transpo digests june 25, 2012

7/31/2019 Transpo Digests June 25, 2012

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REPUBLIC vs.MANILA ELECTRIC

Facts:

- shall define the limits of the power of respondent MERALCO, a giant

public utility and a monopoly, to charge our people for their electric

consumption.

- The question is: should public interest prevail over private profits?

- December 23, 1993, MERALCO filed with the ERB an app for the

revision of its rate schedules.

o The application reflected an average increase of 21 centavos per

(kwh)

o prayer for provisional approval of the increase pursuant to

Sec16(c) of the Public Service Act and Section 8 of Executive

Order No. 172.

- ERB issued an Order granting a provisional increase of P0.184 per kwh,

subject to:

"In the event, however, that the Board finds, after hearing and submission by the

Commission on Audit of an audit report on the books and records of the applicant

that the latter is entitled to a lesser increase in rates, all excess amounts collected

from the applicant's customers as a result of this Order shall either be refunded to

them or correspondingly credited in their favor for application to electric bills

covering future consumptions."- ERB requested COA to conduct an "audit and examination of the

books and other records of account of the applicant for such period of

time

- COA submitted its Audit Report which contained recommendation not

to include income taxes paid by MERALCO as part of its operating

expenses for purposes of rate determination and the use of the net

average investment method for the computation of the proportionate

value of the properties used by MERALCO during the test year for the

determination of the rate base

- ERB rendered its decision adopting the above recommendations. The

ERB further ordered that "the provisional relief in the amount of P0.184

per kilowatthour granted under the Board's Order dated January 28,

1994 is hereby superseded and modified and the excess average

amount of P0.167 per kilowatthour beginning February 1994 until its


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billing cycles beginning February 1998, be refunded to [MERALCO's]

customers or correspondingly credited in their favor for future

consumption."4

o ERB held that income tax should not be treated as operating

expense as this should be "borne by the stockholders who are

recipients of the income or profits realized from the operation oftheir business" hence, should not be passed on to the consumers.

o ERB adopted the recommendation of COA that in computing the

rate base, only the proportionate value of the property should be

included, determined in accordance with the number of months

the same was actually used in service during the test year.

- CA: set aside the ERB decision insofar as it directed the reduction of

the MERALCO rates and the refund of such amount to MERALCO'scustomers

- Pet are now before the Court seeking a reversal CA

Issues:

- WON income tax paid by MERALCO should be treated as part of its

operating expenses and thus considered in determining the amount of

increase in rates imposed by MERALCO

- WON net average investment method used by the COA and the ERB is

proper

Held: No to income tax; yes to system of ERB

Ratio:

- regulation of rates to be charged by public utilities is founded upon the

police powers of the State. In regulating rates charged by public

utilities, the State protects the public against arbitrary and excessiverates

- When private property is used for a public purpose and is affected with

public interest, it ceases to be juris privati only and becomes subject to

regulation. The regulation is to promote the common good. Submission

to regulation may be withdrawn by the owner by discontinuing use; but

as long as use of the property is continued, the same is subject to

public regulation


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- Thus, the rates prescribed by the State must be one that yields a fair

return on the public utility upon the value of the property performing

the service and one that is reasonable to the public for the services

- While the power to fix rates is a legislative function, a det of whether

the rates so fixed are reasonable and just is a purely judicial question

- ERB was created under EO 172 to regulate the distribution of energyresources and to fix rates to be charged by public utilities involved in

the distribution of electricity.

o In the fixing of rates, the only standard which the legislature is

required to prescribe for the guidance of the administrative

authority is that the rate be reasonable and just.

o requirement of reasonableness comprehends such rates which

must not be so low as to be confiscatory, or too high as to be

oppressive

- jurisprudence holds that factual findings of administrative bodies on

technical matters within their area of expertise should be accorded not

only respect but even finality

- In the cases at bar, findings and conclusions of the ERB on the rate

that can be charged by MERALCO to the public should be respected

- In determining the just and reasonable rates to be charged by a public

utility, three major factors are considered by the regulating agency:

o rate of return

o rate base

o the return itself or the computed revenue to be earned by the

public utility based on the rate of return and rate base

o

The rate of return is a judgment percentage which, if multipliedwith the rate base, provides a fair return on the public utility for

the use of its property for service to the public.2

o The rate of return of a public utility is not prescribed by statute

but by administrative and judicial pronouncements. This Court

has consistently adopted a 12% rate of return for public utilities.


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o The rate base, on the other hand, is an evaluation of the property

devoted by the utility to the public service or the value of

invested capital or property which the utility is entitled to a

return.

- resolution hinges on the determination of the kind and the amount of

operating expenses that should be allowed to a public utility togenerate a fair return and the proper valuation of the rate base or the

value of the property entitled to a return.

- In determining whether or not a rate yields a fair return to the utility,

the operating expenses of the utility must be considered. Thus, the

public utility is allowed a return on capital over and above operating

expenses.

- ERB correctly ruled that income tax should not be included in thecomputation of operating expenses of a public utility . Income tax paid

by a public utility is inconsistent with the nature of operating expenses.

o operating expenses are those which are reasonably incurred in

connection with business operations to yield revenue

o operating expenses "should be a requisite of or necessary in the

operation of a utility, recurring, and that it redounds to the

service or benefit of customerso Income taxis imposed on an individual or entity as a form of

excise tax

o income tax payments of a public utility are not expenses which

contribute to or are incurred in connection with the production of

profit of a public utility. Income tax should be borne by the

taxpayer alone as they are payments made in exchange for

benefits received by the taxpayer from the State

o No benefit is derived by the customers of a public utility for the

taxes paid by such entity and no direct contribution is made by

the payment of income tax to the operation of a public utility

o Accordingly, the burden of paying income tax should be Meralco's

alone and should not be shifted to the consumers


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- We are not impressed by the reliance by MERALCO on some American

case law allowing the treatment of income tax paid by a public utility

as operating expense

o Suffice to state that with regard to rate-determination, the

government is not hidebound to apply any particular method or

formula.

o The question of what constitutes a reasonable return for the

public utility is necessarily determined and controlled by its

peculiar environmental milieu. Aside from the financial condition

of the public utility, there are other critical factors like particular

reasons involved for the request of the rate increase, the quality

of services rendered by the public utility, the existence of

competition, the element of risk or hazard involved in the

investment, the capacity of consumers

- Rate regulation is the art of reaching a result that is good for the public

utility and is best for the public. For these reasons, the Court cannot

give in to the importunings of MERALCO that we blindly apply the

rulings of American courts

- An approach allowing the indiscriminate inclusion of income tax may

create an undesirable precedent and serve as a blanket authority for

public utilities to charge their income tax payments to operatingexpenses and unjustly shift the tax burden

- By charging their income tax payments to their customers, public

utilities virtually become "tax collectors" rather than taxpayers. In the

cases at bar, MERALCO has not justified why its income tax should be

treated as an operating expense to enable it to derive a fair return for

its services.

- MERALCO likewise cites decisions of the ERB33 allowing the application

of a tax recovery clause for the imposition of an additional charge on

consumers for taxes paid by the public utility. A close look at these

decisions will show they are inappropos.

o In the said cases, the ERB approved the adoption of a formula

which will allow the public utility to recover from its customers

taxes already paid by it.


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o in the cases at bar, the income tax component added to the

operating expenses of a public utility is based on an estimate or

approximate figure of income tax to be paid by the public

utility.

- In the det of the rate base, property used in the operation of the public

utility must be subject to appraisal and evaluation to det the fair value

thereof entitled to a fair return.

