in 1995 to P48.00 in 2000, CITRA alleged that there was a compelling

 need for the increase of the toll rates to meet the loan obligations of the Project
Magallanes to 19.35 15.00 20.00
 and the substantial increase in debt-service burden.

Bicutan
 

Bicutan to Sucat 11.21 9.00 11.00
 Due to heavy opposition, CITRA’s petition remained unresolved. This prompted
Sucat to Alabang 10.99 9.00 11.00
 CITRA 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
"PROVIDED that the recovery of the sum from the interim rate adjustment shall Governing Hearing Before the Toll Regulatory Board" (TRB Rules of Procedure)
be applied starting the year 2003.
 which provides: 


 

"APPROVED as it is hereby APPROVED." 
 "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,
On December 17, 24 and 31, 2001, the above Resolution approving provisional thereafter, the Board may grant on motion of the pleader or in its own initiative,
toll rate adjustments was published in the newspapers of general circulation. 2 
 the relief prayed for without prejudice to a final decision after completion of the

 hearing should the Board find that the pleading, together with the affidavits and
Tracing back the events that led to the issuance of the said Resolution, it appears supporting documents attached thereto and such additional evidence as may
that on February 27, 2001 the Citra Metro Manila Tollways Corporation (CITRA) have been requested and presented, substantially support the provisional order;
filed with the TRB an application for an interim adjustment of the toll rates at the Provided: That the Board may, motu proprio, continue to issue orders or grant
Metro Manila Skyway Project — Stage 1. 3 CITRA moored its petition on the relief in the exercise of its powers of general supervision under existing laws.
provisions of the "Supplemental Toll Operation Agreement" (STOA), 4 authorizing Provided: Finally, that pending finality of the decision, the Board may require the
it, as the investor, to apply for and if warranted, to be granted an interim Petitioner to deposit in whole or in part in escrow the provisionally approved
adjustment of toll rates in the event of a "significant currency devaluation." The adjustment or initial toll rates." 

relevant portions of the STOA read:


On October 30, 2001, CITRA moved to withdraw 7 its "Urgent Motion for
Provisional Approval" without prejudice to its right to seek or be granted public respondent TRB, Philippine National Construction Corporation (PNCC),
provisional relief under the above-quoted provisions of the TRB Rules of Department of Public Works and Highways (DPWH) and Judge Ranada, a
Procedure, obviously, referring to the power of the Board to act on its own "Consolidated Comment" 15 contending that: (1) the TRB has the exclusive
initiative.
 jurisdiction over all matters relating to toll rates; (2) Resolution No. 2001-89

 covers both the Skyway and the at-grade level of the South Luzon Expressway
On November 7, 2001, CITRA wrote a letter 8 to TRB expressing its concern over as provided under the STOA; (3) that while Resolution No. 2001-89 does not
the undue delay in the proceeding, stressing that any further setback would bring mention any factual basis to justify its issuance, however, it does not mean that
the Project’s financial condition, as well as the Philippine banking system, to a TRB’s finding of facts is not supported by evidence; and (4) petitioner Padua
total collapse. CITRA recounted that out of the US$354 million funding from cannot assail the validity of the STOA because he is not a party thereto.

creditors, two-thirds (2/3) thereof came from the Philippine banks and financial 

institutions, such as the Landbank of the Philippines and the Government Service Upon the other hand, on January 9, 2002, petitioner Eduardo Zialcita, as a
Insurance Services. Thus, CITRA requested TRB to find a timely solution to its taxpayer and as Congressman of Parañaque City, filed the present petition for
predicament.
 prohibition 16 with prayer for a temporary restraining order and/or writ of

 preliminary injunction against TRB and CITRA, docketed as G.R. No. 151108,
On November 9, 2001, TRB granted CITRA’s motion to withdraw 9 the Urgent impugning the same Resolution No. 2001-89.

Motion for Provisional Approval and, at the same time, issued Resolution No. 

2001-89, 10 earlier quoted.
 Petitioner Zialcita asserts that the provisional toll rate adjustments are exorbitant

 and that the TRB violated its own Charter, Presidential Decree No. 1112, 17 when
Hence, petitioners Ceferino Padua and Eduardo Zialcita assail before this Court it promulgated Resolution No. 2001-89 without the benefit of any public hearing.
the validity and legality of TRB Resolution No. 2001-89.
 He also maintains that the TRB violated the Constitution when it did not express

 clearly and distinctly the facts and the law on which Resolution No. 2001-89 was
Petitioner Ceferino Padua, as a toll payer, filed an "Urgent Motion for a Temporary based. And lastly, he claims that Section 3, Rule 10 of the TRB Rules of
Restraining Order to Stop Arbitrary Toll Fee Increases" 11 in G.R. No. 141949, 12 Procedure is not sanctioned by P.D. No. 1112. 

a petition for mandamus earlier filed by him. In that petition, Padua seeks to 

compel respondent Judge Santiago Ranada of the Regional Trial Court, Branch Private respondent CITRA, in its comment 18 on Congressman Zialcita’s petition,
137, Makati City, to issue a writ of execution for the enforcement of the Court of counters that: (1) the TRB has primary administrative jurisdiction over all matters
Appeals’ Decision dated August 4, 1989 in CA-G.R. SP No. 13235. In its relating to toll rates; (2) prohibition is an inappropriate remedy because its
Decision, the Court of Appeals ordered the exclusion of certain portions of the function is to restrain acts about to be done and not acts already accomplished;
expressways (from Villamor Air Base to Alabang in the South, and from (3) Resolution No. 2001-89 was issued in accordance with law; (4) Section 3, Rule
Balintawak to Tabang in the North) from the franchise of the PNCC.
 10 of the TRB Rules is constitutional; and (5) private respondent and the Republic

 of the Philippines would suffer more irreparable damages than petitioner.

In his urgent motion, petitioner Padua claims that: (1) Resolution No. 2001-89 

was issued without the required publication and in violation of due process; (2) The TRB, through the OSG, filed a separate comment 19 reiterating the same
alone, TRB Executive Director Jaime S. Dumlao, Jr., could not authorize the arguments raised by private respondent CITRA.

provisional toll rate adjustments because the TRB is a collegial body; and (3) 

CITRA has no standing to apply for a toll fee increase since it is an "investor" and On January 11, 2002, this Court resolved to consolidate the instant petitions,
not a "franchisee-operator." 
 G.R. No. 141949 and G.R. No. 151108. 20 


 

On January 4, 2002, petitioner Padua filed a "Supplemental Urgent Motion for a We rule for the respondents.

TRO against Toll Fee Increases," 13 arguing further that: (1) Resolution 2001-89 

refers exclusively to the Metro Manila Skyway Project, hence, there is no legal In assailing Resolution No. 2001-89, petitioners came to us via two
basis for the imposition of the increased rate at the at-grade portions; (2) unconventional remedies — one is an urgent motion for a TRO to stop arbitrary
Resolution No. 2001-89 was issued without basis considering that while it was toll fee increases; and the other is a petition for prohibition. Unfortunately, both
signed by three (3) of the five members of the TRB, none of them actually are procedurally impermissible.

attended the hearing; and 3) the computation of the rate adjustment under the
STOA is inconsistent with the rate adjustment formula under Presidential Decree I

No. 1894.
 Petitioner Padua’s motion is a leap to a legal contest of different dimension. As

 previously stated, G.R. No. 141949 is a petition for mandamus seeking to compel
On January 10, 2002, the Office of the Solicitor General (OSG) filed, in behalf of respondent Judge Ranada to issue a writ of execution for the enforcement of the
Court of Appeal’s Decision dated August 4, 1989 in CA-G.R. SP No. 13235. The expertise, training and skills to judiciously decide matters of this kind. As may be
issue therein is whether the application for a writ of execution should be by a gleaned from the petition, the main thrust of petitioner Zialcita’s argument is that
mere motion or by an action for revival of judgment. Thus, for petitioner Padua to the provisional toll rate adjustments are exorbitant, oppressive, onerous and
suddenly interject in the same petition the issue of whether Resolution No. unconscionable. This is obviously a question of fact requiring knowledge of the
2001-89 is valid is to drag this Court to his web of legal convolution. Courts formula used and the factors considered in determining the assailed rates.
cannot, as a case progresses, resolve the intrinsic merit of every issue that Definitely, this task is within the province of the TRB.

comes along its way, particularly those which bear no relevance to the resolution 

of the case.
 We take cognizance of the wealth of jurisprudence on the doctrine of primary

 administrative jurisdiction and exhaustion of administrative remedies. In this era
Certainly, petitioner Padua’s recourse in challenging the validity of TRB of clogged court dockets, the need for specialized administrative boards or
Resolution No. 2001-89 should have been to institute an action, separate and commissions with the special knowledge, experience and capability to hear and
independent from G.R. No. 141949.
determine promptly disputes on technical matters or intricate questions of facts,
subject to judicial review in case of grave abuse of discretion, is indispensable.
II
Between the power lodged in an administrative body and a court, the
The remedy of prohibition initiated by petitioner Zialcita in G.R. No. 151108 also unmistakable trend is to refer it to the former." 24 In Industrial Enterprises, Inc. v.
suffers several infirmities. Initially, it violates the twin doctrine of primary Court of Appeals, 25 we ruled: 

administrative jurisdiction and non-exhaustion of administrative remedies.
 


 ". . ., if the case is such that its determination requires the expertise, specialized
P.D. No. 1112 explicitly provides that "the decisions of the TRB on petitions for skills and knowledge of the proper administrative bodies because technical
the increase of toll rate shall be appealable to the Office of the President within matters or intricate questions of facts are involved, then relief must first be
ten (10) days from the promulgation thereof." 21 P.D. No. 1894 reiterates this obtained in an administrative proceeding before a remedy will be supplied by the
instruction and further provides: 
 courts even though the matter is within the proper jurisdiction of a court." 


 

"SECTION 9. The GRANTEE shall have the right and authority to adjust any Moreover, petitioner Zialcita’s resort to prohibition is intrinsically inappropriate. It
existing toll being charged the users of the Expressways under the following bears stressing that the office of this remedy is not to correct errors of judgment
guidelines:
but to prevent or restrain usurpation of jurisdiction or authority by inferior
x       x       x
tribunals and to compel them to observe the limitation of their jurisdictions. G.R.

 No. 151108, while designated as a petition for prohibition, has for its object the
c) Any interested Expressways user shall have the right to file, within a period of setting aside of Resolution No. 2001-89 on the ground that it was issued without
ninety (90) days after the date of publication of the adjusted toll rate(s), a petition prior notice, hearing and publication and that the provisional toll rate adjustments
with the Toll Regulatory Board for a review of the adjusted toll rate(s); provided, are exorbitant. This is not the proper subject of prohibition because as long as
however, that notwithstanding the filing of such petition and the pendency of the the inferior court, tribunal or board has jurisdiction over the person and subject
resolution thereof, the adjusted toll shall be enforceable and collectible by the matter of the controversy, the writ will not lie to correct errors and irregularities in
GRANTEE effective on the first day of January in accordance with the procedure, or to prevent an erroneous decision or an enforcement of an
immediately preceding paragraph.
erroneous judgment. And even in cases of encroachment, usurpation, and
x       x       x
improper assumption of jurisdiction, the writ will not issue where an adequate

 and applicable remedy by appeal, writ or error,  certiorari, or other prescribed
e) Decisions of the Toll Regulatory Board on petitions for review of adjusted toll methods of review are available. 26 In this case, petitioner Zialcita should have
shall be appealable to the Office of the President within ten (10) days from the sought a review of the assailed Resolution before the TRB.

promulgation thereof." 


 III

These same provisions are incorporated in the TRB Rules of Procedure, Even granting that petitioners’ recourse to the instant remedies is in order, still,
particularly in Section 6, Rule 5 and Section 1, Rule 12 thereof. 22 
 we cannot rule in their favor.


 

Obviously, the laws and the TRB Rules of Procedure have provided the remedies For one, it is not true that the provisional toll rate adjustments were not published
of an interested Expressways user. 23 The initial proper recourse is to file a prior to its implementation on January 1, 2002. Records show that they were
petition for review of the adjusted toll rates with the TRB. The need for a prior published on December 17, 24 and 31, 2001 27 in three newspapers of general
resort to this body is with reason. The TRB, as the agency assigned to supervise circulation, particularly the Philippine Star, Philippine Daily Inquirer and The
the collection of toll fees and the operation of toll facilities, has the necessary Manila Bulletin. Surely, such publications sufficiently complied with Section 5 of
P.D. No. 1112 which mandates that "no new rates shall be collected unless views of a subordinate." Thus, it is logical to say that this mandate was rendered
published in a newspaper of general publication at least once a week for three precisely to ensure that in cases where the hearing or reception of evidence is
consecutive weeks." At any rate, it must be pointed out that under Letter of assigned to a subordinate, the body or agency shall not merely rely on his
Instruction No. 1334-A, 28 the TRB may grant and issue ex parte to any recommendation but instead shall personally weigh and assess the evidence
petitioner, without need of notice, publication or hearing, provisional authority to which the said subordinate has gathered." 

collect, pending hearing and decision on the merits of the petition, the increase in 

rates prayed for or such lesser amount as the TRB may in its discretion Be that as it may, we must stress that the TRB’s authority to grant provisional toll
provisionally grant. That LOI No. 1334-A has the force and effect of law finds rate adjustments does not require the conduct of a hearing. Pertinent laws and
support in a catena of cases decreeing that "all proclamations, orders, decrees, jurisprudence support this conclusion.

instructions, and acts promulgated, issued, or done by the former President 

(Ferdinand E. Marcos) are part of the law of the land, and shall remain valid, legal, It may be recalled that Former President Ferdinand E. Marcos promulgated P.D.
binding, and effective, unless modified, revoked or superseded by subsequent No. 1112 creating the TRB on March 31, 1977. The end in view was to authorize
proclamations, orders, decrees, instructions, or other acts of the President." 29 In the collection of toll fees for the use of certain public improvements in order to
Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian attract private sector investment in the government infrastructure projects. The
Reform, 30 this Court held: 
 TRB was tasked to supervise the collection of toll fees and the operation of toll

 facilities. One of its powers is to "issue, modify and promulgate from time to time
"The Court wryly observes that during the past dictatorship, every presidential the rates of toll that will be charged the direct users of toll facilities and upon
issuance, by whatever name it was called, had the force and effect of law notice and hearing, to approve or disapprove petitions for the increase thereof."
because it came from President Marcos. Such are the ways of despots. Hence, it 34 

is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not 

have repealed P.D. No. 27 because the former was only a letter of instruction. The To clarify the intent of P.D. No. 1112 as to the extent of the TRB’s power, 35
important thing is that it was issued by President Marcos, whose word was law Former President Marcos further issued LOI No. 1334-A expressly allowing the
during that time." (Emphasis supplied)
 TRB to grant ex parte provisional or temporary increase in toll rates, thus: 


 

For another, it is not true that it was TRB Executive Director Dumlao, Jr. alone "NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of
who issued Resolution No. 2001-89. The Resolution itself contains the signature the Philippines, by virtue of the powers vested in me by the Constitution, do
of the four TRB Directors, namely, Simeon A. Datumanong, Emmanuel P. Bonoan, hereby direct, order and instruct the Toll Regulatory Board to grant and issue ex-
Ruben S. Reinoso, Jr. and Mario K. Espinosa. 31 Petitioner Padua would argue parte to any petitioner, without need of notice, publication or hearing, provisional
that while these Directors signed the Resolution, none of them personally authority to collect, pending hearing of and decision on the merits of such
attended the hearing. This argument is misplaced. Under our jurisprudence, an petition, the increase in rates prayed for or such lesser amount as the Board may
administrative agency may employ other persons, such as a hearing officer, in its discretion provisionally grant, upon (a) a finding that the said petition is
examiner or investigator, to receive evidence, conduct hearing and make reports, sufficient in form and substance, (b) the submission of an affidavit by the
on the basis of which the agency shall render its decision. Such a procedure is petitioner showing that the increase in rates substantially conforms to the
practical necessity." 32 Thus, in Mollaneda v. Umacob, 33 we ruled: 
 formula, if any stipulated in the franchise or toll operation agreement/certificate of

 the petitioner and that failure to immediately impose and collect the increase in
". . . At any rate, it cannot be gainsaid that the term "administrative body or rates would result in outright delay or stoppage of urgently needed
agency" Includes the subordinate officials upon whose hand the body or agency improvements, expansion or repairs of toll facilities and/or in great irreparable
delegates a portion of its authority. Included therein are the hearing officers injury to the petitioner, and (c) the submission by the petitioner to the Board of a
through whose eyes and ears the administrative body or agency observes the bond, in such amount and from such surety or sureties and under such terms and
demeanor, conduct and attitude of the witnesses and listens to their testimonies.
 conditions as the Board shall fix, to guarantee the refund of the increase in rates

 to the affected toll payers in case it is finally determined, after notice and hearing,
"It must be emphasized that the appointment of competent officers to hear and that the petitioner is not entitled, in whole or in part, to the same. Any provisional
receive evidence is commonly resorted to by administrative bodies or agencies in toll rate increases shall be effective immediately upon approval without need of
the interest of an orderly and efficient disposition of administrative cases. . .
 publication." 


 

". . . Corollarily, in a catena of cases, this Court laid down the cardinal Thereafter, the TRB promulgated as part of its Rules of Procedure, the following
requirements of due process in administrative proceedings, one of which is that provision: 

"the tribunal or body or any of its judges must act on its or his own independent 

consideration of the law and facts of the controversy, and not simply accept the "RULE 5


 entered into by no less than the Republic of the Philippines and by the PNCC.
PROCEDURE FOR APPROVAL OF TOLL RATE
 Section 7.04 of the STOA provides that the Investor, CITRA, and/or the Operator,

 PNCC, shall be entitled to apply for and if warranted, to be granted an interim
"Section 2. Provisional Relief — Upon initial findings of the Board that the Petition adjustment of toll rates in case of force majeure and a significant currency
for the approval of initial toll rate or the petition for toll rate adjustment is in valuation. 39 Now, unless set aside through proper action, the STOA has the
accordance with Sections 1 and 2 of Rule 2, Section 2 of Rule 3 and Section 1 of force and effect of law between the contracting parties, and is entitled to
Rule 4 hereof, the Board within a reasonable time after the filing of the Petition, recognition by this Court. 40 On the same breath, we cannot sustain Padua’s
may in an en banc decision provisionally approve the initial toll rate or toll rate contention that the term "Metro Manila Skyway" Project excludes the at-grade
adjustment, without the necessity of any notice and hearing." 
 portions of the South Luzon Expressway considering that under the same STOA

 the "Metro Manila Skyway" includes:" (a) the South Metro Manila Skyway,
From the foregoing, it is clear that a hearing is not necessary for the grant of coupled with the rehabilitated at grade portion of the South Luzon Expressway,
provisional toll rate adjustment. The language of LOI No. 1334-A is not from Alabang to Quirino Avenue; (b) the Central Metro Manila Skyway, from
susceptible of equivocation. It "directs, orders and instructs" the TRB to issue Quirino Avenue to A. Bonifacio Avenue; . . . ." 41 

provisional toll rates adjustment ex parte without the need of notice, hearing and 

publication. All that is necessary is that it be issued upon (1) a finding that the Petitioner Zialcita faults the TRB for not stating the facts and the law on which
main petition is sufficient in form and substance; (2) the submission of an affidavit Resolution No. 2001-89 is based. Petitioner is wrong. Suffice it to state that while
showing that the increase in rates substantially conforms to the formula, if any is Section 14, Article VIII of the 1987 Constitution provides that "no decision shall
stipulated in the franchise or toll operation agreement, and that failure to be rendered by any court without expressing therein clearly and distinctly the
immediately impose and collect the increase in rates would result in great facts and the law on which it is based," this rule applies only to a decision of a
irreparable injury to the petitioner; and (3) the submission of a bond. Again, court of justice, not TRB. 42 

whether or not CITRA complied with these requirements is an issue that must be 

addressed to the TRB.
 At this point, let it be stressed that we are not passing upon the reasonableness

 of the provisional toll rate adjustments. As we have earlier mentioned, this matter
The practice is not something peculiar. We have ruled in a number of cases that is best addressed to the TRB.

an administrative agency may be empowered to approve provisionally, when

demanded by urgent public need, rates of public utilities without a hearing. The IV

reason is easily discerned from the fact that provisional rates are by their nature
temporary and subject to adjustment in conformity with the definitive rates
approved after final hearing. 36 In Maceda v. Energy Regulatory Board, 37 we
ruled that while the ERB is not precluded from conducting a hearing on the grant
of provisional authority — which is of course, the better procedure — however, it
can not be stigmatized if it failed to conduct one. Citing Citizens’ Alliance for
Consumer Protection v. Energy Regulatory Board, 38 this Court held: 
 again, we have impressed that this Court is not a trier of facts, more so, in the


In the light of Section 8 quoted above, public respondent Board need not even
have conducted formal hearings in these cases prior to issuance of its Order of
14 August 1987 granting a provisional increase of prices. The Board, upon its
own discretion and on the basis of documents and evidence submitted by private
respondents, could have issued an order granting provisional relief immediately
upon filing by private respondents of their respective applications. In this respect,
the Court considers the evidence presented by private respondents in support of
their applications — i.e., evidence showing that importation costs of petroleum
products had gone up; that the peso had depreciated in value; and that the Oil
Price Stabilization Fund (OPSF) had been depleted — as substantial and hence
constitutive of at least prima facie basis for issuance by the Board of a
provisional relief order granting an increase in the prices of petroleum products.
 "Petition for Prohibition" is DISMISSED. SO ORDERED.
In fine, as what we intimated in Philippine National Construction Corp. v. Court of
Appeals, 43 we commend petitioners for devoting their time and effort on a
matter so imbued with public interest as in this case. But we can do no better
than to brush aside their chief objections to the provisional toll rate adjustments,
for a different approach would lead this Court astray into the field of factual
conflict where its pronouncements would not rest on solid grounds. Time and
consideration of an extraordinary remedy of prohibition where only questions of
lack or excess of jurisdiction or grave abuse of discretion is to be entertained. 