- Petitioners maintain that the net average investment method (also

known as "actual number of months use method") adopted by the ERB

should be used, while MERALCO argues that the average investment

method (also known as the "trending method") to determine the

proportionate value of properties should be applied.

o Under the "net method," properties and equipment used in the

operation of a public utility are entitled to a return only on the

actual number of months they are in service during the period

o "average investment method" computes the proportionate value

of the property by adding the value of the property at the

beginning and at the end of the test year with the resulting sum

divided by two

- ERB did not abuse its discretion when it applied the net average

investment method.

o COA explained that the computation of the proportionate value of

the property and equipment in accordance with the actual

number of months such property or equipment is in service for

purposes of determining the rate base is favored, as against the

trending method employed by MERALCO, "to reflect the real

status of the property."

o By using the net average investment method, the ERB and the

COA considered for determination of the rate base the value of

properties and equipment used by MERALCO in proportion to the

period that the same were actually used

o treatment is consistent with the settled rule in rate regulation that

the det of the rate base of a public utility entitled to a return


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must be based on properties and equipment actually being used

or are useful to the operations

- MERALCO does not seriously contest this treatment of actual usage of

property but opposes the method of computation on the ground that

the net average investment method "assumes an ideal situation where

a utility is able to record in its books within any given month the valueof all the properties actually placed in service

- MERALCO contends that immediate recordal in its books is not possible

as MERALCO's franchise covers a wide area. Hence, MERALCO adopted

the "average investment method" or the "trending method" which

computes the average value of the property at the beginning and at

the end of the test year to compensate for the irregular recording in its

books.

- MERALCO'S stance is belied by the COA Report which states that the

"verification of the records, as confirmed by the Management Staff,

disclosed that properties are recorded in the books as these are

actually placed in service

- computing the proportionate value of assets used in service in

accordance with the actual number of months the same is used during

the test year is a more accurate method of determining the value of

the properties of a public utility entitled to a return.

- we were to sustain the application of the "trending method," the public

utility may easily manipulate the valuation of its property entitled to a

return

- MERALCO further insists that the Court should sustain the "trending

method" in view of previous decisions by the Public Service

Commission

- what is a just and reasonable rate cannot be fixed by any immutable

method or formula. Hence, it has been held that no public utility has a

vested right to any particular method of valuation

- MERALCO has not adequately shown that the rates prescribed by the

ERB are unjust or confiscatory as to deprive its stockholders a

reasonable return on investment.

- In the early case ofYnchausti S.S. Co. v. Public Utility

Commissioner, this Court held:


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"[t]here is a legal presumption that the rates fixed by an administrative agency arereasonable, and it must be conceded that the fixing of rates by the Government,

through its authorized agents, involves the exercise of reasonable discretion and,

unless there is an abuse of that discretion, the courts will not interfere."44 Thus, the

burden is upon the oppositor, MERALCO, to prove that the rates fixed

by the ERB are unreasonable or otherwise confiscatory as to merit the

reversal of the ER

ALBANO vs. REYES

Facts:

- PPA Board adopted its Resolution No. 850 directing PPA management

to prepare the Invitation to Bid and all relevant bidding documents

necessary for the public bidding of the development, management and

operation of the MICT and authorizing the Board Chairman, Secretary

Reyes, to oversee the preparation of the technical and the


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documentation requirements for the MICT leasing as well as to

implement this project.

- respondent Reyes created a Special MICT Bidding Committee charged

with evaluating all bid proposals

- PPA published the Invitation to Bid several times in a newspaper o

which publication included the reservation by the PPA of "the right to

reject any or all bids and to waive any informality in the bids or to

accept such bids which may be considered most advantageous to the

government."

- respondent declared the ICTSI consortium as the winning bidder.

- Before the corresponding MICT contract could be signed, two

successive cases were filed against the respondents which assailed the

legality or regularity of the bidding.

- President approved the MICT Contract; PPA and the ICTSI perfected the

Contract

- Meanwhile, the petitioner Albano filed the present petition as citizen

and taxpayer and as a member of HOR, assailing the award of the

MICT contract to the ICTSI=> since the MICT is a public utility, it needs

a legislative franchise before it can legally operate as a public utility,

pursuant to Art 12, Sect 11 of the Consti

Issue: WON leg franchise needed

Held: No

Ratio:

- review of provisions of law indicates that a franchise specially granted

by Congress is not necessary for the operation of MICP by a private

entity, a contract entered into by the PPA and such entity constitutingsubstantial compliance with the law.

- Executive Order No. 3 provides:

do hereby order the immediate recall of the franchise granted to the Manila

International Port Terminals, Inc. (MIPTI) and authorize the Philippine Ports Authority

(PPA) to take over, manage and operate the Manila International Port Complex at


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North Harbor, Manila and undertake the provision of cargo handling and port related

services thereat

- while the PPA has been taskedwith the management and operation of

the Manila International Port Complex and to undertake the providing

of cargo handling, the law provides that such shall be "in accordance

with P.D. 857 and other applicable laws and regulations." On the other

hand, P.D. No. 857 expressly empowers the PPA to provide services

within Port Districts "whether on its own, by contract, or otherwise"

[See. 6(a) (v)]. Therefore, under the terms of E.O. No. 30 and P.D. No.

857, the PPA may contract with the International Container Terminal

Services, Inc. (ICTSI) for the management, operation and development

of the MICP.

- Even if the MICP be considered a public, its operation would not

necessarily call for a franchise from the Legislative Branch.

- Franchises issued by Congress are not required before each and every

public utility may operate. Thus, the law has granted certain

administrative agencies the power to grant licenses for or to authorize

the operation

- That the Constitution provides that the issuance of a franchise,

certificate or other form of authorization for the operation of a public

utility shall be subject to amendment, alteration or repeal by Congressdoes not necessarily, imply, that only Congress has the power to grant

such authorization

- Reading E.O. No. 30 and P.D. No. 857 together, the inescapable

conclusion is that the lawmaker has empowered the PPA to undertake

by itself the operation and management of the MICP or to authorize its

operation and management by another by contract or other means, at

its option.

- The latter power having been delegated to the PPA, a franchise from

Congress to authorize an entity other than the PPA to operate and

manage the MICP becomes unnecessary.

- the PPA, in the exercise of the option granted it by P.D. No. 857, chose

to contract out the operation and management of the MICP to a private

corporation. This is clearly within its power to do.


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- contract between the PPA and ICTSI, coupled with the President's

written approval, constitute the necessary authorization for ICTSI's

operation and management

- The award of the MICT contract approved by no less than the President

herself enjoys the legal presumption of validity and regularity of official

action.

- In the case at bar, there is no evidence which clearly shows the

constitutional infirmity of the questioned act of government.

TATAD vs. HON. JESUS B. GARCIA

Facts:

- 1989, DOTC planned to construct a light railway transit line aEDSA LRT

III

- letter of intent was sent by the Eli Levin Enterprises, Inc., to DOTC

Secretary Oscar Orbos, proposing to construct the EDSA LRT III on aBuild-Operate-Transfer (BOT) basis.

- Sec Orbos invited Levin to send a technical team to discuss the project

with DOTC.

- Republic Act No. 6957 entitled "An Act Authorizing the Financing,

Construction, Operation and Maintenance of Infrastructure Projects by

the Private Sector, and For Other Purposes," was signed=> provides

for two schemes for the financing, construction and operation ofgovernment projects through private initiative and investment: Build-

Operate-Transfer (BOT) or Build-Transfer (BT).

- PBAC issued guidelines for the prequalification of contractors for the

financing and implementation of the project.

- the PBAC declaring only the EDSA LRT Consortium "met the

requirements of garnering at least 21 points per criteria


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- Sec Orbos was replaced by Secretary Prado. The latter sent to

President Aquino recommending the award of the EDSA LRT III project

to the sole complying bidder, the EDSA LRT Consortium

- Finding this proposal to be in compliance with the bid requirements,

DOTC and respondent EDSA LRT Corporation entered into an

"Agreement to Build, Lease and Transfer a Light Rail Transit System forEDSA" under the terms of the BOT Law

- Executive Sec Drilon, who replaced Orbos, informed Sec Prado that the

President could not grant the requested approval for the following

reasons:

o DOTC failed to conduct actual public bidding in compliance with

Section 5 of the BOT Law

o the law authorized public bidding as the only mode to award BOTprojects, and the prequalification proceedings was not the public

bidding contemplated under the law

o that Item 14 of the Implementing Rules and Regulations of the

BOT Law which authorized negotiated award of contract in

addition to public bidding was of doubtful legality

o congressional approval of the list of priority projects under the

BOT or BT Scheme provided in the law had not yet been grantedat the time the contract was awarded

- DOTC, represented by Secretary Jesus Garcia vice Secr Prado, and resp

entered into a "Supplemental Agreement to the 22 April 1992 Revised

and Restated Agreement to Build, Lease and Transfer a Light Rail

Transit System for EDSA" so as to "clarify their respective rights and

responsibilities" and to submit [the] Supplemental Agreement to the

President, of the Philippines for his approval"

- Sec Garcia submitted the two Agreements to President Ramos=>

approved

o Private respondents shall undertake and finance the entire project

required for a complete operational light rail transit system


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o Upon full or partial completion and viability thereof, private

respondent shall deliver the use and possession of the completed

portion to DOTC which shall operate the same

o DOTC shall pay private respondent rentals on a monthly basis

through an Irrevocable Letter of Credit. The rentals shall be

determined by an independent and internationally accreditedinspection firm to be appointed by the parties

o As agreed upon, private respondent's capital shall be recovered

from the rentals to be paid by the DOTC which, in turn, shall come

from the earnings of the EDSA LRT III

o After 25 years and DOTC shall have completed payment of the

rentals, ownership of the project shall be transferred to the latter

for a consideration of only U.S. 1

- R.A. No. 7718, an "Act Amending Certain Sections of Republic Act No.

6957, Entitled "An Act Authorizing the Financing, Construction,

Operation and Maintenance of Infrastructure Projects by the Private

Sector, and for Other Purposes" was signed to law

Issues:

- WON public utility, and the ownership and operation thereof is limitedby the Constitution to Filipino citizens and domestic

- WON the Build-Lease-Transfer (BLT) scheme provided in the

agreements is not the BOT or BT Scheme under the law

- WON the contract to construct the EDSA LRT III was awarded to private

respondent not through public bidding which is the only mode of

awarding infrastructure projects under the BOT law;

- Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own

EDSA LRT III; a public utility?

Held: No violation;

Ratio:

- What private respondent owns are the rail tracks, rolling stocks like the

coaches, rail stations, terminals and the power plant, not a public

utility. While a franchise is needed to operate these facilities to serve


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the public=> they do not by themselves constitute a public utility.

What constitutes a public utility is not their ownership but their use to

serve the public

- Constitution, in no uncertain terms, requires a franchise for the

operation of a public utility. However, it does not require a franchise

before one can own the facilities needed to operate a public utility so

long as it does not operate them to serve the public.- Section 11 of Article XI No franchise, certificate or any other form of

authorization for the operation of a public utilityshall be granted except to citizens

of the Philippines or to corporations or associations organized under the laws of the

Philippines at least sixty per centum of whose capital is owned by such citizens, nor

shall such franchise, certificate or authorization be exclusive character or for a

longer period than fifty years . . .

- there is a clear distinction between the "operation" of a public utility

and the ownership of the facilities and equipment used to serve the

public.

o Ownership is defined as a relation in law by virtue of which a

thing pertaining to one person is completely subjected to his will

in everything not prohibited by law or the concurrence with the

rights of another

o exercise of the rights encompassed in ownership is limited by law

so that a property cannot be operated and used to serve the

public as a public utility unless the operator has a franchise.

o right to operate a public utility may exist independently and

separately from the ownership of the facilities

o One can own said facilities without operating them as a public

utility,

- While respondent is the owner of the facilities necessary to operate the

EDSA. LRT III, it admits that it is not enfranchised to operate a public

utility

- Resp and DOTC agreed that on completion date, resp willimmediately deliver possession of the LRT system by way of lease for

25 yrs, during which period DOTC shall operate the same as a common

carrier and resp shall provide maintenance and repair

- By the end of the three-year construction period, DOTC shall be able to

operate the EDSA LRT III on its own and train all new personnel by

itself.


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- In sum, private respondent will not run the light rail vehicles and

collect fees from the riding public. It will have no dealings with the

public and the public will have no right to demand any services from it.

- role of private respondent as lessor during the lease period must be

distinguished from the role of PGMCthe case ofKilosbayan Inc. v.

Guingona

o Therein, the Contract of Lease between PGMC and PCSO was

actually a collaboration or joint venture agreement prescribed

under the charter of the PCSO

o In the Contract of Lease; PGMC, the lessor obligated itself to build,

at its own expense, all the facilities necessary to operate and

maintain a nationwide on-line lottery system from whom PCSO

was to lease the facilities and operate the same.o Court found that PGMC's participation was not confined to the

construction and setting up of the on-line lottery system. It spilled

over to the actual operation thereof, becoming indispensable to

the pursuit, conduct, administration and control of the highly

technical and sophisticated lottery system

- a mere owner and lessor of the facilities used by a public utility is not a

public utility- BOT scheme is defined as one where the contractor undertakes the

construction and financing in infrastructure facility, and operates and

maintains the same.

o The contractor operates the facility for a fixed period during

which it may recover its expenses and investment in the project

plus a reasonable rate of return thereon.

o After the expiration of the agreed term, the contractor transfersthe ownership and operation of the project to the government.

- In the BT scheme, the contractor undertakes the construction and

financing of the facility, but after completion, the ownership and

operation thereof are turned over to the government.


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o The government, in turn, shall pay the contractor its total

investment on the project in addition to a reasonable rate of

return.

o If payment is to be effected through amortization payments by

the government infrastructure agency or local government unit

concerned, this shall be made in accordance with a scheme

proposed in the bid and incorporated in the contract

- Emphasis must be made that under the BOT scheme, the owner of the

infrastructure facility must comply with the citizenship requirement of

the Constitution on the operation of a public utility. No such a

requirement is imposed in the BT scheme.

- no mention in the BOT Law that the BOT and BT schemes bar any other

arrangement for the payment by the government of the project cost.

The BLT scheme in the challenged agreements is but a variation of the

BT scheme under the law.

- burden on the govt in raising funds to pay for the project is made

lighter by allowing it to amortize payments out of the income from the

operation of the LRT System.

o the challenged agreements provide that rentals are to be paid on

a monthly basis according to a schedule of rates through and

under the terms of a confirmed Irrevocable Revolving Letter of

Credit

o At the end of 25 years and when full payment shall have been

made to and received by private respondent, it shall transfer to

DOTC, free from any lien or encumbrances, all its title to, rights

and interest in, the project for only U.S. $1.00

- A lease is a contract where one of the parties binds himself to give to

another the enjoyment or use of a thing for a certain price and for a

period which may be definite or indefinite but not longer than 99 years

o there is no transfer of ownership at the end of the lease period.

o But if the parties stipulate that title to the leased premises shall

be transferred to the lessee at the end of the lease period upon

the payment of an agreed sum, the lease becomes a lease-

purchase agreement.


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- The fact that the contract for the construction of LRT III was awarded

through negotiation and before congressional approval on January 22

and 23, 1992 of the List of National Projects to be undertaken by the

private sector pursuant to the BOT Law does not suffice to invalidate

the award=> made part of subsequent congressional approval of the

list including "rail-based projects packaged with commercial

development opportunities"

- Pet insist that the prequalifications process which led to the

negotiated award of the contract appears to have been rigged from the

very beginning to do away with the usual open international public

bidding

o records show that only one applicant passed the prequalification

process.

o Since only one was left, to conduct a public bidding in

accordance with Section 5 of the BOT Law for that lone participant

will be an absurb and pointless

o Sec 5 of the BOT Law in relation to Presidential Decree No. 1594

allows the negotiated award of government infrastructure

projects.