And to accord the main petition for mandamus in G.R. No. 141949 the full
deliberation it deserves, we deem it appropriate to discuss its merit on another
occasion. Anyway, G.R. No. 141949 was consolidated with G.R. No. 151108 only
by reason of petitioner Padua’s deviant motion assailing Resolution 2001-89. As
we have previously said, the main petition in G.R. No. 141949 presents an entirely
different issue and is set on a different factual landscape.



WHEREFORE, petitioner Padua’s "Urgent Motion for Temporary Restraining
Order to Stop Arbitrary Toll Fee Increases" is DENIED and petitioner Zialcita’s



Anent petitioner Padua’s contention that CITRA has no standing to apply for a toll
fee increase, suffice it to say that CITRA’s right stems from the STOA which was
G.R. No. 161113             June 15, 2004
On November 11, 2003, NASECORE filed a  Motion for Production of
Documents to enable it to evaluate MERALCO’s Application.7

FREEDOM FROM DEBT COALITION, ANA MARIA NEMENZO, as President of

FREEDOM FROM DEBT COALITION, MA. TERESA I. DIOKNO-PASCUAL, In an  Order  dated November 13, 2003, the ERC directed MERALCO to file its
REP.  LORETTA ANN ROSALES (Party-List  Akbayan), REP. JOSE VIRGILIO comment on NASECORE’s Motion for Production of Documents.8

BAUTISTA (Party-List  Sanlakas), REP. RENATO MAGTUBO (Party-

List  Partido Manggagawa),  petitioners,  vs. ENERGY REGULATORY On November 19, 2003, the ERC issued an Order directing MERALCO to submit
COMMISSION, MANILA ELECTRIC COMPANY (MERALCO), respondents.
certain documents in connection with the evaluation of its Application.9

D E C I S I O N
On November 21, Lualhati filed his Opposition10 to MERALCO’s Application.

TINGA, J.:
The FDC likewise filed a Motion for Production of Documents on November 27,
2003, adopting NASECORE’s list in its  Motion,  and requesting for other
The privately-owned public utility "is the substitute for the State in the documents in addition thereto.11

performance of . . . (a) public service, thus becoming a public servant,"1 so wrote

Justice Louis Brandeis more than eighty years ago. As in the United States, the
provision of public utility services in the Philippine setting is a combination of
private ownership and public control. Such an amalgam of clashing interests is a
formula for inevitable conflicts. At bar here is one such conflict, in fact the current
high point of a raging controversy where the public, on one side, is pitted against
However, on November 27, 2003, the ERC, without first resolving the Motions for
Production of Documents  of NASECORE and FDC and apparently without
considering Lualhati’s  Opposition,  issued an  Order  provisionally approving
MERALCO’s  ex parte  application for rate increases. The dispositive portion of
the Order states:

the regulatory body and the country’s leading power utility, on the other.

Before the Court is a Petition for Certiorari, Prohibition and Injunction with Prayer
for the Issuance of a Temporary Restraining Order or a Status Quo
Order.  The  Petition  assails the  Order  dated November 27, 2003 of respondent
Energy Regulatory Commission (ERC), provisionally authorizing respondent
Manila Electric Company (MERALCO) to increase its rates by an average amount
of twelve centavos (P0.12) per kilowatt hour.
adjustment in the average amount of TWELVE (12) CENTAVOS per kwh,
On October 10, 2003, MERALCO filed with the ERC an  Application  for an
increase in rates. MERALCO also prayedex parte  for the grant of a provisional
WHEREFORE, considering all the foregoing, this Commission, pursuant
to Section 8 of Executive Order No. 172 and Section 4 (e) of the
Implementing Rules and Regulations of the EPIRA (R.A. 9136), hereby
provisionally authorizes applicant Manila Electric Company (MERALCO)
to adopt and implement the attached rate schedules embodying a rate
effective with respect to its billing cycles beginning January 2004. The
impact of this approved rate adjustment will vary from one customer
class to another depending on the load cycles.

authority to implement the increase according to the schedule attached to its

Application. The case was docketed as ERC Case No. 2003-480.2
The rate adjustment authorized herein shall be subject to refund in the
event that this Commission finds, after completion of the hearings of this
On October 14, 2003, the National Association of Electricity Consumers for case, that the same is unjust and unreasonable.

Reforms, Inc. (NASECORE), in a Letter addressed to then ERC Chairman Manuel

R. Sanchez (Sanchez), informed him of its intention to file an  Opposition to The hearing of this case is hereby set on December 22, 2003 at nine o’
MERALCO’s Application.3
clock in the morning (9:00 A.M.) at the ERC Hearing Room, 15th Floor,
Pacific Center Building, San Miguel Avenue, Ortigas Center, Pasig City.
On October 24, 2003, Mr. Genaro Lualhati  (Lualhati) sent a  Letter  to Sanchez In this connection, MERALCO is hereby directed to publish, at its own
seeking the dismissal of MERALCO’sApplication.4
expenses, the attached Notice of Public Hearing at least twice (2) for
two (2) successive weeks in two (2) newspapers of nationwide
On October 29, 2003, petitioner Freedom from Debt Coalition (FDC) also circulation in the country, the last date of publication to be made not
expressed its intention to file an opposition to MERALCO’s Application.5
later than two (2) weeks before the scheduled date of initial hearing.

On November 3, 2003, the ERC directed FDC, NASECORE and Lualhati to file Let copies of this Order and the attached Notice of Public Hearing be
their respective comments on theApplication  within fifteen (15) days from their furnished all the Municipal/City mayors within the MERALCO’s franchise
receipt thereof.6
area for appropriate posting thereof on their respective bulletin
boards….12

 On January 9, 2004, The ERC issued an Order clarifying that the provisional rate
Thereafter, the following  were filed with the ERC after its issuance of the increase granted to MERALCO in its November 27, 2003 Order should be applied
November 27, 2003 Order:
beginning January 1, 2004.

(1)  Urgent Motion to Resolve Motion for Production of Documents & The Court En Banc issued on January 13, 2004, a R E S O L U T I O N ordering
Opposition to the Provisional Authorityfiled by NASECORE on December ERC and MERALCO to file their respective Comments on the Petition. The Court
8, 2003;
also enjoined ERC and MERALCO to observe the status quo prevailing before the
(2)  Manifestation Joining the National Association of Electricity filing of the Petition and set the case for oral arguments on January 27, 2004.

Consumers for Reforms, Inc. in its Opposition to the Provisional

Authority and Motion for Production of Documents filed by the Philippine On January 26, 2004, ERC, MERALCO and the Office of the Solicitor General
Consumers Watch on December 11, 2003;
(OSG) filed their respective Comments on the Petition.

(3) Opposition filed by the Philippine Consumers Welfare Union (PCWU) In its  Comment,  the ERC concurred with the arguments of the OSG and insists
on December 15, 2003;
that it is authorized to issue provisional orders under the law. ERC argues that it
(4)  Urgent Motion to Suspend Implementation and Motion for must not have been the intention of Congress to expand the functions of the
Reconsideration filed by the Napocor Industrial Consumers Association, ERC, as the successor of the Energy Regulatory Board (ERB), and clip its powers
Inc. (NICAI) on December 12, 2003;
at the same time.15

(5)  Letter  requesting for reconsideration of the November 27,

2003  Order  of the ERC, sent by the National Consumer Affairs Council The ERC further asserts that it is authorized to issue provisional rate increases ex
on December 9, 2003;
parte, and that it may base its provisional order on the verified application and
(6) Letter objecting to the November 27, 2003 Order of the ERC, sent by supporting documents submitted by the application, and it is not required to wait
the Federation of Philippine Industries, Inc. on December 11, 2003; and
for the comments of consumers or local government units (LGUs) concerned
(7)  Motion for Production of Documents  and  Motion for Production of before issuing a provisional order.16

Documents  (Supplemental) filed by Atty. Ruperto J. Estrada on

December 15, 2003 and December 16, 2003, respectively.
The ERC likewise denies that the November 27, 2003  Order  was issued with
grave abuse of discretion. On the contrary, it claims that the Order is supported
On December 19, 2003, MERALCO filed its Comment.13 It refused to produce the by substantial evidence.17

documents requested by the oppositors on the ground that such documents are
immaterial and irrelevant to its application.
Finally, ERC asseverates that the filing of the instant  Petition  is premature
because it was denied the opportunity to have a full determination of
On December 22, 2003, the scheduled date of hearing, the ERC did not revoke the Application after trial on the merits, and is violative of the doctrine of primary
the provisional authority granted to MERALCO per its November 27, 2003 Order.
jurisdiction.18

FDC did not move for reconsideration of the Order but on December 23, 2003, it
filed the instant Petition.
For its part, MERALCO asserts that the November 27, 2003  Order  is valid,
because it was issued by the ERC pursuant to Section 44 of the EPIRA which
FDC argues that the November 27, 2003 Order of the ERC is void for having been allows the transfer of powers (not inconsistent with the EPIRA) of the old ERB to
issued without legal or statutory authority. It also contends that Rule 3, Section the ERC.19  It also denies that the assailed  Order  was issued by the ERC with
4(e) of the Implementing Rules of the EPIRA is unconstitutional for being an grave abuse of discretion, asserting that on the contrary, the issuance thereof
undue delegation of legislative power. FDC further asserts that the November 27, was based on the Application, affidavits and other supporting documents which
2003  Order  is void for having been issued by the ERC with grave abuse of it submitted earlier.20

discretion and manifest bias. In support of its prayer for the issuance of injunctive
relief, FDC claims that the implementation by MERALCO of the provisional rate Bayan Muna, Bayan, KMU, Gabriela, Kadamay, Agham, Gabriela Women’s
increase will result in irreparable prejudice to FDC and others similarly situated Party  and the  Anak Pawis  (petitioners-in-intervention) filed their  Motion to
unless the Court restrains such implementation.14
Intervene, and attached thereto their  Petition-in-Intervention. The Court granted
the  Motion  and admitted the  Petition-in- Intervention  in its  R E S O L U T I O
On December 29, 2003, FDC filed with the Court an  Urgent Motion to Grant N dated January 27, 2004.21

Restraining or Status Quo Order.

In their  Petition-in-Intervention,  petitioners-in-intervention argue that the

November 27, 2003  Order  is void for having been issued by ERC with manifest
bias in favor of MERALCO and without due regard for the rights of consumers.
They assert further that the ERC committed grave abuse of discretion in In tandem with the restructuring of the industry is the establishment of "a strong
considering the appraisal of MERALCO’s assets as of the year 2002, in violation and purely independent regulatory body."30  Thus, the law created the ERC in
of Section 43(f)(i) of the EPIRA. Lastly, they claim that the assailed Order is void place of the Energy Regulatory Board (ERB).31

for unjustifiably imposing upon the consumers increased rates to fund the 42
major capital projects of MERALCO for the year 2004.22
To achieve its aforestated goal, the law has reconfigured the organization of the
regulatory body. It requires the Chairman and four (4) members of the ERC to be
During the oral arguments, the Court defined the issues as follows:
equipped with "at least three (3) years of active and distinguished experience" in
(1) Whether the ERC has legal authority to grant provisional rate the fields of energy, law, economics, finance, commerce or engineering, and at
adjustments under Republic Act (R.A.) No. 9136, otherwise known as least one of them with ten (10) years or more of experience in the active practice
the "Electric Power Industry Reform Act of 2001" (EPIRA); and
of law and another one with similar experience as a certified public accountant.
(2) Assuming that the ERC has the authority to grant provisional orders, 32  Their terms of office were increased to seven (7) years from the four (4)

whether the grant by the ERC of the provisional rate adjustment in provided in Executive Order No. 172 (E.O. No. 172) and their security of tenure
question was committed with grave abuse of discretion amounting to assured.33  The Chairman and members were given the same salaries,
lack or excess of jurisdiction.23
allowances, benefits and retirement pay as the Chief Justice and Associate
Justices of the Supreme Court,34  a lot higher than the salary and benefits
The Court thereafter required the parties to submit their accorded the Chairman and members of the ERB which were equivalent only to
respective  Memoranda  within a non-extendible period of twenty days from those of a Department Undersecretary and the official next in rank, and those of
January 27, 2004. The ERC was likewise ordered to produce certain documents the Chairman and members of the Commission on Elections, respectively.35

pertinent to the resolution of the case.24

Statutory Authority To

We rule in the affirmative on both issues.

Grant Provisional Increase

Overview of the EPIRA

FDC posits that the ERC has no power to issue provisional orders because the
EPIRA repealed Commonwealth Act No. 146 (The Public Service Act) and E.O.
One of the landmark pieces of legislation enacted by Congress in recent years is No. 172 (creating the ERB), which laws expressly conferred upon the precursors
the EPIRA.25 It established a new policy, legal structure and regulatory framework of ERC the power to grant provisional orders. It argues further that while Section
for the electric power industry.
44 of the EPIRA provides for the transfer of the powers and functions of the ERB
to the ERC, such transfer cannot be deemed to include the power to issue
The new thrust is to tap private capital for the expansion and improvement of the provisional orders because such power is inconsistent with the policies ordained
industry as the large government debt and the highly capital-intensive character in Section 2 of the EPIRA to protect the public interest insofar as it is affected by
of the industry itself have long been acknowledged as the critical constraints to the rates and services of electric utilities and other providers of electric power
the program. To attract private investment, largely foreign, the jaded structure of and to ensure transparency and full accountability in rate-fixing.36Considering
the industry had to be addressed. While the generation and transmission sectors that the EPIRA itself does not confer upon the ERC the power to issue provisional
were centralized and monopolistic, the distribution side was fragmented with orders, Section 4(e), Rule 3 of the law’s Implementing Rules, which refers to the
over 130 utilities, mostly small and uneconomic. The pervasive flaws have grant of provisional authority by the ERC, constitutes an undue delegation of
caused a low utilization of existing generation capacity; extremely high and legislative power.37

uncompetitive power rates; poor quality of service to consumers; dismal to

forgettable performance of the government power sector; high system losses; The petitioners-in-intervention agree with and adopt the aforementioned
and an inability to develop a clear strategy for overcoming these shortcomings.
arguments of FDC.

Thus, the EPIRA provides a framework for the restructuring of the industry,
including the privatization of the assets of the National Power Corporation (NPC),
the transition to a competitive structure, and the delineation of the roles of
various government agencies and the private entities.26  The law ordains the
division of the industry into four (4) distinct sectors, namely: generation,
transmission, distribution and supply.27  Corollarily, the NPC generating plants
have to privatized28  and its transmission business spun off and privatized
thereafter.29
meantime the insufficiency of the applicant’s rates would result in its inability to
MERALCO, on the other hand, claims that the power of the ERB to issue
provisional orders under Section 16(c) of the Public Service Act and Section 8 of
E.O. No. 172 was not repealed by the EPIRA. On the contrary, Section 80 of the
EPIRA expressly mentions that the applicable provisions of the Public Service Act
and E.O. No. 172 that are not inconsistent therewith shall continue to have full
force and effect.39 It adds that the power of the ERC to approve reasonable rates
would be rendered meaningless if it can only do so after a full hearing, and in the
supply quality, reliable and secure electric power.40

 Presidential Decree No. 40 and all laws, decrees, rules and regulations,
The OSG contends that ERC has statutory authority to issue provisional orders, or portions thereof, inconsistent with this Act are hereby repealed or
including provisional rate increases. It points out that the EPIRA expressly states modified accordingly.

that the powers of the Energy Regulatory Board (ERB) under E.O. No. 172 shall
be exercised by the ERC.41
The principal powers of the ERB relative to electric public utilities transferred to
the ERC are the following:

For its part, the ERC maintains that it possesses the authority to grant provisional 1. To regulate and fix the power rates to be charged by elective
orders under Section 16 (c) of the Public Service Act and Section 8 of E.O. No. companies;44

172 in relation to Sections 44 and 80 of the EPIRA.42 Thus, it claims that Section 2. To issue certificates of public convenience for the operation of electric
4(e), Rule 3 of the  Rules and Regulations To Implement  Republic Act No. 9031, power utilities;45

Entitled "Electric Power Industry Reform Act of 2001"  (IRR) is valid. It further 3. To grant or approve provisional electric rates.46

argues that its duty to protect the public interest necessarily requires it to balance
the interests of the consumers and the utilities — that is, to maintain reasonable It bears stressing that the conferment upon the ERC of the power to grant
rates while ensuring that the utilities will be able to remain financially sound and provisional rate adjustments is not inconsistent with any provision of the EPIRA.
operationally viable.43
The powers of the ERB transferred to the ERC under Section 44 are in addition to
the new powers conferred upon the ERC under Section 43.

The Court agrees with the respondents and the OSG.

Section 80 of the EPIRA complements Section 44, as it mandates the continued

ERC authority is found in
efficacy of the applicable provisions of the laws referred to therein. The material
Secs. 44 and 80 of the EPIRA
provisions of the Public Service Act which continue to be in full force and effect
are contained in Section 16(c), which states thus:

The ERC is endowed with the statutory authority to approve provisional rate
adjustments under the aegis of Sections 44 and 80 of the EPIRA. The sections Section 16.  Proceedings of the Commission, upon notice and hearing.
read, thus:
— The Commission shall have power, upon proper notice and hearing in
accordance with the rules and provisions of this Act, subject to the
SEC. 44.  Transfer of Powers and Functions. — The  powers and limitations and exceptions mentioned and saving provisions to the
functions of the Energy Regulatory Board not inconsistent with the contrary:

provisions of this Act are hereby transferred to the ERC. The …

foregoing transfer of powers and functions shall include all applicable
funds and appropriations, records, equipment, property and personnel
as may be necessary.
mileage, kilometrage, and other special rates which shall be
S e c . 8 0 .  A p p l i c a b i l i t y a n d R e p e a l i n g C l a u s e . — T h e
applicability provisions of Commonwealth Act No. 146, as amended,
otherwise known as the "Public Services Act;" Republic Act 6395, as
amended, revising the charter of NPC; Presidential Decree 269, as
amended, referred to as the National Electrification Decree; Republic Act
7638, otherwise known as the "Department of Energy Act of
1992;" Executive Order 172, as amended, creating the ERB; Republic
7832 otherwise known as the "Anti-Electricity and Electric Transmission
Lines/Materials Pilferage Act of 1994;" shall continue to have full force
and effect except insofar as they are inconsistent with this Act.
service of such operator for the purposes of fixing the rates.
(c) To fix and determine individual or joint rates, toll, charges,
classifications, or schedules thereof, as well as commutation,
imposed, observed, and followed thereafter by any public
service:  Provided,  That the Commission may, in its discretion,
approve rates proposed by public services provisionally and
without necessity of any hearing; but it shall call a hearing
thereon within thirty days thereafter, upon publication and
notice to the concerned parties operating in the territory
affected:  Provided, further,  That in case the public service
equipment of an operator is used principally or secondarily for
the promotion of a private business, the net profits of said
private business shall be considered in relation with the public

The provisions with respect to electric power of Section 11(c) of Similarly, Sections 8 and 14 of E.O. No. 172 or the ERB Charter continue to be in
Republic Act 7916, as amended, and Section5(f) of Republic Act 7227 full force by virtue of Sections 44 and 80 of the EPIRA. Said provisions of the
are hereby repealed or modified accordingly.
ERB charter read:

SEC. 8. Authority to Grant Provisional Relief. -- The Board may, upon the
filing of an application, petition or complaint or at any stage thereafter
 and without prior hearing, on the basis of the supporting papers duly
verified or authenticated, grant provisional relief on motion of a party in
the case or on its own initiative, without prejudice to a final decision
after hearing, should the Board find that the pleadings, together with
such affidavits, documents and other evidence which may be submitted
in support of the motion, substantially support of the provisional
order; Provided, That the Board shall immediately schedule and conduct
a hearing thereon within thirty (30) days thereafter, upon publication and
notice to all affected parties.
the widest participation of the people.
SEC. 14. Applicability Clause.— The applicability (applicable) provisions
of Commonwealth Act No. 146, as amended, otherwise known as the
"Public Service Act;" Republic Act No. 6173, as amended, otherwise
known as the "Oil Industry Commission Act;" Republic Act No. 6395, as
amended, revising the charter of the National Power Corporation under
C.A. 120; Presidential Decree No. 269, as amended, also referred to as
the "National Electrification Administration Decree;" and Presidential
Decree No. 1206, as amended, creating the Department of Energy, shall
continue to have full force and effect, except insofar as inconsistent with
this Order. (Word in parenthesis supplied)
ERC of the authority to approve provisional rate adjustments. Again for one, even
The above-quoted applicability clause is quite clear. It cannot be argued that the
clause could not have referred to the provisions of the prior laws empowering the
Public Service Commission (PSC) and the ERB to grant provisional rate
adjustments on the premise that the lawmakers deliberately deleted the
provisions in the crafting of the EPIRA. Such an argument begs the question.
What is clear from Sections 80 and 44 is that the legislators saw the superfluity or
needlessness of carrying over in the EPIRA the same provision found in the
previous laws. The power to approve provisional rate increases is included
among the powers transferred to the ERC by virtue of Section 44 since the grant
of that authority is not inconsistent with the EPIRA; rather, it is in full harmony
with the thrust of the law which is to strengthen the ERC as the new regulatory
body.
Sec. 44
Furthermore, under Section 80, only three (3) specific laws were expressly
repealed or modified. These are Section 11(c) of Republic Act No. 7916,47  as
amended, Section 5(f) of Republic Act No. 722748  and Presidential Decree No.
40.49  Section 8 of E.O. No. 172 and Section 16(c) of C.A. No. 146 which both
grant the regulatory body concerned the authority to approve provisional rate
increases are not among the provisions expressly repealed or modified. This
clearly indicates the law’s intent to transfer the power to the ERC.
ensure customer choice and penalize abuse of market power in the
Indeed, nary a hint in the EPIRA intimates that the powers of ERC’s predecessors
not mentioned therein are revoked or repealed. Be it noted that implied repeals
are not favored in our jurisdiction.50  The legislature is presumed to know the
existing laws; if it intended a repeal of the earlier law, it should have so expressed
that intention in the subsequent statute.51
….
Thus, a statute will not be deemed to have been impliedly repealed by another
enacted subsequent thereto unless there is a showing that a plain, unavoidable
and irreconcilable repugnancy exists between the two.52
Likewise, it may not be asserted with success that the power to grant provisional
rate adjustments runs counter to the statutory construction guide provided in
Section 7553 of the law. The section ordains that the EPIRA shall be construed in
favor of market competition and people power empowerment, thereby ensuring
To the Court, the goals of market competition and people empowerment are not
negated by the ERC’s exercise of the authority to approve provisional rate
adjustments. The concerns are taken care of by Section 43 of the EPIRA and its
IRR. While Section 43 lays down the publication requirement as regards the rate
application, Section 4(e), Rule 3 of the IRR fleshes out the requirement.54
Neither is the notion of provisional rate adjustment incompatible with the policy to
protect public interest, as enunciated in Section 2(f)55  of the law. The common
weal is not relegated to the back-burner simply by upholding the grant to the
if there is a ground to grant the provisional rate increase, the ERC may do so only
after the publication requirement is met and the consumers affected are given the
opportunity to present their side. For another, the rate increase is provisional in
character and therefore may be modified or even recalled anytime. Still for
another, the ERC is mandated to prescribe a rate-setting methodology "in the
public interest"56 and "to promote efficiency."57
For that matter, there is a plethora of provisions in Section 43 and related
sections which seek to promote public interest, market competition and
consumer protection.58
Sec. 43 of the EPIRA, being a list of ERC’s new powers, is not inconsistent with
Although the power to grant provisional rate adjustments is not one of the
powers mentioned in Section 43, this provision itself characterizes the listed
powers as the "key functions in the restructured industry." They are not the
typical or traditional prerogatives or functions of regulatory bodies. Reproducing
the initial paragraph of the section is illuminating, viz:
The ERC shall promote competition, encourage market development,
restructured electricity industry. In appropriate cases, the ERC is
authorized to issue cease and desist order after due notice and hearing.
Towards this end, it shall be responsible for the following key functions
in the restructured industry: (Emphasis supplied).
Significantly, the fundamental power to fix rates is also not one of the functions
enumerated under Section 43. Thus, to deny the power to grant provisional rate
increase to ERC simply because it is not mentioned in Section 43 is also to deny
the power to fix rates to the Commission by the same token. Clearly, the 10. Section 43(k) on the power to penalize abuse of market power,
proposition is absurd.
cartelization and anti-competitive or discriminatory behavior, also
Moreover, as the OSG correctly pointed out, to interpret the EPIRA as not provided in Section 45.

retaining the ERC’s power to issue provisional orders will wreak havoc on the 11. Section 43(l) on the power to impose fines and penalties, also
regulatory environment, which has been painstakingly built and enhanced since provided in Section 46.

the enactment of the EPIRA.59

12. Section 43(o) on the power to monitor activities in the generation
and supply of the electric power industry, also provided in Sections 6
To repeat, the EPIRA grants unto the ERC both old and new powers. The old and 29;

powers are referred to in Section 44 while the new ones are listed in Section 43 of 13. Section 43(p) on the power to act on application for/or modifications
the law.
of certificates of public convenience and/or necessity, etc., also
provided in Sections 22 and 23;

The powers enumerated in Section 43 have a common thread. Characterized as 14. Section 43(r) on the power to act against any participant or player in
the "key functions," they are thenew powers granted to the ERC in relation to the the energy sector for violations of law, rule or regulation, also provided in
reform and modernization of the electric power industry sought to be achieved by Sections 46 and 74.

the law. They 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 Notably, under Section 43(u) the ERC is granted "original and exclusive
sections. It is a compendium of powers provided in other provisions of the same jurisdiction over all cases contesting rates, fees, fines and penalties" imposed
law but were not enjoyed by the previous regulatory bodies. It is a statutory tool thereby in the exercise of its functions and responsibilities in Section 43.

to achieve clarity and convenience, at least with respect to the new powers.

In determining the extent of powers possessed by the ERC, the provisions of the
The powers provided in Section 43 and the corresponding related provisions in EPIRA must not be read in separate parts. Rather, the law must be read in its
the EPIRA are:
entirety, because a statute is passed as a whole, and is animated by one general
purpose and intent. Its meaning cannot to be extracted from any single part
1. Section 43(a) on the power to implement the rules and regulations of thereof but from a general consideration of the statute as a whole.60

the Act, also provided in Section 177;

2. Section 43(b) on the power to promulgate and enforce the National Considering the intent of Congress in enacting the EPIRA and reading the statute
Grid Code and Distribution Code, also provided in Sections 9, 11, 19, in its entirety, it is plain to see that the law has expanded the jurisdiction of the
20, 21, 22, 23 and 24.
regulatory body, the ERC in this case, to enable the latter to implement the
3. Section 43(c) on the power to enforce the rules and regulations on the reforms sought to be accomplished by the EPIRA. When the legislators decided
operation of the electricity spot market and on the participants in the to broaden the jurisdiction of the ERC, they did not intend to abolish or reduce
spot market, also provided in Sections 30 and 31.
the powers already conferred upon ERC’s predecessors. To sustain the view that
4. Section 43(d) on the power to determine the level of cross-subsidies the ERC possesses only the powers and functions listed under Section 43 of the
in the retail rate until its removal, also provided in Section 74;
EPIRA is to frustrate the objectives of the law.

5. Section 43(e) on the power to amend or revoke the authority to

operate of any person or entity for failure to comply with the IRR or an All the foregoing undeniably lead to the conclusion that the ERC, under Sections
order or resolution of the ERC, also provided in Sections 6, 7, 20, 22, 26, 43(u), 44 and 80 of the EPIRA, in relation to Section 16 (c) of the Public Service
28, 29 and 30;
Act and Section 8 of E.O. No. 172, possesses the power to grant provisional rate
6. Section 43(g) on the power to ensure that the charges of the adjustments subject to the procedure laid down in these laws as well as in the
TRANSCO and distribution utilities do not bear cross-subsidies, also IRR.

provided in Section 74;

7. Section 43(l) on the power to review and approve changes on the Legislative history supports ERC’s power to grant provisional rate adjustments

terms and conditions of service of the TRANSCO and any distribution A brief review of the legislative history of the regulatory bodies which preceded
utility, also provided in Sections 9, 22 and 23;
the ERC is instructive.

8. Section 43(h) on the power to allow the TRANSCO to charge user

fees, also provided in Section 9 (b);
The first regulatory body was the Board of Rate Regulation (BRR) which came
9. Section 43(j) on the power to set a lifeline rate for marginalized end- into existence in 1907.61  It had the power,  after a full hearing,  to fix, revise,
users, also provided in Section 73;
regulate, reduce or increase the rates charged by public service corporations
from time to time.62  In 1913, the Board of Public Utility Commissioners (BPUC)
was created to take over the functions of the BRR.63  The BPUC was
empowered,  after conducting a hearing, to fix rates imposed by any public contained in Sections 11 and 21 of P.D. No. 1206 and Section 14 of E.O. No. 172;
utility.64  In addition, it had the power to hear and determine, upon a written and, (4) The applicability clause or transfer of power provision is sufficient to
complaint or  motu proprio,whether any increase or changes in classification of effect the transfer of powers from a regulatory agency to its successor.

rates proposed by a public utility is just and reasonable.Pending such hearing

and determination, the BPUC had the power to order the suspension of the All told, the provisions of the Public Service Act74 and E.O. No. 17275 which relate
increase or change in classification for a period not exceeding three (3) to the power of the regulatory body to approve provisional rates continue to have
months.65
full force and effect, and the power was transferred to the ERC by virtue of
Section 80 in relation to Section 44 of the EPIRA. Said provisions are not
The BPUC was shortly replaced by the PSC. Under its Charter,66  the PSC was inconsistent with the EPIRA except the directives therein dispensing with the
authorized to fix rates and approve provisional rate adjustments.67
need for prior hearing. They are deemed modified to the extent that the EPIRA
imposes a publication requirement76 and, through the IRR, assures the customers
With the advent of Martial Law, on September 24, 1972, then President Marcos affected the opportunity to oppose or comment on the application for provisional
through Presidential Decree No. 1 reorganized the executive branch of the rate adjustment before it is acted upon by the ERC.77

National Government and implemented the Integrated Reorganization Plan.

Under the Plan, the Board of Power and Waterworks (BOPW) was created in Indeed, both the letter and spirit of the law require that the authority of the ERC
place of the PSC, taking over the "pertinent regulatory and adjudicatory to grant provisional power rate adjustments should be upheld. The law is so clear
functions" of the latter.68
that it cannot be misread.

Later, President Marcos created the Board of Energy (BOE) through Presidential
Decree No. 1206, transferring to it the powers and functions of the BOPW relative Grave Abuse of Discretion

to power utilities.69

The FDC contends that the issuance of the November 27,

The Board of Energy had the authority to grant provisional rate adjustments on 2003  Order  provisionally approving MERALCO’s application for rate increase is
the basis of the last paragraph of Section 11 of P.D. No. 1206, which reads:
void because, among others, the affected sectors were not afforded the
….
opportunity to be heard. Since the issuance of provisional orders is quasi-judicial
Likewise, the foregoing transfers of powers and functions of the in character, the ERC cannot dispense with the requirements of notice and
abolished agencies shall be to the extent that they are not modified by hearing.78 It likewise claims that the ERC based the provisional increase only on
any specific provision of this Decree.
MERALCO’s bare allegation that it was in dire financial straits, as there was no
proof of MERALCO’s actual financial condition.79

This Court, in Bautista v. Board of Energy,70 held that the Board of Energy derived
its prerogative to grant provisional relief not only from Section 11 of P.D. No. Petitioners-in-intervention, for their part, argue that the ERC issued the
1128, amending Section 12 of R.A. No. 6173, but also from Section 16(c) of the assailed Order in haste, thereby virtually ignoring the opposition expressed by the
Public Service Act.71
oppositors in their pleadings submitted to the Commission. They point out that
the issuance by the ERC of the Order notwithstanding the failure of MERALCO to
The BOE in turn was replaced by the ERB pursuant to E.O. No. 172. Sections comply with the publication requirement under Section 4(e), Rule 3 of the IRR
872  and 1473  of the E.O. empowered the ERB to grant provisional rate manifests the Commission’s partiality for MERALCO.80

adjustments.

Significantly, the OSG is also of the view that the proceedings before the ERC
Historically, therefore, in this jurisdiction, at least beginning with the Public relative to MERALCO’s Application is defective. Among the defects, according to
Service Act in 1936, the regulatory bodies concerned have exercised the power the OSG, are MERALCO’s failure to publish its Application or at least a summary
to grant provisional rate adjustments only because there was a statutory grant of of the reasons for its application, as required by Section 4(e), Rule 3 of the IRR;
such power.
the ERC’s failure to consider the serious objections raised by the oppositors to
the application and the ERC’s failure to resolve the motions for production of
The foregoing recital establishes the following salient points: (1) Section 16(c) of documents filed by several oppositors.81

the Public Service Act authorizing the approval of provisional rate increases has
never been repealed and as such continues to be in full force and effect up to the
present; (2) The BOPW had the power to grant provisional rate increases on the
basis of the 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 the same as or similar to the applicability clauses
Maintaining that FDC and the petitioners-in-intervention have failed to show any
grave abuse of discretion on its part, the ERC stresses that it is authorized under
the law to issue provisional rate adjustments without conducting a prior hearing
and that such issuance may be made permanent, modified or denied in the
course of the main proceeding.82

 Thereafter, the ERC shall conduct a formal hearing on the application or

The ERC also argues that Section 4(e) of the IRR does not require the publication petition, giving proper notices to all parties concerned, with at least one
of the Application itself, citing in support of its contention the ruling of the Court public hearing in the affected locality, and shall decide the matter on the
in  Beautifont, Inc. v. Court of Appeals83  that Section 7 of the Permissible merits not later than twelve (12) months from the issuance of the
Investments Law requires the publication of the summary or abstract of the aforementioned provisional order.

application, not the application itself.84  The ERC further asserts that it is 

premature for the Court to rule on the issue of whether it acted with grave abuse Two postulates evidently flow from a reading of Section 4(e), Rule 3. First, the
of discretion in issuing the November 27, 2003  Order  considering that publication of the application itself is required, not merely the notice of hearing
MERALCO’s main petition is pending hearing before it.85
issued by the ERC. Second, in granting a provisional authority, the ERC must
consider not only the evidence submitted by the applicant in support thereof, but
In its  Memorandum,  MERALCO maintains that the ERC acted not with grave also the comments of the consumers and the Local Government Units (LGUs)
abuse of discretion but rather in accordance with its duty under Section 43(f) of concerned.

the EPIRA to fix rates that will allow the recovery of just and reasonable costs and
a reasonable return on rate base (RORB) to operate viably. MERALCO insists that It is suggested that the IRR provision in point should be construed as granting
the ERC had substantial basis for issuing the assailed Order.86
the ERC the power to issue provisional rate adjustments ex parte.88 Such power,
partaking as it does the nature of the police power of the State, is conferred on
The Court is convinced of the meritoriousness of FDC’s position which is the administrative agencies like the ERC to enable them to pursue temporary
same stance taken by the petitioners-in-intervention and the OSG.
measures to address problems that cannot wait until the completion of formal
proceedings. Thus, the ERC may grant provisional rate adjustments on the basis
Under Section 16(c), C.A. No. 146 and Section 8, E.O. No. 172 in relation to of the public utility’s application and supporting documents, and the pleadings
Sections 43 and 80 of the EPIRA, the ERC may grant provisional rate submitted by other parties may have filed at that time. Thereafter, it is
adjustments without first conducting a hearing prior to such grant. However, it is mandated to hold a full-blown hearing to resolve the case on the merits.89

required to conduct a hearing on the propriety of the grant of provisional rate

adjustments within 30 days from the issuance of the provisional order.87
Concededly, like Section 16(c), C.A. No. 146 and Section 8, E.O. No. 172, Section
4(e), Rule 3 of the IRR does not require the conduct of a hearing prior to the
Section 4(e), Rule 3 of the IRR requires the ERC to resolve the motion for issuance of a provisional order. However, reading the aforementioned provisions
issuance of a provisional order within seventy five (75) calendar days from the of the Public Service Act, the ERB Charter and the IRR in relation to one another,
filing of the application or petition. If, within 30 days from the publication of the as they should be read, the inexorable conclusion is that the provisional order
application or receipt of a copy thereof, an affected consumer or the Local cannot be issued under the circumstances  based exclusively on the
Government Unit (LGU) concerned files with the ERC a comment on the prayed application and supporting documents thereof. The IRR explicitly requires, as
for provisional rate adjustment and/or the application itself, the ERC is mandated a prerequisite to such issuance, that the ERC consider also the comments of the
to consider such comment in its action on the prayer for provisional rate consumers and the LGUs concerned on the application which were filed within
adjustment. Section 4(e), Rule 3 reads in full:
thirty (30) days from their receipt of a copy of the application or the publication
thereof.

Any application or petition for rate adjustment or for any relief affecting
the consumers must be verified and accompanied with an
acknowledgement of receipt of a copy thereof by the LGU Legislative
body of the locality where the applicant or petitioner principally operates
together with the certification of the notice of publication thereof in a
newspaper of general circulation in the same locality.
the application and its supporting documents.
In other words, the ERC must wait for thirty (30) days from service of copies of
the application for rate adjustments on interested parties or from the publication
of such application before it can issue a provisional order. If after the 30th day, no
comments are filed by concerned parties, then and only then may the ERC, if it
deems proper under the circumstances, issue a provisional order on the basis of

The ERC may  grant provisionally  or deny  the relief prayed  for not To synthesize, the new order on rate adjustments is as follows:

later than seventy five (75) calendar days from the filing of the
application or petition, based  on the same or supporting documents (1) The applicant must file with the ERC a verified application/petition for
attached thereto and such comments or pleadings the customers or rate adjustment. It must indicate that a copy thereof was received by the
the LGU concerned may have filed within thirty (30) calendar days legislative body of the LGU concerned. It must also include a
from receipt of a copy of the application or petition or from the certification of the notice of publication thereof in a newspaper of
publication thereof as the case may be.
general circulation in the same locality.

 (2) Within 30 days from receipt of the application/petition or the When an administrative agency promulgates rules and regulations, it
publication thereof, any consumer affected by the proposed rate "makes" a new law with the force and effect of a valid law, …Rules and
adjustment or the LGU concerned may file its comment on the regulations when promulgated in pursuance of the procedure or
application/petition, as well as on the motion for provisional rate authority conferred upon the administrative agency by law, partake of
adjustment.
the nature of a statute …This is so because statutes are usually couched
(3) If such comment is filed, the ERC must consider it in its action on the in general terms, after expressing the policy, purposes, objectives,
motion for provisional rate adjustment, together with the documents remedies and sanctions intended by the legislature. The details and the
submitted by the applicant in support of its application/petition. If no manner of carrying out the law are often times (sic) left to the
such comment is filed within the 30-day period, then and only then may administrative agency entrusted with its enforcement. In this sense, it
the ERC resolve the motion for provisional rate adjustment on the basis has been said that rules and regulations are the product of a delegated
of the documents submitted by the applicant.
power to create new or additional legal provisions that have the effect of
(4) However, the ERC need not conduct a hearing on the motion for law….96

provisional rate adjustment. It is sufficient that it consider the written

comment, if there is any.
The challenged provisional rate increase transgresses Section 4(e), Rule 3 of the
(5) The ERC must resolve the motion for provisional rate adjustment IRR in two major respects. The violations involve a couple of new requirements
within 75 days from the filing of the application/petition.
prescribed by the IRR. These are, first, the need to publish the application in a
(6) Thereafter, the ERC must conduct a full-blown hearing on the newspaper of general circulation in the locality where the applicant operates; and
application/petition not later than 30 days from the date of issuance of second, the need for ERC to consider the comments or pleadings of the
the provisional order and must resolve the application/petition not later customers and LGU concerned in its action on the application or motion for
than 12 months from the issuance of the provisional order.90 Effectively, provisional rate adjustment.

this provision limits the lifetime of the provisional order to only 12

months.
Obviously, the new requirements are aimed at protecting the consumers and
diminishing the disparity or imbalance between the utility and the consumers. The
Section 4(e), Rule 3 of the IRR, outlining as it does the approval process for an publication requirement gives them enhanced opportunity to consciously weigh
application or petition for provisional rate adjustment, enforces not only Section the application in terms of the additional financial burden which the proposed
43(u) thereof but also Sections 44 and 80 which, as earlier stated, refer to the rate increase entails and the basis for the application. With the publication of the
powers of the ERB passed on to the ERC and found in other prevailing laws, application itself, the consumers would right from the start be equipped with the
such as Section 16(c) of the Public Service Act.
needed information to determine for themselves whether to contest the
The validity of the IRR, including Section 4(e) under Rule 3 thereof, is not in application or not and if they so decide, to take the needed further steps to
dispute.
repulse the application. On the other hand, the imposition on the ERC to consider
the comments of the customers and the LGUs concerned extends the comforting
The IRR was crafted by the Department of Energy (DOE) in consultation with assurance that their interest will be taken into account. Indeed, the requirements
relevant government agencies in accordance with its mandate under the EPIRA. address the right of the consuming public to due process and at the same
91  It was promulgated on the same day that it was approved by the Joint advance the cause of people empowerment which is also a policy goal of the
Congressional Power Commission on February 27, 2002.92  This Commission is EPIRA along with consumer protection.

composed of fourteen (14) members of the Senate and the House.93

It is settled that an administrative agency possesses the power to issue rules and
regulations to implement the statute which it is tasked to enforce, unless another
agency is the one so authorized by the law as in the case of the EPIRA. This is so
because it is impracticable, if not impossible, for the legislature to anticipate and
provide for the multifarious and complex situations that may be encountered in
enforcing the law. So long as the rules and regulations are germane to the objects
and purposes of the law and conforms to the standards prescribed thereby, they
are deemed to have the force and effect of law.94
the LGUs in its resolution of the application for provisional rate adjustment.
In Victoria’s Milling Co., Inc. v. Social Security Commission,95 the Court explained:
the new requirements, it should mention in the provisional order the points and
Corollarily, the requirements seek to temper the lack of fairness implicit in the
kind of  ex parte  modality theretofore followed in regard to applications for
provisional rate increases. Before the adoption of the IRR provision, to secure a
provisional rate adjustment all that a public utility needed to do was to file the
corresponding application with the supporting documents. Without the burden of
a hearing and in total disregard of the opposition, the applicant could press the
regulatory body to grant the application. With the new protocol under the IRR, the
ERC is tasked to pass upon the comments or opposition of the consumers and
Consequently, for the ERC to be true to its mission and to prevent evisceration of
arguments of the oppositors which it adopts or give its reasons if it does not
uphold them. In other words, the proof of its compliance with the requirements
should appear in the provisional order itself.
MANILA ELECTRIC COMPANY

While the system of interim rates cannot be dispensed with since it helps ensure
the 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 enough safeguards are put in place. It happened many
times before that after the provisional rate increase had been granted, no action
on the main petition was taken, or if one was taken it was made only after the
lapse of a considerable period of time. The ultimate effect of the inaction or delay
was virtually to make the provisional rate permanent. Thus, the consumers were
made to pay what effectively evolved to be the permanent rate without the
benefit of a hearing. In the meantime, the collections on the provisional rate were
spent by the utility.
before the Energy Regulatory Commission.
In a recent decision,97  this Court ordered MERALCO to make a refund which
remains uncomplied with up to the present, to the prejudice of the
consumers.  The consumers will similarly suffer if MERALCO, or any power
utility for that matter, is allowed to collect on a provisional rate increase, the
application for which they effectively have no knowledge of.
The new requirements address the dismal scenario by ensuring dissemination of
information on the application for rate increase and consideration by the ERC of
the written position taken by consumers in its action on the motion for provisional
rate increase.
however, is not apropos. For one thing, despite some imprecision in a segment of
The publication and comment requirements, like the 30-day period also imposed
in Section 4(e), Rule 3 of the IRR, are in keeping with some of the avowed
policies of the EPIRA. These are to protect the public interest vis-à-vis the rates
and services of electric utilities and other providers of electric power,98 to ensure
transparent and reasonable prices of electricity in a regime of free and fair
competition and full public accountability for greater operational and economic
efficiency, to enhance the competitiveness of Philippine products in the global
market,99  and to balance the interests of the consumers and the public utilities
providing electric power through the fair and non-discriminatory treatment of the
two sectors.100
For its part, MERALCO alleges that it relied on the ERC’s interpretation that what
Clearly, therefore, although the new requirements are procedural in character,
they represent significant reforms in public utility regulation as they engender
substantial benefits to the consumers. It is in this light that the new requirements
should be appreciated and their observance enforced.
The record shows that MERALCO failed to comply with the publication
requirement prescribed by the IRR. What the IRR requires to be published is the
application itself. In fact, it even requires the applicant to submit the "certification
of the notice of publication" of the "application or petition for rate
adjustment" 101  together with the application/petition to the ERC.
The Notice, quoted in full hereunder, which MERALCO caused to be published on
October 10, 2003 in the  Manila Times, does not comply with the requirement,
thus:
Pasig City
NOTICE OF APPLICATION
Pursuant to paragraph (e), Section 4, Rule 3 of the
Implementing Rules and Regulations of R.A. 9136,  notice is
hereby given that an Application  dated October 8, 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 Avenue, Pasig City,
Issued this 9th day of October 2003.
(Sgd). GIL S. SAN DIEGO

Vice President and Head

Legal Services102 (Emphasis supplied)
ERC invokes the case of  Beautifont, Inc. v. Court of Appeals,103  involving the
deciphering of the publication requirement in the Permissible Investments Law,
R.A. No. 5455, where this Court held that the law did not require the publication
of the subject application itself with the Board of Investments.104  The case,
the provision involved, other parts thereof clearly signify that only the notice of
the application is meant to be published. Here, the IRR provision clearly refers to
the application itself which is required to be published. For another,
in  Beautifont  the Court was quite explicit that under the provision involved not
just the notice of application "but an abstract or summary thereof,
comprehending the items mentioned"105 had to be published and it intimated that
the item actually published complied with the law. Here, what was actually
published is a mere  notice of the intent to file an application. Nothing more,
nothing less.
had to be published "is simply a notice of the intent to file an application"106 So, it
"caused the publication of such notice before it filed the application."107 As it is
feeble and self-defeating, the claim is also incongruent with the position actually
presented by the ERC in this case.108
In this regard, the stance taken by the OSG as the People’s Tribune deserves to
be quoted, thus:
The first paragraph of Section 4(e) of Rule 3 of the EPIRA IRR provides
that a "petition for rate adjustment x x x must be x x x accompanied
with x x x the certification of the notice of  publication thereof in a
newspaper of general circulation  in the x x x locality." It is very clear
from the above-cited rule that the application for rate adjustment must
be published in a newspaper of general circulation.