Bidding. Construction projects shall generally be undertaken by contract

after competitive public bidding. Projects may be undertaken by

administration or force account or by negotiated contract only in exceptional

cases where time is of the essence, or where there is lack of qualified bidders

or contractors, or where there is conclusive evidence that greater economy

and efficiency would be achieved through this arrangement,

o where there is a lack of qualified bidders or contractors, the

award of government infrastructure contracts may he made by

negotiation

- challenged agreements have been approved by President himself.

- Pet claim that the BLT scheme and direct negotiation of contracts are

not contemplated by the BOT Law has now been rendered moot and

academic by R.A. No. 7718.

o Section 3 of this law authorizes all government infrastructure

agencies, government-owned and controlled corporations and


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local government units to enter into contract with any duly

prequalified proponent for the financing, construction, operation

and maintenance of any financially viable infrastructure or

development facility through a BOT, BT, BLT, BOO (Build-own-and-

operate), CAO (Contract-add-operate), DOT (Develop-operate-

and-transfer), ROT (Rehabilitate-operate-and-transfer), and ROO

(Rehabilitate-own-operate

o once and applicant has prequalified, it can enter into any of the

schemes enumerated in Section 2 thereof, including a BLT

arrangement

o Republic Act No. 7718 is a curative statute. It is intended to

provide financial incentives and "a climate of minimum

government regulations and procedures and specific government

undertakings in support of the private sector"

o A curative statute makes valid that which before enactment of the

statute was invalid. Thus, whatever doubts and alleged

procedural lapses private respondent and DOTC may have

engendered and committed in entering into the questioned

contracts, these have now been cured by R.A. No. 7718

- Pet claim that the agreements are grossly disadvantageous to the

government because the rental rates are excessive and respsdevelopment rights over the 13 stations and the depot will rob DOTC of

the best terms during the most productive years

o resp has been granted, for a period of 25 years, exclusive rights

over the depot and the air space above the station

o resp shall pay DOTC in Philippine currency guaranteed revenues

generated therefrom in the amounts set forth in the Supplemental

Agreement

o In the event that DOTC shall be unable to collect, DOTC shall beallowed to deduct any shortfalls from the monthly rent due resp

for the construction of LRT III

o terms of the agreements were arrived at after a painstaking study

by DOTC.

o Government officials are presumed to perform their functions with

regularity and strong evidence is necessary to rebut this

presumption.


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o Petitioners have not presented evidence on the reasonable

rentals to be paid by the parties to each other. The matter of

valuation is an esoteric field which is better left to the experts

- DOTC is the primary policy, planning, programming, regulating and

administrative entity of the Executive branch of government in the

promotion, development and regulation of dependable and

coordinated networks of transportation and communications

- It is the Executive department, DOTC in particular that has the power,

authority and technical expertise determine whether or not a specific

transportation or communication project is necessary, viable and

beneficial to the people

DAVIDE, JR.,J., dissenting:

- the challenged contract is void for at least two reasons:o it is an-ultra-vires act of the Department of Transportation and

Communications (DOTC) since under R.A. 6957 the DOTC has no

authority to enter into a Build-Lease-and-Transfer (BLT) contract

o ) even assuming arguendo that it has, the contract was entered

into without complying with the mandatory requirement of public

bidding.

- R.A. 6957 recognizes only two (2) kinds of contractual arrangements

between the private sector and government infrastructure agencies:(a) the Build-Operate-and-Transfer (BOT) scheme and (b) the Build-

and-Transfer (BT) scheme.

- A Build-Lease-and-Transfer (BLT) scheme is not authorized under the

said law, and none of the aforesaid prior acts and negotiations were

designed for such unauthorized scheme. Hence, the DOTC is without

any power or authority to enter into the BLT contract in question.

- majority opinion maintains, however, that since "[t]here is no mentionin the BOT Law that the BOT and the BT schemes bar any other

arrangement for the payment by the government of the project cost,"

then "[t]he law must not be read in such a way as to rule outer unduly

restrict any variation within the context of the two schemes.

- This interpretation would be correct if the law itself provides a room

for flexibility. We find no such provisions in R.A. No. 6957 if it intended


20/48

to include a BLT scheme, then it should have so stated, for contracts of

lease are not unknown in our jurisdiction, and Congress has enacted

several laws relating to leases.

- hat the BLT scheme was never intended as a permissible variation

"within the context" of the BOT and BT schemes is conclusively

established by the passage of R.A. No. 7718

- Public bidding is mandatory in R.A. No. 6957=> The requirement of

public bidding is not an idle ceremony. It has been aptly said that in

our jurisdiction "public bidding is the policy and medium adhered to in

Government procurement and construction contracts under existing

laws and regulations.

- Pet correctly disapproved the contract because no public bidding is

strict compliance with Section 5 of R.A. No. 6957 was conducted.Secretary Drilon Further bluntly stated that the provision of the

Implementing Rules of said law authorizing negotiated contracts was of

doubtful legality. Indeed, it is null and void because the law itself does

not recognize or allow negotiated contracts.

- This view of the majority would open the floodgates to the rigging of

prequalification proceedings or to unholy conspiracies among

prospective bidders, which would even include dishonest government

officials.

- section 5 admits of no exception and that no bidding could be validly

had with only one bidder is likewise conclusively shown by the

amendments introduced by R.A. No. 7718 Per section 7 thereof, a new

section denominated as Section 5-A was introduced in R.A. No. 6957 to

allow direct negotiation contract

- Can this amendment be given retroactive effect to the challenged

contract so that it may now be considered a permissible negotiatedcontract? I submit that it cannot be R.A. No. 7718 does not provide that

it should be given retroactive effect to pre-existing contracts. Section

18 thereof says that it "shall take effect fifteen (15) days after its

publication in at least two (2) newspapers

- If it were the intention of Congress to give said act retroactive effect

then it would have so expressly provided. Article 4 of the Civil Code


21/48

provides that "[l]aws shall have no retroactive effect, unless the

contrary is provided."

- The presumption is that all laws operate prospectively, unless the

contrary clearly appears or is clearly, plainly, and unequivocally

expressed or necessarily implied. In every case of doubt, the doubt will

be resolved against the retroactive application of laws

PAL V CAB

Facts:

- resp Grand Air applied for a Certificate of Public Convenience and

Necessity with the Board

o Chief Hearing Officer of the CAB issued a Notice of Hearing setting

the application and directing GrandAir to serve a copy of the

application and corresponding notice to all scheduled PhilippineDomestic operators

o petitioner raised the issue of lack of jurisdiction of the Board to

hear the application because GrandAir did not possess a

legislative franchise

o Hearing Officer of CAB issued an Order denying petitioner's

OppositionThe Civil Aeronautics Board has jurisdiction to hear and resolve


22/48

the application has been ruled that under Section 10 (c) (I) of R.A. 776, the Board

possesses this specific power and duty.

o petitioner this time, opposed private respondent's application for

a temporary permit maintaining that:

The applicant does not possess the required fitness and

capability of operating the services applied for under RA776; and,

Applicant has failed to prove that there is clear and urgent

public need for the services

- Board promulgated Resolution No. 119(92) approving the issuance of a

Temporary Operating Permit in favor of Grand Air 7for a period of

three months

- Board justified its assumption of jurisdiction over GrandAir's application

that the CAB is specifically authorized under Section 10-C (1) of

Republic Act No. 776

- Pet argue that the respondent Board acted beyond its powers and

jurisdiction in taking cognizance of GrandAir's application for the

issuance of a Certificate of Public Convenience and Necessity, and in

issuing a temporary operating permit in the meantime, since GrandAir

has not been granted and does not possess a legislative franchise toengage in scheduled domestic air transportation.

- A legislative franchise is necessary before anyone may engage in air

transport services, and a franchise may only be granted by Congress.

This is the meaning given by the petitioner upon a reading of Sec 11,

Art XII, and Section 1, Article VI, of the Consti

- Respondent GrandAir relies on its interpretation of the provisions of RA

776, which follows the pronouncements of the Court of Appeals in thecases ofAvia Filipinas vs. Civil Aeronautics Board and Silangan

Airways, Inc. vs. Grand International Airways

o the issue resolved was whether or not the Civil Aeronautics Board

can issue the Certificate of Public Convenience and Necessity or

Temporary Operating Permit


23/48

- CA: upheld the authority of the Board to issue such authority, even in

the absence of a legislative franchise, which authority is derived from

Section 10 of Republic Act 776

o Board is expressly authorized by Republic Act 776 to issue a

temporary operating permit or Certificate of Public Convenience

and Necessity, and nothing contained in the said law negates thepower to issue said permit before the completion of the

applicant's evidence and that of the oppositor thereto on the main

petition.

o Indeed, the CAB's authority to grant a temporary permit "upon its

own initiative" strongly suggests the power to exercise said

authority, even before the presentation of said evidence has

begun.

Issue: WON CAB could issue permit w.o leg franchise

Held: Yes

Ratio:

- The power to authorize and control the operation of a public utility is

admittedly a prerogative of the legislature, since Congress is that

branch of government vested with plenary powers of legislation.- It is 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 franchises has frequently been delegated, even to

agencies other than those of a legislative nature.

- privileges conferred by grant by local authorities as agents for the

state constitute as much a leg franchise as though the grant had been

made by an act of the Legislature

- we find that the Civil Aeronautics Board has the authority to issue aCertificate of Public Convenience and Necessity, or Temporary

Operating Permit to a domestic air transport operator, who, though not

possessing a legislative franchise, meets all the other requirements

prescribed by the law. Such requirements were enumerated in Section

21 of R.A. 776.

- There is nothing in the law nor in the Consti, which indicates that a leg

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


24/48

domestic air transport operator. Although Section 11 of Article XII

recognizes Congress' control over any franchise, certificate or authority

to operate a public utility, it does not mean Congress has exclusive

authority to issue the same. Franchises issued by Congress are not

required before each and every public utility may operate.

- A reading of Section 10 of the same reveals the clear intent of

Congress to delegate the authority to regulate the issuance of alicense to operate domestic air transport services

- Pet argues that since R.A. 776 gives the Board the authority to issue

"Certificates of Public Convenience and Necessity", this, according to

petitioner, means that a leg franchise is an absolute requirement

o This relies on the premise that the authority to issue a certificate

of public convenience and necessity is a regulatory measure

separate and distinct from the authority to grant a franchise for

the operation of the public utility subject of this particular case,which is exclusively lodged by petitioner in Congress.

o We do not agree with the petitioner.

- Public convenience and necessity exists when the proposed facility will

meet a reasonable want of the public and supply a need which the

existing facilities do not adequately afford. It does not mean or require

an actual physical necessity or an indispensable thing

- 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 way modify the nature of such certification,

or the requirements for the issuance

- Congress, by giving the Board the power to issue permits for the

operation of domestic transport services, has delegated to the said

body the authority to det the capability and competence of a

prospective domestic air transport operator to engage in such venture

- This is not an instance of transforming the Board into a mini-legislative

body, with unbridled authority to choose who should be given authority

to operate air transport

- In sum, rBoard should now be allowed to continue hearing the

application of GrandAir for the issuance of a Certificate of Public

Convenience and Necessity, there being no legal obstacle to the

exercise of its jurisdiction


25/48


26/48

Y" vs.THE NATIONAL LABOR RELATIONS COMMISSION

Facts:

- Yujuico Transit Co., mortgaged ten (10) of its buses to DBP to secure a

loan in the amount of P2,795,129

- Board of Directors of Yujuico Transit passed a resolution authorizing its

Pres Yujuico to enter into a dacion en pago arrangement with the DBP,

whereby Yujuico would transfer to the DBP the Saint Martin Technical

Institute in consideration of the full settlement of the obligations of

three companies, one of which was Yujuico Transit

- transfer of the property was made and DBP released the mortgages.

Consequently, the company transferred the ownership of its

mortgaged properties, including the buses, to Jesus Yujuico.

- Yujuico Transit Employees Union filed two (2) consolidated complaints

for Unfair Labor Practice and violations of Presidential Decrees Nos.

525, 1123, 1614 and 851

- Labor Arbiter rendered a decision dismissing the complaint for unfair

labor practice but holding Yujuico Transit Co., Inc. liable under the

aforementioned Presidential Decrees

- Resp herein opposed the Third party claim on the ground that the

transactions leading to the transfer of the buses to "Y" Transit Co., Inc.

were void because they lacked the approval of the BOT as required by


27/48

the Public Service Act. They also argued that the buses were still

registered in the name of Yujuico Transit Co.

o Labor Arbiter found that "Y" Transit Co., Inc. had valid title to the

buses and that the BOT, by its subsequent acts had approved the

transfer

o Third-Party Claim was granted and the release of all the buses

levied for execution was ordered.

- NLRC: transfer of the buses lacked the BOT approval.

Issue: WON resp commit grave abuse of discretion in reinstating the levy

on the buses which have been allegedly transferred to a third party, herein

petitioner "Y" Transit Co., Inc.?

Held: transfer invalid

Ratio:

- There being no prior BOT approval in the transfer of property from

Yujuico Transit Co., Inc. to Jesus Yujuico, it only follows that as far as

the BOT and third parties are concerned, 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

- Conversely, where the registered owner is liable for obligations to third

parties and vehicles 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 in whose name the vehicle is registered remains to

be the owner and the transferee merely holds the vehicles for the

registered owner.

- Thus, "Y" Transit Co., Inc. cannot now argue that the buses could not

be levied upon to satisfy the money judgment in favor of herein

respondents.

- However, this does not deprive the transferee of the right to recover

from the registered owner any damages which may have been

incurred by the former since the . . . transfer or lease is valid and

binding between the parties. . . . 7


28/48

- Thus, 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 former may avail of its

remedies to recover damages.

RAYMUNDO vs. LUNETA MOTOR CO

Facts:

- question squarely raised in these concerns the forced sales of

certificates of public convinced held by public service operators and

the liability to execution of such certificates.

- we find Nicanor de Guzman, signing as Guzco Transit, purchasing

trucks from the Luneta Motor Co. and to pay for them executing a

series of PNs guaranteed by a chattel mortgage on several trucks. On

failure of De Guzman or Guzco Transit to pay the promissory notes,


29/48

suit was brought for the collection of the amount outstanding and

unpaid.

- When the complaint was presented, a writ of attachment was obtained

against the properties of the Guzco Transit, and as a consequence

garnishment was served on the Secretary of the Public Service

Commission attacking the right, title, and participation of the Guzco

Transit in the certificates of public convenience covering the bustransportation lines

- certificates were ordered sold by the Court of First Instance of Manila,

and in fact the certificates of public convenience Nos. 25635 and

23914 were sold to the Luneta Motor

- or nine days after the certificates were attached by the Luneta Motor

Co., the same certificates, together with certificate No. 25951 and

several trucks, were sold by De Guzman for the Guzco Transit to

Dominador Raymundo. The approval of this sale was sought from thePublic Service commission, and is the other case now under review.

- the commission in its decision approved the sale at public auction in

favor of the Luneta Motor Co., and disapproved the sale made to

Dominador Raymundo, reserving to Raymundo the right to present

another petition for the approval of the sale which was not included in

the sale in favor of the Luneta Motor Co.

Issue: which of the two sales, the one at public auction by virtue of anattachment, or two voluntary sale made after the property had been levied

upon, should prevail

Held: affirm

Ratio:

- The Public Service Law, Act No. 3108 authorizes certificates of public

convenience to be secured by public service operators from the Public

Service Commission

- certificate of public convenience granted to the owner or operator of

public service motor vehicles, it has been held, grants a right in the

nature of a limited franchise.