In the case of MERALCO in ERC Case No. 2003-480, it appears that
only a notice of hearing has been published. The notice that was
published did not cite the essential allegations or contain a summary of
the reasons in support of the application for rate increase.
Rule 4(e), Rule 3 of the IRR publication and comment requirements of Rule 4(e),
The purpose of the publication of the application or the essential
allegations or summary of the reasons given for the relief sought in the
application for rate adjustment contained in the notice of hearing in a
newspaper of general circulation is to inform and enable the consumers
in the applicant’s franchise area to understand as much as possible the
application as well as the reasons therefore. This is more so because the
relief sought will have an immediate and great impact on the consumers.
109
gross as to amount to an evasion of positive duty or to a virtual refusal
The November 27, 2003  Order  reveals that the ERC did not consider the
opposition to MERALCO’s  Application  and other pleadings filed by several
concerned parties in determining whether the rate increase applied for by
MERALCO should be approved provisionally.
the Constitution, the law or jurisprudence,116  or when executed whimsically,
The ERC’s provisional approval of MERALCO’s application for rate increase was
based on MERALCO’s say-so alone, including the purported value of its assets
as of the year 2002 and its claimed financial difficulties, resulting according to it
in its deferral of forty-two (42) major capital projects and failure to meet its
maturing debt obligations. In the assailed  Order,  the Commission held that
MERALCO’s inability to construct its capital projects to meet the growing
demand of its customers and to ensure the reliability and efficiency of its existing
system would ultimately be to the prejudice of the consumers.110
has the force and effect of law118 and thus should have been complied with.
The provisional authority to impose increased rates was approved
notwithstanding the fact that soon after MERALCO filed its  Application  on
October 10, 2003, FDC and NASECORE expressed their intention to file their
respective oppositions to the Application,111 and later their respective Motions for
Production of Documents.112Neither did the ERC consider the  Letter  dated
October 24, 2003 of Lualhati (a consumer), seeking the dismissal of
the Application.
oppositors in their respective pleadings prior to the issuance of the
Although on November 13, 2003, the ERC issued an Order requiring MERALCO
to comment on NASECORE’sMotion for Production of Documents,113 it failed to
resolve the same, as well as FDC’s similar  Motion,  before issuing its November
27, 2003  Order.  The motions filed by NASECORE and FDC should have been
acted upon by the ERC prior to resolving MERALCO’s prayer for provisional rate
increase, because NASECORE and FDC would be able to express their
agreement or opposition to MERALCO’s  Application  only after perusing the
documents presented, if their Motions were granted; or in case the Motions were
denied, they could at least make known their respective positions on
the  Application  on the basis of the documents submitted by MERALCO.
Certainly, the spirit if not the language of the IRR provision should have led ERC
to treat the motions which are preludes to active opposition to the application in
a more favorable light and in a less cavalier fashion. Without even mentioning the
motions in itsOrder, ERC granted the motion for provisional rate increase.
The foregoing clearly establish that ERC failed to comply with the requirements of
Rule 3 of the IRR.
In Benito v. Commission on Elections,114 we held that:
Grave abuse of discretion means "such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, or, in other
words where the power is exercised in an arbitrary or despotic manner
by reason of passion or personal hostility, and it must be so patent and
to perform the duty enjoined or to act at all in contemplation of law." It is
not sufficient that a tribunal, in the exercise of its power, abused its
discretion; such abuse must be grave. (Citations omitted)115
It is settled that there is grave abuse of discretion when an act is done contrary to
capriciously or arbitrarily out of malice, ill will or personal bias.117
What makes the challenged  Order  particularly repugnant is that it involves a
blatant and inexcusable breach of the very rules which the ERC is mandated to
observe and implement. The violated provision which is Section 4(e), Rule 3 of
the IRR specifies how the ERC should exercise its power to issue provisional
orders pursuant to Section 44 in relation to Section 80 of the EPIRA. Since the
IRR was issued pursuant to the EPIRA, Section 4(e) of Rule 3 as part of the IRR
In view of the infirmities which attended the issuance of the November 27,
2003 Order, particularly: (1) the failure of MERALCO to publish its Application or
at least a summary thereof; (2) the failure of the ERC to resolve the Motions for
P r o d u c t i o n o f D o c u m e n t s  fi l e d b y t h e o p p o s i t o r s t o
MERALCO’s  Application  before acting on the motion for provisional rate
adjustment; and (3) the failure of the ERC to consider the arguments raised by the
assailed Order; the Court declares void the November 27, 2003 Order of the ERC
for having been issued with grave abuse of discretion.
One final word. The character of the infirmities which taint the challenged Order is
such that it precludes the remand of the case to the ERC without invalidating
the Order. The defect of the notice as published is deemed of so serious a nature
as to negate the notice altogether and forestall the ERC’s assumption of
jurisdiction over MERALCO’sApplication and its prayer
for provisional rate increase. Similarly, the ERC’s failure to consider the
oppositions and motions already on record in issuing the challenged Order and to
act upon other relevant motions has such grave due process implications that
render the Order void, independently of its breach of its own rules. Thus, should
the case be simply remanded to the ERC without further action by the Court, the
defects would not be cleansed and they would retain their potency and still serve
as solid basis to nullify the challenged Order and all other issuances of the ERC
which would be infected by the infirmities. Indeed, such a denouement would be
inescapable once the application is elevated again to this Court in connection
with the infirm issuances. Clearly then, a remand is not in the best interest of
MERALCO and the ERC. Rather, it is to their advantage, same as with the
consumers, that they begin again on a clean slate.
WHEREFORE, the  Petition  and the  Petition-in- Intervention  are GRANTED, and
the November 27, 2003 Order of the respondent Energy Regulatory Commission
in ERC Case No. 2003-480, granting provisional rate increases to the respondent
MERALCO, is DECLARED VOID and accordingly SET ASIDE.
141369, entitled Lawyers Against Monopoly and Poverty (LAMP) et al. vs. Manila
Respondent Commission is DIRECTED to comply with Section 4(e), Rule 3 of the
Implementing Rules and Regulations of Republic Act No. 9136, particularly the
publication and comment requirements therein, in conformity with this D E C I S I
O N, in acting upon and resolving respondent MERALCO’s prayer for provisional
rate increase in its Application dated October 8, 2003 in ERC Case No. 2003-480.
portion of the Supreme Court Decision in the MERALCO Refund cases reads:

SO ORDERED.
WHEREFORE, in view of the foregoing, the instant petitions are GRANTED and
[G.R. No. 171624, December 06 : 2010] 
 P0.017 kilowatthour, effective with respect to MERALCO's billing cycles


B F H O M E S , I N C . A N D T H E P H I L I P P I N E WAT E R W O R K S A N D
CONSTRUCTION CORP., PETITIONERS, VS. MANILA ELECTRIC COMPANY,
RESPONDENT.
 be refunded to MERALCO's customers or correspondingly credited in their favor


D E C I S I O N 
LEONARDO-DE CASTRO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails
the Decision[1] dated October 27, 2005 of the Court of Appeals in CA-G.R. SP No.
82826, nullifying and setting aside (1) the Order[2]  dated November 21, 2003 of
the Regional Trial Court (RTC), Branch 202 of Las Piñas City, in Civil Case No.
03-0151, thereby dissolving the writ of injunction against respondent Manila
Electric Company (MERALCO); and (2) the Resolution[3]  dated February 7, 2006
of the Court of Appeals denying the Motion for Reconsideration of petitioners BF
Homes, Inc. (BF Homes) and Philippine Waterworks and Construction
Corporation (PWCC).
 10. On May 20, 2003, without giving any notice whatsoever, MERALCO


MERALCO is a corporation duly organized and existing under Philippine laws
engaged in the distribution and sale of electric power in Metro Manila. On the
other hand, BF Homes and PWCC are owners and operators of waterworks
systems delivering water to over 12,000 households and commercial buildings in
BF Homes subdivisions in Parañaque City, Las Piñas City, Caloocan City, and
Quezon City.  The water distributed in the waterworks systems owned and
operated by BF Homes and PWCC is drawn from deep wells using pumps run by
electricity supplied by MERALCO.



On June 23, 2003, BF Homes and PWCC filed a Petition [With Prayer for the
Issuance of Writ of Preliminary Injunction and for the Immediate Issuance of
Restraining Order] against MERALCO before the RTC, docketed as Civil Case
No. 03-0151.

In their Petition before the RTC, BF Homes and PWCC invoked their right to
refund based on the ruling of this Court in Republic v. Manila Electric Company[4]:
7.    It is of judicial notice that on November 15, 2002, in G.R. No. 141314,
entitledRepublic of the Philippines vs. Manila Electric Company, and G.R. No.
Electric Compnay (MERALCO), (both cases shall hereafter be referred to as
"MERALCO Refund cases," for brevity), the Supreme Court ordered MERALCO
to refund its customers, which shall be credited against the customer's future
consumption, the excess average amount of P0.167 per kilowatt hour starting
with the customer's billing cycles beginning February 1998.  The dispositive
the decision of the Court of Appeals in C.A. G.R. SP No. 46888 is REVERSED. 
Respondent MERALCO is authorized to adopt a rate adjustment in the amount of
beginning February 1994.  Further, in accordance with the decision of the ERB
dated February 16, 1998, the excess average amount of P0.167 per kilowatt hour
starting with the applicant's billing cycles beginning February 1998 is ordered to
for future consumption.

x x x x.

8.   The Motion for Reconsideration filed by MERALCO in the MERALCO Refund
cases was DENIED WITH FINALITY (the uppercase letters were used by the
Supreme Court) in the Resolution of the Supreme Court dated April 9, 2003.



9.    The amount that MERALCO was mandated to refund to [BF Homes and
PWCC] pursuant to the MERALCO Refund cases is in the amount of
P11,834,570.91.[5]


BF Homes and PWCC then alleged in their RTC Petition that:
disconnected electric supply to [BF Homes and PWCC's] sixteen (16) water
pumps located in BF Homes in Parañaque, Caloocan, and Quezon City, which
thus disrupted water supply in those areas.



11.  On June 4, 2003, [BF Homes and PWCC] received by facsimile transmission
a letter from MERALCO, x x x, in which MERALCO demanded to [BF Homes and
PWCC] the payment of electric bills amounting to P4,717,768.15.



12.  [MERALCO] replied in a letter dated June 11, 2003, x x x, requesting litigation expenses in the amount of at least P500,000.00 for which [BF Homes
MERALCO to apply the P4,717,768.15 electric bill against the P11,834,570.91 and PWCC] should be indemnified.[7]

that MERALCO was ordered to refund to [BF Homes and PWCC] pursuant to the 

MERALCO Refund cases. x x x
 BF Homes and PWCC additionally prayed that the RTC issue a writ of preliminary

 injunction and restraining order considering that:

13.  Displaying the arrogance that has become its distinction, MERALCO, in its 21. As indicated in its letter dated June 4, 2003 (Annex A), unless seasonably
letter dated June 16, 2003, x x x, denied [BF Homes and PWCC's] request restrained, MERALCO will cut off electric power connections to all of [BF Homes
alleging that it has not yet come up with the schedule for the refund of large and PWCC's] water pumps on June 20, 2003.

amounts, such as those of [BF Homes and PWCC].
 


 22. Part of the reliefs herein prayed for is to restrain MERALCO from cutting off
14.  Even while MERALCO was serving its reply-letter to [BF Homes and PWCC], electric power connections to [BF Homes and PWCC's] water pumps.

MERALCO, again, without giving any notice, cut off power supply to [BF Homes 

and PWCC's] five (5) water pumps located in BF Homes Parañaque and BF 23. Unless MERALCO'S announced intention to cut off electric power
Resort Village, in Pamplona, Las Piñas City.
 connections to [BF Homes and PWCC's] water pumps is restrained, [BF Homes

 and PWCC] will suffer great and irreparable injury because they would not [be]
15.  In its letter dated June 4, 2003 (Annex A), MERALCO threatened to cut off able to supply water to their customers.

electric power connections to all of [BF Homes and PWCC's] water pumps if [BF 

Homes and PWCC] failed to pay their bills demanded by MERALCO by June 20, 24. [BF Homes and PWCC] therefore pray that a writ for preliminary injunction be
2003.[6]
issued upon posting of a bond in an amount as will be determined by this

 Honorable Court.

BF Homes and PWCC thus cited the following causes of action for their RTC 

Petition:
25. [BF Homes and PWCC] further pray that, in the meantime and immediately
16. In refusing to apply [MERALCO's] electric bills against the amounts that it upon the filing of the above captioned Petition, a restraining order be issued
was ordered to refund to [BF Homes and PWCC] pursuant to the MERALCO before the matter of preliminary injunction can be heard.[8]

Refund cases and in making the implementation of the refund ordered by the 

Supreme Court dependent upon its own will and caprice, MERALCO acted with On August 15, 2003, MERALCO filed before the RTC its Answer with
utmost bad faith.
 Counterclaims and Opposition to the Application for Writ of Preliminary

 Injunction[9] of BF Homes and PWCC.

17. [BF Homes and PWCC] are clearly entitled to the remedies under the law to 

compel MERALCO to consider [BF Homes and PWCC's] electric bills fully paid According to MERALCO:

by the amounts which MERALCO was ordered to refund to [BF Homes and 2.2.  Both petitioners BF Homes, Incorporated and Philippine Waterworks
PWCC] pursuant to the MERALCO Refund cases, to enjoin MERALCO to Corporation are admittedly the registered customers of [MERALCO] by virtue of
reconnect electric power to all of [BF Homes and PWCC's] water pumps, and to the service contracts executed between them under which the latter undertook to
order MERALCO to desist from further cutting off power connection to [BF supply electric energy to the former for a fee.  The following twenty-three (23)
Homes and PWCC's] water pumps.
 Service Identification Nos. (SINs) are registered under the name of BF Homes,

 Incorporated: x x x. While the following twenty-one (21) Service Identification
18. MERALCO's unjust and oppressive acts have cast dishonor upon [BF Homes Nos. (SINs) are registered under the name of Philippine Waterworks Construction
and PWCC's] good name and besmirched their reputation for which [BF Homes Corporation: x x x

and PWCC] should be indemnified by way of moral damages in the amount of 

not less than P1,000,000.00.
 x x x x


 

19. As an example for the public good, to dissuade others from emulating 2.4.  The service contracts as well as the terms and conditions of [MERALCO's]
MERALCO's unjust, oppressive and mercenary conduct, MERALCO should be service as approved by BOE [Board of Energy], now ERC [Energy Regulatory
directed to pay [BF Homes and PWCC] exemplary damages of at least Commission], provide in relevant parts, that [BF Homes and PWCC] agree as
P1,000,000.00.
 follows:


 

20. MERALCO's oppressive and inequitable conduct forced [BF Homes and DISCONTINUANCE OF SERVICE:

PWCC] to engage the services of counsel to defend their rights and thereby incur The Company reserves the right to discontinue service in case the customer
is in arrears in the payment of bills  or for failure to pay the adjusted bills in
those cases where the meter stopped or failed to register the correct amount of that respondent is directed to make the refund to its customers in accordance
energy consumed, or for failure to comply with any of these terms and with the decision of the ERC (formerly ERB) dated February 16, 1998.  Hence,
conditions, or in case of or to prevent fraud upon the Company.  Before [MERALCO] has to wait for the schedule and details of the refund to be approved
disconnection is made in the case of, or to prevent fraud, the Company may by the ERC before it can comply with the Supreme Court decision.

adjust the bill of said customer accordingly and if the adjusted bill is not paid, the 

Company may disconnect the same." (Emphasis supplied)
3.2. [MERALCO] has the right to disconnect the electric service to [BF Homes

 and PWCC] in that:

2.5.  This contractual right of [MERALCO] to discontinue electric service for 

default in the payment of its regular bills is sanctioned and approved by the rules a) The service contracts between [MERALCO] and [BF Homes and PWCC]
and regulations of ERB (now the ERC).  This right is necessary and reasonable expressly authorize the former to discontinue and disconnect electric services of
means to properly protect and enable [MERALCO] to perform and discharge its the latter for their failure to pay the regular electric bills rendered.

legal and contractual obligation under its legislative franchise and the law.  

Cutting off service for non-payment by the customers of the regular monthly b) It is [MERALCO's] legal duty as a public utility to furnish its service to the
electric bills is the only practical way a public utility, such as [MERALCO], can general public without arbitrary discrimination and, consequently, [MERALCO] is
ensure and maintain efficient service in accordance with the terms and conditions obligated to discontinue and disconnect electric services to [BF Homes and
of its legislative franchise and the law.
 PWCC] for their refusal or failure to pay the electric energy actually used by them.

 [11]

x x x x
 


 For its compulsory counterclaims, MERALCO prayed that the RTC orders BF
2.14.  Instead of paying their unpaid electric bills and before [MERALCO] could Homes and PWCC to pay MERALCO P6,551,969.55 as actual damages
effect its legal and contractual right to disconnect [BF Homes and PWCC's] (representing the unpaid electric bills of BF Homes and PWCC for May and June
electric services, [BF Homes and PWCC] filed the instant petition to avoid 2003), P1,500,000.00 as exemplary damages, P1,500,000.00 as moral damages,
payment of [MERALCO's] valid and legal claim for regular monthly electric bills.
 and P1,000,000.00 as attorney's fees.


 

2.15.  [BF Homes and PWCC's] unpaid regular bills totaled P6,551,969.55 Lastly, MERALCO opposed the application for writ of preliminary injunction of BF
covering the May and June 2003 electric bills. x x x
 Homes and PWCC because:



x x x x
 I


 [MERALCO] HAS THE LEGAL AND CONTRACTUAL RIGHT TO DEMAND

2.17.  [BF Homes and PWCC] knew that [MERALCO] is already in the process of PAYMENT OF THE ELECTRIC BILLS AND, IN CASE OF NON-PAYMENT, TO
implementing the decision of the Supreme Court as to the refund case.  But this DISCONTINUE THE ELECTRIC SERVICES OF [BF HOMES and PWCC]

refund has to be implemented in accordance with the guidelines and schedule to

be approved by the ERC.  Thus [BF Homes and PWCC's] filing of the instant II

petition is merely to evade payment of their unpaid electric bills to [MERALCO].[10]

[BF HOMES and PWCC] HAVE NO CLEAR RIGHT WHICH WARRANTS

 PROTECTION BY INJUNCTIVE PROCESS

Hence, MERALCO sought the dismissal of the RTC Petition of BF Homes and 

PWCC on the following grounds:
After hearing,[12]  the RTC issued an Order on November 21, 2003 granting the
3.1 The Honorable Court has no jurisdiction to award the relief prayed for by [BF application of BF Homes and PWCC for the issuance of a writ of preliminary
Homes and PWCC] because:
 injunction.  The RTC found that the records showed that all requisites for the

 issuance of said writ were sufficiently satisfied by BF Homes and PWCC.  The
a) The petition is in effect preempting or defeating the power of the ERC to RTC stated in its Order:

implement the decision of the Supreme Court.