- Code of CivPro establishes the general rule that "property, both real

and personal, or any interest therein of the judgment debtor, not


30/48

exempt by law, and all property and rights of property seized and held

under attachment in the action, shall be liable to execution

o The statutory exemptions do not include franchises or certificates

of public convenience

o The test by which to determine whether or not property can be

attached and sold upon execution is whether the judgment debtor

has such a beneficial interest therein that he can sell or otherwise

dispose of it for value.

- Public Service Law and the Code of Civil Procedure are silent on the

question at issue; silent in the sense of not containing specific

provisions on the right to attach certificates of public convenience

- Should the leg intention thus evidenced be taken as meaning that the

generality of the language used by the Code of Civil Proc was too

vague to permit of forced sales of franchises and certificates of public

convenience, or notwithstanding the provisions to be found in these

special laws, is the language of the code of Civil Procedure broad

enough to include certificates of public convenience? We lean to the

latter proposition

- The test to be applied was announced by our Supreme Court in Reyes

vs. Grey, supr- That rule it will be recalled tested the liability of property to execution

by determining if the interest of the judgment debtor in the case can

be sold or conveyed to another in any way.

- Now the Public Service Law permits the Public Service Commission to

approved the sale, alienation, mortgaging, encumbering, or leasing of

property, franchises, privileges, or rights or any part thereofand in

practice the purchase and sale of certificates of public convenience has

been permitted by the Public Service Commission.

- If the holder of a certificate of public convenience can sell it

voluntarily, there is no valid reason why the same cert cannot be taken

and sold involuntarily pursuant to process.

- It has been intimated herein before, a practice has grown up in the

Public Service Commission of permitting the alienation of certificates of


31/48

public convenience and in so doing approval has been given to the sale

through foreclosure proceedings of the certificates of public

convenience to third parties.

- The ruling of the SC: Certificates of public convenience secured by

public service operators are liable to execution, and the Public Service

Commission is authorized to approve the transfer of the certificates ofpublic convenience to the execution creditor. As a consequence, the

decision brought on review will be affirmed

BATANGAS vs. CAYETANO

Facts:

- appellee Orlanes alleges that he is the holder of a certificate of public

convenience issued by the Public Service Commission to operate an

autobus line from Taal to Lucenapassing through Batangas, Bolbok and

Bantilan, in the Province of Batangas, and Candelaria and Sariaya, in

the Province of Tayabas, without any fixed schedule; that by reason of

the requirements of public convenience, he has applied for a fixed

schedule from Bantilan to Lucena and return;

- Batangas Transportation Company appeared and filed an applicationfor a permit, in which it alleged that it is operating a regular service of

auto trucks between the principal municipalities of the Province of

Batangas and some of those of the Province of Tayabas

- that in the year 1925 Orlanes obtained from the Commission a

certificate of public convenience to operate an irregular service of auto

trucks between Taal, Province of Batangas, and Lucena, Province of

Tayabas with the express limitation that he could not accept

passengers from intermediate points between Taal and Bolbok, exceptthose which were going to points beyond San Juan de Bolbok or to the

Province of Tayabas;

- that he inaugurated this irregular in March, 1926, but maintained it on

that part of the line between Taal and Bantilan only for about three

months, when he abandoned that portion of it in the month of June and

did not renew it until five days before the hearing in which hearing the


32/48

Batangas Transportation Company asked for additional hours for its

line between Batangas and Bantilan

- , 1926, Orlanes sought to obtain a license as a regular operator on that

portion of the line between Bantilan and Lucena without having asked

for a permit for tat portion of the line between Bantilan and Taal

- Orlanes and the Batangas Transportation Company were jointly

operating a regular service between Bantilan and Lucena, with trips

every half an hour, and Orlanes not having asked for a regular service

between Bantilan and Taal, the Batangas Transportation Company

remedied this lack of service under the authority of the Commission,

and increased its trips between Bantilan and Tayabas to make due and

timely connections in Bantilan on a half-hour service between Bantilan

and Batangas

- It is then alleged that the service maintained by the company is

sufficient to satisfy the convenience of the public, and that the public

convenience does not require the granting of the permit for the service

which Orlanes petitions, and that to do so would result in ruinous

competition and to the grave prejudice of the company and without

any benefit to the public

- Public Service Commission granted the petition of Orlanes

Issue: WON permit should be granted

Held: No

Ratio:

- Before such a business can be operated, it must apply for, and obtain,

a license or permit from the Public Service Commission, and comply

with certain defined terms and conditions, and when license is once,

granted, the operator must conform to, and comply with all,reasonable rules and regulations of the Public Service Commission

- it has never been the policy of a public service commission to grant a

license for the operation of a new line of railroad which parallels and

covers the same field and territory of another old established line, for

the simple reason that it would result in ruinous competition between

the two lines


33/48

- fact that the Commission has previously granted a license to any

person to operate a bus line over a given highway and refuses to grant

a similar license to another person over the same highway, does not in

the least create a monopoly in the person, for the reason that at all

times the PSC has the power to say what is a reasonable compensation

to the utility, and to make reasonable rules and regulations for

convenience of public

- at the time of his application, Orlanes was what is known as an

irregular operator. Orlanes now seeks to have his irregular changed

into a regular one, fixed hours of departure and arrival between

Bantilan and Taal, and to set aside and nullify the prohibition against

him in his certificate of public convenience, in substance and to the

effect that he shall not have or receive any passengers or freight at

any of the points served by the Batangas Transportation Company for

which that company holds a prior license from the Commission.

- His petition to become such a regular operator over such conflicting

routes is largely based upon the fact that, to comply with the growing

demands of the public

- no claim or pretense that the Batangas Transpo has violated any of

the terms and conditions of its license.

- Neither does the PSC find as a fact that the granting of a license toOrlanes as a regular operator between the points in question is

required or necessary for the convenience of the traveling public, or

that there is any complaint or criticism by the public of the services

rendered by the Batangas Transportation Company over the route in

question.

- law creating the Public service Commission of the Philippine Islands is

known as Act No. 3108, as amended by Act No. 3316=> power of the

Commission to issue a certificate of public convenience depends on the

condition precedent that, after a full hearing and investigation, the

Commission shall have found as a fact that the operation of the

proposed public service and its authority to do business must be based

upon the finding that it is for the convenience of the public.

- certificate of public convenince granted to Orlanes in the instant case

expressly recites that it "will promote the public interests in a proper


34/48

and suitable manner." Yet no such finding of fact was made by the

Commission.

- evidence is conclusive that the Batangas Transpo operated its line five

years before Orlanes ever turned a wheel, yet the legal effect of the

decision of PSC is to give an irregular operator, who was the last in the

field, a preferential right over a regular operator, who was the first inthe field. That is not the law.

- So long as the first licensee keeps and performs the terms and

conditions of its license and complies with the reasonable rules and

regulations of the Commission and meets the reasonable demands of

the public, it should have more or less of a vested and preferential

right

- rule has been laid down that where an operator is rendering good,sufficient and adequate service to the public, that the convenience

does not require and the public interests wont be promoted in a

proper and suitable manner by giving another operator a cert of public

convenience to operate a competing line over same route.


35/48

SAN PABLO V PANTRANCO

Facts:


36/48

- Pantranco is a domestic corporation engaged in the land transportation

business with PUB service for passengers and freight and various

certificates for public conveniences CPC to operate passenger buses

from Metro Manila to Bicol

- PANTRANCO through its counsel wrote to Maritime Industry Authority

requesting authority to lease/purchase a vessel named M/V "Black

Double" "to be used for its project to operate a ferryboat service willprovide service to company buses and freight trucks that have to cross

San Bernardo Strait

- PANTRANCO was informed by MARINA that it cannot give due course to

the request on the basis of the following observations

o Matnog-Allen run is adequately serviced by Cardinal Shipping

Corp. and Epitacio San Pablo; MARINA policies on interisland

shipping restrict the entry of new operators to Liner trade routes

where these are adequately serviced by existing/authorizedoperators.

- PANTRANCO nevertheless acquired the vessel MV "Black Double" . It

wrote the Chairman of the Board of Transportation (BOT) through its

counsel, that it proposes to operate a ferry service to carry its

passenger buses and freight trucks between Allen and Matnog in

connection with its trips to Tacloban City

- PANTRANCO claims that it can operate a ferry service in connection

with its franchise for bus operation in the highway from Pasay City to

Tacloban City "for the purpose of continuing the highway, which is

interrupted by a small body of water, the said proposed ferry operation

is merely a necessary and incidental service to its main service and

obligation of transporting its passengers from Pasay City to Tacloban

City. Such being the case ... there is no need ... to obtain a separate

certificate for public convenience to operate a ferry service between

Allen and Matnog to cater exclusively to its passenger buses and

freight trucks. 4

- Without awaiting action on its request PANTRANCO started to operate

said ferry service

- Epitacio San Pablo and Cardinal Shipping Corporation who are

franchise holders of the ferry service in this area interposed their


37/48

opposition. They claim they adequately service the PANTRANCO by

ferrying its buses, trucks and passengers.

- BOT then asked the legal opinion from the Minister of Justice whether

or not a bus company with an existing CPC between Pasay City and

Tacloban City may still be required to secure another certificate in

order to operate a ferry service

o Minister of Justice Ricardo Puno rendered an opinion to the effect

that there is no need for bus operators to secure a separate CPC

to operate a ferryboat service

a common carrier which has been granted a certificate of public convenience

is expected to provide efficient, convenient and adequate service to the riding

public

Thus, when the bus company in the case at bar proposes to add a ferry serviceto its Pasay Tacloban route, it merely does so in the discharge of its duty

under its current certificate of public convenience to provide adequate and

convenient service to its riders. Requiring said bus company to obtain another

certificate to operate such ferry service when it merely forms a part and

constitutes an improvement of its existing transportation service would

simply be duplicitous and superfluous

- BOT rendered its decision holding that the ferry boat service is part of

its CPC to operate from Pasay to Samar/Leyte by amending

PANTRANCO's CPC so as to reflect the same

Let the original Certificate of public convenience granted to Pantranco South Express

Co., Inc. be amended to embody the grant of authority to operate a private ferry

boat service as one of the conditions for the grant of the certificate subject to the

condition that the ferryboat shall be for the exclusive use of Pantranco bus

- San Pablo filed for revocation of said decision

Issue: WON a ferry service is an extension of the highway and thus is a part

of the authority originally granted PANTRANCO

Held: separate certificate as the boat is not a ferry

Ratio:

- A ferry service, in law, is treated as a continuation of the highway from one side of

the water over which passes to the other side for transportation of passengers or of


38/48

travellers with their teams vehicles and such other property as, they may carry or

have with them

- The ferry boat service of Pantranco is a continuation of the highway traversed by its

buses from Pasay City to Samar, Leyte passing through Matnog (Sorsogon) through

San Bernardino Strait to Alien (Samar). It is a private carrier because it will be used

exclusively to transport its own buses, passengers and freight trucks traversing the

said route. It will cater exclusively to the needs of its own clientel and will not offer

itself indiscriminately for hire or for compensation to the general public. Legallytherefore, Pantranco has the right to operate the ferry boat

- the exclusive use of its own buses, passengers and freight trucks without the need

of applying for a separate certificate of public convenience or provisional authority.

Since its operation is an integral part of its land transport system, its original

certificate of public convenience should be amended to include the operation of such

ferryboat for its own exclusive use

- The term ferry is often employed to denote the right or franchise granted by the

state or its authorized mandatories to continue by means of boats, an interrupted

land highway over the interrupting waters and to charge toll for the use thereof bythe public.

- "Ferry" properly means a place of transit across a river or arm of the sea, but in law

it is treated as a franchise, and defined as the exclusive right to carry passengers

across a river, or arm of the sea, from one vill to another, or to connect a continuous

line of road leading from township or vill to another

- Javellana We made clear distinction between a ferry service and

coastwise or interisland service by holding that:

and the definition of ferry as above quoted we have the impression and we are

inclined to believe that the Legislature intended ferry to mean the service either by

barges or rafts, even by motor or steam vessels, between the banks of a river or

stream to continue the highway which is interrupted by the body of water, or in

some cases to connect two points on opposite shores of an arm of the sea such as

bay or lake which does not involve too great a distance or too long a time to

navigate But where the line or service involves crossing the open sea like the body

of water between the province of Batangas and the island of Mindoro which the

oppositors describe thus "the intervening waters between Calapan and Batangas are

wide and dangerous with big waves where small boat barge, or raft are not adapted

to the service," then it is more reasonable to regard said line or service as moreproperly belonging to interisland or coastwise trade.

The Commission makes the distinction between ferry service and motorship in the

coastwise trade, thus: A ferry service is distinguished from a motorship or

motorboat service engaged in the coastwise trade in that the latter is intended for

the transportation of passengers and/or freight for hire or compensation between

ports or places in the Philippines without definite routes or lines of service.


39/48

- We cannot agree. The definiteness of the route of a boat is not the deciding factor.

We believe that it will be more in consonance with the spirit of the law to consider

steamboat or motorboat service between the different islands, involving more or

less great distance and over more or less turbulent and dangerous waters of the

open sea, to be coastwise or inter-island service. Anyway, whether said service

between the different islands is regarded as ferry service or coastwise trade service,

as long as the water craft used are steamboats, motorboats or motor vessels, the

result will be the same as far as the Commission is concerned. "

- This Court takes judicial notice of the fact that Matnog which is on the

southern tip of the island of Luzon and within the province of Sorsogon

and Allen which is on the northeastern tip of the island of Samar, is

traversed by the San Bernardino Strait which leads towards the Pacific

Ocean.

- As the San Bernardino Strait which separates Matnog and Allen leads

to the ocean it must at times be choppy and rough so that it will not besafe to navigate the same by small boats or barges but only by such

steamboats or vessels as the MV "Black Double.

- Considering the environmental circumstances of the case, the

conveyance of passengers, trucks and cargo from Matnog to Allen is

certainly not a ferry boat service but a coastwise or interisland

shipping service. Under no circumstance can the sea between Matnog

and Allen be considered a continuation of the highway

- While a ferry boat service has been considered as a continuation of the

highway when crossing rivers or even lakes, which are small body of

waters - separating the land, however, when as in this case the two

terminals, Matnog and Allen are separated by an open sea it can not

be considered as a continuation of the highway.

- PANTRANCO should secure a separate CPC for the operation of an

interisland or coastwise shipping service in accordance with the

provisions of law.

- Its CPC as a bus transportation cannot be merely amended to include

this water service under the guise that it is a mere private ferry

service.

- The contention of PANTRANCO that its ferry service operation is as a

private carrier, not as a common carrier for its exclusive use in the

ferrying of its passenger buses and cargo trucks is absurd.


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o PANTRANCO does not deny that it charges its passengers

separately from the charges for the bus trips and issues separate

tickets whenever they board the MV

o cannot pretend that in issuing tickets to its passengers it did so as

a private carrier and not as a common carrier

- What is even more difficult to comprehend is that while in one breath

PANTRANCO claims that it is a private carrier insofar as the ferryboat

service is concerned, in another breath it states that it does not

thereby abdicate from its obligation as a common carrier to observe

extraordinary diligence and vigilance in the transportation of its

passengers and goods.

- considering that the authority granted to PANTRANCO is to operate a

private ferry, it can still assert that it cannot be held to account as acommon carrier towards its passengers and cargo.

- at the beginning PANTRANCO planned to operate such ferry boat

service between Matnog and Alien as a common carrier so it requested

authority from MARINA to purchase the vessel M/V "Black Double in

accordance with the procedure

- when its request was denied as the said routes, it nevertheless

purchased the vessel

- Obviously to go about this obstacle to its operation, it then contrived a

novel theory that what it proposes to operate is a private ferryboat

service across a small body of waterfor the exclusive use of its buses,

trucks and passengers as an incident to its franchise to convey

passengers and cargo on land from Pasay City to Tacloban

- Court holds that the water transport service between Matnog and Allen

is not a ferry boat service but a coastwise or interisland shipping

service.