 Albeit, this Court respects the right of a public utility company like MERALCO,
b) [MERALCO] is a utility company whose business activity is wholly regulated by being a grantee of a legislative franchise under Republic Act No. 9029, to collect
the ERC.  The latter, being the regulatory agency of the government having the overdue payments from its subscribers or customers for their respective
authority over the respondent, is the one tasked to approve the guidelines, consumption of electric energy, such right must, however, succumb to the
schedules and details of the refund.
 paramount substantial and constitutional rights of the public to the usage and

 enjoyment of waters in their community. Thus, there is an urgent need for the
c) The decision of the Supreme Court, dated November 15, 2002, clearly states issuance of a writ of preliminary injunction in order to prevent social unrest in the
community for having been deprived of the use and enjoyment of waters flowing 

through [BF Homes and PWCC's] water pumps.[13]
In its Decision dated October 27, 2005, the Court of Appeals agreed with

 MERALCO that the RTC had no jurisdiction to issue a writ of preliminary
The RTC decreed in the end:
injunction in Civil Case No. 03-0151, as said trial court had no jurisdiction over
the subject matter of the case to begin with. It ratiocinated in this wise:

WHEREFORE, in the light of the foregoing, [BF Homes and PWCC's] prayer for
the issuance of a writ of preliminary injunction is hereby GRANTED.  Respondent For one, it cannot be gainsaid that the ERC has original and exclusive jurisdiction
Manila Electric Company is permanently restrained from proceeding with its over the case.  Explicitly, Section 43(u) of Republic Act No. 9136, otherwise
announced intention to cut-off electric power connection to [BF Homes and known as the "Electric Power Industry Reform Act,"  (RA 9136), states that the
PWCC's] water pumps unless otherwise ordered by this Court.  Further, [BF ERC shall have the original and exclusive jurisdiction over all cases contesting
Homes and PWCC] are hereby ordered to post a bond in the amount of P500,000 rates, fees, fines and penalties imposed by the ERC in the exercise of its powers,
to answer for whatever injury or damage that may be caused by reason of the functions and responsibilities and over all cases involving disputes between and
preliminary injunction.[14]
among participants or players in the energy sector.  Section 4(o) of Rule 3 of the

 Implementing Rules and Regulations of RA 9136 likewise provides that the ERC
The Motion for Reconsideration of MERALCO of the aforementioned Order was shall also be empowered to issue such other rules that are essential in the
denied by the RTC in another Order issued on January 9, 2004.[15]  The RTC discharge of its functions as an independent quasi-judicial body.

reiterated its earlier finding that all the requisites for the proper issuance of an 

injunction had been fully complied with by BF Homes and PWCC, thus:
For another, the respondent judge, instead of presiding over the case, should
have dismissed the same and yielded jurisdiction to the ERC pursuant to the
Records indubitably show that all the requisites for the proper issuance of an doctrine of primary jurisdiction.  It is plain error on the part of the respondent
injunction have been fully complied with in the instant case.
 judge to determine, preliminary or otherwise, a controversy involving a question

 which is within the jurisdiction of an administrative tribunal, especially so where
It should be noted that a disconnection of power supply would obviously cause the question demands the exercise of sound administrative discretion.

irreparable injury because the pumps that supply water to the BF community will 

be without electricity, thereby rendering said community without water.  Water is Needless to state, the doctrine of primary jurisdiction applies where the
a basic and endemic necessity of life.  This is why its enjoyment and use has administrative agency, as in the case of ERC, exercises its quasi-judicial and
been constitutionally safeguarded and protected.  Likewise, a community without adjudicatory function.  Thus, in cases involving specialized disputes, the practice
water might create social unrest, which situation this Court has the mandate to has been to refer the same to an administrative agency of special competence
prevent.  There is an urgent and paramount necessity for the issuance of the pursuant to the doctrine of primary jurisdiction.  The courts will not determine a
injunctive writ to prevent serious damage to the guaranteed rights of [BF Homes controversy involving a question which is within the jurisdiction of the
and PWCC] and the residents of the community to use and enjoy water.[16]
administrative tribunal prior to the resolution of that question by the

 administrative tribunal, where the question demands the exercise of sound
The RTC resolved the issue on jurisdiction raised by MERALCO, as follows:
administrative discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical and intricate matters
As to the jurisdictional issue raised by respondent MERALCO, it can be gleaned of fact, and a uniformity of ruling is essential to comply with the premises of the
from a re-evaluation and re-assessment of the records that this Court has regulatory statute administered.

jurisdiction to delve into the case. This Court gave both parties the opportunity to 

be heard as they introduced evidence on the propriety of the issuance of the Verily, the cause of action of [BF Homes and PWCC] against [MERALCO]
injunctive writ.  It is well-settled that no grave abuse of discretion could be originates from the Meralco Refund Decision as it involves the perceived right of
attributed to its issuance where a party was not deprived of its day in court as it the former to compel the latter to set-off or apply their refund to their present
was heard and had exhaustively presented all its arguments and defenses.  electric bill.  The issue delves into the right of the private respondents to collect
(National Mines and Allied Workers Union vs. Valero, 132 SCRA 578, 1984.)[17]
their refund without submitting to the approved schedule of the ERC, and in

 effect give unto themselves preferential right over other equally situated
Aggrieved, MERALCO filed with the Court of Appeals a Petition consumers of [MERALCO]. Perforce, the ERC, as can be gleaned from the afore-
for Certiorari under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. stated legal provisions, has primary, original and exclusive jurisdiction over the
82826.  MERALCO sought the reversal of the RTC Orders dated November 21, said controversy.

2003 and January 9, 2004 granting a writ of preliminary injunction in favor of BF 

Homes and PWCC.  MERALCO asserted that the RTC had no jurisdiction over Indeed, the respondent judge glaringly erred in enjoining the right of [MERALCO]
the application of BF Homes and PWCC for issuance of such a writ.
 to disconnect its services to [BF Homes and PWCC] on the premise that the
court has jurisdiction to apply the provisions on compensation or set-off in this BF Homes and PWCC argued that due to the threat of MERALCO to disconnect
case.  Although [MERALCO] recognizes the right of [BF Homes and PWCC] to electric services, BF Homes and PWCC had no other recourse but to seek an
the refund as provided in the Meralco Refund Decision, it is the ERC which has injunctive remedy from the RTC under its general jurisdiction.  The merits of Civil
the authority to implement the same according to its approved schedule, it being Case No. 03-0151 was not yet in issue, only the propriety of issuing a writ of
a dispute arising from the exercise of its jurisdiction.
 preliminary injunction to prevent an irreparable injury.  Even granting that the RTC

 has no jurisdiction over the subject matter of Civil Case No. 03-0151, the ERC by
Moreover, it bears to stress that the Meralco Refund Decision was brought into enabling law has no injunctive power to prevent the disconnection by MERALCO
fore by the Decision dated 16 February 1998 of the ERC (then Energy Regulatory of electric services to BF Homes and PWCC.

Board) granting refund to [MERALCO's] consumers.  Being the agency of origin, 

the ERC has the jurisdiction to execute the same.  Besides, as stated, it is The Petition has no merit.

empowered to promulgate rules that are essential in the discharge of its functions 

as an independent quasi-judicial body.[18]
Settled is the rule that jurisdiction is conferred only by the Constitution or the law.

 [21]  Republic v. Court of Appeals[22] also enunciatedthat only a statute can confer

The dispositive portion of the judgment of the appellate court reads:

jurisdiction on courts and administrative agencies.

W H E R E F O R E , t h e f o re g o i n g c o n s i d e re d , t h e i n s t a n t p e t i t i o n i s 

hereby  GRANTED  and the assailed Orders  REVERSED  and  SET ASIDE.  Related to the foregoing and equally well-settled is the rule that the nature of an
Accordingly, the writ of injunction against [MERALCO] is hereby DISSOLVED.  No action and the subject matter thereof, as well as which court or agency of the
costs.[19]
government has jurisdiction over the same, are determined by the material

 allegations of the complaint in relation to the law involved and the character of
In a Resolution dated February 7, 2006, the Court of Appeals denied the Motion the reliefs prayed for, whether or not the complainant/plaintiff is entitled to any or
for Reconsideration of BF Homes and PWCC for failing to raise new and all of such reliefs.  A prayer or demand for relief is not part of the petition of the
persuasive and meritorious arguments.
cause of action; nor does it enlarge the cause of action stated or change the legal

 effect of what is alleged.  In determining which body has jurisdiction over a case,
Now, BF Homes and PWCC come before this Court  via  the instant Petition, the better policy is to consider not only the status or relationship of the parties
raising the following assignment of errors:
but also the nature of the action that is the subject of their controversy.[23]



1. The Court of Appeals ERRED in saying that the respondent judge In  Manila Electric Company v. Energy Regulatory Board,[24]  the Court traced the
committed grave abuse of discretion by issuing the disputed writ of legislative history of the regulatory agencies which preceded the ERC, presenting
injunction pending the merits of the case including the issue of subject a summary of these agencies, the statutes or issuances that created them, and
matter jurisdiction.
the extent of the jurisdiction conferred upon them, viz:

2. The Court of Appeals ERRED in saying that the ERC under the doctrine
of primary jurisdiction has the original and EXCLUSIVE jurisdiction to 1. The first regulatory body, the Board of Rate Regulation (BRR), was created by
take cognizance of a petition for injunction to prevent electrical virtue ofAct No. 1779.  Its regulatory mandate under Section 5 of the law was
disconnection to a customer entitled to a refund.
limited to fixing or regulating rates of every public service corporation.

3. The Court of Appeals ERRED in NOT SAYING that the ERC as a quasi- 

judicial body under RA 9136 has no power to issue any injunctive relief 2. In  1913,  Act No. 2307  created the  Board of Public Utility Commissioners
or remedy to prevent disconnection.
(BPUC)  to take over the functions of the BRR. By express provision of Act No.
4. The Court of Appeals ERRED in not resolving the issue as to the 2307, the BPUC was vested with jurisdiction, supervision and control over all
violation of MERALCO of a standing injunction order while the case public utilities and their properties and franchises.

remains undecided.[20]



 3. On  November 7, 1936,  Commonwealth Act (C.A.) No. 146, or the Public
At the core of the Petition is the issue of whether jurisdiction over the subject Service Act (PSA), was passed creating the Public Service Commission (PSC) to
matter of Civil Case No. 03-0151 lies with the RTC or the Energy Regulatory replace the BPUC.  Like the BPUC, the PSC was expressly granted jurisdiction,
Commission (ERC).  If it is with the RTC, then the said trial court also has supervision and control over public services, with the concomitant authority of
jurisdiction to issue the writ of preliminary injunction against MERALCO.  If it is calling on the public force to exercise its power, to wit:

with the ERC, then the RTC also has no jurisdiction to act on any incidents in "SEC. 13.  Except as otherwise provided herein, the Commission shall have
Civil Case No. 03-0151, including the application for issuance of a writ of general supervision and regulation of,  jurisdiction and control over, all public
preliminary injunction of BF Homes and PWCC therein.
 utilities,  and also over their property, property rights, equipment, facilities and

 franchises so far as may be necessary for the purpose of carrying out the
provisions of this Act, and in the exercise of its authority it shall have the
necessary powers and the aid of the public forcex x x."
shall include all applicable funds and appropriations, records, equipment,


Section 14 of C.A. No. 146 defines the term "public service" or "public utility" as
including "every individual, copartnership, association, corporation or joint-stock
company, . . . that now or hereafter may own, operate, manage or control within
the Philippines, for hire or compensation, any common carrier, x x x,  electric
light, heat, power, x x x, when owned, operated and managed for public use or
service  within the Philippines x x x."  Under the succeeding Section 17(a), the
PSC has the power even without prior hearing -
of 1992"; Executive Order 172, as amended, creating the ERB; Republic Act 7832
(a)  To investigate, upon its own initiative, or upon complaint in writing, any matter
concerning any public service as regards matters under its jurisdiction; to require
any public service to furnish safe, adequate and proper service as the public
interest may require and warrant, to enforce compliance with any standard, rule,
regulation, order or other requirement of this Act or of the Commission, x x x.
The provisions with respect to electric power of Section 11(c) of Republic Act


4. Then came  Presidential Decree (P.D.) No. 1, reorganizing the national
government and implementing the  Integrated Reorganization Plan. Under the
reorganization plan, jurisdiction, supervision and control over public services
related to electric light, and power heretofore vested in the PSC were transferred
to the Board of Power and Waterworks (BOPW).
 accordingly.
Later,  P.D. No. 1206  abolished the BOPW. Its powers and function relative to
power utilities, including its authority to grant provisional relief, were transferred
to the newly-created Board of Energy (BOE).



5. On May 8, 1987, then President Corazon C. Aquino issued  E.O. No.
172 reconstituting the BOE into the ERB, transferring the former's functions and
powers under P.D. No. 1206 to the latter and consolidating in and entrusting on
the ERB "all the regulatory and adjudicatory functions covering the energy
sector."  Section 14 of E.O. No. 172 states that "(T)he applicable provisions of
[C.A.] No. 146, as amended, otherwise known as the `Public Service Act'; x x x
and [P.D.] No. 1206, as amended, creating the Department of Energy, shall
continue to have full force and effect, except insofar as inconsistent with this
Order."[25]
(f)  In the public interest, establish and enforce a methodology for setting


Thereafter, on June 8, 2001, Republic Act No. 9136, known as the Electric Power
Industry Reform Act of 2001 (EPIRA), was enacted, providing a framework for
restructuring the electric power industry.  One of the avowed purposes of the
EPIRA is to establish a strong and purely independent regulatory body.  The
Energy Regulatory Board (ERB) was abolished and its powers and functions not
inconsistent with the provision of the EPIRA were expressly transferred to the
ERC.[26]
 must ensure a reasonable price of electricity.  The rates prescribed shall be non-


The powers and functions of the ERB not inconsistent with the EPIRA were
transferred to the ERC by virtue of Sections 44 and 80 of the EPIRA, which read:
Section 10 of Republic Act No. 7832, is hereby amended and shall be replaced
Sec. 44.    Transfer of Powers and Functions. -  The powers and functions of the
Energy Regulatory Board not inconsistent with the provisions of this Act are
hereby transferred to the ERC.  The foregoing transfer of powers and functions
property and personnel as may be necessary.



Sec. 80.    Applicability and Repealing Clause. - The applicability provisions of
Commonwealth Act No. 146, as amended, otherwise known as the "Public
Service Act."  Republic Act 6395, as amended, revising the charter of NPC;
Presidential Decree 269, as amended, referred to as the National Electrification
Decree; Republic Act 7638, otherwise known as the "Department of Energy Act
otherwise known as the "Anti-Electricity and Electric Transmission Lines/
Materials Pilferage Act of 1994"; shall continue to have full force and effect
except insofar as they are inconsistent with this Act.



7916, as amended, and Section 5(f) of Republic Act 7227, are hereby repealed or
modified accordingly.



Presidential Decree No. 40 and all laws, decrees, rules and regulations, or
portions thereof, inconsistent with this Act are hereby repealed or modified
In addition to the foregoing, the EPIRA also conferred new powers upon the ERC
under Section 43, among which are:
SEC. 43.  Functions of the ERC. - The ERC shall promote competition, encourage
market development, ensure customer choice and penalize abuse of market
power in the restructured electricity industry.  In appropriate cases, the ERC is
authorized to issue cease and desist order after due notice and hearing.  Towards
this end, it shall be responsible for the following key functions in the restructured
industry:



x x x x



transmission and distribution wheeling rates and retail rates for the captive
market of a distribution utility, taking into account all relevant considerations,
including the efficiency or inefficiency of the regulated entities.  The rates must be
such as to allow the recovery of just and reasonable costs and a reasonable
return on rate base (RORB) to enable the entity to operate viably.  The ERC may
adopt alternative forms of internationally-accepted rate-setting methodology as it
may deem appropriate.  The rate-setting methodology so adopted and applied
discriminatory.  To achieve this objective and to ensure the complete removal of
cross subsidies, the cap on the recoverable rate of system losses prescribed in
by caps which shall be determined by the ERC based on load density, sales mix,
cost of service, delivery voltage and other technical considerations it may
promulgate.  The ERC shall determine such form of rate-setting methodology,
which shall promote efficiency.  x x x.
 falls upon the ERC.  By filing their Petition before the RTC, BF Homes and PWCC

 intend to collect their refund without submitting to the approved schedule of the
x x x x
 ERC, and in effect, enjoy preferential right over the other equally situated

 MERALCO consumers.

(u)  The ERC shall have the original and exclusive jurisdiction over all cases 

contesting rates, fees, fines and penalties imposed by the ERC in the exercise of Administrative agencies, like the ERC, are tribunals of limited jurisdiction and, as
the abovementioned powers, functions and responsibilities and over all cases such, could wield only such as are specifically granted to them by the enabling
involving disputes between and among participants or players in the energy statutes.  In relation thereto is the doctrine of primary jurisdiction involving
sector.
 matters that demand the special competence of administrative agencies even if

 the question involved is also judicial in nature.  Courts cannot and will not resolve
All notices of hearings to be conducted by the ERC for the purpose of fixing rates a controversy involving a question within the jurisdiction of an administrative
or fees shall be published at least twice for two successive weeks in two (2) tribunal, especially when the question demands the sound exercise of
newspapers of nationwide circulation.
administrative discretion requiring special knowledge, experience and services of

 the administrative tribunal to determine technical and intricate matters of fact. 
A careful review of the material allegations of BF Homes and PWCC in their The court cannot arrogate into itself the authority to resolve a controversy, the
Petition before the RTC reveals that the very subject matter thereof is the off- jurisdiction of which is initially lodged with the administrative body of special
setting of the amount of refund they are supposed to receive from MERALCO competence.[27]

against the electric bills they are to pay to the same company.  This is squarely 

within the primary jurisdiction of the ERC.
 Since the RTC had no jurisdiction over the Petition of BF Homes and PWCC in

 Civil Case No. 03-0151, then it was also devoid of any authority to act on the
The right of BF Homes and PWCC to refund, on which their claim for off-setting application of BF Homes and PWCC for the issuance of a writ of preliminary
depends, originated from the MERALCO Refund cases.  In said cases, the Court injunction contained in the same Petition.  The ancillary and provisional remedy of
(1) authorized MERALCO to adopt a rate adjustment in the amount of P0.017 per preliminary injunction cannot exist except only as an incident of an independent
kilowatthour, effective with respect to its billing cycles beginning February 1994; action or proceeding.[28]

and (2) ordered MERALCO to refund to its customers or credit in said customers' 

favor for future consumption P0.167 per kilowatthour, starting with the Incidentally, BF Homes and PWCC seemed to have lost sight of Section 8 of
customers' billing cycles that begin February 1998, in accordance with the ERB Executive Order No. 172 which explicitly vested on the ERB, as an incident of its
Decision dated February 16, 1998.
 principal function, the authority to grant provisional relief, thus:

It bears to stress that in the MERALCO Refund cases, this Court only affirmed the
February 16, 1998 Decision of the ERB (predecessor of the ERC) fixing the just
and reasonable rate for the electric services of MERALCO and granting refund to
MERALCO consumers of the amount they overpaid.  Said Decision was rendered
by the ERB in the exercise of its jurisdiction to determine and fix the just and
reasonable rate of power utilities such as MERALCO.
 pleadings, together with such affidavits, documents and other evidence which


Presently, the ERC has original and exclusive jurisdiction under Rule 43(u) of the
EPIRA over all cases contesting rates, fees, fines, and penalties imposed by the
ERC in the exercise of its powers, functions and responsibilities, and over all
Section 8. Authority to Grant Provisional Relief. -- The Board may, upon the filing
of an application, petition or complaint or at any stage thereafter and without
prior hearing, on the basis of supporting papers duly verified or authenticated,
grant provisional relief on motion of a party in the case or on its own initiative,
without prejudice to a final decision after hearing, should the Board find that the
may be submitted in support of the motion, substantially support the provisional
order:  Provided, That the Board shall immediately schedule and conduct a
hearing thereon within thirty (30) days thereafter, upon publication and notice to
all affected parties.

cases involving disputes between and among participants or players in the 


energy sector.  Section 4(o) of the EPIRA Implementing Rules and Regulation
provides that the ERC "shall also be empowered to issue such other rules that
are essential in the discharge of its functions as in independent quasi-judicial
body."



Indubitably, the ERC is the regulatory agency of the government having the
authority and supervision over MERALCO.  Thus, the task to approve the
guidelines, schedules, and details of the refund by MERALCO to its consumers,
to implement the judgment of this Court in the MERALCO Refund cases, also
The aforequoted provision is still applicable to the ERC as it succeeded the ERB,
by virtue of Section 80 of the EPIRA.  A writ of preliminary injunction is one such
provisional relief which a party in a case before the ERC may move for.



Lastly, the Court herein already declared that the RTC not only lacked the
jurisdiction to issue the writ of preliminary injunction against MERALCO, but that
the RTC actually had no jurisdiction at all over the subject matter of the Petition
of BF Homes and PWCC in Civil Case No. 03-0151.  Therefore, in addition to the
dissolution of the writ of preliminary injunction issued by the RTC, the Court also
deems it appropriate to already order the dismissal of the Petition of BF Homes
and PWCC in Civil Case No. 03-0151 for lack of jurisdiction of the RTC over the
subject matter of the same. Although only the matter of the writ of preliminary
injunction was brought before this Court in the instant Petition, the Court is
already taking cognizance of the issue on the jurisdiction of the RTC over the
subject matter of the Petition.  The Court may motu proprio consider the issue of
jurisdiction.  The Court has discretion to determine whether the RTC validly
acquired jurisdiction over Civil Case No. 03-0151 since, to reiterate, jurisdiction
over the subject matter is conferred only by law.  Jurisdiction over the subject
matter cannot be acquired through, or waived by, any act or omission of the
parties.  Neither would the active participation of the parties nor estoppel operate
to confer jurisdiction on the RTC where the latter has none over a cause of
action.[29]  Indeed, when a court has no jurisdiction over the subject matter, the
only power it has is to dismiss the action.[30]



WHEREFORE, the instant Petition for Review is  DENIED. The Decision dated
October 27, 2005 of the Court of Appeals in CA-G.R. SP No. 82826
is AFFIRMED with the MODIFICATION that the Regional Trial Court, Branch 202
of Las Piñas City, is  ORDERED  to dismiss the Petition [With Prayer for the
Issuance of Writ of Preliminary Injunction and for the Immediate Issuance of
Restraining Order] of BF Homes, Inc. and Philippine Waterworks and
Construction Corporation in Civil Case No. 03-0151.  Costs against BF Homes,
Inc. and Philippine Waterworks and Construction Corporation.



SO ORDERED.

[G.R. No. L-5868. December 29, 1953.]
 ruling that to maintain an action for damages caused by the breach of a carrier’s

 obligation to carry a passenger safely to his destination it is necessary to prove
SANCHO MONTOYA, in his own behalf and as guardian ad litem of the that the damages were caused by the negligence of the driver of said carrier in
minors ISMAEL, FELICITAS, DIVINA and NAPOLEON, all surnamed order that liability may attach which, they claim, is contrary to the ruling of this
MONTOYA, Petitioners, v. MARCELINO IGNACIO, Respondent. 
 court in the case of Castro v. 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
D E C I S I O N
concurred in by the Court of Appeals so much so that it made an express
manifestation that it fully agreed with the theory of petitioners. The ruling of the
BAUTISTA ANGELO, J.:
court below having been overruled, we see no reason why the same issue should

 now be reiterated in this instance. 

In the afternoon of January 5, 1949, Tomasita Arca boarded the jeepney driven by 

Leonardo de Guzman at Tanza, Cavite in order to go to Cavite City. She paid the The second error refers to the person who was actually operating the jeepney at
usual fare for the trip. While the jeepney was on its way to its destination, and at the time of collision. It is claimed that while Marcelino Ignacio, owner of the
a point between Tanza and Cavite City, somewhere in barrio Ligton, municipality jeepney, has leased the same to one Leoncio Tahimik on June 8, 1948, and that
of Rosario, it collided with a bus of the Luzon Bus Line causing as a result the at the time of collision it was the latter who was actually operating it, the contract
death of Tomasita. Tomasita was then a school teacher of Tanza Elementary of lease was null and void because it was not approved by the Public Service
School with an annual Compensation of P1,320. Her death left a widower and Commission as required by section 16, paragraph h, of the Public Service Law. 

four minor children. Because of the jeepney’s failure to transport Tomasita safely 

to her destination and her resultant death, her widower and children instituted the There is merit in this contention. The law really requires the approval of the Public
present action praying that the defendants, owners of the jeepney, be ordered to Service Commission in order that a franchise, or any privilege pertaining thereto,
pay them an indemnity in the amount of P31,000. 
 may be sold or leased without infringing the certificate issued to the grantee. The

 reason is obvious. Since a franchise is personal in nature any transfer or lease
Defendants set up as a special defense that the collision between the jeepney thereof should be notified to the Public Service Commission so that the latter
and the bus was investigated by the Office of the Provincial Fiscal of Cavite and may take proper safeguards to protect the interest of the public. In fact, the law
the result of the investigation was that the one at fault was the driver of the bus requires that, before the approval is granted, there should be a public hearing,
and, as a consequence, said driver was charged with triple homicide thru with notice to all interested parties, in order that the Commission may determine
reckless imprudence in the Court of First Instance of Cavite (Criminal Case No. if there are good and reasonable grounds justifying the transfer or lease of the
10771). Defendants claim that inasmuch as the present case involves the same property covered by the franchise, or if the sale or lease is detrimental to public
issues as those in the case filed against the driver of the bus, the same should be interest. Such being the reason and philosophy behind this requirement, it follows
held in abeyance until after the final termination of the criminal case. Defendant that if the property covered by the franchise is transferred, or leased to another
Cayetano Tahimik further claims that he is not and has never been the owner of without obtaining the requisite approval, the transfer is not binding against the
the jeepney and cannot therefore be held responsible for the damages caused by Public Service Commission and in contemplation of law the grantee continues to
it. 
 be responsible under the franchise in relation to the Commission and to the

 public. Since the lease of the jeepney in question was made without such
After the parties had presented their evidence, the lower court rendered decision approval, the only conclusion that can be drawn is that Marcelino Ignacio still
dismissing the case holding that defendants are not liable because it was not continues to be its operator in contemplation of law, and as such is responsible
proven that the collision which resulted in the death of Tomasita Arca was due to for the consequences incident to its operation, one of them being the collision
the negligence of the driver of the jeepney whose ownership is attributed to under consideration. 

defendants. From this decision plaintiffs have appealed. 
 


 It may be argued that section 16, paragraph (h) provides in its last part that
The Court of Appeals affirmed the decision appealed from, but in so doing it "nothing herein contained shall be construed to prevent the sale, alienation, or
predicated its affirmance not on plaintiffs’ failure to prove that the collision was lease by any public utility of any of its property in the ordinary course of
due to the negligence of the driver but on the fact that Marcelino Ignacio was not business", which gives the impression that the approval of the Public Service
the one operating the jeepney but one Leoncio Tahimik who had leased the Commission is but a mere formality which does not affect the effectivity of the
jeepney by virtue of a document duly executed by the parties. And not agreeable transfer or lease of the property belonging to a public utility. But such provision
to this finding, plaintiffs filed the present petition for review. 
 only means that even if the approval has not been obtained the transfer or lease

 is valid and binding between parties although not effective against the public and
In their first assignment of errors, petitioners claim that the lower court erred in the Public Service Commission. The approval is only necessary to protect public
interest. 


 ownership of its mortgaged properties, including the buses, to Jesus Yujuico. 

Wherefore, the decision appealed from is reversed. Judgment is hereby rendered 

ordering the defendant Marcelino Ignacio to pay the plaintiffs the sum of P31,000 Meanwhile, sometime in June and July 1979, the Yujuico Transit Employees
as damages, with costs. 
 Union (Associated Labor Union) filed two (2) consolidated complaints against

 Yujuico Transit Co., Inc. for Unfair Labor Practice and violations of Presidential
Paras, C.J., Pablo, Bengzon, Padilla and Jugo, JJ., concur. 
 Decrees Nos. 525, 1123, 1614 and 851 (non-payment of living allowances).


 

REYES, J., concurring and dissenting:chanrob1es virtual 1aw library
 On May 21, 1980, Jesus Yujuico sold the subject buses to herein petitioner "Y"

 Transit Co., Inc. for P3,485,400.00.

I concur in the result, but must express my disconformity to that part of the 

majority opinion which holds that the sale by a public utility of any of its property On July 23, 1981, the Labor Arbiter rendered a decision dismissing the complaint
without the approval of the Public Service Commission is binding between the for unfair labor practice but holding Yujuico Transit Co., Inc. liable under the
parties though not effective against the public. This, I believe, is a aforementioned Presidential Decrees in the amount of P142,790.49. On February
misconstruction of section 16, paragraph, of the Public Service Law. 
9, 1982, a writ of execution for the said amount was issued by the Labor Arbiter.
On June 14, 1982, an alias writ of execution was issued and levy was made upon
the ten (10) buses. Thereafter, "Y" Transit Co., Inc. filed Affidavits of Third Party
Claim.cralawnad

[G.R. No. 88195-96. January 27, 1994.]
 


 Private respondents herein opposed the Third Party claim on the ground that the
"Y" TRANSIT CO, INC.,  Petitioner, v. THE NATIONAL LABOR RELATIONS transactions leading to the transfer of the buses to "Y" Transit Co., Inc. were void
COMMISSION AND YUJUICO TRANSIT EMPLOYEES UNION (ASSOCIATED because they lacked the approval of the BOT as required by the Public Service
LABOR UNION), MANUEL VILLARTA,Respondents.
 Act. They also argued that the buses were still registered in the name of Yujuico
Transit Co. which was, therefore, still the lawful owner thereof.

D E C I S I O N


The Labor Arbiter found that "Y" Transit Co., Inc. had valid title to the buses and
ROMERO, J.:
that the BOT, by its subsequent acts had approved the transfer. The decision

 stated further, thus: 

This is a special civil action for  certiorari  filed by "Y" Transit Co., Inc. for the 

annulment of the decision of the National labor Relations Commission, the "The fact that the registration certificates of most of the vehicles in question are
dispositive portion of which reads as follows: 
 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
"WHEREFORE, the appealed Order should be as it is hereby REVERSED operative act that transfers ownership, unlike in land registration cases.
reinstating the levy made by the Sheriff on July 13 and 16, 1982. Accordingly, the Furthermore, the evidence shows that the claimant cannot be faulted for its
sale of the levied properties may proceed pursuant to existing laws.
 failure to have the certificates of registration transferred in its own name. Prior to

 the levy, claimant had already paid for the transfer fee, the fee for the cancellation
SO ORDERED." 1 
 of mortgage and other fees required by the BLT. Moreover, the registration fees of

 the vehicles whose last digit of their plate numbers made the vehicles due for
The antecedent facts of the case are as follows: 
 registration were already paid for by the claimant (Exhibits ‘N’ to ‘N-7’). Therefore,

 there was already a constructive registration made by the claimant (Mariano B.
In March 1960 and sometime thereafter, Yujuico Transit Co., Inc., mortgaged ten Arroyo v. Maria Corazon Yu de Sane, Et Al., 54 Phil. 511, 518), sufficient notice to
(10) of its buses to the Development Bank of the Philippines (DBP) to secure a affect the rights of third-parties. It is now ministerial on the part of the BLT to
loan in the amount of P2,795,129.36. Thereafter, the Board of Directors of Yujuico issue the Registration Certificates in the name of the claimant, but the same was
Transit Co., Inc. passed a resolution authorizing its President, Jesus Yujuico to held in abeyance pending the computerization of the records of BOT on public
enter into a dacion en pago arrangement with the DBP, whereby Jesus Yujuico utility vehicles. On all fours is the ruling of the Supreme Court in Mariano B.
would transfer to the DBP the Saint Martin Technical Institute in consideration of Arroyo v. Ma. Corazon Yu de Sane, 54 Phil. 511, which upheld the right of PNB as
the full settlement of the obligations of three companies, one of which was mortgagee over motorized water vessels as superior over the rights of a
Yujuico Transit Co, Inc. Accordingly, on or about October 24, 1978, the transfer of judgment creditor who had already secured a writ of attachment and execution
the property was made and DBP released the mortgages constituted on the over the vessels, it appearing that the delay was caused by the Collector of
buses of Yujuico Transit Co., Inc. Consequently, the company transferred the Custom’s uncertainty as to the necessity of the registration of the vessels." 2 


 order that a franchise, or any privilege pertaining thereto, may be sold or leased
Accordingly, the Third-Party Claim was granted and the release of all the buses without infringing the certificate issued to the grantee. The reason is obvious.
levied for execution was ordered.
 Since a franchise is personal in nature any transfer or lease thereof should be

 notified to the Public Service Commission so that the latter may take proper
On appeal, the NLRC reversed the labor arbiter’s decision on the ground that the safeguards to protect the interest of the public. In fact, the law requires that,
transfer of the buses lacked the BOT approval. It ordered the reinstatement of the before approval is granted, there should be a public hearing with notice to all
levy and the auction of properties.
 interested parties in order that the commission may determine if there are good

 and reasonable grounds justifying the transfer or lease of the property covered by
"Y" Transit Co., Inc. thereafter filed this special civil action for  certiorari  under the franchise, or if the sale or lease is detrimental to public interest. Such being
Rule 65 of the Rules of Court praying for the issuance of a Restraining Order and/ the reason and philosophy behind this requirement, it follows that if the property
or a Writ of Preliminary Injunction and for the annulment of the NLRC decision as covered by the franchise is transferred, or leased to another without obtaining the
it was issued with grave abuse of discretion amounting to lack of requisite approval, the transfer is not binding against Public Service Commission
jurisdiction.chanrobles law library : red
 and in contemplation of law, the grantee continues to be responsible under the

 franchise in relation to the Commission and to the public. . . .

In this petition, "Y" Transit Co., Inc. raised the following issue, to writ:


It may be argued that Section 16, paragraph (h) provides in its last part that
"I
‘nothing herein contained shall be construed to prevent the sale, alienation, or

 lease by any public utility of any of its property in the ordinary course of
The public respondent NLRC committed palpable legal error and grave abuse of business," which gives the impression that the approval of Public Service
discretion amounting to lack of jurisdiction when it held that there was no valid Commission is but a mere formality which does not affect the effectivity of the
transfer of ownership in favor of the petitioner, completely disregarding the transfer or lease of the property belonging to a public utility. But such provision
preponderance of evidence and existing jurisprudence which support the validity only means that even if the approval has not been obtained the transfer or lease
of the transfer of ownership to the petitioner. 3 
 is valid and binding between the parties although not effective against the public

 and the Public Service Commission. The approval is only necessary to protect
On July 6, 1989, petitioner filed a motion to cite Labor Arbiter Benigno C. public interest." (Underscoring ours)

Villarente, Jr. for contempt of court and for the issuance of an order for the 

immediate release of the property. Petitioner argues that the Labor Arbiter There being no prior BOT approval in the transfer of property from Yujuico Transit Co., Inc.
refused to release the vehicles levied on June 5, 1989 despite notice that a TRO to Jesus Yujuico, it only follows that as far as the BOT and third parties are concerned,
has been issued by the Supreme Court; that there was no reason to hold on to Yujuico Transit Co., Inc. still owned the properties. and Yujuico, and later, "Y" Transit Co.,
Inc. only held the same as agents of the former. In Tamayo v. Aquino, 6 the Supreme Court
the levy as petitioner had already posted a bond to answer for the damages and
stated, thus: 

award in the above-entitled case; that the labor arbiter wrongly required the


payment of storage charges and sheriff’s fees before releasing the levied buses.
 ". . . In operating the truck without transfer thereof having been approved by the Public

 Service Commission, the transferee acted merely as agent of the registered owner and
Did public respondent commit grave abuse of discretion in reinstating the levy on should be responsible to him (the registered owner) for any damages that he may cause the
the buses which have been allegedly transferred to a third party, herein petitioner latter by his negligence." 

"Y" Transit Co., Inc.?
 


 Conversely, where the registered owner is liable for obligations to third parties and vehicles
We rule in the negative.
 registered under his name are levied upon to satisfy his obligations, the transferee of such

 vehicles cannot prevent the levy by asserting his ownership because as far as the law is
concerned, the one whose name the vehicle is registered remains to be the owner and the
The following facts have been established before the NLRC; that the transfer of
transferee merely holds the vehicles for the registered owner. Thus, "Y" Transit Co., Inc.
ownership from Yujuico Transit Co., Inc. to Jesus Yujuico, and from Jesus Yujuico
cannot now argue that the buses could not be levied upon to satisfy the money judgment in
to "Y" Transit Co., Inc. lacked the prior approval of the BOT as required by favor of herein respondents. However, this does not deprive the transferee of the right to
Section 20 of the Public Service Act; 4 that the buses were transferred to "Y" recover from the registered owner any damages which may have been incurred by the
Transit Co., Inc. during the pendency of the action; and that until the time of the former since the . . . transfer or lease is valid and binding between the parties. . . ." 7 Thus,
execution, the buses were still registered in the name of Yujuico Transit Co., Inc.
 had there been any real contract between "Y" Transit Co., Inc. and Yujuico Transit Co., Inc.

 of "Y" Transit Co., Inc. and Jesus Yujuico regarding the sale or transfer of the buses, the
In Montoya v. Ignacio, 5 we held: 
 former may avail of its remedies to recover damages.


 

". . . The law really requires the approval of the Public Service Commission in Regarding the Motion for Contempt filed by petitioner, we are constrained to deny the same
since the Order to levy upon petitioner’s alleged properties was issued even before the
issuance by this Court of a temporary restraining order. From the records, it appeared that There is no dispute as to the facts:

Labor Arbiter Villarente ordered the public auction of the subject properties on May 12,
1989. The sheriff levied on the properties on June 5, 1989. The Supreme Court issued the On April 4, 1995, respondent ICC, holder of a legislative franchise under Republic
Temporary Restraining Order on June 19, 1989 and this was received by the Labor Arbiter
Act (RA) No. 7633 to operate domestic telecommunications, filed with the NTC
on June 22, 1989. On June 28, 1989, the Labor Arbiter directed the sheriff to release the
two buses already levied upon by him.
 an application for a Certificate of Public Convenience and Necessity to install,

 operate, and maintain an international telecommunications leased circuit service
Likewise, we find no error in requiring petitioner to pay the storage fees prior to the release between the Philippines and other countries, and to charge rates therefor, with
of the properties. Storage costs are imposed in accordance with the provisions of Rule IX of provisional authority for the purpose.

the NLRC Manuel of Instructions for Sheriffs, to wit: 



 In an Order3  dated June 4, 1996, the NTC approved the application for a
"Sec. 3. Storing of Levied Property. — To avoid pilferage of or damage to levied property, provisional authority subject, among others, to the condition:

the same shall be inventoried and stored in a bonded warehouse, wherever available, or in
a secured place as may be determined by the sheriff with notice to and conformity of the 2. That applicant [ICC] shall pay a permit fee in the amount of P1,190,750.00, in
losing party or third party claimant. In case of disagreement, the same shall be referred to
accordance with section 40(g) of the Public Service Act,4 as amended;

the Labor Arbiter or proper officer who issued the writ of execution for proper disposition.
For this purpose, sheriffs should inform the Labor Arbiter or proper officer issuing the writ of
corresponding storage fees, furnishing him as well as the parties with a copy of the Respondent ICC filed a motion for partial reconsideration of the Order insofar as
inventory. The storage fees shall be shouldered by the losing party."  
 the same required the payment of a permit fee. In a subsequent Order dated

 June 25, 1997, the NTC denied the motion.

WHEREFORE, in view of the foregoing, this petition is hereby DISMISSED.



 Therefrom, ICC went to the CA on a Petition for  Certiorariwith prayer for a
The Motion to Cite Labor Arbiter Benigno Villarente, Jr. is DENIED and petitioner is ordered temporary restraining order and/or writ of preliminary injunction, questioning the
to PAY storage costs and sheriff’s fees.
 NTC's imposition against it of a permit fee ofP1,190,750.50 as a condition for the

 grant of the provisional authority applied for.

This decision is immediately executory. SO ORDERED.

In its original decision5 dated January 29, 1999, the CA ruled in favor of the NTC
whose challenged orders were sustained, and accordingly denied
ICC's certiorari petition, thus:

[G.R. NO. 141667 : July 17, 2006]

WHEREFORE, the instant petition is hereby DENIED. In view thereof, the assailed
orders dated 4 June 1996 and 25 June 1997, requiring the payment of permit
R E P U B L I C O F T H E P H I L I P P I N E S , re p re s e n t e d b y N AT I O N A L fees in the amount of One Million One Hundred Ninety Thousand Seven Hundred
ELECOMMUNICATIONS COMMISSION (NTC),  Petitioner,  v.  INTERNATIONAL Fifty and 50/100 Pesos (P1,190,750.50) as a condition for the grant of a
COMMUNICATIONS CORPORATION (ICC),Respondent.
Provisional Authority to operate an International Circuit service, are hereby
AFFIRMED. ACCORDINGLY, the International Communications Corporation is
D E C I S I O N
hereby ordered to pay the amount of One Million One Hundred Ninety Thousand
Seven Hundred Fifty and 50/100 Pesos (P1,190,750.50) to the National
GARCIA, J.:
Telecommunications Commission.

SO ORDERED.

In this Petition for Review under Rule 45 of the Rules of Court, petitioner
Republic, through the National Telecommunications Commission (NTC), seeks In time, ICC moved for a reconsideration. This time, the CA, in its Amended
the annulment and setting aside of the  Amended Decision1  dated September Decision dated September 30, 1999, reversed itself, to wit:

30, 1999 of the Court of Appeals (CA), setting aside the orders dated June 4,
1996 and June 25, 1997 of the NTC insofar as said orders required respondent WHEREFORE, the instant Motion for Reconsideration is hereby GRANTED.
International Communications Corporation (ICC) to pay the amount Accordingly, the Decision dated 29 January 1999 including the imposition by the
of P1,190,750.50 by way of permit fee as a condition for the grant of a provisional public respondent of permit fees with respect to [ICC's] international leased
authority to operate an international telecommunications leased circuit service, circuit service is hereby REVERSED. Judgment is hereby rendered, setting aside
and the Resolution2  dated January 24, 2000, denying NTC's motion for the questioned orders dated 04 June 1996 and 25 June 1997, insofar as they
reconsideration.
impose upon petitioner ICC the payment of the amount of One Million One
Hundred Ninety Thousand Seven Hundred Fifty and Fifty Centavos dwell of necessity on issues already passed upon. If a motion for reconsideration
(P1,190,750.50) by way of permit fees as a condition for the grant of a provisional may not discuss those issues, the consequence would be that after a decision is
authority to operate an International Leased Circuit Service. No costs.
rendered, the losing party would be confined to filing only motions for reopening
SO ORDERED. (Word in bracket added).
and new trial.9

Petitioner NTC filed a motion for reconsideration, but its motion was denied by Where there is no apparent intent to employ dilatory tactics, courts should be
the CA in its equally challenged Resolution dated January 24, 2000. Hence, slow in declaring outright a motion for reconsideration as pro forma. The doctrine
NTC's present recourse claiming that the CA erred in ruling that:
relating to  pro forma  motions has a direct bearing upon the movant's valuable
right to appeal. Hence, if petitioner's motion for reconsideration was indeedpro
1. NTC has arrogated upon itself the power to tax an entity;
forma, it would still be in the interest of justice to review the Amended Decision a
2. Section 40(g) of the Public Service Act has been amended by Section 5(g) of quo on the merits, rather than to abort the appeal due to a technicality, especially
R.A. 7925;6
where, as here, the industry involved (telecommunications) is vested with public
3. The imposition of permit fees is no longer authorized by R.A. 7925; interest. All the more so given that the instant petition raises some arguments that
andcralawlibrary
are well-worth resolving for future reference.