TEJA MARKETING vs.HONORABLE INTERMEDIATE APPELLATE COURT

Facts:


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- "'Ex pacto illicito' non oritur actio" (No action arises out of illicit

bargain) is the time-honored maxim that must be applied to the parties

in the case at bar. Having entered into an illegal contract, neither can

seek relief from the courts, and each must bear the consequences of

his acts."

- May 9, 1975, the defendant bought from the plaintiff a motorcycle withcomplete accessories and a sidecar in the total consideration of

P8,000.

- Out of the total purchase price the defendant gave a downpayment of

P1,700.00 with a promise that he would pay plaintiff the balance within

sixty days. The defendant, however, failed to comply with his promise

- the period of paying the balance was extended to one year in monthly

installments until January 1976 when he stopped paying anymore. Theplaintiff made demands but just the same the defendant failed to

comply with the same thus forcing the plaintiff to consult a lawyer and

file this action for his damage

- In this particular transaction a chattel mortgage was constituted as a

security for the payment of the balance of the purchase price. It has

been the practice of financing firms that whenever there is a balance

of the purchase price the registration papers of the motor vehicle

subject of the sale are not given to the buyer.

- The records of the LTC show that the motorcycle sold to the defendant

was first mortgaged to the Teja Marketing by Angel Jaucian though the

Teja Marketing and Angel Jaucian are one and the same, because it

was made to appear that way only as the defendant had no franchise

of his own and he attached the unit to the plaintiff's MCH Line.

- The agreement also of the parties here was for the plaintiff to

undertake the yearly registration of the motorcycle with the LandTransportation Commission.

- Pursuant to this agreement the defendant gave the plaintiff P90.00,

the P8.00 would be for the mortgage fee and the P82.00 for the

registration fee of the motorcycle. The plaintiff, however failed to

register the motorcycle on that year on the ground that the defendant

failed to comply with some requirements such as the payment of the


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insurance premiums and the bringing of the motorcycle to the LTC for

stenciling, the plaintiff saying that the defendant was hiding the

motorcycle from him

- plaintiff explained also that though the ownership of the motorcycle

was already transferred to the def the vehicle was still mortgaged with

the consent of the defendant to the Rural Bank of Camaligan for thereason that all motorcycle purchased from the plaintiff on credit was

rediscounted with the bank.

- defendant did not dispute the sale and the outstanding balance of

P1,700. 00 still payable

- defendant was persuaded to buy from the plaintiff the motorcycle with

the side car because of the condition that the plaintiff would be the

one to register every year the motorcycle- 1976, however, the plaintfff failed to register both the chattel

mortgage and the motorcycle with the LTC notwithstanding the fact

that the defendant gave him P90.00 for mortgage fee and registration

fee

- ecause of this failure of the plaintiff to comply with his obligation to

register the motorcycle the defendant suffered damages

- defendant disputed the claim of the plaintiff that he was hiding fromthe plaintiff the motorcycle resulting in its not being registered. The

truth being that the motorcycle was being used for transporting

passengers

- motor vehicle sold to him was mortgaged by the plaintiff with the Rural

Bank of Camaligan without his consent and knowledge and the

defendant was not even given a copy of the mortgage deed.

- Def claims that it is not true that the motorcycle was mortgagedbecause of re-discounting for rediscounting is only true with Rural

Banks and the Central Bank.

- The defendant puts the blame on the plaintiff for not registering the

motorcycle with the LTC and for not giving him the registration papers

- Court so finds that defendant purchased the motorcycle in question,

particularly for the purpose of engaging and using the same in the


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transportation business and for this purpose said trimobile unit was

attached to the plaintiffs transportation line who had the franchise, so

much so that in the registration certificate, the plaintiff appears to be

the owner of the unit.

- petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum

of Money with Damages" against private respondent Pedro N. Nale

- City Court rendered judgment in favor of petitioner

- On appeal to the decision was affirmed in toto

Issue: WON respondent court erred in applying the doctrine of "pari

delicto."

Held: in pari delicto

Ratio:

- the parties herein operated under an arrangement, commonly known

as the "kabit system" whereby a person who has been granted a

certificate of public convenience allows another person who owns

motor vehicles to operate under such franchise for a fee.

- A certificate of public convenience is a special privilege conferred by

the government. Abuse of this privilege by the grantees thereof cannot

be countenanced. The "kabit system" has been Identified as one of the

root causes of the prevalence of graft and corruption

- Although not outrightly penalized as a criminal offense, the kabit

system is invariably recognized as being contrary to public policy and,

therefore, void and in existent under Article 1409 of the Civil Code.

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a

criminal offense, the following rules shall be observed:

1. When the fault is on the part of both contracting parties, neither may recover that he has

given by virtue of the contract, or demand, the performance of the other's undertaking.

- defect of in existence of a contract is permanent and cannot be cured

by ratification or by prescription. The mere lapse of time cannot give

efficacy to contracts that are null and void.


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LARA, ET AL vs.BRIGIDO R. VALENCIA

Facts:

- an action for damages brought by plaintiffs against defendant in the

Court of First Instance of Davao for the death of one Demetrio Lara, Sr.

allegedly caused by the negligent act of defendant

- court after hearing rendered judgment ordering defendant to pay the

plaintiffs

- The deceased was an inspector of the Bureau of Forestry stationed in

Davao

- The defendant is engaged in the business of exporting logs from his

lumber concession in Cotabato. Lara went to said concession upon

instructions of his chief to classify the logs of defendant which were

about to be loaded

- The work Lara of lasted for six days during which he contracted

malaria fever

- Lara who then in a hurry to return to Davao asked defendant if he

could take him in his pick-up as there was then no other means of

transportation, to which defendant agreed, and in that same morning


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the pick-up left Parang bound for Davao taking along six passengers,

including Lara.

- The pick-up has a front seat where the driver and two passengers can

be accommodated and the back has a steel flooring enclosed with a

steel wallin

- Before leaving Parang, defendant invited Lara to sit with him on the

front seat but Lara declined

- It was their understanding that upon reaching barrio Samoay,

Cotabato, the passengers were to alight and take a bus bound for

Davao, but when they arrived at that place, only Bernardo alighted and

the other passengers requested defendant to allow them to ride with

him up to Davao because there was then no available bus that they

could take in going to that place. Defendant again accommodated thepassengers.

- Upon reaching Km. 96, barrio Catidtuan, Lara accidentally fell from the

pick-up and as a result he suffered serious injuries=> dead

Issue: WON defendant was negligent as a carrier

Held: no

Ratio:- deceased, as well his companions who rode in the pick-up were merely

accommodation passengers who paid nothing for the service and so

they can be considered as invited guests within the meaning of the

law.

- As accommodation passengers or invited guests, defendant as owner

and driver of the pick-up owes to them merely the duty to exercise

reasonable care so that they may be transported safely to their

destination.

- Thus, "The rule is established by the weight of authority that the owner

or operator of an automobile owes the duty to an invited guestto

exercise reasonable care in its operation, and not unreasonably to

expose him to danger and injury by increasing the hazard of travel.


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- This rule, as frequently stated by the courts, is that an owner of an

automobile owes a guest the duty to exercise ordinary or reasonable

care to avoid injuring him. Since one riding in an automobile is no less

a guest because he asked for the privilege of doing so, the same

obligation of care is imposed upon the driver as in the case of one

expressly invited to ride"

- Defendant is only required to observe ordinary care, and is not in duty

bound to exercise extraordinary diligence as required of a common

carrier by our law

- sufficient to show that defendant has failed to take the precaution

necessary to conduct his passengers safely to their place of destination

for there is nothing there to indicate that def has acted with negligence

or without taking the precaution that an ordinary prudent man would

have taken under

transpo digests june 25, 2012

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