4. The imposed permit fee in the amount of P1,190,750.50 for respondent's

provisional authority is exorbitant.
This brings us to the substantive merits of the petition.

Before addressing the issues raised, we shall first dwell on the procedural matter In its Amended Decision, the CA ruled that petitioner NTC had arrogated upon
raised by respondent ICC, namely, that the present petition should be dismissed itself the power to tax an entity, which it is not authorized to do. Petitioner
outright for having been filed out of time. It is respondent's posture that disagreed, contending the fee in question is not in the nature of a tax, but is
petitioner's motion for reconsideration filed with the CA vis-a-vis the latter's merely a regulatory measure.

Amended Decision is a pro forma motion and, therefore, did not toll the running
of the reglementary period to come to this Court via this Petition for Review .
Section 40(g) of the Public Service Act provides:

Under Section 2 of Rule 45 of the Rules of Court, a recourse to this Court by way Sec. 40. The Commission is authorized and ordered to charge and collect from
of a Petition for Review must be filed within fifteen (15) days from notice of the any public service or applicant, as the case may be, the following fees
judgment or final order or resolution appealed from,  or of the denial of the as  reimbursement of its expenses in the authorization, supervision and/or
petitioner's motion for new trial or reconsideration filed in due time after notice of regulation of the public services:

the judgment. While a motion for reconsideration ordinarily tolls the period for xxx xxx xxx

appeal, one that fails to point out the findings or conclusions which were
supposedly contrary to law or the evidence does not have such an effect on the g) For each permit, authorizing the increase in equipment, the installation of new
reglementary period as it is merely a pro forma motion.7
units or authorizing the increase of capacity, or the extension of means or general
extensions in the services, twenty centavos for each one hundred pesos or
In arguing for the outright dismissal of this petition, respondent ICC claims that fraction of the additional capital necessary to carry out the permit.

the motion for reconsideration filed by petitioner NTC in connection with the CA's
Amended Decision failed to point out specifically the findings or conclusions of
the CA which were supposedly contrary to law. Respondent contends that the
issues raised by the petitioner in its motion for reconsideration were mere
reiterations of the same issues which had already been considered and passed
upon by the CA when it promulgated its Amended Decision. On this premise,
respondent maintains that petitioner's aforementioned motion for reconsideration
is a mere pro forma motion that did not toll the period for filing the present
petition.
collect such fees. However, the amount thereof must be reasonably related to the
Clearly, Section 40(g) of the Public Service Act is not a tax measure but a simple
regulatory provision for the collection of fees imposed pursuant to the exercise of
the State's police power. A tax is imposed under the taxing power of government
principally for the purpose of raising revenues. The law in question, however,
merely authorizes and requires the collection of fees for the reimbursement of the
Commission's expenses in the authorization, supervision and/or regulation of
public services. There can be no doubt then that petitioner NTC is authorized to
cost of such supervision and/or regulation.10

Under established jurisprudence, the mere fact that a motion for reconsideration
reiterates issues already passed upon by the court does not, by itself, make it Petitioner NTC also assails the CA's ruling that Section 40(g) of the Public
a  pro forma  motion.8  Among the ends to which a motion for reconsideration is Service Act had been amended by Section 5(g) of R.A. No. 7925, which reads:

addressed is precisely to convince the court that its ruling is erroneous and
improper, contrary to the law or evidence; and in so doing, the movant has to
Sec. 5. Responsibilities of the National Telecommunications Commission. - The possible, seeming conflicts in the laws and resolve doubts in favor of their validity
National Telecommunications Commission (Commission) shall be the principal and co-existence.14

administrator of this Act and as such shall take the necessary measures to
implement the policies and objectives set forth in this Act. Accordingly, in Here, there does not even appear to be a conflict between Section 40(g) of the
addition to its existing functions, the Commission shall be responsible for the Public Service Act, as amended, and Section 5(g) of R.A. 7925. In fact, the latter
following:
provision directs petitioner NTC to "continue to impose such fees and charges
xxx xxx xxx
as may be necessary to cover reasonable costs and expenses for the regulation
and supervision of telecommunications entities." The absence alone of the word
g) In the exercise of its regulatory powers,  continue to impose such fees and "authorization" in Section 5(g) of R.A. No. 7921 cannot be construed to mean that
charges as may be necessary to cover reasonable costs and expenses for petitioner NTC had thus been deprived of the power to collect such fees. As
the regulation and supervision of the operations of telecommunications pointed out by the petitioner, the words "authorization, supervision and/or
entities.
regulation" used in Section 40(g) of the Public Service Act are not distinct and
completely separable concepts which may be taken singly or piecemeal. Taken in
The CA ratiocinated that while Section 40(g) of the Public Service Act (CA 146, as their entirety, they are the quintessence of the Commission's regulatory functions,
amended), supra, allowed NTC to impose fees as reimbursement of its expenses and must go hand-in-hand with one another. In petitioner's own words, "[t]he
related to, among other things, the "authorization" of public services, Section Commission authorizes, supervises and regulates telecommunications entities
5(g), above, of R.A. No. 7921 no longer speaks of "authorization" but only of and these functions... cannot be considered singly without destroying the whole
"regulation" and "supervision." To the CA, the omission by Section 5(g) of R.A. concept of the Commission's regulatory functions."15  Hence, petitioner NTC is
No. 7921 of the word "authorization" found in Section 40(g) of the Public Service correct in asserting that the passage of R.A. 7925 did not bring with it the
Act, as amended, meant that the fees which NTC may impose are only for abolition of permit fees.

reimbursement of its expenses for regulation and supervision but no longer for
authorization purposes.
However, while petitioner had made some valid points of argument, its position
must, of necessity, crumble on the fourth issue raised in its petition. Petitioner
We find, however, that NTC is correct in saying that there is no showing of itself admits that the fees imposed are precisely regulatory and supervision fees,
legislative intent to repeal, even impliedly, Section 40(g), supra, of the Public and  not  taxes. This necessarily implies, however, that such fees must be
Service Act, as amended. An implied repeal is predicated on a substantial conflict commensurate to the costs and expenses involved in discharging its supervisory
between the new and prior laws. In the absence of an express repeal, a and regulatory functions. In the words of Section 40(g) of the Public Service Act
subsequent law cannot be construed as repealing a prior one unless an itself, the fees and charges which petitioner NTC is authorized to collect from any
irreconcilable inconsistency and repugnancy exist in the terms of the new and old public service or applicant are limited to the "reimbursement of its expenses in
laws.11 The two laws must be absolutely incompatible such that they cannot be the authorization, supervision and/or regulation of public services." It is difficult to
made to stand together.12
comprehend how the cost of licensing, regulating, and surveillance could amount
toP1,190,750.50. The CA was correct in finding the amount imposed as permit
Courts of justice, when confronted with apparently conflicting statutes or fee exorbitant and in complete disregard of the basic limitation that the fee
provisions, should endeavor to reconcile the same instead of declaring outright should be at least approximately commensurate to the expense. Petitioner itself
the validity of one as against the other. Such alacrity should be avoided. The wise admits that it had imposed the maximum amount possible under the Public
policy is for the judge to harmonize such statutes or provisions if this is possible, Service Act, as amended. That is hardly taking into consideration the actual costs
bearing in mind that they are equally the handiwork of the same legislature, and of fulfilling its regulatory and supervisory functions.

so give effect to both while at the same time also according due respect to a
coordinate department of the government. It is this policy the Court will apply in Independent of the above, there is one basic consideration for the dismissal of
arriving at the interpretation of the laws and the conclusions that should follow this petition, about which petitioner NTC did not bother to comment at all. We
therefrom.13
refer to the fact that, as respondent ICC aptly observed, the principal ground
given by the CA in striking down the imposition of the P1,190,750.50 fee is that
It is a rule of statutory construction that repeals by implication are not favored. An respondent ICC is entitled to the benefits of the so-called "parity clause"
implied repeal will not be allowed unless it is convincingly and unambiguously embodied in Section 23 of R.A. No. 7925, to wit:

demonstrated that the two laws are so clearly repugnant and patently
inconsistent with each other that they cannot co-exist. This is based on the
rationale that the will of the legislature cannot be overturned by the judicial
function of construction and interpretation. Courts cannot take the place of
Congress in repealing statutes. Their function is to try to harmonize, as much as
Section 23. Equality of Treatment in the Telecommunications Industry. - Any
advantage, favor, privilege, exemption, or immunity granted under existing
franchises, or may hereafter be granted, shall ipso facto become part of
previously granted telecommunications franchises and shall be accorded conference or requiring them to submit position papers or other documents
immediately and unconditionally to the grantees of such franchises x x x.
enforceability thereof only in Metro Manila; and their being applicable only to
taxicabs and not to other transportation services.

In this connection, it is significant to note that the subsequent congressional 

franchise granted to the Domestic Satellite Corporation under Presidential Decree The Supreme Court held that there was no denial of due process since calling the
No. 947, states:
taxicab operators or persons who may be affected by the questioned Circulars to
Section 6. In consideration of the franchise and rights hereby granted, the a conference or requiring them to submit position papers or other documents is
grantee shall pay to the Republic of the Philippines during the life of this franchise only one of the options open to the BOT which is given wide discretionary
a tax of one-half percent of gross earnings derived by the grantee from its authority under P.D. No. 101; and fixing a six- year ceiling for a car to be operated
operation under this franchise and which originate from the Philippines. Such tax as taxicab is a reasonable standard adopted to apply to all vehicles affected
shall be due and payable annually within ten days after the audit and approval of uniformly, fairly, and justly. The Court also ruled that neither has the equal
the accounts by the Commission on Audit as prescribed in Section 11 hereof protection clause been violated by initially enforcing the Circulars only in Metro
and shall be in lieu of all taxes, assessments, charges, fees, or levies of any Manila since it is of common knowledge that taxicabs in this city, compared to
kind, nature, or description  levied, established or collected by any those of other places, are subjected to heavier traffic pressure and more constant
municipal, provincial, or national authority x x x
use, thus making for a substantial distinction; nor by non-application of the
Circulars to other transportation services because the said Circulars satisfy the
The CA was correct in ruling that the above-quoted provision is, by law, criteria required under the equal protection clause, which is the uniform operation
considered as  ipso facto  part of ICC's franchise due to the "parity clause" by legal means so that all persons under identical or similar circumstances would
embodied in Section 23 of R.A. No. 7925. Accordingly, respondent ICC cannot be be accorded the same treatment both in privilege conferred and the liabilities
made subject to the payment of the subject fees because its payment of the imposed.

franchise tax is "in lieu" of all other taxes and fees.

WHEREFORE, the petition is hereby  DENIED  and the assailed Amended D E C I S I O N

Decision and Resolution of the CA are AFFIRMED. SO ORDERED.

MELENCIO-HERRERA, J.:



This Petition for" Certiorari, Prohibition and Mandamus with Preliminary Injunction
and Temporary Restraining Order" filed by the Taxicab Operators of Metro Manila,
[G.R. No. L-59234. September 30, 1982.]
 Inc., Felicisimo Cabigao and Ace Transportation, seeks to declare the nullity of

 Memorandum Circular No. 77-42, dated October 10, 1977, of the Board of
TAXICAB OPERATORS OF METRO MANILA, INC., FELICISIMO CABIGAO Transportation, and Memorandum Circular No. 52, dated August 16, 1980, of the
and ACE TRANSPORTATION CORPORATION, Petitioners, v. THE BOARD OF Bureau of Land Transportation.

TRANSPORTATION and THE DIRECTOR OF THE BUREAU OF LAND 

TRANSPORTATION, Respondents.
 Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a domestic
corporation composed of taxicab operators, who are grantees of Certificates of

 Public Convenience to operate taxicabs within the City of Manila and to any other
SYNOPSIS
place in Luzon accessible to vehicular traffic. Petitioners Ace Transportation
Petitioners who are taxicab operators assail the constitutionality of Memorandum Corporation and Felicisimo Cabigao are two of the members of TOMMI, each
Circular No. 77-42 issued by the Board of Transportation (BOT) providing for the being an operator and grantee of such certificate of public convenience.

phasing out and replacement of old and dilapidated taxicabs; as well as 

Implementing Circular No. 52 issued pursuant thereto by the Bureau of Land On October 10, 1977, respondent Board of Transportation (BOT) issued
Transportation (BLT) instructing personnel of the BLT within the National Capital Memorandum Circular No. 77-42 which reads:chanrob1es virtual 1aw library

Region to implement the said BOT Circular, and formulating a schedule of phase- 

out of vehicles to be allowed and accepted for registration as public SUBJECT: Phasing out and Replacement of

conveyances. Petitioners allege that the questioned Circulars did not afford them 

procedural and substantive due process, equal protection of the law, and Old and Dilapidated Taxis

protection against arbitrary and unreasonable classification and standard. Among 

others, they question the issuance of the Circulars without first calling them to a "WHEREAS, it is the policy of the government to insure that only safe and
comfortable units are used as public conveyances;


 

WHEREAS, the riding public, particularly in Metro-Manila, has, time and again, "Pursuant to BOT Memo Circular No. 77-42, taxi units with year models over six
complained against, and condemned, the continued operation of old and (6) years old are now banned from operating as public utilities in Metro Manila. As
dilapidated taxis;
 such the units involved should be considered as automatically dropped as public

 utilities and, therefore, do not require any further dropping order from the BOT.

WHEREAS, in order that the commuting public may be assured of comfort, 

convenience, and safety, a program of phasing out of old and dilapidated taxis "Henceforth, taxi units within the National Capitol Region having year models
should be adopted;
 over 6 years old shall be refused registration. The following schedule of phase-

 out is herewith prescribed for the guidance of all concerned: 

WHEREAS, after studies and inquiries made by the Board of Transportation, the 

latter believes that in six years of operation, a taxi operator has not only covered "Year Model Automatic Phase-Out Year

the cost of his taxis, but has made reasonable profit for his investments;
 


 1980

NOW, THEREFORE, pursuant to this policy, the Board hereby declares that no 

car beyond six years shall be operated as taxi, and in implementation of the 1974 1981

same hereby promulgates the following rules and regulations:chanrob1es virtual 

1aw library
 1975 1982


 

1. As of December 31, 1977, all taxis of Model 1971 and earlier are ordered 1976 1983

withdrawn from public service and thereafter may no longer be registered and 

operated as taxis. In the registration of cards for 1978, only taxis of Model 1972 1977

and later shall be accepted for registration and allowed for operation;
 


 etc. etc.

2. As of December 31, 1978, all taxis of Model 1972 are ordered withdrawn from 

public service and thereafter may no longer be registered and operated as taxis. Strict compliance here is desired." 2 

In the registration of cars for 1979, only taxis of Model 1973 and later shall be 

accepted for registration and allowed for operation; and every year thereafter, In accordance therewith, cabs of model 1971 were phase-out in registration year
there shall be a six-year lifetime of taxi, to wit: 
 1978; those of model 1972, in 1979; those of model 1973, in 1980; and those of

 model 1974, in 1981.

1980 — Model 1974
 


 On January 27, 1981, petitioners filed a Petition with the BOT, docketed as Case
1981 — Model 1975, etc.
 No. 80-7553, seeking to nullify MC No. 77-42 or to stop its implementation; to

 allow the registration and operation in 1981 and subsequent years of taxicabs of
All taxis of earlier models than those provided above are hereby ordered model 1974, as well as those of earlier models which were phased-out, provided
withdrawn from public service as of the last day of registration of each particular that, at the time of registration, they are roadworthy and fit for operation.

year and their respective plates shall be surrendered directly to the Board of 

Transportation for subsequent turnover to the Land Transportation Commission.
 On February 16, 1981, petitioners filed before the BOT a "Manifestation and

 Urgent Motion", praying for an early hearing of their petition. The case was heard
For an orderly implementation of this Memorandum Circular, the rules herein shall on February 20, 1981. Petitioners presented testimonial and documentary
immediately be effective in Metro-Manila. Its implementation outside Metro evidence, offered the same, and manifested that they would submit additional
Manila shall be carried out only after the project has been implemented in Metro documentary proofs. Said proofs were submitted on March 27, 1981 attached to
Manila and only after the date has been determined by the Board." 1 
 petitioners’ pleading entitled, "Manifestation, Presentation of Additional Evidence

 and Submission of the Case for Resolution." 3 

Pursuant to the above BOT circular, respondent Director of the Bureau of Land 

Transportation (BLT) issued Implementing Circular No. 52, dated August 15, On November 28, 1981, petitioners filed before the same Board a "Manifestation
1980, instructing the Regional Director, the MV Registrars and other personnel of and Urgent Motion to Resolve or Decide Main Petition" praying that the case be
BLT, all within the National Capitol Region, to implement said Circular, and resolved or decided not later than December 10, 1981 to enable them, in case of
formulating a schedule of phase-out of vehicles to be allowed and accepted for denial, to avail of whatever remedy they may have under the law for the
registration as public conveyances. To quote said Circular: 
 protection of their interests before their 1975 model cabs are phased-out on
January 1, 1982.
 means of inquiry."cralaw virtua1aw library


 

Petitioners, through its President, allegedly made personal follow-ups of the In support of their submission that they were denied procedural due process,
case, but was later informed that the records of the case could not be located.
 petitioners contend that they were not called upon to submit their position

 papers, nor were they ever summoned to attend any conference prior to the
On December 29, 1981, the present Petition was instituted wherein the following issuance of the questioned BOT Circular.

queries were posed for consideration by this Court: 
 


 It is clear from the provision aforequoted, however, that the leeway accorded the
"A. Did BOT and BLT promulgate the questioned memorandum circulars in Board gives it a wide range of choice in gathering necessary information or data
accord with the manner required by Presidential Decree No. 101, thereby in the formulation of any policy, plan or program. It is not mandatory that it should
safeguarding the petitioners’ constitutional right to procedural due process?
 first call a conference or require the submission of position papers or other

 documents from operators or persons who may be affected, this being only one
B. Granting arguendo, that respondents did comply with the procedural of the options open to the Board, which is given wide discretionary authority.
requirements imposed by Presidential Decree No. 101, would the implementation Petitioners cannot justifiably claim, therefore, that they were deprived of
and enforcement of the assailed memorandum circulars violate the petitioners’ procedural due process. Neither can they state with certainty that public
constitutional rights to.
 respondents had not availed of other sources of inquiry prior to issuing the

 challenged Circulars Operators of public conveyances are not the only primary
(1) Equal protection of the law;
 sources of the data and information that may be desired by the BOT.


 

(2) Substantive due process; and
 Dispensing with a public hearing prior to the issuance of the Circulars is neither

 violative of procedural due process. As held in Central Bank v. Hon. Cloribel and
(3) Protection against arbitrary and unreasonable classification and standard?
 Banco Filipino, 44 SCRA 307 (1972): 


 

On Procedural and Substantive Due Process: 
 "Previous notice and hearing as elements of due process, are constitutionally

 required for the protection of life or vested property rights, as well as of liberty,
Presidential Decree No. 101 grants to the Board of Transportation the power
 when its limitation or loss takes place in consequence of a judicial or quasi-

 judicial proceeding, generally dependent upon a past act or event which has to
"4. To fix just and reasonable standards, classification, regulations, practices, be established or ascertained. It is not essential to the validity of general rules or
measurements, or service to be furnished, imposed, observed, and followed by regulations promulgated to govern future conduct of a class or persons or
operators of public utility motor vehicles." 
 enterprises, unless the law provides otherwise." (Emphasis supplied)


 

Section 2 of said Decree provides procedural guidelines for said agency to follow Petitioners further take the position that fixing the ceiling at six (6) years is
in the exercise of its powers:jgc:chanrobles.com.ph
 arbitrary and oppressive because the road-worthiness of taxicabs depends upon

 their kind of maintenance and the use to which they are subjected, and,
"Sec. 2. Exercise of powers. — In the exercise of the powers granted in the therefore, their actual physical condition should be taken into consideration at the
preceding section, the Board shall proceed promptly along the method of time of registration. As public respondents contend, however, it is impractical to
legislative inquiry.
 subject every taxicab to constant and recurring evaluation, not to speak of the

 fact that it can open the door to the adoption of multiple standards, possible
Apart from its own investigation and studies, the Board, in its discretion, may collusion, and even graft and corruption. A reasonable standard must be adopted
require the cooperation and assistance of the Bureau of Transportation, the to apply to all vehicles affected uniformly, fairly, and justly. The span of six years
Philippine Constabulary, particularly the Highway Patrol Group, the support supplies that reasonable standard. The product of experience shows that by that
agencies within the Department of Public Works, Transportation and time taxis have fully depreciated, their cost recovered, and a fair return on
Communications, or any other government office or agency that may be able to investment obtained. They are also generally dilapidated and no longer fit for safe
furnish useful information or data in the formulation of the Board of any policy, and comfortable service to the public specially considering that they are in
plan or program in the implementation of this Decree.
 continuous operation practically 24 hours everyday in three shifts of eight hours

 per shift. With that standard of reasonableness and absence of arbitrariness, the
The Board may also call conferences, require the submission of position papers requirement of due process has been met.

or other documents, information, or data by operators or other persons that may 

be affected by the implementation of this Decree, or employ any other suitable On Equal Protection of the Law: 


Petitioners alleged that the Circular in question violates their right to equal
protection of the law because the same is being enforced in Metro Manila only
and is directed solely towards the taxi industry. At the outset it should be pointed
out that implementation outside Metro Manila is also envisioned in Memorandum
Circular No. 77-42. To repeat the pertinent portion: 



"For an orderly implementation of this Memorandum Circular, the rules herein
shall immediately be effective in Metro Manila. Its implementation outside Metro
Manila shall be carried out only after the project has been implemented in Metro
Manila and only after the date has been determined by the Board." 4 



In fact, it is the understanding of the Court that implementation of the Circulars in
Cebu City is already being effected, with the BOT in the process of conducting
studies regarding the operation of taxicabs in other cities.



The Board’s reason for enforcing the Circular initially in Metro Manila is that
taxicabs in this city, compared to those of other places, are subjected to heavier
traffic pressure and more constant use. Thus is of common knowledge.
Considering that traffic conditions are not the same in every city, a substantial
distinction exists so that infringement of the equal protection clause can hardly
be successfully claimed.
 53090. On August 26, 1939, the petitioner filed with the Public Service


As enunciated in the preambular clauses of the challenged BOT Circular, the
overriding consideration is the safety and comfort of the riding public from the
dangers posed by old and dilapidated taxis. The State, in the exercise of its
police power, can prescribe regulations to promote the health, morals, peace,
good order, safety and general welfare of the people. It can prohibit all things
hurtful to comfort, safety and welfare of society. 5 It may also regulate property
rights. 6 In the language of Chief Justice Enrique M. Fernando "the necessities
imposed by public welfare may justify the exercise of governmental authority to
regulate even if thereby certain groups may plausibly assert that their interests
are disregarded." 7 
 publica expedidos en los expedientes Nos. 24948, 30973, 36831, 32014 y la


In so far as the non-application of the assailed Circulars to other transportation
services is concerned, it need only be recalled that the equal protection clause
does not imply that the same treatment be accorded all and sundry. It applies to
things or persons identically or similarly situated. It permits of classification of the
object or subject of the law provided classification is reasonable or based on
substantial distinction, which make for real differences, and that it must apply
equally to each member of the class. 8 What is required under the equal
protection clause is the uniform operation by legal means so that all persons
under identical or similar circumstance would be accorded the same treatment
both in privilege conferred and the liabilities imposed. 9 The challenged Circulars
satisfy the foregoing criteria.
 adquisicion."
Evident then is the conclusion that the questioned Circulars do not suffer from
any constitutional infirmity. To declare a law unconstitutional, the infringement of
constitutional right must be clear, categorical and undeniable. 10 

WHEREFORE, the Writs prayed for are denied and this Petition is hereby
dismissed. No costs. SO ORDERED.
[G.R. No. 47065. June 26, 1940.]



PANGASINAN TRANSPORTATION CO., INC.,  Petitioner, v. THE PUBLIC
SERVICE COMMISSION,Respondent. 

D E C I S I O N

LAUREL, J.:

The petitioner has been engaged for the past twenty years in the business of
transporting passengers in the Provinces of Pangasinan and Tarlac and, to a
certain extent, in the Provinces of Nueva Ecija and Zambales, by means of motor
vehicles commonly known as TPU buses, in accordance with the terms and
conditions of the certificates of public convenience issued in its favor by the
former Public Utility Commission in cases Nos. 24948, 30973, 36831, 32014 and
Commission an application for authorization to operate ten additional new
Brockway trucks (case No. 56641), on the ground that they were needed to
comply with the terms and conditions of its existing certificates and as a result of
the application of the Eight Hour Labor Law. In the decision of September 26,
1339, granting the petitioner’s application for increase of equipment, the Public
Service Commission ordered: 



"Y de acuerdo con lo que se provee por el articulo 15 de la Ley No. 146 del
Commonwealth, tal como ha sido enmendada por el articulo 1 de la Ley No. 454,
por la presente se enmienda las condiciones de los certificados de conveniencia
autorizacion concedida en el expediente No. 53090, asi que se consideran
incorporadas en los mismos las dos siguientes condiciones: 



"Que los certificados de conveniencia publica y autorizacion arriba mencionados
seran validos y subsistentes solamente durante el periodo de veinticinco (25)
anos, contados desde la fecha de la promulgacion de esta decision. 



"Que la empresa de la solicitante podra ser adquirida por el Commonwealth de
Filipinas o por alguna dependencia del mismo en cualquier tiempo que lo
deseare previo pago del precio de costo de su equipo util, menos una
depreciacion razonable que se ha de fijar por la Comision al tiempo de su


Not being agreeable to the two new conditions thus incorporated in its existing
certificates, the petitioner filed on October 9, 1939 a motion for reconsideration
which was denied by the Public Service Commission on November 14, 1939. market shall be taken into consideration. 

Whereupon, on November 20, 1939, the present petition for a writ 

of  certiorariwas instituted in this court praying that an order be issued directing "The foregoing is likewise applicable to any extension or amendment of
the secretary of the Public Service Commission to certify forthwith to this court certificates actually in force and to those which may hereafter be issued, to
the records of all proceedings in case No. 56641; that this court, after hearing, permits to modify itineraries and time schedules of public services and to
render a decision declaring section 1 of Commonwealth Act No. 454 authorizations to renew and increase equipment and properties." 

unconstitutional and void; that, if this court should be of the opinion that section 

1 of Commonwealth Act No. 454 is constitutional, a decision be rendered Under the first paragraph of the aforequoted section 15 of Act No. 146, as
declaring that the provisions thereof are not applicable to valid and subsisting amended, no public service can operate without a certificate of public
certificates issued prior to June 8, 1939. Stated in the language of the petitioner, convenience or certificate of convenience and public necessity to the effect that
it is contended: 
 the operation of said service and the authorization to do business will promote

 "public interests in a proper and suitable manner." Under the second paragraph,
"1. That the legislative powers granted to the Public Service Commission by one of the conditions which the Public Service Commission may prescribe for the
section 1 of Commonwealth Act No. 454, without limitation, guide or rule except issuance of the certificate provided for in the first paragraph is that "the service
the unfettered discretion and judgment of the Commission, constitute a complete can be acquired by the Commonwealth of the Philippines or by any
and total abdication by the Legislature of its functions in the premises, and. for instrumentality thereof upon payment of the cost price of its useful equipment,
that reason, the Act, in so far as those powers are concerned, is unconstitutional less reasonable depreciation," a condition which is virtually a restatement of the
and void. 
 principle already embodied the Constitution, section 6 of Article XII, which

 provides at "the State may, in the interest of national welfare and defense,
"2. That even if it be assumed that section 1 of Commonwealth Act No. 454, is a establish and operate industries and means of transportation and
valid delegation of legislative powers, the Public Service Commission has communication, and, upon payment of just compensation, transfer to public
exceeded its authority because: (a) The Act applies only to future certificates and ownership utilities d other private enterprises to be operated by the
not to valid and subsisting certificates issued prior to June 8, 1939, when said Government." Another condition which the Commission may prescribe, and
Act took effect, and (b) the Act, as applied by the Commission, violates which is assailed by the petitioner, is that the certificate "shall be valid only for a
constitutional guarantees. 
 definite period of time." As there is a relation between the first and second

 paragraphs of said section 15, the two provisions must be read and interpreted
Section 15 of Commonwealth Act No. 146, as amended by section 1 of together. That is to say, in issuing a certificate, the Commission must necessarily
Commonwealth Act No. 454, invoked by the respondent Public Service be satisfied that the operation of the service under said certificate during a
Commission in the decision complained of in the present proceedings, reads as definite period fixed therein "will promote the public interests in a proper and
follows: 
 suitable manner." Under section 16 (a) of Commonwealth Act No. 146 which is a

 complement of section 15, the Commission is empowered to issue certificates of
"With the exception of those enumerated in the preceding section, no public public convenience whenever it "finds that the operation of the public service
service shall operate in the Philippines without possessing a valid and subsisting proposed and the authorization to do business will promote the public interests in
certificate from the Public Service Commission, known as ’certificate of public a proper and suitable manner." Inasmuch as the period to be fixed by the
convenience,’ or ’certificate of convenience and public necessity,’ as the case Commission under section 15 is inseparable from the certificate itself, said period
may be, to the effect that the operation of said service and the authorization to cannot be disregarded by the Commission in determining the question whether
do business will promote the public interests in a proper and suitable manner. 
 the issuance of the certificate will promote the public interests in a proper and

 suitable manner. Conversely, in determining "a definite period of time," the
"The Commission may prescribe as a condition for the issuance of the certificate Commission will be guided by "public interests," the only limitation to its power
provided in the preceding paragraph that the service can be acquired by the being that said period shall not exceed fifty years (sec. 16 (a), Commonwealth Act
Commonwealth of the Philippines or by any instrumentality thereof upon payment No. 146; Constitution, Art. XIII, sec. 8.) We have already ruled that "public
of the cost price of its useful equipment, less reasonable depreciation; and interest" furnishes a sufficient standard. (People v. Fernandez and Trinidad, G. R.
likewise, that the certificate shall be valid only for a definite period of time; and No. 45655, promulgated June 15, 1938; People v. Rosenthal and Osmeña, G. R.
that the violation of any of these conditions shall produce the immediate Nos. 46076 and 46077, promulgated June 12, 1939, citing New York Central
cancellation of the certificate without the necessity of any express action on the Securities Corporation v. U. S. A., 287 U. S. 12, 24, 25, 77 Law. ed. 138, 145,
part of the Commission. 
 146; Schenchter Poultry Corporation v. U. S., 295 U. S. 495, 540, 79 Law. ed.

 1570,1585; Ferrazzini v. Gsell, 34 Phil., 697, 711-712.) 

"In estimating the depreciation, the effect of the use of the equipment, its actual 

condition, the age of the model, or other circumstances affecting its value in the Section 8 of Article XIII of the Constitution provides, among other things, that no
franchise, certificate, or any other form of authorization for the operation of a
public utility shall be "for a longer period than fifty years," and when it was
ordained, in section 15 of Commonwealth Act No. 146, as amended by
Commonwealth Act No. 454, that the Public Service Commission may prescribe
as a condition for the issuance of a certificate that it "shall be valid only for a
definite period of time" and, in section 16 (a) that "no such certificates shall be
issued for a period of more than fifty years," the National Assembly meant to give
effect to the aforesaid constitutional mandate. More than this, it has thereby also
declared its will that the period to be fixed by the Public Service Commission
shall not be longer than fifty years. All that has been delegated to the
Commission, therefore, is the administrative function, involving the use of
discretion, to carry out the will of the National Assembly having in view, in
addition, the promotion of "public interests in a proper and suitable manner." The
fact that the National Assembly may itself exercise the function and authority thus
conferred upon the Public Service Commission does not make the provision in
question constitutionally objectionable. 
 an attempt to suppress, by way of amendment, the sentence "and likewise, that


The theory of the separation of powers is designed by its originators to secure
action and at the same time to forestall over action which necessarily results from
undue concentration of powers, and thereby obtain efficiency and prevent
despotism. Thereby, the "rule of law" was established which narrows the range of
governmental action and makes it subject to control by certain legal devices. As
a corollary, we find the rule prohibiting delegation of legislative authority, and from
the earliest time American legal authorities have proceeded on the theory that
legislative power must be exercised by the legislature alone. It is frankness,
however, to confess that as one delves into the mass of judicial pronouncements,
he finds a great deal of confusion. One thing, however, is apparent in the
development of the principle of separation of powers and that is that the maxim
of delegatus non potest delegari or delegata potestas non potest delegari,
attributed to Bracton (De Legibus et Consuetedinious Angliae, edited by G.E.
Woodbine, Yale University Press, 1922, vol. 2, p. 167) but which is also
recognized in principle in the Roman Law (D. 17.18.3), has been made to adapt
itself to the complexities of modern governments, giving rise to the adoption,
within certain limits, of the principle of "subordinate legislation," not only in the
United States and England but in practically all modern governments. (People v.
Rosenthal and Osmeña, G. R. Nos. 46076 and 46077, promulgated June 12,
1939.) Accordingly, with the growing complexity of modern life, the multiplication
of the subjects of governmental regulation, and the increased difficulty of
administering the laws, there is a constantly growing tendency toward the
delegation of greater powers by the legislature, and toward the approval of the
practice by the courts. (Dillon Catfish Drainage Dist. v. Bank of Dillon, 141 S. E.
274, 275, 143 S. Ct. 178; State v. Knox County, 54 S. W. 2d. 973, 976, 165 Tenn.
319.) In harmony with such growing tendency, this Court, since the decision in
the case of Compania General de Tabacos de Filipinas v. Board of Public Utility
Commissioners (34 Phil., 136), relied upon by the petitioner, has, in instances,
extended its seal of approval to the "delegation of greater powers by the
legislature." (Inchausti Steamship Co. v. Public Utility Commissioner, 44 Phil.,
366; Alegre v. Collector of Customs, 53 Phil., 394; Cebu Autobus Co. v. De Jesus,
56 Phil., 446; People v. Fernandez & Trinidad, G. R. No, 45655, promulgated June
15, 1938 in People v. Rosenthal & Osmeña, G. R. Nos. 46076, 46077,
promulgated June 12, 1939; and Robb and Hilscher v. People, G.R. No. 45866,
promulgated June 12, 1939.) 



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




"Sr. CUENCO. Senor Presidente, para otra enmienda. En la misma pagina, lineas
23 y 24, pido que se supriman las palabras ’and likewise, that the certificate shall
be valid only for a definite period of time.’ Esta disposicion del proyecto autoriza
a la Comision de Servicios Publicos a fijar un plazo de vigencia del certificado de
conveniencia publica. Todo el mundo sabe que no se puede determinar cuando
los intereses del servicio publico requieren la explotacion de un servicio publico y
como ha de saber la Comision de Servicios Publicos, si en un tiempo
determinado, la explotacion de algunos buses en cierta ruta ya no tiene razon de
ser, sobre todo, si se tiene en cuenta; que la explotacion de los servicios publicos
depende de condiciones fluctuantes, asi como del volumen del trafico y de otras
condiciones. Ademas, el servicio publico se concede por la Comision de
Servicios Publicos cuando el interes publico asi lo exige. El interes publico no
tiene duracion fija, no es permanente; es un proceso mas o menos indefinido en
cuanto al tiempo. Se ha acordado eso en el caucus de anoche. 



"El PRESIDENTE PRO TEMPORE. Que dice el Comite?



"Sr. ALANO. El Comite siente tener que rechazar esa enmienda, en vista de que
esto de los certificados de conveniencia publica es igual que la franquicia: se
puede extender. Si los servicios prestados por la compania durante el tiempo de
su certificado lo requiere, puede pedir la extension y se le extendera; pero no
creo conveniente el que nosotros demos un certificado de conveniencia publica
de urla manera que podria pasar de cincuenta anos, porque seria
anticonstitucional."
x       x       x




By a majority vote the proposed amendment was defeated. (Sesion de 17 de
mayo de 1939, Asamblea Nacional.) 
 prior to May 1, 1917, as against those subsequently securing such rights under a


The petitioner is mistaken in the suggestion that, simply because its existing
certificates had been granted before June 8, 1939, the date when
Commonwealth Act No. 454, amendatory of section 15 of Commonwealth Act
No. 146, was approved, it must be deemed to have the right of holding them in
perpetuity. Section 74 of the Philippine Bill provided that "no franchise, privilege,
or concession shall be granted to any corporation except under the conditions
that it shall be subject to amendment, alteration, or repeal by the Congress of the
United States." The Jones Law, incorporating a similar mandate, provided, in
section 28, that "no franchise or right shall be granted to any individual, firm, or
corporation except under the conditions that it shall be subject to amendment,
alteration, or repeal by the Congress of the United States." Lastly, the
Constitution of the Philippines provides, in section 8 of Article XIII, that "no
franchise or right shall be granted to any individual, firm, or corporation, except
under the condition that it shall be subject to amendment, alteration, or repeal by
the National Assembly when the public interest so requires." The National
Assembly, by virtue of the Constitution, logically succeeded to the Congress of
the United States in the power to amend, alter or repeal any franchise or right
granted prior to or after the approval of the Constitution; and when
Commonwealth Acts Nos. 146 and 454 were enacted, the National Assembly, to
the extent therein provided, has declared its will and purpose to amend or alter
existing certificates of public convenience. 
 This right of the state to regulate public utilities is founded upon the police power,


Upon the other hand, statutes enacted for the regulation of public utilities, being
a proper exercise by the state of its police power, are applicable not only to those
public utilities coming into existence after its passage, but likewise to those
already established and in operation. 
 of the laws, especially inasmuch as the question whether or not private property


"Nor is there any merit in petitioner’s contention, that, because of the
establishment of petitioner’s operations prior to May 1, 1917, they are not subject
to the regulations of the Commission. Statutes for the regulation of public utilities
are a proper exercise by the state of its police power. As soon as the power is
exercised, all phases of operation of established utilities, become at once subject
to the police power thus called into operation. Producers’ Transportation Co. v.
Railroad Commission, 251 U. S. 228, 40 Sup. Ct. 131, 64 Law. ed. 239, Law v.
Railroad Commission, 184 Cal. 737, 195 Pac. 423, 14 A. L. R. 249. The statute is
applicable not only to those public utilities coming into existence after its
passage, but likewise to those already established and in operation. The ’Auto
Stage and Truck Transportation Act’ (Stats. 1917, c. 213) is a statute passed in
pursuance of the police power. The only distinction recognized in the statute
between those established before and those established after the passage of the
act is in the method of the creation of their operative rights. A certificate of public
convenience and necessity is required for any new operation, but no such
certificate is required of any transportation company for the operation which was
actually carried on in good faith on May 1, 1917. This distinction in the creation of
their operative rights in no way affects the power of the Commission to supervise
and regulate them. Obviously the power of the Commission to hear and dispose
of complaints is as effective against companies securing their operative rights
certificate of public convenience and necessity. (Motor Transit Co. Et. Al. v.
Railroad Commission of California Et. Al., 209 Pac. 586.)" 



Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic acts of
the Public Service Commission but are "a part of the charter of every utility
company operating or seeking to operate a franchise" in the Philippines. (Streator
Aqueduct Co. v. Smith Et. Al., 295 Fed. 385.) The business of a common carrier
holds such a peculiar relation to the public interest that there is superinduced
upon it the right of public regulation. When private property is "affected with a
public interest it ceased to be juris privati only." When, therefore, one devotes his
property to a use in which the public has an interest, he, in effect, grants to the
public an interest in that use, and must submit to be controlled by the public for
the common good, to the extent of the interest he has thus created. He may
withdraw his grant by discontinuing the use, but so long as he maintains the use
he must submit to control. Indeed, this right of regulation is so far beyond
question that it is well settled that the power of the state to exercise legislative
control over public utilities may be exercised through boards of commissioners.
(Fisher v. Yangco Steamship Company, 31 Phil., 1, citing Munn v. Illinois, 94 U. S.
113; Georgia R. & Bkg. Co. v. Smith, 128 U. S. 174; Budd v. New York, 143 U. S.
517; New York etc. R. Co. v. Bristol, 151 U. S. 556, 571; Connecticut etc. R. Co.
v. Woodruff, 153 U. S. 689; Louisville etc. Ry Co. v. Kentucky, 161 U. S. 677, 695.)
and statutes for the control and regulation of utilities are a legitimate exercise
thereof, for the protection of the public as well as of the utilities themselves. Such
statutes are, therefore, not unconstitutional, either as impairing the obligation of
contracts, taking property without due process, or denying the equal protection
shall be devoted to a public use and the consequent burdens assumed is
ordinarily for the owner to decide; and if he voluntarily places his property in
public service he cannot complain that it becomes subject to the regulatory
powers of the state. (51 C. J., sec. 21, pp. 9-10.) This is the more so in the light of
authorities which hold that a certificate of public convenience constitutes neither
a franchise nor a contract, confers no property right, and is a mere license or
privilege. (Burgess v. Mayor & Aldermen of Brockton, 235 Mass. 95, 100, 126 N.E.
456; Roberto v. Commissioners of Department of Public Utilities, 262 Mass. 583,
160 N.E. 321, Scheible v. Hogan, 113 Ohio St., 83 148 N.E. 581; Matz v. Curtis
[J.L. ] Cartage Co., [1937], 132 Ohio St. 271, 7 N.E. [2d] 220; Manila Yellow
Taxicab Co. v. Sabellano, 59 Phil. 773.) 



Whilst the challenge provisions of Commonwealth Act No. 454 are valid and
constitutional, we are, however. of the opinion that the decision of the Public
Service Commission should be reversed and the case remanded thereto for
further proceedings for the reason now to be stated. Th Public Service
Commission has power, upon proper notice and hearing, "to amend, modify or
revoke at any time any certificate issued under the provisions of this Act,
whenever the facts and circumstances of the strength of which said certificate
was issued have been misrepresented or materially changed." (Section 16, par.
[m]. Commonwealth Act No. 146.) The petitioner’s application here was for an
increase of its equipment to enable it to comply with the conditions of its
certificates of public convenience. On the matter of limitation of twenty five (25)
years of the life of its certificates of public convenience, there had been neither
notice not opportunity given the petitioner to be heard or present evidence. The
Commission appears to have taken advantage of the petitioner to augment
petitioner’s equipment in imposing the limitation to twenty-five (25) years which
might as well be twenty of fifteen or any number of years. This is, to say the least,
irregular and should not be sanctioned. There are cardinal primary rights which
must be respected even in proceedings of this character. The first of these rights
is the right of a hearing, which includes the right of the party interested or
affected to present his own case and submit evidence in support thereof. In the
language of Chief Justice Hughes, in Morgan 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 v. U. S., 298 U. S. 468, 56 S. Ct. 906, 80 Law.
ed. 1288.) In the language of this Court in Edwards v. McCoy (22 Phil., 598), "the
right to adduce evidence, without the corresponding duty on the part of the
board to consider it, is vain. Such right is conspicuously futile if the person or
persons to whom the evidence is presented can thrust it aside without notice or
consideration." While the duty to deliberate does not impose the obligation to
decide right, it does imply a necessity which cannot be disregarded, namely, that
of having something to support its decision. A decision with absolutely nothing to
support it is a nullity, at least when directly attacked. (Edwards v. 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.